TOGETHER, WE'RE - futurestrong: Prospera Credit Union and ...€¦ · credit union operating under...

A MEMBER’S GUIDE TO THE MERGER OF

Prospera Credit Union AND

Westminster Savings Credit Union

TOGETHER, WE'RE

September 27, 2019

NOTICE IS HEREBY GIVEN THAT A SPECIAL GENERAL MEETING OF THE MEMBERS

ofWESTMINSTER SAVINGS CREDIT UNION

will be held atSurrey City Hall Council Chambers

13450 104 Avenue, Surrey, BC

November 21, 2019Registration Time: 6:00 p.m. | Meeting Time: 7:00 p.m.

FOR THE FOLLOWING PURPOSES

1. Presentation by the board of directors and/or executive leadership team of Westminster Savings Credit Union on the proposed merger of Westminster Savings Credit Union and Prospera Credit Union (the “Merger”).

2. An opportunity for members of Westminster Savings Credit Union to ask questions and receive answers from the board of directors and/or the executive leadership team of Westminster Savings Credit Union on the Merger.

3. A review of the results of the vote of the members of Westminster Savings Credit Union on the special resolution below approving the Merger.

In accordance with the voting process provided for in the rules of Westminster Savings Credit Union, prior to the special meeting, Westminster Savings Credit Union is seeking your approval on the below Special Resolution approving the Merger. In this information circular you will find the information you will need to make an informed decision with respect to the special resolution as well as information relating to the voting process. Please refer to page 20 of this information circular for more information relating to the voting process.

BE IT RESOLVED THAT:

1. Having been presented with the Amalgamation Agreement and upon the recommendation from the board of directors of Westminster Savings Credit Union, the Merger in accordance with and pursuant to section 20 of the Credit Union Incorporation Act (British Columbia) and all of the terms and conditions set forth in the Amalgamation Agreement be and is hereby approved, ratified, sanctioned and confirmed.

2. That any officer or director of Westminster Savings Credit Union is hereby authorized to do all things and to execute all instruments and documents necessary or desirable to carry out and give effect to the Merger and all matters ancillary thereto.

TABLE OF CONTENTS

INTRODUCTION .............................................. 1

VISION ............................................................... 2

BENEFITS OF THE MERGER .......................... 2

Member Benefits ........................................... 3

Employee Benefits ........................................ 5

Community Benefits ...................................... 5

Internal Benefits ............................................ 5

Credit Union System Benefits ....................... 6

Financial Benefits .......................................... 6

WHY MERGE NOW? ........................................ 8

Economic and Political Drivers ..................... 8

Competitive Drivers ....................................... 8

Regulatory Drivers ........................................ 8

HISTORY AND BACKGROUND OF MERGER DISCUSSIONS .................................. 9

ALTERNATIVES CONSIDERED ..................... 10

RISKS OF THE MERGER .................................. 11

MERGER COSTS ............................................... 12

Integration Costs ........................................... 12

Management Incentives and Severance Costs related to the Merger ........ 13

Management: Change of Control Agreements ...................................... 13

HOW NEW PROSPERA WILL OPERATE ...... 14

Name of New Prospera ................................. 14

Shares ........................................................... 14

Start Date and Head Office ........................... 14

Products and Services .................................. 14

Branch Locations .......................................... 15

NEW PROSPERA LEADERSHIP ..................... 16

Governance Structure ................................... 16

Board of Directors ......................................... 16

THE AMALGAMATION AGREEMENT ......... 17

Key Provisions of the Amalgamation Agreement ............................. 17

MEMBERSHIP VOTE INFORMATION .......... 20

HOW TO VOTE ................................................ 20

Voter Eligibility ............................................... 20

Voting Method ............................................... 20

Voting Period ................................................. 20

Voter Confidentiality ...................................... 20

More Information ........................................... 21

QUESTIONS AND ADDITIONAL INFORMATION ABOUT THE MERGER ........ 21

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS .......... 22

22019 Special Resolution

INTRODUCTION For over 75 years, Prospera Credit Union (“Prospera”) and Westminster Savings Credit Union (“Westminster” and together with Prospera, the “Credit Unions”) have been pioneers and innovators, growing because they are committed to meeting the needs and expectations of their members, employees and communities.

Today, member demands are changing as quickly as the financial services industry itself. The Credit Unions recognize this evolution and the imperative to stay ahead of it, to provide the best service and advice for members, fulfilling careers for employees, and investment in our communities. Because of this, the boards of directors of Prospera and Westminster believe it is in the best interests of these groups to amalgamate the two Credit Unions (such amalgamation being referred to throughout this information circular as the “Amalgamation” or “Merger”).

This information circular explains both the benefits and risks of the merger and why both boards of directors enthusiastically and unanimously believe that by coming together and creating a stronger credit union we will be in the best position to innovate and lead, invest and grow, provide new products and services, provide employees with expanded job and training opportunities, and communities with greater resources.

As members, you are owners, not just customers. All members have an equal say in how their credit union operates and members can voice their opinions and vote on the issues that matter to them. The decision to amalgamate is no different, and this information circular (together with the related Supplemental Information Package (which is available at your local Westminster branch or online at futurestrong.ca)) is meant to provide you with the information you need in order to make an informed voting decision.

The new credit union, adopting the name Prospera Credit Union (such new credit union continuing as a result of the Merger shall, for the purposes of this information circular only and for distinction throughout this information circular from the current pre-merger credit union operating under the name Prospera Credit Union and defined in this information circular as Prospera, be referred to herein as “New Prospera”, but for clarity, upon amalgamation, be known legally as Prospera Credit Union), will result from a merger of two credit unions that are likeminded when it comes to their values and principles. Both Credit Unions share a similar DNA, from the way they started to the way they have grown, to their purpose and values. Both are cooperatives founded with the express purpose of helping members achieve their financial goals, with deep roots in the communities stretching back seven decades. Both Credit Unions provide hundreds of employees with rewarding careers, are considered top employers and are Great Place to Work™ certified.

New Prospera will be better positioned to become a stronger, better credit union for British Columbians. The number of branches will effectively be doubled, extending from Vancouver through the Fraser Valley and up to the Okanagan, allowing members to do their banking wherever it is most convenient for them. It is expected to have the scale and capital to invest in the technology, products, and services that matter most to members and employees. It is expected that as a result of its increased size, New Prospera will have an opportunity to provide more affordable banking options to its members over time and will offer more dynamic and fulfilling career opportunities for its employees. New Prospera will remain deeply committed to the communities it serves and will be able to invest even more towards building strong communities. It will achieve all of this (and more) while still maintaining the personalized service, professional financial advice, and local feel members know and love.

VISION The vision for New Prospera is to build upon the Credit Unions’ roots as community based, purpose-driven organizations which exist to enrich the lives and the communities in which they serve. Prospera and Westminster recognize that this is a unique opportunity to do something special together, to tangibly contribute to the growth of the British Columbia economy, and to establish a sustainable business model that allows New Prospera to give back to its communities, while adding significant value to its individual and business members, and offering dynamic and fulfilling careers for its employees. Not just for today, but for generations to come.

BENEFITS OF THE MERGERAt the outset of merger discussions between the Credit Unions, the focus quickly shifted from a merger of two credit unions to the opportunity to create a new and better credit union. The Merger presents a unique opportunity to create something special by imagining what New Prospera could look like and be known for over time. How would New Prospera ‘stand out’ in the crowded space of banks, credit unions and other financial institutions? What would it mean to be bold and innovative in fashioning a future for New Prospera? How would New Prospera partner with and support its communities?

Today, New Prospera is envisioned as a community based, purpose-driven organization that, at its core, will exist to enrich the communities in which it serves, and the lives of its members and employees. The Credit Unions believe that the Merger presents an opportunity to serve these groups in a deeper way, and they are excited to seize that opportunity.

The Merger of these two successful credit unions is expected to create a $9.5 billion financial services provider that has the combined resources and capital to invest in members, including local businesses, in ways neither of the existing Credit Unions could do. This includes investing in enhanced products and services, technological innovation, and greater convenience, with anytime, anywhere banking.

The merged credit union will be the third largest credit union in B.C. and the sixth largest in Canada. The Merger is anticipated to result in annual cost savings of between $10 million and $16 million from improved operational efficiencies and enhanced operational cooperation. New Prospera is committed to returning these savings to members through more competitive pricing, innovative solutions and enhanced products.

This information circular together with the related Supplemental Information Package provide the necessary detail and information to allow members to make an informed decision with respect to the Merger. If you have any questions related to the Merger after reading these documents, please contact Westminster at [email protected], or call 604.517.0100 for further information.


What Members Are Asking For Highlighted Benefits Offered Through New Prospera

• Embrace and invest in technological innovation.

• Focus on providing existing and future members with significant value in terms of service provided and products offered.

• Give staff the tools they need to provide rich and meaningful advice to members, helping them reach their financial goals.

• Greater wealth management options.

• More investment in enhanced staff training and retention of top-quality financial services employees through additional career and development opportunities.

• With increased scale, New Prospera expects that over time it will have an enhanced opportunity to offer members more competitive account and service fee pricing.

• New Prospera will have an enhanced ability to effectively price and serve a broader selection of business owners and local businesses with larger lending limits.

• Provide an effortless experience – easy, convenient and user-friendly, delivered to members the way they want to be served.

• New Prospera will double the current number of Prospera and Westminsters' branches, creating a network extending from Vancouver through the Fraser Valley and up to the Okanagan.

• An extended rollout of better online and mobile channel capabilities, such as online chat and mobile mortgage specialists.

• Enhanced digital capabilities will provide opportunities that are intended to make it easier for all members to do their banking whenever, and wherever, is most convenient for them, whether that is online, in branch, or through an app.

• The local business member experience is expected to be substantially improved with innovative solutions, personal relationships, expanded branch networks, mobile relationship management, improved products and services, and streamlined lending processes.

Enhance product offerings and quality of service

Make banking more affordable

Make banking more convenient

Make banking simpler and faster

Member Benefits

Below are some of the direct benefits of the Merger to members, employees, communities and the industry.

Digital First: Enhancing Technology to Better Serve Members

The Merger provides enormous opportunities for New Prospera to function in ways that Prospera or Westminster couldn’t achieve on their own. For instance, New Prospera will employ a “digital first” strategy, which includes revamping its processes, tools and capabilities, products and services and data analytics, providing the capacity to innovate. Members benefit from innovative solutions, practical help and advice throughout their personal and business life cycles, and an effortless experience – easy, convenient and user-friendly, delivered to members the way they want to be served.

By tapping into technological innovation, New Prospera will provide the digital tools that save members time and provide them with valuable insights into their personal finances and businesses through data analytics. Moreover, by automating internal processes, New Prospera will enable employees to spend more time providing meaningful advice to members.

The Go-To Financial Institution for B.C. Local Businesses

In recent years, both Prospera and Westminster have built significant strengths in serving local businesses, the economic backbone of B.C. When combined, New Prospera will offer an increased level of expertise and business banking solutions to local business members from Vancouver to the Okanagan. In addition, both Credit Unions offer a complementary line-up of business products and services including commercial loans, mortgages, project financing, merchant services and business lines of credit.

With New Prospera, business will continue to be personal. Prospera and Westminster have always focused on local businesses and currently serve 10,000 local businesses. It is intended that a successful Merger will only sharpen that focus. Together, we are committed to serving the local business market and its entire eco-system, including employees, owners and their families. This means:

• We want to be the best in providing expert advice and guidance to local businesses while providing them with a comprehensive platform of products and services for their future success and growth.

• We consider ourselves a true financial partner for business owners – one that cares enough to invest in them as people, helps them grow their financial resilience, and strengthens their professional network.

• We will offer a comprehensive suite of products and services intended to position us as the partner of choice for business owners.

We are confident New Prospera will become B.C.’s acknowledged leader in serving business owners, their families and their employees, and other members of their business networks.

Enhanced Service for Personal Members

A focused and targeted approach to small businesses does not mean abandoning our other members, far from it. In fact, in serving local businesses, New Prospera expects to increasingly support the eco-system of those businesses which includes its owners, employees, families and the communities they live in. Approximately 90% of New Prospera’s members are personal members, who will also be better served by New Prospera. For example, members will have greater access to high-quality advice from experts, more branches that allow them to meet where and when they want and more convenient banking options.


Employee Benefits

Employees are core to the success of the Credit Unions, and they make meaningful contributions to community service. New Prospera will offer a wide range of career opportunities for its employees that neither Prospera nor Westminster can currently provide, building upon the Great Place to Work™ certifications both Credit Unions have. Over time, it is expected that this will include the creation of new roles, expanded scope of responsibilities around existing positions, dynamic and fulfilling career opportunities, enhanced leadership opportunities, improved training and contemporary working arrangements fit for a large, diverse group of employees. New Prospera will invest in improved technological solutions that make it easy for employees to do their jobs and enjoy a modern workspace. The geographic diversity of New Prospera also allows employees to have wider mobility and career options.

Community Benefits

Both Prospera and Westminster have made important investments in a variety of community initiatives. Using the combined resources from both Credit Unions and having access to an increased financial capacity, New Prospera will create deeper, more robust relationships within the communities it serves. New Prospera is forecasted to make a $4.5 million community investment over the first five years after the Merger, plus $1.6 million from the existing Westminster Savings Foundation. In addition, the larger employee base will enable a greater volunteer commitment to local community initiatives.

Internal Benefits

The combined operating capacity of New Prospera will allow it to expand its offerings to members and capture business that the legacy Credit Unions would not have been able to serve effectively on their own. Related to the expansion of local businesses, New Prospera expects that it will be able to attract the individuals connected to small and local businesses (e.g. employees, owners and related families) to its other business lines such as wealth management, automobile and equipment leasing, commercial and personal banking/lending and insurance.

A primary synergy that New Prospera will enjoy is effectively doubling its resources while executing from a single and powerful brand platform across all trade areas. Supported by market research, we have chosen to leverage the existing Prospera Credit Union name and brand as a core pillar of its strategy, as it was seen to possess several desirable advantages including:

• a strong brand presence;

• a set of positive brand attributes from which to execute New Prospera’s strategy;

• little to no perceived geographic limitations, and

• more cost-efficient and less costly than promoting a new brand.

Leveraging this existing brand will allow the Credit Unions to focus on other aspects of the Merger and assist in developing an enhanced brand for New Prospera in the future.

Credit Union System Benefits

B.C.’s credit union system has supported the growth of B.C.’s economy for generations. The Merger is expected to result in a better and stronger New Prospera for the entire B.C. credit union system. New Prospera will possess the resources necessary to better serve its members and the communities, the scale to compete within an increasingly competitive landscape and have a stronger balance sheet and financial position to withstand uncertain economic events.

As the third largest credit union in B.C. and the sixth largest in Canada, New Prospera will have a stronger voice and an enhanced position to influence decisions and changes within the credit union system. It will also have a greater ability to interact with and influence suppliers and to explore new business opportunities.

Financial Benefits

Comprehensive and detailed financial analysis and modeling were completed as part of the due diligence and pre-merger process. The financial model was developed on a conservative basis and represents five year projections for the balance sheet and income statement of New Prospera.

New Prospera will undoubtedly benefit from economies of scale and the ability to pool resources in order to positively impact its bottom line. The analysis completed by both Credit Unions demonstrates that the Merger will create a solid foundation for future growth and position New Prospera for more success than either Credit Union could achieve on its own.

The financial model demonstrates that the Merger will result in significant economies of scale, stronger and more robust asset growth, a larger capital base, improved profitability and cost efficiencies. Key points from the analysis include:

• New Prospera is anticipated to have annual cost savings of between $10 million to $16 million as a result of better economies of scale and enhanced operational streamlining. These cost savings, in turn, enable New Prospera to make more and smarter investments in innovative solutions for members.

• New Prospera is expected to have over $11.9 billion in assets under management in five years, which would translate into being among the top three largest credit unions in British Columbia and the top five largest in Canada.

• New Prospera is expected to contribute significant earnings to its capital base over the five year period greatly enhancing available capital and building a solid foundation for future growth.

• Greater opportunities to invest in technology, product development, communities and staff.

With enhanced scale will also come new growth and revenue opportunities, a greater ability to gain efficiencies and keep operating expenses lower, and the ability to build a stronger market presence and attract members. The analysis represents a truly compelling financial business case for the Merger of the two Credit Unions.


OPENING YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 5YR CAGR

Balance SheetTotal Assets $7.7B $8.0B $8.2B $8.6B $9.0B $9.5B 4.2%Total Assets Under Management

$9.5B $9.9B $10.2B $10.7B $11.3B $11.9B 4.6%

Total Deposits $6.0B $6.3B $6.5B $6.8B $7.1B $7.4B 4.3%Total Capital $414.5M $434.8M $460.1M $495.8M $537.6M $585.0M 7.1%

Income StatementTotal Revenue $167.4M $178.2M $186.5M $194.2M $204.9M 5.2%Total Expense $153.3M $153.1M $151.3M $152.9M $157.8M 0.7%Net Income $14.1M $25.1M $35.5M $41.3M $47.0M 35.0%

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Key Performance RatiosCapital 12.6% 12.7% 13.0% 13.5% 14.1%Liquidity 14.8% 13.7% 13.0% 13.2% 11.7%Return on Assets 0.2% 0.3% 0.4% 0.5% 0.5%Return on Equity 3.8% 6.4% 8.4% 9.0% 9.4%Expense Ratio 1.9% 1.8% 1.7% 1.6% 1.5%Operating Efficiency 89.3% 82.2% 76.1% 73.1% 70.9%

The following table shows more details on the financial opportunity available through this Merger.

Financial Summary

For modeling purposes, the projections are based on a five year horizon noted as Year one to Year five. The date of the Amalgamation is currently undefined, but for consistency and modeling purposes is assumed to be effective as at January 1, 2020.

The above financial summary does not represent a full strategic plan, operating plan or tactical plan, or the possibility of potential associated revenue uplift according to New Prospera’s strategy. As part of integration planning, the management and board of directors of New Prospera will develop a more detailed strategic plan, supported by a comprehensive operating plan, that reflects the needs of the business.

WHY MERGE NOW?In addition to the benefits cited above, economic, political and regulatory considerations also support the case for the Merger. Today, the Credit Unions operate in an increasingly competitive and complex environment.

Member expectations of financial institutions are only increasing, while financial services are being disrupted by new and legacy competitors. The continued long-term viability of the credit union model is at potential risk unless it is willing, on a continual basis, to explore how to create value for members.

A merger, which allows for combining capital and a much greater ability to invest in innovation, will help Prospera and Westminster to improve value for members and better position them to face increasing competition.

Economic and Political Drivers

The competitive landscape for financial services organizations is changing daily. Technology giants such as Apple and Facebook are disrupting the banking industry through new payment methods and data collection, while open banking legislation in Europe and Australia is enhancing competition in those countries. With technology companies encroaching and Canada likely to move toward open banking, financial institutions such as Prospera and Westminster must redefine their roles and prospects for future growth in a new and open market.

The expectations for slower economic growth in B.C., along with the relatively high cost of housing and its impact on recruitment and retention of labour, can together translate into a slower-growth operating environment, potential interest rate changes and unstable investor confidence.

In addition, international factors such as Brexit, the United States-Mexico-Canada Trade Agreement and rising interest rates, all add uncertainty to financial institutions’ day-to-day operations.

Competitive Drivers

Both Prospera and Westminster currently compete with all major Canadian banks, larger credit unions, mortgage lenders, and non-traditional new entrants, who offer similar products and services. The number of entrants has created a hyper-competitive market, which are expected to add further stress and costs to operations. New Prospera’s increased market presence and scale will better position the credit union to meet these challenges.

Regulatory Drivers

The costs that B.C. credit unions must absorb to effectively manage increasing regulatory pressures continues to rise. These include costs for anti-money laundering, cybersecurity, staff training, and enterprise risk management. The costs are estimated at over $100 million per year, equaling nearly $55 per member for medium-sized credit unions such as Prospera and Westminster.


HISTORY AND BACKGROUND OF MERGER DISCUSSIONSOver seven decades, Prospera and Westminster have been pioneers and innovators, growing and succeeding because they are committed to meeting the needs and expectations of members, employees and communities. The Credit Unions’ vision of one merged entity is built on a foundation of this common history and shared mission as financial cooperatives.

Fall 2019 FICOM issued a Letter of Consent, pursuant to which it granted its consent to the Merger. To view a complete copy of the Letter of Consent issued by FICOM, please refer to Section 1 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca

Early 2018 The boards of directors of Prospera and Westminster initiated the Merger discussions.

June 2018 Both boards entered into a Memorandum of Understanding (“MOU”) outlining their agreement on certain key implementation principles.

June 2018 Both boards of directors passed a unanimous resolution approving the MOU.

June 2018 The Financial Institutions Commission of British Columbia (“FICOM”) advised that an application under B.C.’s Credit Union Incorporation Act was being considered and confirmed the timing and process for the Merger. According to the MOU, a Joint Merger Team, comprised of the chairs of both boards of directors and two other directors from Prospera and Westminster, have authorized to undertake in the advancement of the Merger.

July 2018 A nominations committee formed to begin deliberations surrounding the composition of the board of directors of New Prospera. Shortly thereafter, Watson Inc., an independent governance firm, was retained to ensure that New Prospera begins with an effective governance composition.

July 2018 Cree Leadership Consulting was engaged as an independent advisor to help select a new Chief Executive Officer of New Prospera.

August 2018 Prospera and Westminster engaged law firm MLT Aikins LLP to act as an independent project and legal advisor to assist with legal due diligence and the overall transaction and engaged Ernst & Young LLP to assist with financial, accounting, tax, intellectual property and information technology due diligence.

September 2018 Representatives of Prospera, Westminster and legal counsel met with FICOM representatives to discuss the proposed transaction at a high level.

September 2018 The independent external advisors and respective management teams delivered their findings in respect of due diligence on Westminster to the board of directors of Prospera, and in respect of due diligence on Prospera, to the board of directors of Westminster.

October 2018 Prospera and Westminster boards of directors concluded that there were no findings during due diligence that gave any reason to not proceed with the Merger. Following this, the executive leadership teams of Prospera and Westminster jointly developed a vision and strategy for New Prospera that was presented and unanimously endorsed by each board of directors.

November 2018 Prospera and Westminster met again with FICOM representatives and following this finalized the Merger documentation.

February 2019 Merger documentation was approved by both boards of directors and the Merger application submitted to FICOM for review and consent.

March 2019 Prospera and Westminster formally advised members that the two Credit Unions were contemplating a merger and had submitted an application to FICOM.

ALTERNATIVES CONSIDEREDThe Prospera and Westminster boards of directors both looked at alternative options to the Merger, including:

• Maintaining the status quo• Pursuing a federal credit union mandate• Forming a strategic alliance or joint ventures.

However, the boards of directors concluded that those alternatives did not provide the member, employee and community benefits that the Merger will provide.

For a brief description of each of the alternatives considered by the boards of directors, please refer to Section 2 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca.

This clear alignment was a catalyst for Prospera and Westminster to begin exploring whether the two institutions could benefit from the Merger.

2018 2019


RISKS OF THE MERGERBoth boards of directors of Prospera and Westminster have assessed the risks of the Merger and concluded that the benefits of the Merger far outweigh the risks. New Prospera has developed key internal control and risk management policies and will effectively track and mitigate risks for members’ benefit. The table below outlines the major merger risks and New Prospera’s approach to managing them.

Risk Description Risk Management and Mitigation Approach

Merger Process

A merger is a transformative event for each credit union and many key items must be addressed correctly from the outset.

Prospera and Westminster have managed this risk by:

• Establishing a Joint Merger Team to manage issues; and • Having independent advisors lead robust merger planning activities

for both Credit Unions.

Expected Synergies May Not Materialize

The financial model is based on the occurrence of future events, which are by nature uncertain.

The financial model of New Prospera is based on reasonable and conservative assumptions, and potential outcomes are well understood.

Due Diligence Risk

Details such as undisclosed liabilities may exist that the other Credit Union is unaware of.

The detailed due diligence process involved outside legal and financial expertise for review and interpretation of findings.

Impact on Operations

Risks to both Credit Unions to operate as usual while preparing for eventual integration.

An Integration Management Office (“IMO”), supported by expert external advisors, has been established to align key financial, member and operational practices and ensure sufficient resources exist to run day-to-day operations.

Technology Adoption and Integration

Risks associated with running multiple systems and platforms during integration.

Effective technology transition and integration plans will be developed to minimize disruption while ensuring data quality and governance.

Loss of Westminster Goodwill

If the Merger proceeds, the Westminster brand will cease to exist.

A thorough brand review points to value in continuing the “Prospera” name, rather than creating a new name, and will allow the Credit Unions to focus on other aspects of the Merger.

Culture Risks associated with integrating two corporate cultures.

A primary driver of the Merger was strong evidence of a commonality of culture and values shared by the two Credit Unions.

Stakeholder Impact Prior to Completing Merger

Given the time between announcements of the Merger to final implementation, there is a risk that stakeholders will have a negative reaction to the uncertainty and the potential impact of the transaction.

The primary stakeholders affected by the announcement will be the respective employees and members of the Credit Unions.

The Credit Unions are committed to an effective employee engagement and communication plan for the period following the announcement and continuing after closing during the integration period.

Member Approval

A condition of the Merger will be the respective approval of the requisite majority of members of each Credit Union.

The Credit Unions have engaged in a thorough process and believe that the Merger is a transformative event with significant benefits to all members and is in line with member demands and expectations.

The Credit Unions expect to engage in a robust educational initiative surrounding the transaction to ensure that its benefits are widely communicated and understood by members.

MERGER COSTS

Integration Costs

The anticipated integration costs of the Merger are as follows:

Integration & Merger Expense ($ Thousands)YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Merger Expenses 200Integration Management Office 1,500 350 150Integration & Merger Expense 1,700 350 150

Human Resources 1,243 7,935 3,059 2,862 2,436 2,374Occupancy and Equipment 1,950 594 490 490 490Data Processing & Electronic Banking 3,430 6,198 245Marketing (including new brand advertising) 850 1,395 1,800 2,500Integration Expense Included in Operating Expenses

1,243 14,165 11,246 5,397 5,426 2,864

Total Integration & Merger Expense 2,943 14,515 11,396 5,397 5,426 2,864

The Credit Unions recognize that the key to a successful Merger lies in careful planning, timely integration of systems and processes, and sufficient allocation of human and financial resources for the integration process. For New Prospera’s integration planning, external consulting support will be engaged to assist with establishing an IMO, and helping to develop a multi-year integration plan. The costs of operating the IMO will be spread over three years and are estimated to be approximately $2.2 million during this period. The integration plan will address the development of a future target operating model, the development of the appropriate work streams to ensure an organized alignment and integration of departments, work processes and technology. There will be an early emphasis on ensuring critical “Day One” capabilities and requirements are met, and it is anticipated that the IMO will guide the governance and project management across all organizational functions.

Overall, included in operating expenses over the five year period is $40.3 million in integration related costs, including one time director expenses related to the merger. This includes advertising and promotion for the New Prospera brand, information technology integration, severance and retention costs and compensation harmonization.


Management Incentives and Severance Costs related to the Merger

Built into the financial model established by the Credit Unions to evaluate the financial benefits of the Merger discussed above, were baseline estimates of severance costs related to the Merger, which are off-set against anticipated synergies realized in salary reductions over time. The financial model was built over a five year period and identified cumulative reductions of $38.1M in salaries over that five year period, offset by one time severance payments and retention costs of approximately $7.5M over the same period. Severance costs were modeled by reviewing possible overlapping positions between the two organizations, with a view to eliminate overlapping or duplicative functions. Using these criteria as a baseline, severance costs were modeled by benchmarking against average salaries and benefit loads between both organizations by job level where anticipated overlap exists (e.g. executive, senior manager, middle manager, manager and non-manager) and an assumption of mid-late tenured individuals. It is important to note that no specific positions or individuals were identified for the purpose of financial modeling and there may be opportunities to redeploy resources that are identified as synergies to other areas, which will be further determined by New Prospera’s leadership team and measured against an ability to maintain a sustainable business case, at the time of any such decision. This modeling did not account for natural attrition that may occur. It is also worth noting that Year 1 severance costs include severing certain executive roles and a number of more senior staff whom would most clearly be redundant.

Management: Change of Control Agreements

Both Credit Unions have in place change of control agreements with the executive members of their senior leadership team that are consistent with industry practice in merger situations. The change of control agreements provide these executives with a possible 24 month change of control payment, comprised of: (a) 21 months of base salary, plus a pro-rated incentive payment (calculated in the normal course), if applicable, for such 21 month period, plus 25% of 21 months of base salary in lieu of benefits, in the event that they do not move forward in the same or substantially the same position with New Prospera; and (b) a 3 month completion payment payable upon completion of the Merger. As noted above, the anticipated severance costs resulting from these change of control agreements are included in the modeled severance costs.

HOW NEW PROSPERA WILL OPERATE

Name of New Prospera

New Prospera will operate under the name “Prospera Credit Union”.

Shares

• As the Rules of New Prospera provide that a member is required to hold five (5) Class A Membership Equity shares, on closing of the Merger (in accordance with the terms and condition of the Amalgamation Agreement), the issued shares of Prospera and Westminster will be exchanged for shares of New Prospera as follows:

• one (1) Class A Membership Equity Share of New Prospera will be exchanged for each Class A Membership Equity Share of Prospera; and

• one (1) Class A Membership Equity Share of New Prospera will be exchanged for each Class A Membership Equity Share of Westminster.

In compliance with the Rules of New Prospera, immediately following the share exchanges set out above, New Prospera will redeem from any member holding in excess of five (5) Class A Membership Equity Shares, those shares that are in excess of five (5) at par value which is equal to $1.00 per share.

Start Date and Head Office

New Prospera is expected to commence operations early 2020, subject to regulatory consent and membership approval. Its head office will be located in Surrey. The consolidation of head office locations and back offices is expected to ultimately drive significant annual cost savings.

Administrative functions are expected to be shared across the locations in Abbotsford and Surrey during the early years following the Merger. Longer-term locations will be decided based on operational and optimization factors.

Products and Services

New Prospera will offer a complementary portfolio of banking products and services that will broaden and improve Prospera and Westminster’s existing portfolios. All products currently provided by the two Credit Unions are expected to be part of New Prospera’s offerings, so members will receive access to products that were previously only offered by one or the other Credit Union. All deposits will continue to be insured by the Credit Union Deposit Insurance Corporation.

Upon amalgamating, New Prospera will be immediately equipped with a well-rounded mix of established products, services and business lines as below:

NEW PROSPERA

Consumer & Personal Banking

Commercial & Small Business Banking

Wealth Management & Insurance

Leasing (Automotive & Equipment)


Branch Locations

Both Westminster and Prospera operate similar branch structures. New Prospera is expected to start with 29 full-service branch locations and a complementary geographic branch footprint extending from Vancouver through the Fraser Valley and up into the Okanagan.

NEW PROSPERA LEADERSHIP

Governance Structure

New Prospera’s board of directors and executive leadership team have been selected based on their experience, expertise and proven ability to build successful values-based credit unions that are recognized for moving ahead while giving back to their communities. They will guide the New Prospera through the Merger and beyond.

Board of Directors

The board of directors of New Prospera will consist of nine (9) members who bring with them decades of experience in various industries and in particular the credit union industry. These nine (9) directors include six (6) current members of each respective Credit Union’s boards of directors, ensuring not only continuity, but that the legacy of each Credit Union will be preserved and live on in New Prospera and three (3) new external directors to provide balance and a diverse outlook. The directors of New Prospera will be: Gina Arsens (External), Stacey Crawford (Prospera), Colin MacKinnon (Westminster), Eric Nadin (Prospera), Kam Raman (External), Catherine Roome (External), Rod Thomson (Prospera), Art Van Pelt (Westminster) and Rita Virk (Westminster).

For more information about New Prospera’s board of directors and their bios, please refer to Section 3 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca.

For more information about New Prospera’s executive leadership team and their bios, please refer to Section 3 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca.

New Prospera will be governed in accordance with the new rules. To view a complete copy of New Prospera's rules please refer to Section 6 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca.

Internal Audit

Corporate Secretary

Gavin ToyPresident & Chief Executive Officer

The diagram below shows the new executive leadership team for New Prospera and their respective titles. The team consists of eight (8) members who, like the board of directors, have decades of experience in various industries and in particular the credit union industry. All are current members of the executive leadership teams of Prospera or Westminster, respectively.

Mary FalconerChief Financial Officer

Angela ChampChief Human Resources Officer

Maury KaskChief Marketing Officer

Greg DyckChief Digital & Information Officer

Greg OyhenartChief Strategy & Integration Officer

Diane DouChief Operating Officer

Brian RogersChief Risk Officer

BOARD OF DIRECTORS

Prospera branches Prospera Head Office

Westminster Savings branches

Westminster Savings Head Office


THE AMALGAMATION AGREEMENT

Key Provisions of the Amalgamation Agreement

The following are some key extracts from the amalgamation agreement which was approved by the Credit Unions’ boards of directors in February of 2019 (the “Amalgamation Agreement”) in respect of the Merger. To view a complete copy of the Amalgamation Agreement, please refer to Section 4 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca.

Section Heading SummaryArticle 2 - Pre-Merger Covenants

2.1 Competition Act Approval

As a condition to the Merger the Credit Unions are required to obtain the approval of the Competition Bureau Canada in accordance with the Competition Act (Canada).

2.2 Special Meetings

As a condition to the Merger the Credit Unions will each need to hold a special meeting of its member who will in turn be asked to vote on approval of the transaction.

2.3 Certificate of Amalgamation

Upon approval by the Credit Unions’ members of the Merger, the Credit Unions will submit all necessary documents to the Registrar of Companies of British Columbia in order to obtain a certificate of amalgamation.

Article 3 - The Merger

3.1 Closing Procedures

The Credit Unions agree to, following approval by its respective members, obtain, execute and deliver to one another any other necessary documents or information required to complete the Merger.

3.2 Shares

As the Rules of New Prospera provide that a member is required to hold 5 Class A Membership Equity Shares, on closing, the shares of Prospera and Westminster will be exchanged for shares of New Prospera as follows:

• one (1) Class A Membership Equity Share of new Prospera will be issued in exchange for each issued Class “A” Membership Equity Share of Prospera; and

• one (1) Class A Membership Equity Share of new Prospera will be issued in exchange for each issued Class A Membership Equity Share of Westminster.

In compliance with the Rules of New Prospera, immediately following the share exchanges set out above, New Prospera will redeem from any member holding in excess of five (5) Class A Membership Equity Shares, those shares that are in excess of five (5) at par value which is equal to $1.00 per share.

Section Heading Summary

3.3 Effective Date The merger of Prospera and Westminster will become effective as of the date the certificate of amalgamation referred to in Section 2.3 is issued.

3.4Amalgamated Credit Union Name

The amalgamated credit union will operate under the name “Prospera Credit Union”.

3.5 Registered/Head Office

New Prospera’s registered and head office will be located at 13450-102 Ave., Suite 1900, Surrey, British Columbia.

3.7Amalgamated Credit Union Rules

The credit union rules of New Prospera have been set out as Schedule 3.7 to the Amalgamation Agreement.

Article 4 - Representations and Warranties

4.1 Representations and Warranties

The Credit Unions have made a number of representations and warranties to one another which have provided each party comfort in entering into the Amalgamation Agreement. These representations and warranties cover a wide range of areas and are meant to bring forward any material facts or situations which would jeopardize the success of New Prospera. The representations and warranties are also designed such that each Credit Union has a substantive understanding of the other’s business prior to merging. Upon consultation with independent legal counsel, the representations and warranties are customary for this type of transaction.

Article 5 – Covenants and Risk of Loss

5.1Conduct of Business by the Credit Unions

The Credit Unions have made a number of promises to one another that during the interim period between signing the Amalgamation Agreement and the completion of the Merger they will each continue to operate their respective businesses in the ordinary course of business and in a manner which is consistent with the short and long term success of New Prospera.

Article 6 – Conditions Precedent

6.1 Mutual Conditions

A number of mutual conditions must be met prior to the completion of the Merger. These include, among others, obtaining all necessary approvals including Competition Act approval and member approval as well as there having been no adverse litigation, or any decree or order by a governmental authority or any change in law restraining or prohibiting the transaction.


Section Heading Summary

6.2Conditions in Favour of Each Party

The Credit Unions are not obligated to complete the Merger in the event a representation or warranty of the other is not accurate or complete, if the other has not complied with its obligations or any covenant or if there has been a material adverse change in one of the Credit Unions since the date the Amalgamation Agreement was signed.

Article 7 - Termination

7.1 Termination

The Amalgamation Agreement may be terminated at any time prior to the date on which the certificate of amalgamation is issued as follows:

• by written agreement of the Credit Unions;

• by one Credit Union if there has been a violation or breach by the other Credit Union of any covenant, representation or warranty contained in the Amalgamation Agreement and such violation or breach is not waived by the non-offending Credit Union or cured within forty five days; or

• by either Credit Union if its respective members vote against the Merger.

Article 8 – Compliance with the CUIA

8.1Business Proposed to be Carried On

The business proposed to be carried on by New Prospera is that of a deposit and trust business.

8.2

Products and Services Proposed to be Offered

New Prospera is expected to offer all products and services currently offered by the respective Credit Unions. It is not anticipated that any new products or services (that are not already being offered by Prospera or Westminster) will be introduced nor will any existing products or services be discontinued at the time of closing the Merger.

8.3 Common Bond of Membership

The common bond of new Prospera will be as follows: “All entities and natural persons who live, work or carry on business in the Province of British Columbia.”

8.4 Constitution The constitution for new Prospera has been attached to the Amalgamation Agreement as Schedule 8.4.

MEMBERSHIP VOTE INFORMATIONOn February 21, 2019 the board of directors of Westminster met independently and reviewed the business case and the FICOM application (including all attachments thereto) and resolved that it is in the best interest of Westminster to enter into the Amalgamation Agreement and to give effect to the Merger, to continue business as Prospera Credit Union, pursuant to Section 20 of the Credit Union Incorporation Act (British Columbia) and in accordance with the terms of the Amalgamation Agreement. To view a complete copy of the certified resolution of the board of directors of Westminster, please refer to Section 5 of the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca.

HOW TO VOTE

Voter Eligibility

In order to be eligible to vote in the 2019 Special Resolution, a member must be 19 years or older and be a member in good standing. A member in good standing means a member who, at the date on which good standing is determined:

• holds a minimum of five (5) membership shares;

• has maintained at least one (1) active account with the credit union since the last day of the month which is not less than ninety (90) days prior to the date on which good standing is determined; and

• is not more than ninety (90) days in arrears in any obligation to the credit union.

Pursuant to the rules of Westminster, the date on which good standing is determined for the 2019 Special Resolution is May 31, 2019. Therefore, for the purpose of this vote a person must be a member of Westminster on or before February 28, 2019, in order to be eligible to vote on the 2019 Special Resolution.

Eligible members are entitled to cast one (1) ballot in the 2019 Special Resolution.

Voting Method

Eligible Westminster members can vote by using the ballot included with the voting package and returning it by mail. Eligible Westminster members who use online banking also have the option to vote electronically and securely. To vote electronically, visit futurestrong.ca. Online voting is also available through the Westminster app or mobile version of the Westminster website. Online voting is only available for personal members at this time.

All businesses, corporations, partnerships and other entities can vote through their authorized representative by completing the Designation of Authorized Representative portion of their mail ballot.

Voting Period

Voting commences at 9:00 a.m. on October 30, 2019, and ends at 5:00 p.m. Pacific Time on November 15, 2019. All mail ballots must be received by Panalytics (Westminster’s third party administrator) by 5:00 p.m. on November 15, 2019. Eligible members are entitled to vote only once, either by mail or electronically.

Voter Confidentiality

An independent returning officer is appointed by the board of directors of Westminster to oversee the election ballot counting process. The ballot is designed to ensure the secrecy of your vote. All ballots are produced with a unique barcode generated by random selection. Mail and online ballots are sent directly to the returning officer care of Panalytics for authentication utilizing a barcode scanning system. Mail ballots are scanned after electronic votes have been cross-referenced to eliminate any duplicate votes. After all ballots are scanned and electronic votes tallied, the results are tabulated and provided to the returning officer.


More Information

For more information about the voting process, please go to futurestrong.ca, email [email protected], or call 604.517.0100

QUESTIONS AND ADDITIONAL INFORMATION ABOUT THE MERGERFor more information about the Merger generally or if you have any additional questions, please go to futurestrong.ca, email [email protected], or call 604.517.0100. Additional information can also be found in the Supplemental Information Package available at your local Westminster branch or online at futurestrong.ca

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis information circular, including documents incorporated by reference herein, contains forward-looking statements and information. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “potential”, “pro forma” and similar expressions are intended to identify forward-looking statements or information. Forward-looking information presented in such statements or disclosures may, among other things, relate to: (i) the anticipated benefits from the Merger; (ii) the expected completion and implementation date of the Merger; (iii) certain operational and financial information; (iv) the nature of new Prospera’s operations following the Merger; (v) sources of income; (vi) forecasts of capital expenditures, including general and administrative expenses; (vii) anticipated income taxes; (viii) new Prospera’s business outlook following the Merger; (ix) plans and objectives of management for future operations; (x) forecast cost savings; and (xi) anticipated operational and financial performance.

Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to Prospera and Westminster, as applicable, including information obtained from third party industry analysts and other third party sources. You are cautioned that the following list of material factors and assumptions is not exhaustive.

The factors and assumptions include, but are not limited to:

• the approval of Prospera’s and Westminster’s members;

• satisfaction of the other conditions for completion of the Merger, including the receipt of all required regulatory and third party approvals to complete the Merger;

• the completion of the Merger;

• no material changes in the legislative and operating framework for the business of Prospera and Westminster, as applicable;

• no material adverse changes in the business of either or both of Prospera and Westminster; and

• no significant events occurring outside the ordinary course of business of Prospera or Westminster, as applicable such as a natural disaster or other calamity.

The forward-looking information contained in statements or disclosures in this information circular (including the documents incorporated by reference herein, including in the Supplemental Information Package) is based (in whole or in part) upon factors which may cause actual results, performance or achievements of Prospera or Westminster, as applicable, to differ materially from those contemplated (whether expressly or by implication) in the forward-looking information. Actual results or outcomes may differ materially from those predicted by such statements or disclosures. While Prospera and Westminster do not know what impact any of those differences may have on their respective businesses, results of operations and financial conditions may be materially adversely affected.

You are further cautioned that the preparation of financial statements in accordance with International Financial Reporting Standards requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

You are cautioned that the foregoing list is not exhaustive. Readers should carefully review and consider the risk factors described under “Risk of Merger” and other risks described elsewhere in this information circular and in the documents incorporated by reference herein, including in the Supplemental Information Package.

The forward-looking statements and information contained in this information circular (including the documents incorporated by reference herein, including in the Supplemental Information Package) are made as of the date hereof and thereof and Prospera and Westminster undertake no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required by applicable laws. Because of the risks, uncertainties and assumptions contained herein and in the documents incorporated by reference herein, Prospera and Westminster members should not place undue reliance on forward-looking statements or disclosures. The forward-looking information and statements contained herein and the documents incorporated by reference herein are expressly qualified in their entirety by this cautionary statement.


Through our community investment initiatives, Westminster Savings is proud to contribute more than $600,000 annually to BC communities, enriching lives and making our neighbourhoods healthier and more inclusive places to live. Specifically, we're passionate about supporting arts and active living opportunities for families and youth. Through our Official Community Partnerships with Arts Umbrella, Special Olympics BC and KidSport BC, we’re creating after-school arts programs for vulnerable children, enhancing programs for athletes with intellectual disabilities, and providing sport registration fees for kids who otherwise could not afford to participate.

Your vote can help support even more families in our local communities. Westminster Savings will donate $1 for every ballot received during the Special Resolution voting period between our major community partners: KidSport BC, Arts Umbrella and Special Olympics BC, up to a maximum of $5,000.

To learn more about our community partnerships visit: wscu.com/Community

Westminster Savings will donate $1 for every ballot received.

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