10 BARBADOS PUBLIC WORKERS’ CO-OPERATIVE CREDIT UNION LIMITED Net Interest Income Net interest income comprised of interest earnings on assets such as loans and securities, less interest expenses paid on lease liabilities deposits and wholesale funding. Net interest income increased by $3.2 million or 5.0 percent in 2023 even as loans on non-accrual increased, decreased by $839.5 thousand or 3.8 percent. Interest income from loans and advances, together with that from cash resources increased by $1.8 million or 2.1 percent and $661.3 thousand or 80.5 percent, respectively. Contrastingly, interest from financial investments increased by $105.4 thousand or 6.6 percent to reach $1.6 million. Other Income Other income increased by $287 thousand or 6.3 percent during the financial year to end at $4.9 million, inclusive of fee income for the international debit card which increased by $448.5 thousand or 22.4 percent. The collection of income from charged-off loans increased by $35.2 thousand or 3.1 percent, while rental income increased by $11.6 thousand. These increases were offset by a negative movement in legal income which declined by $161.2 thousand or 13.5 percent. Efficiency And Expense Management Staff Costs & Support During the reporting period, the Credit Union advanced its organization redesign plan and executed voluntary separation packages offerings to its employees. It also renewed an expired agreement with the Barbados Workers Union which was outstanding for a four-year period, and made the associated negotiated payments, including back pay to staff. Together these activities resulted in staff compensation and benefits increasing by $4.3 million or 22.3 percent to end the year at $23.9 million. Despite the organisational changes taking place, the organization once again exceeded its internal benchmark for customer satisfaction with a rating of 96 percent during the financial year 2023. Total Operating Expenses Total operating expenses for the year were reported at $60.0 million (2022 - $52.3 million), representing an increase of $7.4 million or 14.1 percent compared to the prior year. The increase in staff costs and benefits arising out of the previously outlined corporate initiatives accounted for 58.9 percent of the increase in total operating expenditure. Changes in operating expenses for 2023, with a comparison to the 2022 prior year, are outlined below: • Increases were recorded in direct cost of services of $1.1 million or 140.6 percent, repairs and maintenance of $866.6 thousand or 16.8 percent, legal and professional fees of $873.1 thousand or 31.7 percent, membership security of $671.3 or 14.9 percent and meeting and conferences of $468.9 or 58.1 percent. • Compensating reductions of $432.0 or 45.2 percent were recorded in staff and members training, while office stationery and supplies and janitorial services recorded decreases of $373.3 thousand or 61.7 percent, and $255.0 thousand or 20.8 percent respectively. While routine maintenance of property, plant and equipment occurred during the fiscal, there were no significant upgrades which merited capitalization and hence depreciation expenses decreased by $232.8 thousand or 5.2 percent. Net Operating Income Net operating income increased by $5.2 million or 8.3 percent to end the year at $67.7 million. This was primarily attributed in part to an increase in interest income of $2.3 million or 2.7 percent, and a decrease in expected credit losses (ECL) of $4.8 million versus $6.5 million in 2022. While there was a marginal increase in non-performing loans, the associated discounted market values of those loans were higher than their carrying values and this positive position resulted in lower overall impairment losses. Assets The Credit Union’s assets have grown by $371.4 million at an average of 27.5 percent over the last five years. This growth continued during the past year but the recorded asset growth of $50.5 million was below the prior year’s growth of $96.0 million. Net loans and advances to members were $1.146 billion, inclusive of the required allocation for expected credit losses which this year carried an allowance of $40.7 million. This compares to $1.115 billion inclusive of an expected credit loss allowance of $39.8 million at the end of the 2022 financial year. Net loan growth was $31.4 million or 2.8 percent over the prior year. Increases in mortgage loans were the primary driver of loan growth, with net mortgages growing by $45.8 million (2022 - $66.6 million) or 10.3 percent (2022 - 17.7 percent). Coming out of the COVID experience, the appetite for loans outside of Net Interest Income Membership 3 Net Interest Income Management Discussion & Analysis (MD&A) (Continued)
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