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