2014 greater building society annual report

Greater Building Society Ltd 2013/14 Annual Report For the Year Ended 30 June 2014

Head Off ice: 103 Tudor Street Hamilton NSW 2303 PO Box 173 Hamilton NSW 2303 P 1300 651 400 F 02 4921 9112Greater Building Society Ltd. • ABN 88 087 651 956 • AFSL/Australian Credit Licence No. 237476

Chairman’s Report 1

CEO’s Report 2

A Greater Way of Banking 4

Our People 8

Our Community 12

Greater Charitable Foundation 15

Financial Statements 30 June 2014 19

Contents

1

Greater Building Society Ltd

1

The last financial year saw the Greater Building Society achieve an outstanding financial result. It is very pleasing to report a record profit for the year.

The Board and management have continued their focus on managing costs and improving efficiency to have capital to invest in major projects such as our new core banking system and digital banking. These investments will assist us in keeping pace with increasing changes in technology, competition, the regulatory environment, and allows us to introduce better products and services to our customers. It is about being nimble and able to react so that we remain relevant and continue to meet our customers’ changing needs.

This year we have also increased our capital adequacy, a measure of our financial strength, to 17.43%, giving us further capacity to invest in the future.

Being nimble is a key reason we have brought forward our planning for the new Strategic Plan.

The good profit results follow Standard and Poors (S&P) favourably changing our counterparty credit rating from BBB/Stable/A-2 to BBB/Positive/A-2. S&P said the revised rating outlook was due to The Greater’s strengthening risk management capabilities, particularly around IT, and its “measured approach” to managing the modernisation of its core banking system. Our overall risk position was supported by our further reductions

in securitisation usage, very low interest rate risk and credit loss experience.

On the regulatory front, the Board welcomes APRA’s revision of Prudential Standard APS 111 Capital Adequacy: Measurement of Capital to give mutuals more flexibility to issue regulatory capital instruments while retaining their structure. The Board has also separated its audit and risk committees to comply with upcoming prudential requirements and to enhance our governance.

Also on the regulatory front, the Board welcomes the Financial Services Inquiry. At the time of writing the Interim Report had been released. The Greater, like other regional banks and customer owned financial institutions, is simply asking for a more level playing field so that we can continue to offer Australian consumers competition and a real alternative to the major banks.

Outgoing CEO Don Magin was instrumental in pushing for the inquiry and making the case for customer owned financial institutions as Chairman of our industry body, the Customer Owned Banking Association. The Board thanks him for that contribution and, more particularly, his contribution to The Greater over 27 years. Don has left The Greater in great financial shape. We wish him all the best in the next stage of his career and life.

New CEO Scott Morgan and his executive team will continue the important focus on financial strength

Greater Board Members; Front row L to R: Malcolm McDonald, Jayne Drinkwater, Wayne Russell 2nd row: Roger Cracknell, Scott Robinson Back row: Russell Ware

Chairman’s Report

2

Annual Report for the Year Ended 30 June 2014

as well as continuing to transform The Greater into a more modern, sophisticated, customer focussed banking organisation.

I’d like to pay tribute to former Greater Chairman, John Kilpatrick, who has stepped down as Chairman of The Greater Charitable Foundation. John has served The Greater family well for 16 years. I am looking forward to working with the new Greater Charitable Foundation Chairman Ian Nelmes as I join the Foundation Board.

The Board and I wish to thank The Greater’s staff for their focus on our customers and for being open to the continuing need for change to serve them properly. I am fortunate to chair a very good team and I also thank my fellow directors for their hard work and support again this year.

To our customers, I say The Greater is in good financial shape and changing to ensure we are able to continue to make your life greater.

Wayne Russell Chairman

It is with a great deal of emotion that I write my last report to our customers as CEO of this great organisation. After 27 wonderful years, including six and a half years as CEO, I am taking the opportunity to spend more time with my family and take on new career challenges.

I am pleased to report that the organisation is in good financial shape, having achieved a record net profit of $31.36 million, up 10.39% on last year.

Our loan portfolio grew slightly by 0.84%. This modest growth level is because customers are repaying debt more quickly (a sign of consumer confidence) but also reflects how exposed some of our current and potential customers are to deteriorating economic conditions in regional areas. We are comfortable with the result given the competitive environment in which we are operating. The deposit portfolio has grown by 4.02%, demonstrating once again that we are continuing to look after our deposit customers even though the funds are not specifically needed for lending at this time.

The profit we have made is important because it helps deliver on our vision of “Always, customer first”. As a customer owned institution, we are able to invest these profits back into new systems and channels to allow us to improve products and services for customers. Our other main focus is in supporting local communities, and the Board has used our increased profitability to allocate an additional $500,000 to The Greater Charitable Foundation to improve life

CEO, Don MaginChairman, Wayne Russell

CEO’s Report

3


Most of all I would like to thank our staff for their friendship and support. While the job of a CEO is always challenging, through the unique Greater culture, I have been fortunate to be able to have a lot of fun at work, as it should be. I will certainly miss you!

I am always impressed by the way our staff willingly give back to the organisations supported by us and our Foundation. That’s another one of the things that sets The Greater apart from big banks. To the wonderful people at our business partners, it has been a privilege to work with you, and my staff and I have gained so much from the experience.

In my role as the Chair of the Customer Owned Banking Association, I have enjoyed the opportunity to experience the passion and commitment that my peers share for customer owned banking, and I am grateful for the opportunities that I have had to explore options to promote the mutual model globally.

It has been a privilege to serve The Greater’s customers. The Greater and its customers have a strong future ahead. My deepest thanks to everyone for their support and friendship during my many years at The Greater. I wish you all the best for the future.

Don Magin Chief Executive Officer

Greater Executive Committee; Seated L to R: Greg Taylor, Don Magin, Lisa Presbury, Doug Williams Standing L to R: Chris Hodgins, Bruce White, Scott Morgan, Steve Taylor, Bruce Mackie

outcomes in the communities in which we operate on behalf of customers.

That’s what families and communities do, help each other. The Greater has been like a second family to me. As CEO, one of my priorities has been to preserve The Greater’s family culture. It is one of the reasons why we have consistently achieved outstanding customer satisfaction results. I am a strong believer that happy staff means happy customers. Our family has changed and grown but we are united by our focus on customers and our local communities.

As our customers change the way they do banking and as we continue to focus on improving efficiency, our family is not growing as quickly as once forecast, enabling us to stay in our Hamilton headquarters for the foreseeable future.

We have been making other changes including rationalising several branches that are no longer meeting customers’ needs as they choose to use other nearby branches or other channels, particularly Mobile Banking.

I’d like to congratulate all of The Greater’s staff for the way they are embracing change. More is required to keep challenging the dominance of the big banks.

4


Holiday and savings surveyPrior to the introduction of its holiday offer The Greater conducted research on holiday and saving intentions of 858 people (customers and non-customers) across the regional NSW areas of the Illawarra, Hunter, Central West, Central Coast, Mid-North and North Coasts, New England and Northern Rivers.

The key findings

• A holiday is the second most popular reason for saving (29%) just behind general savings and emergencies (31%).

• 56% of people have had a holiday in the last 12 months, while 17% have not had a holiday in more than five years.

• 47% of people are likely to travel in the next 12 months and 41% of those people plan to travel in Australia.

• The USA is the preferred country for those planning to travel overseas in the next 12 months.

Great value rates – alwaysThe Greater continued to offer customers some of the best interest rates in the marketplace, particularly if comparison rates are used.

It passed on the RBA’s cut of 0.25% to its home loan rates in August, taking its Ultimate (packaged) Home Loan rate below 5%. A month prior it had cut its One Year Fixed Ultimate rate to match the lowest advertised one year fixed rate in Australia. In April 2014 it cut two, three, four and five year Ultimate fixed rates with three year rates going below 5%.

A new discounted offer on Ultimate home loans over $300,000, with a loan-to-value ratio of 80% or less, was also planned for release on 1 July 2014, making this the lowest variable package rate of any financial institution in Australia.

Great Rate holiday offerIn March 2014, The Greater introduced a successful new holiday offer for customers to make its Great Rate (basic) Home Loan even better value.

Anyone taking out a new home loan or switching their existing home loan ($200,000 and over) to the Great Rate Home Loan before 30 June 2014 was able to choose from:

• return flights to Los Angeles for two

• a five-night holiday to Fiji for two

• a range of South Pacific cruises for two

• a Gold Coast family holiday

The no-catch offer was a genuine bonus to customers.

A Greater Way of Banking

• Market-leading rates

• Holiday offer makes home loan even greater value

• Greater is Australia’s most loved banking organisation

• Better branches

• More ways to connect – mobile and social banking

5


Deputy CEO Greg Taylor (far right) presents the 2013 Hunter Business Award for Customer Service (less than 20 staff) to Hungerford Hill staff

Australia’s most loved banking organisation and building society of the year for customer serviceRoy Morgan Research this year showed The Greater to be Australia’s most loved banking organisation.

The Greater also took out the Roy Morgan Customer Satisfaction Award for Best Building Society for 2013.

The award is based on data collected for monthly awards. The Greater has won the building society award every month from January 2013 to June 2014 – a record-breaking 18 times in a row.

Roy Morgan data for the six months to September 2013 showed The Greater had an aggregated customer satisfaction score of 97%, the highest of any Australian financial institution, making it “Australia’s most loved banking organisation”.

The customer satisfaction ratings are collected from Roy Morgan’s single-source survey of approximately 50,000 Australians annually – the world’s largest ongoing single-source survey.

Greater supports best practice customer service Hunter Valley winemaker Hungerford Hill took out the inaugural 2013 Hunter Business Award for Customer Service (less than 20 staff) in August.

The Greater was the sponsor of this award. The Hunter Business Awards are the largest and most prestigious regional business awards in Australia.

Greater Head of Marketing Matt Hingston accepting the Roy Morgan Customer Satisfaction Award

The refurbished Tuggerah branch

A Greater Way of Banking

Better branches This year The Greater refurbished its Tuggerah branch and relocated its Nowra branch to provide a better customer experience and improve staff amenity.

6


Greater ways to connectCustomers have even more ways to connect to The Greater with the launch of three new social media channels in March.

The Greater had previously operated in social media using Twitter, YouTube and its blog. Facebook, Google Plus and employment networking site LinkedIn are now other ways customers can find out more about The Greater’s products and services, support for its community as well as helpful information on financial matters to make their lives greater. The Greater Charitable Foundation also introduced a Facebook page and Instagram account.

Another point of connection with local communities was established with the Greatest Moments project. Online pages are highlighting the fantastic achievements and milestones of the towns in which The Greater operates. This year, Greatest Moments pages were established for the Hunter, Central Coast and NSW South Coast regions.

Changes were also made to Internet Banking to make the service even greater for customers. A tipping point was reached late in the financial year with more customers now accessing Internet Banking via mobile devices than through personal computers.

Looking ahead, The Greater will launch a new, more customer-friendly website and make further improvements to its Mobile Banking services in the first half of the 2014/15 financial year.

Connect with The Greater’s social media channels

The Greater receives 1,000 likes on Facebook

Other highlights

• The Greater was one of the first financial institutions to sign up to V.me by Visa (now renamed “Visa Checkout”), a new electronic wallet for online shopping.

• Customers are now able to use Xero as well as MYOB BankLink to directly transfer financial information to their accountant.

• Newcastle advertising and branding agency Out of the Square Media (OOTS) was appointed as The Greater’s new agency for three years.

• The Greater was named one of Australia’s ‘Top 5 home lenders’ in the 2013 Mozo People’s Choice Awards. The Greater had taken out a number of Top 5 awards in each of the four years the awards have been running in categories such as home loans, savings accounts and debit cards.

• A tender was issued for business partner insurance products. It has since been won by current partner Allianz Insurance.

7


Customers win thanks to GreaterThis year a number of lucky customers have not only benefitted from great products and services, but have also won one of the many competitions The Greater ran this year.

• Tamworth (Kootingal) couple Andrew and Lyn won a Term Investment of $5,000 in a competition by seeing a Bridges Financial Planner through The Greater.

Tamworth Branch Manager Mitchell Balderston with Andrew and Lyn after they won a $5,000 term investment

• Anne and Ken from Medowie near Newcastle won $5,000 in The Greater’s Travel Money competition.

• There were 21 winners in The Greater’s holiday competition. People in Orange, Dubbo, Bathurst, the Hunter, Central Coast and the Illawarra were able to win the holidays on offer in the Great Rate Home Loan offer through local media outlets.

Branch staff celebrate customers’ 100th birthdaysStaff at two branches surprised their much loved customers with a celebration in the branch to mark their 100th birthdays.

Happy birthday to:

Lila Johns – Woy Woy branch

Charles Lonergan – Morisset branch

Warrawong Branch Manager Wendy Triffitt presents customer Getju with his brand new car

Judy Arms, Therese Irwin and Kathy Rathbone from Woy Woy branch join Lila Johns in celebrating her 100th birthday

A Greater Way Of Banking

• Getju from Unanderra in the Illawarra, got a cheaper premium, 12 months FREE roadside assistance and won a new car when he switched his comprehensive car insurance to Allianz through The Greater in a national competition run by Allianz.

8


Our People

Long service awardsThe Greater’s Long Service Awards program recognises staff service at 10, 15, 20, 25, 30, 35 and beyond years of service. The following 67 staff achieved 20 years or more service during the 2013/14 financial year. A number of long-serving staff were honoured by CEO Don Magin at a special dinner.

Farewell and thanksThe Greater farewelled several long-serving staff this year including Business Banking specialists Andrea Rufo and Paul Harrison as well as Ballina Branch Manager Terry Chandler.

• Staff recognised for long service to The Greater and its customers

• Greater women shine in staff awards

• Kristy Bagnall an emerging leader

• Greater staff give back

Name Yrs of Service

William Brandon 40

Gail Smith 40

Suzanna Sherman 35

Gaye Pike 35

Mirella Liddell 34

Gregory Taylor 34

Diane Jones 34

Julieanne O’Sullivan 33

John Bailey 32

Wendy Ryan 32

Peter Marquet 32

Chris Hodgins 32

John Wolski 30

Sharon Wicks 29

Wayne Goodchild 29

Glenda Kopp 29

David Smith 29

Christine Mogford 29

Kevin Buckley 29

Donna Ryan 28

Kristine Carter 28

Lisa Hense 27

Don Magin 27

Name Yrs of Service

Colin Hope 27

Wendy Morris 27

Louise Spencer 27

Dawn Gowie 26

Robert Lowcock 26

Lauren Tickner 26

Mitchell Johns 26

Elizabeth Schneider 26

Sharon White 26

Stephen Clifford 25

Colleen Hodgins 25

Wayne Dean 25

Duncan Coulton 25

Helen O’Connor 25

Stephen Goverd 25

Megan McInnes 24

Janelle Haller 24

Yvonne Stone 24

Paul Gibson 24

David Bryde 24

Susan Caponecchia 23

Glenda Bartrop 23

Janelle Modinger 23

Name Yrs of Service

Vicki Rowett 23

Donna Adamson 23

Tracy Gee 23

Stephen Taylor 23

Maria Di Claudio 23

Debra Dwyer 23

Katherine Davis 23

Linda Monahan 23

Wes Lassam 23

Susan Smart 23

Toni Parkinson 22

Kristine Loadsman 22

Richard Penfold 21

Matthew Scully 21

Helen Snape 21

Catherine Jones 21

Annette Clarke 20

Annette Avery 20

Catherine Thomas 20

Shane Greig 20

Rona Green 20

9


Two Greater staff clock up 80 years of serviceIn January, The Greater honoured its two longest-serving staff members who both clocked up 40 years’ service.

Gail Smith and Bill Brandon were both presented gifts and a plaque by Chairman Wayne Russell and CEO Don Magin in recognition of their dedication to the company and its customers.

Gail is Executive Assistant to the CEO and Board. Bill is the Lending Services System and Administration Manager. He has also worked as a Branch Manager in the Illawarra and at New Lambton.

The pair started within three days of each other in January 1974. Gail worked in the typing pool and Bill started as a Clerk in Head Office.

Gail has been the Executive Assistant to all but one of The Greater’s CEOs.

“I love my job because every day is different and I have made some truly great friends here,” she says.

Bill said when he started, The Greater had assets of $50 million and today it has assets of $5 billion.

“I love working at The Greater and the people are fantastic,” Bill said.

Wayne and Don paid tribute to the pair and thanked them for their tremendous contribution to The Greater.

Don Magin, Gail Smith, Bill Brandon and Wayne Russell

HR Manager Kristy Bagnall being presented with the national 2013 Emerging Leader Award

Greater women are emerging leadersTwo Greater Building Society staff members took out Emerging Leader awards at the 2013 national Customer Owned Banking Association conference.

HR Manager Kristy Bagnall won the national 2013 Emerging Leader Award. Senior Business Analyst Vanessa Nirmal won one of four Emerging Leader Tertiary Education Scholarships.

Kristy used her $10,000 prize to attend a leadership course at Harvard University and will also attend the 2014 World Credit Union Conference.

This is the second year in a row that a Greater staff member has taken out the top award for emerging talent. Internal Communication Specialist Emma Avery won the award in 2012. Kristy and Emma were also recipients of the Hunter Business Women’s Network 2013 Emerging Leader scholarships.

Our People

10


Staff recognised

Employee of the Year AwardShellharbour Branch Customer Service Officer Ivana Pejovska is The Greater’s Employee of the Year.

As well as striving to always give the best customer service, Ivana has been a leading volunteer for the KidzSpeak program, funded by The Greater Charitable Foundation.

Ivana was selected from these other finalists who won Employee of the Quarter Awards.

• Vickie Moles, Lake Haven Branch Customer Service Officer

• Alessandra Saltos, Senior Corporate Lawyer

• Catherine Huff, Senior Learning & Development Consultant

• Liz Hedge, Salamander Bay Branch Supervisor

• Rachel Vincent, Ballina Branch Customer Service Officer

• Michael Clement, Ballina Branch Lending Manager

• Sarah Winn, Business Analyst Cadet

• Sam Graham, Online Content Specialist

Ian Nelmes Award for ServiceAnnette Avery took out this year’s Ian Nelmes Award. The award, in honour of former Greater Chairman and current Greater Charitable Foundation Chairman Ian Nelmes, is chosen by The Greater’s executive. It recognises the performance and the contribution a person makes in demonstrating and promoting The Greater’s cultural values.

The awards are one part of The Greater’s staff reward and recognition program.

Employee of the Year Ivana Pejovska volunteering with KidzSpeak

Annette Avery (centre) received this year’s Ian Nelme’s Award

11


Jaide Burt cut and auctioned her ponytail to raise more than $15,000 to fund Look Good... Feel Better workshops

Staff give back

Greater staff embrace The Greater’s culture of giving back by doing some amazing things of their own volition.

• A total of 92 Greater staff in 23 teams participated in an Australian-inspired global health and wellness initiative called STEPtember. They raised more than $13,000 for Cerebral Palsy Alliance programs to help adults and kids with cerebral palsy. The team took enough steps to climb Mount Everest and Mount Kilimanjaro 70 times.

• Head of Customer Relations Lisa Presbury was recognised by Heal for Life Foundation for her services to the charity. She organises fundraising as well as working bees on the Foundation’s property. Lisa and her fellow members of The Greater executive all donate money weekly to provide annual scholarships for young women who are rebuilding their lives after having experienced abuse or childhood trauma.

• In February, 24-year-old Risk Officer Jaide Burt cut and auctioned her ponytail to raise more than $15,000 to fund Cancer Patients Foundation, Look Good... Feel Better workshops to support those who have cancer. She did so in memory of her Aunty who died of breast cancer.

• Business Banking Specialist Andrea Rufo and close friends have raised almost $500,000 for cancer research and support services in honour of his late wife Sandra through five biennial Pink Frangipani Balls. Sandra died in 2005 after a courageous 10-year battle with breast cancer. The Greater has been a sponsor of every ball.

A total of 92 Greater staff in 23 teams participated in the global health and wellness initiative called STEPtember

Our People

12


As a customer owned financial institution The Greater does not have the same pressure for shareholder returns as the major banks. It puts its profits back into offering competitive rates, low fees and support for the communities in which it operates. Below are some of the organisations and events sponsored or supported by The Greater this year. The Greater also funds The Greater Charitable Foundation to support charities that are working to improve the lives of people and families in The Greater’s area of operations and beyond (see page 16).

• Greater supports a range of community and sporting organisations

• Support for next Olympians

• Greater staff give back

• Investment in medical research pays off for community

Our Community

The Illawarra’s largest Christmas treeChristmas cheer was brought to Illawarra people with The Greater funding the installation of the nine-metre KidzWish Christmas Tree outside the Entertainment Centre for the third year in a row.

Gardens for Father Chris Riley to help Cessnock youthYoung people in Cessnock using the local Father Chris Riley’s Youth Off The Streets drop-in centre now have a supply of fresh vegetables, herbs and gardens to care for thanks to staff from the Finance and Risk departments as well as from PwC Newcastle’s auditing team. Each year The Greater and PwC staff do a day’s work for a charity.

Armidale Hospital bedArmidale residents are less likely to have to wait or need to travel for surgery with the arrival of a new $50,000 operating theatre bed at Armidale Hospital, supplied by The Greater. The donation came from the $1.5 million fund established when The Greater merged with Armidale Building Society in 2011. The money is to be spent in the New England area over 15 years.

The Greater funded the installation of the nine-metre KidzWish Christmas Tree

Top: Greater and PwC finish work on gardens at Father Chris Riley’s Youth Off The Streets Cessnock drop-in centre Bottom: Greater Director Roger Cracknell tries out the new operating theatre bed for Armidale Hospital staff

13


Renewed support to help people enjoy sportSport plays an important part in the lives of The Greater’s customers and the communities in which they live. The Greater renewed its sponsorship of two sporting organisations, helping their communities to enjoy the benefits of sport.

It will remain the major naming rights sponsor for the 2014 and 2015 Newcastle and Hunter Rugby competitions, including the finals series. The Greater became the naming rights sponsor in 2010, rescuing NHRU and local rugby clubs, after it endured the 2009 season without a major sponsor.

Young Central Coast athletes, such as Josh English, and their coaches benefitted from The Greater renewing its sponsorship of the Central Coast Academy of Sport for another year. CEO Don Magin and Central Coast branch staff joined in celebrating the success of the Central Coast Academy of Sport’s programs at its Scholarship Presentation and Awards Night in November.

The Greater’s CEO, Don Magin, with then NHRU General Manager, Fenton Coull

Our Community

Greater’s investment in regional medical research pays a dividend to communityA report and news of the commercialisation of an anti-cancer drug has showed there has been a significant benefit to both researchers and the community from The Greater’s support for medical research.

A report was commissioned this year, analysing the social return on investment (SROI) of the donated funding The Greater and The Greater Charitable Foundation provided to Hunter Medical Research Institute (HMRI) for two stroke research projects. The Report found that for one project the SROI was 6.63 and for another it was 2.30.

This year Australian company Viralytics announced it planned to use $27 million worth of global institutional investment to conduct one UK and two US clinical trials before commercialisation of its anti-cancer drug, Cavatak. The drug has been developed out of research that was initially looking at cures for the common cold by HMRI researchers. The research was kickstarted with funding from The Greater almost 15 years ago. It is now potentially among the most significant immunotherapy drugs developed for the treatment of melanoma over the past decade.

Fifteen researchers are now involved in the drug’s development.

The Greater Building Society is an inaugural supporter of HMRI. Funding of HMRI transferred to The Greater Charitable Foundation when it was established in 2011. Together the organisations have provided HMRI with more than $1.3 million.

Dr Bivard from HMRI and Charitable Foundation CEO Anne Long

The Greater again sponsored the Hunter Track Classic. Athletics Australia and NSW Athletics organised the event, which brought some of Australia’s top athletes to the Hunter region to compete in February 2014.

14


21st Greater Building Society Olympic Sports Scholarships Four up-and-coming Hunter athletes, including Paralympic medallist Maddison Elliott, were awarded their first ever Greater Building Society Olympic Sports Scholarship this year.

A total of 10 athletes across seven different sports were awarded the $2,000 scholarship. Triathlete Aaron Royle received his fifth successive scholarship.

In the 21 years the scholarships have been operating, more than $340,000 has been provided to support more than 100 athletes. A quarter of the athletes have represented Australia at an Olympic or Paralympic Games including legends such as Justin Norris, Angie Bainbridge, Nathan Outteridge, Jenni Screen, Heath Francis, Matthew Helm, Simon Orchard and Natalie Ward. Three current and three former scholarship holders competed at the 2014 Commonwealth Games in Glasgow.

The scholarships are managed for The Greater by Hunter Academy of Sport.

The next round of scholarships will be announced in November 2014.

Hunter Olympic Sport Scholarship holders Kailani Craine, Mariah Williams, Taylor Corry, Aaron Royle, Georgia McConville and Meg Bailey

Greater Building Society 2013–2014 Olympic Sports Scholarship Recipients

Meg Bailey Swimming

Taylor Corry Swimming (AWD)

Kailani Craine Figure Ice Skating

Maddison Elliott Swimming (AWD)

Teegan McCloy Clay Target Shooting

Georgia McConville Water Polo

Gordon Marshall Water Polo

Aaron Royle Triathlon

Sophie Stanwell Track and Field

Mariah Williams Hockey

Scholarship starts careerAt this year’s scholarship ceremony, Commonwealth Games medallist and world champion triathlete Aaron Royle told how his first scholarship changed his career.

He had been offered an opportunity to go to Europe for some coaching. With no money, he was about to decline when he was told he’d won The Greater’s Olympic scholarship.

Aaron said that he was able to gain experience and skills in Europe to set great foundations for his career.

15


The Greater Charitable Foundation

The Greater has a proud and long history of giving back to the community in which we live and work. The Greater Charitable Foundation is continuing that tradition by providing support to families and communities throughout our business footprint.

Since establishment in 2011, the Foundation has allocated more than $4 million in funds. Over the past 12 months, the Foundation has funded 11 charities to undertake activities including: furthering medical research; taking music to disadvantaged school communities; providing services to families as they face chronic illness, autism, cerebral palsy and life-limiting conditions; and providing young people with education and training.

PartnersDuring 2013, The Greater Charitable Foundation worked with the following charity partners to help improve the life outcomes of families and communities:

Australian Children’s Music Foundation

Autism Spectrum Australia (Aspect)

Cerebral Palsy Alliance

Heal For Life Foundation

Hunter Institute of Mental Health

Hunter Medical Research Institute (HMRI)

KidzWish Foundation

Starlight Children’s Foundation

Supported 11 charities

Over 500 hours

spent volunteering

200 Greater staff have now

volunteered for charity partners

$4 million in allocated

funds

www.greaterfoundation.org.au

16


YWCA NSWFunding from the Foundation is supporting YWCA NSW’s Community in the Kitchen Program for at-risk young people aged between 15 and 24 in the Northern Rivers region of NSW. The program is designed to help young people reach their educational and social potential by providing employment and training opportunities.

The Foundation also provided additional funding to some of the current partners to ensure the continuation and expansion of their programs.

Volunteering A key platform of the Foundation’s activities is the involvement of The Greater staff in funded projects through volunteering or pro bono assistance. Over the past year, more than 200 Greater staff have volunteered their time with one or more of our Foundation partners.

New Partners in 2014The Greater welcomed three new charity partners to our Foundation family at the start of 2014.

Camp QualityFoundation funding is supporting the Play Therapist program in the in-patient ward and day unit at the paediatric oncology ward at John Hunter Children’s Hospital in Newcastle. The Camp Quality Play Therapists focus on supporting the psychosocial development of children diagnosed with cancer in order to build their resilience and promote effective coping strategies.

Youth Off The Streets The Greater Charitable Foundation is funding Youth Off The Streets’ Hunter Valley Futures Program to support communities within the greater Cessnock and Maitland regions, focusing on tailored early-intervention and education programs for disadvantaged children and young people.

Foundation Support

Northern Rivers

Taree

Hunter Region

Central Coast

Illawarra/South Coast

Regional NSW & Gold Coast

Cessnock/Weston/Kurri Kurri

Region Foundation

Map is not to scale and is indicative of coverage areas only.

YWCA NSW

ACMF

Aspect, HIMH, HMRI,

CPA, HFL

CPA

KidzWish

Starlight

Youth Off The Streets

Version 1.1 August 2014 Greater Building Society Ltd. ABN 88 087 651 956 AFSL/Australian Credit License No: 237476

17


Volunteering “I think it is so wonderful that the Foundation gives employees the opportunity to volunteer, it is a great way of introducing us to the charity... I felt so lucky to be part of the day... Our presence offered an additional aspect to the day, not only with the activities that we did, but also with the children and parents having someone else to talk to and interact with. And also for me personally, I felt honoured I was able to be part of the fun with the families...”

Greater staff member Leanne Rix after volunteering at a Camp Quality Family Camp.

“Words cannot express how grateful I am for the support of The Greater and their staff. The support has allowed us to reach so many children and their families...this has made a huge difference to the hospital experience for the families and kids.”

Ken Gamma, Hospital Programs Manager NSW.

Greater staff visit the John Hunter Hospital with the Starlight Captains – September 2013

Branch Supervisor Lorraine Erskine helping to deliver the KidzSpeak Program to children at Cringila Children’s House

The Greater Charitable Foundation

18


Greater Staff working alongside their mentees at the Cerebral Palsy Alliance Ignition Mentoring session – April 2014

YWCA NSW CEO Anna Bligh congratulating the graduates of the Community in the Kitchen Program in Lismore – June 2014

Card Services Supervisor Lynda Casey volunteering at Autism Spectrum Australia’s Playgroup at the Aspect School in Thornton – March 2014

“We can’t thank you enough for providing families with such an amazing program. You are giving families the best start for the long, hard road ahead. It was my pleasure to provide you all with a little personal insight into the world of autism.”

Parent of a child with autism who took part in the EIRP program funded by the Foundation and then presented to The Greater staff about her family’s experience.

19


Contents

Directors’ Report 20

Independent Auditor’s Report to the Members 25

Directors’ Declaration 27

Statement of Comprehensive Income 28

Balance Sheet 29

Statement of Changes in Equity 30

Statement of Cash Flows 31

Notes to and Forming Part of the Financial Statements 32

Financial Statements 30 June 2014

20


The Directors have much pleasure in presenting their report on the consolidated financial statements consisting of Greater Building Society Ltd (the Society) and the entities it controlled at the end of, or during, the year ended 30 June 2014.

DirectorsThe following persons held office as Directors for the whole of the financial year and up until the date of this report.

W M Russell, B.Comm, CA, GAICD, MIIA(Aust)Mr Russell joined the Board in April 2011. He has extensive experience in providing auditing and assurance services, having worked as an audit and assurance partner at PricewaterhouseCoopers for 20 years. He is currently a partner at accountancy firm Pitcher Partners. Mr Russell is involved in a number of industry associations and is a member of the executive and past President of the Australian Financial Institutions Auditors Association. Mr Russell has been the Chairman of the Board since his appointment on the 29 November 2011.

Special Responsibilities: Member of the Audit & Risk Management Committee, Member of the Remuneration Committee, Member of the M&A Strategy Committee and Chairman of the Succession Planning Committee.

D S Robinson, B.Surveying (Hons) MAICDMr Robinson joined the Board in October 2007 and has over 30 years’ experience in surveying, town planning and land development. He is the Managing Director of ADW Johnson, a leading Hunter based consultancy in surveying, town planning, engineering and land development. Mr Robinson has also previously worked as a part-time teacher at TAFE and was a Junior Officer in the Royal Australian Navy.

Special Responsibilities: Deputy Chairman of the Board, Chairman of the IT Steering Committee, Chairman of Parkwood Unit Trust (a subsidiary of The Greater involved in land development), Member of the M&A Strategy Committee, Member of the Succession Planning Committee and Member of the Marketing Steering Committee.

W R Ware, LL.M.(Hons), FAICD Mr Ware joined the Board in February 2009. He practised law for 14 years until 1987 when he became a professional Company Director and Business Consultant. He has served on the boards of a number of public companies in diverse industries for over 27 years. He is a co-owner and Director of Rosedale Gardens Retirement Living, a retirement village at Cooranbong, south of Newcastle.

Special Responsibilities: Chairman of the Remuneration Committee and Member of the Succession Planning Committee.

M L McDonald, B Ec. FCA, GAICD Mr McDonald joined the Board in May 2009. He has practised as a Chartered Accountant for over 30 years and was a Partner in the Newcastle Offices of Touché Ross & Co and KPMG Peat Marwick until his resignation in 1994. He has since that date and until recently practised on his own account. He is a Trustee of the Anglican Diocese of Newcastle and has considerable involvement in the Not for Profit sector at Board and Committee level.

Special Responsibilities: Chairman of the Audit & Risk Management Committee, Member of the Succession Planning Committee and Member of the Remuneration Committee.

V J Drinkwater, B Ec. MBA (with merit), GAICD, CAHRIMrs Drinkwater joined the Board in October 2010. She has extensive experience as a Senior Executive in operations, customer service, IT and marketing. Mrs Drinkwater was previously employed as Interim CEO New Zealand, Chief Marketing Officer and Chief Operating Officer at nib health funds limited. She is currently a Principal of local firm, Arion Systems and is also a Trustee of the Anglican Diocese of Newcastle.

Special Responsibilities: Member of the Remuneration Committee, Member of the Succession Planning Committee and Chair of the Marketing Steering Committee.

R J Cracknell, CPA, FAICDMr Cracknell joined the Board in May 2011. He was Chief Executive of ABS Building Society from 1973 until April 2011 and has over 40 years’ experience in the Building Society Industry. He has held various executive positions with the Australian Permanent Building Societies (NSW Division) and was a Councillor of AAPBS (National). Mr Cracknell was a partner in the accountancy firm of Jones, Cracknell & Starr for over 40 years.

Special Responsibilities: Member of the Audit & Risk Management Committee, Member of the Succession Planning Committee and Chairman of the M&A Strategy Committee.

Directors’ Report

21


Company SecretaryFor the whole of the financial year the Company Secretary has been Mr B E Mackie B Leg S, LLM, F Fin. Mr Mackie is a qualified Lawyer with over 20 years’ experience in public, private and corporate legal practice, the majority of that time working in large public companies providing financial products and services. Mr Mackie joined the Greater Building Society Ltd in 2003.

Corporate ObjectivesThe Society’s long term objective is to ensure the financial viability of the Society and to provide a range of financial services to members that are competitive and meet their needs. Short term objectives involve seeking opportunities to grow the business, either by new products or services or by an expansion of distribution networks. Growth aspirations are however, sought in a prudent and sustainable manner. Current strategies to achieve these objectives are to maintain a network of well-presented and convenient locations; to continue to expand the Society’s branch network into new areas; to expand the range of products and services to meet the demands of members; to continue to provide a superior service level; to strive to enhance the member experience at all points of contact; to be an employer of choice and to provide a challenging and enjoyable workplace; and to continue to build capacity and knowledge with good corporate governance.

The Society measures its performance using a range of financial and non-financial indicators. The main financial indicators are interest margins, cost to income ratio, return on equity, profit per employee, loan portfolio growth and deposit portfolio growth, while non-financial indicators include number of products and services per member, staff and member satisfaction surveys.

Principal ActivitiesThe principal activity during the year of the consolidated entity comprising the Greater Building Society Ltd and the controlled entities consisted of the provision of financial services to members in the form of taking deposits and providing financial accommodation. Those activities enhanced the financial position of the Society and provided the platform to enable the Society to improve the quality of its distribution channels and expand the range of products and services available to members.

Results Of The Consolidated Entity 2014 2013$’000 $’000

Profit after income tax expense 31,361 28,410

Less profit attributable to outside equity interests (255) (691)

Profit attributable to members of the Greater Building Society Ltd 31,106 27,719

Review Of OperationsA review of operations of the consolidated entity is contained in the Chairman’s and Chief Executive Officer’s Report.

Directors’ Report (continued)

22


Directors’ MeetingThe persons holding office as Directors of the parent entity during the year were; W M Russell, D S Robinson, W R Ware, M L McDonald, V J Drinkwater and R J Cracknell. The number of meetings of the Directors (including meetings of Committees) held during the year and the number of meetings attended by each Director were as follows:

Board of Directors

Audit & Risk Management

Committee

Remuneration Committee

IT Steering Committee

M & A Strategy

Committee

Marketing Steering

Committee

Succession Planning

Committee

Number of Meetings 11 7 8 4 2 5 5

W M Russell 11 / (11) 7 / (7) 8 / (8) 4 / (4) 2 / (2) 5 / (5) 5 / (5)

D S Robinson 11 / (11) – – 4 / (4) 2 / (2) 5 / (5) 5 / (5)

M L McDonald 11 / (11) 7 / (7) 5 / (8) – – – 4 / (5)

W R Ware 10 / (11) – 8 / (8) – – – 5 / (5)

V J Drinkwater 11 / (11) – 7 / (8) – – 5 / (5) 5 / (5)

R J Cracknell 11 / (11) 7 / (7) – – 2 / (2) – 5 / (5)

Insurance Of OfficersDuring the financial year, the Society paid premiums to insure the Directors and Senior Executive Officers of the Society and its controlled entities.

In accordance with normal commercial practice, disclosure of the total amount of premium payable under, and the nature of the liabilities covered by the insurance contract, is prohibited by a confidentiality clause in the contract.

The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the consolidated entity.

State Of AffairsThere was no significant change in the state of affairs of the consolidated entity during the financial year.

Member LiabilityThe Society is a company limited by shares and guarantee. The Society has not issued shares. The guarantee is provided by members of the Society and is limited to $1 per member. The total amount that members of the company are liable to contribute if the company were wound up is $240,262.

After Balance Date EventsThe Directors are not aware of any matters or circumstances that have arisen since 30 June 2014 that have significantly affected or may significantly affect:

A) The operations of the consolidated entity,

B) The results of those operations, or

C) The state of affairs of the consolidated entity in the financial years subsequent to 30 June 2014.

Likely Developments And Expected Results Of OperationsThere are no material likely developments in the operations of the consolidated entity, other than continued profitable operations, at the date of this report.


23


Proceedings On Behalf Of The CompanyNo person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Society, or to intervene in any proceedings to which the Society is a party, for the purpose of taking responsibility on behalf of the Society for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Society with leave of the Court under Section 237 of the Corporations Act 2001.

Environmental RegulationThe Society or its controlled entities are not subject to any significant environmental regulation.

Auditors’ Independence DeclarationA copy of the Auditors’ Independence Declaration as required under Section 307C of the Corporations Act 2001 is set out on page 25.

Rounding Of AmountsThe amounts in the financial statements have been rounded to the nearest thousand dollars under the option available to the Society under ASIC Class Order 98/100. The Society is an entity to which the Class Order applies.

AuditorPricewaterhouseCoopers Australia continues in office in accordance with Section 327 of the Corporations Act 2001. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers Australia) for audit and non-audit services provided during the year are disclosed in Note 27.

W M Russell Chairman

Signed at Hamilton this 23rd day of September 2014 in accordance with a resolution of the Directors.


24



25

Greater Building Society LtdGreater Building Society Ltd

Independent Audit Report to the Members

26


Independent Audit Report to the Members (continued)

27


In the Directors’ opinion:A) The financial statements and notes set out on pages 28 to 71 are in accordance with the

Corporations Act 2001, including:

i) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

ii) Giving a true and fair view of the Society’s and consolidated entity’s financial position as at 30 June 2014 and of their performance, as represented by the results of their operations, changes in equity and their cash flows, for the financial year ended on that date; and

B) There are reasonable grounds to believe that the Society will be able to pay its debts as and when they become due and payable; and

C) Note 1(A) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

This declaration is made in accordance with a resolution of the Directors.

W M Russell

Chairman

Signed at Hamilton this 23rd day of September 2014.

Directors’ Declaration

28


Statement Of Comprehensive IncomeDirectors’ Declaration

Consolidated Society

2014 2013 2014 2013

Notes $'000 $'000 $'000 $'000Interest revenue 2 264,079 291,043 276,862 291,368

Interest expense 3 (139,775) (169,902) (154,388) (172,025)

Net interest income 124,304 121,141 122,474 119,343

Non-interest income 4 23,830 24,895 22,223 19,743

148,134 146,036 144,697 139,086

Non-interest expense 5 (104,039) (106,405) (100,615) (100,966)

PROFIT BEFORE INCOME TAX 44,095 39,631 44,082 38,120

Income tax expense 6 (12,734) (11,221) (13,129) (11,163)

PROFIT FOR THE YEAR 31,361 28,410 30,953 26,957

PROFIT ATTRIBUTABLE TO

Members of Greater Building Society Ltd 31,106 27,719 30,953 26,957

Non-controlling interests 25 255 691 – –

31,361 28,410 30,953 26,957

OTHER COMPREHENSIVE INCOME

Items that may be reclassified to profit or loss

Available for sale assets 23 – – – –

Cash f low hedges 23 (1,137) (2,543) (1,137) (2,543)

Income tax relating to these items 23 341 763 341 763

Items that will not be reclassified to profit or loss

Revaluation of land and buildings 23 404 7 314 70

Fair value assets through other comprehensive income 23 293 1,101 293 1,101

Income tax relating to these items 23 (209) (333) (182) (351)

Total other comprehensive income (308) (1,005) (371) (960)

TOTAL COMPREHENSIVE INCOME 31,053 27,405 30,582 25,997

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO

Members of Greater Building Society Ltd 30,798 26,714 30,582 25,997


31,053 27,405 30,582 25,997

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

for the Year Ended 30 June 2014

29


Balance Sheet


2014 2013 2014 2013

Notes $'000 $'000 $'000 $'000

ASSETS

Cash and cash equivalents 7 234,438 160,219 215,999 153,583

Investment securities 8 576,442 554,835 1,009,851 563,463

Other receivables 9 916 1,189 2,756 1,879

Derivative financial instruments 10 3,546 4,438 3,546 4,438

Loans and advances 11 4,229,021 4,193,842 4,229,021 4,193,842

Inventories 12 – 1,535 – –

Other financial assets 13 3,547 3,255 4,150 5,526

Deferred tax assets 14 3,279 3,509 3,316 3,650

Property, plant and equipment 15 27,759 29,027 27,759 29,027

Investment properties 16 4,303 4,301 4,303 4,301

Intangible assets 17 1,663 1,398 1,663 1,398

TOTAL ASSETS 5,084,914 4,957,548 5,502,364 4,961,107

LIABILITIES

Payables and other liabilities 18 7,552 9,677 7,551 8,976

Deposits 19 4,423,591 4,185,057 4,426,513 4,189,675

Current tax liabilities 20 4,607 3,532 4,607 3,492

Derivative financial instruments 10 130 379 130 379

Other financial liabilities 21 251,719 391,609 669,239 395,084

Provisions 22 10,057 9,816 10,057 9,816

TOTAL LIABILITIES 4,697,656 4,600,070 5,118,097 4,607,422

NET ASSETS 387,258 357,478 384,267 353,685

MEMBERS’ FUNDS

Reserves 23 30,051 30,309 27,619 27,656

Retained prof its 24 357,207 326,151 356,648 326,029

387,258 356,460 384,267 353,685

Non-controlling interests 25 – 1,018 – –

TOTAL MEMBERS’ FUNDS 387,258 357,478 384,267 353,685

The above Balance Sheet should be read in conjunction with the accompanying notes.

as at 30 June 2014

30


Statement Of Changes In EquityBalance Sheet


2014 2013 2014 2013

Notes $'000 $'000 $'000 $'000

TOTAL EQUITY AT THE START OF THE FINANCIAL YEAR

Reserves 23 30,309 30,546 27,656 27,638


Non-controlling interests 25 1,018 1,092 – –

357,478 331,105 353,685 327,688

TOTAL PROFIT & LOSS FOR THE YEAR



31,361 28,410 30,953 26,957

TOTAL OTHER COMPREHENSIVE INCOME FOR THE YEAR

Reserves 23 (308) (1,005) (371) (960)

(308) (1,005) (371) (960)

OTHER TRANSACTIONS WITHIN EQUITY FOR THE YEAR

Transfer from retained prof its to reserves 23 50 768 334 978

Transfer from reserves to retained prof its 24 (50) (768) (334) (978)

Non-controlling interest adjustment 23 – (267) – –

Distributions provided for or paid to non-controlling interests 25 (299) (765) – –

Return of capital paid to non-controlling interests 25 (974) – – –

(1,273) (1,032) – –

TOTAL EQUITY AT THE END OF THE FINANCIAL YEAR

Reserves 23 30,051 30,309 27,619 27,656


Non-controlling interests 25 – 1,018 – –

387,258 357,478 384,267 353,685

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.


31


Statement Of Cash Flows


2014 2013 2014 2013

$'000 $'000 $'000 $'000

NotesInf lows/

(Outf lows)Inf lows/



(Outf lows)

CASH FLOWS FROM OPERATING ACTIVITIES

Interest received 264,504 290,181 277,289 290,499

Fees and commissions received 18,141 17,358 18,141 17,358

Other income received 3,379 7,104 1,245 502

Interest paid (139,825) (176,591) (156,102) (177,195)

Operating expenses paid (99,041) (97,631) (99,685) (94,152)

Income taxes paid (11,202) (9,459) (11,202) (9,459)

Net advances and repayments in loans and advances (43,548) (80,499) (35,404) (81,044)

Net placements and redemptions in investment securities (20,091) (128,930) (11,161) (129,105)

Net acceptances and payments in deposits 238,973 203,137 237,280 205,290

NET CASH PROVIDED BY OPERATING ACTIVITIES 30 211,290 24,670 220,401 22,696

CASH FLOWS FROM INVESTING ACTIVITIES

Net purchases and sales in other financial assets and liabilities

8 740 2,650 859

Payments for property, plant and equipment (3,966) (4,299) (3,953) (4,264)

Proceeds from sale of property, plant and equipment 709 360 709 360

Dividends and distributions received 17 12 521 1,302

CASH FLOWS FROM INVESTING ACTIVITIES (3,232) (3,187) (73) (1,743)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments of commercial notes (132,957) (160,597) (157,912) (159,500)

Distributions Paid (882) (670) – –

NET CASH PROVIDED BY FINANCING ACTIVITIES (133,839) (161,267) (157,912) (159,500)

Net increase/(decrease) in cash held 74,219 (139,784) 62,416 (138,549)

CASH AT THE BEGINNING OF THE FINANCIAL YEAR 160,219 300,003 153,583 292,129

CASH AT THE END OF THE FINANCIAL YEAR 7 234,438 160,219 215,999 153,583

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.


32


Notes to and Forming Part of the Financial Statements

for the Year Ended 30 June 2014for the Year Ended 30 June 2014

Statement Of Cash Flows

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) Basis of PreparationThe financial report includes separate financial statements for Greater Building Society Ltd as an individual entity (ie the Society) and the consolidated entity consisting of the Society and all its subsidiaries.

The financial statements of the Society and the consolidated entity are general purpose financial reports prepared in accordance with provisions of Australian Accounting Standards and the Corporations Act 2001 in Australia. The Society’s and consolidated entity’s financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Greater Building Society Ltd is a for-profit entity for the purposes of preparing financial statements.

The financial statements of the Society and the consolidated entity are prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value, certain classes of property and investment property.

All amounts are expressed in Australian dollar currency.

The significant accounting policies adopted in the preparation of these financial statements and that of the previous financial year are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated.

i) Critical account estimates and significant judgements The preparation of the financial statements requires the use of certain critical accounting estimates. It also

requires management to exercise judgement in the process of applying the accounting policies. The notes of the financial statements set out the areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the Society and its consolidated entity financial statements. The most significant of these are:

• impairment losses on loans and advances, • consolidation of special purpose entities, and • fair valuation estimates.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. Management believes the estimates used in preparing the financial statements are reasonable. Actual results in the future may differ from those reported.

ii) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for

30 June 2014 reporting periods. The consolidated entity’s assessment of the impact of these new standards and interpretations is set out below.

Revenue from contracts with customers (effective 1 January 2017)

The IASB has issued a new standard for the recognition of revenue. This will replace IAS18 which covers contracts for goods and services and IAS11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer, so the notion of control replaces the existing notion of risks and rewards. While the consolidated entity does not expect the new standard to have an impact on how revenue is recognised, it is yet to perform a detailed assessment.

B) Consolidation i) Controlled entities The consolidated financial statements comprise the financial statements of the Society and its controlled entities

(together, ‘the consolidated entity’). The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. The effects of all transactions between entities in the consolidated entity have been eliminated in full. Non-controlling interest in the results and equity of controlled entities, where the Society owns less than 100% of the issued capital, are shown separately in the consolidated statement of comprehensive income, statement of changes of equity and balance sheet.

Where control of an entity was obtained during the financial period, its results have been included in the consolidated statement of comprehensive income from the date on which control commenced. Where control of an entity ceased during the financial period, its results are included for that part of the financial period during which control existed.

Investments in subsidiaries are accounted for by the Society at cost.

33




ii) Business combinations The acquisition method of accounting is used to account for all business combinations. The consideration

transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.

Acquisition-related transaction costs are expensed as incurred.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquired entity, over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised directly in profit or loss as a bargain purchase.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

iii) Securitisation Securitised positions are held through a number of Special Purpose Entities (‘SPEs’). These securitised positions

allow the Society to access funding. The Society does not consolidate a SPE it does not control. Where it can sometimes be difficult to determine whether the Society does control the SPE, it makes judgements about its exposure to the variable returns of the entity and its ability to affect those returns. The Society has consolidated its SPEs. Accordingly, their underlying assets, liabilities, revenues and expenses are reported in the Society’s consolidated balance sheet and statement of comprehensive income.

iv) Land development investment During the year, the Society had an equity investment in a controlled entity involved in the development of

land for subdivision and subsequent sale as residential lots. This controlled entity was wound up during the year.

Development properties are classified as inventory and carried at the lower of cost and net realisable value. Cost includes expenses incidental to the cost of acquisition, development and holding costs excluding borrowing costs. Costs are allocated on a per lot basis based on direct cost allocation where possible or by an averaging process by applying indirect costs across all relevant lots.

Contracts are generally conditional upon performance of some condition of the contract, sale is recognised upon the satisfaction of the condition which generally is upon settlement of the contract.

C) Segment ReportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. All operating segments are less than the required quantitative threshold to require separate disclosure.

D) Revenue Recognition i) Interest revenue Interest income arising from loans and held to maturity investment securities is brought to account using the

effective interest rate method. Incremental fees and transaction costs associated with the origination of loans and held to maturity investment securities which are an integral part of the effective interest rate are deferred and recognised in the statement of comprehensive income on a yield basis over the expected life of the financial instrument.

The effective interest rate is that rate that exactly discounts estimated future cash flows throughout the life of the financial instrument.

The balance outstanding of the deferred origination income and expense is recognised in the balance sheet as an adjustment to the carrying amount of the loans and held to maturity investment securities outstanding.

ii) Other revenue Other income, commission and fee income is recognised in the statement of comprehensive income as revenue

on an accruals basis when the service has been provided or incurred.

34




E) Income TaxThe consolidated entity has adopted the balance sheet liability method of tax-effect accounting which focuses on the tax effect of transactions and other events that affect amounts recognised in either the balance sheet or a tax-based balance sheet.

Deferred tax assets and liabilities are recognised for temporary differences, except where the deferred tax asset/liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that the future taxable amounts will be available to utilise those temporary differences and losses.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

The Society and certain wholly owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2002. The Australian Taxation Office has been notified of the decision. As a consequence, those entities are taxed as a single entity and the deferred tax assets and liabilities of those entities are set off in the consolidated financial statements.

Tax funding and sharing agreements between the Society and certain wholly owned Australian controlled entities, known as ‘group member entities’, apply from 1 July 2013. Broadly, group member entities are required to calculate their notional tax liability as if they were standalone taxpayers before transferring their tax liability to the head entity. Such transfers will be effected on intercompany account. The Society has responsibility for settling the consolidated entity’s income tax liability with the ATO.

F) Financial AssetsThe consolidated entity has elected to apply AASB 9 Financial Instruments and AASB2009-11 Amendments to Australian Accounting Standards arising from AASB 9 from 1 July 2010, because the new accounting standards provide more reliable and relevant information for users to assess the amounts, timing and uncertainty of future cash flows.

All financial assets are initially recognised at fair value plus, in the case of financial assets and liabilities not classified as at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset.

Financial assets are then classified as either a debt or equity financial asset, which in turn determines their subsequent accounting measurement. The categories and measurement treatments are:

i) Debt Financial Asset A debt financial asset is classified as at amortised cost only if both of the following criteria are met:

• the asset is held within a business model with the objective to collect the contractual cash flows, and,

• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding.

The nature of any derivatives embedded in the debt financial asset are considered in determining whether the cash flows of the asset are solely payment of principal and interest on the principal outstanding and are not accounted for separately.

A gain or loss on a debt financial asset that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the financial asset is derecognised or impaired and through the amortisation process using the effective interest rate method.

If either of the two criteria above are not met, the debt financial asset is classified as at fair value through profit or loss.

A gain or loss on a debt financial asset that is subsequently measured at fair value and is not part of a hedging relationship is recognised in profit or loss and presented net in the income statement within other income or other expenses in the period in which it arises.

35




ii) Equity Financial Asset All equity financial assets are measured at fair value.

Equity financial assets that are held for trading are measured at fair value through profit or loss. Changes in the fair value of financial assets at fair value through profit or loss are recognised in other income or other expenses in the income statement as applicable. Interest income from these financial assets is included in the net gains/(losses). Dividend income is presented as other revenue.

For all other equity financial assets (ie. equity financial assets other than held for trading) the consolidated entity can make an irrevocable election at initial recognition of each equity financial asset to recognise changes in fair value through other comprehensive income (OCI) rather than through profit or loss.

Where management has elected to present fair value gains and losses on equity financial assets in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Gains and losses arising from subsequent changes in fair value for equity financial assets nominated as fair value through other comprehensive income are recognised directly in the financial asset at fair value through other comprehensive income reserve in equity, until the asset is derecognised, at which time the cumulative gain or loss will be transferred to retained profits. Dividends from equity financial assets continue to be recognised in profit or loss as other revenue when the right to receive payments is established and as long as they represent a return on investment.

Equity financial assets are measured at fair value. Fair values of quoted equity financial assets in active markets are based on current bid prices. If the relevant market is not considered active (or the securities are unlisted), the consolidated entity establishes fair value by using valuation techniques, including recent arm’s length transactions, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants. Where equity financial assets cannot be reliably valued they are recorded at cost.

G) Cash And Cash EquivalentsCash and cash equivalents includes cash on hand and deposits at call and other short term, highly liquid investments with original maturities of three months or less that are readily convertible to cash and are subject to an insignificant risk of changes in value.

H) Investment Securities i) Asset recognition Investment securities are classified as debt financial assets and are measured at amortised cost using the

effective interest rate method. Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period to maturity. Any gains or losses from investments are recognised in profit and loss when the investments are derecognised, on impairment, as well as through the amortisation process.

ii) Revenue recognition Interest income arising from investment securities is recognised in the statement of comprehensive income

using the effective interest rate method (refer Note 1D).

iii) Investments in associates Associates are those entities over which the consolidated entity exercises significant influence, but not

control. Investments in associates are accounted for in the financial statements using the equity accounting method. Under this method, the consolidated entity’s share of the post acquisition profits or losses of associates is recognised in the consolidated statement of comprehensive income, and its share of post acquisition movements in reserves is recognised in consolidated reserves. The cumulative post acquisition movements are adjusted against the carrying amount of the investment.

Investments in associates are accounted for by the Society at cost.

I) Loans And Advances i) Asset recognition Loans and advances are classified as loans and receivable assets and are recognised when cash is advanced

to members. They are carried at amortised cost using the effective interest rate method (refer Note 1F).

36




ii) Revenue recognition Interest income arising from loans is brought to account using the effective interest rate method (refer Note 1D).

Loan fees received and transaction costs directly attributable to the acquisition of the loan are deferred and included as an adjustment to the interest revenue of the loan on a yield basis over the expected life of the loan using the effective interest rate method. The deferred revenues and costs are included in the balance sheet as part of the value of the loans and advances outstanding.

Other loan fees, commissions and other service fees provided in relation to services are recognised as profit and loss as other income on an accruals basis.

iii) Loan impairment All loan assets are subject to regular review and assessment for possible impairment. Allowances for impairment

losses on loans are based on an incurred loss model, which recognises an allowance where there is objective evidence of impairment.

Specific allowances are raised for losses that may be incurred for loans that are known to be impaired. Estimated losses on these loans are measured at the difference between the loans carrying amount and the present value of the estimated cash flows discounted at the loans effective interest rate.

Where individual loans are found to not be impaired they are grouped together with loans of similar credit risk characteristics and then assessed collectively for impairment. Any loan that has been individually assessed and considered impaired is excluded from the collective assessment.

Loans that are collectively assessed for impairment are estimated on the basis of historical loss experience adjusted for any current conditions that may have impacted on the historical loss experience.

A credit loss reserve is maintained in equity to cover credit risks inherent in the loan portfolio. Movement in the credit loss reserve is recognised as an appropriation of retained profits (refer Note 1S).

iv) Restructured loans A restructured loan is a non-commercial facility where the original contractual terms have been modified to

provide concessional changes for reasons relating to financial difficulties of the borrower. Where the loan after restructuring remains doubtful and it is not well secured the loan shall be subject to impairment. Loans will only be recognised as restructured once the customer has formally agreed to the new terms.

v) Assets acquired through enforcement of security Assets acquired through enforcement of security are assets acquired in full or partial settlement of a loan or

similar facility through enforcement of security arrangements.

vi) Bad debts written-off Bad debts are written-off as identified by management and the Board of Directors when it is reasonable to

expect that the recovery of the debt is unlikely.

Bad debts will be written-off directly to profit and loss in the period in which they are identified. Bad debts can be written-off directly against the allowance for impaired losses only to the extent that the allowance balance includes a specific allowance in respect of the debt being written-off.

J) Plant, Property And Equipment i) Asset recognition Land and buildings are initially recognised at cost and then subsequently carried at fair value less

accumulated depreciation.

Plant and equipment are initially recognised at cost and then subsequently carried at cost less accumulated depreciation and less any impairment adjustment. Assets are reviewed for impairment annually.

Cost includes expenditure directly attributable to the acquisition of the asset.

Items of equipment, furniture and fittings and other small assets, which cost less than $1,000 will be expensed at the time of purchase.

37




ii) Revaluations Land and buildings are carried at fair value at the date of the revaluation less any subsequent accumulated

depreciation of buildings and accumulated impairment losses.

Increases in the carrying amounts arising on revaluation of land and buildings are recognised, net of tax, in other comprehensive income and accumulated in the property revaluation surplus reserve in equity. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to the asset; all other decreases are charged to profit or loss. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation surplus reserve relating to the particular asset being disposed is transferred to retained profits.

The balances in the asset revaluation surplus reserve for each particular asset are net of any potential capital gains tax liability.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit and loss in the year the item is derecognised.

Fair value is determined by reference to market-based evidence, which is the amount which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date. Annual assessments of the fair value is made by the Directors, supplemented by independent valuations performed every three years (or more often if circumstances require) ensuring that the carrying amount does not differ materially from the asset’s fair value at the balance sheet date.

iii) Depreciation Depreciation is calculated so as to write-off the net cost or revalued amount of each item of property, plant and

equipment (excluding land) over its expected useful life. Additions are depreciated from the date of acquisition.

The consolidated entity uses the following rates and methods of depreciation:

Rate MethodBuildings 2.5% straight line

Office Furniture 25% reducing balance

Office Equipment 25% reducing balance

Motor Vehicles 30% reducing balance

Computer Hardware 40% reducing balance

Cash Dispensing Units 15% straight line

Leasehold improvements are amortised over the shorter of the unexpired period of the lease or the useful life of the leasehold improvements on a prime cost basis.

Useful lives and residual values are reviewed annually and reassessed in light of commercial and technological developments. If an asset’s carrying value is greater than its recoverable amount due to a useful life, residual value or impairment adjustment, the carrying amount is written down immediately to its recoverable amount. Adjustments arising from such restatements and on disposal of fixed assets are recognised in profit and loss.

For taxation purposes the consolidated entity determines an effective life to allow assets to be depreciated. The consolidated entity generally uses the reducing balance method of depreciation for tax purposes.

38




K) Investment PropertiesInvestment properties are initially recognised at cost and then subsequently carried at fair value. Cost includes expenditure directly attributable to the acquisition of the asset.

Fair value is determined by reference to market-based evidence, which is the amount which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm’s length transaction as at the valuation date. Annual assessments of the fair value are made by the Directors, supplemented by independent valuations performed every three years (or more often if circumstances require) ensuring that the carrying amount does not differ materially from the asset’s fair value at the balance sheet date.

Changes in fair values for investment properties are recognised directly in profit and loss.

Where the property is used by the consolidated entity for its own occupation the property is classified as plant, property and equipment.

L) InventoryNo expenditure is treated as an asset where it has no realisable value or it is insignificant in size and nature. Items such as printed internal forms, advertising brochures, etc are not treated as inventory.

All inventories are stated at the lower of cost and net realisable value.

M) Intangible Assets i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the consolidated entity’s

share of the net identifiable assets of the acquired entity at the date of acquisition. Goodwill on acquisitions of controlled entities is included in intangible assets. Goodwill on acquisitions of associates is included in the carrying value of investments in associates. Goodwill is not amortised but tested for impairment annually, or more frequently if events indicate that it might be impaired. In this event, it is carried at cost less accumulated impairment losses.

ii) Computer software Costs directly incurred in acquiring computer software, plus costs incurred in developing major products

or systems that will contribute to future period financial benefits through revenue generation and/or cost reductions are capitalised to computer software and amortised over the estimated useful life. Costs incurred on research and software maintenance are expensed as incurred.

The consolidated entity uses the following rates and methods of depreciation:

Rate/ Life MethodMajor System or Product Development 3 to 7 years straight line

Computer Software 40% reducing balance

N) Members’ DepositsMembers’ deposits are measured at amortised cost using the effective interest rate method (refer Note 1F).

Interest on deposits is brought to account using the effective interest rate method (refer Note 1D).

O) Financial LiabilitiesFinancial liabilities are measured at amortised cost using the effective interest rate method (refer Note 1D) except for derivatives, financial liabilities designated as at fair value through profit and loss, and in other limited circumstances as allowed under AASB 9 Financial Instruments which are subsequently measured at fair value through profit and loss. All the consolidated entity’s financial liabilities except for derivatives are classified at amortised cost.

P) ProvisionsThe consolidated entity makes provision where it has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation.

A provision for promotion and reward scheme costs is recognised when the present obligations arise. The provision is measured as the amount unpaid at the balance date discounted by an estimated rate of non-usage.

39




Q) Derivative InstrumentsThe consolidated entity uses derivative financial instruments to hedge its exposure to interest rate risks arising from operational, financing and investment activities. In accordance with its treasury management policy, the consolidated entity does not hold or issue derivative financial instruments for trading purposes.

All derivatives, including those used for balance sheet hedging purposes, are recognised on the balance sheet at fair value and are disclosed as an asset where they have a positive fair value at balance date or as a liability where the fair value at balance date is negative (refer Note 1F).

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured to their fair value at balance date. Fair values for interest rate swaps is the estimated amount that the Society would receive or pay to terminate the swap at the balance date, taking into account current interest rates and the credit worthiness of the swap counter parties. Movements in the carrying amounts of derivatives are recognised in profit and loss, unless the derivative is designated as a hedge and meets the requirements for hedge accounting.

i) Cash flow hedges For a derivative designated as hedging a cash flow exposure arising from a recognised asset or liability

(or a highly probable forecast transaction), the gain or loss on the derivative associated with the effective portion of the hedge is initially recognised in equity in the cash flow hedge reserve and reclassified into the statement of other comprehensive income when the hedged item is brought to account. The gain or loss relating to the ineffective portion of the hedge is recognised immediately in profit and loss.

ii) Fair value hedges For a derivative designated as hedging a fair value exposure arising from a recognised asset or liability

(or a firm commitment), the gain or loss on the derivative is recognised in profit and loss together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

R) Employee Entitlements i) Wages, salaries and annual leave Liabilities for wages, salaries, annual leave and sick leave are recognised and are measured at the amounts

expected to be paid when the liabilities are settled.

ii) Long service leave A liability for long service leave is recognised and is measured as the present value of expected future

payments to be made in respect of services provided by employees up to the balance date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows.

iii) Superannuation Contributions are made by the consolidated entity to an employee’s superannuation fund and are charged

as expenses when incurred. The consolidated entity has no legal obligation to cover any shortfall in the funds liability to provide benefits to employees on retirement.

iv) On-costs On-costs associated with employees, including payroll tax, are recognised as liabilities and expenses when the

employment to which they relate has occurred.

S) ReservesWith effect from 1 July 2005 the Society has established a reserve for credit losses to cover credit risks inherent but not yet incurred in the loan portfolio (refer Note 1I (iii)). Movement in the credit loss reserve is recognised as an appropriation of retained profits.

T) Goods And Services TaxWhere capital or expense acquisitions relate to input taxed activities goods and services tax is generally non-recoverable from taxation authorities. Accordingly, where the amount of goods and services tax incurred is not recoverable, the tax is recognised as part of the cost of acquisition of an asset or as part of an item of expense.

40




For the purposes of the statement of cash flows, receipts and payments from operations are inclusive of goods and services tax.

U) ImpairmentThe carrying amounts of the consolidated entity’s assets are reviewed at least at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Any impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit and loss unless the asset has previously been revalued, in which case the impairment loss is recognised as a reversal but only to the extent of the previous revaluation amount.

V) Rounding Of AmountsThe company is of a kind referred to in ASIC Class Order 98/100, issued by Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.


2014 2013 2014 2013

$'000 $'000 $'000 $'000

2. INTEREST REVENUE

Cash and cash equivalents 7,597 9,491 6,875 9,381

Investment securities 24,920 26,500 38,376 26,812

Loans and advances 231,562 255,052 231,611 255,175

264,079 291,043 276,862 291,368

3. INTEREST EXPENSE

Deposits 128,978 152,343 129,023 152,372

Other financial liabilities 10,797 17,559 25,365 19,653

139,775 169,902 154,388 172,025

4. NON-INTEREST INCOME

Commission 3,684 3,768 3,684 3,768

Dividend revenue (including revenue on wind up of wholly owned subsidiary) 17 12 17 12

Fee income 14,428 13,441 14,428 13,441

Impaired losses recovered 16 18 16 18

Net gain on revaluation of investment properties 2 – 2 –

Net gain on revaluation of land and buildings 16 – 106 –

Net gain on disposal of investment securities 2,215 497 2,215 497

Net gain on disposal of property, plant and equipment 197 41 197 41

Rental revenue 250 326 250 326

Sales revenue from sale of inventory 2,348 6,226 – –

Trust distributions – – 504 1,290

Other revenue 657 566 804 350

23,830 24,895 22,223 19,743

41




Notes


2014 2013 2014 2013

$'000 $'000 $'000 $'000

5. NON-INTEREST EXPENSE

Amortisation of computer software 676 686 676 686

Cost of inventory sold 1,541 3,860 – –

Depreciation – buildings 359 404 359 404

Depreciation – leasehold improvements 1,524 1,388 1,524 1,388

Depreciation – plant and equipment 1,886 2,086 1,886 2,086

Employee related expense 52,335 51,192 52,335 51,192

Net loss on financial assets at fair value through profit and loss – 23 – 23

Net loss on revaluation of investment properties – 980 – 980

Net loss on revaluation of land and buildings – 1,708 – 626

Net loss on disposal of other financial assets 10 – 10 –

Net loss on disposal of property, plant and equipment 84 353 84 353

Operating rental expense 9,578 9,360 9,578 9,360

Payment system processing costs 7,107 7,411 7,105 7,406

Other general and administration expenses 28,939 26,954 27,058 26,462

104,039 106,405 100,615 100,966

6. INCOME TAX EXPENSE

A) Income Tax Expense

Current tax 12,844 11,176 12,968 11,540

Deferred tax 88 222 359 (200)

Adjustment to current tax of prior years (198) (177) (198) (177)

12,734 11,221 13,129 11,163

Income tax expense attributable to profit from operations 12,734 11,221 13,129 11,163

Aggregate income tax expense 12,734 11,221 13,129 11,163

Deferred income tax expense/(revenue) included in income tax expense comprises

Decrease/(increase) in deferred tax assets 14 194 1,089 398 561

Increase/(decrease) in deferred tax liabilities 14 (106) (867) (39) (761)

88 222 359 (200)

42




Notes


2014 2013 2014 2013

$'000 $'000 $'000 $'000

B) Numerical Reconciliation Of Income Tax Expense To Prima Facie Tax Payable

Profit from operations before income tax expense 44,095 39,631 44,082 38,120

Prima facie tax payable at 30% (2013 – 30%) 13,229 11,889 13,225 11,436

Tax effect of amounts which are not deductible (taxable) in calculating taxable income

Non-assessable income (exempt Charitable Foundation) (18) (70) – –

Non-assessable distributions (89) (325) – –

Research and development (200) (100) (200) (100)

Entertainment expenses 13 15 13 15

Debt forgiveness for consolidated entity – – 292 –

Sundry items (3) (12) (3) (12)

Under/(over) provision prior year (198) (176) (198) (176)

12,734 (668) 13,129 (273)

INCOME TAX EXPENSE 12,734 11,221 13,129 11,163

C) Amounts Recognised Directly In Equity

Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity

Current tax – credited directly to equity 149 (57) 149 (182)

Net deferred tax – debited/(credited) directly to equity 14 (16) 488 10 594

Reserves – debited/(credited) directly to equity 80 – – –

23 213 431 159 412

7. CASH AND CASH EQUIVALENTS

All Cash and Cash Equivalents are current assets

Cash on hand 18,916 17,892 18,937 17,877

Financial institution balance – at call 92,390 34,774 73,930 28,153

Financial institution balance – short term 123,132 107,553 123,132 107,553

234,438 160,219 215,999 153,583

Short term cash and cash equivalents are those where original maturity is less than 90 days

43





2014 2013 2014 2013

$'000 $'000 $'000 $'000

8. INVESTMENT SECURITIES

Financial institutions balance 548,639 541,076 550,048 542,704

Investments in other securities 27,803 13,759 459,803 20,759

576,442 554,835 1,009,851 563,463

Investments with financial institutions are those where original maturity is greater than 90 days

Investment securities expected to mature within 12 months 142,020 195,554 141,312 195,098

Investment securities expected to mature after 12 months 434,422 359,281 868,539 368,365

576,442 554,835 1,009,851 563,463

9. OTHER RECEIVABLES

All Other Receivables are current assets

Accrued income 224 253 224 253

Prepayments 692 832 678 813

Other receivables – 104 1,854 813

916 1,189 2,756 1,879

10. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instrument asset Interest rate swap contracts – cash flow hedges 3,546 4,438 3,546 4,438

3,546 4,438 3,546 4,438

Derivatives expected to mature within 12 months 693 155 693 155

Derivatives expected to mature after 12 months 2,853 4,283 2,853 4,283

3,546 4,438 3,546 4,438

Derivative financial instrument liability Interest rate swap contracts – cash flow hedges

130 379 130 379

130 379 130 379

Derivatives expected to mature within 12 months 130 196 130 196

Derivatives expected to mature after 12 months – 183 – 183

130 379 130 379

Cash flow hedge ineffectiveness – gain/(loss) – – – –

44





2014 2013 2014 2013

$'000 $'000 $'000 $'000

11. LOANS AND ADVANCES

Overdrafts 130,595 144,606 130,595 145,981

Term loans 4,099,457 4,050,195 4,099,457 4,050,195

Gross loans and advances 4,230,052 4,194,801 4,230,052 4,196,176

Allowance for specific impairment losses (1,031) (959) (1,031) (2,334)

Net loan and advances 4,229,021 4,193,842 4,229,021 4,193,842

Loans and advances expected to be paid within 12 months 1,367,403 1,068,919 1,367,403 1,069,270

Loans and advances expected to be paid after 12 months 2,861,618 3,124,923 2,861,618 3,124,572

4,229,021 4,193,842 4,229,021 4,193,842

A) Allowance For Specific Impairment Losses

Movement in the allowance for specific impairment losses are as follows

Opening balance 959 1,828 2,334 1,828

Bad debt write-off (263) (712) (1,235) (712)

New/(Released) provision 335 (157) (68) 1,218

1,031 959 1,031 2,334

B) Impaired Loans

Impaired loans with specific provision for impairment 2,976 2,633 2,976 4,008

Less provision (1,031) (959) (1,031) (2,334)

1,945 1,674 1,945 1,674

Impaired loans will be either assessed individually or grouped together with similar credit risk assets and assessed collectively for impairment. Individual assessment will usually be performed where the risk exposure is either significant by amount or of a particular product type. The consolidated entity in assessing individual specific impairment will consider the counter parties willingness to meet their contractual arrangements, the counter parties economic circumstances and their future financial prospects and the security provided.

Security for housing loans is in the form of registered mortgage over residential property real estate. Security for commercial loans is in the form of registered mortgage over residential and/or commercial real estate. Security for personal loans is in the form of either registered mortgage over real estate, mortgage over other property or charges against funds held on deposit.

45





2014 2013 2014 2013

$'000 $'000 $'000 $'000

C) Assets Acquired Through The Enforcement Of Security

Net fair value of assets acquired through the enforcement of security still held at the end of the financial year

Real estate 265 235 265 235

Other assets – 8 – 8

265 243 265 243

Assets acquired during the year are disposed of as soon as practically possible with the proceeds used to reduce the outstanding indebtedness. Any residual proceeds after the debt is repaid are returned to the borrower.

There were no assets through the enforcement of security during the year which were used by the Society or the consolidated entity in its operations.

D) Past Due Loans

Analysis of loans that have not met their contractual repayment schedule but are not impaired

Less than 3 months past due 84,279 88,267 84,279 88,267

3 months to less than 6 months past due 3,669 1,284 3,669 1,284

6 months or more past due 1,565 2,500 1,565 2,500

89,513 92,051 89,513 92,051

Security for housing loans is in the form of registered mortgage over residential property real estate. Security for commercial loans is in the form of registered mortgage over residential and/or commercial real estate. Security for personal loans is in the form of either registered mortgage over real estate, mortgage over other property or charges against funds held on deposit.

12. INVENTORIES

All Inventories are current assets

Land – 1,535 – –

13. OTHER FINANCIAL ASSETS

All other financial assets are non-current assets

Equity financial assets 3,547 3,255 3,547 3,255

Controlled entities – – 603 2,271

3,547 3,255 4,150 5,526

46




CONTROLLED ENTITIES

Name of EntityClass of Share

Investment Holding

Nature of Business2014 20132014 $’000

2013 $’000

Parkwood Unit Trust Units – 63% – 1,669 Land Development

Greater Investment Services Pty Ltd Ordinary 100% 100% 603 603 Management Services

Greater Property Holdings Number 1 Pty Ltd Ordinary 100% 100% – –Property Development and Investment

Greater Charitable Foundation Trust N/A 100% 100% – – Charitable Foundation

Greater Charitable Foundation Pty Ltd Ordinary 100% 100% – – Trustee

GBS Receivables Trust No 3 N/A N/A N/A – –Mortgage securitisation special purpose entity (wound up June 2014)

GBS Receivables Trust No 4 N/A N/A N/A – –Mortgage securitisation special purpose entity

GBS Receivables Repo Trust N/A N/A N/A – –Mortgage securitisation special purpose entity (created September 2013)

Waratah GBS Mortgages Trust No 1 N/A N/A N/A – –Mortgage securitisation special purpose entity

Notes:

a) All the above entities are incorporated in Australia.

b) The Parkwood Unit Trust was wound up in June 2014. Previously, the Trust owned 100% of the issued units in Ashtonfield Unit Trust.

c) The Society has control of GBS Receivables Trust No 4, GBS Receivables Repo Trust (created September 2013) and Waratah GBS Mortgages Trust No 1 as the Society is exposed to, and has the ability to affect, the variable returns associated with these special purpose entities. GBS Receivables Trust No 3 was wound up during the year.

d) The GBS Receivables Repo Trust (created September 2013) is an internal securitisation and the Society holds all of the notes on issue.

e) The investment holding in Greater Property Holdings Number 1 Pty Ltd was impaired as at 30 June 2014 and written down to NIL (2013 NIL).

47





2014 2013 2014 2013

$'000 $'000 $'000 $'000

14. DEFERRED TAX ASSETS

Net Deferred tax assets 3,279 3,509 3,316 3,650

A) Composition Of Net Deferred Tax Assets

Deferred tax assets

The balance comprises temporary differences attributable to

Doubtful debts 309 288 309 700

Impaired assets – – 89 89

Employee benefits 2,942 3,558 2,942 3,558

Loan origination costs and fair value adjustments 11 124 11 124

Property, plant and equipment 1,796 1,828 1,796 1,828

Investment securities – 96 – 96

Accruals 1,024 467 972 107

6,082 6,361 6,119 6,502

Amounts recognised directly in equity

Fair value assets through other comprehensive income – – – –

6,082 6,361 6,119 6,502

Deferred tax liabilities

Less set off of deferred tax liabilities

The balance comprises temporary differences attributable to

Prepayments (18) (46) (18) (46)

Property, plant and equipment (812) (778) (812) (778)

Investment securities (40) – (40) –

Derivatives (79) – (79) –

Loan origination costs (60) (145) (60) (145)

(1,009) (969) (1,009) (969)

Amounts recognised directly in equity

Property revaluation surplus reserve (189) (95) (189) (95)

Available for sale investments (680) (592) (680) (592)

Fair value assets through other comprehensive income (925) (1,196) (925) (1,196)

(1,794) (1,883) (1,794) (1,883)

Total set-off amount of deferred tax liabilities (2,803) (2,852) (2,803) (2,852)

48





2014 2013 2014 2013

$'000 $'000 $'000 $'000

B) Movements In Net Deferred Tax AssetsAttributable to deferred tax assets

Opening balance 6,361 7,487 6,502 7,100

Credited/(charged) to the statement of comprehensive income (194) (1,089) (398) (561)

Under/(over) provision in prior year (85) (37) 15 (37)

6,082 6,361 6,119 6,502

Less off-set of deferred tax liabilities

Attributable to deferred tax liabilities

Opening balance 2,852 4,217 2,852 4,217

Charged/(credited) to the statement of comprehensive income (65) (867) (39) (761)

Charged/(credited) to equity 16 (488) (10) (594)

Under/(over) provision in prior year – (10) – (10)

Total set-off amount of deferred tax liabilities 2,803 2,852 2,803 2,852

NET DEFERRED TAX ASSETS 3,279 3,509 3,316 3,650

C) Recovery Of Deferred Tax Assets

Attributable to deferred tax assets

Deferred tax assets to be recovered after more than 12 months 2,801 2,997 2,875 3,107

Deferred tax assets to be recovered within 12 months 3,281 3,364 3,244 3,395

6,082 6,361 6,119 6,502

Attributable to deferred tax liabilities

Deferred tax liabilities to be settled after more than 12 months 1,850 72 1,850 72

Deferred tax liabilities to be settled within 12 months 953 2,780 953 2,780

2,803 2,852 2,803 2,852

NET DEFERRED TAX ASSETS 3,279 3,509 3,316 3,650

49





2014 2013 2014 2013

$'000 $'000 $'000 $'000

15. PROPERTY, PLANT AND EQUIPMENT

All property, plant and equipment are non-current assets

Land and buildings 18,435 18,572 18,435 18,572

Less accumulated depreciation – – – –

18,435 18,572 18,435 18,572

Leasehold improvements 13,341 13,090 13,341 13,090

Less accumulated depreciation (9,265) (8,501) (9,265) (8,501)

4,076 4,589 4,076 4,589

Plant and equipment 18,354 17,861 18,354 17,861

Less accumulated depreciation (13,106) (11,995) (13,106) (11,995)

5,248 5,866 5,248 5,866

PROPERTY, PLANT AND EQUIPMENT 27,759 29,027 27,759 29,027

A) Valuation Of Land And BuildingsThe valuation of land and buildings is on the basis of fair market values based on existing use and are classified as level 3 assets. During the financial year no land and buildings were transferred between categories. In determining fair value the consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Specifically, inputs include observations of the net rental market and current commercial capitalisation rates. An annual assessment is made by the Directors’ to ensure that the carrying values do not differ materially from the fair value. The Directors assessments are supported by independent valuations. Details of the independent valuations are shown below.

June 2014 – the Directors’ valuation considered the independent valuations performed at 30 June 2013 by P Macadam (AAPI), Reg Valuer No. 3784 and H Pawlik (FAPI, CPV), Reg Valuer No. 1192 and B Green (AAPI), Reg Valuer No. 6283

B) Carrying Amounts That Would Have Been Recognised If Land And Buildings Were Stated At Cost

Freehold land and buildings stated on the historical cost basis, would be as follows;

Land and buildings

Cost 20,947 20,977 20,947 20,977

Accumulated depreciation (4,042) (3,640) (4,042) (3,640)

Net book amount 16,905 17,337 16,905 17,337

C) Movement In Land And Buildings

Balance as at start of year 18,572 20,650 18,572 19,532

Additions 71 – 71 –

Disposals (269) – (269) –

Building in course of construction – 27 – –

Revaluation increment/(decrement) recognised in profit and loss 16 (1,708) 106 (626)

Revaluation increment/(decrement) recognised in other comprehensive income

404 7 316 70

Depreciation expense (359) (404) (359) (404)

Balance as at end of year 18,435 18,572 18,435 18,572

50





2014 2013 2014 2013

$'000 $'000 $'000 $'000

D) Movement In Leasehold ImprovementsBalance as at start of year 4,589 4,469 4,589 4,469

Additions 1,029 1,686 1,029 1,686

Disposals (18) (169) (18) (169)

Depreciation expense (1,524) (1,388) (1,524) (1,388)

Transfer to plant and equipment – (9) – (9)


E) Movement In Plant And Equipment


Additions 1,552 1,862 1,552 1,862

Disposals (284) (474) (284) (474)

Depreciation expense (1,886) (2,086) (1,886) (2,086)

Transfer from leasehold improvements – 9 – 9


16. INVESTMENT PROPERTIES

All Investment Properties are non-current assets

Investment properties 4,303 4,301 4,303 4,301

A) Valuation Of Investment PropertiesThe valuation of investment properties is on the basis of fair market values based on existing use and are classified as level 3 assets. During the financial year no investment properties were transferred between categories. In determining fair value the consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. Specifically, inputs include observations of the net rental market and current commercial capitalisation rates. An annual assessment is made by the Directors to ensure that the carrying values do not differ materially from fair value. The Directors assessments are supported by independent valuations. Details of the independent valuations are shown below.

June 2014 – the Directors’ valuation considered the independent valuations performed at 30 June 2013 by P Macadam (AAPI), Reg Valuer No. 3784 and H Pawlik (FAPI, CPV), Reg Valuer No. 1192 and B Green (AAPI), Reg Valuer No. 6283

B) Movement In Investment Properties


Additions – – – –

Revaluation increment/(decrement) recognised in profit and loss 2 (980) 2 (980)


51





2014 2013 2014 2013

$'000 $'000 $'000 $'000

C) Leasing ArrangementsThe investment properties are leased to tenants under short term operating leases with rentals payable monthly. Minimum lease payments receivable on leases of investment properties are as follows.

Minimum lease payments not recognised in the financial statements are receivable as follows

Within one year 107 161 107 161

Later than one year but before five years 158 252 158 252

Balance as at end of year 265 413 265 413

D) Amount Recognised In Profit And Loss For Investment Properties

Rental income 222 317 222 317

Direct operating expenses (6) (6) (6) (6)

216 311 216 311

17. INTANGIBLE ASSETS

All intangible assets are non-current assets

Computer software 5,141 5,019 5,141 5,019

Less accumulated amortisation (3,478) (3,621) (3,478) (3,621)

1,663 1,398 1,663 1,398

A) Movement In Software Balances


Additions 965 639 965 639

Disposals (24) (22) (24) (22)

Amortisation expense (676) (686) (676) (686)


18. PAYABLES AND OTHER LIABILITIES

All payables and other liabilities are expected to be settled within 12 months

Creditors and other accruals 7,552 9,677 7,551 8,976

19. DEPOSITS

Call deposits 2,071,417 1,870,104 2,074,339 1,874,346

Term deposits 2,352,174 2,314,953 2,352,174 2,315,329

4,423,591 4,185,057 4,426,513 4,189,675

52





2014 2013 2014 2013

$'000 $'000 $'000 $'000

20. CURRENT TAX LIABILITIES

All current tax liabilities are expected to be settled within 12 months

Income tax 4,607 3,492 4,607 3,492

Deferred tax liability – 40 – –

4,607 3,532 4,607 3,492

21. OTHER FINANCIAL LIABILITIES

Commercial notes 251,719 391,609 – –

Loans – securitisation special purpose entities – – 669,239 395,084

Loans – other – – – –

251,719 391,609 669,239 395,084

Other financial liabilities expected to be settled within 12 months 63,397 96,267 160,732 95,513

Other financial liabilities expected to be settled after 12 months 188,322 295,342 508,507 299,571

251,719 391,609 669,239 395,084

22. PROVISIONS

Employee benefits 9,808 9,708 9,808 9,708

Other 249 108 249 108

10,057 9,816 10,057 9,816

Provisions expected to be settled within 12 months 4,427 4,400 4,427 4,400

Provisions expected to be settled after 12 months 5,630 5,416 5,630 5,416

10,057 9,816 10,057 9,816

23. RESERVES

Fair value assets through other comprehensive income 2,547 2,342 2,547 2,342

Cash flow hedge reserve 2,602 3,398 2,602 3,398

Credit loss reserve 9,966 9,632 9,966 9,632

Property revaluation surplus reserve 2,873 2,781 441 221

Revaluation on consolidation reserve – 93 – –

Business combination reserve 10,699 10,699 10,699 10,699

Community support reserve 1,364 1,364 1,364 1,364

30,051 30,309 27,619 27,656

53





2014 2013 2014 2013

$'000 $'000 $'000 $'000

MOVEMENT IN RESERVES

A) Fair Value Assets Through Other Comprehensive Income Reserve

Balance at beginning of year 2,342 1,571 2,342 1,571

Revaluation gross 293 1,101 293 1,101

Deferred tax (88) (330) (88) (330)

2,547 2,342 2,547 2,342

The fair value through other comprehensive income reserve relates to equity financial assets designated as fair value through other comprehensive income. Fair value movements on these equity financial assets are held in equity rather than through profit and loss as described in Note 1F.

B) Cash Flow Hedge Reserve


Recognised in equity during the year (642) (2,831) (642) (2,831)

Transferred to profit and loss during the year (495) 288 (495) 288

Deferred tax 341 763 341 763

2,602 3,398 2,602 3,398

The cash flow hedge reserve represents the future value of hedged instruments which have been designated as effective hedges in accordance with hedge accounting as described in Note 1Q (i).

C) Credit Loss Reserve


Transfer (to)/from retained profits 334 1,064 334 1,064

9,966 9,632 9,966 9,632

The credit loss reserve is a requirement of Australian Prudential Regulation Authority Prudential Standards and represents the potential inherent losses in the loans and advances portfolio under a stressed economic environment.

D) Property Revaluation Surplus Reserve

Balance at beginning of year 2,781 2,776 221 172

Transfer (to)/from retained profits (273) – – –

Deferred tax 82 – – –

Revaluation gross 63 (398) 133 (255)

Deferred tax (19) 119 (40) 76

Depreciation transfer gross 342 405 181 325

Deferred tax (103) (121) (54) (97)

2,873 2,781 441 221

The property revaluation surplus reserve is used to record the unrealised increments and decrements on the revaluation of property as described in Note 1J.

54





2014 2013 2014 2013

$'000 $'000 $'000 $'000

E) Revaluation On Consolidation ReserveBalance at beginning of year 93 304 – –

Transfer (to)/from retained profits (93) (211) – –

– 93 – –

The revaluation on consolidation reserve recognises the fair value of unrecognised assets acquired as a result of consolidating a subsidiary.

F) Business Combination Reserve


Transfer (to)/from retained profits – – – –

10,699 10,699 10,699 10,699

The business combination reserve recognises the net assets acquired on merger.

G) Community Support Reserve

Balance at beginning of year 1,364 1,450 1364 1,450

Transfer (to)/from retained profits – (86) – (86)

1,364 1,364 1,364 1,364

The community support reserve has been set aside to provide services and facilities in the communities in which the Greater Building Society operates.

24. RETAINED PROFITS

Retained profits 357,207 326,151 356,648 326,029

Movement in retained profits


Net profit in the year 31,106 27,719 30,953 26,957

Transfer (to)/from credit loss reserve (334) (1,065) (334) (1,064)

Transfer (to)/from consolidation reserve 93 211 – –

Transfer (to)/from property revaluation surplus reserve 191 – – –

Transfer (to)/from community contribution reserve – 86 – 86

Transfer to/(from) deferred tax assets – (267) – –

357,207 326,151 356,648 326,029

55





2014 2013 2014 2013

$'000 $'000 $'000 $'000

25. NON-CONTROLLING INTEREST

Reconciliation of non-controlling interest in controlled entities

Balance at beginning of year 1,018 1,092 – –

Share of operating profit 289 882 – –

Share of net assets of acquired entity (34) (191) – –

Distribution paid or payable (299) (765) – –

Return of capital (974) – – –

– 1,018 –

26. RELATED PARTIES

A) Controlled Entities

Information in respect of controlled entities is disclosed in Note 13.

B) Key Management Personnel

Key management personnel are the Directors and those Senior Executives that are responsible for the planning, directing and controlling of the activities of the Society and consolidated entity. Details of changes to the Directors are shown in the Directors’ Report.


2014 2013 2014 2013

$ $ $ $

i) Compensation paid to key management personnel

Short term employee benefits 3,757,352 3,509,669 3,733,352 3,485,669

Post-employment benefits 355,167 306,386 355,167 306,386

Other long term benefits 263,964 330,293 263,964 330,293

Termination benefits – – – –

4,376,483 4,146,348 4,352,483 4,122,348

ii) Loans to key management personnel (including related parties)

Loans outstanding at beginning of year 2,554,555 7,283,330 2,554,555 7,283,330

Net balances from changes in personnel – – – –

Advances made during the year 435,625 1,164,854 435,625 1,164,854

Interest and fees charged 117,072 350,514 117,072 350,514

Repayments made during the year (727,500) (6,244,143) (727,500) (6,244,143)

Loans outstanding at end of year 2,379,752 2,554,555 2,379,752 2,554,555

Loans granted at commercial terms are provided at the same interest rate and terms available to members generally. Security is taken in the majority of cases in accordance with the Society’s normal credit risk policy.

Loans granted at non-commercial terms relate to loans provided to Senior Executives in accordance with the concessional staff loan policy. Under this policy, staff are eligible for loans at concessional rates of interest dependent upon their length of employment, their seniority and their salary level.

56





2014 2013 2014 2013

$ $ $ $

iii) Deposits made by key management personnel (including related parties)

Deposits outstanding at the beginning of year 2,464,002 2,544,399 2,464,002 2,544,399

Net balances from changes in personnel – – – –

Interest paid 98,444 120,765 98,444 120,765

Net movement in deposits during the year 612,301 (201,162) 612,301 (201,162)

Deposits outstanding at the end of the year 3,174,747 2,464,002 3,174,747 2,464,002

The Society has entered into an Enterprise Agreement with its staff. Under this agreement the Society provides each staff member a deposit account upon which no transaction fees are payable. These amounts are included in the above disclosure.

C) Transactions With Other Related PartiesThe Society has related party transactions with the following entities:

i) Greater Rollover and Allocated Pension Fund invests funds with the Society. At balance date these deposits totalled $15,179,000 (2013 $18,652,000). The Society acted as Administrator to the Trust until April 2013. The Society provided administration services to the entity for $NIL (2013 $NIL) consideration, these services ceased at April 2013.

ii) Greater Investment Services Pty Ltd invests funds with the Society. At balance date these deposits totalled $2,067,000 (2013 $1,922,000). In support of the entities AFS licence the Society has provided a support agreement including a financial support commitment to the entity. The entity acts as the manager for GBS Receivables Trust No 3 (Dissolved, June 2014), GBS Receivables Trust No 4, GBS Receivables Repo Trust (Created, September 2013) and Waratah GBS Mortgage Trust No 1. The Society provides administration services to the entity for $NIL (2013 $NIL) consideration.

iii) Parkwood Unit Trust was wound up in June 2014. Previous to this it invested funds with the Society. At balance date these deposits totalled $NIL (2013 $1,611,000). Parkwood Unit Trust had a secured revolving credit loan facility with the Society. At balance date the loan facility was for a total facility limit of $NIL (2013 $539,500) with a balance outstanding of $NIL (2013 $NIL). The Trust also had unsecured loans on an interest free basis. At balance date the balance outstanding is $NIL (2013 $NIL). The Trust carried out activities of land development within the Hunter Valley Region. The Society provided administration services to the Trust for $NIL (2013 $NIL) consideration.

iv) The Society provides custodian, basis swap, interest rate swap and redraw commitment facilities to GBS Receivables Trust No 3 (Dissolved, June 2014), GBS Receivables Trust No 4 and GBS Receivables Repo Trust (Created, September 2013) as well as acting as servicer of the securitised mortgages. These trusts are special purpose entities that allow the Society to access funding by securitising mortgage loans. The revenues and fees in relation to these services are part of the funding arrangements, accordingly, they are included in the effective interest rate of the loan facility. The Society holds units in and invests funds with GBS Receivables Trust No 4. At balance date the units had a value of $7,000,000 (2013 $7,000,000) and the deposits totalled $2,117,382 (2013 $2,083,950). The Society also holds all the units with GBS Receivables Repo Trust. At balance date the units had a value of $425,000,000 (2013 $NIL).

v) Waratah GBS Mortgage Trust No 1 during the year accepted the sale of mortgages from the Society. The Society provides custodian and interest rate swap facilities to the Trust as well as acting as servicer of the securitised mortgages. The trust is a special purpose entity that allows the Society to access funding by securitising mortgage loans. The revenues and fees in relation to these services are part of the funding arrangements, accordingly, they are included in the effective interest rate of the loan facility.

57




vi) Property Holdings Number 1 Pty Ltd invests funds with the Society. At balance date these deposits totalled $NIL (2013 $NIL). Property Holdings Number 1 Pty Ltd had a secured revolving credit loan facility with the Society that was closed December 2013. At balance date the loan facility was for a total facility limit of $NIL (2013 $1,500,000) with a balance outstanding of $NIL (2013 $NIL). An impairment loss was previously recognised on the loan balance to the value of $NIL (2013 $1,375,000). The Entity also had an unsecured loan on an interest free basis. At balance date the loan outstanding is $NIL (2013 $NIL). The Society provided administration services to the entity for $NIL (2013 $NIL) consideration.

vii) Greater Charitable Foundation invests funds with the Society. At balance date these deposits totalled $875,000 (2013 $1,099,000). The Trusts principal activities are the provision of distributions to other entities or persons to advance or promote a charitable purpose. During the year the Society donated $1,700,000 (2013 $1,200,000) to the foundation and provided administration services for $306,000 (2013 $217,000) consideration.


2014$

2013$

2014$

2013$

27. REMUNERATION OF AUDITORS

PricewaterhouseCoopers Australia

Income received or due and receivable by the auditors for

Auditing services for the financial statements of any entity within the consolidated entity

265,145 296,597 212,485 239,667

Auditing services for prudential regulation reporting 55,616 108,403 55,616 108,403

Other audit related work 27,070 35,980 19,570 35,980

Taxation advisory services 117,504 155,435 111,504 152,435

General advisory services 16,500 3,286 16,500 3,286

481,835 599,701 415,675 539,771

28. COMMITMENTS

The Group leases various ATM locations and Branch offices under non-cancellable operating leases expiring within two to seven years. The leases have varying terms, escalation clauses and renewal rights.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows.

i) Lease commitments

Within one year 7,584 6,871 7,584 6,871

Later than one year but not later than five years 11,620 12,509 11,620 12,509

Later than five years 20 32 20 32

19,224 19,412 19,224 19,412

29. SEGMENTAL REPORTING

The consolidated entity’s operations are confined to one business segment being the provision of financial services and products to members in the form of taking deposits and providing financial accommodation as prescribed by the constitution.

58





2014 2013 2014 2013

$'000 $'000 $'000 $'000

30. RECONCILIATION OF NET CASH

Provided By Operating Activities To Operating Profit After Income Tax

Operating profit after income tax 31,361 28,410 30,953 26,957

Depreciation and amortisation 4,445 4,563 4,445 4,564

Impaired losses/(gains) on loans 335 (156) (68) 1,219

Profit on sale of investments (2,215) (497) (2,215) (497)

Loss on sale of investments 10 – 10 –

Profit on sale property, plant and equipment (197) (41) (197) (41)

Loss on sale of property, plant and equipment 84 353 84 353

Dividend and distributions received from investing activities (17) (12) (521) (1,302)

Fair value movement of land and buildings (16) 386 (106) 449

Fair value movement of investment properties (2) 2,301 (2) 1,156

Fair value movement of other financial assets – – – 296

Investment in subsidiary via tax consolidation – – – 115

Income tax attributed directly to equity – – – (19)

Inventory revaluation movement on sales – 353 – –

Increase/(decrease) in accrued interest payable (3,433) (6,424) (4,382) (5,143)

Decrease/(increase) in accrued interest receivable 425 (863) 426 (868)

Decrease/(increase) in other receivables 29 149 29 149

Decrease/(increase) in deferred tax assets 693 857 384 597

Decrease/(increase) in sundry debtors 299 (176) 482 (340)

Decrease/(increase) in inventory 1,535 2,013 – –

Decrease/(increase) in derivatives – 307 – 307

Increase/(decrease) in income taxes payable 1,115 1,923 1,115 1,923

Increase/(decrease) in deferred taxes payable 163 (1,037) 203 (931)

Increase/(decrease) in creditors and accrued expenses 1,101 119 (1,195) 176

Increase/(decrease) in other provisions 241 (1,566) 241 (1,566)

Decrease/(increase) in loans and advances (43,548) (80,499) (35,404) (81,044)

Decrease/(increase) in investment securities (20,091) (128,930) (11,161) (129,105)

Increase/(decrease) in deposits 238,973 203,137 237,280 205,291

NET CASH PROVIDED BY OPERATING ACTIVITIES 211,290 24,670 220,401 22,696

59





2014 2013 2014 2013

$'000 $'000 $'000 $'000

31. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

A) Financial Assets And Liabilities

The carrying amount of the following categories of financial assets and liabilities are

Financial assets

Financial assets measured at amortised cost 5,041,892 4,911,076 5,458,750 4,915,132

Fair value through other comprehensive income 3,547 3,255 4,150 5,526

Financial assets that are designated hedging instruments 3,546 4,438 3,546 4,438

5,048,985 4,918,769 5,466,446 4,925,097

Financial liabilities

Financial liabilities that are designated hedging instruments 130 379 130 379

Financial liabilities measured at amortised cost 4,682,906 4,586,375 5,103,396 4,593,767

4,683,036 4,586,754 5,103,526 4,594,146

The consolidated entity early adopted AASB 9 Financial Instruments and AASB2009-11 Amendments to Australian Accounting Standards arising from AASB 9 from 1 July 2010. This resulted in a re-classification of financial instruments in 2012. Further information is provided in Note 1A (ii) and Note 1F.

B) Risk Management Framework

The consolidated entity’s activities are principally related to the use of financial instruments. The consolidated entity predominantly accepts deposits from members at both fixed and floating rates for various periods and lends to retail borrowers at both fixed and floating rates with a range of credit standings. Surplus funding is invested in high quality liquid or investment securities. Accordingly, the consolidated entity’s activities are exposed to the following key financial risks: market risk; credit risk; and liquidity risk.

Risks are monitored and managed using an enterprise wide risk management system. This system records all the identified risks, the risk controls and risk mitigants used to manage the risks and an assessment of each risk. These risks are formally reviewed by management and presented to the Audit & Risk Management Committee on a quarterly basis.

Risk management is carried out by the Executive Committee, comprising of Senior Management Executives, under policies approved by the Board of Directors (the Board). The Board provides written principles for the overall risk management, as well as written policies covering specific areas as required, to meet minimum Prudential Standards requirements issued by the Australian Prudential Regulation Authority (APRA).

These Risk Management Policies identify the consolidated entity’s policies and procedures, processes and controls that comprise its risk management and control systems. These systems address key material risks, financial and non-financial, likely to be faced by the consolidated entity. The policies and procedures are reviewed annually by Senior Management and the Board to take account of changing circumstances. In addition, the Chief Executive Officer annually certifies to APRA that Senior Management and the Board have identified key risks facing the consolidated entity. The Board has established systems to monitor those risks, including setting and requiring adherence to a series of prudential limits; adequate timely reporting processes; and compliance reporting demonstrating that these risk management systems are operating effectively and are adequate having regard to the risks they are designed to control.

60




C) Market RiskThe predominant market risk the consolidated entity is exposed to is interest rate risk. The consolidated entity is not exposed to foreign exchange or other price risk.

The consolidated entity’s interest rate risk arises from the net difference in cash flows from long term fixed rate assets or liabilities which are funded by or invested in floating rate assets or liabilities. Long term fixed rate assets include loans advanced to members and other investment securities, while long term fixed rate liabilities includes deposits raised from members and other wholesale funding arrangements. This exposure creates an interest rate risk because the net balances and cash flows generated from these assets and liabilities are dependent upon movements in interest rates.

The consolidated entity has established policy limits for the level of interest rate risk. Current policy measures interest rate risk in terms of the net present value of a basis point (PVBP) movement in interest rates. PVBP measures the net effect on the fair value of financial instruments for every one basis point (0.01%) change in the interest rate yield curve. The policy has limits for the amount of movement in the fair value of net assets or liabilities exposed to a hypothetical basis point variance before the risk requires active management. The limits are placed for specific time periods together with an overall portfolio limit. The risk is managed by, or a combination of, changes to product pricing or product terms to change consumer product purchasing preferences, by the use of interest rate swaps or other derivative instruments, or by the maturity placement of investment securities. When interest rate swaps are used for the above purpose, the consolidated entity may use hedge accounting.

For the PVBP model the cash flows from financial assets and liabilities are allocated into time buckets based on contractual repricing except for ‘at call’ transactional accounts. At call transactional accounts are liabilities raised from members and historically have limited sensitivity to movements in interest rates. The model allocates the portion of the transactional account balances that is sensitive to movements in interest rates into the less than three months’ time bucket while the remaining portion of transaction account balances that are not sensitive to interest rate movements are evenly allocated into each time bucket over a five year time horizon. The yield curve used in the PVBP model is based off the relevant published interbank interest rates.

The following tables set out the consolidated entity’s and Society’s exposure to interest rate risk, measured by the present value of a basis point change in the yield curve.

PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2014 – CONSOLIDATED

FINANCIAL INSTRUMENTSLESS THAN 3

MONTHS3 TO 12

MONTHS1 TO 3 YEARS

3 TO 5 YEARS

OVER 5 YEARS

TOTAL

Net Exposure ($’s) 7,294 11,532 -19,010 5,906 -1,254 4,468

PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2014 – SOCIETY


MONTHS3 TO 12

MONTHS1 TO 3 YEARS

3 TO 5 YEARS

OVER 5 YEARS

TOTAL

Net Exposure ($’s) 7,299 11,550 -18,860 6,185 -1,254 4,920

PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2013 – CONSOLIDATED


MONTHS3 TO 12

MONTHS1 TO 3 YEARS

3 TO 5 YEARS

OVER 5 YEARS

TOTAL

Net Exposure ($’s) 9,022 4,608 -27,623 9,146 -1,610 -6,457

PRESENT VALUE OF BASIS POINT (PVBP) PROFILE 2013 – SOCIETY


MONTHS3 TO 12

MONTHS1 TO 3 YEARS

3 TO 5 YEARS

OVER 5 YEARS

TOTAL

Net Exposure ($’s) 9,022 4,660 -27,355 9,610 -1,610 -5,673

61




D) Credit Risk

The consolidated entity’s credit risk predominantly arises from the risk that counter parties will not meet their contractual obligations with the consolidated entity. The main exposure to credit risk for the consolidated entity is either loans provided to members or investments made for prudential liquidity needs.

Credit risk exposure for loans is minimised by prudent assessment of each individual loan applicant, obtaining security for the majority of loans made and where credit risk warrants undertaking credit insurance.

The credit risk policy assesses the credit worthiness of the applicant considering not only the ability to service the loan but also other factors such as length and stability of employment, asset accumulation and stability of residency. To facilitate this, a credit risk grading system is used which scores or grades loan applicants based on the above criteria. Security still remains an important consideration in assessing the granting of credit. The pricing offered to loan applicants is dependent upon a combination of the loan applicant’s credit risk grade, the security provided and the reason or purpose for the credit request.

The consolidated entity minimises concentration of credit risk in relation to loans by dealing with a relatively large number of individual members of the consolidated entity. Exposure to credit risk is limited to the market area that the consolidated entity participates in. The consolidated entity is active in the retail finance markets of Newcastle, Hunter Valley, Central Coast, Sydney, South Coast, Central West and North Coast of New South Wales and South East Queensland. The Society imposes portfolio limits for each loan product and for each credit risk grade. These portfolio limits seek to limit the consolidated entities exposure to certain products which represent a specific credit exposure and also to ensure the portfolio is not concentrated in a specific category of credit risk grade loan applicants.

Security for housing loans is in the form of registered mortgage over residential property real estate. Security for commercial loans is in the form of registered mortgage over residential and/or commercial real estate. Security for personal loans is in the form of either registered mortgage over real estate, mortgage over other property or charges against funds held on deposit. Where appropriate, guarantees are also sought from related parties to a loan. No security is taken for loans via credit cards and some personal loans. Credit risk also arises in relation to financial guarantees given to certain parties. Such guarantees are secured by a registered mortgage over real estate property or by a charge over funds held on deposit.

The Society has entered into a number of residential mortgage backed securitisation arrangements. Loans are equitability assigned to special purpose vehicles. These special purpose vehicles issue commercial notes to note holders secured by the cash flows arising from the loans. A substantial component of the credit risk has been transferred to the unit holders. The Society still retains the market risk, operational risk and some credit risk from these loans. Due to the retention of substantially all the risks and rewards of these loans, the Society and the consolidated entity continue to recognise these assets as ‘loans and advances’.

The following sets out the carrying value of loans and the associated liabilities. The fair value of the transferred assets and associated liabilities approximates their carrying value.


2014 2013 2014 2013

$'000 $'000 $'000 $'000

Carrying amount of transferred assets

Loans and advances 260,496 419,991 260,496 419,991

Carrying amount of associated liabilities to the transferred assets

Commercial notes 261,909 416,516 261,909 423,516

62





2014 2013 2014 2013

$'000 $'000 $'000 $'000

Financial assets that are neither past due nor impaired

Cash on hand 18,916 17,892 18,937 17,877

Cash & cash equivalents – by external credit rating (S&P)

- A1+/AAA 51,925 25,740 33,465 19,119

- A1/AA+/AA/AA- 45,454 9,034 45,454 9,034

- A2/A+/A/A- 118,143 107,554 118,143 107,553

- A3 – – – –

- Unrated – – – –

Investment securities – by external credit rating (S&P)

- A1+/AAA 27,803 43,978 461,921 53,062

- A1/AA+/AA/AA- 262,897 280,044 262,189 279,588

- A2/A+/A/A- 235,548 208,480 235,548 208,480

- BBB+ 30,237 – 30,237 –

- Unrated 19,957 22,333 19,957 22,333

Other receivables (unsecured) 916 1,189 2,756 1,879

Derivative financial instruments

- A1+/AAA 3,546 4,438 3,546 4,438

Loans and advances

- mortgage over residential property security 3,809,891 3,584,937 3,809,891 3,584,937

- mortgage over other property 6,784 29,062 6,784 29,062

- other security 38,896 52,672 38,896 52,672

- no security 24,438 15,565 24,438 15,565

Other financial assets (unsecured) 3,547 3,255 4,150 5,527

4,698,898 4,408,507 5,116,312 4,413,460

Credit risk exposure for treasury transactions (i.e. investment securities, cash and derivative transactions) to counter parties is minimised by limiting transactions to pre-approved financial institutions. The consolidated entity also has policies that limit the amount of credit exposure to individual counter parties and limit portfolio exposures based on external credit rating agency bands.

The maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the carrying amount of these indicated in the balance sheet except for loans and advances. For loans and advances the maximum credit risk exposure for the consolidated entity is $3,972M (2013 $3,778M) and for the Society is $3,972M (2013 $3,778M). For loans that are securitised, credit risk is transferred to a special purpose vehicle (refer Note 1B). This maximum exposure does not take into account the value of any security.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to the external credit rating (if available) or the security provided. The following table provides an analysis of credit risk for financial assets that are neither past due or impaired by either external credit rating or type of security.

63




Effect of collateral – all loans where the consolidated entity bears the credit risk

For loans where the consolidated entity bears the credit risk, the carrying value of the loans and the degree of credit risk involved is shown in the table below. Loans classed as ‘Fully Secured’ are residentially secured loans with either full mortgage insurance or with a loan to valuation ratio of 80% or less. Loans classed as secured are residentially secured loans with either partial or no mortgage insurance or a loan to valuation ratio of more than 80% plus commercial loans secured by non-residential property plus secured consumer loans and secured guarantees. Loans with no security are unsecured consumer loans or credit cards.

ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2014 – CONSOLIDATED

LOANSFULLY SECURED

$’000SECURED

$’000NO SECURITY

$’000TOTAL $’000

Mortgage Over Residential Property 3,669,459 213,809 – 3,883,268

Mortgage Over Other Property – 7,656 – 7,656

Other Security – 40,124 – 40,124

No Security – – 41,450 41,450

TOTAL 3,669,459 261,589 41,450 3,972,498

ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2013 – CONSOLIDATED

LOANSFULLY SECURED

$’000SECURED

$’000NO SECURITY

$’000TOTAL $’000




No Security – – 19,646 19,646

TOTAL 3,575,102 183,569 19,646 3,778,317

ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2014 – SOCIETY

LOANSFULLY SECURED

$’000SECURED

$’000NO SECURITY

$’000TOTAL $’000




No Security – – 41,450 41,450

TOTAL 3,669,459 261,589 41,450 3,972,498

64




ALL LOANS WHERE ENTITY BEARS THE CREDIT RISK 2013 – SOCIETY

LOANSFULLY SECURED

$’000SECURED

$’000NO SECURITY

$’000TOTAL $’000




No Security – – 19,646 19,646

TOTAL 3,575,102 183,569 19,646 3,778,317

LOANS – PAST DUE BUT NOT IMPAIRED 2014 – CONSOLIDATED

LOANSLESS THAN 3 MONTHS

$’0003 TO 6 MONTHS

$’0006 MONTHS OR MORE

$’000TOTAL $’000

Mortgage Over Residential Property 52,239 14,256 4,699 71,194

Mortgage Over Other Property 678 128 66 872

Other Security 988 131 51 1,170

No Security 16,277 – – 16,277

TOTAL 70,182 14,515 4,816 89,513

LOANS – PAST DUE BUT NOT IMPAIRED 2013 – CONSOLIDATED




$’000TOTAL $’000


Mortgage Over Other Property 134 – – 134

Other Security 225 – – 225

No Security 2,409 – – 2,409

TOTAL 88,289 1,284 2,500 92,073

LOANS – PAST DUE BUT NOT IMPAIRED 2014 – SOCIETY




$’000TOTAL $’000


Mortgage Over Other Property 678 128 66 872

Other Security 988 131 51 1,170

No Security 16,277 – – 16,277

TOTAL 70,182 14,515 4,816 89,513

Loans that are past due but not impaired

An age analysis of loans that are past due but not impaired is set out in the table below. A loan is considered to be past due when any payment under contractual terms has been missed. The amount included is the carrying value, rather than the overdue amount.

65




EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2014 – CONSOLIDATED

LOANSFULLY SECURED

$’000PARTIALLY

SECURED $’000UNSECURED

$’000TOTAL $’000

Mortgage Over Residential Property 66,306 4,888 – 71,194

Mortgage Over Other Property 688 184 – 872

Other Security 972 198 – 1,170

No Security – – 16,277 16,277

TOTAL 67,966 5,270 16,277 89,513

EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2013 – CONSOLIDATED

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000


Mortgage Over Other Property – 134 – 134

Other Security – 225 – 225

No Security – – 2,409 2,409

TOTAL 73,666 15,998 2,409 92,073

The coverage provided by collateral held in support of loans that are past due but not impaired is shown in the table below. The estimated realisable value of collateral held is based on a combination of formal valuations currently held in respect of such collateral and management’s assessment of the estimated realisable value of collateral held given its experience with similar types of loans in similar situations and the circumstances peculiar to the subject collateral.

A loan is deemed ‘Fully Secured’ when it is residentially secured with either full mortgage insurance or with a loan to valuation ratio of 80% or less. ‘Partially Secured’ includes other residentially secured loans not considered ‘Fully Secured’ and other loans that have a non-residential property security. A loan is classed as ‘Unsecured’ if there is no security or if the security value is less than the loan carrying amount.

LOANS – PAST DUE BUT NOT IMPAIRED 2013 – SOCIETY




$’000TOTAL $’000


Mortgage Over Other Property 134 – – 134

Other Security 225 – – 225

No Security 2,409 – – 2,409

TOTAL 88,289 1,284 2,500 92,073

66




EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2014 – SOCIETY

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000


Mortgage Over Other Property 688 184 – 872

Other Security 972 198 – 1,170

No Security – – 16,277 16,277

TOTAL 67,966 5,270 16,277 89,513

EFFECT OF COLLATERAL – PAST DUE BUT NOT IMPAIRED 2013 – SOCIETY

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000


Mortgage Over Other Property – 134 – 134


No Security – – 2,409 2,409

TOTAL 73,666 15,998 2,409 92,073

Loans that are impaired

The following table shows the gross amount of impaired loans, along with the provision for impairment and assessment of the coverage provided by collateral held in support of impaired loans. The classification of a loan as ‘Fully Secured’, ‘Partially Secured’ and ‘Unsecured’ is on the same basis as the loans past due but not impaired.

EFFECT OF COLLATERAL – IMPAIRED LOANS 2014 – CONSOLIDATED

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000

Mortgage Over Residential Property – 2,183 – 2,183

Mortgage Over Other Property – – – –


No Security – – 735 735

Total – 2,241 735 2,976

Impairment Provision – (346) (685) (1,031)

Carrying Amount – 1,895 50 1,945

67




EFFECT OF COLLATERAL – IMPAIRED LOANS 2013 – CONSOLIDATED

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000

Mortgage Over Residential Property – – – –

Mortgage Over Other Property – 1,849 433 2,282



Total – 1,903 730 2,633

Impairment Provision – (332) (627) (959)


EFFECT OF COLLATERAL – IMPAIRED LOANS 2014 – SOCIETY

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000

Mortgage Over Residential Property – 2,183 – 2,183

Mortgage Over Other Property – – – –



Total – 2,241 735 2,976

Impairment Provision – (346) (685) (1,031)


EFFECT OF COLLATERAL – IMPAIRED LOANS 2013 – SOCIETY

LOANSFULLY SECURED

$’000PARTIALLY


$’000TOTAL $’000

Mortgage Over Residential Property – – – –

Mortgage Over Other Property – 1,849 433 2,282


No Security – – 1,672 1,672

Total – 1,903 2,105 4,008

Impairment Provision – (332) (2,002) (2,334)


68




E) Liquidity Risk

The consolidated entity’s liquidity risk arises from the risk that the consolidated entity will encounter difficulties in financing its obligations associated with financial liabilities.

The consolidated entity manages liquidity risk by maintaining sufficient cash and highly marketable securities to not only respond to expected cash flow events but also to provide for a range of unexpected cash flow events. The consolidated entity has established policy limits around the minimum level of liquidity and the quality of liquid assets that it holds for liquidity management purposes.

The following tables show the contractual maturity of financial liabilities.

FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2014 – CONSOLIDATED ENTITY

FINANCIAL LIABILITIESLESS THAN 3 MONTHS

$’000

3 TO 12 MONTHS

$’000

1 TO 3 YEARS $’000

3 TO 5 YEARS $’000

OVER 5 YEARS $’000

TOTAL $’000

Payables and other accruals 7,552 – – – – 7,552

Deposits 3,425,553 747,003 222,865 28,170 – 4,423,591

Derivatives 93 37 – – – 130

Other financial liabilities 2,410 47,467 86,901 49,472 65,469 251,719

TOTAL 3,435,608 794,507 309,766 77,642 65,469 4,682,992

Unrecognised loan commitments 40,466 – – – – 40,466

FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2013 – CONSOLIDATED ENTITY


$’000

3 TO 12 MONTHS

$’000

1 TO 3 YEARS $’000

3 TO 5 YEARS $’000


TOTAL $’000


Deposits 3,317,721 641,247 192,647 33,443 – 4,185,058

Derivatives 120 124 94 41 – 379


TOTAL 3,335,394 866,685 252,368 70,510 61,766 4,586,723


69




FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2014 – SOCIETY


$’000

3 TO 12 MONTHS

$’000

1 TO 3 YEARS $’000

3 TO 5 YEARS $’000


TOTAL $’000


Deposits 3,428,475 747,003 222,865 28,170 – 4,426,513

Derivatives 93 37 – – – 130


TOTAL 3,471,064 865,228 441,124 154,094 171,923 5,103,433


FINANCIAL LIABILITIES CONTRACTUAL MATURITY PROFILE 2013 – SOCIETY


$’000

3 TO 12 MONTHS

$’000

1 TO 3 YEARS $’000

3 TO 5 YEARS $’000


TOTAL $’000


Deposits 3,322,339 641,247 192,647 33,443 – 4,189,676

Derivatives 120 124 94 41 – 379


TOTAL 3,342,786 866,685 252,368 70,510 61,766 4,594,115


70




F) Fair Value Measurements

The following tables present the consolidated and the Society’s assets and liabilities measured and recognised at fair value as at the reporting date.

FINANCIAL ASSETS AND LIABILITIES – CONSOLIDATED ENTITY

FAIR VALUE MEASUREMENTSCONSOLIDATED

2014 $’000

CONSOLIDATED 2013

$’000

SOCIETY 2014

$’000

SOCIETY 2013

$’000

ASSETS

LEVEL 1

Interest rate swap contracts – cash flow hedges – – – –

Interest rate swap contracts – at fair value – – – –

Equity financial assets 3,228 2,934 3,228 2,934

LEVEL 2

Interest rate swap contracts – cash flow hedges 3,546 4,438 3,546 4,438


Equity financial assets – – – –

LEVEL 3



Equity financial assets 320 320 923 2,592

TOTAL ASSETS 7,094 7,692 7,697 9,964

LIABILITIES

LEVEL 1



LEVEL 2

Interest rate swap contracts – cash flow hedges 130 379 130 379


LEVEL 3



TOTAL LIABILITIES 130 379 130 379

71




The fair value of financial assets and liabilities traded in active markets (such as publicly traded equity financial assets) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the consolidated entity is the current bid price. These instruments are included in level 1.

The fair value of financial assets and liabilities that are not traded in an active market (for example over-the-counter derivatives) is determined using valuation techniques. The consolidated entity uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows. These instruments are included in level 2.

During the financial reporting period no assets or liabilities were transferred between categories.

Level 3 financial assets and liabilities are investments in non-listed entities, including controlled entities as set out in Note 13. These investments are illiquid and include non-traded shares and units in unit trusts where there are no reliable inputs that can be used to estimate a fair value. The Society therefore measures these investments at cost which is supported by the net tangible assets of the entities invested in exceeding the cost value of the shares. The carrying value of level 3 financial assets and liabilities has not changed during the financial year. However, Parkwood Unit Trust, which has a value of $1,669,000, was wound up in June 2014.

32. CAPITAL MANAGEMENT

The consolidated entity has established a Capital Management Policy and Internal Capital Adequacy Assessment Process (ICAAP) Summary Statement. Their objectives are to ensure that the consolidated entity and the Society both maintain a level of capital that is:

• consistent and appropriate to the risks the consolidated entity and the Society is exposed to from its activities;

• sufficient to provide a buffer to absorb any unanticipated losses from its activities and, in the event of any major problem, enable it to continue operating while the problem is being addressed; and

• sufficient to provide depositors and creditors confidence that the consolidated entity and the Society will continue to honour its obligations to them.

The above policies are consistent with the requirements of the Prudential Standards issued by the Australian Prudential Regulation Authority (APRA).

The consolidated entity and the Society are required by APRA to measure and report capital on a risk weighted basis in accordance with the requirements of the Prudential Standards (known as ‘capital adequacy’). APRA requires the consolidated entity and Society to maintain minimum levels of capital to risk weighted assets. The consolidated entity and Society have met the capital requirements imposed by the Prudential Standards throughout the current and previous financial year. The Board has a policy of imposing an additional level of capital above the minimum required by APRA.

Capital adequacy is measured as a ratio of capital to risk weighted assets. Capital is split into two tiers. Common Equity Tier 1 is generally retained earnings, a portion of the property reserves, reserve balances available for general use and other regulatory adjustments relating to items that are included in equity but are treated differently for capital adequacy purposes. It excludes the fair value assets through other comprehensive income reserve. Tier 2 capital includes qualifying subordinated liabilities and the credit loss reserve.

The Society and consolidated entity has adopted the standardised approach for measuring credit and operational risk. Credit risk is measured based on allocating weightings to assets that seek to reflect the varying levels of risk associated to on balance sheet assets and off balance sheet exposures. Operational risk is measured based on risk weighting the investment and lending portfolios, plus each significant non-interest income source.

The consolidated entity capital results can be viewed at:

https://www.greater.com.au/About-Us/Regulatory-Disclosures/Regulatory-Disclosures.aspx

These results are unaudited, but are consistent with the consolidated entity’s prudential reporting requirements.

33. COMPANY DETAILS

Greater Building Society Ltd (ABN 88 087 651 956) is a company limited by shares and guarantee, incorporated and domiciled in Australia. The registered office and principal place of business is:

Greater Building Society Ltd | 103 Tudor Street | Hamilton NSW 2303

The financial report was authorised for issue by the Directors on 23rd day of September 2014. The Directors have the power to amend and reissue the financial report.

This page has been intentionally left blank

2014 greater building society annual report

Documents