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transcript
Consolidated Financial statements of
Integris Credit Union
December 31, 2015
Integris Credit Union December 31, 2015 Table of contents Independent Auditor’s Report ................................................................................... 1-2
Consolidated Statement of Financial Position .............................................................. 3
Consolidated Statement of Comprehensive Income .................................................... 4
Consolidated Statement of Changes in Members’ Equity ............................................ 5
Consolidated Statement of Cash Flows ....................................................................... 6
Notes to the Consolidated Financial Statements .................................................... 7-53
Consolidated Continuity of Property and Equipment 2015......................................... 54
Consolidated Continuity of Property and Equipment 2014......................................... 55
Deloitte LLP 500 - 299 Victoria Street Prince George BC V2L 5B8 Canada Tel: 250-564-1111 Fax: 250-562-4950 www.deloitte.ca
INDEPENDENT AUDITOR’S REPORT
To the Members of Integris Credit Union
We have audited the accompanying consolidated financial statements of Integris Credit Union, which comprise the consolidated statement of financial position as at December 31, 2015, and the consolidated statement of comprehensive income, consolidated statement of changes in members’ equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
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Integris Credit Union February 26, 2016 Page 2
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Integris Credit Union as at December 31, 2015, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Chartered Professional Accountants Prince George, BC February 26, 2016
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INTEGRIS CREDIT UNION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEyear ended December 31, 2015
2015 2014
FINANCIAL INCOMEInterest income $ 24,001,240 $ 22,940,507 Investment income 1,673,240 1,777,416
Total financial income 25,674,480 24,717,923
FINANCIAL EXPENSESInterest expense ‐ deposits 8,496,377 8,092,740 Other interest expense 122,234 149,039
Total financial expenses 8,618,611 8,241,779
FINANCIAL MARGIN 17,055,869 16,476,144 Allowance for credit losses (Note 8) 3,447,016 251,553
Net interest margin 13,608,853 16,224,591
Other operating income (Note 19) 8,486,844 7,628,135
Operating margin 22,095,697 23,852,726
Operating expenses (Note 20) 21,483,905 21,670,909
Distributions to members (Note 16) 143,752 158,074
Income before income taxes 468,040 2,023,743
Income taxes (recovery) (Note 15) (79,196) 357,914
NET INCOME 547,236 1,665,829
Other comprehensive income1 260,705 346,778 Income taxes relating to OCI (50,541) (57,201)
Other comprehensive income1 210,164 289,577
TOTAL COMPREHENSIVE INCOME $ 757,400 $ 1,955,406
The accompanying notes are an integral part of these consolidated financial statements.
1 Represents items that may be subsequently reclassified to profit or loss
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INTEGRIS CREDIT UNION
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
year ended December 31, 2015
Accumulatedother
Contributed comprehensive
Member Equity Retained incomeshares (Note 17) earnings (Note 18) Total
As at December 31, 2013 $ 3,862,366 $ 6,953,743 $ 17,041,703 $ 298,922 28,156,734
Total comprehensive income ‐ ‐ 1,665,829 289,577 1,955,406
Issued membership shares 2,311,966 ‐ ‐ ‐ 2,311,966
Redeemed membership shares (240,402) ‐ ‐ ‐ (240,402)
Dividends on investment shares 222,872 ‐ (189,441) ‐ 33,431
As at December 31, 2014 $ 6,156,802 $ 6,953,743 $ 18,518,091 $ 588,499 $ 32,217,135
Total comprehensive income ‐ ‐ 547,236 210,164 757,400 Issued membership shares 2,453,608 ‐ ‐ ‐ 2,453,608 Redeemed membership shares (147,033) ‐ ‐ ‐ (147,033) Dividends on investment shares 290,603 ‐ (243,525) ‐ 47,078
As at December 31, 2015$ 8,753,980 $ 6,953,743 $ 18,821,802 $ 798,663 $ 35,328,188
The accompanying notes are an integral part of these consolidated financial statements.
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INTEGRIS CREDIT UNION
CONSOLIDATED STATEMENT OF CASH FLOWS
year ended December 31, 2015
2015 2014
Operating activitiesNet income $ 547,236 $ 1,665,829 Adjustments forAllowance for credit losses 3,447,016 251,553 Interest income (24,942,826) (23,979,874) Interest expense 8,618,611 8,241,779 Depreciation 1,427,951 1,648,312 Net loss on financial assets designated at fair value through profit or loss 31,252 52,147
(Gain) loss on sale of property and equipment (204,564) 4,770 Income tax (recovery) expense (79,196) 357,914 Interest received 24,539,050 23,838,321 Interest paid (8,121,450) (7,944,965) Income tax paid (394,222) (355,818) Non‐cash distributions to members 143,752 158,074 Net unrealized foreign exchange gain (6,102) (45,689)
5,006,508 3,892,353
Changes in operating assets/liabilities:Loans to members, net of repayments (36,066,378) (68,286,375) Deposits from members, net of withdrawals 55,373,787 51,919,332 Other operating assets (520,617) (13,909) Other operating liabilities (359,745) (139,482)
23,433,555 (12,628,081)
Investing activitiesPurchase of equity investments (320,434) (243,822) (Purchase) sale of term deposits (4,850,000) 9,650,013 Purchase of intangible assets (1,377,613) (1,200,000) Purchase of property and equipment (5,039,745) (1,298,605) Proceeds from sale of property and equipment 213,367 25,230
(11,374,425) 6,932,816
Financing activitiesProceeds from issuance of membership share capital 498,106 396,060 Redemption of membership share capital (588,241) (460,652) Proceeds from issuance of investment shares 3,377,551 2,891,560 Redemption of investment shares (494,333) (302,106) Repayment of loan securitization borrowings (1,014,792) (1,141,145) Proceeds from credit facility borrowings 39,000,000 6,000,000 Repayment of credit facility borrowings (39,000,000) (6,000,000)
1,778,291 1,383,717
Net change in cash and cash equivalents 13,837,421 (4,311,548)
Cash and cash equivalents, beginning of year 12,314,809 16,295,545
Effects of exchange rate changes on the balance of cash
held in foreign currencies 574,792 330,812
Cash and cash equivalents, end of year $ 26,727,022 $ 12,314,809
The accompanying notes are an integral part of these consolidated financial statements. 6
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Reporting entity
Integris Credit Union (the “Credit Union”) is incorporated under the Credit Union Incorporation Act of
British Columbia and is a member of Central 1 Credit Union Limited (“Central 1”). The Credit Union
operates as one operating segment in the loans and deposit taking industry in British Columbia.
Products and services offered to its members include mortgages, personal, and commercial loans ,
chequing and savings accounts, term deposits, RRSPs, RRIFs, TFSA’s, mutual funds, automated banking
machines, debit and credit cards and internet banking, financial planning services, and operates an
insurance agency. The Credit Union head office is located at 1598 6th Avenue, Prince George, British
Columbia.
These consolidated financial statements (the “financial statements”) have been authorized for issue
by the Board of Directors on February 26, 2016.
Basis of presentation
These financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”).
These financial statements were prepared under the historical cost convention, as modified by the
revaluation of available‐for‐sale financial assets and derivative financial instruments measured at fair
value.
The Credit Union’s functional and presentation currency is the Canadian dollar.
The preparation of financial statements, in compliance with IFRS, requires management to make
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
Notes 2 and 3.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Credit Union and its wholly owned subsidiaries Integris Insurance Services Ltd., Integris Financial Planning Services Ltd. and 608538 BC Ltd., as well as its 20% interest in a joint operation in Northline Management Ltd. Control is achieved when the Credit Union:
has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
Basis of consolidation (continued)
The Credit Union reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Credit Union has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Credit Union considers all relevant facts and circumstances in assessing whether or not the Credit Union's voting rights in an investee are sufficient to give it power, including:
the size of the Credit Union’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
potential voting rights held by the Credit Union, other vote holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that the Credit Union has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Credit Union's accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the Credit Union and its investees are eliminated in full on consolidation.
Interests in joint operations
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 control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION (continued)
Interests in joint operations (continued)
When a group entity undertakes its activities under joint operations, the Credit Union as a joint operator recognizes in relation to its interest in a joint operation:
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
The Credit Union accounts for the assets, liabilities, revenues and expenses relating to its interest in a
joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues
and expenses.
When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a sale or contribution of assets), the Credit Union is considered to be conducting the transaction with the other parties to the joint operation, and gains and losses resulting from the transactions are recognized in the Credit Union’s financial statements only to the extent of other parties' interests in the joint operation.
When a group entity transacts with a joint operation in which a group entity is a joint operator (such as a purchase of assets), the Credit Union does not recognize its share of the gains and losses until it resells those assets to a third party.
2. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently by the Credit Union to all periods presented in these financial statements.
Business combinations
The Credit Union accounts for acquisitions using the acquisition method as at the acquisition date,
which is the date on which control is acquired by the Credit Union. Control is the power to govern,
the financial and operating policies of an entity so as to obtain benefits from its activities. In
assessing control, the Credit Union takes into consideration potential voting rights that are currently
exercisable or de facto control which is the ability to control because no other party has the power
to govern.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Business combinations (continued)
The Credit Union elects for each acquisition whether to measure non‐controlling interest at fair
value or at its proportionate share of the recognized amount of the identifiable net assets at the
acquisition date.
Transaction costs incurred with the acquisition, other than those associated with the issue of debt or
equity securities, are expensed as incurred.
Financial instruments
Financial assets and financial liabilities are recognized when the Credit Union becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially recognized at fair value and their subsequent
measurement is dependent on their classification as described below. Their classification depends
on the purpose for which the financial instruments were acquired or issued, their characteristics and
the Credit Union’s designation of such instruments. Settlement date accounting is used.
The Credit Union is required to classify all financial assets either as fair value through profit or loss,
available‐for‐sale, held‐to‐maturity, or loans and receivables and, financial liabilities are classified as
either fair value through profit or loss, or other liabilities.
The standards require that all financial assets and financial liabilities, including all derivatives, be
subsequently measured at fair value with the exception of loans and receivables, debt securities
classified as held‐to‐maturity, available‐for‐sale financial assets that do not have quoted market
prices in an active market and whose fair value cannot be reliably estimated, and other liabilities.
a) Fair value through profit or loss (“FVTPL”) Financial assets and liabilities are classified as FVTPL when the financial asset or financial liability
is either held for trading or it is designated as at FVTPL.
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 pattern of short‐term profit‐taking; or
it is a derivative that is not designated and effective as a hedging instrument.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
a) Fair value through profit or loss (continued)
A financial asset and 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/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, and IAS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial assets and financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on re‐measurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned/paid on the financial asset/liability and is included in the other operating income.
As at December 31, 2015, the Credit Union’s financial assets and financial liabilities classified as FVTPL include derivative instruments, unless they are designated and effective as hedging instruments in a hedge accounting relationship, and embedded derivatives.
b) Held‐to‐maturity
Held‐to‐maturity investments are non‐derivative financial assets with fixed or determinable payments and fixed maturity dates that the Credit Union has the positive intent and ability to hold to maturity, other than those that the entity upon initial recognition designates as fair value through profit or loss or as available for sale.
Subsequent to initial recognition, held‐to‐maturity financial assets are measured at amortized cost using the effective interest method, net of impairment losses.
As at December 31, 2015, the Credit Union’s held‐to‐maturity investments consist of liquidity deposits held with Central 1.
c) Available‐ for‐ sale financial assets
Available‐for‐sale financial assets are non‐derivative financial assets that are either designated as available‐for‐sale or are not classified as (a) loans and receivables, (b) held‐to‐maturity investments or (c) financial assets at fair value through profit or loss.
Shares held by the Credit Union that are not traded in an active market are classified as available‐for‐sale.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
c) Available‐ for‐ sale financial assets (continued)
Available‐for‐sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period.
Subsequent to initial recognition, available‐for‐sale financial assets that trade on an active market are measured at fair value, and the gains and losses on such assets are recorded in other comprehensive income until the investment is derecognized or until the investment is identified as being subject to impairment.
As at December 31, 2015, the Credit Union’s available‐for‐sale financial assets consist of equity investments.
d) Loans and receivables
Loans and receivables are non‐derivative financial assets with fixed or determinable payments that are not quoted in an active market and which the Credit Union does not intend to sell immediately or in the near term.
As at December 31, 2015, the Credit Union’s loans and receivables consist of loans to members, accrued interest on loans, accrued interest on investments, and accounts receivable, and are measured at amortized cost using the effective interest method, net of impairment losses.
Interest income is recognized by applying the effective interest rate.
e) Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset or financial liability and of allocating interest income/ expense over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability.
f) Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each period end date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have been affected. For financial assets carried at amortized cost and available‐for‐sale debt securities, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
f) Impairment of financial assets (continued) The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of loans to members, where the carrying amount is reduced through the use of an allowance account. When a loan to a member is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.
The impairment loss on financial assets is based on a review of all outstanding amounts at period end. The Credit Union has established percentages for the allowance for doubtful accounts which are based on historical collection trends for each payer type and age of the receivables. Accounts that are considered to be uncollectible are reserved for in the allowance until they are written off or collected.
When an available‐for‐sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.
For financial assets other than available‐for‐sale equity securities, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss 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.
g) Derecognition of financial assets The Credit Union derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Credit Union neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Credit Union continues to recognize the transferred asset to the extent of the Credit Union’s continuing involvement in that asset. If the Credit Union retains substantially all the risks and rewards of ownership of a transferred asset, the Credit Union continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
g) Derecognition of financial assets (continued) On derecognition of a financial asset in its entirety, the difference between the asset’s carrying value and the sum of the consideration received/ receivable and any cumulative gain or loss that had been recognized in other comprehensive income and accumulated comprehensive income is recognized in profit or loss.
h) Other financial liabilities
Other financial liabilities (including member deposits and borrowings) are subsequently measured at amortized cost using the effective interest method.
i) Derecognition of financial liabilities
The Credit Union derecognizes financial liabilities when, and only when, the Credit Union’s obligations are discharged, cancelled or they expire.
j) Transaction costs
Transaction costs related to financial assets and liabilities at fair value through profit and loss are expensed as incurred. Transaction costs include fees and commissions paid to agents, advisors, broker and dealers related to available‐for‐sale financial assets, held‐to‐maturity financial assets, other liabilities and loans and receivables are included in the carrying value of the asset or liability and are amortized over the expected life of the instrument using the effective interest method. Transaction costs do not include debt premiums or discounts, financing costs or internal administrative costs.
k) Derivative instruments
The Credit Union enters into a variety of derivative financial instruments to manage its exposure to market risk, including interest rate, foreign currencies and equity indices. Further details of derivative financial instruments are disclosed in Note 6. Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently re‐measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a cash flow hedging instrument, in which event the effective portion of the gain or loss is recognized in other comprehensive income while the ineffective portion is recognized in profit or loss.
A derivative with a positive fair value is recognized as a financial asset. A derivative with a negative fair value is recognized as a financial liability.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial instruments (continued)
l) Embedded derivatives
Derivatives embedded in non‐derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL. As at December 31, 2015 and December 31, 2014, the Credit Union has embedded derivatives as described in other non‐hedge derivatives on page 17.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits with Central 1, other short‐term highly
liquid investments with original maturities of three months or less; and for the purpose of the
statement of cash flows, bank overdrafts that are repayable on demand.
Cash and cash equivalents are classified as held for trading and are carried at fair value.
Investments
a) Central 1 deposits
These deposit instruments are classified as held to maturity and are initially measured at fair value
plus transaction costs that are directly attributable to their acquisition. Subsequently they are
carried at amortized cost, which approximates fair value.
b) Equity investments
These investments, consisting primarily of shares held in Central 1, are classified as available‐for‐
sale and are initially recognized at fair value plus transaction costs that are directly attributable
to their acquisition. Subsequently they would be carried at fair value, except that they do not
have a quoted market price in an active market and fair value is not reliably determinable
therefore they are carried at cost.
Changes in fair value are recognized as a separate component of other comprehensive income.
Where there is a significant or prolonged decline in the fair value of an equity investments (which
constitutes objective evidence of impairment), the full amount of the impairment, including any
amount previously recognized in other comprehensive income, is recognized in profit or loss.
Purchases and sales of equity investments are recognized on settlement date with any change in
fair value between trade date and settlement date being recognized in accumulated other
comprehensive income.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments (continued)
b) Equity investments (continued)
On sale, the amount held in accumulated other comprehensive income associated with that
instrument is recognized in profit or loss.
Derivative financial instruments and hedging
a) Hedges
The Credit Union, in accordance with its risk management strategies, enters into various
derivative financial instruments to protect itself against the risk of fluctuations in interest rates.
The Credit Union manages interest rate risk through interest rate swaps.
Hedge accounting is applied to derivative financial instruments only where all of the following
criteria are met:
at the inception of the hedge there is formal designation and documentation of the hedging relationship and the Credit Union’s risk management objective and strategy for undertaking the hedge;
for cash flow hedges, the hedged item in a forecast transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit or loss;
the effectiveness of the hedge can be reliably measured; and
the hedge is expected to be highly effective at inception and remains highly effective on each date it is tested. The Credit Union has chosen to test the effectiveness of its hedge on a quarterly basis.
The interest rate swap contracts can be designated as fair value hedge instruments or cash flow
hedge instruments. The Credit Union has not entered into any fair value hedges at this time.
Cash flow hedges modify exposure to variability in cash flows for variable rate interest bearing
instruments or the forecasted issuance of fixed rate liabilities. The Credit Union’s cash flow
hedges are primarily hedges of floating rate commercial and personal loans.
If the Credit Union closes out its hedge position early, the cumulative gains and losses recognized
in other comprehensive income are reclassified to profit or loss over the remaining term of the
original hedging relationship.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Derivative financial instruments and hedging (continued)
b) Other non‐hedge derivatives
The Credit Union designates certain financial assets upon initial recognition as at fair value
through profit or loss (fair value option). Financial instruments included in this category are the
embedded derivatives and derivatives related to index linked term deposits.
These instruments are measured at fair value, both initially and subsequently. The related
transaction costs are expensed. Gains and losses arising from changes in fair value of these
instruments are recorded in profit or loss.
Joint operation
The Credit Union has a joint operation, Northline Management Ltd. The Credit Union has a 20% interest in the operation which is a credit union service organization that manages and maintains the banking software for its investees. The operation is based in Williams Lake, BC.
Member loans All member loans are non‐derivative financial assets with fixed or determinable payments that are
not quoted in an active market and have been classified as loans and receivables.
Member loans are initially measured at fair value, net of loan origination fees and inclusive of
transaction costs incurred. Member loans are subsequently measured at amortized cost, using the
effective interest rate method, less any impairment losses.
Loans to members are reported at their recoverable amount representing the aggregate amount of
principal, less any allowance or provision for impaired loans plus accrued interest. Interest is
accounted for on the accrual basis for all loans.
If there is objective evidence that an impairment loss on member loans carried at amortized cost has
been incurred, the amount of the loss is measured as the difference between the loans carrying
amount and the present value of expected cash flows discounted at the loans original effective
interest rate. Short‐ term balances are not discounted.
The Credit Union first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Member loans (continued) If it is determined that no objective evidence of impairment exists for an individually assessed financial
asset, whether significant or not, the asset is included in a group of financial assets with similar credit
risk characteristics and that group of financial assets is collectively assessed for impairment. Assets
that are individually assessed for impairment and for which an impairment loss is or continues to be
recognized are not included in a collective assessment of impairment.
The expected future cash outflows for a group of financial assets with similar credit risk characteristics
are estimated based on historical loss experience.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized
in profit or loss.
Bad debts written off
Bad debts are written off from time to time as determined by management and approved by the
Investment and Lending Committee when is it reasonable to expect that the recovery of the debt is
unlikely. Bad debts are written off against the provisions for impairment, if a provision for impairment
and previously been recognized. If no provision had been recognized, the write offs are recognized
as expenses in profit or loss.
Property and equipment
Property and equipment is initially recorded at cost and subsequently measured at cost less
accumulated depreciation and any accumulated impairment losses, with the exception of land which
is not depreciated.
Depreciation is recognized in profit or loss and is provided on a straight‐line basis over the estimated
useful life of the assets as follows:
Buildings 15‐40 years Furniture and equipment 5‐20 years
Computer software 2 – 7 years Leasehold improvements Lease term plus one renewal period
Vehicles 5 years Parking lots 12 years
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
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2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and equipment (continued)
Depreciation methods, useful lives and residual values are reviewed annually and adjusted if
necessary.
Computer software which is not integral to the computer hardware owned by the Credit Union is
separately classified in property and equipment. Software is initially recorded at cost and
subsequently measured at cost less accumulated amortization and any accumulated impairment
losses. Software is amortized on a straight‐line basis over its estimated useful life of 2 years. Major
banking system software is amortized over a useful life of 7 years.
Intangible assets
Indefinite life intangible assets are carried at cost less accumulated impairment losses. Cost of
intangible assets includes expenditures directly attributable to the acquisition of the asset and
required to establish the asset in working condition given its intended use as well as borrowing costs.
Subsequent expenditures are capitalized only when they increase the future economic benefits
embodied in the asset.
Goodwill Goodwill arising on acquisition of a subsidiary or jointly controlled entity represents the excess of the
cost of acquisition over the Credit Union’s interest in the fair value of net identifiable assets, liabilities
and contingent liabilities of the subsidiary or jointly controlled entity recognized at the date of
acquisition. Goodwill is initially recognized as an asset at cost, and is subsequently measured at cost
less any accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Credit Union’s cash‐
generating units expected to benefit from the synergies of the acquisition.
Cash‐generating units to which goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be impaired. If the recoverable amount
of the cash‐generating unit is less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro‐rata on the basis of the carrying amount of each asset in the unit. An
impairment loss recognized for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of
the profit or loss on disposal.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
20
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of non‐financial assets (other than goodwill)
Non‐financial assets are subject to impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Intangible assets with indefinite useful
lives are tested for impairment at least annually, and whenever there is an indication that the asset
may be impaired. Where the carrying value of an asset exceeds its recoverable amount, which is the
higher of value in use and fair value less costs to sell, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment
test is carried out on the asset’s cash‐generating unit, which is the lowest group of assets in which the
asset belongs for which there are separately identifiable cash flows.
Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized
in profit or loss except to the extent that it relates to a business combination, or items recognized
directly in equity or in other comprehensive income. Current income taxes are recognized for the
estimated income taxes payable or receivable on taxable income or loss for the current year and any
adjustment to income taxes payable in respect of previous years. Current income taxes are measured
at the amount expected to be recovered from or paid to the taxation authorities. This amount is
determined using tax laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability
differs from its tax base, except for taxable temporary differences arising on the initial recognition of
goodwill and temporary differences arising on the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of the transaction affects neither
accounting or taxable profit or loss.
Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary
differences is restricted to those instances where it is probable that future taxable profit will be
available which allow the deferred tax asset to be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is no longer probable that the related tax benefit
will be realized.
The amount of the deferred tax asset or liability is measured at the amount expected to be recovered
from or paid to the taxation authorities. This amount is determined using tax rates and tax laws that
have been enacted or substantively enacted by the reporting date and are expected to apply when
the liabilities/ assets are settled/ recovered.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
21
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Member deposits
All member deposits are initially measured at fair value, net of any transaction costs directly
attributable to the issuance of the instrument. Member deposits are subsequently measured at
amortized cost, using the effective interest rate method.
Employee benefits
a) Pension Plan
The Credit Union participates in a defined contribution pension plan. The amounts payable to the
plan is in proportion to the services rendered to the Credit Union by the employees and are
expensed in the year which they relate. Unpaid contributions are recorded as a liability.
b) Termination benefits
Termination benefits are recognized as an expense when the Credit Union is committed without
realistic probability of withdrawal to a formal detailed plan either to terminate employment
before the normal retirement date or to provide termination benefits. If benefits are payable
more than 12 months after the reporting period, they are recorded at their discounted present
value.
Accounts payable and other payables
Liabilities for trade creditors and other payables are classified as other financial liabilities and initially
measured at fair value net of any transaction costs directly attributable to the issuance of the
instrument and subsequently carried at amortized cost using the effective interest rate method.
Provisions
Provisions are recognized when the Credit Union has a present legal or constructive obligation as a
result of a past event, it is probable that the Credit Union will be required to settle the obligation, and
a reliable estimate can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the
present obligation at the end of the reporting period, taking into account the risks and uncertainties
surrounding the obligation. When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows (when the effect of
the time value of money is material).
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
22
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Members’ shares
Members’ shares issued by the Credit Union are classified as equity only to the extent that they do
not meet the definition of a financial liability.
Shares that contain redemption features subject to the Credit Union maintaining adequate regulatory
capital are accounted for using the partial treatment requirements of IFRIC 2 Members’ Shares in Co‐
operative Entities and Similar Instruments.
Distribution to members
Dividends on shares classified as liabilities are charged against earnings. Dividends on equity shares
classified as equity, less related income tax reductions, are charged against retained earnings in the
year in which they are declared. Dividends are recorded when declared by the Board of Directors.
Revenue recognition
Revenue from the provision of services to members is recognized when earned, specifically when
amounts are fixed or can be determined and the ability to collect is reasonably assured.
Dividend income is recognized in profit or loss when the Credit Union’s right to receive the dividends
is established. Interest income is recognized in income using the effective interest method. Foreign
exchange gains or losses on debt securities are recognized immediately in profit or loss and is
included in the ‘other operating income’ line item in the consolidated statement of comprehensive
income.
Foreign currency translation
Foreign currency accounts are translated into Canadian dollars as follows:
At the transaction date, each asset, liability, revenue and expense denominated in a foreign currency
is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year‐
end date, unsettled monetary assets and liabilities are translated into Canadian dollars by using the
exchange rate in effect at the year‐end date and the related translation differences are recognized in
profit or loss.
Exchange gains and losses arising on the retranslation of monetary available‐for‐sale financial assets
are treated as a separate component of the change in fair value and are recognized in profit or loss.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
23
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
New standards and interpretations not yet adopted
At December 31, 2015 a number of standards and interpretations, and amendments thereto have
been issued by the IASB, which are not effective for these consolidated financial statements, and have
not been applied in preparing these financial statements. Those which could have an impact on
Integris Credit Union’s consolidated financial statements are discussed below.
a) Acquisitions of interests in joint operations
The amendments to IFRS 11, Joint Arrangements (“IFRS 11”) provide guidance on how to account
for the acquisition of a joint operation that constitutes a business as defined in IFRS 3, Business
Combinations. The amendments to IFRS 11 are not effective until annual periods beginning on or
after January 1, 2016. Integris Credit Union does not anticipate that the amendments to IFRS 11
would have significant impact to its consolidated financial statements.
b) Financial instruments
On July 24, 2014 the IASB issued the final version of IFRS 9, Financial Instruments (“IFRS 9”). IFRS
9 is effective for annual periods beginning on or after January 1, 2018.
Key requirements of IFRS 9:
All recognized financial assets that are within the scope of IAS 39 are to be subsequently measured
at amortized cost or fair value. Specifically, debt investments that are held within a business
model whose objective is to collect the contractual cash flows, and that have contractual cash
flows that are solely payments of principal and interest on the principal outstanding are generally
measured at amortized cost at the end of subsequent accounting periods. Debt instruments that
are held within a business model whose objective is achieved both by collecting contractual cash
flows and selling financial assets, and that have contractual terms that give rise on specified dates
to cash flows that are solely of principal and interest on the principal amount outstanding, are
generally measured at fair value through OCI (FVTOCI). All other debt investments and equity
investments are measured at their fair value at the end of subsequent accounting periods.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
24
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
New standards and interpretations not yet adopted (continued)
b) Financial instruments (continued)
In addition, under IFRS 9, entities may make an irrevocable election to present subsequent
changes in the fair value of an equity instrument (that is not held‐for‐trading) in OCI, with only
dividend income generally recognized in profit or loss.
With regard to the measurement of financial liabilities designated as at FVTPL, IFRS 9 requires
that the amount of change in the fair value of the financial liability, that is attributable to changes
in the credit risk of that liability, is presented in OCI, unless the recognition of the effects of
changes in the liability’s credit risk in OCI would create or enlarge an accounting mis‐match in
profit or loss. Changes in the fair value attributable to a financial liability’s credit risk are not
subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the
fair value of the financial liability designated as FVTPL is presented in profit or loss.
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss model, as
opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires
an entity to account for expected credit losses and changes in those expected credit losses at each
reporting date to reflect changes in credit risk since initial recognition. In other words, it is no
longer necessary for a credit event to have occurred before credit losses are recognized.
The Credit Union anticipates that the application of IFRS 9 in the future may have a significant
impact on amounts reported in respect to the Credit Union’s financial assets and financial
liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9
until a detailed review has been completed.
c) Revenue from contracts with customers
IFRS 15, Revenue from Contracts with Customers (IFRS 15), is a new standard that addresses the
recognition of revenue from contracts with customers. IFRS 15 will supersede the current
revenue recognition guidance including IAS 18, Revenue (IAS 18), IAS 11 Construction Contracts
and the related Interpretations when it becomes effective. Under IFRS 15, a customer of an entity
is a party that has contracted with the entity to obtain goods or services that are an output of the
entity’s ordinary activities in exchange for consideration. Unlike the scope of IAS 18, the
recognition and measurement of interest income and dividend income from debt and equity
instruments are no longer within the scope of IFRS 15. Instead they are within the scope of IAS
39 (or IFRS 9, once adopted).
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
25
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
New standards and interpretations not yet adopted (continued)
d) Revenue from contracts with customers (continued)
The core principle of the new standard is the recognition of revenue to depict the transfer of
goods or services to customers in amounts that reflect the consideration to which the entity
expects to be entitled in the exchange for those goods or services. Specifically, IFRS 15 introduces
a five‐step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied
(i.e. when control of the goods or services underlying the particular performance obligation is
transferred to the customer). Far more prescriptive guidance has been added in IFRS 15 to deal
with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.
IFRS 15 was initially effective for annual periods beginning on or after January 1, 2017. In July
2015, the IASB approved the deferral of the effective date of IFRS 15. IFRS 15 is now effective for
annual periods beginning on or after January 1, 2018. Integris Credit Union is currently evaluating
the impact of the new standard on its consolidated financial statements.
e) Leases
IFRS 16, Leases, specifies how the entity will recognize, measure, present and disclose leases. The
standard provides a single lessee accounting model, requiring lessees to recognize assets and
liabilities for all leases unless the term is twelve months or less or the underlying asset has a low
value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor
accounting substantially unchanged from its predecessor IAS 17. IFRS 16 is effective for periods
beginning on or after January 1, 2019. The Credit Union is currently evaluating the impact of the
new standard on its consolidated financial statements.Leases prescribes the accounting policies and disclosures applicable to leases, both for lessees and lessors. Leases are required to be classified as either finance leases (which transfer substantially all the risks and rewards of ownership, and give rise to asset and liability recognition by the lessee and a receivable by the lessor) and operating leases (which result in expense recognition by the lessee, with the asset remaining
AS 17 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005. IAS 17 will be superseded by IFRS 16 Leases as of 1 January 2019
Integris Credit Union did not early adopt any new or amended standards in 2015.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
26
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Credit Union makes estimates and assumptions about the future that affect the reported amounts
of assets, liabilities, revenues and expenses. Estimates and judgments are continually evaluated
based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual experiences may differ from
these estimates and assumptions. The effect of a change in an accounting estimate is recognized
prospectively by including it in the financial statements in the period of the change, if the change
affects that period only; or in the period of the change and future periods, if the changes affects both.
The estimates and assumptions that have a significant risk of causing material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
Fair value of financial instruments
The Credit Union determines the fair value of financial instruments that are not quoted in an active
market, using valuation techniques. Those techniques are significantly affected by the assumptions
used including discount rates and estimates of future cash flows. In that regard, the derived fair value
estimates cannot always be substantiated by comparison with independent markets and, in many
cases, may not be capable of being realized immediately. The methods and assumptions applies, and
the valuation techniques used, for financial instruments that are not quoted in an active market are
disclosed in Note 5 and Note 23.
Member loan loss provision
In determining whether an impairment loss should be recorded, the Credit Union makes judgements
on whether objective evidence of impairment exists individually for financial assets that are
individually significant.
Where this does not exist the Credit Union uses its judgement to group member loans with similar
credit risk characteristics to allow a collective assessment of the group to determine any impairment
loss. In determining the collective loan loss provision Management uses estimates based on historical
loss experience for assets with similar credit risk characteristics and objective evidence of impairment.
Further details on the estimates used to determine the allowance for impaired loans collect provision
are provided in Note 8.
Income tax
The Credit Union periodically assesses its liabilities and contingencies related to income taxes for all
years open to audit based on the latest information available. For matters where it is probable that
an adjustment will be made, the Credit Union records its best estimate of the tax liability including
the related interest and penalties in the current tax provision.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
27
4. CASH AND CASH EQUIVALENTS
The Credit Union’s cash is held in current accounts with Central 1 except for cash on hand totaling
$3,612,810 as of December 31, 2015 ($4,039,462 – December 31, 2014). The average yield on cash
held with Central 1 at December 31, 2015 is 0.9% (2014 ‐ 1.4%).
5. INVESTMENTS
Central 1 deposits
Under requirements of the Act, the Credit Union must maintain liquidity reserves with Central 1 at 8% of total deposits at December 31 each year. The deposits can be withdrawn only if there is a sufficient reduction in the Credit Union’s total deposits or upon withdrawal of membership from Central 1. The liquidity reserves are due within one year. At maturity, these deposits are reinvested at market rates for various terms. The yield on the accounts at December 31, 2015 is between 0.50% and 3.28%. Equity investments
The shares in Central 1 are required as a condition of membership and are redeemable upon
withdrawal of membership or at the discretion of the Board of Directors of Central 1. In addition, the
member credit unions are subject to additional capital calls at the discretion of the Board of Directors
of Central 1.
Class A Central 1 shares are subject to an annual rebalancing mechanism and are issued and
redeemable at par value. There is no separately quoted market value for these shares; however, fair
value is determined to be equivalent to the par value due to the fact that transactions occur at par
value on a regular and recurring basis.
Class E Central 1 shares are issued with a par value of $0.01 each, however are redeemable at $1 each,
or a total of $20,727, at the option of Central 1. There is no separately quoted market value for these
shares and the fair value could not be measured reliably. Fair value cannot be measured reliably as
the timing of redemption of these shares cannot be determined, therefore, the range of reasonable
fair value estimates is significant and the probabilities of the various estimates cannot be reasonably
assessed. Therefore, they are recorded at cost.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
28
5. INVESTMENTS (continued)
The following tables provide information on the investments by type of security and issuer. The
maximum exposure to credit risk is limited to the amount recorded in the consolidated statement of
financial position.
2 0 1 5 2 0 1 4
Liquidity reserve deposit $ 49,125,868 $ 44,376,261
Term deposit 3,764,101 3,043,236
Total Central 1 Deposits 52,889,969 47,419,497
Central 1 Credit Union ‐ Class A 2,413,816 2,093,382
Central 1 Credit Union ‐ Class E 207 207
Other 205,006 205,006
Total equity investments 2,619,029 2,298,595
$ 55,508,998 $ 49,718,092
6. DERIVATIVE FINANCIAL INSTRUMENTS
Index linked term deposits
Included in Member Deposits of $653,887,580 are $1,529,303 (2014‐ $2,133,785) in index linked term
deposits to its members. The Index linked term deposits are three and five year deposits that pay
interest at the end of the term, based on the performance of a variety of indices.
The Credit Union has entered into agreements with Central 1 to offset the exposure to the indices
associated with this product, whereby the Credit Union pays a fixed rate of interest for the term of
each Index linked term deposit on the face value of the deposits sold. At the end of the term, the
Credit Union receives an amount equal to the amount that will be paid to the depositors, based on
the performance of the indices. The agreements are secured by a general security agreement
covering all assets of the Credit Union.
Interest rate swaps
The Credit Union has entered into interest rate swap contracts with Central 1 to hedge the Credit Union’s exposure to interest rate risks.
As at December 31, 2015, the Credit Union had entered into interest rate swap contracts for a total
of $30,000,000 of notional principal whereby it has agreed to pay at variable interest rates based on
Banker’s Acceptance rates for one month and receive at fixed interest rates. The agreements are
secured by a general security agreement covering all assets of the Credit Union.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
29
6. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
2015Notional Maturity Paying Fair
Counterparty Amount Date Variable Receiving Value
Central 1 10,000,000 May 14, 2018 0.821% 2.015% 267,726 Central 1 10,000,000 Jul 12, 2018 0.798% 2.040% 287,612 Central 1 10,000,000 Sep 5, 2018 0.840% 2.500% 421,687
$ 30,000,000 $ 977,025
2014Notional Maturity Paying Fair
Counterparty Amount Date Variable Receiving Value
Central 1 10,000,000 Dec 7, 2015 1.28% 2.520% 110,759 Central 1 10,000,000 May 12, 2018 1.28% 2.015% 143,655 Central 1 10,000,000 Jul 12, 2018 1.27% 2.040% 152,657 Central 1 10,000,000 Sep 5, 2018 1.28% 2.500% 316,362
$ 40,000,000 $ 723,433
The Credit Union’s exposure under derivative contracts is closely monitored as part of the overall
management of the Credit Union’s market risk.
7. MEMBER LOANS
2 0 1 5 2 0 1 4
Residential mortgages $ 354,316,652 $ 325,919,163
Personal loans 50,919,702 51,064,272
Commercial loans 177,239,939 171,636,640
582,476,293 548,620,075
Accrued interest receivable 1,398,048 994,271
583,874,341 549,614,346
Allowance for impaired loans (Note 8) (2,561,717) (1,324,860)
Total member loans $ 581,312,624 $ 548,289,486
Terms and conditions
Member loans can have either a variable or fixed rate of interest and have maturities ranging from
one to ten years.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
30
7. MEMBER LOANS (continued)
Terms and conditions (continued)
Variable rate loans are based on a prime rate formula, ranging from prime minus 1.30% to prime plus
15%. The rate is determined by the type of security offered and the member’s credit worthiness. The
Credit Union’s prime rate at December 31, 2015 was 3.30%.
The interest rate offered on fixed rate loans being advanced at December 31, 2015 ranges from 2% to
21%. The rate offered to a member varies with the type of security offered and the member’s credit
worthiness.
Residential mortgages are loans and lines of credit secured by residential property and are generally
repayable monthly with either blended payments of principal and interest or interest only.
Personal loans consist of term loans and lines of credit that are non‐real estate secured and, as such,
have various repayment terms. Some of the personal loans are secured by chattels and personal
property or investments, and others are unsecured.
Commercial loans consist of term loans, operating lines of credit and mortgages to individuals,
partnerships and corporations, and have various repayment terms. They are secured by various types
of collateral, including mortgages on real property, general security agreements, charges on specific
equipment, investments, and personal guarantees.
Credit quality of loans
A breakdown of the portfolio based on type of security held is as follows:
2 0 1 5 2 0 1 4
Unsecured loans $ 26,872,310 $ 26,469,960
Loans secured by chattels 50,629,071 53,168,471
Loans guaranteed by government 2,323,929 2,825,920
Residential mortgages insured by government 147,423,592 142,698,453
Residential mortgages uninsured 206,893,059 183,220,477
Commercial mortgages uninsured 145,082,749 136,718,243
Fully secured 3,251,583 3,518,551
$ 582,476,293 $ 548,620,075
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
31
7. MEMBER LOANS (Continued)
Concentration of credit risk
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 credit risk exists for the credit union due to its primary service area being Prince George
and its surrounding areas. To reduce the impact of the credit risk, the credit union has 41.6% (2014 –
43.8%) of its residential mortgages insured against credit loss.
8. ALLOWANCE FOR IMPAIRED LOANS
Total allowance for impaired loan provision comprises: 2 0 1 5 2 0 1 4
Collective allowance $ 1,188,862 $ 942,410
Specific allowance 1,372,855 382,450
$ 2,561,717 $ 1,324,860
Movement in individual specific provision and collective allowance for impairment:
Write‐offs Ending
Beginning net of BalanceBalance Provision recoveries 2 0 1 5
Personal LoansMortgages $ 366,731 $ 119,222 46,813 $ 439,140 Other 443,964 154,004 128,297 469,671
Commercial loansMortgages 130,184 588,001 59,710 658,475 Other 383,981 2,585,789 1,975,339 994,431
$ 1,324,860 $ 3,447,016 $ 2,210,159 $ 2,561,717
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
32
8. ALLOWANCE FOR IMPAIRED LOANS (continued)
Write‐offs Ending Beginning net of BalanceBalance Provision recoveries 2 0 1 4
Personal LoansMortgages $ 368,622 $ 8,073 9,964 $ 366,731 Other 379,508 96,540 32,084 443,964
Commercial loansMortgages 154,696 7,006 31,518 130,184 Other 320,319 139,934 76,272 383,981
$ 1,223,145 $ 251,553 $ 149,838 $ 1,324,860
Analysis of individual loans that are impaired based on repayments outstanding:
Loan SpecificBalance Allowance 2 0 1 5
Personal LoansMortgages $ 75,273 $ 45,450 $ 29,823 Other 269,778 192,405 77,373
Commercial loansMortgages 4,016,101 1,079,000 2,937,101 Other 100,794 56,000 44,794
$ 4,461,946 $ 1,372,855 $ 3,089,091
Carrying amount
Loan SpecificBalance Allowance 2 0 1 4
Personal LoansMortgages $ 358,222 $ 97,050 $ 261,172 Other 201,110 165,400 35,710
Commercial loansMortgages 192,972 10,000 182,972 Other 152,916 110,000 42,916
$ 905,220 $ 382,450 $ 522,770
Carrying amount
Key assumptions in determining the allowance for impaired loans collective provision
The Credit Union has determined the likely impairment loss on loans which have not maintained the
loan repayments in accordance with the loan contract, or where there is other evidence of potential
impairment such as industrial restructuring, job losses or economic circumstances.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
33
8. ALLOWANCE FOR IMPAIRED LOANS (continued)
Key assumptions in determining the allowance for impaired loans collective provision (continued)
In identifying the impairment likely from these events the Credit Union estimates the potential
impairment using the loan type, industry, geographic location, type of loan security, the length of time
the loans are past due and the historical loss experience. The circumstances may vary for each loan
over time, resulting in higher or lower impairment losses. The methodology and assumptions used
for estimating future cash flows are reviewed regularly by the Credit Union to reduce any differences
between loss estimates and actual loss experience. For purposes of the collective provision loans are
classified into separate groups with similar risk characteristics, based on the type of product and type
of security.
Loans with repayments past due but not regarded as individually impaired and considered in
determining the collective provision:
Residential 2 0 1 5 Mortgage Personal Commercial Total
30 to 90 days $ 853,741 $ 122,590 $ 364,971 $ 1,341,302 Over 90 days 1,846,338 15,523 3,233,167 5,095,028
Balance at December 31, 2015 $ 2,700,079 $ 138,113 $ 3,598,138 $ 6,436,330
Residential 2 0 1 4 Mortgage Personal Commercial Total
30 to 90 days $ 668,351 $ 143,640 $ 209,595 $ 1,021,586 Over 90 days 455,969 9,892 347,514 813,375
Balance at December 31, 2014 $ 1,124,320 $ 153,532 $ 557,109 $ 1,834,961
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
34
9. INTANGIBLE ASSETS
2 0 1 5 2 0 1 4
Indefinite useful life intangible assets:Licenses $ 3,377,677 $ 3,377,677 Goodwill 365,000 365,000
3,742,677 3,742,677
Limited life intangible assets:Banking platform 2,317,443 939,830 Accumulated amortization (807,723) (631,580)
1,509,720 308,250
$ 5,252,397 $ 4,050,927
10. OTHER ASSETS
2 0 1 5 2 0 1 4
Receivables, prepaids and other $ 2,554,035 $ 1,957,557
Derivative financial instrument (Note 6) 977,025 723,433
Income taxes receivable 276,813 ‐
Deferred income taxes (Note 15) 120,248 46,161
$ 3,928,121 $ 2,727,151
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
35
11. MEMBER DEPOSITS
2 0 1 5 2 0 1 4
Chequing $ 152,378,953 $ 131,482,802
Demand 120,948,032 130,113,961
Term 240,486,828 204,710,451
Registered savings plans 73,247,319 74,650,965
Registered retirement income funds 21,947,230 19,007,731
Tax free savings accounts 35,731,198 28,210,689
Members' shares (Note 16) 5,488,735 4,859,690
650,228,295 593,036,289
Accrued interest payable 3,659,285 3,162,125
$ 653,887,580 $ 596,198,414
Terms and conditions
Chequing deposits are due on demand and bear interest at a variable rates ranging from 0% up to
prime (3.30% at December 31, 2015).
Demand deposits are due on demand and bear interest at a variable rates ranging from 0% up to
prime (3.30% at December 31, 2015).
Term deposits bear fixed rates of interest for terms of up to five years. Interest can be paid annually,
semi‐annually, monthly or upon maturity. The interest rates on term deposits issued on December
31, 2015 range from .20% to 6.75%.
The registered retirement savings plans (“RRSP”) accounts can be fixed or variable rate. The fixed rate
RRSPs have terms and rates similar to the term deposit accounts described above. The variable rate
RRSPs bear interest at demand account rates up to 1.8% at December 31, 2015.
Registered retirement income funds (“RRIFs”) consist of both fixed and variable rate products with
terms and conditions similar to those of the RRSPs described above. Members may make withdrawals
from a RRIF account on a monthly, semiannual or annual basis. The regular withdrawal amounts vary
according to individual needs and statutory requirements.
The tax‐free savings accounts can be fixed or variable rate with terms and conditions similar to those
of the RRSPs described above.
Included in chequing deposits is an amount of $6,670,787 (2014 ‐ $5,509,657) denominated in US
dollars.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
36
11. MEMBER DEPOSITS (continued)
Concentration of risk
The Credit Union potentially has an exposure to groupings of individual deposits which concentrate
risk and create exposure to particular segments. The Credit Union mitigates this concentration risk
by limiting deposits by any one member or related group of members to no more than 2.5% of total
deposits. The Board of Directors may approve on exception a deposit outside of this policy. At
December 31, 2015 there were no members that were in exception to the 2.5% limit.
12. OTHER LIABILITIES
2 0 1 5 2 0 1 4
Accounts payable and accrued liabilities $ 1,804,567 $ 2,075,260
Income taxes payable ‐ 115,722
Post retirement benefits obligation (Note 14) 543,850 626,416
$ 2,348,417 $ 2,817,398
13. LOAN SECURITIZATION FINANCING
Loan securitization financing represents the carrying value of mortgage pools which have been
transferred to other financial institutions. The Credit Union may be required to repurchase any
maturing mortgages in any of the mortgage pools where the terms and conditions of the loan cannot
be agreed upon with that financial institution. These contracts have terms of repayment between 1
to 6 years and bear interest at various rates ranging from 3.00% to 6.25%.
These assets were transferred to other institutions between 2004 and 2007. The value of the assets
transferred matched the corresponding liability incurred in the amount of $22,389,536. In the current
year, the Credit Union has recognized $5,082 of management fees.
14. PENSION PLAN
The Credit Union makes contributions to a pension plan, which is a multi‐employer plan, on behalf of
members of its staff. The amount contributed to the plan for 2015 was $561,002 (2014‐$505,032).
The contributions were made for current service and these have been recognized in profit or loss. In
accordance with the terms of specific employment contracts, certain employees (and retired
employees) are entitled to benefits after retirement. These benefits are accrued as they are earned,
and reversed as they are paid to the individual.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
37
15. INCOME TAXES
The significant components of tax expense included in profit or loss are composed of:
2015 2014
Current tax
Current tax expense in respect of
current year $ 74,418 $ 305,585
Non‐deductible expenses (recoveries) (25,141) 15,223
Other 23,601 39,847
Reassesssment of 2005 taxes (77,987) ‐
(5,109) 360,655
Deferred tax
Deferred tax (recovery) expense in the
current year (74,087) (2,741)
$ (79,196) $ 357,914
Reasons for the difference between tax expense for the year and the expected income taxes based
on the statutory tax rate of 15.9% (2014‐ 15.1%) are as follows:
2015 2014
Net income before tax $ 468,040 $ 2,023,743
Income tax expense based on statutory rate 74,418 305,585
Effect of non‐deductible expenses (recoveries) (25,141) 15,223
Other (50,486) 37,106
Reassessment of 2005 taxes (77,987) ‐
Income tax expense $ (79,196) $ 357,914
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
38
15. INCOME TAXES (continued)
The movement in 2015 deferred tax liabilities and assets are:
2014
Recognized in
net income 2015
Deferred income tax assets (liabilities)
Allowance for credit losses $ 150,208 $ 62,908 $ 213,116
Premises and equipment (190,660) 64,974 (125,686)
Other 86,613 (53,795) 32,818
$ 46,161 $ 74,087 $ 120,248
2013
Recognized in
net income 2014
Deferred income tax assets (liabilities)
Allowance for credit losses $ 97,000 $ 53,208 $ 150,208
Premises and equipment (148,000) (42,660) (190,660)
Other 94,420 (7,807) 86,613
$ 43,420 $ 2,741 $ 46,161
16. MEMBERS’ SHARES
Equity Liability Equity Liability
Membership
shares $ ‐ $ 3,300,240 $ ‐ $ 3,320,490
Investment
shares 8,753,979 2,188,495 6,156,802 1,539,200
$ 8,753,979 $ 5,488,735 $ 6,156,802 $ 4,859,690
2 0 1 5 2 0 1 4
Membership shares and investment shares are recognized as a liability in member deposits, equity or
compound instrument based on their terms in accordance with IAS 32, Financial Instrument
Presentation and IFRIC 2 Members’ Shares in Co‐operative Entities and Similar Instruments.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
39
16. MEMBERS’ SHARES (continued)
If the shares are classified as equity, they are recognized at cost. If the shares are recognized as a
liability, they are initially recognized at fair value net of any transaction costs directly attributable to
the issuance of the instrument.
Terms and conditions
Membership shares
As a condition of membership, which is required to use the services of the Credit Union, each member
is required to hold $5 in membership shares and is restricted to a maximum holding of $1,000 per
member. These membership shares are redeemable at par only when a membership is withdrawn.
Dividends are at the discretion of the Board of Directors.
Funds invested by members in member shares are not insured by the Credit Union Deposit Insurance
Corporation (“CUDIC”). The withdrawal of member shares is subject to the Credit Union maintaining
adequate regulatory capital (see Note 25), as is the payment of any dividends on these shares.
Membership shares that are available for redemption are classified as a liability. Any difference
between the total membership shares and the liability amount are classified as equity. The Credit
Union has authorized an unlimited number of membership shares.
Investment shares
Investment shares are non‐voting, can be issued only to members of the Credit Union, and pay
dividends at the discretion of the Board of Directors in the form of cash. They are redeemable
thereafter subject to the Credit Union maintaining adequate regulatory capital (see Note 25).
Where the Credit Union has met its regulatory capital requirements, through subordinate classes of
shares, the investment shares are deemed to be a compound instrument. The liability component is
measured as the present value of the amount redeemable and the equity component, which
represents the discretionary dividends, is measured as the residual.
Where the Credit Union has not met its regulatory capital requirements, investment shares that are
available for redemption are classified as a liability, measured at the present value of the amount
redeemable, and the difference is classified as equity. The Credit Union has authorized an unlimited
number of investment shares. Members are limited to a maximum of $50,000 per individual.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
40
16. MEMBERS’ SHARES (continued)
Distributions to members
Net Net
Income Equity Income Equity
Dividends on membership shares $ 71,101 $ ‐ $ 102,356 $ ‐
Dividends on investment shares 72,651 290,603 55,718 222,872
Less related income taxes ‐ (47,078) ‐ (33,431)
$ 143,752 $ 243,525 $ 158,074 $ 189,441
2 0 1 5 2 0 1 4
17. CONTRIBUTED EQUITY
Contributed equity represents the net assets received from members in 2004 from the merger of
Prince George Savings, Quesnel & District and Nechako Valley credit unions.
18. ACCUMULATED OTHER COMPREHENSIVE INCOME
2 0 1 5 2 0 1 4
Accumulated other comprehensive income is comprised of:
Effective portion of the fair value of interest rate swaps 1
$ 953,058 $ 692,353
less: taxes associated with the above (154,395) (103,854)
$ 798,663 $ 588,499
1 Represents items that may be subsequently reclassified to profit or loss
19. OTHER OPERATING INCOME 2 0 1 5 2 0 1 4
Account service fees $ 2,450,255 $ 2,076,928
Commissions 3,622,099 3,280,960
Loan payment and other fees 820,122 829,935
Loan insurance 1,005,108 1,064,100
Other 589,260 376,212
$ 8,486,844 $ 7,628,135
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
41
20. OPERATING EXPENSES 2 0 1 5 2 0 1 4
Salaries and benefits $ 12,391,194 $ 12,159,465
Advertising and member relations 749,963 751,828
Advisory and board donations 62,804 129,448
Service charges 479,810 462,123
Consulting fees 97,893 44,600
Data processing 1,361,439 1,233,278
Depreciation 1,427,951 1,648,312
Insurance 182,415 168,784
Office and general 2,234,011 2,452,300
Premises 1,283,688 1,342,732
Professional services 568,293 713,515
Regulatory costs 644,444 564,524
$ 21,483,905 $ 21,670,909
21. RELATED PARTY TRANSACTIONS
The Credit Union entered into the following transactions with key management personnel which are
defined by IAS 24, Related Party Disclosures, as those persons having authority and responsibility for
planning, directing and controlling the activities of the Credit Union, including twelve directors and six
key management personnel.
2 0 1 5 2 0 1 4
Compensation
Salaries and other short‐term employee benefits $ 1,427,062 $ 1,154,518
Total pension and other post‐employment benefits 101,204 99,655
$ 1,528,266 $ 1,254,173
The Credit Union makes loans, primarily residential mortgages, and offers deposits, primarily fixed
term deposits, to its Board of Directors, management and employees at various preferred rates and
terms. All loans are in good standing and are granted in accordance with the Credit Union’s
standard credit practices.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
42
21. RELATED PARTY TRANSACTIONS (continued)
2 0 1 5 2 0 1 4
Loans to key management personnel
Aggregate value of loans advanced $ 2,326,982 $ 3,364,665
Interest received on loans advanced 55,107 58,609
Total value of lines of credit advanced 387,900 407,900
Interest received on lines of credit advanced 5,441 5,859
Unused value of lines of credit 217,044 204,264
Deposits from key management personnel
Aggregate value of term and savings deposits 1,853,419 1,394,683
Total interest paid on term and savings deposits 34,791 28,961
There are no additional benefits or concessional terms and conditions applicable to key
management personnel or close family members.
22. CONTINGENCIES
During the normal course of business, there are various claims and proceedings which have been or
may be instituted against the Credit Union. Management believes the disposition of the matters that
are pending or asserted is not expected to have a material adverse effect on the financial position or
the results of operations of the Credit Union.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
43
23. FINANCIAL INSTRUMENT CLASSIFICATION AND FAIR VALUE
The following table represents the carrying amount by consolidated statement of financial position
classification.
Difference
(in thousands of dollars) Book Value Fair Value Between BV & FV
Assets
Cash and cash equivalents $ 26,727 $ 26,727 $ ‐
Investments 55,509 56,335 826
Member loans 581,312 590,472 9,160
Other assets 3,531 3,531 ‐
$ 667,079 $ 677,065 9,986
Liabilities
Member deposits $ 653,887 $ 657,599 (3,712)
Payables, accruals and other 2,348 2,348 ‐
Loan securitization financing 1,305 1,352 (47)
$ 657,540 $ 661,299 (3,759)
Fair value difference $ 6,227
2 0 1 5
Difference (in thousands of dollars) Book Value Fair Value Between BV & FV
AssetsCash and cash equivalents $ 12,315 $ 12,315 $ ‐ Investments 49,718 50,023 305 Member loans 548,289 555,462 7,173 Other assets 2,681 2,681 ‐
$ 613,003 $ 620,481 7,478
LiabilitiesMember deposits $ 596,198 $ 597,373 (1,175) Other liabilities 2,701 2,701 ‐ Loan securitization financing 2,320 2,393 (73)
$ 601,219 $ 602,467 (1,248)
Fair value difference $ 6,230
2 0 1 4
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
44
23. FINANCIAL INSTRUMENT CLASSIFICATION AND FAIR VALUE (continued)
The estimated fair value of the variable rate loans is assumed to be equal to book value as the interest
rates on these loans re‐price to market on a periodic basis. The estimated fair value of fixed rate loans
is determined by discounting the expected future cash flows at current market rates for products with
similar terms and credit risks.
The estimated fair value of the demand deposits and variable rate deposits are assumed to be equal
to book value as the interest rates on these deposits re‐price to market on a periodic basis. The
estimated fair value of fixed rate deposits is determined by discounting the expected future cash flows
of these deposits at current market rates for products with similar terms and credit risks.
The following table provides an analysis of investments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is
observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in
active markets for identical assets or liabilities using the last bid price;
Level 2 fair value measurements are those derived from inputs other than quoted prices
included with Level 1 that are observed for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices). The fair value of derivative financial
instruments is calculated based on valuation techniques using inputs reflecting market
conditions at a specific point in time and may not be reflective of future fair values; and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the financial asset or financial liability is categorized
is determined on the basis of the lowest level of input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their entirety into only one of three levels.
Level 1 Level 2 Level 3 Total
Cash and cash equivalents $ 26,727,022 $ ‐ $ ‐ $ 26,727,022
Central 1 bid term deposits ‐ 3,764,101 ‐ 3,764,101
Derivative instruments ‐ 977,025 ‐ 977,025
$ 26,727,022 $ 4,741,126 $ ‐ $ 31,468,148
Financial Assets at fair value at Dec 31, 2015
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
45
23. FINANCIAL INSTRUMENT CLASSIFICATION AND FAIR VALUE (continued)
Level 1 Level 2 Level 3 Total
Cash and cash equivalents $ 12,314,809 $ ‐ $ ‐ $ 12,314,809
Central 1 bid term deposits ‐ 3,043,236 ‐ 3,043,236
Derivative instruments ‐ 723,433 ‐ 723,433
$ 12,314,809 $ 3,766,669 $ ‐ $ 16,081,478
Financial Assets at fair value at Dec 31, 2014
24. FINANCIAL INSTRUMENT RISK MANAGEMENT
General objectives, policies and processes
The Board of Directors has overall responsibility for the determination of the Credit Union’s risk
management objectives and policies and, whilst retaining ultimate responsibility for them, it has
delegated the authority for designing and operating processes that ensure effective implementation
of the objectives and policies to the Credit Union’s finance function. The Board of Directors receives
quarterly reports from the Credit Union’s Senior Management Team through which it reviews the
effectiveness of the processes put in place and the appropriateness of the objectives and policies it
sets.
Credit risk
Credit risk is the risk of financial loss to the Credit Union if a counterparty to a financial instrument
fails to make payments of interest and principal when due. The Credit Union is exposed to credit risk
from claims against a debtor or indirectly from claims against a guarantor of credit obligations.
Risk measurement
Credit risk rating systems are designed to assess and quantify the risk inherent in credit activities in
an accurate and consistent manner. To assess credit risk, the Credit Union takes into consideration
the member’s credit worthiness, ability to pay, and value of collateral available to secure the loan.
The Credit Union’s credit risk management principles are guided by its overall risk management
principles. The Board of Directors ensures that management has a framework, and policies, processes
and procedures in place to manage credit risks and that the overall credit risk policies are complied
with at the business and transaction level.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
46
24. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Credit risk (continued)
Risk measurement (continued)
The Credit Union’s credit risk policies set out the minimum requirements for management of credit
risk in a variety of transactional and portfolio management contexts. Its credit risk policies comprise
the following:
general loan policy statements including approval of lending policies, eligibility for loans,
exceptions to policy, policy violations, and loan administration;
loan lending limits including Board of Director limits, schedule of assigned limits and exemptions
from aggregate indebtedness;
loan collateral security classifications which set loan classifications, advance ratios and
amortization periods;
procedures outlining loan overdrafts, release of substitution of collateral, temporary
suspensions of payments and loan renegotiations;
loan delinquency controls regarding procedures followed for loans in arrears; and
audit procedures and processes for the Credit Union’s lending activities.
With respect to credit risk, the Board of Directors receives monthly reports summarizing new loans,
delinquent loans and overdraft utilization. The Board of Directors also receives an analysis of bad
debts and allowance for doubtful loans quarterly.
A sizeable portfolio of the loan book is secured by commercial and residential property in northern
British Columbia. Therefore, the Credit Union is exposed to the risks in reduction of the loan to
valuation ratio cover should the property market be subject to a decline. The risk of losses from loans
undertaken is primarily reduced by the nature and quality of the security taken.
Liquidity risk
Liquidity risk is the risk that the Credit Union will not be able to meet all cash outflow obligations as
they come due. The Credit Union mitigates this risk by monitoring cash activities and expected
outflows so as to meet all cash outflow obligations as they fall due.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
47
24. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Liquidity risk (continued)
Risk measurement
The assessment of the Credit Union’s liquidity position reflects management’s estimates, assumptions
and judgments pertaining to current and prospective market conditions and the related behavior of
its members and counterparties.
Objectives, Policies and Procedures
The Credit Union’s liquidity management framework is designed to ensure that adequate sources of
reliable and cost effective cash or its equivalents are continually available to satisfy its current and
prospective financial commitments under normal and contemplated stress conditions.
Provisions of the Credit Unions Act require the Credit Union to maintain a prudent amount of liquid
assets in order to meet member withdrawals. The Credit Union has set a minimum liquidity ratio of
8% of member deposits.
The Credit Union manages liquidity risk by:
continuously monitoring actual daily cash flows and longer term forecasted cash flows;
monitoring the maturity profiles of financial assets and liabilities;
maintaining adequate reserves, liquidity support facilities and reserve borrowing facilities; and
monitoring the liquidity ratios monthly.
The Board of Directors receives monthly liquidity reports as well as information regarding cash
balances in order for it to monitor the Credit Union’s liquidity framework. The Credit Union was in
compliance with the liquidity requirements throughout the fiscal year.
As at December 31, the position of the Credit Union is as follows:
2 0 1 5 2 0 1 4
Qualifying liquid assets on hand
Cash and cash equivalents $ 26,727,022 $ 12,314,809
Liquidity reserve deposit 49,125,868 44,376,261
Term deposits 3,674,101 3,043,236
79,526,991 59,734,306
Total liquidity requirement 52,311,066 47,695,873
Excess liquidity requirement $ 27,215,925 $ 12,038,433
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
48
24. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Objectives, policies and procedures (continued)
The maturities of liabilities are shown below under market risk.
There have been no significant changes from the previous year in the exposure to risk or policies,
procedures and methods used to measure the risk.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as
a result of market factors. Market factors include three types of risk: interest rate risk, currency risk,
and equity risk.
Interest rate risk
Interest rate risk is the potential for financial loss caused by fluctuations in fair value or future cash
flows of financial instruments because of changes in market interest rates. The Credit Union is
exposed to this risk through traditional banking activities, such as deposit taking and lending.
The Credit Union’s goal is to manage the interest rate risk of the statement of financial position to a
target level. The Credit Union continually monitors the effectiveness of its interest rate mitigation
activities.
Risk measurement
The Credit Union’s position is measured monthly. Measurement of risk is based on rates charged to
clients as well as funds transfer pricing rates.
Objectives, policies and procedures
The Credit Union’s major source of income is financial margin, the difference between interest earned
on investments and members loans and interest paid on member deposits. The objective of asset/
liability management is to match interest sensitive assets with interest sensitive liabilities as to
amount, term, and interest rate re‐pricing dates, thus minimizing fluctuations of income during
periods of changing interest rates.
Schedules of matching and interest rate vulnerability are regularly prepared and monitored by Credit
Union management and reported to FICOM in accordance with the Credit Union’s policy. This policy
has been approved by the Board of Directors and filed with FICOM as required by Credit Union
regulations. For the year‐ended 2015, the Credit Union was in compliance with this policy.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
49
24. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Interest rate risk (continued)
Objectives, policies and procedures (continued)
The following schedule shows the Credit Union’s sensitivity to interest rate changes. Amounts with
floating rates or on demand are classified as maturing within three months, regardless of maturity. A
significant amount of loans and deposits can be settled before maturity on payment of a penalty, but
no adjustment has been made for repayments that may occur prior to maturity. Amounts that are
not interest sensitive have been grouped together, regardless of maturity.
As at December 31, 2015:
Liabilities Asset /
Assets Yield (%) and equity Cost (%) Liability Gap
Maturity dates
Fixed rate:
0‐3 months $ 32,323,589 4.62% $ 44,365,703 2.31% $ (12,042,114)
4‐6 months 24,049,627 3.96% 23,805,676 2.22% 243,951
7‐12 months 50,390,863 3.85% 59,694,800 2.33% (9,303,937)
1‐2 years 105,019,855 3.65% 103,805,312 2.24% 1,214,543
2‐3 years 95,194,527 3.46% 57,836,023 2.20% 37,358,504
3‐4 years 102,428,728 3.50% 22,463,398 1.87% 79,965,330
Over 4 years 102,236,281 3.31% 47,090,306 1.70% 55,145,975
511,643,470 359,061,217 152,582,252
Non‐interest rate 33,133,740 244,113,446 (210,979,706)
sensitive
Variable rate 148,092,263 3.96% 89,694,809 0.72% 58,397,454
$ 692,869,472 3.53% $ 692,869,472 1.32% $ ‐
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
50
24. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Interest rate risk (continued)
As at December 31, 2014:
Liabilities Asset /
Assets Yield (%) and equity Cost (%) Liability Gap
Maturity dates
Fixed rate:
0‐3 months $ 29,462,350 5.09% $ 30,511,013 2.17% $ (1,048,663)
4‐6 months 28,410,779 4.49% 30,221,013 2.31% (1,810,234)
7‐12 months 44,317,579 4.06% 58,071,040 2.40% (13,753,461)
1‐2 years 77,301,313 4.09% 109,049,689 2.37% (31,748,376)
2‐3 years 98,718,261 3.73% 28,237,617 2.36% 70,480,644
3‐4 years 89,403,708 3.42% 25,784,979 1.99% 63,618,728
Over 4 years 102,899,787 3.59% 33,389,007 1.90% 69,510,780
470,513,778 315,264,357 155,249,420
Non‐interest rate 27,922,079 217,430,163 (189,508,084)
sensitive
Variable rate 135,117,170 4.62% 100,858,506 1.01% 34,258,665
$ 633,553,026 3.87 $ 633,553,026 1.39 $ ‐
Interest sensitive assets and liabilities cannot normally be perfectly matched by amount and term to
maturity. The Credit Union utilizes interest rate swaps to assist in managing this rate gap.
An analysis of the Credit Union’s risk due to changes in interest rates determined that an increase in
interest rates of 1% could result in an increase to profit or loss before income taxes of $336,000 (2014 ‐
$108,000) while a decrease in interest rates of 1% could result in a decrease to profit or loss before
income taxes of $94,000 (2014 ‐ $200,000).
There have been no significant changes from the previous year in the exposure to risk or policies,
procedures and methods used to measure the risk.
Currency risk
Foreign currency exchange risk refers to the potential impact of changes in foreign exchange rates on the
Credit Union’s earnings when balances or currencies of its foreign currency liabilities are not matched
with the balances of its foreign currency assets.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
51
24. FINANCIAL INSTRUMENT RISK MANAGEMENT (continued)
Currency risk (continued)
The Credit Union’s foreign exchange risk is related to Unites States dollar deposits. Foreign currency
changes are continually monitored by the investment committee for effectiveness of its foreign
exchange mitigation activities and holdings are adjusted when offside of the investment policy.
Risk measurement
The Credit Union’s position is measured at least weekly. Measurement of risk is based on rates
charged to clients as well as currency purchase costs.
Objectives, policies and procedures
The Credit Union’s exposure to changes in currency exchange rates shall be controlled by limiting the
un‐hedged foreign currency exposure to $500,000 in U.S. funds.
For the year‐end December 31, 2015, the Credit Union’s exposure to foreign exchange risk is within
policy. Outlined below is a summary of foreign currency assets and liabilities at December 31, 2015:
2 0 1 5 2 0 1 4
Assets
Cash (US$) $ 3,124,547 $ 1,838,798
Investments (US$) 3,924,872 2,950,000
7,049,419 4,788,798
Liabilities
Deposits (US$) 7,004,564 4,753,181
Net exchange risk $ 44,855 $ 35,617
There have been no significant changes from the previous period in the exposure to risk or policies,
procedures and methods used to measure the risk.
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
52
25. CAPITAL MANAGEMENT
The Credit Union’s objectives with respect to capital management are to maintain a capital base that
is structured to exceed regulatory requirements and to best utilize capital allocations.
Regulations to the Credit Unions Act (“The Act”) require that the Credit Union establish and maintain
a level of capital that meets or exceeds the following:
retained earnings shall not be less than 35% of the capital base of the Credit Union (46.73% ‐
December 31, 2015; 47.7% – December 31, 2014); and
total regulatory capital calculated in accordance with the Act shall not be less than 8% of the
risk weighted value of its assets (13.06% ‐ December 31, 2015; 12.7% ‐ December 31, 2014).
The Credit Union considers its capital to include membership shares, investment shares, contributed
equity, deferred taxes and retained earnings. There have been no changes in what the Credit Union
considers to be capital since the previous period.
The Credit Union establishes the risk weighted value of its assets in accordance with the regulations
of The Act which establishes the applicable percentage for each class of assets. The Credit Union’s
risk weighted value of its assets as at December 31, 2015 was $323,629,945 (2014 ‐ $305,914,076),
with a risk weighted asset ratio of 46.7% (2014 – 48.3%).
2 0 1 5 2 0 1 4
Tier I Capital
Membership shares $ 3,300,240 $ 3,320,490
Investment shares ‐ non‐redeemable portion 8,753,979 6,156,802
Contributed equity 6,953,743 6,953,743
Deferred income taxes (120,248) (46,161)
Retained earnings 18,821,803 18,518,091
37,709,517 34,902,965
Tier II Capital
Redeemable portion of investment shares 2,188,495 1,539,200
System capital 4,823,279 4,433,136
7,011,774 5,972,336
Less: deductions from capital 2,419,607 2,092,829
Total Regulatory Capital $ 42,301,684 $ 38,782,472
Integris Credit Union Notes to the Consolidated Financial Statements December 31, 2015
53
26. NON‐CASH TRANSACTIONS During the year, the Credit Union entered into the following non‐cash investing and financing activities which are not reflected in the consolidated statement of cash flows:
proceeds with a value of $100,000 in respect of the Credit Union’s disposal of property
were received in the form of naming rights;
dividends of $69,896 were reinvested in membership shares and dividends of $363,253
were reinvested in investment shares.
27. COMMITMENTS
Credit facilities
The Credit Union has authorized credit facilities with Central 1 totaling $19,000,000. These credit
facilities are secured by a registered assignment of book debts and a general security agreement
covering all assets of the Credit Union. At December 31, 2015, the Credit Union had no borrowings
(2014: $Nil) under these facilities.
The Board of Directors has set an overall borrowing limit of $26,560,250.
Member loans
The Credit Union has the following commitments to its members at the year‐end date on account of
loans, unused lines of credit and letters of credit:
Unadvanced loans $ 7,035,193
Unused lines of credit $ 63,138,708
Letters of Credit $ 2,767,992
Contractual obligations
The Credit Union leases land and building for certain offices. The estimated yearly rental is
approximately $321,777 with triple net adjustments every year. The lease will be up for renewal in
2017.
INTEGRIS CREDIT UNION SCHEDULE 1Consolidated Continuity of Property and Equipmentyear ended December 31, 2015
Leasehold Furniture and Computer Parking
Land Buildings improvement equipment software Vehicles lot Total
CostBalance at
$ 3,521,348 $ 15,342,893 $ 1,246,922 $ 7,702,808 $ 1,322,251 $ 41,072 $ 200,956 $ 29,378,250
Additions 17,259 3,743,466 (3,555) 913,453 117,417 1,173 250,532 5,039,745 Disposals (43,432) (775,453) (14,759) (271,809) (48,144) ‐ ‐ (1,153,597)
Balance on $ 3,495,175 $ 18,310,906 $ 1,228,608 $ 8,344,452 $ 1,391,524 $ 42,245 $ 451,488 $ 33,264,398
Accumulated depreciationBalance at
$ ‐ $ 4,387,396 $ 923,453 $ 6,283,134 $ 1,233,608 $ (2,050) $ 100,149 $ 12,925,690
Depreciation expense ‐ 495,952 76,431 628,966 37,205 4,281 8,973 1,251,808 Disposals ‐ (725,407) (14,641) (265,218) (48,144) ‐ ‐ (1,053,410)
Balance on $ ‐ $ 4,157,941 $ 985,243 $ 6,646,882 $ 1,222,669 $ 2,231 $ 109,122 $ 13,124,088
Net book value $ 3,495,175 $ 14,152,965 $ 243,365 $ 1,697,570 $ 168,855 $ 40,014 $ 342,366 $ 20,140,310
December 31, 2014
December 31, 2015
December 31, 2014
December 31, 2015
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INTEGRIS CREDIT UNION SCHEDULE 2Consolidated Continuity of Property and Equipmentyear ended December 31, 2014
Leasehold Furniture and Computer Parking
Land Buildings improvement equipment software Vehicles lot Total
CostBalance at
$ 3,503,805 $ 14,577,168 $ 1,246,922 $ 7,279,382 $ 1,281,762 $ 67,411 $ 193,606 $ 28,150,056
Additions 17,543 765,725 ‐ 423,426 40,489 44,072 7,350 1,298,605 Disposals ‐ ‐ ‐ ‐ ‐ (70,411) ‐ (70,411)
Balance on $ 3,521,348 $ 15,342,893 $ 1,246,922 $ 7,702,808 $ 1,322,251 $ 41,072 $ 200,956 $ 29,378,250
Accumulated depreciationBalance at
$ ‐ $ 3,880,687 $ 811,992 $ 5,501,114 $ 1,178,141 $ 34,402 $ 87,596 $ 11,493,932
Depreciation expense ‐ 506,709 111,461 782,020 55,467 3,959 12,553 1,472,169 Disposals ‐ ‐ ‐ ‐ ‐ (40,411) ‐ (40,411)
Balance on $ ‐ $ 4,387,396 $ 923,453 $ 6,283,134 $ 1,233,608 $ (2,050) $ 100,149 $ 12,925,690
Net book value $ 3,521,348 $ 10,955,497 $ 323,469 $ 1,419,674 $ 88,643 $ 43,122 $ 100,807 $ 16,452,560
December 31, 2013
December 31, 2014
December 31, 2013
December 31, 2014
55