1

Annual Information Meeting

Réunion d’information annuelle

March 30, 2017

Le 30 mars 2017

2

Steve BlakelyChair of the Board

Président du Conseil

3

DICO’s Board of DirectorsConseil d’administration de la SOAD

From L to R Top Row: Jim Houston, Helen Young, Steve Blakely, Monique Tremblay, John Ferreira

Bottom Row: Gail Di Cintio, Carmen Rossiter, Don Dalicandro

4

2016 Highlights2016 – Faits saillants

All depositor funds were protected

Maintained confidence in the sector

Sector experienced solid growth and profitability

Consolidation continued – down by 11 credit unions

Continued to enhance prudential oversight processes Insurance fund at $226.0 M (79 bps of insured

deposits)

5

2016 Highlights 2016 – Faits saillants

Internal Initiatives

Refreshing HR Strategy

Internal Audit function

Executive Compensation Framework

Optimizing Organizational Structure

6

DICO Strategic ObjectivesObjectifs stratégiques de la SOAD

Proactive and balanced regulation and risk managementRéglementation proactive et équilibrée et la gestion des risques

Sound Corporate GovernanceBonne gouvernance corporative

Effective Public and Stakeholder Awareness Sensibilisation efficace du public et des intervenants

Strong PartnershipsPartenariats solides

More details are available on DICO’s website

7

DICO InitiativesInitiatives de la SOAD

Focus on Governance: Consultation on Liquidity Guidance and Stress Testing

and tools Enhancements to Director and Audit Committee

Handbooks Expansion of applicability of ICAAP and Stress Testing

guidance to CU’s >$500 million to $1billion New in-house web-based reporting tool

Deposit Insurance Reserve Fund (DIRF) DIRF target – 100 bps of insured deposits in 2023 Recoveries on past claims continue

8

DICO InitiativesInitiatives de la SOAD

CUCPA Revisions Phase 1 changes submitted to government review

process Work continues on more fulsome rewrite

New Regulatory Authority Prudential and solvency regulator Consumer protection Deposit insurer responsibilities separate Creation of secretariat to facilitate transition Timing still to be determined

9

DICO Initiatives Initiatives de la SOAD

Proactive risk based prudential regulation Establishing guidance and expectations Examining regularly and providing feedback Avoiding potential losses by intervening early Assisting boards in long term strategic planning

Working with stakeholders

Continued focus on credit union sustainability & sector stability

10

Beryl RobertoDICO OmbudsmanOmbudsman de la SOAD

Ombudsman’s ReportRapport de l’ombudsman

11

2016 Overview2016 -Vue d’ensemble

Guy HubertPresident and CEO (Acting)

Président et chef de la direction (Intérim)

12

Sector Consolidation 1980 - 2016Consolidation du secteur 1980 - 2016

-50

50

150

250

350

450

550

0

150

300

450

600

750

900

1050

1200

1981 1986 1991 1996 2001 2006 2011 2016

$ milli

ons

Numb

er of

credit

unio

ns/ca

isses

pop

ulaire

s

Number of credit unions/caisses populaires Average Assets

Chart1

19811980

19821981

19831982

19841983

19851984

19861985

19871986

19881987

19891988

19901989

19911990

19921991

19931992

19941993

19951994

19961995

19971996

19981997

19991998

20001999

20012000

20022001

20032002

20042003

20052004

20062005

20072006

20082007

20092008

20102009

20112010

20122011

20132012

20142013

20152014

20162015

Number of credit unions/caisses populaires

Average Assets

Number of credit unions/caisses populaires

$ millions

999

5

952

6

925

7

906

8

862

9

833

10

795

11

734

12

696

13

656

16

598

18

563

20

529

23

501

25

474

27

445

29.3

407

32.8

378

36.4

343

37.3

321

47.6

302

54.9

276

65.2

258

82.9

240

92.5

235

102.2

220

112.8

210

126.6

198

142.3

186

158.3

167

185.6

152

222.1

143

255.9

127

307

117

362.8

110

424

99

524

Sheet1

Column1197719791980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016

Number of credit unions/caisses populaires12001092104999995292590686283379573469665659856352950147444540737834332130227625824023522021019818616715214312711711099

Average Assets134567891011121316182023252729.332.836.437.347.654.965.282.992.5102.2112.8126.6142.3158.3185.6222.1255.9307362.8424524

13

Sector PerformanceRendement du secteur

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

$0$5

$10$15$20$25$30$35$40$45$50$55$60

Retu

rn on

Ass

ets

Total

Ass

ets

Total Assets Return on Assets

Chart1

19971997

19981998

19991999

20002000

20012001

20022002

20032003

20042004

20052005

20062006

20072007

20082008

20092009

20102010

20112011

20122012

20132013

20142014

20152015

20162016

Total Assets

Return on Assets

Total Assets

Return on Assets

13.3

0.0042

13.8

0.0058

14

0.0038

15.4

0.0047

16.7

0.004

17.9

0.0039

21.3

0.0031

22.3

0.003

23.4

0.0029

24.7

0.004

26.2

0.0033

27.9

0.0015

29.6

0.0025

31

0.0048

33.8

0.0051

36.6

0.0037

38.991

0.0043

42.45

0.0035

46.626

0.0028

51.85

0.0033

Sheet1

yearTotal AssetsReturn on Assets

1997$13.300.42%

1998$13.800.58%

1999$14.000.38%

2000$15.400.47%

2001$16.700.40%

2002$17.900.39%

2003$21.300.31%

2004$22.300.30%

2005$23.400.29%

2006$24.700.40%

2007$26.200.33%

2008$27.900.15%

2009$29.600.25%

2010$31.000.48%

2011$33.800.51%

2012$36.600.37%

2013$38.990.43%

2014$42.450.35%

2015$46.630.28%

2016$51.850.33%

14

Number of Credit Unions/Caisses Populaires

Assets($ Billions)

ROA(bps)

British Columbia 42 72.1 34

Alberta 24 24.4 49

Saskatchewan 46 21.5 66

Manitoba 35 28.3 47

Québec 300 157.8 77

Ontario 99 51.9 33

Other ProvincesAutres provinces

15

Ontario Sector Profile 4Q16Profil du secteur de l’Ontario au 4T16

Credit Unions

Caisses Populaires Total Ontario

Number of Institutions 74 25 99

Assets ($Billions) $ 45.1 $6.8 $51.9

Capital (% assets) 6.66% 9.00% 6.97%

ROA (bp % assets) 27 70 33

ROA before dividends 36 75 41

Efficiency Ratio 83.4% 67.8% 81.0%

16

Capital Composition 2002 - 2016 Composition du capital entre 2002 – 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Membership Shares Investment Shares Retained Earnings Other Capital

17

Sector Profile by Risk Level (% of assets)Profil du secteur selon le niveau de risque (% de l’actif)

5.0%

5.0%

58.0%

13.0%

19.0%

2016

High Moderate-High Moderate Low-Moderate Low

18

Examination Findings: By-law #5 Résultats des inspections : Règl. No 5

Governance: Board

Directors Training & Qualification Overall Adequate

Governance: Audit Committee

Enterprise Risk Management Overall Adequate

Internal Audit Some Improvement Needed

Governance: Management

Commercial Lending Some Improvement Needed

Capital & Liquidity management Some Improvement Needed

19

Intervention Levels by Program Niveaux d’intervention selon le programme

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Watchlist Supervision Administration Liquidation

20

Number of Failed Credit Unions/Caisses PopulairesNombre de faillites de caisses populaires/Credit Union

0

5

10

15

20

25

Chart1

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

# of Failures

19

10

8

20

15

11

10

4

11

3

2

2

0

1

1

0

0

1

0

3

2

2

2

1

0

0

0

0

0

Sheet1

Column119881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016

# of Failures191082015111041132201100103222100000

21

Losses to the Fund(Severity - By Year $M)Pertes au Fonds(Gravité - par année en millions $)

-70

-60

-50

-40

-30

-20

-10

0

10

20

h F d R h F d

22

Current Deposit Profile: 2008 - 2016 Profil des dépôts : 2008 - 2016

0

5

10

15

20

25

30

35

40

45

2008 2009 2010 2011 2012 2013 2014 2015 2016Insured Deposits Uninsured Deposits

$ bi

llion

s

23

Reserve Fund Comparison with Other Provincial Jurisdictions (Dec. 31, 2016) Fonds de réserve : comparaison avec celui des autres provinces (31 déc. 2016)

0

20

40

60

80

100

120

140

160

180

BC AB SK MB QC ON

Basi

s Po

ints

of I

nsur

ed D

epos

its

Actual

Target

$0.07*

$0.15* $0.09*

$0.08*

$0.02* $1.04*

* Premium per $1,000 of insured deposits

24

Key Strategies for 2017 Principales stratégies pour 2017

Support the Ministry with the Legislative reviews Support the Financial Regulatory Services Modernization

Secretariat as it works to implement transition plan Issue enhanced Liquidity Guidance Develop guidance on Securitization Enhance Lending Guidance and Loan Provisioning Revise guidance and deposit insurance materials to reflect

changes to the CUCPA Enhance examination practices

25

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

-150

-100

-50

0

50

100

150

200

250

300

350

400

450

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

DIRF ($) DIRF % Current Coverage of Insured Deposits

$m

illion

s

Perc

enta

ge

Trend in Reserve Fund Évolution du Fonds de réserve

DIRF Projections ($) DIRF Projections as a % of Current Insured Deposits

Chart4

19941994

19951995

19961996

19971997

19981998

19991999

20002000

20012001

20022002

20032003

20042004

20052005

20062006

20072007

20082008

20092009

20102010

20112011

20122012

20132013

20142014

20152015

20162016

20172017

20182018

20192019

20202020

20212021

20222022

20232023

$ millions

Percentage

DIRF ($)

DIRF % Current Coverage of Insured Deposits

-90.3

-0.0078

-75.3

-0.007

-58.3

-0.0053

-50.2

-0.0046

-31.2

-0.0028

-7.7

-0.0007

15.1

0.0012

28.9

0.0021

43.1

0.003

60.8

0.0038

74.3

0.0045

85.2

0.005

100.2

0.0056

106.2

0.0057

97

0.005

81.8

0.004

94.8

0.0044

113.2

0.0052

147.5

0.0064

164.7

0.0068

185.1

0.0073

205.6

0.0077

226

0.0079

246

0.0083

272

0.0078

299

0.0082

328

0.0086

356

0.0091

391

0.0095

426

0.01

Sheet1

199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023

DIRF ($)-90.3-75.3-58.3-50.2-31.2-7.715.128.943.160.874.385.2100.2106.29781.894.8113.2147.5164.7185.1205.6226246272299328356391426

DIRF % Current Coverage of Insured Deposits-0.78%-0.70%-0.53%-0.46%-0.28%-0.07%0.12%0.21%0.30%0.38%0.45%0.50%0.56%0.57%0.50%0.40%0.44%0.52%0.64%0.68%0.73%0.77%0.79%0.83%0.78%0.82%0.86%0.91%0.95%1.00%

Sheet1

DIRF ($)

DIRF % Current Coverage of Insured Deposits

Sheet2

DIRF Target set at 100 bps

DIRF ($)

DIRF % Current Coverage of Insured Deposits

DIRF Target of 100 bps projected to be reached in 2023

Sheet3

26

Legislative and Mandate ReviewsExamens du mandat et des mesures législatives

Legislative Review Implementation: Phase 1 Phase 2 – TBD

Key ProposalsPhase 1:

Increase deposit insurance coverage to $250,000 (2018) Permit inter-provincial credit union loan syndications Permit wholly owned insurance brokerages Remove differentiated rules for smaller credit unions

Phase 2: Adopt capital rules based on BASEL III principles Enhance corporate governance and consumer protection

27

Mandate ReviewExamen du mandat

Mandate Review Appointment of Secretariat and planning – 2017 Appointment of Board Hiring of management Implementation – TBD

Key Preliminary Proposals Integrated single regulatory agency – Financial Services

Regulatory Authority (FSRA) Distinct functions – market conduct, pensions and

prudential regulation for all Ontario financial services DICO’s prudential regulatory functions transferred to FSRA Deposit insurance stays with DICO

28

Questions and Discussions Questions et dialogue

Steve BlakelyChair of the Board

Président du Conseil

29

Closing RemarksRemarques de clôture

Steve BlakelyChair of the Board

Président du Conseil

30

Thank you.

Merci.

Slide Number 1Slide Number 2Slide Number 32016 Highlights�2016 – Faits saillants2016 Highlights �2016 – Faits saillants DICO Strategic Objectives�Objectifs stratégiques de la SOADDICO Initiatives�Initiatives de la SOAD DICO Initiatives�Initiatives de la SOAD DICO Initiatives �Initiatives de la SOAD Slide Number 10Slide Number 11Sector Consolidation 1980 - 2016 �Consolidation du secteur 1980 - 2016Sector Performance �Rendement du secteurOther Provinces�Autres provinces Ontario Sector Profile 4Q16 �Profil du secteur de l’Ontario au 4T16Capital Composition 2002 - 2016 �Composition du capital entre 2002 – 2016 Sector Profile by Risk Level (% of assets)�Profil du secteur selon le niveau de risque (% de l’actif) Examination Findings: By-law #5 �Résultats des inspections : Règl. No 5 Intervention Levels by Program �Niveaux d’intervention selon le programmeNumber of Failed Credit Unions/Caisses Populaires�Nombre de faillites de caisses populaires/Credit UnionLosses to the Fund (Severity - By Year $M)�Pertes au Fonds (Gravité - par année en millions $)Current Deposit Profile: 2008 - 2016 �Profil des dépôts : 2008 - 2016Reserve Fund Comparison with Other Provincial Jurisdictions (Dec. 31, 2016) �Fonds de réserve : comparaison avec celui des autres provinces (31 déc. 2016)Key Strategies for 2017 �Principales stratégies pour 2017Trend in Reserve Fund �Évolution du Fonds de réserveLegislative and Mandate Reviews�Examens du mandat et des mesures législativesMandate Review�Examen du mandatQuestions and Discussions �Questions et dialogueClosing Remarks�Remarques de clôtureThank you. ��Merci.