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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________
FORM 10-Q
_____________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
_____________________
Commission file number 1-4629
GOLDEN WEST FINANCIAL CORPORATION
Incorporated Pursuant to the Laws of Delaware State
___________________
IRS - Employer Identification No. 95-2080059
1901 Harrison Street, Oakland, California 94612
(510) 446-3420
_____________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
Yes [ X ] No [ ]
The number of shares outstanding of the registrant's
common stock as of April 30, 2003:
Common Stock -- 152,636,933 shares.
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GOLDEN WEST FINANCIAL CORPORATION
TABLE OF CONTENTS
Page No.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Financial Condition -
March 31, 2003 and 2002 and December 31, 2002........................1
Consolidated Statement of Net Earnings -
For the three months ended March 31, 2003 and 2002...................2
Consolidated Statement of Cash Flows -
For the three months ended March 31, 2003 and 2002...................3
Consolidated Statement of Stockholders' Equity -
For the three months ended March 31, 2003 and 2002...................5
Note to Consolidated Financial Statements - Stock-Based Compensation......6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................7
Financial Highlights........................................................8
Financial Condition........................................................10
Cash and Investments.......................................................13
Loans Receivable, Including MBS............................................13
Mortgage Servicing Rights..................................................21
Asset Quality..............................................................22
Deposits...................................................................24
Advances from Federal Home Loan Banks......................................25
Securities Sold Under Agreements to Repurchase.............................26
Other Borrowings...........................................................26
Stockholders' Equity.......................................................26
Regulatory Capital.........................................................27
New Accounting Pronouncements..............................................28
Results of Operations......................................................29
Liquidity and Capital Resources............................................35
Item 3. Quantitative and Qualitative Disclosures about Market Risk.........36
Item 4. Controls and Procedures............................................36
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................37
Item 5. Audit Services Disclosure..........................................37
Item 6. Exhibits and Reports on Form 8-K...................................38
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Golden West Financial
Corporation and subsidiaries (Golden West or Company), including World Savings
Bank, FSB (WSB) and World Savings Bank, FSB (Texas) (WTX), for the three months
ended March 31, 2003 and 2002 are unaudited. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair statement of the results for such three month periods have been
included. The operating results for the three months ended March 31, 2003 are
not necessarily indicative of the results for the full year.
Golden West Financial Corporation
Consolidated Statement of Financial Condition
(Dollars in thousands)
March 31 December 31 March 31
2003 2002 2002
------------------ ----------------- -----------------
(Unaudited) (Unaudited)
------------------ -----------------
Assets
Cash $ 305,998 $ 318,914 $ 373,229
Securities available for sale at fair value 618,377 922,177 462,201
Purchased mortgage-backed securities available for sale 31,727 34,543 44,957
Purchased mortgage-backed securities held to maturity 132,654 161,846 238,934
Mortgage-backed securities with recourse held to maturity 5,281,816 5,871,069 10,114,205
Loans receivable 60,960,882 58,268,899 45,543,068
Interest earned but uncollected 191,377 183,130 208,521
Investment in capital stock of Federal Home Loan Banks--at cost
which approximates fair value 1,121,798 1,072,817 1,038,353
Foreclosed real estate 11,362 11,244 11,663
Premises and equipment--at cost less accumulated depreciation 356,301 351,942 336,827
Other assets 991,211 1,209,247 975,796
------------------ ----------------- -----------------
$70,003,503 $68,405,828 $59,347,754
================== ================= =================
Liabilities and Stockholders' Equity
Deposits $43,503,235 $41,038,797 $35,508,352
Advances from Federal Home Loan Banks 18,882,322 18,635,099 17,540,760
Securities sold under agreements to repurchase 21,988 522,299 28,523
Federal funds purchased 200,000 -0- 200,000
Bank notes -0- 1,209,925 -0-
Senior debt--net of discount 990,076 989,690 198,311
Subordinated notes--net of discount 199,911 199,867 499,654
Taxes on income 615,978 489,252 569,938
Other liabilities 396,322 295,649 340,504
Stockholders' equity 5,193,671 5,025,250 4,461,712
------------------ ----------------- -----------------
$70,003,503 $68,405,828 $59,347,754
================== ================= =================
Golden West Financial Corporation
Consolidated Statement of Net Earnings
(Unaudited)
(Dollars in thousands except per share figures)
Three Months Ended
March 31
-------------------------------
2003 2002
------------- -------------
Interest Income
Interest on loans $773,829 $658,200
Interest on mortgage-backed securities 78,915 179,968
Interest and dividends on investments 24,690 30,068
------------- -------------
877,434 868,236
Interest Expense
Interest on deposits 250,102 276,581
Interest on advances 69,941 100,267
Interest on repurchase agreements 1,269 420
Interest on other borrowings 27,381 24,069
------------- -------------
348,693 401,337
------------- -------------
Net Interest Income 528,741 466,899
Provision for loan losses 4,479 8,539
------------- -------------
Net Interest Income after Provision for Loan Losses 524,262 458,360
Noninterest Income
Fees 34,511 36,503
Gain on the sale of securities, MBS and loans 15,323 14,419
Change in fair value of derivatives 2,853 7,131
Other 14,375 11,951
------------- -------------
67,062 70,004
Noninterest Expense
General and administrative:
Personnel 96,894 82,832
Occupancy 23,599 21,165
Deposit insurance 1,621 1,502
Advertising 5,985 3,885
Other 41,611 31,677
------------- -------------
169,710 141,061
Earnings before Taxes on Income 421,614 387,303
Taxes on income 161,549 149,222
------------- -------------
Net Earnings $260,065 $238,081
============= =============
Basic Earnings Per Share $1.70 $1.53
============= =============
Diluted Earnings Per Share $1.67 $1.51
============= =============
Golden West Financial Corporation
Consolidated Statement of Cash Flows
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31
------------------------------
2003 2002
--------------- ------------
Cash Flows from Operating Activities
Net earnings $ 260,065 $238,081
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for loan losses 4,479 8,539
Amortization of net loan costs 16,992 7,201
Depreciation and amortization 10,255 8,785
Loans originated for sale (571,441) (453,374)
Sales of loans 804,541 771,289
Decrease (increase) in interest earned but uncollected (8,368) 48,402
Federal Home Loan Bank stock dividends (11,675) (15,685)
Decrease (increase) in other assets 218,036 (198,546)
Increase in other liabilities 100,673 27,730
Increase in taxes on income 140,227 117,975
Other, net 1,744 9,881
--------------- ------------
Net cash provided by operating activities 965,528 570,278
Cash Flows from Investing Activities
New loan activity:
New real estate loans originated for portfolio (6,371,316) (4,975,202)
Real estate loans purchased (100) -0-
Other, net (48,060) (148,819)
--------------- ------------
(6,419,476) (5,124,021)
Real estate loan principal payments:
Monthly payments 313,928 240,538
Payoffs, net of foreclosures 3,222,307 2,279,683
--------------- ------------
3,536,235 2,520,221
Sales of mortgage-backed securities available for sale -0- 176,063
Repayments of mortgage-backed securities 543,162 1,273,423
Proceeds from sales of foreclosed real estate 12,419 13,265
Decrease in securities available for sale 271,512 150,468
Purchases of Federal Home Loan Bank stock (37,185) -0-
Redemptions of Federal Home Loan Bank stock -0- 81,782
Additions to premises and equipment (14,877) (17,151)
--------------- ------------
Net cash used in investing activities (2,108,210) (925,950)
Golden West Financial Corporation
Consolidated Statement of Cash Flows (Continued)
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31
-----------------------------------
2003 2002
-------------- ---------------
Cash Flows from Financing Activities
Net increase in deposits $ 2,464,438 $ 1,035,767
Additions to Federal Home Loan Bank advances 3,050,000 1,020,000
Repayments of Federal Home Loan Bank advances (2,802,777) (1,516,749)
Proceeds from agreements to repurchase securities 100,045 8,265
Repayments of agreements to repurchase securities (600,356) (203,265)
Increase in federal funds purchased 200,000 200,000
Decrease in bank notes purchased (1,209,925) -0-
Repayment of subordinated debt -0- (100,000)
Dividends on common stock (13,048) (11,276)
Exercise of stock options 2,126 5,757
Purchase and retirement of Company stock (60,737) (48,657)
-------------- ---------------
Net cash provided by financing activities 1,129,766 389,842
-------------- ---------------
Net Increase (Decrease) in Cash (12,916) 34,170
Cash at beginning of period 318,914 339,059
-------------- ---------------
Cash at end of period $ 305,998 $ 373,229
============== ===============
Supplemental cash flow information:
Cash paid for:
Interest $ 342,443 $ 404,913
Income taxes 21,365 31,422
Cash received for interest and dividends 869,187 915,315
Noncash investing activities:
Loans receivable and loans underlying mortgage-backed
securities converted from adjustable rate to fixed-rate 341,770 171,723
Loans transferred to foreclosed real estate 12,791 11,019
Loans securitized into mortgage-backed securities
with recourse held to maturity recorded as loans
receivable per SFAS 140 -0- 6,842,373
Mortgage-backed securities held to maturity desecuritized
into adjustable rate loans and recorded as loans receivable -0- 2,075,052
Golden West Financial Corporation
Consolidated Statement of Stockholders' Equity
(Unaudited)
(Dollars in thousands)
For the Three Months Ended March 31, 2003
--------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholders' Comprehensive
Stock Capital Earnings Income Equity Income
---------- ----------- ------------- -------------- -------------- -------------
Balance at January 1, 2003 $ 15,352 $ 198,162 $ 4,612,529 $ 199,207 $ 5,025,250
Comprehensive income:
Net earnings -0- -0- 260,065 -0- 260,065 $ 260,065
Change in unrealized gains on
securities available for sale,
net of tax -0- -0- -0- (19,985) (19,985) (19,985)
------------
Comprehensive Income $ 240,080
============
Common stock issued upon
exercise of stock options 8 2,118 -0- -0- 2,126
Purchase and retirement of
Company stock (83) -0- (60,654) -0- (60,737)
Cash dividends on common
stock ($.085 per share) -0- -0- (13,048) -0- (13,048)
---------- ----------- ------------- -------------- --------------
Balance at March 31, 2003 $ 15,277 $ 200,280 $ 4,798,892 $ 179,222 $ 5,193,671
========== =========== ============= ============== ==============
For the Three Months Ended March 31, 2002
--------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholders' Comprehensive
Stock Capital Earnings Income Equity Income
---------- ----------- ------------- -------------- -------------- -------------
Balance at January 1, 2002 $ 15,553 $ 173,500 $ 3,873,758 $ 221,379 $ 4,284,190
Comprehensive income:
Net earnings -0- -0- 238,081 -0- 238,081 $ 238,081
Change in unrealized gains on
securities available for sale,
net of tax -0- -0- -0- (5,636) (5,636) (5,636)
Reclassification adjustment for
gains included in income -0- -0- -0- (747) (747) (747)
------------
Comprehensive Income $ 231,698
============
Common stock issued upon
exercise of stock options 25 5,732 -0- -0- 5,757
Purchase and retirement of
Company stock (77) -0- (48,580) -0- (48,657)
Cash dividends on common
stock ($.0725 per share) -0- -0- (11,276) -0- (11,276)
---------- ----------- ------------- -------------- --------------
Balance at March 31, 2002 $ 15,501 $ 179,232 $ 4,051,983 $ 214,996 $ 4,461,712
========== =========== ============= ============== ==============
Note to Consolidated Financial Statements -- Stock-Based Compensation
The Company has a stock-based employee compensation plan. The Company
applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) and related interpretations in accounting for its plan.
Historically, the options have been granted at fair value with the exercise
prices equal to fair value; accordingly, no compensation cost has been
recognized for awards granted under the plan. Had compensation cost been
determined using the fair value based method prescribed by SFAS 123, "Accounting
for Stock Based Compensation," the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
Golden West Financial Corporation
Pro Forma Net Income and Earnings Per Share
(Dollars in thousands except per share figures)
(Unaudited)
Three Months Ended
March 31
--------------------------------
2003 2002
-------------- --------------
Net income, as reported $ 260,065 $ 238,081
Deduct: Total stock based employee
compensation expense determined under
fair value based method for all awards, net
of related tax effects (702) (866)
-------------- --------------
Pro forma net income $ 259,363 $ 237,215
============== ==============
Basic earnings per share
As reported $ 1.70 $ 1.53
Pro forma 1.69 1.53
Diluted earnings per share
As reported $ 1.67 $ 1.51
Pro forma 1.66 1.51
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Golden West Financial Corporation is a holding company that has as
its principal asset World Savings Bank, FSB, a federally chartered savings bank,
which is the nation's second largest savings institution. Additionally, Golden
West owns Atlas Advisers, Inc., an investment adviser to our Atlas family of
mutual funds, and Atlas Securities, Inc., the distributor of our Atlas mutual
funds and annuities.
The discussion and analysis included herein covers those material
changes in liquidity and capital resources that have occurred since December 31,
2002, as well as material changes in results of operations during the three
month periods ended March 31, 2003 and 2002, respectively.
The following narrative is written with the presumption that the
users have read or have access to the Company's 2002 Annual Report on Form 10-K,
which contains the latest audited financial statements and notes thereto,
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations as of December 31, 2002, and for the year then ended.
Therefore, only material changes in financial condition and results of
operations are discussed herein.
The Company's Internet address is www.gdw.com. Copies of the
Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and any amendments to such reports are available, free of
charge, through www.gdw.com as soon as reasonably practicable after their filing
with the Securities and Exchange Commission.
Forward-Looking Statements
This report 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:
o competitive practices in the financial services industries;
o operational and systems risks;
o general economic and capital market conditions, including fluctuations in
interest rates;
o economic conditions in certain geographic areas; and
o the impact of current and future laws and governmental regulations
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
Financial Highlights
(Unaudited)
(Dollars in thousands except per share figures)
March 31 December 31 March 31
2003 2002 2002
----------------- ---------------- -----------------
Assets $70,003,503 $68,405,828 $59,347,754
Loans receivable including mortgage-backed securities 66,407,079 64,336,357 55,941,164
Adjustable rate mortgages including MBS 63,915,960 61,770,142 53,038,536
Deposits 43,503,235 41,038,797 35,508,352
Stockholders' equity 5,193,671 5,025,250 4,461,712
Stockholders' equity/total assets 7.42% 7.35% 7.52%
Book value per common share $ 34.00 $ 32.73 $ 28.78
Common shares outstanding 152,774,708 153,521,103 155,011,562
Yield on loan portfolio, including MBS 5.08% 5.28% 5.82%
Yield on investments 1.39% 1.94% 5.95%
Yield on earning assets 5.07% 5.25% 5.82%
Cost of deposits 2.25% 2.56% 3.04%
Cost of borrowings 1.67% 1.85% 2.35%
Cost of funds 2.06% 2.32% 2.81%
Yield on earning assets less cost of funds 3.01% 2.93% 3.01%
Ratio of nonperforming assets to total assets .63% .62% .71%
Ratio of troubled debt restructured to total assets .00% .00% .01%
Loans serviced for others with recourse $ 2,954,306 $ 2,897,859 $ 3,019,909
Loans serviced for others without recourse 2,612,264 2,510,635 2,243,958
World Savings Bank, FSB:
Total assets $ 69,991,039 $ 67,967,975 $59,335,091
Stockholder's equity 5,605,735 5,358,440 4,938,396
Stockholder's equity/total assets 8.01% 7.88% 8.32%
Regulatory capital ratios:(a)
Tier 1 capital (core or leverage) 7.77% 7.61% 8.00%
Total risk-based capital 14.65% 14.26% 14.60%
World Savings Bank, FSB (Texas):
Total assets $9,054,200 $7,916,763 $ 7,711,823
Stockholder's equity 467,479 413,885 404,702
Stockholder's equity/total assets 5.16% 5.23% 5.25%
Regulatory capital ratios:(a)
Tier 1 capital (core or leverage) 5.16% 5.23% 5.25%
Total risk-based capital 23.27% 24.07% 25.17%
(a) For regulatory purposes, the requirements to be considered "well-capitalized" are 5.0% and 10.0% for tier 1 capital and
total risk-based capital, respectively.
Golden West Financial Corporation
Financial Highlights
(Unaudited)
(Dollars in thousands except per share figures)
Three Months Ended
March 31
-----------------------------------
2003 2002
--------------- ----------------
New real estate loans originated $ 6,942,757 $ 5,428,576
New adjustable rate mortgages as a percentage of
new real estate loans originated 91% 89%
Refinances as a percentage of new real estate
loans originated 72% 63%
Deposits increase $ 2,464,438 $ 1,035,767
Net earnings $ 260,065 $ 238,081
Basic earnings per share 1.70 1.53
Diluted earnings per share 1.67 1.51
Cash dividends on common stock $ .085 $ .0725
Average common shares outstanding 153,347,780 155,415,549
Average diluted common shares outstanding 155,851,663 157,570,350
Ratios:(a)
Net earnings/average stockholders' equity (ROE) 20.32% 21.73%
Net earnings/average assets (ROA) 1.50% 1.62%
Net interest margin(b) 3.14% 3.27%
General and administrative expense/average assets .98% .96%
Efficiency ratio(c) 28.48% 26.27%
(a) 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.
(b) Net interest margin is net interest income divided by average
interest-earning assets.
(c) The efficiency ratio is defined as general and administrative expense
divided by the sum of net interest income and noninterest income.
Financial Condition
The consolidated condensed statement of financial condition shown in
the table below presents the Company's assets and liabilities in percentage
terms at March 31, 2003, December 31, 2002, and March 31, 2002. The reader is
referred to page 47 of the Company's 2002 Annual Report on Form 10-K for
similar information for the years 1999 through 2002 and a discussion of the
changes in the composition of the Company's assets and liabilities in those
years.
TABLE 1
Consolidated Condensed Statement of Financial Condition
In Percentage Terms
March 31 December 31 March 31
2003 2002 2002
------------- ----------------- -------------
Assets
Cash and investments 1.3% 1.8% 1.4%
Loans receivable including mortgage-backed
securities 94.9 94.1 94.3
Other assets 3.8 4.1 4.3
------------- ----------------- -------------
100.0% 100.0% 100.0%
============= ================= =============
Liabilities and Stockholders' Equity
Deposits 62.1% 60.1% 59.8%
Federal Home Loan Bank advances 27.0 27.2 29.6
Securities sold under agreements to repurchase .0 .8 .1
Federal funds purchased .3 .0 .3
Bank notes .0 1.8 .0
Senior debt 1.4 1.4 .3
Subordinated notes .3 .3 .8
Other liabilities 1.5 1.1 1.6
Stockholders' equity 7.4 7.3 7.5
------------- ----------------- -------------
100.0% 100.0% 100.0%
============= ================= =============
As the above table shows, deposits represent the majority of the
Company's liabilities. The largest asset component is loans receivable including
mortgage-backed securities (MBS), which consists primarily of long-term
mortgages. The Company emphasizes ARMs - loans with interest rates that change
periodically in accordance with movements in specified indexes. Almost all of
the Company's ARMs have rates that change monthly and are tied to one of the
following three indexes:
1. The Eleventh District Cost of Funds Index (COFI), which is equal to
the monthly average cost of deposits and borrowings of savings
institution members of the Federal Home Loan Bank System's Eleventh
District, which is composed of California, Arizona, and Nevada.
2. The Golden West Cost of Savings Index (COSI), which is equal to the
monthend weighted average rate paid on the Company's deposits.
3. The Certificate of Deposit Index (CODI), which is equal to the
12-month rolling average of the monthly average of the three-month
certificate of deposit rate as published in the Federal Reserve H-15
Statistical Report.
The Company is subject to interest-rate risk to the extent its assets
and liabilities reprice at different times and by different amounts. The
disparity between the repricing (maturity, prepayment, or interest rate change)
of mortgage loans, including MBS, and investments and the repricing of deposits
and borrowings can have a material impact on the Company's results of
operations. The difference between the repricing characteristics of assets and
liabilities is commonly referred to as "the gap."
The gap table on the following page shows that, as of March 31, 2003,
the Company's assets reprice faster than its liabilities. If all repricing
assets and liabilities responded equally to changes in the interest rate
environment, then the gap analysis would suggest that the Company's earnings
would rise when interest rates increase and would fall when interest rates
decrease. However, the changes in the Company's earnings are also affected by
the built-in reporting and repricing lags inherent in the adjustable rate
mortgage indexes used by the Company. Reporting lags occur because of the time
it takes to gather the data needed to compute the indexes. Repricing lags occur
because it may take a period of time before changes in interest rates are
significantly reflected in the indexes. COFI, which is the index Golden West
uses to determine the rate on $23 billion of its existing adjustable rate
mortgages, has a two-month reporting lag. As a result, the COFI in effect in any
month actually reflects the Eleventh District's cost of funds at the level it
was two months prior. The COFI repricing lag occurs because COFI is based on a
portfolio of accounts, not all of which reprice immediately. Many of these
liabilities, including certificates of deposit, do not reprice each month and,
when they do reprice, may not reflect the full change in market rates. Some
liabilities, such as low-rate checking or passbook savings accounts, may reprice
by only small amounts. Still other liabilities, such as noninterest bearing
deposits, do not reprice at all. Therefore, COFI does not fully reflect a change
in market interest rates. COSI has a one-month reporting lag. COSI also has a
repricing lag, because the rates paid on many of the deposits that make up COSI
do not respond immediately or fully to a change in market interest rates.
However, the COSI repricing lag is offset by the same repricing lag on the
Company's deposits. CODI has a one-month reporting lag. CODI also has a
repricing lag, because the index is a 12-month rolling average and consequently
trails changes in short-term market interest rates. Partially offsetting the
index reporting and repricing lags are similar lags on a portion of the
Company's liabilities.
TABLE 2
Repricing of Interest-Earning Assets and Interest-Bearing
Liabilities, Repricing Gaps, and Gap Ratio
As of March 31, 2003
(Dollars in millions)
Projected Repricing(a)
-----------------------------------------------------------------------------------
0 - 3 4 - 12 1 - 5 Over 5
Months Months Years Years Total
------------- -------------- ------------- -------------- -------------
Interest-Earning Assets:
Investments $ 618 $ -0- $ -0- $ -0- $ 618
MBS:
Adjustable rate 5,007 -0- -0- -0- 5,007
Fixed-rate 56 123 203 57 439
Loans receivable:
Adjustable rate 57,136 774 675 -0- 58,585
Fixed-rate 242 499 804 553 2,098
Other(b) 1,380 -0- -0- -0- 1,380
Impact of swaps 236 (219) (17) -0- -0-
------------- -------------- ------------- -------------- -------------
Total $ 64,675 $ 1,177 $ 1,665 $ 610 $ 68,127
============= ============== ============= ============== =============
Interest-Bearing Liabilities:
Deposits(c) $ 33,924 $ 5,715 $ 3,853 $ 11 $ 43,503
FHLB advances 17,925 500 3 454 18,882
Other borrowings 222 200 497 494 1,413
------------- -------------- ------------- -------------- -------------
Total $ 52,071 $ 6,415 $ 4,353 $ 959 $ 63,798
============= ============== ============= ============== =============
Repricing gap $ 12,604 $ (5,238) $ (2,688) $ (349) $ 4,329
============= ============== ============= ============== =============
Cumulative gap $ 12,604 $ 7,366 $ 4,678 $ 4,329
============= ============== ============= ==============
Cumulative gap as a percentage of
total assets 18.0% 10.5% 6.7%
============= ============== =============
(a) Based on scheduled maturity or scheduled repricing; loans and MBS reflect
scheduled repayments and projected prepayments of principal based on
current rates of prepayment.
(b) Includes cash in banks and Federal Home Loan Bank (FHLB) stock.
(c) Deposits with no maturity date, such as checking, passbook, and money
market deposit accounts, are assigned zero months.
The Company's principal strategy to limit the sensitivity of earnings
to changes in interest rates is to originate and keep in portfolio adjustable
rate mortgages to provide interest sensitivity to the asset side of the balance
sheet. At March 31, 2003, ARMs constituted over 96% of the Company's loan and
MBS portfolio. Asset rate sensitivity is further enhanced by the use of
adjustable rate mortgages on which the rate changes monthly. At March 31, 2003,
such monthly adjustable mortgages accounted for 96% of the Company's ARM
portfolio. Additionally, the Company offers home loans tied to certain
adjustable rate mortgage indexes so that the ARM index rates and the rates on
the liabilities that fund these mortgages respond in a similar manner to changes
in market rates. Specifically, COSI-indexed ARMs track the Company's cost of
deposits and CODI-indexed ARMs follow the Company's cost of borrowings. ARMs
indexed to COSI and CODI constituted 90% of the ARM originations in the first
quarter of 2003 and 61% of the ARM portfolio at March 31, 2003. While the index
strategy has improved the match between Golden West's adjustable rate mortgage
portfolio and its savings and borrowings, there still exist some differences in
the timing of the repricing of the Company's ARMs and liabilities, primarily due
to lags in the repricing of the indexes, particularly CODI.
Cash and Investments
At March 31, 2003, December 31, 2002, and March 31, 2002, the Company
had securities available for sale in the amount of $618 million, $922 million
and $462 million, respectively, including unrealized gains on securities
available for sale of $292 million, $326 million, and $351 million,
respectively. At March 31, 2003, December 31, 2002, and March 31, 2002, the
Company had no securities held for trading in its investment securities
portfolio.
Loans Receivable, Including MBS
The Company invests primarily in single-family residential real
estate loans. From time to time, the Company securitizes loans from its
portfolio into MBS and Real Estate Mortgage Investment Conduit Securities
(MBS-REMICs). Under Statement of Financial Accounting Standards (SFAS) No. 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" (SFAS 140), if the Company retains 100% of the beneficial
interests in its MBS securitizations, it will not have any effective "retained
interests" requiring disclosures under SFAS 140. To date, the Company has not
sold any interests requiring disclosures under SFAS 140. Because the Company
currently retains all of the beneficial interest in these MBS securitizations,
the securitizations formed after March 31, 2001 are securities classified as
securitized loans and included in loans receivable in accordance with SFAS 140
(see page 28 for further discussion). Additionally, from time to time, the
Company purchases MBS. Loans, securitized loans, and MBS are available to be
used as collateral for borrowings.
During the first half of 2002, the Company desecuritized $4.1 billion
of Federal National Mortgage Association (Fannie Mae) MBS that were classified
as MBS held to maturity with recourse and the underlying loans were reclassified
to loans receivable. This desecuritization led to a significant decrease in the
outstanding balance of MBS, which in turn contributed to lower MBS repayments
and lower interest on mortgage-backed securities. The desecuritization also
contributed to an increase in the outstanding balance of loans receivable and an
increase in interest on loans.
TABLE 3
Balance of Loans Receivable, Including MBS, by Component
(Dollars in thousands)
March 31 December 31 March 31
2003 2002 2002
----------------- ---------------- ----------------
Loans $43,632,772 $39,159,502 $34,097,901
Securitized loans(a)(b) 17,254,951 19,066,063 11,489,306
----------------- ---------------- ----------------
Total loans, excluding MBS 60,887,723 58,225,565 45,587,207
----------------- ---------------- ----------------
Fannie Mae MBS -0- -0- 2,151,743
MBS-REMICs 5,281,816 5,871,069 7,962,462
Purchased MBS 164,381 196,389 283,891
----------------- ---------------- ----------------
Total MBS 5,446,197 6,067,458 10,398,096
----------------- ---------------- ----------------
Other(c) 73,159 43,334 (44,139)
----------------- ---------------- ----------------
Total loans receivable, including MBS $66,407,079 $64,336,357 $55,941,164
================= ================ ================
(a) Loans securitized after March 31, 2001 are classified as securitized loans
per SFAS 140 (see discussion on page 28).
(b) Includes $8.6 billion at March 31, 2003 of loans securitized with Fannie
Mae where the underlying loans are subject to full credit recourse to the
Company.
(c) Includes deferred loan costs, allowance for loan losses, and other
miscellaneous reserves and discounts.
Repayments from loans receivable, including MBS, were $4.1 billion
and $3.8 billion for the three months ended March 31, 2003 and 2002. These
repayments were higher in 2003 as compared to 2002 due to an increase in the
portfolio balance.
Loans
New loan originations amounted to $6.9 billion for the three months
ended March 31, 2003 compared to $5.4 billion for the same period in 2002. The
volume of originations increased during 2003 due to extremely low mortgage
rates, which led to a strong demand for home loans, including the Company's ARM
products. In particular, consumers continued to take advantage of these low
interest rates to refinance their mortgages and, as a result, refinanced loans
constituted 72% of new loan originations for the three months ended March 31,
2003, compared to 63% for the three months ended March 31, 2002.
First mortgages originated for portfolio, excluding equity lines of
credit (ELOCs), amounted to $6.4 billion for the three months ended March 31,
2003, compared to $4.9 billion for the same period in 2002. First mortgages
originated for sale amounted to $546 million for the three months ended March
31, 2003, compared to $440 million for the same period in 2002. During the first
quarter of 2003, $342 million of loans, including MBS, were converted at the
customer's request from adjustable rate to fixed-rate compared to $172 million
for the same period in 2002. The Company sells most of its new and converted
fixed-rate loans. For the three months ended March 31, 2003, the Company sold
$788 million of fixed-rate first mortgage loans compared to $737 million for the
same period in 2002.
At March 31, 2003, the Company had lending operations in 38 states.
The largest source of mortgage origination was loans secured by residential
properties in California. For the three months ended March 31, 2003 and 2002,
68% of total loan originations were on residential properties in California. The
five largest states, other than California, for originations for the three
months ended March 31, 2003, were Florida, New Jersey, Texas, Colorado, and
Illinois with a combined total of 16% of total originations. The percentage of
the total loan portfolio (including MBS, except purchased MBS) that was
comprised of residential loans in California was 64% at March 31, 2003, December
31, 2002, and March 31, 2002. For additional detail on the Company's loan
portfolio by state, see tables 8 and 9 on pages 19 and 20.
Golden West originates ARMs tied primarily to CODI, COFI, and COSI.
Golden West also establishes ELOCs indexed to the prime rate. Golden West's ARM
originations constituted 91% of new mortgage loans made by the Company for the
first three months of 2003 compared to 89% for the first three months of 2002.
The following table shows the distribution of ARM originations by index for the
first quarters of 2003 and 2002.
TABLE 4
Adjustable Rate Mortgage Originations by Index
(Dollars in thousands)
Three Months Ended
March 31
----------------------------------
ARM Index 2003 2002
- ----------------------- --------------- ---------------
CODI $ 3,982,417 $ 1,543,648
COFI 454,592 1,013,657
COSI 1,696,425 2,293,879
Prime(a) 150,641 -0-
--------------- ---------------
$ 6,284,075 $ 4,851,184
=============== ===============
(a) As of January 2003, includes fundings of new ELOCs indexed to the prime
rate; only amounts initially drawn are included in these fundings.
The portion of the mortgage portfolio (including securitized loans
and MBS) composed of adjustable rate loans was 96% at March 31, 2003 and
December 31, 2002, and 95% at March 31, 2002. The following table shows the
distribution by index of the Company's outstanding balance of adjustable rate
mortgages (including ARM MBS) at March 31, 2003, December 31, 2002, and March
31, 2002.
TABLE 5
Adjustable Rate Mortgage Portfolio by Index
(Including ARM MBS)
(Dollars in thousands)
March 31 December 31 March 31
ARM Index 2003 2002 2002
- -------------------------- ----------------- ----------------- -----------------
CODI $16,903,807 $13,286,566 $ 2,085,148
COFI 23,281,195 24,755,498 28,105,771
COSI 21,987,167 22,070,692 21,538,709
Prime(a) 1,146,683 999,251 436,010
Other(b) 597,108 658,135 872,898
----------------- ----------------- -----------------
$63,915,960 $61,770,142 $53,038,536
================= ================= =================
(a) ELOCs tied to the prime rate.
(b) Primarily ARMs tied to the twelve-month rolling average of the One-Year Treasury Constant Maturity (TCM).
During the life of a typical ARM loan, the interest rate may not be
raised above a lifetime cap, set at the time of origination or assumption. The
weighted average maximum lifetime cap rate on the Company's ARM loan portfolio
(including securitized ARM loans, Fannie Mae MBS, and MBS-REMICs before any
reduction for loan servicing fees) was 12.20% or 7.02% above the actual weighted
average rate at March 31, 2003, versus 12.13% or 6.74% above the actual weighted
average rate at December 31, 2002 and 12.19% or 6.34% above the weighted average
rate at March 31, 2002.
At March 31, 2003, approximately $5.2 billion of the Company's ARM
loans (including MBS with recourse held to maturity) have terms that state that
the interest rate may not fall below a lifetime floor set at the time of
origination or assumption. As of March 31, 2003, $2.6 billion of ARM loans had
reached their rate floors compared to $2.0 billion at December 31, 2002 and $2.2
billion at March 31, 2002. The weighted average floor rate on the loans that had
reached their floor was 5.63% at March 31, 2003 compared to 5.87% at December
31, 2002 and 6.00% at March 31, 2002. Without the floor, the average rate on
these loans would have been 4.79% at March 31, 2003, 5.19% at December 31, 2002
and 5.29% at March 31, 2002.
Most of the Company's loans are collateralized by first deeds of
trust on one-to-four family homes. The Company also originates second deeds of
trust in the form of fixed-rate loans. The Company's fixed-rate second mortgage
originations amounted to $29 million and $44 million for the first quarters of
2003 and 2002, respectively. The outstanding balance of fixed-rate seconds
amounted to $193 million and $324 million at March 31, 2003 and 2002,
respectively.
The Company also establishes ELOCs indexed to the prime rate, which
are collateralized typically by second and occasionally by first deeds of trust.
The Company established new ELOCs totaling $284 million and $233 million for the
three months ended March 31, 2003 and 2002, respectively. The outstanding
balance of ELOCs amounted to $1.1 billion and $436 million at March 31, 2003 and
2002, respectively. The maximum total line of credit available on the Company's
ELOCs amounted to $1.7 billion and $716 million at March 31, 2003 and 2002,
respectively.
The Company generally lends up to 80% of the appraised value of
residential real estate property. In some cases, a higher amount is possible
through a first mortgage loan or a combination of a first and a second mortgage
loan on the same property. The second mortgage loan may be a fixed-rate loan or
an ELOC. During the first three months of 2003, 11% of loans originated exceeded
80% of the appraised value of the property. For the first three months of 2002,
13% of loans originated were in excess of 80% of the appraised value of the
property.
The Company takes steps to reduce the potential credit risk with
respect to loans with a loan to value (LTV) or a combined LTV (the sum of the
first and second loan balances as a percentage of total value) over 80%. Among
other things, the loan amount may not exceed 95% of the appraised value of a
single-family residence at the time of origination. Also, most first mortgage
loans with an LTV over 80% carry mortgage insurance, which reimburses the
Company for losses up to a specified percentage per loan, thereby reducing the
effective LTV to below 80%. Furthermore, the Company sells without recourse a
significant portion of its second mortgage originations. Sales of second
mortgages amounted to $17 million for the first quarter of 2003 as compared to
$35 million for the same period in 2002. In addition, the Company carries pool
mortgage insurance on ELOCs and most fixed-rate seconds not sold. The cumulative
losses covered by this pool mortgage insurance are limited to 10% or 20% of the
original balance of each insured pool.
The following table shows mortgage originations with LTV ratios or
combined LTV ratios greater than 80% for the three months ended March 31, 2003
and 2002.
TABLE 6
Mortgage Originations With Loan to Value and
Combined Loan to Value Ratios Greater Than 80%
(Dollars in thousands)
Three Months Ended
March 31
-----------------------------
2003 2002
------------ ------------
First mortgages with loan to value ratios greater than 80%:
With mortgage insurance $ 67,690 $ 51,063
With no mortgage insurance 15,953 19,423
------------ ------------
83,643 70,486
------------ ------------
First and second mortgages with combined loan to value
ratios greater than 80%:
With pool insurance on second mortgages 515,725 559,743
With no pool insurance 150,867 84,671
------------ ------------
666,592 644,414
------------ ------------
Total $ 750,235 $ 714,900
============ ============
The following table shows the outstanding balance of mortgages with
original LTV or combined LTV ratios greater than 80% at March 31, 2003 and 2002.
TABLE 7
Balance of Mortgages With Loan to Value and
Combined Loan to Value Ratios Greater Than 80%
(Dollars in thousands)
As of March 31
---------------------------------
2003 2002
-------------- --------------
First mortgages with loan to value ratios greater than 80%:
With mortgage insurance $ 577,809 $ 440,768
With no mortgage insurance 256,532 491,699
-------------- --------------
834,341 932,467
-------------- --------------
First and second mortgages with combined loan to value
ratios greater than 80%:
With pool insurance on second mortgages 3,902,732 2,596,262
With no pool insurance 344,676 396,276
-------------- --------------
4,247,408 2,992,538
-------------- --------------
Total $ 5,081,749 $ 3,925,005
============== ==============
The following tables show the Company's loan portfolio by state at
March 31, 2003 and 2002.
TABLE 8
Loan Portfolio by State
March 31, 2003
(Dollars in thousands)
Residential
Real Estate Commercial Loans
---------------------------------- Real Total as a % of
State 1 - 4 5+ Land Estate Loans Portfolio
- -------------------------- ---------------- --------------- ------------- ---------------- ---------------- -----------
Northern California $ 21,802,687 $1,786,110 $ -0- $ 9,875 $23,598,672 35.67%
Southern California 17,059,516 1,560,486 -0- 1,414 18,621,416 28.15
Florida 3,559,847 45,863 -0- 60 3,605,770 5.45
Texas 2,632,469 119,885 -0- 339 2,752,693 4.16
New Jersey 2,498,778 -0- -0- 890 2,499,668 3.78
Washington 1,289,381 699,117 -0- -0- 1,988,498 3.01
Illinois 1,577,305 128,360 -0- -0- 1,705,665 2.58
Colorado 1,398,718 193,622 -0- 4,097 1,596,437 2.41
Other(a) 9,633,017 152,802 2 2,154 9,787,975 14.79
---------------- --------------- ------------- ---------------- ---------------- -----------
Totals $ 61,451,718 $4,686,245 $ 2 $ 18,829 66,156,794 100.00%
================ =============== ============= ================ ===========
Net deferred loan costs 365,607
Allowance for loan losses (284,673)
Undisbursed loan funds (7,775)
Loans on deposits 12,745
----------------
Total loan portfolio and loans securitized into MBS-REMICs 66,242,698
Loans securitized into MBS-REMICs (5,281,816)(b)
----------------
Total loans receivable $60,960,882
================
(a) All states included in Other have total loan balances with less than 2% of total loans.
(b) The above schedule includes the March 31, 2003 balances of loans that were securitized and retained as MBS-REMICs.
TABLE 9
Loan Portfolio by State
March 31, 2002
(Dollars in thousands)
Residential
Real Estate Commercial Loans
--------------------------------- Real Total as a % of
State 1 - 4 5+ Land Estate Loans Portfolio
------------------------- --------------- -------------- ------------- ---------------- ---------------- -----------
Northern California $ 17,221,769 $ 1,742,429 $ 13 $ 14,743 $18,978,954 34.08%
Southern California 15,293,800 1,538,950 -0- 2,819 16,835,569 30.23
Florida 2,870,414 29,391 -0- 141 2,899,946 5.21
Texas 2,211,487 91,968 151 871 2,304,477 4.14
New Jersey 2,017,962 -0- -0- 1,500 2,019,462 3.63
Washington 1,117,166 659,241 -0- -0- 1,776,407 3.19
Illinois 1,399,859 120,585 -0- -0- 1,520,444 2.73
Colorado 1,220,212 181,039 -0- 4,512 1,405,763 2.52
Other(a) 7,829,066 112,087 3 3,366 7,944,522 14.27
--------------- -------------- ------------- ---------------- ---------------- -----------
Totals $ 51,181,735 $ 4,475,690 $ 167 $ 27,952 55,685,544 100.00%
=============== ============== ============= ================ ===========
Net deferred loan costs 231,131
Allowance for loan losses (269,327)
Undisbursed loan funds (5,943)
Loans on deposits 15,868
----------------
Total loan portfolio and loans securitized into Fannie Mae MBS with recourse
and MBS-REMICs 55,657,273
Loans securitized into Fannie Mae MBS with recourse and MBS-REMICs (10,114,205)(b)
----------------
Total loans receivable $45,543,068
================
(a) All states included in Other have total loan balance less than 2% of total
loans.
(b) The above schedule includes the March 31, 2002 balances of loans that were securitized and retained as Fannie Mae MBS with
recourse and MBS-REMICs.
Loan repayments consist of monthly loan amortization and loan
payoffs. For the three months ended March 31, 2003, loan repayments were $3.5
billion compared to $2.5 billion in the same period of 2002. The increase in
loan repayments was primarily due to an increase in the balance of loans
receivable.
Securitized Loans
During the first quarter of 2002, the Company securitized $6.8
billion of loans. No loans were securitized during the first quarter of 2003.
These securities are classified as loans receivable on the Consolidated
Statement of Financial Condition and are available to be used as collateral for
borrowings.
Mortgage-Backed Securities
At March 31, 2003, December 31, 2002, and March 31, 2002, the Company
had MBS held to maturity in the amount of $5.4 billion, $6.0 billion, and $10.4
billion, respectively. The decrease in MBS from March 31, 2002 to March 31, 2003
was due to prepayments and to the desecuritization of $2.1 billion of Fannie Mae
MBS during the second quarter of 2002. Fannie Mae MBS and MBS-REMICs are
available to be used as collateral for borrowings. The Company has the ability
and intent to hold these MBS until maturity and, accordingly, these MBS are
classified as held to maturity.
At March 31, 2003, December 31, 2002, and March 31, 2002, the Company
had MBS available for sale in the amount of $32 million, $35 million, and $45
million, respectively, including net unrealized gains on MBS available for sale
of $190 thousand at March 31, 2003, $139 thousand at December 31, 2002, and $1
million at March 31, 2002. During the first quarter of 2002, the Company sold
$176 million of MBS available for sale, which resulted in a gain of $3 million.
Repayments of MBS during the first quarter of 2003 were $543 million
compared to $1.3 billion during the same period of 2002. MBS repayments were
lower during the first quarter of 2003 as compared to the first three months of
2002 due to a decrease in the balance of MBS outstanding discussed above.
Mortgage Servicing Rights
Capitalized mortgage servicing rights (CMSRs) are included in "Other
assets" on the Consolidated Statement of Financial Condition. The following
table shows the changes in capitalized mortgage servicing rights for the three
months ended March 31, 2003 and 2002.
TABLE 10
Capitalized Mortgage Servicing Rights
(Dollars in thousands)
Three Months Ended
March 31
----------------------------
2003 2002
----------- -----------
Beginning balance of CMSRs $69,448 $56,056
New CMSRs from loan sales 12,479 9,921
Amortization of CMSRs (7,735) (4,507)
----------- -----------
Ending balance of CMSRs $74,192 $61,470
=========== ===========
The estimated amortization of the March 31, 2003 balance for the
remainder of 2003 and the five years ending 2008 is $25.2 million (2003), $22.5
million (2004), $14.8 million (2005), $8.7 million (2006), $2.9 million (2007),
and $138 thousand (2008). Actual results may vary depending upon the level of
the payoffs of the loans currently serviced.
The book value of the Company's CMSRs did not exceed the fair value
at March 31, 2003 or 2002 and, therefore, no reserve was required to adjust the
servicing rights to their fair value.
Asset Quality
An important measure of the soundness of the Company's loan and MBS
portfolio is its ratio of nonperforming assets (NPAs) and troubled debt
restructured (TDRs) to total assets. Nonperforming assets include non-accrual
loans (that is, loans, including loans securitized into MBS with recourse and
loans securitized into MBS-REMICs, that are 90 days or more past due) and real
estate acquired through foreclosure. No interest is recognized on non-accrual
loans. The Company's TDRs are made up of loans on which delinquent payments have
been capitalized or on which temporary interest rate reductions have been made,
primarily to customers impacted by adverse economic conditions.
The following table sets forth the components of the Company's NPAs
and TDRs and the various ratios to total assets.
TABLE 11
Nonperforming Assets and Troubled Debt Restructured
(Dollars in thousands)
March 31 December 31 March 31
2003 2002 2002
--------------- ----------------- ---------------
Non-accrual loans $ 432,479 $ 413,123 $ 408,862
Foreclosed real estate 11,362 11,244 11,663
--------------- ----------------- ---------------
Total nonperforming assets $ 443,841 $ 424,367 $ 420,525
=============== ================= ===============
TDRs, net of interest reserve $ 611 $ 233 $ 3,479
=============== ================= ===============
Ratio of NPAs to total assets .63% .62% .71%
=============== ================= ===============
Ratio of TDRs to total assets .00% .00% .01%
=============== ================= ===============
Ratio of NPAs and TDRs to total assets .63% .62% .72%
=============== ================= ===============
The balances of NPAs at March 31, 2003, December 31, 2002 and March
31, 2002 reflect the normal increase in delinquencies associated with the aging
of the large volume of mortgages originated during the past two years together
with the uncertain U.S. economy. The Company closely monitors all delinquencies
and takes appropriate steps to protect its interests. The Company mitigates its
credit risk through strict underwriting standards and loan reviews. Interest
foregone on non-accrual loans (loans 90 days or more past due) amounted to $2
million for the three months ended March 31, 2003 and 2002. Interest foregone on
TDRs amounted to $2 thousand for the three months ended March 31, 2003, compared
to $5 thousand for the three months ended March 31, 2002.
The following tables show the Company's NPAs by state as of March 31,
2003 and 2002.
TABLE 12
Nonperforming Assets by State
March 31, 2003
(Dollars in thousands)
Non-Accrual Loans(a)(b) Foreclosed Real Estate (FRE)
----------------------------------------- --------------------------------------
Residential Commercial Residential Commercial NPAs as
Real Estate Real Real Estate Real Total a % of
State 1 - 4 5+ Estate 1 - 4 5+ Estate NPAs Loans
- ----------------------- ------------ ---------- ------------- --------- -------- -------------- ----------- --------
Northern California $ 107,948 $ 187 $ 6 $ 1,797 $ -0- $ -0- $109,938 .47%
Southern California 106,744 83 309 34 -0- -0- 107,170 .58
Florida 32,111 -0- -0- 496 -0- -0- 32,607 .90
Texas 33,322 -0- -0- 3,565 -0- 442 37,329 1.36
New Jersey 19,585 -0- 495 -0- -0- -0- 20,080 .80
Washington 17,664 433 -0- 834 -0- -0- 18,931 .95
Illinois 13,887 -0- -0- 382 -0- -0- 14,269 .84
Colorado 5,126 63 -0- 502 -0- -0- 5,691 .36
Other(c) 94,311 205 -0- 3,572 -0- -0- 98,088 1.00
------------ ---------- ------------- --------- -------- ------------- ----------- --------
Totals $ 430,698 $ 971 $ 810 $11,182 $ -0- $ 442 444,103 .67
============ ========== ============= ========= ======== =============
FRE general valuation allowance (262) (.00)
----------- --------
Total nonperforming assets $443,841 .67%
============ ========
(a) Non-accrual loans are 90 days or more past due and interest is not
recognized on these loans. (b) The March 31, 2003 balances include loans that
were securitized into MBS. (c) All states included in Other have total loan
balances with less than 2% of total loans.
TABLE 13
Nonperforming Assets by State
March 31, 2002
(Dollars in thousands)
Non-Accrual Loans(a)(b) Foreclosed Real Estate (FRE)
----------------------------------------- --------------------------------------
Residential Commercial Residential Commercial NPAs as
Real Estate Real Real Estate Real Total a % of
State 1 - 4 5+ Estate 1 - 4 5+ Estate NPAs Loans
- ----------------------- ------------ ---------- ------------- --------- -------- -------------- ----------- --------
Northern California $ 85,118 $ 251 $ 104 $ 275 $ -0- $ -0- $ 85,748 .45%
Southern California 131,327 568 656 1,589 -0- -0- 134,140 .80
Florida 36,549 -0- 23 825 -0- -0- 37,397 1.29
Texas 19,913 -0- -0- 2,637 -0- -0- 22,550 .98
New Jersey 19,304 -0- -0- 183 -0- -0- 19,487 .96
Washington 14,710 421 -0- -0- -0- -0- 15,131 .85
Illinois 18,601 -0- -0- 525 -0- -0- 19,126 1.26
Colorado 2,383 66 -0- -0- -0- -0- 2,449 .17
Other(c) 78,725 143 -0- 5,966 -0- -0- 84,834 1.07
------------ ---------- ------------- --------- -------- ------------- ----------- --------
Totals $ 406,630 $ 1,449 $ 783 $12,000 $ -0- $ -0- 420,862 .76
============ ========== ============= ========= ======== =============
FRE general valuation allowance (337) (.00)
----------- --------
Total nonperforming assets $ 420,525 .76%
============ ========
(a) Non-accruals loans are 90 days or more past due and interest is not
recognized on these loans.
(b) The March 31, 2002 balances include loans that were securitized into MBS.
(c) All states included in Other have total loan balances with less than 2% of total loans.
The Company provides specific valuation allowances for losses on
major loans when impaired and a write-down on foreclosed real estate when any
significant and permanent decline in value is identified. The Company also
utilizes a methodology for monitoring and estimating probable loan losses that
is based on both the Company's historical loss experience in the loan portfolio
and factors reflecting current economic conditions. This approach uses a
database that identifies losses on loans and foreclosed real estate from past
years to the present, broken down by year of origination, type of loan, and
geographical area. This process also takes into consideration current trends in
economic growth, unemployment, housing market activity, and home prices for the
nation and individual geographic regions. This approach further considers the
impact of other events such as natural disasters. Based on the analysis of
historical performance, current conditions, and other risks, management
estimates a range of loss allowances by type of loan and risk category to cover
probable losses in the portfolio. One-to-four single-family real estate loans
are evaluated as a group. In addition, periodic reviews are made of major
multi-family and commercial real estate loans and foreclosed real estate. Where
indicated, valuation allowances are established or adjusted. In estimating
probable losses, consideration is given to the estimated sale price, cost of
refurbishing the security property, payment of delinquent taxes, cost of
disposal, and cost of holding the property. Additions to and reductions from the
allowances are reflected in current earnings based upon quarterly reviews of the
portfolio and the review methodology and historical analyses are reconsidered
quarterly.
The table below shows the changes in the allowance for loan losses
for the three months ended March 31, 2003 and 2002.
TABLE 14
Changes in Allowance for Loan Losses
(Dollars in thousands)
Three Months Ended
March 31
------------------------------
2003 2002
------------- -------------
Beginning allowance for loan losses $ 281,097 $ 261,013
Provision for loan losses charged to expense 4,479 8,539
Loans charged off (1,049) (321)
Recoveries 146 96
------------- -------------
Ending allowance for loan losses $ 284,673 $ 269,327
============= =============
Ratio of net chargeoffs to average loans outstanding
(including MBS with recourse and MBS-REMICs) .01% .00%
============= =============
Ratio of allowance for loan losses to total loans
(including MBS with recourse and MBS-REMICs) .43% .48%
============= =============
Ratio of allowance for loan losses to NPAs 64.1% 64.0%
============= =============
Deposits
The Company raises deposits through its retail branch system as well
as through the money markets.
Retail deposits increased during the first quarter of 2003 by $2.5
billion, including interest credited of $211 million, compared to an increase of
$1.0 billion, including interest credited of $230 million in the first quarter
of 2002. Retail deposits increased during the first quarter of 2003 because the
public found savings to be a more favorable investment compared with other
alternatives. At March 31, 2003 and 2002, transaction accounts (which include
checking, passbook, and money market deposit accounts) represented 70% and 47%,
respectively, of the total balance of deposits.
The table below shows the Company's deposits by interest rate and by
remaining maturity at March 31, 2003 and 2002.
TABLE 15
Deposits
(Dollars in millions)
March 31
-----------------------------------------------------------
2003 2002
---------------------------- ----------------------------
Rate Amount Rate* Amount
----------- ------------- ----------- -------------
Deposits by rate:
Interest-bearing checking accounts 1.15 % $ 174 1.28 % $ 97
Interest-bearing checking accounts swept
into money market deposit accounts 1.69 4,643 1.96 4,544
Passbook accounts .52 459 .85 470
Money market deposit accounts 2.11 25,212 2.82 11,471
Term certificate accounts with original maturities of:
4 weeks to 1 year 1.53 4,345 2.61 8,848
1 to 2 years 2.22 3,589 3.86 6,152
2 to 3 years 3.58 1,862 4.74 1,616
3 to 4 years 4.33 1,290 5.01 912
4 years and over 4.99 1,842 5.31 1,232
Retail jumbo CDs 3.85 87 3.99 166
------------- -------------
$ 43,503 $ 35,508
============= =============
Deposits by remaining maturity:
No contractual maturity 2.01 % $ 30,488 2.52 % $ 16,582
Maturity within one year 2.23 9,151 3.28 15,756
1 to 5 years 4.14 3,853 4.60 3,154
Over 5 years 4.55 11 5.55 16
------------- -------------
$ 43,503 $ 35,508
============= =============
* Weighted average interest rate, including the impact of interest rate swaps.
At March 31, the weighted average cost of deposits was 2.25% (2003)
and 3.04% (2002).
Advances from Federal Home Loan Banks
The Company uses borrowings from the FHLBs, also known as "advances,"
to provide funds for loan origination activities. Advances are secured by
pledges of certain loans, MBS, and capital stock of the FHLBs. FHLB advances
amounted to $18.9 billion at March 31, 2003, compared to $18.6 billion at
December 31, 2002, and $17.5 billion at March 31, 2002, respectively.
Securities Sold Under Agreements to Repurchase
The Company borrows funds through transactions in which securities
are sold under agreements to repurchase (Reverse Repos). Reverse Repos are
entered into with selected major government securities dealers and large banks,
using MBS from the Company's portfolio. Reverse Repos with dealers and banks
amounted to $22 million, $522 million, and $29 million at March 31, 2003,
December 31, 2002, and March 31, 2002, respectively.
Other Borrowings
At March 31, 2003, Golden West, at the holding company level, had a
total of $200 million of subordinated debt outstanding compared to $500 million
at March 31, 2002. As of March 31, 2003, Golden West's subordinated debt
securities were rated A2 and A by Moody's Investors Service (Moody's) and
Standard & Poor's (S&P), respectively.
At March 31, 2003, Golden West, at the holding company level, had
outstanding $990 million of senior debt compared to $198 million at March 31,
2002. As of March 31, 2003, Golden West's senior debt was rated A1 and A+ by
Moody's and S&P, respectively.
WSB has a bank note program under which up to $5 billion of
borrowings can be outstanding at any point in time. WSB had no bank notes
outstanding at March 31, 2003 and 2002. At December 31, 2002, WSB had $1.2
billion of bank notes outstanding. As of March 31, 2003, WSB's bank notes were
rated P-1 and A-1+ by Moody's and S&P, respectively.
WSB may issue long-term wholesale deposits and long-term unsecured
senior debt. At March 31, 2003, WSB had no long-term wholesale deposits or
long-term unsecured senior debt outstanding. As of March 31, 2003, WSB's
unsecured senior debt ratings were Aa3 and AA- from Moody's and S&P,
respectively.
Stockholders' Equity
The Company's stockholders' equity increased by $168 million during
the first three months of 2003 as a result of net earnings partially offset by
decreased market values of securities available for sale, the payment of
quarterly dividends to stockholders and the $61 million cost of the repurchase
of Golden West stock. The Company's stockholders' equity increased by $178
million during the first three months of 2002 as a result of net earnings
partially offset by decreased market values of securities available for sale,
the payment of quarterly dividends to stockholders and the $49 million cost of
the repurchase of Golden West stock. Unrealized gains, net of taxes, on
securities and MBS available for sale included in stockholders' equity at March
31, 2003, December 31, 2002, and March 31, 2002 were $179 million, $199 million,
and $215 million, respectively.
Since 1993, through five separate actions, the Company's Board of
Directors has authorized the repurchase by the Company of up to 60.6 million
shares of Golden West's common stock. As of March 31, 2003, 50.2 million shares
had been repurchased and retired at a cost of $1.3 billion since October 1993,
of which 839 thousand were purchased and retired at a cost of $61 million during
the first three months of 2003. Earnings from WSB are expected to continue to be
the major source of funding for the stock repurchase program. The repurchase of
Golden West stock is not intended to have a material impact on the normal
liquidity of the Company.
Regulatory Capital
The Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA) established capital standards for federally insured financial
institutions, such as WSB and WTX. Under FIRREA, savings institutions must have
tangible capital equal to at least 1.5% of adjusted total assets, have core
capital equal to at least 4% of adjusted total assets, and have risk-based
capital equal to at least 8% of risk-weighted assets.
The OTS and other bank regulatory agencies have established five
capital tiers: well-capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. The rules
provide that a savings institution is "well-capitalized" if its leverage ratio
is 5% or greater, its Tier 1 risk-based capital ratio is 6% or greater, its
total risk-based capital ratio is 10% or greater and the institution is not
subject to a capital directive.
As used herein, the total risk-based capital ratio is the ratio of
total capital to risk-weighted assets, the Tier 1 risk-based capital ratio is
the ratio of core capital to risk-weighted assets, and the Tier 1 or leverage
ratio is the ratio of core capital to adjusted total assets, in each case as
calculated in accordance with current OTS capital regulations. As of March 31,
2003, the most recent notification from the OTS categorized WSB and WTX as
"well-capitalized" under the current requirements. There are no conditions or
events that have occurred since that notification that the Company believes
would have an impact on the categorization of WSB or WTX.
The following tables show WSB's and WTX's regulatory capital ratios
and compares them to the OTS minimum requirements at March 31, 2003 and 2002.
TABLE 16
Regulatory Capital Ratios, Minimum Capital Requirements,
and Well-Capitalized Capital Requirements
As of March 31, 2003
(Dollars in thousands)
WELL-CAPITALIZED
MINIMUM CAPITAL CAPITAL
ACTUAL REQUIREMENTS REQUIREMENTS
------------------------- -------------------------- ---------------------------
Capital Ratio Capital Ratio Capital Ratio
-------------- ------- ---------------- ------- ---------------- -------
WSB and Subsidiaries
Tangible $5,421,604 7.77% $ 1,046,388 1.50% --- ---
Tier 1 (core or leverage) 5,421,604 7.77 2,790,367 4.00 $ 3,487,959 5.00%
Tier 1 risk-based 5,421,604 13.92 --- --- 2,336,283 6.00
Total risk-based 5,704,758 14.65 3,115,044 8.00 3,893,806 10.00
WTX
Tangible $ 467,479 5.16% $ 135,813 1.50% --- ---
Tier 1 (core or leverage) 467,479 5.16 362,168 4.00 $ 452,710 5.00%
Tier 1 risk-based 467,479 23.24 --- --- 120,693 6.00
Total risk-based 468,001 23.27 160,925 8.00 201,156 10.00
TABLE 17
Regulatory Capital Ratios, Minimum Capital Requirements,
and Well-Capitalized Capital Requirements
As of March 31, 2002
(Dollars in thousands)
WELL-CAPITALIZED
MINIMUM CAPITAL CAPITAL
ACTUAL REQUIREMENTS REQUIREMENTS
------------------------- -------------------------- ---------------------------
Capital Ratio Capital Ratio Capital Ratio
-------------- ------- ---------------- ------- ---------------- -------
WSB and Subsidiaries
Tangible $4,723,573 8.00% $ 885,434 1.50% --- ---
Tier 1 (core or leverage) 4,723,573 8.00 2,361,158 4.00 $ 2,951,447 5.00%
Tier 1 risk-based 4,723,573 13.55 --- --- 2,091,647 6.00
Total risk-based 5,088,062 14.60 2,788,862 8.00 3,486,078 10.00
WTX
Tangible $ 404,702 5.25% $ 115,677 1.50% --- ---
Tier 1 (core or leverage) 404,702 5.25 308,473 4.00 $ 385,591 5.00%
Tier 1 risk-based 404,702 25.16 --- --- 96,512 6.00
Total risk-based 404,847 25.17 128,682 8.00 160,853 10.00
New Accounting Pronouncements
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133), as amended,
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the Statement of Financial Condition and measure
those instruments at fair value. The Company adopted SFAS 133 as of January 1,
2001 and recorded a loss of $10 million before tax, or $6 million after tax.
Because the Company has decided not to use permitted hedge accounting for the
derivative financial instruments in portfolio on March 31, 2003 and 2002, the
changes in fair value of these instruments are reported in Noninterest Income as
the "Change in Fair Value of Derivatives" in the Consolidated Statement of Net
Earnings.
In September 2000, Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS
140). This statement replaces previously issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" (SFAS 125). SFAS 140
revises the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain disclosures, but it carries
over most of SFAS 125's provisions without reconsideration. This statement is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after March 31, 2001. From time to time, the Company
securitizes loans from its portfolio into MBS, including MBS-REMICs. Under SFAS
140, if the Company retains 100% of the beneficial interests in its MBS
securitizations, it will not have any effective "retained interests" requiring
disclosures under SFAS 140. To date, the Company has not sold any interests
requiring disclosure under SFAS 140. In accordance with SFAS 140, the Company's
securitizations after March 31, 2001 resulted in securities classified as
securitized loans and recorded as loans receivable (see page 21 for further
discussions).
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development, and the normal operation
of a long-lived asset, except for certain obligations of lessees. This statement
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002.
The adoption of SFAS 143 on January 1, 2003 had no impact on the Company's
financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146), which addresses
accounting for restructuring and similar costs. SFAS 146 supersedes previous
accounting guidance, principally Emerging Issues Task Force Issue No. 94-3. SFAS
146 requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost should be recognized at the date of the Company's
commitment to an exit plan. SFAS 146 also establishes that the liability should
initially be measured and recorded at fair value. Accordingly, SFAS 146 may
affect the timing of recognizing future restructuring costs as well as the
amounts recognized. The Company believes that SFAS 146 will not have a
significant impact on its financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" (SFAS 148). This statement
amends Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based compensation and the effect of the method used on reported results.
This statement is effective for interim periods beginning after December 15,
2002. The Company adopted SFAS 148 on January 1, 2003. See page six for the
required disclosure.
Results Of Operations
Net Earnings
Net earnings for the three months ended March 31, 2003 were $260
million compared to net earnings of $238 million for the three months ended
March 31, 2002. Net earnings increased in 2003 as compared to 2002 primarily as
a result of increased net interest income, which was partially offset by an
increase in general and administrative expenses.
Net Interest Income
The largest component of the Company's revenue and earnings is net
interest income, which is the difference between the interest and dividends
earned on loans and other investments and the interest paid on customer deposits
and borrowings. Long-term growth of the Company's net interest income, and hence
earnings, is related to the ability to expand the mortgage portfolio, the
Company's primary earning asset, by originating and retaining high-quality
adjustable rate home loans. Over the short term, however, net interest income
can be influenced by business conditions, especially movements in short-term
interest rates, which can temporarily increase or reduce changes in net interest
income.
Net interest income amounted to $529 million for the three months
ended March 31, 2003 as compared to $467 million for the three months ended
March 31, 2002. This amount represented a 13% increase over the previous year.
The growth of net interest income in 2003 compared with the prior year resulted
from the growth in the loan portfolio over the past twelve months which was
partially offset by a modest decrease for the first quarter in the Company's
average primary spread, which is the monthly average of the monthend difference
between the yield on loans and other investments and the rate paid on deposits
and borrowings.
Between March 31, 2002 and March 31, 2003, the Company's earning
asset balance increased by $10.6 billion or 18%. This growth resulted from
strong mortgage originations which more than offset loan repayments and loan
sales.
As noted in the discussion of the gap on pages 10 and 11, the
Company's liabilities respond more rapidly to movements in short-term interest
rates than the Company's assets, most of which are adjustable rate mortgages
tied to indexes that lag changes in market interest rates. Consequently, when
short-term interest rates decline, the Company's primary spread temporarily
widens, because the index lags slow the downward movement of the yield on the
Company's adjustable rate mortgage portfolio. When interest rates stabilize
after a period of falling rates, the primary spread usually declines for a while
until the yield on the ARM portfolio catches up to previous rate decreases. The
opposite occurs when interest rates increase. Specifically, when short-term
interest rates move up, the Company's primary spread compresses for a period of
time, because the index lags slow the upward adjustment of the yield on the
Company's ARMs. When interest rates stabilize after a period of rising rates,
the primary spread expands for a while until the ARM yield catches up to
previous rate increases. For the five years ended March 31, 2003, which included
periods of both falling and rising interest rates, the Company's primary spread
averaged 2.48% with a high of 3.21% and a low of 1.88%.
During 2001, the Federal Reserve's Open Market Committee lowered the
Federal Funds rate, a key short-term interest rate, by a total of 475 basis
points in order to stimulate the then-weak economy. Other short-term market
rates experienced similar decreases. In response to significantly lower
short-term interest rates, the Company's cost of funds declined by 284 basis
points during 2001, while the yield on the Company's assets fell by only 166
basis points. As a consequence, the Company's primary spread widened
substantially during 2001, and by yearend reached 3.21%, the highest level in
the Company's history. In 2002, the Federal Funds rate remained steady at 1.75%
until November, when the Federal Reserve's Open Market Committee lowered the
Federal Funds rate by 50 basis points to 1.25%. During 2002, the Company's cost
of funds declined by an additional 83 basis points. At the same time, the
Company's asset yield fell by 111 basis points, as the ARM indexes continued to
adjust downward in response to the large interest rate declines experienced in
2001. Because the yield on earning assets fell faster than the cost of funds in
2002, the Company's primary spread narrowed from 3.21% at December 31, 2001 to
2.93% at December 31, 2002. Reflecting the decline of short-term interest rates
at the end of 2002, the Company's cost of funds declined by 26 basis points
during the first three months of 2003, while the yield on the Company's assets
fell by only 18 basis points. Consequently, the Company's primary spread widened
to 3.01% at March 31, 2003. However, the average primary spread for the first
three months of 2003 was 2.97% compared with 3.12% for the same period in 2002.
The table below shows the components of the Company's primary spread
at March 31, 2003, December 31, 2002, and March 31, 2002.
TABLE 18
Yield on Earning Assets,
Cost of Funds, and Primary Spread
March 31 December 31 March 31
2003 2002 2002
------------- ----------------- -------------
Yield on loan portfolio, including MBS 5.08% 5.28% 5.82%
Yield on investments 1.39 1.94 5.95
------------- ----------------- -------------
Yield on earning assets 5.07 5.25 5.82
------------- ----------------- -------------
Cost of deposits 2.25 2.56 3.04
Cost of borrowings 1.67 1.85 2.35
------------- ----------------- -------------
Cost of funds 2.06 2.32 2.81
------------- ----------------- -------------
Primary spread 3.01% 2.93% 3.01%
============= ================= =============
The following table sets forth certain information with respect to
the yields earned and rates paid on the Company's interest-earning assets and
interest-bearing liabilities for the three months ended March 31, 2003 and 2002.
TABLE 19
Average Interest-Earning Assets and Interest-Bearing Liabilities
(Dollars in thousands)
Three Months Ended Three Months Ended
March 31, 2003 March 31, 2002
------------------------------------------ -----------------------------------------
Annualized End of Annualized End of
Average Average Period Average Average Period
Balances(a)(b) Yield Yield Balances(a)(b) Yield Yield
-------------- ------------ --------- ------------- ----------- ---------
ASSETS
Investment securities $ 3,570,110 1.46% 1.39% $ 2,904,853 1.98% 5.95%
Loans receivable, including MBS(c) 65,323,349 5.22 5.08 55,407,310 6.05 5.82
Invest. in capital stock of FHLBs 1,092,206 4.28 3.78 1,055,578 5.94 4.32
-------------- ------------ ------------- -----------
Interest-earning assets $69,985,665 5.01% $59,367,741 5.85%
============== ============ ============= ===========
LIABILITIES
Deposits:
Checking accounts $ 157,653 1.29% 1.15% $ 105,546 2.10% 1.28%
Savings accounts 28,898,431 2.14 2.02 15,053,235 2.44 2.53
Term accounts 13,324,097 2.84 2.80 20,065,569 3.67 3.50
-------------- ------------ ------ ------------- ----------- ---------
Total deposits 42,380,181 2.36 2.25 35,224,350 3.14 3.04
Advances from FHLBs 18,464,307 1.52 1.46 17,550,669 2.29 2.19
Reverse repurchases 401,313 1.26 .30 95,510 1.76 .78
Other borrowings 4,824,282 2.27 4.58 3,393,103 2.84 5.55
-------------- ------------ ------------- -----------
Interest-bearing liabilities $66,070,083 2.11% $56,263,632 2.85%
============== ============ ============= ==========
Average net interest spread 2.90% 3.00%
============ ===========
Net interest income $ 528,741 $ 466,899
============== =============
Net yield on average interest-
earning assets 3.02% 3.15%
============ ===========
(a) Averages are computed using daily balances.
(b) Includes balances of assets and liabilities that were acquired and matured within the same month. (c) Includes nonaccrual
loans (90 days or more past due).
The following table shows the Company's revenues and expenses as a
percentage of total revenues for the three months ended March 31, 2003 and 2002.
TABLE 20
Selected Revenue and Expense Items
as Percentages of Total Revenues
Three Months Ended
March 31
---------------------------
2003 2002
------------ ----------
Interest on loans 81.9 % 70.2 %
Interest on mortgage-backed securities 8.4 19.2
Interest and dividends on investments 2.6 3.2
------------ ----------
92.9 92.6
Less:
Interest on deposits 26.5 29.5
Interest on advances and other borrowings 10.4 13.3
------------ ----------
36.9 42.8
Net interest income 56.0 49.8
Provision for loan losses .5 .9
------------ ----------
Net interest income after provision for loan losses 55.5 48.9
Add:
Fees 3.7 3.9
Gain on the sale of securities, MBS and loans 1.6 1.5
Change in fair value of derivatives .3 .8
Other non-interest income 1.5 1.2
------------ ----------
7.1 7.4
Less:
General and administrative expenses 18.0 15.0
Taxes on income 17.1 15.9
------------ ----------
Net earnings 27.5 % 25.4 %
============ ==========
Interest on Loans
In the first quarter of 2003, interest on loans increased by $116
million or 17.6% from the comparable period in 2002. The increase in the first
quarter of 2003 was due to a $16.3 billion increase in the average portfolio
balance which was partially offset by an 88 basis point decrease in the average
portfolio yield.
Interest on Mortgage-Backed Securities
In the first quarter of 2003, interest on mortgage-backed securities
decreased by $101 million or 56.2% from the comparable period in 2002. The
decrease in the first quarter of 2003 was primarily due to a $6.3 billion
decrease in the average portfolio balance and a 46 basis point decrease in the
average portfolio yield. The decrease in the mortgage-backed securities
portfolio was primarily due to the desecuritization of Fannie Mae MBS into
loans, as discussed on page 21.
Interest and Dividends on Investments
The income earned on the investment portfolio fluctuates, depending
upon the volume outstanding and the yields available on short-term investments.
In the first quarter of 2003, interest and dividends on investments decreased by
$5 million or 17.9% from the comparable period in 2002. The decrease in the
first quarter of 2003 was due to a 52 basis point decrease in the average
portfolio yield partially offset by a $665 million increase in the average
portfolio balance. Investment income in the first quarter 2002 was also
bolstered by $4.4 million because the fourth quarter 2001 FHLB of San Francisco
dividend, which was received in February 2002, was unexpectedly high.
Interest on Deposits
In the first quarter of 2003, interest on deposits decreased by $26
million or 9.6% from the comparable period in 2002. The decrease in the first
quarter of 2003 was due to a 78 basis point decrease in the average cost of
deposits partially offset by a $7.2 billion increase in the average balance of
deposits.
Interest on Advances and Other Borrowings
In the first quarter of 2003, interest on advances and other
borrowings decreased by $26 million or 21.0% from the comparable period of 2002.
The decrease in the first quarter of 2003 was primarily due to a 71 basis point
decrease in the average cost of these borrowings partially offset by a $2.7
billion increase in the average balance.
Interest Rate Swaps
The Company enters into interest rate swaps as a part of its interest
rate risk management strategy. Such instruments are entered into primarily to
alter the repricing characteristics of designated assets and liabilities. The
Company does not hold any interest rate swaps or other derivative financial
instruments for trading purposes.
TABLE 21
Schedule of Interest Rate Swaps Activity
(Notional amounts in millions)
Three Months Ended
March 31, 2003
--------------------------------
Receive Pay
Fixed Fixed
Swaps Swaps
------------- --------------
Balance at December 31, 2002 $ 91 $ 591
Maturities (91 ) (335)
-------------- ---------------
Balance at March 31, 2003 $ -0- $ 256
============== ===============
The range of floating interest rates received on swap contracts in
the first three months of 2003 was 1.26% to 1.83%, and the range of floating
interest rates paid on swap contracts was 1.78% to 1.84%. The range of fixed
interest rates received on swap contracts in the first three months of 2003 was
6.39% to 6.56% and the range of fixed interest rates paid on swap contracts was
2.42% to 7.53%.
Interest rate swap payment activity decreased net interest income by
$3.3 million for the three months ended March 31, 2003 as compared to a decrease
of $6.0 million for the same period in 2002.
The Company accounts for interest rate swaps under the provisions in
SFAS 133. Upon adoption of SFAS 133 on January 1, 2001, the Company reported a
one-time pre-tax charge of $10 million, or $.04 after tax per diluted share. As
a result of the ongoing valuation of the Company's swaps, the Company reported
pre-tax income of $3 million, or $.01 after tax per diluted share for the three
months ended March 31, 2003, as compared to pre-tax income of $7 million, or
$.03 after tax per diluted share for the three months ended March 31, 2002. This
additional income occurred because the fair value of Golden West's swaps changed
in 2003 and 2002 as a result of interest rate movements and the maturities of
interest rate swaps. The changes in fair value of these swap contracts are
reflected as a net liability on the Consolidated Statement of Financial
Condition with corresponding amounts reported in Noninterest Income as the
"Change in Fair Value of Derivatives" in the Consolidated Statement of Net
Earnings. The Company has decided not to utilize permitted hedge accounting for
the derivative financial instruments in portfolio at March 31, 2003.
Provision for Loan Losses
The provision for loan losses was $4 million for the three months
ended March 31, 2003 compared to $9 million for the same period
in 2002.
Noninterest Income
Noninterest income was $67 million for the three months ended March
31, 2003 compared to $70 million for the same period in 2002. The decrease in
2003 as compared to 2002 resulted primarily from the decrease in income
associated with the ongoing valuation of swaps.
General and Administrative Expenses
For the first quarter of 2003, general and administrative expenses
(G&A) were $170 million compared to $141 million for the comparable period in
2002. G&A as a percentage of average assets on an annualized basis was .98% for
the first quarter of 2003 compared to .96% for the same period in 2002. G&A
expenses increased in 2003 because of the increased activity on both the loan
and savings sides of the business, as well as the continued investment in
resources to support future expansion of the Company. G&A as a percentage of net
interest income plus noninterest income (the "efficiency ratio") amounted to
28.48% for the first quarter of 2003 compared to 26.27% for the same period in
2002.
Taxes on Income
The Company utilizes the accrual method of accounting for income tax
purposes and for preparing its published financial statements. Taxes as a
percentage of earnings were 38.3% for the first quarter of 2003 compared to
38.5% for the first quarter of 2002.
Liquidity and Capital Resources
WSB's principal sources of funds are cash flows generated from
earnings; deposits; loan repayments; borrowings from the FHLB of San Francisco;
bank notes; borrowings from its parent; borrowings from its WTX subsidiary; debt
collateralized by mortgages, MBS, or securities; and sales of loans. In
addition, WSB has other alternatives available to provide liquidity or finance
operations including wholesale certificates of deposit; federal funds purchased,
the issuance of medium-term notes, borrowings from public offerings of debt,
issuances of commercial paper, and borrowings from commercial banks.
Furthermore, under certain conditions, WSB may borrow from the Federal Reserve
Bank of San Francisco to meet short-term cash needs. The availability of these
funds will vary depending upon policies of the FHLB, the Federal Reserve Bank of
San Francisco, and the Federal Reserve Board.
WTX's principal sources of funds are cash flows generated from
borrowings from the FHLB Dallas; earnings; deposits; loan repayments; debt
collateralized by mortgages or securities; and borrowings from affiliates.
The principal sources of funds for WSB's parent, Golden West, are
dividends from subsidiaries, interest on investments, and the proceeds from the
issuance of debt securities. Various statutory and regulatory restrictions and
tax considerations limit the amount of dividends WSB can pay. The principal
liquidity needs of Golden West are for payment of interest and principal on
senior debt and subordinated debt securities, capital contributions to its
insured subsidiaries, dividends to stockholders, the repurchase of Golden West
stock (see stockholders' equity section on page 26), and general and
administrative expenses. At March 31, 2003, December 31, 2002, and March 31,
2002, Golden West's total cash and investments amounted to $773 million, $830
million, and $213 million, respectively. Included in the cash and investments
above are a subordinated note receivable from WSB in the amount of $100 million
at March 31, 2002.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Golden West estimates the sensitivity of the Company's net interest
income, net earnings, and capital ratios to interest rate changes and
anticipated growth based on simulations using an asset/liability model which
takes into account the lags described on pages 10, 11, and 30. The
simulation model projects net interest income, net earnings, and capital ratios
based on a significant interest rate increase that is sustained for a thirty-six
month period. The model is based on the actual maturity and repricing
characteristics of interest-rate sensitive assets and liabilities. For mortgage
assets, the model incorporates assumptions regarding the impact of changing
interest rates on prepayment rates, which are based on the Company's historical
prepayment information. The model factors in projections for anticipated
activity levels by products offered by the Company. Based on the information and
assumptions in effect at March 31, 2003, Management believes that a 200 basis
point rate increase sustained over a thirty-six month period would not
materially affect the Company's long-term profitability and financial strength.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officers and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officers and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in the Company's periodic SEC filings. No significant changes were made
in the Company's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) April 28, 2003 - Annual Meeting
For Against Withheld Abstain
------------------ -------------- -------------- -------------
(b) Directors elected:
Maryellen Cattani Herringer 140,786,954 1,715,598
Kenneth T. Rosen 140,771,959 1,730,593
Herbert M. Sandler 139,325,958 3,176,594
(c) Ratification of Auditors:
Appointment of Deloitte & Touche
LLP, independent public
accountants, for the fiscal year
2003 140,286,447 1,497,523 718,582
Other Directors continuing in office are:
Louis J. Galen, Antonia Hernandez, Patricia A. King, Bernard A. Osher, Marion O. Sandler, and Leslie Tang Schilling.
ITEM 5. AUDIT SERVICES DISCLOSURE
On April 28, 2003, the stockholders of the Company ratified the
selection of Deloitte & Touche LLP to serve as the Company's independent outside
auditors for the year ending December 31, 2003, and pursuant to Section 10A of
the Securities Exchange Act of 1934, as amended, the Audit Committee of the
Board of Directors of the Company approved the engagement of Deloitte & Touche
LLP to perform reviews of the Company's interim financial statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index to Exhibits
Exhibit No. Description
3 (a) Certificate of Incorporation, as amended, and amendments thereto,
are incorporated by reference to Exhibit 3(a) to the Company's
Annual Report on Form 10-K (File No. 1-4269) for the year ended
December 31, 1990.
3 (b) By-Laws of the Company, as amended in 1997, are incorporated by
reference to Exhibit 3(b) to the Company's Annual Report on Form
10-K (File No. 1-4269) for the year ended December 31, 1997.
4 (a) The Registrant agrees to furnish to the Commission, upon request,
a copy of each instrument with respect to issues of long-term
debt, the authorized principal amount of which does not exceed
10% of the total assets of the Company.
10 (a) 1996 Stock Option Plan, as amended and restated February 2, 1996,
and as further amended May 2, 2001, is incorporated by reference
to Exhibit 10 (a) of the Company's Annual Report on Form 10-K
(File No. 1-4269) for the year ended December 31, 2002.
10 (b) Incentive Bonus Plan, as amended and restated, is incorporated by
reference to Exhibit A of the Company's Definitive Proxy
Statement on Schedule 14A, filed on March 15, 2002, for the
Company's 2002 Annual Meeting of Stockholders.
10 (c) Deferred Compensation Agreement between the Company and
James T. Judd is incorporated by reference to Exhibit 10(b) of
the Company's Annual Report on Form 10-K (File No. 1-4629) for
the year ended December 31, 1986.
10 (d) Deferred Compensation Agreement between the Company and
Russell W. Kettell is incorporated by reference to Exhibit 10(c)
of the Company's Annual Report on Form 10-K (File No. 1-4629) for
the year ended December 31, 1986.
10 (e) Deferred Compensation Agreement between the Company and
Michael Roster is incorporated by reference to Exhibit 10(e) of
the Company's Annual Report on Form 10-K (File No. 1-4629) for
the year ended December 31, 2002.
10 (f) Operating lease on Company headquarters building, 1901 Harrison
Street, Oakland, California 94612, is incorporated by reference
to Exhibit 10(h) of the Company's Quarterly Report on Form 10-Q
(File No. 1-4629) for the quarter ended September 30, 1998.
10 (g) Form of Supplemental Retirement Agreement between the Company and
certain executive officers is incorporated by reference to
Exhibit 10(g) to the Company's Annual Report on Form 10-K (File
No. 1-4629) for the year ended December 31, 2002.
10 (h) Form of Indemnification Agreement for use by by the Company with
its directors.
11 Statement of Computation of Earnings Per Share
(a) Index to Exhibits (continued)
Exhibit No. Description
99.1 Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350.
99.2 Certification of Principal Executive Officer Pursuant to
18 U.S.C. Section 1350.
99.3 Certification of Principal Financial Officer Pursuant to
18 U.S.C. Section 1350.
(b) Reports on Form 8-K
The Registrant did not file any current reports on Form 8-K with the
Commission during the first quarter of 2003, but has since filed the
following report on Form 8-K with the Commission:
1. Report filed April 18, 2003. Item 7. Exhibits. The report dated
April 17, 2003 included the Golden West First Quarter 2003
Earnings Press Release and the Golden West March 31, 2003
Thirteen Month Statistical Data Press Release.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN WEST FINANCIAL CORPORATION
Dated: May 13, 2003
/s/ Russell W. Kettell
-----------------------
Russell W. Kettell
President and Chief Financial Officer
/s/ William C. Nunan
-----------------------
William C. Nunan
Group Senior Vice President and Chief Accounting Officer
CERTIFICATION
I, Herbert M. Sandler, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Golden West
Financial Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
quarterly report;
4) The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the Audit Committee
of the Company's Board of Directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or other
employees who have significant role in the Company's internal
controls; and
6) The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
May 13, 2003 /s/ Herbert M. Sandler
- ----------------------------------------- ---------------------------------
Date Herbert M. Sandler
Chairman of the Board and
Chief Executive Officer
Golden West Financial Corporation
CERTIFICATION
I, Marion O. Sandler, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Golden West
Financial Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
quarterly report;
4) The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the Audit Committee
of the Company's Board of Directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or other
employees who have significant role in the Company's internal
controls; and
6) The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
May 13, 2003 /s/ Marion O. Sandler
- ----------------------------------------- ---------------------------------
Date Marion O. Sandler
Chairman of the Board and
Chief Executive Officer
Golden West Financial Corporation
CERTIFICATION
I, Russell W. Kettell, certify that:
1) I have reviewed this quarterly report on Form 10-Q of Golden West
Financial Corporation;
2) Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Company as of, and for, the periods presented in this
quarterly report;
4) The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5) The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the Audit Committee
of the Company's Board of Directors:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize and report financial data and have identified for
the Company's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or other
employees who have significant role in the Company's internal
controls; and
6) The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
May 13, 2003 /s/ Russell W. Kettell
- ------------------------------------- ---------------------------------
Date Russell W. Kettell
President and Chief Financial Officer
Golden West Financial Corporation
EXHIBIT 10 (h)
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (this "Agreement"), made as of this 28th
day of April, 2003, by and between Golden West Financial Corporation, a Delaware
corporation (the "Company"), and ____________________ (the "Indemnitee"), a
director of the Company.
WHEREAS, the Indemnitee is currently serving as a director of the
Company and in such capacity has rendered and will render valuable services to
the Company; and
WHEREAS, the stockholders of the Company have adopted bylaws (the
"Bylaws") providing for the indemnification of directors, officers, employees
and other agents of the Company as authorized by the Delaware law, and the
Bylaws and Delaware law, by their non-exclusive nature, permit contracts between
the Company and its directors, officers, employees and agents with respect to
indemnification of such persons; and
WHEREAS, the number of lawsuits challenging the judgment and actions
of directors, the costs of defending those lawsuits, and the threat to
directors' personal assets have all materially increased over the past several
years, potentially impacting the willingness of capable individuals to undertake
the responsibilities imposed on directors; and
WHEREAS, recent federal legislation and rules adopted by the
Securities and Exchange Commission and the New York Stock Exchange have imposed
additional disclosure and corporate governance obligations on directors of
public companies and have exposed directors to new and substantially broadened
civil liabilities and a greater risk of criminal proceedings; and
WHEREAS, in order to induce and encourage highly experienced and
capable persons such as the Indemnitee to continue to serve as director of the
Company, the Board of Directors has determined, after due consideration and
investigation of the terms and provisions of this Agreement and the various
other alternatives available to the Company and the Indemnitee in lieu hereof,
that this Agreement is not only reasonable and prudent, but necessary to promote
and ensure the best interests of the Company and its stockholders;
NOW, THEREFORE, in consideration of the premises and mutual
agreements hereinafter set forth, and other good and valuable consideration,
including, without limitation, the continued service of the Indemnitee, the
receipt of which hereby is acknowledged, and in order to induce the Indemnitee
to continue to serve as a director of the Company, the Company and the
Indemnitee hereby agree as follows:
1. Definitions. As used in this Agreement:
(a) "Change in Control" shall mean a change in control of the Company of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar or successor schedule or form) promulgated under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(collectively, the "Act"), whether or not the Company is then subject to such
reporting requirement; provided, however, that, without limitation, such a
Change in Control shall be deemed to have occurred (irrespective of the
applicability of the initial clause of this definition) if (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Act, but excluding any
trustee or other fiduciary holding securities pursuant to an employee benefit or
welfare plan or employee stock plan of the Company or any subsidiary of the
Company, or any entity organized, appointed, established or holding securities
of the Company with voting power for or pursuant to the terms of any such plan)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 20% or more of
the combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the Continuing Directors (as
defined below) in office immediately prior to such person's attaining such
interest; (ii) the Company is a party to a merger, consolidation, sale of assets
or other reorganization, or a proxy contest, as a consequence of which
Continuing Directors in office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors of the Company (or any
successor entity) thereafter; or (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Company (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) (such directors being referred to
herein as "Continuing Directors") cease for any reason to constitute at least a
majority of the Board of Directors of the Company.
(b) "Disinterested Director" with respect to any request by the Indemnitee for
indemnification or advancement of expenses hereunder shall mean a director of
the Company who neither is nor was a party to the Proceeding (as defined below)
in respect of which indemnification or advancement is being sought by the
Indemnitee.
(c) The term "Expenses" shall mean, without limitation, expenses of Proceedings,
including attorneys' fees, disbursements and retainers, accounting and witness
fees, expenses related to the preparation or service as a witness, travel and
deposition costs, expenses of investigations, judicial or administrative
proceedings and appeals, amounts paid in settlement of a Proceeding by or on
behalf of the Indemnitee, costs of attachment or similar bonds, any expenses of
attempting to establish or establishing a right to indemnification or
advancement of expenses, under this Agreement, the Company's Certificate of
Incorporation or Bylaws, applicable law or otherwise, and reasonable
compensation for time spent by the Indemnitee in connection with the
investigation, defense or appeal of a Proceeding or action for indemnification
for which the Indemnitee is not otherwise compensated by the Company or any
third party. The term "Expenses" shall not include the amount of judgments,
fines, interest or penalties, or excise taxes assessed with respect to any
employee benefit or welfare plan, which are actually levied against or sustained
by the Indemnitee to the extent sustained after final adjudication.
(d) The term "Independent Legal Counsel" shall mean any firm of attorneys,
selected by the Company, with prior experience advising clients about the issues
pertaining to the Proceeding, so long as such firm has not represented the
Company, the Indemnitee, any entity controlled by the Indemnitee, or any party
adverse to the Company, within the preceding five years. Notwithstanding the
foregoing, the term "Independent Legal Counsel" shall not include any person
who, under applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or the Indemnitee
in an action to determine the Indemnitee's right to indemnification or
advancement of expenses under this Agreement, the Company's Certificate of
Incorporation or Bylaws, applicable law or otherwise.
(e) The term "Proceeding" shall mean any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism, or any other
proceeding (including, without limitation, an appeal therefrom), formal or
informal, whether brought in the name of the Company or otherwise, whether of a
civil, criminal, administrative or investigative nature, and whether by, in or
involving a court or an administrative, other governmental or private entity or
body (including, without limitation, an investigation by the Company or its
Board of Directors), by reason of (i) the fact that the Indemnitee is or was a
director of the Company, or is or was serving at the request of the Company as
an agent of another enterprise, whether or not the Indemnitee is serving in such
capacity at the time any liability or expense is incurred for which
indemnification or reimbursement is to be provided under this Agreement, (ii)
any actual or alleged act or omission or neglect or breach of duty, including,
without limitation, any actual or alleged error or misstatement or misleading
statement, which the Indemnitee commits or suffers while acting in any such
capacity, or (iii) the Indemnitee attempting to establish or establishing a
right to indemnification or advancement of expenses pursuant to this Agreement,
the Company's Certificate of Incorporation or Bylaws, applicable law or
otherwise.
(f) The phrase "serving at the request of the Company as an agent of another
enterprise" or any similar terminology shall mean, unless the context otherwise
requires, (i) serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, limited
liability company, trust, employee benefit or welfare plan or other enterprise,
foreign or domestic, and (ii) serving as a director, officer, employee or agent
of a corporation which was a predecessor corporation of the Company or of
another enterprise at the request of such predecessor corporation. The phrase
"serving at the request of the Company" shall include, without limitation, any
service as a director of the Company which imposes duties on, or involves
services by, such director with respect to the Company or any of the Company's
subsidiaries, affiliates, employee benefit or welfare plans, such plan's
participants or beneficiaries or any other enterprise, foreign or domestic. In
the event that the Indemnitee shall be a director, officer, employee or agent of
another corporation, partnership, joint venture, limited liability company,
trust, employee benefit or welfare plan or other enterprise, foreign or
domestic, 40% or more of the common stock, combined voting power or total equity
interest of which is owned by the Company or any subsidiary or affiliate
thereof, then it shall be presumed conclusively that the Indemnitee is so acting
at the request of the Company.
2. No Employment Rights. Nothing contained in this Agreement is intended to
create in Indemnitee any right to continued employment with or by the Company or
any of its subsidiaries or affiliates.
3. Proceeding Other Than a Proceeding By or In the Right of the Company. The
Company shall indemnify the Indemnitee if the Indemnitee is a party to or
threatened to be made a party to or is otherwise involved in any Proceeding
(other than a Proceeding by or in the right of the Company to procure a judgment
in its favor), by reason of the fact that the Indemnitee is or was a director of
the Company, or is or was serving at the request of the Company as an agent of
another enterprise, against all Expenses, judgments, fines, interest or
penalties, and excise taxes assessed with respect to any employee benefit or
welfare plan, which are actually and reasonably incurred by the Indemnitee in
connection with such a Proceeding, to the fullest extent permitted by applicable
law; provided, however, that any settlement of a Proceeding must be approved in
advance in writing by the Company.
4. Proceedings By or In the Right of the Company. The Company shall indemnify
the Indemnitee if the Indemnitee is a party to or threatened to be made a party
to or is otherwise involved in any Proceeding by or in the right of the Company
to procure a judgment in its favor by reason of the fact that the Indemnitee is
or was a director of the Company, or is or was serving at the request of the
Company as an agent of another enterprise, against all Expenses, judgments,
fines, interest or penalties, and excise taxes assessed with respect to any
employee benefit or welfare plan, which are actually and reasonably incurred by
the Indemnitee in connection with the defense or settlement of such a
Proceeding, to the fullest extent permitted by applicable law.
5. Indemnification for Costs, Charges and Expenses of Witness or Successful
Party. Notwithstanding any other provision of this Agreement (except as set
forth in subparagraph 9(a) hereof), and without a requirement for determination
as required by Paragraph 8 hereof, to the extent that the Indemnitee (a) has
prepared to serve or has served as a witness in any Proceeding in any way
relating to the Company or any of the Company's subsidiaries, affiliates,
employee benefit or welfare plans, such plan's participants or beneficiaries or
any other enterprise, foreign or domestic, or anything done or not done by the
Indemnitee as a director of the Company, as a director, officer, employee or
agent of another corporation, partnership, joint venture, limited liability
company, trust, employee benefit or welfare plan or other enterprise, foreign or
domestic, or as a director, officer, employee or agent of a corporation which
was a predecessor corporation of the Company or of another enterprise, at the
request of such predecessor corporation, or (b) has been successful in defense
of any Proceeding or in defense of any claim, issue or matter therein, on the
merits or otherwise, including the dismissal of a Proceeding without prejudice
or the settlement of a Proceeding without an admission of liability, the
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by the Indemnitee in connection therewith to the fullest extent
permitted by applicable law.
6. Partial Indemnification. If the Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for a portion of the Expenses,
judgments, fines, interest or penalties, or excise taxes assessed with respect
to any employee benefit or welfare plan, which are actually and reasonably
incurred by the Indemnitee in the investigation, defense, appeal or settlement
of any Proceeding, but not, however, for the total amount of the Indemnitee's
Expenses, judgments, fines, interest or penalties, or excise taxes assessed with
respect to any employee benefit or welfare plan, then the Company shall
nevertheless indemnify the Indemnitee for the portion of such Expenses,
judgments, fines, interest penalties or excise taxes to which the Indemnitee is
entitled.
7. Advancement of Expenses. The Expenses incurred by the Indemnitee in any
Proceeding shall be paid promptly by the Company in advance of the final
disposition of the Proceeding at the written request of the Indemnitee to the
fullest extent permitted by applicable law; provided, however, that the
Indemnitee shall set forth in such request reasonable evidence that such
Expenses have been incurred by the Indemnitee in connection with such
Proceeding, a statement that such Expenses do not relate to any matter described
in subparagraph 9(a) of this Agreement, and an undertaking in writing to repay
(without interest) any advances if it is ultimately determined as provided in
subparagraph 8(b) of this Agreement that the Indemnitee is not entitled to
indemnification under this Agreement. In addition, in consideration of the
indemnification and advancement of expenses provided under this Agreement,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.
8. Indemnification Procedure; Determination of Right to Indemnification.
(a) Promptly after receipt by the Indemnitee of notice of the commencement of
any Proceeding, the Indemnitee shall, if a claim for indemnification or
advancement of Expenses in respect thereof is to be made against the Company
under this Agreement, notify the Company of the commencement thereof in writing.
The omission to so notify the Company will not relieve the Company from any
liability which the Company may have to the Indemnitee under this Agreement
unless the Company shall have lost significant substantive or procedural rights
with respect to the defense of any Proceeding as a result of such omission to so
notify.
(b) The Indemnitee shall be conclusively presumed to have met the relevant
standards of conduct, if any, as defined by applicable law, for indemnification
pursuant to this Agreement and shall be absolutely entitled to such
indemnification, unless a determination by clear and convincing evidence is made
that the Indemnitee has not met such standards by (i) the Board of Directors by
a majority vote of a quorum thereof consisting of Disinterested Directors, (ii)
the stockholders of the Company by majority vote of a quorum thereof consisting
of stockholders who are not parties to the Proceeding due to which a claim for
indemnification is made under this Agreement, (iii) Independent Legal Counsel as
set forth in a written opinion (it being understood that such Independent Legal
Counsel shall make such determination only if the quorum of Disinterested
Directors referred to in clause (i) of this subparagraph 8(b) is not obtainable
or if the Board of Directors of the Company by a majority vote of a quorum
thereof consisting of Disinterested Directors so directs), or (iv) a court of
competent jurisdiction; provided, however, that if a Change in Control shall
have occurred and the Indemnitee so requests in writing, such determination
shall be made only by a court of competent jurisdiction.
(c) If a claim for indemnification or advancement of Expenses under this
Agreement is not paid by the Company within 30 days after receipt by the Company
of written notice thereof, the rights provided by this Agreement shall be
enforceable by the Indemnitee in any court of competent jurisdiction. Such
judicial proceeding shall be made de novo. The burden of proving by clear and
convincing evidence that indemnification or advances are not appropriate shall
be on the Company. Neither the failure of the directors or stockholders of the
Company or Independent Legal Counsel to have made a determination prior to the
commencement of such action that indemnification or advancement of Expenses is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, if any, nor an actual determination by the directors or
stockholders of the Company or Independent Legal Counsel that the Indemnitee has
not met the applicable standard of conduct shall be a defense to an action by
the Indemnitee or create a presumption for the purpose of such an action that
the Indemnitee has not met the applicable standard of conduct. The termination
of any Proceeding by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself (i) create a
presumption that the Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in the best interests of the Company and/or its
stockholders, and, with respect to any criminal Proceeding, that the Indemnitee
had reasonable cause to believe that his conduct was unlawful or (ii) otherwise
adversely affect the rights of the Indemnitee to indemnification or advancement
of Expenses under this Agreement, except as may be provided herein. The Company
shall not oppose the Indemnitee's right or entitlement to indemnification or
advancement of Expenses in any such judicial proceeding or appeal therefrom. The
Company further agrees to stipulate in any such judicial proceeding that the
Company is bound by all the provisions of this Agreement and is precluded from
making any assertion to the contrary.
(d) If a court of competent jurisdiction shall determine that the Indemnitee is
entitled to any indemnification or advancement of Expenses hereunder, the
Company shall pay all Expenses actually and reasonably incurred by the
Indemnitee in connection with such adjudication (including, but not limited to,
any appellate proceedings). The Indemnitee's Expenses incurred in connection
with any Proceeding concerning the Indemnitee's right to indemnification or
advancement of Expenses in whole or in part pursuant to this Agreement shall
also be indemnified by the Company, regardless of the outcome of such a
Proceeding, to the fullest extent permitted by applicable law and the Company's
Certificate of Incorporation, as amended.
(e) With respect to any Proceeding for which indemnification or advancement of
Expenses is requested, the Company will be entitled to participate therein at
its own expense and, except as otherwise provided below, to the extent that it
may wish, the Company may assume the defense thereof, with counsel reasonably
satisfactory to the Indemnitee. After notice from the Company to the Indemnitee
of its election to assume the defense of a Proceeding, the Company will not be
liable to the Indemnitee under this Agreement for any Expenses subsequently
incurred by the Indemnitee in connection with the defense thereof, other than as
provided below. The Company shall not settle any Proceeding in any manner which
would impose any penalty or limitation on the Indemnitee without the
Indemnitee's written consent. The Indemnitee shall have the right to employ his
own counsel in any Proceeding, but the fees and expenses of such counsel
incurred after notice from the Company of its assumption of the defense of the
Proceeding shall be at the expense of the Indemnitee, unless (i) the employment
of counsel by the Indemnitee has been authorized by the Company, (ii) the
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of the defense of
a Proceeding, or (iii) the Company shall not in fact have employed counsel to
assume the defense of a proceeding, in each of which cases the fees and expenses
of the Indemnitee's counsel shall be advanced by the Company. The Company shall
not be entitled to assume the defense of any Proceeding brought by or on behalf
of the Company or as to which the Indemnitee has concluded that there may be a
conflict of interest between the Company and the Indemnitee. 9. Limitations on
Indemnification. No payments pursuant to this Agreement shall be made by the
Company:
(a) To indemnify or advance funds to the Indemnitee for Expenses with respect to
(i) Proceedings initiated or brought voluntarily by the Indemnitee and not by
way of defense, except with respect to Proceedings brought to establish or
enforce a right to indemnification under this Agreement or any other statute or
law or otherwise as required under applicable law or (ii) Expenses incurred by
the Indemnitee in connection with preparing to serve or serving, prior to a
Change in Control, as a witness in cooperation with any party or entity who or
which has threatened or commenced any action or proceeding against the Company,
or any director, officer, employee, trustee, agent, representative, subsidiary,
parent corporation or affiliate of the Company, but such indemnification or
advancement of Expenses in each such case may be provided by the Company if the
Board of Directors finds it to be appropriate;
(b) To indemnify the Indemnitee for any Expenses, judgments, fines, interest or
penalties, or excise taxes assessed with respect to any employee benefit or
welfare plan, and sustained in any Proceeding for which payment is actually made
to the Indemnitee under a valid and collectible insurance policy or valid and
enforceable indemnity clause, bylaw or agreement, except in respect of any
excess beyond the amount of payment under such insurance, clause, bylaw or
agreement;
(c) To indemnify the Indemnitee for any Expenses, judgments, fines, expenses or
penalties sustained in any Proceeding for an accounting of profits made from the
purchase or sale by the Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Act or similar provisions of any federal,
state or local statute or regulation;
(d) To indemnify the Indemnitee for any Expenses, judgments, fines, interest or
penalties, or excise taxes assessed with respect to any employee benefit or
welfare plan, for which the Indemnitee is indemnified by the Company otherwise
than pursuant to this Agreement;
(e) To indemnify the Indemnitee for any Expenses, judgments, fines, interest or
penalties, or excise taxes assessed with respect to any employee benefit or
welfare plan, on account of the Indemnitee's conduct if such conduct shall be
finally adjudged to have been knowingly fraudulent, deliberately dishonest or
willful misconduct, including, without limitation, conduct that constituted a
breach of the duty of loyalty to the Company or resulted in any personal profit
or advantage to which Indemnitee was not legally entitled; or
(f) If a court of competent jurisdiction determines that any indemnification
hereunder is unlawful.
10. Continuation of Indemnification. All agreements and obligations of the
Company contained herein shall continue during the period that the Indemnitee is
a director, officer, employee or other agent of the Company (or is or was
serving at the request of the Company as an agent of another enterprise, foreign
or domestic) and shall continue thereafter so long as the Indemnitee shall be
subject to any possible Proceeding by reason of the fact that the Indemnitee was
a director of the Company or serving in any other capacity referred to in this
Paragraph 10.
11. Indemnification Hereunder Not Exclusive. The indemnification provided by
this Agreement shall not be deemed to be exclusive of any other rights to which
the Indemnitee may be entitled under the Company's Certificate of Incorporation,
as amended, the Company's Bylaws, as amended, any agreement, vote of
stockholders or vote of Disinterested Directors, provisions of applicable law,
or otherwise, both as to action or omission in the Indemnitee's official
capacity and as to action or omission in another capacity on behalf of the
Company while holding such office.
12. Extension of Indemnification Rights to Indemnitee's Associates. If the
Indemnitee is a party to or threatened to be made a party to or is otherwise
involved in any Proceeding by reason of the fact that the Indemnitee is or was a
director of the Company, and if any Associate of the "Indemnitee" (as defined in
Rule 12b-2 under the Act) is also involved in such Proceeding primarily as a
result of actions taken or omitted by the Indemnitee as a director of the
Company or while serving at the request of the Company as an agent of another
enterprise, foreign or domestic, such Associate of the Indemnitee shall also be
entitled to indemnification under this Agreement in the same manner as the
Indemnitee, but only to the extent that the claims against such Associate are
based upon or directly attributable to actions taken or omitted by the
Indemnitee.
13. Successors and Assigns.
(a) This Agreement shall be binding upon, and shall inure to the benefit of, the
Indemnitee and the Indemnitee's heirs, executors, administrators and assigns,
whether or not the Indemnitee has ceased to be a director, and the Company and
its successors and assigns. Upon the sale of all or substantially all of the
business, assets or capital stock of the Company to, or upon the merger of the
Company into or with, any corporation, partnership, joint venture, trust or
other person, this Agreement shall inure to the benefit of and be binding upon
both the Indemnitee and such purchaser or successor person. Subject to the
foregoing, this Agreement may not be assigned by either party without the prior
written consent of the other party hereto.
(b) If the Indemnitee is deceased and is entitled to indemnification under any
provision of this Agreement, the Company shall indemnify the Indemnitee's estate
and the Indemnitee's spouse, heirs, executors, administrators and assigns
against, and the Company shall, and does hereby agree to assume, any and all
Expenses actually and reasonably incurred by or for the Indemnitee or the
Indemnitee's estate, in connection with the investigation, defense, appeal or
settlement of any Proceeding. Further, when requested in writing by the spouse
of the Indemnitee, and/or the Indemnitee's heirs, executors, administrators and
assigns, the Company shall provide appropriate evidence of the Company's
agreement set out herein to indemnify the Indemnitee against and to itself
assume such Expenses.
14. Subrogation. In the event of payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
the Indemnitee, who shall execute all documents required and shall do all acts
that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
15. Severability. Each and every paragraph, sentence, term and provision of this
Agreement is separate and distinct so that if any paragraph, sentence, term or
provision thereof shall be held to be invalid, unlawful or unenforceable for any
reason, such invalidity, unlawfulness or unenforceability shall not affect the
validity, unlawfulness or enforceability of any other paragraph, sentence, term
or provision hereof. To the extent required, any paragraph, sentence, term or
provision of this Agreement may be modified by a court of competent jurisdiction
to preserve its validity and to provide the Indemnitee with the broadest
possible indemnification permitted under applicable law.
16. Savings Clause. If this Agreement or any paragraph, sentence, term or
provision hereof is invalidated on any ground by any court of competent
jurisdiction, the Company shall nevertheless indemnify the Indemnitee as to any
Expenses, judgments, fines, interest or penalties, or excise taxes assessed with
respect to any employee benefit or welfare plan, which are incurred with respect
to any Proceeding to the fullest extent permitted by any (a) applicable
paragraph, sentence, term or provision of this Agreement that has not been
invalidated or (b) applicable provision of Delaware law.
17. Interpretation; Governing Law. This Agreement shall be construed as a whole
and in accordance with its fair meaning. Headings are for convenience only and
shall not be used in construing meaning. This Agreement shall be governed and
interpreted in accordance with the laws of the State of Delaware without regard
to the conflict of laws principles thereof.
18. Amendments. No amendment, waiver, modification, termination or cancellation
of this Agreement shall be effective unless in writing signed by the party
against whom enforcement is sought. The indemnification rights afforded to the
Indemnitee hereby are contract rights and may not be diminished, eliminated or
otherwise affected by amendments to the Certificate of Incorporation, Bylaws or
by other agreements, including directors' and officers' liability insurance
policies, of the Company. If the indemnification provisions of Delaware law are
amended or interpreted after the date of this Agreement to permit the Company to
provide broader indemnification rights, the Company hereby agrees to provide
such broader rights to Indemnitee under this Agreement as are then available
under Delaware law.
19. Counterparts. This Agreement may be executed in one or more counterparts,
all of which are considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other.
20. Notices. Any notice required to be given under this Agreement shall be
directed to the Company at 1901 Harrison Street, Oakland, CA 94612 Attention:
General Counsel, and to the Indemnitee at Indemnitee's address in the Company's
records (of if Indemnitee's current address is not available in the records, to
Golden West Financial Corporation, 1901 Harrison Street, Oakland, CA 94612,
Attention: General Counsel), or to such other address as either shall designate
to the other in writing. All notices will be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed, or (ii) upon the third business day after the date on which such
communication was mailed by certified or registered mail.
IN WITNESS WHEREOF, the parties have executed this Indemnification
Agreement as of the date first written above.
INDEMNITEE
By:
Printed Name: ______________
GOLDEN WEST FINANCIAL CORPORATION
By:
Printed Name:
Title:
EXHIBIT 11
Golden West Financial Corporation
Statement of Computation of Basic and Diluted Earnings Per Share
(Dollars in thousands except per share figures)
Three Months Ended
March 31
---------------------------------
2003 2002
--------------- ---------------
Net Earnings $ 260,065 $ 238,081
=============== ===============
Weighted Average Shares 153,347,780 155,415,549
Dilutive effect of outstanding
common stock equivalents 2,503,883 2,154,801
--------------- ---------------
Diluted Average Shares Outstanding 155,851,663 157,570,350
=============== ===============
Basic Earnings Per Share $ 1.70 $ 1.53
=============== ===============
Diluted Earnings Per Share $ 1.67 $ 1.51
=============== ===============
EXHIBIT 99.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Form 10-Q of Golden West Financial
Corporation for the quarterly period ended March 31, 2003, I, Herbert M.
Sandler, Chairman of the Board and Chief Executive Officer of Golden West
Financial Corporation, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted
pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1) such Form 10-Q of Golden West Financial Corporation for the
quarterly period ended March 31, 2003 fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2) the information contained in such Form 10-Q of Golden West Financial
Corporation for the quarterly period ended March 31, 2003 fairly
presents, in all material respects, the financial condition and
results of operations of Golden West Financial Corporation.
May 13, 2003 /s/ Herbert M. Sandler
- ----------------------------------------- ---------------------------------
Date Herbert M. Sandler
Chairman of the Board and
Chief Executive Officer
Golden West Financial Corporation
EXHIBIT 99.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Form 10-Q of Golden West Financial
Corporation for the quarterly period ended March 31, 2003, I, Marion O. Sandler,
Chairman of the Board and Chief Executive Officer of Golden West Financial
Corporation, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant
to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1) such Form 10-Q of Golden West Financial Corporation for the
quarterly period ended March 31, 2003 fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2) the information contained in such Form 10-Q of Golden West Financial
Corporation for the quarterly period ended March 31, 2003 fairly
presents, in all material respects, the financial condition and
results of operations of Golden West Financial Corporation.
May 13, 2003 /s/ Marion O. Sandler
- ----------------------------------------- ---------------------------------
Date Marion O. Sandler
Chairman of the Board and
Chief Executive Officer
Golden West Financial Corporation
EXHIBIT 99.3
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the accompanying Form 10-Q of Golden West Financial
Corporation for the quarterly period ended March 31, 2003, I, Russell W.
Kettell, President and Chief Financial Officer of Golden West Financial
Corporation, hereby certify pursuant to 18 U.S.C. ss. 1350, as adopted pursuant
to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
1) such Form 10-Q of Golden West Financial Corporation for the
quarterly period ended March 31, 2003 fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
2) the information contained in such Form 10-Q of Golden West Financial
Corporation for the quarterly period ended March 31, 2003 fairly
presents, in all material respects, the financial condition and
results of operations of Golden West Financial Corporation.
May 13, 2003 /s/ Russell W. Kettell
- ------------------------------------- ---------------------------------
Date Russell W. Kettell
President and Chief Financial Officer
Golden West Financial Corporation