2015 – Annual Report

YEARS
2015 ANNUAL REPORT
DEPOSIT GUARANTEE CORPORATION OF MANITOBA
redit
C
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Minne
Union
C a m b ri a n C re d
it U n io n
Ar bo rg Cr e d it Un io n
2015 ANNUAL REPORT 01
VISION
The Deposit Guarantee Corporation of
TABLE OF CONTENTS
Manitoba is respected as a proactive and
effective regulator and deposit guarantor.
MISSION
To maintain confidence in the strength
and sustainability of the Manitoba credit
union and caisse Systems.
CORPORATE VALUES
We consider our staff our most
important asset.
We employ best practices.
We communicate openly with our
stakeholders.
We conduct our activities with a high
level of integrity and accountability.
We treat everyone with respect and
fairness.
We exercise sound judgment.
We adjust our regulatory approach in an
evolving environment.
EMPLOYEE
STATEMENT OF INTENT
We are a team of professionals that
proactively and effectively oversees and
assists in the management of risk within
the Manitoba credit union and caisse
Systems.
REPORT FROM
THE CHAIR
MANAGEMENT
DISCUSSION AND
ANALYSIS
CORPORATE
GOVERNANCE
A VIBRANT
NETWORK
REPORT FROM
THE CHIEF
EXECUTIVE
OFFICER
2015
SUMMARY
FINANCIAL
STATEMENTS
2
4
6
8
17
18
02 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
REPORT FROM THE CHAIR
I
’m honoured to have been appointed as the Chair of the Deposit
Guarantee Corporation of Manitoba’s (DGCM) Board effective
July 1, 2015. It was a good year for DGCM and my first Annual
Report contains updates on a year full of activity.
I wish to thank all the Board members with whom I had the
pleasure of serving with. Their focus on maintaining the strength and
integrity of the Manitoba credit unions and the caisse is appreciated.
Effective December 16, 2015, the government appointed a
Director to fill our last open position. We look forward to welcoming
Robert Jones to the Board in 2016 and his wealth of credit union
experience will be an asset to our Board.
Everyone on this Board continues to be genuinely committed to
providing and developing excellence in our governance processes
and activities. Setting the direction for DGCM is a primary Board
responsibility and the annual strategic planning session is a major
event in our calendar and work plan. In 2015, we again confirmed
our three strategic goals:
• ensuring DGCM operates effectively and efficiently
• ensuring credit union and caisse Systems appropriately manage risk
• ensuring the Guarantee Fund is strong and secure
The 2015 planning session included presentations from three credit
Everyone on this Board continues to be
genuinely committed to providing and
developing excellence in our governance
processes and activities.
union Chief Executive Officers: Kevin Sitka of Assiniboine Credit
Union; Kevin Knight of Noventis Credit Union; and Ian Gerrard of
Vanguard Credit Union. We also heard from Garth Manness, CEO
of Credit Union Central of Manitoba (CUCM) and Ken Lofgren,
Deputy Superintendent of Financial Institutions Regulations Branch
(FIRB).
Tactical plans for DGCM to work on in 2016 include:
• continuing to work with government to support the Manitoba
Systems
• enhancing our oversight of Information Technology in Manitoba
• conducting research into defining regionally important credit
union and caisse entities
• enhancing our contingency planning/crisis management process
In 2015, we received a number of informative sessions from a
variety of sources to enhance our efficiencies and understanding of our
environment.
Credit
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o
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Rive
Union
2015 ANNUAL REPORT 03
We engaged CUCM’s Banking and Payments Services
to provide an update on its liquidity management functions
and Central Credit Committee to define its lending services
responsibilities. As well, Deloitte LLP was engaged to review
what Boards need to be aware of regarding cyber security in the
credit union and caisse Systems. We continue to investigate how
to better educate ourselves and adjust our processes to enhance
our governance responsibilities.
To ensure DGCM appropriately maintains the Guarantee
Fund, the Board received a presentation from Eckler Limited to
reassess its long-term investment strategy. DGCM is mandated,
and remains committed to safeguard the Guarantee Fund with a
prudently managed Investment Policy Statement.
DGCM completed an International Association for Deposit
Insurers (IADI) self-assessment which reviews our deposit
insurance framework against the IADI core principles. While
largely compliant, we have developed and prioritized an action
plan to achieve greater compliance.
I attended the World Council of Credit Unions (WOCCU)
and the International Credit Union Regulators Network
(ICURN) Conferences which identified cyber security as a
universal concern amongst financial institutions around the
world. DGCM continues to examine our oversight practices,
concentrating on this area of emerging risk.
To remain in touch with DGCM’s and the Systems’
environments, DGCM routinely looks for ways to modify or
revise our regulatory oversight to contribute to the success of the
Manitoba Systems.
The Board would like to express sincere appreciation to our
competent and committed executive team and staff. Their efforts,
engagement, and accomplishments all complement our vision of
being respected as a proactive and effective regulator and deposit
guarantor.
Bryan Rempel, Chair
04 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
CORPORATE GOVERNANCE
DGCM is administered by a Board of seven
directors, all of whom are formally appointed by
the Lieutenant Governor in Council, Province
of Manitoba. Four directors are nominated by
Government, two directors by CUCM, and one
director by the caisse System.
The Board governs the business affairs of DGCM
and helps set the strategic direction that oversees
Niverv
ille
nion
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i
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the safety and stability of the Guarantee Fund as
mandated by The Credit Union and Caisses Populaires
Act. The directors operate under formal Terms of
Reference for both the Board and its Committees.
A Code of Conduct is acknowledged annually by
directors and employees. The Board and Senior
Management, as a team, complement each other’s
skills in effectively directing the use of DGCM’s
resources to accomplish its purposes.
The Board establishes the strategic direction, and
sets the foundation for ongoing effective governance
of DGCM.
Dale Ward
Monica Girouard
Brian Mayes
Chuck Golfman
Bryan Rempel
(Chair)
B o ard Of Dir e c tor s
Paul Gilmore
(Vice-Chair)
Robert Jones (absent)
2015 ANNUAL REPORT 05
FRAMEWORK
DGCM began operating in 1965 as The Credit
Union Stabilization Fund. Since 1968, legislation has
required that every Manitoba credit union and caisse
be covered by a deposit guarantee entity.
DGCM has established a governance framework
that closely follows best practices in the financial
industry. Our framework is based on the legal,
regulatory, institutional, and ethical environment
that addresses the administration and controls in our
organization.
DGCM regularly reviews its objectives to
ensure we remain focused on our mandate to fully
guarantee the safety of member deposits. There are
internal programs in place to closely monitor the
Manitoba credit union and caisse environment and
keep DGCM apprised of changes and trends. Our
proactive risk-based approach to regulation allows us
to become involved earlier to mitigate potential risks
to the Guarantee Fund.
COMMITTEES
Board Committees are designed to utilize directors’
strengths to enhance our governance practices and
address key responsibilities and activities.
A s s in ib o in e
C r e d it U n
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e d it U n io n
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C
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Finance & Audit Committee
The Finance & Audit Committee reports quarterly to
the Board and meets independently with the Auditors
to verify external and internal due diligence in DGCM’s
controls and financial reporting. This reporting includes
confirming the activities outlined in its Terms of
Reference to ensure that the fundamental activities are
being conducted.
The Finance & Audit Committee is subject to the
following legislative requirements:
• review the annual audited financial statements
• review the changes in the accounting principles and
practices
• recommend the appointment of an auditor
• review the scope, timing, and coordination of the
external and internal audit plans
• review all significant recommendations made by the
auditor
The Finance & Audit Committee is also responsible
for oversight of:
• compliance and regulatory practices
• financial performance
• financial reporting and accounting practices
• operational and internal control practices
• investment policy reporting and compliance
Governance & Human Resources Committee
The Governance & Human Resources Committee
reports quarterly to the Board. The Committee oversees
DGCM’s corporate governance practices and confirms it
operates under a formal Terms of Reference, satisfactorily
fulfilling its functions during the year.
The Governance & Human Resources Committee is
responsible for:
• corporate governance
• board orientation and education
• succession planning
• CEO performance and compensation
• stakeholder communication
BOARD AND COMMITTEE MEETING ATTENDANCE
DGCM’s Board held five meetings in 2015, one of which was the strategic planning session. The Finance
& Audit Committee and the Governance & Human Resources Committee each met four times. Director
meeting attendance is summarized below.
Directors
Paul Gilmore
Monica Girouard
Chuck Golfman
Brian Mayes
Bryan Rempel
Dale Ward
Board of Directors
Meetings (5)
Finance & Audit
Committee Meetings (4)
Governance & Human Resources
Committee Meetings (4)
5/5
4/4
-
5/5
3/4
5/5
4/4
5/5
-
5/5
5/5
-
-
4/4
-
4/4
-
3/4
06 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
REPORT FROM THE CHIEF EXECUTIVE OFFICER
I
am pleased to report DGCM and the credit union and caisse
Systems enjoyed another successful year in 2015. In many
parts of Canada, the economy has taken a toll on economic
growth while the resilient and diversified Manitoban economy
continues to provide a stable operating environment for credit
unions and the caisse.
We were pleased to be able to provide lower assessment rates
to credit unions and the caisse in 2015, while maintaining our
Guarantee Fund well within the policy range of 95-115 basis
points (bps) of Systems’ deposits. The assessment rate at 8 bps
for 2015 was 1 bps lower than in 2014 and resulted in savings of
$1.1 million to the Systems. Our Guarantee Fund now stands
at $268.7 million, which is up by $17.2 million over 2014. The
Guarantee Fund continues to be managed very conservatively in
short-term, fixed rate instruments to alleviate the volatility risk
seen in the markets this year.
DGCM controlled operating costs in 2015, increasing by
only 1.6% to $4.98 million. We remain very cost effective and
efficient in our operations compared to similar organizations
across the country.
Credit unions and the caisse were able to show very
sustainable growth in 2015, just under 8%. Although credit
unions and the caisse were not quite as profitable as in previous
Going forward DGCM will work with
all stakeholders to ensure Manitoba’s
credit unions and the caisse continue
to thrive in these challenging economic
conditions.
years, they remain very competitive in this marketplace and
continue to maintain a very healthy return on assets of just
under 50 bps.
Much of DGCM’s focus in 2015 was to ensure the
organization clearly outlined its expectations to credit unions
and the caisse. We issued guidance in the areas of Audit
Committees, Internal Audit, Asset Liability Management, and
Information Technology (IT) Risk.
Cyber security remains an emerging risk as it has the greatest
potential to cause systemic issues within the financial services
industry. We were pleased to act as the Chair of a Credit
Union Prudential Supervisors Association (CUPSA) Working
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Union
2015 ANNUAL REPORT 07
Group. This group provided guidance to help regulated institutions
manage the risks IT and cyber security pose to credit unions and
caisses populaires.
DGCM has been working over the past couple of years to
introduce increased capital standards to our regulated entities.
Although not identical to the Basel III framework introduced
after the 2008 global financial crisis, it closely follows many of
its elements. We have sought and received feedback from all
stakeholders on our proposed methodology to calculate riskweighted capital. We made moderate changes to the original
Across Canada, we were involved with the current review of
the structuring of the payment and settlement business within
the national credit union movement. Regulators have a common
interest to ensure the credit union payment and settlement system
is managed and regulated to limit liquidity and solvency problems.
The payment business of many financial institutions is under attack
from start-up Fintechs, and the credit union system is ensuring
this important function remains efficient and within acceptable risk
parameters.
Associated with payments and settlements is the area of liquidity
framework that reflects this feedback and still remain relevant
management. During the 2008 financial crisis, stable funding
government to allow them to start drafting the changes required
viable. We are working with CUCM and FIRB, to explore
to the Manitoba Systems. Our proposal was forwarded to
to Regulations. With a spring election in Manitoba, we are not
expecting these changes to be made prior to the end of 2016.
Leverage capital remains strong at 6.3%, with the vast majority of
it made up of retained earnings, which is the strongest form
of capital.
Another major project undertaken in 2015 was the rollout
of our new regulatory reporting system called the Business
Intelligence & System Oversight Network (BISON). This
provides DGCM, credit unions and the caisse, and other
stakeholders with a secure and efficient method to provide the
necessary communication and reporting between all parties.
In late 2014, we issued an enhanced intervention framework.
During 2015, we tested the framework as part of our oversight
sources were very important to ensuring institutions remained
numerous options to ensure this risk is properly managed and
mitigated; and that robust protocols are in place. CUPSA has also
formed a working group to provide guidance on best practices for
liquidity management to credit unions across the country.
We were saddened in late 2014 to learn of the passing of the
Board Chair, Sheryl Feller. Her passing was a tremendous loss to
our organization. Bryan Rempel was appointed Chair and he has
continued to lead the Board in making sound decisions that are in
the best interest of all stakeholders.
Going forward DGCM will work with all stakeholders to ensure
Manitoba’s credit unions and the caisse continue to thrive in these
challenging economic conditions.
I would like to thank the Board and staff for all their hard work
to ensure it was fair and delivered the necessary performance
in 2015. I am pleased with the professionalism and cooperation
with how the framework performed during the one-year test
work collaboratively to enhance value for credit union and caisse
improvements in credit unions and the caisse. We were pleased
period and it will be fully implemented on January 1, 2016.
DGCM held its second annual Town Hall meeting in Brandon
shown by our staff, as well as credit unions and the caisse, as we
members in Manitoba.
in 2015. Although the weather was terrible, we were extremely
pleased we had such a large turnout. We believe the Town Hall
provides an opportunity for two-way dialogue with credit unions
and the caisse, and we ask for input into the agenda on topics
of interest.
Vernon MacNeill, Chief Executive Officer
08 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
MANAGEMENT DISCUSSION AND ANALYSIS
MANDATE
Our mission and vision, coupled with our corporate
values, keeps us focused on fulfilling our mandate.
Manitoba legislation prescribes DGCM’s mandate to:
• guarantee deposits in credit unions and the caisse
• promote credit union and caisse development of
sound business practices to protect them from
financial losses
• ensure that credit unions and the caisse operate
under sound business practices
DGCM believes that efficient and effective
operations facilitate the execution of our mandate
to maintain depositor confidence in the guarantee.
To maintain focus on the mandate, a comprehensive
strategic plan is refined on an annual basis to remain
current. As well, the accompanying employee
statement of intent reflects a staff-level commitment
to fulfilling our mandate.
The Chief Executive Officer (CEO) plans,
communicates, and sets in motion the action
undertaken by the organization to meet the Board’s
strategic direction.
Po r t a g e C
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Credit
einbach
Union
Zach Zahradnik (COO)
Heather Shaw
(Corporate Secretary)
Vernon MacNeill
(CEO)
Joe Nowicky
(CFO)
Ray Braun
(CRO)
Se n i o r Manage m e nt
2015 ANNUAL REPORT 09
STANDARDS OF SOUND
BUSINESS PRACTICE
The Standards of Sound Business Practice
(Standards) are a set of principles that assists DGCM
to direct and manage itself in a prudent, effective, and
appropriate manner.
The prudence exhibited by DGCM’s Directors
and Senior Management Team have critical influence
on DGCM’s viability, safety and soundness, and its
ability to achieve its mandated objectives.
DGCM’s four Standards are:
1. Corporate Governance – DGCM must effectively
direct, oversee, and manage its business activities
and ensure that performance, accountability, and
integrity are achieved.
2. Strategic Management – DGCM must ensure
that business operations are effectively planned,
executed, and monitored.
3. Risk Management – DGCM must have a
comprehensive approach to identifying, managing,
and controlling business and operating risks.
4. Internal Control Structure – DGCM must
establish and maintain effective systems for
internal control, and ensure these systems are
reviewed and validated on a regular basis.
The credit union and caisse Systems also use the
same four Standards to operate in a prudent, effective,
and appropriate manner.
MANAGING RISK
DGCM utilizes a formal Enterprise Risk
Management (ERM) framework for identifying,
evaluating, and managing risks present in our
operating environment. The Board and Management
maintain policies and guidelines governing the
framework, ensuring appropriate risk tolerance, and
understanding of risk exposure. A corporate, crossfunctional committee reviews the comprehensive risk
profile on a semi-annual basis. The comprehensive
risk profile is a critical input into DGCM’s strategic
planning process, driving the annual business plan
and budget. The ERM framework is continually
refined to leverage emerging best practices, with
practical application, advancing the framework to an
appropriate level of maturity.
ERM is broken down into the following distinct
stages:
• Risk Identification – identifies broad risk categories
and principal inherent risks within each category
• Current Mitigation Strategies – determines
existing risk management strategies and evaluates
effectiveness
• Residual Risk – defines residual risk, considering
inherent risks and existing risk mitigation
strategies, on the basis of likelihood and impact
• DGCM’s Risk Tolerance – establishes DGCM’s
comfort or acceptable level of risk
• Comprehensive Risk Profile – consolidates all
principal residual risks relative to DGCM’s
accepted risk tolerance level in the form of a risk
map
• Risk Management & Monitoring – identifies and
implements risk management strategies to avoid,
accept, transfer, or mitigate principal residual risks
approaching or exceeding DGCM’s accepted risk
tolerance level; also reviews the effectiveness of
risk management strategies in controlling principal
risks to DGCM
DGCM maintains five broad risk categories:
• Deposit Guarantee/Solvency Risk – risk to the
strength and stability of every credit union and
caisse, and the adequacy of the Guarantee Fund
• Strategic Risk – risk that impairs the effectiveness
of DGCM’s Board and Senior Management Team,
or can have a material effect on the reputation of
the organization
• Regulatory Risk – risk with a material effect on
DGCM’s compliance with its legislated mandate,
along with other applicable laws and regulations
• Financial Risk – risk with a material effect on the
Guarantee Fund’s value, liquidity, and investment
yield
• Operational Risk – risk with a material effect
on DGCM’s business operations and functional
processes
Cambrian
Credit U
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10 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
KEY INITIATIVES AND ACHIEVEMENTS
DGCM’s 2015 business plan re-affirmed three core strategies to fulfill its mandate. To support these strategies, a number of strategic initiatives
were identified and scheduled for implementation during the year. The table below summarizes the core strategies and results for the year, along
with key initiatives planned over the next two years.
Corporate Strategy #1
2015 Results
2016-2017 Planned Key Initiatives
Credit union and caisse Systems
appropriately manage risk
Information Technology Oversight
• Enhance information technology risk
oversight
• Review merger, acquisition, and takeover
policies
• Refine supervision, liquidation, and payout
modelling
• Continue refinement of national and
provincial liquidity protocols
• Finalize revised capital adequacy standards
• Communicate ERM guidance
We will oversee the credit union
and caisse Systems, ensuring that
risks are managed appropriately
through supportive guidance
and examination programs, and
appropriate intervention measures
that protect the interests of
depositors.
Piloted an expanded IT Examination framework to
monitor risk within the Systems.
Merger, acquisition, and takeover policies
Policies were updated to help ensure preparedness
in the unlikely event of DGCM involvement in
credit union or caisse resolution.
National and provincial liquidity protocols
Continued collaboration with Systems’ stakeholders
to enhance protocols, increasing preparedness in
the unlikely event of significant stress on Systems’
liquidity.
Capital adequacy standards
Finalized Basel III compliance standards and
submitted proposal for government consideration.
Corporate Strategy #2
2015 Results
2016-2017 Planned Key Initiatives
Effective and efficient operations
Business continuity/disaster recovery planning
• Implement balanced scorecard methodology
to measure corporate performance
• Develop formal policy on external
communications
• Examination framework review
• Bi-annual stakeholder surveys of DGCM
performance
• Enhance compliance with international best
practices on:
• Contingency planning and crisis
management
• Crisis resolution
• Depositor reimbursement
• Information technology infrastructure
review
We will fulfill our legislated
mandate through the engagement of
a dedicated team of knowledgeable
staff, using an effective inventory
of tools and resources to satisfy the
needs of key stakeholders, while
aligning operations to support core
strategies. These efforts will be
executed prudently to achieve the
required results.
Finalized existing plans to ensure operational
resiliency. Established alternate worksite and
information centre.
Operational Review
Assessed DGCM’s compliance against
international best practices for effective deposit
insurance systems.
O a k v il le C r e
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2015 ANNUAL REPORT 11
Arborg
Credi
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Corporate Strategy #3
2015 Results
2016-2017 Planned Key Initiatives
Strong and secure Guarantee Fund
Investment Policy Statement Review
• Conduct actuarial study of the Guarantee
Fund’s adequacy using harmonized
framework
• Investment policy statement revisions
• Review internal controls over financial
reporting
We continue to build and maintain a
Guarantee Fund that is sufficient in size
and mix to meet the anticipated risk
management needs of the credit union
and caisse Systems. The Guarantee
Fund will provide a revenue stream for
our operations and will contribute to
public confidence in DGCM.
Explored alternative asset mixes to
improve returns with reduced risk in the
low-yield environment.
M in n e d o s a C
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12 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
DGCM FINANCIAL OVERVIEW
F I NA N CIA L P OS ITION HIGHL I GHT S
On December 31, 2015, our assets totaled $269.5 million. The increase of $17.1 million,
or 6.8% over 2014, was derived principally from comprehensive income. Our investment
portfolio, which represents 98% of our assets, is conservatively invested in treasury bills,
government and corporate bonds, and guaranteed investment certificates (GICs). The
majority of these securities are quality rated at the equivalent of AAA or higher.
28%
Corporate Bonds
3.9%
GICs
11+56+294L 55+18+207L
53.9%
AAA
21.5%
AA
20.7%
A
3.9%
Unrated (CUCM)
TOTAL EQUITY POSITION
300
115
250
110
200
MILLIONS
The Guarantee Fund, DGCM’s equity totaling $268.7 million,
is comprised of retained earnings and accumulated other
comprehensive income (AOCI). The Guarantee Fund represents
the current internal financial resources available to protect
Manitoba’s credit union and caisse Systems.
Retained earnings are DGCM’s net income accumulated over
time. At year-end, retained earnings totaled $268.5 million, an
increase of $17.0 million or 6.8% over 2014. This increase was
due to annual net income from regular operations.
AOCI is accumulated unrealized gains and losses, driven by
fluctuations in the fair market value of the investment portfolio.
At year-end, AOCI was in an unrealized gain position of $122
thousand, net of deferred taxes.
When AOCI is combined with retained earnings, the total
equity position in absolute dollars and relative to all credit
union and caisse deposits, reflects the fair market value of our
Guarantee Fund. At year-end, total equity was 106.6 bps of
Systems’ deposits.
105
150
100
100
95
50
90
0
-50
85
2011
2012
Retained Earnings
AOCI
bps Deposits
2013
2014
2015
BASIS POINTS
56.9%
Government Bonds
Union
Composition of Marketable Securities by Credit Quality
Composition of Marketable Securities by Issuer Type
11.2%
Treasury Bills
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2015 ANNUAL REPORT 13
CO M PR EHENS IVE INCOM E HI GHL I GHT S
COMPREHENSIVE INCOME
Comprehensive income is the total income over the course of
the year from regular operations (net income) and unrealized
changes in the fair market value of the investment portfolio
(other comprehensive income). Comprehensive income for the
year totaled $17.7 million.
Revenue for the year totaled $21.7 million, offset by
operating expenses and taxes of $4.7 million. The result was a
net income of $17.0 million. Other comprehensive income for
2015 was $36 thousand.
30
25
MILLIONS
20
15
10
5
0
-5
-10
2011
2012
2013
2014
2015
DGCM charges quarterly assessments to Manitoba credit
unions and the caisse to maintain the Guarantee Fund. This
Guarantee Fund is available to offset credit union or caisse
shortfalls to reimburse depositors in the event of failure.
In 2015, DGCM charged an annualized rate of 8.0 bps
of average Systems’ deposits, generating $19.5 million in
revenue.
MILLIONS
ASSESSMENTS
25
11
20
10
15
9
10
8
5
7
0
6
2011
2012
2013
2014
2015
Assessments
Assessment Rate (bps of Average Systems’ Deposits)
INVESTMENT REVENUE
12
10
MILLIONS
DGCM earns revenue on its investments through
interest revenue and realized gains/losses on sales of
investments. Total investment revenue was $2.2 million,
comprised principally of interest revenue. The notable
decrease in revenue was due to falling market yields
on fixed income securities and a move to a short-term
mandate, to protect the investment portfolio principal
from market volatility. Investment revenue is used to
offset operating expenses and provides some relief on the
assessment rate charged to maintain the Guarantee Fund.
8
6
4
2
0
2011
2012
2013
Total Investment Revenue
Operating Expenses
2014
2015
BASIS POINTS
Net Income
Other Comprehensive Income
Comprehensive Income
14 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
O P ERATIN G EXP ENS ES
DGCM incurs operating expenses in fulfilling its legislated mandate. The total operating expenses for 2015 were $4.98 million, an increase
of $79 thousand or 1.6% over 2014. This increase was largely attributed to normal increases in salaries and personnel costs, offset by staff and
Board vacancies, and deferred projects.
64.1%
Salaries and Benefits
5.2%
Contract and Professional Fees
8.7%
Administration
3.8%
Travel
7.5%
Occupancy
3.0%
Corporate Governance
5.8%
CUCM Program Funding
1.9%
Other
6
3.0
5
2.5
4
2.0
3
1.5
2
1.0
1
.5
0
0
2011
2012
2013
2014
2015
Operating Expenses
bps of Systems’ Assets
DGCM remains committed to managing expenses.
While expenses in absolute dollars have increased,
costs have remained controlled relative to the Systems’
assets.
BASIS POINTS
TRENDS
MILLIONS
64+9+865431L
PROFILE OF OPERATING EXPENSES
2015 ANNUAL REPORT 15
SYSTEMS’ FINANCIAL OVERVIEW
ASSETS AND REGULATORY CAPITAL
Asset and deposit growth increased slightly over the previous year due to
a focus on growing liquidity. These efforts were assisted by weak market
returns. Loan growth dropped significantly due to a further decline in
demand as a result of a sluggish economy.
Systems’ assets grew by $2.0 billion, to $27.3 billion. An
increase in asset growth, combined with a drop in net income,
resulted in a slight reduction to capital as a percentage of
assets.
12
8
BILLIONS
PERCENTAGE
10
6
4
2
30
8.0
25
7.5
20
7.0
15
6.5
10
6.0
5
5.5
0
0
2011
2012
2013
2014
2015
5.0
2011
Asset Growth
Loan Growth
Deposit Growth
PERCENTAGE
GROWTH
2012
2013
2014
2015
Systems’ Assets in $ Billions
Regulatory Capital as % of Systems’ Assets
REGULATORY CAPITAL COMPOSITION
PROFITABILITY
Retained earnings continued to increase marginally as a percentage
of total capital. This trend was maintained despite a reduction in
profitability, as a result of a decline in surplus shares.
Gross financial margin and comprehensive income saw a
further decline in 2015. While gross operating expenses were
down as well, the drop did not have the expected positive effect
on comprehensive income, due to a decline in other revenue
and an increase in patronage allocations and dividends.
7
2.0
1.8
5
1.6
4
1.4
1.2
PERCENTAGE
PERCENTAGE
6
3
2
1.0
0.8
0.6
0.4
0.2
0.0
1
0
2011
2012
Retained Earnings
Share Capital
2013
2014
2015
2011
2012
2013
Gross Financial Margin
Gross Operating Expenses
Other Revenue
Comprehensive Income
2014
2015
16 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
DELINQUENCY
While loan delinquency continues to be well controlled,
the declining trend over the past several years has reversed
in 2015.
SYSTEMS’ PROFILE BY ASSET SIZE AND
NUMBER OF INSTITUTIONS
The total number of institutions continued to decline in 2015, down
from 37 to 35, as a result of two mergers. This trend, particularly
evident in the institutions under $250 million, is expected to continue.
1.0
30
25
20
BILLIONS
PERCENTAGE
0.75
0.5
15
6
7
8
8
8
11
10
0.25
5
0
0
2011
2012
2013
2014
Greater than 30 days
ial Group
c
n
a
in
F
Caisse
2015
8
7
9
10
28
28
21
19
16
2011
2012
2013
2014
2015
Greater than $1 Billion
Between $250 Million – $1Billion
Less than $250 Million
2015 ANNUAL REPORT 17
A VIBRANT NETWORK
DGCM regulates and guarantees the deposits of Manitoba’s vibrant network of 34 credit
unions and 1 caisse. (Virtual deposit taking institutions are identified in italics.)
Access Credit Union
Me-Dian Credit Union
Amaranth Credit Union
Minnedosa Credit Union
Assiniboine Credit Union
(Outlook Financial)
Niverville Credit Union
Austin Credit Union
Beautiful Plains Credit Union
Belgian-Alliance Credit Union
Caisse Financial Group
Cambrian Credit Union
(Achieva Financial)
North Winnipeg Credit Union
Noventis Credit Union
Oak Bank Credit Union
Portage Credit Union
Prairie Mountain Credit Union
Rorketon and District Credit Union
Carpathia Credit Union
Rosenort Credit Union
Casera Credit Union
(Casera Financial)
Steinbach Credit Union
Catalyst Credit Union
Crocus Credit Union
Crosstown Civic Credit Union
(AcceleRate Financial)
Entegra Credit Union
(Implicity Financial)
Erickson Credit Union
Flin Flon Credit Union
Grandview Credit Union
Strathclair Credit Union
Sunova Credit Union
(Hubert Financial)
Sunrise Credit Union
Swan Valley Credit Union
Vanguard Credit Union
Westoba Credit Union
(Maxa Financial)
Winnipeg Police Credit Union
18 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
2015 SUMMARY FINANCIAL STATEMENTS
TABLE O F CONT E NT S
19 20 21 22 23 24
Report of the
Independent Auditor
on the Summary
Financial Statements
Summary
Statement
of Financial
Position
Summary
Statement of
Comprehensive
Income
Summary
Statement of
Changes in
Equity
Summary
Statement of
Cash
Flows
Notes to
Summary
Financial
Statements
2015 ANNUAL REPORT 19
REPORT OF THE INDEPENDENT
AUDITOR ON THE SUMMARY
FINANCIAL STATEMENTS
To the Board of Directors of Deposit Guarantee Corporation of Manitoba
The accompanying summary financial statements, which comprise the summary statement of
financial position as at December 31, 2015, the summary statement of comprehensive income,
the summary statement of changes in equity, the summary statement of cash flows for the year
then ended, and related notes, are derived from the audited consolidated financial statement of
the Deposit Guarantee Corporation of Manitoba (DGCM) for the year ended December 31,
2015. We expressed an unmodified audit opinion on those consolidated financial statements in our
report dated February 26, 2016.
The summary financial statements do not contain all the disclosures required by International
Financial Reporting Standards as issued by the Accounting Standards Board (ASB). Reading the
summary financial statements, therefore, is not a substitute for reading the audited consolidated
financial statements of DGCM.
Management’s Responsibility for the Summary Financial Statements
Management is responsible for the preparation of a summary of the audited consolidated financial
statements on the basis described in Note 1.
Auditor’s Responsibility
Our responsibility is to express an opinion on the summary financial statements based on our
procedures, which were conducted in accordance with Canadian Auditing Standards (CAS) 810,
Engagements to report on summary financial statements.
Opinion
In our opinion, the summary financial statements derived from the audited consolidated financial
statements of DGCM for the year ended December 31, 2015 are a fair summary of those financial
statements, in accordance with Note 1.
Chartered Accountants
February 26, 2016
Winnipeg, Manitoba
20 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
S UMMA RY STATEMENT OF F I NANCI AL POSI T I ON
(in thousands of dollars)
As at December 31
20152014
ASSETS
Cash
Investments
$
$ 1,015
262,870245,626
Assessments receivable
5,015
5,272
296
–
48
43
362
458
$ 269,467
$ 252,414
Current tax receivable
Deferred tax assets
Other assets
876
LIABILITIES
Accounts payable and accrued liabilities
Defined benefit plan obligation
$
323
$
302
469
422
Current tax payable
–
86
Deferred tax liability
15
11
807
821
268,538
251,507
122
86
268,660
251,593
$ 269,467
$ 252,414
Total liabilities
Contingent liabilities (Note 2)
CORPORATION EQUITY
Retained earnings
Accumulated other comprehensive income
Total corporation equity
Approved by the Board February 26, 2016
Bryan Rempel, CPA, CA
Board Chair
Paul Gilmore
Finance & Audit Committee Chair
2015 ANNUAL REPORT 21
SU M MAR Y S TATEME NT OF COM PRE HE NSI VE I NCOM E
(in thousands of dollars)
Year Ended December 31
20152014
REVENUES
Regular assessments
$ 19,492
Investment revenue
2,225
$ 20,603
5,576
21,71726,179
EXPENSES
Operating expenses
4,988
4,908
INCOME BEFORE INCOME TAXES
Income tax (recovery) expense
NET INCOME
16,72921,271
(302)
73
17,03121,198
OTHER COMPREHENSIVE INCOME Items that may be reclassified subsequently to net income
Unrealized gains on available-for-sale assets
41
Income tax expense
(4)
(964)
Realized gains on available-for-sale assets
(1)
(1,184)
–
130
Income tax expense
Total items that may be reclassified
366,742
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAX36
COMPREHENSIVE INCOME
8,760
$ 17,067
6,742
$ 27,940
22 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
S UMMA RY STATEMENT OF CHANGE S I N E QUI T Y
(in thousands of dollars)
Accumulated Other
Comprehensive
Income (Loss)
[Unrealized (Losses)
Gains Available-For-Sale
Retained Earnings
Financial Assets]
Total
Balance at January 1, 2014
Net income
$ 230,309
$ (6,656)
$ 223,654
21,198
–
21,198
Other comprehensive income
–
6,742
6,742
Total comprehensive income 21,198
6,742
27,940
Balance at December 31, 2014
$ 251,507
$
86
$ 251,593
Balance at January 1, 2015
$ 251,507
$
86
$ 251,593
17,031
–
17,031
–
36
36
17,031
36
17,067
$ 268,538
$ 122
$ 268,660
Net Income
Other comprehensive income
Total comprehensive income
Balance at December 31, 2015
2015 ANNUAL REPORT 23
SU M MAR Y S TATEME NT OF CASH F L OW S
(in thousands of dollars)
Year Ended December 31
20152014
OPERATING ACTIVITIES
Net income
$ 17,031
Non-cash (recovery) expense – deferred income taxes
$ 21,198
(1)
822
Non-cash expense – depreciation
144
193
Net decrease in assessments receivable
257
274
Net (increase) decrease in prepaid expenses
(12)
4
(382)
170
Net increase in accounts payable and accrued liabilities
21
14
Net increase in defined benefit obligation
47
101
Net (decrease) increase in tax payable and receivable Cash flows generated by operating activities
17,10522,776
INVESTING ACTIVITIES
Net increase in investments, net of deferred tax liability
(17,208)
(22,430)
(36)
(64)
Purchase of property and equipment, net of disposal proceeds
Cash flows used in investing activities
(17,244)(22,494)
(DECREASE) INCREASE IN CASH (139)282
CASH, BEGINNING OF YEAR
CASH, END OF YEAR
1,015733
$
876
$
86
$ 1,015
SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid (recovered)
$
(85)
24 DEPOSIT GUARANTEE CORPORATION OF MANITOBA
NOTES TO SUMMARY FINANCIAL STATEMENTS
1) Basis of Presentation
The summary financial statements are derived from the audited consolidated financial statement, prepared in accordance with International
Financial Reporting Standards, as at December 31, 2015 and for the year then ended.
The preparation of these summary financial statements requires management to determine the information that ensures consistency in all
material respects with, or represent a fair summary of, the audited consolidated financial statements.
Management prepared these summary financial statements using the following criteria:
• the summary financial statements include a statement for each statement included in the audited consolidated financial statements;
• information in the summary financial statements agrees with the related information in the audited consolidated financial statements;
• major subtotals, totals and comparative information from the audited consolidated financial statements are included; and
• the summary financial statements contain the information from the audited consolidated financial statements dealing with matters
having a pervasive or otherwise significant effect on the summarized financial statements.
The audited consolidated financial statements and notes of DGCM are available upon request, or at www.depositguarantee.mb.ca
2) Contingent Liabilities
As at December 31, 2015, DGCM guaranteed $25.2 billion (2014: $23.5 billion) in credit union and caisse deposits. Based on its ongoing
monitoring procedures, DGCM has concluded that a provision for such contingencies does not need to be established at this time.
As at December 31, 2015, DGCM has provided a loan indemnification with a maximum exposure of $608 thousand (2014: $670 thousand).
DGCM has concluded that a provision for loss does not need to be established at this time.
Readers of the summary financial statements are advised that in order to appropriately interpret the provisions, or lack thereof, for contingent
liabilities of DGCM, they must refer to the audited consolidated financial statements and notes for the year ended December 31, 2015,
which contains the information describing the estimate.
Deposit Guarantee
Corporation of Manitoba
390-200 Graham Avenue
Winnipeg, MB R3C 4L5
Phone: 204-942-8480
Fax: 204-947-1723
Toll Free: 1 800-697-4447
www.depositguarantee.mb.ca