2014 ANNUAL REPORT - Meridian · 2017. 7. 28. · 2014 Annual Report | Our Story 3 Meridian is Ontario’s largest credit union, helping more than a quarter of a million Members grow

™Trademarks of Meridian Credit Union Limited.

2014 ANNUAL REPORT

22014 Annual Report | Contents

Our Story .............................................................................................3

Message from the Chair .................................................................4

Message from the President and CEO.......................................5

The Meridian Team ..........................................................................6

Meridian’s Commitment to Communities ..................................7

Corporate Highlights......................................................................11

Financial Highlights ........................................................................13

Corporate Governance Report ...................................................14

Management Discussion & Analysis .........................................22

Core Business & Strategy .......................................................23

Key Performance Drivers ........................................................24

Capability to Deliver Results ...................................................25

Financial Results .....................................................................27

Capital Management ...............................................................36

Risk Management ...................................................................37

2015 Outlook ...........................................................................48

Consolidated Financial Statements ...........................................49

Index to the Consolidated Financial Statements ....................49

Independent Auditor’s Report .................................................50

Consolidated Balance Sheet ..................................................51

Consolidated Statement of Comprehensive Income ..............52

Consolidated Statement of Changes in Equity .......................53

Consolidated Statement of Cash Flows ..................................54

Notes to the Consolidated Financial Statements ....................55

Meridian Locations .......................................................................107

Contents

32014 Annual Report | Our Story

Meridian is Ontario’s largest credit union, helping more than a quarter of a million Members grow their lives and businesses.

As a credit union, we are 100 percent owned by our Members. We work only for them, with profits returned to our Members in the form of the best products and services we can offer. We’re not motivated by short-term profit objectives the way publicly traded organizations are. Rather, we take a long-term view and act in the best interests of our Members and the communities they live in.

We get to know our Members so that we can proactively advise them on ways to save money, how

to invest for the future, and what financial solutions are in their best interest. We believe financial well-being is a key ingredient to overall well-being.

Our Members know that we have their backs. Our employees—more than 1,300 in our 67 branches, 7 Commercial Business Centres and 2 corporate offices—have the ability and power to make decisions on the spot, because they know our Members and their circumstances best.

Meridian combines exceptional Member service with a full range of products and services such as telephone, mobile, and online electronic banking services that allow our Members to securely access their money anywhere, anytime.

Our Story

42014 Annual Report | Message from the Chair

This past May, Meridian welcomed Bill Maurin to his new role as Meridian’s President and CEO. With Bill’s 25 years of experience in the financial services industry, strong business acumen and leadership foresight, the Board of Directors is very confident that Bill will continue to lead Meridian into a bright and prosperous future.While there were many accomplishments reached in 2014, the Board is extremely proud of the establishment of Meridian’s Commitment to Communities, our expression of corporate social responsibility. Our commitment is local and based on the co-operative values and beliefs our Members and employees share. Through it, we invest money, our time and talent to help build prosperous, resilient communities where people can grow their lives. We also invest at least 4% of our pre-tax earnings to the communities we serve. Building and forging a stronger co-operative sector in Ontario remains a key priority for Meridian and its Board of Directors. Throughout 2014, Meridian made good on this commitment by collaborating with a variety of

credit unions and co-operatives throughout Ontario and Canada to help inform, celebrate and promote the co-operative difference. In early 2014, Meridian joined with other Ontario-based credit unions to launch an Ontario awareness campaign, whose primary goal is to help raise awareness of credit unions among Ontarians and inspire them to participate in the co-operative banking movement through a multi-media advertising and public relations campaign. Meridian was also very active in promoting the credit union difference to various levels of government. Last spring, as part of Meridian’s affiliation with the Credit Unions of Ontario, Meridian participated in Central 1’s advocacy campaign. As part of the advocacy campaign, the Credit Unions of Ontario has created a petition calling on the Government of Ontario to support the strength and growth of the credit union system in the following three ways:

1. Maintain current credit union provincial tax rates;

2. Show confidence in Ontario credit unions by increasing deposit insurance limits; and

3. Permit credit unions to diversify the breadth of their business by enhancing subsidiary ownership powers, among other things.

This past fall, the Minister of Finance, Charles Sousa, appointed an MPP to conduct regional sessions across the province with key credit union stakeholders to identify any changes or revisions that need to be made to the Credit Unions and Caisses Populaires Act, 1994. Meridian, as Ontario’s

largest credit union, took an active role in this process and attended several consultations. Meridian continues to champion Ontario’s co-operative sector as seen through our Provincial Sponsorship of the Ontario Co-operative Association’s Regional Co-op Connections Roundtables program. The regional roundtable program fosters local co-operative networks and encourages collaboration and sharing of best practices and ideas. In late 2014, Meridian announced a strategic alliance with The Co-operators on a pilot basis, to be operationalized during 2015 in the Greater Toronto Area. The pilot program will include certain side-by-side locations of new Meridian branches and Co-operators agencies, providing the opportunity for Members and clients of both organizations to benefit from financial planning while gaining more convenient access to a broad array of financial products and services including those relating to insurance, lending, daily banking and wealth management.On behalf of the Board of Directors, I would like to extend a heartfelt thank you to our employees for their continuing commitment to helping lives grow and improving the communities we live in. Thanks also to you, our Members, for your ongoing loyalty and belief in the co-operative principles we follow and value.

Don Ariss Chair, Board of Directors

Message from the Chair

52014 Annual Report | Message from President and the CEO

From a personal perspective, 2014 stands out as a true inflection point for me as it marks the year that our Board selected me as Meridian’s President and CEO. It is a true honour and privilege to lead an organization of Meridian’s calibre and I would like to thank Meridian’s Board of Directors for their confidence in my ability to lead Meridian into the future. 2014 is also significant in that it represents a demarcation point. It is a year in which we celebrated and leveraged our history of successes and learnings, and simultaneously readied ourselves as an organization for the next ambitious leg of our growth journey. Part of that readiness preparation included the expansion of our executive team. It gives me great pleasure to welcome Leo Gautreau, Chief Risk Officer; Tim Smart, Chief Financial Officer; and Sunny Sodhi, Chief Legal Officer to Meridian’s Executive Leadership Team. Together, in partnership with the rest of Meridian’s Executive Leadership Team, we will leverage our full range of skills and capacity to grow the

lives of our Members and the communities we serve, and in so doing, help to build a stronger province for Ontarians. In 2014, we continued to aggressively execute against our strategic plan, which resulted in our strongest growth to date. Meridian recorded growth across all our business lines and despite a competitive environment, assets under management grew to $11.4 billion, we recorded pre-tax earnings of $50.5 million and we grew our Member relationships (including lending, deposits and Wealth) by $1.7 billion. Our focus on expanding Members’ access resulted in the expansion of our branch footprint with the opening of three new branches, two of those being in Hamilton and one in Barrie. We also continued enhancements to our digital and online capabilities with a special focus on our business banking Members. Meridian also continued to offer market-leading products including our ”We’ve Got Your Back Mortgage” offering last February and our “No Fine Print” Good to Grow high-interest savings account. Providing value to our Members is at the forefront of all that we do at Meridian. As a Member-owned organization, your thoughts, opinions and insights on how we can continue to have your back and serve you better matters to us. I’d also like to take this opportunity to thank those Members that agreed to meet with me in 2014 to share what makes Meridian different

from other financial institutions in their eyes. Last year, through our Voice of Member program, more than 12,000 Members were contacted by an independent third-party firm to gauge their Meridian experience. I’m happy and proud to report that our Net Promoter Score—a measure of how likely our Members are to recommend Meridian to their friends and family —is industry leading and well above our 2014 goal. While much was accomplished in 2014, Meridian will not rest on its laurels. As we look forward to 2015, Meridian is well positioned to continue the growth momentum established in 2014. Members can continue to expect innovative and highly competitive product offerings, ongoing advancements to our digital banking capabilities, and more branch access in new and current Meridian communities — with a strong focus in the Greater Toronto Area. We pride ourselves on being “different” from our competitors and we will focus on furthering that differentiation in everything we do and offer you.To our Members, we at Meridian thank you for your ongoing loyalty and we will continue to strive to have your back and help your lives grow.

Bill Maurin President and Chief Executive Officer

Message from the President and CEO

2014 Annual Report | The Meridian Team 6

The Meridian Team

Bill Maurin – Chief Executive Officer* Leo Gautreau – Chief Risk Officer Gary Genik – Chief Information Officer Tim Smart – Chief Financial Officer* James Millard – Chief People Services Officer

Jennifer Rowe – Chief Marketing Officer Bill Whyte – Chief Member Services Officer Sunny Sodhi – Chief Legal Officer* Sheryl Wherry – Corporate Secretary* (not pictured)

Audit & FinanceRichard Owen – Chair Mark Kraemer Ross Lamont Tamara Paton Patricia Callon

Executive Leadership Team and OfficersBack row left to right: Sunny Sodhi, Jennifer Rowe, Tim Smart, Bill Whyte, and Gary GenikFront row left to right: Leo Gautreau, Bill Maurin, and James Millard

* Credit Union Officer

GovernanceDon Ariss – Chair* John Murphy Ross Lamont Colleen Sidford

Human ResourcesJohn Murphy – Chair* Don Ariss Larry Doran Kevin Thompson Phoebe Wright

NominatingMark Kraemer – Chair Larry Doran Richard Owen Phoebe Wright

RiskColleen Sidford – Chair Tamara Paton Kevin Thompson Karl Wettstein

COMMITTEES

Back row left to right: Richard Owen, Phoebe Wright, Patricia Callon, John Murphy, Mark Kraemer, Kevin Thompson Front row left to right: Colleen Sidford, Ross Lamont, Larry Doran, Don Ariss, Karl Wettstein, Tamara Paton

Board of Directors

72014 Annual Report | Meridian’s Commitment to Communities

Meridian’s Commitment to CommunitiesMeridian exists to help lives grow. One of the ways we help lives grow is through Meridian’s Commitment to Communities.We uphold this commitment to help build our local communities across Ontario, where we can all grow and have better, more prosperous lives.As part of our commitment, we will invest at least 4% of our pre-tax earnings in money and in-kind resources in Meridian communities, following the London Benchmarking Group (LBG) Canada guidelines. Under our Commitment to Communities, we are continuously working toward five key goals:

1. IMPROVING FINANCIAL LITERACYOne of the many ways we honour our commitment to helping lives grow is by sharing our knowledge as financial experts to improve financial literacy across the province. Unfortunately, many Ontarians are not where they need to be when it comes to financial literacy – for personal and new business planning. To address this systemic issue, we first gained a clear understanding of the financial planning knowledge of Ontario’s families and new business owners, and the financial issues they face. We conducted studies with Prosper Canada and the Ontario Network of Entrepreneurs to identify priority needs in our local communities. These include:

• Access to trusted tools and resources to improve understanding.

• Access to trusted advisors and community networks to strengthen our support systems.

• Access to financial products in one’s best interest.

To combat these needs and help Ontarians and business owners to better understand and improve their finances, Meridian is working with a variety of

provincial and local not-for-profit organizations to develop new financial literacy-related tools, resources and community-based initiatives.In celebration of Canada’s first Education Savings Week in 2014, we announced a new community partnership with Omega Foundation to create SmartSAVER.org. This is an online tool to help families eligible for the Canada Learning Bond to learn about and open Registered Education Savings Plans (RESP’s) in order to access free government money for their child’s post-secondary education.In 2015 and beyond, we will continue to develop, launch and share new tools, resources and programs with community partners to increase financial literacy for families and new business owners across Ontario.

SmartSAVER and Canada’s Education Savings Week launch event in Ottawa, November, 2014


In Ontario, over 520,000 children from families with house-hold incomes up to $43,953 are eligible for government contributions of up to $2,000 to be contributed to their education savings through the Canada Learning Bond., Fewer than 30% of eligible youth are taking advantage of this free money. This is an issue that Meridian is working to address with Omega Foundation and local organizations by promoting SmartSAVER.org.During Canada’s first ever Education Savings Week in November 2014, Meridian announced a community partner-ship with Omega Foundation to support a new online tool to make it easier than ever for families to apply to receive the Canada Learning Bond and open an RESP account: SmartSAVER.org. SmartSAVER.org will have a

big impact on children by helping their families save for their education. Children with some savings are more likely to graduate from high school and 50% more likely to pursue a post-secondary education.Every child deserves an education to help them live up to their full potential. We hope to help children get that education through helping their families save.(Source: Statistics Canada and Human Resources Develop-ment Canada.)

SmartSAVER.org

2. INVESTING IN LOCAL COMMuNITIES

Meridian’s united Way CampaignEvery October, Meridian holds our annual United Way campaign throughout all of our branches, commercial business centres and offices. During the month, employees donate their money and time by hosting fundraising events with all proceeds going to local United Way chapters. This year, Meridian matched personal employee donations and together we ultimately managed to raise a total of $266,000 for the United Way – our highest total yet.

Ontario Association of Food Banks (OAFB)Over the holiday season, we invited our employees, Members and our other social media followers to be involved in our giving. For every like, comment or share of our holiday e-card we committed to donating $2 to the OAFB – an organization that supports a network of over 125 food banks across the province serving 375,000 people each month.Because of the overwhelming support we received, Meridian doubled its’ donation, giving $20,000 to the OAFB. This donation could result in the equivalent of 60,000 meals for families in need.

We are committed to building prosperous and resilient communities and have a strong legacy of investing in local organizations, businesses and activities that make our communities strong. Through our Local Community Sponsorship Program, our 67 branches have supported hundreds of organizations financially and with our employees’ time and energy.


4. CONTRIBuTING TO A HEALTHIER ENVIRONMENTIn 2014, our Facilities team began a benchmarking project to identify Meridian’s direct environmental impacts and develop measurable initiatives to reduce them in 2014 – 2015 and beyond. The areas that have been investigated to-date have included: electricity and natural gas consumption, waste management and cleaning practices.For 2015, we have already begun charting action plans to support improved energy efficiency, waste management, procurement, and employee transportation.

PaperLESS ChallengeIn August, we issued a challenge to all of our corporate office employees to reduce their print usage and paper waste over the next six months. Begin-ning August 1, we began tracking the amount of paper printed by each floor in our two corporate offices and compar-ing it to the monthly average from the first half of 2014.In the first two months alone, this friendly competition resulted in a 4% decrease in printing throughout our corporate offices! We plan to build on this progress in the months and years to come.

3. ENGAGING OuR EMPLOYEESAt Meridian, our employees are the ones who make good on our Commitment to Communities and so we, in turn, believe that we have a commitment to them. In April 2014, we launched My Commitment to Communities – a pilot program designed to support each employee’s personal donations, fundraising and volunteerism to their own favourite charities and not-for-profit organizations. My Commitment to Communities offered Donation Matches, through which Meridian matched the charitable donations of each employee up to $500, and Volunteer Grants, where employees who donated 20 or 40 hours to an organization were eligible for a $250 or $500 grant. Response to My Commitment to Communities has been overwhelmingly positive. Over 18% of our employees participated – supporting over 110 charities. Meridian was able to provide over $80,000 to support these causes that were important to our employees.

The Heart & Stroke Big Bike

Team Event

My Commitment to Communities: Michael LangMichael, like nearly 250 other Meridian employees, applied to the My Commitment to Commu-nities program and received a matching donation for his cause of choice – the Toronto People With AIDS Foundation.When a friend was diagnosed with the disease Michael took it upon himself to help by joining the “Friends for Life” bike rally fundraiser – a six day journey from Toronto to Montreal. In total, Michael raised over $2,500 to support AIDS care and research.


5. SuPPORTING A STRONG CO-OPERATIVE SECTOR2014 has been a big year for awareness in the Ontario co-operative sector and as Ontario’s largest credit union, Meridian has been at the forefront of many of these initiatives. Meridian was the largest sponsor of the Credit Unions of Ontario’s CooperativeBanking.ca campaign – a province-wide media campaign aimed at raising awareness of cooperative banking and educating viewers about the differences between credit unions and banks.

We have also been involved in several government advocacy initiatives on behalf of credit unions throughout Ontario such as the “My Credit Union Matters” campaign and took an active role in the government-led public consultations about the review of the Credit Union and Caisses Populaires Act. In doing so, Meridian is taking a proactive approach to help create a stronger co-operative sector throughout Ontario. In addition to our awareness and advocacy work, Meridian continues to foster the next generation of cooperative leaders by sponsoring the Co-operative Young Leaders (CYL) summer camp and All 4 Each programs operated by the Ontario Co-operative Association. Through these two programs, high-school students from across the province have the opportunity to learn about cooperatives and credit unions. At the CYL summer camp, they learn the leadership and communication skills needed to start their own co-op.

2014 Annual Report | Corporate Highlights

BRANCH ExPANSIONIn 2014, Meridian opened three new branches – expanding our network footprint while continuing to help grow lives in the Barrie and Hamilton-area communities. With the opening of the Rymal Road and Stoney Creek branches, Meridian expanded its presence in the Greater Hamilton Area to six branches. Last December, Meridian opened our third branch in Barrie — Big Bay Point. The opening of these branches allows us to expand our footprint in high-growth markets while providing our Members with better access and convenience.

New Products & Services

MARkET-LEADING PRODuCTSLast spring we offered a market-leading mortgage rate of 2.95 per cent on our 5-year We Got Your Back Mortgage; demonstrating our commitment to helping our Members own their homes sooner while potentially saving them thousands of dollars in interest. Our Good to Grow high-interest saving account was introduced last summer, offering our Members a highly competitive rate with “No Fine Print”.

ENHANCED ONLINE ExPERIENCEMeridian continues to invest in technology that improves and enhances our Members’ experience. Last summer, in support of our Good to Grow high-interest savings account launch, Meridian kicked-off our new onboarding process, providing prospective Members throughout Ontario the ability to purchase a Good to Grow high-interest savings account online. In May, Meridian launched its Small Business Online Banking platform, enabling our Members to access their personal and business holdings through one login, delegate authority to an employee, and access business banking-specific functionality.

Corporate Highlights

11

2014 Annual Report | Corporate Highlights

DEDICATED TO SuPERIOR SERVICEMeridian prides itself on providing our Members with superior service and quality financial advice. A year-long mystery shopping program, conducted by Toronto-based research firm Surviscor, found Meridian provided the best service among Canadian credit unions. Meridian’s Net Promoter surveys, in which Members are surveyed and asked if they would recommend Meridian to a friend, continue to exceed our expectations.

JOIN THE SOCIAL MEDIA CONVERSATION Whether it’s on Facebook, Twitter or Instagram, Meridian loves to connect, engage and educate Ontarians about all matters of personal finance. Last year, our Win Your Way to Savings contest winner, Sherry Bertleff, won $10,000 simply for playing a game on Meridian’s Facebook page! In addition to fun contests, Meridian’s social media platforms offer practical personal finance tips, up-to-date information about Meridian and highlight Meridian’s support and involvement in the communities we operate in. Visit www.meridiancu.ca to learn more about Meridian’s social media platforms.

12

2014 Annual Report | Financial Highlights 13

Financial Highlights Meridian achieved record relationship growth, growing the lives of our Members, while our earnings continued to contribute to a strong capital position.

Performance Ratios Minimum

Regulatory Required

2014 2013

Capital Ratio 4.0% 6.4% 6.6%

Risk Weighted Capital 8.0% 13.2% 13.4%

Liquidity Ratio - 10.5% 11.1%

Return on Average Equity - 5.8% 10.3%

Annual Dividend Payments ($ millions) - $11.3 $10.8

Our capital position remained strong.

Our capital and liquidity positions continued to remain well above regulatory and Board policy limits. Our return on Members' equity declined as capital was strategically invested for future success.

Meridian paid $11.3 million in dividends.

Total relationships with Members grew to $18.3 billion.

Record relationship growth was achieved across all business lines and across all product categories, particularly mortgages, demand deposits and mutual funds.

Pre-tax earnings totaled $50.5 million.

Net interest income continued to grow steadily, driven by increased relationships.

Strategic investments in new branches, building awareness of Meridian in Ontario and improving the experience of Members resulted in increased expenses.

* Includes share of profits from investments in associates and joint venture. ** Excludes Desjardins Credit Union amalgamation expenses, amortization of fair value adjustments and pension curtailment gains.

Financial Highlights Meridian achieved record relationship growth, growing the lives of our Members, while our earnings continued to contribute to a strong capital position.

Performance Ratios Minimum

Regulatory Required

2014 2013

Capital Ratio 4.0% 6.4% 6.6%

Risk Weighted Capital 8.0% 13.2% 13.4%

Liquidity Ratio - 10.5% 11.1%

Return on Average Equity - 5.8% 10.3%

Annual Dividend Payments ($ millions) - $11.3 $10.8

Our capital position remained strong.

Our capital and liquidity positions continued to remain well above regulatory and Board policy limits. Our return on Members' equity declined as capital was strategically invested for future success.

Meridian paid $11.3 million in dividends.

Total relationships with Members grew to $18.3 billion.

Record relationship growth was achieved across all business lines and across all product categories, particularly mortgages, demand deposits and mutual funds.

Pre-tax earnings totaled $50.5 million.

Net interest income continued to grow steadily, driven by increased relationships.

Strategic investments in new branches, building awareness of Meridian in Ontario and improving the experience of Members resulted in increased expenses.

* Includes share of profits from investments in associates and joint venture. ** Excludes Desjardins Credit Union amalgamation expenses, amortization of fair value adjustments and pension curtailment gains.

Financial Highlights

2014 Annual Report | Corporate Governance Report 14

Meridian operates within a comprehensive regulatory framework. We are established under provincial legislation, the Credit Union & Caisses Populaires Act, 1994. (the “Act”). Primarily credit unions are regulated by two bodies: i) the Financial Services Commission of Ontario (“FSCO”); and ii) the Deposit Insurance Corporation of Ontario (“DICO”).

The Ministry of Finance is responsible for developing and establishing the legislative and regulatory framework under which credit unions must operate. FSCO is responsible for ensuring that credit unions operate in accordance with the requirements of the Act and the regulations thereunder, particularly with respect to issues involving market conduct relating to Members and the general public. DICO is responsible for overseeing compliance with solvency rules and for providing deposit insurance protection for deposits held in Ontario credit unions and Caisses Populaires up to prescribed limits. As part of this responsibility, DICO has the authority to issue by-laws to ensure that insured institutions operate in accordance

with Sound Business and Financial Practices. To promote responsible governance through strength and stability, Meridian meets quarterly with DICO representatives, provides regular reporting to DICO and participates in periodic risk based examinations. Although it is not the practice of FSCO to schedule regular meetings with Ontario credit unions, as a best practice, Meridian proactively advises FSCO of matters relating to its business of which we believe the regulator should be aware.

The Act was scheduled for review in 2014. Meridian participated on an Ontario credit union system working group to organize a submission to the Ontario government in respect of the Act review setting out suggested amendments. Additionally, Meridian developed its own submission to the Government wherein we encouraged amendments to the legislative framework that will facilitate the continued growth of Ontario credit unions and provide options to expand our business model in order to further sustainable growth.

Governing Legislation and Regulation

Approach to Governance at MeridianMeridian’s Board of Directors continues to be committed to the highest standards of Corporate Governance in order to demonstrate our stewardship to Members, employees and the communities we serve. We believe this is essential for continued success and continuation of our Members’ trust.

Meridian operates with a principle based governance philosophy with key principles that provide the foundation for its own governance policies and practices, such as:

• Fulfilling its legal and fiduciary obligations and ensuring it is adhering at all times to statutory and regulatory requirements;

• Acting in the best interests of Meridian and the totality of its Membership;

• Continually educating the Membership on the role of the Board and other key governance issues including efforts to ensure Members can effectively exercise their rights and obligations in respect of the election process;

• Ensuring the Credit Union has the means, capability and willingness to put into practice effective measures to direct itself prudently;

• Ensuring effective stewardship of business operations and management of risk including an effective enterprise wide risk management framework;

• Reflecting the Credit Union’s commitment to integrity, open communication, teamwork, and continuous improvement; and

• Continually assessing its effectiveness in fulfilling these responsibilities.

Corporate Governance Report


The Board of Directors protects and enhances Meridian’s assets and is responsible for ensuring Meridian has clear strategic direction. Their goal is to protect the best interests of Meridian’s Members and stakeholders. It is further responsible for overseeing Management to ensure that Meridian’s operations are

managed in a sound and prudent manner thereby assuring Members that all regulatory and statutory requirements are met. Every Director is responsible for exercising independent judgment with honesty and integrity.

Board Composition and ElectionIn accordance with our Bylaws, Meridian’s Board is composed of 12 Directors, all of whom are independent Directors. The process for the election of Directors is comprehensive. Each year the Board reviews the skills, knowledge and experience of the Board in order to determine if any gaps exist to ensure the highest quality Board composition. The Board’s Nominating Committee is requested by the Board to seek to fill any identified gaps as they solicit candidates for nomination from Meridian’s Members. Prospective candidates receive an extensive package of information. In recent years DICO used this package as the basis for a sample Director Candidate Information Guide, released to the Ontario

credit union system. All eligible candidates are placed in nomination. The Nominating Committee interviews all candidates and evaluates them against a set of criteria defined by the Board in advance. The Nominating Committee recommends to our Members those candidates who are considered best qualified to serve Meridian to fill the number of vacancies. Nominees who are not recommended are eligible to remain on the ballot for election. Our Members can vote for the election of Directors by casting a ballot electronically via the Internet or in person at any of our Branches. Meridian’s Directors are elected for three-year terms and represent a broad range of skills, experiences and backgrounds.

Board DiversityMeridian’s Board has adopted a Statement of Intent, which states that Meridian recognizes and embraces the benefits of diversity in Board members. The Board demonstrates a diversity of thought that aligns to the needs of the demographic composition of the communities we serve today and in the future. A truly diverse Board will include and make good use of difference in the skills, regional and industry experience, background, race, gender and other attributes of Directors. The best qualified candidates will be recommended for election to the Board while taking into account broad diversity differences required to represent our Membership of today and tomorrow. As important as these diverse considerations, Meridian considers diversity of thought, experience and backgrounds equally important.

The current 12 Directors bring to the Board table the following backgrounds and qualifications:

Bachelor of Commerce; Two Chartered Accountants (CPA, CA’s); LL.B Law Degree; Honours BA French Language and Literature; Certified Independent Director Designations; Honours BA (Economics Major); BA Economics; CMA; MA in Leadership; MBAs; Professional Engineering Degree; Bachelor of Science; MSc (Mathematics and Computer Science); Certified Human Resources Professional; Various entrepreneurial endeavours; MBA (Wharton School of Business); Two Chartered Financial Analysts; Bachelor of Mathematics; MBA (Finance & Marketing); Hon. BA Political Science; Fellow of ICB; Large Corporate Business environments and considerable work experience within the co-operative sector.

Board Mandate


Orientation and Continuing EducationNew Directors are provided a comprehensive orientation to familiarize them with Meridian’s business operations and Governance processes. Every year we conduct a formal de-briefing of the orientation session so as to capture enhancement opportunities for subsequent years. The Governance Committee continues to evaluate this program to ensure the most effective orientation is provided to new Directors. Individual Committees have also established their own orientation programs to better educate new Committee members in their responsibilities. The Board has an approved budget for ongoing Director training and development, including educational sessions for the Board as a whole, industry-sponsored seminars and other conferences for individual Directors that are relevant

to Meridian’s business. The Board established a policy in late 2012, that sets an objective for the majority of Meridian’s Directors to receive an external Director accreditation designation. We are pleased to note that at the end of 2014, seven Directors hold either the Institute of Corporate Directors (“ICD”) or Director’s College designation, while one more is currently registered and part way through the ICD program. Based on these efforts the objective set by the Board has been accomplished. During 2014 a number of information/educational sessions were arranged through both our Risk and Audit & Finance Committees, that all Board members were invited to attend. These sessions have mostly been conducted by Management of the Credit Union and have been well attended by Directors.

Board EvaluationsThe Board is committed to effective governance and continuous improvement. Annually the Governance Committee facilitates a Board evaluation process to assess the effectiveness of Board activities. Generally external consultants are engaged to conduct these engagements. In 2014, a unique approach to the Board’s evaluation was undertaken. The focus was to engage the Board in considering what a Progressive Leadership Board would mean to

Meridian, and concurrently working through a group effectiveness exercise intended to allow Directors to capitalize on individual strengths to enhance overall group effectiveness. A third component was to assess the effectiveness of the Board during the extended absence of the former CEO. Learnings from these respective components have been utilized in developing further Governance policies.

• Review of financial statements, internal controls, accounting policies and reporting procedures;

• Review the Credit Union’s financial performance relative to established metrics;

• Ensuring integrity of financial reporting;• Oversight of internal and external audit processes;

• Monitor the independence of external auditors; • Overseeing compliance with Regulations, and

monitoring compliance with all Board policies; and• Oversight of the reporting relationship of the Chief

Audit Executive.

Board CommitteesThe Board has delegated the oversight for monitoring adherence to its policies to five Committees with the following primary accountabilities:

Audit & Finance Committee


Governance Committee

• Maintaining a healthy governance culture and overseeing all Governance policies;

• Assessing the effectiveness of the Board, its Committees and Committee Chairs;

• Oversight of the Board’s annual planning process; and• Oversight of the development plans for Directors.

Nominating Committee

• Oversight of the nomination, assessment and recommendation of candidates for the Board;

• Assessment of the adequacy of the candidate pool to ensure it fulfills any identified gaps;

• Oversee the Director election process;

• Accountable for the general content, objectives and guidelines of Meridian’s annual report; and

• Oversight of the activities associated with the Annual General Meeting and any Special Members’ Meetings.

Risk Committee

• Ensuring a robust process for identifying, managing and monitoring critical risks;

• Ensuring policy guidelines and systems are in place to ensure enterprise risks are at an acceptable level;

• Provide strategic oversight to risk management policies and DICO standards;

• Oversee the establishment of a risk appetite framework; and

• Reviewing and approving individual connected and restricted party credit applications.

Human Resources Committee

• Overseeing the HR policies and programs, ensuring that they are developed, implemented and adhered to by Management in support of the business strategies of the Credit Union;

• Reviewing and recommending Director compensation;

• Administering the process for reviewing the CEO’s performance and compensation; and

• Oversight of the employee pension plans.


The Board believes it is important to offer a level of transparency to you the Members who elect the Board to serve you. To that end the Board provides you with information on its activities.

The Board is proud of the following initiatives implemented in 2014:

• Conducting a comprehensive search for a new CEO, and finalizing such appointment in the second quarter;

• Conducted a unique and comprehensive Board evaluation that encompassed a variety of components aimed at enhancing the Board’s effectiveness;

• Based on the results of this work, the Board has established a plan for developing these findings to continue to enhance the Board’s evolution;

• Conducted a planning session mid-year that provided direction to Management to explore growth strategies aimed at achieving a bold 10 year strategic vision;

• Completed the third iteration of individual Director self-assessments against the nine competencies required under the DICO Guidance Note, as well as four additional competencies developed by Meridian, and undertook a comprehensive validation of those results;

• In conjunction with the Board Chair, used the results of the above to establish updated individual Director plans including specific objectives for their own development and specific actions plans;

• Conducted a three year review of all Board Governance Policies; and

• Continued participation in dialogue among Board Chairs of the 15 largest Credit Unions in Canada.

Board Code of ConductMeridian’s Board has adopted a policy that outlines the Duties and Obligations of Directors, and annually requires each Director to sign a statement of Director

Commitment, which confirms that they have read the Board’s policies and agree to respect and abide by them at all times.

2014 Board Initiatives

Director CompensationMeridian’s Human Resources Committee is responsible to recommend Director compensation. As stated in the Board’s policies, a comprehensive review is undertaken every two years in this regard. The last comprehensive bi-annual review was conducted in the early part of 2014 with implementation effective January 1, 2014. Meridian recognizes the importance of attracting and retaining a high quality and dedicated Board of Directors, and therefore offers a level of remuneration that both reflects our co-operative heritage and makes us competitive in the marketplace. Director remuneration

will be proportional to a consistent peer group of Canadian financial services institutions of like size and complexity. As a result Meridian has established a compensation philosophy which states that the total compensation of Meridian’s Directors will be reflective of the range between the 50th and 75th percentile of target organizations surveyed through relevant third-party and/or custom compensation survey sources that are most recently available.

Listed below are the Retainers paid to Meridian’s Directors in 2014.


Meridian also recognizes that there may be extraordinary circumstances (i.e. significant additional time required to be spent on a matter) that justifies an additional payment be made to a Director.

In keeping with good governance practice of disclosure, the table below summarizes the total compensation (excluding expense re-imbursement) received by individual Directors during 2014:

Total Compensation of Individual Meridian DirectorsDirector Total CompensationDon Ariss (Board Chair; Governance Committee Chair) $56,900Patricia Callon (effective 4/14 – 12/14) $16,816Alan Caslin (until 4/14) $8,117Larry Doran (effective 4/14) $18,583Mark Kraemer $41,533Ross Lamont $38,050John Murphy (Human Resources Committee Chair; Vice Chair, effective 5/13) $43,400Richard Owen (Audit & Finance Committee Chair) $37,850Tamara Paton $27,350Colleen Sidford (Risk Committee Chair) $32,850Kevin Thompson $36,917Karl Wettstein $30,150Phoebe Wright $28,100Helen Young (until 4/14) $8,317

Meridian Director RetainersBoard Chair $40,000Audit & Finance Committee Chair $27,000Vice Chair and Other Committee Chairs $22,000Director $17,000

Executive Compensation & CEO Performance ManagementMeridian’s Human Resources Committee is responsible for recommending to the Board the Compensation of the CEO, and ensuring that the compensation practices relating to the Executive Leadership Team are consistent with the strategy and policy of Executive compensation. A third party executive compensation firm is engaged by the Committee to assist them in this work. The

Board determines the form and amount of CEO compensation based on recommendations from the Human Resources Committee. The Committee is also responsible for developing performance objectives for the CEO, and evaluating performance against those objectives. Emphasis is placed on the appropriate balance to incent achievement of short-term objectives while ensuring longer-term success.


Board of Directors Meeting Attendance (2014 Fiscal Year)Board of Directors Committee Total

Director Attend Held Attend Held Attend Held %Ariss, Don 8 8 10 10 18 18 100.0

Callon, Patricia 5 5 3 3 8 8 100.0

Caslin, Alan 3 3 2 2 5 5 100.0

Doran, Larry 4 5 6 6 10 11 90.9

Kraemer, Mark 8 8 9 9 17 17 100.0

Lamont, Ross 8 8 9 9 17 17 100.0

Murphy, John 8 8 10 10 18 18 100.0

Owen, Richard 8 8 8 8 16 16 100.0

Paton, Tamara 8 8 9 9 17 17 100.0

Sidford, Colleen 8 8 10 10 18 18 100.0

Thompson, Kevin 8 8 13 13 21 21 100.0

Wettstein, Karl 8 8 8 8 16 16 100.0

Wright, Phoebe 8 8 9 10 17 18 94.4

Young, Helen 3 3 2 2 5 5 100.0

Director AttendanceThe Board has a policy for “Attendance by Directors” and receives semi-annual reporting of individual attendance. While the policy reflects a 12 month rolling attendance record due to the need to capture consecutive meeting attendance, the following chart reflects attendance during the fiscal year. It includes former and newly elected Directors whose terms ended and/or commenced concurrent with

the Annual General Meeting in April 2014. The attendance records of our respective Directors are noted below. The percentages pertain to the attendance at both Board and Committee meetings held during the period January 1, 2014 to December 31, 2014. Overall this translates to a 98.95% average attendance by Meridian’s Directors.

The Board continues to be very pleased with the progress that Meridian has made since its inception in 2005. Many of Meridian’s recent successes are highlighted in the Management Discussion & Analysis that follows.

Your Board would like to thank all of our Members for your continued loyalty and patronage in 2014.


Contacting the BoardMembers or other parties may communicate with the Board through our Governance office by writing to:

E-mail: [email protected]: Attention: Corporate Secretary Meridian Credit Union Limited 75 Corporate Park Drive St. Catharines, ON L2S 3W3

For further information about Meridian’s Board of Directors, visit: www.meridiancu.ca/meridian/about/Pages/default.aspx

2014 Annual Report | Management’s Discussion & Analysis 22

2014 Annual Report Management’s Discussion & Analysis 1

Caution Regarding Forward-Looking Statements This MD&A includes forward-looking statements, which by their very nature require management to make assumptions and involve inherent risks and uncertainties. Forward-looking statements are typically identified by the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “may increase”, “may impact”, and other similar expressions, or future or conditional verbs such as “will”, “should”, “would” and “could”. A number of important factors, many of which are beyond management’s control, could cause actual future results, conditions, actions or events to differ materially from the targets, projections, expectations, estimates or intentions expressed in forward-looking statements. These factors include, but are not limited to, changes in general economic conditions in Canada, particularly those in Ontario; legislative or regulatory developments; changes in accounting standards or policies; and Meridian’s success in anticipating and managing the risks inherent in these factors. Readers are cautioned that the foregoing list is not exhaustive. Undue reliance should not be placed on forward-looking statements as actual results may differ materially from expectations. Meridian does not undertake to update any forward-looking statements contained in this MD&A.

Management’s Discussion & Analysis This management’s discussion and analysis (“MD&A”) gives readers an overview of Meridian Credit Union Limited (“Meridian”), and enables them to assess Meridian’s financial condition and results of operations for the fiscal year 2014, as compared to prior years. The MD&A should be read in conjunction with the audited financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Unless otherwise indicated all amounts in the MD&A are expressed in Canadian dollars. The MD&A commentary is as of February 27, 2015. In accordance with its terms of reference, Meridian’s Audit and Finance Committee of the Board of Directors has reviewed the content of the MD&A and recommended its approval to the Board of Directors. The MD&A was approved by Meridian’s Board of Directors. Core Business & Strategy .............................. 2

Corporate Overview ..................................... 2

Our Corporate Strategy ............................... 2

Key Performance Drivers ............................... 3

Capability to Deliver Results .......................... 4

Financial Results .......................................... 6

2014 Financial Overview ............................. 6

2014 Financial Performance Review ......... 8

Total Revenue ............................................ 8

Net Interest Income ................................. 8

Provision for Credit Losses .................... 10

Credit Portfolio Quality ........................... 10

Non-Interest Income from Operating Activities ................................................... 11

Non-Interest Income from Investments in Associates & Joint Ventures ................................................... 12

Non-Interest Expenses .......................... 12

Dividends .................................................. 13

Financial Conditions Review ...................... 13

Balance Sheet Summary ....................... 13

Liquidity Review ...................................... 14

Capital Management ................................... 15

Overview ...................................................... 15

Managing and Monitoring Capital ............ 15

Capital Review ............................................. 15

Internal Capital Adequacy Assessment Process .......................................................... 16

Risk Management ....................................... 16

Overview ...................................................... 16

Risks that may Affect Future Results ...... 18

Enterprise Risk Management Philosophy .................................................... 19

Enterprise Risk Management Framework ................................................... 19

Identification and Management of Key Risks .............................................................. 26

2015 Outlook ............................................. 28


Caution Regarding Forward-Looking Statements This MD&A includes forward-looking statements, which by their very nature require management to make assumptions and involve inherent risks and uncertainties. Forward-looking statements are typically identified by the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “may increase”, “may impact”, and other similar expressions, or future or conditional verbs such as “will”, “should”, “would” and “could”. A number of important factors, many of which are beyond management’s control, could cause actual future results, conditions, actions or events to differ materially from the targets, projections, expectations, estimates or intentions expressed in forward-looking statements. These factors include, but are not limited to, changes in general economic conditions in Canada, particularly those in Ontario; legislative or regulatory developments; changes in accounting standards or policies; and Meridian’s success in anticipating and managing the risks inherent in these factors. Readers are cautioned that the foregoing list is not exhaustive. Undue reliance should not be placed on forward-looking statements as actual results may differ materially from expectations. Meridian does not undertake to update any forward-looking statements contained in this MD&A.

Management’s Discussion & Analysis This management’s discussion and analysis (“MD&A”) gives readers an overview of Meridian Credit Union Limited (“Meridian”), and enables them to assess Meridian’s financial condition and results of operations for the fiscal year 2014, as compared to prior years. The MD&A should be read in conjunction with the audited financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Unless otherwise indicated all amounts in the MD&A are expressed in Canadian dollars. The MD&A commentary is as of February 27, 2015. In accordance with its terms of reference, Meridian’s Audit and Finance Committee of the Board of Directors has reviewed the content of the MD&A and recommended its approval to the Board of Directors. The MD&A was approved by Meridian’s Board of Directors. Core Business & Strategy .............................. 2

Corporate Overview ..................................... 2

Our Corporate Strategy ............................... 2

Key Performance Drivers ............................... 3

Capability to Deliver Results .......................... 4

Financial Results .......................................... 6

2014 Financial Overview ............................. 6

2014 Financial Performance Review ......... 8

Total Revenue ............................................ 8

Net Interest Income ................................. 8

Provision for Credit Losses .................... 10

Credit Portfolio Quality ........................... 10

Non-Interest Income from Operating Activities ................................................... 11

Non-Interest Income from Investments in Associates & Joint Ventures ................................................... 12

Non-Interest Expenses .......................... 12

Dividends .................................................. 13

Financial Conditions Review ...................... 13

Balance Sheet Summary ....................... 13

Liquidity Review ...................................... 14

Capital Management ................................... 15

Overview ...................................................... 15

Managing and Monitoring Capital ............ 15

Capital Review ............................................. 15

Internal Capital Adequacy Assessment Process .......................................................... 16

Risk Management ....................................... 16

Overview ...................................................... 16

Risks that may Affect Future Results ...... 18

Enterprise Risk Management Philosophy .................................................... 19

Enterprise Risk Management Framework ................................................... 19

Identification and Management of Key Risks .............................................................. 26

2015 Outlook ............................................. 28

Management’s Discussion & Analysis

Core Business & Strategy ........................................23

Corporate Overview ............................................23

Our Corporate Strategy .......................................23

Key Performance Drivers .........................................24

Capability to Deliver Results .....................................25

Financial Results .....................................................27

2014 Financial Overview ......................................27

2014 Financial Performance Review .......................29

Total Revenue .................................................29

Net Interest Income ........................................29

Provision for Credit Losses ...............................31

Credit Portfolio Quality ....................................31

Non-Interest Income from Operating Activities .........................................32

Non-Interest Income from Investments in Associates & Joint Venture ..........33

Non-Interest Expenses ....................................33

Dividends ......................................................34

Financial Conditions Review ..................................34

Balance Sheet Summary ..................................34

Liquidity Review ..............................................35

Capital Management ...............................................36

Overview ...........................................................36

Managing and Monitoring Capital ..........................36

Capital Review....................................................36

Internal Capital Adequacy Assessment Process .......37

Risk Management ...................................................37

Overview ...........................................................37

Risk that may Affect Future Results .......................38

Enterprise Risk Management Philosophy ................39

Enterprise Risk Management Framework ................39

Identification and Management of Key Risks ...........46

2015 Outlook .........................................................48



Core Business & Strategy

Corporate Overview

Meridian exists to grow the lives of our Members and improve the communities we live in.

As Ontario’s largest credit union, we grow lives by delivering banking products and services to our over a quarter of a million Members, through a network of 67 branches, seven Commercial Business Centres, a Member Contact Centre and through online services.

Meridian is owned by our Members. We work only for them and always put their interests first. Our

employees take the time to understand the financial goals and aspirations of our Members, which then allows us to proactively offer solutions that meet their needs.

We also grow lives through a commitment to invest money, time, and talent to help build prosperous, resilient communities. Our Commitment to Communities is based on the co-operative values and beliefs our Members and employees share.

Our Corporate Strategy

Meridian strives to be the leader in Member-centric banking among Canadian co-operatives. We focus on strategies that are in the best long-term interest of our Members, not short-term corporate earnings objectives. In so doing, we grow the lives of our Members by deepening relationships with existing Members and building relationships with new Members. Our medium term strategic objectives continue to be relevant in supporting Meridian’s longer term sustainability and our ability to deliver on what we call Our Story. These objectives are as follows:

1. Deliver a Differentiated Member Experience

Our differentiated Member experience sets us apart from other financial institutions

This experience is delivered daily through objective interactions with Members

Our employees deliver a consistent and meaningful sales and service experience

Our products and services demonstrate Our Story which is focused on growing the lives of our Members, having their best interest at heart and always having their back

2. Building the Brand

Our goal is to build stronger awareness of who Meridian is and what we have to offer in the markets in which we operate

We want to ensure that Meridian is not the best kept secret in financial services

3. Expanding Member Access

Ensuring that our existing and future Members are able to access our products and services easily is essential

Members request a competitive level of convenience, with access to physical branches, as well as online or mobile services

Our goal is to meet these demands by providing ubiquitous access to all Members through all channels

4. Sustainable Growth

We strive to improve Members’ financial well-being and livelihoods

We seek to expand the boundaries of our business model and our markets

Growth in Members and relationships enhances Meridian’s earnings, which in turn fuels value-added investments in Member products and services, and our communities

5. Creating an Ownership Culture

Our goal is to create a differentiated ownership experience for our employees

Providing opportunities for employees to grow their lives as they help Members grow theirs

By empowering employees, we aim to establish a company-wide risk awareness culture

6. Technology and Information Management

We are committed to enhancing our use of technology and information to better support Meridian’s Members and employees, and to achieve our strategic objectives

We continually upgrade our core technology platforms, ensuring that they are robust and secure, and are capable of supporting emerging technologies



Key Performance Drivers

Critical to our success are our Members, our employees, and our presence in the community. These ultimately drive our performance, creating a financially sound and sustainable credit union. We pay attention to our success factors; by listening to what our Members say, ensuring the marketplace is aware of Meridian’s value proposition, and ensuring our employees are fully engaged.

Voice of Member

Voice of Member is our Member relations program, which provides Meridian an opportunity to hear the opinions of our Members. It enables us to better respond to Member needs and truly add value as we grow their lives. Favourable Member ratings is a direct indicator that we are delivering on Our Story and results in growth in relationships with Members, which includes lending, deposits and wealth management.

Meridian’s Voice of Member ratings continued to increase substantially in 2014

Growth in relationships with Members was significantly stronger than prior years

Relationships per Member continued to grow Awareness of Meridian

We regularly assess awareness of Meridian and our unique value proposition. We monitor our progress over time, in the areas of awareness, differentiated Member experience, and access. These factors influence our ability to deliver Our Story to more Ontarians.

Our brand awareness research shows that the percentage of Ontarians who know about Meridian grew in 2014

Twice as many Ontarians recognized Meridian without being prompted

Membership Growth

Growth in Membership means that Meridian is able to help more lives grow, as over time we will have an opportunity to deepen our relationships with Members. Growth in our Membership base is influenced by increased awareness of Meridian and an expansion in Meridian’s points of access.

Over 15,000 Ontarians became Members of Meridian in 2014

Employee Engagement

We continuously undertake activities that ensure our employees are engaged and empowered to make decisions in the best interest of the Member. We provide tools to help them effectively manage risks, just like an owner. We also promote the well-being of our employees through our iMwell program and engage in activities to help grow their lives.

Meridian continues to receive high employee engagement scores, resulting in a greater ability to service the needs of our Members

Once again, Meridian is recognized as one of the Achievers 50 Most Engaged Workplaces™ in North America

Capital Position

A key indicator of our financial soundness and ability to exist as a going concern is the strength of our capital base, which consists mainly of Member shares and retained earnings. A strong capital position allows us to absorb shocks stemming from economic downturns and market risk, reinvest in activities that add value to our Members and helps to protect Members’ deposits. We, therefore, focus on maintaining strong capital ratios by building our capital base using high quality retained earnings that can be used in the event of a shock, or can be deployed to better meet the needs of Members.

Meridian’s capital and risk-weighted capital ratio remained strong in 2014, well above regulatory limits



Capability to Deliver Results

Meridian’s long-term sustainability hinges on our success in achieving our strategic objectives, which are supported by multiple initiatives. We continue to strengthen our capabilities in our delivery network, organizational processes, technology, organizational structure and employees. The following 2014 successes and current initiatives highlight our ability to achieve our strategic objectives and meet current and future needs of Members:

Differentiated Member Experience

Good to Grow High Interest Savings Account

The Good to Grow high interest savings account, launched in 2014, demonstrates Our Story and helps grow the lives and savings of our Members. It is a superior product, offered at an interest rate that was higher than rates offered by banks. Interest is earned on every dollar and there is no minimum monthly balance or fees. This product generated significant interest from existing and new Members.

IIROC Certified Wealth Advisor

Meridian launched a pilot with Investment Industry Regulatory Organization of Canada (“IIROC”) certified Senior Wealth Advisors in 2014. This enabled us to offer a more extensive suite of wealth products to our Members, including equities, bonds and exchange traded funds (“ETFs”).

We’ve Got Your Back Mortgages

Meridian offered Members “We’ve Got Your Back” mortgages at a market leading rate. A substantial number of Members realized their dreams by taking advantage of this offer.

Payroll Service Partnership

Meridian has engaged in a partnership arrangement to provide payroll services to business Members. This is an important service in growing the businesses of these Members.

Net Worth Statements

A financial profile tool was developed to support robust net worth discussions and provide advice to new and existing Members.

New Small Business Offers

As part of Meridian’s focus on expanding our Small Business offer, products specifically designed for professionals and students in specific professional school programs were developed.

We also launched our Small Business online and mobile banking in 2014.

Member Access

New Branches

Meridian opened three new branches in 2014, making it easier for new and future Members to access our services.

Rymal Road opened in April, 2014 (Hamilton area) Stoney Creek opened in November, 2014 (Hamilton area) Big Bay Point opened in December, 2014 (Barrie area)

We will continue to expand our branch footprint in targeted Ontario markets. We will intensify our expansion in the Greater Toronto Area (“GTA”) with significant investment in new branches, some of which will be located in close proximity to agency offices of another highly-regarded financial services co-operative, The Co-operators. By working closer with like-minded organizations with similar ideals and Member bases, we will provide greater value to our Members.

Digital Strategy

We continue to focus on our digital strategy as a means to provide expanded access to Members. The following capabilities were added in 2014:

We launched Small Business online and mobile banking New Members are now able to join Meridian through online or mobile

channels Members are able to open registered deposit products online


















Member Access

New Branches




Digital Strategy





















Member Access

New Branches




Digital Strategy






Brand Awareness

Advertising, Media & Community Investment

In 2014 we invested in traditional and digital advertising, social media, brand experiences, earned media and sponsorships.

We expanded our social media activity, created financial literacy content and launched several competitions on social media. Our Facebook community and Twitter followers grew significantly as a result.

The Meridian Centre, a multi-use sports arena and home of the Ontario Hockey League’s Niagara Ice Dogs, was opened in St. Catharines. Meridian also received the naming rights to a public square called Meridian Place, located near the revitalized Barrie waterfront.

Credit Unions of Ontario Awareness Campaign

Meridian continues to jointly participate in the Credit Unions of Ontario awareness campaign that promotes co-operative banking and showcases the credit union difference. A series of television advertisements were aired in 2014 and new ones are scheduled for 2015.

Technology

Mortgage Process Enhancements

Meridian has been engaged in a project to implement workflow automation and imaging technologies into our mortgage lending processes. In 2015 these processes will be integrated into our lending origination system, resulting in operational efficiencies and quicker turnaround of mortgage sales and fulfilment.

Commercial Lending Platform

As part of our multi-year business banking transformation program (“BBTP”), a new Commercial lending platform will be implemented in the near future. We expect to gain efficiencies from the new system while enhancing our risk management and most importantly improving our business Members’ experience.

Employees

Strong Leadership

Meridian’s Board of Directors appointed Bill Maurin as the new President and Chief Executive Officer of Meridian, following the retirement of Meridian’s previous President and Chief Executive Officer, Sean Jackson. This appointment ensures the stability of Meridian’s leadership team and continued progress in establishing and achieving our strategic objectives.

Two new leadership positions which are critical to Meridian’s long-term sustainable growth were also created and filled in 2014 - Chief Risk Officer and Chief Legal Officer.

Liquidity Management

Funding Sources

Funding our strong asset growth is essential to our strategy. Meridian has been successful at securing funding through external channels such as deposit brokers, mortgage securitization and credit facilities. We continue to look for alternative funding sources as we grow and diversify.



Financial Results

2014 Financial Overview

After a slow start to 2014, economic activity in Canada picked up in the second quarter of the year and maintained momentum for the rest of the year. This was influenced by a weaker Canadian dollar, which supported increased exports, and ongoing low interest rates. Early in the year, an unseasonably cold winter kept consumers from shopping but once conditions improved, low interest rates supported consumer spending at levels that are considered unsustainable. Inflationary pressures were muted due to the persistent slack in the economy, which resulted from operating below full capacity. Additionally, lower energy costs and the effects of continued competition in the retail sector offset other sector-specific price increases. The Bank of Canada therefore maintained its overnight lending rate at 1%.

In Ontario, preliminary indicators show that economic growth expanded at a faster rate than in 2013 driven by exports and household spending. Exports were favourably impacted by the weaker Canadian dollar, with increased demand for motor vehicles and parts. Sales of existing homes grew by 3.7% while new housing starts fell slightly below 2013 starts. Business investment declined due to weak corporate profits, which resulted from low demand and declines in commodity prices in recent years. This consequently resulted in weak employment growth compared to 2013. Nonetheless the increase in employment was sufficient to reduce the unemployment rate to 7.3%. The public sector also caused a drag on economic growth as government spending was restrained in an effort to rebalance public sector finances.

The economic environment in 2014 presented opportunities that Meridian took advantage of and challenges which had to be mitigated. Overall, Meridian’s operating performance was strong with significant growth in relationships with Members. Total assets grew by $810.0 million to $10.0 billion at the end of 2014, driven largely by lending to Members for mortgages and commercial business activities. Assets under management, which include off-balance sheet Wealth management assets, increased by $1.1 billion to $11.4 billion. Wealth asset growth continued to be exceptional, surpassing the strong growth achieved in 2013. Despite continued stiff competition among financial institutions for deposits, Meridian’s deposit growth recovered in 2014, achieving more than double the growth realized in 2013. Deposits grew by $559.1 million to total $8.0 billion at the end of 2014.

Meridian continued to operate profitably in 2014,

despite the challenge of a continued low interest rate environment and significant investment in initiatives to support our long-term sustainability. Meridian generated $50.5 million in pre-tax earnings, a decrease of $8.9 million over the previous year. The lower earnings were attributable to higher long-term strategic expenses, while interest income continued to be impacted by low interest rates. These factors contributed to an after-tax return on equity (“ROE”) of 5.8% in 2014 compared to 10.3% achieved in 2013. ROE represents total comprehensive income as a percentage of average total equity.

Total revenue, net of provisions for credit losses, was $11.6 million higher than the 2013 results, totalling $224.3 million in 2014. The main driver of this increase was the significant growth in relationships with Members, which resulted in higher net interest and non-interest income. Net interest income, which is the difference between the income that is generated by Meridian’s assets and the cost to attract Member deposits and other borrowings, grew by $10.4 million to $186.8 million. The strong increase in Member account balances was sufficient to offset the adverse impact of ongoing margin compression. Non-interest income from operating activities, excluding profits from investments in associates and joint ventures, rose by $4.0 million to $43.4 million, influenced by revenue from Wealth assets. Non-interest income from investments in associates and joint ventures declined by $2.2 million to $1.3 million as our investment holdings reduced. Non-interest expense was $20.5 million above that of 2013 expenses, totaling $173.8 million. The increase in expenses was largely attributable to higher expenses associated with our growth and branch expansion, increased community investment, marketing spend to build awareness and investments in strategic initiatives. The 2013 results also benefited from a one-time $5.7 million reduction in expenses due to a pension plan curtailment gain.



The efficiency ratio is a measure of productivity and is calculated as non-interest expense divided by total revenues, expressed as a percentage. Faster growth in expenses relative to increased revenue, previously described, resulted in a higher efficiency ratio of 77.5% in 2014 compared to 72.1% in 2013.

Meridian’s capital and risk-weighted capital ratios remained strong at 6.4% and 13.2% respectively due to strong earnings, well exceeding the minimum regulatory requirements of 4.0% and 8.0%, respectively. The ratios declined slightly from 2013 due to strong asset growth.

Meridian’s liquidity ratio declined to 10.5% at the end of 2014 from 11.1% a year earlier. This ratio remains well above the minimum operating target of 7.75%, while Meridian optimizes liquidity for operating activity.

Meridian’s leverage ratio rose to 13.4% reflecting an increase in mortgage securitizations used to fund lending to Members.



2014 Financial Performance Review

Pre-tax earnings totaled $50.5 million in 2014, down from $59.4 million in 2013. The reduction in earnings was driven by higher strategic investment expenses coupled with restrained revenue growth due to continued net interest margin compression, brought about by the low interest rate and competitive environment.

To assess Meridian’s financial performance from core business operations, earnings have been normalized to exclude unusual charges and adjustments associated with Meridian’s amalgamation of Desjardins Credit Union (“DCU”) in 2011, and unusual items resulting from changes to defined benefits pension plans. Normalized pre-tax earnings were $53.3 million in 2014, a decrease of $3.7 million from 2013.

Items excluded from normalized earnings include: Integration expenses, including legal and banking

system conversion expenses, totalling $0.2 million and $3.7 million in 2013 and 2012 respectively

Expenses related to the amortization of fair value adjustments recorded as part of the amalgamation of $2.8 million, $3.1 million and $6.8 million in 2014, 2013, and 2012 respectively

Pension plan curtailment gain of $5.7 million in 2013 and $1.1 million in 2012

Total Revenue

Total revenue, which consists of interest and non-interest income before provisions for credit losses, grew from $219.3 million in 2013 to $231.4 million in 2014. The increase was largely driven by strong growth in relationships with Members. Increased net interest income was generated from growth in lending to Members and partly offset by the cost of deposits and other sources used to fund lending. Wealth management assets grew significantly, both in terms of sales and market appreciation. This resulted in

higher trailer fee revenue, which was the main contributor to Meridian’s favourable non-interest income from operating activities. The combined positive revenue growth was partly offset by a decline in revenue from investments in affiliates. Holdings of asset-backed commercial paper (“ABCP”) by Meridian’s investment affiliate decreased, resulting in lower profits despite increases in market value of the paper held.

Net Interest Income

Net interest income is comprised of earnings on assets such as loans and securities, including interest income, less interest expense paid on liabilities, such as deposits and wholesale funding.

Net interest income for the year was $186.8 million, an increase of $10.4 million or 5.9% over 2013. This was a result of earnings on assets increasing by $18.9 million or 5.9%, partially offset by interest expense incurred on liabilities increasing $8.5 million or 5.9% over 2013.

Meridian’s average total assets increased $665.9 million or 7.5% in 2014, mostly driven by loans to Members. In particular, there was substantial growth in average mortgage balances, with an increase of $526.2 million or 11.7% over the prior year due to

strong housing demand and attractive mortgage rates. The Commercial sector also realized some sizeable gains in 2014 which is indicated by average loan growth of $228.6 million or 11.5% over 2013. While loans to Members grew significantly in the year, growth in average total assets was partially offset by the deployment of cash to fund loan growth.

Net interest margin is the ratio of net interest income to average total assets, expressed as a percentage. In 2014 net interest margin was 1.95%, down 3 basis points from the prior year. Declining margin, consistent with 2013, was due to the continued low rate environment and competition in the financial services sector for deposits and lending. While interest income from lending and investments was constrained, little relief was experienced from deposits and external



borrowing. As outlined in the following table, total interest expense is growing at almost the same rate as interest income. In addition the table shows the year-

over-year changes in net interest income, net interest margin, average assets, average liabilities and yields.

Net interest income Average assets / liabilities Net interest margin

($ millions) Change ($ millions) Change (in basis points)

2014 20131 % 2014 2013 % 2014 20131 Change

Cash and cash equivalents 0.5 2.1 (76.2) 170.2 297.5 (42.8) 29.4 70.2 (40.8)

Investments 14.9 13.8 8.0 822.5 805.3 2.1 181.2 171.5 9.7

Loans 107.3 100.6 6.7 2,215.1 1,986.6 11.5 484.4 506.5 (22.1)

Lines of credit 51.3 50.5 1.6 1,272.0 1,251.8 1.6 403.3 403.5 (0.2)

Mortgages 166.5 154.6 7.8 5,005.9 4,479.7 11.7 332.8 345.1 (12.5)

Other assets 107.5 106.5 0.9

Interest income / total assets 340.5 321.6 5.9 9,593.2 8,927.4 7.5 355.0 360.3 (5.4)

Demands 24.9 22.3 11.7 3,225.4 2,990.2 7.9 77.2 74.6 2.6

Fixed terms 97.2 98.1 (0.9) 4,287.3 4,224.4 1.5 226.7 232.3 (5.6)

Borrowings 29.1 24.7 17.8 1,307.4 991.3 31.9 222.6 249.2 (26.6)

Other liabilities 2.5 0.1 2,400.0 168.0 160.0 5.0 148.8 6.3 142.6

Interest expense / total liabilities 153.7 145.2 5.9 8,988.1 8,365.8 7.4 171.0 173.6 (2.6)

Members’ equity 605.1 561.5 7.8

Total liabilities and Members’ equity

153.7 145.2 5.9 9,593.2 8,927.3 7.5 160.2 162.6 (2.4)

Total 186.8 176.4 5.9 194.7 197.6 (2.9)

Despite significant market competition for deposits, Meridian was able to generate late year deposit growth with the re-branding of our market leading high interest savings product. This re-branding was a key contributor to total demand balance growth of $235.2 million or 7.9% in the year.

Meridian continued to securitize residential mortgages throughout 2014 to help fund sustainable growth. The interest expense associated with Meridian’s securitization activities increased, from 2013, by $4.9 million or 22.1% to $26.9 million, largely due to incremental issuances of $247.4 million. Although the mortgage securitization liability has grown year-over-year, Meridian believes that the continued use of mortgage securitization as a funding source is economically advantageous, and continues to weigh it against alternative funding sources to ensure funding is being planned in a responsible manner.

Net interest income is also impacted by fluctuations in capital markets above and beyond what we consider to be our normal operating activities. As circumstances warrant, we undertake hedging activities, which may include the purchase of derivative instruments to protect Meridian and its Members from changes in external market conditions. These hedging activities, in turn, generate their own net interest income or loss, countering the impact on the underlying item.

In December, Meridian executed a bond forward hedging strategy to lock in the cost of funds for a portion ($200 million) of 2015 securitization funding. In addition, in order to match the duration of our short-term demand deposits with our longer term lending products, Meridian executed $500 million of pay fix interest rate swaps in 2014,which consisted of $400 million five year pay fix interest rate swaps and $100 million four year pay fix interest rate swaps. The notional amounts of our derivatives represent the amount to which rate or price is applied in order to calculate the amount of cash that must be exchanged under the contract. Notional amounts do not represent assets or liabilities and therefore are not recorded in our consolidated balance sheet. The fair value of over-the-counter (“OTC”) derivative contracts is recorded in our consolidated balance sheet. The interest income or expense associated with quarterly cash settlements are reflected in profit and loss.1

1 Comparative information for the year ended December 31, 2013 has been revised to reflect the reclassification of costs incurred in the establishment of a securitization issue. A total of $2.7 million in costs have been recognized in interest expense borrowings for the year ended December 31, 2013. In prior years these costs were presented in non-interest income.



Provision for Credit Losses

The provision for credit losses (“PCL”) was $7.2 million in 2014, compared to $6.5 million in 2013. The PCL for the Commercial loan portfolio was $4.9 million ($4.7 million in 2013) and $2.3 million was attributable to the Retail and Small Business loan portfolios ($1.8 million in 2013). Commercial losses are comprised of a relatively small number of larger, and sometimes individually significant, losses. Due to the specialized nature of the underlying security, it can take several years to sell properties or realize on the security. There have been only a few new Commercial impairments over the past couple of years; however in 2014 the Commercial PCL included several significant

impairments dating back to 2010. Of the $4.9 million of losses on the Commercial portfolio, $5.7 million resulted from adjustments to security valuations on pre-2014 impairments and $2.2 million related to new Commercial impairments. These losses were offset by a $3.0 million adjustment to the collective provision reflecting the declining five-year average of historical loss rates on which the provision level is based. The PCL represented 0.08% of the total loan portfolio in 2014, which was consistent with 2013 results. Commercial PCL is 0.18% of the Commercial loan portfolio (0.20% in 2013) and Retail PCL represented 0.04% of the respective portfolio (0.03% in 2013).

Credit Portfolio Quality

Loan loss provisioning is determined in accordance with an established policy. Management reviews the loan allowance position monthly with a focus on updated forecasts for Watchlist accounts, impairment levels and expected net credit losses. Provisioning is adjusted where necessary to ensure compliance with policies and to include management’s best estimate of losses based on currently available information.

Gross impaired loans decreased from $84.7 million in 2013 to $71.2 million in 2014 representing 0.80% of the total loan portfolio. The total allowance for impaired loans, at $36.2 million, was $1.6 million lower than the prior year. Due to the high exposure levels and nature of security on many of the Commercial impairments, impaired accounts can take in excess of a year or two to close. Several large Commercial impairments from previous years remained on the books at year-end resulting in an allowance significantly higher than the PCL in 2014.

Of the total allowance, $22.7 million was attributable to specific impairments, with the remaining $13.5 million attributable to collective reserves. The collective allowance estimates incurred losses in the existing credit portfolio that cannot yet be identified on an individual loan basis. The total loan allowance, as a ratio to total loans, was 0.41% in 2014, of which 0.26% represented specific allowance and 0.15% was collective allowance. The total collective allowance decreased as a percentage of total loans by 0.05% from 2013. This was largely a result of a decline in the Commercial collective allowance. The Commercial collective allowance was determined by considering the past five years of Commercial impairments and applying an average default rate to the loan portfolio in 2014. Average default rates have declined due to favorable loss experience in recent years, relative to historical periods.

Asset quality coverage

2014 2013

($ millions)

Total loans, December 31 8,890.7 8,100.7

Gross impaired loans (“GIL”), December 31

71.2 84.7

Total allowance for impaired loans, December 31

36.2 37.8

Provision for credit losses (“PCL”)

7.2 6.5

GIL as % of total loans 0.80% 1.05%

GIL as % of Members’ equity 11.58% 14.54%

Total allowance as % of total loans 0.41% 0.47%

PCL as % of total loans 0.08% 0.08%

Commercial loans:

% Better than average 14.8% 15.9%

% Average 68.2% 65.1%

83.0% 81.0%

A risk rating system is utilized to assess and monitor the risk profile of our Commercial loan portfolio. The model is based on an in-depth assessment of the borrower’s risk of default, which is measured by industry, business, management, and financial risk factors, along with the risk of loss given default. The risk of loss given default is based on an assessment of security composition and relative historical recovery experience. The Commercial loan portfolio, stratified by risk rating ranging from “very low” to “impaired”, is reviewed monthly. Most of the portfolio continued to fall into the combined “better than average” and “average” categories. Collectively, these two ratings accounted for approximately 83.0% of the total



Commercial portfolio, up from 81.0% the previous year. During 2014, the Early Warning System that was piloted in 2013 was fully rolled out for all Commercial accounts. This comprehensive system considers 17 metrics in a monthly assessment that will identify accounts where there may be indicators of increase in risk. This allows for more timely identification of accounts that require follow up, additional attention through the adjudication process or an increase in risk rating to Watchlist status, with the objective of correcting issues that may otherwise result in future impairment of the account.

Meridian continues to make significant progress towards the implementation of the multi-year BBTP. Initiatives identified at the onset are well underway, including the enhancement of internal portfolio credit management practices, the introduction of continuous credit risk monitoring and the improvement of the Member experience through new automated processes and techniques.

The Commercial Target Operating Model (“TOM”) has since been fully introduced, yielding significant operational benefits including an enhanced credit quality assessment process, improved leadership

development and direction, as well as leveraging existing employee experience and drive to improve the Member experience and deliver an exceptional product. The scoping and development of the Commercial and Small Business Loan Origination System (“LOS”) is currently in progress. Substantial credit quality based advances are anticipated in the form of increased efficiencies and a more stringent control environment, improved credit based analytics and reporting, and an enriched Member experience.

Meridian’s Commercial portfolio is now measured with a robust set of credit risk monitoring and reporting techniques designed to improve the transparency of the credit quality within the Commercial portfolio. This further empowers management with sound analytics to support improved decision making. Specific enhancements include the implementation of an early risk identification process, balance and utilization trending and peer comparative analysis.

Meridian continues to benefit from the significant improvements regarding credit quality awareness within the Commercial portfolio as a direct product of the BBTP.

Non-Interest Income from Operating Activities

Non-interest income from operating activities rose by $4.0 million or 10.1% to $43.4 million in 2014. This performance was largely attributable to results from our off balance sheet wealth portfolio. Mutual fund revenue accounted for $2.5 million of the increase in non-interest income, growing by a record 41.0% to $8.6 million. The results reflect significant growth in wealth balances due to exceptional sales and market appreciation. Sales were influenced by an increase in Meridian’s overall Wealth management workforce and a growing affinity by Members for wealth products that are capable of yielding higher returns, given the low interest rate environment. Additionally, Meridian’s wealth product offering was expanded to include equities, bonds and ETFs.

Insurance commissions grew by $0.9 million to $5.6 million on account of life insurance sales, as we encouraged Members to engage in their overall estate planning. Substantial growth was experienced in Commercial lending in 2014, driving a $0.6 million increase in income from loan fees to $8.7 million. Revenue from service fees rose by $0.4 million to $12.3 million mainly reflecting the annualized impact of passbook and statement fees that were introduced in 2013. Service fees also grew as a result of increased usage of email money transfers, a value added service that was introduced in 2012 and is

gaining popularity among Members.

Interac revenue declined by $0.2 million to $2.0 million due to continued lower ABM transaction volumes. This is an ongoing trend in the financial services industry as alternative electronic means of payment are adopted. Revenue from foreign exchange also fell by $0.4 million to $3.5 million. This was influenced by the weaker Canadian dollar, which resulted in a decrease in foreign exchange purchases.

The following table summarizes the composition of Meridian’s non-interest income.

Non-interest income

($ millions) 2014 20131 %

Change Service fees 12.34 11.92 3.5%

Mutual fund revenue 8.56 6.07 41.0%

Loan servicing fees 8.68 8.07 7.6%

Insurance commission 5.61 4.74 18.5%

Foreign exchange 3.46 3.83 -9.6%

Interac revenue 2.00 2.24 -10.8%

Credit card revenue 1.04 0.89 16.5%

Other 1.69 1.65 2.8%

Total 43.38 39.41 10.1%



Non-Interest Income from Investments in Associates & Joint Ventures

Non-interest income from Meridian’s investments in associates and joint ventures decreased $2.2 million to $1.3 million in 2014. This largely reflects a reduction in third party ABCP held by the CUCO Cooperative Association, as investments matured or were sold. The association was created to hold the ABCP of the legacy Credit Union Central of Ontario on behalf of Member

credit unions, following the merger with Credit Union Central of British Columbia to form Central 1 on July 1, 2008. In the past, gains on the ABCP investments were significant due to appreciation of market value. In more recent years, gains have moderated as the investments move closer to maturity and the risk profile of the remaining paper decreases.

Non-Interest Expenses

Non-interest expenses rose to $173.8 million in 2014 from $153.3 million in 2013. The 13.4% increase in expenses was mainly associated with activities that support Meridian’s strategic objectives. Higher spending was related to branch expansion, community investment, marketing to build awareness and investments in strategic initiatives. It should also be noted that the 2013 results were favourably impacted by a one-time $5.7 million pension plan curtailment gain which reduced personnel expenses. Adjusting for this one-time gain, expenses increased by $14.8 million or 9.3% from 2013 to 2014.

Personnel expenses, which include all employee salaries, benefits and incentive compensation, accounted for $15.9 million of the increase in expenses. Excluding the one-time pension curtailment gain in 2013, personnel expenses grew by $10.2 million. Higher personnel expenses are largely attributable to incremental employees required for our expanded network of branches and to support a significant number of strategic initiatives. We also strengthened our senior leadership with key positions that are important to the long-term success of the Credit Union. Additional support was provided to our existing Delivery network, to ensure Members could truly be provided a differentiated experience and that relationships could be deepened. The increase in variable incentive compensation partly reflected the growth in employees but was also attributable to our employees’ outstanding performance in 2014, which exceeded targets established by the Board.

Marketing expense, which includes investments into the communities in which we operate, grew by $2.1 million to $8.3 million. The increase reflected support for our strategic goal to build brand awareness and also funding for our Commitment to Communities program. Through that program, in addition to time and talent, we invest at least 4% of our pre-tax

earnings. In 2014, brand awareness activities included investment in traditional and digital advertising, print, radio, direct mail, outdoor advertising, wrapped transit shelters, as well as participation in community events.

Occupancy costs rose by $0.8 million to $13.4 million on account of our expanded branch network.

Meridian’s investment in strategic initiatives doubled in 2014 to $5.5 million. These investments were directly related to projects that support Meridian’s strategic objectives and will enable us to achieve long-term sustainability. Apart from branch expansion, these initiatives included participation in the Credit Unions of Ontario awareness campaign, implementation of online banking for Small Business Members, enhancement of our lending processes and technology, implementation of a digital banking strategy, implementation of unique Member IDs and implementation of an in-take employee development program for key strategic roles.

Non-interest expenses

($ millions) 2014 2013 %

Change

Salaries and benefits 103.6 87.7 18.2% Salaries 74.3 69.5 7.0% Benefits 16.2 9.4 72.5% Variable incentive 13.1 8.8 48.4%

Occupancy 13.4 12.6 6.3% Transaction services 9.7 9.6 1.2% Deposit insurance 5.8 5.7 1.4% Marketing 8.3 6.2 32.9% Software and hardware 4.0 3.8 5.6% Depreciation 6.0 5.6 7.1% Amortization 3.5 3.4 4.4% Human resources 2.3 2.5 -8.1% Other expenses 17.1 16.2 6.0%

Total 173.8 153.3 13.4%



Dividends

Meridian’s track record of profitability has enabled the payment of dividends on its various series of investment shares. Meridian has declared and paid a dividend on each series of these shares since inception, with market leading rates for these types of investments. The dividend rate paid on the “50th Anniversary” and the series 98 shares was 4.75% for

2012 to 2014 (previously 6.0%). The dividend rate paid on the series 01 and series 96 shares was 4.5% for 2012 to 2014 (previously 6.0% for series 01 and 5.75% for series 96), while the dividend rate paid on the series 09 shares has been 5.75%. The payment track record is illustrated in the table below for the last five years.

History of dividends paid during the past 5 years ($ millions) 2014 2013 2012 2011 2010 “50th Anniversary” Class A shares 2.8 2.7 2.6 3.1 2.9 Series 96 Class A shares 1.9 1.8 1.7 2.1 2.0 Series 98 Class A shares 0.2 0.2 0.2 0.2 0.2 Series 01 Class A shares 2.4 2.3 2.2 2.8 2.7 Series 09 Class A shares 4.0 3.8 3.6 3.5 1.0

Total 11.3 10.8 10.3 11.7 8.8

Financial Conditions Review

Balance Sheet Summary

Meridian’s total assets grew by 8.8% to $10.0 billion in 2014, an increase of $810.1 million over the previous year.

Growth in lending to Members was primarily attributable to the increase in assets. Short-term investments declined, contributing to a strategic decrease in liquidity. Long-term investments in mortgage backed securities and our liquidity reserve deposits held with Central 1 grew, offsetting the decrease in short-term investments.

Loans to Members grew by 9.8% or $790.0 million to $8.9 billion, with Retail mortgages accounting for 60.5% of this growth.

Retail mortgages increased by $478.7 million, slightly above the growth realized in 2013. Growth was generated across all channels including through the branch network, mobile mortgage specialists and mortgage brokers. The “We’ve Got Your Back” mortgage offer with a competitive interest rate was a key driver to our success in growing Meridian’s mortgage portfolio. Growth in Commercial lending represented 36.8% of total loan growth, while personal lending accounted for the remainder of the increase in loan balances.

Member deposits grew by 7.5% or $559.1 million to $8.0 billion in 2014.

Despite continued intense competition for deposits among financial institutions and an increase in Member preference for potentially higher yielding wealth products, Meridian’s deposit growth more than doubled the results from 2013. The fastest growing deposit product was the Good to Grow high interest savings account which offers Members an opportunity to grow their savings faster with a market leading interest rate. The Business Advantage Plus was the account of choice

$10.0

$9.2

2014

2013

Total Assets ($ billions)

$8.9

$8.1

2014

2013

Loans to Members ($ billions)

$8.0

$7.4

2014

2013

Members' Deposits ($ billions)



for business Members to grow their deposits. Tax Free Savings Accounts (“TFSAs”) continued to perform well in 2014, with balances growing by $95.1 million, while growth in term deposits was restrained due to the interest rate environment.

Other than deposits, Meridian’s most significant change in liabilities was mortgage securitization, which grew by 18.2% or $203.0 million. The increase supported funding for lending to Members and contributed to the rise in Meridian’s leverage ratio.

Meridian’s off-balance sheet assets are its wealth portfolio, which is comprised largely of mutual fund assets held by Members.

Meridian’s wealth portfolio continued to experience

significant growth in 2014. Member balances rose 31.5% or $329.1 million to $1.4 billion. This strong growth represents net sales of $240.6 million along with appreciation in the market value of Members’ investments, despite market volatility in the fourth quarter of the year.

Overall, the total Member relationships managed by Meridian, which include lending, deposits and wealth, grew by 10.9% to $18.3 billion in 2014.

Growth was diversified across business lines and across product categories. Wealth grew the fastest, a clear indicator that Members are focused on retirement and overall financial planning, seeking to maximize their return with the help of Meridian’s Advisors.

Liquidity Review

Managing liquidity and funding risk is critical to ensure the safety and soundness of Meridian, depositor confidence and stability in earnings. Meridian’s policies ensure that there are sufficient liquid assets and funding capacity to meet financial commitments, even in times of stress. Meridian’s Board policy stipulates the maintenance of a minimum liquidity ratio of 7.75%, which is determined by a ratio of cash and cash equivalents to Members’ deposits and borrowings As of December 31, 2014, Meridian’s liquidity ratio was 10.5% compared to 11.1% at the end of 2013, situating Meridian’s liquidity comfortably above the minimum requirement established by the Board.

Meridian’s funding strategy follows a sustainable growth approach in that the funding of organic lending growth is primarily accomplished through organic deposit growth. Meridian maintains a large and stable base of Member deposits that, along with our strong capital base, is a source of strength. It supports the maintenance of a sound liquidity position and reduces

our reliance on wholesale funding. Member deposits include core deposits and larger Retail and Commercial fixed rate deposits. Throughout the year Meridian entered into a total of $500 million of notional 4 and 5-year term pay fix interest rate swaps to extend the duration of our variable deposits to match our longer term lending products. With the volatility present in the markets today, this derivative strategy provides protection to our balance sheet.

Securitization remains an attractive funding strategy for Meridian as it provides stable ready access to long-term funding at a low cost. This wholesale funding source increased by 18.2% compared to 2013 as a result of $247.4 million of incremental securitization issuances in 2014. Diversification of wholesale funding sources is an important aspect of Meridian’s overall liquidity management strategy. Meridian continues to maintain a diversity of funding sources in the event that future securitization funding may not be available or may only be available at significantly higher rates.

$1.4

$1.0

2014

2013

Wealth ($ billions) $18.3

$16.5

2014

2013

Total Relationships ($ billions)



Capital Management

Overview

Meridian is committed to a disciplined approach to capital management and maintaining a strong capital base to support the risks associated with its business activities. Maintaining a strong capital position contributes to safety for our Members, promotes confidence in attracting new Members to Meridian, maintains strong returns to Meridian’s Class A Shareholders and allows Meridian to take advantage of growth opportunities.

Meridian’s capital management philosophy is to remain adequately capitalized at all times and to maintain a prudent cushion of equity to ensure its on-going economic stability as well as finance new growth opportunities.

The principles and key elements of our capital management framework are outlined in the Board

Capital Management Policy. This policy establishes and assigns the responsibilities related to capital, and sets forth both general and specific policy guidelines related to capital management and the reporting mechanisms.

The Board of Directors and its Risk Committee provide ultimate oversight and approval of capital management, including the Capital Management Policy and Annual Capital Plan. They regularly review Meridian’s capital position and key capital management activities. The Executive Leadership Team provides senior management oversight of the capital management process, including review and discussion of significant capital policies, issues and action items. The Risk Committee has strategic and operational oversight of the Capital Management Policy while the Audit & Finance Committee monitors compliance with the policy.

Managing and Monitoring Capital

Meridian has a comprehensive risk management framework to ensure that the risks taken while conducting business activities are consistent with its risk appetite. In managing our capital position, close attention is paid to the cost and availability of the types of capital, desired leverage, changes in both assets and risk weighted assets, and the opportunities to profitably deploy capital.

Capital levels are monitored monthly and compared to

forecasted levels for both capital and risk-weighted capital. Our monitoring and forecasting procedures track the expected growth rate in assets relative to earnings to determine if additional share capital is required. These projections also take full account of any future impact of changes in accounting standards. A detailed discussion of capital management is provided in note 29.5 of the audited consolidated financial statements.

Capital Review

Meridian’s regulatory capital ratios are strong and well exceed the requirements of the Credit Unions and Caisses Populaires Act, 1994 (the “Act”) that regulates Ontario Credit Unions and underlies Board policy requirements. These ratios underscore Meridian’s strength and long-term stability and commitment to a disciplined approach to capital management that balances the interests and requirements of Members, regulators and depositors. Meridian’s capital adequacy ratio was 6.4% as of December 31, 2014 compared to 6.6% at the end of 2013 and well ahead of the 4.0% stipulated in the Act. Meridian’s risk weighted capital adequacy ratio was 13.2% at the end

of 2014, down slightly from 13.4% in 2013 and significantly higher than the 8.0% stipulated in the Act. Meridian’s capital quality also exceeds regulatory minimum requirements. Provincial regulations require that at least 50% of a credit union’s capital base be comprised of primary or Tier 1 capital. In order to maintain an appropriate level of conservatism, our internal capital management philosophy is to keep our Tier 1 capital as a percentage of total capital greater than 60%. As of year-end, 88.1% of Meridian’s capital base consisted of Tier 1 capital, an increase of 60 basis points over 2013 and well in excess of internal and provincial minimums.



Internal Capital Adequacy Assessment Process

Beginning in 2014, Meridian began implementing an Internal Capital Adequacy Assessment Process (“ICAAP”) and Stress Testing program, in line with the requirement for all Class 2 credit unions (which are those with assets of $50 million and over) regulated by the Deposit Insurance Corporation of Ontario (“DICO”). The purpose of an ICAAP under the Basel II framework is to determine the adequate capitalization of Meridian given the risks endured, as well as future risks arising from growth, new markets and expansion of the

product portfolio. Pillar I of this framework establishes the minimum capital requirement (a requirement previously and still in place). Within Pillar II of the framework, Meridian assesses its own capital adequacy using an ICAAP which will either determine no additional capital is needed, or additional capital is required above Pillar I levels. Incremental stress testing instills additional capital requirements to provide a cushion against the impacts of adverse events.

Risk Management

Overview

Meridian’s activities expose the organization to a number of risks, which could materially impact future performance. These risks are generally shared by all deposit taking financial institutions. In support of the achievement of sustainable growth, a balanced approach must be taken between business objectives and the amount of risk.

The main drivers of success of Meridian’s risk management program are the independence of our risk management practices and oversight, and the comprehensiveness of our risk management framework and approach.

Similar to other financial institutions, Meridian continually faces challenges in managing risks with the key challenges being:

The increasing volume and complexity of regulatory requirements

The competition to attract and retain Members

The continued low interest rates Increasing commoditization of core products

In 2014, a number of activities were undertaken to enhance Meridian’s risk management. These included:

Appointed a permanent Chief Risk Officer Developed an Enterprise Risk Management

(“ERM”) Strategic Plan, providing a roadmap for enhancing Meridian’s ERM program

Developed Meridian’s first ICAAP report and required supporting processes

Completed and initiated the processes to enable implementation of an Internal Risk-

Adjusted Return on Capital application for Commercial lending

Compared risk management framework and processes to the Office of the Superintendent of Financial Institutions (“OSFI”) guidelines to assess current program against national best practices and guide continuous improvement plans

Redesigned Meridian’s Emerging Risk program Strengthened commercial credit controls

environment through the addition of a number of new monitoring tools

Meridian continues to improve and enhance its risk management practices and in 2015 the key priorities will be to:

Continue to execute on elements of the ERM Strategic Plan

Enhance Meridian’s ICAAP and related risk quantification capabilities

Install / implement / upgrade supporting technology, including a new Governance, Risk, and Compliance portal; and upgrades to our Retail Loan Adjudication system

Develop a Commercial Loan Origination system for implementation in 2016

Evolve Meridian’s risk appetite framework and develop and deploy Key Risk Indicators for Meridian’s six risk categories

Continue to promote a strong risk culture across the organization through internal ERM communication, awareness, and training programs



Risks that may Affect Future Results

Top and Emerging Risks that may Affect Meridian and Future Results

Overview

There are numerous risk factors, many of which are beyond Meridian’s control and the effects of which can be difficult to predict, that could cause our results to differ significantly from our plans, objectives, and estimates. All forward-looking statements, including those in this MD&A, are, by their very nature, subject to inherent risks and uncertainties, general and specific, which may cause Meridian’s actual results to differ materially from the expectations expressed in the forward-looking statements. Some of these factors are discussed below and others are noted in the “Caution Regarding Forward-Looking Statements” section of this MD&A.

Meridian considers it critical to regularly assess its operating environment and highlight top and emerging risks. These are risks with a potential to have a material effect on Meridian and where the attention of members of the Senior Leadership Team is focused due to the potential magnitude or immediacy of their impact. Many of the risks are beyond Meridian’s control and their effects, which can be difficult to predict, could cause Meridian’s results to differ significantly from the plans, objectives, and estimates or could impact Meridian’s reputation or sustainability of its business model.

Risks are identified, discussed, and actioned by members of the Senior Leadership Team and reported quarterly to the Management Risk Committee and the Risk Committee of the Board. Specific plans to mitigate top and emerging risks are prepared, monitored, and adjusted as required.

Canadian Household Debt

There is increasing vulnerability of Canadians to negative financial shocks as the debt levels of Canadian households continue to grow, primarily from higher levels of mortgage debt driven by rising housing prices. When interest rates start to rise, the ability of Canadians to repay their loans may be adversely affected, creating a risk to the credit quality of the Retail lending portfolio. Meridian actively manages its lending portfolios and reviews its credit-granting policies to minimize the risk of credit losses.

Technology and Information Security

Meridian’s strategic objective of “Expanding Member Access” includes the development of a comprehensive online and mobile channel offering which features secure processing, transmission and storage of confidential information. The use of the internet and reliance on digital technologies exposes Meridian, like

all financial institutions, to technology and information security risks. These risks could include cyber-attacks, phishing attacks, computer viruses, information security breaches and malicious software which could result in financial loss, business disruption, unauthorized access to personal or confidential information, legal claims, regulatory issues and reputational damage. Meridian has a comprehensive information security framework and places a significant focus on enhancing this framework to detect, prevent and contain possible threats through enterprise-wide programs, reviewing industry best practices and conducting robust threat and vulnerability assessments.

Increasing Regulatory Requirements

The introduction of new, and changes to current, laws and regulations continue to increase Meridian’s regulatory requirements. These regulatory changes have the potential to increase Meridian’s operational, compliance and technology costs, as well as its reputational risk and hinder the ability to pursue strategic initiatives or be involved in certain business activities. Meridian minimizes the potential impacts of this risk by continually staying abreast of evolving regulatory changes, expressing its views on proposed regulatory reform to regulators where the opportunity is available and monitoring regulatory requirements to appropriately plan resources for implementation of enacted changes.

Fraud Evolution

The various types of fraud that Meridian is exposed to continue to quickly evolve in their sophistication and materiality. Meridian’s accountability is to prevent, detect, and mitigate the misappropriation of assets and misuse of products and services. Therefore, it has a fraud prevention framework, which ensures policies, procedures, and internal controls are in place and effective in managing and minimizing the financial losses and non-financial impact of fraudulent activities. Meridian continually implements new capabilities to combat fraud and strengthen its fraud defences.

Competitive Environment

The financial services industry is highly competitive and the level of competition directly impacts Meridian’s performance. The attraction and retention of Members is influenced by a number of factors including product/service offerings, pricing, and service experience, and deterioration in these factors can impact Meridian’s financial and operational



performance. Meridian has developed strategic objectives which will enhance its competitive position among all types of financial institutions and utilizes a

comprehensive Member satisfaction and brand awareness program to continually understand the wants and needs of current and prospective Members.

Enterprise Risk Management Philosophy

Our enterprise risk management philosophy is to anticipate risk in all planning and decision making, be proactive in managing risk, and be accountable for the impact of our actions.

Enterprise risk management is:

The responsibility of everyone at Meridian, including the Board of Directors, management, and all employees

Embodied in the strategic objective of Creating an Ownership Culture in which

employees take responsible risks to derive value for Members and Meridian

Critical to the attainment of the strategic objectives of Meridian, and as such it is given a high priority

This philosophy, combined with the knowledge and experience of Meridian’s operating management and risk management teams, ensures that business strategies and activities are consistent with Meridian’s risk appetite, which ensures sustainable growth.

Enterprise Risk Management Framework

The enterprise risk management framework:

Provides a basis for confidence among Members, creditors and regulatory agencies that Meridian will manage risk on a prudent basis through appropriate mitigations to achieve its business objectives

Clearly defines the roles and responsibilities for managing and reporting on risks

Provides reasonable assurance that the risks associated with achieving business objectives are well understood and that Meridian responds appropriately to these risks at all levels within the organization

The strategic objective of sustainable growth requires a strong risk management framework. As such, having a disciplined and integrated approach to managing risks is integral to Meridian’s operations. Meridian’s ERM framework is intended to provide appropriate and independent risk oversight across the entire enterprise and is essential to building competitive advantage and stability. It is applied on an enterprise-wide basis and consists of the following six key elements:

1. Risk Appetite 2. Risk Management Structure 3. Governance and Control

4. Technology and Tools 5. ERM Processes 6. People and Culture

ERM Processes

Risk Management Structure

Risk Appetite

People/ Culture

Technology & Tools

Governance & Control

Business Strategy



Risk Appetite

As an integral element of the ERM framework, Meridian has established and maintains a risk appetite that will:

Enable the Board and management to make better strategic and tactical decisions based on a risk-reward basis

Provide the organization with a clear mandate for the amount and type of risks to accept and the risks to avoid

Facilitate a more considered risk-taking culture in which decisions about taking on risks reflect the capacity to manage those risks

Result in efficient allocation of risk management resources and enable the pursuit of business opportunities that would otherwise be rejected

Enable the successful pursuit of business opportunities that would not otherwise be considered and capitalized on

Meridian’s risk appetite framework reflects the business model and enables Meridian to adapt to the changing economic and regulatory environment in order to manage new types of risks. The effective establishment of the risk appetite framework reinforces a strong risk culture which provides an environment that is conducive to ensuring that emerging risks that will have material impact and any risk-taking activities beyond risk appetite are identified, escalated, and addressed in a timely manner. The framework consists of the following four key elements:

Principles are statements which reflect the organization’s ERM objectives and its risk-taking philosophy. The Board of Directors have established the following principles for Meridian’s risk appetite:

In pursuit of its vision and achievement of sustainable growth, Meridian will proactively seek and accept only risks which can be appropriately managed to:

o Develop the enablers of its Strategic Plan

o Enhance Meridian’s brand

o Enhance its ability to attract and retain Members through a positive Member experience

Meridian has no appetite for non-compliance with laws and regulations or inappropriate external reporting (financial or regulatory)

As a risk intelligent enterprise, Meridian approaches risk management not only as a defensive strategy to manage the negative impact of risks but also to enhance decision making to capitalize on profitable opportunities

Risks and opportunities are considered both on an individual basis and in relation to Meridian’s aggregate risk position for its entire portfolio

Meridian’s risk management capabilities must be considered in establishing risk appetite to ensure risks are successfully understood and managed

Risk appetite should be established for those areas where Meridian expects to be fairly compensated for risk-taking

Risk Tolerance Limits facilitate the definition and communication of risk appetite throughout Meridian and provide a framework for making decisions and determining whether decisions are aligned with risk appetite. Risk Tolerance Limits are financial benchmarks that establish the amount of risk (i.e. a risk “budget”) Meridian is prepared to accept in specific risk categories to facilitate value creation for risk-taking. Criteria provide supporting guidance for the development of robust risk appetite statements.

Key Applications establish where and how the risk appetite will be embedded and operationalized within the organization’s strategic and operational processes.

Meridian’s risk appetite will be linked to its strategic and financial plans. Risk appetite will be considered throughout the strategic planning process as strategic goals and objectives are set, strategies are formulated, operations/compliance/reporting objectives are established and decisions are made on how to manage risks related to the achievement of objectives. Once the financial plan is established, Management will validate that the planned results for all risk appetite metrics do not fall outside of the approved risk tolerance range.

Governance & Control establishes the protocols that ensure the risk appetite is subject to appropriate internal controls. These protocols include roles and responsibilities, monitoring and reporting and the actions taken when breaches are identified.



Structure

Meridian’s ERM framework establishes an organizational structure which encompasses employees that individual business units who follow and seek to enhance processes/procedures/controls in place to manage risk, all the way to the Board of Directors who has overall responsibility for the establishment and oversight of Meridian’s ERM framework.

A critical element of this structure is the Three Lines of Defence model.

This model recognizes that: Everyone in the organization has a role to play in effective risk management and control; and Without a cohesive coordinated approach, limited risk and control resources may not be deployed effectively and

significant risks may not be identified or managed appropriately.

The foundation of Meridian’s ERM framework is a governance structure that includes a robust committee structure. The committee structure of the risk governance model is presented below. A description of the responsibilities for each member in the committee structure follows.

Enterprise Risk Management Framework

Risk Owners Delivery and Corporate Business Unit Accountabilities First Line of Defence

• Identifies and manages risk in day-to-day activities • Designs, implements and maintains effective internal controls • Implements risk-based approval processes

Risk Oversight Governance, Risk & Control Business Unit Accountabilities Second Line of Defence

• Establishes enterprise governance, risk, and control strategies and practices • Provides oversight and independent challenge to the First Line through review, inquiry, and discussion • Develops and communicates governance, risk, and control policies • Provides training, tools, and advice to support policy and compliance • Monitors and reports on compliance with risk appetite and policies

Independent Assurance Internal Audit Services Third Line of Defence

• Validates the effectiveness of the First and Second Lines of Defence in fulfilling their mandates and managing risk • Independently verifies that the ERM framework is operating effectively

Business Units

Risk Management Services Internal Audit Services

Executive Leadership Team

Board of Directors

Risk Commit tee President & Chief Executive Officer

ManagementRisk

Commit tee

Credit Management Commit tee

Asset/Liability Commit tee

Senior Leadership Team

C reditRisk

StructuralRisk

LiquidityRisk

MemberRisk

StrategicRisk

OperationalRisk

Information Security

Commit tee

Pension Commit tee

Audit & Finance Commit tee



The Board of Directors oversees the strategic direction of Meridian and has overall responsibility for the establishment and oversight of Meridian’s ERM framework. This includes the following:

Ensure management has implemented an effective system to manage the risks of the organization

Regularly review and discuss the risks with management

Receive information about the organizational risks, especially the high residual risks, and how management plans to handle them within the approved risk appetite

Ensure the organization’s ERM policies and procedures are consistent with the strategy and are functioning as directed

Work with management to promote and actively cultivate the culture

Provide leadership in embedding an ERM culture Review with management the Board’s expectations

as to the roles, responsibilities, and expectations for risk, and the management thereof to ensure a shared understanding

Review/approve risk appetite and related risk limits

Develop ownership of ERM at the Board level Review with management the quality, type and

format of risk-related information provided to directors

Review reports from management, independent auditors, insurers, regulators, and external experts as appropriate regarding risk the organization faces, and the ERM function

The Board accomplishes its mandate both directly and through its Risk Committee and Audit & Finance Committee, described below.

The Risk Committee is responsible for overseeing risk management across Meridian and assists the Board in fulfilling its responsibilities for approving Meridian’s Risk Appetite and overseeing Meridian’s risk profile and performance against the defined Risk Appetite. This includes oversight of policies, procedures, and limits related to the identification, measurement, monitoring and control of Meridian’s critical enterprise risks.

The Risk Committee is accountable for:

Reviewing Management’s identification and mitigation plans for the significant risks of

Meridian Overseeing the application of the ERM program

and reporting to the Board of Directors on risk exposure

Monitoring Risk Appetite metrics and reviewing the Risk Appetite Framework

The Audit & Finance Committee, in addition to overseeing financial reporting, regulatory compliance, and internal/external audit, assesses the adequacy and effectiveness of internal controls, including controls over relevant risk management processes.

The President & Chief Executive Officer (“CEO”) leads Meridian’s Executive Leadership Team in the setting of the long-term business strategy, the definition of risk appetite, and integration of risk appetite into the business strategies and plans. The CEO has ultimate accountability and responsibility for:

Shaping the culture Working with Board and leadership to determine

the risk appetite for the organization Ensuring that the leadership understands the

“enterprise” part of ERM Positioning ERM for success Holding leaders accountable for execution

The CEO is supported by the Chief Risk Officer (“CRO”) and five Management Committees in the overall management of Meridian's risk.

The CRO is responsible for ensuring that Meridian’s key strategic and tactical business activities are directed and managed with due regard to understanding and pro-actively managing all inherent risk / reward considerations and trade-offs. The CRO has ultimate accountability and responsibility for:

Developing and implementing an ERM Framework Providing risk oversight leadership and direction in

respect of the Credit Union’s operations Acting as Executive Sponsor for the Board Risk

Committee Evolving a risk aware culture across the

organization Overseeing Meridian’s anti-money laundering,

fraud management, credit risk management, operational risk, and internal audit programs



Management Committees:

The Management Risk Committee, which comprises select members of the Executive Leadership Team and Senior Leadership Team, provides risk oversight and governance at the highest levels of management through the review and discussion of significant risk issues and action plans that arise in the execution of the enterprise-wide strategy. The Committee is responsible for ensuring that Meridian’s risk profile is consistent with its strategic objectives and risk appetite and there are continuous, appropriate and effective risk management processes. Risk Management Services supports the Committee in the performance of these activities.

The Management Risk Committee is specifically accountable for:

Promoting a strong, robust and pervasive risk management culture that establishes the "tone at the top" relative to risk management

Acting as risk representatives to ensure emerging risks are surfaced, encouraging participation in and overseeing risk quantification efforts (including stress testing and scenario analysis) and providing oversight of function-specific risk activity

Reviewing annually Meridian's ERM framework and providing senior management approval of additions and changes prior to the review conducted by the Board Risk Committee

Reviewing at least annually changes to the Risk Appetite statement and related metrics

Reviewing new or changes to existing risk management policies

Reviewing significant pronouncement and changes to regulatory requirements relating to ERM that apply to Meridian

Reviewing the results of Meridian's stress testing program and Internal Capital Adequacy Assessment Process

Reviewing the quarterly ERM review report identifying the current and emerging risks, their risk assessments and status of mitigation plans, and any new risks identified by senior management

Assessing risk mitigation plans, assigning responsibility for risk mitigation, ensuring internal control activities are implemented for risk mitigation and monitoring action taken to mitigate significant exposures

Reviewing the actual results of Risk Appetite metrics and approving the action plans provided by senior management to return the metric within its stated risk appetite range

Reviewing the results of independent reviews of the risk management function and ERM Program

Reviewing the results and Management's action plans and responses relative to the findings and

recommendations of Regulatory reviews conducted by Regulatory agencies, Internal Audit Services or third parties contracted by Internal Audit Services

The Credit Management Committee, which comprises the CEO, CRO, Chief Financial Officer (“CFO”), Chief Member Services Officer (“CMSO”), VP Commercial Delivery, and VP Credit Management, reviews Meridian’s overall loan portfolio key indicators and monitors performance against established Credit policy. Key activities include reviewing key portfolio management indicators (sector / connected party limits, delinquency and impairment trends, and watch list reports), reviewing pipeline reporting to ensure lending is managed within established loan targets, reviewing limit proposals and providing input from a business perspective, annual review of loan provisioning policy and review/monitoring of provisioning status and forecasts throughout the year, approval of commercial deals from a ‘strategy’ perspective, and review of macro-economic industry trends that could have systemic impact, positive or negative, upon all or portions of the loan portfolio.

The Asset/Liability Committee is comprised of the CEO, CFO, CRO, CMSO, Chief Marketing Officer, and the VP Treasury and Performance Measurement. The Committee provides strategic direction in the management of interest rate risk, foreign exchange risk, liquidity and funding risk, investment portfolio decisions, and capital management. The Committee is also accountable for compliance with policies, guidelines, and regulations relative to investments, derivatives, and liquidity.

The Information Security Committee is comprised of the Chief Information Officer (“CIO”), CRO, CMSO, and IT Governance leaders. The Information Security Committee is accountable for the governance of Information Security and security of Member information, ensuring that Information Security policies and activities are integrated and coordinated across all related business operations, and providing awareness of Meridian’s information risk profile, and that information security risks are mitigated to an acceptable level in accordance with policy.

The Pension Committee, comprised of the Chief People Services Officer, CMSO, CFO, and senior leaders from Finance, Risk Management Services, and People Services, is responsible for all communications, investments, actuarial, and funding and administration/operations related to Meridian’s defined benefit pension plan and defined contribution pension / savings (RRSP) plan.



Management Structure:

Risk management is integrated into the operating structure of Meridian, ensuring both a robust risk management capability and the effective consideration of risk in day-to-day management.

The Senior Leadership Team is accountable and responsible for:

Identifying new risks Monitoring existing risks on a continuous basis and

providing status reports to the Management Risk Committee

Obtaining and allocating resources for risk mitigation

Implementing internal controls and mitigation supporting processes

Proposing amendments or enhancements to Meridian’s risk appetite

Managing risk in their portfolio(s) Working with colleagues to ensure that ERM is

integrated across the organization Working with direct reports to establish the culture

of ERM Overseeing the implementation and compliance of

policies and procedures within their portfolio(s) Overseeing the implementation of risk reduction

and mitigation strategies within their portfolio(s)

Business Units, the First Line of Defence, will ensure that processes, procedures and controls that are in place to manage risk are being followed and enhanced where necessary and will implement supporting processes and internal controls identified through the risk mitigation process by the Senior Leadership Team.

Risk Management Services, one of the Second Lines of Defence, is responsible for the design and application of Meridian’s ERM framework and provides independent oversight and governance with respect to

risk identification, measurement, control, monitoring and reporting. Risk Management Services is independent of Meridian’s Business Units and works collaboratively with Business Units to:

Establish policies, procedures and limits that align with Meridian’s risk appetite

Identify, assess, mitigate and monitor the risks associated with business activities and strategies

Provide education and awareness relative to Meridian’s ERM framework

Risk Management Services is also accountable for:

Maintaining and refining Meridian’s ERM program and its related systems

Periodically reviewing and recommending changes, if any, to the ERM and risk appetite frameworks

Providing consultation to Management on risk-related issues

Coordinating risk reporting to the Risk Committee, Audit & Finance Committee and Board of Directors

Developing and delivering educational presentations internally to Management, Board Committees and the Board of Directors as required

Risk Management Services will develop and submit for approval to the Management Risk Committee and Board Risk Committee multi-year strategic plan for ERM to update and refine the ERM program and will provide an update at least annually to the Risk Committee on the status of these plans.

Internal Audit Services, the Third Line of Defence, provides independent assurance to the Board of Directors, through the Audit & Finance Committee, of the effectiveness of risk management, control and governance processes that are in place to manage the risks that are faced by Meridian.

Governance & Control

This element of the framework establishes the enterprise risk universe and the policies, processes and controls that are designed to ensure that risks in that universe are being appropriately identified and managed. Board Policies consist of both those risk management policies required by DICO By-Law No. 5 and other Board policies established by management for critical functions/activities.

Risk management frameworks and policies establish the necessity for this framework and its applicability to the enterprise risks and also include management policies and procedures to manage risk.

Risk review and approval processes establish approval responsibilities governed by delegated authorities for specific categories. They are established based on the nature, size and complexity of the risks involved. In general, the process involves a formal review and approval by an individual or a committee that is independent of the originator. The approval responsibilities are governed by delegated authorities based on the following categories:

Portfolio transactions Structured transactions Strategic projects and initiatives



New products and services

Authorities and Limits act as a key control for underwriting, investing, hedging, structuring, and maintaining adequate liquidity. The Board of Directors maintains overall responsibility for the risks to which Meridian is exposed. However, the Board delegates

the responsibility of managing specific risks, on a day-to-day basis, to certain members of senior management and/or Executive Committees. The delegation of responsibility by the Board of Directors is in accordance with the provisions of a particular Board policy.

Technology & Tools

This element of the framework encompasses tools to monitor risk management programs and obtain relevant risk information. The loss database is a key, standard element of the resources needed for effective ERM. The collection and analysis of internal loss data provides management information that can be fed back into the ERM and mitigation process. In addition, the database of internal loss events builds up over time and provides the basis for quantitative analysis and the calculation of capital allocation. Meridian develops financial models to determine the aggregate risk in our financial portfolios. A variety of techniques are used to

analyze a portfolio and make forecasts of the likely losses that would be incurred for a variety of risks and the amount of capital to maintain. Such risks are typically grouped into credit risk, liquidity risk, market risk, and operational risk categories. Benchmarking is used to evaluate various aspects of the ERM processes in relation to both Meridian’s performance and performance of other external parties. Benchmarking is be used to develop plans on how to make improvements or adopt specific best practices with the aim of increasing some aspect of performance.

Processes

This element of the framework includes the practices and techniques that Meridian employs to identify risks, assess them, measure them, select an appropriate risk response and provide ongoing monitoring and reporting. The identification of risks, including emerging risks, occurs formally through the quarterly ERM risk review process. Outside of that process, risk owners reach out directly to Risk Management Services when a new risk has been identified. Risk measurement involves the models established in the Technology and Tools framework element and stress testing. A robust risk assessment methodology has been developed which employs likelihood, impact,

velocity, and trend to compute a final risk score that corresponds to 1 of 4 risk levels. Meridian’s risk response options include: Avoid (eliminate), Reduce (mitigation), Transfer (outsource or insure), or Retain (accept & budget). As part of the risk response process, Risk Management Services assesses the effectiveness of the response and ensures that control activities are an integral part of a risk response. Monitoring and reporting are critical components of the framework and operating culture that help senior management, Committees and the Board to effectively perform their risk management and oversight responsibilities.

People / Culture

People and Culture sit at the centre of the ERM framework, as a robust risk culture is a substantial determining factor of whether an organization is able to successfully execute its strategy within its defined risk appetite. Having processes and controls in place is not enough to give Boards and senior management confidence that the established risk appetite will be adhered to. They must ensure that all employees are aware of what risks they are taking, make the right decisions, and raise objections when necessary. Within Meridian, this is referred to as Creating an Ownership Culture.

At the core of Meridian’s risk culture is its ERM philosophy, which is established by the Board of Directors, and its qualitative risk appetite statement.

This philosophy, combined with the knowledge and experience of Meridian’s operating management and risk management teams, ensures that business strategies and activities are consistent with Meridian’s risk appetite.

Complementing the ERM philosophy is the value proposition for ERM at Meridian.

Our Risk Governance Structure ensures that the responsibilities for oversight and control of risk management are clearly defined. In support of this structure, Risk Management Services works in partnership with management to identify, assess, mitigate and monitor Meridian’s risks. Risk Management Services provides independent oversight



and governance for all risk management functions to promote a strong risk management culture.

Business Unit Management is responsible for the development and execution of operational plans that are aligned with Meridian’s strategic plan and its ERM framework. Management is accountable for understanding and managing the risks they incur, and working in partnership with Risk Management Services to ensure that their business risks are thoroughly

evaluated and appropriately managed.

Decision-making on strategic risk issues is centralized through Management Committees, which are responsible for the review, approval, and monitoring of transactions and the related risk exposures. These Management Committees are comprised of, and led by, one or more members of the Executive Leadership Team, and include other members of the Leadership Team from appropriate cross-functional areas.

Identification and Management of Key Risks

Management has identified six key risk classes to which specific risks are assigned. Accountability for each risk class and the related specific risks has been assigned through the ERM framework. A discussion of each risk and how it is managed follows.

Credit Risk

Credit risk is the risk of financial loss when a Member or counterparty to a financial instrument fails to meet its contractual obligations. This risk arises principally from the loan portfolio. Meridian’s lending philosophy is established by its Board through the Credit Risk Management Policy. The Credit Risk Management Policy provides direction to management relative to:

Formulating operational credit policies covering eligible purposes of loans, collateral requirements, credit assessment, risk rating and reporting, documentary and legal procedures, and compliance with regulatory and statutory requirements

Establishing a lending authority structure for the approval and renewal of credit facilities. Authorization limits are delegated to the CEO, who further delegates such lending authority to senior management

Reviewing and assessing specific and aggregate credit risk. The Credit department assesses and approves, where applicable, all credit exposures in excess of delegated limits

Limits in concentrations of exposure to counterparties

Compliance with agreed exposure limits. Regular reports are provided to the Risk Committee of the Board on the credit quality of the portfolio.

A detailed discussion of the management of credit risk is provided in note 29.1 of the audited consolidated financial statements.

Market Risk

Market risk is the risk of loss resulting from changes in financial market factors, most commonly through

interest rate changes. Interest rate risk is the sensitivity of Meridian’s financial position to movements in interest rates. It arises from the fact that assets, liabilities, and off-balance sheet instruments mature or re-price at various dates. As interest rates change, net interest income can be negatively impacted based on the distribution of these maturity and re-pricing dates. Meridian assesses the level of interest rate risk on a monthly basis through the use of a sophisticated income simulation model. Through this model, Meridian runs various scenarios based upon expected interest rate levels and manages risk tolerance levels based upon a 1% and 2% shock to those rates. The process and procedures surrounding this are governed by a defined policy that is approved by the Board of Directors annually. A detailed discussion of the management of market risk is provided in note 29.2 of the audited consolidated financial statements.

Liquidity Risk

Liquidity risk arises in the course of managing our assets and liabilities. It is the risk that Meridian is unable to meet its financial obligations in a timely manner and at reasonable prices. Liquidity levels, prescribed by the Act, state that a class 2 credit union (a credit union with total assets greater than or equal to $50 million or a credit union which makes a commercial loan) shall establish and maintain prudent levels and forms of liquidity that are sufficient to meet its cash flow needs, including depositor withdrawals and other obligations as they come due. As a member of a liquidity pool, however, Meridian is compelled to maintain 6% of assets in liquid investments. In order to maintain an appropriate level of conservatism, our internal liquidity management philosophy is to keep our liquidity level between 7.75% and 15% of deposits and borrowings, and to ensure that Meridian has both adequate capacity and diversity of external funding sources available. Meridian’s external funding sources consist of:

The Canada mortgage bond (“CMB”) securitization program



Two lines of credit with Central 1, a Total Basic Credit Facility which provides for general borrowing and letters of credit, and a Capital Markets Line which provides for the exposure in the CMB securitization program and any derivative exposure Meridian has with Central 1

An additional credit facility with a Schedule I bank which enables management to borrow both overnight as well as longer-term, to fill short-term liquidity fluctuations caused by seasonal growth patterns, as well as provide the comfort of longer-term borrowing in the event that the CMB program was unavailable to provide necessary funding

Deposit brokerage channels Issuance of mortgage-backed securities to market

Meridian updates funding requirement levels daily based upon forecasted growth rates and balances the use of these funding sources so as to ensure both funding diversification and adequate contingency lines. Within the available balance, early warning limits exist, which trigger required reporting and action plans from the Asset/Liability Management Committee and reporting through the Risk Committee and Board of Directors. A detailed discussion of the management of liquidity risk is provided in note 29.3 of the audited consolidated financial statements.

Member Risk

Member risk is the risk that Meridian cannot meet the expectations of its Members. This risk can arise if Meridian is not aware of changes in pervasive Member needs and/or wants and can lead to a decline in Member confidence regarding Meridian’s ability to provide a superior or consistent level of service, a loss of Members or the inability to grow the business.

The responsibility for Member risk management resides primarily with Meridian’s Delivery and Marketing teams which work together to engage Members, determine their wants and needs and develop the appropriate plans to meet both current and anticipated expectations. Supporting Delivery and Marketing in the management of Member risk is Meridian’s, Operating Committee and Executive Leadership Team which provide direct oversight to Meridian’s strategic initiatives. Given the importance of meeting Member expectations and providing a superior level of service, initiatives related to these objectives are designated as strategic and awarded a high priority for completion.

Meridian differentiates itself by providing an exceptional Member experience. It is the responsibility of every employee to help deliver this experience. This process helps create ownership and buy-in from all groups within Meridian.

The Board of Directors provides oversight to the strategic direction of Meridian and therefore approves the strategic plans developed by management, which include initiatives that will manage Member risk.

Strategic Risk

Strategic risk is the risk that Meridian is not able to implement appropriate business plans and strategies, or to effectively allocate resources. In addition, this risk may also arise from the inability to adapt to changes in the business environment.

Meridian manages strategic risk through the performance of its comprehensive Enterprise Strategic Planning process, which encompasses financial and strategic planning at business unit and enterprise-wide levels. Meridian’s Executive Leadership Team, led by the CEO, is responsible for developing and recommending strategies as well as operational and financial plans for the Board’s approval, and to report to the Board, in a timely and accurate manner, on Meridian’s performance against stated objectives. In developing its strategic plans, management engages the Board, as appropriate, at such points in the planning process where perspectives on Member and larger system issues are desired.

The Board of Directors has two key responsibilities. To establish strategic direction, and regularly review that direction to ensure it responds to the changing business environment in which Meridian operates; and, to monitor Meridian’s performance. In fulfilling these responsibilities, the Board provides input to, and approves the annual strategic, operational, and financial plans and regularly reviews Meridian’s progress towards achieving the priorities and performance expectations established in the plan.

This integrated financial and strategic planning process considers business unit strategies and key initiatives, and ensures alignment between business unit and enterprise strategies. Following the approval of the strategy by the Board of Directors, performance relative to the strategic plan is monitored and reported on, including effectiveness and risks.

Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed human performance, processes, or technology. Meridian is exposed to a broad range of operational risks including talent acquisition, retention, performance and succession, technology/systems failures, fraud/theft/misappropriation of assets, business disruption, information/privacy/fiduciary breaches, failed transaction processing, and non-compliance with regulatory requirements, legal obligations, or internal policies. The failure to manage operational risk can result in direct or indirect financial loss, reputational impact, regulatory censure, and penalties or failure in the management of other risks.

Meridian manages operational risk through extensive policies, procedures, and internal controls related to human resources, information technology development, change management, and business



operations. Complementing these policies, procedures, and internal controls are centralized departments, which focus on the enterprise-wide management of specific operational risks such as financial crime, business continuity/disaster recovery, privacy & confidentiality, vendor management, project

management, and information security & information technology governance. These departments have developed specific programs, policies, standards, and methodologies to support the management of operational risk.

2015 Outlook

Economic prospects in Canada have been dampened by developments in the energy sector. A decline in oil prices due to short-term excess supply is expected to result in a weaker Canadian dollar in 2015. Amidst these developments and expectations that inflationary pressure will remain low in 2015, the Bank of Canada reduced its overnight lending rate to 0.75% in January 2015. Further changes in the Bank’s interest rates will likely depend on developments in the energy sector. It is now less likely that the Bank’s overnight lending rate will move above 1.0% in 2015. In Ontario, the weaker Canadian dollar is anticipated to result in favourable exports and, therefore, stronger economic growth. Continued low interest rates will encourage business to invest and increase job creation. Demand for housing is expected to grow, supported by improvements in employment and low interest rates.

Meridian is well positioned to take advantage of the opportunities presented by the favourable economic outlook for Ontario. Strong growth in relationships with Members is anticipated, in line with demand by businesses to invest and demand by Members to achieve home ownership. The overnight rate decrease is likely to spur additional lending demand while potentially limiting Member deposit appetite. As such, Meridian is focused on further diversification of available funding sources. Given the expected growth in employment in Ontario, we anticipate deepening our relationships with existing and new Members to help them achieve their savings goals and plan for retirement. Growth in wealth balances is expected to continue to be strong, with an increase in IIROC certified Senior Wealth Advisors and a continued focus

on supporting Members’ overall financial needs.

The anticipated strong growth in relationships is expected to result in increased income, but the persistent low interest rate environment will continue to compress net interest margin. Income from loans and wealth products will help support investments in strategic initiatives. These investments are expected to benefit Meridian in achieving its long-term success but will impact earnings in the short-term.

Meridian will continue to invest in new branches. These will include branches in targeted areas outside of the GTA, as well as branches in the GTA that will be strategically located alongside The Co-operators agencies. As these new branches build their portfolio of Members and product balances, over time they will contribute fully to Meridian’s profitability.

Other key initiatives in 2015 will include continued efforts to build brand awareness, continued implementation of our Business Banking Transformation Program, execution on new product offerings, evaluation of alternative sources of funding, assessment of internal technology systems that support decision making and continuation of our multi-year digital banking strategy.

Capital will be essential to allow Meridian to continue to invest strategically to support Members’ future needs. Management is committed to implementing strategies to maintain capital levels that are financially sound and will employ long-term strategies to further strengthen Meridian’s capital base.

2014 Annual Report | Consolidated Financial Statements 49

Page

Independent auditor’s report 50

Consolidated balance sheet 51

Consolidated statement of comprehensive income 52

Consolidated statement of changes in equity 53

Consolidated statement of cash flows 54

Notes to the consolidated financial statements:

Note Page

1 Nature of operations 55

2 Basis of preparation 55

2.1 Statement of compliance 55

2.2 Use of estimates and judgments 55

2.3 Regulatory compliance 56

3 Summary of significant accounting policies 56

3.1 Basis of consolidation 57

3.2 Foreign currency translation 57

3.3 Financial assets and financial liabilities 57

3.4 Interest income and expense 59

3.5 Fee and commission income 59

3.6 Impairment of financial assets 60

3.7 Intangible assets 60

3.8 Property, plant and equipment 61

3.9 Impairment of non-financial assets 61

3.10 Leases 61

3.11 Provisions 62

3.12 Employee benefits 62

3.13 Income taxes 62

3.14 Share capital 63

4 Changes in accounting policies 63

5 Cash and cash equivalents 64

6 Receivables 64

7 Investments – other loans and receivables 64

8 Loans to Members 65

9 Derivative financial instruments 67

10 Investments available for sale 69

Note Page

11 Investment in associates 70

12 Investment in joint venture 71

13 Intangible assets 72

14 Property, plant and equipment 73

15 Deferred income taxes 74

16 Other assets 75

17 Members’ deposits 75

18 Borrowings 75

19 Payables and other liabilities 76

20 Mortgage securitization liabilities 76

21 Pension and other employee obligations 78

22 Share capital 84

23 Net interest income 87

24 Non-interest income 88

25 Income tax expense 88

26 Related party transactions 89

27 Contingent liabilities and commitments 91

28 Regulatory information 93

29 Financial risk management 94

29.1 Credit risk 94

29.2 Market risk 96

29.3 Liquidity risk 99

29.4 Fair value of financial assets 101

and financial liabilities

29.5 Capital management 105

30 Comparative information 105

31 Authorization of consolidated financial statements 106

Consolidated Financial StatementsMERIDIAN CREDIT UNION LIMITED INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2014

Page

Independent auditor’s report

Consolidated balance sheet

Consolidated statement of comprehensive income

Consolidated statement of changes in equity

Consolidated statement of cash flows

Notes to the consolidated financial statements:

Note Page Note

1 Nature of operations 13 Intangible assets

2 Basis of preparation 14 Property, plant and equipment

2.1 Statement of compliance 15 Deferred income taxes

2.2 Use of estimates and judgments 16 Other assets

2.3 Regulatory compliance 17 Members’ deposits

3 Summary of significant accounting policies 18 Borrowings

3.1 Basis of consolidation 19 Payables and other liabilities

3.2 Foreign currency translation 20 Mortgage securitization liabilities

3.3 Financial assets and financial liabilities 21 Pension and other employee obligations

3.4 Interest income and expense 22 Share capital

3.5 Fee and commission income 23 Net interest income

3.6 Impairment of financial assets 24 Non-interest income

3.7 Intangible assets 25 Income tax expense

3.8 Property, plant and equipment 26 Related party transactions

3.9 Impairment of non-financial assets 27 Contingent liabilities and commitments

3.10 Leases 28 Regulatory information

3.11 Provisions 29 Financial risk management

3.12 Employee benefits 29.1 Credit risk

3.13 Income taxes 29.2 Market risk Market risk

3.14 Share capital 29.3 Liquidity risk Liquidity risk

4 Changes in accounting policies 29.4 Fair value of financial assets and financial

5 Cash and cash equivalents liabilities

6 Receivables 29.5 Capital management liabilities

7 Investments - other loans and receivables 30 Comparative information Capital management

8 Loans to Members 31 Authorization of consolidated financial statements

9 Derivative financial instruments

10 Investments available for sale

11 Investment in associates

12 Investment in joint venture


March 12, 2015 INDEPENDENT AUDITOR’S REPORT To the Members of Meridian Credit Union Limited, We have audited the accompanying consolidated financial statements of Meridian Credit Union Limited and its subsidiaries, which comprise the consolidated balance sheet as at December 31, 2014, and the consolidated statements of comprehensive income, of changes in equity and cash flows for the year then ended, and the related notes, which comprise a summary of significant accounting policies and other explanatory information. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Meridian Credit Union Limited and its subsidiaries as at December 31, 2014, and their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards.

Chartered Professional Accountants, Licensed Public Accountants


MERIDIAN CREDIT UNION LIMITED CONSOLIDATED BALANCE SHEET As at December 31, 2014 with comparative figures for 2013

Note (thousands of Canadian dollars) December 31

2014

December 31 2013

ASSETS

5 Cash and cash equivalents $ 131,894 $ 146,260

6 Receivables 1,466 3,133

7 Investments - other loans and receivables 812,847 770,137

8 Loans to Members 8,890,745 8,100,734

9 Derivative financial assets 18,016 23,984

10 Investments available for sale 54,557 51,762

11 Investment in associates 12,148 19,208

12 Investment in joint venture 1,820 1,849

13 Intangible assets 7,516 9,794

14 Property, plant and equipment 28,867 26,505

15 Deferred income tax assets 24,511 22,085

16 Other assets 9,362 8,247

Total assets $ 9,993,749 $ 9,183,698

LIABILITIES

17 Members’ deposits $ 7,966,606 $ 7,407,479

18 Borrowings 22,557 1,812

19 Payables and other liabilities 18,469 38,514

25 Current income taxes payable 674 2,197

20 Mortgage securitization liabilities 1,317,883 1,114,852

9 Derivative financial liabilities 5,840 282

21 Pension and other employee obligations 40,278 29,439

22 Membership shares 6,528 6,452

Total liabilities 9,378,835 8,601,027

MEMBERS’ EQUITY

22 Members’ capital accounts 236,845 226,884

Contributed surplus 104,761 104,761

Retained earnings 277,709 250,516

Accumulated other comprehensive income (4,401) 510

Total equity attributable to Members 614,914 582,671

Total liabilities and Members’ equity $ 9,993,749 $ 9,183,698

The accompanying notes are an integral part of these consolidated financial statements


MERIDIAN CREDIT UNION LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended December 31, 2014 with comparative figures for 2013

Note (thousands of Canadian dollars) 2014

2013

INTEREST INCOME

Interest income - loans to Members $ 325,180 $ 305,760

Interest income - other 15,330 15,876

Total interest income 340,510 321,636

INTEREST EXPENSE

Interest expense - Members’ deposits 124,601 122,706

Interest expense - other 29,129 22,534

Total interest expense 153,730 145,240

23 Net interest income 186,780 176,396

8 Provision for credit losses 7,156 6,534

Net interest income after provision for credit losses 179,624 169,862

24 Non-interest income 43,384 39,406

11 Share of profits from investment in associates 1,001 3,143

12 Share of profits from investment in joint venture 271 314

Net interest and non-interest income 224,280 212,725

NON-INTEREST EXPENSES

21 Salaries and employee benefits 103,633 87,696

Administration 47,243 44,015

Occupancy 13,433 12,633

13 Amortization of intangible assets 3,540 3,391

14 Depreciation of property, plant and equipment 5,971 5,574

Total non-interest expenses 173,820 153,309

Operating earnings 50,460 59,416

25 Income tax expense 6,031 2,791

Profits for the year attributable to Members 44,429 56,625

OTHER COMPREHENSIVE (LOSS) INCOME

Items that will not be reclassified to profit or loss

21 Actuarial losses in defined benefit pension plans (6,106) -

25 Related income taxes 1,044 -

(5,062) -

Items that may be subsequently reclassified to profit or loss Cash flow hedges – effective portion of changes in fair value (5,982) 617

Cash flow hedges – reclassified to profit or loss 9 -

25 Related income taxes 1,062 (107)

(4,911) 510

Other comprehensive (loss) income for the year, net of income taxes (9,973) 510

Total comprehensive income for the year attributable to Members 34,456 $ 57,135



MERIDIAN CREDIT UNION LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended December 31, 2014 with comparative figures for 2013

Note (thousands of Canadian dollars) Members’

capital Contributed

surplus Retained earnings

Hedging reserves

Total equity

Balance as at January 1, 2014 $ 226,884 $ 104,761 $ 250,516 $ 510 $ 582,671

22 Dividends on Members’ capital accounts - - (12,174) - (12,174)

22 Shares issued as dividends 9,961 - - - 9,961

Transactions with owners 9,961 - (12,174) - (2,213)

Profits for the year attributable to Members - - 44,429 - 44,429

Other comprehensive income for the year, net of income taxes:

Actuarial losses in defined benefit pension plans

- - (5,062) - (5,062)

Cash flow hedges – effective portion of changes in fair value

- - - (4,918) (4,918)

Cash flow hedges – reclassified to profit or loss - - - 7 7

Total comprehensive income for the year attributable to Members - - 39,367 (4,911) 34,456

Balance as at December 31, 2014 $ 236,845 $ 104,761 $ 277,709 $ (4,401) $ 614,914

Note (thousands of Canadian dollars) Members’

capital Contributed

surplus Retained earnings

Hedging reserves

Total equity

Balance as at January 1, 2013 $ 217,448 $ 104,761 $ 204,663 - $ 526,872

22 Dividends on Members’ capital accounts - -

(10,772) - (10,772)

22 Shares issued as dividends 9,436

- - - 9,436

Transactions with owners 9,436

-

(10,772)

- (1,336)

Profits for the year attributable to Members - - 56,625 - 56,625

Other comprehensive income for the year, net of income taxes:

Actuarial losses in defined benefit pension plans

- - - - -

Cash flow hedges – effective portion of changes in fair value - - - 510 510

Total comprehensive income for the year attributable to Members

-

- 56,625 510 57,135

Balance as at December 31, 2013 $ 226,884 $ 104,761 $ 250,516 510 $ 582,671



MERIDIAN CREDIT UNION LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended December 31, 2014 with comparative figures for 2013

Note (thousands of Canadian dollars) 2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES

Interest received $ 345,379

$ 326,098

Interest paid (146,461) (142,665)

Fee and commission receipts 37,437 32,961

Other income received 1,692 1,647

Premiums paid on index-linked option contracts (2,062) (1,838)

8 Recoveries on loans previously written off 356 398

Payments to employees and suppliers (180,560) (153,867)

Income taxes paid (7,873) (4,321)

Net cash flows from operating activities before adjustments for changes in operating assets and liabilities 47,908 58,413

Adjustments for net changes in operating assets and liabilities:

Net change in loans to Members (798,122) (638,201)

Net change in receivables 1,667 96

Net change in other assets and liabilities (1,138) 1,424

Net change in Members’ deposits 558,424 238,414

Net cash flows used in operating activities (191,261) (339,854)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of National Housing Act mortgage backed securities (79,482) (12,163)

Net decrease (increase) in other investments 34,084 (54,675)

11 Distributions received from investment in associates 8,061 8,887

12 Distributions received from investment in joint venture 300 250

13 Purchase of intangible assets (1,262) (2,300)

14 Purchase of property, plant and equipment (8,338) (6,397)

Net cash flows used in investing activities (46,637) (66,398)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from securitization of mortgages 247,403 209,456

Payment of mortgage securitization liabilities (43,549) (60,252)

Repayment of (proceeds from) borrowings (335) 51

Proceeds on settlement of derivatives 140 -

Dividends paid on Members’ capital accounts (1,283) (1,336)

Net cash from changes in Membership shares 76 56

Net cash flows from financing activities 202,452 147,975

Net decrease in cash and cash equivalents (35,446) (258,277)

Cash and cash equivalents, beginning of year 146,260 404,537

5, 18 Cash and cash equivalents, end of year(1) $ 110,814 $ 146,260

The accompanying notes are an integral part of these consolidated financial statements (1) End of year cash and cash equivalents is comprised of Consolidated Balance Sheet items Cash and cash equivalents and $21,080 of bank overdrafts, due on demand, included within Borrowings. 1 Nature of operations


MERIDIAN CREDIT UNION LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2014 with comparative figures for 2013

Meridian Credit Union Limited (“the Credit Union” or “Meridian”) is incorporated in Canada under the Credit Unions and Caisses Populaires Act (the “Act”), and is a member of the Deposit Insurance Corporation of Ontario (“DICO”) and of Central 1 Credit Union (“Central 1”). The Credit Union is headquartered at 75 Corporate Park Drive in St. Catharines, ON. The Credit Union primarily is involved in the raising of funds and the application of those funds in providing financial services to Members. The activities of the Credit Union are regulated by DICO. The Credit Union has 67 branches and seven commercial business centres across Ontario.

2 Basis of preparation

2.1 Statement of compliance

The consolidated financial statements of the Credit Union have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRIC interpretations as issued by the International Accounting Standards Board (“IASB”) and legislation for Ontario’s Credit Unions and Caisses Populaires. Unless otherwise indicated, all amounts except for per share figures are expressed in thousands of Canadian dollars.

2.2 Use of estimates and judgments

The preparation of the consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the consolidated balance sheet date and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from such estimates. Estimates and judgments are continually evaluated and are made based on historical experience and other factors, including expectations of future events that are reasonable under the circumstances.

The items subject to the most significant application of judgment and estimates are as follows:

Fair value of financial instruments As described in note 29.4, where the fair value of financial assets and financial liabilities cannot be derived from active markets, the Credit Union uses valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment is required to establish fair values. The judgments include considerations of liquidity and model inputs, such as discount rates and prepayment rates. Management believes that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments. Note 29.4 provides detailed information about the key assumptions used in the determination of the fair value of financial instruments, as well as the detailed sensitivity analysis for these assumptions. Impairment losses on loans and advances The Credit Union reviews its loan portfolio to assess impairment at each consolidated balance sheet date. In determining whether an impairment loss should be recorded in the consolidated statement of comprehensive income, the Credit Union makes judgments as to whether there is any objective evidence indicating an impairment trigger followed by a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with that portfolio. The assessment takes account of historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling its future cash flows. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. The impairment loss on loans and advances is disclosed in more detail in note 3.6 and note 8.

MERIDIAN CREDIT UNION LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended December 31, 2014 with comparative figures for 2013

Note (thousands of Canadian dollars) 2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES

Interest received $ 345,379

$ 326,098

Interest paid (146,461) (142,665)

Fee and commission receipts 37,437 32,961

Other income received 1,692 1,647

Premiums paid on index-linked option contracts (2,062) (1,838)

8 Recoveries on loans previously written off 356 398

Payments to employees and suppliers (180,560) (153,867)

Income taxes paid (7,873) (4,321)

Net cash flows from operating activities before adjustments for changes in operating assets and liabilities 47,908 58,413

Adjustments for net changes in operating assets and liabilities:

Net change in loans to Members (798,122) (638,201)

Net change in receivables 1,667 96

Net change in other assets and liabilities (1,138) 1,424

Net change in Members’ deposits 558,424 238,414

Net cash flows used in operating activities (191,261) (339,854)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of National Housing Act mortgage backed securities (79,482) (12,163)

Net decrease (increase) in other investments 34,084 (54,675)

11 Distributions received from investment in associates 8,061 8,887

12 Distributions received from investment in joint venture 300 250

13 Purchase of intangible assets (1,262) (2,300)

14 Purchase of property, plant and equipment (8,338) (6,397)

Net cash flows used in investing activities (46,637) (66,398)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from securitization of mortgages 247,403 209,456

Payment of mortgage securitization liabilities (43,549) (60,252)

Repayment of (proceeds from) borrowings (335) 51

Proceeds on settlement of derivatives 140 -

Dividends paid on Members’ capital accounts (1,283) (1,336)

Net cash from changes in Membership shares 76 56

Net cash flows from financing activities 202,452 147,975

Net decrease in cash and cash equivalents (35,446) (258,277)

Cash and cash equivalents, beginning of year 146,260 404,537

5, 18 Cash and cash equivalents, end of year(1) $ 110,814 $ 146,260

The accompanying notes are an integral part of these consolidated financial statements (1) End of year cash and cash equivalents is comprised of Consolidated Balance Sheet items Cash and cash equivalents and $21,080 of bank overdrafts, due on demand, included within Borrowings. 1 Nature of operations



2.2 Use of estimates and judgments (continued)

Impairment of intangible assets

The Credit Union performs an assessment of its intangible assets at each consolidated balance sheet date to determine whether an impairment loss should be recorded in the consolidated statement of comprehensive income. Core deposit intangibles comprise most of the Credit Union’s intangible assets. The carrying value of core deposit intangibles is significantly impacted by estimates about the future runoff pattern for the demand deposit portfolio to which the intangible asset relates as well as estimates used in determining the net cost of servicing the deposits compared to the alternative cost of borrowing. Management assesses actual runoff patterns on a regular basis to determine the impact on the remaining runoff estimates. Further details on impairment of intangible assets are disclosed in note 3.9. Recognition of securitization arrangements As part of its program of liquidity, capital and interest rate risk management, the Credit Union enters into arrangements to fund growth by entering into mortgage securitization arrangements. As a result of these transactions and depending on the nature of the arrangement, the Credit Union may be subject to the recognition of the funds received as secured borrowings and the continued recognition of the securitized assets. The determination of the requirements for continued recognition requires significant judgment. Further details of securitization arrangements are disclosed in note 20. Deferred income taxes Deferred income tax assets are recognized in respect of unused tax losses or deductible temporary differences to the extent that it is probable that taxable income will be available against which the losses can be utilized. Judgment is required to determine the amount of deferred income tax assets that can be recognized, based on the likely timing and level of future taxable profits, together with future tax planning strategies.

Further details on deferred income taxes are included in note 3.13 and note 15. Retirement benefit obligations The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty. Any changes in these assumptions will impact the carrying value of the pension obligations. Note 21 provides detailed information about the key assumptions used in the valuation of retirement benefit obligations, as well as the detailed sensitivity analysis for these assumptions.

2.3 Regulatory compliance

Regulations to the Act specify that certain items are required to be disclosed in the consolidated financial statements that are presented at annual meetings of Members. This information has been integrated into these consolidated financial statements and notes. When necessary, reasonable estimates and interpretations have been made in presenting this information.

Note 28 contains additional information disclosed to support regulatory compliance.

3 Summary of significant accounting policies

These consolidated financial statements were prepared on a going concern basis, under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities, including derivative financial instruments, at fair value. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all of the years presented.



3.1 Basis of consolidation

The financial results of wholly owned subsidiaries of the Credit Union are included within these consolidated financial statements. All intercompany balances and transactions have been eliminated on consolidation. Investments in which the Credit Union exerts significant influence but not control over operating and financing decisions are accounted for using the equity method. Under equity accounting, investments are initially recorded at cost and adjusted for the Credit Union’s proportionate share of the net income or loss which is recorded in share of profits from investment in associate and share of profits from investment in joint venture in the consolidated statement of comprehensive income. Investments in which the Credit Union exercises joint control are initially recognized at cost and subsequently accounted for using the equity method. The Credit Union’s share of profits from investment in the joint venture is based on financial statements prepared up to a date not earlier than three months before the date of the consolidated balance sheet, adjusted to conform to the accounting policies of the Credit Union. The joint venture in which the Credit Union participates operates an office building, which generates income from leasing of space for commercial use.

3.2 Foreign currency translation

The consolidated financial statements are presented in Canadian dollars, which is the Credit Union’s functional and presentational currency. Monetary assets and liabilities denominated in foreign currencies, primarily United States (“U.S.”) dollars, are translated into Canadian dollars at exchange rates prevailing on the consolidated balance sheet date. Income and expenses are translated at the exchange rates in effect on the date of the transaction. Exchange gains and losses arising on the translation of monetary items are included in non-interest income for the year.

3.3 Financial assets and financial liabilities

Financial assets and financial liabilities, including derivative financial instruments, are recognized on the consolidated balance sheet of the Credit Union at the time the Credit Union becomes a party to the contractual provisions of the instrument. The Credit Union recognizes financial instruments at the trade date. All financial assets and financial liabilities are measured at fair value on initial recognition.

Financial assets There are four categories of financial assets: loans and receivables; fair value through profit or loss; held to maturity; and available for sale. Management classifies each financial asset to one of these categories at the time of initial recognition. The classification depends on the purpose for which the asset was acquired. The category determines how the financial asset will be subsequently measured and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income. All financial assets are subject to review for impairment at least at each reporting date. Impairment is recognized when there is objective evidence that a financial asset or a group of financial assets is impaired. Different criteria to determine impairment are applied for each category of financial assets. The categories of financial assets are described below: (a) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market (other than investments where the credit union intends to sell in the short-term or where the credit union may not recover substantially all of the investment, which have been designated as available for sale). The Credit Union has designated receivables, loans to Members and fixed term deposits with Central 1 as loans and receivables. Financial assets classified as loans and receivables are initially measured at fair value net of loan fees and direct transaction costs and are subsequently measured at amortized cost using the effective interest method of amortization less provision for impairment.

(b) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or that meet certain conditions and are designated at fair value through profit or loss on initial recognition. All of the Credit Union’s derivative financial instruments fall into this category as well as cash and cash equivalents, except for short-term investments with less than 100 days maturity from the date of acquisition, which are classified as loans and receivables. Financial assets at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the consolidated statement of comprehensive income. They are subsequently measured at fair value with gains and losses recognized in profit or loss.



3.3 Financial assets and financial liabilities (continued) Derivative financial instruments Derivative financial instruments are contracts, such as options, swaps and futures, where the value of the contract is derived from the price of an underlying variable. The most common underlying variables include stocks, bonds, commodities, currencies, interest rates and market rates. The Credit Union periodically enters into derivative contracts to manage financial risks associated with movements in interest rates and other financial indices as well as to meet the requirements to participate in the Canada Mortgage Bond Program (“CMB Program”) for securitization as discussed in note 20. The Credit Union’s policy is not to utilize derivative financial instruments for trading or speculative purposes. Assets in this category are measured at fair value. Gains or losses are recognized in profit or loss in other interest income, unless the derivative is designated as a hedging instrument. For designated hedging instruments, the recognition of the gain or loss will depend on the hedge accounting rules described below. Gains or losses on derivative financial instruments are based on changes in fair value determined by reference to active market transactions or using a valuation technique where no active market exists. Certain derivatives embedded in other financial instruments, such as the embedded option in an index-linked term deposit product, are treated as separate derivative financial instruments when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These embedded derivatives are separately accounted for at fair value, with changes in fair value recognized in profit or loss.

Hedge accounting The Credit Union documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as the risk management objectives and strategies for undertaking various hedge transactions. The Credit Union also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivative financial instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items attributable to the hedged risk. In a cash flow hedge, the effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income (“OCI”). The gain or loss relating to the ineffective portion is recognized immediately in profit or loss within net interest income. Amounts accumulated in OCI are reclassified to profit or loss in the periods when the hedged item affects profit or loss and are recorded within net interest income. The Credit Union utilizes cash flow hedges primarily to convert floating rate assets and liabilities to fixed rate. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in accumulated other comprehensive income (“AOCI”) at that time remains in AOCI and is recognized in the statement of comprehensive income as the hedged item affects earnings. When a forecasted transaction is no longer expected to occur, the cumulative gain or loss that was reported in OCI is immediately transferred to the income statement within net interest income. If a forecasted transaction is no longer highly probable of occurring, but is still likely to occur, hedge accounting will be discontinued and the cumulative gain or loss existing in AOCI at that time remains in AOCI and is amortized to net interest income in the statement of comprehensive income at the same time the hedged item will affect earnings. Cash and cash equivalents Cash and cash equivalents comprise balances with less than 100 days maturity from the date of acquisition. Given the short-term nature, the carrying value of cash and cash equivalents, excluding short-term investments, is a reasonable approximation of fair value. (c) Held to maturity financial assets Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Credit Union’s management has the positive intention and ability to hold to maturity. The Credit Union has not classified any of its financial assets as held to maturity investments. (d) Available for sale financial assets Available for sale financial assets are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices and which are not classified as loans and receivables, fair value through profit or loss or held to maturity. These would include those non-derivative financial assets that are explicitly designated as such or do not qualify for inclusion in any of the other categories of financial assets. The Credit Union has designated its equity investments not subject to significant influence as available for sale. Available for sale financial assets are initially recognized at fair value plus transaction costs. They are subsequently measured at fair value, with any resultant gain or loss recognized in other comprehensive income, except for impairment losses which are recognized in profit or loss. Investments in equity instruments that have been designated as available for sale but that do not have a quoted market price in an active market, and whose fair value cannot be reliably measured, are recorded at cost. When financial instruments are derecognized, the cumulative gains and losses previously recognized in accumulated other comprehensive income are recognized in profit or loss.



3.3 Financial assets and financial liabilities (continued) Interest income earned on available for sale debt instruments is recognized in profit or loss in other interest income. Dividends received on available for sale equity instruments are recognized in profit or loss in other interest income. Financial liabilities There are two categories of financial liabilities: fair value through profit or loss; and other liabilities. Management classifies each financial liability to one of these categories at the time of initial recognition. The category determines how the financial liability will be subsequently measured and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income.

The categories of financial liabilities are described below: (a) Financial liabilities at fair value through profit or loss The Credit Union’s derivative financial instruments fall into this category and are described above under financial assets. (b) Other liabilities The Credit Union has designated all financial liabilities other than derivative financial liabilities as other liabilities. These include Members’ deposits, borrowings, mortgage securitization liabilities and trade and other payables. Other liabilities are initially recorded at fair value and subsequently measured at amortized cost using the effective interest method. Derecognition of financial instruments Financial assets are derecognized when the Credit Union no longer has contractual rights to the cash flows from the asset, or when substantially all of the risks and rewards of ownership are transferred. If the Credit Union has neither transferred nor retained substantially all the risks and rewards of ownership, it assesses whether it has retained control over the transferred asset. A financial liability is derecognized when it is extinguished, discharged, cancelled or expired.

3.4 Interest income and expense

Interest income and expense for all interest-bearing financial instruments, except those designated as fair value through profit or loss, are recognized within interest income or interest expense in the consolidated statement of comprehensive income as they accrue using the effective interest method. Once a financial asset has been written down as a result of an impairment loss, interest income is recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or financial liability to its fair value at inception. The effective interest rate is established on initial recognition of the financial asset or liability and incorporates any fees and transaction costs that are integral to establishing the contract.

3.5 Fee and commission income Fee and commission income not directly attributable to the acquisition of financial instruments is recognized when the related service is provided and the income is contractually due. Fee and commission income is included in non-interest income on the consolidated statement of comprehensive income. Fee and commission income that is directly attributable to acquiring or issuing a financial asset or financial liability not classified as fair value through profit or loss, is added to or deducted from the initial carrying value. Fee and commission income is then included in the calculation of the effective interest rate and amortized through profit or loss over the term of the financial asset or financial liability. For financial instruments carried at fair value through profit or loss, transaction costs are immediately recognized in profit or loss on initial recognition.



3.6 Impairment of financial assets The Credit Union assesses at each consolidated balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. (a) Financial assets carried at amortized cost A financial asset or group of financial assets are impaired only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event or events has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Credit Union uses to determine that there is objective evidence of an impairment include delinquency in contractual payments of principal or interest, financial difficulties experienced by the borrower, breach of loan covenants or conditions, initiation of bankruptcy proceedings or deterioration in the value of collateral.

The Credit Union completes an assessment to determine whether objective evidence of impairment exists on an individual and/or collective basis. If the Credit Union determines that objective evidence of impairment does not exist for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses the group for impairment. Assets that are individually assessed for impairment and for which an impairment is identified, are not included in the collective assessment of impairment. The specific allowance assessed on an individual financial asset is measured as the amount that is required to reduce the carrying value of the impaired asset to its estimated realizable amount, which is generally the fair value of the security underlying the asset, net of expected costs of realization. Expected costs of realization are determined by discounting at the financial asset’s original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statement of comprehensive income. The estimated period between when a loss occurs and its identification is determined by management to be 12 months, on average, for the purpose of collectively provisioning loans. For the purposes of the collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Future cash flows within each group are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Credit Union to reduce any differences between loss estimates and actual loss experience. An impairment loss on an investment carried at amortized cost is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. The reversal is recognized in the consolidated statement of comprehensive income. (b) Financial assets classified as available for sale When objective evidence of impairment exists, which may include a decline in fair value or recoverable amount of the future cash flows below the cost that is other than temporary, an impairment loss is recorded. All impairment losses are recognized in the consolidated statement of comprehensive income. Any decline in fair value of an available for sale financial asset recognized previously in other comprehensive income that is considered to be impaired is taken into profit or loss for the year. Impairment losses relating to an available for sale debt instrument are reversed when in a subsequent period, the fair value of the instrument increases and the increase can be objectively related to an event occurring after the loss was recognized.

3.7 Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately include computer software, other than software which is considered to be an integral part of property classified as property, plant and equipment which is included in computer hardware and software, as well as design plans which will be used in the future construction or renovation of branch locations or commercial banking centres. Intangible assets acquired separately are recorded at historical cost.

Intangible assets acquired through business combinations Intangible assets acquired through business combinations include the fair value of contractual rights relating to the mutual fund portfolios of acquired Members as well as core deposit intangibles representing the cost savings inherent in acquiring a deposit portfolio with a lower cost of funding versus going into the market for the funds.

Intangible assets with a limited life, except for core deposit intangible assets, are amortized to income on a straight-line basis over the period during which the assets are anticipated to provide economic benefit, which currently ranges from three to ten years. An accelerated method of amortization is used for core deposit intangible assets based on the anticipated runoff pattern over a seven year period.

3.7 Intangible assets (continued)



Intangible assets are subject to impairment review as described in note 3.9. The Credit Union does not have any intangible assets with indefinite lives. The Credit Union has not recognized any internally generated intangible assets.

3.8 Property, plant and equipment

Recognition and measurement

Land is carried at cost less impairment losses. Buildings and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalized as part of the computer hardware.

Depreciation

Land is not depreciated. Depreciation of other assets commences when the asset is available for use and is calculated using the straight-line method over the estimated useful lives of the related assets as follows:

Buildings and improvements 5-40 years Furniture and office equipment 5-10 years Computer hardware and software 3-5 years Leasehold improvements lease term to a maximum of 10 years

Where components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Residual value estimates and estimates of useful life are reviewed, and adjusted if appropriate, at each consolidated balance sheet date.

Assets are subject to impairment review as described under note 3.9.

3.9 Impairment of non-financial assets Non-financial assets that are subject to amortization or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying value exceeds its recoverable amount. For non-financial assets with the exception of core deposit intangible assets, the recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the branch level. This is considered to be the lowest level for which there are separately identifiable cash flows (i.e. the cash-generating units). For core deposit intangibles, the recoverable amount is determined by applying current assumptions about the inherent cost savings and runoff patterns to the remaining deposit portfolio balance. Non-financial assets that have suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

3.10 Leases

Leases where the Credit Union assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial recognition the leased asset under a finance lease is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset and depreciated using the straight-line method over the term of the lease. The interest element of the finance cost is charged to profit or loss over the lease period.

Other leases are operating leases and the leased assets are not recognized on the Credit Union’s consolidated balance sheet. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.


3.6 Impairment of financial assets The Credit Union assesses at each consolidated balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. (a) Financial assets carried at amortized cost A financial asset or group of financial assets are impaired only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event or events has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Credit Union uses to determine that there is objective evidence of an impairment include delinquency in contractual payments of principal or interest, financial difficulties experienced by the borrower, breach of loan covenants or conditions, initiation of bankruptcy proceedings or deterioration in the value of collateral.

The Credit Union completes an assessment to determine whether objective evidence of impairment exists on an individual and/or collective basis. If the Credit Union determines that objective evidence of impairment does not exist for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses the group for impairment. Assets that are individually assessed for impairment and for which an impairment is identified, are not included in the collective assessment of impairment. The specific allowance assessed on an individual financial asset is measured as the amount that is required to reduce the carrying value of the impaired asset to its estimated realizable amount, which is generally the fair value of the security underlying the asset, net of expected costs of realization. Expected costs of realization are determined by discounting at the financial asset’s original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statement of comprehensive income. The estimated period between when a loss occurs and its identification is determined by management to be 12 months, on average, for the purpose of collectively provisioning loans. For the purposes of the collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics. Future cash flows within each group are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Credit Union to reduce any differences between loss estimates and actual loss experience. An impairment loss on an investment carried at amortized cost is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. The reversal is recognized in the consolidated statement of comprehensive income. (b) Financial assets classified as available for sale When objective evidence of impairment exists, which may include a decline in fair value or recoverable amount of the future cash flows below the cost that is other than temporary, an impairment loss is recorded. All impairment losses are recognized in the consolidated statement of comprehensive income. Any decline in fair value of an available for sale financial asset recognized previously in other comprehensive income that is considered to be impaired is taken into profit or loss for the year. Impairment losses relating to an available for sale debt instrument are reversed when in a subsequent period, the fair value of the instrument increases and the increase can be objectively related to an event occurring after the loss was recognized.

3.7 Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately include computer software, other than software which is considered to be an integral part of property classified as property, plant and equipment which is included in computer hardware and software, as well as design plans which will be used in the future construction or renovation of branch locations or commercial banking centres. Intangible assets acquired separately are recorded at historical cost.

Intangible assets acquired through business combinations Intangible assets acquired through business combinations include the fair value of contractual rights relating to the mutual fund portfolios of acquired Members as well as core deposit intangibles representing the cost savings inherent in acquiring a deposit portfolio with a lower cost of funding versus going into the market for the funds.

Intangible assets with a limited life, except for core deposit intangible assets, are amortized to income on a straight-line basis over the period during which the assets are anticipated to provide economic benefit, which currently ranges from three to ten years. An accelerated method of amortization is used for core deposit intangible assets based on the anticipated runoff pattern over a seven year period.

3.7 Intangible assets (continued)



3.11 Provisions Provisions are recognized when the Credit Union has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Where the Credit Union expects a provision to be reimbursed, the reimbursement is recognized as an asset only when the reimbursement is virtually certain. At each consolidated balance sheet date, the Credit Union assesses the adequacy of its pre-existing provisions and adjusts the amounts as necessary based on actual experience and changes in future estimates.

Provisions are measured at the present value of the estimated expenditure required to settle the present obligation and are recorded within operating expenses on the consolidated statement of comprehensive income.

3.12 Employee benefits

(a) Pension obligations

The Credit Union provides post-employment benefits through defined benefit plans as well as a defined contribution plan.

A defined contribution plan is a pension plan under which the Credit Union pays fixed contributions into a separate entity. The Credit Union has no legal or constructive obligation to pay further contributions after its payment of the fixed contribution. The contributions are recognized as employee benefit expense when they are due.

A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation. The cost of the plan is actuarially determined using the projected unit cost method pro-rated on service and management’s best estimate of discount rates, expected plan investment performance, salary escalation, and retirement ages of employees. The plans include an annual indexation of the lesser of 4% or the increase in the previous calendar year’s Consumer Price Index. Service cost is the change in the present value of the defined benefit obligation resulting from employee service in either the current period or prior periods and from any gain or loss on settlement. Net interest is the change in the net defined benefit liability or asset that arises from the passage of time. Both service cost and net interest are recognized immediately in salaries and employee benefits. Re-measurements of the net defined benefit liability include actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, the return on plan assets excluding amounts included in net interest and changes in the effect of any asset ceilings. Re-measurements are recognized immediately in other comprehensive income. The net defined benefit liability or asset recognized in the consolidated balance sheet is the plans’ deficit or surplus at the balance sheet date, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The plans’ deficit or surplus is the present value of the defined benefit obligation less the fair value of plan assets.

(b) Other post-retirement obligations Other post-retirement obligations include health and dental care benefits for eligible retired employees. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans along with management’s best estimate of expected health care costs. (c) Other short-term benefits Liabilities for employee benefits for wages, salaries, termination pay and vacation pay represent the undiscounted amount which the Credit Union expects to pay as at the consolidated balance sheet date including related costs.

3.13 Income taxes

Income tax expense on the consolidated statement of comprehensive income comprises current and deferred income taxes. Income taxes are recognized in profit or loss, except to the extent that they relate to items recognized directly in other comprehensive income, in which case they are recognized in other comprehensive income.

Current income taxes are the expected taxes refundable or payable on the taxable income for the year, using tax rates enacted or substantively enacted at the consolidated balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred income taxes are recognized using the liability method, providing for temporary differences between the carrying values of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred income tax provided is based on the expected manner of realization or settlement of the carrying value of assets and liabilities, using tax rates enacted or substantively enacted at the consolidated balance sheet date. A deferred income tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. Deferred income tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be utilized.



3.14 Share capital

(a) Member shares Shares are classified as liabilities or Members’ equity according to their terms. Where shares are redeemable at the option of the Member, either on demand or on withdrawal from membership, the shares are classified as liabilities. Residual value in excess of the face value on Member share liabilities, if any, is classified as equity. Where shares are redeemable at the discretion of the Credit Union’s Board of Directors, the shares are classified as equity.

(b) Distributions to Members

Dividends on shares classified as liabilities are charged to profit or loss, while dividends on shares classified as equity are charged to retained earnings. Dividends declared on the Membership shares shall be paid in cash. Members may elect to receive dividends declared on Class A shares by way of cash or newly issued, fully paid equity shares of the same class. Dividends payable in cash are recorded in the period in which they are declared by the Credit Union’s Board of Directors. Dividends payable by way of newly issued shares are recorded in the period in which the shares are issued.

(c) Share issue costs Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of income taxes, from the proceeds.

4 Changes in accounting policies

(A) New standards, amendments and interpretations adopted by the Credit Union

The Credit Union has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of January 1, 2014.

(a) IAS 32, Financial instruments: Presentation was amended in December 2011 to provide additional application guidance on offsetting financial assets and financial liabilities. The amendment did not impact the presentation of the Credit Union’s financial assets and financial liabilities in the consolidated financial statements. Other standards, amendments and interpretations which are effective for the financial year beginning on January 1, 2014 are not material to the Credit Union. (B) New standards, amendments and interpretations not yet adopted Standards issued but not yet effective up to the date of issuance of the Credit Union’s financial statements are listed below. This listing is of standards and interpretations issued which are expected to apply to the Credit Union at a future date. The Credit Union intends to adopt these standards when they become effective.

(a) IFRS 9, Financial Instruments, was issued in July 2014 and incorporates previously issued components of the new standard. It replaces the existing guidance in IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through profit or loss (“FVTPL”). The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The Credit Union does not anticipate any changes to the measurement basis of its financial assets or financial liabilities as a result of these changes in accounting policy. IFRS 9 now includes a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. The model applies to all financial assets that are not measured at FVTPL, including specified financial guarantees and loan commitments issued. The model uses a dual measurement approach under which a loss allowance is measured for each financial asset as either: 12-month expected credit losses; or lifetime expected credit losses. The measurement basis generally depends on whether there has been a significant increase in credit risk since initial recognition. It is expected that the changes will result in an increase in the allowance for impaired loans and an earlier recognition of impairment losses in profit and loss. The Credit Union will undertake a thorough assessment of the new requirements to determine the implications to current impairment modelling and processes. IFRS 9 also includes changes to hedge accounting guidance and aims to improve the decision usefulness of the financial statements by better aligning hedge accounting with the risk management activities of an entity. It has removed or amended some of the key prohibitions and rules within IAS 39, providing more flexibility to an entity in establishing relationships that would qualify for hedge accounting. It is not anticipated that any of the Credit Union’s current hedging relationships will be impacted. The Credit Union will assess the impact of the new requirements as it relates to future derivative strategies prior to the effective date of implementation. IFRS 9 is effective for accounting periods beginning on or after January 1, 2018.



4 Changes in accounting policies (continued) (b) IFRS 15, Revenue from Contracts with Customers deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The standard is effective for annual periods beginning on or after January 1, 2017. The Credit Union is assessing the impact of IFRS 15 but does not anticipate a material impact as the amount of revenue generated through the sale of goods and services that would be impacted by this standard is minimal.

5 Cash and cash equivalents

Cash and cash equivalents include cash on hand, current accounts and short-term investments with other financial institutions.

2014 2013

Cash on hand 28,426 27,259

Deposits with other financial institutions 103,468 81,140

Short-term investments - 37,861

Total cash and cash equivalents 131,894 146,260

Included in deposits with other financial institutions is $20,793 (2013 – $17,839) held as an unscheduled prepayment cash reserve, a requirement of the Credit Union’s participation in the National Housing Act Mortgage-Backed Securities (“NHA MBS”) program. The use of these funds is restricted to those allowed as provided for by the NHA MBS program.

6 Receivables

2014 2013

Other receivables 1,466 3,133

Total receivables 1,466 3,133

Current 1,466 3,133

Non-current - -

7 Investments - other loans and receivables

2014 2013

Central 1 liquidity reserve deposit 612,113 552,180

Other interest bearing deposits - 105,666

National Housing Act mortgage-backed securities 199,566 111,123

All other loans and receivables 1,168 1,168

Total investments - other loans and receivables 812,847 770,137

Central 1 liquidity reserve deposit The Credit Union is a member of Central 1. As a condition of maintaining membership in Central 1 in good standing, the Credit Union is required to maintain on deposit an amount equal to 6% of its assets as at each calendar quarter-end. The deposits bear interest at varying rates, dependent on the terms of the investments. Other interest bearing deposits The Credit Union held nil (2013 – two) interest bearing deposits with nil (2013 – one) Canadian financial institutions. These deposits have a maturity more than 100 days from the date of acquisition.



7 Investments - other loans and receivables (continued) National Housing Act mortgage-backed securities The Credit Union held National Housing Act mortgage-backed securities, of which $177,643 (2013 - $90,485) is pledged in trust with CHT for CMB reinvestment purposes. These securities mature more than 100 days from the date of acquisition. Under the terms of the CMB program agreement, the Credit Union is not permitted to withdraw the principal held in trust for any purpose other than the contractual settlement of the mortgage securitization liabilities as disclosed in note 20.

8 Loans to Members

2014 2013

Residential mortgages 5,138,784 4,660,071

Personal loans 1,041,692 1,022,972

Commercial loans 2,746,455 2,455,522

8,926,931 8,138,565

Allowance for impaired loans (36,186) (37,831)

Total net loans to Members 8,890,745 8,100,734

Current 2,608,533 2,274,346

Non-current 6,282,212 5,826,388

Residential mortgage loans are repayable in monthly blended principal and interest instalments over a maximum term of ten years, based on a maximum amortization period of 35 years. Open mortgages may be paid off at any time without notice or penalty and closed mortgages may be paid off at the discretion of the Credit Union, but are subject to penalty. Commercial loans and personal loans, including line of credit loans, are generally repayable in monthly blended principal and interest instalments over a maximum amortization period of 25 years, except for line of credit loans, which are repayable on a revolving credit basis and require minimum monthly payments.

Allowance for impaired loans

Residential mortgages

Personal loans

Commercial loans

Collective allowance Total

Year ended December 31, 2014

Balance as at January 1 536 625 20,614 16,056 37,831

Loans written off (577) (1,509) (7,071) - (9,157)

Recoveries on loans previously written off 83 257 16 - 356

Provision for credit losses 455 1,451 7,847 (2,597) 7,156

Balance as at December 31 497 824 21,406 13,459 36,186


Personal loans

Commercial loans

Collective allowance Total


Balance as at January 1 420 1,024 30,626 13,482 45,552

Loans written off (774) (1,419) (12,460) - (14,653)

Recoveries on loans previously written off 62 299 37 - 398

Provision for credit losses 828 721 2,411 2,574 6,534

Balance as at December 31 536 625 20,614 16,056 37,831



8 Loans to Members (continued)


Personal loans

Commercial loans

Total

Gross impaired loans 16,603 1,616 53,023 71,242

Related security, net of expected costs (16,106) (792) (31,617) (48,515)

Balance as at December 31, 2014 497 824 21,406 22,727

Interest income recognized on impaired loans 3,803


Personal loans

Commercial loans

Total

Gross impaired loans 16,862 2,068 65,759 84,689

Related security, net of expected costs (16,326) (1,443) (45,145) (62,914)

Balance as at December 31, 2013 536 625 20,614 21,775

Interest income recognized on impaired loans 4,819

The allowance for impaired loans provided for in the accounts of the Credit Union is in accordance, in all material respects, with the DICO by-law governing such allowances.

Loans past due but not impaired

< 30 days 30-59 days 60-89 days 90 days and

greater

Retail 154,765 21,903 6,700 -

Commercial 48,085 19,755 96 -

Total as at December 31, 2014 202,850 41,658 6,796 -

< 30 days 30-59 days 60-89 days 90 days and

greater

Retail 156,259 27,578 6,525 -

Commercial 59,918 1,849 2,609 1,164

Total as at December 31, 2013 216,177 29,427 9,134 1,164

The following table illustrates the credit quality of financial assets that are neither past due nor impaired.

Retail portfolio risk rating Commercial portfolio risk rating

(% of portfolio) 2014 2013 (% of portfolio) 2014 2013

Unrated 6.5% 7.3% Unrated 0.0% 0.2% A+ 35.8% 35.2% Very low 0.2% 0.4% A 33.8% 33.1% Low 0.8% 0.8% B 13.1% 13.9% Better than average 14.8% 15.9% C 6.7% 6.3% Average 68.2% 65.1% D 2.9% 2.8% Higher 11.8% 10.9% E 1.2% 1.4% Watch list 4.0% 5.8% Distressed 0.2% 0.9%

Refer to note 29.1 - Financial risk management - credit risk for a detailed explanation of the risk rating process for both portfolios.



8 Loans to Members (continued) Collateral There are documented policies and procedures in place for the valuation of financial and non-financial collateral. The fair valuation of non-financial collateral is performed if there has been a significant change in the terms and conditions of the loan and/or the loan is considered impaired. For impaired loans, an assessment of the collateral is taken into consideration when estimating the net realizable amount of the loans. The amount and type of collateral and other credit enhancements required depend on the Credit Union’s assessment of counterparty credit quality and repayment capacity. Non-financial collateral is used in connection with both Commercial and Retail loan exposure. The Credit Union standards for collateral valuation, frequency of recalculation of the collateral requirement, documentation, registration and perfection procedures and monitoring are in effect. Non-financial collateral taken by the Credit Union includes vehicles, residential real estate, real estate under development, commercial real estate and business assets, such as accounts receivable, inventory and fixed assets. The main types of financial collateral taken by the Credit Union include cash and negotiable securities issued by governments and investment grade issuers, and assignment of life insurance. Guarantees are also taken to reduce credit exposure risk.

2014 2013

Fair value of collateral held on assets either past due >30 days or impaired 142,732 126,642

9 Derivative financial instruments

The tables below provide a summary of the Credit Union’s derivative portfolio and the notional value of the financial assets or financial liabilities to which the derivatives relate.

Maturities of derivatives (notional amount) Fair value

Within 1 year 1 to 5 years Total

Derivative instrument

assets


liabilities Year ended December 31, 2014 Foreign exchange derivatives: Forward contracts 1,200 - 1,200 40 74 Equity index-linked options: Purchased equity options 81,393 112,108 193,501 17,952 - Interest rate swaps: Designated cash flow hedges - 600,000 600,000 - 5,458 Bond forward contracts: Designated cash flow hedges 200,000 - 200,000 24 308

Total derivative contracts as at December 31, 2014

282,593

712,108

994,701

18,016

5,840



9 Derivative financial instruments (continued)

Maturities of derivatives (notional amount) Fair value

Within 1 year 1 to 5 years Total


assets


liabilities Year ended December 31, 2013 Foreign exchange derivatives: Forward contracts 6,033 - 6,033 293 282 Equity index-linked options: Purchased equity options 62,688 157,290 219,978 23,258 - Interest rate swaps: Designated cash flow hedges - 100,000 100,000 433 - Total derivative contracts as at December 31, 2013 68,721 257,290 326,011 23,984 282

The notional amounts are used as the basis for determining payments under the contracts and are not actually exchanged between the Credit Union and its counterparties. They do not represent credit or market risk exposure.

The Credit Union has credit risk, which arises from the possibility that its counterparty to a derivative contract could default on their obligation to the Credit Union. However, credit risk associated with derivative contracts is normally a small fraction of the notional principal amount of the contract. Derivative contracts expose the Credit Union to credit loss where there is a favourable change in market rates from the Credit Union’s perspective and the counterparty fails to perform. The Credit Union only enters into derivative contracts with a counterparty that the Credit Union has determined to be creditworthy. Foreign exchange forward contracts As part of its ongoing program for managing foreign currency exposure, the Credit Union enters into foreign exchange forward contracts to purchase U.S. dollars. These agreements function as an economic hedge against the Credit Union’s net U.S. dollar denominated liability position. The fair value of these contracts as at December 31, 2014 was $(34) (2013 - $11). Of this net balance, $40 (2013 - $293) is included in derivative instrument assets and $74 (2013 - $282) is included in derivative instrument liabilities. Gains/losses on foreign exchange forward contracts are included in non-interest income (see note 24). Equity index-linked deposits The Credit Union has $199,127 (2013 - $221,597) of equity index-linked term deposit products outstanding to its Members. These term deposits have maturities of up to seven years and pay interest to the depositors, at the end of the term, based on the performance of various market indices. The Credit Union has purchased equity index-linked options agreements with various counterparties to offset the exposure to the indices associated with these products. The Credit Union pays a fixed amount based on the notional amount at the inception of the equity index-linked option contract. At the end of the term the Credit Union receives from the counterparties payments equal to the amount that will be paid to the depositors based on the performance of the respective indices.

The purpose of the options agreements is to provide an economic hedge against market fluctuations. These options agreements have fair values that vary based on changes in equity indices. The fair value of these options agreements amounted to $17,952 as at December 31, 2014 (2013 - $23,258). The fair value of the embedded written option in the equity index-linked term deposit products amounted to $(17,665) as at December 31, 2014 (2013 - $22,880) and is included as part of Members’ deposits (see note 17). Although hedge accounting is not applied, these agreements continue to be effective as economic hedges. Gains/losses from interest rate derivative financial instruments are included in profit or loss as part of interest expense on term deposits (see note 23).

Interest rate swaps As part of its interest rate risk management process, the Credit Union utilizes interest rate contracts in the form of interest rate swaps, floors and caps, to maintain its interest rate exposure within the preset limits defined within the Board of Directors’ (the “Board”) approved policy. Designated cash flow hedges are interest rate swap agreements which qualify as hedging relationships for accounting purposes under IAS 39, Financial Instruments: Recognition and Measurement. All other interest rate swaps agreements are classified as economic hedges. The Credit Union has designated certain hedging relationships involving interest rate swaps that convert variable rate deposits to fixed rate deposits as cash flow hedges.



9 Derivative financial instruments (continued) Interest rate swap agreements are valued by netting the discounted variable and fixed cash flows. Variable cash flows are calculated using implied interest rates as determined by current Canadian Dealer Offered Rate (“CDOR”) and swap interest rates, and term relationships. Fixed cash flows are calculated based on the rates stated in the agreements. These notional cash flows are discounted using the relevant points on the zero interest curve as derived from the month-end CDOR and swap rates. As at December 31, 2014, the fixed interest rates on the Credit Union’s interest rate swaps is between 1.8% and 2.1% (2013 – 2.0%). During the year, $16 (2013 - $114) of losses due to hedge ineffectiveness arose and was recorded in profit or loss within net interest income. Fair value of the interest rate swaps involved in these hedges at the end of the year was $(5,458) (2013 – $433). The amount of other comprehensive income that is expected to be reclassified to profit or loss over the next 60 months is $(5,329) (2013 – $547). Bond forward contracts As part of its interest rate risk management process, the Credit Union utilizes bond forwards to maintain its interest rate exposure on forecasted debt issuances associated with securitization activity. These hedging relationships are designated as cash flow hedges. Realized gains (losses) on these derivatives are deferred and amortized in accordance with the effective interest rate method along with the debt originated. Fair values of the bond forwards involved in these hedges that were unrealized at the end of the year were $(284) (2013 – nil). The amount of other comprehensive gain that is expected to be reclassified to profit or loss over the next 66 months is $(27) (2013 – $70). During the year, $38 (2013 - $(1)) of losses due to hedge ineffectiveness arose and was recorded in profit or loss within net interest income.

10 Investments available for sale

2014 2013

Central 1 Class A shares 33,297 30,502

Central 1 Class E shares 21,083 21,083

Other shares 177 177

Total investments available for sale 54,557 51,762

Shares in Central 1 As a condition of maintaining membership in Central 1, the Credit Union is required to maintain an investment in shares of Central 1, as determined by the Central 1 Board of Directors. They may be surrendered upon withdrawal from membership for proceeds equal to the paid-in value, to be received in accordance with a Central 1 by-law providing for the redemption of its share capital. Central 1 Class A shares are carried at fair value. These shares are subject to annual rebalancing and the redemption value is equal to par value. In this circumstance, fair value is considered to be equivalent to par value or redemption value.

Central 1 Class E shares are carried at cost. This class of shares is not subject to annual rebalancing and the redemption value is not equal to par value. There is no active market for these shares, as they are issued only by virtue of membership in Central 1, and the fair value cannot be reliably measured. Other shares The Credit Union holds an insignificant number of shares in other cooperative entities. The carrying value of these shares is considered to be a reasonable approximation of fair value. The Credit Union has no intention at present to dispose of these shares.



11 Investment in associates

The Credit Union has an investment in CUCO Cooperative Association (“CUCO Co-op”), which is owned collectively by Ontario credit unions and is located in Toronto, ON. CUCO Co-op has a year end of December 31. CUCO Co-op was formed in 2011, through the restructuring of Credit Union Central of Ontario and ABCP (2008) Limited Partnership (the “LP”). The assets of CUCO Co-op consist primarily of third party asset-backed commercial paper (“ABCP”) investments and cash resources. As of December 31, 2014, the Credit Union owned 22% (2013 – 22%) of the voting shares of CUCO Co-op, maintaining the largest individual shareholding and held one of five positions on the Board. As such, the Credit Union maintains significant influence over the activities of CUCO Co-op. The activities of CUCO Co-op are not considered strategic to the Credit Union. As the market for certain of the investments remains relatively illiquid, valuations for some components of the ABCP were provided by an independent valuation firm engaged by CUCO Co-op, who employed the use of valuation models. The balance of the portfolio has been valued based on market bid prices. Due to the judgment used in the determination of the various assumptions, the fair market value determined will not necessarily be comparable among financial institutions. The calculation of the estimated fair market value is based on market conditions as at year end and may not be reflective of future fair market values.

The Credit Union accounts for its investment in CUCO Co-op using the equity method. The change in the investment balance during the year is as follows:

2014 2013

Balance, beginning of year 19,208 24,952

Share of comprehensive income 1,001 3,143

Distributions received (8,061) (8,887)

Balance, December 31 12,148 19,208

The aggregate amounts relating to CUCO Co-op are as follows:

2014 2013

Cash and cash equivalents 334 2,213

Investment securities 54,888 85,086

Other assets 8 2

Total assets 55,230 87,301

Accounts payable 77 91

Total liabilities 77 91

Net assets 55,153 87,210

Share of net assets 12,148 19,208

2014 2013

Interest income 643 1,058

Other revenue 4,257 13,662

Expenses (356) (449)

Comprehensive income of the associate 4,544 14,271

Share of comprehensive income 1,001 3,143



11 Investment in associates (continued)

Transactions with CUCO Co-op during the period comprised of distributions of $8,061 (2013 - $8,887) representing a return of the capital of CUCO Co-op. This has been recorded as a reduction of the investment balance. The Credit Union has not incurred any contingent liabilities or other commitments relating to its investment in the partnership.

12 Investment in joint venture

The Credit Union participates in Seventy-Five Corporate Park Drive Limited (joint venture), an incorporated real estate joint venture located in St. Catharines, ON, with a fiscal year end of October 31. The October 31 year end was established under a previous ownership structure and was carried over to the new entity when Meridian made its investment and the joint venture was created. The Credit Union’s ownership percentage is 50%. The investment is structured as a separate legal entity and provides the Credit Union and the other party to the arrangement with the rights to the net assets of the limited company under the arrangement. The entity is not restricted from renting to third parties. The activities of the joint venture are not considered strategic to the Credit Union. The investment meets the requirements for being classified as a joint venture and is accounted for using the equity method as of December 31.

The change in the investment balance during the year is as follows:

2014 2013

Balance, beginning of year 1,849 1,785

Share of comprehensive income 271 314

Distributions received (300) (250)


The aggregate amounts relating to the joint venture are as follows:

2014 2013

Cash and cash equivalents 409 265

Other current assets 297 294

Non-current assets 3,125 3,255

Total assets 3,831 3,814

Current liabilities 167 83

Non-current liabilities 24 33

Total liabilities 191 116

Net assets 3,640 3,698

Share of net assets 1,820 1,849

2014 2013

Revenue 1,515 1,657

Expenses excluding depreciation and amortization (697) (747)

Depreciation and amortization (174) (152)

Net earnings before income taxes 644 758

Income tax expense (103) (131)

Comprehensive income 541 627

Share of comprehensive income 271 314



12 Investment in joint venture (continued)

Transactions during the year with the joint venture are comprised of rent, common area maintenance, property taxes and utilities paid to the joint venture in the amount of $1,411 (2013 - $1,402). The Credit Union has an operating lease with the joint venture for its offices at Seventy-Five Corporate Park Drive in St. Catharines, ON that expires in 2015. Future minimum lease payments are as follows:

2014 2013

Within 1 year 742 885

1 to 4 years - 664

Total 742 1,549

The Credit Union has not incurred any contingent liabilities or other commitments relating to its investment in the joint venture.

13 Intangible assets

Core deposit intangible

assets Software Other Total


As at January 1, 2014, net carrying value 5,912 3,320 562 9,794

Additions, separately acquired - 1,261 1 1,262

Amortization (1,835) (1,347) (358) (3,540)

As at December 31, 2014, net carrying value 4,077 3,234 205 7,516

As at December 31, 2014

Cost 14,163 11,926 451 26,540

Accumulated amortization (10,086) (8,692) (246) (19,024)

Net carrying value 4,077 3,234 205 7,516

Core deposit intangible

assets Software Other Total


As at January 1, 2013, net carrying value 8,044 2,226 615 10,885

Additions, separately acquired - 2,062 238 2,300

Amortization (2,132) (968) (291) (3,391)

As at December 31, 2013, net carrying value 5,912 3,320 562 9,794


Cost 16,601 10,665 3,305 30,571

Accumulated amortization (10,689) (7,345) (2,743) (20,777)

Net carrying value 5,912 3,320 562 9,794



14 Property, plant and equipment

Land

Building and

improvements

Furniture and

office

equipment

Computer

hardware and

software

Leasehold

improvements Total


As at January 1, 2014, net carrying value 2,733 8,605 4,391 4,823 5,953 26,505

Additions - 1,215 2,650 1,590 2,883 8,338

Disposals - (5) - - - (5)

Depreciation - (1,015) (1,351) (2,244) (1,361) (5,971)

As at December 31, 2014, net carrying value 2,733 8,800 5,690 4,169 7,475 28,867


Cost 2,733 21,051 21,369 34,068 22,432 101,653

Accumulated depreciation - (12,251) (15,679) (29,899) (14,957) (72,786)

Net carrying value 2,733 8,800 5,690 4,169 7,475 28,867

Land

Building and

improvements

Furniture and

office

equipment

Computer

hardware and

software

Leasehold

improvements Total


As at January 1, 2013, net carrying value 2,733 8,793 3,476 5,649 5,031 25,682

Additions - 754 2,087 1,496 2,060 6,397

Depreciation - (942) (1,172) (2,322) (1,138) (5,574)

As at December 31, 2013, net carrying value 2,733 8,605 4,391 4,823 5,953 26,505


Cost 2,733 19,846 18,718 32,478 19,580 93,355

Accumulated depreciation - (11,241) (14,327) (27,655) (13,627) (66,850)

Net carrying value 2,733 8,605 4,391 4,823 5,953 26,505

The Credit Union leases equipment under non-cancellable finance lease agreements. The lease terms are between five and ten years. Computer hardware includes the following amounts where the Credit Union is a lessee under a finance lease:

2014 2013

Cost - capitalized finance lease 2,624 2,624

Accumulated depreciation (1,741) (1,442)

Net carrying value 883 1,182



15 Deferred income taxes

2014 2013

Deferred income tax assets

Deferred tax assets to be recovered after more than 12 months 23,215 21,659

Deferred tax assets to be recovered within 12 months 4,151 4,081

Total deferred income tax assets 27,366 25,740

Deferred income tax liabilities

Deferred tax liabilities to be paid after more than 12 months 1,176 1,563 Deferred tax liabilities to be paid within 12 months

1,679 2,092

Total deferred income tax liabilities 2,855 3,655

Net deferred income tax assets 24,511 22,085

The movement in the deferred income tax account is as follows: Recognized in

January 1

2014 Profit or loss OCI (*) December 31

2014 Non-capital losses available for carry-forward 16,534 (487) - 16,047

Allowance for impaired loans 3,133 (304) - 2,829

Employee future benefits 2,704 510 1,044 4,258

Other accrued expenses 333 (54) - 279

Property, plant and equipment 2,682 (60) - 2,622

Fair value adjustments on acquisition (1,524) 532 - (992)

Deferred expenses (1,275) 137 - (1,138)

Financial instruments adjustments (47) 43 - (4)

Mortgage securitization fees (702) (19) - (721)

Cash flow hedges (107) - 1,062 955

Other 354 22 - 376

Total 22,085 320 2,106 24,511

(*) Other comprehensive income

Recognized in

January 1

2013 Profit or loss OCI (*) December 31

2013 Non-capital losses available for carry-forward 10,095 6,439 - 16,534

Allowance for impaired loans 2,587 546 - 3,133

Employee future benefits 3,259 (555) - 2,704

Other accrued expenses 334 (1) - 333

Property, plant and equipment 3,876 (1,194) - 2,682

Fair value adjustments on acquisition (1,779) 255 - (1,524)

Deferred expenses (1,106) (169) - (1,275)

Financial instruments adjustments (44) (3) - (47)

Mortgage securitization fees (577) (125) - (702)

Cash flow hedges - - (107) (107)

Other 258 96 - 354

Total 16,903 5,289 (107) 22,085

(*) Other comprehensive income



16 Other assets

2014 2013

Deferred securitization fees 3,862 3,886

Prepaid assets 2,918 2,465

Other 2,582 1,896

Total other assets 9,362 8,247

Current 5,415 3,787 Non-current 3,947 4,460

17 Members’ deposits

2014 2013

Demand deposits 3,076,939 2,632,992

Term deposits 2,969,525 2,939,466

Registered plans 1,920,142 1,835,021

Total Members’ deposits 7,966,606 7,407,479

Current 2,990,614 4,294,139

Non-current 4,975,992 3,113,340

Term deposits include equity index-linked deposits as described in note 9.

18 Borrowings

2014 2013

Central 1 overdraft 21,080 -

Finance lease liabilities 1,477 1,812

Total borrowings 22,557 1,812

Current 21,490 335

Non-current 1,067 1,477

Central 1 borrowings

The Credit Union has established credit and contingency loan facilities at Central 1. Credit facilities from which the Credit Union has the capacity to borrow amount to $253,900 (2013 – $272,900) of which the balance outstanding was $21,080 as at December 31, 2014 (2013 – nil). Ancillary contingent credit facilities have been established in the amount of $174,000 (2013 - $155,000). Assets have been pledged as security for $427,900 (2013 - $427,900) in authorized credit facilities at Central 1 by an assignment of book debts and a general security agreement subject to adjustment for mortgage collateral pledged against bank borrowings as noted below. Bank borrowings The Credit Union has an overdraft line totaling $240 (2013 - $240) with Caisse Centrale Desjardins (“CCD”). As at December 31, 2014, the overdraft line had a balance of nil (2013 - nil). The Credit Union has a settlement risk line totaling $15,000 (2013 - $15,000) with the Bank of Montreal. As at December 31, 2014, the settlement line had a balance of nil (2013 - nil). The Credit Union has a $300,000 (2013 - $300,000) credit facility with the Canadian Imperial Bank of Commerce (“CIBC”). As at December 31, 2014, the CIBC credit facility had a nil balance (2013 - nil). The credit facility is secured by eligible mortgages insured through either CMHC or Genworth.



18 Borrowings (continued) Finance lease liabilities

2014 2013

Gross finance lease liabilities - minimum lease payments Within 1 year 574 692 679

1 to 5 years 2,369 1,383 2,071

Over 5 years 12 - 4

2,955 2,075 2,754

Future finance charges on finance lease liabilities (598) (942)

Present value of finance lease liabilities 1,477 1,812

The present value of minimum lease payments is as follows: Within 1 year 410 335

1 to 5 years 1,067 1,473

Over 5 years - 4

Present value of finance lease liabilities 1,477 1,812

19 Payables and other liabilities

2014 2013

Accounts payable and accrued liabilities 8,158 28,109 Deferred income 682 463 682 Cheques and other items in transit 9,848 9,723

Total payables and other liabilities 18,469 38,514

Current 39,018 16,809 36,345

Non-current 3,088 1,660 2,169 20 Mortgage securitization liabilities

2014 2013

Mortgage securitization liabilities 1,317,883 1,114,852

Current 220,637 44,604 Non-current 1,097,246 1,070,248

As part of its program of liquidity, capital and interest rate risk management, the Credit Union enters into arrangements to fund growth by entering into mortgage securitization arrangements. These arrangements allow the Credit Union to transfer fully insured residential mortgages to unrelated third parties, generally through the transfer of these assets to multi-seller conduits which issue securities to investors. These transactions are derecognized from the consolidated balance sheet when the transaction meets the derecognition criteria described in note 3.3. In instances where the Credit Union’s mortgage securitizations do not result in a transfer of contractual cash flows of the mortgages or an assumption of an obligation to pay the cash flows of the mortgages to a transferee, the Credit Union has not derecognized the transferred asset and has instead recorded a secured borrowing with respect to any consideration received. During the year, the Credit Union had outstanding mortgage securitization liabilities pertaining to the use of two securitization vehicles to access liquidity:



20 Mortgage securitization liabilities (continued) Under the first securitization vehicle, which was last accessed in 2009 and is closed to further sales, the Credit Union periodically sold residential insured mortgage loan receivables to Central 1 who in turn packaged these mortgages into National Housing Act mortgage backed securities (“MBS”). The MBS were then sold by Central 1 to a government-sponsored special purpose entity, the Canada Housing Trust (“CHT”), through the CMB Program. As of December 31, 2014 the outstanding balance of mortgage securitization liabilities pertaining to this program is nil (2013 - $35,801). Under the second securitization vehicle, which was first used in 2010, the Credit Union packages insured mortgage loan receivables into MBS and in turn sells the MBS to CHT directly through the CMB Program. CHT is financed through the issuance of government-guaranteed mortgage bonds, which are sold to third party investors. Proceeds of the issuances are used by CHT to purchase the government-guaranteed MBS from approved Issuers. Under the terms of the CMB Program, Central 1, on behalf of the Credit Union, acts as counterparty to interest rate swap agreements under which Central 1 pays CHT the interest due to investors on the government-guaranteed mortgage bonds and receives the interest on the MBS sold to CHT. The terms of the interest rate swap agreements are mirrored back exactly between Central 1 and the Credit Union, resulting in the Credit Union ultimately paying CHT the interest due to investors on the government-guaranteed mortgage bonds and receiving the interest on the MBS sold to CHT. Accordingly, because they prevent derecognition of the securitized assets, these interest rate swap agreements are not recognized. As all mortgages securitized by the Credit Union are required to be fully insured prior to sale, they pose minimal to no credit risk to the Credit Union immediately before or any time after the securitization transaction. As the Credit Union remains exposed to interest rate risk, timely payment and prepayment risks associated with the underlying assets, the assets, liabilities, revenues and expenses have not been derecognized and the transactions are accounted for as secured financing transactions in the Credit Union’s consolidated balance sheet and consolidated statement of comprehensive income. In addition to securitizing mortgages for liquidity purposes as described above, the Credit Union also packages residential insured mortgage loan receivables into MBS and in turn utilizes them to meet the reinvestment needs of the CMB Program. As principal is received on mortgages securitized into the CMB Program through the second securitization vehicle, it is required to be reinvested in accordance with CMB guidelines. These MBS are transferred to CHT as required to meet these reinvestment requirements.

Costs incurred in the establishment of a securitization issue are amortized over the life of the issue as part of mortgage securitization cost of funds included within interest expense – other. Meridian purchases interests in MBS and interest bearing investments purchased from third parties as part of its reinvestment strategy. The MBS are issued by CMHC-sponsored securitization trusts and are collateralized by the assets owned by them. As at December 31, 2014, the carrying value of the purchased MBS (excluding accrued interest) included in Investments – other loans and receivables in the consolidated balance sheet is $199,232 (2013 - $111,088), of which $177,643 (2013 - $90,485) has been designated for reinvestment purposes. The Credit Union is exposed to interest rate risk, as the return on reinvested assets must be sufficient to cover the prepayment exposure. Due to the nature of the underlying risks, Meridian’s total exposure cannot be reasonably determined. Active management of the securitization program and the reinvestment portfolio helps to minimize exposure and ensure that sufficient assets are maintained to meet reinvestment requirements.



20 Mortgage securitization liabilities (continued) The following summarizes the carrying and fair values of assets of the Credit Union that have been securitized and sold by the Credit Union to third parties as well as the carrying and fair values of the corresponding mortgage securitization liabilities:

2014 2013

Carrying

value Fair

value Carrying

value Fair

value

Securitized mortgages sold via CMB Program (included in loans to Members) 1,119,342 1,118,245 1,002,017 999,796

Securitized mortgages sold as NHA MBS (included in loans to Members) - - 7,835 7,906

Purchased MBS held in trust per CMB reinvestment guidelines (included in investments - other loans and receivables) 177,643 179,613 90,485 92,389

Principal receipts to be reinvested in the following month (included in cash and cash equivalents) 20,350 20,350 14,288 14,288

Total designated assets 1,317,335 1,318,208 1,114,625 1,114,379

Mortgage securitization liabilities (1,317,883) (1,337,785) (1,114,852) (1,116,695)

Net amount (548) (19,577) (227) (2,316)

21 Pension and other employee obligations

2014 2013

Short-term employee benefits payable 20,187 15,114

Retirement benefit obligations 20,091 14,325

Total pension and other employee obligations 40,278 29,439

The Credit Union provides a number of pension and other retirement benefits to its current and retired employees. These plans include the following: Contributory Defined Benefit Pension Plans The Credit Union has two contributory defined benefit pension plans. The first defined benefit plan (“DB1”) provides retirement income and related benefits for eligible employees based on length of credited service and final average earnings. This plan was closed to new members effective January 1, 2005 and the service and final average earnings were frozen effective December 31, 2014. Members of this plan will become members of the Credit Union’s defined contribution pension plan starting January 1, 2015. The most recent valuation of the DB1 Plan for funding purposes was as of June 30, 2013. The next actuarial valuation is expected to be completed as of June 30, 2016. The Credit Union is responsible for contributing to the DB1 pension fund such amounts as are required in accordance with, and within the time limits specified in, applicable pension laws. Effective January 1, 2015, members of the DB1 Plan are neither required nor permitted to contribute to the plan. The DB1 pension fund is held in trust by CIBC Mellon. The second defined benefit plan (“DB2”) provides retirement income and related benefits for eligible employees based on length of credited service and final average earnings. This plan was closed to new members effective June 1, 2011 and the service and final average earnings were frozen effective December 31, 2012. Members of this plan became members of the Credit Union’s defined contribution pension plan starting January 1, 2013. The most recent valuation of the DB2 Plan for funding purposes was as at December 31, 2013. The next valuation is expected to be completed as at December 31, 2016. The Credit Union is responsible for contributing to the DB2 pension fund such amounts as are required in accordance with, and within the time limits specified in, applicable pension laws. Effective January 1, 2013, members of the DB1 Plan are neither required nor permitted to contribute to the plan. The DB2 pension fund is held in trust by Desjardins Financial Security.



21 Pension and other employee obligations (continued) Both of the defined benefit pension plans are operated under Ontario’s Pension Benefits Act. The Pension Benefits Act is administered by the Superintendent of Financial Services appointed by the Financial Services Commission of Ontario (“FSCO”). Plan valuations must be filed with both the FSCO and with the Canada Revenue Agency. The Pension Benefits Act prescribes the minimum contributions that the Credit Union must make to the plan. The Income Tax Act (Canada) places a maximum limit on the amount of employer contributions. Responsibility for governance of the plans, including investment decisions and contribution schedules lies with the Credit Union. Non-contributory Supplemental Executive Retirement Plan This plan is a defined benefit pension plan which provides designated employees benefits in excess of the benefits payable to such employees under the DB1 Plan, under which benefits are restricted by the maximum permitted under the Income Tax Act (Canada). The benefits payable under the Supplemental Plan are based on the benefit formula under the DB1 Plan. The Credit Union has established a trust fund, pursuant to a trust agreement between the Credit Union and the trustee, for the purpose of providing security for the benefits accrued under the Supplemental Plan. A member of this plan will neither be required nor permitted to make any contribution to this plan. Defined Contribution Pension Plan and Group Registered Retirement Savings Plan (“RRSP”) An employee who becomes a member of the Defined Contribution (“DC”) Plan and who accrues benefits under the DC provisions is not required or permitted to make contributions to the Plan but is required, on fulfilling certain eligibility requirements, to make contributions to a group RRSP. The Credit Union will contribute each plan year a portion thereof, in respect of a member who is accruing continuous service in Canada, a percentage of the member’s earnings based on the member’s completed years of continuous service. Post-Employment Medical Benefit Plans The Credit Union also provides certain health and dental care benefits for eligible retired employees of the DB1 Plan. For financial reporting purposes, the Credit Union measures the benefit obligations and pension plan assets as at December 31 each year. Components of the net benefit plan expense are as follows: (a) Service cost is the increase in the present value of the accrued benefit obligation resulting from employee service in the

current period or prior periods and from any gain or loss on settlement. (b) Net interest cost is the change in the net defined benefit liability or asset that arises from the passage of time. (c) Remeasurements of the net defined benefit liability include actuarial gains and losses arising from experience

adjustments and changes in actuarial assumptions, the return on plan assets excluding amounts included in net interest and changes in the effect of any asset ceilings.

2014 2013

Consolidated balance sheet obligations for:

Pension benefit plans 12,751 7,915

Post-employment medical benefits 7,340 6,410

20,091 14,325

Consolidated statement of comprehensive income charge (recovery) to salaries and employee benefits for:

Pension benefit plans 4,689 (1,458)

Post-employment medical benefits 626 598

5,315 (860)

Consolidated re-measurement loss (gain) included in other comprehensive income for:

Pension benefit plans 5,573 407

Post-employment medical benefits 533 (407)

6,106 -



21 Pension and other employee obligations (continued)

2014 2013

The amounts recognized in the consolidated balance sheet are determined as follows:

Present value of funded obligations

53,582 44,995 Fair value of plan assets

(41,646) (37,833)

Funded plans’ deficit 11,936 7,162 Present value of unfunded obligations

8,155 7,163

Liability recognized in the consolidated balance sheet 20,091 14,325

Defined benefit pensions Post-employment medical benefits

2014 2013 2014 2013

The movement in the present value of the defined benefit obligation over the year is as follows:

Defined benefit obligation, January 1 45,759 49,790 6,410 6,418

Current service cost 942 (4,931) 330 345

Interest cost 2,155 1,921 296 252

Charge to salaries and employee benefits 3,097 (3,010) 626 597

Remeasurements: Actuarial losses from changes in demographic assumptions 241 11,273 1,817 245

Actuarial losses (gains) from changes in financial assumptions 7,750 (9,404) (1,284) (652)

Experience losses 386 747 - -

Charge to other comprehensive income 8,377 2,616 533 (407)

Employee contributions 226 268 - -

Benefits paid (3,062) (3,905) (229) (198)

Defined benefit obligation, December 31 54,397 45,759 7,340 6,410

The movement in the fair value of plan assets for the year is as follows:

Fair value of plan assets, January 1 37,844 35,820 - -

Interest income 1,644 1,194 - -

Decrease to salaries and employee benefits 1,644 1,194 - -

Remeasurements: Return on plan assets, excluding amounts included in interest income 2,804 2,626 - - Decrease to other comprehensive income 2,804 2,626 - -

Employer contributions 2,190 1,841 229 198

Employee contributions 226 268 - -

Benefits paid (3,062) (3,905) (229) (198)

Fair value of plan assets, December 31 41,646 37,844 - -

Net defined benefit liability 12,751 7,915 7,340 6,410




Total pension benefits Post-employment medical benefits

2014 2013 2014 2013

The amounts recognized in the consolidated statement of comprehensive income charged to salaries and employee benefits are as follows:

Defined benefit pension expense (recovery) 1,453 (4,444) - -

Defined contribution pension expense 3,236 2,986 - -

Post-employment medical expense - - 626 598

Net benefit plan expense (recovery) 4,689 (1,458) 626 598

Actuarial assumptions: Total pension benefits Post-employment medical benefits

2014 2013 2014 2013

The principal actuarial assumptions used were as follows:

Discount rate 4.00% 4.90% 4.00% 4.70%

Rate of compensation increase 3.50% 3.50% - -

Pension growth rate 2.00% 2.00% - -

Long-term increase in health care costs - - 5.80% 6.10%

Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience in Canada. These assumptions translate into an average life expectancy in years for a pensioner retiring at age 65 as follows:

2014 2013

Retiring at the end of the reporting period:

Male 86.5 87.5

Female 89.0 89.5

Retiring 20 years after the end of the reporting period:

Male 87.6 88.4

Female 90.0 90.2

The weighted average duration of the defined benefit obligation as at December 31, 2014 is 14.2 years (2013 - 13.7 years). The following shows the expected maturity analysis of undiscounted defined benefit pension and post-employment medical benefits:

At December 31, 2014

Within 1 year

1 to 5 years

Over 5 years Total

Defined benefit pensions 2,361 9,993 90,095 102,449

Post-employment medical benefits 279 1,433 18,542 20,254

Total 2,640 11,426 108,637 122,703




At December 31, 2013

Within 1 year

1 to 5 years

Over 5 years Total

Defined benefit pensions 2,251 9,174 95,816 107,241

Post-employment medical benefits 229 1,236 18,630 20,095

Total 2,480 10,410 114,446 127,336

Benefit plan assets The defined benefit pension plans’ policies are to invest in a diversified portfolio of investments to minimize concentration of credit risk. The plan assets are primarily composed of equity and fixed income investments. The allocation of the plan assets by investment category is as follows:

2014 % 2013 %

Equity investments 19,690 47% 19,136 51% Fixed income investments 21,956 53% 18,697 49% Total 41,646 100% 37,833 100%

All of the benefit plan assets have a quoted market price in an active market. The investments of the defined benefit pension plans are managed within an asset-liability matching (“ALM”) framework that has been developed taking into account obligations under the pension plans. The Credit Union has not changed the processes used to manage its risks from the previous period. The Credit Union uses dynamic de-risking for DB1, whereby the allocation to equity investments is gradually decreased and allocation to fixed income investments is gradually increased when the plan reaches pre-defined trigger points. Derivative financial instruments are permitted for liability hedging purposes. Investments are well diversified, such that the failure of any single investment within an investment fund would not have a material impact on the overall level of assets. The current target asset mix for the DB1 Plan is 44% in equities and 56% in fixed income investments. The target asset mix at the end of the de-risking glidepath is 20% equities and 80% fixed income. The current target asset mix for DB2 Plan is 50% in equities and 50% in fixed income investments.

Contributions for the upcoming fiscal year are anticipated to be approximately $1,024 (2013 - $2,519) for defined benefit pension plans, $3,785 (2013 - $3,425) for defined contribution plans and $279 (2013 - $229) for other employee benefit plans.



21 Pension and other employee obligations (continued) Sensitivity analysis The following table outlines the key weighted-average economic assumptions used in measuring the accrued benefit obligation:

Accrued benefit obligation

Defined benefit pensions Post-employment medical benefits

2014 2013 2014 2013

Discount rate

Impact of: 1% increase (7,198) (7,702) (924) (815) 1% decrease 8,418 8,916 1,160 1,023 Rate of compensation increase

Impact of: 1% increase N/A 209 N/A N/A N/A 1% decrease N/A (209) N/A N/A N/A Pension growth rate

Impact of: 1% increase 5,600 6,332 N/A N/A N/A 1% decrease (5,691) (6,260) N/A N/A N/A

Life expectancy

Impact of: 1 year increase 1,044 787 330 289 1 year decrease (1,051) (797) (344) (302) Assumed overall health care cost trend rate

Impact of: 1% increase N/A N/A N/A 1,043 1,041 1% decrease N/A N/A N/A (858) (849)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the pension liability recognized within the consolidated balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period. In 2014 the sensitivity of the defined benefit obligation to a 1% increase or decrease in the rate of compensation is not significant as Members in neither of the contributory defined benefit plans accrue service after December 31, 2014. Risks: Through its defined benefit pension plans and post-employment medical plans, the Credit Union is exposed to a number of risks, the most significant of which are detailed below: a) Equity Risk

The plans hold a significant proportion of equity investments, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the plans mature and their funded status improves, the Credit Union intends to reduce the level of investment risk by investing more in assets that better match the liabilities. However the Credit Union believes that due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the long term strategy to manage the plans efficiently.

b) Changes in bond yields

The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ fixed income investments.




c) Inflation risk The majority of the plans’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities. Caps on the level of inflationary increases are in place to protect the plan against extreme inflation. A portion of the plans’ assets are invested in real return bonds, which are expected to provide some protection against changes in inflation. However, a significant portion of the plans’ assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit.

d) Life expectancy The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities.

22 Share capital

Par value per share 2014 2013

Membership shares classified as liabilities Membership shares 5 6,528 6,452

As at December 31 6,528 6,452

Members’ capital accounts “50th Anniversary” Class A shares 1 61,785 59,207 Series 96 Class A shares 1 42,949 41,237 Series 98 Class A shares 1

3,656 3,496 Series 01 Class A shares 1 55,873 53,706 Series 09 Class A shares 1 72,582 69,238

As at December 31 236,845 226,884

(number of shares)

“50th Anniversary”

Class A shares

Series 96 Class A shares




Membership shares

Issued as at January 1, 2013 56,738,311 39,598,694 3,343,506 51,643,662 66,340,366 1,279,176

Shares issued to (redeemed by) new Members - - - - - 11,160

Shares issued as dividends 2,468,164 1,638,507 152,796 2,062,030 3,114,369 -

Issued as at December 31, 2013 59,206,475 41,237,201 3,496,302 53,705,692 69,454,735 1,290,336

Shares issued to (redeemed by) new Members

- - - - - 15,276

Shares issued as dividends 2,578,611 1,711,583 159,224 2,167,065 3,344,405 -

Issued as at December 31, 2014 61,785,086 42,948,784 3,655,526 55,872,757 72,799,140 1,305,612

(a) Authorized share capital The authorized share capital of the Credit Union consists of the following: (i) an unlimited number of Class A special shares, issuable in series (“Class A shares”); (ii) an unlimited number of Class B special shares, issuable in series (“Class B shares”); and (iii) an unlimited number of Membership shares. Membership shares rank junior to Class A shares and to Class B shares for priority in the payment of dividends and, in the event of the liquidation, dissolution or winding up of the Credit Union. In addition, Class B shares rank junior to Class A shares. There are no Class B shares outstanding.



22 Share capital (continued) (b) Class A shares “50th Anniversary” Class A shares The “50th Anniversary” Class A shares are non-cumulative, non-voting, non-participating shares with a minimum dividend rate adjusted every five years. The new dividend rate for each five-year period will be set by the Board in its absolute discretion at a rate not less than the chartered bank average five-year GIC rate published by the Bank of Canada Review. The dividend rate for the five-year period beginning on January 1, 2011 was set at 4.75%. The holders of the “50th Anniversary” Class A shares are entitled to receive dividends, if and when declared by the Board, subject to availability of sufficient earnings to meet the regulatory capital requirements of the Act described in note 29.5. Any declaration of dividends for the “50th Anniversary” Class A shares is made by the Board in the fourth quarter of the fiscal year and the dividends, if and when declared, are payable annually on January 1. These shares are redeemable at the sole and absolute discretion of the Credit Union’s Board of Directors. Based on these redemption characteristics, these shares have been recorded within Members’ equity as Members’ capital accounts. Dividends declared on the “50th Anniversary” Class A shares in 2014 for the year ended December 31, 2014 amounted to $2,933 (2013 - $2,810), of which $286 (2013 - $232) will be paid in cash and have been recorded in the current year. The remaining $2,647 (2013 - $2,579) will be paid in the form of newly issued “50th Anniversary” Class A shares and will be recorded in the following fiscal year when the shares are issued. Series 96 Class A shares The series 96 Class A shares are cumulative, non-voting, non-participating shares with a dividend rate adjusted every five years. The new dividend rate for each five-year period will be set by the Board in its absolute discretion at a rate not less than 1% above the chartered bank average five-year GIC rate published by the Bank of Canada Review. The dividend rate for the five-year period beginning September 27, 2011 was set at 4.50%. The holders of series 96 Class A shares are entitled to receive dividends, if and when declared by the Board, subject to availability of sufficient earnings to meet the regulatory capital requirements of the Act described in note 29.5. Any declaration of dividends for the series 96 Class A shares is made by the Board in the third quarter of the fiscal year and the dividends, if and when declared, are payable annually on September 26. These shares are redeemable at the sole and absolute discretion of the Credit Union’s Board of Directors. Based on these redemption characteristics, these shares have been recorded within Members’ equity as Members’ capital accounts. Dividends declared and paid on the series 96 Class A shares in 2014 amounted to $1,856 (2013 - $1,783), of which $145 was paid in cash (2013 - $144) and $1,712 (2013 - $1,639) was paid in the form of newly issued series 96 Class A shares. The full amount of the series 96 dividend was recorded in the current fiscal year. Series 98 Class A shares The series 98 Class A shares are non-cumulative, non-voting, non-participating shares with a minimum dividend rate of the average of the month-end five-year GIC rates for the period, plus 1%. The holders of series 98 Class A shares are entitled to receive dividends, as and when declared by the Board, subject to availability of sufficient earnings to meet the regulatory capital requirements of the Act described in note 29.5. Any declaration of dividends for the Series 98 Class A shares is made by the Board in the fourth quarter of the fiscal year and the dividends, if and when declared, are payable annually on January 1. These shares are redeemable at the sole and absolute discretion of the Credit Union’s Board of Directors. Based on these redemption characteristics, these shares have been recorded within Members’ equity as Members’ capital accounts. Dividends declared on the series 98 Class A shares in 2014 for the year ended December 31, 2014 amounted to $173 (2013 - $166), of which $8 (2013 - $7) will be paid in cash and have been recorded in the current year. The remaining $165 (2013 - $159) will be paid in the form of newly issued series 98 Class A shares and will be recorded in the following fiscal year when the shares are issued.

Series 01 Class A shares The series 01 Class A shares are non-cumulative, non-voting, non-participating shares with a minimum dividend rate adjusted every five years. The new dividend rate for each five-year period will be set by the Board in its absolute discretion at a rate not less than 1% above the chartered bank average five-year GIC rate published by the Bank of Canada Review. The dividend rate for the five-year period beginning on December 12, 2011 was set at 4.50%. The holders of series 01 Class A shares are entitled to receive dividends, as and when declared by the Board, subject to availability of sufficient earnings to meet the regulatory capital requirements of the Act described in note 29.5. Any declaration of dividends for the series 01 Class A shares is made by the Board in the third quarter of the fiscal year and the dividends, if and when declared, are payable annually on December 12. These shares are redeemable at the sole and absolute discretion of the Credit Union’s Board of Directors. Based on these redemption characteristics, these shares have been recorded within Members’ equity as Members’ capital accounts.



22 Share capital (continued) Dividends declared and paid on the series 01 Class A shares in 2014 for the year ended December 12, 2014 amounted to $2,418 (2013 - $2,325), of which $251 was paid in cash (2013 - $263) and $2,167 (2013 - $2,062) was paid in the form of newly issued series 01 Class A shares. The full amount of the series 01 dividend was recorded in the current fiscal year. Series 09 Class A shares The series 09 Class A shares are non-cumulative, non-voting, non-participating shares with a minimum dividend rate adjusted every five years. The new dividend rate for each five-year period will be set by the Board in its absolute discretion at a rate not less than the chartered bank average five-year GIC rate published by the Bank of Canada Review. The dividend rate was set at 5.75% for dividend payments relating to fiscal years on or before December 31, 2014. The holders of series 09 Class A shares are entitled to receive dividends, as and when declared by the Board, subject to availability of sufficient earnings to meet the regulatory capital requirements of the Act described in note 29.5. Any declaration of dividends for the Series 09 Class A shares is made by the Board in the fourth quarter of the fiscal year and the dividends, if and when declared, are payable annually following each fiscal year end and prior to the annual general meeting of Members. These shares are redeemable at the sole and absolute discretion of the Credit Union’s Board of Directors not before the end of the fifth year from the date of issuance. Based on these redemption characteristics, these shares have been recorded within Members’ equity as Members’ capital accounts. Dividends declared on the series 09 Class A shares in 2014 for the year ended December 31, 2014 amounted to $4,184 (2013 - $3,992), of which $637 (2013 - $647) will be paid in cash and have been recorded in the current year. The remaining $3,547 (2013 - $3,345) will be paid in the form of newly issued series 09 Class A shares and will be recorded in the following fiscal year when the shares are issued. (c) Membership shares Par value of one Membership share of the Credit Union is $5. Members under the age of 18 must hold two shares; those 18 and older must hold five shares. There were 266,264 Members at December 31, 2014 (2013 – 263,093). These shares are redeemable at their issue price only when the Member withdraws from Membership in the Credit Union subject to: (i) the Credit Union’s meeting capital adequacy requirements; and (ii) the discretion of the Board, who may require notice. Based on the redemption features of these shares, they have been recorded as Membership shares within the liability portion of the consolidated balance sheet, and have been designated as other liabilities. The residual equity component is nil.

(d) Dividends Dividends recognized as distributions to owners during the year are as follows:

2014 2013

“50th Anniversary” Class A shares 3,097 2,693 Series 96 Class A shares 1,856 1,783 Series 98 Class A shares 174 159 Series 01 Class A shares 2,418 2,325 Series 09 Class A shares 4,629 3,812


Dividends declared during the year that will be paid subsequent to December 31 and which Members have elected to receive by way of newly issued shares of the same series amount to $6,359 (2013 - $6,968). These dividends will be charged to retained earnings in the following year when the shares are issued as follows:



22 Share capital (continued)

2014 2013

“50th Anniversary” Class A shares 2,647

2,810

Series 98 Class A shares 165

166 Series 09 Class A shares 3,547

3,992


No dividends have been declared or paid on Membership shares for the years ended December 31, 2014 or 2013.

23 Net interest income

2014 2013

Interest income Residential mortgages 161,859 148,479 Personal loans 39,924 38,865

1 Commercial loans 123,397 118,416 Interest income - loans to Members

325,180 305,760 Cash and cash equivalents

549 2,431 Investments - other loans and receivables

13,457 13,300 Investments available for sale

1,377 257 Net loss on interest rate derivative instruments

(53) (112)

Total interest income 340,510 321,636

Interest expense Demand deposits 22,620 16,971 Term deposits 66,587 70,646 Registered plans 35,394 35,089 Interest on Members’ deposits 124,601 122,706 Interest on borrowings 2,259 526 Mortgage securitization cost of funds 26,870 22,008

Total interest expense 153,730 145,240

Interest income on institutional loans, agricultural loans, unincorporated association loans and syndicated loans is included within Commercial loans.



24 Non-interest income

2014 2013

Service fees 12,339 11,916

Mutual fund revenue 8,560 6,070

Loan servicing fees 8,680 8,070

Insurance commissions 5,611 4,737

Foreign exchange 3,463 3,831

Interac revenue 2,001 2,244

Other 1,692 1,647

Credit card revenue 1,038 891

Total non-interest income 43,384 39,406

25 Income tax expense

2014 2013

Current income tax expense 6,350 8,080

Deferred income tax recovery (319) (5,289)

Total income tax expense 6,031 2,791

Current income tax expense includes an expense of $99 (2013 – recovery of $199) and deferred income tax expense includes a charge of $10 (2013 – $52) related to adjustments recognized during the current year that relate to prior years’ provisions. Note 15 provides information on the Credit Union’s deferred income tax assets and liabilities, including amounts recognized directly in other comprehensive income. The tax on the Credit Union’s consolidated operating earnings before income taxes differs from the amount that would arise using the Canadian federal and provincial statutorily enacted tax rates as follows:

2014 2013

Tax provision % of Pre-tax

income Tax provision % of Pre-tax

income

Operating earnings for the year, before tax 50,460 n/a 59,416 n/a

Income tax expense at statutory rates 13,372 26.5% 15,746 26.5% Credit union rate reduction

(4,743) -9.4% (6,179) -10.4% Recovery of Ontario corporate minimum tax - - (92) -0.2%

Deductible dividend payments (2,165) -4.3% (1,734) -2.9%

Non-deductible expense 100 0.2% 75 0.1%

Non-taxable income (453) -0.9% (599) -1.0%

Adjustment of prior year provision 109 0.2% (55) -0.1%

Impact of future tax rates (176) -0.3% (4,391) -7.4%

Other items (13) -0.0% 20 0.1%

Income tax expense 6,031 12.0% 2,791 4.7%

Other comprehensive (loss) income for the year, before tax (12,079) n/a 617 n/a

Deferred income tax (recovery) expense, recognized directly in other comprehensive income (2,106) 17.6% 107 17.2%



25 Income tax expense (continued)

The amount of income taxes relating to each component of other comprehensive income can be summarized as follows:

2014

Before income

taxes Income tax

recovery Net of income

taxes Net loss on cash flow hedges (5,982) 1,064 (4,918) Net gain on cash flow hedges transferred to net income 9 (2) 7 Actuarial losses in defined benefit pension plans (6,106) 1,044 (5,062)

Other comprehensive loss (12,079) 2,106 (9,973)

2013

Before income

taxes Income tax

expense Net of income

taxes Net gain on cash flow hedges 650 (112) 538 Net loss on cash flow hedges transferred to net income (33) 5 (28)

Other comprehensive income 617 (107) 510

26 Related party transactions

The Credit Union’s related parties include its subsidiaries, associates and joint venture, key management personnel and their close family members as well as any entities that are controlled, jointly controlled or significantly influenced by them, and the post-employment benefit plans. Unless otherwise noted, transactions with related parties include no special terms and conditions and no guarantees were given to or received from the related parties. Outstanding balances are usually settled in cash.

(a) Subsidiaries 2044230 Ontario Inc. and 2044231 Ontario Inc. are both wholly owned subsidiaries of the Credit Union. The extent of transactions between the Credit Union and the two entities consists of cash deposits held by the Credit Union and the respective interest paid on the accounts.

(b) Associate CUCO Co-op, as referred to in note 11, is a related party of the Credit Union.

(c) Joint venture The joint venture referred to in note 12 is a related party of the Credit Union. (d) Post-employment benefit plans The defined benefit plans referred to in note 21 are related parties of the Credit Union. The assets in the defined benefit plans do not include shares in the Credit Union. The Credit Union’s transactions with the defined benefit plans include contributions paid to the plans, which are disclosed in note 21. The Credit Union has not entered into other transactions with the defined benefit plans, neither has it any outstanding balances at the reporting dates. (e) Key management personnel Key management personnel include all members of the Board, officers of the Credit Union and members of the Executive Leadership Team. Transactions with related parties The compensation paid or payable to key management personnel for director or employee services is shown below:

2014 2013

Salaries, retainers, per diems and other short-term employee benefits 4,415 5,054

Post-employment benefits 95 88

Total compensation 4,510 5,142



26 Related party transactions (continued) During the year, the Credit Union had transactions in the ordinary course of business with related parties. Transactions include interest bearing loans and advances to related parties as well as cash deposits held by the Credit Union and the respective interest paid on the accounts. Key management personnel who are employees of the Credit Union are entitled to receive benefits under the Credit Union’s employee benefit package. This includes a financial benefits program, whereby full-time and part-time employees are eligible to receive discounted interest rates on mortgages, personal loans and lines of credit as well as Membership account banking privileges and improved rates of return on selected investment products. All employee applications are subject to the same underwriting criteria as applicable to the Members of the Credit Union. All other related party loans have been advanced on the same terms and conditions as have been accorded to all Members of the Credit Union. Loan facilities held by related parties include both secured and unsecured loans. Related party balances and transactions are detailed below: Loans advanced to related parties

2014 2013

Loan balance as at January 1 12,842 12,668

Change in loan balances during the year (11,036) 174

Less: Provision for impairment - -

Loan balance as at December 31 1,806 12,842

Total interest revenue earned on loans 193 544

Revolving credit facilities granted to related parties

2014 2013

Total value of facilities approved as at January 1 2,583 4,667

Increase (decrease) in limits granted 383 (1,294)

Total value of facilities approved at December 31 2,966 3,373

Balance outstanding (1,222) (790)

Net balance available on facilities as at December 31 1,744 2,583

Total interest revenue earned on revolving credit facilities 21 23

Term deposits held for related parties

2014 2013

Deposit balance as at January 1 999 943

Net change in deposits during the year 189 56

Deposit balance as at December 31 1,188 999

Total interest expense on term deposits 32 17

Demand deposit balances held for related parties

2014 2013

Demand deposit balance as at December 31 5,209

3,101

Total interest expense on demand deposits 44

25

Other transactions with related parties Sales/purchases of goods and services Key management personnel and parties related to them provided $5 (2013 - $15) of goods and services to the Credit Union. Related parties are subject to the same internal request for pricing procedures as third party suppliers for material purchases and contracts for service. Shares and dividends As at December 31, 2014 related parties hold share capital valued at $975 (2013 - $1,251). During the year, dividends of $65 (2013 - $62) were paid on these shares.



26 Related party transactions (continued) Guarantees and commitments Commitments on undrawn credit facilities and letters of credit in the amount of $1,888 (2013 - $2,727) have been issued to related parties.

27 Contingent liabilities and commitments

(a) Legal proceedings During the normal course of business, the Credit Union enters into legal proceedings primarily relating to the recovery of delinquent loans. As a result, various counterclaims or proceedings have been or may be instituted against the Credit Union. The disposition of the matters that are pending or asserted is not expected by management to have a material effect on the financial position of the Credit Union or on its results of operations. (b) NHA MBS commitments The Credit Union is required, as an Issuer of NHA MBS, to remit the NHA MBS principal and interest amounts due on outstanding securities to Computershare in the following month, who distributes payments to NHA MBS investors on behalf of CMHC. The total NHA MBS principal and interest amounts due as at December 31, 2014 on NHA MBS that Meridian retains ownership of, either directly or through participation in the CMB Program, are $25,298 (2013 - $17,743).

The Credit Union will be required in early 2015, as an Issuer of NHA MBS, to fund an additional unscheduled prepayment cash reserve, calculated based on the outstanding principal balance of all outstanding NHA MBS as at December 31, 2014. As at December 31, 2014 the expected amount of the cash reserve required is $28,283 (2013 - $20,574). As the obligation to fund the increased cash reserve will not take effect until 2015, no amount has been recorded in the consolidated financial statements of the Credit Union as at December 31, 2014 to reflect this commitment. (c) Collateral The Credit Union is required, as a participant in the CMB Program, to enter into an agreement, whereby, if required by CHT, the Credit Union will assign collateral in the event that the net position of the mirrored CHT interest rate swap is outside of a predetermined range set by CHT. The Credit Union has a nil balance of assigned collateral as at December 31, 2014 (2013 - nil).

(d) Commitments for loans to Members In the normal course of business, the Credit Union enters into various commitments to meet the credit requirements of its Members. Such commitments, which are not included in the consolidated balance sheet, include documentary and commercial letters of credit, which require the Credit Union to honour drafts presented by third parties on completion of specific activities; and commitments to extend credit, which represent undertakings to make credit available in the form of loans or other financings for specific amounts and maturities, subject to certain conditions. These credit arrangements are subject to the Credit Union’s normal credit standards, financial controls and monitoring procedures and collateral may be obtained where appropriate. The contract amounts for these commitments set out in the table below represent the maximum credit risk exposure to the Credit Union should the contracts be fully drawn, the counterparty default and any collateral held prove to be of no value. As many of these arrangements will expire or terminate without being drawn on, the contract amounts do not necessarily represent future cash requirements.

2014 2013

Undrawn overdrafts and credit facilities 1,539,357 1,833,908

Standby and commercial letters of credit 121,627 105,469

Loans approved but not funded:

Mortgages 31,057 27,222

Loans 854 1,913

Commercial 358,810 254,111

Total Member loan commitments as at December 31 2,051,705 2,222,623



27 Contingent liabilities and commitments (continued)

(e) Operating lease commitments Lessee: The Credit Union has non-cancellable operating leases for various branches and offices as well as equipment and vehicles. The terms of the leases are between three to 15 years. The leases have varying terms, escalation clauses and renewal rights. Future minimum lease payments are as follows:

2014 2013

Within 1 year 6,619 6,289

1 to 5 years 20,046 16,519

Over 5 years 8,218 7,115

Total 34,883 29,923

Total operating lease payments made during 2014 were $6,481 (2013 - $5,686) and are included on the consolidated statement of comprehensive income within occupancy expenses.

Lessor: The Credit Union, as the lessor, has entered into non-cancellable operating leases for premises. Future minimum lease payments due to the Credit Union are as follows:

2014 2013


1 to 5 years 186 175

Total 302 312

Total operating lease payments received during 2014 were $142 (2013 - $141) and are included on the consolidated statement of comprehensive income within non-interest income.

(f) Guarantees In the normal course of business, the Credit Union enters into agreements that may contain features which meet the definition of a guarantee under IFRS. The maximum potential amount of future payments represents the amounts that could be lost to the Credit Union under guarantees if there were a total default by the guaranteed parties, without consideration of possible recoveries under recourse provisions, insurance policies or from collateral held or pledged.

The Credit Union has, as a participant in Central 1’s Mortgage Pool Purchase and Securitization Program, indemnified Central 1 for all costs and expenses incurred by Central 1 in respect of the Credit Union’s participation. The indemnification is considered by management to be in the normal course of business. The amounts that may become payable in future years are not determinable at this time. Management considers that the costs, if any, are not material. The Credit Union offers MasterCard and its services through a contract with Credit Union Electronic Transaction Services and Unified Network Payment Solutions. Where MasterCard credit limits must be fully secured by the Credit Union, a guarantee of 100% of the approved credit limit for the life of the account, plus up to 90 days’ interest will be made by the Credit Union. The Credit Union will in turn hold at least an equivalent amount of the credit limit approved for the MasterCard from the cardholder through an assignment of funds on deposit or a pledge of term deposits. These guarantees are considered by management to be in the normal course of business. The maximum potential amounts of future payments the Credit Union could be required to make under the guarantee before any amounts that may possibly be recovered are not readily determinable. An estimate of the maximum potential amount cannot be estimated as the cardholder balances fluctuate depending on use. Management considers that the costs are not material as the assignment or pledge of funds is expected to cover cardholder balances in default.



27 Contingent liabilities and commitments (continued) (g) Meridian Centre As part of Meridian’s Commitment to Communities, in 2013 the Credit Union entered into a contract with the City of St. Catharines to contribute $5,234 over 25 years to the new multi-purpose spectator facility constructed in downtown St. Catharines, which is named The Meridian Centre. In addition to being given exclusive naming rights, Meridian has been designated as the official financial services provider during the term of the contract. The contract term is from September 1, 2013 to August 31, 2039. Future payments for the duration of the contract are as follows:

2014 2013


1 to 5 years 1,000 900

Over 5 years 3,934 4,134

Total 5,034 5,134

Total payments made during 2014 were $100 (2013 - $100) of which $100 (2013 - $33) is included on the consolidated statement of comprehensive income within administration expenses.

(h) Meridian Place As part of Meridian’s Commitment to Communities, in 2014 the Credit Union entered into a 25-year contract with the City of Barrie to contribute $750 over ten years toward the building of a new town square in the community of Barrie, Ontario. In exchange for the contribution, Meridian will be granted naming rights for the next 25 years. The public square will be known as Meridian Place upon completion in 2016. The contract term is from July 1, 2014 to June 30, 2039. Future payments for the ten years are as follows:

2014 2013

Within 1 year 75 -

1 to 5 years 375 -

Over 5 years 225 -

Total 675 -

Total payments made during 2014 were $75 (2013 - nil) of which $15 (2013 – nil) are included on the consolidated statement of comprehensive income within administration expenses.

28 Regulatory information

Restricted party transactions The Credit Union employs the definition of restricted party contained in the Act and regulations. A restricted party includes a person who is, or has been within the preceding twelve months, a director, officer or auditor of the Credit Union, any corporation in which the person owns more than 10% of the voting shares, his or her spouse, their dependent relatives who live in the same household as the person, and any corporation controlled by such spouse or dependent relative.

As at December 31, 2014, the aggregate value of loans issued to restricted parties was $8,846 (2013 - $12,972). These loans have been advanced on the same terms and conditions as have been accorded to all Members of the Credit Union. There was no allowance for impaired loans required in respect of these loans. Directors received $418 (2013 - $388) for annual retainer and per diem and $48 (2013 - $36) for reimbursement of travel and out-of-pocket expenses.



28 Regulatory information (continued) Remuneration of officers and employees The Act requires credit unions to disclose remuneration paid during the year to the officers and employees of the Credit Union whose total remuneration for the year exceeds $150. If there are more than five officers and employees of a credit union whose total remuneration for the year was over $150, the five officers and employees with the highest total remuneration for the year are disclosed. The table below provides this information for the current year:

Total salary

received Total bonuses

received

Monetary value of benefits

received Bill Maurin, President & CEO 442,038 425,250 75,658

Jennifer Rowe, Chief Marketing Officer 271,747 229,928 44,964

Bill Whyte, Chief Member Services Officer 271,747 206,584 50,578

Gary Genik, Chief Information Officer 286,811 168,756 53,372

Leo Gautreau, Chief Risk Officer 239,195 168,070 49,304

Deposit insurance The annual premium paid to DICO for insuring Members’ deposits during the year ended December 31, 2014 was $5,799 (2013 - $5,716). The premium rates are based on relative risk to the insurance fund as measured by an overall composite risk score encompassing financial and other risk based factors. Central 1 fees The total fees paid to Central 1 amounted to $4,193 (2013 - $4,000). These fees were primarily in respect of Membership dues, banking and clearing, and other services.

29 Financial risk management

The Board of Directors has overall responsibility for the establishment and oversight of the Credit Union’s risk management framework. The Board has established the Risk Committee and charged it with the responsibility for, among other things, the development and monitoring of risk management policies. The Risk Committee reports regularly to the Board on its activities.

29.1 Credit risk

Credit risk is the potential for financial loss to the Credit Union if a borrower or guarantor fails to meet payment obligations in accordance with agreed terms. Credit risk is one of the most significant and pervasive risks in the business of a credit union. Every loan, extension of credit or transaction that involves settlements between the Credit Union and other parties or financial institutions exposes the Credit Union to some degree of credit risk.

The Credit Union’s primary objective is to create a methodological approach to credit risk assessment in order to better understand, select and manage exposures to deliver stable ongoing earnings. The strategy is to ensure central oversight of credit risk, fostering a culture of accountability, independence and balance. The responsibility for credit risk management is organization wide in scope, and is managed through an infrastructure based on: (i) centralized approval by the Board, of the Credit Risk Management Policy including, but not limited to, the following six

areas: a. credit risk assessment, including policies related to credit risk analysis, risk rating and risk scoring; b. credit risk mitigation, including credit structuring, collateral and guarantees; c. credit risk approval, including credit risk limits and exceptions; d. credit documentation focusing on documentation and administration; e. credit reviews that focus on monitoring of financial performance, covenant compliance and any sign of

deteriorating performance; f. credit portfolio management, including sectoral, geographic, and overall risk concentration limits and risk

quantification; (ii) centralized approval by the Vice President Credit Management of the discretionary limits of lending officers throughout

the Credit Union; (iii) credit adjudication subject to compliance with established policies, exposure guidelines and discretionary limits, as well

as adherence to established standards of credit assessment. A Credit Management Committee (“CMC”) has been established and is charged with the high level overview of the Commercial portfolio including sectoral exposure and geographic concentration. The CMC will set or amend credit application processes and specific dollar thresholds in response to changes in portfolio metrics;



29.1 Credit risk (continued) (iv) credit department oversight of the following:

a. the establishment of guidelines to monitor and limit concentrations in the portfolios in accordance with Board-approved policies governing industry risk and group exposures;

b. the development and implementation of credit risk models and policies for establishing borrower risk ratings to quantify and monitor the level of risk and facilitate management of Commercial credit business;

c. approval of the scoring techniques and standards used in extending, monitoring and reporting of personal credit business; and

d. implementation of an ongoing monitoring process of the key risk parameters used in our credit risk models.

The Board has delegated to the CEO the authority to establish a lending hierarchy. As such, a procedure for the delegation of lending authority has been developed and is in active use. The Credit Union employs persons who are trained in managing its credit granting activities. Staff may be delegated individual authorities based on experience and background. Designated staff whose primary job accountabilities are to manage the quality and risk of the Credit Union’s portfolio are granted the authority to use judgment and discretion consistent with policy, in discharging their duties. Management has the responsibility to: (i) systematically identify, quantify, control and report on existing and potential credit risks and environmental risks in the

loan portfolio; (ii) prudently manage the exposure to default and loss arising from those risks; and (iii) employ and train, as necessary, personnel who can implement risk measurement and credit management techniques,

as required by policy. Measuring, monitoring and reporting activities on risk position and exposure are maintained and compliance and audit responsibilities are in place and adhered to. Both the Board and the Board’s Risk Committee receive regular summary performance measurements of the credit portfolio. The Credit Union’s credit risk portfolio is primarily classified as “Retail” or “Commercial”, and a different risk measurement process is employed for each portfolio. Credit risk rating systems are designed to assess and quantify the risk inherent in credit activities in an accurate and consistent manner.

Credit exposure is assessed along these two dimensions: probability of default, which is an estimate of the probability that an obligor with a certain borrower risk rating will default within a one-year time horizon, and loss given default, which represents the portion of credit exposure at default expected to be lost when an obligor defaults. The Credit Union follows a formal loan granting process that addresses appropriate security documentation, its registration, the need and use of credit bureau reports and other searches, situations where co-signers or guarantors may be or will be required, the use of wage assignments and the use of accredited appraisers, lawyers and other professionals. The Credit Union’s credit risk portfolio is diversified with the objective of spreading risk. Diversification is assessed using different measures in each portfolio. In the Retail portfolio, diversification areas include authorized loan types, forms of security and sectoral groupings and/or such other objective criteria that the Board may set from time to time. In the Commercial loan portfolio, diversification is achieved through the establishment of credit exposure limits for specific industry sectors, individual borrowers and borrower groups (multiple borrowers grouped together based on shared security and/or the same income source). Industry rating models and detailed industry analysis are key elements of this process. Where several industry segments are affected by common risk factors, an exposure limit may be assigned to those segments in aggregate. Management regularly reviews the above parameters to ensure that acceptable diversification is maintained. The top five industry sectors represent approximately 68% (2013 - 64%) of the total Commercial loan portfolio. Credit scoring is the primary risk rating system for assessing Retail exposure risk. Retail exposure is managed on a pooled basis, where each pool consists of exposures that possess similar homogeneous characteristics. The Retail credit segment is composed of a large number of Members, and includes residential mortgages, as well as secured and unsecured loans and lines of credit. Requests for Retail credit are generally processed using automated credit and behavioural decisioning tools. Standard evaluation criteria may include, but are not limited to: gross debt service ratio, total debt service ratio, and loan to value ratio. Within this framework, underwriters in branches and corporate office adjudicate within designated approval limits. Retail exposures are assessed on a pooled basis and measured against an internal benchmark of acceptable risk penetration levels within each pool. Internal benchmarks are established using “Equifax Beacon score”. Equifax Inc. is a global service provider of this credit score, which is a mathematical model used to predict how likely a person is to repay a loan. The score is based on information contained in an individual’s credit report. This information is obtained from credit lenders from which the consumers have borrowed in the past. The benchmark is measured monthly to ensure that the risk of the portfolio is managed on an ongoing basis. The risk ratings of the portfolio range from A+, which represents very low risk, to E, which represents the highest risk.



29.1 Credit risk (continued) The Commercial credit risk rating model is premised on a comprehensive assessment of the borrower’s risk of default, through measurement of industry, business, management and financial risk factors along with the risk of loss given default, based on assessment of security composition and relative historical recovery experience. The model includes a standard set of questions and answers that align to an implied level of risk. Questions are given varied weightings and an overall borrower risk rating is derived from a cumulative weighting of the answers. The Commercial loan portfolio stratified by risk rating is reviewed monthly. The Credit Union’s credit risk policies, processes and methodologies have not changed materially from the prior year. Except as noted, the carrying value of financial assets recorded in the consolidated financial statements, which is net of impairment losses, represents the Credit Union’s maximum exposure to credit risk without taking into account the value of any collateral obtained. The Credit Union is also exposed to credit risk through transactions, which are not recognized in the consolidated balance sheet, such as granting financial guarantees and extending loan commitments. Refer to note 27 for further details. The risk of losses from loans undertaken is reduced by the nature and quality of collateral obtained. Refer to note 8 for a description of the nature of the security held against loans as at the consolidated balance sheet date.

29.2 Market risk

(a) Interest rate risk Interest rate risk is the sensitivity of the Credit Union’s financial position to movements in interest rates. The Credit Union is exposed to interest rate risk when it enters into banking transactions with its Members, namely deposit taking and lending. When asset and liability principal and interest cash flows have different payment or maturity dates, this results in mismatched positions. An interest-sensitive asset or liability is repriced when interest rates change, when there is cash flow from final maturity, normal amortization, or when Members exercise prepayment, conversion or redemption options offered for the specific product. The Credit Union’s exposure to interest rate risk depends on the size and direction of interest rate changes, and on the size and maturity of the mismatched positions. It is also affected by new business volumes, renewals of loans or deposits, and how actively Members exercise options, such as prepaying a loan before its maturity date.

The Credit Union’s interest rate risk is subject to extensive risk management controls and is managed within the framework of policies and limits approved by the Board. These policies and limits ensure, among other things, that the Credit Union is in full adherence to the regulatory requirements prescribed in the Act as well as DICO’s standards of Sound Business and Financial Practices. Overall responsibility for asset/liability management rests with the Board. As such, the Board receives regular reports on risk exposures and performance against approved limits. The Board delegates the responsibility to manage the interest rate risk on a day-to-day basis to the Asset/Liability Committee (“ALCO”), which meets no less frequently than monthly. ALCO is chaired by the CFO and includes other senior executives. The key elements of the Credit Union’s interest rate risk management framework include:

i. guidelines and limits on the structuring of the maturities, price and mix of deposits, loans, mortgages and investments and the management of asset cash flows in relation to liability cash flows;

ii. guidelines and limits on the use of derivative financial instruments to hedge against a risk of loss from interest rate changes; and

iii. requirements for comprehensive measuring, monitoring and reporting on risk position and exposure management. Valuations of all asset and liability positions, as well as off-balance sheet exposures, are performed no less frequently than monthly. The Credit Union’s objective is to establish and maintain a balance sheet and off-balance sheet structure that will protect and enhance the Credit Union’s net interest income and the value of the Credit Union’s capital during all phases of the interest rate cycle and varying economic conditions. The carrying values of interest sensitive assets and liabilities and the notional amount of swaps and other derivative financial instruments used to manage interest rate risk are presented below in the periods in which they next reprice to market rates or mature, and are summed to show the interest rate sensitivity gap. Loans are adjusted for prepayment estimates which reflect expected repayments on other than contractual maturity dates. The prepayment rate applied to the portfolio is based on experience and current economic conditions. The average rates presented represent the weighted average effective yield based on the earlier of contractual repricing or maturity dates. Further information related to the derivative financial instruments used to manage interest rate risk is included in note 9.



29.2 Market risk (continued)

December 31, 2014

Variable Less than 1

year 1 to 5 years

Over 5 years

Non- interest

sensitive Total Assets Cash and cash equivalents 111,101 20,793 - - - 131,894 Yield 0.66% 1.35% - - - 0.77% Investments - other loans and receivables - 337,226 470,983 - 4,638 812,847 Yield - 1.97% 1.53% - - 1.70% Loans to Members 3,141,770 1,266,950 4,400,799 31,629 49,597 8,890,745 Yield 3.97% 3.92% 3.54% 4.40% - 3.73% Derivative financial assets 18,016 - - - - 18,016 Yield - - - - - - Investments available for sale - - - - 54,557 54,557 Yield - - - - - - Other assets - - - - 85,690 85,690 Yield - - - - - -

Total assets 3,270,887 1,624,969 4,871,782 31,629 194,482 9,993,749

Liabilities and Members’ equity Members’ deposits 2,611,716 2,635,050 1,762,652 84 957,104 7,966,606 Yield 1.20% 2.16% 2.38% 2.31% - 1.64% Borrowings 21,080 - - - 1,477 22,557 Yield 1.75% - - - - 1.64% Mortgage securitization liabilities - 219,511 1,097,246 - 1,126 1,317,883 Yield - 2.77% 1.99% - - 2.12% Derivative financial liabilities 5,840 - - - - 5,840 Yield - - - - - - Other liabilities and Members’ equity - - - - 680,863 680,863 Yield - - - - - -

Total liabilities and Members’ equity 2,638,636 2,854,561 2,859,898 84 1,640,570 9,993,749

Effect of Interest Rate Swaps Fixed pay swaps 600,000 - (600,000) - - - Yield 1.29% - 1.90% - - -

Interest sensitivity position 2014 1,232,251 (1,229,592) 1,411,884 31,545 (1,446,088) -




December 31, 2013

Variable Less than 1

year 1 to 5 years

Over 5 years

Non- interest

sensitive Total Assets Cash and cash equivalents 108,399 37,839 - - 22 146,260 Yield 0.81% 1.58% - - - 1.01% Investments - other loans and receivables - 262,260 503,346 - 4,531 770,137 Yield - 1.84% 1.90% - - 1.87% Loans to Members 2,993,165 1,109,055 3,902,825 33,241 62,448 8,100,734 Yield 3.98% 4.04% 3.71% 4.42% - 3.83% Derivative financial assets 23,984 - - - - 23,984 Yield - - - - - - Investments available for sale - - - - 51,762 51,762 Yield - - - - - - Other assets - - - - 90,821 90,821 Yield - - - - - -

Total assets 3,125,548 1,409,154 4,406,171 33,241 209,584 9,183,698

Liabilities and Members’ equity Members’ deposits 2,187,565 2,195,093 2,139,107 - 885,714 7,407,479 Yield 0.98% 2.36% 2.52% - - 1.72% Borrowings - - - - 1,812 1,812 Yield - - - - - - Mortgage securitization liabilities - 44,604 1,070,248 - - 1,114,852 Yield - 1.68% 2.01% - - 2.00% Derivative financial liabilities 282 - - - - 282 Yield - - - - - - Other liabilities and Members’ equity - - - - 659,273 659,273 Yield - - - - - -

Total liabilities and Members’ equity 2,187,847 2,239,697 3,209,355 - 1,546,799 9,183,698

Effect of Interest Rate Swaps Fixed pay swaps 100,000 - (100,000) - - - Yield 1.22% - 2.04% - - -

Interest sensitivity position 2013 1,037,701 (830,543) 1,096,816 33,241 (1,337,215) -

The management of interest rate risk against internal exposure limits is supplemented by monitoring the sensitivity of the Credit Union’s financial assets and financial liabilities to standard interest rate shock scenarios. The key metrics used to monitor this sensitivity are Earnings at Risk (“EaR”) and Economic Value of Equity at Risk (“EVaR”). EaR is defined as the change in our net interest income from a predetermined shock to interest rates measured over a 12 month period. EVaR is defined as the change in the present value of our asset portfolio resulting from a predetermined shock versus the change in the present value of the Credit Union’s liability portfolio resulting from the same predetermined interest rate shock. The Credit Union completes various static and dynamic interest rate shock scenarios throughout the year, including a 100 basis point (“bps”) rate shock. The estimated impact of a 100 bps rate shock on these metrics is presented below. These metrics have been calculated as at December 31, 2014 using a static structure in the interest-sensitive asset and liability portfolios, which represents a change compared to the 2013 metrics which were calculated using a dynamic structure. This change was made to enable management to more accurately analyze the impact of the underlying drivers of interest rate risk. The metrics also incorporate management estimates of minimum interest rates for certain loan and deposit products, prepayment assumptions on loan balances as detailed above and forecasted changes in the Credit Union’s prime rate and the yield curve. 2014 2013

EaR: 100 bps exposure (4,604) (5,451)

EVaR: 100 bps exposure -0.10% -6.02%




(b) Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign currency exchange rates. The Credit Union is exposed to foreign currency risk as a result of its Members’ activities in foreign currency denominated deposits and cash transactions. The Credit Union’s foreign currency risk is subject to formal risk management controls and is managed in accordance with the framework of policies and limits approved by the Board. These policies and limits are designed to ensure, among other things, that the Credit Union is in full adherence to the regulatory requirements prescribed in the Act as well as DICO’s standards of Sound Business and Financial Practices. The Board receives regular reports on risk exposures and variances from approved limits. The aforementioned activities that expose the Credit Union to foreign currency risk are measured, monitored and controlled daily to minimize the adverse impact of sudden changes in foreign currency values with respect to the Canadian dollar. U.S. dollar denominated liabilities are hedged through a combination of U.S. dollar investments and forward rate agreements to buy U.S. dollars and net exposure as measured on a daily basis is limited to 1% of prior year ending Members’ equity. The Credit Union uses forward foreign currency derivative financial instruments to neutralize its exposure to foreign exchange contracts with Members. As at December 31, 2014 and December 31, 2013, the Credit Union’s exposure to a 10% change in the foreign currency exchange rate, which is reasonably possible, is insignificant. (c) Other price risk Other price risk is the risk that the fair value on future cash flows of a financial instrument will fluctuate because of changes in market prices other than those arising from interest rate risk or foreign currency risk. The Credit Union is exposed to other price risk in its own investment portfolio. The Credit Union adheres to the principles of quality and risk diversification in its investment practices. The Credit Union’s other price risk is subject to extensive risk management controls and is managed within the framework of policies and limits approved by the Board. These policies and limits assist in ensuring, among other things, that the Credit Union is in full adherence to the regulatory requirements prescribed in the Act as well as DICO’s standards of Sound Business and Financial Practices. The Board receives regular reports on risk exposures and performance against approved limits. As at December 31, 2014 and December 31, 2013, the Credit Union has limited investments subject to other price risk and this exposure is insignificant.

29.3 Liquidity risk

Liquidity risk arises in the course of managing the Credit Union’s financial assets and financial liabilities. It is the risk that the Credit Union is unable to meet its financial obligations in a timely manner and at reasonable prices. The Credit Union’s liquidity risk management strategies seek to maintain sufficient liquid financial resources to continually fund its consolidated balance sheet under both normal and stressed market environments. The Credit Union’s liquidity risk is subject to formal risk management controls and is managed within the framework of policies and limits approved by the Board. These policies and limits assist in ensuring, among other things, that the Credit Union is in full adherence to the regulatory requirements prescribed in the Act as well as DICO’s standards of Sound Business and Financial Practices. The Board receives regular reports on risk exposures and performance against approved limits. ALCO provides management oversight of liquidity risk through its monthly meetings. The key elements of the Credit Union’s liquidity risk management framework include:

i. limits on the sources, quality and amount of liquid assets to meet normal operational requirements, regulatory requirements and contingency funding;

ii. a methodology to achieve an acceptable yield on the operating liquidity investment portfolio within prudent risk management bounds;

iii. prudence tests of quality and diversity where investments bear credit risk; iv. parameters to limit term extension risk; v. implementation of deposit concentration limits in order to assist in ensuring diversification and stability of deposit

funding; and vi. requirements for adequate measuring, monitoring and reporting on risk position and exposure management.

Under DICO regulations, the Credit Union will establish and maintain prudent levels and forms of liquidity that are sufficient to meet its cash flow needs, including depositor withdrawals and all other obligations as they come due. The liquidity ratio measures the Credit Union’s liquid assets as a percentage of Members’ deposits and specified borrowings.. The Credit Union targets to maintain operating liquidity within the range of 7.75% to 15%. The low end of the range has been established in order to maintain a comfortable cushion beyond minimum operating liquidity needs, even during periods of market volatility. A cap has been placed on the range in recognition of the fact that too much excess liquidity has a negative impact on earnings. As at December 31, 2014, the Credit Union’s liquidity ratio was 10.48% (2013 – 11.05%).



29.3 Liquidity risk (continued) The table below sets out the period in which the Credit Union’s non-derivative financial assets and financial liabilities will mature and be eligible for renegotiation or withdrawal. These cash flows are not discounted and include both the contractual cash flows pertaining to the Credit Union’s consolidated balance sheet assets and liabilities and the future contractual cash flows that they will generate. In the case of loans, the table reflects adjustments to the contractual cash flows for prepayment estimates, which reflect expected repayments on other than contractual maturity dates. The prepayment rate applied to the portfolio is based on experience and current economic conditions. In addition to the cash flows detailed below, the Credit Union is exposed to potential cash outflows in the form of commitments and contingencies, as set out in note 27.

December 31, 2014

Less than 1

month 2 to 12 months

1 to 3 years

3 to 5 years

Over 5 years

Not specified Total

Financial assets Cash and cash equivalents 131,894 - - - - - 131,894 Receivables 1,466 - - - - - 1,466

Investments - other loans and receivables 12,590 334,883 201,419 280,579 - 1,167 830,638 Loans to Members 558,832 2,788,088 1,737,065 4,432,309 102,190 - 9,618,484 Investments available for sale - - - - - 54,557 54,557

Total financial assets 704,782 3,122,971 1,938,484 4,712,888 102,190 55,724 10,637,039

Financial liabilities Members’ deposits 3,780,377 2,519,816 668,423 1,180,521 84 - 8,149,221 Borrowings 21,080 - - - - - 21,080 Payables and other liabilities 44,676 - - - - - 44,676

Mortgage securitization liabilities 312 245,870 281,804 866,167 - - 1,394,153

Total financial liabilities 3,846,445 2,765,686 950,227 2,046,688 84 - 9,609,130

Net maturities (3,141,663) 357,285 988,257 2,666,200 102,106 55,724 1,027,909

December 31, 2013

Less than 1

month 2 to 12 months

1 to 3 years

3 to 5 years

Over 5 years

Not specified Total

Financial assets Cash and cash equivalents 126,275 20,077 - - - - 146,352 Receivables 3,133 - - - - - 3,133 Investments - other loans and receivables 12,148 270,623 338,805 167,624 - 1,167 790,367 Loans to Members 517,675 2,480,061 2,953,524 2,749,707 48,831 - 8,749,798 Investments available for sale - - - - - 51,762 51,762

Total financial assets 659,231 2,770,761 3,292,329 2,917,331 48,831 52,929 9,741,412

Financial liabilities Members’ deposits 3,174,663 2,126,165 2,034,148 202,735 - - 7,537,711 Payables and other liabilities 57,200 - - - - - 57,200 Mortgage securitization liabilities 1,686 64,367 517,672 602,259 - - 1,185,984

Total financial liabilities 3,233,549 2,190,532 2,551,820 804,994 - - 8,780,895

Net maturities (2,574,318) 580,229 740,509 2,112,337 48,831 52,929 960,517



29.3 Liquidity risk (continued)

The table below sets out the undiscounted contractual cash flows of the Credit Union’s derivative financial assets and liabilities:

December 31, 2014

Less than 1 month

2 to 12 months

1 to 3 years

3 to 5 years

Over 5 years Total

Equity index-linked options 1,248 7,510 5,740 3,621 - 18,119 Gross-settled forward exchange contracts: Outflow (291) (949) - - - (1,240) Inflow 309 965 - - - 1,274 Interest rate swaps Outflow (710) (2,722) (3,907) (430) - (7,769) Inflow - - - 1,166 - 1,166 Bond forward contracts - (284) - - - (284)

Total 556 4,520 1,833 4,357 - 11,266

December 31, 2013

Less than 1 month

2 to 12 months

1 to 3 years

3 to 5 years

Over 5 years Total

Equity index-linked options 148 12,341 9,438 1,502 - 23,429 Gross-settled forward exchange contracts: Outflow (1,316) (4,435) - - - (5,751) Inflow 1,313 4,427 - - - 5,740 Interest rate swaps Outflow - (551) (791) - - (1,342) Inflow - - - 2,021 - 2,021

Total 145 11,782 8,647 3,523 - 24,097

Derivative financial assets and liabilities reflect interest rate swaps that will be settled on a net basis and forward exchange contracts and index-linked equity options that will be settled on a gross basis (see note 9). The gross inflows/(outflows) disclosed in the previous table represent the contractual undiscounted cash flows relating to derivative financial assets and liabilities held for risk management purposes and which are usually not closed out before contractual maturity. The future cash flows on derivative instruments may differ from the amount in the above table as interest rates, exchange rate and equity market indices change. Cash outflows relating to the embedded written option in equity index-linked deposits are included with Members’ deposits in the previous table for non-derivative financial assets and liabilities.

29.4 Fair value of financial assets and financial liabilities

The following table represents the fair values of the Credit Union’s financial assets and financial liabilities for each classification of financial instruments. The fair values for short-term financial assets and financial liabilities approximate carrying value. These include accrued interest receivable, accounts payable, accrued liabilities and accrued interest payable. The fair values disclosed do not include the value of assets that are not considered financial instruments. While the fair value amounts are intended to represent estimates of the amounts at which these instruments could be exchanged in a current transaction between willing parties, many of the Credit Union’s financial instruments lack an available trading market. Consequently, the fair values presented are estimates derived using present value and other valuation techniques and may not be indicative of the net realizable values. Due to the judgment used in applying a wide range of acceptable valuation techniques and estimates in calculating fair value amounts, fair values are not necessarily comparable among financial institutions. The calculation of estimated fair values is based on market conditions at a specific point in time and may not be reflective of future fair values.



29.4 Fair value of financial assets and financial liabilities (continued)

December 31, 2014 December 31, 2013

Carrying

value Fair value Fair value difference

Carrying value Fair value

Fair value difference

Financial assets at FVTPL (*):

Cash and cash equivalents 132,081 132,081 - 108,227 108,227 -

Derivative financial assets

Equity index-linked options 17,952 17,952 - 23,258 23,258 -

Interest rate swaps - - - 433 433 -

Bond forward contracts 24 24 -

Foreign exchange contracts 40 40 - 293 293 -

Available for sale:

Investments 54,557 54,557 - 51,762 51,762 -

Loans and receivables:

Cash and cash equivalents - - - 37,861 37,689 (172)

Receivables 1,466 1,466 - 3,133 3,133 -

Investments 812,847 810,594 (2,253) 770,137 768,440 (1,697)

Loans to Members 8,890,745 8,863,162 (27,583) 8,100,734 8,078,100 (22,634)

Total financial assets 9,909,712 9,879,876 (29,836) 9,095,838 9,071,335 (24,503)

Financial liabilities at FVTPL (*):

Derivative financial liabilities

Interest rate swaps 5,458 5,458 - - - -

Bond forward contracts 308 308 - - - -

Foreign exchange contracts 74 74 - 282 282 -

Other liabilities:

Member’s deposits 7,966,606 7,985,954 19,348 7,407,479 7,412,757 5,278

Borrowings 21,080 21,080 - - - -

Payables and other liabilities 8,158 8,158 - 28,110 28,110 -

Mortgage securitization liabilities 1,317,883 1,337,785 19,902 1,114,852 1,116,695 1,843

Employee obligations 20,187 20,187 - 15,114 15,114 -

Membership shares 6,528 6,528 - 6,452 6,452 -

Total financial liabilities 9,346,282 9,385,532 39,250 8,572,289 8,579,410 7,121

(*) Fair value through profit or loss

Interest rate sensitivity is the main cause of changes in the fair values of the Credit Union’s financial instruments. With the exception of financial assets and financial liabilities recorded at fair value through profit or loss, the carrying values of the above financial instruments are not adjusted to reflect the fair value. The following methods and assumptions were used to estimate the fair value of financial instruments:

i. The fair value of cash and cash equivalents, excluding short-term deposits with original maturities of 100 days or less, are assumed to approximate their carrying values, due to their short-term nature. The fair value of short-term deposits with original maturities of 100 days or less are based on fair market values, which are derived from valuation models and a credit valuation adjustment is applied to account for counterparty risk.

ii. With the exception of investments reported using the equity method of accounting, the fair value of investments is determined by discounting the expected future cash flows of these investments at current market rates and a credit valuation adjustment is applied to account for counterparty risk.

iii. The estimated fair value of floating rate loans and floating rate deposits is assumed to be equal to carrying value, as the interest rates on these loans and deposits reprice to market on a periodic basis. A credit valuation adjustment is applied to the calculated fair value of uninsured floating rate deposits to account for the Credit Union’s own credit risk.




iv. The estimated fair value of fixed rate deposits and Member entitlements is determined by discounting the expected future cash flows of these investments, deposits and borrowings at current market rates for products with similar terms and credit risks. A credit valuation adjustment is applied when determining the current market rates used to calculate the fair value of uninsured fixed rate deposits to account for counterparty and the Credit Union’s own credit risk.

v. The estimated fair value of fixed rate loans is determined by discounting the expected future cash flows of these loans at current market rates for products with similar terms and credit risks. Historical prepayment experience is considered along with current market conditions in determining expected future cash flows. In determining the adjustment for credit risk, consideration is given to market conditions, the value of underlying security and other indicators of the borrower’s creditworthiness.

vi. The estimated fair value of derivative instruments is determined through valuation models based on the derivative notional amounts, maturity dates and rates and a credit valuation adjustment is applied to account for counterparty and the Credit Union’s own credit risk.

vii. The fair values of other liabilities are assumed to approximate their carrying values, due to their short-term nature. Fair values are determined based on a three level fair value hierarchy that reflects the significance of the inputs used in making the measurements. The levels of the hierarchy are as follow:

i. Level 1 - Unadjusted quoted prices in active markets for identical financial assets and financial liabilities; ii. Level 2 - Inputs other than quoted prices that are observable for the financial asset or financial liability either

directly or indirectly; iii. Level 3 - Inputs that are not based on observable market data.

The following table illustrates the classification of the Credit Union’s financial instruments within the fair value hierarchy.

Fair value as at December 31, 2014

Level 1 Level 2 Level 3

Recurring measurements

Financial assets

Cash 132,081 - -

Derivative financial assets:

Equity index-linked options - 17,952 -

Bond forward contracts - 24 -

Foreign exchange contracts - 40 -

Investments available for sale - 21,260 -

Total financial assets 132,081 39,276 -

Financial liabilities Borrowings 21,080 - -

Embedded derivatives in index-linked deposits - 17,665 -

Derivative financial liabilities:

Interest rate swaps - 5,458 -

Bond forward contracts - 308 -


Total financial liabilities 21,080 23,505 -






Fair values disclosed Investments – other loans and receivables - 810,594 -

Loans to Members - - 8,863,162

Member’s deposits - (7,960,278) -

Mortgage securitization liabilities - (1,337,785) -

Membership shares - (6,528) -

The fair values of cash and cash equivalents, receivables, payables and other liabilities and employee obligations approximate their carrying values due to their short-term nature.

The fair value of Central 1 Class E shares, which are classified as investments available for sale and measured at cost, has been excluded from the above table as they are not quoted in an active market and their fair value cannot be reliably determined.



Recurring measurements

Financial assets

Cash 108,227 - -

Derivative financial assets:

Equity index-linked options - 23,258 -

Interest rate swaps - 433 -


Investments available for sale - 30,680 -

Total financial assets 108,227 54,664 -

Financial liabilities Embedded derivatives in index-linked deposits - 22,880 -

Derivative financial liabilities:


Total financial liabilities - 23,162 -



Fair values disclosed Cash equivalents - 37,689 -

Investments – other loans and receivables - 768,440 -

Loans to Members - - 8,078,100

Member’s deposits - (7,389,877) -

Mortgage securitization liabilities - (1,116,695) -

Membership shares - (6,452) -

There have been no transfers between level 1 and level 2 of the fair value hierarchy during the year.



29.5 Capital management

The Credit Union maintains policies and procedures relative to capital management so as to ensure the capital levels are sufficient to cover risks inherent in the business. The Credit Union’s objectives when managing capital are: (i) to ensure that the quantity, quality and composition of capital needed reflects the inherent risks of the entity and to

support the current and planned operations and portfolio growth; (ii) to provide a safety net for the variety of risks to which the entity is exposed in the conduct of its business and to

overcome the losses from unexpected difficulties either in earnings or in asset values; (iii) to provide a basis for confidence among Members, depositors, creditors and Regulatory agencies; (iv) to form a solid foundation for business expansion and ongoing reinvestment in business capabilities, including

technology and process automation and enhancement; and (v) to establish a capital management policy for the entity appropriate for current legal and economic conditions, including

compliance with regulatory requirements and with DICO’s standards of Sound Business and Financial Practices.

The Act requires credit unions to maintain minimum regulatory capital, as defined by the Act. Regulatory capital is calculated as a percentage of total assets and of risk weighted assets. Risk weighted assets are calculated by applying risk weighted percentages, as prescribed by the Act, to various asset categories, operational and interest rate risk criteria. The prescribed risk weights are dependent on the degree of risk inherent in the asset. Tier 1 capital, otherwise known as core capital, is the highest quality. It is comprised of retained earnings, contributed surplus, Members’ capital accounts, and Member entitlements with the exception of the series 96 Class A shares. Of the “50th Anniversary”, series 98, series 01 and series 09 Class A shares that have been included within Members’ capital accounts, only 90% are allowable as Tier 1 capital due to specific features of these shares. Tier 1 capital as at December 31, 2014 was $563,504 (2013 - $528,811). Tier 2 capital, otherwise known as supplementary capital, contributes to the overall strength of a financial institution as a going concern, but is of a lesser quality than Tier 1 capital relative to both permanence and freedom from charges. It is comprised of the series 96 Class A shares and the 10% portion of the “50th Anniversary”, series 98, series 01 and series 09 Class A shares that are not admissible as Tier 1 capital. It also includes the eligible portion of the total collective allowance for credit losses. Tier 2 capital as at December 31, 2014 was $75,798 (2013 - $75,858). The Act requires credit unions to maintain a minimum capital ratio of 4% and a risk weighted capital ratio of 8%. The Credit Union has a stated policy that it will maintain at all times capital equal to the minimum required by the Act plus a prudent cushion. The current minimum ratios per Board policy are a capital ratio of 6% and a risk weighted capital ratio of 9%. The Credit Union’s internal policy also dictates that the ratio of Tier 1 capital to total capital will be a minimum of 60%. These internal limits are increased by the Board in tandem with significant increasing risk detected in the economic environment of the Credit Union. The Credit Union is in compliance with the Act as indicated by the table below:

Regulatory capital Capital leverage ratio Risk weighted capital

Minimum Actual Minimum Actual 2014 639,302 4.00% 6.40% 8.00% 13.16% 2013

604,669 4.00% 6.61% 8.00% 13.44%

30 Comparative information

Comparative information for the year ended December 31, 2013 has been revised to reflect the reclassification of costs incurred in the establishment of a securitization issue. A total of $3,141 in costs has been recognized in interest expense – other for the year ended December 31, 2014 (2013 - $2,749). In prior years these costs were presented in non-interest income. This reclassification did not have any impact on the opening figures presented as of January 1, 2013. It is management’s practice to include the fees within the mortgage securitization cost of funds when evaluating the profitability of securitization transactions and as such the amounts have been reclassified to enhance the usefulness of these financial statements. Certain other comparative information has been revised to conform to the presentation adopted in these current year financial statements and accompanying notes.



31 Authorization of consolidated financial statements

The consolidated financial statements for the year ended December 31, 2014 were approved by the Board of Directors on March 12, 2015. Amendments to the consolidated financial statements subsequent to issuance are not permitted without Board approval.

___________________________________ ___________________________________ Don Ariss Richard Owen Chair, Board of Directors Chair, Audit & Finance Committee

2014 Annual Report | Meridian Locations 107

Meridian LocationsPembroke

Ottawa

A

C

GEORGIAN BAY

LAKEHURON

LAKE ERIE

Owen SoundOwen Sound Downtown

Penetanguishene

Orillia

BarrieBig Bay Point

CourticeBowmanville

Whitby

Pickering SatellitePickering

Collingwood

Kincardine

Seaforth

HanoverWalkerton

Orangeville

WoodstockSt. Marys

LondonNanticoke

Aylmer

Brantford

Port Elgin

Windsor

LAKE ONTARIO

Essa Rd

B

D

C

LAKE ONTARIO

Clarkson

Hydro PlaceHydro Place

NewmarketAurora

KiplingKipling

A

EllesmereEllesmere

401 403

407404400

SunnybrookSunnybrook

St. ClairSt. Clair Ave E

Bay/Richmond

410

427

Wellesley

Richmond HillRichmond Hill

MorningsideMorningside

TorontoToronto

401

BKingFergus

KingSpeedvaleKingWyndham

KingStone SquareKingClair & Gordon

GuelphGuelph

Centre on Barton

Stoney CreekStoney Creek

Rymal Rd

Binbrook

AncasterAncasterAncaster

403QEW

LAKE ONTARIO

Jacson SquareJackson Square

C Hamilton

QEW

D

LAKE ONTARIO

GrimsbyBeamsville

VinelandKingKing

Lake Street Grantham Plaza

DrummondDrummond

Niagara-on-the-Lake

Ridley SquareRidley Square

Pendale Plaza Portage Portage

Kalar KalarFonthill

Wainfleet

Port Colborne

Welland

StevensvilleStevensvilleFort ErieFort ErieFort Erie

NiagaraRegion

Corporate Head Office St. Catharines 75 Corporate Park Dr. St. Catharines, ON L2S 3W3 905-988-1000 Corporate Office Toronto 777 Bay St., College Park, 26th Floor Toronto, ON M5G 2C8 416-597-4400

365 Bay St. Toronto, ON M5H 2V5 1-866-592-2226

Greater Toronto Area 797 Milner Ave., Unit 200 Toronto, ON M1B 3C3

Grey Bruce 255 10th St. Hanover, ON N4N 1P1

Guelph/Wellington 200 Speedvale Ave. W. Guelph, ON N1H 1C3

Niagara-on-the-Lake 1567 Niagara Stone Rd. Virgil, ON L0S 1T0

Simcoe-Muskoka 135 Bayfield St., Suite 201 Barrie, ON L4M 3B3

St. Catharines 75 Corporate Park Dr. St. Catharines, ON L2S 3W3

Welland 610 Niagara St. N. Welland, ON L3C 1L8

Corporate Offices

Contact Centre

Commercial Business Centres

67 conveniently located branches, 2 Satellite locations, and 7 Commercial Business Centres

Meridian Credit union Branch and Satellite Locations

Ancaster Branch 1100 Wilson St. W. Ancaster, ON L9G 3K9

Aurora Branch Millwood Heights Plaza, 297 Wellington St. E. Aurora, ON L4G 6K9

Aylmer Branch 34-36 Talbot St. W. Aylmer, ON N5H 1J7

Bank Street Branch 99 Bank St., Suite G001 Ottawa, ON K1P 6B9

Barrie Branch 18 Collier St. Barrie, ON L4M 1G6

Bay and Richmond Branch 375 Bay St. Toronto, ON M5H 2V5

Beamsville Branch 4520 Ontario St. Beamsville, ON L0R 1B5

Big Bay Point Branch 592 Yonge St. Barrie, ON L4N 4E4

2014 Annual Report | Meridian Locations 108

Grimsby Branch Orchardview Plaza, 155 Main St. E. Grimsby, ON L3M 1P2

Hanover Branch 255 10th St. Hanover, ON N4N 1P1

Hydro Place Branch 700 University Ave., Shopping Concourse Toronto, ON M5G 1Z5

Jackson Square Branch 2 King St. W. Hamilton, ON L8P 1A1

Kalar & McLeod Branch 7107 Kalar Rd. Niagara Falls, ON L2H 3J6

Kincardine Branch 818 Durham St. Kincardine, ON N2Z 3B9

King Street Branch 106 King St. St. Catharines, ON L2R 3H8

Kipling Branch 800 Kipling Ave., Unit 6 Toronto, ON M8Z 5G5

Lake Street Branch 531 Lake St. St. Catharines, ON L2N 4H6

Morningside Branch 797 Milner Ave., Unit 100 Toronto, ON M1B 3C3

Nanticoke Branch 34 Haldimand Road 55 Nanticoke, ON N0A 1L0

Newmarket Branch (Agency) 70 Davis Dr., Unit 23 Newmarket, ON L3Y 2M7

Niagara-on-the-Lake Branch 1567 Niagara Stone Rd. Virgil, ON L0S 1T0

Orangeville Branch 190 Broadway, Suite 1 Orangeville, ON L9W 1K3

Orillia Branch 73 Mississaga St. E. Orillia, ON L3V 1V4

Ouellette Avenue Branch 545 Ouellette Ave. Windsor, ON N9A 4J3

Owen Sound Branch 1594 16th Ave. E. Owen Sound, ON N4K 5N3

Owen Sound Downtown Branch 825 2nd Ave. E., Box 182 Owen Sound, ON N4K 5P3

Pembroke Branch 40 Pembroke St. W., Box 216 Pembroke, ON K8A 6X3

Pendale Plaza Branch Pendale Plaza, 210 Glendale Ave. St. Catharines, ON L2T 3Y6

Penetanguishene Branch 7 Poyntz St. Penetanguishene, ON L9M 1M3

Pickering Branch 1550 Kingston Rd., Unit 25 Pickering, ON L1V 1C3

Pickering Satellite Branch Main Security Building #P19 1675 Montgomery Park Rd., Pickering ON L1V 2R5 (Bank at work branch - no public access)

Port Colborne Branch 43 Clarence St. W. Port Colborne, ON L3K 3G1

Port Elgin Branch 626 Goderich St., PO Box 730 Port Elgin, ON N0H 2C0

Portage Branch 4780 Portage Rd. Niagara Falls, ON L2E 6A8

Richmond Hill Branch 9050 Yonge St. Richmond Hill, ON L4C 9S6

Ridley Plaza Branch Ridley Square Plaza, 111 Fourth Ave. St. Catharines, ON L2S 3P5

Rymal Branch 2176 Rymal Road E., Unit 102 Hamilton, ON L0R 1P0

Seaforth Branch 49 Main St. S., PO BOX 55 Seaforth, ON N0K 1W0

Speedvale Branch 200 Speedvale Ave. W. Guelph, ON N1H 1C3

St. Clair Avenue East Branch 26 St. Clair Ave. E. Toronto, ON M4T 1L7

St. Marys Branch 134 Queen St. St. Marys, ON N4X 1A9

Stevensville Branch 2763 Stevensville Rd. Stevensville, ON L0S 1S0

Stone Square Branch 370 Stone Rd. W. Guelph, ON N1G 4V9

Stoney Creek Branch 259 Highway 8, Unit 1 Stoney Creek, ON L8G 1E4

Sunnybrook Branch Sunnybrook Health Sciences Centre, 2075 Bayview Ave., Room CB02 Toronto, ON M4N 3M5

Vineland Branch 3370 King St. Vineland, ON L0R 2C0

Wainfleet Branch 31885 Hwy #3, PO Box 165 Wainfleet, ON L0S 1V0

Walkerton Branch 244 Durham St., Box 308 Walkerton, ON N0G 2V0

Welland Branch 610 Niagara St. N. Welland, ON L3C 1L8

Wellesley (Queen’s Park) Branch 56 Wellesley St. W., Suite 103 Toronto, ON M5S 2S3

Wellington Road Branch 555 Wellington Rd., Unit 2 London, ON N6C 4R3

Whitby Branch 4061 Thickson Rd. N. Whitby, ON L1R 2X3

Woodstock Branch 396 Dundas St. W. Woodstock, ON N4S 1B7

Wyndham Street Branch 153 Wyndham St. N. Guelph, ON N1H 4E9

Binbrook Marketplace Branch 2537 Regional Road 56 Binbrook, ON L0R 1C0

Brantford Branch 300 King George Rd, Unit J3 Brantford, ON N3R 5L8

Centre on Barton Branch 1187 Barton St. E. Hamilton, ON L8H 2V4

Clair & Gordon Branch B-2 Clair Rd. E. Guelph, ON N1L 0G6

Clarkson Branch Clarkson Crossing Plaza, 970 Southdown Rd. Mississauga, ON L5J 2Y4

Collingwood Branch 171 St. Marie St. Collingwood, ON L9Y 3K3

Courtice Branch 1416 King St. E. Courtice, ON L1E 2J5

Darlington Satellite Branch Holt Rd. S. Main Security Building Lobby Bowmanville ON L1C 3Z8 (Bank at work branch - no public access)

Drummond & Dunn Branch Southway Plaza, 6175 Dunn St. Niagara Falls, ON L2G 2P4

Ellesmere Branch 1501 Ellesmere Rd. Toronto, ON M1P 4T6

Essa Road Branch 410 Essa Road, Unit A1-A Barrie, ON L4N 9J7

Fergus Branch 120 MacQueen Blvd. Fergus, ON N1M 3T8

Fonthill Branch 1401 Pelham St., PO Box 860 Fonthill, ON L0S 1E0

Fort Erie Branch 450 Garrison Rd., Unit 14 Fort Erie, ON L2A 1N2

Grantham Plaza Branch Grantham Plaza, 400 Scott St. St. Catharines, ON L2M 3W4

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meridiancu.ca

™Trademarks of Meridian Credit Union Limited.

Documents

2014 ANNUAL REPORT - Meridian · 2017. 7. 28. · 2014 Annual Report | Our Story 3 Meridian is Ontario’s largest credit union, helping more than a quarter of a million Members grow