Non-Consolidated Annual Report 2020

BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | NON-CONSOLIDATED ANNUAL REPORT 2020 11 The Credit Union continues to mitigate its principal risk; credit risk, through a robust credit risk management environment that ensures a sound credit-underwriting process, effective and appropriate credit administration and robust measurement and monitoring. Loans continue to be the largest andmost obvious source of credit risk and in the current environment, our efforts notwithstanding, non-performing loans during the year ended March 31, 2020 increased by $16.9 million or 19.2 percent. Non-performing loans represented 9.9% of the Credit Union’ total loan portfolio.” We acknowledge that times are difficult and some of our members are experiencing financial challenges and we remain committed to engaging with them to assess their individual situation and offer workable solutions geared at returning their accounts to a state of normalcy. While deposit interest rates in the market continue to trend downward to all-time lows, the Credit Union continues to maintain some of the most competitive rates on deposits. This commitment to allowing members a reasonable return has resulted in the Credit Union achieving unprecedented growth in deposits of $104.6 million at the end of the financial year 2020, at an average rate of return of 1.92 percent. This growth in deposits increased available cash resources to $294.9 million as compared to prior year $233.6 million and was used to fund our members’ lending needs. REVIEW OF FINANCIAL PERFORMANCE TOTAL INCOME AND NET INCOME Total income, which is made up of interest and non-interest income before provisions for credit losses, was reported at $94.4 million as compared to $93.2 million in the prior year. Net income for the year ended March 31, 2020 was reported at $17.1 million, up from $12.0 million in the prior year. NET INTEREST INCOME Net interest income is comprised of earnings on assets such as loans and securities, including interest income, less interest expense paid on liabilities, such as deposits and wholesale funding. Net interest income grew by $3.1 million or 4.9 percent in 2020 as deposits were lowered as well as repriced at lower values. Total interest income grew marginally by $513.8 thousand or 0.6 percent to reach $89.9 million, while total interest expense decreased by $2.6 million or 9.9 percent to reach $23.6 million. Interest income from loans and advances increased by $1.0 million or 1.2 percent while interest from cash resources and financial investments decreased by $239.8 thousand and $253.3 thousand or 26.6 percent and 15.7 percent respectively. OTHER INCOME Other income increased by $739.9 thousand or 19.6 percent during the financial year. This was driven mainly by increased legal income of $454.8 thousand or 46.0 percent; increased income from ATM transactions and related services of $254.8 thousand or 16.6 percent combined with a $109.4 thousand or 10.3 percent increase in revenues from the recovery of charged off loans. EFFICIENCY AND EXPENSE MANAGEMENT The success of our organization can be attributed to the careful and diligent management of internal expenses by our highly trained, dedicated, and experienced staff. Non-interest expenses were primarily associated with activities that support our strategic objectives. STAFF COST Compensation and benefits to staff remained relatively flat. We continue to invest in our people, processes and technology to ensure a member experience that creates a framework for enhancing their financial health. The ability to deliver supreme service to our members is measured by an annual satisfaction survey. During the year, the Credit Union attained a score of 96 percent, signaling our members’ satisfaction with the quality of service being offered to them by staff. TOTAL OPERATING EXPENSES Total operating expenses for the year was reported at $47.6 million, representing an increase of $1.3 million or 2.8 percent above the prior year. This was primarily attributable to an increase in premiums for the deposit and loan protection benefits our members enjoy which went from $3.1 million to $4.1 million, and the regulatory fees paid to the Financial Services Commission of $506 thousand. The other expense items remained within our acceptable range due to the prudent management of operating expenditure. NET OPERATING INCOME Net operating income increased by $2.8 million or 4.5 percent to end the year at $64.7 million. Expected credit losses (ECL) were $6.1 million, increasing by $2.4 million or 62.4 percent over prior year. While the increase in delinquent loans were relatively consistent with that of prior year, increases in ECL were required as our statistical models showed that the probabilities of loans going delinquent (probabilities of default) and the resulting losses that would arise should those probabilities of defaults be realized (loss given defaults) had both increased with a change in the mix of loans going delinquent. ASSETS Assets continued to record strong growth in the current year over the prior year to reach approximately $1.5 billion at March 31, 2020. Growth, recorded at $120.4 million or 8.9 percent, was - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2016 2017 2018 2019 2020 1,020,250 1,111,578 1,223,643 1,352,317 1,472,712 In BD$'000 Total Assets 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 2016 2017 2018 2019 2020 13,542 16,017 16,597 11,962 17,092 In BD$'000 Net Income - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2016 2017 2018 2019 2020 1,020,250 1,111,578 1,223,643 1,352,317 1,472,712 In BD$'000 Total Assets