<PAGE>PAGE 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
For Quarter Ended March 31, 1995 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
April 30, 1995, was 58,604,405 shares.
<PAGE>PAGE 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Golden West Financial
Corporation and subsidiaries (the Company) for the three months ended
March 31, 1995, and 1994, 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 month periods have been included. The
operating results for the three months ended March 31, 1995, 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)
March 31 March 31 December 31
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Cash $ 183,482 $ 130,919 $ 242,441
Securities available for sale 1,288,384 1,799,561 1,488,845
Other investments 1,287,850 785,625 534,600
Mortgage-backed securities available for sale at fair value 317,430 966,085 323,339
Mortgage-backed securities held to maturity at cost 1,144,447 401,402 871,039
Loans receivable 28,115,602 24,027,203 27,071,266
Interest earned but uncollected 229,406 177,257 202,456
Investment in capital stock of Federal Home Loan Banks--at
cost, which approximates fair value 350,792 328,663 332,940
Real estate held for sale or investment 73,898 64,795 72,217
Prepaid expenses and other assets 222,017 169,189 206,478
Premises and equipment--at cost less accumulated depreciation 202,100 168,594 201,875
Goodwill arising from acquisitions 140,388 136,176 136,245
----------- ----------- -----------
$33,555,796 $29,155,469 $31,683,741
=========== =========== ===========
Liabilities and Stockholders' Equity:
Customer deposits $20,226,662 $17,519,321 $19,219,389
Advances from Federal Home Loan Banks 7,014,781 6,226,617 6,488,418
Securities sold under agreements to repurchase 367,081 647,533 601,821
Medium-term notes 1,863,668 676,709 1,164,079
Federal funds purchased -0- -0- 250,000
Accounts payable and accrued expenses 463,335 397,344 443,693
Taxes on income 330,177 376,418 294,508
Subordinated notes--net of discount 1,221,928 1,220,431 1,221,559
Stockholders' equity 2,068,164 2,091,096 2,000,274
----------- ----------- -----------
$33,555,796 $29,155,469 $31,683,741
=========== =========== ===========
</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 March 31
1995 1994
-------- --------
<S> <C> <C>
Interest Income:
Interest on loans $489,991 $398,052
Interest on mortgage-backed securities 25,565 28,273
Interest and dividends on investments 36,339 25,370
-------- --------
551,895 451,695
Interest Expense:
Interest on customer deposits 235,905 165,367
Interest on advances 94,404 58,890
Interest on repurchase agreements 6,480 6,939
Interest on other borrowings 48,675 31,605
-------- --------
385,464 262,801
-------- --------
Net Interest Income 166,431 188,894
Provision for loan losses 14,779 16,492
-------- --------
Net Interest Income after Provision for
Loan Losses 151,652 172,402
Non-Interest Income:
Fees 6,292 7,941
Gain on the sale of securities and
mortgage-backed securities 18 1
Other 4,702 3,482
-------- --------
11,012 11,424
Non-Interest Expense:
General and administrative:
Personnel 36,520 35,981
Occupancy 11,820 10,363
Deposit insurance 10,661 10,060
Advertising 2,628 2,435
Other 16,755 13,998
-------- --------
78,384 72,837
Amortization of goodwill arising
from acquisitions 936 578
-------- --------
79,320 73,415
-------- --------
Earnings Before Taxes on Income 83,344 110,411
Taxes on income 32,411 45,115
-------- --------
Net Earnings $ 50,933 $ 65,296
======== ========
Net earnings per share $ .87 $ 1.02
======== ========
</TABLE>
<PAGE>PAGE 4
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Cash Flows
(Unaudited)
($000s Omitted)
Three Months Ended March 31
1995 1994
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 50,933 $ 65,296
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for loan losses 14,779 16,492
Amortization of loan fees and discounts (4,884) (8,787)
Depreciation and amortization 5,590 4,453
Loans originated for sale (2,553) (67,903)
Sales of loans originated for sale 2,026 101,726
(Increase) in interest earned but uncollected (26,950) (2,177)
Federal Home Loan Bank stock dividends (8,511) (6,225)
(Increase) in prepaid expenses and other assets (9,973) (57,058)
Increase in accounts payable and accrued expenses 19,642 41,545
Increase in taxes on income 20,032 26,109
Other, net (10,911) (4,739)
----------- -----------
Net cash provided by operating activities 49,220 108,732
Cash Flows From Investing Activities:
New loan activity:
New real estate loans originated for portfolio (1,751,681) (1,161,031)
Real estate loans purchased (28,369) (109)
Other, net (49,979) 2,369
----------- -----------
(1,830,029) (1,158,771)
Real estate loan principal payments:
Monthly payments 138,561 142,210
Payoffs, net of foreclosures 263,607 721,913
Refinances 35,569 94,205
----------- -----------
437,737 958,328
Purchases of mortgage-backed securities available for sale (6,254) (385)
Purchases of mortgage-backed securities held to maturity (1,171) (109)
Sales of mortgage-backed securities available for sale 6,396 12
Repayments of mortgage-backed securities 25,079 132,818
Proceeds from sales of real estate 54,310 50,992
Purchases of securities available for sale (440,773) (1,120,600)
Sales and maturities of securities available for sale 677,016 949,026
(Increase) in other investments (753,250) (247,525)
Purchases of Federal Home Loan Bank stock (13,236) -0-
Redemptions of Federal Home Loan Bank stock 150 -0-
Additions to premises and equipment (6,685) (9,851)
----------- -----------
Net cash used in investing activities (1,850,710) (446,065)
</TABLE>
<PAGE>PAGE 5
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Cash Flows (Continued)
(Unaudited)
($000s Omitted)
Three Months Ended March 31
1995 1994
---------- ---------
<S> <C> <C>
Cash Flows From Financing Activities:
Customer deposit activity:
Increase (decrease) in deposits, net $ 819,518 $ (36,823)
Interest credited 187,755 133,660
---------- ---------
1,007,273 96,837
Additions to Federal Home Loan Bank advances 532,290 10,000
Repayments of Federal Home Loan Bank advances (6,027) (65,139)
Increase (decrease) in securities sold under agreements
to repurchase (234,740) 204,659
Proceeds from medium-term notes 699,360 -0-
Repayments of Federal Funds purchased (250,000) -0-
Dividends on common stock (4,979) (4,799)
Purchase and retirement of Company stock (646) (16,491)
---------- ---------
Net cash provided by financing activities 1,742,531 225,067
---------- ---------
Net Decrease in Cash (58,959) (112,266)
Cash at beginning of period 242,441 243,185
---------- ---------
Cash at end of period $ 183,482 $ 130,919
========== =========
Supplemental cash flow information:
Cash paid for:
Interest $ 374,961 $ 269,350
Income taxes 11,406 19,005
Cash received for interest and dividends 524,945 449,518
Noncash investing activities:
Loans transferred to foreclosed real estate 61,110 53,976
Loans securitized into MBS 287,659 -0-
</TABLE>
<PAGE>PAGE 6
<TABLE>
<CAPTION>
Golden West Financial Corporation
Consolidated Statement of Stockholders' Equity
(Unaudited)
($000s omitted except per share figures)
Three Months Ended March 31
1995 1994
---------- ----------
<S> <C> <C>
Common Stock:
Balance at January 1 $ 5,859 $ 6,393
Common stock issued upon exercise of stock options 2 9
Common stock retired upon purchase of treasury stock (2) (43)
---------- ----------
Balance at March 31 5,859 6,359
---------- ----------
Paid-in Capital:
Balance at January 1 45,689 40,899
Common stock issued upon exercise of stock options 256 1,321
---------- ----------
Balance at March 31 45,945 42,220
---------- ----------
Retained Earnings:
Balance at January 1 1,929,740 1,933,593
Net earnings 50,933 65,296
Cash dividends on common stock (4,979) (4,799)
Retirement of treasury stock (644) (16,448)
---------- ----------
Balance at March 31 1,975,050 1,977,642
---------- ----------
Unrealized Gains on Securities Available for Sale:
Balance at January 1 18,986 84,719
Change during period 22,324 (19,844)
---------- ----------
Balance at March 31 41,310 64,875
---------- ----------
Total Stockholders' Equity at March 31 $2,068,164 $2,091,096
========== ==========
</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, 1994, as well as certain material changes in results of
operations during the three month periods ended March 31, 1995, and 1994,
respectively.
The following narrative is written with the presumption that the users
have read or have access to the Company's 1994 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, 1994, and for the year then ended.
Therefore, only material changes in financial condition and results of
operations are discussed herein.
ACQUISITIONS AND DIVESTITURES
During the first three months of 1995, the Company acquired a
one-branch New Jersey savings bank with $48 million in deposits and sold
seven Colorado branches with balances totaling $153 million.
<PAGE>PAGE 8
<TABLE>
<CAPTION>
Golden West Financial Corporation
Financial Highlights
(Unaudited)
($000s omitted except per share figures)
March 31 March 31 December 31
1995 1994 1994
----------- ----------- -----------
<S> <C> <C> <C>
Assets $33,555,796 $29,155,469 $31,683,741
Loans receivable 28,115,602 24,027,203 27,071,266
Mortgage-backed securities 1,461,877 1,367,487 1,194,378
Customer deposits 20,226,662 17,519,321 19,219,389
Stockholders' equity 2,068,164 2,091,096 2,000,274
Stockholders' equity/total assets 6.16% 7.17% 6.31%
Book value per common share $ 35.30 $ 32.88 $ 34.14
Common shares outstanding 58,591,005 63,591,785 58,589,955
Yield on loan portfolio 7.33% 6.69% 6.91%
Yield on investments 6.00% 4.25% 5.42%
Yield on earning assets 7.23% 6.47% 6.81%
Cost of deposits 5.14% 3.79% 4.57%
Cost of borrowings 6.26% 4.60% 5.85%
Cost of funds 5.52% 4.06% 5.00%
Yield on earning assets less cost of funds 1.71% 2.41% 1.81%
Ratio of nonperforming assets to total assets 1.07% 1.49% 1.12%
Ratio of troubled debt restructured to total assets .20%(a) .13% .23%(a)
World Savings and Loan Association:
Net worth $ 2,165,290 $ 2,216,190 2,090,555
Net worth/total assets 6.66% 7.81% 6.74%
Regulatory capital ratios:
Tangible capital 6.15% 7.38% 6.26%
Core capital 6.15% 7.75% 6.64%
Risk-based capital 12.92% 15.79% 13.54%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31
1995 1994
----------- -----------
<S> <C> <C>
New real estate loans originated $ 1,754,234 $ 1,228,934
Average yield on new real estate loans 7.11% 6.53%
Increase in customer deposits $ 1,007,273 $ 96,837
Net earnings 50,933 65,296
Net earnings per share .87 1.02
Cash dividends on common stock .085 .075
Average common shares outstanding 58,586,488 63,934,636
Ratios:(b)
Net earnings/average net worth 10.00% 12.49%
Net earnings/average assets .63% 0.91%
Net interest income/average assets 2.05% 2.62%
General and administrative expense/average assets .96% 1.01%
</TABLE>
(a) Included in TDR ratio is 0.06% or $20 million and 0.07% or $22 million
related to the January 1994 Southern California earthquake, as of March 31,
1995, and December 31, 1994, respectively.
(b) Ratios are annualized by multiplying the quarterly computation by four.
Averages are computed by adding the beginning balance and each month end
balance during the quarter and dividing by four.
<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
March 31, 1995, and 1994, and December 31, 1994. The reader is referred to
page 46 of the Company's 1994 Form 10-K for similar information for the
years 1991 through 1994 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
March 31
------------------ December 31
1995 1994 1994
------ ------ -----------
<S> <C> <C> <C>
Assets:
Cash and investments 8.2% 9.3% 7.2%
Mortgage-backed securities 4.4 4.7 3.8
Loans receivable 83.8 82.4 85.4
Other assets 3.6 3.6 3.6
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
Liabilities and Stockholders' Equity:
Customer deposits 60.3% 60.1% 60.7%
Federal Home Loan Bank advances 20.9 21.4 20.5
Securities sold under agreements
to repurchase 1.1 2.2 1.9
Medium-term notes 5.5 2.3 3.7
Other liabilities 2.4 2.6 3.1
Subordinated debt 3.6 4.2 3.8
Stockholders' equity 6.2 7.2 6.3
----- ----- -----
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. 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 that, as
of March 31, 1995, the Company's assets are scheduled to reprice sooner
than its liabilities. Consequently, one would expect falling interest rates
to lower the Company's earnings and rising interest rates to increase the
Company's earnings. However, the Company's earnings are also affected by
the built-in lag inherent in the Eleventh District Cost of Funds Index
(COFI), which is the benchmark the Company uses to determine the rate on
the great majority of its adjustable-rate mortgages. Consequently, the
COFI reporting lag causes assets to initially reprice more slowly than
liabilities, enhancing earnings when rates are falling and holding down
income when rates rise.
<PAGE>PAGE 10
<TABLE>
<CAPTION>
TABLE 2
Repricing of Interest-Earning Assets and Interest-Bearing Liabilities,
Repricing Gaps, and Gap Ratio
(Dollars in Millions)
March 31, 1995
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 $ 1,753 $ 138 $ 635 $ 50 $ 2,576
Mortgage-backed securities 387 72 345 658 1,462
Loans receivable:
Rate-sensitive 22,519 2,116 283 -0- 24,918
Fixed-rate 54 178 941 1,804 2,977
Other(b) 441 -0- -0- -0- 441
Impact of hedging 981 15 (316) (680) -0-
------- ------- ------- ------ -------
Total $26,135 $ 2,519 $ 1,888 $1,832 $32,374
======= ======= ======= ====== =======
Interest-Bearing Liabilities(c):
Customer deposits $ 6,520 $ 9,347 $ 4,235 $ 125 $20,227
FHLB advances 5,782 592 536 105 7,015
Other borrowings 1,317 507 919 709 3,452
Impact of hedging 4,167 (2,285) (1,913) 31 -0-
------- ------- ------- ------ -------
Total $17,786 $ 8,161 $ 3,777 $ 970 $30,694
======= ======= ======= ====== =======
Repricing gap $ 8,349 $(5,642) $(1,889) $ 862
======= ======= ======= ======
Cumulative gap $ 8,349 $ 2,707 $ 818 $1,680
======= ======= ======= ======
Cumulative gap as a percentage of
total assets 24.9% 8.1% 2.4%
======= ======= =======
</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
deposits and short-term borrowings. For the months ended March 31, 1995,
and 1994, and December 31, 1994, World's average regulatory liquidity ratio
was 7%, 8%, and 7%, respectively, consistently exceeding the requirement.
At March 31, 1995, and 1994, and December 31, 1994, the Company had no
securities held to maturity or for trading. At March 31, 1995, and 1994,
and December 31, 1994, the Company had securities available for sale in the
<PAGE>PAGE 11
amount of $1.3 billion, $1.8 billion, and $1.5 billion, respectively, and
unrealized gains on securities available for sale of $57 million,
$59 million, and $23 million, respectively. For the impact on
stockholders' equity, see page 22.
Included in the securities available for sale at March 31, 1995, and
1994, and December 31, 1994, were collateralized mortgage obligations
(CMOs) in the amount of $620 million, $727 million, and $668 million,
respectively. The Company holds CMOs on which both principal and interest
are received. It does not hold any interest-only or principal-only CMOs.
At March 31, 1995, the majority of the Company's CMOs are fixed rate and
had remaining terms to maturity of five years or less and qualified for
inclusion in the regulatory liquidity measurement.
MORTGAGE-BACKED SECURITIES
During the first three months of 1995, the Company securitized
$288 million of adjustable-rate mortgages (ARMs) into FNMA mortgage-backed
securities (MBS), to be used as collateral for borrowings. These
securities are with full recourse to the Company. The Company does not
intend to sell and has the ability and intent to hold these MBS until
maturity. Accordingly, these MBS are classified as held to maturity.
MBS held to maturity at March 31, 1995, and 1994, and December 31,
1994, are $1.1 billion, $401 million, and $871 million, respectively. MBS
available for sale at March 31, 1995, and 1994, and December 31, 1994, are
$317 million, $966 million, and $323 million, respectively. Unrealized
gains on MBS available for sale at March 31, 1995, and 1994, and
December 31, 1994, are $12 million, $52 million, and $6 million,
respectively.
Repayments of MBS during the first quarter of 1995 were $25 million
compared to $133 million in the same period of 1994. The portion of the
Company's loans receivable represented by MBS was 5%, 5%, and 4% at
March 31, 1995, and 1994, and December 31, 1994, respectively.
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, as
exhibited in the reduction of repayments between 1995 and 1994.
LOAN PORTFOLIO
LOAN VOLUME
New loan originations for the quarter ended March 31, 1995, amounted
to $1.8 billion compared to $1.2 billion for the same period in 1994. The
higher rate environment in 1995 stimulated consumer interest in ARMs, which
during the quarter were 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
<PAGE>PAGE 12
contributed to the 43% increase in 1995's first quarter originations as
compared to the previous year. Refinanced loans constituted 31% of new
loan originations for the quarter ended March 31, 1995, compared to 59% for
the quarter ended March 31, 1994.
Although the Company has lending operations in 22 states, the primary
source of mortgage origination continues to be loans secured by residential
property in California. For the three months ended March 31, 1995, 56% of
total loan originations were on residential properties in California
compared to 70% for the same period in 1994. Although California
originations continue to be a large portion of total originations, the
decrease in 1995 as compared to 1994 was due to increased activity by the
Company in markets outside California. The next largest state for
originations was Texas, with 7% of the total loan originations for the
first quarter of 1995. The percentage of the total loan portfolio that is
comprised of residential loans in California was 76% at March 31, 1995,
compared to 81% at March 31, 1994, and 77% at December 31, 1994.
The tables on the following two pages show the Company's loan
portfolio by state at March 31, 1995, and 1994.
<PAGE>PAGE 13
<TABLE>
<CAPTION>
TABLE 3
Loan Portfolio by State
March 31, 1995
($000s Omitted)
Residential
Real Estate Commercial Loans as
------------------------ Real Total a % of
State 1 - 4 5+ Land Estate Construction Loans(a) Portfolio
- - ------------ ----------- ---------- ------ ---------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
California $18,343,951 $3,325,576 $ 285 $ 81,498 $ -0- $21,751,310 76.06%
Colorado 744,991 174,638 -0- 8,232 -0- 927,861 3.24
Illinois 699,054 169,795 -0- 2,858 -0- 871,707 3.05
New Jersey 750,080 -0- -0- 8,692 4,746 763,518 2.67
Texas 631,731 33,692 600 1,748 -0- 667,771 2.33
Washington 316,778 273,369 -0- 810 -0- 590,957 2.07
Florida 519,118 -0- 295 1,771 -0- 521,184 1.82
Virginia 377,709 691 -0- 1,681 -0- 380,081 1.33
Arizona 328,826 40,235 -0- 1,787 -0- 370,848 1.30
Pennsylvania 311,058 -0- -0- 4,676 -0- 315,734 1.10
Connecticut 275,478 -0- -0- -0- -0- 275,478 0.96
Maryland 245,392 -0- -0- 633 -0- 246,025 0.86
Oregon 161,027 8,199 -0- 3,879 -0- 173,105 0.61
Nevada 138,099 1,298 -0- -0- -0- 139,397 0.49
Kansas 126,637 5,303 -0- 222 -0- 132,162 0.46
Utah 72,181 69 -0- 2,126 -0- 74,376 0.26
Missouri 61,673 8,238 -0- 77 -0- 69,988 0.24
New York 56,500 -0- -0- -0- -0- 56,500 0.20
Georgia 47,787 -0- -0- 2,351 -0- 50,138 0.18
Wisconsin 38,595 3,956 -0- -0- -0- 42,551 0.15
Minnesota 42,115 -0- -0- -0- -0- 42,115 0.15
Ohio 28,731 2,708 465 5,862 -0- 37,766 0.13
Washington D.C. 27,806 -0- -0- -0- -0- 27,806 0.10
New Mexico 18,094 -0- -0- -0- -0- 18,094 0.06
Delaware 14,104 -0- -0- -0- -0- 14,104 0.05
North Carolina 9,287 396 -0- 3,097 -0- 12,780 0.04
Idaho 9,369 -0- -0- -0- -0- 9,369 0.03
Other 11,424 39 -0- 5,096 -0- 16,559 0.06
----------- ---------- ------ -------- ------ ----------- ------
Totals $24,407,595 $4,048,202 $1,645 $137,096 $4,746 28,599,284 100.00%
=========== ========== ====== ======== ====== ======
FAS 91 deferred loan fees (89,066)
Loan discount on purchased loans (7,236)
Undisbursed loan funds (4,450)
Allowance for loan losses (128,221)
LTF interest reserve (775)
TDR interest reserve (6,063)
Loans on customer deposits 32,580
Consumer loans 7,208
-----------
Total loan portfolio and loans securitized into FNMA MBS with recourse $28,403,261
===========
Loans securitized for FNMA with recourse (287,659)(b)
-----------
Total loan portfolio $28,115,602
===========
</TABLE>
(a) The Company has no commercial loans.
(b) Loans amounting to $288 million have been securitized with full recourse
into FNMA MBS for the sole purpose of providing collateral for borrowings.
These loans have been included in this schedule by state.
<PAGE>PAGE 14
<TABLE>
<CAPTION>
TABLE 4
Loan Portfolio by State
March 31, 1994
($000s Omitted)
Residential
Real Estate Commercial Loans as
------------------------ Real Total a % of
State 1 - 4 5+ Land Estate Loans(a) Portfolio
- - ------------ ----------- ---------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
California $16,352,122 $3,275,926 $ 301 $ 86,024 $19,714,373 81.38%
Colorado 571,205 127,183 -0- 8,768 707,156 2.92
Illinois 435,400 144,526 -0- 5,167 585,093 2.42
New Jersey 533,170 40 -0- 165 533,375 2.20
Washington 221,688 223,613 -0- 837 446,138 1.84
Florida 320,076 -0- 393 2,372 322,841 1.33
Texas 275,161 2,732 612 1,835 280,340 1.16
Virginia 253,677 887 -0- 1,789 256,353 1.06
Arizona 185,775 4,297 -0- 1,866 191,938 0.79
Connecticut 184,135 -0- -0- -0- 184,135 0.76
Pennsylvania 152,926 -0- -0- 9,183 162,109 0.67
Oregon 120,255 8,032 -0- 4,049 132,336 0.55
Maryland 130,711 -0- -0- 675 131,386 0.54
Kansas 122,686 5,396 -0- 235 128,317 0.53
Nevada 94,118 1,386 -0- -0- 95,504 0.39
Missouri 60,527 8,982 -0- 79 69,588 0.29
New York 64,900 173 -0- 648 65,721 0.27
Georgia 55,718 -0- -0- 2,678 58,396 0.24
Ohio 38,372 3,785 1,054 7,169 50,380 0.21
Utah 40,822 139 -0- 2,297 43,258 0.18
Wisconsin 5,152 3,773 -0- -0- 8,925 0.04
New Mexico 3,563 -0- -0- -0- 3,563 0.02
Idaho 793 -0- -0- -0- 793 0.00
Delaware 231 -0- -0- -0- 231 0.00
Other 39,510 543 -0- 11,622 51,675 0.21
----------- ---------- ------ -------- ----------- ------
Totals $20,262,693 $3,811,413 $2,360 $147,458 24,223,924 100.00%
=========== ========== ====== ======== ======
FAS 91 deferred loan fees (100,948)
Loan discount on purchased loans (7,909)
Undisbursed loan funds (2,957)
Allowance for loan losses (113,497)
LTF interest reserve (852)
TDR interest reserve (1,341)
Loans on customer deposits 30,783
-----------
Total loan portfolio $24,027,203
===========
</TABLE>
(a) The Company has no commercial loans.
<PAGE>PAGE 15
The Company continues to emphasize ARMs--loans with interest rates
that change periodically in accordance with movements in specified indexes.
The portion of the mortgage portfolio (excluding MBS) composed of
rate-sensitive loans was 91% at March 31, 1995, compared to 87% at
March 31, 1994, and 89% at December 31, 1994. While rates on fixed-rate
mortgages rose significantly during 1994, lower rates on ARM loans made
adjustable instruments more attractive in the marketplace. The Company's
ARM originations constituted approximately 99% of new mortgage loans made
by the Company in the first quarter of 1995 compared to 78% in the first
three months of 1994.
The weighted average maximum lifetime cap rate on the Company's ARM
portfolio was 13.25%, or 6.07% above the actual weighted average rate, at
March 31, 1995, versus 13.74%, or 7.43% above the weighted average rate, at
March 31, 1994.
Approximately $5.0 billion of the Company'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 March 31, 1995, $762.0 million of these loans
were at their rate floors. The weighted average floor rate on these loans
was 7.74% at March 31, 1995. Without the floor, the average yield on these
loans would have been 7.09%.
Loan repayments consisting of monthly loan amortization, payoffs, and
refinances during the first quarter of 1995 were $438 million compared to
$958 million in the same period of 1994. The decrease in loan repayments
was primarily due to lower mortgage payoffs and lower refinances within our
loan portfolio, as previously discussed.
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. No interest is recognized on
non-accrual loans.
The table on the following page shows the components of the Company's
nonperforming assets and the ratio of nonperforming assets to total assets
at March 31, 1995, and 1994, and December 31, 1994.
<PAGE>PAGE 16
<TABLE>
<CAPTION>
TABLE 5
Nonperforming Assets
($000s Omitted)
March 31
------------------------ December 31
1995 1994 1994
-------- -------- -----------
<S> <C> <C> <C>
Non-accrual loans $286,230 $371,260 $284,103
Real estate acquired
through foreclosure, net 71,708 60,643 70,981
Real estate in judgement 1,350 1,764 390
-------- -------- --------
Total nonperforming assets $359,288 $433,667 $355,474
======== ======== ========
Ratio of nonperforming
assets to total assets 1.07% 1.49% 1.12%
======== ======== ========
</TABLE>
The strengthening California economy has favorably impacted the
Company's NPA ratios during the past year. The Company continues to
closely monitor all delinquencies and takes appropriate steps to protect
its interests. Interest foregone on non-accrual loans in the first quarter
of 1995 amounted to $5 million compared to $6 million in the same period of
1994.
The tables on the following two pages show the Company's nonperforming
assets by state at March 31, 1995, and 1994.
<PAGE>PAGE 17
<TABLE>
<CAPTION>
TABLE 6
Nonperforming Assets by State
March 31, 1995
($000s Omitted)
Non-Accrual Loans(a)
--------------------------------------------
Residential Real Estate Owned
Real Estate ------------------------------ NPAs as
----------------- Commercial Residential Commercial Total a % of
State 1-4 5+ Real Estate Construction 1-4 5+ Real Estate NPAs Loans(b)
- - ------------ -------- ------- ----------- ------------ ------- ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California $238,864 $ 8,604 $309 $-0- $58,270 $ 9,592 $3,716 $319,355 1.47%
Colorado 1,244 177 -0- -0- 231 27 -0- 1,679 0.18
Illinois 3,274 -0- -0- -0- 103 714 -0- 4,091 0.47
New Jersey 10,062 -0- 5 525 776 -0- -0- 11,368 1.49
Texas 2,176 -0- -0- -0- 21 -0- -0- 2,197 0.33
Washington 976 -0- -0- -0- -0- -0- -0- 976 0.17
Florida 2,323 -0- 36 -0- 535 -0- -0- 2,894 0.56
Virginia 2,169 -0- -0- -0- 186 -0- -0- 2,355 0.62
Arizona 1,290 -0- -0- -0- 39 -0- -0- 1,329 0.36
Pennsylvania 2,605 -0- -0- -0- 67 -0- -0- 2,672 0.85
Connecticut 4,080 -0- -0- -0- (219) -0- -0- 3,861 1.40
Maryland 280 -0- -0- -0- 187 -0- -0- 467 0.19
Oregon 478 -0- -0- -0- -0- -0- -0- 478 0.28
Nevada 614 -0- -0- -0- -0- -0- -0- 614 0.44
Kansas 458 40 -0- -0- 121 -0- -0- 619 0.47
Utah 123 -0- -0- -0- -0- -0- -0- 123 0.17
Missouri 664 69 -0- -0- -0- -0- -0- 733 1.05
New York 3,300 -0- -0- -0- 440 -0- -0- 3,740 6.62
Georgia 1,067 -0- -0- -0- -0- -0- -0- 1,067 2.13
Wisconsin -0- -0- -0- -0- -0- -0- -0- -0- 0.00
Minnesota -0- -0- -0- -0- -0- -0- -0- -0- 0.00
Ohio 22 -0- 211 -0- 36 239 -0- 508 1.35
Washington D.C. -0- -0- -0- -0- -0- -0- -0- -0- 0.00
New Mexico 1 -0- -0- -0- -0- -0- -0- 1 0.01
Delaware -0- -0- -0- -0- -0- -0- -0- -0- 0.00
North Carolina 82 -0- -0- -0- -0- -0- -0- 82 0.64
Idaho -0- -0- -0- -0- -0- -0- -0- -0- 0.00
Other 102 -0- -0- -0- 6 -0- -0- 108 0.65
-------- ------- ---- ---- ------- ------- ------ -------- -----
Totals $276,254 $ 8,890 $561 $525 $60,799 $10,572 $3,716 361,317 1.26
======== ======= ==== ==== ======= ======= ======
REO general valuation allowance (2,029) (0.00)
-------- -----
$359,288 1.26%
======== =====
</TABLE>
(a) Non-accrual loans are 90 days or more past due and have no unpaid interest
accrued.
(b) Loans amounting to $288 million have been securitized with full recourse
into FNMA MBS for the sole purpose of providing collateral for borrowings.
Nonperforming loans related to this MBS have been included in this
schedule by state.
<PAGE>PAGE 18
<TABLE>
<CAPTION>
TABLE 7
Nonperforming Assets by State
March 31, 1994
($000s Omitted)
Non-Accrual Loans(a)
------------------------------ Real Estate Owned
Residential ------------------------------- NPAs as
Real Estate Commercial Residential Commercial Total a % of
State 1-4 5+ Real Estate 1-4 5+ Real Estate NPAs Loans
- - ------------ -------- ------- ----------- ------- ------ ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California $300,750 $23,780 $508 $46,135 $8,016 $4,566 $383,755 1.94%
Colorado 1,397 325 -0- 262 842 261 3,087 0.44
Illinois 3,024 628 -0- 218 -0- -0- 3,870 0.66
New Jersey 13,988 -0- 3 647 -0- -0- 14,638 2.74
Washington 553 -0- -0- -0- -0- -0- 553 0.12
Florida 3,951 -0- 314 1,079 -0- -0- 5,344 1.66
Texas 1,600 -0- -0- 160 -0- -0- 1,760 0.63
Virginia 800 -0- -0- 320 -0- -0- 1,120 0.44
Arizona 1,277 -0- -0- 115 -0- -0- 1,392 0.73
Connecticut 4,732 -0- -0- 566 -0- -0- 5,298 2.88
Pennsylvania 1,932 -0- -0- -0- -0- -0- 1,932 1.19
Oregon 392 -0- -0- -0- -0- -0- 392 0.30
Maryland 1,792 -0- -0- -0- -0- -0- 1,792 1.36
Kansas 898 40 -0- 278 -0- -0- 1,216 0.95
Nevada 469 -0- -0- -0- -0- -0- 469 0.49
Missouri 427 375 -0- 19 -0- -0- 821 1.18
New York 4,687 -0- -0- 533 -0- -0- 5,220 7.94
Georgia 1,923 -0- -0- 140 -0- -0- 2,063 3.53
Ohio 7 -0- 58 -0- -0- 80 145 0.29
Utah 156 -0- -0- -0- -0- -0- 156 0.36
Wisconsin 2 -0- -0- -0- -0- -0- 2 0.02
New Mexico 18 -0- -0- -0- -0- -0- 18 0.50
Idaho -0- -0- -0- -0- -0- -0- -0- 0.00
Delaware -0- -0- -0- -0- -0- -0- -0- 0.00
Other 453 -0- -0- -0- -0- -0- 453 0.96
-------- ------- ---- ------- ------ ------ -------- -----
Totals $345,228 $25,148 $883 $50,472 $8,858 $4,907 435,496 1.80
======== ======= ==== ======= ====== ======
REO general valuation allowance (1,829) (0.01)
-------- -----
$433,667 1.79%
======== =====
</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 $68 million or
0.20% of assets at March 31, 1995, compared to $38 million or 0.13% of
assets at March 31, 1994, and $73 million or 0.23% of assets at
December 31, 1994. At March 31, 1995, and December 31, 1994, respectively,
$20 million or 0.06% and $22 million or 0.07% of TDRs were related to the
January 1994 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 $481 thousand for the three months ended
March 31, 1995, compared to $120 thousand for the quarter ended
March 31, 1994.
<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. 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. In addition, 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. Additions to and reductions from the allowances are
reflected in current earnings.
The table below shows the changes in the allowance for loan losses for
the three months ended March 31, 1995, and 1994.
<TABLE>
<CAPTION>
TABLE 8
Changes in the Allowance for Loan Losses
($000s Omitted)
Three Months Ended
March 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Beginning allowance for loan losses $124,003 $106,698
Provision charged to expense 14,779 16,492
Less loans charged off (11,429) (9,954)
Add recoveries 868 261
-------- --------
Ending allowance for loan losses $128,221 $113,497
======== ========
Ratio of net chargeoffs to average loans
outstanding (excluding MBS without recourse) 0.15% 0.16%
======== =======
Ratio of allowance for loan losses to
nonperforming assets 35.7% 26.2%
======== =======
</TABLE>
The Company has provided for any known losses related to the January
1994 Southern California earthquake. The March 31, 1995, reserve for loan
losses included $4 million in loss reserves specifically identified for
earthquake losses.
<PAGE>PAGE 20
CUSTOMER DEPOSITS
Customer deposits increased during the first quarter of 1995 by
$1.1 billion, including interest credited of $188 million, excluding the
effect of the sale of seven Colorado branches with balances totaling
$153 million and the acquisition of a one-branch New Jersey savings
institution with $48 million in deposits. In the first three months of
1994, customer deposits increased by $97 million, including interest
credited of $134 million. The net increase of customer deposits during the
first three months of 1995 as compared to the same period for 1994 resulted
primarily from higher rates offered on insured accounts.
<PAGE>PAGE 21
The table below shows the Company's customer deposits by interest rate
and by remaining maturity at March 31, 1995, and 1994.
<TABLE>
<CAPTION>
TABLE 9
Customer Deposits
(Dollars in millions)
1995 1994
----------------- -----------------
Rate* Amount Rate* Amount
----------------- -----------------
<S> <C> <C> <C> <C>
Customer deposits by interest rate:
Interest-bearing checking
accounts 1.33% $ 708 1.27% $ 740
Passbook accounts 2.29 611 2.08 642
Money market deposit accounts 3.11 1,559 3.06 2,386
Term certificate accounts with
original maturities of:
4 weeks to 1 year 5.55 6,639 3.15 3,928
1 to 2 years 4.96 5,183 3.81 4,681
2 to 3 years 5.26 2,184 4.49 1,772
3 to 4 years 5.33 822 5.99 1,138
4 years and over 6.31 2,105 5.36 2,071
Retail jumbo CDs 6.02 409 4.56 144
All other 7.74 7 7.78 17
------- -------
$20,227 $17,519
======= =======
Customer deposits by remaining maturity:
No contractual maturity $ 2,878 $ 3,768
Maturity within one year:
2nd quarter 3,643 3,805
3rd quarter 4,815 2,737
4th quarter 2,751 1,485
1st quarter 1,780 1,259
------- ------
12,989 9,286
1 to 2 years 2,197 2,463
2 to 3 years 1,171 482
3 to 4 years 257 807
4 years and over 735 713
------- -------
$20,227 $17,519
======= =======
</TABLE>
*Weighted average interest rate, including the effect of hedging transactions.
ADVANCES FROM FEDERAL HOME LOAN BANKS
The Company uses borrowings from the Federal Home Loan Banks (FHLB),
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
<PAGE>PAGE 22
cases, prepayment at the Company's option. FHLB advances amounted to
$7.0 billion at March 31, 1995, compared to $6.2 billion and $6.5 billion
at March 31, 1994, and December 31, 1994, respectively.
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
$367 million, $648 million, and $602 million at March 31, 1995, and 1994,
and December 31, 1994, respectively.
OTHER BORROWINGS
The Company 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 March 31, 1995. As of March 31, 1995,
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 a shelf registration with the OTS for the
issuance of $2.0 billion of unsecured medium-term notes. At
March 31, 1995, $2.0 billion was available for issuance. World had
medium-term notes outstanding with principal amounts of $1.9 billion at
March 31, 1995, compared to $677 million at March 31, 1994, and
$1.2 billion at December 31, 1994, under prior registrations. As of
March 31, 1995, World'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 $300 million of subordinated notes. At March 31, 1995,
$300 million was available for issuance. As of March 31, 1995, World had
issued a total of $200 million of subordinated notes, which are rated A2
and A by Moody's and S&P, respectively. The subordinated notes are
included in World's risk-based regulatory capital as Supplementary Capital.
STOCKHOLDERS' EQUITY
The Company's stockholders' equity increased during the first quarter
of 1995 as a result of earnings and an increase in the market values of
securities available for sale. Unrealized gains on securities and MBS
available for sale included in stockholders' equity at March 31, 1995, and
1994, and December 31, 1994, were $40 million, $65 million, and
$17 million, respectively. Also included in stockholders' equity at
March 31, 1995, and 1994, and December 31, 1994, were unrealized gains on
MBS transferred to held to maturity of $1 million, $-0-, and $2 million,
respectively.
<PAGE>PAGE 23
The Company's Board of Directors previously authorized the purchase by
the Company up to a total of 6.3 million shares of Golden West's common
stock. As of March 31, 1995, 5.8 million shares had been repurchased and
retired at a cost of $224.1 million since inception of program, of which
18 thousand shares were purchased and retired at a cost of $646 thousand
during the first quarter of 1995. At March 31, 1995, the total remaining
shares authorized for repurchase was 505 thousand shares. If the Company
were to complete the program at March 31, 1995, with a market price of
$38.25 per share, the remaining authorized but unacquired shares would
require $19 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 below shows World's
current regulatory capital ratios and compares them to the current OTS
minimum requirements at March 31, 1995, and 1994.
<TABLE>
<CAPTION>
TABLE 10
World Savings and Loan Association
Regulatory Capital Ratios
Under Current Requirements
($000s Omitted)
1995 1994
----------------------------------------- -----------------------------------------
ACTUAL REQUIRED ACTUAL REQUIRED
------------------- ------------------ ------------------- ------------------
Capital Ratio Capital Ratio Capital Ratio Capital Ratio
---------- ------ ---------- ----- ---------- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tangible $1,987,529 6.15% $ 484,825 1.50% $2,083,093 7.38% $ 423,482 1.50%
Core 1,987,529 6.15 969,649 3.00 2,188,964 7.75 846,965 3.00
Risk-based 2,297,336 12.92 1,422,710 8.00 2,485,765 15.79 1,259,556 8.00
</TABLE>
World Savings paid a total of $275 million in dividends to the Company
in the fourth quarter of 1994. The main purpose for the dividends was to
fund the Company's stock repurchase program.
<PAGE>PAGE 24
The table below shows a reconciliation of World's equity capital to
regulatory capital at March 31, 1995.
<TABLE>
<CAPTION>
TABLE 11
Reconciliation of Equity Capital to Regulatory Capital
($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 surplus 233,441
Retained earnings 1,886,486
Unrealized gains on
securities available for sale 45,213
-----------
Equity capital $ 2,165,290 $ 2,165,290 $ 2,165,290 $ 2,165,290 $ 2,165,290 $ 2,165,290
===========
Positive goodwill (215,622) (215,622) (215,622) (215,622) (215,622)
Negative goodwill 83,074 83,074 83,074 83,074 83,074
Gain on securities available for sale (45,213) (45,213) (45,213) (45,213) (45,213)
Equity/other investments (704)
Subordinated debt 199,141
General valuation allowances 111,370
----------- ----------- ----------- ----------- -----------
Regulatory capital $ 1,987,529 $ 1,987,529 $ 1,987,529 $ 1,987,529 $ 2,297,336
=========== =========== =========== =========== ===========
Total assets $32,518,232
===========
Adjusted total assets $32,321,646 $32,321,646 $32,321,646
=========== =========== ===========
Risk-weighted assets $17,783,872 $17,783,872
=========== ===========
CAPITAL RATIO - ACTUAL 6.66% 6.15% 6.15% 6.15% 11.18% 12.92%
=========== =========== =========== =========== =========== ===========
Regulatory Capital Standards:
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>
<PAGE>PAGE 25
The table below compares World's regulatory capital to the well
capitalized classification at March 31, 1995.
<TABLE>
<CAPTION>
TABLE 12
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 $1,987,529 6.15% $1,616,082 5.00%
Tier 1 risk-based 1,987,529 11.18 1,067,032 6.00
Total risk-based 2,297,336 12.92 1,778,387 10.00
</TABLE>
RESULTS OF OPERATIONS
SPREADS
An important determinant of the Company'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
March 31, 1995, and 1994, and December 31, 1994.
<TABLE>
<CAPTION>
TABLE 13
Yield on Earning Assets,
Cost of Funds, and Primary Spread,
Including Effect of Purchase Accounting
March 31
--------------------- December 31
1995 1994 1994
------ ------ -----------
<S> <C> <C> <C>
Yield on loan portfolio 7.33% 6.69% 6.91%
Yield on investments 6.00 4.25 5.42
---- ---- ----
Yield on earning assets 7.23 6.47 6.81
---- ---- ----
Cost of customer deposits 5.14 3.79 4.57
Cost of borrowings 6.26 4.60 5.85
---- ---- ----
Cost of funds 5.52 4.06 5.00
---- ---- ----
Primary spread 1.71% 2.41% 1.81%
==== ==== ====
</TABLE>
The Company's primary spread is to some degree dependent on changes in
interest rates because the Company's liabilities tend to respond somewhat
more rapidly to rate movements than its assets. In the past year, interest
rates rose, leading to an increase in the cost of the Company's liabilities
during the first quarter of 1995 as compared to 1994. At the same time,
however, the yield on the Company's major earning asset, the loan
portfolio, increased more slowly because most of the Company's
adjustable-rate mortgages are tied to COFI, which lags changes in market
rates by several months. In addition, not all ARMs adjust each month.
Consequently, at March 31, 1995, the Company's primary spread was lower
than at both December 31, 1994, and March 31, 1994.
<PAGE>PAGE 26
The Company enters into selected 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
1995, virtually all derivative products were various types of interest rate
swaps.
Derivatives decreased net interest income by $9 million for the three
months ended March 31, 1995, as compared to $10 million for the same period
in 1994.
The table below summarizes the unrealized gains and losses for
derivative instruments at March 31, 1995, and 1994.
<TABLE>
<CAPTION>
TABLE 14
Supplemental Schedule of Unrealized Gains and Losses on Derivative Products
($000s Omitted)
March 31, 1995 March 31, 1994
------------------------------------- -------------------------------------
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 $ 265 $ -0- $ 265 $ -0- $ (626) $ (626)
Interest rate swaps 38,551 (63,509) (24,958) 64,164 (90,045) (25,881)
------- -------- -------- ------- -------- ---------
Total $38,816 $(63,509) $(24,693) $64,164 $(90,671) $ (26,507)
======= ======== ======== ======= ======== =========
</TABLE>
<TABLE>
<CAPTION>
TABLE 15
Schedule of Derivative Activity
(Notional Amounts in Millions)
Three Months Ended
March 31, 1995
---------------------------------------------------
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, 1994 $4,991 $2,225 $200 $ 135 $300
Additions 219 -0- 43 -0- -0-
Maturities/amortization (150) (175) -0- -0- (20)
Terminations -0- -0- -0- -0- -0-
Forward starting becoming effective 125 -0- -0- (125) -0-
Other -0- -0- -0- -0- -0-
------ ------ ---- ----- ----
Balance, March 31, 1995 $5,185 $2,050 $243 $ 10 $280
====== ====== ==== ===== ====
</TABLE>
(a) Receives based upon one index, pays based upon another index.
The range of floating interest rates received on swap contracts in the
first three months of 1995 was 5.13% to 7.02%, and the range of floating
interest rates paid on swap contracts was 4.37% to 6.69%.
<PAGE>PAGE 27
The table below shows the Company's revenues and expenses as a
percentage of total revenues for the three months ended March 31, 1995, and
1994, in order to focus on the changes in interest income between years as
well as changes in other revenue and expense amounts.
<TABLE>
<CAPTION>
TABLE 16
Selected Revenue and Expense Items
as Percentages of Total Revenues
1995 1994
------ ------
<S> <C> <C>
Interest on loans 87.0% 85.9%
Interest on mortgage-backed securities 4.5 6.1
Interest and dividends on investments 6.5 5.5
---- ----
98.0 97.5
Less:
Interest on customer deposits 41.9 35.7
Interest on advances and other borrowings 26.6 21.1
---- ----
68.5 56.8
Net interest income 29.5 40.7
Provision for loan losses 2.6 3.6
---- ----
Net interest income after provision for
loan losses 26.9 37.1
Add:
Fees 1.1 1.7
Gain on the sale of securities and
mortgage-backed securities 0.0 0.0
Other non-interest income 0.8 0.8
---- ----
1.9 2.5
Less:
General and administrative expenses 13.9 15.7
Amortization of goodwill 0.1 0.1
Taxes on income 5.8 9.7
---- ----
Net earnings 9.0% 14.1%
==== ====
</TABLE>
INTEREST ON LOANS
In the first quarter of 1995, interest on loans was higher than in the
comparable 1994 period by $91.9 million or 23.1%. The increase in 1995 was
due to a 49 basis point increase in the average portfolio yield and a
$3.7 billion increase in the average portfolio balance.
INTEREST ON MORTGAGE-BACKED SECURITIES
In the first quarter of 1995, interest on mortgage-backed securities
was lower than in the comparable 1994 period by $2.7 million or 9.6%. The
decrease in 1995 was due primarily to a 28 basis point decrease in the
average portfolio yield and a $86.7 million decrease in the average
portfolio balance.
<PAGE>PAGE 28
INTEREST AND DIVIDENDS ON INVESTMENTS
For the first three months of 1995, interest and dividends on
investments was $10.9 million or 43.2% higher than for the same period in
1994. The increase was primarily due to a 180 basis point increase in the
average portfolio yield as well as a $9.6 million increase in the average
portfolio balance.
INTEREST ON CUSTOMER DEPOSITS
In the first quarter of 1995, interest on customer deposits increased
by $70.5 million or 42.7% from the comparable period of 1994. The increase
was primarily due to a 100 basis point increase in the average cost of
deposits and a $2.3 billion increase in the average deposit balance.
INTEREST ON ADVANCES AND OTHER BORROWINGS
For the first three months of 1995, interest on advances and other
borrowings was $52.1 million or 53.5% higher than in the same period in
1994. The increase was primarily due to a 142 basis point increase in the
average cost of these borrowings and a $1.5 billion increase in the average
balance of these borrowings.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $14.8 million for the three months
ended March 31, 1995, compared to $16.5 million for the same period of
1994. The lower provision in 1995 reflected the slowly improving
California economy.
GENERAL AND ADMINISTRATIVE EXPENSES
For the first three months of 1995, general and administrative
expenses (G & A) increased by $5.5 million or 7.6% from the comparable
period in 1994. The primary reasons for the increase were the expansion of
loan origination capacity, increased loan volume, growth in savings
deposits, and miscellaneous operating expenses. G & A as a percentage of
average assets on an annualized basis was 0.96% for the first quarter of
1995 compared to 1.01% for the same period in 1994.
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.
The corporate tax rate for the first quarter of 1995 was 38.9%
comparable to 40.9% for the same period a year ago. The decrease in the
first quarter 1995 tax rate is the result of tax benefits from the final
settlement of prior year tax audits.
<PAGE>PAGE 29
LIQUIDITY AND CAPITAL RESOURCES
World'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, World 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 World's liquidity positions
at March 31, 1995, and 1994, and December 31, 1994, see the cash and
investments section on page 10.
The principal sources of funds for Golden West (the Parent) 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 World can pay. The principal
liquidity needs of Golden West are for payment of interest on subordinated
debt securities, dividends to stockholders, the purchase of Golden West
stock (see the stockholders' equity section on page 23), and general and
administrative expenses. At March 31, 1995, and 1994, and
December 31, 1994, Golden West's total cash and investments amounted to
$910 million, $964 million (including a $150 million short-term loan to
World), and $938 million (including a $250 million short-term loan to
World), respectively.
<PAGE>PAGE 30
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) May 2, 1995 - Annual Meeting.
<TABLE>
<CAPTION>
Broker
For Against Withheld Abstain No Votes
---------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
(b) Directors elected:
Patricia A. King 51,586,775 222,774
Marion O. Sandler 51,771,224 98,325
Paul Sack 51,711,206 98,343
(c) Ratification of Auditors:
Appointment of Deloitte &
Touche, independent public
accountants, for the
fiscal year 1995 51,750,903 14,155 44,491
</TABLE>
Other Directors continuing in office are:
Louis J. Galen, William D. McKee, Bernard A. Osher, Kenneth T. Rosen, and
Herbert M. Sandler
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Statement of Computation of Earnings Per Share
<PAGE>PAGE 31
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: May 11, 1995. /s/ J. L. Helvey
---------------------------------
J. L. Helvey
Group Senior Vice President (duly
authorized and principal
financial officer)
<PAGE>PAGE 32
<TABLE>
<CAPTION>
EXHIBIT 11
Golden West Financial Corporation
Statement of Computation of Earnings Per Share
($000s omitted except per share amounts)
Three Months Ended
March 31
------------------------
1995 1994
----------- -----------
<S> <C> <C>
Line 1:
Average Number of Common
Shares Outstanding 58,586,488 63,934,636
=========== ===========
Line 2:
Net Earnings $ 50,933 $ 65,296
=========== ===========
Line 3:
Earnings Per Common Share
(Line 2 divided by Line 1) $ .87 $1.02
===== =====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 183482
<INT-BEARING-DEPOSITS> 10001
<FED-FUNDS-SOLD> 622050
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1605814
<INVESTMENTS-CARRYING> 1144447
<INVESTMENTS-MARKET> 0
<LOANS> 281115602
<ALLOWANCE> 128221
<TOTAL-ASSETS> 33555796
<DEPOSITS> 20226662
<SHORT-TERM> 367081
<LIABILITIES-OTHER> 793512
<LONG-TERM> 10100377
<COMMON> 5859
0
0
<OTHER-SE> 2062305
<TOTAL-LIABILITIES-AND-EQUITY> 33555796
<INTEREST-LOAN> 489991
<INTEREST-INVEST> 36339
<INTEREST-OTHER> 25656
<INTEREST-TOTAL> 551895
<INTEREST-DEPOSIT> 235905
<INTEREST-EXPENSE> 385464
<INTEREST-INCOME-NET> 166431
<LOAN-LOSSES> 14779
<SECURITIES-GAINS> 18
<EXPENSE-OTHER> 79320
<INCOME-PRETAX> 83344
<INCOME-PRE-EXTRAORDINARY> 83344
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50933
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
<YIELD-ACTUAL> 7.23
<LOANS-NON> 286230
<LOANS-PAST> 0
<LOANS-TROUBLED> 68275
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 124003
<CHARGE-OFFS> 11429
<RECOVERIES> 868
<ALLOWANCE-CLOSE> 128221
<ALLOWANCE-DOMESTIC> 128221
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
