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Credit Unions and Caisses Populaires SECTOR OUTLOOK 3Q16 November 2016 Summary Results In This Issue Summary Results….Page 1 Sector Financial Highlights… ……….Page 6 Sector Financial Statements…… …..Page 7 Selected Performance Trends …… ……...Page 9 The information presented in this report has been prepared using a variety of sources, including unaudited reports submitted to DICO by credit unions and caisses populaires. While DICO believes that the information contained in this report would be useful to readers, and considers the financial statements to be reliable, their accuracy and completeness cannot be guaranteed. Ce document est également disponible en français. Contact Us: [email protected] Throughout this document, unless specifically indicated otherwise, credit union refers to both credit unions and caisses populaires. Selected Aggregate Sector Performance Indicators Total Sector Assets (millions) Credit Unions (% of Total Sector Assets) Caisses Populaires (% of Total Sector Assets) Total Number of Credit Unions and Caisses Populaires Number of Credit Unions Number of Caisses Populaires Avg. Asset Size of Credit Unions and Caisses Populaires ($millions) Number of Members (000’s) Regulatory Capital (Aggregate Leverage Ratio) Credit Unions (Leverage) Caisses Populaires (Leverage) Regulatory Risk Weighted Capital Ratio (Class 2 only) Credit Unions Caisses Populaires Number not meeting minimum regulatory capital level Liquidity Credit Unions Caisses Populaires Asset Growth Total Loan Delinquency (greater than 30 days) Credit Unions Caisses Populaires Commercial Loan Delinquency (greater than 30 days) Credit Unions Caisses Populaires As at September 30 2016 $50,596 86.6 2015 $45,659 86.0 13.4 14.0 101 76 25 $501 1,612 7.01% 6.73% 8.82% 13.80% 13.28% 17.03% 0 11.20% 11.64% 8.29% 10.8% 0.71% 0.70% 0.82% 1.17% 1.18% 1.11% 111 85 26 $411 1,591 6.91% 6.61% 8.76% 13.35% 12.81% 16.49% 0 10.80% 11.09% 8.98% 10.4% 0.96% 0.97% 0.90% 1.66% 1.72% 1.34% Year to Date (annualized) Net Interest Income (Financial Margin) Other Income ROAA Return on Regulatory Capital Efficiency Ratio (before dividends & interest rebates) Credit Unions Caisses Populaires 1.95% 0.58% 0.32% 4.49% 81.2% 2.07% 0.55% 0.35% 4.99% 81.3% 83.6% 68.5% 84.0% 68.1% Unless stated otherwise, all figures reported are as at 3Q16. 3Q16 SECTOR OUTLOOK, November 2016 1 Economic Overview ELECTRONIC PUBLICATION: The Sector Outlook is available in PDF format (readable using Adobe Acrobat Reader) and can be downloaded from the Publications section on DICO’s website at www.dico.com. The Bank of Canada’s October Monetary Policy Report expects economic growth in Canada to be lower than previously projected in July due to slower near-term housing resale activity and lower exports. New measures implemented to promote stability in Canada’s housing market (details provided below) are anticipated to restrain residential investment while lessening household burdens. Growth in exports in 2017 and 2018 are expected to be slower than previously forecast due to lower estimates of global demand, US growth that appears less favourable to Canadian exports, and ongoing competitiveness challenges for Canadian firms. The Bank projects Canada’s real GDP to grow by 1.1% in 2016 and about 2% in both 2017 and 2018; implying the economy will not return to full capacity until mid-2018, materially later than forecast in July 2016. Economists expect the overnight interest rate to remain at 0.5% until late 2017 with some suggesting that another 0.25% decrease may be required to stimulate the economy. Low rates will continue to put pressure on credit unions’ profitability as interest rate spreads remain thin. The level of household debt continues to set new highs largely due to the rapid increase in house prices in Canada and more specifically in Vancouver and Toronto. In October 2016, the Federal Finance Minister announced the following series of changes to mortgage lending rules: NOTE : 1. The mortgage interest rate stress test to qualify for mortgage insurance has been expanded Income Statement results are to all mortgage loans made on or after October 17, 2016; based on aggregate year to 2. Eligibility requirements for low-ratio mortgage insurance have been tightened; date annualized information for each credit union. 3. The removal of a tax loophole that permitted foreign investors to claim an investment Comparative results may not property as their principal residence thus allowing them to avoid capital gains tax upon sale always agree with previously of the property; and reported information for the same period as a result of 4. The announcement of consultation for Lender Risk Sharing where lenders will assume the additional information received initial portion of the loss on an insured mortgage if it falls into default. after the reporting date. These changes are designed to stabilize Canada’s housing market by moderating increasing debt load, reducing the incidence of “house flipping” and ensuring capital gains are taxed appropriately. Once implemented, these measures should help reduce the risk of a housing market correction. DICO will be monitoring the effects of these changes on the credit union sector. Capital Results are based on the latest available information as at October 25, 2016. Aggregate regulatory capital for the sector increased to $3.51 billion (7.01% of assets) from $3.12 billion (6.91%) year over year. The increase in capital was largely due to eight credit unions issuing investment share offerings in the latter part of 2015 that raised approximately $300 million representing about 75% of the increase in capital. All credit unions met minimum regulatory capital requirements. Regulatory capital grew by 6.8% year over year and was comprised of: 1. Retained earnings $2.19 B (62.4%); 2. Investment and patronage shares $1.26 B (36.0%); and 3. Membership shares $65 million (1.6%). Credit unions should ensure their capital management stress testing models appropriately reflect any potential changes in interest rates. Growth Sector consolidation continued over the last twelve months with the number of credit unions decreasing by 10 to 101, resulting in an increase in the average asset size to $501 million. The number of credit unions declined by 9 to 76 resulting in an average asset size of $576 million compared to caisses populaires which decreased by one to 25 with an average asset size of $271 million. Total assets grew by 10.8% to $50.6 billion, largely due to growth in commercial loans (14.3%), and residential mortgage loans (11.3%). The proportion of personal loans has decreased from 10.9% to 6.4% of total loans over the past five years while residential mortgages have increased from 56.9% to 59.4% and commercial loans from 27.8% to 29.9%. The following table provides more information on lending activity. 3Q16 SECTOR OUTLOOK, November 2016 2 Sector Lending Activity 3Q 2016 Percent of $ Billions Total Loans Residential Mortgage Loans $ 25.96 59.4% Commercial Loans $ 13.06 29.9% Agricultural Loans $ 1.73 4.0% Personal Loans $ 2.78 6.4% Other Loans $ 0.14 0.3% $ 43.67 100% 3Q 2015 Percent of $ Billions Total Loans $ 23.31 59.3% $ 11.42 29.1% $ 1.61 4.1% $ 2.84 7.2% $ 0.12 0.3% $ 39.30 100% 3Q 2011 Percent of $ Billions Total Loans $ 15.63 56.9% $ 7.65 27.8% $ 1.13 4.1% $ 2.99 10.9% $ 0.09 0.3% $ 27.49 100% Total deposits grew by 9.3%, the highest year over year growth rate in the last 10 years, materially higher than the five-year average deposit growth trend of 6.9%. This compares favourably against the average five-year growth rate for the entire Canadian credit union sector of 4.5%. Demand deposit growth led the way with an increase to 13.6% from 12.0% last year while term deposits increased by 7.5% year over year from 3.6% the previous year. While depositor behaviour continues to favour for demand products, the year over year increase in term deposits is the largest increase since 2Q 2013. The funding gap, the difference between total loans and total deposits, continues to grow and has increased from 6.2% in 3Q15 to 7.9% in 3Q16 as credit unions aggressively grow their loan portfolios in order to increase revenue. There are currently 15 credit unions with a funding gap greater than 10%, including 7 credit unions with funding gaps greater than 20%. Insured deposits are estimated to be $28.0 billion or 69.3% of total deposits in contrast to the banking sector with insured deposits of 27% (source: CDIC, Sept. 2016). The level of insured deposits at credit unions has decreased steadily at an average of 1% per year over the last decade from 81% in 2006. Efficiency Ratio Credit Unions 83.6% Caisses Populaires 68.5% Banks 65% The overall efficiency ratio (before dividends and interest rebates) strengthened slightly to 81.2% from 81.3% in 3Q15. However, it remains significantly higher than large Canadian banks at 65.0% (2Q16). Collectively, caisses populaires continue to report an efficiency ratio (68.5%) that is closer to bank results. Caisses populaires benefit from increased economies of scale through an integrated model where most back office functions (including credit underwriting and adjudication) are shared. Profitability: Decreasing Over Time Return on average assets (ROAA) decreased to 32 bps in 3Q16 from 35 bps in 3Q15. The following table provides the income and expense breakdown for the sector over the last 4 years. Breakdown of Income and Expenses for Sector As a percentage of Avg. Assets Interest and Investment Income Other Income Total Income Interest Expense Dividend Expense Loan Costs Total Expenses Net Income 3Q 2016 3.31% 0.58% 3.89% 1.07% 0.30% 0.06% 3.57% 0.32% 3Q 2015 3.55% 0.55% 4.10% 1.19% 0.29% 0.08% 3.75% 0.35% 3Q 2014 3.73% 0.57% 4.30% 1.25% 0.26% 0.08% 3.91% 0.39% 3Q 2012 3.98% 0.63% 4.61% 1.41% 0.15% 0.15% 4.24% 0.37% There has been a 67 bps decrease in interest and investment income (16.8%) over the last four years as a result of low interest rates driving down rates charged on loans. “Other income” has decreased by 5 bps over the same period to 58 bps. Credit unions continue to seek alternative sources to increase income from non-interest earning related sources to make up for the shortfall in interest and investment income. 3Q16 SECTOR OUTLOOK, November 2016 3 Total expenses decreased by 67 bps over the period (15.8% decrease) led by lower interest expenses - down 34 bps (or 24.1%) and non-interest expenses - down 36 bps (or 14.7%). All categories of non-interest expenses decreased over the last five years, led by salaries and benefits that dropped by 18 bps (13.4%). While credit unions have focused efforts on lowering expenses, it has not been enough to overcome the 72 bps reduction in gross income, resulting in an overall decrease in net income of 5 bps (or 13.5%). Credit unions are beginning to explore new avenues to drive operating expenses down further through economies of scale achieved by pooling resources to provide shared services. Credit Risk Gross loan delinquency greater than 30 days was 0.71% of total loans, down 25 bps from 0.96% in 3Q15. This was due mainly to lower delinquencies in commercial loans (1.17% vs. 1.66%), residential mortgages (0.46% vs. 0.62%) and agricultural loans (1.07% vs. 1.22%). In dollar terms, total commercial loan delinquencies decreased from $189.0 million in 3Q15 to $153.8 million in 3Q16 led by a $28 million decrease at three credit unions (with a large portion due to the resolution of two large delinquent loans at one credit union). Residential Mortgage delinquencies decreased from $143.6 million to $119.9 million year over year with $23 million of the change due to accounts moving from 30 - 89 days delinquent to 0 - 30 days delinquent. Total agricultural delinquencies decreased from $19.6 million to $18.3 million year over year. The total amount of impaired commercial loans decreased by $13 million year over year to $153.3 million from $166.7 million while the percentage of impaired loans ($) has decreased to 1.17% from 1.46%. During that period, impaired loan resolutions at one credit union account for $9 million of the improvement in commercial loan impairments. The following chart shows fluctuations in delinquencies greater than 30 days over the past five years for different loan types. Commercial loan and residential mortgage delinquencies continue to trend down from the highs experienced in 2009 and are now at the lowest level seen in over 10 years. Similarly, loan costs decreased from 0.08% to 0.06% year over year. The decrease in delinquencies coincides with the findings from the Examinations group that, overall, credit unions have improved their loan management processes. 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% Q3 11 Q1 12 Personal Q3 12 Q1 13 Mortgages Q3 13 Q1 14 Commercial Q3 14 Q1 15 Q3 15 Agriculture Q1 16 Q3 16 Total Loan Mix and Yields Total loans grew by 11.0% due to growth in all loan categories with the exception of personal loans. Personal loans decreased by $65 million (2.3%) year over year to $2.78 billion and continue to represent a declining portion of the total loan portfolio mix at 6.4% from 7.2% in 2015. Competition in the residential mortgage market and low yields in the bond markets have resulted in floating and fixed rates that are near historical lows leading to continued strong demand for new mortgages. The following chart illustrates the current loan portfolio mix and yields versus the values from 3Q15 and their notional impacts on gross interest revenues. 3Q16 SECTOR OUTLOOK, November 2016 4 Product % of portfolio Change ($M) % Change Yield 3Q 2016 Yield 3Q 2015 Notional impact (in Millions) on gross interest revenues due to change in 2016 2015 Personal Loans 6.4% 7.2% $ (64) -2.3% 6.13% 5.82% portfolio mix (20.5) interest rates 7.6 Mortgage Loans 59.4% 59.3% $ 2,643 11.3% 3.71% 3.79% 2.2 (18.3) Commercial Loans 29.9% 29.1% $ 1,635 14.3% 4.46% 4.69% 16.5 (26.5) Agricultural Loans 4.3% 4.4% $ 143 8.9% 3.46% 3.74% (1.7) (4.6) Total 100% 100% (3.6) (41.8) Liquidity and Borrowings Year over year borrowings increased 34.5% due largely to securitization of residential mortgages in order to make up the funding gap between the growth in assets and deposits. Securitization programs have increased by 47.0% in 3Q15 while all other borrowings decreased 2.1%. There are currently 17 credit unions involved in securitization programs. DICO is monitoring the use of securitization programs due to the heavy reliance of this as a liquidity funding source at a few credit unions. Securitization Total Loans of Residential ($ millions) Mortgages ($ millions) 3Q 2013 $ 32,542 $ 32,644 $1,771 $667 $2,438 7.0% 3Q 2014 $ 34,360 $ 35,798 $2,393 $963 $3,356 8.9% 3Q 2015 $ 36,979 $ 39,307 $3,490 $1,187 $4,677 11.2% 3Q 2016 $ 40,431 $ 43,645 $5,129 $1,163 $6,292 13.5% As at end of quarter Borrowings from Other Sources ($ millions) Securitizations Total and Securitizations Borrowings as & Borrowings a % of Total ($ millions) Liabilities Total Deposits ($ millions) Liquid asset holdings increased by $672 million to $5.16 billion improving the liquidity ratio to 11.20% from 10.80% in 3Q15. This is mostly attributable to increases in deposits at the leagues/centrals held for liquidity, and commercial paper, banker’s acceptances and similar instruments. Liquidity at caisses populaires, (8.29%) remains much lower than at credit unions (11.64%). In comparison, liquidity of Canada’s banks was approximately 11%. The following chart provides a breakdown of liquidity sources. The largest source of liquidity is “Deposits in a League or Central” (72.8%), followed by “Deposits in deposit taking institutions” (7.9%), “Commercial paper, banker’s acceptances and similar instruments” (6.1%), “Securities secured by mortgages and guaranteed by CMHC” (5.1%) and “Cash held for liquidity” (4.4%). Sources of Liquidity Deposits in a League or Central Deposits in a deposit taking institution in Canada Securities secured by mortgages and guaranteed by CMHC held for liquidity Commercial paper, banker's acceptances and similar instruments Cash held for liquidity Other Sources of Liquidity Total Sources of Liquidity 3Q 2016 3Q 2015 3Q 2014 % of Total % of Total % of Total $ millions $ millions $ millions Liquidity Liquidity Liquidity $ 3,758.3 72.8% $ 3,387.4 75.4% $ 3,115.2 79.7% $ 407.5 7.9% $ 423.2 9.4% $ 290.1 7.4% $ 264.1 5.1% $ 171.2 3.8% $ - 0.0% $ 314.7 6.1% $ 139.6 3.1% $ 144.9 3.7% $ $ $ 227.3 191.6 5,163.5 4.4% $ 3.7% $ 100.0% $ 222.9 147.5 4,491.8 5.0% $ 3.3% $ 100.0% $ 218.8 139.7 3,908.6 5.6% 3.6% 100.0% Credit unions are encouraged to stress test their liquidity requirements sufficiently to challenge the level of liquidity to which they have access and develop alternative contingency strategies to rectify potential liquidity shortages. Credit unions are also encouraged to monitor and manage their dependence on a single source of liquidity. 3Q16 SECTOR OUTLOOK, November 2016 5 Sector Financial Highlights 3Q 2016 Selected Bank Information ONTARIO SECTOR % average assets*, Year to date at . . . 3Q 2016 3Q 2015 2Q 2016 1.95% 0.06% 0.58% 2.47% 2.08% 0.40% 2.07% 0.08% 0.55% 2.54% 2.12% 0.42% 1.65% 0.10% 1.55% 2.80% 1.81% 0.79% 83.97% 81.25% 0.40% 0.32% 5.65% 4.49% 83.62% 81.34% 0.42% 0.35% 5.96% 4.99% 79.20% 64.74% 0.71% 0.39% 0.96% 0.47% 12,018 8,876 23.65% 17.15% 101 111 Total Assets ($ millions) Average Assets per Credit Union ($ millions) 50,596 500.9 45,659 411.3 Median Assets ($ millions) Regulatory Capital 159.9 7.01% 115.4 6.91% 0 0 11.20% 10.80% PROFITABILITY Net Interest and Investment Income Loan Costs Other (non-interest) Income Total Income Total Non-Interest Expenses (Operating Expenses) Net Income/(Loss) before Taxes and Non-recurring & Extraordinary items Efficiency Ratio (% Operating Expenses to Total Income) Efficiency Ratio (% Operating Expenses, before dividends & interest rebates Return on Average Assets (ROA) before dividends etc. Return on Average Assets (ROA) Return on Regulatory Capital before dividends etc. Return on Regulatory Capital to Total Income) 0.85% 12.96% 5.77% CREDIT RISK, as at the quarter-end Gross Delinquency greater than 30 days (% Gross Delinquency greater than 90 days (% of total loans) of total loans) OFF BALANCE SHEET ACTIVITY Off balance Sheet Assets ($millions) (Includes mutual fund sales and administered loans etc.) Income on Off Balance Sheet Activity ( % Other Income) OTHER INDICATORS, as at the quarter-end Total Number of Credit Unions 4,700,259 (as a percentage of net assets) Number of Credit Unions below Regulatory Minimum Liquidity * Year to date annualized unless otherwise stated. Totals may not agree due to rounding 3Q16 SECTOR OUTLOOK, November 2016 6 Sector Financial Statements 3Q 2016 Balance Sheet ONTARIO SECTOR 3Q 2016 3Q 2015 ($000) ($000) ASSETS Cash and Investments Personal Loans Residential Mortgage Loans Commercial Loans Institutional Loans Unincorporated Association Loans Agricultural Loans Total Loans Total Loan Allowances Capital (Fixed) Assets Intangible & Other Assets Total Assets 6,206,247 2,779,969 25,955,598 13,058,030 81,453 40,584 1,729,283 43,644,917 135,997 487,256 393,329 50,595,752 5,660,201 2,844,296 23,312,124 11,422,651 61,671 58,421 1,607,514 39,306,678 130,506 444,772 378,205 45,659,349 12.3% 5.5% 51.3% 25.8% 0.2% 0.1% 3.4% 86.3% 0.3% 1.0% 0.8% 100.0% 12.4% 6.2% 51.1% 25.0% 0.1% 0.1% 3.5% 86.1% 0.3% 1.0% 0.8% 100.0% LIABILITIES Demand Deposits Term Deposits Registered Deposits Other Deposits Total Deposits Borrowings Securitization Other Liabilities Total Liabilities 16,869,545 13,097,355 10,227,237 237,163 40,431,299 536,895 5,129,247 990,326 47,087,767 14,874,869 12,185,629 9,713,717 229,287 37,003,502 1,094,070 3,490,371 948,522 42,536,465 33.3% 25.9% 20.2% 0.5% 79.9% 1.1% 10.1% 2.0% 93.1% 32.6% 26.7% 21.3% 0.5% 81.0% 2.4% 7.6% 2.1% 93.2% 65,302 2,190,079 1,262,578 (9,974) 3,507,985 72,107 2,051,787 994,347 4,643 3,122,884 0.1% 4.3% 2.5% 0.0% 6.9% 0.2% 4.5% 2.2% 0.0% 6.8% 50,595,752 45,659,349 100.0% 100.0% MEMBERS' EQUITY & CAPITAL Membership Shares Retained Earnings Other Tier 1 & 2 Capital Accumulated Other Comprehensive Income Total Members' Equity & Capital Total Liabilities, & Members' Equity & Capital 3Q 2016 3Q 2015 (Percentage of Total Assets) Totals may not agree due to rounding 3Q16 SECTOR OUTLOOK, November 2016 7 Sector Financial Statements 3Q 2016 Income Statement ONTARIO SECTOR Canadian Chartered Banks ** Percentage of Average Assets * 3Q 2016 3Q 2015 2Q 2016 3.15% 3.33% 2.04% 0.17% 0.23% 0.35% 3.31% 3.55% 2.39% 1.07% 1.19% 0.53% 0.30% 0.29% 0.21% 1.37% 1.48% 0.74% Net Interest & Investment Income 1.95% 2.07% 1.65% Loan Costs Net Interest & Investment Income after Loan Costs Other (non-interest) Income Net Interest, Investment & Other Income 0.06% 1.89% 0.58% 2.47% 0.08% 1.99% 0.55% 2.54% 0.10% 1.55% 1.25% 2.80% 1.14% 0.20% 0.20% 0.13% 0.08% 0.19% 0.13% 2.08% 1.16% 0.20% 0.21% 0.14% 0.08% 0.19% 0.13% 2.12% 0.97% 0.14% 0.15% 0.08% Net Income/(Loss) Before Taxes and Nonrecurring & Extraordinary items 0.40% 0.42% 0.99% Non-recurring & Extraordinary gains/(losses) T axes Minority Interests Net Income/(Loss) 0.01% 0.08% 0.00% 0.32% 0.01% 0.08% 0.00% 0.35% 0.00% 0.20% 0.00% 0.79% 48,753,150 44,097,168 4,708,458,603 Interest and Investment Income Loan Interest Income Investment Income Interest Expense Interest Expense on Deposits Interest Rebates & Dividends on Share Capital Dividends on Investment Capital & Other Capital Other Interest Expense T otal Rebates, Dividends & Other Interest Expense Non-interest Expenses Salaries and Benefits Occupancy Computer, office & other equipment Advertising & Communications Member Security Administration Other Average Assets ($000) 0.00% 0.08% 0.21% 0.00% 0.07% 0.22% 0.47% 1.81% * Year to date annualized ** Source: Canadian Bankers Association, Detailed Financial Statistics. Totals may not agree due to rounding. 3Q16 SECTOR OUTLOOK, November 2016 8 Selected Financial Trends Selected Growth Trends Selected Performance Trends 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 3.75% 0.80% 3.50% 0.70% 3.25% 0.60% 3.00% 0.50% 2.75% 0.40% 2.50% 0.30% 2.25% 0.20% 2.00% 0.10% 1.75% 0.00% Assets Loans 0.00% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Financial Margin (L) Gross Margin (L) Operating Expenses (L) ROA (R) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Deposits Loan Growth Loan Yields 10.00% 20.0% 9.00% 15.0% 8.00% 10.0% 7.00% 6.00% 5.0% 5.00% 0.0% 4.00% 3.00% -5.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Personal Mortgages Commercial Total Personal Mortgages Commerical Total Sources of Liquidity Loan Delinquencies - Greater than 30 Days $MM 3.50% 15.0% $6,000 3.00% 14.0% $5,000 2.50% 13.0% $4,000 2.00% 12.0% $3,000 1.50% 11.0% $2,000 1.00% 10.0% $1,000 0.50% 9.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Personal Mortgages Commercial Other Sources of Liquidity ( R ) Mortgage securities guaranteed by CMHC ( R ) Deposits in League or Central ( R ) Liquidity ( L ) Total Loan Costs and Return on Assets 3Q16 1Q16 3Q15 1Q15 3Q14 1Q14 3Q13 1Q13 3Q12 1Q12 0.00% 3Q11 1Q11 $0 CPs, BAs and similar instruments ( R ) Deposits in Canadian FIs for Liquidity ( R ) Cash held for liquidity ( R ) Deposit Growth 0.30% 0.70% 0.25% 0.60% 0.20% 0.50% 0.15% 0.40% 0.10% 0.30% 0.05% 0.20% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% 0.00% 0.10% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Loan Costs (L) ROA (R) 3Q 2011 1Q 2012 3Q 2012 1Q 2013 3Q 2013 1Q 2014 3Q 2014 1Q 2015 3Q 2015 1Q 2016 3Q 2016 Demand Deposits - Yearly Growth Term Deposits - Yearly Growth Registered Deposits - Yearly Growth Total Deposits - Yearly Growth Average Total Deposit Growth Rate NOTE: L refers to the Left Axis and R refers to the Right Axis 3Q16 SECTOR OUTLOOK, November 2016 9