OUR VISIONThe islands’ choice for financial
and community leadership.
OUR MISSIONWe are a democratic, member- owned
organization that provides financial services and
contributes to the well being of our communities.
The Values and Principlesthat Guide Our Vision & Mission are:
AccountabilityWe maintain the highest level of financial
accountability to our members and our community.
CooperationWe work together in a fair, open and
caring way for the benefit of those we serve.
ExcellenceWe are enthusiastic, team-oriented,
and dedicated professionals.
InnovationWe are an empowering organization
that encourages innovative ideas.
IntegrityWe are honest, trustworthy, ethical, and
respectful in our relationships with everyone.
ResponsibilityWe are committed to being an organization
that embraces corporate social responsibility.
ResponsivenessWe are responsive to the needs of our
members, our community and each other.
C O N T E N T S
Report to the Membership 1
Board of Directors 4
Success Stories 7
Consolidated Financial 20Statements
Management’s Report 20
Audit Committee Report 21
Investment & Lending 21Committee Report
Auditors’ Report 22
Financial Statements 23
Notes to Consolidated 26Financial Statements
Branch Information 37
A N N U A L R E P O R T
2 0 0 3
After celebrating life to its fullest, Kerm Culham passed away unexpectedly
on March 31, 2004. He was born in 1943 to Iva and Russell Culham in
Cabri, Saskatchewan.
A well-respected human resources professional, Kerm joined the
Coastal Community Credit Union team in April 1992, and headed the
human resources area during his twelve years with us. He brought vast
experience, wisdom and innovative human resource practices to the
credit union.
Kerm thoroughly enjoyed the people part of his career, which spanned
40 years. He truly cared about the well-being of our employees. Under
his direction and his commitment to employee participation, education,
mutual respect, and workplace wellness, our Human Resources department
has helped Coastal Community achieve its status as a healthy, supportive
and vibrant workplace.
Kerm leaves many dear friends at Coastal Community, in the credit union
industry, and in our communities. Those who knew Kerm will remember
his wonderful sense of humour and optimistic outlook on life.
An avid sportsman throughout his life, the game of golf captivated him
more and more as time progressed, which he shared with close friends
and family.
His greatest passion in life was his dedication to, and love for, his family.
He is survived by his wife and best friend, Deborah; son Harry; daughter
Dannielle Nichol; daughter Jessica; and grandson Kyran. He is also
survived by mother Iva, and predeceased by father Russell. Kerm leaves
behind five siblings, Ken, Karen, Lloyd, Lyle, and Kathy, and many dear
friends and colleagues.
Our credit union and administration office will not be the same.
We will miss Kerm's good friendship, calm leadership, vast experience
and wonderful smile.
In Memoriam
KERMIT (KERM) RUSSELL CULHAM
Vice President, Human Resources
In 2003 Coastal Community Credit Union surpassed the $500 million asset mark,
achieved over $4.6 million in earnings from operations, and shared over $1 million
directly with its members. Our success was due to a number of principles and practices,
including responsible member relationship management, strong community involvement,
a supportive human resources environment, fiscally-responsible financial management,
and innovative product development and service delivery. Most important to our
success, however, were the ongoing support of our members and the commitment
of our employees and directors.
Financial ResultsFrom the perspective of both growth and profitability, 2003 was again a very successful
year for Coastal Community Credit Union. The growth in assets for Coastal Community
Credit Union of 9.70%, representing $47.8 million, speaks well to our overall success.
We ended the year with a healthy $541,157,347 in assets.
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We are pleased to report to the Membership on the activities
and accomplishments of your Credit Union for 2003, which was
an extremely successful year.
Report to the Membership
JUDY FRASER, Chair of the Board
R.A. (BOB) BENNIE, President and CEO
0
100
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AssetsDepositsLoans
2003200220010
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200
300
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AssetsDepositsLoans
200320022001
Loans, Deposits & AssetsIn Millions of Dollars
Financial Results continued from 1
The local economies – in all of our communities – were
vibrant and growing during 2003. A very strong real estate
market contributed to exceptional growth in our loans
portfolio. Loans growth at 9.89% continued the strong
growth trend of the previous year. Deposit growth during
2003 was also robust, with growth in member deposits
of 9.25% compared to the provincial credit union system
average of 8.24%.
Our portfolio of assets under administration (not included
in our consolidated statements), which includes the Family
of Ethical Funds and the balances administered by our
financial advisors, grew by $12.2 million, reflecting both
increased consumer confidence and a stronger market
performance. This brings the total off-balance sheet assets
under administration to $101.9 million.
In the fall of 2003, CCCU purchased the building that
houses our Harbourfront Branch, resulting in an increase
in the value of our premises and equipment.
This purchase is a very tangible statement of our
commitment to downtown Nanaimo and confirms
our position as one of the major financial institutions
in Nanaimo.
Earnings from operations were $4.6 million, before
distributions to members and payment of income taxes.
We were very pleased to transfer $2.9 million of these
earnings to our retained earnings. Capital adequacy
at 11.26% exceeds the 8.00% base as required by
provincial regulations, and reflects another year of
good growth in capital.
Given this strong operating income, your Board
of Directors declared an Investment Equity Share
Dividend of 6.0% and a Membership Equity Share
Dividend of 3.0%.
Report to the Membership
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Return on Average Assets
In Percent
200320022001
.89
.68
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Net IncomeEarnings
200320022001
Human ResourcesOne of the many initiatives for Human Resources during
2003 was the creation of our WOW (Working on Wellness)
employee committee. This strategic initiative with guiding
values of Confidentiality, Voluntary and Open Participation,
Integrity, Empowerment and Support, has been well received
by our employees. Over 91% of employees participated in
an introductory survey and based on their input, the WOW
committee has coordinated evening seminars, web-based information distribution, library
contributions, and support for personal wellness initiatives. We thank the WOW Committee
members for their innovative contributions to employee wellness.
A principal theme for the human resources program of Coastal Community Credit Union
is “education.” We are committed to supporting and encouraging educational endeavors
for all of our employees, managers and directors. Our Education Centre, located below the
Bowen Community Branch location was in use 145 days last year, offering a variety of
courses. In total, 195 employees from the credit union, insurance and financial planning
divisions participated in over 900 courses during 2003.
Our focus is on the future needs of our credit union and our membership, and our
commitment is to prepare and support all of our employees as they strive to meet those needs.
3
RecognitionIn 2003, the Marketing Association for Credit Unions again recognized Coastal Community
Credit Union. A first place Achievement in Marketing Excellence Award was won for the
2002 Annual Report. We were also recognized with two Certificates of Excellence for the
2003 RRSP Campaign and the 2002 Community Savings Bond (An Investment with Real
Heart) Campaign. At the local front, readers of the Nanaimo News Bulletin rated Coastal
Community Credit Union as the “Best Bank” in Nanaimo; we thank them for this honour.
Report to the Membership
With respect to Patronage Rebates, the Board of Directors
was pleased to approve patronage rebates in the amount of
$790,397. Patronage rebates were paid based on rebates of
loan interest paid by members, bonuses on deposit interest
received by members, and rebates of service fees paid by
members for the operation of their savings and chequing
accounts. In total, distributions to members in the form of
dividends and rebates amount to $1,020,201, up 9.40%
over 2002. This is truly “Sharing our Success” with those
who contributed to it !
Financial Results continued from 2
During 2003, the Board of Directors reconfirmed the mission and principles of Coastal
Community Credit Union. We also affirmed our commitment to a new vision, which
is to be: “The islands’ choice for financial and community leadership.” We reviewed
our growth strategy in light of the unsuccessful merger with Island Savings Credit
Union, and we continue to believe that mergers, partnerships and alliances with other
like-minded Vancouver Island credit unions are the way of the future. To that end,
we are exploring opportunities with a number of Vancouver Island credit unions.
While not a new initiative, Corporate Social Responsibility has been given an elevated
priority for our organization. During 2004, we will be doing an audit of our current
practices, and evaluating our programs and processes in regards to a socially responsible
organization. We are committed to operating in an economically and environmentally
sustainable manner while recognizing the interests of our stakeholders. Stakeholders
include members, employees, business partners, local communities,
the environment and society at large.
BOARD OF DI R ECTORS: ( clockwise from bottom left )
JOHN NEWALL, JAY MUSSELL, BOB SMITS, MICHELLE BUTTS, JOE SIEBER,
JUDY FRASER, LEN TOWNSEND, AND SUSANNE JAKOBSEN.
( Missing from photo: JOHN F. LITTLE )4
Report to the Membership
Board of Directors
Considerable effort has been directed towards reviewing board fiduciary responsibilities
to ensure that our policies and processes are above reproach. Prudent fiscal
management demands that we constantly monitor the risks inherent in our financial
operations. The board also continued to focus on governance and has initiated a
board self-evaluation process.
The Board of Directors approved funding for a number of major initiatives during 2003.
The purchase of the Harbourfront Community Branch building was finalized; the
branch renovations at the Qualicum Beach Community Branch were completed; and
the much needed renovations for the Hammond Bay Community Branch were approved.
The administration offices on Victoria Crescent are being expanded to support the
centralization of loans processing - a move that will allow our branch employees to
focus more on the member and less on the paperwork. We also approved funding
for the Member Relationship Management project. This project will provide tools
for our employees that will enable them to provide even more personalized
service to our members.
5
Report to the Membership
Board of Directors continued from 4
COASTAL COMMUNITY EXECUTIVE GROUP: ( from left to right )
LORNE PURCHASE, Vice President, Operations
LOIS STEWART, Executive Assistant
LYNNE FRASER, Vice President, Finance and Community Relations
BRUNO DRAGANI, Vice President, Retail Services
KERMIT CULHAM, Vice President, Human Resources
JOE CRISTIANO, Vice President, Marketing
Community InvolvementOur community involvement during 2003 proved again to be well received by all of
our communities – from Gabriola Island to Qualicum Beach. Financial and in-kind
contributions were made to a variety of groups – over 250 organizations received our
support and funding during this past year. Our directors, managers, and employees
were again at the forefront in contributing their time and energies to many
worthwhile projects.
Our corporate funding, branch fundraising and employee commitment activities were
provided to various categories of groups and events – Community Service, Seniors,
Youth, Culture, Education, Medical, Sports, Environment and Ecology. During 2003, a
total of $250,000 was returned to the communities we serve in the form of corporate
donations, sponsorships, scholarships, in-kind donations, as well as through our
Fundraising Fridays program. During 2003, our Fundraising Fridays program passed
a milestone – since inception in 1997 our employee fundraising has exceeded
$100,000 in funds raised for local non-profit organizations!
We were also pleased to increase our scholarship funding levels and to add two new
scholarships for 2004. The Leaders of Tomorrow scholarships are available to students
who have shown leadership qualities in community activities as well as academic
proficiency. Funds are available to students of all of our communities with preference
given to members of our credit union and may be used for academic or
vocational pursuits.
We are currently working on a Community Branching Initiative which would see even
stronger contributions and engagement by our branches to their local communities.
Coastal Community Credit Union recognizes the significance of the local identity of
each branch and community, and the need to preserve its uniqueness. This is an
exciting concept that we look forward to working on in 2004.
2003 was an exciting year. Sharing our success with our members and communities
continues to demonstrate the difference between being a bank and being a credit union
– and even more importantly for members, the difference between being a customer
and being a member. At Coastal Community Credit Union we remain committed to
our employees, our members and our communities.
Thank you for your continued support. It is what drives our success.
Respectfully submitted,
Judy Fraser R.A. (Bob) BennieChair, Board of Directors President and CEO
6
Report to the Membership
7
Success Stories
The last several years have been very successful for Coastal Community Credit Union,
with 2003 being the most successful experienced by many measurements.
Overall asset growth, earnings, and membership growth were solid and well over the
provincial average. We surpassed several milestones in 2003 - the half a billion asset
mark, the 40,000 membership mark, and the $4 million earnings mark. Our success will
allow us to share the greatest amount ever directly with our members - over $1 million.
The success of any organization is dependent on many factors - both external and
internal. Some of the external factors that contributed positively include an improving
local economy and low interest rates.
As identified earlier in the annual report there are a number of internal factors that
contributed to our success. These include solid board governance, responsible member
relationship management, strong community involvement, supportive human resources
practices, fiscally-responsible financial management, and innovative product
development and service delivery.
While there are many more than we are able to identify in the annual report, the
following pages list a number of internal success activities. We also highlight six
stories from 2003 that provide a sampling of the various initiatives that contributed
to our success.
Once again I would like to thank members for their ongoing patronage, and
employees and directors for their hard work and commitment. It is through your
actions that Coastal Community Credit Union is such a success.
R.A. (BOB) BENNIE,
President and CEO
Sharing our SuccessDistributing over $1 million to our members
and our communities
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of Coastal Community since 1991,
figured prominently in our Sharing
our Success communication campaign
in spring 2003.
S U C C E S S E S
JanuaryDividends totaling over $400,000
are paid to members on their
share holdings, including
Membership and Investment
Equity Shares.
The Parksville Civic and
Technology Centre of Malaspina
University-College is given funding
by Coastal Community for a
state-of-the-art sound system.
Our local Crime Stoppers receives
special donation from Coastal
Community to help fund its
community improvement activities.
The Fundraising Fridays program
begins the year by raising funds
and awareness for the District 69
Volunteer Centre Association and
Nanaimo Volunteer and Information
Centre Society. The Fundraising
Fridays program provides funds
for different community groups
each month.
S U C C E S S E S
FebruaryCoastal Community conducts
a very successful RRSP campaign.
While members benefit from
an excellent range of RRSP products,
the credit union later receives a
Certificate of Excellence Award
for the campaign by the Marketing
Association for Credit Unions.
The Ballenas High School
Dry Grad receives a boost from
employees of our Parksville
Community Branch, as they hold
special fundraising activities for
the important initiative.
The Fundraising Fridays
community partners for the
month are Project Literacy,
serving the Parksville/Qualicum
areas and Literacy Nanaimo.
Sharing our success with our members and communities is at
the heart of our credit union.
Members will remember the beginning of 2003 as the time when we
shared almost $1 million of our profits with them. Members received
cheques and direct deposits to their accounts based on the amount of
business they conducted with us.
Member Rewards resulting from our credit union’s success in 2003 will
be even more memorable, as we share over $1 million with members –
an increase of 9.4% over the previous year!
For 2003, dividends are based on share balances, while patronage
rebates are calculated based on loan interest paid by members, deposit
interest received by members, and service fees paid by members for
the operation of their savings and chequing accounts. This is truly
“Sharing our Success” with those who contribute to it !
In addition to sharing with members, we also share our profits with
the larger communities we serve. During 2003, we provided $250,000
in donations and sponsorships to various organizations. Not only did we
offer financial support to over 250 community organizations, but also
our employees contributed thousands of hours, serving as volunteers,
directors and advisors for our vital community groups.
Overall, our success in 2003 will result in the sharing of over $1.25 million
with members we serve and the communities we live in. Sharing more
than one-quarter of our profits with our members and communities simply
makes sense. After all, it’s the trust our members
and communities place in us that
drives our growth and success.
Sharing our Success
9
Innovative Products forMembers and Communities
Preserving a green space in Nanaimo
Supporters of the Nanaimo Area
Land Trust and members of
Coastal Community Credit Union,
the Thomas family enjoys an
afternoon in Linley Park.
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S U C C E S S E S
MarchThe 6th annual Community Builder
GIC is launched, in support of the
Linley Valley Park Campaign by
the Nanaimo Area Land Trust
(see feature story for more).
The spring fundraising campaign
of the Canadian Cancer Society
is supported by Coastal Community
Credit Union with a donation
as well as an insert through
its monthly statement.
The new Neighbourhood Heroes
Hidden Hero Program receives
a special donation to fund the
development of its website.
Fundraising Fridays features
Community Kitchens in District 69
and Nanaimo. These groups offer
support for low-income families.
S U C C E S S E S
AprilCoastal Connection, an exciting
and well-received employee
newsletter is launched for 2003.
Enhancements to MasterCard
credit cards are introduced to
members. Among the changes
are the addition of Platinum
and Business cards.
Coastal Community Credit Union's
annual report for 2002 is produced.
The report would later win an
Achievement in Marketing Excellence
award from the Marketing Association
for Credit Unions.
Fundraising Fridays supports
the Canadian Cancer Society.
It’s the last remaining large expanse of natural habitat within Nanaimo.
Home to mature Douglas firs, open meadows, woodlands, wildlife, and
rare songbirds, the Linley Valley is a remarkable oasis within the city.
Thanks to phenomenal community support, this pristine 145-acre area
will become a park for current and future generations to enjoy.
In 2003 we partnered with the Nanaimo Area Land Trust (NALT) in
support of their Linley Valley Park Campaign through our Community
Builder GIC program. Through this innovative product we are able to
meet our members’ investment needs and our credit union’s financial
needs, while contributing to the well being of our communities. Based
on the success achieved in GIC deposits, over $7,900 was donated to
the Linley Valley Park Campaign. This amount was in addition to
previous donations by the credit union to NALT totaling $7,500.
Along with this financial support, we
promoted the importance of the initiative
throughout our branches. We set up a
special account to accept donations from
the community, informed our members
about the project and sold t-shirts to
raise awareness.
The response was outstanding. With widespread community support,
and the support of our members, the Nanaimo Area Land Trust was
able to preserve the land. This pristine green space will now be protected
from development, and community members can continue to enjoy the
natural beauty of the parkland.
Through a similar Community Savings Bond program in the fall of
2003, we partnered with the Nanaimo RCMP and Oceanside RCMP
School Liaison Units, as well as School Districts 68 and 69, and
donated $8,822 for new anti-bullying programs to be introduced in
an effort to reduce the incidence of bullying.
Since launching the Community Builder and Community Savings Bond
programs in 1997 we’ve donated more than $100,000 to various community
groups throughout our communities. In 2004, we’ll continue to build on
this legacy of success.
Innovative Products for
Members and Communities
11
Personal ServiceBringing banking services
into the community
Member of Coastal Community
Ann Clowes (center), gets help
with her banking at her home from
Brenda Light, Assistant Manager,
and April Mathers, Member Service
Representative, of our Hammond Bay
Community Branch.
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S U C C E S S E S
MayCoastal Community reaches
a special milestone -
$500 million in assets!
Member Reward cheques and
direct deposits of over $500,000
are distributed to members,
bringing the total amount shared
directly with members to almost
$1 million based on 2002 results.
The BC credit union system
contributes more than $1 million
towards establishing the BC
Credit Union Centre of Excellence
in Depression Research, in
conjunction with the VGH/UBC
Hospital Foundation.
Coastal Community donates
$39,000 to this project,
representing $1 per member.
The Angel Program of the
Vancouver Island International
Children's Festival is sponsored.
Fundraising Fridays partner is
the Multiple Sclerosis Society,
Central Island Chapter.
S U C C E S S E S
JuneMember support of branch
activities helps raise over $10,000
in the annual Financial Institutions
Campaign to benefit the Vancouver
Island Hospital Foundation.
Coastal Community Credit Union
wins first prize in the "Best Bank"
category as rated by the readers
of the Nanaimo News Bulletin.
The Choices program wraps up
for another school season. Through
a variety of engaging activities in
classroom presentations, Coastal
Community employees emphasize
the long-term benefits of ongoing
education to all grade 8 students in
School Districts 68 and 69.
Errington Therapeutic Riding
Association and Nanaimo Saori
Weaving Society are the focus
of June's Fundraising Fridays.
Great personal service is one of the qualities that has made Coastal
Community such a popular place to do business. While we offer a full
complement of hi-tech financial services like Internet banking, we are
still committed to taking care of our members in person.
This commitment to personal service even extends out of the branch.
Realizing that many seniors have limited access to transportation, we
decided to go to them. In June of 2003, employees from our Hammond
Bay Community Branch began weekly visits to the Long Lake Chateau,
a seniors residence in Nanaimo. We meet most of the banking needs of
our members at the residence – whether it’s cashing a cheque, paying
bills, or setting up term deposits.
Our Bowen Community branch has developed similar relationships.
Since 1999, Bowen employees have been visiting Berwick on the Lake
and Lakeside Gardens.
The program has become very popular,
and not only with the seniors. Our
employees take great pride in helping
our members and look forward to the
weekly visits. And now when the
members from these seniors’ residences
come into the branch, they feel very
comfortable as they already recognize
familiar faces.
Coastal Community is committed to high quality personal service
that will continue to be the foundation of our organization and one
of the keys to our success.
Personal Service
13
Supporting Our EmployeesPromoting wellness at work and in life
Members of the Beach Day Committee
enjoy Parksville Beach. From left are
Sandra Kokorudz, Mary Brouilette,
Janice Krall, Carol Thompson, Melissa Young,
Paula Blazina, Laura McCafferty,
and Marnie Weeks. Missing from photo
is Wendy MacLachlan.
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S U C C E S S E S
JulyA special renovation loan
campaign featuring a credit union
member is launched.
The Nanaimo Youth Services
Association receives $10,000
from a special youth campaign
of the Savings and Credit Unions
of British Columbia.
Fun, games, food & sunshine
are enjoyed by Coastal Community
employees and their families at the
first annual Family BBQ and Beach
Day at beautiful Parksville Beach.
Coastal Community is the major
sponsor of the largest baseball
tournament in Nanaimo's history.
The North American competition
brings 17 teams of 11 year old
baseball players together for
the tournament.
Fundraising Fridays partners
are Springboard Family Centre
and Nanaimo Foodshare.
S U C C E S S E S
AugustNanaimo Foodshare's
Summer Lunch Munch program
receives support through a
golf tournament held by the
employees of our Bowen
Community Branch.
Employees of our Nanoose Bay
Community Branch volunteer
once again at the celebrated
Nanoose Bay Teddy Bear Picnic.
In support of the Kelowna
fire victims, funds are raised
though a BBQ and bake sale
by the employees of our
Southgate Community Branch.
Symphony in the Park,
a unique presentation of the
Vancouver Island Symphony,
is sponsored by
Coastal Community.
Fundraising Fridays supports
Arrowsmith Search and Rescue
and Nanaimo Search and Rescue.
We care about the well-being of our employees. Through professional
and personal education, employee involvement, fun group activities,
and team commitment, Coastal Community works hard at creating a
healthy and vibrant workplace.
We recognize continuing education is critical to the success of our
employees and the credit union. We provide professional and personal
learning activities to enrich the quality of work life and member service
through a variety of innovative programs. In 2003, nearly 200 of our
250 employees attended personal and professional development courses.
We covered topics specific to our business, as well as programs on people
management, coaching, sales training and leadership development.
Although we place a high value on professional training and education,
other initiatives also help make us a healthy and supportive place to
work. We encourage employee involvement through a variety of methods
such as the Ideas Into Action suggestion program, and the Coastal
Connections employee newsletter. Last year a Working on Wellness
campaign was launched by a newly-formed Wellness Committee,
composed of employees from our various locations. The campaign
included evening seminars on wellness topics and an intranet site
providing employees with access to a wealth of information on
health and wellness.
But it’s not always about work – we also believe strongly in celebrating
our successes by having fun ! Last year we hosted our first annual
Beach Day. An employee driven initiative, this highly successful event
brought 180 people together on Parksville Beach for games, music,
food and fun. Plans are already underway by our employee Beach Day
Committee for an even better celebration
in 2004.
Through education, participation, mutual
respect and having fun, Coastal Community
is committed to the promotion of wellness
in our workplace and to the success of our
employees, our credit union, and ultimately
our communities.
Supporting Our Emp loyees
15
Financial Services forBusinesses and Organizations
Growing Businesses and Communities
CO
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Senior Account Manager, Business Centre,
and Kevin Wilson, Executive Director
of the Society of Organized Services,
in front of the new S.O.S. Thrift Shop
in Parksville.
S U C C E S S E S
SeptemberMemberDirect Internet banking
is enhanced, offering members
new online banking services
including: hyperWALLET, multiple
bill payments, enhanced account
inquiries and a secure online
message centre.
The kids activity corner at
the Heart & Stroke Foundation's
Mother-Daughter Walk is sponsored
by Coastal Community.
A special contest by Coastal
Community Insurance Agencies
awards seven students in
School Districts 68 & 69 with
driving lessons for their winning
submissions on safe driving.
The 2003 -2004 Jazz Series by
the Port Theatre is sponsored by
Coastal Community Credit Union.
St. John's Brigade receives
our Fundraising Fridays support
this month.
S U C C E S S E S
OctoberCoastal Community purchases
the building that houses our
Harbourfront Community Branch,
solidifying our commitment to
economic development in
downtown Nanaimo.
The fall 2003 Community Savings
Bonds become available for member
investment, with a donation of
$8,822 being provided to
partnering Nanaimo & Oceanside
RCMP School Liaison Units and
School Districts 68 & 69, as
they introduce new anti -bullying
programs.
Coastal Community earmarks
$1 million to lend as part of
the $10 million BC credit union
provincial GrowthStart initiative
to provide loans to rural
and small businesses.
The Ravensong Aquatic Centre
in Parksville receives a donation
by Coastal Community to install
a lift chair for individuals
with disabilities.
Support for Habitat for Humanity
is provided this month by the
Fundraising Fridays program.
When businesses and community organizations succeed, we all benefit –
through increased economic development and stronger communities.
We opened our Business Centre in 1996 to act as a hub for our
commercial lending expertise. The Centre specializes in providing
commercial financing for small and mid-sized local businesses and
community organizations.
In 2003, financing provided by our Business Centre assisted the Society
of Organized Services (SOS) in the construction of their new building
in Parksville. This 18,000 square foot retail space is now home to the
organization’s very popular thrift shop, which generates revenues to fund
SOS’s vital community services. This expansion made it possible for SOS
to convert its old thrift shop into a new child, youth and family centre,
providing additional support for the
community. We are proud to be
a financial partner for this important
organization.
Coastal Community is also participating
in a new provincial initiative
to help small businesses achieve their
goals. GrowthStart is a $10 million
business development fund that provides loans of up to $500,000 for
rural and small businesses. As one of the nine participating credit unions,
Coastal Community has earmarked $1 million to lend as part of this
program.
Our business banking services and the support we provide help businesses
and organizations succeed – just another way that we are strengthening
our local communities.
Financial Services for
Businesses and Organizations
17
Community InvolvementGiving back to the communities we serve
Michelle Butts,member of the Board
of Directors at Coastal Community,
and Corinne James, Coordinator of
the Old School House Arts Centre,
browse the gallery at the
Old School House in Qualicum.
CO
AS
TA
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OM
MU
NIT
YS
ucce
ss S
tori
es
S U C C E S S E S
NovemberAn innovative promotion of
Registered Education Savings Plans
features a special coin gift set.
The Working on Wellness
Committee provides employees
of Coastal Community with
enhanced information and
links on wellness through
its intranet website.
A total of $3,000 is raised
for the United Way Campaign.
Credit union employees contribute
through a payroll deduction program
and members contribute through
branch fundraising events.
Fundraising Fridays supports
District 69 Family Resource Centre
and the Boys & Girls Club
of Nanaimo and District.
S U C C E S S E S
DecemberAnother important milestone is
achieved as credit union membership
increases to 40,000 !
Coastal Community employees
and families enjoy the 12th annual
Coastal Community Skating Party,
held at the new twin rinks arena
in Parksville.
Our Qualicum Beach Community
Branch wins "Best Theme"
in the Moonlight Madness
Christmas Decorating Contest.
Harbourfront Community Branch
employees enter their first
themed float in the Santa Clause
Parade in Downtown Nanaimo.
Family Day at the Malaspina
University-College's Festival of Trees
is sponsored by Coastal Community.
Hospice organizations in our
communities are the recipients of
December's Fundraising Fridays.
Our commitment to all of our communities is a core value of Coastal
Community Credit Union. We are known for our innovative approach
to supporting those groups that contribute to the well-being of
our communities.
A total of $250,000 in cash and in-kind donations were made during
2003 to over 250 groups and organizations from Gabriola Island to
Qualicum Beach, which supported a broad range of projects and events.
Our corporate funding, branch fundraising and employee commitment
activities are provided to various categories of groups and events –
Community Service, Seniors, Youth, Culture, Education, Medical,
Sports, Environment and Ecology.
The Old School House Arts Centre in Qualicum Beach was one of many
organizations that received our support. The Centre, with two galleries
and eight studios for resident artists, will receive $10,000 over the next
five years to assist with operating costs and projects to upgrade their
facilities. One of the first projects undertaken was a renovation of the
Centre’s exterior.
Investing in local organizations makes our communities better
for all of us. We are very proud of the work we have done so far
and are striving to remain a leader in our communities.
Community Involvement
19
Management’s ReportThe consolidated financial statements and other financial information in this annual
report have been prepared by the management of Coastal Community Credit Union,
which is responsible for their reliability, completeness and integrity. They were
developed in accordance with requirements of the Financial Institutions Act of British
Columbia and conform in all material respects with Canadian generally
accepted accounting principles.
Systems of internal control and reporting procedures have been designed to provide
reasonable assurance that the financial records are complete and accurate so as to
safeguard the assets of the Credit Union. These systems include establishment and
communication of standards of business conduct throughout all levels of the
organization to provide assurance that all transactions are authorized and proper
records maintained. Further, the systems of control are reviewed by the Credit Union’s
external auditors.
The Board of Directors has approved the consolidated financial statements. The Audit
Committee of the Board, composed of three directors, has reviewed the statements
with the external auditors, in detail, and received regular reports on internal control
findings. BDO Dunwoody LLP, the external auditors appointed by the membership,
have examined the consolidated financial statements and attendant notes of the Credit
Union in accordance with Canadian generally accepted auditing standards. They have
had full and free access to employees of the credit union and the Audit Committee
of the Board. Their report outlines the scope of their examination and their opinion.
R. A. (Bob) Bennie Lynne Fraser
President & CEO Vice President,Finance & Community Relations
Consolidated Financial Statements ofCoastal Community Credit Union
Year ended December 31, 2003
20
Investment &Lending Committee ReportThe Investment and Lending Committee meets throughout the year to review and approve theCredit Union’s Investment and Lending Policies, process individual loan approvals, review ourprovision for losses, recommend bad debt write-offs to the Board of Directors, and monitorliquidity and capital adequacy levels. For 2003, the total loan portfolio grew from $421.5 millionto $463.1 million, representing healthy growth of 9.87% for the year. The growth was primarilydriven through personal mortgages and personal loan products. Overall loan delinquency atyear-end was 0.86%, which represents a decrease over the last two years from 1.89% (2001)and 0.97% (2002).
The weak economic conditions in 2000 and 2001 kept delinquency levels somewhat higher thanhistorically experienced. A recovery in the real-estate market in 2002 and 2003, however, hasserved to lower current delinquency levels. Write-offs during 2003 decreased over 2002 by$236,910.63. Contributions towards monthly loan loss reserves remained the same in 2002and 2003. Even with decreasing delinquency the Credit Union maintained the same reservelevels through 2003, to mitigate the impact of future loan losses.
I would like to thank the other members of the committee for their work and involvement:Susanne Jakobsen, John Newall, Joe Sieber and Bob Smits. I would also like to thank allemployees for their efforts put forth this past year, and the membership for their continuedsupport of the credit union’s products and services.
Len Townsend,Chair, Investment & Lending Committee
Audit Committee ReportDuring 2003, the Audit Committee met frequently to review the results of external and internalaudits. We also met to review and approve the annual budget and year-end financial statements.The committee reviewed and approved the 2003 audit plan and in all areas we are confident thatcurrent policies and procedures, and monitoring processes provide a safe and sound organizationfor our members.
Our internal auditors, Peter Reimer and Associates, of Delta, again concentrated on the risk andcontrols aspect of audit. In addition to regular branch audits, we have instituted technology andnetwork security reviews, database audits and an initial audit of the Money Laundering andProceeds of Terrorism policies and procedures.
Our external auditors, BDO Dunwoody, of Vancouver, and Church Pickard & Co., of Nanaimo,worked with the Audit Committee and the Board of Directors to ensure the timely and successfulcompletion of the external audit. Our thanks to Bill Cox, Lorana Laporte and the staff of both firms.
I wish to acknowledge the contributions of management and staff for their assistance andsupport. Also, my thanks to my fellow Audit Committee members – Bob Smits, Joe Sieber,Len Townsend, Susanne Jakobsen and Michelle Butts for their commitment to the audit process.
Respectfully submitted,
John LittleChair, Audit Committee
Consolidated Financial Statements ofCoastal Community Credit Union
Year ended December 31, 2003
21
Auditors’ ReportTo the Members of Coastal Community Credit Union
We have audited the consolidated Balance Sheet of Coastal Community Credit Union
as at December 31, 2003 and the consolidated statements of Earnings and Retained
Earnings and Cash Flows for the year then ended. These consolidated financial statements
are the responsibility of the Credit Union’s management.Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all material respects,
the financial position of the Credit Union as at December 31, 2003 and the results of its
operations and its cash flows for the year then ended in accordance with Canadian
generally accepted accounting principles. As required by the British Columbia Financial
Institutions Act, we report that, in our opinion, these principles have been applied on a
basis consistent with that of the preceding year.
Chartered Accountants
Nanaimo, British Columbia
February 6, 2004
Consolidated Financial Statements of
Coastal Community Credit Union
Year ended December 31, 2003
22
2003 2002
AssetsCash resources (note 3) $52,756,193 $50,531,751
Loans (note 4) 463,181,285 421,481,422
Investments (note 6) 11,870,853 12,920,318
Premises and equipment,
net of amortization (note 7) 8,634,715 4,963,765
Other assets (note 8) 4,714,301 3,420,529
$541,157,347 $493,317,785
LiabilitiesMember deposits (note 9) $514,127,006 $470,593,506
Short-term borrowings from Credit Union
Central of British Columbia (note 10) 500,045 –
Accounts payable and accrued liabilities 5,121,313 4,232,287
519,748,364 474,825,793
Members’ equityRetained earnings 21,408,983 18,491,992
$541,157,347 $493,317,785
See accompanying notes to consolidated financial statements.
On behalf of the Board:
Judy Fraser John Little
Director Director
Coastal Community Credit Union
Consolidated Balance Sheet
December 31, 2003, with comparative figures for 2002
23
2003 2002
Financial income:
Loans $28,379,100 $26,571,917
Cash resources and investments 3,205,446 2,641,206
31,584,546 29,213,123
Financial expenses:
Deposit 12,694,068 12,001,276
Borrowings 168,000 57,189
12,862,068 12,058,465
Financial margin 18,722,478 17,154,658
Other income (expenses):
Other income (note 12) 8,859,527 8,437,011
Provision for credit losses,
net of recoveries (note 4) (744,957) (840,265)
Other expenses (note 13) (2,588,218) (2,628,547)
5,526,352 4,968,199
Operating margin 24,248,830 22,122,857
Operating expenses (note 14) 19,584,279 18,979,279
Earnings from operations 4,664,551 3,143,578
Gain on dispositions (note 22) 154,080 2,314,955
Non-controlling interest (128,672) 13,963
Distribution to members (note 15) (1,020,201) (932,555)
Earnings before income taxes 3,669,758 4,539,941
Income taxes 752,767 569,001
Net earnings 2,916,991 3,970,940
Retained earnings, beginning of year 18,491,992 14,521,052
Retained earnings, end of year $21,408,983 $18,491,992
See accompanying notes to consolidated financial statements.
Coastal Community Credit Union
Consolidated Statement of Earnings and Retained Earnings
Year ended December 31, 2003, with comparative figures for 2002
24
2003 2002
Cash provided by (used in):Operations:
Net earnings $2,916,991 $3,970,940
Items not involving cash:
Amortization of premises
and equipment 939,595 1,025,097
Amortization of goodwill – 41,570
Gain on dispositions (154,080) (2,314,955)
Provision for loan losses 744,957 840,265
Change in non-cash operating
working capital (406,011) (363,161)
4,041,452 3,199,756
Financing:
Deposits 43,533,500 37,739,542
Short-term borrowings (repayments) 500,045 –
44,033,545 37,739,542
Investments:
Loans (46,470,713) (39,460,569)
Investments 1,049,465 (10,032,336)
Purchase of premises and equipment (4,609,280) (636,127)
Proceeds on dispositions 4,179,973 2,087,665
(45,850,555) (48,041,367)
Increase (Decrease) in cash position 2,224,442 (7,102,069)
Cash resources, beginning of year 50,531,751 57,633,820
Cash resources, end of year $52,756,193 $50,531,751
Supplemental Financial Information:Interest received $31,414,094 $29,007,301
Interest and dividends paid 12,250,465 12,354,847
Income taxes paid 553,266 399,255
Non-cash Investing Activity:Receivable relating to land disposition $ 640,000 $ 800,000
See accompanying notes to consolidated financial statements.
Coastal Community Credit Union
Consolidated Statement of Cash Flows
Year ended December 31, 2003, with comparative figures for 2002
25
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
Coastal Community Credit Union (“Credit Union”) is incorporated under the British ColumbiaCredit Union Incorporation Act. The operation of the Credit Union is subject to the BritishColumbia Financial Institutions Act. The Credit Union predominately serves members in thecentral Vancouver Island area.
1. Significant accounting policies:
(a) Basis of presentation:
These consolidated financial statements have been prepared in accordance with generallyaccepted accounting principles in Canada.
(b) Principles of consolidation:
These consolidated financial statements include the assets, liabilities, and operating resultsof the Credit Union and its wholly owned subsidiary, Coastal Community FinancialManagement Inc. and Coastal Community Insurance Agencies Ltd. (50% interest ownedby CCCU).
(c) Use of estimates:
The preparation of the financial statements of the Credit Union in accordance withCanadian generally accepted accounting principles requires management to makeestimates and assumptions, mainly considering values, which affect reported amounts ofassets, liabilities, net income, and related disclosures. Amounts are based on bestestimates but actual amounts may vary from the amounts recorded. Areas subject toestimation include provisions for credit losses (because of the inherent subjectivityinvolved in estimating the amount and timing of future cash flows) and amortization ofpremises and equipment (because of the difficulty in estimating the useful lives of theassets).
(d) Loans:
Loans to members are stated at the unpaid principal plus accrued interest less anallowance established to provide against potential losses on ultimate realization of theloan portfolio. The allowance is determined by reference to specific loans in arrears, priorloan collection experience, geographical concentration, economic conditions, and otherfactors, which in management’s judgment deserve consideration. Loans considereduncollectible are written off.
(e) Investments and goodwill:
Investments are recorded at lower of cost or net realizable value. Goodwill reflects theexcess of cost over the underlying tangible value of Creduco Insurance Agencies Ltd.assets acquired and is amortized on a straight-line basis over 10 years. On January 2,2002, a 50% interest in Coastal Community Insurance Agencies was sold to CumisServices Ltd.
(f) Premises and equipment:
Premises and equipment are recorded at cost less accumulated amortization.Amortization is provided on the straight-line basis over 5 to 10 years for furniture andequipment, 10 to 15 years for leasehold improvements, 25 years for buildings, and 3 to 5years for computer equipment.
(g) Revenue recognition:
Interest income on loans is recorded on the accrual method, unless the loan is classifiedas impaired. A loan is considered as impaired generally at the earlier of when, in theopinion of management, there is reasonable doubt as to the collectibility of principal orinterest, or when principal or interest is 180 days past due. Thereafter, interest income isrecognized on a cash basis only after any specific provisions or partial write-offs havebeen recovered and provided there is no further doubt as to the collectibility of principal.
26
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
1. Significant accounting policies (continued):
Income received on prepayment or renegotiation of fixed term loans is recorded asearned income in the year it is received.
(h) Dividends:
Dividends on non-equity and equity shares and patronage rebates are charged againstearnings.
2. Capital requirements:
The Financial Institutions Act requires the Credit Union to maintain, at all times, a capital baseadequate in relation to its level of business activities. The level of capital required is based on aprescribed percentage of the total value of its risk-weighted assets, each asset of the CreditUnion being assigned a risk factor based on the probability that a loss may be incurred onultimate realization of that asset.
Effective January 1, 1994, the Financial Institutions Act regulations prescribed a minimumrequired capital ratio of 8% of the risk-weighted value of assets. At December 31, 2003, theCredit Union had attained a capital ratio in excess of 11%.
3. Cash resources:
2003 2002
Cash on hand $3,414,353 $3,117,133
Demand and short-term investments held at Credit Union Central of British Columbia 48,495,791 46,656,691
Accrued interest on cash resources 846,049 757,927
$52,756,193 $50,531,751
In accordance with provincial legislation and the terms of arrangements with Credit UnionCentral of British Columbia, credit unions are required to maintain deposits with Credit UnionCentral of British Columbia totaling 10% of their deposits (net of equity and non-equityshares) and debt liabilities.
4. Loans:
An analysis of the Credit Union’s loan portfolio, (net of allowance for credit losses bycategory), is as follows:
2003 2002
Gross Specific Carrying Carryingamount allowance amount amount
Residential mortgages $300,366,386 $23,567 $300,342,819 $271,717,415
Commercial mortgages 75,759,970 987,281 74,772,689 63,350,752
Personal and other loans 86,799,878 175,041 86,624,837 85,038,445
Accrued interest 1,440,940 – 1,440,940 1,374,810
Net loans $464,367,174 $1,185,889 $463,181,285 $421,481,422
27
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
4. Loans (continued):
Analysis of specificallowance for Residential Commercial Personal Total Totalcredit losses mortgages mortgages and other 2003 2002
Allowance for credit losses, beginning $20,975 $787,451 $243,655 $1,052,081 $1,061,510
Provision, net of recoveries 2,592 499,708 242,657 744,957 840,265
23,567 1,287,159 486,312 1,797,038 1,901,775
Write-offs, less recoveries – 299,878 311,271 611,149 849,694
Allowance for creditlosses, ending $23,567 $987,281 $175,041 $1,185,889 $1,052,081
Allowance as a percentage of total loans 0.26% 0.25%
5. Securitized mortgages:
The Credit Union, as part of its program of managing liquidity, enters into arrangements tosecuritize mortgages through certain intermediaries.
Such securitized mortgages, which are not included in the loan balances, total $1,526,121 asat December 31, 2003 (2002 – $7,696,677). The Credit Union is required to administer thesemortgages until maturity. These securitized mortgages will mature by 2005.
The outstanding principal on securitized mortgages has either been insured with agovernment corporation or the holders have contractually waived recourse against the CreditUnion in the event the mortgage defaults.
6. Investments:
2003 2002
Statutory investments:
Credit Union Central of British Columbia shares $ 1,868,159 $ 1,813,383
Non-statutory investments:
Mortgage packages purchased 8,096,852 10,190,964
Communities First Investment Fund 1,000,000 –
Data Solutions Inc. shares at cost (market value $469,893) 557,297 557,297
Other investments 188,785 154,344
Goodwill, net of accumulated amortization 53,992 110,660
Accrued income on investments 105,768 93,670
$11,870,853 $12,920,318
28
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
6. Investments (continued):
(a) Shares in Credit Union Central of British Columbia are a required investment as acondition of membership in Credit Union Central of British Columbia and provinciallegislation. This investment is determined based on the Credit Union’s assets and isrealizable only on withdrawal from membership.
(b) Mortgages purchased have maturities in the range from 1 to 4 years with an averageanticipated yield of between 4.41% and 5.70%.
7. Premises and equipment:
2003 2002
Accumulated Net book Net bookCost amortization value value
Land $1,603,019 $ – $ 1,603,019 $1,003,630
Buildings 4,397,948 352,627 4,045,321 1,072,282
Leasehold improvements 2,819,690 1,640,318 1,179,372 1,366,784
Furniture and equipment 4,919,342 3,625,657 1,293,685 1,243,009
Computer equipment 2,755,376 2,242,058 513,318 278,060
$16,495,375 $7,860,660 $8,634,715 $4,963,765
8. Other assets:
2003 2002
Accounts receivable $1,307,073 $671,462
Prepaid expenses 903,017 634,751
Receivable – land sale 640,000 800,000
Advance payments for data processing services (note 18) 1,886,515 1,261,201
Property acquired in settlement of loans – –
Non – controlling interest (22,304) 53,115
$4,714,301 $3,420,529
The non-controlling interest consists of equity of CCIA held by a third party.
29
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
9. Member deposits:
2003 2002
Demand $156,563,560 $144,338,734
Term 249,214,081 226,240,979
Registered savings plans 97,850,228 90,133,215
Accrued interest on member deposits 5,381,554 4,769,995
509,009,423 465,482,923
Non-equity shares:
Non-voting, $1 par value, unlimited number authorized 216,911 233,988
Equity shares:
Membership equity shares, voting, $1 par value, unlimited number authorized 2,358,932 2,355,016
Investment equity shares, non-voting, $1 par value, unlimited number authorized 2,541,740 2,521,579
$514,127,006 $470,593,506
Non-equity shares:
Amounts contributed by members for non-equity shares can be withdrawn on demand orredeemed by the Credit Union. The holders of these shares may be entitled to a life insurancepolicy of up to $2,000 in accordance with the original purchase terms. The Credit Union hasceased issuance of these shares.
Equity shares:
The equity shares of the Credit Union are divided into two classes designated as membershipequity shares and investment equity shares having the following rights and restrictions:
• Each member shall purchase not less than 5 and may purchase not more than 1,000membership equity shares; a member may purchase a maximum of $5,000 in investmentequity shares; and, holding of non-equity shares is not restricted.
• Redemption of membership equity and investment shares is subject to certain conditionsand to approval of the directors, subject to an overall restriction that the Credit Union maynot be required to redeem in any financial year more than 10% of the total amount of suchshares issued and outstanding on the last day of the preceding financial year.
• Dividends declared may, at the discretion of the directors, be different for each class ofshares, and such dividends may be paid as an allocation of membership equity shares ornon-equity shares.
• Equity shares are not insured by the Credit Union Deposit Insurance Corporation ofBritish Columbia.
30
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
9. Member deposits (continued):
Deposit insurance protection:
The Credit Union Deposit Insurance Corporation of British Columbia, a governmentcorporation, protects the deposits of all British Columbia credit union members up to amaximum of $100,000 per “separate deposit” (as defined by Regulation) per credit union.
10. Credit facilities:
The Credit Union has an operating line of credit secured by a demand debenture in theamount of $30,000,000 in favour of Credit Union Central of British Columbia. The debenturecreates a floating charge on certain assets and undertakings of the Credit Union.
11. Commitments:
Computer services:
The Credit Union is committed to acquire on-line data processing services until January 1,2010. Data processing charges are based on the level of equipment and services utilized andon the number of Credit Union members.
Premises:
The Credit Union has committed to lease premises until 2011. The minimum lease payments,including estimated operating costs incorporated into lease agreements, in each of the nextfive years are $898,074 in 2004, $902,502 in 2005, $992,979 in 2006, $1,050,392 in 2007,and $863,336 in 2007.
12. Other income:
2003 2002
Member services:
Chequing and savings accounts $2,397,870 $2,433,221
Other service income 1,136,338 1,111,007
Insurance administration fees 553,453 482,608
Loan fees 653,229 597,589
Mortgage payout and prepayment income 710,188 561,100
Safety deposit boxes 139,740 140,423
5,590,818 5,325,948
Building and property income 119,796 97,551
Commission income from subsidiaries 3,148,913 3,013,512
$8,859,527 $8,437,011
31
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
13. Other expenses:
2003 2002
Electronic services $ 986,832 $ 990,994
Automated teller machine services 368,636 439,540
Other services 824,720 834,773
Chequing services 408,030 363,240
$ 2,588,218 $ 2,628,547
14. Operating expenses:
2003 2002
Salaries and benefits $11,883,399 $11,315,183
Premises and equipment 1,814,372 1,899,292
Other administrative 1,950,810 1,850,819
Data processing 1,367,952 1,279,970
Amortization of premises and equipment 939,595 1,025,097
Advertising and member relations 724,467 567,795
Professional services 460,329 458,886
Regulatory costs 195,060 359,666
Capital tax 248,295 181,001
Amortization of goodwill – 41,570
$19,584,279 $18,979,279
15. Distribution to members:
2003 2002
Dividends on equity shares $ 229,620 $ 397,766
Dividends on non-equity shares 184 2,362
Patronage rebate 790,397 532,427
$ 1,020,201 $ 932,555
16. Employee future benefits:
The Credit Union contributes toward retirement benefits for its employees.
(a) Group registered retirement savings plan
The contributions made for the majority of employees are made to a group registeredretirement savings plan at rates varying from 8% to 10% of annual salary. Contributionsmade during the year totaled $ 678,056 (2002 – $667,517). Employees contributed atotal of $207,842 (2002 – $175,378) during the year.
32
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
16. Employee future benefits (continued):
(b) Multi-employer defined benefit pension plan
A multi-employer defined benefit pension plan exists where the members are employeesfrom various credit unions in British Columbia. Contributions totaling $57,270 (2002 –$45,087) were made to this plan during the year on behalf of certain employees.Employees contributed a further $39,253 (2002 – $29,284) to the pension plan.
The plan is a defined benefit pension plan and is subject to actuarial review every threeyears. The latest available actuarial review is for December 31, 2000. As of the December31, 2000 valuation, plan assets exceeded plan liabilities by approximately $15,100,000.The actuary does not attribute portions of the plan surplus to individual employers. TheCredit Union records contributions to the plan as an expense in the year which paymentsare made.
(c) Individual pension plans
Individual pension plans are maintained for certain employees. The plans generally havethe characteristics of a defined contribution plan. Contributions made to these plansduring the year totaled $75,910 (2002 – $68,743) and by the employees totaled $44,538(2002 – $42,934).
17. Other Information:
At December 31, 2003 loans to directors, officers, management and members of a committeeof the Credit Union amounted to $ 4,194,535 (2002 – $4,264,590).
Directors received remuneration of $57,140 in 2003 (2002 – $49,693).
18. Related party transactions:
The Credit Union is under contract to purchase data processing services from DatawestSolutions Inc. until January 1, 2010.
The President and Chief Executive Officer of the Credit Union was, at December 31, 2003, amember of the Board of Datawest Solutions Inc.
Advance payments for data processing services have been made totaling $1,886,515 (2002 –$1,259,940). Advance payments of $152,379 bear interest at between 9% and 10%. The2002 advance payments of $867,470 bear a floating interest rate (prime) plus 2.5% perannum. The 2003 advance payments of $866,666 bear interest at prime plus 2%. Theadvance payments have been recovered by reduction of amounts otherwise payable for dataprocessing services. The advance payments will be fully recovered by the end of the contract,January 1, 2010.
This transaction is recorded at the exchange amount, being the consideration established andagreed to by the related parties.
19. Derivative financial instruments:
Index-linked swaps are being used by the Credit Union to hedge risk for registered and non-registered term products linked to changes in various stock indexes. The notional principal of$259,978 related to these contracts is not included in the non-consolidated balance sheet(2002 – $838,901).
Expenses from these contracts are deferred and amortized over the term of the swap contract.
Fixed – Received Interest rate swaps are being used by the Credit Union to increase thematurity structure of the asset base to better align rate sensitivity to the overall liability base.The notional value of $42,500,000 (2002 – $45,000,000) related to the contracts in placeDecember 31, 2003 is not included in the balance sheet. Interest earned on these swaps isbeing accrued over the term of the swap.
33
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
19. Derivative financial instruments (continued):
A forward swap agreement was signed on August 15, 2003. The swap is for $10,000,000;the effective date is August 16, 2004 with a maturity date of August 18, 2008.
In the opinion of management and in accordance with capital adequacy guidelines issued bythe provincial government, the credit risk inherent with this item is considered to beinsignificant.
20. Fair value of financial instruments:
2003 2002
Balance sheet
Assets
Cash resources $53,707,340 $51,489,327
Loans 471,434,641 419,704,247
Investments 12,086,516 12,640,095
Other assets 4,714,301 3,420,529
Liabilities
Member deposits 519,466,006 473,821,586
Short-term borrowings from Credit Union 500,045 –
Accounts payable and accrued liabilities 5,121,313 4,232,287
Swaps, net 684,000 199,770
The fair value of items that are highly liquid or short-term in nature approximates theircarrying value; such items include certain cash resources, investments, other assets, and otherliabilities. The fair value of loans and member deposits with fixed rates is estimated usingdiscounted cash flow models with discount rates based on market interest rates for similartypes of instruments. The fair value of loans and member deposits with variable rates ofinterest approximates their carrying value.
The fair values of cash resources, loans, investments, member deposits, and derivative financialinstruments are determined from estimates of their net proceeds of disposal. As the estimatesare affected by changes in the financial markets, the fair values will have changed subsequentto the year-end.
34
Coastal Community Credit Union
Notes to Consolidated Financial Statements
Year ended December 31, 2003
22. Dispositions:
On April 23, 2003, the Credit Union sold and converted the MasterCard portfolio to CU Credit.
This sale is summarized as follows:
Gross proceeds $4,179,973
Payout of balances (3,949,453)
Discount on delinquent cards (76,990)
Gain on disposition $ 154,080
In 2002, the gain on dispositions were from the sale of two real estate properties and the sale of 50%interest in Coastal Community Insurance Agencies Ltd.
21. Interest rate sensitivity position:
The repricing of the Credit Union’s interest-sensitive financial assets and liabilities and theiraverage effective interest rates, based on contractual maturity dates, is as follows (inthousands of dollars):
35
Repricing period2004 2005/2006 >=2007 Non-Rate
Principal Rate Principal Rate Principal Rate Sensitive Total Rate
ASSETS
Cash resources $12,974 3.3% $25,930 4.6% $8,500 4.1% $5,352 $52,756 3.7%
Loans 216,088 6.0% 182,627 6.5% 64,466 6.5% - 463,181 6.3%
Investments 2,204 6.7% 4,167 6.4% 5,290 6.2% 210 11,871 6.3%
Other assets - -% - -% - -% 13,349 13,349 -%
$231,266 5.8% $212,724 6.3% $78,256 6.2% $18,911 $541,157 5.9%
LIABILITIES
Member deposits $175,722 2.5% $ 115,656 4.4% $79,499 4.5% $143,250 $514,127 2.6%
Other liabilities – –% – –% – –% 5,621 5,621 –%
Equity – –% – –% – –% 21,409 21,409 –%
$175,722 2.5% $115,656 4.4% $79,499 4.5% $170,280 $541,157 2.6%
Swaps (37,500) 15,000 22,500 –
Net Mismatch $18,044 $112,068 $21,257 $(151,369)
Bowen2350 Labieux Rd.(250) 729 -2550
Hammond Bay6365 Hammond Bay Rd.(250) 390 - 8900
Harbourfront#111 – 59 Wharf St.(250) 741-3100
Southgate#111 – 50 Tenth St.(250) 741 -1233
MemberLink24 hr banking
Nanaimo(250) 741-10101- 888-741- 4040
Parksville(250) 248- 65701-800-303-6570
Administration#21-13 Victoria Cres.Nanaimo,B.C.V9R 5B9(250) 741-32001- 888 -741-1010
Business Centre2350 Labieux Rd.Nanaimo,B.C.(250) 729-2569
Coastal Community Credit UnionA N D
Coastal Community Financial Management Inc.
Community Branch Locations
Coastal Community Insurance Agencies Ltd.
Internet Sitewww.cccu.ca
Gabriola Island#7 – 580 North Rd.(250) 247- 8521
Nanoose Bay#2 -2451 Collins Cres.(250) 468 -7624
Parksville140 Alberni Hwy.(250) 248-3275
Qualicum Beach118 2nd Ave.(250) 752-9244
Nanaimo
Nanaimo
Bowen2350 Labieux Rd.(250) 729-2570
Hammond Bay6365 Hammond Bay Rd.(250) 390-8940
Harbourfront#111 – 59 Wharf St.(250) 741-3175
Southgate#111 – 50 Tenth St.(250) 741- 8600
Gabriola Island#7 – 580 North Rd.(250) 247- 8521
Nanoose Bay#2-2451 Collins Cr.(250) 468-9944
Parksville140 Alberni Hwy(250) 248- 5725
Qualicum Beach120A 2nd Ave.West(250) 752- 3331
Coastal Community Credit Union