-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JmiUDyowJeYZ2EXlMJqZAYHk0yX18z26Xilf3ZDVdLJ0MfVokSpyu75kAcpjk9Sn GFldur+Ipux2a/e/dFP54A== 0000042293-96-000003.txt : 19960515 0000042293-96-000003.hdr.sgml : 19960515 ACCESSION NUMBER: 0000042293-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04629 FILM NUMBER: 96562317 BUSINESS ADDRESS: STREET 1: 1901 HARRISON STREET CITY: OAKLAND STATE: CA ZIP: 94612 BUSINESS PHONE: 5104663420 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-Q 1 GOLDEN WEST MARCH 31, 1995, LIVE 10-Q FILING SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q For Quarter Ended March 31, 1996 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, 1996, was 58,435,959 shares. 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, 1996 and 1995 are unaudited. 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, 1996, are not necessarily indicative of the results for the full year.
Golden West Financial Corporation Consolidated Statement of Financial Condition (Unaudited) (Dollars in thousands) March 31 March 31 December 31 1996 1995 1995 ------------ ------------- ------------- Assets: Cash $ 203,419 $ 183,482 $ 218,695 Securities available for sale at fair value 707,755 1,288,384 901,856 Other investments at cost 1,086,255 1,287,850 1,190,160 Mortgage-backed securities available for sale at fair value 269,590 317,430 282,881 Mortgage-backed securities held to maturity without recourse at cost 859,705 857,029 893,774 Mortgage-backed securities held to maturity with recourse at cost 2,174,244 287,418 2,232,686 Loans receivable 28,388,930 28,115,602 28,181,353 Interest earned but uncollected 218,347 229,406 225,395 Investment in capital stock of Federal Home Loan Banks--at cost which approximates fair value 392,597 350,792 350,955 Real estate held for sale or investment 73,864 73,898 76,187 Prepaid expenses and other assets 295,466 222,017 222,015 Premises and equipment--at cost less accumulated depreciation 205,352 202,100 203,637 Goodwill arising from acquisitions 138,194 140,388 138,562 ------------ ------------- ------------- $35,013,718 $33,555,796 $35,118,156 ============ ============= ============= Liabilities and Stockholders' Equity: Customer deposits $20,990,781 $20,226,662 $20,847,910 Advances from Federal Home Loan Banks 6,459,770 7,014,781 6,447,201 Securities sold under agreements to repurchase 2,139,371 367,081 1,817,943 Medium-term notes 889,570 1,863,668 1,597,507 Accounts payable and accrued expenses 487,897 463,335 450,814 Taxes on income 390,947 330,177 356,036 Subordinated notes--net of discount 1,322,790 1,221,928 1,322,392 Stockholders' equity 2,332,592 2,068,164 2,278,353 ------------ ------------- ------------- $35,013,718 $33,555,796 $35,118,156 ============ ============= =============
Golden West Financial Corporation Consolidated Statement of Net Earnings (Unaudited) (Dollars in thousands except per share figures)
Three Months Ended March 31 1996 1995 ------------ ------------- Interest Income: Interest on loans $ 541,208 $ 489,991 Interest on mortgage-backed securities 61,673 25,565 Interest and dividends on investments 36,226 36,339 ------------ ------------- 639,107 551,895 Interest Expense: Interest on customer deposits 265,370 235,905 Interest on advances 89,981 94,404 Interest on repurchase agreements 28,388 6,480 Interest on other borrowings 47,709 48,675 ------------ ------------- 431,448 385,464 ------------ ------------- Net Interest Income 207,659 166,431 Provision for loan losses 18,522 14,779 ------------ ------------- Net Interest Income after Provision for Loan Losses 189,137 151,652 Non-Interest Income: Fees 8,883 6,292 Gain on the sale of securities, MBS and loans 4,684 18 Other 3,244 4,702 ------------ ------------- 16,811 11,012 Non-Interest Expense: General and administrative: Personnel 39,385 36,520 Occupancy 12,216 11,820 Deposit insurance 11,332 10,661 Advertising 2,248 2,628 Other 15,610 16,755 ------------ ------------- 80,791 78,384 Amortization of goodwill arising from acquisitions 368 936 ------------ ------------- 81,159 79,320 ------------ ------------- Earnings Before Taxes on Income 124,789 83,344 Taxes on Income 49,277 32,411 ------------ ------------- Net Earnings $ 75,512 $ 50,933 ============ ============= Net earnings per share $ 1.28 $ .87 ============ =============
Golden West Financial Corporation Consolidated Statement of Cash Flows (Unaudited) (Dollars in thousands)
Three Months Ended March 31 --------------------------- 1996 1995 ------------ ------------ Cash Flows From Operating Activities: Net earnings $ 75,512 $ 50,933 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for loan losses 18,522 14,779 Amortization of loan fees and discounts (6,526) (4,884) Depreciation and amortization 5,161 5,590 Loans originated for sale (194,359) (2,553) Sales of loans originated for sale 185,663 2,026 Decrease (increase) in interest earned but uncollected 7,048 (26,950) Federal Home Loan Bank stock dividends (9,251) (8,511) (Increase) in prepaid expenses and other assets (68,743) (9,973) Increase in accounts payable and accrued expenses 37,083 19,642 Increase in taxes on income 35,572 20,032 Other, net 10,563 (11,169) ------------ ------------ Net cash provided by operating activities 96,245 48,962 Cash Flows From Investing Activities: New loan activity: New real estate loans originated for portfolio (984,084) (1,751,681) Real estate loans purchased (200) (28,369) Other, net (16,776) (49,979) ------------ ------------ (1,001,060) (1,830,029) Real estate loan principal payments: Monthly payments 141,548 138,561 Payoffs, net of foreclosures 521,211 263,607 Refinances 66,888 35,569 ------------ ------------ 729,647 437,737 Purchases of mortgage-backed securities available for sale -0- (6,254) Purchases of mortgage-backed securities held to maturity (62) (1,171) Sales of mortgage-backed securities available for sale -0- 6,396 Repayments of mortgage-backed securities 104,559 25,079 Proceeds from sales of real estate 51,303 54,310 Purchases of securities available for sale (323,235) (440,773) Sales of securities available for sale 74,951 110,610 Maturities of securities available for sale 444,197 566,406 Decrease (increase) in other investments 103,905 (753,250) Purchases of Federal Home Loan Bank stock (37,099) (13,236) Redemptions of Federal Home Loan Bank stock -0- 150 Additions to premises and equipment (6,939) (6,685) ------------ ------------ Net cash provided by (used in) investing activities 140,167 (1,850,710)
Golden West Financial Corporation Consolidated Statement of Cash Flows (Continued) (Unaudited) (Dollars in thousands)
Three Months Ended March 31 -------------------------- 1996 1995 ------------ ----------- Cash Flows From Financing Activities: Customer deposit activity: Increase (decrease) in deposits, net $ (70,839) $ 819,518 Interest credited 213,710 187,755 ----------- ----------- 142,871 1,007,273 Additions to Federal Home Loan Bank advances 25,950 532,290 Repayments of Federal Home Loan Bank advances (13,470) (6,027) Proceeds from agreements to repurchase securities 396,362 268,810 Repayments of agreements to repurchase securities (74,934) (503,550) Proceeds from medium-term notes -0- 699,360 Repayments of medium-term notes (708,135) -0- Repayments of federal funds purchased -0- (250,000) Dividends on common stock (5,581) (4,979) Sale of stock 2,262 258 Purchase and retirement of Company Stock (17,013) (646) ----------- ----------- Net cash provided by (used in) financing activities (251,688) 1,742,789 ----------- ----------- Net Decrease in Cash (15,276) (58,959) Cash at beginning of period 218,695 242,441 ----------- ----------- Cash at end of period $ 203,419 $ 183,482 =========== =========== Supplemental cash flow information: Cash paid for: Interest $ 453,630 $ 374,961 Income taxes 19,871 11,406 Cash received for interest and dividends 646,155 524,945 Noncash investing activities: Loans transferred to foreclosed real estate 52,174 61,110 Loans securitized into MBS with recourse -0- 287,659
Golden West Financial Corporation Consolidated Statement of Stockholders' Equity (Unaudited) (Dollars in thousands)
Three Months Ended March 31 -------------------------- 1996 1995 ----------- ----------- Common Stock: Balance at January 1 $ 5,887 $ 5,859 Common stock issued upon exercise of stock options 8 2 Common stock retired upon purchase of stock (33) (2) ------------ ----------- Balance at March 31 5,862 5,859 ------------ ----------- Paid-in Capital: Balance at January 1 55,353 45,689 Common stock issued upon exercise of stock options 2,254 256 ------------ ----------- Balance at March 31 57,607 45,945 ------------ ----------- Retained Earnings: Balance at January 1 2,140,883 1,929,740 Net earnings 75,512 50,933 Cash dividends on common stock (5,581) (4,979) Retirement of stock (16,980) (644) ------------ ----------- Balance at March 31 2,193,834 1,975,050 ------------ ----------- Unrealized Gains on Securities Available for Sale: Balance at January 1 76,230 18,986 Change during period (941) 22,324 ------------ ----------- Balance at March 31 75,289 41,310 ------------ ----------- Total Stockholders' Equity at March 31 $2,332,592 $2,068,164 ============ ===========
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, 1995, as well as certain material changes in results of operations during the three month periods ended March 31, 1996, and 1995, respectively. The following narrative is written with the presumption that the users have read or have access to the Company's 1995 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, 1995, and for the year then ended. Therefore, only material changes in financial condition and results of operations are discussed herein. Golden West Financial Corporation Financial Highlights (Unaudited) (Dollars in thousands except per share figures)
March 31 March 31 December 31 1996 1995 1995 ------------ ------------ -------------- Assets $35,013,718 $33,555,796 $ 35,118,156 Loans receivable 28,388,930 28,115,602 28,181,353 Mortgage-backed securities 3,303,539 1,461,877 3,409,341 Customer deposits 20,990,781 20,226,662 20,847,910 Stockholders' equity 2,332,592 2,068,164 2,278,353 Stockholders' equity/total assets 6.66% 6.16% 6.49% Book value per common share $ 39.79 $ 35.30 $ 38.70 Common shares outstanding 58,622,859 58,591,005 58,871,409 Yield on loan portfolio 7.64% 7.30% 7.69% Yield on MBS 7.35% 8.03% 7.41% Yield on investments 5.68% 6.00% 5.96% Yield on earning assets 7.51% 7.23% 7.56% Cost of deposits 5.01% 5.14% 5.15% Cost of borrowings 5.95% 6.26% 6.15% Cost of funds 5.33% 5.52% 5.50% Yield on earning assets less cost of funds 2.18% 1.71% 2.06% Ratio of nonperforming assets to total assets 1.24% 1.07% 1.11% Ratio of troubled debt restructured to total assets .13% .20% .13% World Savings and Loan Association: Total assets $27,800,772 $32,518,232 $30,354,740 Net worth 2,051,277 2,165,290 2,128,329 Net worth/total assets 7.38% 6.66% 7.01% Regulatory capital ratios: Tangible capital 6.70% 6.15% 6.38% Core capital 6.70% 6.15% 6.38% Risk-based capital 14.12% 12.92% 13.40% World Savings Bank, a Federal Savings Bank: Total assets $ 7,127,638 $ 91,273 $ 4,017,491 Net worth 577,705 22,068 566,851 Net worth/total assets 8.11% 24.18% 14.11% Regulatory capital ratios: Tangible capital 8.05% 19.95% 14.01% Core capital 8.05% 19.95% 14.01% Risk-based capital 15.25% 29.96% 26.55%
Three Months Ended March 31 -------------------------- 1996 1995 ------------ ------------ New real estate loans originated $ 1,178,443 1,754,234 Average yield on new real estate loans 7.71% 7.11% Increase in customer deposits $ 142,871 1,007,273 Net earnings 75,512 50,933 Net earnings per share 1.28 .87 Cash dividends on common stock .095 .085 Average common shares outstanding 58,788,639 58,586,488 Ratios:(a) Net earnings/average net worth 13.09% 10.00% Net earnings/average assets .86% .63% Net interest income/average assets 2.37% 2.05% General and administrative expense/average assets .92% .96%
(a) Ratios are annualized by multiplying the quarterly computation by four. Averages are computed by adding the beginning balance and each monthend balance during the quarter and dividing by four. 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, 1996 and 1995, and December 31, 1995. The reader is referred to page 48 of the Company's 1995 Form 10-K for similar information for the years 1992 through 1995 and a discussion of the changes in the composition of the Company's assets and liabilities in those years. TABLE 1 Consolidated Condensed Balance Sheet In Percentage Terms
March 31 -------------------- December 31 1996 1995 1995 ------- ------- --------- Assets: Cash and investments 5.7% 8.2% 6.6% Mortgage-backed securities 9.4 4.4 9.7 Loans receivable 81.1 83.8 80.2 Other assets 3.8 3.6 3.5 ------- ------- ------ 100.0% 100.0% 100.0% ======= ======= ====== Liabilities and Stockholders' Equity: Customer deposits 60.0% 60.3% 59.4% Federal Home Loan Bank advances 18.4 20.9 18.4 Securities sold under agreements to repurchase 6.1 1.1 5.2 Medium-term notes 2.5 5.5 4.5 Other liabilities 2.5 2.4 2.2 Subordinated debt 3.8 3.6 3.8 Stockholders' equity 6.7 6.2 6.5 ------- ------- ------ 100.0% 100.0% 100.0% ======= ======= ======
As the above table shows, customer deposits represent the majority of the Company's liabilities. The largest asset component is the loan portfolio, which consists primarily of long-term mortgages. The disparity between the repricing (maturity or interest rate change) of deposits and borrowings and the repricing of mortgage loans and investments 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, 1996, the Company's assets mature or 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. Specifically, there is a two-month delay in reporting the COFI because of the time required to gather the data needed to compute the index. As a result, the current COFI actually reflects the Eleventh District's cost of funds at the level it was two months prior. Consequently, when the interest rate environment changes, 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. In addition to the COFI reporting lag, other elements of ARM loans also have an impact on earnings. These elements are the interest rate adjustment frequency of ARM loans, interest rate caps or limits on individual rate changes, interest rate floors, and introductory rates on new ARM loans. TABLE 2 Repricing of Interest-Earning Assets and Interest-Bearing Liabilities, Repricing Gaps, and Gap Ratio As of March 31, 1996 (Dollars in Millions)
Projected Repricing(a) ------------------------------------------------------------------------ 0 - 3 4 - 12 1 - 5 Over 5 Months Months Years Years Total ---------- ----------- ------------- ------------- ----------- Interest-Earning Assets: Investments $ 1,539 $ 4 $ 249 $ 2 $ 1,794 Mortgage-backed securities 2,291 115 432 466 3,304 Loans receivable: Rate-sensitive 23,723 1,350 112 -0- 25,185 Fixed-rate 103 294 1,221 1,308 2,926 Other(b) 497 -0- -0- -0- 497 Impact of interest rate swaps and caps 779 (135) 22 (666) -0- ---------- ---------- ---------- ----------- ---------- Total $ 28,932 $ 1,628 $ 2,036 $ 1,110 $ 33,706 ========== ========== ========== =========== ========== Interest-Bearing Liabilities(c): Customer deposits $ 8,812 $ 8,687 3,405 $ 87 $ 20,991 FHLB advances 4,911 984 390 175 6,460 Other borrowings 1,872 1,150 734 595 4,351 Impact of interest rate swaps 1,792 (601) (1,210) 19 -0- ---------- --------- ----------- ----------- ---------- Total $ 17,387 $ 10,220 $ 3,319 $ 876 $ 31,802 ========== ========= =========== =========== ========== Repricing gap $ 11,545 $ (8,592) $ (1,283) $ 234 ========== ========= =========== =========== Cumulative gap $ 11,545 $ 2,953 $ 1,670 $ 1,904 ========== ========= =========== =========== Cumulative gap as a percentage of total assets 33.0% 8.4% 4.8% =========== ======== ===========
(a) Based on scheduled maturity or scheduled repricing; loans reflect scheduled repayments and projected prepayments of principal. (b) Includes cash in banks and Federal Home Loan Bank (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 World Savings and Loan Association (World or Association) and World Savings Bank, a Federal Savings Bank (WFSB), 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, 1996 and 1995, and December 31, 1995, World's average regulatory liquidity ratios were 5.5%, 7%, and 8%, respectively, consistently exceeding the requirement. For the months ended March 31, 1996, and December 31, 1995, WFSB's average regulatory liquidity ratios were 6%, consistently exceeding the requirement. The level of the Company's investments position in excess of its liquidity requirements at any time depends on liquidity needs. At March 31, 1996 and 1995, and December 31, 1995, the Company had securities available for sale in the amount of $708 million, $1.3 billion, and $902 million, respectively, including net unrealized gains on securities available for sale of $116 million, $57 million, and $117 million, respectively. At March 31, 1996 and 1995, and December 31, 1995, the Company had no securities held to maturity or for trading. Included in the securities available for sale at March 31, 1996 and 1995, and December 31, 1995, were collateralized mortgage obligations (CMOs) in the amount of $340 million, $620 million, and $408 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, 1996, the majority of the Company's CMOs were fixed-rate instruments with remaining terms to maturity of five years or less, and qualified for inclusion in the regulatory liquidity measurement. MORTGAGE-BACKED SECURITIES At March 31, 1996 and 1995, and December 31, 1995, the Company had mortgage-backed securities (MBS) held to maturity in the amount of $3.0 billion, $1.1 billion, and $3.1 billion, respectively, including $2.2 billion of Federal National Mortgage Association (FNMA) MBS subject to full credit recourse at March 31, 1996. At March 31, 1996 and 1995, and December 31, 1995, the Company had mortgage-backed securities available for sale in the amount of $270 million, $317 million, and $283 million, respectively, including net unrealized gains on MBS available for sale of $13 million, $12 million, and $14 million, respectively. At March 31, 1996 and 1995, and December 31, 1995, the Company had no trading MBS. During 1995, the Company securitized $2.3 billion of adjustable rate mortgages (ARMs) into FNMA COFI-indexed MBS, to be used as collateral for borrowings. These securities are subject to full credit recourse to the Company. The Company has the ability and intent to hold these MBS until maturity. Accordingly, these MBS are classified as held to maturity. Repayments of MBS during the first quarter of 1996 were $105 million compared to $25 million in the same period of 1995. The increase in repayments on MBS during the first three months of 1996 as compared to the first three months of 1995 was primarily due to the increase in MBS that resulted through the securitization of ARM loans into FNMA MBS as well as an increase in prepayments on the underlying mortgages. LOAN PORTFOLIO LOAN VOLUME New loan originations for the quarter ended March 31, 1996, amounted to $1.2 billion compared to $1.8 billion for the same period in 1995. The decline in loan volume in the first quarter of 1996 was due to interest rate decreases which brought down the price of new fixed-rate mortgage loans, making competition from fixed-rate lenders more intense for adjustable rate mortgage lenders, such as the Company. Loans originated for sale amounted to $194 million for the first three months of 1996 compared to $3 million for the first three months of 1995. The increase in for sale originations was driven by a higher demand for fixed-rate mortgages. The Company continues to sell most of its fixed-rate originations. Refinanced loans constituted 43% of new loan originations for the quarter ended March 31, 1996, compared to 31% for the quarter ended March 31, 1995. The Company has lending operations in 24 states. The primary source of mortgage origination is loans secured by residential properties in California. For the three months ended March 31, 1996, 53% of total loan originations were on residential properties in California compared to 55% for the same period in 1995. The five largest states, other than California, for originations for the three months ended March 31, 1996, were Texas, Florida, Colorado, Illinois, and Arizona with a combined total of 28% of total originations. The percentage of the total loan portfolio (including mortgage-backed securities with recourse) that is comprised of residential loans in California was 73% at March 31, 1996 compared to 76% at March 31, 1995, and 73% at December 31, 1995. The tables on the following two pages show the Company's loan portfolio by state at March 31, 1996 and 1995. TABLE 3 Loan Portfolio by State March 31, 1996 (Dollars in thousands)
Residential Real Estate Commercial Loans as -------------------------- Real Total a % of State 1 - 4 5+ Land Estate Construction Loans (a) Portfolio - --------------- ------------ ----------- ----------- -------------- ------------ ------------ ------------- California $18,962,350 $3,348,673 $ 268 $ 69,921 $ -0- $22,381,212 72.73% Colorado 840,118 219,688 -0- 7,486 -0- 1,067,292 3.47 Illinois 847,231 181,987 -0- 2,301 -0- 1,031,519 3.35 Texas 859,969 87,978 586 1,653 -0- 950,186 3.09 New Jersey 886,719 412 -0- 7,478 199 894,808 2.91 Florida 747,365 2,625 196 1,090 -0- 751,276 2.44 Washington 361,530 307,278 -0- 783 -0- 669,591 2.18 Arizona 451,889 52,372 -0- 1,704 -0- 505,965 1.64 Virginia 428,668 3,000 -0- 1,562 -0- 433,230 1.41 Pennsylvania 398,270 -0- -0- 4,000 -0- 402,270 1.31 Connecticut 323,487 -0- -0- 15 -0- 323,502 1.05 Maryland 273,918 -0- -0- 586 -0- 274,504 0.89 Oregon 177,982 10,673 -0- 2,861 -0- 191,516 0.62 Nevada 157,545 1,200 -0- -0- -0- 158,745 0.52 Kansas 129,368 5,001 -0- 207 -0- 134,576 0.44 Utah 102,878 64 -0- 1,940 -0- 104,882 0.34 Minnesota 85,262 -0- -0- -0- -0- 85,262 0.28 Missouri 65,180 6,969 -0- -0- -0- 72,149 0.23 Wisconsin 63,103 4,205 -0- -0- -0- 67,308 0.22 New York 52,541 -0- -0- 22 -0- 52,563 0.17 Georgia 41,332 -0- -0- 2,016 -0- 43,348 0.14 Washington, DC 36,962 -0- -0- -0- -0- 36,962 0.12 Ohio 22,208 2,549 414 5,006 -0- 30,177 0.10 New Mexico 25,387 -0- -0- -0- -0- 25,387 0.08 Delaware 19,237 -0- -0- -0- -0- 19,237 0.06 Massachusetts 17,414 -0- -0- 20 -0- 17,434 0.06 Idaho 17,341 -0- -0- -0- -0- 17,341 0.06 North Carolina 8,698 303 -0- 533 -0- 9,534 0.03 Other 16,597 26 -0- 4,829 -0- 21,452 0.06 ------------ ----------- ------------ ------------ ------------ ------------ ---------- Totals $26,420,549 $4,235,003 $ 1,464 $ 116,013 $ 199 30,773,228 100.00% ============ =========== ============ ============ ============ ========== SFAS 91 deferred loan fees (74,160) Loan discount on purchased loans (5,776) Undisbursed loan funds (4,074) Allowance for loan losses (152,360) Loans to facilitate (LTF) interest reserve (474) Troubled debt restructured (TDR) interest reserve (4,533) Loans on customer deposits 31,323 ------------ Total loan portfolio and loans securitized into FNMA MBS with recourse 30,563,174 Loans securitized into FNMA MBS with recourse (2,174,244)(b) ------------ Total loan portfolio $28,388,930 ============
(a) The Company has no commercial loans. (b) Loans amounting to $2.3 billion were securitized with full recourse into Federal National Mortgage Association (FNMA) mortgage-backed securities during 1995. The March 31, 1996 balances of these FNMA mortgage-backed securities are reflected in the amounts above. TABLE 4 Loan Portfolio by State March 31, 1995 (Dollars in thousands) Residential Real Estate Commmercial Loans as -------------------------- Real Total a % of State 1 - 4 5+ Land Estate Construction Loans (a) Portfolio - --------------- ------------ ----------- ------- ------------- ------------- ------------ ------------- California $18,343,951 $3,325,576 $ 285 $ 81,498 $ -0- $21,751,310 76.04% 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, DC 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 18,632 39 -0- 5,096 -0- 23,767 0.08 ----------- ---------- ------ ---------- ------- ---------- -------- Totals $24,414,803 $4,048,202 $1,645 $ 137,096 $ 4,746 28,606,492 100.00% =========== ========== ====== ========== ======= ======== SFAS 91 deferred loan fees (89,066) Loan discount on purchased loans (7,236) Undisbursed loan funds (4,450) Allowance for loan losses (128,221) Loans to facilitate (LTF) interest reserve (775) Troubled debt restructured (TDR) interest reserve (6,063) Loans on customer deposits 32,580 ------------ Total loan portfolio and loans securitized into FNMA MBS with recourse 28,403,261 Loans securitized into FNMA MBS with recourse (287,659)(b) ------------- Total loan portfolio $ 28,115,602 =============
(a) The Company has no commercial loans. (b) Loans amounting to $288 million were securitized with full recourse into FNMA mortgage-backed securities during the first quarter of 1995. The March 31, 1995 balances of these mortgage-backed securities are reflected in the amounts above. The Company continues to emphasize ARM 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 90% at March 31, 1996, March 31, 1995, and December 31, 1995. Because of increased competition from fixed-rate mortgages, the Company's ARM originations constituted approximately 77% of new mortgage loans made in the first quarter of 1996 compared to 99% in the first three months of 1995. The weighted average maximum lifetime cap rate on the Company's ARM loan portfolio (including MBS with recourse) was 13.08%, or 5.64% above the actual weighted average rate at March 31, 1996, versus 13.25%, or 6.07% above the weighted average rate at March 31, 1995. Approximately $5.2 billion of the Company's loans (including MBS with recourse) 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, 1996, $632 million of these ARM loans had reached their rate floors. The weighted average floor rate on these loans was 7.79% at March 31, 1996 and 7.74% at March 31, 1995. Without the floor, the average yield on these loans would have been 7.28% at March 31, 1996 and 7.02% at March 31, 1995. Loan repayments consist of monthly loan amortization, loan payoffs, and refinances. For the quarter ended March 31, 1996, loan repayments were $730 million compared to $438 million in the same period of 1995. The increase in loan repayments was primarily due to higher mortgage payoffs and higher refinances within the portfolio. MORTGAGE SERVICING RIGHTS On January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122). SFAS 122 amends Statement of Financial Accounting Standards No. 65, "Accounting for Certain Mortgage Banking Activities," to require that any financial institution participating in the secondary mortgage market recognize, as separate assets, rights to service mortgage loans for others when those rights are acquired through either the purchase or origination of mortgage loans which are subsequently sold or securitized. SFAS 122 also requires that financial institutions participating in the secondary mortgage market assess capitalized mortgage servicing rights based on the fair value of those rights on a disaggregated basis. The Company adopted SFAS 122 on January 1, 1996. For the first quarter of 1996, the Company has recognized a $4.7 million gain on the sale of loans due to the capitalization of servicing rights under SFAS 122. After amortization, the balance at March 31, 1996 of the capitalized servicing rights was $4.6 million. ASSET QUALITY One measure of the soundness of the Company's portfolio is its ratio of nonperforming assets (NPAs) to total assets. Nonperforming assets included 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 Company's troubled debt restructured (TDRs) is 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. The table on the following page shows the components of the Company's nonperforming assets and TDRs, and the ratios to total assets. TABLE 5 Nonperforming Assets and Troubled Debt Restructured (Dollars in thousands)
March 31 -------------------------- December 31 1996 1995 1995 ----------- ------------ ------------ Non-accrual loans $ 361,376 $ 286,230 $ 314,086 Real estate acquired through foreclosure 72,487 71,708 75,158 Real estate in judgment 798 1,350 443 ----------- ------------ ------------ Total nonperforming assets $ 434,661 $ 359,288 $ 389,687 =========== ============ ============ TDRs $ 46,683 $ 68,275 $ 45,222 =========== ============ ============ Ratio of NPAs to total assets 1.24% 1.07% 1.11% =========== ============ ============ Ratio of TDRs to total assets .13% .20% .13% =========== ============ ============ Ratio of NPAs and TDRs to total assets 1.37% 1.27% 1.24% =========== ============ ============
The increase in NPAs during 1996 reflects the continued weakness in the California housing market and national trends toward higher home mortgage delinquencies. The Company continues to closely monitor all delinquencies and takes appropriate steps to protect its interests. Interest foregone on non-accrual loans is fully-reserved and amounted to $6 million in the first quarter of 1996 compared to $5 million in the same period of 1995. Interest foregone on TDRs amounted to $368 thousand for the three months ended March 31, 1996, compared to $481 thousand for the three months ended March 31, 1995. The tables on the following two pages show the Company's nonperforming assets by state at March 31, 1996 and 1995. TABLE 6 Nonperforming Assets by State March 31, 1996 (Dollars in thousands)
Non-Accrual Loans (a) Real Estate Owned ----------------------------------- -------------------------------- Residential Commerical Commercial NPAs as Real Estate Real Residential Real Total a % of State 1 -4 5+ Estate 1 - 4 5+ Estate NPAs(b) Loans - ----------- --------- ---------- --------- -------- -------- --------- ---------- -------- California $300,572 $ 12,549 $ 368 $55,304 $ 12,870 $ 3,779 $ 385,442 1.72% Colorado 1,690 -0- 3,251 108 -0- -0- 5,049 0.47 Illinois 3,464 472 -0- 791 302 -0- 5,029 0.49 Texas 4,390 -0- -0- 53 -0- -0- 4,443 0.47 New Jersey 11,206 -0- 687 429 -0- -0- 12,322 1.38 Florida 3,536 -0- 150 221 -0- -0- 3,907 0.52 Washington 458 -0- -0- -0- -0- -0- 458 0.07 Arizona 1,152 -0- -0- 88 -0- -0- 1,240 0.25 Virginia 1,810 -0- -0- 302 -0- -0- 2,112 0.49 Pennsylvania 2,439 -0- -0- 167 -0- -0- 2,606 0.65 Connecticut 3,536 -0- -0- 417 -0- -0- 3,953 1.22 Maryland 1,805 -0- -0- -0- -0- -0- 1,805 0.66 Oregon 545 -0- -0- -0- -0- -0- 545 0.28 Nevada 473 -0- -0- 203 -0- -0- 676 0.43 Kansas 665 40 -0- 46 -0- -0- 751 0.56 Utah 122 -0- -0- -0- -0- -0- 122 0.12 Minnesota -0- -0- -0- -0- -0- -0- -0- 0.00 Missouri 563 961 -0- 26 -0- -0- 1,550 2.15 Wisconsin -0- -0- -0- -0- -0- -0- -0- 0.00 New York 2,683 -0- -0- 81 -0- -0- 2,764 5.26 Georgia 1,448 -0- -0- 36 -0- -0- 1,484 3.42 Washington, DC 7 -0- -0- -0- -0- -0- 7 0.02 Ohio 61 -0- 58 -0- -0- 154 273 0.90 New Mexico 1 -0- -0- -0- -0- -0- 1 0.00 Delaware -0- -0- -0- -0- -0- -0- -0- 0.00 Massachusetts -0- -0- -0- -0- -0- -0- -0- 0.00 Idaho 68 -0- -0- -0- -0- -0- 68 0.39 North Carolina 46 -0- -0- -0- -0- -0- 46 0.48 Other 100 -0- -0- -0- -0- -0- 100 0.47 --------- ---------- --------- -------- --------- --------- ---------- ---- Totals $342,840 $ 14,022 $ 4,514 $58,272 $ 13,172 $ 3,933 436,753 1.42 ========= ========== ========= ======== ========= ========= REO general valuation allowance (2,092) (0.01) ---------- ----- Total nonperforming assets $ 434,661 1.41% ========== =====
(a) Non-accruals loans are 90 days or more past due and have no unpaid interest accrued. (b) Loans amounting to $2.3 billion were securitized with full recourse into FNMA mortgage-backed securities during 1995. The March 31, 1996 balance of the related nonperforming assets have been reflected in the amounts above. TABLE 7 Nonperforming Assets by State March 31, 1995 (Dollars in thousands)
Non-Accrual Loans (a) Real Estate Owned -------------------------------------------------- ------------------------------ Residential Commerical Commercial NPAs as Real Estate Real Residential Real Total a % of State 1 -4 5+ Estate Construction 1 - 4 5+ Estate NPAs(b) Loans - ----------- --------- ---------- --------- ------------ -------- -------- --------- ---------- -------- 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, DC -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 0.45 -------- --------- --------- ------ --------- -------- ------- --------- ----- 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) --------- ----- Total nonperforming assets $359,288 1.26% ========= =====
(a) Non-accruals loans are 90 days or more past due and have no unpaid interest accrued. (b) Loans amounting to $288 million were securitized with full recourse into FNMA mortgage-backed securities during the first quarter of 1995. The March 31, 1995 balance of the related nonperforming assets are reflected in the amounts above. The Company provides specific valuation allowances for losses on loans when impaired, including loans securitized into MBS with recourse or loans sold with recourse, and on real estate owned when any significant and permanent decline in value is identified. The Company also utilizes a methodology, based on trends in the basic portfolio, 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 database 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 general 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 possible 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, 1996 and 1995. TABLE 8 Changes in Allowance for Loan Losses (Dollars in thousands)
Three Months Ended March 31 --------------------------- 1996 1995 ----------- ------------ Beginning allowance for loan losses $ 141,988 $ 124,003 Provision charged to expense 18,522 14,779 Less loans charged off (8,360) (11,429) Add recoveries 210 868 ----------- ----------- Ending allowance for loan losses $ 152,360 $ 128,221 =========== =========== Ratio of net charge-offs to average loans outstanding (including MBS with recourse) .11% .15% ============ ============ Ratio of allowance for loan losses to nonperforming assets 35.1% 35.7% ============ ============
CUSTOMER DEPOSITS Customer deposits increased during the first quarter of 1996 by $143 million, including interest credited of $214 million. In the first three months of 1995, customer deposits increased $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. During the first quarter of 1996, rates on certificates of deposit were lower than a year ago which led to a slowdown in the savings inflows compared to the first three months of 1995. The table below shows the Company's customer deposits by interest rate and by remaining maturity at March 31, 1996 and 1995. TABLE 9 Customer Deposits (Dollars in millions)
March 31 -------------------------------------------------- 1996 1995 ---------------------- ---------------------- Rate* Amount Rate* Amount -------- ---------- --------- --------- Customer deposits by interest rate: Interest-bearing checking accounts 1.22% $ 768 1.33% $ 708 Passbook accounts 2.22 571 2.29 611 Money market deposit accounts 3.42 1,321 3.11 1,559 Term certificate accounts with original maturities of: 4 weeks to 1 year 5.10 8,892 5.55 6,639 1 to 2 years 5.42 4,407 4.96 5,183 2 to 3 years 5.86 1,920 5.26 2,184 3 to 4 years 5.40 614 5.33 822 4 years and over 5.95 2,067 6.31 2,105 Retail jumbo CDs 5.36 428 6.02 409 All other 7.67 3 7.74 7 ---------- --------- $ 20,991 $ 20,227 ========== ========= Customer deposits by remaining maturity: No contractual maturity $ 2,660 $ 2,878 Maturity within one year: 2nd quarter 6,152 3,643 3rd quarter 3,382 4,815 4th quarter 2,480 2,751 1st quarter 2,825 1,780 ---------- ---------- 14,839 12,989 1 to 2 years 2,255 2,197 2 to 3 years 414 1,171 3 to 4 years 644 257 4 years and over 179 735 ---------- ---------- $ 20,991 $ 20,227 ========== ==========
* Weighted average interest rate, including the impact of interest rate swaps. ADVANCES FROM FEDERAL HOME LOAN BANKS The Company uses borrowings from the FHLB, also known as "advances," to supplement cash flow and to provide funds for loan origination activities. FHLB advances amounted to $6.5 billion at March 31, 1996, compared to $7.0 billion and $6.4 billion at March 31, 1995, and December 31, 1995, respectively. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE The Company borrows funds through transactions in which securities are sold under agreements to repurchase (Reverse Repos). Reverse Repos are entered into with selected major government securities dealers, large banks, and the Federal Home Loan Bank of San Francisco, typically using MBS from the Company's portfolio. Reverse Repos with dealers, banks and the Federal Home Loan Bank of San Francisco amounted to $2.1 billion, $367 million, and $1.8 billion at March 31, 1996 and 1995, and December 31, 1995, respectively. The $2.1 billion balance at March 31, 1996, included $1.5 billion in Federal Home Loan Bank of San Francisco MBS Reverse Repos with maturities ranging from 1996 to 1998. OTHER BORROWINGS At March 31, 1996, Golden West, at the holding company level, had a total of $1.1 billion of subordinated debt issued and outstanding. As of March 31, 1996, the Company's subordinated debt securities were rated A3 and A- by Moody's Investors Service (Moody's) and Standard & Poor's Corporation (S&P), respectively. At March 31, 1996, Golden West had on file a registration statement with the Securities and Exchange Commission for the sale of up to $300 million of subordinated notes. World currently has on file a shelf registration with the OTS for the issuance of $2.0 billion of unsecured medium-term notes, all of which was available for issuance at March 31, 1996. World had medium-term notes outstanding under prior registrations with principal amounts of $890 million at March 31, 1996, compared to $1.9 billion at March 31, 1995, and $1.6 billion at December 31, 1995. As of March 31, 1996, 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 and, at March 31, 1996, the full amount was available for issuance. As of March 31, 1996, World had issued a total of $200 million of subordinated notes, which were 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 three months of 1996 and 1995 as a result of retained earnings. The increase was partially offset by the $17 million cost of the repurchase of Company stock and by a decline in market values of securities available for sale since December 31, 1995. Unrealized gains on securities and MBS available for sale included in stockholders' equity at March 31, 1996 and 1995, and December 31, 1995, were $75 million, $41 million, and $76 million, respectively. The Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123) on January 1, 1996. SFAS 123 establishes accounting and disclosure requirements using a fair value based method of accounting for stock based employee compensation plans. Under SFAS 123, the Company can either adopt the new fair value based accounting method or continue the intrinsic value based method and provide pro forma disclosures of net income and earnings per share as if the accounting provisions of SFAS 123 had been adopted. The Company adopted only the disclosure requirements of SFAS 123; therefore such adoption has no effect on the Company's March 31, 1996 consolidated financial statements. During periods of low asset growth, the Company's capital ratios may build to levels well in excess of the amounts necessary to meet regulatory capital requirements. Golden West's Board of Directors regularly reviews alternative uses of excess capital, including faster growth and acquisitions. At times, the Board has determined that repurchase of common stock is a wise use of excess capital. Through three separate actions, Golden West's Board of Directors authorized the purchase by the Company of up to 12.2 million shares of Golden West's common stock. As of March 31, 1996, 6.2 million shares had been repurchased and retired at a cost of $243 million since October 28, 1993, of which 330 thousand were purchased and retired at a cost of $17 million during the first three months of 1996. Dividends from World Savings are expected to continue to be the major source of funding for the stock repurchase program. The repurchase of Golden West stock is not intended to have a material impact on the normal liquidity of the Company. In March 1996, World paid a $165 million dividend to Golden West. 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 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 and WFSB, to meet certain minimum capital requirements. The table on the following page shows World's current regulatory capital ratios and compares them to the current OTS minimum requirements at March 31, 1996 and 1995. TABLE 10 World Savings and Loan Association Regulatory Capital Ratios (Dollars in thousands)
March 31, 1996 March 31, 1995 --------------------------------------------------- -------------------------------------------------- ACTUAL REQUIRED ACTUAL REQUIRED ------------------------- ----------------------- ------------------------ ------------------------ Capital Ratio Capital Ratio Capital Ratio Capital Ratio ------------ ---------- ----------- ---------- ----------- ---------- ----------- ---------- Tangible $1,845,592 6.70% $ 413,319 1.50% $1,987,529 6.15% $ 484,825 1.50% Core 1,845,592 6.70 826,638 3.00 1,987,529 6.15 969,649 3.00 Risk-based 2,169,719 14.12 1,228,984 8.00 2,297,336 12.92 1,422,710 8.00
The following table shows WFSB's current regulatory capital ratios and compares them to the current OTS minimum requirements at March 31, 1996 and 1995. TABLE 11 World Savings Bank, a Federal Savings Bank Regulatory Capital Ratios (Dollars in thousands)
March 31, 1996 March 31, 1995 ---------------------------------------------------- -------------------------------------------------- ACTUAL REQUIRED ACTUAL REQUIRED ------------------------- ------------------------ ----------------------- ------------------------ Capital Ratio Capital Ratio Capital Ratio Capital Ratio ------------ ---------- ----------- ---------- ----------- --------- ----------- ---------- Tangible $573,896 8.05% $ 106,874 1.50% $17,243 19.95% $1,297 1.50% Core 573,896 8.05 213,748 3.00 17,243 19.95 2,593 3.00 Risk-based 583,679 15.25 306,105 8.00 17,528 29.96 4,680 8.00
In addition, institutions whose exposure to interest rate risk as determined by the OTS is deemed to be above normal may be required to hold additional risk-based capital. The OTS has determined that the Association does not have above-normal exposure to interest rate risk. The OTS has not yet analyzed WFSB's interest rate risk exposure, although it is the Company's belief that WFSB does not have above-normal exposure to interest rate risk. The OTS has adopted rules based upon five capital tiers: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The determination of whether an association falls into a certain classification depends primarily on its capital ratios. The tables on the following pages summarized the capital ratios for each of the five classifications and shows that World and WFSB met the "well capitalized" standard as of March 31, 1996. The table below shows a reconciliation of World's equity capital to regulatory capital at March 31, 1996. TABLE 12 World Savings and Loan Association Reconciliation of Equity Capital to Regulatory Capital March 31, 1996 (Dollars in thousands)
Core/ Tier 1 Total Equity Tangible Tangible Leverage Risk-Based Risk-Based Capital Capital Equity Capital Capital Capital ----------- ----------- ------------ ------------ ------------ ------------ Common stock $ 150 Paid-in surplus 233,441 Retained earnings 1,744,752 Unrealized gains on securities available for sale 72,934 ----------- Equity capital $ 2,051,277 $2,051,277 $2,051,277 $2,051,277 $2,051,277 $2,051,277 =========== Positive goodwill (201,689) (201,689) (201,689) (201,689) (201,689) Negative goodwill 70,254 70,254 70,254 70,254 70,254 Unrealized gains on securities available for sale (72,934) (72,934) (72,934) (72,934) (72,934) Non-qualifying mortgage servicing (1,316) (1,316) (1,316) (1,316) (1,316) rights Equity/other investments (442) Subordinated debt 199,351 General valuation allowance 125,218 ----------- ----------- ----------- ----------- ------------ Regulatory capital $1,845,592 $1,845,592 $1,845,592 $1,845,592 $2,169,719 =========== =========== =========== =========== ============ Total assets $27,800,772 =========== Adjusted total assets $27,554,602 $27,554,602 $27,554,602 =========== =========== ============ Risk-weighted assets $15,362,295 $15,362,295 ============ ============ CAPITAL RATIO - ACTUAL 7.38% 6.70% 6.70% 6.70% 12.01% 14.12% =========== =========== ============ ============ ============ ============ 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 undercapitalized, less than 3.00% 3.00% 6.00% =========== =========== ========== Critically undercapitalized, equal to or less than 2.00% ============
The table below shows a reconciliation of WFSB's equity capital to regulatory capital at March 31, 1996. TABLE 13 World Savings Bank, a Federal Savings Bank Reconciliation of Equity Capital to Regulatory Capital March 31, 1996 (Dollars in thousands)
Core/ Tier 1 Total Equity Tangible Tangible Leverage Risk-Based Risk-Based Capital Capital Equity Capital Capital Capital ----------- ----------- ------------ ------------ ------------ ------------ Common stock $ 150 Paid-in surplus 570,182 Retained deficit 7,373 ----------- Equity capital $ 577,705 $ 577,705 $ 577,705 $ 577,705 $ 577,705 $ 577,705 =========== Positive goodwill (3,809) (3,809) (3,809) (3,809) (3,809) General valuation allowance 9,783 ----------- ------------ ------------ ------------ ------------ Regulatory capital $ 573,896 $ 573,896 $ 573,896 $ 573,896 $ 583,679 =========== ============ ============ ============ ============ Total assets $7,127,638 =========== Adjusted total assets $ 7,124,923 $ 7,124,923 $ 7,124,923 =========== ============ ============ Risk-weighted assets $ 3,826,315 $ 3,826,315 ============ ============ CAPITAL RATIO - ACTUAL 8.11% 8.05% 8.05% 8.05% 15.00 15.25 =========== =========== ============ ============ ============ ============ 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 undercapitalized, less than 3.00% 3.00% 6.00% =========== ============ =========== Critically undercapitalized, equal to or 2.00 % less than ============
The table below compares World's regulatory capital to the well capitalized classification at March 31, 1996. TABLE 14 World Savings and Loan Association Regulatory Capital Compared to Well Capitalized Classification (Dollars in thousands)
ACTUAL WELL CAPITALIZED -------------------------- -------------------------- Capital Ratio Capital Ratio ----------- ----------- ----------- ----------- Leverage $ 1,845,592 6.70 % $ 1,377,730 5.00 % Tier 1 risk-based 1,845,592 12.01 921,738 6.00 Total risk-based 2,169,719 14.12 1,536,230 10.00
The table below compares WFSB's regulatory capital to the well capitalized classification at March 31, 1996. TABLE 15 World Savings Bank, a Federal Savings Bank Regulatory Capital Compared to Well Capitalized Classification (Dollars in thousands)
ACTUAL WELL CAPITALIZED -------------------------- -------------------------- Capital Ratio Capital Ratio ----------- ----------- ----------- ----------- Leverage $ 573,896 8.05% $ 356,246 5.00% Tier 1 risk-based 573,896 15.00 229,579 6.00 Total risk-based 583,679 15.25 382,632 10.00
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, 1996 and 1995, and December 31, 1995. TABLE 16 Yield on Earning Assets, Cost of Funds, and Primary Spread, Including Effect of Purchase Accounting
March 31 --------------------------- December 31 1996 1995 1995 --------- -- ----------- ------------- Yield on loan portfolio 7.64% 7.30% 7.69% Yield on MBS 7.35 8.03 7.41 Yield on investments 5.68 6.00 5.96 ---------- -------- ---------- Yield on earning assets 7.51 7.23 7.56 ---------- -------- ---------- Cost of customer deposits 5.01 5.14 5.15 Cost of borrowings 5.95 6.26 6.15 ---------- -------- ---------- Cost of funds 5.33 5.52 5.50 ---------- -------- ---------- Primary spread 2.18% 1.71% 2.06% ========== ======== ==========
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, which are primarily adjustable rate mortgages. Most of the Company's ARMs have interest rates that change in accordance with an index based on the cost of deposits and borrowings of savings institutions that are members of the FHLB of San Francisco (the COFI). In general, the repricing of COFI ARM portfolios tends to lag liability interest rate changes because of certain loan features which restrain monthly adjustments and because the COFI tends to trail changes in liability costs due to the existence of a two-month reporting lag. During the first quarter of 1996, the effect of the generally declining interest rates during the second half of 1995 and early in 1996, led to a 17 basis point reduction in the Company's cost of funds. During the same period, the yield on the loan portfolio fell by only five basis points allowing for a 12 basis point increase in the Company's spread since yearend 1995. The table on the following page shows the Company's revenues and expenses as a percentage of total revenues for the three months ended March 31, 1996 and 1995, in order to focus on the changes in interest income between years as well as changes in other revenue and expense amounts. TABLE 17 Selected Revenue and Expense Items as Percentages of Total Revenues
Three Months Ended March 31 ------------------------- 1996 1995 ---------- ---------- Interest on loans 82.5% 87.0% Interest on mortgage-backed securities 9.4 4.5 Interest and dividends on investments 5.5 6.5 ---------- ----------- 97.4 98.0 Less: Interest on customer deposits 40.5 41.9 Interest on advances and other borrowings 25.3 26.6 ---------- ----------- 65.8 68.5 Net interest income 31.6 29.5 Provision for loan losses 2.8 2.6 ---------- ----------- Net interest income after provision for loan losses 28.8 26.9 Add: Fees 1.4 1.1 Gain on the sale of securities, mortgage-backed securities, and loans 0.7 0.0 Other non-interest income 0.5 0.8 ---------- ----------- 2.6 1.9 Less: General and administrative expenses 12.3 13.9 Amortization of goodwill 0.1 0.1 Taxes on income 7.5 5.8 ---------- ----------- Net earnings 11.5% 9.0% ========== ===========
INTEREST RATE SWAPS AND CAPS The Company enters into interest rate swaps and caps as a part of its interest rate risk management strategy. Such instruments are entered into solely to alter the repricing characteristics of designated assets and liabilities. The Company does not hold any derivative financial instruments for trading purposes. Interest rate swap and cap activity decreased net interest income by $4 million for the three months ended March 31, 1996, compared to a decrease of $9 million for the same period in 1995. The table on the following page summarizes the unrealized gains and losses for interest rate swaps and caps at March 31, 1996 and 1995. TABLE 18 Schedule of Unrealized Gains and Losses on Interest Rate Swaps and Caps (Dollars in thousands) March 31, 1996 March 31, 1995 ---------------------------------------- ---------------------------------------- Net Net Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized Gains Losses Gain (Loss) Gains Losses Gain (Loss) ------------ ------------ ------------- ------------ ------------ ------------ Interest rate caps $ 15 $ -0- $ 15 $ 265 $ -0- $ 265 Interest rate swaps 33,070 (54,767) (21,697) 38,551 (63,509) (24,958) ------------ ------------ ------------ ----------- ------------ ------------ Total $ 33,085 $ (54,767) $ (21,682 $ 38,816 $ (63,509) $ (24,693) ============ ============ ============ =========== ============ ============
TABLE 19 Schedule of Interest Rate Swaps and Caps Activity (Notional amounts in millions)
Three Months Ended March 31, 1996 ------------------------------------------------------------------------ Receive Pay Forward Interest Fixed Fixed Basis Starting Rate Swaps Swaps Swaps(a) Swaps Caps ----------- ----------- ----------- ----------- ------------ Balance at December 31, 1995 $ 3,221 $ 1,775 $ 43 $ 10 $ 225 Additions 523 -0- -0- -0- -0- Maturities (595) (40) (43) -0- (30) Terminations -0- -0- -0- -0- -0- Forward starting becoming effective -0- -0- -0- -0- -0- Other -0- -0- -0- -0- -0- ------------ ------------ ------------ ------------ ------------ Balance March 31, 1996 $ 3,149 $ 1,735 $ -0- $ 10 $ 195 ============ ============ ============ ============ ============
(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 1996 was 5.14% to 6.02%, and the range of floating interest rates paid on swap contracts was 4.98% to 6.02%. The range of fixed interest rates received on swap contracts in the first three months of 1996 was 4.61% to 9.68% and the range of fixed interest rates paid on swap contracts was 5.38% to 9.14%. INTEREST ON LOANS In the first quarter of 1996, interest on loans was higher than in the comparable 1995 period by $51 million or 10.5%. The increase in the first quarter of 1996 was due to a $719 million increase in the average portfolio balance and a 54 basis point increase in the average portfolio yield. INTEREST ON MORTGAGE-BACKED SECURITIES In the first quarter of 1996 interest on mortgage-backed securities was higher than in the comparable 1995 period by $36 million or 141.2%. The 1996 increase was due primarily to a $2.1 billion increase in the average portfolio balance, which was partially offset by a 65 basis point decrease in the average portfolio yield. The increase in the mortgage-backed securities portfolio, and the lower average portfolio yield were primarily the result of the securitization of adjustable-rate loans with recourse that began in March 1995, as discussed on page 11. INTEREST AND DIVIDENDS ON INVESTMENTS The income earned on the investment portfolio fluctuates, depending upon the volume outstanding and the yields available on short-term investments. For the first quarter of 1996, interest and dividends on investments were $113 thousand or 0.3% lower than for the same period in 1995. The decrease was primarily due to a 1 basis point decrease in the average portfolio yield and a $341 million decrease in the average portfolio balance. These decreases were partially offset by $4.4 million of interest income received on an income tax refund in 1996. INTEREST ON CUSTOMER DEPOSITS In the first quarter of 1996, interest on customer deposits increased by $29 million or 12.5% from the comparable period of 1995. The first quarter increase was due to a $1.2 billion increase in the average deposit balance and a 23 basis point increase in the average cost of deposits. INTEREST ON ADVANCES AND OTHER BORROWINGS For the first quarter of 1996, interest on advances and other borrowings increased by $17 million or 11.0% from the comparable period of 1995. The first quarter increase was primarily due to a $996 million increase in the average balance, which was partially offset by a 7 basis point decrease in the average cost of these borrowings. PROVISION FOR LOAN LOSSES The provision for loan losses was $18.5 million for the three months ended March 31, 1996, compared to $14.8 million for the same period in 1995. The higher provision in 1996 reflects the increase in non-accrual loans, primarily in California. GENERAL AND ADMINISTRATIVE EXPENSES For the first quarter of 1996, general and administrative expenses (G&A) increased by $2.4 million or 3.1% from the comparable period in 1995. The primary reasons for the increases in 1996 were growth in savings offices and general inflation. G&A as a percentage of average assets on an annualized basis was 0.92% for the first quarter compared to 0.96% for the same period in 1995. DEPOSIT INSURANCE Legislation to capitalize the Savings Association Insurance Fund (SAIF) in order to bring it into parity with the FDIC's other insurance fund, the Bank Insurance Fund (BIF) was not signed into law even though it passed both houses of Congress in 1995. The legislation would have required an assessment of all SAIF-insured institutions of approximately 80 basis points on their March 31, 1995, customer deposit balances. It is not clear when the disparity between SAIF and BIF will be resolved, therefore, the exact impact on the Company of that resolution is unknown at this time. 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. Taxes As a percentage of earnings were 39.5% for the first three months of 1996 compared to 38.9% for the first three months of 1995. 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, 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, 1996, and 1995, and December 31, 1995, see the cash and investments section on page 11. WFSB's principal sources of funds are cash flows generated from earnings; customer deposits; loan repayments; borrowings from the FHLB; investments from its parent; and debt collateralized by mortgages or securities. In addition, WFSB has a number of other alternatives available to provide liquidity or finance operations. These include sales of loans, negotiable certificates of deposit, and borrowings from commercial banks. For a discussion of WFSB's liquidity positions at March 31, 1996, and 1995, and December 31, 1995, see the cash and investments section on page 11. The principal sources of funds for Golden West (the Parent) are interest on investments, 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 and principal on subordinated debt securities, capital contributions to its insured subsidiaries, dividends to stockholders, the purchase of Golden West stock (see stockholders' equity section on page 22), and general and administrative expenses. At March 31, 1996 and 1995, and December 31, 1995, Golden West's total cash and investments amounted to $857 million (including a $700 million short-term loan to World), $910 million, and $719 million, respectively. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) April 30, 1996 - Annual Meeting
Broker For Against Withheld Abstain Non-Vote ------------- ------------- ------------- ------------- ------------- (b) Directors elected: Louis J. Galen 54,366,610 247,541 Antonia Hernandez 54,104,375 509,776 Bernard A. Osher 54,369,006 245,145 (c) Approve the amendment and restatement of the Company's 1996 Stock Option Plan 45,931,958 5,308,245 324,342 3,049,606 (d) Ratification of Auditors: Appointment of Deloitte & Touche LLP, independent public accountants, for the fiscal year 1996 54,484,216 41,680 88,255
Other Directors continuing in office are: Patricia A. King, William D. McKee, Kenneth T. Rosen, Marion O. Sandler and Herbert M. Sandler ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 - 1996 Stock Option Plan as Amended 11 - Statement of Computation of Earnings Per Share 27 - Financial Data Schedule SIGNATURES Pursuant to the requirements of the Securities and 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 13, 1996 /s/ J. L. Helvey ------------------------------------------- J. L. Helvey Group Senior Vice President (duly authorized and principal financial officer) EXHIBIT 10.1 Golden West Financial Corporation Amended and Restated 1996 Stock Option Plan (As Amended and Restated February 2, 1996) ARTICLE I GENERAL 1. Purpose. This 1996 Stock Option Plan (the "Plan") is intended to increase incentive and to encourage stock ownership on the part of (i) selected key employees of Golden West Financial Corporation (the "Company") or of other corporations which are or become subsidiaries of the Company, and (ii) certain consultants, advisory board members, and other independent contractors who provide services to the Company or its subsidiaries, but who are neither employees of the Company or its subsidiaries nor directors of the Company ("consultants"). It is also the purpose of the Plan to provide such employees and consultants with a proprietary interest, or to increase their proprietary interest, in the Company and its subsidiaries, and to encourage them to remain in the employ of and/or to increase their efforts on behalf of the Company or its subsidiaries. It is intended that certain options granted pursuant to the Plan shall constitute incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") ("incentive stock options"), and that certain other options granted pursuant to the Plan shall not constitute incentive stock options ("nonqualified stock options"). Prior to February 2, 1996, the Plan was known as the 1987 Stock Option Plan. 2. Administration. The Plan shall be administered by the Stock Option Committee (the "Committee") of the Board of Directors of Golden West Financial Corporation (the "Board"). The Committee shall from time to time at its discretion make determinations with respect to the persons to whom options shall be granted and the amount of such options. The Committee shall consist of not fewer than two members of the Board. The Committee shall be comprised solely of Directors who both are (i) "outside directors" under section 162(m) of the Code and (ii) "disinterested persons" under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-3"). The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 3. Eligibility. Subject to Section 2 of this Article I, the persons who shall be eligible to receive options under the Plan shall be such persons selected by the Committee from among the officers, key employees (including directors who are also salaried employees of the Company) and consultants of the Company, as may be determined by the Committee in its sole discretion. Notwithstanding any contrary provision of the Plan, consultants shall not be eligible to receive incentive stock options. Except where the context otherwise requires, the term "Company," as used herein, shall include (i) Golden West Financial Corporation and (ii) [any corporation or any other entity (including, but not limited to, partnerships and joint ventures) controlling, controlled by, or under common control with Golden West Financial Corporation (each a "subsidiary corporation")], and the terms "officers, key employees and consultants of the Company," and words of similar import, shall include officers, key employees and consultants of each such subsidiary corporation, as well as officers, key employees and consultants of Golden West Financial Corporation. 4. Shares of Stock Subject to the Plan. The shares that may be issued under the Plan shall be authorized and unissued or reacquired shares of the Company's common stock (the "Common Stock"). The aggregate number of shares which may be issued under the Plan shall not exceed 7,000,000 shares of Common Stock, unless an adjustment is required in accordance with Article III. If an option expires or is cancelled for any reason without having been fully exercised or vested, the number of shares subject to such option which were not purchased or did not vest prior to such expiration or cancellation may again be made subject to an option granted hereunder (to the same person or to a different person). 5. Amendment of the Plan. The Board, in its sole discretion, may amend or terminate the Plan, or any part thereof, at any time and for any reason. However, if and to the extent required to maintain the Plan's qualification under Rule 16b-3, any such amendment shall be subject to stockholder approval. The amendment or termination of the Plan shall not, without the consent of the option holder, alter or impair any rights or obligations under any option theretofore granted to such individual. 6. Term of Plan. The Plan, as amended and restated herein, shall remain in effect until amended or terminated by the Board in accordance with Section 5 of Article I. However, without further stockholder approval, no option which is intended to be an incentive stock option may be granted under the Plan after February 1, 2006. 7. Restrictions. All options granted under the Plan shall be subject to the requirement that, if at any time the Committee shall determine, in its discretion, that the listing, registration or qualification of the shares subject to options granted under the Plan upon any securities exchange or under any state or federal law, or the consent or approval of any government regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such options or the issuance, if any, or purchase of shares in connection therewith, such options may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 8. Nonassignability. 9. Withholding Taxes. Whenever shares of Common Stock are to be issued under the Plan, the Company shall have the right to require the optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. 10. Definition of "Fair Market Value." For the purposes of this Plan, the term "Fair Market Value," when used in reference to the date of grant of an option or the date of surrender of Common Stock in payment for the purchase of shares pursuant to the exercise of an option, as the case may be, shall mean the closing sale price of the Common Stock quoted on the Composite Tape for New York Stock Exchange--Listed Stocks, as published in "The Wall Street Journal," or if no sale price was quoted on such date, then as of the next preceding date on which such a sale price was quoted. If the Common Stock is not listed on the New York Stock Exchange, Fair Market Value shall mean the mean between the highest and lowest sale prices on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, as published in "The Wall Street Journal" and determined by the Committee, or, if such stock is not listed on any such securities exchange, the mean between the highest and lowest sale prices or bid quotations with respect to a share of such stock on the date such option is granted on the National Association of Securities Dealers, Inc. Automated Quotations System or any successor system or, if no such sale prices or quotations are available, the Fair Market Value on the date in question of a share of such stock as determined in good faith by the Committee. ARTICLE II STOCK OPTIONS 1. Award of Stock Options. Awards of stock options may be made under the Plan under all the terms and conditions contained herein. However, the aggregate Fair Market Value (determined as of the date of grant) of the stock with respect to which incentive stock options are exercisable for the first time by such officer or key employee during any calendar year (under all incentive stock option plans of the Company and its parent and subsidiary corporations) shall not exceed $100,000. The nature of options under the foregoing sentence shall be determined by taking options into account in the order in which they were granted. In no event shall an option constitute an incentive stock option if, at the time such option is granted, the terms of the option provide that it shall not constitute an incentive stock option. The date on which any option is granted shall be the date of the Committee's authorization of such grant or such later date as may be determined by the Committee at the time such grant is authorized. 2. Term of Options and Effect of Termination. Notwithstanding any other provision of the Plan, no option granted under the Plan shall be exercisable after the expiration of ten (10) years from the date of its grant. In addition, notwithstanding any other provision of the Plan, no incentive stock option granted under the Plan to a person who, at the time such option is granted and in accordance with Section 424(d) of the Code, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company shall be exercisable after the expiration of five (5) years from the date of its grant. 3. Terms and Conditions of Options. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Committee shall from time to time determine, which agreements shall contain such terms and conditions as determined by the Committee in its sole discretion and which also shall comply with the following terms and conditions. (A) Optionee's Agreement. Each optionee shall agree to remain in the employ of and/or to render to the Company his or her services for a period of two (2) years from the date of the option, but such agreement shall not impose upon the Company any obligation to retain the optionee in its employee and/or service for any period. (B) Number of Shares and Type of Option. Each option agreement shall state the number of shares to which the option pertains and whether the option is intended to be an incentive stock option or a nonqualified stock option. During any calendar year, no individual shall be granted options covering more than 300,000 shares. An option which is intended to be an incentive stock option may be granted only to an individual who on the grant date is an employee of Golden West Financial Corporation or of a corporation which constitutes a subsidiary corporation (within the meaning of Section 424(f) of the Code) of Golden West Financial Corporation. (C) Option Price. Each option agreement shall state the option price per share (or the method by which such price shall be computed). The option price per share shall not be less than 100% of the Fair Market Value of a share of the Common Stock on the date such option is granted. Notwithstanding the foregoing, the option price per share of an incentive stock option granted to a person who, on the date of such grant and in accordance with Section 424(d) of the Code, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company shall be not less than 110% of the Fair Market Value of a share of the Common Stock on the date that the option is granted. (D) Medium and Time of Payment. The option price shall be payable upon the exercise of an option in the legal tender of the United States or, in the discretion of the Committee, (i) by tendering previously acquired shares having an aggregate Fair Market Value at the time of exercise equal to the total option price, or (ii) by any other means which the Committee, in its sole discretion, determines to both provide legal consideration for the shares, and to be consistent with the purposes of the Plan. Upon receipt of payment, the Company shall deliver to the optionee (or the person entitled to exercise the option) a certificate or certificates for the shares of Common Stock to which the option pertains. (E) Exercise of Options. Each option shall state the time or times when it becomes exercisable, which shall be determined by the Committee. The Committee may, in its discretion, waive any vesting provisions contained in an option agreement. To the extent that an option has become vested (except as provided in Article III), and subject to the foregoing restrictions, it may be exercised in whole or in such lesser amount as may be authorized by the option agreement; provided, however, that no partial exercise of an option shall be for fewer than fifty (50) shares of Common Stock. If exercised in part, the unexercised portion of an option shall continue to be held by the optionee and may thereafter be exercised as herein provided. (F) Termination and Transfer of Options. In connection with the grant of any option under the Plan, the Committee may provide in the option agreement for the termination of all or any portion of an option under certain circumstances, including, without limitation, termination of the recipient's employment or service as a result of resignation, retirement, disability or death, or for cause, and may distinguish among various causes of termination as the Committee deems appropriate. In addition, the Committee may provide, through an option agreement or otherwise, that in the event an optionee's employment (or other service for the Company) is terminated, (i) such optionee's options may be exercised (by the optionee or, if appropriate, his or her beneficiary or personal representative) for specified periods thereafter within the option period, or (ii) to the extent not fully exercisable or otherwise vested on the termination date, such optionee's options may continue to become exercisable within the option period. ARTICLE III RECAPITALIZATION AND REORGANIZATIONS The number of shares of Common Stock covered by the Plan, and the number of shares and price per share of each outstanding option shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of consideration by the Company. If the Company shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain to and apply to the securities to which a holder of the same number of shares of Common Stock that are subject to that option would have been entitled. A dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation (a "Terminating Transaction") shall cause each outstanding option to terminate, unless the agreement of merger or consolidation shall otherwise provide; provided, however, that each optionee in the event of a Terminating Transaction which will cause his or her option to terminate shall have the right immediately prior to such Terminating Transaction to exercise such option in whole or in part, subject to every limitation on the exercisability of such option, other than any vesting provisions not required by the Code. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Committee, whose determination in that respect shall be final, binding and conclusive. The grant of an option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. ARTICLE IV MISCELLANEOUS PROVISIONS 1. Rights as a Stockholder. An optionee or a transferee of an option shall have no rights as a stockholder of the Company with respect to any shares covered by an option until the date of the receipt of payment (including any amounts required by the Company pursuant to Section 9 of Article I) by the Company. No adjustment shall be made as to any option for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to such date, except as provided in Article III. 2. Other Provisions. The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option or restrictions required by any applicable securities laws, as the Committee shall deem advisable. 3. Application of Funds. The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of options will be used for general corporate purposes. 4. No Obligation to Exercise Option. he granting of an option shall impose no obligation upon the optionee or a transferee of the option to exercise such option. GOLDEN WEST FINANCIAL CORPORATION Dated: February 2, 1996 /s/ J. L. Helvey ------------------------------------------- J. L. Helvey Group Senior Vice President (duly authorized and principal financial officer) EXHIBIT 11 Golden West Financial Corporation Statement of Computation of Earnings Per Share (Dollars in thousands except per share amounts)
Three Months Ended -------------------------------- March 31 -------------------------------- 1996 1995 -------------- -------------- Line 1: Average Number of Common Shares Outstanding 58,788,639 58,586,488 ============== ============== Line 2: Net Earnings $ 75,512 50,933 ============== ============== Line 3: Earnings Per Common Share (Line 2 divided by Line 1) $ 1.28 .87 ============== ==============
EX-27 2
9 3-MOS DEC-31-1995 MAR-31-1996 203,419 0 536,655 0 977,345 3,033,949 3,098,469 28,388,930 152,360 35,013,718 20,990,781 2,623,420 878,844 8,188,081 0 0 5,862 2,326,730 35,013,718 541,208 36,226 61,673 639,107 265,370 431,448 207,659 18,522 0 81,159 124,789 124,789 0 0 75,512 1.28 1.28 7.51 361,376 0 46,683 0 141,988 8,360 210 152,360 152,360 0 0
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