SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

         For Quarter Ended June 30, 1998 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, 1998, was 57,599,599 shares.


<PAGE>


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,  1998 and  1997 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,
1998, are not necessarily indicative of the results for the full year.

<TABLE>
<CAPTION>


                                                                        June 30        June 30     December 31
                                                                          1998          1997           1997
                                                                      -------------  ------------  -------------
                                                                             (Unaudited)
                                                                      ---------------------------

Assets:
<S>                                                                   <C>            <C>           <C>         
  Cash                                                                $    198,513   $   130,667   $    172,241
  Securities available for sale at fair value                              416,441       601,278        608,544
  Other investments at cost                                                144,000     1,044,756        252,648
  Mortgage-backed securities available for sale without recourse at        136,289       206,722        157,327
fair value
  Mortgage-backed securities held to maturity without recourse at          678,434       768,468        752,029
cost
  Mortgage-backed securities held to maturity with recourse at cost      8,306,056     3,077,534      3,030,390
  Loans receivable                                                      27,600,120    31,821,887     33,260,709
  Interest earned but uncollected                                          209,687       217,309        216,923
  Investment in capital stock of Federal Home Loan Banks--at cost
      which approximates fair value                                        708,382       572,157        590,244
  Real estate held for sale or investment                                   44,065        73,436         62,006
  Prepaid expenses and other assets                                        363,406       356,021        247,003
  Premises and equipment--at cost less accumulated depreciation            261,836       224,847        240,207
                                                                      ------------   ------------  ------------
                                                                      $ 39,067,229   $39,095,082   $ 39,590,271
                                                                      =============  ============  =============

Liabilities and Stockholders' Equity:
  Deposits                                                            $ 24,993,708   $24,036,660   $ 24,109,717
  Advances from Federal Home Loan Banks                                  7,486,916     7,359,039      8,516,605
  Securities sold under agreements to repurchase                         1,816,433     2,954,221      2,334,048
  Medium-term notes                                                            -0-       309,936        109,992
  Accounts payable and accrued expenses                                    521,828       485,805        446,325
  Taxes on income                                                          313,634       248,759        265,065
  Subordinated notes--net of discount                                    1,011,159     1,209,772      1,110,488
  Stockholders' equity                                                   2,923,551     2,490,890      2,698,031
                                                                      -------------  ------------  -------------
                                                                      $ 39,067,229   $39,095,082   $ 39,590,271
                                                                      =============  ============  =============
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                         Three Months Ended              Six Months Ended
                                                              June 30                         June 30
                                                    ----------------------------    ----------------------------
                                                        1998           1997            1998            1997
                                                    -------------   ------------    ------------    ------------
   Interest Income:
<S>                                                  <C>            <C>             <C>             <C>        
       Interest on loans                             $   587,188    $   583,659     $ 1,216,066     $ 1,148,722
       Interest on mortgage-backed securities            105,536         72,369         177,731         147,302
       Interest and dividends on investments              47,845         34,211         101,975          68,494
                                                    -------------   ------------    ------------    ------------
                                                         740,569        690,239       1,495,772       1,364,518
   Interest Expense:
       Interest on deposits                              321,079        294,122         636,289         574,442
       Interest on advances                              105,206        107,781         228,766         220,389
       Interest on repurchase agreements                  33,097         40,470          66,033          68,368
       Interest on other borrowings                       41,990         31,286          81,773          66,047
                                                                                    ------------    ------------
                                                    -------------   ------------
                                                         501,372        473,659       1,012,861         929,246
                                                    -------------   ------------    ------------    ------------
           Net Interest Income                           239,197        216,580         482,911         435,272
   Provision for loan losses                               2,682         13,111           5,647          33,806
                                                    -------------   ------------    ------------    ------------
           Net Interest Income after Provision
               for Loan Losses                           236,515        203,469         477,264         401,466
   Non-Interest Income:
       Fees                                               15,716         11,298          28,663          22,035
       Gain on the sale of securities,
           MBS, and loans                                 19,077          3,061          21,584           4,284
       Other                                               8,304          5,451          18,853          12,723
                                                    -------------   ------------    ------------    ------------
                                                          43,097         19,810          69,100          39,042
   Non-Interest Expense:
       General and administrative:
           Personnel                                      48,044         43,892          94,580          87,992
           Occupancy                                      14,949         13,408          29,118          26,796
           Deposit insurance                               1,516          1,937           3,128           3,983
           Advertising                                     3,218          2,342           5,464           4,760
           Other                                          19,309         17,048          38,420          34,266
                                                    -------------   ------------    ------------    ------------
                                                          87,036         78,627         170,710         157,797
   Earnings Before Taxes on Income and
       Extraordinary Item                                192,576        144,652         375,654         282,711
       Taxes on Income                                    75,626         57,375         148,623         112,060
                                                    -------------   ------------    ------------    ------------
   Earnings Before Extraordinary Item                    116,950         87,277         227,031         170,651
   Extraordinary Item:
   Federal Home Loan Bank advance prepayment
       penalty, net of tax of $5,325                         -0-            -0-          (7,710)           -0-
                                                    -------------   ------------    ------------    ------------
   Net Earnings                                     $    116,950    $    87,277     $   219,321     $   170,651
                                                    =============   ============    ============    ============

   Basic Earnings Per Share Before Extraordinary    $       2.04    $      1.53     $      3.96     $      2.99
   Basic Earnings Per Share on Extraordinary
       Item, Net of Tax                                     0.00           0.00           (0.13)           0.00
                                                    -------------   ------------    ------------    ------------
   Basic Earnings Per Share                         $       2.04    $      1.53     $      3.83     $      2.99
                                                    =============   ============    ============    ============

   Diluted Earnings Per Share Before Extraordinary  $       2.01    $      1.51     $      3.91     $      2.94
   Diluted Earnings Per Share on Extraordinary
   Item,
       Net of Tax                                           0.00           0.00           (0.13)           0.00
                                                    -------------   ------------    ------------    ------------
   Diluted Earnings Per Share                       $       2.01    $      1.51     $      3.78     $      2.94
                                                    =============   ============    ============    ============

</TABLE>


<PAGE>


                        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
                                                    --------------------------   ---------------------------
                                                       1998            1997          1998           1997
                                                    -----------    -----------   ------------   ------------
Cash Flows From Operating Activities:
<S>                                                   <C>            <C>            <C>            <C>        
  Net earnings                                        $   116,950    $    87,277    $   219,321    $   170,651
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Extraordinary item                                        -0-            -0-         13,035            -0-
    Provision for loan losses                               2,682         13,111          5,647         33,806
    Amortization of loan fees and discounts                (5,989)        (4,810)       (11,094)        (9,251)
    Depreciation and amortization                           5,967          5,164         11,691         10,307
    Loans originated for sale                            (212,419)       (45,191)      (333,958)       (98,751)
    Sales of loans originated for sale                    268,226         48,796        400,166         98,304
    Decrease (increase) in interest earned but              3,903         (5,029)         7,236          4,295
     uncollected
    Federal Home Loan Bank stock dividends                (10,332)        (8,596)       (27,715)       (24,318)
    Increase in prepaid expenses and other assets .       (15,228)       (62,881)      (106,832)      (121,462)
    Increase in accounts payable and accrued               15,648          3,470         74,472         33,623
     expenses
    Increase (decrease) in taxes on income                (20,707)       (29,799)        43,231         24,869
    Other, net                                             (1,445)        (3,244)        (5,872)        (7,870)
                                                      -----------    -----------    -----------    -----------
      Net cash provided by (used in) operating            147,256         (1,732)       289,328        114,203
        activities

Cash Flows From Investing Activities:
  New loan activity:
    New real estate loans originated for portfolio     (1,859,213)    (2,109,072)    (3,204,867)    (3,450,976)
    Real estate loans purchased                              (642)          (608)        (1,689)        (1,260)
    Other, net                                             (9,554)       (14,849)       (20,371)       (23,119)
                                                      -----------    -----------    -----------    -----------
                                                       (1,869,409)    (2,124,529)    (3,226,927)    (3,475,355)
  Real estate loan principal payments:
    Monthly payments                                      159,588        170,310        334,507        334,559
    Payoffs, net of foreclosures                        1,476,320        699,963      2,554,813      1,187,683
    Refinances                                             79,203         70,223        178,079        127,606
                                                      -----------    -----------    -----------    -----------
                                                        1,715,111        940,496      3,067,399      1,649,848

  Repayments of mortgage-backed securities                367,349        132,561        515,869        238,586
  Proceeds from sales of real estate                       35,131         60,636         86,536        113,316
  Purchases of securities available for sale             (127,459)        (1,177)      (127,481)        (1,187)
  Sales of securities available for sale                   81,150            961         81,373            961
  Matured securities available for sale                   243,629         48,452        253,671        224,053
  Decrease in other investments                           245,044        493,795        108,648         34,076
  Purchases of Federal Home Loan Bank stock               (99,004)           -0-        (99,994)       (56,239)
  Additions to premises and equipment                     (20,234)        (8,785)       (35,297)       (23,132)
                                                      -----------    -----------    -----------    -----------
    Net cash provided by (used in) investing              571,308       (457,590)       623,797     (1,295,073)
      activities
</TABLE>



<PAGE>


                        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
                                                   --------------------------   ---------------------------
                                                      1998          1997           1998           1997
                                                   -----------   ------------   ------------   ------------
Cash Flows From Financing Activities:
    Deposit activity:
<S>                                                <C>           <C>            <C>            <C>        
    Increase in deposits, net                     $    171,678    $    854,966    $    375,813    $  1,473,148
    Interest credited                                  262,760         237,770         508,178         463,578
                                                  ------------    ------------    ------------    ------------
                                                       434,438       1,092,736         883,991       1,936,726

  Additions to Federal Home Loan Bank advances       2,553,300          22,600       3,264,500          44,200
  Repayments of Federal Home Loan Bank advances     (2,718,566)       (797,490)     (4,306,273)     (1,483,689)
  Proceeds from agreements to repurchase securities  1,808,100       1,011,791       3,063,990       2,436,493
  Repayments of agreements to repurchase securities (2,176,658)       (719,749)     (3,581,605)     (1,390,398)
  Repayments of medium-term notes                          -0-             -0-        (110,000)       (280,000)
  Proceeds from federal funds purchased             35,060,000             -0-      79,850,000             -0-
  Repayments of federal funds purchased            (35,560,000)            -0-     (79,850,000)            -0-
  Repayment of subordinated debt                      (100,000)       (115,000)       (100,000)       (115,000)
  Dividends on common stock                             (7,163)         (6,253)        (14,303)        (12,554)
  Exercise of stock options                              8,585             320          12,847           2,329
  Purchase and retirement of Company stock                 -0-         (31,938)            -0-         (45,289)
                                                  ------------    ------------    ------------    ------------
    Net cash provided by (used in) financing          (697,964)        457,017        (886,853)      1,092,818
     activities
                                                  ------------    ------------    ------------    ------------
Net Increase (Decrease) in Cash                         20,600          (2,305)         26,272         (88,052)
Cash at beginning of period                            177,913         132,972         172,241         218,719
                                                  ============    ============    ============    ============
Cash at end of period                             $    198,513    $    130,667    $    198,513    $    130,667
                                                  ============    ============    ============    ============

Supplemental cash flow information:
  Cash paid for:
    Interest                                      $    507,214    $    476,118    $  1,014,588    $    928,642
    Income taxes                                       100,251          87,903         104,082          88,514
  Cash received for interest and dividends             744,472         685,210       1,503,008       1,368,813
  Noncash investing activities:
    Loans transferred to foreclosed real estate         27,492          54,069          59,053         104,726
    Loans securitized into mortgage-backed
     securities with recourse                        5,197,466             -0-       5,698,458             -0-
</TABLE>
         


<PAGE>


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

                                                      For the Six Months Ended June 30, 1998
                               -------------------------------------------------------------------------------------
                                                                       Accumulated
                                                                      Comprehensive
                                                                       Income From
                                            Additional                 Unrealized         Total
                                Common       Paid-in     Retained       Gains On       Stockholders' Comprehensive
                                 Stock       Capital     Earnings      Securities        Equity          Income
                               ----------   ----------   ----------   --------------   ------------  ---------------

<S>                            <C>          <C>          <C>          <C>              <C>         
Balance at January 1, 1998     $    5,707   $    85,532    $ 2,457,055    $   149,737    $ 2,698,031

Comprehensive income:
  Net earnings                        -0-           -0-        219,321                       219,321    $   219,321
  Change in unrealized gains on
    securities available for sale,
    net of tax                        -0-           -0-            -0-         15,677         15,677         15,677
  Reclassification adjustment
    for gains included in income      -0-           -0-            -0-         (8,022)        (8,022)        (8,022)
Cash dividends on common
  stock ($.25 per share)              -0-           -0-       (14,303)        (14,303)
Common stock issued upon
  exercise of stock options,
  including tax benefits               52        12,795            -0-            -0-         12,847
                                ---------   -----------   ------------   ------------   ------------   ------------
Balance at June 30, 1998        $   5,759   $    98,327   $ 2,662,073    $   157,392    $  2,923,551   $    226,976
                                =========   ===========   ============   ============   ============   ============
</TABLE>
<TABLE>
<CAPTION>


                                                      For the Six Months Ended June 30, 1997
                               -------------------------------------------------------------------------------------
                                                                       Accumulated
                                                                       Comprehensive
                                                                        Income From
                                            Additional                  Unrealized         Total
                                Common       Paid-in       Retained     Gains On       Stockholders' Comprehensive
                                 Stock       Capital       Earnings     Securities        Equity          Income
                               ----------   ----------   ------------  --------------   ------------  ---------------

<S>                           <C>           <C>           <C>            <C>            <C>        
Balance at January 1, 1997    $     5,734   $   67,953    $ 2,177,098    $    99,692    $ 2,350,477

Comprehensive income:
  Net earnings                       -0-           -0-        170,651                       170,651    $   170,651
  Change in unrealized gains on
    securities available for sale,
    net of tax                       -0-           -0-            -0-         27,020         27,020         27,020
  Reclassification adjustment
    for gains included in income     -0-           -0-            -0-         (1,744)        (1,744)        (1,744)
Cash dividends on common
  stock ($.22 per share)             -0-           -0-       (12,554)                       (12,554)
Common stock issued upon
  exercise of stock options,
  including tax benefits              9          2,320            -0-                         2,329
Purchase and retirement of
  Company stock                     (69)           -0-       (45,220)                       (45,289)

                               -----------   -----------  ------------   -----------    -----------     -----------
Balance at June 30, 1997       $   5,674     $  70,273    $ 2,289,975    $   124,968    $ 2,490,890     $   195,927
                               ===========   ===========  ============   ===========    ===========     ===========
</TABLE>




<PAGE>


  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, 1997, as well as certain material changes in results of operations  during
  the three and six month periods ended June 30, 1998, and 1997, respectively.

         The following  narrative is written with the presumption that the users
  have read or have access to the  Company's  1997  Annual  Report on Form 10-K,
  which  contains the latest  audited  financial  statements  and notes thereto,
  together with Management's  Discussion and Analysis of Financial Condition and
  Results of  Operations  as of December 31, 1997,  and for the year then ended.
  Therefore,  only  material  changes  in  financial  condition  and  results of
  operations are discussed herein.

         NEW ACCOUNTING PRONOUNCEMENT

         Effective  January 1, 1998,  Golden West adopted Statement 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.

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and Hedging  Activities" (SFAS 133). This Statement  establishes  accounting and
reporting standards for derivative  instruments and for hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at fair value.  This  Statement is effective  for all fiscal  quarters of fiscal
years  beginning  after June 15, 1999.  The Company has not yet completed a full
assessment  of the impact of this  statement  on its  financial  statements  and
results of operations.
<PAGE>
<TABLE>
<CAPTION>


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

                                                         June 30          June 30        December 31
                                                           1998            1997              1997
                                                       ------------    ------------     -------------
<S>                                                    <C>             <C>               <C>         
   Assets                                              $ 39,067,229    $ 39,095,082      $ 39,590,271
   Loans receivable                                      27,600,120      31,821,887        33,260,709
   Mortgage-backed securities                             9,120,779       4,052,724         3,939,746
   Deposits                                              24,993,708      24,036,660        24,109,717
   Stockholders' equity                                   2,923,551       2,490,890         2,698,031
   Stockholders' equity/total assets                          7.48%           6.37%             6.81%
   Book value per common share                         $      50.76    $      43.90      $      47.28
   Common shares outstanding                             57,590,999      56,738,514        57,068,504
   Yield on loan portfolio                                    7.51%           7.42%             7.53%
   Yield on mortgage-backed securities                        7.23%           7.10%             7.23%
   Yield on investments                                       6.89%           6.51%             6.48%
   Yield on earning assets                                    7.44%           7.35%             7.48%
   Cost of deposits                                           4.99%           5.10%             5.04%
   Cost of borrowings                                         6.02%           5.97%             5.99%
   Cost of funds                                              5.29%           5.38%             5.36%
   Yield on earning assets less cost of funds                 2.15%           1.97%             2.12%
   Ratio of nonperforming assets to total assets               .89%           1.11%              .96%
   Ratio of troubled debt restructured to total assets         .08%            .19%              .11%
   World Savings Bank, a Federal Savings Bank:
     Total assets                                      $ 28,789,260    $ 20,240,335      $ 24,608,701
     Net worth                                            1,931,153       1,341,396         1,605,561
     Net worth/total assets                                   6.71%           6.63%             6.52%
     Regulatory capital ratios:
       Core capital                                           6.69%           6.61%             6.51%
       Risk-based capital                                    12.91%          13.22%            12.80%
   World Savings and Loan Association:
     Total assets                                      $ 10,103,271    $ 18,767,337      $ 15,446,575
     Net worth                                            1,049,734       1,260,995         1,121,961
     Net worth/total assets                                  10.39%           6.72%             7.26%
     Regulatory capital ratios:
       Core capital                                           9.00%           6.13%             6.42%
       Risk-based capital                                    17.78%          13.30%            13.64%
</TABLE>



<PAGE>
<TABLE>
<CAPTION>


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

                                                         Three Months Ended           Six Months Ended
                                                              June 30                      June 30
                                                      -------------------------   --------------------------
                                                         1998          1997          1998           1997
                                                      -----------   -----------   ------------   -----------
<S>                                                   <C>           <C>           <C>            <C>       
   New real estate loans originated                   $2,071,632    $2,154,263    $ 3,538,825    $3,549,727
   Average yield on new real estate loans                  7.76%         7.51%          7.76%         7.52%
   Increase in deposits (a)                           $  434,438    $1,092,736    $   883,991    $1,936,726
   Earnings before extraordinary item                    116,950        87,277        227,031       170,651
   Net earnings                                          116,950        87,277        219,321       170,651
   Basic earnings per share before extraordinary item       2.04          1.53           3.96          2.99
   Diluted earnings per share before extraordinary item     2.01          1.51           3.91          2.94
   Basic earnings per share                                 2.04          1.53           3.83          2.99
   Diluted earnings per share                               2.01          1.51           3.78          2.94
   Cash dividends on common stock                           .125           .11            .25           .22
   Average common shares outstanding                  57,338,227    56,892,526     57,233,046    57,102,416
   Average diluted common shares outstanding          58,110,247    57,815,785     57,969,377    58,030,202
   Ratios:(b)
     Net earnings/average net worth (ROE)(c)              16.31%        14.24%         15.58%        14.09%
     Net earnings/average assets (ROA)(c)                  1.19%          .90%          1.11%          .89%
     Net interest income/average assets                    2.43%         2.24%          2.44%         2.27%
     General and administrative expense/average assets      .88%          .81%           .86%          .82%
   
</TABLE>
(a)    Includes  an  increase  of $674  million of  wholesale  deposits  for the
       quarter  ended June 30, 1997.  Includes a decrease of $525 million and an
       increase of $1.1 billion of  wholesale  deposits for the six months ended
       June 30, 1998 and 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, 1998  include the  extraordinary
       item.  The  year-to-date  ratios  as  of  June  30,  1998  excluding  the
       extraordinary item are: ROE 16.13% and ROA 1.15%.




<PAGE>


         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,
  1998 and 1997, and December 31, 1997. The reader is referred to page 52 of the
  Company's  1997  Annual  Report on Form 10-K for similar  information  for the
  years 1994 through 1997 and a discussion of the changes in the  composition of
  the Company's assets and liabilities in those years.
<TABLE>
<CAPTION>

                                     TABLE 1

                      Consolidated Condensed Balance Sheet
                               In Percentage Terms

                                                                 June 30                 
                                                           --------------------       December 31
                                                            1998         1997             1997
                                                           -------      -------       -------------
       Assets:
          <S>                                                 <C>          <C>              <C> 
          Cash and investments                                1.9%         4.5%             2.6%
          Mortgage-backed securities                         23.3         10.4             10.0
          Loans receivable                                   70.7         81.4             84.0
          Other assets                                        4.1          3.7              3.4
                                                           -------      -------          -------
                                                            100.0%       100.0%           100.0%
                                                           =======      =======          =======
       Liabilities and Stockholders' Equity:
          Deposits                                           64.0%        61.5%            60.9%
          Federal Home Loan Bank advances                    19.2         18.8             21.5
          Securities sold under agreements to repurchase      4.6          7.6              5.9
          Medium-term notes                                   0.0          0.8              0.3
          Other liabilities                                   2.1          1.8              1.8
          Subordinated debt                                   2.6          3.1              2.8
          Stockholders' equity                                7.5          6.4              6.8
                                                           -------      -------           -------
                                                            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 mortgage-backed securities
and 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."



<PAGE>


         The following gap table shows that, as of June 30, 1998,  the Company's
assets  reprice  sooner  than  its  liabilities.  If all  repricing  assets  and
liabilities responded equally to changes in the interest rate environment,  then
the gap analysis  would  suggest  that the  Company's  earnings  would rise when
interest rates increase and would fall when interest  rates  decrease.  However,
the Company's earnings are also affected by the built-in reporting and repricing
lags inherent in the Eleventh District Cost of Funds Index (COFI),  which is the
index Golden West uses to determine  the rate on the majority of its  adjustable
rate mortgages (ARMs).  The reporting lag occurs because of the time it takes to
gather the data needed to compute the index. As a result,  the COFI in effect in
any month actually  reflects the Eleventh  District's cost of funds at the level
it was two months prior.  The  repricing  lag occurs  because COFI is based on a
portfolio of accounts,  not all of which reprice  immediately.  Therefore,  COFI
does  not  initially   fully  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 rates rise.

<TABLE>
<CAPTION>

                                     TABLE 2

            Repricing of Interest-Earning Assets and Interest-Bearing
                   Liabilities, Repricing Gaps, and Gap Ratio
                               As of June 30, 1998
                              (Dollars in millions)

                                                            Projected Repricing(a)
                                       -----------------------------------------------------------------
                                         0 - 3        4 - 12        1 - 5        Over 5
                                         Months       Months        Years         Years        Total
                                       -----------   ----------   -----------   ----------   -----------
Interest-Earning Assets:
<S>                                    <C>           <C>          <C>           <C>          <C>       
  Investments                          $      531    $      27    $      -0-    $       2    $      560
  Mortgage-backed securities                8,391           99           339          292         9,121
  Loans receivable:
    Rate-sensitive                         23,484        1,507           151          -0-        25,142
    Fixed-rate                                129          286           977          869         2,261
  Other(b)                                    857          -0-           -0-          -0-           857
  Impact of interest rate swaps               442          248          (454)       (236)           -0-
                                      ------------   ----------   -----------   ----------   -----------
Total                                  $   33,834    $   2,167    $    1,013    $     927    $   37,941
                                       ===========   ==========   ===========   ==========   ===========
Interest-Bearing Liabilities(c):
  Deposits                             $   13,003    $   9,721    $    2,259    $      11    $   24,994
  FHLB advances                             6,025        1,050           122          290         7,487
  Other borrowings                          1,910          -0-           718          199         2,827
  Impact of interest rate swaps               474         (331)         (143)         -0-           -0-
                                       -----------   ----------   -----------   ----------   -----------
Total                                  $   21,412    $  10,440    $    2,956    $     500    $   35,308
                                       ===========   ==========   ===========   ==========   ===========

Repricing gap                          $   12,422    $  (8,273)   $   (1,943)   $     427    $    2,633
                                       ===========   ==========   ===========   ==========   ===========

Cumulative gap                         $   12,422    $   4,149    $    2,206    $   2,633
                                       ===========   ==========   ===========   ==========

Cumulative gap as a percentage of
    total assets                            31.8%        10.6%          5.6%
                                       ===========   ==========   ===========
</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 checking,  passbook and money
     market deposit accounts, are assigned zero months.


<PAGE>


         CASH AND INVESTMENTS

         The Office of Thrift  Supervision (OTS) requires insured  institutions,
such as World Savings Bank, FSB (WFSB),  and World Savings and Loan  Association
(WSL) to maintain a minimum  amount of cash and certain  qualifying  investments
for liquidity purposes.  As of December 1, 1997, the current minimum requirement
was changed from a monthly to a quarterly  calculation and is either equal to 4%
of the quarterly average of daily balances of short-term deposits and borrowings
or 4%  of  the  prior  quarter's  ending  balance  of  short-term  deposits  and
borrowings.  For all other months during 1997, the minimum liquidity requirement
was  calculated  monthly and was equal to 5% of the monthly  average of deposits
and short-term  borrowings.  WFSB's regulatory liquidity ratios were 16% and 11%
for the quarters ended June 30, 1998 and December 31, 1997, respectively. WFSB's
regulatory  average  liquidity ratio was 5.5% for the month ended June 30, 1997.
WSL's  regulatory  liquidity ratios were 15% and 12% for the quarters ended June
30, 1998 and December 31, 1997, respectively. WSL's regulatory average liquidity
ratio was 7% for the month  ended June 30,  1997.  The  increase  in the average
liquidity ratios at June 30, 1998 and December 31, 1997, as compared to June 30,
1997, was due to a change in the revised OTS liquidity regulation which expanded
the assets qualifying for the calculation.

         At June 30,  1998 and 1997,  and  December  31,  1997,  the Company had
securities  available for sale in the amount of $416 million,  $601 million, and
$609 million,  respectively,  including unrealized gains on securities available
for sale of $260 million, $203 million, and $245 million,  respectively. At June
30, 1998 and 1997, and December 31, 1997, the Company had no securities  held to
maturity or for trading in its investment securities portfolio.

         Included  in the  securities  available  for sale at June 30,  1998 and
1997, and December 31, 1997, were collateralized  mortgage obligations (CMOs) in
the amount of $45 million,  $96  million,  and $71  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, 1998, all CMOs
qualified for inclusion in the regulatory liquidity measurement.

         MORTGAGE-BACKED SECURITIES

     At June  30,  1998 and  1997,  and  December  31,  1997,  the  Company  had
mortgage-backed securities (MBS) held to maturity in the amount of $9.0 billion,
$3.8  billion,  and  $3.8  billion,  respectively,  including  Federal  National
Mortgage  Association  (FNMA) MBS subject to full credit recourse to the Company
of $4.5 billion at June 30, 1998, $3.1 billion at June 30, 1997 and $3.0 billion
at December 31, 1997 and including  $3.8 billion of securities  issued by a Real
Estate  Mortgage  Investment  Conduit  (REMIC).  At June 30, 1998 and 1997,  and
December 31, 1997, the Company had mortgage-backed securities available for sale
in the amount of $136  million,  $207 million,  and $157 million,  respectively,
including  unrealized gains on MBS available for sale of $6 million, $8 million,
and $8 million,  respectively.  At June 30, 1998 and 1997 and December 31, 1997,
the Company had no trading MBS.

     During the second quarter of 1998, the Company  securitized $3.9 billion of
mortgage loans into a Real Estate Mortgage Investment Conduit. Securities issued
by the REMIC are being used as collateral  for advances from the FHLB of Dallas.
The securities issued by the REMIC are classified as MBS held to maturity.


<PAGE>


         During the first and second  quarters of 1998, the Company  securitized
$501 million and $1.3 billion, respectively, of adjustable rate mortgages (ARMs)
into FNMA  COFI-indexed  MBS.  During the fourth  quarter of 1997,  the  Company
desecuritized  $856 million of FNMA COFI-indexed MBS in November and securitized
$1.0 billion of ARMs into FNMA COFI-indexed MBS in December. The Company has the
ability and intent to hold these MBS until maturity and, accordingly,  these MBS
are classified as held to maturity.  The FNMA MBS held to maturity are available
to be used as collateral for borrowings and are subject to full credit  recourse
to the Company.

         Repayments  of MBS during the  second  quarter  and first six months of
1998 were $367 million and $516 million, respectively,  compared to $133 million
and $239 million in the same periods of 1997. MBS repayments  were higher during
the first six months of 1998 as  compared to the first six months of 1997 due to
an increase in total MBS  outstanding  and an  increase  in  prepayments  on the
underlying mortgages.

         LOAN PORTFOLIO

                  LOAN VOLUME

         New loan originations for the three and six months ended June 30, 1998,
amounted  to $2.1  billion  and $3.5  billion,  respectively,  compared  to $2.2
billion and $3.5 billion for the same periods in 1997.  The 1998 loan volume was
similar to the 1997 loan volume due to a  continued  strong  housing  market and
lower  interest  rates  causing more  borrowers to refinance.  Refinanced  loans
constituted  42% and 43% of new loan  originations  for the three and six months
ended June 30, 1998,  compared to 31% and 33% for the three and six months ended
June 30, 1997.

     Loans originated for sale amounted to $212 million and $334 million for the
three and six months ended June 30, 1998, respectively,  compared to $45 million
and $99 million for the same periods in 1997. The Company continues to sell most
of its fixed-rate originations.

     The Company  has lending  operations  in 26 states.  The primary  source of
mortgage  origination is loans secured by residential  properties in California.
For the three and six months ended June 30, 1998, 62% and 61%, respectively,  of
total loan originations were on residential properties in California compared to
53% and 52% for the same periods in 1997.  The five largest  states,  other than
California,  for  originations for the three and six months ended June 30, 1998,
were Florida, Texas, Colorado,  Illinois and New Jersey with a combined total of
20% and 21% of total  originations,  respectively.  The  percentage of the total
loan  portfolio  (excluding  mortgage-backed  securities  with recourse) that is
comprised of  residential  loans in California was 56% at June 30, 1998 compared
to 67% at June 30, 1997,  and 63% at December 31, 1997.  The  percentage  of the
total loan portfolio (including  mortgage-backed  securities with recourse) that
is  comprised  of  residential  loans in  California  was 66% at June  30,  1998
compared to 67% at June 30, 1997, and 66% at December 31, 1997.

     The tables on the following two pages show the Company's  loan portfolio by
state at June 30, 1998 and 1997.


<PAGE>
<TABLE>
<CAPTION>


                                     TABLE 3

                             Loan Portfolio by State
                                  June 30, 1998
                             (Dollars in thousands)

                         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        $20,354,069    $3,414,490    $     223    $    43,343      $23,812,125       65.83%
Texas               1,407,972        74,256          529          1,405        1,484,162        4.11
Florida             1,422,475        19,575            5            819        1,442,874        3.99
Illinois            1,202,328       158,430          -0-          1,529        1,362,287        3.77
Colorado            1,060,890       221,099          -0-          6,951        1,288,940        3.57
New Jersey          1,240,886           -0-          -0-          5,267        1,246,153        3.45
Washington            534,073       408,648          -0-            702          943,423        2.61
Arizona               761,859        25,980          -0-            532          788,371        2.18
Pennsylvania          636,666         4,191          -0-          3,054          643,911        1.78
Virginia              514,365         8,461          -0-          1,250          524,076        1.45
Connecticut           492,953           -0-          -0-             17          492,970        1.36
Maryland              358,397         2,136          -0-            463          360,996        1.00
Oregon                255,116        14,527          -0-            244          269,887        0.75
Minnesota             213,871         8,073          -0-            -0-          221,944        0.61
Utah                  207,871            51          -0-          1,460          209,382        0.58
Nevada                176,984           944          -0-            -0-          177,928        0.49
Kansas                168,717         4,990          -0-            164          173,871        0.48
Wisconsin             168,218         3,826          -0-            -0-          172,044        0.48
Massachusetts         133,710           -0-          -0-            -0-          133,710        0.37
Missouri               88,044         5,662          -0-            -0-           93,706        0.26
Washington DC          53,429           -0-          -0-            -0-           53,429        0.15
New Mexico             50,032           -0-          -0-            -0-           50,032        0.14
New York               39,509           -0-          -0-            -0-           39,509        0.11
Delaware               33,109           -0-          -0-            -0-           33,109        0.09
Idaho                  31,562           -0-          -0-            -0-           31,562        0.09
Georgia                27,634           -0-          -0-          1,375           29,009        0.08
North Carolina         21,943           -0-          -0-            -0-           21,943        0.06
Michigan               20,962           -0-          -0-            -0-           20,962        0.06
Ohio                    8,924         1,274           73          3,061           13,332        0.04
South Dakota           11,397           -0-          -0-            -0-           11,397        0.03
Other                   7,737           -0-          -0-          2,792           10,529        0.03
                  ------------   -----------   ----------   ------------     ------------   ---------
  Totals          $31,705,702    $4,376,613    $     830    $    74,428       36,157,573      100.00%
                  ============   ===========   ==========   ============                    =========

SFAS 91 deferred loan fees                                                       (28,652)
Loan discount on purchased loans                                                  (3,410)
Undisbursed loan funds                                                            (4,156)
Allowance for loan losses                                                       (239,537)
Loans to facilitate (LTF) interest reserve                                          (564)
Troubled debt restructured (TDR) interest reserve                                 (2,869)
Loans on deposits                                                                 27,791
                                                                             ------------
     Total loan portfolio and loans securitized into FNMA MBS with recourse
     and REMIC MBS                                                            35,906,176
Loans securitized into FNMA MBS with recourse and REMIC MBS                   (8,306,056)(b)
                                                                             ------------
     Loans receivable                                                        $27,600,120
                                                                             ============
</TABLE>

(a)    The Company has no commercial loans.
(b)    The above schedule includes the June 30, 1998 balances of adjustable rate
       loans that have been securitized with full recourse into Federal National
       Mortgage Association  mortgage-backed securities and loans that have been
       securitized into REMIC mortgage-backed securities.


<PAGE>
<TABLE>
<CAPTION>


                                     TABLE 4

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

                         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 interest reserve                                                (668)
Troubled debt restructured 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)
                                                                             ------------
   Loans receivable                                                          $31,821,887
                                                                             ============
</TABLE>

(a)    The Company has no commercial loans.
(b)    The above schedule includes the June 30, 1997 balances of adjustable rate
       loans that have been securitized with full recourse into Federal National
       Mortgage  Association  mortgage-backed  securities,  which can be used to
       collateralize reverse repurchase agreements.



<PAGE>


         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, 1998 and 1997,  compared to 93% at December  31, 1997.
The portion of the mortgage portfolio (including MBS) composed of rate-sensitive
loans was 92% at June 30, 1998 compared to 91% at June 30, 1997 and December 31,
1997. The Company's ARM  originations for the first half of 1998 constituted 87%
of new  mortgage  loans made in 1998  compared  to over 95% in the first half of
1997.

         The weighted  average  maximum  lifetime cap rate on the  Company's ARM
loan  portfolio  (including  MBS with  recourse) was 12.67%,  or 5.31% above the
actual weighted average rate at June 30, 1998, versus 12.81%, or 5.55% above the
weighted average rate at June 30, 1997.

         Approximately  $5.1 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,
1998,  $522  million of ARM loans had reached  their rate  floors.  The weighted
average  floor rate on the loans that had reached  their floor was 7.74% at June
30, 1998  compared  to 7.73% at June 30,  1997.  Without the floor,  the average
yield on these  loans  would have been 7.16% at June 30,  1998 and 7.09% at June
30, 1997.

         Loan repayments consist of monthly loan amortization, loan payoffs, and
refinances.  For the three and six months ended June 30, 1998,  loan  repayments
were $1.7 billion and $3.1 billion,  respectively,  compared to $940 million and
$1.6 billion in the same periods of 1997.  The increase in  prepayments  for the
first  half of 1998 as  compared  to the first six  months of 1997 was due to an
apparent surge in refinance activity.

         MORTGAGE SERVICING RIGHTS

         The Company  accounts for mortgage  servicing rights in accordance with
SFAS 122 and SFAS 125. For the first  quarter and first six months of 1998,  the
Company recognized gains of $4.4 million and $6.6 million,  respectively, on the
sale of loans due to the  capitalization  of servicing  rights  compared to $1.1
million and $2.1 million for the same periods in 1997. After  amortization,  the
balance at June 30, 1998 and 1997 of the capitalized  servicing rights was $15.7
million  and  $10.0  million,  respectively.  The book  value of  Golden  West's
servicing  rights did not  exceed  the fair value at June 30,  1998 or 1997 and,
therefore,  no  write-down  of the  servicing  rights  to their  fair  value was
necessary.


<PAGE>


         ASSET QUALITY

         One measure of the soundness of the Company's portfolio is its ratio of
nonperforming  assets  (NPAs) to total  assets.  Nonperforming  assets  includes
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>
<CAPTION>

                                     TABLE 5

               Nonperforming Assets and Troubled Debt Restructured
                             (Dollars in thousands)

                                                            June 30              
                                                   --------------------------    December 31
                                                      1998          1997            1997
                                                   -----------   ------------   --------------
<S>                                                <C>           <C>             <C>                                                
Non-accrual loans                                  $  302,922    $   361,860     $   317,550                                        
Real estate acquired through foreclosure               43,643         72,697          61,517
Real estate in judgment                                   -0-            191              67
                                                   -----------   ------------    ------------
Total nonperforming assets                         $  346,565    $   434,748     $   379,134   
                                                   ===========   ============    ============

TDRs                                               $   31,978    $    75,834     $    43,795
                                                   ===========   ============    ============

Ratio of NPAs to total assets                           0.89%          1.11%            .96%
                                                   ===========   ============    ============

Ratio of TDRs to total assets                           0.08%           .19%            .11%
                                                   ===========   ============    ============

Ratio of NPAs and TDRs to total assets                  0.97%          1.30%           1.07%
                                                   ===========   ============    ============
</TABLE>

         The  decrease in NPAs during 1998  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 $2 million and $5 million in the second
quarter  and first six months of 1998  compared to $4 million and $9 million for
the same periods of 1997.  Interest  foregone on TDRs  amounted to $241 thousand
and $527 thousand for the three and six months ended June 30, 1998,  compared to
$555 thousand and $1.1 million for the three and six months ended June 30, 1997.

         The tables on the following two pages show the Company's  nonperforming
assets by state at June 30, 1998 and 1997.


<PAGE>
<TABLE>
<CAPTION>



                                     TABLE 6

                          Nonperforming Assets by State
                                  June 30, 1998
                             (Dollars in thousands)


                          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          $209,013    $ 10,454    $   453      $38,018    $  1,389    $   -0-     $259,327     1.09%
Texas                  7,463         -0-        -0-        1,078         -0-        -0-        8,541     0.58
Florida               13,447         -0-        187          390         -0-        -0-       14,024     0.97
Illinois              10,572         220        -0-          818         -0-        -0-       11,610     0.85
Colorado               1,904         -0-          3          -0-         -0-        -0-        1,907     0.15
New Jersey            17,249         -0-        210          704         -0-        -0-       18,163     1.46
Washington             1,577         747        -0-          111         -0-        -0-        2,435     0.26
Arizona                1,700         -0-        -0-          493         -0-        -0-        2,193     0.28
Pennsylvania           7,066         -0-        -0-          289         -0-        -0-        7,355     1.14
Virginia               2,012         -0-        -0-          150         -0-        -0-        2,162     0.41
Connecticut            3,656         -0-        -0-          194         -0-        -0-        3,850     0.78
Maryland               1,789         -0-        -0-          170         -0-        -0-        1,959     0.54
Oregon                   646         -0-        -0-          -0-         -0-        -0-          646     0.24
Minnesota              1,336         -0-        -0-           47         -0-        -0-        1,383     0.62
Utah                   2,147         -0-        -0-          -0-         -0-        -0-        2,147     1.03
Nevada                 2,483         -0-        -0-          270         -0-        -0-        2,753     1.55
Kansas                   361          40        -0-          -0-         -0-        -0-          401     0.23
Wisconsin                520         -0-        -0-          -0-         -0-        -0-          520     0.30
Massachusetts            369         -0-        -0-          -0-         -0-        -0-          369     0.28
Missouri                 234         -0-        -0-           91         162        -0-          487     0.52
Washington, DC           101         -0-        -0-          -0-         -0-        -0-          101     0.19
New Mexico               407         -0-        -0-          -0-         -0-        -0-          407     0.81
New York               3,309         -0-        -0-          104         -0-         11        3,424     8.67
Delaware                  81         -0-        -0-          -0-         -0-        -0-           81     0.24
Idaho                    235         -0-        -0-          -0-         -0-        -0-          235     0.74
Georgia                  819         -0-        -0-           93         -0-        -0-          912     3.14
North Carolina           -0-         -0-        -0-          -0-         -0-        -0-          -0-     0.00
Michigan                  14         -0-        -0-          -0-         -0-        -0-           14     0.07
Ohio                       2         -0-        -0-          -0-         -0-        -0-            2     0.02
South Dakota              72         -0-        -0-          -0-         -0-        -0-           72     0.63
Other                     24         -0-        -0-          -0-         -0-        -0-           24     0.22
                    ---------   ---------   --------      -------   ---------   --------    ---------    -----
  Totals            $290,608    $ 11,461    $   853       $43,020   $  1,551    $    11      347,504     0.96%
                    =========   =========   ========      =======   =========   ========

REO general valuation allowance                                                                 (939)    0.00
                                                                                            ---------    -----
Total nonperforming assets                                                                  $346,565     0.96%
                                                                                            =========    =====
</TABLE>


(a)  Non-accruals loans are 90 days or more past due and have no unpaid interest
     accrued.  
(b)  During  the past four  years,  the  Company  has  securitized
     adjustable rate loans into FNMA mortgage-backed securities with full credit
     recourse.  In  addition,  during the second  quarter of 1998,  the  Company
     securitized  mortgage  loans into REMIC MBS. The June 30, 1998  balances of
     the related nonperforming assets are reflected in the amounts above.



<PAGE>
<TABLE>
<CAPTION>


                                     TABLE 7

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


                          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,  1996,  and  1997,  the  Company  securitized
     adjustable  rate mortgages into FNMA  mortgage-backed  securities with full
     credit  recourse.  The June 30, 1997 balances of the related  nonperforming
     assets are reflected in the amounts above.



<PAGE>


         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.

         The table below shows the changes in the  allowance for loan losses for
  the three months ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>

                                     TABLE 8

                      Changes in Allowance for Loan Losses
                             (Dollars in thousands)

                                                                 Three Months Ended            Six Months Ended
                                                                       June 30                      June 30
                                                             --------------------------   --------------------------
                                                                1998          1997           1998          1997
                                                             ------------  ------------   -----------   ------------
<S>                                                          <C>           <C>            <C>           <C>        
  Beginning allowance for loan losses                        $   237,186   $   209,077    $  233,280    $   195,702
  Provision charged to expense                                     2,682        13,111         5,647         33,806
  Less loans charged off                                            (467)       (5,747)          -0-        (13,305)
  Add recoveries                                                     136           210           610            448
                                                             ------------  ------------   -----------   ------------
  Ending allowance for loan losses                           $   239,537   $   216,651    $  239,537    $   216,651
                                                             ============  ============   ===========   ============

  Ratio of chargeoffs net of recoveries to average loans
    outstanding (including MBS with recourse)                       .00%          .06%          .00%           .08%
                                                             ============  ============   ===========   ============
  Ratio of allowance for loan losses to nonperforming assets                                   69.1%          49.8%
                                                                                          ===========   ============

  Ratio of allowance for loan losses to total loans
    (including MBS with recourse)                                                               .67%           .62%
                                                                                          ===========   ============
</TABLE>
         DEPOSITS

         Retail  deposits  increased  during the second  quarter of 1998 by $434
million, including interest credited of $263 million, compared to an increase of
$419 million, including interest credited of $238 million, in the second quarter
of  1997.  Retail  deposits  increased  during  the  first  half of 1998 by $1.4
billion, including interest credited of $508 million, compared to an increase of
$866 million,  including interest credited of $464 million, in the first half of
1997.  Retail  deposits  increased  during the first six months of 1998 and 1997
primarily due to ongoing  marketing efforts and competitive rates offered by the
Company on its  insured  accounts.  In  addition,  the  Company  began  actively
promoting market rate transaction accounts during the second half of 1997, which
continued during the first half of 1998.


<PAGE>


         Beginning in January  1997,  the Company began a program to use brokers
to sell certificates of deposit (CDs) to institutional investors.  There were no
outstanding  wholesale  CDs at June 30, 1998 as compared to $1.1 billion at June
30, 1997.

         The table below shows the  Company's  deposits by interest  rate and by
remaining maturity at June 30, 1998 and 1997.
<TABLE>
<CAPTION>

                                     TABLE 9

                                    Deposits
                              (Dollars in millions)

                                                                                    June 30
                                                               ---------------------------------------------------
                                                                       1998                         1997
                                                               ----------------------      -----------------------
                                                                 Rate*        Amount         Rate*        Amount
                                                               --------     ----------     ---------    ----------
       Deposits by interest rate:
<S>                                                                <C>      <C>                <C>      <C>      
       Interest-bearing checking accounts                          3.23%    $      84          1.17%    $     276
       Passbook accounts                                           2.22           544          2.22           545
       Money market deposit accounts                               4.28         6,040          3.02         1,940
       Term certificate accounts with original maturities of:
           4 weeks to 1 year                                       5.10         7,977          5.32        12,543
           1 to 2 years                                            5.44         6,688          5.37         3,687
           2 to 3 years                                            5.46         1,458          5.44         1,322
           3 to 4 years                                            5.34           372          5.79           489
           4 years and over                                        5.76         1,208          5.87         1,648
       Retail jumbo CDs                                            5.34           622          5.51           515
       Wholesale CDs                                               0.00           -0-          5.64         1,071
       All other                                                   7.56             1          7.67             1
                                                                           -----------                 -----------
                                                                           $   24,994                  $   24,037
                                                                           ===========                 ===========

       Deposits by remaining maturity:
       No contractual maturity                                             $    6,668                  $    2,761
       Maturity within one year:
          3rd quarter                                                           6,335                       7,289
          4th quarter                                                           5,463                       7,237
          1st quarter                                                           2,567                       2,499
          2nd quarter                                                           1,691                       1,371
                                                                           -----------                 -----------
                                                                               16,056                      18,396

          1 to 2 years                                                          1,718                       1,929
          2 to 3 years                                                            289                         679
          3 to 4 years                                                            144                         110
          4 years and over                                                        119                         162
                                                                           -----------                 -----------
                                                                           $   24,994                  $   24,037
                                                                           ===========                 ===========
</TABLE>

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

         At June 30, the weighted  average cost of deposits was 4.99% (1998) and
5.10% (1997).



<PAGE>


         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 and capital stock of the FHLB.
FHLB  advances  amounted  to $7.5  billion at June 30,  1998,  compared  to $7.4
billion and $8.5 billion at June 30, 1997, and December 31, 1997,  respectively.
During the first quarter of 1998, the Company notified the FHLB of San Francisco
that it would pay off, before maturity,  $2.9 billion of high-cost advances and,
as a result,  incurred a $13 million  pre-tax charge during the first quarter of
1998 for the penalties associated with these prepayments. See Extraordinary Item
discussion on page 30. During July 1998,  the Company  notified the FHLB that it
would pay off an additional $1.5 billion, before maturity, of FHLB advances and,
as a result, will incur an additional $8 million pre-tax charge during the third
quarter of 1998 for the penalties associated with these prepayments.

         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 $1.8 billion,  $3.0 billion,  and $2.3 billion at June
30, 1998 and 1997, and December 31, 1997, respectively.

         The Company uses  accounting and reporting  standards for transfers and
servicing of financial assets and  extinguishments  of liabilities in accordance
with SFAS 125 and SFAS 127. The Company  adopted SFAS 127 on January 1, 1998 and
the adoption of SFAS 127 had no effect on the Company's  financial condition and
results of operations.

         OTHER BORROWINGS

         At June 30, 1998,  Golden West,  at the holding  company  level,  had a
total of $911 million of subordinated  debt issued and  outstanding.  As of June
30, 1998, 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, 1998, 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.

         WSL 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,  1998,  the full
amount was available for issuance.  As of June 30, 1998, WSL had a total of $100
million of subordinated notes issued and outstanding,  which were rated A2 and A
by Moody's and S&P,  respectively.  The subordinated notes are included in WSL's
risk-based regulatory capital as Supplementary Capital.

         WSL  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,  1998.  WSL  had  no  medium-term  notes
outstanding under prior registrations at June 30, 1998, compared to $310 million
at June 30, 1997,  and $110  million at December 31, 1997.  As of June 30, 1998,
WSL's  medium-term  notes had a  preliminary  rating of A1 and A+ by Moody's and
S&P, respectively.


<PAGE>


         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.  As of June 30,  1998,  WFSB had not issued any notes
under this authority.

         STOCKHOLDERS' EQUITY

         The Company's stockholders' equity increased by $226 million during the
first six months of 1998. The increase in  stockholders'  equity was a result of
net  earnings  for the first six  months of 1998 and an $8 million  increase  in
market  values  of  securities  available  for sale  since  December  31,  1997,
partially  offset by the  payment  of $14  million  in  quarterly  dividends  to
stockholders.  The  Company's  stockholders'  equity  increased  by $140 million
during the first six months of 1997.  The increase in  stockholders'  equity was
primarily as 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.  Unrealized gains net of taxes on securities and MBS available
for sale  included  in  stockholders'  equity  at June 30,  1998 and  1997,  and
December  31,  1997,  were  $157  million,   $125  million,  and  $150  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 the Company's common stock
is a wise use of excess capital.

         Since 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, 1998,  8.5 million  shares
had been purchased and retired at a cost of $380 million since October 1993. The
Company  did not  purchase  any  stock  during  the  first  six  months of 1998.
Dividends from  subsidiaries  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.

         WSL paid a $100  million  dividend  to  Golden  West in March  and $100
million in June 1998. In addition, WSL has received approval from the OTS to pay
up to $150 million more in upstream  dividends to Golden West. Also, Golden West
purchased  from WSL,  and  subsequently  contributed  as capital  to WFSB,  $100
million  of loans  during the first  quarter  of 1998 and $100  million in loans
during the second quarter of 1998.

         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.


<PAGE>


         REGULATORY CAPITAL

     The OTS requires federally insured  institutions,  such as WFSB and WSL, to
meet certain minimum capital  requirements.  Effective March 31, 1998,  FIRREA's
old 3% minimum requirement for Core (or Leverage) Capital has been superseded by
a 4%  minimum  requirement  under  the  Federal  Deposit  Insurance  Corporation
Improvement Act of 1991 (FDICIA).

         The following table shows WFSB's regulatory capital ratios and compares
them to the OTS minimum requirements at June 30, 1998 and 1997.
<TABLE>
<CAPTION>

                                    TABLE 10

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

                              June 30, 1998                                     June 30, 1997
              -----------------------------------------------   ----------------------------------------------
                     ACTUAL                  REQUIRED                  ACTUAL                  REQUIRED
              ----------------------   ----------------------   ----------------------   ----------------------
               Capital      Ratio       Capital      Ratio       Capital      Ratio       Capital      Ratio
              -----------  ---------   -----------  ---------   ----------   ---------   ----------   --------
<S>           <C>            <C>       <C>            <C>       <C>            <C>       <C>            <C>  
   Tangible   $1,929,619     6.69%     $  432,456     1.50%     $1,338,857     6.61%     $  304,005     1.50%
   Core        1,929,619     6.69       1,153,217     4.00       1,338,857     6.61         608,010     3.00
   Risk-based  2,031,581    12.91       1,259,075     8.00       1,406,712    13.22         851,290     8.00
</TABLE>


         The following table shows WSL's current  regulatory  capital ratios and
compares them to the OTS minimum requirements at June 30, 1998 and 1997.
<TABLE>

                                    TABLE 11

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

                               June 30, 1998                                      June 30, 1997
              ------------------------------------------------   ------------------------------------------------
                      ACTUAL                   REQUIRED                 ACTUAL                   REQUIRED
              -----------------------   -----------------------  ----------------------   -----------------------
               Capital       Ratio       Capital      Ratio       Capital       Ratio      Capital       Ratio
              -----------   ---------   -----------  ---------   -----------   --------   -----------   --------
<S>           <C>            <C>        <C>            <C>      <C>             <C>       <C>            <C>  
   Tangible   $  892,726     9.00%      $  148,730     1.50%    $ 1,142,979     6.13%     $  279,515     1.50%
   Core          892,726     9.00          396,614     4.00       1,142,979     6.13         559,030     3.00
   Risk-based  1,067,516    17.78          480,347     8.00       1,458,621    13.30         877,655     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 WFSB nor WSL
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.  As of June 30, 1998, the most recent  notification from the OTS
categorized  both  WFSB  and  WSL  as  "well   capitalized"  under  the  current
requirements.  There are no conditions  or events that have occurred  since that
notification   that  the   Company   believes   would  have  an  impact  on  the
categorization of either WFSB or WSL.


<PAGE>


         The table  below  shows that  WFSB's  regulatory  capital  exceeds  the
requirements of the well capitalized classification at June 30, 1998.
<TABLE>
<CAPTION>

                                    TABLE 12

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

                                          ACTUAL                       WELL CAPITALIZED
                                -------------------------       --------------------------
                                 Capital        Ratio             Capital         Ratio
                                -----------    ----------       -----------    -----------
<S>                            <C>                <C>           <C>                <C>  
        Leverage               $ 1,929,619        6.69%         $ 1,441,521        5.00%
        Tier 1 risk-based        1,929,619       12.26              944,306        6.00
        Total risk-based         2,031,581       12.91            1,573,844       10.00

</TABLE>

         The table  below  shows  that  WSL's  regulatory  capital  exceeds  the
requirements of the well capitalized classification at June 30, 1998.
<TABLE>
<CAPTION>

                                    TABLE 13

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

                                          ACTUAL                     WELL CAPITALIZED
                                -------------------------       --------------------------
                                 Capital        Ratio             Capital         Ratio
                                -----------    ----------       -----------    -----------
<S>                             <C>               <C>            <C>               <C>  
        Leverage                $  892,726        9.00%          $  495,768        5.00%
        Tier 1 risk-based          892,726       14.87              360,260        6.00
        Total risk-based         1,067,516       17.78              600,434       10.00
</TABLE>


RESULTS OF OPERATIONS

         NET EARNINGS

         Net  earnings  before an  extraordinary  item (see  extraordinary  item
discussion  on page 30) for the six months ended June 30, 1998 were $227 million
compared to net earnings of $171 million for the six months ended June 30, 1997.
Net earnings after the extraordinary item for the six months ended June 30, 1998
were $219  million  compared to net  earnings of $171 million for the six months
ended June 30, 1997.  Net earnings for the first half of 1998 included a gain of
$13 million before tax from the  redemption of preferred  stock which was called
by the issuer. In addition to the stock gain, net earnings  increased in 1998 as
compared 1997 as a result of increased net interest income and a decrease in the
provision for loan losses. These increases to net earnings were partially offset
by an increase in general and administrative expense.



<PAGE>


         EARNINGS PER SHARE

         Golden West  calculates  Basic Earnings Per Share (EPS) and Diluted EPS
in  accordance  with SFAS 128.  Basic EPS is calculated by dividing net earnings
for the  period  by the  weighted-average  common  shares  outstanding  for that
period. Diluted EPS takes into account the effect of dilutive instruments,  such
as stock options, but uses 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.  The Company's Basic EPS before the extraordinary
item and the  preferred  stock  gain of $.13 per share for the  quarter  and six
months  ended June 30, 1998 were $1.91 and $3.96,  respectively,  as compared to
$1.53  and  $2.99  for  the  quarter  and  six  months   ended  June  30,  1997,
respectively. Basic EPS after the extraordinary item and including the preferred
stock gain for the  quarter  and six months  ended June 30,  1998 were $2.04 and
$3.83,  respectively,  as compared  to $1.53 and $2.99,  for the quarter and six
months  ended June 30,  1997,  respectively.  The Company  reported  Diluted EPS
(before the extraordinary item and the preferred stock gain) of $1.88 and $3.91,
for the quarter and six months ended June 30, 1998,  compared to $1.51 and $2.94
for the  three  and six  months  ended  June 30,  1997.  Diluted  EPS  after the
extraordinary  item and the preferred  stock gain for the quarter and six months
ended June 30, 1998 were $2.01 and $3.78, respectively, as compared to $1.51 and
$2.94 for the quarter and six months ended June 30, 1997, 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,
1998 and 1997, and December 31, 1997.
<TABLE>
<CAPTION>

                                    TABLE 14

                            Yield on Earning Assets,
                        Cost of Funds, and Primary Spread

                                                  June 30                  
                                         ---------------------------      December 31
                                           1998            1997              1997
                                         -----------   -----------      -------------
<S>                                          <C>           <C>                <C>  
        Yield on loan portfolio              7.51%         7.42%              7.53%
        Yield on MBS                         7.23          7.10               7.23
        Yield on investments                 6.89          6.51               6.48
                                        ----------      --------         ----------
        Yield on earning assets              7.44          7.35               7.48
                                        ----------      --------         ----------
        Cost of deposits                     4.99          5.10               5.04
        Cost of borrowings                   6.02          5.97               5.99
                                        ----------      --------         ----------
        Cost of funds                        5.29          5.38               5.36
                                        ----------      --------         ----------
        Primary spread                       2.15%         1.97%              2.12%
                                        ==========      ========         ==========
</TABLE>



<PAGE>


         The Company originates ARMs to manage the rate sensitivity of the asset
side of the balance  sheet.  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).  Nevertheless,  the yield on the  Company's  ARM  portfolio  tends to lag
changes  in market  interest  rates  because  of lags  related  to the index and
because of certain loan features.  These features include  introductory rates on
new ARM loans,  the interest rate  adjustment  frequency of ARM loans,  interest
rate caps or limits on  individual  rate  changes and interest  rate floors.  On
balance,  COFI and ARM structural  features cause the Company's assets initially
to reprice more slowly than its liabilities,  resulting in a temporary reduction
in net interest income when rates increase.

         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, 1998
and 1997, in order to focus on the changes in interest  income  between years as
well as changes in other revenue and expense amounts.
<TABLE>

                                    TABLE 15

                       Selected Revenue and Expense Items
                        as Percentages of Total Revenues

                                                           Three Months Ended         Six Months Ended
                                                                 June 30                   June 30
                                                          ----------------------    ----------------------
                                                             1998         1997         1998         1997
                                                          ---------    ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>          <C>  
    Interest on loans                                         74.9%        82.2%        77.7%        81.8%
    Interest on mortgage-backed securities                    13.5         10.2         11.4         10.5
    Interest and dividends on investments                      6.1          4.8          6.5          4.9
                                                          ---------    ---------    ---------    ---------
                                                              94.5         97.2         95.6         97.2
    Less:
      Interest on deposits                                    41.0         41.4         40.6         40.9
      Interest on advances and other borrowings               23.0         25.3         24.1         25.3
                                                          ---------    ---------    ---------    ---------
                                                              64.0         66.7         64.7         66.2

    Net interest income                                       30.5         30.5         30.9         31.0
      Provision for loan losses                                0.3          1.8          0.4          2.4
                                                          ---------    ---------    ---------    ---------
    Net interest income after provision for loan              30.2         28.7         30.5         28.6
    losses

    Add:
      Fees                                                     2.0          1.6          1.8          1.6
      Gain on the sale of securities,  MBS, and loans          2.4          0.4          1.4          0.3
      Other non-interest income                                1.1          0.8          1.2          0.9
                                                          ---------    ---------    ---------    ---------
                                                               5.5          2.8          4.4          2.8
    Less:
      General and administrative expenses                     11.1         11.1         10.9         11.2
      Taxes on income                                          9.7          8.1          9.5          8.0
                                                          ---------    ---------    ---------    ---------
    Earnings before extraordinary item                        14.9         12.3         14.5         12.2
    Extraordinary item                                         0.0          0.0          0.5          0.0
                                                          ---------    ---------    ---------    ---------
    Net earnings                                              14.9%        12.3%        14.0%        12.2%
                                                          =========    =========    =========    =========

</TABLE>


<PAGE>


         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 $2 million
and $4 million for the three and six months ended June 30, 1998,  as compared to
a decrease of $1 million and $2 million for the same periods in 1997.

         The following  table  summarizes  the  unrealized  gains and losses for
interest rate swaps at June 30, 1998 and 1997.
<TABLE>
<CAPTION>

                                    TABLE 16

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

                                         June 30, 1998                              June 30, 1997
                            ----------------------------------------   ----------------------------------------
                                                           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         $     7,215   $  (34,529)  $   (27,314)     $   17,881   $   (31,179)  $   (13,298)
                            ============  ============ =============   ============  ============= =============
</TABLE>
<TABLE>
<CAPTION>


                                    TABLE 17

                         Schedule of Interest Rate Swaps
                         (Notional amounts in millions)

                                            Six Months Ended
                                              June 30, 1998
                                       ----------------------------
                                         Receive           Pay
                                          Fixed           Fixed
                                          Swaps           Swaps
                                       -------------   ------------
<S>                                     <C>             <C>        
Balance at December 31, 1997            $     1,679     $     1,108

Additions                                       -0-             -0-
Maturities                                     (803)          (140)
                                        ------------    ------------
Balance at June 30, 1998                $       876     $       968
                                        ============    ============
</TABLE>


         The range of floating  interest rates received on swap contracts in the
first six months of 1998 was 5.62% to 6.19%, and the range of floating  interest
rates paid on swap  contracts  was 4.95% to 6.08%.  The range of fixed  interest
rates  received on swap  contracts  in the first six months of 1998 was 4.86% to
8.68% and the range of fixed  interest rates paid on swap contracts was 5.38% to
9.14%.


<PAGE>


         INTEREST ON LOANS

         In the second quarter of 1998, interest on loans was higher than in the
comparable  1997  period by $3.5  million or 0.6%.  The  increase  in the second
quarter of 1998 was due to a 13 basis point  increase  in the average  portfolio
yield,  partially  offset by a $340  million  decrease in the average  portfolio
balance.  For the first half of 1998,  interest  on loans was higher than in the
comparable  1997 period by $67 million or 5.9%.  The  increase was due to a $1.2
billion increase in the average  portfolio balance and a 13 basis point increase
in the average portfolio yield.

         INTEREST ON MORTGAGE-BACKED SECURITIES

     In the second quarter of 1998,  interest on mortgage-backed  securities was
higher than in the  comparable  1997  period by $33  million or 45.8%.  The 1998
increase was due primarily to an $1.9 billion increase in the average  portfolio
balance. For the first half of 1998, interest on mortgage-backed  securities was
higher than in the comparable  1997 period by $30 million or 20.7% due primarily
to an $835 million  increase in the average  portfolio  balance and a four basis
point increase in the average portfolio yield.

         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 1998, interest and dividends on investments was higher
than in the  comparable  1997 period by $14 million or 39.9%.  The  increase was
primarily due to a $882 million increase in the average portfolio balance, which
was partially offset by a 5 basis point decrease in the average portfolio yield.
For the first half of 1998,  interest and  dividends on  investments  was higher
than in the  comparable  1997 period by $33 million or 48.9%.  The  increase was
primarily due to a $1.1 billion increase in the average  portfolio balance and a
two basis point increase in the average portfolio yield.

         INTEREST ON DEPOSITS

     In the second  quarter  of 1998,  interest  on  deposits  increased  by $27
million or 9.2% from the  comparable  period in 1997. In the first half of 1998,
interest  on  deposits  increased  by $62  million or 10.8% from the  comparable
period in 1997. The second quarter  increase was due to a $2.2 billion  increase
in the average  balance of  deposits,  which was  partially  offset by a 2 basis
point  decrease in the average  cost of  deposits.  The six month  increase  was
primarily due to a $2.4 billion  increase in the average balance of deposits and
a 2 basis point increase in the average cost of deposits.

         INTEREST ON ADVANCES AND OTHER BORROWINGS

         For the second quarter and first half of 1998, interest on advances and
other  borrowings  increased  by $1  million  or 0.4% and $22  million  or 6.1%,
respectively,  from the comparable  periods of 1997. The second quarter increase
was primarily  due to a seven basis point  increase in the average cost of these
borrowings, which was partially offset by a $102 million decrease in the average
balance.  The six month increase was primarily due to a $486 million increase in
the average  balance and a 12 basis point  increase in the average cost of these
borrowings.



<PAGE>


         PROVISION FOR LOAN LOSSES

         The   provision  for  loan  losses  was  $3  million  and  $6  million,
respectively,  for the three and six months ended June 30, 1998, compared to $13
million and $34 million for the same  periods in 1997.  The lower  provision  in
1998 was due to lower chargeoffs  resulting from the strong  California  housing
market and declining nonperforming assets.

         GENERAL AND ADMINISTRATIVE EXPENSES

         For  the  second   quarter   and  first  half  of  1998,   general  and
administrative  expenses  (G&A) was $87 million and $171 million,  respectively,
compared to $79 million and $158 million for the comparable periods in 1997. G&A
as a  percentage  of average  assets on an  annualized  basis was .88% and .86%,
respectively, for the second quarter and first half of 1998 compared to .81% and
 .82%, respectively, for the same periods in 1997. Expenses are likely to rise in
subsequent quarters because of the seasonal increase in mortgage activity during
the summer months, the ongoing expansion of the Company's branch system, and the
implementation of a variety of technology  initiatives  including addressing the
"Year 2000 " computer issue (see Year 2000 discussion on page 32).

         EXTRAORDINARY ITEM

         During the first quarter of 1998, the Company  notified the FHLB of San
Francisco that it intended to retire before maturity,  $2.9 billion of high-cost
FHLB advances.  As a result, the Company incurred a $13 million pretax charge in
the first quarter of 1998 for the  penalties  associated  with the  prepayments.
Golden West will replace the prepaid FHLB advances with new low-cost obligations
that will produce more favorable  interest expense for the Company over the next
five years.

         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  extraordinary  item were
39.3% and 39.6%,  respectively,  for the second  quarter  and first half of 1998
compared to 39.7% and 39.6%, respectively, for the same periods a year ago.



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         WFSB's  principal  sources  of funds  are  cash  flows  generated  from
earnings;  deposits;  loan  repayments;   negotiable  certificates  of  deposit,
borrowings from the FHLB;  investments and borrowings from its affiliates;  debt
collateralized by mortgages, MBS, or securities; and the issuance of medium-term
notes. 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, 1998,  and 1997, and December 31, 1997, see the
Cash and Investments section on page 12.

         WSL's  principal  sources  of  funds  are  cash  flows  generated  from
earnings;   deposits;   loan   repayments;   borrowings   from  the  FHLB;  debt
collateralized by mortgages, MBS, or securities; and the issuance of medium-term
notes. In addition,  WSL has a number of other alternatives available to provide
liquidity or finance  operations.  These include borrowings from its affiliates,
borrowings  from  public   offerings  of  debt,   sales  of  loans,   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 WSL's liquidity positions at June 30, 1998, and 1997, and December
31, 1997, see the Cash and Investments section on page 12.

         The  principal  sources of funds for WFSB's  and WSL's  parent,  Golden
West, are dividends from subsidiaries, interest on investments, and the proceeds
from  the  issuance  of  debt  and  equity  securities.  Various  statutory  and
regulatory  restrictions  and tax  considerations  limit the amount of dividends
WFSB and WSL can pay.  The  principal  liquidity  needs of  Golden  West are for
payment of interest and principal on subordinated debt securities (of which $200
million  mature in 1998),  capital  contributions  to its  insured  subsidiaries
(including  $311 million for the six months ended June 30, 1998 and $284 million
for the year ended December 31, 1997 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, 1998 and 1997, and December 31,
1997,  Golden West's total cash and investments  amounted to $750 million,  $900
million, and $965 million, respectively. Included in the June 30, 1998 and 1997,
and December 31, 1997 amounts is a $600 million long-term loan to WFSB.




<PAGE>


YEAR 2000

     The  Company  is  aware of the  system  challenges  that the Year  2000 has
created and  currently  has a plan in place to insure that all of the  Company's
mission critical systems will be Year 2000 compliant by early 1999. The plan has
been  developed  in  accordance  with  guidance  set  forth by  federal  banking
regulators  in a series of  jointly-issued  policy  statements.  The Company has
completed an inventory and  assessment of its systems.  The Company is currently
in the  process  of testing  and  modifying  or  replacing  systems  that may be
affected by these Year 2000 compliance  issues (Year 2000 Project.)  Included in
this process are both  information  technology  systems and other  systems (e.g.
elevators,  doorlocks)  that could be affected by Year 2000 issues.  The Company
has  placed  priority  on  information  technology  systems  affecting  its core
business of deposit-taking  and lending.  Testing of individual  systems for the
ability to function during the Year 2000 has been started,  with such testing to
be  substantially  completed by December 31, 1998.  During the first  quarter of
1999,  the Company  will  commence  integrated  testing and  ascertain  that all
systems function together. All systems affecting the Company's core business are
scheduled to be Year 2000 compliant by June 1999.

         While  the  Company  believes  it is doing  everything  technologically
possible to assure Year 2000 compliance, the success of the Year 2000 Project is
to some extent dependent upon vendor  cooperation.  The Company is requiring its
computer  systems and software  vendors to represent that the products  provided
are or will be Year 2000  compliant  and has  planned a program of  testing  for
compliance. Such testing is included in the testing previously described in this
section.  To date, the Company has no indication  that its principal  vendors or
their systems will adversely affect the Company's Year 2000 compliance efforts.

         The Company  currently  estimates that over the next two years, it will
cost  approximately  $19 million to make all of its  computer  systems Year 2000
compliant.  The Company  will  expense all costs  associated  with the Year 2000
Project and expects to fund such costs through  operating  cash flows.  The Year
2000  Project  expense  incurred  during the first half of 1998 was $4  million.
Included  in the  $19  million  are  estimates  for  compensation  of  employees
dedicated to the Year 2000 Project,  consultants,  hardware and software expense
and  depreciation of the equipment  purchased as part of this process.  However,
the  Company's  Year 2000  expenses  are not  expected to result in a dollar for
dollar  increase  in the  Company's  overall  information  systems  expenditures
because  the Company is likely to  dedicate a number of its  existing  resources
solely to the Year 2000 Project. 

     The  Company  believes  that its  Year  2000  Project  will  result  in the
Company's systems functioning normally, without adverse consequences.  While the
systems of others,  with whom and through which the Company  conducts  business,
are not within the  Company's  control,  the Year 2000  Project is  intended  to
provide the Company with  sufficient  advance warning that such systems will not
perform.  In the unlikely event of a system  problem,  the Company has developed
contingency  plans to address the potential that one or more systems might fail,
despite efforts to the contrary.



<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Golden West  estimates  the  sensitivity  of the Company's net interest
income,  net  earnings,  and capital  ratios to interest  rate changes  based on
simulations  using an  asset/liability  model which takes into  account the lags
described on pages 11 and 27. The simulation model projects net interest income,
net earnings,  and capital  ratios based on an immediate  interest rate increase
that is  sustained  for a  thirty-six  month  period.  The model is based on the
actual maturity and repricing  characteristics of interest-rate sensitive assets
and  liabilities.   For  certain  assets,  the  model  incorporates  assumptions
regarding the impact of changing  interest  rates on prepayment  rates which are
based on the Company's historical prepayment  information.  The model factors in
projections  for  anticipated  activity  levels by product  lines offered by the
Company.  Based on the  information  and assumptions in effect at June 30, 1998,
Management  believes  that a 200 basis  point  rate  increase  sustained  over a
thirty-six month period would not affect the Company's  long-term  profitability
and financial strength.






<PAGE>


PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Index to Exhibits

         Exhibit No.   Description
        -----------    -----------

           3(a)     Certificate  of  Incorporation,  as amended,  and amendments
                    thereto,  are  incorporated  by reference to Exhibit 3(a) to
                    the Company's  Annual Report on Form 10-K (File No.  1-4269)
                    for the year ended December 31, 1990.

           3(b)     By-Laws  of  the   Company,   as   amended  in  1997,.   are
                    incorporated  by reference to Exhibit 3(a) to the  Company's
                    Annual  Report on Form 10-K (File No.  1-4269)  for the year
                    ended December 31, 1997.

           4(a)     The  Registrant  agrees to furnish to the  Commission,  upon
                    request, a copy of each instrument with respect to issues of
                    long-term  debt,  the authorized  principal  amount of which
                    does not exceed 10% of the total assets of the Company.

           10(a)    1996 Stock  Option  Plan,  as amended,  is  incorporated  by
                    reference  to Exhibit A of the  Company's  Definitive  Proxy
                    Statement on Schedule 14A,  filed on March 15, 1996, for the
                    Company's 1996 Annual Meeting of Stockholders.

           10(b)    Annual  Incentive Bonus Plan is incorporated by reference to
                    Exhibit A of the  Company's  Definitive  Proxy  Statement on
                    Schedule  14A,  filed on March 14, 1997,  for the  Company's
                    1997 Annual Meeting of Stockholders.

           10(c)    Deferred  Compensation  Agreement  between  the  Company and
                    James T. Judd is  incorporated by reference to Exhibit 10(b)
                    of the  Company's  Annual  Report  on Form  10-K  (File  No.
                    1-4629) for the year ended December 31, 1986.

           10(d)    Deferred  Compensation  Agreement  between  the  Company and
                    Russell  W.Kettell is  incorporated  by reference to Exhibit
                    10(c) of the Company's  Annual Report on Form 10-K (File No.
                    1-4629) for the year ended December 31, 1986.




<PAGE>


ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K (Continued)

          (a)     Index To Exhibits (continued)

        Exhibit No.   Description
        -----------   -----------

           10(e)    Deferred  Compensation  Agreement between the Company and J.
                    L. Helvey is  incorporated  by reference to Exhibit 10(d) of
                    the Company's  Annual Report on Form 10-K (File No.  1-4629)
                    for the year ended December 31, 1986.

           10(f)    Deferred Compensation  Agreement between the Company and
                    David C. Welch is incorporated by reference to Exhibit 10(f)
                    of the  Company's  Annual  Report  on Form  10-K  (File  No.
                    1-4629) for the year ended December 31, 1987.

           10(g)    Operating lease on Company headquarters  building,  1901
                    Harrison Street, Oakland,  California 94612, is incorporated
                    by reference to Exhibit 10(e) of the Company's Annual Report
                    on Form 10-K (File No.  1-4629) for the year ended  December
                    31, 1986.

           10(h)    Form  of  Supplemental   Retirement  Agreement  between  the
                    Company and certain  executive  officers is  incorporated by
                    reference to Exhibit 10(j) to the Company's Annual Report on
                    Form 10-K (File No.  1-4629) for the year ended December 31,
                    1990.

           11       Statement of Computation of Earnings Per Share

           27       Financial Data Schedule


(b)       Reports on Form 8-K

          The Registrant  did not file any current  reports on Form 8-K with the
          Commission in the first quarter.

<PAGE>


                                   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 14, 1998            /s/ J. L. Helvey
                                   --------------------------------------------
                                   J. L. Helvey
                                   Executive Vice President
                                   (duly authorized and principal financial
                                   officer)