PrimeSource Mortgage Inc. is no alien to growth.
Expansion in its birthplace, downtown Roswell, N.M., left the firm in a squeeze for space last year — office space, not outer space — and a need to be closer to a major airport.
It came down to Dallas or Oklahoma City, said Jeffrey Smith, president and CEO of PrimeSource, wholly owned subsidiary of publicly traded PSM Holdings Inc. — ticker PSMH.
He said Oklahoma City won out because PrimeSource, founded in 1994, has a long-standing partnership with American Southwest Mortgage, a wholly owned subsidiary of Bristow-based SpiritBank — and because of Dallas traffic. PrimeSource's headquarters are in Founders Tower, 5900 Mosteller Drive, Suite 3.
“Honestly, the traffic in Dallas scared us to death,” he said.
At midyear, the company had more than 170 employees in 24 offices in 15 states, with plans to expand to several others. Ten worked in the corporate office in Oklahoma City, with an eventual 15 planned.
“Overall, we've been so excited and refreshed by the friendliness of the people,” Smith said. “We're excited to be here. We're excited to grow.”
Six employees made the move here from Roswell, which has about one-tenth the population of Oklahoma City — or just 5 percent of the metro area. Smith wasn't the only one surprised to feel so welcome.
“The people in Oklahoma City have been incredibly warm and excited to get to know us. The biggest surprise to me when moving here was the friendliness of everyone when considering the size of the city,” said Crystal Havez, vice president of lending services. “Everyone we meet is excited to hear where we have moved from and is quick to offer any assistance that we might need in getting settled.”
PrimeSource's slogan, “We Walk You Home,” is also its website — www.wewalkyouhome.com — and Smith said it reflects a corporate approach similar to what executives have encountered in Oklahoma City.
“Because the mortgage process is so complex, we have chosen to walk hand-in-hand with each client through the entire process,” he said in an investor presentation. “This assures our customers of world-class service from their first encounter through the closing and even beyond.”
Banking on reform
PrimeSource is a mortgage bank with its own warehouse lines of credit, which is short-term revolving credit drawn on to extend mortgages. It offers conventional, government-backed and jumbo mortgages and refinancing. “Strong warehouse capacity,” Smith said, is backing the company's expansion plans.
Growth lately has come by way of acquisitions fueled by banking reform since the Great Recession. Increased net worth requirements for mortgage originators — from $250,000 to $2.5 million — mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act is forcing out “mom-and-pop” lenders, Smith said.
PSM Holdings is acquiring mature mortgage operations, he said, and with nearly 3,000 non-depository lenders with average net worth of $1.6 million, the field remains ripe for more acquisitions.
PrimeSource now closes between $60 million and $70 million in loans per month, plans to double that over the next year and is positioned to triple it, Smith said.
Earlier this year, PSM issued preferred stock in two rounds to venture capital investors to raise $5.7 million for expansion. Boca Raton, Fla.-based LB Merchant invested $3.7 million in 3,700 units of Series A Convertible Preferred Stock and a single institutional investor invested $2 million in 2,000 units of Series B Convertible Preferred Stock.
The two newest banking locations opened in June in Moab, Utah, and Montrose, Colo. Earlier this month, California approved PrimeSource as a residential mortgage licensee. Smith said expansion on the West Coast will bring “significant contributions.”
PSM also is banking on growth from its affiliation with Costco Mortgage Services. PSM acquired Tulsa-based United Community Mortgage Corp. — since absorbed into PrimeSource — in early 2011, just before it was approved as a preferred mortgage lender offering services to Costco's approximately 23 million members.
In May, PSM reported a $1.4 million net loss for its third quarter, which ended March 31, after also posting a net loss of $1.4 million for the same period a year ago. Revenue grew by $900,000 to $4.5 million for the quarter, a 28 percent increase over the year before.
“Traditionally, the third quarter is the slowest quarter of the year. Still, we were able to show solid growth in revenue and closed loans,” Smith said.