Countrywide Financial Corp (CFC), the largest U.S. mortgage lender, said Thursday its second-quarter earnings may not meet investor expectations as it spreads out some gains from making new loans over several quarters instead of realizing them in a single quarter.

The company affirmed its previous forecast for full-year earnings of $3.60 to $4.60 a share, which helped lift Countrywide's shares on the New York Stock Exchange (search).

Wall Street analysts had expected the company to earn $1.05 a share in the second quarter and $4.22 for the year, according to Reuters Estimates.

Countrywide said its fast-growing bank arm had held onto billions of dollars of loans, instead of selling them.

The mortgage lender has traditionally made loans, and then quickly sold them to investors and realized the gain.

But with low rates having spurred several years of record lending in the mortgage industry, Countrywide is now holding on to more loans through its Countrywide Bank arm, said John Kichula, financial services analyst at Glenmede Trust Co. in Philadelphia.

That is likely what cut into second-quarter earnings, Kichula said. By holding onto more mortgages, the company can generate profits from the assets over time rather than all at once, he added. Glenmede owned Countrywide shares as of its most recent filing.

"Assuming they do a good job with managing interest-rate and credit risk, it could make sense for them," Kichula said.

Countrywide Bank's assets reached $66 billion on June 30, up 141 percent from June 2004.

In 2001, when Countrywide acquired the entity that became Countrywide bank, it had $75 million of assets, according to a company filing.

Countrywide's bank held on to an extra $7.2 billion of loans during the second quarter, which combined with another of $1.8 billion of home equity loans in the company inventory could have been sold to recognize a $150 million pretax gain, Countrywide said.

Calabasas, California-based Countrywide said demand for loans was strong in the second quarter as mortgage rates fell. Second-quarter mortgage loan volume totaled $120 billion, 21 percent greater than the second quarter of 2004.

Countrywide shares fell 6 cents, or 0.16 percent, to close at $38.53 on the New York Stock Exchange. The company's shares have risen 4.1 percent this year, while the Standard & Poor's Thrifts and Mortgage Finance index (search) has fallen 6.2 percent.