CONTENTS Organisational Structure . . . . . . . . . . . . . . . 3 Our Leaders Barbados Public Workers’ Co-operative Credit Union Limited . . . . . . . . . . . . . . . . . . 4 Legacy Foundation . . . . . . . . . . . . . . . . . . . . 6 Allied Co-Operators Incorporated . . . . . . . 7 BPW Financial Holdings Inc . . . . . . . . . . . . 8 CAPITA Financial Services Inc . . . . . . . . . . 8 CAPITA Insurance Brokers Inc . . . . . . . . . 10 Consolidated Financial Highlights . . . . . . 12 Management Discussion and Analysis . . . 14 Board of Directors’ Report . . . . . . . . . . . . 20 Independent Auditors’ Report . . . . . . . . . 28 Consolidated Financial Statements . . . . . 32 Our Vision We are a group of companies committed to improving the livelihood of people and their communities. In response to the COVID-19 environment and the related changes it has brought upon us we took the opportunity to revisit and review our strategic plan in order to redetermine what is required to realise our vision of providing an unrivaledmember experience and becoming a group of companies consistently improving the livelihood of people and their communities.
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 2 Errol AndersonGay 1930 – 2021 Our beloved Brother was laid to his eternal rest on April 23, 2021. Brother Gay, a well-respected credit unionist and a founding member of our Credit Union provided yeoman service up until his passing. As one of our stalwarts, he served on the Supervisory Committee in the Credit Union’s formative years, and subsequently spent many years as Chairman of the Credit Union’s Credentials Committee. One of his most visible public contributions to the credit union has been his voluntary service in the role of Chairman of Elections at the Annual General Meetings from 2012 until his passing. Brother Gay truly exemplified the credo that all credit unionists live by...people helping people. He dedicated his life to service with many organizations and will be deeply missed by the Credit Union Family. Rest in Peace and Rise in Glory Brother Gay. Our beloved Brother
3 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 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 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 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 HOLDINGS BPW Legacy Foundation is a registered charity and philanthropic armof Barbados PublicWorkers’ Co-operative Credit Union, its subsidiaries and associated companies Allied Co-operators Inc (ACI) is a wholly owned subsidiary of Barbados Public Workers’ Co-operative Credit Union Ltd Through a shared services partnership with the Barbados Co-operative & Credit Union League ACI aims to provide every League Affiliated Credit Union with affordable access to best-in-class assurance services, regardless of their size BPW Financial Holdings Inc was established to hold the shares of BPWCCUL’s subsidiary CAPITA Financial Services Inc
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 4 Our Leaders President Bro. Glendon Belle Treasurer Bro. Troy White Director Sis. Lydia Lewis Vice President Sis. Julie Corbin Assistant Secretary Sis. Kieva Cadogan Director Bro. Courtney Gibson Secretary Bro. Mark Hope Director Bro. Cedric Murrell Director Sis. Jameela Hollingsworth Meet the Board of Directors
5 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 Member Relations Manager - Loans Bro. Philip Babb Manager, Management Information Systems Bro. Irwin Gibson Group Chief Executive Officer Bro. Glyne Harriison Card and e-Services Manager Sis. Sadie Austin Internal Auditor Bro. Eric Small Group Financial Controller Bro. LeVere Catlyn Risk Manager Sis LaVerne Derrick-Watson Compliance Manager Sis. Wanda Massiah General Counsel Sis. Natalie Holder Meet the Management Team
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 6 Trustee Mr. Cedric Murrell Trustee Mr. Cranston Browne Trustee Ms. Patsy Crichlow Trustee Ms. Ayodele Burrowes Trustee Mr. Courtney Gibson Our Leaders (Continued) Chairman Ms. Maureen Graham Programme Development Coordinator Mr. Hanif Moore Trustee Ms. Kieva Cadogan Meet the Management Team www.legacybarbados.org Meet the Board of Directors
7 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 Secretary Ms. Julie Corbin Director Mr. Derrick Cummins Director Mr. Barry Hunte Chairman Mr. Mark Hope Internal Auditor Ms. Millicent Maximilien Director Mr. Troy White Director Mr. Antonio Rowe Director Mr. Glyne Harrison Meet the Management Team CO-OPERATORS INCORPORATED Meet the Board of Directors
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 8 Director Mr. Glendon Belle Director Mr. Luther Jones Secretary Ms. Lydia Lewis Our Leaders (Continued) Director Mr. Benjamin Drakes Chairman Mr. Cedric Murrell FINANCIAL HOLDINGS INC. BPW Meet the Board of Directors Meet the Board of Directors Director Mr. Philmore Alleyne Director Mr. Michael Mayers Chairman Ms. Stacey Estwick Secretary Ms. Julie Corbin
9 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 Meet the Management Team Manager, Finance & Planning Mr. Terry Bonnett Card Manager Mrs. Sonia Hall-Hunte Director Mr. Troy White Director Mr. Damien Gaskin Director Mr. Mark Hope Chief Executive Officer Mr. Paul Maxwell Director Mr. Bartlett Morgan Director Mr. Glyne Harrison
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 10 Director Ms. Jameela Hollingsworth Meet the Board of Directors Meet the Management Team Director Mr. Cameron Haynes Director Mr. Paul Maxwell Director Ms. Deborah Walkes Director Mr. Glyne Harrison Director Mr. Frank Odle Operations Manager Ms. Cheryl Browne Chairman Mr. Glendon Belle Our Leaders (Continued) INSURANCE BROKERS
11 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 “ Over 300 dedicated staff serve our 103,300 members. As a credit union, our guiding philosophy of “People Helping People” came to the fore as we were classified as essential services and were called upon to provide service to our members throughout the many lockdowns and curfews and in the most difficult of circumstances. We could not have done this without the contributions of all of our staff. Over 3,300 Members benefitted from $347,100 in support through Legacy Foundations contributions. CHARITABLE CONTRIBUTIONS 2020 2.6%MEMBERSHIP INCREASE FROM 2020
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 12 Consolidated Financial Highlights For The Years Ended March 31, 2017 To March 31, 2021 2021 2020 2019 2018 2017 Statement of financial position: Assets Cash and equivalents 362,535 279,870 216,110 112,849 68,263 Investments 51,263 53,688 61,974 76,711 84,338 Loans to Members (net) 1,330,140 1,311,851 1,235,760 1,174,576 1,099,233 Property and Equipment 61,604 61,852 59,772 59,741 44,725 Other Assets 22,357 19,530 18,476 22,011 18,804 Total Assets 1,827,899 1,726,791 1,592,092 1,445,888 1,315,363 Liabilities Deposits 1,616,272 1,527,678 1,400,074 1,259,922 1,138,486 External Debt 1,317 1,342 13,520 15,230 22,323 Other 36,352 30,606 27,362 23,277 21,957 Total Liabilities 1,653,941 1,559,626 1,440,956 1,298,429 1,182,766 Equity Share Capital 12,357 12,008 11,401 10,706 10,084 General & Other Reserves 160,361 151,057 139,597 126,948 113,495 Retained earnings 1,240 4,100 138 9,805 9,018 Total Equity 173,958 167,165 151,136 147,459 132,597 Total Liabilities and Owner’s Equity 1,827,899 1,726,791 1,592,092 1,445,888 1,315,363 Statement of income: Interest Income 100,004 106,307 104,657 101,056 95,242 Interest Expense 29,753 30,957 33,491 32,166 33,400 Net Interest Income 70,251 75,350 71,166 68,890 61,842 Other income 6,337 6,883 5,890 6,129 5,604 Net income and other income 76,588 82,233 77,056 75,019 67,446 Impairment loss on subsidiary - - 2,910 - - Impairment expense 10,071 6,445 4,151 6,942 5,032 Net operating income 66,517 75,788 69,995 68,077 62,414 Total operating expenses 55,932 56,383 54,441 49,778 45,648 Net income before extra-ordinary items 10,585 19,405 15,554 18,299 16,766 Derecognition of Government Securities - - 4,038 - - Taxes 1,059 1,010 772 932 813 Net income after taxes 9,526 18,395 10,744 17,367 15,953
13 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 2021 2020 2019 2018 2017 Financial statistics in percent: Asset Growth 5.86 8.46 10.11 9.92 8.16 Loan Growth 1.39 6.16 5.21 6.85 9.77 Deposit Growth 5.80 9.11 11.12 10.67 9.77 Net Surplus Growth -48.21 71.21 -38.14 8.86 21.02 Return on Assets 0.54 1.11 0.71 1.26 1.26 Return on Equity 5.59 11.56 7.20 12.40 12.77 Operating Efficiency 84.09 74.40 77.78 73.12 73.14 Net Interest Margin 3.95 4.54 4.69 4.99 4.89 2021 2020 2019 2018 2017 Other statistics Delinquency ratio (%) 14.4 10.0 8.6 7.4 6.3 # of members (000’s) 103.0 100.1 95.0 89.2 84.0 # of branches 6 6 6 5 4 2021 2020 2019 2018 2017 Net income per member $92.49 $182.67 $113.09 $194.70 $189.92 Consolidated Financial Highlights For The Years Ended March 31, 2017 To March 31, 2021 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 2021 14 2017 2018 2019 2020 2021 84 ,000 89, 200 95 ,000 100,700 103 , 300 Resilience through COVID-19 Continuous member growth Member satisfaction However, financial institutions have tempered the effects of the interruption in employment opportunities and business operations by offering moratoria on loan repayments and restructuring debt in some cases. Given the increase in non-performing loans (NPLs), measures such as these have contained NPLs to levels that are well below expectations, given the jump in unemployment and decline in economic activity. Macro-Financial Environment On a macro level, the world economy was derailed by COVID-19 as travel bans and stay at home orders were imposed to contain the spread of the pandemic. According to the 2020 Financial Stability Report “COVID-19 triggered the most significant economic peril since the financial crisis of 2008”. Nonetheless, the global financial system was in a position to withstand the pandemic due to regulatory measures that were put in place after the 2008 crisis. Consequently, it was reported that “prompt decisive actions were taken by monetary authorities and financial institutions in response to the pandemic, and large banks within the G20 reaped the benefits from pre-COVID-19 capital, liquidity and leverage requirements”. The report indicated that there was global evidence to support “loan payment moratoria” as an effective financial stability tool for abrupt crises such as COVID-19. However, it cautioned against its use to mask deteriorating credit quality, which could potentially undermine the financial stability over the medium term. Management Discussion and Analysis Economic Outlook COVID-19 Impact According to the Financial Stability Report 2020, the COVID-19 pandemic severely impacted the local economy and consequently, there was a shift in economic policy, as the government continued its focus on the protection of lives and livelihoods. The disruption in business cycles resulted in the cessation of activity in the tourism sector and caused business closures across other sectors and ultimately led to a series of national curfews. This by extension elevated the level of credit and other risks within financial institutions. Notwithstanding these challenges, the sector remained stable and well-capitalized. Unemployment levels rose, as a result of reduced economic activity. Consequently, there was an increase in borrowers who faced challenges in servicing their debt obligations. This section of the Barbados Public Workers’ Co-operative Credit Union Limited’s Consolidated Annual Report provides a discussion and analysis of the financial position and performance of the consolidated operations of the Barbados Public Workers’ Co-operative Credit Union Limited and its subsidiaries (“the Group”) for the financial year ended March 31, 2021. This MD&A should be read in conjunction with the audited consolidated financial statements, which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The Group includes the parent, Barbados Public Workers’ Co-operative Credit Union Limited and its subsidiary BPW Financial Holdings Inc., the holding company for the CAPITA Group that includes subsidiaries CAPITA Financial Services Inc. (“CAPITA”) and CAPITA Insurance Brokers Limited (“CIB”).
15 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 Nonetheless, the financial sector remained relatively stable as central banks implemented shock-mitigating measures to combat the effects of the pandemic. This was strengthened by the expansions in fiscal deficits and debt during the pandemic as governments sought to ease the economic strain on households and businesses. Stress testing of the financial sector A stress testing exercise was conducted relative to runs on deposits in the various deposit-taking institutions (DTIs) given the level of reduced economic activity. Where appropriate, simulations sought to determine whether capital adequacy buffers were adequate to absorb market shocks and focused primarily on liquidity, credit, interest rate risk and large exposures. Liquidity Risk Given that DTIs are largely funded by deposits, maintaining adequate levels is of utmost importance in the event of a run on the institution. Hitherto and during the pandemic, the financial system was marked by excess liquidity. Commercial banks, finance and trust companies held upwards to 26.5 percent in liquid assets (cash equivalents and tradeable securities) on their balance sheets. The low prevailing interest rates between demand and time deposits has minimized the penalties for early withdrawal. Assuming that 95.0 percent of all liquid assets were fully convertible to cash on a given day, a 5.0, 10.0 and 15.0 percent run on all domestic-currency deposits (demand and time deposits) accounts were examined. Credit Unions Requiring Liquidity Support upon runs on Members Savings At 5.0% At 10.0% At 15.0% Day 1 0 0 0 Day 2 0 0 2 Day 3 0 1 4 Day 4 0 3 4 Day 5 1 4 4 Source: Financial Services Commission The above results for credit unions show that at daily deposit runs of 5.0 percent one credit union would require liquidity support at day five. While at daily deposit runs of 10.0 and 15.0 percent respectively, four credit unions require liquidity support. Last year testing at the 15.0 percent level showed that seven of the largest credit unions required liquidity support. Credit Risk As stated in the 2020 Stability Report, the credit union sector’s current rate of provisioning for NPLs is 23.4 percent and the capital adequacy ratio for the industry stood at 10.5 percent. The seven largest entities in the sector accounted for more than 93.0 percent of total assets and three of these entities were below the regulatory benchmark of 10.0 percent before any shocks were applied for stress testing. Domestic Economic Conditions Barbados’ tourism product was hardest hit as the country experienced declines in all its major economic industries, except for agriculture. There was a 70.0 percent fall-off in tourism which stemmed from lower visitor stay-overs and cruise arrivals. The rate of inflation slowed, indicating lower fuel and electricity prices combined with discounts offered by retailers. The economic downturn was especially sharper during those periods where the economy was on lockdown for extended periods. Conversely, the economy showed signs of a gradual recovery towards the year-end 2020. The country experienced a second wave of COVID-19 during the first quarter of 2021 which triggered further business closures and curfews. Consequently, there was a 20.0 percent decline in real GDP when compared to the first quarter of 2020. Group Overview We are a group of companies committed to improving the livelihood of people and their communities. 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 fifty-first year as a Credit Union and eleventh 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.
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 16 Adoption of New Accounting Standards During the fiscal ended March 31, 2021, there were no newly adopted or implemented accounting standards which had a significant impact on the reporting or performance of the Group. Snapshot of Credit Union’s Performance In 2021, we continued our positive performance of prior years in the areas of assets, deposits and membership growth. Despite increased challenging economic conditions, 2,905 additional persons selected the Barbados Public Workers’ Cooperative Credit Union Limited as their financial institution. This represented a 2.3 percent overall increase in membership over the prior year. With our success anchored to the quality of service we deliver, staff continued to focus their efforts on transforming the member experience to make the credit union the financial services provider of choice as evidenced by the 96.0 percent service rating on the annual customer satisfaction survey. The increase in membership contributed to the credit union’s deposits growing by $94.7 million (2020 - $104.6 million) or 7.4 percent (2020 - 8.9 percent). Demand for loans remained high as evidenced by gross commitments in amounts approved and pending disbursements of $103.4 million (2020 -$82.3 million) representing an overall increase of $21.1 million or 25.6 percent over the prior year. With existing mortgage rates of 4.75 percent, the demand for mortgages has increased. Overall the Credit Union’s loans approved and pending has increased, mortgages approved and pending increased by $11.8 million or 22.9 percent to reach $63.4 million, while gross commitments of consumer loans approved and pending increased from $30.7 million in the prior year to $40.0 million, reflecting a $9.3 million or 30.3 percent increase. During fiscal 2021, credit union net loans grew moderately by $8.6 million or 0.8 percent. Overall loan growth for the credit union was recorded at $18.0 million or 1.7 percent. However, the credit union’s balance sheet remained robust and was able to absorb any major shock during 2021 fiscal. - Overall cash resources ended at $387.7 million (2020 - $294.9 million) representing growth of 31.5 percent. - Asset grew by $104.5 million (2020 - $120.4 million) or 7.1 percent (2020 - 8.9 percent). - On the other hand net surplus was impacted by the challenges of the COVID-19 pandemic. Total interest income was recorded at $83.6 million which was $6.3 million or 7.0 percent below that of the prior year; interest expense was reported at $23.2 million (2020 - $23.5 million), which represented a $370 thousand decline or 1.6 percent below the prior year. - Non-interest income decreased by $791.0 thousand or 17.5 percent to end the year at $3.7 million (2020 - $4.5 million). Expected credit losses increased by $3.1 million over the prior year to reach $9.2 million, as loans on non-accrual increased from $104.6 million in 2020 to $147.0 million at March 31, 2021. - Total operating expenses reached $23.9 million (2020 - $22.5 million) at the end of the fiscal. Notable increases were reported in legal and professional fees which grew by 1.1 million or 109.9 percent, while the direct cost of services increased by $548.3 thousand or 104.1 percent. The above increases were however offset by declines in publicity and promotions of $1.1 million or 35.3 percent. Notwithstanding, the net offsetting effects of rising and falling operating line items resulted in an overall increase of $1.5 million or 6.5 percent. Snapshot of CAPITA’s performance CAPITA realized an increase in growth, whereby assets grew by $4.9 million or 1.6 percent over the prior year to reach $313.1 million at March 31, 2021. Income before levies and taxation at March 31, 2021, was approximately $2.9 million (2020 - $2.6 million) and net income after tax was $1.9 million for the 2021 fiscal period versus $1.6 million for 2020. CAPITA has made great strides as it ventures into the technological future of the financial services sector. Partnering with the Co-operative and Credit Union Leagues in Barbados and St. Lucia, CAPITA has successfully deployed several services including ATM and Debit Card solutions. In December 2019, CAPITA in conjunction with the St. Lucia Cooperative and Credit Union League created a historic milestone by launching the first ATM Network for credit unions on the island, to date enlisting nine Credit Unions. CAPITA is planning to forge ahead to offer the members of participating Credit Unions an internationally branded Debit Card that can be used at any ATMs, POSs and online anywhere the brand is accepted. In Barbados, an international Debit Card has been launched for two major Credit Unions, expanding the capacity of the previously held cards. Negotiations are underway with additional Credit Unions and other entities to participate in the issuance of the international Prepaid Debit Cards, and early indications are very encouraging. On completion of the Debit Cards project an international Credit Card project is also to be introduced to the local Credit Union sector, to assist the sector in providing a broader suite of services to their members. Group Performance Summary The Group’s net surplus for the financial year-end March 31, 2021, was recorded at $10.6 million as compared to $19.4 million in the prior year. Management Discussion and Analysis (Continued)
17 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 The economic challenges presented by the COVID 19 pandemic caused an increase in loans on non-accrual status which by extension resulted in a reduction in interest income. Throughout the financial year ended March 31, 2021, interest rates on savings and deposits trended downwards in the sector and eventually reached a low of zero percent at some financial institutions at March 31, 2021. Despite this downward pressure, the minimum interest rate on deposits across the Group was 0.5 percent at March 31, 2021. This commitment to ensuring depositors achieve a reasonable return remains a fundamental part of our member/customercentric philosophy. The net interest margin for the year was 3.9 percent as compared to 4.5 percent in 2020. The Group’s levies on assets increased by $118.3 or 14.0 percent while corporation taxes declined by $70.1 thousand or 41.7 percent. Net income after tax and levies for the year totalled $9.5 million compared to $18.4 million for the year ended March 31, 2020. Consolidated Financial Statement Highlights Revenues For the financial year ended March 31, 2021, the Group earned total interest revenue of $100.0 million, down from $106.3 million the previous year. This represented a decrease of $6.3 million or 5.9 percent when compared to the prior year. Income generated from non-interest sources decreased by $546 thousand or 7.9 percent from the results of the prior year. Net interest income Consequently, net interest income moved from $75.3 million in 2020 to $70.3 million in 2021. This represented a decrease of $5.0 million or 6.8 percent in net interest income. Net income The Group earned a consolidated net income before levies and taxes of $10.6 million (2020 - $19.4 million). This was relatively on par with the performance of 2019, where net income was reported at $11.5 million before levies and taxes. Operating Expenses Total operating expenses inclusive of taxes decreased from $57.4 million in 2020 to $57.0 million in 2021. The decrease was principally driven by a decline in staff costs of $1.7 million or 7.4 percent, while legal and professional fees increased by $1.3 million or 98.4 percent. Assets Total assets of the Group stood at $1.8 billion at March 31, 2021. This represented an increase of $101.1 million or 5.9 percent over the previous year. At March 31, 2021, the Group’s consolidated net loans and advances stood at $1.3 billion, an increase of $18.3 million or 1.4 percent over the prior year. Loan growth was primarily driven by increased mortgage loans of $47.8 million while consumer loans decreased by 29.2 million. 2017 2018 2019 2020 2021 Deposits 2017 2018 2019 2020 2021 Net Income 2017 2018 2019 2020 2021 Total Assets Deposits Net Income Total Assets
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 18 The Group remained highly liquid with total cash resources of $381.8 million compared to $308.2 million in the prior year. Liquid resources therefore increased by $73.6 million or 23.9 perecent. Asset quality The delinquency ratio increased to 14.4 percent at the end of March 31, 2021, compared to 10.0 percent at the end of March 31, 2020. This represented an increase in non-performing loans of $62.5 million. While this rate was above the 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. During the 2021 fiscal the Credit Union offered borrowers cash flow relief through loan payment moratoria which allowed for a deferral of loan payments while interest continued to accrue on outstanding balances. The initial moratoria periods ranged from three to six months and were intended for members who faced financial difficulty due to COVID-19 but who were previously in good standing. Loans subject to moratoria were not treated as non-performing during the deferral period. The moratoria programme adopted an opt-in approach where members were required to request the moratoria if needed. All payment deferrals ended on March 31, 2021 and the organization remains committed to providing support to financially challenged members through the below options. Options available for members upon expiry of the initial deferral period include: • extension of loan terms • converting outstanding interest to a separate loan; and • consolidation of debt We are committed to providing relief and solutions according to individual needs, and to assisting with working through the financial implications of the economic fallout. 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 $1.6 billion, an increase of $88.6 million or 5.8 percent compared to an increase of $127.6 million or 9.1 percent in the 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 remained at $1.3 million. Equity As at March 31, 2021, the Group’s total equity was $174.0 million. This is an increase of $6.8 million or 4.1 percent compared to an increase of $16.1 million or 10.7 percent in the previous year. This increase included the issuance of $430.6 thousand in additional shares (2020 - $732.1 thousand), and the distribution of $3.6 million in dividends and interest rebate to members during the year consistent with that of the prior year. The Group’s capital adequacy ratios continue to be well above regulatory requirements. This ratio is a key measurement relative to the Group’s ability to absorb market shocks and as such is continually monitored on an ongoing basis. Economic Review 2021-2022 Fiscal The Central Bank of Barbados in its April 2021 press release indicated that “uncertainty continues to cloud the outlook for the Barbados economy for 2021”. Additionally, they indicated that “the pace of the global economic recovery is expected to quicken this year and the IMF has recently raised its growth forecast, partly on the expectation of a revitalized US economy and the anticipated favourable impact of the vaccine roll-out across countries”. Notwithstanding the level of optimism for economic recovery, it was further stated that given the level of uncertainty, significant downside risks remain and the global recovery is likely to be uneven. Despite the decline in economic activity last year, predictions are that the Barbadian economy will achieve growth ranging from 1.0 to 3.0 percent. This however, is dependent on the country’s ability to contain and manage the spread of the COVID-19 pandemic domestically, combined with maintaining targeted levels of tourism activity as more world economies achieve their desired vaccination level. Barbados has introduced a “Welcome Stamp” initiative designed to tap into non-traditional markets which will be critical to rebuilding the tourism sector. This programme offers the potential of converting otherwise short-term visitor arrivals into repeat tourists and investors. To facilitate the ease of business activity, efforts are being made to transition the Barbadian economy to a digital economy. The Management Discussion and Analysis (Continued) 2017 2018 2019 2020 2021 Loan and Advances Loans and Advances
19 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 need to accelerate this transition has been underscored by the economic impact arising out of COVID-19 and more recently the ash fall from the eruption of the La Soufrière volcano. Economic Recovery The re-opening of the economy has been accompanied by general improvements in the areas previously impacted by reduced employment levels. However, as unemployment benefits expire, government will be pressured to accelerate initiatives to drive economic recovery. The government in its 2021/22 estimates provided for a primary deficit of -0.3 percent driven by the fact that reduced revenue, due to diminished economic activity and an expected fall in corporate taxes, would not be sufficient to rebound to financial year 2019/20 levels. Consequently, government will need to rely on the continued support of international financial institutions, with drawdown levels anticipated to be on par with that of 2020. Government is anticipating that the target date for reaching its targeted 60.0 percent debt-to-GDP ratio may have to be extended. However, it is reported that the country has adequate liquidity buffers to meet its external obligations. The country’s financial system is expected to remain stable despite anticipated further deterioration in non-performing loans. Outlook – 2022 and Beyond Our expectations last year as we tried to predict what 2021 would bring aligned to the reality of what we are currently facing. We anticipate a challenging year marred by economic slowdown along with continued levels of unemployment that would continue beyond the current year. As we stand in the present realizing the accuracy of those predictions, we however remain undaunted by the circumstances we find ourselves in, and see opportunities and possibilities in every entity that makes us who we are. Despite a down turn in its financial performance this year, the Barbados Public Workers’ Co-operative Credit Union Limited remains strong and stable. Its contribution in the past year goes well beyond the numbers in its balance sheet and income statement and is reflected more so in the contributions it has made in the lives of its members, the enhanced corporate social responsibility role it has shouldered and the leadership position it has taken in the movement in various forms. The same can be expected in the coming year, along with a commitment to enhancing product and service offerings to better meet the changing financial needs of members. The CAPITA Group continues to evolve and mature as a subsidiary that is well positioned to deliver on those services the credit union cannot offer to its members and the wider public or sector. Their significant achievement of successfully transitioning to a full Part II financial institution with a foreign exchange license has allowed us to advance further down the path of realizing the benefits of our acquisition ten years ago. Insurance and brokerage services and electronic payment processing by way of debit and credit card services complete a portfolio of diverse lending products, and in so doing provide a foundation for the provision of products and services outside of the current group customers and into the wider credit union movement and small and medium size business enterprises. We fully intend to capitalize and build on this to the Group’s benefit in the coming year. Allied Co-operators Incorporated came into the fold during the past year and made its mark this year. To date there has been positive engagement and acceptance of the company as it seeks to fulfill its mandate of providing much needed assistance to our smaller brothers and sisters in the credit union movement. While yet in its embryonic stage, the demand for its provision of compliance and audit related services paint a positive picture of the potential that is yet to be tapped. We anticipate reporting positive news of its growth and success in upcoming reports. As we move into the 2021-22 financial period, there remains much for us to do as we continue to deliver on our promise of building a group of companies that consistently improves the livelihood of people and their communities. We will therefore continue to focus on value creation for the mutual benefit of members, employees, communities and Group. As a Group we will continue to build on the work that has gotten us to where we are, but will do so in a way that ensures we remain relevant and capable of taking on whatever the future brings. As we revisited our strategic plan, it reinforced the need to ensure we realigned our organization in all aspects, revisiting our structures, finding ways to be more efficient and improving our technologies and processes to ensure we can meet your needs as they too evolved. The revised plan incorporates strategies to prioritise four specific areas - development of our people, culture and communications; brilliant execution in our operations; enhanced member and customer focus; working towards a sustainable and relevant future. It is our belief that continued focus on these areas will result in our long-term viability and sustainability. We remain confident and optimistic about the coming year as we move into it on a firm foundation with a strong vision, a revised strategy, committed and dedicated directors and elected officers, a professional and caring management and staff body and very importantly the support of you our valued members. We thank you for your continued confidence in us as your financial services provider and look forward to continuing to serve you through all of our corporate entities. This is where you belong! Today, Tomorrow, Together.
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 20 Board of Directors’ Report Overview The year 2020 will no doubt be remembered as the year that the COVID-19 pandemic touched Barbados and significantly and materially changed the lives of many It not only affected the personal and household level, but it also significantly impacted businesses across all sectors, while testing the robustness and stability of the Barbados economy Overview There are signs that we are moving in the right direction as a country, region and world to remove ourselves from the clutches of the COVID-19 pandemic. Our Credit Union’s model has shown itself to be robust as we have continued to successfully navigate the impact of the COVID-19 pandemic, and while we expect further adversity in the year ahead, we commit to being there for you, as we respond to whatever challenges may come our way. What was to be a visible year of celebration and thanksgiving with you our membership for allowing us to achieve a Golden Jubilee, was muted into a year of caring and sharing for our brothers and sisters, and looking out for the health and welfare of our staff, members and the wider communities we serve. As a Credit Union, our guiding philosophy of “People Helping People” came to the fore as we were classified as essential services and were called upon to provide service to our members throughout the many lockdowns and curfews, and in the most difficult of circumstances. We could not have done this without the contributions of our staff body. Our sincere thanks must go out to the management and staff who stepped up and rose to each and every challenge that came their way. Likewise, we extend our thanks to you the membership for the patience you have shown as we have had to continue to enforce the sometimes inconvenient but yet very necessary social distancing protocols to protect you, as we went about delivering our various services to you. Special thanks go out to those of you in the frontline community especially, who we all continue to depend on even more as we go through these testing times. The year 2020-21 was one of unprecedented change. Following a 2019-20 that was already impacted by economic slow-down and uncertainty, the prevailing macro-economic conditions during the period remained unfavorable for business growth, as members continued to experience hardships including lay-offs and businesses continued to experience closures and restricted opening hours. The combination of these factors lead to an unavoidable and predictable slowdown in demand for loans, an increase in delinquency, continued requests for moratoriums and greater requests for assistance through social welfare. For those who had the wherewithal, there was an increase in cautious behavior evidenced by an increase in deposits as confidence in the economy deteriorated and members elected to save for a rainy day. Conscious of the impact of the changing environment on our membership, your Credit Union was able to put measures in place to soften the full impact of the financial fallout while still providing much needed help to many. As we recognised the reality and severity of the challenges of COVID-19 from early, we were able to acknowledge the varying needs as they emerged and responded accordingly. We committed funding to a Member Education and Relief Plan to engage and where needed, empower our members, and also increased the social welfare allocation so that we could serve more when called upon to do so. These were both well received and the various initiatives planned, “ We are proud of what we have accomplished from an operational, member service and community perspective
21 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 will be continued in the current fiscal. Looking back at the past year, we are proud of what we have accomplished from an operational, member service and community perspective. Through adherence to our co-operative values we were able to provide the support our membership required, when they required it most. Financial Performance The impact of the COVID-19 virus on the local landscape and by extension the Credit Union’s financial performance is evidenced by the reduced surplus of $8.0 million, which represents a net profit margin of 9.6 percent for the 2020-21 financial year, compared to a surplus of $17.1 million and a net profit margin of 19.0 percent for the 2019-20 financial year. Asset growth for the 2020-21 financial year was recorded at 7.1 percent, with the Credit Union recording total assets of $1.58 billion, an increase of $104.5 million. With continued liquidity being experienced in the movement due to uncertainty and lower demand for credit, cash and cash equivalents grew to an ending position of $387.7 million, an increase of $92.8 million or 31.5 percent, while investments which were utilized as an alternative to the much more preferred loans and credit products changed to a total of $62.8 million, an increase of $7.8 million or 14.2 percent. Overall, as corroborated by the Central Bank of Barbados’ quarterly reviews, the appetite for new credit continues to be low. The report as at end of March 2020 details that new loans were 70% of 2019 levels, particularly driven by a decrease in the area of household debt which is a major line item for the Credit Union. It is against this backdrop that the overall loan portfolio registered a movement of $18.5 million as at the end of the past financial year. The specific details around the performance in this area, as well as the movement in other key related metrics such as the various income streams and delinquency are available in the financial highlights presentation and Credit Committee Report. The change in macro-economic conditions has resulted in an extremely competitive environment where there has been enhanced activity not only by the commercial banks and other regulated entities, but also significant encroachment by unregulated entities such as retailers, shadow banks and similar. The bold and predatory practices of these players continue to threaten market share and potentially erode members’ financial positions. We will continue assess and review our lending policies, procedures and general framework to minimize the need for members to go outside of the Credit Union to access financing. Subsidiary Performance The CAPITA Financial Services Group continues to perform admirably recording another year of significant performances at both the stand-alone, now referred to as separate, to ensure compliance with accounting standards, and the consolidated levels. CAPITA Financial Services Inc. achieved a final profit position of $1.9M with growth in the key area of net interest income. Total assets rose to $313M, a 1.6% increase over prior year with loans continuing to be the primary contributor at this time, positively growing to $275.5M. Likewise, CAPITA Insurance Brokers Inc. also had a laudable year with significant improvements being recorded in their final profit position. Commissions from business generated grew by 10.9% and helped the company to achieve its best performing year to date, positively contributing to the overall Group’s final position. The above performances notwithstanding, diversification of revenue streams continues to be a focus for CAPITA’s management. The previously reported ATM shared service initiative continues to be rolled out in the St. Lucia market with five (5) Credit Unions now actively utilizing the service which allows our Credit Union brothers and sisters to have CarIFslike access to Automated Teller Machines (ATMs). To date, the transactions have been to targeted levels and there has been positive acceptance and uptake by the St. Lucian members. In keeping with the electronic services being provided in the St. Lucia market space, CAPITA is also on the way to providing similar services locally, as the provider of processing services to local credit unions transitioning from the proprietary CarIFS environment to the new internationally branded MasterCard debit card environment. Work on this has progressed significantly for your Credit Union and your new card will be available for your collection and use during the course of the current financial year. This is a redefining moment for the company and one that builds a strong and diversified platform for future products and services to be built upon. It is of such significance that it is worthwhile to restate the sentiment expressed last year when we acknowledged that these types of projects not only underscore the long-term value of CAPITA to the sector and Group, but also underscores the importance and Sis. Kieva Cadogan presenting to an 11 Plus Awardee at the Thrift Club Awards Ceremony.
BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 22 relevance of CAPITA in transformation of the movement locally and for some of our regional colleagues. Regulatory Discussions As has become standard practice given our growth in size and complexity, we continue to proactively engage with the regulator at the level of both the board and management. Discussions have focused on matters of governance and best practices and we have been made aware of impending changes to legislation that will result in a more risk-based approach to supervision of the movement. This will have implications for the way business is done across our group of companies as we can expect stricter performance monitoring, enhanced financial requirements, increased prudential reporting and greater application of risk analysis as our Credit Union is assessed. Recognising the impact of our actions and activities on the entire movement we will continue to play our part as required. Member & Community Engagement – Corporate Social Responsibility Scholarships & Grants The funds allocated to the Educational Scholarships & Grants Fund are used to assist members by way of gratuitous payments in accordance with the approved board policy. Applications from members are reviewed by a Scholarships and Grants Committee appointed by the Board of Directors who determine awards to applicants across a broad range of areas including traditional academic awards (Barbados Secondary Schools’ Entrance Examinations (11+), Caribbean Secondary Education Certificate Examinations CSEC), Caribbean Advanced Proficiency Examinations (CAPE), specific scholarships at some of our secondary and tertiary learning institutions and general educational grants to some finding it difficult to finance their learning dreams. We encourage you to access these opportunities, details of which can be found on our website at www.publicworkers.bb. The Educational Scholarships & Grants Committee met four (4) times during the reporting period and approved $227,434.68 for disbursement under the above mentioned categories. Social Outreach The funds allocated to the Social Outreach Assistance Fund are used to assist members by way of gratuitous payments, in accordance with the approved board policy. Assistance is considered under a variety of hardship categories and applications from members, are reviewed by a Social Outreach Assistance Committee appointed by the Board of Directors. The Social Outreach Assistance Committee met thirteen (13) times during the period and approved a total of $201,791.00 in much needed assistance those in need. The Committee also invested in twenty tablets and devices to meet the needs of members experiencing challenges accessing devices for use in their children’s or wards online school requirements. To date, six have been distributed. The Committee continues to receive the occasional request from members for help with finding employment. Legacy Foundation Legacy Foundation, the philanthropic arm of the BPWCCUL Group has been on a mission to improve the lives of individuals across Barbados since its founding in 2013. In more recent years, and in keeping with the Credit Union principles, Legacy has worked to meet the needs of the most vulnerable through the Foundation’s Wellness, Empowerment & Learning pillars and the various initiatives and projects funded. During the course of the 2020-21 period, Legacy Foundation revisited and temporarily adjusted its funding strategy in acknowledgement of the impact of the pandemic on our communities. Focus was placed on providing assistance where it was most needed without entering into the credit union’s space and contributions were made as shown below. Board of Directors’ Report (Continued) BPWCCUL President, Bro. Glendon Belle (right) and Ms. Tyra Holder, Business Development Officer of Career Development Institute (CDI) sign a Memorandum of Understanding to provide preferred rates on training to BPWCCUL members.
23 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED | CONSOLIDATED ANNUAL REPORT 2021 Initiative Amount Impact (# of persons) Grant Funding $177,300.00 2,245 Food Support $10,800.00 47 families Lifelong Skills Training $12,000.00 20 students Duke of Edinburgh International Awards $17,000.00 600 New Growth Aquaponics Project $120,000.00 500 Face Masks $10,000.00 1,000 Legacy Foundation is committed to actively contributing to projects that have constructive long-term impact but we cannot do it without your assistance. Your contributions and donations, which are tax deductible, are needed and welcomed as we seek to fill those overlooked needs in our communities. To play a part you may either 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. Matters of Significance – Key Updates The past year has been one of review and recalibration as the various changes that have been taking place around us, required us to revisit and assess our operating processes and frameworks. Additionally, the timelines and priorities previously associated with many of our projects were reassessed as they were negatively impacted by way of delays and temporary pauses as we dealt with the reality of an environment of lock-downs, shut-ins and restrictions on work activities in various forms. In some instances the changes forced upon us resulted in different perspectives being forged and opportunities for improvements being seized. Thrift Club Programme Our junior savers and the associated thrift club programme are a critical part of who we are, and are even more important as we help our members to navigate these uncertain times. More than ever it is critical that we empower our youth with the important life-skill of being financially aware and responsible. The thrift club does this by introducing our young savers to the concept of money and the value of sound money management practices. The importance of building a savings habit from an early age is always emphasised as we subscribe to the view that empowering our junior members at this early stage of their life will lead to a generation of financially responsible adults in the future. Through our schools savers programme we continue to work with committed teachers and students at a number of primary and secondary schools across the island, and are proud of having established the first student-run branches locally. These school branches provide a great learning experience and opportunity for all involved, as they allow students to develop not only financial literacy skills, but also work-life skills through their participation in the operations of the school branch. We make every effort to have the operations of the school branches mirror the workings of an actual branch, providing opportunities that will benefit them for years to come through the development of leadership and other important inter-personal skills. As we note the contributions that our past junior members are making in all spheres of Barbadian life, we remain committed to the ongoing development of this programme and by so doing the ongoing development of our Credit Union and wider society. With its many added features, the new BPWCCUl Mastercard will become a big part of your everyday life!
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