Conference 7.286::dcu

    
>   The Board reviewed the minutes of the November 3, 1993, Telephone Vote
>   regarding a VISA loan for Board member, XXXXXXX.  The Board requested that
>   the minutes be considered EXECUTIVE SESSION and the vote be considered
>   GENERAL SESSION.
>    
>   *  It was moved by Mr. McEachin and seconded by Ms. Mann to approve the
>   November 3, 1993, Telephone Vote minutes as amended.  MOTION CARRIED
>   UNANIMOUSLY.

    I was pleased to see this. While the discussion of a loan to a member,
    even a Board member, should be executive session, votes should never
    be cast in secret. In NH, at least, public bodies are not permitted to
    vote in executive session. At School Board meetings it is standard
    boiler plate upon leaving executive session to state that no votes
    were taken. I doubt that such laws bind the DCU Board and I applaud
    them for taking this step on their own.

    			Alfred

    DCU access to VAXnotes:

    I have some reservations about allowing access to this notesfile
    to those not employed either directly or by contract by Digital.
    My understanding of these notesfiles is that they are for the
    exclusive use of those employed by the above method.  The BoD
    has rights to this file as they are employees of Digital.  Would
    policy have to be changed/adjusted in order for access?  Would
    this compromise security of the network within Digital?  

    Just some of my initial thoughts.

    justme....jacqui

        External access, be it from the DCU or Digital business partners,
    has to be approved by a security committee. It is my understanding
    that DCU has this approval already.

    			Alfred

Am I mistaken, but was the capital ratio 'goal' in the past 8% and now
is at 8.5%?

Should it not be set at 10% so that we are better than the rest of our
peer credit unions?

	- mark

>>Year to date, savings have declined at
>>   an annualized rate of 7.4% with certificates experiencing the greatest
>>   decline.  

This is great - using real facts and data.

>>Management noted that they believe that this trend continues to
>>   be a reflection of savers moving to riskier, higher-yielding alternative
>>   investments.

This is not great - management is guessing at what's happening, and their
guesses may or may not reflect reality.

I say this because I personally moved a large amount of money out of 
savings in order to pay off higher interest loans.

And, even if it were true that money is chasing yield, what could/should
DCU do to compete for those savings?

On the other hand, if low interest savings are being used to pay off high
interest loans, might DCU be losing twice?  (only once in may case, as
the loan was from someone else more competitive)

Unless, of course, the intent of management is to keep the savings balance
low.

/bruce

re: .4 Capital Ratio Target moving

Thanks for pointing that out.  I track the current ratio, but I didn't notice
that the target had been increased to 8.5%, without any explanation.  Could it
please be explained?

Elaine

    
    	RE: .4 & .6  (capital ratio)
    
    	We have also changed the yardstick we are using.  We are now using NET
    	capital ratio as well as gross capital ratio.  Here are the
    	formulas for both:
    
    	Gross Capital Ratio =
    
    	(Allowance for loan losses + Reserves + Undivided Earnings)
        -----------------------------------------------------------
    				Total Assets
    
    	Net Capital Ratio =
    
    	(Reserves + Undivided Earnings)
        -------------------------------
    		Total Assets
    
    	So using Novembers Statement figures we have:
    
    		(2,745,340 + 6,167,814 + 13,846,929)
    		------------------------------------    = 6.71 gross cap. ratio
    			    339,113,892
    
    
    		(6,167,814 + 13,846,929)
    		------------------------    = 5.90 net cap. ratio
    			339,113,892
    
    
    	Our current Five Year Goals call for:
    
    	9.0% gross capital ratio or better by yearend 1998
    	8.5% net   capital ratio or better by yearend 1998
    
    	This ratio is positively affected by an increasing numerator and a
    decreasing denominator.  We have been experiencing BOTH these and thus
    the rapid increase in capital ratio.
    
    As some people have already noticed, these target capital ratios seem to
    be creeping up.  You are correct.  Two years ago, 7% was tossed around
    as the target, then 8% and now 9%.  Obviously, higher is better with
    regards to how our regulators view DCU but where and when will the line
    be drawn?  I have heard that some institutions have reserves as high as
    12%.
    
    Let's never forget that Undivided Earnings is money that is YOURS that 
    has been retained by DCU.  While it is important to reach and maintain
    adequate reserves, there IS a point after which it becomes excessive
    IMO.  As long as DCU maintains LOANS TO MEMBERS ONLY, does not
    invest in "investments" and maintains adequate loan loss reserves, the
    capital ratio will take no massive hit as it did 2 years ago.  Even
    with the tremendous down-sizing that Digital is going through, the
    membership has proven itself once again with below budget charge-off
    and delinquency ratios.  In good times, these ratios are far, far below
    our peers.  The strength of DCU *IS* its membership.  That is what must
    be protected at all costs.
    

    
    RE: .5
    
    The Board has asked management for more detailed information on the
    reduction of assets, including member surveys.  It is in the works.

>    	We have also changed the yardstick we are using.  We are now using NET
>   	capital ratio as well as gross capital ratio.  Here are the
>    	formulas for both:
    
>    	Gross Capital Ratio =
    
>    	(Allowance for loan losses + Reserves + Undivided Earnings)
>        -----------------------------------------------------------
>    				Total Assets
    
>    	Net Capital Ratio =
    
>    	(Reserves + Undivided Earnings)
>        -------------------------------
>    		Total Assets

    
>    	This ratio is positively affected by an increasing numerator and a
>    decreasing denominator.  We have been experiencing BOTH these and thus
>    the rapid increase in capital ratio.
    
Let's not forget that the DCU CEO and some or all of the DCU employees will be
rewarded (bonus) once the capital ratio hits <some magic number>. This can be
achieved by increasing the numerator or decreasing the denominator (or both).
IMO rewarding people for reducing assets by decreasing the membership i.e.
'Relationship Members' is very bad business. Short term gain at the risk of
long term loss.

Chris