TCCU / NLCU Membership Meeting THE ROAD TO ENSURING SUSTAINABILITY INTO THE FUTURE.

TCCU / NLCU Membership Meeting

THE ROAD TO ENSURING SUSTAINABILITY INTO THE FUTURE

AGENDA PURPOSE OF TONIGHT'S MEETING

MEETING FORMAT AND TOPICS•Time: from 7:00 - 8:30 p.m.

•Trends in credit union system nationally / provincially. What are the driving forces behind that? •What does that mean to TCCU / NLCU?

•Who is TCCU / NLCU? •Question period open to the floor

•2 minute time limit to position question from floor•1 minute follow-up question on response •1 question per member until all interested members have had an opportunity

•What if I have additional questions after the meeting?

• NEXT STEPS / KEY DECISIONS & DATES

MEETING PURPOSE:

• To share information on proposed amalgamation between Thamesville Community Credit Union Limited and Northern Lights Credit Union Limited.

• Town Hall meetings being held in both locations.

• To discuss business drivers behind the proposal.

• To share what the post-amalgamation credit union will look like.

• To answer membership questions

• Often the past provides a roadmap to the future:

Significant consolidation within the credit union system began in earnest about 15 years ago.

Since 2001 the number of credit unions (NOT the # of branches) has shrunk nationally by 57% and in Ontario by 63%

The average credit union membership in Ontario is 11,388 members. TCCU stands at 3,393

As at Dec. 31st Canada Ontario2001 1596 3022002 1401 2762003 1279 2582004 1217 2402005 1146 2272006 1105 2192007 1061 2082008 1009 1992009 942 1862010 907 1642011 825 1522012 771 1432013 711 1272014 694 (57% reduction) 117 (63% reduction)

WHAT ARE THE DRIVING FORCES BEHIND THIS?

System health and sustainability over the long term. Sustainability isn’t just about avoiding any 1 single financial catastrophe. It’s about preventing slow and steady erosion of our membership base and associated revenues. It’s about looking down the road and seeing what events will cause stagnation...then taking action to avoid them.

THERE ARE 3 PRIMARY DRIVERS: SCALE / DIVERSIFICATION / TECHNOLOGY

1)Scale A credit unions ability to meet members borrowing needs is linked to the size of its capital

base.

As separate entities TCCU is restricted to a maximum per member loan size of $859,000, while NLCU is restricted to $1,800,000. Those amounts seem large, but as we speak, both of these companies have had to turn aside several member requests that exceeded those amounts.

See post-amalgamation chart below AMALGAMATED CREDIT UNION - PROJECTED LENDING LIMITS

2015 2016 2017 2018 2019 2020

Total projected eligible capital 11,625,837 12,155,095 12,954,958 13,944,394 15,120,151 16,526,459

Total projected lending limits 2,906,459 3,038,774 3,238,740 3,486,099 3,780,038 4,131,615

2.Risk Management through Diversification:

Credit risk management through geographic diversification. One of the immutable facts of credit risk management within the Financial Services Industry is that the level of exposure to a potentially unsustainable level of loan losses decreases the more diversified the lender is across different product lines and across different geographies.

This risk management approach reduces exposure to both industry specific downturn cycles as well as region-specific economic down cycles. Diversification is a fundamental principle of a sound risk management process.

3.Technology:

Remaining relevant to current and next generation members Ability to afford new technologies such as “check image deposit” and other emerging technologies. The ability to purchase these technologies is directly tied to the level of earnings and equity to support such an investment. Each succeeding generation of consumers and business owners demands access to more advanced technologies. Failure to be in a position to provide them will inevitably lead to erosion of our membership base to competitors who offer that support. It’s a fact of life.

ARE WE AT TCCU OR NLCU IMMUNE TO THIS PRESSURE?

No. It simply cannot be said any simpler. Businesses that ignore undeniable trends in their industry are doomed to become irrelevant. Here are some examples: The demise of Kodak and Blockbuster Video. Blackberry’s fall from dominance.

CAN WE SUCCESSFULLY INSULATE OURSELVES AGAINST IT? SHOULD WE?

Again...No. If we do nothing, becoming irrelevant to our membership won’t happen overnight. It will be gradual over several years as our memberships needs and expectations outstrip our ability to keep pace.

WHO IS NORTHERN LIGHTS CREDIT UNION? LOCATIONS

WHO IS NORTHERN LIGHTS CREDIT UNION?

• Formed in 1947 and has expanded over the years via acquisition of other area credit unions with the most recent being Great Lakes Credit Union in 2004.

• Consists of 6 branches (Thunder Bay, Dryden, Fort Frances, Sioux Lookout, Ignace and Rainy River) with 62 staff and $162 million in assets.

• The Northwest Economic Region covers the districts of Thunder Bay, Rainy River and Kenora and is home to almost 240,000 residents. The region, known as the Ring of Fire, basic industries are mining, forestry, transportation services, manufacturing and tourism. Primarily resources will continue to drive the region’s economy, although construction, manufacturing, utilities and a variety of service industries will expand in concert with growth in these core industries.

• Experienced a period 2010-2012 where commercial lending underwriting did not meet industry norms or regulatory requirements. Resulted in unacceptable level of delinquency and loan losses 2013/2014.

• Losses weakened capital position. Placed on Watchlist by DICO due to loan losses and capital position.

• Leadership changes implemented. Credit policies, procedures, processes and underwriting strengthened.

• Loan losses down substantially / profitability and capital strengthening underway.

• Loan portfolio subjected to 100% audit by senior TCCU leadership as part of our due diligence

• TCCU CEO invited to attend recent DICO exit interview.

WHO IS THAMESVILLE COMMUNITY CREDIT UNION?

• TCCU just celebrated its 60th year. It has 3 branches (Thamesville, Wardsville and Dutton), 17 staff and $45 million in assets. TCCU has never merged with another credit union.

• Experienced a period 2006-2012 where commercial lending underwriting did not meet industry norms or regulatory requirements. Loan loss levels rose, but not to an unacceptable level, but higher than industry norms.

• Lack of controls and proper documentation and procedures resulted in being put on DICO Watchlist.

• Leadership changes implemented. Credit policies, procedures, processes and underwriting strengthened.

• Removed from Watchlist in 2014.

• Above average capital position and above average asset growth (20% in 2014 and 27% in 2015).

THE GEOGRAPHICAL AREA IS:

•The NUMBER ONE producer of tomatoes in all of Canada

•The NUMBER ONE producer of seed corn in all of Canada

•The NUMBER ONE producer of sugar beets in all of Ontario

•One of the top producers of Brussels sprouts in all of North America

•Produces approximately 20% of all vegetables grown in Ontario

•Produces approximately 25% of all green peas grown in Ontario

•Produces approximately 25% of all cucumbers grown in Ontario

WHO IS THAMESVILLE COMMUNITY CREDIT UNION?

WHY IS THE TCCU & NLCU AMALGAMATION THE BEST FIRST STEP?

The boards of both companies see it as step-1 of a multi-step / multi-year strategic plan to build:

A credit union with assets in the $500 million to $1 billion range

A credit union whose primary focus is to serve members across Ontario from smaller urban markets and rural communities while simultaneously achieving the benefits of scale, capital strength, and risk diversification.

You called TCCU/NLCU a first step. Why?

• The needs of credit union members in smaller centres and rural areas is unique from our larger counterparts.

• Building a stronger credit union, more financially sustainable whose primary membership and board governance comes from rural and smaller Ontario communities.

• Importance of maintaining a primary focus on smaller town / rural communities.

• This approach offers a different model...”build a large credit union via consolidation of the small market credit unions with other like-minded rural and smaller urban center credit unions”. Our niche-market can and will become more sustainable, more relevant, have a larger voice at the table via this approach

WHAT OTHER SCALE OPTIONS WERE CONSIDERED?

1. Merging with one of the largest Ontario credit unions ( Meridian- $9 billion, Libro -$4 billion, Alterna - $3 billion, First Ontario - $2 billion)

2. Amalgamating with other mid-sized Ontario Credit Unions (Your Neighbourhood $900 million, Northern $900 million, Mainstreet $400 million, Sudbury $340 million, Copperfin $320 million)

Both boards established minimum threshold criteria for potential partners

Commitment to maintaining local branches

Commitment to maintaining local employment levels

Commitment to funding local community involvement / funding / donations

Important to both boards that the post-merger board with whichever partner(s) selected have a majority representation from smaller urban centers / rural areas

Cultural fit

The two options above did not offer all these assurances

WHAT WILL CHANGE IF I VOTE "YES” FOR THIS AMALGAMATION?

FIRST OUR NAMES • Nexus Community Credit Union Limited: Merriam-

Webster defines Nexus as: a relationship or connection between people. A center or focus point.

• Our ability to meet our members borrowing needs up to $2.9 million per member

• Our ability to afford enhanced systems and technology and expand product offering

• Access to increased staff expertise in finance, credit, technology

WHAT WILL REMAIN UNCHANGED IF I VOTE "YES” FOR THIS AMALGAMATION?

• Our branch networks. Success of this amalgamation is not built on downsizing (any future branch closure would require support from 75% of directors)

• Our talented employees committed to serving our membership. Success of this amalgamation is not built upon reductions in levels of staffing.

• TCCU and NLCU are important local employers and play a vital role in the economic health of the communities we serve. Combined we pay out over $4,800,000 in salaries which in turn buy goods & services in these communities.

WHAT DO THE POST-AMALGAMATION FINANCIALS LOOK LIKE...NOW AND INTO THE NEAR-TERM FUTURE?

(Unaudited - see Notice to Reader)

In $ 2016 2017 2018 2019 2020

Assets

Cash 8,821,550 12,453,904 11,889,907 10,824,985 6,234,017 4,000,722

Investments 25,877,894 25,877,894 25,877,894 25,877,894 25,877,894 25,877,894

Member loans (note 4 ) 162,119,139 166,791,500 174,339,614 182,745,282 195,031,239 205,373,893

Other assets 1,298,946 1,298,946 1,298,946 1,298,946 1,298,946 1,298,946

Property and equipment 4,053,365 3,769,630 3,468,060 3,155,934 2,840,341 2,527,903

202,170,894 210,191,874 216,874,421 223,903,041 231,282,437 239,079,358

Liabilities

Member deposits 190,528,098 198,149,222 204,093,699 210,216,510 216,523,005 223,018,696

Other liabilities 1,133,436 1,133,436 1,133,436 1,133,436 1,133,436 1,133,436

Members' shares 515,761 715,761 715,761 715,761 715,761 715,761

192,177,295 199,998,419 205,942,896 212,065,707 218,372,202 224,867,893

Members' Equity

Members' shares 2,135,534 1,985,534 1,835,534 1,685,534 1,535,534 1,385,534

Retained earnings 7,473,667 7,823,523 8,711,593 9,767,402 10,990,303 12,441,533

Accumulated other comprehensive income 384,398 384,398 384,398 384,398 384,398 384,398

9,993,599 10,193,455 10,931,525 11,837,334 12,910,235 14,211,465

202,170,894 210,191,874 216,874,421 223,903,041 231,282,437 239,079,358

Nexus Community Credit Union LimitedStatement of Forecast Balance Sheet

As at December 31,

2015

WHAT DO THE POST-AMALGAMATION FINANCIALS LOOK LIKE...NOW AND INTO THE NEAR-TERM FUTURE?

(Unaudited - see Notice to Reader)

In $ 2015 2016 2017 2018 2019 2020

Interest income

Member loans 7,867,416 8,064,101 8,337,180 8,661,228 9,050,983 9,538,579

Investments 416,021 420,181 424,383 428,626 432,912 437,241

8,283,437 8,484,282 8,761,563 9,089,854 9,483,895 9,975,820

Interest expense

Member deposits 1,437,846 1,466,603 1,495,935 1,540,813 1,602,446 1,666,544

Distributions to members 170,000 173,400 176,868 182,174 189,461 197,039

1,607,846 1,640,003 1,672,803 1,722,987 1,791,907 1,863,583

Net interest income 6,675,591 6,844,279 7,088,760 7,366,867 7,691,988 8,112,237

Provision for impaired loans 150,000 321,196 336,176 352,817 376,876 397,282

Net interest income after provision for impaired loans 6,525,591 6,523,083 6,752,584 7,014,050 7,315,112 7,714,955 - - - - - -

Other income 2,288,520 2,334,290 2,404,319 2,476,448 2,550,742 2,627,264

Net interest and other income 8,814,111 8,857,373 9,156,903 9,490,498 9,865,854 10,342,219

Operating expenses

Salaries and benefits 4,482,827 4,482,827 4,303,514 4,346,550 4,433,481 4,522,150

Occupancy expenses 869,698 887,092 904,834 922,930 941,389 960,216

Computer, office and other equip. 807,492 823,642 840,115 856,918 874,056 891,537

Advertising and communications 227,667 113,834 113,834 113,834 113,834 113,834

Member security 394,352 402,239 410,283 418,489 426,859 435,396

Administrative expenses 1,347,156 1,374,099 1,401,581 1,429,612 1,458,205 1,487,369

One time merger cost - 300,000 - - - -

Loan costs 60,238 62,045 64,527 67,753 71,141 74,698 - - - - - -

8,189,430 8,445,778 8,038,688 8,156,086 8,318,965 8,485,200

Income before income taxes 624,681 411,595 1,118,215 1,334,412 1,546,889 1,857,019

Income taxes 110,540 61,739 230,145 278,603 323,988 405,789

Net income 514,141 349,856 888,070 1,055,809 1,222,901 1,451,230

Retained earnings, beginning of year 6,959,526 7,473,667 7,823,523 8,711,593 9,767,402 10,990,303

Retained earnings, end of year 7,473,667 7,823,523 8,711,593 9,767,402 10,990,303 12,441,533

Nexus Community Credit Union LimitedStatement of Forecast Earnings and Retained Earnings

For the years ending December 31,

WHAT DO THE POST-AMALGAMATION FINANCIALS LOOK LIKE...NOW AND INTO THE NEAR-TERM FUTURE?

Year Ended Total AssetsLiquidity Ratio

Capital Ratio

Risk Weighted Capital Ratio

Net Profit (before taxes)

ROE (before taxes)

ROA (before taxes)

Productivity Ratio

Dec 31st /15 (as at amalgamation)

202,170,894 15.0% 5.8% 10.7% 624,681 6.38% 0.31% 92.9%

Dec 31st /16 210,191,874 15.9% 5.8% 10.4% 411,595 4.08% 0.20% 95.4%

Dec 31st /17 216,874,421 15.2% 6.0% 10.6% 1,118,215 10.59% 0.52% 87.8%

Dec 31st /18 223,903,041 14.4% 6.2% 10.8% 1,334,412 11.72% 0.61% 85.9%

Dec 31st /19 231,282,437 12.2% 6.5% 11.0% 1,546,889 12.50% 0.68% 84.3%

Dec 31st /20 239,079,358 11.0% 6.9% 11.2% 1,857,019 13.69% 0.79% 82.0%

* Productivity ratio is defined as "how much does the credit union spend to generate $1 of gross revenue" The lower the percentage # the better it is.

WHAT ARE THE NEXT STEPS?

• An application for approval to amalgamate has been submitted to the Financial Services Commission of Ontario (FSCO). Their decision is expected by end of October.

• The membership vote must be held within 30 days of receiving FSCO approval at TCCU branches in Thamesville, Wardsville and Dutton and will be held on the same dates / times by NLCU in accordance with their by-laws.

• The results of the membership vote will be announced the next day.

• If approved by the membership, the merger “effective date” will be January 1st, 2016.

WHAT IS THE VOTING PROCESS?

• Voting will be held in accordance with the applicable by-laws of TCCU and NLCU

• TCCU members must vote in-person only. NLCU members vote in-person or electronically. Vote will be held in the branches from 5PM to 9PM on a date that will be announced to the membership once FSCO's decision received.

• Independent scrutineers will be at each location, will tally the votes / ensure the confidentiality of the ballots / their destruction post-vote.

• A 66% “Yes” vote in favour of the amalgamation is required from all classes of shareholders at both credit unions for it to proceed.

• The results of the vote will be available to members the morning following the vote and can be accessed in multiple ways:

o Will be shown on the TCCU and NLCU websites as well as www.ruralgrowth.ca

o Will be posted in each branch.

THERE ARE 3 CHOICES WHEN IT COMES TO MANAGING CHANGE:

1. First decide if the change is a "temporary aberration or a permanent direction". Getting this right is critically important. Examples of companies that didn't get it right are:

• Kodak with respect to digital photography.

• Blockbuster Video with respect to on-line video streaming.

• Blackberry with respect to the appeal of the touch screen technology to the business world.

As at Dec. 31st Canada Ontario2001 1596 3022002 1401 2762003 1279 2582004 1217 2402005 1146 2272006 1105 2192007 1061 2082008 1009 1992009 942 1862010 907 1642011 825 1522012 771 1432013 711 1272014 694 (57% reduction) 117 (63% reduction)

•What does history show as far as direction within the credit union system:

Significant consolidation within the credit union system began in earnest about 15 years ago.

Since 2001 the number of credit unions (NOT the # of branches) has shrunk nationally by 57% and in Ontario by 63%

This is clearly a permanent trend

2) Fight against it to the bitter end / hope it will pass you by.

OR

3) Embrace the fact that change is a reality. Grab a hold of it andshape the change to your advantage. That's what TCCU and NLCUare doing with this proposal.

That’s the choice facing the membership of TCCU and NLCU on vote day

If approved by the membership, the merger “effective date” will be January 1st, 2016.

QUESTION PERIOD:

Question period open to the floor

• 2 minute time limit to position question from floor

• 1 minute follow-up question on the response to the question

• 1 question per member until all interested members have had an opportunity

What if I have additional questions after the meeting?

• Submit questions via website at www.ruralgrowth.ca

• Call or drop into any branch of TCCU or NLCU