2015 Annual Report- 8x8 - Diamond North Credit Union

2015 Annual Report
Real People, Practical Banking & Investment Advice
Vision
Diamond North Credit Union
THE financial institution of choice.
Mission
Diamond North Credit Union is a member owned institution that delivers
a superior service experience. We focus on developing member
relationships and delivering on our service promises. Our financial
solutions are accessible anywhere our members call home.
Statement of Beliefs
Diamond North Credit Union believes in:
Honesty
Integrity
Confidentiality
Trust and Respect
Fairness and Caring
Community Support
Open Communication
Co-operative Principles
Open to All for Membership
Personalized and Competitive Service
2
Table of Contents
4
Welcome Message
6
Market Code & Cooperative Values
7
Saskatchewan Credit Union Director Recognition Program
8
Corporate Structure and Governance
12 Our Company
14 Corporate Social Responsibility
16 Management Discussion and Analysis
23 10 Year Anniversary
24 Enterprise Risk Management
26 CUDGC Message
27 Auditors Report
28 Summary Consolidated Financial Statements
Serving You Since
1939 - Arctic (PA)
1941 - Arborfield
1942 - Zenon Park
1943 - Choiceland
1945 - White Fox
1950 - Albertville & Nipawin
1954 - Carrot River
3
Welcome Message
From President Maurice Lalonde and CEO John Shenher
The year of 2015 was another strong and positive year for Diamond North Credit Union.
The past year was one that focused on people, our members, our staff, and our Board of
Directors. We have invested in our staff by training our entire employee group to
provide “Choice Service” for our members. We want to see our members receive the
best service possible from all staff and locations of our credit union, service that
exceeds what any other financial institution would be offering in the marketplace. Our
credit union wants lifetime members. We believe that our business is all about advice
giving and relationships and no longer about simply helping with transaction requests.
Our success as a financial co-operative is building on the financial success of our
individual members. By investing in our staff and delivering a Choice Service experience
we will provide the foundation to attain financial success for all of our members.
More retirements and changes in a number of staff positions happened in 2015. This
seems to be the way it goes in today’s credit union, as we are a business in which you
can have a lifelong career. Approximately 45% of our employees have 10 or more years
of service in the credit union. We are also experiencing change in our Board of
Directors as four of our ten directors are new to the Board in the last two years. Maurice Lalonde was elected as
President of the Board in 2015 replacing Al Mochoruk who retired from the Board after nine years as the President of
Diamond North Credit Union.
Maurice Lalonde, President
and John Shenher, CEO
Financially, in 2015, we had another very good year as outlined in our Financial Statements included in this report.
Despite the challenging economy we are in, we were able to grow 4.67% in assets, ending the year at $415 million. This
is the first time we surpassed the $400 million mark at year end. The book of Wealth Management business continues to
make positive gains increasing to $93.4 million an increase of 7.6%. In total, this amounts to over a half a billion dollars
in assets under administration. Our net income was $2.5 million (after tax) which is our second best ever result. We
continued to support communities by making financial contributions in excess of $89,000 and logging almost
3500 hours of staff volunteer time.
We acknowledge the efforts of our staff, management team, and Board of Directors for their contributions throughout the
year and, of course, our members. It is because of our members’ support that our credit union is successful year after
year.
At the end of 2015, Diamond North Credit Union completed our tenth year since the multi-credit union merger that
started our organization in 2006. Our goal ten years ago was “to form a new credit union that would be better than what
any of us were as individual organizations”. The last ten years have seen us change, grow, and prosper through some
very difficult and challenging economic times. We are proud of our credit unions progress over the years and look
forward to continued member support so we, in turn, can support our members and communities for years to come.
Respectfully submitted,
Maurice Lalonde, President
John Shenher, CEO
4
5
Credit Union Market Code
Cooperative Values
Diamond North Credit Union voluntarily adheres to the
Credit Union Market Code. This code has been jointly
developed by Saskatchewan credit unions, SaskCentral,
and Credit Union Deposit Guarantee Corporation to
ensure the protection of credit union members. The code
sets forth the guidelines for the following areas:
As a true co-operative financial institution, Diamond
North Credit Union is guided by the seven internationally
recognized principles of co-operation:
Voluntary and Open Membership- Co-operatives are
voluntary organizations, open to all people able to use its
services and willing to accept the responsibilities of
membership, without gender, social, racial, political or
religious discrimination.
Fair Sales– Diamond North Credit Union’s actions and
decisions regarding member advice, information and
recommendations are objective and reflective of the
financial needs and the roles and responsibilities of the
members and the credit union. Diamond North Credit
Union is committed to providing relevant and meaningful
information about products and services to enable
members to make informed decisions.
Democratic Member Control- Co-operatives are
democratic organizations controlled by their members,
those who buy the goods or use the services of the
co-operative, who actively participate in setting policies
and making decisions.
Members'
Economic
ParticipationMembers
contribute equally to, and democratically control, the
capital of the co-operative. This benefits members in
proportion to the business they conduct with the
cooperative rather than on the capital invested.
Transparency and Disclosure– Diamond North Credit
Union is open and honest in its dealings with existing and
potential members. Providing general information about
the rights and obligations that arise out of a relationship a
member has, relative to the financial services Diamond
North Credit Union provides.
Autonomy and Independence- Co-operatives are
autonomous, self-help organizations controlled by their
members. If the co-operative enters into agreements
with other organizations or raises capital from external
sources, it is done so based on terms that ensure
democratic control by the members and maintains the
co-operative’s autonomy.
Professional Standards for Employees- Diamond
North Credit Union is committed to employee
development,
education,
professional
designations
and/or accreditation standards where appropriate.
Business is conducted in a manner that maintains a strong
reputation by exercising reasonable, prudent, and
professional judgment in the provision of products and
services.
Education, Training and Information- Co-operatives
provide education and training for members, elected
representatives, managers and employees so they can
contribute effectively to the development of their
cooperative. Members also inform the general public
about the nature and benefits of cooperatives.
Privacy- Diamond North Credit Union protects the
interests of members by ensuring all member/client
information is kept confidential and used only for the
purpose for which it was gathered.
Co-operation
Among
Co-operativesCo-operatives serve their members most effectively and
strengthen the cooperative movement by working
together through local, national, regional and
international structures.
Complaint Handling– Diamond North Credit Union has
an established internal complaint handling process that
provides timely and responsive service to member’s
complaints. The information on complaint handling is
available at www.diamondnorthcu.com.
Concern for Community- While focusing on member
needs, co-operatives work for the sustainable
development of communities through policies and
programs accepted by the members.
Low Fee Accounts- Diamond North Credit Union offers a
basic banking account that will accommodate all persons.
A low fee account is an option for individuals who
conduct limited monthly transactions.
6
Saskatchewan Credit Union Director Recognition Program
2016 Recipient, Andre Laforge
The Saskatchewan Credit Union Director Recognition Program recognizes
elected officials who have demonstrated a significant contribution to the
Saskatchewan credit union system. Annually, each Saskatchewan credit
union may induct one board member, past or present, to the Saskatchewan
Credit Union Director Order of Merit Awards.
Award principles include:
Past Order of Merit Recipients
2015 - Bill Weighill, Carrot River
2014 - Carman Dodge, Prince Albert
2013 - Bruce Smith, Arborfield
2012 - Adlard Blair, Choiceland
2011 - Richard Daoust, Zenon Park
•
Record of exemplary service to a Saskatchewan credit union
•
Demonstrated leadership and an understanding of and commitment to
co-operative principles
2010 - Robert Samson, Albertville
Illustrates a positive public profile that reflects favorably on the credit
union and the local community
2008 - Osborne Craig, Carrot River
•
2009 - Dorothy Morrow, Nipawin
2007 - Mike Nycholat, White Fox
Andre Laforge was born and raised in Arborfield Saskatchewan, in the heart of
Diamond North country. As a youth he attended school in Zenon Park. After
graduating from high school Andre moved to Saskatoon to attend the University of
Saskatchewan to study Agriculture. Andre graduated with a Bachelor of Science and
Agriculture (BSA) degree and began his career in Regina as a professional agrologist
with Shell Oil.
In 1981, northeast Saskatchewan beckoned Andre back, so he returned to Nipawin
where he continued his agricultural career with Gates Fertilizers Ltd. In 1984, an
opportunity arose in Carrot River where Andre has made his home for the last 32
years. Andre is employed with Richardson Pioneer.
Andre has always had a strong commitment to community involvement where he has
served on many committees and boards. Amongst them, Carrot River Recreation
Board (14 yrs.), Zenon Park School Board (7 yrs.), Knights of Columbus (since 1989),
Carrot River Credit Union (7 yrs.), and Diamond North Credit Union (6 yrs.). Often he
served as chairman, president and vice-president. In addition, Andre donned a Santa
Claus suit for 24 consecutive years for various community groups until 2015, at which
time Andre could no longer continue due to health issues. This activity gave him particular satisfaction, as he saw many
happy faces, both old and young. Andre is well respected in Carrot River and the broader community.
In 1987, while vacationing in Cuba, he met a young woman from Toronto, who was born and raised in Belfast. Betty and
Andre were married a year later. They are particularly proud of their 3 adult children Stefan (25 yrs.), Chantal (21 yrs.)
and Marcel (18 yrs.). Stefan is employed with Richardson Pioneer in Saskatoon. Chantal is attending the University of
Regina and Marcel is attending the University of Saskatchewan. Chantal and Marcel are each enrolled in the Arts and
Sciences program.
Communities working together for the common good have always brought great satisfaction to Andre. This was never
more evident during the 13 years he spent as director on the Carrot River and Diamond North Credit Union Boards.
Diamond North Credit Union is pleased to induct Mr. Andre Laforge to the Saskatchewan Credit Union Director
Recognition Program and to present him with the Order of Merit.
7
Corporate Structure and Governance
Board of Directors
Anchored in the co-operative principle of democratic control, Diamond North Credit Union is governed by a memberelected Board of Directors. The board is accountable for leading and nurturing the long term strategic direction of the
credit union while creating and maintaining value for its members, and the communities in which it does business.
The board respects the role that outside agencies play in ensuring fair practices, consumer protection and a level playing
field with competitors. The credit union is committed to following the regulations and guidelines set for it by the
Government of Saskatchewan, Credit Union Deposit Guarantee Corporation and in the Credit Union Act 1998, The
Standards of Sound Business Practice, and its own bylaws and policies.
In 2013 the credit union adopted The Policy Governance model which focuses on the functions rather than the
structure of governance. Carefully established written board policy sets the strategic direction for the credit union and
provides both the board and management with clear boundaries around who is accountable for specific outcomes and the
means for seeing those outcomes achieved.
Board of Directors as of March 31, 2016
Occupation
Years of
Service
District
Term
Expiry
Meeting
Attendance*
Retired Office Manager
0.75
Carrot River
2016
78%
Self-Employed
1
Nipawin
2018
95%
Farmer
21
Nipawin
2016
69%
Businessman
18
Zenon Park
2016
100%
Lindsay, Rick
Farmer
12
Arborfield
2016
100%
Nicklen, Louise
Farmer
1.25
White Fox
2017
95%
Bison Rancher
Owner;
Building Contractor
6
Choiceland
2018
90%
15
Albertville
2017
95%
2
Nipawin
2017
90%
18
Arctic
(Prince Albert)
2016
93%
Name
Grimes, Emily
Hind-Hluchaniuk, Heather
Kirk, Roger
Lalonde, Maurice
President
Pagan, Greg
Sande, Darryl
Vice - President
Serack, Leslee
Thompson, John
Retired Finance Director
Retired Forester
*Although meeting attendance is tracked for the electoral year (April – March); it is only reported up to the time of printing
(to February 23, 2016). Only those meetings scheduled for a director’s attendance are included when calculating attendance.
8
Board Composition
Directors, which are elected by district,
serve 3 year terms that expire on a
rotational basis and there is no limit to the
number of terms a director may serve.
The outcome of the director election
process saw a change in the faces around
the board table.
We bid farewell to
President, Al Mochoruk who was a longtime
director
representing
Nipawin.
In-branch election in Nipawin brought
Heather Hind-Hluchaniuk to the table in
April, 2015. Jim Barnett from Carrot River
did not seek re-election. No candidates
were nominated in Carrot River but the
board continued to seek someone to fill
the position and in August of 2015, Emily
Grimes from Carrot River was appointed to
fill the vacant director position until April,
2016.
From L-R: Darryl Sande, Heather Hind-Hluchaniuk, Greg Pagan, Roger Kirk, Emily Grimes,
John Thompson, Leslee Serack, Maurice Lalonde, Rick Lindsay, Louise Nicklen
Mandate and Responsibilities
The Board of Directors governs on behalf of the members. With an emphasis on outward vision, diversity in viewpoints,
strategic leadership and a clear distinction of roles between the Board and the CEO, the board translates its members’
wishes into credit union performance. The board maintains policies that are responsive to the needs of its members
and designed to maximize the potential for the long term viability of the organization as a whole.
Director Training
Diamond North Credit Union is committed to the on-going professional development of its directors and has
established policies that provide the financial resources to do so. Policy requires that new directors complete the first
of three levels of training available through the national Credit Union Director Achievement program (CUDA) in their
first year.
Heather Hind-Hluchaniuk has completed Level A. Louise Nicklen is registered for Level A but has not yet completed
this program. John Thompson and Leslee Serack attended the Canadian Conference for Credit Union Leaders in May
and the board arranged an in-house CUDA training session held in Nipawin in November that was attended by seven
directors.
In January, 2016 seven of the board members received management planning training facilitated through
SaskCentral. Heather Hind-Hluchaniuk attended the first session of the Professional Director Education & Certification
Program in December 2015 and will complete this training in June 2016.
Directors also attended seminars and system meetings as necessary throughout the year. Attendance and training is
tracked on a yearly basis.
9
Corporate Structure and Governance, continued
Board of Directors, continued
Director Committees
The Board of Directors believes that a fundamental principle of sound governance is ensuring that members of the board
have equal access to all information, discussion and options requiring board approval and therefore takes a minimalistic
approach to the use of committees to preserve the wholeness of the board’s job. However, to ensure compliance with
governing legislation, the following board committees have been appointed:
Audit Committee: The purpose of the Audit committee is to ensure an independent review of the credit union’s
operations on areas deemed necessary to maintain the integrity of financial data, adequacy of internal controls,
and adherence to requirements of The Credit Union Act, 1998, The Credit Union Regulations, 1999, and the
Standards of Sound Business Practices. All directors serve on the committee which meets during regular board
meetings.
Conduct Review Committee: The Conduct Review Committee ensures that Diamond North Credit Union acts with
the full integrity and objectivity of its directors and employees, by having in place policies, processes and
practices that protect people and the organization from claims and from the perception of unfair benefit or
conflict of interest. All directors serve on the Conduct Review Committee which meets during regular board
meetings.
Elections Committee: The Elections Committee oversees the nomination and election processes for the election
of Credit Union directors. The committee is comprised of each member of the board not seeking re-election in
the next board election cycle. The minutes of its meetings are submitted to the board and it reports to the
Board during regular board meetings.
Note: Other oversight committees include:
Asset/Liability, Risk Management, and Credit Management. These
committees are facilitated by management and report to the Board as required.
Diamond North Credit Union directors receive remuneration for items related to Diamond North Credit Union business or
training. Allowable reimbursable expenses are for meetings, travel, meals, accommodations, mileage, and training. In
addition, Diamond North Credit Union pays insurance premiums on behalf of the directors.
In 2015 the budgeted remuneration amount was $43,564.00, actual paid was $46,989.60. Directors were reimbursed
an additional $12,108.45 for out of pocket expenses. Insurance premiums that were paid on behalf of the directors
totaled $5,594.52.
Evaluation
The purpose of board self-evaluation is to compare what the board does and produces with what it said it would do and
produce. With this in mind, the board reviews its policies that address board behaviour and performance at least
annually to ensure they accurately reflect expectations. Compliance with these policies is assessed regularly throughout
the year.
10
Executive Management
The Diamond North Credit Union Executive Management team is responsible to oversee the operations of the credit union
within the context and strategies outlined by the board. The Executive Management team is comprised of four members:
Chief Executive Officer (CEO), John Shenher
John’s responsibilities as CEO include developing and implementing
high level strategies, making major corporate decisions and managing
the overall operations and resources of the credit union. John is the
communication link between Diamond North Credit Union’s Board of
Directors and the operations of the credit union. John has worked in
the credit union system for more than 31 years; 21 of those years in
the CEO/General Manager position, providing a wealth of knowledge
and experience to our organization. John has been the CEO of
Diamond North Credit Union since inception in 2006; he is also a
director on the Credit Union Electronic Account Management Services
Association Board (CEAMS) and the CRI Canada Advisory Council.
Vice President of Corporate Services, Brenda Lehmann
From L-R, Back row: Erlinda Capili, Jason Panchyshyn.
Front row: John Shenher and Brenda Lehmann
Brenda, as VP of Corporate Services, is responsible for ensuring success
in the business units that support retail functions of the organization.
These business units are Compliance, Human Resources, Marketing and Technology. Brenda also leads the Risk
Management Committee within Diamond North Credit Union. She holds a Business Administration Certificate from the
University of Saskatchewan and a Certification in Credit Union Management Studies; and has a Professional Leadership
Certification from the University of Regina. Brenda has 32 years of co-operative experience, 26 years in the credit union
system and 19 years specific to Diamond North Credit Union.
Interim Vice President of Finance, Erlinda Capili
Diamond North Credit Union is currently recruiting for a VP of Finance. In the interim, the vacancy is being filled by Manager
of Corporate Accounting, Erlinda Capili. Erlinda has 25 years of experience with the co-operative system, 15 years
specifically in the credit union system. A Certified Public Accountant from Manila, Philippines, Erlinda also holds a Certified
General Accountant (CGA) designation. Before joining Diamond North Credit Union in 2010, Erlinda held audit and
risk/compliance positions with Prince Albert Credit Union and Conexus Credit Union.
Vice President of Retail Services, Jason Panchyshyn
As VP of Retail Services for Diamond North Credit Union, Jason is responsible for the retail branches and the Credential
Financial Strategies office; he ensures back office and administrative departments function fluidly and leads the Credit
Management Committee. He works closely with the branch managers and supervisors in the areas of deposits, lending, and
wealth management. Jason holds a Bachelor of Commerce degree from the University of Saskatchewan and is a Fellow of the
Credit Union Institute of Canada. Prior to joining Diamond North Credit Union, in 2006, Jason worked in the public
accounting field and has been active in a family retail business.
11
Our Company
Diamond North Credit Union
Diamond North Credit Union operates throughout northeast Saskatchewan with branches in Albertville, Arborfield,
Carrot River, Choiceland, Nipawin, Prince Albert (Arctic Branch), White Fox and Zenon Park. Diamond North Credit
Union’s team of 94 employees is committed to the well-being of our members and communities.
2015 was a busy and productive year for our organization with the completion of numerous initiatives and the
beginning of others. Although many new initiatives have started, we remain invested in our communities. One of the
largest ongoing projects is our Nipawin branch renovation
Our Nipawin Branch building, which houses our Retail Branch, Executive offices, several administrative departments,
and our Credential Financial Strategies (CFS) Centre, was last renovated 16 years ago when the credit union was a
single branch. Over the last 16 years, our retail branch has more than doubled in business volume, our CFS Centre has
tripled in business volume, and the merger to form Diamond North Credit Union took place. There are now twice as
many staff working in the building as were in 2001; we had no further room for future expansion in our current floor
plan. After having experts analyze the space we currently have, we have concluded that both the upper and lower
levels need to be redesigned to meet today’s member service expectations and the present needs of our credit union.
We are using the redesign to address mechanical, electrical, and technological components, some of which are over 40
years old. The redesign will also accommodate potential staff expansion in the future without adding more square
footage to our current building structure; it will also include an update to the exterior facade.
This multi-million dollar project began in February 2016; work will be completed in three phases over a period of one
year. Our executive and administration staff were moved to temporary facilities to accommodate the construction
phases. The general contractor, called NewGround, specializes in the construction and renovation of credit union
branches nationally. Several companies within the region that our credit union serves have been awarded tenders as
sub-contractors in the project.
In recent years, our credit union has continued to invest in our communities by building expansions in Arborfield and
Albertville. In 2015, commercial upgrades were done in our Carrot River, Choiceland and White Fox branches; we also
purchased our branch building in Prince Albert. The Nipawin Branch renovation is our latest project and it is very
important for the future, both in the service delivery to our membership and the efficient operation of our management
and administration staff who provide support to all eight of Diamond North Credit Union’s branches. After
approximately three years of planning, we are excited to see the project finally get underway.
12
Choice Service is a journey to provide our
members and fellow employees our very best at
every interaction - to go beyond the transaction at
hand and provide valuable advice that enhances
your service experience and ensures you reach
your financial goals.
Choice Service is about being authentic and reliable.
It shows our members that we care for them and it builds trust. It’s meeting
people face to face, putting ourselves in their shoes
and seeing the world through their eyes. Choice Service is an experience, it
gets people talking about our personalized service; it means
empowering our members with options and knowledge. It gets members
excited! Choice Service elevates our organization above the competition and
pushes us to continue learning and to keep getting better. It shows diversity.
This is our service promise.
In July, we introduced the newly redesigned Member Card® with Interac
Flash, an enhancement of Interac Debit. Interac Flash allows the user
to make quick, convenient and secure every day purchases at select
merchants without having to insert their card or enter their personal
identification number (PIN).
In September, we joined 3 social media platforms. The objective of
launching social media platforms is to (1) increase awareness of our
organization; (2) enhance our member service experience by providing
responsiveness and attention to areas of concern or member issues; and
(3) develop a communication channel for two way conversation with
existing and prospective members.
To continue enhancing service in the mobile space, we added the
Android™ app to our lineup of mobile banking channels in Spring of 2015.
Our mobile apps (iPhone version was available in 2014) provide access to
online banking from mobile devices.
13
Corporate Social Responsibility
Corporate Social Responsibility is belief in a company's accountability to community; the
belief that a company should take into account the social, ethical, and environmental
effects of its activities on its staff and the community around it.
As outlined in the Co-operative Principles (Concern for
Community) and in our Statement of Beliefs (Community
Support) Diamond North Credit Union strongly believes in
giving back to the communities in which we live and work.
Without the support of the community our credit union
would not operate as it does today; we believe in
supporting our communities, just as they support us.
In 2015, Diamond North Credit Union donated $89,538 to
various organizations, charities, non-profit clubs, parks,
and projects. That’s 3.1% of 2014’s pre-tax profit.
Through several different initiatives, Diamond North
Credit Union’s employees have volunteered hundreds of
hours of their own time to enhance the communities
they live in. In 2015, our 94 employees donated over
3485 hours of their time to various volunteer activities
and organizations. Without the willingness of our
employees and the strength of our membership, we
would not be able to give back as we have in 2015.
As well as donations to various events and
organizations, Diamond North Credit Union awarded
$5,500 in scholarships to students in our
communities. Our 2015 scholarship recipients were
Keely Fladager (Meath Park), Mallory Lindsay
(Arborfield), Dana Palmer (Carrot River), Shae Thibault
(Choiceland), Margo LeBlanc (Zenon Park) Trent Kozun
(Nipawin), Carly Mollberg (Nipawin), Thomas Rowlett
(Nipawin), Nial Christiansen (Nipawin - Commerce), Rene Kreutzweiser (Former White Fox
Student), and Ashely Bober (Cumberland College award).
ager
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Zenon Park
Through funding of countless projects, donations of volunteer time, scholarships for students and contributions to a
variety of events Diamond North Credit Union returns the support our members have shown us to the communities we
live and operate in. We are proud of our communities and by actively participating in community improvements and
activities, we create something much bigger than ourselves.
Staff donated 3485 hours of their own time to various community
events, projects and committees in 2015. That’s an average of 36
hours per person or 9.5 hours every day in 2015!
14
Nipawin staff pose after doing a
member’s yardwork, courtesy of
summer 2015’s Yard Crashers initiative.
Carrie Cummings, Arborfield Branch
Supervisor, presents a donation to Joann
Rusk of the Bryden Park Upgrade project.
White Fox Branch Supervisor, Tanya
Hamilton, presents a donation to Darwin
Love of the White Fox Fire Department.
Brandy Burka, Choiceland Branch
Supervisor, presents a donation to
Lorenda Friesen of Torch Trail Bible Camp.
Arctic Branch Manager, Tyler Venne (left)
presents the Business of the Year Award to
Trevor Dutchak of Parkland Ambulance Care.
Carrot River staff enjoy a meal in the field
during harvest with the Kozun family,
during 2015’s Tailgate Parties.
Nancy Lavoie presents a donation to
Adrienne Lavoie, representing the
Meath Park School Christmas Dinner.
Jeff Chorney, (second from left) presents a
donation to Nipawin’s Habitat for
Humanity Project.
Darci Wlaz presents sponsorship of the
Tri Town Thunder hockey team
to Parry Williams, President.
15
Management Discussion and Analysis
Introduction
Presented herein is the discussion and analysis of the operational and financial position of Diamond North Credit
Union (Diamond North Credit Union) as at December 31, 2015, represented in Canadian dollars and prepared in
accordance with International Financial Reporting Standards (IFRS). The commentary is tied to, and should be
viewed in combination with, the Diamond North Credit Union Consolidated Financial Statements and their
accompanying notes. This report will also make note of key areas and items pertaining to Diamond North Credit
Union business. Management’s Discussion and Analysis is presented to enable readers to make assessments
regarding material changes in the financial condition and operating results of Diamond North Credit Union, and
with consideration of current and future risks.
Operational Overview
Diamond North Credit Union is an independent regional credit union owned by our members. Under the current credit
union legislation, Diamond North Credit Union is able to provide financial services to members (9,947) and
non-members (3,873).
Diamond North Credit Union is located in, and provides in-branch financial services (deposit, lending, and wealth
services) at eight locations across northeast Saskatchewan. The branches serve the communities of Albertville,
Arborfield, Carrot River, Choiceland, Nipawin, Prince Albert, White Fox, and Zenon Park.
With the exception of Prince Albert, Diamond North Credit Union serves a district that is mainly rural. As such the key
market segments are agriculture and businesses related to the agricultural industry. The economic environment in the
Diamond North Credit Union trading area stayed a steady course, similar to the previous couple years. In many areas the
agricultural industry saw fine results, though there were some residual deterrents with crop prices and surplus volumes
from the previous year’s crop inventories.
In 2015 Diamond North Credit Union experienced good economic environment ending at $2.54M after tax profitability
(2014 =$2.42M, 2013=$2.78M, 2012=$1.91M, 2011=$1.02M, 2010=$1.92M, 2009=$1.69M, 2008=$1.10M). This is
partially attributable to the continued low interest rate environment, and the strength of revenue generating loan
demand. This low interest rate environment is expected to continue in 2016 and will most likely continue to encourage
the “spend not save” environment we have been experiencing. The level of profitability achieved, 0.73% (before taxes),
enabled us to generate required capital targets that sustain the long term growth of the organization.
16
Strategy
The strategic direction prepared by the Board and Management encompass economic and technological scenarios that
Diamond North Credit Union might find itself in the coming years. Within the strategy and in tandem with the
economic and technological scenarios, the guiding factors are Diamond North Credit Union’s Core Competencies and
Key Success Factors that will be the applied strategy going forward from 2015.
Core Competencies
Key Success Factors
•
Member Relationships
•
Leverage Technology
•
Staff Empowerment
•
Leaders Not Followers
•
Local Involvement in the Community
Key Performance Drivers
In order to evaluate the performance of an organization consideration must be given to the regulatory nature of the
business, the economic environment that it resides in, future objectives of the organization, as well as current
organizational position. With these in mind, targets are set to meet the organizations short and long term objectives for
financial, regulatory, and cultural health.
The corporate targets are reviewed yearly and are set with a mind to what the key focus the organization should have in
the coming year. The targets are evaluated regularly to ensure that the required goals are being met and that the
organization is performing as desired. The methodology that Diamond North Credit Union employs for these targets is
the Balanced Scorecard.
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Management Discussion and Analysis, continued
Results
Profitability
For 2015, our annualized return on asset before tax was .73% compared to .72% in 2014. Total profit after tax for the
year was $2.5M an increase from $2.4M in the previous year.
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Growth
Total asset growth for the year was 4.68%, increasing from $396.1M to $414.6M. Asset growth is derived primarily
from increases in values of our investment portfolio, member loans receivable and, to a lesser extent, investment in
capital assets. These are in turn funded by growth in member deposit balances. The relationship between these items
are managed very closely to ensure that adequate liquidity is maintained and our risk is within tolerable levels. For
further details on loan and deposit growth, refer to subsequent commentary.
19
Management Discussion and Analysis, continued
Results
Loan Portfolio
Total outstanding loan principal
balances increased $11.8M in 2015,
from $316.7M to $328.5M. This
represents an acceptable growth rate
of 3.72%, which is lower than 2014
and below our 5 year average of
4.52%. For the third year in a row,
loan
demand
outpaced
deposit
growth, requiring us to sell a portion
of our loan portfolio to credit union
partners. This is a common practice
utilized when necessary to balance
the
relationship
between
loan
demand and member deposits. The
difference between loans sold, less
balances
of
loans
previously
purchased from other sources, grew
by $7.6M. Removing the effects of
these
loan
syndications
and
participations, loan growth from
branch activities was 5.76%, for 2015.
Deposit/Wealth Portfolio
We also had a decent year in deposit
growth. Balances in member deposit
accounts grew $15.4M, from $361.4M
to $376.9M, or 4.27%. This is very
close to our 5 year average of 4.48%.
The core components of our deposit
base, chequing and savings accounts,
continued their steady increase, but
the largest gains came in TFSA
accounts, which are becoming a very
popular savings vehicle for our
members.
Not reflected in these numbers, are
our off-book deposits – primarily
member investments held with our
in-branch
Credential
Asset
Management (CAM) reps or our
Credential Financial Strategies (CFS)
office. Balances in these accounts
increased 7.7%, or $6.6M, to close the
year at $93.4M. A very good result
given the market fluctuations over the
past year.
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Capital Management
All financial institutions have regulatory
oversight. The highest industry regulator for
credit unions is the Credit Union Deposit
Guarantee Corporation (CUDGC).
CUDGC
provides the guiding principles that we must
operate within to be regulatory compliant. The
two key indicators for capital adequacy are Tier
1 Capital and Risk Weighted Capital.
These
measure the financial strength of an
organization.
The required ratios in these areas are Total
Tier 1 Capital of 8.50% and Eligible Capital to
Risk Weighted Assets of 10.50%. Diamond
North Credit Union stands favourably in these
measures for 2015 at Total Tier 1 of 12.38%
and Eligible Capital of 12.40%.
Our credit union manages capital requirements by annually developing a Capital Plan that outlines the capital
requirements the organization must achieve to remain financially healthy and compliant with regulations. This plan is
developed within the regulatory framework (Standards of Sound Business Practice), is provided to the Board of Directors,
and is reviewed regularly by management. The plan is developed to ensure that the organization meets and exceeds
capital requirements. As such, Diamond North Credit Union policy dictates that our capital levels should exceed
regulatory minimums to further mitigate risk if there were to be an unforeseen event that would draw on the capital
reserves. Having a strong capital base allows for unexpected losses, as well as the implementation of long term strategic
plans, and the ability to grow our assets.
Also included in the capital management
category is the management of capital
assets and facilities. Diamond North has
eight branches, and all buildings are well
maintained.
As an organization it is
important to invest in capital assets and
facilities.
To that end, Diamond North
Credit Union invests in maintenance and
upgrades
to
each
of
the
branch
locations. Currently, the Nipawin and Prince
Albert facilities are facing challenges with
meeting member service and staffing
needs. As such, work has begun on the
renovation in the Nipawin branch to be
completed in 2016. Long term plans are
being researched for the Prince Albert
branch.
21
Management Discussion and Analysis, continued
Results
Credit Quality
Credit quality is a key facet of lending, and requires diligence. The health of an organization’s loan portfolio is
determined by how well the credit of the loan portfolio is performing. This is measured by the delinquency of the
portfolio. The performance of the portfolio is vital in relation to risk management and as an indicator of credit quality.
Diamond North Credit Union’s delinquency ratio greater than 90 days for 2015 was 1.63%, an increase from last year’s
0.85%. Delinquency and credit adequacy are carefully monitored and reviewed regularly to assess items that may be, or
become, impaired. Part of this review encompasses assessing the necessity for allowances and estimating the
likelihood that there would need to be an impairment allocated that would change the book value of the assets.
Patronage
For the past several years Diamond North Credit Union has not had the profitability and capital position to be able to
provide a member patronage. The Board is committed to returning to a patronage program and has put focus on it in
the new Strategic Plan. For the year ended 2015 there is no additional patronage payout but, previous patronage that
was retained by Diamond North Credit Union was partially paid out in 2014 and the remainder was paid out in 2015. In
2016, research and development of the patronage program is one of managements’ strategic projects.
Other
Net Interest Margin – measures the total interest revenue less the total interest expense. This is a crucial measurement
as the majority of a credit union’s profitability is generated by interest margins. Diamond North Credit Union’s net
interest margin for 2015 was 2.78%, slightly down from the previous year’s 2.81%. Diamond North Credit Union
finished the year with a net interest margin above its peer group and will continue to strive for this in 2016.
Other Income – included in this category is fixed asset revenue, service charges, and commissions. Other income for
2015 was $3.4M, not far off $3.17M of the previous year.
Operating Expenses – includes various operating expenses such as personnel costs, member security, organizational
costs, occupancy, and general business. These costs increased to $11.5M in 2015 from $11.3M in 2014. The main
contributor to this increase is personnel costs (training), maintaining our branch structure and investment in
technology.
Outlook
It had been anticipated that market prime and overnight rate will stay flat in 2016. This would give us positive targeted
ratios of
Net Interest Margin 2.76%
Profitability 0.72%
Asset Growth 5.71%
It is expected that there will not be a large change in the economic environment in our area that will unfavorably and
meaningfully affect revenue generating activities. As always, management keeps a close eye on actual measures
compared to budget and makes adjustments as necessary to ensure Diamond North Credit Union remains strong
financially. 2016 may have many global economic changes (ex - oil prices, political uncertainties, etc) that could impact
Diamond North Credit Union; therefore management will continue to be diligent to minimize these external impacts.
22
Celebrating our
Does your project support community & economic
development or youth & education?
Is your project in need of funding to build, expand or improve
facilities that support the development of our communities?
Is your project in need of funding to build, expand or improve facilities that
support the development and implementation of programs that support the people
in our communities?
In 2016, we celebrate our 10 year anniversary as
Diamond North Credit Union. Diamond North
Credit Union was formed on January 1st, 2006
through the amalgamation of the Carrot River &
District Credit Union Ltd., Nipawin Credit Union
Ltd., White Fox Savings & Credit Union Ltd. and
Zenon Park Credit Union. This merger brought
four credit unions and six branches together in
northeast Saskatchewan. In 2008 Arctic Savings &
Credit Union, Prince Albert, and the Albertville
Credit Union joined Diamond North making our
organization an eight branch regional credit
union.
One of the keys to the success of our credit union
is the communities we serve. To celebrate our 10
year anniversary, Diamond North Credit Union will
be giving back to our members and communities
through various activities in 2016.
One of the first ways we are celebrating is our
$25,000 People Helping People Project. Visit our
website www.diamondnorthcu.com or stop by a
branch to find out if your project is eligible to
receive our People Helping People funding.
23
Enterprise Risk Management
As with all financial institutions, Diamond North Credit Union is exposed to a variety of risks. Each year our credit union
invests a significant amount of resources to measure and assess risks to ensure that we are adequately prepared to
serve our communities now and in the future. This process is called Enterprise Risk Management (ERM), and is a
requirement of credit unions in Saskatchewan as laid out by Credit Union Deposit Guarantee Corporation.
The risk tolerance for Diamond North Credit Union is set out by policy as defined by the Board of Directors. Diamond
North Credit Union will maintain appropriate levels of control over all risks faced by the enterprise in the normal course
of doing business. These controls are aimed at minimizing uncertainty and maximizing opportunity (mitigating
identified risks) while managing the enterprise for growth and stakeholder value. Diamond North Credit Union has in
place a Risk Appetite Statement that outlines identified risks and guidelines pertaining to and mitigating those risks.
This function is overseen by the Risk Management Committee and is reported back to the Board. Following are the risk
categories that comprise Diamond North Credit Union’s ERM philosophy:
Credit Risk
The risk to earnings or capital arising from a member’s failure to meet the terms of any contract with the credit union or otherwise fail to
perform as agreed. Credit risk is found in all activities where success depends on counter party, issuer, or borrower performance. Some key
individual credit risks are default risk, portfolio concentration risk, inadequate allowance risk, and policy exceptions risk. Diamond North Credit
Union has practices and policy in place to mitigate credit risk in the organization. These risks are reviewed and evaluated regularly through the
Risk Management Committee to determine and resolve potential risks. Diamond North Credit Union operates within its identified risk profile.
Market Risk
This is the risk from dealing within a market place that has exposure to the fluctuations in market price and/or rates. There is the risk of
potential losses if pricing or rates change, thereby adversely affecting the value of assets and liabilities. In our case, Diamond North Credit
Union would mainly be affected by increases/decreases in interest rates. Management adheres to a comprehensive risk management plan and
procedures to ensure that we are aware of and can mitigate potential risks. Deployment of this is through the defined policy to regularly
monitor and measure risks and report them to the appropriate body: ALCO, Board, and regulators. Further to this we implement various
scenario testing tools and dynamic modeling tools to create simulated situations that may apply to our organization. Based on these practices
we take mitigating actions as necessary.
Liquidity Risk
This is the risk to earnings or capital arising from a credit union’s inability to meet its obligations when they come due, without incurring
unacceptable losses. Liquidity risk includes the inability to manage unplanned decreases or changes in funding sources. Liquidity risk also
arises from the failure to recognize or address changes in market conditions that affect the ability to liquidate assets quickly and with minimal
loss in value. Liquidity is monitored on a daily basis, with an eye to the current actual needs, and in anticipation of, future cash inflow and
outflow needs. To facilitate the demands, we have an investment portfolio of liquid demands, and an established borrowing facility with
SaskCentral.
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Major Initiatives Risk
The risk to earnings, capital or image arising from major projects occurring within the organization. Major initiatives can be defined as any project where
there are risks such as financial loss, image impacts, and resource impacts. Diamond North Credit Union creates and adheres to a specific risk profile for
major initiatives and ensures decision making is aligned with the organization’s Risk Appetite Statement.
Legal and Regulatory Risk
This is the risk to earnings or capital arising from violations of, or nonconformance with laws, rules, regulations, prescribed practices, or
ethical standards. The financial institution industry is highly regulated therefore Diamond North Credit Union is also closely regulated. Policies
and procedures, as well as the structure of the organization assist us with complying with regulatory demands. There are prescribed processes
that allow us to review and report on compliance matters regularly. In addition to this we also undergo regular internal, external, and
regulatory audits.
Strategic Risk
Strategic risk is the risk that the organization will be unable to meet objectives due to adverse business decisions, ineffective business plans, or
failure to respond to changes in the competitive environment. This risk is a function of the compatibility of an organization’s strategic goals,
the business strategies developed to achieve these goals, the resources deployed against these goals, and the quality of implementation.
Diamond North Credit Union has a strategic plan in place that addresses various economic scenarios and plans. Identified strategic risk for our
organization is the possibility that there is not a robust enough long term growth/capital strategy (inclusive of wealth management and
information technology strategies) that also encompasses the risks of remaining autonomous or not being a competitive, rate matching
institution. In this economic time of low interest rates, uncertainty, and slim margins this risk is not unique to our organization. In order to try
to alleviate this risk Diamond North Credit Union directors and management are diligent in keeping abreast of current economic conditions and
trends, doing research on pricing, and making timely and relevant decisions. Diamond North Credit Union has a formal strategic planning
process that involves the Board of Directors and senior management. This process is facilitated through an annual planning session to develop
objectives, measures, and key initiatives. Comprehensive reporting to the Board on performance to the strategic plan is presented by
management quarterly. All strategies are reviewed regularly, and if necessary, are adapted to meet the changing financial and economic
landscape.
Operational Risk
This is the risk of loss resulting from inadequate or failed internal processes, people and systems, or external events. Exposures to this risk arise from
deficiencies in internal controls, technology failures, human error, employee integrity, or natural disasters. Operational risks could be identified as operational
situations that were not planned for. Diamond North Credit Union manages operational risk through its policies, along with controls and procedures that are
monitored regularly. Operational risk is mitigated with the implementation of business continuity and disaster recovery planning, appropriate and robust
insurance coverage, and proper structure.
Technical Risk
Technical risk is the risk to earnings, capital, or image arising from inadequate processes, procedures, and policies in regard to technology. Diamond North
Credit Union has policies, procedures, and controls in place to minimize technical risk. Technical strategies are aligned with the organization’s Risk Appetite
Statement. Diamond North Credit Union uses a process of continuous monitoring to ensure the organization and staff have the capacity to deal with the
pace and scale of technological change. Additionally, we partner with third party providers and contractors to gain efficiencies of scale when working on
credit union projects.
25
CUDGC Guarantee
26
Auditors' Report on Summary Consolidated Financial Statements
To the Members of Diamond North Credit Union:
The accompanying summary consolidated financial statements of Diamond North Credit Union and its
subsidiary, which comprise the summary consolidated statement of financial position as at December 31, 2015,
the summary consolidated statements of comprehensive income, changes in members' equity, and cash flows for
the year then ended are derived from the audited consolidated financial statements of Diamond North Credit
Union for the year ended December 31, 2015. We expressed an unmodified audit opinion on those consolidated
financial statements in our report dated February 22, 2016
The summary consolidated financial statements do not contain all disclosures required by International Financial
Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for
reading the audited consolidated financial statements of Diamond North Credit Union.
Management's Responsibility for the Summary Financial Statements
Management is responsible for the preparation and fair presentation of a summary of the audited consolidated
financial statements in accordance with International Financial Reporting Standards.
Auditors' Responsibility
Our responsibility is to express an opinion on the summary consolidated financial statements based on our
procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, "Engagements to
Report on Summary Financial Statements."
Opinion
In our opinion, the summary consolidated financial statements derived from the audited consolidated financial
statements of Diamond North Credit Union for the year ended December 31, 2015 are a fair summary of those
consolidated financial statements, in accordance with International Financial Reporting Standards.
February 22, 2016
Saskatoon, Saskatchewan
27
Summary Consolidated Financial Statements
28
29
Notes
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31
ALBERTVILLE
ARBORFIELD
ARCTIC (PA)
CARROT RIVER
Box 99, 1 Unity Street
Albertville, SK S0J 0A0
P 306.929.4714
Box 265, 108 Main St
Arborfield, SK S0E 0A0
P 306.769.8581
200 28th St W
Prince Albert, SK S6V 4S9
P 306.922.8252
Box 639, 10 Main St
Carrot River, SK S0E 0L0
P 306.768.2703
CHOICELAND
NIPAWIN
WHITE FOX
ZENON PARK
Box 39, 100 Railway Ave
Choiceland, SK S0J 0M0
P 306.428.2152
Box 2074, 100 1st Ave W
Nipawin, SK S0E 1E0
P 306.862.4651
Box 310, 125 Railway Ave
White Fox, SK S0J 3B0
P 306.276.2142
Box 160, 735 Main St
Zenon Park, SK S0E 1W0
P 306.767.2434
Real People, Practical Banking & Investment Advice
www.diamondnorthcu.com
INVESTMENT ADVICE
REAL PEOPLE
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