AGM2021 WORKBOOK Table of Contents 7th Annual General Meeting April 17, 2021 Page 1 AGM Workbook

Table of Contents

Be Libro ...... 2

Agenda ...... 3

Notes to the Agenda...... 4

Minutes of the Last Annual General Meeting ...... 5 – 9

Report on Business Arising from the Minutes ...... 10

Report of the Board of Directors ...... 11 – 13

Report of the Board Committees ...... 14 – 17 Audit and Finance Committee ...... 14 People and Culture Committee ...... 15 Risk and Credit Committee ...... 16 Director Recruitment Sub-Committee ...... 17

Board Election Information and Candidates’ Biographies ...... 18 – 30 Bryan Aitken ...... 21 Marycatharine Kusch ...... 23 Stephanie Soulis ...... 25 Ronda Stewart ...... 28

Special Resolution to Amend the Bylaws ...... 31 – 33

Special Resolution to confirm Director Remuneration ...... 34 – 36

2020 Financial Statements ...... 37 – 84 Management’s Responsibility for Financial Reporting ...... 37 Auditor’s Report ...... 38 – 40 Financial Statements ...... 41 – 44 Notes to Financial Statements ...... 45 – 84

Libro Board of Directors ...... 85

Libro Executive Leadership Team ...... 86

Libro Owner Representatives ...... 87 – 89 Be Libro 7th Annual General Meeting April 17, 2021 Page 2 AGM Workbook

Agenda 7th Annual General Meeting April 17, 2021 Page 3 AGM Workbook

Agenda

10:00 am Annual General Meeting 1. Call to Order 2. Growing Prosperity Awards 3. Report on Registration & Establishment of Quorum 4. Adoption of the Agenda 5. Minutes of the Last Annual General Meeting and Business Arising (Note 1) 6. Report of the Board of Directors (Note 2) 7. Director Elections (Note 3) 8. Special Resolution re: Bylaw Amendment 9. Special Resolution re: Director Remuneration 10. Management Report on Operations for 2020 (Note 4) 11. Report of the Audit and Finance Committee (Note 2) a. Report of the External Auditors (Note 4) b. Submission of Financial Statements (Note 4) c. Appointment of External Auditors (Note 5) 12. Report of the President & CEO 13. New Business (if any) 14. Closing Announcements and Adjournment

Notes to the Agenda 7th Annual General Meeting April 17, 2021 Page 4 AGM Workbook

Notes to the Agenda

1. Minutes and Business Arising The minutes of the 6th Libro Annual General Meeting, via livestream from the Libro Corporate Offices at 217 York Street, London on Saturday, April 4, 2020, are included on pages 5 – 9. A reference to business arising from those minutes is on page 10. Libro’s practice is to not read the minutes at the meeting or review them in detail. They will be presented for adoption as printed with time allotted for Owner Representatives to identify any errors or omissions. There will be time to discuss topics covered in the minutes under Agenda item 5.

2. Report of the Board of Directors and Committees The written report of the Board of Directors begins on page 11. The report of the Audit and Finance Committee as required by our Bylaws and the Credit Unions and Caisses Populaires Act and Regulations, is on pages 14 – 15 followed by reports from the Board’s other standing Committees and Sub-Committee.

3. Elections Terms of office are expiring for three Directors, and there are three available positions each for a three-year term. Five candidates were nominated during the advance nomination period with one candidate withdrawing their nomination after the close of the nomination period. The candidates completed the Candidate Information Session with the Director Recruitment Sub-Committee comprised of an equal number of Owner Representatives and Directors. The Corporate Secretary, appointed by the Board as Elections Officer, will conduct the elections at the AGM. For further details and candidate profiles, see pages 18 –30 of this Workbook.

4. 2020 Audited Financial Statements and Report of Management on Operations Starting on page 39, this Workbook contains the full financial statements including the notes to the financial statements in support of the Report of Management on Operations 2020 (Agenda item 10), Report of the External Auditors (Agenda item 11a) and the official Submission of the Financial Statements (Agenda item 11b).

Libro’s Year in Review | 2020 Annual Report and the audited financial statements will be shared with Owners and the public on the website at https://www.libro.ca/about/reports.

5. Appointment of External Auditors The Board of Directors will recommend Ernst & Young, LLP as external auditors for the fiscal year ending December 31, 2021. Information regarding the process for reviewing the external auditor is found in the report of the Audit and Finance Committee on pages 14 and 15.

Minutes of Last AGM 7th Annual General Meeting April 17, 2021 Page 5 AGM Workbook

LIBRO CREDIT UNION LIMITED MINUTES of the 6th ANNUAL GENERAL MEETING (AGM) held on Saturday, April 4, 2020 via Livestream from LIBRO CORPORATE OFFICES 217 YORK STREET, LONDON, ONTARIO

Call to Order and Opening Announcements Gary Baker, Board Chair, called the meeting to order at 10:02 am. He welcomed attendees to the first Libro Annual General Meeting to be conducted virtually. He offered a Land Acknowledgment in reflection of Truth and Reconciliation and commented on the environment during the COVID-19 pandemic. He reviewed meeting procedures including guidance on electronic voting for Owner Representatives.

Report on Registration and Establishment of Quorum Janet Taylor reported that the following numbers were registered at 10:00 am. Owner Representatives 88

Gary Baker declared a quorum (minimum requirement equals 79 Owner Representatives). Note: During the meeting Owner Representative attendance fluctuated without dropping below quorum requirements and reaching a high of 108.

Minutes of Last Annual Meeting and Business Arising Janet Taylor presented the minutes of the 5th Annual General Meeting and the Report on Business Arising. Owner Representatives approved an electronic motion to adopt the minutes of the 5th Annual General Meeting of Libro Credit Union Limited, held on Saturday, April 13, 2019 at the London Convention Centre in London, Ontario.

Report of the Board of Directors Gary Baker presented the Report of the Board of Directors concentrating on achievements in the following areas: . Appreciation for the efforts of Libro staff to deliver service to Libro Owners during the COVID- 19 pandemic; . Celebration of a record setting year during 2019; . Board of Directors activities including o Establishment of Libro Pillars, o Connections with Regional Councils, o Restructuring of the Board committees, o Increased awareness and understanding of the evolution of digital finance.

Director Elections Janet Taylor, as Acting Corporate Secretary and appointed by the Board, assumed the chair to conduct the elections. There were four vacancies with all four positions for three-year terms. Terms

Minutes of Last AGM 7th Annual General Meeting April 17, 2021 Page 6 AGM Workbook of office expired for Gary Baker, Alan DeVillaer, Dennis Hogan, and Ronda Stewart. Advance nominations were received from Alan DeVillaer, Jeff McCallum, Jodi Simpson, Ronda Stewart, and Garrett Vanderwyst. All five candidates in their advance nomination papers indicated their acceptance of nomination in writing. Janet Taylor stated that in accordance with Libro bylaws and election rules the floor would not be open to further nominations and elections would be conducted by ballot. Following speeches from the candidates, Owner Representatives were instructed to mark their ballots for four names. Once electronic balloting concluded Janet Taylor recessed the elections and returned the chair to Gary Baker.

Special Resolution re: Owner Representative Remuneration Gary Baker, on behalf of the Governance Committee and Governance Working Group, presented the amended Special Resolution regarding Owner Representative Remuneration. He highlighted the reasons why the Board had repealed changes to Director Remuneration policy citing the timing of those changes in relation to the environment. He reviewed the changes to Owner Representative Remuneration policy specifically relating to per diems for training attended. Owner Representatives approved the Special Resolution to amend Board Policy F.4 Owner Representative Remuneration with more than the 2/3rds majority required.

Prior to the vote, the following question was posed: Dave Zenger asked for clarification on an inconsistency in policy statements regarding remuneration for Owner Representatives and Directors for attendance at the Fall Forum. Janet Taylor responded that the intent and current practice is that neither Directors nor Owner Representatives are remunerated for attendance at the Fall Forum. The director remuneration policy statement will be updated to reflect this intent during the annual policy review cycle.

Report of Management on Operations Kathleen Grogan and Carol Normandeau, on behalf of the Executive Leadership Team, presented the management operations report and reviewed: . Record profitability, . Growth and targets, . Assets under administration, . Operational net income, . Dividends and profit sharing, . Owner growth, . Owner satisfaction, . Moments Matter, . Growing for impact.

Report of the Audit and Risk Committee Marycatharine Kusch, on behalf of the Audit and Risk Committee, presented this report and reviewed the duties and responsibilities of the Audit and Risk Committee as per the Act, Libro Bylaws and board policy. She concluded with the Audit and Risk Committee opinion that the committee had met the requirements of the Act and policies and further that the system of internal controls in place

Minutes of Last AGM 7th Annual General Meeting April 17, 2021 Page 7 AGM Workbook are sufficient to provide reasonable assurance of the safeguarding of Libro assets, the accuracy of financial reports and compliance with policies and procedures.

Report of the External Auditor Andrea Feddema, on behalf of the external auditors, Ernst & Young, presented this report.

Submission of Financial Statements Marycatharine Kusch submitted the Financial Statements for adoption as presented at the meeting including the statement on management’s responsibility for financial reporting appearing on page 42 and the external auditor’s report on pages 43 and 44 of the AGM Workbook.

Appointment of External Auditors Marycatharine Kusch formally presented the recommendation of the Board of Directors to appoint the firm of Ernst and Young LLP as external auditor. Owner Representatives adopted an electronic motion to: . Accept the Report of the Audit and Risk Committee as printed and presented; . Adopt the Audited Financial Statements for the year ended December 31, 2019 which include the Report of the External Auditor; and . Appoint the firm of Ernst and Young LLP as external auditor for Libro Credit Union for the year ending December 31, 2020.

Following submission of the financial statements: Bill Wilkinson asked which audit or risk compliance issues the Audit & Risk Committee had considered, and of which Owner Representatives should be aware, in giving its opinion that were no issues to report. Marycatharine Kusch responded that there were no material misstatements or outstanding adjustments in the financial statements. She further noted that the committee feels the internal controls are operating adequately to ensure that the financial statements are accurate.

Director Election Results Gary Baker turned the chair back to Janet Taylor to complete the election process. She reported the following results. Elected to a three-year term of office were: . Jodi Simpson, . Garrett Vanderwyst, . Alan DeVillaer, and . Jeff McCallum. There were 105 ballots cast.

Janet Taylor concluded the election process and returned the chair to Gary Baker. Gary Baker welcomed the directors elected and re-elected, and thanked those not returning to the Libro Board. Gary Baker followed by Dennis Hogan addressed the meeting as retiring directors.

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Report of the President & Chief Executive Officer Stephen Bolton, Libro President & CEO, made a presentation on: . Focus on success and a bright future together; . Libro Pillars of financial resilience, employment, food accessibility and housing; . Solid foundation to weather difficult times; . Protecting and growing prosperity in southwestern Ontario . Executive leadership team changes and appreciation for retiring directors.

The following questions and comments were shared. Dave Zenger asked about changes to requirements for the Student Awards program, specifically requirements for applicants to submit final grades. Michael Smit responded that Libro is trying to minimize obstacles for students applying for the awards. Student grades continue to be a requirement however applicants will not be required to provide proof of enrollment to apply.

Dave Zenger asked if the Annual Grant Program would return in 2021. Stephen Bolton shared that the deferral of the Annual Grant Program, in which Owner Representatives participate, was to allow for a timely contribution to the United Way agencies in southwestern Ontario in response to the COVID-19 crisis. Libro continues to distribute community funding through sponsorships and donations and plans to relaunch the Annual Grant Program in 2021.

Mira Ratkaj asked about anticipated impacts on capital, liquidity and write downs due to the COVID- 19 pandemic. Stephen Bolton responded that Libro is monitoring liquidity on a daily basis. Liquidity, capital and profitability had thus far remained strong. Libro does expect the bad debt allowance to increase through the year which will be evident in International Financial Reporting Standard (IFRS) 9 requirements.

Michael Clarke commented that Libro’s actions are speaking volumes and that he is proud to be a Libro Owner Representative.

Dave Zenger asked if Libro was participating in mortgage deferral programs. Stephen Bolton replied that Libro acted quickly to offer payment deferrals and continues to work with Owners one-on-one to find solutions.

Dave Zenger questioned why an Owner Representative was permitted to seek an additional term of office without having completed the Owner Representative Accreditation Program. Janet Taylor responded that each Candidate Recruitment Committee is empowered to have conversations with candidates and may uncover unique situations that may have impacted the Owner Representative’s ability to complete the program.

An Owner Representative asked if Libro would be considering the stipulation that Owner Representatives attend in person training as a result of the pandemic. Janet Taylor responded that Libro will be considering delivery methods for staff and elected training as a result of the pandemic.

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New Business There was no new business brought before the meeting.

Adjournment Gary Baker made a few closing announcements and adjourned the meeting at 12:03 pm.

Business Arising 7th Annual General Meeting April 17, 2021 Page 10 AGM Workbook

Report on Business Arising from the Minutes

The following are updates on selected topics included and questions raised in the minutes of the Annual General Meeting (AGM) of April 4, 2020 for which there is a substantive update or new information to report.

1. An inconsistency between Owner Representative and Director Remuneration policies identified during the 6th Annual General Meeting and related to remuneration at the Fall Forum has been corrected in Director Remuneration Policy E.5 Director Remuneration, that is presented for confirmation by Special Resolution at this Annual General Meeting. See AGM Workbook pages 36 to 38 for more detail.

2. During 2020 and into 2021, the world continued to be impacted by the COVID-19 pandemic. The Government of Canada provided stimulus funding in an effort to keep the economy stable. Libro had full participation in the government programs, making sure Owners had full support in funding terms and in the coaching that could make a real difference to their financial wellbeing. Additional information is found in Notes 6 and 20(b) of the Audited Financial Statements.

*To October 31, 2020

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Report of the Board of Directors

Governing with strength and resilience The past year was eventful. The Board of Directors faced the challenge by living its values and following its risk appetite. We are thankful for our Libro staff who worked so hard during unprecedented events. Take a read through A Story of Strength | 2020 Annual Report to better understand the impact we have made together.

Some of the areas the Board of Directors focused on in the past year include: • Following a successful first virtual Annual General Meeting the Board continued to adapt to the pandemic environment by holding director onboarding sessions, Board and Committee meetings using virtual technology. • Through the efforts of the planning committee, Libro hosted its first virtual Fall Forum where we were engaged in learning more about Libro as a purpose-based business and enjoyed hearing from Terry O’Reilly of CBC Radio’s Under the Influence. • Operating within a revised board committee structure that was designed to ensure we have an agile and effective structure to support and enable our growth objectives. In the first year of the revised structure we have found that mutual respect and trust have proven to be key elements in the success thus far. Each of the standing committees has reflected on its successes and areas for improvement, offering only minor suggestions for the 2021-2022 year. • Reflecting on market trends and analysis, in particular the concerns of the ongoing impact of COVID-19 and the effects on our economy. • The Board received regular updates on the effect COVID-19 had on Libro from staff, Owner, and financial perspectives. • Exploring climate change and how Libro can take a strategic stance on this issue, being prepared to lead in key areas aligned to purpose, while also being sensitive to potential concerns in certain market segments. • Recognized by Governance Professionals of Canada for Excellence in Governance in the area of ESG (Environmental, Social, Governance) and Sustainability. • Articulating the themes and trends Libro will need to consider along the path to Libro 20.0 ($20 billion in assets under management by the end of 2029). • Actively participating in Regional Council meetings with Owner Representatives and regional management. Each director serves as a Liaison to a Regional Council acting as a conduit between the Regional Council and the Board.

Diversity, Equity and Inclusion Libro is committed to building an environment where everyone feels engaged, welcome and supported regardless of background, religion, race, gender, physical ability or sexual orientation. Strong organizations thrive when diversity and equity are recognized as being inseparable. At Libro we recognize the effort we need to take to continue to grow in this area.

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For the first time in our history, Libro’s Board Chair and Vice Chair are both women. At the Regional Council level there are 13 women serving in leadership roles as Chair or Vice Chair.

Gender Distribution: Women Men Board Members 45% 55% Owner Representatives 58% 42% Libro Staff 76% 24%

We know that gender is just one element of diversity, equity and inclusion. Libro has created a staff led Diversity, Equity and Inclusion Council that will provide strategic direction, insights and feedback into the rollout and operation of Libro’s diversity and inclusion strategy and programs. The Council has identified three key areas of focus as they begin their work. 1. People of Libro 2. Education and Awareness 3. Community Partnerships and Engagement

Engagement Survey Scores Directors continue to be highly engaged and enthused about their role in governing our credit union. The increasing trend shown in the summary table below reflects the efforts we have undertaken to strengthen our Board activities. We continue to explore the survey details to identify areas where additional improvements can be made.

Earlier declines in Owner Representative engagement, shown in the table below, have stabilized as Regional Councils mature within the new regional governance structure. Councils have reviewed their own survey details and set goals to ensure they have clarity and find value in their roles, and have the opportunity to be meaningfully engaged, on behalf of Libro, within their regions.

2020 2019 2018 2017 Board of Directors 90% 89% 88% 86% Owner Representatives 86% 86% 89% 90%

Director and Owner Representative engagement scores are collected through a survey process whereby Directors and Owner Representatives complete ratings in the areas such as group functioning and effectiveness; composition, skills and development; culture and dynamics; and relationship with management.

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Board of Directors Activity One way the Board demonstrates leadership is through commitment to attendance and participation at meetings. The statistics below reflect meetings held since the last AGM.

# Members # Meetings Attendance Board of Directors 11 6 94% Audit and Finance Committee 5 4 100% People and Culture Committee 4 4 100% Risk and Credit Committee 5 4 100% Director Recruitment Sub- 6 4 96% Committee (3 Directors + 3 Owner Representatives)

Note: The above attendance statistics refer to formal meetings of the Board and its Committees. Directors also participate in Owner Representative meetings, the strategic planning session, and other conferences and events as required as part of their service to the Libro Board.

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Report of the Board Committees

Audit and Finance Committee Libro’s Audit and Finance Committee is a standing committee of the Board of Directors as required by Section 125 of the Credit Union and Caisses Populaires Act. Five directors form the Committee and we have adopted committee mandates that include the duties specified in the Act to be performed by an Audit Committee.

The Audit and Finance Committee has met four (4) times since our last Annual General Meeting and arranged the agenda to carry out our duties, to meet goals and objectives, and to take appropriate action where necessary. Principal activities and issues undertaken by the Audit and Finance Committee, on behalf of the Board, this past year include:

• Monitored pandemic related financial updates, forecasting and stress tests. • Received educational presentations on Securitization, and the Internal Capital Adequacy Assessment Process (ICAAP). • In accordance with Libro’s Enterprise Risk Management (ERM) Framework, reviewed regular updates on management’s identification and assessment of key business risks inherent to Libro, and obtained assurances that management has adopted reasonable internal controls and risk mitigation activities that provide for safeguarding the assets of Libro, ensuring accuracy of financial reports, and compliance with policies and procedures. • Oversight of the activities of Libro’s internal auditor including review and approval of the Internal Audit Charter and annual work plan, review of reports and any significant findings. • Review and recommendation for Board approval of the 2021 and 2022 annual operating budget and related capital and liquidity plans. Further the Committee reviewed the Contingent Funding Plan (CFP) which is a supplement to the annual Liquidity Risk Management Plan. • Oversight of the activities of the external auditors appointed at our last annual general meeting, including review of the terms, scope and results of the 2020 financial statement audit. • Review of Libro’s annual consolidated financial statements and recommendation for Board approval. • Reviewed policies related to legislative and regulatory compliance, with a particular focus on requirements for liquidity, capital adequacy, interest rate risk management and market risk. Where appropriate we recommended necessary changes for Board approval. • Oversight of pension fund performance, confirmation of pension fund filings, and approved an updated Statement of Investment Policies and Procedures. • Reviewed regular reporting on asset liability management.

The former Audit & Risk Committee of the Board, through an external audit Request for Proposal (RFP) process, selected Ernst and Young LLP as the preferred external auditor in 2016 and agreed to

Report the Board & Committees 7th Annual General Meeting April 17, 2021 Page 15 AGM Workbook retain their services provided their services continued to meet expectations of the Board and management. The Committee further agreed to a more comprehensive review every five (5) years, that may consist of an RFP. With the RFP having taken place in 2016, this more comprehensive review will take place in 2021. The Audit and Finance Committee began this comprehensive review at their late February 2021 meeting. The Committee will present its recommendation for external auditor for the year ending December 31, 2022 to the Board which will then be presented to the Owner Representatives voting at the 8th Annual General Meeting.

Based on its findings, the Audit and Finance Committee issues reports and makes recommendations to the Board of Directors or Executive Leadership Team, as appropriate. These recommendations are reviewed to ensure they are considered and appropriate action taken.

The Audit and Finance Committee is pleased to report to the Owners of Libro that, pursuant to the Act, it continues to meet the requirements of its annual mandate. The Committee receives full cooperation and support from management to enable it to play an effective role in improving the quality of financial reporting to the Owners and enhancing the overall risk management and control structure at Libro.

There are no significant recommendations made by the Audit and Finance Committee that have not been implemented. In addition, there are no matters which the Audit and Finance Committee believes should be reported to the Owners, nor are there any further matters which are required to be disclosed pursuant to the Act or Regulations.

Respectfully submitted by the Audit and Finance Committee,

Marycatharine Kusch, Chair Chris Mendes, Member Garrett Vanderwyst, Member Donna Taylor, Vice Chair Chris Smith, Member

People and Culture Committee The People and Culture Committee monitors Libro’s culture to ensure it aligns with strategy such that Libro attracts and retains people with the right skills and values to serve as staff, directors and Owner Representatives. The People and Culture Committee has met four (4) times since our last Annual General Meeting and arranged the agenda to carry out our duties, to meet goals and objectives, and to take appropriate action where necessary. During the 2020-2021 year, the Committee focused attention in the following areas: • Oversight of the annual CEO evaluation process, CEO and Executive compensation, and talent mapping for senior leadership positions at Libro. • Monitoring progress on the Talent Management Strategic Priority, which included a full review of Libro’s total cash compensation programs such as salary structure, variable compensation, team and individual incentives. • Recommending an amended Director Remuneration policy, presented as a Special Resolution at the AGM.

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• Oversight of staff, Owner Representative, and director engagement. • Engaged Ahria Consulting to manage the director assessment program which includes a board engagement survey, multi-rater assessment (peer evaluation), board effectiveness, and regulatory skills and qualifications self-assessment. • Reviewing director candidate endorsement practices at other organizations. • Monitoring progress on Governance Working Group recommendations. • Oversight of official Owner complaints escalated to Financial Services Regulatory Authority (FSRA) or the Better Business Bureau (BBB), of which there were none in 2020, and reports to the external Integrity in Action hotline, of which there were none in 2020. • Supporting and overseeing the Director Recruitment Sub-Committee. • Reviewed policies including Terms of Reference for various governing groups and positions, Employment Principles, Compensation, Diversity, and specifics of Board and Regional Council operations. Where appropriate we recommended necessary changes for Board approval. • Reviewed regular reporting and obtained reasonable assurances with respect to Libro’s compliance with legislative and regulatory requirements.

Respectfully submitted by the People and Culture Committee,

Bryan Aitken, Chair Jeff McCallum, Member Janet Boot, Vice Chair Jodi Simpson, Member

Risk and Credit Committee The Risk and Credit Committee has met four (4) times since our last Annual General Meeting and arranged the agenda to carry out our duties, to meet goals and objectives, and to take appropriate action where necessary. Principal activities and issues undertaken by the Risk and Credit Committee this past year include:

• Received educational presentations on Cyber Security Awareness, and the Enterprise Risk Management (ERM) Framework. • Oversight of Libro’s ERM Framework that identifies manages and reports on risk levels inherent to Libro, in accordance with risk appetite, direction and tolerance levels established by the Board. • Received updates on progress made to enhance the ERM framework as part of management’s development plan. • Monitored Libro’s approach to the COVID-19 pandemic through reporting from the Crisis Management Team. • Approved or recommended to the Board of Directors, where required by policy, transactions with Restricted and Related parties as defined in the Act. • Reviewed compliance reporting including watch list, delinquent loans, large credit exposures, high risk loans, and loan limits and concentrations. • Monitored emerging risks, information security governance, corporate insurance program, and the impact of proposed regulatory changes.

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• Reviewed policies related to enterprise risk management, information privacy, loans and credit granting, and technology risk. Where appropriate we recommended necessary changes for Board approval. • Reviewed regular reporting and obtained reasonable assurances with respect to Libro’s compliance with legislative and regulatory requirements.

Respectfully submitted by the Risk and Credit Committee,

Alan DeVillaer, Chair Donna Taylor, Member Chris Mendes, Vice Chair Garrett Vanderwyst, Member

Director Recruitment Sub-Committee Reporting to the People and Culture Committee of the Board, the Director Recruitment Sub- Committee is comprised of an equal number of Owner Representatives and Directors, none of which will be candidates in the upcoming elections. The Director Recruitment Sub-Committee is tasked with securing a number of candidates at least equal to the number of positions becoming vacant at the upcoming Annual General Meeting (AGM). The Sub-Committee met four (4) times since the last AGM and conducted one (1) virtual Candidate Information Session. In meeting its goals and objectives, the Sub-Committee focused on the following: • Identifying areas of strength and gaps in the skills and competencies of the Board, as compared to regulatory requirements and Libro leadership attributes. • Made a statement on Diversity, Equity and Inclusion as part of the Director Candidate Information Guide. • Discussed candidate endorsement information provided by the People and Culture Committee. • Met with potential candidates to discuss the role, responsibilities and obligations of a Libro director. • Offered suggestions for continuous improvement of director recruitment including increasing term length of Owner Representatives serving on the Sub-Committee, consideration of Diversity, Equity and Inclusion training for Directors and Owner Representatives, and inclusion of a modified skills assessment to be completed by director candidates as part of the nomination process.

Respectfully submitted by the Director Recruitment Sub-Committee,

Trae Robinson, Chair Jeff McCallum, Member John Fyfe-Millar, Vice Chair Jodi Simpson, Member Elizabeth Baldwin, Member Chris Smith, Member

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Board Elections and Candidate Information

Diversity, Equity and Inclusion Libro is committed to building an environment where everyone feels engaged, welcome and supported regardless of background, religion, race, gender, physical ability or sexual orientation.

Libro seeks individuals to serve on the Board of Directors who may have: • knowledge, living or lived experience with diversity, equity and inclusion matters. • a commitment as a change-agent in diversity, equity and inclusion matters at Libro and in the community. • experience working in teams, community groups, boards or organizations, with experience in diversity, equity & inclusion working groups. • a commitment to continuous learning and mutual inclusivity.

Libro is committed to building an inclusive environment that welcomes and values diversity. Differences, including gender, geography, culture, educational background, skill, and professional experiences are essential to promote best governance.

Director Skills and Competencies The Board of Directors has established a base of desired skills and attributes. The Board uses individual, peer, and team assessments to identify its existing skills but also those skills it wishes to build or strengthen.

Libro seeks to build and maintain a diverse Board comprised of leaders with a variety of skills and attributes. We recognize that not all directors will have the skills and attributes set out below at the beginning of their tenure on the Board. Libro seeks candidates with a commitment and aptitude to acquire the skills and attributes to make them effective leaders in our organization.

• Culture and strategic focus • Credit union operations • Leadership • Board and CEO performance • Relationship builder • Financial literacy • Commitment to Libro and stakeholders • Governance and ethics • Communication • Regulatory environment • Business acumen • Risk management oversight • Audit and compliance • Strategic planning

For the 2021 elections, the Board of Directors is seeking candidates who connect strongly with the values and culture of Libro, who will enhance the diversity of the board, and those with experience in one or more of the following areas: • Digital strategy, • Industry experience in wealth • Audit and compliance, management. • Regulatory environment,

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Board Vacancies Three vacancies will be open at the beginning of the elections at the Annual General Meeting on April 17, 2021. All three positions will be for three-year terms. Terms of office expire for Bryan Aitken, Janet Boot, and Marycatharine Kusch.

Advance Nominations Advance nomination forms, for election to the Libro Board, were received from five candidates prior to the close of business on the last day of the Advance Nomination Period (January 1 – February 28, 2021). After the advance nomination period closed and before this AGM Workbook was published one of the candidates withdrew their nomination. The following individuals are candidates in the 2021 director election – Bryan Aitken, Marycatharine Kusch, Stephanie Soulis, and Ronda Stewart.

Elections by Ballot The Board of Directors has appointed the Corporate Secretary as Elections Chair. Since there are a more candidates nominated in advance than vacancies, she will conduct a vote by ballot at the AGM using the following procedures: • She will ask each candidate to speak to the meeting for a maximum of three (3) minutes, timing the candidate speeches such that the candidate will receive an informal signal that they are approaching the three-minute limit and a more formal indication when and if they have reached the limit. Should public health guidelines allow, the candidates will speak live from the AGM or alternatively the candidates will be pre-recorded using the same technology and space being used for the live portion of the AGM. • Following candidate speeches, she will ask the moderator to open the voting so that Owner Representatives can mark their electronic ballots for three (3) names, no more and no fewer, as per the Credit Unions and Caisses Populaires Act. • When all ballots are marked the Elections Chair will ask the moderator to close the balloting. The Elections Chair will return control of the meeting to the Chair of the Board of Directors who will conduct more of the AGM until the tally is complete. • When the results are available, the Elections Chair will report the names of those elected and the total number of ballots submitted. • If there is a tie between candidates determining the difference between being elected or not elected, she will conduct a run off ballot between only the candidates so affected. Again, the moderator will open and close the balloting at the request of the Elections Chair. The Board Chair will continue with the remainder of the agenda until the results are available. • The Elections Chair will invite candidates elected to offer their remarks and then close the elections. Note: The Chair of the Board of Directors has the prerogative to invite any Directors not returning to the Board to offer their remarks at this time.

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Candidates for the Board of Directors Libro guidelines ensure that candidates have a fair and equal opportunity for exposure to the Owner Representatives to communicate their desire to become a director. The candidates have shared profile information and statements on the following pages.

Mandatory Disclosures by Candidates for Election to the Board of Directors

As Owners, all four candidates (plus related or connected parties) deal with Libro. Their deposit, loan and other service relationships are conducted in the normal course of business subject to the same limits and on the same terms, rates and conditions as are available to Owners generally.

All four candidates have declared that they (and all parties related or connected to them) are not involved in any material contract or proposed material contract with the credit union. None of the candidates provides any professional services to the credit union as defined by the Act (examples: legal or accounting).

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BRYAN AITKEN

Educational / Professional Designations • B.E.Sc. Western University • P. Eng. Professional Engineers Ontario • LORA Libro Owner Representative Accreditation program graduate • ACCUD Accredited Canadian Credit Union Director 2019 • ICD.D Institute of Corporate Directors Accredited Director 2015

Work Experience • Retired Lambton College 2018 • Dean of Technology, Applied Science and Apprenticeship, Lambton College (2 years) • Coordinator, Engineering Technology Programs, Lambton College (14 years) • Professor, Engineering Technology Programs, Lambton College (15 years) • Professional Engineer and Operations, Dow Chemical Canada (6 years)

Board and/or Committee Experience • Libro Credit Union Board of Directors 2014-current • Chair – People and Culture Committee 2020 • Chair – Human Resources Committee 2019 • Chair – Loans Committee 2018 • Vice-Chair of Board 2017/2018 • Chair of Governance Committee 2016/2017 • Libro Financial Group Board of Directors 2012-2013 • Owner Representative – Watford Branch Council 2005-2012

Explain how you will enhance the diversity of the Libro board and describe your experience in the skills and attributes being sought this year. A diverse board requires people from various ages and backgrounds to be involved. I would enhance the board by bringing a background with 16 years of governance experience to the board table. This will help to present a balanced approach including aspects of where we came from to get to this point in our history. The board will continue to work towards

Board Elections 7th Annual General Meeting April 17, 2021 Page 22 AGM Workbook diversity in many areas moving forward.

My experience over the years as chair of various committees as well as sitting on other standing committees has helped me develop broad director skills and knowledge across all key areas of board competencies. The professional training received through ICD and ACCUD has helped to hone these skills. Areas of particular unique strength include technology knowledge with my engineering background, the education sector with a 33-year career in education, and the agricultural sector. In terms of the skills and attributes being sought this year, digital strategy and regulatory environment would rank as strengths.

Community Involvement / Other Interests • Provide guitar and vocals for local elderly care residence • Guest speaker – local area churches • Hobbies include home renovations, mechanical work, music

Candidate Position Statement This term I find my focus changing with respect to the Board. There have been so many positive changes over the past few years resulting in a more diverse and dynamic board and a new outlook to the future of Libro. I am loving the changes and the interactions with this enhanced board, but also believe we need a voice that has experienced the series of combinations and the excellent organic growth we have experienced over the past decade, as we keep our strategy in focus. I have been on the board during these impressive changes providing oversight while continuing to be forward looking.

The training I have received through ICD (University of Toronto) and ACCUD (Dalhousie University) has helped me to develop well rounded board skills across the competencies required. I feel that I offer particular contributions in the areas of digital strategy, regulatory environment, governance, and human resources. The technical areas of the business are always of interest due to my engineering background, but as a former manager (Dean) at Lambton College, I also possess a keen passion for governance, people and culture, and strive to represent Libro owners as best possible.

I am also actively involved in agriculture and I help to provide the board with insights into this sector which is an important part of Libro’s business focus. Since retiring from the education sector, in partnership with two of my sons we have grown a cash crop business to approximately 750 acres currently.

I am very much looking forward to the journey towards Libro 20.0 and would welcome your support to continue to be a part of this journey.

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MARYCATHARINE KUSCH

Educational / Professional Designations • Bachelor of Arts degree from Western University • Bachelor of Commerce degree from the University of Windsor • Chartered Professional Accountant – Chartered Accountant since 1989

Work Experience I received my Chartered Accountant designation in 1989 and have worked in Public Accounting for most of my career. I am the senior partner in a small public accounting firm servicing owner-managed business in southwestern Ontario.

My husband and I own several residential rental properties near the University of Western Ontario.

Board and/or Committee Experience Member of Libro Board of Directors for 16 years, where I participated in the Audit & Finance, People & Culture, and Risk & Credit Committees.

Explain how you will enhance the diversity of the Libro board and describe your experience in the skills and attributes being sought this year. As a small business owner, a Chartered Professional Accountant, and a board member, I possess many of the skills and attributes necessary to be part of a diverse Libro Board. I have strong leadership skills as I lead a team of 15 people that service owner-managed business throughout southwestern Ontario. Other skills and attributes that I possess are • Relationship Builder • Commitment to Libro and Stakeholders • Business Acumen • Audit and Compliance • Board and CEO Performance • Financial Literacy • Risk Management Oversight • Strategic Planning

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Community Involvement / Other Interests I enjoy golfing, knitting, cross-stitch and reading.

Candidate Position Statement It has been a privilege and pleasure to serve on the Board of Directors for the past three years. In that time, I have grown as a leader at Libro. I am the Vice-Chair of the board and the Chair of the Audit and Finance Committee.

I have been an Owner of Libro since 1988 and have valued the relationship that I have with Libro. I am married to my husband Kevin for 35 years. We have four children that live throughout the province and are satisfied Libro Owners.

I am a small business owner, providing public accounting services to owner-managed businesses throughout southwestern Ontario. Through my work as a Chartered Professional Accountant, I help individuals achieve their business goals. I understand the difference when your financial institution is a partner in your financial success rather than just a lender.

COVID-19 continues to challenge small business owners as they adapt to comply with Public Health measures. I am proud of how Libro has been there during this critical time for their Owners and the communities where we live.

I look forward to continuing my work on the Board of Directors to oversee our strategic plan development and set the cultural tone at the top; so, our Owners, our credit union and our communities continue to prosper.

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STEPHANIE SOULIS

Educational / Professional Designations • Bachelor of Arts, Double Major in History & Geography from Wilfrid Laurier University 2003 • Bachelor of Education, Intermediate/Senior Level from Ottawa University 2006

Work Experience • Warranty Sales, prairieFyre Software, Kanata (2005-2007) • Sales & Event Manager, Artbar Creative Dining & Wines, Kitchener (2007-2010) • Program Coordinator, Summer Chef School, Kitchener (2008-2010) • CEO & President Little Mushroom Catering, Food Shoppe, Dining Lounge & Nom Nom Treats Bakery, Cambridge (2010-current)

Board and/or Committee Experience • Kitchener Public Library (2014-present, Vice Chair 2015-2018, Chair 2018-present) • Conestoga College Program Advisory Council for Hospitality & Tourism (Chair 2018- present) • Conestoga College Program Advisory Council for Culinary Management (2018-present) • Waterloo Region Tourism Marketing Corporation Board Member (May 2019-present, Chair of Governance Committee, term ends April 2021) • Centre for Family Business Young Guns Roundtable Facilitator (2019-current) • Libro Beechwood Branch Council (2012-2018, Chair 2012-2015, 2016-2018); Completed the LORA governance training modules • Foodlink Waterloo Region (2014-2017, Chair 2015-2017) • Greater Kitchener Waterloo Chamber of Commerce Board Member (2014-2016) • Waterloo Region Food System Round Table Board Member – Public Health (2015-2017) • Planning Committee Member – Youer Than You Mental Health Awareness Event 2019 • Planning Committee Member – Junior Achievement Theatre Fundraiser 2018 • Waterloo Region Entrepreneur’s Working Group Committee Member 2013-2017 Board Elections 7th Annual General Meeting April 17, 2021 Page 26 AGM Workbook

Explain how you will enhance the diversity of the Libro board and describe your experience in the skills and attributes being sought this year. I am an under 40 female entrepreneur, with over a decade of history with Libro, i ncluding experience as Chair of a branchn cou cil for several years. My personal and business values align very closely with Libro’s and the culture they have been building with staff andr owne s. I am a champion of the Living Wage Movement, a supporter of local small businesses and farmers, and model my own businesses based on s ocially responsible and environmentally conscious values. I am currently taking Little Mushroom Catering through the process of becoming B Corp certified. I am an LGBTQ+ advocate and am a respected voice of change in the food service industry.

In the areas of culture, leadership, relationship building, communication, business acumen, governance, and strategic planning, I feel I have a lot of experience and insight to bring to the table. I am an active member of many associations, including the Chamber of Commerce (for KW, Cambridge, Guelph), the Centre for Family Business, the CFIB, and the Company of Women. I am keen on attending many learning and educational events through these associations, including around the topics of Human Resources, company culture, generation gaps, communication, leadership, and the future of business. I’m also engaged with our industry associations and have nco nections across eth pr ovince through the Ontario Wedding Association and Restaurants Canada. As the primary stakeholr de in Little Mushroom, I make all decisions regarding risk management and finances, while keeping the well-being of my employees and the sustainability of the business as key focus.

As Chair of several different boards over the years, I have experience participating on the finance & audit committee of .ea I havch e also been part of major strategic initiatives of many of the Boards on which I have served and have taken my key managers through the process as well. With the help of my book-keeper and accountant, I manag e the finances at Little Mushroom. I have navigated my business through acquisitions, expansions, and this past year, through a major downturn due to changes in government regulations. I have successfully navigated through CRA audits, Ministry of Labour check-ins, and changing public health requirements.

I guide our digital strategy at work, which has been instrumental in keeping the business both open and relevant during Covid-related shutdowns and the many r egulation changes regarding gatherings over the past year. I have nspo atke se veral different marketing and business conferences across Ontario about the importance of digital strategy, authenticity and engagement since opening in 2010.

Community Involvement / Other Interests I am a corporate sponsor and member for over five years of our local branch of 100 Women Who Care (a fundraising club for local charities). I volunteer as a mentor with Junior Achievement, the Business Education Partnership, Waterloo Region Small Business Centre, Board Elections 7th Annual General Meeting April 17, 2021 Page 27 AGM Workbook and the YWCA. I am a public speaker, often being called on to speak about company culture and entrepreneurship. My most recent “in-person” speaking engagement was at the Restaurants Canada Show in March 2020 where I focused on the Fair Kitchens Movement.

In 2016 I was the inaugural recipient of the Libro Growing Prosperity Award for Owner Representatives. In 2015, I was awarded the Young Entrepreneur Award in Cambridge, and was inducted into the Waterloo Region Entrepreneur Hall of Fame as the first ever Junior Achievement Alumni of Distinction. In 2019, Little Mushroom won the Chamber of Commerce Business Excellence Award for best Small Business both in Cambridge (1-49 Employees) and in Kitchener-Waterloo (11-50 Employees). Little Mushroom was also crowned the #1 Catering Company by Food Awards Ontario in 2019, for our focus on social responsibility and environmental sustainability.

I am a mother of three, an oenophile, a world traveler, and a karaoke enthusiast. I love to network and to listen to other’s stories. I love board games, Jeopardy, reading, and discovering new places and new foods.

Candidate Position Statement I kindly ask for your support in being elected to the Libro Board, as my personal values, experience, and talents would complement the existing board well. For those of you who already know me, you know that I love connecting people, networking, and building relationships.

I have strong interpersonal, leadership and management skills. I am an active listener, able to see the big picture and help identify potential opportunities or threats when strategizing. I am solution and goal-oriented, ambitious and committed.

I work well with teams and excel at identifying other’s strengths or motivations. I am not shy about sharing my opinions, ideas and perspective while being respectful of others. I have experience regarding diversity and inclusion and have both completed & led training programs geared to better understand existing barriers and opening doors.

I am very familiar with Libro’s governance model, having completed LORA training and was an Owner representative through the re-modelling of branch councils to regional councils. I understand deeply the importance of public perception, digital strategy, and regulatory compliance. I have experience recruiting, interviewing, hiring, and assessing C-level executives. As mentioned previously, I have been on the finance and audit committee for several non-profits, including the Kitchener Public Library who, as a municipal service, is responsible and accountable to city taxpayers.

I believe my experience as a business owner, an active and engaged citizen, and an epic human, make me a qualified candidate for the Libro board. Did I mention I’m humble too?

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RONDA STEWART

Educational / Professional Designations • Certified Economic Developer • Completed 2/3 of the Credit Union Director Achievement Program (Level B) • PR & Communications Certificate from Western

Work Experience I’m the Economic Development Director leading Rural Oxford Economic Development Corporation. Over the past 10 years, I’ve managed and collaborated on a number of economic development initiatives, primarily supporting people, businesses and communities across Elgin, Middlesex and Oxford counties.

Board and/or Committee Experience I proudly served: • My first term as a Libro Director from April 2017 to April 2020. • On three former committees: HR, Governance (as Vice-Chair), and Pension (as Chair). • On two sub-committees: Director Recruitment, Governance Working Group (as Vice- Chair) through the transition from a local to regional governance model. • As Director Liaison for St. Thomas, London South, Sarnia and later London-Elgin- Oxford South.

Explain how you will enhance the diversity of the Libro board and describe your experience in the skills and attributes being sought this year. I enhance the diversity of the board as an economic development professional with a grassroots entrepreneurial spirit. I’m a strategic leader, genuine relationship builder and thoughtful connector with experience and understanding of what is required of a Libro Director.

I have strengths in the following skills and attribute areas: • Culture and Strategic Focus,

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• Leadership, • Relationship Builder, • Commitment to Libro and Stakeholders, • Communication, • Business Acumen, • Credit Union Operations, • Board and CEO Performance, • Financial Literacy, • Regulatory Environment, • Governance and Ethics, • Strategic Planning.

I have some knowledge and am keen to develop in the following skills and attributes areas: Audit and Compliance, Risk Management Oversight, Digital Strategy.

My lived experiences have taught me to overcome barriers and have awarded me innumerous opportunities to help others face the barriers in front of them. With kindness, compassion and empathy for others, I’ve advocated for and helped those who struggle to navigate the “government and/or regulatory systems” on their own. I meet people where they are at and offer guidance to help them achieve a measure of success that is meaningful to them.

Community Involvement / Other Interests My community involvement includes providing business advice and mentorship to startup and existing businesses in the region. I am also often called upon in my network to help people facing barriers with resume building and job searching. I aim to be flexible and open to lend a hand when called on to help someone navigate through a difficult situation.

Candidate Position Statement In April 2017, I was acclaimed to the Board of Directors for my first term. I learned a great deal and proudly served our credit union. I arrived at meetings prepared for discussion; asked thoughtful questions; researched matters and new concepts; raised my hand for opportunities to engage with Owner Representatives; attended training sessions to strengthen my overall knowledge of the industry and developed new leadership skills with the goal of supporting Libro for years to come.

In April 2020, during Libro’s first digital AGM amidst a global pandemic, I was honoured to put my name forward to continue in this role I had come to love. However, I was not re-elected at that time. The following week I received a request to serve as an Owner Representative with the London-Elgin-Oxford South Council and without hesitation, I gladly joined this wonderful community. This past year, I’ve dedicated most of my time to helping hundreds of people and businesses affected by this pandemic.

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At the April 2021 AGM, I humbly request your vote to re-elect me to the Libro Board of Directors. I am honoured to put my name forward and ready to come back and serve.

My talents and values align strongly and compliment Libro’s Purpose before Profit cooperative model. I enhance Board diversity as an economic development professional with grassroots entrepreneurial spirit. I’m an experienced strategic leader, a genuine relationship builder and thoughtful connector who understands what is required of a Libro Director.

Thank you.

Special Resolution re: Bylaws 7th Annual General Meeting April 17, 2021 Page 31 AGM Workbook

Special Resolution to Amend the Bylaws of Libro Credit Union

The Libro Board of Directors adopted an amendment to the Bylaws of Libro Credit Union Limited at their meeting on March 2, 2021. The amended Bylaw is presented as a Special Resolution for confirmation by the Libro Owner Representatives voting at the Annual General Meeting (AGM) on April 17, 2021. This Special Resolution requires a two-thirds majority to pass. The Board is requesting and recommending adoption of the Special Resolution.

Summary of Changes To become a Certified B Corporation in Canada, credit unions must add an amendment to their by- laws and seek approval for the amendment from their member-Owners. Credit unions have until one year after certification to complete this process. Libro is seeking renewal of its B Corp certification in early 2021 which requires that the Board present a Bylaw amendment to the Owner Representatives voting at the Annual General Meeting on April 17, 2021. The paragraphs added to the Bylaws include the wording approved by B Lab in consultation with the Canadian Credit Union Association, on behalf of Canadian certified B Corp credit unions. The added paragraphs are placed in Article II of the Bylaws Business of the Credit Union. These paragraphs become subsection 2.01 with the remaining subsections renumbered as follows: 2.02 Corporate Seal, 2.03 Financial Year, 2.04 Execution of Instruments, 2.05 Banking Arrangements, 2.06 Borrowing. We have included only Article II of the Bylaws in this document as there are no other amendments being proposed at this time, and all other sections of Bylaw that came into effect on January 1, 2019 remain in full force and effect. Owner Representatives may review the entire Bylaw document on Libro Spark.

BE IT ENACTED AND IT IS HEREBY ENACTED as a by-law of Libro Credit Union Limited (hereinafter called the Credit Union) as follows:

ARTICLE II: BUSINESS OF THE CREDIT UNION

Purpose of the Credit Union

2.01 The purpose of the Credit Union includes, but is not in any way limited to or restricted by, the creation of a positive impact on society and the environment, taken as a whole, from the business and operations of the Credit Union, which impact is material in view of the size and nature of the Credit Union’s business. The directors shall, in accordance with their applicable statutory and regulatory duties and requirements and in alignment with the co-operative principles of the Credit Union and its purpose, act with a view to the best interests of the Credit Union. In considering the best interests of the Credit Union, the directors shall consider the interests of the Credit Union’s Owners, shareholders, employees, suppliers and creditors, as well as the government, the

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natural environment, and the community and society in which the Credit Union operates (collectively, the “Stakeholders”) and the short-term and long-term interests of the Credit Union, to inform their decisions. In discharging their duty to act with a view to the best interests of the Credit Union, the directors shall consider the interests of all of the Credit Union’s Stakeholders and shall not be required to consider the interests of any particular Stakeholder as determinative, in exercising their judgment.

Corporate Seal

2.02 The Credit Union may adopt a corporate seal, and may change that seal, by resolution of the Board.

Financial Year

2.03 The financial year of the Credit Union shall end on December 31.

Execution of Instruments

2.04 (a) Documents requiring the signature of the Credit Union may be signed on behalf of the Credit Union by any two (2) officers or Directors, and instruments in writing so signed shall be binding upon the Credit Union without any further authorization or formality. Notwithstanding the foregoing, the Board shall have the power, from time to time, by resolution to appoint any Director or Directors, officer or officers, or any individual or individuals either to sign Documents generally, or to sign specific Documents on behalf of the Credit Union.

(b) The seal of the Credit Union may, when required, be affixed to Documents signed as provided in subsection 2.04(a).

(c) The signature of any Signing Officer may, if specifically authorized by resolution of the Board, be printed, engraved, lithographed or otherwise reproduced upon Documents of the Credit Union, executed or issued by or on behalf of the Credit Union, and all Documents of the Credit Union upon which the signature of any such Signing Officer is so reproduced shall be deemed to have been manually signed by such individuals and shall be valid to all intents and purposes as if it had been signed manually, notwithstanding that such Signing Officer may have ceased to hold office at the date of the delivery or issue of such Documents of the Credit Union.

Banking Arrangements

2.05 Subject to section 2.06 of this By-law and the Act, the banking business of the Credit Union, or any part thereof, including, without limitation, the borrowing of money and, subject to the

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Act, the giving of security therefore, shall be transacted with such financial institutions, bodies corporate or other organizations as may, from time to time, be designated by or under the authority of the Board. Such banking business, or any part thereof, shall be transacted under such agreements, instructions and delegations of power as the Board may from time to time by resolution prescribe or authorize.

Borrowing

2.06 The Credit Union shall be authorized to borrow money on the credit of the Credit Union at such rates of interest and on such conditions as the Board may determine, provided that the Credit Union shall not borrow in the aggregate an amount exceeding twenty-five (25) percent of its regulatory capital and deposits.

Special Resolution re: Remuneration 7th Annual General Meeting April 17, 2021 Page 34 AGM Workbook

Special Resolution to Amend Director Remuneration Policy

The Libro Board of Directors adopted a revised Board Policy E.5 Director Remuneration on December 15, 2020. This policy is presented for confirmation by Special Resolution of the Libro Owner Representatives voting at the Annual General Meeting (AGM) on April 17, 2021. The Board is requesting and recommending adoption of the Special Resolution.

Director Remuneration Summary of Changes • Align per diems to directors for completion of Owner Representative training program modules with those per diems set in Owner Representative Remuneration policy adopted April 4, 2020. • Increase Board Chair stipend to $31,800 from $30,000. • Increase Vice Chair stipend to $19,000 from $18,000. • Increase Director stipend to $15,000 from $13,000. • Increase per diem for Owner Representatives and Directors serving on a board sub-committee to $300 from $100. • Align extra annual stipend for board sub-committee chairs with those of board appointed task forces/panels/ad hoc committees at $1,200.

SPECIAL RESOLUTION

BE IT RESOLVED: The Libro Owner Representatives hereby confirm the Board of Directors’ amended Board Policy E.5 Director Remuneration as adopted by the Board on December 15, 2020 as presented below.

Policy Reference: E.5 Director Remuneration Date of Last Committee Review: September 23, 2020 Last Policy Amendment Approval: December 15, 2020 Date of Last Board Review: December 15, 2020 Date Confirmed by Owner To be presented April 17, 2021 Representatives:

WHY • Place a value on the important work done by Directors • Ensure Directors are equitably compensated, in respects to the size and scope of Libro

HOW • Provide schedule and table for Director remuneration • Review Director remuneration through ongoing evaluations and consultations

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WHAT • Principles based approach to remuneration • Simple and clear process for understanding remuneration

FORMAL POLICY STATEMENTS

DUTIES AND RESPONSIBILITIES

1. Director Remuneration a) Remuneration includes stipends and per diems b) Director remuneration will be paid as outlined below:

ANNUAL STIPEND Position Amount Director $15,000 Board Chair $31,800 Board Vice Chair $19,100 Board Committee Chair $3,000 in addition to Stipends above Task Force/Panel/Ad Hoc or Sub-Committee $1200 in addition to Stipends above Chair *to be paid if Chair is a Director or Owner Representative

c) Director per diem will be paid per meeting attended, as outline below:

PER DIEM Type of Meeting Amount Per Diem Board Meeting $400 Board Standing Committee Meeting $400 Board Sub-Committee Meeting $300 *to be paid to Owner Representatives and Directors Full Day Training Session or Conference $500 Half Day Training Session or Conference $250 Annual or Special Regional Owner Meeting $100 as Liaison Director Regional Council meetings as Liaison $100 Director Task Force/Panel/Ad Hoc Committee $100 Meetings Board Strategic Planning Session $400

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d) Libro Owner Representative Training Per Diem will be paid as follows:

Pre-recorded or web-based Owner $50 Representative Training Program Course In-person Owner Representative Training $100 Program Course I. Only one payment per course will be made.

e) Per diems will not be paid for the following: i. Annual General Meeting ii. Special Meetings iii. Fall Forum iv. Social Events v. External Meetings f) Per diems are tracked by official recorded minutes g) Stipends are paid monthly (pro-rated) and per diem fees are paid quarterly (Jan, Apr, July, Oct)

2. Director Development Funding a) Development, approval and funding processes are located within policy E.2 Director Development b) Libro reimburses the cost of Director development as per policy E.2

SPECIFIC AUTHORITIES AND DELEGATIONS • Changes to this policy will only become effective upon confirmation by a special resolution adopted by Owner Representatives with a two thirds majority vote • The People and Culture Committee is responsible for oversight of this policy • Audit and Finance Committee reviews a full summary report on Director remuneration paid

WORK PLANS AND REPORTING • The annual budget for Board operations will include an amount for Director remuneration

RELATED BOARD POLICIES • B.1 Board of Directors Terms of Reference • B.2 Individual Director Terms of Reference • E.2 Director Development • E.4 Director Business Code of Conduct • F.2 Owner Representative Training

Management’s Responsibility 7th Annual General Meeting for Financial Reporting April 17, 2021 Page 37 AGM Workbook

Management’s Responsibility for Financial Reporting The accompanying financial statements of Libro Credit Union Limited and all the information in this annual report are the responsibility of Management and have been approved by the Board of Directors (the “Board”).

The financial statements have been prepared by Management in accordance with International Financial Reporting Standards. When alternative accounting methods exist, Management has chosen those it deems most appropriate in the circumstances. Financial statements are not precise since they include certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects. Management has prepared the financial information presented elsewhere in the annual report and has ensured that it is consistent with the financial information presented in the financial statements.

Libro maintains systems of internal accounting and administrative controls of high quality, consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is relevant, reliable and accurate and that the credit union’s assets are appropriately accounted for and adequately safeguarded.

The Board is responsible for ensuring that Management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit and Finance Committee. The Audit and Finance Committee is appointed by the Board. The Audit and Finance Committee meets periodically with Management, and the external auditor, to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its responsibilities, and to review the annual report, the financial statements and the external auditor’s report. The Audit and Finance Committee reports its findings to the Board for consideration when approving the financial statements for issuance to the owners.

The financial statements have been audited by Ernst & Young LLP, the external auditor, in accordance with Canadian generally accepted auditing standards on behalf of the owners. Ernst & Young LLP has full and free access to the Audit and Finance Committee.

Stephen Bolton Kathleen Grogan President and Executive Vice President Finance and Chief Executive Officer Chief Financial Officer

March 2, 2021

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Independent Auditor’s Report

To the Owners of Libro Credit Union Limited

Opinion

We have audited the financial statements of Libro Credit Union Limited, (the “Credit Union”), which comprise the balance sheet as at December 31, 2020, and the statement of income, statement of comprehensive income, statement of owners’ equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Credit Union as at December 31, 2020, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis of opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Credit Union in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information included in the Credit Union’s 2020 Annual Report

Management is responsible for the other information. The other information comprises the information, other than the financial statements and our auditor’s report thereon, in the Annual Report and Management Discussion and Analysis.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above, and in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the Annual Report and Management Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Credit Union’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

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Those charged with governance are responsible for overseeing the Credit Union’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

[a] Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

[b] Obtain an understanding of internal control relevant to the audit 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 Credit Union’s internal control.

[c] Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

[d] Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Credit Union’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Credit Union to cease to continue as a going concern.

[e] Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

London, Canada March 2, 2021

2020 Financial Statements 7th Annual General Meeting April 17, 2021 Page 41 AGM Workbook

Balance Sheets As at December 31 [thousands of dollars] Note 2020 2019 Assets Cash and cash equivalents 10 21,209 37,659 Accrued interest receivable 9,673 8,507 Investments 4 963,818 371,748 Other assets 9 31,145 32,605 Loans to owners 5, 6 3,862,404 3,715,848 Derivative financial instruments 15 649 2,707 Property and equipment 7 58,299 57,398 Intangible assets 8 1,592 4,124 Deferred tax assets 19 6,725 4,636 Total assets 4,955,514 4,235,232 Liabilities and owners' equity Owners' deposits 16 4,410,760 3,722,786 Accrued interest payable 19,412 20,792 Accrued and other liabilities 22 17,734 16,735 Income taxes payable 19 945 79 Pension and other employee obligations 13 25,730 17,531 Derivative financial instruments 15 4,367 922 Securitization liabilities 20[b] 140,617 127,177 4,619,565 3,906,022 Liabilities qualifying as regulatory capital 12 Owners' capital accounts 11 176,576 164,453 Stock dividends payable 11 7,712 14,690 184,288 179,143 Total liabilities 4,803,853 4,085,165 Contributed surplus 60,998 60,998 Retained earnings 100,856 93,568 Accumulated other comprehensive loss (10,193) (4,499) 151,661 150,067 Total liabilities and owners' equity 4,955,514 4,235,232 See accompanying notes

On behalf of the Board of Directors:

Ms. J. Davison, Chair of the Board Ms. M. Kusch, Vice Chair of the Board

2020 Financial Statements 7th Annual General Meeting April 17, 2021 Page 42 AGM Workbook

Statements of Income Years ended December 31 [thousands of dollars] Note 2020 2019 Interest income Interest on loans 17 146,879 148,030 Investment income 6,836 7,092 153,715 155,122 Interest expense Interest on owners' deposits 17 49,484 54,521 Dividends on Class I Investment shares 11 5,046 4,854 Interest on borrowings 4,320 3,123 58,850 62,498 Net interest income 94,865 92,624 Non-interest income 17 14,194 20,125 Total revenue 109,059 112,749 Provision for (recovery of) credit losses 6 4,146 (2,087) Non-interest expenses Salaries and employee benefits 58,969 55,691 General and administrative 9,690 10,293 Marketing and business development 3,744 3,956 Insurance 4,178 3,396 Systems and technology 5,661 5,001 Occupancy 7,934 7,378 Corporate and branch governance 12 753 980 Amortization of core deposit intangible 8 2,143 2,143 93,072 88,838 Income before the undernoted 11,841 25,998 Dividends and profit sharing distributions 11 2,634 9,672 Income before income taxes 9,207 16,326 Provision for (recovery of) income taxes Current 19 2,741 3,524 Deferred 19 (822) (370) 1,919 3,154 Net income for the year 7,288 13,172

See accompanying notes

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Statements of Comprehensive Income Years ended December 31 [thousands of dollars] 2020 2019 Net income for the year 7,288 13,172 Other comprehensive loss Items that will not be reclassified to income: Actuarial loss in employee defined benefit plans (6,961) (5,961) Related income taxes 1,267 1,102 (5,694) (4,859) Items that may be subsequently reclassified to income: Cash flow hedges - effective portion of changes in fair value - 81 Related income taxes - (12) Reclassification to income of gains on cash flow hedges - (108) - (39) Other comprehensive loss for the year, net of income taxes (5,694) (4,898) Total comprehensive income for the year, net of income taxes 1,594 8,274

See accompanying notes

Statements of Owners' Equity Years ended December 31

[thousands of dollars] 2020 2019 Contributed surplus 60,998 60,998 Retained earnings Balance as at beginning of year 93,568 80,396 Net income for the year 7,288 13,172 Balance as at end of year 100,856 93,568 Accumulated other comprehensive income (loss), net of income taxes Balance as at beginning of year (4,499) 399 Other comprehensive loss for the year (5,694) (4,898) Balance as at end of year (10,193) (4,499) Total owners' equity as at end of year 151,661 150,067

See accompanying notes

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Statements of Cash Flows Years ended December 31

[thousands of dollars] Note 2020 2019 Cash provided by (used in) Operating activities Net income for the year 7,288 13,172 Add (deduct) non-cash items: Depreciation and amortization 9,310 9,351 Amortization of discount/premium on loans and deposits - 114 Provision for (recovery of) credit losses 4,146 (2,087) Loss on disposal - 71 Deferred income taxes (2,089) (1,460) Unrealized loss (gain) on interest rate swap agreements 5,503 (1,027) Changes in operating assets and liabilities: Increase (decrease) in stock dividends payable (6,978) 3,055 Increase in accrued interest receivable (1,166) (639) Increase (decrease) in income taxes payable 866 (1,579) Decrease (increase) in other assets 1,460 (2,202) Increase in loans to owners (150,702) (310,859) Increase in owners' deposits 687,974 312,093 Increase (decrease) in accrued interest payable (1,380) 4,128 Increase in accrued and other liabilities 999 1,711 Increase in pension and other employee obligations 2,505 2,216 Proceeds from securitization of loans 20 60,135 59,623 Repayments of securitization liabilities (46,695) (10,176) Cash provided by operating activities 571,176 75,505 Financing activities Increase in owners' capital accounts 12,123 9,258 Decrease in loans payable - (18,447) Cash provided by (used in) financing activities 12,123 (9,189) Investing activities Increase in investments (592,070) (40,501) Purchase of property and equipment (6,600) (6,721) Purchase of intangible assets (1,079) (1,537) Cash used in investing activities (599,749) (48,759) Net increase (decrease) in cash during the year (16,450) 17,557 Cash and cash equivalents as at beginning of year 37,659 20,102 Cash and cash equivalents as at end of year 21,209 37,659

See accompanying notes

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 45 AGM Workbook

1) REPORTING ENTITY

Libro Credit Union Limited (“Libro” or the “credit union”) is incorporated under the Credit Unions and Caisses Populaires Act (Ontario) (the “Act”) in Canada, is a member of Central 1 Credit Union (“Central 1”) and the activities of the credit union are regulated by the Financial Services Regulatory Authority (“FSRA”). The corporate office is located at 217 York Street in London, Ontario.

The credit union is primarily involved in providing a full range of retail, commercial and agricultural financial services to its Member/Owners in southwestern Ontario. The credit union has 36 locations across southwestern Ontario.

2) BASIS OF PREPARATION

[a] Statement of compliance Libro follows accounting policies appropriate to its activities and governing legislation, which conform, in all material respects, to International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The financial statements were authorized for issue by the Board of Directors on March 2, 2021. The Board of Directors has the power to amend the financial statements after issuance only in the case of discovery of an error.

[b] Basis of measurement The financial statements have been prepared on the historical cost basis except for the following:

(i) Derivative financial instruments, fair value through profit (“FVPL”) or loss financial assets and fair value through other comprehensive income (“FVOCI”) financial assets are measured at fair value; and (ii) The liability for defined benefit obligations is recognized as the present value of the defined benefit obligation less the net total of the plan assets.

[c] Currency The financial statements are presented in Canadian dollars, which is the credit union’s functional currency. All values are rounded to the nearest thousand dollars, except where otherwise indicated.

3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted by the credit union are summarized below.

[a] Use of estimates and judgments The preparation of these financial statements in conformity with IFRS requires management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting years. Actual results may differ from those estimates. Estimates and judgments are continually evaluated and are made based on historical experience and other factors, including expectations of future events that are reasonable under the circumstances. The credit union’s results and operations have been and will continue to be impacted by the COVID-19 pandemic and related uncertain macroeconomic environment. The breadth and depth of these events and how long they will

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continue have introduced additional uncertainty around estimates, including a higher degree of uncertainty in determining reasonable and supportable forward-looking information and assessing significant increase in credit risk used in measuring expected credit loss (“ECL”).

The most significant uses of estimates and judgments include the following:

(i) Fair value of financial instruments Where the fair value of financial assets and liabilities cannot be derived from active markets, Libro uses valuation techniques that include inputs derived from either observable market data or management’s judgment. Note 18 provides detailed information about the determination of the fair value of financial instruments.

(ii) Impairment losses on financial assets The measurement of impairment losses under IFRS 9, Financial Instruments (“IFRS 9”) requires judgment, in particular, the estimation of the amount and timing of future cash flows and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. These estimates are driven by a number of factors, changes in which can result in different levels of allowances. The credit union’s ECL allowance calculations are outputs of complex models with a number of underlying assumptions. Note 3[e] and note 6 further describe elements of the ECL models that require judgments and estimates.

(iii) Retirement benefit obligations Libro estimates the present value of employee retirement benefit obligations that depend on a number of factors that are determined on an actuarial basis using a number of assumptions. The actuarial valuation involves assumptions including discount rates, future salary increases, mortality rates, and other cost increases. Note 13 provides detailed information about the employee retirement benefit obligations.

[b] Foreign currency translation Assets and liabilities denominated in foreign currencies, primarily US dollars, are translated into Canadian dollars at rates prevailing at the year-end date. Income and expenses are translated at the exchange rates in effect on the date of the transactions. Exchange gains and losses arising on the translation of monetary items are included in net income for the year.

[c] Interest income and expense Interest income and expense is recognized in the Statements of Income for all interest-bearing financial instruments using the effective interest rate (“EIR”) method.

The EIR method is a method of calculating the amortized cost of a financial asset or liability and allocating the interest income or expense over the relevant period. The EIR is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial instrument. The application of this method has the effect of recognizing income and expense on the instrument evenly in proportion to the amount outstanding over the period to maturity or repayment.

In calculating the effective interest, the credit union estimates cash flows (using projections based on its experience of owners’ behaviour) considering all contractual terms of the financial instruments but excluding future credit losses. Fees, including those for early redemption, are included in the calculation to the extent that they can be measured and are considered to be an integral part of the EIR. Where it is not

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possible or practical to otherwise estimate reliably the cash flows or the expected life of a financial instrument, effective interest is calculated using the payments or receipts specified in the contract, and the full contractual term.

[d] Fees Unless included in the effective interest calculation, fees are recognized on an accrual basis as the service is provided and reported on the Statements of Income as non-interest income.

[e] Financial assets and financial liabilities

(i) Classification

Financial assets All financial instruments are initially recorded at fair value and subsequently classified as measured at amortized cost, FVOCI or FVTPL. A financial asset is measured at amortized cost if it meets the following conditions and is not designated as FVTPL: • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL: • The asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Equity instruments are measured at FVTPL unless an election is made to designate them at FVOCI upon purchase. All other financial assets are classified as measured at FVTPL.

The details of these conditions are outlined below.

Business model assessment The credit union assesses the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: • How the performance of the business model and the financial assets held within that business model are evaluated and reported to the entity's key management personnel; • The risks that affect the business model and the way those risks are managed; • How managers of the business are compensated; and • The expected frequency, value and timing of sales.

Contractual cash flow characteristics The credit union assesses the contractual terms of financial assets to identify whether the contractual cash flows are solely principal and interest. Management assesses whether the terms indicate a basic lending arrangement, where the most significant elements of interest are typically the consideration for the time value of money and credit risk. If contractual terms introduce an exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, the financial asset is measured at FVTPL.

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Financial liabilities The credit union classifies its financial liabilities as measured at amortized cost or as at FVTPL. Amortized cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the EIR.

Financial assets and liabilities at FVTPL Financial assets and financial liabilities measured at FVTPL are those that are designated by management upon initial recognition, assets part of a portfolio managed on a fair value basis and assets whose cash flows do not represent payments that are solely payments of principal and interest. Financial assets and financial liabilities at FVTPL are recorded in the Balance Sheets at fair value. Changes in fair value are recorded in profit or loss. Interest earned or incurred on instruments designated at FVTPL is accrued in interest income or interest expense, respectively, using the EIR. Dividend income from equity instruments measured at FVTPL is recorded in profit or loss as other operating income when the right to the payment has been established.

(ii) Derecognition of financial assets

Derecognition due to substantial modification of terms and conditions The credit union derecognizes a financial asset, such as a loan to an owner, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognized as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognized loans are classified as Stage 1 for ECL measurement purposes. If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the credit union records a modification gain or loss, to the extent that an impairment loss has not already been recorded. The modification of the contractual cash flows for accounts requesting short term payment relief during the COVID-19 pandemic were not considered substantial and did not result in derecognition of these loans or any modification gains or losses.

Derecognition other than for substantial modification A financial asset is derecognized when the rights to receive cash flows from the financial asset have expired. The credit union also derecognizes the financial asset if it has both transferred the financial asset and the transfer qualifies for derecognition. The credit union has transferred the financial asset if the credit union has transferred its contractual rights to receive cash flows from the financial asset or it retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement.

When the credit union has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognized only to the extent of the credit union’s continuing involvement, in which case, the credit union also recognizes an associated liability.

(iii) Impairment on financial assets The credit union recognizes an ECL allowance on all financial instruments not recorded at FVTPL, which includes loans to owners, investments and certain loan commitments. Equity instruments are not subject to impairment under IFRS 9. The credit union measures ECL at an amount equal to lifetime ECL or 12-month ECL. The portion of ECL that results from the default events on a financial

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 49 AGM Workbook

instrument that are possible within the 12 months after the reporting date are referred to as the 12- month ECL. The impairment model measures ECL using a three-stage approach as described below: • Stage 1: When a financial asset has not shown a significant increase in credit risk since origination, the credit union records a 12-month ECL. • Stage 2: When a financial asset has shown a significant increase in credit risk since origination, the credit union records a lifetime ECL. • Stage 3: When a financial asset is credit-impaired, the credit union records a lifetime ECL or the asset is written off.

The interest income is calculated on the gross carrying amount for financial assets in Stages 1 and 2 and on the gross carrying amount net of impairment allowance for financial assets in Stage 3.

Significant increase in credit risk The assessment of significant increase in credit risk considers information about past events and current conditions as well as reasonable and supportable forecasts of future events and economic conditions. The credit union has established thresholds for significant increases in credit risk based on both a risk rating and change in probability of default relative to its initial recognition. In addition, instruments that are 30 days past due are also considered to have experienced a significant increase in credit risk.

The measurement of ECL The credit union measures ECL based on three probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

The ECL is based primarily on the product of the following variables: • The Probability of Default (“PD”) is an estimate of the likelihood of default over a given time horizon. The PD for each instrument is modelled based on historical data and is estimated based on current market conditions and reasonable and supportable information about future economic conditions. • The Loss Given Default (“LGD”) is an estimate of the amount that may not be recovered in the event of default. LGD takes into consideration the amount and quality of any collateral held as well as reasonable and supportable information about future economic conditions. • The Exposure at Default (“EAD”) is an estimate of the outstanding amount of credit at a future default date.

Expected life When measuring ECL, the credit union considers the maximum contractual period over which it is exposed to credit risk. For facilities without a maximum contractual period, the credit union uses the period that the entity is expected to be exposed to credit risk and the expected losses are not mitigated by credit risk management actions.

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Definition of default The credit union considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) in all cases when the borrower becomes 90 days past due on its contractual payments. The credit union also considers a variety of qualitative characteristics that may indicate an unlikeliness to pay, in which case the credit union may determine a loan defaulted before contractually past due.

Forward-looking information The credit union relies on a broad range of forward-looking information as economic inputs, such as unemployment rates, Central Bank base rates, and house price indices. The estimation and application of forward-looking information requires significant judgment.

Purchased or originated credit impaired financial assets (“POCI”) POCI financial assets are initially recognized at fair value with no initial ECL allowance. Changes in lifetime ECL since initial recognition are recorded in the allowance for credit losses.

Write-offs Financial assets are written off either partially or in their entirety only when the credit union has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to loan provision expense.

[f] Derivatives and hedge accounting Derivative financial instruments are contracts that require or provide the opportunity to exchange cash flows or payments determined by applying certain rates, indices or changes therein to notional contract amounts. Libro uses derivative financial instruments, primarily interest rate swaps, in order to manage interest rate risk. Such derivative financial instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

For the purpose of hedge accounting, hedges are classified as: • Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment; and • Cash flow hedges when hedging the exposure to variability of cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.

At the inception of a hedge relationship, Libro formally designates and documents the hedge relationship to which it wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how Libro will assess whether the hedging relationship meets the hedge effectiveness requirements.

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Hedges that meet all of the qualifying criteria for hedge accounting are accounted for, as described below:

Fair value hedges The changes in fair value of a hedging instrument are recognized in the Statements of Income. The change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in the Statements of Income. For fair value hedges relating to items carried at amortized cost, any adjustments to carrying value is amortized through profit or loss over the remaining term of the hedge using the EIR method. The EIR amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged. If the hedge is re-recognized, the unamortized fair value is recognized immediately in profit or loss.

Cash flow hedges Applying cash flow hedge accounting enables the credit union to reduce the cash flow fluctuations arising from interest rate risk on loans. The effective portion of the gain or loss on the hedging instrument is recognized in other comprehensive income (loss)(“OCI”), while any ineffective portion is recognized immediately in the Statements of Income as investment income. The amounts and timing of future cash flows are projected for each portfolio of financial assets and liabilities on the basis of their contractual terms and other relevant factors, including estimates of prepayments and defaults. The aggregate principal balances and interest cash flows across all portfolios over time form the basis for identifying the effective portion of gains and losses on the derivatives designated as cash flow hedges.

If a cash flow hedge is discontinued, the amount that has been accumulated in OCI must remain in accumulated OCI if the hedged future cash flows are still expected to occur. Otherwise, the amount will be immediately reclassified to profit or loss as a reclassification adjustment. After discontinuation, once the hedged cash flow occurs, any amount remaining in accumulated OCI must be accounted for depending on the nature of the underlying transaction as described above.

Certain derivatives embedded in other financial instruments, such as the embedded option in an index- linked term deposit, are treated as separate derivatives when they can be separated from the host contract. These embedded derivatives are separately accounted for at fair value as derivative assets and liabilities with changes in fair market value recognized in the Statements of Income.

[g] Cash and cash equivalents Cash and cash equivalents include cash on hand, current accounts, and cheques and other items in transit. Given their short-term nature, the carrying value of cash and cash equivalents equals fair value.

[h] Property and equipment Property and equipment are carried at cost less accumulated depreciation. Assets are generally depreciated on the following basis:

Buildings 40 to 50 years straight-line Building components 15 to 30 years straight-line Leasehold improvements 5 to 20 years straight-line Furniture and equipment 5 to 10 years straight-line Electronic equipment 3 to 5 years straight-line Computer equipment 2 to 7 years straight-line

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Depreciation in the first year is prorated based on the number of months the asset is in service. Depreciation methods, useful lives and residual value are reviewed annually and adjusted if necessary.

Impairment of non-financial assets Non-financial assets are subject to an impairment test whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly.

Impairment charges are included in the Statements of Income, except to the extent they reverse gains previously recognized in OCI.

[i] Intangible assets Intangible assets are carried at cost less accumulated amortization. Amortization in the first year is prorated based on the number of months the asset is in service. Intangible assets are amortized over their expected lives on the following basis:

Computer software 1 to 3 years straight-line Banking system software 5 to 10 years straight-line Core deposit intangibles 7 years straight-line

The core deposit intangibles were acquired through business combinations. They represent the fair market value of the cost savings inherent in acquiring a portfolio of demand deposits with a lower cost of funding versus attracting funds in the open market. Intangible assets are subject to impairment review as described under note 3[h].

[j] Income taxes The credit union follows the asset and liability method of tax allocation used in accounting for income taxes. Under this method, deferred tax benefits and obligations are determined based on differences between the financial reporting and tax basis of assets and liabilities, and measured using the substantively enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Tax expense recognized in the Statements of Income comprises the sum of deferred tax and current tax not recognized in OCI or directly in equity.

Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income, based on the credit union’s forecast of future operating results. Deferred tax liabilities are always provided for in full.

Deferred tax assets and liabilities are offset only when the credit union has a right and intention to set off current tax assets and liabilities for the same taxation authority.

Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in the Statements of Income, except where they relate to items that are recognized in OCI or directly in equity, in which case the related deferred tax is also recognized in OCI or equity, respectively.

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[k] Employee benefit plans Libro maintains three pension plans for current employees and retirees, and one sick leave benefit plan. The pension plans consist of a Defined Benefit Plan (“DB”), a Supplementary Employee Retirement Plan (“SERP”), and a Defined Contribution Plan (“DC”).

Full actuarial valuations of the DB, SERP, and sick leave benefit plans are conducted no less frequently than every three years. The most recent valuation of these plans was prepared as at December 31, 2019.

(i) Defined benefit plans For the DB pension plan, the SERP and the sick leave plan, plan assets are valued at fair market values. Benefit costs and accrued benefits are determined based upon actuarial valuations using the projected benefit method prorated on service and management’s best estimates. The expected return on plan assets is based on the fair value of plan assets. Actuarial gains and losses are recognized immediately through OCI.

Service cost is the change in the present value of the defined benefit obligation resulting from employee service in either the current year or prior years and from any gain or loss on settlement. Net interest is the change in the net defined benefit liability or asset that arises from the passage of time. Both service cost and net interest are recognized immediately in salaries and employee benefits.

Remeasurements of the net defined benefit liability include actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, the return on plan assets excluding amounts included in net interest and changes in the effect of any asset ceilings. Remeasurements are recognized immediately in OCI.

(ii) Defined contribution pension plan For the DC pension plan, annual pension expense is equal to the credit union’s contribution to the plan. The assets of the plan are held in independently administered funds. This plan was closed to new members effective July 1, 2014.

[l] Cheques and other items in transit, net Libro records cheques and other items in transit, representing uncleared settlements with other financial institutions, at cost. The net value of these items is included in accrued and other liabilities or other assets on the Balance Sheets.

[m] Leases Libro identifies whether a contract is a lease by whether it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Libro applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. Libro recognizes lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

(i) Right-of-use assets Libro recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any

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lease incentives received. Right-of-use assets are depreciated over the earlier of the useful life of the underlying asset or the lease term. The right-of-use assets are also subject to impairment. Refer to the accounting policies in note 3[h].

(ii) Lease liabilities At the commencement date of the lease, Libro recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under any residual value guarantees. The lease payments include the exercise price of a purchase option reasonably certain to be exercised by Libro and payments of penalties for terminating the lease, if the lease term reflects Libro exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.

The lease term is determined as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. Libro has lease contracts that include extension and termination options. Judgment is applied in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease based on an assessment of all relevant factors. After the commencement date, the lease term is reassessed if there is a significant event or change in circumstances that is within Libro’s control and affects Libro’s ability to exercise or not to exercise the option to renew or to terminate.

For real estate leases, Libro cannot readily determine the interest rate implicit in the lease and therefore uses the incremental borrowing rate (“IBR”) to measure lease liabilities. For vehicle leases, Libro uses the rate implicit in the lease. The IBR is the rate of interest that Libro would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Libro estimates the IBR using observable inputs when available and is required to make certain entity-specific estimates.

After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset.

(iii) Short-term leases and leases of low-value assets Libro applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be of low value. Lease payments on short-term leases and leases of low value assets are recognized as an expense on a straight-line basis over the lease term.

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[n] Transfer of financial assets

(i) Securitization When Libro transfers loans in a securitization transaction, loans are derecognized only when the contractual rights to receive the cash flows from the assets have ceased to exist or substantially all the risks and rewards of the loan have been transferred. If the criteria for derecognition have not been met, the securitization is reflected as a financing transaction and the related liability is initially recorded at fair value and subsequently measured at amortized cost, using the EIR method.

Securitized residential mortgages generally do not meet the derecognition requirements of IFRS 9 and as a result, all loans are measured at amortized cost in the Balance Sheets. The securitization is reflected as a financing transaction and the related liability is initially recorded at fair value and subsequently measured at amortized cost, using the EIR method. The credit union retains mortgage servicing responsibilities but does not receive an explicit servicing fee.

(ii) Government loan programs As a result of the COVID-19 pandemic, the Government of Canada launched several loan programs. Under the Canada Emergency Business Account (“CEBA”) Program, funding is provided by the Government of Canada and loans issued under the program are not recognized on Libro’s Balance Sheets, as the credit union transfers substantially all risks and rewards in respect of the loans to the Government of Canada. Under the Government of Canada’s loan participation (“Co-Lending”) program, 80% of funding is provided by the Business Development Bank of Canada and Libro provides the remaining 20% of funding. Libro recognizes 20% of the outstanding loans in Loans to owners on the Balance Sheets which reflects its share of risks and rewards in respect of the loans.

[o] Going concern Libro has made an assessment of its ability to continue as a going concern and is satisfied that the credit union has the resources to continue in business for the foreseeable future. Libro is not aware of any material uncertainties that may cause significant doubt regarding the credit union’s ability to continue as a going concern. The financial statements have been prepared on a going concern basis.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 56 AGM Workbook

4) INVESTMENTS

Investments consist of the following: December 31, 2020 December 31, 2019 Effective Effective $ Rate $ Rate Short-term investments (due within 1 year): Bank Investment Deposits, fair value of $215,307 [$20,310 in 2019] i 215,307 0.83% 20,310 2.04% Central 1 Liquidity Reserve Deposit, fair value of $159,334 [$62,923 in 2019] i 158,723 0.74% 62,943 1.63% Central 1 Deposits, fair value of $390,222 [$66,247 in 2019] i 389,655 0.45% 66,171 1.92% 763,685 0.62% 149,424 1.82% Long-term investments (due beyond 1 year): Central 1 Liquidity Reserve Deposit, fair value of $141,733 [$187,327 in 2019] i 138,764 1.10% 187,941 1.63% Central 1 Deposits, fair value of $40,373 [$13,235 in 2019] i 40,000 0.69% 12,988 2.72% Finance lease receivable i 287 4.81% 453 3.51% Central 1 Class A shares ii 1,415 - 1,389 - Central 1 Class E shares ii 6,487 - 6,487 - Central 1 Class F shares ii 12,895 - 12,781 - Other investments ii 285 - 285 - 200,133 0.91% 222,324 1.54% 963,818 0.68% 371,748 1.65%

Financial Instrument Classifications: i Amortized cost ii FVTPL

Central 1 Liquidity Reserve Deposit The credit union is required to maintain a liquidity reserve deposit equal to 6% of its total assets on a monthly basis. At December 31, 2020, the liquidity reserve deposit was held with Central 1 and consisted of a number of individual deposits, invested at fixed market rates for various terms which mature within two years. The liquidity reserve deposit can only be withdrawn if there is a reduction in the credit union’s total asset base.

These investments are classified as financial assets valued at amortized cost. The terms and conditions of these instruments are consistent with a lending contract whereby cash flows are advanced to Central 1 with a commitment to repay the credit union at a specified rate of interest according to pre-set maturity dates.

As a result of regulatory changes, the liquidity reserve deposit held with Central 1 was discharged at fair value in exchange for financial assets on January 4, 2021. In addition, Central 1 Class F shares were redeemed for cash.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 57 AGM Workbook

Central 1 Deposits The credit union holds excess liquidity in Central 1 interest deposits with various maturity dates.

Shares in Central 1 The Central 1 shares include Classes A, E, and F, and are required as a condition of membership and are redeemable upon withdrawal of membership or at the discretion of the Board of Directors of Central 1. In addition, the member credit unions are subject to additional capital calls at the discretion of the Board of Directors of Central 1.

Class A and Class F Central 1 shares are subject to an annual rebalancing mechanism and are issued and redeemable at par value. There is no separately quoted market value for these shares; however, fair value is determined to be equivalent to the par value due to the fact that transactions occur at par value on a regular and recurring basis.

Central 1 Class E shares are carried at cost, which is considered to be the best representation of fair value given the wide range of possible fair value measurements. These shares are not subject to annual rebalancing. There is no active market for these shares, as they are issued only as a condition of membership in Central 1, and the fair value cannot be reliably measured until such time as a transaction occurs. The fair value of Class E shares cannot be measured reliably as the timing of redemption of these shares cannot be determined; therefore, the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed.

The credit union is not intending to voluntarily dispose of any Central 1 shares as the services supplied by Central 1 are relevant to the day-to-day activities of the credit union. Dividends on these shares are at the discretion of the Board of Directors of Central 1.

5) LOANS TO OWNERS

December 31, 2020 Principal Impaired Allowance for Balance Loans Credit Losses Net Loans Residential mortgage loans 1,492,787 - 365 1,492,422 Personal loans 201,631 57 847 200,784 Agricultural loans 930,885 2,288 198 930,687 Commercial loans 1,247,748 7,046 9,237 1,238,511 3,873,051 9,391 10,647 3,862,404

December 31, 2019 Principal Impaired Allowance for Balance Loans Credit Losses Net Loans Residential mortgage loans 1,419,307 - 345 1,418,962 Personal loans 218,858 161 676 218,182 Agricultural loans 961,468 2,094 183 961,285 Commercial loans 1,123,217 8,727 5,798 1,117,419 3,722,850 10,982 7,002 3,715,848

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 58 AGM Workbook

Loans to owners can have either a variable or fixed rate of interest and mature within 10 years. Variable rate loans are based on a “prime rate plus/minus” formula with the rate above or below prime being determined by the size of the loan, the type of collateral offered, the purpose of the loan and the owner’s creditworthiness. Interest rates offered on fixed rate loans vary depending on the size of the loan, the type of collateral offered, the purpose of the loan, the owner’s creditworthiness and the loan term. All loans to owners are recorded at amortized cost.

From time to time owner loans may be renegotiated, either as part of an ongoing owner relationship or in response to a change in the circumstances of the owner. Renegotiations and debt restructuring are in the normal course of the credit union’s business. It is possible that a renegotiation could result in an extension of the due date of a repayment; however, the new terms and new interest rates would reflect the current market rates and economic environment. These are treated as new agreements and the loan would not be considered delinquent or impaired. If an owner is in financial distress they may be placed on an interest-only payment plan. This will result in the loan continuing to be delinquent and the loan will be considered as part of the impairment policy.

As at December 31, the balances of loans in arrears within the portfolio were as follows:

December 31, 2020 Residential Mortgage Personal Agricultural Commercial Loans Loans Loans Loans Total Current 1,488,649 193,785 920,293 1,238,361 3,841,088 Less than 30 days arrears 3,799 7,758 7,371 7,810 26,738 30–89 days arrears 339 31 1,779 1,038 3,187 90–179 days arrears - 39 1,442 288 1,769 180–365 days arrears - 8 - 251 259 More than 365 days arrears - 10 - - 10 1,492,787 201,631 930,885 1,247,748 3,873,051

December 31, 2019 Residential Mortgage Personal Agricultural Commercial Loans Loans Loans Loans Total Current 1,412,531 206,401 955,752 1,100,857 3,675,541 Less than 30 days arrears 6,593 12,149 2,868 11,762 33,372 30–89 days arrears 183 147 1,088 5,573 6,991 90–179 days arrears - 105 896 929 1,930 180–365 days arrears - 25 799 2,210 3,034 More than 365 days arrears - 31 65 1,886 1,982 1,419,307 218,858 961,468 1,123,217 3,722,850

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 59 AGM Workbook

As at December 31, the term to maturity and effective interest rates of the loan portfolio were as follows:

December 31, 2020 Less than Maturity (in years) Variable 1 1 to 2 2 to 3 3 to 4 4 to 5 5 to 7 7 to 10 Total Total loans 950,009 611,019 539,536 550,431 551,376 532,986 36,797 100,897 3,873,051 Effective interest rate 3.65%3.38% 3.48% 3.82% 3.59% 3.05% 4.02% 4.25% 3.54%

December 31, 2019 Less than Maturity (in years) Variable 1 1 to 2 2 to 3 3 to 4 4 to 5 5 to 7 7 to 10 Total Total loans 928,919 560,929 505,672 529,777 532,669 517,683 44,360 102,841 3,722,850 Effective interest rate 5.20%3.66% 3.45% 3.48% 3.89% 3.64% 4.37% 4.35% 4.04%

6) ALLOWANCE FOR CREDIT LOSSES

The carrying amount of loans and the balance of their respective allowance as at December 31, according to the stage in which they are classified are listed below:

December 31, 2020 Stage 1 Stage 2 Stage 3 Total Gross Allowance Gross Allowance Gross Allowance Gross Allowance Carrying for Credit Carrying for Credit Carrying for Credit Carrying for Credit Amount Losses Amount Losses Amount Losses Amount Losses Residential mortgage loans 1,401,080 147 91,707 218 - - 1,492,787 365 Personal loans 193,306 314 8,268 526 57 7 201,631 847 Agricultural loans 809,721 66 118,876 103 2,288 29 930,885 198 Commercial loans 985,300 1,962 255,402 6,974 7,046 301 1,247,748 9,237 Total 3,389,407 2,489 474,253 7,821 9,391 337 3,873,051 10,647

December 31, 2019 Stage 1 Stage 2 Stage 3 Total Gross Allowance Gross Allowance Gross Allowance Gross Allowance Carrying for Credit Carrying for Credit Carrying for Credit Carrying for Credit Amount Losses Amount Losses Amount Losses Amount Losses Residential mortgage loans 1,367,521 222 51,786 123 - - 1,419,307 345 Personal loans 212,297 379 6,400 265 161 32 218,858 676 Agricultural loans 858,316 81 101,058 42 2,094 60 961,468 183 Commercial loans 1,020,840 1,059 93,650 3,781 8,727 958 1,123,217 5,798 Total 3,458,974 1,741 252,894 4,211 10,982 1,050 3,722,850 7,002

The credit union, consistent with the industry, offered a deferral payment program to some owners who have been impacted from COVID-19 and were under financial stress. The credit union offered owners the ability to defer principal and interest payments, however interest continued to accrue on the loan balance. Deferrals on loans and mortgages with balances totalling approximately $603,500 were granted. As at December 31, 2020, deferrals on loans and mortgages with balances totalling $37,500 remained active.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 60 AGM Workbook

The following table shows the continuity of the allowance for credit losses:

December 31, 2020 Stage 1 Stage 2 Stage 3 Total Opening balance 1,741 4,211 1,050 7,002 Transfer to Stage 1 ECL 537 (537) - - Transfer to Stage 2 ECL (284) 284 - - Transfer to Stage 3 ECL - (71) 71 - Net remeasurement of loss allowance (150) 3,839 (120) 3,569 New financial assets originated or purchased 1,005 1,119 9 2,133 Financial assets derecognized (360) (1,024) (172) (1,556) Write-offs - - (921) (921) Recoveries of amounts previously written off - - 420 420 As at December 31, 2020 2,489 7,821 337 10,647

December 31, 2019 Stage 1 Stage 2 Stage 3 Total Opening balance 1,596 4,349 5,009 10,954 Transfer to Stage 1 ECL 607 (607) - - Transfer to Stage 2 ECL (89) 106 (17) - Transfer to Stage 3 ECL - (8) 8 - Net remeasurement of loss allowance (707) 341 460 94 New financial assets originated or purchased 626 1,103 3 1,732 Financial assets derecognized (292) (1,073) (2,548) (3,913) Write-offs - - (2,981) (2,981) Recoveries of amounts previously written off - - 1,116 1,116 As at December 31, 2019 1,741 4,211 1,050 7,002

The following table further details the continuity of the ECL by loan category:

December 31, 2020 Residential Mortgage Personal Agricultural Commercial Total Loans Loans Loans Loans Allowance Balance, January 1, 2020 345 676 183 5,798 7,002 Collection of accounts previously written off - 128 - 292 420 Accounts written off - (226) - (695) (921) Provision for credit losses 20 269 15 3,842 4,146 Balance, December 31, 2020 365 847 198 9,237 10,647

December 31, 2019 Residential Mortgage Personal Agricultural Commercial Total Loans Loans Loans Loans Allowance Balance, January 1, 2019 300 723 104 9,827 10,954 Collection of accounts previously written off - 162 - 954 1,116 Accounts written off - (334) - (2,647) (2,981) Provision for (recovery of) credit losses 45 125 79 (2,336) (2,087) Balance, December 31, 2019 345 676 183 5,798 7,002

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 61 AGM Workbook

The following table shows the ECL by credit quality and stage:

December 31, 2020 Stage 1 Stage 2 Stage 3 Total Residential Mortgage Loans Above standard 114 3 - 117 Standard 33 121 - 154 Below standard - 94 - 94 Personal Loans Above standard 254 19 - 273 Standard 60 270 - 330 Below standard - 237 7 244 Agricultural Loans Above standard 55 10 19 84 Standard 11 88 9 108 Below standard - 5 1 6 Commercial Loans Above standard 154 947 - 1,101 Standard 1,808 2,507 - 4,315 Below standard - 3,520 301 3,821 2,489 7,821 337 10,647

December 31, 2019 Stage 1 Stage 2 Stage 3 Total Residential Mortgage Loans Above standard 105 2 - 107 Standard 82 43 - 125 Below standard 35 78 - 113 Personal Loans Above standard 194 12 5 211 Standard 142 75 11 228 Below standard 43 178 16 237 Agricultural Loans Above standard 39 9 - 48 Standard 41 27 - 68 Below standard 1 6 60 67 Commercial Loans Above standard 75 - - 75 Standard 984 24 - 1,008 Below standard - 3,757 958 4,715 1,741 4,211 1,050 7,002

Standard is defined as loans with a credit score between 600 and 649 or C commercial paper.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 62 AGM Workbook

Collateral There are documented policies and procedures in place for the valuation of financial and non-financial collateral. The fair value of non-financial collateral is updated if there has been a significant change in the terms and conditions of the loan or the loan is considered impaired. For impaired loans, an assessment of the collateral is taken into consideration when estimating the expected future cash flows and net realizable amount of the loan.

The amount and type of collateral and other credit enhancements required depend upon Libro’s assessment of counterparty credit quality and repayment capacity. Libro’s policy is to follow industry standards for collateral valuation, frequency of recalculation of the collateral requirements, documentation, registration and perfection procedures, and monitoring. Non-financial assets accepted as collateral include vehicles, residential real estate, real estate under development, commercial real estate and certain business assets (accounts receivable, inventory, and fixed assets). Financial collateral includes cash and negotiable securities issued by governments and investment grade issuers. Guarantees are also accepted to reduce credit risk.

The fair value of collateral held with respect to assets that are either past due greater than 30 days and/or impaired is $22,941 [$13,889 in 2019].

It is not practical to quantify the fair values on security of all loans at the reporting date; however, loans by security type are as follows: December 31, 2020 Secured by Secured by Real Estate Non-Real Estate Unsecured Total Loans 1 Residential mortgage loans 1,492,787 - - 1,492,787 Personal loans 150,910 4 9,824 897 201,631 Agricultural loans 850,035 7 7,782 3,068 930,885 Commercial loans 1,147,509 9 6,214 4,025 1,247,748 3,641,241 223,820 7,990 3,873,051

December 31, 2019 Secured by Secured by Real Estate Non-Real Estate Unsecured Total Loans 1 Residential mortgage loans 1,419,307 - - 1,419,307 Personal loans 155,123 6 3,012 723 218,858 Agricultural loans 856,933 9 9,937 4,598 961,468 Commercial loans 1,004,275 1 14,224 4,718 1,123,217 3,435,638 2 77,173 10,039 3,722,850

1Residential mortgage loans include $272,048 of loans insured by Canada Mortgage and Housing Corporation or Genworth [$296,380 in 2019].

In accordance with the Act, personal loans secured by collateral first mortgages on owners’ residential property have been designated as residential mortgage loans for the purposes of risk-weighted capital requirements [note 12].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 63 AGM Workbook

Economic scenarios Libro determines ECL using multiple probability-weighted forward-looking scenarios. Libro considers both internal and external sources of information in order to achieve an unbiased, probability-weighted measure of the scenarios used. The “base case” represents the most likely outcome and is given a probability weighting of 80%. The other scenarios represent more optimistic or more pessimistic outcomes and are each given a weighting of 10%.

December 31, 2020 Worst Case Base Case Best Case 12-month Thereafter 12-month Thereafter 12-month Thereafter Housing price index 2.5% 2.6% 2.6% 2.6% 2.6% 2.8% 3-month banker's acceptance 0.5% 0.8% 0.3% 1.1% 0.5% 2.8% Unemployment rate 9.5% 6.9% 8.6% 6.1% 7.8% 5.3%

December 31, 2019 Worst Case Base Case Best Case 12-month Thereafter 12-month Thereafter 12-month Thereafter Housing price index 2.1% 2.1% 2.3% 2.3% 2.3% 2.5% 3-month banker's acceptance 0.7% 0.9% 1.7% 1.9% 2.3% 2.5% Unemployment rate 7.2% 7.3% 6.0% 5.8% 4.4% 4.4%

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 64 AGM Workbook

7) PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

December 31, 2020

Buildings and Leasehold Furniture and Electronic Computer Right-of-use Components Land Improvements Equipment Equipment Equipment Assets Total Cost: Opening balance 51,524 6,645 8,898 9,056 9,811 7,136 8,145 101,215 Additions and 2,474 (43) 173 283 622 612 2,479 6,600 adjustments As at December 31, 53,998 6,602 9,071 9,339 10,433 7,748 10,624 107,815 2020 Accumulated depreciation: Opening balance (18,729) - (4,128) (6,283) (7,984) (5,604) (1,089) (43,817) Depreciation and (2,118) - (476) (466) (928) (879) (832) (5,699) adjustments As at December 31, (20,847) - (4,604) (6,749) (8,912) (6,483) (1,921) (49,516) 2020 Net book value 33,151 6,602 4,467 2,590 1,521 1,265 8,703 58,299

December 31, 2019 Buildings and Leasehold Furniture and Electronic Computer Right-of-use Components Land Improvements Equipment Equipment Equipment Assets Total Cost: Opening balance 49,502 6,422 7,012 8,631 9,279 6,101 - 86,947 IFRS 16 transition ------7,618 7,618 Additions and 2,022 223 1,886 431 597 1,035 527 6,721 adjustments Disposals - - - (6) (65) - - (71) As at December 31, 51,524 6,645 8,898 9,056 9,811 7,136 8,145 101,215 2019

Accumulated depreciation: Opening balance (16,615) - (3,784) (5,782) (6,984) (4,627) - (37,792) Depreciation and (2,114) - (344) (501) (1,000) (977) (1,089) (6,025) adjustments As at December 31, (18,729) - (4,128) (6,283) (7,984) (5,604) (1,089) (43,817) 2019 Net book value 32,795 6,645 4,770 2,773 1,827 1,532 7,056 57,398

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 65 AGM Workbook

Right-of-use assets consist of 15 real estate leases and 1 vehicle lease. There are no leases with residual value guarantees or leases not yet commenced to which Libro is committed. Interest expense on all lease liabilities is $200 and included in occupancy expense in the Statements of Income.

Libro owns properties in which space not used by the credit union is rented to tenants for the purpose of earning rental income. The cost of the land and buildings with respect to floor space rented to tenants by Libro is $13,410 [$13,115 in 2019]. The land and buildings have a net book value of $8,437 [$8,665 in 2019].

The total gross revenue on credit union owned rental properties in the current year was $1,727 [$1,650 in 2019], which resulted in net income of $358 [$255 in 2019]. The net rental income or loss has been included in non- interest income.

8) INTANGIBLE ASSETS

Intangible assets consist of the following:

December 31, 2020 Computer Banking System Core Deposit Software Software Intangibles Total Cost: Opening balance 5,604 4,086 14,998 24,688 Additions and adjustments 1,079 - - 1,079 As at December 31, 2020 6,683 4,086 14,998 25,767 Accumulated amortization: Opening balance (4,199) (4,046) (12,319) (20,564) Amortization (1,428) (40) (2,143) (3,611) As at December 31, 2020 (5,627) (4,086) (14,462) (24,175) Net book value 1,056 - 536 1,592

December 31, 2019 Computer Banking System Core Deposit Software Software Intangibles Total Cost: Opening balance 4,067 4,086 14,998 23,151 Additions and adjustments 1,537 - - 1,537 As at December 31, 2019 5,604 4,086 14,998 24,688

Accumulated amortization: Opening balance (3,168) (3,894) (10,176) (17,238) Amortization (1,031) (152) (2,143) (3,326) As at December 31, 2019 (4,199) (4,046) (12,319) (20,564) Net book value 1,405 40 2,679 4,124

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 66 AGM Workbook

9) OTHER ASSETS

Other assets consist of the following: December 31, December 31, 2020 2019 Prepaid items 1,823 1,724 Other receivables 2,906 2,039 Cheques and other items in transit, net [note 3[l]] 26,416 28,842 31,145 32,605

10) LOANS PAYABLE

Libro has access to line of credit facilities at Central 1: • A Canadian dollar Clearing Line of Credit for $35,000 CAD [$34,000 CAD in 2019]; largest draw $26,175 CAD • A US dollar Clearing Line of Credit for $3,500 US [$3,500 USD in 2019]; largest draw $928 USD • A Core Line of Credit Facility for $35,000 CAD [$40,000 CAD in 2019]; largest draw $40,000 CAD (within 2019 limit) • A Core Notice Facility for $48,000 CAD [$35,000 CAD in 2019]; largest draw $35,000 CAD

The balance of the lines of credit facilities at year-end was nil [nil in 2019]. The clearing line of credit facility bears interest at 1.20% [2.7% in 2019] and the other line of credit facility bears interest at 0.98% [2.58% in 2019]. The lines of credit are payable on or before the facility maturity date of July 31, 2021. The other credit facilities bear a fixed rate depending on the term ranging from seven days to one year. Libro has given a promissory note and pledged an assignment of its assets as collateral.

11) OWNERS’ CAPITAL ACCOUNTS

Membership shares An unlimited number of membership shares have been authorized with a stated value of $1 per share. Owners who are age 18 and over are required to have a minimum of 50 shares while owners under that age are required to have 10 shares. These shares are redeemable at their stated value only when the owner withdraws from ownership in Libro. As at December 31, 2020, Libro had 108,361 owners [106,790 in 2019] who held a total of 5,152,010 membership shares [5,073,505 in 2019]. Each owner who is age 16 and over is entitled to one vote.

Class P shares An unlimited number of Class P non-cumulative, non-voting, non-participating special shares have been authorized having an issue price of $1. As at December 31, 2020, there were 45,331,125 Class P shares outstanding [38,137,827 in 2019].

Class I shares An unlimited number of Class I non-cumulative, non-voting, non-participating special shares have been authorized to be issued in series at a price of $1. As at December 31, 2020, there were a total of 126,247,283 Class I shares outstanding [121,396,059 in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 67 AGM Workbook

As at December 31, 2020, the number of Class I shares outstanding by series were as follows:

December 31, December 31, [number of shares in thousands] 2020 2019 Series 1 3,522 3,386 Series 2 3,468 3,336 Series 3 9,009 8,663 Series 4 22,765 21,892 Series 5 87,483 84,119 Total 126,247 121,396

Class P and Class I shares are redeemable by the holder only under certain restricted conditions. The aggregate maximum amount that can be redeemed in any year cannot exceed 10% of the outstanding balance of each series, including any dividends declared but not yet paid, of either the Class P or each series of the Class I shares, provided regulatory capital requirements are met. As at December 31, 2020, the aggregate maximum amount that could be redeemed is $4,799 in Class P shares and $12,625 in Class I shares.

The continuity of outstanding shares is as follows:

Membership Class P Class I [number of shares in thousands] Shares Shares Shares Total Outstanding, January 1, 2019 5,008 33,612 116,729 155,349 New shares issued 336 6,445 - 6,781 Shares redeemed (270) (2,281) - (2,551) Shares issued as dividends - 361 4,667 5,028 Outstanding, December 31, 2019 5,074 38,137 121,396 164,607 New shares issued 307 9,289 - 9,596 Shares redeemed (229) (2,603) - (2,832) Shares issued as dividends - 508 4,851 5,359 Outstanding, December 31, 2020 5,152 45,331 126,247 176,730 Less share issuance costs - - (154) (154) Total carrying value of shares 5,152 45,331 126,093 176,576

All owners’ capital accounts have been designated as financial liabilities. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

In 2015, the credit union harmonized its dividend policy for all five series of Class I Investment Shares to pay a dividend rate the greater of 4.00% or a rate that exceeds by 1.25% the simple average of the yields on the monthly series of the Government of Canada five-year bonds during the fiscal years ending on or before December 31, 2020. For fiscal years ending after that date, the rate will be equal to or greater than the rate which exceeds by 1.25% the simple average of the yield on the monthly series of the Government of Canada five-year bonds during the fiscal year. In 2020, Libro declared a dividend of 4.00% [4.00% in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 68 AGM Workbook

Prior to the fiscal year-end, the Board of Directors approved its intent to distribute a portion of the current year’s income in the form of stock dividends to be paid in the subsequent year, as follows: December 31, December 31, 2020 2019 Class P Profit share distribution - calculated as $0.30 for every $1,000 of average deposit and loan balances [$1.32 in 2019] 2,369 9,321 Class P Profit share dividend - calculated as 0.72% on owner Class P Profit share holdings as at year-end [1.43% in 2019] 294 513 Class I, Series 1 Investment share dividend of 4.00% [4.00% in 2019] 141 135 Class I, Series 2 Investment share dividend of 4.00% [4.00% in 2019] 139 133 Class I, Series 3 Investment share dividend of 4.00% [4.00% in 2019] 360 347 Class I, Series 4 Investment share dividend of 4.00% [4.00% in 2019] 910 876 Class I, Prosperity Series 5 Investment share dividend of 4.00% [4.00% in 2019] 3,499 3,365 Stock dividends payable at year-end 7,712 14,690 Accrued dividends from prior years (32) (164) Dividend expense 7,680 14,526

Although owners’ shares are regarded as capital for regulatory purposes, they impose a contractual obligation on Libro to pay cash in certain defined future circumstances and have, therefore, been classified as liabilities for the purposes of these financial statements. Correspondingly, dividends paid on those shares have been included in the Statements of Income as a charge to income.

12) REGULATORY INFORMATION

[a] Regulatory capital Libro’s capital management plan is designed to establish a strong base for future growth, the payment of dividends and profit sharing, as well as provide a cushion in the event of market volatility. Libro’s capital plan is designed to comply with the Act, which requires Libro to maintain regulatory capital of not less than 4% of total assets and 8% of a risk-weighted equivalent value. The risk-weighted equivalent value is calculated by applying risk-weighted percentages as prescribed by the Act to various assets, operational and interest rate risk criteria. As at December 31, 2020, the total risk-weighted equivalent value for Libro was $3,056,903 [$2,794,272 in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 69 AGM Workbook

Libro is in compliance with the Act and regulations regarding regulatory capital as follows:

December 31, December 31, 2020 2019 Tier 1 capital Membership shares 5,152 5,074 Investment and patronage shares 171,424 159,379 Stock dividends payable 7,712 14,690 Redeemable portion of shares (17,424) (8,674) Retained earnings 100,856 93,568 Contributed surplus 60,998 60,998 Unqualified portion of fair value adjustments 580 580 Total Tier 1 capital 329,298 325,615 Tier 2 capital Redeemable portion of shares 17,424 8,674 Stage 1 and Stage 2 allowance for credit losses 10,310 5,952 AOCI defined benefit plans (10,193) (4,499) Total Tier 2 capital 17,541 10,127 Total regulatory capital 346,839 335,742 % of total assets 7.00% 7.93% % of risk-weighted assets 11.35% 12.02%

[b] Restricted party transactions As at December 31, 2020, the aggregate value of loans, lines of credit, overdrafts and letters of credit outstanding to directors, officers, their spouses and related corporations amounted to $3,153 [$2,895 in 2019]. There was no allowance for credit losses required in respect of these credit facilities. Interest rates and other terms and conditions relating to loans to directors are the same as those offered to all owners of Libro. Terms and rates of loans offered to officers are the same as all terms and rates offered to all Libro staff. Loans committed to restricted parties were nil [nil in 2019].

Deposits held for restricted parties were $6,142 [$5,369 in 2019]. Terms and rates of deposits for officers and directors are the same as those offered to all Libro owners.

The total compensation paid to officers was $2,575 [$2,063 in 2019] and the total remuneration paid to elected representatives, including directors was $335 [$379 in 2019]. In addition to this remuneration, total reimbursement to directors and committee members for travel and out-of-pocket expenses for attendance at meetings was $110 [$267 in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 70 AGM Workbook

[c] Executive compensation The Act requires disclosure of the five highest paid officers and employees where the remuneration paid during the year exceeded $150. The names, positions and remuneration paid during the year of these officers and employees are as follows:

December 31, 2020 Variable Monetary Value Name Title Salary Compensation of Benefits Total Stephen Bolton President & CEO 406 186 44 636 Carol Normandeau EVP Advice & Service Delivery 272 84 32 388 Scott Ferguson EVP Information Systems 229 70 27 326 Tania Goodine EVP Engagement 229 70 28 327 Kathleen Grogan EVP Finance & CFO 230 44 35 309

December 31, 2019 Variable Monetary Value Name Title Salary Compensation of Benefits Total Stephen Bolton President & CEO 387 148 40 575 Carol Normandeau EVP Advice & Service Delivery 258 61 31 350 Scott Ferguson EVP Information Systems 219 54 27 300 Tania Goodine EVP Engagement 219 53 27 299 Fred Blaak EVP Risk & Corporate Services 204 29 25 258

The Executive Leadership Team at Libro includes the President & CEO, and all individuals with positions titled Executive Vice President (“EVP”).

On an annual basis, the Board of Directors reviews executive compensation and considers market expectations for similar roles in comparable organizations nationally. Variable compensation is based on corporate performance against strategic targets in the previous year. The monetary value of benefits includes a pension plan, dental plan, health plan, automobile benefits (President & CEO), and life and disability insurance.

[d] Deposit insurance The net premium paid to FSRA for 2020 deposit insurance and prudential regulation assessment was $3,520 [$2,744 in 2019].

[e] Central 1 fees The total fees paid to Central 1 amounted to $1,351 in the current year [$1,383 in 2019]. These fees were primarily in respect of banking and clearing services, and membership dues.

13) EMPLOYEE FUTURE BENEFITS

Libro sponsors a defined benefit pension plan, a defined contribution pension plan, a supplementary employee retirement plan, and a sick leave benefit plan providing pension and sick leave benefits to eligible employees. The defined contribution pension plan is for staff who were formerly employed by United Communities Credit Union, who were given the option to either remain in the plan or join the defined benefit pension plan. The defined contribution pension plan has been closed to new entrants. The credit union employees’ defined benefit pension plan is administered by CUMIS Life Insurance Company, while the defined contribution pension plan is administered by Canada Life.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 71 AGM Workbook

The defined benefit pension plan is operated under the Pension Benefits Act (Ontario) (the “Pensions Benefits Act”). The Pension Benefits Act is administered by the Superintendent of Financial Services appointed by FSRA. Plan valuations must be filed with both FSRA and with the Canada Revenue Agency.

The Pension Benefits Act prescribes the minimum contributions that the credit union must make to the plan. The Income Tax Act (Canada) places a maximum limit on the amount of employer contributions. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies with the credit union.

During 2009, the credit union amended its sick leave benefit plan whereby after December 31, 2008, staff members can no longer accrue a benefit to be paid out on termination or retirement. Existing members had their accumulated sick leave days capped at the level achieved as at December 31, 2008.

[a] Defined benefit plans Actuarial valuations of the plans are made based on market-rated discount rates. The following table presents information related to Libro’s benefit plans as at December 31, 2020 including the amounts recorded on the Balance Sheets, and the components of net benefit expense: December 31, 2020 December 31, 2019 Pension Sick Leave Pension Sick Leave Benefits Benefits Benefits Benefits Accrued benefit obligation Balance as at beginning of year 67,677 1,697 52,393 1,694 Current service cost 5,023 - 3,872 - Interest cost 2,302 54 2,231 65 Benefits paid (1,670) (49) (1,266) (164) Employee contributions 136 - 138 - Actuarial loss 9,732 76 10,309 102 Balance as at end of year 83,200 1,778 67,677 1,697 Plan assets Fair value at beginning of year 51,843 - 43,670 - Expected return on plan assets 1,703 - 1,786 - Employer contributions 4,389 49 3,065 164 Employee contributions 136 - 138 - Benefits paid (1,670) (49) (1,266) (164) Actuarial gain on assets 2,847 - 4,450 - Fair value as at end of year 59,248 - 51,843 - Funded status - plan deficit (23,952) (1,778) (15,834) (1,697)

The supplementary employee retirement plan is included in the defined benefit pension plan. The weighted average duration of liabilities is 23.3 years [21.1 in 2019] for the defined benefit plan, 10.9 years [11.3 in 2019] for the supplementary employee retirement plan, and 7.4 years [7.8 in 2019] for the sick leave plan.

Assets held within the pension plan consist of balances in the units of Addenda Capital Tactical Balanced Fund (24%), Mawer Investment Management’s Balanced Fund (52%), and 18 Asset Management Balanced Fund (24%).

Contributions for the upcoming year are anticipated to be approximately $3,260 for the defined benefit plans, and $49 for the sick leave plan.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 72 AGM Workbook

Libro’s net defined benefit plan expenses recognized in the Statements of Income were as follows:

December 31, 2020 December 31, 2019 Pension Sick Leave Pension Sick Leave Benefits Benefits Benefits Benefits Current service cost 5,023 - 3,872 - Net interest cost 599 54 445 65 Total included in salaries and employee benefits expense 5,622 54 4,317 65

Libro’s net defined benefit plan expenses recognized in OCI loss were as follows:

December 31, 2020 December 31, 2019 Pension Sick Leave Pension Sick Leave Benefits Benefits Benefits Benefits Actuarial gain on assets 2,847 - 4,450 - Actuarial loss on liabilities (9,732) (76) (10,309) (102) Total loss recognized in OCI (6,885) (76) (5,859) (102)

Included in the above total actuarial loss on liabilities are the following:

December 31, 2020 December 31, 2019 Pension Sick Leave Pension Sick Leave Benefits Benefits Benefits Benefits Change in discount rate (8,457) (64) (10,309) (100) Other (1,275) (12) - (2) Total actuarial loss on liabilities (9,732) (76) (10,309) (102)

The assumptions used in the measurement of the benefit obligations are shown in the following table:

December 31, 2020 December 31, 2019 Pension Sick Leave Pension Sick Leave [percentages] Benefits Benefits Benefits Benefits Discount rate 2.70% 2.70% 3.20% 3.20% Expected long-term rate of return on plan assets 2.70% - 3.20% - Rate of compensation increase 2.50% 2.50% 2.50% 2.50%

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 73 AGM Workbook

A one percentage point change in assumed discount rates and salary costs would have the following impact on the defined benefit plans:

December 31, 2020 December 31, 2019 Pension Sick Leave Pension Sick Leave Change in Benefit Obligations Benefits Benefits Benefits Benefits 1% increase in discount rate (16,995) (123) (12,672) (124) 1% decrease in discount rate 21,385 140 15,605 140 1% increase in rate of compensation increase 6,428 138 4,477 139 1% decrease in rate of compensation increase (5,966) (125) (4,201) (126)

Through its defined benefit pension plans and post-employment plans, the credit union is exposed to a number of risks, the most significant of which are detailed below:

(i) Equity risk The plans hold balanced funds, which include equity investments, and are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. However, due to the long-term nature of the plan liabilities, a level of continuing equity investment is an appropriate element of the long-term strategy to manage the plans efficiently.

(ii) Changes in bond yields The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plan’s fixed income investments.

(iii) Inflation risk The majority of the plan’s benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities. The plan’s assets may or may not correlate with inflation, meaning that an increase in inflation may also increase the deficit.

(iv) Life expectancy The majority of the plan’s obligations are to provide benefits for the life of the employee, so increases in life expectancy will result in an increase in the plan’s liabilities.

[b] Defined contribution plans The pension expense for the defined contribution plan in the current year was $19 [$23 in 2019]. The contributions for the upcoming fiscal year are anticipated to be approximately $14 [$14 in 2019].

14) COMMITMENTS

[a] Loan commitments As at December 31, 2020, Libro had commitments to advance loans totalling $358,396 [$279,039 in 2019]. The mix of loans committed is consistent with existing funded portfolio balances.

[b] Undrawn lines of credit As at December 31, 2020, Libro had undrawn lines of credit outstanding on behalf of owners amounting to $831,667 [$730,287 in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 74 AGM Workbook

[c] Letters of credit As at December 31, 2020, Libro had letters of credit outstanding on behalf of owners amounting to $37,247 [$39,209 in 2019].

[d] ECL on commitments Included in the ECL in note 6 is $582 [$202 in 2019] related to undrawn lines of credit and unused letters of credit.

15) DERIVATIVE FINANCIAL INSTRUMENTS

The following table summarizes the carrying values of the derivative financial instruments held by Libro. The credit union only enters into derivative contracts with a counterparty it has determined to be creditworthy.

December 31, 2020 December 31, 2019 Counterparty Assets Liabilities Assets Liabilities Interest rate swap agreements - 3,718 1,950 165 Index-linked term deposit hedge agreements 649 649 757 757 649 4,367 2,707 922

Interest rate swap agreements Libro enters into interest rate swap agreements in order to hedge against exposure to interest rate fluctuations. As at December 31, 2020, Libro was party to six such agreements [eight in 2019] with Central 1. The agreements, in aggregate, represent a notional principal amount of $103,473 [$203,639 in 2019]. The notional principal amounts are used as the basis for determining payments under the contracts and are not actually exchanged between Libro and its counterparties.

Interest rate swap agreements are valued by netting the discounted variable and fixed cash flows. Variable cash flows are calculated using implied interest rates as determined by current Canadian Dealer Offered Rate (“CDOR”) and swap interest rates, and term relationships. Fixed cash flows are calculated based on the rates stated in the agreements. These notional cash flows are discounted using the relevant points on the zero-interest curve as derived from the month-end CDOR and swap rates.

A summary of Libro’s swap agreements is given below:

December 31, 2020 Notional Maturity Paying Rate Receiving Rate Paying Receiving Value Counterparty Amount Date Index Index Rate Rate Fair Central 1 1,124 May 2021 10-year swap rate - fixed 30-day CDOR 1.860% 0.469% (6) Central 1 934 Jun. 2021 10-year swap rate - fixed 30-day CDOR 3.070% 0.469% (12) Central 1 1,124 Jul. 2021 10-year swap rate - fixed 30-day CDOR 1.890% 0.460% (9) Central 1 291 Oct. 2022 10-year swap rate - fixed 30-day CDOR 2.090% 0.469% (8) Central 1 50,000 May 2024 5-year swap rate - fixed 30-day CDOR 1.825% 0.460% (2,065) Central 1 50,000 Aug. 2024 5-year swap rate - fixed 30-day CDOR 1.460% 0.469% (1,618) 103,473 1.662% 0.464% (3,718)

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 75 AGM Workbook

December 31, 2019 Notional Maturity Paying Rate Receiving Rate Paying Receiving Fair Counterparty Amount Date Index Index Rate Rate Value Central 1 50,000 Apr. 2020 5-year swap rate - fixed 30-dayy CDORp 1.283% 2.064% 182 Central 1 50,000 Aug. 2020 30-day CDOR rate - fixed 1.980% 1.700% (149) Central 1 1,172 May 2021 10-year swap rate - fixed 30-day CDOR 1.860% 1.983% 2 Central 1 974 Jun. 2021 10-year swap rate - fixed 30-day CDOR 3.070% 1.965% (15) Central 1 1,172 Jul. 2021 10-year swap rate - fixed 30-day CDOR 1.890% 2.069% 1 Central 1 321 Oct. 2022 10-year swap rate - fixed 30-day CDOR 2.090% 1.999% (1) Central 1 50,000 May 2024 5-year swap rate - fixed 30-day CDOR 1.825% 2.064% 421 Central 1 50,000 Aug. 2024 5-year swap rate - fixed 30-day CDOR 1.460% 1.980% 1,344 203,639 1.647% 1.953% 1,785

Foreign exchange forward contracts Libro uses foreign exchange forward contracts to manage liquidity, interest income, and to hedge the exchange risk in products denominated in US dollars. As at December 31, 2020, Libro was not party to any such agreements [none in 2019] with Central 1.

From time to time, Libro enters into foreign exchange forward contracts with some of its owners. Owners enter into these contracts primarily to manage interest expense and hedge against US dollar exchange rates in their own operations. The notional value of these agreements in US dollars was $771 [$258 in 2019] at year-end. Libro enters into offsetting agreements with Central 1 to hedge the exchange risk with its owners. The notional amount of these offsetting agreements in US dollars was $745 [$100 in 2019] at year-end. These agreements represent a fair market value on a combined basis of nil [nil in 2019] at year-end.

Index-linked term deposit agreements Libro has outstanding $6,727 [$9,066 in 2019] in index-linked term deposits to its owners. The index-linked term deposits are three and five-year deposits that pay interest at the end of the term, based on performance of a variety of indices. The embedded derivative associated with these deposits is presented in liabilities and has a fair value of $649 [$757 in 2019].

Libro has entered into agreements with Central 1 to offset the exposure to the indices associated with each product, whereby the credit union pays a fixed rate of interest for the term of each index-linked deposit on the face value of the deposits sold. At the end of the term, the credit union receives an amount equal to the amount that will be paid to depositors based on the performance of the indices. As at December 31, 2020, Libro had entered into such contracts in the amount of $6,727 [$9,066 in 2019]. The agreements are secured by a general security agreement covering all assets of the credit union. The embedded derivative associated with these agreements is presented in assets and has a fair value of $649 [$757 in 2019].

Hedge accounting for interest rate swaps As part of its risk management strategy for interest rate risk, the credit union uses interest rate swaps to reduce its exposure. A discussion of the credit union’s approach to management of interest rate risk is in note 21[c].

As at December 31, 2020, Libro had no financial instruments designated for hedge accounting.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 76 AGM Workbook

16) OWNERS’ DEPOSITS December 31, December 31, 2020 2019 Demand deposits 896,286 745,375 Chequing deposits 1,441,814 1,052,079 Term deposits 1,123,592 1,038,758 Registered savings plans 321,118 317,102 Registered income funds 214,443 202,221 Registered tax free savings accounts 413,507 367,251 4,410,760 3,722,786

Owners’ deposits are either redeemable on demand or have a fixed date of maturity up to five years. Interest rates are set based upon the type, size and term to maturity of the deposit. All owners’ deposits are financial liabilities and measured at amortized cost.

The term to maturity and effective interest rates of Libro owners’ deposit portfolio were as follows:

December 31, 2020 1 year Over 1 to Over 2 to Over 3 to Over 4 to Maturity Demand or Less 2 Years 3 Years 4 Years 7 Years Total Total deposits 2,500,043 1,082,821 471,940 163,477 102,382 90,097 4,410,760 Effective interest rate 0.26% 1.66% 2.26% 2.35% 2.66% 2.20% 1.00%

December 31, 2019 1 year Over 1 to Over 2 to Over 3 to Over 4 to Maturity Demand or Less 2 Years 3 Years 4 Years 7 Years Total Total deposits 1,932,042 997,546 381,940 241,632 92,933 76,693 3,722,786 Effective interest rate 0.86% 2.11% 2.45% 2.66% 2.73% 2.85% 1.57%

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 77 AGM Workbook

17) STATEMENTS OF INCOME AND CASH FLOW DISCLOSURES

[a] Interest income and expense

The amount of income earned from each loan class and interest expense for each type of deposit was as follows:

December 31, December 31, 2020 2019 Interest Income Residential mortgage loans 46,983 43,923 Personal loans 12,960 15,661 Agricultural loans 36,161 38,937 Commercial loans 50,775 49,509 146,879 148,030

Interest Expense Demand deposits 4,721 8,775 Chequing deposits 3,387 4,958 Term deposits 22,336 22,036 Registered savings plans 6,863 6,969 Registered income funds 4,705 4,455 Registered tax free savings accounts 7,472 7,328 49,484 54,521

[b] Non-interest income

Non-interest income consists of the following:

December 31, December 31, 2020 2019 Service fees 12,511 12,214 Commissions 4,967 4,801 Foreign exchange 1,485 1,814 Unrealized gains (losses) on derivatives (5,127) 1,041 Income from property 358 255 14,194 20,125

[c] Supplemental cash flow disclosures

Total interest paid in the year on owners’ deposits and securitization liabilities was $55,184 [$53,516 in 2019]. Total interest received on loans to owners and investments was $151,660 [$153,957 in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 78 AGM Workbook

18) FINANCIAL INSTRUMENTS

The following table represents the fair values of Libro’s financial instruments. The fair values disclosed do not include the value of assets that are not considered financial instruments. While the fair value amounts are intended to represent estimates of the amounts at which these instruments could be exchanged in a current transaction between willing parties, some of Libro’s financial instruments lack an available trading market. Consequently, the fair values presented are estimates derived using present value and other valuations techniques and may not be indicative of the net realizable values. The calculation of estimated fair values is based on market conditions at a specific point in time and may not be reflective of future fair values. December 31, 2020 December 31, 2019 Book Value Fair Value Difference Book Value Fair Value Difference Amortized Cost Loans to owners 3,873,051 3,941,567 68,516 3,722,850 3,741,286 18,436 Investments 942,736 947,256 4,520 350,806 350,495 (311) Fair Value through Profit or Loss Investments 21,082 21,082 - 20,942 20,942 - Index-linked deposits 649 649 - 757 757 - Derivative financial instruments - - - 1,950 1,950 - Total financial assets 4,837,518 4,910,554 73,036 4,097,305 4,115,430 18,125 Amortized Cost Owners' deposits 4,410,760 4,419,069 (8,309) 3,722,786 3,725,439 (2,653) Accrued and other liabilities 17,734 17,734 - 16,735 16,735 - Securitization liabilities 140,617 141,203 (586) 127,177 126,730 447 Fair Value through Profit or Loss Index-linked deposits 649 649 - 757 757 - Derivative financial instruments 3,718 3,718 - 165 165 - Total financial liabilities 4,573,478 4,582,373 (8,895) 3,867,620 3,869,826 (2,206)

Estimated fair values are determined as follows: (i) Fair values for items that are short term in nature approximate their book value. These include cash and cash equivalents, accrued interest receivable, other assets, accrued and other liabilities and accrued interest payable. Fair values for floating rate financial instruments are equal to book value as the interest rates automatically reprice to market. (ii) Investments are valued using quoted market prices where available. Cost is used where no ready market values are available. (iii) Fixed-rate loans are valued by discounting the contractual future cash flows at current market rates for loans with similar credit risks. (iv) Fixed-rate deposits are valued by discounting the contractual future cash flows using market rates currently being offered for deposits with similar terms.

Fair values are determined based on a three-level fair value hierarchy that reflects the significance of the inputs used in making the measurements. The levels of the hierarchy are as follows: (i) Level 1 - Unadjusted quoted prices in active markets for identical financial assets and financial liabilities; (ii) Level 2 - Inputs other than quoted prices that are observable for the financial asset or financial liability either directly or indirectly; and (iii) Level 3 - Inputs that are not based on observable market data.

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 79 AGM Workbook

The following table illustrates the classification of Libro’s financial instruments within the fair value hierarchy:

December 31, 2020 Level 1 Level 2 Level 3 Total Recorded at Fair Value Assets Index-linked deposits - 649 - 649 Central 1 Class E shares - - 6,487 6,487 Central 1 Class A shares - - 1,415 1,415 Central 1 Class F shares - - 12,895 12,895 Other investments - - 285 285 Total assets held at fair value - 649 21,082 21,731 Liabilities Index-linked deposits - 649 - 649 Derivative financial instruments - 3,718 - 3,718 Total liabilities held at fair value - 4,367 - 4,367 Fair Value Disclosed Assets Loans to owners - - 3,941,567 3,941,567 Investments - 947,256 - 947,256 Total assets disclosed at fair value - 947,256 3,941,567 4,888,823 Liabilities Owners' deposits - 4,419,069 - 4,419,069 Securitization liabilities - 141,203 - 141,203 Total liabilities disclosed at fair value - 4,560,272 - 4,560,272 December 31, 2019 Level 1 Level 2 Level 3 Total Recorded at Fair Value Assets Index-linked deposits - 757 - 757 Central 1 Class E shares - - 6,487 6,487 Central 1 Class A shares - - 1,389 1,389 Central 1 Class F shares - - 12,781 12,781 Other investments - - 285 285 Derivative financial instruments - 1,950 - 1,950 Total assets held at fair value - 2,707 20,942 23,649 Liabilities Index-linked deposits - 757 - 757 Derivative financial instruments - 165 - 165 Total liabilities held at fair value - 922 - 922 Fair Value Disclosed Assets Loans to owners - - 3,741,286 3,741,286 Investments - 350,495 - 350,495 Total assets disclosed at fair value - 350,495 3,741,286 4,091,781 Liabilities Owners' deposits - 3,725,439 - 3,725,439 Securitization liabilities - 126,730 - 126,730 Total liabilities disclosed at fair value - 3,852,169 - 3,852,169

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 80 AGM Workbook

19) INCOME TAXES

Significant components of the deferred tax assets are as follows: Statements January 1, 2020 of Income OCI December 31, 2020 Allowance for credit losses 1,121 762 - 1,883 Employee future benefits 3,203 212 1,267 4,682 Property and equipment 67 (47) - 20 Fair value adjustments on acquisition (98) 98 - - Deferred revenue 343 29 - 372 Prepaid expenses - (232) - (232) 4,636 822 1,267 6,725

Statements January 1, 2019 of Income OCI December 31, 2019 Allowance for credit losses 1,193 (72) - 1,121 Employee future benefits 1,928 173 1,102 3,203 Property and equipment 270 (203) - 67 Fair value adjustments on acquisition (500) 402 - (98) Deferred revenue 273 70 - 343 Cash flow hedges 12 - (12) - 3,176 370 1,090 4,636

The reconciliation of income tax computed at the statutory rates to income tax expense is as follows:

Amount % Amount % Expected tax provision based on combined federal and provincial rate 2,439 26.5% 4,327 26.5% Ontario rate reduction (764) (8.3%) (1,306) (8.0%) Permanent difference 39 0.4% 120 0.7% Other 205 2.2% 13 0.1% 1,919 21% 3,154 19%

Tax amounts related to current year OCI are as follows: December 31, 2020 Gross Tax Net of Tax

Actuarial gain (loss) in employee defined benefit plans included in OCI (6,961) 1,267 (5,694)

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 81 AGM Workbook

20) TRANSFER OF FINANCIAL ASSETS

[a] Securitization activity

Libro periodically may securitize mortgages through the transfer of mortgage loans to a special purpose entity as described in note 3[n] through programs sponsored by the Canada Mortgage and Housing Corporation. The following table summarizes Libro’s securitization activity in the year:

December 31, December 31, 2020 2019 Residential mortgages securitized and sold 60,883 60,204 Net cash proceeds received 60,135 59,623 Outstanding balance of securitized mortgages 137,156 125,299

There were no mortgage loans that were delinquent as at year-end [nil in 2019]. In addition, there were no credit losses incurred on the mortgages transferred in 2020 or 2019.

Libro retains a securitization liability for mortgages transferred. The liability bears an average fixed interest rate of 1.83% [2.30% in 2019] and bears a weighted average maturity date of 2023 [2023 in 2019]. As at December 31, 2020, the liability was $140,617 [$127,177 in 2019].

[b] Government loan programs In 2020, Libro funded $124,200 of loans under the CEBA Program and $4,005 under the Co-Lending program. As at December 31, 2020, outstanding balances were $122,909 of loans under the CEBA Program and $4,005 of loans under the Co-Lending program.

21) RISK MANAGEMENT

The credit union’s results and operations have been and will continue to be impacted by the COVID-19 pandemic. The adverse effects include but are not limited to a decline in interest rates, increase in credit risk, volatility in equity markets and disruption of business operations. Significant uncertainty remains regarding the breadth and depth of these events and the long-term economic impact on the credit union.

[a] Liquidity risk Liquidity risk is defined as the risk that the credit union will be unable to pay obligations when they fall due, or become unable to repay depositors when funds are withdrawn, or become unable to meet commitments to lend money. Libro manages liquidity risk within Board of Directors’ Policy limits to ensure the credit union has sufficient liquidity to meet its obligations. This is managed by monitoring cash flows and cash forecasts, maintaining a portfolio of high-quality liquid financial assets [note 4], monitoring and managing the remaining contractual term to maturity of its loan and deposit portfolios [notes 5 and 16], and maintaining access to credit facilities through Central 1 [note 10]. Libro achieves this through a combination of active management of organic balance sheet growth, borrowing, whole loan sales, and loan securitization. Since the credit union does not issue redeemable long-term deposit products, liquidity risk will not increase as a result of unexpected prepayments or changing deposit maturity forecasts.

As at year-end, Libro’s liquidity ratio was 21.85% [11.20% in 2019] and assets held for liquidity purposes totalled $990,209 [$416,971 in 2019], consisting of $297,488 liquidity reserve deposits [$250,885 in 2019] and $692,721 cash and other qualifying deposits [$166,086 in 2019].

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 82 AGM Workbook

[b] Credit risk Credit risk is defined as the risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms and arises from the credit union’s direct lending, trading, investment and hedging activities. Granting loans to owners is one of the credit union’s primary sources of income and Libro grants credit through consideration of an owner’s credit history, character, collateral, and capacity for debt. Owners’ financial situations are monitored through the life of the loan and all current receivables are expected to be collected. Debt that appears to be in arrears is impaired to the extent that a loss is expected. Libro uses internal risk scoring measures to assess the credit quality of commercial and agricultural borrowers. These measures are derived from the underlying credit experience, collateral, management expertise, and other objective financial measures.

(i) Credit quality Credit quality of retail borrowers is measured in part by a standardized credit rating system, which considers payment history, current debt, age of accounts, type of credit and credit enquiries. Standard is defined as loans with a credit score between 600 and 649 or C commercial paper.

The application of these scoring measures is as follows:

December 31, 2020 Residential Personal Agricultural Commercial Mortgage Loans Loans Loans Loans Total Above standard 1,363,078 190,909 432,902 417,854 2,404,743 Standard 82,037 7,034 406,162 756,501 1,251,734 Below standard 47,672 3,688 91,821 73,393 216,574 1,492,787 201,631 930,885 1,247,748 3,873,051 December 31, 2019 Residential Personal Agricultural Commercial Mortgage Loans Loans Loans Loans Total Above standard 1,268,635 203,442 395,801 345,945 2,213,823 Standard 93,898 10,714 459,968 683,111 1,247,691 Below standard 56,774 4,702 105,699 94,161 261,336 1,419,307 218,858 961,468 1,123,217 3,722,850

To manage credit risk, Libro secures collateral against all types of loans. In the event that an owner is unwilling or unable to meet their obligations as a borrower, security is liquidated to repay the obligation to Libro. Collateral is taken on each loan funded with regard to the owner’s overall creditworthiness including credit history, character, capacity for debt, and type of loan granted. Note 6 provides detail on collateral held against loans.

[c] Market risk Market risk is defined as the risk that the credit union’s ability to meet business objectives will be adversely affected by volatility in market rates. Libro manages market risk using an earnings at risk approach. The primary objective of this approach is to maximize earnings on a consistent basis while minimizing reductions to net income resulting from changes in future interest rates.

Interest rate risk is the impact that changes in interest rates could have on the credit union’s margins, profit or loss, and equity. Interest rate risk arises from the difference between interest paid related to the credit union’s liabilities and the interest earned on its assets. As part of the credit union’s risk management

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 83 AGM Workbook

strategy, the Board of Directors has established limits on the interest rate exposures that are consistent with the credit union’s risk appetite.

The credit union’s policy is to monitor positions on a monthly basis. Libro uses income simulation modeling to measure exposure to changes in interest rates over short-term periods. Earnings at risk is calculated by forecasting the net interest margin for the next 12-month period using most likely assumptions, including existing hedging activities. Most likely assumptions include management’s best estimates for planned growth rates and the use of future interest rates. Planned growth rates are recorded at the start of the fiscal period as initially set out in the budget and modified to actual experience through the fiscal period. Future interest rates on new business and product renewals are determined using the future interest rates derived mathematically based on the term structure of interest rates. The impact of rate shock scenarios are measured against the most likely forecast (“MLF”) as defined above. The resulting change in the forecast as a result of interest rate shocks is then compared to the MLF to determine the earnings at risk amount. Maximum change limits under these interest rate scenarios have been set out by the Board of Directors. These scenarios are based on hypothetical simulations assuming the markets are shocked with 100 or 200 basis point volatility. At the current time, Libro is in compliance with all limits set by the Board of Directors’ Policy.

The policy limits and most likely projections are as follows:

Maximum Change to Asset Liability Management Limits Change Limit Earnings Status Most Likely Shocked + 200 basis points -10% 7.99% Compliant Most Likely Shocked + 100 basis points -5% 4.00% Compliant Most Likely Forecast Scenario 0% 0.00% Compliant Most Likely Shocked - 100 basis points -5% -0.95% Compliant Most Likely Shocked - 200 basis points -10% -3.24% Compliant

[d] Currency risk Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of a change in foreign currency rates. Libro’s net income is exposed to currency risk from US dollar investments and owner US dollar deposits. Libro mitigates currency risk of US dollar financial assets and liabilities by investing in offsetting US dollar financial instruments with similar terms. Currency risk is managed in accordance with the Board of Directors’ Policy which the Board of Directors reviews annually. For a 1% instantaneous increase or decrease in exchange rate, Libro’s net income would change by $3 [$1 in 2019].

22) ACCRUED AND OTHER LIABILITIES

Accrued and other liabilities consist of the following: December 31, December 31, 2020 2019 Owner remittances to third parties 2,923 2,005 Salaries payable to employees 5,934 6,443 Accounts payable 49 1,148 Lease obligations 8,828 7,139 17,734 16,735

Notes to 2020 Financial Statements 6th Annual General Meeting [in thousands of dollars except as noted or per share] April 17, 2021 Page 84 AGM Workbook

The lease obligations by maturity date are as follows: Minimum Obligation 2021 35 2022 156 2023 796 Thereafter 8,676 Less: Present value discount (835) Lease obligations 8,828

23) COMPARATIVE FIGURES

Certain comparative figures have been reclassified to reflect the presentation adopted in the current year.

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Libro Board of Directors

Jacquie Davison Marycatharine Kusch Bryan Aitken Board Chair Board Vice Chair

Janet Boot Alan DeVillaer Jeff McCallum

Chris Mendes Jodi Simpson Chris Smith

Donna Taylor Garrett Vanderwyst

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Libro Executive Leadership Team

Stephen Bolton Brian Aalbers Rhonda Choja Head Coach, President & CEO EVP People & Culture EVP Operations

Scott Ferguson Tania Goodine Kathleen Grogan EVP Information Systems EVP Strategy & Innovation EVP Finance & Chief Financial Officer

Carol Normandeau Michael Smit EVP Advice & Service EVP Brand & Digital Delivery

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Libro Owner Representatives

Haldimand Norfolk Regional Council Huron Perth North Regional Council Cheryl Beemer Amanda Beddow Mark Dennis Marlene Beyerlein Doug Donovan Josi Evanski Carol Judd Charlie Hoy Simona Kerr Conrad Kuiper Randy Kiernan Jane Muegge Jake Poirier Susanne Robinson Kevin Rauwerda Quinn Ross Tanya Ribbink Marilyn Tyndall Kevin Smelser Danielle Van Wyk Abe Versteeg Chris Watson

Huron Perth South Regional Council Lambton Kent Middlesex East Regional Elizabeth Baldwin Council Sharon D’Arcey Maria Bruijns Joyce DeDecker Michael Clarke Allie Gabel Jenny Coeck Richard Hessels Danielle Cornelissen James Hough Julie Field Michelle Maloney Tim Gilroy Nathan Martens Liz Greve Sydney McCourt Eric Hogervorst Debb Ritchie Roman Lalich Ashley Stewart Barb McNeil Maria Urquhart Erica Michielsen Jennifer Timmermans Hubert Vandenberg

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Lambton Kent Middlesex West Regional London Elgin Oxford North Regional Council Council Emily Charbonneau Kim Atkinson Margaret Eastman Sara Bertens Dave Erskine Katie Brooks Steve Levack Lynn Brown Matt McEachran Ray Chowen Patti-Jo Pumple John Fyfe-Millar Deb Reitberger Lorraine Garnham Missy Stephens Fabienne Haller Gigi Walent-Burke Warren Hoy Paul Warriner Matt Langford Lori Wilkins George Le Mac Sarah Leeming Terry Marcoccia Tim McHugh Amina Meddaoui Dan Mellamphy Mira Ratkaj Trae Robinson Katie Singer

London Elgin Oxford South Regional Waterloo Regional Council Council Allison Bourke Rachel Berdan Donna Diebel Sean Dilamarter Paige Doherty Scott Gunn Sasha Einwechter Cara Goertz David Jensenius Casey Kulchycki Michele Livingstone Donna Lunn Daniel MacKenzie Shereen Miller Rick Martins Lindsay Reid Henry Schmidt Richard Stewart Dave Zenger Ronda Stewart Neil Sunnuck Mark Vaandering Bill Wilkinson Lindsay Wilson

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Windsor Essex North Regional Council Windsor Essex South Regional Council Cathy Chapman Bill Baker Joe Kester Penny Brando Clay Kraynack Walt Cherneski Cindy Lanoue Carolyn Davies Linda Lloyd-Dupuis Dan Gemus Charlie Mailloux Kris Ives Tim McDermott Ivan Martin Jenn McKim Danielle Moldovan Gayle Mitchell Katie Omstead Thom Parent Sarah Parks Bonnie Popov Larry Patterson James Quenneville Kerri Reid Michelle Stein Garnet Talbot

WINDSOR/ESSEX Cayuga Downtown Kitchener London East Amherstburg 18 Talbot St. E., Box 308 165 King Street 1867 Dundas St. E. 463 Sandwich St., S. Cayuga N0A 1E0 Kitchener N2G 1A7 London N5W 3G1 Amherstburg N9V 3K8 905-772-3376 519-904-0366 519-451-2200 519-736-5409 Hagersville Waterloo London Old East Village Belle River 15 King St. E., Box 337 55 Northfield Dr. E. 874 Dundas St. 441 Notre Dame Hagersville N0A 1H0 Waterloo N2K 3T6 London N5W 3A1 Belle River N0R 1A0 905-768-3347 519-744-1031 519-451-4860 519-728-2471 Simcoe Williamsburg London North Downtown Windsor 440 Norfolk St. S. 100 - 1170 Fischer 1703 Richmond St. Business Accelerator Simcoe N3Y 2X3 Hallman Rd., London N5X 3Y2 1501 Howard Ave. 519-426-5930 Kitchener N2E 3Z3 519-673-6928 Windsor N8X 3T5 519-570-9955 226-826-0356 x2510 London South HURON/PERTH 841 Wellington Rd. S. Clinton LAMBTON/KENT/ London N6E 3R5 Essex 48 Ontario St., Box 310 147 Talbot St. N. MIDDLESEX 519-686-1291 Clinton N0M 1L0 Arkona Essex N8M 2C6 519-482-3466 519-776-5231 7130 Arkona Rd. Box 2 London West Arkona N0M 1B0 919 Southdale Rd. W. Exeter 519-828-3971 London N6P 0B3 Harrow 87 Main St. N. 174 King St. W., 519-652-2263 Exeter N0M 1S3 Blenheim Box 387 519-235-0640 Harrow N0R 1G0 11 Talbot St. W. Box 675 St. Thomas Blenheim N0P 1A0 1073 Talbot St. 519-738-2263 Goderich 519-676-8104 St. Thomas N5P 1G4 74 Kingston St., Unit 1 Kingsville 519-631-6195 Goderich N7A 3K4 Sarnia 328 Main St. E. 519-440-0583 Kingsville N9Y 1A8 1315 Exmouth St. Woodstock Sarnia N7S 3Y1 383 Norwich Ave., Unit 1 519-733-6521 Listowel 519-542-5578 Woodstock N4S 3W4 165 Mitchell Rd. S., Unit 1 Leamington 226-253-0123 Listowel N4W 3K9 Strathroy 141 Erie St. S. 519-291-6189 Leamington N8H 3B5 72 Front St. W. 519-326-8641 Strathroy N7G 1X7 Stratford 519-245-1261 391 Huron St. Woodslee Stratford N5A 5T6 Watford 2536 County Rd. 27 519-271-4883 Box 40 5307 Nauvoo Rd. Box 550 Woodslee N0R 1V0 Watford N0M 2S0 Wingham 519-876-2748 519-975-2300 43 Alfred St. W., Box 690 Wingham N0G 2W0 HALDIMAND/ 519-357-2311 LONDON/ELGIN/ NORFOLK OXFORD Caledonia WATERLOO London Downtown 22 Caithness St. 167 Central Ave. Box 2135 REGION Main Floor Caledonia N3W 2G6 Beechwood London N6A 1M6 905-765-4071 420 Erb St. W. 519-673-4130 Waterloo N2L 6H6 519-725-6060