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
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