Just four months ago, the jumbo lender Thornburg Mortgage Inc. was caught in a credit squeeze, and its president, Larry Goldstone, had to go on television to reassure investors that it did not intend to file for bankruptcy protection.
On Tuesday the Santa Fe, N.M., real estate investment trust provided the strongest evidence yet that it is well on the road to recovery.
Thornburg's board reinstated its dividend — albeit at about one-third the payout it had made to shareholders in the second quarter — and Mr. Goldstone said the company would return to profitability this quarter.
The company also said Tuesday that it had promoted him to chief executive, taking over duties from Garrett Thornburg, who remains chairman.
"We anticipate being profitable again in the fourth quarter," Mr. Goldstone said on CNBC Tuesday morning, declining to make a specific forecast.
"All of our loans are performing as expected, our delinquency rate is well below industry averages, and our credit losses are minuscule," he said.
However, in the press release announcing the dividend reinstatement, Mr. Goldstone said Thornburg "remains cautious in its near-term outlook for financing high-quality mortgage assets."
Bose George, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said restoring the dividend was more an indication of Thornburg's outlook for 2008 than of its fourth-quarter performance. "This is what their investor base wanted to see, so they're positioning themselves better for 2008," he said.
"It is not surprising" that Thornburg would be back in the black this quarter after weathering a credit crunch and being forced to sell assets at steep discounts, Mr. George said.
Thornburg raised $500 million in a convertible preferred offering on Aug. 30 to improve its liquidity.
"The main problem of liquidity is now under control," Mr. George said. "This time around, they've protected themselves better, and while their profitability remains challenging, it's reasonable to assume they'll make money this quarter. Basically they're saying, 'We're back in business.' "
However, though Thornburg completed a securitization of jumbo loans in October, many potential borrowers are unable to qualify for jumbo loans because the secondary market remains "in a holding pattern," Mr. George said.
In afternoon trading, Thornburg's shares were up about 4%, to $10.02, on a relatively lackluster day for the overall stock market.
Jason Arnold, an analyst at Royal Bank of Canada's RBC Capital Markets, said reinstating the dividend removed a level of uncertainty for investors.
"Some investors were thinking there may not be a dividend again," he said, "so having a resumption of the dividend was favorable."
Thornburg's board announced that the company will pay a 25-cent-per-share dividend to common stockholders on Jan. 30. (The Series C, D, and E preferred shareholders will be paid a fourth-quarter dividend of 46 cents to 50 cents a share.)
The company had suspended its dividend in October after reporting a third-quarter loss of $1.099 billion, which was higher than its previous estimate of $863 million. Thornburg paid a dividend of 68 cents in the second quarter.
The third-quarter loss worked out to $8.83 a share and compared with net income of $75.3 million, or 64 cents a share, a year earlier.
The loss turned out to be bigger than the company had initially forecast because it had underestimated the hit it would take on the sale of $22 billion of mortgage assets.
