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Silverado Financial Inc. (SLVO) |
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CEOCFO
Interview Index |
This is a printer friendly page! Silverado
Financial provides a full service mortgage broker through Silverado Mortgage and offers
on-line loans direct to consumers through LendingTech.com Bio of CEO: Prior to being appointed President and Chief
Executive Officer of Silverado Financial, Inc., Mr. Hartman was Chief Executive Officer of
NEXT Advisors, Incorporated. While CEO of NEXT Advisors he was responsible for raising
over $4.5M in funding for the development of its proprietary technology and the creation
of a residential and commercial lending division and a futures brokerage. Mr. Hartman also
completed three acquisitions on behalf of Next Advisors including an on-line securities
brokerage, ATradeUSA.com, an insurance brokerage and a traditional securities brokerage.
Before joining Next Advisors, he was Managing Partner of Hartman and Kauffman, LLC, which
was acquired by Next Advisors. As the Managing Partner of H&K, he
increased the gross sales of the San Jose office 400% and grew the sales force from 2 to
30. From 1995 to January 1999, Mr. Hartman was a Financial Advisor with Morgan
Stanley where he managed over $75M in assets for individuals and institutions. Prior
to beginning his career at Morgan Stanley, he was a Partner at Realty Capital Partners
where he syndicated equity and angel funding in excess of $15 million while managing the
complete development of several multimillion-dollar commercial and residential real estate
developments in coastal California. Prior to Realty Capital Partners, he held the
positions of research analyst and Investment Property Specialist with Grubb & Ellis
and Company, a commercial real estate firm headquartered in San Francisco, California.
He received his Masters in Business Administration (MBA) from California Coast
University in Santa Ana, California and Bachelor of Science Degree in Business
Administration from San Jose State University in San Jose, California. CEOCFOinterviews: Mr. Hartman, what your vision was when you joined Silverado and how has it developed? Mr. Hartman: “I was elected to the position of CEO by the Board of Directors in August of 2002. I was previously running a financial services company and related securities, mortgage and insurance brokerage operations. Silverado was looking to take a different direction and I was hired to make that happen. It has been slower going than we anticipated because we had to go back and review many of the previous companies and divest some of those assets, restructure the stock and build the business from the ground up. It has taken us about a year to get the company into a position where we felt we had a platform from which to build. We are now generating revenues that are growing exponentially quarter by quarter. We are finally seeing some of the growth from the time invested in developing the company’s infrastructure.” CEOCFOinterviews: Will you give us an overview of the company? Mr. Hartman: “Silverado is a licensed mortgage broker through the Department of Real Estate and through the California Department of Corporations. We have approximately forty employees and two offices and we are opening a third in the next thirty days. We have recently acquired an online platform that does about a million dollars a year in revenue, called LendingTech.com and we are integrating that with our lead generation platform that we have developed here. We are in the process of obtaining our first warehouse line to become a direct lender. The results of all this is that we intend to build a company that can take advantage of some of the changes that are taking place and we believe will force the consolidation of the mortgage industry. Some of the smaller brokerage houses that are out there now, the people that are not direct lenders, are going to be forced out of the business or forced to consolidate under a larger firm and take advantage of the economy and reporting capabilities. That is where we are developing ourselves as a public company.” CEOCFOinterviews: Why are you focusing on the sub-prime market? Mr. Hartman: “The sub-prime market is less interest rate sensitive. It is people with less than perfect credit. The businesses are making their money on straight A paper refinance low interest rates and no point loans and I think that business is going to fall off about 40% in a few years. The fees with the sub-prime markets are higher because of the risk involved and it is much less interest rate sensitive. It is people that have been living from their homes’ equity for the last two years as the economy has been poor. Our business seems to be increasing even as interest rates have come up.” CEOCFOinterviews: If the rates are higher and the risk is greater, how do you match that successfully? Mr. Hartman: “For us at this point, all of our loans are straight broker and they are sold off to investors, therefore we have no risk on repayment of those loans. As a direct lender, we have some risk but it will only be the first payment risk and through the sure step program on which we are working. We will not have any risk repurchase on those loans, which is the biggest risk for a direct lender in this business.” CEOCFOinterviews: Will you tell us about the competition? Mr. Hartman: “It is a distinct niche. There is Fremont Bank, Long Beach Mortgage, and (inaudible), which is Option One. Many of these people are not only competitors, but they direct to whom we sell our loans. Some of the A paper players are trying to get into the market. There have been many people who have tried and have not been successful. I think you have to stick to your “knitting” and do what you do best. This is the area where we seem to shine.” CEOCFOinterviews: Will you tell us about LendingTech.com? Mr. Hartman: “LendingTech.com was one of our first acquisitions. We acquired it because it was able to be relocated and because it had a strong online following. We gain the bulk of our leads through a telemarketing division that we have created and now we are getting a number of leads through our online platform at Lendingtech. Any leads that come in are immediately turned into applications through the Lendingtech platform and are pushed into the telemarketing system so we are “skinning the cat” from both ends. The margins from Lendingtech are higher because they are all electronically applied for and other than a processor there is no broker involved. We are looking to spend some money over the next quarter to expand the traffic that is coming in through the Lendingtech platform and use it as a distribution source for our warehouse line as well. We believe that the key to the longevity of the business is clientele and that is where we are investing our money. In doing so, we find that the brokers are coming from other firms because we have the leads.” CEOCFOinterviews: What are you looking for by way of acquisitions? Mr. Hartman: “When we look at acquisitions, we are looking for clientele and distribution. We have been looking for a number of diversified type businesses; single family residential and property management firms because we can obtain 400-1000 clients on a contract basis. It smoothes out on commissionable revenue even though it is a lower margin business and it gives us long term access to clients for refinance business. We are looking for straight distribution for our lending products and we are looking primarily for acquisitions in other states that would allow us to get a toe hold and expand from there.” CEOCFOinterviews: Do you need to be licensed in other states? Mr. Hartman: “We are required to be licensed in other states and we are in the process of applying for those licenses. But if we can make an acquisition where we have ten people that are profitable, that is an easier thing for us to do and then to use that to expand and distribute our products.” CEOCFOinterviews: How do you find the right acquisitions? Mr. Hartman: “I have a partner here, Sean Radetich that comes from the M&A side of the business and his job is to research and look at acquisitions on behalf of the company. He narrows them down and brings the ones that are worth pursuing to me and then we take a run at those companies. Right now, our biggest stumbling block has been that revenues for these companies have been off as much as 50% or 60%. We are waiting for a fall out in the industry to take place before I can see a significant acquisition strategy go forward.” CEOCFOinterviews: Do you plan to open more offices? Mr. Hartman: “Campbell is our hub office and we will double the size of the Campbell office in November of this year. We are opening some smaller offices that are spokes off of these hubs. For example the one we are opening in Rockridge is a five person office and all of the purchasing and technology will be run off of these hub offices. These are offices of opportunity where groups have come from other brokerage firms and real estate firms and want to work for us. We go in and help them set up a small office and consolidate their costs and overhead and allow them to do what they do best, which is selling.” CEOCFOinterviews: Will you tell us about the financial condition of the company? Mr. Hartman: “Last year was our first year of operation and we spent about half of that doing the restructure of the business. We came out of the box this year earning about $100,000. We have doubled that for Q-2 and it looks as though we will double that for Q-3. We should do about a million plus for 2004 and we look to double that in 2005.” CEOCFOinterviews: What challenges do you see going forward and how are you prepared? Mr. Hartman: “The challenges are in the industry such as the legal challenges and the interest rate raises and that type of thing. There are many inexperienced brokers in this industry looking for homes, and our problem is to weed those out and make sure that we get good talent for the company. Managing the growth is a full time job. Our plan is to expand in the western region and get our licensing.” CEOCFOinterviews: In closing, why should potential investors be interested? Mr. Hartman: “I think that this is as low as the stock is going to be. There has been no recognition of all the work that we have done over the last year and a half in the marketplace at this time except by the few people that have been watching it. I think with the exponential revenue growth that we are currently experiencing, and the growth that we are going to have over the next three to five years, that the stock is significantly undervalued. We are buying it just because we think it is cheap, so I think there is a tremendous opportunity in the shares right now.” disclaimers |
“For us at this point, all of our loans are straight broker and they are sold off to investors, therefore we have no risk on repayment of those loans. As a direct lender, we have some risk but it will only be the first payment risk and through the sure step program on which we are working. We will not have any risk repurchase on those loans, which is the biggest risk for a direct lender in this business.” - John Hartman |
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