Financial Statement of - National Workers Co-Operative

Financial Statement of NATIONAL WORKERS CO-OPERATIVE CREDIT

UNION LIMITED

December 31, 2019

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Financial Statements December 31, 2019 C O N T E N T S

Page

Independent Auditors’ Report 1 – 3

Statement of Financial Position 4

Statement of Profit or Loss and Other Comprehensive Income 5

Statement of Changes in Members’ Equity 6

Statement of Cash Flows 7

Notes to Financial Statements 8 – 40

Independent Auditors’ Report on Supplementary Information 41

Statement of Profit or Loss – Nassau, Head Office 42

Statement of Operating Expenses – Nassau, Head Office 43 – 44

Statement of Profit or Loss – Freeport Branch 45

Statement of Operating Expenses – Freeport Branch 46 – 47

Statement of Profit or Loss – Andros Branch 48

Statement of Operating Expenses – Andros Branch 49 – 50

Statement of Profit or Loss – Berry Islands Branch 51

Statement of Operating Expenses – Berry Islands Branch 52 – 53

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NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Profit or Loss and Other Comprehensive Income For the year ended December 31, 2019 (Expressed in Bahamian dollars)

Notes 2019 2018

INTEREST INCOME

Loan interest income 20 3,955,587$ 3,719,171$

Investment interest income 21 467,137 541,236

Interest in deposits with League 9 193,809 209,147

Total interest income 4,616,533 4,469,554

INTEREST EXPENSE

Deposit interest expense 22,25 1,590,103 1,836,570

Total interest expense 1,590,103 1,836,570

NET INTEREST INCOME BEFORE PROVISION FOR LOAN

IMPAIRMENT 3,026,430 2,632,984

Provision for loan impairment 12 (234,919) (275,040)

NET INTEREST INCOME AFTER PROVISION FOR LOAN

IMPAIRMENT 2,791,511 2,357,944

Other income 23 808,157 650,068

NET INTEREST AND OTHER INCOME 3,599,668 3,008,012

OPERATING EXPENSES

Personnel 24, 25 1,860,566 1,686,513

Occupancy 24 404,697 409,721

General business 24 406,478 248,951

Organizational 24 173,418 113,897

Depreciation 24 241,319 127,683

Members' insurance 24 201,278 172,392

Computer expense 24 66,058 53,501

Marketing 24 99,301 88,030

Total operating expenses 3,453,115 2,900,688

PROFIT FOR THE YEAR 146,553 107,324

OTHER COMPREHENSIVE INCOME

Item that may be subsequently reclassified to profit or loss:

Fair value change on equity securities 19(ii) 32,135 (44,821)

TOTAL COMPREHENSIVE INCOME 178,688$ 62,503$

See notes to financial statements.

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NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Changes in Members’ Equity For the year ended December 31, 2019 (Expressed in Bahamian dollars)

Notes

Qualifying

Shares

Statutory

Reserve

Fund

Fair Value

Reserve

Revaluation

Reserve

Accumulated

(Deficit)/

Surplus Total

Balance as at December 31, 2017 1,420,751$ 3,895,784$ 419,814$ 154,517$ 469,108$ 6,359,974$

Comprehensive income for the year

Profit for the year - - - - 107,324 107,324

Fair value loss on marketable securities 19(ii) - - (44,821) - - (44,821)

Total comprehensive income for the year - - (44,821) - 107,324 62,503

Transactions with members

Net decrease in memberships 18 (59,005) - - - - (59,005)

Total transactions with members (59,005) - - - - (59,005)

Statutory reserve transfer 400,000 (400,000) -

Balance as at December 31, 2018 1,361,746 4,295,784 374,993 154,517 176,432 6,363,472

Impact of adopting IFRS 9 5(ii) - - - - (1,115,019) (1,115,019)

Restated balance as at January 1, 2019 1,361,746 4,295,784 374,993 154,517 (938,587) 5,248,453

Comprehensive loss for the year

Profit for the year - - - - 146,553 146,553

Fair value profit on marketable securities 19(ii) - - 32,135 - - 32,135

Total comprehensive loss for the year - - 32,135 - 146,553 178,688

Transactions with members

Net increase in memberships 18 50,370 - - - - 50,370

Total transactions with members 50,370 - - - - 50,370

Statutory reserve transfer 19 - - - - - -

Balance as at December 31, 2019 1,412,116$ 4,295,784$ 407,128$ 154,517$ (792,034)$ 5,477,511$


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NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Cash Flows For the year ended December 31, 2019 (Expressed in Bahamian dollars) `

2019 2018

Cash flows from operating activities:

Net profit for the year 146,553$ 107,324$

Adjustments for items not involving the movement of cash:

Interest income (4,616,533) (4,469,554)

Interest expense 1,590,103 1,836,570

Provision for loan impairment 321,107 385,300

Loss on disposal of property and equipment 80,428 4,578

Depreciation 241,319 127,683

(2,237,023) (2,008,099)

Changes in operating assets and liabilities:

Interest received 3,770,506 3,446,973

Interest paid (1,852,943) (1,749,237)

(Increase)/decrease in other assets (53,655) 83,071

Net movements in loans receivable (3,948,493) (4,172,062)

Increase/(decrease) in accounts payable and accrued expenses 159,350 (860)

Increase in members and other deposits 1,630,200 6,024,639

Net cash (used in)/provided by operating activities (2,532,058) 1,624,425

Cash flows from investing activities:

Net disposal of deposits and short-term investments 5,463,613 1,541,831

Increase in deposits with the League (200,000) (3,300,000)

Acquisition of financial investments (2,400) (3,000)

Proceeds from disposal of financial investments - 1,252,000

Acquisition of investment properties (4,340) (45,102)

Proceeds from disposal of property and equipment 2,201 -

Acquisition of property and equipment (423,401) (1,971,778)

Net cash provided by/(used in) investing activities 4,835,673 (2,526,049)

Cash flows from financing activities:

Net issuance to qualifying shares 50,370 (59,005)

Principal paid on lease liabilities (89,592) -

Net cash used in financing activities (39,222) (59,005)

Net increase/(decrease) in cash and cash equivalents 2,264,393 (960,629)

Cash and cash equivalents, beginning of year 1,141,713 2,102,342

CASH AND CASH EQUIVALENTS, END OF YEAR 3,406,106$ 1,141,713$

Supplemental cash flow information:

Dividends received 50,537$ 46,506$


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NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Notes to Financial Statements December 31, 2019 (Expressed in Bahamian dollars)

1. INCORPORATION AND ACTIVITIES

The National Workers Co-operative Credit Union Limited (the “Credit Union”) was established in 1976 under the provisions of The Commonwealth of The Bahamas Cooperative Societies Act, 2005 (the “2005 Act”).

On May 12, 2015, the government enacted The Bahamas Co-operative Credit Unions Act, 2015 (the “2015 Act”) which superseded the 2005 Act. Under the 2015 Act, The Central Bank of The Bahamas is responsible for the administration of all co-operative credit unions. Effective June 1, 2015, the Credit Union was granted a Certificate of Continuance by The Central Bank of The Bahamas to continue as a co-operative credit union.

The Credit Union’s primary purpose is to:

Promote thrift among its members by affording them an opportunity to accumulate savings.

Create for its members a source of credit for provident or productive purposes at reasonable rates of interest.

Provide the opportunity for members to use and control their money for their mutual benefit in accordance with co-operative principles.

The Credit Union is affiliated with The Bahamas Co-operative League Limited (the “League”) and The Caribbean Confederation of Credit Union.

The registered office of the Credit Union is located on Tonique Williams-Darling Highway, Nassau, The Bahamas.

2. LAWS AND REGULATIONS

During the year ended December 31, 2015, the Bahamas Co-operative Credit Unions Act, 2015 and the Bahamas Co-operative Credit Unions Regulations, 2015 came into effect. The Act transferred the regulation of credit unions in the Bahamas to The Central Bank of The Bahamas.

This regulatory framework affects these financial statements, and the effects are disclosed in the financial statements and the relevant notes:

a) Section 65(1) of the Bahamas Co-operative Credit Unions Act, 2015 states that “where a co-operative credit union realizes an annual surplus from its transactions, that co-operative credit union shall establish and maintain a statutory reserve fund as may be prescribed by regulations”.

b) Section 122 of the Bahamas Co-operative Credit Unions Act, 2015 exempts the Credit Union from stamp duty relating to the execution of documents in the Bahamas, including loans granted.

3. BASIS OF PREPARATION a) Statement of compliance – The Credit Union’s financial statements have been prepared in

accordance with International Financial Reporting Standards (“IFRSs”). b) Basis of preparation – These financial statements have been prepared under the historical cost

convention except for certain financial investments, which are measured at fair value. c) Head office-branch accounting – The financial statements include the accounts of the Credit Union’s

Head Office in New Providence and the three (3) branches in Freeport (Grand Bahama), Fresh Creek (Andros), and The Berry Islands. All balances and transactions between the Head Office and the branches have been eliminated.

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3. BASIS OF PREPARATION (Continued)

d) Foreign currency translation

Functional and presentation currency Items included in the financial statements of the Credit Union are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The financial statements are presented in Bahamian dollars, which is the Credit Union’s functional and reporting currency.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary and non-monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss in the statement of comprehensive income.

4. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

The Credit Union’s accounting policies for financial instruments up to December 31, 2018 were in accordance with IAS 39. Effective January 1, 2019, the Credit Union adopted IFRS 9, a new standard that replaces IAS 39. Accounting policies for financial instruments applicable from December 31, 2018 are disclosed in Note 5.

a) New standards and amended standards issued but not yet effective

The following standards have been issued but are not yet effective, and have not been adopted by the Credit Union.

IAS 1 and IAS 8 (Amendment): Definition of Material (Effective January 1, 2020) –The IASB made amendments to IAS 1, ‘Presentation of Financial Statements’ and IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’ which use a consistent definition of materiality throughout International Financial Reporting Standards and the Conceptual Framework for Financial Reporting, clarify when information is material and incorporate some of the guidance in IAS 1 about immaterial information.

In particular, the amendments clarify: o that the reference to obscuring information addresses situations in which the effect is similar to

omitting or misstating that information, and that an entity assesses materiality in the context of the financial statements as a whole, and

o the meaning of ‘primary users of general purpose financial statements’ to whom those financial statements are directed, by defining them as ‘existing and potential investors, lenders and other creditors’ that must rely on general purpose financial statements for much of the information they need.

The application of other new standards, amendments and interpretations to existing standards

that have been published but are not yet effective, are not expected to have a material impact on

the Credit Union’s accounting policies or financial statements in the financial period of initial

application.

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4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

b) Cash and cash equivalents – Cash and cash equivalents are carried at amortized cost in the

statement of financial position. For the statement of cash flows, cash and cash equivalents include cash on hand, at banks and fixed deposits with original maturity of 90 days or less.

c) Deposits and short-term investments – Deposits and short-term investments are carried at amortized costs in the statement of financial position, have original maturities of over 90 days, and subject to an insignificant risk of change in value. These investments are financial assets categorized as loans and receivables.

d) Deposits with the League – Deposits with the League represent the proceeds of the statutory reserves

fund and the liquidity reserve fund, which are deposited with and administered by the League, as required by the Act. Other deposits are also held at the League. These deposits are carried at amortized cost using the effective interest method in the statement of financial position.

e) Other assets – Other assets, which include refundable deposits, prepaid expenses, interest receivable

and other receivables, are carried at cost in the statement of financial position, net of provision for impairment, due to their short-term nature.

f) Loans receivable – Loans are recorded at their outstanding principal balances less allowance for doubtful accounts. A loan becomes delinquent immediately after one day of payment missed. Delinquent loans over 90 days are placed in a loans’ suspense account after the outstanding loan balance has been applied to the member’s share and deposit balances. Calculation of interest on delinquent loans will cease after 180 days. All loans must be secured by a member share, chattel mortgage on automobile loans or approved collateral.

g) Non-performing financial assets – All loans and advances to members on which principal or interest payments are overdue in excess of thirty (30) days are classified by management as non-performing, and monitored closely for impairment.

h) Investment properties – Investment properties consist of properties that are held to earn rentals and/or for capital appreciation and are not occupied by the Credit Union. Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes the costs of day-to-day servicing of an investment property.

The Credit Union uses the cost method in subsequent recognition of its investment properties. Under this method, investment properties are subsequently measured at depreciated cost less any accumulated impairment losses.

Expenditures incurred after the investment properties have been put into operations, such as repairs and maintenance costs, are normally charged to operations in the period in which the costs are incurred.

Land is carried at cost less any impairment losses. Investment properties are depreciated using the straight-line method over the estimated useful lives of the respective assets:

Building - 25 years

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i) Property and equipment – Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on the straight-line basis over the following estimated useful lives of the respective assets:

Buildings - 25 years Furniture and fixtures - 10 years Leasehold improvements - 10 years Computer hardware and software - 5 years Automobiles - 2.5 and 4 years

Expenses incurred after property and equipment have been put into operation, such as repairs and maintenance, are normally charged to profit or loss in the period when the costs are incurred. In a situation where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item beyond its originally assessed standard of performance, the expenditures are capitalized as an addition to the cost of property and equipment.

j) Financial instruments – Policy applicable prior to January 1, 2019

A financial instrument is any contract that gives rise to both a financial asset of one enterprise and financial liability or equity of another enterprise.

Financial assets For the purpose of subsequent measurement, financial assets other than those designated and effective as hedging instruments are classified into the following categories upon initial recognition:

loans and receivables

available-for-sale financial assets

held-to-maturity investments

The category determines subsequent measurement and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income.

All financial assets except for those at fair value through profit or loss are subject to review for impairment at least at each reporting date. Financial assets are impaired when there is any objective evidence that a financial asset or a group of financial assets is impaired.

Loans and receivables – Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortized cost using the effective interest method, less provision for impairment. Any change in their value is recognized in profit or loss. Discounting, however, is omitted where the effect of discounting is immaterial. Included in this category are the Credit Union’s cash at bank, short term investments, loans receivable, deposits with the League and other receivables and prepayments

Available-for-sale financial assets – Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. They are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within the valuation reserve within equity, except for impairment losses which are recognized in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognized in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Dividends are recognized in profit or loss.

The Credit Union’s marketable securities are considered available-for-sale financial assets.

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j) Financial instruments – Policy applicable prior to January 1, 2019 (Continued) Financial assets (Continued)

Held-to-maturity investments – Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity other than loans and receivables. Investments are classified as held-to-maturity if the Credit Union has the intention and ability to hold them until maturity.

They are subsequently measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings, the financial asset is measured at the present value of estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in profit or loss.

The Credit Union’s investments in bonds and Bahamas Government Registered Stock are considered held-to-maturity investments.

Financial liabilities The Credit Union’s financial liabilities include, accounts payable and accrued expenses, and members’ and other deposits, which are measured subsequently at amortized cost using the effective interest rate method. Discounting, however, is omitted where the effect of discounting is immaterial.

k) Provisions – Provisions for restructuring costs and legal claims are recognized when the Credit Union has a present legal or constructive obligation as a result of past events, it is more likely than not that, an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.

l) Related parties – Related parties represent entities or individuals who can exercise significant influence or control over the operations and policies of the Credit Union. In these financial statements, current and past members of the Board of Directors, committee members (one year past), management staff and their close relatives are classified as related parties.

The Credit Union is a member of the League and has a representative on the Board of Directors. Accordingly, the League is considered a related party in these financial statements. All related party transactions and balances are shown as such in these financial statements.

m) Impairment of financial assets – Policy applicable prior to January 1, 2019

An assessment is made at each financial position date to determine whether there is any indication of impairment of any assets, or whether there is any indication that an impairment loss previously recognized on an asset in prior years may no longer exist or may have changed. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is computed as the higher of the asset’s value in use or its net selling price.

An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to operations in the period in which it arises unless the asset is carried at a revalued amount in which case the impairment is charged to the revaluation increment of the said asset.

A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation), had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is credited to current operations.

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n) Members’ regular deposits – Members’ regular deposits represent the deposit holdings of the Credit

Union’s members, to satisfy membership requirements and facilitate eligibility for loans and other benefits. These deposits earn interest on the first day of the month following such deposits, provided that the amounts paid in on the first day of any month shall earn interest from that day. The rate of interest payable on members’ regular deposits is fixed by the Board of Directors, and voted on by the members at the annual general meetings.

o) Other deposits – Other deposits represent term and other deposits, savings accounts and retirement accounts, which are held by members and non-members of the Credit Union. These deposits, if interest bearing, bear interest at rates that are also set by the Board of Directors, but do not require the approval of the general membership at the annual general meetings.

p) Members’ shares – Members’ shares consist of qualifying and investment equity shares held by the Credit Union’s members, to satisfy membership requirements. These shares are classified as equity in the statement of financial position.

Qualifying shares Qualifying shares are shares required to become a member of the Credit Union as described in the Credit Union’s Bye-Laws. Each member of the Credit Union is required to own a minimum of two qualifying shares with a par value of $100 each. These shares entitle each member to one vote at the annual general meetings.

q) Statutory reserve – Statutory reserve is set up in accordance with the provisions of the Bahamas Co-operative Credit Unions Act, 2015 set out in Note 2(a) to the financial statements. The proceeds of this reserve are deposited with the League, and are not available for distribution.

r) Fair value reserve – Fair value reserve represents the accumulated unrealized gains and losses arising on changes in the fair value of financial investments.

s) Retained earnings – Retained earnings represent the undistributed surplus after statutory appropriations and dividends.

t) Dividends declaration – Section 33 (2)(b) of The Bahamas Co-operative Credit Union Act, 2015, states that the Credit Union “shall not pay a dividend or make any payment on account or out of its surplus unless the requirements under section 65 (2)(b) have been complied with”. Dividends are accrued in these financial statements when declared by the Board of Directors.

u) Interest income and expense recognition – Interest income and expense are recognized in the statement of comprehensive income for all instruments measured at amortized cost using the effective interest method. Loan origination fees for loans that are likely to be drawn down are deferred (together with related direct costs) and recognized as an adjustment to the effective interest rate on the loans. Loan interest income is not recognized on loans that are past due for periods exceeding 90 days.

The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset of financial liability. When calculating the effective interest rate, the Credit Union estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and commissions paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

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v) Fees and other income – Fees and other income are recognized on the accrual basis. Performance

linked fees or fee components are recognized when the performance criteria are fulfilled. w) Operating expenses – Operating expenses are recognized on the accrual basis in the statement of

profit and loss and other comprehensive income.

x) League dues and stabilization fees – The League has fixed its dues at $12 annually per member, while stabilization fees are set at $3 annually per member.

y) Employee benefits – The Credit Union’s employees participate in a defined contribution pension plan, administered by an external party. A defined contribution pension plan is a pension plan under which the Credit Union pays fixed contributions into a separate entity. The Credit Union has no legal or constructive obligations to pay further contributions if the plan does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Credit Union’s contributions are recognized as employee benefits expense in the statement of comprehensive income when they are due.

5. CHANGES IN ACCOUNTING POLICIES a) IFRS 9, Financial Instruments

The Credit Union has adopted IFRS 9 with a date of initial application of January 1, 2019. As permitted under IFRS 9 ((the modified retrospective approach), the Credit Union has elected not to restate comparative figures. Any adjustments to the carrying amounts of financial instruments at the date of the transition were recognized in opening retained earnings on January 1, 2019. Accordingly, the comparative information presented for 2018 does not reflect the requirements of IFRS 9. i) Financial Instruments – policy applicable from January 1, 2019

IFRS 9 sets out the requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial assets. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 brings fundamental changes to the accounting for financial assets and to certain aspects of the accounting for financial liabilities.

Additionally, the Credit Union has adopted the consequential amendments to IFRS 7, Financial Instruments: Disclosures which are applied to disclosures in the prior year, but have not been applied to the comparative information.

Recognition, classification and measurement IFRS 9 contains three (3) principal classification categories for financial assets, which are measured at:

o Amortized cost; o Fair value through other comprehensive income (FVTOCI); or o Fair value through profit or loss (FVTPL).

The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and contractual cash flow characteristics.

The standard eliminates the IAS 39 categories of held-to-maturity, loans and receivable and available-for-sale.

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5. CHANGES IN ACCOUNTING POLICIES (Continued)

a) IFRS 9, Financial Instruments (Continued)

i) Financial Instruments – policy applicable from January 1, 2019 (Continued)

Recognition, classification and measurement (Continued) A financial asset is measured at amortized cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch.

See Note 6(ii) below for the changes in the categories from IAS 39 to IFRS 9.

Impairment IFRS 9 replaces the “incurred loss” model in IAS 39 with an “expected loss” (ECL) model. The new impairment model applies to financial assets measured at amortized cost, and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IFRS 39.

Loans and provision for impairment losses Loans are recognized when cash is advanced to borrowers.

The Credit Union, under the IFRS 9 Expected Credit Loss (ECL) impairment framework, recognises ECLs on loans, taking into account past events, current conditions and forecast information. In this regard, the Credit Union determines the economic variables that are likely to influence the borrowers’ ability to meet their loan obligations in the future and incorporate such forward looking economic information in the overall estimation of the expected credit loss.

Additionally, the Credit Union is required to update the amount of ECLs recognised at each reporting date to reflect changes in credit risk of the loan portfolio. Loans to members are held solely for the collection of principal and interest in accordance with the contractual arrangement between the credit union and the borrower. Therefore, loans are classified under the hold to collect business model and are measured at amortized cost.

The Credit Union assigns an initial risk rating to each loan at the date of disbursement. The risk rating is determined by the credit score assigned and categorised in the recognised credit score bands.

Loan staging – By way of disclosure, the credit union estimates and reports the ECL on a stage by stage basis. o Stage 1 - Loans are placed in Stage 1 at origination and remains in this stage providing

that such loans have not experience a significant increase in credit risk. o Stage 2 Loans are transitioned to Stage 2 when there is evidence that such loans have

experienced a significant increase in credit risk. o Stage 3 - Loans are transitioned into Stage 3 if there is evidence that these loans are

impaired or are at a default stage. Loans that are past due for a period of 90 days or more are deemed to have defaulted.

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i) Financial Instruments – policy applicable from January 1, 2019 (Continued)

Derecognition of financial instruments IFRS 9 retains, largely unchanged, the requirements of IAS 39 relating to the derecognition of financial instruments.

Financial liabilities IFRS 9 has not substantially changed the classification of financial liabilities, and retained the following categories:

o Amortized cost; or o Fair value through profit or loss (FVTPL).

The Credit Union’s financial liabilities are classified as measured at amortized cost, therefore, there is no effect from the adoption of IFRS 9.

ii) Transition impact of IFRS 9

Classification of financial instruments on the date of initial application of IFRS 9 The following tables show the original measurement categories in accordance with IAS 39 and the new measurement categories under IFRS 9 for the Credit Union’s financial instruments as at January 1, 2019:

Measurement

Category

Carrying amount

at Dec-31-2018

Measurement

Category

Carrying amount

at Jan-01-2019

Financial assets:

Cash and cash equivalents Loans and receivables 1,141,713$ Amortized cost 1,141,713$

Deposits and short-term investments Loans and receivables 13,730,215 Amortized cost 13,730,215

Deposits with the League Loans and receivables 13,261,606 Amortized cost 13,261,606

Other assets Loans and receivables 595,074 Amortized cost 595,074

Financial investments Held-to-maturity 2,405,700 Amortized cost 2,405,700

Financial investments Available-for-sale 1,359,288 FVTOCI 1,359,288

Loans receivable Loans and receivables 32,180,376 Amortized cost 31,065,357

64,673,972$ 63,558,953$

Financial liabilities:

Accounts payable and accrued expenses Amortized cost 393,262$ Amortized cost 393,262$

Members and other deposits Amortized cost 62,474,330 Amortized cost 62,474,330

62,867,592$ 62,867,592$

IAS 39 IFRS 9

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ii) Transition impact of IFRS 9 (Continued)

Impact of adoption on opening accumulated fund ECL allowance for December 31, 2018 carried in accumulated funds at January 1, 2019 comprises:

Jan-01-2019

Allowance for credit losses on loans receivable (IFRS 9) 1,115,019$

Impact on opening accumulated surplus 1,115,019$

b) IFRS 15, Revenue from Contracts with Customers

The Credit Union has adopted IFRS 15 from January 1, 2019. The standard provides principles for reporting about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contract with customers. The standard provides a single, principle based five-step model for recognition to be applied to contracts with customers except for revenue arising from items such as financial instruments, insurance contracts and leases. The standard replaces IAS 18, Revenue; IAS 11, Contracts; and related interpretations.

The adoption of IFRS 15 did not impact the timing or amount of fees and other income from contracts with customers and the related assets and liabilities recognized by the Credit Union.

c) IFRS 16, Leases i) Lease policy prior to January 1, 2019 – For the period from January 1, 2018 to December 31, 2018,

the Credit Union applied IAS 17 Leases. All leases were classified as operating leases. Where substantially all of the risks and rewards incidental to ownership are not transferred to the Credit Union (an operating lease), the total rental payable under the lease are charged to the statement of profit or loss and other comprehensive income on a straight line basis over the lease term. It also holds leases as a lessor, but lessor accounting remains substantially the same as in IAS 17.

ii) Lease policy from January 1, 2019 – From January 1, 2019, the Credit Union has applied IFRS 16 Leases. Leases are recognized as right-of-use assets and the corresponding lease liabilities at the date of adoption of the standard.

IFRS 16, ‘Leases’, (effective for annual periods beginning on or after January 1, 2019) was issued in January 2017 and replaces IAS 17, ‘Leases’. The standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. IFRS 16 also requires enhanced disclosures to be provided by lessors and lessees that will improve information provided to users of the financial statements.

Note 16 discloses the Credit Union’s leases.

18


6. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, and contingent assets and contingent liabilities at the statement of financial position date and the income and expenses for the year then ended. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgments made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next financial year are discussed below: Impairment losses on loans and advances to members The Credit Union reviews its loan portfolios to assess impairment on a monthly basis and more frequently when the need arises. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Credit Union assesses whether there is objective evidence that a financial asset or group of financial assets is impaired. Objective evidence for an individual financial asset includes: significant financial difficulty of the borrower; a breach of contract, such as delinquency in interest or principal payments; and actual or probable bankruptcy or other financial reorganization of the borrower. Loans for which no specific impairment has been identified are grouped with similar loans in a portfolio and the Credit Union makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from that portfolio of loans before the decrease can be identified with an individual loan in that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or economic conditions that correlate with defaults on financial assets.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (e.g. asset type, collateral, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group, historical loss experience for financial assets with similar credit risk characteristics and objective evidence of impairment similar to those in the portfolio. Estimates of changes in future cash flows for groups of financial assets should reflect and be directionally consistent with changes in related observable data from period to period. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

19


7. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of the following:

Interest Rate 2019 2018

Cash on hand N/A 423,696$ 64,511$

Non-interest bearing accounts 0.00% 954,190 609,824

Interest bearing accounts 1.25% 2,028,220 467,378

3,406,106$ 1,141,713$

8. DEPOSITS AND SHORT-TERM INVESTMENTS

Deposits and short-term investments are comprised of the following:


Fidelity Bank Bahamas Limited 2.00%-3.00% 4,605,479$ 4,507,355$

Bahamas Government Treasury Notes (fixed rate) 2.50% 3,518,816 5,382,232

Scotiabank (Bahamas) Limited 0.03%-0.08% 142,307 142,265

Bank of The Bahamas Limited 2.50% - 2,631,985

BAF Financial annuity 3.75%-4.25% - 1,066,378

8,266,602$ 13,730,215$

9. DEPOSITS WITH THE LEAGUE

Deposits with the League are comprised of the following:


Statutory reserve deposits (i) 1.44%

Balance, beginning of year 7,002,637$ 3,996,773$

Additional deposits during the year 100,000 2,900,000

Interest earned during the year 102,214 105,864

Balance, end of year 7,204,851 7,002,637

Liquidity reserve deposits (ii) 1.44%

Balance, beginning of year 6,258,969 5,755,686

Additional deposits during the year 100,000 400,000

Interest earned during the year 91,595 103,283


13,655,415$ 13,261,606$

20


9. DEPOSITS WITH THE LEAGUE (Continued)

i) Statutory reserve deposit – Section 65(1) of the Act requires that annual amounts be transferred from

retained earnings to the statutory reserves, before the payment of dividends. The proceeds of this reserve are held at the League. At the end of the reporting period, the surplus/(deficit) in the statutory reserve fund is as follows:

2019 2018

Statutory deposits with the League 7,204,851$ 7,002,637$

Requirement (10% of total assets) (7,040,910) (6,923,106)

Surplus in statutory reserve deposits 163,942$ 79,531$

ii) Liquidity reserve deposit – Section 65(2) of the Act stipulates that not less than 10% of the Credit

Union’s members’ deposits are kept in a “liquidity reserve fund”. The proceeds of the liquidity reserve fund are deposited with the League. At the end of the reporting period, the surplus in the liquidity reserve fund is as follows:

2019 2018

Liquidity reserve deposits with the League 6,450,564$ 6,258,969$

Requirement (10% of members' deposits) (6,410,453) (6,247,433)

Surplus in liquidity reserve deposits 40,111$ 11,536$

10. OTHER ASSETS

Other assets represent the following:

2019 2018

Accounts receivable and refundable 148,126$ 143,991$

Investment interest receivable 181,732 227,997

Other assets 131,425 131,425

Insurance claims receivable 101,831 -

Prepaid expenses 85,615 91,661

648,729$ 595,074$

21


11. FINANCIAL INVESTMENTS

Financial investments are comprised of the following:

2019 2018

Debt securities - Amortized cost Interest Rate (%)

Bahamas Government Registered Stocks:

Maturing in 2024 4.500 3,700$ 3,700$

Maturing in 2025 4.531 102,000 102,000

Maturing in 2033 5.400 2,000,000 2,000,000

Maturing in 2037 4.875 200,000 200,000

Total Bahamas Government Registered Stocks 2,305,700 2,305,700

Corporate Bonds:

Bahamas First Holdings Limited Series II (Oct-2025) 6.250 100,000 100,000

Total Corporate Bonds 100,000 100,000

Total debt securities 2,405,700 2,405,700

Equity securities - FVTOCI

Quoted investments:

CFAL Money Market Investment Fund A 596,126 552,871

Famguard Corporation Limited 53,200 44,100

Freeport Oil Holdings Company Limited 254,880 260,640

Emera Incorporated 47,932 35,790

CFAL Balanced Fund Limited 31,235 29,737

983,373 923,138

Unquoted investments:

Famguard Corporation Limited Preference Shares 7.50% 250,000 250,000

FOCOL Holdings Limited Preference Shares A prime plus 1.75% 43,200 43,200

FOCOL Holdings Limited Preference Shares B prime plus 1.75% 88,000 88,000

The Bahamas Co-operative League Limited 57,350 54,950

438,550 436,150

Total equities securities 1,421,923 1,359,288

Total 3,827,623$ 3,764,988$

22


12. LOANS RECEIVABLE

The Credit Union has a lien on the shares, deposits and savings of all members with outstanding loan balances. Interest is charged at various rates per month on the outstanding principal balance of members’ loans over the term of the loan. The rate of interest charged is based on the type of loan. In most instances, loans are repaid via salary deductions, which are established at the time the various loans are granted. Loans receivable consist of the following:

2019 2018

Consumer 19,750,453$ 15,275,916$

Revolving line of credit 9,031,605 8,436,092

Mortgage 5,849,679 6,136,852

Debt consolidation 1,756,464 2,596,973

Loans in collection 169,112 181,227

Auto 109,718 80,790

Computer - 10,688

36,667,031 32,718,538

Interest receivable 611,365 568,409

37,278,396 33,286,947

Less: Allowance for credit losses (1,742,072) (1,106,571)

35,536,324$ 32,180,376$

The movement on loans receivable during the year is as follows:

2019 2018


Loans disbursed 13,268,408 11,677,834

Loans repaid (9,319,915) (7,505,772)

36,667,031 32,718,538

Interest receivable 611,365 568,409

37,278,396 33,286,947


Balance, end of year 35,536,324$ 32,180,376$

23


12. LOANS RECEIVABLE (Continued)

Non-accrual loans receivable consist of the following:

2019 2018

Residential mortgages 3,310,641$ 934,679$

Demand loans 1,287,651 1,179,939

4,598,292$ 2,114,618$

Loans receivable classified as non-accrual represent 12.54% (2018: 6.46%) of the total gross loans.

Concentration of loans receivable is as follows:

% 2019 % 2018

$0 - $100,000 90.52 33,191,244$ 86.29 28,461,666$

$100,001 - $300,000 7.54 2,765,851 11.23 3,096,152

$300,001 - $500,000 1.94 709,936 2.48 1,160,720

100 36,667,031 100 32,718,538

Accrued interest receivable 611,365 568,409


35,536,324$ 32,180,376$

The movement on the provision for loan impairment during the year is as follows:

2019 2018

Balance beginning of year 1,106,571$ 954,244$

Remeasurement on adoption of IFRS 9 1,115,019 -

Net provision during the year 321,107 385,300

Loans written-off (800,625) (232,973)


Provided for during the year 321,107$ 385,300$

Recoveries of bad debts (86,188) (110,260)

Impairment losses reported in profit or loss 234,919$ 275,040$

24


12. LOANS RECEIVABLE (Continued)

Reconciliation of Regulatory loss provision and IFRS Expected Credit Losses provision:

2019 2018

IFRS Expected Credit losses 1,742,072$ 2,221,590$

Regulatory loss provision 733,546 1,106,571

Difference 1,008,526$ 1,115,019$

The following is an aged analysis of all loans receivable that were past due as of the date of the statement of financial position:

Days

in Arrears

Number of

Accounts

Delinquent

Loans

Value of

Security Exposure

Loan Loss

Provision

Provision

Rate

1 to 30 days 39 218,621$ 72,779$ 145,842$ -$ n/a

31 to 90 days 32 299,240 218,577 80,663 28,232 35%

91 to 180 days 73 516,746 245,189 271,557 95,045 35%

181 to 365 days 95 685,319 299,942 385,377 134,882 35%

> 365 days 169 2,866,072 2,390,685 475,387 475,387 100%

408 4,585,998$ 3,227,172$ 1,358,826$ 733,546$

Days

in Arrears

Number of

Accounts

Delinquent

Loans

Value of

Security Exposure

Loan Loss

Provision

Provision

Rate

1 to 30 days 48 235,116$ 137,386$ 97,730$ -$ n/a

31 to 90 days 22 123,757 38,330 85,427 29,899 35%

91 to 180 days 70 465,984 251,577 214,407 75,042 35%

181 to 365 days 91 610,898 320,133 290,765 101,768 35%

> 365 days 315 3,198,545 2,299,522 899,023 899,861 100%

546 4,634,300$ 3,046,948$ 1,587,352$ 1,106,571$

As at December 31, 2019


25


13. INVESTMENT PROPERTIES

Investment properties consist of the following:

Land Building Total

Cost

Balance at December 31, 2017 475,167$ 1,021,250$ 1,496,417$

Additions - 45,102 45,102

Balance at December 31, 2018 475,167 1,066,352 1,541,519

Additions - 4,340 4,340

Balance at December 31, 2019 475,167 1,070,692 1,545,859

Accumulated depreciation

Balance at December 31, 2017 - 645,173 645,173

Additions - 41,364 41,364


Additions - 42,800 42,800


Carrying value

As at December 31, 2019 475,167$ 341,355$ 816,522$

As at December 31, 2018 475,167$ 379,815$ 854,982$

26


14. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Land Building

Furniture

and

Fixtures

Leasehold

Improvements

Computer

System Vehicles

Construction

in Progress

Right of

Use Total

Cost (Note 16.1)

Balance at December 31, 2017 1,029,597$ 407,801$ 577,272$ 201,877$ 685,248$ 62,805$ 317,694$ -$ 3,282,294$

Additions 100,000 1,654,633 50,899 56,609 103,737 5,900 - - 1,971,778

Disposal - - (36,521) (10,895) (38,058) - - - (85,474)

Balance at December 31, 2018 1,129,597 2,062,434 591,650 247,591 750,927 68,705 317,694 - 5,168,598

Additions - 332,506 21,508 2,035 32,129 35,223 - 354,714 778,115

Disposal - - (46,695) (65,305) (166,867) (32,800) - - (311,667)

Transfers - 12,414 - (12,414) - -

Balance at December 31, 2019 1,129,597 2,407,354 566,463 171,907 616,189 71,128 317,694 354,714 5,635,046

Accumulated depreciation

Balance at December 31, 2017 - 207,786 395,646 144,555 649,919 55,005 - - 1,452,911

Additions - 16,469 32,728 9,373 21,126 6,623 - - 86,319

Disposal - - (31,449) (7,813) (33,480) - - - (72,742)

Balance at December 31, 2018 - 224,255 396,925 146,115 637,565 61,628 - - 1,466,488

Additions - 16,400 37,903 14,272 28,179 17,493 - 84,272 198,519

Disposal - - (33,838) (48,232) (166,865) (32,800) - - (281,735)

Transfers 4,789 (4,789) -

Balance at December 31, 2019 - 245,444 400,990 107,366 498,879 46,321 - 84,272 1,383,272

Carrying value

As at December 31, 2019 1,129,597$ 2,161,910$ 165,473$ 64,541$ 117,310$ 24,807$ 317,694$ 270,442$ 4,251,774$

As at December 31, 2018 1,129,597$ 1,838,179$ 194,725$ 101,476$ 113,362$ 7,077$ 317,694$ -$ 3,702,110$

Included in land is a property on JFK Drive, with a carrying value of $763,315. This land was purchased in 2013 as a location for the construction of the Credit Union’s future main office. The Credit Union incurred architectural design and other preliminary costs related to construction totaling $317,694. These costs were classified as construction-in-progress. A site inspection performed by a third party resulted in the identification of topography and other issues. The total cost to resolve the issues is currently unknown. The project has since been put on hold and the Board of Directors instructed its legal counsel to pursue legal action for recovery of all costs incurred related to the project including $750,000 for the tract of land, and $1,400,000 in damages and losses. The matter has been filed in the Supreme Court of The Bahamas with the trial is set for October 25, 2021.

The Credit Union’s Poinciana Drive property is comprised of land and building with net book value of $157,500 and $200,015 respectively. In October 2008, Bahamas Realty Limited, an independent qualified real estate broker and appraiser, conducted an appraisal of the Poinciana Drive property. The restated fair market value resulted in a revaluation surplus of $154,517 (land: $123,900 and building: $30,617), which is included in equity. The remaining land pertains to a property in George Town, Exuma with a carrying value of $108,752.

27


15. ACCRUED EXPENSES AND OTHER LIABILITIES

Accounts payable and accrued expenses consist of the following:

2019 2018

Members' salary deductions received in advance 412,460$ 263,383$

Insurance payable 47,323 42,938

Accounts payable 76,136 26,616

Value Added Tax payable 26,954 20,490

Rent payable 1,050 16,850

Professional and legal fees payable 25,040 11,747

Others (36,351) 11,238

552,612$ 393,262$

16. LEASES

Details of the amounts recognized in the statement of financial position and the statement of comprehensive income for the Credit Union’s right of use asset and the corresponding lease liability are set out below: 16.1. Right of use asset

2019 2018

Balance, beginning of year -$ -$

Recognized on adoption of IFRS 16 354,714 -

Amortization expense recognized in profit or loss (84,272) -

Balance, end of year 270,442$ -$

16.2. Lease liability

2019 2018

Balance, beginning of year -$ -$

Operating lease commitments recognized on adoption of IFRS 16 354,714 -

Interest expense recognized in profit or loss 9,320 -

Lease payments during the year (89,592) -

Balance, end of year 274,442$ -$

Maturity Analysis:

The future minimum lease payments under this lease at the

reporting period are as follows:

No later than one year 82,714$ -$

Later than one year and not later than five years 191,728 -

274,442$ -$

28


16. LEASES (Continued)

16.3. Amounts recognized in profit or loss

2019 2018

Amortization of right of use asset (Depreciation expense) 84,272$ -$

Interest on lease liability (Occupancy cost) 9,320 -

93,592$ -$

17. MEMBERS AND OTHER DEPOSITS Members and other deposits consist of the following:

2019 2018

Members' share deposits (a) 29,808,665$ 28,765,540$

Term deposits (b) 23,433,924 24,230,861

Educational savings (c) 1,930,637 1,774,969

House plan savings (d) 1,565,830 1,314,786

Deposit accounts (e) 2,528,781 1,568,704

Dormant accounts 719,908 712,937

Retirement savings 902,596 779,854

Credit card security account 288,231 408,878

Vacation club savings 465,315 454,088

Christmas savings (f) 179,741 227,208

Debit card account 393,899 304,522

Back-to-school savings (g) 117,323 104,266

Other deposit accounts 1,029,892 825,089

63,364,742 61,471,702

Accrued interest payable 739,788 1,002,628

64,104,530$ 62,474,330$

Included in deposits is an amount of $719,036 (2018: $719,036) that is attributable to non-members.

29


17. MEMBERS AND OTHER DEPOSITS (Continued)

Concentration of members and other deposits is as follows:

% 2019 % 2018

$0 - $100,000 75.72 47,978,673$ 77.76 47,801,110$

$100,001 - $300,000 16.82 10,660,576 15.36 9,441,044

$300,001 - $500,000 3.65 2,312,229 3.91 2,404,963

$500,001 and over 3.81 2,413,264 2.97 1,824,585

100 63,364,742 100.00 61,471,702

Accrued interest payable 739,788 1,002,628

64,104,530$ 62,474,330$

a) Members’ Share Deposits – This account is the anchor for the Credit Union; it is mandatory that members deposit a minimum of $20.00 per week or $80.00 per month. This account can be used as a retirement account as members are discouraged from making withdrawals from this account except under extreme circumstances. This account can also be used as the collateral account for consumer loans. Interest is paid on this account at a range of 2% to 3% (2018: 3.00% to 3.50%) per annum depending on the balance of the account.

b) Term Deposits – Term deposits have a minimum duration of one year (2018: one year) and a minimum deposit requirement of $1,000. The deposits bear interest at rates ranging from 2.00% to 5.50% (2018: 3.00% to 5.50%).

c) Educational Savings – Educational savings account is designed to assist members preparing for their

children education or for a designated child college expenses. A child must be named for this account and must not be over the age of 18 years old. Interest on this account is paid at 4.5% per annum (2018: 5.00%).

d) House Plan Savings – This account is designed to assist members in saving for acquisition of a home.

Interest is calculated at 3.0% (2018: 3.5%).

e) Deposit Accounts – This is a regular savings account. There is a free access to the balance of this account, and members may use this account for salary deposit or any other saving purpose. No interest is paid on this account.

f) Christmas Savings – The Christmas savings account is an additional savings vehicle for members

during the Christmas period. Members can deposit funds to this account at any time during the year. Interest is calculated at 3.0% (2018: 3.5%).

g) Back-to-School Account – The purpose of this account is to aide members in preparing for school fees

and associated expenses that are due at the beginning of each semester/term. Interest is paid on this account at 1.0% (2018: 1.5%).

30


18. QUALIFYING SHARES

The movement in the qualifying shares is as follows:

2019 2018


Issued during the year 189,570 180,346

Withdrawals and transfers (139,200) (239,351)


At December 31, 2019, there were 7,061 members (2018: 6,809 members) in the Credit Union. Included in the qualifying shares are junior co-operative members with a total value of $516 (2018: $346).

19. OTHER RESERVES

i) Statutory Reserve

The movement in the statutory reserve is as follows:

2019 2018


Transfer from retained earnings - 400,000


Requirement (10% of total assets) 7,040,910 6,923,106

Deficiency in statutory reserve (2,745,126)$ (2,627,322)$

The requirement to hold 10% of the Credit Union’s assets in a statutory reserve in members’ equity has

not been met. The current amount of the statutory reserve in equity is 6.13% (2018: 6.20%) of total

assets.

ii) Fair Value Reserve

The movement in the fair value reserve is as follows:

2019 2018

Balance, beginning of year 374,993$ 419,814$

Net change in fair value of quoted equities during the year 32,135 (44,821)

Balance, end of year 407,128$ 374,993$

31


20. LOAN INTEREST INCOME

Loan interest income consists of interest earned on loans receivable from members.

2019 2018

Consumer 2,226,710$ 1,753,628$

Revolving line of credit 667,743 1,181,833

Mortgage 248,288 421,756

Debt consolidation 796,731 351,079

Auto 14,807 4,406

Other 1,308 6,469

3,955,587$ 3,719,171$

21. INVESTMENT INTEREST INCOME

Investment interest income consists of interest earned on investments held by the Credit Union.

2019 2018

Term deposits 200,789$ 250,210$

Bahamas Government Registered Stock 121,754 131,565

Bahamas Government Treasury Note 135,434 132,430

Current accounts 2,910 20,781

Bahamas First Series 2 Corporate Bonds 6,250 6,250

467,137$ 541,236$

22. DEPOSIT INTEREST EXPENSE

Interest expense on members’ deposits during the year is as follows:

2019 2018

Members' share deposits 736,287$ 839,090$

Term deposits 662,322 782,001

Educational savings 85,380 92,145

House plan savings 42,909 46,205

Other deposit accounts 40,635 48,647

Christmas savings 22,570 28,482

1,590,103$ 1,836,570$

Included in interest expense on members’ share deposits, is an amount of $30,847 (2018: $27,667) that is attributable to two non-member depositors.

32


23. OTHER INCOME

Other income consists of the following:

2019 2018

Service charges 578,314$ 389,655$

Credits and debits cards fees 63,404 50,907

Other 63,293 95,289

Lease income 40,300 27,600

Dividends 34,637 50,537

Entrance fees 11,887 11,362

Liabilities written-off 16,322 24,718

808,157$ 650,068$

Lease income pertains to rentals earned on the Credit Union’s investment properties.

24. OPERATING EXPENSES

Operating expenses are comprised of the following:

2019 2018

Personnel

Salaries 1,184,840$ 1,052,214$

Group health insurance 118,656 114,189

Vacation pay 113,321 109,380

Staff pension (Note 26) 93,460 71,311

Travel 113,251 127,429

Employee training and development 33,175 30,080

Christmas bonus 70,590 63,165

National insurance contribution 64,046 59,043

Overtime 15,775 12,216

Other employee benefits 53,452 47,486

1,860,566$ 1,686,513$

33


24. OPERATING EXPENSES (Continued)

2019 2018

Occupancy

Utilities 197,632$ 166,447$

Rent - 86,934

Security 50,304 53,791

Repairs and maintenance 110,608 67,428

Insurance - building and contents 26,946 26,890

Real property tax 9,887 8,231

Lease Liability 9,320 -

404,697 409,721

General business

Professional and legal fees 119,224 53,854

Insurance - general 12,298 14,333

Value Added Tax (VAT) 96,536 65,561

Vehicles 22,400 24,525

Stationery supplies 30,783 27,158

Bank charges 14,664 15,712

Office supplies 18,246 14,835

Equipment maintenance 5,015 6,725

Courier and postage 3,137 8,916

Loss on disposal of assets 80,428 4,578

Other expenses 3,747 12,754

406,478 248,951

Organizational

Board and committee meetings 133,943 77,729

Annual general meeting 24,497 20,897

Officials development and travel 7,925 8,221

Insurance - Officers liabilities 4,653 4,650


173,418 113,897

Depreciation

Building - investment property 42,800 41,364

Furniture and fixtures 37,903 32,728

Building and improvements 16,400 16,469

Computer hardware and software 28,179 21,126

Vehicles 17,493 6,623

Leasehold improvements and right of use assets 98,544 9,373

241,319$ 127,683$

34


24. OPERATING EXPENSES (Continued)

2019 2018

Members' insurance

Share/loan insurance premium 179,246$ 152,190$

Stabilization fee 22,032 20,202

201,278 172,392

Computer costs

Computer maintenance 60,988 49,905

Computer stationery supplies 5,070 3,596

66,058 53,501

Marketing

Advertising and promotions 94,336 84,132

Donations 4,965 3,898

99,301 88,030

3,453,115$ 2,900,688$

25. RELATED PARTY BALANCES AND TRANSACTIONS

The following balances and transactions are held or conducted directly or indirectly by or with related parties:

2019 2018

Assets

Loans receivable, net 522,446$ 550,220$

Liabilities

Interest payable 3,548$ 2,572$

Term deposits 389,644$ 255,371$

Other deposits 107,635$ 94,673$

Share deposits 695,633$ 616,282$

Equity

Qualifying shares 2,800$ 2,800$

Income

Interest income on loans receivable 48,849$ 43,964$

Expenses

Interest expense on deposits 42,056$ 31,339$

Key management, board and committee compensation 159,465$ 157,857$

35


26. PENSION PLAN

The Credit Union has a Participation Agreement with Bahamas Hotel and Allied Industries Pension Fund (BHAIPF). BHAIPF is a defined contribution retirement plan (the “Plan”) administered by Providence Advisors Limited. The Credit Union contributes an amount equivalent to 5.00% of the employees’ weekly salaries to the Plan. Total pension cost charged to operations amounted to $93,460 (2018: $71,311).

27. FINANCIAL RISK MANAGEMENT

The Credit Union has exposure to the following risks from its use of financial instruments:

27.1. Credit risk 27.2. Liquidity risk 27.3. Market risk 27.4. Interest rate risk

This note presents information about the Credit Union’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the Credit Union’s risk management framework.

The Credit Union’s risk management policies are established to identify and analyze the risks faced by the Credit Union, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Credit Union’s activities.

27.1. Credit risk

Credit risk is the risk of financial loss arising if a customer or counter-party fails to meet its contractual obligations. The Credit Union is exposed to credit risk from deposits and banks and other financial institutions including the League, loans to members, investments in debt securities, and other receivables. The most significant credit risk for the Credit Union is on loan to members.

Loans to Members and Credit Policy The Credit Union controls credit risk by the application of credit approvals, limits, and monitoring procedures. The Credit Union ensures that loans are extended to members with appropriate credit history and an internal mechanism exists to monitor the granting of credit and the management of credit exposures. It is also the Credit Union’s policy to trade with recognised and creditworthy third parties.

The Board of Directors is responsible for establishing credit policies. The Credit Committee has oversight responsibility for the credit risk management process, including reviewing and assessing credit risk. There is a documented credit policy in place which guides the Credit Union’s credit review process. The Credit Committee reports to the Board of Directors on a monthly basis.

Collateral – The Credit Union holds collateral against loans, depending on the type of loans and the risk rating assigned to the member. The required collateral is set out in the loan policy manual issued by the Credit Union.

Write-off policy – The Credit Union writes off loans and any related allowances for impairment losses when it is determined that the loans are uncollectible.

36


27. FINANCIAL RISK MANAGEMENT (Continued)

27.1. Credit risk (Continued Maximum exposure to credit risk – Loans to Members The following table below sets out information about the Credit Union’s maximum exposure to credit

risk on loans to its members at the end of the reporting date:

Stage 1 Stage 2 Stage 3 Total

Loans to members before credit losses 32,452,504$ 299,239$ 3,915,288$ 36,667,031$

Allowance for credit losses (98,523) (5,806) (1,637,743) (1,742,072)

32,353,981$ 293,433$ 2,277,545$ 34,924,959$

Stage 1 Stage 2 Stage 3 Total

Loans to members before credit losses 28,179,981$ 123,757$ 4,414,800$ 32,718,538$

Allowance for credit losses (68,511) (9,187) (2,143,892) (2,221,590)

28,111,470$ 114,570$ 2,270,908$ 30,496,948$

Allowance for Credit Losses

Allowance for Credit Losses



27.2. Liquidity risk

Liquidity risk is the risk that the Credit Union will not be able to meet its financial obligations as they fall due. The Credit Union’s approach to managing liquidity is to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions. The Credit Union ensures that it has sufficient liquid assets to settle currently maturing obligations. The maturity profile of the Credit Union’s financial liabilities and the liquidity gap are disclosed in Note 28.

27.3. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Credit Union’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Credit Union is exposed to market risk on investments in that the Credit Union may not be able to readily dispose of its holdings when it chooses and also that the price obtained on disposal may be below that at which the investment is included in the Credit Union’s financial statements. The Credit Union’s market risk is managed by the Board of Directors through diversification of the investment portfolio across a wide range of financial assets.

27.4. Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Cash balances and short term investments are not subject to significant interest rate risk due to their short-term nature. The Credit Union’s loans receivable and members’ deposits have fixed interest thus there is no significant exposure to interest rate risk on these instruments. The investments in bonds and Bahamas Government Registered Stock have interest rates based on the Bahamas Prime rate of 4.75% which is set by the Central Bank of the Bahamas and is also not considered exposed to significant fluctuations.

37


28. MATURITY OF SIGNIFICANT ASSETS AND LIABILITIES

Maturity of significant assets and liabilities consist of the following:

Within 3

Months

3 to 6

Months

6 to 12

Months

1 to 3

Years

3 to 5

Years Over 5 Years Total

Financial assets:

Cash and cash equivalents 2,982,410$ -$ -$ -$ -$ -$ 2,982,410$

Short-term investments 2,009,969 3,518,816 1,091,433 1,646,384 - - 8,266,602

Deposits with the League 13,655,415 - - - - - 13,655,415

Other assets 563,114 - - - - - 563,114

Financial investments 1,421,923 - - - 3,700 2,402,000 3,827,623

Loans receivable 66,149 117,232 750,519 4,836,751 12,418,969 17,028,101 35,217,721

20,698,980 3,636,048 1,841,952 6,483,135 12,422,669 19,430,101 64,512,885


Accrued expenses and

other liabilities 552,612 - - - - - 552,612

Members and other deposits 47,453,886 3,602,470 5,774,628 4,606,811 2,666,735 - 64,104,530

48,006,498 3,602,470 5,774,628 4,606,811 2,666,735 - 64,657,142

Liquidity gap (27,307,518)$ 33,578$ (3,932,676)$ 1,876,324$ 9,755,934$ 19,430,101$ (144,257)$

Within 3

Months

3 to 6

Months

6 to 12

Months

1 to 3

Years

3 to 5

Years Over 5 Years Total

Financial assets:

Cash and cash equivalents 5,197,743$ -$ 1,579,191$ 1,646,384$ -$ -$ 8,423,318$

Short-term investments - 6,448,610 - - - - 6,448,610

Deposits with the League 13,261,606 - - - - - 13,261,606

Other assets 503,413 - - - - - 503,413

Financial investments 1,359,288 - - - - 2,405,700 3,764,988

Loans receivable 378,393 142,894 540,378 5,230,420 12,888,287 13,000,004 32,180,376

20,700,443 6,591,504 2,119,569 6,876,804 12,888,287 15,405,704 64,582,311


Accrued expenses and

other liabilities 393,262 - - - - - 393,262

Members and other deposits 45,022,864 4,490,458 7,355,704 3,219,744 2,385,560 - 62,474,330

45,416,126 4,490,458 7,355,704 3,219,744 2,385,560 - 62,867,592

Liquidity gap (24,715,683)$ 2,101,046$ (5,236,135)$ 3,657,060$ 10,502,727$ 15,405,704$ 1,714,719$



38


29. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date.

Most of the Credit Union’s financial instruments lack an available trading market. Therefore, these

instruments have been fair valued using other valuation techniques and may not necessarily be indicative

of the amounts realizable on the settlement of the instruments.

a) Financial instruments not measured at fair value: i) The fair value of liquid assets maturing within one year is assumed to approximate their carrying

amount. This assumption is applied to liquid assets and the short-term elements of all other financial assets and financial liabilities.

ii) The fair values of variable rate financial instruments are assumed to approximate their carrying amounts.

iii) The fair value of fixed rate loans is estimated by comparing market interest rates when the loans were granted with current market rates offered on similar loans. For match-funded loans, the fair value is assumed to be equal to their carrying value, as gains and losses offset each other. Changes in the credit quality of loans within the portfolio are not taken into account in determining gross fair values, as the impact of credit risk is recognized separately by deducting the amount of the provisions for credit losses from both the book and fair values.

iv) The fair value of members’ regular shares and deposits, with no specific maturity is assumed to be the amount payable on demand at the reporting date.

v) The fair values of all other financial instruments not mentioned above are assumed to approximate their carrying values.

b) Financial instruments measured at fair value: Quoted securities classified as available-for-sale are measured by reference to quoted market prices on the Bahamas International Stock Exchange (BISX).

c) Fair value hierarchy: The following table provides an analysis of financial instruments held at the reporting date that, subsequent to initial recognition, are measured at fair value. The financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observable as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level consists of listed equity securities traded on the Bahamas International Stock Exchange (BISX).

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). This includes government debt securities and other securities with observable inputs.

Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. The Credit Union has no financial instruments categorized in this level.

39


29. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

c) Fair value hierarchy (Continued)

The following table analyzes within the fair value hierarchy, the Credit Union’s financial assets measured at fair value as at the statement of financial position date:

Level 1 Level 2 Level 3 Total

Financial instruments

Marketable securities 356,012$ 1,008,561$ 57,350$ 1,421,923$

Level 1 Level 2 Level 3 Total

Financial instruments

Marketable securities 340,530$ 963,808$ 54,950$ 1,359,288$



30. CAPITAL REQUIREMENTS

The Credit Union maintains an actively managed capital base to cover risks inherent in the business. The adequacy of the credit Union’s capital is monitored using, among other measures, the rules and ratios established by the Department of Cooperatives.

The primary objectives of the Credit Union’s capital management are to ensure that it complies with externally imposed capital requirements and that the Credit Union maintains strong capital ratios in order to support its business and to safe guard its ability to continue as a going concern to maximize members’ value.

At December 31, 2019, the capital structure of the Credit Union consists of qualifying shares, reserves and accumulated earnings. On-going capital management includes the payment of dividends, new qualifying share issuances and obtaining accumulated earnings.

40


31. EVENTS AFTER THE REPORTING PERIOD

During the first quarter of 2020, consistent with other countries, The Bahamas was impacted by the global pandemic COVID-19 (commonly referred to as the Coronavirus), which has created uncertainty regarding the future economic performance of The Bahamas. The Credit Union’s financial position and performance is expected to be negatively impacted by the strategies deployed by the government of The Bahamas and other countries, and other stakeholders to address the health, economic and other issues as a result of the global pandemic, which in turn are expected to result in significant contractions in GDP and increases in unemployment in The Bahamas.

The impact on the financial position and financial performance of the Credit Union for the year ended December 31, 2020 and beyond is currently impractical to determine, as decisions and strategies are continually being developed and amended based on the health risks posed by COVID-19. However, the result of the global pandemic will negatively impact the Credit Union’s cash flows, as the Central Bank of The Bahamas allowed loan payments to be deferred for three months. Therefore, the expected consequences are: reduced loan payments from members, reduced loan interest income, and lower operating expenses.

42

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Profit or Loss – Nassau, Head Office For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

FINANCE INCOME

Loan interest income 2,999,668$ 2,914,189$

Investment interest income 333,895 401,805

Interest in deposits with League 182,010 178,412

Total finance income 3,515,573 3,494,406

FINANCE COST

Deposit interest expense 1,196,711 1,400,509

Total finance cost 1,196,711 1,400,509

NET FINANCE INCOME 2,318,862 2,093,897

OTHER INCOME 609,476 624,534

OPERATING EXPENSES

Personnel 1,255,763 1,214,483

Provision for credit losses 63,851 324,600

Occupancy 261,748 341,586

General business 247,926 206,135

Members' insurance 151,488 134,956


Organizational 105,871 61,929

Marketing 68,442 58,664

Computer expense 55,842 41,449

Total operating expenses 2,386,522 2,494,489

PROFIT FOR THE YEAR 541,816 223,942

OTHER COMPREHENSIVE INCOME

Nassau Head Office - net comprehensive (loss)/income 541,816 223,942

Freeport Branch - net comprehensive loss (238,624) (116,618)

Andros Branch - net comprehensive loss (64,910) -

Berry Islands Branch - net comprehensive loss (91,729) -

NET COMPREHENSIVE (LOSS)/INCOME 146,553$ 107,324$

43

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Nassau, Head Office For the year ended December 31, 2019 (Expressed in Bahamian dollars)

Personnel

Salaries 778,517$ 689,980$


Vacation pay 92,434 89,590

Staff pension 79,433 58,105


Travel 19,577 103,296



Overtime 13,213 11,473


1,255,763 1,214,483


Occupancy

Utilities 148,480 134,438

Rent - 82,734

Security 29,067 42,792



Real property tax 9,032 8,231


261,748 341,586

General business




Vehicles 14,938 14,827




Equipment maintenance 5,015 6,725

Courier and postage 2,261 7,618

(Gain)/loss on disposal of assets (1,521) 2,846


247,926$ 206,135$

44

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Nassau, Head Office (Continued) For the year ended December 31, 2019 (Expressed in Bahamian dollars)

Organizational

Board and committee meetings 76,658$ 41,535$





105,871 61,929

Depreciation

Building - investment property 42,800 41,364


Building and improvements 16,400 16,469


Vehicles 13,128 5,634

Leasehold improvements and right of use assets 55,360 4,866

175,591 110,687

Members' insurance

Share/loan insurance premium 134,751 119,497


151,488 134,956

Computer costs


Computer stationery supplies 2,002 87

55,842 41,449

Marketing



68,442 58,664

2,452,661$ 2,494,489$

45

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Profit or Loss – Freeport Branch For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

FINANCE INCOME

Loan interest income 870,887$ 804,982$

Investment interest income 133,229 139,431

Interest in deposits with League 11,799 30,735

Total finance income 1,015,915 975,148

FINANCE COST

Deposit interest expense 375,122 436,061

Total finance cost 375,122 436,061

NET FINANCE INCOME 640,793 539,087

OTHER INCOME 157,209 135,794

OPERATING EXPENSES

Personnel 464,630 472,030

Provision for credit losses 166,570 60,700

Occupancy 114,013 68,135

General business 132,577 42,816

Members' insurance 46,977 37,436


Organizational 65,117 51,968

Marketing 18,836 29,366

Computer expense 9,087 12,052

Total operating expenses 1,036,626 791,499

NET COMPREHENSIVE LOSS (238,624)$ (116,618)$

46

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Freeport Branch For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

Personnel

Salaries 342,693$ 362,234$


Vacation pay 20,887 19,790

Staff pension 14,027 13,206


Travel 29,535 24,133



Overtime 380 743


464,630 472,030


Occupancy

Utilities 40,916 32,009

Rent - 4,200

Security 12,511 10,999



Real property tax 855 -

114,013 68,135

General business




Vehicles 6,785 9,698




Courier and postage 598 1,298

Loss on disposal of assets 81,949 1,732

Other expenses 457 424

132,577$ 42,816$

47

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Freeport Branch (Continued) For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

Organizational

Board and committee meetings 56,426$ 36,194$




65,117 51,968

Depreciation



Vehicles 2,360 989

Leasehold improvements 4,532 4,507

18,819 16,996

Members' insurance

Share/loan insurance premium 42,069 32,693


46,977 37,436

Computer costs


Computer stationery supplies 3,068 3,509

9,087 12,052

Marketing



18,836 29,366

1,056,674$ 791,499$

48

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Profit or Loss – Andros Branch For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

FINANCE INCOME

Loan interest income 81,570$ -$

Investment interest income 13 -

Total finance income 81,583 -

FINANCE COST

Deposit interest expense 14,506 -

Total finance cost 14,506 -

NET FINANCE INCOME 67,077 -

OTHER INCOME 35,931 -

OPERATING EXPENSES

Personnel 89,698 -

Provision for credit losses 4,366 -

Occupancy 17,026 -

General business 18,043 -

Members' insurance 1,828 -

Depreciation 28,912 -

Organizational 1,654 -

Marketing 6,286 -

Computer expense 105 -

Total operating expenses 167,918 -

NET COMPREHENSIVE LOSS (64,910)$ -$

49

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Andros Branch For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

Personnel

Salaries 43,624$ -$

Employee training and development 1,245 -

Travel 37,597 -

Christmas bonus 2,042 -

National insurance contribution 2,685 -

Overtime 1,851 -

Other employee benefits 654 -

89,698 -

Provision for loan impairment 4,366 -

Occupancy

Utilities 5,533 -

Rent - -

Security 2,135 -

Repairs and maintenance 4,553 -

Insurance - building and contents 3,273 -


15,494 -

General business

Insurance - general 4,043 -

Value Added Tax (VAT) 5,459 -

Vehicles 59 -

Stationery supplies 7,641 -

Bank charges 58 -

Office supplies 716 -

Courier and postage 67 -

18,043 -

Organizational

Board and committee meetings 675 -

Annual general meeting 779 -

Other expenses 200 -

1,654$ -$

50

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Andros Branch (Continued) For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

Depreciation

Furniture and fixtures 3,346$ -$

Computer hardware and software 572 -

Leasehold improvements and right of use assets 24,994 -

28,912 -

Members' insurance

Share/loan insurance premium 1,573 -

Stabilization fee 255 -

1,828 -

Computer costs

Computer maintenance 105 -

Marketing

Advertising and promotions 6,286 -

166,386$ -$

51

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Profit or Loss – Berry Islands Branch For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

FINANCE INCOME

Loan interest income 3,462$ -$

Total finance income 3,462 -

FINANCE COST

Deposit interest expense 3,764 -

Total finance cost 3,764 -

NET FINANCE LOSS (302) -

OTHER INCOME 5,542 -

OPERATING EXPENSES

Personnel 50,475 -

Provision for credit losses 134 -

Occupancy 11,909 -

General business 7,932 -

Members' insurance 985 -

Depreciation 17,997 -

Organizational 776 -

Marketing 5,737 -

Computer expense 1,024 -

Total operating expenses 96,969 -

NET COMPREHENSIVE LOSS (91,729)$ -$

52

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Berry Islands Branch For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

Personnel

Salaries 20,006$ -$

Employee training and development 977 -

Travel 26,542 -

Christmas bonus 1,000 -

National insurance contribution 1,265 -

Overtime 331 -

Other employee benefits 354 -

50,475 -

Provision for loan impairment 134 -

Occupancy

Utilities 2,703 -

Security 6,591 -

Repairs and maintenance 1,047 -

Insurance - building and contents 631 -

Lease Liability 937 -

11,909 -

General business

Insurance - general 3,723 -

Value Added Tax (VAT) 3,194 -

Vehicles 618 -

Stationery supplies 135 -

Bank charges 51 -

Courier and postage 211 -

7,932 -

Organizational

Board and committee meetings 184 -

Annual general meeting 592 -

776$ -$

53

NATIONAL WORKERS CO-OPERATIVE CREDIT UNION LIMITED Statement of Operating Expenses – Berry Islands Branch (Continued) For the year ended December 31, 2019 (Expressed in Bahamian dollars)

2019 2018

Depreciation

Furniture and fixtures 2,334$ -$

Vehicles 2,005 -

Leasehold improvements and right of use assets 13,658 -

17,997 -

Members' insurance

Share/loan insurance premium 853 -

Stabilization fee 132 -

985 -

Computer costs

Computer maintenance 1,024 -

Marketing

Advertising and promotions 5,582 -

Donations 155 -

5,737 -

96,969$ -$

Documents

Financial Statement of - National Workers Co-Operative