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Golden West Financial (GDW) reported first-quarter earnings of $1.25 a share, one penny below expectations.

Golden West Financial Corp., the nation's second-largest savings and loan, reported Thursday that strong performance from its adjustable-rate mortgage lending products helped push up first-quarter profit by 12 percent.

The parent company of World Savings Bank reported profit for the period of January through March rose to $390.9 million, or $1.25 per share, from $348.3 million, or $1.12 per share, a year earlier. Results missed Wall Street projections for earnings of $1.26 per share, according to Thomson Financial.

"As always, the key driver behind the growth of the company's profits was the ability to expand our mortgage portfolio, which is our primary earning asset," Chairman and Chief Executive Herbert Sandler said in a statement.

Golden West's loans receivable increased by $14.8 billion, or 14 percent, from the year-ago period. Adjustable-rate mortgages, or ARMs, are popular when interest rates become unpredictable and fixed-rate loans become difficult to obtain.

Sandler said low long-term interest rates have made fixed-rate loans more attractive to borrowers, while the cost of adjustable-rate mortgages continues to climb. He said the company's loan volume during the quarter edged up to $11.6 billion from $11.2 billion.

Banks with large lending operations have seen margins squeezed after 15 straight Federal Reserve interest rate hikes, which have also curbed demand for refinancing and home loans. Banks make money from the spread between deposits and what they charge for loans.

Golden West also reported deposit growth of $1.4 billion, down from a first-quarter record of $2.6 billion set in 2005. Renewed interest in the stock market along with aggressive pricing by our competitors slowed deposit inflows from last year's all-time high level, the company said.

Posted by edelfenbein at April 20, 2006 9:49 AM