smile :) - visioncu.ca€¦ · MAKES US SMILE.” 6 Smiling is the most essential form of communication there is. Kim Loesch CDA Clerk Head Office Arlene Stauffer VP Finance & Administration

smile :)

Battle River Credit Union 2002 Annual Report

we’re all“QUALITY PRODUCTS, INNOVATIVETECHNOLOGY, MEMBER ACCESSIBILITY,COMMITMENT TO COMMUNITY, ANDSERVICE WITH A SMILE – THAT’SWHO WE ARE.”

Photo: TyAge 10 monthsNew MemberFebruary 2002

Come Grow With UsAt Battle River Credit Union, we’re all smiles. We’ve achieved our bestannual results and financial position ever– with record increases in loans,deposits, assets and profits, amongother things. We’ve allocated $750,000to reserves and reinvested over$40,000 in community initiatives.

Come grow, and smile, with us.

Smiling is contagious.See?Smiling is contagious.See?

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smiles

Outstanding PerformanceHaving had our best annual results everin the past year, Battle River CreditUnion is in a strong financial positionfor future success. An allocation offunds for future growth and stability ofour Credit Union brings our reservesclose to the level they were before wedoubled in size.

Makes you want to smile, doesn’t it?

The Best Personal ServiceWe’re convinced that smart and mean-ingful investments ultimately lead tolarger yields. Your smiles are reflectedin ours, so we’re intent on investing inthe best service, accessibility, modernfacilities and state-of-the-art technology,all for the benefit of our membership.We’re committed to the communitiesthat are committed to us. We don’t havecustomers. Instead we have members,friends, neighbours and family. Our rela-tionship with our membership is enviedindustry-wide. So while other cus-tomers are frowning, feel free to smile.

Unprecedented GrowthDeep roots grow tall trees. Our mem-bership is helping us reach for the sky,one year at a time. Records you say?We had record increases in key areas,giving us a healthy growth spurt. Our52 years of innovation and membersupport have put us on the leadingcompetitive edge. Our 52 years ofshared smiles keep us there.

Exciting New ProductsHow can you hide an incurable grin?Our new products include an industry-first Transaction Imaging System forcheques, and a new farm equipment lineof credit for our agricultural members,making buying equipment easier andfaster. A new home equity line of creditallows our members to draw on theequity in their homes for the moreimportant things in life.

Smile faster. Smile larger. Smile again.

BATTLE RIVER CREDIT UNION 2002 ANNUAL REPORT

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Smile

Our brilliant, smiling employees saw more in our community. Looking at “u” and “t”, theysaw something crucial: the “future”. Sure, they left great things like “i” and “c” aside, but tooksomething more important along instead: “u”. And they added an “e”, just because we thinkvowels are a sound investment. Soon enough, another discovery. Thought gave us “u” and“u” gave us community, and our community gave us the future. And we liked that. A lot. Infact, we liked it so much we went back and borrowed “m”, “i”, “s” and “l” from our community’ssoul, and borrowed an “e” from the future and gave ourselves something: a “Smile”. We likedthat. A lot. In fact, it’s one of our favourite words. Our employees are proud of it. That’s whythey wear it, even when you’re not. And that should make you smile. And we’d like that.A lot.

We started with “our”, as in “our” family. But what really stood out about “our” family was“u”; our members, our employees. We liked that. A lot. We wanted to include “u” in everythingwe did, so we did a little thinking along with our dreaming. We thought about fame, and wethought about profit, and we thought about markets, and those things were great, but noneof them included “u”. But as we were dreaming, we noticed that with a little thought, comes“u”. We liked thought so much that we borrowed two things from it: “o” and “u”. We tookthose two things and something came quite naturally: soul. And we liked that. A lot. So wedecided to look for other things that “u” could make. Guess what? It takes “u” to build “us”.That was inspirational. But we found that “u” is essential to something else, and once we haddiscovered it we realized it was there all along. We found community. And it had soul, too.Imagine that. We like community.

“THIS IS WHERE WEWORK AND WE’REPROUD OF THAT.THAT’S WHY YOU’LLSEE US SMILING. WELOVE THIS PLACE.”

Pauline MarcinkowskiProduct Development & Training Manager

Jason TerleskyBranch ManagerTwo Hills


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Thank YouI am pleased to report another year of record earnings for your Credit Union.

Outstanding. That is the only word to describe this year’s results. Our earnings beforeProfitShare and taxes were $4,374,000, by far the highest in our history. $2,770,000 was allocatedto our members by way of ProfitShare.

The Board of Directors has set the goal of the Credit Union of providing very competitiveloan and interest rates while building reserves for stability and growth. Though our growthover the past few years has been significant – we are now the 34th largest Credit Union inCanada (outside Quebec) – our reserves now stand at 7.54% of assets.

One ratio I believe deserves special mention. Our earnings before tax and allocation this yearrepresent a return on assets of 1.32%. This is extremely high for a financial institution, and

we believe it is the highest of any Credit Union in Alberta. And of course the profits are solelyowned by you the member.

We continue to provide our members with first class premises and a friendly place to dobusiness. Construction of our new City Centre branch in Camrose is well underway and shouldbe finished by March 2003.

On behalf of the Board I would like to extend our thanks to management and staff for theirexceptional dedication and professionalism. And to you the members, thank you for yourbusiness and loyalty. We will always try to be worthy of the trust you have placed in us.

On behalf of the Board of Directors,

Alan D. FieldingPresident

“WE’RE FOCUSED ONSERVICE AND WILLDO WHAT IT TAKESTO SATISFY YOURPERSONAL BANKINGNEEDS. WE’LL KEEPYOU SMILING; COUNTON IT.”

Monica RusnakLoans OfficerWest End Branch

Sharon Nelson, Accounting ClerkDeanne Whitefish, Accounting SupervisorHead Office


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smile :)

Come Grow With Us• over $331 million in assets

• net income before tax andallocations of $4.4 million

• $221 million in loans

• deposits of $306 million

• equity of $18 million

• earnings distribution of $2.77 million

• reserves of $7 million

• 18,000 memberships

• 11 branches

• 9 ATMs

• 9,670 MemberCard debit cards

• over 230,000 telephone andInternet banking transactions

• 110 employees

“WE’RE SMILING BECAUSE, LIKE OURCOMMUNITY, THE CREDIT UNION ISPERFORMING AND GROWING. IT’SWELL-POSITIONED FOR THE FUTURE.”

Allison HusebyReceptionistHead Office

Mickey MohanVP Operations

It’s 2.5 times easier to smile than to frown. Take it from us.


It’s 2.5 times easier to smile than to frown. Take it from us.

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PerformanceOur smiles have never been brighter.BRCU had its best annual results everlast year, thanks to our membership’scommitment to our continued, suc-cessful development, and ourcommitment to the values that makeBRCU a consistently competitive finan-cial institution. Encouraged by increasedprofits, record increases in loans anddeposits, our smiles have becomesome of the brightest in the market.BRCU managed to allocate funds suf-ficient for sustaining continued growthand profitability, while maintaining ourresponsibility to support our commu-nities, because our performance isreflected in the performance of ourcommunities.

GrowthSmiling is a contagious investment, mul-tiplying exponentially in its use. Imaginefor a minute that each smile was wortha dollar (though we would argue it’sworth much more than that). You smile,

causing someone else to smile, who inturn smiles at a few of their neighbours,who in turn smile at a few of theirfriends. Pretty soon your whole com-munity is smiling; all from one smile.That’s why we value smiles. We feel thatif such a small investment can spreadto provide such large yields, it must bea formula for success, evident in ourconsistent performance. BRCU is wellpositioned for the future. We have ahealthy outlook supported by hardwork, initiative, pro-active investmentand attention to detail. Any futureBRCU growth must be supported firstby local investment, and second bysound financial planning. We work withour communities to support meaning-ful and sustainable growth, so that ourfuture can help support our member-ship’s future. We’re locally owned byour membership, allowing us to be flexible and responsive to the needs of a sophisticated, demanding andever-changing marketplace. As ourmembership grows, we grow.


“PEOPLE BANK AT THE CREDITUNION BECAUSE WE ARE STRONG,SAFE AND SECURE – AND THATMAKES US SMILE.”

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Smiling is the mostessential form ofcommunication there is.

Kim LoeschCDA Clerk

Head Office

Arlene StaufferVP Finance &

Administration

smile mo

Come Grow With UsAt Battle River Credit Union, there isa lot to smile about.

• a full range of quality financialproducts and services

• personal and business accounts

• convenient member access, 24-7

• innovative technology and a planfor the future

• strong and solid financial base withsufficient reserves

• profit sharing program for members

• contribution to the growth andprosperity of the communities

And most importantly, personalizedmember service that is second to none.Come grow with us.


Smiling is the mostessential form ofcommunication there is.

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ore :)

With 11 branches and close to 18,000members in 10 communities and sur-rounding areas in East Central Alberta,BRCU has shown a commitment toprogressive development. But part ofgrowth is potential. Start smiling.BRCU is a dynamic and innovativeCredit Union built on a solid founda-tion of quality products, andsecond-to-none personalized memberservice. As a community-consciousfinancial institution, we take into consideration the needs of our mem-bership while perpetually advancing ourservices and products to meet a rap-idly evolving industry. We don’t justgrow for the sake of growing. We adaptand grow with our changing member-ship- always with future commitmentand present satisfaction in mind. Ourreserves are close to same level asbefore we doubled in size. That’ssound planning. That makes us smile.Knowing that past growth has stabilizedand supported future growth gives usconfidence in meeting our member-ship’s future demand without sacrificingour services. We had record increases

in loans, deposits, assets and profits,proving that our membership supportsour growth. We invest in the presentto prosper in the future. Smile, it’sworth it!

Best Personal ServiceWe smile when you smile. We thinkthat a smile is the most selfless gift youcan give. At BRCU we’re all about smil-ing. Not because we have to, butbecause we want to.

Our personal service extends beyondour over-the-counter interactions. ForBRCU, personal service carries beyondthe walls of our various branches. Forus, personal service is commitment tothe development and maintenance ofcommunity relationships, infrastruc-ture and organizations. Just as we havea membership, we consider ourselvesmembers in the communities we serve.As part of our community membershipwe are committed to providing soundfinancial services in rural areas, whilecontributing to the centres in whichwe’re based.


“OUR CREDIT UNION HAS ALL THE ACCOUNTS AND INVESTMENTS PEOPLE NEED, AND OUR COMPETITIVERATES MAKE THEM SMILE.”

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smile mor

Come Grow With Us• deposit accounts

• term deposits including RRSPs andRRIFs

• residential and commercial mortgages

• personal, agricultural and businessloans

• lines of credit

• safety deposit boxes

• electronic transfers

• travellers’ cheques

• foreign exchange bank drafts

• US accounts

• MasterCard credit and gold cards

• telephone and Internet banking

• retirement planning

• mutual funds and other investments

• youth accounts

• trust, brokerage and insuranceservices

• MemberCard debit cards

17 facial muscles are used to create a smile.

Brooke ElworthyMSR

City Centre Branch

Agnes MinnesCDA Clerk

Head Office

2002 ANNUAL REPORTBATTLE RIVER CREDIT UNION

17 facial muscles are used to create a smile.

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re often :)

Exciting New ProductsWe’re excited. Can’t you tell? Remem-ber when you were a kid (or even now,when you’re wiser), and you got a newtoy, and you couldn’t wait to showeveryone else? Well we’re kind of likethat. Except our toys include advancedtransaction imaging technology and personalized lines of credit. Our com-petitors get excited with words like“more” and “bigger”. We tend to pre-fer words like “better” and “faster”,because more and bigger inevitablyleads to words like “line-ups” and“technological difficulties”. Our membersdon’t want “technological difficulties”and “line-ups” when they need accessto their accounts. That’s why we investin sound technology and services thatmake transactions more efficient. Ourmembers have more important thingsto do than stand in line, and we rec-ognize that. Our new products includean industry-first Transaction Imagingsystem for cheques, ensuring quick

reproduction, fraud prevention andimproved accuracy, among other things.

Our online and telephone banking serv-ices offer members quick and easyaccess to account information andmaintenance, and our in-branch bank-ing technology continues to be on theleading edge. Shiny new toys and lead-ing edges aren’t the only things thatmake us smile though. New lines ofcredit allow members flexibility and ver-satility in meeting the demands of theirfuture goals. We want everyone tobenefit from membership, so though weremain at the leading edge, we’re alsointerested in the edges that aren’t lead-ing. BRCU has all of the other financialproducts and services that people andbusinesses want today. From simplechequing accounts to mutual funds toInternet banking, members can enjoyboth basic and innovative bankingservices and products. Allowing themto smile, 24-7, 365 days a year.


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we’ve been smiling

1950Incorporated: Camrose Savings and Credit UnionLtd. to serve East Central Alberta residents.

Membership: 21

Assets: $178

1961General Manager: Gerritt Oldekamp

1966Opened: Edberg branch office.

Membership: 1,122

Assets: $790,940

1969Built new building on 51st Street.

1972Building space doubled.

Staff: 18

Membership: 4,412

Assets: $7.3 million

1973Converted to computerized service.

Membership: 4,905


1974Amalgamated with J&L Credit Union of New Sarepta

1976Opened new branch in Stettler.

Opened head office in Central Agencies Building.

Membership: 7,819


1977Opened branch at Duggan Mall.

Amalgamated with Flagstaff Credit Union.

Opened branch in Coronation.

1979Relocated head office to 51st Street branch.

New General Manager: Terry Kelly


1982Installed ATM at 51st Street branch in Camrose – the first in Camrose

1984Amalgamated with Vegreville and District Savings & Credit Union.

Installed ATM at Stettler.

Changed name to Battle River Credit Union Ltd.

1986Built new 3,250 sq.ft. office in Vegreville.

Connected ATMs with the Circuit/Cirrus network.

Issued MasterCard credit cards


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for over 50 years :)

1987Renovated Duggan Mall branch.

Relocated ATM from Stettler to Duggan Mall.

Closed Coronation office.


1988Built new 3,116 sq.ft. office in Viking.


1991Added second storey at head office.


1996Introduced Mutual Funds, Teleservice and ChoiceRewards.


1997Introduced new personal accounts and MasterCardGold credit card.


1998Introduced Internet Banking Service.

Moved Duggan Mall Branch to a new building tobecome the West End Branch.

Assets: $132 million

1999Installed ATMs at Viking and Stettler branches.

Introduced Ethical Funds RESP.


2000Became owners of seven Bank of Montreal brancheswith five new locations for a total of 11 branches.

Installed ATMs in Daysland, Castor and Sedgewick,and renovated City Centre Branch and CorporateOffice.


2001Introduced Student Select and Business Essentialsaccounts including special lending features.

Launched Web site atwww.battlerivercreditunion.com.


2002Launched Transaction Imaging.

Started construction of new City Centre Branch.



our community

“WE SMILE WHEN WE THINK OFEVERYTHING THIS CREDIT UNION HAS DONE FOR OUR COMMUNITY.”

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When you’re smiling, the whole world smiles with you.

Matt DankoBranch Manager

Alliance

Morgan PasiukMSR

City Centre Branch


When you’re smiling, the whole world smiles with you.

is smiling too:)

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Community EnhancementWe are dedicated to providing financialservices in rural areas and contribut-ing to the economic development ofour community.

Deposits and loans at BRCU keep financial resources working locally andwe have grown to become a leadingemployer.

We continue to build relationships andsupport activities that enhance oursense of community such as sponsor-ing groups and events.

Youth DevelopmentAt BRCU, we recognize our responsi-bility to invest in, and focus on,development of our youth. Examplesinclude $3,300 in scholarships weawarded to local students and thecreation of the Leif Osback MemorialFund for the Greater CamroseCommunity Foundation.


BATTLE RIVER CREDIT UNION 2002 ANNUAL REPORT14

AssetsTotal $331,624,000

Property, Plant & Equipment (1.37%)$4,536,000

Other (0.29%)$967,000

Loans (66.66%)$221,073,000

Investments (29.15%)$96,663,000

Cash (2.53%)$8,385,000

Liabilities, Capital & ReservesTotal $331,624,000

Other (0.18%)$604,000

Common Shares (4.46%)$14,791,000

Deposits (80.66%)$267,492,000

Special Reserve &Retained Earnings (2.11%)$7,000,000

Allocation Distribution (0.97%)$3,216,000

Registered Deposits (11.62%)$38,521,000

Financial & Operating IncomeTotal $20,935,000

Investments (19.37%)$4,055,000

Loans (69.36%)$14,521,000

Other (11.27%)$2,359,000

Income Expended or AllocatedTotal $20,935,000

Interest on Deposits (32%)$6,719,000

Expenses & Taxes (49%)$10,249,000

Allocation to Members (13%)$2,770,000

Reserves & Surplus (6%)$1,197,000

Financial Position – Balance Sheet October 31, 2002 (unaudited)

Financial Position – Operations October 31, 2002 (unaudited)

BATTLE RIVER CREDIT UNION 2002 ANNUAL REPORT15

Capital, Reserves & Registered DepositsOctober 31, 2002 (unaudited)$ Millions

40

32

24

16

8

0Capital &Reserves

2002 2001 2000

RegisteredDeposits

Battle River Credit Union Ltd.

AssetsOctober 31, 2002 (unaudited)$ Millions

250

200

150

100

50

0Loans toMembers

Investments

2002 2001 2000

Property, Plant& Equipment

Cash &Other

Liabilities, Capital & ReservesOctober 31, 2002 (unaudited)$ Millions

275

220

165

110

55

0Non-Registered

DepositsRegisteredDeposits

2002 2001 2000

Capital &Reserves

Other


Management’s Responsibility for Financial StatementsThe financial statements of BATTLE RIVER CREDITUNION LTD. and all other information contained inthe annual report are prepared and presented bymanagement, which is responsible for their accuracy,objectivity and completeness. This responsibilityincludes presenting the statements in accordance withgenerally accepted accounting principles. Thepreparation of the statements necessarily involves theuse of estimates, which are made using carefuljudgement.

Management is responsible for maintaining a systemof internal controls designed to provide reasonableassurance as to the reliability of financial informationand the safeguarding of assets.

The Board of Directors has the ultimate responsibilityfor these financial statements. The Board overseesmanagement’s responsibilities for financial reportingthrough an Audit and Finance Committee, which iscomposed entirely of directors who are not officersor employees of BATTLE RIVER CREDIT UNIONLTD. The Committee reviews the financial statementsand recommends them to the Board for approval.

To carry out its duties, the Audit and FinanceCommittee reviews the annual financial statements,as well as issues related to them. The Audit andFinance Committee also assesses the effectiveness of

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internal controls over the accounting and financialreporting systems. The Audit and Finance Committee’sreview of financial reports includes an assessment ofkey management estimates and judgements materialto the financial results.

The external auditor, appointed by the Board ofDirectors, conducted an audit of these financialstatements in accordance with generally acceptedauditing standards. The external auditor has full andunrestricted access to the Audit and FinanceCommittee to discuss their audit findings as to theintegrity of BATTLE RIVER CREDIT UNION LTD.’sfinancial reporting and adequacy of internal controls.

Mowbrey Gil Chartered Accountants has examinedthese financial statements and their report follows.

Terry KellyGeneral Manager

Arlene StaufferVP Finance & Administration

Camrose, AlbertaNovember 15, 2002


Auditors’ ReportWe have audited the statement of financial positionof BATTLE RIVER CREDIT UNION LTD. as atOctober 31, 2002 and the statements of income,retained earnings and cash flows for the year thenended. These financial statements are the responsi-bility of the Credit Union’s management. Ourresponsibility is to express an opinion on these finan-cial statements based on our audit.

We conducted our audit of these financial statementsin accordance with Canadian generally accepted audit-ing standards. Those standards require that we planand perform the audit to obtain reasonable assurancewhether the financial statements are free of materialmisstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclo-sures in the financial statements. An audit also includesassessing the accounting principles used and signifi-cant estimates made by management, as well asevaluating the overall financial statement presentation.

In our opinion, these financial statements presentfairly, in all material respects, the financial position ofthe Credit Union as at October 31, 2002 and theresults of its operations and the cash flows for theyear then ended in accordance with Canadian gen-erally accepted accounting principles.

Chartered Accountants

Edmonton, AlbertaNovember 15, 2002

Audit and Finance Committee ReportThe Audit and Finance Committee met four timesduring the 2002 fiscal year. We reviewed the legis-lated financial reports as well as the financial resultsof each branch and compared their performance tobudget. We received quarterly Asset LiabilityManagement reports provided to ensure our port-folio was properly matched.

We reviewed and recommended the 2003 budget forapproval. We received and reviewed the internalaudits conducted during the fiscal year, our externalauditors’ management letter and the audited finan-cial statements.

The purpose of the audits is to verify the Credit Unionprocedures are being followed in accordance with theCredit Union’s policies and that the legislatedrequirements governed by the Credit Union Act andBy-Laws are adhered to.

The committee also recommended the appointmentand remuneration of the external auditors for 2003.

My sincere thanks to the members of the commit-tee and to the management who provided theirassistance and information this past year.

Ron PilgerCommittee Chairman

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Financial Position

October 31, 2002($ Thousands) 2002 2001 2000

AssetsCash $ 8,385 $ 6,136 $ 5,583Investments (note 3) 96,663 106,522 108,558Accounts receivable and prepaid expenses 194 43 777Income taxes receivable 3 – –Future tax (note 4) 741 424 91Member loans (note 5) 221,073 203,831 183,751Foreclosed properties held for resale 29 149 –Property, plant and equipment (note 6) 4,536 4,782 4,666

$ 331,624 $ 321,887 $ 303,426

LiabilitiesAccounts payable $ 604 $ 672 $ 692Income taxes payable – 362 204Member deposits (note 7) 306,013 298,923 289,228

306,617 299,957 290,124

Contingent liabilities (note 8)

Capital, Reserves and Retained EarningsShare capital (note 9) 14,791 13,362 6,305Dividends and allocation distributable (note 9) 3,216 2,318 1,497Special reserve (note 10) 5,500 5,500 5,500Retained earnings 1,500 750 –

25,007 21,930 13,302

$ 331,624 $ 321,887 $ 303,426

Approved on behalf of the Board:

Alan D. Fielding Ron Pilger Director Director

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Statement of Income

For the year ended October 31, 2002($ Thousands) 2002 2001 2000

Interest incomeMember loans $ 14,521 $ 15,338 $ 11,973Investments 4,055 5,873 3,742

18,576 21,211 15,715

Interest expenseDeposit accounts 6,720 10,604 7,950Loan payable funds 9 6 77

6,729 10,610 8,027

Net interest income 11,847 10,601 7,688Provisions for credit losses (note 5) 299 180 145

Net interest income after provision for credit losses 11,548 10,421 7,543Other income 2,359 2,236 1,725

Net interest income and other income 13,907 12,657 9,268

Non-interest expensesPersonnel 3,595 3,343 2,649General and administrative 4,768 4,668 3,466Occupancy 483 476 395Member Security 534 516 375Organization 153 139 96

9,533 9,142 6,981

Income before ProfitShare allocation and income taxes 4,374 3,515 2,287ProfitShare allocation (note 9) 2,770 2,017 1,497

Income before provision for income taxes 1,604 1,498 790Provision for income taxes (note 4) 526 529 290

Net income for the year $ 1,078 $ 969 $ 500

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Statement of Retained Earnings


Retained earnings, beginning of year $ 750 $ – $ –Add:

Net Income for the year 1,078 969 500

1,828 969 500Deduct:

Series A Investment share dividends (Note 9) 446 301 0Less: Income tax recovery thereon (118) (82) 0

Allocation to special reserves – – 500

328 219 500

Retained earnings, end of year $ 1,500 $ 750 $ –

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Statement of Cash Flows


Operating activitiesInterest received $ 18,749 $ 20,935 $ 14,031Dividends received 270 211 180Other income received 2,359 2,236 1,725Interest paid (7,608) (10,666) (5,632)Income taxes paid (1,087) (621) (307)Operating expenses paid (9,612) (8,208) (6,943)

Cash provided by operating activities 3,071 3,887 3,054

Investing activitiesPurchase of property, plant and equipment (327) (567) (1,459)Net increase in loans (17,196) (20,089) (56,107)Additions to and proceeds of investment securities 9,368 2,110 (95,461)Proceeds on disposal of property, plant

and equipment 131 52 –Proceeds on disposal of foreclosed properties 162 289 158Purchase of foreclosed properties, net (41) (439) (158)

Cash flows from investing activities (7,903) (18,644) (153,027)

Financing activities(Repayment) Proceeds on borrowings – – (575)Share capital issued, net 2 6,008 9Redemption of share capital (590) (448) (533)Net increase in deposits 7,670 9,750 155,735

Cash flows from financing activities 7,081 15,310 154,636

Increase (Decrease) in cash 2,249 553 4,663Cash, beginning of year 6,136 5,583 920

Cash, end of year* $ 8,385 $ 6,136 $ 5,583

*Consists ofCash and deposits with Credit Union Central $ 9,209 $ 6,704 $ 8,347Cheques and other items in transit, net (824) (568) (2,764)

Cash, end of year $ 8,385 $ 6,136 $ 5,583

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Notes to the Financial StatementsFor the year ended October 31, 2002

1. Nature of Operations

The credit union is incorporated under the Credit Union Act of the Province of Alberta to serve members in Camroseand the surrounding area and operates eleven credit union branches.

The Credit Union Deposit Guarantee Corporation (Corporation), a Provincial Corporation, guarantees the repaymentof all deposits with Alberta credit unions, including accrued interest. The Credit Union Act provides that the Provincewill ensure that the Corporation carries out this obligation.

2. Significant Accounting Policies

The credit union follows accounting policies appropriate to its activities and governing legislation, which conform toCanadian generally accepted accounting principles. The significant accounting policies adopted by the credit unioninclude:

a) Investments

Investments are recorded at the lower of cost and net realizable value.

b) Member Loans

Member loans are recorded net of any unearned income and allowance for credit losses. Interest income fromloans is recorded on an accrual basis.

A loan is classified as impaired when there is reasonable doubt as to the timely collection of some portion ofprincipal or interest. A loan where payment of interest is contractually past due 90 days is classified as impairedunless there is no reasonable doubt as to the collectibility of all interest and principal. Loans or portions of loansconsidered uncollectible are written-off.

c) Allowance for Credit Losses

The credit union maintains an allowance for credit losses in an amount considered adequate to absorb creditlosses existing in its loan portfolio. The allowance is increased by a provision for credit losses, which is chargedto income, and reduced by write-offs, net of recoveries. The allowance for credit losses consists of the following:

A specific provision is established on an individual loan basis, to reduce the carrying book values to estimatedrealizable values. Estimated realizable values are determined by discounting the expected future cash flows at theeffective interest rate inherent in the loans. When the amounts and timing of future cash flows cannot be reliablyestablished, estimated realizable values are determined by reference to market prices for the loans or their underlyingsecurity.

A collective provision is established when evidence of impairment within groups of loans exists but is not sufficientto allow identification of individual impaired loans. Impairment is estimated using a formula based on historicalcredit loss experience, known risks in the portfolio and current economic conditions and trends. As individualimpaired loans are identified, a specific allowance is assigned to that loan and the collective allowance is adjustedaccordingly.

d) Income Taxes

Income taxes are recorded on the tax liability method. The credit union is taxed at an effective rate of 26.3%.

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Notes to the Financial Statements

2. Significant Accounting Policies (continued)

e) Property, Plant and Equipment

Land is recorded at cost. Building, furniture, office equipment, computer hardware and computer software arereported at cost less accumulated amortization. Amortization is calculated primarily using the straight-line methodover the estimated useful lives of the related assets as indicated below:

Buildings 2.5%Parking lot 4%Furniture 10%Office equipment 10% and 20%Computer hardware 20%, 331⁄3% and 50%Computer software 20% and 331⁄3%

Full amortization is recorded in the year of acquisition and none in the year of disposal.

f) Use of Estimates

In preparing the financial statement, management must make estimates and assumptions considering values of certainassets, liabilities, and net income reported in these financial statements.

3. Investments

($ Thousands) 2002 2001 2000

Credit Union Central Alberta LimitedShares $ 4,860 $ 4,560 $ 2,661Term deposits 75,784 100,944 104,953Other investments 15,492 – –

96,136 105,504 107,614Accrued interest 527 1,018 944

$ 96,663 $ 106,522 $ 108,558

As required by the Credit Union Act, the credit union holds investments in Central to maintain its liquidity level.

The estimated market value of the investments is equal to book value. The shares have no specific date of maturity.

4. Future Tax

($ Thousands) 2002 2001 2000

Income tax expense is comprised of:Current income taxes $ 842 $ 863 $ 442Future income taxes (316) (333) (153)

Provision for income taxes $ 526 $ 530 $ 289

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4. Future Tax (continued)

Income tax expense differs from the amount that would be computed by applying the Federal and provincial statutoryincome tax rates of 42.33% (2001 – 43.45%; 2000 – 44.62%) to income before income taxes. The reasons for thedifferences are as follows:

2002 2001 2000

Income taxes calculated at the statutory rate $ 679 $ 651 $ 352Income taxes adjusted for the effect of:

Reduction for credit unions and small business deduction (284) (262) (145)Excess of premium paid on purchase of Bank of Montreal

branches over amount deductible in year 124 127 63Other 7 14 19

Income taxes as recorded $ 526 $ 530 $ 289

The tax effects of temporary differences that give rise to significant portions of the future tax assets are as follows:

2002 2001 2000

Property, plant and equipment $ (91) $ (99) $ (87)Intangible assets 816 509 161Allowance for credit losses 16 14 17

$ 741 $ 424 $ 91

5. Member Loans

($ Thousands) 2002 2001 2000

AllowanceOutstanding for Credit

Balance Losses* Total Total Total

Mortgage $ 128,509 $ 100 $ 128,409 $ 116,705 $ 108,003Non-mortgage 91,137 446 90,691 85,200 73,812

219,646 546 219,100 201,905 181,815Accrued interest 1,973 – 1,973 1,926 1,936

$ 221,619 $ 546 $ 221,073 $ 203,831 $ 183,751

* For presentation purposes, the allowance for credit losses has been allocated proportionately to the above loan categories. However, thisallowance is available for the total loan portfolio.


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5. Member Loans (continued)

The allowance for credit losses includes a general allowance of $337,321 (2001 – $229,348; 2000 – $279,133). Therewere $304,471 (2001 – $326,444; 2000 – $347,433) in impaired loans as at the year-end included in the above amounts.Impaired assets include foreclosed real estate assets held for sale with a gross amount of $28,799 (2001 – $149,130;2000 – $0) and a related specific allowance of $28,799 (2001 – $0; 2000 – $0). Details of the changes in the allowancefor credit losses are as follows:

($ Thousands) 2002 2001 2000

Balance, beginning of year $ 501 $ 494 $ 450Less: Accounts written off, net of recoveries (254) (173) (101)

247 321 349Charge for credit losses 299 180 145

Balance, end of year $ 546 $ 501 $ 494

6. Property, Plant and Equipment

($ Thousands) 2002 2001 2000

Net Net NetAccumulated Carrying Carrying Carrying

Cost Amortization Value Value Value

Land $ 633 $ – $ 633 $ 684 $ 442Buildings 4,473 1,406 3,067 3,181 3,195Parking lot 97 18 79 84 89Furniture 1,141 841 300 354 403Office equipment 495 380 115 150 163Computer hardware 827 612 215 252 298Computer software 127 – 127 77 76

$ 7,793 $ 3,257 $ 4,536 $ 4,782 $ 4,666

Amortization in respect of the above depreciable assets for the year amounted to $442,314 (2001 – $399,495; 2000– $372,165).

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7. Member Deposits

The repayment of all deposits, including accrued interest, is guaranteed by Credit Union Deposit Guarantee Corporation,for which the credit union pays a deposit guarantee assessment fee.

($ Thousands) 2002 2001 2000

Demand deposits $ 132,180 $ 132,996 $ 112,875Term deposits 132,346 124,430 135,690Registered plans 38,521 37,651 36,761

303,047 295,077 285,326Accrued interest 2,966 3,846 3,902

$ 306,013 $ 298,923 $ 289,228

8. Contingent Liabilities and Commitments

Lease Commitments

The credit union has obligations under long-term, non-cancelable operating leases for the rental of equipment. Thefuture minimum lease payment commitments are:

2003 $ 66,6452004 8,464

$ 75,109

Credit Commitments

In the normal course of business, the credit union enters into various commitments to meet the credit requirementsof its members. These include credit commitments, letters of credit, letters of guarantee and loan guarantees, whichare not included in the Balance Sheet.

Guarantees and standby letters of credit represent an irrevocable obligation to make payments to a third party inthe event that the member is unable to meet its contractual financial or performance obligations. In the event of acall on such commitments, the credit union has recourse against the members.

Commitments to extend credit represent undertakings to make credit available in the form of loans or other financingfor specific amounts and maturities, subject to certain conditions and include recently authorized credit not yet drawndown and credit facilities available on a revolving basis.

These credit arrangements are subject to the credit union’s normal credit standards and collateral may be obtainedwhere appropriate. The contract amounts set out below represent the maximum credit risk exposure to the creditunion should the contracts be fully drawn, and any collateral held proves to be of no value. As many of thesearrangements will expire or terminate without being drawn upon, the contract amounts do not necessarily representthe future cash requirements.

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8. Contingent Liabilities and Commitments (continued)

As at October 31, 2002 the credit union had the following amounts outstanding:

($ Thousands) 2002 2001 2000

Guarantee and standby letters of credit $ 285 $ 357 $ 395Commitments to extend credit:

Original term to maturity of one year or less 7,338 6,301 5,140Original term to maturity of more that one year 27,317 24,338 18,617

$ 34,940 $ 30,996 $ 24,152

9. Share Capital

($ Thousands) 2002 2001 2000

CommonShares – Common

Credit Shares – Series AUnion Member Investment

Contributed Contributed Shares Total Total Total

Balance, beginning of year $ 7,215 $ 142 $ 6,006 $ 13,363 $ 6,305 $ 5,593Previous year’s

allocation paid 2,017 – – 2,017 1,497 1,236Net purchases – 2 – 2 6,008 9Redemptions:

Section 110(2)b (348) (8) (356) (348) (433)Section 110(3)a+b (162) (4) – (166) (100) (100)Section 107(6) – – (69) (69) – –

Balance, end of year $ 8,722 $ 132 $ 5,937 $ 14,791 $ 13,362 $ 6,305

Common Shares

The Credit Union Act created a class of equity shares known as Common Shares, having the following characteristics:

a) an unlimited number may be issued;

b) a par value of $1, but fractional shares may be issued;

c) transferable only in restricted circumstances:

d) non-assessable; and

e) redemption of common shares is at par value and is at the discretion of the credit union, subject to the restrictionscontained in the Credit Union Act and Regulations.

A member must purchase at least 1 share to retain membership in the credit union.

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9. Share Capital (continued)

Series A Investment Shares

Series A Investment shares have the following characteristics:

a) no par value;

b) no voting rights;

c) non-assessable;

d) transferable under limited circumstances;

e) callable at the discretion of the credit union upon 5 years written notice;

f) dividends are non-cumulative and subject to the credit union’s dividend policy and approval of the Board of Directors;and

g) redemptions are subject to the credit union’s redemption policy and approval of the Board of Directors.

Common shares and Series A Investment shares represent “at risk” capital and are not guaranteed by the Corporation.

The Board of Directors declared a $2,770,144 ProfitShare Allocation, and a Series A Investment Share Cash Dividendof 7.5% totaling $445,799. ProfitShare allocations are paid to members by the issuance of common shares and areallocated to members’ accounts as determined by the Board of Directors. Series A Investment Share dividends arepaid to the members in cash and are allocated to the members’ accounts as determined by the Board of Directors.

The Board of Directors called Series A Investment Shares September 21, 2001, with a call date of September 29, 2006.

The credit union has met the Capital Adequacy requirements as prescribed by the Credit Union Act.

10. Special Reserves

($ Thousands) 2002 2001 2000

Balance, beginning of year $ 5,500 $ 5,500 $ 5,000Allocation for the year – – 500

Balance, end of year $ 5,500 $ 5,500 $ 5,500

The special reserve was established to build greater reserves and to provide a fund to draw on for extraordinaryoccurrences, capital expenditures and acquisitions. Allocations to the special reserve are made from retained earningsas determined by the Board of Directors.

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11. Fair Value of Financial Instruments

The amounts are designed to approximate the fair values of the credit union’s financial instruments using the valuationmethods and assumptions described below. Since many of the credit union’s financial instruments lack an availabletrading market, the fair values represent estimates of the current market value of instruments, taking into accountchanges in market rates that have occurred since their origination. Due to the estimation process and the need touse judgement, the aggregate fair value amounts should not be interpreted as being necessarily realizable in an immediatesettlement of the instruments.

The carrying value of most of the credit union’s financial instruments is not adjusted to reflect changes in interestrates, as it is the credit union’s intention to hold the instruments to maturity.

Estimated fair values of on-balance sheet financial instruments are summarized as follows:

($ Thousands) 2002 2001 2000

Book Value Book Value Book ValueBook Over Over OverValue Fair Value Fair Value Fair Value Fair Value

AssetsCash $ 8,385 $ 8,385 $ – $ – $ –Investments 96,663 100,393 3,730 (5,509) (5,791)Loans 221,073 219,867 (1,206) 3,815 (2,055)Other assets 5,504 5,504 – – –

Less:Liabilities

Deposits 306,013 303,009 (3,004) (5,686) (1,611)Other liabilities 604 604 – – –

$ 25,008 $ 30,536 $ 5,528 $ 3,992 $ ($6,235)

The following methods and assumptions were used to estimate the fair value of financial instruments:

a) The fair values of cash, investments, other assets and other liabilities are assumed to approximate book values,due to their short-term nature.

b) The estimated fair value of floating rate member loans and member deposits are assumed to equal book value asthe interest rates automatically reprice to market.

c) The estimated fair value of fixed rate member loans and fixed rate member deposits is determined by discountingthe expected future cash flows of these loans and deposits at current market rates for products with similar termsand credit risks.

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12. Interest Rate Risk

2002 Floating Within Non-rate($ Thousands) Rate 1 Year 1 to 5 Years Sensitive Total

AssetsCash $ – $ – $ – $ 8,385 $ 8,385Investments 4,860 56,505 34,771 527 96,663

Effective Yield 3.00% 2.32% 6.07% 0.00% 3.69%Member Loans 56,767 44,547 117,090 2,669 221,073

Effective Yield 5.67% 6.37% 7.26% 0.00% 6.58%Other – – – 5,503 5,503

$ 61,627 $ 101,052 $ 151,861 $ 17,084 $ 331,624

Liabilities and EquityMember deposits $ 86,465 $ 87,216 $ 76,094 $ 56,238 $ 306,013

Effective Yield 1.00% 3.93% 4.22% 0.00% 2.45%Capital and retained earnings – – – 25,007 25,007Other – – – 604 604

$ 86,465 $ 87,216 $ 76,094 $ 81,849 $ 331,624

Net gap $ (24,838) $ 13,836 $ 75,767 $ (64,765) $ –% of assets -7.49% 4.17% 22.85% -19.53% 0.00%

2001Net gap $ (30,439) $ 29,797 $ 69,140 $ (68,498) $ –% of assets -9.46% 9.26% 21.48% -21.28% 0.00%

13. Related Party Transactions

Directors and staff of the credit union have loans from the credit union totalling $6,947,247 (2001 – $5,349,964;2000 – $4,835,299) at interest rates ranging from 2.00% to 9.90%. Loan rates are specified by Credit Union policy.Directors pay regular member rates. All loans were in good standing as at October 31, 2002.

Directors and management of the credit union have deposits with the credit union totalling $843,104. Staff also haveaccess to personal chequing accounts which do not incur service charges.

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14. Directors’ Fees and Expenses

($ Thousands) 2002 2001 2000

Directors’ expenses $ 3 $ 8 $ 7Directors’ remuneration 19 16 14

Total $ 22 $ 24 $ 21

15. Segmented Information

The credit union operates principally in personal and commercial/agricultural banking in Alberta.

16. Contractual Obligation

The credit union is contractually liable, pursuant to an agreement with Credit Union Central, whereby it purchasedcertain assets of a chartered bank, to make payments of $158,691 in each month that it earns a return of 2.5% onassets. The obligation continues for a period of 60 months from June 1, 2000 to May 31, 2005.

17. Comparative Figures

The October 31, 2001 and October 31, 2000 financial statements have been reclassified, where applicable, to conformto the presentation used in the current year. The changes do not affect the October 31, 2001 and October 31, 2000earnings.

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Board of Directors

Executive Officers

32

Standing (left to right): Joe Mohan (VP Operations), Steve Friend (VP Operations).Seated (left to right): Arlene Stauffer (VP Finance & Administration), Terry Kelly(General Manager), Mickey Mohan (VP Operations).

Standing (left to right): Ron Pilger, Glenn Friesen (Vice President), Allen Rostad, Joe Cameron, Garry Schielke,Darrell Rosland. Seated (left to right): Ernie Duchscherer, Alan Fielding (President), Bernie Klammer, DennisBaird. Absent: Lane Carrington.


Management Team

Matt DankoAlliance

Branch Manager

Steve DaviesStettler

Branch Manager

Gerard DurandViking

Branch Manager

Maureen GroveOffice Manager/

Human Resources

Melody HallumKillam

Branch Manager

Jerry HansenCity Centre Camrose

Branch Manager

Kevin JohnsonCastor

Branch Manager

Pauline MarcinkowskiProduct Development

Training Manager

Tom MooreSedgewick

Branch Manager

Colleen ReedMarketing/Premises

Manager

Yvonne SchellDaysland

Branch Manager

Cheryl SeifermanController

Bruce WeinkaufWest End CamroseBranch Manager

Darin WinderIT Manager

Dani SheetsCompliance Manager

Mary Lee HartlMemberCare

Gail SmookVegreville

Branch Manager

Jason TerleskyTwo Hills

Branch Manager

Corporate Office5007 – 51 StreetCamrose, Alberta T4V 1S6Telephone (780) 672-1175Edmonton Direct

(780) 424-1302Fax (780) 672-5996

Alliance BranchBox 180201 Main StreetAlliance, Alberta T0B 0A0Telephone (780) 879-3644Fax (780) 879-3838

Castor BranchBox 605002 – 50 AvenueCastor, Alberta T0C 0X0Telephone (403) 882-3950Fax (403) 882-3555

City Centre Branch5005 – 51 StreetCamrose, Alberta T4V 1S6Telephone (780) 672-9221Edmonton Direct

(780) 424-1302Fax (780) 672-9230

Daysland BranchBox 1305004 – 50 StreetDaysland, Alberta T0B 1A0Telephone (780) 374-3951Fax (780) 374-3736

Killam BranchBox 395004 – 50 StreetKillam, Alberta T0B 2L0Telephone (780) 385-3731Fax (780) 385-2406

Sedgewick BranchBox 1274838 – 47 StreetSedgewick, Alberta T0B 4C0Telephone (780) 384-3912Fax (780) 384-3938

Stettler BranchBox 13574911 – 51 StreetStettler, Alberta T0C 2L0Telephone (780) 742-2331Fax (780) 742-2255

Two Hills BranchBox 3884916 – 47 AvenueTwo Hills, Alberta T0B 4K0Telephone (780) 657-3321Fax (780) 657-2036

Vegreville BranchBox 13154917 – 51 AvenueVegreville, Alberta T9C 1S5Telephone (780) 632-3998Fax (780) 632-4080

Viking BranchBox 2155302 – 50 StreetViking, Alberta T0B 4N0Telephone (780) 336-4944Fax (780) 336-3181

West End Branch4705 – 65 StreetCamrose, Alberta T4V 3M5Telephone (780) 672-8893Edmonton Direct

(780) 424-1302Fax (780) 672-8895

Battle River Credit Unionwww.battlerivercreditunion.com

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smile :) - visioncu.ca€¦ · MAKES US SMILE.” 6 Smiling is the most essential form of communication there is. Kim Loesch CDA Clerk Head Office Arlene Stauffer VP Finance & Administration