Annual Report
“Cornerstone Credit Union is committed to you, our members and owners. We are proud to share our successes and accomplishments from the past year and most importantly, we are proud to be your credit union!� Kevin Lukey, CEO
Vision, Mission and Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2015 Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Corporate Structure and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Management Discussion and Analysis for 2015 . . . . . . . . . . . . . . . . . . . . . . 9 Our Business Environment & 2015 Operational Review . . . . . . . . . . . . . 10 2015 Performance Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2015 Financial Performance Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Enterprise Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Co-operative Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Deposits Fully Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Summarized Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Cornerstone Credit Union | Annual Report 2015
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Vision, Mission and Values
Our vision Creating an amazing experience and tailoring financial solutions at every point along life’s journey.
Our mission We enrich our members. Everyone has a life story. We partner to achieve members’ financial success along their journey. We are a professional, caring credit union that demonstrates excellence and innovation in all we do.
Our values Values are the high road that we take. Values are the cornerstone of our interactions, our decision making and our steps forward. We value trust, integrity, leadership, excellence, community and our co-operative principles. These values reflect who we are as a credit union. Helping each other to succeed is not just how we do things, it is who we are. We are a family, and we work together for common goals and successes. We constantly learn. We grow from our experiences. We always take the high road.
Cornerstone Credit Union | Annual Report 2015
Trust We continue to earn the trust of our members, our communities and our staff. People are treated with honesty and respect. We are their trusted financial services provider. Integrity We have high standards, ethics and personal accountability. We adhere to our values. Leadership We demonstrate and inspire leadership in our people. We are empowered to make decisions and are responsible and accountable in our actions. Excellence We are recognized for our excellence. “Being good enough” is not acceptable. We add value to our members’ experience. Community Community creates a sense of belonging, regardless of geographical and tangible boundaries. We accept our responsibility for the economic and social well being of our communities. We are a good corporate citizen. Co-operative Principles As a credit union we are distinct among financial institutions by our commitment to the co-operative principles. As a member – owned organization, we partner with our members, our community and the credit union system.
“Helping each other to succeed is not just how we do things, it is who we are.� Cornerstone Credit Union | Annual Report 2015
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2015 Highlights
2015 Highlights As we reflect on 2015, Cornerstone Credit Union is very proud of our accomplishments and successes over the past year. This success would not be possible without the loyalty and support of our many stakeholders. We thank our staff, Board of Directors, and you, our members, for your business and support throughout the past year – you continue to be the reason for our existence. It is the commitment and support of these stakeholders that make Cornerstone Credit Union the great organization that we are today. On behalf of Cornerstone Credit Union, we thank you for your business and look forward to working with you and for you in the future.
Over $1 billion in managed assets. Cornerstone Credit Union serves approximately 26,000 members. There are branches in 11 Saskatchewan communities and we also provide accessibility at our members’ fingertips; on the phone, through our mobile app or on our website. Cornerstone Credit Union employs over 185 local people. We provide best-in-class financial solutions so you can achieve more. Staff invested over 5,800 hours of their personal time back to their communities. Cornerstone Credit Union | Annual Report 2015
We supported over 400 community groups, events and organizations in 2015 by investing approximately $200,000 back into the communities we serve. Plus, staff volunteered countless hours of corporate time in the community (that’s how important it is for us!). Cornerstone Credit Union offers a FreeStyle No-Fee Personal Chequing account; no fees, no minimum balance, no strings attached! We continue to focus on ‘MemberFirst’ and elevating the member experience at every interaction. At Cornerstone Credit Union, deposits are fully guaranteed.
2015 Highlights
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We’re part of a credit union network that offers ding free® transactions to our members at any participating credit union ATM in the country surcharge-free. In 2015 we achieved efficiencies throughout the year to keep our operating costs in line. This means we can continue providing value to our members by offering competitive rates and fees.
We’re the fifth largest credit union in Saskatchewan.
We put our members’ needs first That’s why we’re working with like-minded credit unions through collaboration to enhance your experience in ways we couldn’t achieve on our own. This will open up many opportunities to provide more benefits to our members through better products and services, more efficient use of resources and a clearer understanding of member needs.
Cornerstone Credit Union | Annual Report 2015
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Corporate Structure & Governance
Corporate Structure and Governance
Board of Directors
The governance of Cornerstone Credit Union is anchored in the co-operative principle of democratic member control. Cornerstone Credit Union’s philosophy on corporate governance is to practice transparency in operations and maintain a professional approach and accountability in dealing with our members. The Credit Union has always focused on maintaining the highest standards by conducting its affairs ethically and lawfully and by sustaining a culture of integrity and professionalism.
Board of Directors: Larry Malinowski, Cheryl Denesowych, Nicole Campbell, Lonnie Kaal, Jack Powell, David Bone, James Knudson, Bonnie Derkatz- Olson, Robert Wilson, Orest Shular, Harold Sigfusson, Lorne Tarasoff
Mandate And Responsibilities The Board of Directors of Cornerstone Credit Union is responsible for the strategic oversight, business direction and supervision of management of Cornerstone Credit Union. In acting in the best interests of the Credit Union and its members, the Board’s actions adhere to the standards set out in The Credit Union Act 1998; the Credit Union Regulations, 1999; Standards of Sound Business Practices; Credit Union bylaws and policy; and other applicable legislation. The Board directs the affairs of the Credit Union and maintains policies which are responsive to their needs and the needs of the Credit Union for sound operations.
Cornerstone Credit Union | Annual Report 2015
Corporate Structure & Governance
The key roles of the Board include formulation of strategic business plans; setting goals, evaluating the performance of the CEO; approving corporate mission, vision and values; monitoring corporate performance against strategic business plans; oversight of operations; ensuring compliance with laws and regulations; keeping members informed regarding plans, strategies and performance of the Credit Union; and other important matters. During the financial year 2015, the Board of Directors held seven meetings.
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District Two Elfros / Ituna / Kelliher / Lestock / Wynyard Orest Shular, Harold Sigfusson, Lorne Tarasoff Distict Three Yorkton / Theodore / Saltcoats / Springside Nicole Campbell, Cheryl Denesowych, Lonnie Kaal, Jack Powell, Larry Malinowski At Large Robert Wilson
Governance Practices Starting in 2013, the Board of Directors initiated a thorough review of its governance practices. This review touched all aspects of board governance functions including committee structure, board meeting structure and schedule, director recruitment and renewal, director development, director representation (i.e. hybrid model) and more. In 2014, the Board of Directors began the process of implementing the recommendations from this review. In 2015 we continued this multi-year process that will ensure the Board is using current governance practices that comply with emerging regulatory guidelines.
Board Composition The Board is comprised of twelve individuals elected via a hybrid model with 11 directors elected by district and one representing the membership at large. For 2016, board representation will fully transition to a “hybrid model” where three directors will be elected by the membership at large (all members from all districts) and nine directors will be elected from the three districts. Terms are three years in duration. In accordance with the bylaws, the Governance Committee is responsible for the nomination process and election of directors. Voting is by paper ballot during in-branch elections and election results are announced at Cornerstone Credit Union’s annual general meeting. The Board of Directors elected for the terms and districts in 2015, as set forth in the Credit Union bylaws are as follows: District One Archerwill / Bjorkdale / Rose Valley / Tisdale David Bone, Bonnie Derkatz-Olson, James Knudson
Board Committees The responsibilities of the board of a modern financial services organization involve an ever-growing list of duties. Cornerstone Credit Union maintains a number of committees comprised of directors. This partitioning of responsibilities enables a clear focus on specific areas of activity vital to the effective operation of the Credit Union. Cornerstone Credit Union has four standing committees to assist in fulfilling board responsibilities: • The Audit and Risk Committee, which met five times in 2015, is comprised of six members from the Board at large. The purpose of the Audit and Risk Committee is to ensure an independent review of the Credit Union’s operation on areas deemed necessary to maintain the integrity of financial data, adequacy of internal controls and adherence to requirements of The Credit Union Act, 1998, The Credit Union Regulations, 1999, The Credit Union Insurance Business Regulations, and the Standards of Sound Business Practice. • The Governance Committee, which met five times in 2015, is comprised of five members from the Board at large. The purpose of the Governance Committee is to ensure that an appropriate governance system is in place through corporate governance policies, the nominations and election process, the board committees’ structure, and board assessment and development processes. • The Conduct Review Committee, which met one time in 2015, is comprised of five members from the Board at large. The purpose of the Conduct Review Cornerstone Credit Union | Annual Report 2015
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Corporate Structure & Governance
Committee is to ensure that all proposed related party transactions with the Credit Union are fair to the Credit Union and that best judgment is exercised in all matters of related party relationships. This also includes approving the Code of Conduct annually.
Evaluation The Board of Directors conducts an evaluation bi-annually to assess the effectiveness of board operations. A formal evaluation was conducted in late 2014.
• The HR / Executive Committee, which met once in 2015, is comprised of the President, the VicePresident, and two elected Board members at large. The purpose of the HR / Executive Committee is to assist the Board of Directors in discharging its oversight responsibilities relating to board stewardship; employment and performance management of the CEO; succession planning for the CEO and the Executive Management team; organizational culture and compensation; as well as assist with extended decision making authority to act in the capacity of and on behalf of the Board of Directors in times of emergency or if the business continuity plan is activated.
Executive Management
Attendance
Cliff Trombley Vice President of Risk and Corporate Services
Board Service 2015
Cornerstone Credit Union has an experienced executive management team. Executive Management is responsible to oversee the operations of the Credit Union within the context of strategies and policies approved by the Board, and for developing processes that identify, measure, monitor and control risks. Management reports performance in key areas to the Board on a regular basis. The Executive Management team is comprised of the following: Kevin Lukey Chief Executive Officer
Director
Board Meetings
Committee Meetings
David Bone Conduct Review Chair
6 of 7 (86%)
6 of 7 (86%)
Nicole Campbell
4 of 7 (57%)
6 of 6 (100%)
Cheryl Denesowych Vice President, Governance Chair
6 of 7 (86%)
7 of 7 (100%)
Bonnie Derkatz-Olson
7 of 7 (100%)
6 of 6 (100%)
Lonnie Kaal Audit & Risk Chair
6 of 7 (86%)
3 of 5 (60%)
James Knudson
6 of 7 (86%)
5 of 5 (100%)
Larry Malinowski President, Board of Directors Chair
7 of 7 (100%)
Ex Officio 10 of 12 (83%)
Jack Powell
6 of 7 (86%)
3 of 5 (60%)
Orest Shular
6 of 7 (86%)
5 of 5 (100%)
Harold Sigfusson
7 of 7 (100%)
5 of 5 (100%)
Lorne Tarasoff
7 of 7 (100%)
5 of 6 (83%)
Robert Wilson
7 of 7 (100%)
5 of 5 (100%)
(NOTE: Re-organization of committees took place in April of 2015.)
Cornerstone Credit Union | Annual Report 2015
Bryan Furber Vice President of Finance Corvyn Neufeld Vice President of People Solutions, Governance and Strategy Lori Walsh Vice President of Marketing & Strategic Solutions Doug Jones Vice President of Retail Services Jodi Chambers Collaboration Leader Carissa Yaholnitsky Executive Assistant
Corporate Structure & Governance
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Executive Management: Kevin Lukey, Cliff Trombley, Bryan Furber, Corvyn Neufeld, Lori Walsh, Doug Jones, Jodi Chambers, Carissa Yaholnitsky
The Asset Liability Management Committee (ALCO) is comprised of select executive and senior management of Cornerstone. The ALCO is responsible for understanding and monitoring liquidity risk, interest rate risk, credit exposure and overall balance sheet structure of the Credit Union. The Committee ensures balance sheet activities and measures are within acceptable limits including, but not necessarily limited to, capital adequacy; lending and investment limits; liquidity risks; and interest rate risk. Furthermore, the Committee sets and approves balance sheet operational strategies with a focus on achieving financial targets, managing market and liquidity risk and optimizing the use of capital. The ALCO met four times in 2015. The Information Technology Governance Committee (ITGC) is comprised of executive management and the AVP of Technology position. The ITGC plans, approves, prioritizes, and directs Cornerstone Credit Union information technology (IT) initiatives to ensure that internal and external customer needs and expectations for IT solutions are met, IT risks are identified and mitigated, and best value is secured as measured by functionality, efficiency, timing, and cost to meet both business and IT needs.
The IT Governance Committee met twice in 2015. The Executive Credit Committee (ECC) is comprised of select executive, credit risk and senior lending management. The ECC is responsible for understanding the Credit Union’s credit risk and for monitoring and oversight of the Credit Union’s policies and risk tolerance levels for credit including, but not limited to delinquency, portfolio mix, leases, write-offs, credit profiling, loan analysis and loan approvals. As part of its mandate, the ECC reviews, assesses and approves, declines or defers certain credit applications. The ECC is responsible for approving, monitoring, and assessing the effectiveness of ongoing strategies related to loan growth, portfolio mix, and credit risk management and reviewing and discussing environmental conditions impacting the financial position and performance of the Credit Union, specific to lending including; economic conditions, interest rate outlook, competition, market conditions and market intelligence. The ECC reviews and approves strategies for effective loan portfolio management and provides recommendations to ALCO. The Executive Credit Committee met four times in 2015.
Cornerstone Credit Union | Annual Report 2015
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Management Discussion and Analysis for 2015
Management Discussion and Analysis This Management Discussion & Analysis (MD&A) is presented to enable readers to assess material changes in the financial condition and operating results of Cornerstone Credit Union (the Credit Union) for the year ended December 31, 2015, compared with prior years. This MD&A is prepared in conjunction with the Consolidated Financial Statements and related Notes for the year ended December 31, 2015, and should be read together. Unless otherwise indicated, all amounts are expressed in Canadian dollars and have been primarily derived from the Credit Union’s annual Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS). Management is responsible for the underlying reliability of the information included in this MD&A and for the controls systems and procedures that help to ensure that reliability. This MD&A may contain future-looking statements concerning Cornerstone Credit Union’s future strategies. These statements involve uncertainties in relation to prevailing economic, legislative and regulatory conditions at the time of writing. Therefore, actual results may differ from the future-looking statements contained in this discussion.
Cornerstone Credit Union | Annual Report 2015
Our Business Environment & 2015 Operational Review 10
Our Business Environment Although Cornerstone Credit Union is focused on serving the needs of its members in Saskatchewan, the economic and business conditions in Canada and abroad can impact the trading area of the Credit Union and its financial position. National and international economic conditions can impact currency rates, interest rates, and monetary policy of the Bank of Canada. These factors, combined with fluctuations in capital markets and competition, can impact the market share and price for the Credit Union’s products and services and, in turn, affect its performance. Canada’s economy was negatively impacted in 2015 by the struggling global economy whose performance overall was less than robust. The decline in oil prices caused significant stress and the Bank of Canada responded by cutting its overnight interest rate twice during the year. The Canadian dollar also fared poorly against the U.S. dollar, somewhat because of the free fall in oil prices, but also because of the relative strength of the U.S. economy. This provided further support for the rate cuts instituted. These rate cuts caused substantial impact in our industry as they directly impacted the revenue stream for credit unions and other financial institutions. Because of these two factors, which are anticipated to remain for some time, Cornerstone does not expect a rate increase in Canada during 2016. The economy of the United States outperformed many others throughout 2015. As a result, in December 2015, for the first time in seven years, the Federal Reserve increased its overnight rate. The 25 basis point increase was a signal that the U.S. has started to recover from the worst financial crisis in recent history and that the Reserve has confidence in the ability of the U.S. economy to continue to perform. Cornerstone’s expectation is that the overnight rate will continue to rise south of the border, but at a very slow pace. While Saskatchewan continues to have the lowest unemployment rate in the country, it too has felt the impact of the plunge in oil prices. Growth has been difficult to achieve with annual decreases in housing starts, manufacturing shipments and retail trade.
The provincial government recently announced its intention to run a deficit as a result of the decline in oil related revenues. We anticipate that the slowdown in Canada and in Saskatchewan in particular will continue to stress Cornerstone’s results. Nonetheless, we are confident that we will be able to continue to serve the needs of our members.
2015 Operational Review Cornerstone Credit Union is a member-centric organization focused on providing the best service to our members at every interaction. We call this MemberFirst. Through MemberFirst, we place members at the center of the relationship and develop proactive solutions for members throughout their life and business cycle. Our focus in 2015 was to ensure we deliver service excellence at every point of contact and to ensure our business and product line innovation, renewal and development results in flexible solutions for the life needs of our members. This has resulted in changes to our business including how we service relationships, our structure to ensure ongoing success, enhanced training and development for our staff and enhancements to deliver seamless and integrated technology to create efficiencies both in-house and for our members. We remain committed to our members and are continually focused on ways to enhance and evolve our services to meet the needs of our member owners. The financial service industry is faced with transcending technology and as a result we continue to evolve our service delivery to meet our members’ needs. Trends continue to expand in the electronic and self-serve technology channels, so we are committed to invest in this technology. Cornerstone implemented Deposit Anywhere™ enabling members to deposit cheques via the new mobile app. Interac Flash® debit cards were implemented providing members the ability to pay for everyday purchases quickly, securely and conveniently with a simple ‘tap’! Cornerstone Credit Union | Annual Report 2015
11 2015 Operational Review
A new Wealth Management entity has been established collaboratively to deliver and grow high quality wealth management services to our members. We have seen some significant progress through our collaboration initiative in a short time and are looking forward to 2016 when we will continue to work on projects that will enhance the member experience and ensure a positive future for our credit unions. While there have been many changes for Cornerstone throughout the past year, one thing remains constant and that is our commitment to our communities. As a member owned institution, we respect our past but also have an obligation to our members to ensure our credit union is positioned for the future. In 2015 a thorough branch review was conducted and decisions were made to close the Elfros and Lestock branches, to reduce the hours of service in the Springside and Theodore branches and to expand the hours of service in Yorkton. These are not easy decisions. The reality is with the changing needs of our members’ we must provide access to full financial services not only in our physical locations but also responding to the increased needs of members who want their banking to be mobile and on the move. To do this we must have continual investment in technology and deliver value by having access to experienced staff that can provide full financial services. To provide sustainability for future generations we must invest in the evolving nature of the financial service business so we can ensure our credit union will be here for future generations. These decisions are not something we take lightly; considerable time was spent in 2015 working with impacted members to ensure a seamless transition to the new service model. Cornerstone, Conexus and Innovation Credit Unions continue to work collaboratively on several initiatives and have made great progress throughout 2015. Our three credit unions are working together for the benefit of all stakeholders – members, communities and employees. A new consumer demand and investment product suite has been developed to better serve the needs of the market and our members; implementation will take place in 2016. Our credit unions have integrated an internal audit program and aligned policies and procedures to help drive efficiencies for all. Cornerstone Credit Union | Annual Report 2015
Investing in and growing our communities is an integral part of who we are. We want our members to grow and prosper and we want the same in our communities. In 2015, Cornerstone contributed approximately $200,000 to hundreds of local events, groups and organizations. Our staff take great pride in the communities in which we live and serve as demonstrated with over 5,800 hours of our employees’ personal time spent volunteering in our local communities. There are several factors that impact the financial performance of our Credit Union such as economic and business conditions in Saskatchewan and abroad, heightened competition, and the low margin environment we are facing. As such, Cornerstone Credit Union is challenged to find new and improved efficiencies - ways to do things in an effort to save time, money or resources that can be reinvested in other areas of our organization for the benefit of our members. We were successful in achieving new efficiencies in 2015 as reflected in the reduction of our operating expenses to 2.49% of assets from 2.60% the year prior. Collaboration has and will continue to contribute to our innovation and efficiency strategy. Our shared collaboration vision is to make a real difference in the lives of our members and we are more committed now than ever to make the necessary changes in order to service our members in the most effective way possible. Together we can do more!
2015 Performance Measurement 12
2015 Performance Measurement Cornerstone Credit Union uses a balanced scorecard framework to measure and monitor our progress towards achieving our strategic objectives. The scorecard utilizes both financial and non-financial measures along four strategic themes: Culture, People and Community; Member and Client Solutions; Organizational and Financial Strength; and Business and Management Processes.
2015 Balanced Scorecard
Culture, People & Community
Strategic Themes
Performance Measures
Actual
Target
• S ustain a dynamic constructive organizational culture.
Community Investment (% Pretax)
3.09%
2.50%
Volunteer Time Hours
5819
5500
Employee Engagement Cultural Assessment
4.34
4.00
• Develop people (members, employees, board). • Empower people and support leadership. • Recruit and retain the best people. • I nstill a sense of engagement, ownership and pride in the work we do for the benefit of our members. • Contribute to and strengthen our communities. Member & Client Solutions
•D emonstrate a member-centric approach through service excellence and providing solutions that fit the member.
Net Promoter Score
39.60%
39%
Deposit Growth %
5.52%
10%
uild and strengthen relationships with our •B members and clients.
Loan Growth %
2.94%
9%
Retail Off Balance Sheet Growth %
12.03%
10%
Operating Return on Average Assets %
.66%
.75%
Total Capital to Risk Weighted Assets %
12.15%
11.98%
Delinquency %
.31%
<0.75%
• Standard Procedures and Practices to ensure corporate effectiveness.
Efficiency Ratio
76.68%
76.23%
• We continually strive to create efficiencies.
Audit Reports (Rating)
Acceptable
Acceptable
ur members receive a consistent ‘Amazing’ •O experience, through all of our delivery channels. ur suite of products and services is simple for •O members and employees to understand and meets the needs of our members. roactively positioned to pursue emerging •P business needs by being an early adopter. Organizational & Financial Strength
• Ensure a balanced approach for long term growth and viability. • Manage enterprise risk. • Ensure the organization has a capital position that enables it to implement the business plan.
Business & Management Processes
• Lever / maximize technology. • We employ an effective risk and compliance regime that is cascaded throughout the credit union. • We recognize what we do well and partner with others to do the rest. (Actual calculations are performed by using internal financial reporting.)
Cornerstone Credit Union | Annual Report 2015
13 2015 Financial Performance Review
2015 Financial Performance Review Growth Cornerstone Credit Union ended December 31, 2015 with on book assets of $964 million compared to $910 million in 2014, representing growth of 5.84%. Total assets under administration by the Credit Union at December 31, 2015 were approximately $1.201 billion, representing annual growth of approximately 7%. This includes on book assets, wealth management assets, credit union owned investments managed through our branch of Credential Securities and interest rate swaps. Off book wealth management assets grew at an annual rate of 11% to $172 million and the notional value of interest rate swaps decreased from $60 million to $50 million. As part of its interest rate risk management processes, Cornerstone routinely considers when and if additional swaps should be added. As a consequence, two $10 million interest rate swaps were purchased in mid-January 2016.
Deposit Growth The Credit Union’s liabilities consist primarily of member deposits. Deposits totaled $857 million at December 31, 2015, an increase of approximately 6% from prior year. FreeStyle chequing balances grew and members continued to direct funds to fixed length term deposits. In particular, laddered investments and tax free savings accounts continued to generate growth and the Credit Union also attracted some larger commercial deposits in the year. With unexpected lower rates and a slower economy, deposit growth was lower than forecast and, while we didn’t achieve our organizational deposit growth target of 10%, we were very satisfied with deposit growth of 6%. The Credit Union’s on book deposits are 100% guaranteed by the regulator of credit unions in Saskatchewan, Credit Union Deposit Guarantee Corporation (CUDGC).
Consolidated Loans by Sector 800
$766M $720M
700
Asset Growth
$788M
$625M
600 $568M
$1202M
1200
$ Millions
1000
$986M
$1066M
$1126M
$912M
500 400 300 200
800
100
600
0
400 200 0
$ Millions
1400
2011
2012
On Book Assets
2013
2014
2015
Off Book Assets
Cornerstone Credit Union | Annual Report 2015
2011
2012
2013
2014
2015
Agricultural Mortgage
Consumer Mortgage
Commercial Mortgage
Agricultural Non-Mortgage
Consumer Non-Mortgage
Commercial Non-Mortgage
2015 Financial Performance Review 14
Loan Growth Accounting for just under 82% of total on book assets, loans amounted to $788 million at December 31, 2015; an increase of $22 million or approximately 3% over 2014. The above illustrations show the breakdown of our total loan portfolio by sector. With lower than expected deposit growth, less funds were available to deploy to loans, resulting in lower than targeted loan growth for 2015.
Investments Investments totaled $112 million at December 31, 2015, an increase of $5 million or 5% from prior year. The increase was planned as Cornerstone chose to increase its liquidity position before directing additional funds to purchased loans. The majority of the Credit Union’s investments are held with SaskCentral or Concentra Financial Services (a credit union company). Credit unions are required by CUDGC to maintain on deposit with SaskCentral for the Provincial Liquidity program an amount equal to 10% of their member deposit liabilities. In addition to these Statutory Liquidity Investments, the Credit Union maintains a high quality, liquid pool of investments to satisfy payment obligations and protect against unforeseen liquidity events. In addition to its securities held with SaskCentral and Concentra Financial Services, investments are also largely held in securities that are guaranteed by the “big five” chartered banks.
Credit Quality As a credit granting organization, credit quality is a key risk management area of Cornerstone Credit Union. Despite the potential impacts of the ongoing financial crises and economic conditions, the Credit Union’s standard credit quality measures have remained very strong. Delinquency greater than 90 days was 0.31% of loans at December 31, 2015, a 0.07% increase from the prior year. This compares favorably to the levels anticipated by credit granting organizations and our peer group in Saskatchewan. The Credit Union monitors its exposure to potential credit losses and maintains both specific and collective loan allowances accordingly. Specific allowances are reviewed regularly by examining the individual loans and estimating the
likelihood of realizing the full carrying value. Collective allowances are calculated using management’s judgment while considering current economic conditions and historical losses. The quality of the credit portfolio was also confirmed by both internal and external audit processes conducted in 2015. Even though Cornerstone’s delinquency is low and quality of credit is high, issues in a specific industry and location caused us to allocate larger than normal allowances. As a consequence, our provision for credit loss is higher in 2015 than in prior years and substantially higher than Cornerstone would consider “normal’ for its operations.
Liquidity One of Cornerstone Credit Union’s primary objectives is to prudently manage liquidity to ensure that the Credit Union is able to generate or obtain sufficient cash or cash equivalents in a timely manner and at a reasonable price to meet commitments as they come due, even under stressed conditions. The Credit Union maintains a liquidity plan in support of its liquidity policy and regulatory guidance. The liquidity plan undergoes regular reviews and is approved by the Board of Directors. As per the plan, the Credit Union maintains a stock of liquid assets while regularly measuring and monitoring its available liquidity and performs stress tests to identify sources of potential liquidity strain. The Credit Union also maintains external borrowing facilities to complement its liquidity management process. An additional source of liquidity for the Credit Union is the sale of mortgage pools under the National Housing Authority Mortgage Backed Securities (NHA MBS) program. During 2015, one issuance was completed under the NHA MBS program. This increased the Credit Union’s securitization debt balance to $20 million at December 31, 2015 compared with $16 million at the end of 2014. The Credit Union’s liquidity is measured by an operating liquidity ratio which considers projected cash inflows as a percentage of projected cash outflows. At December 31, 2015, the ratio was 69%; for 2014 fiscal year end it was 56%. The Credit Union targets a range of 50% to 110% for this measure. Throughout 2015, loan
Cornerstone Credit Union | Annual Report 2015
15 2015 Financial Performance Review
demand was funded primarily by deposits from Credit Union members and, to a lesser extent, the additional issuance under the NHA MBS program. During the year, the Credit Union increased its line of credit with SaskCentral to $17 million from $15 million to manage clearing and settlement and unforeseen funding needs and cancelled its $10 million revolving credit facility with Concentra Financial. At December 31, 2015 the remaining credit facility was not in use. During 2015, CUDGC introduced draft liquidity standards which would require all Saskatchewan credit unions to meet liquidity coverage ratios calculated in approximately the same format as is required by the Office of the Superintendent of Financial Institutions for Canada. These standards are expected to come into effect for years starting on January 1, 2017. Based on work completed to date, Cornerstone anticipates exceeding the minimum standards. Cornerstone’s liquidity position is more favorable than had been the case in the recent past. We will continue to carefully manage our loan to asset ratio and our investment portfolio to ensure we remain able to meet member loan demand and revised regulatory requirements.
Capital Management One of the primary measures of financial strength of any financial institution is its capital position. Credit unions measure capital adequacy using both risk-weighted and leverage tests. Credit unions operate in a highly regulated environment where CUDGC sets regulatory guidelines to which credit unions must adhere. The standard segregates between two types of capital – tier 1 and tier 2, with tier 1 capital being the primary capital and having the highest quality. The standards require that each credit union hold a minimum common equity tier 1 capital ratio of 4.5% of risk weighted assets, a total tier 1 capital ratio of 6.0% of risk weighted assets and a total eligible capital ratio of 8.0% of risk weighted assets. Starting in 2016, CUDGC will also require a further 2.5% buffer to be added to each of the risk weighted measures – effectively increasing the minimum requirement by 2.5% for each individual ratio. In addition, credit unions are currently required to maintain a minimum ratio of Cornerstone Credit Union | Annual Report 2015
5% for total eligible capital (eligible capital divided by total assets), with total assets adjusted for deductions from capital and the addition of certain off balance sheet items. There is no increase regulated for this measure in January 2016. Cornerstone exceeded the statutory requirements with both a common eligible tier 1 capital ratio and total tier 1 capital ratio of 10.78%, compared with 10.34% in 2014, a total eligible capital ratio of 12.15% compared with 11.83% in 2014 and a capital leverage ratio of 8.03% compared with 7.97% in 2014. In addition to the standards prescribed by CUDGC, the Credit Union also undertakes an internal capital adequacy assessment process (ICAAP) quarterly. The ICAAP helps credit unions determine the amount of capital they should hold for their specific risk profiles. Cornerstone’s December 2015 ICAAP suggests that, at this time, it would be prudent to hold an additional 2.21% of capital above the regulatory minimum plus buffer, for a total eligible capital ratio of 12.71%. Cornerstone is working toward building the additional capital suggested appropriate by its ICAAP. The additional capital suggested by ICAAP will continue to change as Cornerstone’s book of business changes.
2015 Capital Measures 14% 12%
11.83%
12.15%
2014
2015
10.94%
10% 8% 6% 4% 2% 0
2013
Minimum Standard Additional
Buffer
2015 Financial Performance Review 16
Retained Earnings (Including Contributed Surplus & Member Held Equity) 90 $79.9M
80
$75.2M $68.8M
70
$63.9M
50 40
Profitability
30 20 10 0
2011
2012
2013
Retained Earnings
2014
2015
Member Held
Cornerstone Credit Union manages capital in accordance with its capital management plan and Board approved capital policies, both of which are reviewed on a regular basis. The capital plan is developed in accordance with the regulatory capital framework and is regularly reviewed and approved by the Board of Directors. Capital is managed in accordance with the capital plan with a goal to achieve and exceed regulatory minimums, maintain an optimal level of capital, meet operational requirements, absorb unexpected losses, implement long term strategic plans and signal financial strength. The Credit Union relies on profitability to grow its capital position and holds the majority of its total capital in retained earnings. Both balance sheet growth and profitability affect the Credit Unionâ&#x20AC;&#x2122;s capital ratios. The Credit Union retains a portion of its annual earnings in order to meet its capital objectives. Once these capital objectives are met, additional earnings may be allocated to members through the Credit Unionâ&#x20AC;&#x2122;s member equity program. Member equity accounts
Income before allocations (Income Tax & Member Patronage) and other comprehensive income for the year was $6.2 million, a decrease from $7.4 million in 2014. The decrease related primarily to the decrease in interest rates in 2015 and a higher than normal provision for loans losses. For 2015 our return on assets before income tax and patronage allocations was 0.64%, compared to 0.82% in 2014.
Income Before Allocations 8
$7.4M $6.9M
7
5
$6.2M
$5.8M
6
$ Millions
$ Millions
60
$59.3M
are included in the determination of capital adequacy as tier 2 capital. Cornerstone continued to review its member equity program in 2015. Following the current capital plan and desire to build capital to the level suggested appropriate by our ICAAP, there was no allocation to member equity in 2015. The intent is to complete the review of the program in 2016 to ensure it will meet the ongoing needs of both the Credit Union and the members. The risk to the Credit Union that member equity will at some point be no longer considered capital will also be assessed and considered during the review of the member equity program.
$5.1M
4 3 2 1 0
2011
2012
2013
2014
2015
Cornerstone Credit Union | Annual Report 2015
17 2015 Financial Performance Review
Gross Financial Margin – includes total interest revenue less total interest expense. For 2015, financial margin was 2.67% compared to 2. 83% in 2014. The Credit Union’s profitability is largely dependent on interest margins. The Credit Union continues to be asset-sensitive, which ultimately means that profitability will increase as interest rates rise. As discussed above, the interest rate environment in Canada holds a large degree of uncertainty at this time. It is expected that interest rates will not rise until sometime into 2017; however, it is uncertain if rates will fall further in mid2016. Even if the flat scenario occurs, the Credit Union still anticipates a lower net interest margin in 2016 as a result of loans repricing at lower rates and continued competition for deposits. Other Income – Includes fixed asset revenue, commissions and service charges. Non-interest revenue ended 2015 at $5.5 million compared to $5.4 million in 2014. As a percentage of assets, non-interest revenue dropped from 0.59% in 2014 to 0.57% in 2015. The Credit Union anticipates that 2016 non-interest revenue will approximately equal the results from 2015; however expects that a decline in non-interest revenue as a percentage of assets will again occur due to balance sheet growth. Operating Expenses – Includes various operating expenses such as personnel, occupancy, security, governance, community development and general business. Operating expenses ended 2015 at 2.49% of assets or $24.0 million compared to 2.60% of assets or $23.6 million in 2014. Personnel costs decreased year over year. Salary levels increased for cost of living adjustments and the credit unions individual variable incentive pay program for staff was delivered. However, profitability results did not trigger a corporate profit share payment under the current program which accounted for most of the year over year variance. Cornerstone expects 2016 personnel costs to approximate the 2015 results as continued efficiencies are expected to offset cost of living increases.
Cornerstone Credit Union | Annual Report 2015
Member security costs increased slightly as a function of growth and are expected to increase marginally in 2016 for the same reason. As deposits and membership grow, the fees assessed to ensure the overall health of the Saskatchewan credit union system also grow. Organization costs were approximately $0.1 million higher in 2015 than in 2014, as a result of costs related to our collaboration efforts. Costs in this category are anticipated to increase in 2016 as additional work is planned on the collaborative front. Occupancy costs showed a $0.3 million increase over 2014, mainly as a result of an increase in property taxes and an increase in depreciation and operating costs for the Yorkton addition as it was utilized for the entire year in 2015. 2016 occupancy costs are anticipated to approximate the 2015 results. The $0.2 million increase in general business cost resulted from increased costs related to technology, depreciation and wealth service, offset somewhat by reduced courier costs due to the disbanding of the credit union courier system. Cornerstone expects general business costs to decline slightly in 2016. Income Tax Expense – The 2013 federal budget removed a special deduction for credit unions over a five year phase in period for current taxes payable. The impact will be to increase the Credit Union’s tax rate over that five year period. Therefore, a higher percentage of earnings were expensed as tax in 2015 than in prior years. The provincial government determined that it was appropriate for credit unions to continue to receive the special deduction due to the significant role they play in their communities and the difference in their business models in comparison to other financial institutions. As a result, the impact of the change in tax structure will not be as dramatic as it would have been if the provincial government had decided to follow the federal government’s position.
Enterprise Risk Management 18
Enterprise Risk Management Each year Cornerstone Credit Union spends significant resources measuring and assessing risks and ensuring we are adequately prepared to serve our members and communities now and in the future. This process is called enterprise risk management (ERM) and is mandated by CUDGC as a requirement of all credit unions in Saskatchewan. As a financial institution, Cornerstone Credit Union is exposed to a variety of risk. Risk is the downside that exists in almost every component of the Credit Union’s activities. Risk represents the potential negative impact to the Credit Union’s ability to achieve important goals. Risk can also cause financial loss and harm to a credit union’s reputation. Managing, or appropriately balancing, risk with business opportunities is the top priority for the Board of Directors and Management of Cornerstone Credit Union. Building sound policies and operational processes, risk based audit practices and capital and liquidity management strategies, all supported by strong human resources, is the heart of our strategic objectives.
The Credit Union’s primary risk offset is its capital position. An adequate capital position allows the Credit Union to absorb unexpected losses, implement long term strategic plans and signal financial strength. The capital position of the Credit Union can be impacted by high levels of growth, low profitability or losses incurred in any of the key risk areas identified below. The Credit Union maintains a capital management plan and establishes capital policies to ensure capital
adequacy is maintained. Capital measures are regularly reported to and reviewed by the Asset Liability Management Committee (ALCO), the Audit and Risk Committee (ARCO) and the Board of Directors. Annual and long term operating forecasts are developed and reviewed regularly with results stress tested and compared to capital plans and policies to ensure proactive management and capital planning is ongoing. The Credit Union’s operations undergo regular independent assessment through external audit, internal audit and regulatory reviews to ensure that key risks are being mitigated and any potential impacts to capital are reported accordingly. The following key risk categories form part of the Credit Union’s overall ERM approach:
Credit Risk Cornerstone Credit Union is exposed to credit risk, which is the risk of financial loss resulting from a borrower or counterparty’s inability to meet its obligations. Due to the relative size of our internal loan portfolio, the majority of this risk derives from our direct lending activities. We are also exposed to credit risk through our holdings of investment securities, derivatives and purchased loans (credit product purchased, but not administered by the Credit Union). Lending and credit risk management is performed in accordance with approved policies, procedures, standards and controls. The Executive Credit Committee oversees credit risk exposure and management. Risk concentration limits have been designed to reflect our risk tolerance. Surplus liquidity is invested in accordance with investment policy and regulatory approved investment criteria. Credit risk is further mitigated through in-depth and ongoing training of loans personnel and independent adjudication of larger, potentially higher risk loan applications and regular monitoring and reporting. The Credit Union’s credit portfolio and lending practices undergo regular and ongoing independent assessment through external audit, internal audit and regulatory reviews. Reports are provided to Management directly and the Board of Directors through the ARCO.
Cornerstone Credit Union | Annual Report 2015
19 Enterprise Risk Management
Liquidity Risk
Strategic Risk
Liquidity risk is the risk of having insufficient cash resources or equivalents to meet demand for loans or depletion of deposits. Liquidity risk arises from general funding activities and through managing assets and liabilities. The Credit Unionâ&#x20AC;&#x2122;s liquidity risk management strategies seek to maintain sufficient liquid resources to continually fund our balance sheet commitments and to ensure we can meet the day to day cash needs and growing loan demands of our members.
Strategic risk is the risk that adverse decisions, ineffective or inappropriate business plans or failure to respond to changes in the competitive environment, customer preferences, product obsolescence or resource allocation will impede the ability of the Credit Union to meet its business objectives. The Credit Union has formal planning processes which result in a strategic business plan and a balanced scorecard that focus on strategic objectives. The Credit Union also uses a comprehensive reporting process to monitor performance relative to plans.
Liquidity risk management requirements are defined by policies and regulatory standards and limits. The ALCO and the finance team oversee liquidity risk exposure and management. Cornerstoneâ&#x20AC;&#x2122;s liquidity risk management framework operates under approved policies and processes. We monitor actual and anticipated inflows and outflows of funds daily. We assess the adequacy of liquidity using potential outflow modeling and stress testing and report results to Management monthly and to the Board of Directors quarterly through the ARCO. We hold a portfolio of liquid assets and have established borrowing facilities with SaskCentral. We also research, make recommendations and enter into alternative sources of funding when appropriate.
Operational Risk Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or external events. Exposure to this risk arises from deficiencies in internal controls or employee integrity, technology failures, human error or natural disasters. Operational risk is managed through the use of policies and procedures, controls and monitoring. The Credit Union mitigates operational risk through internal audit programs, business continuity planning, appropriate insurance coverage and secure technology solutions.
Market Risk
Legal and Regulatory Risk
Market risk is the risk that financial position or earnings will be adversely affected by changes in market conditions such as interest and foreign exchange rates. Cornerstoneâ&#x20AC;&#x2122;s market risk arises primarily from movements in interest rates.
Legal and regulatory risk is the risk of loss arising from potential violation of, or nonconformance with, laws, rules, regulations, prescribed practices, or ethical standards.
The Credit Union employs comprehensive management processes around our market exposures and risk taking activities. We have defined policy around numerous risk measures which we actively monitor and upon which we regularly report to the ALCO, the ARCO, the Board of Directors and system regulators. We employ dynamic modeling and income simulation for scenario and stress testing based on changes in interest rates. We implement mitigation strategies, including the use of interest rate swaps, where and when deemed necessary to strategically manage risks.
Cornerstone Credit Union | Annual Report 2015
Cornerstone Credit Union operates in a heavily regulated environment. Our structure, policies, and procedures aid us in complying with laws and regulations. Compliance managers are in place to manage and report on compliance on a regular basis. We also undergo regular review by internal, external and regulatory audit.
Summary 20
Summary As we reflect back on 2015, it was a challenging year and we are proud of the accomplishments of Cornerstone Credit Union. While we continue to focus on serving the needs of our members, the economic and business conditions we face have an impact to the performance of our Credit Union. Despite the challenges encountered throughout the past year, we were still able to grow our organization, improve technology, expand service delivery, and find efficiencies that could be reinvested back into our organization for the benefit of our members. We continue our commitment to grow our organization and expand service to our members and, through collaboration, we will continue to work together with our partner credit unions for the benefit of all stakeholders of Cornerstone. Thank you to our Board of Directors and Staff for the commitment and hard work put forth over the past year. We also wish to acknowledge and show appreciation to our members for their continued support as our organization evolves. We look forward to meeting all of your financial needs in the future.
Credit Union Market Code Cornerstone Credit Union voluntarily adheres to the Credit Union Market Code. This code has been jointly developed by Saskatchewan credit unions, SaskCentral and Credit Union Deposit Guarantee to ensure the protection of credit union members. The code sets forth guidelines for the following areas: •
Complaint handling, which outlines the process for dealing with all complaints regarding the service, products, fees or charges of Cornerstone Credit Union.
•
Fair sales by outlining the roles and relationship of staff to all members/clients and in accordance with the financial services agreement.
•
Financial planning process to advise members/ clients on the risks and benefits associated with financial planning services.
•
Privacy to protect the interests of those who do business with Cornerstone Credit Union. Privacy is the practice to ensure all member/client information is kept confidential and used only for the purpose for which it was gathered.
•
Professional standards to preserve a positive image of Cornerstone Credit Union among our members, clients and communities.
•
Capital management to ensure our capital structure aligns with our risk philosophy.
•
Financial reporting to adhere to business and industry standards.
•
Governance practices to adhere to the intent and stipulation of our corporate bylaws, which are approved by the membership of Cornerstone Credit Union.
•
Risk management to ensure all risks are measured and managed in an acceptable fashion.
Cornerstone Credit Union | Annual Report 2015
21 Co-operative Principles
Co-operative Principles As a true co-operative financial institution, Cornerstone Credit Union acts in accordance with internationally recognized principles of co-operation:
Voluntary and Open Membership Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
Democratic Member Control Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organized in a democratic manner.
Member Economic Participation Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.
Cornerstone Credit Union | Annual Report 2015
Autonomy and Independence Co-operatives are autonomous, self-help organizations controlled by their members. If they enter to agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.
Education, Training and Information Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation.
Co-operation among Co-operatives Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.
Concern for Community Co-operatives work for the sustainable development of their communities through policies approved by their members.
Deposits Fully Guaranteed 22
Deposits Fully Guaranteed Credit Union Deposit Guarantee Corporation (the Corporation) is the primary regulator and deposit guarantor for Saskatchewan credit unions. The Corporation is given its mandate through provincial legislation, The Credit Union Act, 1998, for the main purpose of guaranteeing the full repayment of deposits held in Saskatchewan credit unions. The Corporation has successfully guaranteed the repayment of deposits held in Saskatchewan credit unions for over 60 years. By guaranteeing deposits and promoting responsible governance, the Corporation contributes to confidence in Saskatchewan credit unions. Continuing to respond to regulatory changes at the international and national levels was a key focus for the Corporation in 2015. At the provincial level, in support of the Standards of Sound Business Practice, work continued on the development of additional standards and guidance that align with current international
standards. In addition, the Corporation was actively involved in discussions with provincial and federal authorities in relation to developments associated with the shift in federal policy direction. These efforts will ensure the Corporation is positioned to continue to deliver on its mandate of protecting credit union depositors which, in turn, contributes to the strength and stability of Saskatchewan credit unions. In 2016 the Corporation will continue to focus on the implications of the changing regulatory environment in addition to carrying forward its preventive efforts to support credit unions as an effective first level of deposit protection. Maintaining constructive relationships with credit unions and investing in programs that reduce risk to the Deposit Guarantee Fund will continue to be a key priority. For more information about deposit protection, the Corporationâ&#x20AC;&#x2122;s regulatory responsibilities and its role in promoting the strength and stability of Saskatchewan credit unions, talk to a representative at the credit union or visit the Corporationâ&#x20AC;&#x2122;s website at www.cudgc.sk.ca.
Cornerstone Credit Union | Annual Report 2015
23 Summarized Financial Statements
Summarized Financial Statements Report of the Independent Auditors’ on the Summary Consolidated Financial Statements To the Members of Cornerstone Credit Union Financial Group Limited,
The accompanying summary consolidated financial statements of Cornerstone Credit Union Financial Group Limited and its subsidiary, which comprise the summary consolidated statement of financial position as at December 31, 2015, theIndependent summary consolidated of incomeFinancial and comprehensive income, changes in members’ equity and cash Report of the Auditors' on thestatements Summary Consolidated Statements flows for the year then ended are derived from the audited consolidated financial statements of Cornerstone Credit UnionofFinancial Group for the yearLimited, ended December 31, 2015. We expressed an unmodified audit opinion on To the Members Cornerstone Credit Limited Union Financial Group those consolidated financial statements in our report dated February 11, 2016.
The accompanying summary consolidated financial statements of Cornerstone Credit Union Financial Group Limited and its subsidiary, which comprise the summary consolidated statement of financial position as atdo December 31, 2015, summary consolidated statements of The summary consolidated financial statements not contain all the disclosures required by International Financial ncome and comprehensive income, changes in members' equity and cash flows for the year then ended are derived from the audited Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for consolidated financial statements of Cornerstone Credit Union Financial Group Limited for the year ended December 31, 2015. We the audit audited consolidated financial statements of in Cornerstone Credit Union Financial Group Limited. expressed reading an unmodified opinion on those consolidated financial statements our report dated February 11, 2016.
Management’s Responsibility for the Summary Consolidated Financial Statements
The summary consolidated financial statements do not contain all disclosures required by International Financial Reporting Standards. Reading the summary consolidated financial statements, therefore, is not forof reading the audited consolidated financial Management is responsible for the preparation of aa substitute summary the audited consolidated financial statements in statements of Cornerstone Credit Union Financial Group Limited.
accordance with International Financial Reporting Standards.
Management's Responsibility for the Summary Consolidated Financial Statements Auditors’ Responsibility Management is responsible for the preparation of a summary of the audited consolidated financial statements in accordance with International Financial Reporting Standards.
Our responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, “Engagements Auditors' Responsibility Our responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted ” to Report on Summary Financial Statements.
n accordance with Canadian Auditing Standard (CAS) 810, "Engagements to Report on Summary Financial Statements."
Opinion
In our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of consolidated Cornerstone Credit Union Financial Group Limited for the financial year ended December 31, 2015 are a fair n our opinion, the summary financial statements derived from the audited consolidated statements of Cornerstone Credit Union Financial Group Limited for the year ended December 31, 2015 are a fair summarywith of those consolidated Financial financial statements, in Standards. summary of those consolidated financial statements, in accordance International Reporting
Opinion
accordance with International Financial Reporting Standards.
February 11, 2016 February 11, 2016 800 - 119 4th Avenue 800 - 119South 4th Avenue South Saskatoon, Saskatchewan Saskatoon, Saskatchewan S7K 5X2
Chartered Professional Accountants
S7K 5X2 Chartered Professional Accountants
Full financial statements can be obtained upon request from any branch of Cornerstone Credit Union or by visiting cornerstonecu.com
Cornerstone Credit Union | Annual Report 2015
Summarized Financial Statements 24 Cornerstone Credit Union Financial Group Limited
Summary consolidated statement ofof financial Summary consolidated statement financialposition position
As at December 31 ($ thousands) Assets Cash and cash equivalents Investments Member loans receivable Other assets Property, plant & equipment Intangible assets Liabilities Member deposits Securitization debt Other liabilities Membership shares Members' equity Retained earnings Contributed surplus Accumulated other comprehensive income
2015
2014
43,707 111,863 787,777 3,563 15,872 873 963,655
18,442 106,388 765,838 2,212 16,499 1,073 910,452
856,634 19,546 7,522 8,382 892,084
811,958 16,424 6,846 8,688 843,916
69,128 2,379 64 963,655
63,812 2,379 345 910,452
A full set of audited financial statements is available from the Credit Union
Cornerstone Credit Union | Annual Report 2015
25 Summarized Financial Statements
Summary consolidated statement of income and comprehensive Cornerstone Creditincome Union Financial Group Limited
Summary consolidated statement of income and comprehensive income
Year Ended December 31 ($ thousands) Interest income Interest expense Gross financial margin Provision for impaired loans Net financial margin Other income Net interest and other income Operating expenses Income before income taxes Provision for income taxes Net income Other comprehensive income (loss), net of tax Total comprehensive income A full set of audited financial statements is available from the Credit Union
Cornerstone Credit Union | Annual Report 2015
2015
2014
35,237 9,516 25,721 1,023 24,698 5,515 30,213 24,002 6,211 895 5,316 (281)
35,614 9,836 25,778 50 25,728 5,353 31,081 23,643 7,438 1,018 6,420 89
5,035
6,509
Summarized Financial Statements 26
Summary consolidated statement of changes in membersâ&#x20AC;&#x2122; equity Cornerstone Credit Union Financial Group Limited
Summary consolidated statement of changes in members' equity Year Ended December 31 ($ thousands)
Balance December 31, 2013 Net income for the year Other comprehensive income for the year Balance December 31, 2014 Net income for the year Other comprehensive loss for the year Balance December 31, 2015
Accumulated Other Comprehensive Income
Retained Earnings
Contributed Surplus
57,392
2,379
256
60,027
6,420 -
-
89
6,420 89
63,812
2,379
345
66,536
5,316 -
-
69,128
2,379
(281) 64
Total
5,316 (281) 71,571
A full set of audited financial statements is available from the Credit Union
Cornerstone Credit Union | Annual Report 2015
27 Summarized Financial Statements
Summary consolidated statement of cash flows Cornerstone Credit Union Financial Group Limited
Summary consolidated statement of cash flows
2015
2014
7,440 47,410 (29,585)
8,553 47,949 (38,381)
Increase in cash and cash equivalents
25,265
18,121
Cash and cash equivalents, beginning of year
18,442
321
Cash and cash equivalents, end of year
43,707
18,442
Year Ended December 31 ($ thousands) Cash flows provided by (used in) the following activities: Operating activities Financing activities Investing activities
A full set of audited financial statements is available from the Credit Union
Cornerstone Credit Union | Annual Report 2015
cornerstonecu.com