MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF HUNTER UNITED EMPLOYEES CREDIT UNION LIMITED HELD AT HUNTER UNITED EMPLOYEES CREDIT UNION LTD, 130 LAMBTON ROAD, BROADMEADOW ON THE 4 th JUNE 2012 DATE: 4 th June 2012 PRESENT: APOLOGIES: CHAIRMAN: DECLARATIONS OF INTEREST: MINUTES: MATTERS ARISING FROM THE MINUTES: Ms S Howes, Ms M Kneale, Messrs J Ford, B Pickering, K Dwyer (Company Secretary) and Mr M Hedges and Ms S Liew (by teleconference). Ms J Gardner and Mr A Smyth Mr B Pickering Meeting declared open 6.15pm. J Ford advised he had received a small gift (cuff links) and had accommodation and meals provided while attending the EFTPOS shareholders conference in Sydney. HUECU is both an issuer of EFTPOS (Cuecard) and scheme debit (Visa) cards. Mr B Pickering asked for an update on the IAS sale proposed by Indue. Mr J Ford advised as RITC s were now unaffected the principle driver for selling had now been removed. The minutes of 2nd May 2012 were signed as true and correct. Mr J Ford advised the power of attorney was finalised and the Board agreed to execute the document. The agreed actions were reviewed and noted. CORRESPONDENCE: Inward Member Jane Bray Australian Govt Treasury Employee Commendation (& response) Government Guaranteed Deposits Seal Media Release NSW Police Force Bank employee charged over $665,000 fraud - Forster 1
IMB Indue Standard & Poors ASIC Outward Gary Eggert CUFSS Wilga Starkey Email to Directors Email to Directors Don Kumaraperu ASIC Capital Review Indue Investor Briefing Genworth Ratings Licence Variation Decline invitation to join Membership termination Staff Fraud Update (including attachments) Draft Merger offer (including email response) Licence Variation MATTERS ARISING FROM THE CORRESPONDENCE: Ms M Kneale asked about the progress on the Wyong Credit Union card and Mr J Ford provided a brief update. Wyong is seeking member approval for a name change before proceeding with the card launch. Mr B Pickering noted the member correspondence complimenting employee Letty McRae. Mr B Pickering asked that the Board s congratulations be passed on to Ms McRae. Mr J Ford provided the Board with feedback on the ASIC AFS Licence variation process noting that the variation request triggered a full review of the licence back to the original application in 2004. A copy of the draft AFSL Licence was included in the Board pack. OPERATING PERFORMANCE: Ms S Howes entered the meeting at 6.25pm. Managing Director s Report The Managing Director s report was tabled and discussed. Mr J Ford detailed the highlights for the month of April 2012 including; Positives April profit of $73k vs budget of $50k (145% achievement) $266k in credit card approvals (373% of budget) Strong lead referral numbers (57) from Solar Newcastle 2
Continued high HQLA of 20.52% as at 30th April Negatives Reduced credit system growth as households deleverage Limited progress in the EA negotiations Margin compression: Reduction in lending rates are not being fully reflected in competitor deposit rates Mr J Ford spoke about the fixed term deposit option for RSA s and how it was an appealing product in today s market conditions. The relationship with Solar Newcastle continues to grow with 82 leads in May. The teething issues with the Nova credit card are now resolved and Nova will now commence actively promoting the card to its membership. The lease for the Green Hills branch has been renewed for a further 3 years and will continue to perform a pivotal role in the Credit Union s business continuity plan. Mr J Ford spoke about the Credit Union s constitution and advised the Board to consider any changes that may be required as the strategic review evolves. Mr J Ford advised the Board that the Credit Union is positioned to achieve a record year in principle and interest loan advances. The Board discussed arrears performance and Mr M Hedges asked about the 4 mortgage loans now beyond 90 days. Mr J Ford advised all were currently making payments. Ms S Howes requested details on how recent the valuations were with respect to the mortgage loans in arrears. Mr B Pickering noted the update on expired home loan policies. Mr J Ford stated that the 185 represented approximately 15% of all policies and that going forward the Credit Union would concentrate on following up on those expired policies where the LVR exceeded 50%. The Board would be kept informed on the progress against the 185 policies still outstanding. The Managing Director s report was accepted. Finance and Statistical Report The Finance and Statistical Report for the month of April 2012 was tabled. 3
Ms S Howes asked if the reduction in commission income was a trend. Mr K Dwyer advised that it was seasonal. Ms M Kneale noted the reduction in advertising expenditure. Mr J Ford stated that this was due to the Marketing Manager currently performing two roles and there were no plans to make up the reduced spend in the coming months. Ms S Liew asked about the Credit Union s competitiveness on rates. Mr J Ford advised that the Credit Union s current suite of product pricing was competitive and is reviewed regularly. The Finance and Statistical Report was accepted. Monthly Credit Activity Report The Monthly Credit Activity Report was tabled and discussed. The Monthly Credit Activity Report and was accepted. Liquidity Report The monthly liquidity report was tabled and included an update on the FTD retention and RSA and Super Choice portfolio. The monthly liquidity reports were accepted. RSA Service Levels Financial Synergy s service level results for April were tabled and accepted. GOVERNANCE ISSUES: Audit Committee Ms M Kneale advised that the Committee met with the external auditors, PricewaterhouseCoopers, without management present. The audit plan was discussed in addition to emerging issues and specifically Basel III. The Internal Audit report with management responses was tabled and reviewed. The Internal Auditor will be invited to attend the next Committee meeting on the 27th June 2012. 4
The compliance reports were tabled and generally reflected a good result across branch audits, cash counts and staff transacting on their own accounts. Merger & Acquisitions Committee No meeting scheduled. See Strategic Issues Nova Credit Union. Nominations and Remuneration Committee Ms S Howes advised the revised charter had been circulated for comment and as there were no additional changes the Committee recommended the Board adopt the revised version. The Board considered and accepted the revised charter. Risk Committee Mr M Hedges advised the Committee met by teleconference on the 4th June 2012 at 12.30pm. The Committee acknowledged that the review of all 207 risks had been completed before the 30 June 2012 and thanked Management for their efforts. Mr M Hedges noted that there were 3 high rated risks, after the review, and recommended that the Committee continue to focus on these while raising the Board s understanding by regularly including them on the Board agenda for discussion. STRATEGIC ISSUES: The Committee reviewed changes to the Market Risk Policy and the Arrears and Collections Policy and recommended they be adopted by the Board. The Board considered and approved the changes to the Market Risk and Arrears and Collections Policies. Life in the Slow Lane Dr John Laker The Board noted and discussed the issues raised in Dr J Laker s speech to the American Chamber of Commerce. Strategy Workshop Summary Notes The workshop summary notes were tabled and the Board agreed the 5 concept ideas are to investigated and brought back to the Board for discussion. 5
Strategy Options Concept Ideas Shift to wholesale Retail transformation (increase online appeal) Superannuation niche play Become first local bank Sell business Nova Credit Union Mr B Pickering advised a formal merger offer had been prepared and forwarded to Nova Credit Union (copy in correspondence). Mr B Pickering had spoken to the Chairman of Nova Credit Union prior to submitting the offer and was advised that it would be discussed at the next Nova Board meeting in June. Mr B Pickering advised the Board that he had again been contacted by the CEO of Maitland Mutual Building Society (MMBS). Mr B Pickering made it clear that any further discussion would be conducted on a Chairman to Chairman basis and this facilitated follow up contact from MMBS s Chairman Mr John Lane. Mr B Pickering and Mr Lane agreed we were at different stages in our strategic planning and that the Board of the Credit Union would not take further action in the absence of any formal proposal. Mr J Ford tabled a report on a review of IMB Ltd s capital structure for the Board s information. Basel III Update The ABACUS update on its recent lobbying activities was noted. The Board also noted Dr John Laker s confirmation that APRA s timetable for the implementation of Basel III recommendations would not change. OTHER BUSINESS: Everingham Loan Approval Mr M Hedges asked for a breakdown on the individual values for home improvements and travel proposed in the application. Mr M Hedges asked for the date of the most recent valuation to gauge the accuracy of the 78% LVR calculation. Mr J Ford advised that it was relatively recent. 6
The Board gave approval to proceed with the application subject to the condition that the travel component did not exceed 30% of the loan. Staff Fraud Update Mr J Ford advised that an update had been provided to both the Audit and Risk Committees and also referred to correspondence included in the Board papers. Mr K Dwyer and Mr G Ferris have met with member 26275 and confirmed the loss on this account of $12,800. A further $2,500 has been identified on member 17164 capping the loss at $15,300. A confession has been received from the employee and no other member of staff has been identified as having any involvement. The loans investigation conducted by the Manager Credit and Internal Auditor did not identify any fraud issues. Mr J Ford spoke about the learnings from the investigation and listed some of the potential controls to be implemented. Centralisation of complaint handling Regular audit of recording devices Annual police and Veda checks Retention of vouchers/documents in branch Loan redraws approved by 2 staff Replace vouchers with card and pin for withdrawals Staff not to attend work while on leave Indue Contract Extension Recommendation Mr J Ford spoke to the Board about the various options available and the potential savings under each option. The Board considered and approved option 1 to extend the transaction settlement services contract, with Indue, up to the 30 June 2016. AFS Licence Variation Update See matters arising from correspondence. Mr J Ford spoke to the Board about ASIC providing fast tracking for a Carbon Trading Licence with an application fee of $35. The Board gave approval for the Managing Director to proceed with an application. CORPORATE CALENDAR: The Board Calendar was reviewed for May 2012. 7
NEXT BOARD MEETING: 27th June 2012 and 26th July 2012 at 6.00pm. Meeting closed 8.15pm. Dated 2011 Chairman Summary of Agreed Actions Tasks Who Due By Status Provide details of harmonisation issues with respect to the Workplace Health & Safety legislation Provide the Board with a list of existing and proposed delegations for a DoA Provide details on valuations for the 4 mortgage loans currently 90 days in arrears EMP& O MC Jul 12 Board Meeting MD 30 June 2012 Jun 12 Board Meeting 8