ANNUAL REPORT 2006
protection. security. stability. contents 1 Transmittal Letter Deposit Insurance Corporation of Ontario would like to thank the 2 DICO Staff, Mission Statement and Corporate Governance following member institutions for the use of their pictures on the 3 DICO Business Model cover of our 2006 Annual Report: 4 Board of Directors & Sub-Committees of the Board • Libro Credit Union Limited (bottom right) 6 Message from the Chair • Peterborough Industrial Credit Union Limited (top left) 8 CEO's Report • Caisse populaire d'Orléans Inc. (bottom left) 19 Management's Discussion and Analysis • Caisse populaire de Timmins Limitée (La ) (top center) 22 Management's Responsibility & Auditors’ Report 23 Consolidated Statement of Financial Position 24 Consolidated Statement of Operations and Changes in the Deposit Insurance Reserve Fund 25 Consolidated Statement of Cash Flows 26 Notes to Consolidated Financial Statements 31 List of Member Institutions Publications available on DICO’s Web Site Corporate • Annual Report
Member Institutions Information • BIS II FORM and Completion Guidelines • DICO By-law # 3 • DICO By-law # 5 - Assessment Workbook for Management - Assessment Workbook for Board of Directors - Assessment Workbook Module: Commercial Lending • DICO By-law # 6 - Application Guide By-law #6, Impaired Loans • DICO New Accounting Standards and Reporting Requirements • Director’s Handbook • Guide to DICO's OSV Process • Guidance Note (Lending) Class 1 Credit Unions • Guidance Note (Lending) Class 2 Credit Unions • Deposit Insurance Brochure & FAQ • League Return (LR) & Annual League Return (ALR) Completion Guides • Member Institution Return (MIR) & Annual Member Institution Return (AMIR) Completion Guide • On-Site Verification Manual • SBFP Reference Manual • System Outlook • System Releases
Deposit Insurance Corporation of Ontario 4711 Yonge Street, Suite 700, Toronto ON M2N 6K8 416 325-9444; 1-800-268-6653 Toll Free FAX: 416 325-9722 Internet site http://www.dico.com E-mail:[email protected] Printed on recycled paper 4711 Yonge Street 4711, rue Yonge Suite 700 Bureau 700 Toronto ON M2N 6K8 Toronto (Ontario) M2N 6K8 Telephone: 416-325-9444 Téléphone : 416 325-9444 Toll Free: 1-800-268-6653 Sans frais : 1 800 268-6653 Fax: 416-325-9722 Télécopieur : 416 325-9722
David Yule Chair of the Board Président du Conseil d'administration
March 7, 2007
The Honourable Greg Sorbara Minister of Finance Frost Building South, 7th floor 7 Queen's Park Crescent Toronto, Ontario M7A 1Y7
Dear Minister:
I have the honour to submit to you and the Superintendent of the Financial Services Commission of Ontario the Annual Report of the Deposit Insurance Corporation of Ontario for the 12 month period ended December 31, 2006.
Yours truly,
Internet Home Page : http://www.dico.com; E -mail:[email protected] Page d'accueil Internet : http://soad.com; Courriel : [email protected] mission : to protect depositors corporate governance
The Deposit Insurance Corporation of Ontario is an agency of the Province of Ontario established in 1977 vision and operates under the Credit Unions and Caisses Populaires Act, 1994 We will support the Ontario Credit Union . The Act sets out DICO's objects, powers and duties as well as general terms for deposit insurance and and Caisse Populaire System by providing other governing parameters. DICO functions within the legal framework established by the Act, Management depositor protection, building financial Board of Cabinet Secretariat Directive on Agency Establishment and Accountability and other applicable soundness and working in collaboration laws. The Corporation is ultimately accountable to the Legislature through the Minister of Finance for the con- with stakeholders. duct of its affairs. The Act requires that the DICO Board of Directors "shall manage the affairs or supervise the management of values the affairs of the Corporation…". The Board of Directors is composed of up to eleven persons all of In all our activities we will strive to: whom are appointed by the Lieutenant-Governor-in- Council to serve for various terms of usually up to three Act with professionalism and integrity; years. At least four of the members of the Board must be appointed from individuals nominated by the credit union Provide value; and caisse populaire movement. Be proactive and innovative; DICO follows a unique appointments process to ensure Recognize and respect the principles, that it recruits the best qualified people to its Board. The Corporation has established a skills profile in addition to a values and diversity of the credit union / position description for directors. DICO has also estab- lished a gender, experience, skills and geographic repre- caisse populaire system; sentation profile for the Board as a whole to ensure that it Collaborate with stakeholders; maintains an appropriate balance of these attributes. All potential candidates for the Board are screened and inter- Recognize the diversity and acknowledge viewed by a committee of the Board prior to being rec- ommended for appointment to the Minister. In each case, the importance of our staff; DICO provides the Minister with more than one candi- Provide an environment where employees date for each position. Once the Minister has made a selection, that recommendation is forwarded to the are treated fairly, and given opportunity Cabinet for approval. and encouragement to develop their DICO follows best practices in corporate governance including: potential. • a formal director orientation process; • continuous director development; • Board succession planning; • annual Board assessment and feedback; • regular in-camera sessions; and dico staff • annual strategic planning session. The Board also establishes annual objectives for itself and Adrienne Barber Suzanne Boyer Alla Brachman Barry Brydges measures its performance against those stated objectives. John BurgmanRichard DaleTony D’ErricoBob EdmisonBrigitte Elie These include strategies for risk management and com- Bill FosterCarmen GheorgheSharon HaslettJohn HuttonEntela Josifi munication with stakeholders, executive management and Yasmin KhojaSteve KokaliarisJim MaxwellAlana McLeary management reporting and control. Danny Pianezza Naile Piranaj Andy Poprawa Helen Poter DICO is a member and active participant in the Andy RechtshaffenMercedes RuanoRannie TuringanGrace Wen Conference Board of Canada's Corporate Governance Michael WhiteRichard WhiteWinnie Yu. Forum. This forum provides the Corporation with an insight into best and next practices for achieving excel- lence in governance.
2 DEPOSIT INSURANCE CORPORATION OF ONTARIO dico’s business model 2006
DICO has developed a business model to encapsulate the way in are considered under the umbrella category of governance. This also which the Corporation conducts its business in light of its legislation reflects the importance of strategic management and enterprise risk and overall environment. This business model reflects DICO's position management. The importance of accountability is also highlighted in as an integral part of Ontario's financial safety net, with its own legis- the business model, as are the major functions of the Corporation in lated mandate. DICO's Board of Directors and management activities fulfiling its mandate.
Ontario's Financial Institutions - Regulatory / Supervisory System Ministry of Finance, Financial Services Commission of Ontario, Deposit Insurance Corporation Of Ontario Legislative Environment
Credit Unions and Caisses Populaires Act Other Legislation, Statutory Requirements and DICO's Business Objectives Guidelines, Including For the Benefit of Depositors: Management Board of Cabinet Directives Provide Deposit Insurance Other Acts, i.e. French Language Services Act, Employment Promote Standards of Sound Business and Financial Standards Act, etc. Practices Act as Stabilization Authority Governance
Board of Directors
Strategic and Policy Direction
Risk Management Human Resources Audit and Finance Committee Committee Committee
Accountability Strategic Management Enterprise Risk Management Corporate Plan DICO's Business Strategies: DICO's Key Risk Categories: Annual Report Risk Assessment / Management Insurance Stakeholder Meetings Minimizing Insurance Costs Operational Protecting Depositors Reputational Collaborative Relationships Financial Efficiency & Effectiveness
Major Functions Policy Development Risk Assessment Litigation Management By-law Review & Development Insurance Asset & Liability Management Advice on Legislation Member Compliance with Legislation Finance & Treasury Standards of Sound Business & & By-laws Human Resources Management Financial Practices Intervention / Failure Resolution Legal & Corporate Depositor Communication & Payout Management Information Systems Technology & Awareness Claims & Recoveries Management Management Internal Communications Payment Obligations Internal Audit Liaison with Stakeholders Certificate of Insured Deposits International Assistance Differential Premium System
Control Environment
2006 ANNUAL REPORT 3 dico board of directors
David Yule André Auger Robert Hammond Sherry MacDonald
Benoît Martin Paul Mullins Laura Talbot Leslie Thompson
David Yule, BComm, FCA Superintendent at OSFI, he served on the Board of David Yule, Chair of the Board, retired in 1997 as a part- Directors of the Canada Deposit Insurance Corporation ner with Ernst & Young where he was involved in their for ten years. From 1992 until retirement in 2003, he was financial institution audit practice and their forensic CEO of the Canadian Payments Association, the organi- accounting practice. He currently serves on several zation responsible for operating Canada’s clearing and boards of directors and carries on a financial consulting settlement system and having credit union centrals, feder- practice. Mr. Yule was appointed to a third term on ations of caisses populaires and independent credit March 23, 2006 and his term expires on March 23, 2009. unions among its members. Mr. Hammond was appoint- ed to a first term on May 30, 2006 and his term expires André Auger, BA, M.Ed. on May 29, 2009. Mr. André Auger is a retired elementary school principal. Sherry MacDonald, CA He has twenty years of experience on caisse populaire boards, ten of which as Chair. He also held the position Sherry MacDonald is VP Risk Management and CFO at a of Chair and Vice-Chair of L’Alliance des caisses popu- major education savings plan organization with a focus laires de l’Ontario ltée. Mr. Auger is active in organiza- on risk management of investment portfolios and adher- tions and service clubs at the local level. He was appoint- ence to regulatory requirements in operations. With more ed to a first term on January 5, 2006 and his term expires than thirteen years of financial management experience in on January 4, 2009. the investment management and pension industries, she has specialized in start-up implementation of treasury Robert Hammond, BA, MBA, FCIA and finance functions as SVP Finance and Chief Robert Hammond, an actuary by profession, spent 29 Financial Officer. Ms. MacDonald was appointed to a years with the Federal Department of Insurance and its second term on March 2, 2005 and her term expires on successor organization, the Office of the Superintendent March 1, 2008. of Financial Institutions (OSFI). At various times he was Benoît Martin responsible for the supervision of federally registered insurance companies, non-bank deposit-taking institu- Benoît Martin retired as Electronics & Project Chief tions, credit union centrals and pension plans. As Engineer with General Dynamics Canada. His activities Superintendent of Insurance and, subsequently, Deputy with the caisses populaires movement included the posi- tion of Chair and Vice Chair of La Fédération des caisses
4 DEPOSIT INSURANCE CORPORATION OF ONTARIO sub-committees populaires de l’Ontario and member and Chair of various of the board caisses populaires. Mr. Martin is also active in a number of community organizations. Mr. Martin was appointed (as at December 31, 2006) to a second term on March 3, 2004 and his term expires on March 2, 2007. DICO’S BOARD OF DIRECTORS MEETINGS 2006 Paul Mullins, BA, LL.B MEETINGS % ATTENDANCE BY Paul Mullins is a lawyer who has had his own practice in DIRECTORS Windsor and Essex County since 1971. He was a com- DICO BOARD 4 91% missioner for the Federal Human Rights Tribunal. He is a AUDIT AND FINANCE COMMITTEE 4 100% RISK MANAGEMENT COMMITTEE 4 94% Director and former President of Windsor Homes HUMAN RESOURCES COMMITTEE 4 100% Coalition which provides low income housing to needy families. He served as a Director of Woodslee Credit Union Limited for 24 years. He is currently Chair of the Board of United Communities Credit Union which has audit and finance committee 33,000 members and assets of over $503 million. Mr. This committee reviews the investment policies and pro- Mullins was appointed on June 17, 2004 and his term cedures as well as monthly and annual financial statements expires on June 16, 2007. of the Corporation. It reviews the results of the external auditors' audit of the annual financial statements. The Laura Talbot, MBA, FCMA, ICD.D committee also reviews recommendations made by the Laura Talbot, Vice-Chair of the Board, is President and internal auditor regarding internal controls and proce- Senior Partner of the TalbotAllan Consulting Group, dures and ensures that appropriate action is taken. providing professional services in governance oversight, • Laura Talbot, Chair strategic advice, and interim management assignments. • André Auger Previously she held senior executive roles with University • Bob Hammond of Waterloo, the Federal government, the Canadian Red • David Yule, ex-officio Cross, several Canadian utilities and US Bank One. She has substantial experience with a variety of industry and human resources committee non profit sector boards, during periods of major strate- This committee reviews and makes recommendations to gic change and increased Board scrutiny. She was previ- the Board on policies relating to the Corporation's human ously Vice Chair of the CS COOP Board, Chair of the resources plans, compensation, employee benefits and Society of Management Accountants of Canada, a related matters. • Laura Talbot, Chair founding Board member of the Treasury Management • André Auger Association of Canada, continues as Treasurer of the • Paul Mullins Ontario Health Quality Council and with the Quebec • David Yule, ex-officio Fellows Council. Ms. Talbot was appointed to a second term on March 24, 2004, and her term expires on March risk management committee 23, 2007. This committee reviews the principal risks to the Leslie Thompson, MBA, MFA, FCSI Corporation including deposit insurance risk exposure Leslie Thompson is President of LESRISK, Debt and Risk and makes recommendations to the Board relating to its Management Inc. She is a risk management consultant with Framework for Enterprise Risk Management including experience as a senior executive with both financial institu- risk assessment and risk management policies, programs tions and government. Her clients include financial institu- and guidelines. • Sherry MacDonald, Chair tions, governments and supra-nationals in Canada and • Benoît Martin abroad. Formerly, she was Vice President of Union Bank • Leslie Thompson of Switzerland and The Chase Manhattan Bank. She also • David Yule, ex-officio led the start-up operations of The Province of Ontario’s treasury operations (now Ontario Financing Authority). Ms. Thompson was appointed on October 12, 2005 and her term expires on October 11, 2008.
2006 ANNUAL REPORT 5 message from the Chair unions and caisses populaires were devel- oped; and finally, • Our operating costs were well below plan. David Yule Chair of the Board of Directors Despite losses to the fund during the year, our reserve fund target was exceeded in 2006 and is n behalf of the Board of Directors, now equivalent to 56 basis points of insured I am pleased to report to the govern- deposits as compared to our current fund target Oment and other stakeholders that dur- of 60 basis points. Average premium rates ing 2006 DICO continued to make significant decreased again from the previous year. progress in the achievement of its long term strategic objectives. These strategic objectives Through all of its policies and programs, DICO include: is continuing to support the stability of and con- • Proactively assessing and managing risk to fidence in the Ontario credit union and caisse the fund and depositors; populaire movement. Our continuing review of • Minimizing the cost of deposit insurance to the commercial lending practices of larger member institutions; insured institutions confirms that the commer- • Ensuring that sufficient financial resources cial credit risk within the industry is generally are available to protect depositors; well managed. Our ongoing evaluation of struc- • Maintaining collaborative relationships with tural risk at insured institutions has provided stakeholders; comfort that this risk is being adequately man- • Effectively and efficiently managing aged as well. Our smaller member institutions' resources. initiative is helping limited-service institutions comply with our standards by assisting them in Some of DICO's accomplishments over the implementing risk management practices appro- past year included the following: priate to their size and complexity. Finally, our • All insured deposits placed with an Ontario on-site verification (inspection) and on-site credit union or caisse populaire were protect- review programs continue to focus on material ed from loss; risk areas in order to provide value-added feed- • Our updated standards of sound business back to insured institutions. and financial practices by-law was fully imple- mented and compliance levels increased to a As a result of effective management by member satisfactory level; institution boards and staff, the current financial • The overall cost of depositor protection to health and operational capacity of the Ontario member institutions and, ultimately to con- credit union and caisse populaire movement sumers, was further reduced; continues to be strong, despite ongoing competi- • The deposit insurance reserve fund grew to tive pressures and a changing financial sector $100 million - ahead of target by $6 million landscape. and the investment return on the fund DICO places a considerable degree of impor- increased; tance on its own governance standards. The • In collaboration with staff of the Ministry of Board of Directors continues to follow best Finance and the Financial Services practices in governance as set out in current lit- Commission of Ontario draft amendments erature on the subject including the Conference to the Act and regulations dealing with credit Board of Canada's publications. For example,
6 DEPOSIT INSURANCE CORPORATION OF ONTARIO each Board meeting includes an in-camera ses- providing advice and research to government sion as well as a director development portion. as requested; Details of our governance practices can be • Enhancing our risk assessment process in found in this annual report. order to better understand the evolution of institutional risk profiles; I would like to take this opportunity to express • Reviewing our differential premium system my appreciation to all our Board members for and premium rates; their dedication and professionalism in working • Evaluating the adequacy of our insurance together in the interests of all stakeholders. fund; and Readers will note from their respective biogra- • Enhance our framework for Enterprise Risk phies, that all of our directors bring a high level Management to respond to emerging risks; of skill, expertise and experi- ence to DICO. During the The strategies employed In conclusion, we believe that past year, our past chair, Mr. our long-term strategic direc- Bill Spinney of Parry Sound over the past few years to tion has supported our man- and Mr. Ron Fitzgerald of date to enhance depositor con- Ottawa retired from the improve risk management fidence and the sector's goal to board after having each be more competitive and served for six years. On practices at individual responsive to its members' behalf of the board and member institutions have needs. By exercising continued staff I would like to thank vigilance through our risk both Bill and Ron for their been successful due, in assessment and management valuable contributions and programs and by building a dedication to DICO. Their large measure, to the strong financial base, DICO leadership and wise counsel believes that we will continue will be missed. During 2006, ongoing positive and to protect depositors effective- we welcomed Bob ly, reduce the cost of depositor Hammond of Ottawa to the productive co-operation protection, and contribute to board. Mr. Hammond who between member the stability of and confidence was nominated by the in Ontario's credit unions and Association of Credit institutions and DICO. caisses populaires. We look Unions of Ontario brings a forward to working with our wealth of experience in the oversight and opera- stakeholders to achieve these goals. tions of Canadian financial institutions. On behalf of the Board, I would like to express Developments in the movement's financial and my sincere appreciation to Andy Poprawa and operational position have implications for the staff of DICO and all stakeholders who DICO's strategic direction. The strategies have joined with us in demonstrating a willing- employed over the past few years to improve ness to work together in achieving these goals. risk management practices at individual member On behalf of the Board of Directors, institutions have been successful due, in large measure, to the ongoing positive and productive co-operation between member institutions and David Yule DICO. For 2007, DICO has identified a num- Chair ber of key priorities: • Participating in the ongoing review of the Credit Unions and Caisses Populaires Act by
2006 ANNUAL REPORT 7 message from the ceo
Andy Poprawa President & CEO
n behalf of DICO’s staff, I am DICO'S 2006 FINANCIAL SCORECARD ($MILLIONS) pleased to provide an overview of Target Actual Ontario's credit unions and caisses O Insurance Fund $94.0 $100.0 populaires and to report on our progress in achieving our corporate goals during 2006. Gross Insurance Claims $5.0 $0.5 Recovery of Prior Years’ Losses 0 $0.2 Overview of Ontario Credit Unions and Total Gross Operating Expenses $5.9 $5.8 Caisses Populaires Total Net Operating Expenses $5.9 $5.7
Industry Changes - Consolidation Slows Return on investments 3.25% 4.20% During 2006 consolidation in the industry con- THE ONTARIO SYSTEM ASSETS tinued at a slower AND REGULATORY CAPITAL MEMBERSHIP PROFILE BY ASSET SIZE pace. The number 2525 3535 7.2 of active member 3030 institutions declined 2020 7.1 2525 by 8 to a total of 1515 7.0 2020 219 as a result of 1515 mergers or wind- 1100 6.9 Assets in $ Billions 1100
% of Total Sector Assets % of Total ups. Today, close to 5 6.8
5 50% of the assets Regulatory Capital as % of Assets 0 6.7 0 of the Ontario movement are held 2002 2003 2004 2005 2006 Over $1B Assets in $Billions under $10M$10-$50M $50-$100M $100-$250M $250M-$1B by the largest 10 Reg. Capital as % of Assets Assets member institu- tions. uidity fell to 13.3% continuing a three year downward trend. Asset Growth and Liquidity Aggregate on-balance sheet assets and deposits Capitalization Remains Strong exhibited growth year over year of over 5% to Aggregate capital within the sector improved to $24.5 billion. Growth in commercial loans 7.11% of assets of which over 4% was retained remained very strong at 15% while aggregate earnings. At the end of 2006, all but four mem- residential mortgage loans showed slower ber institutions (one of which is under DICO's growth at 11%. The composition of deposit lia- Administration, two under Supervision and one bilities shifted slightly from the previous year on the Watchlist) met the prescribed statutory with more term deposits and fewer registered minimum of 5% on a leverage basis and 8% on a deposits reported. At the end of 2006 gross liq- risk weighted measure.
8 DEPOSIT INSURANCE CORPORATION OF ONTARIO Credit Risk Increases but Remains Within By the end of the year over 90% of member Acceptable Levels institutions, including virtually all larger institu- Throughout 2006 the sector's aggregate credit tions, had achieved full compliance with all stan- risk, as measured by aggregate loan costs, and dards – an improvement from the prior year. delinquency increased but remained within Distribution of Member Institutions by Premium acceptable levels. In addition, the coverage ratio Category (loan allowances as a percentage of impaired loans) is stable despite increasing deliquencies. DICO's Differential Premium System (DPS) Gross delinquency greater than 30 days measures the aggregate risk profiles of institu- increased slightly to 117 basis points of total tions using quantitative and qualitative factors loans compared to 95 basis points in 2005. for five key components - capital, asset quality, adherence to standards of sound business and Aggregate Profitability Improves financial practices, earnings, and interest rate Profitability during 2006 continued to be risk. The following table demonstrates the posi- impacted by the low but stable interest rate tive migration to lower premium rate tiers over environment. Financial margins increased slight- the past four years. As a result, the average pre- ly as rates moved a little higher during the year, mium rate for deposit insurance continues to however, aggregate decline. EARNINGS IN THE ONTARIO SYSTEM operating expenses OVERALL DPS RISK RATINGS: 2002 TO 2006 Based on data as of February 15, 2007 also increased thus DISTRIBUTION BASED ON % OF SYSTEM ASSETS RATE PER $1,000 INSURED DEPOSITS 5050 reducing the overall PREMIUM RISK 2002 2003 2004 2005 2006 positive impact. RATE $ LEVEL 4040 Overall aggregate 0.90 LOW 15% 30% 38% 36% 34% 3030 return on average 1.00 LOW 50% 39% 40% 48% 53%
Basis points assets increased to 2020 40 basis points 1.15 MOD. 30% 30% 20% 15% 6%
1010 from 34 basis 1.40 HIGH 4% 1% 1% 1% 7% points in 2005. A 2.10 HIGH 1% 0% 1% 0% 0% 0 number of institu- 2002 2003 2004 2005 2006 tions experienced Summary operating losses during 2006. These institutions are being closely In the context of a continuing low interest rate monitored to ensure that either the underlying and competitive market environment, the reasons for the losses are being rectified or that Ontario credit union and caisse populaire sector sufficient capital is being injected by members has further consolidated and, at the same time, to support their continued viability. grown to expand services to communities across the province. While profitability in some mem- Enhanced Adherence to Standards of Sound ber institutions continues to be a concern for Business and Financial Practices their future viability in this competitive financial During 2006, adherence to the Standards of services marketplace, generally the sector Sound Business and Financial Practices contin- remains stable. ued to increase as measured by the results of the On-Site Verification (inspection) program.
2006 ANNUAL REPORT 9 DICO's Strategies and Objectives processes to assess and manage the risk to the To fulfil its statutory mandate, DICO has estab- fund in order to protect the interests of deposi- lished five key corporate objectives in its tors. These processes have assisted in the overall Corporate Plan: reduction of claims against the fund as well as • Proactively assess and manage risk to the contributing to the financial and operational fund and depositors; health of our member institutions. During 2006 • Minimize the cost of deposit insurance to our specific goals included: member institutions; • Promoting revised Standards of Sound • Ensure that sufficient financial reserves are Business and Financial Practices; available to protect depositors' funds; • Updating the risk profiles of each member • Maintain collaborative relationships with our institution by conducting on-site and off-site stakeholders; and risk assessments; • Be as efficient and effective as possible. • Providing member institutions with financial analysis and other information to assist in We are pleased to report to stakeholders that the managing their risks; specific goals outlined in our Plan were achieved • Conducting research into emerging risks and during 2006. providing information to stakeholders; • Intervening in the affairs of member institu- Proactively Assess and Manage Risk to tions where the risk to the fund was consid- the Fund ered significant or where member institutions With the support of our stakeholders, DICO required assistance and guidance. has implemented rigorous and disciplined
DICO’S 2006 DEPOSIT INSURANCE RISKS RISK DESCRIPTION OF RISK NET RISK TREND
Risk Assessment / Monitoring Risk The risk that DICO does not promptly or systematically identify ^ MODERATE member institutions that pose an unacceptable level of insurance risk resulting in financial loss. Decreasing Risk Management / Intervention Risk The risk that DICO does not take appropriate action with respect to MODERATE an unacceptable level of insurance risk posed by a member institution resulting in financial loss. Stable Failure / Loss Management Risk The risk that DICO does not take appropriate action to manage MODERATE member institutions that are under Administration or in Liquidation resulting in increased financial loss. Stable
Fraud Risk in Member Institutions The risk of financial loss due to fraud in small member institutions ^ HIGH which do not have sufficient separation of duties or internal audit functions. Decreasing
10 DEPOSIT INSURANCE CORPORATION OF ONTARIO 2006 Results DICO’S MEMBERSHIP PROFILE... AT A GLANCE….
2006 2005 Promoting Revised Standards of Sound Business Number of Member Institutions 219 227 and Financial Practices Total Assets (billions) $24.5 $23.3 DICO's Standards of Sound Business and Financial Practices (DICO By-law #5) are a key Total Deposits (billions) $21.7 $20.7 element of our risk assessment and manage- Insured Deposits (billions) $17.8 $17.0 % of Total Deposits 82% 82% ment strategy. We believe that those member institutions that comply with these standards Regulatory Capital Ratio (leverage basis) 7.11% 7.0% will significantly reduce the likelihood of prob- Asset Quality (loan costs % of average assets) 0.12% 0.12% lems and resulting intervention by DICO or the Profitability (net income % of average assets) 0.40% 0.34% Financial Services Commission of Ontario (FSCO). Compliance with this by-law is a condi- dance with agreed upon standards using external tion of deposit insurance, applicable to all professional firms and/or DICO staff. To insured member institutions; the revised by-law address the growing potential risk inherent in became effective for fiscal year-ends commenc- commercial loan portfolios and changing bal- ing after July 1, 2005. Compliance with the new ance sheets, DICO continued its reviews of by-law has been excellent with over 90% of these risk areas utilizing expert external institutions reporting full compliance. resources. The results of the reviews indicate that the risk management practices in these two Updating Risk Profiles areas are generally satisfactory. DICO employs a risk assessment framework Smaller Member Institution Initiative which has been developed by staff modelled on similar frameworks currently being used by In recognition of the special needs of smaller other Canadian regulatory agencies. This risk member institutions, particularly closed bond based framework evaluates the inherent risk credit unions with basic savings and loan opera- associated with each member institution and the tions, DICO continues to employ its own staff quality of its risk management consistent with to conduct on-site reviews. While on site, they the requirements of the standards of sound assist member institutions in implementing the business and financial practices. In order to required risk management processes to ensure complete an assessment of an institution's risk adherence to the standards. This approach rec- profile, DICO staff use information from vari- ognizes the limited resources available to smaller ous sources including quarterly and annual fil- institutions and has contributed to their ability ings, annual business plans and reports, results to provide services to their members. of on-site verifications and reviews as well as Providing Financial Analysis and Information interviews with management and board. DICO provides all member institutions with DICO completed a total of 132 on-site verifica- financial analysis and information regarding tions and reviews including commercial loan their condition and performance using a dynam- and structural risk reviews during 2006. ic, sophisticated, web-based financial analysis Pursuant to our agreement with FSCO, the reg- tool that provides all institutions with the ability ulatory agency responsible for administering the to perform various analytical functions, includ- Act, these reviews were conducted in accor- ing self-selected peer group analysis, through the DICO website. These features assist institutions
2006 ANNUAL REPORT 11 in performing meaningful financial analysis and Member institutions, which meet certain risk- comparisons using other similar credit unions based criteria, may be placed under Supervision. and caisses populaires as benchmarks. In consultation with the Stakeholder Advisory Committee, minimum capital and other inter- Conducting Research In the context of a vention criteria for DICO conducts research on Supervision for all credit emerging risks and provides continuing low interest unions and caisses populaires the results to various stake- have been established. The holders including insured rate and competitive criteria for Supervision are institutions, FSCO and the failure to meet the regulatory Ministry of Finance. During market environment, the minimum capital level or 2006, DICO provided a sig- Ontario Credit Union and material and sustained non- nificant amount of research compliance with DICO's to support the ongoing dis- Caisse Populaire sector standards of Sound Business cussions related to a review and Financial Practices as of the legislation and regula- has further consolidated determined by the results of tions. an on-site visit. DICO fol- and, at the same time, lows the practice of provid- Intervening in the Affairs of grown to expand services ing member institutions with Member Institutions time to correct deficiencies in Early involvement with mem- to communities across their operations, as identified ber institutions that exhibit a through on-site verifications higher risk profile minimizes the province. or reviews, prior to being the likelihood and size of placed under Supervision. insurance losses in the future. In the event that The length of time provided is dependent on member institutions are unable or unwilling to the seriousness of the deficiency and the likeli- take appropriate corrective action, DICO has hood of early correction. During 2006 there the authority to intervene in their affairs to were two member institutions placed under assist in ensuring that timely action plans to Supervision compared to none in the previous resolve exceptional risks are implemented. year. In both situations, DICO is working close- Intervention is a phased-in approach with three ly with the boards of these member institutions stages. The level of intervention by DICO dur- to assist them in resolving the underlying rea- ing 2006 increased slightly from the previous sons for being placed under supervision. year. In circumstances where a member institution is Member institutions that exhibit a higher risk unable to meet its obligations, DICO has the profile are placed on the Watchlist. During 2006, authority to place it under its Administration. DICO worked with the boards of 13 member Administration allows the member institution to institutions on the Watchlist with total assets of continue to operate under DICO's control while $2.4 billion. As a result, 4 member institutions providing sufficient time to develop and imple- were successful in resolving their problems and ment the most appropriate resolution strategy to no formal intervention was required. At the end protect depositors and the fund. At the end of of the year, 9 institutions (11 in 2005) with 2006, one institution - Mariposa Community assets of $2.4 billion remained on the Watchlist. Credit Union Limited, with assets of $14 mil-
12 DEPOSIT INSURANCE CORPORATION OF ONTARIO lion, was under Administration. This credit 2006 Results union came under the administration of DICO after substantial loan losses were incurred. Differential Premium System Although DICO has determined that the best The differential premium system was designed resolution strategy is to wind-up the credit to reward member institutions with lower pre- union’s affairs, arrangements have been made to miums if they have a lower risk profile. Each ensure that financial services will be maintained year DICO reviews its assessment process and in the affected communities through another the premium rates to ensure that the system is credit union. achieving its primary goals. The results of risk ratings indicate that the majority of member After the failure or near failure of an insured institutions have taken the appropriate steps to institution, DICO completes an analysis of what ensure that their premiums rates are minimized, went wrong and takes whatever steps are neces- thus lowering the risk to the deposit insurance sary to try to minimize the likelihood of similar reserve fund. As a result of improved risk pro- occurrences in the future. This includes sharing files based on increased earnings and better information with law enforcement and inves- adherence to standards, deposit insurance pre- tigative agencies in situations where it is believed miums in 2006 were lower than forecast. that the law has been violated. For example, Ontario deposit insurance rates are competitive during 2006 the board of directors and the gen- with those of other provincial credit eral manager of a member institution were union/caisse populaire deposit insurance and charged with a provincial offense after the credit stabilization organizations. union redeemed investment shares which placed it in non-compliance with minimum capital DEPOSIT INSURANCE ESTIMATED EFFECTIVE PREMIUM RATE COMPARISON requirements. Other investigations are ongoing. WITH SELECTED PROVINCIAL JURISDICTIONS IN 2005
Minimize the Cost of Deposit Insurance to Per $1,000 Insured Deposits Member Institutions Provinces Assessment Cost of Operations
The cost of deposit insurance to member insti- Alberta* $1.70 $0.46 tutions continues to decrease largely as a result Saskatchewan $0.50 $0.47 of improved risk profiles of member institu- tions. In 2006 average premiums amounted to Manitoba $0.87 $0.24 less than $1 per thousand of insured deposits or Québec $0.66 $0.43 about 2.3% of aggregate operating expenses. Ontario(2006) $0.98 $0.30
However, DICO recognizes that deposit insur- * including deficit reduction of $1.10 ance is an important cost factor in today's com- An analysis of premium levels indicated that petitive marketplace. DICO has undertaken, as a DICO was on track to meet its fund target with strategic objective, to minimize these costs while the current level of premium income. As a ensuring an appropriate risk management frame- result, we recommended to the government that work remains in place. During 2006, our specific the current level of premiums be maintained for goals included: 2007. • Reviewing the premium levels to ensure that they are adequate to meet fund targets; and • Maximizing recoveries through liquidation and litigation.
2006 ANNUAL REPORT 13 DEPOSIT INSURANCE RESERVE FUND $ MILLIONS 120 120 100 100 80 80 60 60 40 40 20 20 0 0 -20 -20 -40 -40 -60 -60 -80 -80 -100 -100 -120 -120 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2006 During 2006 DICO continued its research in depositors that DICO can meet its statutory reviewing its differential premium system. obligations to pay claims, if and when, a mem- Research will continue on this project during ber institution fails. To ensure that these finan- 2007 in conjunction with the ongoing discus- cial resources are available, DICO is in the sions regarding a new legislative framework. process of building a deposit insurance reserve fund and, in addition, maintains a borrowing Maximizing Recoveries through Liquidation and facility to meet unexpected claims. During 2006, Litigation our specific goals included: In most instances where a member institution • Achieving a reserve fund balance of $94 mil- has ceased operations, DICO is appointed liq- lion (53 basis points of insured deposits); uidator of the estate. The main purpose is to • Implementing the long-term fund strategy; protect depositors and maximize the recovery • Maintaining appropriate contingency financ- of assets. At the end of 2006, DICO was man- ing; aging the affairs of 5 institutions (7 in 2005) in • Developing and testing a contingency plan to liquidation. During the year, DICO realized deal with possible failure scenarios and $192 thousand in assets of member institutions. • Maximizing investment income on the fund At the end of 2006, one legal action to recover while maintaining appropriate liquidity and past losses was outstanding. This legal action compliance with the Act. involves a dispute between DICO as liquidator of Iroquois Falls Community Credit Union and 2006 Results its bonding insurer. As the matter is before the courts, the liquidator cannot comment on the Deposit Insurance Reserve Fund potential outcome of this action. DICO's primary financial priority during 2006 was to continue to build an insurance reserve Ensure that Sufficient Financial Resources fund to protect depositors while minimizing Are Available to Protect Depositors' Funds claims and premium levels. At the end of 2006, Access to sufficient financial resources is an the fund amounted to $100 million compared to important element of our depositor protection our target of $94 million. The $6 million mandate and provides assurance to insured improvement was due primarily to lower insur-
14 DEPOSIT INSURANCE CORPORATION OF ONTARIO ance losses and operating expenses. Provisions Maintaining Appropriate Contingency Financing for insurance losses amounted to $.3 million, In addition to the deposit insurance reserve which reflected the estimated losses on new fund, DICO has access to a $150 million loan claims and adjustments related to prior claims guarantee provided by the government of including recoveries on losses previously Ontario. Based upon the long-term fund strate- incurred. The general reserve for insurance loss- gy proposed by DICO, this loan guarantee is in es of $1.75 million remained unchanged from place until December 2008. the prior year. Developing and Testing a Contingency Plan Long-Term Fund Strategy An important element of DICO's ability to DICO's fund strategy is based on an actuarial address a crisis situation is having a tested con- model that measures the probability and magni- tingency plan that can adequately respond to tude of potential claims against the fund to various failure scenarios. While past experience determine the required size of the fund. After has shown that usually the most effective consultations with industry and government response to an institutional failure is to place a stakeholders in 2003, it was concluded that a member institution under administration and fund of 60 basis points of insured deposits find going concern solutions, it is possible that a would be sufficient to provide a confidence level situation may arise that would preclude that of 95% that the insurance fund would not go course of action. Under such a scenario, DICO into deficit over a has the obligation, by statute, to pay depositors DEPOSIT INSURANCE RESERVE FUND COMPARISON WITH OTHER twenty year period. the portion of their deposits that are insured. PROVINCIAL JURISDICTIONS At the end of 2006 To ensure that DICO has the ability to identify 200 the fund stood at insured deposits, testing of various member 150 about 56 basis institutions' data systems were undertaken dur- points of insured ing 2006 in conjunction with another deposit 100 deposits or over insurer. As a result of these tests, we were able 50 90% of the target to determine the nature and types of issues that fund size. might arise in the event of a payout scenario as Basis Points of Insured Deposits Basis Points 0 B.C. Alberta Sask. Man. Québec Ontario well as verify that the reported insured deposits Actual Actual Ontario were accurate. Target Ontario
Maximizing Investment Income During 2006 DICO engaged a major consulting In order to comply with statutory requirements firm to review its model and assumptions to and its own liquidity needs, DICO's policy is to ensure that changes in the environment, loss invest all of its funds in shorter term, low-risk experience and other factors have been taken securities. DICO has engaged the Ontario into account when determining an appropriate Financing Authority (OFA), the agency charged target fund size. The results of the review indi- with the responsibility of managing the cate that the fund should be in a range of Province's cash and debt, to manage its invest- between 56 and 68 basis points of insured ment portfolio. A management agreement, deposits to provide assurances that the fund which sets out DICO's objectives of capital would be adequate to cover losses without preservation, adequate liquidity and enhanced falling into a deficit position. yield, governs the management process. By the
2006 ANNUAL REPORT 15 end of 2006 DICO's effective yield on the DICO's website (www.dico.com) continues to investment portfolio reached to 4.2% compared be enhanced on a regular basis. DICO makes to 3.4% in 2005. available all its information and analysis relating to each member institution on a confidential Maintaining Collaborative Relationships basis to the institution itself. with Stakeholders DICO continues to place a high degree of Conducting Research into Consumer Awareness importance on collaborative relationships with In conjunction with other Canadian financial its stakeholders. Good working relationships are services compensation funds, such as the important in order to achieve our objectives. Canada Deposit Insurance Corporation (CDIC), During 2006, our specific goals included: Canadian Investor Protection Fund (CIPF), • Conducting consultative processes through Assuris (Life & Health Insurance Compensation advisory and ad-hoc committees; Fund), Property and Casualty Insurance • Communicating effectively with stakeholders Compensation Corporation (PACICC), Mutual and establishing protocols; Fund Dealers Association (MFDA), Credit • Conducting research into consumer aware- Union Deposit Insurance Corporation of ness about deposit insurance coverage; and British Columbia (CUDIC - BC) and the • Working closely with FSCO and the Ministry Authorité des Marchés Financiers (Québec), of Finance on the development of draft leg- DICO participated in an ongoing assessment of islation and regulations. consumer awareness about compensation schemes. Our research confirmed that the most 2006 Results effective way to educate consumers about deposit insurance coverage was to provide infor- Conducting Consultative Processes mation at the time that deposits are made at the Our advisory committees play a significant role institutions. DICO has developed and distrib- in helping DICO to develop its stabilization uted a "Quick Reference Guide" to assist front programs, standards of sound business and line staff of member institutions in providing financial practices and related implementation information about deposit insurance. tools. Throughout 2006 the Stakeholder Advisory Committee was active in providing DICO is also participating with other compen- DICO with advice on various aspects of our sation funds in a joint website site at programs. www.financeprotection.ca specifically designed to provide guidance to consumers about the Communicating Effectively with Stakeholders protection of their financial assets. DICO maintains a protocol agreement with both La Fédération des caisses populaires de l'Ontario Working Closely with Financial Services and L'Alliance des caisses populaires de l’Ontario. Commission of Ontario (FSCO) and the Ministry of These agreements recognize the important roles Finance that both L'Alliance and La Fédération play with DICO recognizes that a close working relation- its members and have been instrumental in ship with the industry's regulator will enhance improving relationships between L'Alliance, La the effectiveness and efficiency of the depositor Fédération, their members and DICO. protection process. FSCO and DICO work together to co-ordinate activities and minimize
16 DEPOSIT INSURANCE CORPORATION OF ONTARIO the burden and cost to the system. Our letter of Effective and Efficient Management understanding with FSCO calls for DICO to DICO is committed to ensuring that its stake- provide FSCO access to its integrated monitor- holders receive value for money. To achieve this ing systems, including OSV reports, at no cost goal, DICO has established a disciplined to FSCO. We work with FSCO to continue the approach to corporate governance. At the core tradition of excellence in consumer protection of its governance structure is the planning and for depositors and members of credit unions reporting framework. Management submits its and caisses populaires in Ontario. annual business plan to the Board of Directors, the Minister of Finance and Management Board DICO also assists the Ministry of Finance in its Secretariat for review and approval. Actual policy-making function by providing informa- results are monitored by the Audit & Finance tion and analysis regarding the credit union and Committee of the Board at least quarterly and caisse populaire industry. Through the provi- the Annual Report provides a report on results sions of its Memorandum of Understanding to all stakeholders. Internal audit and external with the Minister of Finance, DICO also fulfils audit reports provide the Board with assurances other duties as assigned by the government. that management has reported information accurately. As required by statute, the During 2006 DICO provided research and Superintendent of FSCO also reports to the advice to the Ministry of Finance in the drafting Minister on DICO's activities annually. This of proposed changes to legislation and regula- report is tabled in the Legislature by the Minister. tions governing credit unions and caisses popu- During 2006, our specific goals included: laires. • Updating our Framework for Enterprise Risk Management; Assisting the International Credit Union Community • Ensuring that business plan targets and per- Throughout 2006 DICO was active in assisting formance targets are met or exceeded within a number of development projects in other budget; countries. One ongoing project, funded by the • Reviewing all DICO corporate policies; Canadian International Development Agency • Reviewing our expenditure levels. (CIDA), involves the development of a regula- tory and consumer protection regime for credit 2006 Results unions in Ukraine. Our staff contributed to the project by providing technical assistance, train- Framework for Enterprise Risk Management ing and advice to the Ukrainian Government To ensure that its principal risks are effectively and Credit Union System in conjunction with managed, DICO has developed a comprehen- the Canadian Cooperative Association (CCA). sive framework for enterprise risk management. Another project involved providing technical This framework is essential to determine and strategic advice to regulators to countries in whether all principal risks have been identified, the Caribbean Confederation of Credit Unions. assessed and adequately managed. During 2006 Finally, DICO is an active contributing partici- DICO updated its assessments of significant pant in the annual World Council of Credit risks and introduced a revised enterprise risk Unions Regulators Roundtable. management reporting system.
2006 ANNUAL REPORT 17 Business Plan Targets • Develop a protocol with leagues and associa- During the past year DICO continued to look at tions as appropriate; and ways to enhance its effectiveness and efficiency • Enhance the Framework for Enterprise Risk and to provide better value to stakeholders. All Management. major initiatives were developed while meeting Our Commitment budget targets. The Board and staff of DICO are committed Reviewing Corporate Policies to providing protection, security and stability to In accordance with good corporate governance the Ontario Credit Union and Caisse Populaire practices, DICO's Board of Directors reviews sector for the benefit of all its members. We its by-laws and all its corporate policies at least look forward to the opportunity in 2007 of con- annually. tinuing to demonstrate our commitment.
Reviewing our Expenditure Levels As the number, complexity, financial and opera- Andy Poprawa, CA tional health of member institutions changes, President & CEO DICO must continuously review its organiza- tion to ensure that we are meeting our mandate while delivering value to our stakeholders. In this context, a review of our organizational structure and expenditure levels was undertaken during the year. As a result of this review, the number of full time staff equivalents was reduced to 29 and net operating expenditures were 8% under the 2006 budget.
2007 Objectives In addition to our normal activities, DICO has planned for a number of major initiatives to be undertaken during 2007: • Increase the insurance reserve fund to $110 million by the end of 2007 or 98% of our current fund target; • Complete the review the adequacy of the fund, the differential premium system and the premium rate structure; • Develop policies and procedures to respond to proposed changes to the legislative and regulatory regime; • Maintain an up-to-date risk profile for each member institution;
18 DEPOSIT INSURANCE CORPORATION OF ONTARIO management’s discussion and analysis The following analysis provides a review of DICO’s financial performance for 2006 that focuses on the Consolidated Statement of Operations and Changes in the Deposit Insurance Reserve Fund. Management’s Discussion and Analysis (MD&A) should be read in conjunction with DICO’s con- solidated financial statements for the year ended December 31, 2006. 2006 Consolidated Financial Performance Review Highlights
2006 2005 2004 Change from Better 2006 For the year ended December 31 (Consolidated) (Consolidated) 2005 than Target (in thousands $) $ $ $ $ % Target $
Deposit Insurance Reserve Fund 100,020 85,004 74,351 15,016 18 94,017
$ of System Insured Deposits (in Billions) 17.8 17.0 16.7 0.8 - 17.7
% of System Insured Deposits 0.56% 0.50% 0.45% - 0.06 0.53%
Premium income 16,845 16,513 16,207 332 2 16,519
Investment & other income 4,177 2,460 1,819 1,717 70 3,191
Gross operating expenses 5,775 5,699 5,844 76 1 5,915
Provision for insurance losses 500 3,188 0 (2,688) (84) 5,000
Recovery of insurance losses 212 499 1,271 (287) (58) 0
Recovery of operating expenses 57 68 151 (11) (16) 39
DICO adopted the Canadian Institute of Chartered Accountants’ (CICA) guideline on the consoli- dation of variable interest entities (“VIEs”) in January 2005. For 2006 the consolidated financial statements combined DICO’s operations and the operation of three institutions in liquidation that met the VIEs criteria for consolidation. The impact of the consolidation as at December 31, 2006 resulted in a $196,000 reduction to the Deposit Insurance Reserve Fund. Details of this accounting policy are provided in Note 1(a) of the Notes to the Consolidated Financial Statements.
Deposit Insurance Reserve Fund (DIRF) DEPOSIT INSURANCE RESERVE FUND The DIRF increased by $15 million, or 18%, to $100.0 million at the 100 0.6 90 0.5 end of December 2006. The increase in the Reserve Fund was pri- 80 70 marily attributable to the significant increase in investment income 0.4 and tight control of operating expenses, which were partially offset 60 by a moderate increase in the provision for insurance losses. In 2006, 50 0.3
$ Millions 40 Percentage 0.2 total income amounted to $21.0 million, against net operating 30 20 expenses of $5.7 million and a net provision for insurance losses of 0.1 $0.3 million, which resulted in a net gain for the year of $15.0 mil- 10 lion. 0 0.0 2002 2003 2004 2005 2006 DIRF in $Millions Premium income DIRF as % of insured deposits Premium income for the year was $16.8 million, compared to $16.5 million in 2005, an increase of $0.3 million or 2%. In 2006, average premiums amounted to $0.98 per thousand of insured deposits. The small growth of premium income was mainly due to an overall improvement in the
2006 ANNUAL REPORT 19 risk profiles of individual member institutions During the year DICO finalized the estates of (classified as lower risk thus paying a lower pre- three member institutions in liquidation and mium). adjusted the required provisions to complete the liquidations. The consolidation of VIEs and the Differential premium rates in effect for 2006 net adjustment to final closing costs resulted in were unchanged from 2005. Premiums are a recovery of $0.2 million in consolidated insur- based on the total amount of insured deposits ance losses. held by member institutions as of their fiscal year ends, calculated in accordance with the Operating Expenses Differential Premium Risk Classification System Gross operating expenses for 2006 totaled as defined by the Regulation. $5.78 million, slightly above last year’s expenses of $5.70 million. In Investment and Other Income 2006 DICO con- GROSS OPERATING EXPENSES Investment and other income for the year tinued its success in 7.0 increased by $1.7 million, or 70%, from 2005. controlling its The total of $4.18 million was comprised of operating costs. 6.5 $4.12 million of net interest earned from invest- Major expenses ments (including the consolidation of VIEs consisted of 6.0 $78 thousand) and $53 thousand of other salaries and related $ Millions income. The Ontario Financing Authority benefits, inspection 5.5 (OFA) manages DICO’s investment portfolio costs, technology under an investment management agreement. and communica- 5.0 2006 As of December 31, 2006 DICO’s investment tion expenses. 2002 2003 2004 2005 portfolio amounted to $105.6 million, with a weighted average yield of 4.23%, an improve- Summary Review of Statement of ment from 3.43% a year ago. The investments Financial Position consist of short term highly liquid fixed rate As at December 31 2006 2005 contracts which are R1 MID or better on the ($ thousands) $ $ DBRS scale. Further details on the composition Assets of investments are provided in Notes (2) and (3) Cash and short-term investments 24,599 3,838 of the Notes to the Consolidated Financial Investments 82,637 88,289 Statements. Net loans 307 335 Premiums receivable 2,590 2,608 Provision for Deposit Insurance Losses Accounts and interest receivable 315 150 and Recoveries Capital Assets 239 198 The increase in the provision for losses for the 110,687 95,418 year was $0.5 million, compared to $3.2 million Liabilities and Deposit Insurance Reserve Fund last year. This change reflects the additional loss for a member institution which was placed Payables and accruals 2,940 2,087 under the Administration program last year. Member shares and deposits of institutions in liquidation 116 694 Two member institutions were placed under Deferred premium income 2,821 2,772 Supervision in 2006, and two new institutions Accrual for deposit insurance losses 4,790 4,861 went into Liquidation. Deposit Insurance Reserve Fund 100,020 85,004
110,687 95,418
20 DEPOSIT INSURANCE CORPORATION OF ONTARIO Total assets increased by $15.27 million or 16% Payables and Accruals from last year to $110.7 million at December 31, Payables and accruals increased by $0.9 million 2006. There was a $15.11 million increase in to $2.9 million. This increase consisted of: combined cash and investments, a $0.17 million $0.4 million for unclaimed deposits and shares increase in accounts and other receivables, a purchased at the closing of two institutions in $0.04 million increase in capital assets, offset by liquidation, $0.2 million for the yearly accrued a $0.03 million decrease in net loans, and a pension benefits and future non-pension benefit $0.02 million decrease in premiums receivable. costs, and a $0.3 million increase in accrual for various normal business activities. Cash and Investments DICO’s investment policy is to invest in shorter Deferred Premium Income term, low-risk securities in order to meet its Differential premiums are calculated based on
CASH AND INVESTMENTS possible liquidity the amount of each member institution’s 120 needs in the event of insured deposits at the end of its fiscal year.
100 an institutional fail- Premium income is amortized over a twelve- ure, and to comply month period. Deferred premium income of 80 with the require- $2.8 million represents the balance of pro-ratedly 60
$ Millions ments of both the invoiced amounts for member institutions
40 Income Tax Act and whose fiscal year straddles DICO’s fiscal year- Regulation 78/95 of end. 20 the Credit Unions and 0 Caisses Populaires Act, Accrual for Deposit Insurance Losses 2002 2003 2004 2005 2006 1994. The accrual for deposit insurance losses was $4.8 million as of December 31, 2006. The As at December 31, 2006, the combined total accrual balance was mainly comprised of of $107.2 million was comprised of $24.6 mil- $2.5 million provided for a member institution lion in cash and short-term investments and under Administration, $0.5 million for institu- $82.6 million in other investment securities. The tions under liquidation and a general accrual for short-term investments have a term to maturity losses of $1.75 million. The methodology used of less than 90 days on the date of purchase. to determine the accrual for general and specific The portfolio earned a weighted average yield losses is described in detail in Note 1(b) to the of 4.23%, 83 basis points higher than last year. financial statements. All investments are highly liquid, fixed rate con- tracts, and are R1 Mid or better on the DBRS scale. The sources and uses of cash are dis- closed in the Statement of Cash Flows.
Premiums Receivable The Premiums receivable of $2.6 million repre- sents the current billings of member institutions with fiscal years ending September 30, 2006 and an accrual of pro-rated premiums for member institutions with fiscal years ending October 31st to November 30th 2006.
2006 ANNUAL REPORT 21 management's auditors' report responsibility
The Deposit Insurance Corporation of KPMG LLP Ontario's management is responsible for the integrity and fair presentation of the financial To the Board of Directors of statements included in the annual report. The Deposit Insurance Corporation of Ontario financial statements have been prepared in accordance with Canadian generally accepted We have audited the Consolidated Statement of accounting principles. Financial Position of Deposit Insurance Corporation of Ontario as at December 31, The Corporation maintains systems of internal 2006 and the Consolidated Statement of accounting controls of high quality consistent Operations and Changes in the Deposit with reasonable cost. Such systems are designed Insurance Reserve Fund and the Consolidated to provide reasonable assurance that the finan- Statement of Cash Flows for the year then cial information is accurate and reliable and that ended. These financial statements are the company assets and liabilities are adequately responsibility of the Corporation’s manage- accounted for and assets safeguarded. ment. Our responsibility is to express an opin- ion on these financial statements based on our The consolidated financial statements have been audit. reviewed by the Corporation's Audit and Finance Committee and have been approved by We conducted our audit in accordance with its Board of Directors. In addition, the finan- Canadian generally accepted auditing standards. cial statements have been examined by Those standards require that we plan and per- KPMG LLP, the auditors, whose report fol- form an audit to obtain reasonable assurance lows. whether the financial statements are free of material misstatement. An audit includes exam- ining, on a test basis, evidence supporting the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting principles used and significant esti- Andy Poprawa, CA mates made by management, as well as evaluat- President & CEO ing the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at James Maxwell December 31, 2006 and the results of its opera- Chief Administrative tions and its cash flows for the year then ended and Financial Officer in accordance with Canadian generally accepted accounting principles.
Toronto, Canada Chartered Accountants January 30, 2007 Toronto, Canada January 30, 2007
22 DEPOSIT INSURANCE CORPORATION OF ONTARIO Deposit Insurance Corporation of Ontario consolidated statement of financial position December 31, 2006, with comparative figures for 2005 (in thousands of dollars)
2006 2005 Consolidated Assets Cash and short-term investments (note 2) $ 24,599 $ 3,838 Investments (note 3) 82,637 88,289 Loans (net of allowance of $1,642 (2005 - $1,828)) (note 4) 307 335 Premiums receivable 2,590 2,608 Interest and other receivables 315 150 Capital assets (net of accumulated amortization of $3,405 (2005 - $3,338)) 239 198 $110,687 $95,418
Liabilities Payables and accruals $ 2,940 $ 2,087 Member Shares and Deposits of institutions in liquidation (note 5) 116 694 Deferred premium income 2,821 2,772 Accrual for deposit insurance losses (note 6) 4,790 4,861 Total Liabilities 10,667 10,414
Deposit Insurance Reserve Fund 100,020 85,004
$110,687 $95,418
Lease Commitments (note 7) Contingencies (note 12)
See accompanying notes to financial statements.
On behalf of the Board:
Director
Director
2006 ANNUAL REPORT 23 Deposit Insurance Corporation of Ontario consolidated statement of operations and changes in the deposit insurance reserve fund Year ended December 31, 2006, with comparative figures for 2005 (in thousands of dollars)
2006 2005 Consolidated Income Premium income $ 16,845 $16,513 Other income 4,177 2,460 21,022 18,973 Expenses Provision for losses 288 2,689 Salaries and benefits 3,505 3,436 Operating expenses 2,270 2,263 Recovery of operating expenses (57) (68) 6,006 8,320
Excess of income over expenses 15,016 10,653
Deposit Insurance Reserve Fund, beginning of year 85,004 74,351
Deposit Insurance Reserve Fund, end of year $100,020 $85,004
See accompanying notes to financial statements.
24 DEPOSIT INSURANCE CORPORATION OF ONTARIO Deposit Insurance Corporation of Ontario consolidated statement of cash flows Year ended December 31, 2006, with comparative figures for 2005 (in thousands of dollars)
2006 2005 Consolidated Cash received from (applied to): Operations: Excess of income over expenses $ 15,016 $ 10,653 Items charged to operations not affecting cash Provision for losses 288 2,689 (Gain)/loss on disposal of capital assets (4) 21 Amortization 118 122 15,418 13,485 Changes in: Premiums receivable 18 (226) Loans 38 130 Interest and other receivables (165) 359 Payables and accruals 853 (68) Membership shares and deposits of institutions in liquidation (578) - Deferred premium income 49 147 215 342 Changes in cash balances of institutions in liquidation 576 - Net advances by deposit insurer 115 (86) Net deposit insurance advances (note 6) (1,060) 136 (369) 50 15,264 13,877 Investing activities: Purchase of investments (82,637) (88,289) Proceeds on sale of investments 88,289 49,855 Purchase of capital assets (163) (61) Proceeds on sale of capital assets 8 86 5,497 (38,409) Increase/(decrease) in cash position during the year 20,761 (24,532) Cash position, beginning of year 3,838 28,370 Cash position, end of year $ 24,599 $ 3,838 Supplementary cash flow information: Loan guarantee fee paid during the year $ 14 $ 16 Interest received during the year $ 4,069 $ 2,711 Cash position is defined as cash and short - term investments less any borrowings See accompanying notes to financial statements.
2006 ANNUAL REPORT 25 notes to consolidated financial statements Year ended December 31, 2006 General of each year during which the guarantee is in Deposit Insurance Corporation of Ontario effect. The Corporation has in place a revolving (“DICO” or “the Corporation”) is an credit facility with a Canadian chartered bank in "Operational Enterprise" Agency of the the amount of $10 million, approved by the Province of Ontario established without share Ontario Financing Authority which administers capital under the provisions of the Credit the Minister's guarantee. The standby fee Unions and Caisses Populaires Act, 1994 (“the charged by the Chartered bank is 3 basis points Act”). on average unused portion of the credit facility, payable in arrears quarterly. The statutory objects of the Corporation under 1. Summary of Significant Accounting Policies: the Act are to: These consolidated financial statements have • provide deposit insurance to depositors of been prepared in accordance with Canadian member institutions; generally accepted accounting principles • act as stabilization authority for the credit (GAAP). To facilitate a better understanding of union and caisse populaire system; our consolidated financial statements, the • promote standards of sound business and Corporation has disclosed its significant financial practices; accounting policies as follows: • collect and publish statistics; • provide financial assistance to member institu- (a) Variable Interest Entities tions; In 2005 the Corporation adopted the Canadian • act as administrator of member institutions; Institute of Chartered Accountants’ (CICA) minimize deposit insurance risk and size of accounting guideline on the consolidation of claims. variable interest entities ("VIEs"). VIEs include entities in which the equity investors do not The Act empowers the Corporation to assess its have a controlling financial interest or the equity member institutions deposit insurance premi- investment at risk is not sufficient to permit the ums to meet the Corporation's requirements for entity to finance its activities without additional insurance funding and administrative costs. The subordinated financial support by other parties. Corporation establishes its premiums rates AcG-15 requires the consolidation of a VIE by annually. They are approved by the Government its primary beneficiary defined as the party that of Ontario and incorporated into the regula- receives the majority of expected residual tions through appropriate amendments as neces- returns and/or that absorbs the majority of the sary. entity’s expected losses. As liquidator of the estates of credit unions in liquidation, it has Borrowings of the Corporation are guaranteed been determined that these rules require the by a Minister's guarantee on behalf of the Corporation to consolidate credit unions in liq- Province of Ontario. The guarantee is for a uidation if claims by DICO against the estate maximum of $150 million and continues until represent more than 50% of the total liabilities December 31, 2008. In addition to the guaran- of the credit unions during the year. The assets tee fee of one-half of one per cent of the aver- and liabilities of the credit unions which meet age end of day balance outstanding of any debt the criteria for consolidation were recorded in obligation subject to the Minister's guarantee, the Corporation’s books at their respective fair the Province of Ontario charges a fee of 5 basis values as of December 31, 2006 and 2005. points on the unused portion of any credit facili- ty guaranteed for the period ending December 31
26 DEPOSIT INSURANCE CORPORATION OF ONTARIO (b) Premium Income: (d) Pension Benefits: Premiums are based on a Differential Premium Pension benefits include a defined contribution Risk Classification System as defined by regula- pension plan covering all of its regular, non- tion applied to insured deposits held by member contractual employees as well as supplemental institutions. Premium income is calculated based arrangements, which provide pension benefits in on the Annual Member Institution Return sub- excess of registered pension plan limits. mitted by the member institutions, which is due Earnings are charged with the cost of pension 75 days after its fiscal year end. Premium benefits earned by employees as service is ren- income is recognized when earned. dered. Pension expense is determined by a fixed
(c) Provision for Losses: percentage of the employees' income plus the The provision for losses includes allowances matching of the employees' contribution to a against deposit insurance advances to member maximum of 4%. The Corporation assumes no institutions in liquidation and an accrual for actuarial or investment risk. losses for which advances have not been made (e) Future Non-Pension Post-Retirement Benefits: at the date of the Consolidated Statement of Future non-pension post-retirement benefits Financial Position. relate to the Corporation's extended health, den- tal and life benefits for both active employees Funds advanced in respect of deposit insurance for whom a full eligibility date was determined and loans to member institutions are initially and existing qualified retirees. The Corporation recorded at cost. Deposit insurance advances accrues obligations under these plans as the recoverable are presented on the Consolidated employees render the service necessary to earn Statement of Financial Position net of the future benefits. The Accrued benefits obli- allowances thereon. gation is actuarially determined using the pro- jected benefit method prorated on service. The accrual for deposit insurance losses Cumulative gains and losses in excess of the includes both provisions for specific losses and accrued benefit obligation at the beginning of a general provision for losses. Specific provi- the year are amortized over the expected average sions for losses in respect of insured deposits remaining service of active members. are estimated by management and recorded when conditions, in the opinion of manage- (f) Investments: ment, exist that will likely result in losses to the Investments comprise short-term fixed income Corporation. instruments and are recorded at amortized cost. The discounts are amortized on a straight line The general provision for losses reflects man- basis over the terms of the instruments. agement's best estimate of losses on insured (g) Capital Assets: deposits arising from the inherent risk in mem- Capital assets are recorded at cost less accumu- ber institutions. The provision is established by lated amortization. Amortization of furniture assessing the aggregate risk in member institu- and equipment is provided by the diminishing- tions based on current market and economic balance method at the rate of 20 per cent per conditions, the likelihood of losses and the annum. Computer and related equipment and application of historic loss experience. Future software are amortized over three years on a economic conditions are not predictable with straight-line basis. Leasehold improvements are certainty and actual losses may vary, perhaps amortized on a straight-line basis over the term substantially, from management's estimates. of the lease.
2006 ANNUAL REPORT 27 (h) Income Taxes: In compliance with the Corporation's invest- The Corporation uses the asset and liability ment policy and relevant statutes, all investments method of accounting for income taxes. Under are highly liquid fixed rate contracts and are RI the asset and liability method, future tax assets MID or better on the DBRS scale. and liabilities are recognized for the future tax December 31, 2006 December 31, 2005 consequences attributable to differences Weighted Weighted Weighted Weighted Amount Average Average Amount Average Average between the financial statement carrying (thousands) Effective Days to (thousands) Effective Days to amounts of existing assets and liabilities and Yield Maturity Yield Maturity their respective tax bases. Future tax assets and Treasury Bills - Canada $61,587 4.16% 95 $46,609 3.39% 96 Bankers' acceptances/ 12,253 4.31% 31 23,334 3.43% 73 liabilities are measured using enacted or substan- Deposit Notes tively enacted tax rates expected to apply to tax- Structured Securities 8,797 4.36% 36 18,346 3.36% 55 able income in the years in which those tempo- Total $82,637 4.20% 75 $88,289 3.40% 81 rary differences are expected to be recovered or 4. Loans (net of allowance): settled. The effect on future tax assets and liabil- Loans (net of allowance) of $307,000 (2005 - ities of a change in tax rates is recognised in $335,000) are comprised of loans of credit income in the period that includes the date of unions in liquidation of $235,000 (2005 - enactment or substantive enactment. $273,000) and loans purchased from the estate 2. Cash and Short-term Investments: of credit unions in liquidation of $72,000 The short-term investments have a term to (2005 - $62,000). maturity of less than 90 days on the date of 5. Member Shares and Deposits of institutions purchase. All investments are highly liquid fixed in Liquidation: rate contracts. Member shares and deposits of institutions in
December 31, 2006 December 31, 2005 liquidation of $116,000 (2005 - $694,000) are Weighted Weighted Weighted Weighted comprised of $103,000 (2005 - $680,000) in Amount Average Average Amount Average Average member shares and $13,000 (2005 - $14,000) in (thousands) Effective Days to (thousands) Effective Days to Yield Maturity Yield Maturity deposits. DICO has an obligation to insure the Short-term $ 22,984 4.35% 68 $1,989 3.32% 49 amounts on deposit up to the prescribed investments amounts. DICO has no obligation to insure Cash 763 951 Cash of member shares but as liquidator has the respon- institutions 852 898 sibility to distribute any residual funds to mem- in liquidation bers once the liquidation is complete. Total $24,599 $3,838 3. Investments: 6. Accrual for deposit insurance losses: The Corporation has contracted the Ontario The provision for losses includes specific provi- Financing Authority to manage its investment sions for known or likely losses from specific portfolio. The composition of DICO's invest- member institutions and a general accrual for ments reflects the nature of the Corporation's losses not identified with specific institutions. potential insurance obligations and is structured That portion of the provision for losses record- to comply with the requirements under both the ed in the year and in previous years which has Income Tax Act and Regulation 78/95 of the not yet required payment by the Corporation is Credit Unions and Caisses Populaires Act, 1994. shown in liabilities on the Consolidated Investments have terms to maturity of 90 days Statement of Financial Position as "Accrual for or greater on the date of purchase. They have a deposit insurance losses". weighted-average yield of 4.20% (2005: 3.40%).
28 DEPOSIT INSURANCE CORPORATION OF ONTARIO 2006 2005 The Corporation has determined that realization (thousands) of the future income tax assets does not meet Accrual for deposit insurance losses, $ 4,861 $ 2,217 beginning of year the more-likely-than-not criterion for recogni- Increase in accrual for current year's 500 3,054 tion and, therefore, a valuation allowance has deposit insurance losses Decrease in accrual for prior year's been recorded against future income tax assets. (212) (365) deposit insurance losses Decrease in deposit insurance advances 9. Pension Plan: - (845) recoverable The Corporation implemented a defined contri- Increase in advances from DICO 10 86 bution pension plan effective January 1, 1999. Consolidation of advances from DICO - 6,861 The pension expense (including supplementary Deficits of institutions in consolidation - (6,197) pension) charged to income for 2006 was Accrual for deposit insurance losses, (4,790) (4,861) end of year $310,000 (2005 - $306,000). Net deposit insurance advances/(recoveries) $ 369 $ (50) 10. Future non-pension post-retirement benefits: The general accrual for losses included in The Corporation accounts for the current value "Accrual for deposit insurance losses" amount- of future non-pension post-retirement benefits. ed to $1,750,000 (2005 - $1,750,000) and is cal- The accrued benefit liability as at December 31, culated in accordance with the methodology as 2006, as actuarially determined, is $1,122,000 described in note 1(c). (2005 - $967,000). Current service costs, includ- ing interest, were $194,000 (2005 - $124,000). 7. Lease Commitments: Actuarial valuation for the Corporation’s plan is The operating lease for the Corporation's prem- required every three years. The most recent ises is for the term commencing January 1, 1998 actuarial valuation was conducted as of and ending August 5, 2007. For the balance of September 30, 2005 and the date of the next the current lease, the future minimum rent is required valuation is September 30, 2008. $83,000 and the property taxes and common area maintenance costs approximates $190,000. The assumptions used in the actuarial valuation The Corporation is currently negotiating with of the future benefits obligations consisted of: the current landlord and other locations for a interest rate of 5.25% (2005 - 5.25%), rate of new lease commencing August 6, 2007. compensation increase of 3.5% (2005 – 3.5%) 8. Income Taxes: and initial weighted average trend rate in health and dental costs of 6.0% (2005 – 6.2%), grading The Corporation is subject to income taxes on down to 5% per annum by 2016. The its income as defined under the Income Tax Corporation measures its accrued benefit obliga- Act. It has accumulated losses for income tax tions as at September 30 of each year. purposes of $26,229,000. They expire as fol- lows: RECONCILIATION OF ACCRUED BENEFIT FISCAL YEAR ENDING FISCAL YEAR ENDING OBLIGATION TO THE ACCRUED BENEFIT DECEMBER 31, 2006 DECEMBER 31, 2005 LIABILITY (THOUSANDS) (THOUSANDS) Originating Expiring Amount Taxation Year Taxation Year (thousands) Accrued benefit obligation $1,868 $1,755 2000 2007 $ 4,992 Employer contributions during year (10) (9) 2001 2008 4,191 Unamortized net actuarial loss (736) (779) 2002 2009 5,161 Accrued benefit liability $1,122 $967 2003 2010 4,124 2004 2014 3,790 2005 2015 2,833 2006 2026 1,138 $ 26,229
2006 ANNUAL REPORT 29 FISCAL YEAR ENDING FISCAL YEAR ENDING 14. Compensation: CHANGE IN BENEFIT DECEMBER 31, 2006 DECEMBER 31, 2005 OBLIGATIONS (THOUSANDS) (THOUSANDS) The following information is furnished in com- Balance beginning of the year $1,755 $1,023 pliance with the Public Sector Salary Disclosure Current service cost 53 53 Act, 1996. Interest cost 94 69 Employee Position held Compensation Taxable Actuarial losses 4 641 benefits* Benefit payments (38) (31) Brydges, Barry Vice President $152,700 $8,691 Insurance & Risk Balance end of year $1,868 $1,755 Management
Burgman, John Chief Information $117,446 $12,457 11. Directors' Expense: Officer During the year the directors received an aggre- Dale, Richard Regional Manager, $106,500 $1,567 gate remuneration of $83,000 (2005 - $51,000). Insurance & Risk Management Total directors' expenses were $35,000 (2005 - $36,000). The fixed per diem rate for the Chair D'Errico Tony Regional Manager, $103,938 $1,517 Insurance & Risk is $500 (minimum $2,000 per month) and for all Management other board members is $350. In addition, direc- tors, other than the Chair, receive an annual Foster, C.William D. Vice President $158,500 $9,446 Asset Management retainer of $3,500. & Recoveries
12. Contingencies: Hutton, John Regional Manager, $105,438 $1,517 The Corporation is subject to various legal Insurance & Risk Management actions brought against it in the normal course of business, when acting in the capacity of Maxwell, James Chief $137,662 $15,024 Administrative administrator or liquidator. It is the view of the & Financial Officer Corporation's management that these actions will be successfully defended. Accordingly, no Poprawa, Andrew President and CEO $209,600 $6,355 provisions have been made in these financial statements. White, Richard Manager, Policy & $104,500 $3,131 Research 13. Fair Value Disclosure: The fair value of financial assets and liabilities * Includes taxable group life insurance, parking which include cash and short-term investments, and use of company vehicle. investments, loans (net of allowance), premiums receivable, interest and other receivables, payables and accruals, member shares and deposits approximate their carrying amounts. The fair value of the accrual for deposit insur- ance losses have not been determined because it is not practicable to determine fair value with sufficient reliability.
30 DEPOSIT INSURANCE CORPORATION OF ONTARIO deposit insurance corporation of ontario’s member institutions at december 31, 2006 Credit Unions Ganaraska Credit Union Limited 3M Employees' (London) Credit Union Limited Genfast Employees Credit Union Limited Adjala Credit Union Limited Goderich Community Credit Union Limited Air - Toronto Credit Union Limited Goodyear Employees (Bowmanville) Credit Union Limited Airline Financial Credit Union Limited Grand River Credit Union Limited All Trans Financial Services Credit Union Limited Grey Bruce Health Services Credit Union Limited Alterna Savings and Credit Union Limited Hald - Nor Community Credit Union Limited Anishinabek Nation Credit Union Inc. Hamilton Community Credit Union Limited APPLE Community Credit Union Limited Hamilton Municipal Employees' Credit Union Limited Arnstein Community Credit Union Limited Hamilton Teachers' Credit Union Limited Auto Workers (Ajax) Credit Union Limited Health Care Credit Union Limited Auto Workers Community Credit Union Limited Heritage Savings & Credit Union Inc. Bay Credit Union Limited Hir-Walk Employees' (Windsor) Credit Union Limited Bayshore Credit Union Limited Hobart Employees' (Owen Sound) Credit Union Limited Brewers Warehousing Employees (Hamilton) Credit Union Limited Holy Angel's & St. Anne's Parish (St. Thomas) Credit Union Ltd. Brewers Warehousing Employees (Kitchener) Credit Union Limited Italian Canadian Savings & Credit Union Limited Budd Automotive Employees (Kitchener) Credit Union Limited Kakabeka Falls Community Credit Union Limited Buduchnist Credit Union Limited Kawartha Credit Union Limited C.N. (London) Credit Union Limited Kellogg Employees Credit Union Limited C.N.R. Employees (Lakehead Terminal) Credit Union Limited Kenora District Credit Union Limited Campbell's Employees' (Toronto) Credit Union Limited Kingston Community Credit Union Limited Canada Sand Papers Employees' (Plattsville) Credit Union Limited King-York Newsmen Toronto Credit Union Limited Canadian General Tower Employees (Galt) Credit Union Limited Korean (Toronto) Credit Union Limited Canadian Transportation Employees' Credit Union Limited Korean Catholic Church Credit Union Limited Canal City Savings and Credit Union Limited Kraft Canada Employees' (Cobourg) Credit Union Limited Cataract Savings & Credit Union Limited Krek Slovenian Credit Union Limited CCB Employees' Credit Union Limited L.I.U.N.A. Local 183 Credit Union Limited City Savings & Credit Union Limited Labatt Employees' (London) Credit Union Limited Communication Technologies Credit Union Limited Lakewood Credit Union Limited Community First Credit Union Limited Lambton Financial Credit Union Limited Community Saving & Credit Union Limited Lasco Employees' (Whitby) Credit Union Limited Croatian (Toronto) Credit Union Limited Latvian Credit Union Limited Crown Cork & Seal Employees Credit Union Limited Lear Seating Canada Employees' (Kitchener) Credit Union Limited Dana Canada Employees' (Ontario) Credit Union Limited Libro Credit Union Limited Desjardins Credit Union Inc. London Civic Employees' Credit Union Limited Domtar Newsprint Employees (Trenton) Credit Union Limited London Diesel Employees' Credit Union Limited DUCA Financial Services Credit Union Limited London Fire Fighters' Credit Union Limited Dundalk District Credit Union Limited Mariposa Community Credit Union Limited Dunnville and District Credit Union Limited McMaster Savings and Credit Union Limited Durham Educational Employees' Credit Union Limited Media Group Financial Credit Union Limited Education Credit Union Limited Member Savings Credit Union Limited Employees of Dofasco (Hamilton) Credit Union Limited MemberOne Credit Union Limited Equity Credit Union Inc. Mennonite Savings and Credit Union (Ontario) Limited Espanola & District Credit Union Limited Meridian Credit Union Limited Estonian (Toronto) Credit Union Limited Miracle Credit Union Limited ETCU Financial Credit Union Limited Mitchell & District Credit Union Limited Etobicoke Aluminum Employees' Credit Union Limited Moore Employees' Credit Union Limited Federal Employees (Kingston) Credit Union Limited Motor City Community Credit Union Limited Fiberglas Employees (Guelph) Credit Union Limited Municipal Employees (Chatham) Credit Union Limited Finnish Credit Union Limited Nasco Employees' Credit Union Limited FirstOntario Credit Union Limited NCR Employees' Credit Union Limited Food Family Credit Union Limited North York Community Credit Union Limited Fort Erie Community Credit Union Limited Northern Credit Union Limited Fort York Community Credit Union Limited Northern Lights Credit Union Limited Frontline Financial Credit Union Limited Northland Savings and Credit Union Limited G.S.W. (Fergus) Credit Union Limited Northridge Savings & Credit Union Limited
2006 ANNUAL REPORT 31 ONR Employees' (North Bay) Credit Union Limited Ukrainian Credit Union Limited Ontario Civil Service Credit Union Limited Unigasco Community Credit Union Limited Ontario Educational Credit Union Limited United Communities Credit Union Limited Ontario Provincial Police Association Credit Union Limited United Employees Credit Union Limited Oregon Employees Credit Union Limited United Ukrainian Credit Union Limited Oshawa Community Credit Union Limited Unity Savings and Credit Union Limited Ottawa Police Credit Union Limited Utilities Employees' (Windsor) Credit Union Limited Ottawa Women's Credit Union Limited Victory Community Credit Union Limited Pace Savings & Credit Union Limited Virtual One Credit Union Limited Parama Lithuanian Credit Union Limited Wallace Barnes Employees' Credit Union Limited Pedeco (Brockville) Credit Union Limited William S. Gibson Employees' Credit Union (Mt. Dennis) Limited Peek Frean Employees' (Toronto) Credit Union Limited Windsor Family Credit Union Limited PenFinancial Credit Union Limited Windsor-Essex County Catholic Parishes Credit Union Ltd. Peoples Credit Union Limited Your Credit Union Limited Peterborough Community Credit Union Limited Your Neighbourhood Credit Union Limited Peterborough Industrial Credit Union Limited Polish Alliance (Brant) Credit Union Limited Caisses Populaires Portuguese Canadian Credit Union Limited Caisse populaire Azilda Inc. Prime Savings Credit Union Limited Caisse populaire Coniston Inc. Prosperity One Credit Union Limited Caisse populaire d'Alban Limitée Provincial Alliance Credit Union Limited Caisse populaire d'Alfred Limitée QuintEssential Credit Union Limited Caisse populaire de Bonfield Limitée R.B.W. Employees' (Owen Sound) Credit Union Limited Caisse populaire de Cochrane Limitée Railway Employees' (Sarnia) Credit Union Limited Caisse populaire de Cornwall Inc. Resurrection Credit Union Limited Caisse populaire de Field Limitée (La ) Rochdale Credit Union Limited Caisse populaire de Hawkesbury Limitée Saugeen Community Credit Union Limited Caisse populaire de Hearst Limitée Scarborough Hospitals Employees' Credit Union Limited Caisse populaire de Kapuskasing Limitée Sheridan Park Credit Union Limited Caisse populaire de la Vallée Slovenia Parishes (Toronto) Credit Union Limited Caisse populaire de Mattawa Limitée Smiths Falls Community Credit Union Limited Caisse populaire de Mattice Limitée So-Use Credit Union Limited Caisse populaire de New Liskeard Limitée (La ) Southlake Regional Health Centre Employees' Credit Union Limited Caisse populaire de Noëlville Limitée Southwest Regional Credit Union Limited Caisse populaire de North Bay Limitée St. Josaphat's Parish (Toronto) Credit Union Limited Caisse populaire de Pointe-aux-Roches Limitée St. Mary's (Toronto) Credit Union Limited Caisse populaire de Técumseh Inc. St. Marys Paperworkers Credit Union Limited Caisse populaire de Timmins Limitée (La ) St. Stanislaus-St. Casimir's Polish Parishes Credit Union Limited Caisse populaire de Verner Limitée Standard Tube Employees' (Woodstock) Credit Union Limited Caisse populaire d'Earlton Limitée (La ) Starnews Credit Union Limited Caisse populaire d'Orléans Inc. State Farm (Toronto) Credit Union Limited Caisse populaire Lasalle Inc. Stelco Finishing Works Credit Union Limited Caisse populaire Nolin de Sudbury Incorporée Sudbury Credit Union Limited Caisse populaire Nouvel-Horizon Inc. Sunnybrook Credit Union Limited Caisse populaire Rideau d'Ottawa Inc. Superior Credit Union Limited Caisse populaire St-Charles Boromée Limitée Sydenham Community Credit Union Limited Caisse populaire St-Jacques de Hanmer Inc. Taiwanese - Canadian Toronto Credit Union Limited Caisse populaire Sturgeon Falls Limitée Talka Lithuanian Credit Union Limited Caisse populaire Trillium Inc. Thamesville Community Credit Union Limited Caisse populaire Val Caron Limitée The Fire Department Employees Credit Union Limited Caisse populaire Vermillon The Police Credit Union Limited Caisse populaire Vision Inc. The Toronto Electrical Utilities Credit Union Limited Caisse populaire Welland Limitée Thorold Community Credit Union Limited Thunder Bay Elevators Employees' Credit Union Limited Toronto Catholic School Board Employees Credit Union Limited Leagues Toronto Municipal Employee's Credit Union Limited L’Alliance des caisses populaires de l'Ontario Inc. Twin Oak Credit Union Limited Credit Union Central of Ontario Ukrainian (St. Catharines) Credit Union Limited Fédération des caisses populaires de l'Ontario Inc.(La )
32 DEPOSIT INSURANCE CORPORATION OF ONTARIO