Online consumer-direct lender E-Loan this morning said its profit more than doubled in the second quarter of 2005, thanks to an increase in revenue despite a drop in loan volume.

The Pleasanton, Calif.-based lender is being acquired by Popular, Puerto Rico’s largest bank, in a move seen by its founder as a vote of confidence in the consumer-direct online lending model.

Quarterly profit for E-Loan grew to $409,000, or $0.01 per share, compared to $190,000, or zero cents per share, in the second quarter of 2004.

In the second quarter of 2005, E-Loan sold 18,139 loans, 11.3 percent fewer than the year before, with the total value falling 4 percent to $1.34 billion. The company’s volume of closed loans was down 7.8 percent to 18,520, while overall value inched up to $1.35 billion from $1.34 billion last year.

Last Wednesday, E-Loan said it agreed to be bought by Popular for about $300 million in cash, expanding Popular’s U.S. lending businesses. The transaction will expand Popular’s reach in the U.S. market and complement its existing nonprime and warehouse-lending businesses.

E-Loan shares climbed 33 percent in the wake of the acquisition news. The offer is expected to close in the fourth quarter.

E-Loan will maintain its brand and become a unit of Popular Financial Holdings, operating in Pleasanton, Calif. Mark Lefanowicz, the CEO and president of E-Loan, will serve as president. Additionally, E-Loan will retain most of its employees.

E-Loan originated more than $5 billion in mortgage, home equity and auto loans in 2004.

E-Loan’s revenues are primarily from the gain on sale of first mortgage, home equity and auto loans that the company originates, funds and then sells. E-Loan also earns interest income on mortgage and home equity loans from the time of funding through the time of sale.

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