Financial & Operational Metrics & Benchmarking TYLER HOUSE, MANAGER, ADVISORY SERVICES
2017 HMDA Volume Stats Industry Volume down 13% • IMBs: volume down 12% • Depositories: volume down 16% Industry Purchase Vol. hits 1 trill., 8% YoY increase • IMBs: purchase volume up 12% • Depositories: purchase volume up 6% Industry Refi Vol. was 650 bill., 35% YoY decrease • IMBs: refi volume down 35% • Depositories: refi volume down 36%
2017 HMDA M&A Stats Almost 1/3 rd of IMBs volume increased YoY (+23%)* 1/4 th of Depositories volume increased YoY (+26%)* ~ 120 lenders active in M&A or significant growth • IMB avg “M&A” was a 40% or 560 mill. increase in vol. • Depository avg “M&A” was a 115% or 340 mill. increase in vol. *Includes only lenders who originated at least 250 mill. In 2017 and 2016.
2017 HMDA Market Share Stats IMBs market share up 1.2% Depositories market share down 0.9% IMB’s share increased for all products/purposes: • Conv: +1.7% • Govt: +0.8% • Jumbo: +2.6% • Purchase: +1.6% • Refi: +0.7%
:: All 1-4 Fam., 1 st Lien -17% -22% Northeast West -12% Coast -11% -16% Mid- -15% Mountain Midwest Atlantic Great Lakes -8% -6% Gulf Atlantic Coast South
Production Volume In 2017: down 9% YoY Q1-2018: down 17% QoQ, but up 6% YoY Q1-2018 volume was highest average volume for any Q1 back to 2012… Looking forward to a more predictable purchase market…
Secondary Gain on Sale 2017 GOS 337 bps, was on par with 2016. Starting Q1.2017 there has been 4 consecutive quarters of declines in GOS. From 354 bps to 315 bps. Is GOS rebounding during Q2?
Annual Costs to Originate 2017 Costs were $8,264 per loan. YoY increase of +$659 per loan. 5 consecutive years of increases in costs…
Q1’s Costs to Originate Q1-2018 costs were $9,170 per loan YoY increase of +$159 per loan. Q1-2018 costs reach highest point, even though volume was higher than all the previous Q1s.
Annual Pretax Income 27 bps in 2017 is lowest profitability in 6 years. What will 2018 look like?
Q1’s Pretax Income 11 bps second lowest earnings total among previous Q1s.
What separates the most profitable lenders from the rest of the industry?
3 Groups Top – top 3rd of the peer group for profitability in each of the last 2 years Bottom – bottom 3rd of the peer group for profitability in each of the last 2 years Avg. – everyone else ***looked at retail lenders only***
Financial Results (Basis Points) 2017 Variance from Top Top Avg Bottom Avg Bottom Secondary Gain on Sale 411.8 359.6 364.5 - 52.2 - 47.3 Origination fees 65.6 35.9 17.4 - 29.7 - 48.2 Total Sales Costs (177.2) (155.6) (161.8) + 21.6 + 15.4 Contribution Margin 303.2 242.0 221.1 - 61.2 - 82.1 Personnel Expense 132.0 130.8 132.0 - 1.2 - Operating (fixed) Expense 72.2 67.8 80.1 - 4.4 + 7.9 Total Expense 204.2 198.6 212.1 - 5.6 + 7.9 Profits 99.1 43.4 8.9 - 55.7 - 90.2 Volume (Bill. / Mill.) 1.6B 2.1B 1.8B + 500M + 200M Avg Loan size (k) 232k 257k 253k + 25k + 21k Govt Mix 44% 36% 35% - 7% - 9% ROE (annualized) 41% 19% 3% - 22% - 38% Loans Per FTE 1.38 1.49 1.35 + 0.11 - 0.03
Where Do Revenues Go? $10,846 $9,629 480.5 $9,510 397.6 382.8
Profit Gap Trend The gap in profitability is growing… Avg compared to Top • was 33 bps lower in 2015, • was 78 bps lower in Q1.2018 Bottom compared to Top • was 60 bps lower in 2015 • was 105 bps lower in Q1.2018
Why items are driving the gap? For the average group: Top line revenues fall behind by 25 bps For the bottom group: Expenses increase by additional 27 bps
Contact Info Tyler House , Manager, Advisory Services tyler@richeymay.com 303.409.2697
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