SCU Board Pack August 2021 Financial Summary & Insights

SCU Board Pack 17 August 2021

CONTENTS Agenda Executive Summary Financials July Detailed PL Actual v Fcst July Summary PL July Balance Sheet July Key Ratios + Cashflow Operating costs Budget 2021/2022 Sales Plan Sales Pipeline Scorecard Customers People Operations Risk & Compliance Awayday - Q&A Structure & Actions

AGENDA 1. 2. 3. 4. 5. 6. Apologies & Minutes 17.00 Executive Summary 17.10 Financials 17.15 Sales & Marketing 17 .45 Risk & Compliance 17..55 Board Awayday Q & A 18.05

Executive Summary target, so year end projected loss less than forecast actions being taken CU) Memberships- 50 new members (34 Family Loan members) Loan performance- steady but behind target: Family Loans- 29% of loan value Payroll loans- 17% Monthly loan income higher than forecast NB Targets set Oct 2020 when Covid impact still unclear Finances- 4k profit for month; Year to date loss 39k ahead of Emerging Risk- national accusations about Family Loans, mitigating Marketing- recent activities and Message and Plan under review Opportunities- Potential HOST partnership at Media City Potential Director with Financial skills (formerly of Stockport

PROFIT & LOSS ACCOUNT ACTUAL BUDGET VARIANCE YTD TO 31.07.2021 INCOME Entrance fees Interest from members' loans Bank interest Bad debts recovered Grants Annual membership fees Ancillary service charges Other income THIS MONTH YTD THIS MONTH YTD THIS MONTH - - - - FINANCIALS: Profit & Loss 19,975.11 185,189.26 18,537.96 175,828.54 1,437.15 9,360.72 392.29 2,770.02 200.00 1,987.83 192.29 782.19 132.88 1,037.24 50.00 530.39 82.88 506.85 - 2,001.54 - 2,001.54 - - - 121.00 45.00 270.00 - 45.00 - 149.00 10.00 230.00 100.00 771.50 - 90.00 - 541.50 42.00 439.01 10.00 281.51 32.00 157.50 - - Total Income 20,552.28 191,788.07 18,942.96 181,671.31 1,609.32 10,116.76 - - EXPENDITURE Admin expenses Auditors remuneration Fidelity bond insurance Bad debt provision Bad debts written off Bank charges FSA fees - - 15,342.53 156,614.36 14,993.20 158,015.42 - 349.33 1,401.06 334.00 3,095.20 334.40 3,492.80 0.40 397.60 - 3,332.94 - 3,332.94 - - - 20,547.66 7,250.00 44,638.18 7,250.00 24,090.52 - 10,902.40 - 13,658.68 - 2,756.28 681.07 4,287.37 856.00 5,522.49 174.93 1,235.12 - 698.13 - 698.13 - - - - Total Expenditure PROFIT/LOSS BEFORE TAXATION 16,357.60 199,478.06 23,433.60 229,358.64 7,076.00 29,880.58 4,194.68 - 7,689.99 - 4,490.64 - 47,687.33 8,685.32 39,997.34 Taxation 74.54 564.09 38.00 354.05 - 36.54 - 210.04 - - PROFIT/LOSS AFTER TAX 4,120.14 - 8,254.08 - 4,528.64 - 48,041.38 8,648.78 39,787.30 5

Summary Profit & Loss JULY- 4k profit for month- budget: 4.5 loss Income higher: Loan interest 1,437 higher than forecast Expenditure lower: No Bad Debt provision for further month- 7k forecast Other costs & income in line with budget Year To Date: 8,254 loss- budget 48,041 Loan Interest 9,360 higher YTD than forecast BDP 24k lower than forecast Year End PROJECTIONS: Now projecting 8.5k loss 19.5k Grant to be released to achieve 11k surplus After 20% required transfer to Reserves- 8,800 remain ACTUAL BUDGET Variance THIS MONTH 1,609.32 THIS MONTH 18,942.96 THIS MONTH 20,552.28 YTD YTD YTD 10,116.76 PROFIT & LOSS Total Income 191,788.07 181,671.31 PROFIT/LOSS AFTER TAX 4,120.14 - 8,254.08 - 4,528.64 - 48,041.38 8,648.78 39,787.30 6

BALANCE SHEET 31/07/2021 ACTUAL Variance - 12,643.00 BUDGET Balance Sheet ASSETS Fixed Assets CURRENT ASSETS Investments - Banks+ Building Societies Secured members loans Unsecured members loans General provision for doubtful debts Specific provision for doubtful debts Due from other credit unions Cash and bank balances Other debtors Prepaid expenses 43.00 12,686.00 - - 1,517,944.82 462,034.02 790,890.76 1,417,145.22 392,523.90 995,831.07 100,799.60 69,510.12 -204,940.31 - - - - 261,503.93 - 285,594.45 24,090.52 IT kit not yet purchased - - - 798,962.75 325.80 2,788.60 708,292.06 982.76 1,206.01 90,670.69 656.96 1,582.59 - Loan book smaller than forecast- projections made Oc.2020 Total Assets 3,311,485.82 3,243,072.57 68,413.25 LIABILITIES Juvenile deposits Grants Other creditors and accruals Corporation tax Other liabilities: DWP etc. 118,601.50 53,325.22 24,037.47 553.79 121,777.85 53,325.22 26,921.19 354.05 3,176.35 - 2,883.72 199.74 - - - - Total Liabilities 196,517.98 202,378.31 5,860.33 Overall reserves higher than forecast due to BDP lower than forecast resulting in higher profit NET ASSETS 3,114,967.84 3,040,694.26 74,273.58 CREDIT UNION CAPITAL & RESERVES General reserve Other reserves 135,880.39 45,745.92 181,885.35 41,196.53 - 46,004.96 86,942.45 - Total Capital Members' share balances 181,626.31 2,933,341.53 140,688.82 2,900,005.11 40,937.49 33,336.42 7 TOTAL CAPITAL AND SHARE BALANCES 3,114,967.84 3,040,693.93 74,273.91

Regulatory Ratios & Cash flow majority of cash flow: deposits and repayments sufficient to meet withdrawal and loan requirements Capital Asset Ratio maintained above 5% threshold:: 5.48% Liquidity maintained above 10% miniimum:- 32.33% Movement on members loans and shares comprises MOVEMENTS ON MEMBERS ACCOUNTS 31/07/2021ACTUAL THIS MONTH 3,070,013.43 514,932.24 533,002.64 - - 3,051,943.03 BUDGET YTD THIS MONTH 3,017,210.12 534,407.04 529,834.19 YTD SHARE ACCOUNTS START BAL. DEPOSITS WITHDRAWALS DIVIDEND FEES CHARGED END BALANCE 2,822,813.86 4,665,945.62 4,436,816.45 + - 4,715,158.00 4,516,189.00 - - - - - - 3,051,943.03 3,021,782.96 LOAN ACCOUNTS START BAL. GRANTED REPAYMENTS INTEREST WRITTEN OFF FEES CHARGED END BALANCE 1,249,681.13 82,879.00 99,566.48 19,975.11 + + - + 1,181,235.03 830,100.00 941,546.74 185,189.26 10,902.40 1,344,891.23 120,000.00 95,030.04 18,537.96 945,805.00 914,469.40 175,828.52 13,658.68 - - - - - - 1,252,968.76 1,252,968.76 1,388,399.15

Salford Credit Union Balanced Scorecard- VERSION 1.0 Family Loans: New loans behind target; reviewing product & engagement All loans: Below target of 2814 loans & 921k lent. Preapproved loans campaign planned Loan Balance Increased against previous year for 4 consecutive months Rate of Return Interest on loan book increasing 9

Order Book, Conversersion Rate and Targets Loans approved so far in August: 109, 32,735 lent Loans Pending decision: 11 Applications Awaiting Further Documentation Total 11,575 to be Drawndown if Approved (as at 13thAugust) Approval rate for July- 70.58% (67.12% at July 2020) Loan Targets- (set October 2020) August September Target Std Loans Needed to Reach Target Family Loans Needed to Reach Target Family Loan Top Ups to Reach Target Total Loans Required 135 50 60 245 110 50 60 220 1,425 570 380 2,375 Std Loans Monthly 's Target Family Loans Monthly s Target Total s Lent Required 84,000 32,000 116,000 72,000 32,000 104,000 Annual 800,000 Annual 332,000 Annual 1,132,000 Loan Book 2020/21 August September Projected Loan Income 19,155 19,704 210,256 10

2021/2022 Budget- Planning Assumptions INCOME Loan interest increase 2% / month Bank interest- maintain current level Remaining 25k grant to be released EXPENDITURE Fixed costs can be projected Admin costs will increase as volume of loans increase- eg ID checks, credit checks etc; project 2%/month increase Insurance costs increase annually, assuming 10% increase Bad Debt provisioning- 3.5k / month BALANCE SHEET New IT kit will increase assets Transfer investments to higher interest account Loan book increase by 0.75% / month Liabilities remain consistent Recommend- Approve Planning Assumptions 11

Sales Plan repeat 19/08/2021 to monitor impact developing Money management videos compliance loans being developed- roll out August/September Newspaper Ad in Salford Weekly Paper 12/08/2021 with Salford City Radio- DWB & AM interview 10/08/2021 Additional campaign categories added to Application forms Social media continuing- new Marketing volunteer Family Loan marketing plan being reviewed to ensure Pre-approved loans campaign for existing members without

Sales Pipeline Marketing Plan being reviewed Will confirm activities, outcomes and timescales Opportunity with HOST at Media City being explored Loans for local entrpreneurs engaged with HOST Payroll product and process being reviewed to enable campaign next Quarter Unite/Unison, and NHS highlighted as key payroll audiences Councillors & MPs to be engaged when Message confirmed Current volunteers keen to support future events, including at Gateways once programme developed Input into Black History Month- October CU4FM consortium- promoting Month of Awareness: (rather than week):: October. International CU Day 21/10/2021 SCC donating Salford Arch Advert over M602 to CU4GM for 2 weeks in October Opportunities for local PR activities 13

People & Operations Staff Annual Leave impacting on capacity but all staff being productive Muntazir Shah succefully completed Probationary period Malcolm Cotton s hours increased from 5 to 6 hours/day to respond to additional Family Loan demand: backlog of work being cleared New IT kit and migration to Microsoft 365 planned for September Co Op Financial Direct migration on hold until current glitches sorted with earlier phases of CUs moved across Alternative postal solution being explored 14

Risk & Compliance Risks evaluated as HIGH on Risk Register, mitigating actions in place. Risk register being reviewed Corporate governance Strategic and annual plans not reviewed to reflect changes CU operations not checked to meet strategic plans SCC Finance advisor- in discussion Potential former Stockport CU Director to be contacted The internal audit program is not based on an effective documented audit plan Director capacity and engagement not sufficient for business, particularly around finance matters Lending Activities Unsecured or under-secured lending represent material amounts on the balance sheet Emergency & external risk Covid-19 & Brexit impacting negatively on wider economy General Administration Controls The volume of work is not measured and the right number of staff is not determined Current additional Risks highlighted Covid-19 Loss of Universal Credit Uplift- impacting members affordability Co Op Bank change Microsoft 365 change Family Loan- financial & reputational risk due to some Debt Advisors challenges and possible compensation claims COMPLIANCE: SCU remains compliant with key ratios and other components of agreed Compliance Table 15

Member Support & Satisfaction turnaround times from typically 3 weeks to 8 days same day carried out Revised process for Family loan introduced June- cut Change to Child Benefit Marketing Plan under review Family loan top ups now processed same day 101 in July Existing member loans less than 500 usually processed Phone lines open 10-12 Answerphone, email/portal queries responded to same day Further analysis of members using collection points to be Great service as always!, thanks very much J Recent member feedback

Delivering the change Key Actions logged Lead Directors identified New approach to progress reporting will be established Growth and improvements to be delivered THE FUTURE: SCU helping more people become more financially resilient Effective & sustainable organisation BOARD AWAYDAY 22/7/2021 Q&A 17

Salford Credit Union Organisation Chart Adopted at 22.07.21 Awayday Members Auditor Lindley Adams Ltd Board (Governing Body) Audit & Risk Sub Committee Directors-HM (Chair), AM Member advisors- Current Supervisory Members Existing Directors + 2 new: Finance & Marketing Marketing Sub Committee Directors-MC(Chair), WN, AM, JY & Member advisors Finance Sub Committee Directors-Treasurer (AM), CEO SCC Advisor P Hart- Advisor Member advisor Staff -CEO -COO & Staff Volunteers Sub Committee Directors-KB (Chair) & Member advisors-TBC existing volunteers Talent Search Sub Committee -Nominations, -Equality & Diversity Directors-MC, KB, AM, WN 18

Actions identified and allocated No. Priority Action Resolve Date 01-Aug 01-Sep 01-Sep 01-Sep 01-Sep 01-Sep 01-Sep 01-Sep 30-Sep 01-Oct 01-Oct 01-Oct 01-Oct 01-Dec 01-Sep 30-Sep 30-Nov 01-Sep 01-Sep 31-Aug 01-Sep 01-Aug 01-Aug 01-Sep 30-Sep 01-Sep 12-Aug 01-Oct 01-Sep 01-Sep Assigned to Miranda Alec Alec Sheila Alec Jack Miranda Miranda Wilson Miranda Sheila Alec Alec Miranda Sheila Sheila David Sheila Sheila David Leads Alec Sheila Sheila Alec Alec David & Board Sheila DWB &SM RAG Status 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 C H H H H H H H H M M M M L M H M H H H H C M M M M C M H M Define Marketing Message Promote loans & services to Unite Members Promote loans & services to Unison Members Promote loans & services to NHS partners Get Article in Salford Weekly paper Ask Councillors and MPs to promote CU services Develop 'local' campaign & images Develop 12m Campaign programme Promote SCU as part of Black History Month activities (Oct) Develop & implement Leaflet distribution strategy Get SCU info on Partners' websites Identify local opportunities for PR and engagement Develop PR Activities with Salford FC Develop campaign for Media City workers after products reviewed Monitor revenue generated via different campaigns Review break even costs for business and individual loan types Operating Platfom Evaluation Bring Forward Audit timescale Bring Forward AGM timescale New Committee structure- document ToR and roles Set up new Sub Committees Co opt Finance advisor from SCC Co opt external Finance advisor Invite interested member with Finance skills to join Committee Set up Friends of Salford CU Charity Develop Scheme of Delegation SMF Responsibilitites- review and progress FCA applications Succession planning- develop approach Redraft Business Plan to incorporate Awayday commitments Update Reporting practice for Board 19

THANK YOU! Any questions? You can find me at: Sheila.Murtagh@salfordcre ditunion.com 20