EX-99.1 2 a5191902ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Golden West Reports 8% Earnings Increase for the Second Quarter OAKLAND, Calif.--(BUSINESS WIRE)--July 20, 2006--Golden West Financial Corporation (NYSE:GDW), parent of World Savings Bank, announced diluted earnings per share of $1.25 in the second quarter, up 8% from the $1.16 reported during the same period in 2005. Per share profits for the first half of 2006 reached $2.50, a 10% increase from the $2.28 posted in the first six months of 2005. The Company also made headlines during the quarter by announcing a definitive agreement to merge with Wachovia Corporation. Opening her quarterly remarks, Marion Sandler, Chairman of the Board and Chief Executive Officer, commented on the pending merger, stating, "Golden West has grown consistently over many years, and this milestone is the next step in our evolution. We entered into this agreement with the expectation that it would create a leading financial institution with more than $650 billion in assets and a national presence. We are very excited about the prospects this presents for our shareholders." Continuing, Sandler noted, "In addition, we look forward to providing our loyal customers with the banking products they've been asking for. We believe Wachovia is the perfect partner to meet customers' needs, provide opportunities to our employees and further enhance the value of the strong company we've built for our investors." Moving to a discussion of Golden West's second quarter results, Sandler began by reflecting on the current lending environment. She observed, "After several years of extraordinary activity, mortgage demand slowed in 2006, as expected. Industry groups estimate that mortgage originations are down approximately 13% from the second quarter last year, and we've experienced a similar decline in our new loan volume." Golden West originated $11.7 billion of loans in the second quarter, a 13% decrease from the $13.5 billion reported one year earlier. For the first six months of 2006, mortgage volume totaled $23.3 billion, a 6% drop from the $24.6 billion in the same period of 2005. Sandler further remarked, "Our mortgage portfolio continued to grow in 2006, even though repayment activity of our existing loans remained high." Golden West's loans receivable balance increased $1.2 billion, or at a 4% annualized rate in the second quarter, and by $10.8 billion, or 10%, from the same period last year. Sandler added, "Having a larger mortgage portfolio and a steady net interest margin provided the impetus for the 8% growth in our profits." Discussing the credit performance of the Company's mortgages, Sandler noted, "The principal way we evaluate the quality of our loan portfolio is the ratio of nonperforming assets, often called NPAs, to total assets. The Company's careful lending practices, combined with a strong real estate market, have helped keep NPAs near historic lows." At June 30, 2006, Golden West's ratio of nonperforming assets to total assets was .37%, up from the very low .28% posted one year earlier. Moving to another topic, Sandler commented on the Company's general and administrative (G&A) expenses, noting, "The Company's G&A ratio, which measures the amount of resources it takes to manage the Company's assets, tends to rise during periods of slower asset growth, such as today's environment, and decline when our balance sheet expands quickly, as was the case last year." Golden West's ratio of G&A to average assets was .89% in the second quarter of 2006, up from a low .83% reported in the same period one year earlier. Concluding, Sandler briefly touched on Golden West's savings activity. She stated, "Aggressive pricing by our competitors and renewed interest in the stock market slowed our deposit inflows from last year's record level." Golden West reported deposit growth of $651 million in the second quarter, down from an all-time high of $3.6 billion in the same period one year earlier. For the first six months of 2006, savings inflows amounted to $2.1 billion, compared to $6.3 billion in the first half of 2005. Headquartered in Oakland, California, Golden West is one of the nation's largest financial institutions with assets over $125 billion as of June 30, 2006. The Company has one of the most extensive thrift branch systems in the country, with 285 savings branches in 10 states and lending operations in 39 states. Golden West's stock is listed on the New York Stock Exchange under the ticker symbol GDW. 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. 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 Six Months Ended June 30 June 30 ------------------------- ------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Interest Income Interest on loans (a) $2,099,570 $1,488,220 $4,054,155 $2,799,561 Interest on mortgage- backed securities (a) 21,093 23,188 42,483 48,728 Interest and dividends on investments 44,393 28,745 87,803 56,158 ------------ ------------ ------------ ------------ 2,165,056 1,540,153 4,184,441 2,904,447 Interest Expense Interest on deposits 573,022 365,029 1,085,041 663,347 Interest on advances 471,296 273,911 900,752 497,179 Interest on repurchase agreements 73,512 33,690 135,896 58,954 Interest on other borrowings 157,772 72,007 290,232 132,078 ------------ ------------ ------------ ------------ 1,275,602 744,637 2,411,921 1,351,558 ------------ ------------ ------------ ------------ Net Interest Income (a) 889,454 795,516 1,772,520 1,552,889 Provision for loan losses 2,758 1,807 7,051 2,691 ------------ ------------ ------------ ------------ Net Interest Income after Provision for Loan Losses 886,696 793,709 1,765,469 1,550,198 Noninterest Income Fees (a) 18,536 14,244 31,495 25,357 Gain on the sale of securities, MBS and loans 3,073 1,847 5,256 3,605 Other 21,851 20,043 43,293 36,976 ------------ ------------ ------------ ------------ 43,460 36,134 80,044 65,938 Noninterest Expense General and adminis- trative: Personnel 196,393 159,791 389,382 311,622 Occupancy 25,521 22,568 50,089 44,793 Technology and tele- communi- cations 26,542 23,252 50,235 44,674 Deposit insurance 1,916 1,869 3,841 3,724 Advertising 8,335 7,045 14,848 14,585 Other 27,963 24,049 49,562 43,415 ------------ ------------ ------------ ------------ 286,670 238,574 557,957 462,813 Earnings before Taxes on Income 643,486 591,269 1,287,556 1,153,323 Taxes on Income 253,108 230,840 506,232 444,644 ------------ ------------ ------------ ------------ Net Earnings $390,378 $360,429 $781,324 $708,679 ============ ============ ============ ============ Basic Earnings Per Share $1.26 $1.17 $2.53 $2.31 ============ ============ ============ ============ Diluted Earnings Per Share $1.25 $1.16 $2.50 $2.28 ============ ============ ============ ============ Average common shares outstanding 308,736,887 307,440,730 308,568,145 307,152,495 Average diluted common shares outstanding 312,072,356 311,770,849 311,944,103 311,469,354 Ratios: (b) Net earnings / average stockholders' equity (ROE) 16.91% 18.59% 17.27% 18.68% Net earnings / average assets (ROA) 1.22% 1.25% 1.23% 1.26% Net interest margin (a)(c) 2.81% 2.80% 2.83% 2.80% General and administrative expense / average assets .89% .83% .88% .82% Efficiency ratio (d) 30.73% 28.69% 30.12% 28.59% (a) Reflects reclassification of prepayment fees and late payment charges from noninterest income to interest income. (b) Ratios are annualized by multiplying the quarterly computation by four and the semi-annual computations by two. Averages are computed by adding the beginning balances and each monthend balance during the quarter and the year and dividing by four and seven, respectively. (c) Net interest margin is net interest income divided by average earning assets. (d) 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) Jun. 30 Mar. 31 Dec. 31 2006 2006 2005 ------------- ------------- ------------- ASSETS Cash $296,595 $242,496 $518,161 Federal funds sold, securities purchased under agreement to resell and other investments 1,524,581 1,579,133 1,321,626 Securities available for sale, at fair value 336,848 359,549 382,499 Purchased MBS available for sale, at fair value 10,131 10,904 11,781 Purchased MBS held to maturity, at cost 278,564 291,302 303,703 MBS with recourse held to maturity, at cost 1,036,197 1,104,248 1,168,480 Loans held for sale 152,439 136,526 83,365 Loans held in portfolio less allowance for loan losses 122,040,539 120,756,630 117,798,600 ------------- ------------- ------------- Total Loans Receivable and MBS 123,517,870 122,299,610 119,365,929 Interest earned but uncollected 452,807 420,400 392,303 Investment in capital stock of Federal Home Loan Banks (FHLBs) 1,917,927 1,887,906 1,857,580 Foreclosed real estate 10,765 10,408 8,682 Premises and equipment, net 408,405 409,582 403,084 Other assets 339,829 347,372 365,299 ------------- ------------- ------------- Total Assets $128,805,627 $127,556,456 $124,615,163 ============= ============= ============= LIABILITIES and STOCKHOLDERS' EQUITY Deposits $62,234,341 $61,583,224 $60,158,319 Advances from FHLBs 38,447,298 38,508,932 38,961,165 Securities sold under agreements to repurchase 5,600,000 5,900,000 5,000,000 Bank notes 2,182,961 2,976,916 2,393,951 Senior debt 9,563,956 8,075,302 8,194,266 Taxes on income 612,175 771,388 547,653 Other liabilities 752,105 697,734 688,844 Stockholders' equity 9,412,791 9,042,960 8,670,965 ------------- ------------- ------------- Total Liabilities and Stockholders' Equity $128,805,627 $127,556,456 $124,615,163 ============= ============= ============= Total deferred interest in loans receivable and MBS $914,508 $665,715 $448,816 Total deferred interest as a percentage of loans receivable and MBS .74% .54% .38% Capitalized mortgage servicing rights $33,214 $35,518 $39,134 Stockholders' equity / total assets 7.31% 7.09% 6.96% Book value per common share $30.47 $29.31 $28.15 Common shares outstanding 308,939,749 308,553,361 308,041,776 Sep. 30 Jun. 30 2005 2005 ---------------- ----------------- ASSETS Cash $326,443 $301,269 Federal funds sold, securities purchased under agreement to resell and other investments 1,235,155 1,091,702 Securities available for sale, at fair value 341,905 590,848 Purchased MBS available for sale, at fair value 12,634 13,665 Purchased MBS held to maturity, at cost 318,257 338,659 MBS with recourse held to maturity, at cost 1,253,710 1,346,080 Loans held for sale 127,553 48,636 Loans held in portfolio less allowance for loan losses 114,801,293 110,999,190 ---------------- ----------------- Total Loans Receivable and MBS 116,513,447 112,746,230 Interest earned but uncollected 361,595 319,264 Investment in capital stock of Federal Home Loan Banks (FHLBs) 1,797,533 1,688,661 Foreclosed real estate 8,828 8,769 Premises and equipment, net 401,713 403,121 Other assets 294,787 335,814 ---------------- ----------------- Total Assets $121,281,406 $117,485,678 ================ ================= LIABILITIES and STOCKHOLDERS' EQUITY Deposits $58,429,315 $59,226,140 Advances from FHLBs 38,896,681 35,755,870 Securities sold under agreements to repurchase 5,150,000 4,450,000 Bank notes 2,488,983 2,232,955 Senior debt 6,705,316 6,736,979 Taxes on income 560,182 594,348 Other liabilities 780,460 552,943 Stockholders' equity 8,270,469 7,936,443 ---------------- ----------------- Total Liabilities and Stockholders' Equity $121,281,406 $117,485,678 ================ ================= Total deferred interest in loans receivable and MBS $279,388 $160,201 Total deferred interest as a percentage of loans receivable and MBS .24% .14% Capitalized mortgage servicing rights $40,684 $43,835 Stockholders' equity / total assets 6.82% 6.76% Book value per common share $26.89 $25.79 Common shares outstanding 307,583,276 307,760,826 GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands except per share figures) For the Quarter Ended -------------------------------------- Jun. 30 Mar. 31 Dec. 31 2006 2006 2005 ------------ ------------ ------------ AVERAGE BALANCES (a) Cash and investments $2,232,295 $2,027,721 $2,522,688 Loans receivable and MBS 123,008,552 120,928,224 117,975,267 Investment in capital stock of FHLBs 1,901,234 1,869,824 1,818,288 Deposits 61,632,739 60,830,208 59,484,698 Advances from FHLBs 38,265,270 38,346,279 38,841,391 Securities sold under agreements to repurchase 5,887,500 5,537,500 5,075,000 Other borrowings 11,820,494 10,956,053 10,087,729 Stockholders' equity 9,231,683 8,867,321 8,461,148 Total Average Assets 128,352,965 125,994,603 123,443,755 Average Earning Assets 126,654,282 124,364,450 121,904,742 Average Interest-Bearing Liabilities 117,606,003 115,670,040 113,488,818 OPERATING RESULTS Net interest income (b) $889,454 $883,066 $858,842 Provision for loan losses 2,758 4,293 2,789 Noninterest income (b) 43,460 36,584 42,276 Noninterest expense 286,670 271,287 262,220 ------------ ------------ ------------ Earnings before taxes on income 643,486 644,070 636,109 Taxes on income 253,108 253,124 240,864 ------------ ------------ ------------ Net earnings $390,378 $390,946 $395,245 ============ ============ ============ Effective tax rate (c) 39.33% 39.30% 37.87% Prepayment fees included in interest income $92,908 $77,813 $90,640 Late fees included in interest income $5,910 $5,943 $5,088 Basic EPS $1.26 $1.27 $1.29 Diluted EPS $1.25 $1.25 $1.27 Average common shares outstanding 308,736,887 308,397,529 307,350,451 Average diluted common shares outstanding 312,072,356 311,808,276 311,323,062 Ratios: (d) Net earnings / average stockholders' equity (ROE) 16.91% 17.64% 18.69% Net earnings / average assets (ROA) 1.22% 1.24% 1.28% Net interest margin (b) 2.81% 2.84% 2.82% General and administrative expense / average assets .89% .86% .85% Efficiency ratio 30.73% 29.50% 29.10% SPREAD DATA Yield on loan portfolio (b) 7.04% 6.71% 6.37% Yield on interest-earning investments 5.30% 4.91% 4.11% ------------ ------------ ------------ Yield on interest-earning assets (b) 7.02% 6.69% 6.35% ------------ ------------ ------------ Cost of savings 3.94% 3.56% 3.24% Cost of borrowings 5.25% 4.78% 4.37% ------------ ------------ ------------ Cost of funds 4.56% 4.14% 3.78% ------------ ------------ ------------ Primary Spread at quarter end (b) 2.46% 2.55% 2.57% ============ ============ ============ Average Primary Spread for the quarter (b) 2.51% 2.57% 2.61% For the Quarter Ended ------------------------------------ Sep. 30 Jun. 30 2005 2005 ----------------- ----------------- AVERAGE BALANCES (a) Cash and investments $1,781,055 $2,085,597 Loans receivable and MBS 114,661,554 110,124,924 Investment in capital stock of FHLBs 1,725,611 1,676,949 Deposits 58,912,429 57,300,656 Advances from FHLBs 36,894,412 35,696,338 Securities sold under agreements to repurchase 4,812,500 4,325,000 Other borrowings 9,118,909 8,579,755 Stockholders' equity 8,109,144 7,756,555 Total Average Assets 119,237,057 114,951,805 Average Earning Assets 117,875,145 113,599,941 Average Interest-Bearing Liabilities 109,738,250 105,901,749 OPERATING RESULTS Net interest income (b) $840,624 $795,516 Provision for loan losses 2,810 1,807 Noninterest income (b) 36,638 36,134 Noninterest expense 237,382 238,574 ----------------- ----------------- Earnings before taxes on income 637,070 591,269 Taxes on income 254,830 230,840 ----------------- ----------------- Net earnings $382,240 $360,429 ================= ================= Effective tax rate (c) 40.00% 39.04% Prepayment fees included in interest income $87,856 $71,211 Late fees included in interest income $4,940 $4,740 Basic EPS $1.24 $1.17 Diluted EPS $1.22 $1.16 Average common shares outstanding 307,889,162 307,440,730 Average diluted common shares outstanding 312,174,156 311,770,849 Ratios: (d) Net earnings / average stockholders' equity (ROE) 18.85% 18.59% Net earnings / average assets (ROA) 1.28% 1.25% Net interest margin (b) 2.85% 2.80% General and administrative expense / average assets .80% .83% Efficiency ratio 27.06% 28.69% SPREAD DATA Yield on loan portfolio (b) 6.04% 5.67% Yield on interest-earning investments 3.93% 3.41% ----------------- ----------------- Yield on interest-earning assets (b) 6.01% 5.64% ----------------- ----------------- Cost of savings 2.97% 2.70% Cost of borrowings 3.82% 3.34% ----------------- ----------------- Cost of funds 3.38% 2.99% ----------------- ----------------- Primary Spread at quarter end (b) 2.63% 2.65% ================= ================= Average Primary Spread for the quarter (b) 2.66% 2.62% (a) Averages are computed by adding the beginning balance and each monthend balance during the quarter and dividing by four. (b) Reflects reclassification of prepayment fees and late payment charges from noninterest income to interest income. (c) 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. (d) 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 ----------------------------------------- Jun. 30 Mar. 31 Dec. 31 2006 2006 2005 -------------- ------------- ------------ LOAN ACTIVITY New real estate loans originated $11,691,213 $11,565,992 $13,119,738 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 84% 84% 81% Loan and MBS repayments (a) $10,544,525 $8,889,241 $9,743,052 Loan and MBS repayment rate (b) 34.74% 30.00% 33.68% Net increase in loan portfolio $1,218,260 $2,933,681 $2,852,482 Growth rate of the loan portfolio (c) 3.98% 9.83% 9.79% Loan sales $329,581 $195,641 $377,195 Loans serviced for others $4,318,321 $4,177,222 $4,158,750 Nonperforming assets Loans and MBS 90 days or more past due $465,510 $426,480 $373,671 Foreclosed real estate 10,765 10,408 8,682 -------------- ------------- ------------ Total nonperforming assets $476,275 $436,888 $382,353 ============== ============= ============ Ratio of nonperforming assets (NPAs) to total assets .37% .34% .31% Ratio of troubled debt restructured (TDRs) to total assets .00% .00% .00% Ratio of NPAs and TDRs to total assets .37% .34% .31% Loan loss reserve $302,069 $299,965 $295,859 Net loan chargeoffs $654 $187 $305 Net chargeoffs/average loans (d) .00% .00% .00% DEPOSIT ACTIVITY Deposit increase (decrease) $651,117 $1,424,905 $1,729,004 STOCK REPURCHASE ACTIVITY Number of shares repurchased and retired 0 0 560,000 Cost of shares repurchased $0 $0 $32,728 Remaining number of shares authorized for repurchase 17,671,358 17,671,358 17,671,358 For the Quarter Ended ------------------------------- Sep. 30 Jun. 30 2005 2005 --------------- -------------- LOAN ACTIVITY New real estate loans originated $13,768,941 $13,452,983 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 76% 75% Loan and MBS repayments (a) $9,557,669 $8,207,391 Loan and MBS repayment rate (b) 34.14% 30.74% Net increase in loan portfolio $3,767,217 $5,252,406 Growth rate of the loan portfolio (c) 13.37% 19.54% Loan sales $225,897 $98,006 Loans serviced for others $4,029,073 $4,105,410 Nonperforming assets Loans and MBS 90 days or more past due $335,376 $322,173 Foreclosed real estate 8,828 8,769 --------------- -------------- Total nonperforming assets $344,204 $330,942 =============== ============== Ratio of nonperforming assets (NPAs) to total assets .28% .28% Ratio of troubled debt restructured (TDRs) to total assets .00% .00% Ratio of NPAs and TDRs to total assets .28% .28% Loan loss reserve $293,375 $291,687 Net loan chargeoffs $1,122 $312 Net chargeoffs/average loans (d) .00% .00% DEPOSIT ACTIVITY Deposit increase (decrease) $(796,825) $3,632,875 STOCK REPURCHASE ACTIVITY Number of shares repurchased and retired 425,000 0 Cost of shares repurchased $25,156 $0 Remaining number of shares authorized for repurchase 18,231,358 18,656,358 (a) For ELOCs, only amounts paid at the termination of the line of credit are included in repayments. Prior to 2006, ELOCs were not included in repayments. (b) The loan and MBS repayment rate is the quarterly repayments annualized as a percentage of the prior quarter's ending loan and MBS balance. (c) The growth rate of the loan portfolio is the quarterly growth annualized as a percentage of the prior quarter's ending loan portfolio. (d) 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