Financial Statements Grand Forks District Savings Credit Union December 31, 2008
Financial Statements
Grand Forks District Savings Credit Union
December 31, 2008
Grand Forks District Savings Credit Union
Contents
Page
Auditors' report 1
Balance sheet 2
Statements of earnings and retained earnings 3
Statement of comprehensive income and accumulated
other comprehensive income 4
Statement of cash flows 5
Notes to the financial statements 6-20
Partners
Kevin Crookes, CA, CBV
Paul F.S. Gallo, CA
Mike Gilmore, CA, CFP
James R. Grant, MBA, CA
Bill McTavish, CGA, CA
Anne C. Postlewaite, CA
Dan Vass, CA
J. Kim Ward, CA, CFP
Bill Winters, CA, CFP
Audit • Tax • Advisory
Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 1
Grant Thornton LLP 200 - 1633 Ellis Street Kelowna, BC V1Y 2A8
T (250) 712-6800 (800) 661-4244 (Toll Free) F (250) 712-6850 www.GrantThornton.ca
Auditors’ report
To the members of
Grand Forks District Savings Credit Union
We have audited the balance sheet of Grand Forks District Savings Credit Union as at
December 31, 2008 and the statements of earnings and retained earnings, comprehensive
income and accumulated other comprehensive income and cash flows for the year then ended.
These financial statements are the responsibility of the Credit Union's management. 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 plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation.
In our opinion, these financial statements present fairly, in all material respects, the financial
position of the Credit Union as at December 31, 2008 and the results of its operations and cash
flows for the year then ended in accordance with Canadian generally accepted accounting
principles.
Kelowna, BC
January 27, 2009 Chartered accountants
See accompanying notes to the financial statements 3
Grand Forks District Savings Credit Union Statement of earnings and retained earnings Year ended December 31 2008 2007 Financial income
Loans $ 9,019,746 $ 8,945,842
Cash resources and investments 1,029,424 1,219,838
10,049,170 10,165,680
Financial expense
Deposits 5,042,906 4,829,354
Share dividends - 15,710
5,042,906 4,845,064
Financial margin 5,006,264 5,320,616
Provision for credit losses (Note 6) 278,493 142,956
4,727,771 5,177,660
Other income (Note 15) 1,355,630 1,344,974
Operating margin 6,083,401 6,522,634
Operating expenses (Note 16) 5,711,465 5,539,318
Patronage dividends - 326,363
5,711,465 5,865,681
Earnings before income taxes 371,936 656,953
Income taxes (Note 17) 113,033 134,922
Net earnings $ 258,903 $ 522,031
Retained earnings, beginning of year $ 7,979,957 $ 7,457,926
Net earnings 258,903 522,031
Retained earnings, end of year $ 8,238,860 $ 7,979,957
See accompanying notes to the financial statements 4
Grand Forks District Savings Credit Union Statement of comprehensive income and accumulated
other comprehensive income Year ended December 31, 2008 2008 2007
Net earnings $ 258,903 $ 522,031
Other comprehensive income, net of tax
Unrealized loss on derivatives - (100,855)
Other comprehensive income recognized in current year (20,807) (7,463)
Total other comprehensive income (20,807) (108,318)
Comprehensive income $ 238,096 $ 413,713
Accumulated other comprehensive income
Balance, beginning of year $ 20,807 $ -
Adjustment for changes in accounting policies,
net of tax expense of $28,119 - 129,125
Other comprehensive income recognized in current year (20,807) (108,318)
Balance, end of year $ - $ 20,807
See accompanying notes to the financial statements 5
Grand Forks District Savings Credit Union Statement of cash flows Year ended December 31 2008 2007 Increase (decrease) in cash resources
Operating activities
Net earnings $ 258,903 $ 522,031
Adjustments for non-cash items:
Provision for loan losses, net of recoveries 278,493 142,956
Loss on sale of capital assets - 43,116
Amortization 351,859 299,311
Change in interest accruals 223,210 207,128
Payables and accruals 85,559 (324,855)
Change in fair value of held for trading investments - 20,807
Recognition of accumulated other
comprehensive income (20,807) -
1,177,217 910,494
Financing activities
Deposits, net of withdrawals 12,016,217 (3,754,752)
(Repayments) advance of borrowings (3,450,000) 3,450,000
(Redemption) issuance of equity shares (6,507) 358
8,559,710 (304,394)
Investing activities
Loans, net of repayments 17,999,021 (17,583,995)
Investments and other 918,797 46,129
Purchase of capital assets (917,393) (622,470)
Proceeds from sale of capital assets - 23,250
18,000,425 (18,137,086)
Net increase (decrease) in cash resources 27,737,352 (17,530,986)
Cash resources, beginning of year 6,893,446 24,424,432
Cash resources, end of year $ 34,630,798 $ 6,893,446
Supplementary cash flow information
Interest paid $ 4,788,946 $ 4,588,019
Income taxes paid $ 148,697 $ 144,486
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
6
1. Governing legislation and operations The Credit Union is incorporated under the Credit Union Incorporation Act of British Columbia and is subject to the Financial Institutions Act of British Columbia. The Credit Union serves members principally in the Boundary Area of British Columbia. 2. Summary of significant accounting policies Basis of presentation These financial statements have been prepared in accordance with Canadian generally accepted accounting principles. In preparing these financial statements management has made estimates and assumptions that could affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those reported. Loans Loans are initially measured at fair value and subsequently remeasured at their amortized cost, net of allowance, using the effective interest rate method. Loan interest
Interest income from loans is recorded on the accrual method, except where a loan is impaired. Interest received on an impaired loan is recognized in earnings only if there is no doubt as to the collectibility of the carrying value of the loan; otherwise, the interest received is credited to the principal. Loan fees The accounting treatment for loan fees varies depending on the transaction. Fees that are considered to be material and an adjustment to loan yield are capitalized and amortized using the effective interest method. Mortgage prepayment fees are recognized in other income when received, unless they relate to a minor modification to the terms of the mortgage, in which case the fees are capitalized and amortized over the average remaining term of the original mortgage. (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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2. Summary of significant accounting policies (continued) Loans (continued)
Allowance for loan losses
The allowance for loan losses is maintained at a level considered adequate to absorb expected loan losses. Specific allowances are provided for specifically identified loans that have been impaired. A loan is classified as impaired generally at the earlier of when, in the opinion of management, there is reasonable doubt as to the collectibility of principal and interest, or when interest is 180 days past due. Impaired loans are carried at their estimated realizable amounts, determined by discounting the expected future cash flows inherent in the loans. When the amounts of future cash flows cannot be estimated with reasonable reliability, impaired loans are carried at the fair value of the underlying security, net of estimated costs of realization. Specific allowances are supplemented by general allowances determined by judgement of management based on historical loan loss experience, known risks in the portfolio and current economic conditions and trends. Investments Investments in equity investments that do not have a quoted market price in an active market are measured at cost. Capital assets Capital assets are recorded at cost less accumulated amortization. Rates of amortization applied on a straight-line basis to write off the cost of capital assets over their estimated lives are as follows: Building and renovations 10 and 33 years Parking lot 12 years Computer equipment 3 years Other equipment 10 years System software 8 years Employee future benefits The cost of pensions and other retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on service and management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs. For the purpose of calculating the expected return on plan assets, those assets are valued at fair value. The accrued benefit asset or liability represents the cumulative difference between the expense and funding contributions and is included in payables and accruals on the balance sheet. (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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2. Summary of significant accounting policies (continued)
Income taxes
The Credit Union follows the asset and liability method of accounting for income taxes, whereby
future tax assets and liabilities are recognized for the expected future tax consequences
attributable to differences between the financial statement carrying amount of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carry forwards. Future
tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled.
Net future income tax assets and liabilities are included in other assets or payables and accruals,
as applicable.
Membership shares
Membership shares are classified as liabilities or as member equity according to their terms.
Where shares are redeemable at the option of the member, either on demand or on withdrawal
from membership, the shares are classified as liabilities. Where shares are redeemable at the
discretion of the Credit Union board of directors, the shares are classified as equity.
Distributions to members
Patronage rebates and dividends on shares classified as liabilities are charged against earnings.
Foreign currency translation The Credit Union uses the temporal method to translate transactions and balances denominated in foreign currencies. Under this method revenues and expenses are translated at the average rate of exchange in the period they occurred and assets and liabilities are translated at the rate of exchange in effect at the balance sheet date. Financial instruments
The financial instruments classified as held for trading are measured at fair value with unrealized gains and losses recognized in net earnings. The Credit Union’s financial instruments classified as held for trading include cash and current accounts. Available for sale financial assets are measured at fair value with unrealized gains and losses recognized in other comprehensive income. The Credit Union’s investments held with Central1 Credit Union have been classified as available for sale. (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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2. Summary of significant accounting policies (continued)
The financial assets classified as loans and receivables and held to maturity are measured at amortized cost. The Credit Union’s financial instruments classified as loans and receivables include all loans, accrued interest and other receivable balances. The Credit Union’s financial instruments classified as held to maturity include deposits held with Central1 Credit Union. Financial instruments classified as other financial liabilities include all deposits, borrowings and payables and accruals. Other financial liabilities are measured at amortized cost. Comprehensive income Comprehensive income includes all changes in equity of the Credit Union during a period except those resulting from investments by members and distributions to members. The major components included in Accumulated other comprehensive income are unrealized gains and losses on financial assets classified as available for sale, gains and losses incurred on effective hedging relationships.
3. Change in accounting policies (a) Current year changes Financial instruments - presentation and disclosure
On January 1, 2008, the Credit Union adopted the provisions of CICA Handbook Section 3862, Financial Instruments – Disclosures, and Handbook Section 3863, Financial Instruments – Presentation. Section 3862 places additional emphasis on disclosures regarding the risks associated with both recognized and unrecognized financial instruments and how these risks are managed. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives and provides additional guidance with classification of financial instruments between liabilities and equity from the perspective of the issuer. These disclosures are included in Note 4 to the financial statements.
Capital disclosures
On January 1, 2008, the Credit Union adopted the provisions of CICA Handbook Section 1535, Capital Disclosures. This section requires enhanced quantitative disclosures about what is regarded as capital and disclosure of information with respect to the objectives, policies and processes used to manage capital. See Note 12 for further information about the Credit Unions objectives, policies and processes related to ongoing capital management.
(continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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3. Change in accounting policies (continued)
(b) Future changes in accounting policies
International Financial Reporting Standards (“IFRS”) The Accounting Standards Board announced that accounting standards in Canada are to converge with IFRS. Publicly accountable entities will begin reporting, with comparative data, under IFRS for interim and financial statements relating to fiscal years beginning on or after January 1, 2011. While IFRS is based on a conceptual framework similar to Canadian GAAP, there are significant differences with respect to recognition, measurement and disclosures, which the Credit Union is beginning to assess. Training and additional resources will be utilized to ensure timely conversion to IFRS. The financial impact of the transition to IFRS cannot be reasonably estimated at this time.
4. Risk management In the normal course of business, the Credit Union is exposed to credit risk, liquidity risk, market risk. For all of the risks noted below, there has been no change in how the Credit Union manages those risks from the previous year. Credit risk Credit risk is the risk of loss resulting from the failure of a borrower or counter party to honour its financial or contractual obligation to the Credit Union. Credit risk primarily arises from loans receivable. Management and the Board of Directors reviews and updates the credit risk policy annually. The maximum exposure of the Credit Union to credit risk before taking into account any collateral held is the carrying amount of the loans as disclosed on the balance sheet. (see Note 6) Concentration of credit risk exists if a number of borrowers are engaged in similar economic activities or are located in the same geographic region, and indicate the relative sensitivity of the Credit Union’s performance to developments affecting a particular segment of borrowers or geographic region. Geographic risk exists for the Credit Union due to its primary service area being Grand Forks and surrounding areas. Liquidity risk Liquidity risk is the risk that the Credit Union cannot meet a demand for cash or fund its obligations as they come due. The Credit Union’s management oversees the Credit Union’s liquidity risk to ensure the Credit Union has access to enough readily available funds to cover its financial obligations as they come due. The Credit Union’s business requires such capital for operating and regulatory purposes. See Note 5 for further information about the Credit Union’s regulatory requirement. (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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4. Risk management (continued) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. For purposes of this disclosure, the Credit Union segregates market risk into two categories: fair value risk and interest rate risk. The Credit Union is not significantly exposed to currency risk or other price risk. Fair value risk Fair value risk is the potential for loss from an adverse movement in the value of a financial instrument. The Credit Union incurs fair value risk on its loans, term deposits and investments held. The Credit Union does not hedge its fair value risk. See Note 14 for further information on fair value of financial instruments. Interest rate risk Interest rate risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Credit Union incurs interest rate risk on its loans and other interest bearing financial instruments. The Credit Union does not hedge its interest rate risk. See Note 13 for further information on interest rate sensitivity.
5. Cash resources 2008 2007
Cash and current accounts $ 1,684,945 $ 1,107,617
Term deposits and accrued interest
Callable or maturing in - three months or less 9,845,669 2,727,875
- more than three months 23,100,184 3,057,954
$ 34,630,798 $ 6,893,446
Provincial legislation requires the Credit Union to maintain, for liquidity purposes, deposits with
Central1 Credit Union of at least 8% (2007 - 8%) of deposits and borrowings. At December 31,
2008, the Credit Union’s liquidity deposits exceed the minimum requirement by $30,715,230
(2007 - $5,659,280).
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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6. Loans 2008 2007
Personal loans
Residential mortgages $ 85,020,093 $ 82,333,303
Other 15,946,361 14,036,155
Commercial loans
Mortgages 26,704,556 27,692,246
Other 2,980,422 3,951,288
Purchased mortgages 17,675,054 38,294,204
Accrued interest 507,084 566,997
Deferred loan fees (81,871) (116,544)
148,751,699 166,757,649
Allowance for loan losses
Specific 257,335 -
General 743,478 760,000
1,000,813 760,000
$ 147,750,886 $ 165,997,649
Allowance for loan losses 2008 2007 Beginning Write-offs / Ending Ending Balance Provision (recoveries) balance balance Commercial $ 590,000 $ 204,079 $ - $ 794,079 $ 590,000 Residential 170,000 74,414 (37,680) 206,734 170,000 $ 760,000 $ 278,493 $ (37,680) $1,000,813 $ 760,000 Percentage of total loans and accrued interest 0.68% 0.46% Impaired loans and related allowances 2008 2007 Loan Specific Carrying Carrying balances allowance amount amount Commercial $ 736,637 $ 82,014 $ 654,623 $ 37,052 Residential 306,523 175,321 131,202 347,864 $ 1,043,160 $ 257,335 $ 785,825 $ 384,916
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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7. Investments and other 2008 2007
Term deposits $ 12,474,552 $ 13,249,450
Shares
Central1 Credit Union 503,942 551,393
CUPP Services Ltd. 65,075 57,039
Credential Securities Inc. 10,000 10,000
Stabilization Central Credit Union 252 252
Receivables and prepaids 46,728 151,212
$ 13,100,549 $ 14,019,346
Investment in shares of Central1 Credit Union are required as a condition of membership and by
provincial legislation.
8. Capital assets 2008 2007
Accumulated Net Net
Cost amortization book value book value
Land $ 239,792 $ - $ 239,792 $ 239,792
Building and renovations 2,325,430 1,155,943 1,169,487 1,277,969
Parking lot 37,637 22,158 15,479 17,690
Computer equipment 808,555 465,383 343,172 378,550
Other equipment 648,230 206,484 441,746 501,674
Systems software 771,533 - 771,533 -
$ 4,831,177 $ 1,849,968 $ 2,981,209 $ 2,415,675
9. Deposits 2008 2007
Term $ 89,837,014 $ 79,361,387
Demand 58,631,988 59,958,101
Registered savings plans 37,703,226 34,836,523
Accrued interest and dividends 2,204,313 1,950,352
Membership equity shares (Note 11) 319,205 325,712
$ 188,695,746 $ 176,432,075
Under agreements with the trustee of the registered savings plans, members' contributions to the
plans are deposited with the Credit Union at rates of interest determined by the Credit Union.
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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10. Borrowings
The Credit Union has available to it, through the Central1 Credit Union, an operating line and
term facility of up to 5% of total assets based on the most recent available data secured by an
assignment of loans to members, accounts receivable and a demand debenture in favour of
Central1 Credit Union. The above loan bears interest at an effective rate of 4.93%. The balance
outstanding at year-end was $nil (2007 - $3,450,000).
11. Equity shares
Capital of the Credit Union is divided into two classes of equity shares designated as membership
and patronage.
The Credit Union is authorized to issue an unlimited number of non-transferable, voting equity
shares, with a par value of $1. Members are required to own membership equity shares which,
under certain occurrences, are redeemable.
Equity shares, which are not guaranteed by the Credit Union Deposit Insurance Corporation of
British Columbia, are redeemable only with the consent of the Board of Directors of the Credit
Union.
Membership shares issued are included in deposit balances (see Note 9)
12. Capital requirements and management
The Credit Union is required under provincial legislation to maintain a minimum capital base
equal to 8% of the total risk-weighted value of assets, each asset being assigned a risk factor
based on the probability that a loss may be incurred on ultimate realization of that asset.
The Credit Union’s current capital base equal to 15% (2007 – 13%) of the total value of risk-
weighted assets.
The Credit Union employs a Capital Management Plan and a Capital Appreciation Plan that are reviewed by management and the Board of Directors. The Capital Appreciation Plan forecasts the Credit Union’s capital position over a five year period. (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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12. Capital requirements and management (continued)
The Capital Management Plan dictates management's approach to growth, loan mix, credit quality, fixed assets, profitability objectives, dividend/patronage rebate policy and has a significant influence on member service objectives. It also establishes the criteria to maintain a cushion beyond the minimum statutory capital requirements. Management and the Board of Directors ensure the Credit Union's Investment and Lending Policy and credit risk profile reflect loan portfolio composition and levels of risk that are consistent with the Credit Union's Capital Management Plan objectives. There has been no change in the overall capital requirements strategy employed during the year ended December 31, 2008. Management will continue to develop business plans targeting capital adequacy ratio which
exceed the minimum ratio established by legislation or regulations. Capital adequacy ratio is
driven by the risk weighting of the Credit Union's assets. Accordingly, capital adequacy objectives
must take into account factors such as loan mix, investment quality and the level of fixed assets.
Decisions relating to strategic objectives that impact the risk weighting of the Credit Union's
assets are analyzed by management to determine their effect on the Credit Union’s capital
adequacy ratio.
13. Interest rate sensitivity
The Credit Union is exposed to interest rate risk as a consequence of the mismatch, or gap between the assets, liabilities and off balance sheet instruments scheduled to reprice on particular dates. The following table details the Credit Union’s exposure to interest rate risk and as defined and prescribed by CICA Handbook Section 3862 – Financial Instrument Disclosures. Maturity dates substantially coincide with interest adjustment dates. Amounts with floating interest rates, or due on demand, are classified as maturing within three months, regardless of maturity. Amounts that are not interest sensitive are grouped together, regardless of maturity. The table below does not incorporate management’s expectation of future events where repricing or maturity dates of certain loans and deposits differ significantly from the contractual date. (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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13. Interest rate sensitivity (continued) Not interest Interest sensitive balances (000’s) sensitive Total Within 4 months Over 1 3 months to 1 year to 5 years Assets Cash resources $ 9,846 $ 13,100 $ 10,000 $ 1,685 $ 34,631 Yield 2.3% 3.3% 3.6%
Loans 39,055 20,571 87,634 491 147,751 Yield 4.5% 5.4% 5.7%
Other 2,282 2,230 7,568 4,001 16,081 Yield 2.7% 4.0% 5.3%
51,183 35,901 105,202 6,177 198,463 Liabilities
Deposits 36,144 50,316 49,988 52,248 188,696 Yield 3.1% 3.5% 4.1%
Other - - - 9,767 9,767 36,144 50,316 49,988 62,015 198,463 Interest sensitivity
position, 2008 $ 15,039 $ (14,415) $ 55,214 $ (55,838) $ -
Interest sensitivity position, 2007 $ (174) $ (15,322) $ 64,185 $ (48,689) $ -
Based on the current financial instruments, it is estimated that a 100 basis point increase in the prime rate would increase financial margin by $160,200 (2007- $170,260). A 100 basis point decrease in the prime rate would decrease financial margin by $215,270 (2007- $228,786).
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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14. Fair values of financial instruments
The estimated fair values of financial instruments are designed to approximate values at which
these instruments could be exchanged in a current market. However, many of the financial
instruments lack an available trading market and therefore fair values are based on estimates.
No fair values have been determined for property and equipment, or any other asset or liability
that is not a financial instrument. The fair values of cash resources, variable rate loans and
deposits, other assets and liabilities are assumed to equal their book values. The fair values of
fixed rate loans and deposits are determined by discounting the expected future cash flows at the
estimated current market rates for loans and deposits with similar characteristics.
Changes in interest rates are the main cause of changes in the fair value of the Credit Union’s
financial instruments.
2008 (000’s) 2007
Estimated Favourable/ Favourable/
Book value fair value (unfavourable) (unfavourable)
Assets
Cash resources $ 34,631 $ 36,205 $ 1,574 $ (80)
Loans 147,751 148,922 1,171 (2,452)
Investments and other 13,101 13,100 - -
2,745 (2,532)
Liabilities
Deposits 188,696 190,935 (2,239) (56)
Payables and accruals 1,529 1,529 - -
(2,239) (56)
Fair value difference $ 506 $ (2,588)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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15. Other income 2008 2007
Account service fees $ 705,172 $ 637,825
Foreign exchange 205,388 278,114
Insurance commissions and fees 76,742 92,021
Loan administration fees 132,688 92,695
Mutual fund fees 121,047 119,026
Other 76,006 90,953
Safety deposit rentals 38,587 34,340
$ 1,355,630 $ 1,344,974
16. Operating expenses 2008 2007
Advertising and member relations $ 80,431 $ 198,725
Amortization 351,859 299,311
Data processing 545,429 469,815
Dues and assessments 159,703 122,508
Human resource development 30,467 53,893
Loss on disposal of capital assets - 43,116
Occupancy 489,894 512,262
Other 366,540 384,994
Phoenix Foundation donation - 50,000
Professional fees 246,482 196,931
Salaries and benefits 3,302,902 3,073,250
Service charges 137,758 134,513
$ 5,711,465 $ 5,539,318
17. Provision for income taxes The components of income tax expense are as follows: 2008 2007
Current income taxes $ 54,340 $ 137,970 Future income tax (benefits) 58,693 (3,048)
Income taxes $ 113,033 $ 134,922 (continued)
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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17. Provision for income taxes (continued) The total provision for income taxes in the statement of earnings and retained earnings is at a rate less than the combined federal and provincial statutory income tax rate of the applicable year for the following reasons: 2008 2007
Combined federal and provincial statutory income tax rate 31.00% 34.12% Decrease in rate due to: Rate reduction applicable to Credit Unions (16.08)% (16.50)% Other, net 15.47% 2.92%
Effective income tax rate 30.39% 20.54% The components of future income tax balances are as follows: Future income tax assets Allowance for credit losses $ 115,382 $ 117,800 Deferred items 76,987 70,959 Other (53,125) 9,178
Net future income tax assets $ 139,244 $ 197,937 18. Pension and other retirement benefits The Credit Union participates in a multi-Credit Union defined benefit pension plan. Contributions
are made by the Credit Union and the employees, and pensions are based on years of service,
contributions and average earnings at retirement. An actuarial valuation is performed periodically to
determine the present value of the accrued pension benefits. As at December 31, 2007 (date of the
most recent valuation) the plan actuary reported that the plan assets exceeded the actuarially
determined liabilities of the plan for accrued pension benefits.
The Credit Union also provides retirement benefits for a portion of its employees under a multi-
employer defined contribution pension plan. In addition to providing pension benefits as above, the Credit Union provides certain health care
and life insurance benefits for retired employees and their dependents. The Credit Union accrues
the projected future cost of providing post-retirement benefits other than pension during the period
that employees render the services necessary to be eligible for such benefits. The accrued liability
included in payables and accruals at December 31, 2008 is $468,796 (2007 - $407,800) and the
expense for the year is $60,996 (2007 - $63,700).
Grand Forks District Savings Credit Union Notes to the financial statements December 31, 2008
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19. Commitment Off balance sheet Letters of credit
In the normal course of business, the Credit Union enters into various off balance sheet commitments such as letters of credit. Letters of credit are not reflected on the balance sheet.
At December 31, 2008, the Credit Union has outstanding letters of credit on behalf of members in the amount of $216,800 (2007 - $239,800). Data processing services
The Credit Union is committed to acquiring online data processing services until November 30, 2016 at an approximate cost of $300,000 per year. Data processing charges are based on the level of equipment and services utilized and on the number of Credit Union members. 20. Related party transactions 2008 2007 Directors received total remuneration made up of - Honoraria $ 22,800 $ 20,375 - Lost wages reimbursed 2,600 4,500 Total directors’ remuneration $ 25,400 $ 24,875 At December 31, 2008, loans to directors, officers and employees of the Credit Union amounted to approximately $1,110,607 (2007 - $1,221,350). All such loans were granted in accordance with normal lending terms, except for computer loans to employees and officers, which are offered at reduced rates. 21. Comparative figures Comparative figures have been reclassified, where appropriate, to conform to the current year’s presentation.