grenada co-operative bank limited

ANNUAL REPORT

Grenada Co-operative Bank Limited

welcome home

MISSION STATEMENT“To be the leading Grenadian Provider of High Quality Financial and

Related Services to Individuals and Organizations in Local and International Markets,

We Care Because

You Matter!

Annual Report 2012

We Care Because You Matter! 1

02Corporate Information

04Notice of Annual Meeting

05Chairman's Review

13Managing Director's Discussion and Analysis

20Management Team

21Corporate Social Responsibility

24Human Resources Report

28Selected Financial Statistics 2009 - 2012

30Financial Statements

CONTENTS

We Care Because You Matter!

Annual Report 2012

2

Directors:

Corporate Secretary:

Auditors:

Solicitors:

Locations:

Derick Steele, Acc. Dir. – Chairman

Gordon V. Steele, O.B.E. – Deputy Chairman

Richard W. Duncan, B.Sc., M.A., FCGA, AICB, Acc. Dir. – Corporate Secretary

Richard Mc Intyre, Acc. Dir.

Leslie Ramdhanny, B.Sc., Acc. Dir.

Lisa Taylor, B.A. (Hons.), LL.B (Hons.), Acc. Dir.

Ambrose Phillip, B.Sc., M.Sc.

Richard W. Duncan, B.Sc., M.A., FCGA, AICB, Acc. Dir.

Messrs. PKF, Accountant & Business Advisers

Messrs. Lewis & Renwick,

Ciboney Chambers,

Law Office of Alban M. John

Head Office

#8 Church Street

St. George’s, Grenada, W.I.

Tel: (473) 440-2111/3549

Fax: (473) 440-6600

Website: www.grenadaco-opbank.com

St. George’s

#14 Church Street

St. George’s, Grenada, W.I.

Tel: (473) 440-2111/3549

Fax: (473) 435-9621

Grenville

Victoria Street

Grenville, St. Andrew

Tel: (473) 442-7748/7708

Fax: (473) 442-8400

Sauteurs

Main Street

Sauteurs, St. Patrick

Tel: (473) 442-9247/9248

Fax: (473) 442-9888

Spiceland Mall

Morne Rouge

St. George

Tel: (473) 439-0778

Fax: (473) 439-0776

Carriacou

Main Street

Hillsborough

Tel: (473) 443-6385/8424

Fax: (473) 443-8184

CORPORATE INFORMATION

Annual Report 2012


Correspondent Banking RelationshipGRENADA CO-OPERATIVE BANK LIMITEDChurch Street, St. George’s

Grenada, W.I.

SWIFT ADDRESS: GROAGDGD

CANADIAN CURRENCY TRANSFERS:

BANK: Bank of Montreal

BANK’S ADDRESS: The International Branch, Toronto, Canada

SWIFT ADDRESS: BOFMCAT2

ACCOUNT NO.: 1019198

TRANSIT #:31442 001 5.

ECD CURRENCY TRANSFERS:

BANK: St. Kitts-Nevis-Anguilla National Bank

BANK’S ADDRESS: P.O. Box 343, Basseterre, St. Kitts, W.I.

SWIFT ADDRESS: KNANKNSK

ACCOUNT NO.:24673

GBP/ EUR CURRENCY TRANSFERS:

BANK: Lloyds TSB

BANK’S ADDRESS: UK International Services, London, UK

SWIFT ADDRESS: LOYDGB2L

ACCOUNT NO.:GBP 01017544

EUR 86161549

SORT CODE: 30-96-34 6.

USD CURRENCY TRANSFERS:

BANK: Bank of America

BANK’S ADDRESS: Miami, FL

SWIFT ADDRESS: BOFAUS3M

ACCOUNT NO.:1901964767

ABA #:026009593

TTD CURRENCY TRANSFERS:

BANK: RBC Royal Bank

BANK'S ADDRESS: P.O. Box 287, 3B Chancery Lane,

Port of Spain,

Trinidad & Tobago

SWIFT ADDRESS: RBTTTTPX

ACCOUNT NO.: 8811022477

BBD CURRENCY TRANSFERS:

BANK: Republic Bank (Barbados) Limited

BANK’S ADDRESS: No.1 Broad Street, Bridgetown,

Barbados

SWIFT ADDRESS: BNBABBBB

ACCOUNT NO.:0229297

ASSOCIATIONS:Caribbean Association of Banks

Grenada Bankers Association


Annual Report 2012

4

Notice is hereby given that the eightieth Annual Meeting of the Bank will be held at the National Stadium’s South

Conference Room, Queens Park, River Road, St. George’s, on Tuesday January 29, 2013 at 5:00p.m.

AGENDA

1. To receive the audited financial statements for the year ended September 30, 2012,

together with the Chairman’s Review and Managing Director’s Report thereon.

2. To announce a dividend

3. To elect Directors.

4. To appoint auditors for the ensuing year. (Messrs. PKF is due to retire and is eligible for

re-appointment).

5. To discuss any other business that may be given consideration at an annual meeting.

By order of the Board of Directors

…………………............................…………..

Richard W. Duncan

Corporate Secretary

November 27, 2012

NOTICE OF ANNUAL MEETING

We Care Because

You Matter!

Annual Report 2012


CHAIRMAN’S REVIEW

We Care Because

You Matter!


Annual Report 2012

6

BOARD OF DIRECTORS

Derick Steele, Acc. Dir.Chairman

Richard Mc Intyre, Acc. Dir.

Leslie Ramdhanny, B.Sc., Acc. Dir.

Gordon V. Steele, O.B.E.Deputy Chairman

Darryl BrathwaiteAcc. Dir.

Richard W. Duncan, B.Sc., M.A., FCGA, AICB, Acc. Dir.Corporate Secretary

Ambrose Phillip, B.Sc., M.Sc.

Lisa Taylor B.A. (Hons.), LL.B (Hons.),

Acc. Dir.

Annual Report 2012


Preliminary Gross Domestic Product (GDP) estimates indicate that Grenada’s economic

performance in 2012 remained positive, though subdued, amid continued global economic

woes. Grenada’s GDP is conservatively estimated to grow by 2.1% in 2012, a 0.49

percentage points increase over the 2011 performance propelled by Agriculture, Education,

Construction and Hotel & Restuarant.

Agricultural production is estimated to account for 4% of total GDP, showed the highest

overall growth of 16% compared to a 2.7% growth in 2011. The Hotel & Restaurant sector

is estimated to grow by 3% in 2012 in contrast to a growth of 3.2% in 2011.

The Construction sector is estimated to expand by 3.5% in 2012 compared to a 0.1%

decline in 2011. Growth in the sector was driven to a large extent by Public Sector

Investment projects.

The Education sector is expected to continue to make a noticeable contribution to GDP

of 21% in 2012; a slight increase from the 20% in 2011. Preliminary estimates indicate that

the sector’s growth in 2012 was on par with its 5.4% growth in 2011.

The Communications & Transport and the Real Estate sectors are expected to reflect

growth of 1.5% and 2% respectively.

The Financial Intermediation sector remained stable, and is estimated to contribute 7.1%

to GDP. The main sub-sectors, that of Banks and other Financial Institutions, reported a

0.4% rate of growth in 2012 following a 1.2% contraction in 2011. Insurance is estimated

to contribute 1.1% to GDP.

The Economic Environment

TABLE 1. TOURISM INDICATORS FOR GRENADA (YEAR TO DATE SEPTEMBER 2012)

YearSTAY-OVER ARRIVALS

CRUISE ARRIVALS

TOTAL EXPENDITURE

2012 86,631 170,699 $239,327,293

2011 86,525 227,765 $228,908,234

Source: Grenada Board of Tourism Estimate


Annual Report 2012

8

TABLE 2. ECONOMIC INDICATORS FOR GRENADA (PROJECTED 2013 AND PRELIMINARY 2012)

INDICATORPROJECTED 2013 (%)

PRELIMINARY 2012(%)

Real Gross Domestic Product (GDP) 3.2 2.1

Inflation 3.0 3.4

Banking & Insurance 4.0 0.4

Agriculture 4.7 15.7

Construction 3.5 3.5

Tourism 3.1 3.0

Education 4.4 5.4

Source: The Central Statistics Office Grenada

The Banking sector experienced growth in both loans and advances, and deposits. In

2012 the sector saw an increase of 0.63% in deposits. This growth was fuelled primarily

by domestic savings. The monetary statistics on loans and advances from the Eastern

Caribbean Central Bank also showed growth of 0.99%, marginally above the 0.67%

YearJUNE 2012 (EC$000)

JUNE 2011 (EC$000)

% CHANGE

Deposits 2,422,114 2,406,910 0.63%

Loans and Advances

2,009,944 1,990,257 0.99%

Source: ECCB Commercial Banks Statistics for Grenada

attained in 2011.

Globally, regionally and locally the

impact of the economic recession and

attendant financial challenges remained

unabated in 2012. Grenada Co-operative

Bank continued its proactive stance in

respect of impaired Loans & Advances.

In keeping with the requirements of

International Accounting Standards and

the Guidelines of the Eastern Caribbean

Central Bank (ECCB) the Bank has made

significant impairment charge for credit

losses of $6.5m.

The Bank declared a Net Income of $2.1m

for 2012 compared with a Net Loss

of $10.8m last year. Having returned

to profitability, the Bank has opted to

pursue a conservative dividend policy

to further strengthen its already healthy

capital base. Our Tier I Capital, Capital

Adequacy Ratio and Solvency Ratio are

above the regulatory requirements. The

Capital Adequacy Ratio and Solvency

Ratio should not be less than 8% and 5%

respectively. As at the financial year end

our Capital Adequacy Ratio and Solvency

Ratio stood at 12% and 9% respectively.

Both show strong favorable positions.

Additionally, the Bank’s financial and non-

financial fundamentals remained fairly

strong. The Bank’s Customer Satisfaction

Rating persisted in 2012 at 4.2 on a

scale of 1 – 5 or 84% according to the

annual independent Household Omnibus

Survey conducted by Jude Bernard and

Associates. Grenada Co-operative Bank

also led the financial sector in respect

of the level of patronage (51%) enjoyed

from households.

Against the background outlined above,

the assets of the Bank continued on a

growth path in 2012. Total assets of the

Bank grew by 3.1% to $590m, less than

the 7.2% in 2011. Loans and Advances

climbed to $417.6m or by $12.4m or 3.1%

in 2012, less robust than the 9.7% in 2011.

Customers’ deposits contracted to

$505.1m or by $4.0m or 0.8% compared

with a 10% increase in 2011.

Grenada’s economy is expected to grow

by 3.2% in 2013. The key drivers in 2013

are anticipated to be the Tourism and

Construction sectors, with estimated

growth of 3.1% and 3.5% respectively.

The strength of Grenada’s economic

performance will be contingent on the

recovery of our tourism source markets

and from the inflows of foreign direct

investments.

The Banking & Financial Services Environment

Future Prospects Bank's Performance

Annual Report 2012


As we forge ahead, the Bank will remain resolute to explore

growth opportunities, yet cautious in light of the weak

economy characterized by high levels of unemployment, weak

productive sectors and high public debt. Despite the current

economic slowdown, the Bank holds a positive outlook of

Grenada’s eventual recovery and growth potential, as well as

its own capacity to profitably grow all avenues of its business.

Consistent with the Board Charter, Directors continued to

exercise good corporate governance within a framework that

promoted high standards of professional conduct, prudent and

diligent discharge of duties, and compliance with applicable

laws, regulations and guidelines in the execution of the Bank’s

strategies.

Implementing Sound Governance PracticesDuring 2012 the Board developed new policies and revised

existing ones to ensure that the Bank’s operations were guided

by adequate policies and controls. Concomitant to this was the

realignment of the Bank’s structure with its strategy and a new

management structure was approved.

Strategic PlanningIn an effort to ensure that the Bank’s vision and goals are clearly

defined, the Board of Directors and the executive management

team engaged in a strategy planning retreat. The output was a

revised strategic plan for the Bank for the period 2013-2015.

Board MeetingsFourteen (14) board meetings were convened in 2012. Board

meetings served as the main forum at which executives and

directors shared information and deliberated on the Bank’s

performance, plans and policies. The various sub-committees

of the Board met with regularity to carry out regular duties and

special assignments as mandated by the Board.

Director Training and DevelopmentAs part of our plan to continue strengthening Director

competence and ensure that Directors possess the requisite

expertise to provide adequate oversight of the Bank, Directors

were engaged in several training and development initiatives:

— Members of the Audit & Risk Management Committee

attended the annual meeting and conference of the Caribbean

Association of Audit Committee Members.

— Refresher Director Education and Accreditation Training

hosted by the Eastern Caribbean Securities Exchange (ECSE)

and the Institute of Chartered Secretaries and Administrators

(ICAS) of Canada was pursued by Directors.

— Director Lisa Taylor, Acc. Dir. completed the Director

Education and Accreditation Training and is now an

Accredited Director as certified by the Institute of Chartered

Secretaries and Administrators (ICAS) of Canada.

“Banks Make Money by Taking Risk. Banks Lose Money by Failing to Manage Risk.” (Author: Unknown)

Corporate Governance

- Directors also participated in two internal training workshops:

Credit Risk Management aimed at improving the quality of

oversight that the Board provides in the area of Credit Risk,

and Duties Roles and Responsibilities of Bank Directors aimed

at enhancing Directors’ ability to assess their performance

against the expectations of the Central Bank.

Annual Self EvaluationResponses to the Board’s self-evaluation questionnaire show

that Directors assessed their performance as excellent as

they have accomplished the major priorities during the past


Annual Report 2012

10

year, which included the revision of the Bank’s policies and

procedures, and giving general direction to management on

how to achieve the Bank’s goals and objectives. The Board also

scored highly on its ability to provide effective governance,

individual performance, and on the maintenance of an excellent

relationship with the Managing Director.

In 2012, the Bank continued its strategic focus to enhance

overall risk management across the Bank’s operations, under

the tutelage of the Board of Directors and its various sub-

committees, namely the Audit & Risk Management Committee

and the Loans Review Committee.

While risk oversight rests ultimately with the full Board of

Directors, various aspects of risk were addressed by the

Board as a whole and through its sub committees namely the

Audit and Risk Management Committee and the Loans Review

Committee. Senior Management committees, The Asset

Liability Committee (ALCO) and the Risk and Capital Committee

both chaired by the Managing Director, facilitated the process.

Significant development work was done during the year to

strengthen several areas of risk management, especially credit

and liquidity risk management.

Liquidity Risk ManagementThe Bank’s liquidity risk management process is spearheaded

by the Asset Liability Committee (ALCO). This Committee

meets weekly, guided by the Bank's Assets Liability Policy and

monitored by the Board of Directors.

ALCO operated within the parameters of an Asset-Liability

(ALCO) Policy which provides specific guidelines and limits on

the activities and modus operandi of the ALCO. The policy

also provides guidance on the Bank’s management of liquidity

and interest rate risks and the Bank’s Contingency Funding Plan.

In 2012, ALCO effectively executed its liquidity management

function, maintained the downward trend in the cost-of-funds

CHIEF AUDIT & RISK

MANAGEMENT EXECUTIVE

SENIOR MANAGER ,

CREDIT RISK

RISK ANALYST

( CREDIT RISK)

RISK ANALYST

( MARKET &

OPERATIONAL RISK)

SENIOR MANAGER,

MARKET & OPERATIONAL RISK

Enhanced Risk Management, Compliance and Internal Control

and ensured an optimal flow and balance of liquid funds was

maintained at all times to meet the Bank's obligations.

Credit Risk ManagementThe correlation between market and credit risk was evident

in 2012 as the local economy tightened, and loan asset quality

deteriorated in the first nine (9) months of the Financial Year,

before improving in the last quarter. To mitigate these risks,

the Bank reinforced its credit quality review and provision for

loan loss processes taking into consideration current market

risk conditions. Where possible, the Bank also sought to

prudently restructure credit facilities, where there was steady

counterparty cash flow and adequate collateral.

Acknowledging that a robust and integrated risk management

framework and practices are vital for long-term success, the

Bank engaged the services of PriceWaterhouseCoopers (PWC)

to undertake a “Strengthening of the Credit Risk Management

Function” project. The main outcomes of this project included

interalia (i) the establishment of an integrated risk management

function as illustrated here-below and (ii) a revised and

comprehensive suite of Credit Risk Management Policies &

Procedures, in accordance with international best practice.

Annual Report 2012


Market Risk ManagementFor Co-op Bank the major focus of market risk is that of the

impact of interest rate and foreign exchange movements on

its earnings and capital position given that the Bank assumes

market risk from consumer and corporate loans, position-

taking, and trading and investment activities.

The Bank actively scanned its external environment for

information about risk events in order to improve its

understanding of those events and their impact, thus facilitating

more informed decision making.

Operational Risk ManagementOperational risk is the risk to earnings or capital arising from

problems with service or product delivery. It is a function of

internal controls, information systems, employee integrity and

operating processes.

At the Bank, the delivery of all products and services is

guided by policies and detailed procedures readily available

on the Bank’s intranet that is accessible from employees’

workstations. These are all supported by a Customer Service

Charter, Customer Service Standards and an Employee Code

of Practice.

Employees continue to utilize the Customer Relationship

Management (CRM) system that supports process improvement

and customer satisfaction. The System facilitates internal

processes with the aim of providing our customers with a

superior customer service experience.

The Bank’s Information Technology controls were the subject

of an external review and penetration testing.

Management of Internal ControlsManagement is responsible for the establishment and

maintenance of a system of internal controls within the

Bank. They are charged with this responsibility by the Board

of Directors and are held accountable by the Audit and Risk

Management Committee.

The Internal Audit Department assisted Management and

the Audit and Risk Management Committee in the fulfillment

of their responsibilities by way of a systematic, disciplined

approach to the assessment of the effectiveness of the

design and execution of the system of internal controls and

risk management processes.

The Internal Audit Department has adopted a risk based

approach to auditing, and undertook mainly compliance

and operational audits. Underpinned by the Committee of

Sponsoring Organizations (COSO) Framework, the audits

focused on the key controls of various aspects of the Bank’s

operations in support of the Bank’s Balanced Scorecard with

the objectives of ensuring:-

- The reliability and integrity of information

- Compliance with the policies, plans, procedures, laws and

regulations

- The safeguarding of assets

- The economical and efficient use of resources.

- The accomplishment of established objectives and goals

of operations.

The Audit and Risk Management Committee continues to

oversee the operations of the department. Executive Managers

appear before the committee to answer questions about

aspects of internal control weakness under their charge; thus

fostering and maintaining a strong internal control environment.

Risk UniverseIn 2012, in addition to the development of the Bank’s Risk

Universe, (the full range of risks that can impact, either

positively or negatively, on the ability of the organisation to

achieve its long term objectives) the Bank also introduced a

Risk Management System Tool that allows Management to track

enterprise–wide risks on a continuous basis, and take early,

decisive action to manage all credit, market and operational

risks.


Annual Report 2012

12

DIRECTORS’ INTERESTThe table below shows the shareholdings of Directors as at

September 30th 2012 with comparisons for the previous year.

DIRECTORS TITLE NO. SHARES2012

NO. SHARES2011

CHANGE

DERICK STEELE

CHAIRMAN 278,088 278,088 -

GORDON V. STEELE

DEPUTY CHAIRMAN

181,680 178,680 3,000

RICHARD W. DUNCAN

CORPORATE SECRETARY

15,500 15,500 -

AMBROSE PHILLIP

Director 2,500 2,500 -

RICHARD MC INTYRE

Director 9,000 9,000 -

LISA TAYLOR

Director 2,000 2,000 -

LESLIE RAMDHANNY

Director 15,000 15,000 -

DARRYLBRATHWAITE

Director 3,857 3,857 -

CHANGES TO THE BOARDThere have been no changes to the Board of Directors in the

past year.

DIVIDEND POLICYGiven the performance of the Bank this year, the Directors

recommend a dividend of $0.07 per share. This amounts to

$532,000.

The annexed Statement of Changes in Equity shows that:- $

The net profit for the Year amounts to 2,069,870

To which has been added from Retained Earnings

at the beginning of the Year 5,528,359

7,598,229

From which has been transferred to:

Statutory Reserves (413,974)

General reserves (51,747)

Making available for distribution 7,132,508

The amounts recommended by Directors

For the payment of dividend 532,000

ACKNOWLEDGEMENTSThe Directors have consistently demonstrated their commitment

to the effective oversight of the Bank’s activities, and 2012 was

no exception. Their relentless support and enthusiasm were

essential in responding to the challenges presented by the

global financial and economic crises. I therefore would like to

convey my sincerest appreciation and gratitude to my colleague

Directors for their efforts at ensuring the Bank’s sustained

progress.

The overall performance of the Bank in the face of ever aggressive

competition and the economic and financial challenges would

not have been possible without strong teamwork, dedication

to duty, and the will to succeed by management and staff alike.

Therefore, on behalf of the Board of Directors, I extend my

sincerest appreciation to you all.

Finally, to all our valued customers and shareholders, I express

my heartfelt thanks for your continued patronage and support

for the Bank.

..........................................................

Derick Steele

Chairman

November 27, 2012

We Care Because

You Matter!

Annual Report 2012


MANAGING DIRECTOR’S DISCUSSION AND ANALYSIS

We Care Because

You Matter!


Annual Report 2012

14

EXECUTIVE TEAM

Deon Moses, B.Sc., M.BA., FICB Chief Operating Officer

Aaron Logie, FCCA, MBA Executive Manager, Finance

Julia G. Lawrence,B.S., MBA-IBF Chief Audit & RiskManagement Executive

Clifford Bhola, AICB Executive Manager, Retail Banking

Floyd Dowden, AICB, AML/CAExecutive Manager, Operations & Administration

Nadia Francis-Sandy, B.Sc., M.Sc. Executive Manager, Corporate & Commercial Banking

Mondelle Squires-Francis, B.Sc Executive Manager, Customer Care

Richard W. Duncan, B.Sc., M.A., FCGA, AICB, Acc. Dir.Managing Director

Annual Report 2012


OVERVIEWDespite the ongoing challenges facing both the economy and

the financial sector, the Bank experienced a turnaround in its

performance in 2012, reporting a profit after tax of $2,069,870

compared to a loss of $10,788,874 in 2011. In 2011, $14.4 million

was written off for investment impairment, whereas in 2012

investment impairments reduced significantly to $325,000.

However, the economic challenges facing the local economy

has resulted in a steep increase in the levels of impairment

charge for credit losses, hence resulted in lower than expected

net profits.

Income

The Bank reported a commendable Net interest income at

$23.9m for the year, an increase of $4.9m or 26% over 2011.

Interest income from loans grew concurrently with the loan

portfolio increasing by $4.6m or 14% over 2011. Income from

investments also increased by $0.8 million or 25%.

Interest expense increased by $0.5 million or 3% in 2012; much

of this increase was attributed to Fixed Deposits. Movement

during the year in the deposit portfolio, highlighted in the

Balance Sheet section of this report, explains the rationale for

this increase in spite of the modest reduction in the deposit

portfolio.

Other Income which comprised commissions on foreign

exchange transactions, loan fees and other sundry charges

increased by 51% or $2 million. This also reflects a commendable

performance.

Non-interest Expense

General administrative expenses totalled $20.9m, represent an

increase by $0.1m or 5% over 2011. With preliminary figures

for inflation for 2012 of 3.4%; this 5% growth represents a

moderate increase. The largest attribute to this total was Staff

Cost which grew by $1.5m or 16% from the previous year. The

main other significant increase was Repairs & Maintenance.

The Bank continues to face the challenge of Non-Performing

Loans, and in 2012 Loan impairment went up by $3.8m or 142%

to $6.5m. As the economic downturn persists, property values

continue to decline. Compliance with International Financial

Reporting Standards means that as property values decline,

increased provisions would have to be made against the loan

portfolio that is secured by real estate.

During the year, Government of St. Kitts & Nevis restructured

its debt portfolio. As a result, the Bank suffered a 50% loss in

the value of $650,000 Governement of St. Kitts & Nevis bonds,

hence the impairment charge on investment of $325,000.

BANK’S REVIEW AND FINANCIAL PERFORMANCE

Net Income from 2008 - 2012

$2.0m $4.6m

$2.9m

$1.0m$(10.8m)

2008

2009

2010

2011

2012


Annual Report 2012

16

Assets and Liabilities

Asset growth of $17.5m equivalent to 3% over 2011 was a

moderate performance when compared to the previous two

years. During those periods growth were $38.7 million or 7.2%

and $32.5 million 6.5% respectively. The main areas of growth

were in financial investments and customers’ loans and advances.

Customers’ Loans and Advances

Notwithstanding the tight credit environment, the overall loan

portfolio increased to $425m. This represents a rise by $14m

or 3% over 2011. Much of the growth was focused in the area

of commercial mortgages. During the year also $10m retail

mortgages were sold on the secondary mortgage market to

Eastern Caribbean Home Mortgage Bank.

Loans by type

Mortgage loans constitute 87% of total Bank loans at the end of

2012. Demand loans and Other Advances comprise 4% and 9%

respectively. Reclassification of some commercial loans from

Demand to Mortgages does not allow meaningful comparison

between 2012 and 2011 for Demand loans.

Loans by Economic Sector

Loan growth was recorded in most economic sectors. The

largest increase in value were in Personal, Distributive Trade,

Construction and Land Development sectors, which experienced

positive growth over 2011. Transportation and Storage, the

fourth largest sector for loans, saw slight growth over last year

of $0.1m or 3.9%, while Agriculture, among the smaller loan

values experienced a lesser increase of $235k or 30%. However,

Fisheries, Utilities, Entertainment/Catering, Professional and

Other services sectors experienced slight reduction in growth

$000

,000

Years

$600

$500

$400

$300$200

$100$0

20122011201020092008

$445.4$501.8 $534.3 $572.9 $590.5

ASSETS EMPLOYEDin millions

$0

$250

$500

2008 2009 2010 2011 2012

$300.9 $352.7 $371.4

$410.6 $424.6

Years

LOANS & ADVANCES (Gross)in millions

$(000

,000)

LOANS BY TYPE

$0

$50

$100

$150

$200

$250

$300

$350

$400

2012 2011 2010

Mortgages Demand Loans Other Advances

MortgagesDemand LoansOther Advances

20102796330

20113136434

20123701639

$(00

0,00

0)

Annual Report 2012


year and is concentrated in fixed deposits held by a few large

institutional investors.

Deposits by type

Certificate of Deposits fell by $14.7m or 6% for reasons alluded

to above. Current accounts also declined by $2.9m or 11%

as businesses draw-down balances to fund their operations.

However, there were increases in Savings and Treasure Chest

deposits by $6.9m or 4% and $5.7m or 16% respectively.

Personal chequing accounts also grew by $1.5m or 10%. This

rebalancing of the portfolio would have future impact on the

average cost of funds for the Bank as the reduction was felt

mainly in the high cost fixed deposit portfolio.

Liquidity

The Bank’s overall liquidity tightened in 2012. All the ECCB

Prudential Liquidity Ratios were maintained in 2012 as shown

below.

levels since 2011. A greater impact was negatively felt in loans

to Financial institutions and in Public Administration sectors,

where negative growth was experienced by $326k or 40%

and $6.8m or 49.06% respectively.

Major sectors include:

Personnel $1.4m or 0.6%

Distributive Trade $14.6m or 53%

Construction and Land Development $2.3m or 8.3%

The quality of the credit portfolio is essential to the Bank’s

profitability and hence its long term sustainability. There was

a decrease in the Non-Performing ratio from 10% to 9%,

still above the ECCB’s prudential benchmark of 5%. In the

meantime tremendous work is ongoing to reduce the Non-

Performing Loan portfolio.

Customer deposits

Customer Deposits make up 86% of the Bank’s total funding

requirement. At the end of 2012, the deposit balance changed

course as it experienced a fall by $3.4m or 1% over 2011. Most

of this reduction was experienced in the last half of the financial

$377.1 $429.0 $460.9

$503.9 $500.5

$0.0

$500.0

$1,000.0

2008 2009 2010 2011 2012

CUSTOMER DEPOSITS (Gross)in millions

$000

,000

Years

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

2012 2011 2010

Personal Chequing Current Accounts Savings Deposits

Treasure Chest Fixed Deposits


Annual Report 2012

18

ECCB Prudential Liquidity Ratios Benchmark GCBL

Minimum Reserves 6% 6%

Net Liquidity Ratio 20% 20%

Loans to deposits 75% - 85% 85%

The above indicates the Bank’s compliance to the ECCB

prudential requirements in respect of liquidity as at September

30th 2012.

Election of Directors and Appointment of Auditors

The Directors retiring are Messrs. Darryl Brathwaite, Richard Mc

Intyre and Lisa Taylor who being eligible, offer themselves for

re-election.

The retiring Auditors, Messrs PKF, Chartered Accountants, offer

themselves for re-appointment.

Appreciation

On behalf of the Board of Directors and myself I wish to place

on record my appreciation for the highly valued contributions

of all our stakeholders: our customers who are the reason

for our continued existence, our Management and staff for

their devotion to duty and hard work during the year, and our

shareholders who provide the capital to make our business

possible.

______________________

RICHARD W. DUNCAN

Managing Director

November 27, 2012

Annual Report 2012


REPORTS

We Care Because

You Matter!


Annual Report 2012

20

MANAGEMENT TEAM

Marquez Mc Sween,Manager Retail Banking, Carriacou

Cynthia DavidsonManager Retail Banking, St. George’s

Ericka Hosten, B.Sc

Marketing Officer

Willvorn Grainger, CRU, Dip.

Manager Retail Banking, Spiceland Mall

Shane Regis, AICB

Manager Retail Banking, SauteursRichard Medford, B.Sc, Dip.Senior IT Officer

Wilfred Gary Sayers, B.Sc

Manager Retail Banking, Grenville

Jennifer Gulston-Gittens, B.A.

Officer in Charge, Recoveries & Collections

Keri-Ann St. Louis-Telesford, B.A.S

Human Resources Officer (Ag.)

Peter Antoine, B.Sc., AICB

Senior Programme & Research Officer

Jennifer Robertson, AICB, Dip.

Senior Manager, Credit Risk (Ag.)

Annual Report 2012


In keeping with its thrust towards sports, on January 21, 2012

Co-op Bank signed a partnership agreement with Mr. Kirani

James, the present 400m Olympic Gold Medalist. Co-op

Bank is now Mr. James’ official bank and local sponsor. One

of the performance conditions of the agreement is that Mr.

James would be a guest presenter at the Co-op Bank National

Primary Schools Athletes’ Workshop as he is deemed by the

Bank to be an excellent role model for our nation’s children. Mr.

James viewed the partnership as a great one for “improving the

community and improving the satisfaction of customers”.

The Co-op Bank National Primary Schools Athletes’ Workshop

was held for the first time this year. Every primary school in

Grenada and Carriacou had an opportunity to send two of their

best athletes (one male and one female for mixed school) as

participants. Dr. Sonia Johnson, who is a former tennis pro

and now a medical professional in the area of sports medicine,

was the lead presenter. Mr. Kirani James, the guest presenter,

addressed one hundred and eighteen (118) student athletes

and fifty-six (56) coaches and Games Teachers, on the topic

“Enjoying Healthy Athletics”.

CORPORATE SOCIAL RESPONSIBILITY

We Care Because You Matter!Again in 2012, Grenada Co-operative Bank Limited devoted

itself to serving the people of the state of Grenada in its own

unique way. We place our customers at the center of all the

decisions that we make.

Hence, 2012 heralded in the Co-op Bank “We Care because You

Matter” marketing programme with the Bank understanding its

corporate social responsibility, starting with its new corporate

campaign, aimed first at restoring the confidence of Grenadians

in indigenous institutions.

We Care About Sports!For the past eight years Co-op Bank has sponsored primary

school games at the parish level (for St. Patrick and St. Andrew

parishes) and the Co-op Bank National Primary Schools' Games.

Each year the games are conducted and the survey results show

a high level of satisfaction (86% in 2012) with the execution of

the Games, from both patrons and participants.

“We care because you matter”

St. George’s: 440-2111 Fax: 440-6600 • Grenville: 442-7748 Fax: 442-8400

Sauteurs: 442-9247 Fax: 442-9888 • Spiceland Mall: 439-0778 Fax: 439-0776

Carriacou: 443-6385 Fax: 443-8184 • [email protected]

www.grenadaco-opbank.com

• Due diligence and compliance with financial regulators such as ECCB

• Strict corporate values of integrity, confidentiality and loyalty to our customers

• Long-standing history of consistent growth and performance, and financial stability in the market-place

Grenada Co-operative Bank Limitedwelcome home

Come Home…To the bank that has always been there and always will be, because of

prudent financial practices and sound financial performance.

Kirani James at the Co-op Bank National Primary Schools' Games


Annual Report 2012

22

This year Co-op Bank also included the “Kirani James Challenge

Trophy” as part of the Co-op Bank National Primary Schools’

Games. Mr. James presented the trophy to the winning team, the

St. Andrew’s Parish Team.

We Care About The Diaspora!As the Bank of the Diaspora, Co-op Bank partnered with the

Ministry of Foreign Affairs, as the main sponsor of the Diaspora

Homecoming 2012, specifically the thematic platforms.

Home Coming 2012 emanated from the two conferences held

in 2010 and 2011; the objectives of which were to ‘implement

projects in communities, stage events in order to achieve

closer interaction and deliver tangible results in the country’.

The Thematic platforms covered areas of Health & Wellness,

Education, Cultural Heritage, Tourism, Business, Economics,

Politics and Governance. These areas were covered by different

territories in the Diaspora.

The Bank also demonstrated its commitment to Grenadians

returning from the Diaspora with the establishment of a Foreign

Exchange service Cambio at Maurice Bishop International

Airport. The Cambio facilitates currency exchange, credit card

advances, and debit card transactions.

Co-op Bank was present as a guest of the Grenada Mission

in London, at the annual Grenada Heritage Day. The Bank’s

representative established contact with Grenadians living in

Britain and displayed, along with other indigenous companies,

what Grenada had to offer its Diaspora. The Bank also issued a

quarterly newsletter, specifically designed to keep the Diaspora

abreast of issues related to financial services.

We Care About Education!On July 16, 2012, Grenada Co-operative Bank Limited awarded

scholarships to fifteen students as part of its annual Super

Starter Education Investment Plan Programme.

Seven silver scholarships, each valued at $1,200, were awarded

to primary school students and seven gold scholarships, each

valued at $2,500, were awarded to secondary school students.

The lottery draw was conducted in the presence of the Bank’s

Auditors, PKF.

Co-op Bank’s Super Starter Education Investment Plan Scholarship

Programme was specially designed to ensure that Plan beneficiaries

from all parishes, including Carriacou, qualify. Over the past three

years, Grenada Co-operative Bank Limited has awarded 39

scholarships throughout the island, to assist in covering primary

and secondary school expenses. This year, the Bank presented 14

more scholarships, bringing the total to 53.

Mr. James presenting at the Co-op Bank National Primary Schools Athletes' Workshop

Mr. James presenting at the Co-op Bank National Primary Schools Athletes' Workshop

Recipients of the 2012 EIP Scholarships

Annual Report 2012


The Bank also awarded its second Platinum Scholarship valued at

$45,000 to Ms. Cherisse Nedd. This draw is conducted every two

years and affords the winner the opportunity to study any subject

area, at any university, anywhere in the world. To date the Bank

has invested in excess of $138,000 in the Super Starter Education

Investment Plan Scholarship Programme.

We Care About Health!Co-op Bank’s Community Outreach Programmes have worked

well for both beneficiaries and the Bank. In 2012 despite the

depressed economic situation, the Bank successfully conducted

its signature event “Co-op Bank Pump it Up” Fun Walk.

This was the fourth year of the walk and has beed coined by many

as “being here to stay!”. The walk was held in both Carriacou and

Grenada, with participation of approximately 5,000 walkers. This

year’s beneficiary was the Sickle Cell Association of Grenada.

We Are Celebrating 80 Years!In July 2012 the Bank celebrated its 80th Anniversary. The Bank

commemorated this milestone with a ceremony attended by

guests who were the immediate relatives of the past General

Managers. At the ceremony, the Bank’s wall of fame was unveiled

featuring General Managers from establishment to present,

numbering five gentlemen, Mr. Sam Brathwaite, Mr. Kenneth O.

Williams, Mr. Irie Bain, Mr. Gordon V. Steele, OBE, and Mr. Richard

W. Duncan.

To mark the celebration, the staff of each Retail Banking Unit

served anniversary cake and a drink to customers doing business

on that day.

As an indigenous financial institution, Grenada Co-operative Bank

Limited remains a strong, supportive corporate citizen within the

state of Grenada.

We Care Because You Matter! welcome home

L to R: Dr. Roxanne Nedd, Cerisse Nedd recipient of the Platinum Scholar-ship, Clifford Bhola, Mondelle Squires-Francis, Executives of the Bank.

Pump it Up 2012

Ms. Evlyn Joyce Camp, daughter of Irie Bain, unveiling the 'Wall of Fame' at the 80th Anniversary Ceremony.

Pump it Up 2012


Annual Report 2012

24

One of the Bank’s corporate goals is to provide an environment

for achieving personal excellence and holistic growth for all

employees. A critical strategic perspective is aptly captioned

Learning and Growth, and focuses on ensuring that the Bank

is staffed by competent, motivated employees. The Career

Development and Manpower Programme (CDMP) continues to

be central to the strategy for this achievement. The focus of

the programme is the forming of a cadre of professional bankers

who support the Bank’s principles of high productivity, strong

expertise and the delivery of excellent service experiences.

The CDMP is one pillar of the Bank’s human resource management

and development strategy. It encapsulates sub-systems

programmes, in which the Bank invests heavily, to ensure staff

CDMP Programme

Number of Persons

Staff Levels Programme Presiding

Educational Institutions

Challenge 5 Middle Management New York Institute of Finance

Professional Certificate in Bank Branch Management

Challenge & Career Pathing

4 Middle Management Real Estate Institute of Canada

Certified Residential Mortgage Underwriting

Challenge 1 Middle Management University of the West Indies

B.Sc. Management studies

Challenge 2 Middle Management KESDEE Inc. Basics of Banking Certificate

Challenge 1 Supervisory KESDEE Inc. Certificate in Credit Analysis

Challenge 1 Supervisory KESDEE Inc. Operational Risk Manage-ment Certificate

Challenge 1 Senior Management University of Leicester MSc Performance Management & Workplace Learning

Challenge & Career Pathing

3 Supervisory and Middle Management

Graduate School Of Banking, Wisconsin

Banking Diploma

Career Pathing 7 Clerical KESDEE Inc. Basics of Banking Certificate

are equipped to meet the challenges of the changing financial

services environment and to respond to the needs of the public

we serve.

To date, of the sixteen (16) members of staff who are enrolled

in the fast-track management and leadership development

programme, titled, "Challenge Programme". Forty-one (41) other

members of staff are enrolled the Career Pathing Programme,

which aims at promoting the development of expertise in

specific banking disciplines.

HUMAN RESOURCES REPORT

The 2012 CDMP education programmes covered were as follows:

Annual Report 2012


CDMP Programme

Number of Persons

Staff Levels Programme Presiding

Educational Institutions

Career Pathing 1 Clerical KESDEE Inc. Corporate Governance

Career Pathing 2 Supervisory KESDEE Inc. Financial Planning

Career Pathing 1 Supervisory KESDEE Inc. Project Valuation

Career Pathing 1 Supervisory KESDEE Inc. Bank Branch Management, Human Resource Management and Customer Service

Career Pathing 1 Clerical American Bankers Association

Diploma in Bank Marketing

Career Pathing 1 Supervisory London School of Business & Finance

Association of Certified Chartered Accountants

Career Pathing 1 Clerical Institute of Canadian Bankers

Associate of the Institute of Canadian Bankers

Given the significant investment is these Bank-sponsored,

diverse and rigorous education programmes, the Bank’s

competency base is being strengthened, over time.

The Bank recognizes Ms. Carla Wilson, Mr. Richard Medford and

Mrs. Jennifer Robertson as the first cohort of staff graduating

from the Graduate School of Banking Wisconsin’s Banking

Diploma programme. Ms. Nicolette Harding is now an Associate

of the Institute of Canadian Bankers, joining seventeen other

employees who are also AICB (the more recent awardees are

shown below.

Left to right: Mr. Richard Medford BSc, Dipl, Mrs. Jennifer Marshall-Robertson, AICB, Dipl, and Ms. Carla Wilson, AICB, BSc., Dipl

Past AICB awardees recognized in 2012 Financial Year

Ms. Nicollete Harding, AICB 2011

Mrs. Rondine Lowe-Griffith, AICB 2010

Mr. Brian James, CAT, AICB, 2011, 2010


Annual Report 2012

26We Care Because You Matter!

Annual Report 2012

Ms. Rachael Duncan, AICB, B.Sc. 2011

Ms. Samica Roberts, B.Sc. 2010

Mrs. Claudette Forteau, AICB, BSc. 2010

Ms Carla Wilson, recent Graduate School of Banking Diploma Graduate, also joined Ms. Rachael Duncan, Ms. Samica Roberts

and Mrs. Claudette Forteau, in the achievement of Bachelor’s Degrees in Management Studies with the University of the

West Indies Open Campus Progamme in Grenada.

Rotations and MentorshipThe Bank Rotation Programme as another critical pillar, within the Human Resource management and development strategy,

fuels the CDMP to purposefully and systematically provide staff with opportunities to enhance and develop new skills and

competencies in the various disciplines within the Bank.

Coupled with the Rotation Programme is the Bank’s Challenge Mentorship Programme, formally implemented in March 2012.

Challengees were assigned to mentors who are avid businesspersons renowed in the Grenadian community.

Other Training in 2012 The training calendar also covered several soft skills and other technical training interventions which included:

Programme of StudyNumber of Persons

17

18

16

9

2

3

3

2

4

24

‘Basics of Supervision’

‘The Supervisor as Coach’

Office Ethics

Teaming up to Manage Change, Team Building & Executive Coaching

Credit Risk - Eastern Caribbean Securities Exchange

Credit Appraisal for Project and Syndicated Lending

Credit Analysis & Credit Management - Eastern Caribbean Institute of Finance

Project Writing - Caribbean Development Bank

Labour Code & Negotiating Workshop - Grenada Employers' Federation

Credit School - Grenada Co-operative Bank Limited

Annual Report 2012


Annual Report 2012


Staff and Family at the end-of day event; a round of tug-of-war.

Chilli Peppers Won the Co-op-a-athon! And they were the staff of Operations and Compliance Department

The overall employee-assigned rating for the relevance of the

various session to their substantive jobs is 94%.

The Learning of Growth perspective of the Bank’s strategic plan

is the foundation on which the rest of its strategic imperatives

are built. The quality of service experience delivered, the

achievement of revenue targets, the market positioning and all

other strategic considerations are all dependant on the quality

of our human resources.

STAFF ACTIVITIESDuring the fiscal year 2011-2012 staff members were involved

in two bank social activities: the Christmas Staff Cocktail &

Award Ceremony in December 2011 and Family Fun Day in May

2012.

At the event several staff members were recognized for their

academic achievements, years of service to the Bank and

overall performances in the respective units and departments,

during the past year.

At the Family Fun Day held on BBC Beach held at “Wild Woods

Park” staff came together with their families to have fun playing

games such as water rides, domino competition, bingo, treasure

hunt, and engaging in healthy competition.

Staff socials underscore the Bank’s commitment to creating an

environment where staff feel motivated and encourages team

work and work situations are cordial and productive.

28

CO-OP BANKSELECTED FINANCIAL STATISTICS

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net After Tax Profits $3,651,611 $3,297,225 $4,594,693 $4,576,219 $5,066,156 $4,551,543 $2,940,142 $762,274 ($10,778,874) $2,069,870

% Change 118.6% -9.7% 39.4% -0.4% 10.7% -10.2% -35.4% -74.1% -1514.0% 119.2%

DIVIDEND PER SHARE (Declared) $0.20 $0.22 $0.11 $0.14 $0.22 $0.25 $0.29 $0.25 $0.00 $0.07

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003-2012

LOANS & ADVANCES $142,499,185 $188,368,818 $232,910,658 $273,389,669 $280,638,341 $300,935,401 $352,707,364 $371,381,947 $410,634,725 $424,623,229

% Change 16.8% 32.2% 23.6% 17.4% 2.7% 7.2% 17.2% 5.3% 10.6% 3.4% 188.2%

LOANS & ADVANCES

PROFITS & DIVIDENDS

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 - 2012

DEPOSITS $203,610,934 $236,862,076 $284,983,243 $316,891,219 $321,150,926 $377,118,178 $429,020,547 $460,845,080 $509,118,529 $505,134,323

% Change 23.7% 16.3% 20.3% 11.2% 1.3% 17.4% 13.8% 7.4% 10.5% -0.8% 150.0%

DEPOSITS(Customers deposits inclusive of interest payable)

$0

$200,000,000

$400,000,000

$600,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

LOANS & ADVANCES2003 - 2012


29

2003 - 2012

$0

$200,000,000

$400,000,000

$600,000,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

DEPOSITS2003 - 2012


2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net After Tax Profits $3,651,611 $3,297,225 $4,594,693 $4,576,219 $5,066,156 $4,551,543 $2,940,142 $762,274 ($10,778,874) $2,069,870

% Change 118.6% -9.7% 39.4% -0.4% 10.7% -10.2% -35.4% -74.1% -1514.0% 119.2%

DIVIDEND PER SHARE (Declared) $0.20 $0.22 $0.11 $0.14 $0.22 $0.25 $0.29 $0.25 $0.00 $0.07

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003-2012

LOANS & ADVANCES $142,499,185 $188,368,818 $232,910,658 $273,389,669 $280,638,341 $300,935,401 $352,707,364 $371,381,947 $410,634,725 $424,623,229

% Change 16.8% 32.2% 23.6% 17.4% 2.7% 7.2% 17.2% 5.3% 10.6% 3.4% 188.2%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003 - 2012

DEPOSITS $203,610,934 $236,862,076 $284,983,243 $316,891,219 $321,150,926 $377,118,178 $429,020,547 $460,845,080 $509,118,529 $505,134,323

% Change 23.7% 16.3% 20.3% 11.2% 1.3% 17.4% 13.8% 7.4% 10.5% -0.8% 150.0%

2003 - 2012

FINANCIAL STATEMENTS 201230

30TH SEPTEMBER, 2012

FINANCIAL STATEMENTS

Annual Report 2012


FINANCIAL STATEMENTSFOR THE YEAR ENDED

30TH SEPTEMBER, 2012

PAGE

1. AUDITORS’ REPORT TO THE SHAREHOLDERS 32

2. STATEMENT OF FINANCIAL POSITION 33

3. STATEMENT OF COMPREHENSIVE INCOME 34

4. STATEMENT OF CHANGES IN EQUITY 35

5. STATEMENT OF CASH FLOWS 36

6. NOTES TO THE FINANCIAL STATEMENTS 37 - 66


We have audited the accompanying financial statements of the Bank which comprise the statement of financial position at September 30, 2012 and the related statements of comprehensive income, changes in equity and cash flows for the year then ended and a summary of significant accounting policies and other explanatory notes.

Responsibility for the Financial Statements

Those charged with governance are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

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

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

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

Opinion

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the company as of September 30, 2012 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

GRENADA: November 27, 2012 Accountants & Business Advisers

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS

Annual Report 2012


Notes ASSETS

Cash and balances with Central Bank and other banks 5 Customers’ loans and advances 7 Financial investments 8 Premises and equipment 9 Other assets and prepayments 10 Income tax recoverable Deferred tax asset 21

TOTAL ASSETS

LIABILITIES AND EQUITY

LIABILITIES Amount due to other banks 11 Customers’ deposits 12 Other liabilities 13

TOTAL LIABILITIES EQUITY

STATED CAPITAL 14 STATUTORY RESERVE 15 OTHER RESERVES 16 RETAINED EARNINGS

TOTAL LIABILITIES AND EQUITY

2012$

62,864,645417,601,40156,334,74544,783,5925,577,026

33,870 3,298,429

590,493,708

34,320,875505,134,323 7,448,675

546,903,873

24,871,739

8,186,429

3,399,159

7,132,508

43,589,835

590,493,708

2011$

69,767,734405,229,14140,970,28944,963,3028,654,720 65,718

3,330,277

572,981,181

18,093,968509,118,529 4,224,112

531,436,609

24,871,739

7,772,455

3,372,019

5,528,359

41,544,572

572,981,181

Approved by the Board of Directors on November 27, 2012 and signed on their behalf by:

Director Director Secretary

The notes on pages 37 to 66 form an integral part of the financial statements

STATEMENT OF FINANCIAL POSITION AT 30TH SEPTEMBER, 2012


STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30TH SEPTEMBER, 2012

Notes

INTEREST INCOME Customer loans and advancesInvestments and deposits at other banks

Interest expense 17

Net interest incomeOther income 18

Operating income

EXPENDITUREImpairment charge for credit losses Investment and deposit impairment 19General administrative expenses 20

Net income/(loss) for the year before income tax Provision for income tax 21 - Current - Deferred

Net income/(loss) for the year after income tax

Basic earnings per share 22

2012 $

37,224,2073,832,571

41,056,778(17,207,460)

23,849,318 5,972,318

29,821,636

6,489,432325,000

20,873,638

27,688,070

2,133,566

(31,848)(31,848)

(63,696)

2,069,870

$0.27

2011$

32,593,5183,062,915

35,656,433(16,733,320)

18,923,113 3,953,109

22,876,222

2,677,01114,426,95519,891,407

36,995,373

(14,119,151)

-3,330,277

3,330,277

(10,788,874)

$(1.42)

The notes on pages 37 to 66 form an integral part of these financial statements

Annual Report 2012


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OPERATING ACTIVITIES

Net income/(loss) before taxation for the year Adjustments for: Depreciation (Gain)/loss on disposal of premises and equipment Operating income/(loss) before working capital changes Net changes in operating assets and liabilities: Other assets and prepayments Customers’ loans and advances Customers’ deposits Other liabilities Due to other banks Net income tax paid

Net cash provided by operating activities

INVESTING ACTIVITIES

Proceeds from sale of premises and equipment Net change in investments Purchase of premises and equipment

Net cash (used in)/provided by investing activities

FINANCING ACTIVITIES

Dividends paid Bond repayment Movement in general reserves Net cash used in financing activities

Net change in cash and cash equivalents Cash and cash equivalents - at beginning of the year

- at end of the year

2012 $

2,133,566

2,565,753 ( 55,533)

4,643,786

3,077,694(12,372,260)(3,984,206)3,224,563

16,226,907

10,816,484 -

10,816,484

58,300(15,364,456)

(2,388,810)

(17,694,966)

--

(24,607) (24,607)

(6,903,089)69,767,734

62,864,645

2011 $

(14,119,151)

2,433,797 101,881

(11,583,473)

7,885,345(35,780,252)48,273,449

236,64814,093,968

23,125,685 409,906

23,535,591

-4,497,626(3,561,460)

936,166

(1,431,250)(11,560,017)

( 113,107)

(13,104,374)

11,367,38358,400,351

69,767,734

The notes on pages 37 to 66 form an integral part of these financial statements

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH SEPTEMBER, 2012

Annual Report 2012


1. CORPORATE INFORMATION

Grenada Co-operative Bank Limited (the Bank) was incorporated on July 26, 1932, and continued under the Companies Act 1994 of Grenada. It provides retail and corporate banking services. The Bank’s registered office and principal place of business is situated on Church Street, St. George’s.

The Bank has five retail units and employed one hundred and fifty-four (154) persons during the year (2011– 156 persons).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Preparation

These financial statements comply with International Financial Reporting Standards (IFRS) and are prepared under the historical cost convention as modified by the revaluation of available-for-sale financial assets and land and buildings.

The preparation of financial statements in accordance with IFRS requires management to make critical estimates and assumptions that affect the reported amounts of assets and liabilities as at the date of the financial statements and income and expenses during the reporting period. Actual results may differ from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4.

b) Accounting standards, amendments and interpretations

(i) There are no new standards amendments and interpretations that are effective for the first time for the financial year beginning on or after 1st October, 2011 that would be expected to have a material impact on the Company’s financial statements.

(ii) Amendments and interpretations issued but not effective for the financial year beginning 1st October, 2011 and not early adopted. These either do not apply to the activities of the Company or have no material impact on its financial statements.

Standard Description

Effective for annual periods beginning on or after –

IAS 1 Presentation of items of other comprehensive income 1st July, 2012

IAS 12Income taxes on deferred tax 1st January, 2012

NOTES TO THE FINANCIAL STATEMENTSAT 30TH SEPTEMBER, 2012


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) b) Accounting standards, amendments and interpretations (continued)

Standard DescriptionEffective for annual periods beginning on or after –

IAS 19 Employee benefits 1st January 2013

IAS 27 Separate financial statements 1st January, 2013

IAS 28 Investments in associates and joint ventures 1st January, 2013

IAS 32 Offsetting financial assets and financial liabilities 1st January, 2014

IFRS 1 Government loans 1st January, 2013

IFRS 7Disclosures – offsetting financial assets and financial liabilities

1st January, 2013

IFRS 9Financial instruments part 1: Classification andmeasurement of financial assets and financial liabilities.

1st January, 2015

IFRS 10 Consolidated financial statements. 1st January, 2013

IFRS 11 Joint arrangements. 1st January, 2013

IFRS 12 Disclosure of interests in other entities 1st January, 2013

IFRS 13 Fair value measurement 1st January, 2013

The Directors anticipate that all of the relevant Standards and Interpretations will be adopted in the Bank’s financial statements and that the adoption of these Standards and Interpretations will have no material impact on the financial statements of the Bank in the period of initial application.

NOTES TO THE FINANCIAL STATEMENTSAT 30TH SEPTEMBER, 2012 (Continued)

Annual Report 2012


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

c) Financial Assets

The Bank classifies its financial assets in the following categories: loans and receivables and available-for-sale financial assets. Management determines the classification of its investments at initial recognition.

i) Financial assets available-for-sale

Available-for-sale investments are those intended to be-held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. Regular-way purchases and sales of financial assets available for sale are recognised on trade date - the date on which the Bank commits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Bank has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognised when they are extinguished - that is, when the obligation is discharged, cancelled or has expired.

Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised directly in equity, until the financial asset is derecognised or impaired. At this time, the cumulative gain or loss previously recognised in equity is recognised in profit or loss. However, interest calculated using the effective interest method and foreign currency gains and losses on monetary assets classified as available-for-sale are recognised in the statement of comprehensive income. Dividends on available-for-sale equity instruments are recognised in the statement of comprehensive income when the entity’s right to receive payment is established.

The fair values of quoted investments in active markets are based on current bid prices. If there is no active market for a financial asset, the Bank establishes fair value using valuation techniques, which include the use of recent arm’s length transactions.

ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: (a) those that the entity intends to sell immediately or in the short term, which are classified as held for trading, and those that the entity upon initial recognition designates at fair value through profit or loss; (b) those that the entity upon initial recognition designates as available for sale; or (c) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.




d) Impairment of Financial Assets

i) Assets carried at amortised cost

The Bank assesses at each statement of financial position date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria that the Bank uses to determine that there is objective evidence of an impairment loss include:

• Delinquency in contractual payments of principal or interest; • Cash flow difficulties experienced by the borrower (for example-: equity ratio, net income

percentage of sales); • Breach of loan covenants or conditions;• Initiation of bankruptcy proceedings;• Deterioration of the borrower’s competitive position;• Deterioration in the value of collateral; and • Downgrading below investment grade level.

The estimated period between a loss occurring and its identification is determined by management for each identified portfolio. In general, the periods used vary between three (3) months and twelve (12) months; in exceptional cases, longer periods are warranted.

The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the statement of comprehensive income. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Bank may measure impairment on the basis of an instrument’s fair value using an observable market price.


Annual Report 2012



d) Impairment of Financial Assets (continued)

i) Assets carried at amortised cost (continued)

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the statement of comprehensive income in impairment charge for credit losses.

ii) Assets classified as available for sale

The Bank assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss) is removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income on equity instruments are not reversed through the statement of comprehensive income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in income, the impairment loss is reversed through the statement of comprehensive income.

iii) Renegotiated loans

Loans that are either subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to be past due but are treated as new loans. In subsequent years, the asset is considered to be past due and disclosed only if renegotiated.




e) Premises and Equipment

All premises and equipment used by the Bank are stated at historical cost except for land and buildings which are at valuation and net of accumulated depreciation. Land is not depreciated. Depreciation of other assets is provided on the straight-line method at rates designed to allocate the cost of the assets over the period of their estimated useful lives. The rates used are as follows:

Furniture and equipment 10%

Computer equipment 162/3%

Motor vehicles 20%

Freehold buildings 21/2%

The assets residual values and useful lives are reviewed and adjusted if appropriate at each statement offinancial position date. Assets are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the statement of comprehensive income.

Leasehold improvements are amortised over the term of the lease.

Maintenance and repairs to buildings are charged to current operations and the cost of improvements are capitalised where such improvements would extend the remaining useful life of the building.

The cost or valuation of premises and equipment replaced, retired or otherwise disposed of and the accumulated depreciation thereon are eliminated from the accounts and the resulting gain or loss reflected in the statement of comprehensive income.

f) Revenue Recognition

(i) Interest income and expense

Interest income and expense are taken into income on an accrual basis using the effective interest yield method based on the actual purchase price or estimated recoverable amount. Interest income includes coupons earned on fixed income investments.


Annual Report 2012



f) Revenue Recognition (continued)

(ii) Fees and commission income

Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan syndication fees are recognised as revenue when the syndication has been completed and the Bank retained no part of the loan package for itself or has retained a part at the same effective interest rate as the other participants. Commission and fees arising from negotiating, or participating in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognised on completion of the underlying transaction.

(iii) Other income

Portfolio and other management advisory and service fees are recognised based on the applicable service contracts, usually on a time-apportioned basis. Asset management fees related to investment funds are recognised rateably over the period in which the service is provided.

The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Performance linked fees or fee components are recognised when the performance criteria are fulfilled.

(iv) Dividends

Dividends are recognised in the statement of comprehensive income when the entity’s right to receive payment is established.

g) Foreign Currency Translation

The financial statements are presented in Eastern Caribbean currency dollars which is also the Bank’s functional currency.

Assets and liabilities denominated in foreign currencies are translated to Eastern Caribbean dollars at the rates of exchange ruling at the end of the financial year. Transactions arising during the year involving foreign currencies have been converted at the rates prevailing on the dates the transactions occurred. Differences arising from fluctuations in exchange rates are included in the statement of comprehensive income.




h) Income tax

The Bank provides for current income tax payable in accordance with the Income Tax Act 1994 as amended.

Deferred income tax is provided using the liability method, on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets and liabilities are measured at the tax rate that is expected apply to the period when the asset is realized or the liability is settled, based on the enacted tax rate at the statement of financial position date. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

i) Pension

The Bank has a Defined Contribution Superannuation Plan. In this Defined Contribution Superannuation Plan, the Bank pays fixed contributions into the fund and has no legal or constructive obligation to pay further contributions.

Contributions are recognised as employee benefit expense when they are due.

j) Cash and cash equivalents

For purposes of the cash flow statement, cash and cash equivalents comprise cash balances, deposits with the Eastern Caribbean Central Bank other than reserve deposit and amounts on deposits with other banks and other financial institutions.

k) Leases

Leases entered into by the Bank are operating leases. The monthly rentals are charged to income on a straight-line basis over the lease term.

l) Dividends on ordinary shares

Dividends are recognised in equity in the year in which they are declared by the Directors.

m) Computer software licences

Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on the basis of the expected useful life.

n) Share issue costs

Costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.


Annual Report 2012



3. FINANCIAL RISK MANAGEMENT

The Bank’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks. Taking risk is core to the financial business, and the operational risks are an inevitable consequence of being in business. The Bank’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Bank’s financial performance.

The Bank’s management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. The Bank regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

Risk management is carried out under policies approved by the Board of Directors. Internal Audit is responsible for the independent review of risk management and the control environment. The most important types of risk are credit risk, liquidity risk, market risk and other operational risk. Market risk includes currency risk, interest rate and other price risk.

3.1 Credit risk

The Bank takes on exposure to credit risk, which is the risk that counterparty will cause a financial loss to the Bank by failing to discharge an obligation. Credit risk is the most important risk for the company’s business; management therefore carefully manages its exposure to credit risk. Credit exposures arise principally in lending activities that lead to loans and advances, and investment activities that bring debt securities and other bills into the Bank’s asset portfolio. There is also credit risk in off statement of financial position sheet financial instruments, such as loan commitments.

3.1.1. Credit risk management

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees, except for personal lending where no such facilities can be obtained.

(i) Loans and advances

These assets result from transactions conducted in the normal course of business and their values are not adversely affected by unusual terms. The inherent rates of interest in the portfolio approximate market conditions and yield discounted cash flow values which are substantially in accordance with financial statement amounts.


3. FINANCIAL RISK MANAGEMENT (continued)

3.1 Credit risk (continued)

(ii) Customers’ deposits

The fair value of items with no stated maturity is assumed to be equal to their carrying values. Deposits with fixed rate characteristics are at rates which are not significantly different from current rates and are assumed to have discounted cash flow values which approximate carrying values.

3.1.2. Risk limit control and mitigation policies

The Bank manages limits and controls concentrations of credit risk wherever they are identified – in particular to individual, counterparties, groups and industries.

The Bank structures the level of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or groups of borrowers and industry segments.

Collateral

The Bank employs a range of policies and practices to mitigate credit risk. The most traditional of these is the taking of security for funds advanced, which is common practice. The Bank implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types for loans and advances are:

• Mortgages over residential properties

• Charges over business assets such as premises, inventory and accounts receivable

• Charges over financial instruments such as debt securities and equities.

3.1.3 Impairment and provisioning policies

The Bank’s rating system focuses on expected credit losses, that is, taking into account the risk of future events giving rise to losses. In contrast, impairment allowance is recognised for financial reporting purposes only for losses that have been incurred at the date of the statement of financial position based on objective evidence of impairment.

The impairment allowance shown in the statement of financial position at year end is derived from each of the five internal rating grades.

The table below shows the percentage of the Bank’s loans and advances and the associated impairment allowance for each category.


Annual Report 2012


3. FINANCIAL RISK MANAGEMENT (continued)3.1 Credit risk (continued)

3.1.3 Impairment and provisioning policies (continued)

Bank Rating2012

Credit Risk Exposure

2011Credit Risk Exposure

2012 Impairment Allowance

2011Impairment Allowance

PassSpecial mentionSubstandardDoubtfulLoss

73%20%

4%3%

0%

100%

76%18%4%2%

0%

100%

0%2%4%

18% 76%

100%

0%7%

22%50% 21%

100%

3.1.4 Maximum exposure to credit risk before collateral held

Credit risk exposures relating to on-statement of financial position assets are as follows:

Gross Maximum Exposure

Loans and advances to customers:Loans to individuals: Overdrafts Mortgages

Loans to corporate entities:Government and Statutory bodies: Loans and Overdrafts Loans to Corporate Customers and Small & Medium Size Enterprises

Loans and Overdrafts

2012$

2,702,718175,109,209

37,959,253

208,852,049

424,623,229

2011 $

2,591,455149,495,400

45,645,946

212,901,923

410,634,724

Credit risk exposures relating to off-statement of financial position items are as follows:

Gross Maximum Exposure

Financial guaranteesLoan commitments and other credit related obligation

$4,497,663

23,985,486

28,483,119

$5,331,752

26,182,970

31,514,722

The above table represents a worst case scenario of credit risk exposure to the Bank at 30th September, 2012 without taking into account any collateral held or other credit enhancements attached.




3.1.5 Industry Sector

The following table breaks down the Bank’s credit exposure at carrying amounts (without taking into account any collateral held or other credit support) as categorized by the industry sectors of the Bank’s counterparties.

Individuals Business

2012Overdrafts

$’000

Loans and Advances

$’000Overdrafts

$’000

Loans and Advances

$’000Total$’000

Financial institutionManufacturingReal EstateWholesale and RetailPublic SectorOther industriesIndividuals

Total

2011

Financial institutionManufacturingReal EstateWholesale and RetailPublic SectorOther industriesIndividuals

Total

------

7,452

7,452

7,7,,,

------

4,807

4,807

--

---

234,772

234,772

------

237,564

237,564

4872,4072,5724,7606,69614,926

-

31,848

8073,0751,2504,8854,433

14,254 -

28,704

-11,215

26,75937,345

41174,821

-

150,551

69,008

25,82522,603

9,51872,600

-

139,560

48713,62229,33142,105

7,10789,747

242,224

424,623

81312,08327,07527,48813,951

86,854242,371

410,635


Annual Report 2012



3.1.6 Loans and advances to customers are summarized as follows:

Neither past due nor impaired Loans and Overdrafts

Past due but not impaired Loans Overdrafts

Individually impaired Loans Overdrafts

Gross

Less: Allowance for impairment

Net

Individually impairedPortfolio allowance

Total impairment charge

2012 $

319,266,498

81,868,617194,538

21,951,695 1,341,881

424,623,229

(10,684,862)

413,938,367

9,247,443 1,437,419

10,684,862

2011 $

318,468,293

65,643,2801,978,594

23,562,152 982,405

410,634,724

(7,381,432)

403,253,292

6,866,699 514,733

7,381,432




3.1 Credit risk (continued)

3.1.7 Age analysis of loans and advances past due but not impaired:

2012Less than1 month

$

1 to 3 months

$

3 to 6 months

$

More than 6 months

$Total

$

Loans

Overdrafts

Total

2011

Loans

Overdrafts

Total

39,406,293

59,965

39,466,258

26,442,688

325,545

26,768,213

26,134,530

48,186

26,182,716

14,820,792

242,808

15,063,600

2,262,881

-

2,262,881

6,741,086

136,811

6,877,897

14,064,913

86,387

14,151,300

17,638,734

1,273,430

18,912,164

81,868,617

194,538

82,063,155

65,643,280

1,978,594

67,621,874

3.2. Market risk

The Bank takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates and equity prices. The Bank separates exposures to market risk into either trading or non-trading portfolios.

3.2.1. Interest rate risk

Interest rate risk arises when there is a mismatch between the size and maturity of interest earning assets and deposit liabilities such that interest rate changes can expose the Bank to earnings volatility. The Bank reviews its exposure to financial risks and implements mitigating measures to minimise or reduce the negative impact of interest rate risk.


Annual Report 2012



3.2.1. Interest rate risk (continued)

Differences in contractual re-pricing or maturity dates and changes in interest rates may expose the Bank to interest rate risk. The table below summarises the Bank’s exposure to interest rate risk:

As at 30th September, 2012

Up to1 year

$’000

Between1-3 years

$’000

Between3-5 years

$’000

Over5 years

$’000

Non-interestbearing$’000

Total

$’000

Assets

Cash and short-term fundsLoans and advancesInvestmentsOther assets

Total assets

Liabilities

Customers’ depositsOther liabilities

Total liabilities

Interest Sensitivity Gap

30,698122,39032,482

-

185,570

483,456 38,974

522,430

(336,860)

-33,28419,341

-

52,625

17,025 -

17,025

35,600

-17,074

822 -

17,896

- -

-

17,896

-251,875

3,689 -

255,564

- -

-

255,564

32,167-

46,672

78,839

-7,449

7,449

62,865424,62356,334

46,672

590,494

500,481 46,423

546,904




3.2.1. Interest rate risk (continued)


Up to1 year

$’000

Between1-3 years

$’000

Between3-5 years

$’000

Over5 years

$’000

Non-interestbearing

$’000

Total

$’000

Assets

Cash and short-term fundsLoans and advancesInvestmentsOther assets

Total assets

Liabilities

Customers’ depositsOther liabilities

Total liabilities

Interest Sensitivity Gap

29,47099,52615,160

-

144,156

492,56718,094

510,661

(366,505)

-36,934

8,811 -

45,745

11,326 -

11,326

34,419

-21,584

13,602 -

35,186

- -

-

35,186

-252,591

1,114 -

253,705

- -

-

253,705

40,298-

2,28351,609

94,190

-9,450

9,450

69,768410,63540,970

51,609

572,982

503,89327,544

531,437

3.3 Liquidity risk

Liquidity risk arises from fluctuations in cash flows. The liquidity management process ensures that the Bank is able to honour all its commitments when they fall due. The Bank has a liquidity policy which sets out the liquidity management process. Liquidity risk is managed by the Bank’s Risk and Capital Committee, which formulates strategies for maintaining adequate exposure from deposit concentrations and also building core deposits.

Past experience has, however, indicated that term deposits and savings are continually reinvested. The table below summarises the Bank’s exposure to liquidity risk:


Annual Report 2012



3.3 Liquidity risk (continued)


Up to1 month

$’000

Over 1 month to3 months

$’000

Over 3 months up to 12 months

$’000

Over 1 year up

to 5 years

$’000

Total

$’000

Liabilities Deposits from banks Deposits from customers Other liabilities

Assets held for managing liquidity risk:

Cash Investments held for trading Customer loans

Gap


Total liabilities Assets held for managing liquidity risk

Gap

8,100314,730 3,725

326,555

62,8652

66,435

129,302

(197,252)

305,216

127,030

(178,186)

18,33137,8433,725

59,899

-4,215

19,841

24,056

(35,843)

52,895

22,315

(30,580)

8,000130,883 4,544

143,427

-28,26536,114

64,379

(79,048)

162,000

35,109

(126,891)

-17,025

-

17,025

-23,852

302,233

326,085

309,060

11,326

80,431

69,105

34,431500,481

11,994

546,906

62,86556,334

424,623

543,822

(3,084)

531,437

264,885

(266,552)

3.4 Fair value of financial instruments

The fair value of financial instruments is based on the valuation methods and assumptions set out in Note 2 - Summary of Significant Accounting Policies. Fair value represents the amount at which financial instruments may be exchanged in an arm’s length transaction between willing parties under no compulsion to transact and is best evidenced by a quoted market place. If no quoted market prices are available, the fair values represented are estimates derived using present value or other valuation techniques indicative of net realisable value.

The following methods and assumptions have been used to estimate the fair value of each class of financial instruments for which it is practical to estimate a value.




a) Short-term financial assets and liabilities

The carrying value of these assets and liabilities is a reasonable estimate of their fair value because of the short maturity of these instruments. Short-term financial assets comprise of cash resources, interest receivable, and other receivables. Short-term financial liabilities comprise interest payable and other liabilities.

b) Investment securities

Debt securities are carried at amortised cost in the absence of market values and are considered to reflect fair value. Equity investments are unquoted and are carried at cost less impairment which is management’s estimate of fair value.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

a) Impairment losses on loans and advances

The Bank reviews its loan portfolios to assess impairment on an annual basis. In determining whether an impairment loss should be recorded in the statement of comprehensive income, the Bank makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with an individual loan in that portfolio. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. Guidelines issued by The Eastern Caribbean Central Bank, the methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

b) Impairment of available-for-sale equity investments

The Bank determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgement. In making this judgement, the Bank evaluates among other factors, the normal volatility in share price. In addition, impairment may be appropriate when there is evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.


Annual Report 2012


4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)

c) Held-to-maturity investments

The Bank follows the IAS 39 guidance on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held to maturity. This classification requires significant judgment. In making this judgment, the Bank evaluates its intention and ability to hold such investments to maturity.

d) Income taxes

Estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Bank recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

e) Revaluation of land and buildings

The Bank utilizes professional valuators to determine the fair value of its properties. Valuations are determined through the application of a variety of different valuation methods which are all sensitive to the underlying assumptions chosen.

5. CASH AND BALANCES WITH CENTRAL BANK AND OTHER BANKS

Cash on hand Amount due from banks Cash at other financial institutions Mandatory reserve deposit with ECCB

2012$

16,432,97612,605,702

1,659,174

30,697,85232,166,793

62,864,645

2011$

14,256,73313,436,3071,776,846

29,469,88640,297,848

69,767,734

6. RESERVE DEPOSIT

Mandatory reserve deposits with the ECCB represent the Bank’s regulatory requirement to maintain a minimum percentage of 6% of deposit liabilities as cash in vault and or deposits with the ECCB in accordance with Article 33 of the ECCB Agreement 1983. These funds are not available to finance the Bank’s day to day operations and as such, are excluded from cash resources to arrive at cash and cash equivalents. The reserve deposit is non-interest bearing.



7. CUSTOMERS’ LOANS AND ADVANCES

Mortgages Promissory notesOther advances

Provision for loan losses

Interest receivable

2012$

369,640,99915,681,91239,300,318

424,623,229(10,684,862)

413,938,367 3,663,034

417,601,401

2011$

313,139,86063,632,610

33,862,255

410,634,725 (7,381,432)

403,253,292 1,975,849

405,229,141

Movement in provision for loan losses is as follows:

Balance beginning of year Bad debts written offIncrease in provision

Balance end of year

7,381,432(3,210,609) 6,514,039

10,684,862

3,916,973(625,197)

4,089,656

7,381,432

7.1 Allowance for loan losses by sector

AgricultureFisheriesManufacturingUtilitiesConstruction and land developmentDistribution tradeTourismEntertainmentTransportationProfessional servicePersonalPublic Administration

11,43044,89570,180

-27,721

4,056,9061,126,18663,090273,331

1,695,4993,312,405

3,219

10,684,862

44,43621,701

916,21615,67622,39488,642

833,660-

59,676402,355

4,976,676-

7,381,432


Annual Report 2012


7. CUSTOMERS’ LOANS AND ADVANCES (continued)

7.2 Maturity profile – Loans and advances

Within 1 year Within 1 to 3 yearsWithin 3 to 5 yearsOver 5 years

2012$’000

122,39033,28417,074

251,875

424,623

2011$’000

99,52636,93421,584

252,591

410,635

7.3 Loans by Sector

AgricultureFisheriesManufacturingUtilities (electricity, water, telephone & media)Construction and land developmentDistributive tradesTourismEntertainment and cateringTransportation and storageFinancial institutionsProfessional and other servicesPublic administrationPersonal

Total

$’000

1,0291,262

13,62216,44729,33142,10524,226

5,71225,980

48715,0917,107

242,224

424,623

$’000

7941,524

12,08317,07527,07527,48821,8195,775

24,999813

16,39213,951

240,847

410,635

8. INVESTMENTS

Fixed income securities classified as loans and receivables under IAS 39:

Government of Grenada - Treasury Bills Government of Grenada - Bonds Eastern Caribbean Home Mortgage Bank - Bonds Grenada Electricity Services Limited - Bonds Government of St. Kitts - Bonds Government of Antigua (ABIB) - Bonds Government of St. Lucia - Bonds

$

31,359,2401,114,771

12,500,0002,100,000

314,9851,662,808

5,000,000

54,051,804

$

13,678,0761,114,771

12,500,0002,500,000

650,0002,774,501

5,500,000

38,667,348



8. INVESTMENTS (continued)

Interest is earned on loans and receivables at rates ranging between 2% to 9.75% (2011 – 4.25% to 9.75%)

Equity - Available for sale: Republic Bank (Grenada) Limited - 8,000 ordinary shares RBTT Bank Grenada Limited - 8,916 ordinary shares Caribbean Credit Card Corporation - 25 ordinary shares Eastern Caribbean Home Mortgage Bank - 4,041 class “C” shares Eastern Caribbean Securities Exchange - shares – 5,000 class “C” shares Antigua Barbuda Investment Bank - 250,000 shares Grenada Electricity Services Limited - 50,000 ordinary shares TCI Bank Limited - 250,000 shares ECIC Holdings Limited - 632,000 shares Cable & Wireless Grenada Limited - 48,000 shares

2012$

440,000

71,378

25,000

646,560

50,000

1

550,000

1

1

500,000

2,282,941

56,334,745

2011$

440,000

71,378

25,000

646,560

50,000

1

550,000

1

1

500,000

2,282,941

40,970,289

8.1 Maturity profile investments

Within 1 year Within 1 to 3 years Within 3 to 5 years Over 5 years

32,482,42419,341,340

822,133 3,688,848

56,334,745

15,159,7718,811,187

13,601,6213,397,710

40,970,289


Annual Report 2012


9.

PREM

ISES

AN

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ENT

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hold

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d an

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ildin

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ompu

ter

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ogre

ssT

otal

For

year

end

ed 1

st O

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er, 2

010

C

ost/

Val

uatio

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Acc

umul

ated

dep

reci

atio

n

NET

BO

OK

VA

LUE

For

year

end

ed 3

0th

Sep

tem

ber,

2011

O

peni

ng n

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ook

valu

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Add

ition

s fo

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nce

at 3

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2011

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dep

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n

NET

BO

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For

year

end

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2012

O

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Add

ition

s fo

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D

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2012

C

ost/

Val

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Acc

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ated

dep

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atio

n

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LUE

36,4

44,7

50(1

,298

,263

)

$35,

146,

487

35,14

6,48

72,

559,

276

148,

430 -

( 8

46,2

18)

$37,

00

7,97

5

39,15

2,45

6(2

,144,

481)

$37,

00

7,97

5

37,0

07,

975

814,

517 - -

(910

,039

)

$3

6,91

2,45

3

39,9

66,9

74(3

,054

,521

)

$36,

912,

453

1,827

,160

(1,0

54,0

14)

$773

,146

773,

146 -

131,7

64-

(259

,956

)

$644

,954

1,855

,857

(1,2

10,9

03)

$644

,954

644,

954

54,2

88 - -(2

49,7

81)

$449

,461

1,910

,145

(1,4

60,6

84)

$449

,461

6,38

8,61

3(2

,573

,875

)

$3,8

14,7

38

3,81

4,73

843

5,0

2319

7,69

3(1

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81)

(485

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$3,8

60,4

60

6,60

6,29

8(2

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,838

)

$3,8

60,4

60

3,86

0,4

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8,88

711

1,367 -

(530

,90

0)

$3,6

29,8

14

6,90

6,55

1(3

,276

,737

)

$3,6

29,8

14

7,14

1,660

(4,18

4,50

3)

$2,9

57,15

7

2,95

7,15

746

7,60

122

1,466

-(7

92,9

66)

$2,8

53,2

58

7,82

0,4

934,

967,

235

$2,8

53,2

58

2,85

3,25

892

,483

694,

567 -

(812

,778

)

$2,8

27,5

30

8,60

7,54

2(5

,780

,012

)

$2,8

27,5

30

471,5

41(3

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83)

$133

,058

133,

058

99,5

60- -

(49,

544)

$183

,074

571,1

01

(388

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)

$183

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183,

074 - -

(2,7

67)

(62,

255)

$118

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405,

100

(287

,048

)

$118

,052

1,112

,934

-

$1,11

2,93

4

1,112

,934 -

(699

,353

) -

-

$413

,581

413,

581

-

$413

,581

413,

581

1,238

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(80

5,93

4) -

-

$846

,282

846,

282

-

$846

,282

53,3

86,6

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$43,

937,

520

43,9

37,5

203,

561,4

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(10

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)(2

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)

$44,

963,

302

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783,

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NO

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E FI

NA

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STAT

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AT 3

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BER

, 201

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ontin

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10. OTHER ASSETS AND PREPAYMENTS

Interest receivable on financial investmentsOther receivables

2012$

427,785 5,149,241

5,577,026

2011$

740,3007,914,420

8,654,720

11. AMOUNT DUE TO OTHER BANKS

Bank borrowings Other deposits from banks

10,100,000 24,220,875

34,320,875

15,000,0003,093,968

18,093,968

12. CUSTOMERS’ DEPOSITS

Savings Fixed deposit Treasure chest Chequing accounts Current accounts

Interest payable

201,902,658217,193,625 40,838,007 17,594,878

22,951,918

500,481,086 4,653,237

505,134,323

194,969,687231,876,898 35,137,564 16,058,57525,850,395

503,893,119 5,225,410

509,118,529

13. OTHER LIABILITIES

Manager’s cheques Other

1,865,1225,583,553

7,448,675

2,009,1842,214,928

4,224,112


Annual Report 2012


14. STATED CAPITAL

2012 2011 $’000 $’000

Authorised:-

An unlimited number of common shares with no par value

Issued:-

7,600,000 common shares with no par value 24,871,739 24,871,739

15. STATUTORY RESERVE

The Banking Act of 2005 under Sub-section 14 (1) requires that a minimum of 20% of net after tax profits in each year be transferred to a Statutory Reserve Fund until the balance of this fund is equal to the issued Share Capital. This reserve is not available for distribution as dividends or any form of appropriation.

16. OTHER RESERVE

PropertyRevaluation

Surplus$

NetUn-realizedGains/losses

$

OtherGeneral

Reserves$

Total$

Balance at 1st October, 2010Transfer of realized losses Appropriation from general reservesRegulatory reserves

Balance at 30th September, 2011

Transfer from retained earningsTransfer of realized lossesRegulatory reserves

Balance at 30th September, 2012

3,825,535 -

- -

3,825,535

--

-

3,825,535

(902,224)1,478,295

-(1,412,645)

(836,574)

-1,412,645

(1,437,252)

(861,181)

561,815-

(178,757) -

383,058

51,747-

-

434,805

3,485,126 1,478,295

(178,757)(1,412,645)

3,372,019

51,7471,412,645

(1,437,252)

3,399,159




2012 201117. INTEREST EXPENSE $ $

Savings deposits 6,704,961 6,881,308Other time deposits 10,400,942 9,745,164Chequing account 101,557 106,748

17,207,460 16,733,320

18. OTHER INCOME$ $

Commissions and fees 5,672,635 3,951,645Miscellaneous 299,683 1,464

5,972,318 3,953,109

19. INVESTMENT AND DEPOSIT IMPAIRMENT

Clico International Life Insurance Company Limited - 5,502,708 British American Insurance Company Limited - 4,549,998 Eastern Caribbean Holdings Limited - 1,706,399 TCI Bank Limited - 1,917,851 Antigua Barbuda Investment Bank Limited - 749,999 Government of St. Kitts & Nevis 325,000 -

325,000 14,426,955

Annual Report 2012



20. GENERAL AND ADMINISTRATIVE EXPENSES

2012 2011By nature $ $Staff costs -Wages, salaries and NIS 8,435,665 8,262,147Pension costs 1,476,365 565,064Other staff costs 970,919 577,277

Total staff costs 10,882,949 9,404,487

Other operating expenses 2,665,055 3,144,580Depreciation 2,565,753 2,433,797Operating lease rentals 406,267 412,827Advertising and promotion 1,035,252 1,282,316Directors’ fees 143,612 100,912Professional fees 526,335 812,843Utilities 1,359,799 1,313,729Repairs and maintenance 1,288,616 985,916

20,873,638 19,891,407

21. TAXATION

Deferred tax assets

Balance at 1st October, 2011 (3,330,277) - Release/(charge) for the year 31,848 (3,330,277)

Balance at 30th September, 2012 (3,298,429) (3,330,277)

The deferred tax asset relates to tax losses carried forward.

Current year:

Taxation on the income before tax differs from the theoretical amount that would arise using the basic tax rate as follows:-

Net income/(loss) before income tax 2,133,566 (14,119,151)

Tax calculated at corporation tax rate of 30% 640,070 (4,235,745)Income not subject to tax (1,188,014) (601,278)Expenses not deductible for tax purposes 377,304 906,439Depreciation on items not eligible for capital allowances 347,946 331,853Other (113,610) 268,454

63,696 (3,330,277)


21. TAXATION (continued)

Tax losses

Tax losses which are available for off-set against future taxable income for income tax purposes are as follows:

Year of loss Balance Expiry date

2010 $1,167,055 20132011 $12,477,399 2014

22. BASIC EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the net income attributable to common shareholders by the weighted average number of common shares in issue during the year.

2012 2011

Net income/(loss) attributable to common shareholders 2,069,870 (10,788,874)

Weighted average number of common shares in issue 7,600,000 7,600,000

Basic earnings per share $0.27 $(1.42)

The Bank has no potential common shares in issue which would give rise to a dilution of the basic earnings per share. Therefore diluted earnings per share would be same as basic earnings per share.

23. CONTINGENT LIABILITIES AND COMMITMENTS a) Legal proceedings

There were four legal proceedings outstanding against the Bank at 30th September, 2012. No provision has been made, as professional advice indicates that it is unlikely that any significant loss will arise.

b) Undrawn loan commitments, guarantees and other financial facilities

At 30th September, 2012, the Bank had contractual amounts of off-statement of financial position financial instruments that commit it to extend credit to customers, guarantees and other facilities as follows:


Annual Report 2012


23. CONTINGENT LIABILITIES COMMITMENTS (continued)

2012 2011$ $

Undrawn loan commitments 22,706,150 26,182,971Guarantees and standby letters of credit 4,503,633 4,985,507

27,209,783 31,168,778

c) Operating leasehold commitments

The Bank was committed to annual leasehold payments at 30th September, 2012 as follows:

Under 1 year 395,579 412,9181 to 5 years 1,582,318 1,585,269

1,977,897 1,998,187

24. PENSION SCHEME

The Bank maintains a superannuation plan into which both employer and employee pay 5% of gross salary. The Bank’s contribution to the Plan in 2012 was $342,069 (2011 - $342,087).



25. RELATED PARTY TRANSACTIONS

2012 2011$ $

Loans and Investments

Directors and key management personnel (and their families) 6,809,980 5,860,987

Deposits and other liabilities

Directors and key management personnel (and their families) 5,450,636 5,146,375

Interest income

Directors and key management personnel (and their families) 400,783 441,741

Interest Expenses

Directors and key management personnel (and their families) 257,516 219,020

Other

Salaries and other short-term employee benefits 1,365,931 1,416,479

Directors’ fees & expenses 143,612 100,200

26. COMPARATIVES

Some specific comparative figures for 2011 were adjusted to conform to the disclosure requirements of 2012.


Annual Report 2012


GRENADA CO-OPERATIVE BANK LIMITEDOFFICES

Offices Description Names

Head Office:No. 8 Church StreetSt. George’sP.O. Box 135Telephone: (473)-440-2111/3549Fax: (473)-440-6600Website: www.grenadaco-opbank.comE-mail: [email protected]

Managing Director

Chief Operating Officer

Executive Manager, Corporate & Commercial Banking

Chief Audit Executive

Executive Manager, Finance & Administration

Executive Manager, Retail Banking

Executive Manager, Operations & Compliance

Senior Manager, Credit Risk - Acting

Executive Manager, Customer Care

Officer in Charge, Recoveries & Collections

Marketing Officer

Senior Programme & Research Officer

Human Resource Officer

R. W. Duncan, B.Sc., MA., FCGA, AICB, ACC. DIR

D. Moses, B.Sc., MBA, FICB

N. Francis-Sandy (Mrs), B.Sc., M.Sc.

J. G. Lawrence (Ms), B.S., MBA-IBF

A. Logie, FCCA, MBA

C. Bhola, AICB

F. Dowden, AICB, AML-CA

J. Robertson (Mrs), AICB, Dip. Banking

M. Squires-Francis (Mrs), B.Sc.

J. Gulston-Gittens (Mrs), B.A.

E. Hosten (Mrs), B.Sc.

P. Antoine, B.Sc., AICB

K. St. Louis-Telesford (Mrs), B.A.S

Grenville:Victoria StreetGrenville, St. Andrew’sTel: (473)-442-7748/7708Fax: (473)-442-8400

Manager, Retail Banking G. Sayers, B.Sc.

Sauteurs:Main StreetSauteurs, St. Patrick’sTel: (473)-442-9247/1188Fax: (473)-442-9888

Manager, Retail Banking S. Regis, AICB

Spiceland Mall:Morne RougeSt. George’sTel: (473)-439-0778Fax: (473)-439-0776

Manager, Retail Banking W. Grainger, CRU, Dip. Mgmt.

Carriacou:Main StreetHillsboroughTel: (473)-443-8424Fax: (473)-443-8184

Manager, Retail Banking M. McSween

St. George’s:No. 8 Church StreetSt. George’sTel: (473)-440-2111Fax: (473)-435-9621

Manager, Retail Banking C. Davidson (Mrs)


NOTES

Designed by: Innovative Marketing Serviceswww.imscaribbean.com

No. 8 Church Street, P.O. Box 135, St. George’s, Telephone: (473)-440-2111/3549 . Fax: (473)-440-6600

Website: www.grenadaco-opbank.com . E-mail: [email protected]

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Grenada Co-operative Bank Limited

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