Xceed Mortgage Corp. today said that its financial results and operations continue to be affected by capital markets turmoil, as it released its financial results for its first quarter ended January 31.

First-quarter 2008 net income tumbled to $1.5 million, compared with $6.8 million a year earlier, a 77.6% decrease.

Basic and diluted earnings per share were 5¢ in the 2008 quarter, compared with 25¢ and 23¢, respectively, a year earlier.

Revenues totaled $5.7 million in the 2008 first quarter, down from $17.5 million in the 2007 period.

The Toronto-based company said its 2008 Q1 results were materially affected by its decision to reduce business volumes and its shift from originating non-conforming mortgages towards lower-margin insured business.

Xceed’s origination business and the sale of originated mortgages to third parties have historically generated the vast majority of the company’s revenue.

The company sold mortgages to securitization vehicles in the 2008 first quarter valued at $131.1 million, compared with $297.3 million in the 2007 period. The gain on sale of mortgages decreased to $3.1 million in the 2008 first quarter, compared with $13 million a year earlier.

Mortgage fundings in the 2008 first quarter were $65.7 million, which compares with $340 million in the 2007 period.

Given reduced originations and securitization sales, mortgages and other assets under administration declined 6.0% to $2.52 billion as at January 31, from $2.68 billion at Oct/ 31, 2007, but were higher than at the end of the 2007 first quarter when they amounted to $2.48 billion.

Return on average shareholders’ equity for the 2008 first quarter was 6.4%, compared with 24.5% a year earlier.

“The capital markets turmoil that began last summer has proven more severe and protracted than most anticipated. Our financial results and operations have been, and continue to be, materially and adversely affected by ongoing market disruption,” said Ivan Wahl, chairman and CEO, in a release.

“Our management has decided to accept only business that meets the underwriting guidelines of mortgage insurers,” Wahl added.