E-LOAN has announced the impossible in today's market- a comeback from penny-stock status to profitability. And it did so from a plan centered in diversity, partnerships with broker, agent and relocation partners, and competitive pricing.

Battling back from a 52-week low of $.38., the stock has soared over 25 percent on the news that it has reached pro forma profitability. To sweeten matters even more, E-loan will be one of the few publicly held companies to upgrade guidance for the fourth quarter. E-loan says it is on target for both GAAP and pro forma profitability in 2002.

Third-quarter losses were about $9 million, compared with a net loss of $23 million a year earlier. Pro forma income was $312,000, or 1 cent per share, compared with a pro forma loss of $8.5 million, or 16 cents per share a year ago.

Revenues, primarily from purchase mortgages, nearly doubled in the quarter to $16.9 million, from $9 million a year earlier.

E-loan upped its guidance for the fourth quarter, saying it would increase its revenues to $18 million, from $16.5 million. And, it raised earnings guidance from pro forma break even to a pro forma profit of $1 million, with continued growth in 2002 of $8 to $11 million in profits.

What does E-Loan's turnaround mean for brokers and agents? That the skepticism about online lenders is dissipating. E-Loan reports that business that has come directly from Realtors was up to 22 percent in the third quarter from 15 percent in Q2.

"We've been around for four years now," says Chris Larson, E-Loan's Chairman and CEO, "and the fact that we are profitable should dispel anyone's fears about online loans. The strong growth of our purchase mortgage business -- up 65 percent from last quarter -- is particularly exciting and further evidence that consumers and real estate professionals are willing to trust our brand."

E-Loan does mortgage, auto, and home equity loans that are funded and sold on the secondary market, as well as loans that are brokered or referred out to third-party sources, says the company. One area where E-Loan has made its mark with investors is its diversity.

"When refinance is good, then the home equity and car loans tend to be softer," says Larson. "When interest rates are this low, people tend to refinance the primary mortgage."

That gives the company a built-in hedge - if interest rates start to climb back up, then customers are more likely to spend in other areas - home equity loans and autos.

E-Loan has also done well by strengthening its relationships with the real estate industry. The company has begun a sales campaign targeted toward the relocation departments of Fortune 500 companies.

"The E-Loan model is well suited to relocation business," explains Larson. "We are a low-cost producer, and that is what the HR people want. They are concerned about costs, service and they want a national company. The benefits is that these relationships are stable, they provide good transaction numbers at low acquisition costs, and we are excited about that."

Larson points out that E-Loan also has a number of programs for Realtors, and pays Realtors for loan origination participation according to RESPA rules and regulations. The company also provides tracking tool called E-Track, so that agents can track the progress of their customers' loans, among prequalification calculators, news, and other tools.

"We are going after the Realtor business and help them get the business by insuring that we are low cost producer, and service driven," says Larson. "We have beefed up our preapproval process, with automated reminders and we have significantly improved the conversion of customers coming through preapproval."

Published: October 10, 2001

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