Board of Directors Report - 2007

ANNUAL REPORT FOR 2008
Board of Directors
Richard W. Montigny – Chair
Charlottetown, PEI
Doug Clow – Vice Chair
Provincial Treasury
James Blanchard
Kensington, PEI
Peter Schurman
Charlottetown, PEI
Edison Shea
Office of the Attorney General
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Board of Directors Report - 2008
In 1992 the Credit Union Deposit Insurance Corporation (CUDIC) was established.
Its main objective is to provide deposit insurance protection for members who place
deposits in one of the ten credit unions in our Province. Under the Credit Unions Act
CUDIC’s mandate reads as follows:
Mandate
The main objects of CUDIC are to:
a) guarantee the repayment of deposits held with credit unions in accordance
with section 173 of the Credit Unions Act;
b) to adopt measures designed to minimize the risk and the size of claims against
a credit union;
c) to stabilize credit unions in financial difficulties and to provide assistance from
the Credit Union Deposit Insurance Fund to such credit unions for the
purpose of continuing operations or the orderly liquidation of operations;
d) to administer the Credit Union Deposit Insurance Fund for the purposes of the
Act and to invest the same in such securities as the board may determine; and
e) where so appointed by the Minister, to supervise and administer the business
and affairs of a credit union.
Credit Unions’ Financial Performance
We are pleased that the credit union system’s profitability continues to grow each
year. For yet another year each of the ten credit unions reported profits for the year
ended September 30, 2008. The Board, once again, can report that no requests from
credit unions were received requiring advances from the Deposit Insurance Fund nor
were there instances of credit union supervision during 2008. We commend our credit
unions for their impressive performance.
CUDIC Financial Performance
The strong performance of credit unions impacts favourably on the financial position
of CUDIC. During this past year we had an increase of $885,409 in the Credit Union
Deposit Insurance Fund, which reached $8,803,189 as of December 31, 2008. This
gives the Fund a balance equal to 1.53% of insured deposits, and brings us closer to
our objective, which is to build the Deposit Insurance Fund until it reaches at least
two percent of insured deposits.
The Deposit Insurance Fund has been growing at a good pace over the past fifteen
years and premiums continue to be assessed at the original rate, one-seventh of one
per cent of insurable deposits.
The purpose of having a substantial pool of money in the Deposit Insurance Fund is
to foster confidence and maintain stability in the credit union system. The Fund is
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invested and the interest income is used to fund annual operating expenses and to
build the Fund. The Fund is available to protect depositors in the event of a credit
union failure.
Governance and Sound Business Practices
During 2008 the Board continued with the assessment of its role and performance in
fulfilling its mandate under the Credit Unions Act.
As noted in our report for 2007 this assessment was primarily supported by several
factors including:
a) The need to follow-up and address outstanding recommendations provided by
the Auditor General in his 2002 review of the Deposit Insurance Program;
b) The Deposit Insurance Program has been in operation for more than 15 years,
and the value of insured deposits has grown significantly to approach the half a
billion mark;
c) The increased focus on improving governance and risk management practices
in corporations generally, and in Canadian credit unions in particular, over the
past several years;
d) The considerable progress being made by credit unions in other provinces in
adopting standards and modernizing policies regarding sound business and
risk management practices; and
e) The fact that the financial services business is becoming increasingly
complicated and financial institutions are increasingly being exposed to risks
that can adversely affect their business (e.g. over exposure in certain economic
sectors, liquidity shortage).
A priority element of our action plan is the implementation of “Standards of Sound
Business and Financial Practices”. During 2008 our Board held information meetings
with directors and managers of all credit unions and with the board of Credit Union
Central. We reviewed comments and proposals from the various stakeholders in an
attempt to ensure these practices are implemented fairly.
Over the past ten years credit unions have grown to be very significant players in the
marketplace. Accordingly, the Board needs to regularly assess whether we are
employing appropriate standards of examination and risk management to meet today’s
needs. Strong governance practices are very important and CUDIC, as well as credit
unions, must ensure such practices are properly employed throughout the credit
union system. One of the Board’s first steps is the hiring of a Chief Executive Officer.
Applications were received until December 31, 2008 for the position. We anticipate
this person will commence work early in the new year.
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Board of Directors’ Functions
The Board of Directors met 14 times in 2008 to respond to various matters relating to
CUDIC (note: 4 of the 14 meetings were the consultation meetings with credit unions re
Standards). The Board is comprised of five directors:
Richard Montigny – Chair
Doug Clow – Vice Chair
Jim Blanchard
Peter Schurman
Edison Shea
Nick Wight – Secretary/Treasurer (officer, non-voting)
Russell Boyle – Inspector of Credit Unions
Katharine Tummon – Registrar of Credit Unions
An important responsibility of the Board continues to be the regular monitoring of the
financial condition of credit unions. Through this review of inspection reports,
financial statements and statistical reports related to each credit union in the province,
we are kept up to date on these financial matters. These are provided by Russell Boyle,
the Inspector of Credit Unions, who plays an important role by performing
inspections.
In our 2007 annual report we reported that CUDIC had made a presentation to the
Attorney General requesting an increase in the deposit insurance coverage to
$250,000 up from $60,000. We are pleased to report that Government passed
amendments to the Credit Unions Act during the spring 2008 session of the
Legislature. These amendments increased deposit insurance coverage to $125,000
from $60,000. In addition the Act was amended to require all credit unions to conduct
external audits of their financial activities commencing September 2009. Other
deposit insurers across Canada have increased the limits on their deposit insurance
coverage to meet changes in the financial landscape of our country.
Conclusion
In concluding, I extend our sincere thanks to Nick Wight and the very capable staff at
Credit Union Central for their contribution this past year. We particularly
acknowledge the terrific support that Jennifer Steele and Mary Acorn provide to our
Board. It certainly makes our efforts easier.
Respectfully submitted on behalf of the Board of Directors,
Richard W. Montigny,
Chairman
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2008 OVERVIEW
Corporation Financial Performance
The Corporation had good financial results in 2008, reporting increases in assets by
12%, net income by 4% and Fund growth of $858,540 to $7,932,308. Audited
financial statements (pages 7-11 of this report) provide complete details and analysis
of the Corporation’s financial position.
Credit Union Financial Growth
Our credit union system’s profitability continues to be strong. Each of the ten credit
unions reported profits for the year ended September 30, 2008.
PEI Credit Union Growth
Millions
$800
$700
$600
$500
Assets
Loans
$400
$300
$200
$100
$0
Deposits
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
PEI Credit Unions increased assets by 6.63%, deposits by 6.96% and loans by 3.23% in
2008. Equity as a percentage of total assets grew to 6.23% from 5.94% in the previous
year.
Insured Deposits
Millions $700
$600
$500
$400
Insurable Deposits
$300
Total Deposits
$200
$100
$0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Deposit Insurance Fund Performance
The Fund Balance at December 31, 2008 was $8,803,189, an increase of $885,000
from 2007. The Deposit Insurance Fund has been growing at a good pace over the
past fifteen years and premiums continue to be assessed at the original rate, oneseventh of one per cent of insurable deposits.
Fund Growth
Millions
$10.0
$9.0
$8.0
$7.0
$6.0
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
Fund Balance
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Currently the Fund balance is equal to 1.53 % of insured deposits. It should be noted
that the slight dip in the percentage from 2007 is due to insured deposits being
recorded at $125,000 up from $60,000. Nevertheless, we are still on course to reach
our objective, which is to build the Deposit Insurance Fund until it reaches at least
two percent of insured deposits.
Fund as % of Insured Deposits
% of Insurable Deposits
2.50%
2.00%
1.50%
Actual Level
Objective
1.00%
0.50%
0.00%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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All Prince Edward Island Credit Unions are members of the Credit Union Deposit
Insurance Corporation and are insured under the provisions of the Corporation.
Central Credit Union
512 Main Street
O’Leary PE, C0B 1V0
Montague Credit Union
524 Main Street
Montague PE, C0A 1R0
Assets: $39,868,103
Manager: Roger Young
President: Linda Dunn
Assets: $32,731,226
Manager: Bryan Haley
President: Gerald Martell
Consolidated Credit Union
305 Water Street
Summerside PE, C1N 1C1
&
236 Main Street
Borden-Carleton, PE C0B 1X0
Morell Credit Union
29 Park Street
Morell PE, C0A 1S0
&
301 Main St
Mt Stewart PE, C0A 1T0
Assets: $128,201,657
Manager: Sarah Millar
President: Larry MacKinnon
Assets: $25,229,436
Manager: David Pearcey
President: Claude Matheson
Evangeline Credit Union
37 Mill Road
Wellington PE, C0B 2E0
&
873 Canada Road
Tyne Valley, PE C0B 2C0
Souris Credit Union
129 Main Street
Souris PE, C0A 2B0
Assets: $33,584,667
Manager: Paul MacNeill
President: Charles Gillis
Assets: $59,097,802
General Manager: Alfred Arsenault
President: Carol Gallant
Malpeque Bay Credit Union
1 Commercial Street
Kensington PE, C0B 1M0
Stella Maris Credit Union
7201 Main Street
North Rustico PE, C0A 1X0
Assets: $77,204,477
Manager: Marc LeClair
President: Vernon Campbell
Assets: $46,535,048
Manager: Louis Gallant
President: Leo McCormick
Metro Credit Union
281 University Avenue
Charlottetown PE, C1A 7L3
&
10 Kinlock Road
Stratford PE, C1B 1R1
Tignish Credit Union
284 Business Street
Tignish PE, C0B 2B0
&
566 Main Street
Alberton PE, C0B 1B0
Assets: $160,278,488
General Manager: David Burt
President: Bernard Keefe
Assets: $96,727,651
Manager: Louis Shea
President: Brenda McAlduff
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