2015 Affinity Annual Report

Looking to the future 2015 Annual Report

“

Affinity immediately saw the potential of our construction project.

”

Greg Foley, Executive Director with Elim Lodge Housing Group

Financing with Impact At Affinity, we work with our business members to provide them with the tools they need to succeed – because their business ventures matter. A prosperous business improves our local economy, creates jobs, provides essential services and ensures local sustainability.

Hyde Park View, Saskatoon’s newest 50-plus adult residence, developed and managed by Elim Lodge Inc. is now under construction. When it’s completed in the fall of 2016, this impressive 170,000 sq. ft., 4.5 storey residence will offer a total of 140 units composed of 100 life leases, 15 rental suites and 25 personal care suites. They will house around 250 people who will enjoy a safe, affordable independent living facility with a community atmosphere.

“It’s hard to believe we have come so far,” said Greg Foley, Executive Director with Elim Lodge. “Plans have been in the works since 2012, but until we found

financing – which was a huge challenge – everything was on hold. Demand for safe and secure seniors’ housing in Saskatoon has been rising quickly in recent years, so we felt the need to get this project off the ground as soon as possible.

“That’s when I approached Affinity Credit Union.

Their business banking people immediately understood our needs and saw the potential of the project – we both wanted to make our community better for everyone.”

The project now provides employment locally to around 60 people and the majority of building materials are sourced in Saskatchewan. Foley said: “It’s a good feeling to be a part of one of the largest projects of its kind in the province, boost employment, enhance services and to allow seniors to age gracefully and happily in a secure environment – it doesn’t get any better than that!”

CONTENTS 1

Financing with Impact

32 Strengthening Local Communities

3 CEO and Board President’s Report

34 Strategic Focus Areas

6 Values You Can Bank On

42 Management Discussion and Analysis

8 Banking Local 9 Business Expansion & Success 10 Board of Directors

55 Summary Consolidated Financial Statements

12 District Council Delegates

56 Management’s Responsibility for Financial Reporting

14 How We Are Governed

57 Independent Auditors’ Report

18 Leadership

58 Summary Consolidated Statement of Financial Position

19 Stakeholder Engagement 20 Member Service & Innovation 24 Engaging Employees 27 Employee Diversity 28 Employee Development 29 Social Impact of Our Financial Services 30 Help for Small Businesses

59 Summary Consolidated Statement of Comprehensive Income 60 Summary Consolidated Statement of Changes In Equity 61 Summary Consolidated Statement of Cash Flows 62 Note to the Summary Consolidated Financial Statements

31 Flexible Financing

DECEMBER 31, 2015

Looking to the future 2015 Annual Report

The cover graphic showcases the newest addition to Affinity’s visual brand. Called the Chevron, it represents who we are, where we’re going and how we’ll get there. Translated, that means Affinity is always moving forward and upwards working to improve the lives of our members and communities. Look out for it on Affinity mobile apps, brochures, website and advertisements. It belongs to you.

Annual Report and Summary Consolidated Financial Statements

1

Scott Flavel, Board President and Mark Lane, CEO

“

We focus on creating long-term economic well-being for our members and their communities.

�

Mark Lane, CEO

CEO and Board President’s Report On behalf of the Board of Directors, executive management and employees, we are pleased to present the 2015 Annual Report for Affinity Credit Union.

Being a member-owned, democratically-run financial institution, the success of the credit union relies on our members and owners. We want to begin by thanking you for choosing Affinity Credit Union as your financial institution and to assure you that we are committed to providing an excellent service experience to our members.

Throughout 2015, we focused on delivering consistent value to our members, optimizing operational resources and maintaining our commitment to co-operative values and principles. We moved forward in many key areas relating to member service and innovation, community building, employee engagement and financial strength.

Member Service and Innovation We continued our investment in better access through improved mobile and technology-enabled channels, which aimed to appeal to both existing members and a new generation of members.

Given the significant adoption of members now preferring to complete transactions remotely and the corresponding decline in those being conducted in-branch, we began implementing changes to Affinity’s branch structure. We took steps to align our branch network so that going forward, branches will be strategically located to maximize and enhance service delivery to members while, at the same time, maintaining our financial sustainability. To further support this strategy, we opened our newest location in Stonebridge, Saskatoon. The new 1,440 square-foot branch is full service and is open six days a week to serve the needs of one of Saskatoon’s fastest growing communities.

We launched new pilots in 2015, including in-lobby terminals in locations with 24/7 access. These included features such as video-enabled live chat with a contact centre representative, envelope-less deposits and large transaction screens. We also completed network upgrades and hardware installations that better connected members with Affinity specialists across the province using video technology. These services improved the member experience and our operational efficiency at the same time.

In our efforts to enhance member engagement, we implemented a new format that provides members with the ability to view our Annual General Meeting (AGM) from any location, even their own home. Using a link hosted on our website, members were able to view the AGM remotely if they were unable to attend the meeting in Saskatoon or at one of our nine other locations across the province. This service will be further enhanced to allow full participation in the AGM beginning in 2016.

Community Building The success of the communities we serve has always been an important measurement of the success we enjoy as a credit union. In 2015, we contributed to an improved quality of life for neighbourhoods and communities, in addition to individuals. This included a continued focus on entry-level housing, and our alternative lending programs including community loans and micro-loans.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

3

Myrna Hewitt, EVP Marketing and Community, accepts the 2015 Strategic Alliance Partnership award on behalf of Affinity

We used our community investment dollars to provide many member benefits, and demonstrated to nonmembers the benefits of banking with Affinity. As one example, we developed and promoted Affinity exclusive member discounts as part of select sponsorship arrangements with arts and cultural events, tradeshows and other community programs.

We were recognized locally and nationally for our work in strengthening communities. Affinity was the recipient of a 2015 Credit Union Central of Canada national award for community economic development for our Business for Good Social Venture Challenge and, more locally, we received the 2015 Strategic Alliance Partnership award from Saskatoon Community Foundation for our partnership with READ Saskatoon.

Our ability to be good corporate citizens was made stronger by our unique governance model, which keeps the credit union connected to its co-operative roots and communities. Our District Council Delegates ensured the voice of our members was heard and responded to. They played a vital role in determining and implementing strategy and guiding the credit union in support of our community funding in strategic focus areas.

Employee Growth Our employees are the engine that drives us as a credit union. Throughout 2015, we continued our progress toward a common service culture following recent mergers and partnerships and banking system conversions.

We recognize the importance of growing our own talent and continued to invest in our employees’ personal and professional growth. Throughout the year, our organizational focus was on operational excellence. Part of this included diversity training for our people managers, as they are the key decision makers in the hiring, coaching and mentoring of employees and are therefore critical to the overall member experience.

2015 also saw the continued development and implementation of our electronic performance management system. During the year, the performance planning, coaching and review modules were rolled out to all employees.

For a number of years we’ve completed a review of our employee engagement through an organization-wide engagement survey. This survey was repeated in 2015 and we are pleased to report that employee satisfaction levels remain high in spite of recent challenges and changes following mergers, banking conversions, restructures and changes to operating processes. Going forward, we remain committed to assessing and understanding the experience of our employee group and making improvements as necessary.

4

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Our Board Directors and Delegates continued to be champions of corporate social responsibility and inspired both themselves and our employees to demonstrate change. As one goal throughout the year, we aimed to decrease work-related travel by 5%. It was challenging in 2015, given our partnerships and geographical footprint, but we made some good progress. In the end, however, even with upgrades to technology (video conferencing, webinar training), we fell short. As such, in 2016, our goals will remain the same and we’ll make continued efforts in this area. However, we exceeded our goal of reducing paper consumption by 15%, achieving 22.2% by the end of the year and were successful in changing 58% of our photocopying paper to a more eco-friendly product. Congratulations to all employees for their efforts!

We continued to support the involvement of our employees and elected officials in community activities and through the Community Spirit Fund, which provides for the allocation of $200 by each individual to the cause of their choice. We are proud that over 98% took part in this initiative. In addition, all employees had the opportunity to spend one paid volunteer day throughout the year where they were involved in community work. This amounted to 1,474 hours, 199 days and had an estimated economic value of $47,280.

“

We’re deepening our commitment to values-based banking.

Scott Flavel, Board President

”

Financial Strength Financially, we continued to achieve balanced growth and strong profitability, while enabling and encouraging many local economies.

Our complete financial story accompanies this report in the form of our 2015 Summary Consolidated Financial Statements.

Future As always, we would like to thank Board Directors and District Council Delegates for their dedication during the past year. Thanks also to our executive management team who have demonstrated leadership and commitment to the success of the credit union and our 906 employees for their continued commitment to Affinity in embracing another great year of change and success.

Looking to the future, Affinity’s Board and management will continue to focus on excellence in member experience by offering enhanced accessibility and providing quality, competitively-priced products and services.

By choosing this path, we hope to strengthen our credit union and become the financial institution of choice for people in Saskatchewan. We have confidence that we can achieve our goals. It is our opportunity to make a difference and to build a better world for everyone, every day.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

5

Values You Can Bank On Our purpose as an organization and our promise to our members, employees and communities is built on co-operative values and principles. These values and principles guide us in all we do and set us apart from any other financial institution. This means we’re locally focused, member-centered and democratically controlled. Our focus is on building relationships with individuals, businesses and local organizations, facilitating and empowering member groups and bringing new people into our governance process.

Our Vision Build a better world for everyone, every day.

Our Mission Enabling members and communities to invest in one another.

Our Values Open, honest, inclusive and committed.

135,879

66 branches in 57 communities

100%

906

$5.9b

Deposits

employees

in managed assets

Member deposits are fully guaranteed by the Credit Union Deposit Guarantee Corporation

members

6

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

of the credit union is owned and run by members

“

If members want to discuss their mortgage options, I’m happy to meet them at a place and time that is convenient for them.

Hilary Maughan (left), Mobile Mortgage Specialist Saskatoon, with Affinity members

DECEMBER 31, 2015

”

Annual Report and Summary Consolidated Financial Statements

7

Banking Local Accounts We offer account and card options designed to fit your age, stage and lifestyle.

And, you can access your funds from anywhere in the world using automated teller machines, mobile devices, internet banking or any one of our branches across the province.

Loans and Mortgages Becoming a homeowner, advancing your education, building your retirement – no matter what your next goal is, Affinity Credit Union is here to lend you so much more than money.

Investments and Advice Looking to craft a personalized plan to help meet your financial goals? Our investment experts are ready to show you how it’s done! With Affinity, you can choose from a full range of investment options and wealth management expertise, plus the personal attention that comes with being a member-owner.

Financial Planning and Estate Planning Financial planning, investments, estate planning – Affinity offers all of the services you’d find at a bank, with the benefit of personalized service. Whether you’re buying a home, saving for your little one’s education or counting down to your retirement, we’re here to help you achieve your dreams.

Business Loans We offer a wide range of commercial loans to finance just about any business, large or small. Micro-loans are also available to provide funds to those businesses that would not qualify for traditional financing.

Insurance Brokerage We have a team of professionals that offer a comprehensive range of general insurance solutions, including home, tenant, condo, farm, commercial, travel, bonding and surety through a variety of insurers. You can visit an insurance broker and get great personalized advice from two locations in Regina, four in Saskatoon and locations in Meadow Lake, Naicam and Prince Albert. We also offer motor vehicle licensing and web-based renewals at affinityis.ca.

100%

$2.5m

of our profits are re-invested in Saskatchewan

in donations, sponsorships and grants

Affinity members Gene and Susan Minard, owners of Minard’s Leisure World Ltd and Minard’s Steadfast Homes Ltd

Business Expansion & Success In 2004, the RV business became a major part of Gene and Susan Minard’s lives when they opened Minard’s Leisure World Ltd in Weyburn.

Positioned between Regina and the U.S. border, the city had nothing to offer RV customers, and Gene and Susan saw both a need and an opportunity. “People wanted to be able to purchase RVs and parts and accessories,” said Susan.

Armed with a background in marketing, Susan launched the business from a 9,000-square-foot building on six acres of land and with five employees.

Business soon took off and they felt they were on top of the world.

Then, in 2009, the recession hit, their financier pulled out of the industry and things looked grim. “It was hard, but we survived,” said Gene. They had to forge

new relationships with new financiers, including Affinity Credit Union. “What we really appreciated was that Affinity had faith in our ability to manage Minard’s Leisure World Ltd and this gave us the chance to not only survive, but to thrive.”

Just over a decade later, Minard’s Leisure World Ltd is one of the largest RV dealers in Western Canada with 751% growth, over $35 million in sales and 50 employees. Further expansion has seen the company branch out into additional businesses.

Minard’s Steadfast Homes Ltd, which just opened a second location in Estevan, specializes in a choice of manufactured, modular and ready-to-move homes, and Offices to Go provides mobile office trailers that are ideal for the construction, commercial and oilfield industries.

16,758

8,083

business members

new members welcomed to Affinity in 2015

Board of Directors Affinity Credit Union is a financial co-operative governed by a Board of Directors and accountable to the member-owners of the credit union. The Board establishes the vision and oversees core business operations at Affinity while building relationships with members and communities and providing leadership within the values-based banking, co-operative and credit union systems.

The Board has a fiduciary responsibility to the credit union and follows the standards set out in The Credit Union Act 1998, the Standards of Sound Business Practice and other applicable legislation.

The Board, led by a non-executive President, is comprised of 23 independent and elected Directors and is based on a tiered governance structure.

Terms are three years in duration and renewable.

Collectively, the Board is capable of fulfilling its role and represents a variety of experience, education, competence and knowledge: 35% are women and 65% are men.

The Board delegates the day-to-day leadership and management of Affinity to the Chief Executive Officer, who establishes the accountabilities for each member of the executive leadership team.

10

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

23 Board members

35%

65%

Women

Men

Wayne Amos

Gailmarie Anderson

Mitchell Anderson

Ed Cechanowicz

Duane Chipley

Saskatoon

Spectra

Scott Flavel

Ruth Glatt

Kearney Healy

Lois Herback

Audrey Horkoff East 1st Vice President

Evelyn Kasahoff

Regina

Milton Kerpan

Paul Ledoux

Martin McInnes

Cameron Nordin Spectra

Hugh Sampson

Saskatoon

Owen Sebastian

Norman Sheehan

Cy Standing

Dannie Wreford

Vanda Wutzke

Spectra

Central President

Advantage N.E.

Saskatoon

Advantage N.E.

Saskatoon

Saskatoon

First Nations

First Nations

Saskatoon

Shellbrook 2nd Vice President

North

Advantage N.

Deb Chobotuk Saskatoon

Langham

Shaunavon

Pauline ZiehlGrimsrud Spectra

Ethics and Integrity Our Board approves credit union policies and management ensures the highest standards of ethics, integrity, honesty, fairness and professionalism – in every respect, without exception, are followed at all times. Our Market Code outlines this commitment and can be found on our website at affinitycu.ca

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

11

District Council Delegates Our communities are represented by local member-elected District Councils. In 2015, there were 12 District Councils representing the communities and members we serve throughout Saskatchewan. Delegates elect Directors to the Affinity Board of Directors from their respective District Councils.

Delegates play an influential role in the governance of the credit union. They use their local knowledge and established community relationships to ensure that the member-owners are represented. Delegates also provide leadership in allocating community development funds and attend many of the credit union’s community events.

Tyler Dueck

Henry Dyck

Lise Gareau

Terry Hinz

Henry Penner

Katrina Regier

Leo Schulz

Vanda Wutzke

Mitchell Anderson

Gayl Basler

Ed Cechanowicz

Deb Chobotuk

Linsey Gatzke

Ruth Glatt

Kearney Healy Kurt Holfeuer

Linh Le

Martin McInnis

Victoria Morris Norman Sheehan

Cecile Smith

Brandi Tracksell-Sampson

Joanne Brochu

Tiffany Dreger

Scott Flavel

Grant Greenshields

Wendy Gullacher

Brett Halstead

Gerald Munholland

Kelvin Schapansky

Colleen Sekulich

Perry Thiessen

Sara Trenouth

Leni Udell

Nathanial Cole

Jean Dufresne

Lois Herback

Richard Heroux

Martin Lelliott

Gwen Nell

Doug Knowles

Mike Heinrich

Patricia Isherwood-Thomas

Ronda Palmer

Gordon Perkins

DISTRICT 5 SOUTH

DISTRICT 4 CENTRAL

DISTRICT 23 SASKATOON

DISTRICT 1 NORTH

As of December 31, 2015, we had 112 Delegates and 10 vacancies. 49% are women and 51% are men.

12

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Betty Ann Schiefner

DISTRICT 6 EAST

Bryan Cottenie

Rosalie Daisley

Caron Hallen

Georgina Harambura

Audrey Horkoff

Andrew Kazakoff

Myra Paslowski

James Yakimoski

Donna Epp

Joanne Janzen

Evelyn Kasahoff

Becky Loewen

Deborah Ann McGuire

Mike McLeod

Bev Turgeon

Peggy Walker

Lyle Banda

Gary Gerein

Stephanie Gosselin

Philip Joanette

Heather Ranger

Tina Stene

Dannie Wreford

Michael Bob

Leighanne Gardipy

Alex Kennedy

Paul Ledoux

Chief Richard Okemow

Jacalyn Pilon

Cy Standing

Janine Hoey

Ray Keller

Karl Panas

Joseph Rybinski

Hugh Sampson

Nick Trofimuk

Gailmarie Anderson

Don Bohay

Randy Boyko

Gladys Court

Milton Kerpan

Alice McFarlane

Dara McMunn Lynn Pederson

Joseph Schemenauer

Larry Sparks

Denis Sunderland

Paul Ulrich

Wayne Amos

Amanda Bendickson

Dennis Bode

Jasmin Carlton

Duane Chipley

Joyce Fraser

Garry Lafrentz

Cameron Nordin

Pauline ZiehlGrimsrud

Robert Anderson

Ted Anderson

Delana Floberg

Linda Kutschall

Debbie Olesen

Linda Ruest

Joe-Ann Ruetz

Owen Sebastian

DISTRICT 13 SHAUNAVON

DISTRICT 12 SPECTRA

DISTRICT 11 ADVANTAGE N.E.

DISTRICT 10 ADVANTAGE N.

DISTRICT 9 FIRST NATIONS

DISTRICT 8 SHELLBROOK

DISTRICT 7 LANGHAM

Linda Bourque

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

13

How We Are Governed Delegate and Director Election Process In accordance with the Affinity Credit Union bylaws, members can nominate members to serve as a District Council Delegate. Voting is by electronic or paper ballot. District Council Delegates elect Board Directors from each of their Districts.

Member Engagement Members are encouraged to engage with the Board of Directors and provide feedback in a variety of ways: • Through their locally-elected Delegates or directly to the Board of Directors • By submitting a resolution or participating in a vote at the Annual General Meeting • By Delegates participating in the All Delegates Meeting, District Council Meetings, and on Board Committees

In 2015, Affinity appointed an external consultant to facilitate a governance assessment process designed to evaluate the performance of the overall Board, Board Chair, Board Committees and individual Directors as self-assessed by each Board member.

Avoiding Conflicts of Interest A conflict of interest occurs when a personal interest of a Director or Delegate interferes or is perceived to interfere with the interests of the credit union. To ensure our elected officials contribute according to high ethical standards, each is required to sign a conflict of interest declaration annually. They are also required to declare conflicts on Board, District Council and Committee meeting agendas.

Continuing Education of Delegates and Directors Directors and Delegates receive the training they need to participate in the governance of the credit union. This includes an orientation program for newlyelected Delegates and Directors and recommended Annual Report and Summary Consolidated Financial Statements

Mandate and Responsibilities of Members of Board Committees Directors and Delegates are expected to prepare for, attend and contribute meaningfully to all Board and applicable Committee meetings and keep deliberations confidential. Each Committee has a mandate outlining its purpose and responsibilities.

Committees meet regularly throughout the year and provide regular reports to the Board. Affinity Credit Union has five Committees.

Board Committees Scott Flavel, Board President, is an ex officio member on all Board Committees.

Assessing the Board’s Performance

14

courses. Directors and Delegates are reimbursed for expenses incurred in connection with these education programs and receive per diems.

• Audit and Risk Committee (7 Directors; Board President) – responsible for overseeing risk management and financial reporting integrity.

• Conduct Review Committee (7 Directors; Board President) – responsible for overseeing conduct and ethical business standards.

• C ompensation and Liaison Committee (5 Directors; Board President) – responsible for providing advice to the CEO on issues affecting the credit union and agendas for Board of Directors’ or Delegates’ meetings on matters pertaining to compensation, policy, structure and direction of the organization.

• Governance Committee (6 Directors; 5 Delegates; Board President) – responsible for overseeing corporate governance.

• Co-operative Values Committee (4 Directors; 1 Delegate from each District; 1 employee; Board President) – responsible for ensuring our co-operative values and traditions remain healthy and robust and for maintaining progressive corporate social responsibility policies.

DECEMBER 31, 2015

Board Meeting Attendance The Governance Committee is responsible for reporting on Board of Directors’ meetings and committee attendance.

2015 Board & Board Committee Meeting Attendance Committee Membership and Attendance May 1 – December 31, 2015 1 Audit and Risk

Conduct Review

Compensation Liaison

Co-operative Values

District Council Meetings

Board Directors

Board Meeting

Wayne Amos

9 of 11

Gailmarie Anderson

8 of 11

Mitchell Anderson

10 of 11

4 of 5

2 of 2

4 of 4

–

–

Ed Cechanowicz

11 of 11

5 of 5

1 of 2

Duane Chipley

11 of 11

Deb Chobotuk (from Apr 1/15)

7 of 7

Scott Flavel, Board President

11 of 11

Ruth Glatt

10 of 11

Kearney Healy

10 of 11

Lois Herback

11 of 11

Cathy Holtslander (to Apr 1/15)

3 of 4

–

–

Audrey Horkoff

10 of 11

4 of 5

1 of 2

Evelyn Kasahoff

11 of 11

3 of 3

4 of 4

Milton Kerpan

10 of 11

3 of 3

4 of 4

Paul Ledoux

7 of 11

Martin McInnis (from Apr 1/15)

6 of 7

5 of 5

2 of 2

3 of 4

Cameron Nordin

9 of 11

3 of 5

2 of 2

4 of 4

Hugh Sampson

11 of 11

4 of 5

1 of 2

4 of 4

Owen Sebastian

9 of 11

Norman Sheehan (from Aug 21/15)

4 of 4

Cy Standing

8 of 11

Brandi TracksellSampson (to June 19/15)

5 of 7

Dannie Wreford

11 of 11

Vanda Wutzke

11 of 11

Pauline ZiehlGrimsrud

8 of 11

Gayl Basler (to Apr 1/15)

Governance

3 of 3

4 of 4 3 of 3

3 of 4 –

–

–

3 of 4 3 of 3

2 of 2

4 of 4 4 of 4

3 of 3

5 of 5

3 of 4

3 of 3

3 of 3

4 of 4 3 of 3

3 of 3

4 of 4 3 of 3 3 of 3

–

4 of 4

–

4 of 4 4 of 4

–

– 3 of 4

1 of 3

2 of 2

4 of 4

3 of 4

4 of 4 3 of 3

3 of 4

1 of 1

3 of 4 3 of 3

5 of 5

4 of 4

2 of 2

4 of 4 3 of 3

4 of 4

Board Committee functions were consolidated in May 2015 resulting in Board Committees reducing from Eight (8) to Five (5). Some Directors did not serve for the entire 2015 calendar year due to the Board election process for those Directors whose terms have expired.

1

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

15

Director Remuneration The Governance Committee is responsible for reviewing elected officials’ compensation.

2015 per diem amounts paid to each Board Director are as follows: 2015 Board Director Per Diems Board Director

Total Per Diems

Dates served as a Director in 20151

Wayne Amos

8,470.00

January 1 to December 31, 2015

Gailmarie Anderson

9,005.00

January 1 to December 31, 2015

Mitchell Anderson

9,965.00

January 1 to December 31, 2015

Gayl Basler

5,840.00

January 1 to April 1, 2015

10,930.00

January 1 to December 31, 2015

Duane Chipley

9,975.00

January 1 to December 31, 2015

Deb Chobotuk

10,455.00

April 1 to December, 2015

Scott Flavel, Board President

34,960.00

January 1 to December 31, 2015

9,610.00

January 1 to December 31, 2015

Kearney Healy

12,910.00

January 1 to December 31, 2015

Lois Herback

10,435.00

January 1 to December 31, 2015

1,795.00

January 1 to April 1, 2015

Audrey Horkoff

13,805.00

January 1 to December 31, 2015

Evelyn Kasahoff

9,435.00

January 1 to December 31, 2015

10,770.00

January 1 to December 31, 2015

Paul Ledoux

6,770.00

January 1 to December 31, 2015

Martin McInnis

8,395.00

April 1 to December 31, 2015

Cameron Nordin

7,890.00

January 1 to December 31, 2015

Hugh Sampson

9,655.00

January 1 to December 31, 2015

Owen Sebastian

6,625.00

January 1 to December 31, 2015

Norman Sheehan

4,800.00

June 19 to December 31, 2015

Cy Standing

7,680.00

January 1 to December 31, 2015

Brandi Tracksell-Sampson

5,410.00

January 1 to June 19, 2015

Dannie Wreford

9,180.00

January 1 to December 31, 2015

Vanda Wutzke

11,400.00

January 1 to December 31, 2015

7,095.00

January 1 to December 31, 2015

Ed Cechanowicz

Ruth Glatt

Cathy Holtslander

Milton Kerpan

Pauline Ziehl-Grimsrud Total 2015 Director Per Diems

$253,260.00

1 Some

Directors may not have served for the entire 2015 calendar year due to the Board election process for those Directors whose terms have expired.

Amounts paid to individuals (including Directors who served for only a portion of the year) include all per diems paid to them for attendance at both Director and Delegate meetings and training sessions throughout 2015. Directors are elected by District Councils in March each year, election results were announced at the Annual General Meeting on April 1, 2015.

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Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Delegate Remuneration 2015 per diems and expenses paid to all Delegates and Directors are as follows: Delegate Remuneration

2015 Totals

Director per diems

$253,260.00

Delegate per diems, taxable benefits and honorariums

$181,450.00

Director and Delegate expenses (includes all meals, accommodation, mileage and training)

$394,100.59

Memberships in Associations Executives and Board Directors hold memberships in various organizations and participate in boards and committees of these organizations. They include, but are not limited to: SaskCentral, Canadian Credit Union Association, Saskatchewan Co-operative Association, Co-operative Development Foundation of Canada, Concentra Financial and the Centre for the Study of Co-operatives.

Global Alliance for Banking on Values Affinity is a member of the Global Alliance for Banking on Values (GABV), a network of the world’s leading values-based financial institutions. As a member of GABV, Affinity complies with sustainable banking principles and shares a commitment to finding global solutions to international problems and to promote positive, viable improvements to the current financial system.

In 2015, Affinity’s EVP Human Resources and Employee Services Manager attended the GABV annual meeting in Paris and Nanterre, France, and marked the 5th anniversary of this growing network of values-based banks. The event represented an opportunity to connect, debate and collaborate on how to build a sustainable financial future.

GABV also held its first face-to-face meeting of the Governing Board Forum in Copenhagen, Denmark, attended by Kearney Healy, Affinity Board Director who lead a discussion on member engagement.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

17

Leadership Affinity Credit Union’s executive leadership team plays a vital role in determining organizational strategy and guiding the operations of the credit union.

Pat Brothers EVP HR

Ken Harding

EVP Governance & Risk

Myrna Hewitt EVP Marketing & Community

Mark Lane CEO

Lise de Moissac EVP & CFO

Tim Schroh

Atul Varde

EVP & COO

EVP & CIO

Shawna Miller

Josh Pion

Affinity Credit Union’s senior leaders develop and implement operational strategies to meet the organizational goals of the credit union.

Hugh Balkwill

Glenn Brodt

Myles Lariviere

Tanya Llewellyn

Dave Schneider

Serese Selanders

Mark St. Onge

Murray Yeadon

VP Credit Services

VP Compliance

18

VP Administration

VP Member Experience

VP Wealth Strategies & Insurance

VP Service Delivery (to Sept 30, 2015)

VP Accounting

VP Business Banking

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Rick Matte

VP Network Infrastructure

VP Governance & Strategy

Chief Internal Auditor

By working with Youth Ambassadors, we hope to develop co-operative and credit union leaders of tomorrow.

Delegates provide input to the leadership team at the annual All Delegates Meeting.

Affinity took part in the Saskatoon Doors Open event and welcomed over 300 people to tour the campus building.

Stakeholder Engagement Affinity’s leadership engages with members, communities, employees, co-operatives, the business community and government agencies, in the following ways:

• Formal surveys and focus groups • Community and town hall meetings regarding service delivery • Sponsorships and donations • Community events • Elected officials’ election process and planning meetings • Youth involvement (Youth Ambassadors) • Annual General Meeting • Representing Affinity and volunteering on external boards and committees • Formal meetings and reports with regulators

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

19

Member Service & Innovation As a member-focused and values-based organization, 2015 saw Affinity continue its pursuit of a better overall experience for our members while maintaining our commitment to delivering our products and services in an ethical manner.

Looking to the future In 2015, we opened a different kind of branch location that transforms the way we interact with our members and provides a new and enhanced member experience. Located in Stonebridge, Saskatoon, the branch is technology-based and has remote network connections that allow members to connect with our specialists regardless of where they are located. For 20

Annual Report and Summary Consolidated Financial Statements

example, if a member wants to speak to an estate planning specialist located in Regina, they can, using video technology.

This branch will be used to pilot new technologies and business approaches that could potentially be rolled out to other locations in the future.

DECEMBER 31, 2015

Enhanced Contact Centre We enhanced our member contact centre services to allow members to speak to representatives via video-enabled ATMs who could then guide them through their transactions. These videoenabled ATMs are in two of our Saskatoon branches.

Video-enabled ATMs allow members to:

Connect to a Contact Centre representative

Deposits without envelopes DECEMBER 31, 2015

Make payments

Use as an ATM 24/7

Annual Report and Summary Consolidated Financial Statements

21

A modern look for Westwiew branch

New Location for Westview Branch In April, we re-opened a brand new Westview branch located adjacent to the original site that was housed in the Westview Co-op Food Store on the corner of Avenue P and 33rd Street, Saskatoon. The new 5,500 square foot facility is a full-service branch. The modern design features a comfortable member waiting area, open member service area, private offices and floor to ceiling windows making for a bright and welcoming space for both members and staff alike. The new branch includes services that are familiar to our members paired with new and cutting-edge technology that will enhance the member experience.

The branch is open Monday to Saturday and is also equipped with a drive-thru ATM and two video-enabled ATMs.

Affinity mobile transactions jumped by 125% in 2015

New Look Mobile App We were excited to announce the launch of our newly renovated mobile app in 2015. We added some great new and improved features that enhanced the overall member experience – and a fresh new look. New features include:

• View detailed transaction histories and other information for all investment, loan and demand accounts • Live chat with our Contact Centre • Update your contact information

Member Deposits are Guaranteed All deposits held in Affinity Credit Union are fully guaranteed by Credit Union Deposit Guarantee Corporation. The Corporation was the first deposit guarantor in Canada and has successfully guaranteed deposits held in Saskatchewan credit unions since 1953. For more information about the Corporation and the guarantee, talk to any one of our employees or visit www.cudgc.sk.ca.

38% of members use electronic banking

Engaging Employees At Affinity, we strive to be an employer of choice and focus on creating an engaged, diverse and educated workforce.

Employee Engagement Survey In 2015, employees were given the opportunity to take part in an employee engagement survey that was conducted through an independent third party specializing in these types of surveys.

We are very pleased to report that 84% of our employees participated in the survey, which was a great response rate.

Our overall employee engagement score was 75%, which compares well to the financial services benchmark of 73%. Given the significant changes in our organization during the past while – mergers, banking system conversions, branch network restructures and changes to operating processes – it is a relatively good outcome.

The survey also identified the three main areas that drive employee engagement at Affinity: professional growth, teamwork and senior management clearly communicating goals and direction.

Going forward, feedback from the survey will be invaluable in developing strategies for continued improvements.

24

84%

86%

89%

of employees say they are proud to tell others they work for Affinity Credit Union

of employees feel that learning is an important objective in their day to day work

of employees say they can make a positive impact at work

89%

93%

96%

of employees believe that member satisfaction is a primary focus of the organization

of employees understand what is expected of them at work

of employees recognize the importance of community involvement to Affinity

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Brendon Lee, Relationship Banking Manager, 8th Street branch

Xu, Wen (Irene), Financial Services Representative, Westview branch

Employee Diversity We aim to build a strong foundation for our employees right across the credit union and remain strongly committed to a diverse workforce.

In 2015, all of our 155 people managers received diversity training. This group is key in making hiring decisions, are key influencers in staff behaviour and are primarily responsible for the member experience.

2015

2014

Total employees

906

916

Full time

712

712

Part time

194

204

Working in urban locations

53%

53%

Working in rural locations

47%

47%

Positions filled internally

78.9%

73.4%

Voluntary turnover

9.44%

9.15%

Unionized

20.6%

20.1%

New hires of Aboriginal ancestry

5.62%

7.83%

New hires from diversity groups

15.73%

24.35%

Management: average age

46.21

45.3

Management: male/female

33.5% male 66.5% female

32.7% male 67.3% female

Non-management: average age

40.96

40.6

Non-management: male/female

9.5% male 90.5% female

9.9% male 90.1% female

0

0

Demographics

Hiring Practices

Workplace Diversity

Human Rights Complaints of discrimination

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

27

Employee Development We recognize the importance of individual employee’s personal and professional growth and encourage individual employee development.

In 2015, we invested a total of $606,672 in learning, including educational support, tuition reimbursement, training and workshops to support individual employees’ personal and professional growth.

Investment in training and developing our people

2015

2014

$606,672

$519,499

To support a smoother transition of our mergers with Hudson Bay and Shaunavon, we carried out comprehensive training in areas such as the banking system, performance management and sales and service processes.

2015 also saw the continued development and implementation of our electronic performance management system. During 2015, the performance planning, coaching and review modules were rolled out to all employees.

From left: Helen Mazurek, Controller; Lana Neufeld, Accounting Supervisor; and Shane Yonkman, Assistant Controller, all based in Saskatoon

Social Impact of Our Financial Services Guided by our co-operative principles, we continue to deepen our commitment to values-based banking and corporate social responsibility. Our goal is to foster healthy communities and productive economies. To achieve this, we re-invest member deposits in our communities through loans that help other Affinity members achieve their goals. We increase access to credit for individuals and organizations that face barriers to gaining the financing they need and provide capital for initiatives that have a social or environmental benefit.

In June 2015, the Truth and Reconciliation Commission released its Call to Action, and Section 92 called on corporate Canada to adopt the UN Declaration on the Rights of Indigenous Peoples and take action to promote education and understanding, as well as efforts of reconciliation with indigenous peoples. As valuesbased credit unions, Affinity, Assiniboine and Vancity Boards together have committed to pursue meaningful reconciliation characterized by inclusion, justice and sustainability.

Where We Invested Members’ Money We are an economic engine for Saskatchewan. In 2015, 70,646 individual member loans, with a value of $3.95 billion, were outstanding in our communities. All of these loans were financed by deposits from our 135,000 members. These included micro-loans, business start-ups, community development loans, affordable housing and green loans.

Purpose of Loans (Total outstanding December 31, 2015) Balance (in thousands of dollars) Type of Loan

2015

2014

Business Loans

$1,025,864

$885,265

Consumer Mortgages

$1,721,103

$1,578,361

Consumer Loans

$447,579

$444,462

Agricultural Loans

$486,715

$410,194

Other Loans, Adjustments and Accrued Interest

$239,091

$227,160

$3,950,352

$3,545,442

TOTAL

Social Finance Loan Programs (Total outstanding December 31, 2015) Balance (in thousands of dollars) Type of Loan

# of Loans

2015

2014

2015

2014

Accessible Home-Ownership Loan Programs

$34,783

$32,131

290

265

Community/Non-Profit Loans

$36,496

$21,319

76

56

First Nations Lending

$25,065

$18,595

29

29

$877

$629

42

31

$97,221

$72,674

437

381

Micro-Loans (Small Business Start-ups) TOTAL

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

29

Affinity member Jeff Alport, owner of Nokomis Craft Ales

Help for Small Businesses Small businesses are the engines of our local economy, yet they often have the hardest time getting financing. Affinity Credit Union’s BusinessCents Micro-Loans provide an opportunity for new entrepreneurs who may not qualify for conventional financing because of a limited business history, lack of collateral, low income level or a weak credit history.

Being local and sourcing ingredients locally enabled Jeff to create different styles of beer that were fresh and proved popular with his customers. “You don’t get that kind of freshness when beer is made in large volumes, at a distant location and then warehoused and transported to retail stores where it sits for months on end,” he explained.

Jeff Alport, owner of Nokomis Craft Ales, is one such entrepreneur. He needed a small loan to get his micro-brewery business off the ground.

Jeff produces 800 litres per week, selling growlers and kegs out of his brewery to Nokomis customers and then travels to farmer’s markets in Saskatoon and Regina each week.

A former Vancouver resident and home brewer, Jeff moved to Nokomis a couple of years ago to run a carpentry business. But, when liquor laws in the province were changed to allow nano-scale commercial breweries, he decided to make the jump from hobby brewer to professional.

He approached Affinity Credit Union for financing and, soon after, his business took off. “It’s lucky I found a banker, an individual at Affinity who took a personal interest in my project. Without their help, I think I would have had a much harder time getting the business off the ground,” said Jeff.

30

Annual Report and Summary Consolidated Financial Statements

One year in, Jeff is already two years ahead of business plan projections and is running at full capacity. He now plans to expand his business to double his current capacity, begin growing his own hops (one of the four ingredients of beer) and establish a micro-malting facility using locally-grown barley. “It would then be a completely Nokomis product,” he added.

DECEMBER 31, 2015

Flexible Financing At Affinity, we offer accessible and flexible financing through community loans to organizations and co-operatives that may not normally qualify for conventional credit, but are making a difference in Saskatchewan communities.

St. Michael’s Camp, located on the shores of Madge Lake, in Duck Mountain Provincial Park, welcomed 150 children of all ages last summer after 10 months of refurbishment and construction.

Owned and run by the Ukrainian Catholic Church Camps of Saskatchewan Inc (UCCC of Sask Inc), the camp offers a range of outdoor sports, campfires and crafts in a Christian-based setting. Myron Derow, President of UCCC of Sask Inc, said, “It’s been a long time coming and we are delighted with the improvements. We are also deeply grateful to our 150+ volunteers who worked endlessly to help make our dream a reality.”

“We raised 65% of the funding required from donations and sponsorships,” said Myron, “but needed a loan for the remainder. That’s where Affinity came in. They provided excellent service, made the process so easy and we were approved for a mortgage right away. It couldn’t have worked out better.”

Throughout the construction process and beyond, the camp created local jobs, boosted the local economy and now hopes to provide a memorable summer camp for young people and a positive environment for family reunions and other community-based activities.

“It’s rewarding to help local organizations achieve their goals and enrich the lives of people in their community,” added Chelsey Puchala, Affinity Commercial Account Manager.

Plans to refurbish the camp started seven years ago after it was decided to provide better facilities so that the camp could be used all year round for family reunions, outdoor educational outings, as well as a summer camp, and would be accessible to people with disabilities.

Creating memories at St. Michael’s Camp

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

31

Strengthening Local Communities We support, or partner with, a variety of organizations, projects and programs that benefit and improve Saskatchewan communities.

In 2015, we provided a total of $2.5 million – or 6.6% of our pre-tax profits – to 1,626 initiatives or organizations, as well as scholarships to 114 young members across the province through our community investment programs. This exceeded our 2015 community investment target of 6% of our pre-tax profits.

affinitycu.ca

For more details on our programs and application timelines, visit our website under Your Community/Community Funding.

Total Investments by Funding Program (as at December 31, 2015) # of Investments Program

2015

Total $

2014

2015

2014

District Council Community Development Funding

204

197

$1,026,562

$814,812

Corporate & Branch Level Donations/Sponsorships

294

300

$1,196,533

$996,709

Youth Scholarships – Build a Better World & Elwood Harvey

114

101

$109,000

$93,000

1,014

976

$202,800

$195,200

1,626

1,678

$2,534,895

$2,139,172

Community Spirit Fund – Employee Giving

TOTAL

32

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

$1,026,562

$109,000

$202,800

in District Council funding including $1,500 to Muskoday First Nation Community School

in scholarship funding including $500 to the Affinity Build a Better World Scholarship winner in Minton-Gladmar

in Community Spirit Funding including $2,000 to the Birch Hills School playground project

Throughout 2015, our District Council Delegates worked to keep us connected with our members in the communities we serve. This included decisions about how and where we allocated funding in each local community.

Funding by District (as at December 31, 2015)

District

2015 Total $

2014 Total $

1 North

$31,907

$34,383

4 Central

$61,881

$100,623

5 South

$188,750

$111,116

6 East

$104,580

$29,333

7 Langham

$28,436

$33,873

8 Shellbrook

$28,654

$86,162

9 First Nations

$10,055

$54,884

10 Advantage North

$50,120

$83,760

11 Advantage North East

$133,679

$94,153

12 Spectra

$205,845

$317,251

13 Shaunavon

$102,831

–

23 Saskatoon

$533,370

$668,756

Province-wide initiatives

$175,284

$197,228

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

33

Strategic Focus Areas There are many important needs, initiatives and organizations in our communities and we know that we cannot meaningfully support them all. To strengthen the impact of our investments and contribute to tangible improvements in economic and social well-being in our communities, we are targeting a growing portion of our community investments into four strategic focus areas: 1. Local economic development 2. Economic self-reliance 3. Environmental sustainability 4. Building community assets and facilities In 2015, 77% of our district council and corporate funding was invested into initiatives that contributed to the goals of these areas. We increased investment in these strategic areas by 4% over our 2014 investment, which met our target of 4-6%.

Total Funding by Strategic Focus Area Strategic Focus Area

2015 Total $

2014 Total $

Local Economic Development

$206,006

$50,494

Economic Self-Reliance

$413,843

$385,726

Environmental Sustainability

$155,296

$154,729

Building Community Assets and Facilities

$799,534

$811,073

$1,574,679

$1,402,022

TOTAL

$2,500

$1,500

$2,000

$1,500

to purchase an aqua wheelchair for Watrous Swimming Pool

to Borden Care Home to provide a shade-giving pergola for residents, their friends and families

to Star City School to expand their shop area for Practical and Applied Arts courses

to Li’l Vikings Co-operative Preschool in Langham

34

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

FOCUS AREA: Economic Self-Reliance We think it is important to provide opportunities for all members of the community to be able to achieve a good quality of life and realize their goals and full potential. We help them achieve this by supporting initiatives that enhance their financial literacy skills, create employment opportunities, reduce poverty and social exclusion and improve educational outcomes for vulnerable populations and youth.

Promoting Financial Literacy Affinity worked with public, private and non-profit partners to launch a financial literacy network across the province. The goal is to improve financial literacy among key target groups, including Aboriginal people, seniors, youth, people with disabilities, immigrants, entrepreneurs and employees.

Members of the network will develop an action plan for the next five years and will promote financial literacy through awareness campaigns and workshops.

Saskatchewan Financial Literacy Network Planning Committee with Jane Rooney (centre), Financial Literacy Leader at the Financial Consumer Agency of Canada

ID Clinics for Inner City Residents By partnering with Community Legal Assistance Services for Saskatoon Inner City (CLASSIC), Affinity provided funding and volunteers to attend three half-day Identification Clinics in Saskatoon.

These ID clinics helped vulnerable people to obtain the identification they needed to access sources of income, such as pensions and others services, and to find employment.

A total of 201 birth certificates and 31 SGI identification applications were made – all paid for

by Affinity.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

35

Teaching Money Management Skills Through Affinity’s partnership with Junior Achievement Canada, our employees delivered the Dollars with Sense program to over 300 students in the Saskatchewan Rivers and Northeast School Divisions.

Dollars with Sense gives junior high school students personal money management skills while challenging them to apply these concepts in their own life.

In 2015, our employees and community partners delivered 50 financial literacy presentations or workshops through local schools and communitybased organizations, reaching 1,167 individuals in 14 communities across the province.

Partnering with Junior Achievement Canada

Developing Life Skills Through 4-H Affinity contributes to the 4-H program in many communities across the province, which strive to encourage individual growth in young people by developing self-confidence, the ability to make wise decisions and a responsible attitude toward community service.

Partnering with First Nations At Affinity, we believe arts and cultural experiences should be accessible to all. That’s why we sponsor pow wows and other First Nations arts and cultural events across the province, including:

Beatty 4-H Club near Melfort

• $8,000 to the Circle of Voices program at the Gordon Tootoosis Nikaniwin Theatre – Saskatoon • $1,000 Northern Lights Casino Thanksgiving Pow Wow – Prince Albert • $2,500 to First Nations University of Canada 37th Annual Spring Celebration Pow Wow – Regina • $5,000 to Ochapowace 2015 Saskatchewan First Nations Summer Games – Whitewood • $5,000 to FSIN Spirit of Our Nations Cultural Celebration and Pow Wow – Saskatoon

FOCUS AREA: Environmental Sustainability The long-term social and economic well-being of our communities depends on the health of the environment, locally and globally. We address environmental concerns and promote environmental sustainability by investing in initiatives that reduce our environmental footprint and promote ecologically responsible practices.

Saskatchewan Living Green Expo To help our members and the general public to live a greener life at home and at work, Affinity sponsored the first-ever Saskatchewan Living Green Expo at Prairieland Park in Saskatoon. Hosted by the Saskatchewan Environmental Society, this two-day event welcomed 66 exhibitors who showcased Saskatchewan's best green products and services and offered information sessions with experts in sustainable and healthy living.

It was attended by over 1,300 people with 149 Affinity members and their guests enjoying 50% off admission through our Member Perk program.

During the event, Affinity gave away over 700 Paper Birch seedlings to the attendees and exhibitors.

Saving Trees During 2015, we aimed to reduce our use of photocopy paper by 15% and made a decision to purchase at least 50% of this paper with 50% recycled content.

To achieve these goals, in January we switched printer defaults to double-sided printing and began an employee education campaign. This resulted in a 22.2% reduction in page usage, exceeding our goal.

Purchasing more recycled paper started later in the year. To ensure we met our targets, we decided to purchase 100% of our photocopying paper with recycled content instead of 50%. As a result, we saw an increase in the amount of recycled paper over non-recycled paper used and exceeded our goal by 8%.

Total weight of paper used (lbs) Total paper containing 50% recycled content purchased

2014

2015

2015 Target

2015 Outcome

51,992 lbs

40,428 lbs

15% reduction in paper use

Exceeded target: 22.2% reduction in paper use

0%

100% of paper purchased contained 50% recycled content

50% of paper purchased to contain 50% recycled content

Exceeded target: 58% of paper purchased contained 50% recycled content

(from June to December)

DECEMBER 31, 2015

(from January to December)

Annual Report and Summary Consolidated Financial Statements

37

Reducing Greenhouse Gases In order to reduce greenhouse gas emissions that are polluting our environment and contributing to climate change, we aimed to decrease work-related travel by 5% in 2015.

Despite introducing video conferencing, webinar training and encouraging carpooling across the organization, we fell short of our goals. We were challenged by our large geographical footprint, the increase in staff and travel following a merger with Shaunavon and Hudson Bay credit unions and the need for more community outreach following branch reorganization. As well, the 2014 calculation for work-related mileage was based on an estimate before tracking processes were clearly established. This may account for the somewhat significant differences in work-related mileage, which was tracked accurately during 2015.

We are determined to continue our efforts in 2016 and to achieve the 5% reduction in work-related mileage. This will be achieved through the use of additional video-conferencing technology installed in key locations and a heightened awareness of our impact on the environment following awareness campaigns held internally in 2015.

Work-Related Travel Employees

2015

2014

2015 Outcome

1,384,447 kms

1,113,125 kms (estimate)

24% increase

Greenhouse gas emissions

384 tonnes

309 tonnes

24% increase

Elected officials

230,239 kms

Not available

–

64 tonnes

Not available

–

Greenhouse gas emissions

1

1

1

Based on average sized car using average fuel consumption of 9 km per litre.

1

35,546

Affinity members use e-statments

Green initiatives in the workplace Affinity works to create a healthier environment by: • Participating in Bike to Work Day • Reducing energy consumption in branches • Using online surveys instead of paper surveys for employee feedback • Adding environmental features in every new and renovated building • Recycling office supplies and furniture between locations and with non-profit organizations • Reducing the amount of non-reusable kitchen supplies like plastic cutlery or cups • Providing bike racks at many Affinity locations • Providing grants and sponsorships for community projects, programs and events that focus on protecting the environment

50 employees from Affinity’s Wealth Strategies and Investment Specialist teams volunteered to help create a local community garden

FOCUS AREA: Local Economic Development As a local financial institution, we know we have a strong role to play in facilitating economic development in our urban and rural communities. We take this role seriously, but can’t do it alone. We work closely with our members and community partners who help us make positive changes.

Business for Good At Affinity, we look for new and engaging ways to work with our members and communities to promote economic development.

Following our success in 2014, we held the Business for Good Social Venture Challenge once again and expanded its focus to include two competitions: one in Saskatoon and one in Regina.

The challenge invited members and the community to co-invest with Affinity to support social enterprises that aim to address specific social or environmental issues. A prize of $50,000 in grant funding would go to the winners in each area.

$50,000 to First Steps Wellness in Regina

Our members and the general public selected the winner by donating at least one dollar whenever they voted, thereby making a contribution to the social enterprise finalists they believe had the most potential to build a better world.

The organization that received the most support in Regina was First Steps Wellness. They will use the $50,000 prize money to expand their services to include a new innovative exercise therapy program for children with cerebral palsy.

The winner in Saskatoon was too close to call so we declared a tie! Crocus Co-op and New Community Youth Development Corporation shared first place and $50,000 in prize money.

$25,000 to the Crocus Co-op in Saskatoon

Crocus Co-operative will use the prize money to continue their support of individuals with mental health issues and hope to increase their capacity and expand their services to a larger customer base.

New Community Youth Development Corp works with, and educates, some of the most at risk young people in Saskatoon.

They will use the funds to open a take away cafĂŠ in Pleasant Hill that will be partially student run.

In addition to Affinity’s prize money of $100,000, the six finalists raised a total of $75,865 through the crowdfunding challenge.

Each social enterprise, regardless of whether they won or not, was able to keep the funds raised through this process.

DECEMBER 31, 2015

$25,000 to New Community Youth Development Corp in Saskatoon

Annual Report and Summary Consolidated Financial Statements

39

Great member perks In 2015, we continued to team up with like-minded organizations to boost the local economy and provide great member perks for events in and around the community. These included: • Souris Valley Theatre, Estevan – $5 off tickets • Regina International Fringe Festival – 2 for 1 admission vouchers • Shakespeare on the Saskatchewan, Saskatoon – $5 off tickets • Golden Apple Theatre, Regina – $5 off tickets • Saskatchewan Living Green Expo, Saskatoon – $5 off admission • Winter Green Fine Craft Market, Regina – free admission

Facilitating Economic Development Throughout the year, we co-ordinated and hosted educational workshops that provided valuable advice and information to our consumer, agriculture, business and non-profit members.

40

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

FOCUS AREA: Building Community Assets and Facilities A healthy community has the facilities and infrastructure it requires to meet the economic, social and cultural needs of its residents.

We help our communities to develop, improve or expand buildings and other facilities that benefit the whole community and support economic, cultural and social vitality.

In 2015, we invested heavily in the development, repair and renovation of community assets and facilities that are critical to community well-being. This investment totaled $799,534. The following provides a snapshot of just some of the many initiatives we have supported.

35

18

recreation centres, sport complexes or rinks

playgrounds, parks and trail facilities

7

41

childcare centres

community halls, libraries, museums, fire halls and cultural centres

4

12

housing facilities

health-care facilities

$1,300 to Milestone Swimming Pool to help purchase a new pump

$4,200 to the Watrous Rotary walking trail expansion

$10,000 to the Grand Coteau Heritage and Cultural Centre to restore the cenotaph in Shaunavon’s Memorial Park

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

41

Management Discussion and Analysis 43 Risk Management 47 Financial Overview 48 Financial Highlights 50 Operating Summary 52 Financial Position Summary 53 Capital and Liquidity Management 54 Outlook

42

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Risk Management

Risk Culture

Overview The Board of Directors, supported by the detailed work of the Audit and Risk Committee, approves the risk framework, sets risk appetite, monitors risk levels and risk mitigation and reviews emerging risk factors.

We manage risk to safeguard and ultimately increase value for the organization and its members.

At Affinity, we consider risk from the perspective of achieving our business objectives as expressed through our strategic and business plans. Our key risks are common to our industry: credit, market, liquidity and a strong focus on capital, as well as strategic, customer, operational, and regulatory and legal. We understand that the potential to impact reputation is embedded in all key risk areas and throughout all business conditions and lines of business.

Top and Emerging Risk Top risks include: strategic implications of the operating model on our competitive position, competitive options arising from federal legislation, the strength of the brand and product offering, living out and differentiating on our values, implications for liquidity and the interplay of growth, efficiency, and return.

We monitor the business environment for factors that could cause our results to be significantly different from our plans. Currently we are attentive to a number of key themes: interest rate cycles, regulatory and legislative developments, fraud and security, technological developments and cyber-security, changing demographics and market trends, and the activities and results of competitors.

At Affinity, we understand that our risk culture is influenced by the actions of our people, the means by which work is done and the manner in which decisions are made. Our risk culture is fostered and supported through strong board oversight, an interactive risk governance structure, awareness and education, risk appetite, policies and procedures, and a variety of tools that support identification, measurement, analysis and risk informed decision-making.

Governance and Design The design of our risk program is intended to support the Board in understanding and speaking knowledgeably about our key risks and our activities to manage them. We strive for plain language, clear communication of the business implications of our risk exposures and risk management activities that improve outcomes and contribute to the successful achievement of our business objectives. This starts with the Board and Audit and Risk Committee and is fostered at all levels of the organization through our executive risk owners and our risk governance committees.

The Strategic Risk Committee (SRCO), comprised of all members of executive management, evaluates and monitors key risks with a dual focus on alignment with risk appetite and implications for business success.

The Strategic Development Manager and the Chief Internal Auditor are in attendance.

Under the direction of the CEO and guided by executive risk owners, business lines are accountable for understanding and managing the risks related to their business activities. As such, they make judgments and decisions to ensure business plans and associated risk levels are appropriate and managed within the approved risk appetite and risk management policies.

Risk Philosophy Affinity Credit Union balances risk and reward to meet goals for members, community, employees, growth and financial sustainability. In pursuit of these goals, we accept risks we understand and can manage within prudent levels.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

43

Reporting to the CEO, the Executive Vice President Governance and Risk has executive accountability for the design, implementation and effectiveness of the enterprise risk program. The conceptual design of the program recognizes that leaders of business lines are the risk owners and ultimately accountable for the risks related to their functional areas. Congruent with a three lines of defense model, the organizational

structure distinguishes between management control functions that own and manage risk, functions that oversee risks and functions that provide independent assurance. The risk function works in concert with other elements within the management and control structure, including compliance and internal audit.

The result promotes transparency and contributes to risk informed decision-making.

Board of Directors

Audit & Risk Committee

Strategic Risk Committee

Operational Risk Committee

Asset Liability Committee

The Board provides oversight to the risk program and its integration with strategic and capital planning.

The Board approves the risk framework, the risk appetite framework and key risk policies and limits.

The quarterly risk report to the Board is a summary of the status, direction and projected trend of key risks relative to approved risk appetite, business implications and risk mitigation activities. The report also comments on economic conditions and emerging risks. The Board receives a risk analysis to support decision-making, such as the approval of the business plan, and as an input to strategic planning.

Awareness and education sessions are conducted throughout the year, including an orientation for new Board members.

The Audit and Risk Committee of the Board reviews risk matters coming before the Board, including the effectiveness of the risk program, status of key risks and strategic implications of risk conditions.

44

Annual Report and Summary Consolidated Financial Statements

Credit Risk Committee

The Chief Internal Auditor reports independently to the Board (through the Audit and Risk Committee) on the effectiveness of the risk governance structure and risk management framework.

The Strategic Risk Committee includes all members of executive management. It reviews and evaluates key risk levels relative to the Board approved risk appetite and discusses potential implications to the achievement of business and strategic plans.

Monitoring of risk levels and risk mitigation activities are conducted according to an established protocol.

The Asset Liability Committee provides high-level oversight and strategic direction to balance sheet management within the Board approved risk appetite and policy. It reviews economic trends, interest rate forecasts, investment portfolio risk and performance, liquidity, foreign exchange exposures and capital adequacy. The committee approves and monitors balance sheet risk management tactics.

DECEMBER 31, 2015

The Credit Risk Committee develops and recommends credit strategies and operating policy within the Board approved risk appetite and policy. It monitors conditions affecting credit procurement and performance, monitors portfolio concentrations and performance, and approves and monitors credit risk management tactics.

The Operational Risk Committee combines dialogue and case studies to increase awareness and identify solutions to cross-functional operational risk challenges. It creates synergy and improves outcomes regarding the management of operational risk across all functional areas.

The Risk Framework The Board reviews and approves the risk framework annually. The framework describes risk management at Affinity: purpose, governance, risk appetite, key program elements, control structure, roles and responsibilities, and risk process and tools. It provides policy direction to the organization, influences the risk culture, helps to provide confidence to key stakeholders that Affinity understands and actively manages its risks in order to meet business objectives.

The Risk Framework

• Government • Regulators

• Board • Audit and Risk Committee

Set objectives Provide legislation Set regulatory standards Conduct examinations

Establish risk culture and program Monitor, manage, and report key risks

Approve risk framework, philosophy, appetite and policy Oversee key risks

Identify opportunities, take and manage risks to deliver services

Ensure adequacy of compliance and controls • Senior Management • Management Risk Committees • Control Functions

• Business Operations

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

45

Risk Appetite

Risk Tools

The Board sets risk appetite for the organization through annual review and approval of the risk appetite framework. The components of the risk appetite framework are the risk philosophy, the risk appetite statements and the target risk appetite, which includes both the selection of target risk levels and quantitative ranges and points. Risk reporting includes current risk levels relative to the approved risk appetite. Executive risk owners provide input to the selection of risk appetite measures and target ranges.

The organization employs a variety of specific tools to manage its key risks, including policy and procedure, risk identification and assessment, analysis processes and stress testing, and risk measurement, monitoring and reporting. Further, the organization has in place an Internal Capital Adequacy Assessment Process (ICAAP), which is reviewed by the Board.

Index of Key Risk Exposures Affinity Credit Union is exposed to several types of key risks specific to financial institutions. We have chosen to organize them according to the following categorization, to which all risks are mapped:

Category Name

Short form definition (risk of loss arising from)

Strategic Risk

Inability to adapt to changes in the business environment through appropriate business plans, decision-making, resource allocation or implementation of effective strategies

Customer Risk

Inability to meet needs and expectations of customers or prospective customers, resulting in loss of customers/volume/revenues

Operational Risk (sub-categories: people, process, technology)

Problems or failures in the performance or controls of business functions or processes

Credit Risk

Counterparty inability or unwillingness to meet contractual obligations

Market Risk

Decreases in the value of a financial instrument or portfolios of financial instruments due to movements in interest rates and timing differences in the repricing of assets and liabilities, changes in movements and volatility in foreign exchange rates and credit spreads.

Liquidity Risk

Inability to meet current and future demands on cash in a timely manner and at reasonable prices

Regulatory and Legal Risk

Non-compliance with governing laws and regulations or failure to meet legal obligations

46

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

Financial Overview With falling oil prices and a decline in business capital investment, the Canadian economy slipped into a recession in 2015. As the economy cooled, the Bank of Canada reacted by lowering the prime bank rate by 25 basis points in January and a further 25 basis points in July. The banking industry partially followed each change to the extent of 15 basis points. The change in the lending rate was felt immediately in currency markets and the Canadian dollar began a downward slide to end the year at US $.72.

Over the year and as a result of the devalued dollar, exports picked up, as did consumer spending, resulting in an overall increase in real gross domestic product. Households received federal government support through transfer payments to families with children. Employment gains overall were better than the 2014 result. The economy grew overall by approximately 1.2% in 2015, the weakest increase since 2009.

The nationwide performance was not uniform across all regions. Saskatchewan’s economy was badly hurt by troubles in the oil and gas industry. This has led to the delay or cancellation of projects in the province and the impact has had wide economic implications.

Weak commodity prices have contributed to a marked decline in non-residential construction and an even higher negative impact on investments in exploration.

The job loss in the oil and gas sector caused the overall unemployment rate to rise during the year, even though small gains were made elsewhere (recreation, hospitality and health care).

Prices in the agriculture sector remained strong for grains, oil crops and cattle, but not for hogs. The overall price stability in agriculture caused a higher year over year level of cash receipts across livestock and crops.

While total exports were up nationally, this was not the case in Saskatchewan, particularly for ores, minerals, energy and consumer goods. The same news was experienced in the agriculture sector, with lower than expected exports of slaughter and feeder cattle.

The fall in oil prices dictated the decrease in retail sales. The price of oil was a key contributor, but the impacts were also felt across the automotive and housing sectors.

At Affinity, we would expect to experience a number of business impacts from a provincial recession. The decline in the bank rate caused deposits to remain an unattractive offer to investors. The unemployment increase caused an inability for some borrowers to pay for existing credit or qualify for new credit. The increase to commercial and residential vacancy rates caused commercial borrowers to delay new projects and consumer property owners to stay put.

Throughout 2015 we have noticed the impacts of the economy on our business. The growth in our consumer and commercial mortgage portfolios declined year over year. Financing our growth through deposits was a challenge. We saw a limited increase in loan delinquency and loan write off levels, generally in keeping with a weakened economy.

The drop in oil prices caused several other economic impacts in 2015. Office vacancy rates in both Regina and Saskatoon increased, as did residential vacancy rates, causing a lease rate correction. Housing starts, completions and sales also declined over the year and the available inventory of housing has climbed.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

47

Financial Highlights

Efficiency Ratio (%)

At Affinity, our overall financial plan was based on sustainable growth and generating a strong return on equity from that growth. Through a capital plan, we determined the appropriate amount of capital the credit union should carry for its unique risk profile.

We considered the optimum efficiency results that covered both essential costs and returned value back to the member through very competitive rates and fees. We modelled a variety of growth scenarios to arrive at the optimum balance between growth and return on members’ equity. This became our 2015 financial plan roadmap.

The highlights represent the consolidated results for the credit union and its wholly-owned subsidiary companies: insurance, property, employee services, investments and student loan administration and a holding company.

Return on Member Equity (%) 12

9

6

3

0

15

15 Target

14

13

The Return on Member Equity of 8.88% far surpassed the 7.53% budget target. Careful cost control, low loan loss levels and strong non-interest revenue contributed to the result.

48

Annual Report and Summary Consolidated Financial Statements

81

78

75

72

69

15

15 Target

14

13

The credit union expected to generate a cost to revenue spend of 77.23%. The overall operation was still reaching its equilibrium post large partnerships and we were not optimistic that necessary changes would come so quickly. Our result of 74.62% was much better than the budget target and was due to our ability to weather rate declines, control our costs and generate meaningful non-interest revenue. Over the last three operating periods, Affinity has posted successive efficiency improvements.

In the midst of an uncertain economy, Affinity continued making progress toward an improved member experience. Ultimately, the goal was to command a much higher market share, both in memberships and wallet share per member. To that end, we continued to develop our branch, mobile and online channels. Over the course of 2015, we worked with an external consultant to identify primary strategic segment opportunities and where continued channel development and back office betterments would best serve those goals.

DECEMBER 31, 2015

Local Financing (%)

Tier 1 Capital/RWA (%)

98

13.0

95 12.5 92 89

12.0

86 11.5 83 80

15

15 Target

14

11.0

13

Affinity Credit Union is a sustainable financial institution and a member of the international Global Alliance for Banking on Values. We are proud to say that we provide financial intermediation services to the real economy whereby we take local deposits and provide local loans predominantly within the Province of Saskatchewan. Over the last several years, our deposits have made up over 90% of our financing requirements with the remainder coming from retained earnings.

15

15 Target

14

13

Affinity’s capital position improved in 2015, through a stronger than expected bottom line and lower balance sheet growth. The target was 12.42%, and 12.37% was achieved.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

49

Operating Summary

Net Interest Margin Net interest margin represents our net earnings from balance sheet loans and investments and funding.

We ended the year at the budget target of 2.65% margin to average assets. We generated $124 million in net interest margin, approximately $.5 million under budget but $9.9 million more than 2014. As rates fell and the margin % compressed, the % return on the growth in our balance sheet also declined. Rates at 2014 levels would have produced an additional $3 million in margin dollars. However, it was our intention to provide very competitive pricing to members and we expected to incur a margin decline in % and dollars to achieve this.

Comprehensive Income 50

($ millions)

40 32.8 30

31.5 27.6 21.6

20

Net Interest Margin (%) 10

0

2.90

15

15 Target

14

13 2.83

Comprehensive income was $1.3 million higher than 2014. This was particularly significant when we enjoyed a number of one-time items in the prior year that provided a $4.9 million pre-tax benefit to our 2014 results. In 2015, the anomalies were very limited and the $32.8 million amount was far ahead of our 2015 target of $27.6 million. Although the two rate cuts were unexpected, we were able to reach our margin dollar budget through managing rates for deposits and loans and receiving additional investment income from our credit union partners. We earned more than expected fee income through subsidiary companies, and we had additional staff attrition opportunities that we took advantage of. At the same time, we chose to return more to communities than the annual operating plan target. The following discussion addresses the major categories of income and expense.

50

Annual Report and Summary Consolidated Financial Statements

2.75

2.68

2.60

15

15 Target

14

13

We were significantly behind budget in loan interest revenues due to the two unanticipated rate cuts and a smaller balance sheet than expected. We felt the largest margin impact on our consumer loan portfolio, which made up more than 60% of our loan base. In response to rate cuts, actual deposit costs were also well behind budget. Again, cost was also impacted by the lower than expected balance sheet size. Net interest margin included investment interest and our return from one credit union sector investment was well above expectations.

DECEMBER 31, 2015

Credit Loss Provision The loan loss provision is determined by the extent to which delinquent loans are security short. The result of this gap is represented as credit loss expense.

Overall, we assessed specifically delinquent loans for our ability to recover principal. We also created an allowance and offsetting provision cost on a collective basis for delinquency we believe is inherent in our loan portfolio that hadn’t yet occurred. The overall cost for 2015 was $1.7 million or $1 million less than budget. Our target for the year was created on a conservative basis as we expected that any combination of economic changes to the province would impact our loan loss experience.

Affinity’s credit quality remained high at the end of 2015. Overall, the delinquency as a percentage of outstanding loans was 25 basis points.

Loan Delinquency (%) 0.8

0.6

Other Income We achieved better than expected results for 2015, generating $42.7 million or $4.6 million than the budget amount. Other income represented two key categories: revenues from traditional financial intermediation and revenues from our diversification initiatives. From traditional sources, we had high levels of success in our merchant program and received paper statement revenues in excess of budget.

Through diversification, we continued to grow revenues from our insurance subsidiaries, of which we have several throughout the province. In recent years, we have relocated three agencies and, in each instance, post-move revenues have surpassed what was achieved in the former locations. In addition to our success in insurance, our mutual fund brokerage provided more than expected revenues in 2015.

The off balance sheet mutual fund portfolio has now passed the $1 billion mark. Finally, we realized significant gains through Saskatchewan venture capital investments.

Operating Expenses

0.4

Affinity’s operating expenses for the year were .26% more than 2014. The 2014 results included an accrual in excess of $1.0 million for banking system migration of incoming partners. We were able to recover much of this cost in 2015 and this led to some variability in expense year over year. In addition to this recovery, 2015 also included unplanned cost for a major consulting contract for strategy development.

0.2

0.0

outstanding loans. We carefully monitor delinquency levels and write off trends as indicators of how the economy is performing and the resulting impact on our borrowers’ ability to deal with credit.

15

14

13

Agricultural Commercial Consumer By individual portfolio, we experienced the highest delinquency levels in the agricultural portfolio, but this area actually realized substantial decline in 2015.

The consumer portfolio delinquency increased from 18 basis points in 2014 to 26 basis points in 2015 and the increase was exclusively in non-mortgage loans.

The weakening in this portfolio was also evident in the number of loans written off in 2015, which was more than double the amount from the prior year. The commercial portfolio delinquency also increased by 11 basis points to end the year at 16 basis points of

Personnel cost was behind budget by $2.2 million and the variance came from reduced salaries and benefits. The 2015 budget anticipated a level of staff attrition and timing lags in hiring for vacant positions and we were able to achieve a better result than planned. Occupancy cost approximated budget as did member security cost. We had more general business cost than expected as a result of unplanned consulting fees, and the savings in computer costs somewhat mitigated this overspend. Organization costs were $250 thousand more than 2014 and over budget by $230 thousand. The budget for community initiatives was based on a preliminary year end pre-tax bottom line and the actual 2014 result was higher than expected, leaving more dollars to share.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

51

Deposit Growth (%)

Affinity’s $32.8 million in Other Comprehensive Income for 2015 represented a strong bottom line from a regulatory perspective. Credit Union Deposit Guarantee Corporation expects a return of 50 basis points per average assets, and Affinity achieved 72 basis points, far ahead of the 59 basis point target.

12

9

Financial Position Summary

6

3

The Affinity Capital Plan sets out an appropriate level of balance sheet growth for the credit union. We seek growth that best leverages capital but does not erode capital and modelled 8-9% as ideal. Asset growth was set for 8.3% for 2015. We had a strong first quarter, but as the economy began to slip and interest rates fell, our growth targets followed suit and we were unable to achieve our plan. Asset growth for 2015 was 10.3% and although that appeared to meet the mark, that result included a January 1st partnership with Shaunavon and Hudson Bay credit unions (combined assets of $220 million). Excluding these partnerships, organic year over year asset growth was 5.23%. We continued to have solid loan demand over the course of 2015, but insufficient financing to match. We had to turn to our excess investments as a funding source and, as we effectively traded one asset for another, overall balance sheet growth was limited.

Deposits We are unable to grow without appropriate financing and our chief financing avenue was member deposits.

In 2015, the credit union deposit base was 90.67% of assets and this was consistent with prior years.

The budget for the year was based on the robust deposit growth in the prior two years. As rates fell in 2015, deposits were less attractive to investors and we struggled to achieve the financing necessary for our desired 8-9% asset growth. Late in the year, we developed a nominee deposit relationship, which is a variety of brokered deposits. This channel provided approximately $200 million in additional financing opportunity from large institutional or corporate depositors. By the end of 2015, we had sourced $26 million through this nominee platform.

0

Annual Report and Summary Consolidated Financial Statements

15 Target

14

13

Overall, deposits grew by 4.9% or $194 million (excluding new partners), far less than the 8.33% target. We were off plan in both fixed and demand deposits. We were able to secure deposits from local corporate investors over the course of the year and this helped to subsidize the growth we didn’t get through our individual membership base.

Loans Loans make up the majority of Affinity’s asset base.

The target of 8.66% for 2015 was largely based on what was achieved in the year prior. The outcome was 7.24% or $257 million, and we lagged behind budget in several areas of the portfolio.

Loan Growth (%) 15

12

9

6

3

52

15

DECEMBER 31, 2015

15

15 Target

14

13

Consumer loans were less than expected for nonmortgage and auto loans. Residential mortgages were growing at a steady pace until late in the fall when the housing market weakened in Regina and Saskatoon. Mortgage growth fared much better in the agricultural and commercial sectors and we exceeded budget targets.

Affinity has a number of loan syndication relationships with third parties. Throughout 2015, we sold $39 million in commercial mortgages to better manage our liquidity position. Had we not sold, loan growth would have been 8.3%. We ended the year with on-balance sheet loans of $3.9 billion.

Capital and Liquidity Management

The final phase of the capital plan involved testing a number of balance sheet growth scenarios against performance targets and capital adequacy.

Appropriate growth would cause capital positions to slowly build over and above the target minimum.

On a regular basis, we monitor our capital position and forecast changes in our business model against capital adequacy to ensure we’re making the right business decisions. And finally, as our risk management framework reaches maturity, we constantly adjust the capital we require for existing and emerging risks. We refresh the capital plan each year by reconsidering performance metrics and the appropriateness of business plans and growth goals against capital.

At the end of 2015, our capital to risk weighted assets were 12.52%, just slightly above our minimum requirement.

Capital Monitoring and Management As a financial institution, Affinity requires an adequate level of capital in reserve to mitigate risk, measured by way of member capital to risk weighted assets. Risk is imbedded in our current balance sheet position, in operations and from our business environment.

Controlling risk encompasses more than what is known at a point in time. We also need to consider unforeseen future risk and our capital position has to measure up accordingly. Our regulator, Credit Union Deposit Guarantee Corporation, has an expectation that Affinity will hold capital that includes a base regulatory level plus a buffer.

Because the measure is based on assets, capital needs to increase as the balance sheet grows. We will always need additional capital if we’re to consider future expansion, either within our traditional business lines or through further diversification. The measure is also based on member capital, and its growth is dependent upon efficient and consistently strong operating results.

I nternal Capital Adequacy Assessment Process (ICAAP) In addition to meeting a regulatory capital base and buffer requirement, the credit union also measures capital adequacy in relation to its unique risk profile.

On a regular basis, the credit union’s key risk map is refreshed. We re-evaluate the current risks and consider emerging risks. Once we’ve established the likelihood of unmitigated risk occurring and its impact on capital, we establish a base internal capital requirement. We meet with risk owners to stress test each risk for plausible but remote scenarios.

During this exercise, we determine what capital buffer needs to be added to the base internal capital requirement. The aggregate becomes our internal capital requirement for the credit union. If the internal capital requirement is greater than the regulatory requirement, we will raise our minimum capital standard. At the end of 2015, the internal capital requirement for our significant risks was less than the regulatory requirement.

Over the course of 2015, Affinity refreshed its rolling 5 year capital plan. This plan comes into effect on January 1, 2016. We tested a capital buffer against our current risk profile and established a 12.5% minimum target, which represents a base of 10.5% plus a 2% buffer. Through testing and market research, we arrived at appropriate performance targets for efficiency and return on equity over the next five years.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

53

Liquidity Management Liquidity management is the constant monitoring of current, near and far term expected cash positions to ensure that Affinity can satisfy demands on cash. The Board and management have set targets of necessary surplus liquidity over a one year time horizon that provide a generous liquidity buffer to withstand the stress of unusual events and contemplate current expected cash flow. Intermediate targets have also been established to oblige action long before any critical shortfalls are experienced.

Throughout 2015, Affinity experienced a tightening of its liquidity position as interest rates fell and our members continued to move away from deposits as a lucrative investment. As a result, we financed a portion of our loan growth in 2015 by using excess liquidity investments.

Because our balance sheet strategies are underpinned by liquidity management, we have arranged for a number of backup sources in addition to raising deposits. We carry a line of credit with Credit Union Central of Saskatchewan (SaskCentral), and two further debt facilities with two different financial institutions. Throughout 2015, we kept these facilities largely unused and available. In 2014, we began an application to access a nominee deposit channel and secured this relationship by the third quarter of 2015.

The channel was tested and by year end, we raised $26 million of an available $200 million limit.

Another liquidity source is leveraging our existing balance sheet through loan securitizations. At the end of 2015, we began an application to enter a residential mortgage securitization platform and we expect to use this in 2016. As well, we have the option to sell loans to raise cash to continue lending. This is our last liquidity resort as our aim is to continue to grow our balance sheet and leverage our capital position.

In 2017, we expect that our regulator will begin to phase in new Basel Liquidity Standards. Over the course of 2015, the credit union had tested its position against these new standards and consistently met them.

54

Annual Report and Summary Consolidated Financial Statements

Outlook The further deterioration in oil prices and the weakness in the energy sector is expected to spread to other areas of the economy. It is anticipated that oil firms will cut their budgets by another 16% after incurring cuts of 24% in 2015. Both the energy and non-energy mining sectors will continue to face a decline in raw material prices. Machinery and equipment spending will fall due to weak business confidence. Very few jobs will be added to the economy. The depreciation of the Canadian dollar is no longer expected to increase exports. Finally, consumers are overstretched and their spending is showing signs of weakening.

The bright spot in the economy could be the potential injection of significant federal government dollars toward infrastructure growth. There is also belief that the Bank of Canada will not announce any further interest rate cuts and rates will remain at current levels until 2017.

The changing economy will undoubtedly increase the risk profile for Affinity. We will monitor and be prepared for an increase to credit risk both through default and security values for 2016. While any softening in our credit positions could have a liquidity effect, we may also benefit from surplus cash coming to us from non-performing markets as investors look for deposit safety.

Throughout 2015, Affinity undertook to recognize gaps within its service channels, back office processes and customer segments to paint a picture of required action. We have created a map of very specific initiatives that will close these gaps. The project list around these initiatives is extensive and we have incorporated this work into the 2016 annual operating plan.

The member experience will be our focus for 2016 and beyond. This will include member-centric changes to service standards, further innovations in technology and re-visioning our member interface through call centres, mobile capabilities and our branch network.

DECEMBER 31, 2015

Summary Consolidated Financial Statements for the year ended December 31, 2015

56 Management’s Responsibility for Financial Reporting 57 Independent Auditors’ Report 58 Summary Consolidated Statement of Financial Position 59 Summary Consolidated Statement of Comprehensive Income 60 Summary Consolidated Statement of Changes In Equity 61 Summary Consolidated Statement of Cash Flows 62 Note to the Summary Consolidated Financial Statements

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

55

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying consolidated financial statements of Affinity Credit Union were prepared by management, which is responsible for the integrity and fairness of the information presented, including the many amounts that must of necessity be based on estimates and judgments.

These consolidated financial statements were prepared in accordance with financial reporting requirements prescribed by the Credit Union Act, 1998 of the Province of Saskatchewan, Credit Union Deposit Guarantee Corporation, and by statute. The accounting policies followed in the preparation of these financial statements conform to international reporting standards (IFRS).

Financial and operating data elsewhere in the annual report are consistent with the information contained in the financial statements. In discharging our responsibility for the integrity and fairness of the consolidated financial statements and for the accounting systems from which they are derived, we maintain the necessary system of internal controls designed to ensure that transactions are authorized, assets are safeguarded, and proper records are maintained. These controls include quality standards in hiring and training of employees, policies and procedures manuals, a corporate code of conduct and accountability for performance within appropriate and welldefined areas of responsibility.

The system of internal controls is further supported by a compliance function, which is designed to ensure that we and our employees comply with appropriate legislation and conflict of interest rules, and by an internal audit staff, which conducts periodic audits of all aspects of our operations.

The Board of Directors oversees management’s responsibilities for financial reporting through an Audit and Risk Committee, which is composed entirely of independent directors.

This Committee reviews our consolidated financial statements and recommends them to the Board for approval. Other key responsibilities of the Audit and Risk Committee include reviewing our existing internal control procedures and planned revisions to those procedures, and advising the directors on auditing matters and financial reporting issues.

Our Senior Compliance Manager and Chief Internal Auditor have full and unrestricted access to the Audit and Risk Committee.

Further monitoring of financial performance and reporting is carried out by the Credit Union Deposit Guarantee Corporation. It is given its responsibilities and powers by provincial statute through the Credit Union Act. Its purpose is to guarantee members’ funds on deposit with Saskatchewan Credit Unions and provide preventative services. Preventative services include ongoing financial monitoring, regular reporting and consultation.

KPMG LLP, Chartered Professional Accountants appointed by the members of Affinity Credit Union upon the recommendation of the Audit and Risk Committee and Board, have performed an independent audit of the consolidated financial statements and their report follows.

The auditors have full and unrestricted access to the Audit and Risk Committee to discuss their audit and related findings.

Mark Lane Chief Executive Officer

Lise de Moissac Executive Vice President and Chief Financial Officer

Saskatoon, Saskatchewan February 22, 2016

2

56

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

KPMG LLP 500 – 475 Second Avenue South Saskatoon Saskatchewan S7K 1P4 Canada

Telephone (306) 934-6200 Fax (306) 934-6233 www.kpmg.ca

INDEPENDENT AUDITORS’ REPORT To the Members of Affinity Credit Union: The accompanying summary consolidated financial statements of Affinity Credit Union, which comprise the summary consolidated statement of financial position as at December 31, 2015, the summary consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and related note, are derived from the complete audited consolidated financial statements, prepared in accordance with International Financial Reporting Standards, of Affinity Credit Union as at and for the year ended December 31, 2015.

We expressed an unmodified audit opinion on those complete consolidated financial statements in our auditors’ report dated February 22, 2016.

The summary consolidated financial statements do not contain all the requirements of International Financial Reporting Standards applied in the preparation of the complete audited consolidated financial statements of Affinity Credit Union. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the complete audited consolidated financial statements of Affinity Credit Union.

Management’s Responsibility for the Summary Consolidated Financial Statements Management is responsible for the preparation of the summary consolidated financial statements in accordance with the basis described in Note 1.

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 complete audited consolidated financial statements of Affinity Credit Union as at and for the year ended December 31, 2015 are a fair summary of those complete consolidated financial statements, in accordance with the basis described in Note 1.

Chartered Professional Accountants February 22, 2016 Saskatoon, Canada

KPMG LLP, is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

57

AFFINITY CREDIT UNION SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at December 31 (in thousands of dollars) 2015

2014

(Note 1)

(Note 1)

ASSETS Cash and cash equivalents Financial investments Loans Other assets Fair value of derivative assets Property and equipment Intangible assets Total Assets

$

22,942 693,375 3,950,352 13,464 1,839 72,647 20,871

$

41,881 630,314 3,545,442 14,387 3,510 73,172 20,930

$

4,775,490

$

4,329,636

$

4,329,777 2,066 46,203 1,905 2,036

$

3,934,945 2,101 42,943 3,510 3,208

LIABILITIES Deposits Loans and borrowings Other liabilities Fair value of derivative liabilities Membership equity Total Liabilities

4,381,987

3,986,707

393,580 263 393,843

343,003 142 343,145

EQUITY Retained earnings Accumulated other comprehensive income Equity attributable to owners

(340)

Non-controlling interest

(216)

393,503

Total Equity $

Total Liabilities and Equity

4,775,490

342,929 $

4,329,636

The accompanying notes are an integral part of these consolidated financial statements.

APPROVED BY THE BOARD

..................................................... CFO

..................................................... Director

58

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

AFFINITY CREDIT UNION SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December 31 (in thousands of dollars) 2015 (Note 1)

PROFIT OR LOSS INTEREST INCOME Loans Investments

$

INTEREST EXPENSE Deposits Borrowings and investment shares

153,882 11,973 165,855

2014 (Note 1)

$

143,432 10,356 153,788

42,145 196 42,341

39,809 355 40,164

NET INTEREST

123,514

113,624

PROVISION FOR CREDIT LOSSES NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES

1,751 121,763

865 112,759

OTHER INCOME NET INTEREST AND OTHER INCOME

42,659 164,422

49,139 161,898

74,918 31,791 9,764 3,496 4,022 123,991

72,120 35,734 9,157 3,244 3,420 123,675

40,431

38,223

7,757

6,494

32,674

31,729

OPERATING EXPENSES Personnel General business Occupancy Organizational Security

PROFIT BEFORE INCOME TAX PROVISION FOR INCOME TAXES PROFIT OTHER COMPREHENSIVE INCOME ITEMS THAT WILL NOT BE CLASSIFIED TO PROFIT AND LOSS Actuarial gain (loss) on employee benefits, net of tax

238

(172)

ITEMS THAT MAY BE CLASSIFIED TO PROFIT AND LOSS Unrealized gain (loss) on available-for-sale financial assets, net of tax

(96)

(20)

RECLASSIFICATION OF GAINS (LOSSES) ON Available-for-sale financial assets disposed of in the year

(21)

(17)

121

OTHER COMPREHENSIVE INCOME (LOSS) TOTAL COMPREHENSIVE INCOME Profit attributable to: Affinity Credit Union

(209)

$

32,795

$

31,520

$

32,798

$

32,345

$

(124) 32,674

$

(616) 31,729

Non-controlling interests - Minority shareholders of 101188741 Saskatchewan Ltd.

The accompanying notes are an integral part of these consolidated financial statements.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

59

AFFINITY CREDIT UNION SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended December 31 (in thousands of dollars)

2015 (Note 1) Retained earnings including contributed surplus Balance, beginning of year

$

343,003

Accumulated other comprehensive income $

142

Equity attributable to owners $

343,145

Addition to contributed surplus

17,779

-

17,779

Total profit or (loss)

32,798

-

32,798

-

121

121

Other comprehensive income, net of tax Balance, end of year

$

393,580

$

263

$

393,843

Non controlling interest $

(216)

Total equity $

-

17,779

(124)

32,674

$

(340)

342,929

121 $

393,503

2014 (Note 1) Retained earnings including contributed surplus

Balance, beginning of year

$

Addition to contributed surplus Total profit or (loss)

$

$

351

$

311,009

-

-

-

32,345

-

32,345

-

Other comprehensive income, net of tax Balance, end of year

310,658

343,003

(209) $

142

Non controlling interest

Equity attributable to owners

Accumulated other comprehensive income

$

400

343,145

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

31,729

$

(216)

311,409 -

(616)

The accompanying notes are an integral part of these consolidated financial statements.

60

$

-

(209) $

Total equity

(209) $

342,929

AFFINITY CREDIT UNION SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS Year ended December 31 (in thousands of dollars) 2015 (Note 1) CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Total profit Adjustments for Non-controlling interest Provision for credit losses Depreciation of property and equipment Amortization of intangible assets Other income Amortization of premium/discount on held-for-trading investments Amortization of premium/discount on held-to-maturity investments Amortization of premium/discount on available-for-sale investments Amortization of premium/discount on loans and receivables Interest revenue Interest expense Income tax expense

$

Changes in operating assets and liabilities (excluding Cash and cash equivalents) Loans Deposits Other assets Other liabilities

Cash interest received Cash interest paid Cash income taxes paid

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES Dividends received from associates Net cash and cash equivalents attributed to minority shareholders Net cash and cash equivalents acquired through business combinations Proceeds from maturity of liquidity and term investments Purchases of liquidity and term investments Proceeds from maturity of available-for-sale investments Purchases of available-for-sale investments Proceeds from maturity of held-to-maturity investments Purchases of held-to-maturity investments Proceeds from maturity of held-for-trading investments Purchase of investment property Purchase of property and equipment Purchase of intangible assets Proceeds from disposal of property and equipment Proceeds from disposal of investment property

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Repayment of loans and borrowings Issuance of new loans and borrowings Repayment of membership equity Issuance of new membership equity Sale of loans Repurchase of loans

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS

32,674

2014 (Note 1)

$

124 1,751 5,320 2,036 (931) (46) 23 75 12 (165,855) 42,341 7,757

616 865 5,349 1,712 (7,491) (305) 62 1,074 137 (153,789) 40,164 6,505

(74,719)

(73,372)

(289,453) 187,984 (897) 2,341 (174,744)

(288,187) 337,343 2,366 10,407 (11,443)

165,506 (43,535) (5,104) (57,877)

153,361 (38,623) (7,390) 95,905

168 (124) 6,002 242,616 (244,568) 27,336 (23,128) 3,057 (1,000) 3,096 (12) (3,974) (1,665) 145 7,949

150 (616) 467,879 (589,609) 15,026 (970) 7,777 (1,740) 2,783 (267) (6,476) (1,588) 8,179 18,180 (81,292)

(35) (1,496) 49 37,959 (5,488) 30,989

(4,862) 182 (221) 51 2,099 (2,751)

(18,939)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

11,862

41,881

CASH AND CASH EQUIVALENTS, END OF YEAR

$

31,729

22,942

30,019 $

41,881

The accompanying notes are an integral part of these consolidated financial statements.

DECEMBER 31, 2015

Annual Report and Summary Consolidated Financial Statements

61

AFFINITY CREDIT UNION Note to the Summary Consolidated Financial Statements December 31, 2015 1. Basis of the summary consolidated financial statements The criteria applied by management in the preparation of these summary consolidated financial statements are as follows: a)

The information in the summary consolidated financial statements is in agreement with the related information in the Credit Union’s December 31, 2015 audited consolidated financial statements (the “Audited Financial Statements�); and

b)

The summary consolidated financial statements contain the information necessary to avoid distorting or obscuring matters disclosed in the Audited Financial Statements, including the notes thereto.

c)

The Audited Financial Statements can be obtained at any Affinity Credit Union branch or on-line at: https://www.affinitycu.ca/YourCreditUnion/About/Pages/AnnualReportsandSta tements.aspx

d)

62

The detailed notes included in the Audited Financial Statements are not included in the summary consolidated financial statements as these notes are available in the Audited Financial Statements which can be obtained as described above.

Annual Report and Summary Consolidated Financial Statements

DECEMBER 31, 2015

AFFINITY CAMPUS 902 7th Avenue North Mail to: PO Box 1330 Saskatoon SK S7K 3P4