Capital Disclosures Under APS330 Capital Adequacy: Public Disclosure of Prudential Information, the following information is required to be disclosed on the Credit Union's website. In making the following disclosures, the post 1 January 2018 common disclosure template is being used because SCCU is fully applying the Basel III regulatory adjustments as implemented by APRA. As a financial institution, Southern Cross Credit Union must hold sufficient capital to support all material risks it is exposed to. In addition, it has capital plans in place to manage its position into the future. Common Disclosure Template Common Equity Tier 1 capital: instruments and reserves 1 Directly issued qualifying ordinary shares (and equivalent for mutuallyowned entities) capital 2 Retained earnings 3 Accumulated other comprehensive income (and other reserves) 4 Directly issued capital subject to phase out from CET1 (only applicable to mutuallyowned companies) 5 Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) 6 Common Equity Tier 1 capital before regulatory adjustments Common Equity Tier 1 capital: regulatory adjustments 7 Prudential valuation adjustments 8 Goodwill (net of related tax liability) 9 Other intangibles other than mortgage servicing rights (net of related tax liability) 10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) 11 Cashflow hedge reserve 12 Shortfall of provisions to expected losses 13 Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) 14 Gains and losses due to changes in own credit risk on fair valued liabilities 15 Defined benefit superannuation fund net assets 16 Investments in own shares (if not already netted off paid in capital on reported balance sheet) 17 Reciprocal crossholdings in common equity 18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 19 Significant investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) 20 Mortgage service rights (amount above 10% threshold) 21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) 22 Amount exceeding the 15% threshold 23 of which: significant investments in the ordinary shares of financial entities 24 of which: mortgage servicing rights 25 of which: deferred tax assets arising from temporary differences 26 National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) 26a of which: treasury shares 26b of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to purchase new ordinary shares issued by the ADI 26c of which: deferred fee income 26d of which: equity investments in financial institutions not reported in rows 18, 19 and 23 26e of which: deferred tax assets not reported in rows 10, 21 and 25 26f of which: capitalised expenses 26g of which: investments in commercial (nonfinancial) entities that are deducted under APRA prudential requirements 26h of which: covered bonds in excess of asset cover in pools 26i of which: undercapitalisation of a nonconsolidated subsidiary 26j of which: other national specific regulatory adjustments not reported in rows 26a to 26i 27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions 28 Total regulatory adjustments to Common Equity Tier 1 29 Common Equity Tier 1 Capital (CET1) As At 30 June 40,769 1,094 41,863 0 (1,539) (577) (636) (326) (1,539)
Additional Tier 1 Capital: instruments 30 Directly issued qualifying Additional Tier 1 instruments 31 of which: classified as equity under applicable accounting standards 32 of which: classified as liabilities under applicable accounting standards 33 Directly issued capital instruments subject to phase out from Additional Tier 1 34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1) 35 of which: instruments issued by subsidiaries subject to phase out 36 Additional Tier 1 Capital before regulatory adjustments Additional Tier 1 Capital: regulatory adjustments 37 Investments in own Additional Tier 1 instruments 38 Reciprocal crossholdings in Additional Tier 1 instruments 39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions) 41 National specific regulatory adjustments (sum of rows 41a, 41b and 41c) 41a of which: holdings of capital instruments in group members by other group members on behalf of third parties 41b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported in rows 39 and 40 41c of which: other national specific regulatory adjustments not reported in rows 41a and 41b 42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions 43 Total regulatory adjustments to Additional Tier 1 capital 44 Additional Tier 1 capital (AT1) 45 Tier 1 Capital (T1=CET1+AT1) Tier 2 Capital: instruments and provisions 46 Directly issued qualifying Tier 2 instruments 47 Directly issued capital instruments subject to phase out from Tier 2 48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group T2) 49 of which: instruments issued by subsidiaries subject to phase out 50 Provisions 51 Tier 2 Capital before regulatory adjustments Tier 2 Capital: regulatory adjustments 52 Investments in own Tier 2 instruments 53 Reciprocal crossholdings in Tier 2 instruments 54 Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 55 Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions 56 National specific regulatory adjustments (sum of rows 56a, 56b and 56c) 56a of which: holdings of capital instruments in group members by other group members on behalf of third parties 56b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in rows 54 and 55 56c of which: other national specific regulatory adjustments not reported in rows 56a and 56b 57 Total regulatory adjustments to Tier 2 capital 58 Tier 2 capital (T2) 59 Total capital (TC=T1+T2) 60 Total riskweighted assets based on APRA standards As At 30 June 42,206 191,687
Capital ratios and buffers 61 Common Equity Tier 1 (as a percentage of riskweighted assets) 62 Tier 1 (as a percentage of riskweighted assets) 63 Total capital (as a percentage of riskweighted assets) 64 Buffer requirement (minimum CET1 requirement of 4.5% plus capital conservation buffer of 2.5% plus any countercyclical buffer requirements expressed as a percentage of riskweighted assets) 65 of which: capital conservation buffer requirement 66 of which: ADIspecific countercyclical buffer requirements 67 of which: GSIB buffer requirement (not applicable) 68 Common Equity Tier 1 available to meet buffers (as a percentage of riskweighted assets) National minima (if different from Basel III) 69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 70 National Tier 1 minimum ratio (if different from Basel III minimum) 71 National total capital minimum ratio (if different from Basel III minimum) Amount below thresholds for deductions (not riskweighted) 72 Nonsignificant investments in the capital of other financial entities 73 Significant investments in the ordinary shares of financial entities 74 Mortgage servicing rights (net of related tax liability) 75 Deferred tax assets arising from temporary differences (net of related tax liability) Applicable caps on the inclusion of provisions in Tier 2 76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap) 77 Cap on inclusion of provisions in Tier 2 under standardised approach 78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratingsbased approach (prior to application of cap) 79 Cap for inclusion of provisions in Tier 2 under internal ratingsbased approach Regulatory Capital Reconciliation Common Equity Tier 1 capital before regulatory adjustments (Refer to Common Disclosure Template Item 6) Total regulatory adjustments to Common Equity Tier 1 (Refer to Common Disclosure Template Item 28) Common Equity Tier 1 Capital (CET1) (Refer to Common Disclosure Template Item 29) Additional Tier 1 Capital before regulatory adjustments (Refer to Common Disclosure Template Item 36) Total regulatory adjustments to Additional Tier 1 capital (Refer to Common Disclosure Template Item 43) Tier 1 Capital (T1=CET1+AT1) (Refer to Common Disclosure Template Item 45) Tier 2 Capital before regulatory adjustments (Refer to Common Disclosure Template Item 51) Total regulatory adjustments to Tier 2 capital (Refer to Common Disclosure Template Item 57) Tier 2 capital (T2) (Refer to Common Disclosure Template Item 58) Total capital (TC=T1+T2) (Refer to Common Disclosure Template Item 59) Adjustments to Regulatory Capital to Reconcile to Audited Financial Statements Available for Sale Investments Equity investments in ADI's (Refer to Common Disclosure Template Item 26 d) Deferred Tax Assets (Refer to Common Disclosure Template Item 26 e) 21.04% 21.04% 22.02% 7.00% 2.50% 0 10.54% 2,127 41,863 (1,539) 42,206 577 636 Intangible Assets (Refer to Common Disclosure Template Item 26 f) 193 Capitalised Expenses (Prepayments) (Refer to Common Disclosure Template Item 26 f) 131 Hedging reserve (183) Total Adjustments to Regulatory Capital to Reconcile to Audited Financial Statements Total Capital as per Audited Financial Statements at 30 June 2015 (Refer Balance sheet Below) ASSETS Cash and cash equivalents 9,265 Receivables from other financial institutions 61,333 Other receivables 548 Loans and advances to members 301,672 Available for sale investments (Refer to Common Disclosure Template Item 26 d) 577 Other assets (Refer to Common Disclosure Template Item 26 f) 131 Property, plant and equipment 1,539 Current tax assets 506 Deferred Tax Assets (Refer to Common Disclosure Template Item 26 e) 636 Intangible Assets (Refer to Common Disclosure Template Item 26 f) 193 TOTAL ASSETS 376,400 LIABILITIES Deposits from members Payables and other liabilities Derivatives Current tax liability Deferred tax liability Provisions TOTAL LIABILITIES NET ASSETS MEMBERS EQUITY Redeemed preference share capital (Refer to Common Disclosure Template Item 3) Capital reserve (Refer to Common Disclosure Template Item 3) Asset revaluation reserve (Refer to Common Disclosure Template Item 3) Hedging reserve General reserve for credit losses (Refer to Common Disclosure Template Item 50) Retained earnings (Refer to Common Disclosure Template Item 2) TOTAL MEMBERS EQUITY 1,354 43,560 327,029 5,126 261 424 332,840 43,560 349 229 514 (183) 1,883 40,768 43,560
Capital Adequacy Requirements for As At 30 Sep As At 30 Jun Credit Risk (in terms of risk weighted assets) Claims on other ADI's 13,081 13,903 Loans secured by residential mortgage 121,854 116,963 Other loan claims held in the banking book 35,278 37,065 All other claims 2,162 2,220 Total Credit Risk (risk weighted assets) 172,376 170,151 Market Risk Operational Risk 21,769 21,536 Total Risk Weighted Assets 194,144 191,687 Common Equity Tier 1 Capital Ratio 20.91% 21.04% Tier 1 Capital Ratio 20.91% 21.04% Total Capital Ratio 21.94% 22.02% Credit Risk Gross Credit Risk Impaired Past Due Specific Bad Debt Average Gross Total Gross Facilities Facilities Provision Writeoffs Exposure Exposure On Balance Sheet Claims on other ADI's 69,539 65,405 Loans secured by residential mortgage 356 53 269,010 281,781 Other loan claims held in the banking book 28 28 7 34,309 34,471 All Other Claims 3,207 2,920 Off Balance Sheet Loans approved not advanced 7,586 6,190 Redraw facilities available 30,103 31,234 Undrawn Credit Commitments 10,906 10,788 Interest rate contracts 235 261 Total Credit Risk 28 356 82 7 424,895 433,051 Gross Exposure by portfolio Other ADI's 69,539 65,405 Housing Loans 262,729 275,129 Overdrafts 529 525 Personal Loans 7,443 7,347 Commercial Loans 32,618 33,251 Total 372,858 381,658 General reserve for credit losses 2,002 Credit Risk As At 30 Sep As At 30 Jun Gross Credit Risk Impaired Past Due Specific Bad Debt Average Gross Total Gross Facilities Facilities Provision Writeoffs Exposure Exposure On Balance Sheet Claims on other ADI's 71,594 69,515 Loans secured by residential mortgage 606 45 261,827 267,414 Other loan claims held in the banking book 21 21 16 34,235 34,323 All Other Claims 3,331 3,168 Off Balance Sheet Loans approved not advanced 11,714 14,446 Redraw facilities available 29,514 30,057 Undrawn Credit Commitments 11,132 11,241 Interest rate contracts 235 261 Total Credit Risk 21 606 65 16 423,582 430,426 Gross Exposure by portfolio Other ADI's 71,594 69,515 Housing Loans 256,381 262,433 Overdrafts 546 559 Personal Loans 7,489 7,438 Commercial Loans 31,646 31,307 Total 367,655 371,253 General reserve for credit losses
Remuneration Disclosures Qualitative Disclosures The Credit Union s remuneration policies are in place to provide assurance that remuneration decisions: Are aligned to the Credit Union s strategy; Aid the attraction and retention of talent; Are marketrelevant and affordable; Are internally equitable, consistent and transparent; Encourage behaviour that supports Credit Union s long term financial soundness and risk management objectives; Ensure the independence of risk and control personnel in the performance of their functions is not compromised; Are compliant with corporate governance requirements. The Credit Union s Board Remuneration Committee makes recommendations to the Board on the remuneration policy and annual recommendations on the remuneration of the Chief Executive Officer, and the Direct Reports to the Chief Executive Officer. The Chief Executive Officer has the Board delegated discretion to oversee and approve the remuneration of all other Managers. The Board Remuneration Committee is comprised of all nonexecutive Directors of the Credit Union s board with a minimum of 3 members making a quorum. The functions of the Board Remuneration Committee include general governance matters and board remuneration committee functions which include: Conducting regular reviews and making recommendations to the Board on the Credit Union s Remuneration Policy. This must include an assessment of the Remuneration Policy s effectiveness and compliance with the requirements of Prudential Standard CPS 510 Governance; Making annual recommendations to the Board on the remuneration of Directors of the Board, the Chief Executive Officer, the Executive Managers and other persons whose activities may in the Board Remuneration Committee s opinion affect the financial soundness of the Credit Union; and Making annual recommendations to the Board on the remuneration of the categories of persons covered by the remuneration Policy (other than those persons for whom such recommendations are already required under the second dot point above). The Credit Union seeks advice directly from Remuneration Consultants in regard to marketbased remuneration and market movements for the Chief Executive Officer and other Direct Reports of the Chief Executive Officer. Benchmark Remuneration levels is sourced from Mcguirk Management Consultants for a number of Senior Managers. The information obtained from Mcguirk Management Consultants pertains to the Mutual Financial Services Sector and is based on the annual ADI salary survey in alliance with the Australian Mutuals Institute. All employees are covered by the Credit Union s Enterprise Agreement (EA). In addiiton, the Chief Executive Officer has a separate employment agreement. For the purposes of this remuneration disclosure, a Senior Manager includes: Chief Executive Officer All Executive Managers Manager Compliance and Audit Administration Manager Loans Manager Marketing Manager There are no other employees in the Credit Union considered as material risk takers.
Remuneration Disclosures continued The Credit Union has a set of remuneration bands for each level using the Financial Services Sector as a benchmark. QUANTITATIVE DISCLOSURES As At 30 June All employees are paid a fixed sum of remuneration within the designated remuneration band according to individual competence and performance. Typically, employees are paid between the minimum and midpoint of the remuneration band with the midpoint indicating an expected standard for a person who has the required level of knowledge, skills and experience to successfully meet the job requirements. Total Employment Cost is comprised of a fixed salary and superannuation payments only. In addition, some positions are provided a motor vehicle as a tool of trade. Other than the qualifying bonus under the Southern Cross Credit Union Enterprise Agreeement, there is no variable component to the remuneration of Senior Managers with the exception of the Chief Executive Officer. The Chief Executive Officer has a variable component differentiated by performance. Performance is then measured and reviewed on a regular basis against the objectives, which include financial and nonfinancial metrics. Remuneration is reviewed annually for all employees on the anniversary of their employment with the exception of the Chief Executive Officer and Executive Managers. The Chief Executive Officer and Executive Managers are reviewed annually to take effect on 1 July. The remuneration policies are reviewed annually by the Remuneration Committees and no material changes have been made in the current financial year. The remuneration of risk and compliance employees is determined through the job evaluation process. All remuneration movements are at the discretion of the Chief Executive Officer. Remuneration is a fixed Total Employment Cost with exception of the Chief Executive Officer who has a variable performance based component and there are no variables to consider when assessing remuneration risks. Annual salary increases are based on national economic indicators such as CPI, Wage Price Index and industry benchmarks for the Finance Sector and the SCCU Enterprise Agreement. A balanced scorecard of corporate level qualitative and quantitative indicators is used to assess business and individual performance. Senior Managers with the exception of the Chief Executive Officer are paid a fixed salary within the remuneration band for their position based on skills and knowledge, market considerations, retention and sustained performance. The Chief Executive Officer s total remuneration package includes a performance linked annual bonus. The determination of the performance bonus is a discretionary process based on various performance metrics including financial and nonfinancial metrics. Financial metrics include profitability ratios, growth targets and performance ratios. NonFinancial metrics includes a detailed peer qualitative assessment of the CEO by all Board members and other reports including succession planning. In determining the payout under any component of variable pay, the Credit Union adopts, as policy, the use of discretion to assess the extent to which performance has been achieved rather than applying a set target, by its nature, may encourage inappropriate or undue risk taking. The Credit Union does not provide for deferred remuneration. As a mutual institution, the Credit Union does not provide equity, or equity linked forms of remuneration. The Board Remuneration Committee met once during the year. The Board Remuneration Committee members do not receive any payment in addition to their remuneration as a Director of the Credit Union. Total Director Remuneration including all fees, allowances, superannuation paid during the 2014 financial year. The table below presents the number of employees who received variable remuneration, guaranteed bonuses, signon or severance payments during the financial year: Variable Remuneration, guaranteed bonuses, signon award and severance payment Variable remuneration discretionary bonus Guarantee bonuses Signon award Termination payments *** Total The Credit Union does not pay deferred remuneration and there are no deferred or retained remuneration exposures for employees. The table below presents total value of remuneration awards for senior staff: Total value of remuneration awards for the current financial year Unrestricted Fixed remuneration Cash based ^^ Shares and sharelinked instruments Other Variable remuneration Cash based Shares and sharelinked instruments Other Total $163,575 2015 No of Employees Total ($) 2 $502,736 2 $502,736 Deferred $922,924 0 $922,924 $0 ^^ Remuneration includes all payments made and accrued during the last financial year, including superannuation paid by the credit union, fringe benefits tax and legal entitlements to termination payments for accrued annual and long service leave. *** Includes termination and severance payments beyound the standard legal entitlements for accrued annual and long service leave.