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Cornerstone Credit Union

2011 Annual report

Elevating the Cornerstone member experience

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Contents

Vision, Mission & VAlUes

WelCoMe MessAge

oUr CoMpAny

CoMMUnity inVestMent

operAtionAl reVieW

CorporAte strUCtUre & goVernAnCe

MAnAgeMent disCUssion & AnAlysis for 2011

Future Looking Statements

Our Business Environment

2011 Performance Measurement

Balanced Scorecard

2011 financial performance review Growth

Deposit Growth

Loan Growth

Investments

Credit Quality

Liquidity

Capital Management

Profitability

Patronage

Enterprise Risk Management

Credit Risk

Liquidity Risk

Market Risk

Strategic Risk

Operational Risk

Legal and Regulatory Risk

Capital Risk

Summary

Credit Union Market Code Co-operative principles

AUditors’ report sUMMArized finAnCiAl stAteMents

loCAtion MAp

2011 was all about creating convenience for our members. We launched Cornerstone Connect – our “full branch over the phone” contact centre, created CUInclusive – our all inclusive banking product, extended our hours and completed an addition to our Tisdale branch. These new initiatives were big news for us! While there were many big changes this year, one thing didn’t change – our involvement in the communities we serve. In 2011 our staff contributed over 6,100 volunteer hours to community events. This community spirit combined with our new innovations helped us elevate the member experience in 2011.

9 to 5 doesn’t jive? We can meet you after hours.

Cornerstone extended HoUrs

We realized that regular office hours didn’t work for everyone. our solution? Members can now set up a time after hours that will work for them. All they need to do is make an appointment.

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3Cornerstone Credit Union | 2011 Annual Report

TrusT We continue to earn the trust of our members, our communities and our staff. People are treated with honesty and respect. We are their trusted financial services provider.

InTegrITy We have high standards, ethics and personal accountability. We adhere to our values.

LeadershIp We demonstrate and inspire leadership in our people. We are empowered to make decisions and are responsible and accountable in our actions.

exceLLence We are recognized for our excellence. “Being good enough” is not acceptable. We add value to our members’ experience.

VisionWe are a leader in providing quality, innovative and full financial solutions to our members. We are known for our integrity and commitment to people and communities.

Missionpartnering in our members’ financial success, enriching the communities we serve, demonstrating excellence and Innovation in all we do.

VAlUesVaLues are The hIgh road ThaT We Take.

Values are the cornerstone of our interactions, our decision making and our steps forward. We value trust, integrity, leadership, excellence, community and our co-operative principles. These values reflect who we are as a credit union. helping each other to succeed is not just how we do things, it is who we are. We are a family and we work together for common goals and successes. We constantly learn. We grow from our experiences. We always take the high road.

communITy Community creates a sense of belonging, regardless of geographical and tangible boundaries. We accept our responsibility for the economic and social well being of our communities. We are a good corporate citizen.

co-operaTIVe prIncIpLes As a credit union we are distinct among financial institutions by our commitment to the co-operative principles. As a member-owned organization, we partner with our members, our community and the credit union system.

Cornerstone Credit Union | 2011 Annual Report4

On behalf of the Board of Directors, Management and staff we are pleased to present the 2011 Annual Report for Cornerstone Credit Union.

Being a member-owned organization; the success of Cornerstone Credit Union is reliant on you, our members and owners. We want to begin by thanking you for choosing Cornerstone Credit Union as your financial institution. Cornerstone Credit Union is dedicated to serving the needs of our members.

With total managed assets of $917 million, Cornerstone Credit Union is the fifth largest credit union in the province. Cornerstone Credit Union serves over 24,000 members, operates branches in 15 communities and employs 198 people.

The mission of Cornerstone Credit Union is Partnering in our members’ financial success, Enriching the communities we serve, and demonstrating Excellence and Innovation in all we do. This mission highlights Cornerstone Credit Union’s ongoing commitment to our members and our communities.

WelCoMe MessAge

We thank you, our members for

your business and support in 2011;

you continue to be the reason for

our existence.

left to right: Kevin lukey, Ceo and Ken sherwin, president

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As we reflect on the past year we have made significant enhancements to our service delivery platform providing our members with more options and added convenience to conduct business with Cornerstone Credit Union. We continue to invest in our communities both financially and through volunteerism. Our staff has invested a significant amount of time volunteering with local groups, events and organizations within our region to contribute to the quality of life within those communities. We have introduced new products and services to meet the ever changing needs of our members. An example of that for 2011 was the development of our new contact centre providing members the convenience of being able to access a full range of services by phone. We continue to invest in our people; by providing the proper training and resources to ensure we are delivering the best possible service to create a positive experience at each interaction with Cornerstone Credit Union.

The environment we operate in continues to provide challenges for our organization, as the economic and business conditions in Canada and abroad have a direct impact on our credit union and our financial position.

Despite these conditions, the economy in Saskatchewan has been strong, resulting in a positive impact on Cornerstone Credit Union as we experienced growth throughout the past year. Considering the low interest margin environment we faced in 2011, we were able to manage operating costs, resulting in profitability (income before allocations and other comprehensive income) for the year of $5.1 million (an increase from $4.2 million in 2010).

Cornerstone Credit Union is proud to share the success of our credit union with our members. Based on the successful year Cornerstone Credit Union had in 2011, the Board of Directors is pleased to declare a patronage allocation of $1.32 million that will be paid back to our members and owners. This results in a bonus or rebate to our members of 4.25% on interest paid and interest earned and a refund of 10% of eligible service fees paid.

We are extremely proud of the accomplishments of Cornerstone Credit Union over the past year. In closing, we would like thank all of our credit union stakeholders. To our staff, we

thank you for your dedication, commitment and contributions you provide to Cornerstone Credit Union each and every day. To our Board of Directors, we thank you for the vision, leadership and direction you provide to our organization. And last but not least, we thank you, our members for your business and support in 2011 – you continue to be the reason for our existence. Without the support and commitment of all our stakeholders Cornerstone Credit Union would not be the organization it is today. We thank you for your business and look forward to working with you and for you in the years ahead.

ken sherwinPresident

kevin LukeyCEO

At Cornerstone Credit Union our members always come first. We are elevating the member experience at each point of contact to demonstrate our commitment to excellence.

Cornerstone Credit Union | 2011 Annual Report

All inclusive? We thought that only happened at resorts?

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CUinClUsiVe

The cuInclusive account is the new smart and convenient way to manage all your chequing, savings, mortgage, loans and line of credit in one, simple and convenient money management account – also providing you with money-saving lower monthly payments.

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Cornerstone Credit Union is a locally owned and controlled financial organization. It is organized and operated on the co-operative philosophy of “One Member - One Vote”. Cornerstone Credit Union currently serves over 24,000 members with total managed assets exceeding $917 Million. Cornerstone Credit Union serves 15 communities with branches located in Archerwill, Bjorkdale, Elfros, Kelliher, Ituna, Lestock, Rhein, Rose Valley, Saltcoats, Springside, Theodore, Tisdale, Wishart, Wynyard and Yorkton.

Cornerstone Credit Union is a regional credit union focused on becoming the primary financial institution for the people of our region. At Cornerstone Credit Union, it is our vision to be a leader in providing quality, innovative and full financial solutions to our members. We are known for our integrity and commitment to people and communities.

Cornerstone Credit Union is a full financial service solutions provider offering core banking services, financial planning and estate planning services to our members.

CredentiAl finAnCiAl strAtegies

Credential Financial Strategies offers a variety of protection and investment plans that complement the financial planning services offered by Cornerstone Credit Union. Credential Financial Strategies representatives operate in association with all branches of Cornerstone Credit Union, with office locations in Yorkton and Tisdale.

Credential Financial Strategies Inc. is a member company under Credential Financial Inc. offering financial planning, life insurance and investments to members of credit unions and their communities.

royAl lepAge preMier reAltyroyAl lepAge renAUd reAlty

Cornerstone Credit Union Financial Group operates two real estate agencies; Royal LePage Premier Realty, located in Yorkton and Royal LePage Renaud Realty, located in Tisdale with a satellite office in Hudson Bay. The real estate services offered through the professional, licensed agents at Royal LePage help clients realize their home buying dreams and secure their future.

renAUd insUrAnCe

Renaud Insurance based in Tisdale provides protection for the things that matter most. Whether you are looking for protection for your home, property, individual or health insurance, Renaud Insurance has the coverage you are looking for. Renaud Insurance is a licensed Wawanesa and GMS insurance agency.

oUr CoMpAny


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cornerstone credit union is proud to be a community-minded credit union. We believe that investing in our communities is an investment in our future. We believe that corporate responsibility and social responsibility go hand in hand – we have a responsibility to be good corporate citizens by giving back to the communities in which we live and do business.

CoMMUnity inVestMent


In 2011, Cornerstone Credit Union staff invested over 6,100 hours of volunteer time to

worthwhile local community initiatives, not because they had to, but because they wanted to –

it’s the Cornerstone way!

Cornerstone Credit Union CoMMUnity inVestMent progrAMCornerstone Credit Union is truly committed to supporting the communities it serves as demonstrated through the significant contributions made throughout the region through the Community Investment Program. In 2011, Cornerstone Credit Union supported over 450 community groups, events and organizations by giving back over $213,000 or 5.67% of our pre-tax profit. Cornerstone Credit Union’s community investment program supports a wide range of initiatives including youth, education, sports, agriculture, arts and culture, health care, economic development, non-profit organizations and charitable donations.

VolUnteering in oUr CoMMUnitiesCornerstone Credit Union understands community leadership is about more than financial support, it is about leading the way. We show our support not only financially but also with the support of our staff and directors being involved in various community organizations and community projects through-out the Cornerstone Credit Union region. Cornerstone Credit Union employees volunteer thousands of hours each year, and are leaders in our communities. In 2011, Cornerstone Credit Union staff invested over 6,100 hours of volunteer time to worthwhile local community initiatives, not because they had to, but because they wanted to – it’s the Cornerstone way!

Cornerstone Credit Union views community involvement as an investment in our future and our communities and it’s just another one of the many ways that Cornerstone Credit Union can give back to our members and our communities.

Cornerstone Credit Union is a proud supporter of the sask Co-operative system’s youth camp.

Cornerstone Credit Union was a proud supporter of saltcoats Minor sports in 2011


MeMber reseArCH Cornerstone Credit Union is committed to delivering the best possible service to our members. We continually strive to improve and elevate our service to create a positive member experience each and every time our members do business with Cornerstone Credit Union. The best way to measure how well we are doing is by asking you, our members for your feedback.

In 2011, Cornerstone Credit Union engaged a third party supplier to conduct a research project to determine the Net Promoter Score (NPS) for Cornerstone Credit Union. NPS research provides a measure of customer loyalty, based on the fundamental perspective that every company’s customers can be divided into three categories: Promoters, Passives and Detractors. By identifying and tracking these categories, it provides us with a better measurement of our performance through the eyes of our members and owners.

The NPS for Cornerstone Credit Union for 2011 was 27.2%. Synovate Canada’s Personal Banking Customer Experience research results for 2011 ranked Canadian financial institutions with an NPS of 9.8%, while Canadian credit unions ranked overall at 18.7%. While this particular research is new to Cornerstone Credit Union, it is also

a relatively new process for the credit union system both provincially and nationally. Cornerstone Credit Union was extremely satisfied with the 2011 NPS results, scoring in the top quartile results for Canadian financial institutions.

With 2011 being the first time we have measured our NPS, these results will become one of the benchmarks to measure the success of Cornerstone Credit Union going forward.

net promoter score – total Canada*

All fi’s*

2011

2010 7.9%

2009 7.8%

9.8%

Credit Unions*


2011

2011

2010 20.2%

2009 21.6%

18.7%

27.2%

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synoVAte best bAnKing AWArds reVeAls Consistent strengtH of Credit Unions


For the seventh consecutive year, Canadians ranked credit unions first in overall Customer Service Excellence, among all financial institutions, surpassing all Canadian banks in Synovate Canada’s annual Best Banking Awards. Credit Unions also took sole honours in two other categories: Values My Business and Branch Service Excellence. Survey results show that credit unions also tied for first in the following categories among all financial institutions: Financial Planning and Advice and Telephone Banking Excellence. The above mentioned honours are the same five award categories Canadian credit unions were recognized for in 2010.

Cornerstone Credit Union, along with the other credit unions in Canada, has a longstanding history of focusing on meeting the needs of our members and owners. The results of the Synovate Best Banking Awards survey reaffirm what Cornerstone Credit Union and other credit unions have always believed to be true; while the products and services we offer are an integral component of our business, the most important focus continues to be the dedication to our members and owners.

Launched in 1987, the Synovate Customer Service Index (CSI) quarterly survey generates the winners of the annual Best Banking Awards. The 2011 Best Banking Awards are based on the combined results of ongoing quarterly CSI surveys ending August 2011. Over 40,000 household responses were received yielding 60,641 financial institution ratings among a regionally and demographically representative sample of Canadians. The full Synovate results are available at www.synovate.com.

internAtionAl yeAr of Co-operAtiVesThe United Nations has declared 2012 the International Year of Co-operatives (2012). IYC is a once-in-a-lifetime opportunity to celebrate and recognize the enormous impact that co-operatives have in our communities. With over one million memberships held in co-operatives in Saskatchewan, and billions of dollars generated each year, co-operatives are a thriving and powerful force here in our province.

Co-operAtiVe fACts• There are well over one million memberships

in financial and non-financial co-operatives held by residents of Saskatchewan.

• In Canada, four of every ten canadians, or 18,000,000 people, are members of at least one co-operative.

• Canada has the highest per-capita credit union membership in the world with 33% of canadians being members of at least one credit union.

• There are over 1,000 co-operatives in saskatchewan, including 61 credit unions serving 304 communities.

• Co-operatives provide jobs for over 10,000 people in Saskatchewan.

Local, provincial and national activities are being planned by organizing committees across Canada and around the world to promote the value of co-operatives and leave a lasting legacy to mark the year. Cornerstone Credit Union is proud to be part of a credit union system serving 188 million members worldwide, in 53,000 credit unions across 100 countries. In 2012, Cornerstone Credit Union will join other co-operatives across the globe to celebrate the economic and social success of people working together.

Watch for more information to come on International Year of Co-operatives from Cornerstone Credit Union in 2012!

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In 2011, we supported over 450 community groups, events and organizations.

Introducing

12,000 new square feet of “how can we help you?”

Cornerstone bUilds neW Addition to tisdAle brAnCH

12,000 square feet never looked so good! This attractive facility, completed in 2011, houses the Tisdale branch as well as affiliate and subsidiary business lines under one roof to help improve our service delivery to members in the archerwill, Bjorkdale, rose Valley and Tisdale region.

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2011 operAtionAl reVieW

Cornerstone Credit Union serves approximately 24,000 members through a network of branches in 15 communities, employing over 190 staff. Elfros-Mozart Credit Union and Springside Credit Union joined Cornerstone Credit Union effective January 1, 2011. The merger of the three credit unions was successful with full integration complete in the spring of 2011.

Cornerstone Credit Union remains committed to responding and adapting to the changing needs of our members. As a result, expanding the service delivery of Cornerstone Credit Union was a key focus for 2011. The expansion of service was demonstrated by the following; the merger increased the number of branch-es with the addition of the Elfros and Spring-side locations to the network of Cornerstone branches. The branch hours of operation were also extended in several locations providing members with access to services earlier in the morning and later into the evening (in Yorkton) which has been very well received by our members.

The largest service delivery enhancement that has been implemented since our inception as Cornerstone Credit Union took place in 2011 with the development of a new contact centre. Cornerstone Connect, the new contact centre offers financial services over the phone to our members providing service six days a week and extended service beyond our regular branch hours of operation. Cornerstone Connect offers a wide range of services offering everything from basic transactions such as balance inquires to providing loans over the telephone. This service elevates convenience to our members as they no longer will have to physically come into our branches (although always welcome) to conduct their business, as they are only ever a phone call away from full service financial solutions with this new channel.

With our ‘MemberFirst’ initiative, staff training continues to be an integral focus for Cornerstone Credit Union in order to provide the utmost level of service possible to our members and to better enable staff to meet the changing needs of our members. Significant time and resources were dedicated to both staff training and banking system training over the past year to improve the service to our members.

A major banking system upgrade was completed in 2011; the upgrade resulted in a newer version of the banking system which is more user friendly and offers more streamlined processes for completing transactions for the benefit of our members. Thanks to lots of training and the hard work of our staff, the transition to the upgraded banking system was seamless with minimal member impact.

The construction project at the Tisdale location was completed in early 2011, providing additional office space to meet the growing needs of the organization. This attractive facility houses the Tisdale branch as well as affiliate and subsidiary business lines under one roof to help improve our service delivery to members in the Archerwill, Bjorkdale, Rose Valley and Tisdale region. Additional facility upgrades took place with the roof renovation project at the Yorkton branch to ensure a safe and comfortable working environment for staff and members in Yorkton.


The largest service delivery

enhancement that has been implemented

since our inception as Cornerstone Credit Union took place in

2011 with the development

of a new contact centre.

boArd of direCtors

from top, left to right: Harold sigfusson, lorne tarasoff, robert Wilson, lester Willerton, James Knudson, david bone, larry Malinowski, Kevin elmy, Val Hvidston, Cheryl denesowych, Winston newman, les Hayward, Ken sherwin, Jack powell

The key roles of the board include formulation of strategic business plans; setting goals, evaluating the performance of the CEO; approving corporate mission, vision and values; monitoring corporate performance against strategic business plans; overseeing operations; ensuring compliance with laws and regulations; keeping members informed regarding plans, strategies and performance of the Credit Union; and other important matters. During the financial year 2011, the Board of Directors held eleven meetings.

boArd CoMpositionThe board is comprised of fourteen individuals elected on a district governance structure. Terms are three years in duration. In accordance with the bylaws, the Governance Committee is responsible for the nomination process and election of directors. Voting is by paper ballot during in-branch elections and election results are announced at Cornerstone Credit Union’s annual general meeting. The Board of Directors elected for the terms and districts in 2011, as set forth in the credit union bylaws are as follows: dIsTrIcT one – Tisdale David Bone, Les Hayward, Val Hvidston, Winston Newman

dIsTrIcT TWo – archerwill, Bjorkdale, rose ValleyJames Knudson, Lester Willerton, Robert Wilson

dIsTrIcT Three – Wynyard, Wishart, Lestock, kelliher, Ituna, elfrosHarold Sigfusson, Lorne Tarasoff

dIsTIcT Four – yorkton, Theodore, rhein, saltcoats, springsideCheryl Denesowych, Jack Powell, Ken Sherwin, Kevin Elmy, Larry Malinowski

boArd of direCtors

MAndAte And responsibilitiesThe Board of Directors of Cornerstone Credit Union is responsible for the strategic oversight, business direction and supervision of management of Cornerstone Credit Union. In acting in the best interests of the credit union and its members, the board’s actions adhere to the standards set out in The Credit Union Act 1998; the Credit Union Regulations, 1999; Standards of Sound Business Practices; credit union bylaws and policy; and other applicable legislation.

The board directs the affairs of the credit union and maintain policies which are responsive to their needs and the needs of the Credit Union for sound operations.



The governance of cornerstone credit union is anchored in the co-operative principle of democratic member control. cornerstone credit union’s philosophy on corporate governance is to practice transparency in operations and maintain a professional approach and accountability in dealing with our members. The credit union has always focused on maintaining the highest standards by conducting its affairs ethically and lawfully and by sustaining a culture of integrity and professionalism.

boArd CoMMitteesThe responsibilities of the board of a modern financial services organization involve an ever-growing list of duties. Cornerstone Credit Union maintains a number of committees comprised of directors. This partitioning of responsibilities enables a clear focus on specific areas of activity vital to the effective operation of the credit union.

Cornerstone Credit Union has four standing committees to assist in fulfilling board responsibilities:

• the Audit and risk Committee, which met seven times in 2011, is comprised of five members from the board at large. The purpose of the Audit and Risk Committee is to ensure an independent review of the Credit Union’s operation on areas deemed necessary to maintain the integrity of financial data, adequacy of internal controls and adherence to requirements of The Credit Union Act, 1998, The Credit Union Regulations, 1999, The Credit Union Insurance Business Regulations, and the Standards of Sound Business Practice.

• the governance Committee, which met three times in 2011, is comprised of five members from the board at large. The purpose of the Governance Committee is to ensure that an appropriate governance system is in place through corporate governance policies, the nominations and election process, the board committees structure, and board assessment and development processes.

• the Conduct review Committee, which met once in 2011, is comprised of five members from the board at large. The purpose of the Conduct Review Committee is to ensure that all proposed related party transactions with the Credit Union are fair to the Credit Union and that best judgment is exercised in all matters of related party relationships.

• the executive Committee, which met eight times in 2011, is comprised of the President, the 1st Vice-President, the 2nd Vice-President and an elected board member at large. The purpose of the Executive Committee is to assist the Board of Directors in discharging its oversight responsibilities relating to board and board committee oversight; compensation oversight; overseeing matters related to the employment of the CEO; CEO performance management; and succession planning oversight. The Executive Committee also acts in the capacity of, and on behalf of the Board of Directors between regular or special board meetings on all board matters except those which the board may not, in compliance with legislative requirements, delegate.


In 2010-2011, the Board of Directors reviewed the governance structure to determine the appropriate size of the board best suited to fulfill the board’s responsibilities. At the 2011 Annual General Meeting, the membership approved a revision to Cornerstone Credit Union Bylaws, which included the reduction of 14 board members to 12 board members through a transition process in 2012-2013.

The following reflects the changes to directors in the districts.

AttendAnCe Board service 2011

Director Board Meetings Committee Meetings

David Bone 10 of 11 Executive - 8 of 8

Cheryl Denesowych 7 of 11 Conduct Review - 1 of 1 Governance Chair Governance - 3 of 3

Kevin Elmy 5 of 11 Nominating - 0 of 1 Conduct Review - 0 of 1 Governance - 0 of 1 Audit & Risk - 1 of 5

Les Hayward 10 of 11 Conduct Review - 1 of 1 Governance - 3 of 3

Val Hvidston 10 of 11 Nominating - 0 of 1 Audit & Risk Chair Audit & Risk - 7 of 7

James Knudson 10 of 11 Nominating - 0 of 1 Executive - 8 of 8

Larry Malinowski 11 of 11 Executive - 8 of 8 Audit & Risk - 2 of 2

Winston Newman 11 of 11 Conduct Review - 1 of 1 Governance - 3 of 3

Jack Powell 9 of 11 Executive - 1 of 1 Audit & Risk - 4 of 5

Ken Sherwin 11 of 11 Executive - 8 of 8 Board of Directors Chair

Harold Sigfusson 11 of 11 Conduct Review - 1 of 1 Conduct Review Chair Governance - 2 of 3

Lorne Tarasoff 10 of 11 Conduct Review - 1 of 1 Governance - 2 of 3

Lester Willerton 9 of 11 Audit & Risk - 2 of 2 Governance - 2 of 2

Robert Wilson 11 of 11 Audit & Risk - 7 of 7

(NOTE: Re-organization of committees took place in April 2011.)

District 2011 2012 2013 *Following AGM *Following AGM

District One: Tisdale, Archerwill, 7 5 4 Bjorkdale, Rose Valley

District Two: Wynyard, Wishart, 2 2 3 Kelliher, Lestock, Ituna, Elfros

District Three: Yorkton, Theodore, 5 5 5 Rhein, Saltcoats, Springside

Total 14 12 12

exeCUtiVe MAnAgeMentCornerstone Credit Union has an experienced executive management team. Executive management is responsible to oversee the operations of the credit union within the context of strategies and policies approved by the board, and for developing processes that identify, measure, monitor and control risks. Management reports performance in key areas to the board on a regular basis.

The executive management team is comprised of the following:Kevin Lukey Chief Executive OfficerBetty Bauhuis Vice President of Retail ServicesBryan Furber Vice President of FinanceCorvyn Neufeld Vice President of Human ResourcesCliff Trombley Vice President of Corporate Services & SupportLori Walsh Vice President of Marketing & Strategic SolutionsSamantha Larsen Executive Assistant

The Asset Liability Management Committee (ALCO) is comprised of executive management and select senior management of Cornerstone. The ALCO Committee is responsible for understanding and monitoring liquidity risk, interest rate risk, credit exposure and overall balance sheet structure of the Credit Union. The Committee ensures balance sheet activities and measures are within acceptable limits included, but not necessarily limited to capital adequacy; lending and investment limits; liquidity risks; and interest rate risk. Furthermore, the committee sets and approves balance sheet operational strategies with a focus on achieving financial targets, managing market and liquidity risk and optimizing the use of capital.

The ALCO Committee met three times in 2011 and was provided quarterly reports which included trend analysis of all risk measures and policy comparisons.

direCtor trAiningIt is the policy of the Board of Directors to provide necessary opportunities for personal and professional self-development of the board. Cornerstone Credit Union has a Director Development policy in place that pertains to the training, education, and development of Directors. This may be obtained by attending meetings, conferences and educational sessions that will provide training and understanding of both broad and technical issues, which will assist in the development or operation of the credit union.

In 2011, four board members attended the 2011 Canadian Conference held in Niagara Falls, Ontario. A number of CUDA courses were also obtained by the Board of Directors in 2011.

eVAlUAtionThe Board of Directors conducts an evaluation bi-annually to assess the effectiveness of board operations; there was not a formal evaluation conducted in 2011, however this is scheduled to take place in 2012.


exeCUtiVe MAnAgeMent

from left to right: Cliff trombley, lori Walsh, Kevin lukey, betty bauhuis, bryan furber, samantha larsen, Corvyn neufeld


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Cornerstone ConneCt

Financial services over the phone? Cornerstone Connect makes it possible wherever you are! It combines the convenience of telephone banking with our friendly and knowledgeable staff, ready to help on the other end of the line. Cornerstone Connect offers everything from basic information, to loans, to personal and secure transactions, and anything else you may need. all over the phone!

➜

➜

Yup, we pinched ourselves too!

A full service branch over the phone?

Management Discussion & Analysis for 2011

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Management Discussion & Analysis for 2011

rose slightly in last half of 2011 from 7.3% to 7.5%. Consumer prices increased earlier in 2011 and then decreased in the latter part of the year, with the annual core inflation at 1.9%. For 2011, inflation averaged 2.9%, the highest annual reading since 1991. Nevertheless, retail sales continued to show improvement. The housing market ended the year strong. Total starts for 2011 exceeded 2010 by 0.9%. Due to the lack of confidence in the global economy, the Bank of Canada is expected to hold interest rates constant until into 2013.

Saskatchewan continues to be somewhat insulated from the impact of the global woes. The province’s population continues to grow, with associated increases in housing starts. Saskatchewan’s retail sales growth was also one of the strongest in the country for 2011. Manufacturing and wholesale trade continued to rise sharply through 2011 with expectations of further growth in 2012. It is also expected that natural resource commodity prices will remain at attractive levels and continue to support economic activity in Saskatchewan throughout 2012 and into 2013. Continued investment in areas like the Bakken oil fields and the potash mines around Esterhazy is expected throughout 2012 as well as continued investment in other areas of the province for future potash mine sites. The exceptional weather in the fall allowed our farming members to complete their harvests and to get a head start on the next farming season, so provided the weather cooperates, our trading area should be in a good position economically in 2012 as agriculture is still a major driving factor in our local economies. 2011 perforMAnCe MeAsUreMentCornerstone Credit Union uses a balanced scorecard framework to measure and monitor our progress towards achieving our strategic objectives. The scorecard utilizes both financial and non-financial measures along four strategic themes: Culture, People and Community; Member and Client Solutions; Organizational and Financial Strength; and Business and Management Processes.

WHAt is An Md & A?

The management discussion & analysis (md & a) is presented to enable readers to assess material changes in the financial condition and operating results of cornerstone credit union (the credit union) for the year ended december 31, 2011, compared with prior years. This md & a is prepared in conjunction with the consolidated Financial statements and related notes for the year ended december 31, 2011, and should be read together. unless otherwise indicated, all amounts are expressed in canadian dollars and have been primarily derived from the credit union’s annual consolidated Financial statements prepared in accordance with canadian International Financial reporting standards (IFrs). 2011 marks the first year of reporting under IFrs.


fUtUre looKing stAteMents This MD & A may contain future-looking statements concerning Cornerstone Credit Union’s future strategies. These statements involve uncertainties in relation to prevailing economic, legislative and regulatory conditions at the time of writing. Therefore, actual results may differ from the future-looking statements contained in this discussion.

oUr bUsiness enVironMentAlthough Cornerstone Credit Union is focused on serving the needs of its members in Saskatchewan, the economic and business conditions in Canada and abroad can impact the trading area of the Credit Union and its financial position. National and international economic conditions can impact currency rates, interest rates, and monetary policy of the Bank of Canada. These factors, combined with fluctuations in capital markets and competition, can impact the market share and price for the Credit Union’s products and services and, in turn, affect its performance.

Unfortunately, 2011 did not bring with it a magical cure to the economic strife being experienced world-wide. European debt continues to be of major concern and it appears that the European community

may have again entered recession. China’s economy also appears to be weakening with lower inflation and a production slow down. On the positive side, some improvements have been made in North America; however, the impact of the U.S. presidential race could have negative consequences in 2012.

The U.S. economy continues its very slow paced recovery. Unemployment rates fell over the last part of 2011, decreasing by 0.6% to end at 8.5%. While this is positive news, there is concern that the decrease will not be sustainable. Housing starts are still somewhat below expectation; however, the three month average for housing starts and building permits was the highest since 2008. There has been continued inflation in the U.S. as the inflation level rose from 2.0% to 2.2% in the latter part of 2011. Consumer confidence is growing, but still leaves significant room for improvement. As a result of the issues still being faced by the U.S. economy and the impact the global woes may cause, it is likely that the extremely low rate environment in the U.S. will continue well into 2014.

Canada continues to take baby steps along the road to economic recovery. Federal monetary policy continues to be greatly influenced by what is happening in the global marketplace. Canada’s unemployment rate



2011 bAlAnCed sCoreCArd

Culture, People and Community Member & Client Solutions Organizational and Financial Strength Business and Management Processes

Actual 5.67%

6177

4.25 8.97%

12.16%

12.98% 0.75%

7.64%

0.31% 80.77%

4.36/5

Acceptable

Target 3.00%

5000

4.00 4.00%

6.95%

11.90% 0.76%

7.65%

< 1.25% 80.00%

4.00/5

Acceptable

• Be recognized as the employer of choice• Develop an organizational constructive culture that fosters innovation

and diversity• Provide an environment where members are able to succeed• Develop people (members, employees, board)• Empower people and support leadership• Instill a sense of engagement, ownership and pride in the work

we do for the benefit of our members• Contribute to and strengthen our communities • Be the financial solutions service provider of choice• Ensure that we demonstrate a member-centric approach through

service excellence and providing solutions that fit the member• Build and strengthen relationships with our members and clients• Ensure the organization is proactively positioned to pursue

emerging business lines • Ensure a balanced approach for the long term growth and

viability of Cornerstone• Manage enterprise risk• Ensure the organization has a capital position that enables it to

implement the business plan • Ensure service excellence• Demonstrate management excellence• Ensure corporate effectiveness• Ensure organizational competencies are in place to implement

the business plan

STrATegiC TheMeS

Community Investment (% Pretax)

Volunteer Time Hours

Employee Cultural Assessment (Average response out of 5) Deposit Growth%

Loan Growth %

Off Balance Sheet Growth Return on Average Assets

Tier 1 Capital %

Delinquency % Efficiency Ratio

Employee understanding of direction & effective internal communication

Audit Reports (Rating)

PerFOrMAnCe MeASureS

Total assets under administration by the credit union at December 31,

2011 were approximately

$917 million

2011 finAnCiAl perforMAnCe reVieW

groWtHCornerstone Credit Union ended December 31, 2011 with on book assets of $764 million compared to $675 million in 2010, representing growth of 13.12%. In 2011, the credit union acquired the assets, liabilities and equity of Springside Credit Union Limited and Elfros-Mozart Credit Union Limited. Total assets acquired were $29.85 million and total liabilities acquired were $27.47 million. This represents 4.42% of the year over year total asset growth.

Other funds under management include wealth management assets totaling $104 million. Other funds under management increased $12 million during 2011. This represents an annual growth rate of nearly 13%.

2011 loan portfolio

Consolidated loans by sector

2010 loan portfolio

31.10%

16.69%

14.10%

15.24%

11.98% 10.89%

Ag Mortgage

Consumer Mortgage

Commercial Mortgage

Ag Non-Mortgage

Consumer Non-Mortgage

Commercial Non-Mortgage

27.59%

19.03%

14.15%

17.25%

11.75% 10.23%

Ag Mortgage

Consumer Mortgage

Commercial Mortgage

Ag Non-Mortgage



2009 loan portfolio

26.98%

15.37%

15.40%

17.71%

13.90% 10.44%

Ag Mortgage

Consumer Mortgage

Commercial Mortgage

Ag Non-Mortgage



loAn groWtHAccounting for nearly 74% of total assets, loans amounted to $568 million as at December 31, 2011, for an increase of $82 million over prior year. The following illustrations show the breakdown of our total loan portfolio by sector.


Total assets under administration by the credit union at December 31, 2011 were approximately $917 million. This would include the above noted on book assets and wealth management assets as well as credit union owned investments and derivatives or interest rate swaps.

deposit groWtHThe Credit Union’s liabilities consist primarily of member deposits. Deposits totaled $700 million as at December 31, 2011, an increase of 13.82% (including acquired liabilities as mentioned previously) from prior year. Deposit growth was better than anticipated despite the continued low rate environment. Strong agricultural economics (production and commodity prices) and natural resource activity attributed to better than expected growth levels. Consumers grew savings or demand type deposits as there continues to be strong desire to keep investments safe and liquid in the current economic and interest rate environment.

The Credit Unions on book deposits are 100% guaranteed by the regulator of credit unions in Saskatchewan, Credit Union Deposit Guarantee Corporation (CUDGC).

Asset growth

$751m

$800m

$917m

2007

$1000m

$900m

$800m

$700m

$600m

$500m

on book Assets

off book Assets

2008 2009 2010 2011

$652m

$712m

26.98%

15.37%

15.40%

17.71%

13.90% 10.44%

Ag Mortgage

Consumer Mortgage

Commercial Mortgage

Ag Non-Mortgage




inVestMentsInvestments totaled $143 million as at December 31, 2011, a decrease of $16.6 million or 10.39% from prior year. The decrease was due to strong loan demand. The majority of the Credit Union’s investments are held with SaskCentral or Concentra Financial Services (a credit union company). Credit unions are required by the provincial regulator, CUDGC to maintain 10% of their member deposit liabilities on deposit with SaskCentral for the Provincial Liquidity program. In addition to these Statutory Liquidity Investments on deposit with SaskCentral, the Credit Union maintains a high quality, liquid pool of investments to satisfy payment obligations and protect against unforeseen liquidity events. In addition to its securities held with SaskCentral and Concentra Financial Services, investments are also largely held in securities that are guaranteed by the Government of Canada, Provincial Governments and the “big five” charted banks.

Credit QUAlityAs a credit granting organization, credit quality is a key risk management area of the Credit Union. Despite the potential impacts of the recent financial crisis and economic conditions, the Credit Union’s standard credit quality measures have remained very strong. Delinquency greater than 90 days was .31% of loans at December 31, 2011, a decrease from .34% in the prior year. This compares very favorably to the 4% maximum standard established by CUDGC. The Credit Union monitors its exposure to potential credit losses and maintains both specific and collective loan allowances accordingly. Specific allowances are reviewed regularly by examining the individual loans and estimating the likelihood of realizing the full carrying value. Collective allowances are calculated using management’s judgment while considering current economic conditions and historical losses. The quality of the credit portfolio was also confirmed by both internal and external audit processes conducted in 2011.


liQUidityOne of Cornerstone Credit Union’s primary objectives is to prudently manage liquidity to ensure that the Credit Union is able to generate or obtain sufficient cash or cash equivalents in a timely manner and at a reasonable price, to meet commitments as they come due, even under stressed conditions.

The Credit Union has an established policy with respect to liquidity, as well as a number of processes and practices with respect to the management of funding requirements. The Credit Union maintains a stock of liquid assets while regularly measuring and monitoring its available liquidity, and performs stress tests to identify sources of potential liquidity strain. The Credit Union also maintains external borrowing facilities to complement its liquidity management process.

The Credit Union’s liquidity is measured by the operating liquidity ratio, which considers projected cash inflows as a percentage of projected cash outflows. This ratio reduced from 2010. At December 31, 2010, the ratio was 118%; for 2011 fiscal year end it was 90%. Throughout 2011, loan demand was funded primarily by deposits from credit union members and to a lesser extent by maturing investments. The Credit Union has a line of credit with SaskCentral in the amount of $10 million to manage clearing and settlement and unforeseen funding needs. As at December 31, 2011, this credit facility was not being used.

CApitAl MAnAgeMentOne of the primary measures of financial strength of any financial institution is its capital position. Credit unions measure capital adequacy using two measures. The first is a simple comparison of tier 1 capital to total assets (leverage test) and the second compares eligible capital to risk weighted assets (risk based test).

Income before allocations

(Income Tax & Member

Patronage) for the year was

$5.1 million, an increase from

$4.2 million in 2010.


Credit unions operate in a highly regulated environment, where Credit Union Deposit Guarantee Corporation (CUDGC) sets regulatory guidelines to which credit unions must adhere to. The guideline requires that a credit union holds a minimum Tier 1 capital ratio of 5% and a minimum risk weighted ratio of 8%. During 2009, CUDGC issued a statement indicating that during this period of economic uncertainty and low interest rate environment, credit unions would be considered adequately capitalized with a Tier 1 ratio of 7% and a risk weighted Capital ratio of 10%. Management and the Board of Directors believe in maintaining a strong capital position for Cornerstone Credit Union. The Credit Union manages capital in accordance with its capital management plan and board approved capital policies. The capital plan is developed in accordance with the regulatory capital framework and is regularly reviewed and approved by the Board of Directors. Capital is managed in accordance with the capital plan with a goal to achieve and exceed regulatory minimums, maintain an optimal level of capital, meet operational requirements, absorb unexpected losses, implement long term strategic plans and signal financial strength.

The Credit Union relies on profitability to grow its capital position and holds the majority of its total capital in retained earnings. Both balance sheet growth and profitability affect the Credit Union’s Tier 1 capital ratio. The Credit Union retains a portion of its annual earnings in order to meet its capital objectives. Once these capital objectives are met, additional earnings are allocated to members through the Credit Union’s member equity program. The member equity program allocates earnings to members’ equity accounts basedon usage of services. Member equity accounts are included in the determination of capital adequacy for internal and regulatory purposes.

For the year ending December 31, 2011, the Credit Union’s Tier 1 capital was 7.66%

compared to 7.75% in 2010. Risk weighted capital ended 2011 at 11.36% compared to 11.61% in 2010. Despite increased profitability in 2011, both capital measures decreased slightly over the past year as a result of total asset growth and continued loan growth.

profitAbilityIncome before allocations (Income Tax & Member Patronage) and other comprehensive income for the year was $5.1 million, an increase from $4.2 million in 2010. For 2010 our return on assets (ROA) before income tax and patronage allocations was .67%, compared to .62% in 2010.

pAtronAgeThe Board of Directors have declared a patronage allocation of $1.32 million to be credited to members’ equity and deposit accounts. The distribution of patronage will be based on the amount of loan interest paid, deposit interest earned and eligible service fees paid by each member during the year. Members will receive a 4.25% rebate or bonus on interest paid and interest earned. They will also receive a refund of 10% of eligible service fees paid. Payments will be made to member equity accounts in the first half of 2012.

gross financial Margin – includes total interest revenue less total interest expense. For 2011, financial margin was 2.86% compared to 2.90% in 2010. The Credit Union’s profitability is largely dependent on interest margins. The Credit Union continues to be asset-sensitive in the short term, which ultimately means that profitability will increase as interest rates increase. It is expected that interest rates will remain relatively low throughout 2012 and into 2013.

non-interest revenue (other income) – includes fixed asset revenue, commissions and service charges as well as gross commissions from real estate and insurance subsidiaries. Non-interest revenue ended 2011 at $6.9 million compared to 2010 at

7.5%

7.75%

7.66%

2007

$800m

$775m

$750m

$725m

$700m

2008 2009 2010 2011

7.49%

7.58%

tier 1 Capital

retained earnings

Member equity

26.98%

15.37%

15.40%

17.71%

13.90% 10.44%

Ag Mortgage

Consumer Mortgage

Commercial Mortgage

Ag Non-Mortgage



$51m$53.5m

$59.3m

2007

$60m

$50m

$40m

$30m

2008 2009 2010 2011

$41.8m

$46.6m

retained earnings (Including Contributed Surplus & Member Held Equity)

$3.3m$4.2m

$5.1m

2007

$6m

$5m

$4m

$3m

$2m

$1m

2008 2009 2010 2011

$5.6m

$5.6m

income before allocations


$6.6 million. Although total non-interest revenue increased in 2011 in terms of dollars, as a % of assets, it dropped from .97% in 2010 to .91% in 2011.

non-interest expense (operating expenses) – includes various operating expenses such as personnel, occupancy, security, governance, community development and general business. Non-interest expense ended 2011 at 3.11% of assets or $23.8 million compared to 3.28% of assets or $22.2 million in 2010. In 2011 the credit union undertook a position valuation project to ensure that all personnel were compensated fairly compared to the market place. Increases to personnel costs are mostly a result of implementing the changes that came from the position valuation project and regular cost of living increases. Security, occupancy, and general business cost all increased during 2011, however it should be noted that operating costs in relation to total assets improved during 2011 as evidence by the decrease in operating expense ratio noted above.

enterprise risK MAnAgeMentEach year Cornerstone Credit Union spends significant resources measuring and assessing risks and ensuring we are adequately prepared to serve our communities now and in the future. This process is called enterprise risk management or ERM for short, and is a requirement of all credit unions in Saskatchewan as laid out by Credit Union Deposit Guarantee Corporation.

As a financial institution, Cornerstone Credit Union is exposed to a variety of risk. Risk is the downside that exists in almost every aspect of the Credit Union’s activities. Risk represents the potential negative impact to the Credit Union’s ability to achieve important goals. Risk can also cause financial loss and harm to a credit union’s reputation. Managing, or appropriately, balancing risk with business opportunities is the top priority for the Board of Directors and Management of Cornerstone Credit Union. Building sound policies and operational processes, risk based audit practices, capital strategies and


liquidity management, supported by strong human resources is the heart of our strategic objectives. The following risk categories form part of the Credit Unions’ overall enterprise risk management approach:

Credit risK Credit risk comes primarily from our direct lending activities and to a lesser extent our holdings of investment securities and syndicated loans (credit product purchased, but not administered by CCU). Credit risk is the risk of financial loss resulting from a borrower or counterparty’s inability to meet its obligations.

Lending and credit risk management is performed in accordance with approved policies, procedures, standards and controls. Risk concentration limits have been designed to reflect our risk tolerance. Surplus liquidity is invested in accordance with investment policy and regulatory approved investment criteria. Credit risk is further mitigated through in-depth and ongoing training of loans personnel and independent adjudication of larger, potentially higher risk loan applications and regular monitoring and reporting.

The Credit Union’s credit portfolio and lending practices undergo regular and ongoing independent assessment through external audit, internal audit and regulatory reviews. Reports are provided to Management and the Board of Directors through the Audit and Risk Committee.

liQUidity risKLiquidity is required to meet the day to day cash needs and growing loan demands of our members. Liquidity risk arises from general funding activities and through managing assets and liabilities. It is the risk of having insufficient cash resources or equivalents to meet demand for loans or depletion of deposits. The Credit Unions liquidity risk management strategies seek to maintain sufficient liquid resources to continually fund our balance sheet commitments.

Despite the challenges we

encountered throughout

the past year, we were still

able to grow our organization,

expand the service delivery

provided to our members

and make an allocation

to member patronage.


strAtegiC risKStrategic risk is the risk that adverse decisions, ineffective or inappropriate business plans or failure to respond to changes in the competitive environment, customer preferences, product obsolescence or resource allocation will impact the ability of the Credit Union to meet its business objectives. The Credit Union has formal planning processes which result in a strategic business plan and a balanced scorecard that focus on strategic objectives. The Credit Union also uses a comprehensive reporting process to monitor performance relative to plans.

operAtionAl risKOperational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or external events. Exposure to this risk arises from deficiencies in internal controls, technology failures, human error, employee integrity or natural disasters.

Operational risk is managed through the use of policies and procedures, controls and monitoring. The Credit Union mitigates operation risks through internal audit programs, business continuity planning, appropriate insurance coverage and secure technology solutions.

legAl And regUlAtory risKLegal and regulatory risk arises from potential violation of, or nonconformance with, laws, rules, regulations, prescribed practices or ethical standards.

Cornerstone Credit Union operates in a heavily regulated environment. Our structure, policies, and procedures aid us in complying with laws and regulations. Compliance managers are in place to manage and report on compliance on a regular basis.

CApitAl risKCapital risk is the risk that the credit union does not maintain adequate capital to satisfy regulatory requirements, absorb unexpected losses, implement long term strategic plans and signal financial strength. Capital levels can be negatively impacted by high levels of growth, accompanied by insufficient profitability to sustain adequate capital or

through losses incurred in any of the other key risk areas.

In the event that the credit union does not maintain adequate capital, the regulator, Credit Union Deposit Guarantee Corporation can intervene and oversee the operations of the credit union to ensure that capital adequacy is restored.

The credit union maintains a capital management plan and establishes capital policies to ensure capital adequacy is maintained. Capital measures are regularly reported and reviewed by the Board of Directors, audit and risk committee and asset liability committee. Annual and long-term operating forecasts are developed and reviewed regularly and results are stress tested and compared to capital plans and policies to ensure proactive management and capital planning is ongoing. The credit unions operations undergo regular independent assessment through external audit, internal audit and regulatory reviews to ensure that key risks are being mitigated and any potential impacts to capital are reported accordingly.

sUMMAry 2011 was a challenging year and we are proud of the accomplishments of Cornerstone Credit Union. While we continue to focus on serving the needs of our members, the economic and business conditions we face have an impact to the performance of our credit union. Despite the challenges we encountered throughout the past year, we were still able to grow our organization, expand the service delivery provided to our members and make an allocation to member patronage.

Thank you to our Board of Directors and staff for the commitment and hard work put forth over the past year. We also wish to acknowledge and show appreciation to our members for their continued support as our organization evolves, and we look forward to meeting all of your financial needs in the future.

Liquidity risk management requirements are defined by policies and regulatory standards and limits. The Asset Liability Management Committee and the Finance team oversee liquidity risk exposure and management. Cornerstone’s liquidity risk management framework includes the following processes and controls by:

• Monitoring actual and anticipated inflows and outflows of funds on a daily basis.

• Analyzing the adequacy of liquidity using potential outflow modeling and reports results to management and the Board of Directors monthly.

• Actively managing liquidity and funding risk by holding a portfolio of liquid assets.

• Having established borrowing facilities with SaskCentral and its affiliate, Concentra Financial.

MArKet risKMarket risk is the risk that the financial position or earnings will be adversely affected by changes in market conditions such as interest rates and foreign exchange rates. Cornerstone’s market risk primarily arises from movements in interest rates.

The Credit Union employs comprehensive management processes around our market exposures and risk taking activities. These include:

• Defined policy around numerous risk measures.

• Dynamic modeling and income simulation for scenario and stress testing based on changes in interest rates.

• Regular reporting of risk measures and policy comparison to ALCO, and system regulators.

• Implementation of mitigation strategies where and when deemed necessary.

• Use of interest rate swaps or forward exchange contracts to strategically manage risks.


Co-operAtiVe prinCiplesAs a true co-operative financial institution, Cornerstone Credit Union acts in accordance with internationally recognized principles of co-operation:

Voluntary and open MembershipCo-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

democratic Member Control Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organized in a democratic manner.

Member economic participation Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.

Autonomy and independence Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.

Credit Union MArKet CodeCornerstone Credit Union voluntarily adheres to the Credit Union Market Code. This code has been jointly developed by Saskatchewan credit unions, SaskCentral and Credit Union Deposit Guarantee to ensure the protection of credit union members. The code sets forth guidelines for the following areas:

• Complaint handling, which outlines the process for dealing with all complaints regarding the service, products, fees or charges of Cornerstone Credit Union.

• Fair sales by outlining the roles and relationship of staff to all member/clients and in accordance with the financial services agreement.

• Financial planning process to advise member/clients on the risks and benefits associated with financial planning services.

• Privacy to protect the interests of those who do business with Cornerstone Credit Union. Privacy is the practice to ensure all member/client information is kept confidential and used only for the purpose for which it was gathered.

• Professional standards to preserve a positive image of Cornerstone Credit Union among our members, clients and communities.

• Capital management to ensure our capital structure aligns with our risk philosophy.

• Financial reporting to adhere to business and industry standards.

• Governance practices to adhere to the intent and stipulation of our corporate bylaws, which are approved by the membership of Cornerstone Credit Union.

• Risk management to ensure all risks are measured and managed in an acceptable fashion.

Co-operatives are democratic

organizations controlled by

their members, who actively

participate in setting their

policies and making

decisions.



education, training and information Co-operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation.

Co-operation among Co-operatives Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

Concern for Community Co-operatives work for the sustainable development of their communities through policies approved by their members.

As a true co-operative financial institution, Cornerstone Credit Union acts in accordance with internationally recognized principles of co-operation.

28

Auditors’ Report on Summarized Financial Statements to the members of Cornerstone Credit Union Financial Group Limited


Full financial statements can be obtained upon request from any branch of cornerstone credit union or by visiting www.cornerstonecu.com

The accompanying summary consolidated financial statements, which comprise the summary consolidated statement of financial position at December 31, 2011, the summary consolidated income statement, summary consolidated statements of comprehensive income, changes in members’ equity and cash flows for the year then ended are derived from the audited consolidated financial statements of Cornerstone Credit Union Financial Group Limited for the year ended December 31, 2011. We expressed an unmodified audit opinion on those consolidated financial statements in our report dated February 16, 2012.

The summary consolidated financial statements do not contain all disclosures required by International Financial Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of Cornerstone Credit Union Financial Group Limited.

management’s responsibility for the summary Financial statementsManagement is responsible for the preparation of a summary of the audited consolidated financial statements in accordance with International Financial Reporting Standards.

auditors’ responsibilityOur responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, “Engagements to Report on Summary Financial Statements.”

opinionIn our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of Cornerstone Credit Union Financial Group Limited for the year ended December 31, 2011 are a fair summary of those consolidated financial statements, in accordance with International Financial Reporting Standards.

February 16, 2012800 - 119 4th Avenue South Chartered Accountants Saskatoon, SaskatchewanS7K 5X2

AUditors’ report


2011 2010 December 31 (in thousands) (In thousands)

Assets

Cash and cash equivalents $ 38,286 $ 15,117

Investments 143,115 159,711

Member loans receivable 567,858 485,809

Other assets 1,632 2,297

Property, plant & equipment 13,246 11,971

$ 764,137 $ 674,905

liabilities

Member deposits $ 699,723 $ 615,384

Loan payable - 1,444

Other liabilities 5,072 4,614

Membership shares 8,119 7,615

712,914 629,057

Members’ equity

Retained earnings 48,232 44,903

Contributed surplus 2,379 -

Retained earnings 612 945

$ 764,137 $ 674,905

sUMMArized stAteMent of finAnCiAl position

2011 2010 December 31 (in thousands) (In thousands)

Interest income $ 31,853 $ 28,660

Interest expense 9,964 9,069

Net interest Income 21,889 19,591

Provision for (recovery of) impaired loans (8) (164)

Gross financial margin 21,897 19,755

Other income 6,946 6,573

Net interest and other income 28,843 26,328

Operating expenses 23,758 22,163

Patronage refund 1,323 1,283

Income before income taxes 3,762 2,882

Income taxes 433 482

Net income 3,329 2,400

Total other comprehensive income (loss) for the year (333) (411)

Total comprehensive income (loss) for the year $ 2,996 $ 1,989

sUMMArized inCoMe stAteMent And CoMpreHensiVe inCoMe


Year Ended December 31

Accumulated other retained Contributed Comprehensive earnings surplus income

Balance, January 1, 2010 42,503 - 1,356

Net income 2,400

Other comprehensive income (loss) (411)

Balance, December 31, 2010 44,903 - 0 945

net income 3,329

other comprehensive income (loss) (333)

Contributed surplus on transfer of business 2,379

balance, december 31, 2011 48,232 2,379 612

2011 2010

Year Ended December 31 (in thousands) (In thousands)

Cash flows provided by (used in)

Operating activities $ 7,521 $ 3,057

Financing activities 83,626 21,677

Investing activities (67,978) (34,755)

Net increase (decrease) in cash resources 23,169 (10,021)

Cash resources, beginning of year 15,117 25,138

Cash resources, end of year $ 38,286 $ 15,117

sUMMArized stAteMent of CHAnges in MeMbers’ eQUity

sUMMArized stAteMent of CAsH floW


Branch LocaTIons

1. archerWILL Branch Phone: 306-323-2115

2. BJorkdaLe Branch Phone: 306-886-2107

3. eLFros Branch Phone: 306-328-2142

4. ITuna Branch Phone: 306-795-2628

5. keLLIher Branch Phone: 306-675-2252

6. LesTock Branch Phone: 306-274-2178

7. rheIn Branch Phone: 306-272-2156

8. rose VaLLey Branch Phone: 306-322-2261

9. saLTcoaTs Branch Phone: 306-744-5400

10. sprIngsIde Branch Phone: 306-792-2066

11. Theodore Branch Phone: 306-647-2131

12. TIsdaLe Branch Phone: 306-873-2616

13. WIsharT Branch Phone: 306-576-2050

14. Wynyard Branch Phone: 306-554-2518

15. yorkTon Branch Phone: 306-783-9433

8

14

6

12

4 10

2

15

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511

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