First South Credit Union Annual Report 2017

FirstSouth AnnuAl RepoRt + Financial Accounts

2017

Li ve Your Dre a m ww w. fsc u. ie

Always Think First.

..

FirstSouth Report Contents AGM Notice & Agenda .................................................................... 4 Standing Orders .............................................................................. 5 Board & Committees ...................................................................... 7 Board of Directors Report .............................................................. 9 Board Oversight Committee Report ............................................ 13 Credit Committee Report ............................................................. 14 Credit Control Committee Report ............................................... 18 Asset & Liabilities Management Committee Report ................. 19 Membership Committee Report .................................................. 20

Financial Accounts Statements of Responsibility ...................................................... 23 Independent Auditors Report ..................................................... 24 Statement of Comprehensive Income ........................................ 28 Statement of Movements in Reserves ........................................ 29 Statement of Financial Position .................................................. 30 Statement of Cash Flows .............................................................. 31 Notes to the Financial Statements ............................................. 32 Schedules to the Financial Statements ...................................... 46

FSCU is regulated by the Central Bank of Ireland.

3

AGM notiCe The 58th Annual General Meeting of First South Credit Union Limited will be held at Ballyphehane Community Centre, on Tuesday 12th December 2017 at 7 pm.

Each member is earnestly requested to attend. The election of three members to the Board of Directors, one member of the Board Oversight Committee and an Auditor will take place at the meeting.

Members are requested to be in attendance before the appointed time to enable the meeting to start punctually and to bring with them their pass books as a means of identification and to establish their voting rights.

_________________________ Norma Cotter, Secretary

AGM AGendA 1.

2.

3.

4.

5.

6.

7.

8.

9.

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Acceptance of Proxies (if any) by Board of Directors Ascertainment that a quorum is present Adoption of Standing Orders Reading and approval (or correction) of the minutes of last Annual General Meeting Appointment of Tellers Report of Nominating Committee Balloting Report of Directors Report of the Auditor

10.

11.

12.

13.

14.

15.

16.

17.

18.

Declaration of Dividend Report of the Board Oversight Committee Report of the Membership Committee Report of the Credit Committee Report of the Credit Control Committee Unfinished Business New Business other than Elections Announcement of Elections Results Adjournment or Close of Meeting

StAndinG oRdeRS 1.

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

2-3

ELECTioN ProCEDUrE

2.

Elections to the board of directors, to the board oversight committee and the position of auditor shall be by majority vote and by secret ballot.

3.

When nominations are announced tellers shall be appointed by the chair and ballot papers shall be distributed.

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

4-9

MoTioNS

4.

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

5.

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

6.

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

5

7.

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

8.

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

9.

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

10 -15 MiSCELLANEoUS 10.

The chair of the board of directors shall be the chair of any general meeting, except where he/she is not available, in which case it shall be the vice-chair, except where he/she is not available, in which case the board shall decide amongst themselves who shall act as chair of any general meeting.

11.

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

12.

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

13.

The chairman’s decision on any matter relating to these Standing Orders or interpretation of same shall be final.

14.

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

15.

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

16.

SUSPENSioN oF STANDiNG orDErS Any one of these Orders or all of these Standing Orders may be suspended on a motion to this effect receiving a two-thirds majority of those present and entitled to vote.

17.

ALTErATioN oF STANDiNG orDErS Standing Orders may be amended or altered at a general meeting and only if a motion to this effect has received a two-thirds majority of those present and voting.

18.

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

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BoARd & CoMMitteeS Board of directors

nomination Committee

Finbarr o’Sullivan Chair Margaret Linehan Vice Chair Norma Cotter Hon. Secretary irene Kavanagh McGrath Carmel Murphy john o’Halloran Eimer o’Leary john o’Shea Blanche ronayne

Eimer o’Leary, Norma Cotter and irene Kavanagh McGrath

Board oversight Committee

George Cantwell Tracy McCarthy johanna Mulvihill Aoileann Ní Dhúill

Eamonn Collins, Margaret Canty & john o’Sullivan

Committees internal Audit Committee irene Kavanagh McGrath, john o’Halloran & Finbarr o’Sullivan

Risk Management Committee Norma Cotter, Margaret Linehan, Carmel Murphy & Eimer o’Leary

Remuneration Committee john o’Shea, Norma Cotter & Finbarr o’Sullivan

Complaints Committee irene Kavanagh McGrath, Eimer o’Leary & Blanche ronayne

Credit Committee Philip Linehan, Margaret Linehan, Alison White & Frances Kelleher

Credit Control Committee john o’Shea, Pat Magee, Christy o’Connor & Finbarr o’Sullivan.

Asset & liabilities Management Committee George Cantwell, Margaret Linehan, Philip Linehan, john o'Halloran, Tracy McCarthy, Blanche ronayne

Membership Committee George Cantwell, oisin Humphreys, Patricia Kearns & Serena Kennedy

First South Credit union Management team

Katherine Spillane Gillian o’Carroll Marian Dennehy Patricia Kearns Ann Murphy Linda Kent john o’Mahony oisin Humphreys Traci Hughes Bernard Farry Serena Kennedy Lisa Byrne

Chief Executive Officer (CEO) Finance Officer Risk Management Officer In House Solicitor, Compliance & Data Protection Officer Operations Officer Project Management Officer Ballyphehane Office Ballyphehane Office Ballyphehane Office Credit Control Information Technology Kinsale Office Lending AML South Mall Office Turners Cross Office

Solicitors P.J. O’Driscoll & Sons, 73 South Mall, Cork

Auditors Ernst and Young, City Quarter, Lapps Quay, Cork

Bankers Ulster Bank, 26 Patrick Street, Cork.

BnP Paribas, 5 Georges Dock, ISFSC, Dublin.

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the DO’s & DON’Ts First South Credit Union Ltd provides online banking services to its members. Our online banking services allow you to manage your finances at a time and place that’s convenient for you. While the Credit Union has taken all the necessary steps to ensure that these services are secure, it is important that you remain vigilant when it comes to the threats and techniques used by fraudsters to try and obtain your personal and security information.

the DO’s

the DON’Ts

Always log out of your online account fully and close your browser window.

Don’t share your passwords with anyone.

Keep your anti-virus software up to date.

Keep your browser up to date.

Keep your operating system up to date.

Change your passwords regularly.

Don’t open emails with attachments from people you do not know. Even if you do know the sender, be careful when it comes to unusual attachments such as invoices, payment slips and parcel tracking numbers.

If in doubt, contact the sender.

Don’t respond to requests to confirm your identity with your account details.

Monitor your accounts on a regular basis.

Don’t click on links sent in a text message.

Report any suspicious requests or money transfers immediately.

Don’t use a computer that you do not trust to log on to access your account online.

Always remember: First South Credit Union Ltd will never send members an email requesting personal information.

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BoARd oF diReCtoRS RepoRt

The primary strategic focus in 2017 was to ensure that the Credit Union continues to grow – growth in the overall Membership numbers, increase in the percentage of borrowing Members and a growing loan book.

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he Board of Directors are responsible for the general control, direction and management of the Credit Union and ensure that adequate and appropriate systems and resources are in place to meet legal and regulatory requirements and ensure that effective governance arrangements including risk management systems and internal audit functions are in place.

Growth must be achieved in a balanced, structured context – within policy and guidelines. Minimizing conduct risk is a key strategy while the Credit Union is in an accelerated period of growth. Continued focus will be maintained on the operations in all offices to ensure a consistent approach to all processes. The Board remained open to exploring new merger opportunities but only if the proposed merger provides strategic benefit to Members and the newly combined entity will have structures in place to facilitate an effective embedding process.

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Financial Highlights 2017 Total Assets

Savings

Loans Outstanding

201 7

201 7

201 7

€164M

€137M

€34M

2016

2016

2016

€137M

€116M

€27M

Loans Issued

Total Reserves

Total Membership

201 7

201 7

201 7

€18M

€26M

28,589

2016

2016

2016

€13M

€21M

23,965

We would also like to inform Members that the Board of Directors have entered into a process with the Board of the Directors of the Lough Credit Union to explore the feasibility of a merger between our two Credit Unions.

We are delighted to have concluded a Transfer of Engagements with our near neighbours Turners Cross. We welcome our new Members and would particularly wish to thank the Board of Directors from Comhar Creidmheasa Chriost Ri Teoranta (Turners Cross) for their co-operation, vision and professionalism during the process. We would also like to acknowledge the Central Bank’s assistance with the project.

We would also like to inform Members that the Board of Directors have entered into a process with the Board of the Directors of the Lough Credit Union to explore the feasibility of a merger between our two Credit Unions. Should both Boards agree that there is value in the merger, the Members of both Credit Unions will be consulted before any final decision is made.

The financial environment in which our Credit Union operates continues to be very challenging. Whilst we have been very successful in seeing our loan book rise we have a significant number of Members who are not availing of their Credit Union for their borrowing needs. We are not encouraging Members to borrow for the sake of borrowing, but if you are intending to borrow please use your Credit Union. When the Credit Union has Members savings which it does not lend to other Members the money must be re-invested with other financial institutions. Our first priority is to protect these investments and we limit investments to ‘A’ rated Banks deposits/bonds and Government Bonds.

Unfortunately the returns on these investments are at a historic low and in fact we are now paying interest as opposed to receiving interest on some deposits. We are very mindful of managing our costs and will continue to do so.

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The insurance benefits we provide to Members were reviewed during the year. At last years AGM the Board reluctantly signalled to Members that the benefits will be reducing within the next year.

The Death Benefit has reduced from €3,250 but we are pleased to be able to continue providing Death Benefit Insurance for the next Financial Year at the rate of €1,950 for qualifying Members. We are continuing to investigate options including a member paid service and will keep our Members informed of any future changes.

We are requesting Members give their consent to receive future notices and reports electronically. This will not alone save costs but be good for the environment. Each member has received a prepaid envelope in your AGM notification which we hope you will return with signed consent.

Members who do not have access to email or computers will still receive written notifications.

We are pleased to announce that our Credit Union has received permission from the Central Bank to offer “Member Personal Current Account Services”. This will enable your Credit Union to offer full current accounts together with Debit Cards and other facilities. We have become a member of PaYaC, a Credit Union owned company, to ensure we will be able to roll out these services late next year.

It would be remiss of me not to record our thanks to our outgoing Auditors Ernst & Young (EY) who are not seeking re-election to the role. They have been the elected Auditor of FSCU since the 1980’s and have always performed their role with great professionalism.

We would like to thank our dedicated and professional Management and staff led by our CEO George Cantwell, who continue to deliver a friendly and efficient service to our Members. I would like to thank the First South Team – my fellow Directors, Board Oversight Committee, volunteers, Management and Staff – for all their work throughout the past year.

One of the keys differences between Credit Unions and banks is that we are always member focused. We don’t have customers - we have Members. You can be assured that you will always be able to meet one of our team when you visit any of our four offices. We are people serving people.

Finally, to you the Members we thank you for your continued loyalty.

Finbarr O’Sullivan Chairman

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thinking of Changing Your Car ? the following may be of benefit to you.

Infomercial by First South Credit Union Ltd

Before going shopping for a car, decide how much you are prepared to spend on a car and not just the monthly repayments. In particular if you are thinking of buying a Used Car, be aware of the dangers and temptations of leaving the garage with a brand new Car and a debt that you hadn’t planned. The monthly repayment may sound very attractive and affordable and might even appear less than a typical personal loan. The garage will make it quick and easy to arrange once you have placed a small deposit.

The main difference between a PCP and a personal loan is that with a personal loan you borrow the money, pay for your car, and own it immediately. With a PCP contract you don’t own the car, you are essentially hiring it for an agreed period of time, typically three to five years. You only own it if you pay the Guaranteed Minimum Future Value (GMFV). The GMFV is a large, final payment, that you must pay to own the car at the end of the contract and is subject to terms and conditions, including any mileage restrictions agreed in the contract.

With a pCp deal: • You don’t own the car until you make this final payment.

• You may not be able to afford repayments in the future if your circumstances change.

• You need permission from the finance company (owner) if you need to sell the car during the term of the contract.

thinking of borrowing, always tHinK FiRSt

think First South Credit union 12

BoARd oveRSiGHt CoMMittee RepoRt Committee Members: Eamonn Collins, Margaret Canty & John O’Sullivan

Under Section 76M of the Credit Union and Co-operation with overseas regulators Act 2012, the role of the Board oversight Committee is to assess whether the Board of Directors has operated in accordance with the Act. We are satisfied from our observations at Board Meetings and our attendances at Board Sub-Committee meetings that the Board of Directors has operated in accordance with Part 4 and part 4A of the Credit Union Act, 1997 as amended. We are not aware that any matter or policy has been prescribed by the Central Bank in relation to the Board of Directors.

We have attended the following Board of Directors sub-committee meetings: 1) Nomination Committee 5) risk Committee 2) remuneration Committee 6) Credit Committee 3) Assets & Liabilities Management Committee 7) Credit Control Committee 4) Audit Committee Minutes were recorded at each meeting. We were satisfied with the scope of business and reviews conducted.

We were satisfied further that all business was conducted within Board Policies. We have attended all Extended Credit Committee meetings during the year and we were satisfied that the approval decisions followed correct procedure in all cases. And we are satisfied further that all business conducted is in the best interests of all our members.

We would like to record our thanks and appreciation to the Board of Directors, the CEO, Management and Staff for their assistance and co-operation throughout the year.

Finally, may we take this opportunity to thank you the members for your continued support and involvement with First South Credit Union Ltd.

Eamonn Collins Chair

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CRedit CoMMittee RepoRt Committee Members: Philip Linehan, Margaret Linehan, Alison White and Frances Kelleher.

d

Loans Issued

Loans Outstanding

Total Membership

201 7

2017

201 7

€18M

€34M

28,589

2016

2016

2016

€13M

€27M

23,965

uring the past year we advanced 4,333 loans amounting to €18,055,595 (2016 – €13,028,681) At the year end the total loans outstanding were €33,500,197 (2016 – €27,366,876).

We are delighted to welcome our new members from Turners Cross. We encourage members to make loan applications over the phone in addition to visting any of our 4 offices.

We have a total of 5,095 borrowers. Our total membership is 28,589 of which 24,117 are adults. This means that only 21% of our members are borrowing from their Credit Union. Whilst we acknowledge that not everyone needs to borrow, and we certainly don’t want to encourage needless borrowing, we believe that our choice of loans, coupled with our personal service will surpass the offerings of any of our competitors.

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Our interest rates continue to be very competitive with five different rates available:• Secured Lending @ 4.97% A.P.r.

• Third Level Education Loans @ 7.23 % A.P.r.

• Car Loan @ 7.23 % A.P.r.

Loan Type Secured Loan

Loan Amount €5,000

Smart Option Loan €25,000 First Time Borrower €5,000

Car Loan Student Loan Personal Loan

€5,000

€5,000

€5,000

• Standard Loans @ 9.9% A.P.r.

• First Time Borrower @ 7.23 % A.P.r.

• Smart option Loan @ 5.64% A.P.r.

Variable repayment Monthly Total Amount APr interest rate Term repayment Payable * 4.97%

4.85%

3 Years

5.64%

5.5%

10 Years

7.23%

7%

3 Years

7.23%

7%

3 Years

7.23%

7%

3 Years

9.90%

9.48%

3 Years

€149.53

€5,382.03

€271.33

€32,553.99

€154.90

€5,574.40

€154.90

€154.90

€160.13

€5,574.40

€5,574.40

€5,762.86

* Plus one final repayment of €148.48 for Secured, €152.90 for First Time/Student/Car and €158.31 for Personal. Figures correct as of 06/10/17.

If you are planning to borrow next year make sure you talk to us. We endeavour to review all loan applications within 24 hours. Our dedicated loan officers are available to talk or meet with you to discuss your lending requirements.

If you can’t make it into the office, pick up the phone and give us a call.

We would like to thank all of our loan officers and in particular the Loans Department under the stewardship of Traci Hughes, for the professional manner in which they have performed their duties.

The Credit Committee ensure that lending decisions comply with the policy of the Board of the Credit Union. The Credit Policy is reviewed on an ongoing basis to ensure that our lending function complies with best practice and Central Bank guidelines. We apply prudential standards for all new and top up loans. We conduct checks on external credit through the Irish Credit Bureau and have systems in place to determine members’ ability to repay. We do so in as fair and equitable a manner as possible.

As previously communicated to members, the Credit Union is now obliged to submit all Loan enquiries made by members to the Central Credit Register (CCR). The performance of Loans is also uploaded to the CCR on a monthly basis. As part of the reporting obligations members must produce their PPS numbers at application stage.

The following documentation may be required to support Loan applications: Proof of income: – Payslips (if paid directly into bank or Credit Union, copy of statement will suffice) – Confirmation of State Benefit (if not in paid employment) – Tax Returns (if self-employed) Bank Statements: – Three (3) Months Bank Statements (if the member has a bank account)

It is important to note that we will require proof of current address when collecting a loan. (Bill issued in the last 6 months). This is required to meet obligations under Anti-Money Laundering legislation.

In conclusion, we would like to express our sincere thanks and gratitude to all members who have borrowed from their Credit Union during the year, and we look forward to serving many more of you during the next twelve months.

Margaret Linehan Chair

colour our for-

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Thinking of Ge

For Loans from €1,0 Family occasions

Car Loans

Educa

Key Loan

• No Minimum Savings required • 94% Approval rate on all Loans • Loa Visit Any of our Four offices: Ballyphehane • Kinsale • South Mall • Turners Cross

Excellent Loan rates

Loans Made Easy

• Easy Application Process

• Pay Online

• Helpful & Efficient Lending Department

• Pay by Direct Debit

• Apply Over the Phone

• No Hidden Charges

• Net loans greater than €45,000 will require security.

• Quick Loan Decisions

How To Apply 1 Over the phone at 021 4965134 2 Call into any one of our FSCU offices 3 Online by registering at www.fscu.ie

021 4965134 16

www.fs

etting a Loan ?

000 to €125,000 Home improvements

ation

Family Holidays

Benef its

ans are based on the Ability To repay • Staff are Always on Hand to Help T y P i C A L LoA N r E PAy M E N T S C H E D U L E Loan Type Secured Loan

Loan Amount €5,000

Variable repayment Monthly Total Amount APr interest rate Term repayment Payable * 4.97%

4.85%

3 Years

First Time Borrower €5,000

5.64%

5.5%

10 Years

7.23%

7%

3 Years

Car Loan

7.23%

7%

3 Years

7.23%

7%

3 Years

9.90%

9.48%

3 Years

Smart Option Loan €25,000

Student Loan Personal Loan

€5,000

€5,000

€5,000

€149.53

€5,382.03

€271.33

€32,553.99

€154.90

€5,574.40

€154.90

€154.90

€160.13

€5,574.40

€5,574.40

€5,762.86

* Plus one final repayment of €148.48 for Secured, €265.72 for Smart Option, €152.90 for First Time/Car/Student and €158.31 for Personal. Figures correct as of 06/10/17.

First South Credit Union is regulated by the Central Bank of ireland.

Loans subject to approval. Terms and conditions apply.

info@fscu.ie

scu.ie

17

CRedit ContRol CoMMittee RepoRt Committee Members: John O’Shea, Pat Magee, Christy O’Connor and Finbarr O’Sullivan

t

he Credit Control Function is closely monitored by the Credit Control Committee who meet on a monthly basis and report to each meeting of the Board of Directors during the year.

The Credit Union is committed to working with Members who find themselves under financial pressure and are having difficulty in coping with their existing debt. We would urge any Member who is finding it difficult to make loan repayments to contact the Credit Control Department as soon as possible. We guarantee that you will be dealt with in a sympathetic and professional manner. We will always differentiate between members who can’t pay and members who won’t pay. We will assist members in difficulty to work out a repayment plan which is affordable to the member. Where a member refuses to engage with the Credit Union or make repayments we may, as a last resort, have to proceed with legal action.

Loans Repaid 201 7

€14.5M 2016

€12.8M

In the last year Members repaid €14,465,164 against their loans. This highlights the commitment Members have to their Credit Union. We charged off €485,171 in the last year. For the same period we recovered €709,947 from loans previously charged off. This again emphasises that whilst loans may be charged off in our accounts, there is an expectation to recover these loans.

Remember, First South Credit Union Ltd. is owned by you, the Members, and by borrowing and repaying your loans on time, you are helping to build a better and stronger Credit Union for your Community.

We would like to thank Linda Kent, our Credit Controller and her team for their dedication and hard work during the year. We would also like to acknowledge our In-house solicitor, Aoileann Ní Dhúill for the support she affords the Credit Control Department and George Cantwell, our CEO for his continued help and support.

Finbarr o’Sullivan Chair 18

ASSet & liABilitY MAnAGeMent CoMMittee RepoRt Committee Members: George Cantwell, Margaret Linehan, Philip Linehan, John O'Halloran, Tracy McCarthy and Blanche Ronayne The Committee are assigned the responsibility for reviewing, managing and making recommendations to the board of directors on the following:

1. Investments 2. Liquidity

3. Balance Sheet Management 4. Capital Reserve Management

At September 30, 2017 the Credit Union assets totalled €164m an increase of 19.34% over last year. As you are aware Turners Cross Credit Union joined First South Credit Union during the year, this increased the Credit Unions total assets by €25m. Our loan book has increased by €6M to €33.5m (included was €3m from Turners Cross). As has been highlighted in many other reports, only 21% of our members currently borrow from their Credit Union. We would encourage any member who has borrowing needs to utilise their Credit Union. Our savings continue to increase. Savings at year end totalled €137m. Members savings continue to be covered by the Deposit Guarantee Scheme (up to €100,000).

Investments and Cash under management have increased to €126m. The average return received on our investments was 1.38%. The returns available on investments is at an all-time low. Some short term investments are now paying a negative return, which means we are being charged interest as opposed to receiving interest. This means we are being charged to make investments. As most of Credit Union savings are available on demand, it is becoming increasingly difficult to get a return on investments whilst ensuring that we both manage our liquidity and minimise capital risk. The Credit Union’s Total Reserves at September 30, 2017 stood at €25.8m which is 17.3% of total assets. Our total Regulatory reserve is 11% of Assets.

This year’s surplus was €2.36m. It is important to highlight that €1.85m of the surplus was a release of bad debt provisions. This money is transferred into the Bad Debt Reserves. Without the release of this provision the surplus would have been €515k. The Board of Directors has recommended a dividend of 0.25% costing €345k. The next number of years will continue to be challenging particularly due to the poor returns on investments. The Loan Book is seeing growth and the Board of Directors are continuously looking at new products to maintain growth. Our Insurance costs for the year came to €835k. As advised at last year’s AGM a review of Death Benefit Insurance (DBI) was completed.

The DBI is now €1,950. The Board of Directors will be reviewing the Insurance benefit over the next number of months to determine how some of the Insurances can be financed. A substantial number of Credit Union’s are now no longer offering DBI and others are requiring members to pay the premium associated with providing the benefit. We will keep members informed of any future changes.

Regrettably, we withdrew the ATM service at the Ballyphehane location. The cost of maintaining this stand-alone ATM for the level of members availing of the service was not sustainable. The Board of Directors is constantly reviewing costs to ensure that we operate as efficiently as possible. We aim to continue to provide a personal service to our members whilst ensuring the highest standards of good governance. The availability of four different office locations for our members to do their business continues to be welcomed. For the last number of years, we have been striving to provide full electronic banking services. We applied to the Central Bank for the provision of a Member Personal Current Account Service. We are pleased to inform members that we have now received approval for this service. This will enable your Credit Union to offer members a real alternative to the Banks by the end of 2018. The service will include full current account facilities including Debit Cards and Overdrafts. We will keep members advised of this exciting proposition.

Our Credit Union now provides services to 28,589 members. We are well placed to ensure that First South Credit Union will continue to be one of the premier Credit Unions in the country.

Blanche ronayne Chair

19

MeMBeRSHip CoMMittee RepoRt Committee Members: George Cantwell, Oisin Humphreys, Patricia Kearns and Serena Kennedy

Your Credit union

Community owned

4 offices

Personal Service

online Access No Hidden Charges

he role of the Membership Officers is to encourage potential members to join our Credit Union and also to ensure that all applicants are eligible for membership. We are delighted to welcome the members of Turners Cross Credit Union to our Credit Union. Our common bond now extends from The Old Head of Kinsale right in to Oliver Plunkett Street in Cork City (including Kinsale, Bellgooly, Riverstick, Ballinhassig, Ballygarvan, Ballyphehane ,Turners Cross and the South Parish). We will ensure that all potential members are made aware of the value of becoming a member of our Credit Union.

t

Who Can Join First South Credit Union?

You must meet one of the following conditions:• Residing in the Common Bond • Employed within the Common Bond • Attending School / College in the Common Bond • Residing with a Family member who satisfies any of the above.

Total Membership 201 7

28,589 2016

20

23,965

Acceptable forms of address verification include: – Government-issued documentation – Recent bill e.g. Gas, ESB etc.

Acceptable forms of verification of identity include: – Passport – Driving Licence

Where a member’s marital status has changed and he/she wishes to amend his/her surname, we will require documented confirmation of this change.

On foot of the Criminal Justice (Money Laundering and Terrorist Financing) Act, 2010 (as amended), Credit Unions have a duty to seek written confirmation of identification and address to support membership applications.

In addition we must ensure that due diligence on all existing members is current and up to date. We would appreciate if you have not previously submitted your proof of identification and/or address to the Credit Union that you provide it when you next call to any of our offices to ensure that we comply with our statutory responsibilities.

Your co-operation with this requirement is greatly appreciated.

Our total membership at 30th September 2017 stood at 28,589 (30th September 2016 – 23,965).

New Members

Ballyphehane

Kinsale

South Mall

Turners Cross

All

Under 16

106

83

19

46

254

Other

260

187

357

64

868

Totals

366

270

376

110

1,122

Ballyphehane

Kinsale

South Mall

Turners Cross

All Members

Under 16

3,011

780

170

511

4,472

Other

14,069

4,430

3,302

2,316

24,117

Totals

17,080

5,210

3,472

2,827

28,589

Total Members

Members have access to services in our four offices located at following locations:

Lower Friars Walk, Ballyphehane

South Mall, Cork

Market Street, Kinsale

Curragh Road, Turners Cross

Members can also avail of services at

www.fscu.ie

Patricia Kearns Membership Officer 21

Financial Accounts

2017

FirstSouth 22

FirstSouth Statement of directors’ Responsibilities For Year Ended 30th September 2017 The directors are responsible for preparing the financial statements in accordance with Irish laws and regulations. The Credit Union Act 1997, as amended, require directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Credit Union and of the income and expenditure of the Credit Union for that period. Under those laws the directors prepare financial statements in accordance with Irish Generally Accepted Accounting Practice in Ireland (accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland and Irish law) including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (Generally Accepted Accounting Practice in Ireland).

In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Credit Union will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy the financial position of the Credit Union and which enable them to ensure that the financial statements comply with the Credit Union Act 1997, as amended. They are also responsible for safeguarding the assets of the Credit Union and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

On behalf of the board ___________________________________ Norma Cotter, Director

___________________________________ Date: 20th November, 2017 Finbarr o’Sullivan, Director

Statement of Board oversight Committee's Responsibilities For Year Ended 30th September 2017 The Credit Union Act 1997, as amended, require the appointment of a Board Oversight Committee to assess whether the board of directors has operated in accordance with Part IV, Part IV(a) and any regulations made for the purposes of Part IV or Part IV(a) of the Credit Union Act 1997, as amended and any other matter prescribed by the Bank in respect of which they are to have regard to in relation to the board.

On behalf of the Board Oversight Committee

_________________________________________ Eamonn Collins, Board Oversight Member

Date: 20th November, 2017

23

FirstSouth

Audited Accounts 2017 independent Auditors report to the Members of First South Credit Union Limited

opinion We have audited the financial statements of First South Credit Union Limited for the year ended 30 September 2017, which comprise the Statement of Comprehensive Income, the Statement of Movements in Reserves, the Statement of Financial Position, the Statement of Cash Flows and notes to the financial statements, including the summary of significant accounting policies set out in note 1.

The financial reporting framework that has been applied in their preparation is Irish Law and FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

In our opinion the financial statements: • give a true and fair view of the state of the Credit Union’s affairs as at 30 September 2017 and its statement of comprehensive income and cash flows for the year then ended; • have been properly prepared in accordance with FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; and • have been properly prepared in accordance with the requirements of the Credit Union Act 1997, as amended.

24

Basis of opinion We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are described below in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the Credit Union in accordance with ethical requirements that are relevant to our audit of financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority (IAASA), and we have fulfilled our other ethical responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions telating to Going Concern We have nothing to report in respect of the following matters in relation to which ISAs (Ireland) require us to report to you where: • the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate: or • the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Credit Union’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

other information The directors are responsible for the other information. The other information comprises the information included in the annual report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information.

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.

25

Opinions on other matters prescribed by the Credit Union Act 1997, as amended: Based solely on the work undertaken in the course of the audit, we report that: • We have obtained all the information and explanations which we consider necessary for the purposes of our audit, • In our opinion proper accounting records have been kept by the Credit Union, and • The financial statements are in agreement with the accounting records.

Respective Responsibilities Responsibilities of directors for the financial statements As explained more fully in the Directors’ Responsibilities Statement set on page 23, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, 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 management either intends 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 statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are 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 ISAs (Ireland) 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 these financial statements. Further details relating to our work as auditor is set out in the Scope of Responsibilities Statement contained in the appendix of this report, which is to be read as an integral part of our report.

The purpose of our audit work and to whom we owe our responsibilities Our report is made solely to the Credit Union’s members, as a body, in accordance with section 120 of the Credit Union Act 1997, as amended. Our audit work has been undertaken so that we might state to the Credit Union’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Credit Union and the Credit Union’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Ernst & Young Chartered Accountants and Registered Auditors Cork 26

Date: 22nd November, 2017

Appendix to the independent Auditor’s Report Further information regarding the scope of our responsibilities as auditor: As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, 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.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the director’s 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 going concerns. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Credit Union to cease to continue as going concerns.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

27

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

INCOME

2017 € 2,456,906 1,769,682 15,050 255,000

2016 € 2,225,779 1,718,018 171,721 –—

4,496,638

4,115,518

23,719

16,257

4,520,357

4,131,775

1,818,350 2,613,144 284,203 (1,847,416) (709,947)

1,695,370 2,134,866 218,463 (1,478,650) (767,992)

TOTAL EXPENDITURE

2,158,334

1,802,057

Excess of Income Over Expenditure For Year

2,362,023

2,329,718

–—

–—

2,362,023

2,329,718

Schedule

Interest on Members’ Loans Other Interest Receivable & Similar Income (Note 3) Unrealised Gains on Investments Realised Gain on Investment (Note 3)

1 2

Net Interest Income Other Income

3

TOTAL INCOME EXPENDITURE Salaries Other Management Expenses Depreciation Bad Debts Provision Bad Debts Recovered

Other Comprehensive Income Total Comprehensive Income for Year

4

Approved on behalf of the Credit Union on 20th November, 2017.

Director:

CEO:

Member of the Board Oversight Committee:

28

FirstSouth

First South Credit Union Financial Accounts 2017

Statement of Movements in Reserves FOR THE YEAR ENDED 30TH SEPTEMBER 2017 Regulatory Operational Restructuring Distribution Reserve Reserve Reserve Reserve € € € € Opening Balance at 1 October 2015 Total comprehensive income for the year Arising from transfer of engagement Transfer to distribution reserve Dividends paid during the year Interest rebate paid during the year Transfer between reserves

General Reserve €

Bad debt Non-distributable Reserve Reserve € €

Total Reserve €

11,973,485

––––

121,078

––––

2,561,639

1,064,705

––––

––––

––––

––––

2,329,718

––––

––––

2,329,718

3,038,635

––––

––––

––––

690,505

––––

––––

3,729,140

––––

––––

––––

671,066

(671,066)

––––

––––

––––

––––

––––

––––

(443,061)

––––

––––

––––

(443,061)

––––

––––

––––

(228,005)

––––

––––

––––

(228,005)

––––

80,000

(121,078)

–––– (1,609,293)

1,478,650

171,721

––––

Closing Balance at 30 September 2016

15,021,120

80,000

––––

––––

3,301,503

2,543,355

171,721 21,108,699

Opening balance at 1 October 2016

15,021,120

80,000

––––

––––

3,301,503

2,543,355

171,721 21,108,699

––––

––––

––––

––––

2,362,023

––––

––––

2,362,023

2,394,380

30,000

––––

––––

579,058

––––

4,696

3,008,134

––––

––––

––––

649,643

(649,643)

––––

––––

––––

––––

––––

––––

(396,141)

––––

––––

––––

(396,141)

––––

––––

––––

(253,502)

––––

––––

––––

(253,502

560,000

––––

––––

–––– (2,422,466)

1,847,416

15,050

––––

17,966,500

110,000

––––

––––

4,390,771

Total comprehensive income for the year Arising from transfer of engagement (Note 2) Transfer to distribution reserve Dividends paid during the year Interest rebate paid during the year Transfer between reserves Closing balance at 30 September 2017

3,170,475

–––– 15,720,907

191,467 25,829,213

First South Credit Union Financial Accounts 2017

29

Statement of Financial Position AT 30TH SEPTEMBER 2017

ASSETS

Note

Cash and Balances at Bank Deposits and Investments – Cash Equivalents Deposits and Investments – Other Loans To Members Less: Provision for Bad Debts Tangible Fixed Assets Debtors, Prepayments & Accrued Income Other Assets

4 4 5 6 7 8

TOTAL ASSETS LIABILITIES Members’ Shares Other Liabilities, Creditors, Accruals and Charges RESERVES Regulatory Reserve Operational Risk Reserve Other Reserves – Realised – Unrealised TOTAL RESERVES TOTAL LIABILITIES & RESERVES

9 10

12 12

2017 € 2,916,936 29,493,821 96,503,968 33,500,197 (2,062,791) 2,843,729 267,086 11,505

2016 € 2,401,801 35,213,204 74,343,634 27,366,876 (4,143,302) 2,564,032 245,642 7,277

163,474,451

137,999,164

137,051,061 594,177

116,185,054 705,411

137,645,238

116,890,465

17,966,500 110,000 7,561,246 191,467

15,012,120 80,000 5,844,858 171,721

25,829,213

21,108,699

163,474,451

137,999,164

These accounts were approved by the Board of Directors on the 20th November, 2017.

CEO:

Member of the Board Oversight Committee:

Member of Board of Directors:

30

FirstSouth

First South Credit Union Financial Accounts 2017

Statement of Cash Flows FOR THE YEAR ENDED 30TH SEPTEMBER 2017

2017 € 37,615,005

2016 € 27,896,160

14,465,164 (18,055,595) 2,472,140 987,271 23,719 709,947 (396,141) (253,502) (4,597,555)

12,752,838 (13,028,681) 2,234,175 859,605 16,257 754,541 (443,061) (228,005) (3,458,037)

NET CASH FLOWS FROM OPERATING ACTIVITIES

(3,607,141)

318,045

Cash Flows from Investing Activities: Fixed assets purchases Increase/(decrease) in deposits and investments Net cash flows from other investment activities

(203,874) 134,366 (21,122,923)

(310,896) 190,573 (14,487,469)

(22,229,842)

(15,466,205)

89,241,909 (84,603,840)

68,043,211 (65,422,914)

4,638,069

2,620,297

2

15,994,666

22,246,708

11

32,410,757

37,615,005

Note

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

11

5 5 3

NET CASH FLOWS FROM INVESTING ACTIVITIES Cash Flows from Financing Activities: Members’ Shares Received Members’ Shares Withdrawn NET CASH FLOWS FROM FINANCING ACTIVITIES Arising from Transfers of Engagement: Cash and Cash Equivalents Introduced CASH & CASH EQUIVALENTS AT END OF YEAR

First South Credit Union Financial Accounts 2017

31

Notes to the Financial Accounts 30TH SEPTEMBER 2017

1.

ACCoUNTiNG PoLiCiES

1.1

Statement of Compliance First South Credit Union Limited is established under the Credit Union Act 1997, as amended. It is registered with the Registrar of Credit Unions and is regulated by the Central Bank of Ireland.

The Credit Union’s financial statements have been prepared in accordance with applicable accounting standards issued by the Financial Reporting Council and promulgated by the Institute of Chartered Accountants in Ireland, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (Generally Accepted Accounting Practice in Ireland).

1.2

Basis of Preparation The financial statements are prepared in euro which is the presentational currency of the Credit Union.

The financial statements are prepared on the going concern basis. After making enquiries the directors of the Credit Union have a reasonable expectation that it has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements. The Credit Union has generated a surplus in the current and prior years and is projecting a surplus next year. It has adequate reserves and liquidity and is meeting all Central Bank requirements.

1.3

judgements and Key Sources of Estimation Uncertainty The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates. The Credit Union’s key source of estimation uncertainty is the amount of the provision for bad debts/loan impairments.

The estimation of loan losses is inherently uncertain and depends upon many factors, including loan loss trends, credit risk characteristics of individual loans and loan classes, the economic climate and conditions in various sectors of the economy to which the Credit Union is exposed. Loans are constantly monitored by the Credit Union. The Credit Union assesses and approves its provisions and provision adequacy on a quarterly basis.

Impairment losses are provided for where there is objective evidence that any loans to members are impaired.

The loans are assessed collectively in groups that share similar credit risk characteristics using an impairment methodology which is designed to reflect historical experience of those loan groupings. Individually significant loans are assessed on a loan by loan basis.

If a loan is impaired, the impairment loss is the difference between the carrying amount of the loan and the present value of the expected cash flows discounted at the asset’s original effective interest rate taking account of pledged shares and other security as appropriate.

32

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

1.4 Significant Accounting Policies (a)

Revenue Recognition interest on members loans: Interest on loans to members is recognised using the effective interest method and is calculated and accrued on a daily basis. other interest and similar income: Other interest and similar income is recognised using the accounting methods outlined in the ‘Investments’ accounting policy note below.

(b)

Tangible Fixed Assets and Depreciation Tangible fixed assets comprises items of property, plant and equipment, which are stated at cost, less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.

Depreciation is provided to write off the cost of each item of property, plant and equipment, less its estimated residual value, on a straight line basis over its estimated useful life. The categories of property, plant and equipment are depreciated as follows: Premises Fixtures and fittings Office equipment Computers

2% straight line 10% straight line 20% straight line 33 1/3% straight line

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

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

(d)

Pension costs The Credit Union participates in an industry-wide pension scheme for employees (The Irish League of Credit Unions Republic of Ireland Pension Scheme). This is a funded defined benefit scheme with assets managed by the Scheme’s trustees.

First South Credit Union Financial Accounts 2017

33

Notes to the Financial Accounts 30TH SEPTEMBER 2017

The scheme is a multi-employer scheme and due to the nature of the scheme, it is not possible for the Credit Union to separately identify its share of the scheme’s underlying assets and liabilities.

Consequently, it accounts for the scheme as a defined contribution plan. There is an agreed funding plan in respect of the Pension Scheme as a result of a Minimum Funding Standard deficit certified by the scheme’s actuary in 2009. Consequently, the Credit Union recognises a liability at each statement of financial position date for its outstanding contributions payable under the agreed funding plan to the extent that they relate to committed funding in respect of the deficit to which the funding plan relates. (e)

Dividends on shares and loan interest rebates Dividends are made from current year’s surplus or the dividend reserves set aside for that purpose. The Board’s proposed distribution to members each year is based on the dividend and loan interest rebate policy of the Credit Union. The rate of dividend and loan interest rebate recommended by the Board will reflect: • the risk profile of the Credit Union, particularly in its loan and investment portfolios; • the Board’s desire to maintain a stable rather than a volatile rate of dividend each year; and • members’ legitimate dividend and loan interest rebate expectations; all dominated by prudence and the need to sustain the long-term welfare of the Credit Union. For this reason the Board will seek to build up its reserves to absorb unexpected shocks and still remain above minimum regulatory requirements.

The Credit Union accounts for dividends and rebates of loan interest when members ratify such payments at the Annual General Meeting.

(f)

Impairment of financial assets/bad debts provision Financial assets, other than those held at fair value, are assessed for indicators of impairment at each reporting end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the expected cash flows discounted at the asset’s original effective interest rate.

In the case of impairment of loans to members, the loans are assessed collectively in groups that share similar credit risk characteristics except for individually significant loans which are assessed on a loan by loan basis for impairment.

Any impairment losses are recognised in the income statement. If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the income statement.

(g)

34

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

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

(h)

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

(i)

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

(J)

Financial liabilities – members’ shares Members’ shareholdings in First South Credit Union Limited are redeemable and therefore are classified as financial liabilities.

(k)

Realised/Unrealised gains and losses Investment income that has been recognised but will not be received within 12 months of the statement of financial position date is classified as “unrealised” and is not distributable as a dividend in accordance with the Central Bank direction. All other income is classified as “realised”. A reclassification between unrealised and realised is made as investments come to within 12 months of maturity date.

2.

TrANSFEr oF ENGAGEMENTS In June 2017 First South Credit Union Limited (FSCU) accepted the Transfer of Engagement of Comhar Creidmheasa Chriost Ri Teoranta, Turner’s Cross (CCCRT). The Assets and Liabilities of CCCRT at 13 June 2017 were incorporated into the Statement of Financial Position of FSCU at that date. FSCU did not pay any consideration in respect of the Transfer of Engagement. On the date of transfer, the members of the transferor Credit Union became members of FSCU, and thereby became entitled to member interest associated with such membership.

First South Credit Union Financial Accounts 2017

35

Notes to the Financial Accounts 30TH SEPTEMBER 2017

2.

TrANSFEr oF ENGAGEMENTS (Continued) The book values and fair values of the net assets acquired are detailed in the table below: CCCRT assets and liabilities prior to transfer €

Fair value adjustments on transfer €

Fair value of assets and liabilities acquired by FSCU €

467,435 93,335 900,750 15,093,916 3,028,061 (250,000) (16,227,939) (97,424)

–––– –––– –––– –––– –––– –––– –––– ––––

467,435 93,335 900,750 15,093,916 3,028,061 (250,000) (16,227,939) (97,424)

Total Transfer from CCCRT

3,008,134

––––

3,008,134

Transferred to reserves as follows: Regulatory reserve Operational reserve Non-distributable reserves Other reserves

2,394,380 30,000 4,696 579,058

–––– –––– –––– ––––

2,394,380 30,000 4,696 579,058)

Total Movement in Reserves Arising from Transfers of Enagements

3,008,134

––––

3,008,134

Tangible fixed assets (Note 7) Prepayments and sundry debtors Cash on hand and at bank Deposits and Investments Members loans (Note 5) Provision for bad debts (Note 6) Members shares Other liabilities, creditors

The total arising from the transfer of engagement is reflected as adjustments to reserves in the Statement of Movements in Reserves on Page 13.

36

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

3.

ANALySiS oF oTHEr iNTErEST AND SiMiLAr iNCoME The following is an analysis of investment income and gains: Received at the statement of financial position date Due to be received within twelve months of the statement of financial position date

Realised Gain on Investment

2017 €

2016 €

732,271

859,605

1,037,411

858,413

1,769,682

1,718,018

255,000

––––

The realised gain on investment relates to a special dividend received against a deposit with IBRC previously written down in 2013 following the financial institution liquidation.

4.

DEPoSiTS AND iNVESTMENTS Deposits and investments comprise: Deposits Bonds and other investments

The maturity date of the deposits and investments is analysed as follows: On demand deposits Maturing in less than three months Maturing between three months and one year Maturing between one and five years Maturing between five and ten years Central Bank Deposit Guarantee Scheme

Statement of Financial Position classification: Deposits and investments – cash equivalents Deposits and investments – other

2017 €

2016 €

105,122,521 20,875,268

95,586,160 13,970,678

125,997,789

109,556,838

14,443,808 15,050,012 21,130,270 35,568,966 38,200,179 1,604,554

14,818,744 20,394,460 14,974,580 41,078,605 17,197,023 1,093,426

125,997,789

109,556,838

29,493,821 96,503,968

35,213,204 74,343,634

125,997,789

109,556,838

Included in the deposits is restricted cash of €1,604,554 (2016: €1,093,424), which relates to funds held with the Central Bank as part of the Credit Union’s Minimum Reserve Requirements and the DGS Legacy Fund in accordance with the Financial Services (Deposit Guarantee Schemes) Act 2009, as amended by the Finance (Miscellaneous Provisions) Act 2015.

First South Credit Union Financial Accounts 2017

37

Notes to the Financial Accounts 30TH SEPTEMBER 2017

5.

LoANS To MEMBErS

2017 €

2016 €

Opening loan balance 1 October Arising from transfer of engagement (Note 2) Advanced during the year Repaid during the year Loans charged off during the year

27,366,876 3,028,061 18,055,595 (14,465,164) (485,171)

23,253,528 4,909,022 13,028,681 (12,752,838) (1,071,517)

Closing Loan Balance 30 September

33,500,197

27,366,876

2017 € 4,143,302 250,000

2016 € 4,996,887 1,648,562

(1,847,416)

(1,478,650)

(483,095)

(1,023,497)

2,062,791

4,143,302

Movements in loans during the year:

6.

MoVEMENT iN ProViSioN For BAD DEBTS DUriNG THE yEAr Opening provision 1 October Arising from transfer of engagement (Note 2) Net movement in bad debt provision during the year for loans currently outstanding Decrease in bad debt provision as a result of loan charged off previously provided for Closing Provision for Bad Debts

The current provision in the financial statements is €2,062,791 (2016: €4,143,302) representing 6% (2016: 15%) of the total loan book.

The provision is calculated by assessing loans collectively in groups that share similar credit risk characteristics using an impairment methodology which is designed to reflect historical experience of those loan groupings.

Individually significant loans are assessed on a loan by loan basis. The percentage impairment provision applied to classes of loans depends on the number of weeks a particular class is in arrears.

38

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

7.

TANGiBLE FiXED ASSETS Premises €

Computer €

Fixtures & Fittings €

Office Equipment €

Total €

2,619,853 ––––

754,520 105,014

414,272 8,672

201,406 10,085

3,990,051 123,771

371,122 ––––

40,226 (94,340)

20,553 ––––

35,535 (12,000)

467,436 (106,340)

2,990,975

805,420

443,497

235,026

4,474,918

Depreciation: At 1 October 2016 Charge for year Disposals

441,798 54,562 ––––

542,388 191,852 (67,033)

256,273 30,098 ––––

185,560 7,691 (12,000)

1,426,019 284,203 (79,033)

At 30 September 2017

496,360

667,207

286,371

181,251

1,631,189

Net book value: 30 September 2017

2,494,615

138,213

157,126

53,775

2,843,729

30 September 2016

2,178,055

212,132

157,999

15,846

2,564,032

Cost: At 1 October 2016 Additions Arising on transfer of engagement (Note 2) Disposals At 30 September 2017

8.

DEBTorS, PrEPAyMENTS AND ACCrUED iNCoME 2017 € 267,086

2016 € 245,642

2017 €

2016 €

Member’s Share Accounts

137,051,061

116,185,054

10. oTHEr LiABiLiTiES

2017 € 439,311 38,341 53,737 62,788

2016 € 424,063 119,645 52,646 109,057

594,177

705,411

Prepayments and Other Receivables

9.

MEMBErS’ SHArES

Creditors and accruals PAYE/PRSI Holiday accrual Pension deficit accrual

First South Credit Union Financial Accounts 2017

39

Notes to the Financial Accounts 30TH SEPTEMBER 2017

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

2017 € 2,916,936 29,493,821

2016 € 2,401,801 35,213,204

32,410,757

37,615,005

12. rESErVES Movements in reserves during the year and reserves as percentage of total assets are set out in the Statement of Movements in Reserves on page 13.

Regulatory Reserve: This is a non-distributable reserve. The Credit Union Act 1997 (Regulatory Requirements) Regulations 2016, requires the Credit Union to maintain a minimum regulatory reserve requirement of at least 10 per cent of the total assets of the Credit Union. The reserve must be perpetual in nature, freely available to absorb losses and comprise realised financial reserves which are unrestricted and non-distributable. An amount of €2,394,380 was transferred to the Regulatory Reserve arising from the transfer of engagement with Comhar Creidmheasa Chriost Ri Teoranta in June 2017. The directors have transferred a further amount of €560,000 of its current year surplus to the Regulatory Reserve to bring the reserve to €17,966,500 (2016: €15,012,120) which represents 11% (2016: 10.87%) of total assets at 30 September 2017.

Operational Risk Reserve: Section 45 of the Credit Union Act 1997 requires that in addition to the regulatory reserve a Credit Union shall maintain additional reserves that it has assessed are required in respect of operational risk having regard to the nature, scale, complexity and risk profile of its business. The amount which the Credit Union holds in the operational risk reserve is the amount of the predicted impact of operational risk events that may have an impact on the Credit Union’s business. An amount of €30,000 was transferred to the Operational Risk Reserve arising from the transfer of engagement with Comhar Creidmheasa Chriost Ri Teoranta in June 2017. During the year the Credit Union transferred a further amount of €Nil (2016: €80,000) to the Operational Risk Reserve.

13. ADDiTioNAL FiNANCiAL iNSTrUMENTS DiSCLoSUrES (a)

40

Financial Risk Management The Credit Union is a provider of personal and business loans and also provides savings products to its members.

The Credit Union invests excess funds with a view to ensuring that the return from members’ loans and investments is adequate to meet the overheads of the Credit Union and provide a reasonable return to members on shares and deposits. The Credit Union has a risk register in place to help the directors manage the various risks arising from its activities to include the issuing of loans to members and investing the excess funds of the Credit Union. The main financial risks arising from First South Credit Union Limited’s activities are liquidity risk, credit risk, market risk and interest rate risk. The Board reviews and agrees policies for managing each of these risks, which are summarised below.

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

Liquidity Risk: The Credit Union’s policy is to maintain sufficient funds in liquid form at all times to ensure that it can meet its liabilities as they fall due. The Credit Union adheres on an ongoing basis to the minimum liquidity ratio and minimum short term liquidity ratio as set out in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016.

Credit Risk: Credit risk is the risk that a borrower will default on their contractual obligations relating to repayments to First South Credit Union Limited, resulting in financial loss to the Credit Union. In order to manage this risk the Board approves the Credit Union’s credit policy, and all changes to it. All loan applications are assessed with reference to the credit policy in force at the time. Subsequently loans are regularly reviewed for any factors that may indicate that the likelihood of repayment has changed. The credit risk on members’ loans is disclosed in Note 14.

The Credit Union’s investments are also exposed to credit risk and the Credit Union mitigates the risk by only placing investments with financial institutions where the counterparties have strong credit ratings and using investment products authorised by the Central Bank.

Market Risk: Market risk is generally comprised of interest rate risk, currency risk and other price risk. First South Credit Union Limited conducts all its transactions in Euro and does not deal in derivatives or commodity markets. Therefore, the Credit Union is not exposed to any form of currency risk or other price risk.

Interest Rate Risk: The Credit Union’s main interest rate risk arises from differences between the interest rate exposures on the receivables and payables that form an integral part of a Credit Union’s operations. The Credit Union considers rates of interest receivable on investments and members’ loans when deciding on the dividend rate payable on shares and on any loan interest rebate. (b)

Interest Rate Risk Disclosures The following table shows the average interest rates applicable to relevant financial assets and financial liabilities: 2017

Financial Assets Loans to Members

2016

Amount €

Average interest rate

Amount €

Average interest rate

125,997,789 33,500,197

1.38% 7.33%

109,556,838 27,366,876

1.02% 8.25%

(c)

Liquidity Risk Disclosures All the Credit Union’s financial liabilities are repayable on demand. The Credit Union retains liquid assets amounting to 25.14% of deposits.

(d)

Fair Value of Financial Instruments The Credit Union holds no financial instruments at fair value other than cash and three investments arising from transfers of engagements.

Two were obtained in the prior year resulting from the transfer of engagement with Kinsale and District Credit Union, the fair value of which at year end stands at €186,773 cumulatively. These are both due to mature on 15 September 2018. A further investment was obtained arising from the transfer of engagement with Turner’s Cross for €350,000. This is due to mature on 09 July 2018.

First South Credit Union Financial Accounts 2017

41

Notes to the Financial Accounts 30TH SEPTEMBER 2017

14. CrEDiT riSK DiSCLoSUrES The majority of personal loans to members are unsecured, except that there are restrictions on the extent to which borrowers may withdraw their savings whilst loans are outstanding. Where security (other than savings) has been obtained, the security is by way of a first legal charge on a member’s property.

Loans are issued subject to the relevant legislation and regulation governing Credit Unions and the lending policy of the Credit Union, at the time of approval.

2017 2016 Amount Amount € % € % Total (Impaired and Not Impaired) Loans Not in Arrears 26,816,165 80 20,556,254 75 Up to 9 Weeks Past Due Between 10 and 18 Weeks Past Due Between 19 and 26 Weeks Past Due Between 27 and 39 Weeks Past Due Between 40 and 52 Weeks Past Due Over 53 Weeks Past Due

4,381,295 543,692 234,818 227,772 200,186 1,096,269

13.1 1.6 0.7 0.7 0.6 3.3

4,001,798 628,870 273,592 317,945 222,075 1,366,342

15 2 1 1 1 5

Total Impaired Loans in Arrears

6,684,032

20

6,810,622

25

33,500,197

100

27,366,876

100

Total Loans

15. rATES oF iNTErEST CHArGED oN MEMBErS’ LoANS The Credit Union offers various different rates of interest on a reducing balance basis.

Type Standard rate Smart option loan First time borrowers Car loan Student loan Secured (by savings) loan

Nominal rate (%) 9.48 5.50 7.00 7.00 7.00 4.85

APR (%) 9.90 5.64 7.23 7.23 7.23 4.97

16. PENSioN CoMMiTMENTS First South Credit Union Limited participates in an industry-wide pension scheme for employees (The Irish League of Credit Unions Republic of Ireland Pension Scheme). This is a funded defined benefit scheme with assets managed by the scheme’s trustees. FSCU also operates a defined contribution scheme for four employees only.

The scheme is a multi-employer scheme and due to the nature of the scheme it is not possible for First South Credit Union Limited to separately identify its share of the scheme’s underlying assets and liabilities. Consequently, it accounts for the scheme as a defined contribution plan, in accordance with FRS 102.

42

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

The Pension’s Act requires the trustees of the scheme to assess whether it could meet a certain prescribed standard, known as the Minimum Funding Standard. This assesses whether, if the scheme was wound up on a specified theoretical valuation date, it could satisfy the Funding Standard at that date. Following the scheme’s actuary certifying a Minimum Funding Standard deficit in the scheme in 2009, First South Credit Union Limited, the ILCU Group and the other Credit Unions participating in the scheme entered into a funding agreement with the scheme that was designed to ensure that, the scheme could be reasonably expected to satisfy the Minimum Funding Standard by a specified future date (1 March 2019). This funding plan runs up until 2019 and was approved by the Pensions Authority. In accordance with the requirements of FRS 102, First South Credit Union Limited has recognised a liability for its outstanding contributions payable under this funding agreement to the extent that they relate to the deficit.

As part of the above solvency assessment process, the scheme actuary must carry out a separate valuation under the Minimum Funding Standard every 3 years and produce a funding certificate for submission to the Pensions Authority within 9 months of the effective date of the valuation. The purpose of the certificate is to certify whether or not the assets of the scheme at the effective date are sufficient to meet the liabilities of the scheme based on the assumption that the scheme was wound up at that date. The most recent Actuarial Funding Certificate was effective as at 1 March 2015 and it certified that the scheme satisfied the funding standard. Further, the actuary was reasonably satisfied that as at 28 February 2015 the scheme can be expected to satisfy the funding standard as specified in Section 44 of the Pensions Act, 1990, at 1 March 2019, being the date specified by the Pensions Authority under Section 49(2) (a) of the Act for the purpose of the existing funding proposal.

An actuarial review of the fund is normally carried out every three years by the scheme's independent, professionally qualified actuary. The actuarial review considers the past and future liabilities of the scheme.

The last completed triennial actuarial review was carried out with an effective date of 1 March 2014, using the Projected Unit valuation method. The principal actuarial assumption used in the valuation was the investment return would be 1.5% higher than the annual salary increases. The market value of the scheme's assets at 1 March 2014 was €157m. The actuarial valuation disclosed a past service deficit of €27.7m at 1 March 2014 calculated under the Ongoing Actuarial Valuation method. This valuation method assumes that the scheme will continue in existence for the foreseeable future. The assumptions used in the actuarial review to determine the past service deficit differ from the assumptions that would be used to determine the liabilities for defined benefit obligations under FRS102. This actuarial review recommended that the rate agreed under the funding proposal, 27.7% of pensionable salary, continues to be paid. The cost of risk benefits is paid in addition to this rate giving a total contribution rate of 30% of pensionable salary.

First South Credit Union Financial Accounts 2017

43

Notes to the Financial Accounts 30TH SEPTEMBER 2017

17. DiViDEND AND LoAN iNTErEST rEBATE

The dividend of €396,141 (0.35%) and loan interest rebate of €253,502 (10%) paid during the year was approved by the members in respect of the year ended 30 September 2016, at the Credit Union’s AGM on 20 December 2016. The directors propose the following dividend in respect of the year ended 30 September 2017: 2017 - Proposed Gross Dividend on Shares

€ 341,650

Rate % 0.25%

The dividend payable is at the discretion of the directors and is therefore not a financial liability of the Credit Union until declared and approved at the AGM. In recommending a dividend the matters considered by the board, include the risk profile of the Credit Union, particularly in its loan and investment portfolios; the Board’s desire to maintain a stable rather than a volatile rate of dividend each year; and members’ legitimate dividend expectations. The Board’s recommendation reflects prudence and the need to sustain the long-term welfare of the Credit Union by building up reserves to absorb unexpected shocks and still remain above minimum regulatory requirements.

18. rELATED PArTy TrANSACTioNS In accordance with FRS 102, a related party is defined as a ‘person or entity that is related to the Credit Union and has significant influence over the Credit Union or is a member of the key management personnel’. All Credit Union directors as well as committee members and management who meet the above criteria are considered to be related parties. In accordance with FRS 102 it also includes family members who may be expected to influence or be influenced by that person in their dealings with the Credit Union. During the year loans amounting to €300,170 (2016: €51,860) were approved for related parties. These loans were approved in accordance with the Standard Credit Union Rules. The aggregate amount of loans owed by related parties at 30 September 2017 was €349,529 (2016: €197,515). Loans to related parties represent 1.14% (2016: 0.72%) of total loans outstanding at the statement of financial position date.

There are no related party loans in arrears in 2017 (2016: Nil).

Key Management Personnel All directors and six senior employees who have authority and responsibility for planning, directing and controlling the activities of the Credit Union are considered to be key management personnel. The directors are unpaid volunteers.

Total remuneration in respect of the senior employees was: 2017 €

2016 €

Short term employee benefits Payments to pension schemes

319,688 94,614

334,526 79,445

Total

414,302

413,971

There were no other related party transactions during the year which would require disclosure under Financial Reporting Standard No. 8 (Related Party Disclosures).

44

First South Credit Union Financial Accounts 2017

Notes to the Financial Accounts FOR THE YEAR ENDED 30TH SEPTEMBER 2017

19. iNSUrANCE AGAiNST FrAUD

The Credit Union has insurance against fraud in the amount of €5,200,000 (2016: €5,200,000) in compliance with Section 47 of the Credit Union Act 1997.

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

21. APProVAL oF FiNANCiAL STATEMENTS The financial statements were approved and authorised for issue by the board of directors on 20th November, 2017.

please Be patient With us...

We, at First South Credit Union, are dedicated to delivering the highest level of service to you, our member.

We are committed to protecting your funds,keeping your information up to date, accurate, safe and secure and fulfilling our legal obligations. In doing all of the above, we ask that you be patient with us.

We May: • Ask you for identification, even when we know you • Ask you to verify some personal information when we interact with you • Ask you if we can take your photo, even if you were never asked before.

We Will Never: • Provide your balance over the phone.

• Allow online access to your account without verifying your identity • Ask you for your PIN number or password.

We appreciate you bearing with us. We are committed to protecting you every step of the way!

Free Draw

€2,000

1st Prize €500 3 Prizes of €250 3 Prizes of €150 3 Prizes of €100

This draw will take place during the AGM Meeting only. Passbooks must be produced.

First South Credit Union Financial Accounts 2017

45

Schedules of the Financial Statements FOR THE YEAR ENDED 30TH SEPTEMBER 2017

SCHEDULE 1 INTEREST ON LOANS Opening accrued loan interest receivable Loan interest received in year Closing accrued loan interest receivable

2017 € 72,542 2,472,140 (87,776)

2016 € 64,146 2,234,175 (72,542)

Total per income and expenditure account

2,456,906

2,225,779

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

1,769,682

1,718,018

Total per income and expenditure account

1,769,682

1,718,018

SCHEDULE 3 OTHER INCOME Commission

23,719

16,257

Total Per Income and Expenditure Account

23,719

16,257

SCHEDULE 4 OTHER MANAGEMENT EXPENSES Share and loan insurance Death benefit insurance Miscellaneous expenses Printing and stationary Repairs and renewals IT software and computer maintenance Promotion, advertising, training General insurance Postage and telephone Bank charges Rent and rates Lighting, heating and cleaning Pension Convention expenses Donations and sponsorship Chapter expenses Audit, legal and professional fees Central Bank - Regulation Levy Security Debt collection Bad debts written-off AGM expenses SPS contribution Affiliation fees Deposit Protection Account charges Loan on disposal of fixed assets

2017 € 400,030 434,325 64,643 46,506 67,194 313,635 86,929 44,087 32,351 85,957 72,659 57,947 167,352 21,224 36,563 3,209 190,381 128,292 43,175 27,425 1,768 34,025 34,702 72,778 117,899 28,088

2016 € 359,527 368,163 61,695 41,458 32,8775 223,148 137,634 30,193 25,328 63,333 36,513 39,914 151,114 19,633 14,864 2,354 184,756 104,654 35,507 17,033 64,626 18,221 44,839 57,364 118 ––

2,613,144

2,134,866

Total per income and expenditure account 46

First South Credit Union Financial Accounts 2017

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Term

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Total Amount Payable

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2 Years

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€5,000

6.5%

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3 Years

€153.26

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€146.76

€8,803.24

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€391.34

€23,475.72

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€489.17

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*Final repayment for each loan in order listed above is €88.30, €151.85, €144.40, €192.58, €289.56, €386.66, €483.67.

Figures correct as at 16/11/2017.

Terms & Conditions Apply: Your Bank Loan must be up to date and no missed payments for 6 months.

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