Conference 7.286::dcu

I assume "Capewind" and "Land Development" are the residue left from
the Mangone mess. Do we know what sort of financial impact these had
on us in terms of Department of Revenue and other settlements?

At what point in time (calendar year is sufficient) did the DEFCU
gain fiduciary involvement in these ventures? Was it an "after the
fact" thing once the scandal had been unearthed, or was it right
from the start?

If right from the start, do auditors reports and/or annual reports
from that time period disclose that publicly and clearly?

    
    Each and every month we see money routinely devoted to charge-offs.
    there is no disccusion listed on the topic.  Perhaps the bod did talk
    about ths issue, but the minutes fail to represent the meeting.
    
    I hope that perhaps the two directors that follow this notefiles could
    comment.
    
    Charge offs.  The way I understand it, is that perhaps DCU isn't
    agressive enough with loans, and the bad loans compared to other
    lending institutions are low.  And these charge offs represent bad
    loans.  Am I right so far?
    
    now being a supporter of six-sigma, and if *I* were a director, I'd
    want to know EACH month, what was learnt from the failed loan and how
    we could tweek our process to get that charge-off lower.  I fear, and I
    hope I'm wrong, that the charge-off is sooo routine, that no thought is
    being expended on how we can reduce it.
    We may well ahve better numbers than other institutions, yet $88,000
    per month yealds darn close to 1 million dollars a year.  With that
    kind of money, I'd like to be assured that we totally understand this
    cost of doing business.  Again, since the minutes do not  go into
    detail, perhaps they do know.
    
    ed
    
    

    I'm kinda curious my self what the process is but two comments...

    1. I've heard in the past and I assume that it's true, while
    charge offs are a Standard Operating Procedure of doing this kind
    of business, DCU's Charge Off percentage is one of the LOWEST in
    the business!

    2. I worry about the role of BoD members and DCU personnel. 

    a. I expect the BoD to guide and point the DCU in the proper
       direction.

    b. I expect the DCU personnel to implemment the plans needed to
       get us where the BoD says we shoud be.


    I DON'T want the BoD getting involved in the nitty-gritty details of
    running the credit union. 

    Now I know what kind of trouble a real lack of involvment on the
    part of the BoD can get us into, but I don't want the pedulum to
    swing too far in the other direction.

    Charly

    
    Re .2, .3:
    
    As with almost anything else, arriving at the optimal charegoff amount
    is a delicate balancing act. For example, if you think the amount is too
    high and you throw more resources at collecting, are you spending more than
    you'll get back? And how adversely would the extra resources affect your
    operating expense ratio (another yardstick for management performance)?
    
    From another perspective, the charge-off rate at DCU is lower than peer
    credit unions, by a factor of 2 or three as I recall. Does that mean
    that it's doing a wonderful job at collections, or that its lending
    criteria are too strict and as a result it's not realizing a chunk of
    potential loan income (the easiest way to approach $0 chargeoffs is with
    $0 loans)? (BTW, when .2 said "DCU isn't agressive enough with loans",
    did you mean not aggressive enough in giving them out, or not aggressive
    enough in getting them back?)
    
    My personal impression:
    
      o  Chargeoffs are taken seriously at DCU; since these chargeoffs involve
         real member/owners, you don't see the details in the minutes. 
    
      o  DCU management is doing a fine job of keeping chargeoffs to a
         minimum, while aggressively (now more than ever) lending to its
         member/owners, all the time keeping the other points on the
         balance sheet in line.
    
    
    Bill
    

RE: .2 HYLNDR::BADGER "Can DO!"
    
We previously discussed as a reply to your similar question in note 950.
Perhaps we can ask the moderators to create a note to discuss charge-offs, so
we don't have to repeat the discussion every few months.

Elaine

    re:. 5
    
    ANYONE can create a new topic in the conference.  Go for it.
    
    Bob

Let's please continue the discussion of charge-off numbers in note 973.

Thanks!

Elaine

    I'm getting old, I didn't remember the topic being discussed.
    Thanks for reminding me of that note.
    
    BUT, perhaps why I bring it up again, or failed to remember it was
    talked about, was that I didn't get an answer I could sink my teeth in.
    
    Yes, we have a small charge off rate, I mentioned that in .2
    
    What I AM saying is becasue the number is small, and consistant, is it 
    routinely ok'ed without thought?
    
    Now, I would not expect the BOD to do the leg work, but DCU managment
    present,   How is that rate or amount achieved, and is there anything
    we can learn from this months FAILURES to reduce the next months charge
    offs.   Please don't read that I want 0 loans to be made as that is the
    only way to reduce this fugure.
    
    What I was think is look at this month's charge offs and last.  Is a 
    greater portion of defaulted loans made by one loan officer?  If so,
    fix.  Is there a question/proceedure I can use that may catch a loan
    that could default.  Is there a way to collect on these loans, ever?
    
    These are the types of questions that come to mind.
    
    AND, I'm not saying it isn't being done today.  What I'm saying is that
    I don't see evidence here or in the other note of this occuring.
    Perhaps a loss of 1 million a year is justifable cost of doing
    business, but 1 million should never be written off with no thought.
    
    thanks, ed
    

    I don't see why the discussion shouldn't happen here, but no problem.
    I posted a reply about chargeoffs as note 973.9.
    
    An implicit issue in Ed's questions is the fact that he couldn't tell
    from the Board meeting minutes whether chargeoffs were being considered
    or not.  Of course Board meeting minutes cannot contain *everything*
    that happens at the Board meeting, and must not contain references to
    individual members or to confidential financial information.  But I
    encourage the Board members who note here to think about whether there
    are places where it would be appropriate for the Board minutes to
    contain more information about the issues that were discussed, even if 
    the details of the discussion cannot or should not be revealed.
    
    Of course, what should be in the minutes depends a lot on what they are
    intended to be.  At a minimum, minutes need to record the decisions
    that are made.  Additionally, the Board minutes are being used to 
    communicate to the members what the Board is doing -- specifically,
    that it is doing its job with due dilligence.  Given this secondary 
    use, you may wish to consider putting more information into the minutes.
    
    		Regards,
    		Larry