Making Banking Easier at Every Step

2015Annual Report

Making banking easier at every step.

TABLE OF CONTENTS

Leadership Viewpoints 3 Easy to do Business With 4 Achievements & Advancements 5 Celebrating 75 Years 6 Advancing Growth & Profitability 7 Report of the Independent Auditor 8 Financial Results & Message to Members 9 Accountability & Transparency 10

© BlueShore Financial Credit Union Leadership Viewpoints Message from Board and Management Chris Catliff, President When we ask clients what they need more of, it’s often not more money, it’s more and CEO, and Dave time. We are all more time-starved than ever before. This is why BlueShore Financial Davenport, Chair, Board continues to introduce new services to save time and increase convenience, while of Directors, in the new remaining true to our commitment to develop long-term relationships to improve BlueShore Financial our clients’ overall financial well-being. branch in Edgemont Village, North Vancouver Through client research you’ve told us that “being easy to do business with” is a priority. We achieve this by combining easy-to-use mobile and digital solutions with our team of trusted advisors to make which opened in fall 2015. the complex, simple; the routine, convenient; and the time-consuming, streamlined.

In addition to launching new online and mobile services for our clients in 2015, we exceeded financial objectives reaching $4 billion in Assets Under Administration, achieved robust growth in total loans and deposits, and reduced loan delinquency to a mere 8 basis points, the lowest level in our history.

For 75 years we have put our clients first, building a stable, profitable, award-winning credit union along the way. We have a rich history of investing locally in BC, from our early days in the ship- building community to today, where we serve a membership base that extends from the North Shore to the Sea-to-Sky, and across Vancouver, Burnaby and the Lower Mainland. We look forward to the next 75 years of progress, innovation and helping our clients achieve financial wellness.

Sincerely, Dave Davenport, Chair, Board of Directors Chris Catliff, President and CEO

© BlueShore Financial Credit Union 3 Easy to do Business With Our reputation for providing expert advice, personalized service and being easy to do business with continues to grow. We pride ourselves on developing deep client relationships that create a unique experience and provide exceptional value.

Each year we survey both our clients and those who don’t bank with us to see how well we’re doing. Our independent survey, conducted by Ipsos Reid, shows we’re on the right track.

Clients consistently tell us that we have a positive impact on their financial well-being in many ways as compared to other financial institutions. By combining high-tech with high-touch, we’re By combining high-tech with high-touch, we’re making it even easier to do business with us through making it even easier a combination of deep, trusted relationships and easy, mobile and digital solutions – whether in to do business with us. person, using our mobile app, online banking on your tablet or desktop, or a call to our locally based Solution Centre.

As clients increase their use of digital channels to manage their money and conduct their everyday banking, in 2015 we expanded our services to include:

■■ Mobile Deposit, a new feature on the BlueShore Financial Mobile Banking app that allows clients to conveniently, quickly and securely deposit Canadian cheques on their iPhone®, iPad® or Android™ device.

■■ Interac Flash® enabled Access Cards to allow clients to make contactless payments quickly and conveniently.

■■ Improved Business Online Banking capabilities designed to help clients effectively delegate their day-to-day business banking, improve oversight on spending and provide a single integrated view of Business and Personal accounts.

■■ Enhancements to our Mobile Banking Apps, including a ‘QuickView’ of account balances without the need to log-in and the convenience of importing contacts from your smartphone if you need to send an Interac e-Transfer payment.

Several times a year we ask clients to voice their opinion on various topics through the BlueShore Financial Online Research Panel. In 2015, panelists shared their thoughts on issues such as: investment rental properties, family-financed education, the role of the executor, and mortgages for self-employed business owners. We use this valuable feedback to inform our product and service decisions.

© BlueShore Financial Credit Union 4 Achievements & Advancements Refreshed and renewed In April 2015 our newest Financial Spa™ opened inside Edgemont Commons, a stunning multi-use building in North Vancouver’s Edgemont Village community. The new branch updates our community presence extending back nearly 40 years.

Our Lonsdale Financial Spa and head office marked its one year anniversary in October. The “West Coast Zen” designed structure continues to gain accolades from clients, visitors and media. The building, landscaping and interior design have all been crafted to provide an environment suited to the delivery of exceptional client service. The building also includes four retail spaces, and this year welcomed Cook Culture to their first North Shore location.

Delivering an exceptional advisory experience We gained increasing recognition as a provider of financial planning expertise and highly personalized service. Business in Vancouver named BlueShore Financial one of the biggest financial planning firms in Metro Vancouver and our advisors were regularly featured in local and national publications including We gained increasing The Globe and Mail, BC Business, Business in Vancouver and The Vancouver Sun, providing commentary recognition as a provider and advice on a wide range of financial and investment topics. of financial planning Embracing our communities expertise and highly Building stronger communities remained a top priority for us in 2015. We proudly returned as personalized service. presenting sponsor of the Vancouver Sun Run, an iconic local event fostering physical and community wellness. Through the associated Shoe Renu program we collected over 500 pairs of shoes for those in need. Rounding out our support of physical wellness events was sponsorship of the Vancouver Triathlon, the BlueShore Financial Spirit of the Shore Half Marathon and the Whistler Half Marathon.

Beyond financial support, Supporting local arts and culture ensures our communities remain vibrant and dynamic. In 2015 playing an active BlueShore Financial continued its support for Capilano University’s BlueShore Financial Centre for role as a volunteer or the Performing Arts, Bard on the Beach Shakespeare Festival, Cornucopia in Whistler and the “Music in the Gallery Series” by the Gordon Smith Gallery of Canadian Art. New this year was support of participant is part of our Family Services of the North Shore’s inaugural Beer by the Pier fundraiser, the Audain Art Museum community commitment. in Whistler and #dinnerpartyYVR, an annual event building connections between communities, We encourage staff to chefs, and charities. We also continued to showcase local artists and their works in our Financial volunteer for causes that Spas and our “Arts in View on Lonsdale” display at BlueShore Centre. matter to them through our “Making Waves” Applauding top talent program, which provides Our success is a direct result of the passion and commitment of our employees. They are a remarkably employees with one hard-working and talented team focused on delivering exceptional service to our clients. Our strong corporate culture and performance were nationally recognized by Waterstone Human Capital as one paid day off a year to of “Canada’s 10 Most Admired Corporate Cultures” and by Aon Hewitt as a “Best Small and Medium volunteer, plus donations Employer in Canada” for the fifth consecutive year. to their chosen causes. Through our 2015 Employee Opinion Survey, staff voiced their opinions on what it’s like to work at BlueShore Financial. More than 90% of staff rated us highly for senior leadership taking action to position our organization for long-term success, our reputation in our local community, and for being proud to be part of the organization. Additionally, it’s clear that our staff value the work culture at BlueShore Financial, as nearly 25% of our new hires in 2015 came from employee referrals.

We’ve come a long way Since 1941 we’ve helped our members reach their financial goals. And as our in 75 years, but what members’ needs have changed, so have we. BlueShore Financial has evolved hasn’t changed is our from a local, community credit union to a financial boutique so we can focus on unwavering dedication the expert financial planning and wealth management services our clients expect to helping our clients and need in a more complex financial world. achieve financial wellness It all began on May 7, 1941, when BlueShore Financial (then North Shore Community Credit and reach their financial Union and later, North Shore Credit Union) was created. With a mere $10 in capital, ten North goals. Shore residents decided to start their own cooperative credit union to serve the needs of the local ship workers and deep-sea fishermen communities. As membership at the credit union grew, we began to expand our offerings and branch network.

By the 1970s, the organization started on a path of innovation to better serve clients’ needs – a strategy we remain committed to today. We were the first BC credit union to bring RRSP products to members. We created a real estate division, built night depository services, and became the first credit union to own an insurance subsidiary (NORCU Insurance Services Ltd.). We were hit with the technology bug in the 1980s and installed the first Automated Teller Machine (ATM) in British Columbia and brought computers into every branch to enable more efficient and automated member service.

While we’ve evolved The next decades were all about customizing the member experience with our “Relationship over the years, our Banking” approach. We created a “Let’s Talk” campaign to give members their first one-on-one commitment to financial planning solution, introduced telephone banking and a Solution Centre service for member convenience, and launched our first Access Card and MasterCard products. community wellness has remained a With the new millennium came new leadership with current CEO Chris Catliff taking the helm in cornerstone of who we 2000. With a focus on personalizing members’ experiences, the organization’s business model are. Whether through shifted to adopt a new vision of transforming the credit union into a Financial Spa™, evoking the sponsorships, donations feeling of “West Coast Zen”, bringing calm and sophistication to the entire banking experience. or volunteer time, we As part of this brand and business evolution, in 2013 the credit union changed its name from North believe in supporting our Shore Credit Union to BlueShore Financial, solidifying the organization’s long-range plan to build a communities to ensure healthy and sustainable organization both on and off the North Shore. The following year, BlueShore they remain strong and Financial opened its flagship Financial Spa and head office in the heart of central Lonsdale, North vibrant places to live, Vancouver. work and play. Our sophisticated yet flexible approach to financial expertise has seen BlueShore Financial’s Assets Under Administration soar to $4 billion today and garner rave reviews from clients, the community and media. Clients who work with a dedicated advisor consistently rate the experience they receive at BlueShore Financial significantly higher than consumers who deal with other financial institutions.

Staff have also continued to rate their working experience highly, earning the organization a spot on the “Best Small and Medium Employers in Canada” list for five consecutive years and multiple Waterstone Human Capital “Canada’s 10 Most Admired Corporate Cultures” awards.

We’ve come a long way in 75 years, but what hasn’t changed is our unwavering dedication to helping our clients achieve financial wellness and reach their financial goals. We thank our clients for taking this journey with us and look forward to a bright future together.

© BlueShore Financial Credit Union 6 Advancing Growth & Profitability Financial discussion and analysis The Canadian economy rebounded in the second half of 2015; however, not at the pace initially expected. Growth for the year of approximately 1% is now anticipated, following a poor final quarter weakened by the continued slide in oil and other commodity prices. The slump in demand from China, coupled with a disappointing performance from other emerging economies, dampened global growth. On the positive side, the U.S. economy remained solid, Europe began a slow improvement, and the UK showed the beginnings of a firming trend. The declining Canadian dollar cushioned some of the impact of the oil price collapse on Canadian exports, but insufficiently to offset the reduction in demand for commodities generally.

In December 2015, the U.S. Federal Reserve Board increased its Federal Funds rate by 25 basis points, signaling the start of a return to “policy normalization” and a level of Federal confidence in the U.S. economy. In contrast, the Bank of Canada cut its overnight rate in January and July 2015 by 25 basis points to help stimulate the flagging economy. This led to downward adjustments to prime interest rates and mortgage rates, and to continued strong demand for home loans. Upward movement in the Bank of Canada rate in 2016 is looking less probable, as excess capacity in the Chief Financial Officer Canadian economy is expected to persist until late 2017. Bill Keen anticipates a competitive mortgage 2015 Financial Performance market once again. BlueShore Financial’s Assets Under Administration reached the $4 billion milestone at the end of 2015 (2014 $3.5 billion). Balance sheet assets increased by $378 million to $3.12 billion (2014 $2.74 billion). Total loans grew by $420 million (an increase of 18.3%) and deposits rose by $280 million (up 11.3%).

Despite the improvement in Net Interest Margin over 2014, the percentage margin declined as a result of further flattening of the yield curve and competitive pricing pressure. Loan growth, however, was outstanding, with strong market share gains once again. Non-interest income was impacted positively by industry leading wealth management results and loan fee revenue from higher volumes.

In the absence of last year’s gain on sale of the Credit Union’s old head office, comparable non- interest income was lower for 2015. Non-interest expenses were moderately higher than last year but were well contained.

Net Operating Income (NOI) of $10.8 million was lower than 2014’s NOI of $14.2 million, due to the absence of the 2014 gain on sale of the old head office. Return on Retained Earnings (RORE) was 8.3% (2014 11.6%) and Return on Average Assets (ROAA) was 37 basis points (2014 55 basis points).

2016 Economic Outlook For more information: The U.S. is expected to maintain its diverging monetary policy from that of Canada. Higher rates are anticipated in the U.S., but on a gradual basis, while Canada holds fast or potentially lowers Full Financial Statements its overnight rate one last time. Canada should benefit from this, but is expected to underperform Management Discussion as commodity prices, particularly oil, remain depressed. Infrastructure spending by the Federal & Analysis Government could, however, add stimulus.

BlueShore Financial anticipates a competitive mortgage market once again. The Credit Union is budgeting for steady growth in loans and deposits with a robust wealth management performance. Balance sheet structure is expected to remain strong, with a healthy capital base, solid liquidity and high asset quality.

Bill Keen, Chief Financial Officer

February 17, 2016 To the Members of BlueShore Financial Credit Union

The accompanying summarized consolidated financial statements, which comprise the summarized consolidated balance sheet as at December 31, 2015, the summarized consolidated statement of income and retained earnings for the year then ended, and related notes, are derived from the audited consolidated financial statements of BlueShore Financial Credit Union for the year ended December 31, 2015. We expressed an unmodified audit opinion on those consolidated financial statements in our report dated February 17, 2016.

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

Management’s responsibility for the summarized consolidated financial statements Management is responsible for the preparation of a summary of the audited consolidated financial statements on the basis described in Note 1.

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

Opinion In our opinion, the summarized consolidated financial statements derived from the audited consolidated financial statements of BlueShore Financial Credit Union for the year ended December 31, 2015 are a fair summary of those consolidated financial statements, on the basis described in Note 1.

Chartered Accountants

Vancouver, BC

BlueShore Financial Credit Union Summarized Consolidated Balance Sheet of December 31, 2015 (in thousands of dollars)

ASSETS 2015 2014 Cash and Cash Equivalents 22,994 135,435 Loans 2,712,066 2,291,719 Interest-bearing Deposits 272,033 221,466 Financial Assets and Investments 33,111 17,549 Premises and Equipment 58,056 58,190 Intangible Assets 8,154 7,922 Other Assets 7,783 5,470 Deferred Income Tax 3,010 1,929 $3,117,207 $2,739,680

LIABILITIES AND MEMBERS’ EQUITY 2015 2014 Members’ Accounts: Demand Deposits 648,018 599,382 Term Deposits 1,804,230 1,591,516 Registered Deposits 290,518 269,000 Accrued Interest 22,326 2,765,092 25,378 2,485,276 Borrowings and Debt Liabilities 164,069 87,322 Other Liabilities 18,660 14,651 Membership and Preferred Equity Shares 1,230 1,275 Members’ Equity: Retained Earnings 132,569 124,977 Equity Shares 29,852 162,421 23,962 148,939 Accumulated Other Comprehensive Income 5,735 2,217 $3,117,207 $2,739,680 Total Assets under Administration (in $ billions) $4.0 $3.5

Summarized Consolidated Statement of Income and Retained Earnings for the year ended December 31, 2015 (in thousands of dollars) 2015 2014 Interest Income 98,788 93,220 Interest Expense 44,408 41,513 Net Interest Income 54,380 51,707 Fee, Commission and Other Income 13,260 18,012 67,640 69,719 Non-interest Expenses 55,793 53,610 Loan Impairment Expense 1,041 1,911 Net Operating Income 10,806 14,198 Donations 108 142 Income Tax Expense 1,995 2,484 Net Income for the Year 8,703 11,572 Retained Earnings - Beginning of Year 124,977 114,193 Dividends on Equity Shares - Net of Tax (1,111) (788) Retained Earnings - End of Year $132,569 $124,977

Dave Davenport, Chair Peter Leitch, Director

Note 1 - Message to Members The accompanying summarized consolidated financial statements have been prepared, in accordance with Section 128 (4) of the Financial Institutions Act, from the consolidated balance sheet of BlueShore Financial Credit Union as at December 31, 2015, and the consolidated statements of income, comprehensive income and changes in members’ equity for the year then ended. Readers are cautioned that these summarized consolidated financial statements do not include all the disclosures necessary for a complete presentation. Complete audited consolidated financial statements for the year ended December 31, 2015, together with the auditors’ report thereon, are available from the Credit Union and will be presented at the annual general meeting of members on April 13, 2016.

Copies of the complete audited consolidated financial statements are also available at all BlueShore Financial locations or online at www.blueshorefinancial.com

© BlueShore Financial Credit Union 9 Accountability & Transparency Committed to excellence in corporate governance BlueShore Financial is governed by a highly experienced nine-person Board of Directors. In addition to approving long-range objectives and policies, the Board closely monitors the Credit Union’s progress. The Board continually reviews its corporate governance practices to ensure they reflect the appropriate oversight, independence and accountability our clients and stakeholders expect and deserve.

In 2015, our Board continued its focus on: 1. Reviewing the organization’s long-term strategic plan and monitoring management’s execution of the plan. 2. Ensuring the organization has a comprehensive enterprise-wide risk management process and is monitoring risk, including emerging risks due to global uncertainties, on an ongoing basis. 3. Reviewing results of ongoing client surveys to understand feedback on what is important to clients and to ensure we are achieving or exceeding expectations. BlueShore Financial is 4. Ensuring the Board has the appropriate regulatory (and other) committees and the expert committed to excellence resources to accomplish their oversight responsibilities. in corporate governance 5. Adhering to the “Standards of Sound Business and Financial Practices,” as recommended by and is governed by a Stabilization Central Credit Union, our industry self-regulator. nine-person Board of 6. With assistance from industry compensation experts, setting the compensation and Directors. performance objectives for the Chief Executive Officer, reviewing the compensation for Executive Management and overseeing the compensation philosophy for the organization. 7. Conducting formal evaluations of overall Board performance, facilitated by a third-party expert. 8. Reviewing the skills and experience required for Board members through the Nominations and Election Committee, and proactively seeking out individuals who they believe best possess the skills required. 9. Completing mandatory industry director education sessions and staying current with governance best practices through leading governance organizations such as the Institute of Corporate Directors. 10. Engaging with management and internal and external auditors to review the internal controls, accounting and auditing to ensure timely and accurate financial reporting.

In 2016, the Board will continue to commit significant time and resources to ensure governance policies reflect best practices for credit unions, including adherence to the Governance Guideline issued by our industry regulator, the Financial Institutions Commission (FICOM).

© BlueShore Financial Credit Union 10 BlueShore Financial Board of Directors BlueShore Financial Executive 2015/16 Management Dave Davenport Chris Catliff Board Chair President and Chief Executive Officer Allan Achtemichuk Fred Cook Investment and Loan Committee Chair Chief Information Officer Brian Atkins Marni Johnson Nominations and Election Committee Chair Senior Vice President, Human Resources and Communications Bill Crawford Vice Chair Bill Keen Chief Financial Officer Yuri Fulmer Human Resources and Compensation Reg Marrinier Committee Chair Senior Vice President, Retail and Business Banking Peter Leitch Audit Committee Chair Doug Smith Senior Vice President, Governance Don Risk Justin Webb BlueShore Financial Subsidiaries Victoria Withers BlueShore Capital Corporation Governance and Conduct Review BlueShore Leasing Ltd. Committee Chair BlueShore Strata Finance Ltd. Head Office & Administration BlueShore Transport Finance Ltd. BlueShore Wealth Ltd. 1250 Lonsdale Avenue North Vancouver, BC Morningside Properties Ltd.

BlueShore Financial Branches BlueShore Financial is an equal partner with Burnaby Capital West Mortgage Inc. in a Joint Venture 4403 Hastings Street that manages Pacifica Mortgage Investment Corporation. North Vancouver 101 - 3053 Edgemont Blvd 1250 Lonsdale Avenue 110 - 1200 Lynn Valley Road 1080 Marine Drive 3680 Mt Seymour Parkway Pemberton 2 - 7438 Prospect Street

604.982.8000 Squamish 102 - 40147 Glenalder Place 1.888.713.6728 Vancouver blueshorefinancial.com 110 - 1100 Melville Street blueshorefinancial 2212 West Broadway @BlueShoreNews West Vancouver BlueShore Financial Park Royal Village, 815 Main Street BlueShore Financial Whistler 101 - 4321 Village Gate Blvd