Alberta Means the World to Us 2013 Annual Report 05 2012–13 Financial Highlights 16 Our Customers 34 Our Senior Executive and Officers 07 ATB at a Glance 20 Our Associates 35 ATB Branches and Agencies 09 Our Strategic Direction 24 Our Corporate Governance 36 Management’s Discussion and Analysis 10 Chair’s Message 28 Connected to Our Communities 115 Consolidated Financial Statements 12 President and CEO’s Message 32 Our Board and Their Committee Roles 184 Glossary Alberta Means the World to Us At ATB Financial, Alberta is everything. We began as a financial institution for Albertans and we have continued to focus exclusively on helping Albertans achieve their dreams for the last 75 years. We are here for this province because Alberta and the people who live here—those who were born here and those from other countries and provinces who have chosen to make their home here—are our world. As we’ve grown, we’ve developed into a sophisticated financial institution with products, services, tools, and expertise that rival those of any of the big banks. Through these resources, we connect our customers to the world. We do so in many ways, like providing financing so growing businesses can reach new markets, and connecting investors with global investment opportunities. Alberta may be our world, but there’s a whole lot of opportunity out there and it’s our job to make sure Albertans can take advantage of it. We will always be the ATB Albertans have known and relied on for 75 years. But we’re also doing things differently now. Innovation has become part of our work. We’re combing the world for brilliant ideas and looking at our business through new lenses. What can we do differently to make our customers’ experiences even better? How can we ensure that Alberta businesses and agricultural producers, many of whom do business around the world, can grow when they’re ready to do so? How can we best give the next generation of leaders what they need as they set out on their journeys? The answers might not be what you expect from a financial institution. We are proud of our past. For 75 years, we have stood by Albertans, and we feel we’ve played a pretty important role in helping this province become the strong, thriving place it is today. But it’s the future that really excites us. Alberta is a world unto itself and, at the same time, we have so much to offer the rest of the world. At ATB, we look forward to working with our customers to improve their own worlds, strengthen Alberta, and change the world in ways we can’t even imagine. 4 2012–13 Financial Highlights For the year ended March 31 2013 2012 Operating results ($ in thousands) Net interest income $ 878,152 $ 815,375 Other income 351,585 304,883 Operating revenue 1,229,737 1,120,258 Provision for credit losses 45,923 23,255 Non-interest expenses 865,892 843,616 Net income before payment in lieu of tax 317,922 253,387 Payment in lieu of tax 73,122 58,279 Net income $ 244,800 $ 195,108 Financial position ($ in thousands) Net loans $ 29,658,461 $ 26,708,813 Total assets $ 33,080,094 $ 31,019,740 Total deposits $ 23,731,371 $ 22,221,032 Equity $ 2,255,461 $ 2,061,563 Key performance measures (%) Return on average assets 0.76 0.63 Operating revenue growth 9.8 9.7 Other income to operating revenue 28.6 27.2 Operating expense growth 2.6 16.0 Efficiency ratio 70.4 75.3 Net interest spread 2.85 2.80 Credit losses to average loans 0.16 0.09 Net impaired loans to total gross loans 0.26 0.35 Net loan growth 11.0 6.2 Performing loan growth 11.1 6.1 Total asset growth 6.6 5.1 Deposit growth 6.8 5.8 Other information Investor Services' assets under management and administration ($ in thousands) $ 8,608,538 $ 7,126,005 Branches 171 170 Agencies 130 130 ABMs 273 276 Associates (head count)1 5,250 5,386 1 Number of associates includes casual and commissioned associates. Performing Loans ($ billions) Deposits ($ billions) 30 $29.6 25 $23.7 $26.6 $22.3 $25.1 $21.0 $21.0 25 $24.1 $20.0 $22.7 20 20 15 15 10 10 5 5 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 ATB Financial 2013 Annual Report 5 5,250 associates provide 5,250 financial products and services 654,000 to over 654,000 Albertans 242 in 242 Alberta communities through a network of 171 branches and 130 agencies; telephone, mobile, and Internet banking; a Customer Care Centre; 171 and 273 automated banking machines 6 Our Dream ATB’s dream is to change our world by putting people first and making dreams come true. Changing our world speaks to the ability to be bold and think big, to refuse to be constrained by conventional wisdom, and to understand that ATB makes a difference to our customers and our province. Putting people first simply underlines how we do things at ATB. Harnessing the power of people—whether our associates or our customers—is the root of ATB’s success. And making dreams come true is our understanding that there is a lot more to banking than transactions. It is about getting results that create value for customers, associates, and Albertans. ATB at a Glance ATB Financial, with over $33.0 billion in assets, is the largest Alberta-based deposit-taking financial institution. We offer retail financial services, business and agriculture financial services, corporate financial services, and investor services. Our 5,250 associates provide financial products and services to over 654,000 Albertans in 242 Alberta communities through a distribution network of 171 branches and 130 agencies; telephone, Internet, and mobile banking; a Customer Care Centre; and 273 automated banking machines. (See page 35 for a full listing of our branches and agencies.) A full range of wealth management products and services are provided under the banner of ATB Investor Services. ATB Financial was established in 1938 as the Province of Alberta Treasury Branches and has been a provincial Crown corporation since 1997. We are focused on Albertans, and our competitors are the myriad of other Canadian financial institutions that conduct business in the province. ATB Financial 2013 Annual Report 7 ATB at a Glance (cont’d) In fiscal 2012–13, through our four lines of business and five strategic service units, ATB: Achieved net income of $244.8 million (an Through Corporate Financial Services (CFS), increase of 25.5%, or $49.7 million), increased continued, for the third consecutive year, to be performing loans by 11.1% to $29.6 billion, the number one financial institution when it and grew deposits to over $23.7 billion comes to supporting Alberta corporations in the (6.8% growth) syndicated loan market1, having participated in nearly 70% of all transactions in Alberta Increased assets under management and administration in ATB Investor Services by Through CFS and AltaCorp Capital, hosted $1.5 billion to $8.6 billion, grew mutual fund a sold-out tw o-day institutional investor assets by 28.1% versus the industry growth conference, focusing on our combined rate of 10.2%, and grew profits to $6.8 million extensive coverage of the Canadian energy services and infrastructure sector Was recognized by Thomson Reuters, with ATB Investment Management winning the Improved company-wide engagement prestigious Lipper Award in 2013—for the scores from 69% to 77%2 year over year second year in a row—for the best mixed-asset Contributed over $4.5 million to communities fund group, based on risk-adjusted return across Alberta through charitable donations, Was given A+ ratings by Fundata Canada on fundraising, and volunteer time four of our six Compass Portfolios for funds Relocated 1,200 associates to our new with the best risk-adjusted returns combined Calgary Campus and moved forward on plans with consistent performance to relocate our Edmonton corporate office Launched MasterCard® PayPass®, mobile Initiated Project Enable to correct the top issues banking, and email money transfers and issued connected with the new banking system, as chip debit cards, making our card services identified by customers and associates offerings best in class Launched a comprehensive new hockey Established the Business Centre of Expertise strategy to support junior hockey and create and the Agriculture Centre of Expertise to memorable experiences for customers and support field professionals in providing families across the province more sophisticated business solutions Through partnerships with Jordan Eberle Captured the spirit of Alberta growers, (Edmonton Oilers) and Mark Giordano (Calgary ranchers, and agribusiness this past year, as Flames), created five television advertisements part of B&Ag’s Long Love This Land video (with close to 100,000 views on YouTube) (more than 25,000 views on YouTube) Reduced our corporate overhead functions, Launched a company-wide productivity resulting in annualized savings of $23.5 million initiative, which contributed to improving our efficiency ratio from 75.3 to 70.4 1 Thomson Reuters, regarding the period of January 1, 2012, through December 31, 2012. 2 Surveyed by AON Hewitt. 8 Our Strategic Direction ATB Financial is a complex organization. We have four lines of business serving a diverse customer base and five strategic service units that operate within some of the most complex combinations of regulatory, privacy, and compliance regimes that businesses face, while trying to find efficiency and ways to create value for our associates and our customers.