Industry Benchmarking
Analytics:
MEASURING AGAINST YOUR PEERS
Why Measure Your Performance?
Common things we hear from our clients:
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My board wants to know how we are doing.
How do we compare to the industry and our competitors?
Help with budgeting and goal setting.
Are we getting enough in Secondary?
Are our costs to originate on par?
What is the market doing and how is if affecting other companies?
How much are others paying their LO’s?
Why Companies Do Not Benchmark
• Finding Relevant Peer Data
• Achieving “Apples to Apples”
Comparison Amongst the Various
Available Reports
• Timeliness of Available Reporting
Benchmarking should aid and drive
informed DECISION MAKING…but it
must be timely to achieve this…
Financial
Performance
What Items
Should You Be
Including in Your
Benchmark
Reporting?
Compensation
Benchmarking
Production
Mix and
Volume
Operational
Metrics
Financial Metrics
• Loan Margins
• Servicing Costs
• Cost to Originate
• Fair Value Adjustments
• Compliance Costs
• Marketing Costs
• Secondary Marketing Gains
• Fixed Costs
• Pre-Tax Net Income
• Profitability by Operating Unit
• Loss Reserves
• Branch Profitability
• Charge-off Losses
Compensation Metrics
• Base Compensation
• Bonus Compensation
• Commission
• Employees per Functional Area
Why Does This All Matter?
Sample Mortgage Co
• Retail Lender
• Annual Production - $1.5 Billion
• Average Gross Margins (Q3-2015) – 390 Bps
• Production Declined 7% from Q2 to Q3 – 2015
• Personnel Costs of $6,100 per Loan
Gross Loan Margins (bps)
460.0
449.0
440.0
Sample Company – 390 Bps
420.0
413.5
400.0
419.1
417.9
• 390 Bps appears to be
in-line with the market
conditions.
• Significantly
underperforms the “Top
Select Performers” and
the Retail Peer Group.
394.7
388.3
376.8
380.0
• Outperforms the Retail
Medium Peer Group.
360.0
340.0
2015- 3rd Quarter
RicheyMayComplete
Top Select Performers
Retail Complete
Retail Large
Retail Medium
Retail Small
Top Retail Performers
• Depending on the Peer
Group, the Company can
arrive at many different
conclusions.
• Similar to the Gross Margins
this metric can be viewed as
a “Positive” or a “Negative”
depending on the Peer
Group and the data being
used.
4%
Changes in Total Production
Volume
2%
3%
0%
-7%
-3%
-3%
-6%
-9%
-11%
-2%
-4%
• Understanding other peer
groups, i.e., Top Select,
Retail Large, etc., allows the
Company to make informed
decisions.
-6%
-8%
-10%
-12%
Sample Company – 7% Decline
2015- 3rd Quarter
RicheyMayComplete
Top Select Performers
Top Retail Performers
Retail Large
Retail Medium
Retail Small
Retail Complete
Total Personnel Expense (per loan)
6,600
Sample Company – $6,100 per loan
6,370
6,400
6,183
6,200
5,984
6,000
5,800
6,147
5,771
5,624
5,600
5,500
5,400
5,200
5,000
2015- 3rd Quarter
RicheyMayComplete
Top Select Performers
Top Retail Performers
Retail Large
Retail Medium
Retail Small
Retail Complete
Comparisons
SCENARIO #1
Loan Volume
Loan Count
Average Loan Size
Gross Margins
Change in Production Prior Quarter
Personnel Costs per Loan
Top Select
Sample Mtg
Difference
$ 2,750,000,000
12,841
214,158
4.135%
-3%
$
5,500
$ 1,500,000,000
7,004
214,158
3.900%
-7%
$
6,100
$ 1,250,000,000
5,837
0.235%
4%
$
(600)
Retail Medium
Sample Mtg
Difference
$ 1,900,000,000
8,872
214,158
3.768%
-9%
$
6,147
$ 1,500,000,000
7,004
214,158
3.900%
-7%
$
6,100
SCENARIO #2
Loan Volume
Loan Count
Average Loan Size
Gross Margins
Change in Production Prior Quarter
Personnel Costs per Loan
$
$
400,000,000
1,868
-0.132%
-2%
47
Comparisons
ANALYSIS OF FINANCIAL RESULTS - #1
Excess (Deficit) Revenue
$
(Excess) Deficit Expenses
Income (Loss) Over Peer Group
$
ANALYSIS OF FINANCIAL RESULTS - #2
(2,937,500)
Excess (Deficit) Revenue
(3,502,200)
(Excess) Deficit Expenses
(6,439,700)
Income (Loss) Over Peer Group
$
528,000
87,796
$
615,796
Two VERY different conclusions can be reached on Sample Mortgage
Co., depending on what peer group they are being evaluated against.
Keys to Benchmarking
• Define Where You Are
• Define Where You Want To
Be
• Understand What Data Is
Being Presented and How it
Pertains to Your Operations
• Select Appropriate Peer
Groups
• Benchmarking and
Forecasting Needs to Be
Reviewed Frequently as the
Data is Constantly Changing
• You Need to Understand
Both Financial and
Operational Metrics as They
Feed Each Other.
Richey May Select
• Data from all the Peer Groups was pulled from Richey May
Select through Q3 – 2015
• Richey May Select is a joint venture with Motivity Solutions
and is the winner of the Mortgage Technology 2013 “Synergy
Award”
• Richey May Select is the “Next-Generation” in peer-to-peer
benchmarking and operational metrics.
Trevor Reinhart
Senior Manager – Advisory Services
D 3 0 3 .9 6 7 .0 6 9 2 | E trevor@richeymay.com
9605 S. Kingston Ct., Suite 200
Englewood, CO 80112
T 303.721.6131
www.richeymay.com