Golden West Reports 19% Increase in Third Quarter Earnings per Share; Nine Month Results Show 2% Decrease

Business Wire,  Oct 16, 1995  

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OAKLAND, Calif.--(BUSINESS WIRE)--Oct. 16, 1995--Golden West Financial Corp., parent of World Savings, today announced third quarter earnings of $1.08 per share, up 19% from the $.91 per share reported for the same period last year.

For the first nine months of 1995, net income amounted to $2.86 per share, down a modest 2% from the $2.91 posted for the first three quarters of 1994.

In making these announcements, Herbert M. Sandler, Chairman of the Board and Chief Executive Officer of Golden West, said, "Our higher reported per share profits in the most recent three months benefited from three major factors: an increase in net interest income (the difference between earnings on our assets, mostly mortgages, and our cost of funds), a lower effective tax rate, and a decrease in the average number of shares outstanding."

Addressing third quarter net interest income, Sandler noted, "This principal revenue source was up 6% compared with the same period in 1994. The upward push in net interest income reflected strong mortgage portfolio growth, although the benefits of this increase were partially offset by a lower profit margin caused by the significant rise in interest rates last year."

Moving to the impact of taxes, Sandler commented, "Thus far, in 1995, we have experienced a lower effective income tax rate. This tax relief is due to benefits from past acquisitions and tax audit settlements."

Touching on the impact of the company's stock purchase program, Sandler noted: "The fact that there were approximately 2.3 million fewer shares outstanding at Sept. 30, 1995, compared with one year ago influenced our per share results positively."

Turning to mortgage operations, Sandler commented, "Third quarter loan originations reflect the increased competitiveness of the home lending market."

For the three months ended Sept. 30, 1995, Golden West's mortgage originations totaled $1.4 billion compared with $1.8 billion for the same period last year. For the first three quarters of 1995, loan production amounted to $4.6 billion, similar to the first nine months of 1994.

Describing the loan market, he said: "The cost of fixed-rate loans tracked the decline in long-term Treasury rates in 1995. By mid-year, fixed-rate mortgages once again dominated the market, making the lending environment tougher for companies such as Golden West which emphasize adjustable rate mortgages (ARMs). Nevertheless, over 87% of Golden West's third quarter loan production was in the form of ARMs which will help protect the Company's earning power over an interest rate cycle."

On the related topic of loan quality, Sandler said: "During the third quarter of 1995, our problem asset statistics continued to improve." At Sept. 30, 1995, Golden West's ratio of nonperforming loans, repossessed property and restructured debt to total assets was 1.24% versus 1.55% a year ago.

Wrapping up with a review of fundraising, Sandler remarked, "During the third quarter, we focused on obtaining financial market borrowings since obligations with attractive terms were readily available. In addition, as rates on new certificates of deposit trended down, some customers began seeking higher returns elsewhere in uninsured investments."

For the third quarter, Golden West's borrowings increased by $413 million, while savings registered a $178 million outflow. To support asset expansion during the first nine months of 1995, borrowings and savings each increased by $1.3 billion.

Headquartered in Oakland, Calif., Golden West is a savings and loan holding company with assets in excess of $34 billion. Currently operating retail deposit gathering offices in seven states under the name of World Savings, Golden West has one of the largest multi-state systems in the country. Golden West's stock is listed on the New York and Pacific Stock Exchanges and traded on the Boston and Midwest Stock Exchanges under the ticker symbol GDW. Options on Golden West's stock are bought and sold on the Philadelphia Options Exchange. -0-

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