The $2.1 billion, Briarwood, N.Y.-based Melrose Credit Union isgiving rave reviews of its experience with the Raleigh, N.C.-basedSageworks' new Electronic Tax Return Reader, which the credit unionsaid helps improve underwriting efficiency.

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Sageworks introduced the Electronic Tax Return Reader as a majortime-saving enhancement to its suite of credit risk managementsolutions for financial institutions. The complimentary upgradeautomatically imports data from borrowers' tax returns.

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“I am ecstatic with this product so far,” Steven Krauser, seniorvice president of retail operations for Melrose CU, told CUTimes.

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He explained that because the credit union's lending portfoliois so diverse, systematizing the evaluation of its underwritingprocess was a priority. Based on the NCUA's requirements, thecredit union needed to provide the matrix for evaluating a loan ina standardized manner across all product lines.

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Krauser, who joined Melrose CU about a year ago, explained oneof his goals was to study what the credit union could do better andbegan researching software that would allow him to do that.

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“We started in business in 1922 in taxi medallion financing,”Krauser said. “We have a significant portfolio in that. That is onereason we wanted to get involved in this.”

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The credit union also desired the ability to flag any problemsin advance by adjusting and stress testing its portfolio, and toquantify and maintain its methodology.

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Melrose CU, which has an open charter and one branch,investigated which lending modules would integrate with its core system's existingdata as well as standardize underwriting within its departments.The Sageworks suite, Krauser explained, allows the credit union tostress test its portfolio based on numerous factors such as loan tovalue, debt service coverage ratio changes and interest rateincreases.

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The credit union started fully underwriting with the system onAug. 4, 2015.

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“The quality of the underwriting analysis has increaseddramatically,” Krauser pointed out, adding that the timesavingbenefit will come later on. “The reason it is not there yet is thatit is new and we're still learning what to do, so there still is alearning curve.”

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Libby Bierman, an analyst for Sageworks, said, “Our bread andbutter at Sageworks has always been commercial loans and businesslending, so the tax packages we support are mostly those commercialproperties that accounting firms used for their businesses. Wesupply our financial institution clients with products that helpthem comply with regulations and improve their efficiency.”

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The Electronic Tax Return Reader works by optically “reading”electronic tax returns produced by many common tax packages,allowing for the creation of digital returns in the Sageworkssystem, where other financial information is also imported andstored. The program also benefits credit departments that analyzecommercial real estate borrower information, as it alsoautomatically populates Schedule E financial information for realestate properties.

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Sageworks said the enhancement allows credit unions to save asignificant amount of time.

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“Our users are spending about 30 minutes per return on average,and obviously, some tax returns are much more complex with manyreal estate properties,” Bierman pointed out.

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Through this program and its technology, that time can be pareddown to two to three minutes, she said.

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“I don't know that a lot of our clients even knew thistechnology was feasible,” Bierman added. “It has just been arecurring theme since we got into the credit analysis business,making sure that data was accurate and entered quickly. It issomething people kind of expected. This will proactively solve mostof those problems.”

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In addition to saving users time, the Electronic Tax ReturnReader aims to reduce errors that can occur during the manual dataentry process, and ensure consistency and accuracy during theproduction of commercial borrower spreads within the SageworksCredit Analysis tool. For applicable tax returns, the technologyensures different analysts across an institution are inputting datathe same way, which helps give credit unions a strong defenseduring exams.

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Bierman said Sageworks also helps clients maintainconsistency.

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“In the past, maybe there were multiple people entering data,and it is very easy to transpose numbers or enter something on thewrong line,” she explained. “The auto import helps eliminateinconsistencies and errors. The system also allows the financialinstitution the capability to go back in and make adjustments.”

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Melrose CU implemented Sageworks' entire suite of cloud-basedproducts about three and a half months ago, Krauser said.

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“Within that time, we were able to learn it, train our people,create a test site, play with it and then map our fields from ourcore system into the Sageworks system,” he noted.

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Krauser said Sageworks performs all calculations for MelroseCU.

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“It gives us the debt to service coverage ratio, loan to valueand matrix on individual loans that we are doing, plus it gives usall the same information on global cash flow for those individualsand does it for our entire portfolio on that individual. So if youhave a loan here and you are asking for a car loan, we can do theanalysis on that car loan to see if it makes [financial]sense.”

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Currently, Melrose CU uses Sageworks' tools for its commercialreal estate department, taxi medallion lending area and businessservices unit. Krauser explained the credit union will eventuallyintroduce Sageworks into its personal lending area as well, butfirst, it wants to gain full confidence using the tools for thelargest portion of its lending business.

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“We have a real robust program here, and we want to make sure wehave all the pieces and understand the full breadth and depth of itbefore we introduce it into other aspects,” Krauser said. “It isreally a great automation of the process.”

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Scott Ogle, CEO for Sageworks, noted, “Sageworks offerssolutions that simplify the complex processes that financialinstitutions handle every day. A key objective when developing orenhancing our solutions is to maximize time and efficiency. Withour customer needs in mind, we developed the Electronic Tax ReturnReader to become an integral component of each of our bankingsolutions, as it will save hours of manual data entry over the lifeof the solution.”

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Sageworks Credit Analysis allows credit unions to book loansfaster, and with consistency and transparency, while also managingrisk, the company said. The global cash flow analysis solutionpresents tax return input screens that create spreads, dynamicnarrative analysis and customizable credit memos.

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“This is also important to those credit unions that are gettinginto more member business lending, who may not feel they have theright staff in place,” Bierman asserted. “They can use a programlike this to take care of some of the more manual work and allocatetime more effectively to the actual analysis.”

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Bierman pointed out the credit analysis tool also helps creditunions prepare for exams, especially those that had trouble in thepast with credit decision inconsistencies and file errors.

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Roy Urrico

Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).