-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ggWl9aWAI6Ba2ozOkjwfmbmM4XcfkcGdMl+3+2jVdR/PXNZAks374zteDnuexrzs vXzoluxz9b1m2yl+IGJySw== 0000042293-95-000003.txt : 19950616 0000042293-95-000003.hdr.sgml : 19950616 ACCESSION NUMBER: 0000042293-95-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950323 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN WEST FINANCIAL CORP /DE/ CENTRAL INDEX KEY: 0000042293 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 952080059 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04629 FILM NUMBER: 95522537 BUSINESS ADDRESS: STREET 1: 1901 HARRISON STREET CITY: OAKLAND STATE: CA ZIP: 94612 BUSINESS PHONE: 510-466-3420 MAIL ADDRESS: STREET 2: 1901 HARRISON STREET CITY: OAKLAND STATE: CA ZIP: 94612 FORMER COMPANY: FORMER CONFORMED NAME: TRANS WORLD FINANCIAL CORP DATE OF NAME CHANGE: 19760806 FORMER COMPANY: FORMER CONFORMED NAME: TRANS WORLD FINANCIAL CO DATE OF NAME CHANGE: 19751124 10-K 1 PAGE F-1 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Golden West Financial Corporation Oakland, California We have audited the accompanying consolidated statement of financial condition of Golden West Financial Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of net earnings, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Golden West Financial Corporation and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Oakland, California January 23, 1995 PAGE F-2 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (Dollars in thousands except per share figures)
ASSETS December 31 ------------------------------ 1994 1993 ----------- ----------- Cash $ 242,441 $ 243,185 Securities available for sale at fair value (Note C) 1,488,845 1,636,586 Other investments at cost (fair value of $534,600 and $538,100) (Notes D and M) 534,600 538,100 Mortgage-backed securities available for sale at fair value (Notes E and M) 323,339 1,114,069 Mortgage-backed securities held to maturity at cost (fair value of $831,436 and $412,243) (Notes F and M) 871,039 408,467 Loans receivable less allowance for loan losses of $124,003 and $106,698 (Notes G and L) 27,071,266 23,912,571 Interest earned but uncollected (Note H) 202,456 175,080 Investment in capital stock of Federal Home Loan Bank, at cost which approximates fair value (Note L) 332,940 325,737 Real estate held for sale or investment (Note I) 72,217 67,156 Prepaid expenses and other assets 206,478 108,832 Premises and equipment, net (Note J) 201,875 162,751 Goodwill arising from acquisitions (Notes A and B) 136,245 136,754 ----------- ----------- $31,683,741 $28,829,288 =========== ===========
See notes to consolidated financial statements.
LIABILITIES AND STOCKHOLDERS' EQUITY December 31 ------------------------------ 1994 1993 ----------- ----------- Customer deposits (Note K) $19,219,389 $17,422,484 Advances from Federal Home Loan Bank (Note L) 6,488,418 6,281,691 Securities sold under agreements to repurchase (Note M) 601,821 442,874 Medium-term notes (Note N) 1,164,079 676,540 Federal funds purchased, due 1995, at 6.4825% to 6.6075% 250,000 -0- Accounts payable and accrued expenses 443,693 355,799 Taxes on income (Note P) 294,508 364,235 ----------- ----------- 28,461,908 25,543,623 Subordinated notes (Note O) 1,221,559 1,220,061 Stockholders' equity (Notes Q and R): Preferred stock, par value $1.00: Authorized 20,000,000 shares Issued and outstanding, none Common stock, par value $.10: Authorized 200,000,000 shares Issued and outstanding 58,589,955 and 63,928,935 shares 5,859 6,393 Paid-in capital 45,689 40,899 Retained earnings - substantially restricted 1,929,740 1,933,593 ----------- ----------- 1,981,288 1,980,885 Unrealized gains on securities available for sale 18,986 84,719 ----------- ----------- Total Stockholders' Equity 2,000,274 2,065,604 ----------- ----------- $31,683,741 $28,829,288 =========== ===========
PAGE F-3 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF NET EARNINGS (Dollars in thousands except per share figures)
Year Ended December 31 -------------------------------------- 1994 1993 1992 ---------- ---------- ---------- Interest Income: Interest on loans $1,649,413 $1,637,764 $1,740,845 Interest on mortgage-backed securities 103,927 138,874 178,010 Interest and dividends on investments 123,137 93,534 65,655 ---------- ---------- ---------- 1,876,477 1,870,172 1,984,510 Interest Expense: Interest on customer deposits (Note K) 714,353 705,700 844,710 Interest on advances 268,952 273,816 268,320 Interest on repurchase agreements 37,620 36,023 65,779 Interest on other borrowings 134,182 121,875 88,371 ---------- ---------- ---------- 1,155,107 1,137,414 1,267,180 ---------- ---------- ---------- Net Interest Income 721,370 732,758 717,330 Provision for loan losses 62,966 65,837 43,218 ---------- ---------- ---------- Net Interest Income after Provision for Loan Losses 658,404 666,921 674,112 Non-Interest Income: Fees 28,816 31,061 24,458 Gain (loss) on the sale of securities and mortgage-backed securities (120) 22,541 4,058 Other 8,790 8,440 12,601 ---------- ---------- ---------- 37,486 62,042 41,117 Non-Interest Expense: General and administrative: Personnel 150,220 132,472 118,553 Occupancy 44,472 40,443 38,521 Deposit insurance 40,220 35,706 37,621 Advertising 10,761 10,782 8,968 Other 57,246 53,764 47,212 ---------- ---------- ---------- 302,919 273,167 250,875 Amortization of goodwill arising from acquisitions (Note B) 2,589 (1,586) 661 ---------- ---------- ---------- 305,508 271,581 251,536 ---------- ---------- ---------- Earnings Before Taxes on Income 390,382 457,382 463,693 Taxes on income (Note P) 159,933 183,528 180,155 ---------- ---------- ---------- Net Earnings $ 230,449 $ 273,854 $ 283,538 ========== ========== ========== Net earnings per share $3.71 $4.28 $4.46 ===== ===== =====
See notes to consolidated financial statements. PAGE F-4 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Dollars in thousands except per share figures)
Unrealized Gains Total Common Paid-in Retained on Securities Stockholders' Stock Capital Earnings Available For Sale Equity ------- ------- ---------- ------------------ ------------- Balance at January 1, 1992 $6,350 $26,879 $1,415,906 $1,449,135 Common stock issued upon exercise of stock options, including tax benefits - 425,890 shares 42 9,307 -0- 9,349 Net earnings -0- -0- 283,538 283,538 Cash dividends on common stock ($.23 per share) -0- -0- (14,624) (14,624) ------ ------- ---------- ---------- Balance at December 31, 1992 6,392 36,186 1,684,820 1,727,398 Common stock issued upon exercise of stock options, including tax benefits - 208,125 shares 21 4,713 -0- 4,734 Net earnings -0- -0- 273,854 273,854 Cash dividends on common stock ($.27 per share) -0- -0- (17,280) (17,280) Purchase and retirement of 204,000 shares of Company stock (Note Q) (20) -0- (7,801) (7,821) Unrealized gains on securities available for sale -0- -0- -0- $ 84,719 84,719 ------ ------- ---------- -------- ---------- Balance at December 31, 1993 6,393 40,899 1,933,593 84,719 2,065,604 Common stock issued upon exercise of stock options, including tax benefits - 222,200 shares 22 4,790 -0- 4,812 Net earnings -0- -0- 230,449 230,449 Cash dividends on common stock ($.31 per share) -0- -0- (19,220) (19,220) Purchase and retirement of 5,561,180 shares of Company stock (Note Q) (556) -0- (215,082) (215,638) Change in unrealized gains on securities available for sale -0- -0- -0- (65,733) (65,733) ------ ------- ---------- -------- ---------- Balance at December 31, 1994 $5,859 $45,689 $1,929,740 $ 18,986 $2,000,274 ====== ======= ========== ======== ==========
See notes to consolidated financial statements. PAGE F-5 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands)
Year Ended December 31 ---------------------------------------- 1994 1993 1992 ----------- ----------- ----------- Cash Flows From Operating Activities: Net earnings $ 230,449 $ 273,854 $ 283,538 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for loan losses 62,966 65,837 43,218 Amortization of loan fees and discounts (28,832) (45,666) (53,125) Depreciation and amortization 19,454 13,978 14,990 Reduction of a valuation allowance on investments -0- (24,000) (4,000) Loans originated for sale (93,951) (442,880) (278,346) Sales of loans originated for sale 146,115 432,362 280,832 Decrease (increase) in interest earned but uncollected (27,376) (17,357) 11,955 Federal Home Loan Bank stock dividends (19,007) (12,744) (4,598) Decrease (increase) in prepaid expenses and other assets (91,751) 26,020 (51,777) Increase (decrease) in accounts payable and accrued expenses 87,894 (5,327) 37,860 Increase (decrease) in taxes on income (23,448) 72,828 179,301 Other, net (20,019) (12,806) 1,571 ----------- ----------- ----------- Net cash provided by operating activities 242,494 324,099 461,419 Cash Flows From Investing Activities: New loan activity: New real estate loans originated for portfolio (6,543,702) (5,968,997) (6,176,744) Real estate loans purchased (68,926) (13,567) (4,678) Other, net 3,816 25,836 47,390 ----------- ----------- ----------- (6,608,812) (5,956,728) (6,134,032) Real estate loan principal payments: Monthly payments 600,879 574,459 502,431 Payoffs, net of foreclosures 2,232,214 2,852,722 3,230,825 Refinances 326,447 388,171 374,363 ----------- ----------- ----------- 3,159,540 3,815,352 4,107,619 Purchases of mortgage-backed securities available for sale (1,656) -0- -0- Purchases of mortgage-backed securities held to maturity (47,086) (302,313) (343,736) Sales of mortgage-backed securities available for sale 121 -0- -0- Sales of mortgage-backed securities held to maturity -0- 138 243 Repayments of mortgage-backed securities 310,704 645,647 552,045 Proceeds from sales of real estate 217,965 206,009 145,247 Purchases of securities available for sale (2,623,315) (4,326,544) (1,388,319) Sales and maturities of securities available for sale 2,732,562 3,771,617 1,227,427 Decrease (increase) in other investments 3,500 (569,697) 257,204 Purchases of Federal Home Loan Bank stock -0- (79,713) (1,440) Redemptions of Federal Home Loan Bank stock 7,775 52,969 6,111 Additions to premises and equipment (58,827) (37,496) (15,462) ----------- ----------- ----------- Net cash used in investing activities (2,907,529) (2,780,759) (1,587,093)
See notes to consolidated financial statements
Year Ended December 31 ---------------------------------------- 1994 1993 1992 ----------- ----------- ----------- Cash Flows From Financing Activities: Customer deposit activity: Increase (decrease) in deposits, net 1,211,544 368,749 (1,008,304) Interest credited 585,361 567,489 676,040 1,796,905 936,238 (332,264) Additions to Federal Home Loan Bank advances 304,500 1,701,200 2,428,850 Repayments of Federal Home Loan Bank advances (98,034) (919,195) (1,088,000) Increase (decrease) in securities sold under agreements to repurchase 158,947 (113,836) (95,503) Proceeds from medium-term notes 499,696 609,235 66,766 Repayments of medium-term notes (12,865) (14,500) (152,305) Proceeds from federal funds purchased 250,000 -0- -0- Proceeds from subordinated debt -0- 297,008 295,616 Dividends on common stock (19,220) (17,280) (14,624) Purchase and retirement of Company stock (215,638) (7,821) -0- ----------- ----------- ----------- Net cash provided by financing activities 2,664,291 2,471,049 1,108,536 ----------- ----------- ----------- Net Increase (Decrease) in Cash (744) 14,389 (17,138) Cash at beginning of period 243,185 228,796 245,934 ----------- ----------- ----------- Cash at end of period $ 242,441 $ 243,185 $ 228,796 =========== =========== =========== Supplemental cash flow information: Cash paid for: Interest $ 1,152,572 $ 1,176,338 $ 1,253,610 Income taxes 182,332 112,970 51,917 Cash received for interest and dividends 1,849,101 1,852,815 1,996,465 Noncash investing activities: Loans transferred to foreclosed real estate 246,612 234,149 172,920 Securities transferred to available for sale -0- 845,786 -0- Mortgage-backed securities transferred to available for sale -0- 1,114,069 -0- Mortgage-backed securities transferred from available for sale to held to maturity (at fair value) 453,564 -0- -0-
PAGE F-6 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE A - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Golden West Financial Corporation, a Delaware corporation, and its wholly owned subsidiaries (the Company or Golden West). World Savings and Loan Association, a federally chartered association (the Association or World Savings), is the Company's principal operating subsidiary with $31 billion in assets on December 31, 1994. Intercompany accounts and transactions have been eliminated. Cash and Investments The Association is required by regulation to maintain liquid assets in the form of cash and securities approved by federal regulations at a monthly average of not less than 5% of customer deposits and short-term borrowings. Effective December 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 115 (FAS 115), "Accounting for Certain Investments in Debt and Equity Securities." FAS 115 establishes classifications of investments into three categories: 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. At December 31, 1994, the Company had no securities held 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. Gains or losses on sales of securities are realized and recorded in earnings at the time of sale and are determined by the difference between the net sales proceeds and the cost of the security, using specific identification, adjusted for any unamortized premium or discount. The Company has other investments which are recorded at cost with any discount or premium amortized using a method that is not materially different from the interest method. 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. Mortgage-backed securities held to maturity are recorded at cost because the Company has the ability to hold these MBS to maturity and because management intends to hold these securities to maturity. Premiums and discounts on MBS are amortized or accreted using the interest method, also known as the level yield method, over the estimated life of the security. MBS available for sale are reported at fair value, with unrealized gains and losses excluded from earnings and reported net of applicable income taxes as a separate component of stockholders' equity until realized. Gains or losses on sales of MBS are realized and recorded in earnings at the time of sale and are determined by the difference between the net sales proceeds and the cost of MBS, using specific identification, adjusted for any unamortized premium or discount. Prior to December 31, 1993, all MBS were recorded at amortized cost. PAGE F-7 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) Loans Receivable The Association's real estate loan portfolio consists primarily of long-term loans collateralized by first trust deeds on single-family residences and multi-family residential property. In addition to real estate loans, the Association makes loans on the security of savings accounts. The adjustable rate mortgage (ARM) is the Association's primary real estate loan. The ARM carries an interest rate that may change as often as monthly, based on movements in certain cost of funds or other indexes. Interest rate changes and monthly payments of principal and interest may be subject to maximum increases or decreases. Negative amortization may occur during periods when payments are limited. The Association also offers "modified" ARMs, loans that offer a low fixed rate generally from 1% to 3% below the contract rate for an initial period, usually three to 36 months. The Association does make a limited number of loans that are held for sale, primarily fixed-rate loans. These loans are usually originated against firm commitments to sell. These loans are recorded at the lower of cost or market. 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. FAS 114 requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate. As a practical expedient, impairment may be measured based on the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance. The valuation allowance and provision for loan losses are adjusted for changes in the present value of impaired loans for which impairment is measured based on the present value of expected future cash flows or for the changes in the appraised value of the loans that are collateral dependent. 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 requires that impaired loans for which foreclosure is probable should be accounted for as loans. As a result, $16,258 of in-substance foreclosed loans, with a valuation allowance of $7,267, were reclassified from real estate held for sale to loans receivable at December 31, 1993. In October 1994, Statement of Financial Accounting Standards No. 118 (FAS 118) was issued as an amendment of FAS 114. FAS 118 allows a creditor to use existing methods for recognizing interest income on an impaired loan and modifies disclosure requirements concerning impaired loans. The only effect of FAS 118 on the Company's financial statements is the additional disclosure in NOTE G. Loan origination fees and certain direct loan origination costs are deferred and amortized, as an interest income yield adjustment, over the life of the related loans using the interest method. "Fees," which include fees for prepayment of loans, income for servicing loans, late charges for delinquent payments, fees from customer deposit accounts, and miscellaneous fees, are recorded when collected. Premiums and discounts on purchased loans, including premiums and discounts arising from acquisitions of other associations, are generally amortized using the interest method over the actual life of the loans. Nonperforming assets consist of loans 90 days or more delinquent, with balances not reduced for loan loss reserves, and real estate owned through foreclosure. For loans past due 90 days or more, all interest earned but uncollected is fully reserved. PAGE F-8 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) Troubled debt restructured consists of loans that have been modified by the lender to grant a concession to the borrower because of a perceived temporary weakness in the collateral and/or borrower. Real Estate Held for Sale or Investment Real estate held for sale or investment is comprised primarily of improved property acquired through foreclosure. All real estate owned is recorded at the lower of cost or fair value. Included in the fair value is the estimated selling price in the ordinary course of business less estimated costs to repair, hold, and dispose of the property. Costs relating to holding property, net of rental and option income, are expensed in the current period. Gains on the sale of real estate are recognized at the time of sale. Losses realized and expenses incurred in connection with the disposition of foreclosed real estate are charged to current earnings. Provision for Loan Losses The Company provides valuation allowances for probable losses on loans and on real estate owned when any significant and permanent decline in value is identified. Additions to and reductions from allowances are reflected in current earnings. Periodic reviews are made of major loans and real estate owned. 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. Goodwill Positive goodwill, or the excess of the cost over the fair value of net assets acquired resulting from acquisitions, of $222,524 (1994) and $235,853 (1993) is stated net of accumulated amortization of $199,693 (1994) and $184,284 (1993). Negative goodwill, or the excess of the fair value of net assets acquired over the cost resulting from acquisitions, of $86,279 (1994) and $99,099 (1993) is shown net of accumulated amortization of $59,921 (1994) and $47,101 (1993). Positive and negative goodwill are being amortized on the straight-line method over periods ranging from 5 to 40 years. See NOTE B for additional information. Securities Sold Under Agreements to Repurchase The Company enters into sales of securities under agreements to repurchase (reverse repurchase agreements) only with selected dealers. Fixed- coupon reverse repurchase agreements are treated as financings and the obligations to repurchase securities sold are reflected as a liability in the Consolidated Statement of Financial Condition. The securities underlying the agreements remain in the asset accounts. Derivative Financial Instruments The Company utilizes a variety of derivative financial instruments as a part of its interest rate risk management strategy. The most frequently used derivative products are various types of interest rate swaps. However, interest rate caps, floors, futures, options, and forwards are also utilized. The Company does not hold any derivative financial instruments for trading purposes. 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 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 limit the impact of changes in interest rates on customer deposits, mortgage loans, or other specified assets or borrowings. Some PAGE F-9 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) interest rate swaps are 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 assets or liabilities with similar interest rate characteristics. 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 that may be received on interest rate cap agreements limits the impact of changes in interest rates. Amounts that 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 assets or liabilities with similar interest rate characteristics. Futures and option contracts are either an obligation or right, respectively, to buy or sell an interest in a financial commodity on a specific day for a preset price. Futures contracts and long put options for futures contracts for Eurodollars, Treasury Bills, and interest rate contracts may be entered into by the Company to limit the Company's sensitivity to changes in interest rates. Gains and losses on futures contracts are deferred until the contracts are closed, at which time gains and losses are included in the cost basis of the related assets and liabilities and amortized, using the straight- line or level yield method, into interest income or expense over the remaining life of the asset or liability. Taxes on Income The Company files consolidated federal income tax returns with its subsidiaries. The provision for federal and state taxes on income is based on taxes currently payable and taxes expected to be payable in the future as a result of events that have been recognized in the financial statements or tax returns. The Association is permitted by the Internal Revenue Code to deduct from taxable income an annual addition to a reserve for bad debts subject to certain limitations. An effective rate of 8% of taxable income has been used in computing the amount of the addition to the bad debt reserve. In the event distributions (which are subject to the regulatory restrictions described below) are made from these reserves, such distributions will be subject to federal income taxes at the then prevailing corporate rates. It is not contemplated that accumulated reserves will be used in a manner that will create income tax liabilities. In the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." FAS 109 required a change from the deferred to the liability method of computing deferred income taxes. The Company has applied FAS 109 prospectively. The consolidated financial statements presented for the years prior to 1993 reflect income taxes under the deferred method under previous accounting standards. Regulatory Capital Requirements The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) established capital standards. Under FIRREA, thrifts must have core capital equal to 3% of adjusted total assets and have tangible capital equal to 1.5% of adjusted total assets. FIRREA also established risk-based capital standards as a percentage of risk-weighted assets of 8% after December 30, 1992. PAGE F-10 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) At December 31, the Association had the following regulatory capital calculated in accordance with FIRREA's capital standards:
1994 1993 ----------------------------------------- --------------------------------------- ACTUAL REQUIRED ACTUAL REQUIRED ------------------- ------------------ ------------------- ------------------ Capital Ratio Capital Ratio Capital Ratio Capital Ratio ---------- ------ ---------- ----- ---------- ------ ---------- ----- Tangible $1,931,375 6.26% $ 462,564 1.50% $2,030,992 7.27% $ 419,052 1.50% Core 2,047,016 6.64 925,129 3.00 2,240,518 8.02 838,103 3.00 Risk-based 2,353,781 13.54 1,390,391 8.00 2,533,738 17.42 1,163,650 8.00
The Office of Thrift Supervision (OTS) has adopted rules based upon five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The rules provide that a savings association is "well capitalized" if its total risk-based capital ratio is 10% or greater, its Tier 1 risk-based capital ratio is 6% or greater, its leverage ratio is 5% or greater, and the institution is not subject to a capital directive. As used herein, total risk-based capital ratio is the ratio of total capital to risk-weighted assets, Tier 1 risk-based capital ratio means the ratio of core capital to risk-weighted assets, and leverage ratio is the ratio of core capital to adjusted total assets, in each case as calculated in accordance with current OTS capital regulations. Under these regulations, World Savings is deemed to be "well capitalized." At December 31, the Association had the following regulatory capital calculated in accordance with FDICIA's capital standards:
1994 1993 ------------------------------------------ ---------------------------------------- ACTUAL WELL CAPITALIZED ACTUAL WELL-CAPITALIZED ------------------- ------------------- ------------------- ------------------- Capital Ratio Capital Ratio Capital Ratio Capital Ratio ---------- ------ ---------- ------ ---------- ------ ---------- ------ Leverage $2,047,016 6.64% $1,541,881 5.00% $2,240,518 8.02% $1,396,839 5.00% Tier 1 risk-based 2,047,016 11.78 1,042,793 6.00 2,240,518 15.40 872,737 6.00 Total risk-based 2,353,781 13.54 1,737,989 10.00 2,533,738 17.42 1,454,562 10.00
Retained Earnings Under OTS regulations, the OTS must be given at least 30 days' advance notice by the Association of any proposed dividend to be paid to the Company. Under OTS regulations, World Savings is classified as a Tier 1 association and is, therefore, allowed to distribute dividends up to 100% of its net income in any year plus one-half of its capital in excess of the OTS fully phased-in capital requirement as of the end of the prior year. At December 31, 1994, $328 million of the Association's retained earnings had not been subjected to federal income taxes due to the application of the bad debt deduction, and $1.8 billion of the Association's retained earnings were available for the payment of cash dividends without the imposition of additional federal income taxes. The Company is not subject to the same tax and reporting restrictions as is World Savings. Earnings Per Share Earnings per share have been computed by dividing net earnings by the weighted average number of common shares outstanding, 62,128,719 (1994), 63,977,876 (1993), and 63,578,168 (1992). PAGE F-11 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE B - Business Combinations/Divestitures On May 6, 1994, the Company acquired $78 million in deposits in New Jersey from Polifly Savings and Loan. On August 13, 1993, the Company acquired $320 million in deposits and seven branches in Arizona from PriMerit Bank. On September 17, 1993, the Company sold $133 million of savings in two Ohio branches to Trumbull Savings and Loan. On October 15, 1993, the Company sold its remaining Ohio branches with $131 million in deposits to Fifth Third Bancorp. On March 6, 1992, the Company sold its two Washington branches with $37 million in deposits. The acquisitions described above are not material to the financial position or net earnings of the Company and pro forma information is not deemed necessary. NOTE C - Securities Available for Sale The following is a summary of securities available for sale:
December 31, 1994 ---------------------------------------------------- Unrealized Unrealized Cost Gains Losses Fair Value ---------- ---------- ---------- ---------- Certificates of deposit and short-term bank notes $ 30,004 $ -0- $ 35 $ 29,969 U.S. Treasury and Government agency obligations 644,279 275 7,485 637,069 Collateralized mortgage obligations 692,065 -0- 23,937 668,128 Commercial paper 1,076 193 -0- 1,269 Equity securities 98,504 66,172 12,266 152,410 ---------- ------- ------- ---------- $1,465,928 $66,640 $43,723 $1,488,845 ========== ======= ======= ==========
December 31, 1993 ---------------------------------------------------- Unrealized Unrealized Cost Gains Losses Fair Value ---------- ---------- ---------- ---------- Certificates of deposit and short-term bank notes $ 482,069 $ 33 $ 2 $ 482,100 U.S. Treasury and Government agency obligations 419,056 821 62 419,815 Collateralized mortgage obligations 275,304 865 761 275,408 Commercial paper 230,385 4 -0- 230,389 Bankers acceptances 58,395 -0- -0- 58,395 Equity securities 101,592 68,887 -0- 170,479 ---------- ------- ---- ---------- $1,566,801 $70,610 $825 $1,636,586 ========== ======= ==== ==========
The weighted average portfolio yields on securities available for sale were 5.24% and 3.93% at December 31, 1994, and 1993, respectively. Sales of securities held for sale resulted in realized gains of $83 (1994) and $22 (1993) and realized losses of $226 (1994) and $13 (1993). PAGE F-12 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) At December 31, 1994, the securities available for sale had maturities as follows:
Amortized Fair Maturity Cost Value ------------------- ---------- ---------- No maturity $ 98,504 $ 152,410 1995 499,138 496,554 1996 through 1999 737,604 715,091 2000 through 2004 96,195 92,204 2005 and thereafter 34,487 32,586 ---------- ---------- $1,465,928 $1,488,845 ========== ==========
NOTE D - Other Investments At following is a summary of other investments not subject to FAS 115:
December 31 ----------------------- 1994 1993 Cost Cost -------- -------- Federal funds $152,000 $ 25,000 Short-term repurchase agreements collateralized by mortgage-backed securities 382,600 513,100 -------- -------- $534,600 $538,100 ======== ========
At December 31, 1994, and 1993, cost approximated fair market value and there were no unrealized gains or losses. The weighted average portfolio yields on other investments were 5.92% and 3.42% at December 31, 1994, and 1993, respectively. Sales of other investments resulted in gains of $-0- (1994), $24,000 (1993), and $4,009 (1992) and losses of $-0- (1994), $1,473 (1993), and $-0- (1992). As of December 31, 1994, the entire other investments portfolio matures in 1995. NOTE E - Mortgage-Backed Securities Available for Sale Mortgage-backed securities available for sale are summarized as follows:
December 31, 1994 -------------------------------------------------- Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- -------- FNMA $130,528 $2,580 $2,658 $130,450 FHLMC 108,676 2,900 669 110,907 GNMA 76,323 4,282 101 80,504 Other 1,485 41 48 1,478 -------- ------ ------ -------- $317,012 $9,803 $3,476 $323,339 ======== ====== ====== ========
PAGE F-13 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures)
December 31, 1993 ----------------------------------------------------- Amortized Unrealized Unrealized Fair Cost Gains Losses Value ---------- ---------- ---------- ---------- FNMA $ 439,817 $25,957 $268 $ 465,506 FHLMC 326,354 24,480 27 350,807 GNMA 271,390 24,164 25 295,529 Other 2,115 112 -0- 2,227 ---------- ------- ---- ---------- $1,039,676 $74,713 $320 $1,114,069 ========== ======= ==== ==========
The weighted average portfolio yields on mortgage-backed securities available for sale were 9.57% and 9.35% at December 31, 1994, and 1993, respectively. Principal proceeds from the sales of securities from the mortgage-backed securities available for sale portfolio were $120 (1994) and $-0- (1993) and resulted in realized gains of $-0- (1994) and $-0- (1993) and realized losses of $1 (1994) and $-0- (1993). At December 31, 1994, mortgage-backed securities available for sale had contractual maturities as follows:
Amortized Fair Maturity Cost Value ------------------- --------- -------- 1996 through 1999 $ 2,137 $ 2,144 2000 through 2004 1,803 1,860 2005 and thereafter 313,072 319,335 -------- -------- $317,012 $323,339 ======== ========
NOTE F - Mortgage-Backed Securities Held to Maturity Mortgage-backed securities held to maturity are summarized as follows:
December 31, 1994 ---------------------------------------------------- Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- -------- FNMA $656,142 $ 95 $39,779 $616,458 FHLMC 113,977 249 342 113,884 GNMA 100,920 199 25 101,094 -------- ---- ------- -------- $871,039 $543 $40,146 $831,436 ======== ==== ======= ========
December 31, 1993 ---------------------------------------------------- Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- -------- FNMA $408,467 $7,103 $3,327 $412,243 ======== ====== ====== ========
The weighted average portfolio yields of mortgage-backed securities held to maturity were 7.99% and 6.94% at December 31, 1994, and 1993, respectively. Principal proceeds from the sales of securities from the mortgage-backed securities held to maturity portfolio amounted to $-0- (1994), $144 (1993), and $252 (1992) and resulted in realized gains of $-0- (1994), $7 (1993), and $9 (1992) and realized losses of $-0- (1994), $-0- (1993), and $-0- (1992). PAGE F-14 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) At December 31, 1994, mortgage-backed securities held to maturity had contractual maturities as follows:
Amortized Fair Maturity Cost Value ------------------- --------- -------- 1996 through 1999 $ 146 $ 145 2000 through 2004 40 41 2005 and thereafter 870,853 831,250 -------- -------- $871,039 $831,436 ======== ========
NOTE G - Loans Receivable
December 31 ----------------------------- 1994 1993 ----------- ----------- Loans collateralized primarily by first deeds of trust: One- to four-family dwelling units $23,217,564 $20,197,613 Over four-family dwelling units 3,946,446 3,785,673 Commercial property 134,189 153,396 Construction loans -0- 580 Land 1,851 2,407 ----------- ----------- 27,300,050 24,139,669 Loans on savings accounts 30,460 32,012 ----------- ----------- 27,330,510 24,171,681 Less: Undisbursed loan funds 2,781 1,882 Unearned fees and discounts 105,314 112,751 Unamortized discount arising from acquisitions 27,146 37,779 Allowance for loan losses 124,003 106,698 ----------- ----------- $27,071,266 $23,912,571 =========== ===========
In addition to loans receivable, the Association services loans for others. At December 31, 1994, and 1993, the amount of loans serviced for others was $843,963 and $806,504, respectively. At December 31, 1994, and 1993, the Company had $4 million and $56 million, respectively, in loans held for sale, all of which are carried at the lower of cost or market. A summary of the changes in the allowance for loan losses is as follows:
Year Ended December 31 ------------------------------ 1994 1993 1992 -------- -------- ------- Balance at January 1 $106,698 $ 70,924 $48,036 Provision for loan losses charged to expense 62,966 65,837 43,218 Less loans charged off (46,556) (38,475) (21,227) Recoveries 895 1,145 897 Reclassification of in-substance foreclosure allowances -0- 7,267 -0- -------- -------- ------- Balance at December 31 $124,003 $106,698 $70,924 ======== ======== =======
PAGE F-15 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) The following is a summary of nonperforming loans, troubled debt restructured, and other impaired loans:
December 31 --------------------- 1994 1993 -------- -------- Nonperforming loans $284,103 $330,062 Troubled debt restructured 72,827 37,190 Other impaired loans 40,504 25,769 -------- -------- $397,434 $393,021 ======== ========
The portion of the allowance for loan losses that was provided for impaired loans was $15,618 and $10,600 at December 31, 1994, and 1993, respectively. The average recorded investment in total impaired loans was $395,228 and $339,338 during 1994 and 1993, respectively. The amount of interest income recognized on total impaired loans was $16,449 and $15,124 during 1994 and 1993, respectively. NOTE H - Interest Earned But Uncollected
December 31 --------------------- 1994 1993 -------- -------- Loans receivable $108,130 $ 99,657 Mortgage-backed securities 7,135 10,368 Interest rate swaps 81,684 53,358 Other 5,507 11,697 -------- -------- $202,456 $175,080 ======== ========
NOTE I - Real Estate Held for Sale or Investment
December 31 ------------------- 1994 1993 ------- ------- Real estate acquired through foreclosure of loans, net of allowance for losses $70,981 $62,724 Real estate in judgement, net of allowance for losses 390 1,366 Real estate held for investment, net of allowance for losses 846 3,066 ------- ------- $72,217 $67,156 ======= =======
NOTE J - Premises and Equipment
December 31 --------------------- 1994 1993 -------- -------- Land $ 47,509 $ 43,738 Buildings and leasehold improvements 143,065 122,465 Furniture, fixtures and equipment 123,688 102,056 -------- -------- 314,262 268,259 Accumulated depreciation and amortization 112,387 105,508 -------- -------- $201,875 $162,751 ======== ========
PAGE F-16 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) Depreciation and amortization, computed by the straight-line method for financial statement purposes, are provided over the useful lives of the various classes of premises and equipment. The aggregate rentals under long-term operating leases on land or premises in effect on December 31, 1994, and which expire between 1995 and 2064, amounted to approximately $134,927. The approximate minimum payments during the five years ending 1999 are $13,916 (1995), $13,527 (1996), $12,482 (1997), $11,204 (1998), and $9,592 (1999). Certain of the leases provide for options to renew and for the payment of taxes, insurance, and maintenance costs. The rental expense for the year amounted to $16,979 (1994), $15,579 (1993), and $14,823 (1992). NOTE K - Customer Deposits
December 31 --------------------------------------- 1994 1993 ------------------ ------------------ Rate* Amount Rate* Amount ----- ----------- ----- ----------- Customer deposits by rate: Interest-bearing checking accounts 1.28% $ 730,290 1.35% $ 736,767 Passbook accounts 2.23 638,905 2.12 611,606 Money market deposit accounts 3.13 1,818,426 2.35 2,378,087 Term certificate accounts with original maturities of: 4 weeks to 1 year 4.56 5,159,037 3.24 4,334,208 1 to 2 years 4.59 5,636,301 3.85 4,614,059 2 to 3 years 4.85 1,997,826 4.62 1,448,779 3 to 4 years 5.22 817,631 6.11 1,149,108 4 years and over 6.99 2,098,984 6.72 2,021,350 Retail jumbo CDs 5.44 312,413 5.03 109,250 All other 7.78 9,576 7.76 19,270 ----------- ----------- $19,219,389 $17,422,484 =========== ===========
*Weighted average interest rate including the impact of hedging
December 31 -------------------------------- 1994 1993 ----------- ----------- Customer deposits by remaining maturity at year end: No contractual maturity $ 3,187,621 $ 3,726,460 Maturity within one year: 1st quarter 3,598,746 3,811,037 2nd quarter 3,319,067 2,991,744 3rd quarter 2,377,766 1,666,045 4th quarter 1,765,131 1,391,652 ----------- ----------- 11,060,710 9,860,478 1 to 2 years 2,799,980 1,865,989 2 to 3 years 983,797 460,472 3 to 4 years 420,778 651,243 Over 4 years 766,503 857,842 ----------- ----------- $19,219,389 $17,422,484 =========== ===========
At December 31, the weighted average cost of deposits was 4.57% (1994) and 3.92% (1993). PAGE F-17 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) Interest expense on customer deposits is summarized as follows:
Year Ended December 31 ------------------------------ 1994 1993 1992 -------- -------- -------- Interest-bearing checking accounts $ 9,463 $ 11,426 $ 12,376 Passbook accounts 19,733 21,043 23,315 Money market deposit accounts 38,430 47,339 75,223 Term certificate accounts 646,727 625,892 733,796 -------- -------- -------- $714,353 $705,700 $844,710 ======== ======== ========
NOTE L - Advances from Federal Home Loan Bank Advances are secured by pledges of $11,085,361 of certain loans and capital stock of the Federal Home Loan Bank, and these borrowings have maturities and interest rates as follows:
December 31, 1994 ------------------------------------------------------------------------------------------------------- Receive Stated Fixed Adjusted Maturity Amount Rate Swaps Rate* ------------------- ---------- ------ ------- -------- 1995 $ 325,469 5.82% (1.45)% 4.37% 1996 170,070 7.93 (1.28) 6.65 1997 400,532 6.38 (0.09) 6.29 1998 1,048,750 5.87 5.87 1999 550,000 4.10 4.10 2000 and thereafter 3,993,597 5.18 (0.09) 5.09 ---------- $6,488,418 ==========
December 31, 1993 ------------------------------------------------------------------------------------------------------- Treasury Bill Receive and Eurodollar Stated Fixed Basis Futures Adjusted Maturity Amount Rate Swaps Swaps Contracts Rate* ------------------- ---------- ------ ------- ----- -------------- -------- 1994 $ 72,549 8.05% 8.05% 1995 325,424 5.83 (3.70)% (0.12)% 2.01 1996 170,051 7.89 (3.27) (0.10) 4.52 1997 150,524 5.73 (0.62) 5.11 1998 1,048,621 3.63 0.03 3.66 1999 and thereafter 4,514,522 3.96 (0.10) 0.04% 0.03 3.93 ---------- $6,281,691 ==========
*Weighted average interest rate adjusted for hedging At December 31, the weighted average cost of advances was 5.21% (1994) and 3.87% (1993). PAGE F-18 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE M - Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase are collateralized by government obligations and mortgage-backed securities with a market value of $657,325 and $483,899 at December 31, 1994, and 1993, respectively.
December 31, 1994 ------------------------------------------------------------------------------------------------------- Pay Receive Stated Fixed Fixed Adjusted Maturity Amount Rate Swaps Swaps Rate* ------------------- -------- ------ ----- ------ -------- 1995 $595,221 5.29% 1.38% 0.02% 6.69% 1999 and thereafter 6,600 8.09 (3.27) 4.82 -------- $601,821 ========
December 31, 1993 ------------------------------------------------------------------------------------------------------- Treasury Bill Pay Receive and Eurodollar Stated Fixed Fixed Futures Adjusted Maturity Amount Rate Swaps Swaps Contracts Rate* ------------------- -------- ------ ----- ------ -------------- -------- 1994 $383,213 1.87% 4.15% (0.27)% 0.02% 5.77% 1995 53,061 8.52 8.52 1999 and thereafter 6,600 8.09 (5.11) 2.98 -------- $442,874 ========
*Weighted average interest rate adjusted for hedging At December 31, these liabilities had a weighted average interest rate of 6.67% (1994) and 6.06% (1993). These borrowings averaged $574,487 (1994) and $464,091 (1993) and the maximum outstanding at any monthend was $930,072 (1994) and $773,140 (1993). At the end of 1994 and 1993, respectively, $316,865 and $205,821 of the agreements to repurchase with broker/dealers were to reacquire the same securities. Agreements with broker/dealers to repurchase substantially the same securities amounted to $284,956 (1994) and $237,053 (1993). PAGE F-19 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE N - Medium-Term Notes Medium-term notes are unsecured obligations of the Association. They have maturities and interest rates as follows:
December 31, 1994 ------------------------------------------------------------------------------------------ Pay Receive Stated Fixed Fixed Basis Adjusted Maturity Amount Rate Swaps Swaps Swaps Rate* -------- ---------- ------ ------- ------- ----- -------- 1995 $ 266,926 5.90% 0.47% 6.37% 1996 697,362 5.38 (0.05)% 0.68% 6.01 1997 199,791 6.05 6.05 ---------- $1,164,079 ==========
December 31, 1993 ------------------------------------------------------------------------------------------ Pay Receive Stated Fixed Fixed Adjusted Maturity Amount Rate Swaps Swaps Rate* -------- -------- ------ ----- ------- -------- 1995 $ 66,848 6.03% 6.03% 1996 609,692 5.17 0.15% (1.30)% 4.02 -------- $676,540 ========
*Weighted average interest rate adjusted for hedging PAGE F-20 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE O - Subordinated Notes
December 31 ----------------------------- 1994 1993 ---------- ---------- Parent: Subordinated notes, unsecured, due from 1997 to 2003 at coupon rates of 6.00% to 10.25%, net of unamortized discount of $7,530 (1994) and $8,818 (1993) $1,022,470 $1,021,182 Association: Subordinated notes, unsecured, due from 1997 to 2000 at coupon rates of 9.90% to 10.25%, net of unamortized discount of $911 (1994) and $1,121 (1993) 199,089 198,879 ---------- ---------- $1,221,559 $1,220,061 ========== ==========
At December 31, subordinated notes had a weighted average interest rate of 8.64% (1994) and 8.65% (1993). At December 31, 1994, subordinated notes had maturities and interest rates as follows:
Maturity Rate* Amount -------- ------ ---------- 1997 10.38% $ 214,439 1998 9.05 199,148 2000 9.31 312,738 2002 8.07 296,794 2003 6.14 198,440 ---------- $1,221,559 ==========
*Weighted average interest rate NOTE P - Taxes on Income The following is a comparative analysis of the provision for federal and state taxes on income. Income taxes for 1992 have not been restated for the effect of adopting FAS 109.
Year Ended December 31 ---------------------------------- 1994 1993 1992 -------- -------- -------- Federal income tax: Current $121,124 $141,016 $149,678 Deferred 1,765 3,599 (11,622) State tax: Current 39,941 42,014 47,019 Deferred (2,897) (3,101) (4,920) -------- -------- -------- $159,933 $183,528 $180,155 ======== ======== ========
PAGE F-21 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) The amounts of net deferred liability included in taxes on income in the Consolidated Statement of Financial Condition are:
December 31 --------------------- 1994 1993 ------- -------- Federal income tax $75,396 $111,369 State tax 40,033 53,460
The deferred tax liability results from changes in the amounts of temporary differences during the year. The components of the net deferred tax liability are as follows:
December 31 ---------------------------- 1994 1993 -------- -------- Deferred tax liabilities: Loan fees and interest income $ 64,116 $ 60,550 FHLB stock dividends 62,524 57,695 Bad debt reserve 39,085 54,458 Unrealized gains on debt and equity securities 13,328 59,459 Depreciation 11,282 10,518 Other deferred tax liabilities 751 1,032 -------- -------- Gross deferred tax liabilities 191,086 243,712 Deferred tax assets: Provision for losses on loans 47,869 41,293 State taxes 14,112 15,251 Loan discount primarily related to acquisitions 11,460 15,678 Other deferred tax assets 2,216 6,661 -------- -------- Gross deferred tax assets 75,657 78,883 -------- -------- Net deferred tax liability $115,429 $164,829 ======== ========
For 1992, deferred tax expense under APB 11 results from timing differences in the recognition of revenue and expense for tax and financial statement purposes. The sources of these differences and the tax effects of each are as follows:
Year Ended December 31 1992 ---------------------------- Federal State -------- ------- Loan fees and interest income $ 506 $ 143 Revenue and expense reported on the cash basis (4,801) (1,355) Effect of allowable federal bad debt deduction applied to timing differences 1,016 -0- State tax (10,888) -0- FHLB stock dividends 2,693 760 Other (148) (4,468) -------- ------- $(11,622) $(4,920) ======== =======
PAGE F-22 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) A reconciliation of income taxes at the federal statutory corporate rate to the effective tax rate follows:
Year Ended December 31 ----------------------------------------------------------- 1994 1993 1992 ----------------- ----------------- ----------------- Percent Percent Percent of of of Pretax Pretax Pretax Amount Income Amount Income Amount Income -------- ------- -------- ------- -------- ------- Computed standard corporate tax expense $136,634 35.0% $160,083 35.0% $157,655 34.0% Increases (reductions) in taxes resulting from: Bad debt deduction based on a percentage of income -0- -0- -0- -0- 3,906 0.8 Net financial income, not subject to income tax, primarily related to acquisitions 393 0.1 (3,293) (0.7) (7,773) (1.6) State tax, net of federal income tax benefit 24,325 6.2 27,783 6.0 27,785 6.0 Adjustment of deferred tax liability due to tax rate increase -0- -0- 1,793 0.4 -0- -0- Other (1,419) (0.3) (2,838) (0.6) (1,418) (0.3) -------- ---- -------- ---- -------- ---- $159,933 41.0% $183,528 40.1% $180,155 38.9% ======== ==== ======== ==== ======== ====
In 1993, the Company adopted FAS 109 and elected to apply it prospectively. In accordance with FAS 109, a deferred tax liability has not been recognized for the tax bad debt reserve of World Savings and Loan Association that arose in tax years that began prior to December 31, 1987. At December 31, 1994, and 1993, the portion of the tax bad debt reserve attributable to pre-1988 tax years was approximately $252 million. The amount of unrecognized deferred tax liability at December 31, 1994, and 1993, was approximately $88 million. This deferred tax liability could be recognized if, in the future, there is a change in Federal tax law, the savings institution fails to meet the definition of a "qualified savings institution," certain distributions are made with respect to the stock of the savings institution, or the bad debt reserve is used for any purpose other than absorbing bad debt losses. NOTE Q - Stockholders' Equity 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 December 31, 1994, 5,765,180 of such shares had been repurchased and retired at a cost of $223 million since October 28, 1993. During 1994, 5,561,180 of the shares were purchased and retired at a cost of $216 million. PAGE F-23 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE R - Stock Options The Company's 1987 stock option plan authorizes the granting of options to key employees to purchase up to 7 million shares of the Company's common stock. The plan permits the issuance of either non-qualified stock options or incentive stock options. Under terms of the plan, incentive stock options have been granted at fair market value as of the date of grant and are exercisable any time after two to six years and prior to either five or ten years from the grant date. Non-qualified options have been granted at fair market value as of the date of grant and are exercisable after two to six years and prior to ten years and one month from the grant date. A summary of the transactions of the stock option plan follows:
Average Price per Shares Share --------- --------- Outstanding, January 1, 1992 2,993,400 $15.94 Granted 278,650 $38.13 Exercised (425,890) $12.15 Canceled (9,300) $26.73 --------- ------ Outstanding, December 31, 1992 2,836,860 $18.66 Granted 329,950 $39.53 Exercised (208,125) $13.54 Canceled (30,100) $29.62 --------- ------ Outstanding, December 31, 1993 2,928,585 $21.26 Granted 381,000 $35.67 Exercised (222,200) $13.46 Canceled (19,800) $37.30 --------- ------ Outstanding, December 31, 1994 3,067,585 $23.51 ========= ======
At December 31, shares available for option amounted to 3,104,200 (1994), 3,465,400 (1993), and 3,765,250 (1992); and shares exercisable amounted to 2,114,335 (1994), 1,792,235 (1993), and 1,225,210 (1992). Outstanding options at December 31, 1994, were held by 347 employees and had expiration dates ranging from July 29, 1995, to January 9, 2005. NOTE S - Financial Instruments with Off-Balance-Sheet Risk and Concentrations of Credit Risk As of December 31, 1994, the Company's loans receivable balance was $27.1 billion. Of that $27.1 billion balance, 78% were California loans, 3% were Colorado loans, 3% were Illinois loans, 2% were New Jersey loans, 2% were Texas loans, and 2% were Washington loans. No other single state made up more than 2% of the total loan portfolio. The majority of these loans are secured by first deeds of trust on one- to four-family residential property. Economic conditions and real estate values in the states in which the Company lends are the key factors that affect the credit risk of the Company's loan portfolio. PAGE F-24 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) In order to reduce its exposure to fluctuations in interest rates, the Company is a party to financial instruments with off-balance-sheet risk entered into in the normal course of business. These financial instruments include commitments to fund loans; commitments to purchase or sell securities, mortgage- backed securities, loans, and mortgage derivative products; interest rate swaps and caps; and futures and options contracts. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statement of financial condition. The contract or notional amounts of these instruments reflect the extent of involvement the Company has in particular classes of financial instruments. To limit credit exposure, among other things, the Company enters into financial instrument contracts only with the Federal Home Loan Bank of San Francisco and with major banks and securities dealers selected by the Company upon the basis of their creditworthiness and other matters. The Company initially has not required collateral or other security to support these financial instruments because of the creditworthiness of the contra parties. Commitments to originate mortgage loans are agreements to lend to a customer providing that the customer satisfies the terms of the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Prior to entering each commitment, the Company evaluates the customer's creditworthiness. The amount of outstanding loan commitments at December 31, 1994, and 1993, was $412 million and $350 million, respectively. Most of these commitments were for adjustable rate mortgages. The Company enters into commitments to purchase or sell mortgage-backed securities and other mortgage derivative products. The commitments generally have a fixed delivery or receipt settlement date. The Company controls the credit risk of such commitments through credit evaluations, limits, and monitoring procedures. The interest rate risk of the commitment is considered by the Company and may be matched with the appropriate funding sources. Interest rate risk during the commitment period may also be managed by use of over-the-counter options, options on futures and futures contracts. The Company had no outstanding commitments to purchase or sell mortgage-backed securities as of December 31, 1994, and 1993. Interest rate swaps and caps are utilized to limit the Company's sensitivity to interest rate changes. The Company is exposed to credit risk in the event of nonperformance by the other parties to the interest rate swap and cap agreements; however, the Company does not anticipate nonperformance by the other parties. The Company manages the credit risk of its futures contracts, long put options for futures contracts, interest rate swap agreements, and interest rate cap agreements through credit approvals, limits, and monitoring procedures. The contract or notional amount of these contracts does not represent exposure to credit risk; rather, credit risk relates only to unsettled amounts on contracts. NOTE T - Derivative Financial Instruments The Company has entered into interest rate swap and cap agreements with selected banks and government security dealers to reduce its exposure to fluctuations in interest rates. The possible inability of counterparties to satisfy the terms of the contracts exposes the Company to credit risk to the extent of the net difference between the calculated pay and receive amounts on each transaction. Net differences of that amount are generally settled quarterly. The Company has not experienced any credit losses from interest rate swaps or caps. The information presented below is based on interest rates at December 31, 1994. To the extent that rates change, variable interest rate information will change. The basis swaps are contracts in which the Company receives an amount based on one interest rate index and pays an amount based on a different interest rate index. The Company has entered into two basis swap contracts on which it makes payments based on three PAGE F-25 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) month LIBOR and in one case receives an amount based on the average Federal Funds rate published by the Federal Reserve and in the other case receives an amount based on the Bank Prime Loan rate published by the Federal Reserve. The forward starting swaps were entered into to convert floating rate assets to fixed-rate in the future in anticipation of future prepayments of matched fixed- rate assets. Accrual of interest on forward starting swaps begins at a predetermined future date. The Company has $125 million and $10 million of forward starting swaps, which are contractually delayed until 1995 and 1997, respectively. The following table illustrates the maturities and weighted average rates of 1994 derivative financial instruments held by the Company by product type.
MATURITIES OF 1994 DERIVATIVE FINANCIAL INSTRUMENTS Maturity -------------------------------------------------------- Balance at 1995 1996 1997 1998 1999+ December 31, 1994 ---------- ---------- -------- ---------- ---------- ----------------- Receive fixed generic swaps: Notional value $2,114,000 $1,545,000 $252,180 $ 827,983 $ 251,837 $4,991,000 Weighted average receive rate 5.07% 5.19% 6.68% 5.72% 6.70% 5.38% Weighted average pay rate 5.98% 4.81% 6.18% 5.27% 5.99% 5.51% Pay fixed generic swaps: Notional value $ 450,000 $ 435,000 $232,000 $ 209,000 $ 899,095 $2,225,095 Weighted average receive rate 5.78% 5.77% 5.57% 6.16% 5.97% 5.87% Weighted average pay rate 6.00% 8.05% 6.86% 7.66% 7.32% 7.18% Basis swaps: Notional value $ 200,000 $ -0- $ -0- $ -0- $ -0- $ 200,000 Weighted average receive rate 5.84% 0.00% 0.00% 0.00% 0.00% 5.84% Weighted average pay rate 6.46% 0.00% 0.00% 0.00% 0.00% 6.46% Forward starting swaps: Notional value $ -0- $ -0- $ -0- $ 125,000 $ 10,000 $ 135,000 Weighted average receive rate 0.00% 0.00% 0.00% 8.35% 8.68% 8.37% Weighted average pay rate 0.00% 0.00% 0.00% 6.80% 7.00% 6.81% Interest rate caps: Notional value $ 75,000 $ 225,000 $ -0- $ -0- $ -0- $ 300,000 ---------- ---------- -------- ---------- ---------- ---------- Total notional value $2,839,000 $2,205,000 $484,180 $1,161,983 $1,160,932 $7,851,095 ========== ========== ======== ========== ========== ========== Total weighted average rate on swaps: Receive rate 5.24% 5.32% 6.15% 6.08% 6.15% 5.59% ========== ========== ======== ========== ========== ========== Pay rate 6.02% 5.52% 6.51% 5.86% 7.03% 6.05% ========== ========== ======== ========== ========== ==========
PAGE F-26 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) Activity in derivative financial instruments in summarized as follows:
DERIVATIVE ACTIVITY For the Years Ended December 31, 1994, 1993, and 1992 (Notional amounts in millions) Treasury Bill Receive Pay Forward Interest and Eurodollar Fixed Fixed Basis Starting Rate Futures Swaps Swaps Swaps Swaps Caps Contracts ------- ------ ----- -------- -------- -------------- Balance, January 1, 1992 $ 406 $1,983 $ -0- $-0- $ 504 $ 4,700 Additions 677 1,175 200 210 87 17,714 Maturities (155) (527) -0- -0- (139) -0- Terminations -0- -0- -0- -0- -0- (18,314) Forward starting becoming effective -0- -0- -0- -0- -0- -0- ------ ------ ----- ---- ----- -------- Balance, December 31, 1992 928 2,631 200 210 452 4,100 Additions 1,807 332 400 -0- 15 9,455 Maturities (29) (381) -0- -0- (30) -0- Terminations -0- -0- -0- -0- -0- (13,555) Forward starting becoming effective -0- -0- -0- -0- -0- -0- ------ ------ ----- ---- ----- -------- Balance, December 31, 1993 2,706 2,582 600 210 437 -0- Additions 2,575 124 200 -0- -0- -0- Maturities (365) (481) -0- -0- (137) -0- Terminations -0- -0- (600) -0- -0- -0- Forward starting becoming effective 75 -0- -0- (75) -0- -0- ------ ------ ----- ---- ----- -------- Balance, December 31, 1994 $4,991 $2,225 $ 200 $135 $ 300 $ -0- ====== ====== ===== ==== ===== ========
Derivatives decreased net interest income by $23 million, $71 million, and $93 million for the years ended December 31, 1994, 1993, and 1992, respectively. NOTE U - Disclosure About Fair Value of Financial Instruments The Financial Accounting Standards Board Statement of Financial Accounting Standards No. 107 (FAS 107) requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. The statement provides for a variety of different valuation methods, levels of aggregation, and assessments of practicability of estimating fair value. PAGE F-27 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) Fair value estimates are not necessarily more relevant than historical cost values. Fair values may have limited usefulness in evaluating portfolios of long-term financial instrument assets and liabilities held by going concerns. Moreover, there are significant inherent weaknesses in any estimating techniques employed. Differences in the alternative methods and assumptions selected by various companies as well as differences in the methodology utilized between years may, and probably will, significantly limit comparability and usefulness of the data displayed. For these reasons, as well as others, management believes that the disclosure presented herein has limited relevance to the Company and its operations. The values presented are based upon information as of December 31, 1994, and 1993, and do not reflect any subsequent changes in fair value. Fair values may have changed significantly following the balance sheet dates. The estimates presented herein are not necessarily indicative of amounts that could be realized in a current transaction. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: The historical cost amounts approximate the fair value of the following financial instruments: cash, interest earned but uncollected, investment in capital stock of Federal Home Loan Bank, other investments, customer demand deposits, securities sold under agreements to repurchase with brokers/dealers due within 90 days, and federal funds purchased. Fair values are based on quoted market prices for securities available for sale, mortgage-backed securities available for sale, mortgage-backed securities held to maturity, medium-term notes, and subordinated notes. Fair values are estimated using projected cash flows present valued at replacement rates currently offered for instruments of similar remaining maturities for: customer term deposits, advances from Federal Home Loan Bank, and consumer repurchase agreements. For loans receivable and loan commitments, the fair value is estimated by present valuing projected future cash flows, using current rates at which similar loans would be made to borrowers and with assumed rates of prepayment. Adjustment for credit risk is estimated based upon the classification status of the loans. The fair value of interest rate caps is derived from current market prices of similar interest rate cap instruments. The fair value of interest rate swap agreements is the estimated amount the Company would receive or pay to terminate the swap agreements on the reporting date, considering current interest rates. PAGE F-28 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures)
December 31 ---------------------------------------------------------- 1994 1993 --------------------------- --------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ----------- ----------- ----------- ----------- Financial Assets: Cash $ 242,441 $ 242,441 $ 243,185 $ 243,185 Securities available for sale 1,488,845 1,488,845 1,636,586 1,636,586 Other investments 534,600 534,600 538,100 538,100 Mortgage-backed securities available for sale 323,339 323,339 1,114,069 1,114 069 Mortgage-backed securities held to maturity 871,039 831,436 408,467 412,243 Loans receivable 27,071,266 26,914,642 23,912,571 24,166,244 Interest earned but uncollected 202,456 202,456 175,080 175,080 Investment in capital stock of Federal Home Loan Bank 332,940 332,940 325,737 325,737 Financial Liabilities: Customer deposits 19,219,389 19,138,503 17,422,484 17,564,644 Advances from Federal Home Loan Bank 6,488,418 6,300,271 6,281,691 6,035,503 Securities sold under agreements to repurchase 601,821 602,117 442,874 447,163 Medium-term notes 1,164,079 864,210 676,540 686,581 Federal funds purchased 250,000 250,000 -0- -0- Subordinated notes 1,221,559 1,053,758 1,220,061 1,349,037
Off-Balance Sheet Instruments (Unrealized Gains (Losses)): December 31 ------------------------------------------------------------------------------ 1994 1993 ------------------------------------- ------------------------------------- Net Net Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized Gains Losses Gain (Loss) Gains Losses Gain (Loss) ---------- ---------- ----------- ---------- ---------- ----------- Interest rate swaps: Receive fixed $ 3,765 $104,098 $(100,333) $64,561 $ 566 $ 63,995 Pay fixed 64,874 8,959 55,915 -0- 159,571 (159,571) Basis -0- 77 (77) 6,634 -0- 6,634 Forward starting 348 -0- 348 -0- -0- -0- Interest rate caps 589 -0- 589 -0- 1,422 (1,422) Loan commitments 1,698 -0- 1,698 -0- 68 (68) ------- -------- --------- ------- -------- --------- Total $71,274 $113,134 $ (41,860) $71,195 $161,627 $ (90,432) ======= ======== ========= ======= ======== =========
PAGE F-29 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE V - Parent Company Financial Information
Statement of Net Earnings Year Ended December 31 -------------------------------- 1994 1993 1992 -------- -------- -------- Revenues: Investment income $ 40,821 $ 28,047 $ 22,542 Insurance commissions and trustee fees 1,190 1,357 2,978 Other 20 20 25 -------- -------- -------- 42,031 29,424 25,545 Expenses: Interest 85,906 75,601 58,313 General and administrative 2,648 2,188 2,088 -------- -------- -------- 88,554 77,789 60,401 -------- -------- -------- Loss before earnings of subsidiaries and income tax credit (46,523) (48,365) (34,856) Income tax credit 20,779 21,585 15,279 Earnings of subsidiaries 256,193 300,634 303,115 -------- -------- -------- Net Earnings $230,449 $273,854 $283,538 ======== ======== ========
Statement of Financial Condition Assets December 31 ------------------------- 1994 1993 ---------- ---------- Cash $ 1,708 $ 9,658 Securities available for sale 299,454 681,935 Other investments 386,707 114,714 Notes receivable from subsidiary 250,000 150,000 Prepaid expenses and other assets 9,273 7,008 Investment in subsidiaries 2,094,784 2,169,364 ---------- ---------- $3,041,926 $3,132,679 ========== ==========
Liabilities and Stockholders' Equity Securities sold under agreements to repurchase $ -0- $ 24,875 Accounts payable and accrued expenses 19,182 21,018 Subordinated notes, net 1,022,470 1,021,182 Stockholders' equity 2,000,274 2,065,604 ---------- ---------- $3,041,926 $3,132,679 ========== ==========
PAGE F-30 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE V - Parent Company Financial Information (Continued)
Statement of Cash Flows Year Ended December 31 ------------------------------------- 1994 1993 1992 ----------- --------- --------- Cash flows from operating activities: Net earnings $ 230,449 $ 273,854 $ 283,538 Adjustments to reconcile net earnings to net cash used in operating activities: Equity in earnings of subsidiaries (256,193) (300,634) (303,115) Amortization of intangibles and discount on subordinated debt 1,353 1,209 837 Other, net (5,086) 15,509 (2,897) ----------- --------- --------- Net cash used in operating activities (29,477) (10,062) (21,637) Cash flows from investing activities: Capital contributed to subsidiaries (625) -0- -0- Dividends received from subsidiary 275,000 34,000 40,000 Purchases of securities held for sale (1,305,371) (1,920,007) (434,738) Sales and maturities of securities available for sale 1,681,257 1,440,605 432,685 Decrease (increase) in other investments (271,993) (169,355) 175,703 Notes receivable from subsidiary (650,000) (150,000) (695,000) Repayments of notes receivable from subsidiary 550,000 475,000 220,000 ----------- --------- --------- Net cash provided (used) in investing activities 278,268 (289,757) (261,350) Cash flows from financing activities: Increase (decrease) in securities sold under agreements to repurchase (24,875) 24,875 -0- Proceeds from subordinated debt -0- 297,008 295,616 Dividends on common stock (19,220) (17,280) (14,624) Sale of stock 2,992 2,818 5,153 Purchase and retirement of Company stock (215,638) (7,821) -0- ----------- --------- --------- Net cash provided (used) by financing activities (256,741) 299,600 286,145 Net increase (decrease) in cash (7,950) (219) 3,158 Cash at beginning of period 9,658 9,877 6,719 ----------- --------- --------- Cash at end of period $ 1,708 $ 9,658 $ 9,877 =========== ========= =========
PAGE F-31 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years ended December 31, 1994, 1993, and 1992 (Dollars in thousands except per share figures) NOTE W - Selected Quarterly Financial Data (Unaudited)
1994 ------------------------------------------------------------ Quarter Ended ------------------------------------------------------------ March 31 June 30 September 30 December 31 -------- -------- ------------ ----------- Interest income $451,695 $457,461 $468,161 $499,160 Interest expense 262,801 271,633 290,975 329,698 Net interest income 188,894 185,828 177,186 169,462 Provision for loan losses 16,492 17,946 15,996 12,532 Non-interest income 11,424 11,435 9,786 4,841 Non-interest expense 73,415 74,347 75,817 81,929 -------- -------- -------- -------- Earnings before taxes on income 110,411 104,970 95,159 79,842 Taxes on income 45,115 43,027 39,034 32,757 -------- -------- -------- -------- Net earnings $ 65,296 $ 61,943 $ 56,125 $ 47,085 ======== ======== ======== ======== Net earnings per share $ 1.02 $ .98 $ .91 $ .79 ======== ======== ======== ======== Cash dividends per share $ .075 $ .075 $ .075 $ .085 ======== ======== ======== ========
1993 ------------------------------------------------------------ Quarter Ended ------------------------------------------------------------ March 31 June 30 September 30 December 31 -------- -------- ------------ ----------- Interest income $463,027 $472,073 $473,813 $461,259 Interest expense 280,911 291,831 288,550 276,122 -------- -------- -------- -------- Net interest income 182,116 180,242 185,263 185,137 Provision for loan losses 11,459 13,182 16,196 25,000 Non-interest income 11,907 13,428 14,444 22,263 Non-interest expense 64,361 63,870 70,077 73,273 -------- -------- -------- -------- Earnings before taxes on income 118,203 116,618 113,434 109,127 Taxes on income 46,619 46,035 49,666 41,208 -------- -------- -------- -------- Net earnings $ 71,584 $ 70,583 $ 63,768 $ 67,919 ======== ======== ======== ======== Net earnings per share $ 1.12 $ 1.10 $ 1.00 $ 1.06 ======== ======== ======== ======== Cash dividends per share $ .065 $ .065 $ .065 $ .075 ======== ======== ======== ========
Due to the effect of stock repurchases on the fourth quarter earnings per share calculation, the year-to-date earnings per share for 1994 do not equal the sum of the quarterly earnings per share amounts. In addition, non-interest income in the fourth quarter of 1993 includes a $17 million reduction of a valuation allowance on investments charged to income in a previous year. PAGE 73 EXHIBIT 23(a) INDEPENDENT AUDITORS' CONSENT Board of Directors and Stockholders Golden West Financial Corporation Oakland, California We consent to the incorporation by reference in Post-Effective Amendment No. 2 to Registration Statement No. 2-66913 on Form S-8, Registration Statement No. 33-14833 on Form S-8, Registration Statement No. 33-29286 on Form S-3, Registration Statement No. 33-40572 on Form S-8, Registration Statement No. 33-48976 on Form S-3, and Registration Statement No. 33-57882 on Form S-3 of our report dated January 25, 1994 appearing in this Annual Report on Form 10-K of Golden West Financial Corporation for the year ended December 31, 1994. Oakland, California March 22, 1995 PAGE 74
EXHIBIT 27 Golden West Financial Corporation Financial Data Schedule ($000s omitted except per share amounts) For the Year Ended December 31, 1994 ------------------ Cash due from banks $ 242,441 Interest-bearing deposits 29,969 Federal funds sold - purchased securities for resale 152,000 Trading account assets -0- Investments and mortgage-backed securities available for sale 1,812,184 Investments and mortgage-backed securities held to maturity - carrying value 871,039 Investments and mortgage-backed securities held to maturity - market value 831,436 Loans 27,071,266 Allowance for losses 124,003 Total assets 31,683,741 Deposits 19,219,389 Short-term borrowings 851,821 Other liabilities 738,201 Long-term debt 8,874,056 Preferred stock - mandatory redemption -0- Preferred stock - no mandatory redemption -0- Common stocks 5,859 Other stockholders' equity 1,994,415 Total liability and stockholders' equity 31,683,741 Interest and fees on loans 1,649,413 Interest and dividends on investments 123,137 Other interest income 103,927 Total interest income 1,876,477 Interest on deposits 714,353 Total interest expense 1,155,107 Net interest income 721,370 Provision for loan losses 62,966 Investment securities losses (120) Other expenses 305,508 Income before income tax 390,382 Income before extraordinary items 390,382 Extraordinary items, less tax -0- Cumulative change in accounting principles -0- Net income 230,449 Earnings per share - primary 3.71 Earnings per share - fully diluted 3.71 Net yield - interest earning assets - actual 6.81% Loans on nonaccrual 284,103 Accruing loans past due 90 days or more -0- Troubled debt restructuring 72,827 Potential problem loans -0- Allowance for loan loss - beginning of period 106,698 Total chargeoffs 46,556 Total recoveries 895 Allowance for loan loss - end of period 124,003 Loan loss allowance allocated to domestic loans 124,003 Loan loss allowance allocated to foreign loans -0- Loan loss allowance - unallocated -0-
EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
9 YEAR DEC-31-1994 DEC-31-1994 242,441 29,969 152,000 0 1,812,184 871,039 831,436 27,071,266 124,003 31,683,741 19,219,389 601,821 738,201 9,124,056 0 0 5,859 1,994,415 31,683,741 1,649,413 123,137 103,454 1,876,477 714,353 1,155,107 721,370 62,966 (120) 305,508 390,382 390,382 0 0 230,449 3.71 3.71 6.81 284,103 0 72,827 0 106,698 46,556 895 124,003 124,003 0 0
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