<PAGE>PAGE 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For Quarter Ended September 30, 1994 Commission File Number 1-4629
GOLDEN WEST FINANCIAL CORPORATION
Delaware 95-2080059
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1901 Harrison Street, Oakland, California 94612
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 446-3420
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's common stock on
October 31, 1994, was 60,478,055 shares.
<PAGE>PAGE 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Golden West Financial
Corporation and subsidiaries (Golden West or the Company) for the three and
nine months ended September 30, 1994, and 1993, have been prepared from
unaudited records of the Company and, in the opinion of the Company, all
adjustments (consisting only of normal recurring accruals) that are
necessary for a fair statement of the results for such three and nine month
periods have been included. The operating results for the nine months
ended September 30, 1994, are not necessarily indicative of the results for
the full year.
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Financial Condition
(Unaudited)
($000s Omitted)
September 30 September 30 December 31
1994 1993 1993
------------ ------------ -----------
<S> <C> <C> <C>
Assets:
Cash $ 151,581 $ 109,515 $ 243,185
Securities available for sale 1,655,133 659,387 1,636,586
Other investments 207,800 1,517,141 538,100
Mortgage-backed securities available for sale at fair value 716,709 -0- 1,114,069
Mortgage-backed securities held to maturity at cost 522,700 1,414,363 408,467
Loans receivable 25,670,613 23,660,080 23,912,571
Interest earned but uncollected 202,009 173,828 175,080
Investment in capital stock of Federal Home Loan Banks--at
cost, which approximates fair value 328,660 367,698 325,737
Real estate held for sale or investment 64,920 76,836 67,156
Prepaid expenses and other assets 213,362 160,925 108,832
Premises and equipment--at cost less accumulated depreciation 196,087 156,558 162,751
Goodwill arising from acquisitions 136,927 136,432 136,754
----------- ----------- -----------
$30,066,501 $28,432,763 $28,829,288
=========== =========== ===========
Liabilities and Stockholders' Equity:
Customer deposits $18,530,133 $17,565,432 $17,422,484
Advances from Federal Home Loan Banks 6,229,344 6,286,870 6,281,691
Securities sold under agreements to repurchase 626,687 280,868 442,874
Medium-term notes 664,199 676,367 676,540
Accounts payable and accrued expenses 416,666 366,585 355,799
Taxes on income 314,718 312,898 364,235
Subordinated notes--net of discount 1,221,181 1,021,467 1,220,061
Stockholders' equity 2,063,573 1,922,276 2,065,604
----------- ----------- -----------
$30,066,501 $28,432,763 $28,829,288
=========== =========== ===========
</TABLE>
<PAGE>PAGE 3
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Net Earnings
(Unaudited)
($000s omitted except per share figures)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ----------------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income:
Interest on loans $411,573 $413,134 $1,205,624 $1,230,269
Interest on mortgage-backed securities 25,037 32,568 79,454 108,592
Interest and dividends on investments 31,551 28,111 92,239 70,052
-------- -------- ---------- ----------
468,161 473,813 1,377,317 1,408,913
Interest Expense:
Interest on customer deposits 180,584 179,898 512,580 531,711
Interest on advances 69,119 68,531 191,031 211,543
Interest on repurchase agreements 8,221 9,310 25,316 29,396
Interest on other borrowings 33,051 30,811 96,482 88,642
-------- -------- ---------- ----------
290,975 288,550 825,409 861,292
-------- -------- ---------- ----------
Net Interest Income 177,186 185,263 551,908 547,621
Provision for loan losses 15,996 16,196 50,434 40,837
-------- -------- ---------- ----------
Net Interest Income after Provision for
Loan Losses 161,190 169,067 501,474 506,784
Non-Interest Income:
Fees 6,598 7,636 22,278 21,759
Gain (loss) on the sale of securities and
mortgage-backed securities (73) 2,767 (106) 7,015
Other 3,261 4,041 10,473 11,005
-------- -------- ---------- ----------
9,786 14,444 32,645 39,779
Non-Interest Expense:
General and administrative:
Personnel 37,221 33,740 109,139 96,892
Occupancy 11,297 10,604 32,417 29,932
Deposit insurance 10,204 9,768 30,325 25,892
Advertising 2,722 2,921 7,957 8,231
Other 13,691 13,410 41,834 38,625
-------- -------- ---------- ----------
75,135 70,443 221,672 199,572
Amortization of goodwill arising
from acquisitions 682 (366) 1,907 (1,264)
-------- -------- ---------- ----------
75,817 70,077 223,579 198,308
-------- -------- ---------- ----------
Earnings Before Taxes on Income 95,159 113,434 310,540 348,255
Taxes on income 39,034 49,666 127,176 142,320
-------- -------- ---------- ----------
Net Earnings $ 56,125 $ 63,768 $ 183,364 $ 205,935
======== ======== ========== ==========
Net earnings per share $ .91 $ 1.00 $ 2.91 $ 3.22
======== ======== ========== ==========
</TABLE>
<PAGE>PAGE 4
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Cash Flows
(Unaudited)
($000s Omitted)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 56,125 $ 63,768 $ 183,364 $ 205,935
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for loan losses 15,996 16,196 50,434 40,837
Amortization of loan fees and discounts (6,241) (11,511) (23,063) (33,233)
Depreciation and amortization 4,837 3,796 13,809 10,319
Reduction of a valuation allowance on investments -0- (2,750) -0- (7,000)
Loans originated for sale (5,596) (117,889) (90,083) (284,441)
Sales of loans originated for sale 5,413 137,864 142,996 297,688
(Increase) in interest earned but uncollected (2,747) (7,015) (26,929) (16,105)
Federal Home Loan Bank stock dividends (4,126) (4,327) (14,743) (9,454)
(Increase) in prepaid expenses and other assets (22,852) (14,080) (97,591) (25,946)
Increase (decrease) in accounts payable and accrued
expenses (6,949) (11,688) 60,867 5,459
Increase (decrease) in taxes on income (12,049) 11,880 (14,689) 79,034
Other, net (5,578) (4,616) (18,700) (10,083)
----------- ----------- ----------- -----------
Net cash provided by operating activities 16,233 59,628 165,672 253,010
Cash Flows From Investing Activities:
New loan activity:
New real estate loans originated for portfolio (1,777,064) (1,459,586) (4,545,842) (4,558,509)
Real estate loans purchased (880) (878) (1,744) (1,920)
Other, net 44 3,765 2,862 21,266
----------- ----------- ----------- -----------
(1,777,900) (1,456,699) (4,544,724) (4,539,163)
Real estate loan principal payments:
Monthly payments 149,388 146,961 448,882 427,199
Payoffs, net of foreclosures 470,388 748,676 1,853,002 1,980,520
Refinances 66,835 94,799 261,139 270,257
----------- ----------- ----------- -----------
686,611 990,436 2,563,023 2,677,976
Purchases of mortgage-backed securities available for sale (919) -0- (1,500) -0-
Purchases of mortgage-backed securities held to maturity (25,724) (582) (46,067) (99,140)
Sales of mortgage-backed securities available for sale -0- -0- 119 -0-
Sales of mortgage-backed securities held to maturity -0- -0- -0- 138
Repayments of mortgage-backed securities 49,903 180,791 279,153 476,254
Sales of real estate 53,455 58,431 159,315 151,815
Purchases of securities available for sale (398,094) (811,869) (2,401,279) (3,253,660)
Sales and maturities of securities available for sale 515,510 835,147 2,355,417 2,758,507
Decrease (increase) in other investments 159,400 426,913 330,300 (719,952)
Redemptions of Federal Home Loan Bank stock -0- -0- 7,775 7,591
Purchases of Federal Home Loan Bank stock -0- -0- -0- (79,713)
Additions to premises and equipment (23,639) (9,799) (46,877) (24,582)
----------- ----------- ----------- -----------
Net cash provided (used) by investing activities (761,397) 212,769 (1,345,345) (2,643,929)
</TABLE>
<PAGE>PAGE 5
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Cash Flows (Continued)
(Unaudited)
($000s Omitted)
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Cash Flows From Financing Activities:
Customer deposit activity:
Increase in deposits, net $ 466,639 $ 358,392 $ 687,565 $ 653,319
Interest credited 148,668 145,816 420,084 425,867
----------- ----------- ----------- ----------
615,307 504,208 1,107,649 1,079,186
Additions to Federal Home Loan Bank advances 14,000 17,000 37,000 1,696,200
Repayments of Federal Home Loan Bank advances (7,521) (570,048) (89,543) (908,948)
Increase (decrease) in securities sold under agreements
to repurchase 246,291 (252,479) 183,813 (275,842)
Proceeds from medium-term notes -0- 56 -0- 609,235
Repayments of medium-term notes -0- -0- (12,865) (14,500)
Proceeds from subordinated debt -0- -0- -0- 98,786
Dividends on common stock (4,612) (4,161) (14,163) (12,479)
Purchase and retirement of Company stock (80,290) -0- (123,822) -0-
----------- ----------- ----------- ----------
Net cash provided (used) by financing activities 783,175 (305,424) 1,088,069 2,271,638
----------- ----------- ----------- ----------
Net Increase (Decrease) in Cash 38,011 (33,027) (91,604) (119,281)
Cash at beginning of period 113,570 142,542 243,185 228,796
----------- ----------- ----------- ----------
Cash at end of period $ 151,581 $ 109,515 $ 151,581 $ 109,515
=========== =========== =========== ==========
Supplemental cash flow information:
Cash paid for:
Interest $ 288,514 $ 355,304 $ 828,705 $ 911,813
Income taxes 51,362 37,786 142,144 65,483
Cash received for interest and dividends 465,414 466,798 1,350,388 1,392,808
Noncash investing activities:
Loans transferred to foreclosed real estate 60,313 64,491 174,468 176,603
</TABLE>
<PAGE>PAGE 6
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Stockholders' Equity
(Unaudited)
($000s omitted except per share figures)
Nine Months Ended September 30
1994 1993
---------- ----------
<S> <C> <C>
Common Stock:
Balance at January 1 $ 6,393 $ 6,392
Common stock issued upon exercise of stock options -
146,900 shares (1994) and 91,800 shares (1993) 14 10
Common stock retired upon purchase of treasury stock -
3,114,080 shares (1994) and -0- shares (1993) (311) -0-
---------- ----------
Balance at September 30 6,096 6,402
---------- ----------
Paid-in Capital:
Balance at January 1 40,899 36,186
Common stock issued upon exercise of stock options -
146,900 shares (1994) and 91,800 shares (1993) 2,109 1,412
---------- ----------
Balance at September 30 43,008 37,598
---------- ----------
Retained Earnings:
Balance at January 1 1,933,593 1,684,820
Net earnings 183,364 205,935
Cash dividends on common stock - $.225 per share (1994)
and $.195 per share (1993) (14,163) (12,479)
Retirement of treasury stock (123,511) -0-
---------- ----------
Balance at September 30 1,979,283 1,878,276
---------- ----------
Unrealized Gains on Securities Available for Sale:
Balance at January 1 84,719 -0-
Change during period (49,533) -0-
---------- ----------
Balance at September 30 35,186 -0-
---------- ----------
Total Stockholders' Equity at September 30 $2,063,573 $1,922,276
========== ==========
</TABLE>
<PAGE>PAGE 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The discussion and analysis included herein covers those material
changes in liquidity and capital resources that have occurred since
December 31, 1993, as well as certain material changes in results of
operations during the three and nine month periods ended
September 30, 1994, and 1993, respectively.
The following narrative is written with the presumption that the users
have read or have access to the Company's 1993 Form 10-K, which contains
the latest audited financial statements and notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations as of December 31, 1993, and for the year then ended.
Therefore, only material changes in financial condition and results of
operations are discussed herein.
ACCOUNTING CHANGES
At December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 114 (FAS 114), "Accounting by Creditors for
Impairment of a Loan." FAS 114 imposes certain requirements on the
measurement of impaired loans. The Company had previously measured loan
impairment in accordance with the methods prescribed in FAS 114. As a
result, no additional loss provisions were required by early adoption of
the pronouncement. FAS 114 also requires that impaired loans for which
foreclosure is probable should be accounted for as loans. Amounts at
September 30, 1993, have not been restated.
Effective December 31, 1993, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities." FAS 115 establishes three investment
classifications: held to maturity, trading, and available for sale. In
accordance with FAS 115, the Company modified its accounting policies as of
December 31, 1993, to identify investment securities as either held to
maturity or available for sale. The Company has no trading securities.
Held to maturity securities are recorded at cost with any discount or
premium amortized using a method that is not materially different from the
interest method. Securities held to maturity are recorded at cost because
the Company has the ability to hold these securities to maturity and
because it is Management's intention to hold them to maturity. Securities
available for sale increase the Company's portfolio management flexibility
for investments and are reported at fair value. Net unrealized gains and
losses are excluded from earnings and reported net of applicable income
taxes as a separate component of stockholders' equity until realized.
<PAGE>PAGE 8
<TABLE>
<CAPTION>
Golden West Financial Corporation
Financial Highlights
(Unaudited)
($000s omitted except per share figures)
September 30 September 30 December 31
1994 1993 1993
------------ ------------ -----------
<S> <C> <C> <C>
Assets $30,066,501 $28,432,763 $28,829,288
Loans receivable 25,670,613 23,660,080 23,912,571
Mortgage-backed securities 1,239,409 1,414,363 1,522,536
Customer deposits 18,530,133 17,565,432 17,422,484
Stockholders' equity 2,063,573 1,922,276 2,065,604
Stockholders' equity/total assets 6.86% 6.76% 7.16%
Book value per common share $ 33.85 $ 30.03 $ 32.31
Common shares outstanding 60,961,755 64,016,610 63,928,935
Yield on loan portfolio 6.62% 6.89% 6.73%
Yield on mortgage-backed securities 8.44% 9.09% 8.67%
Yield on investments 5.16% 3.58% 3.80%
Yield on earning assets 6.60% 6.74% 6.61%
Cost of deposits 4.05% 4.02% 3.92%
Cost of borrowings 5.23% 4.83% 4.69%
Cost of funds 4.42% 4.28% 4.18%
Yield on earning assets less cost of funds 2.18% 2.46% 2.43%
Ratio of nonperforming assets to total assets 1.35% 1.32% 1.37%
Ratio of troubled debt restructured to total assets .20%(a) .08% .13%
World Savings and Loan Association:
Net worth $ 2,325,607 $ 2,051,047 $ 2,164,651
Net worth/total assets 7.83% 7.39% 7.72%
Regulatory capital ratios:
Tangible capital 7.41% 6.94% 7.27%
Core capital 7.79% 7.69% 8.02%
Risk-based capital(b) 15.67% 16.72% 17.42%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
New real estate loans originated $ 1,782,660 $ 1,577,475 $ 4,635,925 $ 4,842,950
Average yield on new real estate loans 6.35% 6.80% 6.37% 6.94%
Increase in customer deposits $ 615,307 $ 504,208 $ 1,107,649 $ 1,079,186
Net earnings 56,125 63,768 183,364 205,935
Net earnings per share .91 1.00 2.91 3.22
Cash dividends on common stock .075 .065 .225 .195
Average common shares outstanding 61,655,775 64,005,260 62,955,404 63,988,501
Ratios:(c)
Net earnings/average net worth 10.77% 13.47% 11.70% 15.02%
Net earnings/average assets .76% .89% .83% .98%
Net interest income/average assets 2.38% 2.58% 2.51% 2.62%
General and administrative expense/average assets 1.01% .98% 1.01% .95%
</TABLE>
(a) Included in TDR ratio is 0.07% or $20 million related to the January 1994
Southern California earthquake.
(b) The decrease in the risk-based capital ratio from December 1993 to
September 1994 was due to the March 1994 change in regulations concerning
the criteria used to determine the risk weighting for multi-family loans
in the calculation of the risk-based capital ratio. Due to uncertainty
over how the new regulations will be applied, World Savings has taken a
conservative approach and, pending further clarification from the Office of
Thrift Supervision, has weighted the Association's entire multi-family
portfolio at 100%.
(c) Ratios are annualized by multiplying the quarterly computation by four and
the nine-month computation by one and one-third. Averages are computed by
adding the beginning balance and each month end balance during the quarter
and the nine-month period and dividing by four and ten, respectively.
<PAGE>PAGE 9
FINANCIAL CONDITION
The consolidated condensed balance sheet shown in the table below
presents the Company's assets and liabilities in percentage terms at
September 30, 1994, and 1993, and December 31, 1993. The reader is
referred to page 43 of the Company's 1993 Form 10-K for similar information
for the years 1990 through 1993 and a discussion of the changes in the
composition of the Company's assets and liabilities in those years.
<TABLE>
<CAPTION>
TABLE 1
Consolidated Condensed Balance Sheet
September 30
------------------ December 31
1994 1993 1993
------ ------ -----------
<S> <C> <C> <C>
Assets:
Cash and investments 6.7% 8.0% 8.4%
Mortgage-backed securities 4.1 5.0 5.3
Loans receivable 85.4 83.2 82.9
Other assets 3.8 3.8 3.4
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
Liabilities and Stockholders' Equity:
Customer deposits 61.6% 61.8% 60.4%
Federal Home Loan Bank advances 20.7 22.1 21.8
Securities sold under agreements
to repurchase 2.1 1.0 1.5
Medium-term notes 2.2 2.4 2.4
Other liabilities 2.4 2.3 2.5
Subordinated debt 4.1 3.6 4.2
Stockholders' equity 6.9 6.8 7.2
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
As the above table shows, customer deposits represent the majority of
the Company's liabilities. On the other side of the balance sheet, the
loan portfolio, which consists primarily of long-term mortgages, is the
largest asset component. The disparity between the repricing (maturity or
interest rate change) of deposits and other liabilities and the repricing
of mortgage loans can affect the Company's liquidity and can have a
material impact on the Company's results of operations. Assets tend to
reprice more slowly than liabilities as commented in the spreads section on
pages 26 and 27. The difference between the repricing characteristics of
assets and liabilities is commonly referred to as the gap. The gap table
on the following page shows the repricing of the Company's assets and
liabilities at September 30, 1994.
<PAGE>PAGE 10
<TABLE>
<CAPTION>
TABLE 2
Repricing of Interest-Earning Assets and Interest-Bearing Liabilities,
Repricing Gaps, and Gap Ratio
(Dollars in Millions)
September 30, 1994
Projected Repricing(a)
------------------------------------------------------
0 - 3 4 - 12 1 - 5 Over 5
Months Months Years Years Total
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Investments $ 505 $ 462 $ 784 $ 112 $ 1,863
Mortgage-backed securities 109 100 413 618 1,240
Loans receivable:
Rate-sensitive 18,756 2,975 616 -0- 22,347
Fixed-rate 73 224 975 1,766 3,038
Other(b) 413 -0- -0- -0- 413
Impact of hedging 1,186 145 (641) (690) -0-
------- ------- ------- ------ -------
Total $21,042 $ 3,906 $ 2,147 $1,806 $28,901
======= ======= ======= ====== =======
Interest-Bearing Liabilities(c):
Customer deposits $ 6,553 $ 6,558 $ 5,232 $ 187 $18,530
FHLB advances 4,609 1,000 540 80 6,229
Other borrowings 567 54 1,084 808 2,513
Impact of hedging 5,051 (2,307) (2,795) 51 -0-
------- ------- ------- ------ -------
Total $16,780 $ 5,305 $ 4,061 $1,126 $27,272
======= ======= ======= ====== =======
Repricing gap $ 4,262 $(1,399) $(1,914) $ 680
======= ======= ======= ======
Cumulative gap $ 4,262 $ 2,863 $ 949 $1,629
======= ======= ======= ======
Cumulative gap as a percentage of
total assets 14.2% 9.5% 3.2%
======= ======= =======
</TABLE>
(a) Based on scheduled maturity or scheduled repricing; loans reflect scheduled
repayments and projected prepayments of principal.
(b) Includes cash in banks and FHLB stock.
(c) Liabilities with no maturity date, such as passbook and money market
deposit accounts, are assigned zero months.
CASH AND INVESTMENTS
The Office of Thrift Supervision (OTS) requires insured institutions,
such as the Company's principal subsidiary, World Savings and Loan
Association (World or Association), to maintain a minimum amount of cash
and certain qualifying investments for liquidity purposes. The current
minimum requirement is equal to a monthly average of 5% of customer depos-
its and short-term borrowings. For the months ended September 30, 1994,
and 1993, and December 31, 1993, World's average regulatory liquidity ratio
was 7%, 9%, and 8%, respectively, consistently exceeding the requirement.
<PAGE>PAGE 11
Effective December 31, 1993, the Company adopted FAS 115, "Accounting
for Certain Investments in Debt and Equity Securities." FAS 115
establishes three investment classifications: held to maturity, trading,
and available for sale. At September 30, 1994, and December 31, 1993, the
Company had no securities held to maturity or for trading. At
September 30, 1994, and December 31, 1993, the Company had securities
available for sale in the amount of $1.7 billion and $1.6 billion,
respectively, and unrealized gains on securities available for sale
included in stockholders' equity of $21 million and $41 million,
respectively. For the impact on stockholders' equity, see page 23. The
Company has other investments that are recorded at cost with any discount
or premium amortized using a method that is not materially different from
the interest method. The adoption of FAS 115 resulted in the
reclassification of certain securities from the investment securities
portfolio to the securities available for sale portfolio. Prior to
December 31, 1993, securities were classified as either securities held for
sale or investment securities. At September 30, 1993, the Company had
$659 million of securities held for sale. Securities held for sale were
recorded at the aggregate portfolio's lower of amortized cost or market,
with any unrealized losses included in earnings.
Included in the securities available for sale at September 30, 1994,
and December 31, 1993, were collateralized mortgage obligations (CMOs) in
the amount of $742 million and $275 million, respectively. The Company
holds CMOs on which both principal and interest are received. At
September 30, 1994, the majority of the Company's CMOs had remaining terms
to maturity of five years or less and qualified for inclusion in regulatory
liquidity measurement. A majority of the CMOs are fixed rate and are
subject to prepayment and interest rate risk. In rising interest rate
environments, the rate of repayment of this type of CMO security tends to
decrease because of the reduced volume of prepayments on the underlying
mortgages.
MORTGAGE-BACKED SECURITIES
FAS 115 also requires the same three classifications for
mortgage-backed securities (MBS): held to maturity, trading, and available
for sale. In accordance with FAS 115, the Company modified its accounting
policies as of December 31, 1993, to identify MBS as either held to
maturity or available for sale. The Company has no trading MBS. At
September 30, 1994, September 30, 1993, and December 31, 1993, the Company
had mortgage-backed securities held to maturity in the amount of
$523 million, $1.4 billion, and $408 million, respectively. At
September 30, 1994, and December 31, 1993, the Company had mortgage-backed
securities available for sale in the amount of $717 million and
$1.1 billion, respectively, and unrealized gains on mortgage-backed
securities included in stockholders' equity of $14 million and $44 million,
respectively.
<PAGE>PAGE 12
Repayments of MBS during the third quarter and first nine months of
1994 were $50 million and $279 million, respectively, compared to
$181 million and $476 million in the same periods of 1993.
The mortgage-backed securities held are primarily fixed-rate
pass-through obligations and are subject to prepayment and interest rate
risk similar to fixed-rate loans. In rising interest rate environments,
the rate of repayment on this type of mortgage-backed security tends to
decrease because of lower prepayments on the underlying mortgages.
LOAN PORTFOLIO
LOAN VOLUME
New loan originations for the quarter and nine months ended
September 30, 1994, amounted to $1.8 billion and $4.6 billion,
respectively, compared to $1.6 billion and $4.8 billion for the same
periods in 1993. Refinanced loans constituted 33% and 44% of new loan
originations for the quarter and nine months ended September 30, 1994,
respectively, compared to 57% and 58% for the quarter and nine months ended
September 30, 1993. In the first nine months of 1994, the rising cost of
new fixed-rate mortgages caused the volume of refinance activity in
the marketplace to drop considerably from the high levels of 1993. Higher
rates have brought other market changes as well, including a renewed
consumer interest in adjustable rate mortgages, which are currently more
attractively priced than traditional fixed-rate loans. The increased
customer preference for adjustable rate instruments combined with the
Company's expanded loan origination staff contributed to the 13% increase
in 1994's third quarter originations as compared to the previous year.
Although the Company has lending operations in 22 states, the primary
mortgage origination focus continues to be on residential properties in
California. For the quarter and nine months ended September 30, 1994, 59%
and 64%, respectively, of total loan originations were on residential
properties in California compared to 71% and 75% for the same periods in
1993. Although California originations continue to be a large portion of
total originations, the decrease in 1994 as compared to 1993 was due to
increased activity by the Company in markets outside California and the
decrease of originations in California. The percentage of the total loan
portfolio that is comprised of residential loans in California was 79% at
September 30, 1994, compared to 82% at September 30, 1993, and 81% at
December 31, 1993.
The tables on the following two pages show the Company's loan
portfolio by state at September 30, 1994, and 1993.
<PAGE>PAGE 13
<TABLE>
<CAPTION>
TABLE 3
Loan Portfolio by State
September 30, 1994
($000s Omitted)
Residential
------------------------ Commercial Loans as
Real Estate Real Total a % of
State 1 - 4 5+ Land Estate Loans (a) Portfolio
- - - ------------ ----------- ---------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
California $17,073,781 $3,272,319 $ 293 $ 83,959 $20,430,352 78.96%
Colorado 637,409 151,320 -0- 8,632 797,361 3.08
Illinois 551,839 157,661 -0- 4,868 714,368 2.76
New Jersey 594,290 40 -0- 155 594,485 2.30
Washington 263,322 229,284 -0- 824 493,430 1.91
Texas 442,100 3,240 607 1,792 447,739 1.73
Florida 410,158 -0- 342 2,142 412,642 1.60
Virginia 320,910 791 -0- 1,736 323,437 1.25
Arizona 236,714 9,818 -0- 1,828 248,360 0.96
Pennsylvania 226,061 -0- -0- 4,978 231,039 0.89
Connecticut 218,598 -0- -0- -0- 218,598 0.85
Maryland 183,772 -0- -0- 654 184,426 0.71
Oregon 138,442 8,246 -0- 3,966 150,654 0.58
Kansas 121,968 5,347 -0- 230 127,545 0.49
Nevada 113,252 1,343 -0- -0- 114,595 0.44
Missouri 60,254 8,060 -0- 79 68,393 0.26
New York 58,568 169 -0- -0- 58,737 0.23
Utah 52,216 71 -0- 2,213 54,500 0.21
Georgia 50,459 -0- -0- 2,545 53,004 0.20
Ohio 32,297 3,762 835 6,508 43,402 0.17
Wisconsin 19,737 3,746 -0- -0- 23,483 0.09
Washington DC 18,612 -0- -0- -0- 18,612 0.07
New Mexico 11,708 -0- -0- -0- 11,708 0.05
Minnesota 6,192 -0- -0- -0- 6,192 0.02
Idaho 5,421 -0- -0- -0- 5,421 0.02
Delaware 5,057 -0- -0- -0- 5,057 0.02
Other 24,521 486 -0- 10,478 35,485 0.15
----------- ---------- ------ -------- ----------- ------
Totals $21,877,658 $3,855,703 $2,077 $137,587 25,873,025 100.00%
=========== ========== ====== ======== ======
FAS 91 deferred loan fees (95,173)
Loan discount on purchased loans (7,141)
Undisbursed loan funds (2,839)
Allowance for loan losses (123,262)
LTF interest reserve (809)
TDR interest reserve (3,098)
Loans on customer deposits 29,910
-----------
Total loan portfolio $25,670,613
===========
</TABLE>
(a) The Company has no commercial loans.
<PAGE>PAGE 14
<TABLE>
<CAPTION>
TABLE 4
Loan Portfolio by State
September 30, 1993
($000s Omitted)
Residential
------------------------ Commercial Loans as
Real Estate Real Total a % of
State 1 - 4 5+ Land Estate Loans (a) Portfolio
- - - ------------ ----------- ---------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
California $16,290,559 $3,275,268 $ 313 $ 91,408 $19,657,548 82.49%
Colorado 579,156 101,217 -0- 6,788 687,161 2.88
New Jersey 537,377 41 -0- 175 537,593 2.26
Illinois 388,296 124,426 -0- 5,463 518,185 2.17
Washington 194,503 205,920 -0- 849 401,272 1.68
Florida 303,359 118 32 4,267 307,776 1.29
Virginia 222,822 -0- -0- 2,819 225,641 0.95
Texas 195,237 4,328 619 1,364 201,548 0.85
Connecticut 174,272 -0- -0- -0- 174,272 0.73
Arizona 157,891 4,347 -0- 1,903 164,141 0.69
Kansas 125,678 5,483 -0- 238 131,399 0.55
Pennsylvania 120,577 110 -0- 9,649 130,336 0.55
Oregon 111,665 10,542 -0- 4,127 126,334 0.53
Maryland 112,540 -0- -0- 2,965 115,505 0.49
Nevada 87,201 1,428 -0- -0- 88,629 0.37
Missouri 62,565 8,202 -0- 80 70,847 0.30
New York 69,237 174 -0- 665 70,076 0.29
Georgia 63,574 -0- -0- 2,817 66,391 0.28
Ohio 48,283 6,279 1,114 4,734 60,410 0.25
Utah 34,581 142 -0- 2,390 37,113 0.16
Other 37,789 5,506 -0- 14,016 57,311 0.24
----------- ---------- ------ -------- ----------- ------
Totals $19,917,162 $3,753,531 $2,078 $156,717 23,829,488 100.00%
=========== ========== ====== ======== ======
FAS 91 deferred loan fees (103,733)
Loan discount on purchased loans (9,358)
Undisbursed loan funds (2,117)
Allowance for loan losses (84,090)
LTF interest reserve (953)
TDR interest reserve (736)
Loans on customer deposits 31,579
-----------
Total loan portfolio $23,660,080
===========
</TABLE>
(a) The Company has no commercial loans.
<PAGE>PAGE 15
Golden West continues to emphasize adjustable rate mortgages
(ARMs)--loans with interest rates that change periodically in accordance
with movements in specified indexes. The portion of the mortgage portfolio
(excluding mortgage-backed securities) composed of rate-sensitive loans was
89% at September 30, 1994, compared to 87% at September 30, 1993, and
December 31, 1993. While rates on fixed-rate mortgages rose significantly
during the first nine months of 1994, lower rates on ARM loans made
adjustable instruments more attractive in the marketplace. Golden West's
ARM originations constituted approximately 90% of new mortgage loans made
by the Company in the first nine months of 1994 compared to 76% in the
first nine months of 1993.
The weighted average maximum lifetime cap rate on the Association's
ARM portfolio was 13.49%, or 7.18% above the actual weighted average rate,
at September 30, 1994, versus 13.92%, or 7.33% above the weighted average
rate, at September 30, 1993.
Approximately $4.5 billion of the Association's loans have terms that
state that the interest rate may not fall below a lifetime floor set at the
time of origination. As of September 30, 1994, $1.2 billion of these loans
were at their rate floors. The weighted average floor rate on these loans
was 7.37% at September 30, 1994. Without the floor, the average yield on
these loans would have been 6.17%.
Loan repayments consisting of monthly loan amortization, payoffs, and
refinances during the third quarter and first nine months of 1994 were
$687 million and $2.6 billion, respectively, compared to $990 million and
$2.7 billion in the same periods of 1993. The decrease in loan repayments
for the first nine months of 1994 was primarily due to lower mortgage
payoffs and lower refinances within our loan portfolio in the second and
third quarters.
The Company adopted Statement of Financial Accounting Standards
No. 114 (FAS 114), "Accounting by Creditors for Impairment of a Loan," in
the fourth quarter of 1993, retroactive to January 1, 1993. See
"Accounting Changes" on page 7.
Based on current assessments of severity of damage, borrower equity,
and levels of insurance coverage, the Company believes that any potential
loss from the Northridge (Southern California) earthquake in January 1994
will not be material to the financial condition and results of operations
of the Company. The first nine months of 1994 loan loss reserve and
provision for loan losses included $3.7 million in loss reserves
specifically identified as earthquake losses. In addition, at
September 30, 1994, troubled debt restructured, which are loans that have
been temporarily modified due to a weakness in the collateral and/or
borrower, included $20 million of loans modified as a result of the
Southern California earthquake.
<PAGE>PAGE 16
NONPERFORMING ASSETS
One measure of the soundness of the Company's portfolio is its ratio
of nonperforming assets (NPAs) to total assets. Nonperforming assets
include non-accrual loans (loans that are 90 days or more past due) and
real estate acquired through foreclosure. Loans in-substance foreclosed
are no longer classified as part of the real estate held for sale portfolio
upon adoption of FAS 114 during December 1993 and are now included in the
Company's total loan portfolio as previously discussed. No interest is
recognized on non-accrual loans.
The table below shows the components of the Company's nonperforming
assets and the ratio of nonperforming assets to total assets at
September 30, 1994, and 1993, and December 31, 1993.
<TABLE>
<CAPTION>
TABLE 5
Nonperforming Assets
($000s Omitted)
September
------------------------ December 31
1994 1993 1993
-------- -------- -----------
<S> <C> <C> <C>
Non-accrual loans $342,192 $300,242 $330,062
Real estate acquired
through foreclosure 62,239 63,985 62,724
Loans in-substance foreclosed -0- 9,068 -0-
Real estate in judgement 805 1,084 1,366
-------- -------- --------
Total nonperforming assets $405,236 $374,379 $394,152
======== ======== ========
Ratio of nonperforming
assets to total assets 1.35% 1.32% 1.37%
======== ======== ========
</TABLE>
The increase in NPAs in 1994 was primarily in California single-family
loans. The weak economy and high unemployment in California resulted in an
increase in loan delinquencies and foreclosures and, in certain areas,
decreases in real estate prices. The growth in the total dollar amount of
NPAs has also been impacted by a continued high level of bankruptcy
filings, which often delay the collection process and extend the length of
time a loan remains delinquent. The Company continues to closely monitor
all delinquencies and takes appropriate steps to protect its interests.
Interest foregone on non-accrual loans in the third quarter and first nine
months of 1994 amounted to $4 million and $14 million, respectively,
compared to $4 million and $15 million in the same periods of 1993.
The tables on the following two pages show the Company's nonperforming
assets by state at September 30, 1994, and 1993.
<PAGE>PAGE 17
<TABLE>
<CAPTION>
TABLE 6
Nonperforming Assets by State
September 30, 1994
($000s Omitted)
Non-Accrual Loans(a)
------------------------------ Real Estate Owned
Residential ---------------------------- NPAs as
Real Estate Commercial Residential Total a % of
State 1-4 5+ Real Estate 1-4 5+ Commercial NPAs Loans
- - - ------------ -------- ------- ----------- ------- ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $274,958 $25,550 $ 990 $47,826 $7,034 $4,471 $360,829 1.77%
Colorado 1,810 -0- 3,141 177 -0- 153 5,281 0.66
Illinois 3,145 774 -0- 244 -0- -0- 4,163 0.58
New Jersey 10,866 -0- -0- 1,676 -0- -0- 12,542 2.11
Washington 519 -0- -0- 121 -0- -0- 640 0.13
Texas 1,003 -0- -0- 351 -0- -0- 1,354 0.30
Florida 2,493 -0- 372 418 -0- -0- 3,283 0.80
Virginia 1,687 -0- -0- 147 -0- -0- 1,834 0.57
Arizona 1,608 -0- -0- -0- -0- -0- 1,608 0.65
Pennsylvania 1,899 -0- -0- 66 -0- -0- 1,965 0.85
Connecticut 3,890 -0- -0- (252)(b) -0- -0- 3,638 1.66
Maryland 514 -0- -0- 678 -0- -0- 1,192 0.65
Oregon 324 -0- -0- -0- -0- -0- 324 0.22
Kansas 602 40 -0- 266 -0- -0- 908 0.71
Nevada 560 -0- -0- -0- -0- -0- 560 0.49
Missouri 359 44 -0- 117 287 -0- 807 1.18
New York 3,492 -0- -0- 778 -0- -0- 4,270 7.27
Utah 125 -0- -0- -0- -0- -0- 125 0.23
Georgia 1,026 -0- -0- 211 -0- -0- 1,237 2.33
Ohio 40 -0- 211 -0- -0- -0- 251 0.58
Wisconsin -0- -0- -0- -0- -0- -0- -0- 0.00
Washington DC -0- -0- -0- -0- -0- -0- -0- 0.00
New Mexico 4 -0- -0- -0- -0- -0- 4 0.03
Minnesota -0- -0- -0- -0- -0- -0- -0- 0.00
Idaho -0- -0- -0- -0- -0- -0- -0- 0.00
Delaware -0- -0- -0- -0- -0- -0- -0- 0.00
Other 146 -0- -0- -0- -0- -0- 146 0.47
-------- ------- ------ ------- ------ ------ -------- -----
Totals $311,070 $26,408 $4,714 $52,824 $7,321 $4,624 406,961 1.57
======== ======= ====== ======= ====== ======
REO general valuation allowance (1,725) 0.00
-------- -----
$405,236 1.57%
======== =====
</TABLE>
(a) Non-accrual loans are 90 days or more past due and have no unpaid interest
accrued.
(b) Amount is negative due to the cost of environmental cleanup.
<PAGE>PAGE 18
<TABLE>
<CAPTION>
TABLE 7
Nonperforming Assets by State
September 30, 1993
($000s Omitted)
Non-Accrual Loans(a)
------------------------------ Real Estate Owned
Residential ---------------------------------- NPAs as
Real Estate Commercial Residential Total a % of
State 1-4 5+ Real Estate 1-4 5+ Land Commercial NPAs Loans
- - - ------------ -------- ------- ----------- ------- ------- ---- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California $243,779 $11,794 $1,222 $48,230 $ 6,754 $-0- $4,144 $315,923 1.61%
Colorado 2,434 77 79 1,698 6,596 -0- 1,973 12,857 1.87
New Jersey 13,563 -0- 5 963 -0- 220 -0- 14,751 2.74
Illinois 2,124 -0- -0- 265 1,022 -0- -0- 3,411 0.66
Washington 259 -0- -0- -0- -0- -0- -0- 259 0.06
Florida 5,093 -0- 381 612 -0- -0- -0- 6,086 1.98
Virginia 1,338 -0- -0- 349 -0- -0- -0- 1,687 0.75
Texas 1,416 -0- -0- 186 -0- -0- -0- 1,602 0.79
Connecticut 3,555 -0- -0- 614 -0- -0- -0- 4,169 2.39
Arizona 1,552 -0- -0- 160 -0- -0- -0- 1,712 1.04
Kansas 1,213 -0- -0- 423 -0- -0- -0- 1,636 1.25
Pennsylvania 1,230 -0- -0- 114 -0- -0- -0- 1,344 1.03
Oregon 321 -0- -0- -0- -0- -0- -0- 321 0.25
Maryland 1,416 -0- -0- 149 -0- -0- -0- 1,565 1.35
Nevada 464 -0- -0- -0- -0- -0- -0- 464 0.52
Missouri 306 -0- -0- 16 626 -0- -0- 948 1.34
New York 4,002 -0- -0- 1,549 -0- -0- -0- 5,551 7.92
Georgia 1,991 -0- -0- 214 -0- -0- -0- 2,205 3.32
Ohio 16 -0- 213 -0- -0- -0- 80 309 0.51
Utah 157 -0- -0- -0- -0- -0- -0- 157 0.42
Other 242 -0- -0- -0- -0- -0- -0- 242 0.42
-------- ------- ------ ------- ------- ---- ------ -------- -----
Totals $286,471 $11,871 $1,900 $55,542 $14,998 $220 $6,197 377,199 1.58
======== ======= ====== ======= ======= ==== ======
REO general valuation allowance (2,820) (0.01)
-------- -----
$374,379 1.57%
======== =====
</TABLE>
(a) Non-accrual loans are 90 days or more past due and have no unpaid interest
accrued.
The Company's troubled debt restructured (TDRs) were $62 million or
0.20% of assets at September 30, 1994, compared to $23 million or 0.08% of
assets at September 30, 1993, and $37 million or 0.13% of assets at
December 31, 1993. The increase from September 1993 to September 1994 is
due in part to the December 31, 1993, FAS 114 reclassification of
in-substance foreclosed loans previously discussed, which included loans
that had been modified. In addition, at September 30, 1994, $20 million or
0.07% was related to the Southern California earthquake. The Company's
TDRs are made up of loans on which delinquent loan payments have been
capitalized or on which temporary interest rate reductions have been made,
primarily to customers negatively impacted by adverse economic conditions.
Interest foregone on TDRs amounted to $220 thousand and $465 thousand for
the three and nine months ended September 30, 1994, respectively, compared
to $61 thousand and $184 thousand for the quarter and nine months ended
September 30, 1993.
<PAGE>PAGE 19
The Company provides allowances for losses on loans when impaired and
real estate owned when any significant and permanent decline in value is
identified and based upon trends in the basic portfolio. Additions to and
reductions from the allowances are reflected in current earnings. Periodic
reviews are made of major loans and real estate owned, and major lending
areas are regularly reviewed to determine potential problems. Where
indicated, valuation allowances are established or adjusted. In estimating
loan losses, consideration is given to the estimated sale price, cost of
refurbishing, payment of delinquent taxes, cost of disposal, and cost of
holding the property.
The table below shows the changes in the allowance for loan losses for
the three and nine months ended September 30, 1994, and 1993.
<TABLE>
<CAPTION>
TABLE 8
Changes in the Allowance for Loan Losses
($000s Omitted)
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Beginning allowance for
loan losses $118,587 $78,617 $106,698 $70,924
Provision charged to expense 15,996 16,196 50,434 40,837
Less loans charged off (11,621) (11,002) (34,646) (28,493)
Add recoveries 300 279 776 822
-------- ------- -------- -------
Ending allowance for loan
losses $123,262 $84,090 $123,262 $84,090
======== ======= ======== =======
Ratio of net chargeoffs to
average loans outstanding
(excluding MBS) .18% .18% .18% .16%
======== ======= ======== =======
Ratio of allowance for loan
losses to nonperforming
assets 30.4% 22.5%
======== =======
</TABLE>
The Company utilizes a methodology for monitoring and estimating loan
losses that is based on both historical experience in the loan portfolio
and factors reflecting current economic conditions. This approach uses a
data base that identifies losses on loans and foreclosed real estate from
past years to the present, broken down by year of origination, type of
loan, and geographical area. Management is then able to estimate a range
of loss allowances to cover losses in the portfolio. The increase in the
allowance and the provision in 1994 over 1993 was considered prudent given
the still weak California economy, the increase in the size of the loan
portfolio, and the January 1994 Southern California earthquake previously
noted.
<PAGE>PAGE 20
Chargeoffs increased as a result of the increase in nonperforming
loans, the increase in real estate owned, and the increased losses on real
estate owned.
CUSTOMER DEPOSITS
Customer deposits increased during the third quarter of 1994 by
$615 million, including interest credited of $149 million, compared to a
customer deposit increase of $504 million, including interest credited of
$146 million and the acquisition of seven branches in Arizona containing
$320 million in deposits and the sale of two branches in Ohio containing
$133 million in deposits, in the third quarter of 1993. Customer deposit
balances for the first nine months of 1994 increased by $1.1 billion,
including interest credited of $420 million and the acquisition of three
branches in New Jersey containing $78 million in deposits, compared to an
increase of $1.1 billion, including interest credited of $426 million and
the acquisition of seven branches in Arizona containing $320 million in
deposits and the sale of two branches in Ohio containing $133 million in
deposits, in the same period of 1993. The net increase of customer
deposits during the first nine months of 1994 resulted from the improvement
in the savings market as interest rates rose. The increase in 1993 was a
result of special promotions in the Company's savings markets.
In the event of the appointment of a receiver for a federally
chartered savings association, such as the Association, based upon the
failure of the savings association to meet certain minimum capital
requirements or the existence of certain other conditions, the Federal
Deposit Insurance Act recognizes a priority in favor of holders of
withdrawable deposits (including the FDIC subrogee or transferee) over
general creditors (including Holders of the Notes). Thus, claims for
deposits would have a priority over claim of Holders of the Notes. As of
September 30, 1994, the Association had approximately $18.5 million of
deposits outstanding.
<PAGE>PAGE 21
The table below shows the Company's customer deposits by interest rate
and by remaining maturity at September 30, 1994, and 1993.
<TABLE>
<CAPTION>
TABLE 9
Customer Deposits
(Dollars in millions)
September 30
-------------------------------------
1994 1993
---------------- ----------------
Rate* Amount Rate* Amount
---------------- ----------------
<S> <C> <C> <C> <C>
Customer deposits by interest rate:
Interest-bearing checking
accounts 1.27% $ 726 1.46% $ 705
Passbook accounts 2.16 667 2.21 607
Money market deposit accounts 2.95 2,048 3.40 2,413
Term certificate accounts with
original maturities of:
4 weeks to 1 year 3.75 4,151 3.29 4,489
1 to 2 years 4.27 5,890 3.92 4,702
2 to 3 years 4.58 1,895 4.92 1,377
3 to 4 years 5.25 849 6.28 1,162
4 years and over 5.58 2,084 6.08 1,999
Retail jumbo CDs 4.81 208 5.59 90
All other 7.80 12 7.75 21
------- -------
$18,530 $17,565
======= =======
Customer deposits by remaining maturity:
No contractual maturity $ 3,441 $ 3,725
Maturity within one year:
4th quarter 3,112 3,413
1st quarter 3,174 2,993
2nd quarter 1,780 1,922
3rd quarter 1,604 1,653
------- -------
9,670 9,981
1 to 2 years 3,236 1,886
2 to 3 years 901 466
3 to 4 years 508 577
4 years and over 774 930
------- -------
$18,530 $17,565
======= =======
</TABLE>
*Weighted average interest rate, including the effect of hedging
transactions.
<PAGE>PAGE 22
ADVANCES FROM FEDERAL HOME LOAN BANKS
The Company uses FHLB borrowings, also known as "advances," to
supplement cash flow and to provide funds for loan origination activities.
Advances offer strategic advantages for asset-liability management,
including long-term maturities and, in certain cases, prepayment at the
Company's option. FHLB advances amounted to $6.2 billion at
September 30, 1994, compared to $6.3 billion at September 30, 1993, and
December 31, 1993.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company borrows funds through transactions in which securities are
sold under agreements to repurchase (Reverse Repos). These funds are used
to take advantage of arbitrage investment opportunities and to supplement
cash flow. Reverse Repos are entered into with selected major government
securities dealers, as well as large banks, typically using MBS from the
Company's portfolio. Reverse Repos with dealers and banks amounted to
$568 million, $217 million, and $377 million at September 30, 1994, and
1993, and December 31, 1993, respectively.
OTHER BORROWINGS
Golden West currently has on file a registration statement with the
Securities and Exchange Commission for the sale of up to $100 million of
subordinated debt securities. The Company had issued a total of
$1.0 billion of subordinated debt at September 30, 1994. As of
September 30, 1994, Golden West's subordinated debt securities were rated
A3 and A- by Moody's Investors Service (Moody's) and Standard & Poor's
Corporation (S&P), respectively.
World currently has on file shelf registrations with the OTS for the
issuance of $2.0 billion of unsecured medium-term notes. At
September 30, 1994, $1.2 billion was available for issuance. The
Association had medium-term notes outstanding under the current and prior
registrations with principal amounts of $664 million at September 30, 1994,
compared to $676 million at September 30, 1993, and $677 million at
December 31, 1993. As of September 30, 1994, the Association's medium-term
notes were rated A1 and A+ by Moody's and S&P, respectively.
World also has on file a registration statement with the OTS for the
sale of up to $250 million of subordinated notes. Under a prior filing
with the OTS, $50 million of subordinated notes remain unissued. As of
September 30, 1994, the Association had issued a total of $200 million of
subordinated notes. As of September 30, 1994, World's subordinated notes
were rated A2 and A by Moody's and S&P, respectively. The subordinated
notes are included in the Association's risk-based regulatory capital as
Supplementary Capital.
<PAGE>PAGE 23
STOCKHOLDERS' EQUITY
The Company's stockholders' equity decreased during the first nine
months of 1994 due to the $50 million decrease in unrealized gains on
securities available for sale caused by the decrease in market values of
securities available for sale since December 31, 1993, and due to the
$124 million cost of repurchasing the Company stock. These decreases in
stockholders' equity were partially offset by 1994's net earnings. The
Company's stockholders' equity increased in the first nine months of 1993
through the retention of net earnings.
On October 31, 1994, the Company received from World a dividend in the
amount of $150 million. The primary purpose of the dividend was to finance
the Company's stock repurchase program.
On October 28, 1993, the Company's Board of Directors authorized the
purchase by the Company of up to 3.2 million shares of Golden West's common
stock. On July 28, 1994, the Company's Board of Directors authorized the
purchase by the Company of an additional 3.1 million shares of Golden
West's common stock. As of September 30, 1994, 3.3 million shares had been
repurchased and retired at a cost of $131.6 million since October 28, 1993,
of which 2.0 million shares were purchased and retired at a cost of
$80.3 million during the third quarter of 1994. At September 30, 1994, the
total remaining shares authorized for repurchase was 3.0 million shares.
At the September 30, 1994, market price of $39.625 per share, the remaining
authorized but unacquired shares would require $118 million to repurchase.
The repurchase of Company stock is not intended to have a material impact
on the normal liquidity of the Company.
The Company has on file a shelf registration statement with the
Securities and Exchange Commission to issue up to two million shares of its
preferred stock. The preferred stock may be sold from time to time in one
or more transactions for total proceeds of up to $200 million. The
preferred stock may be issued in one or more series, may have varying
provisions and designations, and may be represented by depository shares.
The preferred stock is not convertible into common stock. No preferred
stock has yet been issued under the registration. The Company's preferred
stock has been preliminarily rated a2 by Moody's.
REGULATORY CAPITAL
The OTS requires federally insured institutions, such as World, to
meet certain minimum capital requirements. The table on the following page
shows World's current regulatory capital ratios and compares them to the
current OTS minimum requirements at September 30, 1994, and 1993.
<PAGE>PAGE 24
<TABLE>
<CAPTION>
TABLE 10
World Savings and Loan Association
Regulatory Capital Ratios
Under Current Requirements
($000s Omitted)
1994 1993
----------------------------------------- -----------------------------------------
ACTUAL REQUIRED ACTUAL REQUIRED
------------------- ------------------ ------------------- ------------------
Capital Ratio Capital Ratio Capital Ratio Capital Ratio
---------- ------ ---------- ----- ---------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tangible $2,191,727 7.41% $ 443,548 1.50% $1,917,726 6.94% $ 414,249 1.50%
Core 2,302,614 7.79 887,096 3.00 2,124,851 7.69 828,499 3.00
Risk-based 2,607,182 15.67 1,331,353 8.00 2,400,407 16.72 1,148,350 8.00
</TABLE>
During the first quarter of 1994, the Office of Thrift Supervision
changed the regulations concerning the criteria used to determine the risk
weighting for multi-family loans in the calculation of the risk-based
capital ratio. Due to uncertainty over how the new regulations will be
applied, World Savings has taken the conservative approach and, pending any
further clarification from the OTS, has weighted the Association's entire
multi-family portfolio at 100%. This change caused a decrease in the
risk-based capital ratio from September 1993 to September 1994.
The table below shows World's regulatory capital ratios and compares
them to the fully phased-in 1995 OTS minimum requirements at
September 30, 1994, and 1993.
<TABLE>
<CAPTION>
TABLE 11
World Savings and Loan Association
Regulatory Capital Ratios
Under Fully Phased-In Requirements
($000s Omitted)
1994 1993
----------------------------------------- -----------------------------------------
ACTUAL REQUIRED ACTUAL REQUIRED
------------------- ------------------ ------------------- ------------------
Capital Ratio Capital Ratio Capital Ratio Capital Ratio
---------- ------ ---------- ----- ---------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tangible $2,191,727 7.41% $ 443,548 1.50% $1,917,726 6.94% $ 414,249 1.50%
Core 2,191,727 7.41 887,096 3.00 1,917,726 6.94 828,499 3.00
Risk-based 2,496,295 15.10 1,322,482 8.00 2,192,253 15.50 1,131,698 8.00
</TABLE>
<PAGE>PAGE 25
The table below shows a reconciliation of World's equity capital to
regulatory capital under OTS regulations at September 30, 1994.
<TABLE>
<CAPTION>
TABLE 12
Reconciliation of Equity Capital to Regulatory Capital
Under Current OTS Regulations
($000s Omitted)
Core/ Tier 1 Total
Equity Tangible Tangible Leverage Risk-Based Risk-Based
Capital Capital Equity Capital Capital Capital
----------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Common stock $ 150
Paid-in capital 233,441
Retained earnings 2,052,881
Unrealized gains on securities
available for sale 39,135
-----------
Equity capital $ 2,325,607 $ 2,325,607 $ 2,325,607 $ 2,325,607 $ 2,325,607 $ 2,325,607
===========
Positive goodwill (1) (2) (223,364) (223,364) (223,364) (223,364) (223,364)
Negative goodwill (1) (3) 89,484 89,484 89,484 89,484 89,484
Qualifying supervisory
positive goodwill (1) (2) 110,887 110,887 110,887 110,887
Equity/other investments (1,739)
Subordinated debt 199,036
General valuation allowances 107,271
----------- ----------- ----------- ---------- -----------
Regulatory capital $ 2,191,727 $ 2,302,614 $ 2,302,614 $ 2,302,614 $ 2,607,182
=========== =========== =========== =========== ===========
Total assets $29,695,969
===========
Adjusted total assets $29,569,881 $29,569,881 $29,569,881
=========== =========== ===========
Risk-weighted assets $16,641,908 $16,641,908
=========== ===========
CAPITAL RATIO - ACTUAL 7.83% 7.41% 7.79% 7.79% 13.84% 15.67%
=========== =========== =========== =========== =========== ===========
Regulatory Capital Ratio Requirements:
Well capitalized, equal to
or greater than 5.00% 6.00% 10.00%
=========== =========== ===========
Adequately capitalized,
equal to or greater than 1.50% 4.00% 4.00% 8.00%
=========== =========== =========== ===========
Undercapitalized, less than 1.50% 4.00% 4.00% 8.00%
=========== =========== =========== ===========
Significantly undercapital-
ized, less than 3.00% 3.00% 6.00%
=========== =========== ===========
Critically undercapitalized,
equal to or less than 2.00%
===========
</TABLE>
(1) All goodwill is required to be deducted from tangible capital. Goodwill
arising prior to April 12, 1989, in excess of a sliding scale limit (0.375%
of assets at September 30, 1994), is required to be deducted from all other
capital computations on a phased-in basis through December 1994. Goodwill
arising after April 12, 1989, must be deducted from all capital
computations.
(2) All but $3,909 of the Association's positive goodwill arose prior to
April 12, 1989.
(3) The Association's negative goodwill arose after April 12, 1989.
<PAGE>PAGE 26
The table below compares World's regulatory capital to the OTS well
capitalized classification of capital standards at September 30, 1994.
<TABLE>
<CAPTION>
TABLE 13
World Savings and Loan Association
Regulatory Capital Compared to Well Capitalized Classification
($000s Omitted)
ACTUAL WELL CAPITALIZED
------------------- -------------------
Capital Ratio Capital Ratio
---------- ------ ---------- ------
<S> <C> <C> <C> <C>
Leverage $2,302,614 7.79% $1,478,494 5.00%
Tier 1 risk-based 2,302,614 13.84 998,514 6.00
Total risk-based 2,607,182 15.67 1,664,191 10.00
</TABLE>
World's leverage, Tier 1 risk-based, and total risk-based capital
ratios under the fully phased-in 1995 OTS minimum requirements at
September 30, 1994, were 7.41%, 13.26%, and 15.10%, respectively.
On October 31, 1994, World paid a dividend to Golden West in the
amount of $150 million. After giving the effect to the dividend, the
September 30, 1994, World fully phased-in leverage, Tier 1 risk-based, and
total risk-based capital ratios on a pro-forma basis were 6.90%, 12.46%,
and 14.32%, respectively. The primary purpose of the dividend was to
finance Golden West's stock repurchase program.
RESULTS OF OPERATIONS
SPREADS
An important determinant of Golden West's earnings is its primary
spread--the difference between its yield on earning assets and its cost of
funds. The table below shows the components of the Company's spread at
September 30, 1994, and 1993, and December 31, 1993.
<TABLE>
<CAPTION>
TABLE 14
Yield on Earning Assets,
Cost of Funds, and Primary Spread,
Including Effect of Purchase Accounting
September 30
-------------------- December 31
1994 1993 1993
------ ------ -----------
<S> <C> <C> <C>
Yield on loan portfolio 6.62% 6.89% 6.73%
Yield on mortgage-backed securities 8.44 9.09 8.67
Yield on investments 5.16 3.58 3.80
------ ------ ------
Yield on earning assets 6.60 6.74 6.61
------ ------ ------
Cost of customer deposits 4.05 4.02 3.92
Cost of borrowings 5.23 4.83 4.69
------ ------ ------
Cost of funds 4.42 4.28 4.18
------ ------ ------
Primary spread 2.18% 2.46% 2.43%
====== ====== ======
</TABLE>
<PAGE>PAGE 27
The Company's primary spread is to some degree dependent on changes in
interest rates because Golden West's liabilities tend to respond somewhat
more rapidly to rate movements than its assets. During the first nine
months of 1994, interest rates rose, leading to an increase in the cost of
Golden West's liabilities during the third quarter. At the same time,
however, the yield on the Company's major earning asset, the loan
portfolio, declined slightly because most of Golden West's mortgages are
tied to the Eleventh District FHLB Cost of Funds Index (the COFI), which
lags changes in market rates by several months. Consequently, at
September 30, 1994, the Company's primary spread was lower than at both
December 31, 1993, and September 30, 1993.
The Company enters into a variety of derivative financial instruments
as a part of its interest rate risk management strategy. The Company does
not hold any derivative financial instruments for trading purposes. During
1994, the most frequently used derivative products are various types of
interest rate swaps and caps.
An interest rate swap is an agreement between two parties in which one
party exchanges cash payments based on a fixed or floating rate of interest
for a counterparty's cash payment based on a floating or fixed rate of
interest. The amounts to be paid are defined by agreement and determined
by applying the specified interest rates to a notional principal amount.
Interest rate swap agreements are entered into to reduce the impact of
changes in interest rates on customer deposit rates, mortgage loan yields,
or rates on other specified assets or borrowings. Some interest rate swaps
have been entered into with starting dates in the future in anticipation of
future prepayments on fixed-rate assets. The interest rate differential
paid or received on interest rate swap agreements is recognized over the
life of the agreements, with income and expense recorded in the same
category as the related balance sheet item. The related balance sheet item
is generally a pool of similar assets or liabilities.
An interest rate cap is an agreement between two parties in which one
party pays a fee for the right to receive a payment from a counterparty
based on the excess, if any, of an open market floating rate over a base
rate applied to a notional principal amount. The excess which may be
received on interest rate cap agreements reduces the impact of increases in
interest rates on consumer deposit rates and mortgage loan yields. Amounts
which may be received on interest rate cap agreements and fees paid to
purchase the agreements are recognized over the life of the agreements,
with income and expense recorded in the same category as the related
balance sheet item. The related balance sheet item is generally a pool of
similar assets or liabilities.
Derivatives decreased net interest income by $3 million and
$18 million for the three and nine month periods ended September 30, 1994,
respectively, as compared to $15 million and $57 million for the same
periods in 1993.
<PAGE>PAGE 28
The table below summarizes the unrealized gains and losses for
derivative instruments at September 30, 1994, and 1993.
<TABLE>
<CAPTION>
TABLE 15
Supplemental Schedule of Unrealized Gains and Losses on Derivative Products
($000s Omitted)
September 30, 1994 September 30, 1993
------------------------------------- -------------------------------------
Net Net
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gain (Loss) Gains Losses Gain (Loss)
---------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest rate caps $ 259 $ -0- $ 259 N/A N/A N/A
Interest rate swaps 93,668 (79,950) 13,718 $96,869 $(201,773) $(104,904)
------- -------- ------- ------- --------- ---------
Total $93,927 $(79,950) $13,977 $96,869 $(201,773) $(104,904)
======= ======== ======= ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
TABLE 16
Schedule of Derivative Activity
(Notional Amounts in Millions)
Nine Months Ended
September 30, 1994
---------------------------------------------------
Receive Pay Forward Interest
Fixed Fixed Basis Starting Rate
Swaps Swaps Swaps(a) Swaps Caps
------- ------ ----- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $2,706 $2,582 $600 $210 $ 437
Additions 2,561 124 -0- -0- -0-
Maturities/amortization (350) (336) -0- -0- (115)
Terminations -0- -0- -0- -0- -0-
Forward starting becoming effective 75 -0- -0- (75) -0-
Other -0- -0- -0- -0- -0-
------ ------ ---- ---- -----
Balance, September 30, 1994 $4,992 $2,370 $600 $135 $ 322
====== ====== ==== ==== =====
</TABLE>
(a) Receives floating, pays floating.
The table on the following page shows the Company's revenues and
expenses as a percentage of total revenues for the three and nine months
ended September 30, 1994, and 1993, in order to focus on the changes in
interest income between years as well as changes in other revenue and
expense amounts.
<PAGE>PAGE 29
<TABLE>
<CAPTION>
TABLE 17
Selected Revenue and Expense Items
as Percentages of Total Revenues
Three Months Nine Months
Ended Ended
September 30 September 30
------------ ------------
1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
Interest on loans 86.1% 84.6% 85.5% 84.9%
Interest on mortgage-backed securities 5.3 6.7 5.6 7.5
Interest and dividends on investments 6.6 5.7 6.6 4.9
----- ----- ----- -----
98.0 97.0 97.7 97.3
Less:
Interest on customer deposits 37.8 36.8 36.4 36.7
Interest on advances and other borrowings 23.1 22.3 22.2 22.8
----- ----- ----- -----
60.9 59.1 58.6 59.5
Net interest income 37.1 37.9 39.1 37.8
Provision for loan losses 3.4 3.3 3.6 2.8
----- ----- ----- -----
Net interest income after provision for
loan losses 33.7 34.6 35.5 35.0
Add:
Fees 1.3 1.6 1.6 1.5
Gain (loss) on the sale of securities and
mortgage-backed securities 0.0 0.6 0.0 0.5
Other non-interest income 0.7 0.8 0.7 0.7
----- ----- ----- -----
2.0 3.0 2.3 2.7
Less:
General and administrative expenses 15.7 14.4 15.7 13.8
Amortization of goodwill 0.1 (0.1) 0.1 (0.1)
Taxes on income 8.2 10.2 9.0 9.8
----- ----- ----- -----
Net earnings 11.7% 13.1% 13.0% 14.2%
===== ===== ===== =====
</TABLE>
INTEREST ON LOANS
In the third quarter of 1994, interest on loans was lower than in the
comparable 1993 period by $1.6 million or 0.4%. The 1994 decrease was due
to a 42 basis point decrease in the average portfolio yield and the
$2.5 million decrease in the amortization of the loan acquisition discount
offset by a $1.6 billion increase in the average portfolio balance. For
the first nine months of 1994, interest on loans was lower than in the
first nine months of 1993 by $24.6 million or 2.0% due to a 54 basis point
decrease in the average portfolio yield and a $5.5 million decrease in the
amortization of the loan acquisition discount, which was partially offset
by a $1.5 billion increase in the average portfolio balance. The loan
acquisition discount resulted from loans acquired in a 1982 merger and is
amortized as loans are repaid.
<PAGE>PAGE 30
INTEREST ON MORTGAGE-BACKED SECURITIES
In the third quarter of 1994, interest on mortgage-backed securities
was lower than in the comparable 1993 period by $7.5 million or 23.1%. The
1994 decrease was due to a 69 basis point decrease in the average portfolio
yield and a $245 million decrease in the average portfolio balance. For
the first nine months of 1994, interest on mortgage-backed securities was
lower than in the comparable 1993 period by $29.1 million or 26.8% due to a
71 basis point decrease in the average portfolio yield and a $332 million
decrease in the average portfolio balance.
INTEREST AND DIVIDENDS ON INVESTMENTS
The income earned on the investment portfolio fluctuates, depending
upon the volume outstanding and the yields available on investments. For
the third quarter of 1994, interest and dividends on investments was
$3.4 million or 12.2% higher than for the same period in 1993. The
increase was primarily due to a 128 basis point increase in the average
portfolio yield, which was partially offset by a $481 million decrease in
the average portfolio balance. For the first nine months of 1994, interest
and dividends on investments was $22.2 million or 31.7% higher than for the
same period in 1993. The increase was primarily due to a $79 million
increase in the average portfolio balance and an 86 basis point increase in
the average portfolio yield.
INTEREST ON CUSTOMER DEPOSITS
The major portion of the Company's customer deposit base consists of
savings accounts with original maturities of two years or less. Thus, the
amount of interest paid on these funds depends upon the level of short-term
interest rates and the savings balances outstanding. In the third quarter
of 1994, interest on customer deposits increased by $686 thousand or 0.4%
from the comparable period of 1993. The third quarter increase was
primarily due to an $807 million increase in the average deposit balance
partially offset by a 17 basis point decrease in the average cost of
deposits. For the first nine months of 1994, interest on customer deposits
was $19.1 million or 3.6% lower than for the same period in 1993. The nine
month decrease was primarily due to a 35 basis point decrease in the
average cost of deposits partially offset by a $901 million increase in the
average deposit balance.
INTEREST ON ADVANCES AND OTHER BORROWINGS
For the third quarter of 1994, interest on advances and other
borrowings was $1.7 million or 1.6% higher than in the same period in 1993.
The third quarter increase was primarily due to a 22 basis point increase
in the average cost of these borrowings partially offset by a $130 million
decrease in the average balance of these borrowings. For the first nine
months of 1994, interest on advances and other borrowings decreased by
$16.8 million or 5.1% compared to the same period a year earlier. The nine
month decrease was primarily due to a 24 basis point decrease in the
average cost of these borrowings, which was partially offset by a
$97 million increase in their average balance.
<PAGE>PAGE 31
PROVISION FOR LOAN LOSSES
The provision for loan losses was $16.0 million and $50.4 million,
respectively, for the three and nine months ended September 30, 1994,
compared to $16.2 million and $40.8 million for the same periods in 1993.
The 1994 increase in the provision over 1993 reflected increased
chargeoffs and the continued buildup of the loan loss reserves reflecting
an increase in nonperforming assets and the weak California economy. In
addition, the provision for the first nine months of 1994 included
$3.7 million in specific earthquake loss reserves.
GENERAL AND ADMINISTRATIVE EXPENSES
For the third quarter and first nine months of 1994, general and
administrative expenses (G & A) increased by $4.7 million or 6.7% and
$22.1 million or 11.1%, respectively, from the comparable periods in 1993.
The primary reasons for the increase in 1994 were the expansion of loan
origination capacity and savings branches primarily outside California; the
expenses of relocating some of our administrative operations to San
Antonio, Texas; the installation of enhancements to data processing
systems; and general inflation. In addition, during the first nine months
of 1993, the Company received a reduction in the FDIC premium due to the
settlement of the FSLIC secondary reserve in the amount of $2.8 million,
resulting in a reduction in deposit insurance expense for the first nine
months of 1993. G & A as a percentage of average assets on an annualized
basis was 1.01% for the third quarter and first nine months of 1994
compared to 0.98% and 0.95% for the same periods in 1993.
TAXES ON INCOME
The Company utilizes the accrual method of accounting for income tax
purposes and for preparing its published financial statements. For
financial reporting purposes only, the Company uses purchase accounting in
connection with certain assets acquired through mergers. The purchase
accounting portion of income is not subject to tax.
In the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
FAS 109 required a change from the deferred method to the liability method
of computing deferred income taxes. The Company has applied FAS 109
prospectively. FAS 109 required the Company to adjust its purchase
accounting for prior business combinations by increasing deferred tax
assets and reducing goodwill by $23 million to reflect the non-taxability
of purchase accounting income. This deferred tax asset is being amortized
over the remaining lives of the related purchased assets.
The corporate tax rate for the third quarter of 1994 was 41.0%
compared to 43.8% for the same period a year ago. The third quarter of
1993 reflects the increase in the federal corporate income tax rate from
34% to 35% retroactive to January 1, 1993, and required an increase to the
deferred tax liability. The corporate tax rate for the first nine months
of 1994 was 41.0% compared to 40.9% for the same period a year ago.
<PAGE>PAGE 32
LIQUIDITY AND CAPITAL RESOURCES
The Association's principal sources of funds are cash flows generated
from earnings; customer deposits; loan repayments; borrowings from the
FHLB; issuance of medium-term notes; and debt collateralized by mortgages,
MBS, or securities. In addition, the Association has a number of other
alternatives available to provide liquidity or finance operations. These
include borrowings from public offerings of debt or equity, sales of loans,
negotiable certificates of deposit, issuances of commercial paper, and
borrowings from commercial banks. Furthermore, under certain conditions,
World may borrow from the Federal Reserve Bank of San Francisco to meet
short-term cash needs. The availability of these funds will vary depending
upon policies of the FHLB, the Federal Reserve Bank of San Francisco, and
the Federal Reserve Board. For a discussion of the Association's liquidity
positions at September 30, 1994, and 1993, and December 31, 1993, see the
cash and investments section on pages 10 and 11.
The principal sources of funds for the Association's parent, Golden
West, are dividends from World and the proceeds from the issuance of debt
and equity securities. Various statutory and regulatory restrictions and
tax considerations limit the amount of dividends the Association can pay.
The principal liquidity needs of the parent company are for payment of
interest on subordinated debt securities, dividends to stockholders, the
purchase of Company stock (see the stockholders' equity section on
page 23), and general and administrative expenses. At September 30, 1994,
and 1993, and December 31, 1993, the parent company's total cash and
investments amounted to $771 million (including $400 million in short-term
loans to the Association), $705 million, and $956 million (including a
$150 million short-term loan to the Association), respectively.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Statement of Computation of Earnings Per Share
<PAGE>PAGE 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GOLDEN WEST FINANCIAL CORPORATION
Dated: November 10, 1994. /s/ J. L. Helvey
J. L. Helvey
Group Senior Vice President (duly
authorized and principal
financial officer)
<PAGE>PAGE 34
<TABLE>
<CAPTION>
EXHIBIT 11
Golden West Financial Corporation
Statement of Computation of Earnings Per Share
($000s omitted except per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Line 1:
Average Number of Common
Shares Outstanding 61,655,755 64,005,260 62,955,404 63,988,501
=========== =========== =========== ===========
Line 2:
Net Earnings $ 56,125 $ 63,768 $ 183,364 $ 205,935
=========== =========== =========== ===========
Line 3:
Earnings Per Common Share
(Line 2 divided by Line 1) $ .91 $1.00 $2.91 $3.22
===== ===== ===== =====
</TABLE>
