Omni Financial Services: The Wall Street Analyst Forum Presentation Transcript

Aug.20.07 | About: Omni Financial (OFSI)
TRANSCRIPT SPONSOR
Click to enlarge

Omni Financial Services, Inc (OTCPK:OFSI)

The Wall Street Analyst Forum

August 16, 2007 9:50 am ET

Executives

Stephen Klein - Chairman and CEO

Gerry Scott - President, Wall Street Analyst Forum

Presentation

Gerry Scott

Good morning, ladies and gentlemen. This morning in our ongoing attempt to adhere to the published schedule, I’d like to introduce the next company in this morning's program, OMNI Financial Services. And as I do throughout the day, welcome the investors who attend via the webcast. The webcast, just to remind you people, all that is aired this morning is live. It's retrievable for 30 days following the live event. It's both the audio component of the program, and the PowerPoint part of the program.

In addition to using that new media tool, which is -- investor conferences, and I have been using that new media tool for 10 years. In the last year, we started using -- for the last six months, we started using a second new media tool, which is having Seeking Alpha, the institutional investor community online at seekingalpha.com, doing transcriptions of the presentation and the Q&A session, including a word-for-word Q&A session that takes place here, and the transcript globalization. The transcription firm is in Israel. And that presentation and Q&A session word-for-word is web searchable, not only on Seeking Alpha, but more importantly on Yahoo Finance, just a few hours after the presentation.

So it’s a way of extending the conference beyond -- not everyone will stay around for playing their webcast, including people like myself, but you go through a transcript maybe in six or seven minutes. So you can find these transcripts, in theory, in six or seven hours on Yahoo Finance. Just go in the stock-box for each company, the stock-box portion, and put in the symbol, and the company will show up and the news stories will show up on the right of this investor conference transcript for all the companies that are in the conference.

We are the only analyst conference doing that. It's an advantage for us, because the investment banks can figure out a way how to make money off of that, even though I give information and stories for free at their conferences, so they are proud of that, I think, but it’s good for the companies, because they can make money, they don’t do it -- but for us it’s really value-added and helps us compete with Goldman Sachs and people like that.

In any case, Omni Financial Services is a bank holding company, headquartered in Atlanta, Georgia. You should tell from the accent. I am in Vermont, you don’t hear that in Vermont, because they are on vacation. Omni Financial Services provides the full range of banking and related services through its wholly-owned subsidiary, Omni National Bank, a national bank headquartered in Atlanta, Georgia.

Omni has one full-service banking location in Atlanta; one in Dalton, Georgia; five in North Carolina; one in Chicago, Illinois; and one in Tampa, Florida. In addition, Omni has loan production offices in Charlotte, North Carolina; Dalton, Georgia; Birmingham, Alabama; Philadelphia, Pennsylvania; and Dallas, Texas.

Omni provides traditional lending and deposit gathering capabilities, as well as a broad array of financial products and services, including specialized services such as community redevelopment lending, small business lending and equipment leasing, warehouse lending, and asset-based lending. Omni Financial Services' common stock is traded on NASDAQ Global Market under the ticker symbol "OFSI."

Without any further introduction, I'd like to introduce Stephen Klein, Chief Executive Officer.

TRANSCRIPT SPONSOR

The Wall Street Analyst Forum, a leading conference host for public corporations to address analysts/portfolio managers and professional investors, sponsors four annual conferences in NYC for large, mid and small-cap companies. Seeking Alpha readers may attend Wall Street Analyst Forum conferences free of charge if you pre-register. See the full conference schedule and attendance information.

Read all Wall Street Analyst Forum conference presentation transcripts here.

To learn more about sponsoring investor conference presentation transcripts see here.

Click to enlarge

Stephen Klein

Thank you. Our forward-looking statements. We started our company in 1992, and we commenced our operations as an inner city redevelopment lending specialist. I would like to tell you that that was a brilliantly conceived business plan that we started our business with in 1992, but I have to admit to you that it’s clearly not the case. What we actually started our business as was a consumer lender. Back in Georgia in the early ‘90s, there was a tremendous amount of predatory lending going on, for the usury interest rate in Georgia is 60%. And many of the lenders in the early ‘90s were trying to get as close to the 60% as they could.

My partner and I decided that consumer lending at high interest rates was not a business line that we wanted to be in. But very fortuitously at around the same time, we were approached by contractors who wanted to buy dilapidated, run-down, inner-city housing, fix it up, rehabilitate it and resell it. And my partner, Jeff Levine, and I said, “That's a novel idea. Why don't you go to a local bank and get that money?” And time and time again the borrower would say, “There are no banks in America who will lend you money on a dilapidated, run-down, vacant inner-city property.”

And in fact, most of the borrowers that came to us were African American, and those borrowers even had more problems going into the inner-city of America as contractors to buy homes and fix them up. So my partner and I decided that we would make that product our own. In 1993, we actually started doing lending to African American borrowers, largely minority populations, both men and women, who would buy run-down inner-city real estate, rehabilitate it, and resell it. That was a very profitable business for us.

We actually back then charged an 18% interest rate and got 10 points. And our borrowers were more than glad to pay that, because there was no other source of funding available to them. So the 18% seemed reasonable to them and the 10 points seemed reasonable to them, and the reason for that is that they were making money on their product. They were buying homes for $30,000 putting $10,000 or $15,000 or $20,000 into them, restoring them to a habitable point, and then reselling them for $80,000 or $90,000, making a $20,000 to $30,000 gross profit; if they paid our bank $3,000 fee -- it was not a bank back then -- our finance company’s $3,000 fee, and maybe $1,000 in interest costs, that total cost in the overall project was de minimis.

So, they didn’t mind paying 18%. They were more than glad to pay us 10 points. We ran that business with that model from 1992 until the late 1990 period, about '98, and that model had grown from no business to roughly $20 million worth of outstanding; not very large as far as the portfolio is concerned, but if you are getting 18% and 10 points, it was eminently profitable.

So, our company, because of the offerings that we were getting, we needed capital, we needed dollars to lend. So, we went out to all of the local banks in the area, and we wanted to pledge our loans as collateral to get more loans to make more loans. And what we found was astonishing, that not only did banks not want to lend money on inner-city dilapidated real estate, they didn’t want to take notes on dilapidated inner-city real estate. And as hard as my partner and I searched, we could not find a bank that wanted to lend us money.

We were going to pledge them a $20 million portfolio of loans, and we only wanted to borrow $10 million against it, but couldn’t find a bank to do it. What we did is, we did find another finance company called Finova who wanted to finance us and they provided us with a $20 million line of credit against our assets, and we continued to grow our business. The problem was Finova itself was having financial difficulty, and in about 1999 it was clear to us that Finova was not going to be able to continue to fund us. Talk about illiquidity in the market today, it was illiquidity for Omni Financial Services in 1999 when Finova couldn’t fund us.

So we decided at that point in time that the best way to fund our operations, to have cash with which to fund our operations, was to be a bank. I started a bank in 1983 in Michigan called Republic Bank Corp, which grew from scratch to about $5 billion and became one of the largest Mid-Western banks in the United States for profitability. That bank gave me my footings to be able to say, “I want to buy a bank.” You just don’t go out in America and say, “I want to buy a bank.” because the regulators won't let you do that.

So in 1999, my partner and I decided we would start a bank. So we went to all the regulatory agencies and we asked them, would you give us the charter to be a community bank, to lend money to African-American people, who are largely going to buy dilapidated, run-down, inner-city real estate and sell it to low and moderate income people under CRA, the Community Reinvestment Act.

And of course for those of you that may be a little bit familiar with banking, CRA is an important consideration in banking, and so the regulators all embraced us; great idea. We get towards the end of the meetings and the regulators would say, “So who are -- how are you going to get your shareholders?” And I would look at my partner, Jeff, and I would say, “Well, Jeff and I are going to be the shareholders.” And they said kind of quizzically, “You mean, it’s going to be the Klein-Levine Bank?” And we said, “No, it’s going to be Omni National Bank.” And they said, “Well, that’s not the model in America. We don’t want it to be the Klein-Levine Bank. We think that 200 shareholders, nobody owning more than 5%, is the model.” And Jeffery and I said, “That’s not the model that we want.”

So we went and shocked regulators. We went to the OPS. We went to the Georgia Banking Commission. We went to the OCC, and we told our story, and each of the regulators had the same belief. They didn’t want two guys owning a bank. So we changed our concept from starting a bank to buying a bank. And we decided that the way to do that was to find a bank that was in trouble, where our purchase of the bank would be important to the government, a bailout.

So, we searched around and we found a minority bank, an African-American owned institution in Fayetteville, North Carolina that was in trouble, that was on the market, and had been chaffed by everybody in America, and nobody wanted it, except us. Jeff and I wanted it, and the reason that we wanted it was because it could form the foundation of constant liquidity for growth. And so in March of 2000, Omni Financial Services, which is now the public corporation, bought what was then United National Bank, and we started at that point in time rehabilitating the bank.

In 2001, we started a subsidiary Omni Community Development Corporation, which is a CDC serving low and moderate income individuals. In 2002, we established Omni Capital, which is a small business lending and commercial leasing division. In 2004, we acquired a Florida Banking Charter, and opened up in Tampa. By the mid-2005 era, we had established a banking office in Chicago.

But one of the problems that we had is under the National Banking Law even though we were located in Atlanta, Georgia, our charter resided in Fayetteville, North Carolina. And we felt that a Fayetteville, North Carolina presence was not the presence that we wanted. And we thought at some point in time an IPO may be a possibility. Taking a company public from Fayetteville, North Carolina we didn’t think had the same market perception of value is taking an Atlanta based bank public. So, we had to acquire a Georgia charter.

In July of 2005, we made another acquisition of a troubled financial institution in Dalton, Georgia, the predominant reason for which was to move our national banking charter from North Carolina to Georgia. Up until July of 2005, we had no ability to take deposits in the Georgia marketplace that changed when we got our Georgia charter. We rehabilitated that bank and folded it into our North Carolina operation, all of which on paper moved to Atlanta, Georgia.

Our growth continued, and it’s hard to see the line, but we went from about $70 million of assets to $600 million to $700 million of assets during that time. And we are a capital intensive industry. Banking is all based upon the amount of capital that you have and the leverage that you can get off the capital. In order to sustain our growth, we needed capital.

Now up until 2005, Jeff and I had to continue to admit more partners and we ran our company much like a law firm, that is to say that everybody who was an employee, generally they bought in. The President bought in, the Chief Credit Officer bought in, the Chief of Lending bought in; everybody came to the table and wrote a check. And we kept writing checks for capital to the point at which we no longer could write checks. By that time, we had 44 partners, all of whom worked for the company, and we had three or four outside shareholders, a couple of people, independent Board of Directors, a couple of people, the godparent to my kids, I wanted to honor him with the investment. But basically it was internally owned and operated.

And in October of 2006 to augment capital we filed for and completed an IPO, raising approximately $33 million. Since that time, we have opened up in Philadelphia. We are opened in Dallas, and we acquired a banking charter for Texas, so our Dallas office is converting to a full-service banking office. And we will be opening in Houston by approximately the third quarter of 2007.

Our insider ownership continues to be very large. We are approximately 58% owned inside of our company. So our people that work for the business are aligned with shareholder value, they are shareholders. So most of our senior level management continues to own and acquire shares of our stock.

The volatility in the market makes our market cap go up and down somewhere around 5% or 8% a day; it was roughly $97 million a few days ago, a penny more or a penny less depending on where our shares are trading. Our average daily volumes are around 19,000 shares, that's unique for a community bank with only 100 million capitalization. Most community banks with our capitalization trade 1,000 to 2,000 shares a day on the average.

We have a very strong organic growth potential. One of the things that's very true of the banking industry is that there are a number of acquisitions that are made in geographic locations everyday, hundreds of them, and banks grow by acquisition. Our bank has not been acquisitive other than the two strategic acquisitions that we did: one, to get the charter; and two, to move the charter to Georgia.

Other than that we have not made an acquisition for acquisition sake, and all of our growth has been organic. That's a very unique model in the banking industry for there are very, very few banks that are growing organically.

But look at the markets that we are in, Atlanta, Chicago, Tampa, Philly, Birmingham, Charlotte, Dallas, Fayetteville and Dalton, I will kind of exclude those two, because those are not necessarily dynamic markets, and opening in Houston. And we have tremendous opportunity to grow in these markets.

Our focus is a growth-oriented focus. We consider ourselves to be a growth company. We have a 5 year earnings per share compounded annual growth rate, of almost 46%. We have a targeted earnings per share growth of 15%, and we have almost tripled that over the last 5 years. We have a target 15% return on average equity. That's a very important number in the banking industry as you'll see by the next chart.

There are 1,062 publicly traded banks in the United States. Of those, 756 have assets less than $1 billion, which is where our assets currently are. Of that group, believe it or not only 54 of the 756 publicly traded banks in United States could have a compounded annual growth rate of loans of more than 25%. Only 54 publicly traded companies could grow their loans 25% or more over a 5-year period, and of that amount only 14 could do so with a return on equity of greater than 13%.

ROE is the focus of the industry, and ROE is the main profitability driver of banks. And only 14 of 756 could grow and accomplish an ROE of 13% or more. Omni was 13.7% and only two banks in United States could increase their earnings per share on a compounded annual growth rate basis over the 5-year period of 40% or more, and Omni is one of those two banks.

Our unique business model attracts us to markets that allow us to have a commodity yield higher than our competitors. We will talk about that in just a moment. Total asset growth back in 2001 was $105 million as a base. It’s not on the slide, but the year before that when we bought United National Bank, United National Bank was $28 million. So, we grew from $28 million to $105 million; second quarter of '07, $857 million.

At the same time the earnings driver for a bank are its loans. We have increased loans from early 2001 $68 million to $602 million. We have a 22% growth rate for '07 net loans, and a 48% year-over-year. And again since loans are the drivers for profitability, achieving close to a 50% growth rate from '06 June to '07 June results in higher profitability.

But we have taken an awful lot of our profitability and reinvested it in infrastructure over the last year since going public. We have a 16% year-to-date '07 net income growth. However, in the slide that you will see in a few moments, one of the reason for the decrease in the accelerated pace of income growth is because we are investing heavily in infrastructure.

But we have $2.7 million of '06 earnings compared to $3.159 million of '07. And because of our IPO, we diluted our shareholders 50% in shares, but our earnings per share went down marginally from $0.36 a share to $0.28 a share for the same period '06 versus '07.

Banks are largely measured by their efficiency ratios, and we have made significant investments to our infrastructure over the last 24 months, but yet our efficiency ratio has stayed fairly stable at 62.5%.

Now what is hard to understand from this slide, because it’s a static slide, is where is the industry in general? 62.5% is largely where most mature banks find their efficiency ratio. They can be in the mid 50s to high 50s, that's where you would kind of like to get, but many banks in United States operate at a 60% efficiency ratio, and can achieve a 12% to 13% return on invested capital. We are doing it and growing our balance sheet at 45% per year. The reason that we are able to do that is that we sell our commodity for a higher yield than our competitors.

Our redevelopment lending product to this day continues to yield higher, but not 18 any more. That product now has a yield of approximately 12.7% as a pure yield, we get three points on the product generally, averages 2.75% company-wide, and that product has an average life of eight months.

So that portfolio was turning one and a third times a year. Take our 13% interest rate, about 3 points and turn that one and a half, one and a third times a year, the pure yield on that portfolio was roughly 18%. That represents 25% of our lending. 75% of the lending that our company does is traditional bank lending. But when 25% of your portfolio is yielding in the high teens, and 75% of your portfolio is yielding traditional banking rates, the result is an earning asset yield that’s significantly higher than is our competition.

Hence, at 9.77% with the cost of funds of 5.22, we boast a net interest margin of 5.02%, which is significantly higher than the industry average. That gives us more gross product from the sale of our loans. Having more gross product permits us to have more overheads, and still achieve an efficiency ratio.

One of the things most banks in United States are not challenged with is FAS 91, which is the rule that says as you take your income you have to amortize it over the life of your loan. So if you get a fee on a loan, you have to treat it as interest. Most banks today, because it's a commoditized product, don’t get much fee income. In the commercial marketplace, fee income is a quarter point, eighth point, half point. And under FAS 91, you can take your costs, and write it off against your interest.

So, an awful lot of banks in United States are not confronted with a problem or an issue that Omni is confronted with, which is because we charge fees and we have this amortization, our deferred fee income line is growing quite materially.

It has gone from the third quarter of '06 of roughly $600,000 to the second quarter of '07 of roughly $2 million, meaning that we have collected approximately $1.4 million of fee income more than our cost, and we have not been able to recognize that as income. So that will get recognized over the life of the loan.

Similarly, in our model, our redevelopment inner-city model results in more foreclosed real estate. It’s part of our model. Approximately 3% to 8% of our loans, unfortunately, do not result in a profitable conclusion, and our company is forced to foreclose.

As a result of that we have either profit or losses from the sales of OREO. Most banks don’t have to deal with this, because they don’t have that credit risk and exposure on their balance sheet. But in our company, we have largely gains from the sale of the OREO, but our internal policy is we do not recognize the gain until we are paid the loan, or if we finance the loan we must receive at least a 20% cash down-payment to recognize the profit.

So, we are particularly in a more difficult economic environment having to defer more and more gains of our sales. Together these two items are almost $3 million of deferred revenue or deferred profits that we currently have in our balance sheet.

Our lines of businesses as you can see are very diverse. We do real estate construction, community redevelopment lending, commercial real estate lending, residential and C&I lending. We do almost no consumer lending. Each of our products represents a penetration level as established by our Board of Directors; because our model achieves a 5% net interest margin, we want the model to be consistent with penetration.

Hence, as we continue to grow our business with a notable exception of real estate construction financing, which as you all know is directly related to a decline in real estate market, that is a product in which we are not continuing to make new loans. All of our other lines of business continue to grow. So we are taking the allocation of our construction financing, and reallocating it among other divisions, so that we can achieve the same penetration and the same growth in our loans.

You will notice our volumes continue to be fairly consistent and slightly increasing. We were doing -- we did $120 million of new loans in the third quarter of '06, which compares favorably to the growth in Q1 of '07 where we did $136 million of new loans, and slightly decreased in the second quarter of '07, largely though real estate construction was the line that got clipped the most and that is a direct result of the economy and not from making new loans to builders.

Because our balance sheet carries more risk than a normal community bank, we do not have the inner-city redevelopment lending component; we measure ourselves differently. We do not believe that NPAs, nonperforming assets, necessarily result in bad things at a bank. If a nonperforming asset can be liquidated at a profit, and the overall return on invested capital is accretive, then a nonperforming asset can result up in profitability.

So, we measure nonperforming assets against our actual charge-offs, and charge-offs are bad. So, charge-offs need to be consistent with our industry and if you -- we don’t have a chart here, but if you look at industry statistics you will see that our charge-off ratios, which average in the high teens to low 20s over the last three years is consistent with the industry. So while we are getting paid significantly more money for our loans, we are not experiencing a greater charge-off ratio as a result, hence greater return on equity.

Our nonperforming assets to gross loans have increased, and the economy does continue to have significant headwinds in it, but our charge-off ratio is staying reasonably stable, which should continue to result in achieving the ROE that we have targeted.

We believe we are an undervalued opportunity in our space. Last 12 months, fully diluted earnings per share of $0.60 creates a multiple of about 14.25 versus a peer in the high 13 range. Banks largely get value based upon their book values as opposed to their PE ratios.

You need to look at both, but our competitors are a group that we measure ourselves against, which I will talk about in just a quick second. They are trading at 178% of book, and we are trading at 134% of book. Most banks that are selling, are selling in the two, two and half, two and three quarters time book. In the Southeastern United States, where we are generally centered, they are trading in close to three to almost slightly above three. So we think there’s significant upside in the acquisition of our shares.

Let me just quickly mentioned that our peer group is a group of banks that was established by our Board of Directors as being high performing banks. They were banks that were growing their balance sheets at least a rate of about 20% per year, I am doing this by memory and I apologize, I may have these statistics slightly wrong. But they had to have an ROE of greater than 12%, and they had to be banks of our comparable size.

So they are banks between $500 million and $1.2 billion, I believe was the pool, which we had disclosed in our CD&A, Compensation Discussion and Analysis, in our line as proxy we identified our competitors as being high performing banks. The reason we did that is that we wanted our compensation to be measured against other banks that are high performing.

So the compensation discussion and analysis shows a very competitive peer group. If you were to take the Southeastern United States banking peer group, they don't achieve these multiples. So we think there is an upside in the stock, we believe that it represents an opportunity to acquire shares at a very reasonable number.

To that end, our Board of Directors authorized $10 million share repurchase at our last Board meeting, increasing it from a previously announced $2 million. We did that not to support the price of our stock, but we did that because we believe the stock represented a very good buy.

And I own a significant amount of shares in our company, and I announced during the same conference call that I was going to acquire 150,000 shares, and I have been in the market since then acquiring shares, and the shares stably trade in the mid 8, the price was 8.59. We traded about 65,000 shares yesterday in around the 8.50 range, I think, we closed it at 8.25. Our IPO was 9.50 priced IPO. So, we are currently trading under where the company went public.

With that I would be happy to answer any questions anybody has. Sir?

Question-and-Answer Session

Unidentified Audience Member

With your size and very rapid growth how can you find enough talent, because I think you attract enough really capable people, the demand you have is very…?

Stephen Klein

It’s a very good question. The question was, with our significant growth and the expansion in multiregional areas, how do we find people? Number one, because of the nature of our redevelopment lending program we used that to seed every new area that we go to. That product, because of its rates being close to 18% total yields, that product is -- makes an office profitable within about three or four months. So, we go into a new area, if we go, for example, into Philadelphia, we can be profitable in the Philadelphia office within six or seven months.

In order to go into Philadelphia we have to have two or three redevelopment specialists. Where do we get those from? We train them. We have an internal training program in Atlanta, Georgia that we developed from 1992 through about 2003. We perfected, if you can use that word, I know – I hate to use that word, as will the CEO of any bank, to say the word perfected. But we honed our skills in how to train redevelopment lenders.

So if we are going to open up in Philadelphia, we bring two people from the Philadelphia market that we hire. We bring them to Atlanta, we train them for anywhere from five to nine months. We educate them in this particular product, send them back to Philly, and they open the Philly market.

We then populate markets with other bankers from the area. So in Philadelphia, for example, we have a gentleman who is the second top officer of a local community bank, who was almost a President, to be President of our local region, and we searched him out, and we use a professional search firm for that, and we interview and we hire. Our compensation packages are higher than anybody else’s. I’m telling you off the bat, that we pay more than everybody else pays, and we do that because we have higher yields…

Unidentified Audience Member

While you are training these people, they are not producing any income, honestly…?

Stephen Klein

That's correct. And it’s a very significant burden and cost to the company. But, because we have a higher interest margin, net interest margin, we have more money with which to do that. Training cost for the first six months of 2007 were $500,000 for the first six months and that's a cost that we have to – that obviously we pay.

So the reason that we are excited about the fundamentals of Omni, is that not only are we growing, continuing to grow at 20% to 30% per year. Not only are we continuing to have record results for profitability, but we are continuing to make a significant infrastructure investment, which will hopefully inure to the profitability of '08, '09 and beyond.

Any other questions, I am almost out of time. I want to respect the conference's limitations. Any other questions. Ma'am?

Unidentified Audience Member

(Question Inaudible)

Stephen Klein

The question is the competitive CRA environment in other banks, and I will answer it shorter for the conference purposes. If you want to see me afterwards I would be happy to answer it for you, but there are an awful lot of banks in United States that are incapable of achieving CRA penetration the way they want.

Our average loan size and our redevelopment lending portfolio is $110,000. We have about 1,500 active loans. We have roughly 800 active contractors. We believe that the barrier to entry to what we do is one of the things that creates enterprise value for Omni.

If Bank of America or UBS or somebody else wants to populate different areas with low and moderate income lending to meet CRA test-worthy acquisition for them, because we can do this in many cities in United States in which we are not currently active, but that’s not our model. We are an income model, we are going to earn money, we are going to continue to earn money, we are going to have high returns on invested equity, and we are going to continue to grow our business with this model.

So, we are not holding ourselves out as a company that is going to be sold, but in answer to your question, sure if another bank wanted to do this, I can pretty much assure you they couldn’t develop the model, absent from acquiring it from us, because it's taken us 17 years to get this model where the charge-off ratios are as low as they are, but very good question.

I have about two minutes left, any other question or follow-up? Yes, sir.

Unidentified Audience Member

[Question Inaudible]

Stephen Klein

The question is what is the reputational risk by having a product that gets a higher interest rate? I think, that's your question, and the answer is, none whatsoever, because number one, these are loans to commercial borrowers. So these are not people who buy these homes to live in them, these are commercial contractors who buy a home and fix it up. And we are in America folks, and it's a free enterprise system. And as between two consenting business partners, they can have whatever economic terms they feel are appropriate. And we have 750 active borrowers, they come back every time they complete a transaction to get another one.

Unidentified Audience Member

So your customers typically are not individuals?

Stephen Klein

They are small companies, but they are largely individuals. Our customer could be a single individual dry-waller who wants to buy a house, and do the work him or herself, and it can be a her, and do a lot of the work herself to fix them up. And they could do two or three homes at a time. Our maximum exposure in that particular product line -- we don't have any one borrower who has more than $1 million outstanding and we have one borrower who has that.

Unidentified Audience Member

Among your employees, you have a lot of minority employees?

Stephen Klein

Yes, among our employees, the question is our staffing. We are about 40% minority in our staffing. Now minority is broad-based, that's African, Americana, Asian, any minority population that is classified. We are about 40% minority. And the original company that we bought, which was an African American bank, continues to largely service an African American population through the office that we retained.

So, we speak 11 different languages within our company. A highly eclectic group if you walk around there, and you can hear different languages, and you can see different colors, and it's really a rainbow of interest, if you come over to the bank at some point. Thank you very much, we appreciate your attention.

TRANSCRIPT SPONSOR

The Wall Street Analyst Forum, a leading conference host for public corporations to address analysts/portfolio managers and professional investors, sponsors four annual conferences in NYC for large, mid and small-cap companies. Seeking Alpha readers may attend Wall Street Analyst Forum conferences free of charge if you pre-register. See the full conference schedule and attendance information.

Read all Wall Street Analyst Forum conference presentation transcripts here.

To learn more about sponsoring investor conference presentation transcripts see here.

Click to enlarge

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!