2014 ANNUAL REPORT

Concentra exists to enhance the success of Canadian credit unions and their members by delivering competitive, high-quality national wholesale fi nancial and trust solutions. Owned by credit unions, centrals, and other co-operative partners, Concentra is a federally regulated fi nancial institution with over $33 billion in assets under administration including almost $7 billion in on-balance sheet assets.

Concentra leverages its regulatory capacity, national network, and industry solutions to help credit unions optimize fi nancial performance, diversify risk and meet member needs. Serving almost 80% of Canada credit unions, Concentra is committed to be a valued and strategic partner to the system.

About Us

Message from the Chairman of the Board and the President and Chief Executive Offi cer 4

Financial Highlights 6

Corporate Direction 7

Board of Directors 7

Corporate Governance Overview 8

Business Profi le 11

Management Discussion and Analysis 13

Risk Management Overview 22

Regulatory Capital Management 26

Management Responsibility for Financial Reporting 30

Independent Auditors’ Report 31

Consolidated Financial Statements 32

The success of the credit union system matters and as a result credit unions remain our number one priority.

Allan MeyerChairman, Board of Directors

10 Years of Building Relationships

Congratulations to everyone who has helped create the amazing story of Concentra. Through 10 years of focused effort, we are fi nancially strong and extremely well positioned for the future. Our success has been built by many, and to each of you we extend our great appreciation.

As we refl ect on a decade of building business relationships, we realize how far we have come. Concentra is a sound and trusted partner for Canada’s credit unions – now recognized as your primary wholesale and trust solutions provider. We help credit unions improve balance sheet performance, diversify risk, and most importantly, help deliver solutions to some 5.3 million Canadians who have made credit unions their fi nancial institution of choice. This is a privileged position that we are proud and honoured to hold.

Financial Performance

The year 2014 ended with total on-balance-sheet assets of $6.7 billion resulting in total assets under administration of $33.3 billion. Growth of on-balance-sheet assets for the year was 11.4% as compared to an increase of 4.1% in the previous year. This growth is primarily a result of higher securities and loan volumes in all portfolios as compared to 2013.

Our consolidated assets under administration including on-balance-sheet assets increased by 12.7% compared to 6.1% in 2013. The increase was mainly due to increases in assets administered or managed by the company on behalf of estates, trusts and agencies along with growth in Tax Free Savings Accounts, registered plans and loan syndications.

Consolidated earnings in 2014 resulted in a net income of $23.2 million with an 8.6% return on common equity. A portion of these profi ts is delivered back to the credit union system through our business solutions and shareholder dividends. By year-end Concentra had returned a total of $51.0 million in dividends to shareholders since 2005.

In 2014, Concentra achieved an overall effi ciency ratio of 55.4%.

While margin compression, regulatory reform and capital constraints challenged our fi nancial performance in 2014, this is our sixth straight year of maintaining solid levels of profi tability. This can be attributed largely to strong core operations through the support of credit unions and prudent management of our non-interest expenses.

Credit union demand for mortgage products started strong in 2014 but softened through the year. Concentra facilitated mortgage sales of $156.0 million to 20 credit unions in seven provinces. Demand for our mortgage securitization program more than doubled from $328.5 million with six credit unions in 2013 to $764.7 million with 13 credit unions in 2014.

In 2014, Concentra funded $861.0 million of commercial loans - nearly four times greater than last year. Commercial loan sales to credit unions in 2014 totaled $87.6 million to 21 credit unions, down from $233.2 million in 2013 - primarily due to a tightening of system liquidity.

Message from the Chairman of the Board and the President and Chief Executive Offi cer

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Allan MeyerChairman, Board of Directors

Ken KosolofskiPresident and Chief Executive Offi cer

Our efforts will push the envelope of possibility to introduce unique value through exceptional solutions and enhance both capability and capacity in the credit union system.

Increasing Relevance

Concentra offers expert advice and insight, helping credit unions make better and more timely market-based decisions. We continue to expand our reach across Canada, deepening our existing relationships with credit unions and building new ones. Initiatives such as the hosting of specialized workshops and webinars, and strategic relationship management efforts have allowed us to grow market relevance and increase our client engagement score to 90%.

Fourteen new foreign exchange credit union clients were added across the country in 2014. The Tier II program has been particularly popular because it enables our clients to offer their commercial members a credit union branded solution that can compete with the banks and other fi nancial institutions.

With Concentra Trust, we continue to focus on clarity within its three business lines: registered plans, personal trust, and corporate trust. Growth in coming years will be focused on the personal trust product line, integrating Concentra Trust with credit unions and tailoring solutions to meet member needs. This past year, we offered over 40 Personal Trust and Registered Plan training sessions to credit unions with approximately 3,000 credit union employees participating.

Worthy of note is the SAGES (Saskatchewan Advantage Grant for Education Savings) program of the Government of Saskatchewan. Of the $2.0 million that the government has paid out, Concentra Trust has facilitated approximately 25% of that, much of it through credit unions. Concentra was recognized at the provincial legislature for this signifi cant achievement, and we are confi dent we can leverage this experience with other provincial grant programs as needs arise.

Moving Forward - Building Capacity, Capability and Culture

We are also proud to report that Concentra was again awarded Canada’s Best Managed Companies designation in 2014, retaining our status as a Platinum Club member. To achieve this distinction, we must consistently meet rigorous criteria and demonstrate excellence in the areas of strategy, capability, and commitment. This is great testimony to our leadership team and our entire staff. Their commitment to our vision and performance has been unwavering over the years.

The success of the credit union system matters and as a result credit unions remain our number one priority. With that in mind, we have begun nurturing a much stronger external customer focus; one that hinges on fi nding new ways to increase our market relevance. Our winning aspiration is to help credit unions grow strong to meet future market demands and ensure sustainability in the face of changing market forces.

Looking ahead, our strategy is to continue building scope and scale, strengthening relationships with our credit union clients and stakeholders, developing more responsive and diversifi ed solutions and providing expertise that will enhance competitive advantage.

Our efforts will push the envelope of possibility to introduce unique value through exceptional solutions and enhance both capability and capacity in the credit union system.

With the stewardship of our board, the leadership of our management team, and the dedication of our employees, we are well equipped to begin creating the second decade of the Concentra story. We look forward to having you be a part of it.

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For the Year 2014 2013 2012 2011 2010Results from Operations

Gross revenue 218.7 208.8 222.2 218.9 231.9

Net interest income 67.4 69.5 69.4 73..6 78.7

Loan impairment charges 6.8 5.3 3.4 1.5 5.2

Non-interest income 1 18.7 15.8 18.3 11.6 21.2

Non-interest expense 47.7 43.9 47.5 49.7 55.6

Income tax expense 8.3 9.3 4.8 6.0 4.7

Net income 1 23.2 26.6 32.0 27.9 36.1

Balance Sheet and Off-Balance Sheet SummaryAt Year End

Total assets 1 6,746.5 6,058.1 5,820.1 5,575.8 5,232.7

Securities 1,164.5 1,067.6 1,040.2 1,118.5 982.6

Loan assets

Commercial and credit union loans 1,211.1 1,194.2 1,261.8 1,070.4 1,004.1

Finance leases 148.3 91.4 92.5 89.3 77.5

Residential mortgages 4,089.2 3,568.0 3,345.0 3,198.6 3,081.3

Total loan assets 5,448.6 4,853.6 4,699.3 4,358.3 4,162.9

Deposits from customers 3,834.5 3,109.7 2,707.4 2,803.5 3,151.9

Liabilities for loans securitized 2,298.5 2,309.4 2,472.0 2,124.1 1,700.3

Share capital 137.2 137.2 137.2 137.2 137.2

Retained earnings 153.1 133.1 111.6 85.4 66.7

Assets under administration 33,331.2 29,571.7 27,872.1 25,226.9 23,781.7

Financial RatiosReturn on Common Equity 8.6% 10.7% 14.5% 13.8% 20.5%

Effi ciency Ratio 55.4% 51.5% 54.2% 58.4% 54.7%

Return on Investment 3.0% 5.0% 5.0% 5.0% 5.0%

Return on Assets 0.35% 0.44% 0.54% 0.52% 0.70%

Capital Adequacy 2

Assets to Capital Multiple 18.2 14.9 13.6 14.7 13.0

Total Regulatory Capital to Risk-Weighted Assets 17.8% 18.9% 19.1% 16.7% 17.8%

1 Income from discontinued operations of $1.1 and $1.7 for 2011 and 2010 respectively has been included within non-interest income. Additionally, the 2010 total assets reported includes $4.0 in assets related to discontinued operations.

2 All capital adequacy ratios for 2014 and 2013 are calculated using guidelines issued by the Offi ce of the Superintendent of Financial Institutions Canada (OSFI) under the Basel III framework. The 2010 to 2012 comparative ratios are calculated using guidelines issued by OSFI under the Basel II framework. Basel III and Basel II are not directly comparable.

Financial Highlights(Millions of Dollars)

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Corporate Direction Concentra Financial Services Association (Concentra) was formed in 2005 as Canada’s only fi nancial services retail association to support and strengthen the growing credit union system. Over the past 10 years, Concentra has worked to develop a deep knowledge of the credit union system and to deliver solutions that are helping credit unions win in the marketplace.

As Concentra continues to evolve, so does its approach to strategic management. This is to ensure a clear direction toward future growth by delivering long-term value to the credit union system. Throughout 2015 and beyond, Concentra will actively focus on strengthening its position as the primary wholesale fi nancial and trust solutions provider, to credit unions, helping them to win in the marketplace.

Business strategies target key drivers that will have maximum impact for credit unions in the areas of fi nancial performance, risk management, and member offerings. Supporting strategies will enhance the capabilities and systems at Concentra to facilitate the achievement of strategic objectives.

Concentra will monitor and evaluate the success of these strategies against industry-recognized measures in the following categories: fi nancial performance, market growth, effective operations, and people.

Our Aspiration

Committed to credit union success, we will push the envelope of possibilities to deliver exceptional solutions and expertise to help credit unions grow and prosper.

Strategic Pillars

BUILD scope and scale to enhance market relevance to credit unions.

GROW as a credit union-centric company.

CHANGE capacity and capabilities to meet credit union needs.

2014 Board of DirectorsAllan Meyer, Chariman of the Board(Saskatchewan Region)

Anne Gillespie(Alberta Region)

Bob Hague (National Services)

Gilles Colbert(Saskatchewan Region)

Joel Rondeau(Minority Shareholders)

Lise de Moissac(Saskatchewan Region)

Malcolm Stoffman(Ontario / British Columbia Region)

Peter Enns, Vice-Chair of the Board (Manitoba Region)

Perry Erhardt(Saskatchewan Region)

Pieter McNair(Saskatchewan Region)

Russ Siemens(Saskatchewan Region)

Scott Kennedy(Ontario / British Columbia Region)

Shawn Good(Saskatchewan Region)

Stephen Fitzpatrick(Class B Shareholders)

Wayne McLeod(National Services)

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The Boards of Concentra Financial Services Association, and its wholly-owned subsidiary Concentra Trust, (the “Company”) aspire to uphold high standards of corporate governance which refl ect not only the applicable legal and regulatory requirements but also emerging best practices and our dedication to the co-operative system and its principles. The Board of Directors (the “Board”) is committed to acting in the best interest of the Company, its shareholders and members.

Board of Directors

The Company has a 15 person Board consisting of one appointed director and 14 directors elected by its membership in accordance with regional representation outlined in the Company bylaws.

The role of the Board is to supervise and provide oversight to the management of the business and affairs of the Company. The Board must ensure that the Company’s resources and capacities are deployed in a manner that advances and protects member interests. The Board is responsible for setting the tone for a culture of integrity and expects the highest level of personal and professional integrity from the CEO and executive offi cers of the Company.

The Board fulfi lls its role directly and through committees which are delegated certain responsibilities. The Board and its committees focus on continued improvement of the Company’s governance principles and practices to align with evolving best practices and regulatory guidance in the Company’s operations as a federally regulated fi nancial institution guided by co-operative principles.

Risk Management

The Board plays an integral role in the Company’s risk management processes and directly oversees risk management to ensure a comprehensive approach to risk. As part of this oversight, the Board approves the enterprise risk management framework to ensure that policies and procedures are in place to measure and manage material risk exposures. The Company’s management team provides quarterly updates on the framework and risk observations to the Board.

The Board is accountable to the shareholders for the organization’s strategy and performance. The Board provides risk oversight, defi nes the risk appetite for the Company and sets a clear tone from the top for risk culture, to preserve the viability of enterprise and shareholder value. The detailed oversight to risk is undertaken at the Board committee level as delegated through Board and committee mandates.

Board Effectiveness and Independence

The Board continues to oversee implementation of the Offi ce of the Superintendent of Financial Institutions (OSFI) Corporate

Governance Guidelines which communicates OSFI’s expectations with respect to corporate governance for federally regulated fi nancial institutions.

While it is the Members that elect directors, the Board plays an important role in identifying candidates for member consideration. The Governance and Nominating Committee is responsible to assess overall composition of the Board and facilitates procedures for reviewing existing directors and selecting and appointing new directors based on the competencies and personal attributes that the Board needs to fulfi ll its responsibilities. Based on the Board approved Director Competency Matrix, the committee is responsible for making recommendations to the Board on appropriate skills required on the Board as a whole, and will also monitor professional development to ensure each director has the developed skills needed to complete the tasks required of him/her.

The relationship between the Company’s business model, its member-owners and the Company’s Bylaws, defi ne the way in which the Company’s directors are identifi ed and elected. The Board must exercise adequate oversight of the nomination process to ensure that the Board can meet its regulatory responsibilities as a federally regulated fi nancial institution.

All members of the Concentra Financial Board of Directors are independent from management. On Concentra Trust, the CEO is a member of the Board, however the remaining directors are non-executive directors, in compliance with OSFI’s Corporate Governance Guideline. The Company has taken the spirit of the OSFI Guideline further by approving an Independence Standard, which encourages self-disclosure of other forms of actual or perceived confl icts of interest, and it states that a minimum of fi ve directors on the Board must be free from any such confl icts.

Strategy

The Company’s corporate direction is established by the Board of Directors and the Executive Leadership Team.

On an annual basis the Company develops a fi ve-year business plan in association with the strategic planning process. It provides an indication of the strategic direction and generates current and long-term fi nancial targets for the Company.

As part of its responsibility to oversee the execution and fulfi llment of the Company’s strategy, the Board spent considerable time reviewing the Company’s strategic plans, including evaluating the impact that current and forecasted economic conditions and regulatory considerations may have on the Company’s performance and the credit union system. The Board understands the importance of strategic decisions and how they impact the Company’s growth and value which are critical to the Company’s members and shareholders. The Board regularly engages management in constructive dialogue, provides challenge and guidance and approves signifi cant strategic decisions and plans.

Corporate Governance Overview

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Committees

In fulfi lling its roles and responsibilities, the Board delegates certain responsibilities to its committees.

Risk Committee

The role of the Risk Committee is to assist the Board in fulfi lling its oversight responsibilities for enterprise risk management. This role encompasses oversight to risk frameworks, risk identifi cation, management and reporting, and strict adherence to risk appetite and policy. The committee meets regularly with and without members of management present, and has the opportunity to meet separately with the chief executive offi cer and the chief risk offi cer. The committee is satisfi ed that it has fulfi lled its responsibilities in 2014 and will continue to provide a forum for an enterprise wide view of risk, reinforce the Company’s risk culture and engage management in substantial dialogue on risk matters.

As at December 31, 2014, the following individuals served as members of the Risk Committee:

Stephen Fitzpatrick (Committee Chair) – director since 2011

Joel Rondeau – director since 2014

Perry Erhardt – director since 2014

Gilles Colbert – director since 2013

Lise de Moissac – director since 2014

Audit and Conduct Review Committee

The Audit and Conduct Review Committee is responsible for supervising the quality and integrity of the Company’s fi nancial reporting, which includes overseeing the integrity of the Company’s fi nancial controls and effectiveness of the internal and external audit functions. The majority of the committee must be independent and every member of the committee must satisfy the fi nancial literacy and experience requirements of all applicable regulatory requirements. At least one member of the committee must be a fi nancial expert and one member must have the legal and regulatory compliance expertise as defi ned in the Company’s Competency Matrix. The committee oversees the Company’s code of conduct, related party transactions and compliance with legal and regulatory requirements, including reviewing the Anti-Money Laundering/Anti-Terrorist Financing program, receiving reports and updates on the Foreign Account Tax Compliance Act, Canada’s Anti-Spam Legislation and overall compliance with the laws and regulations that apply to the Company.

The committee meets regularly with and without members of management present, and has the opportunity to meet separately with the chief executive offi cer, the chief fi nancial offi cer, the chief internal auditor, the chief compliance offi cer and the chief anti-money laundering offi cer. The committee is satisfi ed that it has fulfi lled its responsibilities and, as at December 31, 2014, the following individuals served as members of the Audit and Conduct Review Committee:

Stephen Fitzpatrick (Committee Chair) – director since 2011

Peter Enns – director since 2011

Gilles Colbert – director since 2013

Pieter McNair – director since 2013

Anne Gillespie – director since 2014

Governance and Nominating Committee

The Governance and Nominating Committee is responsible for developing the Company’s corporate governance principles. The committee’s responsibilities include ensuring appropriate structure and composition of the Board and the committees of the Board, reviewing the competencies and skills of the Board, its committees and potential candidates for membership on the Board, and the nominations and elections process. The committee monitors director education, new director orientation the assessment and evaluation of the Board and oversees shareholder communications.

In 2014, the Governance and Nominating Committee continued to oversee implementation of regulatory requirements, in particular, OSFI’s revised Corporate Governance Guidelines. In carrying out their responsibilities, the committee spent considerable time discussing the structure and composition of the Board’s committees and, with input from an external consultant, recommended a new committee structure which included a dedicated Risk Committee. The committee substantially refi ned the nominations process, implemented the use of a Competency Matrix to identify the competencies and personal attributes required of directors to allow the Board to fulfi ll its wide-ranging responsibilities, and established an ongoing process to identify key competencies required on the Board to align with operations and strategic direction.

The committee is composed of directors from four regions and has the opportunity to meet with and without management. The committee is satisfi ed that it has fulfi lled its responsibilities for 2014 and, as at December 31, 2014, the following individuals served as members of the Governance and Nominating Committee:

Malcolm Stoffman (Committee Chair) – director since 2008

Shawn Good – director since 2014

Wayne McLeod – director since 1994

Russ Siemens – director since 2014

Bob Haque – director since 2010

Human Resources and Compensation Committee

The Human Resources and Compensation Committee provides oversight to the Company’s overall compensation structures and incentive plan, compensation and performance management of the CEO and reviews compensation and succession planning for the Executive Leadership Team. To assist in executing its responsibilities, the committee relied on the advice of an independent compensation advisor to assist in developing compensation recommendations for the CEO and senior management.

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Chaired by the Chairman of the Board, the committee is composed of the Board committee chairs to ensure knowledge and expertise in issues related to human resources, leadership, talent management, compensation, governance and risk management. As of December 31, 2014, the following directors served as members of the Human Resources and Compensation Committee:

Al Meyer (Chairman of the Board and Committee Chair) –

director since 2013

Malcolm Stoffman – director since 2008

Wayne McLeod – director since 1994

Pieter McNair – director since 2013

Scott Kennedy – director since 2007

Stakeholder Relations Committee The Stakeholder Relations Committee was created in June 2014 as an ad hoc committee of the Board to oversee and direct the Board and senior management to develop strong stakeholder relationships that advance knowledge and understanding of Concentra’s value proposition, Board endorsed strategic direction, and critical issues & opportunities. In general, the committee provides oversight in communication strategies and plans for interacting and collaborating with signifi cant direct and indirect stakeholders. In 2014, the committee provided

oversight to stakeholder relations to implement initiatives related to regulatory capital and consolidation of wholesale fi nancial and trust services in the credit union system.

As of December 31, 2014, the following directors served as members of the Stakeholder Relations Committee:

Al Meyer (Chairman of the Board and Committee Chair) –

director since 2013

Malcolm Stoffman – director since 2008

Wayne McLeod – director since 1994

Shawn Good – director since 2014

Scott Kennedy – director since 2007

Board Compensation and Director Attendance

Director compensation is paid according to policy which is subject to annual review. Our regional governance structure requires director representation from across Canada. Given the varying locations of residence, travel expenses among individual directors may vary signifi cantly due to the location and frequency of meetings they are accountable to attend.

The table below summarizes compensation, expense reimbursement, and attendance for each director in 2014.

Director RegionRetainers/

HonorariumsPer 

DiemsTravel/Other Total $

Board Meetings 

Committee Meetings

Gilles Colbert Saskatchewan $7,200 $10,200 $8,226 $25,626 11/11 7/7

Lise de Moissac* Saskatchewan 4,700 8,100† 926 $13,726 6/7 4/4Loretta Elford*1 Saskatchewan 4,700 3,900 1,521 $10,121 5/5 5/5

Peter Enns Manitoba 7,200 13,800 12,048 $33,048 11/11 9/9

Perry Erhardt* Saskatchewan 4,700† 12,300† 6,011 $23,011 7/7 4/4Stephen Fitzpatrick 2 Class B Shareholders 19,100 11,400 19,263 $49,763† 10/12 11/12

Anne Gillespie* Alberta 4,700 8,700 7,336 $20,736† 6/7 4/4

Shawn Good* Saskatchewan 4,700 8,400 4,988 $18,088† 6/7 8/8

Bob Hague National Services 7,200† 6,600† 10,063 $23,863 7/11 6/9

Scott Kennedy Ontario/B.C. 7,200 19,800 13,263 $40,263 10/12 12/13

Gordon Lightfoot* Saskatchewan 2,500 5,100 3,635 $11,235 5/5 3/3

Wayne McLeod National Services 7,200 16,200 9,660 $33,060 11/12 14/15

Pieter McNair Saskatchewan 7,200 13,500 7,600 $28,300 12/12 13/13Bobby McVeigh *3 Minority (Atlantic) 10,000 8,100 18,226 $36,326 4/4 4/4Al Meyer 4 Saskatchewan 21,300 16,800 11,405 $49,505 12/12 9/10

Ken Morris* Alberta 2,500 1,500 3,787 $7,787 3/5 3/5

Joel Rondeau* Minority (Caisse ‐ MB) 4,700 9,900 5,431 $20,031 7/7 4/4

Russ Siemens* Saskatchewan 4,700 8,400 4,861 $17,961 7/7 5/5Malcolm Stoffman 5 Ontario/B.C. 14,400 10,200 24,880 $49,480 10/11 14/16

Dean Walde* Saskatchewan 2,500 2,100 4,309 $8,909 5/5 2/2

Totals $148,400 $195,000 $177,439 $520,839

§ Compensation represents compensation earned by directors over the course of 2014, not necessarily what was paid out in 2014, in rounded numbers.*Part of 2014 only† Director elects to have compensa�on paid directly to his/her employer/organiza�on1 Chair of the Governance Committee (until May 2014)

DIRECTOR DISCLOSURE: January ‐ December 2014

3 Board Chair (until May 2014)4 Board Chair (after May 2014)5 Chair of the Conduct Review Committee (until May 2014) and Chair of the Governance and Nominating Committee (after May 2014)

Meeting AttendanceCompensation§

2 Chair of Audit & Risk Committee (until May 2014), and Chair of both Audit & Conduct Review Committee and Risk Committee (after May 2014

§ Compensation represents compensation earned by directors over the course of 2014, not necessarily what was paid out in 2014, in rounded numbers.* Part of 2014 only† Director elects to have compensation paid directly to his/her employer/organization1 Chair of the Governance Committee (until May 2014)2 Chair of Audit & Risk Committee (until May 2014), and Chair of both Audit & Conduct Review Committee and Risk Committee (after May 2014)3 Board Chair (until May 2014)4 Board Chair (after May 2014)5 Chair of the Conduct Review Committee (until May 2014) and Chair of the Governance and Nominating Committee (after May 2014)

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Concentra was formed with a national mandate to serve the Canadian credit union system. Today, with its wholly-owned subsidiary Concentra Trust, Concentra is a fully functioning federally regulated fi nancial institution within the Canadian co-operative system. Concentra operates with a broad set of federal retail powers, similar to national banks, providing wholesale fi nancial and trust solutions across provincial borders to Canada’s credit unions.

Concentra exists to be a trusted national fi nancial partner to credit unions. Its aim is to meet the growing and sophisticated needs of credit unions with business solutions that improve fi nancial performance, support effective risk management, and meet member needs. Concentra has two distinct strategic groups of business established to meet credit union needs – Financial Intermediation and Concentra Trust.

Financial Intermediation

Known for responsiveness and fl exibility in bringing solutions to bear on new emerging market opportunities, the Financial Intermediation business lines deliver a range of wholesale solutions that target capital and liquidity, risk management, and the lending/investing needs of credit union members. Federal retail powers differentiate Concentra with the ability to operate in capital and senior markets to strategically move assets and source funding to better serve credit unions.

COMMERCIAL MARKETS

Commercial Markets solutions offer wholesale commercial investment opportunities that perform as diversifi ed revenue sources to optimize fi nancial performance and manage risk. Commercial solutions also serve to manage concentration limits and single issuer connection limits.

FINANCIAL MARKETS

Financial Market solutions include derivatives, foreign exchange, funding, and strategic fi nancial management.

Intermediary derivatives are specialized fi nancial instruments that include interest rate swaps, bond and U.S. dollar forwards used to reduce a specifi c risk profi le on the balance sheet. Concentra offers a leading foreign exchange platform to credit union and corporate clients to manage foreign exchange exposure. Concentra manages its funding portfolio through retail, commercial, wholesale sources to support credit union liquidity needs. Strategic Financial Management (SFM) offers industry-leading asset-liability management consulting to credit unions to improve balance sheet performance.

RESIDENTIAL MARKETS

Residential Markets offers acquisition, syndication, securitization of residential mortgages, competitive mortgage investment products, and expert consulting to enhance mortgage strategies.

A signature offering of this business is providing access and support for credit union participation in the National Housing Act Mortgage-Backed Securities (NHA MBS) and Canada Mortgage Bond (CMB) programs. These programs are leading investment tools to achieve long-term funding that improves fi nancial performance.

COMMERCIAL EQUIPMENT FINANCING

Concentra offers specialized commercial equipment fi nancing solutions with competitive deal structures and pricing. Equipment fi nancing solutions help credit unions expand product offerings to meet the needs of members while providing an additional revenue stream.

Select 2014 Highlights• Secured additional funding, as a provider and program partner,

to a MCAP-led Commercial Mortgage-Backed Securities (CMBS) private placement offering in the Canadian capital markets valued at $228.6 million

• Achieved $861.0 million in commercial loans funded, growth of nearly 400% from 2013 largely due to rise in the construction portfolio, CMBS activity, and credit union business

• Obtained over $1.0 billion in retail deposits increasing capability to serve credit union funding needs

• Facilitated $764.8 million in credit union securitization transactions, a 13.3% increase over 2013

• Operationalized funding of insured multi-family/social housing commercial loans through Canadian Mortgage Housing Corporate (CMHC) sponsored securitization programs, totaling approximately $124.3 million

• Strengthened the Strategic Financial Management (SFM) team to meet the growing demand of our fi nancial consulting service

• Invested in new technology to enhance the management and delivery of foreign exchange solutions, resulting in greater client effi ciency and security

• Equipment fi nancing origination volumes surpassed $143.5 million, an increase of 63% over 2013

• Equipment fi nancing originations from credit unions increased by over 27% from 2013

Strategic Priorities• Develop expertise and capacity to expand in agriculture and

construction lending solutions to credit unions

• Development of the CMBS program with targeted credit unions

• Invest in further development of technology for online facilitation of syndicated loans within the credit union system

• Complete additional foreign exchange technology upgrades

• Market expansion of the CMB/NHA MBS securitizationprograms within the credit union system

• Engage strategic partners to support growth of the equipment fi nancing business line

Business Profi le

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Concentra Trust

Wholesale and retail trust services are delivered through Concentra Trust, a wholly-owned subsidiary of Concentra Financial. With the same powers as other national trustees, Concentra Trust offers a wide range of personal trust, corporate trust and registered plan solutions. Concentra Trust offerings are utilized by almost 80% of Canada’s credit unions.

PERSONAL TRUST

Personal Trust offers professional, impartial executor and trustee solutions designed to meet individual estate and trust planning needs.

CORPORATE TRUST

Corporate Trust solutions include trustee solutions for cemetery and funeral trusts, escrows, forest renewal trusts, and life lease trusts. The service offering includes safeguarding of assets, administration, reporting, regulatory capacity, and legislative profi ciency.

REGISTERED PLAN TRUSTEESHIP

The registered plan program offerings serve as opportunities for credit unions to retain fi nancial assets while meeting the investment needs of their members, helping to retain assets and wealth within the credit union system.

2014 Select Highlights• Concentra Trust assets under administration grew

approximately 12% primarily as a result of growth within the registered plan portfolio

• Invested in operational process adjustments to improve risk management and client delivery

• Participated in a new RESP program, Saskatchewan Advantage Grant Education Savings (SAGES), facilitating payments of approximately $500 thousand largely through credit unions

• Reached over 3,000 credit union employees with webinar and face-to-face training presentations

Strategic Priorities• Deepen credit union client relationships with trust offerings

to further support growth and retention of assets and wealth in the system

• Align the corporate trust business line to a disciplined renewal and growth strategy

• Examine market opportunities for increased capacity to serve the growing personal trust needs of the credit union system

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ASSET GROWTH

The company establishes long-term growth targets annually, based on anticipated credit union and market opportunities.

A capital plan is developed to ensure Concentra has capital in excess of regulatory minimums to meet growth targets.

Growth of on-balance sheet assets for the year was 11.4% (2013 - 4.1%). Growth has been seen in all material portfolios, and was driven by loan growth and as a result of liquidity requirements. The increase was predominantly funded by retail deposits. The overall size of the balance sheet is within acceptable levels in relation to capital and liquidity targets.

Consolidated assets under administration including on-balance sheet assets increased by 12.7% (2013 – 6.1%). The increase was mainly due to increases in assets administered or managed by the company on behalf of estates, trusts and agencies along with growth in Tax Free Savings Accounts, registered plans and loan syndications.

EFFICIENCY

Effi ciency measures the ratio between non-interest expenses to net interest income and non-interest income. The company endeavours to continue to cost containment through streamlining functions, reducing manual processes, and outsourcing where appropriate. As well Concentra continues to look for opportunities to increase net interest margin for itself and the credit unions.

Strategic Objective Long Term Targets 2014 Target 2014 Actual 2013 Actual 2012 Actual

Asset Growth Range: 10% - 15% 7.3% 11.4% 4.1% 4.4%

Effi ciency Range: 45% - 55% 54.8% 55.4% 51.5% 54.2%

Return on Common Equity (ROE) Range: 8% - 12% 10.2% 8.6% 10.7% 14.5%

Return on Assets (ROA) n/a 0.42% 0.35% 0.44% 0.54%

Return on Investment (ROI) Range: 3% - 5% 5.0% 3.0% 5.0% 5.0%

The following discussion and analysis on the operations and fi nancial position of Concentra for the year ended December 31, 2014, should be read in conjunction with the Consolidated Financial Statements and the accompanying notes.

This MD&A may contain forward-looking statements concerning Concentra’s future fi nancial strategies. These statements involve uncertainties in relation to prevailing economic, legislative and regulatory conditions at the time of writing. Therefore, actual results may differ from the forward-looking statements contained in this discussion.

Financial Performance

Concentra is committed to build the company for exceptional performance, which includes strong and sustainable fi nancial results, to support its ability to provide fi nancial wholesale and

trust solutions to credit unions across Canada. To that end, Concentra establishes long-term fi nancial performance objectives that are reviewed and approved annually by the Board of Directors as an essential component of the strategic planning process. The measurement of these key fi nancial performance indicators is based on consolidated operations. Concentra’s return on common equity (ROE) decreased from 10.7% to 8.6% in 2014. The continued low rate environment combined with a shift in asset/liability mix had a negative effect on the 2014 net interest margin. While this was partially offset by additional transactions designed to generate non-interest income, the overall effect was a decline in net income as compared to 2013. The following is a summary of the company’s key fi nancial performance indicators.

45.0%

50.0%

55.0%

60.0%

55.4%

51.5%

54.2%

2014 2013 2012

Management Discussion and Analysis

14

The effi ciency ratio increased in 2014 to 55.4% (2013 – 51.5%). The increase in the ratio as compared to prior years was mainly attributed to lower net interest income resulting from the continued low rate interest environment. This was partially offset by higher non-interest income due to an increased gain on fi nancial instruments during the year.

RETURN ON COMMON EQUITY

For the year ended December 31, 2014, the consolidated return on common equity was 8.67% (2013 - 10.7%). Return on capital was impacted by a decrease in net interest margin.

Management will continue to pursue changes in product and funding mix to improve net interest margin.

RETURN ON ASSETS

The consolidated return on assets decreased from 0.44% in 2013 to 0.35% in 2014. Financial performance was positively impacted by an increase in non-interest income; however this was offset by a decrease in net interest income.

RETURN ON INVESTMENT TO MEMBERS

In order to provide a balance between investor return and growth objectives, Concentra reduced the 2014 cash dividend to $4.0 million (2013 - $6.7 million) which represents a 3% return on average share capital. Management continues to pursue alternative sources of capital in order to provide a balanced return to investors going forward.

0%2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

8.6%

10.7%

14.5%

2014 2013 2012

0.0%

0.2%

0.4%

0.6%

0.35%

0.44%

0.54%

2014 2013 2012

0

2,000

4,000

6,000

8,000

3,997

6,661 6,661

3.0%

5.0% 5.0%

2014

Class A dividends

2013 2012

Return on investment

2015 Financial Performance Outlook

The outlook for fi nancial performance is based on expectations of moderate economic growth in the Canadian market. Concentra will achieve the 2015 targets by continuing to balance the need for increased profi ts while still providing value to credit unions. The company is also focused on strengthening both new and existing relationships with suppliers and customers to further cement its role as a strategic partner that supports credit union competitiveness in the fi nancial industry.

Concentra will maintain its focus on further growth in fi nancial intermediation and trust solutions in an environment of compressed net interest margin as a result of historically low interest rates and fl attening interest rate curve. Given this environment, practical management of this growth will focus on ensuring appropriate returns.

Performance measures for 2015 such as net interest income and return on equity are expected to be consistent with 2014 actual results.

15

Financial Statement Analysis

BALANCE SHEET

Consolidated assets increased by 11.4% to $6,746.5 million in 2014. The increase was primarily due to higher planned growth in all portfolios. The company’s increase in total assets was funded by an increase in a mix of funding sources including deposit liabilities.

SECURITIES

Securities increased by $96.9 million to $1,164.5 million in 2014. Securities of $270.7 million (2013 - $360.0 million) are held within securitization programs. The securities portfolio is mainly comprised of high quality debt instruments, with risk ratings of A/R1L or better. Securities are typically held to maturity and are managed in conjunction with the company’s liquidity requirements.

In anticipation of the Liquidity Coverage Ratio (LCR) requirements effective January 1, 2015, Concentra has repositioned the securities portfolio to increase holdings of highly liquid assets that qualify as level 1 assets under OSFI’s new Liquidity Adequacy Requirements Guideline. As a result the composition of the securities portfolio is primarily composed of government backed securities. The Company will continue to manage the portfolio going forward to ensure an adequate balance between liquidity requirements and yield.

LOAN ASSETS

Loans increased by $595.0 million to $5,448.6 million in 2014 compared to 2013. Residential mortgages of $2,497.0 million (2013 - $2,145.9 million) and credit union loans of $27.7 million (2013 - $124.2 million) are held within securitization programs.

Overall Concentra experienced growth in all loan portfolios in 2014. Residential mortgages continue to be Concentra’s largest portfolio, increasing by $521.2 million which represents the strongest source of loan growth in dollar terms. Finance leases increased by $56.9 million and Commercial and Credit Union Loans increased by $16.9 million. The composition of the loans portfolio remained relatively unchanged during the year.

Corporate & Securitization Securities(Millions of Dollars)

2012

Corporate securities

2013

2014

Securitization securities

0 300 600 900 1,200

271894

360708

438602

Composition of Securities

2014 2013 2012

Government 63% 41% 36%

Corporate 12% 8% 10%

Mortgage-backed 1% 12% 11%

Asset-backed 24% 39% 43%

Total securities 100% 100% 100%

Corporate & Securitization Loans(Millions of Dollars)

2012

Corporate loans

2013

2014

Securitization loans

0 1,500 3,000 4,500 6,000

2,5252,924

2,2702,584

2,0832,616

Total Consolidated Assets & Total Loan Assets(Millions of Dollars)

2012

Total consolidated assets

2013

2014

0 1,500 3,000 4,500 6,000 7,500

6,746

5,449

4,854

4,699

6,058

5,820

Total loan assets

Government Corporate

Mortgage-backed Asset-backed

24%

63%

1%

12%

16

The geographical disbursement of loans has been consistent in recent years with the Ontario region continuing to represent the largest segment, followed by Alberta and Saskatchewan. Efforts continue to geographically diversify as the company works with credit unions throughout the country to acquire loan products and develop other service offerings.

During 2014, the company securitized $1,005.7 million (2013 - $673.5 million) of residential mortgages through the Canada Mortgage and Housing Corporation (CMHC) sponsored National Housing Act Mortgage-Backed Securities (NHA MBS) program which were sold to third parties, securitized or assigned as replacements for repaid amounts under the Canada Mortgage Bond (CMB) program, or held for future purposes including liquidity.

The company from time to time will also enter into securitization transactions through the NHA MBS program that transfer substantially all of the risks and rewards of ownership of the underlying mortgages to a third party. These transactions include (1) securitizing and selling certain insured multi-family residential or social housing mortgages with no pre-payment privileges; and (2) securitizing pools of third party originated insured single family residential mortgages and simultaneously entering into an agreement to sell the retained interest (excess spread) less specifi c related costs, back to the third party originator. For both of these types of transactions, as substantially all of the risks and rewards of ownership have been transferred to a third party, the underlying mortgages are derecognized from the company’s balance sheet. In 2014, the company entered into derecognized securitizations totaling $124.3 million (2013 - $33.4 million).

LOAN IMPAIRMENT

Specifi c allowances are reviewed for adequacy on a regular basis by examining the present value of estimated future cash fl ows for individual assets. Collective allowances are determined based on management’s judgment considering credit risk characteristics, economic conditions and historical credit performance.

Commercial and credit union loans

Residential mortgages

Finance leases

75%

3%

22%

Composition of Loans

2014 2013 2012

Commercial and credit union loans 22% 25% 27%

Finance leases 3% 2% 2%

Residential mortgages 75% 73% 71%

Total loans 100% 100% 100%

2014 2013 2012

British Columbia 13% 13% 13%

Alberta 25% 21% 25%

Saskatchewan 17% 19% 16%

Manitoba 2% 1% 2%

Ontario 36% 39% 36%

Quebec 1% 1% 1%

Atlantic 6% 6% 7%

Total loans 100% 100% 100%

Atlantic Saskatchewan

British Columbia

Alberta

Manitoba

Ontario

Quebec

36%

25%

17%

2%

13%

6%1%

0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000 0.45%

0.40%

0.35%

0.30%

0.25%

0.21%

0.16%

0.12%0.10%

0.18% 0.20% 0.20%

0.15%

0.10%

0.05%

0.00%

$8,720

$5,705

$8,617

$9,268

$4,572

$11,559

2014Specific allowancesSpecific allowances as apercentage of gross credit loans

Collective allowances as apercentage of gross credit loans

Collective allowances2013 2012

17

In 2014, gross impaired loans and property held for resale as a ratio of gross credit loans decreased to 0.50% from 0.73% in the prior year. The decrease in the ratio is primarily due to the full recovery of one signifi cant commercial loan which was impaired during the prior year. The geographic disbursement of gross impaired loans remained consistent with the prior year with the exception of the Saskatchewan region which experienced a large decrease as a result of the commercial loan recovery noted above.

DERIVATIVE FINANCIAL INSTRUMENTS

In the ordinary course of business, the company enters into derivative transactions to support the following strategic objectives/functions: (1) asset/liability management derivatives are used to manage interest rate and foreign currency exposure on the company’s balance sheet, including contracts used to reposition the company’s overall risk profi le; (2) securitization derivatives are used to hedge interest rates on securities and loans held within the CMB program and interest rates on future CMB issuances including certain derivatives designated in a qualifying cash fl ow hedging relationship; and (3) intermediary derivatives are contracts entered into with third party fi nancial institutions on behalf of credit union customers. The company does not have a trading program for derivatives. The following table summarizes the company’s derivative portfolio by strategic objective/function:

Gross Impaired Loans & Property Held for Resaleas a Ratio of Gross Credit Loans 1

0.00%0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.50%

0.33%

0.73%

2014 2013 2012

Gross Impaired Loans & Property Held for Resaleas a Ratio of Gross Credit Loans 1

201220132014

0.00%

Atlantic

Quebec

Ontario

British Columbia

Total

Manitoba

0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40%

Saskatchewan

Alberta

(Thousands of Dollars)

Notional Amount

Positive Fair Value

Negative Fair Value

Notional Amount

Positive Fair Value

Negative Fair Value

Asset liability managementInterest rate swaps 688,877 1,064 9,015 802,350 5,129 9,065 Forward contacts 64,484 - 767 - - - Foreign exchange contracts 1,715 - - 2,652 - -

SecuritizationInterest rate swaps 325,531 6,644 343 352,812 10,593 2,939 Forward contacts 832 - 17 8,615 70 - Designated in cash flow hedges 20,000 34 - - - -

IntermediaryInterest rate swaps 1,108,986 6,387 6,079 650,787 2,779 2,299 Forward contacts 276,078 422 414 - - - Foreign exchange contracts 41,253 - - 46,235 - -

Total 2,527,756 14,551 16,635 1,863,451 18,571 14,303

2014 2013

All of the company’s derivative contracts are over-the-counter (OTC) bilateral agreements with highly rated Canadian fi nancial institutions. The company does not use derivatives that are traded on a recognized exchange or cleared by central counterparties (CCP).

(1) Gross credit loans includes total outstanding principal before specifi c and collective allowances.

18

DEPOSITS FROM CUSTOMERS

Deposits increased by $724.8 million to $3,834.5 million in 2014 as a result of growth in personal deposits partially offset by a decrease in credit union and commercial deposits. The asset growth achieved in 2014 was primarily funded from personal deposits as Concentra leveraged relationships primarily within the retail market to obtain new sources of deposits.

The increased involvement in the retail market has resulted in the company obtaining a larger percentage of referring agents in Ontario compared to the other regions. As a result the growth in personal deposits is largely concentrated within the Ontario region. The increased growth of personal deposits has diminished the dependency on Saskatchewan sourced deposits as compared to years prior, however commercial and credit union deposits continue to be concentrated within Saskatchewan. Concentra continues to diversify geographically and by source.

LIABILITIES FOR LOANS SECURITIZED

Liabilities for loans securitized decreased by $10.9 million to $2,298.5 million in 2014 compared to 2013. When a NHA MBS is sold to a third party or securitized as part of a CMB issuance a matching liability is established based on the fair value of the assets on the date of the transfer. Liabilities for loans securitized are consistent with the prior year as the company typically matches maturing obligations with new liabilities resulting in nominal changes in the overall liability.

Deposit Portfolios(Millions of Dollars)

Credit union

2012

2013

2014

Commercial Personal

0 1,000 2,000 3,000 4,000

1,184 2,457193

4161,276 1,417

3121,480 916

2014 Commercial Credit Union Personal

British Columbia 0% 6% 7%

Alberta 0% 6% 2%

Saskatchewan 96% 63% 8%

Manitoba 0% 0% 3%

Ontario 4% 7% 78%

Quebec 0% 0% 1%

Atlantic 0% 18% 1%

Total deposits 100% 100% 100%

2014 2013 2012

British Columbia 6% 10% 7%

Alberta 4% 6% 7%

Saskatchewan 29% 36% 56%

Manitoba 2% 5% 4%

Ontario 52% 34% 16%

Quebec 1% 1% 0%

Atlantic 6% 8% 10%

Total deposits 100% 100% 100%

Liabilities for Loans Securitized (Millions of Dollars)

2012

CMB

2013

2014

NHA MBS

0 500 1,000 1,500 2,000 2,500

4361,862

2152,094

2332,239

19

Balance Sheet Outlook

Concentra will continue to provide the products and services that credit unions need to increase competitiveness, enhance profi tability, and manage risk. Accordingly, Concentra anticipates increased activity in fi nancial intermediation products. The outlook for new business opportunities in serving credit unions is positive for 2015. This is supported by the strength of the credit union system and the relative strength of the Canadian economy.

Management believes that market share can be expanded through increased focus on relationships with partners and credit unions which will lead to a larger asset base in 2015 through fi nancial intermediation activities. This larger asset growth will be funded through expanding existing funding sources and selective use of the debt capital markets.

The Bank of Canada responded to a weakness in oil prices by lowering the overnight rate in early 2015. These actions will help to stimulate investment and growth in the Canadian economy by encouraging the movement of investment away from the resource based geographies back into manufacturing geographies. Concentra has a diversifi ed portfolio based on sound credit practices and will continue to manage the portfolio within the established risk appetite. The decline in oil prices and resulting economic impacts are not anticipated to have a material impact on Concentra’s loan portfolio and growth opportunities.

Possible risks that could have a material impact on Concentra’s balance sheet include a substantial and sustained decline in Canadian real estate prices, or a substantial market disturbance affecting the Canadian economy.

ASSETS UNDER ADMINISTRATION

In addition to the company’s on-balance sheet assets, assets under administration includes assets administered by the company and assets where the company acts as a trustee on behalf of clients. Consolidated assets under administration as at December 31, 2014, were $33,331.2 million, an increase when compared to $29,571.7 million for 2013. The increase was mainly due to increases in assets administered or managed by the company on behalf of estates, trusts and agencies along with growth in Tax Free Savings Accounts, registered plans and loan syndications. The level of assets administered or managed contributes to non-interest income.

2012

Assets administered

2013

2014

On-balance sheet assets

0 10,000 20,000 30,000 40,000

6,74626,585

6,05823,514

5,82022,052

Assets Under Administration (Millions of Dollars)

NET INTEREST INCOME

The company experienced further margin compression in 2014 as the low interest rate environment and increasing level of competition in the market have continued to have a negative impact on net yields. The average yield on assets decreased from 3.20% to 3.03% primarily due to lower yields on new loans. This decrease was further enhanced by the repositioning of the securities portfolio in preparation for the LCR requirements effective January 1, 2015, as the company

sold high yielding non-qualifying securities, and purchased more liquid but lower yielding assets. Liability yields experienced a relatively smaller decrease from 2.05% to 2.01% as the effect of lower market rates on loans and notes payable and deposits was substantially offset by the continued shift towards personal deposits which carry a higher rate of interest compared to the company’s other funding sources. Overall, the decrease in asset yields relative to the decrease in liability yields reduced the net interest spread from 1.15% to 1.02%.

(Thousands of Dollars) Average Balance Mix Interest

Interest Rate

Average Balance Mix Interest

Interest Rate

Average Balance Mix Interest

Interest Rate

AssetsSecurities 1,207,188             18% 20,781                     1.72% 1,148,126             19% 21,515                     1.87% 1,218,590             21% 25,556                     2.10%Loans 5,264,392             80% 179,246               3.40% 4,796,210             80% 171,487               3.58% 4,576,578             77% 178,349           3.90%Non-earning assets 138,682                   2% 89,844                         1% 98,699                         2%

6,610,262             100% 200,027               3.03% 6,034,180             100% 193,002               3.20% 5,893,867             100% 203,905           3.46%

Liabilities & EquityDeposits 3,541,542             53% 69,389                     1.96% 2,888,921             48% 52,029                     1.80% 2,998,113             50% 57,677                     1.92%Liabilities for loans securitized 2,332,646             35% 54,497                     2.34% 2,430,705             40% 61,807                     2.54% 2,397,377             42% 70,893                     2.96%Loans and notes 314,352                   5% 4,309                         1.37% 283,186                   5% 3,807                         1.34% 145,286                   2% 1,910                         1.31%Subordinated debentures 100,645                   2% 4,433                         4.40% 132,728                   2% 5,910                         4.45% 79,699                         1% 4,030                         5.06%Non-costing liabilities & equity 321,077                   5% 298,640                   5% 273,392                   5%

6,610,262             100% 132,628               2.01% 6,034,180             100% 123,553               2.05% 5,893,867             100% 134,510               2.28%

Total Assets / Net Interest Income 6,610,262 67,399 1.02% 6,034,180 69,449 1.15% 5,893,867 69,395 1.18%

2014 2013 2012

20

LOAN IMPAIRMENT CHARGES

Loan impairment charges as a percentage of gross loans increased from 0.11% to 0.13% for the year ended December 31, 2014. The increase was the result of growth within the commercial portfolio resulting in a higher collective allowance as well as an increase in the specifi c provision on a signifi cant commercial loan. These increases were partially offset by a reversal of a specifi c provision on another signifi cant commercial account which had been recorded in the prior year.

0.00%

0.03%

0.06%

0.09%

0.12%

0.15%

0.07%

0.11%

0.13%

2014 2013 2012

Loan Impairment Charges as a Percentage of Gross Credit Loans

NON-INTEREST INCOME

Non-interest income has increased $2.9 million to $18.7 million for the 2014 fi scal year. The increase was the result of a higher gain on fi nancial instruments (2014 - $6.5 million; 2013 - $1.2 million) resulting from increased securities sales during the year as Concentra repositioned its portfolio to be in compliance with the new LCR requirements effective January 1, 2015. Securitization income also increased in the current year as a result of additional securitization transactions which achieved

derecognition resulting in current period gains. These gains were partially offset by a $1.1 million decrease in fee for service primarily due to downward movements in the Canadian to U.S. dollar exchange rate resulting in lower foreign exchange income. Unrealized and realized gains/losses on derivatives decreased $2.1 million as downward movements in interest swap curves during the year resulted in a $6.2 million net unrealized loss (2013 - $3.1 million) offset by $3.6 million in net realized gains (2013 - $2.5 million).

(Thousands of Dollars) 2014 2013 2012Commercial and credit union loans 5,622 4,115 240 Finance leases 325 (494) 402 Residential mortgages 889 1,698 2,796 Total loan impairment charges 6,836 5,319 3,438

(Thousands of Dollars) 2014 2013 2012Impairments net of reversals - specific 3,894 5,970 2,061 Impairments net of reversals - collective 2,942 (651) 1,377 Total loan impairment charges 6,836 5,319 3,438

(Thousands of Dollars) 2014 2013 2012Fee for service 13,942 15,010 14,533 Gain on financial instruments 6,520 1,226 4,395 Securitization income 825 107 41 Unrealized and realized gains (losses) on derivatives (2,636) (584) (690) Total non-interest income 18,651 15,759 18,279

2015 Net Interest Margin Outlook

Concentra is expecting a further decline in net interest margin due to the historically low interest rate environment and fl attened yield curve. The margin decline will be offset by a change in portfolio mix resulting in net interest margin levels in 2015 consistent with those realized in 2014.

The company will leverage and extend the core competencies of the fi nancial intermediation businesses to diversify into other attractive asset classes in order to meet credit union demand and enhance net interest margin. This includes a modest investment in consumer credit, vendor channel equipment fi nancing, and expanded focus on commercial lending opportunities in construction and agriculture.

21

NON-INTEREST EXPENSE

In 2014 non-interest expenses have increased by $3.8 million to $47.7 million. The increase is primarily attributed to salaries and employee benefi ts and professional and advisory services which increased $1.5 million and $1.6 million respectively. The

increased salaries and benefi ts were the result of annual salary incements and one-time costs. Additional legal fees related to a commercial loan product as well as a number of new consulting engagements drove the increase in professional and advisory services.

(Thousands of Dollars) 2014 2013 2012Salaries and employee benefits 28,202 26,662 28,730 Professional and advisory services 11,082 9,516 10,389 General business 6,715 6,002 6,680 Occupancy 1,707 1,741 1,706 Total non-interest expense 47,706 43,921 47,505

INCOME TAX EXPENSE

The effective income tax rate for 2014 remained unchanged at 26.9% resulting in income tax expense of $8.3 million (2013 - $9.3 million). In previous years, the Company had been able to claim the maximum deduction available to credit unions which reduced the effective tax rate to the lower small business rate. However since 2013 the Company has been unable to claim the deduction due to an insuffi cient level of eligible deposits. Furthermore, the Income Tax Act was amended in 2013 to phase out the credit union deduction over a fi ve year period and as such the company is not expecting to receive future benefi t from the credit union deduction.

Income Tax Expense(Thousands of Dollars)

0

2,000

4,000

6,000

8,000

10,000

8,301

26.9%

26.9%

16.6%

4,771

9,345

2014 2013 2012

22

Risk Management OverviewAs a fi nancial institution, Concentra assumes risk within the risk appetite specifi ed by the board to create value for its shareholders. Effective risk management strengthens the ability of the company to achieve its business objectives and meet its obligations. A strong risk culture underpins effective risk management.

Risk Principle Statements

The following risk principle statements guide the corporate-wide management of risk for Concentra:

• Risk management is integrated into decision making and strategy every day. Matters related to risks will be escalated and communicated in a timely, accurate and transparent manner.

• While following relevant guidelines and policies, good risk management relies heavily on the application of common sense and business judgment.

• The board takes accountability for risk through setting risk appetite for Concentra. All employees are accountable to actively manage risk within the lines of defense model. Risks are explicitly owned, understood and managed within functional accountabilities.

• Concentra has adopted a lines of defense model to provide independent oversight of risk-taking activities across the company.

• Concentra undertakes suffi cient due diligence to ensure the company knows its clients and business partners to protect itself and its stakeholders against unacceptable risk, including damage to reputation.

• Concentra employs an effective balance of risk and reward. This balance is achieved by aligning risk appetite with business strategy and innovation, diversifying risk, pricing for risk, maintaining adequate levels of capital to support the nature and level of risks taken, and treating risk through preventative and detective controls.

• All signifi cant risks enterprise-wide, including wholly-owned subsidiaries and business alliances, are clearly understood, identifi ed, measured, treated, managed, monitored and reported.

• Concentra avoids actions that are not consistent with the company’s vision and mission, values and code of conduct/confl ict of interest policy to protect our reputation and brand and the reputation of the credit union system.

Enterprise Risk Management

Concentra defi nes enterprise risk management as a comprehensive and integrated measurement and management of all material risks through sound risk management capabilities, a robust governance structure and a strong risk culture. Enterprise risk management focuses on enhancing shareholder value by aligning business strategies and decisions with risk appetite, product pricing and capital management.

Concentra has adopted the ISO 31000 Standard for Risk Management. This standard provides a means to understand risks and potential impacts to successfully achieve business objectives.

Enterprise risk management provides the basis for risk management programs that refl ect a broad and proactive approach to managing risks and risk ownership. It refl ects an integrated approach to manage risks while maintaining a comprehensive view of current and prospective risks.

Concentra has an Enterprise Risk Management Framework which is the umbrella risk framework for the company. It provides overarching guidance for all of the risk frameworks, policies and programs of Concentra and the foundation for board oversight to management’s risk based decision making. Within this umbrella framework, risk specifi c frameworks are developed for all material risk categories. Material risks are those considered to be a signifi cant threat to the success of Concentra.

23

Risk Governance

Concentra has adopted a lines of defense approach to the management of risk.

BOARD OF DIRECTORS

Risk Committee, Audit and Conduct Review Committee, Governance and Nominating Committee, Human Resources and Compensation Committee

The board is accountable to the shareholders for the organization’s strategy and performance. The board provides risk oversight, defi nes the risk appetite for the company and sets a clear tone from the top for risk culture, to preserve the viability of enterprise and shareholder value. The detailed oversight to risk is undertaken at the board committee level as delegated through board and committee mandates.

The role of the Risk Committee is to assist the board in fulfi lling its oversight responsibilities for enterprise risk management. This role encompasses oversight to risk frameworks, risk identifi cation, management and reporting, and adherence to risk appetite and policy. The Audit and Conduct Review Committee has an oversight role specifi c to the adequacy and effectiveness of the company’s system of internal controls, the code of conduct and compliance with legal and regulatory requirements. The Governance and Nominating Committee is primarily responsible for corporate governance oversight and the Human Resources and Compensation Committee provides oversight to the company’s compensation structures, performance management of the Executive Leadership Team and succession planning.

EXECUTIVE LEADERSHIP TEAM

Executive Leadership Risk Committee, Asset-Liability Committee, Credit Committee

The primary responsibility of the Executive Leadership Team is to execute the strategy approved by the board and manage the company’s risk profi le. This role includes clearly articulating the company’s risk appetite and taking an active role in ensuring the alignment of strategy with risk appetite. The Executive Leadership Team is accountable for implementing the board’s decisions and is responsible for directing and overseeing the operations of the company. The Executive Leadership Team provides oversight to risk through the Executive Leadership Risk Committee, Asset-Liability Committee and Credit Committee.

The Executive Leadership Risk Committee is responsible to assess key risk exposures, direct action to manage risk levels, recommend the company’s risk appetite to the board and oversee actions to protect the company during a business continuity event. This committee provides specifi c oversight to strategic, reputation, operational and regulatory compliance risks. The Asset-Liability Committee provides oversight to credit risk management and asset-liability risk management (market, funding and liquidity and capital risks). The Credit Committee is responsible to approve large credit transactions.

Business Operations (First Line of Defense)

Risk and Compliance (Second Line of Defense)

Internal Audit (Third Line of Defense)

2  |  P a g e    

Enterprise risk management provides the basis for risk management programs that reflect a broad and proactive approach to managing risks and risk ownership. It reflects an integrated approach to manage risks while maintaining a comprehensive view of current and prospective risks.

Concentra has an Enterprise Risk Management Framework which is the umbrella risk framework for the company. It provides overarching guidance for all of the risk frameworks, policies and programs of Concentra and the foundation for board oversight to management’s risk based decision making. Within this umbrella framework, risk specific frameworks are developed for all material risk categories. Material risks are those considered to be a significant threat to the success of Concentra.

Enterprise Risk Management Framework

Emerging Risk Framework Stress Testing Framework Risk Appetite Framework

RISK GOVERNANCE

Concentra has adopted a lines of defense approach to the management of risk.

Board of Directors

Risk Committee, Audit and Conduct Review Committee, Governance and Nominating Committee, Human Resources and Compensation Committee

The board is accountable to the shareholders for the organization’s strategy and performance. The board provides risk oversight, defines the risk appetite for the company and sets a clear tone from the top for risk culture, to preserve the viability of enterprise and shareholder value. The detailed oversight to risk is undertaken at the board committee level as delegated through board and committee mandates.

The role of the Risk Committee is to assist the board in fulfilling its oversight responsibilities for enterprise risk management. This role encompasses oversight to risk frameworks; risk identification, management and reporting; and adherence to risk appetite and policy. The Audit and Conduct Review Committee has an oversight role specific to the adequacy and

Strategic Risk

Framework

Reputation Risk

Framework

Credit Risk Framework

Market Risk Framework

Funding &

Liquidity Risk Framework

Capital Risk Framework

Regulatory Compliance Risk

Framework

Operational Risk Framework

Umbrella  Risk  Frameworks    

Risk  Specific  

Frameworks  

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BUSINESS OPERATIONS

Business Operations has primary responsibility for the day-to-day management of risk and includes the front, middle and back offi ces. The front offi ce owns the risk and rewards of all business transactions. The middle offi ce owns the management, integration and coordination of risk throughout the fi rst line of defense. The back offi ce owns the risks associated with administrative elements of the business transactions and data integrity.

RISK AND COMPLIANCE

The primary responsibility of Risk and Compliance is to establish risk management frameworks and set standards that address signifi cant risks across the company. In addition, Risk and Compliance provide oversight to the effectiveness of the company’s risk management practices and report to the board on the enterprise risk profi le of the company independent of Business Operations. Risk and Compliance recommend policy, as developed by the fi rst line, within board approved risk appetite and ensure risk-taking limits are aligned with risk appetite.

INTERNAL AUDIT

Internal Audit is primarily responsible to provide assurance on the effectiveness of governance, risk management and internal controls, including the manner in which the fi rst and second lines of defense achieve risk management and control objectives.

Risk Appetite

Concentra defi nes risk appetite as the amounts and types of risk that the company is willing to accept in pursuit of its strategy. The company’s approach to expressing risk appetite includes setting qualitative and quantitative risk appetite statements at both the enterprise and portfolio level.

The Concentra Risk Appetite Framework provides a comprehensive basis upon which to align risk appetite with strategy and a structured approach to the management, measurement and control of risk. By aligning risk appetite with forward looking strategy, the company is in a position to determine the boundaries for asset and liability choices, signifi cant business activities, participation in external markets and evaluation of new products and services.

Concentra defi nes risk capacity as the maximum level of risk the company can assume before it exceeds regulatory or other constraints. Given this risk capacity, the company choses risk appetite levels that optimize available capacity while leaving a buffer to provide suffi cient protection. Within risk appetite, policy levels are set to align risk taking activities to risk appetite and delegate authority to management for risk taking in operations. Risk appetite is integrated throughout the company through the formulation of business unit risk appetite.

Material Risks

STRATEGIC RISK

Strategic risk is the risk of fi nancial non-sustainability due to changes in the external environment and/or failure to respond to these changes due to inaction, ineffective strategies, and ineffective execution of strategy.

The strategic plan, encompassing a fi ve-year time horizon, is approved by the board on an annual basis. The strategic plan identifi es the company’s desired future state and approach to meeting target goals. Operational planning and budgeting is undertaken to develop the annual business plan.

The Executive Leadership Risk Committee assesses and monitors enterprise level strategic risks on a quarterly basis. Through this process, key strategic risks to the company are identifi ed and assigned to members of the Executive Leadership Team.

REPUTATION RISK

Reputation risk is the risk of fi nancial loss, business sanctions or additional oversight, due to deterioration in stakeholders’ perception of Concentra from negative publicity, whether true or not. Reputation risk generally arises from a defi ciency in managing another risk.

Concentra has a Code of Conduct/Confl ict of Interest policy that must be followed by all board members, offi cers and employees, and a Responsible Persons Assessment policy to assess the suitability and integrity of members of the board and members of management who play a signifi cant role in the management of the company. In addition, Concentra has a communications policy and crisis management processes in place to protect the company’s image and reputation.

The Executive Leadership Risk Committee assesses and monitors enterprise level reputation risks on a quarterly basis. Through this process, key reputation risks to the company are identifi ed and assigned to members of the Executive Leadership Team.

CREDIT RISK

Credit risk is the risk of fi nancial loss due to a borrower, guarantor or counterparty’s inability or unwillingness to fulfi ll contractual payment obligations.

Activities in place to manage the company’s credit risk profi le within risk appetite include: setting credit concentration limits by issuer group, issuer and industry; implementing prudent credit granting criteria; managing monitored and non-productive assets; undertaking conservative valuation and loss recognition practices and stress testing.

The company has a credit risk management function, which is segregated from credit business generation activities and is responsible for delegating credit approval limits to business units and approving loan, lease and mortgage applications in excess of the credit authority delegated. In addition, credit risk management undertakes an ongoing systematic review of

25

the credit adjudication process and the condition of the credit portfolio and reports the results to the board.

MARKET RISK

Market risk is the risk of fi nancial loss in value of the company due to changes in interest rates, credit spreads, foreign exchange rates and market prices of fi nancial instruments.

Activities in place to manage the company’s market risk profi le within risk appetite include: establishing prudent market risk limits, investing in marketable securities, utilizing off-balance sheet instruments to manage interest rate risk levels, simulating the impact of interest rate changes, monitoring exposure to foreign currencies and undertaking stress testing.

The company does not have a trading program.

FUNDING AND LIQUIDITY RISK

Funding and liquidity risk is the risk of fi nancial loss due to an inability to access sources of funds or to generate suffi cient cash or cash equivalents in a timely manner to meet all commitments as they become due, without raising funds at adverse rates or selling on a forced basis.

Activities in place to manage the company’s funding and liquidity risk profi le within risk appetite include: establishing prudent liquidity policies; regular monitoring of cash fl ows; maintaining prudent levels of cash and cash equivalents; securitizing assets; maintaining external credit facilities; undertaking stress testing; maintaining a liquidity plan, funding strategy and liquidity contingency plan; diversifying funding resources and maintaining an investment grade market rating.

CAPITAL RISK

Capital risk is the risk of fi nancial loss due to the inability to generate suffi cient capital either in quality or quantity to support the company’s business strategies including its risk profi le.

The company’s policies set out requirements for the quantity and quality of capital the company is required to maintain, as well as policies that address capital impairment and dividends. On an annual basis management prepares a capital plan, aligned to the business plan, which projects future growth and recommends strategies to meet regulatory and internal capital obligations, achieve business objectives and manage the company’s capital risk profi le with risk appetite. The capital plan is presented to the board for approval on an annual basis. Management also calculates, reports and stress tests regulatory capital and internal capital levels throughout the year. Internal capital calculations supplement regulatory capital reporting by measuring capital required to be set aside to support the company’s risk levels.

REGULATORY COMPLIANCE RISK

Regulatory compliance risk is the risk of regulatory sanctions or restricted business capacities due to non-compliance with applicable regulatory requirements within governing legislation and other legislation, regulations and regulators’ expectations applicable to the operations of Concentra. A regulatory requirement requires a company to do (or prohibits it from doing) certain things or to act or conduct its affairs in a particular manner.

The Chief Compliance Offi cer of Concentra is responsible to ensure that key day-to-day regulatory compliance management controls throughout the company are suffi ciently robust to control compliance with all regulatory and legislative requirements. Regulatory compliance matters are reported to the Executive Leadership Team and board.

Concentra has a Chief Anti-Money Laundering Offi cer in place to manage corporate-wide measures to combat money laundering and terrorist fi nancing activity risks within the company. The Chief Anti-Money Laundering Offi cer reports to the Executive Leadership Team and board on anti-money laundering and anti-terrorist fi nancing matters.

Concentra has a Privacy Offi cer in place to monitor, report, and be accountable on a day-to-day basis for the company’s compliance with applicable federal and provincial privacy legislation.

Regulatory compliance management integration is facilitated throughout the company by designated Business Compliance Offi cers and Anti-Money Laundering Offi cers within Business Operations.

OPERATIONAL RISK

Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes or systems, human error or from external events. This defi nition includes legal risk.

The key operational risk management objectives of the company are to provide awareness of signifi cant operational risks, facilitate appropriate decisions to act upon operational risk, empower business units with the responsibility and accountability for operational risks assumed, and monitor and report on operational risk.

The Executive Leadership Risk Committee assesses and monitors enterprise level operational risks on a quarterly basis. Through this process, key operational risks to the company are identifi ed and assigned to members of the Executive Leadership Team.

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Capital levels are managed in accordance with policies and plans that are regularly reviewed and approved by the Board of Directors and take into account forecasted capital needs and markets. Maintaining adequate regulatory capital is the goal in order to be considered well capitalized, protect customer deposits and provide capacity for internal growth and strategic opportunities, all the while providing a satisfactory return for shareholders.

Basel III Capital Adequacy Requirements

Regulatory capital and capital ratios are calculated, reported and managed in accordance with the requirements of OSFI Capital Adequacy Requirements Guideline. OSFI requires federally regulated deposit taking institutions to measure capital adequacy in accordance with instructions for determining risk-adjusted capital and risk-weighted assets, including off-balance sheet commitments.

Effective January 1, 2013, OSFI required all federally regulated deposit taking institutions to meet or exceed the 2019 “all-in” minimum ratios in the transition period. For the Common Equity Tier 1 (CET1) ratio, the target was 7.0% by the fi rst quarter of 2013. The targets for Tier 1 regulatory capital and Total capital ratios were 8.5% and 10.5% respectively, effective the fi rst quarter of 2014. Each of the above ratios take into account the transition related to a ten year phase-out of non-qualifying capital instruments (preferred shares and existing subordinated debentures).

“All-in basis” is defi ned by OSFI as capital calculated to include all of the regulatory adjustments that will be required by 2019, but retaining the phase-out rules for non-qualifying capital instruments. Federally regulated deposit taking institutions use the “all-in” methodology to calculate OSFI target ratios and manage to these ratios internally. For cross jurisdictional comparatives, transitional capital ratio disclosure is also required.

The introduction to Basel III beginning January 1, 2013, caused signifi cant changes to the recognition of Additional Tier 1 and Tier 2 regulatory capital. All forms of non-common equity, such as subordinated debentures and preferred shares, must meet the Non-Viability Contingent Capital (NVCC) requirements. Compliant NVCC instruments include a clause that would require full and permanent conversion into common shares in the event that OSFI deems the fi nancial institution to be insolvent or a federal or provincial government has provided a capital injection for the fi nancial institution.

OSFI has implemented a ten year transition period for non-qualifying Additional Tier 1 and Tier 2 regulatory capital beginning January 1, 2013, by allowing the aggregate base of all non-qualifying instruments in each category to amortize down on a straight line basis. The aggregate base for each category which is eligible for amortization was fi xed as at January 1, 2013, and is not subject to change over the 10 year period. This amortization is only recognized in the corresponding

regulatory capital category if the total available capital in that category is greater than the unamortized remaining aggregate base for the category. The implications of such as transitional arrangement is applicable to the outstanding Class B preferred shares and existing subordinated debentures due to the inability to meet the NVCC requirements of conversion to common shares.

At the present time the outstanding Class B shares cannot be exchanged or converted to Class A shares as the current bylaws have no right of conversion, exchange, substitution or redemption. These bylaws can be changed by special resolution to allow for such an event, if required. The holders of the Class B shares also have the right to vote on any amendments which would affect their class of shares. Unless the bylaws are amended, the Class B preferred shares are not NVCC compliant and are subject to the ten year transition period for non-qualifying regulatory capital whereby they amortize down on a straight line basis starting January 1, 2013.

Furthermore, OSFI requires that each subordinated debenture which contains a step-up feature with a pre-set initial credit spread must be derecognized at each of their respective call dates and therefore removed from the total available Tier 2 capital. Since issuances of Tier 2 capital prior to 2012 contain a step-up feature, each issuance will be derecognized at their respective call dates causing the total available capital to be greater than the remaining unamortized aggregate non-qualifying Tier 2 capital at each year end beginning in 2013.

To assist federally regulated entities in the transition to IFRS, OSFI permits insured mortgages sold through specifi c securitization programs up to and including March 31, 2010, to be excluded from the ACM. For transactions under the CMB program, including intermediary securitization, completed up to and including March 31, 2010, all existing and future reinvestments newly reported on the balance sheet as a result of IFRS are excluded from the ACM. In 2014, the grandfathered assets decreased by $603.1 million to $79.5 million (2013 - $682.6 million).

Throughout 2014 and 2013, the company has been in compliance with OSFI prescribed capital adequacy requirements.

Regulatory Capital Management

27

Capital Structure and Regulatory Ratios

The capital structure and regulatory ratios at year-end are shown in the following table.

All-in Basis(1)

(Thousands of Dollars)(Thousands of Dollars) 2014 2013Common Equity Tier 1 Capital

Common shares 133,254 133,254 Retained earnings 153,137 133,080 Accumulated other comprehensive income 3,984 6,997 Regulatory adjustments (21,624) (21,704)

Common Equity Tier 1 Capital 268,751 251,627 Additional Tier 1 Capital

Non-cumulative perpetual preferred shares 3,192 3,592 Regulatory adjustments n/a n/a

Additional Tier 1 Capital 3,192 3,592 Tier 1 Capital 271,943 255,219 Tier 2 Capital

Subordinated debentures (non-qualifying Tier 2B) 91,821 103,298 Tier 2 Capital 91,821 103,298 Total Regulatory Capital 363,764 358,517

Risk-Weighted AssetsCredit risk 1,885,420 1,730,537 Market risk n/a n/aOperational risk 157,469 162,652

Total Risk-Weighted Assets 2,042,889 1,893,189

Capital RatiosCommon Equity Tier 1 regulatory capital to risk-weighted assets 13.2% 13.3% Tier 1 regulatory capital to risk-weighted assets 13.3% 13.5% Total regulatory capital to risk-weighted assets 17.8% 18.9%

Capital Instruments Subject to Phase-Out ArrangementsCurrent cap on Additional Tier 1 capital instruments subject to phase-out arrangements 3,192 3,592 Amount excluded from Additional Tier 1 capital due to cap 798 399 Current cap on Tier 2 capital instruments subject to phase-out arrangements 91,821 103,298 Amount excluded from Tier 2 capital due to cap 1,529 10,052

(1) The all-in basis is capital calculated to include all of the regulatory adjustments that will be required by 2019 but retaining the phase-out rules of non-qualifying capital.

(1) The all-in basis is capital calculated to include all of the regulatory adjustments that will be required by 2019 but retaining the phase-out rules of non-qualifying capital.

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Subsidiary Capital and Risk Weighted Assets

Concentra Trust has individual responsibility for maintaining compliance with regulatory capital adequacy requirements. Throughout 2014 and 2013, Concentra Trust has been in compliance with OSFI prescribed capital adequacy requirements. The following table provides the regulatory ratios at year end.

All-in Basis(1)

(Thousands of Dollars)(Thousands of Dollars) 2014 2013Common Equity Tier 1 Capital

Common shares 10,000 10,000 Retained earnings 2,897 1,997 Accumulated other comprehensive income (31) (28)

Common Equity Tier 1 Capital 12,866 11,969 Additional Tier 1 Capital - - Tier 1 Capital 12,866 11,969 Tier 2 Capital - - Total Regulatory Capital 12,866 11,969

Risk-Weighted AssetsCredit risk 2,964 2,862 Market risk n/a n/aOperational risk 11,464 11,656

Total Risk-Weighted Assets 14,428 14,518

Capital RatiosCommon Equity Tier 1 regulatory capital to risk-weighted assets 89.2% 82.4%Tier 1 regulatory capital to risk-weighted assets 89.2% 82.4%Total regulatory capital to risk-weighted assets 89.2% 82.4%

(1) The all-in basis is capital calculated to include all of the regulatory adjustments that will be required by 2019 but retaining the phase-out rules of non-qualifying capital.

Risk-Weighted Assets

The calculation of risk-weighted assets for credit risk and operational risk are shown in the following table.

(1) Total credit risk is calculated using the Standarized approach(2) Operational risk is calculated using the Basic Indicator approach

(1) The all-in basis is capital calculated to include all of the regulatory adjustments that will be required by 2019 but retaining the phase-out rules of non-qualifying capital.

(Thousands of Dollars)

120% and 0% 20% 35% 50% 100% greater

Credit risk(1)

Corporate - 31,199 - 53,978 1,361,051 3,206 1,449,434 1,399,087 Sovereign 357,849 - - - - - 357,849 - Bank - 146,540 - - 12 - 146,552 29,320 Retail residential mortgages 4,070,448 - 534,322 - 138,491 - 4,743,261 325,504 Other retail, excluding small business entities - - - - - - - - Equity - - - - 2,898 - 2,898 2,898 Undrawn commitments - 37,010 - - 78,640 - 115,650 86,042 Securitization exposures - 16,699 - - - - 16,699 3,340 Other credit risk-weighted assets 36,175 - - - 28,160 4,921 69,256 39,229

Total Credit Risk 4,464,472 231,448 534,322 53,978 1,609,252 8,127 6,901,599 1,885,420 Market risk n/a n/a n/a n/a n/a n/a n/a n/aOperational Risk(2) - - - - - 12,598 12,598 157,469 As at December 31, 2014 4,464,472 231,448 534,322 53,978 1,609,252 20,725 6,914,197 2,042,889

As at December 31, 2013 3,781,007 479,108 486,588 30,656 1,394,686 46,697 6,218,742 1,893,189

Credit Risk Exposure

Risk-Weighted Assets

29

Basel III Leverage Requirements

In October 2014, OSFI released its Leverage Requirements Guideline which outlines the application of the Basel III Leverage ratio in Canada and the replacement of the existing assets to capital multiple, effective Q1 2015. The leverage ratio is defi ned as the capital measure divided by the exposure measure. The capital measure is currently defi ned as the all-in Tier 1 capital of the institution and the exposure measure is the sum of (a) on balance sheet exposures; (b) derivative exposures; (c) securities fi nancing transaction (SFT) exposures and (d) off-balance sheet items. Institutions will be required to maintain an operating buffer above the minimum OSFI prescribed level. As required by OSFI, the Company will transition to the Basel III Leverage ratio and expects to comply with the new requirements. Disclosure in accordance with OSFI’s September 2014 Public Disclosure Requirements related to Basel III Leverage Ratio will be madeannually commencing in 2015.

Basel III Liquidity Adequacy Requirements

In November 2014, OSFI released its Liquidity Adequacy Requirements Guideline which implements a series of liquidity metrics that will be used by OSFI to assess the liquidity adequacy of an institution. Institutions are expected to comply with the Liquidity Coverage Ratio (LCR) in January 2015 and the Net Stable Funding Ratio (NSFR) in January 2018. The Company is currently reporting the Net Cumulative Cash Flow (NCCF) metric to OSFI and expects an OSFI provided target for this metric in 2015. The Company is in compliance with the LCR and will comply with the new requirements once they are implemented.

The calculation of risk-weighted assets for credit risk and operational risk are shown in the following table.

(1) Total credit risk is calculated using the Standardized approach(2) Operational risk is calculated using the Basic Indicator approach

(Thousands of Dollars)

120% and 20% 100% greater

Credit risk(1)

Bank 13,040 - - 13,040 2,608 Other credit risk-weighted assets - 356 - 356 356

Total Credit Risk 13,040 356 - 13,396 2,964 Market risk n/a n/a n/a n/a n/aOperational Risk(2) - - 917 917 11,464 As at December 31, 2014 13,040 356 917 14,313 14,428

As at December 31, 2013 11,794 385 979 13,158 14,518

Credit Risk Exposure

Risk-Weighted Assets

30

The accompanying Consolidated Financial Statements of Concentra Financial Services Association (Concentra Financial) were prepared by management who is responsible for the integrity and fairness of the information presented and for ensuring that all the information in the annual report is consistent with the Consolidated Financial Statements. This responsibility includes the selection of appropriate accounting policies and making objective judgments and estimates in accordance with International Financial Reporting Standards, including the requirements of the Cooperative Credit Associations Act (Canada), and the related rules and regulations issued by the Offi ce of the Superintendent of Financial Institutions Canada.

In discharging this responsibility for the integrity and fairness of the Consolidated Financial Statements and for the accounting systems from which they are derived, management maintains the necessary systems of internal control to provide reasonable assurance that transactions are authorized, assets are safeguarded and proper records are maintained. This control is augmented by written policies and procedures, the careful selection and training of qualifi ed staff, the creation of organizational structures that provide a well-defi ned division of responsibilities and accountability for performance, and the written communication of policies and guidelines for business conduct throughout Concentra Financial. This system of internal controls is supported by a compliance function which is designed to ensure compliance with all regulatory requirements and by an internal audit function which carries out periodic audits of the operations of Concentra Financial.

The Board of Directors carries out its responsibilities for reviewing the Consolidated Financial Statements through its Audit and Conduct Review Committee which is composed entirely of directors who are neither offi cers nor employees of Concentra Financial. The Audit and Conduct Review Committee reviews the Consolidated Financial Statements and recommends approval to the Board of Directors. Other responsibilities of the Audit and Conduct Review Committee include meeting regularly with management, internal audit and the company’s external auditors, to discuss the effectiveness of internal controls over the fi nancial reporting process as well as the planning and results of the external audit. Both the external and internal auditors have full and free access to the Audit and Conduct Review Committee.

The Offi ce of the Superintendent of Financial Institutions Canada examines and inquires into the business affairs of Concentra Financial as deemed necessary to determine whether the provisions of the Cooperative Credit Associations Act (Canada), having reference to the safety of the depositors, are being duly observed and that Concentra Financial is in a sound fi nancial condition.

KPMG LLP, the external auditors are appointed by the members of Concentra Financial, upon the recommendation of the Audit and Conduct Review Committee, to perform an independent audit of the Consolidated Financial Statements and provide an opinion thereon; their report is presented separately.

Ken KosolofskiPresident and Chief Executive Offi cer

Ron FriesenExecutive Vice-President and Chief Financial Offi cer

Regina, SaskatchewanFebruary 18, 2015

Management Responsibility for Financial Reporting

31

KPMG LLP Telephone (306) 791-1200 Chartered Accountants Fax (306) 757-4703 Hill Centre Tower II Internet www.kpmg.ca 1881 Scarth Street, 20th Floor Regina Saskatchewan S4P 4K9, Canada

INDEPENDENT AUDITORS’ REPORT To the Members of Concentra Financial Services Association

We have audited the accompanying consolidated financial statements of Concentra Financial Services Association, which comprise the consolidated balance sheet as at December 31, 2014, the consolidated statements of changes in equity, income, comprehensive income, and cash flows for the year then ended, and notes, comprising 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.

Auditors’ 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 our 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, we consider 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 consolidated financial position of Concentra Financial Services Association as at December 31, 2014, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Comparative information

The consolidated financial statements of Concentra Financial Services Association as at and for the year ended December 31, 2013 were audited by another auditor who expressed an unmodified opinion on those consolidated financial statements on February 19, 2014.

Chartered Accountants February 18, 2015 Regina, Canada

32

CONCENTRA FINANCIAL SERVICES ASSOCIATION

CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 2014

(Thousands of Canadian Dollars) Note 2014 2013

ASSETS

Cash resources 80,163 84,914 Securities 3 1,164,538 1,067,605 Derivative assets 5 14,551 18,571 Loans to customers 6 5,448,613 4,853,565 Trade and other receivables 1,205 3,095 Other assets 8 12,778 7,158 Goodwill 9 19,248 19,248 Current income tax assets 1,290 53 Deferred income tax assets 10 4,099 3,868

Total assets 6,746,485 6,058,077

LIABILITIES

Deposits from customers 11 3,834,471 3,109,676 Derivative liabilities 5 16,635 14,303 Loans and notes payable 12 186,137 214,892 Liabilities for loans securitized 13 2,298,478 2,309,426 Trade and other payables 21,100 16,109 Other liabilities 1,122 125 Subordinated debentures 14 93,892 113,991 Current income tax liabilities 284 2,233

Total liabilities 6,452,119 5,780,755

MEMBERS' EQUITY

Share capital 15 137,245 137,245 Retained earnings 153,138 133,080

Accumulated other comprehensive income (loss) 3,983 6,997

Total equity 294,366 277,322

Total equity and liabilities 6,746,485 6,058,077

The accompanying notes form an integral part of these consolidated financial statements Approved by Ken Kosolofski, President and Chief Executive Officer Stephen Fitzpatrick, Director and Chair, Audit and Conduct Review Committee Al Meyer, Board Chair

33

CONCENTRA FINANCIAL SERVICES ASSOCIATION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2014

(Thousands of Canadian Dollars)

Share Capital

Retained Earnings

Accumulated Other Comprehensive Income

(Loss) Total Members’

Equity Available-for-Sale Securities

Cash Flow Hedges

Balance as at January 1, 2013 137,245 111,555 8,807 - 257,607

Net income - 26,623 - - 26,623

Net fair value gains (losses) on available-for-sale securities, net of tax - - (2,649) - (2,649)

Cash flow hedges, net of tax - - - 839 839

Total comprehensive income for the year - 26,623 (2,649) 839 24,813

Shares issued - - - - -

Dividends, Class A shares - (6,661) - - (6,661)

Dividends, Class B shares - (311) - - (311)

Reduction in income taxes - 1,874 - - 1,874

Balance as at December 31, 2013 137,245 133,080 6,158 839 277,322

Net income - 23,207 - - 23,207

Net fair value gains (losses) on available-for-sale securities, net of tax - - (1,892) - (1,892)

Cash flow hedges, net of tax - - - (1,122) (1,122)

Total comprehensive income for the year - 23,207 (1,892) (1,122) 20,193

Shares issued - - - - -

Dividends, Class A shares - (3,997) - - (3,997)

Dividends, Class B shares - (311) - - (311)

Reduction in income taxes - 1,159 - - 1,159

Balance as at December 31, 2014 137,245 153,138 4,266 (283) 294,366

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

34

CONCENTRA FINANCIAL SERVICES ASSOCIATION

CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2014

(Thousands of Canadian Dollars) Note 2014 2013

INTEREST INCOME

Loans 179,246 171,487

Securities 20,781 21,515

200,027 193,002

INTEREST EXPENSE

Deposits 68,496 51,371

Loans and notes 58,806 65,614

Subordinated debentures 4,433 5,910

Other direct expenses 893 658

132,628 123,553

NET INTEREST INCOME 67,399 69,449

Loan impairment charges 6,836 5,319

NET INTEREST MARGIN 60,563 64,130

NON-INTEREST INCOME

Fee for service 16 13,942 15,010

Gain on financial instruments 17 6,520 1,226

Securitization income 18 825 107

Unrealized and realized gains (losses) on derivatives (2,636) (584)

18,651 15,759

79,214 79,889

NON-INTEREST EXPENSE

Salaries and employee benefits 28,202 26,662

Professional and advisory services 11,082 9,516

General business 6,715 6,002

Occupancy 1,707 1,741

47,706 43,921

INCOME BEFORE INCOME TAXES 31,508 35,968 33,136

Income tax expense 10 8,301 9,345

NET INCOME 23,207 26,623

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

35

CONCENTRA FINANCIAL SERVICES ASSOCIATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2014

(Thousands of Canadian Dollars) Note 2014 2013

NET INCOME 23,207 26,623

OTHER COMPREHENSIVE INCOME (LOSS) Items that will be reclassified subsequently to net income Available-for-sale securities Net unrealized (losses) gains on available-for-sale securities, before tax

5,524

(3,151)

Reclassification of (gains) losses on available-for-sale securities to net income, before tax

(7,835)

(83)

Cash flow hedges Net gains (losses) on derivatives designated as cash flow hedges, before tax

5 (1,388)

1,329

Reclassification of (gains) losses on derivatives designated as cash flow hedges to net income, before tax

5 (146)

(182)

Income tax relating to components of other comprehensive income that will be reclassified subsequently to net income 10 831

277

OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR, NET OF TAX (3,014)

(1,810)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 20,193 24,813

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

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CONCENTRA FINANCIAL SERVICES ASSOCIATION

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014

(Thousands of Canadian Dollars) Note 2014 2013

CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES Net income 23,207 26,623 Adjustments to determine net cash from (used in) operating activities

Income tax expense 10 8,301 9,345

Net interest income (67,399) (69,449)

Amortization of premises and equipment 8 281 364

Other amortization 8 789 540

Loan impairment charges 6,836 5,319

Unrealized and realized (gains) losses on derivatives 2,636 584 Gain on financial instruments 17 (6,520) (1,226) Gain (loss) on sale of retained interests 18 - 5 Other securitization revenue 18 (736) (110)

Changes in operating assets and liabilities

Loans to customers, net of repayments and sales (615,262) (169,193)

Deposits from customers, net of withdrawals 709,448 402,566

Trade and other receivables 1,794 (719)

Other assets (2,828) (3,122)

Trade and other payables 4,992 (1,404)

Other liabilities 184 (468)

Interest paid (116,907) (119,003)

Interest received 220,388 210,444

Net realized gains (losses) from derivatives 1,220 (2,536)

Net realized gains (losses) from derivatives designated as cash flow hedges (1,422) 1,147

Income tax paid (9,728) (2,981)

Net cash from operating activities 159,274 286,726

CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES

Proceeds from sales and maturities of securities 2,690,600 2,421,626

Purchase of securities (2,876,235) (2,451,789)

Premises and equipment purchases, net of disposals (90) (157)

Intangible asset purchases, net of transfers (709) (970)

Net cash used in investing activities (186,434) (31,290)

CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES

Loans and notes payable, net of repayments (28,746) 5,788

Liabilities for loans securitized, net of repayments 75,463 (167,279)

Redemption of subordinated debentures 14 (20,000) (25,000)

Dividends paid 15 (4,308) (6,972)

Net cash from (used in) financing activities 22,409 (193,463)

NET (DECREASE) INCREASE IN CASH RESOURCES (4,751) 61,973

Cash resources, beginning of year 84,914 22,941

CASH RESOURCES, END OF YEAR 80,163 84,914

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

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Concentra Financial Services Association Page 1 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 1. GENERAL INFORMATION

Concentra Financial Services Association (the Company) is a company domiciled in Canada and carries on business pursuant to the Cooperative Credit Associations Act (Canada). The address of the Company’s registered office is 333 – Third Avenue North, Saskatoon, Saskatchewan, Canada, S7K 2M2. The Company provides financial intermediation and trust services to Canadian credit unions and associated commercial and retail customers. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Presentation

(a) Statement of Compliance

The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements of the Company have been prepared in accordance with subsection 292(4) of the Cooperative Credit Associations Act (Canada) which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions Canada (OSFI), the consolidated financial statements are to be prepared in accordance with Canadian generally accepted accounting principles which require publicly accountable enterprises to report using IFRS. The significant accounting policies followed in the preparation of these consolidated financial statements, including the accounting requirements of OSFI, are summarized below. These policies have been consistently applied to all years presented and conform in all material respects to IFRS. The consolidated financial statements for the year ended December 31, 2014, were approved for issue by the Board of Directors on February 18, 2015. (b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except the available-for-sale financial assets, financial assets and financial liabilities held at fair value through profit or loss and all derivative contracts, which have been measured at fair value. (c) Functional and presentation currency

The consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency. Except as otherwise indicated, financial information presented in Canadian dollars has been rounded to the nearest thousand. (d) Use of estimates and judgment

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates thereby impacting the consolidated financial statements. Management believes that the underlying assumptions are appropriate and that the Company’s financial statements therefore present the financial position and results fairly. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Information about key estimates and critical judgements are described in Note 2.26.

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Concentra Financial Services Association Page 2 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Basis of Consolidation

The Company conducts business through various corporate structures including subsidiaries and other investments. The consolidated financial statements include the Company’s assets, liabilities and results of operations, after the elimination of intercompany transactions and balances, of all subsidiaries for which the Company has concluded it controls. Control is achieved when the Company has (1) power over the investee; (2) exposure, or rights, to variable returns from its involvement with the investee; and (3) the ability to use its power over the investee to affect the amount of the Company’s returns. The Company reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of these three elements of control. The financial statements have been prepared using consistent accounting policies and valuation methods for like transactions and other events in similar circumstances. The following entities are included in the consolidated financial statements of the Company: Concentra Trust – The Company owns 100% of the common shares of Concentra Trust; as such, these consolidated financial statements include the assets and liabilities and results of operations of this wholly owned subsidiary. Celero Solutions – The Company’s 5.8% interest in Celero Solutions, an unincorporated entity, is recorded using the cost method of accounting. Under this method the investment is initially recorded at cost and income is recognized only to the extent any distributions are received or receivable. Losses, other than a temporary decline in value, are recorded in other non-interest income. 2.3 Sales and Repurchase Agreements

Securities sold subject to repurchase agreements are treated as collateralized borrowing transactions when the transferee has the right by contract or custom to sell or repledge the collateral and are classified as available-for-sale and recorded at fair value. Obligations related to securities sold under repurchase agreements are recorded in loans and notes payable. Interest incurred on repurchase agreements is included in loans and notes interest expense. 2.4 Financial Assets and Liabilities

In accordance with IAS 39, all financial assets and liabilities, including derivative financial instruments are recognized in the consolidated balance sheet and measured in accordance with their assigned category. Standards for recognizing and measuring financial assets and financial liabilities require that financial assets and financial liabilities, including derivatives, be recognized on the consolidated balance sheet when the Company becomes a party to the contractual provisions of a financial instrument or non-financial derivative contract. All financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods depends on the classification of the financial instrument. The Company uses trade date accounting for regular way contracts when recording financial asset transactions. 2.4.1 Financial Assets

The Company classifies financial assets into the following IAS 39 categories: financial assets at fair value through profit or loss; available-for-sale financial assets; and loans and receivables. Management determines the classification of its financial instruments at initial recognition. (a) Financial assets at fair value through profit or loss

This category comprises two sub-categories: financial assets classified as held-for-trading and financial assets designated by the Company as at fair value through profit or loss upon initial recognition. The Company has no financial assets designated at fair value through profit or loss.

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Concentra Financial Services Association Page 3 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

A financial asset is classified as held-for-trading if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term or if on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking. Derivatives are also categorized as held-for-trading unless they are designated and effective as hedging instruments. Gains and losses arising from changes in fair value of derivative financial assets classified as held-for-trading are included in the consolidated statement of income and are reported as unrealized and realized gains (losses) on derivatives unless they are related to certain sales transactions, in which case they are reported in either securitization income or gain on financial instruments. (b) Available-for-sale financial assets

Available-for-sale securities are non-derivative financial assets that are 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 or that are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss. Available-for-sale financial assets are initially recognized at fair value, which is the cash consideration including any transaction costs, and measured subsequently at fair value with gains and losses being recognized in other comprehensive income (loss) (OCI) in the consolidated statement of comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognized. Available-for-sale financial assets are subject to impairment review at the end of each reporting period. If an available-for-sale financial asset is determined to be impaired, the cumulative gain or loss previously recognized in OCI in the consolidated statement of comprehensive income is recognized in the consolidated statement of income. Interest is calculated using the effective interest method and foreign currency gains and losses on monetary assets classified as available-for-sale are recognized in the consolidated statement of income. Purchase premiums or discounts on available-for-sale securities are amortized over the life of the security using the effective interest method and are recognized in securities interest income. Interest income accruing on available-for-sale securities is recorded in securities interest income. Dividends on available-for-sale equity instruments are recognized in the consolidated statement of income in securities interest income when the Company’s right to receive payment is established. Gains and losses realized on disposal of available-for-sale securities are included in gain on financial instruments. Investments in equity instruments of co-operative enterprises classified as available-for-sale that do not have a quoted market price in an active market are measured at cost which is considered to be fair value due to the nature of the holdings. (c) 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: (1) those that the Company intends to sell immediately or in the near term, which are classified as held-for-trading, and those that the Company upon initial recognition designates as at fair value through profit or loss; (2) those that the Company upon initial recognition designates as available-for-sale; or (3) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which are classified as available-for-sale. Loans are initially recognized at fair value, which is the cash consideration to originate or purchase the loan including any transaction costs, and measured subsequently at amortized cost using the effective interest rate method. Loan fees, premiums and commissions paid on the acquisition of loans are amortized to loan interest income using the effective interest method. Loans are reported in the consolidated balance sheet as loans to customers. Interest on loans is included in the consolidated statement of income and is reported as loan interest income. Realized gains from the sale of loans to customers are recorded in realized gains on sale of loans within gain on financial instruments. In the case of an impairment, the impairment loss is reported as a deduction from the carrying value of the loan. Interest income continues to be accrued at the original effective interest rate of the loan based on the net carrying value of impaired loans.

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Concentra Financial Services Association Page 4 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.4.2 Financial Liabilities

The Company’s holdings in financial liabilities includes financial liabilities measured at amortized cost and hedging derivatives, which are classified as held for trading unless they are designated and effective as hedging instruments. Financial liabilities are derecognized when extinguished. Gains and losses arising from changes in fair value of derivative financial liabilities classified as held-for-trading are included in the consolidated statement of income and are reported as unrealized and realized gains (losses) on derivatives. 2.4.3 Classes of Financial Instruments

The classification made can be seen in the table below:

Category as Defined by IAS 39 Class as Determined by the Company

Financial Assets

Financial assets at fair value through profit or loss

Financial assets classified as held-for-trading Derivative assets

Loans and receivables Cash resources

Loans and advances Loans to customers

Trade and other receivables

Available-for-sale financial assets Available-for-sale securities – debt securities

Available-for-sale securities – equity securities

Financial Liabilities

Financial liabilities at fair value through profit or loss

Financial liabilities classified as held-for-trading Derivative liabilities

Financial liabilities at amortized cost Deposits from customers Loans and notes payable Liabilities for loans securitized Trade and other payables Subordinated debentures

2.4.4 Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. The Company follows a fair value hierarchy to categorize the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Valuation techniques used to measure fair value maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The objective of using a valuation technique is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Fair values are determined by reference to quoted bid or asking prices, as appropriate, in the principal market or most advantageous market for that instrument to which the Company has immediate access (Level 1).

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Concentra Financial Services Association Page 5 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include the following: (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; (c) inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves observable at commonly quoted intervals, implied volatilities and credit spreads; and (d) market-corroborated inputs. Fair values determined using valuation models require the use of assumptions concerning the amount and timing of estimated future cash flows and discount rates. In determining those assumptions, the Company looks primarily to external readily observable market inputs including factors such as interest rate yield curves, currency rates, and price and rate volatilities, as applicable (Level 2). In limited circumstances, the Company uses one or more input parameters that are not based on observable market data or uses observable inputs that require significant adjustment based on unobservable inputs (Level 3). The impact on net income of financial instrument valuations reflecting non-market observable inputs (Level 3 valuations) is disclosed in Note 21.2. The Company believes that using possible alternative assumptions will not result in significantly different fair values. The credit quality of financial assets and financial liabilities, including derivative instruments, is considered in determining the fair value of these instruments. In determining the credit quality of the instrument both the Company’s own credit risk and the risk of the counterparty are considered elements of this credit quality. The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Company holds. Valuations are therefore adjusted, where appropriate, to allow for additional factors including model risks, liquidity risk and counterparty credit risk. 2.5 Impairment of Financial Assets

(a) Loans carried at amortized cost

The Company maintains an allowance to absorb credit-related losses in portfolios of on-balance sheet items. The allowance for impairment consists of specific and collective allowances, which are reviewed by management on an ongoing basis. The allowance for impairment is deducted from the related asset category. Loans are classified as impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the loan that can be reliably estimated. The criteria that the Company uses to determine that there is objective evidence of impairment include: Delinquency in contractual payments of principal or interest Cash flow difficulties experienced by the borrower Breach of loan covenants or conditions Initiation of bankruptcy proceedings Deterioration of the borrower’s competitive position Deterioration in the value of collateral The Company first assesses whether objective evidence of impairment exists individually for loans that are individually significant, and individually or collectively for loans that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed loan, whether significant or not, it includes the loan in a group of loans with similar credit risk characteristics and collectively assesses them for impairment. Loans that are individually assessed for impairment and for which an impairment loss is or continues to be recognized through the use of a specific allowance are not included in a collective assessment of impairment. Collective allowances for impairment are established to recognize incurred loss events for which there is objective evidence of loss but whose effects are not yet evident. Loans are assessed for impairment collectively, in groups of loans with similar credit risk characteristics (i.e. loan type, geographical location, industry, collateral type, past-due status, and other relevant factors).

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Concentra Financial Services Association Page 6 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

The amount of the impairment loss is measured as the difference between the loan’s carrying value and the present value of estimated future cash flows discounted at the loan’s original effective interest rate. The carrying value of the loan is reduced through the use of an allowance account and the amount of the loss is recognized in the consolidated statement of income. When a loan is restructured, and the present value of the future principal and interest payments discounted at the loan’s original effective interest rate is less than the carrying value of the loan, the restructured loan is considered impaired. In subsequent periods, if the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the allowance for impairment is adjusted and the increase in the carrying value of the loan is credited to loan impairment charges. An impairment loss is reversed only to the extent that the loan’s carrying value does not exceed the carrying value that would have been determined if no impairment had been recognized. When a loan is uncollectible, it is written off to loan impairment charges and the related specific allowance for impairment is reversed. This determination is made after considering information such as the occurrence of significant changes in the borrower’s financial position such that the borrower can no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the entire exposure. Property held for resale acquired through the settlement of loans is valued at the lower of the outstanding balance of the loan at the date of acquisition adjusted for costs incurred subsequent to foreclosure or repossession and the fair value of the property less costs of disposal. Property held for resale is sold as soon as practicable, with the proceeds used to reduce the outstanding net carrying value. Property held for resale is classified in the consolidated balance sheet within loans to customers. (b) Securities classified as available-for-sale

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less any impairment loss on that financial asset previously recognized in net income – is removed from accumulated other comprehensive income (loss) (AOCI), and recognized in the consolidated statement of income. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in net income, the impairment loss is reversed through the consolidated statement of income. Impairment losses recognized in the consolidated statement of income on equity instruments are not reversed through the consolidated statement of income. 2.6 Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheet only when there is currently a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. 2.7 Interest Income and Expense

Interest income and expense for all interest-bearing financial instruments are recognized within interest income and interest expense in the consolidated statement of income using the effective interest method. Once a financial asset or a group of similar financial assets 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.

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Concentra Financial Services Association Page 7 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8 Derecognition of Financial Assets or Liabilities

Financial assets are derecognized when the contractual rights to receive the cash flows from these assets have ceased to exist or when the Company has transferred substantially all the risks and rewards of ownership of the assets. Where substantially all the risks and rewards of ownership of the financial asset are neither retained nor transferred, the Company derecognizes the transferred asset only if it has lost control over that asset. Control over the assets is represented by the practical ability to sell the transferred asset. If the Company retains control over the asset, it will continue to recognize the asset to the extent of its continuing involvement. When a financial asset is derecognized in full, a gain or loss is recognized in net income for an amount equal to the difference between the carrying amount of the asset and the value of the consideration received. Financial liabilities are derecognized when they have been redeemed or otherwise extinguished. 2.9 Asset Securitization

The Company periodically securitizes groups of assets by selling them to independent structured entities. As part of these transactions, the Company generally retains an interest in the securitized assets, such as servicing rights and various forms of recourse including rights to excess spread. When assets have been transferred and substantially all of the risks and rewards of ownership of the assets have also been transferred to a third party during a securitization transaction, the transaction is recorded as a sale and the Company removes the transferred assets from the consolidated balance sheet. When substantially all of the risks and rewards of ownership of the assets have not been transferred during a securitization transaction, the transaction is not accounted for as a sale and the assets remain on the consolidated balance sheet of the Company. At the time of the transaction, the securitized borrowings are recognized as liabilities for loans securitized on the consolidated balance sheet. Securitized assets are classified as either securities or loans on the consolidated balance sheet. Securities are carried at fair value. Loans are carried at amortized cost using the effective interest method. Securitized borrowings are classified as liabilities for loans securitized on the consolidated balance sheet and are carried at amortized cost. Securitized assets and liabilities are periodically reviewed for impairment or increased obligation with any impairment or increased obligation charged to net income. In certain cases, the Company has a continuing involvement in the securitized assets that is quite limited. Such loans are securitized and sold and the Company retains rights to the excess spread and servicing responsibilities for the assets sold, with very little exposure to variable cash flows. The Company accounts for its continuing involvement as retained interests and servicing liabilities on the consolidated balance sheet in other assets and other liabilities. Gains or losses on these transactions are recorded in securitization income and are dependent in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the retained interests, based on their relative fair value at the date of transfer and net of transaction costs. During the life of the securitization, as cash is received, the retained interest and the servicing liability are amortized and recognized in securitization income. Retained interests and servicing liabilities are revalued quarterly to assess for impairment or for increased obligation. In certain circumstances, the Company sells its retained interest arising from securitization transactions. When this sale results in the Company transferring substantially all of the risks and rewards of ownership associated with the underlying mortgages, the mortgages are derecognized and a resulting gain or loss is recorded. These gains or losses are recorded in securitization income and are dependent in part on the previous carrying amount of the financial assets involved in the transfer. 2.10 Derivative Financial Instruments and Hedge Accounting

2.10.1 Derivative Financial Instruments

Derivative instruments are recorded on the consolidated balance sheet at fair value, including those derivatives that are embedded in financial or non-financial contracts that are not closely related to the host contracts. Changes in the fair values of derivative instruments are recorded in unrealized and

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Concentra Financial Services Association Page 8 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

realized gains (losses) on derivatives, with the exception of derivative instruments designated in effective cash flow hedges which are recorded in OCI. The Company enters into derivative transactions to hedge interest rate and foreign currency risks, and for economic and asset/liability management purposes. Hedge accounting may be applied when appropriate. The Company does not have a trading program for derivatives. The Company also enters into derivative transactions on an intermediary basis on behalf of its clients. Economic and asset/liability management derivatives are used to manage interest rate and currency exposure on the Company’s balance sheet, but do not meet the specific criteria to qualify as hedge derivatives. These derivatives include contracts that reposition the Company’s overall interest rate and foreign exchange risk profile and are reported on the balance sheet at their fair value. 2.10.2 Hedges

IAS 39 specifies the criteria that must be satisfied in order for hedge accounting to be applied and the accounting for each of the permitted hedging strategies. The Company uses derivatives in hedging strategies to manage its exposures to interest rate and foreign currency risks. When derivatives are used to manage exposures, the Company determines for each derivative whether hedge accounting can be applied. Hedge accounting may be applied where a derivative is highly effective in offsetting either changes in the fair value or cash flows attributable to the risk being hedged, both at inception and over the life of the underlying asset or liability. The hedging relationship is required to be documented at inception detailing the hedging relationship and the particular risk management objective and strategy for undertaking the hedge transaction. The Company assesses, both at the inception of the hedge and on an ongoing basis, whether the hedging instruments have been highly effective in offsetting changes in the fair value or cash flows of the hedged items. Note 5 sets out the details of the fair values of derivatives used for hedging purposes. Cash flow hedge In a cash flow hedging relationship, the effective portion of the change in the fair value of the hedging derivative, net of income taxes, is recorded in OCI while the ineffective portion is recorded in unrealized and realized gains (losses) on derivatives. All components of each derivative’s change in fair value have been included in the assessment of cash flow hedge effectiveness. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, hedge accounting is discontinued and the amounts previously recorded in OCI are reclassified to net interest income during the periods when the variability in the cash flows of the hedged item affects net interest income. When a forecast transaction is no longer expected to occur, the amounts previously recorded in OCI are immediately reclassified to the statement of income and are recorded as unrealized and realized gains (losses) on derivatives. 2.11 Fee for Service

Fee for service revenues except for estate administration fees are recognized over the period in which the related service is rendered. Estate administration fees are recognized as income when the Company has rendered all services and is entitled to collect the fee. 2.12 Cash Resources

Cash resources consist of cash and short-term securities that are due on demand or had short periods to maturity at date of acquisition, are highly liquid and readily convertible to known amounts of cash, are subject to insignificant risk of change in fair value, and are used to manage short-term cash commitments. 2.13 Leases

Leases are accounted for in accordance with IAS 17 and IFRIC 4. They are divided into finance leases and operating leases. (a) As Lessor

When assets are held subject to a finance lease, the present value of the lease payments is recognized as a receivable. The difference between the gross receivable and the present value of the receivable is

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Concentra Financial Services Association Page 9 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

recognized as unearned finance income. Lease income is recognized over the term of the lease using the net investment in the lease and the interest rate implicit in the lease, which reflects a constant periodic rate of return. The Company does not enter into operating leases as a lessor. (b) Lessee

The leases entered into by the Company are operating leases as a significant portion of the risks and rewards are retained by another party, the lessor. The total payments made under operating leases are charged to non-interest expense in the consolidated statement of income on a straight-line basis over the period of the lease. The Company does not enter into finance leases as a lessee. 2.14 Premises, Equipment and Other Intangible Assets

Premises and equipment are measured at cost less accumulated amortization and accumulated impairment losses. As no finite useful life for land can be determined, its carrying amount is not depreciated. Buildings, building components, building improvements and equipment are carried at acquisition cost less subsequent amortization and impairment losses. Amortization is recognized on a straight-line basis over the estimated useful life of the item of premises or equipment. The applicable amortization periods are as follows: Buildings 40 years Building components 20 years Building improvements 5 years Equipment 3 – 10 years Amortization methods, residual values and estimates of useful lives are reassessed at each financial year-end and adjusted if appropriate. Other intangible assets consist of acquired and internally developed software. Other intangible assets are carried at cost less accumulated amortization and accumulated impairment losses. The useful lives of intangible assets are assessed to be finite. Amortization is recognized on a straight-line basis over their estimated useful lives of 3-5 years. 2.15 Subordinated Debentures

Transaction costs, premiums and discounts incurred in the issuance of subordinated debentures are amortized to interest expense using the effective interest method. 2.16 Income Tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it relates to items recognized directly in equity or in other comprehensive income (loss). (a) Current income tax

Income tax payable (receivable) is calculated on the basis of the applicable tax law in the respective jurisdiction and is recognized as an expense (income) for the period except to the extent that current tax related to items that are charged or credited in other comprehensive income (loss) or directly to equity. In these circumstances, current tax is charged or credited to other comprehensive income (loss) or to equity (for example, current tax on available-for-sale securities). Reduction of income taxes that arise from the distribution of dividends by the Company are recognized at the same time as the liability to pay the related dividend is recognized and are recorded directly in equity.

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Concentra Financial Services Association Page 10 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the consolidated balance sheet and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. The principal temporary differences arise from securities, securitized assets, loans to customers, amortization of premises and equipment, accrued expenses, effective interest method, and carry-forward amounts. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. A deferred tax asset is recognized for deductible temporary differences relating to investments in subsidiaries to the extent that it is probable that the temporary differences will reverse in the foreseeable future and that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. Deferred tax related to fair value re-measurement of available-for-sale securities and cash flow hedges, which are recognized in other comprehensive income (loss), is also recognized in other comprehensive income (loss) and subsequently in the consolidated statement of income together with the deferred gain or loss. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities against current tax assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but the Company intends to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously. 2.17 Employee Benefits

(a) Pension benefits

The Company has a defined contribution plan which is a post-employment benefit plan under which the Company pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to pay further contributions if the plan does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognized as employee benefit expense when they are due in respect of service rendered before the end of the reporting period. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the reporting period in which the employees rendered the service are discounted to their present value at the reporting date. (b) Termination benefits

Termination benefits are employee benefits provided when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts an offer of benefits in exchange for the termination of employment. The Company recognizes termination benefits at the earlier of the date when the Company can no longer withdraw the offer of those benefits and the date the Company recognizes costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination benefits. Benefits falling due more than 12 months after the date of the consolidated balance sheet are discounted to present value. 2.18 Provisions A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

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Concentra Financial Services Association Page 11 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.19 Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Company has determined the Company executive leadership team as its chief operating decision-maker. All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and costs being eliminated. Income and expenses directly associated with each segment are included in determining business segment performance. In accordance with IFRS 8, the Company has the following lines of business: Financial Intermediation and Trust Operations. Financial Intermediation includes residential mortgage, commercial lending and commercial leasing activities, personal and corporate deposit products, securities and treasury services. Trust Operations consist of personal, corporate, and registered plans trust products and services. The Trust Operations line of business before the elimination of intercompany transactions and balances has total revenue of $6,128 (2013 - $6,233), net income of $900 (2013 - $904) and total assets of $13,396 (2013 - $12,226). The Trust Operations business does not meet the quantitative thresholds within IFRS 8 to require separate disclosure. 2.20 Interest in Joint Operations

The Company is party to a joint arrangement in which the Company along with its participating partners have combined efforts to issue a series of Commercial Mortgage Pass-Through Certificates. A joint arrangement is an arrangement in which two or more parties have joint control. Joint control exists only when decisions about the relevant activities require unanimous consent of the parties sharing the control of the arrangement. Joint arrangements are either classified as joint operations or joint arrangements depending on the contractual rights and obligations of each investor rather than the legal structure of the joint arrangement.

When determining the classification of the joint arrangement the Company considered the terms and conditions of the underlying agreement to determine the Company’s contractual rights and obligations under the arrangement. The Company’s role in this arrangement is limited to the warehousing and/or contribution of certain commercial mortgages prior to the issuance of the pass through certificates in return for a proportionate share of the final net proceeds. During the warehousing period the Company retains all risks and rewards attributable to the commercial mortgages. Post issuance the Company has transferred the commercial mortgages to its joint operating partner and has no continuing involvement. As a result, the Company has concluded that the arrangement is joint operation and recognizes its share of the operation represented by (1) its assets and liabilities held/incurred jointly; and (2) its revenue and expenses incurred jointly arising from the joint operation. 2.21 Goodwill

Goodwill represents the excess of the purchase price over the fair value of the Company’s share of the net identifiable assets acquired in business combinations. Goodwill is allocated to cash-generating units or groups of cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Goodwill is tested for impairment annually, or whenever a trigger event has been observed, by comparing the present value of the expected future cash flows from a cash-generating unit with the carrying value of its net assets, including applicable goodwill carried at cost less previous accumulated impairment losses. Any goodwill impairment is charged to income in the period in which the impairment is identified. Impairment losses on goodwill are not reversed.

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Concentra Financial Services Association Page 12 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.22 Assets Under Administration

Assets administered or managed by the Company on behalf of estates, trusts and agencies are recorded separately from the Company’s assets and are not included on the consolidated balance sheet. 2.23 Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative information. Where retrospective application or restatement under IAS 8 applies, comparative figures have been adjusted to conform with the changes in presentation in the current year. Certain amounts of the prior year have been reclassified within the consolidated financial statements to match the current year presentation. Specifically, to better reflect the nature of the underlying revenues, other non-interest income of $6,234 included in the consolidated statement of income has been reallocated to gain on financial instruments and fee for service income in the amounts of $122 and $6,112 respectively. As well, amounts previously reported on the consolidated balance sheet as premises and equipment, and other intangible assets for $3,250 and $2,456 respectively are now presented within other assets to match the current year presentation. Furthermore, loan classifications presented within Notes 6 and 7 have been adjusted to reflect the classifications utilized on an ongoing basis by management. Specifically, amounts previously reported as commercial loans, commercial mortgages, and credit union loans have been consolidated and reported as commercial and credit union loans in the current year. Additionally, finance leases previously included in commercial loans have been reclassified and reported as a separate category in the current year presentation. There was no impact to net income for these changes. 2.24 Standards, amendments and interpretations adopted

Of the new standards, amendments and interpretations that became effective in 2014, the following are relevant to the Company.

Amendments to IAS 32 Offsetting Financial Assets and Liabilities - The amendments clarify the requirements relating to the offsetting of financial assets and liabilities. Specifically the amendments clarify the meaning of “currently has a legally enforceable right of set-off, and simultaneous realization and settlement”. Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets - The amendments to IAS 36 provides new disclosure requirements relating to the measurement of the recoverable amount of impaired assets as a result of issuing IFRS 13, Fair value measurement. Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - The amendments to IAS 39 adds a limited exception to allow continuation of hedge accounting when a derivative designated as a hedging instrument is novated under certain circumstances. The amendments also clarify that any change to the fair value of the derivative designated as a hedging instrument arising from the novation should be included in the assessment and measurement of hedge effectiveness. IFRIC 21 Levies - IFRIC 21 addresses the issue of when to recognize a liability to pay a levy imposed by government that is accounting for in accordance with IAS 37, Provisions, contingent liabilities and contingent assets. The Interpretation defines a levy, and specifies that the obligating event that gives rise to the liability is the activity that triggers the payment of the levy, as identified by legislation. The Interpretation provides guidance on how different levy arrangements should be accounted for, in particular, it clarifies that neither economic compulsion nor the going concern basis of financial statements preparation implies that an entity has a present obligation to pay a levy that will be triggered by operating in a future period. The adoption of these standards did not have a significant impact on the Company’s financial statements.

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Concentra Financial Services Association Page 13 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.25 Standards, amendments and interpretations issued but not yet adopted

The following standards, amendments and interpretations have been issued and are mandatory for the Company’s accounting periods beginning January 1, 2015, or later periods and are expected to be relevant to the Company. The Company is currently assessing the impact of adopting these standards when they become effective. IFRS 9 - Financial Instruments In July 2014, the IASB finalized the reform of financial instruments accounting and issued IFRS 9 (as revised in 2014), which will supersede IAS 39 Financial instruments: Recognition and Measurement in its entirety. The standard covers three broad topics: Classification and measurement, Impairment and Hedging. Classification and Measurement The standard uses a single approach to determine whether a financial asset is measured at amortized cost or fair value. Financial assets will be measured at fair value through profit or loss unless certain conditions are met which permits measurement at amortized cost or at fair value through other comprehensive income. Most of the IFRS 9 requirements for financial liabilities have been carried forward unchanged from IAS 39. Impairment The standard introduces a new single model for the measurement of impairment losses on all financial instruments subject to impairment accounting. The expected credit loss (ECL) model replaces the current “incurred loss” model and is based on a forward looking approach. The ECL model contains a “dual stage” approach which is based on the change in credit quality of loans since initial recognition. Under the first stage, an amount equal to 12 months expected credit losses will be recorded for financial instruments where there has not been a significant increase in credit risk since initial recognition. Under the second stage, an amount equal to the lifetime expected losses will be recorded for those financial instruments where there has been a significant increase in credit risk since initial recognition. Hedging The standard expands the scope of hedged items and hedging items to which hedge accounting can be applied. It changes the effectiveness testing requirements and removes the ability to voluntarily discontinue hedge accounting. The standard is effective January 1, 2018. IFRS 15 - Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers which provides a single revenue recognition standard to align the financial reporting of revenue from contracts with customers and related costs. A company would recognize revenue when it transfers goods or services to a customer in the amount of consideration the company expects to receive from the customer. The revenue arising from financial instruments is not within the scope of IFRS 15. The standard is effective January 1, 2017. 2.26 Critical accounting estimates and judgments

The Company’s financial statements and its financial results are influenced by accounting policies, assumptions, estimates and management judgment, which necessarily have to be made in the course of preparation of these consolidated financial statements. The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. All estimates and assumptions required in conformity with IFRS are best estimates undertaken in accordance with the applicable standard. Estimates and judgments are evaluated on a continuous basis, and are based on past

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Concentra Financial Services Association Page 14 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

experience and other factors, including expectations with regard to future events. Accounting policies and management’s judgments for certain items are especially critical for the Company’s results and financial position due to their materiality. 2.26.1 Key Sources of Estimation Uncertainty

(a) Allowances for impairment

The Company reviews its loan portfolios to assess impairment at least on a quarterly basis. In determining whether an impairment loss should be recorded in the consolidated statement of income, the Company makes judgments as to whether there is any observable data indicating an impairment trigger followed by measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can be identified with that portfolio. This evidence may include observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the portfolios. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the portfolio when forecasting 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 specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgments about a counterparty’s financial situation and the net realizable value of any underlying collateral. Each impaired asset is assessed on its merits, and the work out strategy and estimate of cash flows considered recoverable are independently approved by the credit risk management function. Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired loans, but the individual impaired loans cannot yet be identified. In assessing the need for collective allowances for impairment, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowance depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances for impairment. (b) Goodwill

Since goodwill is tested for impairment annually, or whenever a trigger event has been observed, by comparing the present value of the expected future cash flows from a cash-generating unit with the carrying value of its net assets, including applicable goodwill carried at cost less previous accumulated impairment losses, management is required to make assumptions as to factors that determine the present value of the expected future cash flows. (c) Fair value of financial instruments

The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases, the fair values are estimated from observable data in respect of similar financial instruments or using models. Where market observable inputs are not available, they are estimated based on appropriate assumptions. Where valuation techniques such as models are used to determine fair values, they are validated and periodically reviewed. All models are approved before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, areas such as credit risk (both own credit risk and counterparty credit risk), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

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Concentra Financial Services Association Page 15 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Income taxes

The Company is subject to income taxes in multiple jurisdictions. Estimates are required in determining income tax expense. There are transactions and calculations for which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact current income tax and deferred income tax expense. 3. SECURITIES

The securities portfolio is comprised of a large number of securities carrying a variety of terms and conditions. Approximately 83.0% (2013 – 79.9%) of the portfolio bears interest at fixed rates and pays interest semi-annually and/or upon maturity. The remainder of the portfolio earns interest at variable rates and pays interest monthly or quarterly, or provides a return of dividends over varying periods of time. Government securities are comprised of securities issued or guaranteed by Canadian federal, provincial and municipal governments. Corporate securities are comprised of commercial paper, medium term notes and co-operative equities. Securities of $175,566 (2013 - $210,832) have been pledged as collateral or held in a segregated safekeeping account for various obligations of the Company. Of these securities, $106,757 (2013 - $137,243) are securities sold under repurchase agreements (see Note 12). Securities of $56,155 (2013 - $52,297) were held in a segregated safekeeping account under the commercial paper program (see Note 12). Securities of $12,654 (2013 - $21,292) were held as collateral under various agreements with counterparties to derivative financial instruments. Collateral is required when the sum of the mark to market of the derivative financial instruments in favour of the counterparty exceeds the threshold established by the counterparty. The collateral provided consists of federal and provincial government securities and is modified as changes in the mark to market of outstanding derivative financial instruments occur. Securities of $270,662 (2013 - $360,042) are held within securitization programs as described in Note 4.

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Concentra Financial Services Association Page 16 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 3. SECURITIES (continued)

The maturity dates, fair value, and weighted average effective interest rates for the securities portfolio are as follows:

2014 ($)

Effective Rate

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

No Fixed Maturity

Total

Available-for-Sale Government

Federal 1.57% 29,855 112,299 434,954 5,207 - 582,315

Provincial 1.53% - 30,841 123,896 - - 154,737 Corporate

Chartered banks - - - - - - -

Co-operatives 0.71% - - 1,500 12 2,898 4,410

Other corporate 2.21% 8,005 27,315 64,909 32,984 - 133,213 Mortgage-backed 2.61% - - 16,399 - - 16,399 Asset-backed 2.05% 45,367 41,885 183,087 - - 270,339 Total fair value 83,227 212,340 824,745 38,203 2,898 1,161,413 Accrued interest 3,125 1,164,538

2013 ($)

Effective

Rate

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

No Fixed Maturity

Total

Available-for-Sale Government

Federal 1.43% 36,365 66,844 144,612 - - 247,821

Provincial 1.60% 125,214 - 67,312 - - 192,526 Corporate

Chartered banks 2.39% 39,261 - 31,402 3,113 - 73,776

Co-operatives 0.78% - - 1,500 12 2,898 4,410

Other corporate 3.38% - - 9,280 - - 9,280 Mortgage-backed 3.19% 25,595 684 101,386 - - 127,665 Asset-backed 1.97% 127,994 190,959 89,231 - - 408,184 Total fair value 354,429 258,487 444,723 3,125 2,898 1,063,662 Accrued interest 3,943 1,067,605

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Concentra Financial Services Association Page 17 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 3. SECURITIES (continued)

Unrealized Gains and Losses on Available-for-Sale Securities

2014 ($) 2013 ($) Amortized

Cost Unrealized Fair

Value Amortized

Cost Unrealized Fair

Value Gains Losses Gains Losses Government 734,925 2,183 (56) 737,052 439,259 1,235 (147) 440,347 Corporate 136,689 1,020 (86) 137,623 85,787 1,687 (8) 87,466 Mortgage-backed 16,331 68 - 16,399 124,228 3,610 (173) 127,665 Asset-backed 268,257 2,163 (81) 270,339 406,866 1,426 (108) 408,184

1,156,202 5,434 (223) 1,161,413 1,056,140 7,958 (436) 1,063,662

4. ASSET SECURITIZATION

4.1 Securitized Assets and Liabilities

The Company enters into transactions that result in the transfer of financial assets to third parties. The Company purchases insured residential mortgages from third party originators. Subsequently, a portion of the purchased insured residential mortgages are securitized through the Canada Mortgage and Housing Corporation (CMHC)-sponsored National Housing Act Mortgage-Backed Securities (NHA MBS) program and the Canada Mortgage Bonds (CMB) program. The Company assigns and transfers all legal rights, title and interest in the mortgages to CMHC when the NHA MBS are issued. The Company remains exposed to variability of future cash flows resulting from the difference between the return on the insured residential mortgages and the interest paid on the related NHA MBS obligation (excess spread) less program costs and from prepayment risk, credit risk and reinvestment risk. The mortgages are subject to prepayment, in full or in part, and thus the future cash flows related to the transferred assets are uncertain including the amount of prepayment penalties paid by the borrower. Since the Company has determined that substantially all of the risks and rewards of ownership of these assets have not been transferred, the assets have not been derecognized for accounting purposes. In the case of NHA MBS sold to third parties, matching securitization obligations are established based on the fair value of the assets on the date of the transfer. As scheduled and unscheduled payments are received, the cash flows are ultimately transferred to the holders of the NHA MBS and the securitization obligations are reduced accordingly. The Company may also retain certain issued NHA MBS as part of its liquidity management strategy. Under the CMB program, matching securitization obligations are established based on the fair value of the assets on the date of the transfer. These securitization obligations are at a fixed rate and amount for the entire fixed term, usually five years. Settlement of the securitization obligations for the fixed amount occurs from the proceeds received from the transferred assets at maturity. As scheduled and unscheduled payments are received, cash flows are reinvested in either replacement mortgages or in prescribed securities. Thus the Company is exposed to variability of the future cash flows related to the reinvestment. To offset this variability, the Company may, but is not required to, enter into a swap agreement with a third party over the term of the matching obligation based on the estimated value of the replacement assets, which value may be subject to reset.

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Concentra Financial Services Association Page 18 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 4. ASSET SECURITIZATION (continued)

The Company coordinates the issuance of NHA MBS on behalf of credit unions. These services are provided on a fee for service basis when the credit union is established as an approved issuer under the CMHC-sponsored NHA MBS program. In previous years when the credit union was not established as an approved issuer and the credit union desired to securitize insured residential mortgages through the CMHC-sponsored NHA MBS program, the Company acted as the issuer under the program requirements. The Company then either securitized these NHA MBS into the CMB program or purchased them as replacement assets under the CMB program. No new transactions were entered into in 2014. When the Company acted as the issuer of the NHA MBS, the Company had determined that substantially all of the risks and rewards of ownership of these assets had not been transferred. Since the transfer did not qualify for derecognition, the Company did not recognize the transferred asset as its asset. Rather the asset retained by the Company was deemed to be a loan receivable from the credit union and was recorded in credit union loans within loans to customers with a corresponding liability included in liabilities for loans securitized. The terms and conditions of the loan receivable mirror those of the related liability. The risk and rewards related to the credit union loans are similar to other credit union loans within loans to customers. The following table presents the carrying value and fair value of the aggregate insured residential mortgages transferred by the Company under these programs that have not been derecognized, the securities held within the CMB program, the related securitization obligations recognized on the consolidated balance sheet and the net position:

2014 ($)

Carrying

Value Fair

Value

Securities (Note 3) 270,662 270,662 Loans to customers – commercial and credit union loans (Note 6) 27,690 28,172 Loans to customers – residential mortgages (Note 6) 2,497,034 2,540,438

2,795,386 2,839,272

Liabilities for loans securitized (Note 13) 2,298,478 2,334,554

Net position 496,908 504,718

2013 ($)

Carrying

Value Fair

Value

Securities (Note 3) 360,042 360,042

Loans to customers – commercial and credit union loans (Note 6) 124,153 123,201

Loans to customers – residential mortgages (Note 6) 2,145,945 2,129,512

2,630,140 2,612,755

Liabilities for loans securitized (Note 13) 2,309,426 2,353,672

Net position 320,714 259,083

At December 31, $498,913 (2013 - $318,444) of residential mortgages were assigned to NHA MBS with a fair value of $505,251 (2013 - $320,937) that were not transferred to third parties and are reported in loans to customers – residential mortgages. 4.2 Derecognized Securitizations The Company creates NHA MBS from a pool of third party originated insured single family residential mortgages and simultaneously enters into an agreement to sell the retained interest (excess spread) less specific related costs, back to the third party originator for a fee which is recorded in securitization income. The Company has accounted for these transactions as a sale as it has transferred substantially all the risks and rewards of ownership associated with the underlying mortgages. The Company has removed the transferred assets from the consolidated balance sheet. The third party has retained responsibility for servicing these mortgages. The Company does not hold a retained interest in the associated residential mortgage portfolio and is not liable for credit losses on the portfolio.

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Concentra Financial Services Association Page 19 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 4. ASSET SECURITIZATION (continued)

The Company securitized and sold through the NHA MBS program certain insured multi-family and social housing residential mortgages with no pre-payment privileges. Since substantially all the risks and rewards related to the NHA MBS have been transferred, the mortgages are derecognized as a result of this transaction. The Company’s continuing involvement is limited to its retained interest in the excess spread and its obligations for mortgage servicing. There is no prepayment or credit risk associated with the retained interest or the cost of servicing. The retained interest and servicing liability are recorded on the consolidated balance sheet in other assets and other liabilities, respectively. The following table provides quantitative information about these derecognized securitization and sales activities during the year:

2014 ($)

Single Family Residential

MBS

Multi-Family and Social Housing

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized in year - 124,296 124,296 Gain on sale of mortgages or residual interests in year (Note 18) - 736 736 Other securitization revenue in year (Note 18) - 89 89 Carrying value of retained interests - 6,203 6,203 Carrying value of servicing liabilities - 840 840 Total derecognized mortgages principal balance outstanding at year end

28,301

133,875

162,176

Cumulative income recorded on outstanding transactions 36 937 973

2013 ($)

Single Family Residential

MBS

Multi-Family and Social Housing

Residential MBS

Total MBS

Carrying value of underlying mortgages derecognized in year 22,118 11,327 33,445

Gain on sale of mortgages or residual interests in year (Note 18) (5) 110 105

Other securitization revenue in year (Note 18) - 2 2

Carrying value of retained interests - 436 436

Carrying value of servicing liabilities - 78 78

Total derecognized mortgages principal balance outstanding at year end

30,600

11,282

41,882

Cumulative income recorded on outstanding transactions 36 112 148

The Company previously sold Retirement Compensation Arrangement (RCA) loans to an independent structured entity. No new RCA loan sales have occurred in 2014 or 2013. At December 31, the outstanding principal loan balance was $25,282 (2013 - $44,150). The Company had accounted for each of these transactions as a sale as it had transferred substantially all the risks and rewards of ownership. The Company has removed the transferred assets in their entirety from the consolidated balance sheet. The Company does not hold a retained interest in the loan portfolio and is not liable for credit losses on the portfolio. The Company has retained the responsibility for servicing these loans in return for a fee for service. Concentra Trust, a wholly owned subsidiary of the Company, acts as the custodian/trustee of each RCA trust.

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Concentra Financial Services Association Page 20 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 5. DERIVATIVE ASSETS AND LIABILITIES

Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, foreign exchange rate, equity instrument or index. Derivative contracts are expressed in notional amounts. The notional amounts, which are off-balance sheet, do not represent amounts exchanged and, thus, are not a measure of the Company’s exposure through the use of derivatives. The notional amount is the reference amount used to determine the payment required by contract and is a common measure of business volume. Swaps are contractual agreements to exchange a series of cash flows based on agreed upon rates to a notional amount. Interest rate swaps are used to manage exposure to interest rate risk by modifying the repricing or interest rate characteristics of assets and liabilities. Exposure is managed through the exchange of fixed and floating interest rate payments based on notional amounts. Forward contracts used to determine the rate of interest to be paid or received beginning at a future date. A forward rate agreement manages the risk of fluctuating market interest rates by locking in a current interest rate for a transaction that will take place in the future. Payment based on a notional amount is paid or received once at maturity. Foreign exchange contracts are contractual obligations to buy or sell one currency against another, for settlement on the day the contract expires. A foreign exchange contract manages the risk of fluctuating exchange rates by locking in a current price for a transaction that will take place in the future. Foreign exchange exposure is managed through entering into foreign exchange forward contracts. The derivatives currently held or issued are for non-trading purposes. These derivatives are used in managing the Company’s asset/liability activities and include investing and hedging activities.

Notional Amounts / Term to Maturity and Fair Value of Derivative Instruments

2014 ($) Notional Amount by Term to Maturity Fair Value

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years Over

5 Years Total Asset Liability

Asset / Liability Management

Interest rate swaps 46,643 124,192 756,676 86,897 1,014,408 7,708 9,358

Forward contracts 55,312 9,172 832 - 65,316 - 784

Foreign exchange contracts 239 729 747 - 1,715 - -

102,194 134,093 758,255 86,897 1,081,439 7,708 10,142

Designated in Cash Flow Hedges

Forward contracts 20,000 - - - 20,000 34 -

20,000 - - - 20,000 34 -

As Intermediary

Interest rate swaps - 216,282 843,340 49,364 1,108,986 6,387 6,079

Forward contracts 145,000 120,000 - 11,078 276,078 422 414

Foreign exchange contracts 27,966 13,287 - - 41,253 - -

172,966 349,569 843,340 60,442 1,426,317 6,809 6,493

295,160 483,662 1,601,595 147,339 2,527,756 14,551 16,635

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Concentra Financial Services Association Page 21 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 5. DERIVATIVE ASSETS AND LIABILITIES (continued)

2013 ($) Notional Amount by Term to Maturity Fair Value

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years Over 5 Years Total Asset Liability

Asset / Liability Management

Interest rate swaps 40,466 271,238 825,686 17,772 1,155,162 15,722 12,004

Forward contracts 8,615 - - - 8,615 70 -

Foreign exchange contracts 231 706 1,715 - 2,652 - -

49,312 271,944 827,401 17,772 1,166,429 15,792 12,004

Designated in Cash Flow Hedges

Forward contracts - - - - - - -

- - - - - - -

As Intermediary

Interest rate swaps 25,708 60,140 517,362 47,577 650,787 2,779 2,299

Forward contracts - - - - - - -

Foreign exchange contracts 38,229 8,006 - - 46,235 - -

63,937 68,146 517,362 47,577 697,022 2,779 2,299

113,249 340,090 1,344,763 65,349 1,863,451 18,571 14,303

Amounts Expected to be Recovered or Settled

2014 ($) 2013 ($) Positive Negative Positive Negative

Within 12 months 9,869 11,643 11,501 5,712 After 12 months 4,682 4,992 7,070 8,591 14,551 16,635 18,571 14,303

The Company is exposed to credit related losses in the event of non-performance by the counterparties to derivative contracts. The Company’s credit exposure on the interest rate contracts is limited to the positive replacement cost (fair value) of the instruments as this represents the cost to replace these contracts at prevailing market rates if a default occurred. The Company mitigates exposures by limiting the counterparties to interest rate contracts to credit worthy Canadian financial institutions. In determining the credit quality of derivative instruments both the Company’s own credit risk and the risk of the counterparty are considered elements of the credit quality. Credit risk is measured by using a credit equivalent amount. The credit equivalent amount is derived from the sum of the positive replacement cost and the potential credit risk exposure which reflects the potential change in replacement cost in relation to the remaining term to maturity of the contract. The risk-weighted amount is determined by applying standard measures of counterparty risk to the credit equivalent amount.

58

Concentra Financial Services Association Page 22 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 5. DERIVATIVE ASSETS AND LIABILITIES (continued)

The following table provides information in relation to the Company’s credit risk exposure for derivative financial transactions. Positive replacement cost is derived from the fair value of derivative financial instruments (Note 21.2). Potential credit risk exposure and risk-weighted equivalents are calculated in accordance with OSFI capital adequacy guidelines.

2014 ($) 2013 ($) Interest

Rate Contracts

Foreign Exchange Contracts Total

Interest Rate

Contracts

Foreign Exchange Contracts Total

Notional amounts 2,484,788 42,968 2,527,756 1,814,564 48,887 1,863,451

Positive replacement cost 14,551 - 14,551 18,571 - 18,571

Potential credit risk exposure 10,258 460 10,718 7,695 557 8,252

Credit equivalent amount 24,809 460 25,269 26,267 557 26,824

Risk-weighted equivalent 4,962 92 5,054 5,253 111 5,364

Results of Hedge Activities

The Company uses forward rate agreements to hedge the variability in cash flows related to issuance of obligations under a securitization program. Interest spreads are exposed to potential changes in interest rates from the time the commitment is made to fund the residential mortgages through to the actual funding date of the residential mortgage and to the ultimate funding of the obligation under the securitization program. Thus the forward rate agreement reduces the impact of interest rate changes on the interest spread between the residential mortgages to be securitized and the liabilities for loans securitized. The realized gains (losses) are reclassified from OCI to net income over the period of the obligation under the securitization program.

2014 ($) 2013 ($)

Cash Flow Hedges

Ineffective portion recorded in unrealized and realized gains (losses) on derivatives during the year

-

42

Effective portion – net gains (losses) recorded in OCI during the year

(1,388)

1,329

Reclassification of (gains) losses to net income during the year

(146)

(182)

59

Concentra Financial Services Association Page 23 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 6. LOANS TO CUSTOMERS

This table provides a summary of the loan portfolio.

2014 ($) 2013 ($) Gross

Loan Balance

Specific Allowances

Total

Gross Loan

Balance Specific

Allowances

Total Commercial and credit union loans

1,223,625

(8,074)

1,215,551 1,201,361 (4,730) 1,196,631

Finance leases 149,086 - 149,086 91,937 - 91,937

Residential mortgages (1) 4,083,735 (646) 4,083,089 3,562,455 (975) 3,561,480

Amortized cost 5,456,446 (8,720) 5,447,726 4,855,753 (5,705) 4,850,048

Collective allowance (11,559) (8,617)

Accrued interest 12,446 12,134

5,448,613 4,853,565 (1) Residential mortgages includes $1,889 (2013 - $2,961) of property held for resale. Approximately 89.8% (2013 – 89.9%) of the loan portfolio bears interest at fixed rates and the remainder bears interest at variable rates. Loans of $25,365 (2013 - $126,488) have been pledged as collateral for various obligations of the Company. Credit union loans of $27,591 (2013 - $123,702) and accrued interest of $99 (2013 - $451) are held within securitization programs as described in Note 4. Residential mortgages of $2,494,015 (2013 - $2,142,907) and accrued interest of $3,019 (2013 - $3,038) are held within securitization programs as described in Note 4. The maturity dates and weighted average effective interest rate information for the loan portfolio are as follows:

2014 ($)

Effective Rate

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

Total Commercial and credit union loans 4.42% 96,698 154,957 649,936 313,960 1,215,551 Finance leases 4.54% 1,452 5,054 131,110 11,470 149,086 Residential mortgages 3.33% 165,627 546,202 3,361,074 10,186 4,083,089 Amortized cost 263,777 706,213 4,142,120 335,616 5,447,726

2013 ($)

Effective Rate

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

Total Commercial and credit union loans 4.42% 97,005 204,579 655,819 239,228 1,196,631 Finance leases 4.86% 877 5,646 76,902 8,512 91,937 Residential mortgages 3.52% 165,141 470,865 2,906,960 18,514 3,561,480 Amortized cost 263,023 681,090 3,639,681 266,254 4,850,048

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Concentra Financial Services Association Page 24 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 6. LOANS TO CUSTOMERS (continued)

Arrears and Impaired Loans A loan is considered past due when a counterparty has not made a payment by the contractual due date. The following table presents the carrying value of loans that are past due but not classified as impaired because they are either (1) less than 90 days past due, or (2) fully secured and collection efforts are reasonably expected to result in full repayment.

2014 ($) 2013 ($)

1 – 29 Days

30 – 89 Days

90 Days and

Greater Total 1 – 29 Days

30 – 89 Days

90 Days and

Greater Total Commercial and credit union loans - - - - - - 3,171 3,171 Finance leases 1,653 1,408 858 3,919 4,636 11 - 4,647 Residential mortgages 54,520 32,835 18,263 105,618 48,096 33,622 20,219 101,937 56,173 34,243 19,121 109,537 52,732 33,633 23,390 109,755

The following table presents the gross amount of individually impaired loans and the specific allowance for impairment.

2014 ($) 2013 ($) Individually

impaired loans – gross

amounts

Specific allowance

for impairment

Individually impaired

loans – net amounts

Individually impaired loans – gross

amounts

Specific allowance

for impairment

Individually impaired

loans – net amounts

Commercial and credit union loans 23,486 (8,074) 15,412 31,014 (4,730) 26,284 Finance leases - - - - - - Residential mortgages 2,003 (646) 1,357 1,682 (975) 707

25,489 (8,720) 16,769 32,696 (5,705) 26,991

The following table represents the gross amount of individually impaired loans and the specific allowance for impairment, by geographic region of security.

2014 ($)

Atlantic Quebec Ontario Prairies and Territories

British Columbia Total

Individually impaired loans – gross amounts - - 19,028 357 6,104 25,489

Specific allowance for impairment - - (6,939) (160) (1,621) (8,720)

Individually impaired loans – net amounts - - 12,089 197 4,483 16,769

2013 ($)

Atlantic Quebec Ontario Prairies and Territories

British Columbia Total

Individually impaired loans – gross amounts 254 - 19,322 8,509 4,611 32,696

Specific allowance for impairment (239) - (736) (3,780) (950) (5,705)

Individually impaired loans – net amounts 15 - 18,586 4,729 3,661 26,991

Loans interest income of $1,133 (2013 - $929) was recognized on impaired loans during the year.

61

Concentra Financial Services Association Page 25 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 6. LOANS TO CUSTOMERS (continued)

Finance leases of certain property and equipment where the Company is the lessor includes the following:

2014 ($) 2013 ($) Minimum lease payments, receivable:

Not later than one year 6,698 6,777

Between one and five years 144,177 84,510

Later than five years 13,507 10,440

164,382 101,727

Unearned finance income on finance leases (15,296) (9,790)

Gross investment in finance leases, receivable 149,086 91,937

7. ALLOWANCE FOR IMPAIRMENT

The following table summarizes the Company’s collective and specific allowances for impairment:

2014 ($)

Balance Beginning

of Year

Reversal of

Impairment

Increase in Impairment Allowance

Balance End of Year

Specific allowances Commercial and credit union loans 4,730 (3,780) 7,124 8,074 Finance leases - (52) 52 - Residential mortgages 975 (975) 646 646 Total specific allowances 5,705 (4,807) 7,822 8,720 Collective allowances Commercial and credit union loans 7,707 (2,267) 4,992 10,432 Finance leases 561 (93) 345 813 Residential mortgages 349 (101) 66 314 Total collective allowances 8,617 (2,461) 5,403 11,559 Total allowance for impairment 14,322 (7,268) 13,225 20,279

2013 ($)

Balance Beginning

of Year

Reversal of

Impairment

Increase in Impairment Allowance

Balance End of Year

Specific allowances Commercial and credit union loans 3,612 (3,557) 4,675 4,730 Finance leases 359 (359) - - Residential mortgages 601 (138) 512 975 Total specific allowances 4,572 (4,054) 5,187 5,705 Collective allowances Commercial and credit union loans 8,152 (2,725) 2,280 7,707 Finance leases 780 (271) 52 561 Residential mortgages 336 (5) 18 349 Total collective allowances 9,268 (3,001) 2,350 8,617 Total allowance for impairment 13,840 (7,055) 7,537 14,322

62

Concentra Financial Services Association Page 26 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 8. OTHER ASSETS

2014 ($) 2013 ($) Prepaid and deferred costs 682 634 Other investments 461 382 Retained interests 6,203 436 Premises and equipment 3,056 3,250 Other intangible assets 2,376 2,456 12,778 7,158

Depreciation recorded on premises and equipment for the year was $281 (2013- $364). Amortization recorded on other intangible assets for the year was $789 (2013- $540).

9. GOODWILL

The Company has completed the annual test for goodwill impairment and has determined that the goodwill is not impaired. The carrying amount of goodwill of $19,248 (2013 - $19,248) is related to Financial Intermediation.

10. INCOME TAXES

Income taxes are included in the consolidated statement of income as follows:

2014 ($) 2013 ($) Current income tax expense (recovery)

Current tax on income for current year 8,537 9,667

Current tax from adjustments for prior years (5) (19)

8,532 9,648

Deferred income tax recovery

Origination and reversal of temporary differences (230) (297)

Impact of tax rate changes (1) (6)

(231) (303)

8,301 9,345

Income taxes are included in the consolidated statement of comprehensive income as follows:

2014 ($) 2013 ($)

Other comprehensive income Current income tax (recovery) expense

Net unrealized gains (losses) on available-for-sale securities 999 (570)

Reclassification of (gains) losses on available-for-sale securities to net income (1,419) (15)

Net gains (losses) on derivatives designated as cash flow hedges (373) 357

Reclassification of (gains) losses on derivatives designated as cash flow hedges to net income

(38)

(49)

(831) (277)

Income taxes are included in the consolidated statement of changes in equity as follows:

2014 ($) 2013 ($)

Retained earnings Current income tax recovery Reduction in income taxes due to payment of dividends (1,159) (1,874)

(1,159) (1,874)

63

Concentra Financial Services Association Page 27 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 10. INCOME TAXES (continued)

Reconciliation of income tax expense from operations:

2014 ($) 2013 ($) Combined federal and provincial income tax rate applied to income from operations (2014 – 26.9%; 2013 – 26.9%)

8,478

9,670

Income tax expense adjusted for the effect of:

Adjustments related to prior periods (14) (71)

Expenses not deductible for tax purposes 42 35

Impact of tax rates changes (205) (289)

8,301 9,345

Deferred income taxes are calculated on all temporary differences under the liability method using an effective tax rate of 26.8% (2013 – 26.7%). The movement in deferred income taxes is as follows:

2014 ($) 2013 ($) Balance, beginning of year 3,868 3,565

Recognized in net income 231 303

Balance, end of year 4,099 3,868

The components of deferred income taxes are as follows:

2014 ($) 2013 ($) Deferred income tax assets

Loans to customers 5,336 4,979

Non-capital loss carried-forward - 47

Securities 91 -

Other 142 174

5,569 5,200

Deferred income tax liabilities

Securities - (14)

Liabilities for loans securitized (1,379) (1,229)

Other (91) (89)

(1,470) (1,332)

Net deferred income taxes 4,099 3,868

Net deferred income taxes are recorded in:

2014 ($) 2013 ($) Deferred income tax assets 4,099 3,868

Deferred income tax liabilities - -

Net deferred income taxes 4,099 3,868

2014 ($) 2013 ($) Deferred income tax assets

Recoverable after more than 12 months 5,911 8,249

Recoverable within 12 months (1,812) (4,381)

4,099 3,868

64

Concentra Financial Services Association Page 28 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 11. DEPOSITS FROM CUSTOMERS

2014 ($) 2013 ($) Commercial deposits 193,238 416,103

Credit union deposits 1,184,425 1,276,186

Personal deposits 2,456,808 1,417,387 3,834,471 3,109,676

All deposits are recorded at amortized cost. The repricing dates, which approximate maturity dates and weighted average interest rates, for the Company's deposits are as follows:

2014 ($)

Effective

Rate

On

Demand

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

Total

Commercial deposits 1.01% 191,931 432 698 171 - 193,232

Credit union deposits 1.39% 495,832 241,401 377,568 66,752 - 1,181,553

Personal deposits 2.21% 111,369 142,969 838,536 1,336,231 35 2,429,140

Total amortized cost 799,132 384,802 1,216,802 1,403,154 35 3,803,925

Accrued interest 30,546

3,834,471

2013 ($)

Effective

Rate

On

Demand

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

Total

Commercial deposits 1.34% 290,992 21,230 103,286 443 - 415,951

Credit union deposits 1.61% 311,776 495,473 426,191 37,308 - 1,270,748

Personal deposits 2.23% 58,073 79,736 569,101 696,777 39 1,403,726

Total amortized cost 660,841 596,439 1,098,578 734,528 39 3,090,425

Accrued interest 19,251

3,109,676

Deposits bear interest at rates determined by market conditions. 12. LOANS AND NOTES PAYABLE

2014 ($) 2013 ($) Credit union funded administered loans 111 161

Lines of credit 11,072 -

Notes payable 67,925 77,156

Obligations related to securities sold under repurchase agreements (Note 3) 107,029 137,575

186,137 214,892

2014 ($) 2013 ($) Within 12 months 186,137 214,892

After 12 months - -

186,137 214,892

65

Concentra Financial Services Association Page 29 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 12. LOANS AND NOTES PAYABLE (continued)

The Company participates in administered loan programs in which credit unions provide funding for loans made by the Company to credit union members. These loans to credit union members are recorded as assets. The corresponding funding by the credit union is recorded as a liability as the credit union has the right to require the Company to provide the direct funding upon request. The Company records the revenue from the credit union member as loans interest income. Interest paid to the credit union is recorded as loans and notes interest expense. Loans to a maximum of $1,000 (2013 - $1,000) are authorized under this program. The outstanding balances of $111 (2013 - $161) had a weighted average effective interest rate of 2.00% (2013 – 2.00%).

The Company maintains a line of credit facility with Credit Union Central of Saskatchewan (SaskCentral) of $100,000 (2013 - $100,000). The line of credit bears interest at prime less 0.50% (2013 – prime less 0.50%) with an effective interest rate at December 31 of 2.50% (2013 – 2.50%) and an outstanding balance of $11,072 (2013 - $nil). The line of credit is partially secured by qualified securities, that would be of a minimum quality acceptable as collateral under the Bank of Canada’s Standing Liquidity Facility, of a minimum of $20,000 held by SaskCentral. The overdraft amount of $nil (2013 - $nil) bears interest at prime plus 4.00% (2013 – prime plus 4.00%) with an effective interest rate at December 31 of 7.00% (2013 – 7.00%). In accordance with the Clearing and Settlement Agreement with SaskCentral, SaskCentral may, at its sole discretion, make an advance in the amount of the overdraft. The Company also maintains a Secured Credit Facility with another financial institution of $500,000 (2013 - $500,000). The facility bears interest at the bankers acceptance rate plus 0.50% (2013 – bankers acceptance rate plus 0.50%) and is secured by insured residential mortgages or other qualified securities. The Company is authorized to issue a maximum of $300,000 (2013 - $300,000) under a commercial paper program. The Company has a commercial paper liquidity support arrangement, which includes: 1) the Company will maintain a segregated account with its custodian containing Federal and Provincial Government guaranteed securities with a market value of $50,000 (2013 - $50,000); 2) in the event that the issuance of commercial paper exceeds $100,000, the excess will be matched at a 1.1:1 market value of additional Federal and Provincial Government guaranteed securities; and 3) the Company will designate $50,000 (2013 - $50,000) of its Secured Credit Facility to be used solely for liquidity support of the commercial paper program. Notes payable consist of commercial paper maturing within 10 months (2013 – within 10 months) and had a weighted average effective interest rate of 1.69% (2013 – 1.48%) at December 31. By policy, the Company may utilize additional credit facilities to a maximum of $500,000 (2013 - $500,000) related to securities repurchase agreements, subject to availability of qualified securities. Outstanding liabilities of $107,029 (2013 - $137,575) are secured by pledged securities. These repurchase agreements mature within 1 month (2013 – 1 month) and had a weighted average effective interest rate of 1.05% (2013 – 1.05%). 13. LIABILITIES FOR LOANS SECURITIZED

2014 ($) 2013 ($) Securitization obligations under the CMB program 1,860,272 2,089,887

Securitization obligations under the NHA-MBS program 435,204 214,480

Accrued interest 3,002 5,059

2,298,478 2,309,426

Financial liabilities from securitizations mature as follows:

2014 ($) 2013 ($)

Within 12 months 338,618 609,984

After 12 months 1,959,860 1,699,442

2,298,478 2,309,426

66

Concentra Financial Services Association Page 30 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 13. LIABILITIES FOR LOANS SECURITIZED (continued)

The securitization obligations under the CMB program have a weighted average interest rate of 2.10% as at December 31, 2014 (2013 - 2.31%). The securitization obligations under the NHA-MBS program have a weighted average interest rate of 2.17% (2013 - 2.26%). 14. SUBORDINATED DEBENTURES

The debentures are unsecured obligations and are subordinate in right of payment to the claims of depositors and certain other creditors. All cancellations, redemptions and exchanges of subordinated debentures are subject to the consent and approval of OSFI.

2014 ($) 2013 ($) Series One 13,350 13,350

Variable Rate – Issue 2009 - 20,000

Issuance costs - (1)

Variable Rate - 19,999

Fixed Rate – Issue November 15, 2012 60,000 60,000

Fixed Rate – Issue November 30, 2012 20,000 20,000

Issuance costs (18) (23)

Fixed Rate 79,982 79,977

Accrued interest 560 665

93,892 113,991

2014 ($) 2013 ($)

Within 12 months 560 665

After 12 months 93,332 113,326

93,892 113,991

The Series One non-convertible subordinated debentures, issued August 15, 2006, are unsecured and subordinated to deposits and other liabilities of the Company. Interest for the first 10 years is payable at a fixed rate set on August 15, 2006, equal to the current Government of Canada ten-year bond rate as announced by the Bank of Canada, plus 1.50% (5.82% at December 31, 2014; 5.82% at December 31, 2013). Interest for the final 5 years is payable at a fixed rate set on August 15, 2016, equal to the Government of Canada five-year bond rate as announced by the Bank of Canada, plus 1.75%. The maturity date of the debentures is August 15, 2021. The debentures are redeemable, at the option of the Company and subject to the approval of OSFI, not earlier than August 15, 2016. These debentures qualify as tier 2B capital. Variable Rate subordinated debentures, issued April 29, 2009, were redeemed on April 29, 2014, subsequent to receiving OSFI approval on January 27, 2014. These subordinated debentures were unsecured and subordinated to deposits and other liabilities of the Company. Interest for the first 5 years was payable quarterly at an adjusted floating rate equal to the three month Canadian Deposit Offering Rate (CDOR) plus 5.13% (6.39% at April 29, 2014; 6.41% at December 31, 2013). Interest for the final 5 years would have been at a quarterly adjusted floating rate equal to the three month CDOR plus 5.63%, payable quarterly. The maturity date of the debentures was April 29, 2019. The debentures were redeemable at the option of the Company and subject to the approval of OSFI. These debentures qualified as tier 2B capital.

67

Concentra Financial Services Association Page 31 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 14. SUBORDINATED DEBENTURES (continued)

Fixed Rate subordinated debentures, issued November 15, 2012, are unsecured and subordinated to deposits and other liabilities of the Company. Interest for the first 5 years is payable quarterly at a fixed rate set on November 15, 2012, equal to the Government of Canada five-year bond rate plus 2.75% (4.05% at December 31, 2014; 4.05% at December 31, 2013). Interest for the final 5 years is payable quarterly at a fixed rate set on November 15, 2017, equal to the Government of Canada five-year bond rate plus 2.75%. The maturity date of the debentures is November 15, 2022. The debentures are redeemable at the option of the Company and subject to the approval of OSFI. These debentures qualify as tier 2B capital. Fixed Rate subordinated debentures, issued November 30, 2012, are unsecured and subordinated to deposits and other liabilities of the Company. Interest for the first 5 years is payable quarterly at a fixed rate set on November 30, 2012, equal to the Government of Canada five-year bond rate plus 2.75% (4.03% at December 31, 2014; 4.03% at December 31, 2013). Interest for the final 5 years is payable quarterly at a fixed rate set on November 30, 2017, equal to the Government of Canada five-year bond rate plus 2.75%. The maturity date of the debentures is November 30, 2022. The debentures are redeemable at the option of the Company and subject to the approval of OSFI. These debentures qualify as tier 2B capital.

15. SHARE CAPITAL

The Company is authorized to issue an unlimited number of membership shares, an unlimited number of Class A shares, 399,054 Class B shares and 2,000 Class C shares. Membership shares may only be issued at such time and to such persons as determined by a resolution of the Board of Directors (the Board). Membership shares are issued and redeemed at Ten Dollars ($10.00) per share and can only be transferred or redeemed subject to approval by the Board. Voting privileges are restricted to membership shares based on one vote per member, regardless of the number of membership shares held by a member. Class A – Series 1 shares are entitled to receive dividends as declared by the Board and may only be issued to the holders of membership shares. Class A – Series 2 shares have the same entitlements as Class A – Series 1 shares except they may only be issued to SaskCentral or an affiliate of SaskCentral. Class B shares are entitled to an annual, non-cumulative dividend of $0.78 per share (2013 - $0.78), subject to the rights of the Class C shares. Class C shares were issued exclusively to SaskCentral or Alberta Central to provide capital for the discontinued Card Operations. Distribution of the earnings of the Card Operations was in accordance with the related Class C share agreements prior to their termination on December 15, 2011. All retained earnings attributed to the Class C shareholders were paid prior to the wind up of the Card Operations on December 15, 2011. The issued Class C shares remain outstanding and can be redeemed for the book value which is defined as the stated value of the Class C shares plus any remaining retained earnings allocated to the Class C shares. Agreements are in place in the event of future impacts to retained earnings related to the Class C shares including certain indemnifications from the Class C shareholders. The following table summarizes the shares issued and outstanding at December 31:

2014 2013

Number of

Shares Issued $ Number of

Shares Issued $ Membership Shares 3,485 35 3,482 35

Class A – Series 1 3,400,582 34,365 3,400,582 34,365

Class A – Series 2 6,186,170 98,855 6,186,170 98,855

Class B 399,054 3,990 399,054 3,990

Class C 2,000 - 2,000 -

137,245 137,245

68

Concentra Financial Services Association Page 32 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 15. SHARE CAPITAL (continued)

The following table provides the continuity of shares issued:

Membership

Shares Class A – Series 1

Class A – Series 2 Class B Class C

Balance as at January 1, 2013 3,472 3,400,582 6,186,170 399,054 2,000

Shares issued in 2013 10 - - - -

Ending balance as at December 31, 2013 3,482 3,400,582 6,186,170 399,054 2,000

Shares issued in 2014 3 - - - -

Ending balance as at December 31, 2014 3,485 3,400,582 6,186,170 399,054 2,000

The following dividends were declared and paid by the Company during the year:

2014 ($) 2013 ($)

Membership Shares – $nil per share (2013 – $nil per share) - -

Class A – $0.416886 per share (2013 – $0.694813 per share) 3,997 6,661

Class B – $0.78 per share (2013 – $0.78 per share) 311 311

Class C – $nil per share (2013 – $nil per share) - -

4,308 6,972

16. FEE FOR SERVICE INCOME

2014 ($) 2013 ($)

Brokerage fees 167 134

Credit related fees 3,002 3,623

Financial management fees 2,653 2,718

Fees from credit union registered plans 2,699 2,936

Fees from estates, trusts and agencies 3,276 3,176

Other fiduciary fees 1,330 1,412

Other fees 185 298

Rental income from property 630 713

Total fee for service income 13,942 15,010

17. GAIN ON FINANCIAL INSTRUMENTS

2014 ($) 2013 ($) Realized gains (losses) on available-for-sale securities 6,383 (205)

Realized gains (losses) on sale of loans 51 1,309

Realized gains (losses) from other investments 86 122

Total gain on financial instruments 6,520 1,226

69

Concentra Financial Services Association Page 33 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 18. SECURITIZATION INCOME

2014 ($) 2013 ($) Gain on sale of mortgages under securitization programs 736 110

Gain (loss) on sale of retained interests - (5)

Other securitization revenue 89 2

Total securitization income 825 107

19. SALARIES AND EMPLOYEE BENEFITS EXPENSE

The Company provides pension benefits to qualified employees. Pension benefits of $1,357 (2013 - $1,358) were paid to defined contribution and supplementary employee retirement plans. These costs are included in salaries and employee benefits. As a defined contribution pension plan, the Company has no future liability or obligation for future contributions to fund benefits to plan members. 20. COMMITMENTS AND GUARANTEES

Lines of credit and loan commitments and letters of credit represent a maximum credit exposure to the Company. If applicable, the maximum credit exposure to the Company under letters of credit includes amounts for which the Company has recourse to a third party lender. Many of these contracts will expire without being drawn upon and thereby reduce the Company’s credit risk from the maximum commitment. The Company earns minimal fees on commitments. The Company has not issued any financial guarantee contracts. 2014 ($)

On

Demand

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

Total

Lines of credit and loan commitments 362,219 38 79,817 59,177 96,622 597,873

Letters of credit 7,427 - 22,693 7,918 - 38,038

369,646 38 102,510 67,095 96,622 635,911

2013 ($)

On

Demand

Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years

Over

5 Years

Total

Lines of credit and loan commitments 213,783 35,240 80,215 54,255 182,599 566,092

Letters of credit 5,547 8,915 25,659 16,573 - 56,694

219,330 44,155 105,874 70,828 182,599 622,786

The Company is responsible for its proportionate share of any operating and investment losses incurred by Celero Solutions. 21. FINANCIAL RISK MANAGEMENT

21.1 Financial Risk Factors

As a financial institution, the Company is exposed to the following risks as a result of holding financial instruments: credit risk, market risk, and funding and liquidity risk. Risk management is carried out by management who report to the Board. The Board is responsible for approving the entity level strategy for credit risk management and the credit risk limits and tolerances, approving the market risk limits and tolerances, and funding and liquidity risk limits and tolerances in the Balance Sheet Policy upon the recommendation of the Risk Committee. The Board has established a credit committee, and asset-liability committee to respond to credit risks, market risks and funding and liquidity risks.

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Concentra Financial Services Association Page 34 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

Further operating credit risk policies and operating funding and liquidity risk policies are outlined in the Balance Sheet Operating Policy which is within the authority of the President and Chief Executive Officer. Compliance to these policies is monitored on a monthly basis. The Portfolio, Business, and Risk Oversight reports, related to the management of credit risk, funding and liquidity risk levels, and market risk levels are provided to the Board on a quarterly basis. The objectives and methodologies related to the management of credit risk, market risk, and funding and liquidity risk have not changed significantly from December 31, 2013. The following is a description of these risks and how the exposure is managed. 21.1.1 Credit Risk

Credit risk arises from the risk of financial loss due to a borrower, guarantor or counterparty’s inability or unwillingness to fulfill contractual payment obligations. Objectives, Policies, and Methodologies The Company manages credit risk by: Restricting the concentration of credit to issuer, issuer group and industry Aggregating credit exposures (including derivatives) to a connected counterparty Determining appropriate levels of credit concentration commensurate with the ability to absorb

credit losses while ensuring business continuity Restricting commercial debt securities not rated by an approved rating agency Segregating business generation activities from credit risk management oversight Establishing and maintaining prudent credit granting criteria Using asset sales to manage credit exposure Effective managing of monitored and non-productive assets Monitoring the quality of the credit portfolio ensuring conservative valuation and timely recognition

of losses through specific loan impairment charges and securities write downs Establishing a collective allowance for impairment to recognize incurred loss events for which there

is objective evidence of loss but whose effects are not yet evident Undertaking regular stress testing to determine probable impacts and developing treatment plans The Company treats credit risk by the taking of security for funds advanced. The Company maintains policies and guidelines on the acceptability of specific classes of collateral or credit risk treatment. The principal collateral types against loans to customers are in the form of mortgage interests over residential and commercial property, charges over business assets such as premises, inventory and accounts receivable, other registered security interests over assets, and guarantees. Estimates of fair value are based on the value of the collateral assessed at the time of borrowing, and generally are not updated except when a loan is individually assessed for impairment. The Company has a credit risk management function which is segregated from business generation activities. Credit risk management is responsible for delegating credit approval limits to business units and approving loan, lease, and mortgage applications in excess of the credit authority delegated. In addition, credit risk management undertakes an overall systematic review of the credit adjudication process on an annual basis and the results of the review are reported to the Board. Risk Measurement

In measuring credit risk under Basel III, the standardized approach is used. Under this approach, risk weights prescribed by OSFI are used to calculate risk-weighted assets for credit risk exposures. In measuring credit risk for Internal Capital Adequacy Assessment Process (ICAAP) purposes, internal models are used to quantify capital required to cover credit risk exposures. In addition, internal capital is set aside for stress testing credit risk exposures under extreme but plausible conditions.

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Concentra Financial Services Association Page 35 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

The Company assumes credit risk in both the securities and loans to customers portfolios. In the securities portfolio the Company supplements internal credit analysis with industry recognized rating agency data (DBRS Limited, Standard and Poor’s, and Moody’s Investors Service). The Company uses the most conservative rating from the rating agency data available. In the loans to customers portfolio the primary reliance is on internal risk ratings and a comprehensive review of the credit worthiness of the borrower. The Company does not transact in credit derivatives. The overall credit risk position is monitored for policy purposes in reference to issuer group, issuer and industry concentration limits. Any contraventions to the policy are reported to the Risk Committee and Board. Credit risk exposure by risk rating

The following table summarizes the authorized credit exposures based on the Company’s internal risk rating for loans to customers.

2014 ($) 2013 ($) Low risk Risk rating 1 3,635,663 3,212,551 Risk rating 2 1,021,298 1,029,392 Standard monitoring Risk rating 3 528,352 628,783 Risk rating 4 796,155 493,662 Special monitoring Risk rating 5 33,909 27,023 Default Risk rating 6 42,696 54,724 Risk rating 7 - -

Total exposure 6,058,073 5,446,135

The following table summarizes the risk rating based on recognized rating agency data for available-for-sale securities at carrying value.

2014 ($) 2013 ($) AAA/R1H 918,211 827,178 AA/R1M 62,693 48,598 A/R1L 130,175 167,647 BBB/R2H 49,041 19,763 BB - - Unrated 4,415 4,416 Co-operatives 3 3 Other - -

Total exposure 1,164,538 1,067,605

Credit Quality Performance Refer to Note 3 for information on the credit quality performance of the securities portfolio and Notes 6 and 7 for information on the credit quality performance of the loans to customers portfolio. Credit risk concentrations indicate the relative sensitivity of performance to developments affecting a particular industry or geographic region. The following tables summarize the authorized credit exposures associated with financial instruments.

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Concentra Financial Services Association Page 36 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

Credit risk exposure by industry

2014 ($)

Outstanding Undrawn

Commitments Total Accommodation and food services 149,468 8,200 157,668 Agriculture, forestry, fishing & hunting 43,710 628 44,338 Arts, entertainment and recreation 23,727 - 23,727 Banking 7,786 11,533 19,319 Construction 123,001 229,556 352,557 Credit card issuing/financing - - - Credit union 34,150 147,291 181,441 Education services 6,508 8,005 14,513 Health care and social assistance 141,713 16,750 158,463 Manufacturing 48,110 7,123 55,233 Mining and oil and gas extraction 44,920 - 44,920 Public administration (federal, provincial and municipal government)

1,513,653

13,000

1,526,653

Real estate (includes commercial mortgage investment funds) 722,856 48,481 771,337 Residential mortgages – conventional 535,998 32,898 568,896 Residential mortgages – insured 3,054,669 69,866 3,124,535 Retail trade 22,355 1,608 23,963 Transportation and warehousing 54,611 4 54,615 Wholesale trade 29,043 15,449 44,492 Other 77,360 855 78,215

Total exposure 6,633,638 611,247 7,244,885

2013 ($)

Outstanding Undrawn

Commitments Total Accommodation and food services 122,350 4,392 126,742 Agriculture, forestry, fishing & hunting 7,812 650 8,462 Arts, entertainment and recreation 24,987 - 24,987 Banking 82,370 170 82,540 Construction 108,521 160,500 269,021 Credit card issuing/financing 39,995 - 39,995 Credit union 133,814 104,796 238,610 Education services 7,650 27,837 35,487 Health care and social assistance 93,154 7,296 100,450 Manufacturing 49,107 10,493 59,600 Mining and oil and gas extraction 42,361 11,139 53,500 Public administration (federal, provincial and municipal government)

1,142,066

33,000

1,175,066

Real estate (includes commercial mortgage investment funds) 738,139 9,603 747,742 Residential mortgages – conventional 485,753 35,856 521,609 Residential mortgages – insured 2,773,661 148,157 2,921,818 Retail trade 13,771 - 13,771

Transportation and warehousing 18,001 - 18,001 Wholesale trade 10,685 39,460 50,145

Other 43,769 506 44,275

Total exposure 5,937,966 593,855 6,531,821

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Concentra Financial Services Association Page 37 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

Credit risk exposure by geographic region (loans)

2014 ($)

Atlantic Quebec Ontario Prairies and Territories

British Columbia Total

Outstanding 345,510 48,803 2,119,213 2,229,344 715,515 5,458,385

Undrawn commitments 5,876 5,778 114,001 406,532 79,060 611,247

Total exposure 351,386 54,581 2,233,214 2,635,876 794,575 6,069,632

2013 ($)

Atlantic Quebec Ontario Prairies and Territories

British Columbia Total

Outstanding 342,715 44,067 2,017,488 1,855,847 600,775 4,860,892

Undrawn commitments 8,050 4,538 165,291 345,307 70,669 593,855

Total exposure 350,765 48,605 2,182,779 2,201,154 671,444 5,454,747

21.1.2 Market Risk

Market risk arises from the risk of financial loss in value of the Company due to changes in interest rates, credit spreads, foreign exchange rates and market prices of financial instruments from movements in foreign exchange rates.

Objectives, Policies, and Methodologies

The Company manages market risk by: Using on- and off-balance sheet strategies to manage interest rate and foreign exchange risk Establishing prudent market risk limits Monitoring exposure and simulating the impact of interest rate changes Monitoring exposure to changes in foreign exchange rates Undertaking monthly stress testing to determine the impact from an immediate change in interest

rates and developing treatment plans In 2014 and 2013, the Company did not have a trading program. The Company has established policies that outline maximum limits for the exposure of adjusted net interest income, the economic value of equity to market risk, unhedged foreign currency and derivative portfolio concentrations. The Company is not exposed to significant foreign exchange risk. Risk Measurement

The risk position is monitored in relation to policy limits on a monthly basis. Measurement of risk for policy purposes is based upon key assumptions such as future interest rate movements, asset growth, and funding mix. The short-term (next 12 months) risk position is assessed by measuring both the impact of an immediate 100 basis point (bp) shock and a 30% rate ramp scenario on net income. The long-term risk position is measured by both the impact of an immediate 100 bp shock and a 30% rate ramp scenario on the economic value of equity. The information presented is a measurement of interest rate sensitivity gaps at a specific point in time, and there is potential for these gaps to change significantly over a short period. The impact on earnings from changes in market interest rates will depend on both the magnitude of and speed with which interest rates change, as well as the size and maturity structure of the cumulative interest rate gap position and the management of those positions over time.

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Concentra Financial Services Association Page 38 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

2014 (%) 2013 (%)

Net Income

Economic Value of Equity

Net Income

Economic Value of Equity

Impact of:

100 bp increase in rates (7.1) (6.2) (3.9) (1.0)

100 bp decrease in rates (1) (5.7) 6.5 2.7 0.9

Impact of:

30% rate ramp increase (11.1) (5.5) (0.9) (0.7)

30% rate ramp decrease 4.8 (1.1) 3.2 1.3 (1) For 2014 and 2013, the rates have been adjusted to zero where effective rates at December 31 were less than 100 bp. In measuring market risk for ICAAP purposes, internal models are used to quantify capital required to cover market risk exposures. In addition, internal capital is set aside for stress testing market risk exposures under extreme but plausible conditions. Interest Rate Risk

The Company’s exposure to interest rate risk can be measured by the mismatch, or gap, between the assets, liabilities and derivative financial instruments scheduled to mature or reprice on particular dates. Gap analysis measures the difference between the amount of assets and liabilities that reprice in specific time periods. Repricing dates are based on the earlier of maturity or the contractual repricing date and effective interest rates, where applicable, represent the weighted average effective yield. The table below shows the Company’s gap position as at December 31. 2014 ($)

Floating and on

Demand Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years Over

5 Years

Non-Interest Sensitive Total

Assets Cash resources 80,163 - - - - - 80,163 Securities - 262,471 199,432 663,616 32,984 6,035 1,164,538 Loans to customers 577,082 175,900 579,674 3,827,721 285,460 2,776 5,448,613 Other assets - - - - - 53,171 53,171

657,245 438,371 779,106 4,491,337 318,444 61,982 6,746,485

Liabilities and Members’ Equity Deposits from customers 799,132 384,802 1,216,802 1,403,154 35 30,546 3,834,471 Loans and notes payable 11,183 129,003 45,945 - - 6 186,137 Liabilities for loans securitized - 77,943 257,673 1,959,860 - 3,002 2,298,478 Subordinated debentures - - - 93,332 - 560 93,892 Other liabilities - - - - - 39,141 39,141 Members’ equity - - - - - 294,366 294,366

810,315 591,748 1,520,420 3,456,346 35 367,621 6,746,485

On-balance sheet gap (153,070) (153,377) (741,314) 1,034,991 318,409 (305,639) - Notional amount of derivative financial instruments

Pay side instruments - (1,098,665) (318,086) (945,380) (122,657) (42,968) (2,527,756) Receive side instruments - 1,512,828 280,732 655,468 35,760 42,968 2,527,756

Derivative financial instruments gap - 414,163 (37,354) (289,912) (86,897) - -

Total gap (153,070) 260,786 (778,668) 745,079 231,512 (305,639) -

Total cumulative gap (153,070) 107,716 (670,952) 74,127 305,639 - -

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Concentra Financial Services Association Page 39 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

2013 ($)

Floating and on

Demand Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years Over

5 Years

Non-Interest Sensitive Total

Assets Cash resources 84,914 - - - - - 84,914 Securities - 355,929 258,487 443,223 3,125 6,841 1,067,605 Loans to customers 490,273 198,571 594,389 3,343,354 214,844 12,134 4,853,565 Other assets - - - - - 51,993 51,993

575,187 554,500 852,876 3,786,577 217,969 70,968 6,058,077

Liabilities and Members’ Equity Deposits from customers 660,841 596,439 1,098,578 734,528 39 19,251 3,109,676 Loans and notes payable - 214,878 - - - 14 214,892 Liabilities for loans securitized - 103,431 501,494 1,699,442 - 5,059 2,309,426 Subordinated debentures - 19,999 - 93,327 - 665 113,991 Other liabilities - - - - - 32,770 32,770 Members’ equity - - - - - 277,322 277,322

660,841 934,747 1,600,072 2,527,297 39 335,081 6,058,077

On-balance sheet gap (85,654) (380,247) (747,196) 1,259,280 217,930 (264,113) - Notional amount of derivative financial instruments

Pay side instruments - (697,981) (182,343) (892,679) (41,561) (48,887) (1,863,451) Receive side instruments - 1,191,373 149,035 450,367 23,789 48,887 1,863,451

Derivative financial instruments gap - 493,392 (33,308) (442,312) (17,772) - -

Total gap (85,654) 113,145 (780,504) 816,968 200,158 (264,113) -

Total cumulative gap (85,654) 27,491 (753,013) 63,955 264,113 - -

The weighted average interest rates of the financial instruments from the table above are as follows:

2014 ($)

Floating and on

Demand Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years Over

5 Years Total Assets and receive side instruments 2.95% 1.66% 3.15% 3.03% 4.19% 2.79% Liabilities and pay side instruments 1.00% 1.38% 2.12% 2.13% 2.73% 1.89%

2013 ($)

Floating and on

Demand Within

3 Months

Over 3 Months to 1 Year

Over 1 Year

to 5 Years Over

5 Years Total Assets and receive side instruments 2.87% 1.62% 3.19% 3.25% 4.37% 2.89% Liabilities and pay side instruments 1.06% 1.56% 2.09% 2.05% 1.43% 1.85%

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Concentra Financial Services Association Page 40 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

21.1.3 Funding and Liquidity Risk

Funding and liquidity risk arises from the risk of financial loss due to an inability to access sources of funds or to generate sufficient cash or equivalents in a timely manner to meet all commitments as they become due, without raising funds at adverse rates or selling on a forced basis. Objectives, Policies, and Methodologies

The Company manages funding and liquidity risk by: Daily monitoring of cash flows Maintaining a liquidity plan and funding strategy to ensure there is sufficient cash and high quality

cash equivalents to support daily liquidity needs Investing a prudent portion of the investment portfolio in liquid, low-risk, unencumbered

instruments Acquiring credit union, commercial, and retail deposits Accessing capital markets Maintaining external credit facilities, including lines of credit, to support daily liquidity and business

needs and unforeseen liquidity events Undertaking monthly stress testing to assist in identifying, measuring and controlling funding and

liquidity risks and assessing the adequacy of liquidity buffers in case of both internal and market-wide stress events

Maintaining an investment grade market rating The Asset-Liability Committee has the authority to set funding and liquidity risk strategies for the balance sheet within the risk limits and tolerances. In addition, this committee monitors the liquidity position and projections, including the results of stress testing. Contractual Obligations

The following table provides a summary of the primary future contractual funding obligations which affect liquidity.

2014 ($)(1)

On

Demand Within

3 months

Over 3 months to 1 year

Over 1 year

to 5 years Over

5 years Total

Deposits from customers 800,534 396,033 1,234,715 1,403,154 35 3,834,471

Loans and notes payable 11,183 129,009 45,945 - - 186,137

Liabilities for loans securitized - 79,962 258,656 1,959,860 - 2,298,478

Subordinated debentures - 560 - - 93,332 93,892

Total exposure 811,717 605,564 1,539,316 3,363,014 93,367 6,412,978

(1) The amounts presented exclude accrued interest except for the categories within 3 months and over 3 months to 1 year.

2013 ($)(1)

On

Demand Within

3 months

Over 3 months to 1 year

Over 1 year

to 5 years Over

5 years Total

Deposits from customers 665,061 601,141 1,108,907 734,528 39 3,109,676

Loans and notes payable 161 189,494 25,237 - - 214,892

Liabilities for loans securitized - 107,179 502,805 1,699,442 - 2,309,426

Subordinated debentures - 665 - - 113,326 113,991

Total exposure 665,222 898,479 1,636,949 2,433,970 113,365 5,747,985

(1) The amounts presented exclude accrued interest except for the categories within 3 months and over 3 months to 1 year.

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Concentra Financial Services Association Page 41 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

Risk Measurement

The assessment of the liquidity position reflects management’s estimates, assumptions, and judgments relative to current and future company specific operations and market conditions. The Company’s liquidity position is monitored on a daily basis to ensure obligations can be met and cash resources are optimized for the balance sheet. The goal is to effectively use the back stop liquidity facilities (see Note 12) to ensure liquidity access during constrained liquidity conditions. The liquidity position is monitored for policy purposes in reference to the liquidity ratio (liquid assets as a percentage of total assets excluding securitized assets), the liquidity investment portfolio ratio (on-balance sheet liquidity investment portfolio as a percentage of total assets excluding securitized assets) and pledging requirements. At December 31, 2014, the liquidity ratio was 40.4% (2013 – 31.0%). At December 31, 2014, the liquidity investment portfolio ratio was 28.3% (2013 – 26.4%). In measuring liquidity risk for ICAAP purposes, internal models are used to quantify capital required to cover liquidity risk exposures. In addition, internal capital is set aside for stress testing liquidity risk exposures under extreme but plausible conditions. In November 2014, OSFI released its Liquidity Adequacy Requirements Guideline which implements a series of liquidity metrics that will be used by OSFI to assess the liquidity adequacy of an institution. Institutions are expected to comply with the Liquidity Coverage Ratio (LCR) in January 2015 and the Net Stable Funding Ratio (NSFR) in January 2018. The Company is currently reporting the Net Cumulative Cash Flow (NCCF) metric to OSFI and expects an OSFI provided target for this metric in 2015. The Company is in compliance with the LCR and will comply with the new requirements once they are implemented.

21.2 Fair Value of Financial Assets and Financial Liabilities

The fair values of financial instruments are based on relevant market prices and information available at that time. Due to the use of subjective judgment and uncertainties, the aggregate fair value amounts shown should not be interpreted as necessarily being realizable in an immediate settlement of the instruments. The table outlines the fair values for financial instruments only and does not include assets or liabilities that are not considered financial instruments, such as premises and equipment, goodwill and intangible assets. Cash resources, trade and other receivables, and trade and other payables are all short-term in nature and as such, their carrying value approximates fair value. The fair value of securities is established using market prices when available. Alternatively, fair values are determined using valuation models based on assumptions concerning the amount and timing of estimated future cash flows and discount rates. The estimated value of loans reflects changes in general interest rates which have occurred since the loans were originated. Moreover, the calculation of estimated fair value is based on market conditions at a specific point in time and may not be reflective of future fair values. The fair value of fixed interest rate loans is calculated using discounted cash flows based on current rates of interest for similar lending arrangements. The fair value of floating interest rate loans is approximately equal to carrying value. The carrying value of deposits with no stated maturity and loans and notes payable due on demand are assumed to approximate fair value. For the remainder of the deposits, fair value is calculated using discounted cash flows based on current market interest rates for similar maturities. The fair value of subordinated debentures and liabilities for loans securitized is calculated using discounted cash flows based on current market interest rates for similar maturities.

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Concentra Financial Services Association Page 42 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

The fair value of derivative financial instruments is calculated by referring to the appropriate current market yields with matching terms to maturity. The fair values reflect the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date. Available-for-sale securities measured at fair value are assessed for impairment at each reporting date. As at December 31, 2014, the pre-tax and after-tax unrealized losses for available-for-sale securities measured at fair value amounted to $223 (2013 - $436) and $183 (2013 - $358) respectively. The Company does not consider the available-for-sale securities measured at fair value of $1,164,538 (2013 - $1,067,605) to be impaired as at December 31, 2014. As at December 31, 2014, the pre-tax and after-tax unrealized gains on the available-for-sale securities totaled $5,434 (2013 - $7,958) and $4,449 (2013 - $6,516), respectively. The following table presents the carrying amounts and fair values of financial assets and liabilities, including their levels in the fair value hierarchy. The table distinguished between those financial instruments recorded at fair value and those recorded at amortized cost.

2014 ($)

Carrying Value Level 1 Level 2 Level 3

Fair Value

Financial assets recorded at fair value

Securities - Available for Sale

1,164,538

-

1,164,538

-

1,164,538

Derivative assets 14,551 - 14,551 - 14,551 Financial assets recorded at amortized cost

Loans to customers - Loans and receivables 5,448,613 - 5,527,489 - 5,527,489

Financial liabilities recorded at fair value

Derivative liabilities 16,635 - 16,635 - 16,635 Financial liabilities recorded at amortized cost

Deposits from customers 3,834,471 - 3,856,108 - 3,856,108 Loans and notes payable 186,137 - 186,388 - 186,388 Liabilities for loans securitized 2,298,478 - 2,331,650 - 2,331,650 Subordinated debentures 93,892 - 93,588 - 93,588

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Concentra Financial Services Association Page 43 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

2013 ($)

Carrying Value Level 1 Level 2 Level 3

Fair Value

Financial assets recorded at fair value

Securities - Available for Sale 1,067,605 - 1,067,605 - 1,067,605

Derivative assets 18,571 - 18,571 - 18,571 Financial assets recorded at amortized cost

Loans to customers - Loans and receivables 4,853,565 - 4,891,895 - 4,891,895

Financial liabilities recorded at fair value

Derivative liabilities 14,303 - 14,303 - 14,303 Financial liabilities recorded at amortized cost

Deposits from customers 3,109,676 - 3,115,065 - 3,115,065 Loans and notes payable 214,892 - 214,895 - 214,895 Liabilities for loans securitized 2,309,426 - 2,353,672 - 2,353,672 Subordinated debentures 113,991 - 106,918 - 106,918

There were no significant transfers between Level 1, Level 2, and Level 3 in 2014 and 2013. 21.3 Offsetting Financial Assets and Financial Liabilities

21.3.1 Financial Assets

The following financial assets are subject to offsetting, enforceable master netting arrangements or similar agreements:

2014 ($)

Note

Gross Amounts of Recognized

Financial Assets

Gross Amounts of Recognized

Financial Liabilities

Set Off in the Balance Sheet

Net Amounts of Financial

Assets Presented

in the Balance Sheet

Related Amounts Not Set Off in the Balance Sheet

Net Amount (3)

Impact of Master Netting Agreements or

Similar Agreements (1)

Collateral Received (2)

Derivative assets 5 14,551 - 14,551 (7,711) - 6,840 14,551 - 14,551 (7,711) - 6,840

(1) Amounts that are subject to master netting arrangements or similar agreements but were not offset because they did not meet the net settlement/simultaneous settlement criteria; or because the rights of set off are conditional upon the default of the counterparty only.

(2) Collateral received and pledged amounts are reflected at fair value, but have been limited to the net balance sheet exposure so as not to include any over-collateralization.

(3) Not intended to represent the Company’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to offsetting and collateral arrangements.

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Concentra Financial Services Association Page 44 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

2013 ($)

Note

Gross Amounts of Recognized

Financial Assets

Gross Amounts of Recognized

Financial Liabilities

Set Off in the Balance Sheet

Net Amounts of Financial

Assets Presented

in the Balance Sheet

Related Amounts Not Set Off in the Balance Sheet

Net Amount (3)

Impact of Master Netting

Agreements or Similar

Agreements (1) Collateral

Received (2)

Derivative assets 5 18,571 - 18,571 (8,880) - 9,691 18,571 - 18,571 (8,880) - 9,691

(1) Amounts that are subject to master netting arrangements or similar agreements but were not offset because they did not meet the net settlement/simultaneous settlement criteria; or because the rights of set off are conditional upon the default of the counterparty only.

(2) Collateral received and pledged amounts are reflected at fair value, but have been limited to the net balance sheet exposure so as not to include any over-collateralization.

(3) Not intended to represent the Company’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to offsetting and collateral arrangements.

21.3.2 Financial Liabilities

The following financial liabilities are subject to offsetting, enforceable master netting arrangements or similar agreements:

2014 ($)

Note

Gross Amounts of Recognized

Financial Liabilities

Gross Amounts

of Recognized Financial

Assets Set Off in the

Balance Sheet

Net Amounts of Financial Liabilities Presented

in the Balance Sheet

Related Amounts Not Set Off in the Balance Sheet

Net Amount (3)

Impact of Master Netting Agreements or

Similar Agreements (1)

Collateral Pledged (2)

Derivative liabilities 5 16,635 - 16,635 (7,711) (1,721) 7,203 Obligations related to securities sold under repurchase agreements 12 107,029 - 107,029 - (106,757) 272

123,664 - 123,664 (7,711) (108,478) 7,475 (1) Amounts that are subject to master netting arrangements or similar agreements but were not offset because they did not

meet the net settlement/simultaneous settlement criteria; or because the rights of set off are conditional upon the default of the counterparty only.

(2) Collateral received and pledged amounts are reflected at fair value, but have been limited to the net balance sheet exposure so as not to include any over-collateralization.

(3) Not intended to represent the Company’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to offsetting and collateral arrangements.

2013 ($)

Note

Gross Amounts of Recognized

Financial Liabilities

Gross Amounts

of Recognized Financial

Assets Set Off in the

Balance Sheet

Net Amounts of Financial Liabilities Presented

in the Balance Sheet

Related Amounts Not Set Off in the Balance Sheet

Net Amount (3)

Impact of Master Netting Agreements or

Similar Agreements (1)

Collateral Pledged (2)

Derivative liabilities 5 14,303 - 14,303 (8,880) (832) 4,591 Obligations related to securities sold under repurchase agreements 12 137,575 - 137,575 - (137,243) 332 151,878 - 151,878 (8,880) (138,075) 4,923

(1) Amounts that are subject to master netting arrangements or similar agreements but were not offset because they did not meet the net settlement/simultaneous settlement criteria; or because the rights of set off are conditional upon the default of the counterparty only.

(2) Collateral received and pledged amounts are reflected at fair value, but have been limited to the net balance sheet exposure so as not to include any over-collateralization.

(3) Not intended to represent the Company’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to offsetting and collateral arrangements.

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Concentra Financial Services Association Page 45 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

For the financial assets and financial liabilities subject to enforceable master netting arrangements or similar arrangements above, each agreement between the Company and the counterparty allows for net settlement of the relevant financial assets and financial liabilities when both elect to settle on a net basis. In the absence of such an election, financial assets and financial liabilities will be settled on a gross basis, however, each party to the master netting arrangement or similar agreement will have the option to settle all such amounts on a net basis in the event of default of the other party. Based on the terms of each agreement, an event of default includes failure by a party to make payment when due; failure by a party to perform any obligation required by the agreement (other than payment) if such failure is not remedied within periods defined in the respective agreements after notice of such failure is given to the party; or bankruptcy. 21.4 Capital Management

The Company manages and monitors capital from several perspectives, including regulatory capital and ICAAP capital. Effective January 1, 2013, the Company adopted Basel III, which introduced several changes from the predecessor framework, commonly referred to as Basel II. The regulatory capital and capital ratios, as calculated under Basel III, are applied only on a prospective basis. Regulatory capital is allocated to three tiers: Common Equity Tier 1 (CET 1), Tier 1 and Tier 2. CET 1 regulatory capital comprises the more permanent components of capital and consists of share capital, retained earnings and AOCI. In addition, goodwill and other items as prescribed by OSFI are deducted from CET 1 regulatory capital. Tier 1 regulatory capital comprises of CET 1 and additional Tier 1 items which include preferred shares. Tier 2 regulatory capital consists of subordinated debentures less deductions as prescribed by OSFI. Total regulatory capital is defined as the sum of Tier 1 and Tier 2 regulatory capital. Regulatory ratios are calculated by dividing CET 1 regulatory capital, Tier 1 regulatory capital and Total regulatory capital by risk-weighted assets (RWA). The calculation of RWA is determined from OSFI prescribed rules relating to on-balance sheet and off-balance sheet exposures and includes an amount for operational risk. The Company is not required to compute market risk since the Company is not an internationally active financial institution. In addition, OSFI formally establishes risk-based capital targets for deposit-taking institutions. Current OSFI targets are a minimum CET 1 regulatory capital to RWA ratio of 7%, a minimum Tier 1 regulatory capital to RWA ratio of 8.5% and a minimum Total regulatory capital to RWA ratio of 10.5%. In addition to the CET 1 regulatory capital to RWA ratio, Tier I regulatory capital to RWA ratio and Total regulatory capital to RWA ratio, Canadian financial institutions are required to ensure that their Assets to capital multiple, which is calculated by dividing gross adjusted assets by Total regulatory capital, does not exceed a maximum level prescribed by OSFI. Throughout 2014 and 2013, the Company has been in compliance with OSFI prescribed capital adequacy requirements.

2014 2013

Capital

Common Equity Tier 1 regulatory capital 268,751 251,627

Tier 1 regulatory capital 271,943 255,219

Total regulatory capital 363,764 358,517

Risk-weighted assets

Credit risk 1,885,420 1,730,537

Market risk - -

Operational risk 157,469 162,652

Total risk-weighted assets 2,042,889 1,893,189

Capital Ratios

Common Equity Tier 1 regulatory capital to risk-weighted assets 13.2% 13.3%

Tier 1 regulatory capital to risk-weighted assets 13.3% 13.5%

Total regulatory capital to risk-weighted assets 17.8% 18.9%

Assets to capital multiple 18.2X 14.9X

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Concentra Financial Services Association Page 46 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 21. FINANCIAL RISK MANAGEMENT (continued)

The Company’s subsidiary, Concentra Trust, is also required to meet these regulatory capital requirements. Throughout 2014 and 2013, the Company’s subsidiary has been in compliance with OSFI prescribed capital adequacy requirements.

2014 2013

Capital

Common Equity Tier 1 regulatory capital 12,866 11,969

Tier 1 regulatory capital 12,866 11,969

Total regulatory capital 12,866 11,969

Risk-weighted assets

Credit risk 2,964 2,862

Market risk - -

Operational risk 11,464 11,656

Total risk-weighted assets 14,428 14,518

Capital Ratios

Common Equity Tier 1 regulatory capital to risk-weighted assets 89.2% 82.4%

Tier 1 regulatory capital to risk-weighted assets 89.2% 82.4%

Total regulatory capital to risk-weighted assets 89.2% 82.4%

Assets to capital multiple 1.0X 1.0X

In October 2014, OSFI released its Leverage Requirements Guideline which outlines the application of the Basel III Leverage ratio in Canada and the replacement of the existing Assets to capital multiple, effective Q1 2015. Institutions will be required to maintain an operating buffer above the minimum OSFI prescribed level. As required by OSFI, the Company will transition to the Basel III Leverage ratio and will comply with the new requirements. Disclosure in accordance with OSFI’s September 2014 Public Disclosure Requirements related to Basel III Leverage Ratio will be made annually commencing in 2015. 22. RELATED PARTY DISCLOSURE

Related party transactions are in the normal course of operations and are measured at the consideration established and agreed to by the parties. The following table summarizes the balances outstanding at year end and transactions during the year not noted elsewhere in the consolidated financial statements. The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. Related party loan balances are included with groups of loans with similar credit risk characteristics when assessing collective allowances for impairment. Balances and transactions between the Company and its subsidiary, which is a related party of the Company, have been eliminated on consolidation and are not disclosed in this note. SaskCentral provides banking and credit services for the Company. The Company provides consultative and administrative services to SaskCentral. With 47.09% (2013 - 47.13%) of the voting shares and 84.30% of the Class A shares, SaskCentral has been determined to have significant influence over the Company. Celero Solutions provides information technology services and support under the terms of a support services agreement.

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Concentra Financial Services Association Page 47 Notes To Consolidated Financial Statements, December 31, 2014 (Thousands of Canadian Dollars) 22. RELATED PARTY DISCLOSURE (continued)

2014 ($) 2013 ($)

SaskCentral Dividends paid to 3,369 5,615 Cash deposited with 2,817 70,897 Due from included in trade and other receivables 6 - Loans pledged on behalf of 25,365 28,086 Interest earned on deposits and securities - 214 Loans payable to 11,072 - Interest paid to 96 76 Interest payable to 6 9 Loan fees paid to 3 44 Fee for service received from 597 792 Capital assets purchased from - 24 Non-interest expenses paid to 1,157 1,211

Celero Solutions Loans to customers receivable from 1,389 1,447 Interest received from 44 50 Investment in 461 382 Due to included in trade and other payables 448 500 Fee for service received from 56 127 Capital assets purchased from 209 128 Fee for service paid to 4,978 5,294

Other Related Parties Fees paid to 193 323

Directors and Key Management Personnel Loans to customers receivable from - 187 Interest received from 3 6 Deposits from customers payable to 139 106 Interest paid to 2 2

Key Management Compensation

2014 ($) 2013 ($)

Directors Salaries and other short-term employee benefits 221 286 Post-employment benefits - - Other long-term benefits - - Termination benefits - - 221 286

Key Management Personnel Salaries and other short-term employee benefits 2,457 2,751 Post-employment benefits 151 247 Other long-term benefits 26 28 Termination benefits 699 60 3,333 3,086 3,554 3,372

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