Golden West Sags Despite Earnings Gain

Loan volume grows in a low interest rate environment.
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Golden West Financial

(GDW)

reported a jump in second-quarter earnings Monday on strong loan originations.

The Oakland, Calif.-based bank earned $272.5 million, or $1.76 a share, from $226.4 million, or $1.44 a share, in the previous-year quarter. Analysts were looking for $1.69 a share.

The shares nevertheless fell 70 cents, or 0.8%, to $83.10.

Interest on loans being paid back, or net interest income, was $542 million, up from $465 million last year. The company cited the expansion of its loan portfolio, up 16% year over year. Noninterest income was $177.2 million, compared with $143 million last year. The company said sales increased because it sold more fixed-rate loans.

"Obviously, having more mortgages, or earning assets, on our books adds to income," said Marion O. Sandler, chief executive. Total assets were $72.2 billion, from $70 billion last year.

Loan originations were $8 billion, up 17% from the year-ago quarter's $6.9 million. And the company said deposit balances were $882 million, a 22% increase from the $722 million produced last year.

"The lowest interest rates in 45 years continued to create strong demand for home loans, especially to refinance current mortgages," said Sandler.