Credit Union Annual Report

We’re very lucky to live in this corner of the world. It’s hard to beat our mix of stunning
scenery, friendly communities and healthy lifestyles. Today that mix includes changes in
technology that connect us to each other faster, better and more productively, putting
the world at our fingertips. Now we can shrug off those snowbound winter days that
close roads and shut down airports. Or enjoy a guilt-free summer hike through the forest
without losing touch. Wherever we are, we’re connected. To our families. To our friends.
And now more than ever, to our finances.

Web 2.0 refers to new, easy-to-use and lightning-fast content delivery systems that let
people effortlessly share products, services and ideas. Improved interactivity allows
everyone equal access to opportunities and advantages, an example of how change
benefits all of us. The freedom of wireless connectivity. The community development
potential of social networking. The convenience of online banking. The efficiency of a
PDA, which – literally and figuratively – puts change in your pocket.

At Kootenay Savings, we see the clarity, choices and personal control offered by Web 2.0
as an extension of our commitment to friendly, straightforward and helpful customer
service. But it can’t replace seeing you unplugged and in person. Our doors are always
open, and we’re always happy to have you drop by. To us, new technology is a way to
enhance our relationship with you and vice versa. That’s why we think it’s essential to
invest in change. According to the past year’s increased profits, investment growth and
community involvement, the benefits of change are paying off.

Welcome to Annual Report 2.0.

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Money For Nothing
Dire Straits.... Brothers in Ar

About Us
My Network
13 branches
40,000 members
We’re committed to helping our
237 employees
members achieve their financial goals
while building healthy communities Part of the BC Credit Union network:
across the Kootenays. 51 credit unions
347 branches
OUR VALUES 137 communities
Ethical & Caring Behaviour
Constructively Challenge the Status Quo Ding Free Close-Knit
Service Over Self Banking Friendly Staff Community
Business Excellence
Financially Responsible
Teamwork
Responsible to Community

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My Credit Union

article discussion edit archives

Kootenay Savings Credit Union
Contents From the free encyclopedia
1 Serving members
by serving the Serving members by
community serving the community
2 Connecting
Ever since Kootenay Savings was
members at the
speed of change
founded in 1969, we’ve focused
on the development of efficient
3 Taking your goals and effective products, tools and
into account
services that make it easier for
4 Making your life you to manage your finances.
easier We want our members to plan
5 External links well, save wisely and make Kootenay Savings’ Corporate Office in Trail, BC.
investments tailored to improving
Related Definitions their lives and achieving their goals. We offer all the options of a bank,
and better rates. But unlike a bank, Kootenay Savings puts profits
Credit Union back into your pocket, not the pockets of strangers. Traditional
British Columbia
financial institutions cater to a select group of shareholders. At
Kootenay Savings, every member is a shareholder.
Kootenays
Profit sharing As a Credit Union, our operations are based on the tried and true
Co-operative philosophy that what goes around, comes around. We all profit when
everyone shares a better quality of life. Supporting the community is
Community banking
good for business, and it’s reciprocal. Perhaps that’s one of the
reasons why a healthy number of local businesses joined us or were
started up by our members in 2006. The value of directing profits into
the community is tangible. Last year, as in previous years, Kootenay
Savings contributed a meaningful percentage of profits to a wide
Search range of activities, initiatives and associations across the Kootenays.

Join | Create Account Connecting members at the speed of change
Web 2.0 has shown us that the ability to share has other advantages.
Enjoy the benefits By communicating information clearly and providing choices you can
along with over customize, Kootenay Savings helps members get a handle on their
40,000 members! finances and on their future. In the same way, sophisticated new
content-delivery systems provide instant access to purposeful advice
and like-minded people online. Today, being wired doesn’t mean being
frenzied; it means being friends.

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My Credit Union


Toolbox From the free encyclopedia
For details, or to
access these tools, [cont’d...] So last year we made our open-door policy on the Web
visit www.kscu.com. even more welcoming. We put the login for Kootenay@Home right on
MoneyWorks the home page, integrating the Kootenay Savings site and online
MemberLine banking. Now you can transfer funds between member accounts and to
Kootenay@Home other financial institutions, and set up a list of vendors online so that you
Flexible Choice can pay bills without visiting your branch. It’s easier than ever for
Mortgages members to connect, communicate and control their finances whenever
MemberCard they feel like it, without having to leave home or work. Or, for that matter,
Choice Rewards the hiking trail, ski slope or that sweet spot along the stream where the
Global Payment fish are really biting.
MasterCard
RRSPs On February 1, 2007, our 2006 merger of insurance services with East
RESPs Kootenay Community Credit Union and Nelson & District Credit Union
RRIFs took effect. Created in the cooperative spirit of Credit Unions,
Mutual Funds Kootenay Insurance Services Ltd. offers members an expanded and
Segregated Funds competitive selection of exceptional insurance products and services.
Life Insurance
Critical Illness Taking your goals into account
Insurance Whatever tomorrow has in store, we’ll help you prepare today.
Disability Insurance Kootenay Savings everyday banking accounts promise good rates of
Home Insurance return and convenient chequing account privileges. And our
Auto Insurance MemberCard gives members convenient access to 2,100 full-service
Travel Insurance ATMs across Canada, without paying additional surcharges.

Whatever your needs, there’s an account just right for you: START
or STASH Accounts for kids outgrowing their piggybanks; STUDY
Accounts for students who want to make the grade; reduced-fee
Search
SENIORS Accounts for retirees who want to enjoy life worry-free;
FREEDOM, PERSONAL and ALL-IN-ONE Accounts for individuals—
Join | Create Account because we’re all different; BUSINESS Accounts for companies of all
sizes, from sole proprietorships to large companies. We can help you
Join a network that decide the best account to reach your goals.
has been serving
members for 40 years!

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My Credit Union


Locations From the free encyclopedia
Credit Union
Castlegar [cont’d...] A Kootenay Savings
Edgewater account also gives you access
Fruitvale to a huge selection of investment
Invermere choices, loans and financing, like
Kaslo the Kootenay Savings Flexible
Kimberley Choice Mortgage. You get a
Nakusp great rate mortgage with flexible
New Denver terms, and use your home equity
Salmo for whatever you want. Our An idyllic Fall view of one of the many Kootenay
South Slocan comprehensive home, auto and communities, located in the lush Selkirk mountains.
Trail travel insurance products and
Waneta services from the experts at Kootenay Savings Insurance Services
Warfield have you covered. And members also benefit from our expert financial
advice and planning offered through Kootenay Savings MoneyWorks.
Moneyworks
Trail Making your life easier
Castlegar
At Kootenay Savings we’re committed to excellent customer service, starting
Kimberley
with convenience. We offer a wide variety of life-simplifying options that
Invermere
include line of credit privileges, overdraft protection, comprehensive
South Slocan
monthly statements, ATM access, free 24/7 online and telephone banking,
Insurance and free online images of cheques that have cleared your account.
Trail
Nelson Don’t worry, automation will never get in the way of our desire to
Cranbrook serve you with the personal touch. Even though we’ve got full VoIP
Crawford Bay technology, you’ll still get a warm greeting from our friendly receptionists
when you call. And smiles from our staff when you drop by.

External links
http://www.kscu.com
Search
http://www.peoplebeforeprofits.com
http://www.wyknet.com
Join | Create Account http://www.cucentral.ca

Your support keeps us

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KS members and employees share what’s new...

MONDAY, APRIL 2, 2007 RECENT POSTS
Kootenay Savings donates $500,000
>

> Employee Care
Based on 2006 earnings, Kootenay Savings distributed $3.8 Wear program donates
million in profits back to our members; profits that come $17,674 in 2006
from interest earned on deposits and paid on loans, as well as
a 4% dividend on membership and patronage shares. The best KS hands out 18
news of all is that we were able to contribute $500,000 to the
>

Kootenay Savings Community Foundation, which helps fund
bursaries worth $750
educational, health, social and economic non-profit projects
each to graduating
that benefit the communities served by Kootenay Savings.
students at 11 high
Since 2000, the Foundation has given a total of over $1
schools
million to a variety of initiatives. > Two Kootenay
posted by ksceobrenttremblay @ 10:03 am 3 comments high school students
receive KS Community
MONDAY, APRIL 2, 2007 Champions Bursaries
worth $1000 each
Keep up the good work
>

My husband and I packed up the kids and moved out here from > Kootenay Savings'
Toronto five years ago because we thought it would be a better new website serves
place to raise a family. Kootenay Savings has been a big part of members better
making that happen. It has supported our schools in so many
ways over the years. We think it’s great that KS partners with 3rd Annual
elementary schools on the annual student artwork calendar.
>

Our three kids were among the 1300 students who submitted
Kootenay Savings

masterpieces to be considered for this year’s calendar, Kootenay
Shinny Tournament
Kids Rock. And each school gets $500 for participating, to
draws kids from across
help pay for supplies, books or field trips. Thanks guys!
the region

posted by ksmember3122 @ 1:15 pm 5 comments

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KS members and employees share what’s new...

MONDAY, APRIL 2, 2007 ARCHIVES
The Career Development Initiative
>

> KS employees
I used to work at a bank where they were really big on volunteer hundreds
keeping customers happy, but not so much the employees.
It’s a whole different ballgame at Kootenay Savings. Here,
of hours in their
we’re part of a real community. I appreciate the credit union’s
communities
ongoing commitment to enhance our knowledge and skills,
like the new Career Development Initiative. This includes KS contributes
>

coaching, professional development and career mapping that tens of thousands in
gives us the tools to serve members better, and to move corporate sponsorships
forward with our careers.

posted by employeeintrail @ 3:01 pm 2 comments
> $44 million dollars
in profits given back to
members since 1992
MONDAY, APRIL 2, 2007
Dressing for community success
>

> Kootenay Business
Hi everyone from the KS in New Denver, where TGIF means Magazine readers
something different than it usually does. Here, as at all KS honour Kootenay
branches and offices, we look forward to Fridays because Savings with Best of
employees who want to contribute to the community each pay Business Awards
$1 for the privilege of wearing a KS “Care Wear” shirt. At the end
of the year, we decide which charity to support. This year, the
people at our branch raised $648 for the Canadian Cancer
> Kootenay Savings
Society. Over in Castlegar, $1,080 went to the Harvest Food
wins 4 prestigious AIME
Bank. Corporate office gave $2,556 to the Kootenay Robusters Awards, including one
dragon boat team, which paddles for breast cancer. Altogether, for the KS Flexible
the employees at Kootenay Savings donated $17,674 for a wide Choice Mortgage
range of non-profits that make us proud to live in the Kootenays. Campaign
posted by newdenveremployee @ 4:22 pm 10 comments

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My Email
ksmail
TO: members@kscu.com
FROM: ceo@kscu.com, boardchair@kscu.com
SUBJECT: Report from Board and Management

Through the dedicated efforts of our employees and with the support of members,
Kootenay Savings enjoyed another highly successful year. We were able to share our
success with members in the form of a 10 percent patronage dividend for the sixth
consecutive year, and with communities by way of a half million dollar contribution to
the Kootenay Savings Community Foundation. As a community-based and member-
owned financial institution, Kootenay Savings has a vested interest in the financial well-
being of both members and communities alike and our results this past year allowed us
to put more than a little change in your pocket.

We surpassed growth objectives in both loans and deposits, as member utilization of
Kootenay Savings continued to rise. The Credit Union, Kootenay Savings Insurance
Services and Kootenay Savings MoneyWorks all had exceptional financial results that
contributed to the overall profitability of the organization.

Technology is a key tool in the operation of Kootenay Savings – both from a service
delivery and an internal operating perspective. This past year saw the launch of a new
online banking platform that integrates our website with home banking. Member response
has been very favourable, and Kootenay Savings’ member utilization of online banking is
among the highest in the industry. Technology-based improvements were also made to
streamline paper-based processes and enhance internal management reporting systems.

Strategic planning is integral to the past and ongoing success of our organization. We
developed new Vision and Values statements in 2006, which are reflective of what we
stand for, and what behaviours we expect. We built new strategic initiatives around the
key areas by which we measure our success – financial performance, member
satisfaction, employee satisfaction and community involvement.

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My Email
ksmail
SUBJECT: Report from Board and Management <continued>

Our employees are our most important asset, and one of the most significant
undertakings last year was the Career Development Initiative. This program was
launched to enhance the skills and knowledge of employees at all levels of the
organization by working individually with each employee. We want our employees to
view their employment at Kootenay Savings as a career and not just a job. Not only will
our employees benefit so too will our members from the improved quality of advice and
information our employees are able to provide.

Kootenay Savings is a significant employer in our region, employing almost 240 people.
Employees give back to their communities in a variety of ways and have a vested interest
in the success of our organization and in the Kootenay region. Our employees are
committed to learning through an educational assistance program which pays for
external business-related education and has an uptake of over 70 percent. We will
continue to invest in our employees as we strive to be the best place to work in the
communities we serve.

In an ever-increasing competitive environment, we must look for cost-effective ways to
continue to enhance our services and product offerings. One way to accomplish this is
through the establishment of strategic alliances and partnerships. In recent years,
Kootenay Savings has established alliances with other Credit Unions and partners in
areas such as syndicated commercial lending, technology development and training.

In 2006, Kootenay Savings, along with Nelson & District Credit Union and East Kootenay
Community Credit Union approved the formation of Kootenay Insurance Services Ltd.
This new company, which is equally owned by the three partners, was established to own,
operate and grow our general insurance business. This partnership is a model of what
Credit Unions can do to compete effectively in the marketplace.

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My Email
ksmail

Kootenay Savings continued to play an active role in supporting our communities.
In 2006, the Kootenay Savings Community Foundation contributed over $84,000 to
community organizations for worthwhile projects. The Foundation also distributed
$29,000 by way of high school bursaries and contributions to college foundations.
Additionally, Kootenay Savings was very active in sponsoring youth organizations,
schools and community events.

Board members and employees actively volunteered for many community organizations,
boards and youth activities. As a community-based financial institution, community
involvement and support is a big part of our culture, and one of the many reasons for our
success. We will continue to focus on this important role that we play in building a
stronger region.

The benefits of change are indeed paying off. Led by a dedicated and talented Board and
management team, and supported by a phenomenal group of employees, Kootenay
Savings will continue to build on its strengths and we will fulfill our vision – to be the best
provider of financial services and the best place to work in the communities we serve.

Respectfully submitted,

Forrest Drinnan Brent Tremblay
CHAIR, BOARD OF DIRECTORS PRESIDENT & CEO

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2002 2003 2004 2005 2006

>
Capital
My Email
(thousands)

ksmail

$52,133
$48,701
$44,472
$41,231

$38,725
Download Financial Facts.xls (311K) preview below 2002 2003 2004 2005 2006

1 Profit sharing 3.8 million (10%)
Profit Shares
2 Assets 628 million Capital
(thousands)
(thousands)
3 Dollars under management 1.185 billion
4 Return on average assets 1.36%
5 Loan growth 14.4%

$3,792

$52,133
$3,736
$48,701
$3,400

$44,472
$3,001
$41,231

$2,925
$38,725
6 Deposit growth 4.6%
7 Community giving $186,390
8
2006 9 39% 2002 2003 2004 2005 2006

2005 10 Assets
(thousands)
2004 11 Deposits
Deposits
(thousands)
12 (thousands)
2003 P
13
$628,584
$597,271
$564,015

14
$541,894
$527,792

Deposit Growth $581,444
$562,408
$532,131

$581,444
$512,560

15
$562,408
$499,382

$532,131
$512,560
$499,382

2006 16 14.39%
2005 17
18 2002 2003 2004 2005 2006
2004 2002 2003 2004 2005 2006
19 2002 2003 2004 2005 2006
2003
20
Profit Shares
21 (thousands)
Loans
Capital L
22 (thousands) (thousands)

23
$510,149

24
$38,725 $3,792

$3,736
$3,400

$445,980
$3,001

$2,925

$386,871
$52,133

$370,652
$354,780
$48,701

25
$44,472
$41,231

26
27
28 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
2002 2003 2004 2005 2006
29
D
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Profit Shares
(thousands)
$3,792

$3,736
$3,400

$3,001

$2,925

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My Finances
kswords
Management’s_Responsibility_to_Members.doc
1 2 3 4 5 6 7

The consolidated financial statements and all other information contained in the Annual
Report are the responsibility of management and have been approved by the Board of
Directors. The consolidated financial statements have been prepared by management in
accordance with the requirements of the Credit Union Incorporation Act and appropriate
generally accepted accounting principles in Canada and include amounts based on informed
judgments and estimates of the expected effects of current events and transactions. Financial
information presented elsewhere in this Annual Report is consistent with that in the
consolidated financial statements.

In meeting its responsibility for the reliability of financial data, management relies on the
comprehensive internal accounting, operating and system controls. Controls include an
organizational structure providing for effective segregation of responsibilities, delegation of
authority and personal accountability, and careful selection and training of personnel; the
application of accounting and administrative policies and procedures necessary to ensure
adequate internal control over transactions, assets and records, as well as a continued program
of extensive internal audits. These controls are designed to provide reasonable assurance that
financial records are reliable for preparing financial statements and maintaining accountability
for assets, and that assets are safeguarded against unauthorized use or disposition. The Board
of Directors has appointed an Audit Committee, comprised of four Directors, to review with
management and auditors the annual financial statements prior to submission to the Board of
Directors for final approval.

PricewaterhouseCoopers Canada LLP has been appointed by the membership as independent
auditors to examine and report on the consolidated financial statements and their report follows this
one. They have full and free access to the internal audit staff and the Audit Committee of the Board.

Brent Tremblay Ron Johnston
PRESIDENT & CEO CFO & VP: FINANCE

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My Finances
kswords
Auditors_Report.doc
1 2 3 4 5 6 7

To the Members of Kootenay Savings Credit Union:

We have audited the consolidated balance sheet of Kootenay Savings Credit Union as at
December 31, 2006 and the consolidated statements of income, retained earnings and cash
flows for the year then ended. These financial statements are the responsibility of the Credit
Union’s management. Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects,
the financial position of the Credit Union as at December 31, 2006 and the results of its
operations and its cash flows for the year then ended in accordance with Canadian generally
accepted accounting principles.

The consolidated financial statements as at December 31, 2005, and for the year then ended,
prior to an adjustment for the accounting changes as described in note 3 to the consolidated
financial statements, were audited by other auditors who expressed an opinion without
reservation on those statements in their report dated February 10, 2006.

Chartered Accountants
February 22, 2007

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My Finances
ksnumbers
Consolidated_Balance_Sheet.xls
A B C
1 For the Year Ended December 31, 2006
2 (000’s Canadian Dollars) 2006 2005
3 (Restated - Note 3)
4 ASSETS
5 Cash and investments (Note 4) $ 103,917 $ 136,892
6 Loans to members (Note 5) 507,598 443,739
7 Other assets (Note 6) 3,609 2,657
8 Property, plant and equipment (Note 7) 10,695 10,641
9 Accrued interest receivable 2,647 3,260
10 Future income tax (Note 23) 118 98
11 Total Assets $ 628,584 $ 597,287
12 LIABILITIES
13 Deposits from members (Note 8) $ 581,444 $ 556,091
14 Accrued interest payable 6,900 6,289
15 Accounts payable and accrued liabilities 3,825 2,567
16 Dividends payable 3,788 2,946
17 Income tax payable 110 124
18 Total Liabilities $ 596,067 $ 568,017
19 MEMBERS’ EQUITY
20 Contributed surplus 5,193 5,193
21 Retained earnings 27,324 24,077
22 Total Members’ Equity $ 32,517 $ 29,270
23
24 Total Liabilities & Members’ Equity $ 628,584 $ 597,287
25 Commitments (Note 20)
26 Contingencies (Note 25)
27
28 APPROVED ON BEHALF OF THE BOARD
29
30
31
32 Phyllis Stone Forrest Drinnan

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My Finances
ksnumbers
Consolidated_Statement_of_Retained_Earnings.xls
A B C
2 (000’s Canadian Dollars)
3 2006 2005
5
6 Balance, Beginning of Year, as previously stated $ 24,077 $ 20,104
7 Adjustment to opening retained earnings (Note 3) – 401
8 Balance, Beginning of Year, as restated $ 24,077 $ 20,505
9
10 Add: Net Income 3,247 3,572
11
12 Balance, End of Year $ 27,324 $ 24,077
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
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ksnumbers
Consolidated_Statement_of_Income.xls
A B C
3 2006 2005
5 Interest income (Note 9) $ 33,866 $ 31,334
6 Interest expense (Note 10) 10,562 9,140
7 Financial Margin $ 23,304 $ 22,194
8
9 Other income (Note 11) 6,192 6,262
10 Net interest and other income 29,496 28,456
11
12 Provision for losses (Note 12) 507 376
13 Net interest and other income, after provision $ 28,989 $ 28,080
14
15 Administrative and operating expenses 20,758 20,958
16 Kootenay Savings Community Foundation 500 –
17 Operating Expenses (Note 13) $ 21,258 $ 20,958
18
19 Net Income, before Distribution to Members and taxes 7,731 7,122
20
21 Patronage and Dividends (Note 2) 3,736 2,917
22
23 Net Income before taxes $ 3,995 $ 4,205
24 Income tax - current (Note 23) 768 788
25 Income tax - future (Note 23) (20) (155)
26 Net Income $ 3,247 $ 3,572
27
28
29
30
31
32

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My Finances
ksnumbers
Consolidated_Statement_of_Cash_Flows.xls
A B C
3 2006 2005
5 CASH FLOWS FROM OPERATING ACTIVITIES
6 Net income $ 3,247 $ 3,572
7 Adjustments for non-cash items:
8 Depreciation 1,013 1,702
9 Amortization of intangible assets – 308
10 Future income tax (20) (155)
11 Provision for loan losses 319 326
12 Net adjustments for non-cash items $ 1,312 $ 2,181
13
14 Changes in non-cash working capital items:
15 Accounts receivable 49 25
16 Prepaid expense (111) (13)
17 Deferred income – (408)
18 Income tax payable/recoverable (14) (138)
19 Other current assets/liabilities 1,594 2,395
20 Net changes in non-cash working capital items 1,518 1,861
21
22 Net cash flows from operating activities $ 6,077 $ 7,614
23
24 CASH FLOWS FROM FINANCING ACTIVITIES
25 Dividends payable 842 (65)
26 Increase in deposits from members 25,353 29,440
27 Net cash flows from financing activities $ 26,195 $ 29,375
28
29
30
31
32

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ksnumbers
Consolidated_Statement_of_Cash_Flows.xls [CONTINUED]
A B C
3 2006 2005
5 CASH FLOWS FROM INVESTING ACTIVITIES
6 Additions to property, plant and equipment (1,067) (685)
7 Increase in loans to members (64,179) (58,783)
8 Decrease in marketable securities 23,306 23,752
9 Decrease in investments 53 25
10 Net cash flows from investing activities $ (41,887) $ (35,691)
11
12 (Decrease) Increase in Cash & cash equivalents $ (9,615) $ 1,298
13
14 Cash & cash equivalents, beginning of year 50,128 48,830
15
16 Cash & cash equivalents, end of year $ 40,513 $ 50,128
17
18 SUPPLEMENTARY INFORMATION
19 Interest received 33,435 29,706
20 Interest paid 9,951 8,302
21 Income tax paid 782 926
22
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Notes_to_Consolidated_Financial_Statements.xls
A
2
3 1. NATURE OF BUSINESS
4 Kootenay Savings Credit Union (“Credit Union”) is incorporated under the laws of British Columbia and is
5 regulated under the Financial Institutions Act of British Columbia. Its primary business activities include
6 providing financing services to its members and the general public in the Kootenays from 13 branches and
7 through its insurance and financial management subsidiaries.
8
9 2. SIGNIFICANT ACCOUNTING POLICIES
10 A) BASIS OF PRESENTATION
11 These consolidated financial statements have been prepared in accordance with Canadian generally
12 accepted accounting principles (GAAP). The financial statements include the accounts of Kootenay Savings
13 Credit Union and its wholly-owned subsidiaries, Kootenay Savings Insurance Services Ltd. and Kootenay
14 Savings MoneyWorks Ltd. All significant intercompany accounts and transactions have been eliminated.
15
16 B) CASH AND INVESTMENTS
17 Cash and investments comprise cash on hand, deposits, cheques and other items in transit plus all
18 securities, whether held with Credit Union Central of British Columbia (“CUCBC”) or other financial
19 institutions plus long-term investments in the shares of CUCBC and other entities (Note 4). Cash and
20 securities held with CUCBC are valued at cost. Investments in shares of CUCBC and others are held at
21 cost, except where there is a loss in value that is determined by management to be other than temporary,
22 in which case the investment is written down to recognize the impairment loss.
23
24 C) LOANS
25 Loans to members are stated at outstanding principal amounts net of a specific allowance for incurred
26 losses on impaired loans and a general provision. Loans are classified as impaired when there is no longer
27 reasonable assurance of timely collection of principal, and interest, generally when interest and principal is
28 90 days past due, unless the loan is well secured and in the process of collection. An allowance for losses
29 incurred on impaired loans is made to reduce the carrying amount of individual loans to the net estimated
30 realizable value.
31
32

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1 2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2 D) REVENUE RECOGNITION
3 Interest income on loans is recorded on an accrual basis. Interest penalties received as a result of loan
4 prepayments by members are recognized as income in the year in which the prepayment is made, except in the
5 case where only minor modifications are made, when the penalty income is deferred and amortized over the
6 term of the loan. Loan origination fees are considered to be adjustments to loan yield and are deferred and
7 amortized to interest income over the term of the loan.
8
9 E) PROPERTY, PLANT AND EQUIPMENT
10 Property, plant and equipment is stated at cost less accumulated amortization. Property, plant and
11 equipment are amortized over their estimated useful lives using the following methods and annual rates:
12 Buildings 4 - 5% declining balance
13 Parking lot 8% declining balance
14 Furniture 15 year straight line
15 Office equipment 8 years straight line
16 Computer equipment and software 4- years straight line
10
17 Leasehold improvements 10 years straight line
18
19 F) PENSIONS AND POST RETIREMENT BENEFITS
20 The Credit Union is a member of a multi-employer pension plan, which is accounted for as a defined
21 contribution plan. Other post employment benefits earned by employees under a defined benefit plan are
22 determined using the projected unit credit actuarial method, pro-rated on service and are charged to the
23 Statement of Income as services are rendered. Adjustments arising from plan amendments, changes in
24 assumptions and experience gains are amortized on a straight-line basis over the estimated average
25 remaining services lives of the employees.
26
27 G) DIVIDENDS PAYABLE
28 Dividends declared and interest payable on share savings and equity shares are charged to earnings for the
29 year. A 4% dividend on membership shares and a .25% interest rate on share savings were declared for
30 2006. A 10% patronage dividend was declared on interest paid and received by eligible members while
31 utilizing Kootenay Savings Credit Union services in 2006. A 4% dividend on patronage equity shares was
32 declared for 2006.

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2 H) FUTURE INCOME TAX
3 The Credit Union follows the asset and liability method for accounting for income taxes. Under the asset
4 and liability method, the change in the net future tax asset or liability is to be included in income. Future tax
5 assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
6 in which temporary differences are expected to be recovered or settled. The effect on future tax assets and
7 liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment
8 or substantive enactment.
9
10 I) FOREIGN CURRENCY TRANSLATION
11 Monetary items denominated in foreign currencies are translated at rates prevailing on the balance sheet
12 date; income and expenses are translated at average rates during the year. Foreign exchange gains or losses
13 arising from the translation or settlement of a monetary item denominated in a foreign currency are recorded
14 in Other Income. The Credit Union does not participate in the active trading of foreign currency positions.
15
16 J) DERIVATIVES
17 For derivative transactions treated as hedges, the Credit Union formally documents all relationships
18 between hedging instruments and hedged items, as well as the risk management objective and strategy for
19 undertaking various hedge transactions. The Credit Union also formally assesses, both at hedge inception
20 and on an ongoing basis, whether the derivatives that are used in the hedging transactions are highly
21 effective in offsetting changes in the fair value or cash flows of a hedged item. Derivative transactions that
22 do not fulfill the hedge documentation requirements or the effectiveness criteria are accounted for on a
23 mark-to-market basis with gains/losses reported through the Statement of Income.
24
25 K) USE OF ESTIMATES
26 The preparation of financial statements in accordance with Canadian generally accepted accounting
27 principles requires management to make estimates and assumptions that affect the reported amounts of
28 assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet date and the
29 reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use
30 of estimates relate to the loan loss provision, underlying loan security values, determination of investment
31 values and useful lives for amortization. Actual results may differ from these estimates.
32

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2 L) GOODWILL
3 Goodwill arose on the acquisition of an insurance business and represents the excess of purchase price of
4 the acquired business over the amount allocated to assets acquired less liabilities assumed, based on their
5 fair values at acquisition. Goodwill is not amortized but tested annually for impairment at the business
6 operating level. Goodwill is determined to be impaired when the fair value is less than its carrying amount.
7 If impaired, the Credit Union would recognize an impairment loss. There were no write-downs of goodwill
8 due to impairment during the year ended December 31, 2006 (2005 – $NIL).
9
10 3. ACCOUNTING CHANGES (Future Income Taxes and Accounting for Insurance Commissions)
11 As a result of a review of its accounting policies and applicable accounting pronouncements, the Credit Union
12 has concluded that the following restatements and change in policy are required.
13
14 Future Income Tax will include general loan loss reserves as a temporary difference in the calculation of Future
15 Income Tax expense and asset/liability balances, the Credit Union adjusted for 2004 $305,002 and for 2005
16 $12,216 of future income taxes through the Statement of Income on a retroactive basis.
17
18 Property and casualty Insurance commissions will be recognized as revenue as of the date of sale of the policy.
19 Accordingly, the Credit Union adjusted for 2004 $144,926 ($95,724 net of future income taxes) and for 2005
20 $523 ($345 net of future income taxes) of property and casualty commissions through the Statement of Income
21 on a retroactive basis.
22
23 4. CASH AND INVESTMENTS
25 Cash and Cash Equivalents
26 Cash on hand, deposits, cheques and other items in transit – net 8,922 12,203
27 Cash equivalents (securities under 90 days to maturity) 31,591 37,925
28 Total Cash and Cash Equivalents 40,513 50,128
29 Marketable Securities (securities over 90 days to maturity)
30 Securities held at CUCBC 36,756 45,493
31 Other securities 24,556 39,125
32 Total Marketable Securities 61,312 84,618

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1 4. CASH AND INVESTMENTS (cont’d)
3 Investments
4 Shares, Credit Union Central of B.C. 1,879 1,980
5
6 Other investments 213 166
7
8 Total Investments 2,092 2,146
9
10 Total Cash and Investments 103,917 136,892
11
12 Under governing legislation, the credit union must maintain, for liquidity purposes, deposits with CUCBC
13 of at least 8% of deposits and borrowings. Shares in CUCBC are required investments as a condition of
14 membership in CUCBC and are also required by provincial legislation. These investments, which are
15 determined by formulae based on Credit Union membership and assets, are realizable only on withdrawal
16 from membership. As there is no market for these financial instruments, their fair value is assumed to
17 approximate their carrying value.
18
19 5. LOANS TO MEMBERS
20 (000’s Canadian Dollars) Personal Commercial Total Total
21 Loans Loans 2006 2005
22 Loans 401,535 108,614 510,149 445,971
23 Allowance for impaired loans (2,008) (543) (2,551) (2,232)
24 399,527 108,071 507,598 443,739
25 Accrued interest 907 621 1,528 1,188
26 400,434 108,692 509,126 444,927
27 Impaired loans 757 999 1,756 1,914
28 Less amounts where loss is not expected 516 634 1,150 1,344
29 Specific allowances 241 365 606 570
30 General allowances 1,767 178 1,945 1,662
31 2,008 543 2,551 2,232
32

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1 5. LOANS TO MEMBERS (cont’d)
2 The activity in the specific allowance for impaired loans has been as follows:
3 (000’s Canadian Dollars) Residential Commercial Personal Commercial
4 Mortgage Mortgage Loans Loans 2006 2005
5 Balance, beginning of year 56 325 189 – 570 156
6 Provision for loan losses (3) – 325 59 381 617
7 Write-offs – – (179) (19) (198) (155)
8 Recoveries of prior (27) – (120) – (147) (48)
9 year allowances
10 Balance, end of year 26 325 215 40 606 570
11
12 The activity in the general allowance for impaired loans has been as follows:
13 (000’s Canadian Dollars) Residential Commercial Personal Commercial
14 Mortgage Mortgage Loans Loans 2006 2005
15 Balance, beginning of year 1,355 99 158 50 1,662 1,818
16 Provision for impairment 237 78 17 (49) 283 (156)
17 Balance, end of year 1,592 177 175 1 1,945 1,662
18
19 6. OTHER ASSETS
21 Prepaid expenses 449 339
22 Accounts receivable 621 670
23 Deferred expenses 1,414 1,030
24 Goodwill 349 349
25 Other 776 269
26 3,609 2,657
27
28
29
30
31
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1 7. PROPERTY, PLANT AND EQUIPMENT
3 Accumulated Net Book Net Book
4 Cost Amortization Value Value
5 Land 940 – 940 940
6 Buildings 10,633 4,697 5,936 6,194
7 Parking lot 20 10 10 11
8 Furniture 1,841 1,141 700 695
9 Office equipment 3,182 1,963 1,219 1,117
10 Computer equipment and software 4,471 3,109 1,362 1,394
11 Leasehold improvements 909 381 528 290
12 21,996 11,301 10,695 10,641
13
14 Depreciation of property, plant and equipment in 2006 was $1,012,817 (2005 – $1,702,489)
15
16 8. DEPOSITS FROM MEMBERS
18 Demand 233,985 226,587
19 Term 210,891 189,106
20 Registered Plans 113,421 116,952
21 Equity Shares (Note 14) 19,614 19,446
22 Non-equity “D” shares 3,533 4,000
23 581,444 556,091
24
25 The Credit Union Deposit Insurance Corporation of British Columbia (“CUDIC”), a government corporation,
26 protects deposits (with the exception of equity shares) of all British Columbia credit union members up to
27 a maximum of $100,000 per “separate deposit” (as defined by regulation) per credit union.
28
29
30
31
32

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1 9. INTEREST INCOME
3 Residential mortgages 16,727 14,538
4 Commercial mortgages 6,230 4,511
5 Other loans 6,660 5,109
6 Cash and marketable securities 4,199 5,686
7 Other interest income 50 1,490
8 33,866 31,334
9
10 A restructuring of CUDIC and Stabilization Central Credit Union Central in 2005 resulted in a special
11 distribution being made to the Credit Union of $1.454 million which was recorded in Other interest income.
12 This distribution was offset by an assessment of regulatory fees by CUDIC as disclosed in Note 13.
13
14 10. INTEREST EXPENSE
16 Demand deposits 1,079 867
17 Term deposits 5,899 4,793
18 Registered plans 3,508 3,460
19 Borrowings 43 22
20 Other interest costs 33 (2)
21 10,562 9,140
22
23 11. OTHER INCOME
25 Account service charges 2,088 2,093
26 Foreign exchange 554 466
27 Insurance commissions 1,715 1,756
28 Loan processing fees 424 556
29 Mutual fund commissions 1,089 744
30 Miscellaneous 322 647
31 6,192 6,262
32

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1 12. PROVISION FOR LOSSES
3 Provision for specific loan losses 381 616
4 Recoveries of prior year allowances (147) (48)
5 Recoveries of prior year losses (10) (37)
6 Provision for general loan losses 283 (156)
7 Provision for operating losses – 1
8 507 376
9
10 13. OPERATING EXPENSES
12 Wages and employee benefits 12,795 11,567
13 Professional fees 1,107 416
14 Data processing 1,080 994
15 Equipment, building maintenance and rent 1,056 976
16 Depreciation and amortization 1,013 1,702
17 Office supplies, telephone and postage 791 805
18 Travel and employee training 642 490
19 Advertising and promotion 575 507
20 Corporate capital tax 550 475
21 Regulatory fees 543 1,683
22 Miscellaneous 1,106 1,343
23 21,258 20,958
24
25 Included in Regulatory fees in 2005 is a special assessment by CUDIC in the amount of $1.474 million. Included
26 in Professional fees in 2006 is a contribution to the Kootenay Savings Community Foundation of $500,000.
27
28 14. EQUITY SHARES
29 The Credit Union has two classes of equity shares. Class A equity shares are a membership requirement
30 with a minimum of 5 shares per junior member and 25 shares for all other members. Class A shares may
31 be withdrawn only upon close of membership. Class B shares are patronage shares received by the
32

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1 14. EQUITY SHARES (cont’d)
2 membership through patronage refunds and dividends. 20% of the total Class B shares held by a member
3 may be withdrawn annually. Full redemption of a member's Class B shares is allowed if the member is
4 65 years of age or older, upon the death of the member, upon close of membership due to a move to an
5 area not serviced by the Credit Union, or certain other conditions.
6
7 Class B shares may be registered in a RRSP or RRIF.
8
9 As an overall restriction, in a given year, the maximum aggregate withdrawal cannot exceed 40% of the
10 total Class B shares, unless approved by the Board.
11
12 Funds invested in Class A and Class B equity shares are not insured by CUDIC.
13
14 Equity Shares 2006 2005
16 Class A, par value $1 each 901 891
17 Class B, par value $1 each (non RRSP) 5,074 5,075
18 Class B, par value $1each (RRSP, RRIF) 13,639 13,480
19 19,614 19,446
20 Equity shares are included as liabilities (Note 8)
21
22 Movements in equity shares are as follows:
23 (000’s Canadian Dollars) Class Class Class B
24 A B (Registered) 2006 2005
25 Balance, beginning of year 891 5,075 13,479 19,445 19,222
26 New shares issued 64 – 1,138 1,202 1,873
27 Share redemption (54) (2,391) (1,560) (4,005) (4,619)
28 Dividends paid to members *– 2,390 582 2,972 2,969
29 Balance, end of year 901 5,074 13,639 19,614 19,446
30 * Class A share dividends are paid in the form of Class B shares
31
32

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1 15. OTHER STATUTORY INFORMATION
2 Regulations to the Financial Institutions Act require disclosure of the following information:
3 A) At December 31, 2006 outstanding loans and lines of credit issued directly or indirectly to directors,
4 officers and employees of the Credit Union amount to $6,634,494 (2005 – $ 6,832,073).
5 B) Compensation of Credit Union management and staff includes the benefit of loans granted at the
6 lesser of the Credit Union's posted rate or the prescribed rates as set out by the Federal Government.
7 At December 31, 2006 these loans amounted to $6,100,176 (2005 – $6,238,314).
8 C) Aggregate payments paid to directors in their capacity as directors, including honoraria, amounted to
9 $81,593 (2005 – $80,000).
10
11 16. BORROWING FROM CREDIT UNION CENTRAL OF B.C.
12 The Credit Union has an operating line of credit from Credit Union Central of British Columbia. As at
13 December 31, 2006, the outstanding amount under the operating line of credit with CUCBC amounted to
14 $NIL (2005 – $NIL).
15
16 17. CAPITAL, LIQUIDITY AND RISK MANAGEMENT
17 The Financial Institutions Act requires the Credit Union to maintain at all times a prescribed capital base.
18 The level of capital required is based on a percentage of the total value of risk weighted assets. Each asset
19 of the Credit Union is assigned a risk factor based on the probability that a loss may occur or the ultimate
20 reduction of that asset. At December 31, 2006, the Credit Union exceeded the prescribed capital ratio of
21 8%. The main financial risks inherent in the Credit Union environment are credit, liquidity and interest risk.
22
23 Credit risk is the risk that the Credit Union will incur a loss because a member fails to meet an obligation.
24 Risk management policies are implemented by management and the Board of Directors. These policies
25 include evaluating the member’s ability to repay the loan when it is originally granted and subsequently
26 renewed, and regularly monitoring member information such as delinquent and over-limit reports.
27
28 Liquidity risk is the risk that the Credit Union will encounter difficulty in raising funds to meet its obligations
29 to members. To mitigate this risk, Credit Union Central of British Columbia requires the Credit Union to
30 maintain, at all times, liquidity that is adequate in relation to the business carried on. The level of liquidity
31 required is based on a prescribed percentage of total members’ deposits, liabilities and shares. At
32 December 31, 2006, the Credit Union exceeded the prescribed liquidity ratio of 8%.

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1 17. CAPITAL, LIQUIDITY AND RISK MANAGEMENT (cont’d)
2 Interest rate risk refers to the potential impact on the Credit Union’s earnings due to changes in interest
3 rates. Interest rate risk results primarily from differences in the maturity or re-pricing dates of assets and
4 liabilities. The Credit Union monitors interest rate risk inherent in its portfolio by employing techniques,
5 including maturity and re-pricing schedules and portfolio modeling, to measure and management the
6 impact of interest rate changes (see Note 19).
7
8 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
9 The following represents the approximate fair values of financial instruments of the Credit Union.
10 (000’s Canadian Dollars) Fair Value Fair Value
11 over (under) over (under)
12 Book Value Fair Value book value book value
13 Dec-06 Dec-06 Dec-06 Dec-05
14 Assets
15 Cash and Investments 103,917 105,594 1,677 1,873
16 Loans 507,598 506,338 (1,260) (908)
17 Accounts Receivable 1,371 1,371 – –
18
19 Liabilities
20 Deposits 581,444 567,555 13,889 14,546
21 Other 7,723 7,723 – –
22 Total Fair Value Adjustment 14,306 15,511
23
24 The fair value of financial assets and liabilities are estimated using discounted cash flow models with
25 discount rates based on market interest rates for similar types of instruments.
26
27 The difference between the book and fair values of the Credit Union’s financial instruments are due
28 primarily to changes in interest rates.
29
30 Not all financial instruments are readily available. As a result, the estimates of fair value are subjective
31 and should not be considered to be precise.
32

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1 19. INTEREST RATE SENSITIVITY
2 Interest rate risk is the sensitivity of the Credit Union’s financial condition to movements in interest. The
3 carrying amounts of interest sensitive assets and liabilities are presented in the periods in which they next
4 re-price to market rates or mature and are summed to show the net interest rate sensitivity gap.
5 (000’s Canadian Dollars) Non-
6 Variable Within 1 to 2 2 to 3 3 to 4 Over 4 Interest Total
7 Rate 1 Year Years Years Years Years Sensitive 2006
8 Assets
9 Cash and investments – 40,114 19,690 16,351 16,775 1,879 9,108 103,917
10 Loans 175,986 82,194 52,498 42,377 32,414 124,364 (2,235) 507,598
11 Accounts Receivable – – – – – – 1,371 1,371
12 175,986 122,308 72,188 58,728 49,189 126,243 8,244 612,886
13 Liabilities and
14 Members' Equity
15 Demand deposits* 191,629 – – – – – 51,864 243,493
16 Term deposits – 129,074 51,164 23,286 4,156 3,211 – 210,891
17 Registered plans 8,474 52,203 31,028 14,884 4,492 2,472 13,507 127,060
18 Other – – – – – – 7,723 7,723
19 200,103 181,277 82,192 38,170 8,648 5,683 73,094 589,167
20 Mismatch (24,117) (58,969) (10,004) 20,558 40,541 120,560 (64,850) 23,719
21 *Includes equity shares and share savings
22
23 20. COMMITMENTS
24 A) LETTERS OF CREDIT
25 As of December 31, 2006, the Credit Union had issued letters of credit on behalf of members in the
26 amount of $816,358 (2005 – $859,803). Of these letters of credit, $654,734 are secured by securities
27 and/or monies on deposit; the remainder by indemnities or personal guarantees.
28
29 B) LEASED PREMISES
30 The Credit Union has committed to lease premises until 2011. The minimum lease payments in aggregate
31 for the next five years are $882,165 plus charges for property taxes, insurance and maintenance costs.
32 Payments are as follows:

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1 20. COMMITMENTS (cont’d)
2 2007-2010 $ 730,068 (or $182,517 annually)
3 2011 $ 152,097
4 Total $ 882,165
5
6 21. CONCENTRATION OF CREDIT RISK
7 Concentrations of credit risk exist if a number of members are engaged in similar business activities or are
8 in the same geographic region, and indicate the relative sensitivity of the Credit Union to occurrences
9 affecting a particular segment of borrowers or geographic region.
10
11 The Credit Union is susceptible to credit risk arising from a protracted economic downturn in the Kootenay
12 region of British Columbia.
13
14 22. PENSIONS AND OTHER POST RETIREMENT BENEFITS
15 The Credit Union sponsors a number of pension and post retirement benefit arrangements covering eligible
16 employees of the Credit Union and its subsidiaries.
17
18 The Credit Union principally provides pension benefits to its eligible employees through a multi-employer
19 defined benefit pension plan, administered by CUCBC. The annual contribution rates are actuarially
20 determined and reported to member credit unions by CUCBC. The CUCBC pension plan is accounted for
21 as a defined contribution plan by the Credit Union. The pension expense for the year ended December 31,
22 2006 amounted to $649,324 (2005 – $611,854) which has been recorded as an expense in the Statement
23 of Income. Accrued contributions of $NIL (2005 – $NIL) were outstanding as at the year-end date.
24
25 The Credit Union also provides additional pension benefits to certain eligible employees who are members
26 of a Supplemental Pension Plan. From December 31, 2006 the Credit Union provides post retirement non-
27 pension benefits to employees on retirement, provided certain eligibility criteria are met. These non-pension
28 benefits consist of contributions up to certain annual maximum limits outlined in the plan agreement with
29 respect to medical and dental benefits. Both plans are unfunded defined benefit plans.
30
31 The Credit Union measured its unfunded defined benefit accrued obligations as at December 31, 2006.
32 The most recent actuarial valuation of the defined benefit plans was as of December 31, 2006.

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1 22. PENSIONS AND OTHER POST RETIREMENT BENEFITS (cont’d)
2 (000’s Canadian Dollars) Supplemental Post Retirement
3 Pension Plan Benefit Plan
4 2006 2006
5 ACCRUED BENEFIT OBLIGATION
6 Balance at beginning of year – –
7 Current service cost 3 –
8 Past service cost 9 345
9 Interest cost 1 –
10 Actuarial (gains) losses 1 –
11
12 Accrued benefit obligation 14 345
13
14 Unamortized unfunded liability 9 345
15
16 Balance reported as accrued benefit liability, end of year – –
17
18 Benefit expense recorded in the 2006 income statement – –
19
20 The significant actuarial assumptions used in measuring the Credit Union’s accrued benefit obligations at
21 December 31, 2006 are as follows :
22 Supplemental Post Retirement
23 Pension Plan Benefit Plan
24 2006 2006
25 Discount rate 5.00% 5.00%
26 Rate of compensation increase 3.50% 3.50%
27 Inflation 2.50% 2.50%
28
29
30
31
32

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