Turn Approved Loans Into Funded Ones

A Q&A with Generations Federal Credit Union on how it improved its conversion ratio.

When Generations Federal Credit Union($572.5M, San Antonio, TX) detected inconsistencies in its funding ratio despite competitive pricing the Lone Star State credit union re-engineered its loan process from the perspective of its members.

In this Q&A, Jack Curtis, senior vice president of retail lending, talks about how the credit union analyzed its issues and took action to improve its conversion ratio.

Jack Curtis, SVP of Retail Lending, Generations FCU

What’s the importance of the funding ratio?

Jack Curtis: We pay close attention to the approved-to-funding ratio for a variety of reasons. The most obvious is that it tells us how many existing opportunities we’re able to convert.It logically follows that convertinga higher percentage of opportunities leads to higher average production.

What else does the funding ratio tell you?

JC: It is also a meaningful qualitative indicator of how well an institution isperforming from a service standpoint and how compelling its loan products and rates are to the membership.We felt, in general, we were competitivelypriced on most of our loan products. So for us, an inconsistent funding ratio highlighted opportunities to provide better service to our members during the loan process itself.

For Generations FCU | Data as of 12.31.15
Callahan & Associates | www.creditunions.com

Median Monthly Conversion Minimum Monthly Conversion
2012 44.79% 40.05%
2013 51.38% 36.76%
2014 51.26% 49.19%
04.15 – 12.15 60.16% 58.73%

Source:Generations Federal Credit Union

What were some of the specific service areas you focused on improving?

JC: As we analyzed the problem, we noticed several things: (1) we weren’t as responsive with our underwriting turn times as we needed to be, (2) the structure of our queues and application routing needed improvement, and (3) we needed to be more efficient in our closing processes.

Additionally, we noticed a higher than expected number of approvals that were not accepted by the member.This indicated that we needed to do a better job of explaining the terms and details of a proposed loan, thus allowing the members to make more informed decisions at the time of application.

How did you develop an answer?

JC: Our work on the approved to funded ratio coincided with our conversion to Meridian Link in April of 2015, which allowed us to restructure queues to improve application routing, automate the Docusign process for more efficient closings,provide staff with better projections to assist members, and enhance our usage of automatic decisioning.

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What other changes did the credit union make?

JC: We made several other changes in support of this. In addition to the conversion, we also expanded our underwriting staff to improve turn times.

Plus, we converted to a universal agent concept where loan reps are able to both originate and close loans.Although this comes with its own set of challenges, in the end, we believe it results in a better member experience by removing the backlogthat a separate closing process can create and, in an ideal scenario, allowing the member to work with the same agent from start to finish. This concept won’t work for everyone, but given our volumes and process design, it works for us.

Our approach was to re-engineer the loan process working backward from the member experience into the operational and risk management components.

Finally, we hired an operations analyst that, as part of her responsibilities, focuses on process improvement, system configurations, and operational risk management.

What results can you share?

JC: Since our April implementation, we’ve seen a higher conversion percentage, approximately 10% higher monthly, and even more significant when compared to our 2012 and 2013 performance. Additionally, our month-to-month volatilityin this area has dropped.

How Do You Compare?

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What advice would you give another credit union looking to improve in this area?

JC: Our approach was to re-engineer the loan process working backward from the member experience into the operational and risk management components. This required us to better use technology and process automation to speed up the servicedelivery to the member, while developing more sophisticated operational controls.

However, the systems by themselves are not enough. It takes a team of talented staff members that are committed to providing best-in-class service to the members.We can do all the workflow enhancements we want, but if the staff isn’t as responsiveand motivated as it needs to be, or if it’s not equipped with the appropriate training and product knowledge, we won’t be getting the most out of our program.


Data as of 09.30.15

  • HQ: San Antonio, TX
  • ASSETS: $572.5M
  • MEMBERS: 51,875
  • BRANCHES: 15
  • 12-MO SHARE GROWTH: 14.39%
  • 12-MO LOAN GROWTH: 20.68%
  • ROA: 0.41%

Fortunately, at GFCU we have a great team of loan agents, underwriters, and supervisors, and under the direction of our vice president of direct lending, Bonnie Aguilar, we’ve continued to make great strides toward improving our sales and serviceculture.

Looking back, is there anything you’d do differently?

JC: There isn’t anything we would do differently with the design or structure. As I mentioned previously, the universal agent concept presents some unique challenges in staffing and training and development, which requires a longerbuild-out.

Did anything surprise you?

JC: When we projected the results, we were hoping to achieve consistent results in the 65%-70% range, which is good for us given the number of auto loans, which is good for us given the number of auto loans we do, which generally havelonger production cycles.

Even more telling, however, is the consistency in the ratio month-to-month. We haven’t seen the large downward fluctuations in the approved to funded ratio that we saw in prior years. While there are other factors that can affect theratio, this is a good indicator that our processes are sound.We’re having to rely less on elbow grease and manual effort to achieve consistent service to our members.

As told to Sharon Simpson

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