SECTOR OUTLOOKOntario Credit Unions and Caisses Populaires

Third Quarter Ended September 30, 2018  Sector   Credit Unions Caisses Populaires

Financial Highlights 3Q-2018* 2Q-2018 3Q-2017 3Q-2018* 2Q-2018 3Q-2017 3Q-2018* 2Q-2018 3Q-2017Income Statement (% average assets)    Net Interest Income 1.97 1.97 1.95 1.92 1.93 1.90 2.26 2.21 2.29Loan Costs 0.06 0.06 0.06 0.05 0.06 0.05 0.10 0.07 0.08Other Income 0.50 0.50 0.53 0.47 0.47 0.50 0.67 0.70 0.70Non-Interest Expense 1.88 1.90 1.97 1.89 1.91 1.98 1.80 1.83 1.89Taxes 0.11 0.10 0.08 0.09 0.08 0.07 0.23 0.23 0.19Net Income 0.43 0.42 0.37 0.37 0.37 0.30 0.81 0.79 0.83Balance Sheet ($ billions; as at quarter end)    Assets 62.0 60.3 56.3 54.1 52.6 49.0 8.0 7.8 7.3Loans 54.5 52.8 48.6 47.6 46.1 42.4 7.0 6.8 3.6Deposits 48.6 47.6 44.7 43.0 42.0 39.2 5.6 5.5 5.6Members' Equity & Capital 4.3 4.2 4.0 3.6 3.5 3.4 0.7 0.7 0.7Capital Ratios (%)    Leverage 6.95 7.02 7.14 6.65 6.71 6.83 9.00 9.12 9.22Risk Weighted 13.62 13.80 13.73 12.99 13.15 13.29 17.88 18.21 16.46Key Measures and Ratios (% except as noted)    Return on Regulatory Capital 6.06 5.99 5.23 5.50 5.47 4.46 8.88 8.56 9.01Liquidity Ratio 10.1 10.4 11.0 10.4 10.8 11.5 7.3 7.7 7.7Efficiency Ratio (before dividends/rebates) 75.9 76.6 79.0 78.3 78.9 81.8 62.1 63.4 64.0Efficiency Ratio 78.2 78.7 81.2 80.9 81.3 84.2 63.3 64.3 65.1Mortgage Loan Delinquency>30 days 0.41 0.38 0.37 0.42 0.38 0.37 0.40 0.39 0.38Commercial Loan Delinquency>30 days 0.72 0.78 1.02 0.70 0.72 1.03 0.89 1.18 0.92Total Loan Delinquency>30 days 0.54 0.53 0.62 0.52 0.50 0.60 0.68 0.73 0.81Total Loan Delinquency>90 days 0.29 0.30 0.26 0.27 0.27 0.24 0.42 0.56 0.44Asset Growth (from last quarter) 2.80 3.43 3.38 2.86 3.46 3.57 2.40 3.24 2.08Loan Growth (from last quarter) 3.18 3.80 3.39 3.24 3.72 3.60 2.78 4.35 1.97Deposit Growth (from last quarter) 2.21 3.12 2.70 2.25 3.53 2.69 1.94 0.07 2.73Credit Unions (number) 79 79 96 67 67 72 12 12 24Membership (thousands) 0 1,649 1,622 1,477 1,462 1,433 188 188 189Average Assets ($ millions, per credit union) 785 764 586 807 784 681 664 648 302

* Trends are current quarter to last quarter Better Neutral Worse

1Sector Outlook Third Quarter Ended September 30, 2018

Sector Key Financial Trends

2009 2010 2011 2012 2013 2014 2015 2016 2017 20184%

5%

6%

7%

8%

9%

10%

11%

12%

13%

14% Table #1 - Selected Growth Trends

Assets Loans Deposits

2009 2010 2011 2012 2013 2014 2015 2016 2017 20181.00%

1.25%

1.50%

1.75%

2.00%

2.25%

2.50%

2.75%

3.00%

0.000%

0.100%

0.200%

0.300%

0.400%

0.500%

0.600%

0.700%

0.800%

0.900%Table #2 - Selected Performance Trends

Financial Margin (L) Operating Expenses (L) Loan Costs (R)Other Income (R) ROA (R)

2009 2010 2011 2012 2013 2014 2015 2016 2017 201870%

75%

80%

85%

90%

95%

100%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%Table #3 - Efficiency Ratio and Return on Assets

Efficiency Ratio (L) ROA (R)

2009 2010 2011 2012 2013 2014 2015 2016 2017 20182%

4%

6%

8%

10%

12%

14%

16% Table #4 - Loan Growth

Mortgages Commercial Total 5-Year Average

CONTACT US: info@dico.comCe document est également disponible en français.

2Sector Outlook Third Quarter Ended September 30, 2018

2009 2010 2011 2012 2013 2014 2015 2016 2017 20180.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%Table #5 - Loan Delinquencies - Greater than 30 Days

Personal Mortgages Commercial Total 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

3%

4%

5%

6%

7%

8% Table #6 - Loan Yields

Personal Mortgages Commerical Total

3Q 20133Q 2014

3Q 20153Q 2016

3Q 20172Q 2018-2%

0%2%4%6%8%

10%12%14%16%18%

Table #7 - Deposit Growth - Yearly Growth

Demand Deposits Term Deposits Registered Deposits

Total Deposits 5 Year Average Total Deposit Growth Rate

$1,000,000,000

$2,000,000,000

$3,000,000,000

$4,000,000,000

$5,000,000,000

$6,000,000,000

$7,000,000,000

$8,000,000,000

8.00%9.00%10.00%11.00%12.00%13.00%14.00%15.00%16.00%17.00%18.00%

Total Borrowings in $millions (L) Securitizations in $millions (L)Liquidity Ratio (R)

Table #8 - Liquidity, Total Borrowings and Securitization

DISCLAIMER: The information presented in this report has been prepared using the latest financial filings submitted to DICO and as such accuracy and completeness cannot be guaranteed. Income Statement results are the aggregate of year-to-date annualized information.

ELECTRONIC PUBLICATION: The Sector Outlook is available in PDF format (readable using Adobe Acrobat Reader) and can be downloaded from the Publications section on DICO’s website at www.dico.com.

3Sector Outlook Third Quarter Ended September 30, 2018

DICO Observations Q3-2018 Profitability is increasing; this is likely to continue as higher rates are reflected in new and repriced loans (although slightly offset by

higher interest on deposits), and non-interest expenses are controlled. Mortgage loan delinquency over 30 (but less than 90) days increased by 4 bps year over year; this is highlighted because of the

continued high rate of growth in mortgage loan assets, the effects of higher interest rates on new and existing mortgages when renewed and high household debt levels.

Asset growth (10.3% year over year) continues to be fueled by residential mortgages (15.3%), perhaps impacted by tightened lending rules at banks; it appears increasing interest rates and slowing sales volumes and/or reduced prices in some markets have not had a negative impact on sector growth.

Loan growth continues to outpace deposit growth leading to reliance on securitization transactions (up 23.3% year over year) and bank borrowings as sources of funding.

Liquidity decreased by 90 bps year over year to 10.1% as growth in liquid assets was outpaced by growth in deposits, borrowings and securitization transactions.

Capital and capital ratios are under pressure as growth in loans outpaces growth in retained earnings.

Economic OverviewThe Bank of Canada (the “Bank”) raised its overnight rate to 1.75% on October 24, 2018, the third 25 bps increase this year and fifth since it began raising rates in July 2017.

In its October report, the Bank stated that low interest rates continue to stimulate the Canadian economy in a way that is likely unwarranted as the economy is operating at close to capacity. Rates could therefore rise until they reach a "neutral rate", the level that neither stimulates nor impedes regular economic activity. The Bank estimates Canada's neutral rate to be between 2.5% and 3.5%.

The Bank expects growth in Canada to average about 2 per cent over the second half of 2018. Real GDP is projected to grow by 2.1 per cent this year and next before slowing to 1.9 per cent in 2020. The Bank’s projections for business investment and exports have been revised up, reflecting the new US-Mexico-Canada Agreement (“USMCA”) and the recently-approved liquid natural gas project in British Columbia. However, investment and exports will be dampened by the recent decline in commodity prices, ongoing competitiveness challenges and limited transportation capacity.

The Bank considers that the global economic outlook remains solid but notes financial market volatility has resurfaced and some emerging markets are under stress. It says the US economy is especially robust but is expected to moderate. It considers the USMCA will reduce trade policy uncertainty in North America which has curbed business confidence and investment but trade conflict, particularly between the United States and China, is weighing on global growth and commodity prices.

4Sector Outlook Third Quarter Ended September 30, 2018

Statistics Canada reports that the ratio of household debt to income increased to 169.1% in the second quarter, up from 168.3% in the first quarter, but down from 169.7% in the second quarter last year.

Housing MarketsIn its report, the Bank states that federal changes in mortgage finance policy, higher interest rates and provincial and municipal housing measures have been e ective in mitigating household debt vulnerabilities, but ff the sheer size of outstanding amounts means that vulnerability will persist for some time.

The Bank says the announcement in October 2017 and implementation in January 2018 of revisions to Guideline B-20 resulted in volatility in housing markets evidenced by abnormally high resales in the fourth quarter of 2017, followed by a sharp drop in the first half of 2018, with national resales recovering somewhat in the third quarter of 2018 but remaining at a lower level than last year.

The Toronto Real Estate Board reports that September year-over-year sales and average prices in the GTA increased 1.9% and 2.9% respectively.

ConsolidationThe sector has continued to consolidate over the last twelve months with the number of institutions decreasing by 17 to 79 and average asset size increasing to $785 million; credit unions declined by five to 67 with average assets of $807 million; caisse populaires decreased by 12 to 12 with average asset size of $664 million. These amalgamations should result in larger, more stable entities capable of achieving economies of scale.

Profitability3Q-2018 vs 3Q-2017

As shown in Tables 2 and 3 on page 2, return on average assets for the sector increased to 43 bps (up 6 bps or 16%) from the same quarter a year earlier mainly reflecting improved net interest income (up 2 bps to 1.97%), decreased other income (down 3 bps to 50 bps) and reduced non-interest expenses (down 9 bps to 1.88%). Within the sector, return on average assets for credit unions increased to 37 bps (up 7 bps or 23%) mainly due to increased net interest income (up 2 bps to 1.92%), a decrease in other income (down 3 bps to 0.47%) and reduced non-interest expenses (down 9 bps to 1.89%). Caisses profitability decreased to 81 bps (down 2 bps or 2%) mainly reflecting a decrease in net interest income (down 3 bps to 2.26%) and higher income taxes (up 4 bps to 0.23%), offset by improvement in non-interest expenses (down 9 bps to 1.80%).

Out of 79 credit unions, five credit unions had a negative return on assets. DICO closely monitors credit unions that are unprofitable, identifies core challenges and works with the credit unions to develop strategies to resolve the situation with the intention of returning to profitability.

5Sector Outlook Third Quarter Ended September 30, 2018

2Q 2018 Ontario Sector vs Canadian Sector*

*Most recent report by Canadian Credit Union Association; including Ontario sector

Ontario sector profitability of 43 bps was below that of the Canadian sector (53 bps). Although net interest income of 1.97% (vs 2.11%) and other income of 0.50% (vs 0.56%) were lower, non-interest expenses of 1.90% (vs 1.96%) were better and taxes and loan costs were similar.

Capital 3Q-2018 vs 3Q-2017

Sector capital increased to $4.3 billion (up $288 million or 7.2%) from the year earlier quarter comprised of:

Retained earnings of $2.6 billion (up $219 million or 9.2%); Investment and patronage shares of $1.6 billion (up $67 million or 4.3%); and Membership shares unchanged at $65 million.

Within the sector, credit union capital increased to $3.6 billion (up $230 million or 6.8%) and consisted of:

Retained earnings of $2.0 billion (up $155 million or 8.5%); Investment and patronage shares of $1.6 billion (up $80 million or 5.5%); and Membership shares of $63 million (up $1 million or 0.9%).

Caisses capital increased to $712 million (up $58 million or 8.9%) comprised of:

Retained earnings of $618 million (up $64 million or 11.5%); Investment and patronage shares of $74 million (down $13 million or 15.4%); and Membership shares of $2 million (down $1 million or 38%).

As a percent of risk weighted assets, sector capital was 13.62%, down 11 bps from the year earlier quarter, as growth in risk weighted assets outpaced growth in capital. Credit union capital was 12.99% (down 30 bps) and caisses capital was 17.88% (up 142 bps). Leverage for the sector was 6.95% (down 19 bps) reflecting credit union leverage of 6.65% (down 18 bps) and caisses leverage of 9.00% (down 22 bps).

Although profitability is increasing, growth in retained earnings has not been keeping pace with the growth in assets. In order to maintain minimum capital requirements and provide for future growth, credit unions have an increasing dependency on the issuance of investment shares. As a result, investment shares remain a significant portion of their capital composition (37.7% in 3Q18 versus 38.8% in 3Q17).

6Sector Outlook Third Quarter Ended September 30, 2018

3Q-2018 vs 2Q-2018

Sector capital increased by $73 million (1.7% from $4.2 billion) from last quarter primarily from an increase in retained earnings of $72 million (3.0% from $2.5 billion) with largely unchanged membership and investment shares.

Sector capital as a percent of risk weighted assets decreased 18 bps (from 13.80%) in the previous quarter. Credit union capital decreased 16 bps (from 13.15%) and caisses’ capital decreased 33 bps (from 18.21%). Leverage for the sector decreased 7 bps (from 7.02%) reflecting decreases at credit unions of 6 bps (from 6.71%) and at caisses of 12 bps (from 9.12%).

Liquidity (including Securitization)

3Q-2018 vs 3Q-2017

As shown in Tables 7 and 8, sector deposits increased by $3.9 billion (up 8.7% to $48.6 billion), securitizations increased by $1.3 billion (up 23.3% to $6.6 billion) and borrowings decreased by $0.1 billion (down 9.5% to $0.9 billion), a net increase of $5.1 billion (up 9.9% to $56.2 billion) from the year earlier. However, liquid assets increased only $0.1 billion (up 1.6% to $5.7 billion) resulting in a decrease in liquidity to 10.1% (down 90 bps from 11.0% in 3Q17).

In 3Q18, there were 31 credit unions (20 credit unions, 11 caisse populaires) with combined total assets of $52.4 billion (85% of sector assets) participating in securitization programs. On September 1, 2018, the Securitization Guidance Note outlining prudent risk management measures came into effect with securitization reporting to DICO beginning in early 2019. DICO is monitoring the extent to which securitization programs are used by credit unions.

Deposits at credit unions increased by $3.8 billion (up 9.8% to $43 billion), securitizations increased by $1.1 billion (up 22.2% to $6.3 billion) and borrowings increased by $222 million (up 57.4% to $0.6 billion), an increase of $5.2 billion (up 11.6% to $49.8 billion). However, liquid assets increased only $0.1 billion (up 2.6% to $5.2 billion) resulting in a decrease in liquidity to 10.43% (down 102 bps from 11.45%).

Deposits at caisses increased by $75 million (up 1.4% to $5.6 billion), securitizations increased by $114 million (up 45.2% to $367 million) and borrowings decreased $321 million (down 48.6% to $341 million), a net decrease of $132 million (down 2.0% to $6.4 billion). Liquid assets decreased by $34 million (down 6.8% to $465 million) resulting in a decrease in liquidity to 7.33% (down 37 bps from 7.70%)

3Q-2018 vs 2Q-2018

Sector deposits increased by $1.0 billion (up 2.2% from $47.6 billion), securitizations decreased by $0.1 billion (down 1.1% from $6.7 billion) and borrowings increased by $0.4 billion (up 69.3% from $0.6 billion), a net increase of $1.3 billion (up 2.5% from $54.9 billion)

7Sector Outlook Third Quarter Ended September 30, 2018

from last quarter. Liquid assets decreased $69 million (down 1.2% from $5.7 billion), resulting in a decrease in liquidity of 37 bps (from 10.43%).

Efficiency Ratio (before dividends/interest rebates)

3Q-2018 vs 3Q-2017

As shown in Table 3, sector efficiency ratio improved to 75.9% (down 310 bps from 79.0%) from the year earlier quarter. Credit unions improved to 78.3% (down 350 bps from 81.8%) and caisses to 62.1% (down 190 bps from 64.0%).

3Q-2018 vs 2Q-2018

Compared to last quarter, sector efficiency improved by 70 bps (from 76.6%) reflecting improvement at credit unions of 60 bps (from 78.9%) and caisses of 130 bps (from 63.4%).

2Q-2018 Ontario Sector vs. Canadian Sector

Although operating expense as a percent of average assets for the Ontario sector (1.90%) was 6 bps better than the Canadian sector (1.96%), the efficiency ratio (76.6%) was 530 bps worse than the Canadian sector (71.3%). The gap is wider than in 2Q-2017 when the spread was 420 bps (Ontario at 79.8% and Canadian Sector at 75.6%).

Credit Quality (delinquency greater than 30 days)

3Q-2018 vs 3Q-2017

As shown in Table 5, total loan delinquency decreased to 54 bps (down 8 bp from 62 bps) from the year earlier quarter. Credit unions reflected a decrease to 52 bps (down 8 bps from 60 bps) and caisses decreased to 68 bps (down 13 bps from 81 bps).

Residential mortgage loan delinquency increased to 41 bps (up 4 bp from 37 bps) in the year earlier quarter. Credit unions reflected an increase to 42 bps (up 5 bp from 37 bps) and caisses increased to 40 bps (up 2 bps from 38 bps).

Commercial loan delinquency decreased to 72 bps (down 30 bps from 102 bps) from the year earlier. Within the sector, commercial loan delinquency decreased at credit unions to 70 bps (down 33 bps from 103 bps) and at caisses to 89 bps (down 3 bps from 92 bps).

3Q-2018 vs 2Q-2018

Compared to last quarter, total delinquency for the sector increased by 1 bp (from 53 bps) reflecting increases at credit unions of 2 bps (from 50 bps) and decreases at caisses by 5 bps (from 73 bps).

Residential mortgage loan delinquency for the sector increased by 3 bps (from 38 bps) reflecting increases at credit unions of 4 bps (from 38 bps) and at caisses of 1 bp (from 39 bps).

8Sector Outlook Third Quarter Ended September 30, 2018

Commercial loan delinquency for the sector improved by 6 bps (from 78 bps) from the previous quarter reflecting decreases at credit unions of 2 bps (from 72 bps) and at caisses of 29 bps (from 118 bps).

Growth3Q-2018 vs 3Q-2017

Compared to the previous year, total sector assets increased to $62.0 billion (up $5.8 billion or 10.3%). This was largely due to growth in residential mortgage loans to $33.9 billion (up $4.5 billion or 15.3%) and commercial loans to $16.0 billion (up $1.6 billion or 10.8%). As shown in Table 4, the annual growth of residential mortgage loans was the highest growth rate in the last ten years. Within the sector, credit unions increased total assets to $54.1 billion (up $5.1 billion or 10.3%) reflecting growth in residential mortgage loans to $29.8 billion (up $4.0 billion or 15.4%) and commercial loans to $14.0 billion (up $1.4 billion or 10.7%). Caisses total assets increased to $8.0 billion (up $713 million or 9.8%) mainly attributed to growth in residential mortgage loans to $4.1 billion (up $533 million or 14.9%) and commercial loans to $2.0 billion (up $212 million or 12.0%).

3Q-2018 vs 2Q-2018

Total assets for the sector increased by $1.7 billion (2.8% from $60.3 billion) from last quarter reflecting growth of $1.4 billion (4.2% from $32.6 billion) in residential mortgage loans and commercial loans of $297 million (1.9% from $15.7 billion). Within the sector, total assets in credit unions increased by $1.5 billion (2.9% from $52.6 billion) reflecting increases of $1.2 billion (4.2% from $28.6 billion) in residential mortgage loans and commercial loans of $255 million (1.9% from $13.7 billion). Caisses total assets increased by $187 million (2.4% from $7.8 billion) reflecting growth of $163 million (4.1% from $3.9 billion) in residential mortgage loans and commercial loans of $42 million (2.2% from $2.0 billion)

2Q-2018 Ontario Sector vs. Canadian Sector

Ontario sector total assets growth rate of 10.9% was 340 bps higher than the Canadian sector (7.5%) attributable to growth in residential mortgages loans of 15.1% (vs 8.9%), commercial loans of 12.2% (vs 10%) and agricultural loans of 14.7% (vs 11.5%).

9Sector Outlook Third Quarter Ended September 30, 2018

Sector Income Statements% of Average Assets (except as noted)

Sector Credit Unions Caisses Populaires CanadianSector¹

3Q-20182Q-20183Q-20173Q-20182Q-20183Q-20173Q-20182Q-20183Q-20172Q-2018Interest and Investment Income Loan Interest 3.23% 3.17% 3.07% 3.26% 3.21% 3.10% 2.99% 2.93% 2.85% 3.14% Investment Income 0.24% 0.23% 0.22% 0.19% 0.19% 0.17% 0.56% 0.51% 0.56% 0.25%Total Interest and Investment Income 3.46% 3.41% 3.29% 3.45% 3.40% 3.27% 3.55% 3.44% 3.41% 3.40%Interest and Dividend Expense Interest Expense on Deposits 1.16% 1.12% 1.05% 1.19% 1.14% 1.08% 0.98% 0.94% 0.85% 1.13%

Rebates/Dividends on Share Capital 0.06% 0.05% 0.4% 0.05% 0.05% 0.04% 0.06% 0.04% 0.05% 0.00%Dividends on Investment/Other Capital 0.02% 0.02% 0.03% 0.03% 0.03% 0.03% 0.00% 0.00% 0.00% 0.07%Other Interest Expense 0.26% 0.25% 0.22% 0.26% 0.25% 0.22% 0.25% 0.25% 0.22% 0.08%

Total 0.34% 0.32% 0.29% 0.34% 0.33% 0.29% 0.31% 0.29% 0.27% 0.15%Total Interest and Dividend Expense 1.50% 1.44% 1.33% 1.53% 1.47% 1.37% 1.28% 1.21% 1.12% 1.28%Net Interest and Investment Income 1.97% 1.97% 1.95% 1.87% 1.93% 1.90% 2.26% 2.21% 2.29% 2.12% Loan Costs 0.06% 0.06% 0.06% 0.05% 0.06% 0.05% 0.10% 0.07% 0.07% 0.07%Net Interest and Investment Income after Loan Costs 1.91% 1.91% 1.90% 1.87% 1.87% 1.85% 2.26% 2.14% 2.21% 2.05% Other (non-interest) Income 0.50% 0.50% 0.53% 0.47% 0.47% 0.50% 0.67% 0.70% 0.70% 0.56%Net Interest, Investment and Other Income 2.40% 2.41% 2.42% 2.34% 2.34% 2.35% 2.84% 2.84% 2.91% 2.61%Non-interest Expenses Salaries & Benefits 1.06% 1.07% 1.11% 1.09% 1.10% 1.14% 0.86% 0.87% 0.89% 1.10% Occupancy 0.18% 0.19% 0.19% 0.18% 0.19% 0.19% 0.18% 0.19% 0.15% 0.18% Computer, Office & Other Equipment 0.19% 0.18% 0.19% 0.18% 0.18% 0.19% 0.19% 0.19% 0.21%

0.68% Advertising & Communications 0.11% 0.11% 0.11% 0.11% 0.10% 0.11% 0.14% 0.15% 0.15% Member Security 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.07% 0.08% 0.07% Administration 0.15% 0.15% 0.17% 0.15% 0.15% 0.16% 0.19% 0.19% 0.25% Other 0.11% 0.11% 0.12% 0.10% 0.10% 0.11% 0.17% 0.16% 0.18%Total Non-interest Expenses 1.88% 1.90% 1.97% 1.89% 1.91% 1.98% 1.80% 1.83% 1.89% 1.96%Net Income/(Loss) Before Taxes 0.52% 0.51% 0.46% 0.45% 0.44% 0.37% 1.04% 1.01% 1.02% 0.65% Taxes 0.11% 0.10% 0.08% 0.09% 0.08% 0.07% 0.23% 0.23% 0.19% 0.12%Net Income/(Loss) 0.43% 0.42% 0.37% 0.37% 0.37% 0.30% 0.81% 0.79% 0.83% 0.53%Average Assets (millions) 59,694 58,845 54,131 51,999 51,243 47,095 7,695 7,601 7,036 217,400

¹Includes Ontario sector, as reported by Canadian Credit Union Association, Second Quarter 2018;

10Sector Outlook Third Quarter Ended September 30, 2018

Totals may not agree due to rounding

11Sector Outlook Third Quarter Ended September 30, 2018

Sector Balance SheetsAs at $millionsSector Credit Unions Caisses Populaires

3Q-2018 2Q-2018 3Q-2017 3Q-2018 2Q-2018 3Q-2017 3Q-2018 2Q-2018 3Q-2017Assets Cash and Investments 6,642 6,653 6,816 5,799 5,794 5,959 843 859 857

Personal Loans 2,348 2,338 2,802 1,699 1,684 2,098 649 654 704Residential Mortgage Loans 33,926 32,573 29,418 29,820 28,630 25,845 4,106 3,943 3,573Commercial Loans 15,977 15,680 14,415 13,996 13,741 12,646 1,981 1,939 1,769Institutional Loans 89 108 98 41 41 41 48 67 58Unincorporated Association Loans 89 91 73 79 81 62 9 10 10Agricultural Loans 2,093 2,052 1,812 1,919 1,886 1,664 174 166 148

Total Loans 54,522 52,841 48,618 47,554 46,062 42,355 6,968 6,779 6,263 Total Loan Allowances 144 137 129 112 107 98 32 30 31 Capital (Fixed) Assets 498 494 491 460 456 452 38 38 38 Intangible and Other Assets 513 489 456 364 355 329 150 134 127Total Assets 62,031 60,340 56,252 54,064 52,560 48,997 7,967 7,780 7,254 Liabilities

Demand Deposits 20,340 19,978 18,930 18,210 17,875 16,616 2,130 2,103 2,314Term Deposits 16,869 16,311 14,817 15,061 14,536 13,175 1,808 1,775 1,642Registered Deposits 11,414 11,283 10,704 9,719 9,636 9,102 1,695 1,648 1,602Other Deposits 0 0 266 0 0 266 0 0 0

Total Deposits 48,624 47,572 44,717 42,991 42,046 39,159 5,633 5,526 5,558 Borrowings 949 561 1,049 609 54 387 341 507 662 Securitizations 6,647 6,723 5,391 6,280 6,357 5,138 367 365 253 Other Liabilities 1,510 1,256 1,080 594 571 952 915 685 128 Total Liabilities 57,729 56,111 52,237 50,474 49,028 45,637 7,255 7,083 6,600 Members' Equity & Capital Membership Shares 65 64 65 63 62 62 2 2 3 Retained Earnings 2,594 2,522 2,375 1,976 1,926 1,821 618 596 554 Other Tier 1 & 2 Capital 1,624 1,631 1,557 1,550 1,544 1,470 74 87 87 AOCI 19 12 17 1 -1 7 18 13 10 Total Members' Equity & Capital 4,302 4,229 4,014 3,590 3,532 3,361 712 698 654Total Liabilities, Members' Equity & Capital 62,031 60,340 56,252 54,064 52,560 48,997 7,967 7,780 7,254

* Totals may not agree due to rounding

12Sector Outlook Third Quarter Ended September 30, 2018

Sector Balance SheetsSector Credit Unions Caisses Populaires

% Increase/(Decrease)

from

% Increase/(Decrease)

from

% Increase/(Decrease)

from3Q-2018 2Q-2018 3Q-2017 3Q-2018 2Q-2018 3Q-2017 3Q-2018 2Q-2018 3Q-2017$millions $millions $millions

Assets Cash and Investments 6,642 -0.2% -2.6% 5,799 0.1% -2.7% 843 -1.8% -1.6%

Personal Loans 2,348 0.4% -16.2% 1,699 0.8% -19.0% 649 -0.7% -7.8%Residential Mortgage Loans 33,926 4.2% 15.3% 29,820 4.2% 15.4% 4,106 4.1% 14.9%Commercial Loans 15,977 1.9% 10.8% 13,996 1.9% 10.7% 1,981 2.2% 12.0%Institutional Loans 89 -17.6% -9.6% 41 0.0% 1.8% 48 -28.5% -17.5%Unincorporated Association Loans 89 -2.2% 22.1% 79 -1.8% 27.6% 9 -5.2% -11.4%Agricultural Loans 2,093 2.0% 15.5% 1,919 1.8% 15.4% 174 4.8% 17.3%

Total Loans 54,522 3.2% 12.1% 47,554 3.2% 12.3% 6,968 2.8% 11.3% Total Loan Allowances 144 5.0% 11.8% 112 5.1% 14.3% 32 4.7% 3.7% Capital (Fixed) Assets 498 0.9% 1.5% 460 1.0% 1.7% 38 -0.5% -0.9% Intangible and Other Assets 513 4.9% 12.7% 364 2.4% 10.5% 150 11.4% 18.4%Total Assets 62,031 2.8% 10.3% 54,064 2.9% 10.3% 7,967 2.4% 9.8% Liabilities

Demand Deposits 20,340 1.8% 7.5% 18,210 1.9% 9.6% 2,130 1.3% -7.9%Term Deposits 16,869 3.4% 13.8% 15,061 3.6% 14.3% 1,808 1.8% 10.1%Registered Deposits 11,414 1.2% 6.6% 9,719 0.9% 6.8% 1,695 2.9% 5.8%Other Deposits 0 0.0% -100.0% 0 0.0% -100.0% 0 0.0% 0.0%

Total Deposits 48,624 2.2% 8.7% 42,991 2.2% 9.8% 5,633 1.9% 1.4% Borrowings 949 69.3% -9.5% 609 1037.1% 57.4% 341 -32.8% -48.6% Securitizations 6,647 -1.1% 23.3% 6,280 -1.2% 22.2% 367 0.4% 45.2% Other Liabilities 1,510 20.2% 39.7% 594 4.1% -37.6% 915 33.6% 615.5% Total Liabilities 57,729 2.9% 10.5% 50,474 2.9% 10.6% 7,255 2.4% 9.9% Members' Equity & Capital Membership Shares 65 1.2% -0.9% 63 1.3% 0.9% 2 -0.7% -37.7% Retained Earnings 2,594 2.9% 9.2% 1,976 2.6% 8.5% 618 3.6% 11.5% Other Tier 1 & 2 Capital 1,624 -0.4% 4.3% 1,550 0.4% 5.5% 74 -15.0% -15.4%Accumulated Other Comprehensive Income 19 63.5% 13.6% 1 -278.6% -84.0% 18 45.3% 89.2% Total Members' Equity & Capital 4,302 1.7% 7.2% 3,590 1.7% 6.8% 712 2.1% 8.9%Total Liabilities, Members' Equity & 62,031 2.8% 10.3% 54,064 2.9% 10.3% 7,967 2.4% 9.8%

13Sector Outlook Third Quarter Ended September 30, 2018

Capital*Totals may not agree due to rounding

14Sector Outlook Third Quarter Ended September 30, 2018

Sector Balance SheetsAs a percentage of Total Assets

Sector Credit Unions Caisses Populaires CanadianSector¹

3Q-2018 2Q-2018 3Q-2017 3Q-2018 2Q-2018 3Q-2017 3Q-2018 2Q-2018 3Q-2017 2Q-2018Assets Cash and Investments 10.7% 11.0% 12.1% 10.7% 11.0% 12.2% 10.6% 11.0% 11.8% 14.5%

Personal Loans 3.8% 3.9% 5.0% 3.1% 3.2% 4.3% 8.2% 8.4% 9.7% 5.6%Residential Mortgage Loans 54.7% 54.0% 52.3% 55.2% 54.5% 52.7% 51.5% 50.7% 49.3% 49.5%Commercial Loans 25.8% 26.0% 25.6% 25.9% 26.1% 25.8% 24.9% 24.9% 24.4% 24.2%Institutional Loans 0.1% 0.2% 0.2% 0.1% 0.1% 0.1% 0.6% 0.9% 0.8% 1.0%Unincorporated Association Loans 0.1% 0.2% 0.1% 0.1% 0.2% 0.1% 0.1% 0.1% 0.1% 0.3%Agricultural Loans 3.4% 3.4% 3.2% 3.6% 3.6% 3.4% 2.2% 2.1% 2.0% 3.6%

Total Loans 87.9% 87.6% 86.4% 88.0% 87.6% 86.4% 87.5% 87.1% 86.3% 83.9% Total Loan Allowances 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.4% 0.4% 0.4% -0.2% Capital (Fixed) Assets 0.8% 0.8% 0.9% 0.9% 0.9% 0.9% 0.5% 0.5% 0.5% 0.9% Intangible and Other Assets 0.8% 0.8% 0.8% 0.7% 0.7% 0.7% 1.9% 1.7% 1.7% 0.9%Total Assets 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Liabilities

Demand Deposits 32.8% 33.1% 33.7% 33.7% 34.0% 33.9% 26.7% 27.0% 31.9% 38.9%Term Deposits 27.2% 27.0% 26.3% 27.9% 27.7% 26.9% 22.7% 22.8% 22.6% 30.7%Registered Deposits 18.4% 18.7% 19.0% 18.0% 18.3% 18.6% 21.3% 21.2% 22.1% 15.7%Other Deposits 0.0% 0.0% 0.5% 0.0% 0.0% 0.5% 0.0% 0.0% 0.0% 0.2%

Total Deposits 78.4% 78.8% 79.5% 79.5% 80.0% 79.9% 70.7% 71.0% 76.6% 85.5% Borrowings 1.5% 0.9% 1.9% 1.1% 0.1% 0.8% 4.3% 6.5% 9.1% 4.8% Securitizations 10.7% 11.1% 9.6% 11.6% 12.1% 10.5% 4.6% 4.7% 3.5% 0.0% Other Liabilities 2.4% 2.1% 1.9% 1.1% 1.1% 1.9% 11.5% 8.8% 1.8% 2.8% Total Liabilities 93.1% 93.0% 92.9% 93.4% 93.3% 93.1% 91.1% 91.0% 91.0% 93.1% Members' Equity & Capital Membership Shares 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0% 0.6% Retained Earnings 4.2% 4.2% 4.2% 3.7% 3.7% 3.7% 7.8% 7.7% 7.6% 5.4% Other Tier 1 & 2 Capital 2.6% 2.7% 2.8% 2.9% 2.9% 3.0% 0.9% 1.1% 1.2% 0.9% AOCI 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.2% 0.1% 0.0% Total Members' Equity & Capital 6.9% 7.0% 7.1% 6.6% 6.7% 6.9% 8.9% 9.0% 9.0% 6.9%Total Liabilities, Members' Equity & Capital 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%¹Includes Ontario sector, as reported by Canadian Credit Union Association, Second Quarter 2018;

15Sector Outlook Third Quarter Ended September 30, 2018

*Totals may not agree due to rounding

16Sector Outlook Third Quarter Ended September 30, 2018