Exhibit 99.1
Golden West Reports 12% Earnings Increase for the First Quarter
OAKLAND, Calif.--(BUSINESS WIRE)--April 20, 2006--Golden West
Financial Corporation (NYSE:GDW)(PCX:GDW), parent of World Savings
Bank, announced diluted earnings per share of $1.25 for the first
three months of 2006, up 12% from the $1.12 reported in the same
period in 2005.
Opening his remarks with a review of Golden West's earnings
results, Herbert Sandler, Chairman of the Board and Chief Executive
Officer, stated, "As always, the key driver behind the growth of the
Company's profits was the ability to expand our mortgage portfolio,
which is our primary earning asset." Since the first quarter of last
year, Golden West's loans receivable increased by $14.8 billion, or
14%.
Reflecting on the lending environment, Sandler observed, "As
usual, the popularity of our main product, the monthly adjustable rate
mortgage, or ARM, is influenced by what's happening with fixed-rate
mortgages, or FRMs, the customers' primary alternative. Low long-term
interest rates made FRMs very attractive to borrowers. At the same
time, the cost of ARMs continued to climb. Despite stiff competition,
our first quarter loan volume of $11.6 billion was slightly above the
$11.2 billion achieved one year earlier."
Continuing, Sandler remarked, "While first quarter originations
were solid, repayment activity remained high, stimulated by low
mortgage rates, strong home sales, and a desire on the part of many
borrowers to convert the equity in their homes into cash.
Nevertheless, new loans exceeded payoffs, and the mortgage portfolio
grew $2.9 billion in the quarter, or at a 10% annualized rate."
Adding to his discussion of Golden West's quarterly performance,
Sandler pointed out, "A key factor that influences Golden West's
profits is the Company's primary spread, which is the difference
between the yield on loans and investments and the cost of savings and
borrowings." In the first quarter of 2006, Golden West's spread
averaged 2.57%, down from 2.65% in the same period one year earlier.
Explaining the decrease, Sandler said, "Since the beginning of last
year, the Federal Reserve's Open Market Committee has raised the
Federal Funds rate, which influences short-term yields, from 2.25% to
4.75%. Our spread normally contracts temporarily 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." As a side note, Sandler pointed out that the Company's
spreads have been adjusted for a change in financial reporting, which
is discussed in more detail later in this release.
In other news, Golden West reported deposit growth of $1.4 billion
in the first three months of 2006, down from a first quarter record of
$2.6 billion set in 2005. Commenting on the Company's savings
activity, Sandler stated, "Renewed interest in the stock market along
with aggressive pricing by our competitors slowed deposit inflows from
last year's all-time high level."
Moving to the topic of the Company's general and administrative
(G&A) expenses, Sandler noted, "Controlling spending is an important
element of our business model. We assess the success of this strategy
using a ratio that measures the amount of resources it takes to manage
the Company's assets." Golden West's ratio of G&A to average assets
was .86% in the first three months of 2006, slightly above the low
..82% reported in the first quarter of 2005.
Switching to a discussion of another performance measure, Sandler
explained, "The principal way we evaluate the quality of 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 NPAs at historic lows." At
March 31, 2006, Golden West's ratio of nonperforming assets to total
assets was a low .34%, just a bit more than the .31% posted one year
earlier.
Sandler then took a moment to point out two changes in the
Company's financial reporting. First he explained a change in the
presentation of fee income, noting, "Until this year, we reported the
fees received from the early prepayment of loans and late payment
charges on the 'Fee Income' line of our income statement. In the first
quarter of 2006, the Office of Thrift Supervision, or OTS, our primary
regulator, changed its financial reporting practice for the
classification of these items, requiring that they be recorded as
interest income. This adjustment by the OTS led to a change in
industry practice in the reporting of prepayment fees and late
charges. Accordingly, we have updated our 'Consolidated Statement of
Net Earnings' for 2006 and earlier years to include these fees with
'Interest Income.' While this was a reclassification only, and had no
impact on our bottom line, some of our key financial data, such as the
yield on the loan portfolio, the net interest margin and the primary
spread, changed as a result."
Discussing the second change in reporting, Sandler spoke about the
implementation of Financial Accounting Standard (FAS) 123R. He
remarked, "In accordance with FAS 123R, as of the first quarter of
2006, stock option expense is now included in the Company's general
and administrative, or G&A, expense. This accounting change added
approximately $3.6 million of expense to our G&A in the first
quarter."
Concluding his remarks, Sandler reflected on Golden West's being
named America's most admired mortgage services company in the March 6,
2006 issue of FORTUNE magazine. Previously, FORTUNE named Golden West
the nation's most admired mortgage services company in 2005 and 2003.
The Company ranked number one in each of the eight of the categories
included in the survey: social responsibility, long-term investment
value, employee talent, quality of products/services, innovation, use
of corporate assets, financial soundness, and quality of management.
Sandler observed, "This distinction recognizes our success in meeting
the needs of the nation's homeowners, in utilizing the talents of our
employees, and in serving the interests of our shareholders."
Headquartered in Oakland, California, Golden West is one of the
nation's largest financial institutions with assets over $125 billion
as of March 31, 2006. 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 Exchange (NYSE) under the ticker symbol GDW. The
Company intends to voluntarily terminate its secondary listing on the
Pacific Exchange (recently renamed NYSE Arca, Inc.) since the NYSE now
owns the Pacific Exchange after its recent merger with Archipelago
Holdings Inc.
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
March 31
---------------------------
2006 2005
------------ ------------
Interest Income
Interest on loans (a) $ 1,954,585 $1,311,341
Interest on mortgage-backed
securities (MBS) (a) 21,390 25,540
Interest and dividends on
investments 43,410 27,413
------------ ------------
2,019,385 1,364,294
Interest Expense
Interest on deposits 512,019 298,318
Interest on advances 429,456 223,268
Interest on repurchase agreements 62,384 25,264
Interest on other borrowings 132,460 60,071
------------ ------------
1,136,319 606,921
------------ ------------
Net Interest Income (a) 883,066 757,373
Provision for loan losses 4,293 884
------------ ------------
Net Interest Income after Provision
for Loan Losses 878,773 756,489
Noninterest Income
Fees (a) 12,959 11,113
Gain on the sale of securities
and loans 2,183 1,758
Other 21,442 16,933
------------ ------------
36,584 29,804
Noninterest Expense
General and administrative:
Personnel 192,989 151,831
Occupancy 24,568 22,225
Technology and
telecommunications 23,693 21,422
Deposit insurance 1,925 1,855
Advertising 6,513 7,540
Other 21,599 19,366
------------ ------------
271,287 224,239
Earnings before Taxes on Income 644,070 562,054
Taxes on Income 253,124 213,804
------------ ------------
Net Earnings $ 390,946 $ 348,250
============ ============
Basic Earnings Per Share $ 1.27 $ 1.13
============ ============
Diluted Earnings Per Share $ 1.25 $ 1.12
============ ============
Average common shares outstanding 308,397,529 306,861,057
Average diluted common shares
outstanding 311,808,276 311,539,734
Ratios: (b)
Net earnings / average
stockholders' equity (ROE) 17.64% 18.78%
Net earnings / average assets
(ROA) 1.24% 1.27%
Net interest margin (a)(c) 2.84% 2.79%
General and administrative
expense / average assets .86% .82%
Efficiency ratio (d) 29.50% 28.49%
(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. Averages are computed by adding the beginning balances and
each monthend balance during the quarter and dividing by four.
(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)
Mar. 31 Dec. 31 Sep. 30
2006 2005 2005
------------- ------------- -------------
ASSETS
Cash $ 242,496 $ 518,161 $ 326,443
Federal funds sold,
securities purchased
under agreement to resell
and other investments 1,579,133 1,321,626 1,235,155
Securities available for
sale, at fair value 359,549 382,499 341,905
Purchased MBS available
for sale, at fair value 10,904 11,781 12,634
Purchased MBS held to
maturity, at cost 291,302 303,703 318,257
MBS with recourse held to
maturity, at cost 1,104,248 1,168,480 1,253,710
Loans held for sale 136,526 83,365 127,553
Loans held in portfolio
less allowance for loan
losses 120,756,630 117,798,600 114,801,293
------------- ------------- -------------
Total Loans Receivable
and MBS 122,299,610 119,365,929 116,513,447
Interest earned but
uncollected 420,400 392,303 361,595
Investment in capital
stock of Federal Home
Loan Banks (FHLBs) 1,887,906 1,857,580 1,797,533
Foreclosed real estate 10,408 8,682 8,828
Premises and equipment,
net 409,582 403,084 401,713
Other assets 347,372 365,299 294,787
------------- ------------- -------------
Total Assets $127,556,456 $124,615,163 $121,281,406
============= ============= =============
LIABILITIES and
STOCKHOLDERS' EQUITY
Deposits $ 61,583,224 $ 60,158,319 $ 58,429,315
Advances from FHLBs 38,508,932 38,961,165 38,896,681
Securities sold under
agreements to repurchase 5,900,000 5,000,000 5,150,000
Bank notes 2,976,916 2,393,951 2,488,983
Senior debt 8,075,302 8,194,266 6,705,316
Taxes on income 771,388 547,653 560,182
Other liabilities 697,734 688,844 780,460
Stockholders' equity 9,042,960 8,670,965 8,270,469
------------- ------------- -------------
Total Liabilities and
Stockholders' Equity $127,556,456 $124,615,163 $121,281,406
============= ============= =============
Total deferred interest in
loans receivable and MBS $ 665,715 $ 448,816 $ 279,388
Total deferred interest as a
percentage of loans
receivable and MBS .54% .38% .24%
Capitalized mortgage
servicing rights $ 35,518 $ 39,134 $ 40,684
Stockholders' equity / total
assets 7.09% 6.96% 6.82%
Book value per common share $ 29.31 $ 28.15 $ 26.89
Common shares outstanding 308,553,361 308,041,776 307,583,276
Jun. 30 Mar. 31
2005 2005
------------- -------------
ASSETS
Cash $ 301,269 $ 311,607
Federal funds sold,
securities purchased
under agreement to resell
and other investments 1,091,702 1,674,914
Securities available for
sale, at fair value 590,848 379,082
Purchased MBS available
for sale, at fair value 13,665 13,548
Purchased MBS held to
maturity, at cost 338,659 357,843
MBS with recourse held to
maturity, at cost 1,346,080 1,440,341
Loans held for sale 48,636 40,988
Loans held in portfolio
less allowance for loan
losses 110,999,190 105,641,104
------------- -------------
Total Loans Receivable
and MBS 112,746,230 107,493,824
Interest earned but
uncollected 319,264 298,693
Investment in capital
stock of Federal Home
Loan Banks (FHLBs) 1,688,661 1,662,312
Foreclosed real estate 8,769 10,840
Premises and equipment,
net 403,121 398,181
Other assets 335,814 358,396
------------- -------------
Total Assets $117,485,678 $112,587,849
============= =============
LIABILITIES and
STOCKHOLDERS' EQUITY
Deposits $ 59,226,140 $ 55,593,265
Advances from FHLBs 35,755,870 35,511,757
Securities sold under
agreements to repurchase 4,450,000 4,050,000
Bank notes 2,232,955 2,485,936
Senior debt 6,736,979 5,955,989
Taxes on income 594,348 730,094
Other liabilities 552,943 681,310
Stockholders' equity 7,936,443 7,579,498
------------- -------------
Total Liabilities and
Stockholders' Equity $117,485,678 $112,587,849
============= =============
Total deferred interest in
loans receivable and MBS $ 160,201 $ 90,172
Total deferred interest as a
percentage of loans
receivable and MBS .14% .08%
Capitalized mortgage
servicing rights $43,835 $48,208
Stockholders' equity / total
assets 6.76% 6.73%
Book value per common share $ 25.79 $ 24.68
Common shares outstanding 307,760,826 307,126,766
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands except per share figures)
For the Quarter Ended
--------------------------------------
Mar. 31 Dec. 31 Sep. 30
2006 2005 2005
------------ ------------ ------------
AVERAGE BALANCES (a)
Cash and investments $ 2,027,721 $ 2,522,688 $ 1,781,055
Loans receivable and MBS 120,928,224 117,975,267 114,661,554
Investment in capital stock
of FHLBs 1,869,824 1,818,288 1,725,611
Deposits 60,830,208 59,484,698 58,912,429
Advances from FHLBs 38,346,279 38,841,391 36,894,412
Securities sold under
agreements to repurchase 5,537,500 5,075,000 4,812,500
Other borrowings 10,956,053 10,087,729 9,118,909
Stockholders' equity 8,867,321 8,461,148 8,109,144
Total Average Assets 125,994,603 123,443,755 119,237,057
Average Earning Assets 124,364,450 121,904,742 117,875,145
Average Interest-Bearing
Liabilities 115,670,040 113,488,818 109,738,250
OPERATING RESULTS
Net interest income (b) $ 883,066 $ 858,842 $ 840,624
Provision for loan losses 4,293 2,789 2,810
Noninterest income (b) 36,584 42,276 36,638
Noninterest expense 271,287 262,220 237,382
------------ ------------ ------------
Earnings before taxes on
income 644,070 636,109 637,070
Taxes on income 253,124 240,864 254,830
------------ ------------ ------------
Net earnings $ 390,946 $ 395,245 $ 382,240
============ ============ ============
Effective tax rate (c) 39.30% 37.87% 40.00%
Prepayment fees included in
interest income $ 77,813 $ 90,640 $ 87,856
Late fees included in
interest income $ 5,943 $ 5,088 $ 4,940
Basic EPS $ 1.27 $ 1.29 $ 1.24
Diluted EPS $ 1.25 $ 1.27 $ 1.22
Average common shares
outstanding 308,397,529 307,350,451 307,889,162
Average diluted common shares
outstanding 311,808,276 311,323,062 312,174,156
Ratios: (d)
Net earnings / average
stockholders' equity (ROE) 17.64% 18.69% 18.85%
Net earnings / average assets
(ROA) 1.24% 1.28% 1.28%
Net interest margin (b) 2.84% 2.82% 2.85%
General and administrative
expense / average assets .86% .85% .80%
Efficiency ratio 29.50% 29.10% 27.06%
SPREAD DATA
Yield on loan portfolio (b) 6.71% 6.37% 6.04%
Yield on interest-earning
investments 4.91% 4.11% 3.93%
------------ ------------ ------------
Yield on interest-earning
assets (b) 6.69% 6.35% 6.01%
------------ ------------ ------------
Cost of savings 3.56% 3.24% 2.97%
Cost of borrowings 4.78% 4.37% 3.82%
------------ ------------ ------------
Cost of funds 4.14% 3.78% 3.38%
------------ ------------ ------------
Primary Spread at
quarter end (b) 2.55% 2.57% 2.63%
============ ============ ============
Average Primary Spread for
the quarter (b) 2.57% 2.61% 2.66%
For the Quarter Ended
-------------------------
Jun. 30 Mar. 31
2005 2005
------------ ------------
AVERAGE BALANCES (a)
Cash and investments $ 2,085,597 $ 2,074,816
Loans receivable and MBS 110,124,924 105,079,482
Investment in capital stock
of FHLBs 1,676,949 1,622,540
Deposits 57,300,656 54,116,414
Advances from FHLBs 35,696,338 34,986,559
Securities sold under
agreements to repurchase 4,325,000 3,937,500
Other borrowings 8,579,755 8,132,422
Stockholders' equity 7,756,555 7,419,240
Total Average Assets 114,951,805 109,807,456
Average Earning Assets 113,599,941 108,489,822
Average Interest-Bearing
Liabilities 105,901,749 101,172,895
OPERATING RESULTS
Net interest income (b) $ 795,516 $ 757,373
Provision for loan losses 1,807 884
Noninterest income (b) 36,134 29,804
Noninterest expense 238,574 224,239
------------ ------------
Earnings before taxes on
income 591,269 562,054
Taxes on income 230,840 213,804
------------ ------------
Net earnings $ 360,429 $ 348,250
============ ============
Effective tax rate (c) 39.04% 38.04%
Prepayment fees included in
interest income $ 71,211 $ 48,343
Late fees included in
interest income $ 4,740 $ 4,466
Basic EPS $ 1.17 $ 1.13
Diluted EPS $ 1.16 $ 1.12
Average common shares
outstanding 307,440,730 306,861,057
Average diluted common shares
outstanding 311,770,849 311,539,734
Ratios: (d)
Net earnings / average
stockholders' equity (ROE) 18.59% 18.78%
Net earnings / average assets
(ROA) 1.25% 1.27%
Net interest margin (b) 2.80% 2.79%
General and administrative
expense / average assets .83% .82%
Efficiency ratio 28.69% 28.49%
SPREAD DATA
Yield on loan portfolio (b) 5.67% 5.25%
Yield on interest-earning
investments 3.41% 2.90%
------------ ------------
Yield on interest-earning
assets (b) 5.64% 5.22%
------------ ------------
Cost of savings 2.70% 2.39%
Cost of borrowings 3.34% 2.89%
------------ ------------
Cost of funds 2.99% 2.62%
------------ ------------
Primary Spread at
quarter end (b) 2.65% 2.60%
============ ============
Average Primary Spread for
the quarter (b) 2.62% 2.65%
(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
--------------------------------------
Mar. 31 Dec. 31 Sep. 30
2006 2005 2005
------------ ------------ ------------
LOAN ACTIVITY
New real estate loans
originated $11,565,992 $13,119,738 $13,768,941
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% 81% 76%
Loan and MBS repayments (a) $ 8,889,241 $ 9,743,052 $ 9,557,669
Loan and MBS repayment rate
(b) 30.00% 33.68% 34.14%
Net increase in loan
portfolio $ 2,933,681 $ 2,852,482 $ 3,767,217
Growth rate of the loan
portfolio (c) 9.83% 9.79% 13.37%
Loan sales $ 195,641 $ 377,195 $ 225,897
Loans serviced for others $ 4,177,222 $ 4,158,750 $ 4,029,073
Nonperforming assets
Loans and MBS 90 days or
more past due $ 426,480 $ 373,671 $ 335,376
Foreclosed real estate 10,408 8,682 8,828
------------ ------------ ------------
Total nonperforming
assets $ 436,888 $ 382,353 $ 344,204
============ ============ ============
Ratio of nonperforming assets
(NPAs) to total assets .34% .31% .28%
Ratio of troubled debt
restructured (TDRs) to total
assets .00% .00% .00%
Ratio of NPAs and TDRs to
total assets .34% .31% .28%
Loan loss reserve $ 299,965 $ 295,859 $ 293,375
Net loan chargeoffs $ 187 $ 305 $ 1,122
Net chargeoffs/average loans
(d) .00% .00% .00%
DEPOSIT ACTIVITY
Deposit increase (decrease) $ 1,424,905 $ 1,729,004 $ (796,825)
STOCK REPURCHASE ACTIVITY
Number of shares repurchased
and retired 0 560,000 425,000
Cost of shares repurchased $ 0 $ 32,728 $ 25,156
Remaining number of shares
authorized for repurchase 17,671,358 17,671,358 18,231,358
For the Quarter Ended
-------------------------
Jun. 30 Mar. 31
2005 2005
------------ ------------
LOAN ACTIVITY
New real estate loans
originated $13,452,983 $11,174,737
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% 78%
Loan and MBS repayments (a) $ 8,207,391 $ 6,314,104
Loan and MBS repayment rate
(b) 30.74% 24.75%
Net increase in loan
portfolio $ 5,252,406 $ 4,824,593
Growth rate of the loan
portfolio (c) 19.54% 18.80%
Loan sales $ 98,006 $ 91,114
Loans serviced for others $ 4,105,410 $ 4,315,925
Nonperforming assets
Loans and MBS 90 days or
more past due $ 322,173 $ 342,394
Foreclosed real estate 8,769 10,840
------------ ------------
Total nonperforming
assets $ 330,942 $ 353,234
============ ============
Ratio of nonperforming assets
(NPAs) to total assets .28% .31%
Ratio of troubled debt
restructured (TDRs) to total
assets .00% .00%
Ratio of NPAs and TDRs to
total assets .28% .32%
Loan loss reserve $ 291,687 $ 290,192
Net loan chargeoffs $ 312 $ 802
Net chargeoffs/average loans
(d) .00% .00%
DEPOSIT ACTIVITY
Deposit increase (decrease) $ 3,632,875 $ 2,627,954
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) 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