NovaStar Financial Inc. said its decision to end its status as a real estate investment trust gave rise to an $84.2 million deferred tax benefit and net income of $44.4 million in the first quarter, almost double its profit of a year earlier.
"This benefit relates to tax-deductible temporary differences at the REIT that will reverse in 2008 and future years" when NovaStar "will be a taxable entity," Greg Metz, the Kansas City, Mo., company's chief financial officer, said in a press release Thursday.
NovaStar reconsidered its REIT status under the expectation that it would generate little or no taxable income from 2007 to 2011, Mr. Metz said. The change will go into effect at the beginning of next year.
Earnings of $1.18 per share were 49 cents higher than a year earlier. The average analyst estimate called for NovaStar to post a net loss of 46 cents a share.
Nonconforming loan originations dropped 21% from a year earlier, to $1.4 billion.
