CU remains ‘in strong financial position’ – Isdell
Despite the uncertainty of 2020, Mullingar Credit Union “remains in a strong financial position”, and that is one of the most important messages the directors want members to hear.
Among the challenges caused by the Covid-19 pandemic is the fact that a normal AGM, when the credit union would update members on progress, is not possible for 2020.
In order to keep members informed on the financial results and position of the credit union, the board of directors has made available a Members Update Report, which includes the audited Financial Statements for the financial year ended 30 September 2020.
In a statement to members, the chairperson, Paul Isdell, provides an update on the financial position of the credit union and sets out the position on holding the AGM, which is now expected to take place in the new year following proposed amendments to credit union legislation.
Mr Isdell said the government has indicated that a necessary change in legislation is considered a priority for enactment before the end of 2020, but that cannot be guaranteed.
The report for members will be available in all five Mullingar Credit Union offices and on its website.
Mr Isdell said the full Annual Report including notice of the AGM will be published in the normal manner as soon as legislation allows.
He reassured members that Mullingar Credit Union remains in a strong financial position despite the challenges and disruption to normal activity brought about by Covid-19. The credit union is reporting a surplus of €1.5m for the financial year, which is considered satisfactory in the prevailing conditions.
“Similar to many other businesses, we are experiencing challenges in our operations,” said Mr Isdell. “In particular we are seeing a significant build-up in savings, a subdued demand for lending and a very low return investment environment.”
He said that in light of the uncertainty created by Covid-19, the Central Bank of Ireland has advised credit unions in the Republic of Ireland that they should not pay a dividend or interest rebate to members this year. Mullingar Credit Union will be adhering to this advice.
Mr Isdell concluded his statement by saying “In the early stages of the pandemic, the government listed credit unions as an essential service and requested that as far as possible they continue to provide services to their members.
“I am pleased to say that all of the Mullingar Credit Union offices have remained open and available to our members throughout and I would like to thank our members, staff, directors, board oversight and other committees for the manner in which they have worked together during this period.”
Main points from directors’ report
• The Credit Union generated a surplus for year ended September of €1.5m.
• Total income for the year increased from €7.4m in 2019 to €8.5m in 2020. Income from loans to members increased by €932,000 in line with the increased level of loans outstanding.
• The transfer of the former Longford CU to Mullingar CU in January 2020 resulted in a significant increase in balance sheet assets and liabilities.
• Income from investments increased by €203,000. However, returns on investment are extremely low at the moment as negative rates are being imposed by some institutions, particularly for short-term liquid funds. This trend of lower investment returns is expected to continue for the foreseeable future.
• Total expenditure increased from €5.1m in 2019 to €6.9m in 2020.
• Bad and doubtful debts written off increased from €407,000 in 2019 to €431,000 in 2020.
• Recoveries from previously written off loans amounted to €438,000 during the year.
• There was an increase in the provision for doubtful debts of €1,023,000 in the current year compared to a credit of €106,000 in 2019, reflecting increased provisions for loan losses that may arise as a result of members suffering loss of earnings as a consequence of Covid–19.
• Staff related costs increased by €213,000 and other management expenses increased by €446,000; these increases include the operational costs of running the Longford branch office from February 2020.
• A significant part of the other management expenses is the cost of insuring member savings and loans. This year the cost of this insurance was €778,000, an increase of €232,000 from 2019. This is due to covering the increased savings and loans values.
• In line with Central Bank instructions, no dividend or interest rebate is to be paid this year. This instruction applies to all credit institutions, including credit unions.
• Overall, assets increased by almost €89m, of which €50m arose from the Longford CU transfer. This build-up of assets is putting severe pressure on the credit union as we need to provide 10% of this, as a minimum, to Regulatory Reserves immediately and on an ongoing basis. Currently we are not generating a sufficient level of surplus for this purpose.
• Overall savings increased by close to €81m, of which €43.5m arose from the transfer of Longford CU.
• Loans to members increased during the year by €11.2m. Loans transferred from the former Longford CU amounted to €12.6m. Excluding the Longford CU transfer, outstanding loans to members fell by €1.4m reflecting a subdued demand for loans during 2020, particularly in the early stages of Covid–19.
• Balances held in cash, accounts with Central Bank, bank deposits and other investments increased by €79m, €36m of the increase arising from the transfer of the former Longford CU investments and the remaining €43m reflecting the increased levels of savings in the credit union during the year.
• The provision for doubtful debts increased to €4.9m from €3.3m at the end of 2019.
• Total reserves increased by €7.4m to €51.3m, €6.6m of which resulted from the Longford CU transfer of engagements.
The directors are conscious of the uncertainties caused by Covid–19, but are confident that the sound financial position of Mullingar CU will be maintained.
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