<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

For Quarter Ended June 30, 1997                    Commission File Number 1-4629


                        GOLDEN WEST FINANCIAL CORPORATION
--------------------------------------------------------------------------------

                  Delaware                                95-2080059
-------------------------------------       ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


1901 Harrison Street, Oakland, California                            94612
------------------------------------------------                  --------------
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number, including area code:           (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
   -----  -----

        The number of shares outstanding of the registrant's common stock on
July 31, 1997, was 56,725,109 shares.


<PAGE>   2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

        The consolidated financial statements of Golden West Financial
Corporation and subsidiaries (the Company) for the three and six months ended
June 30, 1997 and 1996 are unaudited. In the opinion of the Company, all
adjustments (consisting only of normal recurring accruals) that are necessary
for a fair statement of the results for such three and six month periods have
been included. The operating results for the three and six months ended June 30,
1997, are not necessarily indicative of the results for the full year.


                        Golden West Financial Corporation
                  Consolidated Statement of Financial Condition
                                   (Unaudited)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                               June 30          June 30        December 31
                                                                1997              1996             1996
                                                              ----------       ----------       ----------
<S>                                                           <C>              <C>              <C>    
Assets:
  Cash                                                       $   130,667      $   189,724      $   218,719
  Securities available for sale at fair value                    601,278          495,607          781,325
  Other investments at cost                                    1,044,756        1,210,140        1,078,832
  Mortgage-backed securities available for sale without          206,722          252,712          227,466
    recourse at fair value
  Mortgage-backed securities available for sale with                 -0-          224,466              -0-
    recourse at fair value
  Mortgage-backed securities held to maturity without            768,468          832,021          800,692
    recourse at cost
  Mortgage-backed securities held to maturity with             3,077,534        2,103,642        3,265,424
    recourse at cost
  Loans receivable                                            31,821,887       29,059,953       30,113,421
  Interest earned but uncollected                                217,309          224,564          221,604
  Investment in capital stock of Federal Home Loan
    Banks--at cost  which approximates fair value                572,157          397,463          500,105
  Real estate held for sale or investment                         73,436           73,221           83,052
  Prepaid expenses and other assets                              356,021          304,782          226,054
  Premises and equipment--at cost less accumulated               224,847          208,000          213,904
    depreciation
                                                             -----------      -----------      -----------
                                                             $39,095,082      $35,576,295      $37,730,598
                                                             ===========      ===========      ===========

Liabilities and Stockholders' Equity:
  Deposits                                                   $24,036,660      $21,040,598      $22,099,934
  Advances from Federal Home Loan Banks                        7,359,039        7,175,549        8,798,433
  Securities sold under agreements to repurchase               2,954,221        2,317,258        1,908,126
  Medium-term notes                                              309,936          689,662          589,845
  Accounts payable and accrued expenses                          485,805          513,018          452,182
  Taxes on income                                                248,759          353,855          207,605
  Subordinated notes--net of discount                          1,209,772        1,323,189        1,323,996
  Stockholders' equity                                         2,490,890        2,163,166        2,350,477
                                                             -----------      -----------      -----------
                                                             $39,095,082      $35,576,295      $37,730,598
                                                             ===========      ===========      ===========
</TABLE>


                                       2


<PAGE>   3


                        Golden West Financial Corporation
                  Consolidated Statement of Net Earnings (Loss)
                                   (Unaudited)
                 (Dollars in thousands except per share figures)


<TABLE>
<CAPTION>
                                                 Three Months Ended                  Six Months Ended
                                                       June 30                             June 30
                                            -----------------------------       -----------------------------
                                                1997             1996              1997              1996
                                            -----------       -----------       -----------       -----------
<S>                                         <C>               <C>             <C>               <C>      
Interest Income:
    Interest on loans                       $   583,659       $   542,280       $ 1,148,722       $ 1,083,488
    Interest on mortgage-backed                  72,369            59,861           147,302           121,534
        securities
    Interest and dividends on                    34,211            28,037            68,494            64,263
        investments
                                            -----------       -----------       -----------       -----------
                                                690,239           630,178         1,364,518         1,269,285
Interest Expense:
    Interest on deposits                        294,122           257,912           574,442           523,282
    Interest on advances                        107,781            91,692           220,389           181,673
    Interest on repurchase agreements            40,470            33,966            68,368            62,354
    Interest on other borrowings                 31,286            38,105            66,047            85,814
                                            -----------       -----------       -----------       -----------
                                                473,659           421,675           929,246           853,123
                                            -----------       -----------       -----------       -----------
        Net Interest Income                     216,580           208,503           435,272           416,162
Provision for loan losses                        13,111            17,236            33,806            35,758
                                            -----------       -----------       -----------       -----------
        Net Interest Income after
        Provision for Loan Losses               203,469           191,267           401,466           380,404
Non-Interest Income:
    Fees                                         11,298             9,485            22,035            18,368
    Gain on the sale of securities,
        MBS, and loans                            3,061             3,147             4,284             7,831
    Other                                         5,451             6,194            12,723            12,151
                                            -----------       -----------       -----------       -----------
                                                 19,810            18,826            39,042            38,350
Non-Interest Expense:
    General and administrative:
        Personnel                                43,892            39,742            87,992            79,127
        Occupancy                                13,408            12,349            26,796            24,565
        Deposit insurance                         1,937            10,017             3,983            21,349
        Advertising                               2,342             2,509             4,760             4,757
        Other                                    17,048            15,852            34,266            31,462
                                            -----------       -----------       -----------       -----------
                                                 78,627            80,469           157,797           161,260
Earnings Before Taxes on Income and
    Cumulative Effect of Change in
    Accounting                                  144,652           129,624           282,711           257,494
Taxes on Income                                  57,375            50,039           112,060            99,316
                                            -----------       -----------       -----------       -----------
Earnings Before Cumulative Effect of
    Change in Accounting for Goodwill            87,277            79,585           170,651           158,178
Cumulative Effect of Change in
    Accounting for Goodwill                         -0-               -0-               -0-          (205,242)
                                            -----------       -----------       -----------       -----------
Net Earnings (Loss)                         $    87,277       $    79,585       $   170,651       $   (47,064)
                                            ===========       ===========       ===========       ===========

Earnings (Loss) Per Share:
Earnings Per Share Before Cumulative
    Effect of Change in Accounting 
    for Goodwill                            $      1.54       $      1.35       $      2.99       $      2.69
Cumulative Effect of Change in
    Accounting for Goodwill                        0.00              0.00              0.00             (3.49)
                                            -----------       -----------       -----------       -----------
Net Earnings (Loss) Per Share               $      1.54       $      1.35       $      2.99       $      (.80)
                                            ===========       ===========       ===========       ===========
</TABLE>


                                       3


<PAGE>   4


                        Golden West Financial Corporation
                      Consolidated Statement of Cash Flows
                                   (Unaudited)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                         Three Months Ended                   Six Months Ended
                                                                June 30                            June 30
                                                     ----------------------------        ----------------------------
                                                        1997             1996              1997               1996
                                                     ----------        ----------        ----------        ----------
<S>                                                   <C>             <C>               <C>               <C>     
Cash Flows From Operating Activities:
  Net earnings (loss)                                $   87,277        $   79,585        $  170,651        $  (47,064)
  Adjustments to reconcile net earnings (loss)
  to net cash provided by (used in)
  operating activities:
    Provision for loan losses                            13,111            17,236            33,806            35,758
    Cumulative effect of the change in                      -0-               -0-               -0-           205,242
        accounting for goodwill
    Amortization of loan fees and discounts              (4,810)           (6,155)           (9,251)          (12,681)
    Depreciation and amortization                         5,164             4,835            10,307             9,628
    Loans originated for sale                           (45,191)         (140,893)          (98,751)         (335,252)
    Sales of loans originated for sale                   48,796           149,216            98,304           334,879
    Decrease (increase) in interest earned but           (5,029)           (6,217)            4,295               831
        uncollected 
    Federal Home Loan Bank stock dividends               (8,596)           (5,233)          (24,318)          (14,484)
    (Increase) in prepaid expenses and other            (62,881)          (72,916)         (121,462)         (144,372)
        assets
    Increase in accounts payable and accrued              3,470            25,121            33,623            62,204
        expenses
    Increase (decrease) in taxes on income              (29,799)          (36,558)           24,869              (986)
    Other, net                                           (3,244)           (1,578)           (7,870)           (7,315)
                                                     ----------        ----------        ----------        ----------
      Net cash provided by (used in) operating           (1,732)            6,443           114,203            86,388
        activities

Cash Flows From Investing Activities:
  New loan activity:
    New real estate loans originated for             (2,109,072)       (1,773,730)       (3,450,976)       (2,757,814)
        portfolio
    Real estate loans purchased                            (608)           (1,875)           (1,260)           (2,075)
    Other, net                                          (14,849)           (5,039)          (23,119)           (5,515)
                                                     ----------        ----------        ----------        ----------
                                                     (2,124,529)       (1,780,644)       (3,475,355)       (2,765,404)
  Real estate loan principal payments:
    Monthly payments                                    170,310           148,314           334,559           289,862
    Payoffs, net of foreclosures                        699,963           601,219         1,187,683         1,122,430
    Refinances                                           70,223            73,409           127,606           140,297
                                                     ----------        ----------        ----------        ----------
                                                        940,496           822,942         1,649,848         1,552,589

  Purchases of mortgage-backed securities held              -0-            (1,456)              -0-           (1,518)
     to maturity
  Repayments of mortgage-backed securities              132,561           115,379           238,586           219,938
  Proceeds from sales of real estate                     60,636            46,675           113,316            97,978
  Purchases of securities available for sale             (1,177)           (7,010)           (1,187)         (330,245)
  Sales of securities available for sale                    961             6,182               961            81,133
  Matured securities available for sale                  48,452           210,674           224,053           654,871
  Decrease (increase) in other investments              493,795          (123,885)           34,076           (19,980)
  Purchases of Federal Home Loan Bank stock                 -0-               -0-           (56,239)          (37,099)
  Additions to premises and equipment                    (8,785)           (7,567)          (23,132)          (14,506)
                                                     ----------        ----------        ----------        ----------
    Net cash used in investing activities              (457,590)         (718,710)       (1,295,073)         (562,243)
</TABLE>


                                       4


<PAGE>   5


                        Golden West Financial Corporation
                Consolidated Statement of Cash Flows (Continued)
                                   (Unaudited)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                            Three Months Ended                    Six Months Ended
                                                                 June 30                             June 30
                                                      -----------------------------        -----------------------------
                                                          1997             1996               1997              1996
                                                      -----------       -----------        -----------       -----------
<S>                                                   <C>               <C>                <C>               <C>         
Cash Flows From Financing Activities:
    Deposit activity:
    Increase (decrease) in deposits, net              $   854,966       $  (160,817)       $ 1,473,148       $  (231,656)
    Interest credited                                     237,770           210,634            463,578           424,344
                                                      -----------       -----------        -----------       -----------
                                                        1,092,736            49,817          1,936,726           192,688

  Additions to Federal Home Loan Bank advances             22,600           737,500             44,200           763,450
  Repayments of Federal Home Loan Bank advances          (797,490)          (21,807)        (1,483,689)          (35,277)
  Proceeds from agreements to repurchase                1,011,791         1,619,309          2,436,493         2,015,671
    securities
  Repayments of agreements to repurchase                 (719,749)       (1,441,422)        (1,390,398)       (1,516,356)
    securities
  Repayments of medium-term notes                             -0-          (200,000)          (280,000)         (908,135)
  Proceeds from federal funds purchased                       -0-           675,000                -0-         1,250,000
  Repayments of federal funds purchased                       -0-          (675,000)               -0-        (1,250,000)
  Repayment of subordinated debt                         (115,000)              -0-           (115,000)              -0-
  Dividends on common stock                                (6,253)           (5,514)           (12,554)          (11,095)
  Sale of  stock                                              320             2,183              2,329             4,445
  Purchase and retirement of Company stock                (31,938)          (41,494)           (45,289)          (58,507)
                                                      -----------       -----------        -----------       -----------
    Net cash provided by financing activities             457,017           698,572          1,092,818           446,884
                                                      -----------       -----------        -----------       -----------
Net Decrease in Cash                                       (2,305)          (13,695)           (88,052)          (28,971)
Cash at beginning of period                               132,972           203,419            218,719           218,695
                                                      -----------       -----------        -----------       -----------
Cash at end of period                                 $   130,667       $   189,724        $   130,667       $   189,724
                                                      ===========       ===========        ===========       ===========

Supplemental cash flow information:
  Cash paid for:
    Interest                                          $   476,118       $   412,194        $   928,642       $   865,824
    Income taxes                                           87,903            85,707             88,514           105,578
  Cash received for interest and dividends                685,210           623,961          1,368,813         1,270,116
  Noncash investing activities:
    Loans transferred to foreclosed real estate            54,069            46,815            104,726            98,989
    Loans securitized into MBS with recourse                  -0-           226,210                -0-           226,210
</TABLE>


                                       5


<PAGE>   6


                        Golden West Financial Corporation
                 Consolidated Statement of Stockholders' Equity
                                   (Unaudited)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                  Six Months Ended
                                                                      June 30
                                                           ------------------------------
                                                              1997               1996
                                                           -----------        -----------
<S>                                                        <C>                <C>        
Common Stock:
  Balance at January 1                                     $     5,734        $     5,887
  Common stock issued upon exercise of stock options                 9                 16
  Common stock retired upon purchase of stock                      (69)              (111)
                                                           -----------        -----------

  Balance at June 30                                             5,674              5,792
                                                           -----------        -----------

Paid-in Capital:
  Balance at January 1                                          67,953             55,353
  Common stock issued upon exercise of stock options             2,320              4,429
                                                           -----------        -----------

  Balance at June 30                                            70,273             59,782
                                                           -----------        -----------

Retained Earnings:
  Balance at January 1                                       2,177,098          2,140,883
  Net earnings (loss)                                          170,651            (47,064)
  Cash dividends on common stock                               (12,554)           (11,095)
  Retirement of stock                                          (45,220)           (58,396)
                                                           -----------        -----------

  Balance at June 30                                         2,289,975          2,024,328
                                                           -----------        -----------

Unrealized Gains on Securities Available for Sale:
  Balance at January 1                                          99,692             76,230
  Change during period                                          25,276             (2,966)
                                                           -----------        -----------

  Balance at June 30                                           124,968             73,264
                                                           -----------        -----------

Total Stockholders' Equity at June 30                      $ 2,490,890        $ 2,163,166
                                                           ===========        ===========
</TABLE>


                                       6


<PAGE>   7


 ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS

        The discussion and analysis included herein covers those material
changes in liquidity and capital resources that have occurred since December 31,
1996, as well as certain material changes in results of operations during the
three and six month periods ended June 30, 1997, and 1996, respectively.

        The following narrative is written with the presumption that the users
have read or have access to the Company's 1996 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, 1996, and for the year then ended. Therefore, only
material changes in financial condition and results of operations are discussed
herein.

        NEW ACCOUNTING PRONOUNCEMENTS

        In June 1997, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130), which requires that an enterprise report, by major components and as
a single total, the change in its net assets during the period from nonowner
sources; and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS 131), which establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas, and major customers. Adoption of these
statements will not impact the Company's consolidated financial position,
results of operations or cash flows, and any effect will be limited to the form
and content of its disclosures. The Company operates as a single segment and,
therefore, SFAS 131 is expected to have no effect on the Company's financial
statements. Both statements are effective for fiscal years beginning after
December 31, 1997, with earlier application permitted.

        CHANGE IN ACCOUNTING FOR GOODWILL

        Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 72, "Accounting for Certain Acquisitions of Banking or
Thrift Institutions," (SFAS 72) for goodwill related to acquisitions made prior
to September 30, 1982. Up until 1996, the Company had applied SFAS 72 only to
acquisitions made after September 30, 1982. The adoption of SFAS 72 for goodwill
relating to acquisitions of banking or thrift institutions prior to September
30, 1982, is permitted but not required. SFAS 72 requires, among other things,
that goodwill be amortized over a period no longer than the estimated remaining
life of the acquired long-term interest-earning assets. As a result, the Company
wrote off goodwill totaling $205 million during 1996 as the cumulative effect of
the change in accounting for goodwill. The remaining goodwill from acquisitions
subsequent to 1982 amounting to less than .2% of total assets is not material
and has been reclassified to other assets. The minor amount of continuing
goodwill amortization no longer warrants a separate line item on the Company's
Consolidated Statement of Net Earnings and, therefore, for 1997 and 1996, has
been included in other income.


                                       7


<PAGE>   8


        The adoption of SFAS 72 noted above resulted in the restatement of
earnings previously reported of $77 million, or $1.32 per share and $152
million, or $2.60 per share for the second quarter and first half of 1996,
respectively, to earnings of $80 million, or $1.35 per share for the second
quarter of 1996 and a loss of $47 million, or $.80 per share for the first half
of 1996. The restatement included a first quarter charge of $3.49 per share for
the cumulative effect of change in accounting for goodwill and a credit of $.05
per share and $.11 per share of goodwill amortization for the second quarter and
first half of 1996, respectively. For the three and six months ended June 30,
1996, earnings before the cumulative effect of the change in accounting for
goodwill were $1.35 per share and $2.69 per share, respectively.


                        Golden West Financial Corporation
                              Financial Highlights
                                   (Unaudited)
                 (Dollars in thousands except per share figures)


<TABLE>
<CAPTION>
                                               June 30       June 30         December 31
                                                 1997          1996             1996
                                             -----------    -----------      -----------
<S>                                          <C>            <C>              <C>        
  Assets                                     $39,095,082    $35,576,295      $37,730,598
  Loans receivable                            31,821,887     29,059,953       30,113,421
  Mortgage-backed securities                   4,052,724      3,412,841        4,293,582
  Deposits                                    24,036,660     21,040,598       22,099,934
  Stockholders' equity                         2,490,890      2,163,166        2,350,477
  Stockholders' equity/total assets                 6.37%          6.08%            6.23%
  Book value per common share                $     43.90    $     37.35      $     40.99
  Common shares outstanding                   56,738,514     57,923,709       57,342,389
  Yield on loan portfolio                           7.42%          7.46%            7.43%
  Yield on mortgage-backed securities               7.10%          7.21%            7.13%
  Yield on investments                              6.51%          5.82%            6.88%
  Yield on earning assets                           7.35%          7.36%            7.37%
  Cost of deposits                                  5.10%          4.92%            4.98%
  Cost of borrowings                                5.97%          5.93%            5.80%
  Cost of funds                                     5.38%          5.28%            5.28%
  Yield on earning assets less cost of funds        1.97%          2.08%            2.09%
  Ratio of nonperforming assets to total            1.11%          1.24%            1.21%
  assets                                                   
  Ratio of troubled debt restructured to             .19%           .16%             .22%
  total assets
  World Savings and Loan Association:
    Total assets                             $18,767,337     $25,150,776     $21,040,890
    Net worth                                  1,260,995       1,743,351       1,427,914
\    Net worth/total assets                         6.72%           6.93%           6.79%
    Regulatory capital ratios:
      Tangible capital                              6.13%           6.65%           6.37%
      Core capital                                  6.13%           6.65%           6.37%
      Risk-based capital                           13.30%          14.37%          13.91%
  World Savings Bank, a Federal Savings 
      Bank: 
    Total assets                             $20,240,335      $10,281,997    $16,929,859
    Net worth                                  1,341,396          764,471      1,136,717
    Net worth/total assets                          6.63%            7.44%          6.71%
    Regulatory capital ratios:
      Tangible capital                              6.61%            7.40%          6.69%
      Core capital                                  6.61%            7.40%          6.69%
      Risk-based capital                           13.22%           13.46%         13.14%
</TABLE>


                                       8


<PAGE>   9


                       Golden West Financial Corporation
                              Financial Highlights
                                  (Unaudited)
                (Dollars in thousands except per share figures)


<TABLE>
<CAPTION>
                                                      Three Months Ended                            Six Months Ended
                                                            June 30                                     June 30
                                              -------------------------------------        ------------------------------------
                                                    1997                  1996                  1997                  1996
                                              --------------        ---------------        --------------        --------------
<S>                                           <C>                   <C>                    <C>                   <C>           
New real estate loans originated              $    2,154,263        $     1,914,623        $    3,549,727        $    3,093,066
Average yield on new real estate loans                  7.51%                  7.62%                 7.52%                 7.65%
Increase in deposits (a)                      $    1,092,736        $        49,817        $    1,936,726        $      192,688
Earnings before cumulative effect of
   change in accounting for goodwill                  87,277                 79,585               170,651               158,178
Net earnings (loss)                                   87,277                 79,585               170,651               (47,064)
Earnings per share before cumulative
   effect of change in accounting for 
   goodwill                                             1.54                   1.35                  2.99                  2.69
Net earnings (loss) per share                           1.54                   1.35                  2.99                  (.80)
Cash dividends on common stock                           .11                   .095                   .22                   .19
Average common shares outstanding                 56,892,526             58,283,423            57,102,416            58,536,031
Ratios:(b)
  Net earnings (loss)/average net worth                14.24%                 14.82%                14.09%                (4.37%)
     (ROE)(c)
  Net earnings (loss)/average assets                     .90%                   .91%                  .89%                 (.27%)
     (ROA)(c)
  Net interest income/average assets                    2.24%                  2.38%                 2.27%                 2.38%
  General and administrative                             .81%                   .92%                  .82%                  .92%
     expense/average assets
</TABLE>


(a)   Includes an increase of $674 million and $1.1 billion of wholesale
      deposits for the quarter and six months ended June 30, 1997, respectively.
(b)   Ratios are annualized by multiplying the quarterly computation by four and
      the semi-annual computation by two. Averages are computed by adding the
      beginning balance and each monthend balance during the quarter and
      six-month period and dividing by four and seven, respectively.
(c)   The year-to-date ratios as of June 30, 1996 include the $205 million
      cumulative effect of the change in accounting for goodwill, which was
      effective January 1, 1996. The year-to-date ratios as of June 30, 1996,
      excluding the change in accounting for goodwill are: ROE 14.68% and ROA
      .90%


                                       9


<PAGE>   10


        FINANCIAL CONDITION

        The consolidated condensed balance sheet shown in the table below
 presents the Company's assets and liabilities in percentage terms at June 30,
 1997 and 1996, and December 31, 1996. The reader is referred to page 51 of the
 Company's 1996 Form 10-K for similar information for the years 1993 through
 1996 and a discussion of the changes in the composition of the Company's assets
 and liabilities in those years.

                                     TABLE 1

                      Consolidated Condensed Balance Sheet
                               In Percentage Terms


<TABLE>
<CAPTION>
                                                     June 30 
                                               ------------------     December 31
                                                1997        1996         1996
                                               -----        -----        -----
<S>                                            <C>          <C>          <C> 
Assets:
   Cash and investments                          4.5%         5.3%         5.5%
   Mortgage-backed securities                   10.4          9.6         11.4
   Loans receivable                             81.4         81.7         79.8
   Other assets                                  3.7          3.4          3.3
                                               -----        -----        -----
                                               100.0%       100.0%       100.0%
                                               =====        =====        =====

Liabilities and Stockholders' Equity:
   Deposits                                     61.5%        59.1%        58.6%
   Federal Home Loan Bank advances              18.8         20.2         23.3
   Securities sold under agreements to           7.6          6.5          5.1
      repurchase
   Medium-term notes                             0.8          1.9          1.6
   Other liabilities                             1.8          2.5          1.7
   Subordinated debt                             3.1          3.7          3.5
   Stockholders' equity                          6.4          6.1          6.2
                                               -----        -----        -----
                                               100.0%       100.0%       100.0%
                                               =====        =====        =====
</TABLE>


        As the above table shows, deposits represent the majority of the
Company's liabilities. The largest asset component is the loan portfolio, which
consists primarily of long-term mortgages. The disparity between the repricing
(maturity or interest rate change) of deposits and borrowings and the repricing
of mortgage loans and investments 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 June 30, 1997, the
Company's assets mature or reprice sooner than its liabilities. Consequently,
one would expect falling interest rates to lower the Company's earnings and
rising interest rates to increase the Company's earnings. However, the Company's
earnings are also affected by the built-in lags inherent in the Eleventh
District Cost of Funds Index (COFI), which is the benchmark the Company uses to
determine the rate on the great majority of its adjustable rate mortgages.
Specifically, there is a two-month delay in reporting the COFI because of the
time required to gather the data needed to compute the index. As a result, the
current COFI actually reflects the Eleventh District's cost of funds at the
level it was two months prior. In addition, because COFI is based on a portfolio
of accounts, not all of which mature or reprice immediately, COFI does not
initially reflect a change in market interest rates. Consequently, when the
interest rate environment changes, the COFI lags cause assets to initially
reprice more slowly than liabilities, enhancing earnings when rates are falling
and holding down income when


                                       10


<PAGE>   11


rates rise. In addition to the COFI lags, other elements of ARM loans also have
an impact on earnings. These elements are the interest rate adjustment frequency
of ARM loans, interest rate limits on individual rate changes, interest rate
floors, and introductory rates on new ARM loans.

                                          TABLE 2

            Repricing of Interest-Earning Assets and Interest-Bearing
                   Liabilities, Repricing Gaps, and Gap Ratio
                               As of June 30, 1997
                              (Dollars in millions)


<TABLE>
<CAPTION>
                                                             Projected Repricing(a)
                                      ---------------------------------------------------------------------
                                       0 - 3          4 - 12          1 - 5           Over 5
                                       Months         Months          Years           Years          Total
                                      -------        -------         -------         -------        -------
<S>                                   <C>            <C>             <C>             <C>            <C>  
Interest-Earning Assets:
  Investments                         $ 1,358        $   119         $   167         $     2        $ 1,646
  Mortgage-backed securities            3,166             91             345             451          4,053
  Loans receivable:
    Rate-sensitive                     27,314          1,526             126             -0-         28,966
    Fixed-rate                             79            236             994           1,282          2,591
  Other(b)                                670            -0-             -0-             -0-            670
  Impact of interest rate swaps           317            430            (296)           (451)           -0-
                                      -------        -------         -------         -------        -------
Total                                 $32,904        $ 2,402         $ 1,336         $ 1,284        $37,926
                                      =======        =======         =======         =======        =======
Interest-Bearing Liabilities(c):
  Deposits                            $10,350        $10,807         $ 2,854         $    25        $24,036
  FHLB advances                         5,933            800             345             281          7,359
  Other borrowings                      3,258            199             619             398          4,474
  Impact of interest rate swaps         1,274           (709)           (552)            (13)           -0-
                                      -------        -------         -------         -------        -------
Total                                 $20,815        $11,097         $ 3,266         $   691        $35,869
                                      =======        =======         =======         =======        =======

Repricing gap                         $12,089        $(8,695)        $(1,930)        $   593
                                      =======        =======         =======         =======

Cumulative gap                        $12,089        $ 3,394         $ 1,464         $ 2,057
                                      =======        =======         =======         =======

Cumulative gap as a
  percentage of total assets             30.9%            8.7%           3.7%
                                      =======         =======        =======
</TABLE>


(a)   Based on scheduled maturity or scheduled repricing; loans reflect
      scheduled repayments and projected prepayments of principal.
(b)   Includes cash in banks and Federal Home Loan Bank (FHLB)stock.
(c)   Liabilities with no maturity date, such as passbook and money market
      deposit accounts, are assigned zero months.


                                       11


<PAGE>   12


        CASH AND INVESTMENTS

        The Office of Thrift Supervision (OTS) requires insured institutions,
such as World Savings and Loan Association (World or Association) and World
Savings Bank, FSB (WFSB), to maintain a minimum amount of cash and certain
qualifying investments for liquidity purposes. The current minimum requirement
is equal to a monthly average of 5% of deposits and short-term borrowings. For
the months ended June 30, 1997 and 1996, and December 31, 1996, World's average
regulatory liquidity ratios were 7%, 7%, and 8%, respectively. For the months
ended June 30, 1997 and 1996, and December 31, 1996, WFSB's average regulatory
liquidity ratios were 5.5%, 5.4%, and 6%, respectively. World and WFSB exceeded
the monthly 5% requirements for each of the six months ended June 30, 1997 and
all months during 1996. The level of the Company's investments position in
excess of its liquidity requirements at any time depends on liquidity needs and
available arbitrage opportunities.

        At June 30, 1997 and 1996, and December 31, 1996, the Company had
securities available for sale in the amount of $601 million, $496 million, and
$781 million, respectively, including unrealized gains on securities available
for sale of $203 million, $114 million, and $159 million, respectively. At June
30, 1997 and 1996, and December 31, 1996, the Company had no securities held to
maturity or for trading.

        Included in the securities available for sale at June 30, 1997 and 1996,
and December 31, 1996, were collateralized mortgage obligations (CMOs) in the
amount of $96 million, $279 million, and $170 million, respectively. The Company
holds CMOs on which both principal and interest are received. It does not hold
any interest-only or principal-only CMOs. At June 30, 1997, the majority of the
Company's CMOs had remaining terms to maturity of five years or less, and
qualified for inclusion in the regulatory liquidity measurement.

        MORTGAGE-BACKED SECURITIES

        At June 30, 1997 and 1996, and December 31, 1996, the Company had
mortgage-backed securities (MBS) held to maturity in the amount of $3.8 billion,
$2.9 billion, and $4.1 billion, respectively, including $3.1 billion of Federal
National Mortgage Association (FNMA) MBS subject to full credit recourse to the
Company at June 30, 1997, $2.1 billion at June 30, 1996, and $3.3 billion at
December 31, 1996. At June 30, 1997 and 1996, and December 31, 1996, the Company
had mortgage-backed securities available for sale in the amount of $207 million,
$477 million, and $227 million, respectively, including unrealized gains on MBS
available for sale of $8 million, $12 million, and $11 million, respectively,
and including $224 million of FNMA MBS subject to full credit recourse at June
30, 1996. At June 30, 1997 and 1996 and December 31, 1996, the Company had no
trading MBS.

        During 1995 and 1996, the Company securitized $2.3 billion and $1.3
billion, respectively, of adjustable rate mortgages (ARMs) into FNMA
COFI-indexed MBS, to be used as collateral for borrowings. Included in the $1.3
billion securitized during 1996, was $226 million of loans securitized into MBS
available for sale with recourse, which were subsequently transferred from the
MBS available for sale portfolio to the MBS held to maturity portfolio during
the fourth quarter of 1996. These securities are subject to full credit recourse
to the Company. The Company has the ability and intent to hold these MBS until
maturity. Accordingly, these MBS are classified as held to maturity.


                                       12


<PAGE>   13


        Repayments of MBS during the second quarter and first six months of 1997
were $133 million and $239 million, respectively, compared to $115 million and
$220 million in the same periods of 1996. Although the balance of the MBS
portfolio is higher than it was a year ago, repayments on MBS during the first
six months of 1997 as compared to the first six months of 1996 were flat
primarily due to a decrease in prepayments on the underlying loans.

        LOAN PORTFOLIO

               LOAN VOLUME

        New loan originations for the three and six months ended June 30, 1997,
amounted to $2.2 billion and $3.5 billion, respectively, compared to $1.9
billion and $3.1 billion for the same periods in 1996. The increase in loan
volume in 1997 over the first half of 1996 occurred because of a strong home
sales market and strong demand for ARMs, our primary product. For most of the
second quarter, rates on new fixed-rate mortgages remained near the 8% level. In
contrast, the starting rates on ARMs, the Company's principal product, remained
low and affordable. The Company continues to sell most of its fixed-rate
originations. Loans originated for sale for the three and six months ended June
30, 1997 were $45 million and $99 million, respectively, compared to $141
million and $335 million for the same periods in 1996. Refinanced loans
constituted 31% and 33% of new loan originations for the three and six months
ended June 30, 1997, compared to 36% and 38% for the three and six months ended
June 30, 1996.

        The Company has lending operations in 23 states. The primary source of
mortgage origination is loans secured by residential properties in California.
For the three and six months ended June 30, 1997, 53% and 52%, respectively, of
total loan originations were on residential properties in California compared to
51% and 52% for the same periods in 1996. The five largest states, other than
California, for originations for the three and six months ended June 30, 1997,
were Florida, Texas, Illinois, Colorado, and New Jersey with a combined total of
26% of total originations for both periods. The percentage of the total loan
portfolio (excluding mortgage-backed securities with recourse) that is comprised
of residential loans in California was 67% at June 30, 1997 compared to 71% at
June 30, 1996, and 69% at December 31, 1996.

        The tables on the following two pages show the Company's loan portfolio
by state at June 30, 1997 and 1996.


                                       13


<PAGE>   14


                                     TABLE 3

                             Loan Portfolio by State
                                  June 30, 1997
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                              Residential                                    
                              Real Estate                           Commercial                         Loans as  
                       --------------------                            Real           Total             a % of  
   State                1 - 4              5+           Land          Estate         Loans (a)        Portfolio
--------------       ----------       ----------       -----       ----------       ----------          ------
<S>                  <C>               <C>               <C>           <C>          <C>                  <C>   
California          $20,327,373       $3,397,605       $ 244          $53,442      $23,778,664           67.65%
Texas                 1,268,634          105,901         567            1,521        1,376,623            3.92
Illinois              1,142,439          178,242         -0-            1,712        1,322,393            3.76
Colorado              1,043,506          233,298         -0-            7,059        1,283,863            3.65
Florida               1,187,442           20,192          59              932        1,208,625            3.44
New Jersey            1,132,637              404         -0-            5,594        1,138,635            3.24
Washington              478,018          382,828         -0-              746          861,592            2.45
Arizona                 700,736           45,145         -0-              568          746,449            2.12
Pennsylvania            538,703            4,240         -0-            3,414          546,357            1.55
Virginia                516,245            8,550         -0-            1,397          526,192            1.50
Connecticut             451,883              -0-         -0-               21          451,904            1.29
Maryland                351,507            2,178         -0-              521          354,206            1.01
Oregon                  240,586           11,539         -0-              246          252,371            0.72
Nevada                  190,579            1,064         -0-              -0-          191,643            0.55
Utah                    182,707               57         -0-            1,685          184,449            0.52
Minnesota               163,919            8,171         -0-              -0-          172,090            0.49
Kansas                  155,432            4,823         -0-              183          160,438            0.46
Wisconsin               123,442            3,879         -0-              -0-          127,321            0.36
Massachusetts           101,971              -0-         -0-               20          101,991            0.29
Missouri                 77,011            6,276         -0-              -0-           83,287            0.24
Washington DC            47,912              -0-         -0-              -0-           47,912            0.14
New York                 46,359              -0-         -0-              -0-           46,359            0.13
New Mexico               41,547              -0-         -0-              -0-           41,547            0.12
Georgia                  33,270              -0-         -0-            1,637           34,907            0.10
Idaho                    28,494              -0-         -0-              -0-           28,494            0.08
Delaware                 26,548              -0-         -0-              -0-           26,548            0.08
Ohio                     14,676            1,832         189            3,822           20,519            0.06
South Dakota              8,714              -0-         -0-              -0-            8,714            0.02
North Carolina            7,488              -0-         -0-              476            7,964            0.02
Other                    10,429                5         -0-            4,491           14,925            0.04
                    -----------      -----------      ------       ----------      -----------          ------
  Totals            $30,640,207      $ 4,416,229      $1,059       $   89,487       35,146,982          100.00%
                    ===========      ===========      ======       ==========                           ======

SFAS 91 deferred loan fees                                                             (48,304)
Loan discount on purchased loans                                                        (3,755)
Undisbursed loan funds                                                                  (4,069)
Allowance for loan losses                                                             (216,651)
Loans to facilitate (LTF) interest reserve                                                (668)
Troubled debt restructured (TDR) interest reserve                                       (6,098)
Loans on deposits                                                                       31,984
                                                                                   -----------
 Total loan portfolio and loans securitized
 into FNMA  MBS with recourse                                                       34,899,421        

Loans securitized into FNMA MBS with recourse                                       (3,077,534)(b)
                                                                                   -----------
     Total loan portfolio                                                          $31,821,887
                                                                                   ===========
</TABLE>


(a)   The Company has no commercial loans.
(b)   During 1995 and 1996, loans amounting to $2.3 billion and $1.3 billion,
      respectively, were securitized with full recourse into Federal National
      Mortgage Association mortgage-backed securities. The June 30, 1997
      balances of these FNMA mortgage-backed securities are reflected in the
      amounts above.


                                       14


<PAGE>   15


                                     TABLE 4

                             Loan Portfolio by State
                                  June 30, 1996
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                    Residential  
                    Real Estate                    Commercial                            Loans as 
                --------------------                  Real                     Total       a % of  
   State        1 - 4         5+         Land        Estate    Construction   Loans(a)    Portfolio
------------  ----------  -----------  ---------   ----------- ------------  ----------   ---------
<S>           <C>         <C>            <C>        <C>         <C>         <C>           <C>   
California   $19,232,989  $3,362,817     $  264     $ 67,333        $  -0-  $22,663,403     71.70%
Colorado         879,922     229,322        -0-        7,448           -0-    1,116,692      3.53
Illinois         906,070     180,441        -0-        1,951           -0-    1,088,462      3.44
Texas            943,562      94,956        583        1,628           -0-    1,040,729      3.29
New Jersey       920,148         411        -0-        7,397           139      928,095      2.94
Florida          822,356      11,428        169          984           -0-      834,937      2.64
Washington       370,901     322,017        -0-          773           -0-      693,691      2.20
Arizona          510,195      52,225        -0-        1,697           -0-      564,117      1.79
Virginia         450,726       4,393        -0-        1,530           -0-      456,649      1.45
Pennsylvania     419,594         278        -0-        3,889           -0-      423,761      1.34
Connecticut      343,346         -0-        -0-           14           -0-      343,360      1.09
Maryland         289,560       1,075        -0-          574           -0-      291,209      0.92
Oregon           186,326      11,067        -0-        2,820           -0-      200,213      0.63
Nevada           163,022       1,174        -0-          -0-           -0-      164,196      0.52
Kansas           131,706       4,977        -0-          203           -0-      136,886      0.43
Utah             116,001          63        -0-        1,891           -0-      117,955      0.37
Minnesota         99,144       2,351        -0-          -0-           -0-      101,495      0.32
Wisconsin         74,466       4,195        -0-          -0-           -0-       78,661      0.25
Missouri          65,726       6,763        -0-          -0-           -0-       72,489      0.23
New York          51,168         -0-        -0-           20           -0-       51,188      0.16
Georgia           39,087         -0-        -0-        1,941           -0-       41,028      0.13
Washington, DC    37,510         -0-        -0-          -0-           -0-       37,510      0.12
Massachusetts     31,476         -0-        -0-           20           -0-       31,496      0.10
Ohio              20,558       2,486        298        4,593           -0-       27,935      0.09
New Mexico        27,880         -0-        -0-          -0-           -0-       27,880      0.09
Idaho             20,828         -0-        -0-          -0-           -0-       20,828      0.07
Delaware          20,065         -0-        -0-          -0-           -0-       20,065      0.06
North Carolina     8,334         279        -0-          522           -0-        9,135      0.03
Other             17,551          22        -0-        4,765           -0-       22,338      0.07
              ----------- ----------   --------   ----------    ----------  -----------    ------
  Totals      $27,200,217 $4,292,740     $1,314     $111,993        $ 139    31,606,403    100.00%
              =========== ==========   ========   ==========    ==========                 ====== 

SFAS 91 deferred loan fees                                                      (68,840)
Loan discount on purchased loans                                                 (5,582)
Undisbursed loan funds                                                           (5,443)
Allowance for loan losses                                                      (163,846)
Loans to facilitate (LTF) interest reserve                                         (486)
Troubled debt restructured (TDR) interest reserve                                (5,110)
Loans on deposits                                                                30,965
                                                                            -----------
     Total loan portfolio and loans securitized into FNMA                    31,388,061
       MBS with recourse
Loans securitized into FNMA MBS with recourse                                (2,328,108)(b)
                                                                            -----------
     Total loan portfolio                                                   $29,059,953
                                                                            ===========
</TABLE>


(a)   The Company has no commercial loans.
(b)   During 1995 and 1996, loans amounting to $2.3 billion and $226 million,
      respectively, were securitized with full recourse into Federal National
      Mortgage Association (FNMA) mortgage-backed securities. The June 30, 1996
      balances of these FNMA mortgage-backed securities are reflected in the
      amounts above.


                                       15


<PAGE>   16


        The Company continues to emphasize ARM loans with interest rates that
change periodically in accordance with movements in specified indexes. The
portion of the mortgage portfolio (excluding MBS) composed of rate-sensitive
loans was 92% at June 30, 1997 compared to 91% at June 30, 1996 and December 31,
1996. The Company's ARM originations for the first half of 1997 constituted over
95% of new mortgage loans made in 1997 compared to 85% in the first half of
1996.

        The weighted average maximum lifetime cap rate on the Company's ARM loan
portfolio (including MBS with recourse) was 12.81%, or 5.55% above the actual
weighted average rate at June 30, 1997, versus 13.02%, or 5.76% above the
weighted average rate at June 30, 1996.

        Approximately $5.5 billion of the Company's ARM loans (including MBS
with recourse) 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 June 30,
1997, $615 million of ARM loans had reached their rate floors. The weighted
average floor rate on the loans that had reached their floor was 7.73% at June
30, 1997 compared to 7.75% at June 30, 1996. Without the floor, the average
yield on these loans would have been 7.09% at June 30, 1997 and 7.37% at June
30, 1996.

        Loan repayments consist of monthly loan amortization, loan payoffs, and
refinances. For the three and six months ended June 30, 1997, loan repayments
were $940 million and $1.6 billion, respectively, compared to $823 million and
$1.6 billion in the same periods of 1996. Although the balance of the loan
portfolio is higher than it was a year ago, loan repayments during the first six
months of 1997 as compared to the first six months of 1996 were flat primarily
due to a decrease in refinances on the underlying loans.

        MORTGAGE SERVICING RIGHTS

        On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" (SFAS
122). SFAS 122 amends Statement of Financial Accounting Standards No. 65,
"Accounting for Certain Mortgage Banking Activities," to require that any
financial institution participating in the secondary mortgage market recognize,
as separate assets, rights to service mortgage loans for others when those
rights are acquired through either the purchase or origination of mortgage loans
which are subsequently sold or securitized. SFAS 122 also requires that
financial institutions participating in the secondary mortgage market should
evaluate and measure for impairment of capitalized mortgage servicing rights
based on the fair value of those rights on a disaggregated basis. If the book
value exceeds the fair value of the capitalized mortgage servicing rights,
financial institutions are required to write-down the servicing rights to their
fair value. The book value of Golden West's servicing rights did not exceed the
fair value at June 30, 1997 or 1996 and, therefore, no adjustment was necessary.
On January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" (SFAS 125). The accounting for mortgage
servicing assets under SFAS 125 is substantially the same as the accounting for
mortgage servicing assets under SFAS 122. See page 22 for further discussion on
SFAS 125. For the second quarter and first half of 1997, the Company recognized
gains of $1.1 million and $2.1 million, respectively, on the sale of loans due
to the capitalization of servicing rights. For the same periods in 1996, the
Company recognized gains of $2.3 million and $7.0 million, respectively. After
amortization, the balance at June 30, 1997 and 1996 of the capitalized servicing
rights was $10.0 million and $6.6 million, respectively.


                                       16


<PAGE>   17


        ASSET QUALITY

        One measure of the soundness of the Company's portfolio is its ratio of
nonperforming assets (NPAs) to total assets. Nonperforming assets include
non-accrual loans (loans, including loans swapped into MBS with recourse, 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 troubled debt
restructured (TDRs) is made up of loans on which delinquent payments have been
capitalized or on which temporary interest rate reductions have been made,
primarily to customers adversely impacted by economic conditions.

        The following table shows the components of the Company's nonperforming
assets and troubled debt restructured and the various ratios to total assets.

                                     TABLE 5

               Nonperforming Assets and Troubled Debt Restructured
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                            
                                                   June 30                                        
                                             ----------------------      December 31
                                              1997           1996            1996
                                             -------       --------      ------------
<S>                                          <C>            <C>           <C>    
Non-accrual loans                           $361,860       $370,081       $373,157
Real estate acquired through                  72,697         71,910         82,075
  foreclosure
Real estate in judgment                          191            738            416
                                            --------       --------       --------
Total nonperforming assets                  $434,748      $ 442,729       $455,648
                                            ========      =========       ========

TDRs                                        $ 75,834      $  56,992       $ 84,082
                                            ========      =========       ========

Ratio of NPAs to total assets                   1.11%          1.24%          1.21%
                                            ========      =========       ========

Ratio of TDRs to total assets                    .19%           .16%           .22%
                                            ========      =========       ========

Ratio of NPAs and TDRs to total assets          1.30%          1.40%          1.43%
                                            ========      =========       ========
</TABLE>


        The decrease in NPAs during 1997 reflects the improving California
economy. The Company continues to closely monitor all delinquencies and takes
appropriate steps to protect its interests. Interest foregone on non-accrual
loans is fully-reserved and amounted to $4 million and $9 million in the second
quarter and first six months of 1997 compared to $4 million and $11 million for
the same periods of 1996. Interest foregone on TDRs amounted to $555 thousand
and $1.1 million for the three and six months ended June 30, 1997, compared to
$411 thousand and $778 thousand for the three and six months ended June 30,
1996.

        The tables on the following two pages show the Company's nonperforming
assets by state at June 30, 1997 and 1996.


                                       17


<PAGE>   18


                                     TABLE 6

                          Nonperforming Assets by State
                                  June 30, 1997
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                   Non-Accrual Loans (a)                     Real Estate Owned
                          -------------------------------------       ---------------------------------
                                  Residential          Commercial                             Commercial                   NPAs as
                                 Real Estate              Real     Residential                    Real        Total         a % of
 State                      1 -4             5+          Estate       1 - 4           5+         Estate       NPAs(b)        Loans
----------------------    --------        -------        ------       ------        ------       ------       -------         ----
<S>                       <C>             <C>             <C>         <C>            <C>          <C>         <C>             <C> 
California                $280,013        $12,211        $1,123      $59,394        $8,886       $2,167      $363,794         1.53%
Texas                        7,454            -0-           -0-          711           -0-          -0-         8,165         0.59
Illinois                     8,148            223           -0-          367           -0-          -0-         8,738         0.66
Colorado                     1,814            -0-         3,088          -0-           -0-          -0-         4,902         0.38
Florida                      7,008            -0-           195          515           -0-          -0-         7,718         0.64
New Jersey                  15,213            -0-           826          365           -0-          -0-        16,404         1.44
Washington                   2,525            -0-           -0-          -0-           -0-          -0-         2,525         0.29
Arizona                      1,158            -0-           -0-          210           -0-          -0-         1,368         0.18
Pennsylvania                 4,988            -0-             4          152           -0-          -0-         5,144         0.94
Virginia                     1,543            -0-           -0-          524           -0-          -0-         2,067         0.39
Connecticut                  2,620            -0-           -0-          590           -0-          -0-         3,210         0.71
Maryland                     1,627            -0-           -0-          289           -0-          -0-         1,916         0.54
Oregon                         804            -0-           -0-          -0-           -0-          -0-           804         0.32
Nevada                       1,252            -0-           -0-          227           -0-          -0-         1,479         0.77
Utah                           375            -0-           -0-          -0-           -0-          -0-           375         0.20
Minnesota                      506            -0-           -0-          -0-           -0-          -0-           506         0.29
Kansas                         426             40           -0-          -0-           -0-          -0-           466         0.29
Wisconsin                      591            -0-           -0-          -0-           -0-          -0-           591         0.46
Massachusetts                  160            -0-            20          -0-           -0-          -0-           180         0.18
Missouri                       423             42           -0-           32           -0-          -0-           497         0.60
Washington,DC                   74            -0-           -0-          -0-           -0-          -0-            74         0.15
New York                     3,412            -0-           -0-          302           -0-          -0-         3,714         8.01
New Mexico                     -0-            -0-           -0-          -0-           -0-          -0-           -0-         0.00
Georgia                      1,784            -0-           -0-          -0-           -0-          -0-         1,784         5.11
Idaho                          -0-            -0-           -0-          -0-           -0-          -0-           -0-         0.00
Delaware                       118            -0-           -0-          -0-           -0-          -0-           118         0.44
Ohio                             7            -0-             2          -0-           -0-          -0-             9         0.04
South Dakota                   -0-            -0-           -0-          -0-           -0-          -0-           -0-         0.00
North Carolina                 -0-            -0-           -0-          -0-           -0-          -0-           -0-         0.00
Other                           43            -0-           -0-          -0-           -0-          -0-            43         0.29
                          --------        -------        ------      -------        ------       ------      --------         ----
  Totals                  $344,086        $12,516        $5,258      $63,678        $8,886       $2,167       436,591         1.24%
                          ========        =======        ======      =======        ======       ======                       
REO general valuation allowance                                                                                (1,843)       (0.00)
                                                                                                             --------         ----
Total nonperforming assets                                                                                   $434,748         1.24%
                                                                                                             ========         ====
</TABLE>


(a)  Non-accruals loans are 90 days or more past due and have no unpaid interest
     accrued.

(b)  During 1995 and 1996, loans amounting to $2.3 billion and $1.3 billion,
     respectively, were securitized with full recourse into FNMA mortgage-backed
     securities. The June 30, 1997 balances of the related nonperforming assets
     are reflected in the amounts above.


                                       18


<PAGE>   19


                                     TABLE 7

                          Nonperforming Assets by State
                                  June 30, 1996
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                       Non-Accrual Loans (a)                 Real Estate Owned
                   ----------------------------   -------------------------------------
                      Residential     Commercial                              Commercial                  NPAs
                      Real Estate        Real         Residential                Real      Total         a % of
 State              1 -4         5+     Estate     1 - 4       5+      Land     Estate     NPAs(b)        Loans
----------------  --------    -------   -------   -------   -------   -------   -------    -------        ----
<S>               <C>          <C>        <C>     <C>        <C>          <C>     <C>      <C>            <C>  
California        $292,980    $25,045    $1,229   $54,780   $13,638   $   400   $ 2,167   $390,239        1.72%
Colorado             1,952        -0-     3,090       148       -0-       -0-       -0-      5,190        0.46
Illinois             4,470        191       -0-       395       541       -0-       -0-      5,597        0.51
Texas                3,274        -0-       -0-       164       -0-       -0-       -0-      3,438        0.33
New Jersey          12,267        -0-       679       424       -0-       -0-       -0-     13,370        1.44
Florida              4,021        -0-       150       292       -0-       -0-       -0-      4,463        0.53
Washington             663        -0-       -0-       -0-       -0-       -0-       -0-        663        0.10
Arizona              1,229        -0-       837       -0-       -0-       -0-       -0-      2,066        0.37
Virginia             1,528        -0-       -0-       818       -0-       -0-       -0-      2,346        0.51
Pennsylvania         2,633        -0-       -0-       225       -0-       -0-       -0-      2,858        0.67
Connecticut          3,370        -0-       -0-       325       -0-       -0-       -0-      3,695        1.08
Maryland             1,486        -0-       -0-       -0-       -0-       -0-       -0-      1,486        0.51
Oregon                 489        -0-       -0-       -0-       -0-       -0-       -0-        489        0.24
Nevada               1,001        -0-       -0-       114       -0-       -0-       -0-      1,115        0.68
Kansas                 895         40       -0-       -0-       -0-       -0-       -0-        935        0.68
Utah                   121        -0-       -0-       -0-       -0-       -0-       -0-        121        0.10
Minnesota              291        -0-       -0-       -0-       -0-       -0-       -0-        291        0.29
Wisconsin              -0-        -0-       -0-       -0-       -0-       -0-       -0-        -0-        0.00
Missouri               618         43       -0-       -0-       -0-       -0-       -0-        661        0.91
New York             3,787        -0-       -0-        55       -0-       -0-       -0-      3,842        7.51
Georgia              1,352        -0-       -0-        72       -0-       -0-       -0-      1,424        3.47
Washington,DC            6        -0-       -0-       -0-       -0-       -0-       -0-          6        0.02
Massachusetts          -0-        -0-       -0-       -0-       -0-       -0-       -0-        -0-        0.00
Ohio                    61        -0-        58         5       -0-       -0-       144        268        0.96
New Mexico             -0-        -0-       -0-       -0-       -0-       -0-       -0-        -0-        0.00
Idaho                  -0-        -0-       -0-       -0-       -0-       -0-       -0-        -0-        0.00
Delaware               -0-        -0-       -0-       -0-       -0-       -0-       -0-        -0-        0.00
North Carolina          80        -0-       -0-       -0-       -0-       -0-       -0-         80        0.88
Other                  145        -0-       -0-       -0-       -0-       -0-       -0-        145        0.65
Totals            --------    -------   -------   -------   -------   -------   -------   --------        ----
                  $338,719    $25,319   $ 6,043   $57,817   $14,179   $   400   $ 2,311    444,788        1.41%
                  ========    =======   =======   =======   =======   =======   =======                    

REO general valuation allowance                                                             (2,059)      (0.01)
                                                                                          --------        ----
Total nonperforming assets                                                                $442,729        1.40%
                                                                                          ========        ====
</TABLE>


(a)  Non-accruals loans are 90 days or more past due and have no unpaid interest
     accrued.
(b)  During 1995 and 1996, loans amounting to $2.3 billion and $226 million,
     respectively, were securitized with full recourse into FNMA mortgage-backed
     securities. The June 30, 1996 balance of the related nonperforming assets
     are reflected in the amounts above.


                                       19


<PAGE>   20


        The Company provides specific valuation allowances for losses on loans
 when impaired, including loans securitized into MBS with recourse or loans sold
 with recourse, and on real estate owned when any significant and permanent
 decline in value is identified. The Company also utilizes a methodology, based
 on trends in the basic portfolio, for monitoring and estimating loan losses
 that is based on both historical 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. Management is then able to estimate a range of general loss allowances to
 cover losses in the portfolio. In addition, periodic reviews are made of major
 loans and real estate owned, and major lending areas are regularly reviewed to
 determine potential problems. Where indicated, valuation allowances are
 established or adjusted. In estimating possible 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. Additions to and reductions
 from the allowances are reflected in current earnings.

        Loans securitized into FNMA MBS with full credit recourse are included
 with the Company's loan portfolio when determining the allowance for loan
 losses. For loans sold to FNMA with full credit recourse, the Company records a
 separate recourse liability for any potential losses.

        The table below shows the changes in the allowance for loan losses for
 the three and six months ended June 30, 1997 and 1996.

                                     TABLE 8

                      Changes in Allowance for Loan Losses
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                     Three Months Ended       Six Months Ended
                                                           June 30                June 30
                                                    ---------------------  ----------------------
                                                      1997        1996       1997        1996
                                                    ---------   ---------  ----------  ----------
<S>                                                 <C>         <C>        <C>         <C>      
 Beginning allowance for loan losses                $209,077    $152,360   $ 195,702   $ 141,988
 Provision charged to expense                         13,111      17,236      33,806      35,758
 Less loans charged off                               (5,747)     (5,871)    (13,305)    (14,231)
 Add recoveries                                          210         121         448         331
                                                    ---------   ---------  ----------  ----------
 Ending allowance for loan losses                   $216,651    $163,846    $216,651   $ 163,846
                                                    =========   =========  ==========  ==========

 Ratio of net charge-offs to average loans
   outstanding (including MBS with recourse)            .06%        .07%        .08%        .09%
                                                    =========   =========  ==========  ==========

 Ratio of allowance for loan losses to                                         49.8%       37.0%
   nonperforming assets
                                                                           ==========  ==========
 Ratio of allowance for loan losses to total loans
   (including MBS with recourse)                                                .62%        .52%
                                                                           ==========  ==========
</TABLE>


                                       20


<PAGE>   21


        DEPOSITS

        Retail deposits increased during the second quarter of 1997 by $419
million, including interest credited of $238 million, compared to an increase of
$50 million, including interest credited of $211 million, in the second quarter
of 1996. Retail deposit balances in the first half of 1997 increased by $866
million, including interest credited of $464 million, compared to an increase of
$193 million, including interest credited of $424 million, in the first half of
1996. Retail deposits increased during 1997 primarily due to ongoing marketing
efforts and competitive rates offered by the Company on its insured accounts.

        Beginning in January 1997, the Company began a program to use government
securities dealers to sell large certificates of deposit (CDs) to institutional
investors. The Company's deposit balance at June 30, 1997 includes $1.1 billion
of these wholesale CDs.

        The mix of reported deposits changed during 1997 as compared to 1996, in
part due to a new program begun in the fourth quarter of 1996. Specifically, the
reported balance of interest-bearing checking accounts has decreased as compared
to 1996 and the reported balance of money market accounts has increased compared
to balances reported in 1996 as a result of this new program which calculates
the minimum amount of funds needed to cover disbursements for each customer's
checking account and transfers the remaining funds to a money market account,
reducing the Company's required reserves at the Federal Reserve Bank. In
addition, during 1997 the Company has been actively promoting money market
deposit accounts.


                                       21


<PAGE>   22


        The table below shows the Company's deposits by interest rate and by
remaining maturity at June 30, 1997 and 1996.

                                     TABLE 9

                                    Deposits
                              (Dollars in millions)


<TABLE>
<CAPTION>
                                                                     June 30
                                                    ------------------------------------------
                                                          1997                    1996
                                                    ------------------     -------------------
                                                     Rate*      Amount      Rate*       Amount
                                                    -------    -------     -------    --------
<S>                                                   <C>      <C>          <C>      <C>   
      Deposits by interest rate:
      Interest-bearing checking accounts              1.17%  $    276        1.21%    $   756
      Passbook accounts                               2.22        545        2.22         560
      Money market deposit accounts                   3.02      1,940        3.25       1,188
      Term certificate accounts with original
      maturities of:
          4 weeks to 1 year                           5.32     12,543        4.97       8,422
          1 to 2 years                                5.37      3,687        5.25       5,138
          2 to 3 years                                5.44      1,322        5.95       1,810
          3 to 4 years                                5.79        489        5.46         616
          4 years and over                            5.87      1,648        5.82       2,062
      Retail jumbo CDs                                5.51        515        5.31         487
      Wholesale CDs                                   5.64      1,071        0.00         -0-
      All other                                       7.67          1        7.69           2
                                                             --------                -------- 
                                                             $ 24,037                $ 21,041
                                                             ========                ========

      Deposits by remaining maturity:
      No contractual maturity                                $  2,761                 $ 2,504
      Maturity within one year:
         3rd quarter                                            7,289                   4,560
         4th quarter                                            7,237                   4,835
         1st quarter                                            2,499                   3,696
         2nd quarter                                            1,371                   2,434
                                                              -------                --------
                                                               18,396                  15,525

      1 to 2 years                                              1,929                   1,826
      2 to 3 years                                                679                     496
      3 to 4 years                                                110                     520
      4 years and over                                            162                     170
                                                             --------                --------
                                                             $ 24,037                $ 21,041
                                                             ========                ========
</TABLE>

* Weighted average interest rate, including the impact of interest rate swaps.

        ADVANCES FROM FEDERAL HOME LOAN BANKS

        The Company uses borrowings from the FHLB, also known as "advances," to
supplement cash flow and to provide funds for loan origination activities.
Advances are secured by pledges of certain loans, capital stock of the FHLB, and
MBS. FHLB advances amounted to $7.4 billion at June 30, 1997, compared to $7.2
billion and $8.8 billion at June 30, 1996 and December 31, 1996, respectively.


                                       22


<PAGE>   23


        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, large banks, and the
Federal Home Loan Bank of San Francisco, typically using MBS from the Company's
portfolio. Reverse Repos with dealers, banks and the Federal Home Loan Bank of
San Francisco amounted to $3.0 billion, $2.3 billion, and $1.9 billion at June
30, 1997 and 1996, and December 31, 1996, respectively. The $3.0 billion balance
at June 30, 1997, included $750 million in Federal Home Loan Bank of San
Francisco MBS Reverse Repos with maturities ranging from 1997 to 1998.

        In June 1996, the Financial Accounting Standards Board (FASB) issued
SFAS 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities". SFAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities. These standards are based on consistent application of a
financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished. This statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. SFAS 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996, and is to be applied prospectively. In December 1996, the FASB issued
Statement of Financial Accounting Standards No. 127, "Deferral of the Effective
Date of Certain Provisions of FASB Statement No. 125" (SFAS 127), which delayed
the effective date for portions of SFAS 125 for one year. The impact of the SFAS
125 and SFAS 127 on the Company's financial condition and results of operations
is not expected to be material.

        OTHER BORROWINGS

        At June 30, 1997, Golden West, at the holding company level, had a total
of $1.0 billion of subordinated debt issued and outstanding. As of June 30,
1997, the Company's subordinated debt securities were rated A3 and A- by Moody's
Investors Service (Moody's) and Standard & Poor's Corporation (S&P),
respectively. At June 30, 1997, Golden West had on file a registration statement
with the Securities and Exchange Commission for the sale of up to $300 million
of subordinated notes.

        World currently has on file a shelf registration with the OTS for the
issuance of $2.0 billion of unsecured medium-term notes, all of which was
available for issuance at June 30, 1997. World had medium-term notes outstanding
under prior registrations with principal amounts of $310 million at June 30,
1997, compared to $690 million at June 30, 1996, and $590 million at December
31, 1996. As of June 30, 1997, World's medium-term notes were rated A1 and A+ by
Moody's and S&P, respectively.

        World also has on file a registration statement with the OTS for the
sale of up to $300 million of subordinated notes and, at June 30, 1997, the full
amount was available for issuance. As of June 30, 1997, World had issued under
prior registrations a total of $200 million of subordinated notes, which were
rated A2 and A by Moody's and S&P, respectively. The subordinated notes are
included in World's risk-based regulatory capital as Supplementary Capital.


                                       23


<PAGE>   24


        During November 1996, WFSB received permission from the OTS to issue
non-convertible medium-term notes to institutional investors under rules similar
to Office of the Comptroller of the Currency rules applicable to similarly
situated national banks.

        STOCKHOLDERS' EQUITY

        The Company's stockholders' equity increased by $140 million during the
first six months of 1997. The increase in stockholders' equity was primarily a
result of net earnings for the first six months of 1997 and a $25 million
increase in market values of securities available for sale since December 31,
1996, which were partially offset by the $45 million cost of the purchase of
Company stock and the payment of $13 million in quarterly dividends to
stockholders. The Company's stockholders' equity decreased during the first six
months of 1996 as a result of a $47 million loss incurred during the first half
of 1996 (see Change in Accounting for Goodwill on page 7), the $59 million cost
of the purchase of Company stock during the first two quarters of 1996, and a $3
million decline in market values of securities available for sale since December
1995. Unrealized gains net of taxes on securities and MBS available for sale
included in stockholders' equity at June 30, 1997 and 1996, and December 31,
1996, were $125 million, $73 million, and $100 million, respectively.

        During periods of low asset growth, the Company's capital ratios may
build to levels well in excess of the amounts necessary to meet regulatory
capital requirements. Golden West's Board of Directors periodically reviews
alternative uses of excess capital, including faster growth and acquisitions. At
times, the Board has determined that the purchase of common stock is a wise use
of excess capital.

        Since October 1993, through three separate actions, Golden West's Board
of Directors has authorized the purchase by the Company of up to 12.2 million
shares of Golden West's common stock. As of June 30, 1997, 8.5 million shares
had been purchased and retired at a cost of $377 million since October 1993, of
which 689,100 were purchased and retired at a cost of $45 million during the
first half of 1997. Dividends from World Savings are expected to continue to be
the major source of funding for the stock repurchase program. The purchase of
Golden West stock is not intended to have a material impact on the normal
liquidity of the Company.

        World paid a $135 million and a $140 million dividend to Golden West in
March and June 1997, respectively. Also, during the first quarter and second
quarter of 1997, Golden West purchased from World, and subsequently contributed
as capital to WFSB, $30 million and $18 million in loans, respectively.

        The Company has on file a shelf registration statement with the
Securities and Exchange Commission to issue up to two million shares of its
preferred stock. The preferred stock may be issued in one or more series, may
have varying provisions and designations, and may be represented by depository
shares. The preferred stock is not convertible into common stock. No preferred
stock has yet been issued under the registration. The Company's preferred stock
has been preliminarily rated a2 by Moody's.


                                       24


<PAGE>   25


        REGULATORY CAPITAL

        The OTS requires federally insured institutions, such as World and WFSB,
to meet certain minimum capital requirements. Both World's and WFSB's regulatory
capital ratios continue to exceed regulatory requirements for well-capitalized
institutions, the highest regulatory standard. The following table shows World's
regulatory capital ratios and compares them to the OTS minimum requirements at
June 30, 1997 and 1996.

                                    TABLE 10

                       World Savings and Loan Association
                            Regulatory Capital Ratios
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                        June 30, 1997                             June 30, 1996
              ---------------------------------------   ---------------------------------------
                 ACTUAL               REQUIRED             ACTUAL              REQUIRED
              ------------------   -------------------  ------------------  -------------------
               Capital    Ratio     Capital    Ratio     Capital    Ratio     Capital    Ratio
              ---------  -------   ---------  -------   ---------  -------   ---------  -------
  <S>         <C>        <C>       <C>        <C>      <C>          <C>      <C>          <C>  
  Tangible   $1,142,979   6.13%    $279,515   1.50%    $1,668,903    6.65%    $376,445    1.50%
  Core        1,142,979   6.13      559,030   3.00      1,668,903    6.65      752,890    3.00
  Risk-based  1,458,621  13.30      877,655   8.00      1,989,286   14.37    1,107,514    8.00
</TABLE>


        World's regulatory capital ratios as of June 30, 1996 have been restated
due to the adoption of SFAS 72 as discussed on page 7. The adoption of SFAS 72
had no effect on WFSB's June 30, 1996 regulatory capital ratios.

        The following table shows WFSB's current regulatory capital ratios and
compares them to the current OTS minimum requirements at June 30, 1997 and 1996.

                                    TABLE 11

                   World Savings Bank, a Federal Savings Bank
                            Regulatory Capital Ratios
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                        June 30, 1997                            June 30, 1996
            --------------------------------------   --------------------------------------
                   ACTUAL             REQUIRED              ACTUAL             REQUIRED
             ------------------  ------------------   ------------------  ------------------
              Capital     Ratio    Capital   Ratio    Capital    Ratio     Capital    Ratio
             ----------   -----   --------- -------   --------  --------  ---------  -------
<S>          <C>         <C>      <C>       <C>       <C>        <C>        <C>       <C>  
  Tangible   $1,338,857   6.61%   $304,005   1.50%    $760,916    7.40%    $154,184   1.50%
  Core        1,338,857   6.61     608,010   3.00      760,916    7.40      308,368   3.00
  Risk-based  1,406,712  13.22     851,290   8.00      778,530   13.46      462,892   8.00
</TABLE>


        In addition, institutions whose exposure to interest rate risk as
determined by the OTS is deemed to be above normal may be required to hold
additional risk-based capital. The OTS has determined that neither the
Association nor WFSB has above-normal exposure to interest rate risk.

        The OTS has adopted rules based upon five capital tiers: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. The determination of whether
an association falls into a certain classification depends primarily on its
capital ratios.


                                      25
<PAGE>   26


        The table below shows that World's regulatory capital exceeds the
requirements of the well capitalized classification at June 30, 1997.

                                    TABLE 12

                       World Savings and Loan Association
         Regulatory Capital Compared to Well Capitalized Classification
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                        ACTUAL                  WELL CAPITALIZED
                                   ------------------       -----------------------
                                    Capital     Ratio         Capital       Ratio
                                   ---------   -------      -----------   ---------
      <S>                         <C>          <C>          <C>            <C>   
       Leverage                  $1,142,979     6.13%       $  931,717      5.00 %
       Tier 1 risk-based          1,142,979    10.42           658,241      6.00
       Total risk-based           1,458,621    13.30         1,097,068     10.00
</TABLE>


        The table below shows that WFSB's regulatory capital exceeds the
requirements of the well capitalized classification at June 30, 1997.

                                    TABLE 13

                   World Savings Bank, a Federal Savings Bank
         Regulatory Capital Compared to Well Capitalized Classification
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                        ACTUAL                  WELL CAPITALIZED
                                ---------------------       ----------------------
                                   Capital      Ratio         Capital       Ratio
                                -----------    ------       ----------    --------
<S>                             <C>            <C>          <C>            <C>  
       Leverage                 $ 1,338,857     6.61%       $1,013,351      5.00%
       Tier 1 risk-based          1,338,857    12.58           638,468      6.00
       Total risk-based           1,406,712    13.22         1,064,113     10.00
</TABLE>


RESULTS OF OPERATIONS

        NET EARNINGS

        Net earnings for the six months ended June 30, 1997 were $171 million or
$2.99 per share compared to a loss of $47 million or $.80 per share for the
first six months ended June 30, 1996. Without the one-time goodwill write-off
(See Accounting Change section on page 7), Golden West's earnings for the first
half of 1996 would have been $158 million or $2.69 per share. Net earnings
increased in 1997 as a result of increased net interest income, a lower
provision for loan losses, and a 2% decrease in general and administrative
expenses due to lower deposit insurance premiums.


                                       26


<PAGE>   27


        SFAS 128 - EARNINGS PER SHARE

        In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Measurement of Earnings Per Share"
(SFAS 128). SFAS 128 replaces Primary and Fully-Diluted Earnings Per Share (EPS)
with "Basic EPS" and "Diluted EPS" for fiscal years ending after December 15,
1997. Basic EPS will be calculated by dividing net earnings for the period by
the weighted-average common shares outstanding for that period. There will be no
adjustment to the number of outstanding shares for stock options or other
dilutive items as is currently done in the calculation of Primary EPS. Diluted
EPS will take into account the effect of dilutive instruments, such as stock
options, but will use the average share price for the period in determining the
number of incremental shares that are to be added to the weighted average number
of shares outstanding. In contrast, the current, Fully-diluted EPS uses the
period-ending share price, if it exceeds the average price, in the calculation
to determine the number of incremental shares that are to be added. If SFAS 128
had been applied for the quarter and the six months ended June 30, 1997, the
Basic EPS reported would have been $1.53 and $2.99, respectively, and the
Diluted EPS would have been $1.51 and $2.94, respectively. For the quarter and
six months ended June 30, 1996, before the cumulative effect of the change in
accounting for goodwill, Basic EPS would have been $1.37 and $2.71,
respectively, and Diluted EPS would have been $1.34 and $2.66, respectively.

        SPREADS

        An important determinant of the Company's earnings is its primary spread
-- the difference between its yield on earning assets and its cost of funds. The
table below shows the components of the Company's spread at June 30, 1997 and
1996, and December 31, 1996.

                                    TABLE 14


<TABLE>
<CAPTION>
                                  Yield on Earning Assets,
                              Cost of Funds, and Primary Spread

                                     June 30                 
                                 ----------------     December 31 
                                 1997        1996        1996
                                 ----        ----        ----
<S>                              <C>         <C>         <C>  
Yield on loan portfolio          7.42%       7.46%       7.43%
Yield on MBS                     7.10        7.21        7.13
Yield on investments             6.51        5.82        6.88
                                 ----        ----        ----
Yield on earning assets          7.35        7.36        7.37
                                 ----        ----        ----
Cost of deposits                 5.10        4.92        4.98
Cost of borrowings               5.97        5.93        5.80
                                 ----        ----        ----
Cost of funds                    5.38        5.28        5.28
                                 ----        ----        ----
Primary spread                   1.97%       2.08%       2.09%
                                 ====        ====        ====
</TABLE>


                                       27


<PAGE>   28


        The Company's primary spread is, to some degree, dependent on changes in
interest rates because the Company's liabilities tend to respond somewhat more
rapidly to rate movements than its assets, which are primarily adjustable rate
mortgages. Most of the Company's ARMs have interest rates that change in
accordance with an index based on the cost of deposits and borrowings of savings
institutions that are members of the FHLB of San Francisco (the COFI). In
general, the repricing of COFI ARM portfolios tends to lag liability interest
rate changes because of certain loan features which restrain monthly adjustments
and because the COFI tends to trail changes in liability costs due to the
existence of a two-month reporting lag. In addition, because COFI is based on a
portfolio of accounts, not all of which mature or reprice immediately, COFI does
not initially reflect a change in market interest rates. Yields on short term
and long-term interest rates increased in the middle of the first quarter of
1997 and drifted back downward during the second quarter of 1997. The effects of
this interest rate environment led to a ten basis point increase in the
Company's cost of funds because our liability costs responded somewhat faster to
the first quarter increase in interest rates than our earning assets. The yield
on earning assets decreased two basis points during the first half of 1997, due
mainly to the lags in the COFI index. These changes resulted in a 12 basis point
decrease in the Company's spread since yearend 1996.

        The following table shows the Company's revenues and expenses as a
percentage of total revenues for the three and six months ended June 30, 1997
and 1996, in order to focus on the changes in interest income between years as
well as changes in other revenue and expense amounts.


                                    TABLE 15
                       Selected Revenue and Expense Items
                        as Percentages of Total Revenues


<TABLE>
<CAPTION>
                                                      Three Months Ended      Six Months Ended
                                                           June 30                 June 30
                                                      -----------------        ----------------
                                                       1997        1996        1997        1996
                                                       ----        ----        ----        ----
<S>                                                    <C>         <C>         <C>         <C>  
Interest on loans                                      82.2%       83.6%       81.8%       82.9%
Interest on mortgage-backed securities                 10.2         9.2        10.5         9.3
Interest and dividends on investments                   4.8         4.3         4.9         4.9
                                                       ----        ----        ----        ----
                                                       97.2        97.1        97.2        97.1
Less:
  Interest on deposits                                 41.4        39.8        40.9        40.0
  Interest on advances and other borrowings            25.3        25.2        25.3        25.3
                                                       ----        ----        ----        ----
                                                       66.7        65.0        66.2        65.3

Net interest income                                    30.5        32.1        31.0        31.8
  Provision for loan losses                             1.8         2.6         2.4         2.7
                                                       ----        ----        ----        ----
Net interest income after provision for loan           28.7        29.5        28.6        29.1
losses

Add:
  Fees                                                  1.6         1.5         1.6         1.4
  Gain on the sale of securities, MBS, and              0.4         0.5         0.3         0.6
    loans
  Other non-interest income                             0.8         0.9         0.9         0.9
                                                       ----        ----        ----        ----
                                                        2.8         2.9         2.8         2.9
Less:
  General and administrative expenses                  11.1        12.4        11.2        12.3
  Taxes on income                                       8.1         7.7         8.0         7.6
                                                       ----        ----        ----        ----
Earnings before cumulative effect of change in
  accounting for goodwill                              12.3        12.3        12.2        12.1
Cumulative effect of change in accounting for           0.0         0.0         0.0       (15.7)
  goodwill
                                                       ----        ----        ----        ----
Net earnings (loss)                                    12.3%       12.3%       12.2%       (3.6)%
                                                       ====        ====        ====        ====
</TABLE>


                                       28


<PAGE>   29


        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 solely to alter
the repricing characteristics of designated assets and liabilities. The Company
does not hold any derivative financial instruments for trading purposes.

        Interest rate swap activity decreased net interest income by $1.2
million and $1.5 million for the three and six months ended June 30, 1997, as
compared to a decrease of $3 million and $7 million for the same periods in
1996.

        The following table summarizes the unrealized gains and losses for
interest rate swaps at June 30, 1997 and 1996.

                                    TABLE 16

         Schedule of Unrealized Gains and Losses on Interest Rate Swaps
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                June 30, 1997                      June 30, 1996
                       ---------------------------------  ---------------------------------
                                                 Net                                Net
                       Unrealized Unrealized  Unrealized  Unrealized  Unrealized Unrealized
                         Gains      Losses     Gain(Loss)   Gains       Losses   Gain(Loss)
                       ---------- ----------  ----------  ----------  ---------  ----------
<S>                    <C>        <C>         <C>         <C>         <C>        <C>     
Interest rate swaps    $   17,881 $  (31,179) $  (13,298) $   29,908  $ (43,730) $  (13,822)
                       ========== ==========  ==========  ==========  =========  ==========
</TABLE>


                                    TABLE 17

                    Schedule of Interest Rate Swaps Activity
                         (Notional amounts in millions)


<TABLE>
<CAPTION>
                                          Six Months Ended
                                            June 30, 1997
                                 ----------------------------------
                                 Receive        Pay         Forward
                                  Fixed        Fixed        Starting
                                  Swaps        Swaps         Swaps
                                ---------    --------       -------
<S>                              <C>          <C>            <C>
Balance at December 31, 1996     $ 2,581      $ 1,340         $ 10


Additions                            -0-          -0-          -0-
Maturities                          (844)        (197)         -0-
Forward starting becoming       
effective                             10          -0-          (10)
                                --------     --------       -------
Balance at June 30, 1997         $ 1,747      $ 1,143         $-0-
                                ========     ========       =======
</TABLE>

        The range of floating interest rates received on swap contracts in the
first six months of 1997 was 5.47% to 6.08%, and the range of floating interest
rates paid on swap contracts was 4.76% to 6.00%. The range of fixed interest
rates received on swap contracts in the first six months of 1997 was 4.62% to
8.68% and the range of fixed interest rates paid on swap contracts was 5.38% to
9.14%.


                                       29


<PAGE>   30


        INTEREST ON LOANS

        In the second quarter of 1997, interest on loans was higher than in the
comparable 1996 period by $41 million or 7.6%. The increase in the second
quarter of 1997 was due to a $2.6 billion increase in the average portfolio
balance which was partially offset by an 8 basis point decrease in the average
portfolio yield. For the first half of 1997, interest on loans was higher than
the comparable 1996 period by $65 million or 6.0%. The increase was due to a
$2.3 billion increase in the average portfolio balance which was partially
offset by a 14 basis point decrease in the average portfolio yield.

        INTEREST ON MORTGAGE-BACKED SECURITIES

        In the second quarter of 1997, interest on mortgage-backed securities
was higher than in the comparable 1996 period by $13 million or 20.9%. The 1997
increase was due primarily to a $802 million increase in the average portfolio
balance which was partially offset by a 21 basis point decrease in the average
portfolio yield. For the first half of 1997, interest on mortgage-backed
securities was higher than in the comparable 1996 period by $26 million or 21.2%
due to a $843 million increase in the average portfolio balance which was
partially offset by a 26 basis point decrease in the average portfolio yield.
The increase in the mortgage-backed securities portfolio, and the lower average
portfolio yield were primarily the result of the securitization of
adjustable-rate loans with full credit recourse that began in 1995, as discussed
on page 12.

        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. For
the second quarter of 1997, interest and dividends on investments were higher
than in the comparable 1996 period by $6 million or 22.0%. The increase was
primarily due to a $147 million increase in the average portfolio balance and a
35 basis point increase in the average portfolio yield. For the first half of
1997, interest and dividends on investments was $4 million or 6.6% higher than
for the same period in 1996. The increase was primarily due to a $50 million
increase in the average portfolio balance and a 25 basis point increase in the
average portfolio yield.

        INTEREST ON DEPOSITS

        In the second quarter of 1997, interest on deposits increased by $36
million or 14.0% from the comparable period in 1996. In the first half of 1997,
interest on deposits increased by $51 million or 9.8% from the comparable period
in 1996. The second quarter increase was due to a $2.4 billion increase in the
average balance of deposits and an 11 basis point increase in the average cost
of deposits. The six month increase was primarily due to a $2.1 billion increase
in the average balance of deposits and a one basis point increase in the average
cost of deposits.


                                       30


<PAGE>   31


        INTEREST ON ADVANCES AND OTHER BORROWINGS

        For the second quarter and first half of 1997, interest on advances and
other borrowings increased by $16 million or 9.6% and $25 million or 7.6%,
respectively, from the comparable periods of 1996. The second quarter increase
was primarily due to a $1.1 billion increase in the average balance, which was
partially offset by a two basis point decrease in the average cost of these
borrowings. The six month increase was primarily due to a $1.2 billion increase
in the average balance which was offset by a 13 basis point decrease in the
average cost of these borrowings.

        PROVISION FOR LOAN LOSSES

        The provision for loan losses was $13 million and $34 million,
respectively, for the three and six months ended June 30, 1997, compared to $17
million and $36 million for the same periods in 1996. The lower provision in
1997 reflects the decrease in non-accrual loans and the improving California
economy.

        GENERAL AND ADMINISTRATIVE EXPENSES

        For the second quarter and first half of 1997, general and
administrative expenses (G&A) were $79 million and $158 million, respectively,
compared to $80 million and $161 million for the comparable periods in 1996. The
primary reason for the decrease in 1997 was the benefit received from reduced
deposit insurance premiums paid by the Association in 1997 (See Deposit
Insurance section below). Excluding the effect of the lower deposit insurance
premiums, total G&A increased due to the expansion of savings branches, higher
loan volume, and the installation of enhancements to data processing systems.
G&A as a percentage of average assets on an annualized basis was .81% and .82%,
respectively, for the second quarter and first half of 1997 compared to .92% for
the same periods in 1996.

        DEPOSIT INSURANCE

        During 1996, legislation was enacted to recapitalize the Savings
Association Insurance Fund (SAIF) in order to bring it into parity with the
FDIC's other insurance fund, the Bank Insurance Fund (BIF). The new banking law
required members to pay a levy of $4.7 billion to bring SAIF up to the required
reserve level of 1.25% of insured deposits, but lowered the premiums paid by
SAIF-insured institutions, starting in the fourth quarter of 1996. As a result
of this legislation, Golden West's subsidiary, World Savings and Loan
Association, incurred a one-time charge of $133 million at the end of the third
quarter of 1996. Beginning on January 1, 1997, the premium paid by the
Association to the FDIC was reduced from $2.30 per $1,000 in savings balances to
$.65 per $1,000. Beginning on January 1, 1997, the premiums paid by BIF insured
institutions, such as WFSB, was increased from $0.00 per $1,000 in savings
balances to $.13 per $1,000.


                                       31


<PAGE>   32


        TAXES ON INCOME

        The Company utilizes the accrual method of accounting for income tax
purposes and for preparing its published financial statements. For financial
reporting purposes only, the Company uses purchase accounting in connection with
certain assets acquired through mergers. The purchase accounting portion of
income is not subject to tax.

        Taxes as a percentage of earnings before the cumulative effect of the
change in accounting for goodwill were 39.7% and 39.6%, respectively, for the
second quarter and first half of 1997 compared to 38.6% for the same periods a
year ago.

LIQUIDITY AND CAPITAL RESOURCES

        World's principal sources of funds are cash flows generated from
earnings; deposits; loan repayments; borrowings from the FHLB; issuance of
medium-term notes; and debt collateralized by mortgages, MBS, or securities. In
addition, World has a number of other alternatives available to provide
liquidity or finance operations. These include borrowings from its parent,
borrowings from public offerings of debt, sales of loans, sales of negotiable
certificates of deposit, issuances of commercial paper, and borrowings from
commercial banks. Furthermore, under certain conditions, World 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. For a
discussion of World's liquidity positions at June 30, 1997, and 1996, and
December 31, 1996, see the cash and investments section on page 12.

        WFSB's principal sources of funds are cash flows generated from
earnings; deposits; loan repayments; negotiable certificates of deposit,
borrowings from the FHLB; issuance of medium-term notes; investments and
borrowings from its affiliates; and debt collateralized by mortgages, MBS, or
securities. In addition, WFSB has other alternatives available to provide
liquidity or finance operations including borrowings from public offerings of
debt, sales of loans, issuances of commercial paper, and borrowings from
commercial banks. Furthermore, under certain conditions, WFSB 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. For a
discussion of WFSB's liquidity positions at June 30, 1997, and 1996, and
December 31, 1996, see the cash and investments section on page 12.

        The principal sources of funds for Golden West (the Parent) are interest
on investments, dividends from World, and the proceeds from the issuance of debt
and equity securities. Various statutory and regulatory restrictions and tax
considerations limit the amount of dividends World and WFSB can pay. The
principal liquidity needs of Golden West are for payment of interest and
principal on subordinated debt securities (of which $200 million matures in
1998), capital contributions to its insured subsidiaries (including $125 million
for the six months ended June 30, 1997 and $500 million for the year ended
December 31, 1996 to WFSB), dividends to stockholders, the purchase of Golden
West stock (see stockholders' equity section on page 23), and general and
administrative expenses. At June 30, 1997 and 1996, and December 31, 1996,
Golden West's total cash and investments amounted to $900 million (including a
$600 million long-term loan to WFSB), $799 million (including a $600 million
short-term loan to World), and $913 million (including a $600 million long-term
loan to WFSB), respectively.


                                       32


<PAGE>   33


PART II.       OTHER INFORMATION

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits

        11    -       Statement of Computation of Earnings Per Share

        27    -       Financial Data Schedule


                                   SIGNATURES

        Pursuant to the requirements of the Securities and 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:  August 13, 1997           /s/ J. L. Helvey
                                  ----------------------------------------------
                                  J. L. Helvey
                                  Executive Vice President
                                  (duly authorized and principal financial
                                  officer)


                                       33