ANNUAL REPORT 2019
the ne t generation credit union
#OutOfTheBlue
Member First Credit Union Limited Annual Report and Accounts 2019 You can manage your MFCU account from the comfort of your sofa!
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Notice for Annual General Meeting 2 Agenda 3 Standing Orders 4 Credit Union Motions 5 Report of the Chair 6 Report of the Chief Executive Officer 9 Return on Investments 11 Community Report 13 Prize Draw 17 Nominations Update 19 Compliance Update 20 Director’s Report and Financial Statements 22 Board Oversight Committee Report 50 Audit Committee Report 51 Risk Committee Report 52 Nomination Committee Report 53 Lending Update 55 We’re going green! #OutOfTheBlue 56 Submitting questions for the AGM 57 NOTICE & AGENDA FOR ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting (AGM) of Member First Credit Union will take place on Monday, 9th December 2019, at 8.00pm in the Crowne Plaza Hotel, Northwood Park, Santry. Members are requested to bring this report and their passbooks to the AGM.
All members attending the AGM will be eligible to participate in a FREE draw on the night, with prizes totalling €5,000.
Free car parking will be available in the Crowne Plaza Hotel. Transport by bus will be available for members from various locations. Please see below bus timetable to the AGM. Members must reserve a seat by contacting us on (01) 851 3400 or by emailing [email protected].
- Gráinne Brennan, Secretary
Bus Timetable
Bus serving NWS, Donnycarney, Artane Location Departure time MFCU North William Street Office 6.35pm Donnycarney Church 6.45pm Member First Credit Union, Artane Branch 7.00pm Roundabout Pub, Ardlea Road 7.05pm Artane Beaumont Family Recreation Centre 7.15pm St. Luke’s Church, Kilmore West 7.20pm
Bus serving Coolock Location Departure time St. Brendan’s Church, Coolock 7.00pm St. Joseph’s Church, Bonnybrook 7.10pm Northside Shopping Centre, Taxi Rank 7.20pm
Bus serving Swords Location Departure time Member First Credit Union, Swords Branch 7.00pm
Bus serving Raheny Location Departure time Member First Credit Union, Raheny Branch, Church Car Park 7.00pm
All buses will arrive at Crowne Plaza at approx. 7.50pm
2 Agenda* When you borrow and save with us, you’re 1. Early Raffle at 8.00pm sharp funding our support 2. Ascertainment that a quorum is present of a variety of local 3. Adoption of standing orders community initiatives. 4. Reading and approval of minutes of AGM 2018 Thank you. 5. Address by MFCU Chair 6. Strategic Update 7. Finance Report 8. Report of the Auditor 9. CEO Report 10 Report of Board Oversight Committee 11. Appointment of Tellers 12. Report of the Nomination Committee 13. Balloting 14. Community Report 15. Announcement of Election Results 16. Any other business 17. Adjournment of meeting 9.15pm sharp followed by refreshments
*Subject to change
World Champion Boxer and MFCU Member, Kellie Harrington, visits MFCU
3 STANDING ORDERS
1. Voting giving the proposer the right of reply before doing Each member shall be entitled to one vote so. irrespective of his/her shareholding, in accordance with section 82(2) of the Credit Union Act 1997 (as 10 – 15. Miscellaneous amended). 10. The Chair of the Board of Directors shall be the Chair of any general meeting, except where he/ 2 – 3. Election Procedure she is not available, in which case it shall be the 2. Elections to the Board of Directors, to the Board Vice Chair, except where he/ she is not available, Oversight Committee and the position of Auditor in which case the Board shall decide amongst shall be by majority vote and by secret ballot. themselves who shall act as Chair of the general 3. When nominations are announced, tellers shall meeting. be appointed by the Chair and ballot papers 11. The Chair may at his/her discretion, extend the shall be distributed. Nominations shall be in the privilege of the floor to any person who is not a following order: (a) nominations for Auditor; (b) member. nominations for members of the Board Oversight 12. Matters not covered by the Agenda may be Committee; (c) nominations for Directors. When introduced under “Any Other Business” at the voting is completed, the votes shall be taken discretion of the Chair. and tallied by the tellers. Any ballot paper which 13. The Chair’s decision on any matter relating to contains votes for more than the number required these Standing Orders or interpretation of same to be elected shall be void. All elections shall be shall be final. by secret ballot and by majority vote. When the 14. No member shall have more than one vote on votes have been counted by the tellers, the results each question at any general meeting of the Credit shall be announced by the Chair. In the event that Union or any adjournment thereof irrespective of all vacancies are not filled by the first ballot further his/her shareholding or the number of accounts ballots shall be taken as required. In the event of in his/her name in the Credit Union provided, an equality of votes between candidates for the however, that except in voting at elections, the remaining vacancies not filled in accordance with presiding member shall have a second or casting the above procedure one further ballot shall be vote in the event of equality of voting. Voting taken and should that ballot fail to determine by proxy shall be allowed only when a member the issue, the vacancies shall be filled by lot from other than a natural person votes through a among such candidates having an equality of representative, who is a member of the group, votes. duly authorised in writing for that purpose and accepted as such by the Board of Directors. 4 – 9. Motions to approve 15. Any matter to be decided upon by vote at the 4. All motions from the floor of the AGM must be AGM shall, unless otherwise expressly provided proposed and seconded by members present at for by law or the rules, be decided upon by simple the AGM and approved by the proposer. If the majority. proposer is absent when the motion is called, the motion shall be deemed to have failed. 16. Suspension of Standing Orders 5. A proposer of a motion may speak for such Any one of these Orders or all of these Standing period as shall be at the discretion of the Chair Orders may be suspended on a motion to this of the meeting and shall have the right of reply effect receiving a two-thirds majority of those before the motion is put to the meeting for a vote. present and entitled to vote. 6. In exercising his/her right of reply, a proposer may not introduce new material. 17. Amendment of Standing Orders 7. The seconder of a motion shall have such time Standing Orders may be amended or altered at as shall be allowed by the Chair to second the the general meeting and only if a motion to this motion. effect has received a two-thirds majority of those 8. Members are entitled to speak on any such present and voting. motion and must do so through the Chair. All speakers to any motion shall have such time as 18. Adjournments shall be at the discretion of the Chair. Adjournments of the AGM shall take place only in 9. The Chair shall have the absolute right to decide accordance with section 81(1) of the Credit Union at any time when a motion has been sufficiently Act, 1997 (as amended). discussed and may put the motion to the meeting
4 CREDIT UNION MOTIONS
Dividend ‘That this Annual General Meeting agrees that the sum of €212,433 (0.1%) be distributed to members by way of a dividend.’
Interest Rebate ‘That this Annual General Meeting agrees that the sum of €292,562 (5%) be distributed to members by way of an interest rebate on standard rate loans.’
Affiliation Fee ‘That this Annual General Meeting agrees that the sum of €1.15 be deducted from each adult members’ share account by way of an Affiliation Fee to the Irish League of Credit Unions.’
Rule Changes There were four amendments to the Standard Rules for Credit Unions (Republic of Ireland) arising from League AGM 2019.
Rule 84A. Membership Officer (1) The board of directors may approve the appointment of a person by the manager as a membership officer to assist the membership committee and work under its supervision and control. (2) A record of each application for membership which has or has not been approved shall be furnished by the membership officer to the membership committee no later than seven days of receipt of the application.
Rule 13. Qualifications for membership (1) An applicant shall be admitted to membership only when: (i) it shall have been determined that he is eligible for membership in accordance with rule 11; and (ii) his application for membership shall have been approved by the affirmative vote of a majority of the board of directors or by a duly appointed and authorised membership committee present at a meeting at which the application is considered, or by a duly appointed and authorised Membership Officer; and
Rule 83. Duties of membership committee and/or membership officer Subject to these rules and the Act, the membership committee and/or membership officer shall:......
Rule 1. Interpretation ‘officer’ includes: (a) the chair, the secretary or any other member of the board of directors, a member of a principal committee, a member of the board oversight committee, risk management officer, compliance officer, credit officer, membership officer or credit control officer of the credit union, (b) an employee of the credit union to whom paragraph (a) does not apply, and (c) a voluntary assistant of the credit union, but does not include an auditor appointed by the credit union in accordance with the requirements of the Act;
CHRISTMAS LOANS COVER YOUR FESTIVE FINANCES
WARNING: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future. Lending criteria, terms & conditions apply. Member First Credit Union Ltd. is regulated by the Central Bank of Ireland.
5 REPORT OF THE CHAIR
As the Chairperson it is my privilege to welcome associated with regulation along with decreasing you to the Annual Report of Member First Credit return on our investment portfolio has led to Union. This Report not only includes the financial increased pressure on our loan book. Results for statements for the year ended 30th September the financial year have been satisfactory with an 2019 but also details many of the activities overall growth in our loan book and a surplus of undertaken by the Credit Union in the past income over expenditure of €3.1 million. However year and I would like to take this opportunity to the increasing reliance on the income achieved express my appreciation to all our members for from our loan book has meant that alternative the confidence you have continued to show in sources of income need to be identified. our Credit Union. The Board, in considering a potential dividend, The role of the Board of Directors is to develop is aware of the current environment and the and guide the strategic plan of Member First likelihood of no change in the near future has Credit Union. With our vision to re-imagine decided to recommend to the Annual General financial services in each of our local communities Meeting a dividend rate of 0.1% on members’ at the centre of our activities during the year the shares and a loan interest rebate of 5% on Board of MFCU reviewed the Credit Union’s standard loans. Strategic Plan to ensure that it remains relevant. Our strategic journey is not one with a defined end point, but rather one that will see us adapting to the rapidly changing external environment which is dominated by innovative technology, 0.1% 5% competitive pressures, regulatory requirements and the changing needs of our members. Dividend Loan interest rebate MFCU continues to play its part in the restructuring of the Credit Union movement. Growth through The importance of Community also features co-operation and collaboration is a cornerstone in the Strategic Plan for our Credit Union and of our Strategic Plan and the Board of Directors throughout the year over €90,000 was distributed ensures that every step we take with other credit to support local schools, education initiatives unions must contribute to the overall strength and literacy programmes, community groups and stability of MFCU. For the members of MFCU and sports clubs. We’d like to acknowledge the this means a strengthening of our assets and achievements of all those who we support in the reserves and enables us to bring our members community and more details can be seen in the an expanded and improved range of high quality, Community Report on pages 13-16 of the report. affordable financial services. Furthermore as your elected Board, we will continue to ensure that any On your behalf, I would like to thank the Board future mergers will be subject to the highest level of Directors for their time and work throughout of due diligence, will be financially beneficial the year. In particular I would like to thank to MFCU and will be in the best interest of our John Matthews our former Chairperson who is members. stepping down from the Board after a number of years service. Throughout the year, new members joined our Credit Union at a significant pace with 3,190 I would also like to recognise our staff under joining. There are now a total 58,782 members the stewardship of our Chief Executive Officer, of our credit union from communities all across Fiona Cunningham. Our management and staff North Dublin and I would like to extend a warm continue to work tirelessly to serve our members welcome to you all. and continually rise to the new challenges each year brings. As we have been reporting in recent years, the challenges facing the Credit Union sector I hope to see many of you at our AGM on continue and 2019 has been no different. The December 9th in the Crowne Plaza. It is a great uncertainty surrounding Brexit, increasing costs opportunity for you to meet your Board of
6 REPORT OF THE CHAIR continued
Directors and staff of MFCU. The details in this Annual Report will be further explained and any questions our members have will be answered. Joan Finally, I’d like to thank you our members for your continued loyalty throughout 2019 and best Barker wishes to all for the Christmas and New Year period and look forward to continuing to serve Chairperson you in 2020.
Board of Directors
Joan Barker, Chairperson Michael McKenna, Vice Chairperson Gráinne Brennan, Secretary Valerie Mulvaney Pascal Delahunty Bridget Johnston John Matthews Olive McMahon Kay Byrne Board Oversight Committee WELCOME Helen Walker, Chairperson George Mongey, Secretary Paddy Carpenter, Committee Member LOANS FOR FIRST TIME BORROWERS
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WARNING: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
Lending criteria, terms & conditions apply. Member First Credit Union Ltd. is regulated by the Central Bank of Ireland.
7 DID YOU KNOW?
You probably think you know, but we want to set the record straight on a number of things that people don’t know about us!
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5 GREAT VALUE LOANS. HASSLE-FREE SAVINGS We’ve got promotional rates for cars, home improvements, self- care and more! Our loan interest is calculated on the reducing loan balance – that means the more you pay, the less you pay!
6 JOIN US IF YOU LIVE OR WORK NEARBY You can join MFCU if you live or work in the area of one of our 6 North Dublin branches – they are Coolock, Artane, . 8 Raheny, Donnycarney/Beaumont, North Strand & Swords REPORT OF CHIEF EXECUTIVE OFFICER
I am delighted to present the results of another This year we wrote off €526k, a significant successful year for Member First Credit Union. improvement on last year of €732k. In contrast Our focus this year has been to fully embed the our recovery amounted to €709k. MFCU actively expanded branch network, further develop the pursue non-paying members using all available business model and to ensure our long-term means to recover outstanding debt. viability. The key financial highlights are as follows: The Member First culture and first-class • The credit union remains financially strong operational standards are now consistently with €272 million in total assets applied across the branch network, in the • Net income of €9.2million Member Services Centre and through our on-line • Expenditure of €5.9 million channels. • Surplus of €3.1 million • Investments are secure with a well-diversified Member First prides itself on our commitment portfolio to our members and we have worked with the • Bad debts recoveries €709k insurance provider for the member pay Death • Bad debt provisions stand at €4.2m Benefit Insurance product and I am happy to • The Board is in a position to propose a report that the benefit will increase from €2,000 dividend of 0.1% to €2,300 effective from January 1st 2020. If • The Board is in a position to propose an you have not yet signed up please speak to a interest rebate of 5% on standard loans member of staff. Member Service Centre We can see strong underlying growth with membership and loans all on the increase. Our The Member Service Centre continues to offer loan book now stands at €92.3 million. At the end an alternative channel of service delivery to of September 2019 your credit union had assets members. We have a team of highly trained and of €272 Million with six branch locations across skilled staff ready to answer your calls, deal with North Dublin. A review of our financial situation on-line and other member enquiries. All calls and operations further reinforces our success are answered promptly by a professional and and points to a strong delivery of services and experienced staff member. Please do not hesitate financial results. to call us if there’s anything we can do to help. You can contact the Member Service Centre on Financials (01) 851 3400.
Despite an anticipated reduction in investment Investment in Information Technology income, continuing robust management of costs and a strong focus on maximising income During the year we upgraded our IT infrastructure opportunities, Member First managed to deliver and conducted penetration testing to ensure the satisfactory financial results. security of all our data. This year has also seen the launch of our upgraded service CU Online+ with The Income and Expenditure account shows significant improved functionality for members. a surplus, of €3.1 million. Interest income on members’ loans has increased to €7.9 million, Member First has successfully retained our up 6% from 2018. The increased loan portfolio certification relating to the International and changes to loan products will deliver a Information Security Standard ISO 27001 and higher level of loan income next year. Investment were also successful in achieving the ISO 20000 income has remained static, despite growth in for best practice in IT managed services. We the investment portfolio. This is a positive result also appointed an IT Manager to ensure that given the current prevailing negative interest rate we manage the ongoing enhancements in environment. The medium to long term outlook technology , which are so important to our future indicates that this will continue to have an impact as more and more members opt to deal with the on our ability to achieve a return. credit union through digital channels.
9 REPORT OF CHIEF EXECUTIVE OFFICER continued
Lending Ackowledgements
This year we issued 14,689 loans to the value of Member First continues to be a strong, stable, €48.8m within our community. It is reflective of efficient, well-governed, well-managed and an increased demand for services and a strong transparent Credit Union, meeting the everyday effort to position ourselves within the community financial needs of its members, thereby retaining as the first choice for affordable financial services. member trust and confidence. I am very proud of Our loan rates continue to be very competitive the commitment of our Management Team and when compared to other lenders and we would Staff and I am deeply grateful for their continued encourage all members to consider us first when dedication and relentless hard work, assisting borrowing. our members in achieving their financial goals. I also want to express my deepest gratitude to our We offer our members a unique loan application volunteer Board of Directors, Board Oversight process and all loans are reviewed within 24 hours Committee and Volunteers for their support and subject to terms and conditions. The quality of contribution to our continued success. our lending remains an important focus and loan decisions are based on assessment of a member’s Finally, to you the member, a sincere thank you ability to repay. This enables us to be fair to all for your continued loyalty and a demonstration members and facilitates good lending decisions. of trust by using our services.
Digital Membership Applications
Digital Onboarding is the newest way to join Member First Credit Union. Through this digital application form, new members can apply and upload all the relevant documents. Once all the details are in order, your application will be Fiona accepted within one working day. You’ll still need Cunningham to drop in to verify your identification, but you’ll have instant online access to your account to get CEO you started.
Calculate your loan
with our online Loan Calculator www.mfcu.ie
10 RETURN ON INVESTMENTS
Member First Credit Union delivered another What does this mean for you, our members? year of solid performance against a backdrop of economic and market uncertainty, combined As outlined in the directors’ report, the Board of with increased market place fragmentation Directors are delighted to provide our members and industry changes. This solid performance with a dividend of 0.1% on the savings they however has not been without its challenges. hold. As you can see from the above, the rate of the return that Credit Union has been able to Negative interest rates on deposits are now achieve on our investments has been reducing unfortunately becoming the norm. Many financial and will continue to do so for the foreseeable institutions are charging corporate customers future. This will have an implication for the return such as Credit Unions as much as 40 basis points we can provide our members on their savings to keep their money on deposit. This means going forward. We are satisfied that the current that should a customer, such as a credit union, dividend is a fair rate and comparable to anything deposit €1 million with the bank, rather than available in the marketplace at present with many earning interest on it, the customer will in effect of our local competitors only providing a rate of be charged €4,000. 0.05% on demand funds.
Twelve months ago, the US Federal Reserve was two and a half years into a cycle of interest rate increases with the prospect of more rate rises Edwina to come. On this side of the Atlantic, the ECB was holding out on the prospect of interest rate Cunnane increases in the second half of 2019. For us, this held out at least the possibility of a return to a Head of Finance more normal interest rate environment. A year later, things are looking very different. The US Central Bank are cutting rates for the first time in more than a decade. Any prospect of an ECB rate increase in the short to medium term has vanished with a further blast of Quantitative Easying (QE) which will push down long-term interest rates even further.
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11 2019 – YEAR IN REVIEW
It’s been another busy year for MFCU! Take a look at some of the key milestones below. €92,387,815 loan book
14,689 loans approved worth €48,800,000
branches across SIX North Dublin
58,782 members
5% standard loan interest rebate 0.1% dividend on shares
for customer service 5 years in a row! #1 CXi Customer Experience Survey 2015 – 2019 COMMUNITY REPORT
recently celebrated this achievement with St. David’s BNS, Artane who were the first school in the Scheme. At Member First, we’re maintaining the tradition of investing time and money where it can make a difference. Which is why, over the last 12 months, we’ve donated €1,000 to each of the 32 local schools who took part in our School Savings Scheme, that aims to show youngsters the advantages of saving for their futures.
We would especially like to mention Scoil MFCU Community Fund Chaitríona who unfortunately experienced fire damage to their school in October. This tragic Member First Credit Union are committed to event has effected so many in our community and supporting our local communities. Community is MFCU will commit to assist in whatever way we all about being a good neighbour, which is why can in order to rebuild the school for our young we founded the MFCU Community Fund. Our members. fund allows us to support a variety of community activities – from local schools, education initiatives Local students save big… and top-class savers and literacy programmes to the arts, community reap the rewards. groups and sports clubs. Together, the pupils from our schools saved over We have given over €825,000 to our local €300,000 with Member First Credit Union during community since the inception of Member the last school year. We’re delighted that so many First Credit Union in 2014. Wherever you see are learning the value of saving regularly, and we the blue heart, you know it’s powered by the rewarded the best saver in each participating MFCU Community Fund. You’ll find full details school was awarded a €150 Smyths Toys voucher. of the MFCU Community Fund and our latest The winner wasn’t the one who saved the most sponsorships over on our website at: money, it was the one who saved most often. www.mfcu.ie/mfcu-community-fund. Scholarship Scheme 2019 Local GAA Sponsorship We have also continued our Scholarship Scheme Our local GAA clubs are at the heart of the for members who are pursuing third-level community and play an important role in its social education. The aim of this Scheme is to help and economic development. In recognising this, with the finances, so students can concentrate each year we make a significant investment on their studies. This year we issued a total to Fingallians GAA Club, Parnells GAA Club, of €10,000 to 11 students, covering a wide Clontarf GAA Club, Naomh Barrog GAA Club, variety of subjects – everything from Fine Art to Whitehall Colmcille GAA Club, Scoil Ui Chonaill Medicine. Congratulations to our Scholarship GAA Club, St. Monica’s GAA Club and Raheny winners: Luke Shiels, Shauna Finn, Mary Rae, GAA Club. We also extend a very warm welcome Habib Abdulhamid, Adam Finn, Juliana Burcea, to Craobh Chiarain GAA Club, as they join our Michael Flavin, Sophie Lynch, Adam Connell, growing list of clubs this year. Áine Murray, Fiona Stapleton.
Alongside our long standing GAA roots we also Defibrillator Sponsorship support a number of local soccer clubs including Killester Donnycarney FC, Raheny United FC, Saving money is nothing compared to saving Artane Beaumont FC and St. Brendan’s United lives. That’s why we continue to fund the purchase FC. and installation of defibrillators in clubs and schools across North Dublin, and cover the cost of the training necessary for their proper use. To Cash boost for local schools date we have funded 20 defibrillators across the In this part of the city, credit unions have been community. You’ll find a map of all defibrillator supporting local schools for over 20 years – we locations on our website. 13 COMMUNITY REPORT continued
Charity of the Year Applying for Sponsorship This year’s Charity of the Year is the Alzheimer Any member can apply for sponsorship for a club Society of Ireland. We powered Clontarf Cycle or group through the application form available Club on their mammoth 700km journey from on our website or in any MFCU branch. We love Malin Head to Mizen Head in support of this great to hear about new and established initiatives. cause. Together we raised a massive €30,000 for the Alzheimer Society. We also supported a number of charity initiatives Conor throughout the year both in our branches and in the community. Our annual Ladies Quiz this year Ralph was in aid of St. Francis Hospice, Raheny. We’d Marketing Officer love to hear from any Men’s Sheds who would like to organise a charitable event of their own.
Clontarf Cycle Club celebrate their Malin to Mizen Challenge at MFCU HQ
14 €825,000issued to local clubs and groups since the inception of Member First Credit Union
€32,000 donated to local schools this year 20 defibrillators across our community €10,000 in Scholarships awarded to 11 student members
15 SUPPORTING THE DUBS by supporting our clubs
Congratulations to Dublin GAA on their successful
DRIVE FOR 5
16 PRIZE DRAW
Members Prize Draw Income & Expenditure Account for the year ended 30 September 2019
2019 INCOME € Member Deductions 661,310 Total Income 661,310
EXPENDITURE Cash prizes 667,000 Admin costs 14,283 Total Expenditure 681,283
Excess of Expenditure over Income (19,973) Opening Balance on Prize Draw Fund 70,224 Closing Balance on Prize Draw Fund 50,271
Car Draw Winners collect their prizes
MONTHLY MEMBER PRIZE DRAW only
per€1 week €50,000 in cash prizes every month
The Car Draw is now the Monthly Member Prize Draw!
17 Death Benefit Insurance
only €1 per week
now increased to €2,300 cover
SIGN UP TODAY in your local MFCU branch
Terms & conditions apply. Member First Credit Union Limited is regulated by the Central Bank of Ireland. 18 Nominations
When you join Member First Credit Union, you will be asked to nominate a beneficiary on the application form. The person nominated will benefit from your shares when you die.
It is therefore important for you to update this form to ensure that it reflects any change in your status. If your nominated beneficiary dies before you, then another beneficiary should be nominated. It is important that you update your nomination in the case of a change in marital status, as the original nomination becomes invalid once you marry.
• Members over 16 can nominate a person/persons to receive their credit union shares and insurance benefits (if any), on death.
• The person/persons nominated can receive the funds without any problems, up to a value of €23,000.
• The balance over €23,000 if any goes into the estate.
Please contact your local branch or call our Member Service Centre on (01) 851 3400 to ensure you have completed a nomination form.
DIRT Notice
Since 1 January 2014, all Credit Union share dividend and deposit interest paid to members is subject to DIRT, with the exception of dividend or interest paid to members who are exempt from DIRT. A rate of 35% applies to interest paid or credited on or after 1 January 2019.
The tax is deducted by the Credit Union before the interest is paid to you. If you request it, you are entitled to be given a statement of the amount of DIRT deducted from your interest. If you receive annual interest payments (or similar profit-type payments) of over €300 your Credit Union must automatically report this to Revenue.
Certain people may qualify for a refund of DIRT or may have their deposit interest paid without the deduction of DIRT. These include;
• First -time buyers • People aged over 65 • People with disabilities • Non-residents
However please note that specific criteria apply where a refund or an exception applies. Further information is available to you at www.revenue.ie/en/additional- incomes/dirt/index.aspx
19 COMPLIANCE UPDATE
Payment Services Directive (PSD2)
We have made changes to our online services to align with new European banking regulations covered under PSD2. PSD2 brings additional safety and security to your online banking. These changes are being introduced to protect consumers from increased instances of online fraud. This additional security is known as Strong Customer Authentication (SCA) and will has been introduced in both our browser-based services (i.e. CU Online +) and our Mobile App (CU Anywhere).
SCA is required for; logging into your online banking, setting up new payees, viewing e-statements and viewing documents or transactions older than 90 days.
It is imperative that the mobile phone number that we have registered to your account is correct. To view the number registered to you and all your other personal details, log in to Online Banking and click the Account option. If any details are incorrect, please contact us immediately to change your details.
Help us to update your details
Why we need to check identity and address details?
The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018 was brought in to prevent Criminals and Terrorists using your Credit Union to hide the proceeds of their crimes.
To prevent this, the Central Bank require us to conduct ongoing due diligence of our members, what this means is that amongst other things, we are required to regularly update and verify our Members Identification and Address details.
How can you help your Credit Union?
You can help us by making sure we have the following:
✓ Proof of Identity e.g. passport, driving licence, national identity card
✓ Proof of Address e.g. current bill, current bank statement, government issued documentation
You can also help us by understanding that we appreciate this may sometimes seem repetitive or intrusive, but we conduct this due diligence to safe guard your Credit Union. There may be times when we have to suspend an account if we cannot conduct the requisite due diligence and that is the last thing we want to do.
If you have any questions about this, please ring Mick our dedicated Member Services Centre on (01) Walsh 851 3400 or email [email protected] Head of Regulatory Your cooperation and assistance in this is greatly appreciated. Compliance
20 NEED A MORTGAGE FOR YOUR PLACE? TALK TO US ABOUT “MY PLACE”
Introducing the My Place Loan – another first for Member First Credit Union. If you’re thinking of buying, moving or improving your home, call into our place and ask about “My Place”. Your home is probably the most expensive (and daunting!) purchase you’ll ever make. With Member First Credit Union you get the reassurance of dealing with people you know, and who know you. Plus, of course, you’ll get a great deal on the interest rate.
WARNING: If you cancel or make a claim for reimbursement of a direct debit repaying your mortgage Mick account, and fail to make alternative arrangements for payment, your account will go into arrears. Walsh WARNING: Your home is at risk if you do not keep up payments on a mortgage or any other loan Head of Regulatory secured on it. The interest rates on this housing loan may be adjusted by the lender from time-to-time. Compliance WARNING: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
Lending criteria, terms & conditions apply. 21 Member First Credit Union Ltd. is regulated by the Central Bank of Ireland. DIRECTORS’ REPORT & FINANCIAL STATEMENTS
Directors’ Report 23 Report of the Auditor 25 Income and Expenditure 28 Balance Sheet 29 Statement of Reserves 30 Cashflow Statement 31 Notes to Financial Statements 32
22 DIRECTORS REPORT
Review of Business and Future Developments • Select suitable accounting policies and then apply them consistently; The Directors are pleased to report a strong • Make judgments and estimates that are surplus for the year, with significant growth in reasonable and prudent; and loan volumes as the year progressed. We also • Prepare the financial statements on a going note an improvement in members’ ability to concern basis unless it is inappropriate to maintain their loans within terms; all of which presume that the credit union will continue have contributed to a very satisfactory result for in. the year. This has allowed us to build our reserves in the current year. The directors are responsible for keeping proper accounting records which disclose with We expect that trading in the coming year will reasonable accuracy at any time the financial be solid and very much dependent on the health position of the credit union and to enable them of our local economy; we expect continued loan to ensure that the financial statements are growth to boost our income; however, the income prepared in accordance with applicable Irish law on our investments has decreased significantly and Generally Accepted Accounting Practice in in the current low interest environment; and the Ireland, including the standards issued by the Board expect total income to increase over the Financial Reporting Council, and in particular next couple of years. FRS102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”. We are satisfied that the finances of Member First The Directors are responsible for safeguarding Credit Union Limited are in very good shape, that the assets of the credit union and hence for our loans are well provisioned, our investments taking reasonable steps for the prevention and prudently invested, that we are well capitalised detection of fraud and other irregularities. with strong reserves and that we are well able to fund our future plans. Principal risks and uncertainties
Authorisations The principal risks and uncertainties facing the credit union are: Member First Credit Union Limited maintains the authorisation to carry out foreign exchange i) Credit risk transactions and to arrange insurance polices on The Directors have identified the risk of loan behalf of its members. default as being the principal risk to the credit union. Credit risk is the risk that a borrower will Statement of Directors’ Responsibilities default on their contractual obligations relating to repayments to the credit union, resulting in The following statement, which should be read financial loss. in conjunction with the statement of respective responsibilities of directors and auditors in ii) Liquidity risk the auditor’s report to the members, is made Is the risk that the credit union will not have with a view to distinguishing for the members, sufficient cash resources to meet day to day the respective responsibilities of the directors running costs and repay members savings when and of the auditors in relation to the ‘financial demanded. statements’. iii) Lack of demand for loans The Credit Union Act 1997 (as amended) requires The provision of loans to members is a key the directors to prepare financial statements for function of the credit union. The interest received each financial year which give a true and fair view from loans is the main source of revenue from of the state of affairs of the credit union and of which both operating costs are serviced and the income and expenditure of the credit union surpluses generated. for that period. In preparing those financial statements, the directors are required to: iv) Investment portfolio performance Is the risk both through the potential to loss of
23 DIRECTORS REPORT continued
capital and/or insufficient rate of return. supported by a robust reporting structure and active management of operational risk events. v) Operational risk Is the risk of loss resulting from inadequate or Post balance sheet events failed internal processes, people and systems or from external events. There were no events after the balance sheet date which impact upon the financial statements. These risks are managed by the Board as follows: Auditors i) Credit risk In order to manage this risk the Board regularly In accordance with Section 115 of the Credit reviews and approves the credit union’s lending Union Act 1997 (as amended), the auditors policy. All loan applications are assessed with EisnerAmper Audit Limited offer themselves for reference to the lending policy. The credit union election. further protects against this risk by employing suitably qualified individuals to underwrite and On behalf of the Board assess loan applications. Subsequent to issuance, loans are regularly reviewed for any factors that may indicate that the likelihood of repayment has Joan Barker Michael McKenna changed. Joan Barker Michael McKenna Chairperson Director ii) Liquidity risk The liquidity level of the credit union is monitored Board of Directors Board of Directors on a regular basis to ensure funds are maintained in short term deposits at all times so that it has sufficient cash to meet its obligations as they fall Date: 29 October 2019 due. Statement of Board Oversight Committees iii) Lack of demand for loans Responsibilities The credit union offers a wide range of for the year ended 30 September 2019. competitive lending products to its members. The products and service are promoted by The Credit Union Act 1997 (as amended) requires regular marketing activities throughout the the appointment of a Board Oversight Committee year. The need to increase demand for loans is to assess whether the Board of Directors has balanced by the need to ensure that borrowers operated in accordance with Part IV, Part IV (a) have the capacity to repay the amount borrowed. and any regulations made for the purposes of Part IV or Part IV (a) of the Credit Union Act 1997 iv) Investment portfolio performance (as amended) and any other matter prescribed by The Board regularly reviews and approves the the Central Bank in respect of which they are to credit union’s investment policy in which it sets have regard to the Board. out the types of investments within which the credit union can invest funds. A key factor for all On behalf of the Board Oversight Committee investments is the need to balance the secure return of capital with the interest yield. Funds Paddy Carpenter are invested in compliance with the credit union’s policy and regulatory guidance. Board Oversight Committee
v) Operational risk The operational risk of the credit union is managed through the recruitment and Date: 29 October 2019 employment of suitably qualified staff to ensure appropriate processes, procedures and systems are implemented and applied. This is further
24 REPORT OF THE AUDITOR
Independent Auditor’s Report to the Members of obtained is sufficient and appropriate to provide Member First Credit Union Limited for the year a basis for our opinion. ended 30 September 2019. Conclusions relating to going concern Opinion We have nothing to report in respect of the We have audited the financial statements of following matters in relation to which ISAs Member First Credit Union Limited (‘the Credit (Ireland) require us to report to you where: Union’) for the year ended 30 September 2019, which comprise the Income and Expenditure • the directors’ use of the going concern Account, the Balance Sheet, the Statement of basis of accounting in the preparation of the Changes in Reserves, the Cash Flow Statement financial statements is not appropriate: or and the related notes to the financial statements, • the directors have not disclosed in the including the summary of significant accounting financial statements any identified material policies set out in note 2. The financial reporting uncertainties that may cast significant framework that has been applied in their doubt about the Credit Union’s ability to preparation is Irish Law, including the Credit continue to adopt the going concern basis Union Act 1997 (as amended), and FRS 102 The of accounting for a period of at least twelve Financial Reporting Standard applicable in the months from the date when the financial UK and Republic of Ireland. statements are authorised for issue.
In our opinion the financial statements: Other information
• give a true and fair view of the state of the The directors are responsible for the other Credit Union’s affairs as at 30 September information. The other information comprises all 2019 and of its income and expenditure and information included in the annual report, other cashflows for the year then ended; than the financial statements and our auditor’s • have been properly prepared in accordance report thereon. Our opinion on the financial with FRS 102 The Financial Reporting statements does not cover the other information Standard applicable in the UK and Republic and, except to the extent otherwise explicitly of Ireland; and stated in our report, we do not express any form • have been properly prepared in accordance of assurance conclusion thereon. with the requirements of the Credit Union Act 1997 (as amended). In connection with our audit of the financial statements, our responsibility is to read the other Basis for opinion information and, in doing so, consider whether the other information is materially inconsistent We conducted our audit in accordance with with the financial statements or our knowledge International Standards on Auditing (Ireland) obtained in the audit, or otherwise appears (“ISAs (Ireland)”) and applicable law. Our to be materially misstated. If we identify such responsibilities under those standards are material inconsistencies or apparent material described in the Auditor’s Responsibilities for the misstatements, we are required to determine Audit of the Financial Statements section of our whether there is a material misstatement in the report. We are independent of the Credit Union financial statements or a material misstatement in accordance with ethical requirements that are of the other information. If, based on the work relevant to our audit of financial statements in we have performed, we conclude that there is a Ireland, including the Ethical Standard issued by material misstatement of this other information, the Irish Auditing and Accounting Supervisory we are required to report that fact. Authority (“IAASA”), and we have fulfilled our other ethical responsibilities in accordance with We have nothing to report in this regard. these requirements.
We believe that the audit evidence we have
25 REPORT OF THE AUDITOR continued
Opinions on other matters prescribed by the Auditor’s responsibilities for the audit of the Credit Union Act 1997 (as amended) financial statements Our objectives are to obtain reasonable assurance Based solely on the work undertaken in the about whether the financial statements as a whole course of the audit, we report that: are free from material misstatement, whether • We have obtained all the information and due to fraud or error, and to issue an auditor’s explanations which we consider necessary report that includes our opinion. Reasonable for the purposes of our audit. assurance is a high level of assurance, but is not a • In our opinion proper accounting records guarantee that an audit conducted in accordance have been kept by the Credit Union, and with ISAs (Ireland) will always detect a material • The financial statements are in agreement misstatement when it exists. Misstatements with the accounting records. can arise from fraud or error and are considered material if, individually or in the aggregate, they We conducted our audit in accordance with could reasonably be expected to influence the International Standards on Auditing (Ireland) economic decisions of users taken on the basis of (“ISAs (Ireland)”) and applicable law. Our these financial statements. responsibilities under those standards are described in the Auditor’s Responsibilities for the Further information regarding the scope of our Audit of the Financial Statements section of our responsibilities as auditor report. We are independent of the Credit Union As part of an audit in accordance with ISAs in accordance with ethical requirements that are (Ireland), we exercise professional judgment and relevant to our audit of financial statements in maintain professional scepticism throughout the Ireland, including the Ethical Standard issued by audit. We also: the Irish Auditing and Accounting Supervisory Authority (“IAASA”), and we have fulfilled our • Identify and assess the risks of material other ethical responsibilities in accordance with misstatement of the financial statements, these requirements. whether due to fraud or error, design and perform audit procedures responsive to Respective responsibilities those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis Responsibilities of directors for the financial for our opinion. The risk of not detecting a statements material misstatement resulting from fraud As explained more fully in the Statement of is higher than for one resulting from error, Directors’ Responsibilities set out on page 2, the as fraud may involve collusion, forgery, directors are responsible for the preparation of intentional omissions, misrepresentations, the financial statements and for being satisfied or the override of internal control. that they give a true and fair view, and for such • Obtain an understanding of internal control internal control as they determine is necessary relevant to the audit in order to design to enable the preparation of financial statements audit procedures that are appropriate in the that are free from material misstatement, whether circumstances, but not for the purpose of due to fraud or error. expressing an opinion on the effectiveness of the Credit Union’s internal control. In preparing the financial statements, the directors • Evaluate the appropriateness of accounting are responsible for assessing the Credit Union’s policies used and the reasonableness ability to continue as a going concern, disclosing, of accounting estimates and related as applicable, matters related to going concern disclosures made by the directors. and using the going concern basis of accounting • Conclude on the appropriateness of the unless management either intends to liquidate director’s use of the going concern basis the Credit Union or to cease operations, or has of accounting and, based on the audit no realistic alternative but to do so. evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Credit Union’s ability to continue
26 REPORT OF THE AUDITOR continued
as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Credit Union to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
The purpose of our audit work and to whom we owe our responsibilities Our report is made solely to the Credit Union’s members, as a body, in accordance with section 120 of the Credit Union Act 1997 (as amended). Our audit work has been undertaken so that we might state to the Credit Union’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Credit Union and the Credit Union’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
EisnerAmper Audit Limited Chartered Accountants, Statutory Audit Firm Carmanhall Road, Sandyford, Dublin 18
04 November 2019
27 INCOME & EXPENDITURE ACCOUNT for year ending 30 September 2019
Note 2019 2018 € € INCOME Interest on members’ loans 7,908,683 7,395,569 Other interest and similar income 4 1,301,079 1,371,588 Interest payable on members’ deposits 5 - - Net interest income 9,209,762 8,767,157 Other income 7 58,353 93,011 Movement in fair value of ‘other’ investments to realised and unrealised reserves 12 (175,469) 163,651 Total income 9,092,646 9,023,819
EXPENDITURE Employment costs 8 2,736,107 2,871,954 Other management expenses (Schedule 1) 3,962,126 4,496,633 Depreciation 359,318 292,225 Net impairment gains on loans to members 14 (752,753) (1,334,264) Changes in fair value of ‘investment properties’ 11 (330,000) (501,741)
Total Expenditure 5,974,798 5,824,807
Surplus for the financial year 3,117,848 3,199,012
Other comprehensive income - -
Total comprehensive income 3,117,848 3,199,012
The financial statements were approved, and authorised for issue, by the Board on 29 October 2019 and signed on its behalf by:
Joan Barker Paddy Carpenter Fiona Cunningham Joan Barker Paddy Carpenter Fiona Cunningham Chairperson Board Oversight Committee Chief Executive Officer Board of Directors
Date: 29 October 2019
28 BALANCE SHEET for year ending 30 September 2019
Note 2019 2018 € € ASSETS Cash and cash equivalents 9 32,915,142 23,546,538 Deposits and investments 12 146,841,212 152,837,053 Loans to members 13 92,387,815 88,685,240 Provision for Bad & Doubtful Debts 14 (4,261,865) (4,507,387) Prepayments and accrued income 15 1,411,408 1,291,055 Tangible fixed assets 10 2,813,497 2,835,501 Investment Property 11 750,000 2,180,000 Total Assets 272,857,208 266,868,000
LIABILITIES Members’ shares 16 (217,958,086) (213,400,799) Members’ deposits 17 (11,038,784) (11,651,561) Creditors and accruals 18 (445,764) (1,002,440) Total Liabilities (229,442,634) (226,054,800) Total Assets less Total Liabilities 43,414,574 40,813,200
RESERVES Regulatory reserve 27,378,856 27,378,856 Operational risk reserve 1,428,916 1,298,336 General reserve 13,834,025 10,830,649 Unrealised reserve 628,731 1,196,774 Non-distributable investment income reserve 144,046 108,585 Total Reserves 43,414,574 40,813,200
The financial statements were approved, and authorised for issue, by the Board on 29 October 2019 and signed on its behalf by:
Joan Barker Paddy Carpenter Fiona Cunningham Joan Barker Paddy Carpenter Fiona Cunningham Chairperson Board Oversight Committee Chief Executive Officer Board of Directors
Date: 29 October 2019
29 STATEMENT OF CHANGES IN RESERVE for year ending 30 September 2019
Non Operational Distributable Regulatory Risk Realised Unrealised Investment Total Reserve Reserve Reserves Reserves Income Reserves ASSETS € € € € € € Opening balance at 1 October 2018 27,378,856 1,298,336 10,830,649 1,196,774 108,585 40,813,200 Total comprehensive income for the year - - 3,117,848 - - 3,117,848 Dividends paid during the year (Note 6) - - (225,305) - - (225,305) Loan interest rebate paid during the year (Note 6) - - (291,169) - - (291,169) Transfer to operational risk reserve - 130,580 (130,580) - - - Transfer to non- distributable investment income reserve - - (35,461) - 35,461 - Transfer from unrealised reserves to realised reserves - - 192,600 (192,600) - - Transfer from unrealised reserves to realised reserves - - 392,574 (392,574) - - Transfer from unrealised reserves to realised reserves - - (17,131) 17,131 - - Closing balance at 30 September 2019 27,378,856 1,428,916 13,834,025 628,731 144,046 43,414,574
(1) The regulatory reserve of the credit union as percentage of total assets as at 30 September 2019 was 10.03% (2018: 10.26%) which is in excess of the credit union’s regulatory reserve requirement of 10%. (2) The operational risk reserve as at the 30 September 2019 was €1,428,916 (2018:€1,298,336) . In this regard, the Board approved an increase in the operational risk reserve of €130,580 following the completion of an internal process to estimate the credit union’s operational risk reserve requirement.
30 CASH FLOW STATEMENT for year ending 30 September 2019
2019 2018 € € Cash flows from operating activities Loans repaid by members 44,577,747 44,387,959 Loans granted to members (48,806,402) (51,434,547) Loan interest received 7,908,683 7,395,569 Investment income received 1,301,079 1,353,890 Investment gains received - 17,698 Other income received 58,353 93,011 Bad debts recovered & impaired cash flows 1,033,310 1,078,803 Dividends & Interest Rebate paid (516,474) (824,736) Operating expenses including employment costs (6,698,233) (7,368,587) Movement in other assets and liabilities 910,069 930,069 Net cash flows from operating activities (231,868) (4,370,871)
Cash flows from investing activities Purchase of property, plant and equipment (339,879) (498,403) Net cash flows from other investing activities 5,995,841 (26,677,209) Net cash flows from investing activities 5,655,962 (27,175,612)
Cash flows from financing activities Members’ savings received 86,350,742 93,985,717 Members’ savings withdrawn (82,406,232) (103,752,454) Net cash flows from financing activities 3,944,510 (9,766,737)
Net (decrease) / increase in cash and cash equivalents 9,368,604 (41,313,220)
Cash and cash equivalents at beginning of year 23,546,538 64,859,758 Cash and cash equivalents at end of year 32,915,142 23,546,538
31 NOTES TO THE FINANCIAL STATEMENTS for year ending 30 September 2019
1. LEGAL AND REGULATORY FRAMEWORK members’ deposits Member First Credit Union Limited is established Interest on members’ deposits under the Credit Union Act 1997 (as amended). Interest on members’ deposits is recognised on a The credit union is registered with the Registry of accruals basis using the effective interest method. Credit Unions and is regulated by the Central Bank of Ireland. Dividends on shares and loan interest rebates Dividends and loan interest rebates are made from 2. SIGNIFICANT ACCOUNTING POLICIES the current year’s surplus or reserves set aside for 2.1 Statement of compliance and basis of that purpose. The Board’s proposed distribution to preparation members each year is based on the dividend and The financial statements have been prepared in loan interest rebate policy of the credit union. accordance with the historical cost convention, modified to include certain items at fair value. The credit union recognises dividends and loan The financial reporting framework that has been interest rebates when approved at the Annual applied in their preparation is FRS 102 “The General Meeting. Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) as issued by The rate of dividend and loan interest rebate the Financial Reporting Council. recommended by the board will reflect inter alia:
2.2 Currency • the Board’s responsibility to ensure that The financial statements are prepared in Euro (€), members’ savings are safeguarded; which is the functional currency of the credit union. • the credit union’s regulatory reserve Monetary amounts in these financial statements requirements; are rounded to the nearest Euro. • the macro economic environment and the returns available for similar savings products 2.3 Going concern in the Irish financial services sector; The financial statements are prepared on the going • the Board’s desire to maintain dividends at a concern basis. The Directors of Member First sustainable level on an ongoing basis; and Credit Union Limited believe this is appropriate as • members’ legitimate dividend interest and the credit union: loan rebate expectations.
• is generating annual surpluses; 2.6 Taxation • maintains an appropriate level of liquidity; and The credit union is not subject to income tax or • has reserves that are currently above the corporation tax on its activities. minimum requirements of the Central Bank of Ireland. 2.7 Cash and cash equivalents Cash and cash equivalents comprise operating 2.4 Income Recognition cash on hand and cash deposited with banks with Interest on members’ loans original maturity of less than or equal to three Interest on loans to members is recognised on a months. accruals basis using the effective interest method. 2.8 Financial instruments Investment income The credit union has elected to apply in full Investment income is recognised on an accruals the provisions of Section 11 ‘Basic Financial basis using the effective interest rate method. Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to its financial Other income instruments. Financial instruments are recognised Other income such as commissions receivable on when the credit union becomes a party to the insurance products and foreign exchange services contractual provisions of the instrument. arises in connection to specific transactions. Income is recognised on an accruals basis. Financial assets and liabilities are offset, with the net amounts presented in the financial statements, 2.5 Dividends to members and interest on when, and only when, there is a legally enforceable
32 NOTES TO THE FINANCIAL STATEMENTS continued right to set off the recognised amounts and there is Level 1 fair values. The best evidence of fair value an intention to settle on a net basis or to realise the is a quoted price for an identical asset in an active asset and settle the liability simultaneously. market. Quoted in an active market in this context means quoted prices are readily and regularly Financial assets and liabilities are classified available and those prices represent actual and according to the substance of the contractual regularly occurring market transactions on an arrangements entered into. arm’s length basis. The quoted price is usually the current bid price. 2.9 Basic financial assets Basic financial assets are initially measured at the Level 2 fair values. When quoted prices are transaction price including transaction costs, and unavailable, the price of a recent transaction for are subsequently carried at amortised cost using an identical asset provides evidence of fair value the effective interest method. Basic financial assets as long as there has not been a significant change include the following: in economic circumstances or a significant lapse of time since the transaction took place. If the entity i) Loans to members can demonstrate that the last transaction price is Loans to members are financial assets with fixed not a good estimate of fair value (e.g. because it or determinable payments. Loans are recognised reflects the amount that an entity would receive or when cash is advanced to members and measured pay in a forced transaction, involuntary liquidation at amortised cost using the effective interest or distress sale), that price is adjusted. method. Level 3 fair values. If the market for the asset is ii) Deposits and investments held at amortised cost not active and recent transactions of an identical Investments held at amortised cost are measured asset on their own are not a good estimate of at amortised cost using the effective interest fair value, an entity estimates the fair value by method less impairment. This means that the using a valuation technique. The objective of investment is measured at the amount paid for the using a valuation technique is to estimate what investment, minus any repayments of the principal; the transaction price would have been on the plus or minus the cumulative amortisation using measurement date in an arm’s length exchange the effective interest method of any difference motivated by normal business considerations. between the amount at initial recognition and the maturity amount; minus, in the case of a 2.11 Impairment of financial assets financial asset, any reduction for impairment or un- Financial assets, other than those held at fair value, collectability. This effectively spreads out the return are assessed for objective evidence of impairment on such investments over time and takes account at each reporting date. immediately of any impairment in the value of the investment. Financial assets are impaired where there is objective evidence that, as a result of one or more iii) Prepayments events that occurred after the initial recognition Other receivables such as prepayments are initially of the financial asset, the estimated future cash measured at transaction price including transaction flows have been affected. If an asset is impaired, costs and are subsequently measured at amortised the impairment loss is the difference between cost using the effective interest method. the carrying amount and the present value of the expected cash flows discounted at the asset’s 2.10 Other financial assets original effective interest rate. Losses expected i) Investments held at fair value from future events are not recognised. The credit union initially recognises its complex investments at fair value. At the end of each If there is objective evidence of impairment, a reporting period, the credit union measures these loss is recognised in the income and expenditure investments at fair value and recognise changes account immediately. Objective evidence that in fair value in profit or loss. The credit union uses a financial asset or group of assets is impaired the following hierarchy to estimate the fair value of includes observable data about the following loss these investments: events:
33 NOTES TO THE FINANCIAL STATEMENTS continued
• significant financial difficulty of the member not transfer loans to third parties. or investment issuer; • a breach of contract, such as a default or 2.13 Basic financial liabilities delinquency in interest or principal payments; Basic financial liabilities are initially recognised at the • the credit union, for economic or legal transaction price, including transaction costs, unless reasons relating to the member’s or the arrangement constitutes a financing transaction, investment issuer’s financial difficulty, where the debt instrument is measured at the granting a concession that the credit union present value of the future payments discounted would not otherwise consider; at a market rate of interest. Financial liabilities are • it has become a probable that the member subsequently carried at amortised cost using the or investment issuer will enter bankruptcy or effective interest method. other financial reorganisation; and • observable data indicating that there has i) Members’ shares, deposits and money been a measureable decrease in the estimate management accounts future cash flows from a group of loans. Members’ shares, deposits and money management accounts are redeemable and In the case of impairment of loans to members, therefore are classified as financial liabilities. the loans are assessed collectively in groups that They are initially recognised at the amount of share similar credit risk characteristics except for cash deposited and subsequently measured at individually significant loans which are assessed on amortised cost. a loan by loan basis for impairment. ii) Creditors Investments are assessed for impairment Other payables are classified as current liabilities individually if payment is due within one year or less. If not, If there is a decrease in the impairment loss arising they are presented as non-current liabilities. Other from an event occurring after the impairment payables are recognised initially at transaction price was recognised, the impairment is reversed. The and subsequently measured at amortised cost using reversal is such that the current carrying amount the effective interest method. does not exceed what the carrying amount would have been, had the impairment not previously been 2.14 De-recognition of financial liabilities recognised. The impairment reversal is recognised Financial liabilities are derecognised when the in the Income and Expenditure account. obligations of the credit union specified in the contract are discharged, cancelled or expire. 2.12 De-recognition of financial assets Financial assets are derecognised when and only 2.15 Tangible fixed assets and depreciation when a) the contractual rights to the cash flows Tangible fixed assets comprises items of property, from the financial asset expire or are settled, b) the plant and equipment, which are stated at cost, less credit union transfers to another party substantially accumulated depreciation and any accumulated all of the risks and rewards of ownership of the impairment losses. Cost includes expenditure that financial asset, or c) the credit union, despite is directly attributable to the acquisition of the having retained some significant risks and rewards asset. of ownership, has transferred control of the asset to another party and the other party has the Depreciation; on a straight line basis; is provided practical ability to sell the asset in its entirety to an to write off the cost of each item of property, plant unrelated third party and is able to exercise that and equipment, less its estimated residual value ability unilaterally and without needing to impose over its estimated useful life. The categories of additional restrictions on the transfer. property, plant and equipment are depreciated as follows: In the case of loans to members, loans are derecognised, when the right to receive cash • Freehold land and buildings, 2% per annum flows from the loans have expired, usually when • Lease Amortisation, 4% per annum all amounts outstanding have been repaid by the • Leasehold Premises, 10% per annum member. Member First Credit Union Limited does • Computer Equipment, 25% per annum
34 NOTES TO THE FINANCIAL STATEMENTS continued
• Fixtures and fittings, 10-25% per annum Expenditure account. • Motor Vehicles, 20% per annum 2.17 Leases The gain or loss arising on the disposal of an asset Leases entered into by the Credit Union as a is determined as the difference between the sale lessee, are primarily operating leases. The total proceeds and the carrying value of the asset, fixed payments made under operating leases are and is recognised in the Income and Expenditure charged to the income statement on a straight-line account. basis over the period of the lease.
2.16 Impairment of tangible fixed assets 2.18 Investment Properties At each reporting end date, the credit union reviews The credit union initially measures investment the carrying value of its tangible fixed assets to properties at cost comprising the purchase price and determine whether there is any indication that any directly attributable expenditure. Investment those assets have suffered an impairment loss. If properties whose fair value can be measured reliably any such indication exists, the recoverable amount are measured at fair value at year end with changes of the asset is estimated in order to determine the recognised in profit and loss. extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of 2.19 Employee Benefits an individual asset, the credit union estimates the Pension Scheme recoverable amount of the cash-generating unit to The credit union operates a defined contribution which the asset belongs. pension scheme for staff. There are no liabilities for pension benefits under the defined contribution Recoverable amount is the higher of the fair value pension scheme, other than contributions payable of the asset less costs to sell and the value in use as a proportion of employees’ salaries in respect (“VIU”). VIU is the present value of the future cash of each year. flows expected to be derived from the asset. In assessing VIU, the estimated future cash flows to Other Employee Benefits be derived from continuing use of the asset and The costs of short-term employee benefits, from its ultimate disposal are discounted to their including holiday pay, are recognised as a liability present value using a pre-tax discount rate that and as an expense (unless those costs are required reflects current market assessments of the time to be recognised as part of the cost of fixed assets) value of money and the risks specific to the asset over the period they are earned. for which the estimates of future cash flows have not been adjusted. Termination benefits are recognised immediately as an expense when the Credit Union is demonstrably If the recoverable amount of an asset is estimated committed to terminate the employment of an to be less than its carrying amount, the carrying employee or to provide termination benefits. amount of the asset is reduced to its recoverable amount. An impairment loss is recognised 2.20 Reserves immediately in the Income and Expenditure i) Regulatory reserve account. The credit union is required to maintain and establish a minimum regulatory reserve of at Recognised impairment losses are reversed if, least 10% of the assets of the credit union in and only if, the reasons for the impairment loss accordance with Credit Union Act 1997 (Regulatory have ceased to apply. Where an impairment loss Requirements) Regulations 2016. subsequently reverses, the carrying amount of the asset is increased to the revised estimate of ii) Operational risk reserve its recoverable amount, but so that the increased In accordance with section 45 of the Credit Union carrying amount does not exceed the carrying Act 1997 (as amended) the credit union established amount that would have been determined had an operational risk reserve which is separate, distinct no impairment loss been recognised for the asset and in addition to the reserves the credit union is in prior years. A reversal of an impairment loss required to hold in its Regulatory reserve. The is recognised immediately in the Income and amount held in the operational risk reserve is the
35 NOTES TO THE FINANCIAL STATEMENTS continued
predicted impact of operational risk events that as legal and regulatory requirements. may have a material impact on the credit union’s business. Credit risk and loss is identified, assessed and measured through the application of the iii) General reserves Credit Union’s accounting policy. The estimated General reserves are the accumulated realised methodology used to apply this policy incorporates surpluses to date. provisions calculated based upon:
iv) Non-distributable investment income reserve a) Grouped assessment – Transition rate Investment income that has been recognised in the methodology financial statements but will not be received within The transition rate methodology determines, for a 12 months of the Balance Sheet date is classified defined period, the pattern or trend of deterioration as “non-distributable” and is not distributable as (or “transition) or improvement of loans for a given a dividend in accordance with Section 31 of the arrears profile to a period at which loss on the Credit Union Act 1997 (Regulatory Requirements) loan (100% provision) is deemed to have occurred Regulations 2016. A reclassification between (arrears of 91 days or more). non-distributable and distributable is made as investments come to within 12 months of maturity This observable historical deterioration pattern is date. used to determine transition rates and thereafter Probabilities of Default rates (“PD”) which are 2.21 Transfer of engagements applied to the net loan balance of loans (i.e. gross Transfers of engagement are accounted for by using loans net of attached savings), at a point in time, to the purchase method of accounting in accordance determine the appropriate provision for bad and with Section 19 ‘Business Combinations and doubtful debts at that time. Goodwill’ of FRS 102. This involves recognising assets and liabilities of any transferor credit union b) Individually significant loans at fair value plus any costs directly attributable to Having calculated a loan provision using the business combination. The value of member the transition rate assessment, an additional interests transferred by Member First Credit Union assessment is undertaken upon loans considered Limited (the Transferee Credit Union) to the former individually significant and loans deemed members of the transferor credit unions represents unsuitable for the transition rate assessment. the consideration for the assets transferred. Individually significant loans are assessed for objective evidence of impairment. Where objective 3. USE OF ESTIMATES AND JUDGEMENTS evidence of impairment is identified, a discounted The preparation of financial statements requires the cash flow (“DCF”) is performed to determine a use of certain accounting estimates. It also requires revised net present value for these loans. the Directors to exercise judgement in applying its accounting policies. The areas requiring a c) Qualitative review of the Credit Union’s higher degree of judgement, or complexity, and governance and control framework relating to areas where assumptions or estimates are most credit underwriting significant to the financial statements are disclosed A qualitative review is undertaken to assess the below: risk the loan contract issuance may be distorting delinquency in the arrears profile of loans (e.g. Top- i) Impairment losses on loans to members up loans). Where a risk is identified, the output of The credit union’s accounting policy for the grouped assessment is reviewed and amended impairment of financial assets is set out in accordingly. accounting policy in Note 2.11. The estimation of loan losses is inherently uncertain and depends Loan loss provisioning is monitored by the credit upon many factors, including loan loss trends, union, and the credit union assesses and approves credit risk characteristics in loan classes, local and its provisions and provision adequacy on a quarterly international economic climates, conditions in basis. If a loan is impaired, the impairment loss is various sectors of the economy to which the credit the difference between the carrying amount of the union is exposed, and, other external factors such loan and the present value of the expected cash
36 NOTES TO THE FINANCIAL STATEMENTS continued flows discounted at the asset’s original effective 6. DIVIDENDS AND LOAN INTEREST RATES interest rate taking account of pledged shares The dividend and any loan interest rebate are and other security as appropriate. After a period formally proposed by the Directors after the year of time, when it is concluded that there is no real end and are confirmed at an AGM of the members. prospect of recovery of loans/part of loans which As a result the proposed dividend for the current have been subjected to a specific provision, year does not represent a liability at the Balance the credit union writes off that amount of the Sheet date and the dividend included in the loan deemed irrecoverable against the specific Statement of Changes in Reserves in the current provision held against the loan. year relates to dividends paid to members in relation to the prior year. ii) Determination of depreciation, useful economic life and residual value of tangible fixed assets The dividends and loan interest rebate for the The annual depreciation charge depends primarily current and prior year periods were as follows: on the estimated useful economic life of each type of asset and, in certain circumstances, estimates of 2019 2018 residual values. The Directors review the useful lives € € on an annual basis and change them if necessary to reflect current conditions. In determining these Dividend paid during the useful lives management consider technological year change, patterns of consumption, physical Dividend rate 0.10% 0.10% condition and expected economic utilisation of the assets. Changes in the useful lives can have a Members’ shares (gross) 225,305 536,792 significant impact on the depreciation charge for the financial year. Proposed dividends 2019 2018 Dividend rate 0.10% 0.10% € € Members’ shares (gross) 221,433 221,302 4. OTHER INTEREST AND SIMILAR INCOME Investment income and 2019 2018 gains received by 30 € € September 524,099 621,885 Interest Rate Rebate paid Investment income and during the year gains receivable within 12 months of 30 September 776,980 749,703 Interest Rebate 291,169 287,944 Total interest and Interest Rebate Rate 5% 10% similar income 1,301,079 1,371,588 Proposed Interest Rate 5. INTEREST PAYABLE ON MEMBERS’ Rebate DEPOSITS The directors recommend the following loan The interest expense for the credit union interest rebates: comprises of interest payable on deposits, and Interest Rebate 292,562 386,441 was as follows for the current and prior year: Interest Rebate Rate 5% 5% Interest payable for the year - - Interest rate: Members’ deposits 0% 0%
37 NOTES TO THE FINANCIAL STATEMENTS continued
Contributions to defined contribution pension scheme 142,813 156,022 2019 2018 Total employment costs 2,736,107 2,871,954 € € 2019 2018 7. OTHER INCOME € € Insurance Commission 15,565 20,964 8c. Key management personnel Foreign Exchange Income 31,660 37,650 The remuneration of key management personnel New Member Fees 1,467 1,737 was as follows: Bill Pay and Coin Charges & Short term employee Statement Fees 9,661 6,136 benefits 1,078,506 1,294,297 CCC Legal Fees Recovered - 15,274 Contributions to defined Rental Income - 11,250 contribution pension Total other income 58,353 93,011 scheme 82,985 98,169 Total key management personnel competition 1,161,491 1,392,466 8. EMPLOYEES AND EMPLOYMENT COSTS 8a. Number of employees Short term employee benefits include wages, The average monthly number of employees salaries, social security contributions and paid annual leave. during the year was:
2019 2018 2019 2018 Number Number € € Management 19 21 9. CASH AND CASH EQUIVALENTS Other Staff 46 44 Cash balances 3,475,489 3,568,547 Total 65 65 Short term deposits with banks 29,439,653 19,977,991
2019 2018 Total cash and cash € € equivalents 32,915,142 23,546,538 8b. Employment Costs Short term deposits with banks are deposits with Wages and salaries 2,358,433 2,466,180 original maturity of less than or equal to three Social security costs 234,861 249,752 months. All other deposits with banks are included under deposits and investments in the Balance Sheet and disclosed in Note 12.
38 NOTES TO THE FINANCIAL STATEMENTS continued
10. TANGIBLE FIXED ASSETS Tangible fixed assets comprise the following property, plant and equipment: Freehold Leasehold Office Motor Computer Premises Premises Equipment Vehicles Equipment Total € € € € € € Cost At 1 October 2018 9,310,728 949,269 1,087,196 14,000 1,925,565 12,286,758 Additions 18,094 - 139,280 17,751 164,755 339,880 Disposals - - - (14,000) - (14,000) At 30 September 2019 9,328,822 949,269 1,226,476 17,751 2,090,320 13,612,638
Depreciation At 1 October 2018 7,170,194 888,643 950,248 10,267 1,431,905 10,451,257 Charge for year 90,731 56,803 47,190 3,534 161,060 359,318 Disposals - - - (11,434) - (11,434) At 30 September 2019 7,260,925 945,446 997,438 2,367 1,592,965 10,799,141
Net Book Value At 30 September 2019 2,067,897 3,823 229,038 15,384 497,355 2,813,497 At 30 September 2018 2,140,534 60,626 136,948 3,733 493,660 2,835,501 Net Book Value (leased assets included above) At 30 September 2019 - 3,823 - - - - At 30 September 2018 - 60,626 - - - -
The Directors reviewed the carrying value of the credit union’s principal tangible fixed assets, its premises, at the financial year-end to determine whether there is any indication that it has suffered an impairment loss. As set out in the credit union’s accounting policy, if any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). FRS 102 Section 27 defines “Recoverable Amount” as the higher of fair value less cost to sell and VIU. In the case of premises, fair value less cost to sell would normally be the amount obtainable from the sale of the premises in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.
The Directors commissioned freehold valuations for the buildings held in Artane and Swords dated 17 August 2018 from Flynn & Associates (MIAVI) estate agents. The Directors also commissioned freehold valuations for the buildings held in North William Street. These valuations indicate that there is no evidence of permanent impairment of the properties required at the end of the year.
39 NOTES TO THE FINANCIAL STATEMENTS continued
11. INVESTMENT PROPERTIES are measured at amortised cost or fair value as Investment Properties comprised of two premises appropriate and comprised of the following: acquired by Member First Credit Union Limited as part of the transfers of engagements (“TOE”) 2019 2018 with Raheny & District Credit Union Limited. These € € properties are not used in the ordinary course of the Credit Unions business and are currently Basic Financial Instruments vacant. Accounts in Reconciliation of the Carrying Authorised Credit Amount € Institutions (Irish and Non-Irish At 1 October 2018 at fair value 2,180,000 based) 77,110,328 72,902,894 Change in Fair Value 330,000 Bank Bonds 28,428,885 23,486,608 Disposal (1,760,000) Government Bond 6,047,340 6,091,148 At 30 September 2019 at fair Collective value 750,000 Investment Schemes 3,965,724 15,587,326 The fair value of the investment properties located in Raheny (Old Credit Union Premises and Church) Central Bank are based upon a valuation by independent minimum deposits 2,019,285 2,019,877 valuers, Flynn & Associates (MIAVI) estate agents Total investments dated 30 October 2018. In line with FRS 102 at amortised cost 117,571,562 120,087,853 Section 16.7, the directors have reflected the investment properties held by the Credit Union at fair value. This has resulted in an increase in fair Other Financial Instruments value of €330,000 being recognised in the income and expenditure account. During the year , the Other - Structured directors sold the buildings at 113 Malahide Road Bonds 29,269,650 32,749,200 & 101/102 Malahide Road. Total investments at fair value Measurement of Fair Value (Level 3) 29,269,650 32,749,200 The fair value of the investment properties was determined by external, independent property valuers, having appropriate recognised Total Investments professional qualifications and recent experience in (Basic & Other) 146,841,212 152,837,053 the location and category of the properties being valued. The independent valuers provided the fair value of the credit union’s investment properties in 2019 2018 October 2018. € € Valuation Technique Other Financial The comparison method of valuation has been Investments - Fair used in assessing the value of the properties. There Value were no direct comparisons in the village area of development type opportunities. Alternative unencumbered properties recently sold in similar Cost 29,000,000 32,300,000 type areas are referenced by the valuers. Capital Guaranteed 29,000,000 32,300,000 Fair Value (Fair 12. DEPOSITS AND INVESTMENTS Value Hierarchy - Deposits and investments at the current and prior Balance Sheet date have been classified as Level 3) 29,269,650 32,749,200 either basic or other financial instruments and
40 NOTES TO THE FINANCIAL STATEMENTS continued
Estimation of fair values Level 3 The level 3 fair value for investment products classified as ‘other investments’ is based on valuations received from Irish credit institutions using valuation techniques, for example discounted cashflow models. As the values provided by the counterparties are lower than the carrying value, the Directors have recognised an unrealised loss of €175,469 (gain 2018:€163,651) in the financial statements of Member First Credit Union Limited. The changes in fair value reflected above are attributable solely to changes in market conditions.
Set out below is summary of the credit union’s investment portfolio, analysed by the credit rating of deposit/investment counter party:
2019 2018 € € Credit rating of deposit/investment counter party: Basic Financial Instruments A 62,579,880 74,193,975 Baa 21,985,599 34,802,730 Ba 33,006,083 11,091,148 B - - 117,571,562 120,087,853
2019 2018 € € Other Financial Instruments A 17,269,650 19,249,200 Baa 12,000,000 13,500,000 29,269,650 32,749,200
41 NOTES TO THE FINANCIAL STATEMENTS continued
13. LOANS TO MEMBERS
Mortgage Unsecured Mortgage Unsecured Loans Loans Total Loans Loans Total 2019 2019 2019 2018 2018 2018 € € € € € €
As at 1 October 6,298,881 82,386,359 88,685,240 2,876,584 79,494,409 82,370,993 Advanced during the year 1,636,300 47,170,102 48,806,402 3,703,765 47,730,782 51,434,547 Repaid during the year (1,006,126) (43,571,621) (44,577,747) (281,468) (44,106,491) (44,387,959) Loans written off - (526,080) (526,080) - (732,341) (732,341) Gross loans to members 6,929,055 85,458,760 92,387,815 6,298,881 82,386,359 88,685,240
Loan Provision Individually significant loans (1,581) - (1,581) (1,453) - (1,453) Grouped assessed loans - (4,260,284) (4,260,284) - (4,505,934) (4,505,934) Loan Provision (1,581) (4,260,284) (4,261,865) (1,453) (4,505,934) (4,507,387) As at 30 September 6,927,474 81,198,476 88,125,950 6,297,428 77,880,425 84,177,853
Member First Credit Union Limited offer mortgages to its members. All mortgages issued by Member First Credit Union Limited are secured by a first legal charge as outlined in the terms and conditions of the mortgage product. There are maximum amounts set out by the regulations in terms of the maximum amount a member can borrow from the credit union. €350,000 (net) is the maximum mortgage loan that a member can borrow from the credit union as set out in the mortgage policy.
The carrying amount of the loans to members represents Member First Credit Union Limited’s maximum exposure to credit risk. The following table provides information on the credit quality of loans. Where loans are not impaired it is expected that the amounts repayable will be received in full.
42 NOTES TO THE FINANCIAL STATEMENTS continued
Credit quality of loans
Proportion of Proportion of Amount loan book Amount loan book 2019 2019 2018 2018 € % € %
Non-impaired loans Neither past due nor impaired 69,283,370 74% 66,139,090 75% Up to 4 weeks past due 16,765,192 18% 15,450,637 17% Between 5 and 8 weeks past due 2,353,360 3% 2,865,605 3% Between 9 and 12 weeks past due 502,734 1% 454,629 1%
Impaired loans Between 13 and 16 weeks past due 700,478 1% 645,790 1% Between 17 and 20 weeks past due 429,470 0% 460,443 1% 20 or more weeks past due 2,353,211 3% 2,669,046 3% Total gross loans 92,387,815 100% 88,685,240 100%
Less: Loan provisions
Individually significant loans (1,581) (1,453) Grouped assessed loans (4,260,284) (4,505,934) Total provisions (4,261,865) (4,507,387)
Total carrying value 88,125,950 84,177,853
Factors that are considered in determining whether loans are impaired are discussed in Note 3, dealing with estimates. Loans which are neither past due nor impaired are reviewed on a monthly basis. The credit union has not identified any material matters which impact upon the credit quality of these assets.
43 NOTES TO THE FINANCIAL STATEMENTS continued
13. LOANS TO MEMBERS continued
Mortgage Unsecured Mortgage Unsecured Loans Loans Total Loans Loans Total 2019 2019 2019 2018 2018 2018 € € € € € € Description of collateral held as security Total gross loans 6,929,055 85,458,760 92,387,815 6,298,881 82,386,359 88,685,240 Attached savings (65,688) (36,853,337) (36,919,005) (104,310) (42,525,431) (42,629,741) Estimated value of security (6,280,608) - (6,820,608) (6,140,697) - (6,140,697) 42,779 48,605,423 48,648,202 53,874 39,860,928 39,914,802
14. PROVISION FOR BAD & DOUBTFUL DEBTS
2019 2018 € €
As at 1 October 4,507,387 5,495,189 Provisions reversed during the year (245,523) (987,802) As at 30 September 4,261,864 4,507,387
2019 2018 € € Net impairment gains on loans to members
Bad debts recovered (709,377) (708,611) Impairment of loan interest on impaired loans (323,933) (370,192) Reduction in loan provisions during the year (245,523) (987,802)
Loans written off 526,080 732,341 Net recoveries on loans to members recognised for the year (752,753) (1,334,264)
44 NOTES TO THE FINANCIAL STATEMENTS continued
15. PREPAYMENTS AND ACCRUED INCOME 17. MEMBER’S DEPOSITS
2019 2018 2019 2018 € € € €
Prepayments 429,696 326,924 Accrued As at 1 October 11,651,561 13,227,225 investment income 776,980 749,703 Received during the Accrued loan year 12,799,107 14,857,580 interest income 204,731 214,427 Repaid during the year (13,411,884) (16,433,244) 1,411,407 1,291,054 As at 30 September 11,038,784 11,651,561 16. MEMBER’S SHARES Members’ deposits maturity analysis 2019 2018 € € 2019 2018 € €
As at 1 October 213,400,799 221,591,872 Received during < 3 months 11,038,784 11,651,561 the year 73,551,635 79,128,137 3-6 months - - Withdrawn during 6-12 months - - the year (68,994,348) (87,319,210) > 1 year - - As at 30 Total as at 30 September 217,958,086 213,400,799 September 11,038,784 11,651,561 Members’ shares are repayable on demand except for shares attached to loans. Attached and 18. CREDITORS AND ACCRUALS unattached shares are as follows:
2019 2018 2019 2018 € € € €
Unattached shares 181,039,081 170,771,058 DIRT 418 1,220 Attached shares 36,919,005 42,629,741 PAYE/PRSI 52,373 56,199 Total members’ Trade creditors 111,077 61,118 shares 217,958,086 213,400,799 Car draw 50,271 70,244 Other creditors and Consequently, €181,039,081 of members’ shares accruals 813,659 are repayable on demand. 231,625 445,764 1,002,440
45 NOTES TO THE FINANCIAL STATEMENTS continued
19. ADDITIONAL FINANCIAL INSTRUMENTS The credit union’s cash at banks and investments DISCLOSURES are also exposed to credit risk and the credit union 19a. Financial risk management mitigates the risk by only placing investments with Member First Credit Union Limited is a provider of financial institutions where the counterparties have personal, business and mortgage loans and also strong credit ratings and using investment products provides savings products to its members. The authorised by the Central Bank. The credit ratings of credit union invests excess funds with a view to the financial institutions where investments are held ensuring that the return from members’ loans and are disclosed in Note 12. investments is adequate to meet the overheads of the credit union and provide a reasonable return to Liquidity risk: members on shares and deposits. The credit union The credit union’s policy is to maintain sufficient has a risk register in place to help the directors funds in liquid form at all times to ensure that it can manage the various risks arising from its activities meet its liabilities as they fall due. The credit union to include the issuing of loans to members and adheres on an ongoing basis to the minimum investing the excess funds of the credit union. liquidity ratio and minimum short term liquidity ratio as set out in the Credit Union Act 1997 The main financial risks arising from Member First (Regulatory Requirements) Regulations 2016. The Credit Union Limited activities are credit risk, credit union’s liquidity ratio as at 30 September liquidity risk and interest rate risk. The Board 2019 was 26.08% (2018: 30.83%). reviews and agrees policies for managing each of these risks, which are summarised below. Market risk: Market risk is generally comprised of interest rate Credit risk: risk, currency risk and other price risk. Member First Credit risk is the risk that a borrower will default Credit Union Limited conducts all its transactions in on their contractual obligations relating to Euro and does not deal in derivatives or commodity repayments to Member First Credit Union Limited, markets. Therefore, the credit union is not exposed resulting in financial loss to the credit union. In to any form of currency risk or other price risk. order to manage this risk the Board approves the Interest rate risk is the risk that future cash flows credit union’s credit policy, and all changes to it. of a financial instrument fluctuate because of a Loan applications are assessed with reference to change in market interest rates. The credit union the credit policy in force at the time. Subsequently manages interest rate risk via its business model loans are regularly reviewed for any factors that of maintaining the vast majority of its liabilities as may indicate that the likelihood of repayment has non-interest bearing (i.e. member shares). changed. Credit risk information on members’ loans is disclosed in Note 13. The credit union receives variable interest income from its loans to members, a combination of The credit union complies with section 12 of the variable and fixed interest income from its Credit Union Act, 1997 (Regulatory Requirements) deposits and investments and pays fixed interest Regulations 2016. This regulation: on its members deposits accounts. Dividends are also payable to members but these do not • restricts the concentration of lending by constitute interest payments. The credit union the credit union within certain sectors or to is not exposed to any material interest rate risks connected persons or groups; relating to the mismatch of interest rates on its • restricts the absolute amount of lending financial assets and liabilities. The credit union’s to certain sectors to a set percentage of the main interest rate risk relates to its exposure to low regulatory reserve; yielding money market and bond products which • restricts the loan duration of certain loans to are currently available in the current low interest specified limits; and rate environment. Consequently, the credit union’s • requires specified lending practices to be in investment income has decreased during the year. place where loans are made to certain sectors such a commercial loans, community loans Set out below is a sensitivity analysis for the credit and loans to other credit unions. union’s interest rate risk disclosing the impact on profit or loss and total reserves for a 10% increase
46 NOTES TO THE FINANCIAL STATEMENTS continued and 10% decrease in interest rates on its investment portfolio. The interest income on members’ loans has not been adjusted on the basis that interest rates do not tend to vary.
Interest Interest Rate Rate Actual (+10%) (-10%) 2019 2019 2019 € € €
Investment income 1,301,079 1,431,187 1,170,971 Surplus for the financial year 3,117,848 3,429,633 2,806,063 Total reserves 43,414,574 47,756,031 39,073,116
19b. Interest rate risk disclosures
Average Average Amount Interest Rate Amount Interest Rate 2019 2019 2018 2018 € % € %
Financial Assets Gross loans to members 92,387,815 9.2% 88,685,240 9.1%
Financial Liabilities Members’ shares 217,958,086 213,400,799 Members’ deposits 11,038,784 0% 11,651,561 0% 228,996,870 - 225,052,360 -
47 NOTES TO THE FINANCIAL STATEMENTS continued
19c. Liquidity risk disclosures outstanding at 30 September 2019 (2018: 0.84%). All of the financial liabilities of the credit union are There were no provisions held against the loans repayable on demand except for some members’ due from the Directors and the management team shares attached to loans and members’ deposits at the current or prior Balance Sheet date. which have a fixed maturity date. Shares 19d. Fair value of financial statements The total amount of savings held by related parties Member First Credit Union Limited has a number at the year end was €162,694 (2018: €272,779). of other financial instruments which are required to be accounted for under FRS 102 at fair value. See (ii) Disclosures required by Section 47(1)(b) of the note 12 for further details. Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 20. CAPITAL Total loans outstanding to Directors and the The credit union maintains sufficient reserves management team of the credit union (to include to buffer the credit union against unforeseen their family members or any business in which the losses. The credit union’s regulatory reserves are directors or management team had a significant in excess of the minimum requirement set down shareholding) at 30 September 2019 were €639,748 by the Central Bank, and are 10.0% of the total (2018: €746,192). These loans amounted to 0.69% assets at the balance sheet date. The credit union’s of total gross loans outstanding at 30 September total capital reserves at 30 September 2019 were 2019 (2018: 0.84%). €43.4m (2018: €40.8m) (15.9% of total assets). 25. OPERATING LEASE COMMITMENTS 21. EVENTS AFTER THE END OF THE There are commitments to operating leases in REPORTING PERIOD relation to branch premises for Member First There are no adjusting or non adjusting events Credit Union Limited. after the end of the reporting period which would require disclosure in the financial statements. 2019 2018 € € 22. CONTINGENT LIABILITIES Member First Credit Union Limited had no contingent liabilities at the current or prior balance Within 12 months 18,465 19,085 sheet date. 1 to 5 years 36,681 55,147 After 5 years - 23. CAPITAL COMMITMENTS - There were no capital commitments either Total 55,146 74,232 contracted for or approved by the Board at the year end. 26. APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved, and 24. RELATED PARTY TRANSACTIONS authorised for issue, by the Board on 29 October (i) Disclosures required by FRS 102 2019. Loans During the year loans were advanced to Directors and the management team of the credit union (to include their family members or any business in which the directors or management team had a significant shareholding) in the amount of €67,601 (2018: €561,400). These loans were approved in accordance with the credit union’s lending policy and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016. The loans outstanding from these parties at 30 September 2019 were €639,748 (2018: €746,198). These loans amounted to 0.69% of total gross loans
48 SCHEDULE
Non-statutory Financial Information
SCHEDULE 1 - OTHER MANAGEMENT EXPENSES (UNAUDITED)
2019 2018 € € LP/LS Insurance 786,527 865,140 Central Bank Levies 443,343 373,912 Rent, Rates & Service Charges 304,756 288,471 Printing and Stationery 57,948 51,386 Conventions, Meetings & Seminars 12,258 11,842 Education & Training 44,345 56,319 General Insurances 75,462 83,517 Repairs & Maintenance 145,848 159,877 Computer & Equipment Maintenance 632,602 578,354 ISO Costs 11,197 16,511 Postage and Telephone 75,809 86,109 Audit & Accountancy 106,704 109,124 AGM Expenses 36,502 46,419 Security 148,552 129,647 Travel Expenses 10,874 11,592 CCC Legal fees 279,278 219,712 Legal & Consultancy Fees 363,444 385,346 Advertising, Promotion and Market Research 200,588 198,623 Project Costs 94,965 - Light & Heat 76,479 92,581 Uniforms & Staff Development 15,693 330 Bank Interest & Charges 64,498 128,904 Affiliation Levies (109,634) (53,179) Profit on Disposal of Fixed Asset (3,433) - Shorts & Overs 8,517 3,567 Sundry Expenses 8,565 35,123 Community Development Expenses 90,129 161,300 SPS Repayment re investment properties (19,690) 455,656 Total per Income and Expenditure Account 3,962,126 4,496,633
The above information does not form part of the statutory financial statements and consequently is not audited.
49 BOARD OVERSIGHT COMMITTEE REPORT
The Board Oversight Committee is an the Board of directors. Our Committee had no independent body elected at the AGM. It is occasion to bring any major issues to the Boards our duty to assess, evaluate, and report on attention. All members of the Board Oversight whether the Board of Directors has operated Committee and Board continue to attend in accordance with Part IV and Part IV(A) of the appropriate professional training and seminars in Credit Union Act, 1997. order to meet the Central Bank of Ireland’s fitness and probity requirements. At the beginning of the year the Committee set out our Terms of Reference and Work Plan During 2019, the Board continue to focus on IT for 2019. The Committee met once a month, Strategy, Compliance and Financial Planning attended sub-Committee meetings and were to ensure the long-term viability of the Credit represented at all Board meetings. We are Union. We note that the Credit Unions Loan Book satisfied that these meetings were conducted in continues to enjoy very successful growth. accordance with the rules of the Credit Union and the Governance Standards set out by the Central As a result of our examinations during the year, Bank. we believe that the Board of Member First Credit Union has acted in the best interest of its During the past year, the Committee held Members by maintaining the strategic objectives four meetings with the Board in line with the of the Credit Union and continues with good requirements of the “The Credit Union and governance. At this time, the Board Oversight Co-Operation with Overseas Regulators Act Committee would like to thank the Board of 2012”, where the performance of the Board Directors, Chief Executive Officer and Staff for was reviewed under Governance, Risk, Strategy their complete co-operation whilst we carried out and Financials. These are the core functions of our duties during 2019.
Board Oversight Committee
Helen Walker George Mongey Paddy Carpenter Helen Walker Committee Member Committee Member Chairperson Board Oversight Committee Board Oversight Committee Board Oversight Committee
CAR LOANS IN 24 HOURS THAT DESERVES A SPEEDING TICKET.
WARNING: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
Lending criteria, terms & conditions apply. Member First Credit Union Ltd. is regulated by the Central Bank of Ireland.
50 AUDIT COMMITTEE REPORT
The principal function of the Audit Committee Reporting to the Board is to oversee the financial reporting process, the system of internal control, and all audit related • The Chairperson of the committee matters of the credit union on behalf of members. provided regular updates to the Board on the committee’s activities including formal Tasks completed during the year quarterly written updates.
Internal Audit Committee Meetings
• Carried out a review of the Internal Audit • The Committee met on a number occasions function’s performance and held a review during the year. The CEO, Deputy CEO, meeting with the lead Internal Auditor Risk and Compliance Officers, Internal and • Approved the Internal Audit Work Plan for External Auditors attended these meetings 2019 as appropriate. • Considered the effectiveness of the internal • Meetings covered all areas of the audit function, adequacy of resources, committee’s responsibilities and thereby experience and expertise and deemed enabled the committee to discharge its these to be satisfactory for the credit union’s duties effectively. current needs. The Committee is satisfied that its activities External Audit during the year supported the delivery of its responsibilities as set out above. In the opinion of • External Auditors presented a clean 2019 the committee the financial control environment audit to the Board of Directors and confirmed of the credit union is robust, and sufficient that internal controls were strong and there personnel with appropriate expertise have been were no concerns or recommendations they employed to ensure compliance with the credit wished to bring to the attention of the Audit union’s obligation to keep proper books of Committee. account and to provide to members’ financial statements free from material misstatement.
Audit Committee
John Matthews Olive McMahon Bridget Johnston John Matthews Olive McMahon Bridget Johnston Audit Committee Member Audit Committee Member Audit Committee Member
EDUCATION LOANS FOR THIRD-LEVEL EXPENSES FEES, BOOKS, LAPTOPS & MORE WARNING: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future. Lending criteria, terms & conditions apply. Member First Credit Union Ltd. is regulated by the Central Bank of Ireland.
51 RISK COMMITTEE REPORT
The Risk Committee is appointed annually by • Reviewing the Risk Management the Board of Directors to oversee and advise the Framework to ensure risk is Board of Directors on the current and future risk managed, monitored, recorded exposures of the Credit Union and, in conjunction and reported in the Credit Union. with the Risk Management Officer, provides oversight of Member First Credit Union’s Risk • Ensuring that the Risk Register Management System. contains all known risks and is maintained and updated on an The role of the Risk Committee is to promote a on-going basis. strong risk management awareness and culture within Member First Credit Union. Understanding • Review monthly reports the risks, the Credit Union is exposed to enables issued directly to the Board by the the Board of Directors to make better and more Risk Management Officer, informed decisions and improve the level of service and security for our members • Fully adhering to legislation, regulation and Central Bank Risk management is now at the core of the recommendations. strategic objectives of the Credit Union. The link between risk, strategy and growth has become The main objective of the Member First Credit important to the operation of the Credit Union. Union Board of Directors, Management Team and Staff is the protection of our members’ shares. The key objectives of the Risk Management Committee in 2019 were: The Risk Management Committee will continue to work closely with the Management Team to • Embedding risk awareness and a ensure that the systems and controls which are in strong risk culture in the Credit place, are maintained and developed to mitigate Union. all risks identified.
Risk Committee
Pascal Delahunty Valerie Mulvaney Michael McKenna Pascal Delahunty Valerie Mulvaney Michael McKenna Risk Committee Member Risk Committee Member Risk Committee Member
HOME SWEET HOME IMPROVEMENTS LOANS UP TO €75,000
WARNING: If you do not meet the repayments on your credit agreement, your account will go into arrears. This may affect your credit rating which may limit your ability to access credit in the future.
Lending criteria, terms & conditions apply. Member First Credit Union Ltd. is regulated by the Central Bank of Ireland.
52 NOMINATION & GOVERNANCE COMMITTEE REPORT
The principal activity of the Nomination & Seeking Volunteers Governance Committee is to review the The Nomination Committee is currently seeking composition of the voluntary Board of Directors interested members for vacancies on the Board of to ensure that it has the right skills, diversity Directors and Board Oversight Committee. The and experience in place to ensure the effective Board of Directors plays a vital role in providing oversight of Member First Credit Union. The leadership and direction to the Credit Union competence and capability of both the individual while the Board Oversight Committee carries out Board members and the collective ability is vital an important oversight role. to successfully navigating MFCU through the challenges encountered by the Credit Union and Benefits of Volunteering developing an appropriate strategy for the future The credit union movement is founded of MFCU. on principles of cooperation, equality and mutual self-help and the efforts of thousands The Board of Directors have adopted a of volunteers who freely give their time and minimum standard of education for all Directors skills to their credit union. Member First Credit and throughout the year each Director also Union relies considerably on the enthusiasm, participated in continuous professional commitment and integrity of its volunteers. An development through attendance at conferences, individual can develop both personally and roadshows, training seminars and lectures. In professionally by volunteering. The benefits of addition the Board underwent an independent credit union volunteering include: assessment of the skills of the current Board members and identified the skills profiles which • Gaining skills and experience in will be required in the future and are working a senior role of a professional with implementing all recommendations from financial service provider the report to ensure that the highest standards of • Availing of education and training, governance are in place within MFCU. both hands-on and via seminars • Working on interesting and The committee are also responsible for identifying worthwhile developmental and candidates to be appointed to the Board. Under business projects the Credit Union Act every candidate to be nominated for appointment as a member of the Candidate Process Board of Directors shall be proposed through the All candidates for the Board and Board Oversight Nominations Committee only. No person shall Committee must conform to a fitness and otherwise be put forward for election or seek probity standard. In applying this regime MFCU election at the AGM. must ascertain that individuals who exercise significant influence and control in a credit union The Committee must ensure that any prospective are capable, competent, honest, ethical, can act candidates meet the competency requirements with integrity and are financially sound. To ensure of MFCU and satisfy the Fitness and Probity that applicants meet the MFCU standards, the requirement of the Central Bank of Ireland. This Nominations Committee carry out due diligence standard ensures that all Board members are to determine that each person has the necessary capable and competent, are financially sound skills, experience, knowledge and integrity to and have the appropriate skills, experience and manage and govern MFCU for the benefit of our integrity to manage and govern the Credit Union. stakeholders. We would encourage anyone interested in the role of a Director to contact the Credit Union for Having regard for these requirements , the details around the competency requirements for Nomination Committee invites all members who the role. have an interest in putting their names forward to the Board of Directors or Board Oversight Over the course of the year the committee Committee to notify, in writing, the Chairperson facilitated the delivery of a Director Training of the Nomination Committee of their interest in Programme. This programme covers all areas of a one or both of these roles. Director’s role in the credit union.
53 NOMINATION & GOVERNANCE COMMITTEE REPORT continued
Notice of Elections
Under the Act the below people are seeking election to the Board of Directors. Three of the below (Gráinne Brennan, Pascal Delahunty and Olive McMahon) have each completed a three year term and are seeking re-election. One person (Eamon Free) is going forward to fill a vacancy on the Board. The Nomination Committee proposes the below mentioned for election by the members.
Candidate Role Term of Office Gráinne Brennan Director 3 years Pascal Delahunty Director 3 years Eamon Free Director 3 years Olive McMahon Director 3 years Paddy Carpenter Board Oversight Committee 3 years EisnerAmper Auditor Elections 1 year
Nomination Committee
Joan Barker Valerie Mulvaney Gráinne Brennan Joan Barker Valerie Mulvaney Gráinne Brennan Nomination Committee Member Nomination Committee Member Nomination Committee Member
Pascal Delahunty Michael McKenna Pascal Delahunty Michael McKenna Nomination Committee Member Nomination Committee Member
54 LENDING UPDATE
Our Loan Book was €92,387,815 on the 30th At the Credit Union we are all about helping our September 2019, representing an increase of members. If you have a Mortgage with MFCU and 4% on the previous financial year. This year we are worried about Mortgage arrears or keeping received a total of 15,631 loan applications, up your repayments, you can call our Mortgage refused only 942 applications, approved 14,689, Arrears Support Officer on(01) 851 3400 or email or 94% of all applications received. The total [email protected]. value of loan applications approved was €48.8 million and the graphs below show a breakdown On the 30th September 2018 we introduced the of the most popular loan types. new Central Credit Register (CCR). MFCU have mandatory obligations to make enquiries on the MFCU is actively lending and very much open for CCR for credit applications of €2,000 or greater. business. We are always looking for new ways to make the loan application process easier. Due to Every month lenders submit information on loans the recent opening of our new Loans Hub, you of €500 or more to the Register. This information can now phone (01) 851 3400 and apply for a is used to generate individual credit reports on loan of up to €75,000. You can then scan and borrowers. Lenders use credit reports to get a email the required paperwork to be assessed. All picture of a borrower’s current lending and credit loans are reviewed within 24 hours, with some history. This can help them to decide if they terms & conditions applicable. should approve an application for a loan or not. Lending must be prudent and in compliance with Recent feedback from members is positive – the regulations as set out by the Central Bank. there are less forms to fill in, an improved sense Credit worthiness and ability to repay are the of security and the lending application process is main considerations when granting a loan. delivered in a much faster time frame.
In response to member demand, we have also expanded our successful Mortgage product. To Edel date over 60 mortgages have been drawn down Phillips with a current value of €6.9m. If you or a family member wish to discuss a potential mortgage Head of Credit with MFCU, please contact our Loans Hub on (01) 851 3400.
Loan Volume Loan Value 7.77% 3.12% 8.53%
3.24% 21.41% 18.46% 14.22% 0.09% 19.82% 12.11% 23.23% 30.31% 14.08% 23.58%
Home General Car Improvement Covered Mortgage Holidays Christmas
55 WE’RE GOING GREEN #OutOfTheBlue
Paperless initiative Digital member onboarding
Our paperless initiative is our latest promise to our You can now join Member First Credit Union local and global community. We’re committed to anytime, anywhere. Through our digital sustainable operations within your credit union. application form, new members can apply and Each loan application, for example, generates up upload all the relevant documents within 10 to 20 pages of paperwork. By applying digitally, minutes. Once all the details are in order, your you are removing the use of this paper. Even this application will be accepted within one working Annual Report is printed on fully recyclable paper. day. You’ll still need to drop in to verify your identification, but you’ll have instant online The next generation credit union access to your account to get you started.
Your credit union is embracing digital. We have recognised the needs of our members in a digital Each year we are legally required to first world, which is why we have introduced send our members a notification of a number of technologies to help make saving our AGM. If we do not have an email and lending a seamless digital experience for address for a member, this report is our members. But we need your help. You can printed and posted. By providing us with update your communication preferences to an email address you are supporting receive communications by paperless means. You our paperless initiative and making a can change your preferences at www.mfcu.ie/go- positive impact on our environment. green-with-mfcu or drop into your local branch.
Digital loan applications Thank you for your co-operation with our promise to support a more sustainable community. Members can apply for a loan with us without the need for any paper from start to finish. Enquire through our Loan Calculator at www.mfcu.ie or call us on (01) 851 3400 to get started. Then you John can upload your documents securely through CU Phillips Online + for us to consider your application.The next step to this paperless loan will be end-to- Deputy CEO end loans online – everything from application to drawdown of funds directly into your account.
We’re going green! Supporting ✔ Digital Annual Report a more sustainable Paperless signatures ✔ community ✔ Digital loan applications ✔ Digital membership
#OutOfTheBlue
56 COMMUNICATIONS WITH MFCU
NAME ACCOUNT NUMBER
EMAIL MOBILE
I consent to Member First Credit Union contacting me for marketing purposes via (tick all that apply):
PHONE SMS EMAIL
I understand that at any time I can ask you to stop or change the methods by which Member First Credit Union may send me marketing materials. This can be done free of charge by writing to Marketing Department, Member First Credit Union, Artane Roundabout, Malahide Road, Dublin 5 or by emailing [email protected]. Please note that you have the right to access data held about you by the Credit Union and to correct any inaccuracies in such data.
SIGNED NAME DATE
AGM QUESTION SUBMISSION
Invitation to members to submit questions in advance of the AGM.
In order to improve the smooth running of the AGM and taking on feedback from members, we are giving members the opportunity to submit questions to the Board of Directors in advance of the meeting. Please also include your contact details. Questions can be sent to our head branch or emailed to [email protected].
Any questions submitted that are not relevant to the business of the AGM will be forwarded for the attention of a relevant officer to be addressed, as appropriate. These might include matters relating to a member’s account or affairs which are unlikely to be relevant to the business of the AGM. Submitting a question in advance of the AGM does not affect your rights as a shareholder to attend and speak at the AGM.
Please return your questions to your local Member First Credit Union branch no later than 6th December 2019 or by email on [email protected]
Member First Credit Union, Artane Roundabout, Malahide Road, Dublin 5.
57 the ne t generation credit union
(01) 851 3400
www.mfcu.ie
Member First Credit Union Limited is #OutOfTheBlue regulated by the Central Bank of Ireland.