V VIRTUS - weyburncu.ca€¦ · V VIRTUS GROUP Chartered Profession al Accountants & Business Advisors LLP INDEPENDENT AUDITORS' REPORT To the Members, Weyburn Credit Union Limited

WEYBURN CREDIT UNION LIMITED

WEYBURN, SASKATCHEWAN INDEPENDENT AUDITORS' REPORT AND

FINANCIAL STATEMENTS

DECEMBER 31, 2017

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MANAGEMENT'S RESPONSIBILITY COMMUNICATION

To the Members,

Weyburn Credit Union Limited

Management has responsibility for preparing the accompanying financial statements and ensuring that all information in the annual report is consistent with the statements. This responsibility includes selecting appropriate accounting principles and making objective judgements and estimates in accordance with International Financial Reporting Standards.

In discharging its responsibilities for the integrity and fairness of the financial statements and for the accounting systems from which they are derived, management maintains the necessary system of internal controls designed to provide assurance that transactions are authorized, assets are safeguarded and proper records are maintained.

Ultimate responsibility for financial statements to members lies with the Board of Directors. An Audit & Risk Committee of Directors is appointed by the Board to review financial statements in detail with management and to report to the Board of Directors prior to their approval of the fmancial statements for publication.

Independent auditors appointed by the members audit the financial statements and meet separately with both the Audit & Risk Committee and management to review their findings. The independent auditors report directly to the members and their report follows. The independent auditors have full and free access to the Audit & Risk Committee to discuss their audit and their findings as to the integrity of the Credit Union's financial reporting and the adequacy of the system of internal controls.

Don Shumlich

Chief Executive Officer

Krista Hayward, CPA, CA

Chief Financial Officer

�A VIRTUSV GROUP

V VIRTUS GROUP Chartered Profession al Accountants

& Business Advisors LLP

INDEPENDENT AUDITORS' REPORT

To the Members,

Weyburn Credit Union Limited

We have audited the accompanying financial statements of Weyburn Credit Union Limited which comprise the statement of financial position as at December 31, 2017 and the statements of comprehensive income, changes in members' equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control as management detennines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perforn1 the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those assessments, the auditor considers internal control relevant to the Credit Union's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Credit Union's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit Opl11lOn.

Opinion

In our opinion, these financial statements present fairly, in all material respects, the financial position of the Credit Union as at December 31, 2017 and its financial perfonnance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

February 28, 2018

Regina, Saskatchewan

V ;..A.,. try, n,,.

Chartered Professional Accountants

I SASKATOON

ITOLL FREE

IREGINA

ISuite 200 - 157 2nd Ave North I Saskatoon, SK S7K 2A9 1-888-258-7677 Suite 200 - 2208 Scarth Street I Regina, SK S4P 2J 6 t. 306-653-6100 f. 306-653-4245 [email protected] www.virtusgroup.ca t. 306-522-6500 f. 306-522-6222 [email protected]


STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2017

(with comparative figures for 2016)

Cash and cash equivalents (Note 4) Investments (Note 5) Loans receivable (Note 6) Other assets (Note 7) Property and equipment (Note 8)

Deposits (Note 9) Other liabilities (Note 11) Shares (Note 12)

Equity accounts (Note 12) Retained earnings Accumulated other comprehensive income

APPROVED BY THE BOARD:

Director ------------

ASSETS 2017

$ 2,756,966 78,865,067

413,942,521 533,132

5 059 329

$ 501,157,015

LIABILITIES

$ 452,774,284 2,193,112

39 905

455 007 301

MEMBERS' EQUITY

4,012,498 42,137,216

46 149 714

$ 501,157,015

------------

"See Accompanying Notes 11

- 1 -

2016

$ 16,175,036 90,722,264

391,661,745 583,393

5 208 642

$ 504,351,080

$ 458,057,956 2,449,031

39 555

460 546 542

4,209,451 39,173,525

421 562

43 804 538

$ 504,351,080

Director

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STATEMENT OF CHANGES IN MEMBERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2017

(with comparative figures for the year ended December 31, 2016)

2017

EQUITY ACCOUNTS

Equity accounts - beginning of year $ 4,209,451

Decrease in member equity accounts (196,953)

Equity accounts - end of year $ 4 012 498

RETAINED EARNINGS

Retained earnings - beginning of year $ 39,173,525

Net income 2,714,639

Reclassification - other comprehensive income 249 052

Retained earnings - end of year $ 42,137,216

ACCUMULATED OTHER COMPREHENSIVE INCOME

Accumulated other comprehensive income - beginning of year $ 421,562

Other comprehensive income (loss) (421,562)

Accumulated other comprehensive income - end of year $

2016

$ 4,362,444

(152,993)

$ 4 209 451

$ 36,370,901

2,802,624

$ 39,173,525

$ 568,948

(147,386)

$ 421 562

TOTAL EQUITY $ 46 149 714 $ 43 804 538

"See Accompanying Notes"

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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2017


2017

Interest revenue Loan $ 14,722,749 Investment 1 806 288

16 529 037

Interest expense Borrowed money 8,599 Member deposits 3 962 020

3 970 619

Net interest 12,558,418

Provision for credit losses 127 751

Net interest after provision for credit losses 12 430 667

Other income 2 720 099

Operating expenses General business 2,559,418 Occupancy 698,170 Organizational 224,882 Personnel 7,756,462 Security 422 000

11 660 932

Income before income taxes 3,489,834

Income taxes (Note 18) Current 814,395 Deferred (recovery) (39,200)

Net income before other comprehensive income 2,714,639

Other comprehensive income (net of tax)

Net unrealized gains (losses) on: Available for sale financial assets (172,510) Reclassification adjustment to income (249,052)

Other comprehensive income (loss) (421,562)

Total comprehensive income $ 2,293,077


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$

$

2016

14,306,509 1 795 481

16 101 990

4,696 4 006 052

4 010 748

12,091,242

165 125

11 926 117

3 137 137

2,561,118 769,704 220,745

7,378,623 448 526

11 378 716

3,684,538

928,814 (46,900)

2,802,624

(147,386)

(147,386)

2,655,238

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2017


2017 Cash provided by (used in) operating activities:

Net income $ 2,714,639 Items not involving cash:

- Amortization on property, plant and equipment 628,069 - Amortization on naming rights 22,383 - Provision for credit losses 127,751 - Other comprehensive income 249,052

Equity patronage allocation (196,953) Net change in other assets and other liabilities (228,042)

3 316 899

Cash provided by (used in) investing activities: Investments 11,435,635 Loans receivable (22,408,527) Property and equipment (478,756)

(11,451,648)

Cash provided by (used in) financing activities: Deposits (5,283,672) Shares 350

(5,283,322)

Increase (decrease) in cash (13,418,071)

Cash position - beginning of year 16 175 036

Cash position - end of year $ 2 756 965


- 4 -

$

$

2016

2,802,624

609,382 22,383

165,125

(152,993) (577,667)

2 868 854

18,346,704 (19,976,613)

(467,026)

(2,096,935)

336,949 (10)

336,939

1,108,858

15 066 178

16 175 036

�A VIRTUS"V GROUP


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017


1. Incorporation and governing legislation

Weybum Credit Union Limited is a for profit corporation governed by The Credit Union Act, 1998 in the Provinceof Saskatchewan, Canada. The Credit Union's registered office is located in Weyburn, Saskatchewan. The CreditUnion provides financial services to members through branches in Weybum, Yellow Grass, Lang, and thesurrounding area.

In accordance with The Credit Union Act, 1998, Credit Union Deposit Guarantee Corporation (CUDGC) regulatesall credit unions in Saskatchewan. CUDGC establishes Standards of Sound Business Practices, provides regulatoryguidance and guarantees the repayment of all deposits, including accrued interest. If a credit union is not incompliance with the standards or regulatory guidance, CUDGC has the authority to take necessary action, whichmay include reducing or restricting the credit union's authorities and limits, taking preventative actions, issuing acompliance order, placing the credit union under supervision or administration, or issuing an amalgamation order.

2. Basis of preparation and statement of compliance

The financial statements have been prepared in accordance with Part I of the CPA Canada Handbook -International Financial Reporting Standards (IFRS). The financial statements comply with IFRS adopted by theInternational Accounting Standards Board (IASB).

The financial statements were approved by the Board of Directors on February 28, 2018.

The financial statements have been prepared on the historical cost basis, except for certain investments which aremeasured at fair value.

Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date, regardless of whether that price is directly observable orestimated using another valuation teclmique. In estimating the fair value of an asset or liability the Credit Uniontakes into account the characteristics of the asset or liability if market participants would take those characteristicsinto account when pricing the asset or liability at the measurement date.

Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis,except for measurements that have some similarities to fair value, but are not fair value, such as value in use onimpairment.

The Credit Union follows a fair value hierarchy to categorize the inputs used to measure fair value into Level 1, 2or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of theinputs to the fair value measurement in its entirely, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) for identical assets or liabilities that the entity can access

at the measurement date.• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the

asset or liability, either directly or indirectly: and• Level 3 inputs are unobservable inputs for the asset or liability.

The financial statements are presented in Canadian dollars, which is the Credit Union's functional currency.

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3. Summary of significant accounting policies

The significant accounting policies used in the preparation of these financial statements are summarized below.These accounting policies have been applied consistently to all periods presented in these financial statements.

Use of estimates and judgments

The preparation of the financial statements required management to make judgments, estimates and assumptionsthat affect the application of accounting policies and the reported amounts of assets and liabilities at the date of thefinancial statements, as well as, the reported amounts of revenues and expenses during the reporting period.Accordingly, actual results could differ from those estimates. Estimates and assumptions are reviewed on anongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and inany future periods affected.

The most significant uses of judgments and estimates are as follows:

(i) Valuation of Financial Instruments

The Credit Union determines the fair value of financial instruments for which there is no observablemarket price using a variety of valuation techniques as described further in Note 3. The inputs to thesemodels are derived from observable market data where possible, but where observable market data isnot available, judgment is required to establish fair values. The judgments include consideration ofliquidity and other risks affecting the specific instrument.

(ii) Allowances for Credit Losses

The individual allowance component of the total allowance for impairment applies to financial assetsevaluated individually for impaim1ent. In particular, management judgment is required to estimate theamount and timing of cash flows the Credit Union expects to receive. These estimates are based on anumber of factors, including the net realizable value of any underlying collateral.

The collective allowance component covers credit losses in portfolios of loans with similar credit riskcharacteristics when there is objective evidence to suggest that a loss has been incurred but theindividual impaired items can not yet be identified. In assessing the collective allowance, managementconsiders factors such as credit quality, historical loss experience and current economic conditions.





3. Summary of significant accounting policies continued

Financial instruments

All financial instruments are initially recognized at fair value plus transaction costs, except in the case of financial assets and liabilities classified as fair value through profit or loss. The classification of financial instruments at initial recognition depends on the purpose and management's intention for which the instruments were acquired and the item's characteristics. The Credit Union uses settlement date accounting for regular way contracts when recording financial asset transactions. All financial instruments are classified as fair value through profit or loss, loans and receivables, held to maturity, available for sale or other financial liabilities.

Fair value through profit or loss

Financial assets and financial liabilities are classified as fair value through profit or loss (FVTPL) when the instrument is held for trading or is designated as FVTPL by management.

A financial asset or financial liability is held for trading if: • It has been acquired principally for the purpose of selling it in the near term, or• On initial recognition, it is part of a portfolio of identified financial instruments that the Credit Union

manages together and has a recent actual pattern of short term profit taking, or• It is a derivative that is not designated (or designated but not effective) as a hedging instrument.

A financial asset or financial liability other than a financial asset or financial liability held for trading may be designated as at FVTPL upon initial recognition if:

• Such designation eliminates or significantly reduces a measurement or recognition inconsistency that

would otherwise arise, or• The financial asset or financial liability forms part of a group of financial assets or financial liabilities

or both, which is managed and its performance is evaluated on a fair value basis, in accordance with

the Credit Union's documented risk management or investment strategy, and information about the

grouping is provided internally on that basis, or• It forms part of a contract containing one or more embedded derivatives.

Financial assets and financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized immediately in profit or loss.

The Credit Union has classified the following financial assets and liabilities as FVTPL:

Cash SaskCentral investments with less than 90 days to maturity

Loans and receivables

Loans and receivables include non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Credit Union does not intend to sell immediately or in the near term. Loans and receivables are subsequently measured at amortized cost using the effective interest method, less any impairment. Interest income, calculated using the effective interest rate method, is recognized in profit or loss.






The Credit Union has classified the following financial assets as loans and receivables:

Loans receivable Accrued interest Accounts receivable

Held to maturity

Held to maturity financial assets are non-derivative assets with fixed or determinable payments and fixed maturity dates that the Credit Union has the positive intention and ability to hold until the maturity date, and which are not designated as another category. Held to maturity financial assets are subsequently measured at amortized cost using the effective interest method less any impainnent, with interest revenue recognized in profit or loss.

The Credit Union has classified the following financial assets as held to maturity:

SaskCentral deposits SaskCentral investments Other investments

Available for sale

Available for sale financial assets are non-derivative financial assets that are designated as available for sale and are not classified in any of the previous categories. Unquoted equity securities whose fair value cannot be reliably measured are carried at cost. All other available for sale financial assets are subsequently measured at fair value.

Interest income is recognized in profit or loss using the effective interest method. Dividend income is recognized in profit or loss when the Credit Union becomes entitled to the dividend. Fair value changes are recognized in other comprehensive income until the investment is sold or impaired. Once sold or impaired, the cumulative gains and losses previously recognized in other comprehensive income are reclassified to profit or loss as a reclassification adjustment.

The Credit Union has classified the following financial assets as available for sale:

SaskCentral shares Concentra shares Other investments

Other financial liabilities

Other financial liabilities are those liabilities which have not been classified as FVTPL. Other financial liabilities are subsequently measured at an1ortized cost using the effective interest method. Interest expense, calculated using the effective interest rate method, is recognized in profit or loss.

The Credit Union has classified the following financial liabilities as other financial liabilities:

Member deposits Accounts payable






Derivative financial instruments

Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate,foreign exchange rate, equity, commodity instrument or index. In the ordinary course of business, the Credit Unionenters into derivative contracts for asset/liability management. The Credit Union enters into derivative financialinstruments to manage its exposure to interest rate risk, including interest rate swaps. Derivatives are initiallyrecognized at fair value at the date that the derivative contract is entered into. It is subsequently measured at fairvalue with changes in fair value recognized in profit or loss, unless it is designated in a qualifying hedgingrelationship. Derivatives may include contracts which are designated as and effective as hedges, and/or contractswhich reposition the Credit Union's overall interest rate risk, credit risk and foreign exchange risk profile. TheCredit Union does not use hedge accounting for derivatives.

Embedded derivatives

Derivatives embedded in other non-derivative financial instruments or other host contracts are separated from theirhost contracts and accounted for as separate derivatives when certain conditions are met. These conditions include:the economic characteristics and risks are not closely related to those of the host contract, a separate instrumentwith the same tenns would meet the definition of a derivative and the combined instrument or contract is notmeasured at FVTPL. Embedded derivatives that are accounted for as separate derivatives are measured at fairvalue with changes in fair value recognized in profit or loss immediately. The Credit Union does not have anyoutstanding contracts or financial instruments with embedded derivatives that require separate recognition.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial asset or financial liabilityand allocating interest income or interest expense over the relevant period. The effective interest rate is the rate thatexactly discounts estimated future cash receipts or payments through the expected life of the financial instrument,or when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

Transaction costs

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of afinancial asset or financial liability. Transaction costs include fees and commissions paid to agents, advisors,brokers and dealers, levies by regulatory agencies and securities exchanges, transfer taxes and duties. Transactioncosts do not include debt premiums or discounts, financing costs or internal administrative or holding costs. TheCredit Union recognizes transaction costs as part of the carrying amount of all financial instruments except thoseclassified as at FVTPL.

Financial asset impairment

The Credit Union assesses financial assets, other than those recorded at FVTPL, for indicators of impairment ateach reporting period. Financial assets are considered to be impaired when there is objective evidence that, as aresult of one or more events that occurred after initial recognition, the estin1ated future cash flows of the asset havebeen negatively affected.






Objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, defaultor delinquency by the borrower, indications that the borrower will enter bankruptcy, disappearance of an activemarket for the security, prolonged decline in fair value of a security, or other observable data relating to a portfolioof assets such as adverse changes in the payment status of borrowers in the portfolio, or national or local economicconditions that correlate with defaults on the assets in the portfolio.

For certain categories of financial assets, such as loans, assets that are assessed not to be impaired individually are,

in addition, assessed for impainnent on a collective basis. In assessing collective impairment, the Credit Unionconsiders historical experience on similar assets in similar economic conditions.

Impairment losses on financial assets carried at amortized cost are measured as the difference between the financial asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of loans, which is reduced through the use of allowance accounts. Impairment losses are recognized in profit or loss.

When available for sale financial assets are considered impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be objectively related to an event occurring after the impairment loss was recognized, the previously recognized in1paim1ent loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impainnent is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. Any subsequent recovery in the fair value of an impaired available for sale equity instrument is recognized in other comprehensive income.

Cash and cash equivalents

Cash and cash equivalents consist of cash and highly liquid securities with a maturity date within 90 days of the year end date. They are subject to insignificant risk of changes in fair value and are used to manage short term cash commitments.

Investments

Investments are initially measured at fair value. For investments not classified as FVTPL, incremental transaction costs are added to the initial measurement. Subsequent measurement is detennined based on the classification of the instrument.

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Loans receivable

Loans are initially measured at fair value plus transaction costs and subsequently at amortized cost using theeffective interest method, less any impairment. A loan is classified as impaired (doubtful) when there is no longerreasonable assurance that the principal and interest will be collected in full. The allowance is comprised of twocomponents - individual allowances and collective allowances, calculated as follows:

(i) The Credit Union records specific individual allowances based on management's regular review andevaluation of individual loans. The estimated realizable amount represents management's best estimateof the present value of future cash flows expected to be received, discounted at the loan's effectivecontractual interest rate. As a practical expedient, impainnent may be measured on the basis of theinstrument's fair value using an observable market price. The calculation of the present value of theestimated future cash flows of a collateralized financial asset reflects the cash flows that may resultfrom foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure isprobable.

(ii) The Credit Union records collective allowances for loans with similar credit risk characteristics, thathave not been individually assessed as impaired when objective evidence of impairment within thegroups of loans exists, but the individually impaired loans cannot be identified. In assessing the needfor collective allowances, management considers factors such as credit quality, portfolio size andeconomic factors. The Credit Union estimates the collective allowance for impairment using a formulabased on its historical loss experience for similar groups of loans in similar economic circumstances andcurrent economic conditions. As management identifies individually impaired loans, it assigns anindividual allowance for impairment to that loan and adjusts the collective allowance accordingly.

Assets held for sale

Assets are considered held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is met only when the sale is highly probable and the asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to be completed within one year from the date of classification.

Property and equipment

Property and equipment are recorded at cost less accumulated amortization and accumulated impairment losses. Property and equipment are amortized over their estimated useful lives using the following rates and methods, with the exception of land which is not amortized:

Building Computer, communications equipment Furnishings, equipment Naming rights

4% straight-line 20% - 33 1/3% straight-line

10% straight-line 7% - 20% straight-line

The estimated useful lives, residual values and depreciation methods are reviewed at each year end and adjusted if appropriate.

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Gains and losses on the disposal or retirement of property and equipment are determined as the difference betweenthe sales proceeds and the carrying amount of the asset and are recorded in the statement of comprehensive incomein the year of disposal.

Membership shares

Shares are classified as financial liabilities in accordance with their terms. Shares are redeemable at the option ofthe member, either on demand or on withdrawal from membership.

Impairment of tangible and intangible assets other than goodwill

At least annually, the Credit Union reviews its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated to determine the eA'tent of impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Credit Union estimates the recoverable an10unt of a group of assets (or cash generating unit) to which the asset belongs. A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash generating units, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is defined as the higher of fair value less costs to sell and value in use. In assessing value in use, the Credit Union estimates future cash flows it expects to derive from the asset or group of assets along with the expectations about possible variations in the amount and timing of those cash flows. The estimated foture cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or group of assets (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset or cash generating unit is reduced to its recoverable amount. An impainnent loss is recognized in profit or loss.

Where an impainnent loss subsequently reverses, the carrying amount of the asset or group of assets is increased to the revised estimate of the recoverable amount. The increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or group of assets in prior years. A reversal of an impairment loss is recognized in profit or loss.

Loan interest revenue

Loan and lease interest revenue is recognized on the accrual basis using the effective interest rate method for all loans not classified as impaired. When a loan becomes impaired, recognition of interest income ceases when the carrying amount of the loan ( including accrued interest) exceeds the estimated realizable amount of the underlying security. The amount of initial impaim1ent and any subsequent changes are recorded through the provision for credit losses as an adjustment of the specific allowance.

Fees that are an integral part of the effective interest rate of the financial instrument, including loan origination, commitment, restructuring and renegotiation fees, are capitalized as part of the related asset and amortized to interest income over the term of the loan using the effective interest method.

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Investment interest revenue

Investment interest income is recognized on the accrual basis using the effective interest method. Purchasepremiums and discounts are amortized using the effective interest method over the term to maturity of theapplicable investment.

Swap interest revenue and expenses

Swap interest revenue and expenses are calculated on an accrual basis on fair value and the result netted forreporting purposes.

Other income

Other revenue is recognized in the fiscal period in which the related service is provided.

Foreign currency translation

Transaction amounts denominated in foreign currencies are translated into Canadian dollar equivalents at exchangerates prevailing at the transaction dates. Carrying values of monetary assets and liabilities reflect the exchangerates at the reporting date. Carrying values of non-monetary assets and liabilities measured at historical cost reflectthe exchange rates at the date of the transaction. Non-monetary assets and liabilities that are measured at fair valueare translated to Canadian dollars at the exchange rate at the date the fair value was determined. Translation gainsand losses are included in profit or loss, except for available for sale equity instruments which are recognized inother comprehensive income.

In come taxes

Income tax expense is comprised of current and deferred taxes which are recognized in profit or loss except to theex.1ent that it relates to items recognized directly in equity or in other comprehensive income.

Current income tax is the expected tax payable or receivable on the ta,'<able income or loss for the year, using taxrates enacted or substantially enacted at the reporting date, and any adjustments to tax payable in respect ofprevious years.

Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporarydifferences between financial statement carrying amounts and amounts used for tax purposes. These amounts aremeasured using enacted or substantially enacted tax rates at the reporting date and re-measured annually for ratechanges. Deferred income tax assets are recognized for the benefit of deductions available to be carried forward tofuture periods for tax purposes to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences can be utilized. Deferred income ta,'< assets are reviewed at each reporting dateand are reduced to the ex.1ent that is no longer probable that the related tax benefit will be realized. Any effect ofthe re-measurement or re-assessment is recognized in the period of change, except when they relate to itemsrecognized directly in other comprehensive income. The Credit Union is taxed at an effective rate of 12.5% ontaxable earnings eligible for that rate and at 27% on the excess balance.

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4.

Deferred taxes are offset when there is a legally enforceable right to set off current tax assets against current taxliabilities and when they relate to income taxes levied by the same taxation authority on the same taxable entity, orfor different tax entities where the Credit Union intends to settle its current tax assets and liabilities on a net basisor simultaneously.

Future accounting and reporting changes

The Canadian Accounting Standards Board (AcSB) has issued new and amended IFRS standards under Part I ofthe CPA Canada Handbook which are not yet effective for the Credit Union. None of the new or amendedstandards have been implemented in these financial statements. The significant changes to the standards are asfollows:

• IFRS 9 Financial Instruments: The amended standard provides revised guidance on classification and

measurement of financial assets, reducing the classification categories from four to three. The

standard also provides a new requirement to calculate the impairment of financial assets using the

expected loss model, and changes to simplify hedge accounting. The effective adoption date is January

1, 2018. The Credit Union expects that the in1pact will not be significant impact as a result of the

changes to the classification categories.• IFRS 15 Revenue from Contracts with Customers: The new standard requires that revenue be

recognized as goods and services are transferred to customers, in amounts that reflect the

consideration the credit union is expected to be entitled. This standard replaces current guidance on

revenue recognition. The effective adoption date is January 1, 2018. The Credit Union expects there

will be no impact as a result of adopting the new standard.• IFRS 16 Leases: The new standard replaces previous guidance on leases. The most significant change

is that a "right of use" asset and lease liability will be recognized on the statement of financial position

for lessees with operating leases. The guidance for lessors, and lessees with capital leases, has not

been changed. The effective adoption date is January 1, 2019. The Credit Union expects there will be

no impact as a result of adopting the new standard.

The Credit Union has not determined the effect, if any, of the above standards on the financial statements.

Cash and cash equivalents

Cash balances $ Investments with maturities < 90 days High interest savings accounts

$

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2017

(3,743,034) $ 6,500,000

2 756 966 $

2016

7,175,036 7,000,000 2 000 000

16 175 036

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5.

6.




Investments 2017

Loans and receivables: Accrued interest $ 458 509

458 509 Held to maturity:

Corporate bonds 12,126,850 SaskCentral term deposits 4,000,000 SaskCentral money market terms 4,000,000 Provincial bonds and other 1 900 000

22,026,850 Available for sale:

SaskCentral liquidity terms 30,975,000 SaskCentral liquidity deposits 16,406,407 SaskCentral demand deposit SaskCentral shares 5,000,000 Concentra shares 4,000,010 Other investments (1,709)

56 379 708

$ 78 865 067

2016

$ 253 744 253 744

9,172,650 11,000,000 2,000,000

400 000 22,572,650

24,375,000 22,247,706 12,000,000

5,000,000 4,000,010

273,154 67 895 870

$ 90 722 264

At December 31, 2017, the market value of investments classified as held to maturity is $23,023,411 (2016 -$22, 708,951).

At December 31, 2017, $22,225,000 (2016- $20,275,000) of investments are expected to be recovered more than 12 months after the reporting date.

Pursuant to Regulation 18(l)(a), credit unions must maintain 10% of total liabilities, using a prescribed formula, in specified liquidity deposits in SaskCentral, in addition to liquidity required to meet their normal cash flow requirements. As of December 31, 2017, the Credit Union met the requirement.

Loans receivable

Personal loans Agricultural loans Commercial loans Finance lease Foreclosed property Lines of credit and overdrafts Accrued interest

Performing

$156,373,933 $ 56,415,050

170,524,804 5,087,118

548,818 24,088,756

1 155 671

$414,194,150 $

- 15 -

2017

Allowances Impaired

$

$

Individual Net

(251,629)$156, 122,304 56,415,050

170,524,804 5,087,118

548,818 24,088,756

1 155 671

(251,629) $413,942,521





6. Loans receivable continued

7.

Personal loans Agricultural loans Commercial loans Finance lease Lines of credit and overdrafts Accrued interest

2016

Allowances Performing Impaired Individual Net

$151,486,335 $ 55,675,233

155,284,556 5,879,500

21,759,976 990 224

$391,075,824 $

61,154 $ (193,352)$151,354,137 55,675,233

685,041 155,969,597 5,879,500

21,759,976 33 078 1 023 302

779,273 $ (193,352) $391,661,745

At December 31, 2017, $329,978,857 (2016 - $281,733,942) of loans are expected to be recovered more than 12 months after the reporting date.

Allowance for impaired loans

The aging of loans, including those past due but not impaired, as at December 31, 2017 was:

Current 31 - 60 days 61 - 90 days 91 - 120 days

Total

$

$

2017

327,300 453,099 92,370

145 712

1 018 481

2016

$ 7,956,440 357,655

1 123 547

$ 9 437 642

The Credit Union holds collateral against loans provided property, chattel property, securities and guarantees.

to customers in the form of interests in real

Other assets 2017

Accounts receivable $ 67,802 Naming rights 225,250 Namings rights - accmnulated amortization (158,583) Deferred income tax assets 355,100 Prepaid expenses 43 563

$ 533 132

- 16 -

$

$

2016

141,508 225,250

(136,200) 315,900

36 935

583 393


8.

9.




Prouert� and eguiument

Banking and Furnishings,

Land Computer Equip Building Equipment Total

Cost Balance at January 1, 2016 $ 634,595 $4,568,678 $8,925,594 $1,622,286 $15,751,153 Additions 328,394 127,466 26,686 482,546 Disposals (543,215) (24,250) (567,465)

Balance at December 31, 2016 $ 634,595 $4,353,857 $9,028,810 $1,648,972 $15,666,234

Balance at January 1, 2017 $ 634,595 $4,353,857 $9,028,810 $1,648,972 $15,666,234 Additions 164 389 292 130 22 236 478 755

Balance at December 31, 2017 $ 634,595 $4,518,246 $9,320,940 $1,671,208 $16,144,989

Depreciation and impairment losses Balance at January 1, 2016 $ $4,075,177 $4,941,671 $1,383,307 $10,400,155 Depreciation expense 247,771 315,165 46,446 609,382 Disposals (543,215) (8,730) (551,945)

Balance at December 31, 2016 $ $3 779 733 $5 248 106 $1 429 753 $10 457 592

Balance at January 1, 2017 $ $3,779,733 $5,248,106 $1,429,753 $10,457,592 Depreciation expense 262 374 319 725 45 969 628 068

Balance at December 31, 2017 $ $4 042 107 $5 567 831 $1 475 722 $11 085 660

Net book value Balance at December 31, 2016 634,595 574,124 3,780,704 219,219 5,208,642 Balance at December 31, 2017 634,595 476,139 3,753,109 195,486 5,059,329

The banking and computer equipment category includes computer software with cost of $899,683 (2016 -$899,683), accumulated depreciation of $809,532 (2016 - $719,563) and net book value of $90,151 (2016 -$180,120).

Deuosits

2017 2016

Chequing $ 117,610,160 $ 109,166,577 Savings 113,165,718 113,931,454 Term deposits 127,848,509 142,287,912 Registered accounts 66,681,690 63,501,229 Other 26,067,931 27,602,128 Accrued interest 1 400 276 1 568 656

$ 452 774 284 $ 458 057 956

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9. Deposits continued

At December 31, 2017, $107,067,938 (2016 - $104,878,034) of deposits are expected to be settled more than 12months after the reporting date.

10. Loans payable

11.

12.

The Credit Union has an authorized line of credit with SaskCentral in the amount of $10,000,000. This line ofcredit bears interest at 2.7% and is secured by an assignment of book debts and funds on deposit with a tieredinterest rate structure based on a ninety day T-Bill rate and bank prime. At the end of the year, the amountoutstanding was $8,192,392 (2016 - $NIL).

Other liabilities

Accounts payable Deferred revenue - leases Income taxes payable

Membership shares & equity accounts

Membership shares

$

$

2017

1,907,371 408,646

(122,905)

2 193 112

$

$

2016

2,224,502 436,779

(212,250)

2 449 031

Membership shares are as provided for by The Credit Union Act, 1998 and administered according to the terms of the Credit Union bylaws which sets out the rights, privileges, restrictions and conditions.

The authorized share capital is unlimited in amount and consists of fully paid shares with a par value of $5 per share. These accounts are not guaranteed by CUDGC. Characteristics include permanence, freedom from mandatory charge and subordination to the rights of creditors and depositors.

The value of outstanding membership shares consists of:

Issued at January 1 Issued Redeemed

Issued at December 31

Equity accounts

$

$

39,555 $ 2,445

(2,095)

39 905 $

2016

39,565 2,275

(2,285)

39 555

Member equity accounts are provided based on credit union policies, are non-appreciating, bear no rate of return, and are subject to specific restrictions for withdrawal by the member.

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13. Capital management

Credit Union Deposit Guarantee Corporation ( CUDGC) prescribes capital adequacy measures and minimumcapital requirements. The capital adequacy rules issued by CUDGC have been based on the Basel III framework,consistent with the financial industry in general. CUDGC's Standards of Sound Business Practice (SSBP) thatincorporate the Basel III framework took effect on July 1, 2013.

The Credit Union follows a risk-weighted asset calculation for credit and operational risk. Under this approach,Credit Unions are required to measure capital adequacy in accordance with instructions for determining riskadjusted capital and risk-weighted assets, including off-balance sheet commitments. Based on the prescribed risk ofeach type of asset, a weighting of 0% to 150% is assigned. The ratio of regulatory capital to risk-weighted assets iscalculated and compared to the standard outlined by CUDGC. Regulatory standards require Credit Unions tomaintain a minimum total eligible capital to risk-weighted assets of 8%, a minimum total tier 1 capital to riskweighted assets of 6% and a minimum conunon equity tier 1 capital to risk-weighted assets of 4.5%. Eligiblecapital consists of total tier 1 and tier 2 capital. In addition to the mini.I11m11 capital ratios, the Credit Union isrequired to hold a capital conservation buffer of 2.5% effective January 1, 2016. The capital conservation buffer isdesigned to avoid breaches of the mi.I1imm11 capital requirement.

Tier 1 capital is defined as a Credit Union's primary capital and comprises the highest quality of capital elementswhile tier 2 is secondary capital and falls short of meeting the tier 1 requirements for permanence or freedom frommandatory charges. Tier 1 capital consists of two components: common equity tier 1 capital and additional tier 1capital. Conunon equity tier 1 capital includes retained earnings, contributed surplus and accumulated othercomprehensive income. Deductions from common equity tier 1 capital include goodwill, intangible assets, deferredtax assets (except those arising from temporary differences), increases in equity capital resulting from securitizationtransactions, unconsolidated substantial investments and fair value gains/losses on own-use property. Additionaltier 1 capital consists of qualifying membership shares and other investment shares issued by the Credit Union thatmeet the criteria for inclusion in additional tier 1 capital.

Tier 2 capital includes a collective allowance for credit losses to a maxi.Inum of 1.25% of risk weighted assets,subordinated indebtedness, and qualifying membership shares or other mvestment shares issued by the Credit Unionthat meet the criteria for inclusion ill tier 2 capital and are not included in tier 1 capital.

Regulatory standards also require the Credit Union to maintain a minimum leverage ratio of 5%. This ratio iscalculated by dividing eligible capital by total assets less deductions from capital plus specified off-balance sheetexposures. Based on the type of off-balance sheet exposure, a conversion factor is applied to the leverage ratio.All items deducted from capital are excluded from total assets. The Credit Union may also exclude from totalassets mortgages securitized through Canada Mortgage and Housing Corporate (CMHC) programs up to andincluding March 31, 2010 and all existing and future reinvestments related to Canada Mortgage Bonds (CMB)Insured Mortgage Purchase Program transactions completed up to and including March 31, 2010.

The Credit Union has adopted a capital plan that conforms to the capital framework and is regularly reviewed andapproved by the Board of Directors. The following table compares CUDGC regulatory standards to the CreditUnion's Board policy for 2017:

Total eligible capital to risk-weighted assets Total tier 1 capital to risk-weighted assets Common equity tier 1 capital to risk-weighted assets Leverage ratio

- 19 -

Regulatory Standards 8% 6%

4.5% 5%

Board Minimum 10.75% 8.75% 7.25% 7.00%

7AIVIRTUS °V GROUP




13. Capital management continued

14.

During the year, the Credit Union complied with all internal and eAiemal capital requirements. The following tablesummarizes key capital information:

Eligible capital: Common equity tier 1 capital $ 41,899,000 $ 39,316,000 Additional tier 1 capital Total tier 1 capital 41,899,000 39,316,000 Total tier 2 capital 4 052 000 4 249 000

Total eligible capital $ 45 951 000 $ 43 565 000

Risk-weighted assets $ 342,730,000 $ 329,382,000

Total eligible capital to risk-weighted assets 13.41% 13.23% Total tier 1 capital to risk-weighted assets 12.23% 11.94% Common equity tier 1 capital to risk-weighted assets 12.23% 11.94% Leverage ratio 8.71% 8.36%

Related party transactions

Related parties exist when one party has the ability to directly or indirectly exercise control, joint control or significant influence over the other or is a member, or close family member of a member, of the key management perso1mel of the Credit Union. Related party transactions are in the nom1al course of operations and are measured at the consideration established and agreed to by the parties.

Loans receivable:

At December 31, 2017, certain members of the board of directors and key management personnel were indebted to the Credit Union for amounts totaling $5,169,043 (2016 - $5,082,369). These loans were granted under the same lending policies applicable to other members, and are included in loans receivable on the statement of fmancial position.

Deposit accounts:

Directors and key management personnel may hold deposit accounts. These accounts are maintained under the same terms and conditions applicable to other members, and are included in member deposits on the statement of financial position.

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14. Related party transactions continued

Remuneration:

Compensation provided to directors and key management personnel is comprised of:

Salaries, Board honoraria and short tem1 benefits Post employment benefits

15. Classification and fair value of financial instruments

$

$

1,203,918 66 217

1,270,135

$

$

1,170,324 63 138

1,233,462

The following table summarizes the carrying amount and fair values of the Credit Union's financial instruments.

2017 2016

Carrying Fair Carrying Fair Value Value Value Value

FINANCIAL ASSETS Cash and cash equivalents $ 2,756,966 $ 2,756,966 $ 16,175,036 $ 16,175,036 Investments 78,865,067 79,762,618 90,722,264 93,063,059 Loans 413,942,521 411,691,000 391,661,745 389,924,000 Other assets 67,802 67,802 141,508 141,508

FINANCIAL LIABILITIES Deposits 452,774,284 276,000,000 458,057,956 458,950,000 Other liabilities 2,316,017 2,316,017 2,661,280 2,661,280

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

The fair values of short tenn financial instruments including cash, other assets, and other liabilities are approximately equal to their book values due to their short tem1 nature.

Fair values of investments are based on quoted market prices, when available, or quoted market prices of similar investments.

For variable interest rate loans that re-price frequently, fair values approximate book values. Fair values of other loans are estimated using discounted cash flow calculations with market interest rates for similar groups of loans.

The fair values of deposits with unspecified maturity terms are approximately equal to their carrying values. Fair values for other deposits and loans payable with specified maturity terms is estimated using discounted cash flow calculations at market interest rates for similar groups of deposits.

The fair values of derivative financial instruments are estimated by reference to the appropriate current market yields with matching terms of maturity. The fair values reflect the estimated amount that the Credit Union would receive or pay to terminate the contracts at the reporting date.

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15. Classification and fair value of financial instruments continued

16.

The following table provides an analysis of financial instruments measured at fair value at the end of the reportingperiod, by the fair value hierarchy into which the fair value measurement is categorized:

2017

Level 1 Level2 Level 3 Total

FINANCIAL ASSETS Short tem1 investments $ 6,500,000 $ $ $ 6,500,000

SaskCentral liquidity deposits 52,008,256 52,008,256

Other investments 17,392,636 17,392,636

2016

Levell Level2 Level 3 Total

FINANCIAL ASSETS Short term investments $ 9,000,000 $ $ $ 9,000,000

SaskCentral liquidity deposits 61,530,867 61,530,867

Other investments 19,932,041 19,932,041

Financial instrument risk management

Credit risk

Credit risk is the risk of financial loss to the Credit Union if a customer or counterparty defaults on its contractual payment obligations. Credit risk may arise from loans and receivables and principal and interest amounts due on investments.

Credit risk is managed in accordance with policies and procedures established by the Board of Directors. In addition, CUDGC establishes standards with which the Credit Union must comply. The Credit Union's Board has established lending policies and procedures which outline the minimum standards and criteria for granting credit to borrowers. Certain types of lending are subject to an annual review process to ensure that standards continue to be met. Accounts which are deemed to be of higher than average risk are monitored more frequently. Policy and procedures also specify the type of assets which may be taken as collateral and the techniques for valuation.

The Credit Union has established credit limits for individual borrowers to manage overall credit risk of the portfolio and establish parameters for credit diversification. The maximum aggregate credit per member is limited to 25% of capital and the maximum unsecured lending limit is $75,000. The established portfolio mix for 2017 is:

Consumer Agriculture Oil and gas Construction Real estate, rental, and leasing Health care & social assistance Accomodations and food services All other categories

-22 -

Board policy Actual 70% 38%

50% 17%

20% 2%

20% 25% 20% 20% 20%

6% 12% 6% 8% 11%

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16. Financial instrument risk management continued

Except as otherwise noted below, the carrying amount of the financial assets recognized in the financial statements,which is net of impairment losses, represents the Credit Union's maximum exposure to credit risk, without takinginto account collateral or other credit enhancements held.

In addition, in the normal course of business, the Credit Union has entered into various commitments to extendcredit that are not reported on the statement of financial position, including guarantees and letters of credit. Theprimary purpose of these contracts is to make funds available for the financing needs of customers. These aresubject to normal credit standards, financial controls, risk management and monitoring procedures.

Guarantees and standby letters of credit represent irrevocable commitments that the Credit Union will makepayments in the event that a customer can not meet its obligations to third parties, and they carry the same risk,recourse and collateral security requirements as loans extended to customers. Commercial letters of credit areinstruments issued on behalf of a customer authorizing a third party to draw drafts on the Credit Union up to astipulated amount subject to specific tenns and conditions. The Credit Union is at risk for any drafts drawn thatare not ultimately settled by the customer, but the amounts are collateralized by the goods to which they relate.Commitments to extend credit represent unutilized portions of authorizations to extend credit in the form of loans,bankers' acceptances or letters of credit.

The amounts reported below represent the maximum credit exposure for commitments to extend credit. Many ofthese contracts expire without being drawn upon, thereby reducing the Credit Union's credit risk from the maximumcommitment. As many commitments will expire or tenninate without being funded, the amounts shown on the tablebelow do not necessarily represent future cash requirements.

Undrawn lines of credit Commitments to extend credit

Liquidity risk

$ 28,329,197 20,937,382

$ 29,594,093 15,857,311

Liquidity risk is the risk of financial loss to the Credit Union in the event that the Credit Union is unable to generate or obtain the necessary cash or cash equivalents in a timely manner, at a reasonable price, to meet its financial commitments as they come due.

Liquidity risk is managed in accordance with policies and procedures established by the Board of Directors. In addition, CUDGC establishes standards to which the Credit union must comply. The Credit Union's primary liquidity risk policies and procedures include policies for minimum liquidity holdings, monthly monitoring and access to additional short tem1 financing.

The Credit Union enters into transactions to purchase goods and services on credit and/or borrow funds for which repayment is required at various maturity dates, including processing the fmancial transactions of borrowers and depositors. Liquidity risk is measured by reviewing the Credit Union's future cash flows for the possibility of a negative net cash flow. The contractual maturities of financial liabilities can be found within the table under interest rate risk below.

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Market risk

Market risk is the risk of loss in value of financial instruments that may arise from changes in market factors suchas interest rates, equity prices and credit spreads. The Credit Union's exposure changes depending on marketconditions.

Market risk is managed in accordance with policies and procedures established by the Board of Directors. Inaddition, CUDGC establishes standards to which the Credit Union must comply. The Credit Union's primarymarket risk policies and procedures include policies for maximum mismatch levels, monthly monitoring andadjusting product mix to address match position.

The primary market risk that the Credit Union is exposed to is interest rate risk. Interest rate risk is the potentialadverse impact on the earnings due to changes in interest rates. The Credit Union's exposure to interest rate riskarises primarily from timing differences in the re-pricing of assets and liabilities, including financial assets andliabilities with fixed and floating rates. The Credit Union's exposure to interest rate risk can be measured by themismatch or gap, between the assets, liabilities and off balance sheet instrnments scheduled to mature or re-price onparticular dates. Gap analysis measures the difference between the amount of assets and liabilities that re-price inspecific time periods.

To manage exposure to interest rate fluctuations and to manage asset and liability mismatch, the Credit Union mayenter into interest rate swaps. These minimize the interest rate risk and cash required to liquidate the contracts byentering into counter balancing positions. The Credit Union did not use interest rate swaps in the current year.

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The table below summarizes the carrying amounts of financial instruments exposed to interest rate risk by theearlier of the contractual re-pricing/maturity dates. Re-pricing dates are based on the earlier of maturity or thecontractual re-pricing date and effective interest rates, where applicable, represent the weighted average effectiveyield.

ASSETS

Total assets

LIABILITIES

Total liabilities

On-balance sheet gap

On-balance sheet gap

2017 Over Over Non-

On Within 3 months 1 year Over interest Demand 3 months to 1 year to 5 years 5 years sensitive Total

$167,188,053 $ 30,631,076$ 93,074,174 $200,821,886$ 5,879,496 $ 4,397,466 $501,992,151

227,899,763 35,873,887 32,415,175 106,980,758 87,180 98,735,388 501,992,151

$ (60,711,710)$ (5,242,811)$ 60,658,999 $ 93,841,128 $ 5,792,316 $ (94,337,922)$

2016 Over Over Non-

On Within 3 months 1 year Over interest Demand 3 months to 1 year to 5 years 5 years sensitive

$ (43,358,126)$ 20,893,103 $ 4,343,371 $ 88,603,238 $ 7,138,793 $ (77,620,379)$

Total

The above tables do not identify management's expectations of future events where re-pricing and maturity dates differ from contractual dates.

A 1 % change in interest rates with all other variable held constant would result in a change in the Credit Union's profit for the year ended December 31, 2017 of$464,812 (2016 - $266,982). The Credit Union uses static gap reports to simulate the effect of a change in the market rate of interest.

17. Credit Union Electronic Account Management Services Association (CEAMS)

CEAMS is an association of credit unions established to develop and manage the eroWorks banking system. TheCredit Union has expensed its share (3.88%) of the acquisition and development costs assessed. The operating costsare expensed as incurred. The assessed cost method of accounting for these costs does not vary significantly fromthe proportionate consolidation method. Subsequent to year end, CEAMS was wound down and all services weretransitioned to the National Consulting Services of SaskCentral.

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18. Income taxes

Income tax expense is comprised of:

Current tax expense

Current period

Deferred tax expense (recovery) Origination and reversal of temporary differences

Total income tax expense

2017

$ 814 395

814,395

(39,200)

(39,200)

$ 775 195

The income tax expense for the year can be reconciled to the accounting profit as follows:

2017

Income before provision for income taxes $ 3,489,834 Combined federal and provincial tax rate 26.75 %

Income tax expense at statutory rate 933,530 Adjusted for the effect of: Non-deductible expenses 2,359 Non-taxable income (123,700) Credit Union rate reduction (36,549) Other (444)

$ 775 196

2016

$ 928 814

928,814

(46,900)

(46,900)

$ 881 914

2016

$ 3,684,538 27.00 %

994,825

3,172

(116,095) 12

$ 881 914

The federal portion of the preferred rate additional deduction for credit unions was fully phased out effective 2017. Starting in 2017, the Saskatchewan portion of the preferred rate has begun phasing out. For 2017, the provincial deduction was reduced to 75% of what the Credit Union would otherwise be entitled to tmder the old rules. The provincial deduction is expected to then be decreased to 50% in 2018, 25% in 2019, and 0% in 2020 and subsequent years.

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18. Income taxes continued

19.

Deferred income tax assets and liabilities recognized are attributable to the following:

Def erred income tax assets Property and equipment Loans

Deferred tax assets -To be recovered after more than 12 months- To be recovered within 12 months

Employee future benefits

2017

$ 348,300 6 800

$ 355 100

2017

$ 348,300 $ 6,800

$

$

310,700 5 200

315 900

$ 310,700 $ 5,200

The Credit Union's employee future benefit program consists of a defined contribution pension plan. Credit Union contributions to the defined contribution plan are are expensed as incurred. The Credit Union has no legal or constructive obligation to pay further contributions if the plan does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

Pension benefits of $364,000 (2016 - $349,000) were paid to defined contribution retirement plans during the year.

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SCHEDULE OF NON-INTEREST EXPENSES

(Unaudited - See Note Below) FOR THE YEAR ENDED DECEMBER 31, 2017


2017

General business Amortization - equipment $ 308,344 Audit and regulatory inspection 67,224 Business development 291,699 Cash shortage (517) Computer costs 1,018,580 Legal, registration 30,875 Maintenance, insurance - equipment 75,986 Office 54,396 Rental - equipment 7,386 Service charges, clearing fees 443,102 Telephone, postage, courier 176,220 Other general business 86 123

$ 2 559 418

Occupancy Amortization - building $ 319,725 Maintenance, taxes, insurance - building 289,963 Utilities 88 482

$ 698 170

Organizational Annual meeting $ 6,921 SaskCentral dues 116,438 Development - officials 38,862 Remuneration - officials 62 661

$ 224 882

- 28 -

$

$

$

$

$

$

SCHEDULE 1

2016

294,217 82,336

306,226 140

954,874 32,068 60,221 73,952 11,325

448,353 175,382 122 024

2 561 118

315,165 372,519 82 020

769 704

7,285 108,235

42,497 62 728

220 745

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SCHEDULE OF NON-INTEREST EXPENSES (Unaudited - See Note Below)

FOR THE YEAR ENDED DECEMBER 31, 2017 (with comparative figures for the year ended December 31, 2016)

SCHEDULE 1 - Continued

Personnel Benefits $ Development Salaries Travel - meals Other personnel expenses

$

Security Bonding insurance $ Deposit guarantee assessment Loan and savings insurance

$

- 29 -

2017

959,534 $ 111,483

6,623,767 5,471

56 207

7 756 462 $

56,333 $ 365,169

498

422 000 $

2016

909,076 158,491

6,248,755

62 301

7 378 623

37,238 410,715

573

448 526

� VIRTUS "V GROUP

Documents

V VIRTUS - weyburncu.ca€¦ · V VIRTUS GROUP Chartered Profession al Accountants & Business Advisors LLP INDEPENDENT AUDITORS' REPORT To the Members, Weyburn Credit Union Limited