Exhibit 99.1
Golden West Reports 16% Earnings Increase for the Third Quarter
OAKLAND, Calif.--(BUSINESS WIRE)--Oct. 20, 2005--Golden West
Financial Corporation (NYSE:GDW), parent of World Savings Bank,
announced record diluted earnings per share of $1.22 in the third
quarter, up 16% from the $1.05 reported during the same period in
2004. Per share profits for the first nine months of 2005 reached
$3.50, a 15% increase from the $3.04 posted in the first three
quarters of 2004.
Opening his remarks on Golden West's results, Herbert Sandler,
Chairman of the Board and Chief Executive Officer, stated, "The key
driver behind the growth of the Company's profits continues to be our
ability to expand our mortgage portfolio, which is our primary earning
asset." In the third quarter, Golden West's loans receivable balance
increased by $3.8 billion. Reflecting on the past three months'
activity, Sandler noted, "Our lending team originated $13.8 billion of
mortgages, just a bit below the all-time high of $14.1 billion set in
the same period last year." For the first nine months of 2005, loan
volume totaled $38.4 billion, up 7% from the $35.9 billion recorded in
2004.
Adding to his explanation, Sandler observed, "As usual, the
popularity of our main product, the adjustable rate mortgage, or ARM,
is influenced by what's happening with fixed-rate mortgages, or FRMs,
the customers' other alternative. Favorable long-term rates kept
interest on FRMs near historic lows the past three months, providing
an attractive option to borrowers. Despite stiff competition, our
lending team had a successful quarter, with no material drop off from
last year's record ARM production."
Continuing, Sandler remarked, "On the one hand originations were
strong in the third quarter, on the other hand repayment activity
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. But in the end, the new loans we added exceeded
payoffs and amortization, leading to annualized growth of the
Company's loan portfolio of 13%."
Expanding his earnings explanation, Sandler pointed out, "Another
key factor that influences Golden West's profits is the Company's
primary spread, which is the difference between what we earn on loans
and investments and what we pay for savings and borrowings." In the
third quarter of 2005, Golden West's spread averaged 2.37%, down from
2.70% in the same period one year earlier. Explaining the decline,
Sandler said, "Since June 2004, the Federal Reserve's Open Market
Committee has raised the Federal Funds rate, which influences
short-term yields, from 1.00% to 3.75%. Our spread normally contracts
when short-term rates rise, because the yield we earn on our loan
portfolio responds to interest rate movements a bit slower 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 for the three months ended
September 30, 2005 improved to .80% from .87% in the same period one
year earlier. Sandler added, "While average assets were up 23% from
the third quarter of last year, expenditures grew only 13% during the
same time frame, leading to a significant decline in our expense
ratio."
Moving to a discussion of another performance measure, Sandler
explained, "One way we evaluate the quality of the loans we make 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 our NPA levels at historic lows." At
September 30, 2005, Golden West's ratio was just .28%, down from a
modest .35% one year earlier.
In other third quarter news, the Company reported that it
purchased 425,000 shares of Golden West stock, the first such activity
since 2003. The program continued into the fourth quarter, and as of
October 19, 2005, a total of 985,000 shares had been repurchased, with
17.7 million shares still available to be acquired under current Board
authorizations.
Concluding with a discussion of Golden West's fund-raising
activity in the third quarter, Sandler commented, "The Company uses
both retail deposits and borrowings from Federal Home Loan Banks and
the capital markets to support our loan portfolio growth. As
competition for savings heated up this past quarter, we did not
aggressively pursue new deposits. We chose instead to borrow, which
was the more cost effective alternative." As a result of this funding
strategy, Golden West experienced a $797 million decline in retail
savings in the third quarter, compared with a $3.1 billion increase in
the same period one year earlier. However, in the first nine months of
2005, deposits grew $5.5 billion, an 11% increase from $4.9 billion
recorded in the first three quarters of the prior year. Sandler added,
"Borrowing is always an option for us because our credit ratings,
which are the highest for any savings institution, allow us to raise
money at favorable rates." Golden West's primary operating subsidiary,
World Savings Bank, is rated Aa3 and AA- by Moody's Investors Services
and Standard and Poor's, respectively, two of the leading credit
rating agencies.
Headquartered in Oakland, California, Golden West is one of the
nation's largest financial institutions with assets over $120 billion
as of September 30, 2005. The Company has one of the most extensive
thrift branch systems in the country, with 282 savings branches in 10
states and lending operations in 38 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 Nine Months Ended
September 30 September 30
------------------------- -------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Interest Income
Interest on
loans $1,575,068 $1,025,021 $4,246,023 $2,835,482
Interest on
mortgage-backed
securities
(MBS) 22,448 28,843 71,022 104,578
Interest and
dividends on
investments 34,250 19,066 90,408 50,359
------------ ------------ ------------ ------------
1,631,766 1,072,930 4,407,453 2,990,419
Interest Expense
Interest on
deposits 421,513 243,669 1,084,860 679,023
Interest
on advances 328,755 123,565 825,934 279,547
Interest on
repurchase
agreements 43,747 13,767 102,701 29,407
Interest
on other
borrowings 89,923 26,800 222,001 75,373
------------ ------------ ------------ ------------
883,938 407,801 2,235,496 1,063,350
------------ ------------ ------------ ------------
Net Interest
Income 747,828 665,129 2,171,957 1,927,069
Provision for loan
losses 2,810 197 5,501 830
------------ ------------ ------------ ------------
Net Interest
Income after
Provision for
Loan Losses 745,018 664,932 2,166,456 1,926,239
Noninterest Income
Fees 106,748 53,292 260,865 150,601
Gain on the
sale of
securities,
MBS and
loans 3,089 1,901 6,694 11,154
Other 19,597 16,412 56,573 50,804
------------ ------------ ------------ ------------
129,434 71,605 324,132 212,559
Noninterest
Expense
General and
administrative:
Personnel 163,189 135,808 474,811 404,111
Occupancy 23,730 21,640 68,523 62,778
Technology
and
telecommuni-
cations 23,228 18,768 67,902 59,070
Deposit
insurance 1,857 1,743 5,581 5,303
Advertising 4,361 7,979 18,946 18,458
Other 21,017 24,522 64,432 67,787
------------ ------------ ------------ ------------
237,382 210,460 700,195 617,507
Earnings before
Taxes on Income 637,070 526,077 1,790,393 1,521,291
Taxes on Income 254,830 201,299 699,474 580,071
------------ ------------ ------------ ------------
Net Earnings $382,240 $324,778 $1,090,919 $941,220
============ ============ ============ ============
Basic Earnings
Per Share $1.24 $1.06 $3.55 $3.08
============ ============ ============ ============
Diluted Earnings
Per Share $1.22 $1.05 $3.50 $3.04
============ ============ ============ ============
Average common
shares
outstanding 307,889,162 305,706,406 307,400,749 305,187,814
Average diluted
common shares
outstanding 312,174,156 310,573,378 311,950,220 310,034,404
Ratios: (a)
Net earnings /
average
stockholders'
equity
(ROE) 18.85% 19.31% 18.74% 19.57%
Net earnings /
average assets
(ROA) 1.28% 1.34% 1.27% 1.39%
Net interest
margin (b) 2.54% 2.78% 2.56% 2.88%
General and
administrative
expense /
average assets .80% .87% .81% .91%
Efficiency ratio(c) 27.06% 28.57% 28.05% 28.86%
(a) Ratios are annualized by multiplying the quarterly computation by
four and the nine month computations by one and one-third.
Averages are computed by adding the beginning balances and each
monthend balance during the quarter and nine month period and
dividing by four and ten, 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)
Sep. 30 Jun. 30 Mar. 31
2005 2005 2005
------------- ------------- -------------
ASSETS
Cash $326,443 $301,269 $311,607
Securities available for
sale at fair value 1,577,060 1,682,550 2,053,996
Purchased MBS available
for sale at fair value 12,634 13,665 13,548
Purchased MBS held to
maturity at cost 318,257 338,659 357,843
MBS with recourse held to
maturity at cost 1,253,710 1,346,080 1,440,341
Loans held for sale 127,553 48,636 40,988
Loans held in portfolio
less allowance for loan
losses 114,801,293 110,999,190 105,641,104
------------- ------------- -------------
Total Loans Receivable
and MBS 116,513,447 112,746,230 107,493,824
Interest earned but
uncollected 361,595 319,264 298,693
Investment in capital
stock of Federal Home
Loan Banks (FHLBs) at
cost 1,797,533 1,688,661 1,662,312
Foreclosed real estate 8,828 8,769 10,840
Premises and equipment,
net 401,713 403,121 398,181
Other assets 294,787 335,814 358,396
------------- ------------- -------------
Total Assets $121,281,406 $117,485,678 $112,587,849
============= ============= =============
LIABILITIES and
STOCKHOLDERS' EQUITY
Deposits $58,429,315 $59,226,140 $55,593,265
Advances from FHLBs 38,896,681 35,755,870 35,511,757
Securities sold under
agreements to repurchase 5,150,000 4,450,000 4,050,000
Bank notes 2,488,983 2,232,955 2,485,936
Senior debt 6,705,316 6,736,979 5,955,989
Taxes on income 560,182 594,348 730,094
Other liabilities 780,460 552,943 681,310
Stockholders' equity 8,270,469 7,936,443 7,579,498
------------- ------------- -------------
Total Liabilities and
Stockholders' Equity $121,281,406 $117,485,678 $112,587,849
============= ============= =============
Total deferred interest in
loans receivable and MBS $279,388 $160,201 $90,172
Total deferred interest as a
percentage of loans
receivable and MBS .24% .14% .08%
Capitalized mortgage
servicing rights $40,684 $43,835 $48,208
Stockholders' equity / total
assets 6.82% 6.76% 6.73%
Book value per common share $26.89 $25.79 $24.68
Common shares outstanding 307,583,276 307,760,826 307,126,766
Dec. 31 Sep. 30
2004 2004
------------- -------------
ASSETS
Cash $292,421 $283,776
Securities available for sale at fair
value 1,374,385 919,647
Purchased MBS available for sale at fair
value 14,438 15,915
Purchased MBS held to maturity at cost 375,632 395,887
MBS with recourse held to maturity at
cost 1,719,982 1,889,322
Loans held for sale 52,325 55,899
Loans held in portfolio less allowance
for loan losses 100,506,854 94,259,118
------------- -------------
Total Loans Receivable and MBS 102,669,231 96,616,141
Interest earned but uncollected 248,073 233,257
Investment in capital stock of Federal
Home Loan Banks (FHLBs) at cost 1,563,276 1,484,560
Foreclosed real estate 11,461 8,815
Premises and equipment, net 391,523 378,769
Other assets 338,171 322,662
------------- -------------
Total Assets $106,888,541 $100,247,627
============= =============
LIABILITIES and
STOCKHOLDERS' EQUITY
Deposits $52,965,311 $51,666,515
Advances from FHLBs 33,781,895 32,017,135
Securities sold under agreements to
repurchase 3,900,000 3,650,179
Bank notes 2,709,895 869,154
Senior debt 5,291,840 3,997,707
Taxes on income 561,772 611,997
Other liabilities 402,952 544,153
Stockholders' equity 7,274,876 6,890,787
------------- -------------
Total Liabilities and Stockholders'
Equity $106,888,541 $100,247,627
============= =============
Total deferred interest in loans
receivable and MBS $54,616 $36,042
Total deferred interest as a percentage of
loans receivable and MBS .05% .04%
Capitalized mortgage servicing rights $53,234 $63,763
Stockholders' equity / total assets 6.81% 6.87%
Book value per common share $23.73 $22.51
Common shares outstanding 306,524,716 306,102,778
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands except per share figures)
For the Quarter Ended
---------------------------------------
Sep. 30 Jun. 30 Mar. 31
2005 2005 2005
------------- ------------ ------------
AVERAGE BALANCES (a)
Cash and investments $1,781,055 $2,085,597 $2,074,816
Loans receivable and MBS 114,661,554 110,124,924 105,079,482
Investment in capital stock
of FHLBs 1,725,611 1,676,949 1,622,540
Deposits 58,912,429 57,300,656 54,116,414
Advances from FHLBs 36,894,412 35,696,338 34,986,559
Securities sold under
agreements to repurchase 4,812,500 4,325,000 3,937,500
Other borrowings 9,118,909 8,579,755 8,132,422
Stockholders' equity 8,109,144 7,756,555 7,419,240
Total Average Assets 119,237,057 114,951,805 109,807,456
Average Earning Assets 117,875,145 113,599,941 108,489,822
Average Interest-Bearing
Liabilities 109,738,250 105,901,749 101,172,895
OPERATING RESULTS
Net interest income $747,828 $719,565 $704,564
Provision for loan losses 2,810 1,807 884
Noninterest income 129,434 112,085 82,613
Noninterest expense 237,382 238,574 224,239
------------- ------------ ------------
Earnings before taxes on
income 637,070 591,269 562,054
Taxes on income (b) 254,830 230,840 213,804
------------- ------------ ------------
Net earnings $382,240 $360,429 $348,250
============= ============ ============
Basic EPS $1.24 $1.17 $1.13
Diluted EPS $1.22 $1.16 $1.12
Average common shares
outstanding 307,889,162 307,440,730 306,861,057
Average diluted common shares
outstanding 312,174,156 311,770,849 311,539,734
Ratios: (c)
Net earnings / average
stockholders' equity (ROE) 18.85% 18.59% 18.78%
Net earnings / average
assets (ROA) 1.28% 1.25% 1.27%
Net interest margin 2.54% 2.53% 2.60%
General and administrative
expense / average assets .80% .83% .82%
Efficiency ratio 27.06% 28.69% 28.49%
SPREAD DATA
Yield on loan portfolio 5.72% 5.40% 5.06%
Yield on interest-earning
investments 3.93% 3.41% 2.90%
------------- ------------ ------------
Yield on interest-earning
assets 5.70% 5.38% 5.02%
------------- ------------ ------------
Cost of deposits 2.97% 2.70% 2.39%
Cost of borrowings 3.82% 3.34% 2.89%
------------- ------------ ------------
Cost of funds 3.38% 2.99% 2.62%
------------- ------------ ------------
Primary Spread at quarter
end 2.32% 2.39% 2.40%
============= ============ ============
Average Primary Spread for
the quarter 2.37% 2.39% 2.46%
For the Quarter Ended
-------------------------
Dec. 31 Sep. 30
2004 2004
------------ ------------
AVERAGE BALANCES (a)
Cash and investments $1,442,083 $1,680,206
Loans receivable and MBS 99,698,762 92,976,928
Investment in capital stock of FHLBs 1,521,608 1,413,980
Deposits 52,317,613 50,229,774
Advances from FHLBs 32,754,803 30,684,256
Securities sold under agreements to
repurchase 3,900,045 3,590,338
Other borrowings 6,373,852 4,604,075
Stockholders' equity 7,073,030 6,729,240
Total Average Assets 103,634,158 96,997,990
Average Earning Assets 102,371,618 95,778,195
Average Interest-Bearing Liabilities 95,346,313 89,108,443
OPERATING RESULTS
Net interest income $691,536 $665,129
Provision for loan losses 2,571 197
Noninterest income 81,364 71,605
Noninterest expense 222,619 210,460
------------ ------------
Earnings before taxes on income 547,710 526,077
Taxes on income (b) 209,209 201,299
------------ ------------
Net earnings $338,501 $324,778
============ ============
Basic EPS $1.11 $1.06
Diluted EPS $1.09 $1.05
Average common shares outstanding 306,312,759 305,706,406
Average diluted common shares outstanding 311,179,468 310,573,378
Ratios: (c)
Net earnings / average stockholders'
equity (ROE) 19.14% 19.31%
Net earnings / average assets (ROA) 1.31% 1.34%
Net interest margin 2.70% 2.78%
General and administrative expense /
average assets .86% .87%
Efficiency ratio 28.80% 28.57%
SPREAD DATA
Yield on loan portfolio 4.75% 4.59%
Yield on interest-earning investments 2.08% 1.90%
------------ ------------
Yield on interest-earning assets 4.73% 4.57%
------------ ------------
Cost of deposits 2.08% 1.97%
Cost of borrowings 2.38% 1.87%
------------ ------------
Cost of funds 2.22% 1.93%
------------ ------------
Primary Spread at quarter end 2.51% 2.64%
============ ============
Average Primary Spread for the quarter 2.60% 2.70%
(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
--------------------------------------
Sep. 30 Jun. 30 Mar. 31
2005 2005 2005
------------ ------------ ------------
LOAN ACTIVITY
New real estate loans
originated $13,768,941 $13,452,983 $11,174,737
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 76% 75% 78%
Loan and MBS repayments $9,557,669 $8,207,391 $6,314,104
Loan and MBS repayment rate(a) 34.14% 30.74% 24.75%
Net increase in loan
portfolio $3,767,217 $5,252,406 $4,824,593
Growth rate of the loan
portfolio (b) 13.37% 19.54% 18.80%
Loan sales $225,897 $98,006 $91,114
Loans serviced for others $4,029,073 $4,105,410 $4,315,925
Nonperforming assets
Loans and MBS 90 days or
more past due $335,376 $322,173 $342,394
Foreclosed real estate 8,828 8,769 10,840
------------ ------------ ------------
Total nonperforming
assets $344,204 $330,942 $353,234
============ ============ ============
Ratio of nonperforming assets
(NPAs) to total assets .28% .28% .31%
Ratio of troubled debt
restructured (TDRs) to total
assets .00% .00% .00%
Ratio of NPAs and TDRs to
total assets .28% .28% .32%
Loan loss reserve $293,375 $291,687 $290,192
Net loan chargeoffs $1,122 $312 $802
Net chargeoffs/average loans(c) .00% .00% .00%
DEPOSIT ACTIVITY
Deposit increase (decrease) $(796,825) $3,632,875 $2,627,954
STOCK REPURCHASE ACTIVITY
Number of shares repurchased
and retired 425,000 0 0
Cost of shares repurchased $25,156 $0 $0
Remaining number of shares
authorized for repurchase 18,231,358 18,656,358 18,656,358
For the Quarter Ended
-------------------------
Dec. 31 Sep. 30
2004 2004
------------ ------------
LOAN ACTIVITY
New real estate loans originated $13,083,888 $14,071,739
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 75% 69%
Loan and MBS repayments $6,665,374 $6,319,795
Loan and MBS repayment rate (a) 27.75% 28.51%
Net increase in loan portfolio $6,053,090 $7,522,608
Growth rate of the loan portfolio (b) 25.06% 33.77%
Loan sales $97,096 $99,405
Loans serviced for others $4,537,024 $4,812,072
Nonperforming assets
Loans and MBS 90 days or more past due $332,329 $346,585
Foreclosed real estate 11,461 8,815
------------ ------------
Total nonperforming assets $343,790 $355,400
============ ============
Ratio of nonperforming assets (NPAs) to
total assets .32% .35%
Ratio of troubled debt restructured (TDRs)
to total assets .00% .00%
Ratio of NPAs and TDRs to total assets .33% .36%
Loan loss reserve $290,110 $290,079
Net loan chargeoffs $2,540 $114
Net chargeoffs/average loans (c) .01% .00%
DEPOSIT ACTIVITY
Deposit increase (decrease) $1,298,796 $3,055,162
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