EX-99.1 2 a5062739ex99_1.txt EXHIBIT 99.1 - EARNINGS PRESS RELEASE Exhibit 99.1 Golden West Reports Record Earnings, Deposits, and Loan Originations in 2005 OAKLAND, Calif.--(BUSINESS WIRE)--Jan. 24, 2006--Golden West Financial Corporation (NYSE:GDW) (PCX:GDW), parent of World Savings Bank, announced record diluted earnings per share of $4.77 for 2005, up 15% from the previous all-time high of $4.13 reported in 2004. Per share profits in the fourth quarter of 2005 reached $1.27, a 17% increase from the $1.09 registered one year earlier. The Company also announced record deposit inflows of $7.2 billion, surpassing the previous best of $6.6 billion, set in 2002. For the fourth quarter of 2005, retail savings grew $1.7 billion, a 33% increase from the $1.3 billion posted in the same period in 2004. All-time high volume was also reported by the Company's lending group. Loan originations totaled $51.5 billion in 2005, compared with $49.0 billion one year earlier. For the fourth quarter of 2005, new loans totaled $13.1 billion, unchanged from the same period one year earlier. In discussing the year's accomplishments, Marion Sandler, Chairman of the Board and Chief Executive Officer, first touched on Golden West's earnings growth. She observed, "The impetus behind the growth of the Company's profits was our ability to expand the mortgage portfolio, which is our primary earning asset. Loan balances increased by $16.7 billion, or 16%, in 2005. Growing the mortgage portfolio is important, because the more earning assets the Company has on the books, the more interest income we generate." Reflecting on the 2005 lending environment in particular, Sandler stated, "As usual, the popularity of our main product, the adjustable rate mortgage, or ARM, was influenced by what was happening with fixed-rate mortgages, or FRMs, the customers' other alternative. Favorable long-term rates kept interest on FRMs near historic lows all year, providing an attractive option to borrowers. Despite stiff competition, our lending team produced record loan volume." Continuing, Sandler remarked, "While originations were strong this past year, repayment activity also remained high, stimulated by low mortgage rates, strong home sales, and a desire on the part of many borrowers to turn the equity in their homes into cash. Nevertheless, the new loans we added exceeded payoffs, leading to 16% growth of the Company's loan portfolio." Adding to her discussion of Golden West's earnings performance, Sandler pointed out, "Some of the benefit we enjoyed this past year from the increased size of our loan portfolio was offset by a decline in our primary spread, which is the difference between the yield we earn on loans and investments and the rates we pay for savings and borrowings." In 2005, Golden West's spread averaged 2.38%, down from 2.76% last year. During the fourth quarter, the Company's spread averaged 2.29%, compared with 2.60% in the same period one year earlier. Explaining the decrease, Sandler said, "Since the beginning of the year, the Federal Reserve's Open Market Committee has raised the Federal Funds rate, which influences short-term yields, from 2.25% to 4.25%. Our spread normally contracts when short-term rates rise, because the yield we earn on our loan portfolio responds to interest rate movements more slowly than the cost of our deposits and borrowings." Covering another earnings related topic, Sandler commented on the Company's general and administrative (G&A) expenses, noting, "Controlling spending is an important element of our business model, because we want to ensure as much of our income as possible flows through to the bottom line and is not eaten up by costs. We assess the success of this strategy using the G&A ratio, which measures the amount of money it takes to manage the Company's assets." Golden West's ratio of G&A to average assets improved considerably to 0.82% in 2005 from 0.90% one year earlier. Sandler explained, "While average assets were up 25% compared to last year, expenditures grew only 15% during the same time frame, leading to the significant decline in our expense ratio." Switching to the topic of loan quality, Sandler said, "In 2005, Golden West's loan portfolio continued to reflect our focus on producing high-quality assets to manage credit risk. A key indicator of our performance is the ratio of net chargeoffs to average loans outstanding. This measure relates credit losses to the size of the loan portfolio. Aided by a strong real estate market, the Company's chargeoff ratio amounted to zero basis points for the eighth consecutive year." Sandler added, "Our success can also be judged by our nonperforming asset level." At December 31, 2005, Golden West's ratio of nonperforming assets to total assets was just 0.31%, down slightly from 0.32% one year earlier. Concluding her comments, Sandler discussed the Company's record deposit growth. She noted, "As interest rates rose in 2005, so did the returns on insured deposit accounts, increasing the public's appetite for traditional certificates of deposit, or CDs. To address our customers' needs, we promoted attractively priced savings products. Investors responded enthusiastically, and as a result, we achieved all-time high savings inflows." Headquartered in Oakland, California, Golden West is one of the nation's largest financial institutions with assets over $120 billion as of December 31, 2005. The Company has one of the most extensive thrift branch systems in the country, with 283 savings branches in 10 states and lending operations in 39 states. Golden West's stock is listed on the New York Stock and Pacific Exchanges under the ticker symbol GDW. Options on the Company's stock are traded on the Chicago Board Options Exchange and the Pacific Exchange. Golden West investor information is available at www.gdw.com. Information about the Company's home loans and savings and checking accounts can be found at www.worldsavings.com and about its proprietary no-load mutual funds and annuities at www.atlasfunds.com. Information in this Press Release may contain various forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include projections, statements of the plans and objectives of management for future operations, statements of future economic performance, assumptions underlying these statements and other statements that are not statements of historical facts. Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are beyond Golden West's control. Should one or more of these risks, uncertainties or contingencies materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated. Among the key risk factors that may have a direct bearing on Golden West's results of operations and financial condition are competitive practices in the financial services industries; operational and systems risks; general economic and capital market conditions, including fluctuations in interest rates; economic conditions in certain geographic areas; and the impact of current and future laws, governmental regulations, and accounting and other rulings and guidelines affecting the financial services industry in general and Golden West's operations in particular. In addition, actual results may differ materially from the results discussed in any forward-looking statements. Financial Information Attached GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF NET EARNINGS AND OTHER FINANCIAL DATA (Unaudited) (Dollars in thousands except per share figures) Three Months Ended Year Ended December 31 December 31 ------------------------- ------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Interest Income Interest on loans $1,723,543 $1,141,137 $5,969,566 $3,976,619 Interest on mortgage-backed securities (MBS) 21,724 27,142 92,746 131,720 Interest and dividends on investments 47,176 20,158 137,584 70,517 ------------ ------------ ------------ ------------ 1,792,443 1,188,437 6,199,896 4,178,856 Interest Expense Interest on deposits 465,657 265,470 1,550,517 944,493 Interest on advances 395,861 168,988 1,221,795 448,535 Interest on repurchase agreements 52,810 20,182 155,511 49,589 Interest on other borrowings 115,001 42,261 337,002 117,634 ------------ ------------ ------------ ------------ 1,029,329 496,901 3,264,825 1,560,251 ------------ ------------ ------------ ------------ Net Interest Income 763,114 691,536 2,935,071 2,618,605 Provision for loan losses 2,789 2,571 8,290 3,401 ------------ ------------ ------------ ------------ Net Interest Income after Provision for Loan Losses 760,325 688,965 2,926,781 2,615,204 Noninterest Income Fees 109,002 59,975 369,867 210,576 Gain on the sale of securities and loans 3,820 2,062 10,514 13,216 Other 25,182 19,327 81,755 70,131 ------------ ------------ ------------ ------------ 138,004 81,364 462,136 293,923 Noninterest Expense General and administrative: Personnel 180,614 143,321 655,425 547,432 Occupancy 24,354 23,339 92,877 86,117 Technology and tele- communications 21,998 20,383 89,900 79,453 Deposit insurance 1,975 1,765 7,556 7,068 Advertising 9,687 8,285 28,633 26,743 Other 23,592 25,526 88,024 93,313 ------------ ------------ ------------ ------------ 262,220 222,619 962,415 840,126 Earnings before Taxes on Income 636,109 547,710 2,426,502 2,069,001 Taxes on Income 240,864 209,209 940,338 789,280 ------------ ------------ ------------ ------------ Net Earnings $395,245 $338,501 $1,486,164 $1,279,721 ============ ============ ============ ============ Basic Earnings Per Share $1.29 $1.11 $4.83 $4.19 ============ ============ ============ ============ Diluted Earnings Per Share $1.27 $1.09 $4.77 $4.13 ============ ============ ============ ============ Average common shares outstanding 307,350,451 306,312,759 307,388,071 305,470,587 Average diluted common shares outstanding 311,323,062 311,179,468 311,790,191 310,119,746 Ratios: (a) Net earnings / average stockholders' equity (ROE) 18.69% 19.14% 18.72% 19.45% Net earnings / average assets (ROA) 1.28% 1.31% 1.27% 1.37% Net interest margin (b) 2.50% 2.70% 2.54% 2.83% General and administrative expense / average assets .85% .86% .82% .90% Efficiency ratio (c) 29.10% 28.80% 28.33% 28.85% (a) Ratios are annualized by multiplying the quarterly computation by four. Averages are computed by adding the beginning balances and each monthend balance during the quarter and the year and dividing by four and thirteen, respectively. (b) Net interest margin is net interest income divided by average earning assets. (c) Efficiency ratio is general and administrative expense divided by the sum of net interest income and noninterest income. GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AND OTHER FINANCIAL DATA (Unaudited) (Dollars in thousands except per share figures) Dec. 31 Sep. 30 Jun. 30 2005 2005 2005 ------------- ------------- ------------- ASSETS Cash $518,161 $326,443 $301,269 Federal funds sold, securities purchased under agreement to resell and other investments 1,321,626 1,235,155 1,091,702 Securities available for sale at fair value 382,499 341,905 590,848 Purchased MBS available for sale at fair value 11,781 12,634 13,665 Purchased MBS held to maturity at cost 303,703 318,257 338,659 MBS with recourse held to maturity at cost 1,168,480 1,253,710 1,346,080 Loans held for sale 83,365 127,553 48,636 Loans held in portfolio less allowance for loan losses 117,798,600 114,801,293 110,999,190 ------------- ------------- ------------- Total Loans Receivable and MBS 119,365,929 116,513,447 112,746,230 Interest earned but uncollected 392,303 361,595 319,264 Investment in capital stock of Federal Home Loan Banks (FHLBs) at cost 1,857,580 1,797,533 1,688,661 Foreclosed real estate 8,682 8,828 8,769 Premises and equipment, net 403,084 401,713 403,121 Other assets 365,299 294,787 335,814 ------------- ------------- ------------- Total Assets $124,615,163 $121,281,406 $117,485,678 ============= ============= ============= LIABILITIES and STOCKHOLDERS' EQUITY Deposits $60,158,319 $58,429,315 $59,226,140 Advances from FHLBs 38,961,165 38,896,681 35,755,870 Securities sold under agreements to repurchase 5,000,000 5,150,000 4,450,000 Bank notes 2,393,951 2,488,983 2,232,955 Senior debt 8,194,266 6,705,316 6,736,979 Taxes on income 547,653 560,182 594,348 Other liabilities 688,844 780,460 552,943 Stockholders' equity 8,670,965 8,270,469 7,936,443 ------------- ------------- ------------- Total Liabilities and Stockholders' Equity $124,615,163 $121,281,406 $117,485,678 ============= ============= ============= Total deferred interest in loans receivable and MBS $448,816 $279,388 $160,201 Total deferred interest as a percentage of loans receivable and MBS .38% .24% .14% Capitalized mortgage servicing rights $39,134 $40,684 $43,835 Stockholders' equity / total assets 6.96% 6.82% 6.76% Book value per common share $28.15 $26.89 $25.79 Common shares outstanding 308,041,776 307,583,276 307,760,826 Mar. 31 Dec. 31 2005 2004 ------------- ------------- ASSETS Cash $311,607 $292,421 Federal funds sold, securities purchased under agreement to resell and other investments 1,674,914 936,353 Securities available for sale at fair value 379,082 438,032 Purchased MBS available for sale at fair value 13,548 14,438 Purchased MBS held to maturity at cost 357,843 375,632 MBS with recourse held to maturity at cost 1,440,341 1,719,982 Loans held for sale 40,988 52,325 Loans held in portfolio less allowance for loan losses 105,641,104 100,506,854 ------------- ------------- Total Loans Receivable and MBS 107,493,824 102,669,231 Interest earned but uncollected 298,693 248,073 Investment in capital stock of Federal Home Loan Banks (FHLBs) at cost 1,662,312 1,563,276 Foreclosed real estate 10,840 11,461 Premises and equipment, net 398,181 391,523 Other assets 358,396 338,171 ------------- ------------- Total Assets $112,587,849 $106,888,541 ============= ============= LIABILITIES and STOCKHOLDERS' EQUITY Deposits $55,593,265 $52,965,311 Advances from FHLBs 35,511,757 33,781,895 Securities sold under agreements to repurchase 4,050,000 3,900,000 Bank notes 2,485,936 2,709,895 Senior debt 5,955,989 5,291,840 Taxes on income 730,094 561,772 Other liabilities 681,310 402,952 Stockholders' equity 7,579,498 7,274,876 ------------- ------------- Total Liabilities and Stockholders' Equity $112,587,849 $106,888,541 ============= ============= Total deferred interest in loans receivable and MBS $90,172 $54,616 Total deferred interest as a percentage of loans receivable and MBS .08% .05% Capitalized mortgage servicing rights $48,208 $53,234 Stockholders' equity / total assets 6.73% 6.81% Book value per common share $24.68 $23.73 Common shares outstanding 307,126,766 306,524,716 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands except per share figures) For the Quarter Ended -------------------------------------- Dec. 31 Sep. 30 Jun. 30 2005 2005 2005 ------------ ------------ ------------ AVERAGE BALANCES (a) Cash and investments $2,522,688 $1,781,055 $2,085,597 Loans receivable and MBS 117,975,267 114,661,554 110,124,924 Investment in capital stock of FHLBs 1,818,288 1,725,611 1,676,949 Deposits 59,484,698 58,912,429 57,300,656 Advances from FHLBs 38,841,391 36,894,412 35,696,338 Securities sold under agreements to repurchase 5,075,000 4,812,500 4,325,000 Other borrowings 10,087,729 9,118,909 8,579,755 Stockholders' equity 8,461,148 8,109,144 7,756,555 Total Average Assets 123,443,755 119,237,057 114,951,805 Average Earning Assets 121,904,742 117,875,145 113,599,941 Average Interest-Bearing Liabilities 113,488,818 109,738,250 105,901,749 OPERATING RESULTS Net interest income $763,114 $747,828 $719,565 Provision for loan losses 2,789 2,810 1,807 Noninterest income 138,004 129,434 112,085 Noninterest expense 262,220 237,382 238,574 ------------ ------------ ------------ Earnings before taxes on income 636,109 637,070 591,269 Taxes on income (b) 240,864 254,830 230,840 ------------ ------------ ------------ Net earnings $395,245 $382,240 $360,429 ============ ============ ============ Prepayment fees included in noninterest income $91,197 $88,560 $72,064 Basic EPS $1.29 $1.24 $1.17 Diluted EPS $1.27 $1.22 $1.16 Average common shares outstanding 307,350,451 307,889,162 307,440,730 Average diluted common shares outstanding 311,323,062 312,174,156 311,770,849 Ratios: (c) Net earnings / average stockholders' equity (ROE) 18.69% 18.85% 18.59% Net earnings / average assets (ROA) 1.28% 1.28% 1.25% Net interest margin 2.50% 2.54% 2.53% General and administrative expense / average assets .85% .80% .83% Efficiency ratio 29.10% 27.06% 28.69% SPREAD DATA Yield on loan portfolio 6.05% 5.72% 5.40% Yield on interest-earning investments 4.11% 3.93% 3.41% ------------ ------------ ------------ Yield on interest-earning assets 6.03% 5.70% 5.38% ------------ ------------ ------------ Cost of deposits 3.24% 2.97% 2.70% Cost of borrowings 4.37% 3.82% 3.34% ------------ ------------ ------------ Cost of funds 3.78% 3.38% 2.99% ------------ ------------ ------------ Primary Spread at quarter end 2.25% 2.32% 2.39% ============ ============ ============ Average Primary Spread for the quarter 2.29% 2.37% 2.39% For the Quarter Ended -------------------------- Mar. 31 Dec. 31 2005 2004 ------------ ------------ AVERAGE BALANCES (a) Cash and investments $2,074,816 $1,442,083 Loans receivable and MBS 105,079,482 99,698,762 Investment in capital stock of FHLBs 1,622,540 1,521,608 Deposits 54,116,414 52,317,613 Advances from FHLBs 34,986,559 32,754,803 Securities sold under agreements to repurchase 3,937,500 3,900,045 Other borrowings 8,132,422 6,373,852 Stockholders' equity 7,419,240 7,073,030 Total Average Assets 109,807,456 103,634,158 Average Earning Assets 108,489,822 102,371,618 Average Interest-Bearing Liabilities 101,172,895 95,346,313 OPERATING RESULTS Net interest income $704,564 $691,536 Provision for loan losses 884 2,571 Noninterest income 82,613 81,364 Noninterest expense 224,239 222,619 ------------ ------------ Earnings before taxes on income 562,054 547,710 Taxes on income (b) 213,804 209,209 ------------ ------------ Net earnings $348,250 $338,501 ============ ============ Prepayment fees included in noninterest income $49,280 $49,490 Basic EPS $1.13 $1.11 Diluted EPS $1.12 $1.09 Average common shares outstanding 306,861,057 306,312,759 Average diluted common shares outstanding 311,539,734 311,179,468 Ratios: (c) Net earnings / average stockholders' equity (ROE) 18.78% 19.14% Net earnings / average assets (ROA) 1.27% 1.31% Net interest margin 2.60% 2.70% General and administrative expense / average assets .82% .86% Efficiency ratio 28.49% 28.80% SPREAD DATA Yield on loan portfolio 5.06% 4.75% Yield on interest-earning investments 2.90% 2.08% ------------ ------------ Yield on interest-earning assets 5.02% 4.73% ------------ ------------ Cost of deposits 2.39% 2.08% Cost of borrowings 2.89% 2.38% ------------ ------------ Cost of funds 2.62% 2.22% ------------ ------------ Primary Spread at quarter end 2.40% 2.51% ============ ============ Average Primary Spread for the quarter 2.46% 2.60% (a) Averages are computed by adding the beginning balance and each monthend balance during the quarter and dividing by four. (b) From quarter to quarter, the effective tax rate may fluctuate due to changes in the volume of business activity in the various states where we operate. (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. GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands except per share figures) For the Quarter Ended -------------------------------------- Dec. 31 Sep. 30 Jun. 30 2005 2005 2005 ------------ ------------ ------------ LOAN ACTIVITY New real estate loans originated $13,119,738 $13,768,941 $13,452,983 New adjustable rate mortgages as a percentage of new real estate loans originated 99% 99% 99% New refinanced mortgages as a percentage of new real estate loans originated 81% 76% 75% Loan and MBS repayments $9,743,052 $9,557,669 $8,207,391 Loan and MBS repayment rate (a) 33.68% 34.14% 30.74% Net increase in loan portfolio $2,852,482 $3,767,217 $5,252,406 Growth rate of the loan portfolio (b) 9.79% 13.37% 19.54% Loan sales $377,195 $225,897 $98,006 Loans serviced for others $4,158,750 $4,029,073 $4,105,410 Nonperforming assets Loans and MBS 90 days or more past due $373,671 $335,376 $322,173 Foreclosed real estate 8,682 8,828 8,769 ------------ ------------ ------------ Total nonperforming assets $382,353 $344,204 $330,942 ============ ============ ============ Ratio of nonperforming assets (NPAs) to total assets .31% .28% .28% Ratio of troubled debt restructured (TDRs) to total assets .00% .00% .00% Ratio of NPAs and TDRs to total assets .31% .28% .28% Loan loss reserve $295,859 $293,375 $291,687 Net loan chargeoffs $305 $1,122 $312 Net chargeoffs/average loans (c) .00% .00% .00% DEPOSIT ACTIVITY Deposit increase (decrease) $1,729,004 $(796,825) $3,632,875 STOCK REPURCHASE ACTIVITY Number of shares repurchased and retired 560,000 425,000 0 Cost of shares repurchased $32,728 $25,156 $0 Remaining number of shares authorized for repurchase 17,671,358 18,231,358 18,656,358 For the Quarter Ended -------------------------- Mar. 31 Dec. 31 2005 2004 ------------ ------------ LOAN ACTIVITY New real estate loans originated $11,174,737 $13,083,888 New adjustable rate mortgages as a percentage of new real estate loans originated 99% 99% New refinanced mortgages as a percentage of new real estate loans originated 78% 75% Loan and MBS repayments $6,314,104 $6,665,374 Loan and MBS repayment rate (a) 24.75% 27.75% Net increase in loan portfolio $4,824,593 $6,053,090 Growth rate of the loan portfolio (b) 18.80% 25.06% Loan sales $91,114 $97,096 Loans serviced for others $4,315,925 $4,537,024 Nonperforming assets Loans and MBS 90 days or more past due $342,394 $332,329 Foreclosed real estate 10,840 11,461 ------------ ------------ Total nonperforming assets $353,234 $343,790 ============ ============ Ratio of nonperforming assets (NPAs) to total assets .31% .32% Ratio of troubled debt restructured (TDRs) to total assets .00% .00% Ratio of NPAs and TDRs to total assets .32% .33% Loan loss reserve $290,192 $290,110 Net loan chargeoffs $802 $2,540 Net chargeoffs/average loans (c) .00% .01% DEPOSIT ACTIVITY Deposit increase (decrease) $2,627,954 $1,298,796 STOCK REPURCHASE ACTIVITY Number of shares repurchased and retired 0 0 Cost of shares repurchased $0 $0 Remaining number of shares authorized for repurchase 18,656,358 18,656,358 (a) The loan and MBS repayment rate is the quarterly repayments annualized as a percentage of the prior quarter's ending loan and MBS balance. (b) The growth rate of the loan portfolio is the quarterly growth annualized as a percentage of the prior quarter's ending loan portfolio. (c) Includes loans that were securitized and retained as MBS with recourse held to maturity. CONTACT: Golden West Financial Corporation William C. Nunan, 510-446-3614