After compiling perhaps the most impressive performance record of any thrift executives, Herbert M. and Marion O. Sandler of Golden West Financial Corp. are reaching the point where people are asking the inevitable questions about how long they can keep it up.
In the average year of the 29 since they took the Oakland, Calif., company public, per-share earnings grew 18.24%, per-share book value 17.28%, and assets 18.32%. By all three measures, Golden West has done better than any other big bank or thrift.
The Sandlers have transformed Golden West and its principal subsidiary, World Savings and Loan Association, from a sleepy, $34 million-asset Bay Area savings and loan to a $35.8 billion-asset giant with offices in 24 states.
The keys to their success are by now well-known. Golden West perennially has among the lowest efficiency and loan-loss ratios in the industry. It also maintains a traditional business mix, relying on attractive pricing - rather than on fancy branches and automated teller machines - to sell certificates of deposit and adjustable-rate mortgages.
But as the Golden West couple approach conventional retirement age - Herbert is 64 and Marion 65 - some questions are being asked. When will they retire? How long can Golden West continue to thrive with a traditional strategy that nearly every other big thrift is abandoning?
"There certainly has been a lot of speculation as to what their plans might be," said a high-level executive at a competing California thrift who asked not to be named.
Mr. Sandler, who prefers to keep a low public profile, confronted the questions in a telephone interview last week.
Speaking while on a two-week vacation with Marion at a family home on the coast of Maine, Mr. Sandler bristled at the suggestion that he and his wife of 35 years might retire in the not-too-distant future.
"We love what we do," he said.
He added that Golden West's future looks fine, and that the company has a firm handle on competition from mutual funds and mortgage banks.
"All of the things that are happening were perfectly obvious to us from at least the late '70s," he said.
Wall Street generally agrees that the future of the Sandlers' company looks good. Most analysts say there will always be a place for a low-cost operator like Golden West.
"I'm not worried about them," said Lehman Brothers Inc. analyst Bruce Harting.
But not everyone thinks Golden West's future is rosy.
Perhaps it's wishful thinking among Golden's competitors, but there are persistent whispers that they may jointly retire someday soon. Golden West's success is often attributed to the Sandlers' management, and many doubt their successors would do as well.
Some thrift executives also suspect that the Sandlers may be losing their golden touch, and that trouble could be on the horizon for the company.
Speculation about their retirement stems from their interests outside of work. They are active in supporting international human-rights causes and enjoy socializing with intellectuals and writers.
Many people wonder if someday soon they might find these activities more appealing than continuing to run a big company. Indeed, were they to sell Golden West, the proceeds from their 18% stake could total $566 million, based on recent stock prices.
"They're very active people who have lives outside of running the institution," said Brian P. Smith, director of policy and research for a savings-and-loan trade group, America's Community Bankers, based in Washington, D.C..
"There is probably some attraction to handing the reins to someone else," he said.
There is also speculation that they'd like to cash in their stake, said an executive of another thrift.
As for the possibility of trouble ahead, one prominent thrift executive pointed to this fact: In 1994 and 1995, Golden West's return on equity declined from a historical average above 16% to a respectable but less- than-stellar 11%.
So far this year, return on equity has rebounded to just above 13%. But Golden West may be starting to show the consequences of sticking with a traditional business mix, this executive argued.
"We have seen in recent years a declining level of profitability there that may be a product of some of the limitations inherent in a commodity business," the executive said.
Mr. Sandler scoffed at all these points. Sure, he acknowledged, he and his wife have outside interests. For instance, they personally funded the creation of the Human Rights Center at the University of California at Berkeley. The center is run by Eric Stover, a physician who has been prominent lately for his forensic work documenting mass killings in the former Yugoslavia.
The Sandlers also frequently push government officials to write letters on behalf of people persecuted abroad, in the hope that such attention can save lives.
"You're talking about two very responsible, socially conscious individuals," said Rep. George Miller, D-Calif., who has written many human-rights letters over the past 15 years at the Sandlers' request.
Although the Sandlers try to keep their private lives quiet, their friendship with writer Leonard Michaels became public last year when The New Yorker magazine published excerpts from Mr. Michaels' personal journal.
"I've always known he was a good guy," Mr. Michaels wrote about Mr. Sandler. "But if the world knew, Herb would lose all power to terrify. His empire would collapse."
"We are people of great, diverse interests," Mr. Sandler acknowledged. But, he added, at their ages they'd be "less healthy and less energetic" if they left work.
In any case, he said, the company could do very well without them. A succession plan would give control to president Russell W. Kettell and senior executive vice president James T. Judd. "Much of the success of the company is due to the efforts of Jim and Russ and a cadre of people who have been working with them for years," Mr. Sandler said.
As for the decline in Golden West's return on equity, Mr. Sandler said it was due to the sluggish California economy and cyclical declines in loan volumes - and not to more fundamental problems.
"I would have liked to do better," Mr. Sandler said. "But it's been an unusual environment."
Indeed, a turnaround may be in the making at Golden West. The company is benefiting this year from a rise in interest rates, which is making adjustable-rate mortgages more attractive in relation to fixed-rate loans. In the second quarter, Golden West's per-share earnings jumped 45%, to $1.32, beating consensus Wall Street estimates by 4 cents. The earnings growth was driven by a 32% increase in loan originations, to $1.9 billion.
Mr. Sandler added that Golden West has no interest in being acquired, even though Wall Street analysts maintain that someday it, like other big California thrifts, may be bought by an out-of-state bank.
For the foreseeable future, then, it seems that Golden West will stick with what it knows best - running an efficient thrift.
"Planning, thinking long-term, and blocking-and-tackling -that's what we think the financial intermediary business is all about," Mr. Sandler said. "And we do not think it's changed over time,"
