St. Michaels Credit Union AGM Notice plus Annual Report (2016) by Anthony MacCarthy

St. Michaelâ&#x20AC;&#x2122;s Serving Our Community Since 1963

Annual General Meeting 2016 NOTICE TO MEMBERS

Monday 13th February, 2017 Blackrock Hurling Club, Church Road, Blackrock

7:30pm

Annual Report + Financial Accounts

Great Value Loans

Community Focused

Friendly Service Your Credit Union www.stmichaelscu.ie

Online Services

Credit Union Invocation Lord, Make me an instrument of thy peace Where there is hatred, let me sow love; Where there is injury, pardon; Where there is doubt, faith; Where there is despair, hope; Where there is darkness, light; And where there is sadness, joy. O Divine Master, Grant that I may not so much seek to be consoled as to console; To be understood as to understand; To be loved as to love; For it is in giving that we receive, It is in pardoning that we are pardoned, And it is in dying that we are born to eternal life. Amen.

St. Michaelâ&#x20AC;&#x2122;s Credit Union Ltd is regulated by the Central Bank of Ireland. 2

St. Michaelâ&#x20AC;&#x2122;s Serving Our Community Since 1963

Report Contents AGM Notice to Members & AGM Agenda ............................................... 4 Standing Orders ....................................................................................... 5 Rule Amendments / Motions .................................................................... 7 Board & Committees ................................................................................ 8 Local Community Support...................................................................... 11 2016 Highlights........................................................................................ 12 Board of Directors Report ...................................................................... 14 Board Oversight Committee Report ...................................................... 18 Nomination Committee Report .............................................................. 19 Membership Officerâ&#x20AC;&#x2122;s Report ................................................................. 20 Credit Committee Report ....................................................................... 21 Credit Control Committee Report .......................................................... 24

Financial Accounts Statements of Responsibility ................................................................. 27 Independent Auditors Report ................................................................. 28 Statement of Comprehensive Income ................................................... 30 Statement of Movements in Reserves ................................................... 31 Statement of Financial Position ............................................................. 32 Statement of Cash Flows ....................................................................... 33 Notes to the Financial Statements ......................................................... 34 Schedules to the Financial Statement ................................................... 47

AGM NOTICE TO MEMBERS The 54th Annual General Meeting of St Michael’s Credit Union Limited will be held at Blackrock Hurling Club, Church Road, Blackrock on Monday 13th February 2017 at 7.30pm. Each member is earnestly requested to attend this meeting. Please bring your credit union passbook as a means of identification. Notice of Elections Elections will be held to fill the following vacancies:• The position of Auditor • 5 vacancies on the Board Oversight Committee • 10 vacancies on the Board of Directors

AGM AGENDA

1. Acceptance of Proxies (if any by the Board of Directors) 2. Ascertainment that a quorum is present. 3. Adoption of Standing Orders. 4. Reading and approval (or correction) of the minutes of last Annual General Meeting held on 15th December 2015 and Special General Meeting held on 3rd February 2016. 5. Report of the Board of Directors. 6. Report of the Board Oversight Committee. 7. Presentation to Members. 8. Proposed Rule Amendments. 9. Appointment of Tellers. 10. Report of the Nomination Committee.

_______________________________ Marion McSweeney, Hon Secretary

11. Balloting – Election of Auditor, Election to fill vacancies on the Board Oversight Committee & Board of Directors. 12. Report of the Auditor 13. Consideration of accounts 2016. 14. Declaration of dividend and rebate of loan interest (if any). 15. Report of the Membership Officer. 16. Report of the Credit Committee. 17. Report of the Credit Control Committee. 18. Announcement of Election Results. 19. Any other business. 20. Adjournment or close of meeting.

STANDING ORDERS 1.

VOTING Each member shall be entitled to one vote irrespective of his/her shareholding, in accordance with section 82(2) of the Credit Union Act, 1997 (as amended).

2-3

ELECTION PROCEDURE

Election to the Board of Directors, to the Board Oversight Committee and the position of Auditor shall be by majority vote and by secret ballot. The 4 highest polling candidates shall serve a three year term; the next 3 highest polling candidates will serve a two year term and the next 3 highest candidates will serve a 1 year term.

When nominations are announced Tellers shall be appointed by the Chair and ballot papers shall be distributed. Nominations shall be in the following order: (a) nominations for Auditor; (b) nominations for members of the Board Oversight Committee; (c) nominations for Directors. When voting is completed, the votes shall be taken and tallied by the Tellers. Any ballot paper which contains votes for more than the number required to be elected shall be void. All elections shall be by secret ballot and by majority vote. When the votes have been counted by the Tellers, the results shall be announced by the Chair. In the event that all vacancies are not filled by the first ballot further ballots shall be taken as required. In the event of an equality of votes between candidates for the remaining vacancies not filled in accordance with the above procedure one further ballot shall be taken and should that ballot fail to determine the issue, the vacancies shall be filled by lot from among such candidates having an equality of votes.

4 -9

MOTIONS

All motions from the floor of the AGM must be proposed and seconded by members present at the AGM and moved by the Proposer. If the Proposer is absent when the motion is called, the motion shall be deemed to have failed.

A Proposer of a motion may speak for such period as shall be at the discretion of the Chair of the meeting and shall have the right of reply before the motion is put to the meeting for a vote.

In exercising his/her right of reply, a Proposer may not introduce new material.

St. Michaelâ&#x20AC;&#x2122;s Credit Union is All About Yo

The Member

5 3

STANDING ORDERS (Continued) 7.

The Seconder of a motion shall have such time as shall be allowed by the Chair to second the motion.

Members are entitled to speak on any such motion and must do so through the Chair. All speakers to any motion shall have such time as shall be at the discretion of the Chair.

The Chair shall have the absolute right to decide at any time when a motion has been sufficiently discussed and may put the motion to the meeting giving the Proposer the right of reply before doing so.

10 -15 MISCELLANEOUS 10.

The Chair of the Board of Directors shall be the Chair of any general meeting, except where he/she is not available, in which case it shall be the Vice-Chair, except where he/she is not available, in which case the Board shall decide amongst themselves who shall act as Chair of any general meeting.

11.

The Chair may at his/her discretion, extend the privilege of the floor to any person who is not a member.

12.

Matters not covered by the Agenda may be introduced under "Other Business" at the discretion of the Chair.

13.

The Chairmanâ&#x20AC;&#x2122;s decision on any matter relating to these Standing Orders or interpretation of same shall be final.

14.

No member shall have more than one vote on each question at any general meeting of the credit union or any adjournment thereof irrespective of his/her shareholding or the number of accounts in his/her name in the credit union provided, however, that except in voting at elections, the presiding member shall have a second or casting vote in the event of equality of voting. Voting by proxy shall be allowed only when a member other than a natural person votes through a representative, who is a member of the group, duly authorised in writing for that purpose and accepted as such by the board of directors.

15.

Any matter to be decided upon by vote at the AGM shall, unless otherwise expressly provided for by law or the rules, be decided upon by simple majority.

16.

SUSPENSION OF STANDING ORDERS Any one of these Orders or all of these Standing Orders may be suspended on a motion to this effect receiving a two-thirds majority of those present and entitled to vote.

17.

ALTERATION OF STANDING ORDERS Standing Orders may be amended or altered at a general meeting and only if a motion to this effect has received a two-thirds majority of those present and voting.

18.

ADJOURNMENTS Adjournments of the AGM shall take place only in accordance with section 81(1) of the Credit Union Act, 1997 (as amended).

6 4

RULE AMENDMENTS Motion 1 Amendments to Standard Rules arising from League AGM 2016. That this Annual General Meeting agrees to amend Rule 13(2) of The Standard Rules of St. Michael’s Credit Union Ltd. to read as follows: (2) A person shall be treated as having the qualification required for admission to membership of the credit union if he is a member of the same household as, and is a member of the family of, another person who is a member of the credit union and who has a direct common bond with those other members. However, a child or step-child of a member, where such child or step-child is under the age of 18 years and living outside the common bond but resident in the Republic of Ireland or the United Kingdom, shall not be precluded from membership of the credit union.

Motion 2 That this Annual General Meeting agrees to amend Rule 40(2) by the substitution of the number 7 with the number 11. The new rule to read: Rule 40. Membership and general provisions (2) The Board of Directors shall consist of 11 members, all of who shall be members of the Credit Union.

Motion 3 That this Annual General Meeting agrees to amend Rule 53(1) by the substitution of the number 3 with the number 5. The new rule to read: Rule 53. Membership and General Provisions (1) The Credit Union shall have a Board Oversight Committee which shall consist of 5 members. It shall consist of three of five members.

Motion 4 That this Annual General Meeting resolves that Moore Stephens, being willing and eligible, is nominated for election as Auditor to St. Michael’s Credit Union Ltd. Signed by: __________________________________________________ Marion McSweeney, Hon. Secretary, St. Michael’s Credit Union Ltd.

What You Need ? For Making a Withdrawal Membership Book or Current Valid Photographic ID (i.e. Passport or Driving Licence)

To Reactivate a Dormant Account Current Valid Photographic ID (i.e. Passport or Driving Licence) and Proof of Address dated within 3 months (i.e. Utility Bill or Bank Statement)

BOARD & COMMITTEES Board of Directors Declan Lynch

Chairman

Co-opted

February 2016

Stephen Kennedy

Vice Chairman

Co-opted

March 2016

Marion McSweeney

Hon Secretary

Ursula Fitzgerald

Director

Moira Forde

Director

Co-opted

March 2016

Darren Lynch

Director

Co-opted

February 2016

Jennifer McNamara

Director

Co-opted

March 2016

Kathy Doody

Director

Resigned

February 2016

Joe Forde

Director

Resigned

March 2016

Paddy O’Brien

Director

Resigned

March 2016

Michael O’Sullivan

Director

Resigned

March 2016

Cathy Rohu

Director

Resigned

February 2016

Board Oversight Committee

Conor Crowley

Chairman

Co-opted

January 2016

Maria O’Brien

Hon Secretary

Co-opted

June 2016

Val Quigley Snr

Board Oversight Committee

Co-opted

September 2016

Willian Hurley

Board Oversight Committee

Resigned

June 2016

Edward Murphy

Board Oversight Committee

Resigned

January 2016

Anne Walsh

Board Oversight Committee

Resigned

September 2016

Management & Staff

Investment Committee Moira Forde Stephen Kennedy Joan Hyde Fiona Sugrue Roland Haussmann

Chair Vice-Chair Secretary

Roland Haussmann, Credit Union Manager

Roland Haussmann Joan Hyde Fiona Sugrue Kate Stack Alison Bennett Luke Casey Mark Constant Laura Dennehy Jeanette Galvin Sean Lucey Lynsey O’Sullivan Carolyn Pierce

Manager Assistant Manager Administrator Senior Teller

Moira Forde, Investment Committee (Chair)

Retired August 2016

Audit, Risk & Compliance Committee

Credit Committee Jennifer McNamara Sean Honohan Paul Cahill Brian Smith

Chair Secretary

Credit Control Committee Stephen Kennedy Mary O’Halloran Marion McSweeney

Chair Secretary

Membership Officer Sean Lucey Loretto Orr

M.O. A.M.O.

Nominating Committee Ursula Fitzgerald Declan Lynch Darren Lynch

Marion McSweeney Fiona Sugrue Moira Forde Paul Cahill Declan Lynch Roland Haussmann

Chair Secretary

HR, Health & Safety Committee Ursula Fitzgerald Denis Toomey John O’Flynn Paddy Toye Declan Lynch

Chair Secretary

Conflict of Interest Committee Stephen Kennedy Mary O’Halloran

Chair Secretary 9

Marketing Committee

School & Youth Committee

Darren Lynch Joan Hyde Jennifer McNamara Luke Casey Brian Trevor Olive McCarthy Eileen Fitzgerald Kay Ti Tan

Phil O’Mahony Alison Bennett Mary Ryan Purcell Anne Walsh

Chair Vice-Chair Secretary Marketing Officer

Chair Secretary / Y.D.O.

Information Technology Committee Darren Lynch Tom Weafer Roland Haussmann Joan Hyde Val Quigley Jnr. Mateusz Kaucz

Chair Vice-Chair Secretary

Darren Lynch, Marketing Committee (Chair)

Appointed Officers Anti-Money Laundering Reporting Officer Chapter Delegate Complaints Officers Data Protection Officer Information Security Officer Risk Management Officer Training Liaison Officer Youth Development Officer

Senior Member of Staff Marion McSweeney Joan Hyde & Sean Lucey Carolyn Pierce Joan Hyde Fiona Sugrue Laura Dennehy Alison Bennett

Outsourced Operations 2015/2016 Auditors: Bankers: Compliance Officer:

Credit Control: Internal Auditor:

Solicitors: 10

Ernst & Young Bank of Ireland Robert Heffernan Hitchmough Kinnear, Chartered Accountants Cabot Financial Ireland Owen Barrett Barrett O’Connor Chartered Accountants, Registered Auditors Carl O’Mahony & Co. Solicitors Belgard Solicitors

LOCAL COMMUNITY SUPPORT Age Action Classes As a community based organisation we are focused on supporting local organisations and people doing fantastic work. Since our last newsletter was issued we have continued to work alongside and support local initiatives. We provided the venue for Age Action’s ‘Over 55s computer and device classes’. The class tutors were pupils from Ursuline’s Secondary Schooland delivered the classes on a one-to-one basis.

Simon Community Christmas Raffle More recently we held a raffle in support of the Simon Communities High Support House, Tír na nÓg. The raffle prizes were provided by St. Michael’s Credit Union and local businesses. We would like to once again thank all the contributing local businesses for their support. From the support of members a total of €1,000 was raised in a relatively short period of time before Christmas.

Kieran Horgan, Simon Community Hamper Winner with Joan Hyde, St. Michael’s Credit Union.

Music Generation in Mahon St. Michael’s proudly provided financial support for the purchase of a new euphonium which has been added to MGCC’s bank of instruments for use by the Mahon Community Youth Brass Band. In September 2016, building on the success of the primary schools’ programme in Mahon, MGCC, in partnership with Cork Academy of Music launched the Local Mahon Community Music Hub at Nagle Community College. We’ve been supporting a variety of local organisations and local people fundraising for organisations. As a financial cooperative concern for community is one of the key principles that credit unions are based on and it’s something we are very proud to be involved with.

List of Recent Sponsorship

€10,000 Funding & Support to Local Inititives

• Avondale United FC • Ballintemple Heart Defibrillator Appeal • Bingo Committee • Blackrock National Hurling Club • Blackrock Scouts • Cork Mental Health • Mahon Community Pre-School As of the end of 2016 we had provided a total of €10,000 in funding and support to local initiatives. 11

2016 Hi 14,348

94%

MEMBERSHIP

LOAN APPROVAL RATING

44,206,896

€208,430

MEMBER SAVINGS TOTAL

SCHOOLS SAVINGS SCHEME

S t . M i c h a e l ’s C r e d i t U n i o n i 12

ghlights 0.5%

10%

DIVIDEND PAID

LOAN INTEREST REBATE

€5,087,284

€1,209,358

TOTAL LOANS ISSUED

OPERATING SURPLUS

s a l l a b o u t Yo u T h e M e m b e r 13

BOARD OF DIRECTORS REPORT

Standing Back Row (Left to Right): Moira Forde, Jennifer McNamara, Darren Lynch, Ursula Fitzgerald. Seated Front Row (Left to Right): Marion McSweeney Hon Secretary, Declan Lynch Chairman, Stephen Kennedy Vice Chairman.

“

The overall performance of the Credit Union remains strong...

he Directors of St. Michael’s Credit Union have the pleasure in presenting their report and audited accounts for the year ended 30th September 2016.

Principle Activity and Review of Business St. Michael’s Credit Union continues to operate as a savings and loan cooperative, run for the benefit of its members and remains in a sound and viable financial position. In line with results from the previous year, 2016 saw the Credit Union maintain reserves at just over 16%, against a statutory requirement of 10%, continuing to maintain a very low cost to income ratio and prudent bad debt provisioning. The overall performance of the Credit Union remains strong and has enabled the Board to propose to this AGM the payment of a dividend (0.5%) and an interest rebate (10% of loan interest paid), in line with 2015.

Your Credit Union continued to attract additional member’s savings (shares) during the financial year. At the 30th September 2016, total member’s savings (shares) amounted to €44.2m (2015: €41.5m), a 6% increase on the previous year, with Net Assets at €53.4m (2015: €49.8m), a 7% increase. Total loans at year end were €9.7m (2015: €11.1m), a decrease of 12%. For most of 2016, the Credit Union operated with lending restrictions imposed by the Central Bank. These restrictions were eased during August 2016, but came too late in the financial year and contributed largely to the falling loan book value. The Loan to Asset ratio continues to be a challenge for the Credit Union, having fallen to 18.2% (2015: 22.2%). While this is a concern for the Credit Union movement nationally, it is one that St. Michael’s Credit Union is not immune to. Focus for the year ahead is to encourage more members to avail of the competitive loan facilities offered by the Credit Union.

The year saw a very poor return on the Credit Union’s investments of 1.3% (2015: 1.9%), which are mainly in bank deposits and bonds. This level of return is very much driven by the current state of the global financial markets, and is largely outside of the control of the Credit Union. However, with effective debt management and control on costs, the Credit Union delivered a surplus of €1.2m (2015: €1.3m). The focus on improving the loan book position will be crucial in reversing any downward pressure on income next year. The year has seen changes to the membership of the Board of Directors, with 5 new members joining the organisation. With these changes to the Board came the development of a new 3 year Strategic Plan that will see the Credit Union continue to operate as a standalone entity, seeking to strengthen its financial position and grow the products and services offered to our members. The year also saw a change to accounting rules under which the Credit Union operates with the introduction of Financial Reporting Standard (FRS) 102. The main impact of FRS 102 is on how we account for interest on member’s loans. Like all Credit Unions the previous method dealt with it when the interest was received, but now loan interest is recognised on an accruals basis. Further changes relate to bad debt provisioning, how we disclose loan arrears in the financial statements and a rationalisation of our bad debt reserves. Another significant development during 2016 saw the roll out of a new Risk Management system, utilising the Cal-Q-Risk software. This is a very important step forward for the governance and day to day management of the Credit Union, providing the Board, management and staff with a modern Risk Management system that has been specifically designed for Credit Unions. It will provide a platform for the Credit Union to produce a more up-to-date, comprehensive and integrated approach for managing risk into the Credit Unions overall governance, strategy, planning, management, values and culture. 15

A key objective for 2017 will be the selection and implementation of a new Information Technology (IT) platform for the Credit Union. The existing IT system utilised by St. Michael’s has served the Credit Union well, but it is now necessary to migrate to a more modern platform that embraces mobile technology and allows the Credit Union to offer modern product and services to our members. This will be a significant investment by the Credit Union, serving as a pathway to building a stronger and more secure Credit Union for all our current and future members.

Board of Directors The Board of Directors of St. Michael’s Credit Union is comprised of volunteers from the general membership. The role of a director and of the Board is very much focused on governance of the Credit Union, ensuring that appropriate policies and procedures are in place to meet the various legal and statutory requirements under which the credit union operates. The Board of Directors also sets out the strategic direction of the Credit Union and ensures that that there are adequate systems and resources in place to help deliver on the goals and objectives of the Credit Union. As mentioned earlier, 2016 brought with it major changes to the makeup of the Board of Directors of St. Michael’s Credit Union, with 5 members stepping down from their roles and 5 new members co-opted on to the board. On behalf of the current Board of Directors, management, staff and general membership of St. Michael’s Credit Union, I wish to extend our sincere gratitude and best wishes to those board members who stood down from their roles in early 2016; Michael O’Sullivan, Joe Forde, Kathy Doody, Paddy O’Brien and Cathy Rohu played pivotal roles in helping to define the success of St. Michael’s Credit Union, guiding the organisation through the turbulent times that came with the economic downturn in 2008 and oversaw the return of the Credit Union to a healthier financial position by the start of 2016. Their loyalty and dedication to St. Michael’s Credit Union is hugely appreciated and will not be forgotten. The current Board of Directors faced many challenges during 2016, not least with the newer members getting up to speed on the governance requirements of the Credit Union, including the legal and statutory obligations that go with the roles. The new board hit the ground running and immediately immersed themselves in every aspect of the Credit Union. Their hard work and effort paid off with the successful delivery in September 2016 of a new 3-Year Strategic Plan for the Credit Union that will seek to strengthen and grow the Credit Union over the coming years. The role of the Board of Directors will be to monitor the implementation of this Strategic Plan and ensure that the goals and objectives set out for the Credit Union are being met. In the challenging financial services environment that the Credit Union operates in, the Board of Directors also needs to regularly assess the internal and external environments to ensure that the Strategic Plan continues to be fit for purpose, amending the plan where and when required. This is an iterative process and the Board of Directors are committed to the managing this Strategic Planning process over the coming years. 16

Standing Back Row (Left to Right): Moira Forde, Jennifer McNamara, Conor Crowley Chairman BOC, Darren Lynch, Ursula Fitzgerald, Maria O’Brien BOC. Seated Front Row (Left to Right): Val Quigley BOC, Marion McSweeney Hon Secretary, Declan Lynch Chairman, Stephen Kennedy Vice Chairman, Roland Haussmann Manager.

Thank You Michael O’Sullivan of Ernst & Young is retiring from the role of Auditor following tonight’s AGM. The Board has decided to change our Auditor, and is proposing a motion to you, our members, during tonight’s meeting. Ernst & Young has served as our Auditor since 2003, and have been part of the Credit Unions operation through good and more recent difficult times. Michael’s advice, professionalism and assistance to our Manager Roland Haussmann and Management team is very much appreciated and we are parting on good terms and with the greatest of respect for you, Ernst & Young and your staff. Our thanks go to Roland, Joan, Fiona and all the staff for the efforts and hard work they have all put in over the year, and to whom so much of the success of the Credit Union relies on. I would also like to thank the volunteers who make up the Board of Directors, board oversight committee and various governance committees, for all the free time they so willingly give to St. Michael’s Credit Union. Finally, I would like to thank you the members of St. Michael’s Credit Union for the support and loyalty shown to the management, staff and board of the Credit Union over the last 12 months. We look forward to working on your behalf in the years ahead.

_____________________________________ Declan Lynch Chairman

BOARD OVERSIGHT COMMITTEE REPORT Committee Members: Maria Oâ&#x20AC;&#x2122;Brien, Conor Crowley Chairman, Val Quigley

his report covers the period since the last A.G.M. on 15th December 2015. The period under report has been a period of considerable change, both for the Board of Directors as well as ourselves the Board Oversight Committee.

The Board Oversight Committee is elected by the members, and acts independently of all other committees, officers and the Board of Directors. In the opinion of the Board Oversight Committee we feel that the main Board of Directors has responded well to the pressures these changes have produced. We are pleased to report that in our opinion your Board of Directors, both individually and collectively, have operated your Credit Union with honesty and integrity in all aspects of their commitments.

Left to right: Maria Oâ&#x20AC;&#x2122;Brien, Conor Crowley (Chairman), Val Quigley.

The main function of the Board Oversight is to review whether the Board of Directors are operating in accordance with Part IV of the Credit Union Act 2013. We meet regularly to review this and present our findings to the Board of Directors at four meetings throughout the year. Also at least 2 of us attends the monthly Board meetings, and we also attend as many sub-committee meetings as we can. As well as attending all Board Meetings we also met with the Internal Auditor and External Auditor as well as the Compliance Officer. The reports we make review the effectiveness of Board meetings, strategy, and the decision process regarding the choice of Internal Auditor, Risk Management Officer, and Compliance Officer and their adherence to their findings, also we review and check the update of the Credit Union policies. The Annual Accounts have been independently audited and certified. As an aside due to the amount of meetings we are requesting you the members to increase our Board Oversight Committee from 3 members to 5 members. At the beginning we stated that this period was one of considerable change. Our Board , the Board Oversight, has had a complete change of members; William Hurley, Edward Murphy and Anne Walsh have all stepped down and Val Quigley, Maria O Brien, and myself Conor Crowley have stepped up to help the Credit Union. There has been a very steep learning curve for all concerned and they have showed an enthusiasm and willingness to face the challenges that have resulted with this change. This report was adopted by the Board Oversight Committee at its meeting on 09/January /2017 ______________________________ 18

Conor Crowley, Chairman

NOMINATION COMMITTEE REPORT Committee Members: Ursula Fitzgerald, Declan Lynch, Darren Lynch

Left to right: Ursula Fitzgerald, Declan Lynch, Darren Lynch.

nder Section 56B of the Credit Union Acts 1997 (as amended by the Credit Union and Co-operation with Overseas Regulators Act 2012) the Nomination Committee has primary responsibility for ensuring that members with the necessary skills and experience are available to fill vacancies that arise on the Board of Directors and Committees.

A Special General Meeting was held on Wednesday 3rd February, 2016. The purpose of the meeting was to seek to fill a large number of vacancies on the Board of Directors, the Board Oversight Committee and on various Credit Union Committees. Following the meeting a number of members expressed an interest in serving our credit union. Over a number of days the Committee met with these people and matched their skills sets to the needs of the Board and Committees. Members attending the Annual General Meeting will continue to exercise their democratic vote by electing nominees to the Board of Directors and Board Oversight Committee. The Nomination Committee is satisfied that the candidates being put forward for election fufill the Fitness and Probity and other requirements as set in the Acts.

_____________________________________ Ursula Fitzgerald, Member of Nomination Committee 19

MEMBERSHIP OFFICERS REPORT

he Board of St Michael’s Credit Union appoints a Membership Officer annually to encourage potential new members, and to ensure that all applicants are eligible for membership in accordance with the Credit Union rules. We urge you to encourage family and friends to benefit from membership of their local Credit Union. Members are reminded that all family members residing with a current member can join our credit union. To qualify for membership of St. Michael’s Credit Union a person must work or reside within the common bond. The Common Bond of St. Michael’s Credit Union is the parishes of Mahon and Blackrock. Acceptable forms for address verification include: • Government issued documentation • Recent utility bill, e.g. Gas, ESB, etc.

Acceptable forms of verification of identity include: • Passport, Driving License • Valid Student ID, Immigration Card.

We welcomed 364 new members to our credit union during the year, 217 Adults and 147 members under 16 years. Total membership now stands at 14,348 We cannot stress enough the importance of a savings culture amongst the members of our community. It is one of the foundation stones of every credit union and it is especially important that this message is instilled among the younger members of our community. With the rising cost of education in particular, a positive attitude towards savings is vital in order to prepare and plan ahead for the future, and it is never too early to start. A regular savings pattern will also help demonstrate a member’s commitment and ability to repay a loan, should they need to borrow. A special thank you to our volunteers, who manage the school savings scheme. Phil O’Mahony, Anne Walsh, Mary Ryan Purcell. To the Principals, teachers and pupils of the following schools. Thank you for your support, Beaumont Boys, Beaumont Girls, St. Michael’s National School, Scoil Ursula, Holy Cross and Gael Scoil Machan. A sincere thank you to Loretto Orr for her work on membership applications each week, to our management and staff for their help and co-operation throughout the year.

___________________________ Sean P. Lucey, Membership Officer

Credit Union is Great

CREDIT COMMITTEE REPORT Committee Members: Jennifer McNamara (Chair), Sean Honohan (Secretary), Paul Cahill, Brian Smith

he Credit Committee is appointed annually by the Board of Directors and is responsible for the oversight of lending within St. Michaels Credit Union. The Credit Committee ensures that approval and issuing of loans to members is within policies and guidelines as set out by the Board of the Credit Union and compliant with the terms of the Credit Union Act and Central Bank of Ireland Regulations. We would like to thank all the members, who have and continue to choose St. Michaels Credit Union for your saving and borrowing needs. As we move (tentatively) forward after a long period of recession, St. Michaels Credit Union, itâ&#x20AC;&#x2122;s staff and Board are here to provide support to all our current and future members for their personal borrowing and saving requirements. 21

â&#x20AC;&#x153;

...we are open and we are lending..

Summer Holidays

Home Improvements

Wedding Loans

Education

Over the last number of years, the Credit Union has been subject to tight lending restrictions from the Central Bank of Ireland which had impacted our ability to provide our preferred volume of lending to our members. However, these restrictions have been relaxed in the past year and in 2016, for the first time in 4 years we have increased our lending to our members. The new Board and Management will be working to remove the lending restrictions in their entirety over the coming 12 months. We continue to strive to improve and refine our processes to ensure a quick turnaround for our members in an ever growing and complex regulated financial environment. Our IT systems and processes are/will be undergoing much change with the focus and purpose being improvement of facilities and services for our members. Our primary considerations in lending is that there is evident capacity to repay the loan and this is supported by previous credit record and savings history. The Credit Committee will review and report on a large sample of loan applications monthly to ensure lending is in line with policy and regulations. The Credit Committee may also assist in the sanctioning of more complex loan applications where required. The primary mission of St. Michaels Credit Union is to be of service to our Members. The Credit Committee supports this mission and together with the Staff & Management team, we are available to help with or advise on our Memberâ&#x20AC;&#x2122;s financial affairs. 22

We hope you have seen our sign at our Skehard Road site or on our upgraded website that states; â&#x20AC;&#x153;We are open and we are lendingâ&#x20AC;?. The new Board together with Staff and Volunteers of St. Michaels Credit Union are now focused on promoting this message, the Credit Union and its products to all our current and future members. It is our mission to be accessible and relevant to our members, providing suitable products and a top-class service that meets the member needs ensuring we are the first choice when it comes to your savings and borrowing requirements.

Whether itâ&#x20AC;&#x2122;s a new motor vehicle, home improvements, holidays, personal expenses or assistance for those in financial difficulty, St. Michaels Credit union is here to be of service to our members. It is important to note that we provide a range of insurance and protection products free of charge to our members that are not offered by other financial institutions. Our Staff are happy to provide information or discuss these products and lending products further if required. It is our ethos that our services are directed to improve the economic and social well-being of all our members. Further information can also be found on our website www.stmichaelscu.ie We would appeal to our members to choose St. Michaels Credit Union for your personal borrowing or savings needs going forward as we strive to sustainably grow our local Credit Union and continue to support you the members and our community at large. Finally, we would like to thank all those who assisted the Credit Committee over the past 12 months, namely the Manager, the Management team, the Staff and the Board of Directors. We look forward to the coming year and positive change and growth for St. Michaels Credit Union.

___________________________ Jennifer McNamara, Credit Committee (Chair) 23

CREDIT CONTROL COMMITTEE REPORT Committee Members: Stephen Kennedy (Chair), Mary O’Halloran (Secretary) and Marion McSweeney

“

...the ethos of the Credit Union is members working together to achieve their financial goals.

he function of the Credit Control Committee is to monitor repayments of loans to members in accordance with the terms of the loan agreement made at the time of issuing the loan. The committee meet on a monthly basis and report to the Board of Directors at the next Board meeting.

Last year it was decided by the board to outsource the Credit Control function to a professional credit control company. This outsourcing continues. The company concentrates in collecting repayments on loans that have fallen into arrears and through their involvement monthly loan repayments in this sector has increased by sixty six percent. 24

This early detection and intervention of loans falling into arrears has not only improved the amount of arrears being collected on behalf of your Credit Union but has also helped members avoid falling into greater difficulty with their loans. During the financial year €334,855 was charged off, all of which was fully provided for. It should be borne in mind that all charged off debt remains collectable and during the financial year €605,883 was collected. It should be remembered that the money given out as loans is member's money and the Credit Control Committee take every opportunity in ensuring loan repayments are made. However the ethos of the Credit Union is members working together to achieve their financial goals. It is with this in mind that I would urge any member experiencing difficulties with their loan repayments to call into the office and discuss the situation. We are here to help. In conclusion I would like to record my thanks to my fellow committee members Mary O'Halloran and Marion McSweeney and to Roland, Joan, Fiona and all the staff who continue to serve the members of St. Michael's Credit Union.

___________________________ Stephen Kennedy, Credit Control Committee (Chairman)

Did You Know ? Deposit Guarantee Scheme This state scheme protects St. Michael’s Credit Union members and all other credit unions in the event of being unable to repay deposits due to financial difficulties. Deposits up to €100,000 per person and institute are protected under the scheme. It is administered by the Irish Central Bank and is funded by all financial organisation covered by the scheme. More information can be found at: www.depositguarantee.ie 25

Financial Accounts 2016 St. Michaelâ&#x20AC;&#x2122;s Serving Our Community Since 1963

St. Michael’s Serving Our Community Since 1963

Statement of Directors Responsibilities For The Year Ended 30th September 2016 The directors are responsible for preparing the financial statements in accordance with Irish laws and regulations. The Credit Union Acts 1997 - 2012 require directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Credit Union and of the income and expenditure of the Credit Union for that period. Under those laws the directors prepare financial statements in accordance with accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland and Irish law) including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (Generally Accepted Accounting Practice in Ireland). In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Credit Union will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy the financial position of the Credit Union and which enable them to ensure that the financial statements comply with the Credit Union Acts 1997 - 2012. They are also responsible for safeguarding the assets of the Credit Union and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. On behalf of the board ___________________________________ Declan Lynch, Chairman

___________________________________ Stephen Kennedy, Vice Chairman

Date: 16th January 2017

Statement of Board Oversight Committee's Responsibilities For The Year Ended 30th September 2016 The Credit Union Acts 1997 to 2012 require the appointment of a Board Oversight Committee to assess whether the board of directors has operated in accordance with Part IV, Part IV(a) and any regulations made for the purposes of Part IV or Part IV(a) of the Credit Union Acts 1997 - 2012 and any other matter prescribed by the Bank in respect of which they are to have regard to in relation to the board. On behalf of the committee _________________________________________ Conor Crowley, Chairman

Date: 16th January 2017

St. Michael’s Serving Our Community Since 1963

Audited Accounts 2016 Independent Auditors Report to the Members of St. Michael’s Credit Union Limited

e have audited the financial statements of St. Michael’s Credit Union Limited for the year ended 30 September 2016 which comprise of the Statement of Comprehensive Income, the Balance Sheet, the Statement of Cash Flows and the related notes 1 to 21. The financial reporting framework that has been applied in their preparation is Irish law and accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland (Generally Accepted Accounting Practice in Ireland), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This report is made solely to the Credit Union's members, as a body, in accordance with section 120 of the Credit Union Acts 1997 - 2012. 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. 28

Respective Responsibilities of Directors and Auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 27, the directors are responsible for the preparation of the financial statements giving a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with Irish law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the Audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the credit union’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on Financial Statements In our opinion the financial statements: • give a true and fair view of the assets, liabilities, and financial position of the Credit Union as at 30 September 2016 and of its surplus for the year then ended; • have been prepared in accordance with Generally Accepted Accounting Practice in Ireland including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and • have been properly prepared so as to conform with the requirements of the Credit Union Acts 1997 – 2012 and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016.

Other Matters Prescribed by the Credit Union Acts 1997 - 2012 • We have obtained all the information and explanations which we considered were necessary for the purposes of our audit. • In our opinion proper accounting records have been kept by the Credit Union. • The financial statements are in agreement with the accounting records.

Ernst & Young Chartered Accountants and Registered Auditors Cork Date: 18th January 2017

Statement of Comprehensive Income FOR THE YEAR ENDED 30TH SEPTEMBER 2017

INCOME

Schedule

Interest on Members’ Loans Other Interest and Similar Income (Note 2)

1 2

Net Interest Income Other Income

TOTAL INCOME EXPENDITURE Salaries Other Management Expenses Depreciation Bad Debts Recovered Bad Debts Provision (Note 5) TOTAL EXPENDITURE Excess of Income Over Expenditure For Year Other Comprehensive Income TOTAL COMPREHENSIVE INCOME FOR YEAR

2016 € 1,081,276 586,227

2015 € 1,532,759 731,297

1,667,503

2,264,056

33,195

13,740

1,700,698

2,277,796

422,700 1,037,210 35,842 (605,883) (398,529)

463,717 942,744 69,808 (470,667) ––

491,340

1,005,602

1,209,358

1,272,194

––

1,209,358

1,272,194

Approved on behalf of the Credit Union on 16th January 2017. Credit Union Manager: Roland Haussmann Member of Board Oversight Committee: Conor Crowley Member of the Board of Directors: Declan Lynch

St. Michael’s Serving Our Community Since 1963

St. Michael’s Credit Union Limited I Financial Accounts 2016

Statement of Movements in Reserves FOR THE YEAR ENDED 30TH SEPTEMBER 2017

Balance at 1 October 2015 €

Payment of Dividend (Note 16) €

Appropriation of Current Year Surplus €

6,294,461

––

125,000

––

6,419,461

Operational Risk Reserve

––

286,737

Other Realised Reserves: Undistributed Surplus Other Realised Reserves

1,551,574 ––

(358,416) ––

1,051,265 ––

(286,737) ––

1,957,686 ––

Total Other Realised Reserves

1,551,574

(358,416)

1,051,265

(286,737)

1,957,686

Unrealised Reserves

––

33,093

––

33,093

7,846,035

(358,416)

1,209,358

––

8,696,977

Regulatory Reserve

TOTAL RESERVES

Transfers Balance at between 30 September reserves 2016 € €

(i) Regulatory Reserve: The Credit Union Act 1997 (Regulatory Requirements) Regulations 2016, requires the Credit Union to maintain a minimum regulatory reserve of at least 10 per cent of the total assets of the Credit Union. The current regulatory reserve satisfies this requirement. The directors have transferred €125,000 of its current year surplus to the Regulatory Reserve. The Regulatory Reserve of €6,419,461 (2015: €6,294,461) represents 12.02% (2015: 12.62%) of total assets at 30 September 2016. (ii) Operational Risk Reserve: During the year the Credit Union transferred an amount of €286,737 to an Operational Risk Reserve. The reserve represents 0.5% of total assets at 30 September 2016. The amended Section 45 of the Credit Union Act 1997 (following the commencement of Section 13 of the 2012 Act) requires that in addition to the regulatory reserve a Credit Union shall maintain additional reserves that it has assessed are required in respect of operational risk having regard to the nature, scale, complexity and risk profile of its business.

St. Michael’s Serving Our Community Since 1963

St. Michael’s Credit Union Limited I Financial Accounts 2016

Statement of Financial Position AT 30TH SEPTEMBER 2016

ASSETS Cash and Balances at Bank Deposits and Investments – Cash Equivalents Deposits and Investments – Other Loans Provision for Bad Debts Tangible Fixed Assets Debtors, Prepayments and Accrued Income

Note

3 3 4 5 6 7

TOTAL ASSETS LIABILITIES Members’ Shares Other Member’s Funds – Budget Accounts Other Liabilities, Creditors, Accruals and Charges RESERVES Regulatory Reserve Operational Reserve Other Reserves – Realised Other Reserves – Unrealised TOTAL RESERVES TOTAL LIABILITIES & RESERVES

8 9

11 11

2016 € 1,192,338 14,856,668 28,771,587 9,739,824 (2,007,468) 763,269 99,695

2015 € 1,721,288 17,768,902 21,182,446 11,088,998 (2,740,852) 789,762 71,046

53,415,913

49,881,590

44,206,896 270,485 241,555

41,598,475 266,967 170,113

44,718,936

42,035,555

6,419,461 286,737 1,957,686 33,093

6,294,461 –– 1,551,574 ––

8,696,977

7,846,035

53,415,913

49,881,590

Approved on behalf of the Credit Union on 16th January 2017. Credit Union Manager: Roland Haussmann Member of Board Oversight Committee: Conor Crowley Member of the Board of Directors: Declan Lynch

St. Michael’s Serving Our Community Since 1963

St. Michael’s Credit Union Limited I Financial Accounts 2016

Statement of Cash Flows FOR THE YEAR ENDED 30TH SEPTEMBER 2016

2016 € 19,490,190

2015 € 18,720,486

Cash Flows from Operating Activities: Loans Repaid Loans Granted Loan Interest Received Investment Interest Received Other Income Bad Debts Recovered Dividends Paid Operating Expenses

6,101,603 (5,087,284) 1,081,276 586,227 33,195 605,883 (358,416) (1,416,011)

6,054,969 (3,471,493) 1,536,361 731,297 13,740 470,667 –– (1,378,981)

NET CASH FLOWS FROM OPERATING ACTIVITIES

1,546,473

3,956,560

Cash Flows from Investing Activities: Fixed Assets Purchases Net Cash Flows from Other Investment Activities

(9,349) (7,590,247)

(13,450) (4,008,587)

NET CASH FLOWS FROM INVESTING ACTIVITIES

(7,599,596)

(4,022,037)

Cash Flows from Financing Activities: Members’ Shares Received Other Members’ Funds (Budget Accounts) Received Members’ Shares Withdrawn Other Members’ Funds (Budget Accounts) Withdrawn

26,507,960 1,407,325 (23,899,539) (1,403,807)

24,090,076 1,394,929 (23,250,832) (1,398,992)

2,611,939

835,181

16,049,006

19,490,190

Note

OPENING CASH & CASH EQUIVALENTS

NET CASH FLOWS FROM FINANCING ACTIVITIES CASH & CASH EQUIVALENTS AT END OF YEAR

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

ACCOUNTING POLICIES

1.1 Statement of Compliance St. Michael’s Credit Union Limited is established under the Credit Union Acts 1997 - 2012. It is registered with the Registrar of Credit Unions and is regulated by the Central Bank of Ireland. The Credit Union’s financial statements have been prepared in accordance with applicable accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (Generally Accepted Accounting Practice in Ireland). The Credit Union transitioned from previously extant Irish GAAP to FRS 102 as at 1 October 2014. An explanation of how transition to FRS 102 has affected the reported financial position and financial performance is given in note 18.

1.2 Basis of Preparation The financial statements are prepared in euro which is the presentational currency of the Credit Union. The financial statements are prepared on the going concern basis. After making enquiries the directors of the Credit Union have a reasonable expectation that it has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The Credit Union has generated a surplus in the last year and is projecting a surplus next year. It has adequate reserves and liquidity and is meeting all central bank requirements.

1.3 Judgements and Key Sources of Estimation Uncertainty The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The Credit Union’s key source of estimation uncertainty is the amount of the provision for bad debts/loan impairments. The estimation of loan losses is inherently uncertain and depends upon many factors, including loan loss trends, credit risk characteristics of individual loans and loan classes, the economic climate and conditions in various sectors of the economy to which the Credit Union is exposed. Loans are constantly monitored by the Credit Union. The Credit Union assesses and approves its provisions and provision adequacy on a monthly basis. Impairment losses are provided for where there is objective evidence that any loans to members are impaired. The loans are assessed collectively in groups that share similar credit risk characteristics using an impairment methodology which is designed to reflect historical experience of those loan groupings. Individually significant loans are assessed on a loan by loan basis. If a loan is impaired, the impairment loss is the difference between the carrying amount of the loan and the present value of the expected cash flows discounted at the asset’s original effective interest rate taking account of pledged shares and other security as appropriate.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

1.4 Significant Accounting Policies (a)

Revenue Recognition Interest on members loans: Interest on members' loans is recognised using the effective interest method on an accruals basis. Other interest and similar income: Other interest and similar income is recognised using the accounting methods outlined in the ‘Investments’ accounting policy note below.

(b)

Tangible Fixed Assets and Depreciation Tangible fixed assets comprises items of property, plant and equipment, which are stated at cost, less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Deprecation is provided to write off the cost of each item of property, plant and equipment, less its estimated residual value, on a straight line basis over its estimated useful life. The categories of property, plant and equipment are depreciated as follows: Premises Fixtures and Fittings Office Equipment Computers

50 years 10 years 5 years 3 years

The carrying values of property, plant and equipment are reviewed for impairment when events of changes in circumstances indicate the carrying value may not be recoverable. (c)

Investments Investments at the current and prior balance sheet date comprise deposits and bank bonds and are all measured at amortised cost. Investments designated on initial recognition as held at amortised cost are measured at amortised cost using the effective interest method less impairment. This means that the investment is measured at the amount paid for the investment, minus any repayments of the principal; plus or minus the cumulative amortisation using the effective interest method of any difference between the amount at initial recognition and the maturity amount; minus, in the case of a financial asset, any reduction for impairment or collectability. This effectively spreads out the return on such investments over time, but does take account immediately of any impairment in the value of the investment.

(d)

Pension Costs The Credit Union operates a defined benefit scheme and a defined contribution scheme for some staff members. All contributions are charged to the income and expenditure account in the period to which they relate. In respect of the defined benefit scheme the Credit Union participates in the Irish League of Credit Union’s Republic of Ireland Pension Scheme, with the assets of the scheme held separately from those of the Credit Union, in separately administered funds.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

The Credit Union’s contributions are affected by the surplus/deficit in the scheme. However, it is not possible to identify the Credit Union’s share of the underlying assets and liabilities in the scheme on a consistent and reasonable basis. Therefore, the scheme is accounted for by expensing actual contributions made to the income and expenditure account in the period to which they relate. The latest available information relating to the scheme and the implications for the Credit Union are detailed in the ‘Pension Commitments’ note to the financial statements. (e)

Impairment of Financial Assets/Bad Debts Provision Financial assets, other than those held at fair value, are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the expected cash flows discounted at the asset’s original effective interest rate. In the case of impairment of loans to members, the loans are assessed collectively in groups that share similar credit risk characteristics except for individually significant loans which are assessed on a loan by loan basis for impairment. Any impairment losses are recognised in the income statement. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the income statement.

(f)

Central Bank Deposits Credit Unions are obliged to maintain certain deposits with the Central Bank. These deposits are technically assets of the Credit Union but to which the Credit Union has restricted access. The funds on deposit with the Central Bank attract nominal interest and will not ordinarily be returned to the Credit Union while it is a going concern. In accordance with the direction of the Central Bank the amounts are shown as current assets and are not subject to impairment reviews.

(g)

Cash and Cash Equivalents Cash and cash equivalents comprise cash at banks and in hand as well as deposits and investment with an original maturity date of three months or less.

(h)

Financial Assets – Loans and Advances to Members Loans to members are financial assets with fixed or determinable payments. Loans are recognised when cash is advanced to members and measured at amortised cost using the effective interest method. Loans are derecognised when the right to receive cash flows from the asset have expired, usually when all amounts outstanding have been repaid by the member.

(i)

Financial Liabilities Members’ Shares Members’ shareholdings in St. Michael’s Credit Union Limited are redeemable and therefore are classified as financial liabilities.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

(J)

Reserves Retained earnings are the accumulated surpluses to date that have not been declared as dividends returnable to members. The retained earnings are subdivided into realised and unrealised In accordance with Section 31 of the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016. Investment income that has been recognised but will not be received within 12 months of the balance sheet date is classified as “unrealised” and is not distributable as a dividend in accordance with the Act. All other income is classified as “realised”. A reclassification between unrealised and realised is made as investments come to within twelve months of maturity date.

ANALYSIS OF OTHER INTEREST AND SIMILAR INCOME

2016 €

2015 €

Received at the balance sheet date

359,659

602,572

Due to be received within twelve months of the balance sheet date

193,475

128,725

33,093

––

586,227

731,297

2016 €

2015 €

31,699,539 11,928,716

30,885,001 8,066,347

43,628,255

38,951,348

6,789,839 8,066,829 8,615,001 15,953,366 4,203,220

9,644,073 8,124,829 10,570,572 10,611,874 ––

43,628,255

38,951,348

14,856,668 28,771,587

17,768,902 21,182,446

43,628,255

38,951,348

The following is an analysis of investment income and gains:

Other

DEPOSITS AND INVESTMENTS Deposits and investments comprise: Deposits Bank bonds The maturity date of the deposits and investments is analysed as follows: On demand deposits Maturing in less than three months Maturing between three months and one year Maturing between one and five years Maturing between five and ten years

Balance sheet classification: Deposits and investments – cash equivalents Deposits and investments – other

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

Deposits and investments – cash equivalents: On demand deposits Maturing in less than three months Deposits and investments – cash equivalents Deposits and investments – other: Maturing between three months and one year Maturing between one and five years Maturing between five and ten years Deposits and investments – other

2016 €

2015 €

6,789,839 8,066,829

9,644,073 8,124,829

14,856,668

17,768,902

8,615,001 15,953,366 4,203,220

10,570,572 10,611,874 ––

28,771,587

21,182,446

43,628,255

38,951,348

Included in the deposits is restricted cash of €325,275 (2015: €308,042), which relates to funds held with the Central Bank as part of the Credit Union’s Minimum Reserve Requirements and the DGS Legacy Fund in accordance with the Financial Services (Deposit Guarantee Schemes) Act 2009, as amended by the Finance (Miscellaneous Provisions) Act 2015.

LOANS

2016 €

2015 €

Opening loan balance 1 October Advanced during the year Repaid during the year Loans charged off during the year

11,088,998 5,087,284 (6,101,603) (334,855)

15,295,917 3,471,493 (6,054,969) (1,623,443)

Closing Loan Balance 30 September

9,739,824

11,088,998

2016 € 2,740,852

2015 € 4,364,295

(398,529)

––

(334,855)

(1,623,443)

2,007,468

2,740,852

Movements in loans during the year:

MOVEMENT IN PROVISION FOR BAD DEBTS DURING THE YEAR Opening provision 1 October Net movement in bad debt provision during the year for loans currently outstanding Decrease in bad debt provision as a result of loan write offs provided for Closing Provision for Bad Debts

The closing provision represents 20.6% (2015: 24.7%) of the total loan book. 38

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

The provision is calculated by assessing loans collectively in groups that share similar credit risk characteristics using an impairment methodology which is designed to reflect historical experience of those loan groupings. Individually significant loans are assessed on a loan by loan basis. Under the impairment methodology an impairment provision is made against all loans which exceed the amount of the attached shares. The percentage impairment provision applied to classes of loans depends on the number of weeks a particular class is in arrears and ranges from 15% to 100% for loans over 53 weeks in arrears.

TANGIBLE FIXED ASSETS Premises €

Fixtures & Fittings €

Office Equipment €

Computer Equipment €

Total €

1,141,825 ––

179,389 ––

87,712 ––

474,666 9,349

1,883,592 9,349

1,141,825

179,389

87,712

484,015

1,892,941

Depreciation: At 1 October 2015 Charge for year

391,823 23,047

164,423 3,167

87,569 143

450,015 9,485

1,093,830 35,842

At 30 September 2016

414,870

167,590

87,712

459,500

1,129,672

Net Book Value: 30 September 2016

726,955

11,799

––

24,515

763,269

30 September 2015

750,002

14,966

143

24,651

789,762

Cost: At 1 October 2015 Additions At 30 September 2016

DEBTORS, PREPAYMENTS AND ACCRUED INCOME

Prepayments and Other Receivables

2016 € 99,695

2015 € 71,046

Total

99,695

71,046

2016 €

2015 €

44,206,896

41,598,475

8. MEMBERS’ SHARES Regular Share Accounts

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

OTHER LIABILITIES Creditors and accruals PAYE/PRSI

10. CASH AND CASH EQUIVALENTS Cash and balances at bank Deposits and investments - cash equivalents (Note 4) Total Cash and Cash Equivalents

2016 € 241,555 ––

2015 € 160,934 9,179

241,555

170,113

2016 € 1,192,338 14,856,668

2015 € 1,721,288 17,768,902

16,049,006

19,490,190

11. RESERVES Movements in reserves during the year and reserves as a percentage of total assets are set out in the Statement of Movements in Reserves on page 6. Regulatory Reserve: This is a non-distributable reserve. The Credit Union Act 1997 (Regulatory Requirements) Regulations 2016, requires the Credit Union to maintain a minimum regulatory reserve requirement of at least 10 per cent of the total assets of the Credit Union. The reserve must be perpetual in nature, freely available to absorb losses and comprise realised financial reserves which are unrestricted and non-distributable. Operational Reserve: Section 45 of the Credit Union Act 1997 requires that in addition to the regulatory reserve a Credit Union shall maintain additional reserves that it has assessed are required in respect of operational risk having regard to the nature, scale, complexity and risk profile of its business. The amount which the Credit Union holds in the operational risk reserve is the amount of the predicted impact of operational risk events that may have an impact on the Credit Union’s business. Non-Distributable Investment Income Reserves: Investment income that has been recognised in the financial statements but will not be received within twelve months of the balance sheet date is classified as “non-distributable” and is not distributable as a dividend in accordance with Section 31 of the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016. A reclassification between non-distributable and distributable is made as investments come to within twelve months of maturity date.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

12. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES (a)

Financial Risk Management The Credit Union is a provider of personal and commercial loans and also provides savings products to its members. The Credit Union invests excess funds with a view to ensuring that the return from members’ loans and investments is adequate to meet the overheads of the Credit Union and provide a reasonable return to members on shares and deposits. The Credit Union has a risk register in place to help the directors manage the various risks arising from its activities to include the issuing of loans to members and investing the excess funds of the Credit Union. The main financial risks arising from St Michael’s Credit Union’s activities are liquidity risk, credit risk, market risk and interest rate risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below. Liquidity Risk: The Credit Union’s policy is to maintain sufficient funds in liquid form at all times to ensure that it can meet its liabilities as they fall due. The Credit Union adheres on an ongoing basis to the minimum liquidity ratio and minimum short term liquidity ratio as set out in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016. Credit Risk: Credit risk is the risk that a borrower will default on their contractual obligations relating to repayments to St. Michael’s Credit Union Limited, resulting in financial loss to the Credit Union. In order to manage this risk the Board approves the Credit Union’s credit policy, and all changes to it. All loan applications are assessed with reference to the credit policy in force at the time. Subsequently loans are regularly reviewed for any factors that may indicate that the likelihood of repayment has changed. The credit risk on members’ loans is disclosed in Note 13. The Credit Union’s investments are also exposed to credit risk and the Credit Union mitigates the risk by only placing investments with financial institutions where the counterparties have strong credit ratings and using investment products authorised by the Central Bank. Market Risk: Market risk is generally comprised of interest rate risk, currency risk and other price risk. League Credit Union Limited conducts all its transactions in Euro and does not deal in derivatives or commodity markets. Therefore, the Credit Union is not exposed to any form of currency risk or other price risk. Interest Rate Risk: The Credit Union’s main interest rate risk arises from differences between the interest rate exposures on the receivables and payables that form an integral part of a Credit Union’s operations. The Credit Union considers rates of interest receivable on investments and members’ loans when deciding on the dividend rate payable on shares and on any loan interest rebate.

(b)

Interest Rate Risk Disclosures The Credit Union had financial assets, comprising deposits and bonds, of €43,628,255 (2015: €38,951,348) at the balance sheet date. The average interest rate earned on these investments during the year was 1.4% (2015: 2.0%). Rates of interest charged on members loans are set out in Note 14. The dividend payable on members’ shares is at the discretion of the directors and is therefore not a financial liability of the Credit Union until declared and approved at the AGM.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

(c)

Liquidity Risk Disclosures All the Credit Union’s financial liabilities are repayable on demand. At the year end the credit union has a liquidity ratio of relevant liquid assets of 59% of its unattached savings which is well in excess of the regulatory requirement of 20%. Also the credit union has a short term liquidity ratio of short term liquid assets of 34% of its unattached savings which is well in excess of the regulatory requirement of 5%.

(d)

Fair Value of Financial Instruments The Credit Union Limited holds no financial instruments at fair value:

13. CREDIT RISK DISCLOSURES All personal loans to members are unsecured, except that there are restrictions on the extent to which borrowers may withdraw their savings whilst loans are outstanding. House loans are secured with a first legal charge on the member’s principal residence. Loans are issued subject to the relevant legislation and regulation governing credit unions and the lending policy of the credit union, at the time of approval. The Credit Union is currently restricted by the Central Bank to lending a maximum €550,000 of new lending per month and individual members may only borrow up to €25,000 in excess of their shares. The following table provides information on the credit quality of the loan repayments: 2016 Gross Loan Amounts: Not Past Due Up to 5 Weeks Past Due Between 5 and 18 Weeks Past Due Between 19 and 26 Weeks Past Due Between 27 and 39 Weeks Past Due Between 40 and 52 Weeks Past Due Over 53 Weeks

Amount €

2015 %

Amount €

6,634,559 1,229,472 478,367 241,571 185,044 185,209 785,602

68.1% 12.6% 4.9% 2.5% 1.9% 1.9% 8.1%

6,768,467 1,265,283 876,861 246,806 335,235 256,735 1,339,611

61.0% 11.4% 7.9% 2.2% 3.0% 2.3% 12.2%

Total

9,739,824

100.0%

11,088,998

100.0%

Loan Impairment Provision

2,007,468

20.6%

2,740,852

24.7%

Net Loans

7,732,356

79.4%

8,348,146

75.3%

Factors that are considered in determining whether loans are impaired are set out in the accounting policy notes and in Note 5.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

14. RATES OF INTEREST CHARGED ON MEMBERS’ LOANS The rate of interest charged on all types of members’ loans (excluding car and home improvement loans greater than €5,000) was 0.92% (2015: 0.92%) per month, 10.98% (2015: 10.98%) APR.

15. PENSION COMMITMENTS The Credit Union operates both a defined benefit pension scheme and a defined contribution pension scheme for its employees that require contributions to be made to separately administered funds. The Credit Union participates in the Irish League of Credit Unions Republic of Ireland Pension Scheme. The pension fund is a multi-employer defined benefit plan where costs are calculated on a scheme wide basis and it is therefore not possible to identify each employer’s share of the assets and liabilities of the plan. Any surplus or deficit disclosed in the actuarial valuation is spread across all employers participating in the plan. Because the Credit Union is unable to identify its share of the assets and liabilities of the pension scheme, it is, in accordance with the requirements of Paragraph 28.11 of FRS 102, accounting for the pension contributions as if the scheme was a defined contribution scheme. An actuarial review of the fund is normally carried out every three years by the Scheme’s independent, professionally qualified, actuary. The most recent triennial actuarial valuation of the scheme was carried out as at 1 March 2014 and indicated that the actuarial value of scheme’s liabilities exceeded the value of the scheme’s assets at that date by €27.7 million. The funding proposal to meet the cost of future accrual is 20.9%. The scheme is, however, also currently subject to a statutory funding proposal designed to enable the scheme to meet the statutory minimum funding standard by 1 March 2019. This results in a total funding requirement of 30%, including the cost of risk benefits. The pension charge represents contributions payable by the Credit Union to the pension schemes and amounted to €52,231 (2014: €48,553) of which €18,998 relates to the defined benefit scheme. Contributions totalling €7,916 (2014: €7,124) were prepaid at year end and are included in prepayments.

16. DIVIDEND AND LOAN INTEREST REBATE

The dividend of €204,864 (0.5%) and the loan interest rebate of €153,552 (10%) paid during the year was approved by the members in respect of the year ended 30 September 2015, at the Credit Union’s AGM on 15 December 2015. The directors propose the following dividend and loan interest rebate in respect of the year ended 30 September 2016: Gross Dividend on Shares Loan Interest Rebate

Rate % 0.5% 10%

€ 211,588 108,126

In recommending a dividend and loan interest rebate the matters considered by the board, include the risk profile of the Credit Union, particularly in, its loan and investment portfolios; the Board’s desire to maintain a stable rather than a volatile rate of dividend each year; and members’ legitimate dividend and loan interest rebate expectations. The Board’s recommendation reflects prudence and the need to sustain the long-term welfare of the Credit Union by building up reserves to absorb unexpected shocks and still remain above minimum regulatory requirements.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

17. RELATED PARTY TRANSACTIONS In accordance with FRS102, a related party is defined as a ‘person or entity that is related to the Credit Union and has significant influence over the Credit Union or is a member of the key management personnel’. All Credit Union directors as well as committee members and management who meet the above criteria are considered to be related parties. In accordance with FRS 102 it also includes family members who may be expected to influence or be influenced by that person in their dealings with the Credit Union. During the year loans amounting to €76,258 (2015: €22,635) were approved for related parties. These loans were approved in accordance with the Standard Credit Union Rules. The aggregate amount of loans owed by related parties at 30 September 2016 was €111,675 (2015: €101,254). Loans to related parties represent 1.1% (2015: 1%) of total loans outstanding at the balance sheet date. Applying the impairment methodology outlined in Note 5, an impairment provision of €16,751 (2015: €5,063) has been made against these loans. Key Management Personnel All directors and three senior employees who have authority and responsibility for planning, directing and controlling the activities of the Credit Union are considered to be key management personnel. The directors are unpaid volunteers. Total remuneration in respect of the senior employees was: 2016 €

2015 €

Short Term Employee Benefits Payments to Pension Schemes

193,435 22,172

178,372 23,114

Total

215,607

201,486

There were no other related party transactions during the year which would require disclosure under Section 33 of FRS102 (Related Party Disclosures).

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

18. TRANSITION TO FRS 102 The Credit Union transitioned to FRS 102 from previously extant Irish GAAP as at 1 October 2014. The impact from the transition to FRS 102 is as follows: Reconciliation of reserves at 1 October 2014 Under previous Irish GAAP Adjustment for interest accrual on members’ loans

€ 6,555,913 17,928

Reserves at 1 October 2014 under FRS 102

6,573,841

Reconciliation of reserves at 30 September 2015 Under previous Irish GAAP Adjustment for interest accrual on members’ loans

€ 7,831,709 14,326

Reserves at 30 September 2015 under FRS 102

7,846,035

Reconciliation of surplus earned in year ended 30 September 2015 Surplus for the year under previous Irish GAAP Adjustment for interest accrual on members’ loans

€ 1,275,796 (3,602)

Surplus for the year ended 30 September 2015 under FRS 102

1,272,194

The following were changes in accounting policies arising from the transition to FRS102: Interest on Members’ Loans Under previous Irish GAAP, St. Michael’s Credit Union Limited accounted for its loan interest from members’ loans on a cash receipts basis. Section 11 of FRS 102 requires the use of the effective interest method for recognising loan interest income, which effectively means recognising interest on members’ loans on an accruals basis, with appropriate allowance made for recognising interest on any impaired loans. The amount of the accrued interest after allowance for interest on impaired loans was €17,928 at 1 October 2014, €14,326 at 30 September 2015 and €14,345 at 30 September 2016. Bad Debts Provision The Credit Union operates a clearly defined methodology in the calculation of its bad debts provision. This methodology was reviewed and enhanced at year end to ensure the capture of impaired loans at the earliest point where there is objective evidence of impairment, in compliance with FRS102. The upgraded methodology was retrospectively applied to the 30th September 2015 and 1 October 2014 figures to test for the potential release of any general bad debts provision, as such general provisions are not permitted under FRS102. This test showed no release of provisions, consequently no prior year transitional adjustments to the bad debts provision was required. Holiday Accrual FRS102 requires the accrual for the cost of staff annual leave earned but not taken at the year end. The Credit Union does not typically permit the accrual of holidays and the amount of any adjustment would be immaterial to the financial statements.

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

19. INSURANCE AGAINST FRAUD

The Credit Union has insurance against fraud in the amount of €1,900,000 in compliance with Section 47 of the Credit Union Act 1997.

20. POST BALANCE SHEET EVENTS There are no material events after the balance sheet date to disclose.

21. APPROVAL OF FINANCIAL STATEMENTS The financial statements were approved and authorised for issue by the board of directors on the 16th January 2017.

St. Michael’s Serving Our Community Since 1963

St. Michael’s Credit Union Limited I Financial Accounts 2016

Notes to the Financial Statements 30TH SEPTEMBER 2016

SCHEDULE 1 INTEREST ON LOANS Opening accrued loan interest receivable Loan interest income received Closing accrual interest income receivable

2016 € (14,326) 1,081,259 14,343

2015 € (17,928) 1,536,361 14,326

Total Per Income and Expenditure Account

1,081,276

1,532,759

SCHEDULE 2 OTHER INTEREST INCOME AND SIMILAR INCOME Investment income received/receivable within one year Investment income other

533,134 33,093

731,297 ––

Total Per Income and Expenditure Account

586,227

731,297

SCHEDULE 3 OTHER INCOME Commission Rental income ECCU rebate

€ 11,358 2,578 19,258

€ 12,990 750 ––

Total Per Income and Expenditure Account

33,195

13,740

SCHEDULE 4 OTHER MANAGEMENT EXPENSES Rent and rates Lighting, heating and cleaning Repairs, renewals, computer and equipment maintenance Security Printing and stationery Postage and telephone Donations and sponsorship Debt collection Promotion and advertising Training costs Chapter expenses AGM & EGM expenses Bank charges Audit fee Board oversight committee expenses General insurance Share and loan insurance Miscellaneous expenses Legal and professional fees Subscriptions Regulatory levies Pension Affiliation fees

€ 22,180 21,266 81,953 18,286 27,640 14,717 8,113 194,302 22,647 10,077 2,701 26,447 29,079 35,670 1,189 12,658 315,174 20,393 41,386 10,857 61,586 51,440 7,449

€ 22,180 21,237 69,527 13,135 24,831 7,943 4,062 130,343 8,583 14,373 2,117 14,201 28,794 46,765 –– 12,272 336,944 14,275 69,274 10,549 37,580 48,553 5,206

1,037,210

942,744

Total Per Income and Expenditure Account

St. Michael’s Credit Union Limited I Financial Accounts 2016

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St. Michael’s Serving Our Community Since 1963

For more information contact:St. Michaels Credit Union Ltd, Skehard Road, Blackrock, Cork T: (021) 435 7771 • E: info@stmichaelscu.ie