1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
---------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISION FILE NUMBER 1-9910
WESTCORP EMPLOYEE STOCK OWNERSHIP AND SALARY SAVINGS PLAN
(FULL TITLE OF THE PLAN)
----------------
WESTCORP
23 PASTEUR
IRVINE, CALIFORNIA 92718-3804
(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT
TO THE PLAN AND THE ADDRESS OF ITS
PRINCIPAL EXECUTIVE OFFICE)
================================================================================
2
REQUIRED INFORMATION
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. Westcorp Employee Stock Ownership and Salary Savings Plan (the "Plan") is
subject to the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA"). Attached hereto is a copy of the most recent financial
statements and schedules of the Plan prepared in accordance with the financial
reporting requirements of ERISA.
2
3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Westcorp Employee Stock Ownership and Salary Savings Plan has duly caused this
Annual Report to be signed by the undersigned thereunto duly authorized.
WESTCORP EMPLOYEE STOCK OWNERSHIP
AND SALARY SAVINGS PLAN
By: /s/ LEE A. WHATCOTT
-----------------------------------
Lee A. Whatcott, Committee Member
June 27, 1997
3
4
Westcorp
Employee Stock Ownership and Salary Savings Plan
Audited Financial Statements
and Other Financial Information
Years ended December 31, 1996 and 1995
CONTENTS
Report of Independent Auditors............................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits.............................. 2
Statements of Changes in Net Assets Available for Benefits................... 3
Notes to Financial Statements................................................ 4
Other Financial Information
Schedule of Assets Held for Investment Purposes..............................13
Schedule of Reportable Transactions..........................................14
4
5
Report of Independent Auditors
Plan Committee
Westcorp Employee Stock Ownership and Salary Savings Plan
We have audited the accompanying statements of net assets available for benefits
of Westcorp Employee Stock Ownership and Salary Savings Plan (the Plan) as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1996 and 1995, and the changes in its net assets available for
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets Held
for Investment Purposes as of December 31, 1996, and Reportable Transactions for
the year then ended are presented for purpose of additional analysis and are not
a required part of the basic financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
May 31, 1997
5
6
Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
1996 1995
------------------------------
ASSETS
Cash and short-term investments $ 1,338,903 $ 580,241
Investments at fair value:
Common stock 23,030,613 17,059,646
Mutual funds 5,537,098 2,978,584
Government National Mortgage Association
Securities
85,571 90,603
Unsettled investment transactions 211,288 -
Loans to participants 61,217 -
------------------------------
Total investments 30,264,690 20,709,074
Interest receivable 1,923 32,071
Dividends receivable 4,748 -
Employee deferrals receivable 88,338 53,469
Contribution receivable 3,380,204 2,366,846
------------------------------
Total receivables 3,475,213 2,452,386
------------------------------
Net assets available for benefits $33,739,903 $23,161,460
==============================
See accompanying notes.
6
7
Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
1996 1995
------------------------------------
Additions to net assets attributed to:
Investment income:
Interest income $ 26,688 $ 49,589
Dividends 607,632 417,919
Net capital gains 377,478 16,785
Other gains 848,521 440,008
Contributions
Employer:
Cash 486,235 2,366,846
Noncash 2,893,969 -
Employee 1,903,548 1,105,851
Rollovers:
The Hammond Company, The Mortgage
Bankers rollover contribution 1,942,828 -
Other rollover contributions 154,527 125,078
Net unrealized appreciation in fair value of
investments 3,759,801 9,096,209
-----------------------------------
Total additions 13,001,227 13,618,285
Deductions from net assets attributed to:
Distributions and withdrawals paid to
participants 2,421,704 1,874,721
Other 1,080 -
-----------------------------------
Total deductions 2,422,784 1,874,721
-----------------------------------
Net increase 10,578,443 11,743,564
Net assets available for benefits at beginning of
year 23,161,460 11,417,896
-----------------------------------
Net assets available for benefits at end of year $33,739,903 $23,161,460
===================================
See accompanying notes.
7
8
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The Westcorp Employee Stock Ownership and Salary Savings
Plan (the Plan) is for the benefit of all eligible employees of Westcorp (the
Company), its wholly-owned subsidiaries, Westran Services Corp., Westcorp
Investments, Inc. and Western Financial Bank, F.S.B. (the Bank), and the Bank's
subsidiaries.
Contributions and Deductions: Contributions by Plan participants are recognized
as additions to net assets when the deduction is made from the participants'
wages at the end of each payroll period. Contributions from the Company are
voluntary and are accrued in the year in which they become obligations of the
Company by authorization of its Board of Directors.
Benefits due to terminated participants and participant withdrawals are recorded
on the date distributions are made.
Investment Valuation and Income Recognition: The Plan's cash and investments are
stated at fair value. The shares of registered investment companies are valued
at quoted market prices which represent the net asset values of shares held by
the Plan at year-end. The loans to participants are valued at cost which
approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. DESCRIPTION OF THE PLAN
GENERAL
The Westcorp Employee Stock Ownership and Salary Savings Plan is a defined
contribution profit sharing plan that covers substantially all employees and
provides for retirement benefits. It is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA).
8
9
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
2. DESCRIPTION OF THE PLAN (CONTINUED)
GENERAL (CONTINUED)
The Company and its subsidiaries make contributions to the employee stock
ownership portion of the Plan, as determined by the Company's Board of
Directors, and within the guidelines of ERISA and the regulations of the
Internal Revenue Service.
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's matching and discretionary contribution
portion of their accounts plus actual earnings thereon is based on years of
service. A participant is 100% vested after seven years of service, or upon
attainment of age 65 or in the event of a participant's death or total
disability while still an employee of the Company. Forfeited balances of
terminated participants' nonvested accounts are used to reduce future Company
contributions. The amount of forfeited nonvested accounts was not material for
the years ended December 31, 1996 and 1995.
It is the intent of the Company to continue the Plan; however, the Plan may be
terminated by the Company at any time. In the event the Plan terminates, the net
assets of the Plan will be allocated. All participants will vest 100%
immediately and will receive their credited balance as of the date of
liquidation.
Further information about the Plan agreement and the vesting and benefit
provisions is contained in the pamphlet Westcorp Employee Stock Ownership and
Salary Savings Plan Summary Plan Document. Copies of this pamphlet are available
from the Plan Committee.
CONTRIBUTIONS
Employees may contribute up to 10% of annual earnings to the Plan through
regular payroll deductions under the 401(k) provisions of the Plan. The Company
may match up to 50% of employee elective contributions, not to exceed 6% of
employee compensation. Forfeitures are credited to the employer and are used to
reduce employer contributions. Plan participants have six investment options. A
participant may invest in any combination of the following mutual fund options
offered by American Funds and/or Westcorp common stock:
9
10
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
2. DESCRIPTION OF THE PLAN (CONTINUED)
CONTRIBUTIONS (CONTINUED)
o The Cash Management Trust of America - Funds are invested in shares
of a registered investment company that primarily invests in various
money market instruments.
o U.S. Government Securities Fund - Funds are invested in shares of a
registered investment company that primarily invests in securities
on which the U.S. government guarantees the payment of principal and
interest.
o The Income Fund of America - Funds are invested in shares of a
registered investment company that invests in a broadly diversified
portfolio of securities including stocks and bonds.
o The Growth Fund of America - Funds are invested in shares of a
registered investment company that invests primarily in common
stocks.
o Washington Mutual Investors Fund - Funds are invested in shares of a
registered investment company that invests primarily in common
stocks.
o Westcorp Stock Fund - Funds are invested in common stock of
Westcorp.
LOANS TO PARTICIPANTS
Loans to participants are not permitted under the Plan, however, loans to
participants which were outstanding under the Hammond Plan (see Note 6 for
discussion) were merged into the Plan during 1996. These loans are required to
be repaid in accordance with their existing terms.
Repayments of loan amounts are used to reduce the outstanding principal balance
of the loan. Such principal reductions are then allocated among the six
investment options in the same proportion in which the individual employee's
elective contributions are allocated at the time of loan repayment.
10
11
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
3. BENEFITS PAYABLE
Vested benefits payable to participants of $671,024 and $171,092 at December 31,
1996 and 1995, respectively, are not reflected as a deduction from net assets
available for benefits in the Plan's financial statements, which creates a
difference from the Plan's Internal Revenue Service (IRS) Form 5500, "Annual
Return/Report of Employee Benefit Plan," which has recorded the vested benefits
as a liability.
4. INVESTMENTS
The Plan's investments, including investments bought during the year, increased
in fair value by $3,759,801 during 1996. Investment income of $1,860,319 was
realized in relation to these investments during 1996.
INCREASE
(DECREASE) IN
FAIR VALUE FAIR VALUE AT
DURING YEAR END OF YEAR
--------------------------------------
Year ended December 31, 1996:
Fair value as determined by quoted market
price:
Short-term investments $ - $ 1,338,903
Westcorp common stock 3,454,948 23,030,613*
Government National Mortgage
Association Securities (1,081) 85,571
Mutual funds 305,934 5,537,098*
Unsettled transactions - 211,288
Loans to participants - 61,217
------------ ------------
$ 3,759,801 $ 30,264,690
============ ============
* Represent more than 5% of the fair value of net assets available for benefits.
5. INCOME TAX STATUS
The IRS has issued a determination letter dated August 8, 1995, that the Plan
qualifies, in form, under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the Code), and, the underlying trust is, therefore, exempt from
federal income taxes under Section 501(a) of the Code. The Plan is required to
operate in accordance with the Code to maintain its tax qualification. The Plan
administrator is not aware of any course of actions or series of events that
have occurred which might adversely affect the Plan's qualified status.
11
12
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
6. ACQUISITION OF THE HAMMOND COMPANY SAVINGS & PROFIT SHARING PLAN
During December 1995, the Bank acquired The Hammond Company, The Mortgage
Bankers. On July 10, 1996 The Hammond Company Savings & Profit Sharing Plan (the
Hammond Plan) was merged into the Plan. Under the terms of the merger, each
employee selected investment options offered under the Plan and rolled over
their participant balances from the Hammond Plan into the Plan. Upon the merger
all participants under the Hammond Plan became 100% vested in the Plan. The
rollover contribution from the acquisition of the Hammond Plan totaled
$1,942,828.
7. ADMINISTRATIVE COSTS
The Company has agreed to voluntarily pay the Plan's administrative expenses of
approximately $96,290 in 1996. This agreement to pay the administrative costs
can be canceled at any time.
8. EMPLOYER CONTRIBUTIONS
The Company's Board of Directors elected to provide a contribution in 1996 of
$3,380,204 for both the employee stock ownership (ESOP) and salary savings
portions of the Plan. The contribution consisted of Westcorp common stock with a
fair value on the date of transfer of $2,893,969 and cash of $486,235. The
contribution expense was allocated to the Company and its subsidiaries based
upon the relative participation of the employees of the Company and its
subsidiaries in the Plan.
9. ESOP PARTICIPANT ALLOCATION
The Plan allocates contributions, investment changes and forfeitures to
participants' accounts as follows:
Contributions: Each participant is credited with one unit for each
$100 of eligible compensation plus an additional unit for each full
year of service.
12
13
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
9. ESOP PARTICIPANT ALLOCATION (CONTINUED)
Investment Changes: Each participant account is allocated the amount
of investment changes on an annual basis in the same proportion that
the cash or shares of each participant's account bears to the total
accounts of all participants in the same investment option at the
time of the valuation.
Forfeitures: Forfeitures are allocated to participants who did not
have a break in service during the current year based on the
proportion of each participant's compensation to the total
compensation of all such participants during the year.
13
14
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
10. SEPARATE CONTRIBUTION PROGRAMS
The Salary Savings Plan maintains six investment programs. Participants
individually elect how to allocate their contributions among the programs. The
following table summarizes the activity for each of the programs and the
Employee Stock Ownership Plan:
THE CASH U.S. THE
MANAGEMENT GOVERNMENT INCOME THE GROWTH
TRUST OF SECURITIES FUND OF FUND OF
AMERICA FUND AMERICA AMERICA
-------------------------------------------------------------------------------
Net assets available for benefits,
January 1, 1996 $ 433,570 $ 337,730 $ 801,110 $ 944,364
Contributions:
Employer:
Cash 26,232 25,210 95,243 180,439
Noncash - - - -
Employee 68,986 68,874 229,567 467,053
Rollovers:
The Hammond Company,
The Mortgage Bankers
rollover contribution 1,042,809 37,127 93,105 333,216
Other rollover contributions 7,741 6,549 28,048 33,095
Loan repayments 1,395 769 5,640 5,224
Interest income 1,159 201 1,006 1,261
Dividends 39,788 22,400 62,684 19,620
Capital gains - - 67,752 153,464
Other gains (losses) - (1,979) 3,352 6,446
Distributions and withdrawals
paid to participants (397,537) (82,897) (128,347) (53,964)
Net unrealized (depreciation)
appreciation in fair value of
investments - (9,797) 33,414 243,238
Transfer of funds (42,353) (16,815) 111,011 (48,657)
Other (79) (13) (46) (81)
-------------------------------------------------------------------------------
Net assets available for benefits,
December 31, 1996 $ 1,181,711 $ 387,359 $ 1,403,539 $ 2,284,718
===============================================================================
14
15
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1996
WASHINGTON
MUTUAL WESTCORP LOANS TO
INVESTORS FUND STOCK FUND PARTICIPANTS ESOP TOTAL
- -------------------------------------------------------------------------------------
$ 1,190,706 $ 5,818,050 $ -- $ 13,635,930 $ 23,161,460
159,111 -- -- -- 486,235
-- 294,117 -- 2,599,852 2,893,969
371,388 697,680 -- -- 1,903,548
183,419 174,402 78,750 -- 1,942,828
40,306 38,788 -- -- 154,527
2,878 1,627 (17,533) -- --
1,206 6,641 -- 15,214 26,688
43,055 129,713 -- 290,372 607,632
156,262 -- -- -- 377,478
1,243 119,771 -- 719,688 848,521
(229,983) (536,791) -- (992,185) (2,421,704)
39,079 1,264,261 -- 2,189,606 3,759,801
245,263 (248,449) -- -- --
(70) (448) -- (343) (1,080)
- -------------------------------------------------------------------------------------
$ 2,203,863 $ 7,759,362 $ 61,217 $ 18,458,134 $ 33,739,903
====================================================================================
15
16
Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
11. HOLDINGS OF PARTIES-IN-INTEREST
CURRENT VALUE
OF ASSET AT
DECEMBER 31
1996
---------------
Westcorp common stock
(1,052,828 shares in 1996) $ 23,030,613
=============
16
17
Other Financial Information
17
18
Westcorp
Employee Stock Ownership and Salary Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1996
DESCRIPTION OF
INVESTMENT, INCLUDING
MATURITY DATE, CURRENT
RATE OF INTEREST, PAR VALUE
IDENTITY OF ISSUER OR BORROWER OR MATURITY VALUE COST OF ASSET
- -----------------------------------------------------------------------------------------------
Westcorp common stock 1,052,828 shares $ 8,841,434 $ 23,030,613
American Funds consists of: 1,447,268 shares 5,985,302 6,679,142
Washington Mutual Investors Fund
The Growth Fund of America
The Income Fund of America
U.S. Government Securities Fund
The Cash Management Trust
of America
Treasury Trust Fund:
Trust for Federal Securities 196,859 shares 196,859 196,859
Government National GNMA Pool #168962
Mortgage Association Single Family Pool at
11% pass through
certificate maturing
July 15, 2016 77,328 85,571
Loans to participants 61,217 61,217
Unsettled Transactions 211,288 units 211,288 211,288
-----------------------------
$ 15,373,428 $ 30,264,690
=============================
18
19
Westcorp
Employee Stock Ownership and Salary Savings Plan
Schedule of Reportable Transactions
Year ended December 31, 1996
CURRENT
VALUE OF
ASSET ON NET
COST OF TRANSACTION GAIN
DESCRIPTION OF ASSETS ASSET DATE (LOSS)
- --------------------------------------------------------------------------------------------
Category (i) - single transactions in excess of 5% of plan assets
- -----------------------------------------------------------------
Trust for Federal Securities $(1,864,079) $(1,864,079) $ --
Trust for Federal Securities 1,864,079 1,864,079 --
Money Market Premium Account (1,184,159) (1,184,159) --
Money Market Premium Account 1,184,159 1,184,159 --
Category (iii) - series of transactions in excess of 5% of plan assets
- ----------------------------------------------------------------------
Trust for Federal Securities $ 8,774,159 $ 8,774,159 $ --
Trust for Federal Securities (8,693,088) (8,693,088) --
Westcorp common stock 1,863,514 1,863,514 --
Westcorp common stock (465,158) (1,304,619) 839,461
There were no Category (ii) or (iv) reportable transactions during 1996.
19