2021 Affinity Annual Report

Affinity Credit Union Annual Report 2021

excelling members for our

Contents 03

From Our Chair and CEO

05

2021 Highlights

06

Lending Services

07

Impact Lending

08

Governance at Affinity

11

Our Board of Directors

12

Meeting Attendance

13

Board Committees

14

Our District Council Delegates

15

Director and Delegate Pay

16

Our Executive Leadership Team

17

Executive Pay

18

Working at Affinity

19

Our Remarkable Employee Experience

20

Community Investment

21

Our Commitment to Truth and Reconciliation

22

Adapting in a Pandemic

23

Community Impact

24

Affinity in the Community

26

Management Discussion and Analysis

43

Summary Consolidated Financial Information

50

District Council Map

All deposits held at Affinity Credit Union are fully guaranteed by the 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.

When the news broke in 2021 of multiple residential school grave uncoverings, we knew we couldn’t stand by idle.

Through our commitment to truth and reconciliation, we looked for ways to lend support. This is why, from June 24 to September 30, employees and elected officials were given the option to direct their Community Spirit Fund (CSF) to the Family Wellness Program, provided

by Regina Treaty/Status Indian Services that supports residential school survivors.

A total of 108 employees and elected officials directed their CSF to this amazing cause and Affinity matched them all — bringing the total to $43,600!

On November 30, Regina & Area Advice Centre Managers Glen Cunningham and Shawn Osier visited the Regina Treaty/Status Indian Services office, where they presented the cheque to CEO Erica Beaudin on behalf of Affinity.

“You could see the emotion on her face — even with her mask on. The sheer level of appreciation on their faces was absolutely indescribable,” said Glen.

Our donation of $43,600 will have a huge impact on the Regina Treaty/Status Indian Services operating budget.

The funds will benefit students, residential school survivors, treatments and more.

“It’s days like this that you get to see firsthand how we can move the needle on truth and reconciliation if we work together,” said Shawn.

Regina Treaty/Status Indian Services Inc. provides assistance, programming, training, advocacy and referral services for the Urban First Nations and those First Nations transitioning between Reserve and the City.

The challenges that have arisen from the pandemic have brought renewed focus to our commitment to our employees, members and communities. Affinity is here for you.

Mitchell Anderson, Board Chair and Mark Lane, CEO

From Our Chair and CEO As we look forward to where we’re going, it’s often beneficial to reflect on where we’ve been.

We’ve managed our way through the second year of the pandemic and COVID-19’s implications on Saskatchewan communities. While 2020 and 2021 challenged the plans of most organizations, Affinity’s priority of putting employees, members and communities first, rooted in who we are as a co-operative, never shifted. We continued our focus on you, our members, by helping you meet ever-shifting needs while still realizing your goals.

In turn, the support and business received from members reflected very positively on our credit union in 2021.

In continuing our journey to be the best credit union we can be for members; we were pleased to again join the list of the 10 largest credit unions in Canada. And for the second year in a row, we were proud to be among Forbes list of World’s Best Banks, as based on members’ sentiment and feedback.

As promised a year ago, we released a refreshed online and mobile banking platform in 2021.

With this release, a new Personal Financial Management (PFM) tool named Know Your Money (KYM) was also introduced. This tool intuitively allows members to create and manage budgets, set goals and view spending habits.

The tool has been well-received and is an example of the innovation in products and services that members can continue to expect.

2021 also included some significant endings and new beginnings. While we were proud to call the Fairhaven area of Saskatoon home for 30 years, we also recognized that as the city grows and

expands, so must our presence. Many of our locations in Saskatoon were concentrated in the central part of the city, with five advice centres located west of the river. Given Saskatoon’s growth, we identified a need to better balance our presence across the city, as to best support our members. With this in mind, we closed the doors of our Fairhaven location in March 2021 and opened the doors of our new Brighton Advice Centre that same month.

The spring and summer of 2021 led to record drought conditions in much of Saskatchewan, which led to increased pressure and stress on farmers and producers. They’re an integral part of our province and membership, and we were called upon to work with many, making efforts to help during a very difficult time. As producers worked hard to meet the challenges on their farms, we offered support and guidance and our advisors remained connected – both on and off the field.

We continue to see evolution and transformation within the financial services industry, and we can assure you your credit union is adapting during this formative time. In 2021, we continued to make strategic business decisions that have been integral to the success your credit union is experiencing today. This success allows Affinity to offer our members enhanced advice and service, competitive rates, quality of access, modernized conveniences and so much more.

We’re excited for what’s in store for your credit union in 2022. Through our shared commitment to excellence and continuous improvement in the service of members, we’re poised to achieve even more!

Mark Lane Chief Executive Officer

Mitchell Anderson Board Chair

Affinity Credit Union Annual Report 2021

3

33,871 141,661 786 100% owned by our

enrolled Government Sign-In

by Verified.Me users

members

provided funding to

10

547

th

largest credit union in Canada

56

locations

incredible employees

over

organizations across Saskatchewan

$386k

47

provided to employees for educational support, tuition reimbursement, training & workshops

over

communities

$8.7B in managed assets

235,792 16,000 calls to our Contact Centre

daily active users on Affinity Mobile

4.7 iOS & Android app rating based on 4,600 reviews

2021 Highlights Affinity Mobile app and online banking got a facelift!

Managing your money got a whole lot easier – thanks to our completely revamped and redesigned Affinity Mobile app and personal and business online banking platforms that we rolled out in June 2021!

With a sleek new look, intuitive features, a user-friendly design and a FREE personal financial management tool called Know Your Money (KYM), this update was a big hit with our members. You talked – we listened! One of the most highly requested improvements was also added to this redesign – the ability to quickly view your available limit on QuickLine accounts.

Things just got a lot brighter in the Brighton area of Saskatoon On March 22, 2021, we opened the doors to our new Brighton Advice Centre, located at 55-137 Gibson Bend in Saskatoon. Given Saskatoon’s growth, we’d identified a need to better balance our presence across the city, as to best support our members. We’re looking forward to serving our members in the Brighton area for years to come!

Video appointment options In April 2021, we launched video appointment on our online booking system and it was met with instant demand! Amongst the most popular video appointment types were personal mortgages and investment advice/mutual funds.

The uptake of online booking proved that how we do business as a credit union is evolving and we’ll continue to adapt and change to best serve our members.

Affinity makes Forbes list of ‘World’s Best Banks of 2021’ for second year in a row For the second year in a row, our efforts to provide remarkable experiences for our members were recognized by the one and only Forbes Magazine in 2021. We ranked 14th among Canadian financial institutions with only two other credit unions making the list.

This list is compiled by Forbes by surveying 40,000 customers around the globe for their opinions on their current and former banking relationships. Financial institutions were rated on general satisfaction and key attributes including trust, digital services and financial advice.

Ease the doubt in a year of drought After an exceptionally dry summer, Saskatchewan crops didn’t fair well. Prolonged drought conditions across the province rapidly deteriorated crop conditions and yields were well below average. In good times and in challenging times, we’re there for our members.

To offer support to our agriculture members across the province, our advisors reached out to them to offer solutions to their unique needs, whatever that may be. They also handed out free cooler bags on trips to the field to connect with them.

Affinity Credit Union Annual Report 2021

5

Lending Services When you’re an Affinity member, your money doesn’t just sit around – it gets put to work through investments back into your community. Member deposits are our primary funding source that help your neighbours get loans to buy homes, start businesses, get educated and more! These investments help to drive the Saskatchewan economy forward and help make our province a great place to live!

2021

2020

Residential Mortgages

$2,278,498,029

$2,194,168,816

Business Loans

$1,634,964,462

$1,485,739,524

Agriculture Loans

$853,639,839

$794,954,093

Personal Loans

$468,864,057

$500,159,270

$14,232,555

$16,128,842

$5,250,198,942

$4,991,150,545

Other Loans Total

Impact Lending Making a difference in our communities and lending a helping hand is very important to us at Affinity.

Providing assistance to those who have little or no credit history, affordable housing loans or making that small business dream a reality – we’re here to help.

2021 Loan Type

Balance

#

Balance

#

Affordable Housing Loans

$131,392,611

892

$105,919,847

714

Small Business Loans

$108,330,450

628

$84,957,761

541

Restart Loans

$1,199,879

703

$923,345

575

Student Loans

$3,382,858

237

$3,740,786

226

$244,305,798

2,460

$195,541,739

2,056

Total *

2020

Impact lending present loans funded in the respective year as opposed to cumulative outstanding balances.

Affinity Credit Union Annual Report 2021

7

Governance at Affinity

As an Affinity member, you’re also an owner!

Your say is important in determining the directors and delegates who work for you to represent your interests.

Board Governance

The Board has a comprehensive charter and mandate that guides their accountability to provide oversight and direction for Affinity Credit Union. This includes commitment to achieving the highest standards of corporate governance and overseeing the effectiveness of business operations and the risk management framework.

The Board meets at least quarterly to discharge their primary responsibilities to approve and oversee items essential to prudential oversight of Affinity Credit Union, such as strategy, risk appetite, capital plans and key policies, and to provide challenge, advice and guidance to senior management.

In 2021, the Board met their expectations to discharge their essential duties. Through the execution of their work plan, the Board accomplished the following key deliverables: • continued to respond to the COVID-19 pandemic and provided direction in the successful continuation of member service, while ensuring the safety of our employees, members and communities, • accelerated the development of a Truth & Reconciliation road map, building on our

8

Affinity Credit Union Annual Report 2021

established commitments and calls to action as a credit union in the key areas of: • create opportunities for learning and discovery of the history, truth and importance of reconciliation for our employees, members and communities • develop connections to expand employment, education and economic prosperity with Indigenous Peoples, communities and businesses • foster an environment that’s inclusive, respectful and welcoming • approved a three-year recurring Board Performance Assessment cycle; and • approved the 2022-2024 strategic plan aligned with our goals and aspirations of being the financial institution of choice in Saskatchewan with a renewed focus on: superior member value, frictionless touchpoints, superior workforce talent, local & co-operative strength and a solid foundation, which includes: • financial strength & retailing strength • risk, compliance & control regimes • governance & oversight • data & digital readiness • Environmental, Social and Governance (ESG) commitment

Governance Model Review

The Governance Committee conducts a governance model review at minimum every five years or more frequently as deemed necessary. In order to fulfill the board’s accountability to members and to satisfy it’s legal and regulatory obligations, the review monitors the effectiveness and appropriateness of the Board Governance Framework and the Delegate Framework.

The Board of Directors initiated a governance model review in early 2021 to assess Affinity’s current governance model and determine what, if any, improvements should be considered.

The 2021 model review coincided with the regular five-year cadence and was conducted in the context of Affinity being designated a Provincially Significant Financial Institution (P-SIFI) by its regulator Credit Union Deposit Guarantee Corporation (CUDGC). As a P-SIFI, Affinity is held to a higher standard and subject to more intensive supervision by CUDGC. In tandem with the governance model review, CUDGC conducted a review and assessment of Affinity’s governance framework and their findings supported the proposed revisions to the governance structure.

Following extensive review and discussion, the Board has determined that a model with an at-large director election aligns the best with the established guiding principles and the overarching requirements to respect the co-operative nature of Affinity while meeting regulatory expectations.

The Board is recommending a revised governance structure and amended Affinity Credit Union Bylaws for presentation to members for their review and approval at the April 20, 2022 Annual General Meeting (AGM).

Affinity Credit Union Annual Report 2021

9

Orientation & Continuing Education

The District Councils

The Board is committed to the provision of appropriate opportunities for the education and professional development of directors to ensure that the Board has the knowledge and skills necessary to fulfill its oversight responsibilities.

As Affinity ambassadors, delegates are role models in their communities and represent Affinity by attending events, being visible to community members and attending delegate meetings. District Councils identify opportunities for credit union support, review and approve community development funding and award the Elwood Harvey Co-operative Leadership scholarship program. The district councils are Affinity’s grassroots connection to our members and ensure communication and feedback between the district councils and the Board.

New directors are offered orientation and mentorship programs to familiarize themselves with Affinity’s governance processes and business operations. The Governance Committee conducts an annual debriefing of the orientation and mentorship programs to capture enhancement opportunities for subsequent years.

In addition to individual director development, the Board approved ongoing director training and development including educational sessions, industry-sponsored seminars and conferences relevant to Affinity’s business. In 2021, the following board education sessions were held to address topics considered to be particularly important, including The Art and Science of Chairing a Board and Committees, The Future of Consumer Directed Finance (Open Banking), Risk Awareness for Directors, A Competency Approach to Governance, and Governance Oversight of Information Security.

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Affinity Credit Union Annual Report 2021

The nine district councils met their meeting cycle requirement of four meetings during 2021. Through the execution of their work plans, the district councils accomplished the following key deliverables: • reviewed 251 community development funding applications and distributed over $570,000 to community initiatives; • awarded 20 scholarships to young leaders; and • updated and approved district council funding guidelines including funding priorities, assessment and eligibility criteria.

From left to right: Cindy Anderson (North District), Mitchell Anderson (Saskatoon District & Board Chair), Deirdra Ness (Saskatoon District), Debra Chobotuk (Saskatoon District), Kurt Holfeuer (Saskatoon District), Joseph Rybinski (North West District), Nathaniel Cole (South District), Larry Spratt (North East District), Bryan Cottenie (East Distrcit) and Scott Flavel (South Central District). Missing from photo: Lois Standing (Indigenous District) and Wayne Amos (South East District).

Our Board of Directors Did you know that Affinity is 100% owned by our members? And that our Board is accountable to that membership? This dedicated group of directors drive where Affinity is headed and what we need to do to get there. They also keep us grounded in our commitment to putting our members first, in support of Affinity’s values and the credit union system as a whole.

All Board members have a fiduciary responsibility to Affinity and follow the standards set out in the Credit Union Act 1998, the Standards of Sound Business Practice, its regulatory requirements and all applicable legislation. Affinity’s independent Board of Directors is led by Mitchell Anderson, non-executive Board Chair. The day-to-day management is delegated to Affinity’s Chief Executive Officer.

Affinity’s Board of Directors approve policies and ensure Affinity operates with integrity, honesty, fairness, professionalism and the highest ethical standards.

Affinity Credit Union Annual Report 2021

11

Meeting Attendance 2021 Director Meeting Attendance January 1 - December 31, 2021 Board Meeting

Audit & Finance

Wayne Amos

8 of 8

Cindy Anderson

8 of 8

Mitchell Anderson*

8 of 8

14 of 14

Debra Chobotuk

8 of 8

14 of 14

Nathaniel Cole

8 of 8

14 of 14

Bryan Cottenie

8 of 8

4 of 4

Scott Flavel

8 of 8

4 of 4

Kurt Holfeuer

8 of 8

3 of 3

Paul Ledoux

3 of 4

1 of 1

Deirdra Ness

8 of 8

Joe Rybinski

8 of 8

4 of 4

Lois Standing

1 of 2

1 of 1

Larry Spratt

4 of 4

Risk

14 of 14 4 of 4

4 of 4

2 of 3

*

Board Chair: Mitchell Anderson

12

Governance

Human Resources & Compensation

Affinity Credit Union Annual Report 2021

District Council Meetings 4 of 4

4 of 4

4 of 4

4 of 4

5 of 5 5 of 5 4 of 4

4 of 4 4 of 4

4 of 4

4 of 4

4 of 4

5 of 5

14 of 14

5 of 5 4 of 4

3 of 4 3 of 4 4 of 4

Board Committees The Board as a whole is responsible for all work undertaken on its behalf by committees. The Board holds committees accountable for assisting them in fulfilling their corporate governance responsibilities by ensuring appropriate oversight over committee work. This is done through approval of committee Terms of Reference, appointment of committee members and assurance that the required technical skills and competencies are present at individual committee levels.

Based on the self-assessment and reflection of each committee, it was deemed they have discharged their duties as outlined in their Terms of Reference and 2021 work plans.

Board Committee

Board Committee Members

Responsibilities

Audit and Finance

Cindy Anderson Bryan Cottenie Scott Flavel (Chair) Deirdra Ness Larry Spratt

Ensures Affinity adheres to an effective control framework for the protection of members’ assets.

The framework is to provide reasonable assurance that the credit union operates in a manner that adheres to required financial control and reporting standards.

Risk

Nathaniel Cole Scott Flavel Kurt Holfeuer (Chair) Joe Rybinski

Responsible for providing effective oversight of the credit union’s risk management framework, legal and regulatory compliance framework. Serves as the credit union’s Conduct Review Committee which oversees adherence to the principles of ethical conduct and responsible business behavior.

Human Resources & Compensation

Cindy Anderson Mitchell Anderson (Chair) Kurt Holfeuer Joe Rybinski Lois Standing

Oversees the compensation strategy and human resource policy framework. Undertakes effective performance management and succession planning for the Chief Executive Officer.

Governance

Wayne Amos Mitchell Anderson Deb Chobotuk (Chair) Nathaniel Cole Deirdra Ness

Oversees the corporate governance framework including the credit union’s delegate framework.

Affinity Credit Union Annual Report 2021

13

Our District Council Delegates Our delegates work hard in their communities – all while being brand ambassadors! They actively put our values into action and connect Affinity to our members and our members back to us.

These are your Affinity district council delegates as of December 31, 2021.

Saskatoon District

North District

East District

South Central District

Audra Krueger

Cindy Anderson

Bryan Cottenie

Grant Greenshields

Charity Beres

Debbie McGuire

Carla Krochak

Kelvin Schapansky

Christine Epp

Jill Curren

Jackie Grisdale

Mike Heinrich

Debra Chobotuk

Peggy Walker

Jason Harbor

Owen Sebastian

Deirdra Ness

Roy Eichendorf

Joseph Kozakewich

Patricia Isherwood

Erica Poulin

Terry Hinz

Margaret Rudychuk

Richard Goulet

Rosalie Daisley

Scott Flavel

Hilary Gough Jasmin Carlton

North East District

Jo Custead

Cindy Porter

South District

South East District

Gailmarie Anderson

Bryan T. Leier

Cameron Nordin

Jordon Eggerman

Jeanne Eriksen

Dennis Bode

Larry Spratt

Joyce Fraser

Duane Chipley

Lynn Pederson

Nathaniel Cole

Dyon Stadnick

Marilee Sterner

Sherry Wolf

Garry Lafrentz

Stephanie Gerwing

Stephen Schury

Paulette Howard

Virginia Wilkinson

Wayne Amos

Kelley Moore Kurt Holfeuer Mitchell Anderson Victoria Morris Indigenous District Damon Delorme Cowessess First Nation

David D. Cote

North West District

The Key First Nation

Adena Viczko

Lois Standing

Charlene Tebbutt

Wahpeton Dakota Nation

Dannie Wreford

Michael Bob

Diana Herzog

Kahkewistahaw First Nation

Terrance Okemow

Joseph Rybinski

Lucky Man Cree Nation

Stephanie Gosselin

Wayne J. Thomas

Tina Stene

Kinistin Saulteaux Nation

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Affinity Credit Union Annual Report 2021

Director and Delegate Pay 2021 Board Director Per Diems Board Director

Total Per Diems

Dates Served as a Director in 2021

Wayne Amos

$16,150.04

January 1 to December 31, 2021

Cindy Anderson

$15,625.04

January 1 to December 31, 2021

Mitchell Anderson

$38,575.16

January 1 to December 31, 2021

Deb Chobotuk

$23,100.08

January 1 to December 31, 2021

Nathaniel Cole

$16,525.04

January 1 to December 31, 2021

Bryan Cottenie

$16,325.04

January 1 to December 31, 2021

Scott Flavel

$18,075.08

January 1 to December 31, 2021

Kurt Holfeuer

$19,975.08

January 1 to December 31, 2021

Paul Ledoux

$4,531.68

January 1 to March 31, 2021

Deirdra Ness

$18,575.04

January 1 to December 31, 2021

Joseph Rybinski

$14,825.04

January 1 to December 31, 2021

Larry Spratt

$9,400.03

April 1 to December 31, 2021

Lois Standing

$5,175.02

June 1 to December 31, 2021

Total 2021 Director Per Diems

$216,857.37

Director and Delegate Remuneration

2021 Totals

Director Per Diems

$216,857.37

Delegate Per Diems

$80,220.00

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

$38,441.11

Affinity Credit Union Annual Report 2021

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From left to right: From left to right: Nilesh Kavia, Chief Data & Operations Officer; Mike Elchuk, Chief Information Officer; Louis Cho, Chief Experience Officer; Heather Sully, Chief People Officer; Richard Schwan, Chief Banking Officer; Corina Farbacher, Chief Risk Officer; Mark Lane, Chief Executive Officer; and Lise de Moissac, Chief Financial Officer.

Our Executive Leadership Team Our focus is always on what’s best for you – our members. As an Executive Leadership Team, we’re committed to leading by example. Guided by decades of expertise and experience, we’re shaping the future of our credit union.

We live and breathe our co-operative values – not only around the executive table but also in our communities. In our spare time, you’ll find us living our values by chairing committees, participating in community initiatives and helping make the world a better place.

The second year of COVID-19 pandemic reiterated that working together was imperative to handling the ripple effects of the pandemic.

As a member, you can be assured that your

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Affinity Credit Union Annual Report 2021

credit union will be there for you not only during an economic downturn but any time you need us.

We’d like to thank Lise de Moissac (former Chief Financial Officer) for her years of service and wish her all the best in retirement.

At Affinity, we’re committed to excellence and continuous improvement and your feedback helps drive strategy in order to get there! We’re always up for hearing where we’re hitting the mark and where there’s room for improvement.

Executive Pay Affinity’s executive pay packages are designed to entice and retain talented, high-integrity leaders, while maintaining alignment with desired external market positioning. Performance-based metrics found in the Affinity Balanced Scorecard determine a portion of the compensation our Executive Team receives each year.

The information on this page can help provide context to how we compensate our Executive Team and how we arrive at executive pay that’s reasonable and fair.

2021 Executive Leadership Compensation

CEO Executive Team** TOTAL

Salary

Variable Pay*

Benefits

Total

$450,986

$284,878

$9,749

$745,613

$1,719,677

$445,920

$219,256

$2,384,852

$2,170,663

$730,798

$229,005

$3,130,465

Variable pay amounts are accrued as an expense in the fiscal year earned and paid the following year. The above table represents the timing based on when these amounts are actually paid.

*

Includes active and departed members of the Executive Team throughout 2021.

**

All values are rounded to nearest dollar.

10:1

CEO pay1 to median full-time Affinity employee pay1.

19:1

CEO pay1 to lowest full-time Affinity employee pay1.

12:1

CEO pay1 to average Saskatchewan salary2.

Salary plus variable pay

1

October 2021 average SK weekly earnings (annualized): $57,943. Source: Saskatchewan government website.

2

Affinity Credit Union Annual Report 2021

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Working at Affinity

786

636

150

EMPLOYEES

FULL TIME

PART TIME

As an integral part of our Affinity family, our employees are dedicated and passionate for our values and vision to build a better world for everyone, every day. In return, they benefit from programs, career opportunities and an environment that make it a fulfilling, inclusive, challenging and rewarding place to work!

We live our values by volunteering our time out in our communities, supporting initiatives that promote inclusivity and awareness, such as the Pride Parade, Orange Shirt Day and many more! Walking in to work every day should feel like coming home, a safe space where we all can be our true selves.

This is what it means to be an Affinity employee.

Providing our members with a remarkable experience starts with providing our employees with a remarkable experience!

2021

2020

2019

Employees in Urban Locations

62%

59%

58%

Employees in Rural Locations

38%

41%

42%

64.6%

58.1%

74.2%

12%

5.4%

5.3%

5%

1.5%

7.1%

24.2%

29%

25.5%

0

0

0

45.2

43.9

43.9

Female Managers

60.6%

59.4%

59.5%

Male Managers

39.4%

40.6%

40.5%

Average Age of Non-Management Employees

42.5

41.8

41.6

Female Non-Management Employees

85%

85.5%

86.8%

Male Non-Management Employees

15%

14.5%

13.2%

18.7%

20%

19.8%

$386,783.61

$439,392.97

$1,000,622.48

Positions Filled Internally Voluntary Turnover New Hires of Indigenous Ancestry (Self-Declared) New Hires from Diversity Groups Complaints of Discrimination Average Age of Managers

Unionized Employees Educational Support, Tuition Reimbursement, Training and Workshops

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Affinity Credit Union Annual Report 2021

Our Remarkable Employee Experience Employee engagement is essential to Affinity because when an employee has a remarkable experience, they’re more likely to provide you, our members, with a remarkable experience too!

Affinity’s Remarkable Employee Experience Framework, which was launched in early 2021, describes the tools that are designed to motivate and engage current employees, while also attracting new employees to our Affinity family. Our employees are dedicated and passionate about Affinity’s values and vision to build a better world for everyone, every day. In return, they gain access to programs, career opportunities and an environment that make it a fulfilling, inclusive, challenging and rewarding place to work!

We’re known for delivering remarkable employee experiences and attracting the very best talent.

In Late September of 2021, our employees provided us with valuable insight into your employee experience through our biennial Employee Engagement Survey. A total of 89% of employees participated in the survey – which

is a fantastic response rate! The results of the survey provided us with an overall engagement score of 77%.

Using the findings from the survey feedback we received, we’ll continue to invest time focusing on areas that provide a remarkable employee experience, such as: • connecting people to our vision, purpose and long-term strategy; • developing Leadership Excellence programming, ongoing learning and development opportunities that build professional expertise; and • equipping our leaders and employees with the skills they need to navigate change and embrace a think digital-first mindset.

As we look to 2022, we’ll continue to use insights to create tactical, tangible ways to address the gaps highlighted in our survey results to continue to position us as a leader in Canada’s financial services sector.

Affinity Credit Union Annual Report 2021

19

Community Investment

547

$1.59

3.8%

MILLION DONATED

POST-TAX PROFITS

ORGANIZATIONS/INITIATIVES ACROSS SASKATCHEWAN

Thank you to our members for making these community investments possible! It’s because of you that we’re able to invest these profits back into your communities. It’s good for you, it’s good for your community and it’s good for us as a credit union – supporting the community simply makes good sense!

Funding by Program 2021

2020

2019

Program

Amount

#

Amount

#

Amount

#

District Council Community Development Funding

$571,243

156

$346,673

111

$1,280,377

217

Community Spirit Fund – Employee and Delegate Directed

$150,200

751

$150,600

753

$165,000

825

Corporate and Advice Centre Donations and Sponsorships

$784,514

84

$766,999

135

$1,214,127

269

$80,000

50

$75,000

48

$80,000

80

$1,585,957

1,041

$1,339,272

1,047

$2,739,504

1,391

Youth Scholarships and Awards Total

2021 Funding Allocations by District Total Funding 2021

2020

East District

$51,450

$65,720

North District

$86,704

$63,711

North East District

$74,020

$66,883

North West District

$62,632

$52,956

Saskatoon District

$583,311

$491,134

South District

$353,013

$338,169

$74,194

$52,776

South East District

$177,809

$76,124

Indigenous District

$15,000

$15,000

$107,825

$116,800

$1,585,958

$1,339,273

South Central District

Province-Wide Initiatives Total

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Affinity Credit Union Annual Report 2021

Our Commitment to Truth and Reconciliation Our hearts broke after the tragic discovery of thousands of graves at former residential schools across Canada in 2021. Broke – because these children deserved better. Broke – because this isn’t ancient history – residential school survivors still walk amongst us. Broke – because trauma runs deep and through generations.

This tragic discovery reinforced that we all share a responsibility to honour the lives of these children and many others that didn’t make it home by learning, listening and committing to the Truth and Reconciliation Commission’s Calls to Action. Here’s a few examples of how we stood alongside the Indigenous, First Nations, Inuit and Metis Peoples to show our support as we continue down our reconciliation journey.

National Day for Truth and Reconciliation

In honour of residential school survivors and as part of our commitment to truth and reconciliation, we closed all of our advice centres and Campus location on Thursday, September 30 to recognize National Day for Truth and Reconciliation as a day of reflection.

Some of those opportunities included: • Walked in Rock Your Roots – a socially distanced walk honouring residential school survivors and reconciliation.

• Provided employees with the free and confidential service to speak with Lloyd Robertson, a Saskatchewan-based, Indigenous registered psychologist trained specifically in Indigenous issues.

• Provided employees the option to direct their Community Spirit Fund (CSF), as mentioned in the front cover, to fund the Indian Residential School Resolution Health Support program provided by Regina Treaty/Status Indian Services. When employees directed their $200 CSF towards this cause, we matched all donations – totalling $43,000.

• Invited Chantel Buffalo, one of our employees from our 8th Street location, to share her story of the intergenerational effects she and her family experienced due to the residential school system.

• Engaged with Annie Battiste, a reconciliation consultant based in Saskatchewan, as she presented to the leadership group discussing Indigenous history, Treaty awareness and reconciliation.

• Listened to the brother-sister duo of Naheyawin as they presented to the Member Experience Division regarding Treaty land acknowledgements.

• Participated in Orange Shirt Day on June 4 and June 25 to honour the discovery of graves at former residential schools on Tk’emlúps te Secwépemc territory in BC and Cowessess First Nation in SK.

In the weeks leading up to September 30, we provided our employees various opportunities to engage with truth and reconciliation-related activities, where they learned more about Indigenous culture and history, as we further demonstrated our commitment to reconciliation.

As part of living our values, we’re proud to celebrate the distinct cultural practices, languages, spiritual beliefs and significant contributions of Indigenous peoples in our community. While our journey to reconciliation is ongoing, we’re committed to listening and learning from local elders and knowledge keepers, so we may heal our past and empower our future.

Affinity Credit Union Annual Report 2021

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Adapting in a Pandemic In an effort to comply with government suggestions to reduce travel and ensure physical distancing, many of our employees and members saw an increase of video conference calls over in-person visits in 2021 – similar to what we saw in 2020. Our employees, members and communities adapted with grace during this uncertain time and for that, we thank you!

Research of Work-Related Travel

In 2021, we continued to see reduced travel due to the COVID-19 pandemic – a 24% decrease from the previous year! While this decreased travel is largely a result of the pandemic, we continue to look for more ways on how to reduce our carbon footprint.

Distance Driven

2021

2020

308,806 km

407,121 km

Our members are helping Affinity go green!

72,823 Affinity members chose to receive e-statements instead of a paper account statement in 2021. That’s almost a 10% increase from 2020 and a 20% increase from 2019!

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Affinity Credit Union Annual Report 2021

Community Impact Building Community Assets and Facilities Buildings, equipment and infrastructure are cornerstones for our community. The curling rink, library, daycare and playground are all places where we come together as a community.

They provide the setting and the backdrop for our lives and that’s one of the many reasons we think it’s important to support these projects. The following places are where we focused a lot of our efforts on in 2021.

20

playgrounds, parks and trail facilities

37

6

recreation centres, sport complexes, golf courses and rinks

78

14

childcare centres

housing facilities

13

community halls, libraries, museums, fire halls, and educational, seniors’ & cultural centres

healthcare facilities

Each One Teach One (EOTO) Financial Literacy Workshops Although the pandemic reduced the option for in-person workshops in 2021, we still managed to make the most of it and utilize video conference call workshops once everyone started settling into the new normal.

2021

2020

36

35

370

423

Communities Reached

14

19

Certified EOTO Trainers

48

55

Workshops Delivered Persons Attending EOTO Presentations

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We’ve said it before and we’ll say it again – our employees have the biggest hearts.

While the pandemic created volunteering challenges due to social distancing and minimizing contacts, our employees still managed to up their game in 2021 to safely support causes and initiatives that are near and dear to them. In fact, a total of 707.63 hours of paid volunteer time were claimed by our employees, which equals out to 98.28 days!

Check out a few initiatives we proudly supported in 2021!

3 Gardening in the City

Shawn Osier, Advice Centre Manager of Regina and Area, was pleased to present a $5,000 cheque to Aria Ramdeo, Executive Director for Heritage Community Gardens project in Regina. These funds went to help with the community pantry of fresh produce, where community members will be able to come and get fresh vegetables to harvest.

Affinity community in the

1 Challenging employees in the name of charity During the month of June, a few employees from our St. Mary’s Advice Centre challenged the folks at City Centre to a friendly competition to see who could collect the most hygiene products for the Food Bank. They broke up into teams and together, they were able to donate over 700 products to people in need!

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2 Planting trees in Affinity gear

4 Bringing the joy of the unknown to you

We joined our friends from Zak’s Building, Tree Canada and the Town of Hague to help plant more than 180 trees in Hague!

Beautiful weather, great company and helping the environment – we’d say that’s a pretty great way to spend a volunteer day.

Affinity Credit Union Annual Report 2021

The Affinity Learning Centre reopened to the public in 2021 with a few exciting additions!

The redesigned layout and new and amazing exhibits will be home to several new species, such as the colourful poison dart frogs, axolotl and a variety of cichlids from Lake Malawi, Africa.

5 Filling plates with food and care Our Saskatoon and area employees raced – and we do mean raced (this volunteer option was claimed within minutes by our employees) to volunteer for The Friendship Inn’s annual Fill the Plate campaign. Our employees were honoured to host on December 22 because they know the important role The Friendship Inn plays in our community. Did you know The Friendship Inn serves approximately 1,000 meals every day? It relied on volunteers to help make that happen and our employees delivered.

7 Competing for a great cause

9 Putting an end to period poverty

Our Estevan Advice Centre was one of the six local organizations that participated in the Green for Life Environmental’s annual food drive challenge. We built a living room set out of non-perishable food items, which landed us in 2nd place!

Angela Denys, Estevan Advice Centre Team Lead, says this is just another form of living the credit union values.

“Times are hard for some families and being able to offer a small support is incredibly rewarding,” said Denys.

This helped to fill the shelves of the Estevan Salvation Army’s Food Bank during a time it was greatly needed.

6 Coming together to create a big impact The team at our Borden Advice Centre pooled their 2020 charity day funds and donated the money to the Borden and District Volunteer Fire Department.

The crew in Borden didn’t stop there — they also gifted the Borden school students with a pizza lunch and treated the teachers to coffee and donuts before the semester ended.

8 Making a list & checking it twice with BBBS We joined forces with Big Brothers and Big Sisters of Saskatoon and Area Inc. (BBBS) for its Ignite a Little Sparkle campaign by matching donations all week in December.

We encouraged members of the community to consider giving to BBBS during the holiday season as they reflect on what they’re grateful for.

Tampon Tuesday is an initiative that raises awareness around period poverty and shows us all how we can help. In 2021, our employees donated $3,235, which went towards purchasing menstrual care products for those who need it in our community, to Moon Time Sisters, United Way of Saskatoon & Area and United Way Regina.

Even with our donation drive in a different format in 2021, our employees more than doubled their overall 2020 donation total.

No matter how great the challenge, we’re committed to building a better world and supporting our communities every step of the way!

Affinity Credit Union Annual Report 2021

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Management Discussion and Analysis Economic Overview

27

Financial Highlights

28

Operating Summary

30

Financial Position Summary

33

Capital and Liquidity Management

36

Outlook

38

Risk Management

39

Economic Overview Following a year of lockdowns in 2020 and the largest economic contraction since post WWII, 2021 was anticipated to be a year of rebound and recovery, with forecasted global growth of 6%. The strength of this revival, however, faced challenges posed by unequal access to effective COVID-19 vaccines, creating an uneven recovery between economies, such as China and India and their G7 counterparts. In North America, optimism was fuelled by the priority the Biden administration placed on fiscal stimulus and the Canadian government’s relief programs. Easing lockdowns in the early part of the year contributed to a labour market recovery and supported growth in consumer spending.

Prospects in many sectors of the economy looked bright, but as the year wound down, the evolution of the pandemic gave rise to new variants that weakened the momentum of the economic recovery in all parts of the world.

The pandemic and associated international restrictions introduced a rise in energy, fertilizer and fuel prices as global supply chains were squeezed. Supply constraints and challenging weather in North America served to generate higher food prices for consumers. Durable goods prices were also impacted, with manufacturers sometimes waiting months to receive inputs to produce final products.

Households with fixed or limited disposable income were compelled to re-balance available spending. For others, the price changes had limited impact. Due to the lockdowns and other restrictions, spending in many households contracted, leading to a sharp increase in collective savings. As these savings climbed, spending on durable goods started to improve, specifically in the categories of entertainment and recreation. Increased demand coupled with supply chain issues fuelled additional price hikes, all of which began to curtail consumption as the year progressed.

In Canada, the Consumer Price Index rose to finish the year at nearly 5%. At this level, inflation was among the highest we’ve seen since the

early 1990’s. It was primarily driven by rising housing costs, supply chain disruptions, unfavorable weather conditions and rising energy prices. Unfortunately, wage growth hasn’t kept pace and resulted in reduced consumer purchasing power, even here in Saskatchewan, where the rate of inflation was low relative to the rest of the country.

Despite reduced purchasing power, many Saskatchewan households were in better shape financially than they were pre-pandemic. Fewer spending opportunities enabled households to strengthen their financial resilience by increasing savings and paying down debt. For businesses, government support programs helped minimize closures and job losses, at least in the short term.

As such, Saskatchewan continued as a national leader in job growth and export volumes.

One sector that did particularly well in 2021 was housing. New homebuyers entering the market, combined with more employees working from home, strong household balance sheets and historically low mortgage rates created an ideal environment for growth in the housing market.

In Saskatchewan, home sales saw strong gains which created a sellers’ market and drove prices higher.

Two sectors that didn’t fare as well were hospitality and agriculture. Demand for hospitality services continued to struggle amid restrictions and historically low levels of business and personal travel. Agriculture, on the other hand, was impacted by severe weather and supply chain disruptions. Locally, the prolonged lack of precipitation and high temperatures significantly reduced crop output. The drought also affected livestock producers by limiting the supply of feed, as well as water quality and quantity. These conditions pushed forward the timeline for bringing livestock to market.

A topic that has grown more popular during the pandemic has been the environmental, social and governance (ESG) practices of companies.

The severe drought on the prairies during the summer and flooding on the west coast in the fall made climate change a particularly popular

Affinity Credit Union Annual Report 2021

27

focus. Consumers were demanding that the industry develop more sustainable business practices and companies were taking note.

The announcement in late 2021 that one of the province’s largest refineries had plans to construct a renewable diesel plant with the objective to achieve net zero emissions by 2050 was a strong example. Of course, this trend aligned perfectly to Affinity’s values and has led to the prioritization of a variety of ESG related initiatives, many of which are detailed within the annual report under the Global Reporting Initiative (GRI).

Although 2021 presented economic challenges, Affinity achieved some notable outcomes.

We were proud to continue offering marketcompetitive pricing while also improving our margin and equity position. A large portion of members improved their financial wellness with higher savings balances, leading to deposit growth that surpassed target two years in a row and provided the liquidity to fund loan growth targets. Further, the financial health of the membership base led to lower-than-expected loan losses. Overall, Affinity generated strong financial results in 2021, which ultimately benefit our members by allowing us to continually enhance the value we deliver to them.

Financial Highlights A structured approach is adopted by Affinity in planning, budgeting and executing on the strategic objectives prioritized for the fiscal year.

The year 2021 was the last of the Board’s three-year strategic plan that commenced in 2019, ambitiously designed to leverage our member-owned financial co-operative values to position Affinity as a competitive and sustainable differentiator within the financial services sector. The strategies outlined in the plan informed the annual plan objectives and were supported by a refreshed capital plan.

The capital plan emphasized the need for strong financial performance to maintain our

28

Affinity Credit Union Annual Report 2021

capital stability and build resilience to weather the uncertainty in economic recovery arising from the COVID-19 pandemic. The financial performance targets outlined within the capital plan formed the basis for the 2021 annual plan in the areas of growth, return on equity (ROE) and efficiency.

The 2021 annual plan extended across the Credit Union’s operational reach in financial, wealth and insurance and focused on priorities that ranged from member service excellence, to innovative digital product solutions, and disciplined balance sheet growth targets within the Board’s established Risk Appetite Framework. Measurements for success were defined within specific, quantifiable metrics that were communicated across the organization to establish clear lines of sight to strategic execution.

Buoyed by the strength of a talented Advisory team, complemented with market competitive rates and technological improvements, asset growth for 2021 was set at a target of 4.01% to achieve a total assets goal of $6.77 billion, fully cognizant that this could be a stretch goal given an economy that was predicted to underperform as the world slowly emerged from the pandemic.

This level of growth however, would bolster Affinity’s ability to maintain market share without weakening our capital position.

Assets ($ billions) $7.2

$6.80 $6.7 $6.51

$6.2 $5.96

$5.7

2019

2020

2021

Affinity finished the year slightly ahead of budget, reporting assets of $6.8 billion.

Recognition for this level of performance effort, which yielded year-over-year asset growth of $293 million, came in the form of Affinity emerging as the largest credit union in Saskatchewan based on asset size, as well as earning the distinction of being the 10th largest credit union in Canada. In addition, Affinity was named on the Forbes list of ‘World’s Best Banks’ for the second year in a row.

Affinity’s return on equity goal for 2021 was established at 6.02%. This was a 1% reduction from the prior year target and was a cautious acknowledgement that the operating environment could encounter lower than anticipated after tax net income with increased credit provisioning. The budget was mindful that in a recessed economy, the ability to generate meaningful levels of growth may be hindered, which would place gains in net interest revenues at risk.

Return on Member Equity 12%

10.43% 9%

7.42%

A notable contribution to the healthy net income was a significant gain in net interest margin year over year, driven largely by our members’ opting to accumulate savings in lower yielding demand accounts rather than lock deposits into longer term deposits. In addition, the 2021 budget for credit loss provision was $13.4 million in anticipation of pandemic triggered defaults. Affinity’s actual experience was contrary, yielding a positive variance to budget of $17.9 million with the probability of default for most loans decreasing as the economy recovered.

Affinity’s operating cost structure was critical in achieving an efficiency ratio that was lower than budget within the pandemic low-rate environment. The target efficiency ratio for 2021 was set at 66.84%. Since efficiency is a measure of the spend required to earn a dollar of revenue, a higher emphasis on cost control was required to compensate for any interest margin shortfalls and maintain the ratio within the targeted range in the capital plan.

7.37%

Efficiency Ratio

6%

3%

earnings provided the capital stability to support the longer term growth strategy outlined in the capital plan. Reported after tax net income for the Credit Union was comprised of the consolidated results from its wholly owned subsidiary operations including wealth and insurance.

73%

68.47% 2019

2020

2021

Following two years of declines in return on equity results, Affinity rebounded with a strong ROE at 10.43% by the end of 2021.

This outcome exceeded prior year levels significantly, and the strength of the ROE metric was correlated to the efficiency of operations.

The year 2021 saw consolidated net income after tax well exceeding budget by 78%, as well as exceeding 2020 results by 55%. This level of

68%

64.30% 63%

59.99% 58%

2019

2020

2021

Affinity Credit Union Annual Report 2021

29

Through diligent expense oversight combined with favorable member behavior in their desire to place larger volumes of savings in highly liquid, low interest demand products, as well as some beneficial gains within our venture capital portfolio investments, Affinity finished 2021 with an exceptional efficiency ratio of 59.99%.

This outcome surpassed budget and yielded a significant year over year efficiency gain, repositioning the Credit Union to be within the capital plan targets by year end. The momentum of this positive trendline should anticipate continued optimism for out-performance in operational efficiency.

For 2021, the target capital level was established at 15.35%. At Affinity, total capital includes an economic capital component, the purpose of which is primarily to mitigate our unique risks, particularly any elevated credit risk inherent in our current environment due to a prolonged period of economic uncertainty.

our capacity to withstand economic downturns or extraordinary events, and empowered the Credit Union to pursue new opportunities.

Operating Summary The key components of Affinity’s comprehensive income included net interest margin, provision for credit losses, other income, operating expenses and provision for income taxes. The 2021 target was $35.9 million.

Comprehensive Income ($ millions) $64.1 $63

$53

Total Capital/Risk-Weighted Assets $43

16%

$41.4 $38.7

15.47% 15.12%

$33

15%

14%

2021

Net Interest Margin 2019

2020

2021

In 2021, despite the skepticism of a lengthy economic recovery, Affinity continued its upward year over year trajectory in enhancing its capital position, finishing the year achieving 15.47%. This positioned the Credit Union 12 basis points ahead of budget and resulted in a 35 basis points gain over 2020.

With well managed growth and strong earnings, Affinity continued to build the capital required to support our strategic objectives, strengthened 30

2020

Affinity achieved a record result in 2021, the best in recent history for the Credit Union, closing the year at $64.1 million. Financial performance exceeded target by $28.1 million and was a $22.7 million improvement over 2020.

14.25%

13%

2019

Affinity Credit Union Annual Report 2021

Net interest margin represents the revenue Affinity earns through financial intermediation.

Loan and deposit growth combined with the level of interest rates directly influence improvements to the net interest margin. The 2021 budget contemplated industry and market sentiments at the time that interest rates would remain unchanged for the foreseeable future.

With no significant increase to interest rate in the budget, interest margin growth was highly dependent on the Credit Union’s ability to retain and attract loans and deposits with competitive pricing that returned the best value to members.

A goal of 2.18% was set for 2021, which was a 14 basis point decrease from the 2020 target and a six basis point decrease from 2020 actual results.

Net Interest Margin

Provision for Credit Losses

2021

Growth in interest income posed to be a greater challenge for Affinity as supply chain disruptions combined with businesses starting or re-opening amidst COVID-19 restrictions reduced the demand for lending activity in 2021. While the Credit Union did achieve its target loan growth for the year, much of the loan growth occurred late in the year and was written at lower-than-expected interest rates.

In addition, any excess liquidity investments resulting from the continued deposit growth were also invested at lower interest rates.

Collectively, the Credit Union ended 2021 with interest income $2.2 million below budget and $11.5 million lower than 2020.

1.3%

0.3%

0.45%

0.8%

0.54%

Members were cautiously optimistic as the economy began to recover in 2021. While spending habits remained conservative, amid uncertainty with markets, employment and financial support programs, members continued to deposit relatively large volumes of available savings in short term, low yielding demand products. Access to these low-cost member deposits to finance lending activity put less reliance on the more expensive wholesale deposit channel. Overall, Affinity completed the year with interest expense yielding a positive variance to budget of $8.2 million and was $22.4 million improved over 2020.

Loan Delinquency

0.79%

2020

0.52%

2019

0.81%

2.26% 2.24%

0.38%

2.3%

0.54%

2.37%

0.41%

2.4%

The provision for credit losses is an estimate of the Credit Union’s potential losses, primarily due to credit risk. The year 2021 was expected to be a year of economic recovery but with the uncertainty of persistent COVID-19 restrictions and the threat of emerging variants that could compromise employment, consumers and businesses were challenged to find adequate cash flow to service their existing and any new debt. Affinity set a target for provision of $13.4 million, which was approximately $0.5 million lower than 2020 actual results.

0.82%

2.5%

2.2%

By the end of 2021, Affinity achieved a net interest margin of 2.26% which was 8 basis points higher than budget and 2 basis points higher than 2020. Year over year, the net interest margin grew by $10.9 million.

2019

2020

2021

Consumer

Commercial

Agricultural

Affinity’s actual experience in 2021 yielded a $17.2 million improvement over 2020 in stage 1 and stage 2 loans combined. The largest triggers for this significant gain included a drop in loss rates, which resulted in reduced write offs, a decrease in stage 2 principal balances, as well as favorable impacts through two updates to the forward-looking factors applied to the loan loss model. Stage 3 saw an improvement of slightly more than $0.8 million over 2020 actual outcomes, primarily impacted by positive resolution in 2021 for new credit risk exposures that emerged toward the end of 2020 and no Affinity Credit Union Annual Report 2021

31

new material loss provisioning in 2021. For definitions related to loan staging, refer to Note 4 accompanying the consolidated financial statements.

Credit quality declined slightly year over year with overall delinquency greater than 90 days finishing the year at 0.53% of total loans, which was three basis points higher than 2020. The commercial portfolio saw the largest change between years with delinquency rising from 0.41% in 2020 to 0.81% in 2021, a 40 basis point increase. Both the consumer and agricultural portfolios fared better in 2021 with an improvement in the consumer portfolio of 16 basis points, while the agricultural portfolio saw a delinquency decline of nine basis points between years.

In aggregate, while the Credit Union included general risks associated with the uncertain economic environment arising from the ongoing presence of COVID-19 variants in its forward-looking indicators of loan losses, it ended the year with a total recovery in loss provisioning of $4.5 million, which was a $17.9 million betterment over budget and was an $18.4 million improvement over 2020.

Other Income Other income includes service fee revenues, returns from wealth advisory services, regular dividends, as well as diversification revenues from insurance operations and gains from the Credit Union’s venture capital investments. The target set for 2021 was $43.7 million, which was $7 million lower than the 2020 actual results.

Other Income ($ millions) $59

$56.6 $55

$51

$50.7

$48.3 $47

2019

2020

2021

Affinity closed 2021 with a strong $56.6 million in other income, which was a $12.9 million betterment over budget and was a $5.9 million improvement over 2020.

Fee income, including wealth advisory services exceeded 2020 levels by $3.3 million. Dividend income decreased by $1.8 million year over year primarily due to the discontinuation of the SaskCentral dividend. The expected negative mark to market adjustments were offset in part by gains in foreign exchange revenue in 2021, which contributed to a $3.9 million decrease in these revenues from 2020.

From a diversification perspective, Affinity experienced a substantial recovery in the valuation of venture capital investments, which gave rise to an $8 million gain on financial assets over 2020. Revenues from insurance operations ended 2021 at $10.9 million, which was a slight decline of $0.3 million from the prior year.

Operating Expenses Affinity’s operating expenses include the broad categories encompassed by personnel, general business, occupancy, organizational and security. Given the uncertainty in the pace of economic recovery and the level of interest rates, which could negatively impact the financial margin and loan loss provisions, a higher emphasis was placed on cost control, with increased effort made to reduce discretionary expenditures. For 2021, the target

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Affinity Credit Union Annual Report 2021

for aggregate operating expenses was set at $125.8 million, which was a $3.5 million increase over 2020 actual spending.

Operating Expenses ($ millions) $131

that contributed to the 2021 budget gain included savings in member loyalty points, communication lines, software costs and marketing. Several negative budget variances also arose that offset the gains, including higher than expected loan collection costs and fraud losses.

Provision for Income Tax

$127.6 $127 $124.2 $123 $122.3

$119

2019

2020

2021

Operating expenses ended the year at $124.2 million, which was $1.6 million under budget but was $1.9 million higher than 2020 actual results. The Credit Union continued to optimize its operating cost structure through process and technological innovations in 2021, with the goal of returning savings derived back to our members either in the form of improved services or better rates and fees.

Personnel expenses were $0.8 million under budget and $2.7 million higher than prior year. Larger budget variances were realized in salaries and benefits, training and loan interest rebates.

Occupancy expenses were $0.2 million under budget, primarily due to lower costs related to rent and utilities. Similarly, organizational costs were $0.2 million under budget due largely to pandemic driven changes in community spend and officials meeting and training formats, which moved in large part from in person to a virtual setting, resulting in overall cost reductions.

Member security costs tracked very closely with budget in 2021.

General business expenses finished the year $0.4 million under budget and $1.1 million lower than 2020. The larger positive variances

Provision for income tax is the estimated amount of corporate income taxes based on the earnings from each subsidiary and then reported on a consolidated basis by Affinity.

This provision includes both a current, as well as a deferred portion. At the end of 2021, the provision for income tax was $23.3 million, which was $10.2 million over budget and was $10.7 million higher than 2020. The significant increase in income tax provision was directly related to the higher net income achieved in 2021.

Financial Position Summary Financial Investments The Credit Union’s financial investments were primarily comprised of a liquidity reserve, term deposits, co-operative shares, corporate and government debt, a venture capital portfolio, as well as accrued interest earned on these investments. The 2021 target level established for investments was $1.36 billion, which anticipated growth of $16.8 million from the end of 2020.

Affinity concluded the year reporting financial investments at $1.39 billion, which was approximately $31 million higher than budget and reflected a growth of 3.57% or $48 million over 2020. In 2021, to maximize margin while retaining adequate operating liquidity, the Credit Union shifted investments from low interest overnight deposits to higher yielding government and higher quality corporate bonds. In addition, an incremental $7.7 million was invested in our venture capital portfolio.

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Collectively, this strategic change resulted in an overall increase in investment income that was 15 basis points or $3.1 million higher than budget.

Loans Loans again formed the largest component of Affinity’s assets throughout 2021. To best leverage our capital and mitigate risk, the Credit Union adopted a target loan mix for consumer (50-70%), agriculture (10-20%) and commercial portfolios (30-40%). The 2021 target for overall loan growth was established at 4.76%, including a further breakdown of 3.95% for consumer, 7.79% for agriculture and 5.49% for commercial.

Loan Growth 9%

6%

6.17% 5.19%

0.65% 2019

2020

2021

The loan mix achieved by the end of 2021 was well within expectations with the total consumer portfolio at 53%, agriculture 16% In Thousands of Dollars

Residential Mortgages

34

Excluding accrued interest, consumer loans and mortgages grew by 1.85%, but fell short of budget by $65.6 million. Agricultural loans and mortgages saw growth of 7.57%, which was slightly below budget by $8.9 million.

Commercial loans and mortgages experienced strong growth at 9.91%, which exceeded budget by $65.9 million. In 2021, to supplement organic loan growth, Affinity actively participated in the purchase of commercial and residential mortgages from third parties, resulting in net growth in the purchased loan portfolio of 12.39%, which was $32.3 million over budget.

Residential mortgages, including Home Equity Lines of Credit (HELOC) comprised a significant amount of our credit portfolio in 2021. At December 31, 2021, Affinity’s residential mortgage gross carrying value was $2.3 billion (2020 - $2.2 billion). The following table provides a breakdown between insured (including those by both Canada Mortgage and Housing Corporation (CMHC) and Sagen) and uninsured mortgages:

3%

0%

and commercial 31%. Affinity completed 2021 with overall loan growth of 5.19%, which was 43 basis points or $1.4 million higher than budget and a significant improvement over the growth achieved in 2020. Loans made up 77.23% of the Credit Union’s asset base and represented an increase of 0.51% from the 2020 result of 76.72%. Typically, the higher the loan percentage, the larger the profit contribution as more assets are deployed in higher yielding loans.

2021

2020

Insured

Uninsured

Insured

Uninsured

$724,664

$1,555,156

$728,938

$1,466,849

31.79%

68.21%

33.2%

66.8%

Affinity Credit Union Annual Report 2021

The Credit Union has established policies and procedures for maximum amortization periods for residential mortgage loans, specific to the loan product.

At December 31, 2021, the Credit Union’s residential mortgage portfolio original amortizations are outlined in the following tables. Portfolio percentages are illustrated for both the outstanding mortgage balance and the number of mortgage loans.

2021 Original Amortization Period

By Outstanding Balance By # of Mtg. Loans

Under 20 yrs

20 - 24 yrs

25 - 29 yrs

30 - 34 yrs

35 yrs+

Revolving

8.6%

7.7%

47.4%

24.3%

3.6%

8.3%

13.6%

7.6%

33.3%

14.9%

2.8%

27.8%

2020 Original Amortization Period

By Outstanding Balance By # of Mtg. Loans

Under 20 yrs

20 - 24 yrs

25 - 29 yrs

30 - 34 yrs

35 yrs+

Revolving

7.7%

7.8%

45.4%

24.7%

4.5%

9.8%

13.4%

7.8%

31.7%

14.8%

3.3%

29.0%

Deposits Deposits formed the largest component of Affinity’s liabilities and served as the primary source for financing asset growth. After an exceptional year in 2020 yielding more than 24% growth in demand deposits, 2021 was anticipated to see a decline in both demand, as well as term deposits. The 2021 growth target set for deposits was 3.83%, which was considerably lower than the 2020 actual realized growth. By category, the target established for demand deposits was 0.54% and 4.67% for term deposits. The introduction of a new market linked GIC product in late 2020 was expected to support deposit growth in all term segments in 2021.

Deposit Growth 11% 9.30% 8%

5%

4.94% 3.97%

3%

2019

2020

2021

Affinity ended the year with a relatively balanced deposit mix between demand and term products. Overall, the Credit Union achieved deposit growth of 3.97%, which was 14 basis points higher than budget but was a growth decline of $266.5 million from 2020.

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35

Excluding accrued interest, chequing and savings deposits experienced solid growth in 2021, ending the year with growth of 11.36%, which was $251.8 million higher than budget.

Terms and registered deposits achieved growth of 1.63%, which was $30.2 million under budget. Members remained cautious in their appetite to lock in savings in this prolonged low-rate environment and instead, continued to park their funds conservatively in highly liquid demand products.

Given another year of successful growth in organic demand deposits, financing through nominee sourced deposits was scaled downward in 2021 by 38.35% or $126.6 million.

Capital and Liquidity Management Capital Monitoring and Management As a regulated financial institution, Affinity is required to maintain an adequate level of capital reserves to mitigate risk. A strong capital position protects the Credit Union against the impact of unexpected losses and can be leveraged to support ongoing growth in our traditional business lines or through diversification opportunities. With Affinity’s main source of capital being derived from retained earnings, building capital is dependent upon generating strong earnings.

On an annual basis a capital plan is developed to ensure Affinity generates sufficient capital to meet our strategic objectives, provide the Credit Union with the ability to withstand economic downturns or extraordinary events, while still maintaining the minimum regulatory capital requirements. The 2021 plan considered various growth scenarios and the impact on key financial performance indicators for return on equity and operating efficiency to determine an optimal level of growth. The plan also evaluated Affinity’s internal Economic Capital requirement to ensure capital levels were appropriate for the Credit Union’s unique risk profile. Our capital

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Affinity Credit Union Annual Report 2021

position was monitored on a regular basis by forecasting changes in our business model against capital adequacy to support ongoing business decisions. This included a regular assessment of existing and emerging risks to ensure the adequacy of both the internal capital requirements and the minimum regulatory requirements.

Our regulator, Credit Union Deposit Guarantee Corporation (The Corporation) measured capital adequacy as total capital as a percentage of risk weighted assets. The Corporation’s minimum requirement is 11.5%, which aligns with our P-SIFI (Provincially Systemically Important Financial Institution) designation. Affinity’s capital adequacy policy requires an additional 1% buffer over the greater of (i) the regulatory minimum or (ii) Affinity’s Economic Capital requirement. For all measurement dates, Affinity’s Economic Capital requirement was lower than the regulatory minimum of 11.5%, meaning that inclusive of the buffer, Affinity’s minimum capital requirement in 2021 was 12.5%.

At the end of 2021, Affinity’s capital to risk weighted assets was 15.47%. This represented total eligible capital of $650.8 million, an increase of $57.5 million during the year and a capital surplus of $167 million compared to minimum regulatory requirements.

Internal Capital Adequacy Assessment Process (ICAAP) Affinity’s Internal Capital Adequacy Assessment Process (ICAAP) quantifies the Credit Union’s Economic Capital requirement. ICAAP is a key component to ensure capital levels are commensurate with the Credit Union’s risk profile. A stress test is then applied to each identified risk using a plausible yet severe stress scenario. The combined base capital together with the additional capital allocation for the stress scenario forms the Credit Union’s total Economic Capital requirement. All key risks are monitored using a risk register which is reviewed and refreshed on a quarterly basis.

Liquidity Management Adequate liquidity is critical for the overall safety and soundness of the Credit Union. Affinity’s liquidity management framework aligns to the liquidity risk management principles issued by The Corporation. These principles complement the regulatory liquidity adequacy standards and cover all facets of liquidity management ranging from the initial setting of the Board’s risk appetite to the daily liquidity management function, including appropriate debt facilities and interaction with third-party liquidity providers. Finally, the principles addresses the identification, management and resolution of a liquidity crisis event.

In 2021, liquidity management included continual monitoring of liquidity sources across multiple time periods to ensure that Affinity could satisfy cash demands. The Board established policy limits for minimum operating liquidity surpluses over a one-year timeline ensures sufficient liquidity is available to satisfy all expected cash outflows, as well as an adequate buffer to withstand the stress of an unusual or unexpected event. Management also established more stringent operating targets to trigger corrective action long before any policy shortfalls would occur. During 2021, we consistently exceeded the minimum policy limits for all time intervals within the 12-month period.

From a regulatory perspective Affinity must maintain a portfolio of statutory liquidity investments with Credit Union Central of Saskatchewan (SaskCentral) equal to 10% of the Credit Union’s deposits and borrowings to support the provincial credit union system’s liquidity program. CUDGC also requires all credit unions to maintain a minimum 100% liquidity coverage ratio (LCR). The LCR is a ratio between the Credit Union’s high-quality liquid assets and the cash outflows associated with the expected deposit run-off from a prescribed 30-day stress scenario. Affinity’s Board established a higher policy minimum of 120% for the LCR. Throughout 2021 we exceeded the higher LCR policy threshold and the 10% statutory liquidity requirement.

The deposit growth that began in 2020 with the start of the pandemic continued throughout 2021 resulting in excess liquidity levels that surpassed the credit union’s lending needs.

Our investment strategies have been heavily influenced by the uncertainty surrounding the timing and velocity that our members may deploy the excess savings accumulated over the last two years. With this heightened uncertainty, excess liquidity was invested primarily in short-term deposits or marketable securities that could be easily liquidated as needed. This conservative approach yielded a positive impact on the policy measures noted above.

Affinity’s ability to borrow funds is a key component of the Credit Union’s overall liquidity management program and Affinity currently has access to $160 million in committed credit facilities. The existing credit facilities with SaskCentral were restructured in 2021 to increase the total committed facilities to $130 million or approximately 2% of the Credit Union’s assets. A new $100 million facility with another provider was approved in 2021 and is expected to be available early next year.

Throughout 2021 these stand-by facilities were largely unused, but this borrowing capacity can provide considerable funding support for the Credit Union during a stressed liquidity event.

Following the first mortgage-backed security (MBS) issuance in late 2020, Affinity issued two additional MBS pools during the year, bringing the total MBS outstanding to $23 million. Affinity will continue this strategy to build contingency liquidity reserves.

We’ve also continued to maintain a number of relationships with nominee deposit brokers, which connected Affinity to depositors outside of Saskatchewan thus diversifying our geographic concentration risk.

The Credit Union also maintained a contingency plan (CFP) that clearly set out strategies for addressing liquidity shortfalls in emergency situations. The CFP outlined the roles, responsibilities, procedures and action plans required to respond to a severe liquidity event. It incorporates various early warning Affinity Credit Union Annual Report 2021

37

indicators and trigger events that would initiate the CFP or Affinity’s Recovery Plan, which was developed in 2020 and further refined in 2021 following assessment criteria outlined in the P-SIFI directive. The CFP and Recovery Plan are reviewed and tested annually.

Overall Affinity’s liquidity remained healthy, and we were well positioned to support the rise in economic activity expected as the effect of the pandemic tapered off.

Outlook In 2020, Saskatchewan’s GDP contracted about the same extent as Canada’s did on the whole, yet we didn’t see the same extent of rebound provincially in 2021 as we saw nationally.

However, growth is expected to be stronger in 2022 and the momentum will continue into 2023.

In Saskatchewan, the expected rebound is based on developments in a few key industries.

For one, unless we encounter severe weather again in 2022, we expect to see a major rebound in agriculture, supported by strong crop prices. The energy sector will also benefit from strong prices, and this will incentivize expansion and production. And a similar story is true for potash. Favourable fertilizer prices, elevated crop prices and increasing global food demand are boosting both production and investment. Finally, the housing sector is expected to remain strong but could be constrained by supply. As mentioned, housing did quite well during the pandemic as households built up unprecedented amounts of savings. Looking forward, recovering labour markets, combined with an increase in young millennials who are at home buying age should see housing starts remaining elevated over the near-term. Overall, residential investment should provide a real boost to economic activity.

On the employment front, Saskatchewan is in a strong position relative to other provinces. We should see employment return to pre-pandemic levels in 2022, and job growth continue into

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Affinity Credit Union Annual Report 2021

2023. Many of the gains we’ll see in employment will come from the service sectors, which was particularly hard hit by the pandemic.

Employment growth will also be seen in the primary sectors as investment picks up.

Stronger employment and healthy household balance sheets will drive a strong return in consumer spending. As restrictions are removed, it’s expected that consumers will be deploying accumulated savings to satisfy pent-up demand. By 2023, consumer spending is likely to return to a more normal level.

The key risk factor for 2022 is our success in containing the spread of the Omicron variant and any other emerging variants of COVID-19.

Trade recovery is likely the single most important factor in accelerating a global economic rebound. Sustained foreign demand for exports and assured access to imports through a reliable cross border flow of essential goods and services will foster a robust economic recovery.

A second risk factor is the direction of inflation.

Pressure on this front could pose challenges to a rapid economic recovery. For one, inflation yields a higher cost of living for households and secondly, sustained inflation will lead the Bank of Canada to hike interest rates and increase the cost of borrowing. It’s anticipated that in order to keep inflation in check, the Bank of Canada will begin raising interest rates in March of 2022 with subsequent increases over the remainder of the year.

Affinity has taken the evolving business environment into consideration in developing plans for 2022 and beyond. We are confident that our continued focus on the member and their experience in banking with Affinity will continue to produce strong business results.

We’ll maintain a specific focus on making member experiences even more seamless and personalized, to delivering high-quality financial advice that supports the financial wellness of members and to leveraging our key differentiators, like our local presence and co-operative business model. Of course, we’ll also maintain a strong focus on preserving

a solid financial foundation to ensure the long-term sustainability of the business, which includes maintaining excellent governance and risk management practices.

Risk Management Overview Affinity exists to provide value to its members and stakeholders. We do this by taking on strategic risk to create, preserve and realize value.

When taking on strategic risk, we’re inherently exposed to other material risks which are consistent with our industry. Our Boardapproved Risk Appetite Framework contains risk appetite metrics for all material risk categories.

Affinity’s Risk Governance Framework provides overarching guidance to our risk program by outlining our risk philosophy, how we categorize the types of risk we are exposed to and our risk management governance. In addition, it provides the foundation for the Board’s oversight to management’s risk-based decision making.

The diagram below provides an overview of Affinity’s approach to risk governance through an integrated risk management approach.

Members Require Strength, Stability and Safeguarded Assets

Board Desired Key Performance Indicators

Legal and Regulatory Compliance Requirements

Risk Appetite

External Rating

Credit Risk

Market Risk

Liquidity Risk

Operational Risk

Strategic Risk

Legal and Regulatory Risk Reputational Risk Integrated Enterprise Risk Management

Affinity Credit Union Annual Report 2021

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Risk Governance Our Board-approved Risk Governance Framework provides an integrated approach to enterprise risk management that encompasses all elements of risk governance.

Affinity utilizes the lines of defence model to clarify segregation of risk management accountabilities. Under this model, ownership for risk resides at all levels of Affinity. The model provides a structure to organize Affinity’s risk management roles and responsibilities; each line of defense is clearly defined in terms of business lines, roles and accountabilities, with functional independence.

The Chief Risk Officer (CRO) and Risk Management Function (RMF) operate within a Board-approved mandate. The CRO reports

functionally to the Board of Directors, through the Risk Committee, and directly to the Chief Executive Officer. The RMF operating in the second line of defence is an independent and enterprise-wide function that is accountable for oversight and effective challenge of all significant material risks faced by the Credit Union.

Risk Management Committee Structure Our integrated risk management program supports the Board in understanding our key risks and the activities to manage them.

The Board delegates to the Risk Committee its responsibility to oversee risk management and understanding of the types of risk Affinity is exposed to. The diagram below outlines Affinity’s risk management committee structure.

Board of Directors

Risk Committee

Audit & Finance Committee

Governance Committee

Operational Risk Committee (ORCo)

Credit Risk Committee (CRCo)

HR & Compensation Committee

Strategic Risk Committee (SRCo)

Asset Liability Committee (ALCo)

Management Committees: The Strategic Risk Committee (SRCo) includes all members of executive management and sets the ‘tone from the top’. It provides oversight to the Asset Liability Committee, the Credit Risk Committee and the Operational Risk Committee.

SRCo is responsible for awareness of key risks that have the potential to impact successful execution of strategies and annual operating plans as approved by the Board of Directors.

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Affinity Credit Union Annual Report 2021

In addition, SRCo monitors internal and external environments to identify and assess existing and emerging risks and the resulting business implications. Subsequently, it directs action to ensure risks are maintained within the Credit Union’s risk appetite.

The Asset Liability Committee (ALCo) provides forward-looking balance sheet management and execution within the parameters of Boardapproved risk appetite and policy. It reviews economic trends, interest rate forecasts,

investment portfolio risk and performance, liquidity, foreign exchange exposures and capital adequacy. The purpose of the committee is to develop and recommend balance sheet risk management strategies to SRCo and approve and monitor balance sheet risk management tactics.

The Credit Risk Committee (CRCo) assesses historical and emerging credit risk by reviewing internal reporting and environmental scanning.

The committee assesses new areas of opportunity and recommends actions to SRCo to manage risks within approved tolerances, while supporting planned growth and profitability objectives.

The Operational Risk Committee (ORCo) is comprised of cross functional subject matter experts to identify, discuss and mitigate current and emerging operational risk issues that affect, or have the potential to affect, the successful operation of the Credit Union. Further, it identifies and promotes opportunities to improve service to members, creates an operational risk-aware culture, contributes to operational improvements and fosters cross functional synergy.

Risk Philosophy The Credit Union balances risk and reward to meet goals for our members, community, employees, growth and financial sustainability.

In pursuit of these goals, we accept risks we understand and can manage within prudent levels.

Risk Culture 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 congruent with Affinity’s desired culture, and is fostered and supported through strong board oversight, an integrated risk governance structure, awareness and education, risk appetite, policies, program guides and procedures. It’s also fostered by a variety of tools that support identification, measurement, analysis, risk communication and reporting, and risk informed decision-making.

Material Risk Categories Strategic Risk: Strategic risk is the risk Affinity ineffectively or improperly implements its strategies or is unable to adapt to changes in the business environment to meet the needs and expectations of members, other stakeholders or achieve expected benefits.

It also includes the failure to achieve organic growth initiatives.

Management identifies risks that could hinder achievement of corporate strategy and develops action plans to mitigate risks that exceed risk appetite. Quarterly, management reviews the risk register and status of action plans. Subsequently, Risk Management Function provides risk status reporting to the Board of Directors.

Credit and Counterparty Risk: Credit risk is the risk Affinity faces when a borrower, guarantor or counterparty fails to meet their financial or contractual obligations.

In 2021, we continued to support our members and communities by working with borrowers to assist them through COVID-19 economic impacts. Management monitors specific industry sectors vulnerable to the pandemic economic impacts.

Affinity manages credit risk by establishing credit risk policies, delegation of authority and concentration limits, including maximum limits on individual and connected accounts.

Prudent underwriting standards are designed to ensure an appropriate balance of risk and return.

Management monitors credit risk exposures including portfolio concentration on a regular basis and proactively implements enhanced account management of higher risk accounts.

This is effective to resolve problem accounts before they become delinquent or incur a loss.

Strong monitoring processes are in place for larger borrowers that encounter difficulty.

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Operational Risk: Affinity faces operational risk resulting from people, inadequate or failed internal processes, controls and systems or from external events including the risk of fraud. Operational risk is inherent in all activities within the Credit Union, including processes and controls used to manage other material risks, such as credit, market, liquidity, legal and regulatory and reputational risk. Unlike other material risk categories, taking on operational risk doesn’t generate financial gain.

Risk Control Self-Assessments (RCSAs) are the primary tools Affinity uses to identify and assess operational risk exposures. The RCSA process assists in the implementation of Affinity’s Internal Control Framework. As a financial institution, Affinity relies on the services of third parties. Our Vendor Risk Management program is our primary tool to manage third-party service provider risk.

Legal and Regulatory Risk: Legal and regulatory risk is the risk Affinity faces when failing to comply with governing laws, satisfying contractual obligations or meeting regulatory requirements.

Affinity operates in a heavily regulated industry.

We actively monitor and evaluate potential impacts of regulatory developments.

Appropriate policies, procedures, training, internal oversight functions and Code of Conduct ensured that we’re successful in meeting regulatory obligations.

As a Provincial Systemically Important Financial Institution (P-SIFI), Affinity’s regulator holds us to the highest standard of regulatory rigor. This requires us to hold higher levels of capital to cover losses, report on an additional liquidity metric and develop and maintain an executable recovery plan to guide the recovery of the Credit Union should it find itself in a distressed situation.

Liquidity Risk: Liquidity risk is the risk of loss due to an inability to access funding sources or having insufficient cash or cash equivalents to meet financial 42

Affinity Credit Union Annual Report 2021

obligations as they come due in a timely and cost-effective manner.

Affinity prudently manages liquidity to ensure sufficient liquidity is available to meets its obligations. Strategies in place to manage liquidity levels include adhering to established targets for the excess liquidity investment portfolio, stand-by credit facilities with SaskCentral and other financial institutions and established programs for deposit gathering and loan syndication.

The Credit Union maintains sufficient levels of unencumbered high-quality liquid assets as prescribed by the Credit Union Deposit Guarantee Corporation’s Liquidity Adequacy Standards.

ALCo reviews the Credit Union’s liquidity risk and liquidity position and provides reporting to SRCo. Quarterly, an operating liquidity report is provided to the Board of Directors.

As a P-SIFI, Affinity also provides quarterly net cumulative cash flow reporting to its regulator.

Market Risk: Market risk exposes Affinity to the risk of loss when decreases in the value of financial instruments or portfolios of financial instruments occur because of changes in interest rates and timing differences in the repricing of assets and liabilities. This also includes changes in movements and volatility of foreign exchange rates.

Affinity actively manages its market risk by modeling several interest rate change scenarios and their impacts to our short-term interest rate margin and long-term value of equity. ALCo reviews interest rate simulation reports and recommends hedging strategies, such as derivatives to manage interest rate risk. Interest rate strategies are limited to activities permitted under the Credit Union Act, Regulations and Standards of Sound Business Practices.

Currently, derivatives are limited to interest rate swaps, forward rate agreements, caps and floors, and purchased interest rate options.

Summary Consolidated Financial Information for the year ended December 31, 2021 Management’s Responsibility for Financial Reporting

44

Summary Consolidated Statement of Financial Position

45

Summary Consolidated Statement of Comprehensive Income

46

Summary Consolidated Statement of Changes in Equity

47

Summary Consolidated Statement of Cash Flows

48

Note to the Summary Consolidated Financial Information

49

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying summary consolidated financial information for Affinity Credit Union has been 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.

The summary consolidated financial information was 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 financial reporting standards (IFRS).

Financial and operating data elsewhere in the annual report are consistent with this financial information. In discharging our responsibility for the integrity and fairness of the summary consolidated financial information 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 team, 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 Finance Committee, which is composed entirely of independent directors.

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Affinity Credit Union Annual Report 2021

This Committee reviews our consolidated financial information and recommends them to the Board for approval. Other key responsibilities of the Audit and Finance 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 Compliance Manager and Chief Internal Auditor have full and unrestricted access to the Audit and Finance 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 Finance Committee and Board, have performed an independent audit of the consolidated financial statements. The auditors have full and unrestricted access to the Audit and Finance Committee to discuss their audit and related findings.

Mark Lane Chief Executive Officer

Nilesh Kavia Chief Financial Officer

Saskatoon, Saskatchewan March 14, 2022

Affinity Credit Union Summary Consolidated Statement of Financial Position As at December 31 (in thousands of CDN $) 2021

2020

(Note 1)

(Note 1)

Assets 48,229

58,243

Financial investments

1,388,586

1,340,688

Loans

5,250,199

4,991,151

111,414

115,512

6,798,428

6,505,594

6,092,599

5,860,039

59,687

63,469

6,152,286

5,923,508

646,142

582,086

646,142

582,086

6,798,428

6,505,594

C ash and cash equivalents

Other assets Total Assets Liabilities Deposits Other liabilities Total Liabilities Equity Retained earnings Total Equity

Total Liabilities and Equity

The accompanying note is an integral part of the summary consolidated financial information.

Approved by the Board

..................................................... Chair, Board of Directors

..................................................... Chair, Audit and Finance Committee

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Affinity Credit Union Summary Consolidated Statement of Comprehensive Income Year ended December 31 (in thousands of CDN $) 2021 (Note 1) Interest income Loans Investments

2020 (Note 1)

176,921 19,750 196,671

188,496 19,664 208,160

46,052 130 46,182

68,482 115 68,597

Net interest

150,489

139,563

(Recovery) Provision for credit losses Net interest income after provision for credit losses

(4,546) 155,035

13,891 125,672

Other income Net interest and other income

56,569 211,604

50,650 176,322

76,261 30,886 10,583 1,345 5,138 124,213

73,556 31,996 10,723 1,346 4,695 122,316

87,391

54,006

23,335

12,651

64,056

41,355

Interest expense Deposits Borrowings

Operating expenses Personnel General business Occupancy Organizational Security

Income before income tax Provision for income taxes Net and comprehensive income

The accompanying note is an integral part of the summary consolidated financial information.

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Affinity Credit Union Annual Report 2021

Affinity Credit Union Summary Consolidated Statement of Changes in Equity Year ended December 31 (in thousands of CDN $)

Retained earnings, beginning of year Net income Retained earnings, end of year

2021

2020

(Note 1)

(Note 1)

582,086

540,731

64,056

41,355

646,142

582,086

The accompanying note is an integral part of the summary consolidated financial information.

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Affinity Credit Union Summary Consolidated Statement of Cash Flows Year ended December 31 (in thousands of CDN $) 2021 (Note 1) Cash flows from (used in) operating activities Net income Adjustments to operating cash flows Changes in operating assets and liabilities Cash interest received Cash interest paid Cash income taxes paid

Cash flows from (used in) investing activities Proceeds from investments Purchases of investments Purchase of non-financial assets Proceeds from disposal of non-financial assets

Cash flows from (used in) financing activities Other liabilities Use of line of credit Repurchase of loans

Net increase (decrease) in cash and cash equivalents Net foreign exchange difference on cash held Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

2020 (Note 1)

64,056 (136,070) (24,548) 200,482 (56,024) (17,494) 30,402

41,355 (109,996) 463,986 205,714 (72,133) (5,501) 523,425

370,184 (404,978) (4,714) (39,508)

196,314 (663,705) (9,529) 8 (476,912)

14 (318) (304)

9 (8,320) (7,277) (15,588)

(9,410)

30,925

(604) 58,243 48,229

(2) 27,320 58,243

The accompanying note is an integral part of the summary consolidated financial information.

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Affinity Credit Union Annual Report 2021

Affinity Credit Union Note to the Summary Consolidated Financial Information December 31, 2021 1. Basis of the summary consolidated financial information The criteria applied by management in the preparation of the summary consolidated financial information are as follows: a)

The content in the summary consolidated financial information is derived from the Credit Union’s December 31, 2021 audited consolidated financial statements (the “Audited Financial Statements”); and

b)

The Audited Financial Statements can be obtained on-line at: https://www.affinitycu.ca/meet-affinity/how-we-re-governed/our-democraticprocess/annual-reports-and-bylaws

Affinity Credit Union Annual Report 2021

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District Council Map

District Council Map

Denare Beach

Meadow Lake Cumberland House

Loon Lake Waskesiu Lake Big River

NORTH WEST

Paradise Hill

Tobin Lake

10 10

Spiritwood

Nipawin

Shellbrook Prince Albert

EAST North Battleford

5 5

66

Melfort

1 1

77

Rosthern

44

NORTH EAST

Unity

8 8

Hudson Bay

Tisdale

Warman Humboldt

Saskatoon

SASKATOON NORTH

Wadena

Preeceville

11

Wynyard

Manitou Beach

Foam Lake Rosetown Kindersley

9 9

Lanigan

11

Canora Kamsack

Outlook Raymore Davidson

Yorkton

Eston Melville Fort Qu’Appelle

SOUTH CENTRAL

Esterhazy

Regina

22

Indian Head

Moose Jaw

33 Whitewood

Swift Current

Moosomin

SOUTH

Gull Lake Maple Creek

Gravelbourg

Shaunavon

Kenosee Lake Weyburn

Assiniboia

Carlyle

Eastend

SOUTH EAST Val Marie

Oxbow Coronach

Estevan

1. Beardy’s and Okemasis First Nation INDIGENOUS Indigenous District Members

7. Muskeg Lake First Nation 2. Cowessess First Nation 8. Red Pheasant Cree Nation 3. Kahkewistahaw First Nation 9. The Key First Nation 1. Beardy’s & Okemasis’ 4. Kinistin Saulteaux Nation 08. Red Pheasant Cree Nation 4. Kinistin Saulteaux Nation 10. Wahpeton Dakota Nation 11. Whitecap Dakota First Nation Cree Nation 5. Little Pine First Nation5. Little Pine First Nation 09. The Key First Nation 6. Lucky Man First Nation

2. Cowessess First Nation

3. Kahkewistahaw First Nation

50

6. Lucky Man Cree Nation

10. Wahpeton Dakota Nation

7. Muskeg Lake Cree Nation

11. Whitecap Dakota First Nation

Affinity Credit Union Annual Report 2021

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