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 & Analysis . . . . . 14 Board of Directors’ Report . . . . . . . . . . . . 20 Independent Auditors’ Report . . . . . . . . . 32 Consolidated Financial Statements . . . . . 36 Digital Transformation As we continue to navigate and manage the intricacies of a rapidly evolving financial services landscape and the challenges that come with it, we remain conscious of our responsibility to meet the growing demands of members while competing with a new range of non-traditional competitors. The Barbados Public Workers’ Co-operative Credit Union Ltd has determined that digital transformation is an inevitable response to this challenge; successful execution of which will position the credit union for long-term success and growth. On completion, members can anticipate an enhanced experience that allows for the delivery of more personalized, efficient, and secure services regardless of the preferred method of interaction. This will include seamless integration from any device, at any time and from any place as geographical barriers, not in-person activities and lengthy processes become less of a challenge in the new framework that will make doing business with us easier than ever. Embrace the future with us as we set off on this journey to empower you with modern tools to meet your evolving needs and expectations. Together, we will chart new paths that will help you to achieve your financial goals with greater ease, convenience and flexibility.
2 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED
3 CONSOLIDATED FINANCIAL STATEMENTS 2023 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
4 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Our Leaders President Bro. Courtney Gibson Director Sis. Nicola Callendar Vice-President Sis. Cheryl Inniss Director Bro. Carl Padmore Director Sis. Lydia Lewis Secretary Bro. Hasani Evelyn Director Sis. Jameela Hollingsworth Director Bro. Mark Hope Meet the Board of Directors Treasurer Bro. Cameron Haynes
5 CONSOLIDATED FINANCIAL STATEMENTS 2023 Chief Information, Communications & Technology Officer Bro. Irwin Gibson Chief Risk and Compliance Officer Sis. Alison Weekes Group Chief Executive Officer Bro. Glyne Harriison Chief Internal Auditor Bro. Eric Small Chief Human Resources Officer Sis. Jacqueline Caesar Chief Financial Officer Bro. LeVere Catlyn Chief Operations Officer Bro. Richard Kennedy Chief Legal & Corporate Affairs Officer Sis. Natalie Holder Meet the Executive Management Team
6 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Trustee Mr. Cranston Browne Trustee Ms. Patsy Crichlow Trustee Ms. Ayodele Burrowes 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 CONSOLIDATED FINANCIAL STATEMENTS 2023 Secretary Mr. Barry Hunte Chairman Mr. Mark Hope Operations Manager Mr. Damien Chase Internal Auditor Ms. Millicent Maximilien Director Mr. Clint Hurley Meet the Management Team CO-OPERATORS INCORPORATED Meet the Board of Directors Director Ms. Jameela Hollingsworth Director Ms. Cheryl Inniss
8 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Director Mr. Cameron Haynes Our Leaders (Continued) Director Mr. Lindell Earle Director Mr. Jaydee Bourne Secretary Mrs. Kimberley Alleyne-Pinder Chairman Mr. Mark Hope FINANCIAL HOLDINGS INC. BPW Meet the Board of Directors Meet the Board of Directors Director Mr. Julian A. Hunte Vice-Chairman Mr. Craig Hinds Chairman Mr. Derrick Cummins Director Mr. Trevor Colucci Director Mr. Romaine Lovell Director Mr. Cornelius Bartlett
9 CONSOLIDATED FINANCIAL STATEMENTS 2023 Meet the Management Team Manager, Finance & Planning Mr. Terry Bonnett Card Manager Mrs. Sonia Hall-Hunte Interim Chief Executive Officer Mr. Ian Desouza Secretary Mr. Hasani Evelyn Director Ms. Lydia R. McCollin Director Mr. Glyne Harriison
10 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Meet the Board of Directors Meet the Management Team Secretary Mr. Frank Odle Operations Manager Ms. Cheryl Browne Director Mr. Courtney Gibson Our Leaders (Continued) INSURANCE BROKERS Director Mr. Cornelius Bartlett Assistant Secretary Mr. Lindell Earle Chairman Ms. Jameela Hollingsworth Director Mr. Clint Hurley Vice-Chairman Ms. Cheryl Inniss
11 CONSOLIDATED FINANCIAL STATEMENTS 2023 Bank On The Go! Co Optima • 24x7 access to BPWCCUL account with your mobile phone • View account balances • Transfer funds within your account • Monitor transaction history • Member to member fund transfers
12 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Consolidated Financial Highlights Financial Highlights - Five Year Review In Bds $’000 2023 2022 2021 2020 2019 Statement of financial position: Assets Cash and equivalents 371,940 388,880 362,535 279,870 216,110 Investments 60,873 51,512 51,263 53,688 61,974 Loans to Members (net) 1,425,341 1,398,822 1,330,140 1,311,851 1,235,760 Property and Equipment 58,053 62,176 61,604 61,852 59,772 Other Assets 29,286 30,363 22,357 19,530 18,476 Total Assets 1,945,493 1,931,753 1,827,899 1,726,791 1,592,092 Liabilities Deposits 1,712,183 1,699,399 1,616,272 1,527,678 1,400,074 External Debt 1,232 1,277 1,317 1,342 13,520 Other 44,006 45,492 36,352 30,606 27,362 1,757,421 1,746,168 1,653,941 1,559,626 1,440,956 Equity Share Capital 13,334 12,901 12,357 12,008 11,401 General & Other Reserves 175,853 171,314 160,361 151,057 139,597 Retained earnings -1,115 1,370 1,240 4,100 138 188,072 185,585 173,958 167,165 151,136 Total Liabilities and Owner’s Equity 1,945,493 1,931,753 1,827,899 1,726,791 1,592,092 Statement of income: Interest Income 105,721 103,466 100,004 106,307 104,657 Interest Expense 26,966 28,447 29,753 30,957 33,491 Net Interest Income 78,755 75,019 70,251 75,350 71,166 Other income 8,003 8,033 6,337 6,883 5,890 Net income and other income 86,758 83,052 76,588 82,233 77,056 Impairment loss on goodwill 0 0 0 0 2,910 Impairment expense 6,824 7,383 10,071 6,445 4,151 Net operating income 79,934 75,669 66,517 75,788 69,995 Total operating expenses 71,349 63,452 55,932 56,383 54,441 Net income before extra-ordinary items 8,585 12,217 10,585 19,405 15,554 Derecognition of Government Securities - - 4,038 Levies and Taxation 940 1,081 1,059 1,010 772 Net income after taxes 7,645 11,137 9,526 18,395 10,744
13 CONSOLIDATED FINANCIAL STATEMENTS 2023 2023 2022 2021 2019 2018 Financial statistics in percent: Asset Growth 0.71 5.68 5.86 8.46 10.11 Loan Growth 1.90 5.16 1.39 6.16 5.21 Deposit Growth 0.75 5.14 5.80 9.11 11.12 Net Surplus Growth -31.35 16.90 -48.21 71.21 -38.14 Return on Assets 0.39 0.59 0.54 1.11 0.71 Return on Equity 4.09 6.19 5.59 11.56 7.20 Operating Efficiency 89.26 83.85 84.09 74.40 77.78 Net Interest Margin 4.06 3.99 3.95 4.54 4.69 2022 2021 2020 2019 2018 Other statistics Delinquency ratio (%) 14.0 14.0 14.4 10.0 8.6 # of members 111.1 107.5 103.0 100.7 95.0 # of branches 6 6 6 6 6 2022 2021 2020 2019 2018 Net income per member $68.81 $103.59 $92.49 $182.67 $113.09 Consolidated Financial Highlights Financial Highlights - Five Year Review 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 PricewaterhouseCoopers SRL Barbados
14 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED The increase in membership contributed to the Credit Union’s deposits growing by $47.8 million (2022 - $78.8 million) or 3.3 percent (2022 - 5.7 percent). New membership accounted for $16.0 million or 33.5 percent of deposit growth during the fiscal. At March 31, 2023 approved loan commitments and pending disbursements cumulatively totaled $78.9 million (2022 -$97.4 million) decreasing from prior year by $18.5 million or 19.3 percent. During fiscal 2023, Credit Union net loans grew moderately by $31.4 million (2022-$60.3 million) or 2.8 percent (2022 - 5.7 percent). Increases in mortgage loans was the primary driver of loan growth, with net mortgages growing by $45.8 million (2022 - $66.6 million) or 10.3 (2022 - 17.7) percent. Consumer loans growth declined for the third consecutive year; the decline for 2023 fiscal was $13.9 million (2022 - $5.5 million) or 2.1 (2022 - 0.83) percent. Additionally, business loans decreased below the prior year by $1.1 million (2022 - $105.6 thousand increase) or 22.2 (2022 - 7.1) percent. The Credit Union’s growth in other key areas of its balance sheet was as follows: - Overall cash resources ended at $435.7 million (2022 - $420.0 million) representing growth of $15.7 million or 3.7 (2022 - 8.3) percent. - Total assets grew by $50.5 million (2022 - $96.0 million) or 3.0 (2022 - 6.1) percent. 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-third year as a Credit Union and thirteenth (13th) 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. Adoption of New Accounting Standards During the fiscal ended March 31, 2023, 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 2023, the Credit Union’s team of dedicated professionals assisted members by helping them identify appropriate financial solutions to meet their needs. Amid challenging economic conditions, the Barbados Public Workers’ Co-operative Credit Union Limited’s membership grew by 3,612 or 3.3 percent to reach 111,118 during the financial year that ended March 31, 2023. With our success anchored to providing supreme member experience, 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 92.0 percent service rating on the annual customer satisfaction survey. 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’ Cooperative Credit Union Limited and its subsidiaries (“the Group”) for the financial year ended March 31, 2023. 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’ Cooperative Credit Union Limited and its subsidiary Allied Cooperators Inc., 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”). Management Discussion & Analysis (MD&A)
15 CONSOLIDATED FINANCIAL STATEMENTS 2023 Operational performance: - The Credit Union’s net surplus declined marginally below prior year by $865.3 thousand or 8.4 percent to finish at $9.4 million as at March 31, 2023. Total interest income was recorded at $88.9 million (2022 - $86.6 million) which was $2.3 million or 2.7 percent above that of the prior year. Interest expense was reported at $21.3 million (2022 - $22.1 million), which represented an $866.1 thousand or 3.9 percentage decline below that of the prior year. - Non-interest income increased by $287 thousand or 6.3 (2022 - 23.1) percent to end the year at $4.9 million (2022 - $4.6 million). Expected credit losses of $4.8 million (2022 - $6.5 million) decreased by $1.7 million (2022- $2.7) or 26.7 (2022 - 29.7) percentage below that of the prior year, while loans on non-accrual increased marginally from $154.4 million in 2022 to $162.6 million at March 31, 2023. - Total operating expenses reached $31.5 million (2022 - $28.2 million) at the end of the fiscal. Notable increases were reported in direct cost of services which grew by $1.1 million or 140.6 percent, professional fees which increased by $873.1 thousand or 31.7 percent over the prior year, and maintenance to property and technology services which increased by $866.6 thousand (2022 - $1.1 million) or 16.8 (2022 - 28.2) percent over that of the prior year. Snapshot of CAPITA’s Performance Materially, the financial impact of CAPITA’S performance on the Group consolidated position is minimal. From a Statement of Financial Position perspective, CAPITA’s assets fell by just 0.4 percent compared to the prior year to reach in $326.4 million at March 31, 2023. Net Income however fell significantly from $1.3 million to $176 thousand at March 31, 2023 as recent negative publicity constrained its ability to grow the loan portfolio and maintain previous levels of interest income. Other factors affecting the performance were an increase in loan provisioning by $1.17 million, which was due to changes in the valuation of the collateral on non-performing loans, and cost overruns on the March 2022 audit. There was also an accrual for back pay in respect of the ongoing negotiations with the Barbados Workers’ Union for the Collective Bargaining Agreement for the period 2019 to 2023. For the Card Services Division, the ATM Acquiring Project, which will enable the BPWCCUL’s ATMS to accept all VISA and MasterCard branded cards, is in the testing phase with go-live scheduled for August 2023. The International VISA Debit Card Project in St. Lucia has progressed to the stage where CAPITA has been accepted by VISA as a principal member of the VISA network. Work is ongoing with the credit unions in St. Lucia for adoption and distribution of the debit cards. The expected launch date is September 2023. The project involving the marketing of Automated Clearing House (ACH) services to other financial services providers is ongoing. It is expected that CAPITA will realise the on-boarding of a target of four users of the service by the end of Quarter 3. These new ventures will provide additional non-interest income streams while allowing members and customers across the Group access to a wider suite of financial products and services. Group Performance Summary: The Group’s net income before levies and taxes for the financial year-end, March 31, 2023, was recorded at $8.6 million as compared to $12.2 million in the prior year. With increased economic activity recorded during the reporting period and employment levels declining, delinquency returned to pre-COVID-19 levels. Consequently, expected credit losses relative to loans decreased from $7.5 million in 2022 to $6.8 million at March 31, 2023, representing an 8.4 percent decrease. During the financial year ended March 31, 2023, the Group’s minimum deposit rate remained fixed at 0.5 percent ensuring that depositors receive a return above that for similar deposits in the market. The Group’s net interest margin as a percentage of average assets grew marginally to reach 4.1 percent as at March 31, 2023 compared to 3.99 percent at March 31, 2022. The Group’s levies on assets decreased moderately by $113.1 thousand or 11.4 percent, while corporation taxes declined by $27.6 thousand or 31.5 percent. Net income after tax and levies for the year totaled $7.6 million compared to $11.1 million for the year ended March 31, 2022. 2019 2020 2021 2022 2023 Deposits Deposits
16 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Consolidated Financial Statement Highlights Revenues: The Group earned total interest revenue of $105.7 million (2022 - $103.5) for the financial year ended March 31, 2023, representing an increase of $2.3 million or 2.2 percent over the prior year. Deposit cost in the form of interest expense declined by $1.5 million or 5.2 percent to move from $28.4 million in 2022 to $27.0 million in 2023, as deposits continue to reprice at lower rates. Consequently, net interest income moved from $75.0 million in 2022 to $78.8 million in 2023. This represented an increase of $3.8 million or 5.1 percent over that of the prior year. Income generated from non-interest revenue items remained relatively steady at $8.0 million over the 2022 and 2023 reporting periods. Net interest income combined with noninterest income increased from $83.0 million in 2022 to $86.8 million in 2023. Net income: The Group’s consolidated net income before levies and taxes was recorded at $8.6 million (2022 - $12.2) at March 31, 2023. Operating Expenses: Total operating expenses inclusive of taxes increased from $64.5 million in 2022 to $72.2 million in 2023 primarily driven by a 19.7 percent, or $4.7 million, increase in staff cost. During the fiscal, the Group executed key aspects of its organization redesign programme and offered voluntary separation packages to its employees. Additionally, outstanding union negotiated payments for the four-year period, 2019 to 2022, were agreed and paid during the fiscal. Assets: Total assets of the Group stood at $1.95 billion at March 31, 2023. This represented an increase of $13.7 million (2022 - $103.9) or 0.7 (2022 - 5.7) percent over the previous year. At March 31, 2023, the Group’s consolidated net loans and advances stood at $1.43 billion, an increase of $26.5 million or 1.9 percent over the prior year. With the focus of allowing members to realize their dream of owning a home remaining paramount, the Group’s mortgage product continues to be the primary driver of loan growth. Consequently, net growth in mortgages was $44.4 million or 7.1 percent while net consumer loans and business decreased by $19.5 million or 2.6 percent. The Group remained highly liquid with total cash resources of $392.8 million compared to $408.4 million in the prior year, a marginal decrease of $15.6 million or 3.8 percent. 2019 2020 2021 2022 2023 Net Income Net Income 2019 2020 2021 2022 2023 Net Income Loans to members 3 Loans to Members 2019 2020 2021 2022 2023 Deposits Total Assets 2 Total Assets Management Discussion & Analysis (MD&A) (Continued)
17 CONSOLIDATED FINANCIAL STATEMENTS 2023 Asset quality: The Group’s non-performing loans grew by $7.4 million in the 2023 period versus overall portfolio growth of $27.9 million. Consequently, with greater percentage growth in the nonperforming loan segment versus the percentage growth in the overall loan portfolio, the delinquency ratio rose marginally to 14.0 percent at the end of March 31, 2023 compared to 13.8 percent at the end of March 31, 2022. While this rate has only moved marginally, we are committed to providing relief and solutions according to individual needs, and to assisting members/customers with working through any financial difficulties arising out of the economic fallout. In this regard we recognize and acknowledge the efforts of staff, in particular the Collections departments, in providing members/ customers with appropriate payment options during these challenging economic times. Options available for members/customers seeking relief includes the following: • extension of loan terms • converting outstanding interest to a separate loan; and • consolidation of debt Liabilities: The Group’s liquidity position continues to be strong and is primarily driven by the continued growth in deposits. Deposit growth however remained sluggish during the period, rising marginally by $12.8 million or 0.8 percent as compared to $83.1 million or 5.1 percent for the 2022 fiscal to finish at $1.712 billion at March 31, 2023 compared to $1.699 billion the previous year. The Group maintains a liquidity buffer which ensures the statutory reserves are fully met, a percentage deposit cover is maintained and a percentage cover for loan commitments is guaranteed. At March 31, 2023 the Group’s cash and cash equivalents of $371.9 million was 56.3 million over the liquidity buffer of $315.6 million. The Group’s operations are 99.9% funded by its members and customers to the extent that the only external borrowing is that held by its subsidiary, CAPITA Financial Services Inc. At the end of the financial year, this external exposure remained at $1.3 million. Equity: As at March 31, 2023, the Group’s total equity rose to $188.1 million, representing an increase of $2.5 million or 1.3 percent compared to an increase of $11.6 million or 6.7 percent in the previous year. This increase included the issuance of $544.1 thousand in additional member shares (2022 - $634.8 thousand), and the distribution of $2.8 million (2022- $2.6) in dividends and interest rebates to members during the year. The Group’s capital adequacy ratios continue to be above the 10 percent regulatory requirements. This ratio is a key measurement relative to the Group’s ability to absorb market shocks and as such is monitored on an ongoing basis. Ecomonic Outlook 2023 fiscal The January to March 2023 Central Bank of Barbados’ “Review of Barbados’ Economic Performance” indicated that the Barbados economy is expected to record growth of between 4 to 5 percent for 2023 driven by the tourism sector, supported by private sector investments. The downside risks to the economic outlook reported in the publication were the possible slowdown of the global economy and the impact of that on fighting high inflation without stifling global demand, and the potential implication of disruptions to the global supply chains and international trade arising out of any escalations to geo-political tensions on the projection for global economic growth. It was reported in the latest World Economic Outlook (WEO, April 2023) that inflation is expected to stabilize over the remainder of the current period as improvements in international commodity prices and the oil market filter into the Barbadian market. This would, however, be dependent on the upward inflationary pressures from domestic demand for discretionary goods and services as the economy expands The Way Forward Beyond 2023 Given the return of Barbados to pre-COVID 19 levels in key areas of economic activity, the Group remains steadfast in its commitment to making a material difference to the social, environmental and economic wellbeing of our members, customers and the communities in which we serve. The roll-out and implementation of the corporate redesign programme in 2023, and the enhancement of our corporate and governance structures in line with independently derived best practices reinforces our focus on the strategic positioning of the ?.8,#*@77"87 #&'$!&"$! #&(!)&($# #&*!(&*$$ #&$%#&('% #&$+'&+$% A"8*$%(.B"*C"D.E"* #"F$"7*,%G*8,H"7 #'&''+ #$&+"' #"&'** #!&!#( *&'*' I.,%7*8.*B"BC"E7 1,235,760 1,311,851 1,330,140 1,398,822 1,425,341 2019 2020 2021 20 2 2023 Delinquency Ratio 1 Delinquency Ratio
18 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Group within Barbados and the wider Caribbean. This is in line with our responsibility as a systematically important financial institution (SIFI) within the sector and the broader economy. As we look ahead, we foresee continued changes in both our members’ preferences as well as within the competitive landscapes in which we operate. These changes necessitate a transformative and future-looking response so that you become empowered with the modern tools required to meet your evolving needs and expectations. Our desire to fulfill this ambitious goal is the underlying basis of the initiation of a digital transformation project, the objective of which is to provide us with a blueprint for building a Group of Companies that operates in a more digitized and automated manner to better serve you and redefine your member/customer experience. This investment will position us to not only offer an enhanced member/customer experience, but by embracing innovation through relevant technologies will also allow us to become more agile and responsive to the ever-changing business environment. This is critical if we are to maintain our leadership position in the sector, and by extension in the rapidly evolving financial services landscape. We look forward to whatever the future brings knowing that together we will take the actions necessary to ensure the sustainable and profitable growth of the Group. Management Discussion & Analysis (MD&A) (Continued) SAVE TIME ! Apply Online Save time with our hassle-free online loan application. Apply now and enjoy the convenience of a streamlined process from the comfort of your own home. Don’t waste precious time waiting in line or dealing with paperwork. Experience the power of technology and apply online today! Legacy Foundation’s mission is to inspire people and mobilize resources to strengthen the communities where our Group of Companies operate. We aim to make a significant positive social impact that will leave a lasting impression in areas that align with our impact objectives of Wellness, Empowerment & Learning. Donate to Legacy Foundation today! Support our mission as we help communities with projects that will make an impact on people’s lives. Donations can be made at any branch of BPWCCUL.
19 CONSOLIDATED FINANCIAL STATEMENTS 2023
20 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Board of Directors’ Report Overview The Governor of the Central Bank of Barbados in his first quarterly review of April 26, 2023 used a theme The Economy has Recovered which articulated macro-economic growth buttressed by what was cited in the review as the economy having recovered from the COVID slump Should the stated assumptions and forecasts run consistent to expectations, this positive news, and the trickle-down impact that is anticipated from both the economic growth and the post-COVID recovery, augurs well for the economy, Barbados and all Barbadians The Governor’s future looking statements predict what is expected to be the case in the coming year and beyond Conversely, as we reflect and report on our past fiscal period, we do so bearing in mind the predictions we made when we stood before you as a board at our AGM in December 2022 These predictions envisaged improved macro-economic conditions and a climate that would allow for increased membership participation, and it was against this backdrop that we set some ambitious budgetary goals; goals underpinned by an anticipated expansion of our membership base and a related improvement in loan activity through increased uptake of our financing products We acknowledge that there is a desire for low-interest rate loans and higher than average interest-rate deposit products, and that this is likely to continue as Barbadians seek to protect their disposable incomes We remain focused on delivering value-added membership, but can only do so to the extent that our actions allow us to maintain the financial strength and stability of our Credit Union, especially in these uncertain times It is imperative that we maintain healthy levels of capital, particularly through the generation of adequate levels of surplus which is our primary vehicle for doing so The principal risks and challenges that could prevent us from doing so are members’ loan defaults, a disproportionate imbalance of investments to member lending and the disparity in interest income as a result, and the liquidity challenges that could arise if overall operations are not properly managed Cognisant of the negative impact of these risks on achieving our set objectives, you are assured that they are monitored and managed by the Board to ensure your Credit Union is secure We are grateful that life has returned to mostly normal patterns following a year of heightened unpredictability It is clear however that this new normalcy is still not aligned with the previous norm, as other events unfolded that impacted the world as we know it and by extension influenced our local markets and the lives of our members The economic effects of the war in the Ukraine, the sluggish recovery and fallout from the COVID-19 pandemic, and even the separation of Britain from the European Union will continue for a number of years and will impact our local economic circumstances, particularly through rising inflationary pressures This rising inflation and the resultant increases in the cost-of-living are a reality felt by us all We are acutely aware of the impact these issues are having on our membership and will work with you as best as we can through this difficult period when inflationary pressures continue to erode your purchasing power “ We are proud of what we have accomplished from an operational, member service and community perspective
21 CONSOLIDATED FINANCIAL STATEMENTS 2023 Audit Transition Our transition last year from the previous auditors to our new auditors, PwC was a challenging one which tested both parties with an outcome that was not in keeping with good practice or our normal corporate standards. We assured you that the situation would not be repeated and are pleased to report that the financial audits were completed within the statutory timelines for all entities across the Group this year. Our commitment to you coming out of the past AGM was that the lessons learnt from last year’s experience, would be used to bring about improvements, and as a Board we can confirm that improvements were evidenced across all aspects of the audits during the reporting period. Having returned to an AGM timeline that is in keeping with our legal requirement, and which syncs with our pre-COVID meeting schedules, we express thanks to the auditors, management, and all other parties involved for rectifying the previous challenges and returning us to a position of general compliance and good corporate practices. Credit Union Performance As we looked into the 2022-2023 reporting period from the platform of last year’s AGM we noted the solid predictions for economic growth and expansion that were emanating from various commentators. To date there has been some validation of those predictions, albeit tempered and not to the expected levels given the economic downturns experienced by our major trading partners which slowed our local rate of growth and economic improvement. Throughout it all your Credit Union has generally performed well in what has been an improving, but still challenging environment and we continue to execute on the vision of attaining long-term stability through sustainable and profitable growth. A snapshot of the financial performance over the previous reporting period is outlined below: Income Statement • Membership grew by a net of 3,612 or 3 percent to reach 111,118 members, up from 107,506 at prior year end. • Total income comprised of interest and non-interest income earned for the year was $95.1 million and this represents an increase of $3.9 million or 4 percent over the prior year. • Operating expenses for the year totalled $59.7 million and this represented an increase of $7.4 million or 14 percent over prior year. • Net interest income (interest earnings on assets, loans and securities less interest expense paid on lease liabilities, deposits, and wholesale funding) increased by $3.2 million compared to a $4.0 million increase in the year ending 2021-22 (5 percent increase versus 6.7 percent increase). • Net operating income for the year was $67.7 million which represents an increase of $5.2 million or 8 percent over prior year. • The cumulative impact of the year’s operational performance was an ending surplus of $9.4 million, compared to $10.3 million for the prior year. This was a decrease of $900 thousand or 8.7 percent. Statement of Financial Position • Total assets grew by $50.5 million or 3 percent over prior year. Total assets at the end of the financial year were $1.723 billion compared to $1.673 billion at the end of the prior year. • Net loans and advances to members, primarily driven by mortgages, grew by $31.4 million, increasing from $1.115 billion at the end of March 31, 2022, to $1.146 billion as of March 31, 2023. • Members’ deposits grew by 3 percent or $47.8 million to end the year at $1.501 billion as at March 31, 2023 compared to $1.453 billion at the end of the prior year. • Retained earnings of $4.9 million were recorded for the year compared to $4.8 million in the previous year, representing an increase of 3 percent, year on year. Subsidiary Performance Capita Financial Services Inc. (CFSI) Through its diversified product offerings and regional footprint, CAPITA Financial Services Inc. plays a crucial role in the overall strategic positioning of the Barbados Public Workers’ Cooperative Credit Union Ltd. Group of Companies, and continues to positively contribute to its overall success. An overview of some of its key financial highlights for the past fiscal period is provided below: Income Statement • Total income, comprised of interest and non-interest income (including fees and commission) for the year ended March 31, 2023, was $25.6 million, an increase of $2.9 million or 13 percent over the prior year total of $22.7 million. • Net interest income (interest earnings on assets, loans, and securities less interest expense paid on lease liabilities, deposits, and wholesale funding) increased by approximately $557 thousand or 5 percent, moving to $11 million at the end of the financial year compared to prior year of $10.4 million. • Total expenses for the year were reported at $25.4
22 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED million compared to prior year $21.3 million, an increase of approximately $4.0 million or 19 percent. • The cumulative impact of the increased expenses versus income was a material decline in the overall profitability of the CFSI Group. Profit before taxes decreased by 52 percent or approximately $1.2 million to $1.1 million (2022 - $2.3 million, 2023 – $1.1 million) while profit after taxes decreased by 83 percent or just over $1.1 million to $129 thousand (2022 - $1.3 million, 2023 - $129 thousand). Statement of Financial Position • Assets decreased by approximately $1.2 million moving from $327.5 million at year-end 2022 to $326.3 million as at the end of the reporting period. • Loans and advances which is the core component of CFSI’s business model decreased by 2 percent or $4.9 million over the reporting period, moving from $283.8 million at year end 2022 to approximately $278.9 million at year end 2023. • Deposits were relatively stable over the reporting period, growing by 0.1 percent or $290 thousand to end at $278.9 million at March 31, 2023 compared to $278.6 million at the previous year-end. • Retained earnings of $9.67 million were recorded at the end of the financial year in comparison to $10.67 million in the previous period; a year on year decrease of 9 percent. • Total equity was relatively stable and moved from $28.35 million for the year ending 2022 to $28.15 million as at year ending March 31, 2023; a $196 thousand or 0.7 percent movement over the period. Following the very public scrutiny and adverse publicity it experienced last year, the subsidiary has taken action to enhance its governance structures and processes, and has put measures in place to re-establish its credibility and image while becoming even more resilient and continuing to serve its customers. The Board which was reconstituted coming into the reporting period is actively seeking a full-time C.E.O to fill the vacancy arising out of the departure of the previous President and C.E.O and is currently being supported by an experienced and wellrespected Interim CEO while the recruitment process is ongoing. It is anticipated that the vacancy will be filled during the 202324 period. We remain committed to investing in our subsidiary’s growth and supporting the initiatives that will guarantee its ongoing success, locally and regionally, while ensuring it attains and maintains a financial performance that provides incremental value to the overall Group. Allied Co-operators Inc. (ACI) For the 2022-23 reporting period, the focus of ACI’s operations has been to increase its revenue and revenue generating capacity. As at the end of the reporting period revenue stood at $267.3 thousand, representing an increase of approximately $169 thousand or 172 percent over the prior year. Generally speaking, most start-ups become profitable within the first three to five years of operation - ACI having only been recently introduced into the market, falls into this category. Since its introduction there has been good progress and a consistent decline in the recorded losses over the past two years. The majority of revenue continues to be generated through services provided to smaller Credit Unions within Barbados, a focus ACI intends to continue into the future. While the highlighted revenue increase is commendable, the desire to become a profitable entity with a well-diversified client portfolio still remains ACI’s primary objective. Given cash flow constraints experienced by many of the smaller credit unions during the COVID-19 period, market conditions were not as favourable as forecasted during the reporting period and the initial take up of the company’s products and services by the smaller credit unions was subsequently below what was projected. As a result and to mitigate against the sluggish market conditions the decision was taken to extend the company’s services to businesses in industries outside of the Credit Union sector. Market research was conducted to determine potential target markets and results indicate insurance companies and the small & medium sized off-shore companies within Barbados and the Caribbean as the best fits. Efforts have been made to seek out clientele in those areas and the results have been encouraging as multiple requests for proposals have been received by management as a direct result of these growth and expansion initiatives. Board of Directors’ Report (Continued) Affordable access to Best-in-class Assurance Services for small to medium sized entities. The regulatory landscape for financial services in the Caribbean is becoming increasingly complex and more and more pressure in the form of increased regulatory requirements from external authorities is being placed on our regional institutions.
23 CONSOLIDATED FINANCIAL STATEMENTS 2023 While focused on these diversification efforts, ACI still remains grounded in the present and focused on the existing business on its books. It continues to provide a high-quality service to its credit union clientele, primarily through the provision of monthly ongoing compliance services to strengthen the compliance and governance infrastructure across the smaller Credit Unions; enhancing both their AML environments and the level of awareness at both the employee and Board of Directors’ level. Additional focus is also being placed on expanding its suite of services to include accounting and audit related services for small and medium sized enterprises (SME). These services will initially be offered to members of the Barbados Public Workers’ Co-operative Credit Union Ltd. and represent another viable initiative that will contribute to ACI’s overall growth. Legacy Foundation Legacy Foundation continued to be challenged across all aspects of its operations during the course of the last reporting period as member donations, foundation activities and initiatives all remained suppressed in the post-COVID economic environment. During the reporting period the Foundation received five applications for funding totalling $275 thousand dollars which are currently under review and made in-roads in the Barbadian community in the United Kingdom as in-person presentations were done in multiple cities including London, Birmingham, Manchester and Reading. The time spent on the ground networking and building relationships allowed for the increased awareness of both the Legacy Foundation and BPWCCUL brands at a time when building trust has become critical. The presentations also provided opportunities to: • Inform the diaspora about the Foundation’s goals and objectives. • Strengthen relationships with the existing member community while building relationships with prospective new members. • Inform and engage possible new donor streams and give Barbadians in the diaspora the opportunity to give back and partner in our charitable efforts. The Foundation’s objective is to undertake initiatives that bring about positive changes and make a meaningful impact in the lives of others, while addressing underserved areas of need in the charity space. By becoming a donor to the Foundation, you too become a part of a credit union force striving to create a better future for all. Every donation counts, and as is the case annually, we ask that you help us to positively impact those who need it most by way of making your deposits in the donation boxes present in all of our branches. Further information on the Foundation is available online at www.legacyfoundation.org. Organisational Strengthening As the Credit Union sector and financial services industry on a whole transition into a post-COVID era, we at the Barbados Public Workers’ Co-operative Credit Union Ltd. need to be in a position to effectively manage the now entrenched changes brought on by the pandemic, pivot in response to both opportunities and threats that are present in our operating environment, and respond in a manner that delivers on our purpose of bringing benefits and value to our members and key stakeholders. To provide us with the focus required to achieve the above and navigate our changing environment, we will refresh our strategy during the 2023-24 reporting period to ensure that we continue on a path that will see us well prepared to face whatever the future brings. This will include continuation of a review of our digital offerings, an area we need to continue to enhance to ensure your interactions with us, and our channels and services are easy and efficient. Through a digital transformation project that is already in motion, we intend to invest in robust alternative electronic delivery channels to provide you with the convenience, security and flexibility you deserve in a busy world where online engagement is now the norm. Complementary to this, we will also continue to focus on our people and becoming an employer of choice through the successful completion of the corporate redesign initiative that, while largely completed, continues to engage our attention as we work through the implementation phase. Building out our governance, compliance and risk management frameworks has been a focus during the past year which will continue into the foreseeable future. To this end we have recruited a Chief Risk & Compliance Officer to focus on strategic risks and compliance matters, and have also provided additional resources to the department to focus on the day to day risks, in conjunction with the various business units. These enhancements, coupled with the provision of additional resources to the Internal Audit Department, has helped with the buildout of even stronger oversight and assurance teams to protect against us the various current and emerging risks the financial services sector is particularly susceptible to. Our strong capital position provides us with a stable base to continue to invest in these key priorities, and to assist our members while working towards sustainable future growth - even in these tumultuous times. As we continue to reinvent ourselves through a strategy refresh and key transformational projects, our focus will continue to be on channelling our investments and resourcing directly into those areas that will most help us to succeed. Digital Enhancements Recognising the importance of technology in delivering superior member experiences, the Credit Union has implemented solutions to provide members with greater convenience in the management of their financial affairs, particularly as it relates to money management and electronic payment and transfers. The Real Time Payment (RTP) service and the BillPay
24 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Board of Directors’ Report (Continued) upgrade form part of the upgraded suite of services available on the online banking platform, specifically designed to enhance operational efficiency and enable faster service delivery. Real Time Payments (RTP) This service allows members to send and/or receive funds between their Credit Union account and accounts at other financial institutions, whether in their own name or in another member’s/customer’s name. As part of the process and to ensure member security, members will receive real time confirmation of the transaction settlement once it has been completed. BillPay Upgrade During the reporting period the Credit Union embarked on the upgrade of the backend of the existing BillPay solution, transitioning from the previous end of day manual process, to an automated delivery of payment information through the Surepay payment network. The upgraded BillPay service passes the payment information from the Credit Union to the Surepay platform in real time when a member completes a payment request in the front-end module, improving on the previous batching of payments and the once daily end of day transfers done under the old system. Collectively, these changes will: • Significantly reduce the time for members’ transfers to be credited to accounts at the various vendors supported by Surepay (BillPay), and at other financial institutions (RTP). • Allow for same day transfer/receipt of funds to/from other financial services institutions. • Provide members with confirmation of the completion of their transaction and the payment status making for easy tracking. • Allow members access to all billing parties supported by Surepay, both in the present and the future. Member Engagement We continued to attract new members, resulting in total membership of 111,118 as at the end of the reporting period, an increase from 107,506 as at March 31, 2022. This growth demonstrates the trust and confidence the wider Barbadian community continues to have in our Credit Union’s ability to effectively meet their financial needs. The trust and confidence placed in us, being a member-owned co-operative is not something we take lightly, as well as ensuring a consistently high level of member satisfaction is critical to ensure this trust is not eroded. We are pleased to note that we continue to perform well in this area as we registered a Customer Satisfaction Score this year of 84.7 percent compared to 83.2 percent as at March 2022, both against a benchmark score of 80 percent. Despite the confidence placed in us as reflected in the membership growth and attainment of our benchmark customer satisfaction score, we know from the reports received that we have not provided as consistent a member experience as we would have liked during the reporting period. There have been reported challenges with our branch wait times, our loan turnaround times and generally our consistent delivery of the quality of service in the branches and across our other channels. This area of quality service delivery continues to capture our attention as we engage with management to determine and address the root causes of the challenges being encountered. Cybersecurity & Resilience Cyberattacks and cybersecurity beaches and exposures pose significant risks to all businesses and is an ongoing issue for all financial institutions regardless of location. Locally we have seen the impact of these attacks across various sectors including retail, health and financial services. As part of our long-established defensive toolkit to proactively counter the possibility of these attacks within our systems, we regularly use independent external assessments to identify any deficiencies within our systems in order to ensure adequate mitigations are in place. Active penetration testing and authorised ethical hacking of our network are some of the tools used to detect infrastructural and system vulnerabilities, and to determine potential threats and areas of weaknesses that could be compromised by malicious/bad actors. The tests simulate realworld attacks and the recommendations coming out of these partnered approaches are used to strengthen the security of our internal systems,
25 CONSOLIDATED FINANCIAL STATEMENTS 2023 networks and applications. This long-standing approach is a critical part of our technological defence to better withstand cyberattacks and has proven to be effective and resilient to date. In addition to these tests we also continue to review and upgrade our network security at both the hardware and software levels, while investing in our cybersecurity systems, frameworks and policies to stay one step ahead. Additionally, as most attacks have been shown to occur due to human error, employees are trained to be aware of, and assist with the prevention and mitigation of attacks that may seek to take advantage of internal weaknesses. This level of staff awareness is achieved through ongoing mandatory security awareness training and testing across the Group. As members, you too play a critical part in ensuring the safety and soundness of our technology environment and we encourage you to also take your awareness of security best practices and fraud mitigation as seriously as we do. We remind you that our online banking system allows you to set-up alerts that can prompt you regarding transaction activity and changes in balances on your accounts. This can be a useful tool to protect you against unauthorised access while jointly ensuring we maintain a secure environment. Updates to Key Matters of Significance Lower Broad Street Building We are pleased to advise that with all of the precursory objectives, i.e. recruitment of a qualified and experienced project management professional, the updating and approval of the procurement policies and manual, and the recruitment of a dedicated procurement officer having been achieved, the Lower Broad Street building project has been restarted. We are currently in the final stages of selecting the successful candidates for professional architectural and quantity surveying services under the oversight of our Internal Audit Department and it is anticipated that the selection and on-boarding process will be completed during the second quarter of the next reporting period. This will be followed by the contracting of the design consultants to start the process of finalising designs to be used in the application for planning approval, and to be put out to public tender for provision of construction services. The build-out of this new location will be done in a manner that aligns with the Credit Union’s future requirements and strategic visioning as we reposition ourselves to bring about future growth. Debit Card There continues to be a consistent increase in the number of cards activated and used, and the number of transactions processed since implementation of the MasterCard debit card as approximately 63,000 cards have been activated and a total of approximately 2 million transactions valued at Barbados $225 million have been processed. Total Activated Cards 63,742 US Transactions $ $ 12,321,838 83 US Transactions # 240,116 BDS Transactions $ $ 201,781,67773 BDS Transactions # 1,757,419 Total Transactions $ 1,997,535 Corporate Governance One of the Board’s primary objectives continues to be the improvement of, and adherence to sound corporate governance principles. The reporting period saw noteworthy progress being made towards achieving this objective even as we faced unique challenges and circumstances coming out of the last AGM that placed the Credit Union in the full glare of the public spotlight, challenged the credibility of our brand and introduced significant reputational and operational risks into our environment. Substantial time and efforts were required to resolve the issues placed in the public domain as wide national discourse overtook what should have been focused membership discussions. These circumstances and events not only impacted the way we operated but, by nature of regulatory involvement and their related actions, had wider implications for the sector as a whole as they highlighted the impact and importance of the Barbados Public Workers’ Group of Companies within the wider economic and societal setting. These recent past experiences strengthened our resolve to ensure that the responsibilities imposed on us as a systemically important financial institution (SIFI), are effectively performed, specifically the responsibility of taking the actions required to ensure the financial soundness and stability of the Group, while simultaneously ensuring that those actions do not negatively impact the stability and safety of the broader financial system. PwC Corporate Governance Review Project Since our last update and following discussions with members of the Board, Supervisory and Credit Committees, the final report with recommendations regarding the enhancement of our governance framework was received from PwC. In keeping with the agreed deliverables and scope of work, the report identifies existing gaps and weaknesses along with supporting recommendations to achieve the desired future state. The PwC led evaluation was a comprehensive one that took immediate, medium and long-term goals into account. During the course of the review key areas of focus were assessed across ten (10) specific themes and these guided PwC’s questionnaires,
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