As banks and lenders trip over one another in their rush to exit the volatile home loan market, two contrarians are sticking with the business.

Pennrock Financial Services Corp., Blue Ball, Pa., has formed a new mortgage subsidiary, Atlantic Regional Mortgage Corp.

And Imperial Credit Industries, Torrance, Calif., is converting its subprime mortgage operation into a freestanding company, Southern Pacific Funding Corp., and raising funds for the spinoff through an initial public offering.

While banks once saw mortgage lending as a way to expand their customer base, industry cycles and downturns have been hard on mortgage companies and their corporate parents.

First Bank System, Minneapolis, last week sold its mortgage unit to three buyers. Prudential Home Mortgage Corp., St. Louis, was sold to Norwest Mortgage Co., Des Moines, earlier this year after the parent company decided to concentrate on its core insurance business. And larger lenders continue to buy small and midsize lenders.

Imperial Credit followed this trend last November in announcing its departure from conventional mortgage banking. The company said it would stop originating conventional loans and sold its branches. A buyer, who has not been identified, has signed a letter of intent to buy about $3 billion in servicing.

But the spinoff of Southern Pacific Funding shows Imperial's willingness to keep a toe in the mortgage waters via the nonconforming lending unit.

Southern Pacific Funding was established in 1994 to originate and acquire nonconforming single-family residential loans.

In addition to an initial public offering of Southern Pacific shares, the parent company is also selling shares of its own to fund special financing operations, the company said. Southern Pacific's offering is expected to close by the end of April. Imperial Credit will retain some ownership of the company, but has not yet determined how much.

Keith Stackhouse, chief executive of Atlantic Regional at its temporary offices near Baltimore, said he saw an opportunity for an upstart regional lender.

"There is money to be made if you operate as a regional lender, and not as a national company looking for the numbers," Mr. Stackhouse said.

Because banks and other mortgage lenders have left the region, Mr. Stackhouse said there are talented employees with important business relationships there looking for work.

"This isn't a complicated business. It's all execution, and we've proved we can execute well," said Mr. Stackhouse, who worked in the mortgage unit of the Bank of Baltimore. He then went to First Fidelity when it acquired his employer, and left when First Union Corp. bought First Fidelity last year.

Atlantic will have a no-frills approach to the business, he said. It will not spend money on fancy offices, but will invest in computer systems, he added.

The company will make loans in Maryland, Virginia, Delaware, Pennsylvania, and Washington. Mr. Stackhouse said he expects the company to fund $250 million in loans this year. In the next three years, Mr. Stackhouse said he expects the company to lend more than $500 million a year, through retail channels and telemarketing.

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