Like a boxer coming back from a standing eight-count to win a bout, stocks of many specialty finance companies have shaken off a bruising they received last fall and are approaching all-time highs.

Strong fourth-quarter earnings reports and solid credit quality have quelled investor worries about consumer delinquencies and created new funding opportunities for the lenders themselves.

"These stocks were beaten mercilessly in the fourth quarter," said John Heffern, a specialty finance analyst with Natwest Securities Corp, "so we were due for some kind of correction in the sector."

The rebound for specialty lenders comes nearly three months after the sector experienced a selloff that eroded as much as 25% of some companies' market value.

At the time, investors were warned that the economy was poised for a recession, and data on consumer debt loads hinted that any economic downturn could have a pronounced effect on overleveraged consumers.

So when Money Store Inc., based in Union, N.J., reported an unexpected rise in third-quarter delinquencies, many investors panicked and dumped shares of the company and other specialty lenders.

"One of the catalysts for the selloff was the Money Store's announcement that delinquencies were rising," said Michael Diana, an analyst following housing and auto-related lenders at Bear, Stearns & Co.

But the delinquency increase was "a false signal," he said. The lender did warn that the delinquency numbers reflected a changeover in computer systems more than a rapid deterioration in credit quality.

Indeed, fourth-quarter results seem to confirm that the increase was an anomaly. On Feb. 14, the company reported the percentage of home equity loans 30 days or more past due declined 61 basis points between the third and fourth quarters, to 4.86% of home equity loans serviced.

The performance was matched by other lenders as well.

"When the December quarter results came in, delinquencies were higher, but the increase was less than anticipated," Mr. Diana said. "Things weren't as bad as people expected them to be."

On the other hand, earnings were higher than investor expectations. Money Store reported an impressive 70% earnings increase for the fourth quarter, and a 56% jump for the year.

"The December earnings reports reminded people just how much earnings momentum these companies have," the Bear Stearns analyst added.

The rebound also has benefited the new issues market. In recent months, a number of specialty lenders have taken advantage of the renewed interest to raise new equity capital.

In January, ContiFinancial Corp., a subsidiary of commodity giant Continental Grain Co., raised nearly $130 million in an initial public offering of common stock. Aames Financial Corp., a Los Angeles-based mortgage lender, raised $115 million in a February convertible, subordinated debt offering.

Money Store also said it was planning to sell six million shares in early March, including five million new shares. Existing shareholders will be bringing one million shares to the market in March. Likewise, Jayhawk Acceptance Corp., a Dallas-based indirect subprime auto lender, announced Thursday it was planning a 2.5 million share secondary offering.

"I suspect as long as the valuations remain strong compared with the fourth quarter, the growing companies will seek more capital," said Mr. Heffern.

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