AnnuAl RepoRt 2006 - Grenada Co-op · PDF file2 Annual Report 2006 ... will be held at the...
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AnnuAl RepoRt 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time
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To be the Leading Grenadian provider of
high quality financial and related services
to individuals and organisations in local
and international markets, maximizing
benefits for all Stakeholders
Annual Report and Financial Statements
September 30, 2006 (expressed in Eastern Caribbean dollars)
Mission stateMent
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Corporate Information ....................................................... 2
Notice/Agenda of Annual Meeting .................................... 3
Chairman’s Review .......................................................... 4-7
General Manager’s Report ............................................ 8-12
Management Team ..................................................... 13-14
Board of Directors ............................................................ 15
Selected Financial Statistics ......................................... 16-17
Auditors’ Report to the Shareholders ............................... 18
Balance Sheet .................................................................. 19
Statement of Changes in Equity ....................................... 20
Statement of Income ....................................................... 21
Statement of Cash Flows ................................................. 22
Notes to the Financial Statements ............................... 23-40
Contents
AnnuAl RepoRt 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time
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2 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
Established 1932
Church Street, St. George’s, and
Branches at Grenville, Sauteurs and Spiceland Mall
DirectorsC.A. St. Bernard, Esq., C.B.E., Q.C. - Chairman
Gordon V. Steele, Esq.
Derick Steele, Esq.
Richard Mc Intyre, Esq.
Lethon Herry, Esq.
Leslie Ramdhanny, Esq.
Darryl Brathwaite, Esq.
Manager/Secretary
Gordon V. Steele, Esq.
Auditors Messrs. PricewaterhouseCoopers
Chartered Accountants
Solicitors Messrs. Lewis & Renwick
A Member bank of the Caribbean Association of
Indigenous Banks
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3 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
Notice is hereby given that the Seventy-fourth Annual Meeting of the Company will be held at the Tropicana Inn Conference Room, Lagoon Road, St. George’s, on Tuesday, January 30, 2007 at 4:45 p.m.
AGENDA
1. To receive the audited financial statements for the year ended September 30, 2006, together with the Chairman’s Review and General Manager’s Report thereon.
2. To announce a dividend for the year ended September 30, 2006.
3. To elect Directors.
4. To appoint auditors for the ensuing year. (Messrs. PricewaterhouseCoopers are due to retire and are eligible for re-appointment).
5. To consider any other business which may be given consideration at an annual meeting.
By order of the Board of Directors
Gordon v. Steele
Secretary
November 30, 2006
Notice of Annual Meeting
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4 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
CHAIRMAN’S REVIEW
THE ECoNoMY
The Grenada economy continued on a recovery path in 2006. on account of tourism recovery real GDp growth of 1.4% is expected this year, compared with 12% in 2005.
THE BANkING & FINANCIAL SERvICES ENvIRoNMENT
The 2005 Banking Act, came into effect in April 2006 thus strengthening the regulation of the banking sector. Additionally the Grenada Authority for the Regulation of Financial Institutions (GARFIN) is currently being established, following on from the passage of the GARFIN Act. GARFIN will regulate and supervise the financial sector comprising the offshore sector, insurance companies, credit and school savings unions, The Grenada Building and Loan, and The Grenada Development Bank.
Compared with 2005, this year reflected mixed behaviour in the level of activities in the banking sector. Eastern Caribbean Central Bank statistics show that between September 2005 and September 2006, loans and advances grew by 12.9% (2005: 3.9%) while deposits expanded by 1.2% (2005: 7.7%).
BANk’S pERFoRMANCE
In 2006, the bank produced commendable growth in assets employed, and profits before taxes. Total assets of the Bank have grown by $40.8m or 13% in 2006, less impressive than the $59.1m or 23% achieved in 2005. For 2006 Income before Tax amounted to $6,331,693, an improvement over the $5,625,867 attained in 2005.
FUTURE pRoSpECTS
In the short to medium term, the economy is expected to continue its recovery. The Economic Reform program should be well advanced and progress made in the area of fiscal consolidation. Going forward, agriculture will continue to recover, and prospects for the tourism sector look favorable, with a number of potential major investments on the horizon. Inflationary pressures that emerged in late 2005 on the heels of an adjustment of domestic fuel prices, have eased considerably in the first half of 2006.
C.A. St. Bernard, Esq., C.B.E.,Q.C., Chairman
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5 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
ENHANCED CoRpoRATE GovERNANCE
Less than expected progress was made in furthering the bank’s corporate governance culture. The board nonetheless remains committed to this process and strategy as outlined in my 2005 Review.
Further, arising from an assessment of the bank’s internal control environment by the Audit and Consulting firm, Ernst & Young, the Board has resolved to correct the weaknesses in the bank’s control environment in the areas of: -
i. Integrity and Ethical values
ii. Commitment to Competence
iii. Board of Directors and Audit Committee
iv. Management’s philosophy and operating Style
v. organizational Structure
vi. Assignment of Authority and Responsibility
vii. Human Resource policies and practices
our board therefore continues to implement systems, policies and guidelines for the management of the bank with due regard for economy, efficiency and effectiveness.
In April 2006 the Bank’s directors held a seminar, facilitated by the Law firm, Lewis & Renwick to familiarize the Directors with the 2005 Banking Act, which became law that same month.
FoLLoW-Up oN UNAUTHoRIZED TRANSACTIoNS
British Solicitors Messrs. Thompson Snell & passmore have been retained by the bank to assess the potential for recovery of $1.7m in fraud losses, which occurred in 2004. In early 2006 the bank instructed its solicitors to enter a claim against Barclays Bank plc of England for the amount of $1.7m.
A Credit Card fraud of $0.7m was discovered in 2006 and has been accounted for in this year’s financials.
Legal proceedings are on-going.
Additional controls have been implemented and are regularly monitored to prevent further occurrences.
CHAIRMAN’S REVIEW
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6 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
CHAIRMAN’S REVIEW
DIvIDEND poLICY
Given the performance of the Bank this year, the directors recommend a dividend of $0.22 per share. This amounts to $1,122,000.
The annexed Statement of Changes in Equity shows that: - $
The net income for the Year amounts to 4,576,219
To which has been added Retained Earnings at the beginning of the Year 8,664,689
13,240,908
From which has been transferred to:
Statutory Reserves 915,244
General Reserves 228,811
Regulatory Reserves 1,415,465
property Revaluation Surplus 152,783 2,712,303
Making available for distribution a total sum of 10,528,605
This amount the Directors recommend should be allocated as follows: -
To payment of dividends: 1,122,000
Retained Earnings at the end of the year 9,406,605
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7 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
75TH ANNIvERSARY
In 2007 the bank will commemorate seventy-five (75) years of achievements.
From its inception, the Grenada Co-operative Bank Ltd. was designed to be a pillar of strength for the Grenadian people.
Had it not been for the remarkably high levels of confidence which our clients and the population have in the bank, we would not have been able to build as strong, profitable and stable a bank as we have. An expanding market share combined with high positive ratings from various customer service surveys mean that the bank is pursuing strategies that are delivering value to the market place. A network of seven ATMs, four well-located branches, a committed and dedicated staff delivering a wide variety of high quality services to corporate, commercial, government, statutory and personal clients have all contributed to this outcome. Equally important is our generous support for the communities we serve. our role as a good corporate citizen spans contributions to environmental enhancement and protection, educational development, science and technology, sports, culture and the performing arts.
Looking ahead, the years to come will be challenging ones for the banking sector. However, we shall be equal to the task. Just as the correct strategies saw us triumphantly through the last 75 years, so too seeking and implementing new ones will take us successfully through.
The Grenada Co-operative Bank remains a national icon of Grenadian fortitude and determination.
ACkNoWLEDGEMENTS
Without the strong commitment of the Board of Directors, the continued success of the bank would not be possible. I would like to convey my sincerest appreciation and gratitude to my colleague directors for their efforts at strengthening the bank and ensuring its sustained progress. The hard work and dedication of management and staff alike have not gone un-noticed. I say thanks, on behalf of the Board, for your enthusiasm in advancing the plans and programmes of the Bank.
C. A. St. Bernard
..........................................................
Chairman
CHAIRMAN’S REVIEW
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8 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
GENERAL MANAGER‘S REPORT
BANk’S pERFoRMANCE
Assets and Liabilities
The 2006 performance of the bank was strong but mixed. Against the back drop of low growth in a recovering economy, the Bank’s asset base grew, and profits remained stable.
Not as strong as last year, Assets employed recorded a 13% or $40.8m expansion – (2005: 23% or $59.2m).
Growth in Customer Loans and Advances (gross) has been less buoyant than in 2005. Loans and Advances grew by $40.5m or 17.4% in 2006 compared with $44.5m or 23.6% in 2005. Loan portfolio growth is evidenced mainly in Mortgage Loans which increased by $21.6m or 11% to $215.7m.
Some $1.1m was invested in Fixed Asset, mainly information technology, and our website www.grenadaco-opbank.com was launched.
Total Customer Deposits displayed less buoyancy in 2006, expanding by $32.1m or 11%. The Bank’s deposit base now stands at $314.2m. Savings Deposits had a strong performance climbing some $19.1m or 16%. Strong growth was also attained in respect of Fixed Deposits ($13.9m or 12%).
Income and Expenses
ongoing application of sound Asset Liability management strategies continue to impact positively on the Bank’s profitability. Net income after taxes for 2006 amounted to $4.6m, the same as in 2005. By the same token net after tax earnings per share is unchanged at $0.90.
Due to the improved Asset Liability management, the ratio of interest earned to interest paid rose from 2.69 in 2005 to 2.73 in 2006.
Interest income on Customer Loans and Advances in 2006, rose by $2.6m (12%) climbing to $23.8m. The interest on investments and deposits held with other banks declined to $3.1m, decreasing by 16% or $0.5m.
During 2006, interest expense rose by $0.6m or 7%. Non-interest expenses moved from $12.3m in 2005 to $13.4m in 2006, an increase of 9%.
Gordon V. Steele, Esq.,Managing Director
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9 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
ASSETS EMPLOYEDin millions of EC DOllars
2002 - 2006
$0
$100.0
$200.0
$300.0
$400.0
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
LOANS & ADVANCES (gross)in millions of EC DOllars
2002 - 2006
$0
$50
$100
$150
$200
$250
$300
$0
$50
$100
$150
$200
$250
$300
$350DEPOSITSin millions of EC DOllars
2002 - 2006
INCOME AFTER TAXES2002 - 2006
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10 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
GENERAL MANAGER‘S REPORT
HUMAN RESoURCE DEvELopMENT
The Bank remains steadfast in its focus on the development of human potential for continued organizational growth. Recognizing that the successes of today must be sustained by talented, well trained and capable staff, the Bank continues to invest in the training and overall professional development of its employees. To further cement this strategy, a Training and Development officer has been recruited, to strengthen the Human Resource Department.
Training…
All levels of staff were exposed to various training programmes throughout the year. Senior Managers, attended various seminars and courses overseas, on-island, in-house, and on-line. Subject matter covered included the 2005
Banking Act. Understanding Bank profitability, Loan pricing, and Credit Risks Management, were done on-line with the Graduate School of Banking, Wisconsin, U.S.A.
Some 38% of the Clerical staff attended local and in-house training programmes covering topics such as Credit Risk Management, The Art of Selling, Workplace Ethics, Etiquette and professionalism, Frontline Supervision, Marketing and First Aid Training.
A wide cross-section of the clerical staff is enrolled in various diploma and degree programmes in pursuit of higher learning and higher levels of performance and productivity are anticipated.
Registration in the Institute of Canadian Bankers’ Associateship programme is on-going. Some employees are working assiduously towards qualifying at the AICB level in 2007.
Social Activities…
The Bank held its Annual Staff Banquet and Awards Ceremony in December 2005 and recognized the exemplary efforts of branch and department staff in its daily operations as well as reminisced on the strides made one year and three months post Hurricane Ivan.
Management and Administrative staff
attending a seminar on the 2005 Banking Act.
Four employees participated in the first Ms. Co-op Bank pageant, which was
exciting and well received.
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11 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
The highlight of the year was “Explosion 3”, the bi-annual staff cultural event, which featured the first Ms. Co-op Bank competition, held in April 2006, at the Grenada Trade Centre Annex.
The talents of the employees in song, dance, poetry and drama were displayed to staff and their families.
In fostering a wholistic environment, the Bank believes that when staff feel motivated, they will be better able to render the quality of service that customers continue to demand and thereby achieve its mission as a “provider of high quality financial and related services”.
CoMMUNITY oUTREACH
As a responsible social partner, the Bank continued to readily give its support for educational, cultural, sporting and intellectual development, to several individuals and organizations. In 2006 beneficiaries included the Grenada Amateur Swimming Association, Agency for Rural Transformation, Rotary Club of Grenada, The Leo Club of St. George’s, Heritage Theatre, GRENSAvE, and the Carriacou United Cricket Board, to name a few.
Noteworthy ventures that promote educational development such as the Co-op Bank Julien Fédon Memorial Lecture & Prize Giving Ceremony and the Sir Archibald Nedd Lecture Series have had the Bank’s support since 2001 and 2002 respectively. The Bank was one of the major sponsors in the inaugural SGU Knowledge Bowl – a keenly contested secondary school quiz that tested the knowledge of fourth and fifth form students from 18 secondary schools, including Carriacou on a broad range of subject areas.
Having recognized the value of the exercise and its close alignment with the Bank’s philosophy for supporting educational development this venture was readily supported.
Sports development is another main avenue of the Bank’s community outreach programme. For the third consecutive year the Bank provided full sponsorship for the Grenada Union of Teachers (G.U.T.) Primary School Sports in
Employees who performed, entertained family and friends at
Explosion 3, 2006.
Far right: Mr. Richard Duncan, Manager Finance & Corporate Affairs during the prize giving ceremony following the final competition
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12 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
GENERAL MANAGER‘S REPORT
St. Andrew’s and St. patrick’s. In addition, for the first time the Bank extended sponsorship to the national event, which is the biggest sporting event for students at the primary school level which sees students from every parish vying for supremacy.
ELECTIoN oF DIRECToRS AND AppoINTMENT oF AUDIToRS
The directors retiring are Messrs. Lethon Herry, Darryl Brathwaite and Richard Mc Intyre who being eligible, offer themselves for re-election.
The retiring auditors, Messrs pricewaterhouseCoopers, Chartered Accountants, offer themselves for re-appointment.
AppRECIATIoN
on behalf of the Board of Directors and myself I wish to place on record our appreciation of the services of the Management and staff for their devotion to duty and hard work during the year under review.
Gordon V. Steele
General Manager
Champions of the National Games – St. Patrick’s, with representatives of the Bank
at the extreme left and right.
Athletes crossing the finish line of a keenly contested race during the National Games.
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13 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
THE MANAGEMENT TEAM
Gordon V. Steele, Esq.,Managing Director
Richard Duncan, B.Sc., M.A.,CGA, AICB, Manager
Finance & Corporate Affairs
Peter Antoine, B.Sc., AICB,Senior Programme &
Research Officer
Floyd Dowden, AICB,Manager,
Banking Operations
Julia Lawrence, B.S.,MBA-IBF, Internal Auditor
Mondelle Squires-Francis,B.Sc., Senior Human
Resources Officer
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14 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
THE MANAGEMENT TEAM
Samantha Ince-John, B.Sc.,Marketing Officer
Clifford Bhola, AICB,Branch Manager, Sauteurs
Shane Regis, AICB,Senior Operations Officer
Jennifer Gulston-Gittens, B.S., Senior Credit Officer
David Flemming,Senior InformationTechnology Officer
Ann Williams,Branch Manager,
Grenville
Cynthia Davidson,Branch Manager,Spiceland Mall
Denby De Freitas,Manager, Credit
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15 Annual Report 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time.
BOARD OF DIRECTORS
Gordon V. Steele, Esq.,General Manager/Managing Director
C.A. St. Bernard, Esq., C.B.E.,Q.C., Chairman
Derick Steele, Esq. Richard Mc Intyre, Esq.
Lethon Herry, Esq. Leslie L. Ramdhanny, Esq. Darryl Brathwaite, Esq.
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16 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
LOANS & ADVANCES 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 - 2006
LOANS & ADVANCES $59,477,721 $70,672,235 $76,146,487 83,228,176 $103,255,993 $122,016,314 $142,499,185 $188,368,818 $232,910,658 $273,389,669
% Change 18.3% 18.8% 7.7% 9.3% 24.1% 18.2% 16.8% 32.2% 23.6% 17.4% 359.7%
DEPOSITS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 - 2006
DEPOSITS $80,376,179 $85,654,999 $102,525,610 $109,865,712 $123,580,718 $162,050,558 $201,036,624 $234,780,553 $282,120,420 $314,172,247
% Change 6.5% 6.6% 19.7% 7.2% 12.5% 31.1% 24.1% 16.8% 20.2% 11.4% 290.9%
PROFITS & DIVIDENDS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Net After Tax Profits $152,034 $606,437 $769,690 $1,464,913 $1,476,450 $1,670,471 $3,651,611 $3,297,225 $4,594,693 $4,576,219
% Change 126.9% 298.9% 26.9% 90.3% 0.8% 13.1% 118.6% -9.7% 39.4% -0.4%
DIVIDEND PER COMMON SHARE 10% 10% $0.10 $0.15 $0.15 $0.20 $0.22 $0.11 $0.14 $0.22
Selected financial statistics1997 - 2006
(expressed in Eastern Caribbean dollars)
1997 2000 2003 20060
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
LOANS
Co
-Op
Ban
k Lo
ans
1997
- 2
006
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17 Annual Report 2006
LOANS & ADVANCES 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 - 2006
LOANS & ADVANCES $59,477,721 $70,672,235 $76,146,487 83,228,176 $103,255,993 $122,016,314 $142,499,185 $188,368,818 $232,910,658 $273,389,669
% Change 18.3% 18.8% 7.7% 9.3% 24.1% 18.2% 16.8% 32.2% 23.6% 17.4% 359.7%
DEPOSITS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 1997 - 2006
DEPOSITS $80,376,179 $85,654,999 $102,525,610 $109,865,712 $123,580,718 $162,050,558 $201,036,624 $234,780,553 $282,120,420 $314,172,247
% Change 6.5% 6.6% 19.7% 7.2% 12.5% 31.1% 24.1% 16.8% 20.2% 11.4% 290.9%
PROFITS & DIVIDENDS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Net After Tax Profits $152,034 $606,437 $769,690 $1,464,913 $1,476,450 $1,670,471 $3,651,611 $3,297,225 $4,594,693 $4,576,219
% Change 126.9% 298.9% 26.9% 90.3% 0.8% 13.1% 118.6% -9.7% 39.4% -0.4%
DIVIDEND PER COMMON SHARE 10% 10% $0.10 $0.15 $0.15 $0.20 $0.22 $0.11 $0.14 $0.22
SOURCE:
Audited Financial Statements
Co
-Op
Ban
k D
epo
sits
199
7 -
2006
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
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18 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
November 30, 2006
Auditors’ Report
To the Shareholders of Grenada Co-operative Bank Limited
We have audited the accompanying balance sheet of Grenada Co-operative Bank Limited as of September
30, 2006 and the related statements of changes in equity, income and cash flows for the year then ended. These
financial statements are the responsibility of the bank’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with International Standards on Auditing. Those standards require
that we plan and perform the audit to obtain reasonable assurance about 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.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the
bank as of September 30, 2006 and the results of its operations and its cash flows for the year then ended in
accordance with International Financial Reporting Standards.
PricewaterhouseCoopers Chartered Accountants
Auditors’ Report
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19 Annual Report 2006
Balance SheetAs of September 30, 2006
(expressed in Eastern Caribbean dollars)
2006 2005 $ $Assets Cash resources (note 4) 28,572,430 29,623,709
Reserve deposit – E.C.C.B. (note 5) 18,850,335 16,920,000
Customer loans and advances (note 6) 269,823,031 228,671,638
Interest receivable on loans and investments 3,759,743 3,489,997
Investments (note 7) 23,010,326 24,217,601
premises and equipment (note 8) 10,298,601 10,788,507
other assets and prepayments 4,996,730 4,819,201
Total Assets 359,311,196 318,530,653
Liabilities Due to other banks 9,000,000 6,000,000
Customer deposits (note 9) 314,172,247 282,120,420
Interest payable 2,718,972 2,862,823
Managers’ cheques 1,820,307 2,246,231
proposed dividends (note 10) 1,122,000 714,000
other liabilities 3,484,598 1,624,622
Income tax payable 895,451 375,625
Total Liabilities 333,213,575 295,943,721
Equity Stated capital (note 11) 7,620,000 7,620,000
Statutory reserve (note 12) 6,250,757 5,335,513
Retained earnings 9,406,605 8,664,689
other reserves (note 13) 2,820,259 966,730
Total Equity 26,097,621 22,586,932
Total Liabilities and Equity 359,311,196 318,530,653
November 30th, 2006
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20 Annual Report 2006
Statement of C
hanges in Equity
For the year ended September 30, 2006
(expressed in Eastern C
aribbean dollars)
GREN
AD
A C
o-o
pERATIv
E BAN
k LIM
ITED
Stated
Statuto
ry O
ther
Retain
ed
Total
capital
Reserve
Reserves
Earnin
gs
Equ
ity
$
$ $
$ $
Balance at September 30, 2004
7,620,000 4,416,574
952,858 5,702,935
18,692,367
Net incom
e for the year –
– –
4,594,693 4,594,693
Transfer to Statutory Reserve –
918,939 –
(918,939) –
Dividends
– –
– (714,000)
(714,000)
Revaluation Reserve – available-for-sale investm
ents –
– 13,872
– 13,872
Balance at September 30, 2005
7,620,000 5,335,513
966,730 8,664,689
22,586,932
Net incom
e for the year –
– –
4,576,219 4,576,219
Transfer to General Reserves
– –
228,811 (228,811)
–
Transfer to Statutory Reserve –
915,244 –
(915,244) –
Transfer to Regulatory Reserve –
– 1,415,465
(1,415,465) –
Dividends
– –
– (1,122,000)
(1,122,000)
Revaluation Reserve – available-for-sale investm
ents –
– 56,470
56,470
Transfer from property revaluation surplus
– –
152,783 (152,783)
–
Balan
ce at Septem
ber 30, 2006
7,620,000 6,250,757
2,820,259 9,406,605
26,097,621
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21 Annual Report 2006
2006 2005 $ $Interest income Customer loans and advances 23,778,941 21,222,215
Investments and deposits at other banks 3,059,477 3,552,732
26,838,418 24,774,947
Interest expense (note 14) 9,840,282 9,203,563
Net interest income 16,998,136 15,571,384
Other income (note 15) 2,718,475 2,331,281
Operating income 19,716,611 17,902,665
Expenditure Loan loss expense (note 6) 123,772 905,909
Direct operating expenses 8,823,550 7,914,520
other expenses 4,437,596 3,444,542
13,384,918 12,264,971
Income, before income tax (note 16) 6,331,693 5,637,694
provision for income tax (note 17) (1,755,474) (1,043,000)
Net income for the year 4,576,219 4,594,694
Basic earnings per share (note 18) 90¢ 90¢
Statement of Income For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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22 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
2006 2005 $ $Cash flows from operating activities Income before income tax 6,331,693 5,637,693
Items not affecting working capital
Depreciation 1,097,253 1,116,449
Loss on disposal of premises and equipment 513,865 3,380
Operating profit before working capital changes 7,942,811 6,757,522
Net changes in operating assets and liabilities:
Interest receivable and prepayments (447,275) (1,503,363)
Customer loans and advances (41,151,393) (44,154,687)
Customer deposits 32,051,827 47,339,867
Interest payable (143,851) 781,300
other liabilities 1,434,052 789,683
Deferred expenses – 69,240
Due to other banks 3,000,000 6,000,000
2,686,171 16,079,562
Net income tax paid (1,235,648) (1,053,745)
Net cash from operating activities 1,450,523 15,025,817
Cash flows from investing activitiesSale/(purchase) of investments 1,263,745 (4,009,351)
purchase of premises and equipment (1,176,212) (1,162,759)
proceeds from sale of premises and equipment 55,000 6,950
Increase in reserve deposit – E.C.C.B. (1,930,335) (2,875,000)
Net cash from/(used in) investing activities (1,787,802) (8,040,160)
Cash flows used in financing activitiesDividends paid (714,000) (561,000)
Net change in cash and cash equivalents (1,051,279) 6,424,657
Cash and cash equivalents – beginning of year 29,623,709 23,199,052
Cash and cash equivalents – end of year (note 18) 28,572,430 29,623,709
Statement of Cash FlowsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
23 Annual Report 2006
1 General information The Bank was incorporated on July 26, 1932, and continued under the Companies Act 1994 of Grenada.
It provides retail and corporate banking services. The Bank’s registered office and principal place of business is situated on Church Street, St. George’s.
The Bank has four branches and employed 100 persons during the year (2005 - 84 persons).
2 Significant accounting policies
a) Basis of preparation
These financial statements comply with International Financial Reporting Standards and are prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets and land and buildings.
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 as at the date of the financial statements and income and expenses during the reporting period. Actual results may differ from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.
Adoption of standards
The Bank adopted the following IFRS, which are relevant to its operations. The prior year’s accounts have been amended as required, in accordance with the relevant requirements.
IAS 1 (revised 2003) presentation of Financial Statements
IAS 8 (revised 2003) Accounting policies, Changes in Accounting Estimates and Errors
IAS 10 (revised 2003) Events after the Balance Sheet date
IAS 16 (revised 2003) property, plant and Equipment
IAS 17 (revised 2003) Leases
IAS 21 (revised 2003) The Effects of Changes in Foreign Exchange Rates
IAS 24 (revised 2003) Related party Disclosures
IAS 32 (revised 2003) Financial Instruments: Disclosure and presentation
IAS 39 (revised 2003) Financial Instruments: Recognition and Measurement
IAS 36 (revised 2004) Impairment of Assets.
The adoption of these standards did not result in substantial changes to the Bank’s accounting policies.
b) Premises and equipment
All premises and equipment are stated at historical cost except for land and buildings which is at valuation and or net of accumulated depreciation. Historical costs include expenditure directly attributable to the acquisition of the item. Land is not depreciated. Depreciation is provided on the
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24 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
2 Significant accounting policies cont.
straight-line method at rates designed to allocate the cost of the assets over the period of their estimated useful lives. These rates are as follows:
Furniture and equipment 10%
Computer equipment 16.66%
Motor vehicles 20%
Freehold buildings 2.5%
Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the income statement.
Leasehold improvements are amortised over the term of the lease.
Maintenance and repairs to buildings are charged to current operations and the cost of improvements are capitalised where such improvements would extend the remaining useful life of the building.
The cost or valuation of premises and equipment replaced, retired or otherwise disposed of and the accumulated depreciation thereon are eliminated from the accounts and the resulting gain or loss reflected in the statement of income.
c) Provision for credit losses
Specific provision for credit losses is established if there is objective evidence that the Bank will not be able to collect all amounts due according to the original contractual terms of loans. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted based on current interest rates. Statutory and other regulatory loan loss reserve requirements that exceed these amounts are recorded in the regulatory reserve as an appropriation of retained earnings.
The regulatory reserve represents transfers from retained earnings in accordance with the ECCB guidelines for loan loss reserves.
The provision for credit losses also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. These have been estimated based upon historical patterns of losses in each component, the credit ratings allocated to the borrowers and reflecting the current economic climate in which the borrowers operate. When a loan is uncollectable, it is written off against the related allowance. Subsequent recoveries are credited to the provision for credit losses on loans in the statement of income.
d) Interest income and expense
Interest income and expense are taken into income on an accrual basis using the effective interest yield method based on the actual purchase price on estimated recoverable amount. Interest income includes coupons earned on fixed income investments.
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
25 Annual Report 2006
e) Currency translation
The financial statements are presented in Eastern Caribbean dollars which is also the Bank’s principal currency.
Assets and liabilities denominated in foreign currencies are translated to E.C. dollars at the rates of exchange ruling at the end of the financial year. Transactions arising during the year involving foreign currencies have been converted at the rates prevailing on the dates the transactions occurred. Differences arising from fluctuations in exchange rates are included in the statement of income.
f) Deferred Taxation
The Bank provides for current income tax payable in accordance with the Income Tax Act 1994 as amended.
Income taxes are accounted for under tax effect accounting using the liability method. Deferred tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes using the rates that are expected to apply when the asset is realised or liability settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised.
g) Investments
Debt and equity investments held for short-term liquidity purposes and or intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates are classified as available-for-sale. Investments classified as available-for-sale are stated at fair market value based on quoted market prices or management’s estimates. Differences between fair value and costs are accounted for under shareholders’ equity as revaluation reserve.
Debt security investments with fixed maturities and fixed incomes are accounted for on the basis of loans and receivables in accordance with IAS 39. These investments are measured at amortized costs.
h) Pension
The Bank’s contributions to its Defined Contribution pension plan are charged to the income statement in the year to which they relate.
i) Cash and cash equivalents
For purposes of the cash flow statement, cash and cash equivalents comprise cash balances, deposits with the E.C.C.B. other than reserve deposit and amounts on deposit with other banks and other financial institutions.
j) Dividends
Dividends are recognised in equity in the period in which they are declared by the Directors.
k) Leases
Leases entered into by the Bank are operating leases. The monthly rentals are charged to income on a straight-line basis over the lease term.
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26 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
l) Fees and commission income
Fees, rentals and commissions are generally recognised on an accrual basis.
3 Critical accounting estimates and judgements in applying accounting policies
The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
a) Impairment losses on loans and advances
The Bank reviews its loan portfolios to assess impairment on an annual basis. In determining whether an impairment loss should be recorded in the income statement, the Bank makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.
b) Impairment of available-for-sale equity investments
The Bank determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgement. In making this judgement, the Bank evaluates among other factors, the normal volatility in share price. In addition, impairment may be appropriate when there is evidence of a deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.
4 Cash resources 2006 2005 $ $
Cash in hand 7,421,950 4,511,451
Cash at other banks – current accounts 7,447,847 5,175,427
Cash at other financial institutions 11,577,170 18,634,052
E.C.C.B. 2,125,463 1,302,779
28,572,430 29,623,709
The total cash resources carry interest rates varying between 0% and 9% per annum (2005 - 0% and 9%), except for deposits with the ECCB which are non-interest bearing.
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
27 Annual Report 2006
5 Reserve deposit
Mandatory reserve deposits with the ECCB represents the Bank’s regulatory requirement to maintain a percentage of deposit liabilities as cash or deposits with the ECCB in accordance with Article 33 of the ECCB Agreement 1983. These funds are not available to finance the Bank’s day-to-day operations and as such, are excluded from cash resources to arrive at cash and cash equivalents.
6 Customer loans and advances 2006 2005
$ $
Mortgages 215,739,678 194,085,208
promissory notes 31,250,301 16,204,289
other advances 26,399,690 22,621,161
273,389,669 232,910,658
provision for loan losses (3,476,057) (4,148,439)
Special provision re. Trans-Nemwil (Finance) Ltd. (see note below) (90,581) (90,581)
269,823,031 228,671,638
Movement in provision for loan losses is as follows:-
2006 2005
$ $
Balance beginning of year 4,148,439 3,717,486
Bad debts written off (796,154) (474,956)
Increase in provision 123,772 905,909
Balance end of year 3,476,057 4,148,439
The aggregate amount of non-performing loans on which interest was not being accrued amounted to $29,133,097 as at September 30, 2006 ($19,383,388 as at September 30, 2005). Uncollected interest accrued on impaired loans amounted to $8,099,166 as at September 30, 2006 ($6,565,588 as at September 30, 2005).
Note:
This amount represents the excess of assets over liabilities, purchase price, acquisition costs and provision for loan losses arising from the 1999 purchase of the said assets and liabilities of Trans-Nemwil (Finance) Ltd. The amounts to be taken into income in any year is based on the realisation of principal balances of the purchased loans.
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28 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
6.1 Maturity profile – Loans and advances 2006 2005
$’000 $’000 Within 1 year 62,784 51,624
Within 1 to 3 years 25,533 17,606
Within 3 to 5 years 19,451 16,486
over 5 years 165,622 147,195
273,390 232,911
6.2 Loans by Sector 2006 2005
$’000 $’000
Agriculture 755 591
Fisheries 1,167 483
Manufacturing 9,862 10,144
Utilities (electricity, water, telephone & media) 350 396
Construction and land development 6,347 3,920
Distributive trades 16,219 13,008
Tourism 10,284 2,440
Entertainment and catering 2,336 981
Transportation and storage 24,027 22,432
Financial institutions 62 239
professional and other services 10,052 9,275
public administration 9,780 7,085
personal 182,149 161,917
Total 273,390 232,911
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
29 Annual Report 2006
7 Investments 2006 2005
$’000 $’000
Government of Grenada -
6% Treasury Bills – E.C.C.B. 492,076 492,076
9% Treasury Bills – E.C.C.B 418,500 418,500
7% Treasury Bills – E.C.C.B 8,067,500 8,067,500
8,978,076 8,978,076
Fixed income securities classified as loans and receivables under IAS 39:
Government of Grenada 1,114,771 1,091,172
National Development 30,000 30,000
Eastern Caribbean Home Mortgage Bank 1,500,000 1,500,000
Grenada Electricity Services Ltd. 327,835 372,190
Government of St. vincent – 2014 Bonds – 1,799,980
Government of St. vincent – 2007 Bonds – 2,900,000
Government of St. vincent 1,000,000 –
Government of St. kitts 650,000 650,000
Government of Antigua (ABIB) Bonds 4,765,860 5,140,269
Government of St. Lucia 500,000 500,000
9,888,466 13,983,611
Interest is earned on held-to-maturity investments at rates ranging between 4.25% to 9.75%
Equities – Available for sale:
Republic Bank (Grenada) Limited – 8,000 ordinary shares 320,000 312,000
RBTT Bank Grenada Ltd. – 8,916 ordinary shares 43,064 43,064
Caribbean Credit Card Corporation – 25 ordinary shares 25,000 25,000
Eastern Caribbean Home Mortgage Bank – 777 Class C Shares 124,320 77,700
Eastern Caribbean Securities Exchange – Shares – 5,000 class C shares 50,000 50,000
Antigua Barbuda Investment Bank – 250,000 shares 750,000 300,000
Grenada Electricity Services Limited – 50,000 ordinary shares 450,000 448,150
TCI Bank Limited – 250,000 shares 675,000 –
ECIC Holdings – 632,000 shares 1,706,400 –
4,143,784 1,255,914
23,010,326 24,217,601
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30 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
7.1 Maturity profile of held to maturity investments 2006 2005
$ $
Within 1 year 9,978,076 13,862,082
Within 1 to 3 years 2,208,450 1,958,731
Within 3 to 5 years 764,849 508,447
over 5 years 5,915,167 6,632,427
18,866,542 22,961,687
8 Premises and equipment Freehold land Leasehold Furniture Computer Motor Total and buildings improvements & equipment equipment vehicles $ $ $ $ $ $
At October 1, 2004
Cost or valuation 7,553,200 645,133 2,846,387 5,306,958 551,008 16,902,686
Accumulated depreciation (300,772) (133,297) (1,850,164) (3,432,002) (433,926) (6,150,161)
Net book amount 7,252,428 511,836 996,223 1,874,956 117,082 10,752,525
Year ended September 30, 2005
opening net book amount 7,252,428 511,836 996,223 1,874,956 117,082 10,752,525
Additions 113,292 48,027 161,804 670,096 80,000 1,073,219
Disposals – – (10,328) – – (10,328)
Adjustments 89,540 – – – – 89,540
Depreciation charge (152,767) (32,523) (197,997) (646,915) (86,247) (1,116,449)
Closing net book amount 7,302,493 527,340 949,702 1,898,137 110,835 10,788,507
At September 30, 2005
Cost or valuation 7,756,032 693,160 2,961,057 5,977,054 552,008 17,939,311
Accumulated depreciation (453,539) (165,820) (2,011,355) (4,078,917) (441,173) (7,150,804)
Net book amount 7,302,493 527,340 949,702 1,898,137 110,835 10,788,507
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
31 Annual Report 2006
Freehold land Leasehold Furniture Computer Motor Total and buildings improvements & equipment equipment vehicles $ $ $ $ $ $
Year ended September 30, 2006
opening net book value 7,302,493 527,340 949,702 1,898,137 110,835 10,788,507
Additions 32,243 113,808 347,919 387,242 295,000 1,176,212
Disposals (543,576) – (25,197) (92) – (568,865)
Depreciation charge (148,288) (38,479) (214,284) (581,822) (114,380) (1,097,253)
Closing net book amount 6,642,872 602,669 1,058,140 1,703,465 291,455 10,298,601
At September 30, 2006
Cost or valuation 7,192,575 806,968 3,278,523 6,282,924 597,008 18,157,998
Accumulated depreciation (549,703) (204,299) (2,220,383) (4,579,459) (305,553) (7,859,397)
Net book amount 6,642,872 602,669 1,058,140 1,703,465 291,455 10,298,601
9 Customer deposits 2006 2005
$ $
Savings accounts 135,268,706 116,198,699
Fixed deposit accounts 124,370,371 110,912,367
Treasure Chest accounts 20,151,870 20,060,020
Chequing accounts 17,458,221 19,115,159
Current accounts 16,923,079 15,834,175
314,172,247 282,120,420
All deposits mature within one year. Effective interest rate ranged from 1.5% to 6%.
10 Proposed dividends 2006 2005
$ $
Common shares 1,122,000 714,000
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32 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
11 Stated capital 2006 2005
$ $
Authorised:-
An unlimited number of common shares with no par value
Issued:-
5,100,000 common shares 7,620,000 7,620,000
12 Statutory reserve
The Banking Act of 2005 under Sub-section 14 (1) requires that a minimum of 20% of net after tax profits in each year be transferred to a Statutory Reserve Fund until the balance of this fund is equal to the issued Share Capital. This reserve is not available for distribution as dividends or any form of appropriation.
The transfer for the year was $915,244 (2005 - $918,939).
13 Other reserves 2006 2005
$ $
property revaluation surplus 848,225 695,442
Revaluation reserve on available-for-sale investments 327,758 271,288
Regulatory reserve 1,415,465 –
General reserve 228,811 –
2,820,259 966,730
Movement in reserves were as follows:-
property revaluation surplus
At october 1, 2005 695,442 695,442
Transfer from retained earnings 152,783 –
848,225 695,442
Property revaluation surplus – This represents surplus on valuation of the Bank’s property. This valuation was undertaken by Joseph John & Associates Ltd. on September 16, 2003. valuations were made on the basis of open market value.
Revaluation reserve 2006 2005
$ $
At october 1, 2005 271,288 257,416
Net gains from changes in fair value 56,470 13,872
327,758 271,288
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
33 Annual Report 2006
Revaluation reserve – Available-for-sale investments – This represents net gains/(losses) from changes in fair value.
2006 2005
Regulatory reserve $ $
At october 1, 2005 – –
Transfer from retained earnings 1,415,465 –
1,415,465 –
Regulatory reserve – This represents transfers from retained earnings to meet loan loss reserve requirements in accordance with ECCB guidelines for loan loss reserves.
2006 2005
General reserve $ $
At october 1, 2005 – –
Transfer from retained earnings 228,811 –
228,811 –
General reserve – The Bank makes an appropriation to a general banking reserve for unforeseeable risks and future losses. General reserve can only be distributed following approval by the Board of Directors.
14 Interest expense 2006 2005
$ $
Savings deposits 4,254,837 3,877,281
other time deposits 5,376,439 5,110,171
Chequing account 209,006 216,111
9,840,282 9,203,563
15 Other income 2006 2005 $ $
Sundry fees 2,705,488 2,166,948
Miscellaneous 12,987 120,533
Transfer from Trans-Nemwil special provision – (note 6) – 43,800
2,718,475 2,331,281
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34 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
16 Income before income tax 2006 2005 $ $
Income before income tax is arrived at after charging the following:-
Depreciation 1,097,253 1,116,449
Staff costs 4,505,897 4,043,571
17 Taxation 2006 2005 $ $
Current tax 1,755,474 1,043,000
The tax on the income before tax differs from the theoretical amount that would arise using the basic tax as follows:-
2006 2005 $ $
Income before income tax 6,331,693 5,637,693
Tax calculated at corporation tax rate of 30% 1,899,508 1,691,308
Income not subject to tax (447,425) (799,561)
Expenses not deductible for tax purposes 234,704 65,703
Depreciation on items not eligible for capital allowances 68,687 81,887
over-provision in accounts – current year – 3,663
1,755,474 1,043,000
18 Basic earnings per share Basic earnings per share is calculated by dividing the income attributable to common shareholders by the
weighted average number of common shares in issue during the year.
2006 2005 $ $
Net income attributable to common shareholders 4,576,219 4,594,693
Weighted average number of common shares in issue 5,100,000 5,100,000
Basic earnings per share 90¢ 90¢
The Bank has no potential common shares in issue which would give rise to a dilution of the basic earnings per share. Therefore diluted earnings per share would be same as basic earnings per share.
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)s)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
35 Annual Report 2006
19 Cash and cash equivalents 2006 2005 $ $
This is comprised of:-
Cash resources (note 4) 28,572,430 29,623,709
20 Leasehold commitments At September 30, 2006, the bank was committed to annual leasehold payments as follows:
2006 2005 $ $
Lease expiry date
Under one year 331,763 247,763
one to five years 1,096,650 854,250
1,428,413 1,102,013
21 Contingent liabilities and commitments In the normal course of business, the following amounts represent outstanding commitments to extend credit which are not reflected on the face of the financial statements. No material losses are anticipated as a result of these.
2006 2005 $ $
Guarantees 5,111,419 1,920,460
Undisbursed loan commitments 23,939,000 30,755,000
29,050,419 32,675,460
22 Capital commitments The bank has commitments of $44,542 in respect of the improvement of electronic information systems.
23 Defined contribution schemeThe bank maintains a superannuation plan into which both employer and employee pay 5% of gross salary. The bank’s contribution to the Scheme was $206,969 (2005 - $199,406).
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36 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
24 Financial instruments
Fair value of financial instruments
The fair value of financial instruments is based on the valuation methods and assumptions set out in note 3 – Significant Accounting policies. Fair value represents the amount at which financial instruments may be exchanged in an arm’s length transaction between willing parties under no compulsion to transact and is best evidenced by a quoted market place. If no quoted market prices are available, the fair values represented are estimates derived using present value or other valuation techniques indicative of net realisable value.
The following methods and assumptions have been used to estimate the fair value of each class of financial instruments for which it is practical to estimate a value.
Short-term financial assets and liabilities
The carrying value of these assets and liabilities is a reasonable estimate of their fair value because of the short maturity of these instruments. Short-term financial assets comprise of cash resources, interest receivable, and other receivables. Short-term financial liabilities comprise interest payable and other liabilities.
Investment securities
Debt securities are carried at amortised cost in the absence of market values and are considered to reflect fair value. Equity investments are unquoted and are carried at cost less impairment which is management’s estimate of fair value.
Loans and advances
These assets result from transactions conducted in the normal course of business and their values are not adversely affected by unusual terms. The inherent rates of interest in the portfolio approximate market conditions and yield discounted cash flow values which are substantially in accordance with financial statement amounts.
Customers’ deposits
The fair value of items with no stated maturity are assumed to be equal to their carrying values. Deposits with fixed rate characteristics are at rates which are not significantly different from current rates and are assumed to have discounted cash flow values which approximate carrying values.
Credit risk management
The Bank takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Impairment provisions are provided for losses that have been incurred at the balance sheet date. Significant changes in the economy, or in the health of a particular industry segment that represents a concentration in the Bank’s portfolio, could result in losses that are different from those provided for at the balance sheet date. Management therefore carefully manages its exposure to credit risk.
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)s)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
37 Annual Report 2006
The Bank structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers. Such risks are monitored on a revolving basis and subject to an annual review.
Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees, except for personal lending where no such facilities can be obtained.
Interest rate risk
Interest rate risk arises when there is a mismatch between the size and maturity of interest earning assets and deposit liabilities such that interest rate changes can expose the Bank to earnings volatility. The Bank reviews its exposure to financial risks and implements mitigating measures to minimise or reduce the negative impact of interest rate risk.
Differences in contractual re-pricing or maturity dates and changes in interest rates may expose the Bank to interest rate risk. The table below summarises the Bank’s exposure to interest rate risk:
Up to Between Between over Non-interest Total 1 year 1-3 years 3-5 years 5 years bearing $’000 $’000 $’000 $’000 $’000 $’000 $ $ $ $ $ $
As at 09.30.06
Assets
Cash and
short-term funds 28,573 – – – 18,850 47,423
Loans and advances 59,308 25,533 19,451 165,622 – 269,914
Investments 9,978 2,208 765 5,915 4,144 23,010
other assets – – – – 18,966 18,966
Total assets 97,859 27,741 20,216 171,537 41,960 359,313
Liabilities
Customers’ deposits 303,082 11,090 – – – 314,172
other liabilities 9,000 – – – 10,042 19,042
Total liabilities 312,082 11,090 – – 10,042 333,214
Interest Sensitivity Gap (214,223) 16,651 20,216 171,537
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38 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
Up to Between Between over Non-interest Total 1 year 1-3 years 3-5 years 5 years bearing $’000 $’000 $’000 $’000 $’000 $’000 $ $ $ $ $ $
As at 09.30.05
Assets
Cash and short-term funds 29,624 – – – 16,920 46,544
Loans and advances 47,476 17,606 16,486 147,195 – 228,763
Investments 13,862 1,959 508 6,633 1,256 24,218
other assets – – – – 19,006 19,006
Total assets 90,962 19,565 16,994 153,828 37,182 318,531
Liabilities
Customers’ deposits 282,120 – – – – 282,120
other liabilities – – – – 13,824 13,824
Total liabilities 282,120 – – – 13,824 295,944
Interest Sensitivity Gap (191,158) 19,565 16,994 153,828
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)s)
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Notes to Financial Statements For the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)
39 Annual Report 2006
Liquidity risk
Liquidity risk arises from fluctuations in cash-flows. The liquidity management process ensures that the Bank is able to honour all its commitments when they fall due. The Bank has a liquidity policy which sets out the liquidity management process. Liquidity risk is managed by the Bank’s Risk and Capital Committee, which formulates strategies for maintaining adequate exposure from deposit concentrations and also building core deposits.
past experience has, however, indicated that term deposits and savings are continually reinvested. The table below summarises the Bank’s exposure to liquidity risk:
Maturity of assets and liabilities Up to Up to over Total 1 year 5 years 5 years ($000’s) ($000’s) ($000’s) ($000’s)
As at September 30, 2006
Assets
Cash resources 47,423 – – 47,423Investments 9,978 2,973 10,059 23,010Loans and advances 59,308 44,984 165,622 269,914
other assets 3,645 5,021 10,299 18,965
Total assets 120,354 52,978 185,980 359,312
Liabilities
Customers’ deposits 314,172 – – 314,172
other liabilities 19,042 – – 19,042
Total liabilities 333,214 – – 333,214
Net liquidity gap (212,860) 52,978 185,980 26,098
As at September 30, 2005
Total assets 112,701 42,708 163,121 318,530
Total liabilities (295,944) – – (295,944) Net liquidity gap (183,243) 42,708 163,121 22,586
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40 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
25 Unauthorised transactions Certain unauthorised transactions were discovered. The total loss of $773,691 resulting from these
transactions have been reported in these financial statements.
26 Related party transactions Related party transactions key management compensation
Key management compensation 2006 2005 $ $
Salaries and other short-term employee benefits 1,190,622 1,061,625
Loans to related parties
Loans to directors and key management of the Company (and their families):
Beginning of year 2,553,585 2,004,131
Loans advanced during the year 108,944 899,679
Loan repayments received (176,967) (350,225)
Interest charged 92,376 108,365
Interest received (92,376) (108,365)
End of year 2,485,562 2,553,585
The loans to directors and key management personnel are secured by a variety of real and financial assets. No provision has been required in 2006 for loans made to directors and key management personnel.
Deposits from related parties 2006 2005 $ $
Deposits from directors and key management of the Company (and their families):
Beginning of year 3,454,895 3,485,846
Deposits accepted during the year 2,141,716 2,484,213
Interest paid 191,766 175,795
Withdrawals made during the year (2,268,982) (2,690,959)
End of year 3,519,395 3,454,895
Notes to Financial StatementsFor the year ended September 30, 2006
(expressed in Eastern Caribbean dollars)s)
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41 Annual Report 2006
Head Office: No. 8 Church Street, St. George’s, Grenada, West Indies Telephone: (473)-440-2111/3549 Fax: (473)-440-6600 Website: www.grenadaco-opbank.com, E-mail: [email protected]
Managing Director Gordon v. Steele, Esq.
Internal Auditor J.G. Lawrence (Miss), B.S., MBA-IBF
Manager, Finance & Corporate Affairs R.W. Duncan, Esq., B.Sc., MA., CGA, AICB
Manager, Credit Denby De Freitas, Esq.
Manager, Banking operations F. Dowden, Esq., AICB
Senior Credit officer J. Gulston-Gittens (Mrs.), B.A.
Senior Information Technology officer D. Flemming, Esq.
Senior Human Resources officer M. Squires-Francis (Mrs.) B.Sc.
Marketing officer S. Ince-John (Mrs.) B. Sc.
Senior operations officer S. Regis, Esq., AICB
Senior programme & Research officer p. Antoine, Esq., B.Sc, AICB
Grenville: Victoria Street Grenville, St. Andrew’s Telephone: (473)-442-7748/7708 Fax: (473)-442-8400 Branch Manager A.C. Williams (Miss)
Sauteurs:
Main Street, Sauteurs, St. Patrick’s Telephone: (473)-442-9247/1188, Fax: (473)-442-9888 Branch Manager C. Bhola, Esq., AICB
Spiceland Mall:
Morne Rouge, St. George’s Telephone: (473)-440-2111, Fax: (473)-439-0776 Branch Manager C. Davidson (Mrs.)
OFFICES
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42 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
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43 Annual Report 2006
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44 Annual Report 2006
GRENADA Co-opERATIvE BANk LIMITED
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AnnuAl RepoRt 2006
Grenada Co-operative Bank LimitedThere for all the people...all the time