Rock Financial Corp. shares fell sharply Wednesday after the Internet- oriented mortgage lender said its earnings for the rest of the year would be lower than analysts had expected.

The Bingham Farms, Mich., company's stock price plummeted as much as 26.7%, before ending at $TK, down TK%.

Rock said its second-quarter earnings would be "substantially below" its first-quarter result of 18 cents per share and that earnings for the year would fall short of analysts' $1.11 per share target.

The company attributed its expectations of a shortfall largely to investments it is making to position itself as an on-line lender.

These investments include a new "Web/call center" and corporate headquarters, which the company expects to occupy in October, as well as a "multimillion-dollar" national advertising campaign planned for the second half of the year, the company said.

Analysts said that volatility in its stock is the price Rock Financial must pay for its focus on the Internet.

"The near-term disruption is certainly unfavorable to some degree," said Sean C. Davis, an analyst at Ferris Baker Watts in Richmond, Va.

However, Mr. Davis said, Rock's strategy of moving away from brick-and- mortar branches toward Internet originations makes sense. "If ever there were a business where the Internet is most applicable, it's in the arena of mortgage lending."

"We try not to focus on our stock price," said Daniel Gilbert, chairman and chief executive officer of Rock Financial, "and instead focus on our strategy. Our strategy happens to be in a volatile kind of sector."

But Rock's share price certainly benefited from the Internet euphoria that boosted other financial services stocks last month. After trading in the high teens in March, Rock shares reached a closing high of $35 on April 13.

On April 8, it released for the first time separate production numbers for RockLoans.com, its Internet origination channel, which closed $29 million of mortgages in the first quarter-most of that in March.

Michael M. Moran, an analyst at Roney Capital Markets in Detroit, said the press release's timing "seemed to be feeding into the frenzy occurring on the Street with regard to Net companies going public."

Mr. Gilbert took issue with that suggestion. He said Rock began publishing its Internet channel's results separately because numerous investors had requested them. The company will continue to publish its Internet production numbers every quarter, he said.

Moving into the new facility will cost about $5.5 million, $2 million of which will be written off by yearend, Mr. Gilbert said.

The new headquarters will increase operating expenses by $125,000 to $150,000 per month, the company said.

It also pointed to thinning margins in conventional loans and a decline in production from its brick-and-mortar branches as factors that will depress earnings this quarter.

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