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Benchmarking

Survey

RONAN KILBANE, AUDIT PARTNER

9th May 2018

Benchmarking 2018- Survey Context

> 8th Annual Benchmarking survey

> Responses from over 45 Credit Unions

> Sample of Credit Unions represented €2.856B or 17% of total asset size

of Credit Union movement in the State

> Certain financial data: Results for 30 September 2017 from annual

reports

> Contributions from CU’s ranging in size from under €40m to €300m +

> Mix of Community based and industrial Credit Unions

Highlights: Key Survey Findings

> Loan Book Growth

> Still concerns over viability for certain CU’s

> HR- Continuing area of challenge

> Members shares continuing to grow more than expected

> Marketing/Business development?

> Board effectiveness?

Financials

Gross Loan Book as a % of Assets

0%

5%

10%

15%

20%

25%

30%

35%

2017

2016

2015

27%30%

30%

Financials - Investment Performance

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2017 2016 2015

2.15%2.78%

3.46%

Return on Investment - % of Total Investment

Loan Repayment Ratio

33.18% 31.81%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2017 2016

Industrial Community

Average Loan Repayment Ratio 31% 33%

Highest Repayment Ratio 35% 40%

Lowest Loan Repayment Ratio 27% 24%

Findings from our survey

Average Interest Rate on Loans

Findings from our survey

2017 2016

Average Interest Rate 8.4% 8.8%

Highest Average Interest Rate 11.3% 13.4%

Lowest Average Interest Rate 5.4% 4.6%

Dividends

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2017 2016 2015

100% 100%

84%

0% 0%

16%

Did your CU pay a Dividend?

Yes

No

Financials- Dividend Rates

60.0%16.7%

13.3%

6.7%3.3%

0 - 0.125% 0.125 - 0.25% 0.25 - 0.5%

0.5 - 0.75% 0.75 - 1%

20162017

14%

9%23%

18%

36%

Range of Dividends Paid

Wages % of Income

27% 24%19% 21%

0%

5%

10%

15%

20%

25%

30%

2017 2016 2015 2014

Findings from our survey

Industrial Community

Average Wages/Income ratio 22% 29%

Highest Wages/Income ratio 32% 45%

Lowest Wages/Income ratio 13% 20%

Survey KPI’s

Ind Comm

Average

Reserve Ratio 17% 16%

Expense to Income

Ratio61% 65%

Bad Debt Provision as

a % of the Loan Book3% 6%

Ind Comm

Highest

21% 26%

80% 93%

9% 18%

Ind Comm

Lowest

13% 13%

40% 32%

1% 1%

Ind = Industrial Credit Unions

Comm = Community Credit Unions

Loan Book

Survey KPI’s

Lowest

Ind Comm

Loans Issued Growth (6%) (5%)

Loan Book Growth 1% (10%)

Ind = Industrial Credit Unions

Comm = Community Credit Unions

Average

Ind Comm

12% 10%

7% 13%

Highest

Ind Comm

27% 41%

21% 21%

67.6%

32.4%

Loan Book growth more or less than expected in 2017

More Less

Findings from our survey

> In terms of growing the loan book, only

35.1% of participants scored

themselves as ‘Doing Enough’

> 21.6% of participants feel they are ‘Not

Doing Enough’ to grow the loan book

Loan Book Growth

What is fastest growing loan type?

Top 6 fastest growing loan types were noted as follows:

1. Home improvement – 34%

2. Car– 28%

3. Special Rate Loans – 13%

4. Covered loans– 11%

5. Mortgages- 6%

6. Agri loans – 4%

Regulatory Compliance

Obstacles to embedding these

functions noted from Credit Unions

> Regulatory Changes

> Time and Resources

> Skills Knowledge and Training

Regulatory Compliance

How are your regulatory functions resourced?

Function In-house Outsourced

Internal Audit 0% 100%

Risk Management 58% 42%

Compliance 67% 33%

Data Protection 64% 36%

Top Risks Noted from Credit Unions

23%

17%

14%

11%

8% 7%5%

0%

5%

10%

15%

20%

25%

Loan Book Growth

Data Protection / GDPR

IT & Cyber Security

Strategy Implementation

Succession Planning / Key PersonDependencyAML

Robust & Detailed Marketing Plan

Member Shares

Percentage Increase in Member Shares

8%15%

54%

15%8%

0-2%

2-5%

5-10%

>10%

Decrease

Cap on Shares

71.1%28.9%

Introduction of a Cap

Yes No

22.2%77.8%

Strategy to match long term lending with long term shares

Yes No

Levels shares are capped at

42.2%

11.1%6.7%

8.9%

31.1%Up to 40k

40k - 50k

50k - 60k

60k - 90k

90k - 99k

Below is a breakdown of our survey results:

Human Resources

Does your Credit Union intend to increase wages in next 12 months

49% 51%

Yes No

2017

39% 61%

2016

Credit Unions that have Restructured their Teams in the last 12 months

51%58%

48%49%42%

52%

0%

10%

20%

30%

40%

50%

60%

70%

2018 2017 2016

Yes

No

Top HR priorities as noted from respondents

0%

5%

10%

15%

20%

25%

30%

27%23%

15% 13%11%

11%

Biggest obstacles in embedding HR framework

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Overall HRExpertise Employee

Engagement ManagementAvailability Management

Skills &Knowledge

50%44%

43%26%

Credit Union Mergers

In the process of completion of a Merger

51%

51%54%

49% 49% 46%

0%

10%

20%

30%

40%

50%

60%

2018 2017 2016

Yes

No

0%

10%

20%

30%

40%

50%

60%

2018 2017

54%

44%

15%18%

13%

23%

10%13%

8%

3%

Stay as we are but open toapproaches

None

Actively seeking a merger

Integrate / completemergers already inprogress

Other

CU’s merger plans for the next 3 years

Biggest challenges in implementing merger

0.01.0

2.03.0

4.05.0

Board consensus

IT integration

Resources to handle the project

Merger integration

Increased profitability

HR integration

Diversion from normal business

2.6

2.7

3.0

3.0

3.3

3.4

3.5

Least Challenging: 1Most Challenging: 5

Strategy

Are there any concerns about viability over the life of the strategic plan?

36% 64%

Yes No

2017

31%69%

2016

Strategic Planning Day

67% 33%

2018 -Day taken to Review and Update the Strategic Plan

Yes No

59%41%

2017 -Day taken to Review and Update the Strategic Plan

Effectiveness of Board

How effective is your Board?

> Just over half of our sample felt their board was only 50% - 75% effective

> 38% felt the effectiveness of their Board was between 75%- 100% effective

> 11% felt Board effectiveness rate was between 25% - 50%

> Above results were a deterioration of perception of effectiveness of Boards compared

to prior year

Marketing

Do you have a specific and separate Marketing/Business Development Function?

65%35%

Yes No

20172016

54% 46%

Marketing Budget as a % of Total Income

51%41%

8%

0 - 2% 3 - 5% > 5%

2018

6%

61%

33%

2017

70%30%

Respondents with a Strategic Marketing Plan for growing the loan book

Yes No

Marketing & Business Development

How effective is your Marketing Business Development function?

> Only 14% of respondents felt the function was 75%- 100% effective

> 46% felt the function was between 50%-75% effective

> 35% felt the function was only between 25% and 50% effective

> Room for improvement

49% 51%

Yes No

2018

Has your Credit Union collaborated with

Other CU's on Innovative Products

54%46%

2017

Effectiveness of Initiatives undertaken to grow the Loan Book

0.0 0.5 1.0 1.5 2.02.5

3.03.5

4.0

Sponsorship

Targeted circulars to members

Print advertising of specific loanpackage offers

Brochures / flyers

Dedicated staff member(s) toloan book growth

Print media, advertising of theCredit Union generally

Social media

Special purpose loans e.g.insurance, home heating,…

2.8

2.9

3.0

3.1

3.1

3.1

3.4

3.6

Most Effective: 5Least Effective: 1

Summary & Conclusion

HR

HR effectiveness review? Is right structure in place to deliver strategic objectives?

Marketing/Business Dev

Are appropriate resources being spent on growing the loan book?

Viability

Is sufficient time being devoted to monitoring of Strategic plan, planning for the future,

exploring potential merger opportunities?

Board effectiveness

Are Board focussing on Non exec role? Are Nominations Committee functioning well and

Board getting appropriate training to increase effectiveness?

Regulatory Compliance

What is blocking embeddedness- Skills? Expertise? Resources? Outsourcing considered

@RBK

@RBKCA

@RBK

www.rbk.ie

Thank you

Disclaimer

While every effort has been made to ensure the accuracy of information within this publication is correct at the time of going to print, Russell Brennan Keane do not accept any responsibility for any errors, omissions or misinformation whatsoever in this publication and shall have no liability whatsoever. The information contained in this publication is not intended to be an advice on any particular matter. No reader should act on the basis of any matter contained in this publication without appropriate professional advice.

Ronan Kilbane

Audit Partner

RBK

T: +353 (01) 6440100

E: rkilbane@rbk.ie