Washington Mutual Inc. is deploying a capital management strategy using its gargantuan portfolio of adjustable-rate mortgages, but the plan has created confusion among investors and sent analysts scrambling to figure how it will affect earnings.

The Seattle thrift company, the nation's largest, unveiled this new direction in a second-quarter earnings release Wednesday. Like other banks and thrifts, it reported net interest income that was squeezed by the effects of higher interest rates.

Some of this decline was offset by a special, double dividend of $28 million paid by the Federal Home Loan Bank of San Francisco. That gain boosted its second-quarter per-share earnings by about three cents, to 92 cents, analysts estimate.

But the company's earnings included another spin: During the quarter Wamu said it had sold $8.45 billion of loans, most of which were "seasoned," or older, adjustable-rate mortgages. This loan sale added $80.7 million to earnings. Taking out the special dividend, gains on the loan sale helped drive up earnings to 89 cents per share, still well over the 83-cent-per-share consensus.

How much of the gain from the loan sale should be considered part of core earnings - and thus expected to contribute to the company's results in subsequent quarters?

Though investors typically view sales of new mortgage originations to be part of a thrift's regular business, they regard sales of seasoned loans as one-time events. Many of them slashed Wamu's earnings per share for the quarter until the effects of the loan sale had been removed.

"Having investors better understand strategy makes a big difference," said Chad Yonker, senior vice president and analyst at Fox-Pitt, Kelton Inc. Those he spoke to early Wednesday were unclear at first over how to view the company's results.

Further clouding estimates is the implication by Wamu that investors could see similarly large sales of older adjustable loans in the future. Wall Street is not used to seeing these sales as a regular addition to earnings.

Kerry Killinger, Wamu's chief executive officer, would not be more specific about the thrift's plans to sell seasoned loans. "It would depend on marketplace, and the opportunities for share repurchases," he told analysts on a conference call Wednesday. "I realize we're not giving you a real crisp, absolute number."

Wamu chief financial officer Bill Longbrake added, "We will continue to look for balance sheet opportunities in order to maximize capital. You should expect some balance sheet restructuring in the third quarter."

In an interview later Mr. Longbrake denied that the company chose to make such sales at a time when net interest income was falling simply to boost earnings. Instead, the company is using the freed up capital to buy back stock while its price is particularly low, he said.

In selling seasoned adjustable loans to free up capital and implying that it will do this again, Wamu is playing a rather unique role. Its total portfolio of $17.95 billion is vastly larger than that of the next largest thrift, Golden State Bancorp of Oakland, Calif. Wamu is the largest lender of adjustable-rate mortgages, with a $10.22 billion portfolio at the end of June.

"The company has taken the decision that it makes better economic sense to sell-off seasoned loans," than newer ones, Mr. Yonker said. "This is new. It's one of first companies to develop a market to sell and securitize adjustable-rate mortgages."

In the first hour of trading on Wednesday, Wamu stock fell 25 cents, to $30.0625. But by the end of the day it had closed up 6.25 cents, at $30.9375. Most analysts interviewed for this article said they had taken out some, but not all of the gains from the sale, with core earnings estimates ranging from $0.82 to $0.84.

"I always assumed the company would report $30 to $40 million loan sale gains - it has so much production it can't hold them all," said James Bradshaw, an analyst for D.A. Davidson & Co. of Portland. Loan sales, though not typically of this size, are a normal part of business for thrifts, he said.

In addition, Wamu has said it plans to sell a pool of fixed-rate, specialty-finance loans from its Long Beach Mortgage unit next quarter. That gain is expected to amount to about $50 million.

Not everyone agrees with the strategy of selling off loans to free up capital for stock buybacks.

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