SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 22, 1997
GREAT WESTERN FINANCIAL CORPORATION
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-4075 95-1913457
- ---------------------------------------------------------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
9200 Oakdale Avenue, Chatsworth, California 91311
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (818) 775-3411
(Former name or former address, if changed since last report.)
Not applicable.
Item 5 Other Events.
------------
Great Western Financial Corporation today reported 1996 fourth quarter
earnings of $5.1 million, or $.01 per share, compared with 1995 fourth quarter
earnings of $98.6 million, or $.66 per share. Fourth quarter 1996 operating
earnings were $85 million, or $.58 per share, before the impact of several non-
recurring charges and a net gain from the divestiture of the company's student
lending business.
The previously announced charges include a $68.3 million pre-tax
restructuring charge primarily for a comprehensive reengineering of the
company's mortgage origination operation and to consolidate office space at the
company's corporate headquarters, a $50 million provision relating to the bulk
sale of nonperforming assets in the company's real estate loan portfolio, a
$21.4 million pre-tax charge to redeem two issues of Great Western Bank's
subordinated notes, and a charge related to litigation. The charges were
partially offset by a pre-tax net gain of $22.5 million resulting from the
previously announced agreement to sell the company's student lending business to
Crestar Bank.
For the year 1996, earnings were $116 million, or $.69 per share,
compared with $261 million, or $1.71 per share for 1995. Earnings for the year
1996 were reduced by the effect of a special one-time federal deposit insurance
assessment imposed on the nation's thrift industry. Without this $188 million
special insurance premium assessment charged during the third quarter, and the
non-recurring charges taken during the fourth quarter, annual earnings for 1996
were $311 million, or $2.09 per share.
Net interest income totaled $335 million in the 1996 fourth quarter,
compared with $351 million in the same period of 1995. Net interest income for
the year 1996 was $1.4 billion compared with $1.3 billion for the year 1995.
The interest spread, the difference between the yield on interest
earning assets and the company's interest bearing liabilities, was 3.05 percent
for the fourth quarter of 1996, compared with 3.10 percent during the previous
quarter. For the year-ago fourth quarter, the interest spread was 3.19 percent.
The interest spread for the year 1996 was 3.15 percent, compared with 3.00
percent for the year 1995.
Noninterest expense in the fourth quarter of 1996 was $260 million
(excluding the non-recurring charges) compared with $241 million (excluding the
special federal deposit insurance assessment) in the third quarter of 1996, $260
million in the second quarter of 1996, and $267 million in the first quarter of
1996. Noninterest expense was $253 million in the fourth quarter of 1995.
Retail banking fees totaled $50.7 million during the fourth quarter of
1996, compared with $40.9 million in the year-
2
ago fourth quarter. For the year 1996, retail banking fees were $180 million,
compared with $155 million for the year 1995.
New real estate loan volume was $1.6 billion in the fourth quarter of
1996, compared with $1.7 billion in the previous quarter, and $1.4 billion in
the fourth quarter of 1995. For the year 1996, new real estate loan volume was
$6.1 billion, compared with $7.3 billion in 1995. Approximately 80 percent of
new loan originations in 1996 were adjustable rate mortgages, compared with 83
percent in 1995. New real estate loans originated outside California increased
to 61% of originations in 1996, compared with 50 percent in 1995, 45 percent in
1994 and 37 percent in 1993.
Nonperforming assets were $546 million, or 1.27 percent of total
assets at December 31, 1996, which includes the effect of the previously
announced bulk sale of $292 million of nonperforming assets during the fourth
quarter of 1996. Nonperforming assets at September 30, 1996 were $778 million,
or 1.79 percent of total assets, and were $768 million, or 1.72 percent of total
assets at December 31, 1995.
The company's Consumer Finance Group produced net income of $61.7
million in 1996, compared with $64.3 million in 1995. Based in Tampa, Fla., the
Consumer Finance Group primarily originates retail consumer loans through a
network of more than 500 offices in 24 states.
The company also reported that it has purchased approximately 6.8
million shares of its common stock to date as part of a stock repurchase program
announced in July, and that it expects to complete the initial authorization of
7.5 million shares. The company also anticipates commencing an additional
repurchase program in 1997.
Set forth below are a consolidating statement of operations for the
three months and the year ended December 31, 1996, and selected financial
statistics for the same periods.
3
GREAT WESTERN FINANCIAL CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
(Dollars in thousands, except per share)
Unaudited
Table 1 of 5
Consumer
Banking Finance
For the three months ended December 31 Operations Group 1996 1995
- -------------------------------------- ---------- -------- -------- ---------
INTEREST INCOME
Real estate loans $522,719 $ - $522,719 $515,748
Mortgage-backed securities 143,369 - 143,369 189,044
Consumer loans 12,004 93,974 105,978 104,081
Securities and other 27,129 2,352 29,481 26,014
-------- ------- -------- --------
705,221 96,326 801,547 834,887
INTEREST EXPENSE
Deposits 291,004 2,182 293,186 313,773
Borrowings 141,909 31,441 173,350 170,273
-------- ------- -------- --------
432,913 33,623 466,536 484,046
-------- ------- -------- --------
NET INTEREST INCOME 272,308 62,703 335,011 350,841
Provision for loan losses 70,500 15,400 85,900 50,300
Noninterest income
Retail banking fees 50,722 - 50,722 40,927
Servicing fees 13,304 - 13,304 14,239
Securities operations 8,046 - 8,046 7,729
Net insurance operations 2,090 5,879 7,969 7,986
Real estate fees 8,301 - 8,301 6,291
Net gain on sale of student loans 22,960 - 22,960 170
Net gain on sale of mortgages 3,234 - 3,234 18,034
Net (loss) gain on securities and investments (2,900) - (2,900) 8,642
Other 61 2,399 2,460 2,453
-------- ------- -------- --------
Total noninterest income 105,818 8,278 114,096 106,471
Noninterest expense
Salaries and benefits 82,049 16,522 98,571 103,927
Premises 41,618 2,785 44,403 43,313
Restructuring expense 68,293 - 68,293 -
FDIC insurance premium 16,487 1 16,488 16,397
Amortization of intangibles 7,469 1,964 9,433 10,090
Advertising and promotion 5,541 1,841 7,382 9,961
Net real estate operations 5,522 - 5,522 6,100
Other 97,708 9,875 107,583 63,657
-------- ------- -------- --------
Total noninterest expense 324,687 32,988 357,675 253,445
-------- ------- -------- --------
EARNINGS (LOSS) BEFORE TAXES ON INCOME (17,061) 22,593 5,532 153,567
Taxes (benefit) on income (6,400) 6,800 400 55,000
-------- ------- -------- --------
NET EARNINGS (LOSS) $(10,661) $15,793 $ 5,132 $ 98,567
======== ======= ======== ========
Primary earnings per common share $ 0.01 $ 0.67
Fully diluted earnings per common share 0.01 0.66
Average common shares outstanding
Without dilution 140,407,688 138,956,721
Fully diluted 140,434,137 139,081,156
Dividends per common share $ 0.25 $ 0.23
Net earnings (annualized) as a percent of
Average assets 0.05% 0.88%
Average equity 0.79% 14.57%
GREAT WESTERN FINANCIAL CORPORATION
CONSOLIDATING STATEMENT OF OPERATIONS
(Dollars in thousands, except per share)
Unaudited
Table 2 of 5
Consumer
Banking Finance
For the year ended December 31 Operations Group 1996 1995
- ------------------------------ ----------- ---------- ---------- -----------
INTEREST INCOME
Real estate loans $2,066,854 $ - $2,066,854 $1,985,346
Mortgage-backed securities 638,424 - 638,424 752,524
Consumer loans 44,472 370,314 414,786 402,591
Securities and other 104,684 9,183 113,867 98,250
---------- -------- ---------- ----------
2,854,434 379,497 3,233,931 3,238,711
INTEREST EXPENSE
Deposits 1,170,313 9,166 1,179,479 1,217,085
Borrowings 564,843 111,592 676,435 719,497
---------- -------- ---------- ----------
1,735,156 120,758 1,855,914 1,936,582
---------- -------- ---------- ----------
NET INTEREST INCOME 1,119,278 258,739 1,378,017 1,302,129
Provision for loan losses 150,171 58,800 208,971 187,700
Noninterest income
Retail banking fees 179,871 - 179,871 154,862
Servicing fees 45,684 - 45,684 55,159
Securities operations 30,175 - 30,175 21,092
Net insurance operations 7,214 22,356 29,570 28,861
Real estate fees 29,105 - 29,105 24,208
Net gain on sale of student loans 23,388 - 23,388 495
Net gain on sale of mortgages 52 - 52 22,409
Net (loss) gain on securities and
investments (11,147) - (11,147) 13,048
Other 278 4,849 5,127 7,534
---------- -------- ---------- ----------
Total noninterest income 304,620 27,205 331,825 327,668
Noninterest expense
Salaries and benefits 366,880 71,724 438,604 441,366
SAIF special assessment 188,359 - 188,359 -
Premises 168,593 11,024 179,617 179,654
Restructuring expense 68,293 - 68,293 -
FDIC insurance premium 65,096 4 65,100 66,365
Amortization of intangibles 29,874 7,848 37,722 40,286
Advertising and promotion 28,113 4,848 32,961 35,661
Net real estate operations 726 - 726 5,605
Other 269,876 32,991 302,867 251,038
---------- -------- ---------- ----------
Total noninterest expense 1,185,810 128,439 1,314,249 1,019,975
---------- -------- ---------- ----------
EARNINGS BEFORE TAXES ON INCOME 87,917 98,705 186,622 422,122
Taxes on income 33,800 37,000 70,800 161,100
---------- -------- ---------- ----------
NET EARNINGS $ 54,117 $ 61,705 $ 115,822 $ 261,022
========== ======== ========== ==========
Primary earnings per common share $ 0.69 $ 1.72
Fully diluted earnings per common share 0.69 1.71
Average common shares outstanding
Without dilution 138,505,046 137,111,074
Fully diluted 139,250,206 137,951,442
Dividends per common share $ 0.98 $ 0.92
Net earnings as a percent of
Average assets 0.27% 0.59%
Average equity 4.23% 10.03%
GREAT WESTERN FINANCIAL CORPORATION
SELECTED FINANCIAL STATISTICS
(Dollars in thousands, except per share)
Unaudited
Table 3 of 5
At December 31 1996 1995
- -------------- --------------- -----------------
ASSETS
Cash, U.S. government and other securities available for sale $ 2,113,575 $ 2,186,876
Mortgage-backed securities held to maturity 1,625,837 1,886,736
Mortgage-backed securities available for sale 6,162,714 7,916,705
Loans, net of allowance for loan and lease losses 30,717,320 29,401,644
Loans available for sale 105,872 485,705
Investment in Federal Home Loan Banks 377,946 341,102
Real estate available for sale or development, net 159,997 217,112
Accrued interest receivable 245,539 298,640
Premises and equipment, net 552,422 604,672
Intangibles arising from acquisitions 285,991 323,713
Other assets 527,359 923,859
------------ ------------
$ 42,874,572 $ 44,586,764
============ ============
LIABILITIES
Deposits $ 28,586,773 $ 29,234,928
Borrowings 10,501,813 11,345,634
Accrued interest payable 172,324 104,607
Taxes on income, principally deferred 226,075 378,381
Other liabilities and accrued expenses 692,387 600,738
CAPITAL SECURITIES OF SUBSIDIARY TRUST 100,000 100,000
STOCKHOLDERS' EQUITY 2,595,200 2,822,476
------------ ------------
$ 42,874,572 $ 44,586,764
============ ============
Stockholders' equity per common share $ 17.63 $ 18.42
Tangible stockholders' equity per common share 15.55 16.06
Common shares outstanding 137,875,955 137,279,331
Loans serviced for others $ 11,686,932 $ 11,110,068
Unrealized holding gains, net of taxes 76,959 108,433
NONPERFORMING ASSETS AND
TROUBLED DEBT RESTRUCTURINGS
Delinquent loans (more than 90 days past due) $ 352,002 $ 486,524
Troubled debt restructurings 74,196 108,385
Real estate owned 119,799 173,405
------------ ------------
$ 545,997 $ 768,314
============ ============
Percent to total assets 1.27% 1.72%
GREAT WESTERN BANK, A FEDERAL SAVINGS BANK
REGULATORY CAPITAL RATIOS
Leverage/tangible capital (1) 5.85% 5.66%
Tier 1 risk-based capital (1) 9.75% 9.40%
Risk-based capital (1) 11.20% 11.81%
(1) Amounts at December 31, 1996 are preliminary.
GREAT WESTERN FINANCIAL CORPORATION
SELECTED FINANCIAL STATISTICS
(Dollars in thousands)
Unaudited
Table 4 of 5
At or for the three months ended December 31 1996 1995
- -------------------------------------------- ------------ ------------
Allowance for loan and lease losses
Beginning balance $ 321,630 $ 378,562
Provision for loan losses
Real estate loans
Single-family 83,901 32,544
Commercial and other (14,993) -
Consumer finance 15,400 17,100
Other 1,592 656
------------ ------------
Total provision for loan losses 85,900 50,300
------------ ------------
Net charge-offs
Real estate loans
Single-family (83,611) (48,786)
Commercial and other (4,399) (2,783)
Consumer finance (3,940) (14,200)
Other (1,881) (244)
------------ ------------
Total net charge-offs (93,831) (66,013)
------------ ------------
Ending balance $ 313,699 $ 362,849
------------ ------------
At or for the year ended December 31
- ------------------------------------
Allowance for loan and lease losses
Beginning balance $ 362,849 $ 438,051
Provision for loan losses
Real estate loans
Single-family 187,420 161,025
Commercial and other (39,908) (18,000)
Consumer finance 58,800 48,500
Other 2,659 (3,825)
------------ ------------
Total provision for loan losses 208,971 187,700
------------ ------------
Net charge-offs
Real estate loans
Single-family (195,687) (193,857)
Commercial and other (14,374) (21,879)
Consumer finance (44,323) (46,149)
Other (3,737) (1,017)
------------ ------------
Total net charge-offs (258,121) (262,902)
------------ ------------
Ending balance $ 313,699 $ 362,849
------------ ------------
GREAT WESTERN FINANCIAL CORPORATION
SELECTED FINANCIAL STATISTICS
(Dollars in thousands)
Unaudited
Table 5 of 5
For the three months ended December 31 1996 1995
- -------------------------------------- ------------ ------------
Interest spread for the period
Average yield on
Loans 8.02% 8.21%
Mortgage-backed securities 7.12 7.36
Securities 6.26 6.46
------------ ------------
Earning assets 7.77 7.93
Average cost of
Deposits 4.07 4.28
Borrowings 6.43 5.91
------------ ------------
Funds 4.72 4.74
------------ ------------
Interest spread 3.05% 3.19%
============ ============
New loans originated
Real estate $1,632,143 $1,446,156
Consumer 699,974 754,530
------------ ------------
Total new loans $2,332,117 $2,200,686
============ ============
Real estate loan sales $475,528 $507,366
(Decrease) in deposits (265,927) (197,248)
Increase in unrealized holding gains, net
of taxes 28,252 90,697
For the year ended December 31
- ------------------------------
Interest spread for the period
Average yield on
Loans 8.08% 8.08%
Mortgage-backed securities 7.19 7.18
Securities 6.24 6.36
------------ ------------
Earning assets 7.81 7.79
Average cost of
Deposits 4.07 4.17
Borrowings 6.21 6.43
------------ ------------
Funds 4.66 4.79
------------ ------------
Interest spread 3.15% 3.00%
============ ============
New loans originated
Real estate $6,146,438 $7,281,157
Consumer 2,343,802 2,407,053
------------ ------------
Total new loans $8,490,240 $9,688,210
============ ============
Real estate loan sales $1,478,008 $1,113,259
(Decrease) increase in deposits (648,155) 533,981
(Decrease) increase in unrealized holding
gains, net (31,474) 163,517
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT WESTERN FINANCIAL CORPORATION
/s/ Stephen F. Adams
-----------------------------------
By: Stephen F. Adams
Title: First Vice President
DATED: January 22, 1997
9