Looking into Key Growth Metrics: Loan Originations per Employee

Surviving 2020 was no easy task for all sorts of businesses, including many credit unions. Those that were most effective found ways to be efficient, cut waste, adjust to changes in consumer habits and continue to provide their members with the essential services they need and expect. After all, credit unions were founded on the principles of collaboration and supporting members, and no year has seen more people in need of support than the previous one.

For credit unions to stay true to their mission but continue to thrive, it’s important that they analyze yearly performance honestly and thoroughly, and the best way to do so is by evaluating key growth metrics. Key growth metrics, which include ratios such as return on assets, cost of technology per member, and net income per full-time employee, can provide insight about the overall effectiveness of a credit union. One of the most important metrics for credit unions to understand is loan originations per employee. Let’s take a closer look.

Why is loan originations per employee important?

Lending has always played a pivotal role in the business model of credit unions. A significant portion of income for operating expenses comes from lending, and credit unions take pride in being able to offer members competitive interest and higher savings rates than other financial institutions. That’s why during such turbulent economic times, it’s even more important for CUs to analyze their lending data and reevaluate their lending strategy.

A good way to check if your lending strategy is working or not is by looking at the loan originations per employee metric. This ratio can be calculated by taking the number of full-time equivalent employees and dividing it by the annualized amount of loan originations. A higher ratio reflects the employee’s ability to generate more loans.

Listed below are a few of the reasons loan originations per employee is important:

• Strategy. Understanding this metric can help you discover weaknesses and/or strengths in your lending strategy and make the appropriate adjustments.
• Employee efficiency. Knowing the productivity of your employees and how well they can generate loans may help you evaluate or implement more efficient training programs.
• Borrowing. The loan originations per employee ratio can help your CU understand your member’s propensity to borrow. Interest rates, user-friendliness, e-Signature options and other features may need to be enhanced to improve your lending strategy.

One of the main responsibilities of a CU’s Chief Lending Officer (CLO) is to calculate key growth ratios such as loan originations per employee. These ratios should be benchmarked annually against other credit unions to gain insight into the CU’s performance in relation to peers.

How to improve your loan originations per employee ratio

Before the pandemic struck, technology was already playing an ever-increasing role in the credit union world. Features such as online banking, digital wallets and mobile lending were rising in popularity and gaining more mainstream acceptance. However, since the pandemic began, technology has become even more essential to the functioning of credit unions.

That’s why choosing the right credit union core system technology for your CU is vital. Core system technologies help you gain insight into how efficiently your credit union is functioning and what needs to be done to improve your metrics. A core system can also provide features to enhance your lending process such as electronic document flow and e-Signature options. By offering members easier and more secure access to loans, you can increase borrowing and maintain a healthy, sustainable credit union for years to come.