VANCOUVER, B.C., February 26, 2021 – Central 1 Credit Union (‘Central 1’ or ‘the organization’) reported a profit after tax of $36.1 million for the year ended December 31, 2020, a $1.9 million increase in profit after tax of $34.2 million in 2019.
Central 1 has consistently maintained strong operational resilience to support credit unions in B.C. and Ontario. In 2020, the organization made significant and immediate changes to support our employees, members and clients during the pandemic. Central 1 focused on maintaining essential products and services, while delivering core business functions for the credit union system and clients.
“Central 1 delivered solid earnings during an uncertain macroenvironment driven by the global pandemic. Our strong balance sheet and diverse business lines are a testament to the strength and resilience of our business and our ability to effectively operate and progress our strategic initiatives in a challenging environment,” said Sheila Vokey, Central 1 Interim President and CEO. “Our success is underpinned by our people who have been unwavering in their commitment to support our members and clients.”
Treasury and Mandatory Liquidity Pool
Treasury continues to deliver strong and consistent contributions to Central 1 earnings. Treasury reported an increase of $27.3 million in profit after tax, primarily driven by a $19.0 million increase in net financial income. In addition to a strong financial performance in 2020, liquidity at Central 1 continues to be robust as deposits remain at an all-time high, increasing by over $5.2 billion during 2020.
On January 1, 2021, Central 1 successfully transitioned the Mandatory Liquidity Pool (MLP) from a deposit structure to an investment structure, representing a significant change in liquidity management for the credit union system in B.C. and Ontario. The initiative ensured the MLP is bankruptcy remote and creditor-proof while maintaining a cost-effective and capital efficient structure for the credit union system to manage its liquidity, drive market confidence and comparability, and ensure the system and individual credit unions continue to thrive.
Digital & Payments Services
As the reliance on digital banking solutions increased this year due to the impact of COVID-19, Central 1 focused on streamlining and accelerating its Digital Banking Platform launches and product enhancements. The organization empowers clients to confidently meet the changing demands facing their organizations.
Central 1 received strong support from its members on its payments strategy which is designed to position the credit union system and financial services industry for growth and innovation. In addition, Central 1 launched its Payments Customer Advisory Council (Payments Council) to maintain strong collaboration between Central 1 and its payments clients.
Our Payments processing continues to grow – particularly electronic payments during COVID. For example, Central 1 processed 1.8 million Interac e-Transfer® transactions over a 5-day period (November 27 – Dec 1) on behalf of Canadian credit unions and other financial institutions, totalling almost $760 million.
2020 consolidated financial results compared to 2019
- Profit after tax of $36.1 million, compared to a profit after tax of $34.2 million.
- Excluding MLP results, Central 1’s profit after tax was $33.8 million, up $27.1 million from $6.7 million.
- Assets of $ 23.1 billion, up 29.1 per cent from $17.9 billion.
Despite the impact from the pandemic, Central 1’s consolidated results in 2020 reflected a $1.9 million increase in profit after tax from 2019. Excluding MLP results, Central 1’s 2020 results saw a profit after tax of $33.8 million, up $27.1 million from the previous year. Strong growth in Central 1’s investment portfolios combined with the reduction in external debt, due to a significant increase in deposit funding from credit unions, contributed to a $15.1 million increase in interest margin from 2019. Since the first quarter of 2020, credit spreads continued to narrow to levels experienced prior to the COVID-19 pandemic, resulting in an increase of $7.5 million in net realized and unrealized gains from 2019. 2020 results also reflected higher Interac e-Transfer® volumes due to increased usage of online payments during the pandemic and a lower spend on corporate expenditures and strategic initiatives. The combined impact of these movements led to strong financial results.
The MLP reported a profit after tax of $2.3 million in 2020, down $25.2 million year-over-year. The lower yield curve and higher demand for short-term investments in anticipation of MLP segregation led to the $18.0 million reduction in interest margin within the portfolio.
Fourth quarter 2020 compared to fourth quarter 2019
- Consolidated profit after tax was $5.5 million, up $14.8 million from the same period in 2019.
- Excluding the results from the MLP, Central 1 saw a profit after tax of $11.1 million, compared to a loss of $17.5 million to the same period in 2019.
- MLP reported a loss after tax of $5.6 million, compared to a $8.2 million profit after tax in the same period last year. The flatter yield curve and shorter durations for the investments in anticipation of the segregation led a decreased interest margin from 2019.
Statement of financial position
Total assets as at December 31, 2020 were $23.1 billion, an increase of $5.2 billion from December 31, 2019, of which $4.1 billion was in the securities portfolios due to strong growth from member credit union deposits. Deposits at Central 1 remain at an all-time high, reflecting elevated liquidity within the credit union system.
About Central 1
Central 1 is a preferred partner for financial, digital banking and payment products and services – fuelling the success of businesses across Canada. With assets of $23.1 billion as at December 31, 2020, (following MLP segregation on January 1, 2021, total assets were $14.0 billion), we leverage our scale, strength and expertise to power progress for more than 250 credit unions and other financial institutions, enhancing the financial well-being of more than 5 million customers from coast to coast. For more information, visit www.central1.com.
Caution Regarding Forward Looking Statements
This press release contains forward-looking statements based on assumptions, uncertainties and management’s best estimates of future events. These include, without limitation, statements relating to our financial performance objectives, vision and strategic goals, the economic, market and regulatory review and outlook for the Canadian economy and the provincial economies in which our member credit unions operate and the impacts of the COVID-19 pandemic, as well as statements that contain the words “may,” “will,” “intends” and “anticipates” and other similar words and expressions. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made. Actual results may differ materially from those currently anticipated. Securityholders are cautioned that such forward-looking statements involve risks and uncertainties. Certain important assumptions by Central 1 in making forward-looking statements include, but are not limited to, competitive conditions, economic conditions, regulatory considerations, and the impacts of the COVID-19 pandemic. Important risk factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include economic risks, regulatory risks, risks and uncertainty from the impact of the COVID-19 pandemic and other risks detailed from time to time in Central 1’s periodic reports filed with securities regulators. Given these risks, the reader is cautioned not to place undue reliance on forward-looking statements. Central 1 undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.
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