Mountain View Credit Union Annual Report

Transcription

We’re Ready
2015 AND BEYOND
2015 Annual Report
Table of Contents
2
Ready for Change
3
Ready for You
4
Message from the Board Chair
7
Ready for Innovation
8 Message from the President & CEO
11
Ready for Giving Back
12
2015 Financial Performance
16
Management’s Responsibility for Financial Reporting
17
Auditors’ Report
18
Financial Statements
50
Board of Directors
50
Executive Team
51
Branch Managers
51
Administrative Managers
52 Locations
Ready for
Change
2015 was a dynamic year. Times were economically challenging
across the country and many sectors of our local economy were
affected by significant challenges. But through it all, Mountain View
Credit Union remained true to our brand promise: to be relevant
for our owners and to work hard in the communities we call home.
With a value-driven approach to business and continually keeping
an eye on the sustainability of our credit union, we look back on
2015 as a year of adaptation. We responded to emerging market
conditions with technology, high-access service and efficiency to
help our customers meet their financial goals. And we look forward
with optimism knowing that our solid foundation and strategic
management will allow us to continue to deliver on our brand
promise that “Owners Win!”.
In 2016 and beyond,
Mountain View Credit Union
is ready.
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Ready for
You
The core of our everyday decisions and the heart of our strategic
business plans are our values. These are our beliefs about our
business and the people who interact with us. And it is also our
promise to our members and owners that we have a common
purpose and goal in everything we do. We are as ready as ever
to live our values for you, every day.
We promise:
Personal and Professional Service – to each of our owners
Creating Long-Term Value – we are based on local ownership and
local decision-making
Community Focus – we believe in supporting local communities
so they remain strong
Commitment to, and by, Employees – we believe that by showing
our staff how much we value them, they in turn will make a difference
to our owners.
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Message from the
Board Chair
The Board was pleased
to approve a dividend
on Common Shares of
2.75%, or $612,900.
This brings our total
Profit Sharing paid to
members to over
$18 million since 1988.
It is with an immense amount of pride that, as Chair of the Board for
Mountain View Credit Union, I comment on our performance and
governance for the 2015 Annual Report.
Sharing a Common Vision
The overall goal of 2015 was to achieve a comfort level as a board
that there is clarity of vision and a common purpose. With the
leadership team, we revisited the Board’s strategic priorities for
Mountain View Credit Union and the overall long-term goals.
This was both to ensure their relevance, as well as to assess progress
in their achievement. There was an overall vision of renewed alignment
across the organization and confidence that across geographic
locations, we are all working to achieve a shared purpose. The Board
was pleased to provide support and guidance to the management
team as they operationalize these strategic priorities.
Focus on Governance
One of the board priorities and primary accomplishments of 2015
was the evaluation and evolution of the governance structure.
In an effort to strengthen our governance practices, processes and
culture, as a Board we engaged Quantum Governance to conduct
a governance assessment survey. The assessment results report provided
information to help advance our governance efforts and enable
the Board to more effectively advance the organization’s mission.
The Board adopted a skill assessment matrix process to gain a more
in-depth understanding of the level of knowledge and expertise
of individual directors and understand if any gaps exist. Another
undertaking included the Governance Committee conducting
an assessment of alignment with the Governance Standards of Sound
Business to ensure understanding and to embrace the standards.
4
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Navigating the changing marketplace.
Without question the global and local dynamics have
seen a fair share of fluctuation over 2015. As a credit
union, we are very aware of the impact the external
environment has on our business. We are constantly
monitoring the local, national and global economies
so that we can better understand how it impacts our
financial performance.
The most significant implications from these dynamic
factors is the need for Mountain View Credit Union
to pursue alternative revenue streams as margin
compression continues. In fact, compressed margins
are now a consistent factor in our financial analysis.
Operating expenses are anticipated to continue
to increase in response to normal inflation rates, and
more significantly, increased regulatory requirements.
We also are faced with an ongoing need to make
technological investments to enhance our product
suite and delivery channels. Yet with these pressures
and changes, we continue to have a host of options
to explore to ensure the sustainability and viability
of our credit union.
• Wendy Metzger – elected for her third term,
fulfilling the role as 1st Vice Chair for two
of those years
• Glenn Sawyer – returning for his second term
When the board met for the first time following the
2015 Annual General Meeting, Charlie van Arnam
was again appointed as Chair, Wendy Metzger
as 1st Vice Chair and Herman Epp as 2nd Vice Chair.
Ready to Adapt
In 2016 and beyond, to be a strong and viable
organization and navigate the continually challenging
economic environment, there is a need to grow the
credit union. We will need to create efficiencies,
improve profitability and provide the capacity
to make the necessary strategic investments that will
create future member value.
Same Faces, New Seats.
The results of a very tight election race in February,
2015 resulted in six eligible nominations received for
three open positions. The successful candidates were;
• Charlie van Arnam – recently serving on the
Board for the past six years, including 2 years
as Chair
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In October we conducted a member survey to evaluate
member awareness, perceptions and satisfaction with
the credit union to compare with baseline measures
established in 2011. The results were very positive,
including 88% of respondents stating that Mountain
View Credit Union provides great overall service. This
information will help ensure member opinion is a key
element in shaping our future direction.
Mountain View Credit Union will need to narrow its
focus to ensure that growth opportunities are defined
by the specific geographic regions that hold the most
potential, and the members within those regions
who are best aligned with the core competencies
and products that make up the credit union’s value
proposition. Technology will need to be strategically
leveraged to create long-term sustainability in our
service locations.
As we consider the theme of this annual report,
Mountain View Credit Union is indeed, ready.
As a Board we are confident that we have sound
governance, organization alignment, and a strong
management team. Together we will make the
necessary decisions moving forward to continue to
build a credit union that is both profitable to our
owners and meaningful to the communities we serve.
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With Gratitude
At the close of this financial year, I would like
to offer my sincere thanks to the members for
trusting the Board to be the steward of their credit
union. I would like to thank the management and
employees for working diligently to make Mountain
View Credit Union a great place to work, and
be to an Owner. And last, but not least, thank you
to my fellow Board members for their support in
our governance structure.
With continued thanks,
Charlie van Arnam
Chair of the Board of Directors
Ready for
Innovation
One of the ways our Board brings the
most current thinking about credit
union corporate governance is through
the Credit union Director Achievement
(CUDA) Program. This integrated, threelevel national program helps directors
strengthen their knowledge and skills to
effectively govern co-operative financial
businesses. Board Chair Charlie van Arnam
successfully graduated from the CUDA
program in 2015.
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Message from the
President and CEO
With exemplary
participation and
positive results, we are
confident our highly
engaged team is
committed to ensuring
member satisfaction,
and ultimately,
financial success for
the credit union.
In 2015, the Leadership Team of Mountain View Credit Union
worked diligently to deliver on the operational goals established in
our strategic plan. In the third and final year of this strategic plan,
we have delivered on a host of operational and infrastructure tactics
that all contribute to one main objective – to do what’s right for
our members each and every day.
Delivering on our strategic initiatives
We are accountable to six strategic initiatives that align to our operational
goals. The following tactical deliverables align our strategic plan
to measurable objectives.
1
Develop our Talent
Investing in our employees is a core value and corporate priority.
In 2015 we conducted our third corporate engagement survey to identify
our employees honest assessments of different aspects of the working
relationship between them and the credit union. With exemplary
participation and positive results, we are confident our highly engaged
team is committed to ensuring member satisfaction, and ultimately,
financial success for the credit union.
We continued to invest in Employee Communication Skills Development
Training, focusing on leadership development. We worked with branch
and department managers on effective leadership techniques. Going
forward, the credit union is committed to the professional development
of our Board and employees to ensure we are building a team of qualified
people who share a vision of our credit union’s long-term success.
2
Embrace Technology
The launch of our Mobile Ap with “Deposit Anywhere” gives members
access to their money anytime, anywhere. Features included secure and
quick deposit of cheques to their account through using the camera on
their phone or tablet without having to visit a branch or ATM.
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Card services and mobile payments are being
fundamentally transformed through technology,
regulatory and competitive change. Government
and regulatory agencies are taking significant action
to address this new environment and the impacts are
significant and more should be expected. Mountain
View Credit Union is working to understand these
implications to decide how to approach payment
services in general We will continue to seek out and
research programs offered by vendors to determine the
best solutions for the credit union and our members.
3
Efficient Operations
InStride Resources Ltd is a Credit Union Service
Organization (CUSO) formed in 2011 between
1st Choice Savings, Lakeland Credit Union and
Mountain View Credit Union. InStride Resources
enables us to consolidate back-office functions, achieve
operating efficiencies, leverage investments in certain
initiatives and improve strategic analysis of solutions
and benefits. The first focus area for InStride was
Information Services, and this past year we also launched
Compliance. This new area will provide oversight,
management and enhancement of all regulatory and
legislative programs for each of the InStride partners.
Our advisors can meet with members in any branch,
providing expert advice and guidance on growing
and protecting their money. We have seen continued
growth in the number of clients and portfolio size,
which speaks to the trust our members have in
receiving reliable advice and sound business results
through our wealth management team.
4
Market Penetration
Over this past year, we have also reviewed our existing
account offerings and developed an optimal suite of
banking services packages and fees for our Personal,
Business, Agriculture and Community members.
We deliver on our brand promise of Owners Win!
by simplifying our account packages to maximize
member savings and earning potential.
Mountain View Credit Union also joined another
CUSO organization in 2015 – CUSO Wealth
Strategies. This company was formed in 2012 and
is co-owned with our InStride partners, as well as
several other BC credit unions. This CUSO provides
economies of scale, as well as expertise and coaching
for our financial planners.
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For example, our recently launched Optimizer
transaction accounts automatically move a member
within different tiers each month based on their number
of transactions, minimizing monthly fees without
switching account types or monitoring their own usage.
5
Brand Awareness
Focusing on brand awareness and brand building
is an important tool to help support our growth
strategies. Beginning with the creation of our new
website, and the addition of new external signage
to all our physical branch locations, there is a tangible
progress to evolving our brand. In previous years,
we focused on branch interiors, and this year minor
renovations refreshed our Cremona, Crossfield and
Carstairs branches.
Branding our physical locations is critical to help
our credit union present an image that coveys
professionalism and reflects our values. Our branches
are designed to be environments that facilitate
conversations and relationship-building. We will
continue enhancing a number of our locations
in 2016 and beyond.
6
Growth Opportunities
Currently, our growth focus has been on increasing the
use of relevant credit union products and improving
relationships with existing members. Moving forward
we must look to grow in other ways, including new
markets, to be sustainable over the long term.
Our new Mountain View Credit Union branded
MEMBER CARD® debit cards were developed and
introduced this past year. With INTERAC† Flash
technology, members can quickly and easily pay for
small purchases with a tap of their card.
We have also been focusing on new partnerships,
such as working with Farm Credit Canada to provide
the best products and services for our members.
We co-hosted our first event, “Save Tax and Simplify
Farm Transfer” in Linden, and were very pleased with
the number of attendees and their positive feedback.
Ready to set new goals
Overall, 2015 was a strong year. Strategic operational
and infrastructure investments will position the
credit union for long-term success. Members can
feel confident in our strong equity position and
solid procedural and process development. We are
looking to new business objectives that will deliver
on the credit union’s strategic initiatives including
a focus on human resources, increasing awareness and
building on our positive image, showing members
a commitment to improvements in technology
and continued behind-the-scenes work to achieve
operational efficiencies.
In Appreciation
As 2015 draws to a close, my thanks go to the
Board for their tireless dedication to ensure
that the future of our credit union is strong and
sustainable. I am grateful to acknowledge all of the
hard work of our Leadership Team and Employees
who continually demonstrate they are committed
to serving our members with pride. And also, thanks
to our members for trusting us to help meet their
financial goals through operational plans that create
a strong credit union.
R.D. (Bob) Marshall
President & Chief Executive Officer
® MEMBER CARD & Design are registered certification marks owned by
Credit Union Central of Canada, used under license.
†
Trademark of Interac Inc., used under license.
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Ready for
Giving Back
Over the years Mountain View Credit
Union employees have made it clear that
they are committed to helping make the
communities where they live and work
strong and vibrant. With over 3,000 hours
of volunteerism in 2015 alone, our credit
union employees have given their own time
and resources to make sure that neighbours
and people always come first.
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2015 Financial Performance
Economic Environment
Low for long is increasingly becoming a consensus outlook for the Canadian economy, whether that is for
interest rates, oil prices or the value of the Canadian dollar. Most economists are seeing the first potential
increase in Prime Rate happening in 2017 at the earliest. Meanwhile, the federal government is promising
fiscal stimulus that is somewhat uncertain in amount, timing, and geographic exposure, with the hope of
softening the impact of the current commodity downturn. The Bank of Canada is sitting, ready, on the
sidelines weighing the impact of monetary stimulus in the form of another Bank Rate cut.
Provincially, the picture is not much brighter. The current oil supply surplus in the global economy all but
ensures a challenging immediate future here in Alberta. This year has the potential for one of the largest
provincial deficits since the 1980’s. There are concerns about whether additional layoffs and deferments of
capital expenditures from the major oil and gas companies will be required, further impacting a depressed
economy. However, we have to recognize that what we call a challenging year in Alberta would still leave
other jurisdictions envious. And on the bright side, perhaps this cooling economy will give local business the
ability to get their costs in line with international competition.
Mountain View Credit Union does not have a lot of direct exposure to the oil and gas industry, but like any
company in Alberta, we will likely feel the effects of any prolonged weakness in oil prices. Conversely, we
are optimistic for our agricultural members, based on strong grain and cattle prices combined with low fuel
costs. We have very minimal exposure to the more volatile fluctuations between the Canadian and US dollars.
The low interest rate environment does take its toll, but we have positioned ourselves to weather the storm
by carefully managing costs while investing in our infrastructure.
Despite the uncertainty in the economic environment, all companies must carefully plan for the future.
Mountain View Credit Union is constantly monitoring the economic landscape and is preparing to meet
any challenges head-on. We have a significant equity base, which leaves us well-positioned for any future
challenges and opportunities.
DEPOSIT MIX ($)
LOAN MIX ($)
15%
Registered
12
29%
17%
56%
Consumer
Agriculture
Term
Commercial
Demand
Residential
Mortgage
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13%
22%
48%
We have a significant equity base,
which leaves us well-positioned for any
future challenges and opportunities.
Growth
Mountain View Credit Union had another year of strong loan growth in 2015. Member loan growth was
10.2%. This includes retail loan growth of 4.9% and commercial and agricultural loan growth of 19.3%.
Member deposits grew at a moderate rate of 1.3%, which was an expected result based on the dramatic
increase seen in 2014. Demand deposits were essentially flat at 0.2%, while term deposits were up by 1.1%
and registered plans increased by 6.5%. Our current liquidity position is balanced, negating the need for
any borrowings.
Profitability
2015 was a solid year financially for Mountain View Credit Union. For purposes of our analysis, we have
excluded the effects of what we consider to be non-operational income. This combined amount was only
$57,000 in the current year and is likewise excluded in our internal reporting, budgeting and analysis.
Excluding this amount, we are left with what management considers operating net income, and we view this
as a better indicator of our current performance.
Financial margin for Mountain View Credit Union increased by 4.4% in 2015, primarily due to the growth
in our balance sheet. Our financial margin ratio came in at 2.37%, which is slightly below 2014, but a similar
level to what we have seen since 2009, the year the Bank of Canada dropped its rate to current levels.
Our other income increased by 0.7%, yet as a percentage of average assets, it declined from 0.59% to 0.55%.
Our ratio of loan losses improved from 0.6% to 0.2%, which we feel is an excellent result given the backdrop
of our current economic environment.
Operating expenses increased by 8.0%, but as a percentage of assets, they maintained a steady ratio of 2.48%.
Our ability to manage this figure will depend on our ability to realize efficiencies and continue to grow our
asset base.
Growth
$700,000,000
Total Assets
$600,000,000
Member Deposits
Member Loans
$500,000,000
$400,000,000
2011
(IFRS)
2012
(IFRS)
2013
(IFRS)
2014
(IFRS)
2015
(IFRS)
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Our operating net income as a percent of average assets decreased from 0.50% to 0.42% in 2015. This decrease
was mainly caused by the decrease in financial margin. Given the interest rate environment and economic
uncertainties, we feel these are excellent results and we continue to position Mountain View Credit Union
for the future.
Mountain View Credit Union remains true to our principles, and continues to return a portion of our profits
to our members. Our Profit Sharing program saw a payment of nearly $612,900 in dividends to our members.
This brings the total Profit Sharing paid to date to nearly $18.1 million. We look forward to the continued
return of our profits to our members and our communities.
Soundness and Security
Mountain View Credit Union has a solid foundation. Our equity base consists of member common shares
and our retained earnings, which is used as a cushion against unexpected financial impacts. Current legislation
requires that we maintain equity levels at the greater of 4.0% of assets and 8.0% of risk-weighted assets. In
addition to our legislative requirements, the Credit Union Deposit Guarantee Corporation has introduced
enhanced regulatory requirements of 10.5% of risk-weighted assets for October 31, 2015.
We are pleased to report that Mountain View Credit Union finished the year with equity levels of 7.9% of
assets and 12.1% of risk-weighted assets. The credit union remains committed to the safety, soundness, and
security of our members’ deposits and share capital. To that end, we will continue to monitor and grow our
equity to strike the appropriate balance between the security of our members’ deposits and returning the
appropriate portion of our profitability back to our members.
Coming into 2016, our credit union remains in a strong position. The banking environment in Alberta is
very competitive with crown corporations, national banks, and credit unions all vying for their piece of the
market. Every financial institution meets these challenges in a different way, but for Mountain View Credit
Union, we feel that the best way to move forward is to be committed to our communities and provide our
members with solid financial advice. Ultimately, we feel that doing the best thing for our members will lead
to profitable growth opportunities for now and in the future.
Profitability
Soundness and Security
Risk Weighted Assets
15.00%
$20,000,000
$15,000,000
12.00%
$10,000,000
9.00%
$5,000,000
6.00%
$2011
(IFRS)
2012
(IFRS)
Profit Share - Lifetime
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2013
(IFRS)
2014
(IFRS)
Operating Net Income
2015
(IFRS)
2011
(IFRS)
Profit Sharing
Capital as % of RWA
2012
(IFRS)
2013
(IFRS)
Regulatory Requirement
2014
(IFRS)
2015
(IFRS)
Legislative Requirement
And we look forward with optimism
knowing that our solid foundation and
strategic management will allow us
to continue to deliver on our brand
promise that “Owners Win!”.
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Management’s Responsibility
To the Members of Mountain View Credit Union Limited:
Management is responsible for the preparation and presentation of the accompanying financial statements, including
responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting
Standards and ensuring that all information in the annual report is consistent with the statements. This responsibility includes
selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions
in which objective judgment is required.
In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and
maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions
are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for
the preparation of financial statements.
The Board of Directors and Audit and Finance Committee are composed entirely of Directors who are neither management
nor employees of the Credit Union. The Board of Directors is responsible for overseeing management in the performance
of its financial reporting responsibilities, and for approving the financial information included in the annual report.
The Board of Directors fulfils these responsibilities by appointing the Audit and Finance Committee. The Committee has
the responsibility of meeting with management, internal auditors, and external auditors to discuss the internal controls
over the financial reporting process, auditing matters and financial reporting issues. The Committee is also responsible for
recommending the appointment of the Credit Union’s external auditors.
MNP LLP, an independent firm of Chartered Professional Accountants, is appointed by the Board of Directors to audit the
financial statements and report directly to them; their report follows. The external auditors have full and free access to, and
meet periodically and separately with, both the Committee and management to discuss their audit findings.
December 17, 2015
Warren Van Orman
Robert D. Marshall
Vice President, Finance
President & Chief Executive Officer
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Independent Auditors’ Report
To the Members of Mountain View Credit Union Limited:
We have audited the accompanying financial statements of Mountain View Credit Union Limited, which comprise the statement
of financial position as at October 31, 2015, the statements of comprehensive income, changes in equity and cash flows
for the year ended October 31, 2015, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards, and for such internal control as management determines is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit
in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of Mountain View Credit Union
Limited as at October 31, 2015 and its financial performance and cash flows for the year ended October 31, 2015 in accordance
with International Financial Reporting Standards.
Calgary, Alberta
December 17, 2015
Chartered Professional Accountants
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Mountain View Credit Union Limited
Statement of Financial Position
(Expressed in Canadian Dollars)
October 31, 2015
As at
October 31, 2014
$$
Assets
Cash 3,394,120
Income tax receivable
7,774
5,882,653
-
Investments and accrued interest (Note 6)
56,877,997 94,654,788
Investment in joint ventures (Note 22)
110
10
Loans to members and accrued interest (Note 7)
556,369,344
504,764,782
Other assets (Note 8)
294,508
680,821
Derivative asset
-
74,297
Deferred tax asset (Note 13)
138,861184,337
Assets held for sale (Note 11)
1,664,629
2,372,353
Property and equipment (Note 9)
23,214,336
24,179,549
Intangibles assets (Note 10)
Total Assets 356,133389,531
642,317,812
633,183,121
Liabilities and Members’ Equity
Income taxes payable
Member deposits and accrued interest (Note 12)
588,761,974
581,595,392
Accounts payable and accrued liabilities
3,435,300
3,584,370 Derivative liabilities -78,264
447,09411,780
592,644,368
585,269,806
Members’ Equity
Allocation distributable (Note 14)
612,900
774,500
Member shares (Note 15)
22,917,174
22,595,854
Retained earnings
26,143,370
24,542,961
49,673,444
47,913,315
Total Liabilities and Members’ Equity 642,317,812
633,183,121
Approved on behalf of the Board of Directors
Charlie van Arnam
Edward Wiper
Chair of the Board of Directors
Chair, Audit & Finance Committee
The accompanying notes are an integral part of these financial statements.
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Statement of Comprehensive Income
For the year ended
October 31, 2015 October 31, 2014
$$
Financial income
Interest on member loans Interest on investments
Net unrealized gain on derivatives
Special patronage distribution (Note 6)
20,945,085
20,135,622
903,901
744,416
-
71,475
200,320 274,888
22,049,306
21,226,401
Financial expense
Interest on member deposits
Interest on borrowings
Net unrealized expense on derivatives
Net interest income
Provision for loan impairment (Note 7)
Recovery on held for sale assets
Gain (loss) on disposal of property and equipment (Note 9)
Service charges and other income
6,694,213
6,632,393
4,031
12,055
598,677
-
7,296,921
6,644,448
14,752,385
14,581,953
(125,278)
(261,675)
352,914
251,868
-
(111,626)
3,484,0143,458,201
18,464,035 17,918,721
Operating expenses
Employee salaries and benefits Occupancy
8,004,017
7,594,606
759,009
626,272
Member security
1,026,168
852,766
Depreciation and amortization (Notes 9,10)
1,446,282
1,243,079
Other operating and administrative
4,085,784
3,857,996
Organization
Income before income taxes
432,727
335,615
15,753,98714,510,334
2,710,048
3,408,387
Provision for income taxes
Current tax (Note 13)
Deferred tax (Note 13)
Total comprehensive income for the year
451,263
484,185
45,476
(161,735)
496,739322,450
2,213,309
3,085,937
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Statement of Changes in Equity
As at October 31, 2013
Distributions to members (Note 14)
Allocation
distributable
$
Members’ shares
$
Retained
earnings
$
Total
$
723,640
22,686,923 22,231,524
45,642,087
-
-
3,085,937
3,085,937
50,860
723,640 (774,500)
-
Issuance of members’ shares (Note 15)
-
987,440
-
987,440
Redemption of members’ shares (Note 15)
-
(1,802,149)
-
(1,802,149)
774,500
22,595,854 24,542,961
47,913,315
-
2,213,309
2,213,309
Distributions to members (Note 14)
-
(161,600)
774,500
(612,900)
-
Issuance of members’ shares (Note 15)
-
1,140,915
-
1,140,915
Redemption of members’ shares (Note 15)
-
(1,594,095) -
(1,594,095)
612,900
22,917,174 26,143,370
49,673,444
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Statement of Cash Flows
For the year ended
$
$
Cash provided by (used for) the following activities
Operating activities
Interest received
Service charges and other income received
Recoveries on loans previously written off (Note 7)
Income taxes paid
22,019,686
21,727,381
3,870,327
3,221,437
28,012
73,599
(537,301)
(265,827)
Interest paid to members
(7,241,184)
(6,129,942)
Operating expenses paid
(14,456,775)
(12,148,960)
Derivative settlement payments
Net cash flows from operating activities
(89,066)
(28,879)
3,593,699
6,448,809
Financing activities
Net change in member deposits
7,709,52260,574,273
Issue of member shares (Note 15)
1,140,915987,440
Redemption of member shares (Note 15)
(1,594,095)
(1,802,149)
Net cash flows from financing activities
7,256,342
59,759,564
(51,782,087)
(30,564,482)
Investing activities
Net change in loans to members
Proceeds on disposition of assets held for sale
Net change in investments
Purchase of property and equipment and intangibles (Notes 9,10)
Proceeds on disposal of property and equipment (Note 9)
Net cash flows from investing activities
1,128,583
1,350,248
37,762,601
(30,072,404)
(481,141)
(3,832,082)
33,4703,199
(13,338,574)
(63,115,521
Net (decrease) increase in cash resources
(2,488,533)3,092,852
Cash resources, beginning of the year
5,882,6532,789,801
Cash resources, end of the year
3,394,120
5,882,653
Cash with Credit Union Central of Alberta Limited
1,473,959
4,194,571
Cash on hand
1,920,161
1,688,082
3,394,1205,882,653
Cash resources are composed of
MVCU
21
Notes to the Financial Statements
For the year ended October 31, 2015
1 Incorporation and operations
Mountain View Credit Union Limited (“the Credit Union”) was formed pursuant to the Credit Union Act of the Province
of Alberta (the “Act”). The address of the registered office of the Credit Union is #401, 6501 51st Street, Olds, Alberta.
The Credit Union, through twelve branches and one business banking centre, serves members in Olds, Sundre, Didsbury,
Cremona, Beiseker, Carbon, Morrin, Linden, Crossfield, Delia, Carstairs, Langdon and their surrounding areas.
The Credit Union Deposit Guarantee Corporation, (“the Corporation”) a provincial corporation, guarantees the repayment
of all deposits with Alberta credit unions, including accrued interest. The Act provides that the Province of Alberta will
ensure that the Corporation carries out this obligation.
The financial statements of the Credit Union were authorized for issue in accordance with a resolution of the directors
on December 17, 2015.
2 Basis of preparation
Statement of compliance
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”).
Basis of measurement
These financial statements are stated in Canadian dollars, which is the Credit Union’s functional currency, and were prepared
under the historical cost convention except for the following financial instruments which are measured at fair value:
• available-for-sale instruments
• derivative instruments
Use of estimates and judgments
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates.
It also requires management to exercise judgment in applying the Credit Union’s accounting policies. The areas involving
a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in Note 3.
3 Significant accounting judgments, estimates and assumptions
The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continuously
evaluated and are based on management’s experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts
recognized in the financial statements are:
Taxes
Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment
of all relevant factors. The Credit Union reviews the adequacy of these provisions at the end of the reporting period. However,
it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final
outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect
the tax provisions in the period in which such determination is made.
22
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3 Significant accounting judgments, estimates and assumptions
(continued)
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash-generating unit exceeds its recoverable amount, which is the
higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data
from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental
costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are
derived from the budget for the next five years and do not include restructuring activities that the Credit Union is not yet
committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being
tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well
as the expected future cash inflows and the growth rate used for extrapolation purposes.
Useful lives of property and equipment
The Credit Union estimates the useful lives of property and equipment based on the period over which the assets are
expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are
updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence
and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of property and
equipment are based on internal technical evaluation and experience with similar assets. It is possible, however, that
future results of operations could be materially affected by changes in the estimates brought about by changes in factors
mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these
factors and circumstances. A reduction in the estimated useful lives of the property and equipment would increase the
recorded expenses and decrease the non-current assets.
Allowance for loan impairment
The individual allowance component of the total allowance for loan impairment applies to financial assets evaluated
individually for impairment. In particular, management judgment is required in the estimate of the amount and timing
of the cash flows the Credit Union expects to receive. These estimates are based on a number of factors, including the net
realizable value of any underlying collateral.
The collective allowance component covers credit losses in portfolios of loans with similar credit risk characteristics when
there is objective evidence to suggest that a loss has been incurred but the individual impaired items cannot yet be identified.
In assessing the collective allowance, management considers factors such as credit quality, historical loss experience and
current economic conditions.
Valuation of financial instruments
The Credit Union determines the fair value of financial instruments for which there is no observable market price using
a variety of valuation techniques. The inputs to these models are derived from observable market data where possible,
but where observable market data are not available, judgment is required to establish fair values. The judgments include
consideration of liquidity, and other risks affecting the specific instrument.
Consolidation and joint arrangements
The Credit Union controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity.
The Credit Union has a 33 1/3% interest in InStride Resources Ltd. (“InStride”) and a 10% interest in CUSO Wealth Strategies
Inc. (“CUSO Wealth Strategies”). The Credit Union has determined that it does not control InStride or CUSO Wealth
Strategies and that the investments are joint arrangements. The Credit Union has (after considering the structure and form
of the arrangement, the terms agreed by the parties in the contractual arrangement and the Credit Union’s rights and
obligations arising from the arrangement) classified its interests as a joint venture under IFRS 11 Joint Arrangements and
accordingly accounts for its investment in these joint ventures using the equity method.
MVCU
23
4 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
A)Cash
Cash consists of cash on hand and demand deposits held at Credit Union Central of Alberta Limited (“Central”).
B) Financial instruments – recognition and measurement
Financial instruments are recognized when the Credit Union becomes a party to the contractual provisions of the
instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired
or have been transferred and the Credit Union has transferred substantially all risks and rewards of ownership. Financial
instruments are recognized initially at fair value plus, for instruments not at fair value through profit or loss, any directly
attributable transaction costs. The Credit Union uses settlement date accounting for regular way contracts when recording
financial asset transactions. Subsequent to initial recognition, financial instruments are measured as described below:
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. Loans and receivables are carried at amortized cost using the effective interest method, less
impairment allowance if any. The effective interest method is a method of calculating amortized cost and of allocating
interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts or payments (including all fees or points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts) through the expected life of the financial instrument, or when
appropriate, a shorter period to the net carrying amount of the instrument.
The Credit Union has classified the following financial assets as loans and receivables: loans to members and accrued
interest, mortgage pools and accounts receivable.
Financial instruments at fair value through profit or loss
Financial assets or financial liabilities are classified as fair value through profit or loss (“FVTPL”) when the financial asset
or liability is either held for trading or it is designated as such by management on initial recognition.
A financial asset or financial liability is classified as held for trading if:
• it has been acquired principally for the purpose of selling it in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Credit Union manages together
and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.
A financial asset or financial liability other than a financial asset or financial liability held for trading may be designated
as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise
arise; or
• the financial asset or financial liability forms part of a group of financial assets or financial liabilities or both, which
is managed and its performance is evaluated on a fair value basis, in accordance with the Credit Union’s documented
risk management or investment strategy, and information about the grouping is provided internally on that basis; or
• it forms part of a contract containing one or more embedded derivatives.
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4 Sumary of significant accounting policies
(continued)
Financial assets or financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement
recognized immediately in the statement of comprehensive income. The net gain or loss recognised in the statement
of comprehensive income incorporates any dividend or interest earned. The Credit Union has classified the following
financial assets and liabilities as FVTPL: cash and derivatives.
Held to maturity
Held to maturity financial assets are non-derivative assets with fixed or determinable payments and fixed maturity dates
that the Credit Union has the positive intention and ability to hold until their maturity dates, and which are not designated
as at fair value through profit or loss or as available-for-sale.
Held to maturity financial assets are subsequently measured at amortized cost using the effective interest method less
any impairment, with revenue recognized on an effective yield basis.
The Credit Union has classified the following financial assets as held to maturity: term deposits with Central and other
term deposits.
Available-for-sale
Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are
not classified in any of the previous categories. Unquoted equity securities whose fair value cannot be reliably measured
are carried at cost. All other available-for-sale financial assets are carried at fair value.
Interest income is recognized in the statement of comprehensive income using the effective interest method. Dividend
income is recognized in the statement of comprehensive income when the Credit Union becomes entitled to the dividend.
Foreign exchange gains or losses on available for sale debt security investments are recognized immediately in the
statement of comprehensive income. Other fair value changes are recognized in other comprehensive income until the
investment is sold or impaired, whereupon the cumulative gains and losses previously recognized in other comprehensive
income are reclassified to the statement of comprehensive income as a reclassification adjustment.
The Credit Union has classified the following financial assets as available-for-sale: shares in Central.
Other financial liabilities
Other financial liabilities include liabilities that have not been classified as FVTPL. Other financial liabilities are subsequently
measured at amortized cost using the effective interest method. Interest expense, calculated using the effective interest
rate method, is recognized in the statement of comprehensive income.
The Credit Union has classified the following financial liabilities as other financial liabilities: member deposits and accrued
interest and accounts payable and accrued liabilities.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Credit Union are recorded at the proceeds received, net of direct issue costs.
MVCU
25
(continued)
Derivative financial instruments
Derivative financial instruments are recognized at fair value, including those embedded in financial or other contracts that
are not closely related to the host contract. Changes in the fair values of derivative financial instruments are immediately
recognized in the statement of comprehensive income, unless designated as cash flow hedges.
The Credit Union enters into derivative investment contracts with Central to insure the rate of return of its equity linked
deposits for its members. The fair value of this derivative is included in investments and accrued interest.
Included in member deposits and accrued interest are certain equity linked deposit contracts. The deposit obligation
varies according to the performance of certain equity indices and includes an embedded derivative that must
be accounted for separately from the host contract. The fair value of the embedded derivative is included in derivative
liabilities on the statement of financial position.
C)Financial instruments – derecognition
Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been
transferred and the Credit Union has transferred substantially all risks and rewards of ownership.
Financial liabilities are derecognized when the obligation has been discharged, cancelled or expires.
D)Impairment of financial assets
The Credit Union assesses financial assets, other than those carried at fair value through profit or loss, for indicators
of impairment at each reporting period. Financial assets are considered to be impaired when there is objective evidence
that, as a result of one or more events that have occurred after the initial recognition of the financial asset; the estimated
future cash flows of the asset have been affected.
For an equity security investment, a significant or prolonged decline in the fair value of the security below its cost
is considered to be objective evidence of impairment. For all other financial assets, objective evidence of impairment
could include significant financial difficulty of the issuer or counterparty, default or delinquency by the borrower, indications
that the borrower will enter bankruptcy, disappearance of an active market for the security, or other observable data
relating to a portfolio of assets such as adverse changes in the payment status of borrowers in the portfolio, or national
or local economic conditions that correlate with defaults on the assets in the portfolio.
For certain categories of financial assets, such as loans to members, the allowance for impairment comprises two parts
– an individual allowance component and a collective allowance component, calculated as follows:
i
The Credit Union records a specific individual allowance based on management’s regular review and evaluation
of individual loans and is based upon the management’s best estimate of the present value of the cash flows expected
to be received, discounted at the loan’s original effective interest rate. As a practical expedient, impairment may
be measured on the basis of the instrument’s fair value using an observable market price. The calculation of the
present value of the estimated future cash flows of a collateralized financial asset reflects the cash flows that may
result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
ii
The Credit Union records a collective allowance for loans with similar credit risk characteristics, that have not been
individually assessed as impaired, when objective evidence of impairment within the groups of loans exists but
the individually impaired loans cannot be identified. In assessing the need for collective allowances, management
considers factors such as credit quality, portfolio size, concentrations and economic factors. The Credit Union
estimates the collective allowance for impairment using a formula based on its historical loss experience for similar
groups of loans in similar economic circumstances and current economic conditions. As management identifies
individually impaired loans, it assigns an individual allowance for impairment to that loan and adjusts the collective
allowance accordingly.
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MVCU
(continued)
When an available-for-sale financial asset is considered impaired, cumulative gains or losses previously recognized
in other comprehensive income are reclassified to the statement of comprehensive income in the period.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be objectively related to an event occurring after the impairment loss was recognized,
the previously recognized impairment loss is reversed through the statement of comprehensive income to the extent
that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized
cost would have been had the impairment not been recognized. Any subsequent recovery in the fair value of an impaired
available-for-sale equity instruments is recognized in other comprehensive income.
E) Property and equipment
Property and equipment are stated at cost less accumulated depreciation and/or accumulated impairment losses if any.
Such cost includes the cost of replacing part of the equipment. When significant parts of property and equipment are
required to be replaced in intervals, the Credit Union recognizes such parts as individual assets with specific useful lives
and depreciation, respectively. Depreciation is recorded on a straight-line basis over the following estimated useful lives:
Building
Leasehold Improvements
Computer equipment
Furniture
Vault and Security equipment
Vehicles
7-40 years
7 years
3-5 years
5-10 years
5-20 years
7 years
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted
prospectively, if appropriate. Gains and losses on the disposal of property and equipment are recorded in the statement
of comprehensive income in the year of disposal.
F) Intangible assets
Intangible assets consist of computer software which are not integral to the computer hardware owned by the Credit
Union. Software is initially recorded at cost and subsequently measured at cost less accumulated amortization and any
accumulated impairment. Software is amortized on a straight-line basis over its estimated useful life of 3-7 years.
G)Impairment of non-financial assets
At the end of each reporting period, the Credit Union reviews the carrying amounts of its tangible and intangible assets
that are subject to depreciation and amortization to determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of
an individual asset, the Credit Union estimates the recoverable amount of the cash-generating unit (“CGU”) to which
the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also
allocated to individual CGU’s, or otherwise they are allocated to the smallest group of CGU’s for which a reasonable
and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted.
MVCU
27
(continued)
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement
of comprehensive income.
Where an impairment loss subsequently reverses for assets with a finite useful life, the carrying amount of the asset
or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or
CGU in prior years. A reversal of an impairment loss is recognized immediately in the statement of comprehensive income.
H)Assets held for sale
Assets are considered held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is met only when the sale is highly probable and the asset is available
for immediate sale in its present condition. Management must be committed to the sale, which should be expected
to be completed within one year from the date of classification.
Assets held for sale include property and land previously used by the Credit Union, and property that has been repossessed
following foreclosure on loans that are in default.
Assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less cost
to sell and are not depreciated. An impairment loss is recognized for any initial or subsequent write-down of the asset
to fair value less costs to sell. A gain is recognized for any subsequent increases in fair value less costs to sell, but not
exceeding any cumulative impairment losses previously recognized.
I) Revenue recognition
Loan interest income
Loan interest income is recognized on an accrual basis and in the statement of comprehensive income using the effective
interest method.
Once a loan is written down as a result of an impairment loss, interest income is recognized using the rate of interest
used to discount the future cash flows for the purpose of measuring the impairment loss.
Fees that are an integral part of the effective interest rate of the financial instrument, including loan origination,
commitment, restructuring and renegotiation fees, are capitalized as part of the related asset and amortized to interest
income over the term of the loan using the effective interest method.
Investment interest income
Investment interest income is recognized on the accrual basis using the effective interest method. Purchase premiums
and discounts are amortized using the effective interest method over the term to maturity of the applicable investment.
Other income
Other revenue is recognized in the fiscal period in which the related service is provided.
J)Taxes
Tax expense comprises current and deferred tax. Tax is recognized in the statement of comprehensive income except
to the extent it relates to items recognized in other comprehensive income or directly in equity.
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(continued)
Current tax
Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible.
Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting
period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected
to be paid to the tax authorities.
Deferred tax
Deferred tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the statement of financial position. Deferred tax is calculated using tax rates
and laws that have been enacted or substantively enacted at the end of the reporting period, and which are expected
to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
Deferred tax liabilities:
• are generally recognized for all taxable temporary differences;
• are recognized for taxable temporary differences arising on investments in subsidiaries except where the reversal of
the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable
future; and
• are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes.
Deferred tax assets:
• are recognized to the extent it is probable that taxable profits will be available against which the deductible temporary
differences can be utilized; and
• are reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognized in respect of temporary differences that arise on initial recognition
of assets and liabilities in a transaction that is not a business combination and that effects neither accounting, nor
taxable profit or loss.
K) Foreign currency translation
Transaction amounts denominated in foreign currencies are translated into their Canadian dollar equivalents at exchange
rates prevailing at the transaction dates. Carrying values of monetary assets and liabilities reflect the exchange rates at
the balance sheet date. Translation gains and losses are included in the statement of comprehensive income.
L) Joint arrangements
A joint arrangement is defined as one over which two or more parties have joint control, which is the contractually agreed
sharing of control over an arrangement. This exists only when the decisions about the relevant activities (being those
that significantly affect the returns of the arrangement) require the unanimous consent of the parties sharing control.
There are two types of joint arrangements, joint operations and joint ventures.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities, relating to the arrangement. Joint operations are accounted for by using
the proportionate consolidation method whereby the Credit Union’s share of assets, liabilities, income, expenses and
cash flows of jointly controlled operations are combined with the equivalent items in the results on a line-by-line basis.
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29
(continued)
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint venture. Investment in JV is accounted for using the equity method. On acquisition, an equity
method investment is initially recognized at cost. The carrying amount of equity method investments includes goodwill
identified on acquisition, net of any accumulated impairment losses. The carrying amount of the investment is adjusted
by the Credit Union’s share of post-acquisition net income or loss, depreciation, amortization or impairment of the fair
value adjustments made at the date of acquisition, dividends, cash contributions and the Credit Union’s share of postacquisition movements in other comprehensive income.
5 Recent accounting pronouncements
On November 1, 2014, the Credit Union adopted the following amendments which became effective for the current fiscal year:
i
IAS 32 Financial Instruments - Presentation, clarifies that an entity has a legally enforceable right to set- off if that
right is (a) not contingent on a future event; and (b) enforceable both in the normal course of business and in the
event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments also clarify that when
a settlement mechanism provides for either net settlement or gross settlement, it is equivalent to net settlement.
The adoption of this amendment had no impact on the Credit Union’s financial statements.
ii
In May 2013 the IASB issued narrow scope amendments to IAS 36 Impairment of Assets. These amendments address
the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value
less costs of disposal. The adoption of this amendment had no impact on the Credit Union’s financial statements.
iii
In December 2014, the IASB issued amendments to IAS 24 Related Party Disclosures. The amendments clarify
that a management entity, or any member of a group of which it is a part, that provides key management services
to a reporting entity, or its parent, is a related party of the reporting entity. The amendments also require an entity
to disclose amounts incurred for key management personnel services provided by a separate management entity.
This replaces the more detailed disclosure by category required for other key management personnel compensation.
The adoption of this amendment had no impact on the Credit Union’s financial statements.
The Credit Union has reviewed new and revised accounting pronouncements that have been issued but are not yet effective
and determined that the following may have an impact on the Credit Union:
i
Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS 16 Property, Plant and
Equipment and IAS 38 Intangible Assets) prohibits revenue from being used as a basis to depreciate property, plant
and equipment and significantly limits use of revenue-based amortization for intangible assets. The amendments
are to be applied prospectively for the annual period commencing November 1, 2016.
ii
IFRS 15 Revenue from Contracts with Customers, was issued in May 2014 and replaces IAS 11 Construction Contracts,
IAS 18 Revenue, IFRIC 13 Customer Loyalty Programs, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC
18 Transfers of Assets from Customers and SIC-31 Revenue - Barter Transactions Involving Advertising Services. The
new standard requires revenue to be recognized to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration expected to be received in exchange for those goods or services.
The principles are to be applied in the following five steps: (1) identify the contract(s) with a customer, (2) identify the
performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the
performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance
obligation. The new standard is to be applied either retrospectively or on a modified retrospective basis and
is effective for the annual period commencing November 1, 2018.
iii
IFRS 9 Financial Instruments: Classification and Measurement replaces IAS 39 Financial Instruments and applies
a principal-based approach to the classification and measurement of financial assets and financial liabilities, including
an expected credit loss model for calculating impairment, and includes new requirements for hedge accounting.
The standard is required to be applied retrospectively for the annual period commencing November 1, 2018.
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6 Investments and accrued interest
$
$
Mortgage pool
Accrued interest
5,4598,592
1,598,7242,117,275
1,593,265
2,108,683
Available-for-sale
Shares in Central
6,500,0005,687,000
6,500,000
5,687,000
Held to maturity
Term deposits with Central
47,080,591
67,587,850
Other term deposits
1,616,600
19,169,623
Accrued interest
82,08293,040
48,779,27386,850,513
Total investments
56,877,99794,654,788
As of October 31, 2015, the Credit Union is a 10.907% (unit share percentage) participant in a residential mortgage pool
with Concentra Financial Services Association (“Concentra Financial”). The Credit Union receives its unit share percentage
of the Concentra Financial return on the pool, less any fees or charges on a monthly basis. This return equated to 2.76%
for fiscal 2015 (2014 – 2.33%).
As required by the Act, the Credit Union holds investments with Central to maintain its liquidity level.
Other term deposits include amounts invested with other Canadian financial institutions.
In 2015, the Credit Union received $200,320 (2014 – $274,888) in special patronage distributions that were based on the
Credit Union’s holdings of statutory term deposits with Central. The distributions were not anticipated by the Credit Union
and are not expected in future years. The distributions are related to partial recoveries in mark-to-market losses in asset
backed commercial paper (“ABCP”) held by Central. Future improvements in the fair value of Central’s ABCP holdings
could result in additional patronage distributions. After the ABCP holdings are matured or otherwise disposed of, patronage
distributions of this type are not expected to recur.
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31
7 Loans to members and accrued interest
Principal and allowance by loan type
October 31, 2015
Consumer loans
Principal
Specific Collective
Net carrying
Gross impaired
amountallowance allowance
amount
loans
$$ $ $
$
71,050,033 76,653 184,22270,789,158
101,653
Residential mortgages
265,304,197
-
263,852265,040,345
-
Commercial loans and mortgages
124,819,813
62,451
727,409124,029,953
1,301,307
Agricultural loans and mortgages
94,694,904
-
20,76094,674,144
-
555,868,947 139,104 1,196,243554,533,600
Accrued interest
1,839,370 3,626
1,402,960
-1,835,744
557,708,317 142,730 1,196,243556,369,344
October 31, 2014
Consumer loans
Principal
amount
$
Specific allowance
$
Collective
allowance
$
Net carrying
amount
$
3,626
1,399,334
Gross impaired
loans
$
80,357,603
51,521
225,174
80,080,908
65,465
240,242,761
-
326,780
239,915,981
-
104,575,487
355,000
676,219
103,544,268
1,950,538
79,458,234
-
29,377
79,428,857
-
504,634,085 406,521 1,257,550502,970,014
Accrued interest
1,795,660
892
2,016,003
-1,794,768
506,429,745 407,413 1,257,550504,764,782
892
2,015,111
The principal collateral and other credit enhancements the Credit Union holds as security for loans include i) insurance,
mortgages over residential lots and properties, ii) recourse to business assets such as real estate, equipment, inventory, and
accounts receivable, iii) recourse to commercial real estate properties being financed, iv) recourse to liquid assets, guarantees
and securities.
Valuations of collateral are updated periodically depending on the nature of the collateral. The Credit Union has policies in
place to monitor the existence of undesirable concentration in the collateral supporting its credit exposure.
Maturity of loans
Loans to members, not including accrued interest, mature as follows:
October 31, 2015
$
Under 1 year
October 31, 2014
$
143,033,077
126,214,279
1 to 2 years
90,567,856
67,639,667
2 to 3 years
107,821,747
79,393,310
3 to 4 years
84,305,131
108,613,767
Over 4 years
130,141,136122,773,062
555,868,947
32
MVCU
504,634,085
7 Loans to members and accrued interest
(continued)
Loan allowance details
Balance, beginning of year
October 31, 2015
$
October 31, 2014
$
1,664,963
2,277,049
122,544
394,728
Provision for loan impairment
Provision for (recovery of) accrued interest impairment
2,734
(133,054)
1,790,241
2,538,723
Less: accounts written off, net of recoveries
451,268873,760
Balance, end of year
1,338,973
1,664,963
Recoveries for the year ended October 31, 2015 totaled $28,012 (2014 - $73,599).
Loans past due but not impaired
A loan is considered past due when a counterparty has not made a payment by the contractual due date. The table that
follows presents the carrying value of loans at year end that are past due but not classified as impaired because they are
either i) less than 90 days past due, or ii) fully secured and collection efforts are reasonably expected to result in repayment.
October 31, 2015
30-59
60-89
90 days and
daysdaysgreaterTotal
$$ $ $
Consumer loans
935,821
77,537
243,1351,256,493
358,287 543,909
935,0781,837,274
2,077 116,385
920,9421,039,404
475,513270,779
October 31, 2014
Consumer loans
1,771,6981,008,610
30-59
days
$
- 746,292
2,099,155 4,879,463
60-89
90 days and
days
greater
Total
$
$
$
1,608,085
101,913
37,507
1,747,505
539,379
-
449,352
988,731
229,688
-
242,807
472,495
531,708
-
1,477,901
2,009,609
2,908,860 101,913
2,207,5675,218,340
MVCU
33
8 Other assets
October 31, 2015
$
October 31, 2014
$
Accounts receivable
193,948
604,311
Prepaid expenses and deposits
100,56076,510
294,508
680,821
9 Property and equipment
Leasehold
Vault and
improve- Computer
security
Land
Building
ments equipment Furniture equipmentVehicles
$
$
$
$
$
$
$
Total
$
Cost
At October 31, 2013
4,303,329
20,352,491
241,710
Additions
435
2,768,270
68,299
412,761
408,892
98,708
34,304
Disposals
-
89,077
48,190
573,989
129,755
103,626
-
944,637
Transfers to held for sale 1,457,155
1,144,372
-
-
-
-
-
2,601,527
2,846,609
21,887,312
261,819
1,070,689 1,339,641
988,763
Additions
-
79,531
113,039
135,464
54,424
5,129
-
387,587
Disposals
-
-
-
136,747
29,250
12,574
-
178,571
2,846,609 21,966,843
374,858
At October 31, 2014
At October 31, 2015
1,231,917 1,060,504
1,069,406 1,364,815
993,681
- 28,183,632
3,791,669
34,304 28,429,137
981,318 34,304 28,638,153
Depreciation and impairment
At October 31, 2013
-
2,784,600
48,190
847,118
560,153
470,051
-
4,710,112
Charge for the year
-
767,068
34,286
Disposals
-
-
48,190
148,524
98,051
71,940
1,634
1,121,503
558,418
123,953
99,251
-
Transfers to held for sale
-
752,215
829,812
-
-
-
-
-
752,215
At October 31, 2014
-
2,799,453
34,286
437,224
534,251
442,740
1,634
4,249,588
Charge for the year
Disposals
-
923,083
36,286
171,636
106,093
77,332
4,900
1,319,330
-
-
-
103,277
29,249
12,575
-
145,101
At October 31, 2015
-
3,722,536
70,572
505,583
611,095
507,497
6,534 5,423,817
At October 31, 2014
2,846,609 19,087,859
227,533
633,465
805,390
546,023
32,670 24,179,549
At October 31, 2015
2,846,609 18,244,307
304,286
563,823
753,720
473,821 27,770 23,214,336
Net book value
In the year ended October 31, 2015, fixed assets with a net carrying value of $33,470 (2014 - $114,825) were disposed of for
a loss of $nil (2014 - $111,626). In the year ended October 31, 2014, fixed assets with a net carrying value and estimated fair
value of $30,000 were donated to the Town of Olds for the use by Olds Emergency Shelter.
34
MVCU
10 Intangible assets
Computer software
$
Cost
At October 31, 2013
1,102,433
Additions40,414
At October 31, 2014
1,142,847
Additions93,554
At October 31, 2015
1,236,401
Amortization
At October 31, 2013
631,740
Charge for the year
121,576
At October 31, 2014
753,316
Charge for the year
126,952
At October 31, 2015
880,268
Net book value
At October 31, 2014
389,531
At October 31, 2015
356,133
11 Assets held for sale
October 31, 2015
$
Foreclosed property
October 31, 2014
$
304,712
343,791
Other land and buildings
1,320,8382,067,641
1,664,629
2,372,353
October 31, 2015
$
October 31, 2014
$
12 Member deposits and accrued interest
Demand deposits
330,764,599
Term deposits
168,134,034166,325,698
Registered plans
87,642,48482,297,625
Accrued interest
586,541,117
330,208,272
578,831,595
2,220,8572,763,797
588,761,974
581,595,392
MVCU
35
12 Member deposits and accrued interest (continued)
Concentra Financial acts as the trustee of the Registered Retirement Savings Plan (“RRSP”) and the Registered Retirement
Income Fund (“RRIF”) offered to members. Under an agreement with Concentra Financial, the contributions to the plan, and the
interest earned on them, are deposited in the Credit Union. When members terminate these plans, the funds are repaid to them.
Maturity of deposits
Member deposits, not including accrued interest, mature as follows:
October 31, 2015
Under 1 year
October 31, 2014
$
$
456,856,025
464,471,429
1 to 2 years
69,810,188
51,469,500
2 to 3 years
30,197,646
21,023,888
3 to 4 years
19,038,607
23,895,200
Over 4 years
10,638,65117,971,578
586,541,117
578,831,595
October 31, 2015
October 31, 2014
$
$
13 Income taxes
Income tax expense comprises:
Current tax expense
Current period
451,263484,185
451,263484,185
Deferred tax expense
Origination and reversal of temporary differences
Total income tax expense
45,476
(161,735)
45,476
(161,735)
496,739322,450
The income tax expense for the year can be reconciled to the accounting profit as follows:
October 31, 2015
October 31, 2014
$
$
2,710,048
3,408,387
Income before provision for income taxes
Combined federal and provincial tax rate
25.67%25%
Income tax expense at statutory rate
695,669
852,097
Adjusted for the effect of:
Non-deductible expenses
Credit Union rate reduction and other adjustments
6,6805,337
(205,610)
(534,984)
496,739
322,450
The Alberta corporate tax rate has increased during the year, resulting in an increase in the Credit Union’s combined statutory tax rate.
36
MVCU
13 Income taxes
(continued)
Deferred tax assets and liabilities recognized are attributable to the following:
October 31, 2015
October 31, 2014
$
$
Deferred tax assets
Loan allowance
Cumulative eligible capital
Loss on derivatives
Property and equipment
121,630134,633
22,97222,871
114,480-42,462
259,082
199,966
-
(15,629)
Deferred tax liabilities
Gain on derivatives
Net deferred tax asset
(120,221)
-
138,861
184,337
14 Allocation distributable
The Board of Directors declared a share dividend of 2.75% (2014 – 3.50%) on common shares as at October 31, 2015 in the
amount of $612,900 (2014 - $774,500). The dividends were paid by issuance of common shares on November 18, 2015 of
$612,900 (2014 - $774,500).
15 Member shares
A)Authorized shares
The common shares are:
a. issuable in unlimited number;
b. issuable as fractional shares with a par value of $1;
c. voting;
d. transferable only in restricted circumstances;
e. non-assessable; and
f. redeemable at par value at the discretion of the Credit Union, subject to restrictions contained in the Credit Union Act.
A membership in the Credit Union requires the purchase of a minimum of 5 shares and individual members are limited
to 50,000 shares. The Corporation does not guarantee common shares, which represent “at-risk” capital.
B) Issued and outstanding
Balance, beginning of year
Issued as share dividends
$
$
22,595,85422,686,923
774,500
723,640
Issued for cash
1,140,915987,440
Shares redeemed
(1,594,095)
(1,802,149)
Balance, end of year
22,917,174
22,595,854
MVCU
37
16 Financial instrument risk management
As part of its operations, the Credit Union carries a number of financial instruments. It is management’s opinion
that the Credit Union is exposed to the following risks as a result of holding financial instruments:
• credit risk;
• liquidity risk; and
• fair value risk.
The following is a description of those risks and how the Credit Union manages the exposure of them.
Credit risk
Credit risk is the risk that a financial loss will be incurred due to the failure of a counterparty to discharge its contractual
commitment or obligation to the Credit Union. Credit risk arises principally as a result of the Credit Union’s lending activities
with members.
Risk measurement
The Credit Union employs a risk measurement process for its loan portfolio which is designed to assess and quantify the
level of risk inherent in credit granting activities. Risk is measured by reviewing qualitative and quantitative factors that
impact the loan portfolio.
Credit quality performance
Refer to Note 7 for additional information on the potential loss exposure related to the Credit Union’s loan portfolio.
Objectives, policies and processes
The Credit Union is committed to the following principles in managing credit risk exposure:
• Credit risk assessment includes the establishment of policies and processes related to credit risk management and risk
rating;
• Credit risk mitigation includes credit structuring, collateral, and guarantees;
• Credit risk approval limits includes establishing credit risk limits and reporting exceptions thereto;
• Credit risk documentation focuses on documentation and administration; and,
• Credit risk monitoring and review
The Credit Union’s credit risk policies, processes and methodologies are reviewed annually to ensure they remain relevant
and effective in managing credit risk.
Liquidity risk
Liquidity risk is the risk of having insufficient financial resources to meet the Credit Union’s cash and funding requirements,
statutory liquidity requirements, or both.
Risk measurement
The assessment of the Credit Union’s liquidity position reflects management’s estimates, assumptions and judgment
pertaining to current and prospective market conditions and the related investing and borrowing activities of members.
38
MVCU
(continued)
The acceptable amount of risk is defined by policies that are approved by the Board of Directors.
The Credit Union manages liquidity by monitoring, forecasting and managing cash flows and the concentration of loans
and deposits within approved policies. Management provides monthly reports on these matters to the Board of Directors.
Key features of liquidity management include:
• Daily monitoring of expected cash inflows and outflows and tracking and forecasting the liquidity position; and
• Consideration of the term structure of loans and deposits, with emphasis on deposit maturities, as well as expected
loan funding and other commitments to ensure the Credit Union can maintain required levels of liquidity while meeting
its obligations.
As at October 31, 2015, the Credit Union is in compliance with its liquidity requirements as indicated by the Act.
Interest rate and market risk
The Credit Union’s primary source of income is financial margin, which is the difference between interest earned on investments
and loans to members and interest paid to members on their deposits. The objective of managing the financial margin
is to manage re-pricing or maturity dates of loans and investments and members’ savings and deposits within policy limits
that are intended to limit the Credit Union’s exposure to changing interest rates. The net gap represents the net mismatch
between loans and investments and members’ savings and deposits by maturity dates.
Risk measurement
The Credit Union’s risk position is measured and monitored each month to ensure compliance with policy. Management
provides monthly reports on these matters to the Credit Union’s Board of Directors.
Management is responsible for managing the Credit Union’s interest rate risk, monitoring approved limits and compliance
with policies. The Credit Union manages market risk by developing and implementing asset liability management policies
periodically to ensure they remain relevant and effective in managing and controlling risk.
Interest rate risk
The following table provides the potential before-tax impact on an immediate and sustained 1% increase or decrease
in interest rates on net interest income. All interest rate risk measures are based upon interest rate exposures at a specific
time and continuously change as a result of business activities and risk management initiatives.
$
$
(661,000)
(187,700)
1% decrease in rates
254,400
210,200
Before tax impact of
1% increase in rates
Interest rate risk arises from a mismatch between deposit rate and maturities and the yields and maturities of the loans
they fund.
MVCU
39
(continued)
The following table includes interest rate re-price information for financial instruments as well as information on remaining
financial statement items for the purposes of comparison to the Statement of Financial Position:
Interest rate re-price
October 31, 2015
(in thousands)
Floating
rate
Within one One to five
year
years
Non-rate
sensitive
Total
3,394
Assets
Cash
-
-
-
3,394
Income tax receivable
-
-
-
8
8
6,500
50,290
-
88
56,878
1.70
0.70
-
-
0.85
168,241
73,062
314,566
500
556,369
4.48
4.91
3.55
-
4.01
Other assets
-
-
-
295
295
Deferred tax asset
-
-
-
139
139
Assets held for sale
-
-
-
1,665
1,665
-
-
-
23,214
23,214
Intangible assets
-
-
-
356
356
174,741
123,352
314,566
29,659
642,318
259,476
110,743
128,537
90,006
588,762
Investments
(effective yield %)
Loans to members
(effective yield %)
Liabilities and Equity
Member deposits
(effective yield %)
0.56
1.78
1.92
-
1.00
Accounts payable
-
-
-
3,435
3,435
Derivative liabilities
-
-
-
447
447
Members’ equity
-
-
-
49,674
49,674
259,476
110,743
128,537
143,562
642,318
Net gap, October 31, 2015
(84,735)
12,609
186,029
(113,903)
-
(13.19)
1.96
28.96
(17.73)
Percentage of assets
40
MVCU
October 31, 2014
(in thousands)
(continued)
Floating
rate
Within one One to five
year
years
Non-rate
sensitive
Total
Assets
Cash
Investments
(effective yield %)
Loans to members
(effective yield %)
-
-
-
5,883
5,883
5,687
87,323
1,543
102
94,655
2.00
1.51
3.61
-
1.57
161,753
71,603
271,278
131
504,765
4.63
4.34
3.78
-
4.13
Other assets
-
-
-
680
680
Derivative assets
-
-
-
74
74
Deferred tax asset
-
-
-
184
184
Assets held for sale
-
-
-
2,372
2,372
-
-
-
24,180
24,180
Intangible assets
-
-
-
390
390
167,440
158,926
272,821
33,996
633,183
Liabilities and Equity
Income taxes payable
Member deposits
(effective yield %)
-
-
-
78
78
287,044
119,919
114,271
60,361
581,595
0.76
2.01
2.35
-
1.25
Accounts payable
-
-
-
3,584
3,584
-
-
-
13
13
Members’ equity
-
-
-
47,913
47,913
287,044
119,919
114,271
111,949
633,183
Net gap, October 31, 2014
(119,604)
39,007
158,550
(77,953)
-
(18.90)
6.16
25.05
(12.31)
Percentage of assets
Market risk
Market risk arises from changes in interest rates that affect the Credit Union’s net interest income. Exposure to this risk
directly impacts the Credit Union’s income from its loan and deposit portfolios. The Credit Union’s objective is to earn
an acceptable net return on these portfolios, without taking unreasonable risk, while meeting member-owner needs.
17 Fair value of financial instruments
The Credit Union classifies fair value measurements recognized in the statement of financial position using a three-tier fair
value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
• Level 1: Quoted prices (unadjusted) are available in active markets for identical assets or liabilities;
• Level 2: Inputs other than quoted prices in active markets that are observable for the assets or liability, either directly
or indirectly; and,
• Level 3: Unobservable inputs in which there is little or no market data, which require the Credit Union to develop its own
assumptions.
MVCU
41
(continued)
Fair value measurements are classified in the fair value hierarchy based on the lowest level input that is significant to that
fair value measurement. This assessment requires judgment, considering factors specific to an asset or a liability and may
affect placement within the fair value hierarchy.
Fair value is the consideration that would be agreed to in an arm’s length transaction between knowledgeable and willing
parties with no compulsion to act. Estimates respecting fair values are based on subjective assumptions and contain significant
uncertainty. Fair values represent estimates of value at a particular point in time and may not be relevant in predicting
future cash flows or earnings. Potential income taxes or other expenses that may be incurred on actual disposition have
not been reflected in the fair values disclosed.
The following methods and assumptions were used to estimate fair values of financial instruments:
a) the book value for cash, short term investments and accounts payable and accrued liabilities approximate their fair value
due to the short term nature of these financial instruments.
b) estimated fair values of term deposits with Central and other investments and accrued interest are calculated using
a net present value valuation technique and inputs consisting of actual balances, actual rates, market rates (for similar
instruments) and payment frequency.
c) fair value of shares in Central is assumed to approximate the instruments cost as there is no observable market data.
d) for variable interest rate loans that are frequently re-priced, book values are assumed to be fair values. Fair values
of other loans are estimated using discounted cash flow calculations with market interest rates for similar groups
of loans and maturity dates.
e) fair value of variable rate and demand deposits approximate their book value. Fair values of other deposits are estimated
using discounted cash flow calculations at market rates for similar deposits.
f) the fair value of derivative financial instruments is calculated on market conditions at a specific point in time.
Recurring fair value measurements
The Credit Union’s assets and liabilities measured at fair value on a recurring basis have been categorized into the fair
value hierarchy as follows:
($ Thousands)
2015
Fair Value
Level 1
Level 2
Level 3
3,394
- -
Financial assets
FVTPL
Cash
3,394
Shares in Central
6,500
-
-
6,500
Total assets
9,894
3,394
-
6,500
447
-
447
-
Available-for-sale
Financial liabilities
FVTPL
Total liabilities 447
-
447
-
Total recurring fair value measurements 9,447
3,394
(447)
6,500
42
MVCU
(continued)
($ Thousands)
2014
Fair Value
Level 1
Level 2
Level 3
Financial assets
FVTPL
Cash
5,883
5,883
-
-
Derivative assets
74
-
74 -
Available-for-sale
Shares in Central
5,687
-
-
5,687
Total assets
11,644
5,883
74
5,687
FVTPL
12
-
12
-
Total liabilities Derivative liabilities
12
-
12
-
Total recurring fair value measurements 11,632
5,883
62
5,687
Assets and liabilities for which fair value is only disclosed
The following table analyses within the fair value hierarchy the Credit Union’s assets and liabilities not measured at fair value
at October 31, 2015 but for which fair value is disclosed:
($ Thousands)
2015
Fair Value
Level 1
Level 2
Level 3
Financial assets
Held to maturity
Term deposits with Central and other term deposits
48,762
-
48,762
-
1,597
-
1,597
-
Mortgage pools
Accounts receivable
194
-
194
Loans to member
563,378
-
563,378
-
Total assets
613,931
-
613,931
-
Accounts payble and accrued liabilities
Member deposits
3,435
-
3,435
-
588,884
-
588,884
-
Total liabilities 592,319
-
592,319
-
MVCU
43
(continued)
($ Thousands)
2014
Fair Value
Level 1
Level 2
Level 3
Financial assets
Held to maturity
Term deposits with Central and other term deposits
86,968
-
86,968
Mortgage pools
Accounts receivable
-
2,129
-
2,129
-
604
-
604
-
Loans to member
510,008
-
510,008
-
Total assets
599,709
-
599,709
-
Accounts payble and accrued liabilities
Member deposits
3,584
-
3,584
-
580,109
-
580,109
-
Total liabilities 583,693
-
583,693
-
18 Off-balance sheet financial instruments
To meet the needs of its members and manage its own exposure to fluctuations in interest rates, the Credit Union participates
in various commitments and contingent liability contracts. The primary purpose of these contracts is to make funds available for
the financing needs of members. These are subject to normal credit standards, financial controls, risk management and monitoring
procedures. The contractual amounts of these credit instruments represent the maximum credit risk exposure without taking
into account the fair value of any collateral, in the event other parties fail to perform their obligations under these instruments.
Guarantees and standby letters of credit represent irrevocable assurances that the Credit Union will make payments in the
event that a customer cannot meet its obligations to third parties, and they carry the same risk, recourse and collateral
security requirements as loans extended to customers. Documentary and commercial letters of credit are instruments issued
on behalf of a customer authorizing a third party to draw drafts on the Credit Union up to a stipulated amount subject to
specific terms and conditions. The Credit Union is at risk for any drafts drawn that are not ultimately settled by the customer
and the amounts are collateralized by the goods to which they relate. Commitments to extend credit represent unutilized
portions of authorizations to extend credit in the form of loans, bankers’ acceptances or letters of credit.
To manage exposure to interest rate fluctuations and to manage asset and liability mismatch, the Credit Union may enter
into interest rate swaps. These minimize the interest rate risk and cash required to liquidate the contracts by entering into
counter-balancing positions.
The Credit Union makes the following instruments available to its members:
a) guarantees and standby letters of credit representing irrevocable assurances that the Credit Union will pay if a member
cannot meet their obligations to a third party;
b) documentary and commercial letters of credit to allow a third party to draw drafts to a maximum agreed amount under
specific terms and conditions; and,
c) commitments to extend credit representing unused portions of authorizations to extend credit in the form of loans
(including lines of credit and credit cards), guarantees or letters of credit.
The amounts shown on the table below do not necessarily represent future cash requirements since many commitments
will expire or terminate without being funded.
44
MVCU
18 Off-balance sheet financial instruments
(continued)
The Credit Union had the following outstanding financial instruments subject to credit risk:
$$
Guarantees and standby letters of credit and direct credit substitutes
2,343,291
2,517,401
Commitment to extend credit - original term to maturity of greater than one year
41,339,937
66,193,924
Commitment to extend credit - original term to maturity of one year or less
49,701,555
50,309,760
93,384,783
119,021,085
19 Credit facilities
The Credit Union has an authorized line of credit due on demand in the amount of $25,000,000 (2014 - $25,000,000) from
Central including a United States dollar component of $1,000,000 (2014 - $1,000,000), bearing interest at prime minus 0.50%
(2014 – prime minus 0.50%) and United States dollar advances at the US prime rate plus 0.50% (2014 – prime plus 0.50%).
As at October 31, 2015, the balance of this line of credit is $nil (2014 - $nil).
The Credit Union also has access to a revolving term loan bearing interest at prime less 1% (2014 - prime less 1%). This loan
has a maximum available limit of $27,500,000 (2014 - $27,500,000). As at October 31, 2015, the balance of this revolving
term loan is $nil (2014 - $nil).
These credit facilities are secured by all present and future accounts, book debts, instruments, deposits and all monies
payable by Central to the Credit Union.
20 Capital management
The Credit Union’s objectives when managing capital are:
• To ensure the long term viability of the Credit Union and the security of member deposits by holding a level of capital
deemed sufficient to protect against unanticipated losses.
• To comply at all times with the capital requirements set out in the Act.
The Credit Union measures the adequacy of capital using two methods:
• Total capital as a percent of total assets;
• Total capital as a percent of risk weighted assets. Under this method the Credit Union reviews its loan portfolio and other
assets and assigns a risk weighting using definitions and formulas set out in the Act and by the Corporation. The more
risk associated with an asset, a higher weighting is assigned. This method allows the Credit Union to measure capital
relative to the possibility of loss with more capital required to support assets that are seen as being higher risk.
The Credit Union management ensures compliance with capital adequacy through the following:
• Establishing policies for capital management, monitoring and reporting;
• Establishing policies for related areas such as asset liability management;
• Reporting to the Board of Directors regarding financial results and capital adequacy;
• Reporting to the Corporation on its capital adequacy; and
• Establishing budgets and reporting variances to those budgets.
The Credit Union is required under the Act to hold capital equal to or exceeding the greater of:
• 4% of total assets; and
• 8% of risk weighted assets
MVCU
45
20 Capital management
(continued)
In addition to the legislated requirements under the Act, the Corporation has introduced an enhanced regulatory capital
requirement of 10.5% for October 31, 2015 (2014 - 10%). The Credit Union has a stated policy that it will maintain at all times
capital equal to no less than the minimum requirements as set out by the Act.
The Credit Union was in compliance with the regulatory requirements as indicated by the Act as follows:
Capital as a % of total assets
Capital as a % of risk weighted assets
7.88
7.66
12.0812.39
21 Related party disclosure
Directors, management and staff
The Credit Union, in accordance with its policy, grants credit to its management and staff at rates slightly below member
rates. Directors pay regular member rates on loans. Directors, management and staff had $13,705,136 (2014 - $13,553,709)
in loans outstanding at October 31, 2015. All loans were in good standing at that date and are included in “Loans to
members and accrued interest”.
Directors, management and staff of the Credit Union hold deposit accounts. These accounts are maintained under the
same terms and conditions as accounts of other members, and are included in “Member deposits and accrued interest”.
Directors, management and staff had $4,602,128 (2014 - $3,740,968) in deposits at October 31, 2015.
Directors and key management personnel
Key management personnel (“KMP”) consist of the President & Chief Executive Officer, Vice President Credit, Vice President
Finance, Vice President Human Resources, Vice President Marketing, Vice President Operations and Vice President
Information Systems.
Loans made to directors and KMP are approved under the same lending criteria available to members. There are no loans
that are impaired in relation to loan balances with Directors and KMP. There are no benefits or concessional terms and
conditions applicable to the family members of Directors and KMP. There are no loans that are impaired in relation to the
loan balances with family or relatives of Directors and KMP.
46
MVCU
21 Related party disclosure
(continued)
October 31, 2015
October 31, 2014
$
$
Loans to Directors and KMP
775,341424,890
Revolving credit facilities to Directors and KMP
2,879,2502,020,750
3,654,591
2,445,640
October 31, 2015
October 31, 2014
$
$
Interest earned on loans to Directors and KMP
51,00235,649
Interest paid on deposits from Directors and KMP
32,779
October 31, 2015
$
9,931
October 31, 2014
$
Demand deposits from Directors and KMP
367,703597,910
Term deposits from Directors and KMP
531,863
Registered plans from Directors and KMP
583,224608,509
1,485,790
October 31, 2015
$
Salary and short term benefits to KMP
373,880
1,580,299
October 31, 2014
$
1,372,9741,467,161
Directors fees and committee remuneration
39,250
28,200
Directors expenses
75,977
52,506
Amounts paid to Directors range from $3,075 (2014 - $875) to $7,775 (2014 - $6,200) with an average of $4,361 (2014 - $2,564).
Central
The Credit Union is a member of Central, which acts as a depository for surplus funds received from and loans made
to credit unions. Central also provides other services for a fee to the Credit Union and acts in an advisory capacity.
These transactions were made in the normal course of operations and are initially measured at fair value.
MVCU
47
22 Investment in joint ventures
On August 16, 2012, the Credit Union joined with two other credit unions to form InStride. InStride was formed to share
resources in order to contribute value to our members and communities as independent credit unions. InStride is jointly
and equally controlled by the three like-minded credit unions. As of October 31, 2015, the Credit Union owns 33 1/3%
of the common shares outstanding of InStride.
InStride had assets of $105,434 (2014 - $174,810), liabilities of $105,404 (2014 - $174,780), income of $1,122,296
(2014 - $850,932) and expenses of $1,122,296 (2014 - $850,322) for the year ended October 31, 2015.
On April 1, 2015, the Credit Union purchased an interest in CUSO Wealth Strategies. CUSO Wealth Strategies is a credit
union owned company that provides management, administrative and advisory services for wealth management services and
products. As of October 31, 2015, the Credit Union owns 10% of the common shares outstanding of CUSO Wealth Strategies.
CUSO Wealth Strategies had assets of $104,107, liabilities of $446,508, income of $390,710 and expenses of $270,065 for
the period ended October 31, 2015.
23 Segmented information
The Credit Union operates principally in personal, agricultural and commercial banking in Alberta.
24 Foreign currency risk
The Credit Union has the following statement of financial position items that are denominated in United States Dollars:
(Expressed in United States dollars)
$$
Cash
898,198
710,407
Investments
2,000,000
1,500,000
Member Deposits
(2,888,315)
(2,305,331)
The Credit Union has an immaterial exposure to fluctuations in the United States Dollar due to the active management
of the net exposure of United States Dollar denominated financial position items.
48
MVCU
Ultimately, we feel that
doing the best thing for
our members will lead
to profitable growth
opportunities now
and in the future.
MVCU
49
Board of Directors
Charlie Van Arnam
Carstairs, Chair
Wendy Metzger
Beiseker, 1st Vice-Chair
Herman Epp
Didsbury, 2nd Vice-Chair
Lindsey Good
Linden, Director
John Richter
Beiseker, Director
Glenn Sawyer
Acme, Director
Casey Setters
Red Deer, Director
Ed Wiper
Olds, Director
Tracy Kelly
Vice President,
Marketing
Dorothy Moore
Didsbury, Director
Executive Team
R.D. (Bob) Marshall
President & Chief
Executive Officer
Stephen Brosinsky
Vice President,
Operations
Kendra Holland
Vice President,
Credit
Warren Van Orman
Vice President,
Finance
Rod Watts
Vice President,
Information Services,
InStride Resources Ltd.
Bob Webb
Vice President,
Human Resources
50
MVCU
Dale Scott
Vice President,
Compliance,
InStride Resources Ltd.
We’re Ready
Branch Managers
Barb Titterington
Beiseker
Angel Sawchuk
Carbon
Peggy Blatz
Carstairs
Lynda Hamilton
Cremona
Andrea Sheehan
Crossfield
Linda Seidler
Delia
Ryan Tebbutt
Didsbury
Lynda vanderWoerd
Linden
Steph Brundige
Langdon
Spencer Lockhart
Morrin
Craig Witcher
Olds
Steven Brigden
Sundre
Pearl Johnson
Manager, Banking
Administration
Bonnie Lavigne
Controller
Joanne Prysunka
Manager, Business
Banking Centre
Administrative Managers
Gerry LeBlanc
Manager, Retail
Credit
Butch Skelding
Manager, Business
Credit Risk
Mark Baron
Manager, Branch
Operations
MVCU
51
Locations
Administration
Branch Locations
6501-51 Street
Olds, Alberta
403.556.3306
Beiseker
Didsbury
237-6 Street
Beiseker, Alberta
403.947.3993
Barb Titterington
Branch Manager
2003-20 Street
Didsbury, Alberta
403.335.3335
Ryan Tebbutt
Branch Manager
Carbon
Linden
645 Glengarry Street
Carbon, Alberta
403.572.3594
Angel Sawchuk
Branch Manager
209 Central Avenue East
Linden, Alberta
403.546.6798
Lynda vanderWoerd
Branch Manager
Carstairs
Langdon
110-10 Avenue North
Carstairs, Alberta
403.337.3248
Peggy Blatz
Branch Manager
259 Centre Street NW
Langdon, Alberta
403.936.5524
Steph Brundige
Branch Manager
Cremona
Morrin
102 Railway Avenue
Cremona, Alberta
403.637.3771
Lynda Hamilton
Branch Manager
104 Main Street
Morrin, Alberta
403.772.3773
Spencer Lockhart
Branch Manager
Crossfield
Olds
1301 Railway Street
Crossfield, Alberta
403.946.0572
Andrea Sheehan
Branch Manager
101, 6501-51 Street
Olds, Alberta
403.556.3304
Craig Witcher
Branch Manager
Delia
Sundre
118 Main Street
Delia, Alberta
403.364.2671
Linda Seidler
Branch Manager
117 Centre Street North
Sundre, Alberta
403.638.4040
Steven Brigden
Branch Manager
Business Banking Centre
201, 6501-51 Street
Olds, Alberta
403.556.3304
Joanne Prysunka
Manager
52
MVCU
MVCU
53
www.mvcu.ca

Mountain View Credit Union Annual Report

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