AnnuAl RepoRt 2012 Growing Stronger - PCCU Annual Report.pdf · There’s an old phrase that goes – “Mighty oaks from little acorns grow”. To put it another way, great things

A n n u A l R e p o R t 2 0 1 2

Growing Stronger

There’s an old phrase that goes – “Mighty oaks from little acorns grow.” To put it another way, great things

often come from humble beginnings. At PCCU we know this is especially true when it comes to your finances.

The acorn… filled with possibilities, potential and promise.

ho would think that at first glance, a small acorn has the potential to one day become a mighty oak tree? Without looking deeper, what would our expectations of that little acorn be? If we

take the time to learn more, we find that with an environment that feeds and nurtures the acorn, hidden and great potential can be found.

PCCU AnnUAl RePoRt 2012 3

Here at Prairie Centre Credit Union, we must provide the same environment for our members to grow and achieve their financial goals. One of the best ways to do this is to share and learn from each other. Each member’s story is different and so is the journey they take. It’s our responsibility to surround the member with the right growing conditions such as innovative products and services. Just like in life, the acorn will struggle and persevere to get through the soil and continue its growth – it can take time and great effort, but the outcome can be so much more than what we envisioned at that first glance. As Albert Einstein stated, “Many see what is… but we see what can be”. In our quest to help members grow their money, let us remember the acorn. Our members’ continued support helps enable Prairie Centre Credit Union be all that we can be, so those we serve can be all they can be… the oak that sleeps inside the acorn.

The acorn also reflects on the potential within people and their ideas. We’d like to celebrate our employee’s career milestones and recognize the Long Service Recipients for 2012. You’ve all helped PCCU stand tall and strong through the years. Thank you for growing with us! 35 Years of Service – Lyle Kubat30 Years of Service – Vickie Dunn, Gaylene Pederson25 Years of Service – Tim Askin, Judy Lawes20 Years of Service – Maggie Latsay15 Years of Service – Brandie Appel, Carren Blosky, Tanya Goheen, Carol Lucki-Book, Marion Miller, Janet Reimer, Bev Rowley, Eileen Schmidt10 Years of Service – Becky Giles, Dallas McDonald, Kathy Meyers, Julie Sparks5 Years of Service – Jannelle Curtis, Justin Dubasov, Christine Leys, Jaci Nieman

The acorn… filled with possibilities, potential and promise.

Prairie Centre has no “urban”

branches, in fact we are the

largest “all rural” credit union in Saskatchewan.

MeSSAGe FRoM tHe BoARD PReSIDent

umble beginnings. You could describe Prairie Centre that way - first formed from the merger of five small town credit unions. Grown into a mighty oak? Well maybe not quite, but growing, absolutely. Prairie Centre, the largest “all rural” credit union in Saskatchewan, now serves a total of 11

communities, and places in the top ten of all credit unions in the province. Taken as a whole, deposits by PCCU members grew by $33 million this past year, and loans were up even more, by $55 million. This is impressive for two reasons: it underlines the success and prosperity that our communities are experiencing of late, and even more important, it shows that as members, you have seen fit to entrust a share of that prosperity here with your member-owned, locally based financial institution.

2012 was a banner year for other reasons as well. You hopefully noticed some extra activity in each of your communities surrounding the 2012 International Year of Co-operatives. Prairie Centre celebrated the occasion by displaying community project proposals in each of our branches and then placing the decision to award a total of $44,000 to worthwhile projects into the hands of PCCU members in each community. It went over very well.

2013 marks the last year in our current three-year strategic plan, a major part of which has been dedicated to improving access to credit union services. Some improvements have already been made, but there are also some very exciting, very visible changes yet to come that will set a new standard for convenient service and ease of access. At the beginning of this past February, Board and Management have again met to strike a direction for the next strategic plan, which will take effect at the beginning of 2014. Through both the current and the new strategic plans, our first priority has been to ensure the credit union is properly capitalized and equipped to accommodate even further growth as it comes. At the same time, we have asked management to ensure that we offer the widest practical range of services at the most competitive cost possible. It’s a fine balance, but we think we are striking it well.

Your Board of Directors at Prairie Centre is an active and engaged one. Our job is to focus on the big picture, to take a “strategic” view of how the Credit Union operates and how we deploy resources to serve our members’ needs. We try to attract a variety of personalities to the board, and maintain a constructive, energetic attitude. This is why we have a bylaw to limit the number of terms a director can stay on the board, and is also why we are always trying to find new board members. You don’t need to be a big depositor or an accountant to become involved with the board, you just need to have an interest in the health of your community, a few extra hours each month, and a willingness to learn. I strongly encourage you to make your interest known if this is something that has any appeal for you at all.

I wish you happiness and success in the coming year. CRAIG HAnSon

President, Board of Directors


It is a great time to be located in

rural Saskatchewan and enjoy the

success that our region and the entire

province has seen.

MeSSAGe FRoM tHe CHIeF exeCUtIve oFFICeR

ur regional economy in 2012 posted an above average growth in agriculture, resources and recreational sectors. Our entire region has continued to prosper over the last three years for individuals and our communities. It is a great time to be located in rural Saskatchewan

and enjoy the success that our region and the entire province has seen.

At PCCU, our assets increased by $37M, which equates to over 8% growth, while our loans increased by $55M, which is 16% growth. Overall our assets under management increased to $564M or almost 6%. Our overall growth is a direct reflection of our Saskatchewan economy.

Our net income increased from $2.7M in 2011 to $3.3M in 2012. We continue to operate in a low interest margin environment, and continue to focus on gaining operating efficiencies and generating other non-interest revenue. We expect the low interest environment to continue through 2013 and 2014.

As mentioned in last year’s report, we continue to work at building our capital / retained earnings. During 2012, we increased our capital from 6.50% to 6.68% or $31.8M. Although we did not achieve our goal of 7%, due to the higher than expected growth levels, we are satisfied with our progress. In our 2013 business plan / capital plan, we expect to exceed the 7% level, and your Board of Directors and Management will be working hard to achieve our goals. The strength and long term viability of our credit union require a strong capital base and we are committed to achieving this goal.

In 2012, we celebrated the International Year of Cooperatives. We determined that one of the best ways to celebrate the year was to give back to our 11 communities, and did this by allocating $4,000 to each one. Since there were numerous projects in each community, we decided that the best way to select a winner was to have members vote to choose the recipient. Congratulations to all the successful groups.

In 2012, we completed a major member and staff survey, which will be used in developing our new strategic plan for 2014 – 2016. I would like to thank everyone who participated in the survey.

We want to thank you, our members for your great support in 2012, and we look forward to meeting your needs in 2013. I want to also thank our 120 staff for their tremendous work throughout the year, and also to our Board of Directors for their strategic direction in guiding our credit union. “Prairie Centre, 1st Choice Financial Solutions for Our Community.” Al MeyeR

CEO


BoARD oF DIReCtoRS Craig Hanson, PresidentElected to the Prairie Centre Board of Directors in 2005. Farmer / Engineer. Sits on the Executive and Governance Committee, the Audit and Risk Committee, and the Conduct Review Committee.

Brian Benson, Vice-PresidentElected to the Prairie Centre Board of Directors in 2009. Retired. Sits on the Executive and Governance Committee, the Audit and Risk Committee, and the Conduct Review Committee.

Keith Collins, Vice-PresidentElected to the Prairie Centre Board of Directors in 2009. Farmer / Custom Grain Hauler. Sits on the Executive and Governance Committee, the Audit and Risk Committee and the Conduct Review Committee.

Cathy newby, Vice PresidentElected to the Prairie Centre Board of Directors in 2005. Farmer / Business Owner. Sits on the Executive and Governance Committee, the Human Resources and Policy Review Committee.

Michelle BrummundElected to the Prairie Centre Board of Directors in 2010. Accountant / Farmer. Sits on the Audit and Risk Committee and the Conduct Review Committee.

Greg HannayElected to the Prairie Centre Board of Directors in 2009 Farmer / Seed Cleaning Plant Owner. Sits on the Human Resources and Policy Review Committee.

John KutzElected to the Prairie Centre Board of Directors in 2011. Farmer. Sits on the Human Resources and Policy Review Committee.

Karen SinclairElected to the Prairie Centre Board of Directors in 2010. ACI / Outlook Trainer Social Services. Sits on the Human Resources and Policy Review Committee.

evan SjovoldElected to the Prairie Centre Board of Directors in 2005. Farmer. Sits on the Audit and Risk Committee and the Conduct Review Committee.

BoARD AnD exeCUtIve teAM PRoFIleS

Back Row l – R: John Kutz, Keith Collins, Cathy newby, Karen Sinclair, Michelle Brummund, Greg Hannay Front Row l – R: Craig Hanson, evan SjovoldMissing: Brian Benson

8 PCCU AnnUAl RePoRt 2012

exeCUtIve teAM Al Meyer, Chief Executive Officer (CEO)In his role as CEO, Al is responsible for implementing the corporate strategic direction, mission and values, along with overseeing the overall credit union operations. With over 30 years of financial institution experience, Al provides leadership within Prairie Centre, the credit union system, and Prairie Centre communities through corporate and community involvement. Since starting with the credit union system, Al has held a number of managerial positions both in Saskatchewan and Alberta. He has been with Prairie Centre since 1993, and CEO since 2000. Al has been a member of the Sask Central Board of Directors since 2007 sitting on the Executive, Audit & Risk, and Delegate Engagement Committees for Sask Central. Al is a director of Co-operative Superannuation Society and is a member of the Celero Management Committee.

tim Askin, Vice President RetailTim is responsible for managing the business activities of all eleven retail service centres as well as managing Advisory services which includes Financial Specialists, Trust Services, Credential Securities, and Credential Financial Strategies. Tim oversees the development of the credit union’s marketing strategy, and spearheads product and service development initiatives pertaining to retail operations. He also manages all branch facilities and properties owned by the credit union. Tim has over 25 years of experience in various credit unions in the system. Tim has completed the Executive Certificate in Applied Leadership at Queens Business College.

Brad Appel, Vice President CreditIn his role as VP Credit, Brad provides leadership and strategic execution of PCCU’s credit management, underwriting standards, loan quality, and overall credit administration. With close to 20 years of experience with Prairie Centre, Brad has held a number of progressively responsible positions. Brad participates with the Agriculture Advisory Committee for SaskCentral. He holds a Business Administration Management Diploma, and a Fellows (FCUIC) and an Associate (ACUIC) designation with the Credit Union Institute of Canada with a Specialty in Lending.

Colleen Harmatiuk, Vice President Corporate ServicesColleen is responsible for overseeing and providing technology strategy, maintaining efficient centralized deposit support functions, overseeing internal audit, compliance and risk management for the credit union. This includes researching and implementing best practices, reviewing and maintaining prudent process for the Enterprise Risk Management, Business Continuity, Privacy, Anti-Money Laundering, Market Code, and other areas of credit union compliance. Colleen has over 20 years of experience in various credit unions in the system.

lesley Carlson, Vice President FinanceIn her role as VP Finance, Lesley is in charge of monitoring the overall financial performance of the credit union, overseeing the operations of the Finance Division. This includes financial forecasting, corporate investments, and managing liquidity and capital of the credit union. Lesley has close to 30 years of credit union experience in a variety of positions – frontline, marketing, deposits, wealth management, and now finance. Lesley earned the Certified Financial Planners designation in 2005, completed the ACUIC Designation with honors and has a Diploma in Management Studies.

top Row: lesley Carlson, Colleen Harmatiuk Bottom Row: tim Askin, Al Meyer, Brad Appel


StRAteGIC oveRvIewPrairie Centre Credit Union’s mission statement is to provide “1st Choice Financial Solutions for our Community.” To achieve this the Board of Directors, along with Executive Management, has set specific objectives that support this vision. We follow a three year planning cycle, and establish specific goals annually to accomplish the objectives we have established in our plans. In 2013, we complete our current plan and start planning for our next three year cycle. Our current objectives are highlighted below:

Financial Our goals in the financial area are to maintain strong profitability to build capital, manage risk, develop and maintain services within the communities, improve efficiencies, and increase non-interest revenues.

In 2012 our assets grew to $477 million from 2011 levels of $439 million. The strong asset growth was accompanied by an increase in our loans to $382 million from $327 million the year prior. Member deposits are at $441.9 million showing large increases from the prior year close to $409 million.

Interest margins continued to be low as interest rates remained constant throughout 2012. This had a negative impact on profitability. Through expense control and stronger non-interest revenue, we were able to achieve profitability above targeted levels. We grew our profit to $3.3 million over our prior year result of $2.7 million.

MAnAGeMent DISCUSSIon AnD AnAlySIS

IntRoDUCtIon Prairie Centre Credit Union is an independent regional credit union owned by our members operating in branches located in the communities of Beechy, Dinsmore, Eatonia, Elbow, Elrose, Eston, Harris, Kyle, Loreburn, Outlook and Rosetown. As of December 31, 2012, Prairie Centre Credit Union has 12,952 members, which is very stable compared to our membership of 12,995 the prior year.

We employ over 120 people who live and work in the trading area and provide full financial services with a focus on helping our members grow their money. Our staff attend ongoing training and development sessions to improve their skills, allowing us to better assist and serve our members.

The Saskatchewan economy remains strong, and we have enjoyed strong asset growth along with our member’s prosperity this year. Persistent low interest rates create a narrower interest margin and we look for ways to reduce costs to remain profitable and build our capital levels.

The Conference Board of Canada forecasts that Saskatchewan will have the fastest economic growth in Canada over the next two years. The low interest rate environment will continue as inflation in Canada has remained low and the Bank of Canada feels no pressure to adjust monetary policy. Continued stress in the European and United States markets create uncertainty globally as both areas are dealing with fiscal austerity measures. Global markets forecast weak growth in 2013 as they continue to control government spending.


Prairie Centre Credit Union’s mission statement is to provide “1st Choice Financial Solutions for our Community.”

In 2013, we are projecting slightly lower profit levels due to the continued low interest margin which reduces our net interest revenue. We will continue to find ways to reduce operating costs and earn additional revenue to reach our targeted profitability and grow the capital levels of our credit union.

technology In technology, our priorities are to develop technology programs for internal usage, further develop on-line service delivery, and implement new technology systems to meet member needs.

In 2012, there was an upgrade to our banking system improving the efficiency of how we use this tool to serve our members. Staff were prepared and there was minimal disruption. We upgraded Microsoft Outlook and ensured all computers have the highest security levels for data integrity.

Priorities in 2013 are to replace our phone systems, implement a more efficient account opening system to streamline this process for members, and to find ways that allow members to process electronic transactions.

Communication Our communication aim is to obtain member and staff input to assist in the development of Prairie Centre Credit Union. Further, we need to provide information about Prairie Centre Credit Union on our products, services and goals to our members, staff and communities.

Insight and direction is provided by our members through their responses on our regular website polls. We also conducted member and staff surveys in 2012 that will provide input to help set future direction. The Board of Directors provides feedback through our regular meetings and periodic planning sessions.

In 2012, we communicated with members through regular updates to our Prairie Centre website. We utilize in-branch


marketing through our monitors, posters and displays as well as local radio and newspapers to promote our products and services to our members.

Our priority for 2013 is to maintain and build upon the communication channels established in the last two years.

Service Delivery The key focus for service delivery is access of services for our members. We need to maintain our physical branch structure while developing new electronic service delivery methods.

In 2012, we provided full financial services to all of our members. We are pleased to offer a comprehensive selection of financial services from loans, deposits and registered savings plans to financial planning, mutual funds, securities, and tax free savings accounts. Our trained and experienced staff are there to serve our members, at our members’ convenience.

Our Member Direct Mobile app made it even easier to check your accounts from your smartphone. Also in 2012, all of our members’ cards received the new chip card technology making card transactions more secure. Prairie Centre offers the best security currently available for remote services to provide our members peace of mind. Prairie Centre Credit Union is focused on enhancing service delivery channels to our members. Initiatives in 2013 will investigate opportunities for members to open deposit accounts and apply for loans remotely.

Prairie Centre facilities are welcoming and secure. In 2012, we upgraded the heating and cooling system in our Kyle Branch and improved the roof in Beechy. We also finalized plans for a new branch in Eston, and look forward to the building taking shape in 2013. These projects demonstrate our continued commitment to providing service in our communities. In 2013, we need to make improvements on the roof of our Administration Building in Rosetown.


Currently our regulator requires that a credit union holds a minimum Tier 1 capital ratio of 5.0% and a minimum risk weighted ratio of 8.0%. Prairie Centre currently has a minimum target level for Tier 1 capital of 6.50% and our minimum target level for risk weighted assets is set at 9.60%. Credit unions assess additional capital requirements based on the risks faced by their individual operations. Additional work will be done in 2013 to ensure the target levels as stated are sufficient for the risks present in the environment Prairie Centre Credit Union operates.

Prairie Centre 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 Union’s Tier 1 capital ratio. The credit union retains its annual earnings in order to meet its capital objectives.

In 2012, our Tier 1 capital level increased to 6.70% from 6.50% in the prior year, and our risk weighted assets ratio was up slightly at 10.25% from 10.16% in 2011. Strong growth in assets at the end of the year resulted in us falling short of budgeted targets even though our earnings outpaced our expectations. Looking ahead to 2013, we believe our Tier 1 capital ratio will reach 7.22% and the risk weighted assets ratio will be at 11.08%.

Value proposition A strong value proposition strengthens our marketplace position – it is how we set ourselves apart from our competitors.

Grow Your Money – it’s what we’re in business to do. Our members have told us that they want their financial institution to help them grow their money and we agree. It’s a win-win proposition as when our members grow their money, we grow our money.

CAPItAl MAnAGeMentWorldwide, financial institutions are being tasked with building capital to ensure downturns in the economy can be withstood. Prairie Centre Credit Union builds capital through retained earnings which is found on our balance sheet in Members’ equity. Capital adequacy uses two measures: the first is a simple comparison of Tier 1 capital to total assets referred to as the leverage test; and the second is the risk based test which compares eligible capital to risk weighted assets.

Credit unions operate in a highly regulated environment, where Credit Union Deposit Guarantee Corporation (CUDGC) sets regulatory guidelines to which credit unions must adhere to. In order to assess capital adequacy, CUDGC is following standards adopted by financial institutions around the globe, including Canadian banks. The standards are evolving and are a response to the recent worldwide financial crisis.

The Board of Directors and Management believe in maintaining a strong capital position. The credit union manages capital in accordance with its capital management plan and Board approved capital policies. The capital management plan is developed in accordance with the regulatory capital framework and is regularly reviewed and approved by the Board of Directors. The goal of capital management is 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.


$5M

$10M

$15M

$20M

$25M

$35M

$30M

2007 2008 2009 201220112010

2007 2008 2009 201220112010

2007 2008 2009 201220112010

Tier 1 Capital Ratio

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Regulatory Minimum Praire Centre Minimum

Risk Weighted Capital Ratio

Regulatory Minimum

Praire Centre Minimum

Capital Levels

Tier 1 Capital Ratio (Leverage Test)

Risk Weighted Capital Assets

CApItAl leVelS

enterprise Risk Management As a financial institution, Prairie Centre Credit Union is exposed to a variety of risks. The fundamental strength of a credit union is the level of capital it holds to protect against normal, anticipated, and unexpected business events. Prairie Centre has a moderate level of capital and therefore takes a moderate approach to risk. Our main objective is to preserve and build capital while growing our market share.

In support of this commitment, Prairie Centre Credit Union maintains appropriate levels of control over all risks faced by the enterprise in the normal course of doing business. An enterprise-wide risk management (ERM) approach is used for the identification, measurement and monitoring of risks.

Prairie Centre utilizes the ERM framework to actively manage all risks using a methodical approach for each risk category as detailed in this section. Both qualitative and quantitative measures guide risk tolerances. The Board is responsible for approving the overall business strategies and for understanding the major risks and setting acceptable levels for these risks. Annually, the Board reviews the relevant risks faced by the credit union, and approves an action plan set by executive management.

Executive management is responsible for implementing strategies and policies approved by the Board and for developing processes that identify, measure, monitor, and control risks. In order to achieve this objective, executive management undertakes continuous risk identification and annually, in conjunction with the business plan, reviews emerging risks from activities planned and by changes occurring in the marketplace. Required activities are built into the budget and business plan for the upcoming year. Strategic RiskStrategic risk is the risk that adverse decisions or ineffective plans will impact 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 the formulation of key strategic measurements to ensure we focus on strategic objectives.


$5M

$10M

$15M

$20M

$25M

$35M

$30M

2007 2008 2009 201220112010

2007 2008 2009 201220112010

2007 2008 2009 201220112010


1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

6.68% 6.21% 5.80% 6.60% 6.50% 6.70%

9.76% 9.49%9.89%

10.45% 10.15% 10.25%

5.00%5.00% 6.00%

6.50%

8.00%8.00%9.60%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%



Regulatory Minimum


Capital Levels


Risk Weighted Capital Assets

t IeR 1 CApItAl RAtIo (leVeRAGe teSt )

$5M

$10M

$15M

$20M

$25M

$35M

$30M

2007 2008 2009 201220112010

2007 2008 2009 201220112010

2007 2008 2009 201220112010


1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

6.68% 6.21% 5.80% 6.60% 6.50% 6.70%

9.76% 9.49%9.89%

10.45% 10.15% 10.25%

5.00%5.00% 6.00%

6.50%

8.00%8.00%9.60%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%



Regulatory Minimum


Capital Levels


Risk Weighted Capital AssetsRISK WeIGHteD CApItAl ASSetS


The Asset and Liability Committee and the Finance team oversee liquidity risk exposure and management. Prairie Centre’s liquidity risk management framework includes the following processes and controls by way of monitoring actual and anticipated inflows and outflows of funds on a daily basis. Operational and Statutory Liquidity levels are assessed and reports are provided to management and the Board of Directors quarterly. We actively manage liquidity and funding risk by holding a portfolio of liquid assets as well as by establishing borrowing facilities with Concentra Financial.

A system-wide initiative was undertaken in 2012 to review operational liquidity in both normal operating and emergency situations. Prairie Centre will align policy and procedures in 2013 based on the findings of the review and make any necessary improvements to our liquidity position as required.

Credit RiskCredit risk comes primarily from our direct lending activities and syndicated loans (credit products purchased, but not administered by PCCU) and to a lesser extent our holdings of investment securities. Credit risk is the risk of financial loss resulting from a borrower or counterparty’s inability to meet its obligations.

Credit risk management focuses on underwriting and pricing loans according to their risk and ensuring the overall portfolio is well diversified. There are five parts to credit risk management including policy, credit granting, monitoring and exposure, portfolio management and audit.

Lending practices are set by the Board of Directors in policy and put into practice through procedures as established by management. Review and revision of lending policy and procedures is completed on an ongoing basis with regular reviews and updates.

Credit granting is performed in accordance with approved policies and procedures and applicable legislation. This includes

The credit union uses a comprehensive reporting process to monitor performance relative to plans and provides regular updates to the Board of Directors. As described above, the Enterprise Risk Management Process further identifies emerging risks and formulates plans as risks are identified.

Market RiskMarket risk is the risk that the financial position or earnings will be adversely affected by changes in market conditions such as, interest rates and foreign exchange rates. Prairie Centre’s market risk primarily arises from movements in interest rates. The credit union employs comprehensive management processes around our market exposures and risk taking activities.

There is defined policy around numerous risk measures which are then compared to our current and expected future situation through dynamic modeling. We also utilize income simulation for scenario and stress testing based on changes in interest rates.

Regular reporting of these risk measures and how they compare to credit union policy is provided to the Asset and Liability Committee, Board Audit and Risk Committee and system regulators. We assess the need for mitigating activities and implement appropriate risk mitigating strategies where and when deemed necessary.

liquidity RiskLiquidity is required to meet the day to day cash needs and for loan demands of our members. Liquidity risk arises from general funding activities and through management of our assets and liabilities. It is the risk of having insufficient cash resources or equivalents to meet members’ demand for loans or drawdowns of deposits. The Credit Unions liquidity risk management strategies seek to maintain sufficient liquid resources to continually fund our balance sheet commitments. Liquidity risk management requirements are defined by policies and regulatory standards and limits and as such we maintain 10% of our deposits in liquidity deposits with SaskCentral.


credit analysis, pricing, terms, and documentation of lending. Loan pricing structures are in place to support lenders in pricing decisions and to ensure risk is being offset by rates. Consistent documentation is used by all Prairie Centre branches.

Concentration limits in regards to industry and size of loans have been designed to reflect our risk tolerance. Credit risk is further mitigated through in-depth and ongoing training of loans personnel and independent adjudication of larger 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 and to the Board of Directors through the Audit and Risk Committee.

As detailed in the notes to the financial statements, we have very low levels of impaired loans and our delinquency levels are at historical lows since the formation of Prairie Centre.

legal and Regulatory RiskLegal and regulatory risk arises from potential non-compliance with laws, rules, regulations, or ethical standards in the jurisdiction in which the organization operates. Prairie Centre Credit Union operates in a heavily regulated environment. Compliance managers are in place to manage and report on compliance on a regular basis. All specialized departments are knowledgeable in the regulations that pertain to their areas. In some cases third party expertise is used through contracted services. Audits are performed on a regular basis to review compliance to regulations.

operational RiskOperational 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, 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 risks through internal audit programs, business continuity planning, appropriate insurance coverage, and secure technology solutions.

CoRPoRAte StRUCtURe AnD GoveRnAnCePrairie Centre 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 DirectorsThe Board of Directors is comprised of nine directors, all of whom are independent, and who are nominated and elected on a regional basis. The functions of the Board include formulation of strategic business plans; setting up goals for evaluating the performance of the CEO; approving corporate mission, vision and values; monitoring corporate performance against strategic business plans; ensuring compliance with laws and regulations; keeping members informed regarding plans, strategies and performance of the Credit Union; and other important matters.

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, the Standards of Sound Business Practice, Prairie Centre Credit Union’s articles and bylaws, and all legislation applicable to credit unions.

During the financial year 2012, the Board of Directors held seven regular meetings and also met once regarding performance assessment. Our directors place strong emphasis on learning and development, and participate in training every year. This year they had one group training session, five directors participated in 14 webinars, and two directors completed modules for Credit Union Director Achievement training certification. Credit Union Deposit Guarantee had a workshop which one director attended and



to the Board of Directors, for their approval. The committee is accountable to make recommendations for consideration by the Board of Directors for all human resources planning, the human resources policy, and the total compensation system of the credit union. This committee met twice in 2012. nominating CommitteeThe Nominating Committee oversees the nomination and election processes for elections of credit union directors. The committee is comprised of the directors whose terms are expiring the following year and they met in 2012 to complete the nomination process.

Returning officer CommitteeAs per our Bylaws, the Returning Officer Committee consists of the Returning Officer appointed at the previous Annual Meeting and those members of the Board of Directors whose term expires in two years. The Returning Officer is charged with conducting the election process and as we did not have an election in 2012, there were no activities required by this committee. executive Management Prairie Centre 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 to the Board and committees on a regular basis on performance and risk controls of the credit union relative to the annual business plan, as well as on measures stipulated in policy.

SummaryThank you to our Board of Directors and Staff for their commitment and hard work. We also wish to acknowledge and show appreciation to our members for your support as our organization evolves, and we look forward to meeting all of your financial needs in the future. It is our pleasure to continue to help you, our members…Grow Your Money.

one director went to the Credit Union Executive Society’s Director Conference that provided an in-depth review of governance and economic issues affecting credit unions.

Committees of the Board are established to provide for partitioning of responsibilities which enables a clear focus on specific areas of activity vital to the effective operation of our credit union. Prairie Centre Credit Union has the following Board committees:

executive/Governance CommitteeThe Executive/Governance Committee is comprised of the President and the three Vice-Presidents of the Board. The purpose of the Committee is to act in the capacity of, and on behalf of the Board of Directors between regular or special board meetings as may be required on matters that can be delegated by the Board. Duties related to governance are to set and maintain effective governance guidelines, ensure the performance and succession of senior leadership, and ensure compliance with governance policies and Prairie Centre Credit Union bylaws. This committee met twice in 2012.

Audit and Risk CommitteeThe Audit and Risk Committee, which met four times in 2012, is comprised of five directors. The purpose of the Audit & Risk Committee is to oversee the financial reporting process, review financial statements, liaise with internal and external auditors and regulators, and review internal control procedures.

Conduct Review CommitteeThe Conduct Review Committee, which met four times in 2012, is comprised of five directors. The purpose of the Conduct Review 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.

Human Resources and policy CommitteeThe Human Resources and Policy Committee reviews the existing policies of Prairie Centre Credit Union, for the purpose of recommending any changes, deletions and/or additions



MAnAGeMent’S ReSPonSIBIlIty

To the members of Prairie Centre Credit Union (2006) Ltd.

Management is responsible for the preparation and presentation of the accompanying summary consolidated financial statements, including responsibility for significant accounting judgments and estimates in accordance with International Financial Reporting Standards and ensuring that all information in the annual report is consistent with the statements. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.

In discharging its responsibilities for the integrity and fairness of the summary consolidated financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.

The Board of Directors and Audit and Risk Committee are composed entirely of Directors who are neither management nor employees of the Credit Union. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Audit and Risk Committee has the responsibility of meeting with management, internal auditors, and external auditors to discuss the internal controls over the financial reporting process, auditing matters and financial reporting issues. The Committee is also responsible for recommending the appointment of the Credit Unions’ external auditors.

MNP LLP, an independent firm of Chartered Accountants, is appointed by the members to audit the summary consolidated financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Committee and management to discuss their audit findings.

March 9, 2012

Chief Executive Officer, Al Meyer VP Finance, Lesley Carlson

AUDItoRS’ RePoRt


The accompanying summary consolidated financial statements, which comprise the summary consolidated statement of financial position at December 31, 2012, the summary consolidated statements of income and comprehensive income, changes in members’ equity and cash flows for the year then ended are derived from the audited consolidated financial statements of Prairie Centre Credit Union (2006) Ltd. for the year ended December 31, 2012. We expressed an unmodified audit opinion on those consolidated financial statements in our report dated February 25, 2013.

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 a substitute for reading the audited consolidated financial statements of Prairie Centre Credit Union (2006) Ltd.

Management’s Responsibility for the Summary Financial StatementsManagement is responsible for the preparation of a summary of the audited consolidated financial statements in accordance with International Financial Reporting Standards.

Auditors’ ResponsibilityOur 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 to Report on Summary Financial Statements.”

opinionIn our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of Prairie Centre Credit Union (2006) Ltd. for the year ended December 31, 2012 are a fair summary of those consolidated financial statements, in accordance with International Financial Reporting Standards.

March 9, 2012 Saskatoon, Saskatchewan Chartered Accountants

Auditors’ Report on Summarized Consolidated Financial Statements to the Members of Prairie Centre Credit Union (2006) Ltd.

SUMMARIzeD ConSolIDAteD StAteMent oF FInAnCIAl PoSItIon

December 31 2012 2011

Assets Cash and cash equivalents $ 43,166,506 $ 41,510,345 Investments 46,286,333 66,375,156 Member loans receivable 382,174,564 327,049,380 Other assets 1,306,444 626,867 Property, plant and equipment 4,116,809 4,292,334

$ 477,050,656 $ 439,854,082 liabilities Member deposits $ 441,926,368 $ 408,807,883 Other liabilities 3,181,041 2,457,769 Member shares 64,740 64,970

445,172,149 411,330,622 Members’ equity Retained earnings 31,878,507 28,523,460

$ 477,050,656 $ 439,854,082

Approved on behalf of the Board

Craig Hanson, Director Greg Hannay, Director



SUMMARIzeD ConSolIDAteD StAteMent oF InCoMe AnD CoMPReHenSIve InCoMe

Year Ended December 31 2012 2011

Interest income $ 18,017,502 $ 16,865,320 Interest expense 5,480,271 5,528,795

Gross financial margin 12,537,231 11,336,525

Operating expenses 12,478,777 11,786,216 Other income 3,488,868 3,510,585 Recovery of impaired loans 102,776 78,994

Income before income taxes 3,650,098 3,139,888

Income taxes 295,051 460,473

Net income and comprehensive income 3,355,047 2,679,415

SUMMARIzeD ConSolIDAteD StAteMent oF CHAnGeS In MeMBeRS’ eqUIty

Year Ended December 31

Retained earnings total

Balance, December 31, 2010 25,844,045 25,844,045

Net income 2,679,415 2,679,415


net income 3,355,047 3,355,047


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SUMMARIzeD ConSolIDAteD StAteMent oF CASH FlowS

Year Ended December 31 2012 2011

Cash flows provided by (used in) the following activities: Operating activities $ 3,873,375 $ 2,705,631 Financing activities 33,100,222 45,080,322 Investing activities (35,317,436) (68,423,591) Net decrease in cash and cash equivalents 1,656,161 (20,637,638) Cash and cash equivalents, beginning of year 41,510,345 62,147,983 Cash and cash equivalents, end of year $ 43,166,506 $ 41,510,345

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For complete details and more information, contact your branch today or visit www.pccu.ca

Documents

AnnuAl RepoRt 2012 Growing Stronger - PCCU Annual Report.pdf · There’s an old phrase that goes – “Mighty oaks from little acorns grow”. To put it another way, great things