2023 Annual Report by horizonbankaus

ANNUAL

REPORT

2023

Chair and CEO’s Report Horizon is pleased to present its annual report for the 2022/2023 financial year. This year has been a testament to Horizon’s commitment to our members and the community. As we navigate the ever-evolving financial landscape, our dedication to serving our members and enhancing our community presence remains unwavering. Horizon Bank firmly believes that our success is intricately linked to the prosperity and well-being of the communities we serve. In the past year, we have continued to strengthen our community engagement initiatives, and our commitment to providing our members with a comprehensive range of high quality banking services is as strong as ever. We are pleased to announce yet another year of strong financial results, complemented by a continuing focus on our communities, an expansion of Horizon’s branch network and ongoing investment in technology. INTEREST RATES The rapid increase in Reserve Bank of Australia (RBA) interest rates during 2022 and 2023 has significantly impacted individuals, businesses and the banking sector. Whilst depositors have enjoyed a welcome return to higher rates of interest, Horizon is cognisant of the impact upon borrowers as repayments increase in a time of high living costs, and we are committed to assisting members who are suffering financial hardship. FINANCIAL PERFORMANCE Higher interest rates have impacted Horizon through a significant decrease in loan demand, and as a consequence loan balances remained static during the year. Similarly deposits and assets remained at similar levels to 2022, which after 3 consecutive high growth years has provided Horizon with a period to consolidate and replenish capital levels. Capital adequacy, being the benchmark measure of a bank’s level of reserves, increased from 14.92% to 16.72%, assisted by a change in APRA’s capital framework methodology. Horizon’s post-tax Net Profit increased 15.2% to $3.18m, whilst assets increased 0.7% to $650.6m. Profitability, as measured by ‘Return on Assets’, has increased from 0.45% to 0.49%, is considered by Horizon’s Board and Management to represent an appropriate balance between prudential soundness and member value. COMMUNITY ENGAGEMENT In addition to the long list of ‘business as usual’ community activities that Horizon has been performing for almost three decades, Horizon launched its Community Grants Program in 2022/23 resulting in almost $50k being distributed across 11 local organisations in the Illawarra, Shoalhaven, Eurobodalla and Bega Valley. Recipient organisations included surf-life saving clubs, disability groups and social welfare providers. Horizon will be seeking to distribute a similar amount of funding through the Community Grants Program in 2023/24.

BANK BRANCHES Our bank branches are the foundation of our relationship with our members. Not only do branches serve as a place for members to obtain banking advice & conduct transactions, they enable Horizon to project a presence – a ‘bricks & mortar’ statement of our commitment to communities and our members. In the past year, Horizon has undertaken several initiatives to enhance the branch experience for our customers, including a full renovation of the Bermagui branch, and most recently the opening of a new branch in Berry. A Senate inquiry is currently investigating the impact of bank branch closures in regional areas, and Horizon is proud to be bucking this trend, and proving that there continues to be demand for personal banking services – particularly in regional areas. TECHNOLOGY INVESTMENT In conjunction with Horizon’s focus on personal banking services, Horizon recognises that it is critical that we continue to invest in digital banking products.

Bermagui branch

The majority of our members transact primarily through internet banking and device based ‘app’ services, and we continue to dedicate significant resources to reviewing and updating these services to ensure that member expectations are being met. Horizon has recently finalised an upgrade of our core banking software, which will provide the platform for exciting enhancements to our internet banking and app software in 2023/24. Horizon remains committed to its core values of community engagement and excellent customer service. We express our gratitude to our dedicated employees and loyal members for their unwavering trust in Horizon, and look forward to another year of achievement and success in 2023/24.

M Crowther Chair

J Stanfield CEO

ANNUAL

REPORT

2023

Chair and CEO’s Report Hori zon is pleased to present its a nnual report for the 2022/2023 fi na ncial year. Thi s year has been a testament to Horizon’s commi tment to our members and the community. As we na vi gate the ever-evolvi ng fi nancial l andscape, our dedication to serving our members and enhancing our community presence remains unwavering. Hori zon Bank firmly believes that our success is i ntricately linked to the prosperity a nd well-being of the communities we serve. In the pa st year, we have continued to s trengthen our community engagement i nitiatives, a nd our commitment to provi ding our members with a comprehensive range of high quality ba nking servi ces is as strong as ever. We a re pleased to announce yet a nother yea r of s trong financial results, complemented by a continuing focus on our communitie s, a n expansion of Horizon’s branch network and ongoing investment in technology. INTEREST RATES The ra pid i ncrease in Reserve Bank of Australia (RBA) i nterest rates during 2022 a nd 2023 has significantly i mpacted i ndividuals, bus inesses a nd the banking sector. Whilst depositors have enjoyed a welcome return to higher ra tes of i nterest, Horizon is cogni sant of the impact upon borrowers as repayments i ncrease in a ti me of high living costs, a nd we are committed to assisting members who a re suffering financial hardship. FINANCIAL PERFORMANCE Hi gher i nterest ra tes have impacted Horizon through a significant decrease i n l oan demand, a nd as a consequence loan balances rema ined static during the year. Similarly deposits a nd assets remained a t similar l evels to 2022, whi ch a fter 3 consecutive high growth yea rs has provided Horizon wi th a period to consolidate and replenish ca pital l evels. Ca pital adequacy, being the benchmark measure of a bank’s level of reserves, increased from 14.92% to 16.72%, a ssisted by a change in APRA’s ca pital fra mework methodology. Hori zon’s post-tax Net Profit increased 15.2% to $3.18m, whilst assets i ncreased 0.7% to $650.6m. Profi tability, as measured by ‘Return on Assets’, has increased from 0.45% to 0.49%, i s considered by Horizon’s Board and Ma nagement to represent an a ppropriate balance between prudential soundness a nd member va lue. COMMUNITY ENGAGEMENT In a ddition to the long l ist of ‘business as usual’ community a ctivities that Horizon has been performing for almost three decades, Hori zon launched its Community Gra nts Program i n 2022/23 resulting i n almost $50k being distributed a cross 11 l ocal organisations i n the Illawarra , Shoalhaven, Eurobodalla and Bega Valley. Recipient organisations included s urf -life saving clubs, disability groups a nd s ocial welfare providers. Horizon will be s eeking to distribute a s imilar a mount of funding through the Community Gra nts Progra m i n 2023/24.

BANK BRANCHES Our ba nk branches a re the foundation of our relationship with our members. Not only do branches s erve a s a place for members to obta in banking advi ce & conduct transactions, they enable Horizon to project a presence – a ‘bri cks & mortar’ s tatement of our commi tment to communities a nd our members. In the past year, Horizon has undertaken several initiatives to enhance the branch experience for our customers, including a full renova tion of the Bermagui branch, a nd most recently the opening of a new branch in Berry. A Senate inquiry i s currently i nvestigating the i mpact of bank branch cl osures i n regional a reas, a nd Horizon is proud to be bucking this trend, a nd proving that there continues to be dema nd for personal banking s ervices – particularly i n regional areas. TECHNOLOGY INVESTMENT In conjunction with Horizon’s focus on personal banking servi ces, Hori zon recognises that i t is cri tical that we continue to invest in di gital banking products.

Bermagui branch

Horizon remains committed to its core values of community engagement and excellent customer service. We express our gratitude to our dedicated employees and loyal members for their unwavering trust in Horizon, and look forward to another year of achievement and success in 2023/24.

Directors’ Report Your Di rectors present their report on the credit union for the financial year ended 30 June 2023. The credit union is a company registered under the Corporations Act 2001.

Information on Directors The na mes of the directors i n office a t any ti me during or since the end of the year are: -

Name

Qualifications

Experience

Current Responsibilities

Mark Crowther

B Com, GAICD

Director – Oct 2013 to Present

Chair of the Board Chair of the Corporate Governance Committee Member of the Remuneration Committee

Jacqueline Fitzgerald

B Com, B Law

Director – Apr 2023 to Present

Member of the Audit Committee Member of the Risk Committee

Elisha Gilmour

B Law, B Sci., GDLP

Director – Apr 2021 to Present

Chair of the Remuneration Committee Member of the Corporate Governance Committee

Michael Gleeson

FCA, GAICD

Director – Oct 2013 to March 2023

Jason Hall

ANZIIF (Fellow) CIP, B Bus, CPRM, GAICD

Director – Oct 2014 to Present

Chair of the Risk Committee Member of the Audit Committee

Maree Kerr

GAICD

Director – Oct 2012 to Present

Member of the Corporate Governance Committee Member of the Remuneration Committee

Nick Scavarelli

B Com, MAICD

Director – Apr 2021 to Present

Member of the Audit Committee Member of the Risk Committee

Viktor Tomeski

B Com (Hons), CPA, MAICD, MBA

Director – Apr 2021 to Present

Chair of the Audit Committee Member of the Risk Committee

The na me of the Company Secretary i n office at the end of the year i s: -

Name

Qualifications

Experience

Jon Stanfield

B Ec., ACA

Chief Executive Officer

Directors’ meeting attendance Board Meetings Director Mark Crowther Jacqueline Fitzgerald Elisha Gilmour Michael Gleeson Jason Hall Maree Kerr Nick Scavarelli Viktor Tomeski

Eligible to attend 20 5 20 15 20 20 20 20

Attended 20 5 19 15 18 17 19 19

Committee Meetings Eligible to attend 6 3 6 7 10 6 10 10

Attended 5 3 6 7 10 6 8 10

Directors’ Benefits No Di rector has received or become entitled to receive during, or since the financial year, a benefit because of a contract m ade by the credit union, controlled entity, or a related body corporate with a Director, a firm of which a Director is a member or an entity i n which a Director has a substantial financial interest, other than that disclosed i n Note 33 of the financial report.

Indemnifying Officer or Auditor Ins urance premiums have been paid to i nsure each of the directors and officers of the credit union, a gainst a ny costs and expenses i ncurred by them i n defending any l egal proceeding a rising out of their conduct while a cting in their ca pacity as a n officer of the credi t union. In accordance with normal commercial practice, disclosure of the premium amount a nd the nature of the i nsured l i abilities is prohibited by a confidentiality cl ause in the contract. No i ns urance cover has been provided for the benefit of the a uditors of the credit union.

Financial Performance Disclosures Principal Activities The principal a ctivities of the credit union during the year were the provision of retail financial services to members in the form of taking deposits a nd giving financial a ccommodation as prescribed by the constitution. No s i gnificant changes in the nature of these a ctivities occurred during the year.

Operating Results The net profit of the credit union for the year a fter provi ding for i ncome ta x was $3.177m [2022 $2.759m].

Dividends No di vi dends have been paid or declared since the end of the financial year a nd no dividends have been recommended or provided for by the Di rectors of the credit union.

Review of Operations The results of the credit union’s operations from its activities of providing financial services to its members improved from the previous yea r. The improvement was due principally to an increase in the Net Interest Margin resulting from increases in the RBA cash rate throughout the year.

Significant Changes in State of Affairs There were no significant changes in the state of the affairs of the credit union during the year.

Events occurring after the reporting period No other ma tters or circumstances have a risen since the end of the financial year which significantly a ffected or may significantly a ffect the operations, or state of affairs of the credit union i n s ubsequent financial years.

Likely Developments and Results No other ma tter, circumstance or l ikely development i n the operations has arisen since the end of the financial year that has s i gnificantly a ffected or may s ignificantly a ffect: (i ) The operations of the credit union; (i i ) The res ults of those operations; or (i i i) The s tate of affairs of the credit union.

Auditors’ Independence The a uditors have provided the following declaration of i ndependence to the Board a s prescribed by the Corporations Act 2001 a s s et out on page 6. Thi s report is ma de in accordance with a resolution of the Board of Directors and is signed for a nd on behalf of the directors by:

Di rector

Si gned and dated this 27 September 2023

Firm Name PKF(NS) Audit & Assurance Limited Partnership ABN 91 850 861 839 PO Box 2368 Dangar NSW 2309

GPO Box 5446 Sydney NSW 2001

+61(2) 4962 2688

+61(2) 8346 6000

pkf.com.au

AUDITORS INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF HORIZON CREDIT UNION LIMITED Auditors’ Independence Declaration I declare that, to the best of my knowledge and belief, during the year ended 30 June 2023, there have been: (i)

no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

PKF

PAUL PEARMAN PARTNER 27 SEPTEMBER 2023 SYDNEY, NSW

PKF(NS) Audit & Assurance Limited Partnership is a member of PKF Global, the network of member firms of PKF International Limited, each of which is a separately owned legal entity and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm(s). Liability limited by a scheme approved under Professional Standards Legislation.

3 of 41

Firm Name PKF(NS) Audit & Assurance Limited Partnership ABN 91 850 861 839 PO Box 2368 Dangar NSW 2309

GPO Box 5446 Sydney NSW 2001

+61(2) 4962 2688

+61(2) 8346 6000

pkf.com.au

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HORIZON CREDIT UNION Report on the Audit of the Financial Report Opinion We have audited the financial report of Horizon Credit Union Limited (the Credit Union), which comprises the statement of financial position as at 30 June 2023, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Credit Union, is in accordance with the Corporations Act 2001, including: (a) (b)

Giving a true and fair view of the Credit Union’s financial position as at 30 June 2023, and of its financial performance for the year then ended; and Complying with the Australian Accounting Standards and Corporations Regulations 2001.

Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence We are independent of the Credit Union in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Credit Union, would be in the same terms if given to the directors as at the time of this auditor’s report.

Other Information The directors are responsible for the other information. The other information comprises the information included in the Credit Union’s annual report for the year ended 30 June 2023 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report The directors of the Credit Union are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Credit Union’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Credit Union or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: •

•

Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Credit Union’s internal control.

Auditor’s Responsibilities for the Audit of the Financial Report (cont’d) • •

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit 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 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 report 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 report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors 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. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

PKF

PAUL PEARMAN PARTNER 27 SEPTEMBER 2023 SYDNEY, NSW

Directors’ Declaration In the opinion of the directors of Horizon Credit Union Li mited: a.

the fi nancial s tatements and notes of Horizon Credit Union Li mited a re in accordance with the Corporations Act 2001, i ncl uding i.

gi vi ng a true a nd fair vi ew of its financial position as at 30 June 2023 a nd of i ts performance for the fi nancial yea r ended on that date; a nd

ii .

compl ying with Australian Accounting Standards (including the Australian Accounting Interpretations) a nd the Corpora tions Regulations 2001; a nd

there a re reasonable grounds to believe that Horizon Credit Union Li mited will be a ble to pay i ts debts as a nd when they become due and payable.

the fi nancial s tatements comply with International Financial Reporting Standards as stated i n Note 1.

Si gned in a ccordance with a resolution of the directors:

Di rector Da ted this 27 September 2023

Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2023 Note

2023 $‘000

2022 $‘000

2a 2c

23,159 (7,875) 15,284

14,502 (1,339) 13,163

2,007 17,291

2,690 15,853

(357) (1,572)

(347) (1,394)

(5,779) (354) (1,729) (682) (516) (1,565) (12,554)

(5,678) (391) (1,572) (762) (486) (1,657) (12,287)

4,737 (1,560) 3,177

3,566 (807) 2,759

358 3,535

1,315 100 4,174

Revenue Interest revenue Interest expense

Net interest income Fees, commission and other i ncome

Non-interest expenses Impaired losses on l oans receiva ble from members Fee a nd commission expenses General administration - Empl oyee costs - Depreciation and amortisation - Information technology - Offi ce occupancy - Other a dministration Other operating expenses Tota l non-interest expenses

Profit before Income Tax Income Ta x Expense

Profit for the year Other comprehensive income Surpl us on revaluation of l and a nd building, net of tax Surpl us (Deficit) on revaluation of Cuscal shares, net of tax

Total comprehensive income for the period

The a bove statement should be read i n conjunction with the attached notes

Statement of Changes in Member Equity for the year ended 30 June 2023

Note

Total at 1 July 2021 Net Profi t for the year Tra ns fers to (from) Reserves Total as at 30 June 2022 Net Profi t for the year Tra ns fers to (from) Reserves Total as at 30 June 2023

Share Redemption Reserve $’000

General Reserve for Credit Losses $’000

Asset Revaluation Reserve $’000

Transfer of Business Reserve $’000

161 1 162 2 164

1,032 (1,032)

2,115 1,411 3,526 (895) 2,631

Retained Earnings

Total

$’000

8,487 8,487

26,272 2,759 1,031 30,062

38,067 2,759 1,411 42,237

8,487

3,177 1,669 34,908

3,177 776 46,190

The above statement should be read in conjunction with the attached notes

Statement of Financial Position as at 30 June 2023 Note

2023 $’000

2022 $’000

4 5 10a 6

6,846 114,701 1,931 187 518,374 1,852 4,803 298 643 912 650,547

5,993 109,287 1,890 1,133 188 520,328 1,374 4,597 118 597 780 646,285

14 15 16 17 18

6,688 590,240 5,761 1,560 108 604,357 46,190

9,188 589,828 3,202 1,740 90 604,048 42,237

19 21 22 23

164 2,631 8,487 34,908 46,190

162 3,526 8,487 30,062 42,237

Assets Ca s h a nd cash equivalents Li quid i nvestments As s ets held for sale Receivables Prepa yments Loa ns to members Investments Property, pl ant a nd equipment Inta ngible assets Ta xa tion assets Ri ght of use assets Total Assets

7&8 9 10 11 12 13

Liabilities Borrowi ngs Deposits from members Pa ya bles Ta xa tion liabilities Provi s ions Total Liabilities Net Assets

Members Equity Sha re redemption reserve As s et revaluation reserve Tra ns fer of business reserve Reta ined earnings Total Members Equity

The above statement should be read in conjunction with the attached notes

Statement of Cash Flows for the year ended 30 June 2023 Note

2023 $’000

2022 $’000

Inflows Interest received Fees a nd commissions Di vi dends Received Other i ncome

22,622 1,475 71 200

14,433 1,715 303 169

Outflows Interest paid Suppliers and employees Income ta xes (paid) Net Cash from Revenue Activities

(7,875) (9,789) (1,090) 5,614

(1,339) (12,153) (644) 2,484

1,598 412

(71,096) 54,473

(5,414) 2,210

8,924 (5,215)

Inflows Proceeds on sale of investment i n s hares Proceeds on sale of property, plant and equipment

1,890

44 56

Less: Outflows Purcha s e of i ntangible assets Purcha s e of property, plant and equipment Net Cash (used in) provided by Investing Activities

(253) (494) 1,143

(49) (387) (336)

(2,500) (2,500)

2,500 2,500

853

(3,051)

5,993

9,044

6,846

5,993

Operating Activities

Inflows (outflows) from other operating activities Decrease (Increase) in Member loans (net movement) Increase in Member deposits and shares (net movement) (Increase) Decrease in receiva bles from financial institutions (net movement) Net Cash (used in) Operating Activities

38b

Investing Activities

Financing Activities Inflows Increase (Decrease) in borrowings (net movement) Net Cash from (used in) Financing Activities Tota l Net Ca sh i ncrease/(decrease) Ca s h a t Beginning of Year Cash at End of Year

38a

The above statement should be read in conjunction with the attached notes

Statement of Accounting Policies The fi nancial report i s prepared for Horizon Credit Union Limited (trading as Horizon Bank) as a single entity, for the year ended the 30th June 2023. The report was a uthorised for i ssue on 27 September 2023 i n a ccordance with a resolution of the Boa rd of Directors. The financial report is presented in Australian dollars. The financial report i s a general purpose fi nancial report that has been prepared i n accordance with the requirements of the Corporations Act 2001, Aus tralian Accounti ng Standards a nd other authoritative pronouncements of the Australian Accounting Standards Board. Compliance wi th Australian Accounting Standards ensures compliance with the International Financial Reporting Standards (IFRSs) as i s sued by the International Accounting Standards Board (IASB). Horizon Credit Union Li mited is a for-profit entity for the purpose of preparing the financial statements.

Changes in significant accounting policies There were no significant changes to a ccounting policies during the year. A number of new s tandards, amendments to s ta ndards and i nterpretations a re effective from annual periods beginning after 1 Ja nuary 2023 ha ve not been applied in prepa ring this financial report. The credit union’s assessment of the i mpact of these new standards a nd i nterpretations is tha t these are not significant a nd not likely to i mpact the financial report a nd a s such have not been reported on.

Revenue recognition Revenues a re recognised at fair va lue of the consideration received net of the amount of goods a nd s ervices tax (GST) pa ya ble to the Australia Ta xation Office (ATO). Exchanges of goods or s ervices of the same nature and va lue without any ca s h consideration a re not recognised as revenues. Sale of Non-current assets Revenue from the disposal of assets is recognised when title passes from the credit union to the purchaser. The gain or loss on di sposal is calculated as the difference between the ca rrying a mount of the asset at the ti me of disposal a nd the net proceeds on disposal. Dividends Di vi dend i ncome is recognised on the date the credit union’s right to receive payment is established. Interest income Interest i ncome is recognised i n the profit or l oss using the effective interest method. The effective interest ra te is the ra te tha t exa ctly discounts the estimated future cash payments and receipts through the expected life of the financial asset (or, where appropriate, a shorter period) to the carryi ng amount of the financial a sset. When calculating the effective i nterest ra te, the credit union estimates future cash flows considering a ll contractual terms of the financial i nstruments, but not future credit l osses. Term loans - The l oan i nterest is ca lculated on the basis of the daily balance outstanding a nd is charged i n a rrears to a member’s a ccount on the last day of each month. Overdraft - The l oan i nterest is calculated i nitially on the basis of the daily balance outstanding and is charged i n arrears to a member’s account on the last day of each month. Credit cards – the i nterest is calculated i nitially on the basis of the daily balance outstanding and is charged i n arrears to a members a ccount on the 28th day of each month, on cash a dvances a nd unpaid purchases at the payment due date. Purcha s es a re granted up to 55 da ys interest free until the due date for payment which is the 21s t day of the following month. Non-accrual loan interest – whi le still legally recoverable, interest is not brought to a ccount as income when the credit uni on is i nformed that the member has deceased, or where a loan is impaired. Loan origination fees Loa n establishment fees a re initially deferred as part of the l oan balance, and are brought to a ccount as income over the expected life of the l oan as i nterest revenue. Transaction costs Tra ns action costs are expenses which are direct a nd incremental to the establishment of the loan. These costs a re initially deferred as part of the l oan balance, and are brought to a ccount as a reduction to income over the expected life of the loan, a nd i ncluded as part of interest revenue. Fees on loans The fees charged on l oans after origination of the loan are recognised a s income when the s ervice is provided or cos ts a re i ncurred, with the exception of fixed ra te l oan renegotiation fees. Fees charged to members who break their fixed rate loan contra ct a nd continue to hold the l oan with either a va riable i nterest ra te or renegotiated fixed rate, a re recognised over the remainder of the fixed ra te period.

Statement of Accounting Policies (Continued) Other revenue Fee, commission a nd other revenue is recognised when the servi ce is completed, or when the fee i n respect of services provi ded is receiva ble.

Financial assets and liabilities Loan impairment AASB 9 requi res the use of forward looking i nformation to recognise expected credit l osses – the ‘expected credit l oss model’ (ECL). Instruments within the s cope of the new requirements include loans a nd advances and other debt-type fi nancial assets measured a t amortised cost and FVOCI, tra de receivables and loan commitments a nd some financial gua ra ntee contracts (for the issuer) that a re not measured at fair va lue through profit or l oss. A broa der range of information is considered when a ssessing credit ri sk a nd measuring expected credit losses, including pa s t events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future ca s h flows of the i nstrument. In a pplying this forward-looking approach, three distinction stages of impairment are made: Sta ge 1 - fi nancial instruments that have not deteriorated s ignificantly in credit quality s ince i nitial recognition or that ha ve l ow credit risk (performing loans); Sta ge 2 - fi nancial instruments that have deteriorated significantly i n credit quality s ince i nitial recognition a nd whose credi t ri sk is not low (underperforming l oans); and Sta ge 3 - covers financial a ssets that have objective evidence of impairment (l oans in default/non -performing) at the reporti ng date. Measurement of ECL ’12 month expected credit losses’ are recognised i n the first s tage while ‘lifetime expected credit losses’ are recognised i n the s econd stage. Measurement of the expected credit l osses is determined by a probability weighted estimate of credit l osses over the expected l ife of the financial instrument. They a re measured as follows: Fi nancial assets that a re not credit-impaired at the reporting date: a s the present va lue of all cash s hortfalls (i.e. the di fference between the cash flows due i n a ccordance with the contract a nd the cash flows expected to be received); Fi nancial assets that a re credit-impaired a t the reporting date: as the difference between the gross ca rrying a mount a nd the present value of estimated future cash flows; Undra wn l oan commitments: as the present va lue of the difference between the contractual cash flows that are due if the commitment is drawn down and the cash flows expected to be received; a nd Fi nancial guarantee contracts: as the expected payments to reimburse the holder less any a mounts expected to be recovered. Note 24C deta ils the credit ri sk management approach for l oans. Credit-impaired financial assets At ea ch reporting date, the credit union assesses whether financial assets ca rried a t amortised cost are credit-impaired. A fi nancial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash fl ows of the financial asset have occurred. Evi dence that a financial asset is credit-impaired i ncludes the following observable data: Si gnificant financial difficulty of the borrower or i ssuer; A brea ch of contract s uch as a default or past due event; The res tructuring of a loan or advance on terms that would otherwise not be considered; It i s becoming probable that the borrower will enter bankruptcy or other fi nancial reorganisation; or The di sappearance of an a ctive market for a s ecurity because of financial difficulties. A l oan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be crediti mpaired unless there is evidence that the risk of not receivi ng contractual cash flows has reduced s ignificantly and there a re no other indicators of i mpairment. In a ddition, a retail loan that is overdue for 90 da ys or more is considered impaired. Presentation of allowance for ECL in the Statement of Financial Position Los s allowances for ECL a re presented i n the Statement of Financial Position as follows: Fi nancial assets measured at a mortised cost: as a deduction from the gross ca rrying a mount of the assets; Loa n commitments a nd financial guarantee contracts: generally, a s a provision; a nd Where a financial i nstrument i ncludes both a drawn a nd undrawn component, and ECL ca nnot be i dentified on the l oa n commitment component separately from those on the drawn component, a combined l oss a llowance for both components is presented. Any excess of the loss allowance over the gross amount of the drawn component i s pres ented as a provision.

Statement of Accounting Policies (Continued) Write-off Loa ns a nd debt securities are wri tten off, either partially or i n full, when there is no realistic prospect of recovery. Thi s is generally the case when it i s determined the borrower does not have assets or sources of income that could generate s ufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be s ubject to enforcement a ctivities i n order to comply with the procedures for recovery of a mounts due. Financial assets and liabilities Fi nancial assets and liabilities are recognised when the credit union becomes a party to the contractual provisions of the fi nancial i nstrument and a re measured i nitially a t cost adjusted by tra nsaction co sts, except for those carried at fair va lue through the profit or l oss, which a re measured i nitially a t fair va lue. Subsequent measurement of financial assets a nd l i abilities a re described below. Fi nancial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the fi nancial asset and all substantial risks and rewards a re transferred. A fi nancial liability i s derecognised when i t is exti nguished, discharged, ca ncelled or expires. Classification and measurement of financial liabilities Fi nancial liabilities include borrowings, member deposits a nd other payables. They a re i nitially measured at fair va lue, a nd where applicable, a djusted for tra nsaction costs unless the credit union designated a financial liability a t fair va lue through the profit a nd l oss. Subsequently, fi nancial liabilities are measured at a mortised cost using the effective i nterest method except fi nancial l iabilities designated at FVPL, which a re ca rried subsequently a t fair va lue w ith gains or l osses recognised in the profit a nd l oss. Al l i nterest related charges a nd i f a pplicable, changes i n a n instrument’s fair va lue that a re reported in profit and loss are i ncl uded within i nterest or non-interest expenses. Classification of financial assets Except for those tra de receivables that do not contain a significant financing component and are measured a t the tra ns action price, all financial assets are i nitially measured at fair va lue a djusted for tra nsaction costs (where applicable ). For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging i ns truments are cl assified into the following categories upon initial recognition: Amorti s ed cost Fa i r va lue through profit and loss (FVPL) Fa i r va lue through other comprehensive i ncome (FVOCI) Al l i ncome a nd expenses relating to financial assets that recognised i n profit or l oss are presented within net i nterest i ncome, fees commissions and other i ncome or non-interest expenses. Cl a ssifications a re determined by both: The credit union’s business model for ma naging the financial asset, and The contra ctual ca sh flow characteristics of the financial assets. Subsequent measurement of financial assets Financial assets at amortised costs A fi nancial asset is measured a t amortised cost if i t meets both of the following conditions a nd i s not designated a s a FVPL: The a sset is held within a business model whose objective is to hold assets to collect contractual cash flows; a nd The contra ctual terms of the financial asset give rise to cash fl ows that a re solely payments of principal and interest on the pri ncipal a mount outstanding. After i nitial recognition, these are measured at a mortised cost using the effective i nterest method. Discounting is omitted where the effect of discounting is i mmaterial. Cash, cash equivalents a nd tra de receivables fall i nto this ca tegory of fi nancial i nstruments as well as negotiable certificates of deposit (NCDs), floating ra te notes (FRNs) a nd bonds. Financial assets at Fair Value through Profit or Loss (FVPL) Fi nancial assets that a re within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are ca tegorised as fair va lue through profit or loss. Irrespective of the business model, financial assets whose contractual ca sh fl ows are not solely payments of principal a nd i nterest are a ccounted for a t FVPL.

Statement of Accounting Policies (Continued) Fair Value through Other Comprehensive Income (FVOCI) Investments i n equity i nstruments that are not held for tra ding a re eligible for a n i rrevocable election at i nception to be mea sured at FVOCI. Subsequent movements i n fair va lue a re recognised in other comprehensive income and are never recl assified to profit or loss. Dividends from these investments continue to be recorded as other income within the profit or l os s unless the dividend cl early represents return of ca pital. This ca tegory i ncludes unlisted equity s ecurities such as s ha res in Cus cal Ltd a nd TAS Ltd. Loans to members Loa ns a nd members i n the Statement of Financial Position i nclude loans a nd a dvances measured at a mortised cost; they are i ni tially measured at fair va lue plus i ncremental direct tra nsaction costs, and subsequently a t their a mortised cost using the effective interest method. Loa ns a nd a dvances a re non-deriva tive financial assets with fixed or determinable payments that are not quoted in a n a cti ve market and that the credit union does not intend to s ell i mmediately or i n the near term . Reclassifications Fi nancial assets are not reclassified subsequent to their i nitial recognition, except in the period a fter the credit union cha nges its business model for managing fi nancial assets. There were no changes to any of the credit union bus iness models during the current year (2022: Ni l).

Property, plant and equipment La nd a nd buildings have been revalued as a t the following dates less accumulated depreciation: Stewa rt Street a s at 30 June 2022 Property pl ant a nd equipment, with the exception of freehold land, is depreciated on a straight-line basis s o as to wri te off the net cost of each asset over i ts expected useful l ife to the credit union. Es timated useful lives a re as follows: -

Bui ldings – 16 to 40 yea rs . Lea sehold Improvements – 8 to 10 yea rs . Pl a nt a nd Equipment – 3 to 7 yea rs . As s ets less than $300 a re not ca pitalised.

Receivables from other financial institutions Term deposits, Floating Rate Notes and Negotiable Certificates of Deposit with other fi nancial i nstitutions a re unsecured a nd have a ca rrying a mount equal to their principal amount. Interest is paid on the daily balance a t maturity or on a n a nnual basis i f i nvested l onger than 12 months. All deposits are in Australian currency. The a ccrual for i nterest receivable is ca lculated on a proportional basis of the expired period of the term of the investment . Interest receivable is i ncluded in the amount of receivables in the Statement of Financial Position.

Equity investment and other securities Investments i n shares a re classified as fair va lue through other comprehensive i ncome (FVOCI). Investments i n shares that do not have a ready ma rket a nd a re not ca pable of being reliably va lued a re recorded a t the a s sessed fair va lue amount. Al l i nvestments are in Australia currency.

Member deposits Basis for measurement Member savi ngs a nd term investments a re quoted at the a ggregate amount payable to depositors as a t 30 June 2023. Interest payable Interest on savings is calculated on the daily balance and posted to the a ccounts periodically, or on maturity of the term deposit. Interest on s avings i s brought to a ccount on a n a ccrual basis in a ccordance with the i nterest ra te terms and condi tions of each s avings a nd term deposit a ccount as va ried from ti me to ti me. The a mount of the accrual is shown as pa rt of a mounts paya ble.

Statement of Accounting Policies (Continued)

Borrowings Al l borrowings are i nitially recognised a t fair va lue, net of tra nsaction costs incurred. Borrowings are s ubsequently mea sured at a mortised cost. Any difference between the proceeds (net of tra nsaction costs) a nd the redemption amount is recognised i n the Statement of Profit or Loss a nd Other Comprehensive Income over the period of the l oans and borrowings us i ng the effective interest method.

Payables / employee entitlements Provi s ion is made for the credit union’s liability for employee benefits a rising from services rendered by employees to ba l ance date. Short-term employee benefits a re current liabilities included i n employee benefits, measured at the undiscounted amount tha t the credit union expects to pay as a result of the unused entitlement. Annual leave is included i n ‘other l ong-term benefit’ and discounted when calculating the leave l iability as the credit union does not expect all annual leave for all empl oyees to be used wholly within 12 months of the end of the reporting period. Annual leave l iability i s still presented as a current l iability for presentation purposes under AASB 101 Presentation of Financial Statements. Provi s ion is made for the credit union’s liability for employee benefits a rising from services rendered by employees to the reporti ng date. Employee benefits expected to be s ettled within one year, have been measured a t their nominal a mount. Provi s ion for long service l eave is determined on a pro-rata basis from commencement of employment measured a t the pres ent va lue of the estimates future ca sh outflows discounted using corporate bond rates. Annual l eave is a ccrued in respect of all employees on a pro-rata entitlement for a part year of servi ce and leave entitlement due but not ta ken at reporting date. Contri butions are made by the credit union to an employee’s superannuation fund and are charged as expenses when i ncurred.

Leases At i nception of a contract, the credit union assesses whether a l ease exists – i .e. does the contract convey the ri ght to control the use of a n i dentified asset for a period of ti me i n exchange for consideration. Thi s involves assessment of whether: -

The contra ct involves the use of a n i dentified asset – this may be explicitly or i mplicitly i dentified within the a greement. If the supplier has a substantive substitution right then there is no i dentified asset.

The credit union has the ri ght to obtain s ubstantially a ll of the economic benefits from the use of the asset throughout the period of use.

The credit union has the ri ght to direct the use of the asset i .e. decision making ri ghts i n relation to changing how a nd for wha t purpose the a sset is used.

Lessee Accounting The non-lease components i ncluded in the lease a greement have been separated and are recognised a s an expense a s i ncurred. At the l ease commencement, the credit union recognises a ri ght-of-use asset and associated lease liability for the lease term. The l ease term includes extension periods only where the credit union believes it is reasonably certain that the option wi l l be exercised. The ri ght-of-use asset is measured using the cost model where cost on i nitial recognition comprises of the lease liability, i ni tial direct costs, prepaid lease payments, estimated cost of removal and restoration less any l ease incentives. The ri ght-of-use asset is depreciated over the l ease term on a s traight l ine basis and assessed for i mpairment i n accordance wi th the impairment of a ssets accounting policy. The l ease liability is i nitially measured at the present va lue of the remaining lease payments at the commencement of the l ease. The discount ra te is the ra te implicit i n the l ease, however where this cannot be readily determined, the credit uni on’s incremental borrowing ra te is used. Subs equent to initial recognition, the lease liability i s measured at a mortised cost using the effective interest rate method. The l ease liability is remeasured whether there is a lease modification, change in estimate of the lease term or i ndex upon whi ch the lease payments are based (e.g. CPI) or a change in the credit union’s assessment of lease term. Where the l ease liability is measured, the right-of-use asset i s adjusted to reflect the remeasurement or the remeasurement i s recorded in profit or l oss if the carryi ng amount of the right-of-use asset has been reduced to zero.

Statement of Accounting Policies (Continued)

Leases (Continued) Exceptions to lease accounting The credit union has chosen to apply the exceptions to l ease a ccounting to both s hort-term l eases (i.e. leases with a term of l ess than or equal to 12 months) and leases of l ow-value a ssets. The credit union recognises the payments associated with thes e leases as an expense on a s traight-line basis over the lease term.

Income Tax The i ncome tax expense shown in the Statement of Profit or Loss and Other Comprehensive Income is based on the opera ting profit before i ncome ta x adjusted for any non -tax deductible, or non-assessable items between a ccounting profit a nd ta xable income. Deferred tax a ssets and liabilities are recognised using the Statement of Financial Position l iability method in respect of temporary differences arising between the ta x bases of assets or liabilities and their carryi ng amounts i n the financial statements. Current and deferred tax balances relating to a mounts recognised directly in equity a re also recognised directly i n equity. Deferred tax assets and liabilities are recognised for all temporary differences between carrying amounts of assets and liabilities for fi nancial reporting purposes and their respective tax bases at the rate of income tax applicable to the period in which the benefit will be received or the liability will become payable. These differences have been assessed at the rate of 25%. Deferred tax assets are only brought to account if it is probable that future taxable amounts will be a vailable to utilise those temporary differences. The recognition of these benefits is based on the assumption that no adverse change will occur in i ncome ta x l egislation; a nd the anticipation that the credit union will derive sufficient future assessable income and comply with the conditions of deductibility i mposed by the law to permit a future income tax benefit to be obtained.

Intangible assets Items of computer s oftware that a re not i ntegral to the computer hardware owned by the credit union a re classified as i nta ngible assets. Computer s oftware held as i ntangible assets is a mortised over the expected useful life of the software. These lives ra nge from 2 to 5 yea rs .

Goods and services tax As a fi nancial institution the credit union is input ta xed on all income except income from commissions a nd s ome fees. An i nput taxed supply is not subject to goods and servi ces ta x (GST) collection, a nd similarly the GST paid on purchases ca nnot be recovered. As some i ncome is charged GST, the GST on purchases is generally recovered on a proportionate basis. In a ddition certain prescribed purchases are s ubject to Reduced Input Ta x Credits, of which 75% of the GST paid is recoverable. Revenue, expenses a nd a ssets are recognised net of the a mount of GST, except where the amount of the GST i ncurred is not recovera ble from the Australian Tax Office (ATO). In these ci rcumstances, the GST i s recognised a s part of the cost of a cquisition of the asset or as part of an i tem of the expense. Receivables a nd payables are stated with the a mount of GST included where a pplicable GST is collected. The net a mount of GST recovera ble from, or payable to the ATO i s included as an a sset or l iability i n the Statement of Financial Position. Ca s hflows a re included i n the s tatement of cashflows on a gross basis. The GST components of ca sh flows arising from i nvesting and financing a ctivities, which are recoverable from, or payable to the Australian Ta xation Office, are cl assified a s opera ting ca shflows.

Cash and cash equivalents Cash compri ses cash on hand and demand deposits. Cash equivalents a re s hort-term, highly liquid investments that a re readily convertible to known a mounts of cash a nd a re s ubject to a n i nsignificant risk of changes in va lue.

Transfer of business Bus iness tra nsfers a re accounted for using the acquisition method as a t the acquisition date. The identifiable assets a nd l i abilities of the tra nsferee a re recognised a t their fair va lue a t acquisition date and held in a Transfer of Business Reserve. The ba lance of the reserve is from the merger wi th Lys aght Credit Union i n FY21. The balance is not impaired a nd continues to be fa irly s tated.

Statement of Accounting Policies (Continued)

Accounting estimates and judgements Ma na gement have made a ccounting estimates when a pplyi ng the credit union’s accounting policies with respect to the va l uation of land and building. In accordance with AASB 13 fa ir va lue for land and buildings should be based on the highest a nd best use and should ta ke i nto a ccount a number of fa ctors including physical characteristics such as location or size, a ny l egal restriction such as zoning and financial feasibility, recent sales evidence for comparable properties, and overall mark et condi tions. Va ri ous models a nd assumptions a re used i n measuring fair va lue of fi nancial assets such as Cuscal shares. Judgement is a pplied i n identifyi ng the most appropriate model for each type of asset, as well as for determining the assumptions used in thes e models, i ncluding assumptions that relate to key drivers of price ri sk a nd factors such as sales evidence, dividend hi s tory, pri ce earning multiple and overall market conditions. Ma na gement have also made s ignificant judgements with respect to the calculation of expected credit loss (ECL) allowance, i ncl uding the i mpact of higher i nflation a nd living expenses, rising interest ra tes, possible downturn i n employment a nd pos sible decline in property va l ues. Key a reas of judgement to be considered under the AASB 9 s tandard i nclude: -

Recognition of credit losses based on “Stage 1” 12 month expected losses and “Stage 2” a nd “Stage 3” l ifetime expected credit losses; Determining cri teria for significant increase i n credit risk: an asset moves to s tage 2 when its credit risk has i ncreased s i gnificantly s ince i nitial recognition. In a ssessing whether the credit risk of a n asset has significantly i ncreased the credi t union ta kes into account qualitative and quantitative reasonable and supportable forward l ooking information. Choos ing appropriate models and assumptions for the measurement of ECL; Es ta blishing groups of similar financial assets for the purposes of measuring ECL: when ECLs a re measured on a col l ective basis, the financial instruments a re grouped on the basis of shared risk characteristics.

Refer to note 8 for further details.

New or emerging standards not yet mandatory The AASB has issued new a nd a mended Accounting Standards a nd Interpretations that have mandatory a pplication dates for future reporting periods. The directors do not expect the adoption of these s tandards to have a ny i mpact on the reporting pos ition or performance of the credit union.

Statement of Profit or Loss and Other Comprehensive Income

Analysis of interest revenue Interest revenue on assets carried at amortised cost Ca s h – deposits at call Receivables from financial institutions Loa ns to members

Other Income Di vi dends received Ba d debts recovered Ga i n on disposal of property, plant a nd equipment a nd i nvestments Mi s cellaneous revenue

73 695 13,734 14,502

538 371 423 404 1,736

801 352 129 471 343 2,096

71 9 191 2,007

303 7 121 163 2,690

6 11 7,858 7,875

1 18 1,320 1,339

357 357

347 347

62 8 70

59 11 70

35 246 73 354

39 250 101 390

513

497

(12) 19 520

(186) 10 321

Impairment losses on loans and advances Increase(Decrease) i n provision for impairment

126 3,975 19,058 23,159

Interest expense Interest expense on liabilities carried at amortised cost Short term borrowings Deposits from financial i nstitutions Deposits from members

2022 $’000

Non-interest revenue Fee and commission revenue - Loa n fee income – other than loan origination fees - Tra ns action fee i ncome - ATM i ncome - Ins urance commissions - Other commissions Total Fee and commission revenue

2023 $’000

Other prescribed expense disclosures Audi tors remuneration (excluding GST) PKF - Externa l a udit fees - Other s ervi ces – ta xation Depreciation of - Bui l dings - Pl a nt a nd equipment Amorti sation of i ntangibles

Property l eases Net movement in provisions for: - Empl oyee entitlements - Lea s ed premises make good - Fra ud

Income Tax Expense

The income tax expense comprises amounts set aside as:

2023 $’000

2022 $’000

1,100 52 3 405

752 44 72 (61)

1,560

807

Profi t

4,737

3,566

Pri ma fa cie ta x payable on profit before income ta x at 25%

1,184

892

Add ta x effect of expenses not deductible - Other non-deductible expenses - Adjus tment to opening deferred tax balances - (Over)/Under provision for tax i n prior yea r - Di vi dend i mputation a djustment Subtotal

1 3 405 7 1,600

1 72 (61) 32 936

Les s - Government stimulus - Imputation credits Income ta x expense a ttributable to current year profit

(10) (30) 1,560

(129) 807

Franking Credits Fra nking credits held by the credit union after a djusting for fra nking credi ts that will a rise from the payment of income tax payable as a t the end of the financial year is:

10,810

9,615

1,841 5,005 6,846

1,288 4,705 5,993

25,726 54,175 4,000 11,500

23,937 44,550 4,000 19,500

19,300 114,701

17,300 109,287

Current ta x expense Deferred tax Adjus tment to opening deferred tax balances (Over)/Under provision from prior year Tota l income ta x expense i n the Statement of Profit or Loss a nd Other Comprehensive Income b.

The prima facie tax payable on profit is reconciled to the income tax expense in the accounts as follows:

Cash and Cash Equivalents Ca s h on hand and at bank Deposits a t call

Liquid Investments Amortised Cost Investments Negotiable certificates of deposit Fl oating rate notes Fi xed ra te bonds Government bonds Receivables Term deposits held with authorised deposit ta king institutions

Receivables

Note

Interest receivable on deposits with other financial institutions Sundry debtors and settlement accounts

2023 $’000

2022 $’000

720 1,211 1,931

183 950 1,133

6,097 512,956 519,053 64 519,117 (743) 518,374

6,423 514,238 520,661 93 520,754 (12) (414) 520,328

504,314 11,492 3,247 519,053

506,373 10,411 3,877 520,661

472,988 26,686 4,640 504,314

460,110 30,886 15,377 506,373

223,661 131,479 129,507 34,406 519,053

237,284 119,890 131,670 31,817 520,661

481,739 13,046 24,268 519,053

486,036 12,609 22,016 520,661

Loans and Advances a.

Amount due comprises: Overdra fts a nd revolving credit Term l oans Una mortised loan origination fees Una mortised fixed ra te loan renegotiation fees Provi s ion for impaired l oans

Credit quality - Security held against loans Secured by residential or commercial property Secured by goods mortgage Uns ecured

It i s not practical to va lue all collateral as a t the balance date due to the va riety of a ssets a nd conditions. A breakdown of the qua lity of the residential mortgage s ecurity on a portfolio basis a s follows: Securi ty held as mortgage a gainst real estate is on the basis of: - LVR of l ess than 80% - LVR of more tha n 80% but mortgage insured - LVR of more tha n 80% a nd not mortgage insured Tota l (LVR – Loan to valuation ratio)

Where the l oan va lue is l ess than 80% there is a 20% ma rgin to cover the cos ts of a ny s ale a nd/or potential value reduction. c.

Concentration of Loans

(i )

Indivi dual loans which exceed 10% of member funds in a ggregate

(i i )

Loa ns to members a re concentrated in the following areas: - Il lawarra - Shoa lhaven - Bega Valley - Other

(i i i)

Loa ns by customer type: Res idential loans a nd fa cilities Pers onal l oans and facilities Bus iness loans and facilities

Provision on Impaired Loans a.

Amounts arising from Expected Credit Loss (ECL) The l oss a llowance as of the year end by class of exposure/asset are summarised i n the table below.

2023

2022

Gross Carrying Value

ECL Allowance

Carrying Value

Gross Carrying Value

Provision for impairment

Carrying Value

$’000

Mortgages Personal

478,135 10,839

88 424

467,599 20,863

481,944 10,569

52 220

481,892 10,349

Overdrafts

5,811

218

5,593

6,132

136

5,996

Total to natural persons Corporate borrowers

494,785 24,268

730 13

494,055 24,255

498,645 22,016

408 6

498,237 22,010

Total

519,053

743

518,310

520,661

414

520,247

Loans to members

An a na lysis of the credit union’s credit ri sk exposure per class of fi nancial asset a nd “s tage” without reflecting on the effects of any collateral or other credit enhancements is demonstrated i n the following tables. Unless specifically i ndicated, for financial asset, the amounts in the ta ble represent gross ca rryi ng amounts.

2023

2022

Stage 1 12 mth ECL

Stage 2 Lifetime ECL

Stage 3 Lifetime ECL

Mortgage secured Personal loans

$’000 88 424

$’000 -

Overdrafts Corporate borrowers

124 13

19 -

Loans to members

Loss allowance Total

Total

Stage 1 12 mth ECL

Stage 2 Lifetime ECL

Stage 3 Lifetime ECL

Total

$’000 -

$’000 88 424

$’000 52 206

$’000 2

$’000 12

$’000 52 220

75 -

218 13

57 6

23 -

56 -

136 6

649

743

321

414

The reconciliations from the opening to the closing balance of the allowance for i mpairment by cl ass of financial i ns trument is s hown i n the ta ble below.

2023

2022

Stage 1 12 mth ECL

Stage 2 Lifetime ECL

Stage 3 Lifetime ECL

Total

Stage 1 12 mth ECL

Stage 2 Lifetime ECL

Stage 3 Lifetime ECL

Total

Loans to members

$’000

Balance at 1 July

321

414

Changes in the loss allowance

- Transfer to stage 1

- Transfer to stage 2

- Transfer to / from stage 3

(28)

(24)

328

357

291

347

(28)

(24)

649

743

321

414

- Net movement due to change in credit risk - Write-offs Balance at 30 June

Provision on Impaired Loans (Continued) b.

Key assumptions in determining the ECL The key i nputs into the measurement of ECL i nclude the following va riables: - proba bility of default (PD) - l oss gi ven default (LGD); and - expos ure at default (EAD) Thes e parameters are generally derived from i nternal analysis, management judgements and other historical data. They a re a djusted to reflect forward-looking information as described below. Proba bility of default (PD) estimates are ca lculated based on arrears over 90 da ys and other l oans and facilities where the likelihood of future repayments is l ow. The definition of default is consistent with the definition of defa ult used for i nternal credit ri sk management and regulatory reporting purposes. Instruments which are 90 da ys pa s t due a re generally considered to be in default. Los s given default (LGD) is the magnitude of the l ikely l oss i f there is a default. The credit union estimates LGD pa ra meters based on the history of recovery ra tes of claims a gainst defaulted counterparties. The LGD percentage a pplied considers the s tructure of the l oan, collateral, s eniority of the cl aim, counterparty i ndustry a nd recovery cos ts of any collateral that is integral to the financial asset. For l oans secured by retail property, Loa n to Value Ratios (LVR) a re a key parameter in determining LGD. LGD estimates a re recalibrated for different economic s cenarios and for rea l estate lending, reflect possible changes in property va l ues. Expos ure at default (EAD) represents the expected exposure i n the event of a default. EAD is derived from the current exposure to the counterparty a nd potential changes to the current amount allowed under the contract i ncl uding a mortisation. The EAD of a financial asset is its gross ca rryi ng a mount. F or lending commitments a nd fi nancial guarantees, the EAD i ncludes the a mount drawn as well as potential future a mounts that may be drawn under the contract, which a re estimated based on historical observa tions and future expectations. The credit union has elected to use the following segments when assessing credit ri sk for Stages 1 a nd 2 of the i mpairment model: - Mortga ge loans - Pers onal l oans - Other – overdra fts a nd credit ca rds Sta ge 3 of the i mpairment model covers fi nancial assets that have objective evidence of i mpairment (l oans in defa ult/non-performing) at the reporting date. Significant increase in credit risk The credit union is not required to develop an extensive list of fa ctors in defining a ‘significant increase i n credit ri sk’. In a ssessing significant increase i n credit risk where a loan or group of l oans must move to Stage 2, the following fa ctors have been considered in the credit union’s current model: - Loa ns more than 30 da ys past due - Loa ns with approved hardship or modified terms When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the credit union considers reasonable a nd s upportable information that is relevant and available wi thout undue cost or effort. This includes both quantitative and qualitative i nformation and a nalysis, based on the credi t union’s historical experience and expert judgement, relevant external factors a nd i ncluding forward -looking i nformation. The credit union presumes that the credit ri sk on a financial asset has increased significantly s ince initial recognition when the exposure is more than 30 da ys past due unless reasonable and supportable i nformation demonstrates otherwise. The a pproach in determining the ECL i ncludes forward -looking i nformation. The credit union has performed hi s torical analysis a nd identified the key economic va riables i mpacting credit risk and expected credit losses for each portfolio segment. Given the lack of loss experience by the credit union a nd across the wider i ndustry, more emphasis has been applied to the historical data available as opposed to forward looking information. Consideration ha s also been given to the l evel of undue cost a nd effort involved in utilising complex s tatistical models, which i s not cons idered appropriate for the s ize a nd complexity of the portfolio. The credit union has considered other forward-looking considerations such as the impact of future unemployment ra tes , increasing interest ra tes, higher i nflation, possible decline i n property pri ces, regulatory cha nge a nd external ma rket risk factors, which have a dded a material i mpact, therefore an adjustment has been made to the ECL for s uch fa ctors. The credit union considers the ECL to represent its best estimate of the possible outcomes a nd i s a l igned with information used by the credit union for other purposes such as strategic planning , budgeting and s tress testing. Periodically the credit union carri es out stress testing of more extreme shocks to ca librate its determination of other potential s cenarios.

Investments Equity investment securities designated as FVOCI Sha res i n Cuscal Limited Sha res i n Tra nsaction Solutions Limited

2023 $’000

2022 $’000

1,784 68 1,852

1,306 68 1,374

Shares in Cuscal Limited Cus ca l supplies end-to-end payments servi ces. At 30 June 2023, the credit union designated i ts i nvestment i n Cuscal shares to be $1.68 per s hare (2022: $1.23) a s a Fair Value through Other Comprehensive Income (FVOCI).

Shares in Transaction Solutions Limited (TAS) TAS provi des IT hosting s ervices. At 30 June 2023, the credit union designated its investment in TAS s hares to be $4.78 per s ha re (2022: $4.78) a s a Fair Value through Other Comprehensive Income (FVOCI), being the cost value of the s hares purcha sed during the FY 2020.

10.

Property, Plant and Equipment a.

2023 $’000

2022 $’000

1,340

550 1,890

2,425 2,425 1,400 (35) 3,790

3,765 (1,340) 2,425 1,950 (550) 3,825

Plant and equipment - at cost Les s: Provi sion for depreciation

2,744 (1,731) 1,013

2,689 (1,917) 772

Capitalised Leasehold Improvements at cost Les s: Provi sion for a mortisation

220 (220) 4,803

284 (284) 6,487

3,825

5,715

Assets held for sale Land – at valuation Buildings – at valuation

Fixed Assets Land – at valuation Les s: Tra nsferred to a vailable for sale Buildings – at valuation Les s: Tra nsferred to a vailable for sale Les s: Provi sion for depreciation

Land and Building – Valuation La nd a nd building – a t va luation

The va l uation of land and buildings a t 27 Stewart Street, Wollongong NSW 2500 ha s been based on a n i ndependent valuation performed by Opteon Property Group Australia as at 30 June 2022. Refer to Note 21. The building at 13 Auburn Street, Wollongong NSW 2500 wa s s ettled on 15 July 2022. The s ale i s reflected i n the decrease in the Asset Revaluation Reserve . Refer to Note 21. The di rectors have assessed the fair va lue of land and did not i dentify a ny i ndicators of impairment during the year ended 30 June 2023. Movement in the assets balances during the year were:

2023

2022

Property

Plant & equipment

Leasehold Improvements

Total

Property

Plant & equipment

Leasehold Improvements

Total

$’000

5,715

772

6,487

4,000

651

4,651

Purchases in the year Acquisitions through business combinations

494

387

Revaluation

1,753

Opening balance

Less Disposal of assets

(1,890)

(7)

(1,897)

(16)

Depreciation charge

(35)

(247)

(281)

(38)

(250)

3,790

1,013

4,803

5,715

772

Balance at the end of the year

(16) -

(288) 6,487

11.

12.

Intangible Assets

2023 $’000

2022 $’000

Software Les s: Provi sion for a mortisation

1,882 (1,584) 298

1,647 (1,529) 118

Movement in the assets balances during the year were: Opening balance Purcha s es Acqui sitions through business combinations

118 253 -

170 49 -

Les s: Di s posal of a ssets Amorti sation charge Ba l ance a t the end of the year

(73) 298

(101) 118

77 566 643

72 525 597

70 186 274 32 (4) 8 566

111 104 279 25 6 525

Taxation Assets Accrua l for GST receiva ble Deferred Tax Asset Deferred tax asset comprises: Accrued expenses not deductible until i ncurred Provi s ions for i mpairment on loans Provi s ions for employee benefits Provi s ions for other Lea se l iabilities Ca pi tal costs from transfer of business

13.

Leases The credit union has l eases over l and a nd buildings and has chosen to not a pply AASB 16 to l eases of intangible assets. Information relating to the l eases in place a nd a ssociated balances and tra nsactions are provided below. Terms and conditions of leases The building leases are for branches a nd have up to 3 yea rs remaining. While some leases have extension options, these a re a t the discretion of the credit union. Va rying i ncreases apply. Right-of-use assets (ROU) Ba l ance a t beginning of year Addi tional ROU assets Depreciation charge Ba l ance a t end of year

780 540 (408) 912

795 422 (437) 780

Lease Liabilities The ma turity a nalysis of l ease l iabilities based on contractual undiscounted cash flows i s shown in the ta ble below: < 1 yea r 1 – 5 yea rs Tota l undiscounted l ease liabilities

471 499 970

417 442 859

Lea se l iabilities i ncluded in this Statement of Financial Position

895

779

13.

Leases (Continued) Extension options A number of building leases contain extension options which allow the credit union to extend the l ease term by up to twice the ori ginal non-cancellable period of the lease. The credit union includes options i n the leases to provide flexibility, certainty and reduce costs of movi ng premises and are a t the credit union’s discretion. At commencement date a nd each s ubsequent reporting dates, the credit union a ssesses where i t is reasonably certa in that the extension options will be exercised. There a re $832k i n potential future l ease payments which are not included i n lease liabilities as the credit union has a s sessed that the exercise of the option is not reasonably certain. Statement of Profit or Loss and Other Comprehensive Income The a mounts recognised in the Statement of Profit or Loss and Other Comprehensive Income relating to l eases where the credi t union is a lessee a re shown below:

Interest expense on lease liabilities Depreciation of right-of-use a ssets

14.

2023 $’000

2022 $’000

38 363 401

27 390 417

6,688 6,688

2,500 6,688 9,188

383,517 206,688 590,205 35 590,240

424,569 165,224 589,793 35 589,828

261,844 126,530 182,920 18,946 590,240

265,028 126,790 177,153 20,857 589,828

850 895 1,114 2,902 5,761

1,009 779 1,126 288 3,202

Borrowings Other fi nancial i nstitutions Res erve Bank of Australia – Term Funding Facility (TFF)

The Reserve Bank of Australia holds $9.600m of fl oating ra te notes as s ecurity a gainst a mounts drawn via the Term Funding Facility (TFF) whi ch is due to be repaid in June 2024

15.

Deposits from Members Member Deposits - a t ca l l - term Total deposits Member withdrawable s hares

Concentration of Member Deposits Member deposits a t balance date are concentrated in the following a reas: - Il lawarra - Shoa lhaven - Bega Valley - Other

16.

Payables Credi tors and accruals Lea se l iability Empl oyee entitlements Interest payable on deposits

17.

Taxation Liabilities

2023 $’000

2022 $’000

Current i ncome ta x liability Deferred tax l iability Accrua l for GST paya ble Accrua l for other ta x liabilities

348 1,081 23 108 1,560

338 1,284 20 98 1,740

1,100 (752) 348

752 (414) 338

608 264 5 16 47 141 1,081

1,026 145 5 20 47 41 1,284

Fraud Ba l ance a t the beginning of the year Li a bility i ncrease (decrease) in current year Ba l ance a t the end of the year

18 18

Lease premises make good Ba l ance a t the beginning of the year Li a bility i ncrease (decrease) in current year Ba l ance a t the end of the year Total provisions

90 90 108

80 10 90 90

162 2 164

161 1 162

Current income tax liability comprises: Li a bility for i ncome ta x in current year Les s: Instalments paid i n current year Deferred tax liability comprises: Ta x on reva lued property held i n equity Ta x on reva lued investments held i n equity Reva luation of TAS shares Deferred loan fees Prepa yments Depreciation on fixed assets

18.

19.

Provisions

Share Redemption Reserve Ba l ance a t the beginning of the year Attri butable to business combinations Tra ns fer from retained earnings on share redemptions Ba l ance a t the end of year

Thi s reserve represents the amount of redeemable Preference Shares redeemed by the credit union since 1s t July 1999. The La w requires that the redemption of the s hares be made out of profits.

20.

General Reserve for Credit Losses Ba l ance at the beginning of the year Attri butable to business combinations Tra ns fer (to) from retained earnings Ba l ance a t the end of year

1,032 (1,032) -

Thi s reserve recorded amounts set aside as a general provision to comply with the Prudential Standards previously s et down by APRA. This i s no longer required due to a change i n the Prudential Standards.

21.

Asset Revaluation Reserve

2023 $’000

2022 $’000

Ba l ance a t the beginning of the year Attri butable to business combinations Add: La nd and building revaluation Les s: La nd and building sale Add: TAS s hares restated at FV Add(Less): Cus cal s hares restated a t FV Les s: Cus cal s hare sale at FV Les s: Adjustments tra nsferred to deferred ta x liability Ba l ance a t the end of year

3,526 (1,669) 478 296 2,631

2,115 1,753 134 (4) (472) 3,526

Thi s reserve relates to unrealised gains on l and and buildings a t 27 Stewart Street, Wollongong NSW 2500 a nd 13 Auburn Street, Wollongong NSW 2500 a s well as s hares held in Cus cal Li mited a nd Tra nsaction Solutions Limited.

22.

Transfer of Business Reserve Ba l ance a t the beginning of the year Add: Bus iness combinations during the year Ba l ance a t the end of the year

23.

8,487 8,487

30,062 3,177 1,253 418 (2) 34,908

26,272 2,759 1,032 (1) 30,062

Retained Earnings Reta ined Profits a t the beginning of the financial year Add: operating profit for the year Add: tra nsfer of reserves from reserve for credit l osses Add: tra nsfer of reserves from asset revaluation reserve Add: tra nsfer of deferred ta x liability from s ale of land and building Les s: tra nsfer of reserves to capital account on redemption of shares Retained Profits at the end of the Financial Year

24.

Financial Risk Management Objectives and Policies Introduction The Board has endorsed a policy of compliance a nd ri sk management to suit the risk profile of the credit union. The credit union’s risk management focuses on the major a reas of market risk, credit risk a nd operational risk. Authority fl ows from the Board of Directors to the Risk Committee which is integral to the management of ri sk. The following di a gram gives a n overvi ew of the structure.

The di agram shows the ri sk management structure. The main elements of risk governance a re as follows:

Board: Thi s i s the primary governing body. It approves the l evel of risk which the credit union is exposed to and the fra mework for reporting a nd mitigating those ri sks.

Risk Committee: Thi s is a key body i n the control of ri sk. It is comprised of four directors with the Chief Risk Officer, Chief Executi ve Officer a nd other members of the Senior Management Team attending meetings a s required. The committee revi ews risks a nd controls that mitigate risks i ncluding the i dentification, assessment and reporting of those risks. Regular moni toring is ca rried out of operational reports a nd control assignments to confirm whether risks a re within the parameters outl ined by the Board. The committee ca rries out a regular review of all operational a reas to ensure that operational risks a re being properly control led a nd reported. It also ensures that contingency plans a re in place to a chieve business continuity i n the event of s eri ous disruptions to business operations. The committee monitors compliance with the framework laid out i n the policy a nd reports in turn to the Board, where a ctua l exposures to risks are measured against prescribed limits on a monthly basis.

Audit Committee: Its key role i n risk management i s the assessment of the controls that are i n place to mitigate risks. The committee considers a nd confirms that the s ignificant risks a nd controls are to be assessed within the internal a udit pl a n. The committee receives the internal a udit reports on assessment a nd compliance with the controls, and provides feedback to the risk committee for their consideration.

Asset & Liability Committee (ALCO): Thi s committee meets monthly a nd has responsibility for managing interest ra te ri s k exposures a nd ensuring that the treasury a nd finance functions a dhere to exposure l imits as outlined i n the policies. The committee has the ability to make changes to fixed loan and term deposit ra tes, and to propose changes to va riable l oa n a nd va riable deposit interest rate changes to the Board. The scrutiny of market ri sk reports is intended to prevent a ny expos ure breaches prior to revi ew by the Board.

Chief Risk Officer: Thi s person has responsibility for both l iaising wi th the operational function to ensure timely production of information for the ri sk committee a nd ensuring that instructions passed down from the Board vi a the Risk Commi ttee are i mplemented. Key ri s k ma nagement policies encompassed i n the overall risk management fra mework include: - Ma rket Ri sk - Li qui dity Ma nagement - Credi t Ri sk - Opera tional Risk The credit union has undertaken the following strategies to minimise the ri sks arising from financial instruments.

24.

Financial Risk Management Objectives and Policies (Continued) A.

Market Risk The objective of the credit union’s market ri sk management is to manage and control market ri sk exposures in order to opti mise ri sk a nd return. Ma rket ri sk i s the risk that changes in interest ra tes, foreign exchange ra tes or other prices and vola tilities will have a n a dverse effect on the credit union's financial condition or results. The credit union is not exposed to currency ri sk, and other s ignificant price ri sk. The credit union does not tra de i n the financial instruments i t holds on i ts books. The credi t union is exposed only to i nterest ra te risk a rising from changes i n market interest ra tes. The ma nagement of ma rket ri sk is the responsibility of ALCO, which reports directly to the Board.

Interest rate risk Interest ra te risk is the risk of va riability of the fair value of future cash flows arising from financial instruments due t o the cha nges in interest ra tes. The credit union does not tra de i n financial instruments.

Interest rate risk in the Statement of Financial Position The credit union is exposed to interest ra te risk in its Statement of Financial Position due to mismatches between the repri cing dates of a ssets and liabilities. The interest ra te risk on the Statement of Financial Position i s measured a nd reported to the ALCO a nd Board on a quarterly basis. The most common i nterest ra te risk the credit union faces a rises from fi xed ra te assets a nd l iabilities. This exposes the credi t union to the risk of sensitivity s hould interest ra tes change. The ta ble set out a t Note 28 displays the period that each asset a nd liability will reprice as a t the balance date. This ri s k is not currently considered significant enough to warra nt the use of derivatives to mitigate the exposure.

Method of managing risk The credit union manages i nterest ra te risk by the use of i nterest ra te sensitivity a nalysis. The detail and assumptions us ed a re set out below.

Interest rate sensitivity The credit union’s exposure to market risk is measured and monitored using interest ra te sensitivity models. The pri ma ry measure used i s Present Value of a Basis Point (PVBP), s upplemented by Value a t Risk (VaR) a nd Earnings a t Ri s k (EaR). Sensitivity or Pres ent Value of a Basis Point (PVBP) is a measure of the change in the present va lue of an a sset or l i ability due to a change in interest ra tes of 1 ba sis point (bp). This i mpact i s extrapolated to 200bp (2.0%) a nd ca l culated as a percentage of ca pital. The 200bp parallel s hift i s a widely used measure. The policy of the credit union is to maintain a balanced ‘on book’ strategy by ensuring the gap between assets and l i abilities is not excessive. The PVBP to Ca pital limit (based on a 200bp s hift i n i nterest rates) has been set by the Boa rd a t 6% of Ca pital. The credit union uses on balance sheet methods to maintain interest ra te risk within the a cceptable ra nge. Ba s ed on the calculations as a t 30 June 2023, a 200bp parallel downward shift would result i n a loss of 1.06% of capital (2022: ga i n of 1.50%). The credit union therefore is exposed to interest ra tes decreasing a nd based on this measure woul d l ose 1.06% of ca pital i f i nterest ra tes decrease 200bps. An i ndependent revi ew of the interest ra te risk profile is conducted by Protecht.ALM Pty Ltd, a n i ndependent ri sk ma nagement consultant. The Board monitors these ri sks through the reports from Protecht.ALM Pty Ltd a nd other ma nagement reports.

Liquidity Risk Li quidity ri sk is the risk that the credit union may encounter difficulties ra ising funds to meet commitments associated wi th fi nancial instruments, e.g. borrowing repayments or member withdrawal demands. It i s the policy of the Board of Di rectors that the credit union maintains adequate cash reserves a nd committed credit facilities so a s to meet member wi thdrawal demands when requested. The credit union manages l iquidity ri sk by: -

Conti nuously monitoring actual daily cash flows a nd l onger term forecasted ca sh flows; Moni toring the maturity profiles of financial assets a nd liabilities; Ma i ntaining adequate reserves, liquidity s upport fa cilities a nd reserve borrowing facilities; a nd Moni toring the prudential l iquidity ra tio daily.

The credit union is a party to the Credit Union Financial Support Scheme (CUFSS) and has executed an Industry Support Contract (ISC) with CUFSS. The purpose of the CUFSS scheme is to provide members with emergency l iquidity s upport i n accordance wi th the terms of the ISC, a contract which has been certified by APRA a nd the Banking Act.

24.

Financial Risk Management Objectives and Policies (Continued) B.

Liquidity Risk (Continued) As a member of CUFSS, the credit union ca n a ccess emergency l iquidity funding vi a CUFSS drawing upon i ts available member-contributed funding pool, plus a dditional voluntary l iquidity s upport from members via funds from the Res erve Bank of Australia i n accordance with the terms of a “Special Loan Facility”, as defined i n the ISC. The credit union is required to maintain at l east 9% of total adjusted liabilities as high quality l iquid assets (HQLA) ca pa ble of being converted to cash within 48 hours under the APRA Prudential standards. The credit union p olicy is to hol d between 14 – 17.25% Mi ni mum Li quidity Holdings (MLH) to maintain a dequate funds for meeting member wi thdrawal requests and loan funding. The ratio i s checked daily. Should the liquidity ra tio move outside this ra nge, ma nagement and Board are to a ddress the matter by i mplementing the necessary s teps set out in the policy, s uch as revi ewing current deposit ra tes offered for example. Note 31 describes the borrowing facilities as a t the balance date. Thes e facilities are i n a ddition to the s upport from CUFSS. The ma turity profile of the financial liabilities, based on the contractual repayment terms are set out i n the s pecific Note 26. Li quidity i nformation over the past year is s et out below: HQLA Hol dings a t 30 June $’000 Ra ti o a t 30 June Pres cri bed ratio Avera ge ra tio for the year Mi ni mum ratio during the year

2023 $104,177 16.43% 9.00% 17.90% 15.61%

2022 $95,910 15.29% 9.00% 16.42% 15.19%

Credit Risk Credi t ri sk i s the risk that members, financial i nstitutions and other counterparties will be unable to meet their obl igations to the credit union which may result i n financial losses. Credit ri sk a rises principally from the credit union’s l oa n book a nd i nvestment assets.

Credit Risk – Loans The a nalysis of the credit union’s l oans by class, is as follows: 2023 Loans to Mortgage Personal Credit cards Overdrafts Total to natural persons Corporate borrowers Total

Carrying value $’000 467,687 21,287

2022

Commitments $’000 56,789 1,844

Max exposure $’000 524,477 23,131

Carrying value $’000 481,944 10.569

Commitments $’000 22,228 100

Max exposure $’000 504,172 10,669

2,021 3,790 494,785 24,268

4,932 1,049 64,614 3,972

6,952 4,839 559,399 28,240

1,871 4,261 498,645 22,016

4,622 5,844 32,794 3,564

6,493 10,105 531,439 25,580

519,053

68,586

587,639

520,661

36,358

557,019

Ca rryi ng va lue is the value on the Statement of Financial Position. Ma ximum exposure is the va lue on the Sta tement of Financial Position plus the undrawn facilities (Loans a pproved not advanced, redraw facilities; l ine of credi t facilities; overdraft facilities; credit ca rds limits). The details are s hown i n Note 30. Al l l oans and facilities are within Australia. A geographic distribution between the three main areas of Illawarra, Shoa lhaven & Bega Valley regions is provi ded i n Note 7c(ii). The method of managing credit risk i s by way of s trict adherence to the credit a ssessment policies before the l oan i s a pproved and close monitoring of defaults i n the repayment of loans thereafter on a weekly basis. The credit ri s k policy has been endorsed by the Board to ensure that l oans are only made to members that a re creditworthy a nd ca pable of meeting loan repayments. The credit union has established policies over the: - Credi t a ssessment and approval of l oans and facilities covering a cceptable risk assessment and security requi rements; - Li mi ts of acceptable exposure over the value to indivi dual borrowers, non-mortgage secured loans, commercial l ending and concentrations to geographic a nd industry groups considered a t high ri sk of default; - Rea ssessing and review of the credit exposures on loans a nd facilities; - Es ta blishing appropriate provisions to recognise the impairment of l oans and facilities; - Debt recovery procedures; a nd - Revi ew of compliance with the above policies. A regular review of compliance i s conducted as part of the internal audit s cope.

24.

Financial Risk Management Objectives and Policies (Continued) Past due and impaired A fi nancial asset is past due when the counterparty ha s failed to make a payment when contractually due. As an exa mple, a member enters i nto a lending agreement with the credit union that requires interest a nd a portion of the pri ncipal to be paid every month. On the first day of the next month, if the agreed repayment amount has not been paid, the l oan is past due. Pa st due does not mean that the counterparty wi ll never pay, but i t ca n tri gger va ri ous a ctions s uch as renegotiation, enforcement of covenants, or l egal proceedings. Once the past due exceeds 90 da ys the l oans is regarded as impaired, unless other factors indicate the i mpairment s hould be recognised s ooner. Da i ly reports monitor the loan repayments to detect delays i n repayments a nd recovery a ction i s undertaken after 7 da ys . For l oans where repayments are doubtful, external consultants may be engaged to conduct recovery a cti on once a l oan is over 90 days in a rrears. The exposure to l osses a rise predominantly i n personal loans a nd fa ci lities not secured by registered mortgages over real estate. If s uch evi dence exists, the estimated recoverable amount of that a sset is determined a nd any i mpairment loss, ba s ed on the net present value of future a nticipated cash flows, i s recognised in the Statement of Profit or Loss a nd Other Comprehensive Income. In estimating these ca sh flows, management makes judgements about the counterparty’s financial s ituation a nd the net realisable value of a ny underlying collateral. In a ddition to specific provisions a gainst individually significant financial a ssets, the credit union makes collective a s sessments for each financial asset portfolio segmented by s imilar risk characteristics. Sta tement of Financial Position provisions a re maintained a t a level that management deems s ufficient to a bsorb proba ble incurred losses in the credit union’s loan portfolio from h omogenous portfolios of assets a nd indivi dually i dentified loans. A provi sion for i ncurred l osses is established on all past due loans a fter a s pecified period of repayment default where it i s probable that s ome of the ca pital will not be repaid or recovered. The provi sions for i mpaired and past due exposures relate to the loans to members. Past due value is the ‘on Sta tement of Financial Position’ loan balances which are past due by 90 da ys or more. Deta ils a re as s et out in Note 8.

Bad debts Amounts a re written off when collection of the l oan or a dva nce is considered to be unlikely. All wri te offs are on a ca s e by ca se basis, ta king account of the exposure at the date of the write off. On s ecured l oans, the write off takes place on ultimate realisation of collateral va lue, or from claims on a ny l enders mortgage i nsurance. A reconciliation i n the movement of both past due and i mpaired exposure provisions is provided i n Note 8.

Collateral securing loans A s i zeable portfolio of the loan book is secured on residential property i n Australia. Therefore, the credit union is exposed to risks s hould the property market be subject to a decline. The ri sk of losses from the loans undertaken is primarily reduced by the nature a nd quality of the security ta ken. Note 7b describes the nature a nd extent of the s ecurity held a gainst l oans as at balance date.

Concentration risk – individuals Concentration risk is a measurement of the credit union’s exposure to a n individual counterparty (or group o f rel a ted parties). If prudential limits a re exceeded as a proportion of the credit union’s regulatory ca pital (10 per cent) a l arge exposure is considered to exist. No ca pital i s required to be held a gainst these but APRA must be i nformed. APRA ma y impose a dditional ca pital requirements i f i t considers the aggregate exposure to all loans over the 10% ca pital benchmark, to be higher than a cceptable. The credit union holds no s ignificant concentrations of exposures to members. Concentration exposures to counterparties are closely monitored.

24.

Financial Risk Management Objectives and Policies (Continued) Concentration risk – industry There is no concentration of credit risk with respect to loans a nd receivables as the credit union has a large number of customers dispersed in areas of employment. The credit union’s foundation had a concentration of retail lending and deposits from mem bers who comprised empl oyees a nd families of l ocal councils and Bluescope Steel for ex-Lysaght Credit Union (LCU) members. The community basis for which the credit union now relies upon membership means this small concentration is cons idered acceptable on the basis that the credit union was originally formed to s ervice these members, and the empl oyment concentration i s not exclusive. Should members leave the i ndustry, the l oans continue and other empl oyment opportunities a re available to the members to facilitate the repayment of the l oans. The details of the geographical concentrations a re set out in Note 7c.

Credit Risk – Liquid Investments Credi t ri sk i s the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the credit union i ncurring a financial loss. This usually occurs when debtors fail to s ettle their obligations owing to the credit union. There is a concentration of credit risk with respect to i nvestment receiva bles with the placement of investments i n Cus cal and other fi nancial i nstitutions. The credit policy is that i nvestments are only ma de to i nstitutions that a re credit worthy. Directors have established policies that a maximum of 25% of ca pital ca n be invested with any one fi nancial i nstitution a t a ti me. The four major banks can be invested up to 50% a nd Cuscal 100% as a pproved by APRA. The ri sk of losses from the liquid investments undertaken is reduced by the nature a nd quality of the i ndependent ra ti ng of the i nvestment body a nd the l imits to concentration on one credit union. Also the relative s ize of the credi t union as compared to the industry is relatively l ow such that the ri sk of loss is reduced. Under the Credit Union Financial Support Scheme (CUFSS), a t least 3.0% of the total a ssets must be i nvested i n a n a pproved manner i n order for the scheme to have a dequate resources to meet its obligations if needed.

External Credit Assessment for Institution Investments The credit union uses the ra tings of reputable ra tings a gencies to a ssess the credit quality of a ll i nvestment expos ure, where applicable, using the credit quality a ssessment scale in APRA prudential guidance APS 112. The credi t quality a ssessment s cale wi thin this s tandard has been complied with. The exposure values a ssociated with each credit quality s tep are as follows:

Investments with

Government – rated AA- and above Cuscal – rated A+ Banks – rated AA- and above Banks – rated below AANon-bank ADIs – rated below AAUnrated institutions Total

Carrying value $’000

2023 Past due value $’000

Provision $’000

Carrying value $’000

2022 Past due value $’000

Provision $’000

11,500 17,969 3,200 75,741 8,960 3,005

19,500 12,417 47,800 24,695 2,991 6,706

120,375

114,109

Capital Management The ca pital l evels are prescribed by Australian Prudential Regulation Authority (APRA). Under the APRA prudential s ta ndards, ca pital is determined i n three components being credit, market a nd operational risk. The market risk component is not required a s the credit union i s not engaged i n a trading book for financial i nstruments.

Capital resources Tier 1 Capital The va s t majority of Tier 1 ca pital comprises retained profits, the asset revaluation reserve and other realised res erves. Tier 2 Capital Ti er 2 ca pital consists of capital instruments that combine the features of debt and equity i n that they a re structured a s debt instruments, but exhibit some of the loss absorption and funding flexibility features of equity. There a re a number of cri teria that capital instruments must meet for inclusion in Tier 2 ca pital resources as s et down by APRA.

24.

Financial Risk Management Objectives and Policies (Continued) D.

Capital Management (Continued) Ca pi tal in the credit union is ma de up as follows:

Tier 1 Ca pi tal reserve As s et revaluation reserve Bus iness combination reserve Reta ined earnings Les s prescribed deductions Net Tier 1 capital Tier 2 Res erve for credit losses Les s prescribed deductions Net Tier 2 capital Total Capital

2023 $’000

2022 $’000

164 2,631 8,487 34,844 46,126 (2,150) 43,976

162 3,526 8,487 29,980 42,155 (1,492) 40,663

43,976

40,663

The credit union is required to maintain a minimum level of ca pital relative to risk weighted assets at a ny given ti me. The ri sk weights attached to each a sset a re based on the weights prescribed by APRA i n APS112. The general rules a pply the risk weights a ccording to the l evel of underlying s ecurity. The ca pital ra tio as a t the end of the financial year over the past 5 yea rs is as follows

Ca pi tal Ratio

2023 Ba s el III 16.71%

2022 Ba s el III 14.92%

2021 Ba s el III 15.20%

2020 Ba s el III 14.02%

2019 Ba s el III 14.54%

The l evel of ca pital ratio ca n be a ffected by growth in a ssets relative to growth i n reserves and by changes in the mix of a s sets. A revi sed version of APS110 from 1 Ja nuary 2023 s ignificantly shifted the l evel of capital required to be hel d for credit ri sk a nd a ccounts for a pproximately 1.18% of the increase for FY23. To ma nage the credit union’s ca pital, the credit union reviews the ratio monthly a nd monitors major movements in the a sset l evels. Policies have been i mplemented that require reporting to the Board and the regulator if the ca pital ra ti o falls below 15.25%. Additionally, a 5 yea r projection of the capital levels is prepared annually to a ddress how s tra tegic decisions or trends may i mpact on the ca pital l evel.

Pillar 2 Capital on Operational Risk Thi s capital component was revised on 1 Ja nuary 2023 a nd coincided with changes in the asset ri sk weightings for s pecified loans a nd liquid i nvestments. The credit union uses the Standardised approach which i s considered to be most suitable for its business gi ven the credi t union’s classification as a non-significant financial i nstitution. The Operational Risk Ca pital Requirement is ca l culated as 10% of the s um of the credit union’s Risk Weighted Assets (RWA). Ba s ed on this a pproach, the credit union’s Operational Risk Ca pital Requirement as a t 30 June 2023 wa s $23.931m [2022: $29.738m].

Internal capital adequacy management The credit union manages i ts internal ca pital l evels for both current a nd future a ctivities through a combination of the va ri ous committees. The outputs of the indivi dual committees a re reviewed by the Board i n its ca pacity as the pri ma ry governing body. The ca pital required for a ny change i n the credit union’s forecasts for a sset grow th, or unforeseen circumstances, are assessed by the Board. The forecast capital resource model is updated and the i mpact upon the overall ca pital position of the credit union is reassessed.

25.

Categories of Financial Instruments a.

2022 $’000

6,846 1,211 115,421 519,053 642,531 1,852 644,383

5,993 950 109,470 520,661 637,074 1,374 638,448

6,715 850 593,079 35 895 601,574

9,206 1,009 590,063 35 779 601,092

The following information classifies the financial instruments into measurement classes Financial assets – carried at amortised cost Ca s h a nd cash equivalents Receivables Receivables from financial institutions Loa ns to members As s ets ca rried at FVOCI

Financial Liabilities – carried at amortised cost Borrowi ngs Credi tors Deposits from members Members withdrawable shares Lea ses b.

2023 $’000

Assets measured at fair value Fa i r va lue measurement a t the end of the reporti ng period using: 2023 Equity investment securities designated as FVOCI

Note

Opening balance

2022

Balance

Level 1

Level 2

Level 3

Balance

Level 1

Level 2

Level 3

1,374

1,284

Add: Cuscal shares acquired through business transfer

134

Add: revaluation of TAS shares

478

(44)

1,852

1,374

Add(Less): revaluation of Cuscal shares Closing balance

The fa ir va lue hierarchy has the following l evels: a . quoted prices (unadjusted i n a ctive markets for i dentical assets or l iabilities (Level 1); b. i nputs other than quoted prices i ncluded within Level 1 that are observa ble for the asset or liability, either di rectly (i .e. as prices) or i ndirectly (i .e. derived from prices) (Level 2); a nd c. i nputs for the a sset or l iability that a re not based on observa ble market data (unobserva ble inputs) (Level 3) The l evel 3 equity i nvestment securities designated a s FVOCI relate to the s hares in Cuscal Li mited a nd Transaction Sol utions Li mited.

26.

Maturity Profile of Financial Assets and Liabilities Moneta ry assets and liabilities have differing maturity profiles depending on the contractual term, and i n the case of loans , the repayment amount and frequency. The ta ble below shows the period in which different monetary a ssets and liabilities hel d will mature a nd be eligible for renegotiation or withdrawal. In the case of l oans, the table s hows the period over which the pri ncipal outstanding will be repaid based on the remaining period to the repayment date assuming contractual repa yments a re maintained. For term l oans the below dissection is based upon contractual conditions of each l oan being s tri ctl y complied with a nd is s ubject to change i n the event that current repayment conditions are va ried. Within 1 month

1–3 months

3 – 12 months

1–5 years

$’000

Cash

5,673

1,173

6,846

Receivables Liquid investments Loans & advances

1,211

30,760

20,206

19,413

59,347

129,726

3,579

7,159

30,861

153,071

634,350

829,020

1,852

41,223

27,365

50,274

212,418

634,350

3,025

968,655

2023

After 5 years No maturity

Total

Assets

FVOCI equity investment Total financial assets

Liabilities Borrowings Creditors

6,688

6,708

850

319

454

895

383,517

383,570

Deposits from members – term

27,136

56,740

122,514

6,312

212,702

On Statement of Financial Position Undrawn commitments

411,543

56,822

122,871

13,454

604,725

95,568

Total financial liabilities

411,543

56,822

122,871

13,454

95,603

700,293

Within 1 month

1–3 months

3 – 12 months

1–5 years

After 5 years No maturity

Total

$’000

Cash Receivables

4,823

1,170

5,993

950

Liquid investments Loans & Advances

32,607

10,010

35,136

37,898

115,651

3,040

6,080

26,076

129,122

555,891

720,209

Leases Deposits from members – at call

2022 Assets

FVOCI equity investment Total financial assets

1,374

41,420

16,090

61,212

167,020

555,891

2,544

844,177

Liabilities Borrowings Creditors Leases

2,500

6,708

9,216

1,009

282

394

779

Deposits from members – at call Deposits from members – term

424,569

424,614

28,585

54,730

81,161

1,661

166,137

On Statement of Financial Position Undrawn commitments

454,197

54,807

83,953

8,763

601,755

40,051

Total financial liabilities

454,197

54,807

83,953

8,763

40,086

641,806

27.

Financial Assets and Liabilities Maturing Within 12 Months The ta ble below represents the a bove maturity profile s ummarised at discounted va lues. The contractual arrangements bes t represents the estimated minimum a mount of repayment on the loans, l iquid i nvestments and on the member deposits within 12 months. While the l iquid i nvestments and member deposits are presented in the table below on a contra ctual basis, as part of our normal banking operations, we would expect a large proportion of these balances to roll over. Loa n repayments are generally a ccelerated by members choosing to repay l oans earlier. These adva nce repa yments a re at the discretion of the members a nd not able to be reliably estimated.

2023

2022

Within 12 months

After 12 months

$’000

Total

Within 12 months

After 12 months

Total

$’000

Financial assets Cash

6,846

5,993

Liquid investments

63,626

51,075

114,701

72,487

36,800

109,287

Loans & advances

24,305

494,748

519,053

25,884

494,778

520,662

Receivables

1,931

1,133

FVOCI equity investments

1,852

1,374

Total financial assets

98,560

545,823

644,383

106,871

531,578

638,449

Financial liabilities Borrowings

6,688

9,188

Deposits from members – at call

383,535

424,579

Deposits from members – term

203,682

5,889

209,571

163,883

1,619

165,502

Creditors

850

1,009

Leases

441

454

895

385

394

779

595,196

6,343

601,539

599,044

2,013

601,057

Total financial liabilities

28.

Interest Rate Change Profile of Financial Assets and Liabilities Fi nancial assets and liabilities have conditions, which allow interest rates to be a mended either on maturity (term deposits a nd term investments) or a fter a dequate notice is given (loans and savings). The table below shows the respective va lue of funds where interest rates are capable of being altered within the prescribed ti me bands, being the earlier of the contractual repri cing date, or maturity date.

Within 1 month

1–3 months

3 – 12 months

1–5 years

Non-interest bearing

Total

$’000

5,673

1,173

6,846

1,211

Liquid investments

58,305

52,760

3,001

7,028

121,094

Loans and advances

193,404

28,087

146,846

150,716

519,053

1,852

257,382

80,847

149,847

157,744

4,236

650,056

92,568

257,382

80,847

149,847

157,744

96,804

742,624

Borrowings

6,688

Creditors

850

Leases

319

454

895

2023 Assets Cash and cash equivalents Receivables

FVOCI equity investments On Statement of Financial Position Undrawn commitments Total financial assets

Liabilities

Deposits from members – at call

383,517

383,570

Deposits from members – term

27,112

56,469

119,993

5,984

209,558

On Statement of Financial Position

410,669

56,551

127,018

6,438

885

601,561

Undrawn commitments

3,000

Total financial liabilities

410,669

56,551

127,018

6,438

3,885

604,561

2022

Within 1 month

1–3 months

3 – 12 months

1–5 years

Non-interest bearing

Total

$’000

4,823

1,170

5,993

950

Liquid investments

53,438

41,304

9,519

10,032

114,293

Loans and advances

162,478

18,542

99,908

239,734

520,662

1,374

220,739

59,846

109,427

249,766

3,494

643,272

37,051

220,739

59,846

109,427

249,766

40,545

680,323

Borrowings

2,500

6,688

9,188

Creditors

1,009

Leases

282

394

779

Assets Cash and cash equivalents Receivables

FVOCI equity investments On Statement of Financial Position Undrawn commitments Total financial assets

Liabilities

Deposits from members – at call

424,569

424,614

Deposits from members – term

28,583

54,682

80,604

1,622

165,491

On Statement of Financial Position

453,186

57,251

80,896

8,704

1,044

601,081

Undrawn commitments

3,000

Total financial liabilities

453,186

57,251

80,896

8,704

4,044

604,081

29.

Net Fair Value of Financial Assets and Liabilities Fa i r va lue has been determined on the basis of the present va lue of expected future cash flows under the terms and condi tions of each fi nancial asset a nd financial liability. Si gnificant assumptions used in determining the cash flows a re that the cash flows will be consistent with the contracted cash fl ows under the respective contracts. The i nformation is only relevant to circumstances at balance date and will va ry depending on the contractual ra tes applied to ea ch asset and liability, relative to market ra tes and conditions a t the time. No assets held a re regularly tra ded by the cre dit uni on and there is no active ma rket to assess the va lue of the financial assets and liabilities. The va lues reported have not been adjusted for the changes in credit ratings of the assets. Disclosure of fair va lue i s not required when the carryi ng a mount is a reasonable approximation of fair value. The ca lculation reflects the interest ra te a pplicable for the remaining term to maturity not the ra te applicable to original term.

2023 Financial Assets Cash and cash equivalents Receivables * Advances to other financial institutions Loans to members FVOCI equity investments Total financial assets

2022

Fair Value

Carrying Amount

Variance

Fair Value

Carrying Amount

$’000

Variance

$’000

6,846 1,931 112,963 520,389 1,852 643,981

6,846 1,931 114,701 518,374 1,852 643,704

(1,738) 2,015 277

5,993 1,133 109,358 520,518 1,374 638,376

5,993 1,133 109,287 520,328 1,374 638,115

71 190 261

5,777 5,761 383,552 205,193 600,283

6,688 5,761 383,552 206,687 602,688

(911) (1,494) (2,405)

9,188 3,202 424,604 163,745 600,739

9,188 3,202 424,604 165,224 602,218

(1,479) (1,479)

Financial Liabilities Borrowings Payables * Deposits from members – at call Deposits from members – term Total financial liabilities

* For these assets and liabilities the carrying value approximates fair value.

As s ets where the net fair va lue is lower than the book value have not been written down i n the a ccounts of the credit union on the ba sis that they a re to be held to maturity, or i n the case of loans, all amounts due are expected to be recovered in full . The fa ir va lue estimates were determined by the following methodologies and assumptions:

Liquid Assets and Receivables from other Financial Institutions The ca rryi ng va lues of cash a nd liquid assets and receiva bles due from other fi nancial i nstitutions redeemable within 12 months a pproximate their net fair va lue as they a re s hort term i n nature or a re receivable on demand.

Loans, Advances The ca rryi ng va lue of loans a nd a dvances i s net of unearned i ncome and both general and specific provisions for doubtful debts. For va ri a ble rate l oans (excluding impaired loans) the a mount s hown i n the Statement of Financial Position is considered to be a rea sonable estimate of net fair value. The net fair va lue for fi xed ra te loans is ca lculated by utilising discounted cash f l ow models (i.e. the net present va lue of the portfolio future principal a nd i nterest cash fl ows), based on th e period to maturity of the l oans. The discount ra tes applied were based on the current applicable ra te offered for the average remaining term of the portfolio. The net fair va lue of impaired l oans was ca lculated by discounting expected cash flows using a ra te, which includes a premium for the uncertainty of the flows.

Deposits From Members The fa ir va lue of call and va riable rate deposits, and fixed rate deposits repricing within 12 months, i s the amount shown in the Sta tement of Financial Position. Discounted cash flows were used to ca lculate the net fair value of other term deposits, ba s ed upon the deposit type and the rate a pplicable to its related period of maturity.

Short Term Borrowings The net fair va lue of payables due to other fi nancial i nstitutions, which consists entirely of the RBA TFF borrowing, is based upon a borrowing ra te applicable to i ts related period of maturity on normal commercial ra te.

30.

Financial Commitments

Outstanding Loan commitments Loa ns approved but not funded a s at 30 June

2022 $’000

13,042

15,010

62,606

8,345

23,017 (6,097) 16,920

20,119 (6,423) 13,696

92,568

37,051

371 371

1,289 324 1,613

3,000

Loan Redraw Facility Fa ci lities available as at 30 June

2023 $’000

Undrawn Loan Facilities Loa n fa cilities a vailable to members for overdrafts and line of credit l oa ns are a s follows: Tota l va lue of facilities approved Les s: Amount a dvanced Net undrawn value Thes e commitments a re contingent on members maintaining credit s ta ndards and ongoing repayment terms on amounts drawn. Total financial commitments

Computer Software Expense Commitments The cos ts committed under the current Ultradata and TAS contracts are a s follows: Not l a ter than 1 year La ter tha n 1 yea r but not 2 years La ter tha n 2 yea rs but not 5 yea rs

31.

Standby Borrowing Facilities Committed facilities Cus ca l Li mited overdraft facility Current borrowing Total Standby borrowing facilities available

3,000

Cus ca l Li mited holds a term deposit as s ecurity a gainst overdraft a mounts drawn

32.

Contingent Liabilities Liquidity Support Scheme The credit union is a party to the Credit Union Financial Support Scheme Li mited (CUFSS) and has executed an industry Support Contract (ISC) with CUFSS. The purpose of the CUFSS scheme is to provide members with emergency l iquidity s upport i n accordance wi th the terms of the ISC, a contract which has been certified by APRA under the Banking Act. As a member of CUFSS, the credit union may be called upon by CUFSS to contribute to emergency l iquidity l oans for one or more other CUFSS members. Should the credit union be required to contribute funding, any s uch liquidity loans would be s tructured a nd priced i n a ccordance with normal commercial terms, as determined by CUFSS. The tota l a mount of funding tha t the credit union could be required to provide to other members cannot exceed in a ggregate, 3% of Horizon’s assets ca pped at $100 mi llion.

33.

Disclosures on Directors and other Key Management Personnel a.

Remuneration of Key Management Persons (KMP) Key management persons a re those persons havi ng a uthority a nd responsibility for planning, directing and control ling the a ctivities of the credit union, directly or i ndirectly, i ncluding any di rector (whether executive or otherwise) of that entity. Control i s the power to govern the financial a nd operating policies of a n entity s o as to obta in benefits from i ts activities.

Key management persons comprise the directors and the senior managers who a re responsible for the day to da y fi nancial a nd operational management of the credit union. The a ggregate compensation of KMP duri ng the year comprising a mounts paid or payable or provided for, was a s fol l ows:

Directors

2023 Other KMP

Total

Directors

2022 Other KMP

Total

$’000

(a) short-term employee benefits; (b) post-employment benefits - superannuation contributions (c) other long-term benefits – net (decrease)/increases in long service leave provision and retirement gifts (d) termination benefits (e) share-based payment

177

1,185

1,362

182

1,604

1,786

153

200

166

214

46 -

(77) -

Total KMP compensation

224

1,384

1,608

230

1,693

1,923

In the a bove table, remuneration shown as short term benefits means (where a pplicable) wages, salaries, directors fees, paid annual and sick leave, profit-sharing and bonuses, value of fringe benefits received, but excl udes out of pocket expense reimbursements. Al l remuneration to directors was approved by the members at the previ ous Annual General Meeting of the credit uni on.

33. Disclosures on Directors and other Key Management Personnel (Continued) b.

Loans to Directors and other Key Management Persons The credit union’s policy for l ending to directors and management is that all loans a re approved a nd deposits a ccepted on the same terms and conditions that a pplied to members for each class of l oan a nd deposit. There a re no l oans that are i mpaired in relation to the l oans balances of directors or other KMP. There a re no benefits or concessional terms and conditions applicable to the cl ose family members of the KMP. There a re no l oans that are i mpaired in relation to the l oan balances wi th close fa mily relatives of directors a nd other KMP. The details of transactions during the year are a s follows: 2023

Funds available to be drawn Balance Amounts disbursed or facilities increased in the year Interest and other revenue earned

2022

Mortgage Secured

Other term loans

Credit Cards

Mortgage Secured

Other term loans

Credit Cards

$’000

325

420

3,366

3,053

142

2023 $’000

2022 $’000

1,891

2,478

Other tra nsactions between rel ated pa rties i nclude deposits from di rectors, and other Key Ma nagement Persons a re: Tota l value of term and savings deposits of KMP Tota l interest paid on deposits to KMP

The credit union’s policy for receiving deposits from KMP i s that a ll tra nsactions are accepted on the same terms and condi tions that apply to members.

Transactions with Other Related Parties Other tra nsactions between related parties include deposits from director related entities or cl ose family members of di rectors a nd other KMP. The credit union’s policy for receiving deposits from related parties is that all tra ns actions are approved and deposits accepted on the same terms a nd conditions that applied to members for ea ch type of deposit. An a mount of $96k was paid to a company partly owned by a cl ose family member of a KMP for the purposes of l easing a property. This lease has been i n place since 14 November 2005, being prior to the releva nt party becoming a KMP a nd was renewed on 15 November 2017 on a normal arms-length commercial basis by reference to market renta ls at the ti me. The l ease was exercised on 15 November 2021 i s i n place until 14 November 2025, ha vi ng a future financial commi tment of $245k a nd is included i n Note 13. There a re no other servi ce contracts to which key management persons or their cl ose family members a re a n i nterested party.

34.

Economic Dependency The credit union has an economic dependency on the following s uppliers of servi ces:

Cuscal Limited Cus ca l Li mited is a n Approved Deposit Taking Institution registered under the Corporations Act 2001 (Cwl th) and the Ba nking Act. This entity: (i )

(ii ) (i i i)

provi des the license ri ghts to Visa Ca rd and settlement with other institutions for ATM, Vi sa card, Pa ys products, New Pa yments Platform, cheque transactions a nd fraud monitoring on cards a s well a s the production of Visa ca rds for use by members; opera tes the s witching network used to link Visa ca rds a nd Pa ys products operated through ATMs and POS fa ci lities to the credit union’s IT s ystems. provi des settlement and cl earance facilities to the credit union.

Ultradata Australia Pty Limited Ul tra data Australia Pty Li mited provides a nd maintains the banking s oftware utilised by the credit union.

Transaction Solutions Limited (TAS) Tra ns action Solutions Limited provi des IT facilities management servi ces to the credit union. The credit union has a ma nagement contract with TAS to receive computer s upport s ervices to meet the day-to-day needs of the credit uni on and ensure compliance with the relevant Prudential Standards.

35.

Segmental Reporting The credit union operates exclusively i n the retail financial services i ndustry wi thin Australia.

36.

Superannuation Liabilities The credit union contributes primarily to the NGS Super Pl an for the purpose of Superannuation Guarantee payments a nd pa yment of other s uperannuation benefits on behalf of employees, however many employees have chosen alternative funds as entitled to through s uper choice. Independent Corporate Trustee administer each of these plans. The credit union has no interest i n a ny of these superannuation plans (other than as a contributor) a nd i s not liable for the performance nor the obligations of the plans.

37.

Events Occurring after the Reporting Period There a re no events occurring after the reporting period that materially i mpact the financial statements measurement of a s sets and liabilities.

38.

Notes to Statement of Cash Flows a.

2023 $’000

2022 $’000

1,841 5,005 6,846

1,288 4,705 5,993

3,177

2,759

282 73 7 -

290 101 (116) (5)

329 18 11 10 2,614 116 96 412 29 1,608 -

324 10 108 509 54,473 78 18 14 15 8,884

(12) (159) (11) (41) (266) (537) (132) (5,414) (2,210)

(2) (186) (582) (34) (189) (33) (24) (417) (90) (69) (71,051) (5,215)

Reconciliation of Cash and cash equivalents Ca s h i ncludes cash on hand, a nd deposits a t call with other fi nancial i ns titutions and comprises: Ca s h on hand and at bank Deposits a t call Total Cash and cash equivalents

Reconciliation of cash from operations to accounting profit The net cash increase from operating activities is reconciled to the opera ting profit a fter ta x Opera ting profit after i ncome tax

Non cash flows Depreciation Amorti sation of i ntangibles Los s on sale of assets Profi t on s ale of assets Profi t on s ale of i nvestments

Add changes in assets and liabilities Increase in provision for l oans Increase in other provisions Increase in GST a nd other ta x liabilities Increase in provision for i ncome ta x Increase in interest payable Increase in lease liabilities Increase in deferred ta x liability Increase in member deposits and shares Decrease in deferred ta x asset Decrease in sundry debtors a nd other receivables Decrease in effective ra te adjustments Decrease in right of use assets Decrease in member l oans Decrease in receiva bles from other fi nancial i nstitutions

Less changes in assets and liabilities Decrease in GST a nd other ta x liabilities Decrease in employee entitlements Decrease in accrued expenses Decrease in unamortised fixed ra te loan renegotiation fees Decrease in interest payable Decrease in lease liabilities Decrease in effective ra te adjustments Increase in prepayments Increase in sundry debtors a nd other receivables Increase in investments Increase in interest receivable Increase in right of use assets Increase in member l oans Increase in receiva bles from financial institutions

Net cash from operating activities

39.

Corporate Information The credit union is a company limited by s hares, and is registered under the Corporations Act 2001. The a ddress of the registered office a nd main place of business is 27 Stewart Street, Wollongong NSW. The na ture of the operations a nd its principal activities are the provision of deposit taking facilities a nd loan fa cilities to the members of the credit union.

Administration Horizon Credit Union Ltd ABN 66 087 650 173 AFSL & Australian credit licence number 240573 trading as Horizon Bank 27 Stewart Street, Wollongong NSW 2500 (02) 4224 7700