CONTENTS Organisational Structure 3 Our Leaders Barbados Public Workers’ Co-operative Credit Union Limited 4 BPW Financial Holdings Inc. 5 CAPITA Financial Services Inc. 6 CAPITA Insurance Brokers Inc. 7 Consolidated Financial Highlights 8 Management Discussion and Analysis 10 Board of Directors’ Report 14 Independent Auditors’ Report 18 Consolidated Financial Statements 22
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 2 www.legacybarbados.org Who We Are Legacy Foundation is the philanthropic arm of the Barbados Public Workers’ Co-operative Credit Union Limited and its associated companies. At our core, Legacy Foundation is about making a positive impact that will leave a lasting impression in the communities where our Group of Companies operate. Whether it’s a small charitable grant to a local school or a large charitable grant to a public entity, we engage in opportunities that align with Legacy Foundation’s strategic objectives.
3 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 INSURANCE BROKERS BPW FINANCIAL HOLDINGS INC. BPW Financial Holdings Inc. was established to hold the shares of BPWCCUL’s subsidiary CAPITA Financial Services Inc. CAPITA Financial Services Inc. (CAPITA) is a wholly owned subsidiary of BPWCCUL and provides financial services to both individuals and corporates. CAPITA focusses on increasing shareholder return through the provision of competitive financial products and services. Barbados Public Workers’ Cooperative Credit Union Limited (BPWCCUL) is a member based financial co-operative. It therefore serves members only and focusses on providing financial services to individuals with the main goal of service to members. CAPITA Insurance Brokers Inc. (CIB) is a wholly owned subsidiary of CAPITA Financial Services Inc., setup to provide an additional source of revenue and return for its shareholders and increase the value proposition for members and clients within the Group of Companies CAPITA Insurance Brokers Inc. (CIB) is a wholly owned subsidiary of CAPITA Financial Services Inc., setup to provide an additional source of revenue and return for its shareholders and increase the value proposition for members and clients within the Group of Companies. ORGANISATIONAL STRUCTURE
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 4 OUR LEADERS Director Sis. Kieva Cadogan Barbados Public Workers’ Co-Operative Credit Union Limited Director Sis. Lydia Lewis Director Sis. Tanya Chase Treasurer Bro. Troy White Director Bro. Clint Hurley Director Bro. Mark Hope President Bro. Glendon Belle Vice President Bro. Cedric Murrell Secretary Sis. Julie Corbin
5 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 BPW Financial Holdings Inc. Vice Chairman Mr. Glendon A. Belle Chairman Mr. Cedric Murrell Director Mr. Luther Jones Director Ms. Lydia Lewis Director Mr. Mark Hope
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 6 OUR LEADERS (Continued) CAPITA Financial Services Inc. Chairperson Dr. Stacey Estwick Director Dr. Philmore Alleyne Director Mr. Michael Mayers Director Mr. Glyne Harrison Secretary Ms. Tanya Chase Director Mrs. Bertha Pilgrim Director Mr. Hilford Murrell Director Mr. Anthony Christie Vice Chairman Mr. Trevor Colucci
7 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 CAPITA Insurance Brokers Inc. Director Mr. Frank Odle Director Mr. Glyne Harrison Chairman Mr. Glendon A. Belle Vice Chairman Mr. Cameron Haynes Secretary Mr. Clint Hurley Director Ms. Deborah Walkes Director Mr. Paul Maxwell
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 8 CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE YEARS ENDED MARCH 31, 2015 TO MARCH 31, 2019 In Bds $’000 2020 2019 2018 2017 2016 Statement of financial position: Assets Cash and equivalents 276,861 216,110 112,849 68,263 73,065 Investments and other short term deposits 56,696 61,974 76,711 84,338 90,309 Loans to Members (net) 1,311,851 1,235,760 1,174,576 1,099,233 1,001,430 Property and Equipment 61,852 59,772 59,741 44,725 31,712 Other 19,531 18,476 22,011 18,804 19,582 Total Assets 1,726,791 1,592,092 1,445,888 1,315,363 1,216,098 Liabilities Deposits 1,527,678 1,400,074 1,259,922 1,138,486 1,037,172 Loans Payable 1,342 13,520 15,230 22,323 41,011 Other 30,606 27,362 23,277 21,957 20,619 1,559,626 1,440,956 1,298,429 1,182,766 1,098,802 Equity Share Capital 12,008 11,401 10,706 10,084 9,407 Reserve Fund 142,363 134,694 121,094 107,687 97,658 Other Reserves 8,694 4,903 5,854 5,808 4,412 Retained earnings 4,100 138 9,805 9,018 5,819 Total Equity 167,165 151,136 147,459 132,597 117,296 Total Liabilities & Equity 1,726,791 1,592,092 1,445,888 1,315,363 1,216,098 Statement of income: Interest Income 106,307 104,657 101,056 95,242 89,462 Interest Expense 30,957 33,491 32,166 33,400 32,978 Net Interest Income 75,350 71,166 68,890 61,842 56,484 Other income 6,883 5,890 6,129 5,604 5,021 Net income and other income 82,233 77,056 75,019 67,446 61,505 Impairment loss on subsidiary - 2,910 - - - Expected Credit Losses 6,445 4,151 6,942 5,032 4,246 Net operating income 75,788 69,995 68,077 62,414 57,259 Total operating expenses 56,383 54,441 49,778 45,648 41,481 Loss on Government Security - 4,038 - - - Net income before taxes 19,405 11,516 18,299 16,766 15,778 Asset Tax 842 800 753 728 2,327 Corporation tax 168 -28 179 85 269 Net income after taxes 18,395 10,744 17,367 15,953 13,182
9 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 2020 2019 2018 2017 2016 Financial statistics in percent: Asset Growth 8.46 10.11 9.92 8.16 11.50 Loan Growth 6.16 5.21 6.85 9.77 10.53 Deposit Growth 9.11 11.12 10.67 9.77 13.31 Net Surplus Growth 71.21 -38.14 8.86 21.02 36.71 Return on Assets 1.11 0.71 1.26 1.26 1.14 Return on Equity 11.56 7.20 12.40 12.77 11.84 Operating Efficiency 74.40 77.78 73.12 73.14 72.44 Net Interest Margin 4.54 4.69 4.99 4.89 4.90 2020 2019 2018 2017 2016 Other statistics Delinquency ratio (%) 10.0 8.6 7.4 6.3 6.3 # of members (000’S) 100.7 95.0 89.2 84.0 78.4 # of branches 6 6 6 4 4 2020 2019 2018 2017 2016 Net income per member $182.67 $113.09 $194.70 $189.92 $168.14 CONSOLIDATED FINANCIAL HIGHLIGHTS FOR THE YEARS ENDED MARCH 31, 2015 TO MARCH 31, 2019 In Bds $’000 PRINCIPAL BANKERS Barbados Public Workers’ Co-operative Credit Union Limited - Republic Bank (Barbados) Ltd. BPW Financial Holdings Inc. - CIBC First Caribbean International Bank CAPITA Financial Services Inc. - CIBC First Caribbean International Bank CAPITA Insurance Brokers Inc. - First Citizens Bank (Barbados) Limited AUDITORS KPMG – Chartered Accountants
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 10 segments of the economy functioning by facilitating remote working arrangements across the private and public sectors. Private Sector Response – Financial Services The financial sector remained stable, with the banking system still well capitalized during the second half of the fiscal year. Excess liquidity or the cash ratio for banks rose from 18.5 percent to 20.1 percent. There was a reported modest increase in non-performing loans and increased provisions in the event of a worsening of credit quality, post the moratoria period which had a projected end date of September 2020. Macro-economic Outlook Overall, the global outlook remains highly uncertain with the IMF’s forecast for global growth declining to -4.9% as at June 2020. This, along with the depressed demand for global travel introduces significant downside risks to rapid recovery in our tourism sector, our primary engine of growth. With the reopening of our borders and the restarting of businesses and some private sector investment projects, we remain hopeful that there will be some slowing of the economic decline and a firming up of the foundation for recovery in 2021. This should be bolstered by steady resumption of tourism and other tourism dependent sectors. Group Overview We are a financial services group offering a wide variety of services ranging from routine deposits and lending to brokerage and insurance services. Born out of the cooperative spirit, our members and customers have been the driving force and catalyst behind our many achievements including our growth and transformation over the past five decades. As we enter into our fiftieth year as a Credit Union and tenth as a Group, we acknowledge and laud the foresight and vision of our founding members, and the support of our existing members and customers without whom, this journey would not have been possible. The COVID-19 pandemic arrival to Barbados in March 2020 coincided with the end of our reporting period and as a result did not significantly impact the Group’s performance. Adoption of New Accounting Standard International Financial Reporting Standard 16-Leases (IFRS 16) The adoption of International Financial Reporting Standard 16 relating to Leases (IFRS 16) resulted in changes in the presentation of rental properties used for Group’s varying operations. IFRS 16 requires lessees to recognized most leases on their balance sheets and to provide enhanced disclosures of the appropriate Lease Liability and Right-of-Use (ROU) Asset. As a result, the Group recorded a Right-of-Use Asset in its Property Plant and Equipment (PPE) of $5.3 million as per (Note 14) of the consolidated financial statements. The associated lease liability of $5.5 million represents the present value of the cumulative lease payments remaining over the term of the contract. Usual rental charges for the year were therefore split $305 thousand as a finance costs (Note 3) and the depreciable MANAGEMENT DISCUSSION AND ANALYSIS This section of the Barbados Public Workers’ Co-operative Credit Union Ltd. Group’s Annual Report provides a discussion and analysis of the financial position and performance of the consolidated operations of the Barbados Public Workers’ Cooperative Credit Union Limited and its subsidiaries (“the Group”) for the financial year ended March 31, 2020. The MD&A should be read in conjunction with the audited financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The Group includes the parent, Barbados Public Workers’ Cooperative Credit Union Limited, its subsidiary BPW Financial Holdings Inc., holding company for the CAPITA Group that includes subsidiaries CAPITA Financial Services Inc. (“CAPITA”) and CAPITA Insurance Brokers Limited (“CIB”). Economic Outlook COVID-19 Impact The impact of the COVID-19 pandemic on the local economy was materially significant as it disrupted business cycles, resulted in the cessation of activity in the tourism sector, caused business closures across other sectors and ultimately led to a series of national curfews. It was against this background that preliminary data, published for the first six months of 2020 by the Central Bank of Barbados in their “Review of the Barbados’ Economic Performance: January-June 2020” report, revealed economic output had declined by almost 15 percent. Public Sector Response As anticipated, reduced economic activity affected the public finances during the first quarter of the fiscal year 2020/2021. The primary balance which is the difference between Government’s revenue and non-interest expenditure, fell by just over $100 million relative to previous year. However, on the upside, it outperformed the target agreed with the International Monetary Fund (IMF). The Barbados Optional Savings Scheme (BOSS) was established by Government in July 2020 to help generate economic activity by diverting a portion of public workers’ salaries to fund capital works. In July 2020, $4.6 million were issued which $1.2 million was taken up by public servants and the remainder $3.4 million being sold to the secondary market to individuals and institutions. Private Sector Response – Non Financial Services Unemployment claims between March and June surged to over 33,000 with a dollar value exceeding $70 million due to the layoffs in the tourism, restaurants and related industries as well as job losses in other sectors. In an effort to minimize the impact of the reduction of customer spend and cash flows, businesses adopted various practices to reduce operating expenses including reduced working hours and temporary employment. These cost management strategies were widespread and played a significant role in softening the overall impact on unemployment levels. To cushion the impact and the effects of unemployment and reduced disposable income, lending institutions offered their clients moratoria on existing loans. Technology also kept
11 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 charge associated with the ROU assets was $1.3 million (Note 14) to bring the total impact to $1.6 million comparable with a rental expense. International Financial Reporting Standard 9 (IFRS 9) The Group adopted IFRS9 accounting standard in 2019 which requires the consideration of current and future events which could adversely affect the loan and investment qualities, and to estimate and record its likely impact. As a result of this forward-looking analysis, the Group accrued or added an additional $4.1 million in expecting credit losses in the coming fiscal as non-performing loans are projected to increase to 12.36 percent in the next 12 months, up from 10.0 percent at year end March 2020. This amount is included in note 6, as a portion of the total expected credit losses. Snapshot of Credit Union’s Performance: In 2020, we continued our positive performance of prior years in the areas in net income, deposits and membership growth. Despite challenging economic conditions, we achieved substantial growth and once again saw more persons, approximately 5,700, selecting the Barbados Public Workers’ Co-operative Credit Union Limited as their financial institution of choice. This represented a 6 percent overall increase in membership year-over-year. With our success anchored to the quality of service we deliver, staff continued to focus their efforts on transforming the member experience, as evidenced by the 96.0 percent service rating on the annual customer satisfaction survey. The increase in membership resulted in the Credit Union’s deposits growing by $105.0 million (2019 - $119.2 million) or 9.0 percent. The Credit Union pro-actively lowered interest rates on the mortgage and vehicle portfolios during the year to ensure members were afforded solutions that were highly competitive comparable to the market. Mortgage rates were lowered to 4.95 percent compared to 6.95 percent, while motor vehicle loan rates were as low as 5 percent for new vehicles and 7 percent for used vehicles. This resulted in growth of $25.1 million in transport loans, while mortgages grew by $21.8 million or 6.8 percent. Overall loan growth for the Credit Union was recorded at $48.5 million or 4.9 percent. Along with this growth, the Credit Union’s Statement of Financial Position and Income Statement remained robust and performed in line with expectations in most major areas: • Overall cash resources was $294.9 million (2019 - $233.6 million) • Total interest income was recorded at $89.9 million which was relatively consistent with prior year, interest expense was reported at $23.5 million (2019 - $26.1 million). • Non-interest income grewby $740 thousand or 19.6 percent. • Expected credit losses increased by $2.3 million over prior year to reach $6.1 million. • Total operating expenses reached $22.5 million (2019 - $21.5 million) at the end of the fiscal. Notable increases were reported in membership security which grew by 1.1 million or 35.5 percent. This represents the cost to provide insurance coverage on loans and deposits to membership. The cost during the year increased to $0.40 per thousand as compared to $0.30 per thousand in the prior year. Snapshot of CAPITA’s performance As it transitions into its 10th year of operation, CAPITA continues to realize steady growth, increasing assets by $ 26.5 million or 9.4 percent over the prior year to reach $ 307 million at March 31, 2020. Income before de-recognition of Government securities, levies and taxation at March 31, 2020 was approximately $2.5 million (2019 - $1.9 million) and net income after tax was $1.6 million for the 2020 fiscal period versus $734 thousand at March 2019. In an environment where technology continues to shape the future of the financial services sector, CAPITA also started to evolve by entering the digital payment space to offer products and services. As part of its planned income diversification strategy, it continues to work with the Co-operative and Credit Union Leagues in Barbados and St. Lucia to deploy a number of services including ATM, Debit Card and Credit Card services. In December 2019, CAPITA in conjunction with the St. Lucia League created a historic milestone by launching the first ATM Network for Credit Unions on the island. For the first time ever, members of participating Credit Unions are now afforded the benefit of having debit cards that can be used at any of the local ATMs in the Credit Union network to access their accounts. Similarly, in Barbados, an international Debit Card Project is underway that will allow participating Credit Unions to be able to issue international debit cards to members to replace their existing local only cards. On completion of this project an international credit card project is also to be introduced to the local Credit Union sector, providing services to those members who previously may not have been able to gain access. Group Performance Summary: The Group rebounded strongly from a previous financial yearend that was marred by two exceptional expenses to end with a net income before levies and taxation position of $19.4 million as compared to $11.5 million for the prior year period ended March 31, 2019. These two exceptional expenses, a loss on Government of Barbados Securities of $4.0 million and a $2.9 million write down on goodwill, together accounted for $6.9 million out of the total variance of $7.9 million. 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 2016 2017 2018 2019 2020 1,001,430 1,099,233 1,174,576 1,235,760 1,311,851 In BD$'000 Loans and advances 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2016 2017 2018 2019 2020 1,037,172 1,138,486 1,259,922 1,400,074 1,527,678 In BD$'000 Deposits
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 12 Throughout the financial year ended March 31, 2020, interest rates on savings and deposits trended downwards in the sector and eventually reached a low of 0.0 percent at some financial institutions at March 31, 2020. Despite this downward trend the minimum interest rate on deposits across the Group was 0.5 percent at March 31, 2020. This commitment to ensuring depositors receive a reasonable return remains a fundamental part of our member/customercentric philosophy. Net interest margin for the year was 4.54 percent as compared to 4.7percent in 2019. As a result of the enhanced growth and financial performance the Group’s levies and corporation taxes increased by $42 thousand and $196 thousand respectively and assets and corporation taxes were $842 thousand and $168 thousand respectively. Net income after taxation and levies for the year totaled $18.4 million compared to $10.7 million for the year ended March 31, 2019. Consolidated Financial Statement Highlights Revenues: For the financial year ended March 31, 2020, the Group earned total interest revenue of $106.3 million, up from $104.7 million the previous year. This represented an increase of $1.6 million or 1.6 percent over the prior year. Income generated from non-interest sources increased by $993.6 thousand or 16.9 percent from the results of prior year. Net interest income: Net interest income moved from $71.2 million in 2019 to $75.3 million at March 31, 2020. This represents an increase of $4.1 million or 5.8 percent. Net income: The Group earned a consolidated net income before levies and taxation of $19.4 million (2019 - $11.5 million). This was relatively on par with the performances of 2018 at $18.3 million and also 2019 net of the two previously noted exceptional transactions that were incurred. Income after taxation and levies were $18.4 million (2019 - $10.7 million). Operating Expenses: Total operating expenses inclusive of taxes increased from $55.2 million in 2019 million in 2020 to $57.4 million. This was principally driven by increases in Regulatory fees, members security, legal and professional fees together with increases in cost to upgrade our properties. Assets: Total assets of the Group stood at $1.7 billion at March 31, 2020. This represented an increase of $134.7 million or 8.5 percent over the previous year. At March 31, 2020, the Group’s consolidated net loans and advances stood at $1.3 billion, an increase of $76 million or 6.2 percent over prior year. Loan growth was primarily driven by increased consumer loans of $30.4 million supported by mortgages ($37. 5 million) The Group remained highly liquid with total cash resources of $308.2 million compared to $252.5 million over prior year. Asset quality: The delinquency ratio increased to 10.0 percent at the end of March 31, 2020 compared to 8.6 percent at the end of March 31, 2019. While this rate was above prior year, we recognize and acknowledge that the economic impact of the COVID-19 crisis is far reaching and profound, and the challenges our members and customers face in these uncertain times are real. We are committed to providing relief and solutions according to individual needs, and to providing assistance while working through the financial implications of the economic fallout. MANAGEMENT DISCUSSION AND ANALYSIS (Continued) 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 2016 2017 2018 2019 2020 1,001,430 1,099,233 1,174,576 1,235,760 1,311,851 In BD$'000 Loans and advances 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 2016 2017 2018 2019 2020 1,037,172 1,138,486 1,259,922 1,400,074 11,527,678 In BD$'000 Deposits - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2016 2017 2018 2019 2020 1,216 098 1,315,363 1,445,888 1,592,092 1,726,791 In BD$'000 Total Assets 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2016 2017 2018 2019 2020 13,182 15,953 17,367 10,744 18,395 In BD$'000 Net Income - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2016 2017 2018 2019 2020 1,216,098 1,315,363 1,445,888 1,592,092 1,726,791 In BD$'000 Total Assets 0 2,000 4,000 6,000 8,000 10,000 12,0 14,000 16,000 18,000 20,000 2016 2017 2018 2019 2020 13,182 15,953 17,367 10,744 18,395 In BD$'000 Net Inco e
13 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 To date, the Group has provided financial assistance to its members and customers in various forms, and as at July 31, 2020 has offered moratoriums in excess of 3,000. Providing assistance through the provision of financial counselling, alternative loan facilities and restructuring plans will remain a key focus of management going forward. Liabilities: The Group’s liquidity position continues to be strong and is primarily driven by the continued growth in deposits. At the end of the financial year, the Group’s deposits totaled $1.5 billion, an increase of $127.6 million or 9.1 percent compared to an increase of $140.2 million or 11.1 percent in prior year. The Group’s only external borrowing pertains to the subsidiary CAPITA Financial Services Inc. and at the end of the financial year, this stood at $1.3 million compared to $13.5 million in prior year. Equity: As at March 31, 2020, the Group’s total equity was $167.2 million. This is an increase of $16.0 million or 10.7 percent compared to an increase of $3.7 million or 2.5 percent in the previous year. This increase included net surplus for the year of $17.1 million, the issuance of $732 thousand in additional shares, and the distribution of $3.6 million in dividend and interest rebate to members during the year. This compared to $3.4 million in the prior year. The Group’s capital adequacy ratios continue to be well above regulatory requirements. This continues to be monitored on an on-going basis. OUTLOOK – 2020 and Beyond The 2019/20 fiscal year was a breakthrough one for the Group in many ways. The Credit Union surpassed the 100,000 members mark; CAPITA diversified its service offerings and entered into the payment systems arena; another subsidiary, Allied Co-operators Incorporated started its journey in the last quarter of the financial year, and Legacy Foundation, our philanthropic arm was relaunched at a time when the charity is needed more than ever. The COVID-19 pandemic arrived bringing significant business disruption, change and unpredictability at both the micro and macro level of our society. As a Group, we are heading into the highly unpredictable waters of fiscal year 2020/21 but we are also heading into a Golden Jubilee year with the Credit Union and CAPITA celebrating their 50th and 10th anniversary respectively. With $1.7 billion in assets and $18.4 million in consolidated income after taxes, the Group has come a far-way from its humble beginnings and continues to exhibit best in class resilience, strength and stability. These are all characteristics needed now more than ever as Barbados, the region and the world seeks to break free from the negative impacts of the pandemic. Our expectation is for a challenging anniversary year. We anticipate the economic slowdown caused by COVID-19 to continue given our reliance on travel and tourism and the impact of the current state of that sector, which may be further compounded by high levels of unemployment that will continue during the year and beyond. While we recognize that members and customers across the Group will try to honor their contractual obligations, we are not oblivious to the realities of personal circumstances and anticipate a decline in our financial performance in what will be a challenging financial environment. Our financial numbers, however, do not define who we are, as our overall value is measured by more than the size of our annual surplus. Our strong financial performances over the years, our robust liquidity and capital positions, our professional and caring staff, and our committed Board of Directors and Elected Officials have placed us in a position to not only withstand the tests that will come our way, but also to help our members find their way through it as well. We remain fully committed to this in alignment with the cooperative values and the fact that ourmembers and customers come first and foremost. We look towards 2021 with great optimism because it was in similar conditions that the Credit Union movement, and the philosophy to which we subscribe, was formed and thrived. We look forward to continued growth in our membership and customer bases and to the strengthening of those relationships as we maintain our acknowledged quality service, introduce new technologies and enter intonewproduct and service areas across the Group including access to developmental opportunities through our Member Education Relief Programme. As we head into the new fiscal year, we remain committed to ensuring the physical and financial health, safety and welfare of our members, customers and employees across the Group are not compromised. We thank you for your dedication and continued confidence in us throughout the past year and look forward to serving you as we work through the coming year together.
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 14 BOARD OF DIRECTORS REPORT OVERVIEW The Board of Directors of the Barbados Public Workers’ Cooperative Credit Union Limited is pleased to address and report to you our valued members in this our Golden Jubilee; a celebratory year for the credit union. Our members are our lifeblood and the reason we are here, so on behalf of the Board of Directors, Management and staff we want to express our sincere gratitude for your loyalty and support, as well as to let you know how proud we are to serve you. As we report on our performance during the financial year 2019 – 2020 we are mindful of the macro-economic conditions that prevailed during the course of the year. Following a 2018-19 period that adversely impacted the movement and its members, optimism in the economy and its engines of growth was returning when management met to discuss the plans and objectives for 2019-20. The macro-economic environment was recovering, Government’s implementation of the BERT programme was showing early results and Barbados was on track to meet targets agreed with the International Monetary Fund. A year on we have witnessed a dramatic change as our country, region and the world faces a deadly coronavirus pandemic. Our members are once again faced with significant hardships as our borders were closed to international trade and travel and many of our sectors, including the invaluable tourism sector, came to a virtual halt crippling the local economy. From all reports, the fallout from the pandemic will be with us for some time to come. Your credit union remains committed to providing the assistance needed to help you through these difficult times and whether by way of moratoriums, training or access to additional financial support, we will work with you in line with our philosophy of people helping people. While the credit union continues to perform admirably and has achieved much during the past year despite the macroeconomic challenges, there are some movement challenges that must be highlighted as they continue to present obstacles to our rate of growth. These include renewed aggressive drives by the local banking community as a result of excess liquidity and mutual customers/members, new competition in the form of payday type and non-traditional lenders and enhanced weightiness of international regulations from an accounting (IFRS9) and a sector (AML/KYC) perspective. All of these activities invoke additional costs on the credit union including but not limited to revised processes, enhanced marketing, additional staff or staff training, technical system changes and software implementation/adaptation. These operational changes directly impact the benefits available to members through reduced surplus, dividends, rebates and member grants. While we look toward an uncertain future, we cannot remove our “foot” from the pedal, which was pressed into action some fifty odd years ago, through the foresight of the founders of this institution. We must forge ahead to ensure that you our members are provided for, catered to and helped in every way possible. FINANCIAL PERFORMANCE Despite the challenges mentioned the credit union experienced another successful year and remains strong. At the end of the 2019 - 2020 financial year, the Credit Union recorded total assets of $1.5 billion which was representative of an increase of $120.4 million or 8.9 percent over last year’s performance. Cash and cash equivalents totalled $294.9 million, an increase of $61.3 million or 26.2 percent, while amortised cost classified financial investments totalled $18.2 million, decreased by $1.3 million or 6.8 percent. While the loan demand tapered off at the end of the financial year due to the national shutdown and resulting business closures associated with the COVID-19 pandemic, the overall loan portfolio increased during the year under review by $48.5 million. Details of the loan growth and other performance highlights are available in the Financial and Credit Committee reports for the period ended 31 March 2020. SUBSIDIARY PERFORMANCE At the consolidated level, CAPITA Financial Services Inc. had recorded its largest profit to date of $1.6 million which can be attributed to the growth in interest income relating to loans and advances. Assets rose to $307.5 million with loans positively growing to $265.8 million. During the year under review, a shared ATM service, similar to the local CarIFS, was completed in the St. Lucia market. CAPITA St. Lucia, in conjunction with the St. Lucia Co-operative & Credit Union League, was pivotal in the roll-out of this initiative which allows our credit union brothers and sisters to have access to Automated Teller Machines (ATMs) for the first time. To date, the three Credit Unions who have completed their roll-out of the machines have been attaining good transaction levels across their networks. Discussions are also presently underway to provide similar shared access to the banking sector of St. Lucia. CAPITA continues to improve performance in its core functions with credible portfolio diversification being evidenced through growth in vehicle and loan financing. Vehicle leasing has been particularly successful and appealing to local businesses. In recognizing the benefit of having a Central Bank regulated entity as part of the sector, the Barbados Co-operative & Credit Union League Ltd has determined to work with CAPITA to be the conduit through which the local credit unions can avail themselves of digital banking services. This has been evidenced in the recent efforts to transition the sector to credit and debit card services for members. Work on this project has been ongoing and is anticipated to conclude during the current fiscal. Similarly, access to Automated Clearing House (ACH) services President Bro. Glendon Belle
15 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 is also in the pipeline. These types of projects underscore the importance and relevance of CAPITA in the transformation of the movement and the long-term value of CAPITA to the sector and Group. CONSOLIDATED PERFORMANCE The consolidation position of the group as at the reporting period, shows that total assets recorded at $1.7 million, with growth in key areas, such as loans and advances and cash resources through growth in deposits and savings. REGULATORY DISCUSSIONS During the financial year under review, we met with the regulators at board and management level and have committed to frequent and open discussions as we move forward. SPECIAL PROJECTS Ever cognizant of the fact that we have outgrown our existing Upper Broad Street premises we continue to be focused on bringing our Lower Broad Street property to a state where it is fit for use. During the period under review, remedial work on the property commenced as the gutting of the building and the building out of electrical and engineering specifications to bring the property up to code were completed. We are currently at the stage where the architectural drawings and designs are being completed, in preparation for issuance of tenders for the works to be done. While we had anticipated being further along at this stage, various regulatory and planning requirements, construction sector issues and COVID-19 pandemic impacts, slowed progress. We however remain focused on completion and in a manner that is in keeping with the highest standards of project management. We wish to place on record, that the work which the Supervisory Committee undertook in reviewing our Mile & A Quarter buildout has been taken very seriously and we are ensuring that the missteps highlighted are not repeated. We acknowledge and share their concerns in ensuring our investments and members’ assets are protected. With the imminent repurposing of CarIFS in the financial services landscape, the credit union had to replace plans to launch a credit card with plans to transition its debit cards from the CarIFs network to the MasterCard network. Extensive work is currently being done on the project to ensure members continue to have fully functional debit access when CarIFS as we know it, disappears. In addition, the use of the MasterCard platform will bring about additional value-added through online and other extended capabilities. While there have been some untimely delays due to circumstances outside of our control, we remain committed to ensuring the project is finalized during this fiscal year. As we approached the end of the reporting period, key technological changes were required in the way we do business to ensure business could continue despite the COVID-19 pandemic. We were able to successfully transition to remote work for the staff who could work from home, while maintaining availability of our human and electronic channels, to ensure that you our members were able to access your funds and provide expected service levels. We are happy with the way staff, management and you the members were able to overcome initial anxieties and adhere to the enforced protocols to ensure continuity of service while maintaining a safe work and member environment. REGULATORY REQUIREMENTS As a small island developing state, Barbados continues to be bound to international agreements and statutes which come with various rules and regulations. These include mandatory Anti-Money Laundering/Countering Financing for Terrorism (AML/CFT), Know Your Customer (KYC) and regulatory reporting requirements. Additionally, a key requirement in new technological services such as credit bureau services, is the agreement to data sharing and privacy agreements and regulations and the maintenance of up to date customer information that is refreshed on a periodic basis. This is the new reality of the sector in which we operate as the implementation of these types of protectionist measures to weed out the bad players and ensure the safety of members’ deposits and the credit union movement in general will continue. A review conducted during the reporting period revealed that we have significant work to do in getting members to assist us in keeping their records up to date as required by law. We need more of you to provide us with updated and current information to ensure that we are compliant with the regulations. We are asking for your assistance in this regard. CORPORATE GOVERNANCE The Credit Union has grown and expanded over the years from a single business entity into a financial services group which includes – BPW Financial Holdings Inc., CAPITA Financial Services Inc, and CAPITA Insurance Brokers Inc. Not only are we the largest credit union in Barbados, we are also the largest indigenous financial institution. Given our size and scope and the level of importance placed on us by the regulators, it is important to ensure the existing governance framework is in line with international best standards for the financial services industry. As we continue to grow by increasing service offerings and diversifying into different areas throughout Barbados and the wider Caribbean, it is important we ensure the necessary controls to protect your investments with us are maintained. We can no longer operate and do business the same way, and to this end we have engaged PwC to conduct an assessment and provide guidance on enhancement of our governance framework. Work on this project is anticipated to be completed during the current fiscal. CORPORATE REDESIGN Work on the corporate redesignwas delayed due to the COVID-19 pandemic. We are pleased to state that we have since restarted and have met and had cordial discussions with the Barbados Workers Union, the employees’ representative, on the matter and we continue to partner on moving it forward to completion. We assure you that your previous concerns were heard and that the intent and purpose of this exercise is not to dislocate or negate any of our essential workers, but rather to ensure that our various structures are properly built out to support our continued growth, and to provide efficient and effective delivery of services to you our members, now and into the future.
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 16 LEGACY FOUNDATION Our philanthropic arm – Legacy Foundation continues to gain recognitionandsuccess in itsoperations. Duringtheperiodunder review, the Foundation continued to provide funding which met its criteria. However, our level of funding philanthropy is limited to the funds granted by the credit union and what we can raise through your generous donations. We encourage you to use the Foundation as your vehicle to make a difference to others less fortunate - no matter how great or small, your tax deductible donation makes a big difference to fellow Barbadians. Visit any of our branches to use the donations boxes which are present or contact the Foundation online at www.legacyfoundation.org for further information or instructions on donating. THRIFT CLUB AND THRIFT CLUB SCHOOL SAVERS PROGRAMME During the period, the Thrift Club and Thrift Club School Savers membership continued to grow as we experienced an almost 3% expansion in the portfolios by the end of the reporting period. Our annual Thrift Club events, the Thrifty Teens Workshop, Summer Camp, Academic Awards and Christmas activities, were well received and participation was high as we continued to effectively engage our future co-operators. There continues to be significant interest in the school savers programmes at the primary school level as we engaged with educators in various fora across the Barbadian landscape. While plans were in place for the launch of two additional schools during the last quarter of the financial year, regrettably these had to be postponed as a result of the changing environment we found ourselves in under the covid-19 pandemic. An increased number of opportunities to work with the youth and champion the importance of cooperatives and financial literacy were secured through this programme as we were able to host student saver member appreciation days and conduct lunch and learn sessions at the credit union. CREDIT UNION REPRESENTATIVES WeacknowledgetheAssociationofCreditUnionRepresentatives and their stellar contribution to our development and growth over the course of the past fifty years. Though having experienced some inactivity for varying reasons over the past year, the Association and its volunteers remain an important part of our Credit Union’s fabric. CORPORATE SOCIAL RESPONSIBILITY There are seven co-operative principles under which all credit unions operate and these are: • Open and Voluntary Membership • Democratic Member Control • Members’ Economic Participation. • Autonomy and Independence. • Education, Training, and Information. • Cooperation among Cooperatives. • Concern for Community We have continued to adhere to these principles in all we do. During the course of the past year however, our focus shifted strongly to co-operating with cooperatives as we recognized the fragility of some of our fellow credit union organisations in the testing economic conditions that prevailed. We started the process to build out our shared service arm of the group through – Allied Co-operators Inc. The objective of this new company is to provide the necessary assistance, through the Barbados Co-operative & Credit Union League Ltd. to smaller credit unions which need assistance due to resource and financial constraints. Initially to be focused on those wishing to remain compliant with regulatory guidelines in the areas of audit and anti-money laundering systems, this will be expanded over time to cover a full suite of support services in the long-term. Much of the work has been completed to date and we are currently in the final stages of transitioning this entity. As members, we ought to be proud that we can provide this supportive assistance to our more vulnerable brothers and sisters in the credit union movement. The cooperative principle of concern for community is key to the longevity of the Credit Union andmovement as a whole. It is our responsibility to build and keep up our communities by giving back. The year under review was no different as we reached out and assisted several members who appealed for assistance, provided scholarships through our annual educational grants and scholarships programmes, participated in reaching out to and through our thrift club to the junior credit union members and provided various forms of donations and sponsorships. Towards the end of the reporting period, we were forced into taking action that was more practicable to assist in our community. The 2020 COVID-19 pandemic forced us into contingent planning for the new fiscal to ensure that you our members could provide for yourselves and families, while at the same time ensuring that we remain economically sound. We have considered and approved a member educational and relief plan to help those members who may be displaced by the pandemic as well as to retool, re-educate and empower those who may want to enter the entrepreneurship arena. We are growing and evolving to better serve you and as we set-out on the journey of our next fifty years, the future of your Credit Union is bright. We are thankful for and acknowledge the leadership and commitment of our management team, the work of our staff and their overall dedication to ensuring that you our members remain the focal point of our activities. LOOKING AHEAD 2021 Operational Changes As we look to 2021, we foresee an environment of continued technological, regulatory and economic changes. Through these changes, we will ensure we adapt by continuing to work on enhancing our digital footprint and embedding member friendly technology into the way it delivers its services. Launch of our branded card products and greater in branch use of technology to support remote loan applications/delivery to members will be a major focus. We will also be working on updating our website and social media presence, augmented with other online tools and services to provide an enhanced, more interactive and personalized BOARD OF DIRECTORS REPORT (Continued)
17 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2020 member experience that educates and informs. In support of our colleagues in the movement we will also continue to operationalize the shared services of our subsidiary Allied Cooperators Inc. to ensure the movement remains strong through compliancewith rules and regulations. More information will be forthcoming on these initiatives as time progresses. As we continue to operate under a new and different norm, we encourage you to take up and utilise our digital and webbased technological services and solutions which are available across our many platforms - online banking, e-statements and co-optima connect to name a few. Our forms and application are all available online, and our payment processes can now be effected electronically to and from employers or any entity/ person from which funds are due or payable. We will work with you to make your transition to these convenient and time saving services easy and effortless. 50th Anniversary Celebrations The celebrations commemorating the 50th Anniversary of the Barbados Public Workers’ Co-operative Credit Union Ltd. were scheduled to commence 6th May 2020, the actual anniversary date of the Credit Union. Given the unexpected arrival of COVID-19 and its impact on gatherings and social events, it became necessary to defer planned activities. To ensure the health and safety of our members, staff and service providers we will continue to be guided by the Government and health authorities’ degree of comfort with the holding of mass events and will revisit our anniversary plans during the course of the year. Thrift Club and Thrift Club School Savers Programme We reaffirm our commitment to the development of our youth and the enhancement of financial capability among them. This will be well supported by a restart of training workshops for secondary school teachers, an initiative previously accommodated as part of our community outreach. These workshops will ensure a greater focus on co-operative principles and financial literacy in schools. Membership’s support will be sought for a reduction in the qualifying shares for potential youth members. We anticipate this change along with the implementation of membership accounts for children under 12 years of age to bring about increased growth in the portfolio. Credit Union Representatives Members’ support will be sought as we refocus on enhancing the Association of Credit Union Representatives by way of a re-launch of the programme, with an emphasis on increasing volunteer members from within the public and private sectors, as well as tertiary level educational institutions. Our objective is to revitalize this group as amajor support arm for the Credit Union, providing assistance primarily for community and corporate social responsibility initiatives but also in support of instilling financial literacy skills and cooperative principles and values among Barbadians. Member Education and Relief Plan Recognising our new Covid environment, the changes that have been thrust upon us and the impact they have had, and will continue to have, in our lives we will be introducing a specifically constructed member education and relief programme to help our Credit Union’s members. Fully supportive of the philosophy of ‘people helping people’ we will be supporting our members who are facing difficulties as a result of the COVID-19 pandemic by coordinating and providing resources and opportunities to you under this programme. Our efforts will be focused on educating, equipping and retooling through the use of free or heavily subsidized training initiatives supported by access to enhanced products such as our microloan product. This initiative will be open to all membership. The Credit Union remains resolute in our promise to nurture member development and growth by providing educational grants, scholarships and special academic awards at all levels. Two new scholarship programmes targeting young school leavers and recognizing sporting and artistic achievements will be added to our suite of awards during the coming year. These are unprecedented times we find ourselves in, but we will adapt to the changing environment and the new norms it brings and strive to provide the assistance you require while doing so. Throughout the trying times we will be here to help you get through… it is the co-operative way! ACKNOWLEDGEMENT The Board of Directors wishes to extend gratitude to members of the elected committees, our committed staff, sub-committees and of course, you, our members for the commitment, perseverance and resolute support of the achievement of the Credit Union during the year under review. The Board of Directors wishes also to place on record appreciation for the immense contribution, devotion and commitment of retiring directors Bro. Clint Hurley, Sis. Lydia Lewis and Sis. Tanya Chase. CONDOLENCES We take this opportunity to extend condolences to those of the Credit Union family, who lost loved ones during the past year.
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