PSMH: New Loan Production Office Could Add $30 Million in Annual Loan Volume

By Ann Heffron, CFA

PSM Holdings, Inc. (OTC BB:PSMH) announced that it had achieved $55 million in loan production for the month of July, the first month in its 2013 fiscal year, ending June 30, 2013. While this is down about 3.5% from June’s record $57 million, it nevertheless represents 11% improvement from May’s $49.7 million.

The average loan size was $179.8 million, an increase of 8% from June’s $166.7 million and of 4% from May’s $172.6 million. PSMH closed on 306 loans in July versus 342 loans in June and 288 mortgage loans in May.

For the 2012 fiscal year ending June 30, 2012, loan production was about $422 million, a gain of 194% from fiscal 2011’s $143.7 million, largely reflecting the acquisition of five companies within the last 15 months.

More acquisitions are planned throughout 2013. In addition, the Company plans to add origination volume by folding in high-production loan offices onto PSMI’s existing mortgage lending platform or opening new branch offices with experienced mortgage lenders. In fact, PSMH just announced the opening of a new office in Steamboat Springs, Colorado, which will come under the direction of its Regional Lending Center in Grand Junction, Colorado. The Steamboat Springs office will be staffed by Kathryn Pedersen, a top producer in Colorado, generating over $30 million in annual loan production.

We note this fold-in strategy is particularly attractive as PSMH acquires the skills of highly productive loan officers who can immediately add to the Company’s book of business, with minimal up-front costs. We expect PSMH to use this strategy more frequently in the months ahead.

We are making no changes to our earnings estimates at this time. PSMH should report fiscal fourth quarter earnings for the period ending June 30, 2012 in mid-September, as it typically does.

PSM Holdings, Inc. is engaged in the businesses of mortgage banking, in which PSMH both originates and funds mortgage loans through its own warehouse lines of credit and currently accounts for about 90% of closed loans, as well as mortgage brokerage, in which PSMH originates mortgage loans funded by over 50 third-party lenders. PSMH immediately sells these loans to its third-party lenders or into the secondary mortgage market. The Company offers a full range of mortgage loan products, including adjustable rate mortgages, fifteen, twenty, and thirty-year fixed rate loans, and balloon loans with a variety of maturities, as well as refinancing, construction loans, second mortgages, debt consolidation, and home equity loans.

PSMH had total assets of $5.1 million at the 2011 fiscal yearend on June 30, 2011, total revenues of $3.9 million for the 2011 fiscal year, and closed 845 mortgage loans, worth $144 million, during this period. Operations are carried out by the Company’s wholly owned subsidiary, PrimeSource Mortgage, Inc. (PSMI). Through this subsidiary, PSMH operates and is licensed in the following 13 states: Arkansas, Colorado, Florida, Iowa, Montana, Missouri, Nebraska, New Jersey, New Mexico, New York, Oklahoma, Texas, and Utah.

To view a free copy of our most recent research report on PSMH, visit Ann Heffron's page at Zacks Small Cap Research .