North American Mortgage Co. appears to be rebounding from a downturn in loan production last year, but its stock price is taking a beating amid investors' worries about rising interest rates.

This week, the Santa Rosa, Calif.-based lender reported that a hefty increase in loan production boosted its first-quarter earnings to $7.5 million, up 32% from a year earlier. Yet its stock hit a 52-week low of $16.625 last Thursday.

"The mortgage market is a cyclical animal, and investors are looking at where the business is going rather than where the business is coming from," said Gareth Plank, a stock analyst at UBS Securities.

The worry is that interest rates on 30-year fixed-rate loans - which had climbed to an average of 7.74% for the week ending June 19, according to HSH Associates, Butler, N.J. - will continue their ascent, putting a damper on lending.

So far, however, North American hasn't been handicapped by the recent run-up in rates. The company's loan originations in the first quarter totaled $2.5 billion, up 118% from the comparable period a year earlier.

President and chief operating officer Terrance G. Hodel said in a quarterly conference call with stock analysts that loan production was helped by an improvement in the California housing market, where North American has a large presence.

Investors are concerned that profit margins and production might be down the rest of the year, Mr. Plank said.

North American also suffered a $2.4 million hedging loss, due to rising interest rates and a volatile bond market. …