As Jack French stepped to the podium at a conference last week, about half the audience of investors got up and left.
They figured that the speech by the chairman of Plaza Home Mortgage Corp. would be anti-climactic, following, as it did, a presentation by mortgage giant Countrywide Credit Industries. But Mr. French, 60, didn't miss a beat.
"For those of you who are leaving, just remember: We're right on Countrywide's tail," he called out. "We're just a little a younger."
7-Year-old Firm
Yes, Mr. French and his company both have plenty of pluck.
Formed only seven years ago, the California-based Plaza already ranks as the nation's 20th-largest mortgage originator. And, helped by fresh capital raised in an initial public offering of stock in October, the company plans to get even bigger.
For 1993, Mr. French says, Plaza is shooting to produce $8 billion of home loans, up from $5.3 billion this year and less than $1 billion three years ago.
What's the secret to such growth?
Paying Top Talent Well
"What you have to do is find the right talent, put it in position in a reasonable market, and motivate it," Mr. French said in an interview. "That's all it takes."
Plaza's brand of motivation is evident in the prospectus for its stock offering, under the heading "executive compensation."
The document shows that the company's originations chief, Brenda Lynn, pulled down a stunning $841,000 in 1991, mainly in volume-based commissions.
That was more than double the norm for production heads at a sampling of major mortgage banks. And it topped Mr. French's own compensation by $137,000.
"We do pay well," Mr. French told investors at the New York conference. "But we also expect maximum performance."
Plans for East, Gulf Coasts
Plaza gets the bulk of its mortgages from a network of 2,200 independent loan brokers. While the company focuses on California, it expanded last year into Arizona, Oregon, and Florida. On tap for early 1993: Massachusetts, Texas, and Washington State.
While rapid growth often leads to trouble in financial services, Gareth Plank, an analyst at Mabon Securities, maintains that Plaza will fare well. For one thing, he points out, Plaza minimizes credit risk by selling all its production on the secondary market - and without recourse.
Furthermore, Mr. French is a seasoned pro, with 32 years in mortgages and real estate. From 1974 through 1977, for example, he set up and ran a mortgage banking unit for Suburban Savings, a now-defunct New Jersey thrift.
He then started his own company, Western Real Estate Financial, a real estate investment concern based in California.
Although that company remains in business, Mr. French works full-time at Plaza, which he founded in 1985 with a group of investors. He remains Plaza's largest shareholder, with a 27% stake.
Targeting 15% Profit Growth
Though its main operating unit is a small thrift - Plaza Savings and Loan Association - the company is evolving into a mortgage bank that happens to have a thrift affiliate. The single-branch thrift serves mainly as a source of inexpensive funds to support new mortgages until they are delivered into the secondary market.
The approach appears to be working well. In the first nine months of this year, Plaza's net earnings soared 90% from the year earlier, to $11 million. And Mr. French says he is shooting for annual earnings growth of at least 15% going forward.
The stock, which came out at $6.50 a share Oct. 2, has recently been trading at around $7 in the over-the-counter market.
Mr. Plank of Mabon Securities, whose firm co-managed the $29 million offering, recommends purchase of the shares based on Plaza's "excellent market opportunities and proven lending strength."
Building Servicing Business
But Sy Jacobs of Alex. Brown & Sons is neutral on the stock. His main concern is that Plaza has yet to build a big servicing business - an activity that could help shield earnings from rises in interest rates.
Mr. French replies that servicing growth is very much on his agenda.
Plaza, which had previously sold the bulk of the servicing rights it produced, has been keeping ever-bigger percentages. As a result, the portfolio has increased by more than 60% this year, to about $2.8 billion.
If Jack French_keeps it up, audiences won't keep walking out on him.
