| T.R | Title | User | Personal
Name | Date | Lines |
|---|
| 973.1 | | CADSYS::RITCHIE | Elaine Kokernak Ritchie, 225-4199 | Wed Jan 31 1996 15:31 | 91 |
| This topic started with the following string from topic 950:
RE: 950.1 NPSS::NPSS::BADGER "Can DO!"
isn't the charge offs getting bigger? they also didn't list the % this
time.
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Note 950.5 Discussion of July 24, 1995 BoD Minutes 5 of 9
CADSYS::RITCHIE "Elaine Kokernak Ritchie, 225-4199" 13 lines 14-SEP-1995 08:54
-< More detail >-
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RE: .1
Since you asked, I looked up the charge-off information missing from the board
minutes.
The charge-off percentage is .19%. This is "extremely low", or at least pretty
darn low. It it well below the industry average. Some at DCU argue that this
is too low.
The delinquency ratio for June was .34%, consistent with May. Recent press
releases have been saying this is about 1/3 the industry average.
Elaine
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Note 950.6 Discussion of July 24, 1995 BoD Minutes 6 of 9
NPSS::KOPACKO 8 lines 14-SEP-1995 09:35
-< regarding charge-off amounts >-
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> The charge-off percentage is .19%. This is "extremely low", or at least
> pretty darn low. It it well below the industry average. Some at DCU argue
> that this is too low.
What exactly is the charge-off percentage? How could any amount of charge-off
be too low? Shouldn't charge-off amounts ideally be 0?
Ray
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Note 950.7 Discussion of July 24, 1995 BoD Minutes 7 of 9
VMSSG::FRIEDRICHS "Ask me about Young Eagles" 12 lines 14-SEP-1995 10:02
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I believe the rational of the "charge-off is too low" is that the DCU
is being "too" conservative in its lending practices. To make more
money, they should be "less" conservative. But, a less conservative
lending practice will result in more write-offs.. The equation must
work out that the increased earnings more than offsets the write-offs
(minus the tax benefits).
If the numbers support this theory, then more write-offs are good.
cheers,
jeff
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Note 950.8 Discussion of July 24, 1995 BoD Minutes 8 of 9
CADSYS::RITCHIE "Elaine Kokernak Ritchie, 225-4199" 14 lines 14-SEP-1995 13:26
-< Loans and charge-offs >-
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re: .6
The charge-off percentage for a given month is the ratio of charge-offs for that
month to the total average amount of loans, averaged year-to-date.
Jeff, in .7 is right. Some believe that DCU is being too conservative in its
lending practices, resulting in fewer delinquencies and charge-offs than the
national average. While this may be true, it is also true that DCU members are
responsible people who take financial matters seriously. This is evidenced by
the fact that even when Digital (our sponsor) was having massive layoffs, the
loan delinquencies and charge-offs still stayed below the national average. DCU
also has a high loan approval rate.
Elaine
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Note 950.9 Discussion of July 24, 1995 BoD Minutes 9 of 9
SLOAN::HOM 6 lines 17-SEP-1995 21:27
-< Add'l note on charge-offs >-
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Though the amount is written off, collection efforts do continue. Some
percentage of charge-offs are eventually recovered.
Gim
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| 973.2 | Copied from 972.2 | CADSYS::RITCHIE | Elaine Kokernak Ritchie, 225-4199 | Wed Jan 31 1996 15:34 | 34 |
| <<< UPSAR::USER$411:[NOTES$LIBRARY]DCU.NOTE;1 >>>
-< DCU >-
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Note 972.2 Discussion of December 18, 1995 BoD Meeting Minutes 2 of 6
HYLNDR::BADGER "Can DO!" 27 lines 31-JAN-1996 12:16
-< charge-offs >-
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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
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| 973.3 | copied from 972.3 | CADSYS::RITCHIE | Elaine Kokernak Ritchie, 225-4199 | Wed Jan 31 1996 15:35 | 30 |
| <<< UPSAR::USER$411:[NOTES$LIBRARY]DCU.NOTE;1 >>>
-< DCU >-
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Note 972.3 Discussion of December 18, 1995 BoD Meeting Minutes 3 of 6
19096::BUSKY 24 lines 31-JAN-1996 13:12
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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
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| 973.4 | copied from 972.4 | CADSYS::RITCHIE | Elaine Kokernak Ritchie, 225-4199 | Wed Jan 31 1996 15:36 | 37 |
| <<< UPSAR::USER$411:[NOTES$LIBRARY]DCU.NOTE;1 >>>
-< DCU >-
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Note 972.4 Discussion of December 18, 1995 BoD Meeting Minutes 4 of 6
WLDBIL::KILGORE "DEC == Digital; Reclaim the Name!" 31 lines 31-JAN-1996 13:57
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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
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| 973.5 | I try not to repeat when I understand the answer | HYLNDR::BADGER | Can DO! | Wed Jan 31 1996 15:43 | 31 |
| 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
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| 973.6 | A little more on charge-offs | CADSYS::RITCHIE | Elaine Kokernak Ritchie, 225-4199 | Wed Jan 31 1996 15:53 | 27 |
| re: previous
Some points I'd like to add:
1. As Bill said in .4, chargeoffs are taken seriously. DCU may write off a
loan, but the collections department does everything they can, including
financial counseling, to get the money back.
2. The number you see in each month's minutes is the amount charged-off.
However, the net number of loans charged off is less each month, reduced
by the amount recovered from previously charged-off loans.
3. The board receives information which helps us to determine if the current
lending policy is too strict or too lenient. There is open communication
between board members and the VP of Lending about the realities of the
policy, which seems to be working well right now.
4. The percentage of charged off to the average number of loans is extremely
low, as I've said before, about 1/3 of 1%. For 1995 it was less than
the budget allowed.
Thanks for remaining vigilant. As the financial report is added back into the
published minutes, it will be easier for you to track the percentages. After
the year that DCU just had, $1 million in chargeoffs is okay. If you start
seeing $1 million each month, you should probably worry.
Elaine
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| 973.7 | discussions at board meetings | SLOAN::HOM | | Wed Jan 31 1996 16:13 | 16 |
| Some other points:
The board package which is reviewed each mouth do include
details by account number and account name. Obviously those details, by
its nature, can't be disclosed.
The lending department researches a small sample of each
month's charge-offs and reviews the methodology used to
approve those loans. Where appropriate changes may be made to
the loan approval process.
The majority of the charge-offs are from unsecured loans. This
is one reason why the interest rates on unsecured loans are higher
than secured loans.
Gim
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| 973.8 | | QUARK::LIONEL | Free advice is worth every cent | Wed Jan 31 1996 16:40 | 5 |
| Another point is that chargeoffs are part of the "cost of doing business" that
is factored into setting the loan interest rates. DCU managing to keep
chargeoffs so low keeps our rates low, which is good.
Steve
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| 973.9 | This SC member is watching what the Board does | WRKSYS::SEILER | Larry Seiler | Sat Feb 03 1996 10:54 | 21 |
| I also have some responses to the excellent questions that Ed Badger
raised in note 972.2.
First, at the Board meetings that I have attended, I have always seen
the Board take a careful look at the chargeoffs, including asking for
further information about any items that seem surprizing. As an SC
member, I would be concerned if the Board simply accepted chargeoffs
without thinking about them, so this is something I watch for. FWIW,
I don't have the impression that the Board is "micro-managing," but
rather that they are looking for lessons to be learned.
Second, the SC asked for a presentation by the collections department,
as reported in our recently posted minutes. One of our goals was to
understand what happens with loans that get into trouble, to ensure that
there are reasonable controls and appropriate efforts to get the loans
paid. I was quite happy with what I heard -- both as an SC member and
as a DCU member. I don't want to go into details, but I can assure you
that the SC is keeping an eye on how things like this are handled.
Enjoy,
Larry
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| 973.10 | thanks | HYLNDR::BADGER | Can DO! | Sat Feb 03 1996 19:18 | 7 |
| Ok thanks, I assumed the right things were being done, but you know
what happens if you assume too much. Perhaps the minutes could be
beefed up a little bit to include that at least there was some
discussion on points, and then perhaps highlights of discussions.
I don't think, I know we have work to do in respect to minutes.
ed
|