-----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, RWKDGZ6WcnxYGCxHTYsR/iJv442TidwjeQZ8bPmwbk5bFM/mWJU9y63lJTraSMgx 0o19z5WQj43JsOR57QfZ9Q== 0000042293-99-000017.txt : 19990514 0000042293-99-000017.hdr.sgml : 19990514 ACCESSION NUMBER: 0000042293-99-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990513 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: SEC FILE NUMBER: 001-04629 FILM NUMBER: 99620197 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 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q For the Quarter Ended March 31, 1999 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, 1999, was 56,096,399 shares. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The consolidated financial statements of Golden West Financial Corporation and subsidiaries (Golden West or Company) for the three months ended March 31, 1999 and 1998 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, 1999, are not necessarily indicative of the results for the full year. Golden West Financial Corporation Consolidated Statement of Financial Condition (Dollars in thousands)
March 31 March 31 December 31 1999 1998 1998 ------------ ------------- ------------- (Unaudited) --------------------------- Assets: Cash $ 196,974 $ 177,913 $ 250,875 Securities available for sale at fair value 331,937 628,235 377,005 Other investments at cost 1,154,996 389,044 422,385 Purchased mortgage-backed securities available for sale at fair value 103,290 148,740 113,585 Purchased mortgage-backed securities held to maturity at cost 518,887 718,733 572,376 Mortgage-backed securities held to maturity with recourse at cost 3,576,300 3,424,636 3,884,347 Mortgage-backed securities REMICs held to maturity 5,008,319 -0- 5,461,657 Loans receivable 26,020,901 32,723,855 25,721,288 Interest earned but uncollected 186,761 213,590 209,328 Investment in capital stock of Federal Home Loan Banks--at cost which approximates fair value 790,955 599,960 780,303 Real estate held for sale or investment 30,310 48,187 45,696 Prepaid expenses and other assets 472,851 347,264 357,363 Premises and equipment--at cost less accumulated depreciation 273,612 249,263 272,521 ------------ ------------- ------------- $38,666,093 $39,669,420 $38,468,729 ============ ============= ============= Liabilities and Stockholders' Equity: Deposits $26,395,440 $24,559,270 $26,219,095 Advances from Federal Home Loan Banks 6,114,548 7,645,830 6,163,472 Securities sold under agreements to repurchase 692,624 2,184,991 1,252,469 Federal funds purchased 475,000 500,000 -0- Accounts payable and accrued expenses 544,818 512,497 468,213 Taxes on income 370,842 341,043 329,409 Subordinated notes--net of discount 912,033 1,110,828 911,753 Stockholders' equity 3,160,788 2,814,961 3,124,318 ------------ ------------- ------------- $38,666,093 $39,669,420 $38,468,729 ============ ============= =============
Golden West Financial Corporation Consolidated Statement of Net Earnings (Unaudited) (Dollars in thousands except per share figures)
Three Months Ended March 31 ---------------------------- 1999 1998 ------------- ------------ Interest Income: Interest on loans $ 476,244 $ 628,878 Interest on mortgage-backed securities 168,751 72,195 Interest and dividends on investments 49,966 54,130 ------------- ------------ 694,961 755,203 Interest Expense: Interest on deposits 307,567 315,210 Interest on advances 86,751 123,560 Interest on repurchase agreements 13,547 32,936 Interest on other borrowings 36,395 39,783 ------------- ------------ 444,260 511,489 ------------- ------------ Net Interest Income 250,701 243,714 Provision for loan losses 574 2,965 ------------- ------------ Net Interest Income after Provision for Loan Losses 250,127 240,749 Non-Interest Income: Fees 16,159 12,947 Gain on the sale of securities, MBS, and loans 10,063 2,507 Other 9,077 10,549 ------------- ------------ 35,299 26,003 Non-Interest Expense: General and administrative: Personnel 51,798 46,536 Occupancy 16,287 14,169 Deposit insurance 1,393 1,612 Advertising 2,179 2,246 Other 21,389 19,111 ------------- ------------ 93,046 83,674 Earnings before Taxes on Income and Extraordinary Item 192,380 183,078 Taxes on Income 72,012 72,997 ------------- ------------ Earnings before Extraordinary Item 120,368 110,081 Extraordinary Item: Federal Home Loan Bank advance prepayment penalty, net of tax benefit -0- (7,710) ------------- ------------ Net Earnings $ 120,368 $ 102,371 ============= ============ Basic earnings per share before extraordinary $ 2.13 $ 1.92 item Basic earnings per share on extraordinary item, net of tax benefit 0.00 (.13) ------------- ------------ Basic earnings per share $ 2.13 $ 1.79 ============= ============ Diluted earnings per share before extraordinary $ 2.11 $ 1.89 item Diluted earnings per share on extraordinary item, net of tax benefit 0.00 (.13) ------------- ------------ Diluted earnings per share $ 2.11 $ 1.76 ============= ============
Golden West Financial Corporation Consolidated Statement of Cash Flows (Unaudited) (Dollars in thousands)
Three Months Ended March 31 ---------------------------- 1999 1998 ------------ ------------- Cash Flows from Operating Activities: Net earnings $ 120,368 $ 102,371 Adjustments to reconcile net earnings to net cash provided by operating activities: Extraordinary item -0- 13,035 Provision for loan losses 574 2,965 Amortization of loan fees and discounts (6,194) (5,105) Depreciation and amortization 6,937 5,724 Loans originated for sale (287,064) (121,539) Sales of loans 535,344 131,940 Decrease in interest earned but uncollected 22,567 3,333 Federal Home Loan Bank stock dividends (20,967) (17,383) Increase in prepaid expenses and other assets (106,244) (91,604) Increase in accounts payable and accrued expenses 66,855 58,824 Increase in taxes on income 62,640 63,938 Other, net (1,249) (4,427) ------------ ------------- Net cash provided by operating activities 393,567 142,072 Cash Flows from Investing Activities: New loan activity: New real estate loans originated for portfolio (1,790,916) (1,345,654) Real estate loans purchased (460) (1,047) Other, net (10,581) (10,817) ------------ ------------- (1,801,957) ( 1,357,518) Real estate loan principal payments: Monthly payments 151,930 174,919 Payoffs, net of foreclosures 1,168,958 1,177,369 ------------ ------------- 1,320,888 1,352,288 Repayments of mortgage-backed securities 750,827 148,520 Proceeds from sales of real estate 40,407 51,405 Purchases of securities available for sale (150,014) (22) Sales of securities available for sale 9 223 Matured securities available for sale 154,208 10,042 Increase in other investments (732,611) (136,396) Purchases of Federal Home Loan Bank stock -0- (990) Additions to premises and equipment (8,397) (15,063) ------------ ------------- Net cash provided by (used in) investing activities (426,640) 52,489
Golden West Financial Corporation Consolidated Statement of Cash Flows (Continued) (Unaudited) (Dollars in thousands)
Three Months Ended March 31 -------------------------- 1999 1998 ----------- ----------- Cash Flows from Financing Activities: Deposit activity: Increase (decrease) in deposits, net $ (69,200) $ 204,135 Interest credited 245,545 245,418 ----------- ----------- 176,345 449,553 Additions to Federal Home Loan Bank advances 1,508,650 711,200 Repayments of Federal Home Loan Bank advances (1,557,573) (1,587,707) Proceeds from agreements to repurchase securities 95 1,255,890 Repayments of agreements to repurchase securities (559,940) (1,404,947) Repayments of medium-term notes -0- (110,000) Increase in federal funds purchased 475,000 500,000 Dividends on common stock (7,921) (7,140) Exercise of stock options 2,067 4,262 Purchase and retirement of Company stock (57,551) -0- ----------- ----------- Net cash used in financing activities (20,828) (188,889) ----------- ----------- Net Increase (Decrease) in Cash (53,901) 5,672 Cash at beginning of period 250,875 172,241 ----------- ----------- Cash at end of period $ 196,974 $ 177,913 =========== =========== Supplemental cash flow information: Cash paid for: Interest $ 435,393 $ 507,374 Income taxes 9,486 3,831 Cash received for interest and dividends 717,528 758,536 Noncash investing activities: Loans converted from adjustable rate to fixed-rate 171,370 8,374 Loans transferred to foreclosed real estate 20,072 31,561 Adjustable rate loans securitized into mortgage-backed securities with recourse -0- 500,992
Golden West Financial Corporation Consolidated Statement of Stockholders' Equity (Unaudited) (Dollars in thousands)
For the Three Months Ended March 31, 1999 ------------------------------------------------------------------------------------ Accumulated Comprehensive Income From Additional Unrealized Total Common Paid-in Retained Gains On Stockholders' Comprehensive Stock Capital Earnings Securities Equity Income ---------- ----------- ---------- -------------- ------------- -------------- Balance at January 1, 1999 $ 5,686 $ 122,159 $2,781,925 $ 214,548 $ 3,124,318 Comprehensive income: Net earnings -0- -0- 120,368 -0- 120,368 $ 120,368 Change in unrealized gains on securities available for sale, net of tax -0- -0- -0- (20,118) (20,118) (20,118) Reclassification adjustment for gains included in income -0- -0- -0- (375) (375) (375) -------------- Comprehensive Income $ 99,875 ============== Cash dividends on common stock ($.14 per share) -0- -0- (7,921) -0- (7,921) Common stock issued upon exercise of stock options, including tax benefits 7 2,060 -0- -0- 2,067 Purchase and retirement of Company stock (62) -0- (57,489) -0- (57,551) ---------- ----------- ------------ -------------- ------------- Balance at March 31, 1999 $ 5,631 $ 124,219 $ 2,836,883 $ 194,055 $ 3,160,788 ========== =========== ============ ============== =============
For the Three Months Ended March 31, 1998 ------------------------------------------------------------------------------------ Accumulated Comprehensive Income From Additional Unrealized Total Common Paid-in Retained Gains On Stockholders' Comprehensive Stock Capital Earnings Securities Equity Income ---------- ----------- ---------- -------------- ------------- -------------- Balance at January 1, 1998 $ 5,707 $ 85,532 $2,457,055 $ 149,737 $ 2,698,031 Comprehensive income: Net earnings -0- -0- 102,371 -0- 102,371 $ 102,371 Change in unrealized gains on securities available for sale, net of tax -0- -0- -0- 17,434 17,434 17,434 Reclassification adjustment for losses included in income -0- -0- -0- 3 3 3 -------------- Comprehensive Income $ 119,808 ============== Cash dividends on common stock ($.125 per share) -0- -0- (7,140) -0- (7,140) Common stock issued upon exercise of stock options, including tax benefits 12 4,250 -0- -0- 4,262 ---------- ----------- ---------- -------------- ------------- Balance at March 31, 1998 $ 5,719 $ 89,782 $2,552,286 $ 167,174 $ 2,814,961 ========== =========== ========== ============== =============
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, 1998, as well as certain material changes in results of operations during the three month periods ended March 31, 1999, and 1998, respectively. The following narrative is written with the presumption that the users have read or have access to the Company's 1998 Annual Report on 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, 1998, and for the year then ended. Therefore, only material changes in financial condition and results of operations are discussed herein. NEW ACCOUNTING PRONOUNCEMENTS In 1998, Golden West adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131), which establishes annual and interim reporting standards for an enterprise's operating segments and related disclosures about its products, services, geographic areas, and major customers. The Company operates as a single segment and, therefore, SFAS 131 had no effect on the Company's financial statements. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivative instruments as either assets or liabilities in the statement of financial position and measure those instruments at fair value. This Statement is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company is in the process of assessing the impact of this statement on its financial statements and results of operations.
Golden West Financial Corporation Financial Highlights (Unaudited) (Dollars in thousands except per share figures) March 31 March 31 December 31 1999 1998 1998 ------------- ------------ -------------- Assets $ 38,666,093 $ 39,669,420 $ 38,468,729 Loans receivable including mortgage-backed securities 35,227,697 37,015,964 35,753,253 Deposits 26,395,440 24,559,270 26,219,095 Stockholders' equity 3,160,788 2,814,961 3,124,318 Stockholders' equity/total assets 8.17% 7.10% 8.12% Book value per common share $ 56.13 $ 49.22 $ 54.95 Common shares outstanding 56,312,799 57,190,004 56,861,124 Diluted common shares outstanding 56,883,065 58,108,240 57,429,914 Yield on loan portfolio 7.25% 7.57% 7.36% Yield on mortgage-backed securities 7.02% 7.23% 7.20% Yield on investments 5.55% 6.53% 5.53% Yield on earning assets 7.14% 7.51% 7.30% Cost of deposits 4.58% 5.02% 4.67% Cost of borrowings 5.73% 6.02% 5.87% Cost of funds 4.85% 5.33% 4.96% Yield on earning assets less cost of funds 2.29% 2.18% 2.34% Ratio of nonperforming assets to total assets .72% .93% .79% Ratio of troubled debt restructured to total assets .04% .10% .06% World Savings Bank, a Federal Savings Bank: Total assets $ 31,893,907 $ 25,820,982 $ 31,912,264 Net worth 2,248,514 1,769,860 2,164,854 Net worth/total assets 7.05% 6.85% 6.78% Regulatory capital ratios: Core capital 7.04% 6.84% 6.77% Risk-based capital 13.18% 13.51% 12.93% World Savings and Loan Association: Total assets $ 6,433,946 $ 25,820,982 $ 6,810,266 Net worth 701,150 1,087,367 687,778 Net worth/total assets 10.90% 7.64% 10.10% Regulatory capital ratios: Core capital 8.21% 6.62% 7.25% Risk-based capital 18.23% 13.90% 16.24% World Savings Bank, a State Savings Bank: Total assets $ 3,508,260 $ 132,201 $ 3,519,046 Net worth 190,175 12,166 186,411 Net worth/total assets 5.42% 9.19% 5.30% Regulatory capital ratios: Tier 1 leverage capital 5.35% 9.43% 5.26% Total risk-based capital 25.81% 17.49% 25.15%
Golden West Financial Corporation Financial Highlights (Unaudited) (Dollars in thousands except per share figures)
Three Months Ended March 31 ------------------------- 1999 1998 ----------- ----------- New real estate loans originated $2,077,980 $1,467,193 Average yield on new real estate loans 7.60% 7.76% Current average rate on new real estate loans (a) 6.14% 6.39% Increase in deposits (b) $ 176,345 $ 449,553 Earnings before extraordinary item 120,368 110,081 Net earnings 120,368 102,371 Basic earnings per share before extraordinary item 2.13 1.92 Diluted earnings per share before extraordinary item 2.11 1.89 Basic earnings per share 2.13 1.79 Diluted earnings per share 2.11 1.76 Cash dividends on common stock .14 .125 Average common shares outstanding 56,580,974 57,126,696 Average diluted common shares outstanding 57,145,979 58,008,840 Ratios:(c) Net earnings/average net worth (ROE)(d) 15.31% 14.83% Net earnings/average assets (ROA)(d) 1.25% 1.03% Net interest income/average assets 2.61% 2.45% General and administrative expense/average assets .97% .84%
(a) The current rate reflects that the actual rate being paid by the borrower at time of origination. (b) Includes a decrease of $525 million of wholesale deposits for the quarter ended March 31, 1998. (c) 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. (d) The ratios for the quarter ended March 31, 1998 include the extraordinary item. The ratios for the quarter ended March 31, 1998 excluding the extraordinary item are: ROE 15.95% and ROA 1.11%. 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, 1999 and 1998, and December 31, 1998. The reader is referred to page 53 of the Company's 1998 Annual Report on Form 10-K for similar information for the years 1995 through 1998 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 1999 1998 1998 ------- ------- ------------- Assets: Cash and investments 4.4% 3.0% 2.7% Mortgage-backed securities 23.8 10.8 26.1 Loans receivable 67.3 82.5 66.9 Other assets 4.5 3.7 4.3 ------- ------- ------- 100.0% 100.0% 100.0% ======= ======= ======= Liabilities and Stockholders' Equity: Deposits 68.3% 61.9% 68.1% Federal Home Loan Bank advances 15.8 19.3 16.0 Securities sold under agreements to repurchase 1.8 5.5 3.3 Federal funds purchased 1.2 1.3 0.0 Other liabilities 2.3 2.1 2.1 Subordinated debt 2.4 2.8 2.4 Stockholders' equity 8.2 7.1 8.1 ------- ------- ------- 100.0% 100.0% 100.0% ======= ======= =======
During 1998, the Company securitized $8.2 billion of loans into mortgage-backed securities which caused the percentage of mortgage-backed securities to total assets to increase from March 31, 1998 to March 31, 1999 and the percentage of loans receivable to total assets to decrease from March 31, 1998 to March 31, 1999. For further discussion, see pages 12 and 13. As the above table shows, the largest asset component is the loan portfolio (including mortgage-backed securities), which consists primarily of long-term mortgages. Deposits represent the majority of the Company's liabilities. The disparity between the repricing (maturity, prepayment, 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 following gap table shows that, as of March 31, 1999, the Company's assets reprice sooner than its liabilities. If all repricing assets and liabilities responded equally to changes in the interest rate environment, then the gap analysis would suggest that the Company's earnings would rise when interest rates increase and would fall when interest rates decrease. However, the Company's earnings are also affected by the built-in reporting and repricing lags inherent in the Eleventh District Cost of Funds Index (COFI), which is the benchmark Golden West uses to determine the rate on the majority of its adjustable rate mortgages (ARMs). The reporting lag occurs because of the time it takes to gather the data needed to compute the index. As a result, the COFI in effect in any month actually reflects the Eleventh District's cost of funds at the level it was two months prior. The repricing lag occurs because COFI is based on a portfolio of accounts, not all of which reprice immediately. Therefore, COFI does not initially fully reflect a change in market interest rates. Consequently, when the interest rate environment changes, the COFI lags cause assets to initially reprice more slowly than liabilities, enhancing earnings when rates are falling and holding down income when rates rise. TABLE 2 Repricing of Interest-Earning Assets and Interest-Bearing Liabilities, Repricing Gaps, and Gap Ratio As of March 31, 1999 (Dollars in millions)
Projected Repricing(a) ------------------------------------------------------------------- 0 - 3 4 - 12 1 - 5 Over 5 Months Months Years Years Total ----------- ----------- ----------- ------------ ----------- Interest-Earning Assets: Investments $ 1,158 $ 32 $ 69 $ 228 $ 1,487 Mortgage-backed securities 8,664 91 285 167 9,207 Loans receivable: Rate-sensitive 21,656 1,952 149 -0- 23,757 Fixed-rate 130 339 1,007 663 2,139 Other(b) 949 -0- -0- -0- 949 Impact of interest rate swaps 545 135 (663) (17) -0- ----------- ----------- ----------- ------------ ----------- Total $ 33,102 $ 2,549 $ 847 $ 1,041 $ 37,539 =========== =========== =========== ============ =========== Interest-Bearing Liabilities(c): Deposits $ 14,477 $ 10,368 $ 1,547 $ 3 $ 26,395 FHLB advances 5,500 200 122 293 6,115 Other borrowings 1,361 7 712 -0- 2,080 Impact of interest rate swaps 234 (113) (121) -0- -0- ----------- ----------- ----------- ------------ ----------- Total $ 21,572 $ 10,462 $ 2,260 $ 296 $ 34,590 =========== =========== =========== ============ =========== Repricing gap $ 11,530 $ (7,913) $ (1,413) $ 745 =========== =========== =========== ============ Cumulative gap $ 11,530 $ 3,617 $ 2,204 $ 2,949 =========== =========== =========== ============ Cumulative gap as a percentage of total assets 29.8% 9.4% 5.7% =========== =========== ===========
(a) Based on scheduled maturity or scheduled repricing; loans and MBS reflect scheduled repayments and projected prepayments of principal based on current rates of prepayment. (b) Includes cash in banks and Federal Home Loan Bank (FHLB) stock. (c) Liabilities with no maturity date, such as checking, 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 Bank, FSB (WFSB), and World Savings and Loan Association (WSL), to maintain a minimum amount of cash and certain qualifying investments for liquidity purposes. At March 31, 1999 and 1998 and at December 31, 1998, WFSB and WSL had liquidity in excess of the regulatory requirements. The state of Texas requires insured institutions, such as World Savings Bank, SSB (WSSB), to maintain a daily minimum amount of cash and certain qualifying investments for liquidity purposes. WSSB met this requirement during the periods under discussion. At March 31, 1999 and 1998, and December 31, 1998, the Company had securities available for sale in the amount of $332 million, $628 million, and $377 million, respectively, including unrealized gains on securities available for sale of $317 million, $275 million, and $358 million, respectively. At March 31, 1999 and 1998, and December 31, 1998, the Company had no securities held for trading in its investment securities portfolio. Included in the Company's investment portfolio at March 31, 1999 and 1998, and December 31, 1998, were collateralized mortgage obligations (CMOs) in the amount of $194 million, $61 million, and $196 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, 1999, all of these CMOs qualified for inclusion in the regulatory liquidity measurement. LOANS RECEIVABLE AND MORTGAGE-BACKED SECURITIES The Company invests in whole loans and mortgage-backed securities (MBS) and, from time to time, the Company securitizes loans from its portfolio into MBS and Real Estate Mortgage Investment Conduit Securities (MBS-REMICs) that are available to be used as collateral for borrowings. At March 31, 1999 and 1998, and December 31, 1998, the balance of loans receivable including mortgage backed securities was $35.2 billion, $37.0 billion, and $35.8 billion, respectively. Included in the $35.2 billion at March 31, 1999, was $3.6 billion of Federal National Mortgage Association (FNMA) mortgage-backed securities with the underlying loans subject to full credit recourse to the Company and $5.0 billion of MBS-REMICs. Included in the $35.8 billion at December 31, 1998, was $3.9 billion of FNMA MBS with the underlying loans subject to full credit recourse to the Company and $5.5 billion of MBS-REMICs. Included in the $37.0 billion at March 31, 1998, was $3.4 billion of FNMA MBS with the underlying loans subject to full credit recourse to the Company At March 31, 1999 and 1998, and December 31, 1998, the Company had MBS held to maturity in the amount of $9.1 billion, $4.1 billion, and $9.9 billion, respectively. At March 31, 1999 and 1998, and December 31, 1998, the Company had MBS available for sale in the amount of $103 million, $149 million, and $114 million, respectively, including unrealized gains on MBS available for sale of $4 million, $8 million, and $5 million, respectively. At March 31, 1999 and 1998 and December 31, 1998, the Company had no trading MBS. During 1998, the Company securitized $6.4 billion of mortgage loans into MBS-REMICs. MBS-REMICs are being used as collateral for borrowings. The Company has the ability and intent to hold these MBS until maturity and, accordingly, MBS-REMICs are classified as MBS held to maturity. During 1998, the Company securitized $1.8 billion of adjustable rate mortgages (ARMs) into FNMA COFI-indexed MBS. The Company has the ability and intent to hold these MBS until maturity and, accordingly, these MBS are classified as held to maturity. The FNMA MBS held to maturity are available to be used as collateral for borrowings and the underlying loans are subject to full credit recourse to the Company. Repayments of MBS during the first quarter of 1999 were $751 million compared to $149 million in the same period of 1998. MBS repayments were higher during the first three months of 1999 as compared to the first three months of 1998 due to an increase in total MBS outstanding and an increase in the prepayment rate of the underlying mortgages. LOAN VOLUME New loan originations for the three months ended March 31, 1999, amounted to $2.1 billion compared to $1.5 billion for the same period in 1998. The high volume of originations during 1999 was due to a continued strong demand for home loans for both purchases and refinances. Refinanced loans constituted 49% of new loan originations for the three months ended March 31, 1999, compared to 44% for the three months ended March 31, 1998. Loans originated for sale amounted to $287 million for the three months ended March 31, 1999, compared to $122 million for the same period in 1998. In addition, during the first three months of 1999, $171 million of loans were converted from adjustable rate to fixed rate compared to $8 million for the same period in 1998. The Company sold $535 million and $132 million of fixed-rate loans for the three months ended March 31, 1999 and 1998, respectively. At March 31, 1999, the Company had lending operations in 27 states. The largest source of mortgage origination is loans secured by residential properties in California. For the three months ended March 31, 1999, 64% of total loan originations were on residential properties in California compared to 59% for the same period in 1998. The five largest states, other than California, for originations for the three months ended March 31, 1999, were Florida, Texas, Washington, Arizona, and Illinois with a combined total of 19% of total originations. The percentage of the total loan portfolio (including mortgage-backed securities with recourse and MBS-REMICs) that is comprised of residential loans in California was 65% at March 31, 1999 compared to 66% at March 31, 1998 and December 31, 1998. The Company originates adjustable rate mortgages tied to various indexes, including the Eleventh District Cost of Funds Index (COFI), the Golden West Cost of Savings Index (COSI), and the twelve-month rolling average of the One-Year Treasury Constant Maturity (TCM). The following table shows the distribution of ARM originations by index for the first quarter of 1999 and 1998. TABLE 3 Adjustable Rate Mortgage Originations by Index (Dollars in thousands)
March 31 ---------------------------- ARM Index 1999 1998 - -------------------------- ------------ ------------ COFI $ 548,633 $ 989,904 COSI 1,077,388 133,248 TCM 38,650 163,975 ------------ ------------ $ 1,664,671 $ 1,287,127 ============ ============
The following table shows the distribution by index of the Company's outstanding balance of adjustable rate mortgages (including ARM MBS with recourse and ARM MBS-REMICs) at March 31, 1999 and 1998 and December 31, 1998. TABLE 4 Adjustable Rate Mortgage Portfolio by Index (Including ARM MBS with recourse and ARM MBS-REMICs) (Dollars in thousands)
March 31 -------------------------------- December 31 ARM Index 1999 1998 1998 - -------------------------- -------------- --------------- --------------- COFI $ 28,354,954 $ 33,142,963 $ 29,761,484 COSI 2,720,655 146,704 1,703,283 TCM 1,250,474 239,752 1,256,775 Other 185,290 269,948 201,756 -------------- --------------- --------------- $ 32,511,373 $ 33,799,367 $ 32,923,298 ============== =============== ===============
The tables on the following two pages show the Company's loan portfolio by state at March 31, 1999 and 1998. TABLE 5 Loan Portfolio by State March 31, 1999 (Dollars in thousands)
Residential Real Estate Commercial Loans as ------------------------- Real Total a% of State 1 - 4 5+ Land Estate Loans (a) Portfolio - ---------------- ------------ ----------- ---------- -------------- ----------- ------------ California $19,452,910 $3,301,332 $ 204 $ 37,569 $22,792,015 65.43% Florida 1,473,511 17,745 2 681 1,491,939 4.28 Texas 1,385,186 63,824 488 1,310 1,450,808 4.17 Illinois 1,120,218 142,985 -0- -0- 1,263,203 3.63 New Jersey 1,187,975 -0- -0- 4,557 1,192,532 3.42 Colorado 920,537 186,859 -0- 5,510 1,112,906 3.20 Washington 553,257 433,808 -0- 677 987,742 2.84 Arizona 737,057 22,555 -0- -0- 759,612 2.18 Other (b) 3,719,381 46,293 63 12,720 3,778,457 10.85 ------------ ----------- ---------- ------------- ------------ --------- Totals $30,550,032 $4,215,401 $ 757 $ 63,024 34,829,214 100.00% ============ =========== ========== ============= ========= SFAS 91 deferred loan fees (3,647) Loan discount on purchased loans (2,878) Undisbursed loan funds (2,928) Allowance for loan losses (236,476) Loans to facilitate (LTF) interest reserve (361) Troubled debt restructured (TDR) interest reserve (1,372) Loans on deposits 23,968 ------------ Total loan portfolio and loans securitized into FNMA MBS with recourse and MBS-REMICs 34,605,520 Loans securitized into FNMA MBS with recourse and MBS-REMICs (8,584,619)(c) ------------ Total loan portfolio $26,020,901 ============
(a) The Company has no commercial loans other than commercial real estate loans. (b) Includes states with loans less than 2% of total loans. (c) The above schedule includes the March 31, 1999 balances of loans that were securitized and retained as FNMA MBS with recourse and MBS-REMICs. TABLE 6 Loan Portfolio by State March 31, 1998 (Dollars in thousands)
Residential Real Estate Commercial Loans as ------------------------- Real Total a% of State 1 - 4 5+ Land Estate Loans (a) Portfolio - ---------------- ------------ ----------- ---------- -------------- ----------- ------------ California $20,559,134 $3,441,030 $ 227 $ 46,376 $24,046,767 66.06% Florida 1,391,624 19,980 7 825 1,412,436 3.88 Texas 1,401,536 84,865 557 1,435 1,488,393 4.09 Illinois 1,207,662 165,490 -0- 1,576 1,374,728 3.78 New Jersey 1,247,812 399 -0- 5,372 1,253,583 3.44 Colorado 1,084,163 223,494 -0- 6,992 1,314,649 3.61 Washington 530,491 410,124 -0- 712 941,327 2.59 Arizona 765,220 36,671 -0- 541 802,432 2.20 Other (b) 3,701,019 52,545 86 15,385 3,769,035 10.35 ------------ ----------- ---------- ------------- ------------ --------- Totals $31,888,661 $4,434,598 $ 877 $ 79,214 36,403,350 100.00% ============ =========== ========== ============= ========= SFAS 91 deferred loan fees (33,962) Loan discount on purchased loans (3,689) Undisbursed loan funds (3,579) Allowance for loan losses (237,186) Loans to facilitate interest reserve (570) Troubled debt restructured interest reserve (3,042) Loans on deposits 27,169 ------------ Total loan portfolio and loans securitized into FNMA MBS with recourse 36,148,491 Loans securitized into FNMA MBS with recourse (3,424,636)(c) ------------ Total loan portfolio $32,723,855 ============
(a) The Company has no commercial loans other than commercial real estate loans. (b) Includes states with loans less than 2% of total loans. (c) The above schedule includes the March 31, 1998 balances of loans that were securitized and retained as FNMA MBS with recourse. 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 (including MBS and MBS-REMICs) composed of rate-sensitive loans was 93% at March 31, 1999 compared to 92% at March 31, 1998 and December 31, 1998. The Company's ARM originations for the first three months of 1999 constituted 80% of new mortgage loans made in 1999 compared to 87% for the first three months of 1998. The weighted average maximum lifetime cap rate on the Company's ARM loan portfolio (including ARMs swapped into MBS with recourse and MBS-REMICs) was 12.59%, or 5.47% above the actual weighted average rate at March 31, 1999, versus 12.72%, or 5.28% above the weighted average rate at March 31, 1998. Approximately $4.5 billion of the Company's ARM loans (including MBS with recourse and MBS-REMICs) have terms that state that the interest rate may not fall below a lifetime floor set at the time of origination or assumption. As of March 31, 1999, $498 million of ARM loans had reached their rate floors. The weighted average floor rate on the loans that had reached their floor was 7.69% at March 31, 1999 compared to 7.75% at March 31, 1998. Without the floor, the average rate on these loans would have been 6.88% at March 31, 1999 and 7.24% at March 31, 1998. Loan repayments consist of monthly loan amortization and loan payoffs. For the three months ended March 31, 1999, loan repayments were $1.3 billion compared to $1.4 billion in the same period of 1998. Although the balance of loans receivable was smaller due largely to the securitization of loans into MBS, prepayments remained high due to the strong refinance and home sale activity. MORTGAGE SERVICING RIGHTS The Company accounts for mortgage servicing rights in accordance with SFAS 125. Capitalized mortgage servicing rights are included in "Prepaid expenses and other assets" on the Consolidated Statement of Financial Condition. The following table shows the changes in capitalized mortgage servicing rights at March 31, 1999 and 1998. TABLE 7 Capitalized Mortgage Servicing Rights (Dollars in thousands)
Three Months Ended March 31 --------------------------- 1999 1998 ------------ ------------ Beginning balance of capitalized mortgage servicing rights $ 28,635 $ 11,116 New capitalized mortgage servicing rights from loan sales 8,968 2,151 Amortization of capitalized mortgage servicing rights (2,353) (892) ------------ ------------ Ending balance of capitalized mortgage servicing rights $ 35,250 $ 12,375 ============ ============
The book value of Golden West's servicing rights did not exceed the fair value at March 31, 1999 or 1998 and, therefore, no write-down of the servicing rights to their fair value was necessary. ASSET QUALITY One measure of the soundness of the Company's loan and MBS portfolio is its ratio of nonperforming assets (NPAs) to total assets. Nonperforming assets include non-accrual loans (loans, including loans swapped into MBS with recourse and loans securitized into MBS-REMICs, 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) are made up of loans on which delinquent payments have been capitalized or on which temporary interest rate reductions have been made, primarily to customers adversely impacted by economic conditions. The following table shows the components of the Company's NPAs and TDRs and the various ratios to total assets. TABLE 8 Nonperforming Assets and Troubled Debt Restructured (Dollars in thousands)
March 31 -------------------------- December 31 1999 1998 1998 ----------- ----------- -------------- Non-accrual loans $ 252,043 $ 319,324 $ 262,332 Real estate acquired through foreclosure 27,106 47,696 42,572 Real estate in judgment 154 69 74 ----------- ----------- ------------ Total nonperforming assets $ 279,303 $ 367,089 $ 304,978 =========== =========== ============ TDRs $ 16,575 $ 38,686 $ 22,774 =========== =========== ============ Ratio of NPAs to total assets .72% .93% .79% =========== =========== ============ Ratio of TDRs to total assets .04% .10% .06% =========== =========== ============ Ratio of NPAs and TDRs to total assets .76% 1.03% .85% =========== =========== ============
The lower NPAs at March 31, 1999 as compared to March 31, 1998 reflect the strong California economy and housing market. The Company continues to closely monitor all delinquencies and takes appropriate steps to protect its interests. Interest foregone on non-accrual loans amounted to $2 million compared to $3 million for the same period in 1998. Interest foregone on TDRs amounted to $135 thousand for the three months ended March 31, 1999, compared to $286 thousand for the three months ended March 31, 1998. The tables on the following page show the Company's nonperforming assets by state as of March 31, 1999 and 1998. TABLE 9 Nonperforming Assets by State March 31, 1999 (Dollars in thousands)
Non-Accrual Loans (a) Real Estate Owned ---------------------------------- ------------------------------ Residential Commercial Commercial NPAs as Real Estate Real Residential Real Total a% of State 1 -4 5+ Estate 1 - 4 5+ Estate NPAs(b) Loans - ------------------ --------- --------- ----------- -------- --------- --------- ---------- -------- California $161,884 $ 3,392 $ 1,808 $22,736 $ -0- $ -0- $ 189,820 .83% Florida 16,841 -0- 78 1,134 -0- -0- 18,053 1.21 Texas 7,111 -0- -0- 491 -0- -0- 7,602 .52 Illinois 12,134 218 -0- 1,394 -0- -0- 13,746 1.09 New Jersey 15,695 -0- 373 743 -0- -0- 16,811 1.41 Colorado 1,636 -0- 3 -0- -0- -0- 1,639 .15 Washington 2,102 -0- -0- -0- -0- -0- 2,102 .21 Arizona 2,304 -0- -0- 64 -0- -0- 2,368 .31 Other (c) 26,380 84 -0- 1,268 -0- -0- 27,732 .73 --------- --------- ----------- -------- --------- --------- ---------- ----- Totals $246,087 $ 3,694 $ 2,262 $27,830 $ -0- $ -0- 279,873 .80% ========= ========= =========== ======== ========= ========= REO general valuation allowance (570) (.00) ---------- ----- Total nonperforming assets $ 279,303 .80% ========== =====
(a) Non-accruals loans are 90 days or more past due and have no unpaid interest accrued. (b) The March 31, 1999 balances include loans that were securitized into FNMA MBS and MBS-REMICs. (c) Includes states with loans less than 2% of total loans. TABLE 10 Nonperforming Assets by State March 31, 1998 (Dollars in thousands)
Non-Accrual Loans (a) Real Estate Owned -------------------------------- ------------------------------- Residential Commercial Commercial NPAs as Real Estate Real Residential Real Total a% of State 1 -4 5+ Estate 1 - 4 5+ Estate NPAs(b) Loans - ------------------ --------- --------- --------- -------- --------- --------- --------- --------- California $224,419 $ 7,827 $ 1,463 $42,586 $ 1,506 $ -0- $277,801 1.16% Florida 12,565 -0- 188 482 -0- -0- 13,235 .94 Texas 8,284 -0- -0- 935 -0- -0- 9,219 .62 Illinois 11,030 221 -0- 612 -0- -0- 11,863 .86 New Jersey 18,194 -0- 201 422 -0- -0- 18,817 1.50 Colorado 1,624 114 68 77 -0- -0- 1,883 .14 Washington 1,969 -0- -0- 544 -0- -0- 2,513 .27 Arizona 1,756 -0- -0- 244 -0- -0- 2,000 .25 Other (c) 29,340 41 20 1,216 162 11 30,790 .82 --------- --------- --------- -------- --------- --------- --------- ----- Totals $309,181 $ 8,203 $ 1,940 $47,118 $ 1,668 $ 11 368,121 1.01% ========= ========= ========= ======== ========= ========= REO general valuation allowance (1,032) (.00) --------- ----- Total nonperforming assets $367,089 1.01% ========= =====
(a) Non-accruals loans are 90 days or more past due and have no unpaid interest accrued. (b) The March 31, 1998 balances include loans that were securitized into FNMA MBS. (c) Includes states with loans less than 2% of total loans. The Company provides specific valuation allowances for losses on loans when impaired, and on real estate owned when any significant and permanent decline in value is identified. The Company also utilizes a methodology for monitoring and estimating loan losses that is based on both historical experience in the loan portfolio and factors reflecting current economic conditions. This approach uses a 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, 1999 and 1998. TABLE 11 Changes in Allowance for Loan Losses (Dollars in thousands)
Three Months Ended March 31 ------------------------ 1999 1998 ---------- ----------- Beginning allowance for loan losses $ 244,466 $ 233,280 Provision charged to expense 574 2,965 Transfer allowance to reserve for losses on loans sold or securitized and retained (9,750) -0- Less loans charged off, net -0- -0- Add recoveries 1,186 941 ---------- ----------- Ending allowance for loan losses $ 236,476 $ 237,186 ========== =========== Ratio of chargeoffs net of recoveries to average loans outstanding (including MBS with recourse and MBS-REMICs) (.01%) (.01%) ========== ===========
As previously mentioned, the Company has securitized loans with recourse from its portfolio into MBS and MBS-REMICs. The Company's intent is to hold these MBS and MBS-REMICs to maturity and the Company is liable for losses on the loans underlying these securities. Because these loans underlying the MBS and MBS-REMICs are similar in all respects to the loans in its loan portfolio, the Company estimates its reserve on these securities in a manner similar to the method it uses for the allowance for loan losses. The Company also sells loans with full credit recourse and has established a reserve for potential losses on these loans. The liability for this reserve for losses on loans sold or securitized and retained is included in accounts payable and accrued expenses. The table below shows the changes in the reserve for losses on loans sold or securitized and retained for the three months ended March 31, 1999 and 1998. TABLE 12 Changes in Reserve for Losses on Loans Sold with Recourse or Securitized and Retained (Dollars in thousands)
Three Months Ended March 31 ------------------------ 1999 1998 ---------- ----------- Beginning balance of reserve for losses on loans sold with recourse or securitized and retained $ 2,256 $ 886 Initial recourse at time of sale 543 137 Transfer from allowance for loan losses 9,750 -0- ---------- ----------- Ending balance of reserve for losses on loans sold with recourse or securitized and retained $ 12,549 $ 1,023 ========== ===========
The ratio to nonperforming assets of the allowance for loan losses and the reserve for losses on loans sold or securitized and retained was 89.2% and 64.9% at March 31, 1999 and 1998, respectively. At March 31, 1999 and 1998, the ratio to total loans (including MBS with recourse and MBS-REMICs) of the allowance for loan losses and the reserve for losses on loans sold or securitized and retained was .72% and .66%, respectively. DEPOSITS Retail deposits increased during the first quarter of 1999 by $176 million, including interest credited of $246 million, compared to an increase of $975 million, including interest credited of $245 million, in the first quarter of 1998. Retail deposits increased during the first three months of 1999 and 1998 primarily due to ongoing marketing efforts as well as active promotions of market rate transaction accounts. At March 31, 1999 and 1998, transaction accounts (which includes checking, passbook, and money market accounts) represented 37% and 23%, respectively, of the total balance of deposits. Beginning in January 1997, the Company began a program to use government securities dealers to sell certificates of deposit (CDs) to institutional investors. There were no outstanding wholesale CDs at March 31, 1999 or at March 31, 1998. The table below shows the Company's deposits by interest rate and by remaining maturity at March 31, 1999 and 1998. TABLE 13 Deposits (Dollars in millions)
March 31 --------------------------------------------------- 1999 1998 ------------------------ ------------------------ Rate* Amount Rate* Amount --------- ----------- ------------------------ Deposits by rate: Interest-bearing checking accounts 2.15% $ 113 2.10% $ 81 Passbook accounts 1.82 517 2.11 527 Money market deposit accounts 4.15 9,191 4.15 5,074 Term certificate accounts with original maturities of: 4 weeks to 1 year 4.49 5,543 5.17 8,734 1 to 2 years 5.03 7,592 5.46 6,292 2 to 3 years 5.34 1,438 5.46 1,495 3 to 4 years 5.26 357 5.45 396 4 years and over 5.62 1,097 5.71 1,256 Retail jumbo CDs 4.79 547 5.45 703 Wholesale CDs 0.00 -0- 0.00 -0- All other 0.00 -0- 7.38 1 ----------- ------------ $ 26,395 $ 24,559 =========== ============ 1999 1998 ----------- ------------ Deposits by remaining maturity: No contractual maturity $ 9,821 $ 5,682 Maturity within one year 15,024 16,465 1 to 5 years 1,547 2,411 Over 5 years 3 1 ----------- ------------ $ 26,395 $ 24,559 =========== ============
* Weighted average interest rate, including the impact of interest rate swaps. At March 31, the weighted average cost of deposits was 4.58% (1999) and 5.02% (1998). ADVANCES FROM FEDERAL HOME LOAN BANKS The Company uses borrowings from FHLBs, also known as "advances," to supplement cash flow and to provide funds for loan origination activities. Advances are secured by pledges of certain loans, MBS-REMICs, other MBS, and capital stock of FHLBs. FHLB advances amounted to $6.1 billion at March 31, 1999, compared to $7.6 billion and $6.2 billion at March 31, 1998, and December 31, 1998, respectively. During 1998, the Company paid off, before maturity, $4.4 billion of high-cost FHLB of San Francisco advances and, as a result, incurred a $21 million pre-tax charge for the penalties associated with these prepayments. See Extraordinary Item discussion on page 31. 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 $693 million, $2.2 billion, and $1.3 billion at March 31, 1999 and 1998, and December 31, 1998, respectively. The Company uses accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities in accordance with SFAS 125 and SFAS 127. OTHER BORROWINGS At March 31, 1999, Golden West, at the holding company level, had a total of $812 million of subordinated debt issued and outstanding. As of March 31, 1999, 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, 1999, 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. As of March 31, 1999, WSL had a total of $100 million of subordinated notes issued and outstanding, which were rated A2 and A by Moody's and S&P, respectively. Although these notes had a maturity of July 1, 2000, WSL exercised its right to call the notes on April 1, 1999. During November 1996, WFSB received permission from the OTS to issue non-convertible medium-term notes to institutional investors under rules similar to Office of the Comptroller of the Currency rules applicable to similarly situated national banks. As of March 31, 1999, WFSB had not issued any notes under this authority. STOCKHOLDERS' EQUITY The Company's stockholders' equity increased during the first three months of 1999 as a result of net earnings partially offset by decreased market values of securities available for sale, the payment of quarterly dividends to stockholders, and the $58 million cost of the repurchase of Company stock. The Company's stockholders' equity increased during the first three months of 1998 as a result of net earnings and increased market values of securities available for sale. Unrealized gains, net of taxes, on securities and MBS available for sale included in stockholders' equity at March 31, 1999 and 1998, and December 31, 1998, were $194 million, $167 million, and $215 million, respectively. From time to time, 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 periodically reviews alternative uses of excess capital, including faster growth and acquisitions. At times, the Board has determined that the purchase of the Company's common stock is a wise use of excess capital. Since 1993, through three separate actions, Golden West's Board of Directors has authorized the purchase by the Company of up to 12.2 million shares of Golden West's common stock. As of March 31, 1999, 10.1 million shares had been repurchased and retired at a cost of $518 million since October 1993, of which 613,800 shares were purchased and retired at a cost of $58 million during the first three months of 1999. Dividends from subsidiaries are expected to continue to be the major source of funding for the stock repurchase program. The purchase of Golden West stock is not intended to have a material impact on the normal liquidity of the Company. The Company has on file a shelf registration statement with the Securities and Exchange Commission to issue up to two million shares of its preferred stock. The preferred stock may be 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 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 WFSB and WSL, to meet certain minimum capital requirements. The following table shows WFSB's regulatory capital ratios and compares them to the OTS minimum requirements at March 31, 1999 and 1998. TABLE 14 World Savings Bank, FSB Regulatory Capital Ratios (Dollars in thousands)
March 31, 1999 March 31, 1998 ----------------------------------------------- ---------------------------------------------- ACTUAL REQUIRED ACTUAL REQUIRED ---------------------- ---------------------- ---------------------- ---------------------- Capital Ratio Capital Ratio Capital Ratio Capital Ratio ----------- --------- ----------- --------- ---------- --------- ---------- -------- Tangible $2,247,752 7.04% $ 479,213 1.50% $1,768,105 6.84% $ 387,893 1.50% Core 2,247,752 7.04 1,277,900 4.00 1,768,105 6.84 1,034,382 4.00 Risk-based 2,391,623 13.18 1,451,557 8.00 1,863,679 13.51 1,103,194 8.00
The following table shows WSL's current regulatory capital ratios and compares them to the OTS minimum requirements at March 31, 1999 and 1998. TABLE 15 World Savings and Loan Association Regulatory Capital Ratios (Dollars in thousands)
March 31, 1999 March 31, 1998 ------------------------------------------------ ------------------------------------------------ ACTUAL REQUIRED ACTUAL REQUIRED ----------------------- ----------------------- ---------------------- ----------------------- Capital Ratio Capital Ratio Capital Ratio Capital Ratio ----------- --------- ----------- --------- ----------- -------- ----------- -------- Tangible $ 507,282 8.21% $ 92,662 1.50% $ 929,084 6.62% $ 210,439 1.50% Core 507,282 8.21 247,099 4.00 929,084 6.62 561,171 4.00 Risk-based 648,252 18.23 284,464 8.00 1,130,198 13.90 650,525 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 neither WFSB nor WSL has 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. As of March 31, 1999, the most recent notification from the OTS categorized both WFSB and WSL as "well-capitalized" under the current requirements. There are no conditions or events that have occurred since that notification that the Company believes would have an impact on the categorization of either WFSB or WSL. The table below shows that WFSB's regulatory capital exceeds the requirements of the well-capitalized classification at March 31, 1999. TABLE 16 World Savings Bank, FSB Regulatory Capital Compared to Well-Capitalized Classification (Dollars in thousands)
ACTUAL WELL-CAPITALIZED ------------------------ -------------------------- Capital Ratio Capital Ratio ----------- ---------- ------------ ----------- Leverage $ 2,247,752 7.04% $ 1,597,376 5.00% Tier 1 risk-based 2,247,752 12.39 1,916,851 6.00 Total risk-based 2,391,623 13.18 1,814,446 10.00
The table below shows that WSL's regulatory capital exceeds the requirements of the well-capitalized classification at March 31, 1999. TABLE 17 World Savings and Loan Association Regulatory Capital Compared to Well-Capitalized Classification (Dollars in thousands)
ACTUAL WELL-CAPITALIZED ---------------------- -------------------------- Capital Ratio Capital Ratio ----------- -------- ------------ ----------- Leverage $ 507,282 8.21% $ 308,874 5.00% Tier 1 risk-based 507,282 14.27 370,648 6.00 Total risk-based 648,252 18.23 355,580 10.00
World Savings Bank, SSB is regulated by the FDIC and the state of Texas. At March 31, WSSB had the following regulatory capital calculated in accordance with the FDIC's capital standards: TABLE 18 World Savings Bank, SSB Regulatory Capital Ratios (Dollars in thousands)
March 31, 1999 March 31, 1998 ----------------------------------------------- ---------------------------------------------- ACTUAL REQUIRED ACTUAL REQUIRED ---------------------- ---------------------- ---------------------- ---------------------- Capital Ratio Capital Ratio Capital Ratio Capital Ratio ----------- -------- ----------- --------- ---------- --------- ----------- --------- Tier 1 Leverage $ 190,175 5.35% $ 106,643 3.00% $ 12,166 9.43% $ 3,870 3.00% Tier 1 risk-based 190,175 25.78 29,505 4.00 12,166 17.23 2.825 4.00 Total risk-based 190,389 25.81 59,011 8.00 12,348 17.49 5,649 8.00
RESULTS OF OPERATIONS NET EARNINGS Net earnings for the three months ended March 31, 1999 were $120 million compared to net earnings of $110 million, before an extraordinary item (see extraordinary item discussion on page 31), for the three months ended March 31, 1998 Net earnings increased in 1999 as compared 1998 as a result of increased net interest income, a decrease in the provision for loan losses, an increase in non-interest income, and a lower effective tax rate. These increases to net earnings were partially offset by an increase in general and administrative expenses. 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, 1999 and 1998, and December 31, 1998. TABLE 19 Yield on Earning Assets, Cost of Funds, and Primary Spread
March 31 December 31 ---------------------------- 1999 1998 1998 ------------ ------------ ------------- Yield on loan portfolio 7.25% 7.57% 7.36% Yield on MBS 7.02 7.23 7.20 Yield on investments 5.55 6.53 5.53 --------- --------- --------- Yield on earning assets 7.14 7.51 7.30 --------- --------- --------- Cost of deposits 4.58 5.02 4.67 Cost of borrowings 5.73 6.02 5.87 --------- --------- --------- Cost of funds 4.85 5.33 4.96 --------- --------- --------- Primary spread 2.29% 2.18% 2.34% ========= ========= =========
The Company holds ARMs to manage the rate sensitivity of the asset side of the balance sheet. 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). Nevertheless, the yield on the Company's ARM portfolio tends to lag changes in market interest rates because of lags related to the index and because of certain loan features. These features include introductory rates on new ARM loans, the interest rate adjustment frequency of ARM loans, interest rate caps or limits on individual rate changes and interest rate floors. On balance, COFI lags and ARM structural features cause the Company's assets initially to reprice more slowly than its liabilities, resulting in a temporary reduction in net interest income when rates increase and a temporary increase in net interest income when rates fall. The following table shows the Company's revenues and expenses as a percentage of total revenues for the three months ended March 31, 1999 and 1998, in order to focus on the changes in interest income between years as well as changes in other revenue and expense amounts. TABLE 20 Selected Revenue and Expense Items as Percentages of Total Revenues
Three Months Ended March 31 ----------------------- 1999 1998 --------- --------- Interest on loans (a) 65.3% 80.5% Interest on mortgage-backed securities (a) 23.1 9.3 Interest and dividends on investments 6.8 6.9 --------- --------- 95.2 96.7 Less: Interest on deposits 42.1 40.4 Interest on advances and other borrowings 18.7 25.1 --------- --------- 60.8 65.5 Net interest income 34.4 31.2 Provision for loan losses .1 .4 --------- --------- Net interest income after provision for loan losses 34.3 30.8 Add: Fees 2.2 1.7 Gain on the sale of securities, MBS, and loans 1.4 .3 Other non-interest income 1.2 1.3 --------- --------- 4.8 3.3 Less: General and administrative expenses 12.7 10.7 Taxes on income 9.9 9.3 --------- --------- Earnings before extraordinary item 16.5 14.1 Extraordinary item 0.0 (1.0) --------- --------- Net earnings 16.5% 13.1% ========= =========
(a) During 1998, the Company securitized $8.2 billion of loans into MBS which caused the percentage of interest on mortgage-backed securities to total revenues to increase from March 31, 1998 to March 31, 1999 and the percentage of interest on loans to total revenues to decrease from March 31, 1998 to March 31, 1999. For further discussion, see pages 12 and 13. INTEREST RATE SWAPS The Company enters into interest rate swaps 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 activity decreased net interest income by $2.7 million for the three months ended March 31, 1999, as compared to a decrease of $2 million for the same period in 1998. The following table summarizes the unrealized gains and losses for interest rate swaps at March 31, 1999 and 1998. TABLE 21 Schedule of Unrealized Gains and Losses on Interest Rate Swaps (Dollars in thousands)
March 31, 1999 March 31, 1998 ---------------------------------------- ---------------------------------------- Net Net Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized Gains Losses (Loss) Gains Losses (Loss) ------------ ------------ ------------ ------------ ------------ ------------ Interest rate swaps: Receive fixed $ 5,021 $ -0- $ 5,021 $ 7,635 $ (626) $ 7,009 Pay fixed 108 (31,978) (31,870) 933 (33,911) (32,978) ------------ ------------ ------------ ------------ ------------ ------------- $ 5,129 $ (31,978) $ (26,849) $ 8,568 $ (34,537) $ (25,969) ============ ============ ============ ============ ============ =============
TABLE 22 Schedule of Interest Rate Swaps Activity (Notional amounts in millions)
Three Months Ended March 31, 1999 ---------------------------- Receive Pay Fixed Fixed Swaps Swaps ------------ ------------ Balance at December 31, 1998 $ 512 $ 899 Additions -0- -0- Maturities (104) (40) ------------ ------------ Balance at March 31, 1999 $ 408 $ 859 ============ ============
The range of floating interest rates received on swap contracts in the first three months of 1999 was 4.94% to 5.82%, and the range of floating interest rates paid on swap contracts was 4.97% to 5.82%. The range of fixed interest rates received on swap contracts in the first three months of 1999 was 5.17% to 8.68% and the range of fixed interest rates paid on swap contracts was 5.58% to 9.14%. INTEREST ON LOANS In the first quarter of 1999, interest on loans was lower than in the comparable 1998 period by $153 million or 24.3%. The decrease in the first quarter of 1999 was due to a $7.4 billion decrease in the average portfolio balance and a 23 basis point decrease in the average portfolio yield. The decrease in the average loan portfolio balance was primarily due to the securitization of loans into FNMA MBS and MBS-REMICs (see page 13). INTEREST ON MORTGAGE-BACKED SECURITIES In the first quarter of 1999, interest on mortgage-backed securities was higher than in the comparable 1998 period by $97 million or 133.7%. The 1999 increase was due primarily to a $5.6 billion increase in the average portfolio balance which was partially offset by a 14 basis point decrease in the average portfolio yield. The increase in the mortgage-backed securities portfolio is primarily due to the securitization of loans into FNMA MBS and MBS-REMICs, as discussed on page 13. 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 1999, interest and dividends on investments was lower than in the comparable 1998 period by $4 million or 7.7%. The decrease was primarily due to a 71 basis point decrease in the average portfolio yield which was partially offset by a $27 million increase in the average portfolio balance. INTEREST ON DEPOSITS In the first quarter of 1999, interest on deposits decreased by $8 million or 2.4% from the comparable period in 1998. The first quarter decrease was due to a 43 basis point decrease in the average cost of deposits, which was partially offset by a $1.7 billion increase in the average balance of deposits. INTEREST ON ADVANCES AND OTHER BORROWINGS For the first quarter of 1999, interest on advances and other borrowings decreased by $60 million or 30.4% from the comparable period of 1998. The first quarter decrease was primarily due to a $3.4 billion decrease in the average balance and a 37 basis point decrease in the average cost of these borrowings. PROVISION FOR LOAN LOSSES The provision for loan losses was $574 thousand for the three months ended March 31, 1999, compared to $3 million for the same period in 1998. The lower provision in 1999 was due to declining nonperforming assets as a result of the strong California housing market and economy. GENERAL AND ADMINISTRATIVE EXPENSES For the first quarter of 1999, general and administrative expenses (G&A) were $93 million compared to $84 million for the comparable period in 1998. G&A as a percentage of average assets on an annualized basis was .97% for the first quarter of 1999 compared to .84% for the same period in 1998. G&A expenses increased in 1999 because of the expansion of the loan origination program and higher depreciation and operating expenses associated with the completion of the roll-out of new computers and automated teller machines to our branch network. EXTRAORDINARY ITEM During the first quarter of 1998, the Company paid off, before maturity, $2.9 billion of high-cost FHLB of San Francisco advances. As a result, the Company incurred a $13 million pretax charge in the first quarter of 1998 for the penalties associated with the prepayments. In addition, in the third quarter of 1998, the Company paid off, before maturity, an additional $1.5 billion of high-cost FHLB advances. As a result, the Company incurred an $8 million pretax charge in the third quarter of 1998 for the penalties associated with the prepayments. 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 before the extraordinary item were 37.4% for the first quarter of 1999 compared to 39.9% for the same period a year ago. The decrease in the tax rate in 1999 as compared to 1998 was due to a lower overall state tax rate due to the expansion of business in lower taxing states. LIQUIDITY AND CAPITAL RESOURCES WFSB's principal sources of funds are cash flows generated from earnings; deposits; loan repayments; sales of loans; negotiable certificates of deposit; borrowings from the FHLB; investments and borrowings from its affiliates; debt collateralized by mortgages, MBS, or securities; and the issuance of medium-term notes. In addition, WFSB has other alternatives available to provide liquidity or finance operations including federal funds purchased, borrowings from public offerings of debt, issuances of commercial paper, and borrowings from commercial banks. Furthermore, under certain conditions, WFSB 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 WFSB's liquidity positions at March 31, 1999, and 1998, and December 31, 1998, see the Cash and Investments section on page 12. WSL's principal sources of funds are cash flows generated from earnings; deposits; loan repayments; borrowings from the FHLB; debt collateralized by mortgages, MBS, or securities; and the issuance of medium-term notes. In addition, WSL has a number of other alternatives available to provide liquidity or finance operations. These include federal funds purchased, borrowings from its affiliates, 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, WSL 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 WSL's liquidity positions at March 31, 1999, and 1998, and December 31, 1998, see the Cash and Investments section on page 12. WSSB's principal sources of funds are cash flows generated from earnings; deposits; loan repayments; borrowings from the FHLB; debt collateralized by mortgages or securities; and borrowings from its affiliates. The principal sources of funds for WFSB's, WSL's and WSSB's parent, Golden West, are dividends from subsidiaries, interest on investments, and the proceeds from the issuance of debt and equity securities. Various statutory and regulatory restrictions and tax considerations limit the amount of dividends WFSB and WSL 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 (including $489 million for the year ended December 31, 1998 and $100 million for the three months ended March 31, 1998), dividends to stockholders, the purchase of Golden West stock (see stockholders' equity section on page 23), and general and administrative expenses. At March 31, 1999 and 1998, and December 31, 1998, Golden West's total cash and investments amounted to $848 million, $964 million, and $898 million, respectively. Included in the March 31, 1999 and 1998, and December 31, 1998 amounts are loans to WFSB. YEAR 2000 The Company is aware of the system challenges that the Year 2000 has created and currently has a plan in place (Year 2000 Project) to insure that all of the Company's mission critical systems will be Year 2000 compliant by mid-1999. The plan has been developed in accordance with guidance set forth by federal banking regulators in a series of jointly-issued policy statements. Federal banking regulators regularly monitor the Company's progress in meeting the requirements of such policy statements. The Company has completed an inventory and assessment of all systems. The Company is currently in the process of testing and modifying or replacing systems that may be affected by these Year 2000 compliance issues. Included in this process are both information technology systems and other systems (e.g. elevators, doorlocks) that could be affected by Year 2000 issues. The Company has placed priority on information technology systems affecting its core business of deposit-taking and lending. The evaluation, correction and testing of these core business systems is now complete, and these systems are now Year 2000 compliant. During the first quarter of 1999, the Company commenced integrated testing to ascertain that all systems function together. While the Company believes it is doing everything technologically possible to assure Year 2000 compliance, the success of the Year 2000 Project is to some extent dependent upon vendor cooperation. The Company is requiring its computer systems and software vendors to represent that the products provided are or will be Year 2000 compliant and has planned a program of testing for compliance. Such testing is included in the testing previously described in this section. To date, the Company has no indication that its principal vendors or their systems will adversely affect the Company's Year 2000 compliance efforts. The Company currently estimates that it will cost approximately $18 million to make all of its computer systems Year 2000 compliant. The Company will expense all costs associated with the Year 2000 Project and expects to fund such costs through operating cash flows. The Year 2000 Project expense incurred during 1998 was $8 million and $3 million was incurred for the quarter ended March 31, 1999. Included in the $18 million are estimates for compensation of employees dedicated to the Year 2000 Project, consultants, hardware and software expense and depreciation of the equipment purchased as part of this process. However, the Company's Year 2000 expenses are not expected to result in a dollar for dollar increase in the Company's overall information systems expenditures because the Company has dedicated a number of its existing resources solely to the Year 2000 Project. The Company believes that its Year 2000 Project will result in the Company's systems functioning normally, without adverse consequences. While the systems of others, with whom and through which the Company conducts business, are not within the Company's control, the Year 2000 Project is intended to provide the Company with sufficient advance warning that such systems will not perform. In the unlikely event of a problem with the Company's systems or the systems of others which relate to the Company's core business, the Company has developed contingency plans to address the potential that one or more systems might fail, despite efforts to the contrary. Although the Company has no reason to believe that such contingency plans will not effectively avoid or mitigate any adverse consequences of such system failures, no assurances are given that such plans will be effective. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Golden West estimates the sensitivity of the Company's net interest income, net earnings, and capital ratios to interest rate changes and anticipated growth based on simulations using an asset/liability model which takes into account the lags described on pages 11 and 27. The simulation model projects net interest income, net earnings, and capital ratios based on an immediate interest rate increase that is sustained for a thirty-six month period. The model is based on the actual maturity and repricing characteristics of interest-rate sensitive assets and liabilities. For certain assets, the model incorporates assumptions regarding the impact of changing interest rates on prepayment rates which are based on the Company's historical prepayment information. The model factors in projections for anticipated activity levels by product lines offered by the Company. Based on the information and assumptions in effect at March 31, 1999, Management believes that a 200 basis point rate increase sustained over a thirty-six month period would not affect the Company's long-term profitability and financial strength. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) April 27, 1999 - Annual Meeting
Broker For Against Withheld Abstain Non-Vote -------------- ------------- ------------- ------------- ------------- (b) Directors elected: Louis J. Galen 51,709,162 580,440 Antonia Hernandez 51,717,787 571,815 Bernard A. Osher 51,710,504 579,098 (c) Ratification of Auditors: Appointment of Deloitte & Touche 52,175,938 18,714 94,950 LLP, independent public accountants, for the fiscal year 1999
Other Directors continuing in office are: Maryellen B. Cattani, Patricia A. King, Bernard A. Osher, Kenneth T. Rosen, Herbert M. Sandler, Marion O. Sandler, and Leslie Tang Schilling ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Index to Exhibits Exhibit No. Description 3(a) Certificate of Incorporation, as amended, and amendments thereto, are incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K (File No. 1-4269) for the year ended December 31, 1990. 3(b) By-Laws of the Company, as amended in 1997,. are incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K (File No. 1-4269) for the year ended December 31, 1997. 4(a) The Registrant agrees to furnish to the Commission, upon request, a copy of each instrument with respect to issues of long-term debt, the authorized principal amount of which does not exceed 10% of the total assets of the Company. 10(a) 1996 Stock Option Plan, as amended, is incorporated by reference to Exhibit A of the Company's Definitive Proxy Statement on Schedule 14A, filed on March 15, 1996, for the Company's 1996 Annual Meeting of Stockholders. 10(b) Annual Incentive Bonus Plan is incorporated by reference to Exhibit A of the Company's Definitive Proxy Statement on Schedule 14A, filed on March 14, 1998, for the Company's 1998 Annual Meeting of Stockholders. 10(c) Deferred Compensation Agreement between the Company and James T. Judd is incorporated by reference to Exhibit 10(b) of the Company's Annual Report on Form 10-K (File No. 1-4629) for the year ended December 31, 1986. 10(d) Deferred Compensation Agreement between the Company and Russell W. Kettell is incorporated by reference to Exhibit 10(c) of the Company's Annual Report on Form 10-K (File No. 1-4629) for the year ended December 31, 1986. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (Continued) (a) Index To Exhibits (continued) Exhibit No. Description 10(e) Deferred Compensation Agreement between the Company and J. L. Helvey is incorporated by reference to Exhibit 10(d) of the Company's Annual Report on Form 10-K (File No. 1-4629) for the year ended December 31, 1986. 10(f) Form of Supplemental Retirement Agreement between the Company and certain executive officers is incorporated by reference to Exhibit 10(j) to the Company's Annual Report on Form 10-K (File No. 1-4629) for the year ended December 31, 1990. 10(g) Operating lease on Company headquarters building, 1901 Harrison Street, Oakland, California 94612, is incorporated by reference to Exhibit 10(h) of the Company's Quarterly Report on Form 10-Q (File No. 1-4629) for the quarter ended September 30, 1998. 11 Statement of Computation of Earnings Per Share 27 Financial Data Schedule (b) Reports on Form 8-K The Registrant did not file any current reports on Form 8-K with the Commission during the first three months of 1999. 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, 1999 /s/ J. L. Helvey ------------------------------ J. L. Helvey Executive Vice President (duly authorized and principal financial officer) EX-11 2
EXHIBIT 11 Golden West Financial Corporation Statement of Computation of Basic and Diluted Earnings Per Share (Dollars in thousands except per share figures) Three Months Ended March 31 --------------------------- 1999 1998 ------------ ------------ Earnings Before Extraordinary Item $ 120,368 $ 110,081 Extraordinary Item, Net of Tax -0- (7,710) ------------ ------------ Net Earnings $ 120,368 $ 102,371 ============ ============ Weighted Average Shares 56,580,974 57,126,696 Add: Options outstanding at period end 1,628,905 2,374,600 Less: Shares assumed purchased back with proceeds of options exercised 1,063,900 1,492,456 ------------ ------------ Diluted Average Shares Outstanding 57,145,979 58,008,840 ============ ============ Basic Earnings Per Share Calculation: Basic Earnings Per Share Before Extraordinary Item $ 2.13 $ 1.92 Extraordinary Item, Net of Tax 0.00 (.13) ------------ ------------ Basic Earnings Per Share $ 2.13 $ 1.79 ============ ============ Diluted Earnings Per Share Calculation: Diluted Earnings Per Share Before Extraordinary Item $ 2.11 $ 1.89 Extraordinary Item, Net of Tax 0.00 (.13) ------------ ------------ Diluted Earnings Per Share $ 2.11 $ 1.76 ============ ============
EX-27 3
9 3-MOS DEC-31-1998 MAR-31-1999 196,974 0 530,737 0 435,227 9,103,506 9,368,819 26,020,901 236,476 38,666,093 26,395,440 737,833 915,660 7,456,372 0 0 5,631 3,155,157 38,666,093 476,244 49,966 168,751 694,961 307,567 444,260 250,701 574 0 93,046 192,380 120,368 0 0 120,368 2.13 2.11 7.14 252,043 0 16,575 75,747 244,466 0 1,186 236,476 236,476 0 0
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