GOLDEN WEST FINANCIAL CORP /DE/ - 10-K Annual Report

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PAGE F-1

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Golden West Financial Corporation
Oakland, California

We have audited the accompanying consolidated statement of financial
condition of Golden West Financial Corporation and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of net
earnings, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Golden West Financial
Corporation and subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.

Oakland, California
January 23, 1995

PAGE F-2
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(Dollars in thousands except per share figures)

ASSETS

December 31
------------------------------
1994 1993
----------- -----------

Cash $ 242,441 $ 243,185
Securities available for sale at fair value (Note C) 1,488,845 1,636,586
Other investments at cost (fair value of $534,600 and
$538,100) (Notes D and M) 534,600 538,100
Mortgage-backed securities available for sale at fair
value (Notes E and M) 323,339 1,114,069
Mortgage-backed securities held to maturity at cost
(fair value of $831,436 and $412,243) (Notes F and M) 871,039 408,467
Loans receivable less allowance for loan losses of
$124,003 and $106,698 (Notes G and L) 27,071,266 23,912,571
Interest earned but uncollected (Note H) 202,456 175,080
Investment in capital stock of Federal Home Loan Bank,
at cost which approximates fair value (Note L) 332,940 325,737
Real estate held for sale or investment (Note I) 72,217 67,156
Prepaid expenses and other assets 206,478 108,832
Premises and equipment, net (Note J) 201,875 162,751
Goodwill arising from acquisitions (Notes A and B) 136,245 136,754
----------- -----------
$31,683,741 $28,829,288
=========== ===========

See notes to consolidated financial statements.

LIABILITIES AND STOCKHOLDERS' EQUITY

December 31
------------------------------
1994 1993
----------- -----------

Customer deposits (Note K) $19,219,389 $17,422,484
Advances from Federal Home Loan Bank (Note L) 6,488,418 6,281,691
Securities sold under agreements to repurchase (Note M) 601,821 442,874
Medium-term notes (Note N) 1,164,079 676,540
Federal funds purchased, due 1995, at 6.4825% to 6.6075% 250,000 -0-
Accounts payable and accrued expenses 443,693 355,799
Taxes on income (Note P) 294,508 364,235
----------- -----------
28,461,908 25,543,623

Subordinated notes (Note O) 1,221,559 1,220,061

Stockholders' equity (Notes Q and R):
Preferred stock, par value $1.00:
Authorized 20,000,000 shares
Issued and outstanding, none
Common stock, par value $.10:
Authorized 200,000,000 shares
Issued and outstanding 58,589,955 and 63,928,935 shares 5,859 6,393
Paid-in capital 45,689 40,899
Retained earnings - substantially restricted 1,929,740 1,933,593
----------- -----------
1,981,288 1,980,885
Unrealized gains on securities available for sale 18,986 84,719
----------- -----------
Total Stockholders' Equity 2,000,274 2,065,604
----------- -----------
$31,683,741 $28,829,288
=========== ===========

PAGE F-3

GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF NET EARNINGS
(Dollars in thousands except per share figures)

Year Ended December 31
--------------------------------------
1994 1993 1992
---------- ---------- ----------

Interest Income:
Interest on loans $1,649,413 $1,637,764 $1,740,845
Interest on mortgage-backed securities 103,927 138,874 178,010
Interest and dividends on investments 123,137 93,534 65,655
---------- ---------- ----------
1,876,477 1,870,172 1,984,510
Interest Expense:
Interest on customer deposits (Note K) 714,353 705,700 844,710
Interest on advances 268,952 273,816 268,320
Interest on repurchase agreements 37,620 36,023 65,779
Interest on other borrowings 134,182 121,875 88,371
---------- ---------- ----------
1,155,107 1,137,414 1,267,180
---------- ---------- ----------
Net Interest Income 721,370 732,758 717,330
Provision for loan losses 62,966 65,837 43,218
---------- ---------- ----------
Net Interest Income after Provision for
Loan Losses 658,404 666,921 674,112
Non-Interest Income:
Fees 28,816 31,061 24,458
Gain (loss) on the sale of securities and
mortgage-backed securities (120) 22,541 4,058
Other 8,790 8,440 12,601
---------- ---------- ----------
37,486 62,042 41,117
Non-Interest Expense:
General and administrative:
Personnel 150,220 132,472 118,553
Occupancy 44,472 40,443 38,521
Deposit insurance 40,220 35,706 37,621
Advertising 10,761 10,782 8,968
Other 57,246 53,764 47,212
---------- ---------- ----------
302,919 273,167 250,875
Amortization of goodwill arising
from acquisitions (Note B) 2,589 (1,586) 661
---------- ---------- ----------
305,508 271,581 251,536
---------- ---------- ----------
Earnings Before Taxes on Income 390,382 457,382 463,693
Taxes on income (Note P) 159,933 183,528 180,155
---------- ---------- ----------
Net Earnings $ 230,449 $ 273,854 $ 283,538
========== ========== ==========

Net earnings per share $3.71 $4.28 $4.46
===== ===== =====

See notes to consolidated financial statements.

PAGE F-4
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Dollars in thousands except per share figures)

Unrealized Gains Total
Common Paid-in Retained on Securities Stockholders'
Stock Capital Earnings Available For Sale Equity
------- ------- ---------- ------------------ -------------

Balance at January 1, 1992 $6,350 $26,879 $1,415,906 $1,449,135

Common stock issued upon
exercise of stock options,
including tax benefits -
425,890 shares 42 9,307 -0- 9,349

Net earnings -0- -0- 283,538 283,538

Cash dividends on common stock
($.23 per share) -0- -0- (14,624) (14,624)
------ ------- ---------- ----------
Balance at December 31, 1992 6,392 36,186 1,684,820 1,727,398

Common stock issued upon
exercise of stock options,
including tax benefits -
208,125 shares 21 4,713 -0- 4,734

Net earnings -0- -0- 273,854 273,854

Cash dividends on common stock
($.27 per share) -0- -0- (17,280) (17,280)

Purchase and retirement of 204,000
shares of Company stock (Note Q) (20) -0- (7,801) (7,821)

Unrealized gains on securities
available for sale -0- -0- -0- $ 84,719 84,719
------ ------- ---------- -------- ----------
Balance at December 31, 1993 6,393 40,899 1,933,593 84,719 2,065,604

Common stock issued upon
exercise of stock options,
including tax benefits -
222,200 shares 22 4,790 -0- 4,812

Net earnings -0- -0- 230,449 230,449

Cash dividends on common stock
($.31 per share) -0- -0- (19,220) (19,220)

Purchase and retirement of 5,561,180
shares of Company stock (Note Q) (556) -0- (215,082) (215,638)

Change in unrealized gains on
securities available for sale -0- -0- -0- (65,733) (65,733)
------ ------- ---------- -------- ----------
Balance at December 31, 1994 $5,859 $45,689 $1,929,740 $ 18,986 $2,000,274
====== ======= ========== ======== ==========

See notes to consolidated financial statements.

PAGE F-5
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)

Year Ended December 31
----------------------------------------
1994 1993 1992
----------- ----------- -----------

Cash Flows From Operating Activities:
Net earnings $ 230,449 $ 273,854 $ 283,538
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for loan losses 62,966 65,837 43,218
Amortization of loan fees and discounts (28,832) (45,666) (53,125)
Depreciation and amortization 19,454 13,978 14,990
Reduction of a valuation allowance on investments -0- (24,000) (4,000)
Loans originated for sale (93,951) (442,880) (278,346)
Sales of loans originated for sale 146,115 432,362 280,832
Decrease (increase) in interest earned but uncollected (27,376) (17,357) 11,955
Federal Home Loan Bank stock dividends (19,007) (12,744) (4,598)
Decrease (increase) in prepaid expenses and other assets (91,751) 26,020 (51,777)
Increase (decrease) in accounts payable and accrued
expenses 87,894 (5,327) 37,860
Increase (decrease) in taxes on income (23,448) 72,828 179,301
Other, net (20,019) (12,806) 1,571
----------- ----------- -----------
Net cash provided by operating activities 242,494 324,099 461,419

Cash Flows From Investing Activities:
New loan activity:
New real estate loans originated for portfolio (6,543,702) (5,968,997) (6,176,744)
Real estate loans purchased (68,926) (13,567) (4,678)
Other, net 3,816 25,836 47,390
----------- ----------- -----------
(6,608,812) (5,956,728) (6,134,032)
Real estate loan principal payments:
Monthly payments 600,879 574,459 502,431
Payoffs, net of foreclosures 2,232,214 2,852,722 3,230,825
Refinances 326,447 388,171 374,363
----------- ----------- -----------
3,159,540 3,815,352 4,107,619
Purchases of mortgage-backed securities available for sale (1,656) -0- -0-
Purchases of mortgage-backed securities held to maturity (47,086) (302,313) (343,736)
Sales of mortgage-backed securities available for sale 121 -0- -0-
Sales of mortgage-backed securities held to maturity -0- 138 243
Repayments of mortgage-backed securities 310,704 645,647 552,045
Proceeds from sales of real estate 217,965 206,009 145,247
Purchases of securities available for sale (2,623,315) (4,326,544) (1,388,319)
Sales and maturities of securities available for sale 2,732,562 3,771,617 1,227,427
Decrease (increase) in other investments 3,500 (569,697) 257,204
Purchases of Federal Home Loan Bank stock -0- (79,713) (1,440)
Redemptions of Federal Home Loan Bank stock 7,775 52,969 6,111
Additions to premises and equipment (58,827) (37,496) (15,462)
----------- ----------- -----------
Net cash used in investing activities (2,907,529) (2,780,759) (1,587,093)

See notes to consolidated financial statements

Year Ended December 31
----------------------------------------
1994 1993 1992
----------- ----------- -----------

Cash Flows From Financing Activities:
Customer deposit activity:
Increase (decrease) in deposits, net 1,211,544 368,749 (1,008,304)
Interest credited 585,361 567,489 676,040
1,796,905 936,238 (332,264)

Additions to Federal Home Loan Bank advances 304,500 1,701,200 2,428,850
Repayments of Federal Home Loan Bank advances (98,034) (919,195) (1,088,000)
Increase (decrease) in securities sold under agreements
to repurchase 158,947 (113,836) (95,503)
Proceeds from medium-term notes 499,696 609,235 66,766
Repayments of medium-term notes (12,865) (14,500) (152,305)
Proceeds from federal funds purchased 250,000 -0- -0-
Proceeds from subordinated debt -0- 297,008 295,616
Dividends on common stock (19,220) (17,280) (14,624)
Purchase and retirement of Company stock (215,638) (7,821) -0-
----------- ----------- -----------
Net cash provided by financing activities 2,664,291 2,471,049 1,108,536
----------- ----------- -----------
Net Increase (Decrease) in Cash (744) 14,389 (17,138)
Cash at beginning of period 243,185 228,796 245,934
----------- ----------- -----------
Cash at end of period $ 242,441 $ 243,185 $ 228,796
=========== =========== ===========
Supplemental cash flow information:
Cash paid for:
Interest $ 1,152,572 $ 1,176,338 $ 1,253,610
Income taxes 182,332 112,970 51,917
Cash received for interest and dividends 1,849,101 1,852,815 1,996,465
Noncash investing activities:
Loans transferred to foreclosed real estate 246,612 234,149 172,920
Securities transferred to available for sale -0- 845,786 -0-
Mortgage-backed securities transferred to available
for sale -0- 1,114,069 -0-
Mortgage-backed securities transferred from available
for sale to held to maturity (at fair value) 453,564 -0- -0-

PAGE F-6
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE A - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of Golden
West Financial Corporation, a Delaware corporation, and its wholly owned
subsidiaries (the Company or Golden West). World Savings and Loan Association,
a federally chartered association (the Association or World Savings), is the
Company's principal operating subsidiary with $31 billion in assets on
December 31, 1994. Intercompany accounts and transactions have been eliminated.

Cash and Investments

The Association is required by regulation to maintain liquid assets in
the form of cash and securities approved by federal regulations at a monthly
average of not less than 5% of customer deposits and short-term borrowings.

Effective December 31, 1993, the Company adopted Statement of
Financial Accounting Standards No. 115 (FAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." FAS 115 establishes classifications
of investments into three categories: held to maturity, trading, and available
for sale. In accordance with FAS 115, the Company modified its accounting
policies as of December 31, 1993, to identify investment securities as either
held to maturity or available for sale. The Company has no trading securities.
Held to maturity securities are recorded at cost with any discount or premium
amortized using a method that is not materially different from the interest
method. Securities held to maturity are recorded at cost because the Company
has the ability to hold these securities to maturity and because it is
Management's intention to hold them to maturity. At December 31, 1994, the
Company had no securities held to maturity. Securities available for sale
increase the Company's portfolio management flexibility for investments and are
reported at fair value. Net unrealized gains and losses are excluded from
earnings and reported net of applicable income taxes as a separate component of
stockholders' equity until realized. Gains or losses on sales of securities are
realized and recorded in earnings at the time of sale and are determined by the
difference between the net sales proceeds and the cost of the security, using
specific identification, adjusted for any unamortized premium or discount. The
Company has other investments which are recorded at cost with any discount or
premium amortized using a method that is not materially different from the
interest method.

Mortgage-Backed Securities

FAS 115 also requires the same three classifications for mortgage-
backed securities (MBS): held to maturity, trading, and available for sale. In
accordance with FAS 115, the Company modified its accounting policies as of
December 31, 1993, to identify MBS as either held to maturity or available for
sale. The Company has no trading MBS. Mortgage-backed securities held to
maturity are recorded at cost because the Company has the ability to hold these
MBS to maturity and because management intends to hold these securities to
maturity. Premiums and discounts on MBS are amortized or accreted using the
interest method, also known as the level yield method, over the estimated life
of the security. MBS available for sale are reported at fair value, with
unrealized gains and losses excluded from earnings and reported net of
applicable income taxes as a separate component of stockholders' equity until
realized. Gains or losses on sales of MBS are realized and recorded in earnings
at the time of sale and are determined by the difference between the net sales
proceeds and the cost of MBS, using specific identification, adjusted for any
unamortized premium or discount. Prior to December 31, 1993, all MBS were
recorded at amortized cost.

PAGE F-7
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

Loans Receivable

The Association's real estate loan portfolio consists primarily of
long-term loans collateralized by first trust deeds on single-family residences
and multi-family residential property. In addition to real estate loans, the
Association makes loans on the security of savings accounts.

The adjustable rate mortgage (ARM) is the Association's primary real
estate loan. The ARM carries an interest rate that may change as often as
monthly, based on movements in certain cost of funds or other indexes. Interest
rate changes and monthly payments of principal and interest may be subject to
maximum increases or decreases. Negative amortization may occur during periods
when payments are limited. The Association also offers "modified" ARMs, loans
that offer a low fixed rate generally from 1% to 3% below the contract rate for
an initial period, usually three to 36 months.

The Association does make a limited number of loans that are held for
sale, primarily fixed-rate loans. These loans are usually originated against
firm commitments to sell. These loans are recorded at the lower of cost or
market.

The Company adopted Statement of Financial Accounting Standards
No. 114 (FAS 114), "Accounting by Creditors for Impairment of a Loan," in the
fourth quarter of 1993, retroactive to January 1, 1993. FAS 114 requires that
impaired loans be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate. As a practical
expedient, impairment may be measured based on the loan's observable market
price or the fair value of the collateral if the loan is collateral dependent.
When the measure of the impaired loan is less than the recorded investment in
the loan, the impairment is recorded through a valuation allowance. The
valuation allowance and provision for loan losses are adjusted for changes in
the present value of impaired loans for which impairment is measured based on
the present value of expected future cash flows or for the changes in the
appraised value of the loans that are collateral dependent. The Company had
previously measured loan impairment in accordance with the methods prescribed
in FAS 114. As a result, no additional loss provisions were required by early
adoption of the pronouncement.

FAS 114 requires that impaired loans for which foreclosure is probable
should be accounted for as loans. As a result, $16,258 of in-substance
foreclosed loans, with a valuation allowance of $7,267, were reclassified from
real estate held for sale to loans receivable at December 31, 1993.

In October 1994, Statement of Financial Accounting Standards No. 118
(FAS 118) was issued as an amendment of FAS 114. FAS 118 allows a creditor to
use existing methods for recognizing interest income on an impaired loan and
modifies disclosure requirements concerning impaired loans. The only effect of
FAS 118 on the Company's financial statements is the additional disclosure in
NOTE G.

Loan origination fees and certain direct loan origination costs are
deferred and amortized, as an interest income yield adjustment, over the life of
the related loans using the interest method.

"Fees," which include fees for prepayment of loans, income for
servicing loans, late charges for delinquent payments, fees from customer
deposit accounts, and miscellaneous fees, are recorded when collected.

Premiums and discounts on purchased loans, including premiums and
discounts arising from acquisitions of other associations, are generally
amortized using the interest method over the actual life of the loans.

Nonperforming assets consist of loans 90 days or more delinquent, with
balances not reduced for loan loss reserves, and real estate owned through
foreclosure. For loans past due 90 days or more, all interest earned but
uncollected is fully reserved.

PAGE F-8
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

Troubled debt restructured consists of loans that have been modified
by the lender to grant a concession to the borrower because of a perceived
temporary weakness in the collateral and/or borrower.

Real Estate Held for Sale or Investment

Real estate held for sale or investment is comprised primarily of
improved property acquired through foreclosure. All real estate owned is
recorded at the lower of cost or fair value. Included in the fair value is the
estimated selling price in the ordinary course of business less estimated costs
to repair, hold, and dispose of the property. Costs relating to holding
property, net of rental and option income, are expensed in the current period.
Gains on the sale of real estate are recognized at the time of sale. Losses
realized and expenses incurred in connection with the disposition of foreclosed
real estate are charged to current earnings.

Provision for Loan Losses

The Company provides valuation allowances for probable losses on loans
and on real estate owned when any significant and permanent decline in value is
identified. Additions to and reductions from allowances are reflected in
current earnings. Periodic reviews are made of major loans and real estate
owned. Major lending areas are regularly reviewed to determine potential
problems. Where indicated, valuation allowances are established or adjusted.
In estimating loan losses, consideration is given to the estimated sale price,
cost of refurbishing, payment of delinquent taxes, cost of disposal, and cost of
holding the property.

Goodwill

Positive goodwill, or the excess of the cost over the fair value of
net assets acquired resulting from acquisitions, of $222,524 (1994) and
$235,853 (1993) is stated net of accumulated amortization of $199,693 (1994) and
$184,284 (1993). Negative goodwill, or the excess of the fair value of net
assets acquired over the cost resulting from acquisitions, of $86,279 (1994) and
$99,099 (1993) is shown net of accumulated amortization of $59,921 (1994) and
$47,101 (1993). Positive and negative goodwill are being amortized on the
straight-line method over periods ranging from 5 to 40 years. See NOTE B for
additional information.

Securities Sold Under Agreements to Repurchase

The Company enters into sales of securities under agreements to
repurchase (reverse repurchase agreements) only with selected dealers. Fixed-
coupon reverse repurchase agreements are treated as financings and the
obligations to repurchase securities sold are reflected as a liability in the
Consolidated Statement of Financial Condition. The securities underlying the
agreements remain in the asset accounts.

Derivative Financial Instruments

The Company utilizes a variety of derivative financial instruments as
a part of its interest rate risk management strategy. The most frequently used
derivative products are various types of interest rate swaps. However, interest
rate caps, floors, futures, options, and forwards are also utilized. The
Company does not hold any derivative financial instruments for trading purposes.

An interest rate swap is an agreement between two parties in which one
party exchanges cash payments based on a fixed or floating rate of interest for
a counterparty's cash payment based on a floating rate of interest. The amounts
to be paid are defined by agreement and determined by applying the specified
interest rates to a notional principal amount. Interest rate swap agreements
are entered into to limit the impact of changes in interest rates on customer
deposits, mortgage loans, or other specified assets or borrowings. Some

PAGE F-9
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

interest rate swaps are entered into with starting dates in the future in
anticipation of future prepayments on fixed-rate assets. The interest rate
differential paid or received on interest rate swap agreements is recognized
over the life of the agreements, with income and expense recorded in the same
category as the related balance sheet item. The related balance sheet item is
generally a pool of assets or liabilities with similar interest rate
characteristics.

An interest rate cap is an agreement between two parties in which one
party pays a fee for the right to receive a payment from a counterparty based on
the excess, if any, of an open market floating rate over a base rate applied to
a notional principal amount. The excess that may be received on interest rate
cap agreements limits the impact of changes in interest rates. Amounts that may
be received on interest rate cap agreements and fees paid to purchase the
agreements are recognized over the life of the agreements, with income and
expense recorded in the same category as the related balance sheet item. The
related balance sheet item is generally a pool of assets or liabilities with
similar interest rate characteristics.

Futures and option contracts are either an obligation or right,
respectively, to buy or sell an interest in a financial commodity on a specific
day for a preset price. Futures contracts and long put options for futures
contracts for Eurodollars, Treasury Bills, and interest rate contracts may be
entered into by the Company to limit the Company's sensitivity to changes in
interest rates. Gains and losses on futures contracts are deferred until the
contracts are closed, at which time gains and losses are included in the cost
basis of the related assets and liabilities and amortized, using the straight-
line or level yield method, into interest income or expense over the remaining
life of the asset or liability.

Taxes on Income

The Company files consolidated federal income tax returns with its
subsidiaries. The provision for federal and state taxes on income is based on
taxes currently payable and taxes expected to be payable in the future as a
result of events that have been recognized in the financial statements or tax
returns.

The Association is permitted by the Internal Revenue Code to deduct
from taxable income an annual addition to a reserve for bad debts subject to
certain limitations. An effective rate of 8% of taxable income has been used in
computing the amount of the addition to the bad debt reserve. In the event
distributions (which are subject to the regulatory restrictions described
below) are made from these reserves, such distributions will be subject to
federal income taxes at the then prevailing corporate rates. It is not
contemplated that accumulated reserves will be used in a manner that will create
income tax liabilities.

In the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes."
FAS 109 required a change from the deferred to the liability method of computing
deferred income taxes. The Company has applied FAS 109 prospectively. The
consolidated financial statements presented for the years prior to 1993 reflect
income taxes under the deferred method under previous accounting standards.

Regulatory Capital Requirements

The Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (FIRREA) established capital standards. Under FIRREA, thrifts must have
core capital equal to 3% of adjusted total assets and have tangible capital
equal to 1.5% of adjusted total assets. FIRREA also established risk-based
capital standards as a percentage of risk-weighted assets of 8% after
December 30, 1992.

PAGE F-10
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

At December 31, the Association had the following regulatory capital
calculated in accordance with FIRREA's capital standards:

1994 1993
----------------------------------------- ---------------------------------------
ACTUAL REQUIRED ACTUAL REQUIRED
------------------- ------------------ ------------------- ------------------
Capital Ratio Capital Ratio Capital Ratio Capital Ratio
---------- ------ ---------- ----- ---------- ------ ---------- -----

Tangible $1,931,375 6.26% $ 462,564 1.50% $2,030,992 7.27% $ 419,052 1.50%
Core 2,047,016 6.64 925,129 3.00 2,240,518 8.02 838,103 3.00
Risk-based 2,353,781 13.54 1,390,391 8.00 2,533,738 17.42 1,163,650 8.00

The Office of Thrift Supervision (OTS) has adopted rules based upon
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized. The rules
provide that a savings association is "well capitalized" if its total risk-based
capital ratio is 10% or greater, its Tier 1 risk-based capital ratio is 6% or
greater, its leverage ratio is 5% or greater, and the institution is not subject
to a capital directive.

As used herein, total risk-based capital ratio is the ratio of total
capital to risk-weighted assets, Tier 1 risk-based capital ratio means the ratio
of core capital to risk-weighted assets, and leverage ratio is the ratio of core
capital to adjusted total assets, in each case as calculated in accordance with
current OTS capital regulations. Under these regulations, World Savings is
deemed to be "well capitalized."

At December 31, the Association had the following regulatory capital
calculated in accordance with FDICIA's capital standards:

1994 1993
------------------------------------------ ----------------------------------------
ACTUAL WELL CAPITALIZED ACTUAL WELL-CAPITALIZED
------------------- ------------------- ------------------- -------------------
Capital Ratio Capital Ratio Capital Ratio Capital Ratio
---------- ------ ---------- ------ ---------- ------ ---------- ------

Leverage $2,047,016 6.64% $1,541,881 5.00% $2,240,518 8.02% $1,396,839 5.00%
Tier 1 risk-based 2,047,016 11.78 1,042,793 6.00 2,240,518 15.40 872,737 6.00
Total risk-based 2,353,781 13.54 1,737,989 10.00 2,533,738 17.42 1,454,562 10.00

Retained Earnings

Under OTS regulations, the OTS must be given at least 30 days' advance
notice by the Association of any proposed dividend to be paid to the Company.
Under OTS regulations, World Savings is classified as a Tier 1 association and
is, therefore, allowed to distribute dividends up to 100% of its net income in
any year plus one-half of its capital in excess of the OTS fully phased-in
capital requirement as of the end of the prior year.

At December 31, 1994, $328 million of the Association's retained
earnings had not been subjected to federal income taxes due to the application
of the bad debt deduction, and $1.8 billion of the Association's retained
earnings were available for the payment of cash dividends without the imposition
of additional federal income taxes. The Company is not subject to the same tax
and reporting restrictions as is World Savings.

Earnings Per Share

Earnings per share have been computed by dividing net earnings by the
weighted average number of common shares outstanding, 62,128,719 (1994),
63,977,876 (1993), and 63,578,168 (1992).

PAGE F-11
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE B - Business Combinations/Divestitures

On May 6, 1994, the Company acquired $78 million in deposits in
New Jersey from Polifly Savings and Loan.

On August 13, 1993, the Company acquired $320 million in deposits and
seven branches in Arizona from PriMerit Bank. On September 17, 1993, the
Company sold $133 million of savings in two Ohio branches to Trumbull Savings
and Loan. On October 15, 1993, the Company sold its remaining Ohio branches
with $131 million in deposits to Fifth Third Bancorp.

On March 6, 1992, the Company sold its two Washington branches with
$37 million in deposits.

The acquisitions described above are not material to the financial
position or net earnings of the Company and pro forma information is not
deemed necessary.

NOTE C - Securities Available for Sale

The following is a summary of securities available for sale:

December 31, 1994
----------------------------------------------------
Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------

Certificates of deposit and short-term bank notes $ 30,004 $ -0- $ 35 $ 29,969
U.S. Treasury and Government agency obligations 644,279 275 7,485 637,069
Collateralized mortgage obligations 692,065 -0- 23,937 668,128
Commercial paper 1,076 193 -0- 1,269
Equity securities 98,504 66,172 12,266 152,410
---------- ------- ------- ----------
$1,465,928 $66,640 $43,723 $1,488,845
========== ======= ======= ==========

December 31, 1993
----------------------------------------------------
Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------

Certificates of deposit and short-term bank notes $ 482,069 $ 33 $ 2 $ 482,100
U.S. Treasury and Government agency obligations 419,056 821 62 419,815
Collateralized mortgage obligations 275,304 865 761 275,408
Commercial paper 230,385 4 -0- 230,389
Bankers acceptances 58,395 -0- -0- 58,395
Equity securities 101,592 68,887 -0- 170,479
---------- ------- ---- ----------
$1,566,801 $70,610 $825 $1,636,586
========== ======= ==== ==========

The weighted average portfolio yields on securities available for sale
were 5.24% and 3.93% at December 31, 1994, and 1993, respectively. Sales of
securities held for sale resulted in realized gains of $83 (1994) and $22 (1993)
and realized losses of $226 (1994) and $13 (1993).

PAGE F-12
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

At December 31, 1994, the securities available for sale had maturities
as follows:

Amortized Fair
Maturity Cost Value
------------------- ---------- ----------

No maturity $ 98,504 $ 152,410
1995 499,138 496,554
1996 through 1999 737,604 715,091
2000 through 2004 96,195 92,204
2005 and thereafter 34,487 32,586
---------- ----------
$1,465,928 $1,488,845
========== ==========

NOTE D - Other Investments

At following is a summary of other investments not subject to FAS 115:

December 31
-----------------------
1994 1993
Cost Cost
-------- --------

Federal funds $152,000 $ 25,000
Short-term repurchase agreements collateralized
by mortgage-backed securities 382,600 513,100
-------- --------
$534,600 $538,100
======== ========

At December 31, 1994, and 1993, cost approximated fair market value
and there were no unrealized gains or losses.

The weighted average portfolio yields on other investments were 5.92%
and 3.42% at December 31, 1994, and 1993, respectively. Sales of other
investments resulted in gains of $-0- (1994), $24,000 (1993), and $4,009 (1992)
and losses of $-0- (1994), $1,473 (1993), and $-0- (1992).

As of December 31, 1994, the entire other investments portfolio
matures in 1995.

NOTE E - Mortgage-Backed Securities Available for Sale

Mortgage-backed securities available for sale are summarized as
follows:

December 31, 1994
--------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------

FNMA $130,528 $2,580 $2,658 $130,450
FHLMC 108,676 2,900 669 110,907
GNMA 76,323 4,282 101 80,504
Other 1,485 41 48 1,478
-------- ------ ------ --------
$317,012 $9,803 $3,476 $323,339
======== ====== ====== ========

PAGE F-13
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

December 31, 1993
-----------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------

FNMA $ 439,817 $25,957 $268 $ 465,506
FHLMC 326,354 24,480 27 350,807
GNMA 271,390 24,164 25 295,529
Other 2,115 112 -0- 2,227
---------- ------- ---- ----------
$1,039,676 $74,713 $320 $1,114,069
========== ======= ==== ==========

The weighted average portfolio yields on mortgage-backed securities
available for sale were 9.57% and 9.35% at December 31, 1994, and 1993,
respectively. Principal proceeds from the sales of securities from the
mortgage-backed securities available for sale portfolio were $120 (1994) and
$-0- (1993) and resulted in realized gains of $-0- (1994) and $-0- (1993) and
realized losses of $1 (1994) and $-0- (1993).

At December 31, 1994, mortgage-backed securities available for sale
had contractual maturities as follows:

Amortized Fair
Maturity Cost Value
------------------- --------- --------

1996 through 1999 $ 2,137 $ 2,144
2000 through 2004 1,803 1,860
2005 and thereafter 313,072 319,335
-------- --------
$317,012 $323,339
======== ========

NOTE F - Mortgage-Backed Securities Held to Maturity

Mortgage-backed securities held to maturity are summarized as follows:

December 31, 1994
----------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------

FNMA $656,142 $ 95 $39,779 $616,458
FHLMC 113,977 249 342 113,884
GNMA 100,920 199 25 101,094
-------- ---- ------- --------
$871,039 $543 $40,146 $831,436
======== ==== ======= ========

December 31, 1993
----------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- --------

FNMA $408,467 $7,103 $3,327 $412,243
======== ====== ====== ========

The weighted average portfolio yields of mortgage-backed securities
held to maturity were 7.99% and 6.94% at December 31, 1994, and 1993,
respectively. Principal proceeds from the sales of securities from the
mortgage-backed securities held to maturity portfolio amounted to $-0- (1994),
$144 (1993), and $252 (1992) and resulted in realized gains of $-0- (1994),
$7 (1993), and $9 (1992) and realized losses of $-0- (1994), $-0- (1993), and
$-0- (1992).

PAGE F-14
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

At December 31, 1994, mortgage-backed securities held to maturity had
contractual maturities as follows:

Amortized Fair
Maturity Cost Value
------------------- --------- --------

1996 through 1999 $ 146 $ 145
2000 through 2004 40 41
2005 and thereafter 870,853 831,250
-------- --------
$871,039 $831,436
======== ========

NOTE G - Loans Receivable

December 31
-----------------------------
1994 1993
----------- -----------

Loans collateralized primarily by first deeds of trust:
One- to four-family dwelling units $23,217,564 $20,197,613
Over four-family dwelling units 3,946,446 3,785,673
Commercial property 134,189 153,396
Construction loans -0- 580
Land 1,851 2,407
----------- -----------
27,300,050 24,139,669
Loans on savings accounts 30,460 32,012
----------- -----------
27,330,510 24,171,681
Less:
Undisbursed loan funds 2,781 1,882
Unearned fees and discounts 105,314 112,751
Unamortized discount arising from acquisitions 27,146 37,779
Allowance for loan losses 124,003 106,698
----------- -----------
$27,071,266 $23,912,571
=========== ===========

In addition to loans receivable, the Association services loans for
others. At December 31, 1994, and 1993, the amount of loans serviced for others
was $843,963 and $806,504, respectively.

At December 31, 1994, and 1993, the Company had $4 million and
$56 million, respectively, in loans held for sale, all of which are carried at
the lower of cost or market.

A summary of the changes in the allowance for loan losses is as
follows:

Year Ended December 31
------------------------------
1994 1993 1992
-------- -------- -------

Balance at January 1 $106,698 $ 70,924 $48,036
Provision for loan losses charged to expense 62,966 65,837 43,218
Less loans charged off (46,556) (38,475) (21,227)
Recoveries 895 1,145 897
Reclassification of in-substance foreclosure allowances -0- 7,267 -0-
-------- -------- -------
Balance at December 31 $124,003 $106,698 $70,924
======== ======== =======

PAGE F-15
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

The following is a summary of nonperforming loans, troubled debt
restructured, and other impaired loans:

December 31
---------------------
1994 1993
-------- --------

Nonperforming loans $284,103 $330,062
Troubled debt restructured 72,827 37,190
Other impaired loans 40,504 25,769
-------- --------
$397,434 $393,021
======== ========

The portion of the allowance for loan losses that was provided for
impaired loans was $15,618 and $10,600 at December 31, 1994, and 1993,
respectively. The average recorded investment in total impaired loans was
$395,228 and $339,338 during 1994 and 1993, respectively. The amount of
interest income recognized on total impaired loans was $16,449 and $15,124
during 1994 and 1993, respectively.

NOTE H - Interest Earned But Uncollected

December 31
---------------------
1994 1993
-------- --------

Loans receivable $108,130 $ 99,657
Mortgage-backed securities 7,135 10,368
Interest rate swaps 81,684 53,358
Other 5,507 11,697
-------- --------
$202,456 $175,080
======== ========

NOTE I - Real Estate Held for Sale or Investment

December 31
-------------------
1994 1993
------- -------

Real estate acquired through foreclosure of loans, net of
allowance for losses $70,981 $62,724
Real estate in judgement, net of allowance for losses 390 1,366
Real estate held for investment, net of allowance for
losses 846 3,066
------- -------
$72,217 $67,156
======= =======

NOTE J - Premises and Equipment

December 31
---------------------
1994 1993
-------- --------

Land $ 47,509 $ 43,738
Buildings and leasehold improvements 143,065 122,465
Furniture, fixtures and equipment 123,688 102,056
-------- --------
314,262 268,259
Accumulated depreciation and amortization 112,387 105,508
-------- --------
$201,875 $162,751
======== ========

PAGE F-16
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

Depreciation and amortization, computed by the straight-line method
for financial statement purposes, are provided over the useful lives of the
various classes of premises and equipment.

The aggregate rentals under long-term operating leases on land or
premises in effect on December 31, 1994, and which expire between 1995 and 2064,
amounted to approximately $134,927. The approximate minimum payments during the
five years ending 1999 are $13,916 (1995), $13,527 (1996), $12,482 (1997),
$11,204 (1998), and $9,592 (1999). Certain of the leases provide for options to
renew and for the payment of taxes, insurance, and maintenance costs. The
rental expense for the year amounted to $16,979 (1994), $15,579 (1993), and
$14,823 (1992).

NOTE K - Customer Deposits

December 31
---------------------------------------
1994 1993
------------------ ------------------
Rate* Amount Rate* Amount
----- ----------- ----- -----------

Customer deposits by rate:
Interest-bearing checking accounts 1.28% $ 730,290 1.35% $ 736,767
Passbook accounts 2.23 638,905 2.12 611,606
Money market deposit accounts 3.13 1,818,426 2.35 2,378,087
Term certificate accounts with original
maturities of:
4 weeks to 1 year 4.56 5,159,037 3.24 4,334,208
1 to 2 years 4.59 5,636,301 3.85 4,614,059
2 to 3 years 4.85 1,997,826 4.62 1,448,779
3 to 4 years 5.22 817,631 6.11 1,149,108
4 years and over 6.99 2,098,984 6.72 2,021,350
Retail jumbo CDs 5.44 312,413 5.03 109,250
All other 7.78 9,576 7.76 19,270
----------- -----------
$19,219,389 $17,422,484
=========== ===========

*Weighted average interest rate including the impact of hedging

December 31
--------------------------------
1994 1993
----------- -----------

Customer deposits by remaining maturity
at year end:
No contractual maturity $ 3,187,621 $ 3,726,460
Maturity within one year:
1st quarter 3,598,746 3,811,037
2nd quarter 3,319,067 2,991,744
3rd quarter 2,377,766 1,666,045
4th quarter 1,765,131 1,391,652
----------- -----------
11,060,710 9,860,478
1 to 2 years 2,799,980 1,865,989
2 to 3 years 983,797 460,472
3 to 4 years 420,778 651,243
Over 4 years 766,503 857,842
----------- -----------
$19,219,389 $17,422,484
=========== ===========

At December 31, the weighted average cost of deposits was 4.57% (1994)
and 3.92% (1993).

PAGE F-17
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

Interest expense on customer deposits is summarized as follows:

Year Ended December 31
------------------------------
1994 1993 1992
-------- -------- --------

Interest-bearing checking accounts $ 9,463 $ 11,426 $ 12,376
Passbook accounts 19,733 21,043 23,315
Money market deposit accounts 38,430 47,339 75,223
Term certificate accounts 646,727 625,892 733,796
-------- -------- --------
$714,353 $705,700 $844,710
======== ======== ========

NOTE L - Advances from Federal Home Loan Bank

Advances are secured by pledges of $11,085,361 of certain loans and
capital stock of the Federal Home Loan Bank, and these borrowings have
maturities and interest rates as follows:

December 31, 1994
-------------------------------------------------------------------------------------------------------
Receive
Stated Fixed Adjusted
Maturity Amount Rate Swaps Rate*
------------------- ---------- ------ ------- --------

1995 $ 325,469 5.82% (1.45)% 4.37%
1996 170,070 7.93 (1.28) 6.65
1997 400,532 6.38 (0.09) 6.29
1998 1,048,750 5.87 5.87
1999 550,000 4.10 4.10
2000 and thereafter 3,993,597 5.18 (0.09) 5.09
----------
$6,488,418
==========

December 31, 1993
-------------------------------------------------------------------------------------------------------
Treasury Bill
Receive and Eurodollar
Stated Fixed Basis Futures Adjusted
Maturity Amount Rate Swaps Swaps Contracts Rate*
------------------- ---------- ------ ------- ----- -------------- --------

1994 $ 72,549 8.05% 8.05%
1995 325,424 5.83 (3.70)% (0.12)% 2.01
1996 170,051 7.89 (3.27) (0.10) 4.52
1997 150,524 5.73 (0.62) 5.11
1998 1,048,621 3.63 0.03 3.66
1999 and thereafter 4,514,522 3.96 (0.10) 0.04% 0.03 3.93
----------
$6,281,691
==========

*Weighted average interest rate adjusted for hedging

At December 31, the weighted average cost of advances was 5.21% (1994)
and 3.87% (1993).

PAGE F-18
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE M - Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase are collateralized by
government obligations and mortgage-backed securities with a market value of
$657,325 and $483,899 at December 31, 1994, and 1993, respectively.

December 31, 1994
-------------------------------------------------------------------------------------------------------
Pay Receive
Stated Fixed Fixed Adjusted
Maturity Amount Rate Swaps Swaps Rate*
------------------- -------- ------ ----- ------ --------

1995 $595,221 5.29% 1.38% 0.02% 6.69%
1999 and thereafter 6,600 8.09 (3.27) 4.82
--------
$601,821
========

December 31, 1993
-------------------------------------------------------------------------------------------------------
Treasury Bill
Pay Receive and Eurodollar
Stated Fixed Fixed Futures Adjusted
Maturity Amount Rate Swaps Swaps Contracts Rate*
------------------- -------- ------ ----- ------ -------------- --------

1994 $383,213 1.87% 4.15% (0.27)% 0.02% 5.77%
1995 53,061 8.52 8.52
1999 and thereafter 6,600 8.09 (5.11) 2.98
--------
$442,874
========

*Weighted average interest rate adjusted for hedging

At December 31, these liabilities had a weighted average interest rate
of 6.67% (1994) and 6.06% (1993). These borrowings averaged $574,487 (1994) and
$464,091 (1993) and the maximum outstanding at any monthend was $930,072 (1994)
and $773,140 (1993). At the end of 1994 and 1993, respectively, $316,865 and
$205,821 of the agreements to repurchase with broker/dealers were to reacquire
the same securities. Agreements with broker/dealers to repurchase substantially
the same securities amounted to $284,956 (1994) and $237,053 (1993).

PAGE F-19
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE N - Medium-Term Notes

Medium-term notes are unsecured obligations of the Association. They
have maturities and interest rates as follows:

December 31, 1994
------------------------------------------------------------------------------------------
Pay Receive
Stated Fixed Fixed Basis Adjusted
Maturity Amount Rate Swaps Swaps Swaps Rate*
-------- ---------- ------ ------- ------- ----- --------

1995 $ 266,926 5.90% 0.47% 6.37%
1996 697,362 5.38 (0.05)% 0.68% 6.01
1997 199,791 6.05 6.05
----------
$1,164,079
==========

December 31, 1993
------------------------------------------------------------------------------------------
Pay Receive
Stated Fixed Fixed Adjusted
Maturity Amount Rate Swaps Swaps Rate*
-------- -------- ------ ----- ------- --------

1995 $ 66,848 6.03% 6.03%
1996 609,692 5.17 0.15% (1.30)% 4.02
--------
$676,540
========

*Weighted average interest rate adjusted for hedging

PAGE F-20
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE O - Subordinated Notes

December 31
-----------------------------
1994 1993
---------- ----------

Parent:
Subordinated notes, unsecured, due from
1997 to 2003 at coupon rates of 6.00%
to 10.25%, net of unamortized discount
of $7,530 (1994) and $8,818 (1993) $1,022,470 $1,021,182

Association:
Subordinated notes, unsecured, due from
1997 to 2000 at coupon rates of 9.90%
to 10.25%, net of unamortized discount
of $911 (1994) and $1,121 (1993) 199,089 198,879
---------- ----------
$1,221,559 $1,220,061
========== ==========

At December 31, subordinated notes had a weighted average interest
rate of 8.64% (1994) and 8.65% (1993). At December 31, 1994, subordinated notes
had maturities and interest rates as follows:

Maturity Rate* Amount
-------- ------ ----------

1997 10.38% $ 214,439
1998 9.05 199,148
2000 9.31 312,738
2002 8.07 296,794
2003 6.14 198,440
----------
$1,221,559
==========

*Weighted average interest rate

NOTE P - Taxes on Income

The following is a comparative analysis of the provision for federal
and state taxes on income. Income taxes for 1992 have not been restated for
the effect of adopting FAS 109.

Year Ended December 31
----------------------------------
1994 1993 1992
-------- -------- --------

Federal income tax:
Current $121,124 $141,016 $149,678
Deferred 1,765 3,599 (11,622)
State tax:
Current 39,941 42,014 47,019
Deferred (2,897) (3,101) (4,920)
-------- -------- --------
$159,933 $183,528 $180,155
======== ======== ========

PAGE F-21
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

The amounts of net deferred liability included in taxes on income in
the Consolidated Statement of Financial Condition are:

December 31
---------------------
1994 1993
------- --------

Federal income tax $75,396 $111,369
State tax 40,033 53,460

The deferred tax liability results from changes in the amounts of
temporary differences during the year. The components of the net deferred tax
liability are as follows:

December 31
----------------------------
1994 1993
-------- --------

Deferred tax liabilities:
Loan fees and interest income $ 64,116 $ 60,550
FHLB stock dividends 62,524 57,695
Bad debt reserve 39,085 54,458
Unrealized gains on debt and equity securities 13,328 59,459
Depreciation 11,282 10,518
Other deferred tax liabilities 751 1,032
-------- --------
Gross deferred tax liabilities 191,086 243,712

Deferred tax assets:
Provision for losses on loans 47,869 41,293
State taxes 14,112 15,251
Loan discount primarily related to acquisitions 11,460 15,678
Other deferred tax assets 2,216 6,661
-------- --------
Gross deferred tax assets 75,657 78,883
-------- --------
Net deferred tax liability $115,429 $164,829
======== ========

For 1992, deferred tax expense under APB 11 results from timing
differences in the recognition of revenue and expense for tax and financial
statement purposes. The sources of these differences and the tax effects of
each are as follows:

Year Ended December 31
1992
----------------------------
Federal State
-------- -------

Loan fees and interest income $ 506 $ 143
Revenue and expense reported on the
cash basis (4,801) (1,355)
Effect of allowable federal bad debt
deduction applied to timing differences 1,016 -0-
State tax (10,888) -0-
FHLB stock dividends 2,693 760
Other (148) (4,468)
-------- -------
$(11,622) $(4,920)
======== =======

PAGE F-22
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

A reconciliation of income taxes at the federal statutory corporate
rate to the effective tax rate follows:

Year Ended December 31
-----------------------------------------------------------
1994 1993 1992
----------------- ----------------- -----------------
Percent Percent Percent
of of of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
-------- ------- -------- ------- -------- -------

Computed standard
corporate tax expense $136,634 35.0% $160,083 35.0% $157,655 34.0%
Increases (reductions) in
taxes resulting from:
Bad debt deduction based
on a percentage of
income -0- -0- -0- -0- 3,906 0.8
Net financial income,
not subject to income
tax, primarily related
to acquisitions 393 0.1 (3,293) (0.7) (7,773) (1.6)
State tax, net of federal
income tax benefit 24,325 6.2 27,783 6.0 27,785 6.0
Adjustment of deferred
tax liability due to
tax rate increase -0- -0- 1,793 0.4 -0- -0-
Other (1,419) (0.3) (2,838) (0.6) (1,418) (0.3)
-------- ---- -------- ---- -------- ----
$159,933 41.0% $183,528 40.1% $180,155 38.9%
======== ==== ======== ==== ======== ====

In 1993, the Company adopted FAS 109 and elected to apply it
prospectively. In accordance with FAS 109, a deferred tax liability has not
been recognized for the tax bad debt reserve of World Savings and Loan
Association that arose in tax years that began prior to December 31, 1987. At
December 31, 1994, and 1993, the portion of the tax bad debt reserve
attributable to pre-1988 tax years was approximately $252 million. The amount
of unrecognized deferred tax liability at December 31, 1994, and 1993, was
approximately $88 million. This deferred tax liability could be recognized if,
in the future, there is a change in Federal tax law, the savings institution
fails to meet the definition of a "qualified savings institution," certain
distributions are made with respect to the stock of the savings institution,
or the bad debt reserve is used for any purpose other than absorbing bad debt
losses.

NOTE Q - Stockholders' Equity

On October 28, 1993, the Company's Board of Directors authorized the
purchase by the Company of up to 3.2 million shares of Golden West's common
stock. On July 28, 1994, the Company's Board of Directors authorized the
purchase by the Company of an additional 3.1 million shares of Golden West's
common stock. As of December 31, 1994, 5,765,180 of such shares had been
repurchased and retired at a cost of $223 million since October 28, 1993.
During 1994, 5,561,180 of the shares were purchased and retired at a cost of
$216 million.

PAGE F-23
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE R - Stock Options

The Company's 1987 stock option plan authorizes the granting of
options to key employees to purchase up to 7 million shares of the Company's
common stock.

The plan permits the issuance of either non-qualified stock options or
incentive stock options. Under terms of the plan, incentive stock options have
been granted at fair market value as of the date of grant and are exercisable
any time after two to six years and prior to either five or ten years from the
grant date. Non-qualified options have been granted at fair market value as of
the date of grant and are exercisable after two to six years and prior to ten
years and one month from the grant date.

A summary of the transactions of the stock option plan follows:

Average
Price per
Shares Share
--------- ---------

Outstanding, January 1, 1992 2,993,400 $15.94
Granted 278,650 $38.13
Exercised (425,890) $12.15
Canceled (9,300) $26.73
--------- ------
Outstanding, December 31, 1992 2,836,860 $18.66
Granted 329,950 $39.53
Exercised (208,125) $13.54
Canceled (30,100) $29.62
--------- ------
Outstanding, December 31, 1993 2,928,585 $21.26
Granted 381,000 $35.67
Exercised (222,200) $13.46
Canceled (19,800) $37.30
--------- ------
Outstanding, December 31, 1994 3,067,585 $23.51
========= ======

At December 31, shares available for option amounted to
3,104,200 (1994), 3,465,400 (1993), and 3,765,250 (1992); and shares exercisable
amounted to 2,114,335 (1994), 1,792,235 (1993), and 1,225,210 (1992).
Outstanding options at December 31, 1994, were held by 347 employees and had
expiration dates ranging from July 29, 1995, to January 9, 2005.

NOTE S - Financial Instruments with Off-Balance-Sheet Risk and Concentrations of
Credit Risk

As of December 31, 1994, the Company's loans receivable balance was
$27.1 billion. Of that $27.1 billion balance, 78% were California loans, 3%
were Colorado loans, 3% were Illinois loans, 2% were New Jersey loans, 2% were
Texas loans, and 2% were Washington loans. No other single state made up more
than 2% of the total loan portfolio. The majority of these loans are secured by
first deeds of trust on one- to four-family residential property. Economic
conditions and real estate values in the states in which the Company lends are
the key factors that affect the credit risk of the Company's loan portfolio.

PAGE F-24
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

In order to reduce its exposure to fluctuations in interest rates, the
Company is a party to financial instruments with off-balance-sheet risk entered
into in the normal course of business. These financial instruments include
commitments to fund loans; commitments to purchase or sell securities, mortgage-
backed securities, loans, and mortgage derivative products; interest rate swaps
and caps; and futures and options contracts. These instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the consolidated statement of financial condition. The
contract or notional amounts of these instruments reflect the extent of
involvement the Company has in particular classes of financial instruments. To
limit credit exposure, among other things, the Company enters into financial
instrument contracts only with the Federal Home Loan Bank of San Francisco and
with major banks and securities dealers selected by the Company upon the basis
of their creditworthiness and other matters. The Company initially has not
required collateral or other security to support these financial instruments
because of the creditworthiness of the contra parties.

Commitments to originate mortgage loans are agreements to lend to a
customer providing that the customer satisfies the terms of the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Prior to entering each commitment, the
Company evaluates the customer's creditworthiness. The amount of outstanding
loan commitments at December 31, 1994, and 1993, was $412 million and
$350 million, respectively. Most of these commitments were for adjustable rate
mortgages.

The Company enters into commitments to purchase or sell
mortgage-backed securities and other mortgage derivative products. The
commitments generally have a fixed delivery or receipt settlement date. The
Company controls the credit risk of such commitments through credit evaluations,
limits, and monitoring procedures. The interest rate risk of the commitment is
considered by the Company and may be matched with the appropriate funding
sources. Interest rate risk during the commitment period may also be managed
by use of over-the-counter options, options on futures and futures contracts.
The Company had no outstanding commitments to purchase or sell mortgage-backed
securities as of December 31, 1994, and 1993.

Interest rate swaps and caps are utilized to limit the Company's
sensitivity to interest rate changes. The Company is exposed to credit risk in
the event of nonperformance by the other parties to the interest rate swap and
cap agreements; however, the Company does not anticipate nonperformance by the
other parties.

The Company manages the credit risk of its futures contracts, long put
options for futures contracts, interest rate swap agreements, and interest rate
cap agreements through credit approvals, limits, and monitoring procedures. The
contract or notional amount of these contracts does not represent exposure to
credit risk; rather, credit risk relates only to unsettled amounts on contracts.

NOTE T - Derivative Financial Instruments

The Company has entered into interest rate swap and cap agreements
with selected banks and government security dealers to reduce its exposure to
fluctuations in interest rates. The possible inability of counterparties to
satisfy the terms of the contracts exposes the Company to credit risk to the
extent of the net difference between the calculated pay and receive amounts on
each transaction. Net differences of that amount are generally settled
quarterly. The Company has not experienced any credit losses from interest rate
swaps or caps.

The information presented below is based on interest rates at
December 31, 1994. To the extent that rates change, variable interest rate
information will change. The basis swaps are contracts in which the Company
receives an amount based on one interest rate index and pays an amount based on
a different interest rate index. The Company has entered into two basis swap
contracts on which it makes payments based on three

PAGE F-25
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

month LIBOR and in one case receives an amount based on the average Federal
Funds rate published by the Federal Reserve and in the other case receives an
amount based on the Bank Prime Loan rate published by the Federal Reserve. The
forward starting swaps were entered into to convert floating rate assets to
fixed-rate in the future in anticipation of future prepayments of matched fixed-
rate assets. Accrual of interest on forward starting swaps begins at a
predetermined future date. The Company has $125 million and $10 million of
forward starting swaps, which are contractually delayed until 1995 and 1997,
respectively.

The following table illustrates the maturities and weighted average
rates of 1994 derivative financial instruments held by the Company by product
type.

MATURITIES OF 1994 DERIVATIVE FINANCIAL INSTRUMENTS

Maturity
-------------------------------------------------------- Balance at
1995 1996 1997 1998 1999+ December 31, 1994
---------- ---------- -------- ---------- ---------- -----------------

Receive fixed generic swaps:
Notional value $2,114,000 $1,545,000 $252,180 $ 827,983 $ 251,837 $4,991,000
Weighted average receive rate 5.07% 5.19% 6.68% 5.72% 6.70% 5.38%
Weighted average pay rate 5.98% 4.81% 6.18% 5.27% 5.99% 5.51%

Pay fixed generic swaps:
Notional value $ 450,000 $ 435,000 $232,000 $ 209,000 $ 899,095 $2,225,095
Weighted average receive rate 5.78% 5.77% 5.57% 6.16% 5.97% 5.87%
Weighted average pay rate 6.00% 8.05% 6.86% 7.66% 7.32% 7.18%

Basis swaps:
Notional value $ 200,000 $ -0- $ -0- $ -0- $ -0- $ 200,000
Weighted average receive rate 5.84% 0.00% 0.00% 0.00% 0.00% 5.84%
Weighted average pay rate 6.46% 0.00% 0.00% 0.00% 0.00% 6.46%

Forward starting swaps:
Notional value $ -0- $ -0- $ -0- $ 125,000 $ 10,000 $ 135,000
Weighted average receive rate 0.00% 0.00% 0.00% 8.35% 8.68% 8.37%
Weighted average pay rate 0.00% 0.00% 0.00% 6.80% 7.00% 6.81%

Interest rate caps:
Notional value $ 75,000 $ 225,000 $ -0- $ -0- $ -0- $ 300,000
---------- ---------- -------- ---------- ---------- ----------
Total notional value $2,839,000 $2,205,000 $484,180 $1,161,983 $1,160,932 $7,851,095
========== ========== ======== ========== ========== ==========

Total weighted average rate on swaps:
Receive rate 5.24% 5.32% 6.15% 6.08% 6.15% 5.59%
========== ========== ======== ========== ========== ==========
Pay rate 6.02% 5.52% 6.51% 5.86% 7.03% 6.05%
========== ========== ======== ========== ========== ==========

PAGE F-26
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

Activity in derivative financial instruments in summarized as follows:

DERIVATIVE ACTIVITY

For the Years Ended December 31, 1994, 1993, and 1992
(Notional amounts in millions)

Treasury Bill
Receive Pay Forward Interest and Eurodollar
Fixed Fixed Basis Starting Rate Futures
Swaps Swaps Swaps Swaps Caps Contracts
------- ------ ----- -------- -------- --------------

Balance, January 1, 1992 $ 406 $1,983 $ -0- $-0- $ 504 $ 4,700

Additions 677 1,175 200 210 87 17,714
Maturities (155) (527) -0- -0- (139) -0-
Terminations -0- -0- -0- -0- -0- (18,314)
Forward starting becoming effective -0- -0- -0- -0- -0- -0-
------ ------ ----- ---- ----- --------
Balance, December 31, 1992 928 2,631 200 210 452 4,100

Additions 1,807 332 400 -0- 15 9,455
Maturities (29) (381) -0- -0- (30) -0-
Terminations -0- -0- -0- -0- -0- (13,555)
Forward starting becoming effective -0- -0- -0- -0- -0- -0-
------ ------ ----- ---- ----- --------
Balance, December 31, 1993 2,706 2,582 600 210 437 -0-

Additions 2,575 124 200 -0- -0- -0-
Maturities (365) (481) -0- -0- (137) -0-
Terminations -0- -0- (600) -0- -0- -0-
Forward starting becoming effective 75 -0- -0- (75) -0- -0-
------ ------ ----- ---- ----- --------
Balance, December 31, 1994 $4,991 $2,225 $ 200 $135 $ 300 $ -0-
====== ====== ===== ==== ===== ========

Derivatives decreased net interest income by $23 million, $71 million,
and $93 million for the years ended December 31, 1994, 1993, and 1992,
respectively.

NOTE U - Disclosure About Fair Value of Financial Instruments

The Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 107 (FAS 107) requires disclosure of the fair value of
financial instruments for which it is practicable to estimate that value. The
statement provides for a variety of different valuation methods, levels of
aggregation, and assessments of practicability of estimating fair value.

PAGE F-27
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

Fair value estimates are not necessarily more relevant than historical
cost values. Fair values may have limited usefulness in evaluating portfolios
of long-term financial instrument assets and liabilities held by going concerns.
Moreover, there are significant inherent weaknesses in any estimating techniques
employed. Differences in the alternative methods and assumptions selected by
various companies as well as differences in the methodology utilized between
years may, and probably will, significantly limit comparability and usefulness
of the data displayed. For these reasons, as well as others, management
believes that the disclosure presented herein has limited relevance to the
Company and its operations.

The values presented are based upon information as of December 31,
1994, and 1993, and do not reflect any subsequent changes in fair value. Fair
values may have changed significantly following the balance sheet dates. The
estimates presented herein are not necessarily indicative of amounts that could
be realized in a current transaction.

The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:

The historical cost amounts approximate the fair value of the
following financial instruments: cash, interest earned but
uncollected, investment in capital stock of Federal Home Loan Bank,
other investments, customer demand deposits, securities sold under
agreements to repurchase with brokers/dealers due within 90 days,
and federal funds purchased.

Fair values are based on quoted market prices for securities
available for sale, mortgage-backed securities available for sale,
mortgage-backed securities held to maturity, medium-term notes, and
subordinated notes.

Fair values are estimated using projected cash flows present valued
at replacement rates currently offered for instruments of similar
remaining maturities for: customer term deposits, advances from
Federal Home Loan Bank, and consumer repurchase agreements.

For loans receivable and loan commitments, the fair value is
estimated by present valuing projected future cash flows, using
current rates at which similar loans would be made to borrowers and
with assumed rates of prepayment. Adjustment for credit risk is
estimated based upon the classification status of the loans.

The fair value of interest rate caps is derived from current market
prices of similar interest rate cap instruments. The fair value of
interest rate swap agreements is the estimated amount the Company
would receive or pay to terminate the swap agreements on the
reporting date, considering current interest rates.

PAGE F-28
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

December 31
----------------------------------------------------------
1994 1993
--------------------------- ---------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------

Financial Assets:
Cash $ 242,441 $ 242,441 $ 243,185 $ 243,185
Securities available for sale 1,488,845 1,488,845 1,636,586 1,636,586
Other investments 534,600 534,600 538,100 538,100
Mortgage-backed securities available for sale 323,339 323,339 1,114,069 1,114 069
Mortgage-backed securities held to maturity 871,039 831,436 408,467 412,243
Loans receivable 27,071,266 26,914,642 23,912,571 24,166,244
Interest earned but uncollected 202,456 202,456 175,080 175,080
Investment in capital stock of Federal Home
Loan Bank 332,940 332,940 325,737 325,737

Financial Liabilities:
Customer deposits 19,219,389 19,138,503 17,422,484 17,564,644
Advances from Federal Home Loan Bank 6,488,418 6,300,271 6,281,691 6,035,503
Securities sold under agreements to
repurchase 601,821 602,117 442,874 447,163
Medium-term notes 1,164,079 864,210 676,540 686,581
Federal funds purchased 250,000 250,000 -0- -0-
Subordinated notes 1,221,559 1,053,758 1,220,061 1,349,037

Off-Balance Sheet Instruments (Unrealized Gains (Losses)):

December 31
------------------------------------------------------------------------------
1994 1993
------------------------------------- -------------------------------------
Net Net
Unrealized Unrealized Unrealized Unrealized Unrealized Unrealized
Gains Losses Gain (Loss) Gains Losses Gain (Loss)
---------- ---------- ----------- ---------- ---------- -----------

Interest rate swaps:
Receive fixed $ 3,765 $104,098 $(100,333) $64,561 $ 566 $ 63,995
Pay fixed 64,874 8,959 55,915 -0- 159,571 (159,571)
Basis -0- 77 (77) 6,634 -0- 6,634
Forward starting 348 -0- 348 -0- -0- -0-
Interest rate caps 589 -0- 589 -0- 1,422 (1,422)
Loan commitments 1,698 -0- 1,698 -0- 68 (68)
------- -------- --------- ------- -------- ---------
Total $71,274 $113,134 $ (41,860) $71,195 $161,627 $ (90,432)
======= ======== ========= ======= ======== =========

PAGE F-29
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE V - Parent Company Financial Information

Statement of Net Earnings

Year Ended December 31
--------------------------------
1994 1993 1992
-------- -------- --------

Revenues:
Investment income $ 40,821 $ 28,047 $ 22,542
Insurance commissions and trustee
fees 1,190 1,357 2,978
Other 20 20 25
-------- -------- --------
42,031 29,424 25,545
Expenses:
Interest 85,906 75,601 58,313
General and administrative 2,648 2,188 2,088
-------- -------- --------
88,554 77,789 60,401
-------- -------- --------
Loss before earnings of subsidiaries
and income tax credit (46,523) (48,365) (34,856)

Income tax credit 20,779 21,585 15,279

Earnings of subsidiaries 256,193 300,634 303,115
-------- -------- --------
Net Earnings $230,449 $273,854 $283,538
======== ======== ========

Statement of Financial Condition

Assets
December 31
-------------------------
1994 1993
---------- ----------

Cash $ 1,708 $ 9,658
Securities available for sale 299,454 681,935
Other investments 386,707 114,714
Notes receivable from subsidiary 250,000 150,000
Prepaid expenses and other assets 9,273 7,008
Investment in subsidiaries 2,094,784 2,169,364
---------- ----------
$3,041,926 $3,132,679
========== ==========

Liabilities and Stockholders' Equity

Securities sold under agreements to repurchase $ -0- $ 24,875
Accounts payable and accrued expenses 19,182 21,018
Subordinated notes, net 1,022,470 1,021,182
Stockholders' equity 2,000,274 2,065,604
---------- ----------
$3,041,926 $3,132,679
========== ==========

PAGE F-30
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE V - Parent Company Financial Information (Continued)

Statement of Cash Flows
Year Ended December 31
-------------------------------------
1994 1993 1992
----------- --------- ---------

Cash flows from operating activities:
Net earnings $ 230,449 $ 273,854 $ 283,538
Adjustments to reconcile net earnings to
net cash used in operating activities:
Equity in earnings of subsidiaries (256,193) (300,634) (303,115)
Amortization of intangibles and
discount on subordinated debt 1,353 1,209 837
Other, net (5,086) 15,509 (2,897)
----------- --------- ---------
Net cash used in operating activities (29,477) (10,062) (21,637)

Cash flows from investing activities:
Capital contributed to subsidiaries (625) -0- -0-
Dividends received from subsidiary 275,000 34,000 40,000
Purchases of securities held for sale (1,305,371) (1,920,007) (434,738)
Sales and maturities of securities available
for sale 1,681,257 1,440,605 432,685
Decrease (increase) in other investments (271,993) (169,355) 175,703
Notes receivable from subsidiary (650,000) (150,000) (695,000)
Repayments of notes receivable from
subsidiary 550,000 475,000 220,000
----------- --------- ---------
Net cash provided (used) in investing
activities 278,268 (289,757) (261,350)

Cash flows from financing activities:
Increase (decrease) in securities sold under
agreements to repurchase (24,875) 24,875 -0-
Proceeds from subordinated debt -0- 297,008 295,616
Dividends on common stock (19,220) (17,280) (14,624)
Sale of stock 2,992 2,818 5,153
Purchase and retirement of Company stock (215,638) (7,821) -0-
----------- --------- ---------
Net cash provided (used) by financing
activities (256,741) 299,600 286,145
Net increase (decrease) in cash (7,950) (219) 3,158
Cash at beginning of period 9,658 9,877 6,719
----------- --------- ---------
Cash at end of period $ 1,708 $ 9,658 $ 9,877
=========== ========= =========

PAGE F-31
GOLDEN WEST FINANCIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands except per share figures)

NOTE W - Selected Quarterly Financial Data (Unaudited)

1994
------------------------------------------------------------
Quarter Ended
------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------

Interest income $451,695 $457,461 $468,161 $499,160

Interest expense 262,801 271,633 290,975 329,698

Net interest income 188,894 185,828 177,186 169,462

Provision for loan losses 16,492 17,946 15,996 12,532

Non-interest income 11,424 11,435 9,786 4,841

Non-interest expense 73,415 74,347 75,817 81,929
-------- -------- -------- --------
Earnings before taxes on income 110,411 104,970 95,159 79,842

Taxes on income 45,115 43,027 39,034 32,757
-------- -------- -------- --------
Net earnings $ 65,296 $ 61,943 $ 56,125 $ 47,085
======== ======== ======== ========

Net earnings per share $ 1.02 $ .98 $ .91 $ .79
======== ======== ======== ========

Cash dividends per share $ .075 $ .075 $ .075 $ .085
======== ======== ======== ========

1993
------------------------------------------------------------
Quarter Ended
------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- -------- ------------ -----------

Interest income $463,027 $472,073 $473,813 $461,259

Interest expense 280,911 291,831 288,550 276,122
-------- -------- -------- --------
Net interest income 182,116 180,242 185,263 185,137

Provision for loan losses 11,459 13,182 16,196 25,000

Non-interest income 11,907 13,428 14,444 22,263

Non-interest expense 64,361 63,870 70,077 73,273
-------- -------- -------- --------
Earnings before taxes on income 118,203 116,618 113,434 109,127

Taxes on income 46,619 46,035 49,666 41,208
-------- -------- -------- --------
Net earnings $ 71,584 $ 70,583 $ 63,768 $ 67,919
======== ======== ======== ========

Net earnings per share $ 1.12 $ 1.10 $ 1.00 $ 1.06
======== ======== ======== ========

Cash dividends per share $ .065 $ .065 $ .065 $ .075
======== ======== ======== ========

Due to the effect of stock repurchases on the fourth quarter earnings
per share calculation, the year-to-date earnings per share for 1994 do not equal
the sum of the quarterly earnings per share amounts. In addition, non-interest
income in the fourth quarter of 1993 includes a $17 million reduction of a
valuation allowance on investments charged to income in a previous year.

PAGE 73

EXHIBIT 23(a)

INDEPENDENT AUDITORS' CONSENT

Board of Directors and Stockholders
Golden West Financial Corporation
Oakland, California

We consent to the incorporation by reference in Post-Effective
Amendment No. 2 to Registration Statement No. 2-66913 on Form S-8, Registration
Statement No. 33-14833 on Form S-8, Registration Statement No. 33-29286 on Form
S-3, Registration Statement No. 33-40572 on Form S-8, Registration Statement
No. 33-48976 on Form S-3, and Registration Statement No. 33-57882 on Form S-3
of our report dated January 25, 1994 appearing in this Annual Report on
Form 10-K of Golden West Financial Corporation for the year ended December 31,
1994.

Oakland, California
March 22, 1995

PAGE 74

EXHIBIT 27

Golden West Financial Corporation
Financial Data Schedule
($000s omitted except per share amounts)

For the Year Ended
December 31, 1994
------------------

Cash due from banks $ 242,441
Interest-bearing deposits 29,969
Federal funds sold - purchased securities for resale 152,000
Trading account assets -0-
Investments and mortgage-backed securities available for sale 1,812,184
Investments and mortgage-backed securities held to maturity -
carrying value 871,039
Investments and mortgage-backed securities held to maturity -
market value 831,436
Loans 27,071,266
Allowance for losses 124,003
Total assets 31,683,741
Deposits 19,219,389
Short-term borrowings 851,821
Other liabilities 738,201
Long-term debt 8,874,056
Preferred stock - mandatory redemption -0-
Preferred stock - no mandatory redemption -0-
Common stocks 5,859
Other stockholders' equity 1,994,415
Total liability and stockholders' equity 31,683,741
Interest and fees on loans 1,649,413
Interest and dividends on investments 123,137
Other interest income 103,927
Total interest income 1,876,477
Interest on deposits 714,353
Total interest expense 1,155,107
Net interest income 721,370
Provision for loan losses 62,966
Investment securities losses (120)
Other expenses 305,508
Income before income tax 390,382
Income before extraordinary items 390,382
Extraordinary items, less tax -0-
Cumulative change in accounting principles -0-
Net income 230,449
Earnings per share - primary 3.71
Earnings per share - fully diluted 3.71
Net yield - interest earning assets - actual 6.81%
Loans on nonaccrual 284,103
Accruing loans past due 90 days or more -0-
Troubled debt restructuring 72,827
Potential problem loans -0-
Allowance for loan loss - beginning of period 106,698
Total chargeoffs 46,556
Total recoveries 895
Allowance for loan loss - end of period 124,003
Loan loss allowance allocated to domestic loans 124,003
Loan loss allowance allocated to foreign loans -0-
Loan loss allowance - unallocated -0-