| T.R | Title | User | Personal
Name | Date | Lines |
|---|
| 730.1 | | CADSYS::RITCHIE | Gotta love log homes | Thu Dec 09 1993 11:44 | 13 |
| So let me understand this. The capital ratio goal of 6% for 1993 was reached by
the end of July, and well exceeded at 6.29% by the end of August. Yet the
President declares "we have a long way to go to get to 8%".
1. Will he even be happy at 8%
2. What's the point of having a goal? In my mind, reaching the goal so soon
in the year means some money should be released to the membership (perhaps
a Q4 mini-dividend, or holding off on fees for another quarter).
We are making money hand over fist!
:-(
|
| 730.2 | | AOSG::GILLETT | Friends dont let Friends Early Apex | Thu Dec 09 1993 12:54 | 8 |
| Hmmm...it's also worth noting that DCU had, by September's end
already pulled in over $4 million in income. Looks like
another record year shaping up in terms of income. Yup, I can
sure see the need for fees.....
:-(
Chris
|
| 730.3 | | NACAD::SHERMAN | Steve NACAD::Sherman DTN 226-6992, LKG2-A/R05 pole AA2 | Thu Dec 09 1993 13:26 | 15 |
| I have asked around about why the 8% number. Basically, what I
understand is that the insurers of the DCU want to see that number.
A capital ratio less than this amount is cause for concern by those
who would insure DCU. As I understand it however, if DCU
is showing good progress in approaching that figure, then it is a Good
Thing as far as the insurer is concerned. My understanding is that
the 8% figure is NOT something that Chuck dreamed up. Rather, it is
an industry standard that DCU is expected to uphold.
I am convinced that the DCU should strive to reach the 8% figure
in order to maintain its posture as a stable and secure institution.
I think the issue isn't whether or not DCU should be at 8%. The
issue is by what means it should attain 8% and how rapidly.
Steve
|
| 730.4 | | FLUME::bruce | discontinuous transformation to win-win | Thu Dec 09 1993 14:19 | 3 |
| I don't know if the capital ratio increases linearly, but it took about
8 months to increase by 1.2, then another .3 in September. So, within
a year we should reach this "magic" 8% - is this right?
|
| 730.5 | | STRATA::JOERILEY | Legalize Freedom | Thu Dec 09 1993 23:26 | 9 |
| RE:.3
> My understanding is that
> the 8% figure is NOT something that Chuck dreamed up. Rather, it is
> an industry standard that DCU is expected to uphold.
Is this a Credit Union standard or is this a bank standard?
Joe
|
| 730.6 | Imagination or pipe dream? | PACKED::COLLIS::JACKSON | DCU fees? NO!!! | Fri Dec 10 1993 09:18 | 6 |
| I have also heard a number of times that DCU has never had a
higher ratio than we currently have.
Just imagine - if that 4 million of profit went back into the
owners pockets instead of DEFCU reserves. Is this what we
can expect in less than 2 years?
|
| 730.7 | IMO, of course ... | NACAD::SHERMAN | Steve NACAD::Sherman DTN 226-6992, LKG2-A/R05 pole AA2 | Fri Dec 10 1993 09:36 | 24 |
| re: .5
This is DEFINITELY a Credit Union standard. It is a number that the
CU industry and insurers are agreed upon. That's how I understand it
from talking to folks and from what I've read.
re: .6
I don't know if DCU has or has not had a higher ratio that it currently
has. I expect that the ratio can change as the number seems based on
factors that can change over time. It could be that at some future
date the industry might move to a lower number or a higher number. DCU
will be expected to still meet that new number. For example, it is
possible (though I think unlikely and am just throwing an uninformed
number out) that next year CUs comparable to DCU will be expected to
maintain a ratio of at least 9%. Or, the number could drop to 7%.
DCU would still be expected to meet the new number.
Having seen what I've seen, I view the current situation as sort of a
probationary period for DCU (my words). Of course, this is only one
parameter. Other aspects of DCU are and continue to be strong. But,
this is an important parameter that DCU is required to address.
Steve
|
| 730.8 | To be more graphic | CADSYS::RITCHIE | Gotta love log homes | Fri Dec 10 1993 12:14 | 56 |
| Below is a rough chart I've been keeping since the capital ratio has been
reported in the board minutes. The good news is that we have come a long way.
Other good news is that we should reach the desired 8% before long. With a rate
of improvement like this, the people who run our credit union must be aiming for
something more than just an 8% ratio. Going from 4% to 8% in less than two
years is phenomenal, and probably more than any governing body would expect.
Are there any rewards coming from NCUA when we hit the magic 8%? Or do they
just stop sending us nasty letters?
Elaine
DCU Capital Ratio History
7.0 | | |
6.8 | | |
6.6 | | |
6.4 | | |
6.2 | | * |
6.0 | G - - - - - -*- - - - - G
5.8 | | * |
5.6 | | * * |
5.4 | | |
5.2 | | * |
5.0 | | |
4.8 | *| |
4.6 * | * | |
4.4 | * * | |
4.2 | | |
4.0 | * | |
3.8 | | |
S O N D|J F M A M J J A S O N D|J F M A M J J A S O N D|
1991 | 1992 | 1993 |
+
+ Reported by C. Cockburn and presented in note 306.0
End of Capital End of Capital
Month Ratio Month Ratio
Reported Reported
Jan 1993 ---
Feb 1993 ---
Mar 1993 5.28 %
Apr 1993 5.56
May 1993 5.69
Jun 1992 4.0 % Jun 1993 5.79
Jul 1992 --- Jul 1993 6.00
Aug 1992 4.4 Aug 1993 6.29
Sep 1992 4.42
Oct 1992 4.6
Nov 1992 ---
Dec 1992 4.82
|
| 730.9 | | PATE::MACNEAL | ruck `n' roll | Fri Dec 10 1993 13:22 | 6 |
| The meeting minutes did say something about DCU's peers (i.e. other
creidt unions) having capital ratios of 8%.
As far as goal setting, it is not uncommon to set incremental goals. I
don't see a problem with setting a goal of 6% for August while having
an overall goal of 8%.
|
| 730.10 | | CADSYS::RITCHIE | Gotta love log homes | Fri Dec 10 1993 13:50 | 11 |
| Well the 6% goal was for the year 1993. I guess the goal for 1994 will be
easy, it will be 8%.
It's not the way I would do my household budget. If I was way ahead on a
savings goal, my family would get some kind of benefit from it (if the goals are
reasonably set, of course).
But then, my family's net worth is not as large as DCU's. I think the customers
are just as demanding!
:-)
|
| 730.11 | | NACAD::SHERMAN | Steve NACAD::Sherman DTN 226-6992, LKG2-A/R05 pole AA2 | Fri Dec 10 1993 14:08 | 6 |
| My impression is that once DCU is "in line" with what other CUs are
doing as far as the ratio goes there will be less emphasis on raising
it any further. I expect there to be some sort of "return" in the form
of improved rates and such. This is *just* my opinion, of course ...
Steve
|
| 730.12 | | PATE::MACNEAL | ruck `n' roll | Fri Dec 10 1993 14:41 | 9 |
| �It's not the way I would do my household budget.
It looks to me like the capital ratio goals being set in a similar
fashion to the way we set some of our manufacturing goals. We will
have a long term goal set with appropriate sub-goals/milestones along
the way. It is much easier (and easier on the ego) hit and recognize
subgoals along the way to the major goal. It can be somewhat
discouraging to look up and realize you are still quite aways away from
the target if you don't recognize the gains made to date.
|
| 730.13 | | CADSYS::RITCHIE | Gotta love log homes | Tue Feb 15 1994 16:57 | 13 |
| re: .1
>> 1. Will he even be happy at 8% ?
I guess I can answer my own question. The average is now 9.2%. We thought we
were doing well when we were 2% behind (6% vs. 8%), but now we're 2.5% behind
(6.7% vs 9.2%).
Maybe we can increase the competitions denominators!
:-)
Elaine
|
| 730.14 | | ROWLET::AINSLEY | Less than 150 kts. is TOO slow! | Tue Feb 15 1994 21:56 | 6 |
| Phil,
In your opinion, are the other CUs that DCU is benchmarking their
capital ratio against, the proper ones?
Bob
|
| 730.15 | | ASE003::GRANSEWICZ | Candidate for DCU Director | Wed Feb 16 1994 00:34 | 32 |
|
Bob, I'm not sure how one would determine "proper". These comparisons
are typically done against credit unions with a certain range of
assets. Usually we fall into a category of over $50 million since
there are not a lot credit unions larger than us but many more smaller
than us. There are many differences between DCU and most of the credit
unions that we get lumped with. I've asked if we could narrow the
comparisons down so that we were comparing apples to apples but I don't
think it's possible, or at least I haven't seen it yet. So bottom line
is beware of blind peer comparisons unless you know MUCH more about
what went into the numbers.
What seems to get lost in the noise about the capital ratio is ASSET
QUALITY, loan policies, controls, etc. If we had a 20% capital ratio
would it be any good if all these weren't being carefully watched? I
think we can all speak from experience on this one. IMO, to focus so
blindly on a magic (ever increasing) capital ratio is to loose sight of
your primary mission, namely serve the membership. The capital ratio
can, and will grow, as a result of taking care of business. IMO, to
design a 5-year strategy around this number is very short-sighted.
NOBODY is saying, stop building equity. What we're saying is stop
building it SO QUICKLY and recognize the needs of the membership.
Perform your primary mission well (serve the membership) and your capital
ratio will do just fine.
DCU members must decide in the coming election if "relationship banking"
serves THEIR needs. Is it what THEY want and need? Remembering at all
times that we will lose part of the membership to competitors who do not
insist on "relationships". DCU's primary advantage of convenience is
nearly neutralized by competitors' ATMs. The last thing we should be
doing is giving members reason to shop around.
|
| 730.16 | | ROWLET::AINSLEY | Less than 150 kts. is TOO slow! | Wed Feb 16 1994 08:30 | 9 |
| re: .15
Thank you Phil. With the ever-increasing capital ratio target, I
suspected that perhaps that we weren't doing an apples-to-apples
comparison.
I also agree with the rest of your comments.
Bob
|
| 730.17 | | NACAD2::SHERMAN | Steve NETCAD::Sherman DTN 226-6992, LKG2-A/R05 pole AA2 | Wed Feb 16 1994 15:19 | 6 |
| This actually reflects a trend among a large number of CUs. The
current thinking seems to be to head to a magic number of, as I recall,
about 10%. I understand the CU rags have a lot of debate going on
about this, but I haven't gotten to read it yet.
Steve
|
| 730.18 | Role playing | ASE003::GRANSEWICZ | Candidate for DCU Director | Wed Feb 16 1994 15:56 | 44 |
|
Capital Ratio Vantage Points:
1) Credit Union Regulator (NCUA)
As a regulator, my job is to make the institution as safe and
sound as possible and ensure that it causes no loss to the deposit
insurance fund. So capital ratio heaven is 100% because then I would
have accomplished my job as best I can.
2) Credit Union Management
As a manager of the credit union, I also need to ensure safety and
soundness. But I also realize that how my credit union is rated is
based, in part, on the capital ratio. Also, all this stockpiled
capital costs me ZERO. Now I can loan this out and eliminate the
cost side of the equation. My profits will increase which will make
my equity increase, which increases my profits further, etc. So
what is my ideal capital ratio? Hard to tell but why wouldn't I want
it to be as high as I can get it?
3) Credit Union Member
I also want my credit union to be safe and sound. But I also need
MY finances to be safe and sound. I don't mind building equity
and improving the capital ratio, but when will it end? When can I
expect to see some return on MY investment in DCU's equity? So what
is the capital ratio I'd like to see DCU have? Hard to say, but I
certainly can't afford 100% that the NCUA guy above wants! I am
concerned with the dynamics of the manager above me. Simply
stated, "What's in it for me?"
4) Credit Union Director (me personally)
I also have to ensure safety and soundness while trying to balance
the interests of all the people above. I have come to the
conclusion that it is important to grow the capital ratio, but not
without including the membership in the distribution of the pie.
Everybody else seems to be getting a piece of it, why not the
members? The members should not have to wait until everybody else
has been satisfied in order to scavenge a few crumbs. After all,
who was the credit union formed to serve?
|
| 730.19 | | PATE::MACNEAL | ruck `n' roll | Wed Feb 16 1994 16:07 | 13 |
| �But I also realize that how my credit union is rated is
� based, in part, on the capital ratio.
Rated by whom?
�I have come to the
� conclusion that it is important to grow the capital ratio, but not
� without including the membership in the distribution of the pie.
� Everybody else seems to be getting a piece of it, why not the
� members?
Who is this everybody else that is getting a piece of the pie, and
exactly what is this pie?
|
| 730.20 | | ASE003::GRANSEWICZ | Candidate for DCU Director | Wed Feb 16 1994 16:50 | 19 |
|
> Rated by whom?
NCUA
> Who is this everybody else that is getting a piece of the pie, and
> exactly what is this pie?
Pie, pie, as in profits!
Examiners are happy, it all goes to equity so it meets their goals.
Management is happy, it all goes to equity so it meets their goals.
DCU bonuses get handed out based on a percentage of profits.
DCU members get "relationship banking", ie. a plan to further maximize
profits and implement a fee environment. More like pie in the face!
|