2022 Annual Report Accounts

REPORT and
ACCOUaN TS
rch 2022
Year ended 31 M
Year ended
31 March 2022
The Cumberland Report and Accounts 2022.indd 1 01/06/2022 16:25

FEEFO PLATINUM
SERVICE AWARD
4.8 In Cumbria
188k
Business Awards
out of
2.88bn
5.0 Charitable Donations
Total assets
CUSTOMER
SATISFACTION* LARGE BUSINESS
OF THE YEAR
STRATEGIC
REPORT
NET
One of the top
PROMOTER
100
GOVERNANCE
Our
CORPORATE
SCORE
REPORT
Source : Feefo
performance
83
Source: Best Companies

HIGHLIGHTS 8.6m companies in the North
STATEMENTS
West to work for
FINANCIAL
Profit before tax *
INFORMATION
OTHER
£422m SOLD
funds inflow*
Gross mortgage
Helped more than £93m
40%
lending*
500
first-time buyers into a
of senior positions
held by women * Those figures highlighted with an asterisk are a Group key
performance indicator (KPI). For information on how these are
home of their own calculated, please see page 139.
All information and data correct as at 31 March 2022

2
The Cumberland Report and Accounts 2022.indd 2-3 01/06/2022 16:26

Strategic Report 6
Chairman’s Welcome 8
CEO’s Business Review 10
What We Do, and Why We Do It 16
Our Communities 20
Our People 24
Our Sustainability Journey 28
STRATEGIC
Risk Report 34
REPORT
CFO’s Review 38
Corporate Governance Report 51
Meet the Board of Directors 54
Meet the Senior Leadership Team 58
GOVERNANCE
CORPORATE
How the Board Works 61
REPORT
Nomination and Governance Committee Report 66
T E N T S
Board Risk Committee Report 70
C O N
Audit Committee Report 74
People, Remuneration and Culture Committee Report 82
STATEMENTS
FINANCIAL
Directors’ Report 88
Statement of Directors’ Responsibilities 90
Financial Statements 92
Independent Auditor’s Report 94
Group and Society Income Statements 103
INFORMATION
Group and Society Balance Sheets 104
OTHER
Statements of Changes in Members’ Interest 105
Consolidated Cash Flow Statement 106
Notes to the Accounts 107
Annual Business Statement 133
Other Information 136
Glossary 138
KPI Calculations 139
UK Corporate Governance Code 140

TRAT E
S Report GIC
STRATEGIC
REPORT
Chairman’s Welcome 8
CEO’s Review 10
What We Do, and Why We Do It 16
Our Communities 20
Our People 24
Our Sustainability Journey 28
Risk Report 34
CFO’s Review 38

IR M
CHA elcome AN ’S
W
On behalf of your Board of Directors, I am delighted to present Modernisation

Cumberland Building Society’s Annual Report and Accounts for the
year ended 31 March 2022. The Cumberland is known and loved for its traditional approach and
values. But holding onto our traditional values does not mean we
It has been another challenging and unpredictable period as the are old-fashioned. We are at the end of the first part of an extensive
STRATEGIC
pandemic continued to disrupt the lives of our people, our customers
REPORT
transformation programme that will bring great benefits for all of
and our business for far longer than many might have predicted. our customers. Our Cumberland 2025 plan will provide new digital
Despite this, our team has continued to do an outstanding job under channels, making it easier, quicker and more convenient for you to
sometimes extremely trying circumstances and our business has engage with us and manage your Cumberland accounts, whenever
grown stronger as a result. and wherever it suits you. Our branch customers will also benefit from
a more streamlined, efficient way of working ‘behind the scenes’ too.
I’m proud to say that the hard work and commitment of our people
has not just been recognised by us, but resoundingly by our customers Financial position & profit expectation
and our industry peers alike, contributing to a range of awards we
have received this year. Financially, The Cumberland remains in a strong position. Despite
the uncertainties of the pandemic, our arrears and bad debts remain
Values & Purpose remarkably low. This is because we’ve maintained focus on our core
residential business - lending to people so that they can buy a home.
The Cumberland is built upon an authentic set of values that are
focused on our customers, our people, and the communities we live On the commercial side, our specialist sector expertise is in the
and work in. I’ve never been more proud of the way we do things
I’ve never been

hospitality sector. After the challenges many have experienced just
at The Cumberland. I truly believe this approach is what makes our trying to keep going during the lockdowns and other Covid-related
Society different and unique. restrictions, we are pleased to see so many businesses are now back
more proud of the

on their feet and thriving again. Using their individual business
Having previously expressed our purpose through Brighter Banking,
expertise, they have made the most of the increased trend towards
we have evolved and refined this to better reflect the needs of our
way we do things
holidaying in the UK. The Cumberland has supported them every
customers and the wider world around us.
step of the way as they have had to pivot and cope with the feast or
We have come through the challenges and tragedies of Covid, with famine nature of running hospitality and holiday businesses this year.
at The Cumberland
its detrimental effect on many lives and livelihoods, and many in our We are looking forward to seeing our commercial customers continue
communities face ongoing hardship. The rising cost of living, including, to rebuild and prosper this coming year.
for example, increasing fuel costs and energy charges, will no doubt
Overall, the next few years are going to be a period of investment for
have a significant impact on many households and businesses as
us, with our focus firmly set on the next stage of our transformation
the year unfolds, and we must continue to provide and enhance our
journey, building a better building society for the long-term benefit
support for those that need it wherever we can. Our communities
of its members. The Cumberland has been serving the people of
continue to face difficult social challenges, such as a lack of financial
Cumbria and the surrounding areas for more than 170 years and the
education, mental health issues and discrimination, all of which are
work we do now will ensure we continue to flourish and prosper by
areas in which we believe we have a part to play, and we are acutely
improving and enhancing our services and making a real difference
aware of our impact on the environment.
in our communities for many more years to come.
By embracing our new purpose, which we present on page 16, we will
focus on these issues, and we are committing to creating banking John Hooper
Chairman
experiences that are kinder to people and planet. You can read more
J OH N about this in the Chief Executive Officer’s business review.

1 June 2022
8

KINDER BANKING.
It’s in our
It is never easy transitioning from a
sustained period of instability and
I would like to take this
NATURE.
opportunity to sincerely
constantly changing rules. We all
experienced the challenges brought by
We’ll continue to
thank each and every
the considerably longer than expected Our purpose
continuation of the Covid-19 pandemic and
nd do what is kind,
member of the Cumberla
its effects on business, personal finances, Look at what we’ve got here in our region. We’re in perhaps the most beautiful corner of the
and people’s individual health and

ed not what is easy, UK. We have a strong sense of community – and we have creative and exciting businesses you
wellbeing. Managing a financial institution

family for their continu and secure a long,
won’t find anywhere else.
dedication and support.

during this time has been challenging, but
strong future
Community and kindness have been at the heart of The Cumberland since 1850, but what
dare I say that The Cumberland was perhaps
STRATEGIC
this means to our customers, and how we show it, has continually evolved. As we develop
REPORT
better prepared than some others. We have
been able to draw on nearly two centuries for our building our business to remain sustainable for the future, now is the right time to evolve our Society’s
purpose to align with the changing needs of our customers, colleagues and communities.
of solid financial prudence. However, it is
the resilience, outstanding attitude and
society. The purpose is our ‘guiding light’ that drives all that we do.
commitment of a fantastic team of people

Over the last year, we took time to listen to our colleagues, our customers and a range of other
that has again ensured another strong year
stakeholders in a series of surveys and focus groups to understand what people think and
for the business.
expect of us. I’m pleased to say the results were positive. The feedback suggested both our
customers and colleagues alike want to see us continue making a real difference but, in order
In the face of some of the strongest challenges
that what we do not be restricted to our immediate stakeholders, we must consider our impact
our people are likely to experience, they
on our society and the wider world around us.
helped deliver another year of growth,
established the platform we need for the next
As a result, we have refined our business purpose and relaunched it as we head into this new
stage of our transformation programme, and
financial year. Our goal is to create a banking experience that is kinder to people and planet,
continued to provide exceptional award-
and this will drive the decisions we make, the actions we take and the way we measure our
winning service to our customers.
impact going forward. The purpose manifests itself in our new strapline ‘Kinder banking. It’s
in our nature.’ and I am very much looking forward to seeing the business focus on this as we
progress with our plans.
We’ll continue to do what is kind, not what is easy, and secure a long, strong future for our
building society. This next stage in our journey is a very exciting one, and our new purpose
will ensure we’re looking out for our customers, communities, and countryside – now and for
generations to come.
CHIEF EXEC U T IVE Supporting our people
It became clear early last year that the new ways of working that were forced upon us during
Review
the pandemic, and which our people adapted to so well during 2020 and 2021, would
Officer’s Business
continue in some way.
Ahead of our head office teams returning to the workplace, we made some
significant changes to the layout and design in response to keeping people safe
and helping them work even better together. Hybrid working has now become our
DES standard practice, with people still working from home part of the time and sharing
reconfigured office spaces.
10

Alex Windle took up
the new role of Chief
Our head office has a new look, in line with the new ways in which kept to a minimum. Earlier this year – at last – we returned to a
Transformation Officer
we are using the spaces, with breakout booths, areas for small place where we felt it safe to reintroduce an element of face-to-face during the year, and is
responsible for delivering
groups to sit together and mini meeting areas. We understand that appointment based service, and it has been great to see smiling
the future digital needs
for some employees, the anxieties of the last two years will take customer faces back in our branches. of our customers and
our business.
time to reduce, and for other people, working from home has been
convenient and enjoyable, and they have been able to thrive and be Improving our business for the benefit of
as productive as they were in the office. We support hybrid working our customers Our head office reopened
wherever it is possible for a role and have not issued a prescriptive earlier this year after a redesign
to provide an improved and
instruction about who must be in the office and when. As a business, Changing behaviours have meant many of our customers are more efficient environment for
we have experienced the benefits of this, with employees who feel increasingly opting to telephone us. During the year we have hybrid working.
appreciated and respected, trusted to do their best work in the spirit invested in our Carlisle-based Customer Care team, bringing in
of autonomy and responsibility. and training more people to be available on the phones to help
customers. We have not changed in our commitment to offering The year saw us continue to build on our recognised on the world stage is quite simply and is now at the end of the first stage.
Our people are professional and committed and each team multiple channels of communication, depending on what suits each reputation for excellence in customer service. amazing, and testament to the impact of our The groundwork required is complete
STRATEGIC
individual customer, whether that be face-to-face in branch, over the In January, we were delighted to earn a team as they continue to pursue our goal of and this year will see us begin working on
REPORT
understands their own priorities and processes. We also recognise
that in the ‘new normal’, the opportunity for hybrid working will phone and, increasingly now, online. Feefo Platinum Trusted Service Award for the providing exceptional customer experiences. delivering the technological change.
help us to attract new talent to the business as we continue to grow second year in a row. Based on the ratings
our teams. This has given us access to some of the best talent in The hospitality sector is also bouncing back after two very feedback, we ask all our new customers to Looking ahead Transforming a multi-billion pound financial
the industry, allowing us to supplement and develop our people to challenging years of lockdowns. We’ve seen a return to growth in our give us, 9 out of 10* gave us 5 stars out of 5. services business is, unfortunately, not
further support us in achieving The Cumberland’s business objectives. business within the sector and have now invested in an intermediary We also collected the In-Cumbria Best Large This year was very much about resetting and a quick process. The first phase of the
channel that will help drive further growth in this area. Business of the Year award in November 2021. responding to the longer-term changes the programme has seen significant investment
Our branches have continued to deliver great service in often pandemic brought, but I’m pleased to say in planning, research and bringing in the
adverse conditions. There were times when national restrictions Earlier this year, we were thrilled to that these issues have had relatively little capability and capacity we need to make it
forced us to close or operate shorter hours, but disruption has been attend OPEX Week, part of the Business impact on our journey to Cumberland 2025. a success, as well as simplifying our business
Transformation World Summit in Miami, model. I’m minded to consider the old tailor’s
Florida, where members of our Operations As I wrote last year, our business needs to saying, “Measure twice, cut once.” These are
team picked up two global Operational undergo a transformation in order that it wise words, and it was absolutely vital to get
Excellence Awards. These were for Best can remain a sustainable, viable and vibrant the foundations of this programme right.
back
Based on the ratings feed
Transformation Project Delivering Customer society for our members and for future This has involved careful assessment of all
Excellence and Best Process Transformation generations. Our plan, called Cumberland of our current processes in order to prepare
ers to
we ask all our new custom Project Under 90 Days category for our end- 2025, is predominately focused on the digital them for digital transformation.
* ave us to-end bereavement process review. To be needs of both our customers and our business
give us, 9 out of 10 g
5 STARS
OUT OF 5 This year was very much about resetting and
responding to the longer-term changes the pandemic
brought, but I’m pleased to say that these issues
have had relatively little impact on our journey to
Cumberland 2025.
*1,074 out of 1,204 new customers (includes existing

12 customers who take a new product (e.g. mortgage renewals))

We’ve spent this year getting everything ready – without having Our annual financial reviews usually include discussion of strong
made any changes to our digital infrastructure yet, we’ve had a profits that are shared with our members. This year we have begun
phenomenal impact on the most critical of all our customer journeys, spending more of what we earn, investing in the future for our
the mortgage journey. We’ve reviewed a process, which used to take customer’s benefit. That means there will be a noticeable reduction
73 days from initial conversation to offer, and reduced that to just 12 in profits over the next few years, but it is absolutely necessary to do
We were thrilled to collect
days. This is just one example, but by making all of the improvements this now. To continue to return profits in the way we have over recent two accolades at the OPEX
Awards in Miami in January.
we can, we will ensure that the digital transformation itself will years would prevent us from making the changes we must make, to
be optimised and most effective. It can’t and shouldn’t happen allow the Society to thrive and continue to help customers for the
overnight. We are changing and we need to make sure that we, and next 170 years. We believe that our members understand this and are
our customers, are fully prepared for the change in order to get the supportive of the reinvestment.
most out of it.
Looking at the future, the next few years are going to be very exciting
Cumberland 2025 is predominantly focused on protecting and and we look forward to being able to share more details of our
delivering longevity for the Society. We’ve built a reputation over progress in next year’s report. We are lining up areas of our business
STRATEGIC
REPORT
172 years for being reliable, safe and secure, and that’s not going to and the ways we operate to allow us to provide additional benefits for
change. But some of the ways we deliver services to our customers our customers, so that they can bank the way they want to.
must change, in line with what they want from a modern financial
service provider.
Des Moore
Chief Executive Officer
1 June 2022
David Robinson joined our

business in 2021 to head up
our brand new intermediary
lending team.
ON CL U S
C in context ION
It is important too, that we consider our own aims and objectives in the context of what is going on in
the wider world. We can’t ignore the potential impact that the rising cost of living, increased energy
and fuel prices, and on-going adjustments to living with Covid are going to have on our customers.
It is clear that there will be a long period of recovery for many, before they achieve equilibrium or get
close to the normal they knew pre-2020.
We are continuing to build from our solid, strong and stable foundation, ensuring we can continue to
deliver the help our customers need in the ways our customers want. In the short term, there is hard work
and investment required to achieve this, and this will increase our costs and impact the profitability In November 2021 we were
named Best Large Business
of our Society over the next three years. However, we have built a sound platform on which we can
of the Year at the In Cumbria
continue to grow and transform in order to develop a prosperous future for our Society, our customers Business Awards.
and our local communities.
14

WHA T we do,
and WH Y we do it
STRATEGIC
REPORT
As a customer-owned organisation, we exist entirely for your benefit. We work hard to We’re driven by our values
provide you with long-term value by operating a financially robust business that offers
competitive savings and mortgage products, exceptional customer service, and supports
Our five core values underpin who we are and what we stand for. They form the basis of how
our shared communities and the wider environment.
we approach our business and they guide every decision we make. Our values are:
Our vision, purpose and strategic priorities
As Des wrote earlier in this report, this year we have refined our purpose based on feedback
Straight Forward Better
and insight from all our stakeholders. Our new purpose – ‘to create a banking experience that’s
Customer Led Responsible Thinking
kinder to people and planet’ – reflects our belief that our impact must
we put customers
Forward Together
we work hard to we do the right we embrace new we work as
extend beyond just helping people with their financial goals. first in everything
make things simpler. thing. ideas to continually one team.
we do.
We, our colleagues and our customers believe we have improve.
a responsibility to play our part in addressing
the social and environmental challenges
that we all face together.
These values, which were developed by our colleagues themselves, ensure we do the right
Our new purpose is our ‘North
thing by our customers, communities and people, and help us to make a positive difference
Star’, helping guide us, and
every day. We have embedded these values across our business, from the boardroom to the
ensuring we remain focussed
branches, sharing our culture with our colleagues and passing it on in everything we all do.
on what we’re here to do.
It will allow us to achieve
our ambitions of growth We’re proud of the culture these values have helped create, but we’re constantly looking for
and delivering the next ways we can improve. We talk about our values regularly, from informal chats through to
stage of ‘Cumberland formal governance decisions, ensuring they’re not just a sign on the wall or something we talk
2025’ – our transformation about once a year, but genuinely and consistently at the front of everyone’s mind. We also
programme to ensure our benchmark each one of our colleagues’ performance against the values.
business remains strong

and sustainable for current
and future generations.
16

Strategic priorities Transforming the business However, our customers and research have How we transform
told us that, despite their need for easy
online services, people still want to be
Our strategic priorities are what we’re concentrating on in order to deliver our growth and transformation plans. These are to: Three years ago, we set out our ambitions Every transformation project has to go
able to get in touch with people easily –
for Cumberland 2025. This is our plan for through a period of getting the foundations
1. Deliver the Cumberland 2025 transformation with pace and focus – safeguarding our business for the future. especially when they need help. Unlike many
how the business will be structured and right before the visible transformation can
other banks, this is at the heart of our 2025
2. Deliver exceptional customer experience and a kinder brand – whilst living our purpose, we aim to offer the best customer experiences in organised, so that it is in the best possible begin. We are meticulously evaluating our
transformation. Whilst we will offer our
the UK. shape for a prosperous future. We have processes and getting everything in the best
customers the digital services they need, we
a responsibility to our customers, our possible shape before we embark on the
3. Embed the right talent, culture and skills to enable us to grow and transform – we need to attract, develop and retain the right talent to remain committed to our telephone-based
people and our local communities to put digital shift, in order to make the transition
support our growth and transformation plan. customer care team and our branch service.
the right resources in place to ensure The as smooth and seamless as possible. The
Cumberland remains profitable, sustainable transition is about technology but, of course,
4. Grow lending safely and defend margin – we will responsibly balance the needs of our customers while ensuring our business remains
and compliant within the tight regulatory By adopting digital solutions that automate people are at the heart of this change. We
profitable so we can continue to grow.
framework required for all financial services. mundane processes, we can give our people have invested in new talent with outstanding
STRATEGIC
5. Protect the society and our members – we will take all necessary steps to ensure we protect our business and our stakeholders whilst we grow more time to focus on providing the human skills and experience to help steer us through
REPORT
and transform. touch. This will also make The Cumberland a this period and manage our new processes
The pandemic brought unexpected
better experience for our colleagues, as well in future.
challenges, and we supported our customers
Our ‘house’ (below) summarises our purpose and strategic priorities, as well as our values. In fact, we use this model to set the objectives of all
as providing better service for our customers.
and people safely through that time.
our colleagues, ensuring everyone’s contribution is aligned to our strategic direction.
Despite that, we’re still on course to deliver Profit
the transformation of the Cumberland, We know that some people are cautious,
developing the business using investment in even mistrustful, of using technology to

We have a rising balance sheet, which is very
technology, in people and in our day-to- manage their personal finances. This is an
important to any growing and prosperous
day processes and practices so that we can opportunity for us to identify and implement
business and, particularly for us this year,
continue to provide great products and the very highest standards of cyber security,
necessary in order to fund our transformation
service to the people of North West England with ongoing strategies and protections that
process. It is going to require a very significant
and South West Scotland and beyond. will increase confidence for our customers. It
investment over the next few years, which
will create greater flexibility for the business
means our success won’t equate to the same
Our To create a banking experience Why transform? to bring out new products faster and more
profit in the coming years. But in the fairly
Purpose that’s kinder to people and planet easily. We will also be able to respond to
short-term, this will result in a more efficient
changes in market demands in a more
Many people now expect an online service operation and more sustainable practises
agile way.
that is available round the clock, to suit their that will help drive business results, the
needs and lifestyles. Demand for online benefits of which will be felt for decades
services accelerated during the pandemic, to come.

Deliver the Cumberland 2025 transformation with pace and focus not just in banking but in all areas, including
retail. We need to ensure we can deliver the
sort of online service that our customers
Deliver Embed the right need and expect of The Cumberland.

exceptional culture, talent and Grow lending Protect the
Our customer skills to enable safely and defend society and our
Objectives experience and us to grow and our margin members
a kinder brand transform
Our Customer
Led
Straight
Forward
Responsible
Forward
Thinking
Better
Together
Values
18

ANTI-RACIST CUMBRIA
We were a part of this year’s Anti Racist Cumbria Summit, hosted
at Brewery Arts in Kendal. As event partners, we were able to
experience a day full of powerful conversations, inspiration and
learning. We have embarked on an anti-racist journey to better
understand the part we play, and our Head of Learning and
Development, Shelley Hayward, represented The Cumberland
on the panel discussion, ‘Is Anti-Racism Relevant in All White
Spaces?’ The range of practical workshops, inspirational speakers,
local topics and panel discussions were invaluable.
STRATEGIC
We also invited Janett Walker, CEO of Anti Racist Cumbria to
REPORT
host a series of virtual workshops for all colleagues to take part in.
Attendees, which numbered over 120, explored a range of themes,
and had in-depth discussions on racism and, in turn, how we could
establish ourselves as an anti-racist organisation.
Our
COMMUNITIES
PLEDGE FOR VOTES
We’re proud to be part of our communities.
Local branches of Mind and Support in Mind Scotland were the
We believe in doing what’s right and part of this beneficiaries of our Pledge for Votes scheme last year. We pledged
means supporting those individuals, businesses and to donate £1 to the charity for every vote we received in our Annual
General Meeting. However, as Covid restrictions meant we couldn’t
organisations that share our own values and give
take in votes in our branches and voting was down, we matched
something back to our region. the previous year’s donation of £19,000. The money is being used
by Mind to promote understanding of mental health across our
region through advice and support to those experiencing issues.
Whether it’s sponsorship, education or financial
support, we’re privileged to be able to help others This year, we’re pleased to be working with Samaritans, and we’re
achieve our common goals. delighted to be increasing the amount of donation to £2 for every
vote received, so please ensure you remember to cast your vote!
tivities we’ve been

................>
mbe r of some of the ac We matched the previous
Here’s a small nu ear. year’s donation of
involved in during the y
20
19,000
R U M
AGE UK LANCASHIRE PREST O N M U S L IM F O
We provided Preston
Muslim Forum with a
We were able to support AgeUK Lancashire launch a series of free We provided Preston Muslim Forum with a grant of £8,300 last year, which helped them
workshops to help people plan for their retirement with a grant provide a wide range of free services and support to disadvantaged people in the city.
of £10,000. Local experts run the online workshops and provide Their services include everything from guidance around finance, housing and employment, to grant of
8,300
advice on topics ranging from wills and pensions to financial immigration support and courses teaching people about subjects including budgeting and IT.
planning and wellbeing. AgeUK have an ambition to empower
people to make the most of their later years. The three sessions In addition, the Forum also runs health and wellbeing activities, such as lunch clubs for elderly
last year
include a Financial Planning and Legal MOT workshop, which is people, coffee mornings, fitness classes and social groups for young parents.
delivered as a blend of presentations and Q&As. The Health and
Wellbeing session includes presentations, gentle exercise, and Community development officer Ayub Bapu said lockdowns and other restrictions at the
mindfulness activities, and the Using Your Time in Retirement height of the pandemic had been particularly hard on isolated and vulnerable people in the
This involved
STRATEGIC
workshops encourage interaction, reflection, and action planning. community, as well as forcing the forum to suspend many of its face-to-face activities.
REPORT
“We were getting a lot of enquiries and calls from the community, particularly people who
setting up a
telephone chat
Anne Oliver, Community Engagement Manager for Age UK had either been laid off or were being furloughed; people were very anxious,” he said.
Lancashire, said, “Research shows that those who make plans for
later life experience the most fulfilled and healthiest retirements. In response, the Forum collaborated with other local organisations to provide a specific service and
The workshops support individuals to create action plans and Covid-19 support programme. This involved setting up a telephone chat service and enlisting
enlisting the help
of a bank of up to
provide information to help people avoid the pitfalls of not acting the help of a bank of up to 80 volunteers to meet the needs of vulnerable clients; whether
A grant of
80
in a timely manner. The sessions also allow people to focus on this was by delivering food and prescriptions or just having a conversation. The Forum also
10,000
health and wellbeing and discussing how to make the most of provided a bereavement service and partnered with local businesses to deliver more than
retirement because hopefully, that can be 30 years or more, which 2000 meals.
can be quite scary when you go into it without a plan of what you
volunteers
hops
for a series of free works
are going to do.”
eir
to help people plan for th
retirement
CARLISLE UNITED
As proud supporters of Carlisle United, we were as pleased as
anyone to see the turnaround in the club’s form earlier this year,
elevating them from a relegation dogfight to football league
safety. We sponsor the club’s community programme which, as well
as providing naming rights of the community stand, provides up
to 200 free tickets to each home match which are given to schools
and community groups from around the region.
We also offer our Cumberland Blues savings account, which means

the club benefits from a donation each year equivalent to 1% of
the average balances held in all the accounts.
22

Our We remain committed to continuing that – it the Best Companies B Heard Survey which that will allow our people to access learning
PEOPLE
is a major part of what sets the Cumberland measures levels of engagement across many online. We operate in a highly regulated
apart from other financial institutions. different companies; last year, we gained industry and it is essential that employees
a prestigious 1* accreditation (very good are kept up to date with changes and new
The pandemic has certainly made us to work for), which was backed up by being legislation in order to remain compliant.
focus on the future of work and, like many named as one of the top 100 companies to The LMS will also support ‘softer’ skills
organisations, we better appreciate that work for in the North West. development and unlock a broader range
collaboration and the need to interact on a of topics.
human level are fundamental to a healthy Digitalising our people

culture. This year will be about developing experience Now that virtual environments have become
and sustaining new and better ways of part of all of our working lives, we can roll
working, that keep people safe, protect This year we invested in a new HR and out some development opportunities to
their health and wellbeing, and allow large numbers of employees at once. We
STRATEGIC
Payroll system which once fully developed
REPORT
them to develop their careers, fulfilling will act as an enabler to streamlining our have established Power Hours, where people
their potential as valued members of the people processes. can focus on key themes, that are delivered
Cumberland team. remotely, alongside an evolved approach to
remote onboarding for new starters through
Learning and Development
Wellbeing a virtual welcome week. Online delivery also
gives us greater flexibility, and offers more
Having the best available people working
scope, to involve external trainers and other
The pandemic has also given us an enhanced at The Cumberland means we can deliver
JILL
experts in our L&D programme, enriching the
focus on supporting colleague health and the best possible service to our customers.
experience for all of our people.
wellbeing, making sure we have assessed and It makes for a more settled and enjoyable
Chief People Officer

put in place measures to mitigate risk and working environment and helps us run
ensuring our colleagues have the resources We were delighted that our work in this area
an efficient and productive business. We
and tools they need. We have invested in was recognised when our team won the
embarked on an ambitious learning and
occupational health and wellbeing resource award for “Financial Services Team of the
development (L&D) strategy last year,
and programmes, including expanding our Year” at the British HR awards in April 2022
building on our existing commitment
network of health champions, and we now at a ceremony in London.
to having a framework to develop
have around 20 mental health and wellbeing performance and encourage employee
Firstly, I’d like to thank all of our people for their amazing contribution to our business. champions across the business, people learning experiences. It’s an investment
from all levels and reflecting the diversity in nurturing and supporting our people,
After two years of adapting and changing in response to the pandemic, I’m so proud of all our people for the resilience they have shown as the of our teams. It feels crucial that everyone helping them to develop new skills and
various challenges kept on coming. 2022 continues to bring fresh challenges, but also opportunities, as we transition to new ways of working has access to somebody who knows how to build a fulfilling career with us. We recognise
and continue to build a workplace where our people can thrive. listen and how to offer support if they need that having a realistic potential career
it. This will be a cornerstone of our people path within our business, supported with
Throughout the pandemic period, we put the safety of our people first, whilst balancing this with a relentless desire to ensure our customers experience moving forward. the most appropriate education and skills
Much of our focus over
could access our services. development opportunities, is key to helping
Communication and us hold onto the best people. the last couple of years,
Engagement is key
To do this, we evolved to a model that saw the majority of our head office team working from home, in line with government guidelines, whilst
therefore, has been on
maintaining a core of colleagues on site in our essential services functions. Those colleagues who continued to work from head office in areas Access to role specific professional
such as Customer Care could not have imagined the care and resilience that they would be required to show to one another and our customers Communicating effectively with our people, qualifications continues to be an area we are supporting colleague
in order to keep services running. wherever they work, has been crucial to our
success over this period and we continue
able to support on and this last year has seen
a range of achievements across many of our
health and wellbeing,
Our colleagues in branches have genuinely continued to provide an excellent service to our members, continually reinforcing how important our to challenge ourselves as to how best to professional services functions. making sure they had
keep our people informed. We pride
branch service is to customers. Other than when infection rates prevented it, we endeavoured to keep our branches open as much as possible
during the pandemic, even when occasionally we had to operate reduced hours. Our branch colleagues have shown amazing flexibility and ourselves on an engaged workforce, so Our investment includes the integration of
the resources and tools
resilience and remain the friendly face of the Cumberland. A lot of our customers want to come into a branch and talk to a person, face-to-face. much so that we annually participate in a new learning management system (LMS), they needed.
24

Growing our teams Although it will be more ‘behind the Future
scenes’ than at head office, our digital
transformation will make work easier for our
The proliferation of remote working has The next year will be a key step in our
branch staff, automating and streamlining
given us a fantastic opportunity to have journey towards Cumberland 2025. It is a
processes and allowing them to focus on the
access to talent that we might not have had critical period for thoroughly examining
customers in front of them. We hope that our
previously. It has allowed us to bring in some and assessing all of our processes so that
customers will experience even better levels
of the very best and diverse talent to serve our we can streamline them, shaping them to
of service in their local branch.
Cumberland customers, supplementing and function more efficiently with the adoption
developing our existing, talented people. of new digital solutions. We will continue
Senior hires to expand our skills base in line with the
Transforming and growing our teams with requirements for the future. This will involve
STRATEGIC
We have made some changes to our structure further recruitment and training, alongside
REPORT
the best range of diverse talent will better
serve us to deliver our future strategy. to accommodate our future ambitions. At upskilling existing employees – there’s a
Senior Leadership Team level, our previous lot of talent here and we are committed to
Chief Customer Officer, Alex Windle, is now helping our people fulfil their potential.
Head Office
Chief Transformation Officer, leading on
the shift to digitise the business. Earlier The strength of The Cumberland has
In order to keep delivering excellent service,
this year, we also welcomed Ian Stacey, our always been rooted in its people.
we have expanded overall numbers based
Chief Information Officer, a new role for the We couldn’t deliver the amazing service
within head office. We have carefully
business with a remit for future-proofing the we do without them.
reconfigured the space to safeguard our
Cumberland and focusing on technological
people and to harness the benefits of hybrid
transformation, to help us achieve our key
working. Hybrid working builds on the success
strategic objective. Jill Johnston
Chief People Officer
of remote working during the pandemic,
allowing people to choose whether to work at
1 June 2022
In other areas of leadership, we have
home or in the office. Implementing a hybrid
established a new role of Head of Digital
model means that not everybody is in the
and welcomed Joann Titheridge and Matt
office every day. We can accommodate up to
Gilliver joined us as Head of Strategy.
60% of our people at once now, with the rest
working from home.
Building an inclusive
Internally, head office looks quite different.
workplace
There are no private offices, even the Senior
Leadership Team are working in open We continue to focus on building an inclusive
spaces. We have systems in place for booking workplace. Whilst our priority over recent
meeting spaces for different sized groups years has been on addressing a sectoral
and small collaboration pods. There is a desk challenge on gender diversity through the
booking system with hot-desking, so teams commitment we have made to the Women in
can choose to sit near specific colleagues Finance Charter and our work with Women
on the days they come in. Overall, the space in Banking and Finance, of which we are a
feels more modern and is suited to the roles foundation sponsor, we also understand the
in head office and hybrid working. broader approach we can bring and have
begun to work with our teams to develop
this. An example of this is the work we have
started to do with our teams through Anti
Racist Cumbria.
26

Since our founding in 1850, our communities, sometimes as the sole
Our
N CE
The Cumberland has consistently made remaining bank or building society branch
PERFORMA
our community central to everything we in a locality. It’s reflected in our commitment
do. This has meant that, as society has to distributing a share of our profits to good
evolved, our Society has evolved, and causes, and how we develop our governance
the current evolution of this is presented to ensure the strength of the Society, even in
in 2022
throughout this report – which explains the most difficult of times.
how we govern the Society for the benefit
of our members. This new section draws together key
points from elsewhere in this report that
Over the course of the year, this has been help illustrate how the Society lives its
STRATEGIC
reflected in our continued support for our environment, social and governance
REPORT
members and community as the UK has commitments. We will continue to develop Social Commitments
navigated through the Covid pandemic. our reporting over time on this critical part of
It’s also reflected in our long-standing our heritage and strategy.
At The Cumberland, we are proud of our history of supporting our community and our colleagues, and this year has been no different. The year
commitment to personal and face-to-face
has seen further Government restrictions brought about by the Covid pandemic. We have recognised the risk of isolation for customers and have
service, helping our members and serving
been pleased to keep our branches open for their support. As we emerge from these restrictions, we look forward to retaining this service for our
customers at the same time as adopting new ways of working to ensure the continued wellbeing of our colleagues.
Our
During the pandemic, we have continued to support our communities through a range of endeavours, including sponsorship, education, and
financial support; more details of this are on pages 20 to 23. We have also been proud to announce our new purpose – “to create a banking
A B ILITY
experience that’s kinder to people and planet” – which we are excited to share more about in the coming year. Our ambitious transformation
IN
SUSTAjourney
project plans have matured, and these will set us on a journey that will improve service still more for our customers.
Theme Our progress to date Our future focus
Charitable donations Our support for charities is undiminished; Through our new purpose, we’re building
during the year, we contributed more than out exciting plans to keep supporting our
£188k to support amazing organisations. community and forge further partnerships.
We have formally committed to giving away
at least 1.5% of our profits every year.
Community Volunteering Despite Government restrictions, colleagues As Covid restrictions ease, we’re looking
have been able to commit time across our forward to helping our community even
community where possible. more in the future.
First time buyers This year, we were proud to help more than We’ll continue to develop competitive
500 customers buy their first home. products for those wanting to take their first
steps on the housing ladder – and continue
to support our thousands of mortgage
customers.
The Cumberland has Customer Satisfaction We are proud to have the happiest savers Through our commitment to our branch
in the UK and to have achieved a Platinum network, our Carlisle based telephone team
consistently made our service award from FEEFO for the second and our strategic transformation plans,
straight year. Borderway, our subsidiary, also we’ll keep enhancing our service for our
community central to received a Platinum award for the first time. customers’ benefit.
We also have industry leading net promoter
everything we do scores.
Real Living Wage for colleagues No colleagues receive anything less than the We will continue to ensure everyone receives
Real Living Wage, exceeding Government fair wages at The Cumberland.
requirements.
28

Good Governance Commitments
Good governance is at the heart of The Cumberland – it ensures we maintain our capital and liquidity strength, our security for our customers, and
deliver on our strategic vision. This governance is embedded through our purpose, objectives, and values, against which we benchmark everything
we do – more details of our purpose and the ways in which we govern ourselves can be seen on page 16 and from page 50 onwards respectively.
But we never stand still. The Society is owned by its members; some key ways in which we have protected our Society for the benefit of our
community, and continued to operate as our members would expect, are highlighted below:
Theme Our progress to date Our future focus
Operational In addition to carefully managing our liquidity and We are on track to deliver on all our regulatory
Resilience capital, in the year, we have developed our day-to-day obligations – and so ensure our customers will be
operational resilience, through technology and process protected in adverse scenarios for the Society. Our work
STRATEGIC
based investment, as well as assessing future need. We on operational resilience will progress between now and
REPORT
have formally identified our important business services 2025.
and set impact tolerances.
Customer While we have always put our members at the heart of We will continue to enhance and develop our practices
Approach our business and this is reflected in our FEEFO and NPS in line with regulatory and industry best practice and
ratings, we challenge ourselves to do more where we aim to support and assist all our customers, including
need to. We have recruited specialist resource to those who are vulnerable, as best we can. This will include
strengthen our Vulnerable Customer team, and have due consideration and implementation of the FCA’s new
continued to develop our policies to ensure we are Consumer Duty Principle, which will require us to focus
considering and supporting the needs of our vulnerable on supporting and empowering our customers to make
customers. good financial decisions and avoiding foreseeable
harm at every stage of our relationship, by, for example,
giving customers information they can understand,
offering products and service that are fit for purpose and
providing helpful customer service, putting customers at
the heart of everything we do.
Safe delivery of We were delighted to receive international awards at We’re strengthening our change capability still further
change OPEX of ‘Best Transformation Project Delivering Customer as we embark on our ambitious transformation journey,
Excellence’ and ‘Best Process Transformation Project as well as partnering with some of the most trusted and
Under 90 Days’. We safely migrated our core banking experienced advisors in the industry.
platform and supporting services to newer servers, one
amongst many successful technology based changes.
Managing our Our policy concerning the payment of trade creditors is We will continue to pay our suppliers in line with agreed
Suppliers to agree terms of payment, to ensure that suppliers fulfil terms and will focus further on our management of third
their contractual obligations and to settle invoices for the parties to ensure that the relationship is a successful
provision of goods and services within the agreed payment partnership for both sides.
terms. At 31 March 2022, the total amount owed to
suppliers was equivalent to 30 days’ credit (2021: 35 days)
Women in Our Charter Target was initially set as 33.3% of senior We will proactively deliver on our commitment to
Finance roles represented by females by April 2021, and we hit enhance female representation at senior levels. We have
this target 6 months early. In September, we increased the also committed to, as a founding partner, pioneering
target to 50% by April 2025. research led by WIFB, which seeks to research and
address gender issues within our sector. Environmental Commitments
Colleague Our commitment to colleague wellbeing and learning is We continue our focus on investment in
Wellbeing reflected in our achieving a place in the Top 100 North our colleagues and embrace of new ways of working to We take our environmental commitments
West employers, and and our Best Companies one star suit all as we emerge from the pandemic.
seriously. Over the course of the year, The
accreditation.
Cumberland has invested significantly to
gain a better understanding of the risks and
opportunities we face from climate-related
change, and in establishing the proforma
tools and governance we’ll need to provide
the best practice management we desire.
Our work this year will be foundational for
the steps we’ll take in the future.
30

We recognise climate change will increase the frequency of flooding and subsidence, the rate of coastal erosion and, potentially, drive the This report also marks the first time that we have consolidated our climate related disclosures. We have been mindful of the best practice
government to require that energy inefficient properties be remediated. To support our assessment of likely impact on the Society and our advocated by the Task Force on Climate-related Financial Disclosures (TCFD). We want to be transparent about how we report on our progress,
members, we commissioned a report from our partners, Landmark, to review potential effects across a range of climate change scenarios. using the metrics and targets set out in the table below; our performance is summarised in the second table.
The findings, which were based on an individual based mortgage property analysis, were reported through our governance and will now inform
our strategy and approach, as well as support development of metrics and new data sources to manage and monitor status.
Themes What this means
Simultaneously, we have developed a Climate Risk Management Framework. This lays out our response to identifying, managing, disclosing, and
Governance How we oversee climate-related risks and opportunities.
mitigating climate risk. It is expected that the framework will evolve over time, as the Society evolves its understanding and strategic direction.
How we identify and manage climate-related risks, which include both risks emerging from
Risk Management the UK’s energy transition and the risk of climate change itself and how these are integrated
Meanwhile, we have continued our focus on managing our environmental impact through ongoing energy conservation, recycling, and waste into the way we manage risk overall.
reduction across our branches and head office.
STRATEGIC
How we manage the impact of climate-related risks and opportunities through our strategy
REPORT
Strategy
and financial planning.
Our submission for the Energy Savings and Opportunities Scheme (‘ESOS’) for the year ended 31 March 2022 is set out in the table below,
alongside 2021 figures, to provide some comparative (which we have restated to provide a like-for-like comparison). We note an overall rise Disclosure How we will report on our risks and our actions.
in emissions brought about by substantial increase in employee numbers with corresponding increase year-on-year of home-working and the
impact of refurbishing and reopening our head office more latterly in the year. Our performance this year:
2020-21 2021-22 Themes Our progress to date Our future focus
SCOPE 1 - DIRECT EMISSIONS Unit Quantity kWh Carbon as tCO2e Quantity kWh Carbon as tCO2e Governance Our Climate Risk Management Routine reporting under Climate
Natural gas kWh 448,596 91.4 421,236 85.5 Framework launched, and Change Policy will be introduced
Natural gas, Home Working kWh 761,981 761,981 155.2 845,222 171.6 Senior Management Function to help the Board monitor our
responsibility assigned. position.
Diesel – average biodiesel, fuel card Miles 1,039 1,105 0.3 29,799 33,457 9.2
Petrol – average biodiesel, fuel card Miles 15,179 17,656 4.3 – – –
The Board received training on We’ll further strengthen our tools
new disclosures and commenced via embedding of our Climate
Total Scope 1 1,229,338 251.18 1,299,915 266.30 oversight of climate risk. Risk Management Framework.
SCOPE 2 – INDIRECT EMISSIONS Unit Quantity kWh Carbon as tCO2e Quantity kWh Carbon as tCO2e
Electricity – National Gridb kWh 434,961 1,125,894* 262.5* 1,140,755 242.2
Risk Management We assessed our exposure to We’ll implement an annual
climate change at an individual review of credit risk exposure,
Electricity, National Grid, Home Working kWh 45,125 45,125 10.5 82,368 17.5 mortgaged property level in focussing on our most vulnerable
Total Scope 2 1,171,019* 273.01* 1,223,123 259.70 conjunction with our partner, customers.
Landmark.
SCOPE 3 – INDIRECT EMISSIONS Unit Quantity kWh Carbon as tCO2e Quantity kWh Carbon as tCO2e We’ll communicate our risk policy
Electricity – transmission & distribution kWh 1,125,894* 22.6* 1,140,755 21.4 We added our first Climate Risk more widely in the Society and
Policy to our Risk Management support its embedding.
Electricity – transmission & distribution,
kWh 45,125 0.9 82,368 1.5 Framework.
Home Working
Employee car – Average Passenger car, Diesel Miles 14,474 15,391 3.9 Strategy We agreed our new purpose, Further development and roll out
Employee car – Average Passenger car, Petrol Miles 19,268 22,413 5.4 which includes our commitment of purpose and product strategy.
to ‘Banking that helps our
Employee car – Average Passenger car, Unknown Miles 55,543 61,794 15.3 69,008 77,406 19.0 We will embed environmental
environment flourish’.
considerations into our annual
Well-to-tank (WTT) – all car miles Miles – – – 98,807 – 7.2
Recruited a new Head of assessments of our future capital
Total Scope 3 1,270,617* 48.13* 1,300,529 49.19 Strategy to lead us on our and liquidity adequacy analysis
Total – Scopes 1, 2, 3 572.32* 575.19 journey. (ICAAP and ILAAP).
Total tCO2e per FTE, Scopes 1 & 2 1.26* 0.87 Disclosure We’ve built the right metrics to Embedding of use of metrics
help us monitor and disclose risk. through the Society’s governance.
Total kWh per m , Scope 1 Gas
2
67.16 63.06
We’ve enhanced our reporting to We want to consider further steps
Total kWh per m , Scope 2 Electricity
2
93.29* 94.52
drive business focus. as we embark on our journey of
Total tCO2e per £M gross turnover, Scopes 1 & 2 11.96* 10.49 kinder banking.
Notes
2020-21 FTE = 416 / 2021-22 FTE = 602
Floor space: 12,069m2 for electricity calculation, 6,680m2 for gas calculation
2020-21 Turnover GBP £43,830,000 / 2021-22 Turnover GBP £50,133,000
*2020-21 Scope 2 and 3 electricity figures and KPIs restated as a result of erroneous exclusion of Head Office usage.
Our work this year will be foundational for the
steps we take in the future.
32

Movement in
Risk and impact Mitigation Latest progress
risk profile
Operational Our incident management

processes were deployed in
The risk profile is improving, reflecting the Society’s effective
handling of the impacts on our staff, customers and operations, and
Impacts of our initial response to the the efficiency of the UK wide vaccination strategy.
pandemic, with increased
Covid-19 levels of governance and more Over the past 12 months, the Society has:
frequent management meetings, • stayed open, serving members throughout;
The direct and indirect risk from
communication and enhanced
the pandemic to the Society, our
support to colleagues health • enhanced the arrears management function to provide support
colleagues, our members and our
and wellbeing. Since then, for customers in financial difficulty;
ability to serve them.
we have adjusted to hybrid
working and kept our colleagues • provided a best practice approach to dealing with wellbeing,
and members safe through through the combined approach of our People and Culture Team,
physical measures and active Occupational Health, Health and Safety, Mental Health and
management of all identified Wellbeing Champions and our People Managers. This has led to a
Covid infections in our branch responsive and colleague centred approach to both physical and
and head office teams. mental wellbeing;
• protected our most vulnerable colleagues, continually updating

our risk assessments in line with government guidelines and
ensured that all our colleagues were supported with enhanced
sick leave and no detriment to pay where pandemic related self-
isolation or work-life balance was important;
• continued to see a high level of colleague engagement through
RISrepKort
dedicated colleague communication and a move to remote
learning, underpinned by a change in our learning approach to
STRATEGIC
respond to the need for colleague connection;
REPORT
• continued to enable a core of colleagues to work from home;
• implemented enhanced covid protections in branches and at

Cumberland House; and
• while the trend of the pandemic in terms of numbers affected

at any one time has fluctuated driven by external impact of the
Increasing Decreasing Stable pandemic at various stages, we have now started to implement
new ways of working within our head office environment,
level of risk level of risk level of risk supported by colleague re-onboarding and learning interventions.
This leads us to a new phase of considering how we will work
effectively in a post pandemic environment.
Macro-economic The key risks to the Society are

the second order impacts of the
As we reach the end of the year the risk profile is increasing due to
unpredictability of national and world wide economic factors; there
s and uncertainties Impacts noted factors on the UK economy remain significant downside risks to the UK economy, volatility in
Principal risk
and our customers. interest rates, and signs of disruption to trade are emerging.
The risk that the economic,
political, or regulatory Whilst structural impacts of Over the past 12 months, the Society has:
changes arising from the wider Brexit and the longer-term
environment cause detriment to consequences of the Covid • monitored and responded to changes in the economy and
the Society, including emerging pandemic are becoming clearer, government support schemes as the UK emerges from the Covid
impacts of inflation, the Covid there remains much uncertainty pandemic;
This year has continued to be dominated The Society utilises a risk framework that has The risk framework supports the design pandemic’s aftermath, Brexit, and volatility in the economy
due to the combination of • monitored the developing legal and regulatory changes required
and the current crisis in Ukraine.
by the Covid-19 pandemic, with our priority, been benchmarked against best practice and and delivery of strategy within agreed risk world events and the attendant because of the exit from the EU;
inflationary pressure and cost of • maintained observation of global events and considered all
once again, being ensuring the Society uses the industry standard ‘3 lines of defence’ levels, minimum standards and adherence living squeeze. potential impacts on the Society; and
protected its colleagues, supported its approach. This is where all risks are owned to applicable regulation and legislation. This general economic risk is • responded quickly to interest rate movements.
managed by governance, scenario
customers, and continued to operate safely. in the most appropriate business area, be it It ensures risks are defined, measured and
planning and stress testing.
We have maintained continuity of key services branches, operational teams or the finance controlled in a consistent way across the
throughout the year. department, because that is the area that Society, and places the Society in the best
Credit Risk Overall lending standards are
controlled by a Board level
The levels of arrears and the use of the Covid forbearance scheme
was high during the pandemic, with continued restrictions on trade
The risk that a borrower fails policy. impacting our specialist lending book performance. Arrears and
will best understand the most suitable way to possible place to manage through severe, but to pay interest or to repay forbearance levels have improved consistently and rapidly since
As we emerged from restrictions imposed by Lending criteria are agreed at the relaxation of Covid-19 requirements and we are supporting
capital on a loan and/or that
control and mitigate these risks. plausible, shocks. formal credit committees, chaired customers with the appropriate forbearance in particular in relation
a counterparty fails to meet
the pandemic, the unexpectedly strong growth by the Head of Data & Credit Risk to our Commercial portfolio, where some customers have accrued
their contractual obligations
and attended by SLT members. additional debt during the pandemic. As the year ended, new risks
in the UK economy in the second half of 2021 The framework itself is owned, developed, The following are the principal, emerging, and to repay the Society or fails
to perform their obligations All lending is fully manually are emerging driven by inflation.
has supported strong credit performance and and overseen by the ‘second line of defence’ significant risks currently facing the Society, in a timely manner. This risk is underwritten, checked for
impacted by unemployment affordability, suitability and that Over the past 12 months, the Society has:
a rapid improvement in arrears performance, Risk function, led by the Chief Risk Officer the key mitigants that help control those risks rates, changes in house values the lending is responsible. • recruited additional colleagues to manage Credit Risk across all
and interest rates. In a recession,
with only a small number of customers still (CRO), who is a member of the SLT. The and commentary outlining the latest progress increasing unemployment and All high value or complex key products;
falling house prices may mean lending is approved by specialist • continued to develop data and reporting capabilities to enable
in financial difficulty; we continue to support appropriateness of the risk framework, the in enhancing the Society’s approach. The set underwriters.
it is more likely that the Society more insight and internal and external leading indicators to
these customers. skill and capability of the CRO and the Risk of risks included are consistent with the risks would lose money if members facilitate more informed decision making; and
failed to keep up to date with Oversight of credit is provided
by assessing the quality of
team, and the successful operation of controls faced in the prior 12 months and, for the first their loan payments. The impact • continued to refine its operational processes to manage arrears
underwriting and tracking and provide forbearance and other forms of support to members;
We have continued to strengthen our of Covid-19 took the UK into
to manage risk are independently overseen by time, we have specifically segmented out recession; on-going recovery portfolio performance and and reviewed lending criteria and procedures to reflect
technology infrastructure throughout the year speed remains uncertain. concentrations with credit changes in credit risk as a result of the relaxation of Covid-19
the internal audit team, the ‘third line climate change risk as it continues to emerge, management information restrictions.
and have completed an exercise to identify summarised at the Board Risk
of defence’. in order to outline what action we have taken Committee.
our most important business services, how
to better understand the impact this risk has,
we deliver these services, and where we have
and will have, on our business.
identified vulnerabilities, how we are planning
to address these.
34

Movement in Movement in
Risk and impact Mitigation Latest progress Risk and impact Mitigation Latest progress
risk profile risk profile
Operational Risk Minimum standards are set

through the Operational Risk
Elements of our technology platform require updating; to address
this, there has been continued investment to improve Operational
Liquidity Risk Managed through the Assets and
Liabilities Committee (ALCO).
Risk profile has improved with some improvements in the approach
to forecasting and managing liquidity requirements.
The risk of loss resulting from Policy. Resilience, and to establish requirements for digitalisation that form The risk of failing to meet
the core of our transformation programme and strategy. Liquidity levels stress tested Over the past 12 months, the Society has:
inadequate or failed internal demands and commitments to
Further policies support the to ensure sufficient liquidity
(including where provided by a provide funds to customers and • increased the frequency of MI to measure and hedge interest
management of risks arising During the year the Society delivered a new operational risk available to meet requirements
third party) processes, people, other third parties. rate risk;
from failures by third parties, the management system which has enhanced the management of through a severe stress.
and systems, or from external
management of financial crime operational risk and deepened capability for risk profiling and • improved its ILAAP with enhanced analysis, insight, and stress
events. This includes losses from Weekly dashboard gives full
risk and the management of analysis. We anticipate that the new insight and intelligence tests based on real world data;
fraud. overview of liquidity levels.
information security risk. provided by the system will draw out previously unrecognised risks.
The Liquidity Management • repaid all of its TFS funding and drew funds from the TFSME
Risk teams in the business Over the past 12 months, the Society has: Scheme, subsequently also repaying part of this too, reflecting our
follow agreed processes to Committee ensures future
• invested in specialist roles to enhance the capability for managing lending volumes and funding continued strong liquidity position; and
identify, measure, manage and
mitigate risk. Technology, Change, Information Security and Financial Crime availability is considered in • continued year-on-year growth in levels of liquidity, with
risks; managing liquidity levels. significant surplus to both our own risk appetite and regulatory
These teams also report any requirements.
incidents or policy or • created new roles with the appointments of Chief Transformation The ILAAP sets our risk appetite
regulatory breaches. Officer and Chief Information Officer, and supporting teams; and helps ensure appropriate
and embedded our First Line Risk teams and working practices, levels of liquidity are maintained
Independent reporting by the maturing our first line of defence risk management practices; and at all times.
risk team helps understand
any trends and tracks overall • successfully replaced elements of our server infrastructure The LCP, which forms part of
operational risk losses against underlying our core banking platform. the Recovery Plan, ensures
the agreed risk appetite. that predetermined plans are
followed if a liquidity stress was
ever to occur.
Strategic Risk All risks are formally assessed Risk profile is stable as despite the worsening macro-economic
STRATEGIC
REPORT
as part of the strategy setting outlook, the Society continues to deliver against its strategy.
The risk that the Society fails to process.
Over the past 12 months, the Society has:
Capital Risk Managed through ALCO. Over the past 12 months, the Society has:
adopt an appropriate business The ICAAP helps ensure • delivered ongoing capital monitoring and the production and
The acceptable levels of risk that The risk of having insufficient
model, set appropriate goals • continued to build key aspects of the business to be able to deliver appropriate levels of capital review of an ICAAP to confirm its capital strength;
can be taken when delivering the capital to meet any risks to
and targets in the Corporate strategic change; are maintained at all times and
strategy are clearly stated in which the Society is exposed. • grown the level of available capital through profitable operation;
Plan, adapt to external events or allows the Society to effectively
risk appetite. • adapted the business operating model to manage the ongoing The Society’s capital is mainly and
that the strategy fails to live up test and set the risk appetite.
to expectations. impacts of the pandemic; made up of 170 years of
Outcomes against risk appetite • considered its strategic plans in light of the level of expenditure
retained profits. Risk profile is stable due to the
and triggers are presented • undertaken a strategic review of our core systems and and planned intangible capitalisation ensuring that this is fully
monthly to Board alongside ‘The reduced levels of capital the
assessed risk agreeing our over arching plan and level of regulator requires the Society captured in capital forecasts.
Top Risks’ review. investment with the Board; to hold.
Monitoring of strategic risks • reviewed our product strategy; and
and changes to our business
environment. • engaged a third party to assist in assessing the future impacts
Interest Rate Risk Managed through ALCO. Generally, a rising interest rate environment is beneficial to banks
and building societies. However, significant volatility in swap
of climate change; and simplified the operations of the Group A financial risk management rates and potentially diverging views of future interest rate paths
The risk of fluctuations in interest
through a programme of process review and improvement. framework and policy details between the Bank of England and markets creates risks that require
rates and changes in the value
all the processes and limits for careful management.
of contracts we use to manage
managing interest rate risk.
Climate Change During the year the Society has
developed a climate change risk
The Society has conducted a portfolio level review of its mortgage
and branch portfolio to identify the risks under different climate
interest rate risk impacting the
Society’s earnings or Capital.
Over the past 12 months, the Society has:
Stress tests are applied as part
Risk framework that identifies and change scenarios and in early 2022-23 will incorporate this into its of the ICAAP, and additional • embedded the ‘Extended Approach’ for treasury into processes
considers the impact climate capital stress testing process. capital is held to cover any and management of risks, including:
The risk climate change could change will have across other unforeseen losses arising from
create for the Society as a result risk categories (particularly – improved capability to manage interest rate risk and
interest rate risk.
of physical impacts and the credit risk, operational risk, and structural risk across the whole balance sheet including
transition of the UK economy to strategic risk). Interest rates have moved profiling of net free reserves and an appropriate proportion
lower carbon activities. upwards after a relatively static of current accounts
period; the Society maintains – undertaken increased fixed rate lending in line with our
Regulatory Risk Minimum standards are
maintained through the
The outlook for this risk is stable. During the course of the year, some
challenges were encountered in delivering regulatory changes in the
an established programme of
constant review in order to plan
customer’s demand;
The risk that the Society makes Regulatory Risk Policy. timescales we wanted, and an issue in one of our internal controls for, and react to, any changes, • diversifying our investments into new areas such as multi-lateral
errors or exercises inappropriate was identified. However, we have worked closely and proactively resulting in a stable risk profile. development bank bonds and covered bonds; and
Business areas in the Society with the regulator to ensure the closure or remediation of these
judgement in the execution of The Society has also developed • via embedded Governance structures, the Society continues
follow agreed processes and historic issues. Further, the Society has successfully delivered a
its business activities, leading to strategies to further manage to monitor current money market volatility and uncertainty
standards for managing number of regulatory requirements and has a number of projects in
non-compliance with regulation, risk utilising the ‘Extended’ regarding interest rates and inflation.
compliance. place to address new regulatory requirements, identified through its
legislation, or voluntary codes permissions gained.
of practice, potentially leading Horizon scanning gives a clear horizon scanning function.
to unfair outcomes for customers
and/or regulatory sanction
view of upcoming regulatory Pension Risk All pension investment decisions
and required Society funding
• at the date of these accounts, the Society is awaiting the
finalisation of its latest triennial actuarial valuation. The rise in
requirements.
and/or reputational risks The risk that the value of assets overseen by an independent inflation creates upward pressure on the Scheme’s liabilities. This
materialising. This is all supported by agreed in the Society’s defined benefit trustee, which is advised by the macro-economic increase in risk has been offset by the Society’s
standards for proactively pension scheme, alongside scheme actuary and investment own actions, which have increased Scheme funding and reduced
managing contact with the additional contributions, managers. investment exposure;
regulators. are insufficient to cover the
The approach is stress tested • over the past 12 months, advised by the scheme’s actuary and
anticipated obligations of the
against standard requirements investment advisers, ISIO, the Society has agreed a long-term
Conduct Risk Managed through a Customer
Outcome Testing Framework
The outlook for this risk is stable as the necessary processes are in
place. We are proactively identifying areas to be investigated and
scheme over time.
set out by the PRA. journey plan for the scheme with the trustee. This is designed to
The risk that the Society makes which looks at all areas of any potential detriment to be put right for our members. address the deficit and move the scheme into a self-sustaining
Capital is held to ensure there basis, in addition to reducing costs to the Society, over a longer
errors or exercises inappropriate potential customer detriment
Over the past 12 months, the Society has: are sufficient funds to cover time horizon. In November 2021 the Board approved a plan to
judgement in the execution of and tests whether any detriment
severe but plausible changes invest £15m into the scheme with a £1m per annum contribution
its business activities, leading is occurring. • ensured that the customer has been at the core of its Covid-19 to pension asset values or thereafter, which is expected to reduce our Pillar 2 Capital
to unfair outcomes being response; liabilities.
A comprehensive set of requirement when coupled with a reduction on the Scheme’s
created for customers and/or
management reporting flags • enhanced its Operational Resilience processes to better anticipated return to Gilts +2.1% (previously Gilts +2.3%), which
reputational risks materialising. The scheme is administered by a
areas to investigate, and any understand the processes that are critical to its customers and the resulted in further de-risking of the Scheme’s investment portfolio;
specialist outsourced body.
issues identified are put right for potential resilience vulnerabilities in these processes; and
customers affected. • governance has been strengthened to provide greater certainty
• commenced work in relation to the FCA’s new Consumer Duty and on the level of committed cashflows and the attendant pathway
Detailed product governance continued to refine its approach to Vulnerable Customers. to low dependency; and
framework ensures that any new
products developed minimise the • scheme advisers will continue to oversee any impacts beyond
likelihood of customer detriment. current assumptions arising from the expected higher inflation in
the UK and continued low interest rate environment.
36

Our financial performance
RICHARD
was good
The Cumberland delivered a solid financial

At an operating profit level, your Society saw a reduction to £5.3m (2021: £9.2m), as revenue rose,
performance in a challenging year. We moved
but our substantial investments in people and processes continued, as we purposefully reshape how
quickly from preparing for the potential
The Cumberland delivers to you, our members.
disruption of negative interest rates as the
pandemic raged, to responding to inflation
and rising base rates as the UK faced into
increasing commodity prices and, most
recently, felt the tragic impact of war in
2.2bn Mortgages 2.4bn Deposits
Ukraine. Against this backdrop, your Society
2022 2206m 2022 2442m
grew its mortgage lending as planned and
2021 2173m 2021 2342m
you continued to trust us with your savings,
transactional banking and deposits. 2020 2156m 2020 2138m
2019 2062m 2019 2067m
STRATEGIC
We continued to invest in our people and our
REPORT
processes, delivering a substantially increased
resilience in our underlying technology
architecture and setting the foundations in place
1.69% Net Interest Margin 8.6m Profit before tax
that will allow us to progress on to the delivery of
2022 1.69% 2022 8.6m
new technology in line with our stated strategy.
Our performance was substantially better than 2021 1.61% 2021 10.5m
budget, and guided in last year’s annual report, 2020 1.60% 2020 8.3m
reflecting both revenue outperformance and a
2019 1.61% 2019 14.3m
modestly slower ramp up of investment spend
than forecast.
Profit before tax was £8.6m (2021: £10.5m). 20.1% HQLA 90.3% Cost to income ratio
2022 20.1% 2022 90.3%
2021 17.7% 2021 77.5%
Welcome to your 2020 16.0% 2020 71.8%
IN A N CIAL
2019 14.4% 2019 62.2%
CHIEFOffFicer’s review 19.6% Common Equity Tier 1 ratio

2022 19.6%
2021 19.5%
2020 19.0%
2019 17.6%
Our performance was

substantially better Key performance indicators
than budget
The Society monitors many aspects of financial and non-financial performance on a regular
basis. The graphic above, and this section, focuses on those measures that are reported to and
considered key to the business’ financial success by the Board. A full list of the Group’s KPIs and
definitions can be found on page 139.
38

Income statement
Overview The Society passed on the base rate rises to its variable rate Defending margin is a key strategic aim, which will remain a focus in Management expenses
mortgage customers, though the overall impact was modest as the 2022-23. Pressure will come from renewed asset pricing compression
This year, profits are lower, reflecting our growing level of investment. majority of borrowers benefitted from their 2 and 5 year fixed rate and volatility in swap rates, which markedly increased in the final Our substantial investment in the Society and its strategy continued
A robust revenue performance, driven by improved mix within our deals. On the liability side, in stark contrast to most of the market, quarter and required swift upward pricing in fixed rate deals in late as we deliver on our commitment to make the business safe, sound,
mortgage books, rises in receipts from our swaps as the market priced the Society quickly increased its rates, including instant access rates, February. While a rising rate environment usually has a positive impact compliant and ultimately sustainable. This is seen in both our people
in interest rate rises, and members preference for instant access in response to both base rate rises. The exception to upward deposit on margin volatility, such as that experienced in the final quarter of and administrative costs, which grew at a faster rate than income.
deposits, helped offset the planned increase in operating expenses, as repricing was a number of historic products, where the rates already the year, it also creates risks that require careful management. Year on year, salaries and staff numbers rose as we brought in new
we deliver greater resilience and continue to transform the business. being paid were higher than both on sale products and those offered skills, particularly in technology and transformation. We also invested
elsewhere in the market. Derivatives and hedge accounting in our distribution and first line risk teams, and we continued to
STRATEGIC
A summarised Income Statement is set out below.
REPORT
invest in our people through initiatives such as Six Sigma training,
For these reasons Net Interest Income (NII) grew more significantly The Society uses derivative financial instruments solely to manage
mentoring and focused learning, and development activity led by our
than the growth in assets. Further detail is captured in the Net Interest interest rate risk arising from its mortgage and savings.
2022 2021 People and Culture team. The fruits of the Six Sigma initiative were
£000 £000
Margin (NIM) section below and in our balance sheet review. By 31 March 2022, the Society had successfully completed the
seen by our winning of two global awards in operational excellence.
Interest receivable 58,121 54,433 transition of all legacy LIBOR swaps to the SONIA fallback approach
Interest payable (10,455) (11,679) Net interest margin without issue. We also saw some evidence of inflationary wage pressures as staff
Net interest income 47,666 42,754
turnover rose and competition for technical skills intensified, as
Other income or charges 724 1,076 NIM has increased by 8 basis points year on year to 1.69%. During the During the year, there has been considerable market volatility
individual’s own appetite for change re-emerged in the light of the
Total operating income 48,390 43,830
year, there was some volatility as we worked to provide good value to impacting swap valuations, particularly in the final few months.
Management expenses (43,700) (33,971) pandemic’s impact on working patterns.
customers. The initial part of the year saw strong margin growth as Both LIBOR and SONIA reacted to the rising evidence of inflation
Provision for bad and doubtful debt 618 (678)
deals agreed during the late part of 2020 and early 2021 completed. and expectation of base rate changes, though markets were wrong Operational expenses rose reflecting significant use of third
Operating profit (before hedge accounting, other
5,308 9,181
provisions and one off items) During this period, customer demand outstripped supply as other footed when rates didn’t rise in November and then base rate saw party skills to ensure we safely manage technology upgrade and
Other provisions and charges (503) (172)
lenders withdrew from many aspects of the market, and so we saw its first ever December increase. The expectation of further rate rises transformation alongside inflation and initial investment in
Gains/(losses) on derivatives and hedge accounting 3,808 1,464
strong growth, particularly in higher LTV products. In the second half in calendar 2022 and 2023 saw the Society’s swaps move from a net subscription based technology.
Profit before tax 8,613 10,473
Tax (1,204) (2,059)
of the year, asset margin was squeezed as other lenders returned and liability position to a substantial net asset, largely in our final quarter.
Profit for the year 7,409 8,414 competition for lending increased. Our decision not to pursue high Throughout this period, the Society’s derivative financial instruments The Society’s major change programmes extend over our three year
volumes of business at low LTV (essentially price led re-mortgages) have remained effective in economically hedging risks as they were strategic planning horizon into financial year 2025-26, and we expect
moderated this impact somewhat. On the liability side, we continued designed to do; however, hedge accounting does not remove all to support a significantly elevated and growing level of investment
Net interest income over this multi-year period, as we move into the heart of delivery over
to offer competitive rates, but the mix of deposits selected by volatility. As a result, gains of £3.8m were recognised in the year.
customers (current account and instant access) meant our cost of This year’s movement was driven by gains on the derivatives, used to the next 2-3 years. Reflecting the initial phase of many elements of
Net interest income grew by 11%. This reflected three key dynamics.
funds has been on a flat trajectory, despite growth and high retention economically hedge the mortgage pipeline. the transformation, a greater proportion of the investment has been
Firstly, a positive mix within our mortgage books. Our letting book
in our term deposit book. This has made a substantial contribution to expensed this year than is likely in future years, when we move into
continued its growth, our FSOL portfolio returned to growth in the
our margin widening. The impact of swaps on margin is the third key These movements represent timing differences and are expected to the delivery phases of the work.
second half of the year after 2 years of decline in the face of the
dynamic in the widening and is discussed further below. reverse over the remaining life of the derivatives and do not reflect the
pandemic’s impact on hospitality and tourism, and we continued our
economic reality of the hedge. Further information regarding management expenses is included in
long term support for first time buyers and home movers. Secondly,
notes 6 and 7 to the accounts.
2022 2021
depositors continued to show a preference for access over rate, As explained in the NII analysis, the Group’s income from mortgages
£m £m
predominantly selecting instant access deposits in preference to
Net interest income 47.7 42.8 has been substantially increased by the sustained rise in variable rate Arrears and impairment charge
term and notice products, leading to a lower cost of funding than Average financial assets 2,818 2,658 income received from the hedging derivatives and this is expected to
planned. Thirdly, and most significantly, after a long period of low and % % The strong credit performance of the Society’s loan books was
continue into the next year. The market is currently predicting a higher
declining base rate expectations, we saw first expectations of rate Net interest margin 1.69 1.61 maintained in 2022, and the benefits of our long term commitment
rate environment for a sustained period though the Bank of England has
rises, and then rises themselves, leading to a substantially lower cost of to prudent and responsible lending was demonstrated. Our rigorous
indicated that the market’s rate view may be too bullish. It is likely that
hedging as we received higher variable rate payments on our swaps. underwriting processes ensure that loans are affordable, and our
rate volatility will persist in the near term as the actual outcome is worked
loans continue to be subject to manual underwriting by specialist
through. Rising swap rates will result in an increased price for fixed rate
teams, rather than relying on automated credit scoring. This
mortgages and unexpectedly sharp movements in swap rates may create
allowed us to rapidly adjust our lending criteria and appetite, as the
margin squeeze as the Society honours rates offered to retail customers,
pandemic lockdowns occurred, without withdrawing from the market.
which no longer reflect the cost of protection (prior to repricing activity).
40

Income statement Balance sheet
We have been able to work through customers’ circumstances, and the business faced before the pandemic or specific factors that meant Overview
lend where this has been the responsible thing to do, and we have that their trade has not reverted to the level hoped. We have also had
continued to provide mortgages, overdrafts and vehicle finance due regard within our collective provision models to the potential Loans and advances to customers and liquidity have grown during Our letting portfolio grew, as growth in holiday let demand more
throughout the pandemic. impact of the inflation and the cost of living increase we are all the year by £70m1 and £118m respectively. Customer deposit growth than offset a continued reduction in our buy to let business.
experiencing, as these accounts are published. was ahead of lending asset growth at £100m. The Society drew down Our FSOL lending, which is focused on the hospitality and tourism
on the Bank of England’s TFSME funding scheme in the 3rd quarter of sectors, stabilised and then returned to growth in the final quarter
In the year ended 31 March 2021, our levels of forbearance grew
The income statement credit for bad and doubtful debts was £618k the year, repaying all TFS. reaching £168m (2021: £171m), almost £6m higher than the book’s
sharply, before the vast majority of customers exited payment
(2021: £678k charge). More information on forbearance, arrears, pandemic low point, as our commercial team investment showed
holidays. After the end of the third lockdown, we have seen across
provisioning and impairment is included in notes 12 and 28 to the A summarised Balance Sheet is set out below: early fruit.
the board improvements in our credit metrics, and a much more
STRATEGIC
annual report and accounts.
REPORT
modest level of customers have continued to require bespoke support
2022 2021 We advanced £422m of mortgages (2021: £343m) and mortgage
arrangements. In our FSOL book, where a higher level of support £000 £000
Other provisions and charges balances grew by £68m1 (2021: £24m).
had been required throughout the pandemic, the vast majority of Assets
Loans and advances to customers 2,228,548 2,194,960
customers, who took forbearance, are now on arrangements which We increased our provision for existing liabilities in 2022. No Liquidity
Liquidity 596,372 478,255
see the customer repay more than their contractual amount each significant new exposures arose. We continue to provide for the
Other 60,365 29,243
month, in order to clear the amounts built up through Covid support largest of the matters discussed in 2020 as we move into the later On-balance sheet liquid assets rose to £596m (2021: £478m), as we
Total assets 2,885,285 2,702,458
measures. The level of customers in forbearance measures at 31 March stages of resolution, and the further charge of £167k reflects the drew down on 4 year TFSME funding in September and October
2022, none of which are Covid mandated forbearance, are: extended period of the program due to slower than anticipated Liabilities immediately prior to closing of the scheme. We concurrently repaid
customer responses this year. A modest loss on revaluation of our Retail funding 2,441,984 2,341,686 £130m of TFS. Throughout the year, we maintained a prudent buffer
No. of cases Wholesale funding 231,702 130,034
31 March 2022 31 March 2021 investment properties of £15k and an impairment charge of £211k on given the uncertain economic backdrop, and liquidity benefitted as
(% of book)
Other 6,495 33,958 members deposited new funds. Our TFSME draw down also pre-
FSRP (All) 41 (0.23%) 233 (1%) operating property (2021: £144k (revaluation and loss on sale) )
Total liabilities 2,680,181 2,505,678
FSRP (Owner Occupied) 32 (0.21%) 165 (1%) was recognised. funded an element of our lending growth for 2023 and 2024, as we
FSRP (BTL and HL) 9 (0.39%) 68 (3%) prepare for a return to more normal level of retail deposit growth in
Equity
FSOL 7 (1.22%) 43 (7%) Subsidiary Companies Profit for the year 7,409 8,414
the current inflationary environment.
General reserve 194,684 185,601

The Group’s financial statements incorporate the assets, liabilities Available for sale reserve 3,011 2,765
The Society’s principal measure of liquidity is high quality liquid
The volume of accounts fully secured on residential property (FSRP)
and results of a small, and reducing, number of subsidiaries, as Total equity 205,104 196,780 assets (HQLA) as a percentage of shares, deposits and loans, as this
and fully secured on land (FSOL) 90 days or more past due (90 DPD)
we deliver on our commitment to simplify our business as part of Total liabilities and equity 2,885,285 2,702,458 reflects the funds that are immediately and fully available to support
at the balance sheet date are as follows:
the Cumberland 2025 strategy. The only operationally significant the Group’s liquidity needs. The level of HQLA remained elevated
subsidiary is Borderway Finance Limited (BFL). BFL, our motor finance Loans and advances to customers growing to 20.1% (2020: 17.7%). The Liquidity Coverage Ratio (LCR),
Accounts in arrears (≥ 90
31 March 2022 31 March 2021
DPD) as % of loan book business, contributed a profit before tax of £530k (2021: £453k) to which is the primary regulatory measure, continued to be very strong
FSRP 0.11% 0.18%
the Group’s reported results. BFL traded successfully during the year The Cumberland’s lending strategy remains consistent, but the year’s at 268% (2020: 236%), considerably above the minimum regulatory
FSOL 2.10% 4.30%
benefitting from the robust value of used cars and its high touch performance is best understood in the light of the Covid-19 pandemic requirement.
customer service, which was recognised by the awarding of Feefo’s and its impact on the UK market over much of the year. Our high
Reflecting the unwinding of forbearance and related arrears as
platinum accolade. The balance sheet grew modestly to £22.3m quality owner occupied book grew throughout the year. Mortgage Liquid assets are principally held in deposits at the Bank of England.
customers have recovered from lockdowns and wider business
(2021: £21.0m). Credit quality has been good. Pleasingly, the level of growth was slow in the initial quarter, as the pipeline of business We have continued to diversify a portion of our liquid assets away
disruption, we have seen a net release of provision in our secured
arrears has remained subdued. moved slowly under lockdown and its immediate aftermath, before from the Bank of England reserve account into covered bonds. These
portfolios. This has been supported by successful conclusion of
accelerating to a peak in June supported by a surge in holiday let deposits, which will largely replace funds that we historically held
recovery activities in relation to the single large connection within
During the year, or shortly thereafter, all of the Group’s other historic business and, thereafter, growing steadily into the end of calendar in unsecured deposits with other UK based financial institutions,
our historic FSOL arrears discussed last year with no further loss.
trading subsidiaries were wound up and struck off, completing the 2021. It modestly increased, thereafter, supported by a return to are secured by the cashflows of the underlying mortgage assets as
This reduction in risk, and the related provisions release, has been
corporate simplification journey commenced in 2019, leaving a FSOL book growth. Strong levels of retention throughout the year well as the guarantee of the issuers, but offer a small increase in the
modestly offset by the raising of new specific provisions. These are on
basic Group structure of the Society, Borderway and an intermediary supported our growth trajectory. available yield. We have also bought a small number of multilateral
a small number of commercial borrowers who have been unable to
holding company. development bank bonds. Accordingly at 31 March 2022, included
trade out of the stresses created by Covid, either due to challenges
in liquid assets are £55m (2021: £7.1m) of assets held at fair value
through other comprehensive income (FVOCI).
1 Gross exposure excluding hedge accounting adjustments.

42

Balance sheet Viability Statement
Retail funding operation through difficult periods. Our capital comes from retained In accordance with the UK Corporate Governance Code, the The Board considers a three year time horizon in detail, which aligns
profits, and our solid financial results have broadly maintained directors have formally assessed the longer term prospects and with its usual forecasting and management reporting, but also
The Society continues to be well funded by its retail depositors, the our gross capital ratio (gross capital expressed as a percentage viability of the Group, taking into account its current financial has due regard to the longer timescales over which its strategy will
great majority of whom are located in its branch operating area. We of total shares and deposits), despite the drawdown of TFSME, at position and considering the potential impact of the principal and ultimately be executed.
saw a more normalised net inflow of funds of £93m (2021: £194m), 7.67% (2021: 7.96%). This gives us a very strong base to support the emerging risks set out on pages 34 to 37. This is the third year where
which, after the capitalisation of accrued interest, resulted in our business, as we accelerate investment levels markedly, as we move our assessment and business context had been informed by the These reviews considered the strengths of the Group’s business model
total retail funding rising to £2,442m (2020: £2,342m), growth of towards Cumberland 2025. Our current level of surplus will also Covid-19 pandemic and its impact on Society and our business. What and financial position and the changes the approved investment
4%. As a result, our deposit to loans ratio remained well over 100% allow us to grow our level of lending, even as profits are very largely started as an unknown, requiring formal crisis management in 2020, over the next three years will bring about. Actions identified as part
and all new lending was fully funded by new deposits. invested in 2023 and beyond. is now a well understood aspect of our trading environment. The of these reviews are incorporated into the Group’s strategic thinking
STRATEGIC
and progressed, so that the Group’s business model remains relevant.
REPORT
primary impact has become that on our people and our members
The extraordinary growth in saving and current accounts in 2021 The Society’s regulatory capital position at 31 March 2022 is wellbeing, as prolonged periods of isolation and working from home
continued in to the first quarter of this year before reverting to a summarised below. Our CET 1 ratio strengthened further to 19.6% The Board considered and approved The Cumberland’s three year
have impacted mental health, as well as the normal interactions
more normalised pattern, initially in current accounts which were (2021: 19.5%). If 2022’s earned profit is included, this ratio improves budget at the end of March 2022 and has incorporated that analysis
that a face to face work environment provides. In this regard, we
flatter in the second half, and thereafter, in instant access savings. to 20.4%. in its assessment of viability.
successfully reopened our head office building to all staff on
Our retention of fixed rate term deposits that passed through
28 February, encouraging its use as space for collaboration. While
March 2022 March 2021
Assessment period for viability
a maturity date was well over 90%, validating our long term
uncertainty remains as a result of the pandemic, it has reduced
commitment to support savers. More recently, we have increased our
Capital resources: £m £m further when compared to that indicated in 2021 and is much lower The directors have considered the viability of the Group and Society
savings rates in response to the rises in UK base rates, ahead of the
Common Equity Tier 1 (CET 1) capital 202.6 196.7 than in 2020. over a three year period to 31 March 2025. The three year review
vast majority of the market, in line with our commitment to long term Total capital 202.6 198.4 period is considered to be the most appropriate timeframe for
value for our members. Risk weighted assets 994.7 965.5 Longer term prospects viability for the following reasons:
Wholesale funding Capital and leverage ratios: % % The Group’s business model and strategic priorities are set out on
• increasing uncertainty, regarding the economic, competitive and
Common Equity Tier 1 (CET 1) ratio 19.6 19.5 pages 16 to 19. These are regularly reviewed by the Board. In the
regulatory environments beyond the three year period, reduces
We use wholesale funding to make our funding mix more diverse. This UK leverage ratio 8.41 7.20 year ended 31 March 2019, the Group completed a 12 month piece
the reliability of a longer assessment of viability;
reduces risk, and our use of the Bank of England’s sterling monetary
of work, which resulted in our refreshed strategy “Cumberland
framework facilities provides additional tenor and flexibility, and The Prudential Regulation Authority (PRA) provides the Society 2025”. Since this work set our direction, the Board has at least • a significant proportion of the Group’s assets and liabilities are
supports overall cost of funding in this historically unusual rate with a Total Capital Requirement (TCR). This sets the minimum annually considered our overarching strategy. In the current year, expected to mature within three years, despite a growing book of
environment, all of which benefits members. capital which the Society must hold under Pillar 1 and Pillar 2A having reconfirmed our strategic direction early in the year, the 5 year fixed rate mortgages;
requirements and is driven by both balance sheet growth and risk Board has considered key elements of both our product suite
As a result of the strong retail inflows in 2021 and early this year, our
factors determined by the PRA. The Society comfortably meets this and technology in a series of more frequent in depth strategic • key drivers of financial performance, such as net interest income
need for new wholesale funding was limited. However, looking forward
requirement using CET 1 capital alone. The Group’s TCR at 31 March days. As a result, as we move into 2023, the Board has committed and impairment losses, are heavily influenced by the level of
into our growth plans for the next 3 years, we encumbered a further
2022 was £94.6m. to significant technological investment and change utilising a market interest rates, house prices and unemployment, which
proportion of our mortgages with the Bank of England and drew down
transformation structure that will operate in parallel to our day are increasingly difficult to predict beyond a three year horizon.
substantial new funding from the Term Funds for SME (TFSME) scheme
Further information on the Group’s capital management can be to day technology teams, to ensure a single minded focus on this Even predicting these over a one year time horizon remains
in the two months prior to its closure to new drawings. This allowed us
found in the Pillar 3 disclosures published on the Society’s website crucial work is maintained as we move into the build phase. The fraught, as a result of periodic restrictions on economic activity,
to repay the residual £130m of TFS prior to its scheduled maturity and
concurrently with these annual financial statements. Board has acknowledged that the overall timescale of our refreshed the complex interaction of post Brexit trade, the pandemic and
has extended the tenor and stability of our funding base. At 31 March
strategy has modestly elongated as a result of the pandemic and significant government responses, alongside war in Ukraine and
2022, £220m of TFSME funding was outstanding. As a result, we made
Richard Ellison has committed to a significant rebuild of our core banking platform, global supply chain issues, all of which have changed the path of
no use of ILTR during the year and only maintained a modest presence
the economy as a whole and seen a re-emergence of significant
Chief Financial Officer
but identified no other macro level changes to the course set in
in the inter bank funding market.
2019. In this context, the Board reflected on another year of change inflation; and
Capital 1 June 2022 delivery and a soild financial performance, while recognising that
• the three year period aligns with the period over which the Group
the path of the pandemic and regulatory initiatives necessarily saw
conducts its annual budgetary forecasts.
The Society holds capital to provide protection for members deposits reprioritisations in some areas.
against losses from lending, and to protect the Society’s continued
44

Viability assessment activities During the year the Group also commenced analysis of the Since the ICAAP analysis took place, the FPC has announced an flow in 2020-21). The Cumberland is an active member of the Sterling
susceptibility of its lending books to the risk of Climate change and increase in the level of countercyclical capital buffer to 1% (effective Monetary Framework (SMF) but, due to the current level of retail
The corporate planning process assesses the forecast financial the transition to a non / lower carbon economy. This analysis which December 2022) and noted its desire to return to 2% in normal inflows, has not utilised ILTR in the current period, focusing funding
performance of the Group under a range of scenarios against its was conducted at an individual mortgaged property level is further economic circumstances. While this has increased the absolute capital on the TFSME Scheme.
strategic risk appetite. The following risk factors, among others, were discussed on pages 32 and 33 but has a very limited direct impact on requirement of the Society, the ICAAP and all internal capital metrics
specifically considered in the modelled scenarios, which are aligned the three year viability assessment period. had been produced on an assumption of a 1% CCYB, so it did not During the year ended 31 March 2022, the Group completed
with scenarios used in the Group’s ICAAP and ILAAP: impact our plans or expected surplus. In the same period, the PRA repayment of Bank of England funding from the financial crisis.
The directors have also reviewed the Society’s viability from a capital also invited the Society to adopt the refined approach to managing It repaid the final £130m of outstanding TFS, well ahead of its
• a recession causing a reduction in market interest rates into and liquidity perspective through the ICAAP and the ILAAP. These maturity and in line with our Board approved funding plan.
its Pillar 2A capital, which allows us, under certain circumstances, to
negative territory resulting in reduced net interest income; processes assess the Society’s ability to withstand severe capital In March 2020, the Bank of England announced a new facility
offset the excess conservatism in Pillar 1 credit risk capital against
and and liquidity stresses, in line with regulatory requirements, including (TFSME), which allows members of the SMF to draw down four year
other risks. The current year’s post tax profits are also available as
new and emerging regulation where sufficient information is known capital, shortly after the date of approval of these accounts. funding. Having topped up its mortgage collateral pools, the Group
• a downturn triggered by a sudden increase in inflation and
about future requirements. initially drew £190m in line with our funding plan in September
STRATEGIC
interest rates, which results in increased credit losses.
REPORT
The ILAAP, which addresses the Group’s funding and liquidity, was 2021. A further tranche was drawn in October to provide strategic
They take into account potential management actions and consider last updated in November 2021 and concluded that the Group is optionality. At 31 March 2022, £220m remained outstanding.
The Group’s baseline financial forecasts for the next three year
the impact and credibility of those actions in mitigating the able to meet both internal risk capacity requirements and regulatory The TFSME drawdowns markedly extend the tenor and stability of
period assume a modest series of interest rate rises during 2022
potential impacts of the stresses applied. An example of a capital requirements under modelled stress scenarios. The ILAAP noted the this funding source and the Group does not expect to draw on ILTR
within the context of an ongoing continuation of the historically low
stress would be a significant growth in the level of loan losses or a high levels of starting liquidity held, reflecting both the level of retail funding until it recommences structured repayment of this funding in
interest rate environment seen since March 2020.
rise in the pension deficit, both of which could occur as a result of a saving during the pandemic (which has outstripped our loan growth) 2023-24 forward.
recession induced by the war in Ukraine and the macro-economic and the drawing of TFSME funding. As a result, the Group has
As a building society owned by its members, the directors believe that
tools used to control inflation. reduced the number of mitigating actions in its regular stress testing Liquidity stress testing, incorporating each of the relevant principal
short term profitability is not the only, or indeed the primary, driver
to reflect the increased cushion available, though these all remain risks on pages 34 to 37, has been performed to understand the
of its viability. Nevertheless, the directors currently expect the Group
The ICAAP was last updated in August 2021 and concluded that the ability of the Group to withstand extreme stress scenarios, including
to remain modestly profitable over the three years of their viability available reflecting the Society’s active management of available
Society maintains sufficient capital resources to meet regulatory unprecedented adverse movements in key economic indicators,
assessment, as the shape of our strategic investment is balanced in unencumbered collateral and other mitigants. Since this date, the
requirements under the central planning scenario and also, with major dislocation and volatility in financial markets, significant
light of the need to transform at pace and our financial capacity. Group has updated its funding plans and stress testing to reflect the
management actions, under the modelled economic stress scenarios. liquidity outflows and severe operational risk events. This testing
continued inflow of customer funding.
The Society’s surplus of capital over regulatory requirements is has demonstrated that the Group has the resources, measures and
The financial statements presented alongside this viability discussion
significant and has grown year on year. In the central scenario, our The Group has seen good inflows from its retail customers in the controls in place to manage and withstand such extreme events.
incorporate the directors’ current best estimate of incurred losses in
capital surplus is now expected to modestly decrease over the three current year (though substantially lower than the exceptional level of Liquidity stress testing is conducted monthly.
its lending portfolios at 31 March 2022. The current year has seen a
year period assessed, reflecting loan growth and the concurrent
significant unwinding of the forbearance measures offered earlier
diversion of income into strategic investment, both of which are in
in the pandemic. While the vast majority of all types of customers
the control of the Society’s management. The Society considered the
have subsequently exited forbearance, returning to loan payments,
economic conditions which existed at 31 March 2022 and concluded
we continue to support our commercial (FSOL) customers though the
that the stress testing remained appropriate.
varying restrictions on trade. We expect this book to take longer to
recover from the pandemic’s impacts than our other portfolios. The
The stress tests applied were in line with, or more severe than Bank
level of loss crystalised has remained very low, and this is reflected in
of England scenarios. The stress testing included consideration
provision coverage (which has moderated in response to the unwind
of negative interest rates (though in management’s view this risk
of forbearance and its subsequent repayment).
has receded) and examined the effects of significant house price
corrections. Scenarios with rate rises, which currently appear more
While there remains a risk that the level of loan losses ultimately
likely, have a less severe impact on the Society than those that
suffered as a result of Covid-19 grows in light of inflation and a
reduce rates.
sharp squeeze on living standards in 2022, our persistently low
levels of loan losses over the last ten years show the strength of our
Our ICAAP stress testing also incorporates a series of reverse
underwriting and quality of our book in relative terms. Our financial
stress tests, which explore the extent to which changes in specific
budgets have incorporated an appropriate level of loan losses vis à
underlying factors would render the Society’s business model non-
vis our actual historic performance in each of the years forecast, and
viable. These are designed to assist management’s understanding of
this risk is also incorporated in our stress testing.
the constraints inherent in the business model.
46

During March 2020, the Society transitioned the vast majority of
head office colleagues to home working in line with government
guidelines. These colleagues continued to work from home locations
through the financial year having been provided with updated IT
and communications equipment and tools. In late February 2022,
The Group’s overarching risk management process, as detailed
on pages 34 to 37, includes ongoing monitoring and reporting of
emerging risks and scenario analysis, enabling further enhancements
to the control environment to adapt to these risks.
At the date of this report, and after over two years of working within
OUTLOOK
we reopened our head office to colleagues as part of new hybrid
working practices. We also moved early to protect the viability of a pandemic impacted operating environment, the Group has not
branch services and wellbeing of our people and have continued to identified any current or emerging supplier issues that would impact
provide services from our branch network, while improving safety for its assessment of the Group’s own viability.
colleagues and customers. These arrangements have been adjusted

Conclusion
to the path of the pandemic and we expect to allow a controlled
return of more face to face customer appointments in the near future The outlook for the UK economy is highly uncertain. In the immediate term, the impact of the
Based on the above assessments, and having considered each of
as restrictions continue to ease.
STRATEGIC
the principal risks and uncertainties discussed on pages 34 to 37, the sharp rise in inflation and war in Ukraine is creating a challenging macro-economic outlook
REPORT
directors have concluded that: with rising rates required to manage inflation before it becomes embedded but, conversely,
This form of flexible and agile operation has become a new normal.
their imposition risking recession. The last two years have shown that prediction is fraught and
The Group has planned and is confident that it can offer the
• the Group’s business model and overarching Cumberland 2025 while a deep recession has not occurred the pandemic has weakened the resilience of many
critical services required by its members even if 50% of staff are
strategy remain appropriate, and actions have been identified borrowing households and business. There is an expectation that interest rates will modestly
unable to work. This leaves the directors satisfied that the business
which are intended to enable it to remain relevant as the markets rise over 2022, and that growth may well stall and slow, reflecting supply chain bottlenecks,
can continue to operate safely and soundly even in the unique
in which it operates evolve; the second order impact of war and trade frictions that Brexit has bought.
circumstances it continues to find itself.
• the Group maintains an appropriate level of liquidity, sufficient to
Early in the pandemic period, the Group put in place a formal As outlined in the Chief Financial Officer’s Review, the Society’s profitability is expected
meet both the normal demands of the business and requirements,
logging and capture horizon scanning process for all regulatory to reduce over the coming three years, as it strategically invests in its future coupled with
which might reasonably arise in modelled stressed circumstances.
and industry body pronouncements and this has been maintained absorbing the impact of inflation, the cost of living squeeze and supply chain bottlenecks
The availability and quality of liquid assets are structured so
throughout the period. on the economy through its key business lines, while simultaneously operating in the highly
that funds can reasonably be expected to be available to repay
competitive environment that characterises UK mortgage lending.
maturing wholesale funds and to cover exceptional demand from
Suppliers and viability
retail investors;
Nevertheless, The Cumberland is well placed to benefit in the medium term from the planned
In our interconnected modern world, the Group relies on third party
• the Society has sufficient current capital resources, in excess of investment. This, coupled with the strong foundations provided by its distinctive business
suppliers for the provision of both goods and services. These range
regulatory requirements, and credible plans to meet known future model which has been highly successful in differing economic climates, will continue to allow
from the mundane, but necessary, matters of office and cleaning
requirements, under both central and modelled stressed scenarios; the Society to thrive into the future.
supplies, to more banking specific matters like new debit cards.
and
The Group has periodically reassessed both its own critical services,
• whilst it is accepted that it is not possible to completely eliminate
John Hooper
in light of the pandemic, and its supplier base. It is also progressing
its program of work to address the operational resilience regulation
all risk, particularly in the uncharted territory the UK and its Chairman
that now applies and determined its important business services,
economy finds itself, the Society has taken reasonable steps to put
1 June 2022
in place suitable operational capabilities to manage and mitigate
defined its impact tolerances and agreed a plan of work to enhance
the impacts of risk events to within reasonable tolerances,
its resilience progressively between now and 2025. During the year
showing over the last two years that it can safely operate under
ended 31 March 2022, the Group began the process of moving some
highly unusual and stressed circumstances.
of its non customer facing technology provision to the Cloud and, as
part of the Cumberland 2025 journey and increasing our operational
Therefore, the directors have a reasonable expectation that the
resilience, we expect this trend to accelerate over time.
Group and Society will be able to continue in operation and meet
their liabilities as they fall due over the three year period.
The Group remains in standardised quarterly contact with the PRA, its
primary regulator, to discuss the path of the pandemic and its impact.
The Group’s going concern statement is included on page 89.
Accordingly, the Group is satisfied that there is nothing in its current

regulatory or legal position that would have an impact on its viability.
48

Corporate Governance
Highlights of Chairman’s Welcome 53
2021/22
Meet the Board of Directors 54
Meet the Senior Leadership Team 58
How the Board Works 61
Nomination and Governance Committee Report 66
Board Risk Committee Report 70
Audit Committee Report 74
nh anced Board engagem ent with People, Remuneration and Culture Committee Report 82
E Directors’ Report 88
tion.
strategy and transforma Statement of Directors’ Responsibilities 90
New operating rhythm to

prov e th e effectiv en es s of our
im
ulture
People Remuneration & C
GOVERNANCE
CORPORATE
nance
and Nomination & Gover
REPORT
Committees.
lea rer B oard Pro c edu re s and
C
on of A uth ority F ram ew ork.
Delegati
pp ointm en t of E ric G u nn as
A
Director.
new Senior Independent
Corporate
GOVERNAN C E
Report
50

The Society’s Board of Directors is responsible
for the governance of the Society
Chairman’s Welcome The Board also worked to improve those areas highlighted for
improvement in the Board Effectiveness Review carried out by an
independent third party at the end of 2020. The main focus was a
Dear Member,
JOHN KELLI Welcome to the Corporate Governance Report for 2021/22 at the
new operating rhythm for our People, Remuneration & Culture and
Nomination & Governance Committees, which was successfully
ERIC JACKIE end of my third year as your Chairman. This year, as ever, my Board
and I remained committed to the highest standards of corporate
developed and implemented with input from experts in this area and
has already raised the effectiveness of both Committees, enhancing
governance. Although the Society, as a mutual organisation, is
the assistance they provide to the Board in its oversight of these
Our
not required to comply with the principles in the UK Corporate
areas. More mundane, but also important, we improved our Board
Governance Code 2018 (the ‘Code’), we nevertheless have regard
SENIOR
Procedures and Delegation of Authority frameworks to align with our
to the Code, along with other legislation and guidance, when
straight forward and responsible values.
establishing and reviewing corporate governance arrangements.
This report explains how the Society does that and the table on pages
At the end of the year, Michael Hulme stood down from the Board for
140-142 sets out the principles of the Code and where in this report
personal reasons. Michael served on our Board for over 6 years and,
you can find how the Society addresses them.
TEAM
during that time, made a truly valuable contribution, not only as an
effective independent non-executive director, but also as member
Two highlights of the Board’s year were the strategy days held in
GOVERNANCE
CORPORATE
of our Audit Committee and our People Remuneration & Culture
November and March, when the Board input into and approved
REPORT
Committee (and its predecessor Remuneration Committee of which he
plans to safeguard the Society’s future as a safe and sustainable,
was Chair) and, since 2018, as our Senior Independent Director (SID).
VICKY DES
independent, purpose-led business for the years to come. It goes
without saying that Board approached these decisions with the
I thank Michael for his valuable contribution to the Board and the
Society during his dedicated service. Eric Gunn succeeded Michael as
care their importance deserved and felt honoured to serve a Society
SID on 1 April 2022 and a process is currently underway to appoint a
sufficiently strong, both financially and operationally, to embark on
new non-executive director to fill the vacancy left by Michael, and we
this significant and exciting journey.
expect to welcome a new member to the Board during 2022.
June 2022
John Hooper, Chairman, 1
Gender split
Male 5
Female 3
Longevity of Board members (years with the Society since 2015)*

*as at 31 March 2022
MARK RICHARD
2 2
JILL JOHN
0 1 1 1 1
Up to Up to Up to Up to Up to Up to Up to
1 year 2 years 3 years 4 years 5 years 6 years 7 years
Executive and non-executive director split
Executive director 2
Non-executive director 5
Chair 1
Committee membership
NGC BRC Audit PARC

John Hooper Chair
Kelli Fairbrother Member
Vicky Bruce Member
SUSANNE Eric Gunn

Jackie Arnold
Member
Member
Chair
Member Chair
Mark Stanger Member Chair
Des Moore
52 ALEX IAN KATH Richard Ellison

The Board is comprised of 6 non-executive
and 2 executive directors. All of the non-
executive directors are considered to be
independent under the Code;
the Chairman was considered independent
on appointment.
The Chairman is responsible for leading the Nomination Board Risk Audit People,
Board and ensuring it acts effectively. The and Committee Committee Remuneration
Chairman must be a different individual to Governance and Culture
the CEO and there must be a clear division Committee Committee
of responsibilities between the two roles. Eric
Gunn is the Senior Independent Director and
acts as a sounding board for the Chairman
and serves as an intermediary for the other
directors and the members from 1 April 2022.
Non-Executive Director since November 2015, Board Chair since July 2019
(independent on appointment)
Skills and experience

John has been involved in banking and financial services for over 35 years, and still
Meet the board of

holds active positions as non-executive director on the boards of several financial
GOVERNANCE
CORPORATE
services companies. During his career, John was an executive director at both
REPORT
Clydesdale Bank PLC and National Australia Bank Europe Limited. Whilst at National
RS
Australia Bank, he held a number of senior positions and was a member of its
DIRECTO
executive committee.
Current material external positions

Non-Executive Director (Chair of Board Risk Committee),
Together Money Personal Finance Limited
JOHN HOOnPER
Non-Executive Director (Chair), Stubbers Adventure Centre Limited
Non-Executive Director (Chair), Stubbers Trading Limited
Board Chairma
Previous positions include and Nomination and
Director, National Australia Bank Europe Limited Governance Chair
Director, Clydesdale Bank PLC
Non-Executive Director, The Leasing Industry Philanthropic and Research
Foundation Limited
The November 2020 Board Effectiveness
Review found the Board operates a positive,
friendly, constructive culture that encourages
transparency and facilitates straight Non-Executive Director and PARC Member since September 2020 (independent)
talking; the way non executive directors and
executive directors operate within the Board
Kelli’s background is in consumer and technology businesses. She is currently CEO of
environment is in line with best practices
technology start-up xigxag after co-founding the company, and was previously Chief
for a unitary board; and the relationship Operating Officer of Gelato. Formerly a US Army Captain and an MBA graduate of
between the Board and the executive team Harvard Business School, Kelli previously led the entry to market of Premier Inn in
Germany whilst working at Whitbread Hotels and Restaurants.
is effective, transparent and productive. This
has continued to be the case during 2021/22. Current material external positions
Co-Founder and CEO, Xigxag Limited
Previous positions include

Chief Operating Officer, Gelato
KELLI FAIRBR OTHER Business Development and Commercial Director, Whitbread

Hotels and Restaurants
Director
Non-Executive Group Head of Strategy, Whitbread Plc
54

Non-Executive Director and BRC Member since September 2020 (independent) Non-Executive Director since June 2018 (independent),
Audit Committee Chair since July 2020
Vicky has worked in international financial services for over 25 years, latterly as a Managing Skills and experience
Director of Deutsche Bank Wealth Management. Her experience spans change, risk and Mark has over 30 years’ experience in the accountancy sector, and is a Senior Partner and
regulations, and she has UK board experience in the not-for-profit as well as the financial Managing Partner with a West Cumbria-based chartered accountancy practice.
services sector.
Current material external positions Senior Partner and Managing Partner, Gibbons
Non-Executive Trustee, Hope and Homes for Children Director, Gibbons Wealth Management Limited
Non-Executive Trustee, Agitos Foundation Director, Gibbons Properties Limited
Consultant, International Paralympic Committee Director, Carleton Properties (Cumbria) Limited
Previous positions include Previous positions include

Global COO for Institutional Wealth Partners, Deutsche Bank Wealth Management Chair, Board of Governors, Lakes College, Lillyhall
VICKY BRUCE
Global Head of Regulatory Change, Deutsche Bank Wealth Management
MARK STANGER
Executive Director, DB UK Bank Ltd Audit Chair
Non-Executive Director Head of Change Management, Coutts
Non-Executive Director since November 2016, BRC Chair since August 2019, Chief Executive Officer and Executive Director since April 2018
SID since April 2022 (independent)
Skills and experience Des is an accomplished senior leader in Financial Services in both the UK and Ireland,
GOVERNANCE
Eric spent his entire career at Clydesdale Bank PLC, most recently as Chief Risk Officer and a having over 30 years’ experience in both retail and commercial banking. Prior to joining
CORPORATE
member of its Executive Management Team. Eric was responsible for managing the UK risk
REPORT
the Society, Des spent five years as Managing Director of AIB (NI), the trading division of
profile of National Australia Bank Group as part of a career of almost 40 years in the UK AIB (UK) plc’s Northern Ireland operation. He was responsible for leading the restructure
banking sector. and turnaround of the bank. Des is a Chartered Director with the Institute of Directors,
and has been leading the transformation of the Society and the implementation of a new
Current material external positions vision since joining in April 2018.
None
Previous positions include Non-Executive Director, Cumbria Local Enterprise Partnership
Chief Risk Officer, Clydesdale Bank PLC
ERIC GUNN Managing Director, AIB (NI)
nior
Board Risk Chair and Se Senior positions – AIB, Bank of Ireland, Permanent TSB and
Independent Director National Irish Bank DES MOORE
Chief Executive Officer
Non-Executive Director and member of NGC since March 2018, PARC Chair since May 2019, Chief Financial Officer since April 2019 and Executive Director since May 2019
Audit Committee Member since September 2020 (independent)
Skills and experience Richard has significant experience in the UK financial services sector. As Deputy Chief
Jackie has over 35 years’ experience in business and financial management roles, and was Financial Officer and Chief Data Officer at CYBG PLC, he helped lead the successful
most recently Head of Strategy at BAE Systems. Prior to this, she held a number of other senior demerger and IPO of Clydesdale Bank PLC from National Australia Bank, and led the
positions with BAE Systems and was Managing Director of Lakeland Power Limited. restructure and cultural transformation of the finance function.
Current material external positions Since joining the Society, Richard has led changes to the treasury function to allow greater
Professor of Practice, University of Cumbria sophistication in risk management, as well as improving operational design of the finance
function to position them to support the delivery of the Cumberland 2025 strategy. He also
Leader in Residence, Lancaster University
oversees the Governance, Legal and Secretariat functions.
Previous positions include Current material external positions

Head of Strategy, BAE Systems
Non-Executive Director and Audit Committee Chair, Kingdom Bank Limited
LD MBE
JACKIE ARNOtio
Managing Director, Lakeland Power Limited
n and Vice Chair, Cumbria Local Enterprise Partnership Previous positions include
People, Remunera
Culture Chair
Member, North West Business Leadership Team
RICHARD ELLIS ON Interim Finance Director, Newcastle Building Society Group
Pro-vice Chancellor, University of Cumbria Deputy Chief Financial Officer and Chief Data Officer, CYBG PLC
ficer
Chief Financial Of
56 Director Banking and Capital Markets, PwC

Chief Risk Officer since December 2020
The CRO is responsible for overseeing risk management across the Group on behalf of the Board. He
is accountable for enabling the efficient and effective governance of significant risks and related
opportunities for the business and its subsidiaries. John oversees the management of standard risk
categories: strategic, credit, operational, financial, conduct and regulatory, and supports the CEO and
SLT to manage the risks in their respective business areas.

John is a qualified accountant, with experience across risk, including credit risk, compliance and as a
CRO covering retail and commercial lending and other banking products. He was previously CRO at
Together Personal Finance and held senior risk roles at Nationwide Building Society, GMAC and
Capital One.

None
JOHN HUNT Previous positions include

CRO, Oodle Car Finance
)
Chief Risk Officer (CRO
Meet the senior

CRO, Together Personal Finance
Director of Compliance Advisory, Nationwide Building Society
DE R
LEA team SHIP Chief Operating Officer since March 2019
The COO has responsibility for direction and control of all organisation operations in
accordance with strategy and business planning as agreed by the CEO and the Board. Susanne
GOVERNANCE
leads the Operations and Customer Service functions and supports the Society by ensuring
CORPORATE
entire enterprise operational resilience.
REPORT
Susanne has over 25 years’ experience in Financial Services with a degree in Banking &
Finance (LIBF) and a MSc in Leadership & Management. Having spent her career with The
Cumberland, she has extensive experience working across the business in both branches and
head office, leading teams of all sizes, from our smaller branches to one of our largest teams in
Operations.

Our Senior Leadership Team is headed by
SUSANNE PAR(CRY
Trustee, University of Cumbria Students’ Union Board
Des Moore, CEO, who we introduced as a
Previous positions include OO)
Chief Operating Officer
member of our Board. Des is responsible
None
for managing the Society and delivering
the strategy within the framework agreed
by the Board, advised by his Senior
Leadership Team.
Richard Ellison, who we also introduced as

a member of our Board, is our CFO and a Chief Information Officer since January 2022
member of the Senior Leadership Team. The The CIO is responsible for leading on technology strategy and operations.
remaining members of the Senior Leadership
Team are introduced on the following pages.
Ian is a technology expert with over 25 years’ experience in financial services. Previously Head
of International Operations at Barclays, and with experience working as a consultant at major
international consultancy firms, recently Ian has held Chief Operating Officer positions at start-up
challenger banks in London.

None

COO, Vive
IAN STACEY
COO, LQID
CIO, First Abu Dhabi Bank
er (Designate)
Chief Information Offic Director, Barclays Wealth
(CIO) Head of International Operations, Barclays
58

Chief Customer Officer (interim) since August 2021
BOARD
The CCO is responsible for ensuring the business provides a differentiated and exceptional
works
customer experience to deliver the business’ income objectives. Kath is accountable for overall
customer acquisition and retention, overseeing all distribution and customer management,
How the
including the branch network, customer care, national lending, brokers, Cumberland Commercial,
Borderway Finance and Marketing.

Kath is an MBA graduate and Chartered Banker, with many years’ experience in retail and
commercial banking. She was previously a Managing director at Barclays as head of Branch
Banking and Community Banking, and a divisional director at National Australia Bank in the UK.
Current material external positions Leadership & Purpose

None
KATH MYERS Previous positions include The Board has established a purpose, values and strategy for the Society as set out in the Strategic Report on pages 6 to 49. The Board
(Interim)
Chief Customer Officer Head of Branch Banking, Barclays
oversees management’s delivery of the strategy within this framework, measuring the SLT against key performance metrics across a range of
(CCO ) Divisional Director of Community Banking, Barclays
strategic, financial, customer, operational, risk and conduct, and people measures.
Divisional Director, National Australia Bank
The Board meets at least ten times each year to fulfil its function. The non-executive directors meet without the executive directors present
on a regular basis. Set out below are details of the directors’ attendance record at Board meetings during 2021/2022. Membership of and
attendance at Board Committees are set out in the relevant Committee reports.
Chief Transformation Officer since August 2021
The CTO is responsible for delivering the Society’s transformation programme. Alex also has
responsibility for creating and managing the corporate strategy.
GOVERNANCE
CORPORATE
REPORT
Alex joined The Cumberland in May 2016, bringing a wealth of strategy, marketing and
commercial experience from senior level roles at BP, LG Electronics and Vodafone both in the UK
and internationally.
JOHN HOOPER
11 /11
None
Previous positions include ALEX WINDLE(CTO)

Chief Customer Officer, Cumberland Building Society Chief Transformation Of
ficer ERIC GUNN MARK STANGER JACKIE ARNOLD
11 /11 11 /11 11 /11
Global Product and Offer Director, British Petroleum PLC
Marketing Director UK, British Petroleum PLC
Head of Marketing UK and Ireland, LG Electronics
KELLI FAIRBROTHER VICKY BRUCE DES MOORE

11 /11 10 /11 11 /11
Chief People Officer since March 2019
The CPO is responsible for leading on people strategy. Jill oversees the development of RICHARD ELLISON
people and culture across the business, providing support across the People function including 11 /11
recruitment, retention, talent development and performance objectives. In addition to this, she
provides organisational development functions including leadership development, reward,
wellbeing and safety, team maturity, inclusion and diversity. Michael Hulme 9/11 (resigned 31 March 2022)

Jill has a Marketing degree, is CIPD qualified and has 25 years’ experience leading HR teams
for organisations including the Guardian Media Group and Border Television plc. She also has
experience of successfully running her own HR consultancy business.
Current material external positions The Chairman ensures that directors receive accurate, timely and clear information to enable them to undertake their roles effectively.
Non-Executive Director, University of Cumbria Established Board reporting formats provide the Board with information on the performance of each business area; these are proactively
Women in Finance Board and Remuneration Committee Chair, Deputy Chair amended when new matters and themes emerge. The November 2020 Board Effectiveness Review found that Board and Committee packs had
JILL JOHNSTOPON)
for Building Society and Credit Union Sectors been “revolutionised” since the last review and that supporting papers were “clearly written and made their points well”. Information is provided
Chief People Officer (C

Previous positions include via a secretariat, headed by the Society’s Secretary. The Secretary ensures that non-executive directors have access to resources, the advice and
HR Director, GMG Radio services of the Secretary and, if necessary, are able to take independent professional advice at the Society’s expense.
Head of HR, Border Television plc/Border Radio
60 Group HR Director, GMG Radio (part of the Guardian Media Group)

Stakeholder engagement
Each year, at least one Board meeting includes an in-depth review of strategy. The Board Under Section 172 of the Companies Act 2006, boards have a duty to promote the success of a company by considering the consequences of
also meets informally, as required, to provide support and challenge to management in the decisions in the long term and the interests of different stakeholders. As a mutual organisation, with members rather than shareholders, a status
development of strategy before it is formally presented to the Board and to provide input to the which the Board values, the Board believes the Society is particularly well placed to respond to the similar provisions that apply to it. The Board
agenda for the annual review of strategy. In 2021/22, the Board held two formal strategy days in recognises the diverse range of the Society’s stakeholders and the importance of assessing and understanding their needs. We have identified
November and February, when the Board input into and approved plans to safeguard the Society’s our key stakeholders below and describe how we engage with each group and give examples of how they have influenced our decision making.
future as a safe and sustainable, independent, purpose-led business for the years to come and the
Society is now embarking on the next phase of transformation as outlined in the CEO’s business Our Customers
review on Page 10.
Members are invited to attend the AGM, where they can ask questions and voice their opinions. In 2022, our intention is, for the first time, to
provide members with the opportunity to legally attend the AGM by video conference which will also afford members the opportunity to ask
The Board is assisted in its work by four Board Committees, which allow it to consider specific areas
questions and vote at the meeting remotely. This follows on from the opportunity we provided to attend (but not formally be present) virtually
in more detail than would be possible within Board meetings:
last year. The Chairman and the CEO are present at the AGM each year and are available to answer questions, along with other members of the
Board, as appropriate.
The Society actively seeks customer engagement feedback daily through its partnership with Feefo, achieving the much sought-after Platinum
BOARD
Trusted Service Award. This award is given to businesses that have achieved Feefo’s Gold standard for three consecutive years and recognises
consistently exceptional customer service.
GOVERNANCE
CORPORATE
The member perspective has been instrumental in shaping the Society’s strategy. “Customer Led” has been adopted as one of the Society’s
REPORT
core values underpinning the strategy and the customer perspective is considered as part of our decisions making process, as a key factor for
consideration in all board papers.
Over the last few years, feedback obtained in these ways has been instrumental in shaping the strategic transformation, which was approved by
the Board. The programme is a significant investment in making the Society sustainable and relevant for our members in the longer term.
This year feedback by survey from both members and potential customers has been a key input into the refined purpose discussed from page 16.
Nomination People,
and Audit Board Risk Remuneration
Governance Committee Committee and Culture
Committee (AC) (BRC) Committee
(NGC) (PARC)
Further information on the on the membership and work of each Committee can be found in the
relevant Committee report later in this section.
The Board, through the work of PARC has actively engaged with the changes being made as
SAM FARRAR
part of the Society’s strategy and their impact on culture. This direct involvement is supported by
the Society’s Internal Audit function’s work, which seeks to assess the Society’s culture to ensure
alignment with the Society’s purpose, values and strategy, as part of its ongoing work, particularly
Manuka Cycleworks
in its end-to-end audit work.
The November 2020 Board Effectiveness Review concluded that the Society’s Board provides
effective oversight and has a firm grip on the strategic direction of the Society.
62

LYNETTE
Kendal branch
GOVERNANCE
CORPORATE
REPORT
Our People Our Suppliers
The Chair of the People, Remuneration and Culture Committee is the designated non- Our Procurement function and relationship managers stay in close contact with our key
executive director for workforce engagement; workforce engagement is facilitated by the suppliers via regular relationship reviews and supplier health checks.
Chief People Officer utilising a variety of forums.
Feedback we have obtained through discussions with suppliers has helped shape our digital
We participate in the Best Companies B Heard engagement survey, which measures levels of transformation programme.
engagement across the Society, and we supplement this with regular feedback using Pulse
surveys throughout the year. Environment
The Senior Leadership Team hold regular events and briefings at which the Society’s strategy We work with a range of external bodies and suppliers to monitor, manage and reduce our
and objectives are communicated to our people, who are encouraged to participate, ask environmental impacts. Feedback we obtained in these ways, alongside the work we have
questions and give feedback. done with Landmark, has helped the Board in shaping the planet element of our new purpose
as well as our policies and risk management framework.
In the year, feedback we obtained in these ways has been instrumental in shaping our new
ways of working, including the way we have reshaped our head office and moved to a hybrid Regulators
working model.
We have a transparent and open relationship with our regulators have regular dialogue with
Our Communities them, both directly, for example through our quarterly update with the PRA, and through
our industry bodies. We monitor regulatory publications both from the regulators and wider
We are actively engaged with the communities in which we operate, providing sponsorship, stakeholder groups and take action as required
education and financial support, as well as through the provision of branch-based services
which were maintained throughout the pandemic. Our people also have the option to spend a Further details on our key stakeholders, and why they are important to us, can be found on
day volunteering for local community organisations. pages 20 to 33 of the Strategic Report.
Our people are active in the business community and our CEO is a non-executive director of
the Cumbria Local Enterprise Partnership.
The perspective of our community stakeholders was a key consideration for the Board in
setting our refined purpose this year, which is to create a banking experience that’s kinder to
people and planet.
64

e
Chair’s introduction Who sits on the committe
Dear Member,
JOHN HOOPER ERIC GUNN

JACKIE ARNOLD
As Chair of the Nomination and Governance Committee (NGC),
which I chair in addition to the Board, I am pleased to present the (CHAIR) 7/7
6/6
(see note below)
7/7
Committee’s report for the financial year ended 31 March 2022. NGC
assists the Board in fulfilling its responsibilities in relation to Board
Michael Hulme 6/7
appointments, succession planning and corporate governance. We (resigned 31 March 2022)
lead the process for appointments and ensure plans are in place for
orderly succession to Board positions. This includes ensuring the right Eric Gunn 6/6, Mark Stanger 6/6, Vicky Bruce 5/6,
mix of capabilities at Board level to enable the successful operation Kelli Fairbrother 6/6, Des Moore 6/6, and Richard Ellison 6/6 all resigned
on 2 November 2021 when Committee was restructured.
of the Board.
Eric Gunn reappointed 1 April 2022 when appointed SID.
NGC’s remit includes oversight of the Society’s wider governance

framework to ensure it remains effective, particularly during
s
How the committee work
implementation of the Society’s programme to simplify and de-risk
independent third party, Praesta. As part of the review, all directors
the business.
and the Senior Leadership Team completed questionnaires and met
with Praesta individually. The findings were reported back to the
GOVERNANCE
I set out below details of the work the Committee has focussed on Board and an action plan was agreed to address any material matters
CORPORATE
The Committee is chaired by the Chairman of the Board and the Chair
REPORT
during the year in relation to the Senior Managers and Certification identified, which will be monitored by the Committee.
of PARC and the Senior Independent Director are also members; their
Regime, Board succession planning and Board effectiveness. No matters relevant to Board composition were raised. As that review
attendance record is set out above. Details of the skills and experience
concluded towards the end of the prior year and there was a significant
of the committee members can be found in their biographies on pages
resulting activity underway in relation to the Committee and PARC,
55 to 56. The Committee is also attended by the Chief People Officer
an internal effectiveness review was not conducted in the year, but a
and the Society’s Secretary. Following a review in November 2021 (see
T I O N
review will be initiated in July 2022.
N A
below), the Committee meets four times a year in January, April, July
I
NOM and
and October and, additionally, as and when required and the number
of meetings held in the year was seven. The Society also has a process to evaluate, at least annually, the
performance and effectiveness of individual directors. The performance
of all directors, both executive and non-executive, is evaluated annually
The Committee conducted a deep dive review of its terms of reference,
N CE
by the Chairman. The Chairman is evaluated by the Senior Independent
N A
structure, and operating rhythm in November 2021 following the
VE R
GO committee report
Director, after consulting and obtaining the views of the other directors.
conclusion of the external review of the People Remuneration & Culture
Committee. The Committee’s remit was aligned with the revised remit
of PARC and the Committee now focusses on the orderly succession and Those non-executive directors, who have served at least six years on the
appointments to the Board, Board related policies, SMCR compliance Board, are subject to a particularly rigorous performance evaluation in
and the continuing effectiveness of the Society’s governance framework line with the Code’s requirements. All directors were appraised during
with diversity and inclusion and wider succession planning moving to the year and the Board is of the view that all directors contribute
PARC. The frequency, timing and membership were also streamlined effectively and are considered suitable for election/re-election (where
to the position outlined above to allow it to discharge its remit more appropriate) at the AGM 2022.
effectively and align with best practice. More detail on the Committee’s
duties and responsibilities can be found within its terms of reference on In relation to diversity and inclusion, the Committee works closely
the Society’s website: cumberland.co.uk with PARC, which oversees diversity and inclusion throughout
the organisation (see Report of PARC on pages 82 to 87) and all
The Board conducts an annual assessment exercise to review the appointments to the Board comply with the Society’s diversity and
effectiveness of the Board and the Board Committees and highlight inclusion policy.
J OH N
any areas which should be improved. During 2020/2021, this formed
part of the external Board Effectiveness Review carried out by an
66

Report on the year
NGC focussed on the following key areas during the year:
Areas of Focus Committee’s Response
NGC Deep Dive Review The Committee conducted a deep dive review of its terms of reference, structure, and
operating rhythm in November 2021 following the conclusion of the external review
of the People Remuneration & Culture Committee as outlined above.
SMCR Compliance The Committee monitored the progress of applications and allocation of
responsibilities under the Senior Manager & Certification Regime and approved the
Society’s Management Responsibilities Map.
Appointments The Committee oversaw the appointment of Kath Myers as Interim CCO in August
2021 (succeeding Alex Windle), the creation of a new SLT role of and appointment of
Ian Stacey to Interim CIO in January 2022, and appointment of Eric Gunn as the SID
in April 2022 (succeeding Michael Hulme).
Non-CBS Appointment The Committee considered and approved the CEO’s external appointment to the
GOVERNANCE
CORPORATE
Cumbria Local Enterprise Partnership. NGC will focus on the following key areas during 2022/2023:
REPORT
Succession Planning The Committee considered and approved an Emergency Succession Plan for SLT roles. Areas of Focus Committee’s Response
Delegation of Authority Framework The Committee considered, and recommended to Board for approval, a revised Board Effectiveness Review The Committee will conduct an internal Board Effectiveness Review beginning in
Delegation of Authority Framework. July 2022.
Board Procedures The Committee considered and approved revised operating procedures for the Board Appointment of new NED The Committee will follow a process to attract and appoint a non-executive director
and the induction of new non-executive directors. following the retirement of Michael Hulme.
SMCR Compliance The Committee will continue to monitor the progress of outstanding applications
under the Senior Manager & Certification Regime and consider the Management
Responsibilities Map twice in the year.
Structure & Composition The Committee will consider the structure and composition of the Board and
succession planning, in particular in relation to Board Committees following the
appointment of an additional non-executive director, to ensure that the Society has
the appropriate mix of skills and experience to support the Society’s strategy.
Policies, Procedures and Processes The Committee will consider policies, procedures and processes, including the Del-
egation of Authority Framework, related to the Board as part of its annual cycle to
ensure they remain effective and to drive continuous improvement.
On behalf of the Nomination and Governance Committee

John Hooper
Chair
1 June 2022
68

e
Dear Member,
ERIC GUNN
As Chair of the Board Risk Committee, I am pleased to present the
MARK STANGER VICKY BRUCE
Committee’s report for the financial year ended 31 March 2022. (CHAIR) 4/4 3/4
4/4
At the end of this financial year, we are emerging from the

restrictions placed upon us by the Covid pandemic. Throughout
this period, the Board Risk Committee has overseen the activity to
s
safeguard our members and employees’ interests, managing the
avoidance of unfair outcomes. As a result of steps taken over the
past two years, the Society has successfully navigated the immediate
risks posed by the pandemic. This has included an ability to move
The Board Risk Committee comprises independent non-executive directors whose attendance record is set out above. Eric Gunn became Chair
many of our impacted retail and commercial customers out of Covid-
of the Committee in August 2019. Details of the skills and experience of the Committee members can be found in their biographies on pages
related forbearance, providing key protections to our Cumberland
56 to 57. The Committee is scheduled to meet four times a year in January, April, July and October and, additionally, as and when required.
community, and the adoption and embedding of effective new ways
The Committee is also attended on a standing basis by the CEO, CFO, CRO and the Head of Internal Audit and receives a report from the CRO
of working for our colleagues.
at each meeting. Subject matter experts are also invited to Committee meetings to present on a variety of topics. Following each meeting, a
written report is provided to the Board by the Chair of the Committee, summarising activities undertaken, areas where the Committee had
GOVERNANCE
challenged management and key decisions taken. The Board Risk Committee also oversees the Risk Management Committee, which is the
CORPORATE
REPORT
RoIrtSK
executive committee responsible for ensuring a co-ordinated risk management approach across all of the Society’s risks.
BOcA RD The Committee reviews its terms of reference and its activities over the previous year as part of an annual cycle to confirm that its activities
were in line with its remit. More detail on the Committee’s duties and responsibilities can be found within its terms of reference on the Society’s
website: cumberland.co.uk.
ommittee rep
Report on the year
With the easing of the pandemic, the Committee has increased focus
The purpose of the Committee is to provide oversight and advice to the Board on all risk-related matters, including advising on risk in strategy
on the next phases of The Cumberland’s transformation journey.
setting, monitoring the risk profile, horizon scanning future risks, supporting adherence to regulations, and ensuring the appropriate level and
During the year, this has meant oversight of the identification
capability of risk resources.
of technology risk matters, and their resolution plans, alongside
reviewing the enhancement of key risk processes and tools, including
It supports the Board sign-off of the following key documents:
the roll-out of the new Magique risk management system and
• Risk Management Framework: the formal framework for identifying and managing risks throughout the business;
investment in our first line risk teams. Looking forward, the coming
• Risk Appetite: to support and monitor the delivery of the corporate plan by ensuring an appropriate level of risk is taken; and
year will deliver increased scrutiny by the Committee of the Society’s
• Risk Policy Framework: ensuring the adherence to documented minimum standards.
management of key risks as we progress our transformation agenda.
The Committee also delivers the following:
• Oversight and challenge of the Society’s significant risks and the controls in place to manage those risks; and
The war in Ukraine, and the accompanying uncertainty in relation to
• sign off of key policies such as the Mortgage Credit Risk and Operational Risk policies under delegated authority from the Board.
inflation, interest rates and wider consumer confidence, will prove to
be a challenge for the UK economy. The Board Risk Committee will
The Board Risk Committee receives results of credit risk stress testing and scenario analysis to ensure the corporate plan is within the Board’s risk
continue to oversee that we have the risk structures, capabilities, and
appetite in line with the Risk Management Framework.
governance in place to be well placed to support you, our members,
through these most difficult of times. This will ensure we maintain
ERIC
our critical services while supporting the health and wellbeing of our
members and employees.
70

g the year
Key areas of focus durin

OPERATIONAL RISK • Oversaw the roll out of our new operational risk management system.
The risk of loss resulting from inadequate • Oversaw improved risk management processes and alignment with the growing
BRC focussed on the following key areas during the year:
or failed internal (including where maturity of the risk capability within the operational areas.
provided by a third party) processes, • Oversaw improved reporting on risk events and associated actions to improve the
people, and systems, or from external Society’s control environment
events. • Supported further enhancements in the financial crime prevention capability of
CONDUCT RISK • Enhanced the frameworks that support fair customer treatment, including progress
the Society.
The risk that the Society makes errors or made in operational resilience.
• Agreed and prioritised investment to improve operational resilience and ensure
exercises inappropriate judgement in the • Continued to oversee processes to ensure fair outcomes for customers as the UK
that regulatory requirements were being met.
execution of its business activities, leading to emerges from the Covid-19 pandemic.
unfair outcomes being created for customers
and/or reputational risks materialising.
REGULATORY RISK • Supported proactive and positive engagement with our regulators at all times.
The risk that the Society makes errors or • Oversaw remediation of regulatory risk matters encountered.
exercises inappropriate judgement in • Reviewed the outputs of regulatory horizon scanning and the delivery of the
the execution of its business activities, operational and regulatory changes required.
leading to non-compliance with regulation
or legislation and/or reputational risks
materialising.
GOVERNANCE
CORPORATE
REPORT
STRATEGIC RISK • Supported strategy development by understanding and providing insight into
The risk that the Society fails to adopt an current and future risk levels.
appropriate business model, set appropriate • Reviewed and ratified a climate change risk framework for Board approval
goals and targets in the Corporate Plan,
adapt to external events or that the strategy
fails to live up to expectations.
CREDIT RISK • Oversaw continued prudent lending standards as we emerge from the
The risk that a borrower fails to pay Covid-19 pandemic.
interest or to repay capital on a loan • Tracked portfolio performance and the continued development of detailed
and/or that a counterparty fails to meet management information (MI) particularly in respect of arrears and forbearance.
their contractual obligations to repay the
During the year ahead, the Committee will continue to focus on ensuring the Society is supporting our members through the economic
Society or fails to perform their obligations
challenges we face as the repercussions of the war in Ukraine impact the global economy and we enter a period of economic uncertainty with
in a timely manner.
rising interest rates, inflation, and reductions in the standard of living.
FINANCIAL RISK • Alongside ALCO and the Board, ensured the monitoring of financial performance
Having overseen the delivery of the climate change risk framework, we will continue to monitor and respond appropriately to the financial risks
The risk of the Society having inadequate and the capital and liquidity position of the Society.
which climate change poses to the Society. The Committee will also oversee the delivery of transformation as the Society invests in building the
earnings, cashflow or capital to meet • Oversaw adherence to policy and any breaches of key minimum standards.
right infrastructure to deliver against our Cumberland 2025 strategy. The Committee will focus on ensuring the Society’s strategy is delivered
current or future requirements and
within agreed levels of risk, minimum standards are adhered to and that, when things go wrong, the lessons are learned, and we always put
expectations.
things right for our members with no fuss or excuses.
On behalf of the Board Risk Committee

Eric Gunn
Chair
1 June 2022
72

e
Dear Member,
MARK STANGER
As Chair of the Audit Committee, I am pleased to present the
(CHAIR) JACKIE ARNOLD
Committee’s report for the financial year ended 31 March 2022. 7/7
7/7
The report explains the details of membership of the Committee, the Michael Hulme 6/7
(resigned 31 March 2022)
work of the Committee during the year and key areas of focus.
Key areas noted within this report include significant accounting
matters and judgements and how they were addressed during the
s
• Monitoring the integrity of annual financial statements, including
year, our review of the Internal Audit function and matters related to
Summary Financial Statements, focusing particularly on significant
the engagement of the external auditor.
financial reporting judgements and ensuring that the financial
The Audit Committee comprises three non-executive directors, who
statements are fair, balanced and understandable and that interests
As part of my role, I meet regularly with the Head of Internal Audit, bring a diverse range of experience in business, finance, auditing, risk
of the Society’s members are properly protected;
the external auditor and the Chief Financial Officer and have a and controls; their attendance record is set out above. The Committee
good working relationship with them all. The Audit Committee has is, therefore, able to challenge and scrutinise the work of management. • Reviewing the effectiveness of the systems of internal controls and
a good working relationship with the Board Risk Committee and risk management systems;
has considered that committee’s priorities when approving its own Other individuals such as the Chief Executive Officer, Chief Financial
Officer, Chief Risk Officier and Head of Internal Audit are standing
GOVERNANCE
assurance priorities for the year ahead. • Scrutinising the activities and performance of the internal audit
CORPORATE
attendees at all meetings and the external auditor was invited to
REPORT
function;
attend all of the Committee’s meetings held in the year.
After conducting careful reviews, the Committee has advised the
• Monitoring the independence and objectivity of the external
Board that, in its opinion, the Annual Report and Accounts are fair,
Following each Committee meeting, the minutes of the meeting auditor and the effectiveness of the audit process;
balanced and understandable.
are distributed to the Board and the Committee Chairman provides
an update to the Society’s Board on key matters discussed by the • Recommending the appointment and approving the remuneration
I set out in the following report details of the work the Committee
Committee. and terms of engagement of the external auditor; and
has focussed on during the year.
Private meetings are held at least once a year with the external auditor • Overseeing the society’s whistleblowing arrangements.
and with the Head of Internal Audit in the absence of management
to enable issues to be raised directly if necessary. The Committee The Committee’s terms of reference are available at www.cumberland.
Chairman meets with the Head of Internal Audit on a regular basis. co.uk and it reports to the Board on these matters during the year. In
AUDrIepTort
addition, the minutes of all meetings are presented to the Board. The
The Committee met on seven occasions during the year. The Committee Committee is authorised by the Board to obtain any information it
draws on the expertise of key advisors and control functions, including needs from a director or employee of the Society. It is also authorised
the internal and external auditors, both of whom are standing to seek, at the expense of the Society, appropriate professional advice
committee
attendees of the Committee. The Committee implements the Society’s as needed.
policy on the use of the external auditor for non- audit work, the
purpose of which is to ensure the continued independence and The Committee reviews its terms of reference and its activities over the
objectivity of the external auditor. The external auditor, Deloitte LLP, previous year as part of an annual cycle to confirm its effectiveness
undertook one non-audit related assignment during the year. and that its activities were in line with its remit. More detail on the
Committee’s duties and responsibilities can be found within its terms of
The Committee works closely with the Board Risk Committee, as some reference on the Society’s website: cumberland.co.uk.
matters are relevant to both committees and the Chief Risk Officer is a
standing attendee to facilitate this work. The Committee has advised the Board that, in its opinion, the Annual
Report and Accounts are fair, balanced and understandable. The
MARK The Committee meets at least five times per year and supports the
Board in protecting the interests of the Society’s members and fulfilling
primary areas of judgement considered by the Committee in relation to
these accounts related to loan loss provisions (including the impact of
its oversight responsibilities for the following: the emerging cost of living squeeze driven by inflation as at 31 March
2022), and the work performed to support the Going Concern and
Viability assumptions.
74

Report on the year
The Audit Committee’s main purpose is to support the Board in protecting the interests of the Society for the benefit of our members and In compiling a set of financial statements, it is necessary to make estimates and judgements about outcomes that are typically
customers. It has achieved this during 2021/2022 by: dependent on future events. Significant matters are set out below:
• overseeing the Society’s systems of internal control, including the work undertaken by Internal Audit;
• monitoring and reporting to the Board on the integrity and the fair and balanced nature of the Society’s financial reporting;
Significant Estimates and Judgements Committee’s Response
• assessing and reporting to the Board on the appropriateness of the Society’s accounting policies;
• monitoring the performance of the external auditor; and Impairment provisions for loan portfolios The Committee oversaw the outcomes of management’s assessment of loan loss
• overseeing the Society’s whistleblowing arrangements. and related disclosures provisioning at 31 March 2022. It noted that management had used a consistent
modelling approach for loans fully secured on residential properties benefiting from
g the year
Key areas of focus durin
last year’s work which had significantly increased the granularity of the calculation
performed. It also evaluated management’s approach to overlays, in light of the
reducing impact of the Covid-19 pandemic. and the impact of rising inflation, rising
The significant judgements, issues and actions taken by the Committee in relation to the Annual Report and Accounts 2021/2022 are outlined
interest rates and the attendant cost of living squeeze, which has occurred since the
below. Each matter was discussed with the external auditor during the year and, where appropriate, have been addressed as areas of audit
final quarter of calendar 2021. This latter matter was accounted for by an in-model
focus in the Auditors’ Report.
adjustment to probability of default.
Areas of Focus Committee’s Response It was also noted that the vast majority of customers, who had received forbearance
through the pandemic, had returned to and remained in the good book and were
Accounting Policies The Committee reviewed the Society’s accounting policies and confirmed they
making repayments.
GOVERNANCE
CORPORATE
were appropriate to be used in the financial statements. In preparing the financial
REPORT
statements, there are inevitably material areas in which significant judgements are
In relation to loans fully secured on land, which is our commercial portfolio focused on
necessary, and the Committee considered these in detail. This year, these included:
tourism and hospitality, the Committee noted the reduction in collective provisions
reflecting a reduction in forbearance and the use of arrangements to overpay by
i) ensuring our approach to hedge accounting under FRS 102
many of the borrowers impacted during the pandemic lockdowns. It also noted the
(IAS 39) remained consistent; and
specific provision recorded, based on recent property valuation for a small number of
ii) reviewing the method to account for the revenue from amortised cost financial
borrowers in arrears who had exhausted the “all customer” forbearance opportunities
instruments on an effective interest rate basis under FRS 102, which was
(provided for in regulation) and who now required tailored support and in some cases
unchanged.
managed exit through sale.
Going concern and business viability The Committee reviewed and recommended to the Board the use of the Going
statement Concern basis of preparation for the Annual Report and Accounts and the attendant The Committee challenged management’s application of judgement in relation to
Going Concern and Viability Statements, having assessed and challenged the basis security realisation rates and HPI trends in light of the requirements of FRS 102 (IAS 39),
for the conclusions management had reached. The detailed viability statement can and concluded that, despite the difficulty in fairly estimating losses at 31 March 2022,
be found on pages 45 to 48 and the Board’s Going Concern Statement on page 89. management had calculated a suitable best estimate.
Fair, balanced and understandable report The Society’s Annual Report and Accounts, taken as a whole, must be fair, balanced Impairment of Investment Properties and At 31 March 2022, the Society continued to hold a portfolio of non-operating property,
and accounts and understandable. The Committee assessed the financial statements and was Buildings within Fixed Assets albeit reduced through successful sales in 2020 and 2021. In this context, the Committee
satisfied that they portray both successes and challenges, fairly represented the noted that the Group had obtained independent, external valuations to support the
results and business performance, and the language used was appropriate (in that it values of investment properties recognised at 31 March 2022, which saw a charge of
could be understood by a person with reasonable knowledge of the building society £15k to the income statement. The Committee noted that one investment property
and financial services sectors). The Committee reviewed the Corporate Governance transferred into operational use as part of the reopening of the head office site towards
Report and was satisfied that it presented an accurate view of the work of the Board the end of the year and that one property previously considered operational moved to
and its Committees. investment property after an impairment of £211k was recognised reflecting the impact
Covid has had on future investment plans, which no longer include extension into
After consideration of management’s report and the Committee’s own review, the the property by the adjacent branch. It supported management’s decision to remove
Committee concluded that it could inform the Board that, in its opinion, the Annual this matter from the critical accounting estimates and judgments note, on the basis
Report and Accounts were fair, balanced and understandable. that uncertainty around the value of the buildings due to the Covid-19 pandemic has
receded, and property transactions have recommenced.
76

The Committee has responsibility for monitoring the adequacy of the Group’s control environment. This has included the ongoing steps being
taken to improve Internal Audit’s operating model and enhance its service proposition. The Committee’s review of the operation of internal
controls encompassed the following:
Controls Committee’s Response
Control Environment The Committee continued to monitor the overall effectiveness of the Society’s control
environment during the year by reviewing reports from Internal Audit and updates
from management in respect of the design and effectiveness of the systems of control
in place to manage risks.
During the year, the Committee, through Internal Audit and other management
information and insight, reviewed the controls in operation for: payments, lending,
information technology, current accounts, technology and information security,
treasury, regulatory reporting and key projects. Internal Audit utilised the services of
RSM LLP and PricewaterhouseCoopers LLP for co-sourced internal audits to provide
specialist expert support, input and promote knowledge transfer to Internal Audit.
GOVERNANCE
Supported by the work of Internal Audit and the opinion of the Head of Internal
The way NEDs and EDs
CORPORATE
Audit, the Committee concluded there had been no significant deficiencies which
REPORT
warrant specific mentioning within the Annual Report and Accounts.
operate within the Board Financial and Treasury Controls The Committee supported Internal Audit in its continued use of data analytics as
environment is in line
part of its assurance programme and noted the benefits of its use. It also considered
internal control matters raised by the external auditor and management’s response.
with best practices for Information Security The Committee had a particular focus in the year on information security receiving
presentations from the information security team noting the controls in place and
a unitary board ongoing work to enhance them in this critical and dynamic area.
Business Change The Committee continued its overview of the Society’s Change processes to ensure
Board Effectiveness Review that as upgrades to the technology environment were being made, appropriate
(November 2020)
controls were in place to manage the change process and ensure that effective risk
management and controls were in place once transitioned to service.
78

Internal audit Audit quality and Audit outputs
materiality
The Committee works closely with the Head The Committee reviewed Deloitte’s year end
of Internal Audit, who reports directly to the The Committee has a responsibility for report for the 2021/2022 financial year and
Chair of the Audit Committee. Throughout reviewing the quality and effectiveness its statutory opinion in respect of the year.
the year, the Committee monitors the of the external audit. Due to the ongoing The Committee also reviewed Deloitte’s
progress of the Internal Audit function. focus on audit quality from the Financial planning report and interim updates on
The Audit Committee approved the internal Reporting Council (FRC) and societal its work.
audit plan and all changes to it during the expectations and the ever more detailed
year. The scope of work takes account of work expected to be carried out by the Audit and non-audit fees
the function’s own assessment of risks, and external auditor, there has been a material
the input of management and the Audit uplift in the external audit fee. Despite this Under the Society’s non-audit fees policy,
Committee itself. At each meeting the uplift and after benchmarking the new fee all non-audit work is approved by the Audit
Committee received updates from the Head levels with the experience of its peers, the Committee where the fee is over £10k, or by
of Internal Audit on the work of the Internal Committee has decided to stay with its its Chair (and subsequently ratified at the
Audit function, drawing its attention to the current external auditors. The Committee next meeting). Where the fee is below £10k
most significant audit work. has asked for a change in process for when approval is required from the Chief Financial
The Committee continued to focus on the it is notified of the external audit fee going Officer. During the 2021/2022 financial year,
GOVERNANCE
CORPORATE
prompt and effective resolution of control forward. The Committee approved the one request to use the external auditor for
REPORT
issues raised by Internal Audit, where scope of the audit plan and considered the non-audit services was made. The non-audit
In 2022/2023, the Audit Committee will continue to focus on its oversight of the financial reporting and internal controls of The Cumberland.
progress was made during the year. proposed materiality level in advance of the service was in response to the need for an
A key area of focus for the Committee will be understanding how the Society has maintained the control environment during a period of
Every six months, the Committee reviewed annual audit. Materiality is the level at which external audit firm to conduct Independent
significant change; particularly as it rolls out its major strategic change programme. In the challenging and competitive environment in which
the resourcing of the internal audit function the auditor considers that a misstatement Assurance on the Society’s quarterly data
The Cumberland operates, the Audit Committee remains committed to its vital role in overseeing the integrity of financial reporting and the
and was satisfied that the resources were would compromise the truth or fairness of submission to the Bank of England under the
effectiveness of controls.
appropriate. A private session with the Head the financial statements. For 2021/2022, TFSME scheme. The Committee approved
of Internal Audit is held either before or after overall audit materiality was set by Deloitte the use of Deloitte to complete this work as
each scheduled committee meeting. at £820k (2020/2021: £787k). it was allowable under the Society’s auditor On behalf of the Audit Committee
independence policy. Mark Stanger
External audit Auditor independence The fees paid to Deloitte for the year ended Chair
31 March 2022 totalled £334k of which 1 June 2022
Deloitte LLP acted as the Society’s external The Board has an established policy setting £300k was for audit services and £34k for
audit firm throughout the 2021/2022 out the non-audit services that can be non-audit services (2020/2021: £129k).
financial year. The Audit Committee is provided by the external auditor. The aim of The total fees are set out in note 6 to the
responsible for overseeing the relationship the policy, which is reviewed annually, is to financial statements.
with the external auditor, and for the safeguard the independence and objectivity
effectiveness of the audit process. of the external auditor and comply with Audit effectiveness
the ethical standards of the FRC. The policy
To protect the independence of the external specifies non-audit services provided by the The Committee reviews the effectiveness
auditor, it is normal to rotate the statutory external auditor that are either permitted of the external audit process on an annual
auditor and hence Matthew Bainbridge of or prohibited. Deloitte has confirmed that it basis taking into account management
Deloitte LLP is The Cumberland’s statutory has complied with relevant regulatory and feedback. This review confirmed that the
auditor for the 2021/2022 financial year. This professional requirements and its objectivity external auditor was performing its duties in
is Matthew’s first year as The Cumberland’s is not impaired. The Committee is satisfied an independent and effective manner, with
statutory auditor. that Deloitte remained independent some areas for consideration identified and
throughout the year. fed back to the statutory auditor.
Deloitte’s report can be found on pages 94
to 102.
80

Jackie Arnold
e
Dear Member,
JACKIE ARNOLD
KELLI FAIRBROTHER
As Chair of the People, Remuneration and Culture Committee
(PARC), I am pleased to present the Committee’s report for the (CHAIR) 4/5
5/5
financial year ended 31 March 2022. PARC assists the Board with
overseeing the Society’s people, remuneration and culture matters. I
signed 31 March 2022)
set out below details the work the Committee has focussed on during Michael Hulme 4/5 (re
the year. This report includes the Report on Directors’ Remuneration,
which explains the remuneration policies for executive and non-
s
executive directors and how the Society has regard to the principles
of the Code.
PARC comprises independent non-executive directors, whose attendance record is set out above. Jackie Arnold is Chair of the Committee. Details
of the skills and experience of the Committee members can be found in their biographies on pages 55 to 56. The Committee is scheduled to meet
four times a year, one week ahead of Board, in January, April, July and October and, additionally, as and when required. The Committee is also
attended on a standing basis by the CEO, CFO, and CPO. Following each meeting, a written report is provided to the Board by the Chair of the
JACKIE Committee, summarising activities undertaken, areas where the Committee had challenged management and key decisions taken.
GOVERNANCE
CORPORATE
REPORT
The Committee reviews its terms of reference and its activities over the previous year as part of an annual cycle to confirm that its activities were
in line with its remit. In the year, the Committee commissioned an external “deep dive” review of its terms of reference, remit and operating rhythm
following the findings of the external Board Effectiveness Review in December 2020. New terms of reference and a revised operating rhythm were
successfully developed and implemented with input from leaders in this area which has raised the effectiveness of the Committee, enhancing the
assistance it provides to the Board. More detail on the Committee’s duties and responsibilities can be found within its terms of reference on the
Society’s website: cumberland.co.uk.
PEOPLE, Report on the year
REMU N E R A T ION
The purpose of the PARC is to ensure:
• the Society’s remuneration, culture and people policies and practices are designed to support strategy and promote long-term
sustainable success;
and CULTURE
• executive remuneration is aligned to the Society’s purpose and values, and is clearly linked to the successful delivery of the Society’s long-term
strategy; and
• there is a formal and transparent procedure for developing policy on executive remuneration and determining director and senior
management remuneration.
ommittee report c
The Committee assumed responsibility for diversity and inclusion from NGC during the year. Diversity and inclusion are core considerations and
we met our commitment under the Women in Finance Charter to have at least 33% of women at senior level by April 2021 and continued to do
so during the year. At present, the gender balance of the Society’s Board, Senior Leadership Team and their direct reports, is follows:
Male Female
2022 2021 2022 2021
Board 5/8 (62.5%) 6/9 (67%) 3/8 (37.5%) 3/9 (33%)
Senior Leadership Team 5/8 (62.5%) 4/6 (67%) 3/8 (37.5%) 2/6 (33%)
Extended Leadership Team 15/25 (60%) 13/25 (52%) 10/25 (40%) 12/25 (48%)
82

Report on the year Report on directors’
PARC focussed on the following key areas during the year:
remuneration
The purpose of this report is to provide information about the
Group’s policy for the remuneration of non-executive and executive
Remuneration The Committee reviewed and approved a set of Remuneration Principles. The Committee
directors and to give details of the process for determining the level of
approved the annual cost of living increase.
remuneration.
Performance The Committee noted the Brighter Performance review process, approved the Senior
The remuneration of non-executive directors comprises only of fees
Managers’ Incentive Scheme and the all company bonus, which was updated to allow more
and this is reviewed and agreed annually by the Board. The Chairman’s
people to participate in the success of the Society. The Committee considered the impact of
remuneration is set by PARC. The remuneration of executive directors is
CRD V on the Executive Directors’ incentives.
determined by PARC.
Benefits The Committee reviewed the benefits provided at the Society and improved the holiday
In determining non-executive and executive director remuneration,
entitlement of those at lower grades, bringing them in line with those at higher grades, to
both the Board and PARC take account of fees and salaries payable
improve wellbeing and work life balance. The Committee also oversaw and noted changes to
and other benefits provided to non-executive directors, executive
the Society’s group life insurance scheme.
directors and chairmen of building societies that are similar in size
Chair’s Fees The Committee reviewed and set the Society Chair’s Fees at a level to attract and retain a and complexity to The Cumberland. To ensure that fees and salaries
GOVERNANCE
Chair with the appropriate skills and experience. are set at a level to retain and attract individuals of the calibre
CORPORATE
REPORT
necessary to operate an organisation such as the Society and which
Engagement and Retention The Committee monitored the Society’s attrition rate in view of the challenging labour reflect the skills and time commitment required, the Committee
market post-pandemic and post-Brexit and discussed the results of the “Best Companies” periodically commissions an external review of executive and non-
engagement survey. executive remuneration.
Terms and Conditions The Committee oversaw the introduction of a new employment contract and handbook The Committee believes that bonus schemes relating to financial
bringing the Society’s terms and conditions and working practices further in line with modern and business performance are an appropriate part of a balanced
working practices. remuneration package for executive directors, and for the year ended
31 March 2022, agreed a bonus based on key elements of the financial
Diversity and Inclusion The Committee assumed responsibility for diversity and inclusion from NGC and approved a and strategic plan delivered in a way that is consistent with The
revised Diversity and Inclusion Policy and agreed that this was a key focus of the Committee. Cumberland’s core values and framework.
Regulatory Compliance The Committee oversaw compliance with the FCA and PRA Remuneration Codes and Executive directors in office at 31 March 2022 are members of a
approved the list of Material Risk Takers. defined contribution scheme and are entitled to receive contributions
towards this, although depending upon their individual circumstances,
Effectiveness Review The Committee commissioned an external “deep dive” review of its remit, structure and they may be paid a pension replacement amount. Executive directors
operating rhythm following the findings of the Board Effectiveness Review December 2020 are also provided with a car (or car allowance) and membership of a
and implemented the recommendations where appropriate. private medical insurance scheme. They are employed under contracts
terminable by the Society on nine to twelve months’ notice and by the
HR and Payroll System The Committee oversaw the introduction of a new HR and payroll system.
individual on six months’ notice.
Hybrid Working Policy The Committee oversaw the introduction of a new policy for hybrid working to ensure the
Full details of individual directors’ remuneration, are disclosed on the
Society’s people were able to retain the benefits of more flexible working enjoyed during
next page.
the pandemic, whilst still collaborating with colleagues in the office. This was designed to
improve wellbeing, work/life balance, engagement and retention.
The Society’s remuneration policy meets with the requirements of the
Remuneration Code.
Severance Policy The Committee reviewed and approved the Severance Policy.
Health & Safety and Fire Policies The Committee reviewed and approved the Health & Safety and Fire Policies.
84

Directors’ Remuneration
2022 2021
£000 £000
Total directors’ remuneration 1,044 1,006
Non-executive directors’ remuneration
John Hooper (Chairman) 70 68
Alan Johnston (Chair of the Audit Committee and Vice-Chairman) (resigned 30 Sept 2020) 27
Eric Gunn (Chair of the Board Risk Committee) 48 47
Jackie Arnold (Chair of the People, Remuneration and Culture Committee) 48 46
Michael Hulme 45 44
Mark Stanger (Chair of Audit Committee since July 2020) 52 49
Vicky Bruce (appointed 29 Sept 2020) 42 21
Kelli Fairbrother (appointed 29 Sept 2020) 41 20
346 322
Executive directors’ remuneration Pension

2022 Pension Replacement Other
Salary Bonus Contributions Amounts Allowances Total
£000 £000 £000 £000 £000 £000
Des Moore 268 54 – 38 12 372
Richard Ellison 234 47 33 – 12 326
502 101 33 38 24 698
2021
GOVERNANCE
CORPORATE
Des Moore 263 53 – 37 12 365
REPORT
PARC will focus on the following key areas during 2022/2023:
Richard Ellison 230 46 31 – 12 319
493 99 31 37 24 684
Remuneration and Retention The Committee on behalf of the Board and supported by external input will consider
Remunerisation and Retention in support of the Society’s strategic agenda.
Diversity & Inclusion The Committee will oversee the development of an action plan to continue to
address diversity and inclusion.
People Strategy The Committee will ensure alignment of the Society’s people strategy with the
overarching Cumberland 2025 strategy and in light of the market wide rise in
employee turnover.
Future of Work The Committee will oversee the embedding of post pandemic ways of working for the
Society to harness the benefits of changes for our colleagues and customers.
On behalf of the People, Remuneration and Culture Committee

Jackie Arnold
Chair
1 June 2022
86

REC T
DI reportORS’
Information on the Group’s strategy and its financial and business Mortgage arrears and forbearance Engagement with stakeholders
performance and likely future developments are included within the
Strategic Report, which starts on page 6. At 31 March 2022, there were 9 accounts where payments were twelve Please see pages 20 to 30 of the Strategic Report.
months or more in arrears. The total amount outstanding on these
Directors accounts was £1,650k, and the amount of arrears was £182k, which Environmental impact and energy efficiency
represents 0.01% of mortgage balances. In certain circumstances,
The directors of the Society during the year and to the date of this Please see pages 31 to 33 of the Strategic Report.
the Society uses forbearance measures to assist those borrowers who
report were as follows:
are experiencing financial difficulty. Such measures include agreeing
Events since the year end
John Hooper Chairman a temporary transfer to interest only payments, or a capitalisation
of arrears, in order to reduce the borrowers’ financial pressures. We The directors consider that there have been no events since the year end that have had a material effect on the position of the Society or any of
Michael Hulme Resigned: 31 March 2022
GOVERNANCE
expect borrowers to resume normal payments once they are able. its subsidiary undertakings.
CORPORATE
Eric Gunn Senior Independent Director
REPORT
As at 31 March 2022, forbearance measures had been agreed for
Mark Stanger
32 residential mortgages with a total balance of £3.29m (2021: 233 Going concern
Jackie Arnold
accounts, balances of £37.2m). Where the Society considers that there
Vicky Bruce The directors are satisfied that the Group has adequate resources to continue in business for the foreseeable future, having taken into account
is a possibility of a loss, a specific provision is made in accordance
Kelli Fairbrother all available information about the future, which is at least, but is not limited to, twelve months from the date when the financial statements are
with the Society’s policies, and the level of forbearance undertaken is
Des Moore Chief Executive Officer authorised for issue. For this reason, the annual accounts continue to be prepared on the going concern basis. Further information on how this
also an element of the Society’s collective provisioning methodology.
Richard Ellison Chief Financial Officer assessment was performed and its basis is included as part of the Group’s viability statement on pages 45 to 48.
Financial risk management policies and

Statement of disclosure to auditors
Further information on all of the directors in office as at 31 March objectives
2022 is provided in the directors’ biographies on pages 55 to 57, and So far as each director is aware, there is no relevant audit information of which the Society’s auditors are unaware. Each of the directors, whose
The Society’s objective is to minimise the impact of financial risk upon
their attendance at the Board and Board Committees is set out in the name is listed above have taken all steps that he or she ought to have taken as a director in order to make himself/herself aware of any relevant
its performance. The financial risks facing the Society are summarised
corporate governance and Committee reports on pages 61 to 87. audit information and establish that the Society’s auditors are aware of that information.
together with an overview of arrangements for managing risk in the
Strategic Report on pages 34 to 37 and are discussed in more detail
All directors will submit themselves for election or re-election at the Auditor
Annual General Meeting. None of the directors had an interest in in notes 25 to 28 of the financial statements.
shares in, or debentures of, any subsidiary undertaking of the Society Deloitte LLP are eligible for re-appointment and have offered themselves for re-election. A resolution to re-appoint Deloitte LLP will be
at any time during the financial year.
Creditor payment policy proposed at the AGM.
Our policy concerning the payment of trade creditors is to agree

At 31 March 2022, 2 directors (or persons connected to them) On behalf of the Board of Directors
terms of payment, to ensure that suppliers fulfil their contractual
had mortgage loans granted in the ordinary course of business, John Hooper
obligations and to settle invoices for the provision of goods and
amounting to £953k (2021: two directors, £1,015m). A register is Chairman
services within the agreed payment terms. At 31 March 2022, the total
maintained at the principal office of the Society, containing details 1 June 2022
amount owed to suppliers was equivalent to 30 days’ credit
of loans, transactions and arrangements between the Society and
(2021: 35 days).
its directors and connected persons; requisite particulars from it are
available for inspection.
Charitable and political donations
In addition, directors and their connected persons have savings
During the year, charitable donations of £188k were made to a
and current accounts with the Society, on the same terms as those
number of organisations within our operating area. No contributions
available to all persons.
were made for political purposes.
88

Directors’ responsibilities in In preparing each of the Group and Society Directors’ responsibilities
respect of the Annual Report annual accounts, the directors are required for accounting records and
and Accounts, the Strategic to: internal control
Report, the Directors’ Report
• select suitable accounting policies and The directors are responsible for ensuring
and the Annual Business
then apply them consistently; that the Group:
Statement
• make judgments and estimates that are • keeps proper accounting records that
The directors are responsible for preparing
reasonable and prudent; disclose with reasonable accuracy at any
the Annual Report, Annual Business
Statement, Strategic Report, Directors’ Report time the financial position of the Group
• state whether applicable accounting
and the annual accounts in accordance with and Society, in accordance with the Act;
standards have been followed, subject to
applicable law and regulations. and
any material departures disclosed and
explained in the annual accounts; and • takes reasonable care to establish,
The Building Societies Act 1986 (“the Act”)
requires the directors to prepare Group maintain, document and review such
• prepare the annual accounts on the going
and Society annual accounts for each systems and controls as are appropriate
concern basis unless it is inappropriate to
financial year. Under the Act they have to its business in accordance with the rules
presume that the Group and Society will
made under the Financial Services and
GOVERNANCE
elected to prepare these in accordance with
CORPORATE
continue in business.
Markets Act 2000.
REPORT
UK Accounting Standards (UK Generally
Accepted Accounting Practice) including In addition to the annual accounts the Act
The directors have general responsibility for
FRS 102, ‘The Financial Reporting Standard requires the directors to prepare, for each
taking such steps as are reasonably open to
applicable in the UK and Republic of Ireland’. financial year, an Annual Business Statement
them to safeguard the assets of the Group
and a Directors’ Report, each containing
The Group and Society annual accounts are and to prevent and detect fraud and other
prescribed information relating to the
required by law to give a true and fair view irregularities.
business of the Group.
of the state of affairs of the Group and of the
The directors are responsible for the
Society as at the end of the financial year and
maintenance and integrity of the corporate
of the income and expenditure of the Group
and financial information included
and of the Society for the financial year.
on the Group’s website. Legislation in
the UK governing the preparation and
dissemination of annual accounts may differ
from legislation in other jurisdictions.
Statement of directors’
RESPONSIBILITIES
90

INA N C
F Statements IAL
STATEMENTS
FINANCIAL
Independent Auditor’s Report 94
Group and Society Income Statements 103
Group and Society Balance Sheets 104
Statements of Changes in Members’ Interest 105
Consolidated Cash Flow Statement 106
Notes to the Accounts 107
Annual Business Statement 133
132
92

Independent Auditor’s Report to the members of 4. Conclusions relating to going concern Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of
Cumberland Building Society In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in the
this report.
preparation of the financial statements is appropriate. 5. Key audit matters
Our evaluation of the directors’ assessment of the Group’s and Key audit matters and those matters that, in our professional
Report on the audit of the financial statements Society’s ability to continue to adopt the going concern basis of judgement, were of most significance in our audit of the financial
accounting included: statements of the current period and include the most significant
1. Opinion we have fulfilled our other ethical responsibilities in accordance with assessed risks of material misstatement (whether or not due to
these requirements. The non-audit services provided to the Group • obtaining an understanding of the relevant controls around fraud) that we identified. These matters included those which had
In our opinion the financial statements of Cumberland Building and the Society for the year are disclosed in note 6 to the financial management’s going concern assessment; the greatest effect on: the overall audit strategy, the allocation of
Society (the ‘Society’) and its subsidiaries (the ‘Group’): statements. We confirm that we have not provided any non-audit resources in the audit; and directing the efforts of the engagement
services prohibited by the FRC’s Ethical Standard to the Group or the • assessing management’s considerations regarding whether they
team.
• give a true and fair view of the state of the Group’s and of the consider it appropriate to adopt the going concern basis of
Society.
Society’s affairs as at 31 March 2022 and of the Group’s and accounting; These matters were addressed in the context of our audit of the
the Society’s income and expenditure for the year then ended; We believe that the audit evidence we have obtained is sufficient and financial statements as a whole, and in forming our opinion thereon,
appropriate to provide a basis for our opinion. • assessing the Group and Society’s compliance with regulation
and we do not provide a separate opinion on these matters.
• have been properly prepared in accordance with United including capital and liquidity requirements;
Kingdom Generally Accepted Accounting Practice, including 3. Summary of our audit approach 5.1 Loan loss provisioning
Financial Reporting Standard 102 “The Financial Reporting • assessing the reasonableness of the assumptions, such as cash
Standard applicable in the UK and Republic of Ireland”; and Key audit matters flows, capital and liquidity, used in the forecasts prepared by Key audit matter description
management;
• have been prepared in accordance with the requirements of The key audit matters that we identified in the current Under IAS 39, the directors are required to assess whether there
the Building Societies Act 1986. year were: • assessing the historical accuracy of forecasts prepared by is objective evidence of impairment of any financial assets that
management by comparing these to the actual results; are measured at amortised cost. If there is objective evidence of
• Loan loss provisioning; and
We have audited the financial statements which comprise: impairment, management should recognise an impairment loss
• Hedge accounting. • involving prudential risk specialists to assess the information
within the income statement immediately.
• the Group and Society income statements; supporting management’s liquidity and capital forecasts,
Within this report, key audit matters are identified as follows:
STATEMENTS
• the Group and Society statements of comprehensive income; including the stress testing and reverse stress testing performed by The Group currently holds on its balance sheet £2,070m (2021:
FINANCIAL
• the Group and Society balance sheets; management; £2,000m) of loans and advances fully secured on residential property
Similar level of risk
• the Group and Society statements of changes in members’ interests; and £168m (2021: £171m) of loans and advances fully secured on
• consideration of whether there were events subsequent to the
• the consolidated cash flow statement; and Materiality land. As at 31 March 2022, the Group held incurred loss provisions
balance sheet date which could have a bearing on the going
• the related notes 1 to 34. of £0.6m (2021: £0.9m) against loans fully secured on residential
The materiality that we used for the Group financial statements was concern conclusion;
property and £1.9m (2021: £2.4m) against loans fully secured on land
£820k (2021: £787k) which was determined on the basis of net assets. in relation to the incurred losses on these loans.
The financial reporting framework that has been applied in their
• inspecting regulatory correspondence and committee and board
preparation is applicable law and United Kingdom Accounting
Scoping meeting minutes to identify events or conditions that may impact
Loan loss provisioning remains one of the most significant estimates
Standards, including Financial Reporting Standard 102 “The Financial
the Group’s and Society’s ability to continue as a going concern;
made by management, particularly in light of current economic
Reporting Standard applicable in the UK and Republic of Ireland” We have performed a full scope audit on all entities within the Group and
conditions including the increased cost of living, climate change,
(United Kingdom Generally Accepted Accounting Practice). which is consistent with the prior year. All full scope audits were
cladding remediation requirements and market circumstances in the
executed at lower levels of materiality applicable to each individual • assessing the appropriateness of going concern disclosures.
2. Basis for opinion UK at the reporting date.
entity. Audit work to respond to the risks of material misstatement
Based on the work we have performed, we have not identified
was performed directly by the Group audit engagement team. For both portfolios, the provision comprises a collective provision for
We conducted our audit in accordance with International Standards
any material uncertainties relating to events or conditions that,
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities losses incurred but not reported at the reporting date, and a specific
Significant changes in our approach individually or collectively, may cast significant doubt on the Group’s
under those standards are further described in the auditor’s provision for loans where there has been an observable impairment
and Society’s ability to continue as a going concern for a period
responsibilities for the audit of the financial statements section of our trigger. Management’s estimate requires the determination of
In the prior year, we identified a key audit matter in relation to of at least twelve months from when the financial statements are
report. assumptions relating to potential impairment indicators, customer
effective interest rate (“EIR”) accounting. As at the reporting date, authorised for issue.
default rates, the likelihood of repossession occurring and forecast
we note that the key estimates in EIR accounting, namely the
We are independent of the Group and the Society in accordance with future cash flows.
determination of behavioural lives and the accounting for early In relation to the reporting on how the Group has applied the UK
the ethical requirements that are relevant to our audit of the financial
redemption charges, are not subject to significant estimation Corporate Governance Code, we have nothing material to add
statements in the UK, including the Financial Reporting Council’s (the
uncertainty and as such, we no longer consider EIR accounting to or draw attention to in relation to the directors’ statement in the
‘FRC’s’) Ethical Standard as applied to public interest entities, and
be a key audit matter. financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
94

We consider the most significant areas of judgement within the • With reference to the current economic conditions including the How the scope of our audit responded to the key and testing a sample of de-designated instruments by creating an
Group’s loan loss provision methodology to be the determination increased cost of living, climate change, cladding remediation audit matter expected amortisation profile and comparing that to management’s
of the specific provision for loans fully secured on land given the requirements and market circumstances, evaluating whether any calculation.
judgement in determining the expected realisable values of the further adjustments were required to the modelled provision; and We performed a walkthrough to understand the hedge accounting
collateral on which the exposures are secured. process and obtained an understanding of the relevant internal Key observations
• Reconciling the loan book to the general ledger and substantively controls. We tested those relevant internal controls.
Given the degree of judgement involved in determining key testing a sample of loans to assess whether the data used in the Based on our audit procedures, the fair value adjustments accounted
assumptions, we also identified that there is potential for fraud provision calculation was complete and accurate. We involved financial instrument specialists to perform a review of for on items designated into the hedge relationship, de-designated
through possible manipulation of this balance. the hedge accounting process, including managements’ approach for from the hedge relationship, and the subsequent amortisation of the
Key observations transforming loan data. adjustments, was considered to be appropriate throughout the year.
The Group’s loan loss provision balances are detailed within note 12.
The associated accounting policies are detailed on page 109 Based on our audit procedures, we have concluded that the provisions We assessed management’s prospective and retrospective We have concluded the macro-hedge relationship has also
with detail about the associated critical accounting estimates on recorded against loans and advances fully secured on residential effectiveness testing results and tested the valuation of derivatives. remained effective throughout the period, and therefore the hedge
page 110. property and land are reasonably stated. This included understanding management’s methodology for relationships continue to be eligible under IAS 39 criteria for hedge
assessing items that have de-designated from the hedge relationship, accounting.
How the scope of our audit responded to the key 5.2. Hedge accounting
audit matter
Key audit matter description 6. Our application of materiality
We performed a walkthrough to understand the end-to-end loan loss
The Society applies hedge accounting using fair value macro 6.1 Materiality
provisioning process that the Group has in place to manage the risk
hedge relationships in order to minimise the volatility of fair value
of inappropriate assumptions being used in the loan loss provisioning
movements in the income statement. As the macro hedge evolves, We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
models and obtained an understanding of the controls around
hedged items and the associated derivative, are designated to reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
how the most significant areas of judgement are subject to review,
and subsequently de-designated from the hedge relationship. The evaluating the results of our work.
challenge and approval.
fair value adjustment to the hedged items at 31 March 2022 was a
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
With reference to the specific judgement relating to the liability of £30.2m (2021: asset of £6.0m).
determination of the specific provision for loans fully secured on Group financial statements Society financial statements
We consider the most significant areas of judgement within the
land, we focussed our work on ten exposures where the valuation was
Group’s hedge accounting to be:
inherently judgemental. We involved internal real estate specialists Materiality £820k (2021: £787k) £779k (2021: £771k)
STATEMENTS
FINANCIAL
to challenge management’s estimate of the future cash-flows arising
• The risk that the identification of items that are designated to,
from realising the collateral on which these exposures are secured,
and then are subsequently de-designated from, the hedging
Basis for determining 0.4% of net assets (2021: 0.4% of net assets) Society materiality equates to 0.4% of net assets
with reference to the specialist’s own market knowledge and other materiality (2021: 0.4% of net assets) which is capped at 95% of
relationships is not complete and the fair value adjustments on
relevant forecast information. Group materiality.
items entering or exiting the hedge are not initially recorded and/
or amortised correctly; and
Our wider procedures over loan loss provisioning included:
Rationale for the We consider that net assets is an appropriate benchmark because the Society’s aim is to maintain a strong capital base
• The accuracy of management’s approach for transforming loan benchmark applied that will allow the Group to invest in activities for its members including increasing future lending. This will also be a
• With involvement of internal credit risk specialists, challenging
data, including cashflow scheduling, behavioural overlays for non- more stable benchmark to use in the medium term due to the strategic transformation programme that is occurring
the methodologies and assumptions used within the loan loss within the Society, and the impact that this may have on the profit before taxation of the Society.
contractual prepayments, and designation of hedging instruments.
provisioning models with reference to the historical experience
observed by the Group and evaluating whether the approach
The hedge effectiveness assessment criteria must also be met on an
generated an output that was compliant with IAS 39;
ongoing basis, both prospectively and retrospectively, for the hedge
Group materiality
relationships to be eligible under IAS 39 “Financial Instruments:
• Testing the general IT controls over the loan administration £820k
Recognition and Measurement” criteria for hedge accounting.
systems and evaluating the manner in which data used in the Component
determination of key assumptions is extracted from these systems Net assets materiality range
Given the degree of judgement involved, we also identified that there Net assets
£10k to £779k
and testing the completeness and accuracy of this underlying data; £205,104k
is potential for fraud through possible manipulation of this balance. Group materiality
• With involvement of internal economic specialists, challenging the Audit Committee

The fair value adjustment to hedged items and the fair value of
reporting threshold
macro-economic forecasts used by management to assess future
derivatives are detailed within notes 5, 11, 19 and 29. The Group’s £41k
changes in the valuation of collateral with reference to external
associated accounting policies are detailed on pages 108-109
forecasts and other third-party sources;
with detail about the associated critical accounting estimates on
page 110.
96

6.2 Performance materiality 7.3 Our consideration of climate-related risks 9. Responsibilities of directors
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected In planning our audit, we have considered the potential impact of As explained more fully in the directors’ responsibilities statement,
misstatements exceed the materiality for the financial statements as a whole. climate change on the Group’s business and its financial statements. the directors are responsible for the preparation of the financial
The Group continues to develop its assessment of the potential statements and for being satisfied that they give a true and fair view,
Group financial statements Society financial statements
impacts of climate change and has reported these on pages 31 to 33. and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from
Performance 70% (2021: 70%) of Group materiality 70% (2021: 70%) of Society materiality
As a part of our audit, we obtained management’s climate risk
materiality material misstatement, whether due to fraud or error.
management framework and held discussions with management
to understand the process of identifying climate-related risks, the In preparing the financial statements, the directors are responsible for
Basis and rationale In determining performance materiality, we considered the following factors: determination of mitigating actions and the impact on the Group’s assessing the Group’s and the Society’s ability to continue as a going
for determining • Our risk assessment, including our assessment of the quality of the control environment and that we were able to rely on
financial statements. concern, disclosing as applicable, matters related to going concern
performance controls for a number of key business cycles;
materiality • Our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements and using the going concern basis of accounting unless the directors
identified in prior periods. We performed our own qualitative risk assessment of the potential
either intend to liquidate the Group or the Society or to cease
impact of climate change on the Group’s account balances and
operations, or have no realistic alternative but to do so.
classes of transactions and did not identify any additional risks of
6.3 Error reporting threshold
material misstatement.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £41k (2021: £39k), as well as 10. Auditor’s responsibilities for the audit of
We have also read the annual report to consider whether they
differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on the ﬁnancial statements
are materially consistent with the financial statements and our
disclosure matters that we identified when assessing the overall presentation of the financial statements.
knowledge obtained in the audit. Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
7. An overview of the scope We obtain an understanding of these business cycles on an annual

8. Other information
whether due to fraud or error, and to issue an auditor’s report
of our audit basis and undertake a rotational approach to testing the relevant that includes our opinion. Reasonable assurance is a high level
controls over a three year rotational cycle. In the current year, of assurance, but is not a guarantee that an audit conducted in
The other information comprises the information included in the
7.1 Identification and scoping of components we tested the relevant controls related to the residential and accordance with ISAs (UK) will always detect a material misstatement
annual report, other than the financial statements and our auditor’s
commercial mortgage lending process. With regards to the savings when it exists. Misstatements can arise from fraud or error and are
report thereon. The directors are responsible for the other information
Our Group audit was scoped by obtaining an understanding of the
and current accounts process, we updated our understanding of each considered material if, individually or in the aggregate, they could
contained within the annual report.
Group and its environment, including Group-wide controls, and
STATEMENTS
relevant control. Where we identified no changes in the controls that reasonably be expected to influence the economic decisions of users
FINANCIAL
assessing the risks of material misstatement at the Group level.
would affect the audit evidence obtained in previous audit periods, Our opinion on the financial statements does not cover the other taken on the basis of these financial statements.
Based on that assessment, we performed an audit of the Society and
we used the audit evidence obtained in previous audit periods. information and, except to the extent otherwise explicitly stated
material subsidiaries. This provided 100% (2021: 100%) coverage A further description of our responsibilities for the audit of the
Where we identified changes in the controls, we tested those controls in our report, we do not express any form of assurance conclusion
of revenue, profit before tax and net assets of the Group, executed financial statements is located on the FRC’s website at:
in the current period. thereon.
at levels of materiality applicable to each individual entity which www.frc.org.uk/auditorsresponsibilities. This description forms part
were lower than Group materiality and in the range of £779k to £10k Our approach in relation to the Group’s IT systems Our responsibility is to read the other information and, in doing so, of our auditor’s report.
(2020: £771k to £0.2k). We, as the Group auditor, were responsible for consider whether the other information is materially inconsistent with
performing the audit of each subsidiary. At the Group level, we also We relied on the IT controls associated with the Group’s IT systems the financial statements or our knowledge obtained in the course of
tested the consolidation process. which support both the residential and commercial lending and the the audit, or otherwise appears to be materially misstated.
11. Extent to which the audit
savings and current accounts business cycles. This includes the Group’s was considered capable of detecting
7.2 Our consideration of the control environment core banking system which supports both business cycles. With the If we identify such material inconsistencies or apparent material irregularities, including fraud
involvement of IT specialists, we tested the general IT controls related misstatements, we are required to determine whether this gives rise
Our approach in relation to the Group’s business cycles Irregularities, including fraud, are instances of non-compliance
to these systems and relied on the IT controls as planned. We also to a material misstatement in the financial statements themselves.
with laws and regulations. We design procedures in line with our
tested the relevant automated controls associated with the business If, based on the work we have performed, we conclude that there is a
We took a controls reliance strategy over the following
responsibilities, outlined above, to detect material misstatements
cycles noted in the preceding section and relied on these controls as material misstatement of this other information, we are required to
business cycles:
in respect of irregularities, including fraud. The extent to which our
originally planned. report that fact.
procedures are capable of detecting irregularities, including fraud is
• residential and commercial mortgage lending; and
detailed below.
We have nothing to report in this regard.
• savings and current accounts.
11.1 Identifying and assessing potential risks
related to irregularities
In identifying and assessing risks of material misstatement in respect

of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
98

• the nature of the industry and sector, control environment 11.2 Audit response to risks identified Report on Other Legal & Regulatory 14. Corporate Governance Statement
and business performance including the design of the Group’s Requirements
remuneration policies, key drivers for directors’ remuneration, As a result of performing the above, we identified loan loss Based on the work undertaken as part of our audit, we have
bonus levels and performance targets; provisioning and hedge accounting as key audit matters related to 12. Opinions on other matters prescribed by concluded that each of the following elements of the Corporate
the potential risk of fraud. The key audit matters section of our report the Building Societies Act 1986 Governance Statement is materially consistent with the financial
• results of our enquiries of management, internal audit and the explains the matters in more detail and also describes the specific statements and our knowledge obtained during the audit:
audit committee about their own identification and assessment of procedures we performed in response to those key audit matters. In our opinion, based on the work undertaken in the course of
the risks of irregularities; the audit: • the directors’ statement with regards the appropriateness
In addition to the above, our procedures to respond to risks identified of adopting the going concern basis of accounting and any
• any matters we identified having obtained and reviewed the included the following: • the annual business statement and the directors’ report have material uncertainties identified set out on page 89;
Group’s documentation of their policies and procedures relating to: been prepared in accordance with the requirements of the
• reviewing the financial statement disclosures and testing to Building Societies Act 1986; • the directors’ explanation as to its assessment of the Group’s
– identifying, evaluating and complying with laws and supporting documentation to assess compliance with provisions of prospects, the period this assessment covers and why the
regulations and whether they were aware of any instances of relevant laws and regulations described as having a direct effect • the information given in the directors’ report for the financial period is appropriate set out on page 45-48;
non-compliance; on the financial statements; year for which the financial statements are prepared is
consistent with the financial statements; and • the directors’ statement on fair, balanced and understandable
– detecting and responding to the risks of fraud and whether they • enquiring of management, the audit committee concerning actual set out on page 76;
have knowledge of any actual, suspected or alleged fraud; and potential litigation and claims; • the information given in the annual business statement (other
than the information upon which we are not required to • the board’s confirmation that it has carried out a robust
– the internal controls established to mitigate risks of fraud or • performing analytical procedures to identify any unusual or report) gives a true representation of the matters in respect of assessment of the emerging and principal risks set out on
non-compliance with laws and regulations; unexpected relationships that may indicate risks of material which it is given. page 34;
misstatement due to fraud;
• the matters discussed among the audit engagement team and In the light of the knowledge and understanding of the Group • the section of the annual report that describes the review of
relevant internal specialists, including tax, valuations, pensions, • reading minutes of meetings of those charged with governance, and the Society and their environment obtained in the course of effectiveness of risk management and internal control systems
IT, economic, credit risk, real estate and prudential regulatory reviewing internal audit reports and reviewing correspondence the audit, we have not identified any material misstatements in set out on page 79; and
specialists regarding how and where fraud might occur in the with the PRA and the FCA; and the directors’ report.
financial statements and any potential indicators of fraud. • the section describing the work of the audit committee set out
• in addressing the risk of fraud through management override of on page 74-81.
As a result of these procedures, we considered the opportunities controls, testing the appropriateness of journal entries and other 13. Opinion on other matter prescribed by
STATEMENTS
and incentives that may exist within the organisation for fraud and adjustments; assessing whether the judgements made in making the Capital Requirements
FINANCIAL
identified the greatest potential for fraud in the following areas: loan accounting estimates are indicative of a potential bias; and (Country-by-Country Reporting) 15. Matters on which we are required to
loss provisioning and hedge accounting. In common with all audits evaluating the business rationale of any significant transactions Regulations 2013 report by exception
under ISAs (UK), we are also required to perform specific procedures that are unusual or outside the normal course of business.
In our opinion the information given in note 33 to the financial 15.1. Adequacy of explanations received and accounting records
to respond to the risk of management override.
We also communicated relevant identified laws and regulations and statements for the financial year ended 31 March 2022 has been
Under the Building Societies Act 1986 we are required to report to you
We also obtained an understanding of the legal and regulatory potential fraud risks to all engagement team members including properly prepared, in all material respects, in accordance with
if, in our opinion:
frameworks that the Group operates in, focusing on provisions internal specialists, and remained alert to any indications of fraud or the Capital Requirements (Country-by Country Reporting)
of those laws and regulations that had a direct effect on the non-compliance with laws and regulations throughout the audit. Regulations 2013.
• adequate accounting records have not been kept by the Society; or
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this • the Society’s financial statements are not in agreement with the
context included the Building Society Act 1986 for the Society and UK accounting records and returns; or
Companies Act for the subsidiaries.
• we have not received all the information and explanations and
In addition, we considered provisions of other laws and regulations access to documents we require for our audit.
that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to
We have nothing to report in respect of these matters.
operate or to avoid a material penalty. These included the regulations
set by Prudential Regulatory Authority (PRA) and Financial Conduct
Authority (FCA).
100

Group and Society Income Statements
16. Other matters which we are required to 17. Use of our report For the year ended 31 March 2022 Group Group Society Society
2022 2021 2022 2021
address
This report is made solely to the Society’s members, as a body, in Total
Notes £000 £000 £000 £000
16.1. Auditor tenure accordance with section 78 of the Building Societies Act 1986.
Interest receivable and similar income 3 58,121 54,433 56,527 52,888
Our audit work has been undertaken so that we might state to the
Following the recommendation of the audit committee, we were Interest payable and similar charges 4 (10,455) (11,679) (10,455) (11,679)
Society’s members those matters we are required to state to them
appointed by the Board of Directors on 24 June 2014 to audit in an auditor’s report and for no other purpose. To the fullest extent Net interest receivable 47,666 42,754 46,072 41,209
the financial statements for the year ending 31 March 2015 and permitted by law, we do not accept or assume responsibility to Fair value gains on financial instruments 5 3,808 1,464 3,471 1,540
subsequent financial periods. The period of total uninterrupted anyone other than the Society and the Society’s members as a body, Pension finance charge 24 (201) (281) (201) (281)
engagement including previous renewals and reappointments for our audit work, for this report, or for the opinions we have formed.
Fees and commissions receivable 538 949 538 800
of the firm is 8 years, covering the years ending 31 March 2015 to
31 March 2022. Matthew Bainbridge (Senior statutory auditor) Fees and commissions payable (2,387) (2,037) (2,119) (1,752)
For and on behalf of Deloitte LLP Other operating income 2,774 2,445 2,771 2,439
16.2. Consistency of the audit report with the additional report to Statutory Auditor
Total Income 52,198 45,294 50,532 43,955
the Audit Committee Leeds, United Kingdom
Administrative expenses 6 (41,395) (32,075) (40,644) (31,203)
01 June 2022
Our audit opinion is consistent with the additional report to the audit Depreciation, amortisation, impairment and profit on sale of tangible fixed assets (2,634) (1,944) (2,638) (1,917)
committee we are required to provide in accordance with ISAs (UK).
Loss on revaluation and disposal of investment properties 16 (7) (144) (7) (133)
Provisions for bad and doubtful debts 12 618 (678) 646 (622)
Provisions for liabilities and charges 22 (167) 20 (167) 20
Write off of amounts owed by and investments in subsidiaries 13 – – (73) –
Profit on ordinary activities before tax 8,613 10,473 7,649 10,100
STATEMENTS
Tax on profit 8 (1,204) (2,059) (1,043) (1,966)
FINANCIAL
Profit for the financial year 7,409 8,414 6,606 8,134
Statements of Comprehensive Income
For the year ended 31 March 2022 Group Group Society Society
2022 2021 2022 2021
Notes £000 £000 £000 £000
Profit for the financial year 7,409 8,414 6,606 8,134
Items that may subsequently be reclassified to income and expenditure:
Available for sale debt securities (loss)/gain 10 (299) 10 (299) 10
Movement in deferred tax relating to debt securities 79 (2) 79 (2)
Gain/(loss) on equity share investment 31 893 (136) 893 (136)
Movement in deferred tax relating to equity share investment (427) 26 (427) 26
Items that may not subsequently be reclassified to income and expenditure:
Actuarial gain/(loss) on retirement benefit obligations 24 892 (6,768) 892 (6,768)
Movement in deferred tax relating to retirement benefit obligations (223) 1,286 (223) 1,286
Total comprehensive income for the year 8,324 2,830 7,521 2,550
The notes on pages 107 to 132 form part of these accounts.
102

Group and Society Balance Sheets Statements of Changes in Members’ Interest
As at 31 March 2022 Group Group Society Society Total Equity

2022 2021 2022 2021 General Available for Attributable
Assets Notes £000 £000 £000 £000 Reserve Sale Reserve to Members
Group
£000 £000 £000
Cash in hand and balances with the Bank of England 9 495,661 431,737 495,661 431,737
Balance at 1 April 2020 191,083 2,867 193,950
Loans and advances to credit institutions 25 45,686 39,436 45,686 39,436
Debt securities 10 55,025 7,082 55,025 7,082 Profit for the year 8,414 – 8,414
596,372 478,255 596,372 478,255 Other comprehensive income (5,482) (102) (5,584)
Derivative financial instruments 29 34,037 3,166 33,760 3,154 Total comprehensive income for the year 2,932 (102) 2,830
Loans and advances to customers 11 Balance at 31 March 2021 194,015 2,765 196,780
Loans fully secured on residential property 2,039,669 2,004,710 2,039,669 2,004,710

Profit for the year 7,409 – 7,409
Other loans 188,879 190,250 166,740 169,399
Other comprehensive income 669 246 915
2,228,548 2,194,960 2,206,409 2,174,109
Total comprehensive income for the year 8,078 246 8,324
Investments in subsidiary undertakings 13 – – 19,570 19,061
Balance at 31 March 2022 202,093 3,011 205,104
Investment in equity shares 31 6,717 5,824 6,717 5,824
Intangible assets 14 2,462 581 2,462 581

Total Equity
Tangible fixed assets 15 10,771 12,117 10,706 12,067 General Available for Attributable
Reserve Sale Reserve to Members
Society
£000 £000 £000
Investment properties 16 1,802 1,952 1,802 1,952
Balance at 1 April 2020 187,354 2,867 190,221
Other assets 17 2,117 3,462 2,114 3,532
Prepayments and accrued income 2,459 2,141 2,131 1,827

Profit for the year 8,134 – 8,134
Total Assets
STATEMENTS
2,885,285 2,702,458 2,882,043 2,700,362
Other comprehensive income (5,482) (102) (5,584)
FINANCIAL
Liabilities Total comprehensive income for the year 2,652 (102) 2,550
Shares 19 2,290,603 2,194,563 2,290,603 2,194,563 Balance at 31 March 2021 190,006 2,765 192,771
Derivative financial instruments 29 110 9,008 105 8,931
Amounts owed to credit institutions 25 231,702 130,034 231,702 130,034 Profit for the year 6,606 – 6,606
Other comprehensive income 669 246 915

Amounts owed to other customers 25 151,381 147,123 151,623 147,792
Total comprehensive income for the year 7,275 246 7,521

Other liabilities 20 723 972 2,192 2,467
Balance at 31 March 2022 197,281 3,011 200,292
Accruals and deferred income 21 4,570 4,482 4,434 4,308
Provisions for liabilities and charges 22 483 850 483 850
Pension liability 24 609 18,646 609 18,646
Total liabilities 2,680,181 2,505,678 2,681,751 2,507,591
Total equity attributable to members 205,104 196,780 200,292 192,771
Total Equity and Liabilities 2,885,285 2,702,458 2,882,043 2,700,362
The notes on pages 107 to 132 form part of these accounts.
These accounts were approved by the Board of Directors on 1 June 2022

John Hooper, Chairman
Mark Stanger, Chair of the Audit Committee
Des Moore, Chief Executive Officer
104

Consolidated Cash Flow Statement Notes to the Accounts
For the year ended 31 March 2022

1. Accounting Policies are calculated at the tax rates that are substantively enacted at the
2022 2021
£000 £000 time the timing differences are expected to reverse.
Cash flows from operating activities The principal accounting policies are summarised below. They have
Intangible Assets
all been applied consistently throughout the year and to the prior
Profit before tax 8,613 10,473
comparative period. An intangible asset is an identifiable non-monetary asset without
Adjustments for:
physical substance. An intangible asset is recognised if it is probable
Depreciation, amortisation, impairment and profit on sale of tangible fixed assets 2,634 1,944 Basis of Preparation
that future economic benefits attributable to the asset will flow from
Loss on revaluation and disposal of investment properties 7 144 The financial statements have been prepared under the historical it and can be measured reliably. During 2021, the Society commenced
Changes in fair values of derivatives (3,808) (1,464) cost convention, modified to include certain items at fair value, and in its strategic investment in technological functionality and purchased
Provisions for bad and doubtful debts (618) 678 accordance with Financial Reporting Standard 102 (FRS 102) issued software licences and IT development services which qualify for
by the Financial Reporting Council. recognition as intangible assets. The Society also recognised as
Provisions for liabilities and charges (367) (56)
intangible assets directly attributable internal development costs
Pension finance charge and service cost 201 281 The Society is included in the consolidated annual accounts, and is
which are considered to meet the intangible assets criteria. Examples
Other non-cash movements (96) (103) considered to be a qualifying entity under FRS 102 paragraphs 1.8
of such development costs which occurred in 2022 include software
to 1.12. The Society has taken advantage of the exemption
Cash generated from operations 6,566 11,897
licence costs, external contractor based development costs and
from producing a separate Society Cash Flow Statement with
Movements in operating assets and liabilities professional services. Costs associated with maintaining computer
related notes.
Loans and advances to customers (69,008) (19,962) software programmes, research costs and development costs that
Basis of Consolidation
Shares 96,276 194,456 do not meet the criteria for recognition as intangible assets are
Loans and advances to credit institutions and other liquid assets (2,433) 14,309 The consolidated financial statements include the financial recognised as an expense as incurred.
statements of the Society and its subsidiary undertakings for the year
Amounts owed to credit institutions and other customers 105,926 (159,578) Intangible assets are recognised at initial cost less accumulated
ended 31 March 2022. All intra-group transactions are eliminated
Prepayments and accrued income (356) (331) amortisation. Amortisation of intangible assets commences when
on consolidation.
Other assets 38 (1) they are ready for their intended use and is charged to the income
Going Concern statement on a straight line basis over the useful economic life of the
Accruals and deferred income 88 1,351
STATEMENTS
FINANCIAL
asset, usually deemed to be between three and five years.
Other liabilities 188 (371) The Group’s financial position and business activities, together with
Payment into defined benefit pension scheme (17,346) (2,346) the factors likely to affect its future development, performance and Intangible assets are reviewed annually for indications of
position are set out in the Strategic Report. impairment, which includes the judgement as to whether it is
Taxation paid (912) (1,367)
probable that future economic benefits will be realised from the asset
Net cash flows from operating activities 119,027 38,057 The directors are satisfied that the Group has adequate resources to
and whether the value in use of the asset is in excess of the carrying
Cash flows from investing activities
continue in business for the foreseeable future. For this reason, the
value. Any impairment in the value of these assets is recognised
financial statements continue to be prepared on the going concern
Purchase of debt securities (48,260) (7,073) immediately in the income statement.
basis. Further details of the directors’ assessment and its basis can be
Maturity of debt securities – 5,000
found on pages 45-48. Fixed Assets and Depreciation
Purchase of intangible fixed assets (2,150) (581)
Corporation Tax The cost of additions and major alterations to freehold land and
Purchase of tangible fixed assets (1,019) (2,048)
buildings and equipment are capitalised. Freehold land and buildings
Sale of tangible fixed assets 95 67 Corporation tax is charged in the accounts on the profit for the
are depreciated at 1% per annum on cost. In addition, included in
Sale of investment property 48 104
year as adjusted for taxation purposes. Current tax is the expected
freehold land and buildings are amounts in respect of refurbishment
tax payable on the taxable income for the year, using tax rates
Net cash flows from investing activities (51,286) (4,531) and plant which are depreciated over their estimated useful lives on a
applicable at the balance sheet date and any adjustment to tax
straight line basis at rates between 5% and 20%.
Net increase in cash and cash equivalents 67,741 33,526 payable in respect of previous years.
The costs less estimated residual values of fixed assets other than
Cash and cash equivalents at beginning of year 441,931 408,405 Deferred Taxation
freehold land and buildings are written off over their estimated useful
Cash and cash equivalents at end of year 509,672 441,931
Provision for deferred tax is made in respect of all timing differences lives on a straight line basis using the following annual rates:
that have originated but not reversed by the balance sheet date.
Represented by:
Fixtures and Fittings and Office Furniture 20%
Timing differences represent differences between gains and losses
Cash and balances with the Bank of England 495,661 431,737
recognised for tax purposes in periods different from those in which Computer Equipment 20% to 50%
Loans and advances to credit institutions repayable on demand 14,011 10,194
they are recognised in financial statements. No deferred tax is
Office Equipment 20%
509,672 441,931
recognised on permanent differences between the Group’s taxable
Motor Vehicles 20%
gains and losses and its results as stated in the financial statements.
106 Deferred tax assets and liabilities are stated without discounting and

Notes to the Accounts Notes to the Accounts
Investments in Subsidiary Undertakings i) Loans and advances If derivatives are not designated as hedges then changes in fair Interest Income and Expense
values are recognised immediately in the income statement.
Investments in subsidiaries are measured at cost less accumulated Interest in respect of all loans is measured using the effective IAS 39 requires that financial instruments carried at amortised cost
impairment. interest rate method. vii) Interest rate benchmark reform be accounted for on an effective interest rate basis. Revenue on
financial instruments classified as loans and receivables, available
If the estimated recoverable amount is lower than carrying amount, the ii) At fair value through income and expenditure Following the end of Libor as a published index rate on 31
for sale, or financial liabilities at amortised cost, is recognised on
carrying amount is reduced to the estimated recoverable amount and an December 2021 the Society has completed its transition to the
Derivatives are initially recognised at fair value on the date on an effective interest rate basis. The effective interest rate basis is a
impairment loss is recognised immediately in the income statement. approved Libor fall back rate on all its remaining Libor linked
which a derivative contract is entered into and are subsequently method of allocating the interest income or interest expense over
contracts. At 31 March 2022 the Society did not have material
Pension Costs re-measured at their fair value. The need for credit valuation the relevant period. The effective interest rate is the rate that exactly
levels of fall back rate contracts outstanding in the context of
adjustments is considered in the determination of the fair value of discounts estimated future cash payments or receipts through the
The Group operates a defined benefit pension scheme and its derivative portfolio and the remaining fall back derivatives
derivatives. All derivatives are carried as assets when their fair values expected life of the financial instrument. This calculation takes into
three defined contribution pension schemes for staff. The assets have short remaining maturities. The Society has applied the
are positive and as liabilities when their fair values are negative. account interest received or paid and fees and commissions paid
of the schemes are held separately from those of the Group in amendments to IAS39 issued by the IASB and has concluded that
independently administered funds. Derivatives can be designated as fair value hedges. or received that are integral to the yield as well as incremental
the fall-back rate is economically equivalent to the LIBOR rate
transaction costs. The effective interest rate recognises the expected
The defined benefit pension scheme’s assets are measured at market iii) Available for sale it replaces. As such given the limited value of the exposures, the
future cash flows over the expected life of the financial instrument or,
value at each balance sheet date and the liabilities are measured transition’s immaterial impact on the Society’s reported results,
Available for sale assets are non-derivative financial assets that where appropriate, a shorter period, to the net carrying amount of
using the projected unit method with a suitable control period which and the successful completion of the transition by 31 March 2022
are not classified into either of the two categories above. The the financial instrument at initial recognition.
reflects the expected ageing of the scheme, discounted using the the Society has not updated the detailed disclosures provided in
available for sale assets are held at fair value with changes in the
current rate of return on a high quality corporate bond of equivalent the year ended 31 March 2021. In respect of residential mortgages, incremental fees and costs
fair value recognised in other comprehensive income. Impairment
term to the liability. associated with the origination of a mortgage are deferred and
losses are recognised in the income statement when they arise. Provisions for Bad and Doubtful Debts amortised over the mortgage product life.
The resultant surplus or deficit is carried on the balance sheet, as is
The premia and discounts arising from the purchase of available The Group applies the measurement criteria of IAS 39. Provisions are
the associated deferred tax. Amounts accrued and settled in relation to payments and receipts
for sale assets are amortised over the period to the maturity date made to reduce the value of loans and advances to the directors’ best
Increases in the present value of scheme liabilities from employee of the security on an effective yield basis. Any amounts amortised which are contractually due on derivatives are recognised within
estimate of the amount that is likely ultimately to be received.
interest receivable and similar income (note 3) for all derivatives
STATEMENTS
service or service benefit improvements, are charged to the income are charged or credited to the income statement in the relevant
FINANCIAL
Throughout the year and at the year end, individual assessments which are economic hedges of financial assets regardless of whether
statement as administrative expenses. The expected return on the financial years.
are made of all loans and advances on properties which are in or not they are in accounting hedge relationships, and within interest
scheme’s assets less the increase in the scheme’s liabilities, arising
iv) Financial liabilities possession or in arrears by three months or more. Specific provision
from the passage of time, is disclosed as pension finance income payable and similar charges (note 4) for all derivatives which are
All financial liabilities are measured at amortised cost using the is made against those loans and advances which are considered to hedges of financial liabilities.
or charge.
effective interest method, except for those financial liabilities be impaired. In considering the specific provision for impaired loans,
Any resulting actuarial gains or losses, that is gains or losses arising account is taken of any discount which may be needed against the Fees and Commission Income
measured at fair value through income and expenditure, e.g.
from differences in the expected return on scheme assets compared to value of the property at the balance sheet date to agree a sale,
derivative liabilities. Fees and commissions are generally recognised on an accruals basis
the actual return and changes in assumptions, or factors which affect the anticipated realisation costs and if applicable the amount
v) Derecognition of financial assets and liabilities when the service has been provided.
those assumptions, used in measuring the scheme liabilities, are recoverable under mortgage indemnity policies. The directors
recognised immediately in the Statement of Comprehensive Income. Financial assets are only derecognised when the contractual rights recognise that not all accounts in arrears will result in possession and 2. Critical Accounting Estimates
Contributions to the defined contribution pension schemes are to receive cash flows from them have expired or when the Group apply a factor based on recent experience to reflect this probability and Judgements
charged to the income statement as incurred. has transferred substantially all risks and rewards of ownership. when calculating the provision for accounts in arrears.
Financial liabilities are only derecognised when the obligation is The Group has to make estimates and judgements in applying its
Investment Properties In addition, a collective impairment reduction is made against those
discharged, cancelled or has expired. accounting policies which affect the amounts recognised in the
loans and advances to customers where objective evidence, including
When land and buildings are held for rental purposes or capital financial statements. These estimates and judgements are based on
vi) Fair value hedges forbearance measures taken to assist borrowers who are, or could
appreciation, they are classified as investment properties and the best available information at the balance sheet date. Although
be experiencing financial difficulty, indicates that it is likely that
held in the balance sheet at their open market valuation and not A fair value hedge is used to hedge exposures to variability in the fair the Group has internal control systems in place to ensure that
losses may ultimately be realised and thus a loss event has occurred.
depreciated. Changes in the fair value are included in the income value of financial assets and liabilities, such as fixed rate loans and estimates are reliably measured, actual amounts may differ from
These factors take into account the Group’s experience of default
statement in the period in which they arise. investment products. Changes in the fair value of derivatives that these estimates. There are no critical accounting judgements.
and delinquency rate, loss emergence periods, regional house price
are designated and qualify as fair value hedges are recorded in the
Financial Instruments movements and adjustments to allow for forced sale values.
income statement, together with any changes in the fair value of the
Purchases and sales of financial assets are accounted for at hedged asset or liability that are attributable to the hedged risk. If the Loans and advances in the balance sheet are shown net of provisions.
settlement date. In accordance with IAS 39 the financial instruments hedge no longer meets the criteria for hedge accounting, the The charge or credit to the income statement comprises the movement
of the Group have been classified into the following categories: adjustment to the carrying amount of the hedged item is amortised in the provisions together with losses written off in the year. Further
to the income statement over the period to maturity. information on the Group’s approach is included in notes 12 and 28.
108

The Group considers the most significant use of accounting estimates If the Group assumed an increase or decrease in the probability of Group Group Society Society
2022 2021 2022 2021
relate to the following areas: default (PD) of 15% across its book for loans subject to collective 3. Interest Receivable and Similar Income £000 £000 £000 £000
impairment, holding all other assumptions constant, the following On loans fully secured on residential property 53,646 51,876 53,646 51,876
Provisions for Bad and Doubtful Debts
increase in provision would be seen resulting in an income On other loans 8,386 9,054 6,716 7,413
The Group reviews its loan portfolios to assess impairment on a statement impact: On debt securities
monthly basis, to determine whether an impairment loss should be Interest and other income 104 34 104 34
recorded in the income statement. In undertaking this review, the Impact of increase/decrease in PD +15% -15%
On other liquid assets
£000 £000
Group makes judgements as to whether there is any observable data Interest and other income 1,043 438 1,043 438
FSOL 75 (75)
indicating that there is a measurable decrease in the estimated Net expense on derivative financial instruments (5,058) (6,969) (4,982) (6,873)
FSRP 36 (36)
future cash flows from a portfolio of loans before such decrease in an Total interest receivable 58,121 54,433 56,527 52,888
Total charge/(credit) 111 (111)
individual loan can be identified. This evidence may include observable All income is derived from operations within the UK.
data indicating that there has been an adverse change in the payment Fair Value of Derivatives
4. Interest Payable and Similar Charges
status or borrower’s position, including forbearance measures such as
The fair value of financial instruments that are not quoted in active On shares held by individuals 9,758 11,188 9,758 11,188
a transfer to interest only products and term extensions. Management
markets are determined by using valuation techniques. All models are On deposits and other borrowings 858 772 858 772
uses estimates based on historical loss experience for assets with Net income on derivative financial instruments (161) (281) (161) (281)
certified before they are used and models are calibrated to ensure
similar credit risk characteristics and objective evidence of impairment. Total interest payable 10,455 11,679 10,455 11,679
that outputs reflect actual data and comparative market prices. To
Management also assesses the expected loss on loans and advances as
the extent practical, models use only observable data; however areas
a result of the movement in house price indices and the discount on the Group Group Society Society
such as credit risk, volatilities and correlations require management 2022 2021 2022 2021
sale of possession properties. The methodology and assumptions used 5. Fair Value Gains on Financial Instruments £000 £000 £000 £000
to make estimates. Changes in assumptions about these factors
for estimating both the amount and timing of future cash flows are Change in fair value derivatives in designated fair value hedge accounting relationships 38,279 6,672 38,279 6,672
could affect the reported fair value of financial instruments. Further
reviewed regularly to minimise any differences between loss estimates Change in fair value derivatives not in designated fair value hedge accounting relationships 1,490 837 1,153 913
details on derivatives are in note 30 and on the interest rate risk they
and actual loss experience. At 31 March 2022 the level of judgement Adjustment to hedged items in designated fair value hedge accounting relationships (35,961) (6,045) (35,961) (6,045)
manage and its sensitivity in note 26.
and estimation of uncertainty was heightened by the unwinding 3,808 1,464 3,471 1,540
The Group only use derivatives to manage interest rate risk. Accordingly the fair value accounting gain above represents the net fair value movement
STATEMENTS
impact of the Covid-19 pandemic coupled with rising inflation and Pensions
FINANCIAL
on derivative instruments that are matching risk exposures on an economic basis. Some accounting volatility arises on these items due to accounting
ineffectiveness on designated hedges, or because hedge accounting has not been adopted or is not achievable on certain items which includes derivatives
interest rates. The Group operates a defined benefit pension scheme. Significant used to hedge the mortgage pipeline.
Furthermore, the Group’s focus on tourism related sectors in the FSOL judgements (on areas such as future interest and inflation rates and
portfolio, where lending to the hospitality and leisure industry makes mortality rates) have to be exercised in estimating the value of the
Group Group Society Society
assets and liabilities of the scheme. These judgements, which are 2022 2021 2022 2021
up over 75% of the book, requires management to make significant 6. Administrative Expenses £000 £000 £000 £000
estimates around the future performance of this industry as it based upon the Board receiving external advice from the Scheme
Staff costs (note 7) 25,251 21,127 24,686 20,434
emerges from the repeated impact of Covid-19 and trade stops and Actuary, are outlined in note 24 to the Accounts. The analysis of the auditor's remuneration is as follows:
starts. These estimates are inherently complex. Fees payable to the Group's auditor for the audit of the annual accounts 300 129 282 111
Other services:
The Group incorporated its best estimate of the pandemic’s declining
Other assurance services 34 – 34 –
impact and of the sharp rise in inflation in its modelling by way of
Other expenses 15,810 10,819 15,642 10,658
adjustment to its expected loss and probability of default (PD) and
41,395 32,075 40,644 31,203
probability of possession given default assumptions.
Group and Society other administrative expenses include £3,653,000 of project based expenditure (2021 - £1,281,000) directly relating to strategic change.
This amount is after the impact of capitalisation of certain expenses as intangible assets (note 14).
If the Group assumed that the loss given default (LGD) of each of its
loans which are subject to collective impairment were to increase
or decrease by 15%, holding all other assumptions constant, the
following movement in provision would be seen resulting in an income
statement impact:
Impact of increase/decrease in LGD +15% -15%

£000 £000
FSOL 249 (249)
FSRP 548 (175)
Total charge/(credit) 797 (424 )
110

7. Staff Numbers and Costs Group Group Society Society

2022 2021 2022 2021
The average number of persons employed during the year (including executive directors) was as follows: 9. Cash in Hand and Balances with the Bank of England £000 £000 £000 £000
Full time Part time Cash in hand 5,451 5,992 5,451 5,992
2022 2021 2022 2021 Balances with the Bank of England 490,210 425,745 490,210 425,745
Society's principal office 307 241 84 86 Included in cash and cash equivalents 495,661 431,737 495,661 431,737
Society's branches 78 106 98 113 Balances with the Bank of England do not include cash ratio deposits of £7.13 million (2021 – £5.71 million) which are not available for use in the Group’s day
to day operations. Such deposits are included within Loans and Advances to Credit Institutions in the Balance Sheet.
Subsidiaries 12 12 5 6
For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances which are repayable on demand:
397 359 187 205
Group
Group Group Society Society 2022 2021

2022 2021 2022 2021 £000 £000
The aggregate costs of these persons were as follows: £000 £000 £000 £000 Cash in hand and balances with the Bank of England (as above) 495,661 431,737
Wages and salaries 22,157 18,291 21,675 17,712
Loans and advances to credit institutions 14,011 10,194
Social security costs 1,755 1,535 1,711 1,481
509,672 441,931
Other pension costs (note 24) 1,339 1,301 1,300 1,241
25,251 21,127 24,686 20,434
The Society operates a salary sacrifice scheme whereby the employee agrees to a reduction in salary in return for the Group making the pension contributions
Group and Society
that were previously paid by the employee. The amounts shown above under wages and salaries include the headline salary (i.e. before the salary sacrifice
deduction) and other pension costs exclude the additional contributions made by the Group as a result of the salary sacrifice scheme. This treatment also 2022 2021
10. Debt Securities £000 £000
applies to the executive directors’ remuneration disclosures in the People, Remuneration and Culture Committee Report
Debt securities
Covered bonds 29,789 7,082

2022 2021 2022 2021 Certificates of deposit 10,018 –
8. Taxation £000 £000 £000 £000
Supranational floating rate notes 15,218 –
(a) Analysis of charge in year:
55,025 7,082
Current tax
Debt securities are held as available for sale assets and carried at their fair value with movements reported through other comprehensive income. In the year ended
Corporation tax at 19% 500 1,463 340 1,389 31 March 2021 the Group acquired covered bonds issued by other rated UK based financial institutions. In the year ended 31 March 2022 the Group increased its
holding of covered bonds and purchased debt from multilateral development banks.
Adjustments in respect of prior year (32) 48 (32) 30
STATEMENTS
Deferred tax at 19% and 25% (2021 - 19%) 736 548 735 547 Movements in available for sale debt securities are summarised as follows:
FINANCIAL
Tax on profit on ordinary activities 1,204 2,059 1,043 1,966 At 1 April 7,082 5,036
Total deferred tax relating to items of other comprehensive income 571 (1,310) 571 (1,310) Additions 48,260 7,073
Maturities and amortisation of premium and discount (56) (5,000)

(b) Factors affecting tax charge in year:
(Losses)/gains from changes in fair value (299) 10
The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation tax is as follows:
Movements in accrued interest 38 (37)
Profit on ordinary activities before tax 8,613 10,473 7,649 10,100
At 31 March 55,025 7,082
Tax on profit on ordinary activities at UK standard rate of 19% 1,636 1,990 1,453 1,919
The remaining maturity of debt securities are noted in note 25.
Effects of:
Capital allowances in excess of depreciation (7) (22) (7) (25) 2022 2021 2022 2021
11. Loans and Advances to Customers £000 £000 £000 £000
Tax deductible pension contributions (1,265) (504) (1,265) (504)
Loans and advances to customers comprise:
Other differences 39 – 62 –
Loans fully secured on residential property before EIR adjustment 2,072,202 2,001,497 2,072,202 2,001,497
Expenses not deductible for tax purposes 97 (1) 97 (1)
Effective interest rate adjustment (1,749) (1,937) (1,749) (1,937)
(Over)/under provision in prior year (32) 48 (32) 30
Loans fully secured on residential property 2,070,453 1,999,560 2,070,453 1,999,560
Total current tax 468 1,511 308 1,419
Other loans
Origination and reversal of timing differences (deferred tax) 679 548 678 547
Loans fully secured on land 168,048 171,257 168,048 171,257
Adjustments for changes in tax rates (deferred tax) 57 – 57 –
Other loans 22,972 21,648 678 658
Tax on profit on ordinary activities 1,204 2,059 1,043 1,966
Fair value adjustment for hedge risk (30,179) 6,018 (30,179) 6,018
Adjustments in respect of prior year primarily relate to differences between the tax charge in the prior year’s financial statements and the finalised tax charge
upon completion of the prior year tax return. 2,231,294 2,198,483 2,209,000 2,177,493
The Finance Act 2021, which was enacted in May 2021, will increase the rate of tax from 19% to 25% with effect from 1 April 2023. Deferred tax balances are Less: Provisions for bad and doubtful debts (note 12) (2,746) (3,523) (2,591) (3,384)
measured at whichever of the enacted tax rates are expected to apply when the related asset is realised or liability is settled.
2,228,548 2,194,960 2,206,409 2,174,109
Other loans include £0.678 million (2021 – £0.658 million) of overdraft lending to the Society’s current account customers. Other loans of the Group also
include £22.294 million (2021 – £20.990 million) of loans and advances to customers of Borderway Finance Limited.
As at 31 March 2022 £629.2 million (2021 – £395.3 million) of loans fully secured on residential property had been pledged as collateral to the Bank of England.
The effective interest rate adjustment of £1.749 million (2021 – £1.937 million) represents fees earned and incurred as a result of bringing mortgages onto the
balance sheet. These fees and charges are amortised over the effective lives of the related loans.
112

Society 2022 Society

Loans fully secured on Loans fully secured Shares Loans Total
residential property on land Other loans Total 13. Investments in Subsidiary Undertakings £000 £000 £000
12. Provisions for Bad and Doubtful Debts £000 £000 £000 £000
At 1 April 2021 Cost less impairment at 1 April 2021 870 18,191 19,061
Collective impairment 868 713 60 1,641 Advances – 1,009 1,009
Individual impairment – 1,734 9 1,743 Repayments – (500) (500)
868 2,447 69 3,384 Cost less impairment at 31 March 2022 870 18,700 19,570
Income and expenditure account

Cost less impairment at 1 April 2020 870 21,745 22,615
Charge/(release) for the year
Advances – 541 541
Collective impairment (343) (215) (8) (566)
Repayments – (4,095) (4,095)
Individual impairment 80 (169) 9 (80)
Cost less impairment at 31 March 2021 870 18,191 19,061
(263) (384) 1 (646)
The loans principally relate to the Society’s operational funding of Borderway Finance Limited, the Group’s vehicle finance subsidiary.
Amount written off during the year
Individual impairment – (146) (1) (147) Subsidiary undertakings

– (146) (1) (147) The Society has ordinary share investments in the following subsidiary undertakings, all registered in England at the Society’s Principal Office,
Cumberland House, Cooper Way, Parkhouse, Carlisle, CA3 0JF, and in each case the interest of the Society is 100%.
At 31 March 2022
Collective impairment 525 498 52 1,075 Company Number Principal Activity
Individual impairment 80 1,419 17 1,516 Direct
605 1,917 69 2,591 Cumberland Holdings Limited 02332404 Holding Company
Group provisions for bad and doubtful debts Indirect

The table above relates to the Society. Borderway Finance Limited 03048466 Motor Vehicle Finance
Borderway Finance Limited had individual impairment provisions of £47,000 at 31 March 2022 and £108,000 of collective provisions, and a charge in the
year of £28,000. As part of the ongoing simplification of the Group’s business model as part of Cumberland 2025, four non-trading subsidiary companies of Cumberland
During the year the Society has continued to work with its customers to ensure that they are supported as the pandemic and attendant lockdowns have Holdings Limited were dissolved in the year. Cumberland Estate Agents Limited, Cumberland Homes Limited and Cumberland Financial Planning Limited
disrupted trade and employment. The vast majority have exited forbearance and have paid or are paying arrears, this is reflected in the release of collective were all dissolved on 15 February 2022. Cumberland Financial Services Limited was dissolved on 22 February 2022. A further subsidiary company, Cumberland
provisions across the Society’s portfolios. The payment status of the Group’s loans at 31 March 2022 and the current level of active forbearance by type Property Services Limited, is in liquidation as at 31 March 2022. Intercompany balances within other debtors of £61,000 and £12,000 owed by Cumberland
are disclosed in note 28. At 31 March 2022 the Group’s customers are facing rising inflation and cost of living, this has been considered within the Group’s Estate Agents Limited and Cumberland Homes Limited to the Society were written off as part of this process.
STATEMENTS
modelled provision calculations which incorporate an element of judgement.
FINANCIAL
Society 2021 Externally Internally
acquired developed Total
Loans fully secured on Loans fully secured 14. Intangible Assets (Group and Society) £000 £000 £000
residential property on land Other loans Total
£000 £000 £000 £000 Cost
At 1 April 2020 At 1 April 2021 485 96 581
Collective impairment 525 899 60 1,484 Additions 1,182 968 2,150
Individual impairment 39 1,263 28 1,330 At 31 March 2022 1,667 1,064 2,731
564 2,162 88 2,814 Amortisation
Income and expenditure account At 1 April 2021 – – –
Charge/(release) for the year Charge for year 191 78 269
Collective impairment 343 (186) – 157 At 31 March 2022 191 78 269
Individual impairment (40) 509 (4) 465 Net book value
303 323 (4) 622 At 31 March 2022 1,476 986 2,462
Amount written off during the year At 31 March 2021 485 96 581
Individual impairment 1 (38) (15) (52) The Group has capitalised internally generated intangible assets as it has moved into the delivery phase of its technology change, as part of Cumberland
2025. The Group capitalised assets to the value of £2,150,000 (2021 - £581,000) that met the definition of an intangible asset under FRS 102. This included
At 31 March 2021
software licences, IT development costs and certain staff costs. Amortisation of such assets is charged to the Income Statement on a straight line basis over
Collective impairment 868 713 60 1,641 the useful life of the asset once the asset is brought into use. The useful life of such assets is determined to be between three and five years. Five years for new
core systems and usually three years for system enhancements of existing platforms, reflecting their expected replacement prior to the end of the Cumberland
Individual impairment – 1,734 9 1,743 2025 programme.
868 2,447 69 3,384
Group provisions for bad and doubtful debts
The table above relates to the Society.
Borderway Finance Limited had individual impairment provisions of £31,000 and £108,000 of collective provisions at 31 March 2021, and a charge in the year of
£59,000. Cumberland Estate Agents Limited recovered £3,000 of previously written off bad debt.
During the year ended 31 March 2021 the Society worked with its customers to ensure that they were supported as the pandemic and attendant lockdowns
disrupted trade and employment. The Group offered customers up to six months of payment holiday on request. Thereafter the Group continued to support
its customers where necessary through individually agreed arrangements and concessions. The vast majority of customers who availed themselves of payment
holiday forbearance chose to capitalise their arrears and subsequently returned to the contractual repayment terms of their loans. Others cleared all amounts
deferred. Some customers, however, begun to build up further arrears and fell into default. The Group continued to support its customers working with them
through the period of financial difficulty. The payment status of the Group’s loans at 31 March 2021 and the current level of active forbearance by type are
disclosed in note 28. The Group accounted for this through its loan loss models, specific provisions and supporting overlays, all of which were updated during the
year ended 31 March 2021.
114

Equipment, Group Group Society Society

Fixtures and 2022 2021 2022 2021
Freehold Land Fittings and 16. Investment Properties £000 £000 £000 £000
and Buildings Vehicles Total
15. Tangible Fixed Assets (Group) At 1 April 1,952 2,175 1,952 2,060
£000 £000 £000
Cost Transfer from tangible fixed assets 150 – 150 –
At 1 April 2021 15,936 15,209 31,145 Transfer to tangible fixed assets (245) 25 (245) 25
Additions 855 164 1,019 Disposals (40) (115) (40) –
Transfer from investment property 245 – 245 Revaluation (15) (133) (15) (133)
Transfer to investment property (150) – (150) At 31 March 1,802 1,952 1,802 1,952
Disposals (186) (360) (546) Valuations of all investment properties were carried out on an open market value basis by an independent valuer, I Henderson BSc MRICS of Carigiet Cowen,
as at 31 March 2022. During the year ended 31 March 2022 one property was sold and a gain of £8,000 was recognised.
At 31 March 2022 16,700 15,013 31,713
If investment properties had not been revalued they would have been included at the following amounts:
Depreciation
At 1 April 2021 8,212 10,816 19,028 Group Group Society Society

2022 2021 2022 2021
Charge for year 310 1,726 2,036
Cost 2,972 2,994 2,972 2,994
Impairment 211 – 211
Depreciation (1,530) (1,571) (1,530) (1,571)
Disposals (78) (255) (333)
1,442 1,423 1,442 1,423
At 31 March 2022 8,655 12,287 20,942
Net book value At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:
At 31 March 2022 8,045 2,726 10,771 Group and Society

2022 2021
At 31 March 2021 7,724 4,393 12,117
£000 £000
Within one year 124 122
Tangible Fixed Assets (Society)
In the second to fifth years inclusive 306 266
Cost
After five years 116 13
At 1 April 2021 15,575 15,395 30,970
546 401
Additions 855 123 978
The Group is additionally contractually obliged to carry out annual repairs and maintenance in respect of investment properties, which in the year ended
STATEMENTS
Transfer from investment property 245 – 245
FINANCIAL
31 March 2022 amounted to £33,000 (2021 – £8,000).
Transfer to investment property (150) – (150)
Disposals (186) (301) (487) Group Group Society Society

2022 2021 2022 2021
At 31 March 2022 16,339 15,217 31,556 17. Other Assets £000 £000 £000 £000
Depreciation Deferred taxation asset (note 18) 2,114 3,421 2,103 3,409
At 1 April 2021 7,851 11,052 18,903 Other 3 41 11 123
Charge for year 310 1,705 2,015 2,117 3,462 2,114 3,532
Impairment 211 – 211
Disposals (78) (201) (279) Group Group Society Society

2022 2021 2022 2021
At 31 March 2022 8,294 12,556 20,850 18. Deferred Taxation £000 £000 £000 £000
Net book value At 1 April 3,421 2,659 3,409 2,646
At 31 March 2022 8,045 2,661 10,706 (Charge) to income and expenditure account (note 8) (736) (548) (735) (547)
At 31 March 2021 7,724 4,343 12,067 (Charge)/credit to other comprehensive income (571) 1,310 (571) 1,310
As a result of a change in its development plans primarily driven by the pandemic, the Group recognised an impairment of £211,000 on a property adjacent At 31 March 2,114 3,421 2,103 3,409
to its English Street branch, and subsequently moved it to investment property (note 16). One property previously held as investment property has become
occupied by Society in the year and was transferred to fixed assets. Disposals of fixed assets are predominantly related to the refurbishment of the head Deferred tax assets and liabilities are attributable to the following items:
office and subsequent disposal of removed and unused items, together with sale of returned staff vehicles resulting in a loss on sale of £118,000 in the Group’s Difference between accumulated depreciation and amortisation and
financial statements (2021 – £16,000 gain). capital allowances 154 142 145 132
Pension deficit reduction contributions 2,658 223 2,658 223
Pension scheme deficit 152 3,543 152 3,543
Investment in equity shares (1,072) (645) (1,072) (645)
Debt securities 75 (4) 75 (4)
Differences arising from transition to FRS 102 147 162 145 160
2,114 3,421 2,103 3,409
Deferred tax assets and liabilities are offset only where the Group has a legally enforceable right to do so and where assets and liabilities relate to income
taxes levied by the same taxation authority on the same taxable entity or another entity within the Group.
The Group’s pension deficit reduction contributions (see note 24) are a taxable expense but the tax deduction is limited by statute when the current year’s
contribution is significantly larger than the prior year’s. The tax relief is spread over 4 years, in the current year the tax relief has driven a tax charge below the
statutory rate of tax as shown in note 8 and the remaining tax relief from the 2022 contributions will be recognised over the next 3 years.
116

Group and Society 24. Pensions

2022 2021 The Group operates a defined benefit pension scheme and three defined contribution schemes.
19. Shares £000 £000
Defined contribution schemes
Held by individuals 2,290,596 2,194,306 The Group operates three defined contribution schemes funded by contributions from the Group and its staff. One scheme is open to all new employees. The
total expense charged to the income statement as part of staff costs in the year ended 31 March 2022 was £1,230,000 (2021 – £1,183,000).
Other 7 21
Defined benefit scheme
Fair value adjustment for hedged risk – 236 The Group operates a defined benefit scheme which was closed to new entrants in April 2000, and to further accrual at 31 March 2015.
2,290,603 2,194,563 All of the following details relate solely to the defined benefit scheme.
The valuation used for FRS 102 disclosures has been prepared by a qualified independent actuary to take account of the requirements of FRS 102 in order to
Group Group Society Society assess the liabilities of the scheme at 31 March 2022 using the projected unit method with a suitable control period which reflects the expected ageing of the
2022 2021 2022 2021 scheme. Scheme assets are stated at their market value at 31 March 2022.
20. Other Liabilities £000 £000 £000 £000
The most recent full actuarial valuation was as at 26 August 2018 and showed a deficit of £6,478,000. At the date of signing these accounts the 26 August
Other liabilities falling due within one year: 2021 actuarial valuation exercise is ongoing and nearing completion. In respect of the 2018 deficit in the Plan, the Society agreed to make annual payments
of £2,346,000 for the next three years. The first of these payments was made in August 2019, the second in August 2020 and the third in August 2021. In
Corporation tax (579) (142) (626) (112) November 2021 the Society made an additional contribution of £15,000,000 as part of agreeing a journey plan towards self sufficiency, and subject to the
Other creditors 1,302 1,114 2,818 2,579 formal outcome of the August 2021 triannual valuation expects to make an annual contribution of £1,000,000 going forward. As part of the journey plan a
revised (lower) target investment return was agreed and the scheme’s assets were aligned to this change prior to 31 March 2022.
723 972 2,192 2,467
Key assumptions used: Valuation at
2022 2021
% %
2022 2021 2022 2021
21. Accruals and Deferred Income £000 £000 £000 £000 Rate of increase in pensions in payment 2.35-3.60 2.20-3.10
Administrative and operating costs 4,369 3,530 4,233 3,356 Discount rate 2.65 2.00
Interest relating to derivative financial instruments 201 952 201 952 Inflation assumption – RPI 3.75 3.20
4,570 4,482 4,434 4,308 – CPI 3.05 2.30
Mortality assumptions:
Group and Society Post-retirement mortality is based on 95% of the S2PXA tables, with projected improvements based on CMI 2021 with a long-term trend of 1.25% p.a.,
2022 2021 a smoothing parameter of 7.0, an initial addition of 0.25% and a w2020 parameter of 0%. No allowance is made for pre-retirement mortality.
22. Provisions for Liabilities and Charges £000 £000
At 1 April 850 906 The number of years’ life expectancy, retiring at 62, is as follows: 2022 2021
STATEMENTS
Charge/(release) to income and expenditure account 167 (20) Retiring today:
FINANCIAL
Utilised (534) (36) Males 87.1 87.1
At 31 March 483 850 Females 89.2 89.2
Retiring in 20 years:
Historic know your customer (KYC) deficiencies Males 88.6 88.5

During the year ended 31 March 2020 a provision was established for the estimated cost of remediating historic KYC deficiencies in the Society’s business
Females 90.8 90.7
current account portfolio. The programme was paused for much of the prior year due to the impact of the Covid-19 pandemic but recommenced during the
year to 31 March 2022. Customer responses have been slower than originally forecast and the programme is now expected to continue into the summer of
2022, driving a further charge. At 31 March 2022 £483,000 was provided for this matter (2021: £850,000).
The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit 2022 2021
scheme is as follows: £000 £000
23. Financial Commitments
Present value of defined benefit obligations (71,713) (77,045)
(a) The Society has undertaken to discharge the liabilities of all its subsidiary undertakings, in so far as they are unable to discharge them out of their
own assets. Fair value of scheme assets 71,104 58,399
(b) Capital commitments at 31 March for which no provision has been made in the accounts were as follows: Liability recognised in the balance sheet (609) (18,646)
Group Group Society Society Movements in the present value of defined benefit obligations were as follows:
2022 2021 2022 2021 At 1 April 77,045 69,375
£000 £000 £000 £000
Interest cost 1,527 1,504
Contracted but not provided for 40 32 40 32
Service cost – –
(c) Memorandum items
Benefits paid (1,441) (1,995)
Irrevocable mortgage commitments 4,329 7,924 4,329 7,924
Actuarial (gain)/loss (5,418) 8,161
Undrawn customer overdraft facilities 8,135 8,576 8,135 8,576
At 31 March 71,713 77,045
Forward purchase of covered bond 7,000 – 7,000 –
The Group contracted to purchase a covered bond on issuance on 28 March 2022, the £7,000,000 payment was settled on 4 April 2022.
118

Movements in the fair value of scheme assets were as follows: 25. Liquidity Risk
At 1 April 58,399 55,432 The Group’s liquidity policy is to maintain sufficient liquid resources to cover cash flow imbalances and fluctuations in funding, to retain full public confidence
in the solvency of the Group and to enable the Group to meet its financial obligations. This is achieved through maintaining a prudent level of liquid assets,
Actuarial (loss)/gain (4,526) 1,393
wholesale funding facilities and management controlling the operations of the business.
Expected return on assets 1,326 1,223 It is Group policy to ensure that sufficient liquid assets are available at all times to meet the Group’s statutory, regulatory and operational obligations.
The development and implementation of liquidity policy is the responsibility of the ALCO and approved by the Board. The day-to-day management of
Contributions from employers 17,346 2,369
liquidity is the responsibility of Treasury with oversight from the Group’s independent Risk Function.
Benefits paid (1,441) (1,995) A series of liquidity stress tests are performed each month to confirm that liquidity levels in relation to the limits remain appropriate. The ALCO is responsible
for setting limits over the level and maturity profile of wholesale funding and for monitoring the composition of the Group balance sheet.
Expenses paid – (23)
Limits on potential cash flow mismatches over defined time horizons are the principal tool used to control liquidity. The size of the Group’s holdings of
At 31 March 71,104 58,399 readily realisable liquid assets is primarily driven by such potential outflows but with due regard given to the Group’s ability to access contingent funding
from the Bank of England, for which the Group maintains a pool of prepositioned but unencumbered assets. During the year ended 31 March 2021 the Group
The analysis of the scheme assets at the balance sheet date was as follows: introduced covered bond into its High Quality Liquid Assets portfolio and will seek to increase its holdings moderately over time.
Growth assets 18,233 30,416
Maturity profile of financial instruments
Diversified credit 35,277 12,406 The table below analyses the Group’s financial assets and liabilities into relevant maturity groupings based on the remaining period between the balance
sheet date and the contractual maturity date. The Society’s maturity grouping is not materially different to the Group position.
Liability driven investments (LDI) 12,492 13,013
Cash 3,178 1,124 Derivative

More than More than fair value
Other assets 1,924 1,440 Not more 3 months 1 year and non
Repayable than but less but less than Over interest
71,104 58,399 on demand 3 months than 1 year 5 years 5 years bearing Total
At 31 March 2022: £000 £000 £000 £000 £000 £000 £000
The scheme’s assets are not intended to be realised in the short term and their market values may be subject to significant change before the assets are realised.
Assets
Cash in hand and balances with the Bank of England 495,515 – – – – 146 495,661
Amounts recognised in the performance statements under the requirements of FRS 102
Loans and advances to credit institutions 14,011 17,632 14,000 – – 43 45,686
a) Administrative expenses
Debt securities – 10,018 2,002 33,114 9,857 34 55,025
Service cost 0 0
Derivative financial instruments – – – – – 34,037 34,037
The operating charge of £nil (2021 – £nil), plus the Group’s contributions to the defined contribution schemes of £1,230,000 (2021 – £1,183,000) and life assurance
premiums of £109,000 (2021 – £118,000), comprise the Group’s other pension costs total of £1,339,000 (2021 – £1,301,000) shown in note 7. Loans and advances to customers
The Society reimbursed the scheme for expenses paid in the year ended 31 March 2021 of £23,000. Since the closure of the trustee bank account on 9 October Loans fully secured on residential property and land 3,863 19,607 62,186 403,314 1,751,280 (34,450) 2,205,800
2020, the Society has directly paid administrative expenses of the scheme totalling £216,000 (2021 - £145,000). These costs are included within administrative Other loans 678 108 1,131 21,055 – (224) 22,748
expenses shown in note 6.
Liabilities
STATEMENTS
FINANCIAL
b) Pension finance charge Shares 1,667,540 393,108 179,381 49,418 – 1,156 2,290,603
Expected return on pension scheme assets 1,326 1,223 Derivative financial instruments – – – – – 110 110
Interest on pension scheme liabilities (1,527) (1,504) Amounts owed to credit institutions – 11,480 – 220,000 – 222 231,702
Net charge (201) (281) Amount owed to other customers 96,890 39,864 14,354 244 – 29 151,381
c) Statement of Comprehensive Income
Actual return less expected return on pension scheme assets (4,526) 1,393
Derivative
Actuarial gain/(loss) on defined benefit obligation 5,418 (8,161) More than More than fair value
Not more 3 months 1 year and non
Actuarial gain/(loss) 892 (6,768) Repayable than but less but less than Over interest
on demand 3 months than 1 year 5 years 5 years bearing Total
Movement in deferred taxation relating to pension scheme (223) 1,286
At 31 March 2021: £000 £000 £000 £000 £000 £000 £000
Actuarial gain/(loss) recognised in the Statement of Comprehensive Income 669 (5,482) Assets
Cash in hand and balances with the Bank of England 431,721 – – – – 16 431,737
2022 2021 Loans and advances to credit institutions 10,194 5,712 8,000 15,524 – 6 39,436
d) Movement in the deficit in the scheme during the year
£000 £000
Debt securities – – – 7,082 – – 7,082
Deficit in scheme at beginning of year (18,646) (13,943)
Movement in year:
Loans and advances to customers
Service cost – –
Loans fully secured on residential property and land 2,397 20,942 64,201 409,039 1,676,175 766 2,173,520
Contributions net of expenses paid 17,346 2,346
Other loans 658 168 1,181 19,641 – (208) 21,440
Pension finance charge (201) (281)
Liabilities
Actuarial gain/(loss) 892 (6,768)
Shares 1,568,882 377,922 185,483 60,297 – 1,979 2,194,563
Deficit in scheme at end of year (609) (18,646)
Amounts owed to credit institutions – – 130,000 – – 34 130,034

History of experience gains and losses 2022 2021 2020 2019 2018
Amount owed to other customers 86,846 45,033 14,751 439 – 54 147,123
Actual return less expected return on pension scheme assets (£000) (4,526) 1,393 (214) 289 (598)
Included within other loans are balances of £22,294,000 (2021 – £20,990,000) relating to loans and advances to customers of Borderway Finance Limited.
Percentage of opening scheme assets 7.8 2.5 0.4 0.5 1.1
Actuarial gain/(loss) on defined benefit obligation (£000) 5,418 (8,161) 2,230 (1,396) 4,185 Gross contractual cash flows for financial liabilities
Percentage of opening scheme liabilities 7.0 11.8 3.1 1.9 5.5 The following tables detail the Group’s remaining undiscounted contractual cash flows for its non derivative financial liabilities including interest that will be
accrued to those instruments, except where the Group is entitled and intends to repay the liabilities before their maturity. The figures in the following tables will not
Note: all figures in the table above are on the FRS102 basis. reconcile to the financial statements because of the undiscounted nature of the cashflows. The Society’s position is not materially different to the Group position.
120

Derivative 26. Interest Rate Risk

More than More than fair value
Not more 3 months 1 year and non The primary market risk faced by the Group is interest rate risk. The net interest income of the Group is exposed to movements in interest rates. This exposure is
Repayable than but less but less than Over interest managed on a continuous basis, within limits set by the Board, using a combination of derivatives and the matching of naturally offsetting instruments. During
on demand 3 months than 1 year 5 years 5 years bearing Total
the prior year the Group enhanced its interest rate risk management through commencing the process of allocating its free reserves over a 63 month profile. This
At 31 March 2022: £000 £000 £000 £000 £000 £000 £000
year it also started to profile its current account balances based on expected maturity.
Shares 1,667,573 393,205 179,965 49,841 – – 2,290,584 The Group only uses derivatives for risk management purposes, principally the management of interest rate risk, and does not run a trading book.
Amounts owed to credit institutions – 12,145 1,650 226,600 – – 240,395 The Group uses interest rate stress testing and gap analysis to analyse and manage its interest rate position. The following table provides a summary of the
interest rate re-pricing profile of the Group’s assets and liabilities. Assets and liabilities have been allocated to time bands by reference to the earlier of the next
Amount owed to other customers 97,036 39,867 14,365 247 – – 151,515
interest rate reset date and the contractual maturity date.
The table takes account of derivative financial instruments which alter the interest basis of Group assets and liabilities. The table does not capture the use of
At 31 March 2021: reserves hedging or use of current accounts as discussed above.
Shares 1,568,882 378,223 186,083 61,119 – – 2,194,307 The Society’s interest rate re-pricing profile is not materially different to the Group’s position.
Amounts owed to credit institutions – – 130,130 – – – 130,130 More than More than More than Derivative
Not more 3 months 6 months 1 year but not fair value and
Amount owed to other customers 87,390 45,044 14,766 446 – – 147,646 than but less than but less than more than non interest
3 months 6 months 1 year 5 years bearing Total
At 31 March 2022: £000 £000 £000 £000 £000 £000
Assets
The following table details the Group’s contractual cashflows for its derivative financial instruments. The table has been drawn up based on the undiscounted net
cash inflows/(outflows) on the derivative instruments that settle on a net basis and the undiscounted gross inflows/(outflows) on those derivatives that require Liquid assets 582,372 7,000 7,000 – – 596,372
gross settlement. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the conditions existing at the
Derivative financial instruments – – – – 34,037 34,037
reporting date. For example, interest rates have been projected as illustrated by the yield curves existing at the reporting date, and where the amount varies with
changes in an index, the amount disclosed may be based on the level of the index at the reporting date. Loans and advances to customers 718,100 105,844 205,779 1,198,825 – 2,228,548
Intangible assets – – – – 2,462 2,462

Derivative
More than More than fair value Tangible fixed assets – – – – 10,771 10,771
Not more 3 months 1 year and non
than but less but less than Over interest Other assets – – – – 13,095 13,095
3 months than 1 year 5 years 5 years bearing Total
At 31 March 2022: £000 £000 £000 £000 £000 £000 Total assets 1,300,472 112,844 212,779 1,198,825 60,365 2,885,285
Swap contracts (1,212) 7,574 27,784 (28) – 34,118 Liabilities
Shares 2,135,464 40,814 56,335 57,990 – 2,290,603

At 31 March 2021:
Derivative financial instruments – – – – 110 110
Swap contracts (649) (3,894) (1,272) 58 – (5,757)
Amounts owed to credit institutions and other customers 379,083 – 4,000 – – 383,083
STATEMENTS
Other liabilities, pension liability, accruals and deferred income – – – – 6,385 6,385
FINANCIAL
Reserves – – – – 205,104 205,104
Total liabilities 2,514,547 40,814 60,335 57,990 211,599 2,885,285
Net assets/(liabilities) (1,214,075) 72,030 152,444 1,140,835 (151,234) –
Derivative instruments 1,334,150 (59,650) (158,200) (1,116,300) – –
Interest rate sensitivity gap 120,075 12,380 (5,756) 24,535 (151,234) –
Cumulative gap 120,075 132,455 126,699 151,234 – –
122

More than More than More than Derivative 27. Wholesale Credit Risk
Not more 3 months 6 months 1 year but not fair value and
than but less than but less than more than non interest The Society holds various liquid investments, including central bank deposits, in order to satisfy operational demand, earn interest and to meet current and
3 months 6 months 1 year 5 years bearing Total future liquidity requirements. Credit risk arises because of factors such as deterioration in the counterparty’s financial health and uncertainty within the
At 31 March 2021: £000 £000 £000 £000 £000 £000 wholesale market generally.
Assets
Wholesale lending credit risk is managed through setting limits to each type of investment in relation to time to maturity, credit rating and country of origin.
Liquid assets 470,250 4,005 4,000 – – 478,255 These limits are set by the ALCO, approved by the Board and monitored by the treasury team on a continuous basis.
Derivative financial instruments – – – – 3,166 3,166
Comprehensive management information ensures that credit risk is effectively controlled, and any adverse trends are identified before they impact on
Loans and advances to customers 943,570 95,346 186,410 969,634 – 2,194,960 performance.
Intangible assets – – – – 581 581 There has been no change in the year to the manner in which the Group manages and measures wholesale credit risk. At 31 March 2022 none of the Group’s
treasury portfolio exposure was either past due or impaired. There are no assets that would otherwise be past due or impaired whose terms have been
Tangible fixed assets – – – – 12,117 12,117 renegotiated. 96% (2021 – 97%) of the Group’s treasury investments are rated A3 or better.
Other assets – – – – 13,379 13,379
The table below provides ratings details for the Group’s treasury investment portfolio as at 31 March 2022:
Total assets 1,413,820 99,351 190,410 969,634 29,243 2,702,458
Liabilities
Shares 2,034,236 49,362 61,417 49,548 – 2,194,563 Group and Society

Derivative financial instruments – – – – 9,008 9,008 2022 2021
% %
Amounts owed to credit institutions and other customers 273,656 500 3,001 – – 277,157
Aaa 7 1
Other liabilities, pension liability, accruals and deferred income – – – – 24,950 24,950
Aa1-A3 4 4
Reserves – – – – 196,780 196,780
Sovereign exposure to the UK 85 92
Total liabilities 2,307,892 49,862 64,418 49,548 230,738 2,702,458
Other 4 3
Net assets/(liabilities) (894,072) 49,489 125,992 920,086 (201,495) – 100 100
Derivative instruments 1,145,350 (73,850) (165,150) (906,350) – –

All wholesale exposures are to UK financial institutions. The largest exposure to a single institution other than the UK Government was £10.1 million
Interest rate sensitivity gap 251,278 (24,361) (39,158) 13,736 (201,495) – (2021 – £10.8 million).
Cumulative gap 251,278 226,917 187,759 201,495 – – Wholesale credit risk is recorded in the extracts from the balance sheet below:
STATEMENTS
The following table details the Group’s and Society’s embedded value (EV) sensitivity to a 250 basis point change in interest rates at the year end with all 2022 2021 2022 2021
FINANCIAL
other variables held constant. A positive number indicates an increase to profit and equity reserves. £000 £000 £000 £000
Cash in hand and balances with the Bank of England 495,661 431,737 495,661 431,737
Group and Society Group and Society Group and Society Group and Society Loans and advances to credit institutions 45,686 39,436 45,686 39,436
+250bps +250bps -250bps -250bps
2022 2021 2022 2021 Debt securities 55,025 7,082 55,025 7,082
£000 £000 £000 £000
Total wholesale credit risk 596,372 478,255 596,372 478,255
Impact on equity reserves (5,620) (2,944) 6,265 3,348
Credit risk also arises from the Group’s derivatives. The Group’s agreements to enter derivatives transactions with counterparties are all documented through
The above interest rate risk represents the market value movement, calculated using a discounted cash flow basis, on all of the Society’s financial assets and the International Swaps and Derivatives Association (ISDA) Master Agreement. In addition, the Group’s agreements in respect of repurchase contracts
liabilities, resulting from an immediate 250 basis points parallel shift in interest rates. are documented through the Global Master Repurchase Agreement (GMRA). Credit Support Annexes are in place with all of the Group’s ISDA and GMRA
Other interest rate risk exposures, such as basis risk (the risk of loss arising from changes in the relationship between interest rates which have similar but not counterparties. These provide the legal basis for measuring the extent of any credit risk exposures and govern how cash is moved as collateral between
identical characteristics, such as LIBOR, SONIA and Bank of England Base Rate) and prepayment risk (the risk of loss arising from early repayments of fixed the Group and the counterparty to offset these exposures, which arise as a result of movements in interest rates. At 31 March 2022 the Group had no open
rate mortgages or withdrawal of fixed rate savings) are also monitored closely and regularly reported to the ALCO. repurchase transactions (2021 – nil).
124

Forbearance strategies
28. Credit Risk on Loans and Advances to Customers The Group continues to invest in developing and enhancing its arrears management strategies to minimise credit risk whilst ensuring that customers are treated
Experienced credit risk functions operate within the Group and comprehensive management information on movements and performance within the various fairly. Such forbearance strategies include the use of arrangements to assist borrowers in arrears who are now able to meet agreed repayment strategies, and aim to
loan portfolios ensures that credit risk is effectively controlled, and any adverse trends are identified before they impact on performance. avoid repossession. In March 2020, the UK entered its first lockdown as a result of the coronavirus pandemic. The Government asked the Group and other financial
service providers to provide payment holidays to its mortgage customers and a series of other measures for those customers with other forms of loans. The primary
The Group’s exposure to retail credit risk can be broken down as follows: Group forbearance offered was a 3-month mortgage holiday and in line with Government and regulatory requests the Group provided this to all customers who requested
it, without conducting its usual assessment of a customer’s specific circumstances. A second, up to 3 month mortgage holiday was also made available resulting in
2022 2021
a total of 6 months forbearance being available to all customers on request in this way up to and including 31 March 2021. As a result, the impact of forbearance
£000 £000
offered as part of Covid-19 is not directly comparable in credit risk impact to that provided historically, reflecting both the impact of other Government grants
Loans fully secured on residential property 2,072,202 2,001,497 and support and the temporary nature of the arrangements. The vast majority of customers have returned to normal repayment and no Covid forbearance was
outstanding at 31 March 2022. Those customers who have required further bespoke support have been offered this and are reported under the relevant concession
Loans fully secured on land 168,048 171,257 type below. The Group had no customers with payment holidays prior to the Covid-19 pandemic. The table shows those customers who had forbearance during the
years to 31 March 2022 and 31 March 2021 unless they solely had Government mandated payment holidays and subsequently returned to contracted payments.
Other loans 22,972 21,648

Total gross exposure (contractual amounts) 2,263,222 2,194,402 Payment
concessions
Impairment and hedging adjustments (32,925) 2,495
Payment including Arrears Transfer to Total
EIR adjustment (1,749) (1,937) holiday interest only capitalised interest only forbearance
At 31 March 2022: £000 £000 £000 £000 £000
Total net exposure 2,228,548 2,194,960
Neither past due nor impaired – 1,704 2,452 – 4,156
Loans fully secured on residential property
Past due up to 3 months – 1,033 121 – 1,154
The Group is firmly committed to the management of this risk at all stages of the lending cycle. The Group closely monitors customer affordability and
income multiples at the application and underwriting stage and takes a proactive approach to the control of bad and doubtful debt, which is managed by a Past due more than 3 months – 203 – – 203
specialist team dedicated solely to the collections and recovery process.
Total loans and advances – 2,940 2,573 – 5,513
Group and Society
2022 2021
At 31 March 2021:
Geographical distribution % %
Neither past due nor impaired 20,832 5,715 1,782 54 28,383
North West 51 54
Past due up to 3 months 1,582 2,884 116 – 4,582
Scotland 11 11
Past due more than 3 months 742 3,472 – – 4,214
London 7 7
Total loans and advances 23,156 12,071 1,898 54 37,179
South East 9 8
South West 10 8 Loans fully secured on land

Credit risk associated with lending fully secured on land is affected by similar factors as for residential mortgages, although on average loans are generally larger
Yorkshire and Humberside 3 3 and reflecting the Group’s focus on tourism related sectors, the impact of Covid-19 on customer cash flows is likely to be greater.
East of England 2 2 Loans fully secured on land are split by industry type as follows:
STATEMENTS
Group and Society
FINANCIAL
North East 2 2 2022 2021
West Midlands 2 2 Industry type % %
Leisure and hotel 86 84
East Midlands 1 1
Commercial investment and industrial units 8 9
Wales 2 2
Retail 2 2
100 100
Loan to value distribution: Others, including mixed use 4 5
The indexed loan to value analysis on the Group’s residential loan portfolio is as follows: 100 100
<70% 85 78 Unindexed loan to value distribution
70%-80% 11 13 <70% 94 93
80%-90% 3 8 70%-80% 3 4
>90% 1 1 80%-90% 2 2
100 100 >90% 1 1
The overall indexed loan-to-value of the residential portfolio is 40% (2021 – 43%). 100 100
The following table provides further information on the Group’s loans fully secured on residential property by payment due status. The balances exclude the The following table provides further information on the Group’s loans fully secured on land by payment due status. The balances exclude the fair value adjustment for
fair value adjustment for hedged risk, impairment losses and EIR adjustments. hedged risk and impairment losses.
Group and Society Group and Society Group and Society Group and Society
2022 2022 2021 2021 2022 2022 2021 2021
Payment due status Payment due status
£000 % £000 % £000 % £000 %
Not impaired: Not impaired:
Neither past due nor impaired 2,055,903 99 1,978,572 99 Neither past due nor impaired 154,973 92 147,742 86
Past due up to 3 months but not impaired 14,102 1 17,646 1 Past due up to 3 months but not impaired 8,412 5 12,361 7
Impaired: Impaired:
Past due 3 to 6 months 783 – 1,465 – Past due 3 to 6 months 2,098 1 2,869 2
Past due 6 to 12 months 1,052 – 1,244 – Past due 6 to 12 months 1,277 1 4,609 3
Past due more than 12 months 362 – 2,570 – Past due more than 12 months 1,288 1 3,676 2
Possessions – – – – 168,048 100 171,257 100
2,072,202 100 2,001,497 100

126 Note: Loans in the analysis above which are less than three months past due have collective impairment allowances set aside to cover credit losses.

Loans in the analysis above which are less than three months past due have collective impairment allowances set aside to cover credit losses. The following table shows the notional principal of derivatives and their residual maturity.
The Group utilises a variety of strategies to support its commercial borrowers, particularly those in hospitality and tourism which have seasonal trading
patterns. In doing this it ensures that customers are treated fairly while deploying strategies to minimise credit risk. Group Group Society Society
2022 2021 2022 2021
In March 2020, the UK entered lockdown as a result of the coronavirus pandemic. The Government asked the Group and other financial service providers to £000 £000 £000 £000
provide payment holidays to its mortgage customers and a series of other measures for those customers with other forms of loans. The primary forbearance Interest rate swaps
offered was a 3-month mortgage holiday and in line with Government and regulatory requests the Group provided this to all customers who requested it,
without conducting its usual assessment of a customer’s specific circumstances. A second, up to 3 month mortgage holiday was also made available resulting Under one year 271,200 289,750 269,200 284,950
in a total of 6 months forbearance being available to all customers on request in this way up to and including 31 March 2021.
Between one and five years 1,077,050 1,004,350 1,065,650 990,900
As a result, the impact of forbearance offered as part of Covid-19 is not directly comparable in credit risk impact to that provided historically, reflecting
1,348,250 1,294,100 1,334,850 1,275,850
both the impact of other Government grants and support and the temporary nature of the arrangements. The vast majority of customers have returned to
normal repayment. Those customers who have required further bespoke support have been offered this and are reported under the relevant concession type
below. The Group’s book is focused on hospitality and tourism and so in many cases businesses have been closed repeatedly over the financial year and have
required bespoke support. The table below indicates the account balances that have been subject to forbearance measures during the year to 31 March 2022, 30. Fair Values
unless they only received Covid-19 related payment holidays and have subsequently had no further forbearance.
The following tables summarise the carrying amounts and fair values of those financial assets and liabilities by category where these are different.
Where available, market values have been used to determine fair values. Where market values are not available in the balance sheet, fair values have been
Payment calculated for other financial instruments by discounting cash flows at prevailing interest rates.
concessions Group and Society
Payment including Arrears Transfer to Total
holiday interest only capitalised interest only forbearance Carrying Fair
At 31 March 2022: £000 £000 £000 £000 £000 Value Value
At 31 March 2022: £000 £000
Neither past due nor impaired – – 388 – 388
Financial assets:
Past due up to 3 months – 733 – – 733
Past due more than 3 months – 1,340 – – 1,340
Loans fully secured on residential property 2,069,848 2,053,705
Total loans and advances – 2,073 388 – 2,461
Loans fully secured on land 166,131 167,338
At 31 March 2021: Financial liabilities:

Neither past due nor impaired 4,727 5,256 – – 9,983 Shares 2,290,603 2,291,142
Past due up to 3 months 459 6,119 – – 6,578 Group and Society
Past due more than 3 months – 4,652 – – 4,652 Carrying Fair
Value Value
Total loans and advances 5,186 16,027 – – 21,213 At 31 March 2021: £000 £000
Financial assets:
STATEMENTS
29. Derivative Financial Instruments
FINANCIAL
Derivative financial instruments are contracts or arrangements whose value is derived from one or more underlying price, rate or index inherent in the Loans fully secured on residential property 1,998,692 2,028,575
contract or arrangement, such as interest rates, exchange rates, or stock market indices. These types of instruments tend to have a smaller or no initial net
investment relative to financial assets/liabilities offering the same risk/return as cash flows and are generally settled at a future date. Loans fully secured on land 168,810 170,434
Derivatives are only used by the Group in accordance with section 9A of the Building Societies Act 1986, to reduce the risk of loss arising from changes in Financial liabilities:
interest rates or other factors specified in the legislation. Derivatives are not used in trading activity or for speculative purposes. Shares 2,194,327 2,194,866
Types of derivatives The fair value and carrying value of balance sheet items not included in the table above are the same, as shown on the balance sheet, due to their short
The main derivatives used by the Group are interest rate swaps. The following table describes the significant activities undertaken by the Group, the related term nature.
risks associated with such activities and the types of derivatives which are typically used in managing such risks. These risks may alternatively be managed
using on balance sheet instruments or natural hedges that exist within the Group balance sheet. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arms-length transaction.
Activity Risk Types of Derivative The carrying value of loans and advances to customers and shares are recognised at amortised cost using the effective interest rate method, less provisions
Fixed rate savings products Sensitivity to falls in interest rates Receive fixed interest swaps for impairment together with fair value adjustments using discounted cash flow principles set out in IAS 39.
Fixed rate lending Sensitivity to increases in interest rates Pay fixed interest rate swaps
The estimated fair value of loans represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are
The following table shows the notional principal amounts of the different types of derivatives held, and their positive and negative market values. discounted at current market rates to determine fair value.
Group 2022 Group 2021 The fair value of derivatives is calculated using discounted cash flow models. Future cash flows are estimated based on forward interest rates (from observable
yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk exposure to the various counterparties.
Notional Notional
principal Positive Negative principal Positive Negative The above assets are Level 2 assets, as defined in FRS 102. In addition, the ‘investment in equity shares’ which is shown in the balance sheet at fair value (see
amount market value market value amount market value market value note 31) includes Series A preference and ordinary C shares (which are valued in relation to ordinary A shares of Visa Inc.) which are Level 2 assets and Series B
£000 £000 £000 £000 £000 £000 preference shares which are a Level 3 asset, as its valuation includes certain assumptions which are deemed to be unobservable.
Interest rate swaps designated as fair value hedges 1,128,900 31,598 (9) 1,138,500 2,140 (8,830)
Debt securities which are carried at fair value taken from quoted prices in active markets are disclosed in note 10 and are considered Level 1 assets.
Interest rate swaps not designated as hedges 219,350 2,439 (101) 155,600 1,026 (178)
Total derivatives held for hedging 1,348,250 34,037 (110) 1,294,100 3,166 (9,008)
Society 2022 Society 2021

Notional Notional
principal Positive Negative principal Positive Negative
amount market value market value amount market value market value
£000 £000 £000 £000 £000 £000
Interest rate swaps designated as fair value hedges 1,128,900 31,598 (9) 1,138,500 2,140 (8,830)
Interest rate swaps not designated as hedges 205,950 2,162 (96) 137,350 1,014 (101)
Total derivatives held for hedging 1,334,850 33,760 (105) 1,275,850 3,154 (8,931)
128

The following table analyses the Group’s assets and liabilities by the class of financial instrument to which they are assigned by the measurement basis:
31. Investment in Equity Shares
Financial
assets/ The investment in equity shares is mostly in respect of Visa Inc. preference shares. These were originally received as part of the consideration for the sale
liabilities at Financial of the Society’s share in Visa Europe in June 2016. At 31 March 2022 the preference shares have been recognised at a fair value of £6,343,000. The Society
fair value assets Financial Non-financial also holds an investment in Ordinary C shares with a fair value of £374,000 (2021 – Visa shares £5,824,000). The gain for the year has been recognised in the
through income available for Loans and liabilities at assets/ available for sale reserve, net of deferred tax.
statement sale receivables amortised cost liabilities Total
At 31 March 2022: £000 £000 £000 £000 £000 £000 Series A preference shares were received on partial conversion of Series B preference shares in September 2020. The £3,546,000 fair value of the Series A
shares is derived from the share price of Common A shares and the conversion factor.
Financial assets:
Cash and balances with the Bank of England – – 495,661 – – 495,661 Series B preference shares are convertible into Visa Inc. common stock or its equivalent at a future date, subject to potential litigation losses that may be
incurred by Visa Europe. The £2,797,000 fair value of Series B preference shares at 31 March 2022 is derived from the share price of Common A shares by
Loans and advances to credit institutions – – 45,686 – – 45,686 way of a conversion factor (which reduced upon the partial conversion in September 2020) discounted for illiquidity/lack of marketability and contingent
litigation risks.
Debt securities – 55,025 – – – 55,025
Derivative financial instruments 34,037 – – – – 34,037
Loans and advances to customers:

32. Related Parties
Loans fully secured on residential property (30,179) – 2,069,848 – – 2,039,669 Transactions with directors
In the normal course of business, directors and their close family members, transacted with the Group and Society. The year end balances of transactions with
Loans fully secured on land – – 166,131 – – 166,131
directors, and their close family members, are as follows:
Other loans – – 22,748 – – 22,748
Investment in equity shares – 6,717 – – – 6,717 Group – 2022

Amounts in respect of key
Non-financial assets – – – – 19,611 19,611 Number of key management
management personnel and
personnel and their close
Total assets 3,858 61,742 2,800,074 – 19,611 2,885,285 their close family members
family members
£000
Loans and advances to customers 2 953
Financial liabilities:
Shares – – – 2,290,603 – 2,290,603 Group – 2021
Derivative financial instruments 110 – – – – 110 Amounts in respect of key

Number of key management
management personnel and
personnel and their close
Amounts owed to credit institutions – – – 231,702 – 231,702 their close family members
family members
£000
Amounts owed to other customers – – – 151,381 – 151,381
Loans and advances to customers 2 1,015
Non-financial liabilities – – – – 6,385 6,385
STATEMENTS
FINANCIAL
General and other reserves – – – 205,104 – 205,104 None of the loans to directors are impaired or have any arrears.
Total reserves and liabilities 110 – – 2,878,790 6,385 2,885,285 Under the Society rules, all Directors are required to hold a savings balance of at least £1,000. These are held on normal commercial terms and were a balance
of £339,000 at 31 March 2022 (2021 – £385,000).
Defined Benefit Pension Scheme

At 31 March 2021:
The Group operates a closed defined benefit pension scheme which constitutes a related party. Details of this pension scheme and of transactions which took
Financial assets: place during the year are shown in note 24.
Cash and balances with the Bank of England – – 431,737 – – 431,737
Loans and advances to credit institutions – – 39,436 – – 39,436 33. Country by Country Reporting
Debt securities – 7,082 – – – 7,082
The Capital Requirements Regulations require the Group to disclose the information below as part of ‘Country by Country Reporting’.
– Nature of activities and geographical location: The principal activities of the Group are set out in the Directors’ Report.
Loans and advances to customers:
The Group operates entirely in the UK and so no further Country to Country information has been presented.
Loans fully secured on residential property 6,018 – 1,998,692 – – 2,004,710
– Average number of employees: information is disclosed in note 7.
Loans fully secured on land – – 168,810 – – 168,810
– Turnover is equivalent to operating income items disclosed in the Group Statement of Income, comprising net interest receivable,
Other loans – – 21,440 – – 21,440
fees and commissions receivable and payable and other operating (charge)/income.
Investment in equity shares – 5,824 – – – 5,824
– Pre-tax profit or loss represents the Group profit or loss before tax, as reported in the Group Statement of Income.
Non-financial assets – – – – 20,253 20,253
– Corporation tax paid: as disclosed in the Group Cash Flow Statement.
Total assets 9,184 12,906 2,660,115 – 20,253 2,702,458
– Public subsidies received: none received.
Financial liabilities:
Shares 236 – – 2,194,327 – 2,194,563
Amounts owed to credit institutions – – – 130,034 – 130,034
Amounts owed to other customers – – – 147,123 – 147,123
Non-financial liabilities – – – – 24,950 24,950
General and other reserves – – – 196,780 – 196,780
Total reserves and liabilities 9,244 – – 2,668,264 24,950 2,702,458
130

Notes to the Accounts Annual Business Statement

34. Capital Structure
The Group’s policy is to maintain a strong capital base to maintain member and market confidence and sustain its future development. The Internal Capital 31 March 2022 Statutory Limit
Adequacy Assessment Process (ICAAP) assesses the Society’s capital adequacy and determines the levels of capital required going forward to support the 1. Statutory Percentages % %
current and future risks to the business. The Board monitors the Group’s actual and projected capital position through its quarterly reporting to ensure that it is Lending Limit 9.13 25
maintained at a level above its Individual Capital Guidance (ICG) as determined by the PRA.
Funding Limit 14.34 50
The Total Capital Requirement required by the regulator as at 31 March 2022 was £94.6 million (unaudited). The Group has maintained capital in excess
of that required by the regulator throughout the year and in doing so, has complied with the requirements included within the EU Capital Requirements The above percentages have been calculated in accordance with the provisions of the Building Societies Act 1986.
Durective IV (Basel III).
The Lending Limit measures the proportion of business assets not in the form of loans fully secured on residential property.
In managing the Group’s capital against regulatory requirements, the Board monitors: Business assets comprise Group total assets plus provision for bad and doubtful debts, less liquid assets, intangible assets and tangible fixed assets.
– Lending and business decisions – the use of strict underwriting criteria establishes whether mortgage, current account overdraft, vehicle finance The Funding Limit measures the proportion of shares and other borrowings not in the form of shares held by individuals.
and secured personal loan applications fit within its appetite for credit risk;
The statutory limits are laid down under the Building Societies Act 1986 and ensure that the principal purpose of a building society is that of making loans
– Pricing – pricing models are utilised for all mortgage product launches; which are secured on residential property and are funded substantially by its members
– Concentration risk – product design takes into account the overall mix of products to ensure that exposure to market risk is within permitted Group Group
parameters; 31 March 2022 31 March 2021
2. Other Percentages % %
– Counterparty risk – wholesale lending is only carried out with approved counterparties in line with the Group’s lending criteria and limits, which are
monitored daily to ensure the Society remains within its risk appetite. As percentage of shares and borrowings:
Gross capital 7.67 7.96

Regular stress tests ensure the Group maintains sufficient capital for possible future events.
Free capital 7.22 7.51
There have been no material changes in the Group’s management of capital during the year.
Liquid assets 22.31 19.35
Under Basel III Pillar 3 the Group is required to publish further information regarding its capital position and exposures, and the Group’s Pillar 3 disclosures are Profit for the financial year as a percentage of mean total assets 0.27 0.31
available on www.cumberland.co.uk.
Management expenses as a percentage of mean total assets 1.58 1.27
Society Society
31 March 2022 31 March 2021
% %
Management expenses as a percentage of mean total assets 1.55 1.24
The above percentages have been prepared from the Group and Society accounts and in particular:
STATEMENTS
FINANCIAL
‘Shares and borrowings’ represent the total value of shares, amounts owed to credit institutions and amounts owed to other customers.
‘Gross capital’ represents the general reserve and the available for sale reserve.
represents the aggregate of gross capital and collective loss provisions for bad and doubtful debts less tangible and intangible
‘Free capital’
fixed assets.
‘Mean total assets’ represent the amount produced by halving the aggregate of total assets at the beginning and end of the financial year.
represent the total of cash in hand and balances with the Bank of England, loans and advances to credit institutions and debit
‘Liquid assets’
securities.
‘Management expenses’ represent the aggregate of administrative expenses, depreciation, impairment and profit on sale of tangible fixed assets.
132

Annual Business Statement
3. Information Relating to the Directors as at 31 March 2022

Date of Other Directorships
Name Occupation appointment (excluding dormant companies)
J. E. Hooper Company Director/Advisor 20/11/15 Sarhon Homes Limited
(Member of the Australian Sarhon Developments Limited
Institute of Directors) Together Personal Finance Limited
Blemain Finance Limited
Spot Finance Limited
Stubbers Adventure Centre
Stubbers Training Limited
J. Arnold, MBE, FCMA, FGMA Management Consultant 19/03/18 Jackie at Eastwood Limited
E. R. Gunn, FCIBS Retired Bank Executive 09/11/16 Nil
M. K. Hulme, MPhil Company Director 03/09/15 Nil

M. J. Stanger, FCA Chartered Accountant 01/06/18 Gibbons Wealth Management Limited
Gibbons Properties Limited
Carleton Properties (Cumbria) Limited
P. D. Moore, MBA, Chief Executive Officer 01/04/18 Borderway Finance Limited
Certified Bank Director (ROI) Cumberland Holdings Limited
Cumberland Property Services Limited
Cumbria Local Enterprise Partnership
R. B. Ellison, CA, MA Hons Chief Financial Officer 22/05/19 Kingdom Bank Limited
Cumberland Holdings Limited
Cumberland Property Services Limited
V. J. Bruce Company Director 29/09/20 Hope and Homes for Children (Non-Executive Trustee)
Agitos Foundation (Non-Executive Trustee)
K. M. Fairbrother Company Director 29/09/20 Xigxag Limited
Mr P. D. Moore is employed under a contract terminable by the Society on twelve months’ notice or by the individual on six months’ notice. Mr P. D. Moore’s
contract was signed on 30 January 2018.
Mr R.B. Ellison is employed under a contract terminable by the Society on nine months’ notice or by the individual on six months’ notice. Mr R.B. Ellison’s
contract was signed on 29 January 2019.
STATEMENTS
Correspondence to the directors jointly or individually should be addressed ‘Private and Confidential’ and c/o Deloitte LLP, 1 City Square, Leeds, LS1 2AL.
FINANCIAL
134

Glossary 138
KPI Calculations 139
UK Corporate Governance Code 140
INFORMATION
OTHER
Other
INFORMATION
136

’s KPIs
Glossary Calculation of the Group
AGM Annual General Meeting IMT Incident Management Team
Feefo rating Cost / income ratio
ALCO Assets and Liabilities Committee KPI Key Performance Indicator
The Feefo rating is the average score received, out of 5, from customers This ratio shows operating costs (administrative expenses and
BFL Borderway Finance Limited KYC Know Your Customer who review the Group’s service on the feedback platform Feefo. depreciation) expressed as a percentage of total income, being the
BP(S) Basis Point(s) LCP Liquidity Contingency Plan sum of net interest income, fees and commissions receivable, other
Engagement score operating income and fees and commissions payable. This ratio
BTL Buy to Let LDI Liability Driven Investment
measures how much the Group spends to earn each £1 of income.
CBS Cumberland Building Society LMS Learning Management System The Engagement Score is based on the responses of our People to the
CCF Cumbria Community Foundation LTV Loan to Value

b-heard survey provided by Best Companies and represents the level Growth in loans and advances to customers
of employee engagement across a range of workplace factors and
CCyB Countercyclical Capital Buffer Management Administrative expenses, depreciation and
expenses impairment and profit on sale of tangible commitment to delivering the Group’s objectives. This shows the net change in the Group and Society lending books
CEAL Cumberland Estate Agents Limited fixed assets as adjusted by items excluded from – principally the mortgage books but also vehicle finance and
CEO Chief Executive Officer

operating profit Group profit before tax overdrafts.
MBO Management Buy Out
CET1 Common Equity Tier 1
MI Management Information
Group profit before tax is the net amount earned after taking into Gross lending during the year
CFO Chief Financial Officer account all expenses as shown in the statutory Income Statement.
Nomination and Governance
NGC This figure shows the amount lent by the Group prior to repayments,
CFSL Cumberland Financial Services Limited Committee
Group profit before tax as a % of mean redemptions and other movements.
CRO Chief Risk Officer NIM Net Interest Margin
total assets
FCA Financial Conduct Authority NPS Net Promoter Score Group operating profit
FPC Financial Policy Committee PARC People, Remuneration and Culture Committee This ratio shows the Group’s profit before tax to its mean total
assets, which are calculated as the simple average of total assets at Group operating profit is a non-statutory alternative performance
FSCS Financial Services Compensation Scheme PRA Prudential Regulation Authority
the beginning and end of the financial year. It allows the Board to measure. It is Group profit before tax, having excluded the impact of
FSOL Mortgages Fully Secured on Land RAG Red, Amber, Green understand the relationship between profitability and the size of the hedge accounting, provisions and other gains and losses determined
Mortgages Fully Secured on SLT Senior Leadership Team balance sheet. by management not to reflect the Group’s underlying performance.
FSRP
Residential Property A reconciliation between Group operating profit and statutory profit
SMCR Senior Managers & Certification Regime
INFORMATION
HL Holiday Let Common equity tier 1 capital ratio before tax is included on page 40.
SME Small and Medium Enterprise
OTHER
HQLA High Quality Liquid Assets
SMF Sterling Monetary Framework Common Equity Tier 1 (CET 1) is the highest form of regulatory capital Inflow of funds from customers
ICAAP Internal Capital Adequacy Assessment Process available and is a measure of financial strength and an entity’s ability
TCR Total Capital Requirement
IFA Independent Financial Advisor to absorb future operational losses if and when they arise, and its This reflects the net movement of funds in and out of the Society’s
TFS Term Funding Scheme ability to support future balance sheet growth. In the case of the Group savings and current account products. It excludes capitalised interest.
ILAAP Internal Liquidity Adequacy Assessment Process
Term Funding Scheme with Additional Incentives CET1 capital primarily comprises internally generated capital from
TFSME
ILTR Index Long-Term Repo for SMEs HQLA ratio
retained profits. An adjustment is made to deduct intangible assets.
CET 1 capital is fully loss absorbing. This ratio, which under regulatory
rules incorporates profits that have been both earned and verified, is The HQLA ratio expresses the Group’s high quality liquid assets (cash
expressed as a percentage of the Group’s total Risk Weighted Assets. in hand, reserve account balance and certain highly-liquid securities)
as a percentage of shares, deposits and other funding liabilities. The
Net interest margin Board ensures that the Group maintains a prudent level of liquidity
at all times to support its ongoing operations while seeking to avoid
This ratio takes the interest received from all financial instruments excessive liquidity holdings which would cause an unnecessary drag on
(principally loans, but including liquid assets and swaps), minus the net interest margin.
interest paid on financial liabilities (principally members with share
accounts, but also deposits by our business customers and market
counterparties) as a percentage of average financial assets. It reflects
the margin earned by the Group.
138

e Code
UK Corporate Governanc Where to read more on how
The Cumberland has complied
Pages
The Code is issued by the Financial Reporting Council and a copy can be obtained at frc.org.uk. Where the Code refers to ‘company’ and
‘shareholder’, for our purposes, you should read ‘Society’ and ‘member’. The Board believes that throughout the year, the Society has had
Division of G. The Board should include an appropriate combination Meet the Board of Directors 54-57
regard to the principles of the Code (in line with the Building Societies Association guidance of July 2018) in establishing and reviewing responsibilities of executive and non-executive (and, in particular,
their corporate governance arrangements as required by PRA Supervisory Statement 19/15 (paragraph 2.17), and has complied with the independent non-executive) directors, such that no one
Code save for the limited aspects explained below. individual or small group of individuals dominates the
Board’s decision-making. There should be a clear division
of responsibilities between the leadership of the Board
Where to read more on how and the executive leadership of the company’s business.
Pages
H. Non-executive directors should have sufficient time Meet the Board of Directors 54-57
Board A. A successful company is led by an effective and Strategic Report 6-49 to meet their board responsibilities. They should provide Attendance Charts 61, 67, 71,
leadership entrepreneurial board, whose role is to promote the How the Board Works 61-62 constructive challenge, strategic guidance, offer specialist 75, 83
and company long-term sustainable success of the company, generating advice and hold management to account.
purpose value for shareholders and contributing to wider society.
I. The Board, supported by the company secretary, should How the Board Works 61-62
B. The Board should establish the company’s purpose, Strategic Report 6-49 ensure that it has the policies, processes, information,
values and strategy, and satisfy itself that these and its How the Board Works 61-62 time and resources it needs in order to function effectively
culture are aligned. All directors must act with integrity, and efficiently.
lead by example and promote the desired culture.
Composition, J. Appointments to the Board should be subject to a formal, Nomination and Governance 66-69
C. The Board should ensure that the necessary resources Our Performance Highlights 2-3
succession and rigorous and transparent procedure, and an effective Committee Report
are in place for the company to meet its objectives and Strategic Report – KPIs 39
evaluation succession plan should be maintained for board and senior PARC Report 82-87
measure performance against them. The Board should Principal Risks and Uncertainties 34-37
management. Both appointments and succession plans
also establish a framework of prudent and effective Board Risk Committee Report 70-73
should be based on merit and objective criteria and, within
controls, which enable risk to be assessed and managed. Audit Committee Report 74-81
this context, should promote diversity of gender, social and
D. In order for the company to meet its responsibilities to Our Communities and our People 20-27 ethnic backgrounds, cognitive and personal strengths.
shareholders and stakeholders, the Board should ensure Stakeholder Engagement 63-65
K. The Board and its committees should have a combination Meet the Board of Directors 54-57
effective engagement with, and encourage participation Our Sustainability Journey 28-33
of skills, experience and knowledge. Consideration should Board Committee Reports 66-87
from, these parties.
be given to the length of service of the Board as a whole and
INFORMATION
E. The Board should ensure that workforce policies and Our People 24-27 membership regularly refreshed.
practices are consistent with the company’s values and Stakeholder Engagement 63-65
OTHER
L. Annual evaluation of the Board should consider its How the Board Works 61-62
support its long-term sustainable success. The workforce should PARC Report 82-87
composition, diversity and how effectively members work
be able to raise any matters of concern.
together to achieve objectives. Individual evaluation
should demonstrate whether each director continues to
Division of F. The chair leads the Board and is responsible for its Chairman’s Welcome 53
contribute effectively.
responsibilities overall effectiveness in directing the company. They Meet the Board of Directors 54-57
should demonstrate objective judgement throughout their Nomination and Governance 66-69
tenure and promote a culture of openness and debate. In Committee Report
addition, the chair facilitates constructive board relations
and the effective contribution of all non-executive
directors, and ensures that directors receive accurate,
timely and clear information.
140

e Code
UK Corporate Governanc
Where to read more on how

Pages
Audit, risk and M. The Board should establish formal and transparent Audit Committee Report 74-81
internal control policies and procedures to ensure the independence and
effectiveness of internal and external audit functions and
satisfy itself on the integrity of financial and narrative
statements.
N. The Board should present a fair, balanced and What We Do and Why We Do It 16-19
understandable assessment of the company’s position CFO’s Review 38-44
and prospects. Viability Statement 45-48
Outlook 49
Audit Committee Report 74-81
O. The Board should establish procedures to manage risk, Principal Risks and Uncertainties 34-37
oversee the internal control framework, and determine Board Risk Committee Report 70-73
the nature and extent of the principal risks the company Audit Committee Report 74-81
is willing to take in order to achieve its long-term strategic
objectives.
Remuneration P. Remuneration policies and practices should be PARC Report 82-87

designed to support strategy and promote long-term
sustainable success. Executive remuneration should be
aligned to company purpose and values, and be clearly
linked to the successful delivery of the company’s long-
term strategy.
Q. A formal and transparent procedure for developing PARC Report 82-87
INFORMATION
policy on executive remuneration and determining
OTHER
director and senior management remuneration should be
established. No director should be involved in deciding
their own remuneration outcome.
Compliance explanation: The Society did not plan to

and has not engaged in a two-way engagement with
employees on executive remuneration during the year.
R. Directors should exercise independent judgment and PARC Report 82-87

discretion when authorising remuneration outcomes,
taking account of company and individual performance,
and wider circumstances.
142

Cumberland Building Society
Cumberland House, Cooper Way,
Parkhouse, Carlisle, CA3 0JF
Phone: 01228 403141
[email protected]
cumberland.co.uk
The Cumberland Report and Accounts 2022.indd 144 01/06/2022 16:30

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REPORT and

The Cumberland Report and Accounts 2022.indd 1 01/06/2022 16:25

Source: Best Companies

All information and data correct as at 31 March 2022

The Cumberland Report and Accounts 2022.indd 2-3 01/06/2022 16:26

The Cumberland Report and Accounts 2022.indd 4-5 01/06/2022 16:26

The Cumberland Report and Accounts 2022.indd 6-7 01/06/2022 16:26

On behalf of your Board of Directors, I am delighted to present Modernisation

I’ve never been

more proud of the

J OH N about this in the Chief Executive Officer’s business review.

The Cumberland Report and Accounts 2022.indd 8-9 01/06/2022 16:26

and people’s individual health and

wellbeing. Managing a financial institution

dedication and support.

commitment of a fantastic team of people

CHIEF EXEC U T IVE Supporting our people

The Cumberland Report and Accounts 2022.indd 10-11 01/06/2022 16:26

give us, 9 out of 10 g

*1,074 out of 1,204 new customers (includes existing

The Cumberland Report and Accounts 2022.indd 12-13 01/06/2022 16:26

David Robinson joined our

The Cumberland Report and Accounts 2022.indd 14-15 01/06/2022 16:26

Our vision, purpose and strategic priorities

business remains strong

The Cumberland Report and Accounts 2022.indd 16-17 01/06/2022 16:26

developing the business using investment in even mistrustful, of using technology to

services accelerated during the pandemic, to come.

Deliver Embed the right need and expect of The Cumberland.

The Cumberland Report and Accounts 2022.indd 18-19 01/06/2022 16:26

tivities we’ve been

We also offer our Cumberland Blues savings account, which means

The Cumberland Report and Accounts 2022.indd 22-23 01/06/2022 16:27

collaboration and the need to interact on a of topics.

human level are fundamental to a healthy Digitalising our people

Chief People Officer

The Cumberland Report and Accounts 2022.indd 24-25 01/06/2022 16:27

The Cumberland Report and Accounts 2022.indd 26-27 01/06/2022 16:27

Theme Our progress to date Our future focus

The Cumberland Report and Accounts 2022.indd 28-29 01/06/2022 16:27

Theme Our progress to date Our future focus

The Cumberland Report and Accounts 2022.indd 30-31 01/06/2022 16:27

2020-21 2021-22 Themes Our progress to date Our future focus

The Cumberland Report and Accounts 2022.indd 32-33 01/06/2022 16:27

Operational Our incident management

• protected our most vulnerable colleagues, continually updating

• continued to see a high level of colleague engagement through

• implemented enhanced covid protections in branches and at

• while the trend of the pandemic in terms of numbers affected

Macro-economic The key risks to the Society are

The Cumberland Report and Accounts 2022.indd 34-35 01/06/2022 16:27

Operational Risk Minimum standards are set

The Cumberland Report and Accounts 2022.indd 36-37 01/06/2022 16:27

The Cumberland delivered a solid financial

Welcome to your 2020 16.0% 2020 71.8%

CHIEFOffFicer’s review 19.6% Common Equity Tier 1 ratio

Our performance was

The Cumberland Report and Accounts 2022.indd 38-39 01/06/2022 16:27

The Cumberland Report and Accounts 2022.indd 40-41 01/06/2022 16:27

General reserve 194,684 185,601