Central 1 Credit Union (‘Central 1’ or ‘the organization’) reported a profit after tax of $25.6 million for the third quarter (Q3) ended September 30, 2020, compared to a profit after tax of $5.7 million in the same period in 2019.
During the quarter, Central 1 continued to help its members and clients navigate the effects of the pandemic by delivering essential and innovative financial, digital and payments products and services. As Canadians accelerated their usage of digital channels, Central 1 has responded by providing stable and advanced digital banking and payments tools to meet the increased demands.
“Our business has performed well despite the significant amount of uncertainty related to the economy and pandemic,” said Mark Blucher, Central 1 President and CEO. “Our results reflect the strength of our organization and our ability to operate in this new environment. Our consultative approach means we are focused on making the right decisions that create sustainable value while balancing the diverse needs of our members and clients.”
The organization remains focused on supporting the credit union system and ensuring the system’s resilience and success.
Treasury and Mandatory Liquidity Pool
Treasury continues to deliver strong and consistent contributions to the earnings of Central 1. In addition to the strong financial performance of 2020, liquidity at Central 1 continues to be robust as non-mandatory deposits remain at an all-time high, increasing by over $4.6 billion during 2020.
On October 2, 2020, Central 1 announced its members passed a special resolution approving amendments to Central 1’s Constitution and Rules. The amendments proposed were in connection with the plan to legally segregate the Mandatory Liquidity Pool (MLP) to restructure system liquidity for the benefit of members. The vote in favour of the amendments enables Central 1 and its members to continue working towards segregating the MLP by the end of the year. Central 1 is committed to supporting and engaging its members throughout the entire process.
The amendments are subject to the consent of the British Columbia Financial Services Authority and will come into effect at a time determined by the Board of Directors of Central 1.
Digital & Payments Services
Central 1 continues to prioritize the onboarding of over 170 clients onto the Forge Digital Banking Platform, with 98 implementations in the pipeline into 2021. As implementations continue, Central 1 is ensuring a stable and secure transition by continuing to provide support and a good user experience through predecessor platform MemberDirect.
Within Payments, volumes of Interac e-Transfer transactions are significantly higher compared to the same period last year; a trend that is expected to continue as Canadians accelerate their use of digital payments. Central 1 is also making good progress on advancing its payments strategy, which is designed to position the credit union system and financial services industry for growth and innovation.
Q3 2020 consolidated financial results compared to the same period last year
- Profit after tax of $25.6 million, compared to a profit after tax of $5.7 million.
- Assets of $ 23.2 billion, up 26.1 per cent from $18.4 billion.
Excluding the results from the Mandatory Liquidity Pool, Central 1’s third quarter results saw an increase of $17.4 million in profit after tax from the same period a year ago. Interest margin was $10.6 million higher supported by strong growth in our investment portfolio and reduced outstanding debt during the period. Credit spreads continued to narrow in the third quarter; continuing the trend of recovering the temporary fair value loss from the first quarter, resulting in a year-over-year increase of $9.6 million in net realized and unrealized gains. Non-financial income and non-financial expense remained relatively stable and investments in strategic initiatives continued in the third quarter.
Year-to-date consolidated financial results
The COVID-19 pandemic continues to impact Central 1’s consolidated results for the first nine months of 2020.
- Consolidated profit after tax was $30.6 million, down $12.9 million from the same period in 2019.
- MLP reported a profit after tax of $7.8 million, down $11.5 million compared to the same period last year. The flatter yield curve and higher demand for short-term investments led to reduced interest margin within the portfolio.
- Excluding the results from the MLP, Central 1 saw a profit after tax of $22.8 million, down $1.4 million compared to the same period in 2019.
Statement of financial position
Many credit unions continued to hold elevated levels of liquidity in response to the potential economic impact of the pandemic. There was an increase in deposits held at Central 1 during the first nine months of 2020. Total assets in 2020 was $23.2 billion compared to $18.4 billion during the same period last year, reflecting credit unions depositing their excess liquidity with Central 1.
Central 1’s third quarter Management’s Discussion and Analysis and Financial Statements have been filed with SEDAR and posted at www.sedar.com and www.central1.com/investor-