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Prairie Centre Credit Union (2006) LimitedConsolidated Financial Statements

December 31, 2013

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Prairie Centre Credit Union (2006) LimitedContents

For the year ended December 31, 2013

Page

Management's Responsibility

Auditors' Report

Consolidated Financial Statements

Consolidated Statement of Financial Position................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................1

Consolidated Statement of Comprehensive Income................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................2

Consolidated Statement of Changes in Members' Equity................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................3

Consolidated Statement of Cash Flows................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................4

Notes to the Consolidated Financial Statements................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................5

Management's Responsibility

To the Members of Prairie Centre Credit Union (2006) Limited:

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

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

The Board of Directors and Audit and Risk Committee are composed entirely of Directors who are neither management nor employeesof 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 meetingwith management, internal auditors, and external auditors to discuss the internal controls over the financial reporting process, auditingmatters and financial reporting issues. The Committee is also responsible for recommending the appointment of the Credit Union'sexternal auditors.

MNP LLP is appointed by the members to audit the consolidated financial statements and report directly to them; their report follows. Theexternal auditors have full and free access to, and meet periodically and separately with, both the Committee and management todiscuss their audit findings.

March 6, 2014

Chief Executive Officer, Al Meyer Chief Financial Officer, Lesley Carlson

Independent Auditors Report

To the Members of Prairie Centre Credit Union (2006) Limited:

We have audited the accompanying consolidated financial statements of Prairie Centre Credit Union (2006) Limited and its subsidiaries,which comprise the consolidated statement of financial position as at December 31, 2013, and the consolidated statements ofcomprehensive income, changes in members' equity and cash flows for the year then ended, and a summary of significant accountingpolicies and other explanatory information.

Managements Responsibility for the Consolidated Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance withInternational Financial Reporting Standards, and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit inaccordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.

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

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

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Prairie Centre CreditUnion (2006) Limited and its subsidiaries as at December 31, 2013 and their financial performance and their cash flows for the year thenended in accordance with International Financial Reporting Standards.

Saskatoon, Saskatchewan

March 6, 2014 Chartered Accountants

800 - 119 4th Ave South, Saskatoon, Saskatchewan, S7K 5X2, Phone: (306) 665-6766, 1 (877) 500-0778

Prairie Centre Credit Union (2006) LimitedConsolidated Statement of Financial Position

As at December 31, 2013

2013 2012

AssetsCash and cash equivalents (Note 5) 46,863,501 43,166,506Investments (Note 6) 39,470,536 46,286,333Member loans receivable (Note 7) 417,015,491 382,174,564Other assets (Note 8) 2,123,929 1,306,444Property, plant and equipment (Note 9) 5,404,387 4,116,809

510,877,844 477,050,656

LiabilitiesMember deposits (Note 11) 469,303,562 441,926,368Other liabilities (Note 13) 5,406,875 3,181,041Membership shares (Note 14) 61,015 64,740

474,771,452 445,172,149

Commitments (Note 19)

Members' equityRetained earnings 36,106,392 31,878,507

510,877,844 477,050,656

Approved on behalf of the Board

Craig Hanson, Director Karen Sinclair, Director

The accompanying notes are an integral part of these financial statements

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Prairie Centre Credit Union (2006) LimitedConsolidated Statement of Comprehensive Income


2013 2012

Interest incomeMember loans 17,911,521 16,318,627Investments 1,351,683 1,698,875

19,263,204 18,017,502

Interest expenseMember deposits 5,296,310 5,467,287Borrowed money 12,446 12,984

5,308,756 5,480,271

Gross financial margin 13,954,448 12,537,231Other income 3,747,468 3,488,868

17,701,916 16,026,099

Operating ExpensesPersonnel 7,418,981 7,137,353Security 446,886 406,517Organizational 294,686 321,253Occupancy 977,152 935,032General Business 3,873,436 3,678,622

13,011,141 12,478,777

Income before recovery of impaired loans and provision for (recovery of)income taxes 4,690,775 3,547,322Recovery of impaired loans (190,274) (102,776)

Income before provision for (recovery of) taxes 4,881,049 3,650,098

Provision for (recovery of) income taxes (Note 12)Current 701,647 513,947Deferred (48,483) (218,896)

653,164 295,051

Comprehensive income 4,227,885 3,355,047


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Prairie Centre Credit Union (2006) LimitedConsolidated Statement of Changes in Members' Equity


Retainedearnings Total equity

Balance January 1, 2012 28,523,460 28,523,460


Balance December 31, 2012 31,878,507 31,878,507


Balance December 31, 2013 36,106,392 36,106,392


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Prairie Centre Credit Union (2006) LimitedConsolidated Statement of Cash Flows


2013 2012

Cash provided by (used for) the following activitiesOperating activities

Interest received from member loans 17,959,139 16,220,823Interest received from investments 1,552,462 1,611,963Other income 3,747,468 3,488,868Cash paid to suppliers and employees (11,092,742) (11,584,959)Interest paid on deposits (5,378,595) (5,449,254)Interest paid to SaskCentral/Concentra Financial (12,446) (12,984)Income taxes paid (523,975) (503,858)

6,251,311 3,770,599

Financing activitiesNet change in member deposits 27,459,479 33,100,452Net change in membership shares (Note 14) (3,725) (230)

27,455,754 33,100,222

Investing activitiesNet change in investments 6,615,018 20,175,735Net change in member loans receivable (34,698,271) (54,924,604)Purchases of property, plant and equipment (Note 9) (1,928,318) (470,392)Proceeds from disposal of property, plant and equipment (Note 9) 1,501 4,601

(30,010,070) (35,214,660)

Increase in cash and cash equivalents 3,696,995 1,656,161Cash and cash equivalents, beginning of year 43,166,506 41,510,345

Cash and cash equivalents, end of year 46,863,501 43,166,506


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Prairie Centre Credit Union (2006) LimitedNotes to the Consolidated Financial Statements


1. Reporting entity

Prairie Centre Credit Union (2006) Limited (the Credit Union) was formed pursuant to the Credit Union Act 1998 ofSaskatchewan (the Act) and operates eleven Credit Union branches.

The Credit Union serves members and non-members in Beechy, Dinsmore, Eatonia, Elbow, Elrose, Eston, Harris, Kyle,Loreburn, Outlook, Rosetown, and the surrounding communities. The address of the Credit Unions registered office is P.O.Box 940, Rosetown, Saskatchewan.

The consolidated financial statements of the Credit Union as at and for the year ended December 31, 2013 comprise theCredit Union and its wholly owned subsidiaries Dinsmore Financial Ltd., Prairie Centre Financial Ltd and Elbow AgenciesLtd., a wholly owned subsidiary of Prairie Centre Financial Ltd. Together, these entities are referred to as the Credit Union.

The Credit Union operates principally in personal and commercial banking in Saskatchewan. Operating branches are similarin terms of products and services provided, methods used to distribute products and services, types of members and thenature of the regulatory environment.

The Credit Union conducts its principal operations through various branches, offering products and services includingdeposit business, individual lending, and independent business and commercial lending. The deposit business provides awide range of deposit and investment products and sundry financial services to all members. The lending business providesa variety of credit products and services designed specifically for each particular group of borrowers. Other businesscomprises business of a corporate nature such as insurance, investment, risk management, asset liability management,treasury operations and revenue and expenses not expressly attributed to the business units.

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards(IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The consolidated financial statements were approved by the Board of Directors and authorized for issue on March 6, 2014.

2. Change in accounting policies

Standards and Interpretations effective in the current period

The following new or amended standards, and their resulting consequential amendments, were applied for the first time inthe current year:

IAS 19 Employee Benefits

The amendment to IAS 19 significantly impacted the accounting for defined benefit plans. The Credit Union has no definedbenefit plans; therefore, this amendment had no impact on the Credit Unions financial results. The amendment also revisedthe accounting for termination benefits and amended the definitions of short and long term which did not have a materialimpact on the Credit Unions financial results.

IFRS 7 Financial Instruments: Disclosure

The amendment to IFRS 7 introduced disclosure on financial assets that were offset in accordance with IAS 32 and masternetting or similar arrangements. The revised IFRS 7 impacted current year and prior year disclosures only (refer to Note 17)and had no impact on the Credit Unions financial results.

IFRS 10 Consolidated Financial Statements

As a result of adopting IFRS 10, the Credit Union has changed its accounting policies with respect to determining whether ithas control over and consequently consolidates its investees. IFRS 10 changes the definition of control such that aninvestor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee andhas the ability to affect those returns through its power over the investee.

In accordance with the transitional provisions of IFRS 10, the Credit Union has re-assessed the control conclusion for itsinvestees at January 1, 2013 and concluded that the new standard does not change its previous conclusion.

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2. Change in accounting policies (Continued from previous page)

IFRS 11 Joint Arrangements

As a result of adopting IFRS 11, the Credit Union changed its accounting policies with respect to the classification andaccounting for arrangements over which it has joint control with one or more other parties i.e. joint arrangements. Jointarrangements are now classified as either joint ventures or joint operations based on the Credit Unions contractual rightsand obligations. Joint venturers use the equity method in accordance with amended IAS 28 to account for their interest inthe joint venture as proportionate consolidation is no longer permissible. For joint operations, the relevant assets, liabilities,income and expenses are recognized and measured based on applicable IFRSs, in relation to their interest in thearrangement.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 requires disclosures with respect to interests in subsidiaries, joint arrangements, associates and/or unconsolidatedstructured entities. In general, the adoption of IFRS 12 has resulted in additional disclosures in the Credit Unionsconsolidated financial statements. Refer to Note 4.

IFRS 13 Fair Value Measurement

IFRS 13 improves consistency and reduces complexity of fair value measurements by providing a precise definition of fairvalue and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirementsdo not extend the use of fair value accounting but provide guidance on how it should be applied where its use is alreadyrequired or permitted by other standards within IFRS. In accordance with the transitional provisions, IFRS 13 has beenapplied prospectively from January 1, 2013. The adoption of IFRS 13 did not have an impact on the measurement of theCredit Unions assets and liabilities but has resulted in additional disclosures. Refer to Note 18.

3. Basis of preparation

Basis of measurement

The consolidated financial statements have been prepared using the historical basis except for the revaluation of certainfinancial instruments.

Functional and presentation currency

These consolidated financial statements are presented in Canadian dollars, which is the Credit Unions functional currency.

Significant accounting judgments, estimates and assumptions

The preparation of the Credit Unions consolidated financial statements requires management to make judgments,estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and thedisclosure of contingent liabilities, at the reporting date. However, uncertainties about these assumptions and estimatescould result in outcomes that would require a material adjustment to the carrying amount of the asset or liability affected inthe future.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognized in comprehensive income in the period in which the estimate is revised if revision affects only that period, or inthe period of the revision and future periods if the revision affects both current and future periods.

Key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date are discussedbelow.

Allowance for impaired loans

The Credit Union reviews its individually significant loans at each reporting date to assess whether an impairment lossshould be recognized. In particular, judgment by management is required in the estimation of the amount and timing offuture cash flows when determining the impairment loss.

In estimating these cash flows, the Credit Union makes judgments about the borrowers financial situation and the netrealizable value of collateral. These estimates are based on assumptions about a number of factors and actual results maydiffer, resulting in future changes to the allowance.

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3. Basis of preparation (Continued from previous page)

Member loans receivable that have been assessed individually and found not to be impaired and all individually insignificantloans are assessed collectively, in groups of assets with similar risk characteristics, to determine whether provision shouldbe made due to incurred loss events for which there is objective evidence but whose effects are not yet evident. Thecollective provision assessment takes account of data from the loan portfolio such as credit quality, delinquency, historicalperformance and industry economic outlook. The impairment loss on member loans receivable is disclosed in more detail inNote 7.

Key assumptions in determining the allowance for impaired loans collective provision

The Credit Union has determined the likely impairment loss on loans which have not maintained the loan repayments inaccordance with the loan contract, or where there is other evidence of potential impairment such as industrial restructuring,job losses or economic circumstances. In identifying the impairment likely from these events the Credit Union estimates thepotential impairment using the loan type, industry, geographical location, type of loan security, the length of time the loansare past due and the historical loss experience. The circumstances may vary for each loan over time, resulting in higher orlower impairment (losses). The methodology and assumptions used for estimating future cash flows are reviewed regularlyto reduce any differences between loss estimates and actual loss experience.

For purposes of the collective provision loans are classified into separate groups with similar risk characteristics, based onthe type of product and type of security.

Financial instruments not traded on active markets

For financial instruments not traded in active markets, fair values are determined using valuation techniques such as thediscounted cash flow model that rely on assumptions that are based on observable active markets or rates. Certainassumptions take into consideration liquidity risk, credit risk and volatility.

Impairment of non-financial assets

At each reporting date, the Credit Union assesses whether there are any indicators of impairment for non-financial assets.Non-financial assets that have an indefinite useful life or are not subject to amortization, such as goodwill, are testedannually for impairment or more frequently if impairment indicators exist. Other non-financial assets are tested forimpairment if there are indicators that their carrying amounts may not be recoverable.

Income taxes

The Credit Union periodically assesses its liabilities and contingencies related to income taxes for all years open to auditbased on the latest information available. For matters where it is probable that an adjustment will be made, the Credit Unionrecords its best estimate of the tax liability including the related interest and penalties in the current tax provision.Management believes that they have adequately provided for the probable outcome of these matters; however, the finaloutcome may result in a materially different outcome than the amount included in the tax liabilities.

Impairment of available-for-sale financial assets

Management determines when an available-for-sale financial asset is impaired in accordance with IAS 39 FinancialInstruments: Recognition and Measurement. This determination requires significant judgment. Management evaluates theduration and extent to which the fair value of an investment is less than its cost; and the financial health of and short-termbusiness outlook for the investee, including factors such as industry and sector performance, changes in technology andoperational and financing cash flow.

When the fair value declines, management makes assumptions about the decline in value to determine if it is an impairmentto be recognized in profit or loss.

At December 31, 2013, no impairment losses have been recognized for available-for-sale assets (2012 - $nil). The carryingamount of available-for-sale assets is $4,869,112 (2012 - $4,271,095).

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3. Basis of preparation (Continued from previous page)

Deferred income taxes

The calculation of deferred income tax is based on assumptions, which are subject to uncertainty as to timing and which taxrates are expected to apply when temporary differences reverse. Deferred income tax recorded is also subject touncertainty regarding the magnitude of non-capital losses available for carry forward and of the balances in various taxpools as the corporate tax returns have not been prepared as of the date of financial statement preparation. By their nature,these estimates are subject to measurement uncertainty, and the effect on the consolidated financial statements fromchanges in such estimates in future years could be material. Further details are in Note 12.

Type of joint arrangement

The Credit Union determined that CEAMS is a joint venture because the venturers have rights to the net assets of thearrangement if the venture were liquidated.

Useful lives of property, plant and equipment

Estimates must be utilized in evaluating the useful lives of all property, plant and equipment for calculation of thedepreciation for each class of assets. For further discussion of the estimation of useful lives, refer to the heading property,plant and equipment contained in Note 4.

4. Summary of significant accounting policies

The principle accounting policies adopted in the preparation of the consolidated financial statements are set out below. Thepolicies have been consistently applied to all the years presented, unless otherwise stated.

Certain comparative amounts have been reclassified to conform to the current years presentation.

Regulations to the Act specify that certain items are required to be disclosed in the financial statements which arepresented at annual meetings of members. It is management's opinion that the disclosures in these consolidated financialstatements and notes comply, in all material respects, with the requirements of the Act. Where necessary, reasonableestimates and interpretations have been made in presenting this information.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Credit Union and its subsidiaries.

Subsidiaries are entities controlled by the Credit Union. Control is achieved where the Credit Union is exposed, or hasrights, to variable returns from its involvement with the investee and it has the ability to affect those returns through itspower over the investee. In assessing control, only rights which give the Credit Union the current ability to direct the relevantactivities and that the Credit Union has the practical ability to exercise, are considered.

The results of subsidiaries acquired or disposed of during the year are included in these consolidated financial statementsfrom the effective date of acquisition or up to the effective date of disposal, as appropriate.

Foreign currency translation

Transactions denominated in foreign currencies are translated into the functional currency of the Credit Union at exchangerates prevailing at the transaction dates (spot exchange rates). Monetary assets and liabilities are retranslated at theexchange rates at the statement of financial position date. Exchange gains and losses on translation or settlement arerecognized in profit or loss for the current period.

Non-monetary items that are measured at historical cost are translated using the exchange rates at the date of thetransaction and non-monetary items that are measured at fair value are translated using the exchange rates at the datewhen the items fair value was determined. Translation gains and losses are included in profit or loss.

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4. Summary of significant accounting policies (Continued from previous page)

Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Credit Union and therevenue can be reliably measured. The following specific recognition criteria must also be met before revenue isrecognized:

Interest income is recognized in profit or loss for all financial assets measured at amortized cost using the effective interestrate method. The effective interest rate is the rate that discounts estimated future cash flows through the expected life of thefinancial instrument back to the net carrying amount of the financial asset. The application of the method has the effect ofrecognizing revenue of the financial instrument evenly in proportion to the amount outstanding over the period to maturity orrepayment.

Interest penalties received as a result of loan prepayments by members are recognized as income in the year in which theprepayment is made, unless only minor modifications (based on a present value of future cash flows test) were made to theloan in which case they are deferred and amortized using the effective interest method.

Fees related to the origination or renewal of a loan are considered an integral part of the yield earned on a loan and arerecognized using the effective interest method over the estimated repayment term of the related loan.

Investment income is recognized as interest is earned on interest-bearing investments, and when dividends are declared onshares.

Investment security gains and losses are recognized in accordance with the requirements of their classification as outlinedfurther under the Financial Instruments policy note.

Loan syndication fees are recognized on completion of the syndication arrangement. Incremental direct costs for originatingor acquiring a loan are netted against origination fees.

Commission revenue is recognized net of broker commission expense as earned on the effective date of each policy.

Other revenue is recognized as services are provided to members.

Financial instruments

Classification and measurement

All financial instruments are initially recognized at fair value at acquisition. Measurement in subsequent periods depends onwhether the financial instrument has been classified as fair value through profit or loss, available-for-sale, held-to-maturity,loans and receivables, or other financial liabilities as described below. Transactions to purchase or sell these items arerecorded on the settlement date. During the year, there has been no reclassification of financial instruments.

Financial instruments classified as fair value through profit or loss are measured at fair value with unrealized gains andlosses recognized through profit or loss. The Credit Union's financial instruments classified as fair value through profit orloss include cash and cash equivalents, derivative assets and liabilities, and line of credit.

Available for sale financial assets are measured at fair value with unrealized gains and losses recognized in othercomprehensive income. Certain equity instruments which do not trade in an open market and whose fair value cannot bereliably measured are recorded at cost. The Credit Unions financial instruments classified as available for sale includeother equity instruments and certain bond investments. The Credit Union's shares in SaskCentral and Concentra Financialhave been classified as available for sale.

Financial assets classified as held-to-maturity are subsequently measured at amortized cost using the effective interest ratemethod. The Credit Union's financial instruments classified as held-to-maturity include term deposits and certain bondinvestments.

Financial assets classified as loans and receivables are subsequently measured at amortized cost. The Credit Union'sfinancial instruments classified as loans and receivables include all member loans receivable and accrued interest thereon,and other receivable balances.

Financial instruments classified as other financial liabilities include member deposits, accounts payable and accruals, andmembership shares. Other financial liabilities are subsequently carried at amortized cost.

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Derecognition of financial assets

Derecognition of a financial asset occurs when:

The Credit Union does not have rights to receive cash flows from the asset;

The Credit Union has transferred its rights to receive cash flows from the asset or has assumed an obligation to

pay the received cash flows in full without material delay to a third party under a pass-through" arrangement; and

either:

The Credit Union has transferred substantially all the risks and rewards of the asset, or

The Credit Union has neither transferred nor retained substantially all the risks and rewards of the asset,

but has transferred control of the asset.

When the Credit Union has transferred its rights to receive cash flows from an asset or has entered into a pass-througharrangement, and has neither transferred or retained substantially all of the risks and rewards of the asset nor transferredcontrol of the asset, the asset is recognized to the extent of the Credit Unions continuing involvement in the asset. In thatcase, the Credit Union also recognizes an associated liability. The transferred asset and the associated liability aremeasured on a basis that reflects the rights and obligations that the Credit Union has retained.

A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. Where anexisting financial liability is replaced by another from the same lender on substantially different terms, or the terms of theexisting liability are substantially modified, such an exchange or modification is treated as a derecognition of the originalliability and the recognition of a new liability, and the difference in the respective carrying amount is recognized in netincome.

The Credit Union designates certain financial assets upon initial recognition as at fair value through profit or loss (fair valueoption). Financial instruments in this category are the embedded derivatives and derivatives related to index linked termdeposits and interest rate swaps not designated as hedging instruments. These instruments are measured at fair value,both initially and subsequently. The related transaction costs are expensed. Gains and losses arising from changes in fairvalue of these instruments are recorded in profit or loss.

Derivative financial instruments

Derivative instruments are recorded at fair value, including those derivatives that are embedded in financial or non financialcontracts that are not closely related to the host contracts. Changes in the fair values of derivative instruments are recordedin net income.

Fair value measurements

The Credit Union classifies fair value measurements recognized in the statement of financial position using a three-tier fairvalue hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Quoted prices (unadjusted) are available in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices in active markets that are observable for the asset or liability, either

directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the Credit Union to develop its

own assumptions.

Fair value measurements are classified in the fair value hierarchy based on the lowest level input that is significant to thatfair value measurement. This assessment requires judgment, considering factors specific to an asset or a liability and mayaffect placement within the fair value hierarchy.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term highly liquid investments with originalmaturities of three months or less that are readily convertible into known amounts of cash and which are subject to aninsignificant risk of changes in value. Cash and cash equivalents are shown net of bank overdrafts that are repayable ondemand and form an integral part of the Credit Unions cash management system. Cash subject to restrictions that preventits use for current purposes is included in restricted cash.

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Investments

Each investment is classified into one of the categories described under financial instruments. The classification dictatesthe accounting treatment for the carrying value and changes in that value.

SaskCentral and Concentra Financial deposits and shares

SaskCentral and Concentra Financial deposits are accounted for as held to maturity, adjusted to recognize other than atemporary impairment in the underlying value, or as available for sale, based on managements intent. Shares areaccounted for as available for sale at cost, as no market exists for these investments.

Portfolio investments

Portfolio bonds are classified as available for sale or held to maturity, based on managements intent. Held to maturityinvestments are adjusted to recognize other than a temporary impairment in the underlying value.

Investments in equity instruments that do not have a quoted market price in an active market are classified as available forsale and measured at cost.

Member loans receivable

Loans are initially recognized at their fair value and subsequently measured at amortized cost. Amortized cost is calculatedas the loans principal amount, less any allowance for anticipated losses, plus accrued interest. Interest revenue is recordedon the accrual basis using the effective interest method. Loan administration fees are amortized over the term of the loanusing the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cashreceipts through the expected life of the financial asset to the carrying amount of the financial asset.

Allowance for loan impairment

Allowance for loan impairment represents specific and collective provisions established as a result of reviews of individualloans and groups of loans. In particular, judgment by management is required in the estimation of the amount and timing offuture cash flows when determining the impairment loss. In estimating these cash flows, the Credit Union makes judgmentsabout the credit worthiness of the borrowers financial situation and the net realizable value of collateral. These estimatesare based on assumptions about a number of factors and actual results may differ, resulting in future changes to theallowance.

Member loans receivable that have been assessed individually and found not to be impaired are then assessed collectively,in groups of assets with similar risk characteristics, to determine whether provision should be made due to incurred lossevents for which there is objective evidence but whose effects are not yet evident. The collective provision takes account ofdata from the loan portfolio and based on analysis of historical data, such as credit quality, levels of arrears, historicalperformance and economic outlook.

Individual allowances are established by reviewing the credit worthiness of individual borrowers and the value of thecollateral underlying the loan. Collective allowances are established by reviewing specific arrears and current economicconditions.

Restructured loans are not considered impaired where reasonable assurance exists that the borrower will meet the terms ofthe modified debt agreement. Restructured loans are defined as loans greater than 90 days delinquent that have beenrestructured outside the Credit Unions normal lending practices as it relates to extensions, amendments andconsolidations.

Loans are classified as impaired, and a provision for loss is established, when there is no longer reasonable assurance ofthe timely collection of the full amount of principal or interest. It is the Credit Unions policy that whenever a payment is 90days past due, loans are classified as impaired unless they are fully secured or collection efforts are reasonably expected toresult in repayment of the debt.

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In such cases, a specific provision is established to write down the loan to the estimated future net cash flows from the loandiscounted at the loans original effective interest rate. In cases where it is impractical to estimate the future cash flows, thecarrying amount of the loan is reduced to its fair value calculated based on an observable market price. Any previouslyaccrued but unpaid interest on the loan is charged to the allowance for loan impairment. Interest income after theimpairment is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring theimpairment loss.

Impairment of financial assets

For financial assets carried at amortized cost, the Credit Union first assesses individually whether objective evidence ofimpairment exists for financial assets that are significant, or collectively for financial assets that are not individuallysignificant. If the Credit Union determines that no objective evidence of impairment exists for an individually assessedfinancial asset, it includes the financial asset in a group of financial assets with similar credit risk characteristics andcollectively assesses them for impairment. Financial assets that are individually assessed for impairment and for which animpairment loss is, or continues to be, recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has occurred, the amount of the loss is measured as the differencebetween the assets carrying amount and the present value of estimated future cash flows. The carrying amount of thefinancial asset is reduced through the use of the provision for impaired financial assets and the amount of the impairmentloss is recognized in net income.

The present value of the estimated future cash flows is discounted at the financial assets' original effective interest rate. Thecalculation of the present value of estimated future cash flows reflects the projected cash flows including provisions forimpaired financial assets, prepayment losses, and costs to securitize and service financial assets.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to anevent occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Anysubsequent reversal of an impairment loss is recognized in net income.

Impairment of non-financial assets

At the end of each reporting period, the Credit Union reviews the carrying amounts of its tangible assets to determinewhether there is any indication that those assets have suffered an impairment loss. If any such indication exists, therecoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is notpossible to estimate the recoverable amount of an individual asset, the Credit Union estimates the recoverable amount ofthe cash-generating units (CGU) to which the asset belongs. Where a reasonable and consistent basis of allocation canbe identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest groupof CGUs for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows havenot been adjusted.

If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of theasset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in net income.

Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revisedestimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount thatwould have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of animpairment loss is recognized immediately in net income.

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Syndication

The Credit Union syndicates individual assets with various other financial institutions primarily to manage credit risk, createliquidity and manage regulatory capital for the Credit Union. Syndicated loans transfer substantially all the risks and rewardsrelated to the transferred financial assets and are derecognized from the Credit Unions consolidated statement of financialposition. All loans syndicated by the Credit Union are on a fully serviced basis. The Credit Union receives fee income forservices provided in the servicing of the transferred financial assets. Fee income is recognized in other income on anaccrual basis in relation to the reporting period in which the costs of providing the services are incurred.

Foreclosed assets

Foreclosed assets held for sale are initially recorded at the lower of cost and estimated net realizable value. Cost comprisesthe balance of the loan at the date on which the Credit Union obtains title to the asset plus subsequent disbursementsrelated to the asset, less any revenues or lease payments received. Foreclosed assets held for sale are subsequentlyvalued at the lower of their carrying amount and fair value less cost to sell. Foreclosed assets are recorded in member loansreceivable.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includesexpenditures that are directly attributable to the acquisition of the asset. When parts of an item of property, plant andequipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

All assets having limited useful lives are depreciated using the straight-line method over their estimated useful lives. Landhas an unlimited useful life and is therefore not depreciated. Assets are depreciated from the date of acquisition. Internallyconstructed assets are depreciated from the time an asset is available for use.

The depreciation rates applicable for each class of asset during the current and comparative period are as follows:

RateBuildings 10 - 40 yearsAutomobiles 4 - 7 yearsComputer and office equipment 3 - 10 years

The residual value, useful life and depreciation method applied to each class of assets are reassessed at each reportingdate.

Gains or losses on the disposal of property, plant and equipment are determined as the difference between the net disposalproceeds and the carrying amount of the asset, and recognized in net income as other operating income or other operatingcosts, respectively.

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Income taxes

The Credit Union accounts for income taxes using the asset and liability method. Current and deferred tax are recognized innet income except to the extent that the tax is recognized either in other comprehensive income or directly in equity, or thetax arises from a business combination. Under this method, the provision for income taxes is based on the tax rates and taxlaws that have been enacted or substantively enacted by the end of the reporting period.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recoveredfrom or paid to the taxation authorities.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the assets arerealized or the liabilities are settled.

Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability differs from its tax base,except for taxable temporary differences arising on the initial recognition of goodwill and temporary differences arising onthe initial recognition of an asset or liability in a transaction which is not a business combination and at the time of thetransaction affects neither accounting or taxable income.

Recognition of deferred tax assets for unused tax losses, tax credits and deductible temporary differences is restricted tothose instances where it is probable that future taxable profit will be available which allow the deferred tax asset to beutilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probablethat the related tax benefit will be realized.

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Leases

A lease that transfers substantially all of the benefits and risks of ownership is classified as a finance lease. At the inceptionof a finance lease, an asset and a payment obligation are recorded at an amount equal to the lesser of the present value ofthe minimum lease payments and the assets fair market value at inception of the lease. Assets under finance leases areamortized on a straight-line basis, over their estimated useful lives. All other leases are accounted for as operating leasesand rental payments are expensed as incurred.

Employee benefits

The Credit Unions post employment benefit programs consist of a defined contribution plan.

Credit Union contributions to the defined contribution plan are expensed as incurred. Pension benefits of $349,014 (2012 $333,475) were paid to the defined contribution retirement plan during the year.

Accounts payable

Accounts payable are initially recorded at fair value and are subsequently carried at amortized cost, which approximates fairvalue due to the short term nature of these liabilities.

Member deposits

Member deposits are initially recognized at fair value, net of transaction costs directly attributable to the issuance of theinstrument, and are subsequently measured at amortized cost using the effective interest rate method.

Membership shares

Shares are classified as liabilities or member equity in accordance with their terms. Shares redeemable at the option of themember, either on demand or on withdrawal from membership, are classified as liabilities. Shares redeemable at thediscretion of the Credit Union Board of Directors are classified as equity. Shares redeemable subject to regulatoryrestrictions are accounted for using the criteria set out in IFRIC 2 Members' Shares in Cooperative Entities and SimilarInstruments.

Standards issued but not yet effective

The Credit Union has not yet applied the following new standards, interpretations and amendments to standards that havebeen issued as at December 31, 2013 but are not yet effective. Unless otherwise stated, the Credit Union does not plan toearly adopt any of these new or amended standards and interpretations.

IFRS 3 Business combinations

The amendments to IFRS 3, issued in December 2013, clarify the accounting for contingent consideration in a businesscombination. At each reporting period, an entity measures contingent consideration classified as an asset or a financialliability at fair value, with changes in fair value recognized in profit or loss. The amendments are effective for businesscombinations for which the acquisition date is on or after July 1, 2014. The Credit Union does not expect this amendment tohave a material impact on its consolidated financial statements.

Additional amendments to IFRS 3, issued in December 2013, clarify that IFRS 3 does not apply to the accounting for theformation of all types of joint arrangements in the financial statements of the joint arrangement itself. The amendments areeffective for annual periods beginning on or after July 1, 2014. The Credit Union does not expect this amendment to have amaterial impact on its consolidated financial statements.

IFRS 7 Financial instruments: disclosures and IAS 32 Financial instruments: presentation

Financial assets and financial liabilities may be offset, with the net amount presented in the statement of financial position,only when there is a legally enforceable right to set off and when there is either an intention to settle on a net basis or torealize the asset and settle the liability simultaneously. The amendments to IAS 32, issued in December 2011, clarify themeaning of the offsetting criterion "currently has a legally enforceable right to set off" and the principle behind netsettlement, including identifying when some gross settlement systems may be considered equivalent to net settlement. Theamendments will only affect disclosure and are effective for annual periods beginning on or after January 1, 2014.

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IFRS 9 Financial instruments

IFRS 9 was issued in November 2009 and subsequently amended as part of an ongoing project to replace IAS 39 Financialinstruments: Recognition and measurement. The standard requires the classification of financial assets into twomeasurement categories based on the entitys business model for managing its financial instruments and the contractualcash flow characteristics of the instrument. The two categories are those measured at fair value and those measured atamortized cost. The classification and measurement of financial liabilities is primarily unchanged from IAS 39. However, forfinancial liabilities measured at fair value, changes in the fair value attributable to changes in an entitys own credit risk isnow recognized in other comprehensive income instead of in profit or loss. This new standard will also impact disclosuresprovided under IFRS 7 Financial instruments: disclosures.

In November 2013, the IASB amended IFRS 9 for the significant changes to hedge accounting. In addition, an entity cannow apply the own credit requirement in isolation without the need to change any other accounting for financialinstruments. The mandatory effective date of January 1, 2015 has been removed to provide sufficient time for preparers offinancial statements to make the transition to the new requirements. The Credit Union is currently assessing the impact ofthis amendment on its consolidated financial statements.

IFRS 10 Consolidated financial statements and IFRS 12 Disclosure of interests in other entities

The amendments to IFRS 10, issued in October 2012, introduce a consolidation exception for investment entities. They dothis by defining an investment entity and requiring an investment entity to measure subsidiaries at fair value through profit orloss in accordance with IFRS 9 Financial instruments or IAS 39 Financial Instruments: Recognition and measurement. Therelated amendments to IFRS 12, issued at the same time, require additional disclosure for investment entities. Theamendments are effective for annual periods beginning on or after January 1, 2014. The Credit Union does not expect thisamendment to have a material impact on its consolidated financial statements.

IFRS 13 Fair value measurement

The Credit Union applies the portfolio" exception. Accordingly, it measures the fair value of financial assets and liabilities,with offsetting positions in market or counterparty credit risk, consistently with how market participants would price the netrisk exposure. The amendments to IFRS 13, issued in December 2013, clarify that the portfolio exception applies to allcontracts within the scope of IFRS 9 Financial instruments or IAS 39 Financial instruments: Recognition and measurement,regardless of whether they meet the definitions of financial assets or financial liabilities in IAS 32 Financial instruments:Presentation. The amendments are effective for annual periods beginning on or after July 1, 2014. The Credit Union iscurrently assessing the impact of this amendment on its consolidated financial statements.

IAS 16 Property, plant and equipment

The amendments to IAS 16, issued in December 2013, clarify how an entity calculates the gross carrying amount andaccumulated depreciation when a revaluation is performed. The amendments are effective for annual periods beginning onor after July 1, 2014. The Credit Union does not expect this amendment to have a material impact on its consolidatedfinancial statements.

IAS 24 Related party disclosures

The amendments to IAS 24, issued in December 2013, clarify that a management entity, or any member of a group of whichit is a part, that provides key management services to a reporting entity, or its parent, is a related party of the reportingentity. The amendments also require an entity to disclose amounts incurred for key management personnel servicesprovided by a separate management entity. This replaces the more detailed disclosure by category required for other keymanagement personnel compensation. The amendments will only affect disclosure and are effective for annual periodsbeginning on or after July 1, 2014.

IAS 36 Impairment of assets

The amendments to IAS 36, issued in May 2013, require: Disclosure of the recoverable amount of impaired assets; and Additional disclosures about the measurement of the recoverable amount when the recoverable amount is based

on fair value less costs of disposal, including the discount rate when a present value technique is used to measurethe recoverable amount.

The amendments will only affect disclosure and are effective for annual periods beginning on or after January 1, 2014.

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IAS 39 Financial Instruments: Recognition and measurement

The amendments to IAS 39, issued in June 2013, clarify that novation of a hedging derivative to a clearing counterparty asa consequence of laws or regulations or the introduction of laws or regulations, does not terminate hedge accounting. Theamendments are effective for annual periods beginning on or after January 1, 2014. The Credit Union does not expect thisamendment to have a material impact on its consolidated financial statements.

5. Cash and cash equivalents

2013 2012

Cash 11,070,684 11,355,309Cash equivalents 35,792,817 31,811,197

46,863,501 43,166,506

6. Investments

2013 2012

Available for saleSaskCentral and Concentra Financial shares 3,816,405 3,352,874Other equity instruments 1,052,707 918,221

4,869,112 4,271,095

Held to maturitySaskCentral and Concentra Financial 33,550,000 40,550,000Portfolio bonds 888,034 1,101,069

34,438,034 41,651,069

39,307,146 45,922,164

Accrued interest 163,390 364,169

39,470,536 46,286,333

Pursuant to Regulations, SaskCentral requires that the Credit Union maintain 10% of its total liabilities in specified liquiditydeposits. The provincial regulator for Credit Unions, Credit Union Deposit Guarantee Corporation (CUDGC), requires thatthe Credit Union adhere to these prescribed limits and restrictions. As of December 31, 2013 the Credit Union met therequirement.

The table below shows the credit risk exposure on investments, excluding liquidity reserves and balances on deposit withSaskCentral and Concentra Financial. Ratings are as provided by Dominion Bond Rating Services (DBRS) unlessotherwise indicated.

2013 2012

Investment portfolio ratingAA 251,164 505,569Unrated 5,505,982 4,866,595

SaskCentral and Concentra Financial shares are included in the unrated category above.

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7. Member loans receivable

Principal and allowance by loan type:

2013

Principalperforming

Principalimpaired

Allowancespecific

Net carryingvalue

Agriculture loans 36,062,345 49,731 49,731 36,062,345Commercial loans 19,433,056 199,868 139,868 19,493,056Consumer loans 25,437,022 197,947 171,447 25,463,522Lines of credit 12,620,848 - - 12,620,848Mortgages 321,390,827 - - 321,390,827

414,944,098 447,546 361,046 415,030,598

Foreclosed assets 184,216 - - 184,216Accrued interest 1,800,677 8,304 8,304 1,800,677

Total 416,928,991 455,850 369,350 417,015,491

2012

Principalperforming

Principalimpaired

Allowancespecific

Net carryingvalue

Agriculture loans 34,373,477 115,777 48,374 34,440,880Commercial loans 15,525,089 1,132,819 280,819 16,377,089Consumer loans 26,142,241 189,062 160,426 26,170,877Lines of credit 11,137,600 - - 11,137,600Mortgages 291,944,142 325,522 66,522 292,203,142

379,122,549 1,763,180 556,141 380,329,588

Accrued interest 1,844,976 11,624 11,624 1,844,976

Total 380,967,525 1,774,804 567,765 382,174,564

The allowance for loan impairment changed as follows:

2013 2012

Balance, beginning of year 567,765 571,299Recovery of loan impairment (190,274) (102,776)

377,491 468,523Less: accounts written off, net of recoveries 8,141 (99,242)

Balance, end of year 369,350 567,765

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7. Member loans receivable (Continued from previous page)

A loan is considered past due when a counterparty has not made a payment by the contractual due date. The table thatfollows presents the carrying value of loans at year-end that are past due but not classified as impaired because they areeither i) less than 90 days past due, or ii) fully secured and collection efforts are reasonably expected to result in repayment.

December 31, 2013 1-30 days 31-60 days 61-90 days 91 days andgreater

Total

Consumer 375,117 61,714 4,058 233,861 674,750Commercial - - 112,484 - 112,484Agriculture 275,572 180,637 13,333 - 469,542

Total 650,689 242,351 129,875 233,861 1,256,776

December 31, 2012 1-30 days 31-60 days 61-90 days 91 days andgreater

Total

Consumer 374,997 45,843 8,365 337,258 766,463Agriculture 118,980 183,705 74,221 91,233 468,139

Total 493,977 229,548 82,586 428,491 1,234,602

The principal collateral and other credit enhancements the Credit Union holds as security for loans include (i) insurance,mortgages over residential lots and properties, (ii) recourse to business assets such as real estate, equipment, inventoryand accounts receivable, (iii) recourse to commercial real estate properties being financed, and (iv) recourse to liquidassets, guarantees and securities. Valuations of collateral are updated periodically depending on the nature of thecollateral. The Credit Union has policies in place to monitor the existence of undesirable concentration in the collateralsupporting its credit exposure. In management's estimation, the fair value of the collateral is sufficient to offset the risk ofloss on the loans past due but not impaired.

8. Other assets

2013 2012

Accounts receivable 814,407 185,142Prepaid expenses and deposits 888,107 748,370Deferred tax asset 421,415 372,932

2,123,929 1,306,444

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9. Property, plant and equipment

Land BuildingsComputer

equipmentOffice

equipment Automobiles Total

CostBalance at December31, 2011 301,116 8,147,671 951,307 3,495,443 223,921 13,119,458

Additions 9,015 353,849 - 107,528 - 470,392

Disposals - - - - (51,529) (51,529)

Balance at December31, 2012 310,131 8,501,520 951,307 3,602,971 172,392 13,538,321

Additions - 1,802,992 - 68,016 57,310 1,928,318

Disposals - - - - (23,062) (23,062)

Balance at December31, 2013 310,131 10,304,512 951,307 3,670,987 206,640 15,443,577

Accumulateddepreciation

Balance at December31, 2011 - 5,188,737 398,774 3,110,362 129,251 8,827,124

Depreciation - 388,329 136,273 92,630 22,561 639,793

Disposals - - - - (45,405) (45,405)


Depreciation - 385,474 135,901 85,694 33,040 640,109

Disposals - - - - (22,431) (22,431)


Net book value

At December 31, 2012 310,131 2,924,454 416,260 399,979 65,985 4,116,809

At December 31, 2013 310,131 4,341,972 280,359 382,301 89,624 5,404,387

10. Line of Credit

The Credit Union has an authorized line of credit due on demand, with no fixed repayment date, bearing interest at primeminus 0.5% in the amount of $9,500,000 (2012 - $7,000,000) from SaskCentral.

Borrowings are secured by an assignment of book debts, financial services agreement, and an operating accountagreement.

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11. Member deposits

2013 2012

Chequing, Savings, Plan 24 331,094,337 311,779,358Registered savings plans 42,947,105 42,598,229Term deposits 93,708,011 85,912,387Accrued interest 1,554,109 1,636,394

469,303,562 441,926,368

Member deposits are subject to the following terms:

Chequing, savings and plan 24 products are due on demand and bear interest at rates up to 1.25% (2012 - 1.25%).

Registered savings plans are subject to fixed and variable rates of interest up to 6.00% (2012 - 4.90%), with interestpayments due monthly, annually or on maturity.

Term deposits are subject to fixed and variable rates of interest up to 5.25% (2012 - 10.50%), with interest payments duemonthly, annually or on maturity.

12. Income tax

Income tax expense recognized in comprehensive income

The applicable tax rate is the aggregate of the federal income tax rate of 11.63% (2012 - 11%) and the provincial tax rate of2% (2012 - 2%).

Deferred income tax recovery recognized in comprehensive income

The deferred income tax recovery recognized in comprehensive income for the current year is a result of the followingchanges:

2013 2012Deferred tax assetProperty, plant and equipment 404,650 365,551Liabilities that are deducted for tax purposes only when paid 10,486 -Allowance for impaired loans 6,279 7,381

421,415 372,932

Net deferred tax asset is reflected in the statement of financial position asfollows:Deferred tax asset 421,415 372,932

Reconciliation between average effective tax rate and the applicable tax rate2013 2012

Applicable tax rate %27.00 %27.00Credit Union deduction %(13.37) %(14.00)Non-deductible and other items %(0.25) %(4.92)

Average effective tax rate (tax expense divided by profit before tax) %13.38 %8.08

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12. Income tax (Continued from previous page)

In October 2013, the government substantially enacted a change in the federal tax rate from 11% to 15% that wasintroduced in the March 2013 budget. This increase in tax rate will impact income within the Credit Union with a phase inover the five year period from 2013 to 2018. Federally, the result is 20% of the Credit Unions taxable income will be taxedat a rate of 15% (prorated from March 21, 2013), with the remaining income continuing to be taxed at a rate of 11% for2013. By 2018, 100% of the Credit Union's taxable income will be taxed at a rate of 15%. No changes in provincial tax rateswere substantially enacted in 2013.

No changes in susidiary tax rates were enacted during 2013.

13. Other liabilities

2013 2012

Accounts payable 5,218,334 3,170,172Corporate income tax payable 188,541 10,869

5,406,875 3,181,041

14. Membership shares

Authorized:

Unlimited number of Common shares, at an issue price of $5.

Issued:2013 2012

12,203 Common shares (2012 - 12,948) 61,015 64,740

All common shares are classified as liabilities.

When an individual becomes a member of the Credit Union, they are issued a common share at $5 per share. Eachmember of the Credit Union has one vote, regardless of the number of common shares held.

During the year, the Credit Union issued 583 (2012 - 587) and redeemed 1,328 (2012 - 630) common shares.

15. Related party transactions

Key management compensation of the Credit Union

Key management personnel ("KMP") of the Credit Union are the Chief Executive Officer, Chief Operating Officer (Retail),Chief Credit Officer, Chief Operating Officer (Corporate), Chief Financial Officer and members of the Board of Directors.

KMP remuneration includes the following expenses:2013 2012

Salaries and short-term benefits 881,479 836,391

Transactions with joint ventures of the Credit Union

Credit Union Electronic Account Management Services Association (CEAMS) is an unincorporated entity that provideselectronic account management and financial services systems for its members. CEAMS was formed on June 1, 1997 andcommenced operations immediately thereafter. The activities of CEAMS are transacted in accordance with the terms andconditions of the Memorandum of Association, dated June 1, 1997, as amended from time to time. The Credit Union owns anominal interest in this joint venture.

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15. Related party transactions (Continued from previous page)

Transactions with key management personnel

The Credit Union, in accordance with its policy, grants credit to its directors, management and staff at discounted rates. Themanagement and staff rates are slightly below member rates.

Loans made to directors and KMP are approved under the same lending criteria applicable to members. There are no loansto KMP that are impaired.

Directors, management and staff of the Credit Union hold deposit accounts. These accounts are maintained under thesame terms and conditions as accounts of other members, and are included in deposit accounts on the statement offinancial position.

There are no benefits or concessional terms and conditions applicable to the family members of KMP.

In the ordinary course of business, the Credit Union provided normal financial services to its wholly-owned subsidiariesDinsmore Financial Ltd. and Prairie Centre Financial Ltd. on terms similar to those offered to non-related parties.

These loans and deposits were made in the normal course of operations and are measured at the exchange amount, whichis the consideration established and agreed to by the related parties.

2013 2012

Aggregate loans to KMP 2,157,908 1,962,018Aggregate revolving credit facilities to KMP 2,019,200 2,023,200Less: approved and undrawn lines of credit (650,353) (715,104)

3,526,755 3,270,114

2013 2012

During the year the aggregate value of loans disbursed to KMP amounted to:Revolving Credit 36,700 22,384Mortgages 159 123Loans 1,371,683 516,385

1,408,542 538,892

2013 2012

Interest earned on loans and revolving credit facilities to KMP 172,220 159,712Interest paid on deposits to KMP 36,248 33,360

2013 2012The total value of member deposits to KMP as at the year-end:

Chequing and demand deposits 471,564 898,198Term deposits 1,035,726 547,048Registered plans 650,804 616,130

Total value of member deposits due to KMP 2,158,094 2,061,376

Directors fees and expenses2013 2012

Directors expenses 12,605 13,196Meeting, training and conference costs 4,401 18,941

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15. Related party transactions (Continued from previous page)

SaskCentral and Concentra Financial

The Credit Union is a member of SaskCentral, which acts as a depository for surplus funds received from and loans madeto credit unions. SaskCentral also provides other services for a fee to the Credit Union and acts in an advisory capacity.

The Credit Union is related to Concentra Financial, which is owned in part by SaskCentral. Concentra Financial providesfinancial intermediation and trust services to Canadian credit unions and associated commercial and retail customers.

Interest earned on investments during the year ended December 31, 2013 amounted to $1,094,062 (2012 - $1,393,932)

Interest paid on borrowings during the year ended December 31, 2013 amounted to $12,446 (2012 - $12,984).

Payments made for affiliation dues for the year ended December 31, 2013 amounted to $178,595 (2012 - $170,464).

Celero Solutions

The Credit Union has entered into an agreement with Celero Solutions to provide the delivery of banking system servicesand the maintenance of the infrastructure needed to ensure uninterrupted delivery of such services. Celero Solutions wasformed as a joint venture by the Credit Union Centrals of Alberta, Saskatchewan and Manitoba along with ConcentraFinancial.

16. Capital management

A capital management framework is included in policies and procedures established by the Board of Directors. The CreditUnions objectives when managing capital are to:

Adhere to regulatory capital requirements as minimum benchmarks;

Co-ordinate strategic risk management and capital management;

Develop financial performance targets/budgets/goals;

Administer a patronage program that is consistent with capital requirements;

Administer an employee incentive program that is consistent with capital requirements; and

Develop a growth strategy that is coordinated with capital management requirements.

Credit Union Deposit Guarantee Corporation (CUDGC) prescribes capital adequacy measures and minimum capitalrequirements. The capital adequacy rules issued by CUDGC have been based on the Basel III framework, consistent withthe financial industry in general. CUDGCs Standards of Sound Business Practice (SSBP) that incorporate the Basel IIIframework took effect on July 1, 2013. The credit unions capital management practices have changed in the year to ensurecompliance with CUDGC requirements.

The Credit Union follows a risk-weighted asset calculation for credit and operational risk. Under this approach, credit unionsare required to measure capital adequacy in accordance with instructions for determining risk-adjusted capital and risk-weighted assets, including off-balance sheet commitments. Based on the prescribed risk of each type of asset, a weightingof 0% to 1,250% is assigned. The ratio of regulatory capital to risk-weighted assets is calculated and compared to thestandard outlined by CUDGC. Regulatory standards require credit unions to maintain a minimum total eligible capital to risk-weighted assets of 8%, a minimum tier 1 capital to total risk-weighted assets of 6% and a minimum common equity tier 1capital to risk-weighted assets of 4.5%. Eligible capital consists of total tier 1 and tier 2 capital. In addition to the minimumcapital ratios, the Credit Union is required to hold a capital conservation buffer of 2.5% effective January 1, 2016. Thecapital conservation buffer is designed to avoid breaches of the minimum capital requirement.

Tier 1 capital is defined as a credit unions primary capital and comprises the highest quality of capital elements while tier 2is secondary capital and falls short of meeting tier 1 requirements for permanence or freedom from mandatory charges. Tier1 capital consists of two components: common equity tier 1 capital and additional tier 1 capital. Common equity tier 1capital includes retained earnings, contributed surplus and accumulated other comprehensive income (AOCI). Deductionsfrom common equity tier 1 capital include goodwill, intangible assets, deferred tax assets (except those arising fromtemporary differences), increases in equity capital resulting from securitization transactions, unconsolidated substantialinvestments and fair value gains/losses on own-use property. Additional tier 1 capital consists of qualifying membershipshares and other investment shares issued by the Credit Union that meet the criteria for inclusion in additional tier 1 capital.

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16. Capital management (Continued from previous page)

Tier 2 capital includes a collective allowance for credit losses to a maximum of 1.25% of risk-weighted assets, subordinatedindebtedness, and qualifying membership shares or other investment shares issued by the Credit Union that meet thecriteria for inclusion in tier 2 capital and are not included in tier 1 capital.

Regulatory standards also require the Credit Union to maintain a minimum leverage ratio of 5%. This ratio is calculated bydividing eligible capital by total assets less deductions from capital plus specified off-balance sheet exposures. Based onthe type of off-balance sheet exposure, a conversion factor is applied to the leverage ratio.

The following table compares Credit Union Deposit Guarantee Corporation regulatory standards to the Credit Unions boardpolicy for 2013:

Regulatorystandards

Board standards

Total eligible capital to risk weighted assets %8.00 %9.60Tier 1 capital to risk-weighted assets %6.00 %6.00Common equity tier 1 capital to risk-weighted assets %4.50 %4.50Leverage ratio %5.00 %6.50

During the year, the Credit Union complied with all external capital requirements.

The following table summarizes key capital information under Basel III as at December 31, 2013:

2013Eligible capitalCommon equity tier 1 capital 35,876,392Additional tier 1 capital -

Total tier 1 capital 35,876,392Total tier 2 capital 61,015

Total eligible capital 35,937,407

Risk-weighted assetsTotal eligible capital to risk-weighted assets 10.68%Total tier 1 capital to risk-weighted assets 10.66%Common equity tier 1 capital to risk-weighted assets 10.66%Leverage ratio 6.99%

The following table summarizes key capital information under the previous Basel II standards as at December 31, 2012:

2012Eligible capitalTotal tier 1 capital 31,943,247Total tier 2 capital -

Total eligible capital 31,943,247

Risk-weighted assetsTotal eligible capital to risk weighted assets %10.25Tier 1 capital to total assets %6.70Tier 2 capital to tier 1 capital %-

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17. Financial instruments

The Credit Union as part of its operations carries a number of financial instruments. It is management's opinion that theCredit Union is not exposed to significant interest, currency or credit risks arising from these financial instruments except asotherwise disclosed.

Risk management policy

The Credit Union carries a number of financial instruments which result in exposure to the following risks: credit risk, marketrisk and liquidity risk.

The Credit Union, as part of operations, has established avoidance of undue concentrations of risk, hedging of riskexposures, and requirements for collateral to mitigate credit risk as risk management objectives. In seeking to meet theseobjectives, the Credit Union follows risk management policies approved by its Board of Directors.

These risk management policies and procedures include the following:

Ensure all activities are consistent with the mission, vision and values of the Credit Union;

Balance risk and return;

Manage credit, market and liquidity risk through preventative and detective controls;

Ensure credit quality is maintained;

Ensure credit, market, and liquidity risk is maintained at acceptable levels;

Diversify risk in transactions, member relationships and loan portfolios;

Price according to risk taken; and

Use consistent credit risk exposure tools.

Various Board of Directors committees are involved in risk management oversight, including the Audit and Risk Committeeand Conduct Review Committee.

There have been no significant changes from the previous year in the exposure to risk, policies and procedures or methodsused to measure risk.

Credit risk

Credit risk is the risk of loss resulting from the failure of a borrower or counterparty to honour its financial or contractualobligations to the Credit Union. Credit risk primarily arises from loans receivable. Management and the Board of Directorsreview and update the credit risk policy annually. The Credit Union's maximum credit risk exposure before taking intoaccount any collateral held is the carrying amount of loans as disclosed on the statement of financial position with additionaldetail reported in Note 7. For investment securities and derivative instruments, the Credit Union is exposed to the risk ofdefault by the counterparty for instruments reported in Note 6.

Concentration of credit risk exists if a number of borrowers are engaged in similar economic activities or are located in thesame geographical region, and indicate the relative sensitivity of the Credit Union's performance to developments affectinga particular segment of borrowers or geographical region. Geographical risk exists for the Credit Union due to its primaryservice area being Beechy, Dinsmore, Eatonia, Elbow, Elrose, Eston, Harris, Kyle, Loreburn, Outlook, Rosetown andsurrounding areas.

Credit risk management for loan portfolio

The Credit Union employs a risk measurement process for its loan portfolio which is designed to assess and quantify thelevel of risk inherent in credit granting activities. Risk is measured by reviewing qualitative and quantitative factors thatimpact the loan portfolio and starts at the time of a member credit application and continues until the loan is fully repaid.

Management of credit risk is established in policies and procedures by the Board of Directors.

The primary credit risk management policies and procedures include the following:

Loan security (collateral) requirements;

Security valuation processes, including method used to determine the value of real property and personal

property when that property is subject to a mortgage or other charge; and

Maximum loan to value ratios where a mortgage or other charge on real or personal property is taken as

security.

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17. Financial instruments (Continued from previous page)

Borrowing member capacity (repayment ability) requirements;

Borrowing member character requirements;

Limits on aggregate credit exposure per individual and/or related parties;

Limits on concentration of credit risk by loan type, industry and economic sector;

Limits on types of credit facilities and services offered;

Internal loan approval processes and loan documentation standards;

Loan re-negotiation, extension and renewal processes;

Processes that identify adverse situations and trends, including risks associated with economic, geographic and

industry sectors;

Control and monitoring processes including portfolio risk identification and delinquency tolerances;

Timely loan analysis processes to identify, assess and manage delinquent and impaired loans;

Collection processes that include action plans for deteriorating loans;

Overdraft control and administration processes; and

Loan syndication processes.

Credit risk management for investments and derivative instruments

Management of risk in relation to investments and derivatives is performed as per board approved policies which set outeligible investment securities and limits on exposure to single entities, issuer groups and maximum terms of investment.Eligible derivatives are defined in policy which includes limits on approval for purchase and disposal of investments andderivatives. Credit risk within these portfolios is monitored and measured by reviewing exposure to individual counterpartiesand ensuring the Credit Union remains within policy limits by issuer weightings and by dollar amount. The quality of thecounterparty is assessed through published credit ratings which is outlined in Note 6.

Credit commitments

To meet the needs of its members and manage its own exposure to fluctuations in interest rates, the Credit Unionparticipates in various commitments and contingent liability contracts. The primary purpose of these contracts is to makefunds available for the financing needs of members. These are subject to normal credit standards, financial controls, riskmanagement and monitoring procedures. The contractual amounts of these credit instruments represent the maximumcredit risk exposure without taking into account the fair value of any collateral, in the event other parties fail to perform theirobligations under these instruments.

The Credit Union makes the following instruments available to its members:

(a) guarantees and standby letters of credit representing irrevocable assurances that the Credit Union will pay if amember cannot meet their obligations to a third party;

(b) commitments to extend credit representing unused portions of authorizations to extend credit in the form of loans,(including lines of credit and credit cards), guarantees or letters of credit.

The amounts shown on the table below do not necessarily represent future cash requirements since many commitments willexpire or terminate without being funded.

As at year-end, the Credit Union had the following outstanding financial instruments subject to credit risk:

2013 2012

Unadvanced lines of credit 70,859,433 64,493,188Guarantees and standby letters of credit 784,879 812,545Commitments to extend cr

Documents

Prairie Centre Credit Union (2006) Limited Consolidated ... Report.pdf · Prairie Centre Credit Union (2006) Limited Consolidated Financial Statements ... MNP LLP is appointed by