2016 Annual Report

Table of ContentsRocky Credit Union Profile ............................................. 2Message from the Board Chair ..................................... 3Management Discussion - Chief Executive Officer ...... 4Management Discussion - VP, Finance......................... 5Community Investment Funds....................................... 6RCU Wealth Management ............................................. 7Board of Directors for 2016 .......................................... 8Executive Management ................................................ 8Staff ................................................................................ 9Staff Recognition .....................................................9 - 10Investing in our Community...................................11 - 12Financial Statements.............................................13 - 19

Community Investment

Rocky Credit Union has always contributed to the well-being of our community, beyond the standard role of financial services and advice that financial institutions offer.

Rocky Credit Union regularly invests capital and time in the Rocky Mountain House region to help create a healthy and prosperous community. Throughout this report we are proud to show pictures of some of the organizations, and community events we invested in this past year.

RCU Staff

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Rocky & District Victim Services

Tour of Alberta

Rocky Credit Union Profile

Our Vision:

Helping Members succeed. Building our community.

Who We Are:

Rocky Credit Union was founded in 1944 by people who wanted a bank that would help local people have the opportunity to grow and prosper by providing good financial service and sound financial advice while sharing the profits in the local community rather than sending them somewhere else.

Since then Rocky Credit Union has evolved into a full service financial institution with:

• Lending services and expertise for consumer mortgages and loans and the commercial/agriculture industry.

• Investing and Wealth Management services for those looking to grow and protect their savings and retirement funds.

• Interconnected system of free credit union ATMs across Canada.

• Convenient online and mobile banking services along with secure online membership and loan applications.

• Over $370 million in assets and 10% equity, providing a strong financial foundation to serve the community for years to come.

With 44 staff to serve the community, and a real dedication to improving the lives of our Members through community investment support, Rocky Credit Union is the place to go to get financial services and feel good about supporting the community at the same time.

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Message from the Board ChairAlan Marshall

On behalf of the Board of Directors I am pleased to provide the 2016 report to our Membership.

A sincere thank you is extended to all of the Directors who served in 2016, as your Board of Directors is integral to the governance, strategic direction and continuing success of the Credit Union. Our

active group of Directors willingly and diligently attend Board meetings and give their time to cuSource financial industry training programs, critical in bringing Directors the skills and ability to professionally serve in the best interests of our Credit Union and Members.

Within the ongoing challenges of the Alberta and local economy, our Credit Union showed continued resiliency in 2016, with our Asset base being maintained at over $370 million. Our operating success allowed us to further build crucial Retained Earnings and overall improve our Financial Position. A revised Capital plan will further strengthen our Capital base as we move to reposition our Capital in line with Bylaw requirements and industry standards.

Our operating success and in particular strong cost-controls, has allowed the Credit Union to declare a 2.85% dividend and return over $436,000 back to our members for the 2016 fiscal year. The Board is pleased to have put a healthy return back in the pockets of our Member shareholders during these challenging economic times. As well, our strengthened Financial Position allowed us to work even more diligently with our Members on challenging lending and investment decisions that could better assist them, as they continued to navigate the ongoing economic turmoil’s of 2016.

The strong Financial Position continues to support a robust personal service culture despite strong competition within the financial services marketplace and an ongoing margin squeeze caused by the low interest rate environment. The Credit Union is committed to quality personal service, along with technology solutions that will support product needs, service efficiencies and service reach for our members.

We are extremely proud of the significant community support initiatives, along with numerous donations to the community organizations and events we were able to provide in 2016, as further highlighted throughout this report. The Board acknowledges and admires the staff’s strong ongoing volunteer commitment to the community, which clearly makes Rocky Mountain House and area a better place to live.

2017 looks to be a more stable year in the important oil and gas industry and local economy. Going forward our Enterprise Risk Management process will continue to balance the needs of our Credit Union with concern for our Members’ financial wellbeing. Be assured that we are financially strong and prepared to adeptly serve the needs of our members through ever changing economic times.

The Board would like to acknowledge the CEO, Executive Management and staff for their professionalism and dedication towards another successful year at Rocky Credit Union.

The Board would like to thank you, our Members, for continuing to support your Credit Union as we strive to provide the best financial services possible to our Members and community.

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2014 2015 2016

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Management Discussion - Chief Executive Officer Doug Glessing

Within a slow local economic environment, 2016 was another successful year with a continued focus on quality member service, prudent balance sheet management,

and practical cost control practices. Within this economic environment, Rocky Credit Union’s Assets stayed at over $370 million, retaining our position as the 8th largest credit union in Alberta and the largest single branch credit union in Canada. Our $1.99 million Net Income is our 5th highest in history while our 2.85% dividend rate significantly exceeds comparable marketplace returns within this historic low rate environment.

In 2016 we returned 21.87% of our Net Income back to our Members in the form of Dividends, while our success also allowed us to continue our regular level of support within our community. In 2016, Rocky Credit Union also gave back 5.25% of Net Income to community organizations and events in the Rocky Region in the form of capital, sponsorships and donations as further featured throughout the report. Proudly, we have allocated approximately $2.4 million dollars in dividends back to our Members in the last five years and approximately $6.0 million dollars have been allocated back to our Members over the last ten years.

We would not be successful without our great employees and we appreciate their hard work and commitment to the credit union. 2016 was the 1st full year under the new organization structure introduced in order to better support Member relationships and the evolving support needs of the organization. The new Supervisory, mid-management

and Management positions have provided internal career development opportunities, along with additional overseer strength, operational input and succession planning alternatives for key positions in the Credit Union, while allowing Executive Management more time to focus on strategic initiatives. We proudly acknowledge the staff’s 2016 community support, with over 1,699 volunteer hours contributed in community participation.

Rocky Credit Union is the “face” of personal service excellence in our community and we strive to build on the personal service standards that our members embrace and which identify our Credit Union. Technology enhancements will continue in an effort to best meet the growing demands and convenience of our more tech savvy Members and provide service efficiencies for our employees. In 2016 we introduced a number of new products/services such as “Deposit Anywhere”, a service convenience allowing Members to deposit their cheques via mobile devices, along with a new Loans Origination System (LOS) that improved our LOS technology capabilities and will continue to enhance our lending services and efficiencies going forward.

Increasing regulatory requirements continue to add significant burden to all financial institutions and Rocky Credit Union remains committed to proactively meeting growing regulatory requirements. Among many changes in 2016 and going forward, we are required to meet changes with the federal Dept. of Finance’s mortgage rule changes, FINTRAC anti money laundering legislation, OECD’s Common Reporting Standards legislation and IFRS 9 Financial Instruments requirements.

Within 2016’s slow provincial, national and global economic environments, Rocky Credit Union’s proactive approach within the local economy resulted in comparatively lower loan delinquency to the Alberta credit union system and tolerable loan losses. Low and volatile oil prices and real estate uncertainty, as well as a low Canadian dollar, challenged our organization in 2016, though a “bottoming out” appears to now provide some optimism for 2017 as well as some opportunities in the tourism, lumber and agriculture industries. We remain cognizant of the lingering financial and resource impacts to our Members in oil/gas, hospitality, retail/consumer spending, reduced disposable incomes and/or job layoffs and recognize the need for us to be there to help assist them with their financial needs wherever possible. An ongoing balanced risk approach will continue to allow us to successfully help Members and our organization navigate through lingering inconsistent economic times and ever changing financial industry requirements and trends. Utilizing robust Enterprise Risk Management practices, we continue to show positive results with regulatory compliance and organizational practices and performance.

Going forward, the new Credit Union Amendment Act passed in December 2016 is expected to provide additional product and service opportunities for Rocky Credit Union, while clarifying and enhancing a number of administrative burdens previously challenging Alberta Credit Unions.

Our success is the result of ongoing Member support and really speaks to the commitment of our Board, Management and Staff to make Rocky Credit Union the best place around to do all of your banking business. I proudly look forward to the continued success of Rocky Credit Union.

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Against the backdrop of a challenging economy, Rocky Credit Union had a successful year in 2016. The Balance Sheet showed marginal contraction, down 0.5% from last year. Cash and Investments grew by 0.14% while Loans reduced by 0.7%. On the other side of the Balance Sheet, Deposits decreased by 1.1% while Equity grew by 4.0%, with a significant boost to Retained Earnings of close to $1.7M.

Rocky Credit Union has not wavered from our “Member First” approach. Rather than pursue growth for growth’s sake, RCU continued to work with lending options for members challenged by the economy as well as continued to put new, quality loans on our books. This was evidenced by our continued low delinquency levels.

On the Income Statement, RCU’s Financial Margin is up over last year by $108,000, however a quick comparison shows that net income is down year-over-year by close to $400,000. Part of the prior year’s higher comparative income was a quarter million dollar loan provision that was brought into 2015’s income. In 2016, personnel costs were up from last year by approximately $107,000. This is primarily due to absorbing a full year of salary costs in 2016 for two 2015 mid-year hires. Non-interest revenues were down year-over-year by $145,000. This was primarily due to freezing account fees, lower loan fees and a reduction of foreign exchange revenues. When it all nets out, Rocky Credit Union achieved a bottom-line of close to $2.0M. Stated differently, in the face of a challenging economy our return on average assets before provision and taxes was 0.72%, down from last year’s 0.88%.

In 2016, Rocky Credit Union strictly adhered to our share dividend policy. After paying dividends into shares, if your regular shares were lower than our share cap, dividends remained in your share account. Those with regular shares above our cap had excess shares transferred into a transaction account for immediate access during the economic downturn. It is Rocky Credit Union’s intention to bring all members with regular shares greater than our cap down to our cap threshold by year-end 2018. Rocky Credit Union will accomplish this while considering the needs of both the members and the credit union.

Looking into 2017 there appears to be some stability with the price of oil; however that may be offset with the unknown of the carbon tax and its effect on households and businesses. Regardless the 2017 Alberta economy still looks to be challenging, and Rocky Credit Union will not be immune from these challenges. From a financial standpoint, our strong capital base will position us to adeptly meet these challenges.

Management Discussion - VP, Finance Randall Sugden

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2014 2015 2016

Millions Balance Sheet

Loans Deposits Assets Capital

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Assets Capital to Assets Capital to RWA

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RCU Community Investment FundThe RCU Community Investment Fund (CIF) supports non-profit organizations and community development cooperatives with capital purchases or construction that will help those organizations as they strive to improve our community.

Rocky Credit Union Ltd. set aside $70,000 in 2014 to award a combination of grants up to $15,000 per year at the 70th through 74th AGMs. Written applications using our RCU CIF Application Form will be received annually each year up until the application deadline of November 30th. Presentations of the grant will be made to each selected applicant at the Rocky Credit Union Ltd. Annual General Meeting held in early February.

Through investing in community groups, Rocky Credit Union helps the overall community not only develop, attract and retain people and businesses, but become an even more vibrant place for our members to work and live, laying foundations to build for more success in the future.

Caroline School Enhancement Project Playground Equipment & Benches 2016

Rocky Curling ClubRenovations 2016

Clearwater Boys & Girls Club Create Wheelchair Accessibilty 2016

Community Legacy ProgramsCredit Union Co-op Aquatic Centre

Co-op & Credit Union Field

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RCU Wealth ManagementRocky Credit Union teamed up with Credential Financial Inc. in 2010 in response to Members’ requests for full financial services. RCU Wealth Management provides access to financial planning, investment and insurance services to our Members and to the general public, for both individuals and businesses.

RCU Wealth Management has access to an extensive range of mutual funds through our partner, Credential Asset Management Inc. a mutual fund dealer. Additionally, RCU Wealth Management has access to segregated funds and life insurance alternatives through Credential Financial Strategies Inc. We have no affiliation to any single insurance or investment company, as our loyalties are to our Members.

Our goal is to provide solid financial services in a comfortable and trustworthy environment. Whether staff is helping set up an education fund or working on a retirement plan with Members, we strive to meet their needs, answer questions and ensure their future is a little brighter.

2016 was a trying year with our provincial economy and unemployment. Many people had to deplete their investments to make ends meet. We still had a profitable year, however are looking forward to a better 2017 with the employment situation improving and hopefully some of the investments starting to be replaced. Ultimately, we want to see successful retirements and positive financial goals being met for our clients.

We strive to offer the best solutions in each individual case and truly care about our Members’ present and future financial planning needs including investments and insurance. We offer investment products such as RRSP, RRIF, LIRA, TFSA, as well as non-registered investments with tax efficient solutions. The insurance offerings include life, disability, long term care, critical illness and guaranteed investment options. Your success is our success!

Elaine Kautz, CFP, Manager, Wealth ManagementNancy Laperriere, Mutual Funds Investment SpecialistChris Leclerc, Mutual Funds Investment Specialist

RCU Apprenticeship & Trades Scholarship

RCU Business Scholarship

RCU Academic Scholarship

RCU Community Minded Scholarship

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2016 Board of DirectorsThe Board of Directors’ role is to oversee the Credit Union and provide direction on long-range objectives, set policy, and monitor Rocky Credit Union’s progress. They work with management to establish and evaluate strategic objectives.

Directors are elected for a three-year term. Duties include establishing corporate objectives, approving corporate strategies and plans, approving financial statements, major financial decisions, and evaluating how well the Credit Union is achieving the Board’s objectives.

Board of DirectorsBack Row: Robert Bryant, Carson Stewart, Mike Day, Tom Morgan, Front Row: Donna Beagle, Alan Marshall, Betts Kariatsumari

Executive Management Back Row: Tammy Young, Ken Peterson, Angie FrenchFront Row: Doug Glessing, Randall Sugden

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Staff MembersBack Row: Avery Erickson, Rachelle Evans, Pam Burrington, Kim Kadyk, Lindsey Haupt, Trish Beach, Nancy LaPerriere, Penny Forster, Patricia MellotFront Row: Kandis Jackson, Jodi Meston, Dan Burger, Melinda Lightbown, Elaine Kautz

Staff MembersBack Row: Kendra Wandler, Joann Thompson, Hennie Webster, Darlene Morrow, Stacey Speight, Judi Tetley, Barb Schooler, Jeannie Nile, Tanya OpdenDries, Patricia Rauch-Erickson, Rhonda RauchFront Row: Tyson Shortneck, Emily Speight, Mark Vos, Jill Munday, Jody OpdenDries Missing: Chris Leclerc, Vanessa Lorentzen, Lani Marte, Vera Mcleod, Robin Montgomery, Colleen Peterson, Megan Teskey, Michelle Wilson, Donna Zenert

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Pam Burrington15 years

MSR I

Patricia Mellott10 years

MSR I

Joann Thompson5 years

Executive Assistant

Halloween “Ghost Busters” Pink Shirt Anti-Bullying Day

Rachelle Evans10 years

Loan Analyst

Doug Glessing40 years

Chief Executive Officer

Years of Service - 2016 Staff Milestones

Chris LeClerc25 years

Financial Service Officer

Kim Kadyk20 yearsController

Canada Day

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Investing In Our Community

Tour of Alberta

Rocky N&S 4-H Beef Clubs Achievement Day

Rocky Pro Rodeo St. Matthew Makerspace Learning Common Area

Alberta Ranch Horse Versatility Association

Rocky Support Services Golf Tournament

Rocky Knights Minor Soccer

Clearwater County Ag Tour

West Central Midget AA Tigers

MRWSARomance n’ Roses

Spruce Valley Vaulters Lochern Elementary School Hot Lunch

RMH & DistrictVictim Services

RMH & District Chambers of Commerce

West Central HS Christmas Feast

Kis Sai Wah Toe Tat Towin Society

Rocky Rams Junior Forest Wardens

National Volunteer Week CR FCSS

Aboriginal Resource Centre

Rocky Darts/STARSFundraiser

Clearwater Centre Grandparent Day

Canada DayFestivities

C.E. Kaniusis Memorial Slow Pitch Tournament

Rocky Oilmen’s Bonspiel

Market on Mainstreet

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Royal Canadian Legion Br.#8 Golf Tournament

Crimson Lake Trail Run

Rocky Ag. Society Rocky Curling Club Leslieville Elks Club

Miniatures in Motion RMCA - WPCA Finals“Battle of the Rockies”

Goldeye Centre Rocky Fish & GameAssociation

Rocky Arts Craft Guild

Northern Crossing Music & Drama Society

Rocky Senior’s Golf Tournament

Women In The WindRally

Caroline Dance West

ROAR Society Leslieville ElementarySchool Penny Carnival

St. Domm Jr.Basketball Team

Kinsmen D & DClearwater B & G Club

Confluence Heritage Society

Leslieville Trail Trotters4-H Club

Rocky Youth RodeoAssociation

Clearwater County Cattlemen’s Day

Caroline Small TownSmack Down

Huskey Spring Swing

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The following Financial Report was extracted from the Financial Statements of the Rocky Credit Union Ltd. for the year ended October 31st, 2016. The Financial Statements were audited by Hawkings Epp Dumont LLP Chartered Accountants who expressed an unmodified opinion on those statements on January 3, 2017.

The Report of the Independent Auditor on the Summary Financial Statements does not cover the other information presented in the Annual Report and the auditors have no specific responsibility for determining whether or not the other information is properly stated.

A complete set of Rocky Credit Union Ltd. Financial statements and notes can be obtained from the branch or online at www.rockycreditunion.com.

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NOTES

Other Community Involvement

FatCat at Santa’s Workshop

Boston Pizza Heart Campaign

FatCat at Market on Main - Jr. Rebels BBQ

Annual Shred-It-Day

RCU’s Float in the Rodeo Parade

School Tour

RCU’s “Gingerbread House” Festival Of Trees

Serving Christmas Dinner at the Confluence Campus