The Art & Science of a Mortgage Branch P&L

There's an art and a science to the branch P&L. The science is the numbers. The art is seeing through the numbers, and that's where profit lives and dies.

Read only the science and your P&L is just a rear view mirror. The art is how you build the windshield.

Calling all Branch Managers... are you profitable?

Calling all Regionals and Divisionals... are you able to help your Branch Managers be profitable?

The science: the numbers

The science is the part everyone can see. Revenue, comp, costs, allocations and what's left per file.

But the science only tells you what already happened. By the time last month's P&L lands, those decisions are made. That's the rear view mirror.

And the trap becomes, “there’s nothing else I can do,” because all you’re ultimately seeing is revenue in and expenses out. My bet is you’ve already done that work.

The art: seeing through the numbers

The art is reading the P&L and asking what insights you’re learning? What is it telling you to do next? What’s behind the numbers?

Ask yourself... are you positioned to protect against a shifting market? Are you positioned to maximize the opportunities?

Profit lives and dies in the decisions you make that build the numbers you see.

For example, are you bonusing your ops team retro to zero loans? That’s not a bonus; that’s a salary. Tier your bonuses so they don’t trigger below your break-even.

Same with overrides. I have fixed many P&L’s right there, because of bps layering. When everyone is getting an override, 10bps here and there becomes 40bps of override.

You can’t see these on a P&L, this is an example of the art of profitability.

Volume isn't sexy. Profit is.

A lot of branches wear volume goggles. Big month, full pipeline. Everybody feels good. Recruit more of that.

However, volume isn't sexy. Profit is. And chasing volume alone can get you into trouble!

Mortgage often becomes a quantity game because “volume cures all,” which is not true when it comes to profitability. I can reframe that as “volume hides a lot,” but as it ebbs and flows, it can get you into worse trouble if you’re not focused on making smart financial decisions.

Profit can't come on the backs of your originators

Spoiler alert... fixing profit can't come on the backs of your originators. It's not as simple as raising margins or lowering comp in this margin compressed environment.

And margin compression is the reality. We have to be profitable with these margins and not hopeful for future margin gains.

So the work is managing branch profitability like a business owner. Know your numbers. Control your expenses. Make decisions you can justify.

Do you know your break even? How to lower that? How many months are you profitable month-over-month? What’s your low and high watermark as well as average monthly volume compared to your break even? Where do you hockey-stick in profitability?

These questions are north stars that govern decision-making and risk tolerance.

Build the windshield

P&L's are just a rear view mirror. I help you build the windshield.

The windshield is a branch Pro Forma, plus a stress test that gives you power in your decision-making. This is what gives you risk tolerance, not just hope in volume alone.

And you don't have to be an accountant to do it. You build it as an empowered leader.

This is how you also take the emotion out of the decision, because now you’re armed with the facts.

And as you’re recruiting and growing, everyone fits onto the P&L. I have saved countless bad decisions before they happened because of this, and more, we’ve also strengthened opportunities that others couldn’t see!

From P&L Manager to Profit Leader

It's my mission to turn P&L Managers into Profit Leaders.

A P&L Manager reports the numbers after the month closes. A Profit Leader sees through them and decides what happens next.

That's why my coaching is built from the Branch Manager up, not CFO down.

This is how you run a business, not just a branch.

How this fits Branch Leadership Coaching

It's what we work on together in Branch Leadership Coaching. We build a branch Pro Forma and Stress Test so your decisions are justified and coming from abundance.

See how it works at ascendxc.com/branchleader.

FAQs

What is the art and science of a branch P&L?

The science is the numbers on your branch P&L. The art is seeing through those numbers to the decisions behind them, and that's where profit lives and dies.

Why isn't more volume the answer to a branch profit problem?

Volume isn't sexy. Profit is. A busy month can still leave very little in the branch, so judge each month by what it left behind, not by how many units closed.

Can a branch fix profit by raising margins or cutting LO comp?

Not in this margin compressed environment. Fixing profit can't come on the backs of your originators. Margin compression is the reality, so the branch has to be profitable with today's margins.

Do I need to be an accountant to run a profitable branch?

No. You read the numbers as an empowered leader and make profitable decisions with them. Building a Pro Forma and stress testing your branch P&L are skills any Branch Manager can learn.

A second set of eyes on your branch numbers

Grab a free 30-minute Discovery Huddle. Bring your toughest P&L question.

Make Shift Happen.

Craig Davis, Leadership Performance Coach, host of Talking Shift with Craig. Craig spent 20+ years in mortgage, from sales to running production for the western United States.