First Rate Credit Union Limited · Nomination and election of officers to be carried out subject to...

ANNUAL REPORT 2017/18

First Rate Credit Union Limited

Email: [email protected]

Website: www.firstratecu.co.uk

2

AGENDA

First Rate Credit Union Ltd. Annual General Meeting 7th February 2019,

17:00 – 1900

Organza Suite, Lightning Club, Mill Lane, Warton

Financial Year 1st October 2017 to 30th September 2018

AGENDA

1. Welcome / Chair’s Address

2. Apologies

3. Minutes of previous AGM (held in February 2018)

4. Chairman / Board of Directors report

5. Accounts / External audit Report

6. Treasurer’s Report

7. Internal Audit report

8. Resignations / Elections to the Board

9. Motions

10. AOB

11. Close

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WELCOME

Dear Member,

First Rate Credit Union is delighted to welcome you to our 2019 Annual General Meeting for financial

year ending 30th September 2018.

The Credit Union belongs to you, its members, and the Annual General Meeting is your opportunity to

have your say, examine the accounts, ask questions of your elected representatives and to elect those

volunteer members who will form the Board of Directors which will set the strategic and policy direction of

the Credit Union into the future.

You will also have the opportunity to vote for this year's recommended dividend to savers and as a

member, you are entitled to put forward motions for consideration by the membership, attend this

meeting & vote on any resolution that may come from any motion passed, or on nominations to the

Board.

The AGM is also essential to the First Rate Credit Union by way of gauging any feedback from our

members on the level of service you experience and an opportunity for members to discuss proposals for

increasing or improving operations.

The last 12 months have been a fantastic year for the credit union, with us being formally recognised

within ABCUL as a “large asset credit union” and the 16th largest within that trade body.

Please look out for the launch of our regular quarterly newsletter soon for more information or follow our

social media pages in order to be kept fully informed about what we are doing, when we do it.

First Rate Credit Union

4

CHAIR’S ADDRESS

Welcome to the 2017-2018 AGM for the First Rate Credit Union.

The last 12 months have been another very successful period for your credit union. With the following

highlights.

Members increase by 227

Assets increased to £14,383,467

Loans increased to £11,036.542

The treasurer will take you through a more in depth review later.

We are categorised as a large asset credit union therefore we have needed to increase our level of

governance and control. The key to our success has been the dedication of our Board of Directors Staff

and Volunteers.

We are in a very healthy, secure position and compare favourably with other Credit Unions. We should

feel proud of our collective success.

This year has been focused on delivering on our commitments made at last year’s AGM.

Highlights for 2017-2018

Robust financial performance

Delivered on the 2 year plan to the Bank of England

Starting to Exploit our information with our IT toolset

Increased the level of a management and Governance

Conducted significant amount of training to increase the skill of both volunteers and Staff.

Recruited a vastly experience Operations manager to take the FRCU to the FRCU to the next

level of growth.

Engaged with BAE Systems to have the support of a Financial Graduate.

Delivery of the gold standard ABCUL compliance requirements

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The major challenge faced by the FRCU has been building Capital reserves. We laid out a 2-year plan for

the Bank of England and we have delivered against it. This has resulted in an increased level of

confidence from the regulator. However, as assets grow the need to build capital reserves at the same or

faster rate continues. The need to continue to build reserves is required to allow the growth opportunities

to be achieved.

The 6 major challenges facing the FRCU for next year (2018-2019)

Keep doing the good things we have previously done and continue to transition to a large Credit Union.

Address the doubtful debt issues

Generate sufficient income to build capital reserves and deliver a competitive dividend.

To grow a profitable loan book

Exploit our IT and the information it holds.

Continue to develop a robust governance process.

Martin Newton Chairman of the First Rate Credit Union

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MINUTES OF THE PREVIOUS ANNUAL GENERAL MEETING

Annual General Meeting

17:00 8th February 2018

Quorum: A quorum was present (21 members)

Apologies: none

The minutes of the 2017 AGM were presented and approved.

Proposed: K. Mortimer

Seconded: A. Emerson

Matters Arising:

No matters were raised to the board.

Introduction to this year’s AGM was presented by the Chairman Report

Chairman’s Report:

The Chairman’s Annual Report was presented & accepted.

Highlights included key challenges in the last year, and a membership increase of 13.6%.

Proposed: P. Lawrenson, Seconded: R. McCann

Treasurer’s Report:

I. The treasurer’s report of the accounts & balance was presented & was followed by a voice over from the Auditor from Moore & Smalley, whom provided a brief on the year’s accounts. The report was subsequently accepted.

Proposed: A. Emerson, Seconded: K. Mortimer

II. This coming year, as in last year, the Credit Union must put more emphasis on the amount of money we have to put into our reserves to meet the FCA/PRA compliance rules.

Proposed: K. Mortimer, Seconded: K. Benfold

The dividend will be accredited to member’s accounts in March 2018.

Proposed: B. Lawrenson, Seconded: K. Mortimer

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MINUTES OF THE PREVIOUS GENERAL MEETING…CONTINUED

Auditors Report:

The Auditors Report was presented & accepted, with the continued use of Moore & Smalley as the Audit body

proposed.

Proposed: B. Lawrenson, Seconded: B. Aspinall

Internal Audit:

The Internal Audit & Advisory Report was presented & accepted.

The AGM attendees were also briefed on the improvements made in the area of compliance through the Code of

Governance.

B. Lawrenson congratulated the Board on achieving a Gold Standard against the Code of Governance.

Proposed: B. Lawrenson, Seconded: B. Hartley

Credit Committee Report:

The Credit Committee report was presented & accepted.

Proposed: B. Lawrenson

Seconded: P. Lawrenson

8

MINUTES OF THE PREVIOUS GENERAL MEETING…CONTINUED

Resignations / Elections to the Board & election of officers:

Retiring from the board;

None

Retiring & Standing for Re-election;

B. Aspinall

Proposed: A. Emerson

Seconded: D. Downey

T. Thomas

Proposed: R. McCann

Seconded: B. Lawrenson

Elections to the Board;

None

Motions:

No motions were presented by the membership.

AOB

None

The meeting closed at 1840

9

ACCOUNTS AND EXTERNAL AUDIT REPORT

[See Directors’ Report and Financial Statements at end of document]

10

TREASURER’S REPORT

TREASURER’S ANNUAL REPORT

FINANCIAL YEAR 01/10/2017 to 30/09/2018

2017/2018 has been another good year for the First Rate Credit Union. Although the growth rate has

slowed compared to the previous year we are still growing, albeit at a more manageable pace.

CATEGORY ABSOLUTE GROWTH

FROM PREVIOUS YEAR

PERCENTAGE GROWTH YEAR ON

YEAR

POSITION AT FINANCIAL YEAR

END

MEMBERSHIP 227 6.2% 3853

SHARES £1,476,432 13.1% £12,787,169

MEMBERS WITH LOANS

88 5.4% 1710

TOTAL LOANS OUTSTANDING

£971,091 9.6% £11,036,542

PROFIT £24,283 4% £636,424

We have transferred £395k into General Reserves. This ensured our compliance with the 10% target of

capital to assets ratio, which was set by the financial regulators. We both met and exceeded the 10%

target ratio through prudent financial management. This currently provides adequate security for our

members. We intend that this should provide a firm financial footing to offer higher returns in the coming

years.

We now ask you to approve the following items:

1. The accounts as a true statement of the financial year.

2. The re-appointment of Moore and Smalley as our auditors for the financial year 2018-19.

3. The Board of Directors recommendation for this year’s dividend to be set at 1%.

Stephen Cameron (Treasurer)

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INTERNAL AUDIT REPORT

2018 Audits

o 65 Planned

o 63 (97%) completed

o Audits undertaken

Bank procedures

Sensitive accounts & expenses

Member accounts & processes

New member processes

Dormant accounts (money laundering risk)

Office processes (e.g. BOD meeting minutes sign off; staff inductions,

contracts of employment & PDRs etc.)

Processes & procedures, reviews (e.g. Training Plan, Office

Procedures, Operations Management Plan (Roles & Responsibilities)

etc.), updates (e.g. Risk / Opportunity, Loans Policy, MLRO etc.) &

tests (e.g. Business Continuity)

o Outcomes

No major issues found during our audit reviews

Minor issues only found like:

Scanned copies in the wrong folder on member accounts

Reminders for BOD & staff to ensure that all receipts are

attached to expenses claims

Infrastructure & IT

o Lace Curtains – an upgrade to our current Curtains Too system to allow us to

exploit the technology and enable staff to concentrate on dealing with the

customer, instead of a mountain of paperwork

o Automated Lending Decisions (ALD) – is a capability within Lace Curtains.

80% of member loan requests are expected to go through this route and again

free up the office staff’s valuable time to review those more “tricky”

applications. It will also allow us to turn round loans quicker on line

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o Windows 10 – you may be aware (or not) that Windows 7 as an operating

system comes out of life at the end of 2019 and, as with BAES, we will be

impacted. We plan to update our infrastructure, to ensure we are able to take

the capability, in October / November this year and we have already confirmed

that our software is W10 compatible.

Code Of Governance – last year we reported we’d achieved Gold standard (i.e. achievement of

an extra 14 optional elements, additional to the mandatory 31 Required elements) and this year

we’ve been working to refine these processes. Over the next 6 months we need to reconfirm our

adherence to that Gold standard and maintain our currency.

FCA / PRA Audit – now we have moved from being a large, small CU to being a small, large CU,

we have a new set of rules to abide to. Part of this is preparation for a potential audit from the

FCA / PRA as we have achieved over £10m in asset. This audit will examine:

o Business Plan

o Policies & procedures

o How we run our BOD

o How we run our internal audits

o The issuing of our legally required reports

o Investment & significant issues register

o Training & development plan

So to help us achieve these requirements we have developed a matrix, as we did for the Code Of

Governance, to systematically guide us through to compliance. Currently we have completed 44

of 47 elements i.e. 94% complete.

Conclusions – as a credit union we should be proud of:

o The high achievement rate of our audit programme

o Our achievements in maintaining Gold standard against the Code of Governance and the

knowledge that we have a well-run & managed credit union

o Our focus on ensuring our systems and capabilities are topical & compatible with the technologies in the wider community

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RESIGNATIONS & ELECTIONS TO THE BOARD

Nomination and election of officers to be carried out subject to the Credit Union’s registered rules number

98 to 109

Resignations at this AGM:

Elaine Bartle (retired)

John Jones (resigned to take up post on Supervisory Committee)

Nominations received to become a Board Member at this AGM:

Stephen Cameron (presently co-opted)

Martin Newton (re-election)

Joe Taylor (re-election)

MOTION:

SUBJECT TO RULE 103: As the number of nominees does not exceed the number of vacancies, that

individual election procedures be dispensed with and all nominees be declared duly elected.

Proposed: [Name]

Seconded: [Name]

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MOTIONS

No other motions have been received from the Board or the members of the Credit Union for this Annual

General Meeting

ANY OTHER BUSINESS

No other items of business were notified prior to the meeting.

CLOSE

Next Annual General Meeting to be held within 6 months of the end of financial year of account (Rule 79)

the time and date to be notified to members in accordance with rules 81 & 82.

First Rate Credit Union Limited is Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority

and the Prudential Regulation Authority. Firm Reference 213241 Registration No. 60c

Registered Address Warton Aerodrome Warton Preston Lancashire PR4 1AX

“Wish I had

joined many

years ago”

“It is not a bank - I like

the principle of the

credit union”

“The people in

FRCU are always

really kind and

very helpful”

FCA Registration No: 213241

Mutuals Registration No: 60C

First Rate Credit Union LimitedDirectors’ Report and Financial Statements

For The Year Ended30 September 2018

MHA Moore & SmalLeyTrusted Tb uk

FIRST RATE CREDIT UNION LIMITEDADMINISTRATIVE INFORMATION

Directors John Geraghty PresidentMartin Newton ChairpersonJohn Jones TreasurerTim Thomas SecretaryJoe TaylorBen AspinallKevan BenfoldElaine Birtle

Financial Services Authority Registration Number—213241

Registered Office W31OA BuildingBAE SystemsWartonPR4 lAX

Auditors MHA Moore and SmalleyRichard HouseWinckley SquarePrestonPR1 3HP

FIRST RATE CREDIT UNION LIMITEDCONTENTS

Page

Directors’ Report 1

Independent Auditor’s Report 3

Revenue Account 6

Balance Sheet 7

Statement of changes in Retained Earnings 8

Cash flow statement 9

Notes to the financial statements 10

FIRST RATE CREDIT UNION LIMITEDDIRECTORS’ REPORT

FOR THE YEAR ENDED 30 SEPTEMBER 2018

The Directors present their report and with the financial statements of the First Rate Credit Union Limited (‘theCredit Union”) for the year ended 30 September 2018.

Principal activities and review of businessThe principal activity in the year under review was that of a credit union. The common bond between themembers of the First Rate Credit Union is:

a. An individual who is employed by BAE Systems (or its successor organisations) in Great Britain.b. A body corporate, an individual in his/her capacity as a partner in a partnership, an individual in his/her

capacity as an officer or member of the governing body of an unincorporated association, is in theabove employer, is related to the above employer in the following way: is a member of a sports andsocial club affiliated to BAE Systems (or its successor organisations) in Great Britain.

c. An individual who is associated with other individuals through being in receipt of a pension from BAESystems (or its successor organisations) in Great Britain.

d. An individual who is a member of the same household as, and is a relative of, an individual who is amember of the credit union and falls directly within a common bond outlined above.

During the year, membership increased from 3,626 to 3,797 and share deposits increased from £11,310,737 at1 October 2017 to £12,788,622 as at 30 September 2018. The Credit Union had a successful year in grantingloans for a variety of needs including holidays, home improvements, debt consolidation, cars and insurance.Loan balances increased from £10,065,450 at 1 October 2017 to £11,036,542 at 30 September 2018.

The Credit Union is authorised by the Prudential Regulation Authority (PRA) and regulated by the FinancialConduct Authority (FCA) and Prudential Regulation Authority. All necessary returns were submitted in line withthe reporting timescales laid down by the FCA.

One of the major benefits of the Credit Union is free life assistance which provides for all loans are paid in full ondeath up to the age of 80.

General reserve and dividendsThe directors propose that a 1% dividend of £120,400 (2017: 2% -£204,500) to be paid for the year ended 30September 2018. The sum of £120,400 has been transferred to a dividend and appropriation reserve. £395,195has been transferred to the general reserve. The trustees have created a Loan Protection Insurance reserve of£45,771 and no longer pay annual premiums to CUNA Mutual. During the year payments totalling £3,459 weremade from this reserve.

Statement of directors’ responsibilitiesThe directors are responsible for preparing the report and financial statements in accordance with applicablelaw and regulations.

Co-operative and Community Benefit Society law requires the directors to prepare financial statements for eachfinancial year. The directors have elected to prepare the financial statements in accordance with UnitedKingdom Generally Accepted Accounting Practice (Financial Reporting Standard 102 and applicable law).Under that law the directors must not approve the financial statements unless they are satisfied that they give atrue and fair view of the state of affairs of the Credit Union and of the income and expenditure of the CreditUnion for that period. In preparing these 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;• state whether applicable UK Accounting Standards have been followed, subject to any material

departures• disclosed and explained in the financial statements;• Prepare the financial statements on the going concern basis unless it is inappropriate to

presume that the Credit Union will continue in business.

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FIRST RATE CREDIT UNION LIMITEDDIRECTORS’ REPORT


Statement of directors’ responsibilities (continued)The directors are responsible for keeping proper accounting records which disclose, with reasonable accuracyat any time, the financial position of the Credit Union and to enable them to ensure that the financial statementscomply with the Co-operative and Community Benefit Societies Act 2014. They are also responsible forsafeguarding the assets of the Credit Union and hence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

The directors are also responsible for ensuring that, as far as they are aware, there is no relevant auditinformation of which the Credit Union’s auditors are unaware and the directors have taken all steps that theyought to have taken to make themselves aware of any audit information and to establish that the auditors areaware of that information.

For and on behalf of the Board

Martin Newton — Chair

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FIRST RATE CREDIT UNION LIMITEDAUDITOR’S REPORT TO THE MEMBERS


Opinion

We have audited the financial statements of First Rate Credit Union Limited for the year ended 30 September2018 which comprise income and expenditure account, the balance sheet and notes to the financial statements,including a summary of significant accounting policies. The financial reporting framework that has been appliedin their preparation is applicable law and United Kingdom Accounting Standards, including Financial ReportingStandard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United KingdomGenerally Accepted Accounting Practice).

This report is made solely to the members of First Rate Credit Union Limited, as a body, in accordance withsection 87 of the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertakenso that we might state to the credit union’s members those matters we are required to state to them in anauditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the credit union and the credit union’s members as a body, for our auditwork, for this report, or for the opinions we have formed.

In our opinion the financial statements:

• give a true and fair view of the state of the credit union’s affairs as at 30 September2018, and of its incomeand expenditure for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice;and

• have been prepared in accordance with the requirements of the Co-operative and Community BenefitSocieties Act 2014.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISA5 (UK)) and applicablelaw. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the auditof the financial statements section of our report. We are independent of the credit union in accordance with theethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’sEthical Standard, 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 ouropinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us toreport to you where:

• the directors’ use of the going concern basis of accounting in the preparation of the financial statements isnot appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that maycast significant doubt about the credit union’s ability to continue to adopt the going concern basis ofaccounting for a period of at least twelve months from the date when the financial statements are authorisedfor issue.

Other information

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

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Other information (continued)

In connection with our audit of the financial statements, our responsibility is to read the other information and, indoing so, consider whether the other information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such materialinconsistencies or apparent material misstatements, we are required to determine whether there is a materialmisstatement in the financial statements or a material misstatement of the other information. If, based on thework we have performed, we conclude that there is a material misstatement of this other information, we arerequired to report that fact.

We have nothing to report in this regard.

Mailers on which we are required to report by exception

In the light of our knowledge and understanding of the credit union and its environment obtained in the course ofthe audit, we have not identified material misstatements in the directors’ report.

We have nothing to report in respect of the following matters in relation to which the Co-operative andCommunity Benefit Societies Act 2014 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept, or returns adequate for our audit have not been receivedfrom branches not visited by us; or

• the financial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

Responsibilities of directors

As explained more fully in the directors’ responsibilities statement set out on page 1, the directors areresponsible for the preparation of the financial statements and for being satisfied that they give a true and fairview, and for such internal control as the directors determine is necessary to enable the preparation of financialstatements 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 tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using the goingconcern basis of accounting unless the directors either intend to liquidate the credit union or to ceaseoperations, or have 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 freefrom material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes ouropinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted inaccordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or in the aggregate, they could reasonably beexpected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs (UK), we exercise professional judgment and maintain professionalscepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud orerror, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement 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.

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Auditor’s responsibilities for the audit of the financial statements (continued)

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe credit union’s internal control.

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

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions thatmay cast significant doubt on the credit union’s ability to continue as a going concern. If we conclude that amaterial uncertainty exists, we are required to draw attention in our auditor’s report to the relateddisclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, futureevents or conditions may cause the credit union to cease to continue as a going concern.

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

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

rj~ftoo~*.Srr~cJ~L-N Date:..~.!~MHA Moore and SmalleyChartered Accountantsand Statutory AuditorPreston

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FIRST RATE CREDIT UNION LIMITEDREVENUE ACCOUNT


2018 2017Note £ £

Loan interest receivable and similar income 4 862,621 798,178

Interest payable 5 (204,500) (362,042)

Net interest income 658,121 436,136

Other income 6 11,382 19562

Administrative expenses 7a (114,820) (109,875)

Other operating expenses 7b (40,432) (77,418)

Bad debt gains/(losses) recognised for the year 11 (155,900) (113,742)

Surplus before taxation 358,351 154,663

Taxation 9a (1,944) (411)

Surplus for the financial year 356,407 154,252

Other comprehensive income

Total comprehensive income 356,407 154,252

Comprising:

Surplus generated in the year available for appropriation beforefund transfers 560907 516294

Payment of dividend and loan rebates from prior year surplus,charged as interest (204,500) (362,042)

356,407 154,252

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FIRST RATE CREDIT UNION LIMITEDBALANCE SHEET


2018 2017Note £ £

ASSETS

Cash, cash equivalents and liquid deposits:

Cash and balances at bank 16 595,007 1,177,383

Deposits and Investments 16 2,953,242 1,453,022

3,548,249 2,630,405

Loans and advances to members 11 10,796,542 9,892,661

Tangible and intangible fixed assets 10 15,822 -

Loans to other credit unions 15,000 15,000

Prepayments and accrued income 7,854 7,611

Total assets 14,383,467 12,545,677

LIABILITIES

Members’ shares — repayable on demand 12 12,788,622 11,310,737

Other creditors 13 20,216 16,718

12,808,838 11,327,455Retained earnings:

General reserve 17 1254,096 858,901Business development reserve 17 157,821 154,821Insurance reserve 17 42,312 -

Dividend and interest rebate appropriation reserve 17 120,400 204,500

Total liabilities 14,383,467 12,545,677

~ciaI~~emen~ziere approved and authorised for issue, by the Board on

Board Memb

i3/,~/) ~

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FIRST RATE CREDIT UNION LIMITEDSTATEMENT OF CHANGES IN RETAINED EARNINGS


Note 2018 2017£ £

As at 1 October2017 1,218,222 1,063,970

Total comprehensive income for the year 356,407 154,252

As at3O September2018 1,574,629 1,218,222

Comprising

General reserve 17 1,254,096 858,901Business development reserve 17 157,821 154,821Insurance reserve 17 42,312 -

Dividend and interest rebate appropriation reserve 17 120,400 204,500

1,574,629 1,218,222

-8-

FIRST RATE CREDIT UNION LIMITEDCASK FLOW STATEMENT


2018 2017Note £ £

Cash flows from operating activities

Surplus/(deflcit) before taxation 358351 154,663

Adjustments for non-cash items:

Interest on loans 4 (852,389) (796,072)

Bad and doubtful debts lid 167,282 129,583(326,756) (511,826)

Movements in:

Other receivables (243) (16,766)

Other payables 1,965 3,699(325,034) (524,893)

Cash flows from changes in operating assets and liabilities

Cash inflow from subscribed capital 12 9,071,465 9,655,100

Cash outflow from repaid capital 12 (7,593,580) (7,525,821)

New loans to members ha (4,862,868) (5,040,784)

Repayment of loans by members 1 la 4,644,094 4,215,8651,259,111 1,304,360

Taxation paid (411) (327)1,258,700 1,304,033

Net cash flows from operating activities 933,666 779,140

Cash flows from investing activities

Capital expenditure in the year 10 (15,822) -

Net cash flow from managing liquid deposits (1,500,000) (750,000)

Net increase/(decrease) in cash and cash equivalents (582,156) 29,140

Cash and cash equivalents at beginning of year 1,880,405 1,851,265

Cash and cash equivalents at end of year 16 1,298,249 1,880,405

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FIRST RATE CREDIT UNION LIMITEDNOTES TO THE FINANCIAL STATEMENTS


Legal and regulatory framework

First Rate Credit Union Limited is a society established under the Industrial and Provident Societies Act1965, whose principal activity is to operate as a credit union, within the meaning of the Credit UnionsAct 1979. The Credit Union has registered with the Financial Conduct Authority and is regulated by thePrudential Regulation Authority under the provisions of the Financial Services and Markets Act 2000.

In accordance with the regulatory environment for credit unions, deposits from members can be madeby subscription for redeemable shares, deferred shares and interest bearing shares. At present, theCredit Union has only issued redeemable shares.

2 Accounting policies

Basis of preparation

These financial statements have been prepared in accordance with FRS 102 The Financial ReportingStandard applicable in the UK and Republic of Ireland. The financial statements are prepared on thehistorical cost basis.

Going concern

The financial statements are prepared on the going concern basis. The directors of the Credit Unionbelieve this is appropriate despite a mismatch in the maturity analysis of subscribed capital and loans tomembers, because some of the subscribed capital is not redeemable at short notice unless loans withthe same member have been repaid.

Income

Loan interest receivable and similar income: Interest on both loans to members and loans to banks (i.e.cash and cash equivalents held on deposit with other financial institutions) is recognised using theeffective interest method and is calculated and accrued on a daily basis.

Fees and commissions receivable: Fees and charges either arise in connection with a specifictransaction or accrue evenly over a year. Income relating to individual transactions is recognised whenthe transaction is completed.

Taxation

The tax charge for the year reflects current tax payable. Current tax payable is the expectedcorporation tax payable for the year, using tax rates in force for the year. The Credit Union is not liableto corporation tax payable on its activities of making loans to members, and investing surplus funds, asthese are not classified as a trade. However, corporation tax is payable on investment income.As a result of the limited activities of the Credit Union from which profits are chargeable to corporationtax, it is unlikely that deferred tax will arise.

Tangible and intangible fixed assets

Tangible and intangible fixed assets are stated at cost, less accumulated depreciation/amortisation andany impairment losses. Cost includes expenditure that is directly attributable to the acquisition of theasset.

Depreciation/amortisation is provided to write off the cost of the asset less its estimated residual value,on a reducing balance basis over the assets expected useful life.

Computer equipment 25%Fixtures and fittings 15%Website costs 33%

Cash and cash equivalents

Cash and cash equivalents comprise balances on hand with banks and other financial institutions withmaturity of less than or equal to three months.

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2 Accounting policies (continued)

Financial assets — loans and advances to members

Loans to members are financial assets with fixed or determinable payments and are not quoted in anactive market. Loans are recognised when cash is advanced to members and measured at amortisedcost using the effective interest method.

Loans are derecognised when the right to receive cash flows from the asset have expired, usually whenall amounts outstanding have been repaid by the member. The Credit Union does not transfer loans tothird parties.

Impairment of financial assets

The Credit Union assesses, at each balance sheet date, if there is objective evidence that any of itsloans to members are impaired. If there is objective evidence that any individual loan is impaired, aspecific loss will be recognised.

Any impairment losses are recognised in the revenue account, as the difference between the carryingvalue of the loan and the net present value of the expected cash flows.

Financial liabilities — subscribed capital

Members’ shareholdings in the Credit Union are redeemable and therefore are classified as financialliabilities, and described as subscribed capital. They are initially recognised at the amount of cashdeposited and subsequently measured at amortised cost.

Reserves

Retained earnings are the accumulated surpluses to date that have not been declared as dividendsreturnable to members,

3 Use of estimates and judgements

The preparation of financial statements requires the use of certain accounting estimates. It alsorequires the Directors to exercise judgement in applying the Credit Union’s accounting policies. Theareas requiring a higher degree of judgement, or complexity, and areas where assumptions orestimates are most significant to the financial statements are disclosed below:

Bad debts

The Credit Union reviews all loans which have fallen in arrears and makes provision against the netexposure on any balances where recovery is doubtful at the following rates of provision:

3-6 months in arrears 35%6-9 months in arrears 60%9-12 months in arrears 80%

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4 Loan interest receivable and similar income

2018 2017£ £

Loan interest receivable from members 852,389 796,072Loan interest receivable on loans to other Credit Unions 262 -

Bank interest receivable on cash and liquid deposits 9,970 2,106

Total loan interest receivable and similar income 862,621 798,178

5 Interest expense

Interest expense is the dividend paid and loan interest refunded to members for the prior year Thedividend and interest rebate are formally proposed by the Directors after the year end and is confirmedat the following ACM. As a result it does not represent a liability at the balance sheet date.

2018 2017£ £

Loan rebate paid in the year - 28,154

Interest paid during the year 204,500 333,888

Dividend rate: 2% 4%

Loan rebate proposed, but not recognised - -

Interest proposed, but not recognised 120,400 204,500

Dividend rate: 1% 2%

6 Other income

2018 2017£ £

Bad debts recovered 11,382 15,841CUNA dividend - 3,656Sundry - 65

11,382 19,562

7 Expenses

2018 2017£ £

Note

Administrative expenses 7a 114,820 109,875Other operating expenses 7b 40,432 77,418

155,252 187,293

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7a Administrative expenses

2018 2017£ £

Note

Employment costs 8b 88,879 67,071Agency staff - 5,844Settlements - 6,200Staff training 1,512 1,708Auditors’ remuneration 7c 4,440 5,414Computer hardware/software costs 5,530 7,675General expenses 1,389 3,137Bank charges 2,332 1,971Charitable donations and sponsorship 1,000 1,000Professional fees 7,078 8,175Printing, postage and stationery 2,660 1,680

Total administrative expenses 114,820 109,875

7b Other operating expenses

Other operating expenses comprise the costs of occupying offices and regulatory and financialmanagement costs.

2018 2017£ £

Accommodation and travel 3,978 3,842Barrow office expenses 6,397 10,276Loan protection costs 3,459 -

FCA fees 2,944 4,397Association of British Credit Unions Limited 5,541 3,518Insurance 2,037 48,313EquifaxlCallcredit fees 10,982 2,806Fidelity bond 5,094 4,266

40,432 77,418

7c Auditor’s remuneration

The Credit Union presents voluntarily an analysis of its auditor’s remuneration in accordance with theCompanies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008.

2018 2017

Fees payable for the audit and preparation of annual accounts 4,200 4,080Other fees 240 1,334

4,440 5,414

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8 Employees and employment costs

Ba Number of employees

The average monthly number of employees during the year was:

2018 2017Number Number

Office staff 6 5

8b Employment costs

2018 2017

Wages and salaries 88,477 66,882

Payments to defined contribution pension schemes 402 189

Total employment costs 88,879 67,071

8c Directors’ remuneration

The Directors of First Rate Credit Union Limited are its key management personnel, none of whomreceive any remuneration for their services.

9 Taxation

9a Recognised in the Revenue Account

The taxation charge for the year, based on the small profits rate of Corporation Tax of 19% (2017:19%) comprised:

2018 2017£ £

NoteCurrent tax

UK Corporation tax 9b 1,894 411

Total current tax and total taxation expense recognised in theRevenueAccount 1,894 411

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9b Reconciliation of taxation expense

The Credit Union is not liable to corporation tax payable on its activities of making loans to members,and investing surplus funds, as these are not classified as a trade. However, corporation tax is payableon investment income. As a result, the tax charge for the year differs from the standard rate ofCorporation Tax. The differences are explained below:

2018 2017£ £

Surplus before taxation 358,351 154,663

Surplus before taxation multiplied by small profits rate ofcorporation tax in the UK of 19% (2017: 19% ) 68,087 29,386

Effects of:

Non-taxable surplus on transactions with members (66,143) (28,975)

Total tax charge for the year 1,944 411

10 Tangible and intangible fixed assets

Tangible IntangibleFixtures and Computer Website Total

fittings Equipment costs£ £ £ £

Cost

At 30 September 2017 597 2,820 - 3,417Additions - 642 15,180 15,822

At 30 September 2018 597 3,462 15,180 19,239

Depreciation and amortisation

At30 September2017 597 2,820 - 3,417Charge for the year - - -

At30 September2018 597 2,820 - 3,417

Net book value

At30 September2018 - 642 15,180 15,822

At 30 September 2017

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11 Loans and advances to members —financial assets

ha Loans and advances to members

Note 2018 2017£ £

As at 1 October 2017 (excluding impairment losses) 10,065,450 8,555,432

Advanced during the year 4,862,868 5,040,784

Interest 852,389 796,072

Repaid during the year (4,644,094) (4,215,865)

Written off (100,071) (110,973)

Gross loans and advances to members 11 b 11,036,542 10,065,450

Impairment losses:Individual financial assets lib, lic (118,988) (94,424)Groups of financial assets lid (121,012) (78,365)

(240,000) (172,789)

As at 30 September 2018 10,796,542 9,892,661

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lib Credit risk disclosures

The Credit Union does not offer mortgages and as a result all loans to members are unsecured, exceptthat there are restrictions on the extent to which borrowers may withdraw their savings whilst loans areoutstanding.

The carrying amount of the loans to members represents the Credit Union’s maximum exposure tocredit risk. The following table provides information on the credit quality of loan repayments. Whereloans are not impaired, it is expected that the amounts repayable will be received in full.

2018 2017Amount Proportion Amount Proportion

£ £ %

Not impaired

Neither past due nor impaired: 10,532,603 95.4 9,928,443 98-6

Up to 3 months past due - - -

Between 6 months and 1 year past due - - -

Over 1 year past due - - -

Sub-total loans not impaired 10,532,603 95.4 9,928,443 98.6

Individually impaired

Not yet past due, but impaired - - -

Up to 3 months past due 282,660 2.6 31,932 0.3

Between 3 and 6 months past due 85,387 0.8 35,585 0.4

Between 6 months and 1 year past due 135,892 1.2 69,490 0.7

Over 1 year past due

Total loans 11,036,542 100% 10,065,450 100%

Impairment allowance (240,000) (172,789)

Total carrying value 10,796,542 9,892,661

Factors that are considered in determining whether loans are impaired are discussed in NoteS.

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lic Provision for bad debts

Note 2018 2017£ £

Asatl October2017 172,789 154,179

(Decrease)/increase in allowances during the year 1 Id 67,211 18,610

Asat3O September2018 240,000 172,789

lid Bad debts recognised for the year

Note 2018 2017£ £

Impairment of individual financial assets 100,071 110,973

(Decrease)/increase in impairment allowances during the year 67,211 18,610

Reversal of impairment where debts recovered (11,382) (15,841)

Bad debt losses recognised for the year 155,900 113,742

12 Members’ shares

Note 2018 2017£ £

Asatl October2017 11,310,737 9,181,458

Received during the year 9,071,465 9,655,100

Repaid during the year (7,593,580) (7,525,821)

As at 30 September 2018 1 5a 12,788,622 11,310,737

Deposits from members may only be made by way of subscription for shares.

13 Other creditors

Note 2018 2017Due less than one year £ £

UK corporation tax 1,944 411

Other creditors - 98

Accruals and deferred income 18,272 16,209

20,216 16,718

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14 Financial risk management

The Credit Union manages its subscribed capital and loans to members so that it earns income from themargin between interest receivable and interest payable.

The main financial risks arising from the Credit Union’s activities are credit risk, liquidity risk and interestrate risk. The Board reviews and agrees policies for managing each of these risks, which aresummarised below.

Credit risk: Credit risk is the risk that a borrower will default on their contractual obligations relating torepayments to the Credit Union, resulting in financial loss to the Credit Union. In order to manage thisrisk, the Board approves the lending policy, and all changes to it. All loan applications are assessedwith reference to the lending policy in force at the time. Subsequently loans are regularly reviewed forany factors that may indicate that the likelihood of repayment has changed.

Liquidity risk: the Credit Union’s policy is to maintain sufficient funds in liquid form at all times toensure that it can meet its liabilities as they fall due. The objective of the liquidity policy is to smooth themismatches between the maturing assets and liabilities and to provide a degree of protection againstany unexpected developments that may arise. Note 2 provides further details about the impact of thematurity mismatch on the going concern status of the Credit Union.

Market risk: Market risk generally comprises interest rate risk, currency risk and other price risk. TheCredit Union conducts all its transactions in sterling and does not deal in derivatives or commonmarkets. Therefore it is not exposed to any form of currency risk or other price risk.

Interest rate risk: The Credit Union’s main interest rate arises from differences between the interestrate 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 when deciding on the dividend rate payable onsubscribed capital.

15a Interest rate risk disclosures

The following table shows the average interest rates applicable to relevant financial assets and financialliabilities.

2018 2017Average Averageinterest interest

Amount rate Amount rate£ % £

Financial assets

Loans to members 11,036,542 8.3% 10,065,450 8.9%

Financial liabilities

Subscribed capital 12,788,622 1% 11,310,737 2%

The interest rates applicable to loans to members are fixed at 9.5% for loans up to £10,000 and 7.6%for loans between £10,001 and £15,000. The interest payable after the year end on subscribed capitalis determined on the basis of income less administrative expenses and, as can be seen above, aconsistent margin is maintained between interest receivable and interest payable. As a result, thesurplus for the year is not particularly sensitive to interest rate risk and no sensitivity analysis ispresented.

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lSb Liquidity risk disclosures

Excluding short-term other payables, as noted in the balance sheet, the Credit Union’s financialliabilities, the subscribed capital, are repayable on demand.

15c Fair value of financial instruments

The Credit Union does not hold any financial instruments at fair value.

16 Cash and cash equivalents

2018 2017£ £

Total balances at bank and other financial institutions 3,548,249 2,630,405

Less amounts maturing after three months (2,250,000) (750,000)

Total cash and cash equivalents 1,298,249 1,880,405

The Co-operative Bank 1,298,249 1,880,405Barclays 2,250,000 750,000

3,548,249 2,630,405

17 Retained earnings

Business DividendGeneral Development Insurance appropriation Income andreserve reserve reserve reserve expenditure Total

£ £ £ £ £ £

Balance brought forward 858901 154821 - 204,500 - 1,218,222

Dividend applied - - - (204,500) 204,500 -

Netprofitaftertax - - - - 356,407 356,407

858,901 154,821 - - 560,907 1,574,629

Transferfrom l&E - 3,000 45,771 - (48,771) -

Transfer to I&E - - (3,459) - 3,459 -

858,901 157,821 42,312 515,595 1,574,629

Profit appropriated 395,195 - - 120,400 (515,595) -

Balance carried forward 1254,096 157,821 42,312 120,400 - 1,574,629

18 Post balance sheet events

There are no material events after the balance sheet date to disclose.

19 Related party transactions

All loans are made to members of the Credit Union and so there is no controlling shareholder. Thedirectors of the Credit Union may hold shares and loans in accordance with the provisions that apply toother members.

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