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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
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(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
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COMMISION FILE NUMBER 1-9910
WESTCORP EMPLOYEE STOCK OWNERSHIP AND SALARY SAVINGS PLAN
(FULL TITLE OF THE PLAN)
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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)
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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.
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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 29, 1998
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Audited Financial Statements
and Other Financial Information
Years ended December 31, 1997 and 1996
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
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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, 1997 and 1996, 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, 1997 and 1996, 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, 1997, 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 29, 1998
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Net Assets Available for Benefits
DECEMBER 31
1997 1996
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ASSETS
Cash and short-term investments $ 1,303,134 $ 1,338,903
Investments at fair value:
Common stock 18,852,429 23,030,613
Mutual funds 9,209,430 5,537,098
Government National Mortgage Association
Securities 55,355 85,571
Unsettled investment transactions - 211,288
Loans to participants 83,895 61,217
----------------------------------
Total investments 29,504,243 30,264,690
Interest receivable 542 1,923
Dividends receivable 80,945 4,748
Employee deferrals receivable 118,862 88,338
Contribution receivable 2,425,576 3,380,204
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Total receivables 2,625,925 3,475,213
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Net assets available for benefits $ 32,130,168 $ 33,739,903
==================================
See accompanying notes.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED DECEMBER 31
1997 1996
--------------------------------
Additions to net assets attributed to:
Investment Income:
Interest income $ 19,672 $ 26,688
Dividends 725,647 607,632
Net investment gains 618,927 377,478
Other gains 1,202,442 848,521
Contributions:
Employer:
Cash 723,426 486,235
Noncash 1,702,150 2,893,969
Employee 2,734,172 1,903,548
Rollovers:
The Hammond Company, The Mortgage Bankers
rollover contribution - 1,942,828
Other rollover contributions 286,437 154,527
Net unrealized (depreciation) appreciation
in fair value of investments (5,800,385) 3,759,801
--------------------------------
Total additions 2,212,488 13,001,227
Deductions from net assets attributed to:
Distributions and withdrawals paid to participants 3,821,230 2,421,704
Other 993 1,080
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Total deductions 3,822,223 2,422,784
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Net (decrease) increase (1,609,735) 10,578,443
Net assets available for benefits at beginning of
year 33,739,903 23,161,460
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Net assets available for benefits at end of year $ 32,130,168 $ 33,739,903
================================
See accompanying notes.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements
December 31, 1997
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 (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 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).
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
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, 1997 and 1996.
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.
2. DESCRIPTION OF THE PLAN (CONTINUED)
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.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
2. DESCRIPTION OF THE PLAN (CONTINUED)
CONTRIBUTIONS (CONTINUED)
Plan participants have seven investment options. A participant may invest in any
combination of the following mutual fund options offered by American Funds
and/or Westcorp common stock:
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 EuroPacific Growth Fund of America - Funds are invested in shares of a
registered investment company that invests in a broadly diversified
portfolio of overseas stocks and bonds.
o Westcorp Stock Fund - Funds are invested in common stock of Westcorp.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
2. DESCRIPTION OF THE PLAN (CONTINUED)
LOANS TO PARTICIPANTS
During 1997, the Plan was amended to allow employees to borrow from their Plan
Accounts. A minimum loan amount of $500 can be borrowed once a year. The maximum
loan amount is 50% of the employee's vested Plan Account balance not to exceed
$50,000. Loans are required to be repaid within five years; however, if the
purpose of the loan is to purchase a primary residence, the term may be up to 30
years.
Repayments of loan amounts are used to reduce the outstanding principal balance
of the loan. Such principal reductions are then allocated among the seven
investment options in the same proportion in which the individual employee's
elective contributions are allocated at the time of loan repayment.
3. BENEFITS PAYABLE
Vested benefits payable to participants of $432,182 and $671,024 at December 31,
1997 and 1996, 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.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
4. INVESTMENTS
The Plan's investments, net of investments purchased during the year, decreased
in fair value by $5,800,385 during 1997. Investment income of $2,566,688 was
realized in relation to these investments during 1997.
INCREASE
(DECREASE) IN
FAIR VALUE FAIR VALUE AT
DURING YEAR END OF YEAR
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Year ended December 31, 1997:
Fair value as determined by quoted market
price:
Short-term investments $ - $ 1,303,134
Westcorp common stock (6,694,287) 18,852,429*
Government National Mortgage
Association Securities 5,439 55,355
Mutual funds 888,463 9,209,430*
Loans to participants - 83,895
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$ (5,800,385) $ 29,504,243
==============================
*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.
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.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
6. ACQUISITION OF THE HAMMOND COMPANY SAVINGS & PROFIT SHARING PLAN (CONTINUED)
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 $125,430 in 1997. 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 1997 of
$2,425,576 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 $1,702,150 and cash of $723,426. 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.
Investment Changes: Each participant account is allocated the amount of
investment changes on a monthly 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.
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
10. SEPARATE CONTRIBUTION PROGRAMS
The Salary Savings Plan maintains seven 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
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Net assets available for
benefits, January 1, 1997 $ 1,181,711 $ 387,359 $ 1,403,539 $ 2,284,718
Contributions:
Employer:
Cash 30,232 43,012 120,165 246,654
Noncash - - - -
Employee deferral/loan
repayments 87,989 114,082 344,309 666,820
Other rollover contributions 3,504 7,861 13,822 24,268
Interest income 466 228 534 1,146
Dividends 55,640 30,370 92,551 19,387
Investment gains - - 105,799 307,212
Other gains (losses) - (1,777) 28,685 36,458
Distributions and withdrawals
paid to participants (300,650) (55,879) (205,691) (499,372)
Net unrealized (depreciation)
appreciation in fair value
of investments - 8,722 67,026 243,082
Transfer of funds 100,029 8,568 (150,211) 93,066
Other (30) (15) (58) (80)
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Net assets available for
benefits, December 31, 1997 $ 1,158,891 $ 542,531 $ 1,820,470 $ 3,423,359
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
EUROPACIFIC
WASHINGTON GROWTH FUND
MUTUAL INVESTORS WESTCORP OF LOANS TO
FUND STOCK FUND AMERICA PARTICIPANTS ESOP TOTAL
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$ 2,203,863 $ 7,759,362 $ - $ 61,217 $ 18,458,134 $ 33,739,903
261,822 - 21,541 - - 723,426
- 350,197 - - 1,351,953 1,702,150
646,440 861,561 24,426 (11,455) - 2,734,172
162,779 72,185 2,018 - - 286,437
1,244 5,454 79 - 10,521 19,672
69,043 145,237 1,341 - 312,078 725,647
202,003 - 3,913 - - 618,927
46,883 322,549 (12) - 769,656 1,202,442
(187,223) (931,354) (433) 34,133 (1,674,761) (3,821,230)
585,295 (1,964,102) (10,224) - (4,730,184) (5,800,385)
210,079 (363,125) 101,594 - - -
(96) (406) (3) - (305) (993)
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$ 4,202,132 $ 6,257,558 $ 144,240 $ 83,895 $ 14,497,092 $ 32,130,168
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Notes to Financial Statements (continued)
December 31, 1997
11. HOLDINGS OF PARTIES-IN-INTEREST
CURRENT VALUE OF
ASSET AT
DECEMBER 31 1997
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Westcorp common stock (1,117,181 shares in 1997) $ 18,852,429
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Other Financial Information
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1997
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 1,117,181 shares $ 11,382,228 $ 18,852,429
American Funds consists of: 426,415 shares 7,632,438 9,209,430
Washington Mutual Investors
Fund
The Growth Fund of America
The Income Fund of America
EuroPacific Growth Fund
Cash and Short-Term
Investments consist of:
The Cash Management Trust
of America 1,112,789 shares 1,112,789 1,112,789
Trust for Federal Securities 190,345 shares 190,345 190,345
Government National GNMA Pool #168962
Mortgage Association Single Family Pool at
11% pass through
certificate maturing
July 15, 2016 49,916 55,355
Loans to participants 83,895
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$ 20,367,716 $ 29,504,243
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Westcorp
Employee Stock Ownership and Salary Savings Plan
Schedule of Reportable Transactions
Year ended December 31, 1997
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 $ 2,118,787 $ 2,118,787 $ -
Trust for Federal Securities (2,151,177) (2,151,177) -
Trust for Federal Securities 2,444,826 2,444,826 -
Trust for Federal Securities (2,460,932) (2,460,932) -
Westcorp common stock (970,822) (1,740,477) 769,655
Category (iii) - series of transactions in excess of 5% of plan assets
- ----------------------------------------------------------------------
Washington Mutual $ 2,342,967 $ 2,342,967 $ -
Growth Fund of America 2,055,097 2,055,097 -
Westcorp common stock (2,531,551) (2,854,100) 322,549
Westcorp common stock 3,138,966 3,138,966 -
Westcorp common stock 2,943,383 2,943,383 -
Westcorp common stock (3,459,166) (4,228,821) 769,655
There were no Category (ii) or (iv) reportable transactions during 1997.
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