Annual Report
2014
Bridging Collectively Overview Members gave us the go-ahead! 2014 was without a doubt an important year for the co-operative democracy… Very important actually since on November 12, the members of all 15 Caisses populaires acadiennes exercised their democratic right by voting on the bridging collectively project. This was made public for the first time more than a year ago. After the extraordinary meetings, the 15 caisses voted in favour of the project. 91% of members taking part in their respective caisse’s extraordinary meeting voted in favour of the project, therefore authorizing their board of directors to approve the merger agreement.
“Members expressed their desire to see their financial co-operative commit to change and modernization. They opted for the advancement of an institution that was able to emerge as a collective growth tool in Acadia almost 80 years ago. We can only be proud of this confidence vote by our members and we sincerely thank them”, said Camille H. Thériault, CEO, during the press briefing that took place the day after the extraordinary meetings.
91
% *
VOTED YES * 91% of members present at the November 12 extraordinary meetings of the caisses voted in favour of the bridging collectively project.
A Transitional Committee Already at Work As soon as the members approved the bridging collectively project, the transitional committee started its work and it will remain in place until it becomes the Board of directors of the new caisse.
In the federal system, the CEO is also a member of the Board of directors, which brings the number to 13. The first annual general meeting of the new caisse will theoretically be held in 2017.
As presented during the meetings, the transitional committee is made up of the following representatives:
Camille Thériault Appointed as Chief Executive Officer of the New Caisse The transitional committee made its choice concerning the CEO of the new entity. The president of the transitional committee, Pierre-Marcel Desjardins, announced on January 15, 2015 that Camille Thériault was being reappointed to this position. In fact, the transitional committee felt that Mr. Thériault was the best candidate to ensure an optimal transition in which member services remain a priority.
Southeast
Guy J. Richard Lynn LeBlanc Pierre-Marcel Desjardins Roland Cormier
Northwest
Allain Santerre Diane Pelletier Lloyd Plourde Maurice Picard
Northeast
President and CEO
Gilles Godin Hugues Thériault Philippe Ferguson Wanita McGraw Camille H. Thériault
To ensure the continuity of the transition, these 13 people will act as members of the transitional committee until the expected date of the merger in 2016. Note that 3 women, one per area, were appointed to serve on the transitional committee. The people were chosen by a unanimous decision of the elected directors.
Towards a Federal Regulatory Framework Since 2012, the revision of the Canadian financial system laws authorizes the adherence of co-operatives. The federal framework allows us to make a better use of capital and cash assets, and to be regulated, just like our main competitors.
Next Steps January to March, 2015
The Transitional Committee starts its work (until the establishment of the new caisse) Provincial legislative amendments
April 2015
Reconvened session of the Extraordinary Meetings (vote for the conversion to federal regulation)
May to December, 2015
Formal approval from provincial and federal regulatory bodies
July 1st, 2016
Creation of the new caisse and conversion to federal regulations
A Unique Co-operative Model In 2014, The Presidents’ Association worked actively to create a unique co-operative model. In order to maintain a strong relationship with the members and their community, the territory will be divided into 12 community co-operative committees, each one made up of 9 representatives elected by members of the communities of interest.
12 Community Co-operative Committees These committees will represent members and be responsible, among other things, for the new caisse’s donation and sponsorship budget, and of the members’ satisfaction follow-up. Human resources from the new caisse will be allocated to each committee in order to ensure that projects are implemented and that the link between the committees is maintained. Grand-Caraquet Restigouche, Campbellton and Kedgwick
3 Regional Co-operative Committees These committees will be comprised of community co-operative committee members for a total of 108 participants. They will work closely with the new caisse’s Board of directors and will act as a basis for consultation. Each of the 3 areas will choose 36 representatives who will take part in the new caisse’s annual general meeting, therefore ensuring a regional representativeness. The 155,000 members will also be able to take part in their meeting in person or virtually. Beyond the annual meeting, members will have other means to democratically take part in their co-operative and, if they wish to do so, become members of their community co-operative committee and have the option to make a real difference in their local area.
Lamèque and Miscou
155,000 members
Chaleur
Members elect Caisse’s Board of Directors Participate
Shippagan Tracadie-Sheila Néguac
9 people elected by the members Community co-operative comittee place in the territory Participate Regional co-operative comittee (3 : Northwest, Northeast, Southeast) Participate
Edmundston and Madawaska
Sud-Est DieppeMemramcook
Grand-Sault, Saint-Quentin and Saint-Léonard
Fredericton and Moncton
Caisse’s Annual General Meeting
Table of Contents The Annual Report was created by Communications and Strategic Planning and Financial Services Management. Fédération des caisses populaires acadiennes
295 Saint-Pierre Blvd. West Caraquet NB E1W 1B7 Graphic Design:
Mistral Communication
Message from the President and Chief Executive Officer
2
Organization Chart
6
Mouvement des caisses populaires acadiennes Management’s Discussion and Analysis
12
Mouvement des caisses populaires acadiennes Combined financial statements
Fédération des caisses populaires acadiennes
Summary consolidated financial statements
Acadia Life
Summary consolidated financial statements
Office de stabilisation de la Fédération des caisses populaires acadiennes Summary financial statements
36
94 100
108
This annual report states financial and business results. To learn more about how communities benefit from our presence, see our Social Responsibility Report (Bilan de responsabilité sociale) available in French only at www.acadie.com/bilansocial.
2014 Highlights As of December 31, 2014
MORE THAN
155,000
$3.5
BILLION
15 CAISSES
IN ASSETS
MEMBERS
200
ELECTED OFFICERS
1,000
EMPLOYEES
$2.7
51 BUSINESS
MILLION
LOCATIONS
4 REGIONAL
OFFICES OF THE FINANCIAL BUSINESS CENTRE
99
ATMs
IN DONATIONS, SPONSORSHIPS AND SCHOLARSHIPS
$ $
$
$1.8
$ MILLION IN MEMBER DIVIDENDS
SURPLUS EARNINGS BEFORE OTHER ITEMS
$31.8
MILLION
Message from the President and Chief Executive Officer
Camille H. Thériault President and Chief Executive Officer
“In spite of a difficult economic climate and even if our bridging project mobilised all of our resources, the Caisses populaires acadiennes and subsidiaries fared well with good performances by having $31.8M in surplus earnings before other items.”
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Rapport Annual Report annuel2014 2014
2014 : Shaping the future today
part of this project that will modernize our Mouvement.
The most important financial institution in Acadia wrote a new page of history in 2014. During this period, we rallied to embrace change and adapt to the realities of a new economy.
In 2014, we worked hard to make sure everyone understood the full implications of this project. However, we took advantage of this opportunity to get members to engage in their caisse… a collective treasure.
Furthermore, our member-owners gave us a clear mandate when, on November 12, 2014, a little over 91% of voting members chose to take part in this ambitious unifying project. It is the result of many months of efforts and of an idea that sprouted in our network in 2006. This project’s objective was to merge the 15 caisses and their Fédération into one single administrative body. These changes meet the increasing demand of members who require more competitive offers from its financial co-operative. This whole transformation was made possible by consolidating different caisses and by closing business locations between 2008 and the end of 2012. In the wake of all this, we saw the emergence of the Financial Business Centre and of the Acadia Administrative Centre, meeting a need for greater effectiveness. As president of this Mouvement, I can only be indebted to the work of directors and managers who wished to further improve the services offered to memberowners. I bow to the members who, in an overwhelming majority, voted in favour of this project on November 12. I feel very privileged but, above all, I feel excited to be
After the natural euphoria that followed the support of our members, it is time for us to deliver! It is with renewed energy that the teams work together and double their efforts in order to meet the deadlines and make sure that the new caisse will be in place on July 1, 2016. Of course, the challenges associated with this new structure are still, in my opinion, a daily motivation for our senior executives and employees. As I have often said during this process, the greatest challenge will be to appropriately manage our organizations while transforming them. In fact, this next year will be particularly demanding since we want to make sure the transition is done while maintaining the same level of service to members. We have the chance to be able to push our Acadian and francophone DNA further thanks to the renewal of our co-operative distinction; a unique model in this country. We will have an extraordinary lever to help us adapt to this new financial market reality and to deal with the increasing pressure of competition while being subjected to the same legislation.
Collective Achievements Attract Success With assets of more than $3.5 billion, we consolidate our local decision-making power here in our province, and we keep on contributing to the enhancement of our distinction towards the Acadian and francophone community of New Brunswick. We have been able to perform well and generate interesting surpluses. In spite of a difficult economic climate and even if our bridging project mobilised all of our resources, the Caisses populaires acadiennes and subsidiary fared well with good performances by having $31.8M in surplus earnings before other items. We believe that the savings achieved by this consolidation will benefit members and will allow the company to develop further and to become more competitive and relevant as a co-operative. Among the other successes achieved during past months, having the possibility to manage the Vitality Network’s transactions account is significant. This breakthrough in the francophone health field at the provincial level opens doors to very interesting future initiatives for the various components of the Mouvement. After this past year’s agreement with the Université de Moncton, it is another winning initiative that will allow us to further develop the reach of the Caisses populaires acadiennes in the Acadian and francophone community of New Brunswick. The implementation of a structure such as the Financial Business Centre provides evidence of the synergy developed between the teams of our organization.
An Important Transition The bridging collectively project will continue to require sustained attention in coming months. In fact, all of our resources will be mobilized for the transition to the new administrative and organizational structure. The modernization of this great institution, as strong as ever, will take up most of our time. In fact, a Board of directors’ transitional committee is now in place and it held its first meeting in Caraquet on November 16, 2014. 3 women are part of the group and this is an important governance element we wished to improve. Lynn LeBlanc, Diane Pelletier and Wanita McGraw were appointed to the transitional committee which is made up of 13 people. Pierre-Marcel Desjardins and Guy J. Richard were chosen as president and vice-president of the committee.
At the operational work level, more than 18 sites or projects are being alternatively developed, led by the management team and consultants. Everything is therefore in place to ensure the success of this Mouvement’s great initiative. We are also pursuing our relationships with different regulatory bodies at both the provincial and national levels in order to make sure we understand and meet their requirements at each step of the process. In fact, until the official transfer to federal legislation is finalized, we must follow the provincial laws governing our operations. We will need to modify the provincial Credit Unions Act in order to be able to submit the accreditation application to the Office of the Superintendent of Financial Institutions (OSFI) and other federal agencies. To this end, many steps were taken with different provincial actors and we are confident that this modification will be done in 2015.
Our Communities, Our Inspiration With close to $2.7M in donations, sponsorships and scholarships, we stand out from our competition by redistributing our surpluses locally in New Brunswick. This amount has never been seen in our institution.
In this modern spirit of co-operation, we want to reassure our members and our communities that they will, more than ever, continue to benefit from the surpluses of this collective success. Besides, our decision to become one entity gives us the tools necessary to further improve the heritage of this great Mouvement’s pioneers. In fact, this great rallying project has the potential to become an inspiring catalyst to stimulate member participation, in addition to becoming an original co-operative model that will protect governance, principles and co-operative values while finding solutions to increase democratic participation. Since the foundation of our first caisse in Petit-Rocher, almost 80 years ago, we have been constantly working to reinvent ourselves and adapt to change. With hard work and conviction, our directors and managers know how to make the decisions needed to ensure the sustainability of this great Mouvement. This is why I wish to recognize their exceptional contribution in the undertaking of their responsibilities. Even with one single administrative entity, the Caisses populaires acadiennes, with their 51 business locations, will be managed locally, by local people.
Message from the President and Chief Executive Officer
3
To our dedicated staff, this includes close to one thousand men and women, thank you for your unwavering support. I am particularly proud to move forward with you in the achievement of this modernization objective which will allow us to meet the needs of our 155,000 members. Together, we move forward to ensure the sustainability of the institution for coming years because we are Shaping the future today.
Camille H. ThĂŠriault President and Chief Executive Officer
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Annual Report 2014
Executive Committee
Mouvement des caisses populaires acadiennes From left to right Rolland LeBouthillier Vice-President and COO Office
David Losier Vice-President and CFO
Camille H. Thériault President and CEO
Denis Laverdière Vice-President and COO
Simonne Godin Corporate Secretary
Éric Aubé Executive Director Communications and Strategic Planning
Executive Comittee
5
Organization Chart Mouvement des caisses populaires acadiennes
Members
15
caisses populaires operated in 51 business locations
1
financial business centre operated in 4 regional offices
Fédération des caisses populaires acadiennes Support Institutions Fondation des caisses populaires acadiennes
Annual Report 2014
Conseil acadien de la coopération
Acadia Service Corporation
Acadia Financial Holdings
- Acadia Service Centre
- Acadia Life - Acadia General Insurance - AVie - Acadia Financial Services
As of April 1st, 2015
6
Office de stabilisation de la Fédération des caisses populaires acadiennes
Northwest
Northeast Southeast
The Caisses with their business locations Northeast Area Acadie
Bas-Caraquet, Caraquet, Grande-Anse, Inkerman, Paquetville and Pokemouche
Beresford
Beresford
Chaleur
Allardville and Bathurst
des Fondateurs
Petit-Rocher and Robertville
des Iles
Lamèque
le Lien des deux Rivières
Saint-Isidore, Sheila and Tracadie-Sheila
Néguac
Néguac and Rivière-du-Portage-Brantville
Shippagan
Shippagan
Northwest Area
Southeast
La Vallée de l’Érable
Grand-Sault, Saint-Léonard and Saint-Quentin
Beauséjour
Fredericton and Moncton (4)
Madawaska
Edmundston, Saint-Jacques and Sainte-Anne de Madawaska
Dieppe-Memramcook
Dieppe and Memramcook
Sud-Est
Restigouche
Balmoral, Campbellton, Eel River and Kedgwick
Trois Rives
Clair, Edmundston, Saint-Basile and Saint-François
Baie Sainte-Anne, Grand-Barachois, Bouctouche, Cap-Pelé, Cocagne, Grande-Digue, Richibucto, Rogersville, Saint-Antoine Saint-Louis, Sainte-Marie and Shediac
As of April 1st, 2015
The Caisses with their business locations
7
Our Employees: Nobody Does It Better Being one of the largest private employers in New Brunswick is an ongoing challenge. And the fact that we are a co-operative adds a whole other dimension, especially since we are owned by nearly 155,000 members. Our mission makes us a different kind of employer, one with broader social responsibilities than other companies.
Making the Most of our Unrivaled Expertise
A Top Employer
We could not sustain high performance levels throughout the organization were it not for our skilled, dedicated staff who are always willing to go the extra mile to achieve excellence. The expertise of our employees and managers is unrivalled—they are our greatest asset.
Our caisses, subsidiaries and other Mouvement business units provide employment for nearly 1,000 individuals. We offer them competitive working conditions with professional opportunities to challenge their interests. We also provide a quality work environment and respect our employees; two critical factors in maintaining the service excellence our members enjoy. Our current success, as well as the one we hope to achieve, would not be possible without the contribution and commitment of competent people. Retaining qualified employees is a critical success factor in the financial services sector. We must therefore use best practices in human resource management if we wish to remain among the best of our industry.
Transparent Communication Guided by a culture of communication and openness, we maintain a productive dialogue with our employees. We work together, using various communication tools and through regular meetings, to develop and share our strategic vision, business objectives, and results.
Achieving our Full Potential In order for our employees to be able to reach their full potential, we provide them with various training and information tools and the support and other means they need to excel. Training is a key element of our employees’ personal and professional growth as well as our competitive edge in the financial markets.
8
Annual Report 2014
We rely on the experience of our employees, who give us an edge in this extremely competitive market. We have built our seasoned work force through effective recruitment and retention strategies.
It is also interesting to note that 55% of our workforce falls at the two extremes of seniority, as shown by the table below. 330
20 years and more
244
11 to 20 years
180
6 to 10 years
290
5 years and less 0
50
100
150
200
250
300
Supporting our Successors Succession planning must be addressed if we are to ensure the future stability and viability of our organization. In this regard, we are always at the ready when it comes to developing employee competencies. We also welcome students and interns looking to gain professional experience during summer jobs or on-site internships.
350
Our Strategic Plan and Orientations 2013-2015 Our Mission Our Vision ORIENTATION 1
ORIENTATION 2
ORIENTATION 3
RELATIVE EFFICIENCY Our annual operating income grows faster than our annual operating expenditures.
RELATIVE GROWTH Our business volume grows at a percentage equal to or greater than the growth of New Brunswick’s financial markets.
CO-OPERATIVE DIFFERENCE Our caisses, by virtue of their distinguishing characteristics, co-operative values, and consistent actions, stand out from the competition and other regional companies.
Our Values
We have just completed the second year of this strategic plan. In other words, we well on our way to reaching our goals in terms of efficiency, growth and co-operative distinction.
2014 - Achieving Targets
We cannot forget that 2014 is the year when members approved the bridging collectively project. Many initiatives yielded positive results at the effectiveness level. The transition to the new caisse, through our commitment, will ensure that this part of the strategic plan receives the importance it deserves. At the growth level, the business sector saw many challenges in terms of business development and fine-tuning of operations. On the flip side, projects in this sector look good. For the personal sector, it was a very good year. In regards to the co-operative difference, the unique concept of the bridging collectively project’s co-operative model leads us to believe that we are on the right track and that the new caisse will gradually assume its rightful place in the Acadian community.
Achieved
Being achieved
Late
Not achieved
Our Strategic Plan and Orientations
9
Tangible Benefits for our Members and Clients Choosing the Best Plan for Service Charges: A First for the Industry
Secure Fund Transfers
The Internet AccèsD “Choose your plan” function allows users to get a recommendation on the best service charge plan for them based on their habits.
The Interac E-TransfersTM function offered on AccèsD Internet allows the transfer of Canadian currency funds to the owner of a Canadian financial institution account by using his email address or mobile phone number.
Easily Accessible Savings Products
Wide Range of Mutual Funds(1)
AccèsD users can get the following products from AccèsD Internet and AccèsD Mobile:
A wide range of income, growth, socially responsible and specialized funds are offered through Acadia Financial Services.
• The High Interest S@vings Account
• Fidelity Investments
• Dynamic Funds
• Term S@vings, for terms of 3 to 5 years
• Renaissance Investments
• AGF Funds, etc.
They can also count on the expertise of expert investment strategies advisors to establish their financial plan and get advice on more complex products.
These mutual funds options allow for a portfolio diversification while taking advantage of the expertise of recognized managers.
Interactive Tool to Simplify Online Shopping Available on acadie.com and AccèsD, the guaranteed investment chooser offers guaranteed investment (term savings and MLGI) simulations and recommendations adapted to everyone’s needs, making it easier to choose products.
(1) Mutual fund are sold and distributed by Acadia Financial Services Inc. Acadia Financial Services Inc. is a wholly-owned subsidiary of Financière Acadie Inc. which is itself a wholly-owned subsidiary of the Fédération des caisses populaires acadiennes. Acadia Financial Services Inc. makes its services of mutual funds brokerage available in association with participating financial organizations. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or the Fund Facts before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Unless otherwise stated, mutual fund securities and cash balances are not covered by the New Brunswick Credit Union Deposit Insurance Corporation or by any other government deposit insurer that insures deposits in credit unions.
10
Annual Report 2014
Accessibility and Proximity Adapting to New Ways of Doing Things We adapt our distribution models in order to better meet the needs of our members. Certain caisses extended their hours of operation and are now opened on Saturdays as well as on weeknights in order to adapt their services to the different schedules of their members.
Pulse Checking A Member Experience survey was conducted in 3 waves among members to evaluate their level of satisfaction and continuously improve the services offered. During each wave, 1,210 members were contacted for a total of 3,640. The survey gave members a chance to make their opinion known in an anonymous way.
Accessibility and Proximity
11
Mouvement des caisses populaires acadiennes Management’s Discussion and Analysis Year ended December 31, 2014
Table of Contents Note to the Reader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Profile and Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Economic and Financial Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Review of Financial Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2014 Surplus Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Analysis by Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Balance Sheet Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Summary Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Cash Flow Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Management’s Discussion and Analysis
13
Note to the Reader This management report offers the reader a general overview of the Mouvement des caisses populaires acadiennes. It is a complement and a supplement to the information provided in the combined financial statements of the Mouvement. It must therefore be read together with the combined financial statements, including the accompanying notes for the year ended December 31, 2014. This report also presents the results analysis and main modifications made to the Mouvement’s balance sheet during the fiscal year ended December 31, 2014. Other information concerning the Mouvement can be obtained from the website www.acadie.com.
Definitions Average Assets – Average Loans – Average Deposits – Average Equity The average balance of these elements matches the average of the amounts at the end of the two fiscal years. Productivity Index The productivity index is used to assess effectiveness. This ratio is calculated by dividing other operating expenses, net of net insurance and annuity benefits, by the total net revenues, net of net insurance and annuity benefits. The result is expressed in percentages. A lower ratio means better productivity. Operating Revenues The notion of operating revenues is used in the analysis of financial results. This notion allows the presentation of structured financial data and eases the comparison between operating activities from one period to the other. The analysis of the Mouvement’s revenues is therefore explained in two parts: operating revenues and investment income, which make up the total income. The operating revenues include net financial income, net premiums, other operating revenues such as service charges on deposits and payments, commissions on loans, credit cards and investment funds, management administrative fees and custodial services, exchange revenues and other revenues. Net Premiums Net premiums, presented in the operating revenues, correspond to net insurance and annuity premiums, net of insurance and annuity benefits.
14
Annual Report 2014
Profile and Structure What We Are
Overview
With more than $3.5B in assets, the Caisses populaires acadiennes, inalienable collective heritage, is the most important Acadian financial institution. It combines, among other bodies, 15 caisses and one financial business centre, spread across New Brunswick. The personal, business, wealth management, life insurance and general insurance areas of activity offer members and customers a complete range of financial products and services that meet their needs. While playing a leadership role on New Brunswick’s economic chessboard, the Mouvement des caisses populaires acadiennes is an important provincial employer and capitalizes on the skills of more than 1,000 employees and the commitment of more than 200 elected officers.
The Caisses populaires acadiennes differ from other provincial financial institutions due to their co-operative nature. The strong mission and values which are a result of this nature are adopted by its officers, managers and employees; they are evident it their orientations and enable the implementation of their vision for a sustainable prosperity among the communities they serve. Since 1936, when the first caisse was founded in Petit-Rocher, the Caisses populaires acadiennes have always played a leading role at the education and sustainable social development levels and they believe that the co-operative business model is more relevant than ever.
Mission To give a better quality of life to our members, all the while taking part in the socioeconomic independence of New Brunswick’s Acadian community respecting its linguistic identity and co-operative values.
Vision The Caisse populaire is the Acadian financial institution at its best, supporting the co-operative method where the first priority is the members and their needs.
The Mouvement’s will to be close to its members and customers is at the heart of all its actions. Thanks to its different distribution channels and to employees who really want to offer quality services, it can remain close to its members and to the communities they are a part of. In this respect, always wanting to meet the different needs of its members, the Mouvement pays particular attention to the number of caisses and to the various distribution methods of its services. This approach is consistent with its desire to ensure the vitality of the caisses’ co-operative life with regards to democratic life, representativeness, education and training, interco-operation and social development support. The Mouvement is also characterized by the active participation of elected officials in the caisses and in the decision-making structure of the organization through local general meetings, boards of directors, the President’s Association and various bodies.
Management’s Discussion and Analysis
15
Organization Chart Mouvement des caisses populaires acadiennes Co-operative Sector Fédération des caisses populaires acadiennes
Members
15 1
Corporate Sector
caisses populaires
operated in 51 Business Locations
financial business centre operated in 4 regional offices
Support Institutions Fondation des caisses populaires acadiennes Office de stabilisation de la Fédération des caisses populaires acadiennes Conseil acadien de la coopération
Acadia Financial Holdings - Acadia Life - Acadie General Insurance - AVie - Acadia Financial Services
Acadia Service Corporation - Acadia Service Centre
Fédération des caisses populaires acadiennes
President
Vice-President and CFO
Camille H. Thériault
David Losier
Credit and Recovery Services Pierre Cormier
Legal Affairs
exécutif
Marc Roy
Corporate Secretary Executive Director Communications and Strategic Planning
Simonne Godin
Éric Aubé
Financial Operations Pierre Doiron
Vice-President and COO Denis Laverdière
Human Ressources and Training Pierre Giard
IT Network Support Services Florence Caissie
Financial Management
Éric St-Pierre
Health and Life Insurance and Mutual funds
Business Development Personal Marc-André Comeau
Yves Duguay
Legend Directly related to the President and CEO
AVie
Yvon Godin
Departments Business relation or subsidiary (not part of the Management Comittee)
Acadia Financial Services Acadia Life
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Annual Report 2014
Business Development Commercial Gilles Lanteigne
Acadia Service Centre
Acadia General Insurance
As of April 1st, 2015
Financial Highlights FINANCIAL SITUATION (in thousands of dollars and as a percentage) Mouvement des caisses populaires acadiennes 2014
2013
Variance
Net interest income
$128,076
$90,942
41%
Other income
$126,335
$53,013
138%
$1,756
$1,552
13%
Assets
$3,545,463
$3,352,115
6%
Equity
$358,473
$333,945
7%
Member dividends
COMPARISON OF 2014 RESULTS WITH ESTABLISHED FINANCIAL TARGETS FOR THE YEAR
2014
2013
Total net revenues
$254,411 $7.18/$100
$143,955 $4.29/$100
Productivity index
75.9%
79.1%
Surplus earnings before other items
$31,789 $0.90/$100
$28,492 $0.85/$100
Return of equity before other items
8.9%
8.5%
5,969,229
5,702,559
4.7%
5.3%
$5,145 $0.15/$100
$3,011 $0.09/$100
Profitability and productivity
Business Development Business volume Business volume growth Risk Credit losses
Management’s Discussion and Analysis
17
Financial Results FINANCIAL RESULTS (in thousands of dollars and as a percentage) FĂŠdĂŠration des caisses populaires acadiennes 2014 Financial revenue
Variance
$17,798
$14,838
19.9%
$2,872
$3,942
(27.1%)
Assets
$621,188
$586,008
6.0%
Equity
$45,268
$41,384
9.4%
Surplus earnings before other items
18
2013
Annual Report 2014
Financial Results as of December 31, 2014
FINANCIAL RESULTS (in thousands of dollars and as a percentage) Acadia Life 2014
2013
Variance
$120,610
$7,684
1,469.6%
Insurance benefits
$5,520
$4,761
15.9%
Operating income before dividends
$11,052
$6,152
79.6%
Dividends to the Caisses populaires acadiennes
$2,002
$2,164
(7.5%)
$205,615
$107,237
91.7%
$43,144
$38,508
12.0%
Revenue
Assets Shareholder’s equity
FINANCIAL RESULTS (in thousands of dollars and as a percentage) Office de stabilisation de la Fédération des caisses populaires acadiennes 2014
2013
Variance
Contribution income from the Caisses populaires acadiennes
$4,713
$4,579
2.9%
Investment income
$3,239
$3,170
2.2%
Assets
$109,033
$103,529
5.3%
Net assets
$101,454
$95,383
6.4%
Management’s Discussion and Analysis
19
Economic and Financial Forecast Economy For the past four years, the International Monetary Fund (IMF) has been systematically scaling down its forecasts. Despite this, their revised forecasts are constantly higher than the actual growth. The end of the crisis would therefore seem further and more complex than predicted. The IMF also suggests that its errors come from a decrease in the growth potential of certain economies which would lead to growth overestimates. Globally, the growth registered during the first quarter of 2014 was weak and the delay will not be completely made up for. Two important economic themes were noticed, particularly during the second half of the year: the collapse of oil prices and the American currency appreciation. The following standardized chart shows the trend which started in the summer of 2014. Major currencies lost between 10% and 20% of their value while oil lost approximately half. Obviously, the effects of these two factors vary from one country to the other.
For the 2014 fiscal year as a whole, economic growth in continental Europe was slow, but still above 2013. The countries most affected by the economic crisis, in particular Greece and Spain, still have a long way to go. Their job situation remains very precarious with unemployment rates above 20%. In Greece, the recent election of a more leftist government that wishes to renegotiate the safeguard agreements caused some uncertainty. Because of this slow growth and an inflation rate below target, the European Central Bank lowered its interest rates twice in 2014 while keeping its security buy-back program on the markets. Japan experienced a difficult year in 2014 with a 0.1% decrease of its GDP because of a consumption tax increase that affected consumers more than predicted. Authorities reacted by maintaining the economic downturn program and by carrying over a second consumption tax increase to another period. China’s growth is also slower, but this country still has one of the most dynamic economies in the world. Its GDP increased by 7.4% in 2014, compared to 7.8% in 2013. With the exception of the first quarter, 2014 was a favourable economic year in the United States. Its growth for the entire year totalled 2.4% and represented its best performance since 2010. Consumption, which accounts for almost 70% of its economic activity, is doing well. In fact, consumers’ trust is built up thanks to job creation (the unemployment rate going from 6.7% to 5.6% in 2014), the drop in oil prices and low interest rates. Furthermore, the United States import more than they export so their currency’s strength decreases their importation costs.
Canadian Euro Yen Pound Oil
20
Annual Report 2014
In Canada, growth accelerated in 2014, going from 2.0% to 2.5%. Consumption expenses were solid with a 2.5% progression compared to 2.5% last year. Employment was volatile; 5 months of loss and 7 months of job creation for a total of approximately 120,000 jobs. The unemployment rate closed the year at 6.7%. However, the last quarter showed some disturbing signs: a decrease in investments and a reduction in exports, two sectors related to oil.
The most recent Statistics Canada data (2013) on economic growth in New Brunswick indicate that the economy had backtracked by 0.5% after a decrease of 0.4% in 2012. Could 2014 show an increase after two years of decline? Economists seem to think so and estimate this growth to approximately 1%. During the year, the unemployment rate increased to 9.4% compared to 9.3% in December 2013. The province lost 4,900 jobs during the period, or 1.4% of total jobs, compared to a job creation of 0.6%. A more detailed analysis of data on New Brunswick’s labour force brings to light considerable disparities between the areas of the province. The table below clearly shows the challenges the northern part of the province will need to face. We should take into account disparities in the level of activity, or total population proportion that considers itself “active” (working or looking for work). For the two northern regions, the activity level, which is decreasing, is lower than the provincial average. We can also consider that the province is well below the national average. The unemployment rate represents the percentage of active population which is looking for a job. In the Northeast, 17% of the active population is unemployed, which means that half of people are working. Level of a cti vi ty
Unempl oyment
Jobs
2013
2014
2013
2014
2013
2014
Northwes t
61.4%
61.6%
10.1%
9.6%
-3.35%
0.00%
Northea s t
56.1%
55.1%
17.3%
16.7%
-2.63%
-2.18%
Southea s t
65.2%
64.6%
8.1%
7.7%
1.43%
0.19%
Southwes t
64.9%
64.0%
7.3%
7.5%
4.98%
-2.43%
Centre
65.5%
64.9%
5.3%
7.3%
4.30%
-2.74%
Provi nce
62.9%
62.2%
9.3%
9.4%
1.69%
-1.40%
Ca na da
66.5%
66.0%
7.1%
6.9%
1.43%
0.62%
Source: Statistics Canada
Forecast In its last economic update, the IMF lowered its global growth forecast by 0.3% to set it at 3.5% which is nevertheless higher than the 3.3% growth in 2014. The price of oil and the currency movement will keep on influencing the global economy in 2015. So far, the geopolitical context in the Middle East, and especially in Ukraine, had little economic impact but these elements remain an element of risk in 2015. The euro area, which has experienced difficulties for many years, still has many obstacles to face in employment and public finances. But there are still positive elements, in addition to the support from the monetary policy, and the region should take advantage of the decrease at the euro and oil levels. The IMF predicts a 1.2% growth in 2015 for the euro zone, compared to 0.8% for 2014. The United Kingdom is more economically sound with a growth prediction of 2.6% for 2014 and 2.7% for 2015. In Asia, trends continue on the same path. In China, the important thing is to control growth. The Chinese authorities seem worried about the level of debt and are trying to decrease the credit dependence without completely stopping investments. Economists seem to think that the orderly downturn will continue in coming years. The IMF’s forecast is 7.4% for 2014 and 6.8% for 2015. For many years, the Japanese government has been putting a lot of effort and means towards the revitalization of the economy, but with very little success. The IMF establishes Japan’s growth at 0.6% for 2015. These two countries, importers of oil and exporters of goods, will take advantage of the lower price of oil and of the American currency’s appreciation. In the United States, the winter weather was particularly hard for the Northeast, which could somewhat slow down growth during the first quarter. This downturn should only be temporary. Furthermore, investments in shale gas and oil, which have been important in past years, should decrease with the drop in oil prices. However, these elements are not important enough to significantly stop the growth. Consumers remain confident because job creation and a decline in energy prices left more money in their pockets. The United States remain a net importer, making currency growth an advantage for them. Most economists expect a growth of approximately 3% for 2015 while members of the Federal Reserve are more conservative with an average growth of 2.5%.
Management’s Discussion and Analysis
21
In Canada, the development of oil sands in the Western part of the country was, in past years, an important source of investments and jobs. If current prices are maintained for a longer period, projects will surely be delayed or canceled. On the other hand, the lower value of the currency and the strength of the American economy benefit exporting provinces. There will be very little provincial support when it comes to public finances because, generally speaking, they are focusing on deficit-reduction. The federal government, however, has greater financial freedom and 2015 is an election year. In short, there is much uncertainty in the Canadian growth forecasts. Economists predict a declining growth which should settle at around 2%. What is in store for New Brunswick in 2015? At first glance, export data show a very strong dependence on oil because exports represent 50% of the province’s GDP and energy accounts for 71% of our exports.
Source IMF
22
Annual Report 2014
However, this activity is essentially due to the Irving refinery which imports crude oil before refining and exporting it. The province is therefore less vulnerable to the price of oil than it could seem. It is not the case for the American currency since the United States purchase 90% of its exports. The fall of the Canadian dollar will therefore be beneficial. Many workers, particularly in the northern area of the province, travel round trip out west; a long term correction of the oil prices could cast doubt upon their recall. Furthermore, the provincial government faces important challenges when it comes to public finances and will therefore not be an important economic growth contributor. In summary, the forecasters believe that New Brunswick’s growth will be slightly lower than Canada’s growth and should settle around 1.8%.
Interest Rate
Stock Market
North American central banks left their rates unchanged in 2014. The updated American rate has been 0.25% since 2008. The Federal Reserve still reduced its security buy-back program, a first step toward a rate increase. Addenda Capital, a portfolio management branch of The Co operators, predicts that the first rate increase in the United States will take place during the second half of the year. The Bank of Canada surprised the markets by reducing its prime rate in January 2015 to establish it at 0.75% while it was at 1% since 2010. The decision is explained by the significant price drop of oil which will have a negative impact on the country’s growth and by the fact that inflation is still low. Many investors anticipate another rate decrease, postponing their forecast of a possible increase to 2016.
After an exceptional year in 2013, North American stock markets showed excellent results in 2014 (see chart). They took advantage of the strong performance of businesses that recorded growing profits. Furthermore, the North American economic outlook is good, especially when compared with other regions. There are little, if any, direct geopolitical risks. Canada suffered in 2014 because of its exposure to energy, which represents more than 20% of the index, and to lower growth prospects.
All through 2014, there was a downward trend in long term Canadian interest rates (see chart) and this trend is still in place. For longer term rates, inflation is the prime determinant. In Canada, inflationary risks are relatively low especially when we consider the recent drop in oil prices. For 2015, there will be little upward pressure on interest rates because of a moderate economic growth, both here and elsewhere in the world, and because of a job market which does not support important salary increases. Investors predict a moderate increase in rates because of rate standardization and an economic decline reversal in 2014. Government of Canada Yield Curve .
Source: MSCI and Bloomberg
Considering its economic growth forecasts, Addenda Capital predicts a good year for the United States and a slightly weaker year for Canada because of our exposure to oil. Many foreign stock exchanges will face lower growth prospects and higher geopolitical risks (Ukraine, Greece and Middle East). However, the lower results from 2014 might help them catch up in 2015.
Addenda Capital forecast S&P/TSX index S&P 500 ($ CAD) index MSCI EAFE ($ CAD)
. . Rate %
Stock market return (local currency) 2014 2013 United States 13.7% 32.4% Canada 10.6% 13.0% Europe 4.7% 21.6% Emerging 5.2% 3.4% Pacific 7.9% 38.1% World 9.8% 28.9%
2015 5% 7% to 8% 7% to 8%
. . .
3 m 1 ye ar
.
Source
Management’s Discussion and Analysis
23
Review of Financial Results 2014 Surplus Earnings The Mouvement des caisses populaire acadiennes recorded $31.8M in surplus earnings before other items in 2014. These results are higher than those of 2013 ($28.5M). This increase is mostly due to the reorganization of the Acadia Life investment portfolio which generated important earnings in 2014 for this subsidiary. More specifically, the profitability of the personal and business sectors’ operations decreased by 7.2% to $20.7M in 2014 compared to $22.3M in 2013. In 2014, the life and health insurance sector contributed $11.1M in surplus earnings compared to $6.2M in 2013. Strict requirements at the capitalization level as well as a strong competition among financial institutions encourage the Mouvement to remain careful when allocating surplus earnings. Therefore, the anticipated amount in dividends to members for the 2014 fiscal year is $1.8M. It still represents an increase compared to 2013 when the dividends to members totalled $1.6M.
Operating Income Operating income, which includes net financial income, net premiums as well as other operating income, totalled $153.1M in 2014 compared to $150.6M in 2013. The Mouvement’s operating income therefore increased by $2.5M compared to the previous fiscal year. The net financial income experienced significant growth in 2014. This $37M increase compared to 2013 is a result of gains on Acadia Life investments which were recorded following a reorganization of its portfolio.
24
Annual Report 2014
The net premiums of Acadia Life generated a loss because of the purchase of an annuity portfolio. However, this loss was compensated by an important gain on investments following the reorganization of its portfolio. This reorganization was made possible by the investment portfolio transfer associated with this annuity purchase.
Income on cash assets and securities increased by $39M compared to the previous fiscal year, from $1.6M in 2013 to $40.6M in 2014. This increase is mainly associated with gains made on certain investments held by Acadia Life. In 2013, the investment portfolio held by Acadia Life had decreased significantly.
Other revenues from operating income decreased slightly in 2014 compared to 2013. They stood at $35.9M in 2014 compared to $36.9M in 2013 for a $1.1M decrease. This decrease is primarily associated with income from service charges collected from members.
Interest income from the Mouvement’s loan portfolio has declined by $0.8M compared to 2013. The interest income from loans totalled $125.8M in 2014 compared to $126.6M in 2013. This can be explained by the 20 basis point decrease of the portfolio’s average rate during the year. However, the increase of the loan portfolio’s average balance helped minimize the negative impact of the portfolio’s decline in performance caused by the strong competition between financial institutions.
The fluctuation in operating income is detailed in the following sections.
Net Interest Income The net interest income corresponds to the difference between the financial income gained on assets such as loans and securities, and financial expenses associated with liability components such as deposits and borrowings. The net interest income totalled $128.1M at the end of 2014, which represents an amount significantly higher than the one of 2013 ($90.9M). In order to analyze the variation in net interest income, we are presenting, in the table located on the following page, its evolution based on the assets and liabilities categories. The net financial margin, expressed in average assets percentage, was at 3.7% in 2014 compared to 2.8% in 2013, a gain of 90 basis points. Financial Income Financial income totalled $166.4M in 2014, a $38.1M increase compared to the previous fiscal year. Financial income is made up of $40.6M revenue on cash assets and investments, and $125.8M revenue on the loan portfolio.
Finance Charges Finance charges totalled $38.3M, an increase of $1M compared to 2013. These charges include interest charges of $36.4M on the deposit portfolio and of $1.9M on money borrowed from other institutions. The interest expense on member deposits went from $35.1M in 2013 to $36.4M in 2014. This slight increase can be explained by the growth of the average deposit portfolio since the average rate of these deposits remained at 1.3%. The interest charges associated with borrowings decreased by $0.3M, going from $2.2M in 2013 to $1.9M in 2014. This decrease is partly explained by the fact that the Mouvement has been securitizing mortgage loans since 2014. This new source of funding is less costly than the traditional loan.
Management’s Discussion and Analysis
25
Other income Other revenues come from several sources, as shown in the following table.
26
Annual Report 2014
Revenues from service charges collected on deposits and payments have been decreasing for the past few years because of a reduction of the volume of transactions at the counter and ATMs in favour of automated transactions. These automated transactions will probably increase since the Mouvement plans on offering its members a cheaper rate. For example, it will offer a no service charge package to students from 18 to 25 years old and to people 60 and over. Commission income is increasing and includes commissions for the sale of Visa credit cards, mutual investment funds and insurance. This increase in commission income is the result of a business volume growth of these products. Net insurance and annuity premiums greatly increased, going from $16.1M in 2013 to $90.5M on 2014. This increase is mainly due to the transfer of an annuity portfolio to Acadia Life which generated an annuity premium of approximately $73M. Provision for Credit Losses Provision for credit losses totalled $5.1M, an increase of $2.1M compared to 2013 when it was $3.0M. It includes two elements: the individual component and the collective component. For the individual component, losses totalled $8.1M in 2014, compared to $5.0M in 2013. The collective component recovered $3.0M in 2014 while it had recovered $2.0M in 2013. More specifically, the individual provisions for business loans totalled $5.5M ($3.8M in 2013) while the individual provisions for personal loans totalled $2.7M ($1.2M in 2013).
Despite the increase in provision for credit losses, the Mouvement still has a quality loan portfolio. On December 31, 2014, gross impaired loans totalled $27.7M, a slight increase of $0.8M from the amount of $26.9M registered in 2013. The ratio of gross impaired loans, as a percentage of the total gross loan portfolio, totalled 0.98% at the end of the 2014 fiscal year. This ratio was similar to the one observed at the end of 2013 (0.99%).
Operating Expenses Wages and Fringe Benefits The decrease in the wages and fringe benefits expense compared to 2013 is explained by a reduction of jobs and by a modification to the employee pension plan. In fact, for the past few years, many positions left vacant by resignation were eliminated, allowing for savings on employee costs. This is in keeping with the Mouvement’s efforts to reduce its operating costs in order to remain competitive while ensuring its financial stability. The Mouvement also wanted to eliminate the volatility and risks associated with the defined benefit pension plan offered to employees. On January 1, 2014, the pension plan of Mouvement employees was converted into a shared risk plan. This new plan is recorded using the same rules as a defined contribution pension plan. This modification eliminates the volatility of the charge that was associated with the defined contribution pension plan.
The provision for losses on business loans includes only a few loans, but whose balances are significant because of the often large amounts of the loans that are granted. That is why this charge may change from year to year. 2014 was characterized by a few important business funding files, particularly in the real estate and construction sectors. The Mouvement chose to be careful and recorded these provisions to reflect the risk of loss. For some of these files, the provision may be recovered in coming years. For the collective allowance, we reviewed in 2014 the assumptions included in the calculations. The method used to determine some of these assumptions was also revised in order to refine it. In fact, during previous years, the method used projected future loss rates from data in the Mouvement’s balance sheet while the revised method is based on individual provisions recorded in the statement of income.
Management’s Discussion and Analysis
27
Other Operating Expenses The other operating expenses include costs associated with work spaces, computer costs, office and communication expenses, deposit and service charges, advertising and sponsorship costs, as well as other charges. Generally, the Mouvement’s operating expenses remained stable if we compare them to the previous fiscal year’s expenses ($46.7M in 2014 and $45.6M in 2013). This slight increase is mainly due to exceptional expenses associated with the Bridging Collectively Project.
Analysis by Line of Business Personal and Business The personal and business sectors include activities related to current and savings transactions in addition to lending activities. These transactions are carried out by the 51 business locations of the Caisses populaires and the 4 offices of the Financial Business Centre. The activities of the Mouvement’s subsidiaries not related to life and health insurance are also included in these sectors. Results associated with these activities are not significant. In order to remain in the lead, the Mouvement ensures it can offer the best possible services to its members by offering them a complete range of financial products and services. The Mouvement also puts much effort into the delivery of technological services such as mobile services and Interac e-TransfertsTM that meet the needs of its members. Opera5ng results for the personal and business segment (in millions of dollars) 2012 2013 2014
$25,609 $22,340 $20,737
This sector contributed $20.7M to surplus earnings before other items of the Mouvement in 2014. It represents a decrease of $1.6M or 7.2%. The profitability of these lines of business has been declining for a few years and this trend is caused by a reduction in the net interest income. In fact, the Mouvement is being pressured by its competitors in this business sector, making it difficult for savings and lending portfolios to grow. Furthermore, this competitive environment helps maintain a profitable interest rate offer for our members, but this environment also has a
28
Annual Report 2014
negative impact on the Mouvement’s net interest income. It is also important to mention that, in its 2013-2015 strategic planning, the Mouvement had made the commitment to adopt a competitive pricing approach. The 2014 fiscal year was also characterized by losses on loans higher than in previous years. As explained in the section on provision for credit losses, the expenditure increased by $2.7M in 2014. In spite of competition, the Mouvement was able to increase its market share for consumer credit from 8.3% in 2013 to 8.9% at the end of 2014. However, there was a slight decrease in our market share for mortgages. At the end of 2014, we held 9.1% of the mortgage market in New Brunswick while the share held in 2013 was 9.3%. Our mortgage portfolio’s balance on December 31, 2014 was $1,395M compared to $1,331M. The consumer credit portfolio increased by $35M to reach $528M on December 31, 2014, while it was $493M on December 31, 2013. In 2014, the business sector made it its priority to restructure its operations and its portfolio. Our business funding market share decreased by 2.3%, going from 24.5% in 2013 to 22.2% in 2014, which is still very high. However, the balance of our business lending portfolio remained relatively stable in 2014 to reach $891M compared to $880M in 2013. The deposit portfolio has increased substantially in 2014. It grew by 3.4% to reach $2,836M in member deposits at the end of 2014, compared to $2,742M in 2013.
Life and Health Insurance The Acadia Life and AVie subsidiaries make up this line of business.
The operating results of this business sector were very positive in 2014. In fact, the activities associated with our subsidiaries working in the life and health insurance sector have generated surplus earnings before taxes of $11.1M for the 2014 fiscal year, compared to $6.2M in 2013. This represents an increase of 79% or $4.9M. These excellent results are due to the market’s performance, the reorganization of the investment portfolio and a revision of the actuarial models used to calculate provisions. The decrease in market interest rates, combined with a good performance of stock markets in 2014, helped generate $4.8M in revenues on investments associated with equity. In 2013, these revenues totalled $0.9M. Changes to the different assumptions associated with the calculations of actuarial liabilities, net of reinsurance assets, were favourable in 2014. In 2014, these modifications resulted in earnings of $6.0M while they resulted in a $1.1M loss in 2013. During 2014, a retirement annuity portfolio was transferred to Acadia Life. This operation generated premium revenues of approximately $73M. Consequently, an $80M provision was recorded. This transaction, individually assessed, created a $7M loss because of the establishment of margins for adverse deviations. These margins will reverse over the next few years, which will in turn make this transaction profitable in the long-term. This operation also helped improve the management of insurance product matching and longevity thus generating significant earnings on the investment portfolio.
Management’s Discussion and Analysis
29
Balance Sheet Review Summary Balance Sheet
Total assets (in millions of dollars) On December 31, 2014, the Mouvement’s total assets were $3.55B, representing a $193M or a 5.8% increase compared to 2013, when the assets totaled $3.35B.
2012 2013 2014
30
Annual Report 2014
$3,214 $3,352 $3,545
Liquidity Management
Loans
The objective of liquidity risk management is to guarantee that the Mouvement, in a timely and profitable manner, will have access to the funds necessary to fulfill its financial commitments when they become payable, both in normal and in crisis situations. This risk management leads to the maintenance of an acceptable level of liquid securities.
The loans portfolio, net of the allowance for credit losses, totalled $2,791M. It represents a 4.2% growth compared to 2013, when the portfolio totalled $2,678M. In 2014, the growth was mainly at the personal loan level.
The minimum level of liquid securities that must be maintained by the Caisses populaires is prescribed by the Credit Unions Act. This minimum level is centrally managed by the Mouvement’s treasury and monitored on a monthly basis. Eligible securities must meet high safety and negotiability standards. The securities portfolio is largely made up of securities issued by government, public bodies and private companies with high credit ratings. Furthermore, during the 2014 fiscal year, the Mouvement’s treasury, through the Fédération, was given the opportunity to issue securitized bonds and to be present on the CMHC-insured securitized loan market. This form of financing is more economical that the traditional loan.
Management’s Discussion and Analysis
31
The following table presents the breakdown of the loan portfolio in the different business lines.
2014
2013
$
$
$
$
$
$
$
$
$
$
( $
32
$
Residential Mortgages
Consumer Loans and Other Personal Loans
The housing market is experiencing a slowdown in growth in New Brunswick primarily at the level of new constructions in the southeastern part of the province. In spite of this tough climate, the Mouvement was able to increase its residential mortgage portfolio by $64M compared to 2013. The total of the mortgage portfolio before allowance totalled $1,395M on December 31, 2014 and $1,331M on December 31, 2013.
This loan portfolio grew by $35M in 2014 to end up at $528M. In 2013, this portfolio totalled $493M. This progression was fuelled by loans granted through the financing centre which provides direct funding to our members and non-members at car and recreational product dealerships. On December 31, 2014, the loan portfolio provided by the financing centre was $172.7M compared to $150.9M in 2013. This represents a $21.8M or 14% growth.
Annual Report 2014
Business Loans The business loan portfolio grew more modestly in 2014 compared to previous years. Globally, this portfolio totalled $891M on December 31, 2014 compared to $880M in 2013. That represents growth of 1.3%. The downturn of the real estate and construction sectors was felt. Our loan portfolios in these two sectors which are important for our network remain practically unchanged. As shown in the previous table, the manufacturing sector is the only one which grew significantly: $7.8M or 22%.
The following table presents the capital ratios of the Mouvement’s bodies.
.
.
.
. .
. ..
.
. .
Deposits
Cash Flow Analysis The Mouvement’s regular activities can cause important fluctuations of its cash assets. In fact, the loan and deposit transactions carried out by our members greatly influence the level of the Mouvement’s cash assets. During the 2014 fiscal year, the Mouvement’s cash assets decreased by $8.5M. The main variations are explained in the following paragraphs.
The member deposit portfolio grew by 3.4% in 2014. The total of deposits reached $2,836M on December 31, 2014 compared to $2,742M in 2013. This growth is a result of different 2014 initiatives organized to stimulate the growth of deposits. Member deposits remain one of the Mouvement’s most economical sources of funding.
Capital Management The Mouvement’s regulatory capital ratio is well over the regulatory requirements. The Credit Unions Act states that a Caisse populaire must maintain a capital amount representing at least 5% of its total assets. In addition to the capital requirements prescribed by law, the Caisses populaires must comply with strict standards established by the Office de stabilisation. In order to maintain enough capital to face all risks to which the caisses are exposed, these standards require that each caisse maintain a capital representing at least 7.5% of its assets before being authorized to pay out dividends to its members.
In 2014, the operational activities of the Mouvement generated $78M in funds. This inflow of funds was driven by, among other things, the transfer of an annuity portfolio to Acadia Life. Furthermore, in 2014, new member deposits generated $94M. The growth of the loan portfolio caused a $118M cash outflow. Because of the strong growth of our member deposit portfolio, the Mouvement was able to decrease its borrowing level. The 2014 financing activities resulted in a reimbursement of $13M. The investing activities led to a $73.5M cash outflow in 2014. The main operation was the purchase of investments following the transfer of an annuity portfolio to Acadia Life.
Management’s Discussion and Analysis
33
Off-Balance Sheet Arrangements In its normal course of business, the Mouvement manages investment portfolios for many of its members. Through the Caisses populaires network, members can deposit their savings in investment funds. This savings portfolio represents off-balance sheet arrangements. The investment funds managed by the Mouvement had a total value of $299M on December 31, 2014 compared to $243M on December 31, 2013. This $56M or 23% increase is explained by the net growth of member deposits and by the strong performance of stock markets in 2014. The Mouvement also offers different credit instruments to its members in order to meet their financial needs. These tools include credit commitments and letters of credit. On December 31, 2014, these off-balance sheet credit instruments totalled $632M, an increase of $141M. They totalled $491M in 2013. Members have access to other off-balance sheet financial products: Visa credit cards and AccordD financing. On December 31, 2014, the outstanding debts of these methods of financing were respectively $111.8M and $17.5M.
34
Annual Report 2014
Risk Management As part of the Collective Bridging Project, the Mouvement undertook the implementation of an integrated risk management structure. Many steps started in 2014 in order for the structure to be ready by the effective date of the collective bridging. One of the important steps will be to hire a vice-president and a chief risk management officer.
• The incentive to take risks must be well understood throughout the institution;
For the Mouvement, the risk culture represents the foundation of risk management since the success of strong risk management is dependent on a good risk culture.
• Senior management implements the policies approved by the Board of directors and leads by example;
In order to effectively convey its risk culture, the Mouvement will make sure the following elements are put in place:
• Risk management is an integral part of strategies; • The Board of directors actively takes part in risk governance and sets the tone;
• The required structure and resources are assigned to risk management; • Accountability is clear and aligned with roles and responsibilities; • A proper division of tasks is established through a solid system equipped with three lines of defense; • Risk knowledge is not outsourced; • Risks concerns everyone in the Mouvement; • The compensation system fosters sound risk management; • Positive and systematic review; • Transparent communication. Furthermore, the Mouvement is actively committed to the implementation of a triple line of defense structure.
Management’s Discussion and Analysis
35
Mouvement des caisses populaires acadiennes Combined financial statements as of December 31, 2014
Table of Contents Management’s Responsibility for Financial Information . . . . . . . . . 38 Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Combined Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . 40 Combined Statement of Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Combined Statement of Comprehensive Income . . . . . . . . . . . . . . . . . 42 Combined Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . 43 Combined Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Notes to the Combined Financial Statements . . . . . . . . . . . . . . . . . . . . 46
Combined financial statement
37
MANAGEMENTʼS RESPONSIBILITY FOR FINANCIAL INFORMATION
The combined financial statements of the Mouvement des caisses populaires acadiennes and all the information contained in this annual report are the responsibility of the management of La Fédération des Caisses Populaires Acadiennes Limitée, whose duty is to ensure their integrity and fairness. The combined financial statements were prepared in accordance with International Financial Reporting Standards. The combined financial statements necessarily contain amounts established by management according to estimates that it deems to be fair and reasonable. These estimates include, among other things, the establishment of actuarial liabilities performed by the valuation actuaries of the Mouvement, the evaluation of the accrued employee benefit liability and the measurement of the fair values of the Mouvement's financial instruments. All financial information presented in the annual report is consistent with the audited combined financial statements. The board of directors of La Fédération des Caisses Populaires Acadiennes Limitée ensures that management fulfils its responsibilities with regard to the presentation of financial information and the approval of the combined financial statements of the Mouvement des caisses populaires acadiennes. The board of directors exercises this role mainly through the audit committees that meet with the auditors, in accordance with their mandate. The combined financial statements were audited by the auditors appointed by the board of directors, Ernst & Young LLP, whose report follows. The auditors may meet with the audit committees at any time to discuss their audit and any questions related thereto, notably the integrity of the financial information provided.
Camille H. Thériault President and Chief Executive Officer
David Losier, CPA, CGA Vice President and Chief Financial Officer
Caraquet, New Brunswick April 14, 2015
38
Annual Report 2014
-1-
INDEPENDENT AUDITORS' REPORT
To the members of La FĂŠdĂŠration des Caisses Populaires Acadiennes LimitĂŠe, We have audited the accompanying combined financial statements of the Mouvement des caisses populaires acadiennes, which comprise the statement of financial position as at December 31, 2014 and the statements of income, comprehensive income, changes in 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 combined financial statements Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines necessary to enable the preparation of combined financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibiliy is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Mouvement des caisses populaires acadiennes as at December 31, 2014 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Dieppe, New Brunswick April 14, 2015
Chartered Professional Accountants
-2-
Combined financial statement
39
Mouvement des caisses populaires acadiennes Combined Statement of Financial Position As at December 31 (in thousands of dollars)
2014
Note
ASSETS
$
Cash Securities
5
Loans Personal Business
6
Allowance for credit losses Other assets Accrued interest, receivables and other assets Capital assets Intangible assets Reinsurance assets
7 8 9 10
Total assets
72,160
2013
$
74,430
572,257
498,341
1,923,060 890,923
1,823,943 879,839
2,813,983 (22,868)
2,703,782 (25,663)
2,791,115
2,678,119
62,957 37,719 2,536 6,719
55,333 37,951 2,247 5,694
109,931
101,225
$ 3,545,463
$ 3,352,115
$ 1,238,279 1,597,815
$ 1,145,903 1,596,565
2,836,094
2,742,468
157,569 6,223 77,301 94,916 14,887
62,997 90,327 114,122 8,256
350,896
275,702
9,362 5,303 5,319 338,489
9,460 4,677 7,541 312,267
358,473
333,945
$ 3,545,463
$ 3,352,115
LIABILITIES AND EQUITY Liabilities Deposits Payable on demand Payable on a fixed date Other liabilities Actuarial liabilities Bank overdraft Borrowings Accrued interest, payables and other liabilities Deferred taxes
10 11 12 19
Equity Share capital Accumulated other comprehensive income Distributable surplus earnings General reserve
14 15 22
Total liabilities and equity
The accompanying notes are an integral part of the combined financial statements. On behalf of the board of directors of La Fédération des Caisses Populaires Acadiennes Limitée,
Pierre-Marcel Desjardins Chair of the board
Elmo Caissie Chair of the audit committee
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Annual Report 2014
Mouvement des caisses populaires acadiennes Combined Statement of Income
For the year ended December 31 (in thousands of dollars) 2014
Note
2013
INCOME $
Financial income Financial expense Net financial income Provision for credit losses
6
Net financial income after provision for credit losses Other income Mainly related to the administration of deposits Related to the administration of other services Net insurance and annuity premiums Other expenses Salaries and fringe benefits General and other expenses Net insurance and annuity benefits
16
17
Surplus earnings before other items Other items
18
Surplus earnings before income taxes Income taxes
19
Surplus earnings for the year before member dividends Member dividends Income taxes recovered on member dividends
20 19
Surplus earnings for the year
$
166,366 38,290
$
128,280 37,338
128,076 5,145
90,942 3,011
122,931
87,931
19,286 16,587 90,462
20,019 16,923 16,071
126,335
53,013
69,477 46,666 101,334
73,447 45,647 (6,642)
217,477
112,452
31,789
28,492
3,442
(10,202)
35,231
18,290
9,857
7,013
25,374
11,277
(1,756) 454
(1,552) 392
24,072
$
10,117
The accompanying notes are an integral part of the combined financial statements.
-4-
Combined financial statement
41
Mouvement des caisses populaires acadiennes Combined Statement of Comprehensive Income For the year ended December 31 (in thousands of dollars)
2014
Note
2013
COMPREHENSIVE INCOME Surplus earnings for the year
$
24,072
$
10,117
Other comprehensive income Item that will not be reclassified to the statement of income Change in the accrued employee benefit liability Change during the year Income taxes Total of the item that will not be reclassified to the statement of income Items to be reclassified to the statement of income Unrealized changes in fair value on available-for-sale instruments Change during the year Income taxes Reclassified to income Realized gains on available-for-sale instruments Income taxes
33,146 (5,994)
24
27,152
2,618 (628)
120 (185)
1,990
(65)
(1,819) 455
(31) 8
(1,364)
(23)
626
Total of the items to be reclassified to the statement of income $
24,722
The accompanying notes are an integral part of the combined financial statements.
42
Annual Report 2014
(88)
650
Total other comprehensive income, net of income taxes Comprehensive income
(296) 320
27,064 $
37,181
Mouvement des caisses populaires acadiennes Combined Statement of Changes in Equity For the year ended December 31 (in thousands of dollars)
2014 Accumulated other Share comprehensive capital income Beginning balance
$
Distribution by the members General reserve Balance after distribution Surplus earnings for the year Other comprehensive income Comprehensive income Net transfer to the general reserve (note 21) Net change in share capital Other Ending balance
9,460
$
-
-
9,460
4,677
-
$
7,541
General reserve $
$
333,945 -
-
319,808
333,945
-
24,072
-
24,072
-
626
-
24
650
-
626
24,072
24
24,722
-
-
18,753
-
9,362
(7,541)
312,267
Total equity
7,541
(98) $
4,677
Distributable surplus earnings
(18,753)
$
5,303
$
5,319
(96) $
338,489
(98) (96) $
358,473
The accompanying notes are an integral part of the combined financial statements.
Combined financial statement
43
Mouvement des caisses populaires acadiennes Combined Statement of Changes in Equity (continued) For the year ended December 31 (in thousands of dollars)
2013
Beginning balance
$
Distribution by the members Interest on capitalization shares General reserve Balance after distribution Surplus earnings for the year Other comprehensive income Comprehensive income Net transfer to the general reserve (note 21) Net change in share capital Other Ending balance
Accumulated other Share comprehensive capital income
Distributable surplus earnings
9,538
$
$
7,749
$
(14) (7,735)
274,916
Annual Report 2014
$
7,735
296,968
-
9,538
4,765
-
282,651
296,954
-
-
10,117
-
10,117
(14) -
-
(88)
-
27,152
27,064
-
(88)
10,117
27,152
37,181
(2,576)
2,576
-
-
(78) 9,460
$
4,677
$
7,541
(112) $
312,267
The accompanying notes are an integral part of the combined financial statements.
44
Total equity
-
-
$
4,765
General reserve
(78) (112) $
333,945
Mouvement des caisses populaires acadiennes Combined Statement of Cash Flows
For the year ended December 31 (in thousands of dollars) 2014
2013
OPERATING ACTIVITIES Surplus earnings before income taxes Adjustments for determining cash flows Depreciation of capital and intangible assets Amortization of premiums and discounts on securities Net change in actuarial liabilities Change in investment contract liabilities Provision for credit losses Other items at fair value Change in accrued employee benefit liability Change in reinsurance assets Net change in interest receivable and payable Net change in loans Net change in deposits Other Income taxes paid during the year Member dividends paid
$
35,231
$
18,290
3,625 (2,084) 94,572 (29) 5,145 (3,442) (13,101) (1,025) (157) (118,141) 93,626 (11,354) (3,018) (1,695)
3,682 (1,481) (13,107) (144) 3,011 10,202 (2,507) 1,151 (1,378) (160,734) 74,871 2,646 (6,972) (964)
78,153
(73,434)
(13,026) (98)
56,515 (78)
(13,124)
56,437
(69,840) (3,682)
(4,973) (4,797)
(73,522)
(9,770)
Decrease in cash and cash equivalents
(8,493)
(26,767)
Cash and cash equivalents, beginning of year
74,430
101,197
Cash flows from operating activities
FINANCING ACTIVITIES Net change in borrowings Net change in share capital Cash flows from financing activities
INVESTING ACTIVITIES Net change in securities Net acquisitions of capital and intangible assets Cash flows from investing activities
Cash and cash equivalents, end of year
$
65,937
$
74,430
$
72,160 (6,223)
$
74,430 -
$
65,937
$
74,430
$
166,163 38,244 4,583
$
129,310 39,746 1,182
The Mouvement's cash and cash equivalents consist of the following items: Cash Bank overdraft
Other cash flow information relating to operating activities: Interest received during the year Interest paid during the year Dividends received during the year
The accompanying notes are an integral part of the combined financial statements.
Combined financial statement
45
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) The Mouvement des caisses populaires acadiennes (Mouvement) includes the Caisses populaires, the Office de Stabilisation de la Fédération des Caisses populaires acadiennes limitée (Office de stabilisation), La Fédération des Caisses Populaires Acadiennes Limitée and its subsidiaries (Fédération), the Société de portefeuille Acadie Vie Inc. and its subsidiaries Acadia Life and AVie (Acadia Life) and the Commercial Loan Fund of the Caisses Populaires Acadiennes (Commercial Loan Fund). The Mouvement, a cooperative financial group, is a first-line agent in the social and economic development of its environment. The headquarters of the Mouvement are located at 295 St-Pierre Boulevard West, Caraquet, New Brunswick, Canada. These combined financial statements and notes were approved by the board of directors on April 14, 2015. Note 1.
Basis of presentation International Financial Reporting Standards These combined financial statements have been prepared by management of the Mouvement in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). These combined financial statements have been prepared on the basis of historical cost, except for the revaluation of certain financial assets and liabilities at fair value, including securities at fair value through profit or loss, available-for-sale securities and derivative financial instruments. Statement of compliance The combined financial statements of the Mouvement as at December 31, 2014 have been prepared in accordance with IFRS.
Note 2.
Significant accounting policies Basis of presentation of the combined financial statements As an integrated services group, the Mouvement is a complete economic entity. The combined financial statements of the Mouvement have been established in order to present the financial position, financial performance and cash flows of this economic entity. As a group, the Caisses populaires own the entire share capital of the Fédération, which is responsible for setting the strategic directions and for coordinating the activities of the Mouvement. The role of the Fédération is also to protect the interests of the members of the Mouvement and to promote the development of the group. By the very nature of the Caisses populaires and the Fédération as financial services cooperatives, these combined financial statements differ from the consolidated financial statements of a group with a traditional organizational structure. Thus, the financial statements of the Mouvement are a combination of the annual accounts of the Caisses populaires and the other entities of the group. The share capital represents the total share capital issued by the Caisses populaires to their members. Scope of consolidation The combined financial statements of the Mouvement are derived from the financial statements of the Caisses populaires, the Office de stabilisation and the Commercial Loan Fund, and the consolidated financial statements of the Fédération and Acadia Life. These last three are included as they are held directly by the Caisses populaires; the Office de stabilisation is included since the majority of its board of directors represents the Caisses populaires and the Fédération.
46
Annual Report 2014
-9-
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued The financial statements of all entities of the Mouvement have been prepared for the same reference period using consistent accounting policies. All intercompany balances, income and expenses as well as gains and losses on internal transactions have been eliminated. Use of estimates and judgment The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities recorded and the presentation of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The actual results could differ from these estimates. The main items for which management had to make these estimates and assumptions include insurance contract liabilities and reinsurance assets, the allowance for credit losses, valuation of financial instruments at fair value, income taxes and the evaluation of the accrued employee benefit liability. The estimates and assumptions with respect to these elements are presented below. Insurance contract liabilities and reinsurance assets Actuarial liabilities are determined using the Canadian Asset Liability Method (CALM), in accordance with accepted actuarial practice in Canada. Under the CALM, the calculation of the actuarial liabilities, net of the reinsurance assets, is based on an explicit projection of cash flows using the current best estimate assumptions for each cash flow component and each significant contingency. Investment returns are based on projected investment income using the current asset portfolio and projected reinvestment strategies. Each non-economic assumption is adjusted by a margin for adverse deviation. With respect to investment returns, the provision for adverse deviation is established by using yield scenarios. These scenarios are determined using a deterministic model that includes testing prescribed by Canadian actuarial standards. The period used for the projection is the policy lifetime for most insurance contracts. For certain types of contracts, a shorter projection period may be used. However, this period is limited to the term of the liability over which the Mouvement is exposed to significant risk without the ability to adjust policy premiums or charges related to the contract. Additional information is presented in note 10. Allowance for credit losses The Mouvement establishes separately, loan by loan, individual allowances on each loan that is considered impaired. To determine the estimated recoverable amount, the Mouvement discounts the future expected cash flows at the interest rate inherent to the loan. When the amounts and timing of future cash flows cannot be estimated with reasonable reliability, the estimated recoverable amount is determined using the fair value of the collateral underlying the loan. The model for determining the collective allowance takes into account certain factors, including the probabilities of default and rates of historical losses. Model results are then examined, taking into account the level of the existing collective allowance as well as management's evaluation of the quality of the portfolio, economic conditions and credit market conditions. Given the significance of the amounts and their inherent uncertainty, a change in the estimates and judgments could materially affect the amounts of the allowances.
- 10 -
Combined financial statement
47
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Valuation of financial instruments at fair value The evaluation of the fair value of financial instruments is based on a fair value hierarchy depending on whether the inputs used for valuation are observable or not. Note 24 presents the distribution of the fair value measurements between the three levels of the hierarchy. The fair value is based on estimates using present value and other valuation methods, which are strongly influenced by the assumptions used about the amount and timing of estimated future cash flows and about discount rates that reflect varying degrees of risk, including liquidity risk and credit risk. Given the role of judgment in the application of a large number of acceptable valuation techniques and estimates for the calculation of fair values, they are not necessarily comparable among financial institutions. The fair value reflects market conditions at a given date and, therefore, may not be representative of future fair values. It also cannot be interpreted as a realizable amount in the event of immediate settlement. Income taxes Determining the provision for income taxes involves an element of judgment. The calculation of income taxes on surplus earnings is based on the tax treatment of the transactions recorded in the combined financial statements. The Mouvement recognizes a liability for anticipated tax adjustments based on an estimate of the additional taxes payable. When the amount payable is different from that originally recorded, the difference affects the income taxes expense, and the provision for income taxes could increase or decrease in subsequent years. Deferred tax assets and liabilities reflect management's estimate of the value of loss carryforwards and other temporary differences. The valuation of deferred tax assets is based on assumptions about the results of future periods, about the timing of the reversal of temporary differences and about the tax rates in effect at the time of reversal, which may change depending on government fiscal policies. In addition, management must assess whether it is more likely than not that deferred tax assets will be realized before they expire and, according to all available evidence, whether it is necessary to record an allowance for impairment of some or all of the deferred tax assets. Moreover, in determining the income taxes on surplus earnings recorded on the combined statement of income, management interprets the tax legislation in various jurisdictions. Using other assumptions or interpretations could lead to significantly different provisions for income taxes. Evaluation of the accrued employee benefit liability The present value of the accrued defined benefit pension plans liability is calculated on an actuarial basis using a number of assumptions. Any change in these assumptions would have an impact on the carrying amount of the accrued employee benefit liability. The assumptions used and additional information can be found in note 13. Financial instruments All financial assets must, at the time of initial recognition, be recorded at fair value and classified as at fair value through profit or loss, as available-for-sale, as held-to-maturity or as loans and receivables, based on the characteristics of the instrument and the purpose for which they were acquired. Financial liabilities must be measured at amortized cost or classified as at fair value through profit or loss. Purchases and sales of financial assets are recorded using the trade date.
48
Annual Report 2014
- 11 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Financial instruments at fair value through profit or loss are measured at fair value and any change in fair value is recorded in profit or loss in the year in which these changes occur. Financial instruments can be classified in this category either because they are classified as held for trading or because, upon initial recognition, they were designated as at fair value through profit or loss. This designation may be made if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases or if a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy and information about the group is provided internally on that basis to key management personnel. With the exception of the derivative financial instruments that are classified as held for trading, the financial instruments at fair value through profit or loss are classified in this category through initial designation. Interest income earned and dividends received are included in financial income using the accrual method. Amortization of premiums and discounts is included in unrealized gains and losses, using the accrual method. Financial instruments classified as available-for-sale (AFS) are measured at fair value and any unrealized gains or losses are recorded in other comprehensive income. AFS financial instruments are non-derivative financial assets that are designated as AFS or that are not classified as loans and receivables, held-to-maturity financial instruments or as financial assets at fair value through profit or loss. Interest revenue earned, amortization of premiums and discounts and dividends received are included in financial income, using the accrual method. When a decline in the fair value of a security is significant or prolonged, the resulting loss is immediately recognized in profit or loss. Financial assets classified as held-to-maturity (HTM), loans and receivables and other financial liabilities are carried at amortized cost using the effective interest rate method. Interest or dividends arising from these financial instruments are included in financial income and expense. Transaction costs relating to the acquisition of AFS investments are capitalized and then amortized over the term of the investment using the effective interest rate method. Those arising from the disposition of investments are deducted from the proceeds of disposition. Investment management fees are charged to income as they are incurred. Transaction costs attributable to financial instruments classified as loans and receivables are capitalized and amortized using the effective interest rate method. Derivative instruments Derivative financial instruments are financial contracts whose value depends on assets, interest rates, foreign exchange rates and other financial indices. Derivative financial instruments are negotiated by mutual agreement between the Mouvement and the counterparty and include interest rate swaps, foreign exchange contracts and stock index options. The Mouvement recognizes derivative instruments at fair value, whether they are stand-alone or embedded. Stand-alone derivative instruments are recorded on the statement of financial position among the other assets and liabilities, while embedded derivative instruments are presented in accordance with their characteristics with their host contract, under deposits payable on a fixed date. Changes in the fair value of stand-alone derivative instruments are recorded in the statement of income in the other items, except for changes in market-linked term deposits, which are recognized as a financial expense. Moreover, changes in the fair value of embedded derivative instruments are recorded as a financial expense adjustment. The Mouvement uses derivative financial instruments mainly to manage assets and liabilities. Derivative financial instruments are generally used to manage the interest rate risk exposure of the assets and liabilities recorded on the statement of financial position, firm commitments and forecasted transactions. Interest rate swaps are transactions in which two parties exchange interest flows on a specified notional amount for a predetermined period based on agreed-upon fixed and floating rates. Principal amounts are not exchanged. - 12 Combined financial statement
49
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued The foreign exchange contracts to which the Mouvement is a party are forward exchange contracts. Forward exchange contracts are commitments to exchange, at a future date, two currencies based on a rate agreed upon by both parties at the inception of the contract. The Mouvement has opted not to apply hedge accounting for these derivative financial instruments, given the complexity of documentation requirements. Cash Cash is classified as loans and receivables and includes cash on hand and current accounts. Securities Debt securities include money market securities, bonds and asset-backed long-term notes. Money market securities held by the Fédération and Acadia Life are classified as at fair value through profit or loss. Money market securities held by the Office de stabilisation are classified as available-for-sale. The bonds held by Acadia Life and in the Fédérationʼs liquidity fund are classified as at fair value through profit or loss. The bonds held in the Fédérationʼs general fund as well as those held by the Office de stabilisation are classified as available-for-sale. The asset-backed long-term notes are classified as at fair value through profit or loss. Equity securities include equities, investment funds and other investments. Equities are classified as available-for-sale. The investment funds that are not matched to the actuarial liabilities are classified as available-for-sale; those that are matched are classified as at fair value through profit or loss. The other investments mainly include equity securities in unrelated corporations and are classified as available-for-sale. Investment income is recorded using the accrual basis of accounting. Loans The loans are classified as loans and receivables. They are recorded at cost using the effective interest rate method, net of the allowance for credit losses. The allowance for credit losses on impaired loans is charged immediately to income. Other assets With the exception of the derivative instruments, the financial assets included in other assets are classified as loans and receivables. Deposits The deposits are classified as other financial liabilities and are carried at amortized cost using the effective interest rate method. Deposits payable on demand, interest-bearing or not, are usually deposits held in chequing accounts and savings accounts. Deposits payable on a fixed date are interest-bearing deposits usually held in fixed-term deposit accounts, guaranteed investment certificates or other similar instruments, with terms generally varying from one day to five years and maturing on a predetermined date. Other liabilities The bank overdraft, the borrowings and the financial liabilities included in other liabilities, with the exception of the derivative instruments, are classified as other financial liabilities and are carried at amortized cost using the effective interest rate method.
50
Annual Report 2014
- 13 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Loans At the reporting date, the Mouvement assesses whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A loan is considered impaired when there is such evidence, specifically when one of the following conditions is met: a) there is reason to believe that a portion of the principal or interest cannot be collected; b) the interest or principal repayment is contractually 90 days or more past due, unless the loan is fully secured and in the process of collection; or c) the interest or principal is more than 180 days in arrears. A loan is not classified as impaired when it is fully guaranteed or insured by a Canadian government (federal or provincial) or a Canadian government agency. A loan is considered to be past due when a borrower has failed to make a payment when contractually due. When a loan becomes impaired, the interest previously accrued but not collected is capitalized to the loan. Payments subsequently received are recorded as a reduction of the principal. A loan ceases to be considered impaired when principal and interest payments are up to date and there is no longer any doubt as to the collection of the loan, or when it is restructured, in which case it is treated as a new loan, and there is no longer any doubt as to the collection of the principal and interest. A loan is written off when all attempts at restructuring or collection have been made and the likelihood of future recovery is remote. When a loan is written off completely, any subsequent payments are recorded in income. Collateral is obtained if deemed necessary for a member's loan facility, after an assessment of their creditworthiness. Collateral usually takes the form of an asset such as cash, government securities, stocks, receivables, inventory or capital assets. Assets foreclosed to settle impaired loans are recognized on the date of foreclosure at their fair value less costs of disposal. The fair value of foreclosed assets is determined by using a comparative market analysis, based on the optimal use of the assets, and considering the characteristics, location and market of each foreclosed asset. Transaction prices for similar assets are used, but certain adjustments are made to take into account the differences between assets on the market and the foreclosed assets being evaluated. Any subsequent change in fair value is recorded on the statement of income. Allowance for credit losses Objective evidence of impairment results from a loss event that occurred after the loan was granted but before the reporting date and that has an impact on the estimated future cash flows of loans. The impairment of a loan or a group of loans is determined by discounting future expected cash flows at the interest rate inherent to the financial asset. The allowance is equal to the difference between this value and the carrying amount. To determine the estimated recoverable amount of a loan, the Mouvement uses the value of the expected future cash flows discounted at the loan始s effective interest rate. When the amounts and timing of future cash flows cannot be estimated with reasonable reliability, the estimated recoverable amount is determined using the fair value of any security underlying the loan, net of expected costs of realization. The allowance for credit losses is management始s best estimate regarding impaired loans at the reporting date. In measuring the allowance for credit losses, management must exercise judgment in order to determine the inputs, assumptions and estimates to be used, including the timing of when a loan is considered impaired and the recoverable amount. A change in these estimates and assumptions would affect the allowance for credit losses, as well as the provision for credit losses for the year. The allowance for credit losses on impaired loans is established on an individual basis while the allowance on unimpaired loans is established on a collective basis. Individual allowances The Mouvement reviews its loan portfolios on a loan-by-loan basis to assess credit risk and determine if there is any objective evidence of impairment for which a loss should be recognized in the statement of income. Combined financial statement
- 14 -
51
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Changes in the individual allowance for credit losses due to the passage of time are recognized in financial income, while those that are due to a revision of expected receipts are recognized in the provision for credit losses. Collective allowance Loan portfolios for which an individual allowance has not been established are included in groups of financial assets having similar credit characteristics and are subject to a collective allowance. The method used by the Mouvement to determine the collective allowance takes into account the risk parameters of the various loan portfolios. This collective allowance impairment model takes into account certain factors such as probabilities of default (loss frequency), loss given default (extent of losses) and gross exposure to default. These parameters, which are based on historical losses, are determined according to the category of each loan for the personal loans portfolio and according to the risk rating of each loan for the business loans portfolio. The measurement of the collective allowance also depends on management始s assessment of current credit quality trends with respect to business sectors, the impact of changes to its credit policies and economic conditions. Finally, the allowance related to off-statement of financial position exposures, such as letters of guarantee and certain unrecognized credit commitments, is recorded in the other liabilities. The allowance for credit losses also includes a collective allowance for losses on student loans. No allowance for credit losses is accrued on federal student loans while students are still in school as repayment of these loans only begins six months after studies are completed. Evaluation of the allowance for losses on student loans on a loan-by-loan basis is not possible because it is difficult to establish students始 repayment capabilities. Therefore, a collective allowance is accrued. Management uses a method based on the past history of losses on student loans to establish the amount of the allowance. Capital assets Land is recorded at cost. Buildings and equipment and other are recorded at cost less accumulated depreciation and are depreciated over their estimated useful life using the straightline method. Gains and losses from disposal are included in income in the year in which they occur and are included in other income. The capital assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When the carrying value exceeds the recoverable amount, the carrying value is adjusted and an impairment loss is recognized in profit or loss.
Useful life Buildings Equipment and other
52
Annual Report 2014
5 to 60 years 1 to 25 years
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Intangible assets Intangible assets include software, acquired or internally generated, and are recorded at cost. They are depreciated over their useful life using the straight-line method over one year to 15 years. The intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When the carrying value exceeds the recoverable amount, the carrying value is adjusted and an impairment loss is recognized in profit or loss. Assets held for sale An asset is classified as held for sale if its carrying amount is expected to be recovered principally through a sale transaction rather than through continuing use and such a sale transaction is highly probable. An asset held for sale is measured at the lower of its carrying amount and its fair value less costs to sell. The fair value of assets held for sale is determined by using a comparative market analysis, based on the optimal use of the assets, as well as the characteristics, location and market of each asset. Transaction prices for similar assets are used and certain adjustments are made to take into account the differences between assets on the market and assets held for sale. Impairment of non-financial assets The Mouvement assesses at the reporting date whether there is evidence that an asset may be impaired. An impairment loss is recognized when the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use. Fair value corresponds to the best estimate of the amount that can be obtained from a sale during an arm始s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. The value in use is calculated according to the most appropriate method, generally by discounting recoverable future cash flows. Impairment losses on that asset may be subsequently reversed and are recognized in the statement of income in the year in which they occur. Estimating the recoverable amount of a non-financial asset to determine if it is impaired also requires that management make estimates and assumptions, and any change in these estimates and assumptions could impact the determination of the recoverable amount of nonfinancial assets and, therefore, the outcome of the impairment test. Inventory Inventories are valued at the lower of cost and net realizable value. Cost is determined using the first in, first out method. Reinsurance assets In the normal course of business, the Mouvement uses reinsurance to limit its exposure to risk. The reinsurance assets represent amounts owed to the Mouvement by reinsurance companies for ceded insurance contract liabilities. These amounts are calculated in a manner similar to the actuarial liabilities for future benefits under insurance contracts, in accordance with the reinsurance agreements. The reinsurance assets are tested for impairment annually. When there is objective evidence that a reinsurance asset is impaired, the carrying value of that asset is written down to its recoverable value and the resulting loss is recognized in profit or loss.
Combined financial statement
53
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Insurance and investment contract liabilities i.
Classification of contracts
Insurance contracts are contracts that transfer a significant insurance risk at the time of issue of the contract. Insurance risk is transferred when the Mouvement agrees to compensate the policyholder if an uncertain future event specified in the contract adversely affects the policyholder. Insurance contracts may also include the transfer of a non significant financial risk. Contracts issued by the Mouvement that transfer a significant insurance risk are classified as insurance contracts in accordance with IFRS 4 "Insurance contracts". Contracts that do not meet the definition of an insurance contract in accordance with IFRS are classified as investment or service contracts, accordingly. Investment contracts are contracts that involve financial risk without significant insurance risk. When a contract has been classified as an insurance contract, it remains an insurance contract for the rest of its term, even if the insurance risk decreases significantly during this period, until its expiry or the expiration of all rights and obligations. However, an investment contract may be reclassified as an insurance policy after its issue if the insurance risk becomes significant. ii. Insurance contract liabilities Actuarial liabilities represent the amounts which, together with estimated future premiums and net investment income, will allow the Mouvement to meet all of its obligations regarding estimated future benefits, taxes other than income taxes and related future expenses. The appointed actuary of the Mouvement is required to determine the actuarial liabilities needed to meet its future commitments. Actuarial liabilities are determined using the Canadian Asset Liability Method (CALM), in accordance with Canadian accepted actuarial practice. The reinsurers' share of the actuarial liabilities is recognized as an asset on the statement of financial position as "Reinsurance assets". iii. Liability sufficiency test The Mouvement meets the minimum requirements of the liability sufficiency test given that it takes into consideration, when determining the actuarial liabilities, current estimates of all contractual and related cash flows, such as the costs of processing claims and cash flows resulting from embedded options and guarantees. Moreover, if the liability is not sufficient, the entire deficiency is recognized in income. iv. Investment contract liabilities The investment contracts of the Mouvement comprise mainly annuity certain contracts. Amounts received as premiums are initially recognized on the statement of financial position as deposits. Subsequently, deposits and withdrawals are recorded directly as an adjustment of the liability on the statement of financial position. v. Reinsurance The Mouvement uses reinsurance treaties for contracts with coverage in excess of certain maximum amounts that vary based on the nature of the activities. In addition, it purchases additional reinsurance protection against large-scale catastrophic events. Liabilities for claims yet to be settled and not yet made These liabilities consist of life insurance claims known at year end that have not yet been settled as well as an estimate of the insurance claims where the death has occurred but the claim has not yet been received by the Mouvement. - 17 54
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 2.
Significant accounting policies - continued Currency translation Monetary assets and liabilities in foreign currency are converted at the exchange rate at year end. Other assets and liabilities are converted at the original exchange rate. Statement of income items are converted at the average exchange rate for the year. Exchange gains and losses are included in current profit or loss. Member dividends Member dividends are a distribution of surplus earnings for the year based on the volume of activity of each member. As such, they are recognized on the statement of income. Income taxes The Mouvement uses the tax asset and liability method of accounting for income taxes. Under this method, income taxes on earnings include both current taxes and deferred taxes. Current taxes represent the taxes on the year's taxable income. Current tax assets and liabilities for the current and prior years are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates that were enacted or substantively enacted at the reporting date. Deferred taxes are recognized based on the expected tax consequences of the differences between the carrying value of items on the statement of financial position and their tax basis, using the tax rates that are enacted or substantively enacted for the years in which it is expected that the differences will reverse. A deferred tax asset is recognized to the extent that future realization of the tax benefit is more likely than not. Pension plans Until December 31, 2013, the Mouvement participated in the Mouvement des caisses populaires acadiennes employee pension plan, as part of a multi-employer defined benefit plan that guaranteed the payment of pension benefits. Pension plan benefits were based on the number of years of plan participation and the employee's salary. The Mouvement accounted for this plan as a defined benefit plan. The cost of the benefits was determined using the Projected Unit Credit Method. The accrued employee benefit liability was measured using an actuarial valuation in accordance with IFRS. Actuarial gains and losses were recognized in other comprehensive income in the period in which they arose. These gains and losses were also recognized immediately in the general reserve and were not reclassified to profit or loss in a subsequent period. Since January 1st, 2014, the Mouvement participates in the Mouvement des caisses populaires acadiennes shared risk pension plan. Under this plan, the actuarial and investment risks are assumed by the employees. As a result, the pension plan is recorded as if it were a defined contribution pension plan. The Mouvement also participates in two other defined benefit pension plans. The Mouvement also offers to its employees a retirement benefit payable as a lump sum payment. This benefit is based on the employee始s salary and the number of years worked within the Mouvement. Revenue recognition Financial income is recognized using the accrual basis of accounting. Revenues related to the administration of deposits consist primarily of fees relating to payment orders issued without sufficient funds and of service fees. These revenues are recognized when the transaction occurs in accordance with the prevailing fee agreement with the member. Gross premiums for all types of insurance contracts are recognized as revenue when due and the amount can be determined objectively. Net premiums represent gross premiums, net of the portion ceded to reinsurers. As soon as these premiums are recognized, the related actuarial liabilities are calculated so that benefits and expenses of these products are recorded. The other revenues are recognized when a good is transferred or a service rendered and the transaction is measurable. - 18 -
Combined financial statement
55
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 3.
Changes in accounting policies IAS 32 "Financial Instruments: Presentation" Amendments made to IAS 32 clarify the criteria for offsetting financial assets and liabilities, particularly the legally enforceable and unconditional right to offset and the simultaneous realization of the asset and the settlement of the liability. The adoption of the IAS 32 amendments by the Mouvement on January 1st, 2014 did not have any impact on its financial performance or position. IAS 36 "Impairment of Assets" In May 2013, the IASB published an amendment entitled "Recoverable Amount Disclosures for Non-Financial Assets". This amendment requires the disclosure of additional information on the recoverable amount of impaired assets, when this amount is based on fair value less costs of disposal. It is also required to disclose the discount rate used to determine, using a discounted cash flow projection method, the recoverable amount of an impaired asset, whether based on fair value less costs of disposal or value in use. The adoption of this amendment did not have any impact on the Mouvement's financial statements.
Note 4.
Future accounting changes IFRS 9 "Financial Instruments" In July 2014, the IASB issued the final version of IFRS 9 "Financial Instruments", which reflects all phases of the financial instruments project and replaces IAS 39 "Financial Instruments: Recognition and Measurement" and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1st, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before February 1st, 2015. The Mouvement is currently assessing the impact of IFRS 9 and plans to adopt the new standard at the required effective date. IFRS 15 "Revenue from Contracts with Customers" IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after January 1st, 2017 with early adoption permitted. The Mouvement is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. IAS 1 "Presentation of Financial Statements" The IASB published amendments in December 2014 to IAS 1 "Presentation of Financial Statements". These amendments clarify the way in which professional judgment should be exercised in the determination of the level and structure of information to be disclosed in the financial statements. Given that IAS 1 is a presentation standard, the amendments to this standard, applicable to annual periods beginning January 1st, 2016, will have no impact on the financial performance or position of the Mouvement. Early adoption is allowed.
56
Annual Report 2014
- 19 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 4.
Future accounting changes - continued IAS 16 "Property, Plant and Equipment" - Clarification of acceptable methods of amortization The IASB published amendments in May 2014 to IAS 16 "Property, Plant and Equipment". These amendments clarify that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate. The amortization of recorded assets should reflect a model of the consumption of the assets rather than the economic benefits of these assets. The amendments to this standard, which will be prospectively applicable to annual periods beginning January 1st, 2016, will have no impact on the financial performance or position of the Mouvement. Early adoption is allowed.
Note 5.
Securities
2014 Term to maturity Within 1 year to 1 year 3 years $ $
3 to 5 years $
5 to 10 Over 10 Without years years maturity $ $ $
Total $
At fair value through profit or loss Canadian federal government debt Canadian provincial and municipal government debt Other Canadian public sector debt Financial institutions debt Other corporate debt Equity securities
24,801
22,020
-
2,739
727
-
50,287
18,567
58,466
28,592
18,311
118,527
-
242,463
55,996 8,479 -
1,024 -
1,229 403 -
3,026 2,668 5,040 -
6,691 1,886 22,399 -
10,679
9,717 61,779 37,345 10,679
107,843
81,510
30,224
31,784
150,230
10,679
412,270
5,912
5,533
6,998
15,204
-
-
33,647
2,651
7,571
9,333
20,668
-
-
40,223
1,139 -
6,964 1,191 -
7,952 -
1,262 2,536 -
2,208 -
62,865
1,262 20,799 1,191 62,865
9,702
21,259
24,283
39,670
2,208
62,865
159,987
117,545
102,769
54,507
71,454
152,438
73,544
572,257
Available-for-sale Canadian federal government debt Canadian provincial and municipal government debt Other Canadian public sector debt Financial institutions debt Other corporate debt Equity securities
Combined financial statement
- 20 -
57
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 5.
Securities - continued
2013 Term to maturity Within 1 year to 1 year 3 years $ $
3 to 5 years $
5 to 10 years $
Over 10 years $
Without maturity $
Total $
At fair value through profit or loss Canadian federal government debt Canadian provincial and municipal government debt Other Canadian public sector debt Financial institutions debt Other corporate debt
32,930
21,418
10,111
10,177
-
-
74,636
6,423
56,038
18,821
15,730
64,667
-
161,679
207 56,005 16,707
106 852 -
181 525
-
1,945 31,263
-
2,439 56,857 48,495
112,272
78,414
29,638
25,907
97,875
-
344,106
2,020
5,895
7,024
16,189
-
-
31,128
6,150 2,954 887 -
5,772 4,089 1,096 -
8,245 8,720 157 -
13,928 3,281 -
2,022 -
65,806
34,095 21,066 2,140 65,806
12,011
16,852
24,146
33,398
2,022
65,806
154,235
124,283
95,266
53,784
59,305
99,897
65,806
498,341
Available-for-sale Canadian federal government debt Canadian provincial and municipal government debt Financial institutions debt Other corporate debt Equity securities
58
Annual Report 2014
- 21 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 6.
Loans Loans by category of borrowers
Personal Residential mortgages Consumer and other Business
2014
2013
$ 1,394,839 528,221 890,923
$ 1,330,824 493,119 879,839
$ 2,813,983
$ 2,703,782
Credit quality of loans
2014 Personal Loans, neither past due nor impaired, gross Loans, past due but not impaired, gross Gross impaired loans Total gross loans Individual allowances Collective allowance Total net loans
$ 1,886,688 31,797 4,575
$
1,923,060 (1,689) $ 1,921,371
Business
Total
855,875 11,910 23,138
$ 2,742,563 43,707 27,713
890,923 (7,651) $
2,813,983 (9,340) (13,528)
883,272
$ 2,791,115
Business
Total
847,380 9,557 22,902
$ 2,633,881 43,024 26,877
2013 Personal Loans, neither past due nor impaired, gross Loans, past due but not impaired, gross Gross impaired loans Total gross loans Individual allowances Collective allowance Total net loans
$ 1,786,501 33,467 3,975
$
1,823,943 (1,733) $ 1,822,210
879,839 (7,493) $
872,346
2,703,782 (9,226) (16,437) $ 2,678,119
Past due loans are loans on which the counterparty has failed to make a payment when contractually due.
Combined financial statement
59
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 6.
Loans - continued Loans past due but not impaired
2014 From 1 to 29 days Personal Business
From 30 to 59 days
From 60 to 90 days 89 days and greater
Total
$ 19,918 11,152
$
4,685 555
$
1,562 203
$
5,632 -
$ 31,797 11,910
$ 31,070
$
5,240
$
1,765
$
5,632
$ 43,707
90 days and greater
Total
2013 From 1 to 29 days Personal Business
From 30 to 59 days
From 60 to 89 days
$ 21,741 8,248
$
4,479 622
$
1,947 644
$
5,300 43
$ 33,467 9,557
$ 29,989
$
5,101
$
2,591
$
5,343
$ 43,024
In addition, there is a total of $0.6 million (2013 - $0.7 million) in student loans in an interestexempt period, which implies an element of delinquency since the students cannot meet their commitments. Impaired loans and individual allowances
2014
Gross Personal Business
60
Annual Report 2014
Individual allowances
Net
$
4,575 23,138
$
(1,689) (7,651)
$
2,886 15,487
$
27,713
$
(9,340)
$
18,373
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 6.
Loans - continued
2013
Gross Personal Business
Individual allowances
Net
$
3,975 22,902
$
(1,733) (7,493)
$
2,242 15,409
$
26,877
$
(9,226)
$
17,651
Change in the allowance for credit losses
Individual allowances, beginning of year Provision for credit losses Write-offs and other Individual allowances, end of year
Personal
Business
$
1,733 2,675 (2,719)
$
7,493 5,471 (5,313)
$
1,689
$
7,651
$
2014
2013
Total
Total
9,226 8,146 (8,032)
$
6,348 5,013 (2,135)
9,340
9,226
Collective allowance, beginning of year Provision for credit losses Other
16,437 (3,001) 92
18,300 (2,002) 139
Collective allowance, end of year
13,528
16,437
$ 22,868
$ 25,663
Loan securitization As part of its liquidity and capital management strategy, the Mouvement participates in the National Housing Act Mortgage-Backed Securities Program. Under this program, the Mouvement bundles residential mortgage loans guaranteed by the Canada Mortgage and Housing Corporation (CMHC) into mortgage-backed securities (NHA MBS) and transfers them to the Canada Housing Trust (CHT). The Mouvement may not subsequently transfer or sell these assets or pledge them as collateral, since they have been sold to the CHT, and it may not repurchase them before maturity. The Mouvement treats these transfers as collateralized financing transactions and recognizes a liability in that respect because it substantially retains certain prepayment and interest risks. This liability is equal to the consideration received from the CMHC for the loans that do not meet the derecognition criteria. For its part, the CHT funds these purchases by issuing Canada Mortgage Bonds (CMB) to investors. The legal guarantee of third parties holding CMB is limited to the transferred assets.
Combined financial statement
61
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 6.
Loans - continued The following table presents the securitized loans as well as the related liabilities:
2014
Note 7.
2013
Securitized mortgage loans
$
23,944
$
-
Related liabilities (note 11)
$
21,867
$
-
Accrued interest, receivables and other assets
2014 Accrued interest Derivative instruments Prepaid expenses Income taxes recoverable Inventory Receivables Foreclosed assets Other
62
Annual Report 2014
2013
$
14,961 24,422 7,321 2,470 192 9,223 3,477 891
$
14,758 23,133 6,137 2,043 239 6,145 1,551 1,327
$
62,957
$
55,333
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 8.
Capital assets
Land
Buildings
Equipment and other
Total
Cost: December 31, 2012 Acquisitions Dispositions and write-offs Assets classified as held for sale
$
December 31, 2013 Acquisitions Dispositions and write-offs December 31, 2014
8,196 (177)
$
48,271 2,337 (1,056)
$
34,139 4,069 (3,278)
$
90,606 6,406 (4,511)
(156)
(1,252)
(342)
(1,750)
7,863 104 (315)
48,300 1,569 (906)
34,588 1,912 (2,817)
90,751 3,585 (4,038)
$
7,652
$
48,963
$
33,683
$
90,298
$
-
$
26,225 1,458 (1,056)
$
27,440 1,770 (1,443)
$
53,665 3,228 (2,499)
Accumulated depreciation: December 31, 2012 Depreciation Dispositions and write-offs Assets classified as held for sale December 31, 2013 Depreciation Dispositions and write-offs December 31, 2014
-
(1,252)
(342)
(1,594)
-
25,375 1,423 (507)
27,425 1,675 (2,812)
52,800 3,098 (3,319)
$
-
$
26,291
$
26,288
$
52,579
$
7,652 7,863
$
22,672 22,925
$
7,395 7,163
$
37,719 37,951
Net book value: December 31, 2014 December 31, 2013
The buildings include an amount of $0 million (2013 - $1.7 million) for a building under construction. The equipment and other include an amount of $0.2 million (2013 - $0 million) for equipment that was not amortized since it was not in use at December 31.
Combined financial statement
63
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 9.
Intangible assets
Acquired software
Internally generated software
Total
Cost: December 31, 2012 Acquisitions
$
December 31, 2013 Acquisitions Dispositions and write-offs December 31, 2014
2,794 552
$
3,346 812 (275)
1,646 7
$
1,653 5 -
4,440 559 4,999 817 (275)
$
3,883
$
1,658
$
5,541
$
1,967 273
$
331 181
$
2,298 454
Accumulated depreciation: December 31, 2012 Depreciation December 31, 2013 Depreciation Dispositions and write-offs December 31, 2014
2,240 341 (274)
512 186 -
2,752 527 (274)
$
2,307
$
698
$
3,005
$
1,576 1,106
$
960 1,141
$
2,536 2,247
Net book value: December 31, 2014 December 31, 2013
The acquired software includes an amount of $0.2 million (2013 - $0 million) for software that was not amortized since it was not in use at December 31.
64
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 10.
Actuarial liabilities Nature Actuarial liabilities represent the estimated amount that, together with future premiums and net investment income, will be sufficient to cover future benefits and expenses related to existing insurance contracts. Actuarial liabilities are determined using the Canadian Asset Liability Method (CALM), in accordance with Canadian accepted actuarial practice, as set out by the Canadian Institute of Actuaries (CIA). The calculation of the actuarial liabilities necessarily includes the risk that actual results could deviate from the best estimates. This risk varies in proportion to the length of the estimation period and the possible instability of the factors used for calculating the liability. The appointed actuary is required to add to each assumption a margin to reflect the uncertainty of the determination of the best estimates and the risk of deteriorating underwriting experience. The CIA prescribes the range of acceptable margins. The appointed actuary must evaluate various scenarios using a cash flow projection method to establish a margin for adverse deviation that adequately covers the risks, including interest rate risk. This provision is recorded in future income when it is no longer required to cover estimation error. If the estimates of future conditions change during the term of a contract, the present value of the changes is recognized in profit or loss immediately. Composition The composition of the actuarial liabilities of the policies is as follows:
2014 Actuarial liabilities Personal life insurance Group and health insurance Annuities
Reinsurance assets
Net amount
$
72,857 1,668 83,044
$
5,739 980 -
$
67,118 688 83,044
$
157,569
$
6,719
$
150,850
2013 Actuarial liabilities Personal life insurance Group and health insurance Annuities
Reinsurance assets
Net amount
$
56,281 2,460 4,256
$
4,882 812 -
$
51,399 1,648 4,256
$
62,997
$
5,694
$
57,303
Combined financial statement
- 28 -
65
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 10.
Actuarial liabilities - continued The assets covering the actuarial liabilities include the following:
2014 Life insurance Bonds and short-term securities Investment funds Reinsurance assets
Annuities
Total
$
63,006 4,800 6,719
$
77,165 5,879 -
$
140,171 10,679 6,719
$
74,525
$
83,044
$
157,569
2013 Life insurance Bonds and short-term securities Reinsurance assets Other
Annuities
Total
$
53,018 5,694 29
$
4,254 2
$
57,272 5,694 31
$
58,741
$
4,256
$
62,997
Actuarial assumptions The nature and method of determining the most significant assumptions used in the computation of the actuarial liabilities comply with industry practice. The actuarial assumptions deal with mortality and morbidity, policy lapse rates, investment income and operating expenses. Measurement uncertainty The basic assumptions used to determine the actuarial liabilities represent the best estimates of the range of possible outcomes. Actuaries must include a margin in each assumption to recognize the uncertainty surrounding the determination of best estimates, to take into account possible deterioration of underwriting experience and to provide the best assurance that the actuarial liabilities will be sufficient to pay future benefits. The CIA prescribes a range of allowable margins. Margins used are at least in the middle of the suggested range. Mortality The mortality assumption is based on a combination of the Mouvement's most recent experience and the industry's recent experience as published by the CIA. An increase (a decrease for annuities) of 1% of the most likely assumption would result in an increase of approximately $1.4 million in the actuarial liabilities (2013 - $0.5 million).
66
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 10.
Actuarial liabilities - continued Morbidity The morbidity assumption is based on the Mouvement's experience and industry results over long periods of time. The majority of products for which a morbidity assumption is significant consists of products whose premiums can be adjusted to reflect the Mouvement's actual experience. In the case of products on which morbidity has a significant effect, a deterioration of 1% of the most likely assumption would not have a significant impact on the actuarial liabilities. Investment income The calculation of the actuarial liabilities reflects the projected net investment income of the assets covering the liabilities. It also takes into account the income that the Mouvement expects to earn on reinvestment or to give up in order to finance the mismatch of cash flows. Interest rate and credit risk projections include some uncertainty. The Mouvement considers this uncertainty by including margins for credit risk in its projections of investment income and by evaluating future interest rate scenarios. Projected investment returns are reduced in anticipation of future credit losses on assets. One way to measure the interest rate risk associated with these assumptions is to determine the effect of an immediate increase or decrease of 1% of interest rates on the present value of net projected cash flows of the assets and liabilities related to the Mouvement's personal insurance activities. These changes in interest rates would impact the projected cash flows. An immediate increase of 1% in interest rates would result in a decrease in the fair value of the assets matched to the liabilities of approximately $20.6 million (2013 - $13.0 million) and a decrease in the corresponding liabilities of $20.2 million (2013 - $19.2 million), resulting in a net negative impact of $0.4 million (2013 - net positive impact of $6.2 million) on the year's income before taxes. An immediate decrease of 1% in interest rates would result in an increase in the fair value of the assets matched to the liabilities of approximately $25.0 million (2013 - $17.4 million) and an increase in the corresponding liabilities of $27.8 million (2013 - $29.3 million), resulting in a net negative impact of $2.8 million (2013 - $11.9 million) on the year's income before taxes. Expenses Amounts are included in the actuarial liabilities for the costs of administering the existing contracts, including the cost of premium collection, the adjudication and processing of benefits, periodic actuarial calculations, preparation and sending of statements, related indirect expenses, renewal commissions and general expenses. The projections of expenses consider estimates of variables such as inflation, productivity and indirect tax rates. An increase of 1% of the most likely assumption of policy management expenses would increase the actuarial liabilities by approximately $0.2 million (2013 - $0.2 million).
Combined financial statement
67
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 10.
Actuarial liabilities - continued Policy lapse or cancellation rates Policyholders can choose to allow their policy to lapse by ceasing to pay their premiums. The Mouvement bases its estimate of policy lapse rates on the past performance of each of its business lines. A business line is considered to be based on policy lapses if an increase in the policy lapse rate is accompanied by an increase in profitability. However, if a decrease in the policy lapse rate is accompanied by an increase in profitability, the business line is not considered to be based on policy lapses. Change in actuarial liabilities The following table shows the changes in actuarial liabilities over the last two fiscal years: 2014 Actuarial liabilities Balance, beginning of year
$
62,997
Normal increase (decrease) for: Existing contracts New contracts
21,409 79,470
Changes in assumptions
(6,307)
2013
Reinsurance assets $
68
Annual Report 2014
$
157,569
$
1,100 194
6,719
$
111
(13,107) $
62,997
6,845 (1,456) 194
1,233
1,025 $
76,104
Reinsurance assets
(10,391) (3,949)
(269)
94,572 Balance, end of year
5,694
Actuarial liabilities
(1,151) $
5,694
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 11.
Borrowings
2014 Operating credit, authorized amount of $50.0 million (2013 - $100.0 million), bearing interest at the cost of funds plus 0.425%, renewable in December 2015.
$
40,000
2013
$
65,000
Operating credit, authorized amount of $100.0 million (2013 - $0 million), bearing interest at the cost of funds plus 0.775%, renewable in December 2017.
5,000
-
Operating credit, authorized amount of $100.0 million (2013 - $0 million), bearing interest at the cost of funds plus 0.925%, renewable in December 2019.
5,000
-
Operating credit, authorized amount of $0 million (2013 - $25.0 million), bearing interest at the cost of funds plus 0.25%.
-
20,000
Securitization loans, guaranteed by mortgage loans as described in note 6, repayable at maturity, interest payable semi-annually at the rate of 2.0%, maturing in September and December 2019.
21,867
-
Loan from the Regional Development Corporation to the Office de stabilisation (of an original amount of $9.9 million), repayable periodically from 2023 to 2032. The interest revenue received on the stabilization preferred shares of La Caisse Populaire de Shippagan Limit茅e as well as the proceeds of any redemption of said shares must be applied against this loan始s principal. This loan is interest-free and was initially recorded at its fair value.
5,434
5,327
$
77,301
$
90,327
The projected loan principal repayments for the next five years are as follows: 2015 - $51,605 2016 84 2017 84 2018 84 2019 - 21,951 The Mouvement also has an operating credit with an authorized amount of $12.5 million, bearing interest at the prime rate plus 0.75% and renewable annually. At December 31, 2014 and 2013, this facility was not used.
Combined financial statement
69
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 12.
Accrued interest, payables and other liabilities
2014 Accrued interest Derivative instruments Payables Deferred revenue Promissory notes Accrued employee benefit liability (note 13) Liabilities for claims yet to be settled and not yet made Investment contract liabilities Other
$
23,726 1,041 36,358 2,234 474 28,013
2013 $
506 317 2,247 $
94,916
23,680 3,576 39,758 2,355 272 40,818 505 346 2,812
$
114,122
The promissory notes bear interest at rates ranging from 1.21% to 1.85% and have maturities ranging from July 2015 to July 2017. They are retractable by the holder before the maturity date. Note 13.
Accrued employee benefit liability Until December 31, 2013, the Mouvement participated in a funded defined benefit pension plan through the Mouvement des caisses populaires acadiennes employee pension plan, date at which the plan was converted to a shared risk pension plan for the active employees. For those already retired, annuities were purchased in 2014 by the pension plan from an insurance company and the plan was thus liquidated. The effects of these transactions are reflected in the following tables. In addition, the Mouvement participates in two other unfunded defined benefit pension plans. Therefore, the Mouvement records, on the combined statement of financial position, the liability for these plans. The benefits under these other two plans were modified and are calculated similarly to those in the shared risk plan. Principal actuarial assumptions The principal actuarial assumptions used in measuring the defined benefit obligation are as follows:
Discount rate Expected rate of salary increases Mortality
2014
2013
4.00% 3.50% CPM2014-B Public
4.60% 3.50% CPMRPP2014 Public
Defined benefit pension plans The following tables show the liabilities and costs recognized in respect of the defined benefit pension plans for the Mouvement.
70
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 13.
Accrued employee benefit liability - continued
2014
2013
Change in the defined benefit plan obligation Defined benefit plan obligation at beginning of year Current service cost Interest expense Participants' contributions Benefits paid Actuarial losses (gains) arising from: The plans' experience Changes in financial assumptions Changes in demographic assumptions Past service costs Impact of liquidation (conversion in 2013)
$
Defined benefit plan obligation at end of year
72,329 176 1,937 (4,190)
$
210,237 6,693 8,498 3,422 (5,682)
100 5,101 (185) (71,719)
61 (34,923) 8,097 (3) (124,071)
3,549
72,329
58,771 1,536
138,068 5,706
4,143 (162) 12,850 (4,190) (72,948)
8,308 (1,024) 12,425 3,422 (5,682) (102,452)
Change in fair value of plan assets Fair value of plan assets at beginning of year Interest on plan assets Difference between the actual return on assets and interest income Administrative expenses Employers' contributions Employees' contributions Benefits paid Impact of liquidation (conversion in 2013) Fair value of plan assets at end of year Accounting deficit Minimum funding requirements under IFRIC 14 Accrued employee benefit liability
$
-
58,771
3,549 -
13,558 1,927
3,549
$
15,485
The defined benefit obligation is divided as follows between the funded plan and the unfunded plans:
2014 Funded plan Unfunded plans
2013
$
3,549
$
69,296 3,033
$
3,549
$
72,329
Combined financial statement
71
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 13.
Accrued employee benefit liability - continued Expense recognized for defined benefit plans The amounts recognized on the statement of income under "Salaries and fringe benefits" for the year ended December 31 are as follows:
2014
2013
Current service cost Interest expense Interest on plan assets Administrative expenses Past service cost Loss (gain) on liquidation (conversion) of the plan Interest application of IFRIC 14
$
176 1,937 (1,536) 162 1,229 89
$
6,693 8,498 (5,706) 1,024 (3) (21,619) -
Expense recognized in profit or loss
$
2,057
$
(11,113)
The amounts recognized in other comprehensive income for the year ended December 31 are as follows:
2014 Losses (gains) for the year Minimum funding requirements under IFRIC 14 Change in accrued employee benefit liability recorded in other comprehensive income
2013
$
873 (2,016)
$
(35,073) 1,927
$
(1,143)
$
(33,146)
Allocation of pension plan assets The fair value of the pension plan assets is detailed as follows:
Bonds Investment funds Other
72
Annual Report 2014
- 35 -
2014 %
2013 %
-
43.50 55.81 0.69
-
100.00
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 13.
Accrued employee benefit liability - continued Sensitivity to the discount rate The following table shows the impact of a one percentage point change in the discount rate on the defined benefit plan obligation at December 31:
2014 $
Increase of 1% Decrease of 1%
(418) 510
2013 $
(7,423) 9,042
The above sensitivity analysis was developped using a method that extrapolates the impact on the defined benefit plan obligation of reasonable changes in the significant assumptions at the closing date. Expected contributions for 2015 The Mouvement expects to contribute $0.1 million to the defined benefit pension plan in the next year. Other accrued employee benefit liability Due to the conversion to the shared risk pension plan, the Mouvement has committed to paying temporary contributions of $3 million per year for 10 years, or until the funding ratio reaches 140%. A liability for these payments has been determined through an analysis of probabilities that considers multiple scenarios and has been discounted using a yield curve that takes into consideration the expected schedule of payments. Since it is only an estimate, the amount of the liability could change in the future. The following table shows the liability and costs of this commitment.
2014
2013
Liability at the beginning of the year Interest expense recorded in income Actuarial losses recorded in other comprehensive income Contributions paid Initial recording of the liability
$
21,519 737 1,439 (3,000) -
$
21,519
Liability at the end of the year
$
20,695
$
21,519
Other retirement benefits The Mouvement also offers to some of its employees a benefit in the form of a one-time payment upon retirement. This benefit is based on the salary and the number of years worked for the Mouvement at the time of retirement. The liability recorded for these benefits amounts to $3.8 million (2013 - $3.8 million).
- 36 -
Combined financial statement
73
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 13.
Accrued employee benefit liability - continued Amount recognized under "Accrued employee benefit liability" The "Accrued employee benefit liability" recorded in note 12 consists of the following:
2014 Liability for pension plans Liability for temporary contributions Liability for other retirement benefits
2013
$
3,549 20,695 3,769
$
15,485 21,519 3,814
$
28,013
$
40,818
Shared risk pension plan During the year, the Mouvement contributed $6.3 million (2013 - $0 million) to the shared risk pension plan. Note 14.
Share capital Authorized The share capital is made up of membership shares, surplus shares, capitalization shares and permanent investment shares. The Caisses populaires may issue an unlimited number of membership shares with an issue price of $5 each, redeemable under certain conditions stipulated in the Credit Unions Act (Act) and in the statutes of the Caisses populaires. Members have only one vote regardless of the number of membership shares they must buy and hold according to the requirements set out in the By-laws of the Caisses populaires. The By-laws of the Caisses populaires authorize the issue of surplus shares with a par value of $10 each. These shares confer no voting right or economic interest in the allocation of surplus earnings and are not refundable except in certain special situations stipulated in the By-laws and in the statutes of the Caisses populaires. The By-laws of the Caisses populaires authorize the issue of capitalization shares with a par value of $500 each. These shares confer no voting right and are not refundable except in certain special situations stipulated in the By-laws and in the statutes of the Caisses populaires. The interest rate is determined annually at the general meeting of each Caisse populaire. The permanent investment shares have been issued by a Caisse populaire in accordance with the Act. These shares have a par value of $1 each and are non-cumulative, non-voting and nonparticipating. The shares issued and paid are distributed as follows:
2014 Membership shares Permanent investment shares
74
Annual Report 2014
- 37 -
2013
$
4,362 5,000
$
4,460 5,000
$
9,362
$
9,460
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 15.
Accumulated other comprehensive income The accumulated other comprehensive income includes unrealized gains of $7.0 million (2013 $6.2 million) on available-for-sale instruments less income taxes of $1.7 million (2013 $1.5 million).
Note 16.
Net insurance and annuity premiums
2014 Gross insurance and annuity premiums Premiums ceded to reinsurers
Note 17.
2013
$
92,371 (1,909)
$
18,220 (2,149)
$
90,462
$
16,071
Net insurance and annuity benefits
2014 Gross insurance benefits Benefits ceded to reinsurers Annuity benefits Change in insurance contract liabilities Change in reinsurance assets
$
$
Note 18.
6,518 (998) 2,267 94,572 (1,025) 101,334
2013 $
6,183 (1,422) 553 (13,107) 1,151
$
(6,642)
Other items
2014 Revenues (losses) arising from the accounting of the following items at fair value: Derivative instruments Asset-backed long-term notes Bonds
2013
$
2,249 1,189 4
$
(11,456) 3,193 (1,939)
$
3,442
$
(10,202)
The change in fair value of the bonds held by Acadia Life is not included in the other items because the bonds are matched with the actuarial liabilities.
Combined financial statement
75
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 19.
Income taxes Income taxes for the years presented in the combined statement of income are composed of the following elements:
Income taxes
Current Income taxes Taxes related to the change in tax rate Income taxes recovered on member dividends
$
3,320
$
6,582
2,866
$
$
3,843
(45)
$
Total 2013
9,902
(45)
(454) $
Total 2014
Deferred
3,170
(454)
6,537
$
(392)
9,403
$
6,621
The provision for income taxes in the combined statement of income differs from that established by application of the Canadian statutory tax rate for the following reasons:
2014 Income taxes at the statutory rate Small business deduction, used by some entities of the Mouvement Non-taxable revenues Change in tax rate on the beginning balance of the deferred income taxes Other
$
$
9,512
2013
27.0 %
(96) (57)
(0.3)% (0.2)%
(45) 543
(0.1)% 1.6 %
9,857
28.0 %
$
4,755 (237) (885)
$
26.0 % (1.3)% (4.8)%
2,827 553
15.5 % 2.9 %
7,013
38.3 %
The change in the applicable tax rate compared to the previous period comes from an increase in the provincial tax rate. The composition of the deferred income tax liability (asset), by type of temporary difference and carryforward, is as follows:
2014 Capital and intangible assets Securities and derivative financial instruments Allowance for credit losses Employee benefits liability Non-capital losses Actuarial liabilities Stabilization fund Other
76
Annual Report 2014
- 39 -
2013
$
(1,585) 3,199 (3,441) (7,517) (2,316) (11) 26,654 (96)
$
(1,632) 2,185 (4,088) (10,388) (2,427) (12) 24,957 (339)
$
14,887
$
8,256
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 20.
Member dividends The member dividends of $1.8 million that appear on the statement of income are based on a resolution of the board of directors of each of the Caisses populaires to recommend that their general assemblies approve these member dividends. The amount is calculated based on the interest on loans and deposits and user fees collected from members. The Caisses populaires may distribute member dividends when legal and regulatory requirements have been met.
Note 21.
Transfer to general reserve The surplus earnings for the year after member dividends have been partially transferred to the general reserve as required under the By-laws of the entities of the Mouvement.
Note 22.
Distributable surplus earnings The distribution is decided annually by members at the general meetings of certain Caisses populaires provided that their regulatory capitalization is higher than that stipulated in the Bylaws, which is 5% of total assets, subject to restrictions imposed by the Office de stabilisation.
Note 23.
Related party transactions Key management personnel compensation The key management personnel of the Mouvement are the members of the board of directors and senior management. These people have the authority and responsibility for planning, directing and controlling the activities of the Mouvement. For the year ended December 31, the compensation of the key management personnel of the Mouvement is as follows:
2014 Short-term benefits Post-employment benefits
Note 24.
2013
$
2,156 481
$
1,979 431
$
2,637
$
2,410
Fair value of financial instruments The following methods and assumptions have been used to estimate the fair value of the financial instruments: Securities: The estimated fair value of securities is based on quoted market prices, when available. When quoted market prices are not available, estimated fair value is determined using other methods such as the discounting of cash flows and the use of market prices for similar securities. Loans: For certain variable rate loans, whose rates are revised frequently, the estimated fair value is assumed to be equal to the carrying value. The fair value of the other loans is estimated using a discounted cash flow calculation method that uses market interest rates currently charged for similar new loans as of December 31, applied to expected maturity amounts. Changes in interest rates as well as in borrowers' creditworthiness are the main reasons for fluctuations in the fair value of the loans. For impaired loans, fair value is equal to carrying value in accordance with the valuation techniques described in note 2. - 40 -
Combined financial statement
77
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 24.
Fair value of financial instruments - continued Deposits and promissory notes: The fair value of deposits with no stated maturity is assumed to be equal to the carrying value. The fair value of fixed rate deposits and the promissory notes is determined by discounting contractual cash flows using market interest rates currently offered for deposits and promissory notes with relatively similar terms remaining to maturity. Reinsurance assets and insurance contract liabilities: The fair value of the reinsurance assets and the insurance contract liabilities has not been established. However, the Mouvement annually segments the assets that cover the actuarial liabilities or the liabilities for the different business lines. It attempts, within reasonable limits, to match the assets' cash flows with those of the liabilities. In this way, changes in the realizable values of assets should generally be offset by changes in the realizable values of the items associated with the actuarial liabilities. Borrowings: For the operating credits and the securitization loans, fair value equals the book value because they bear interest either at a variable rate or at rates that are close to the market rate. For the Office de stabilisation's loan, the fair value is determined by discounting expected future contractual cash flows using a discount rate equal to the rate of return earned on the related investment at that date. Investment contract liabilities: The fair value of the investment contract liabilities is assumed to be equal to the carrying value. Derivative instruments: The fair value of derivative instruments is calculated based on the net present value of expected cash flows at the market interest rates currently charged for instruments with similar features and maturities.
78
Annual Report 2014
- 41 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 24.
Fair value of financial instruments - continued The fair value of financial instruments according to their classification in the categories defined by the standards for financial instruments is as follows:
2014 At fair value through profit or loss $
Loans and receivables and financial Availableliabilities at for-sale amortized cost $ $
Total $
Fair value $
Financial assets Cash Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Loans Other assets
-
-
72,160
72,160
72,160
91,227 309,340 1,024 10,679 24,422
3,812 93,310 57,669 5,196 -
2,791,115 24,184
95,039 402,650 1,024 57,669 15,875 2,791,115 48,606
95,039 402,650 1,024 57,669 15,875 2,803,749 48,606
Total financial assets
436,692
159,987
2,887,459
3,484,138
3,496,772
-
-
2,836,094
2,836,094 2,854,955
Financial liabilities Deposits Other liabilities Bank overdraft Borrowings Accrued interest, payables and other liabilities
-
-
6,223 77,301
6,223 77,301
6,223 79,112
1,041
-
63,628
64,669
64,669
Total financial liabilities
1,041
-
2,983,246
2,984,287
3,004,959
Financial instruments at fair value through profit or loss are included in this category upon initial designation, with the exception of the other assets and liabilities, which are held for trading.
Combined financial statement
79
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 24.
Fair value of financial instruments - continued
2013 At fair value through profit or loss $
Loans and receivables and financial Availableliabilities at for-sale amortized cost $ $
Total $
Fair value $
Financial assets Cash Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Loans Other assets
-
-
74,430
74,430
74,430
98,524 214,427 31,155 23,133
5,919 82,510 53,879 11,927 -
2,678,119 20,903
104,443 296,937 31,155 53,879 11,927 2,678,119 44,036
104,443 296,937 31,155 53,879 11,927 2,689,255 44,036
Total financial assets
367,239
154,235
2,773,452
3,294,926
3,306,062
-
-
2,742,468
2,742,468
2,762,021
Financial liabilities Deposits Other liabilities Borrowings Accrued interest, payables and other liabilities
-
-
90,327
90,327
92,521
3,576
-
67,373
70,949
70,949
Total financial liabilities
3,576
-
2,900,168
2,903,744
2,925,491
Financial instruments at fair value through profit or loss are included in this category upon initial designation, with the exception of the other assets and liabilities, which are held for trading.
80
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 24.
Fair value of financial instruments - continued Classification of fair value measurements in the fair value hierarchy IFRS 13 "Fair value measurement" establishes a fair value hierarchy that reflects the relative weight of the data used for valuation. The hierarchy consists of the following levels: Level 1 - Quoted prices in active markets for identical financial instruments. Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the financial instrument, either directly or indirectly. Level 3 - Inputs for the financial instrument that are not based on observable market data. The following table presents the measurement levels according to the fair value hierarchy:
2014 Level 1
Level 2
Level 3
Total
Financial instruments recorded at fair value Assets Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Derivative instruments
$
-
$
95,039 402,650
$
-
$
95,039 402,650
12,224
1,024 45,445
-
1,024 57,669
-
15,875 24,422
-
15,875 24,422
-
1,041
-
1,041
-
$ 2,803,749
$ 2,803,749
2,854,955 474
-
2,854,955 474
Liabilities Derivative instruments
Financial instruments for which fair value is disclosed Assets Loans
$
-
$
Liabilities Deposits Promissory notes
-
Combined financial statement
81
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 24.
Fair value of financial instruments - continued
2013 Level 1
Level 2
Level 3
Total
Financial instruments recorded at fair value Assets Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Derivative instruments
$
-
$
104,443 296,937
$
-
$
104,443 296,937
8,356
31,155 45,523
-
31,155 53,879
-
11,927 23,133
-
11,927 23,133
-
3,576
-
3,576
-
$ 2,689,255
$ 2,689,255
2,762,021 272
-
2,762,021 272
Liabilities Derivative instruments
Financial instruments for which fair value is disclosed Assets Loans
$
-
$
Liabilities Deposits Promissory notes
Note 25.
-
Commitments and contingencies Letters of credit and credit commitments The primary purpose of financial instruments that present a credit risk is to ensure that members and clients have funds available when necessary for variable terms and under specific conditions. The collateral security policy of the Mouvement with respect to these credit instruments is generally the same as that applied to loans. Letters of credit are irrevocable commitments by the Mouvement to make payments for members or clients who might not be able to meet their financial obligations to third parties and represent the same credit risk as loans. Credit commitments represent unused portions of authorizations to extend credit in the form of loans or letters of credit.
82
Annual Report 2014
- 45 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 25.
Commitments and contingencies - continued The total amount of credit instruments does not necessarily represent future cash requirements since many of these instruments will expire or terminate without being funded. The maximum amount of letters of credit and credit commitments is presented in note 27. Other commitments At year end, minimum future commitments relating to the purchases of services and sponsorship and donation agreements are as follows:
2015 2016 2017 2018 2019
$
376 297 300 303 306
$
1,582
Contingencies The Mouvement is party to various business litigation matters, lawsuits and potential claims arising in the course of normal business activities. In management's opinion, the total amount of contingent liability resulting from these lawsuits will not have a material impact on the financial position of the Mouvement. Note 26.
Leases Lessee Operating lease At year end, the future minimum lease commitments under non-cancellable operating leases for premises and equipment are presented in the following table: 2014
Note 27.
2013
Under 1 year 1 to 5 years More than 5 years
$
536 1,603 974
$
335 731 436
Total
$
3,113
$
1,502
Financial instrument risk management The Mouvement is exposed to different types of risk in the normal course of operations, including credit risk, liquidity risk and market risk. The Mouvement's objective in risk management is to optimize the risk-return trade-off, within set limits, by applying integrated risk management and control strategies, policies and procedures throughout its activities. Under the Mouvement始s risk management approach, its entities and units are accountable for the combined results and the quality of risk management practices. The boards of directors of the Mouvement's components also play a pivotal role in monitoring the risks and results of those units and entities. Several committees support the boards of directors and management teams of each component in their efforts to fulfill their risk management responsibilities. - 46 -
Combined financial statement
83
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued CREDIT RISK Credit risk is the risk of losses resulting from a borrower's or a counterparty's failure to honour its contractual obligations, whether or not these obligations appear on the combined statement of financial position. Most of the loans and deposits of the Mouvement are related to the New Brunswick market. Credit risk management The Mouvement upholds its goal of effectively serving all of its members. To this end, it has developed distribution channels specialized by product and member type. The units and components that make up these channels are considered centres of expertise and are accountable for their performance in their respective markets, including credit risk. In this regard, they have latitude regarding the framework they use and credit granting and are also equipped with the corresponding management and monitoring tools and structures. Framework A set of policies and standards govern all aspects of credit risk management for the Mouvement. These frameworks define: · ·
The minimal framework that governs risk management and control activities; The roles and responsibilities of the parties involved.
These frameworks are supplemented by the Fédération's credit practices. These practices are authorized by the Office de stabilisation and are applicable to the caisses populaires and their Business Centre. They define: · · ·
The guidelines relating to commitment, authorization, review and delegation limits; The policies regarding the management and control of credit activities; The financing terms and conditions applicable to borrowers.
Credit granting To assess the risk of credit activities with individuals and smaller businesses, credit rating systems, based on proven statistics, are generally used. These systems were developed using a history of borrower behaviour with a profile or characteristics similar to those of the applicant to determine the risk of a particular transaction. The performance of these systems is analyzed on an ongoing basis and adjustments are made regularly with a view to assessing transaction and borrower risk as accurately as possible. The granting of credit to businesses is based on an analysis of the various parameters of each file, where each borrower is assigned a risk rating. These ratings are assigned individually following a detailed examination of the financial, market and management characteristics of the business. The depth of the analysis and the approval level required depend on the product as well as the complexity and scope of the transaction risk. Larger loans are approved by the Fédération. File monitoring and management of more significant risks Portfolios are monitored by the Mouvement's business units using procedures that set out the degree of depth and frequency of review based on the quality and extent of the risk related to the commitments. The management of higher-risk loans involves follow-up controls adapted to their particular circumstances. 84
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued Credit risk mitigation In its lending operations, the Mouvement obtains collateral if deemed necessary for a member始s loan facility following an assessment of their creditworthiness. Collateral is normally comprised of assets such as cash, government securities, stocks, receivables, inventory or capital assets. For some portfolios, programs offered by organizations such as the Canada Mortgage and Housing Corporation (CMHC) are used in addition to the customary collateral. At December 31, loans guaranteed by the CMHC represented 59% (2013 - 61%) of the residential mortgage portfolio. Maximum credit risk exposure
2014
2013
Recognized on the statement of financial position $
Cash Securities Loans Personal Business Collective allowance Reinsurance assets Other financial assets
33,024 498,713
$
1,921,371 883,272 (13,528) 6,719 24,184
38,729 432,535 1,822,210 872,346 (16,437) 5,694 20,903
$ 3,353,755
$ 3,175,980
$
13,520 618,238
$
13,929 477,389
$
631,758
$
491,318
Off-statement of financial position Letters of credit Credit commitments
- 48 -
Combined financial statement
85
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued The following table presents the credit quality of the money market securities and bond portfolios, evaluated in accordance with external credit risk ratings. The other financial assets of the Mouvement are not rated.
2014 Money market securities R1-H R1-M R1-L
Bonds AAA AA A BBB
2013
$
62,387 19,266 13,386
$
56,880 30,856 16,707
$
95,039
$
104,443
$
71,963 139,759 174,585 16,343
$
95,867 86,042 107,391 7,637
$
402,650
$
296,937
LIQUIDITY RISK Liquidity risk refers to the Mouvement始s capacity to raise the necessary funds (by increasing liabilities or converting assets) to meet a financial obligation, whether or not it appears on the combined statement of financial position, on the date it is due or otherwise. The Mouvement manages liquidity risk in order to ensure that it has access, on a timely basis and in a profitable manner, to the funds needed to meet its financial obligations as they become due, in both routine and crisis situations. Managing this risk involves maintaining a minimum level of liquid securities, stable and diversified sources of funding and an action plan to implement in extraordinary circumstances. Liquidity risk management is a key component in an overall risk management strategy because it is essential to preserving market and depositor confidence. Policies have been established describing the principles, limits and procedures that apply to liquidity risk management. The Mouvement also has a liquidity contingency plan to deal with a crisis situation. This plan also identifies sources of liquidities that are available in exceptional situations. This plan permits an effective intervention in order to minimize disruptions caused by sudden changes in member and client behaviour and potential disruptions in markets or economic conditions. The Credit Unions Act sets out the minimum level of liquidity that the Caisses populaires must maintain. This liquidity level is centrally managed by the Mouvement's treasury and is monitored on a monthly basis. Eligible securities must meet high security and negotiability standards. The securities portfolio in the liquidity fund comprises mostly securities issued by governments, public bodies and private companies with high credit ratings, i.e. R1-L or better.
86
Annual Report 2014
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued The Mouvement's treasury ensures stable sources of funding by type, source and maturity. The following table presents certain financial instruments by remaining contractual maturity:
2014 Under 1 year Deposits Borrowings Bank overdraft Other financial liabilities Credit commitments Letters of credit Derivative instruments with net settlement Derivative instruments with gross settlement
$ 1,979,037 51,605 6,223 32,899 618,238 13,520
1 to 5 years $
940,288 22,201 24 -
731
412
2,344
-
Over 5 years $
6,404 -
Total $ 2,919,325 80,210 6,223 32,923 618,238 13,520
(1)
1,142
-
2,344
Over 5 years
Total
2013 Under 1 year Deposits Borrowings Other financial liabilities Credit commitments Letters of credit Derivative instruments with net settlement Derivative instruments with gross settlement
$ 1,894,372 85,096 38,921 477,389 13,929 (906) 4,015
1 to 5 years $
928,828 384 24 -
$
7,959 -
$ 2,823,200 93,439 38,945 477,389 13,929
4,835
-
3,929
-
-
4,015
MARKET RISK Market risk refers to the risk of changes in the fair value of financial instruments as a result of changes in parameters affecting this value such as interest rates, exchange rates, credit spreads and their volatility. The Mouvement is mainly exposed to interest rate risk through positions related to its traditional financing and deposit-taking activities. Interest rate risk management The Mouvement is exposed to interest rate risk, which represents the potential impact of interest rate fluctuations on net financial income and the economic value of its equity.
Combined financial statement
87
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued Dynamic and prudent management is applied to optimize net financial income while minimizing the negative impact of interest rate movements. Simulations are used to measure the impact of different variables on net financial income and the economic value of equity. The assumptions used in the simulations are based on an analysis of historical data and the impact of different interest rate conditions on the data, and concern changes in the structure of the statement of financial position, member behaviour and pricing. The Mouvement's investment committee is responsible for analyzing and adopting the global matching strategy in order to have proper risk management. The following table presents the potential impact, at year end, of a sudden and sustained 1% increase or decrease in interest rates (before income taxes) on the Mouvement's surplus earnings and equity:
2014 $
Impact of an increase Impact of a decrease
2013
565 (584)
$
(872) 957
The extent of the interest rate risk depends on the gap between assets, liabilities and offstatement of financial position instruments. The situation presented reflects the position as at that date, and may change depending on members始 behaviour, the interest rate environment and the strategies adopted by the Mouvement's investment committee. The tables below succintly show the matching of the maturities of the Mouvement's assets and liabilities at year end.
2014 Net gap on the statement of financial position Non interest rate-sensitive items Interest rate-sensitive items Floating rate Fixed rate - 0 to 12 months Fixed rate - 1 to 5 years Fixed rate - over 5 years
88
Annual Report 2014
$(1,315,469) 456,840 460,328 151,720 239,273
Impact of derivative instruments $
(672,600) 673,100 (500)
Total gap $(1,315,469) 456,840 (212,272) 824,820 238,773
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued
2013 Net gap on the statement of financial position Non interest rate-sensitive items
$(1,256,624)
Interest rate-sensitive items Floating rate Fixed rate - 0 to 12 months Fixed rate - 1 to 5 years Fixed rate - over 5 years
639,304 316,476 159,758 144,463
Impact of derivative instruments $
(710,425) 710,425 -
Total gap $(1,256,624) 639,304 (393,949) 870,183 144,463
The net gap position on the statement of financial position is based on maturity dates or, if closer, the interest rate revision dates of fixed-rate assets and liabilities. This gap position represents the difference between the total assets and the total liabilities and equity for a given period. The above tables show year end balances, except in the case of certain non interest ratesensitive assets and liabilities for which the average monthly balance is provided as it is used for managing sharply fluctuating daily balances. The impact attributable to derivatives represents the cumulative net notional amount related to interest rate swaps used to control interest rate risks. At year end, the conditions for these swaps were such that they had offsetting impacts for some periods reported in the table. Swaps are transactions under which two parties exchange fixed and variable rate payments, based on a notional amount. A positive total gap for a given period indicates that a sustained rise in interest rates would have the effect of increasing the net financial income of the Mouvement, while a sustained decline in interest rates would decrease net financial income. The reverse occurs when the sensitivity gap is negative. Foreign exchange risk management Foreign exchange risk arises when the actual or expected value of assets denominated in a foreign currency is higher or lower than that of liabilities denominated in the same currency. Certain components have adopted specific policies to manage foreign exchange risk, notably by limiting the gap between the assets and liabilities denominated in U.S. dollars. Certain components use foreign exchange contracts to help them match their assets and liabilities in U.S. dollars. However, the Mouvement始s exposure to this risk is limited because the majority of its transactions are conducted in Canadian dollars. At year end, the Mouvement has contracts to buy $18.0 million (2013 - $15.0 million) in U.S. dollars.
Combined financial statement
- 52 -
89
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 27.
Financial instrument risk management - continued The statement of financial position includes the following amounts in Canadian dollars with respect to financial assets and liabilities with cash flows denominated in U.S. dollars:
2014 $
Cash Securities Loans Other assets Deposits
4,220 10,311 26 7 28,043
2013 $
6,985 7,292 39 6 25,221
INSURANCE AND REINSURANCE RISK In the normal course of operations, the Mouvement is exposed to insurance risk. This risk represents the risk that the initial pricing is or will become insufficient; it arises from the selection of risks, from claims settlement and from contractual clause management. The Mouvement attempts to limit the risk of loss to which it is exposed with regards to a single insured or a catastrophic event affecting many insureds and to recover a portion of the claims paid by means of reinsurance agreements. In the event that the reinsurers are not able to honour their contractual obligations, the Mouvement is liable for contingent risks related to retrocession. Reinsurance is arranged primarily with a single reinsurer. This reinsurer is rated AA- by the credit-rating agency Standard & Poor's. Note 28.
Capital management The Mouvement's capital is composed of its equity and the collective allowance for credit losses. The capital management goal of the Mouvement is to ensure that a sufficient level of high-quality capital is maintained in order to preserve flexibility for its development, to maintain a favourable credit rating and to maintain the confidence of depositors and financial markets. Caisses populaires Capital management is the responsibility of the Caisse populaires' board of directors. In accordance with the Credit Unions Act, a Caisse populaire must maintain a minimum amount of capital corresponding to 5% of its total assets. The regulatory capital of the Caisses populaires, which is composed of equity and the collective allowance for credit losses, represents 8.7% of total assets (2013 - 8.4%). The stabilization preferred shares issued by certain Caisses populaires to the Office de stabilisation are not included in the regulatory capital because they are eliminated in the combined financial statements of the Mouvement. In addition to the regulatory capital maintained by the Caisses populaires, the Office de stabilisation maintains a stabilization fund in accordance with the Credit Unions Act in order to protect its member Caisses populaires against financial losses and insolvency and to provide them with the necessary financial assistance for the purposes of stabilization. At year end, the balance of this fund is $98.7 million (2013 - $92.4 million).
90
Annual Report 2014
- 53 -
Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements
For the year ended December 31, 2014 (in thousands of dollars) Note 28.
Capital management - continued Fédération The Fédérationʼs objective is to maintain a capitalization ratio of 5% of its assets. At year end, its capitalization ratio is 7.3% (2013 - 7.1%). One of the Fédérationʼs subsidiaries, Acadia Financial Services Inc., is subject to externally imposed capital requirements. It manages its capital in such a way as to respect the regulatory requirements imposed by the Mutual Fund Dealers Association of Canada. Acadia Life Under the Insurance Companies Act (Act), federal life insurance companies are required to maintain sufficient capital. In addition, the Act requires that companies that operate branches in Canada maintain a sufficient excess of assets over liabilities. The professional standards of the CIA require that the designated actuary perform annually a dynamic review of capital sufficiency. This review highlights to management the evolution of the surplus and the risks to the company's solvency. This process requires the actuary to analyze and project, using scenarios, trends in the company's financial situation, considering the current circumstances, its recent past and its business plan. Within this process, regulatory formulas are used as standards for capital sufficiency. Currently, the required minimum continuing capital and surplus requirement (MCCSR) on available capital is 120%. However, the Office of the Superintendent of Financial Institutions Canada (OSFI) and the New Brunswick Superintendent of Insurance expect that each institution will establish and maintain a target MCCSR ratio of at least 150%. The minimum MCCSR threshold set by Acadia Life is 200%. However, in accordance with the strategic planning of the insurance company, the MCCSR target is 250% in order to take into consideration market volatility and economic conditions, innovations within the industry, trends in business combinations and changes occurring internationally. This target is revised every three years or as needed if changes occur in the market or in legislation. At year end, Acadia Life's MCCSR is 312.6% (2013 - 400.4 %). Mouvement At year end, the Mouvement's capitalization ratio is 10.5% (2013 - 10.4%).
Note 29.
Comparative figures Certain comparative figures have been reclassified to conform with the presentation used in the current year.
- 54 -
Combined financial statement
91
92
Annual Report 2014
Board of Directors and Management Fédération des caisses populaires acadiennes From left to right Roland T. Cormier, Director Southeast
André Chouinard, Director Northwest
Lloyd Plourde, Director Northwest
David Losier, Vice-President and CFO
Pierre-Marcel Desjardins,
Camille H. Thériault,
Chairman and Director Southeast
President and CEO
Hugues Thériault, Director Northeast
Denis Laverdière,
Elmo Caissie, Director Southeast Gilles Godin, Director Northeast Philippe Ferguson, Director Northeast Rolland LeBouthillier, Vice-President and COO Office
Simonne Godin, Corporate Secretary
Vice-President and COO
Allain Santerre, Director Northwest Hermel Chiasson, Director Northeast Éric Aubé, Executive Director Communications and Strategic Planning
Guy J. Richard, Vice Chair and Director Southeast Maurice Picard, Director Northwest
Board of Directors and Management
93
FĂŠdĂŠration des caisses populaires acadiennes Summary consolidated financial statements as of December 31, 2014
INDEPENDENT STATEMENTS
AUDITORS'
REPORT
ON
THE
SUMMARY
CONSOLIDATED
FINANCIAL
To the directors of La Fédération des Caisses Populaires Acadiennes Limitée The accompanying summary consolidated financial statements, which comprise the consolidated statement of financial position as at December 31, 2014 and the consolidated statements of income, comprehensive income and changes in equity for the year then ended, are derived from the audited consolidated financial statements of LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2014. We expressed an unmodified audit opinion on those consolidated financial statements in our auditors' report dated March 13, 2015. The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE. Management's responsibility for the summary consolidated financial statements Management is responsible for the preparation of a summary of the audited consolidated financial statements. Auditors' responsibility Our responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, "Engagements to Report on Summary Financial Statements." Opinion In our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2014 are a fair summary of those financial statements, in accordance with International Financial Reporting Standards.
March 13, 2015 Dieppe, New Brunswick
Chartered Professional Accountants
Summary consolidated financial statements
95
LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31,
2014
ASSETS Cash and deposits with other financial institutions
$
13,152,431
2013 $
20,158,432
Securities
279,371,721
313,218,463
Loans Affiliated caisses Residential mortgages Students Other related parties
18,163,548 282,704,432 1,171,394 -
39,439,912 178,794,526 1,309,531 3,819,162
302,039,374
223,363,131
14,509,439 3,356,086 6,702,816 2,055,742
16,642,631 3,731,210 7,027,945 1,866,263
26,624,083
29,268,049
$ 621,187,609
$ 586,008,075
$ 466,661,970
$ 420,515,335
6,222,678 71,867,241 21,977,150 474,202
85,000,000 27,184,311 272,200
100,541,271
112,456,511
8,716,488
11,651,786
575,919,729
544,623,632
21,788,325 23,479,555
20,067,321 21,317,122
45,267,880
41,384,443
$ 621,187,609
$ 586,008,075
Other assets Accrued interest, receivables and other assets Deferred income taxes Capital assets Intangible assets
LIABILITIES Deposits Other liabilities Bank overdraft Borrowings Accrued interest, payables and other liabilities Promissory notes
Employee benefit liability
EQUITY Share capital Undistributed surplus earnings
FOR THE BOARD OF DIRECTORS
Pierre-Marcel Desjardins Chair
96
Annual Report 2014
Guy J. Richard Vice Chair
LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE CONSOLIDATED STATEMENT OF INCOME Year ended December 31, FINANCIAL INCOME Cash Securities Loans - residential mortgages Loans - affiliated caisses Loans - students Loans - other
2014 $
FINANCIAL EXPENSES Deposits - affiliated caisses Deposits - other Borrowings and other financial expenses
128,639 9,326,668 7,680,117 534,524 77,808 50,048
2013 $
69,237 8,672,175 5,116,285 844,824 88,088 47,616
17,797,804
14,838,225
6,954,765 363,392 4,336,245
6,880,672 356,140 2,192,737
11,654,402
9,429,549
NET FINANCIAL INCOME RECOVERY ON IMPAIRED LOANS
6,143,402 (33,135)
5,408,676 (387,291)
NET FINANCIAL INCOME AFTER RECOVERY ON IMPAIRED LOANS
6,176,537
5,795,967
15,140,062 19,583,234
16,115,305 20,249,222
34,723,296
36,364,527
20,816,572 17,211,233
21,589,725 16,628,273
38,027,805
38,217,998
SURPLUS EARNINGS BEFORE OTHER ITEMS Other items
2,872,028 884,556
3,942,496 338,334
SURPLUS EARNINGS BEFORE TAXES INCOME TAXES
3,756,584 909,672
4,280,830 1,253,111
SURPLUS EARNINGS BEFORE MEMBER DIVIDENDS
2,846,912
3,027,719
OTHER INCOME Contributions from affiliated caisses Other
EXPENSES OTHER THAN FINANCIAL EXPENSES Wages and benefits Other
Member dividends Income taxes recovered on member dividends
SURPLUS EARNINGS FOR THE YEAR
$
868,064 (234,377)
1,082,762 (281,518)
633,687
801,244
2,213,225
$
2,226,475
Summary consolidated financial statements
97
LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December 31,
SURPLUS EARNINGS FOR THE YEAR
$
2,213,225
2013
$
2,226,475
OTHER COMPREHENSIVE INCOME Item that will not be reclassified to the consolidated statement of income Change in the employee benefit liability Change during the year Deferred taxes relating to temporary differences and deferrals Deferred taxes relating to the change in tax rate
361,817 (97,691) 206,300
7,676,799 (1,941,402) 732,366
Total of other comprehensive income, net of taxes
470,426
6,467,763
COMPREHENSIVE INCOME
$
2,683,651
$
8,694,238
SURPLUS EARNINGS FOR THE YEAR RELATED TO: Members Non-controlling interests
$
2,213,225 -
$
2,221,390 5,085
$
2,213,225
$
2,226,475
$
2,683,651 -
$
8,670,513 23,725
$
2,683,651
$
8,694,238
COMPREHENSIVE INCOME RELATED TO: Members Non-controlling interests
98
2014
Annual Report 2014
LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF CHANGES IN EQUITY
Year ended December 31, 2014
Undistributed Total surplus equity related earnings to members $ $
Share capital $ Balance, beginning of year
21,317,122
41,384,443
-
41,384,443
-
2,213,225
2,213,225
-
2,213,225
-
2,683,651
-
(702,356)
21,788,325
23,479,555
-
Other comprehensive income
Share capital issued
Dividends
1,721,004 -
Income taxes recovered on dividends Refundable dividend tax on hand Balance, end of year
Total equity $
20,067,321
Surplus earnings for the year
Comprehensive income
Non-controlling interests $
470,426
470,426
-
2,683,651
-
470,426
2,683,651
-
1,721,004
-
1,721,004
189,636 (8,498)
189,636 (8,498)
-
189,636 (8,498)
(702,356)
-
45,267,880
-
(702,356)
45,267,880
Year ended December 31, 2013
Undistributed surplus earnings $
Share capital $ Balance, beginning of year Surplus earnings for the year
Other comprehensive income
Comprehensive income Share capital issued
Dividends on share capital
Income taxes recovered on dividends Refundable dividend tax on hand
Redemption of non-controlling interests Balance, end of year
Total equity related to members $
Non-controlling interests $ (23,503)
31,374,132
5,085
2,226,475
Total equity $
18,267,301
13,130,334
31,397,635
-
2,221,390
2,221,390
-
8,670,513
-
(639,356)
-
(10,602)
(10,602)
(177)
(10,779)
20,067,321
21,317,122
41,384,443
-
41,384,443
-
1,800,020 -
-
6,449,123
6,449,123
18,640
8,670,513
23,725
(639,356)
-
-
1,800,020
166,233
166,233
-
-
-
(45)
6,467,763 8,694,238
1,800,020 (639,356)
166,233 (45)
Summary consolidated financial statements
99
Acadia Life Summary consolidated financial statements as of December 31, 2014
INDEPENDENT STATEMENTS
AUDITORS'
REPORT
ON
THE
SUMMARY
CONSOLIDATED
FINANCIAL
To the directors of Acadia Life The accompanying summary consolidated financial statements, which comprise the statement of financial position as at December 31, 2014 and the consolidated statements of income, comprehensive income and changes in equity for the year then ended, are derived from the audited consolidated financial statements of Acadia Life for the year ended December 31, 2014. We expressed an unmodified audit opinion on those consolidated financial statements in our auditors' report dated April 14, 2015. The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of Acadia Life. Management's responsibility for the summary consolidated financial statements Management is responsible for the preparation of a summary of the audited consolidated financial statements. Auditors' responsiblity Our responsiblity is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standards (CAS) 810, "Engagements to Report on Summary Financial Statements". Opinion In our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of Acadia Life for the year ended December 31, 2014 are a fair summary of those financial statements, in accordance with International Financial Reporting Standards. Emphasis of matter We draw attention to the fact that these summary consolidated financial statements have been amended since their initial issuance. Subsequent to the issuance of the summary consolidated financial statements on March 13, 2015, the company realized that the provision for current income taxes was understated by $1,098,157. As a result, the company corrected the consolidated financial statements and these summary consolidated financial statements replace the previously issued summary consolidated financial statements. As a result, this independent auditors' report replaces our report dated March 13, 2015. Our opinion is not qualified in respect of this matter.
April 14, 2015 Dieppe, New Brunswick
Chartered Professional Accountants
Summary consolidated financial statements
101
ACTUARIAL OPINION I have valued the policy liabilities and reinsurance recoverables on the statement of financial position of Acadia Life (on a consolidation basis) as at December 31, 2014 and their change in the statement of income (on a consolidation basis) for the year then ended, in accordance with accepted actuarial practice in Canada, including selection of appropriate assumptions and methods. In my opinion, the amount of policy liabilities net of reinsurance recoverables makes appropriate provision for all policyholder obligations and the consolidated financial statements fairly present the result of the valuation.
Jacques Tremblay, FICA Toronto, Canada February 28, 2015
102
Annual Report 2014
ACADIA LIFE CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, ASSETS Investments Money market securities Bonds Investment funds Equities Asset-backed long-term notes Cash Receivables Reinsurance assets Intangible assets Deferred income tax asset
LIABILITIES Insurance contract liabilities Actuarial liabilities Provision for claims under settlement and claims not received Investment contract liabilities Patronage allocations and bonuses payable Payables and accrued expenses Due to related entities, without interest Income taxes payable Employee benefit liability
SHAREHOLDER'S EQUITY Capital stock Accumulated other comprehensive income Undistributed surplus
2014
$
4,372,016 163,302,757 15,602,055 12,224,359 31,049
2013
$
6,139,492 69,369,114 11,662,670 8,355,684 945,915
195,532,236 662,735 2,210,716 6,719,398 480,028 9,691
96,472,875 2,771,046 1,798,794 5,694,045 380,501 119,963
$ 205,614,804
$ 107,237,224
$ 157,569,023 505,703
$
62,997,244 505,319
158,074,726 316,701 2,002,116 1,132,598 74,281 538,780 331,951
63,502,563 346,024 2,163,785 828,763 135,209 1,207,611 544,884
162,471,153
68,728,839
15,887,118 1,760,933 25,495,600
15,887,118 2,658,883 19,962,384
43,143,651
38,508,385
$ 205,614,804
$ 107,237,224
FOR THE BOARD OF DIRECTORS
Pierre-Marcel Desjardins Chair
Elmo Caissie Chair, Audit Committee
Summary consolidated financial statements
103
ACADIA LIFE CONSOLIDATED STATEMENT OF INCOME Year ended December 31,
REVENUE Gross insurance and annuity premiums Premiums ceded to reinsurers
2014
$
Net insurance and annuity premiums Net investment income Management fees Commission revenue
OPERATING EXPENSES Gross insurance benefits Insurance benefits ceded to reinsurers Annuity benefits Change in insurance contract liabilities Change in investment contract liabilities Change in reinsurance assets Wages and other operating expenses
2013
92,993,409 $ (1,909,453) 91,083,956 27,560,350 326,207 1,639,252
16,657,430 (11,008,091) 325,380 1,709,519
120,609,765
7,684,238
6,518,038 (997,980) 2,267,243 94,571,779 (29,323) (1,025,353) 8,253,413
6,183,499 (1,422,327) 553,197 (13,107,218) (144,217) 1,151,312 8,318,179
109,557,817
1,532,425
11,051,948
6,151,813
2,002,116
2,163,785
INCOME BEFORE TAXES
9,049,832
3,988,028
INCOME TAXES Current income taxes Deferred taxes relating to temporary differences and deferrals Deferred taxes relating to the change in tax rate
2,316,329 122,560 -
OPERATING INCOME BEFORE PATRONAGE ALLOCATIONS AND BONUSES Patronage allocations and bonuses to the caisses
945,954 70,097 (2,228)
2,438,889 NET INCOME
104
18,806,666 (2,149,236)
Annual Report 2014
$
6,610,943
1,013,823 $
2,974,205
ACADIA LIFE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December 31,
NET INCOME
2014
$
OTHER COMPREHENSIVE INCOME Item that will not be reclassified to the consolidated statement of income Change in the employee benefit liability Change during the year Deferred taxes relating to temporary differences and deferrals Deferred taxes relating to the change in tax rate Total of the item that will not be reclassified to the consolidated statement of income Items that will be reclassified to the consolidated statement of income Unrealized changes in fair value on available-for-sale securities Change during the year Income taxes
Reclassified to income Realized gains on available-for-sale securities Income taxes
Total items that will be reclassified to the consolidated statement of income Total other comprehensive income, net of taxes COMPREHENSIVE INCOME
$
6,610,943
2013
$
2,974,205
(45,511) 12,288 -
389,782 (105,241) 19,646
(33,223)
304,187
636,228 (171,781)
2,698,228 (716,557)
464,447
1,981,671
(1,817,562) 455,165
(30,336) 7,890
(1,362,397)
(22,446)
(897,950)
1,959,225
(931,173)
2,263,412
5,679,770
$
5,237,617
Summary consolidated financial statements
105
ACADIA LIFE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended December 31, 2014
Balance, beginning of the year
$
Capital stock
Accumulated other comprehensive income
15,887,118
$
2,658,883
Undistributed surplus
$
19,962,384
Total equity
$
38,508,385
Net income Other comprehensive income
-
(897,950)
6,610,943 (33,223)
6,610,943 (931,173)
Comprehensive income Dividends
-
(897,950) -
6,577,720 (1,044,504)
5,679,770 (1,044,504)
Balance, end of the year
$
15,887,118
$
1,760,933
$
25,495,600
$
43,143,651
Year ended December 31, 2013 Accumulated other comprehensive income
Capital stock
Balance, beginning of the year
15,887,118
$
699,658
$
17,562,276
Total equity
$
34,149,052
Net income Other comprehensive income
-
1,959,225
2,974,205 304,187
2,974,205 2,263,412
Comprehensive income Dividends
-
1,959,225 -
3,278,392 (878,284)
5,237,617 (878,284)
Balance, end of the year
106
$
Undistributed surplus
Annual Report 2014
$
15,887,118
$
2,658,883
$
19,962,384
$
38,508,385
Board of Directors and Management Office de stabilisation de la Fédération des caisses populaires acadiennes
From left to right Gary Donald Long,
Janice Lirette Evers, Caisses populaires
appointed by the Board of Fédération
members’ representative
Simonne Godin, Corporate Secretary
Camille H. Thériault, President and CEO
Roger Lessard, Caisses populaires members’ representative
Micheline Doiron, appointed by the Financial and Consumer Services Commission
Marcel Lanteigne, Chairman and
Luc St-Jarre, appointed by the Board of Fédération
Caisses populaires members’ representative
Gilles Haché, appointed by the Financial and Consumer Services Commission
Rolland LeBouthillier, Vice-President and COO Office
Board of Directors and Management
107
Office de stabilisation de la FĂŠdĂŠration des caisses populaires acadiennes Summary financial statements as of December 31, 2014
INDEPENDENT AUDITORS' REPORT ON THE SUMMARY FINANCIAL STATEMENTS To the Directors of l'Office de Stabilisation de la Fédération des Caisses populaires acadiennes limitée The accompanying summary financial statements, which comprise the statement of financial position as at December 31, 2014 and the statements of income, comprehensive income and changes in net assets for the year then ended, are derived from the audited financial statements of l'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2014. We expressed an unmodified audit opinion on those financial statements in our auditors' report dated February 20, 2015. The summary financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of l'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE. Management's responsibility for the summary financial statements Management is responsible for the preparation of a summary of the audited financial statements. Auditors' responsibility Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, "Engagements to Report on Summary Financial Statements." Opinion In our opinon, the summary financial statements derived from the audited financial statements of l'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2014 are a fair summary of those financial statements, in accordance with International Financial Reporting Standards.
February 20, 2015 Dieppe, New Brunswick
Chartered Professional Accountants
Summary financial statements
109
OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF FINANCIAL POSITION December 31,
2014
2013
ASSETS $
Cash Other assets Accrued investment income Recoverable income taxes Other receivables Prepaid expenses
725,438
$
1,324,082
530,327 4,017 10,969 1,115
518,334 94,915 2,391 4,805
546,428
620,445
Securities
97,121,983
88,428,988
Investment in stabilization preferred shares
10,631,700
13,143,609
7,688
11,797
$ 109,033,237
$ 103,528,921
$
$
Capital assets
LIABILITIES Payables and accrued liabilities Deferred income taxes Long-term debt Employee benefit liability
715,148 910,919 5,433,514 519,940
1,672,604 428,732 5,327,486 716,810
7,579,521
8,145,632
2,731,875 95,179,756 3,542,085
2,948,302 90,417,837 2,017,150
101,453,716
95,383,289
$ 109,033,237
$ 103,528,921
NET ASSETS Appropriated net assets Unappropriated net assets Accumulated other comprehensive income
ON BEHALF OF THE BOARD
Marcel Lanteigne Chair
110
Annual Report 2014
Janice Lirette Evers Chair, Audit Committee
OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF INCOME Year ended December 31,
REVENUE Investment income Contribution income Revenue - other
2014
$
EXPENSES Services purchased from the Fédération General and administration expenses Expense related to the fair value of the long-term debt
INCOME BEFORE TAXES INCOME TAXES Current Deferred
NET INCOME
$
2013
3,239,049 4,713,292 -
$
3,170,286 4,578,905 24,400
7,952,341
7,773,591
1,293,713 2,034,143 216,427
1,404,516 2,032,480 122,088
3,544,283
3,559,084
4,408,058
4,214,507
(4,017) (10,137)
(54,907) (14,799)
(14,154)
(69,706)
4,422,212
$
4,284,213
Summary financial statements
111
OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF COMPREHENSIVE INCOME Year ended December 31,
NET INCOME
2014
$
OTHER COMPREHENSIVE INCOME Item that will not be reclassified to the statement of income Changes in the employee benefit liability Change during the year Income taxes Total of the item that will not be reclassified to the statement of income Items that will be reclassified to the statement of income Unrealized changes in fair value on available-for-sale securities Change during the period Income taxes
Reclassified to income Realized gains on available-for-sale securities Income taxes
Total of items that will be reclassified to the statement of income Total of other comprehensive income, net of income taxes COMPREHENSIVE INCOME
112
Annual Report 2014
$
2013
4,422,212
$
4,284,213
160,104 (36,824)
332,028 (76,366)
123,280
255,662
1,981,464 (455,737)
(2,578,588) 531,874
1,525,727
(2,046,714)
(1,029) 237
(200) 44
(792)
(156)
1,524,935
(2,046,870)
1,648,215
(1,791,208)
6,070,427
$
2,493,005
OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF CHANGES IN NET ASSETS
Year ended December 31, 2014 Appropriated net assets
Balance at beginning of year
$
2,948,302
Net income Other comprehensive income
$
-
Comprehensive income Transfers Balance at end of year
Unappropriated net assets
(216,427) $
2,731,875
$
90,417,837
Accumulated other comprehensive income
$
2,017,150
Total net assets
$
95,383,289
4,422,212 123,280
1,524,935
4,422,212 1,648,215
4,545,492 216,427
1,524,935 -
6,070,427 -
3,542,085
$ 101,453,716
95,179,756
$
Year ended December 31, 2013 Appropriated net assets
Balance at beginning of year
$
Net income Other comprehensive income
3,070,390
$
-
Comprehensive income Transfers Balance at end of year
Unappropriated net assets
(122,088) $
2,948,302
$
85,755,874
Accumulated other comprehensive income
$
4,064,020
Total net assets
$
92,890,284
4,284,213 255,662
(2,046,870)
4,284,213 (1,791,208)
4,539,875 122,088
(2,046,870) -
2,493,005 -
90,417,837
$
2,017,150
$
95,383,289
Summary financial statements
113
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