VANCOUVER, B.C., and TORONTO, Ont. (3/22/12)--Canada's Central 1 CU, the central facility for credit unions in British Columbia and Ontario, has weathered last year's market volatility and the adoption of new accounting standards. It announced Tuesday that it had posted a $16.7 million profit during 2011, compared with $43.6 million a year earlier.
The credit union organization saw improvement in market volatility during fourth quarter, which provided a year-end boost to the earnings. Profit for fourth quarter was $15.4 million (Marketwire
"Our core business remains strong and profitable," said Central 1 President/CEO Don Rolfe. "The market turbulence resulted in a decrease in the fair value of some financial instruments we hold, but the quality of our investment portfolio remains high."
Credit spreads on provincial and corporate debt narrowed, and earnings from operations were up, resulting in stronger earnings than had been reported earlier in the year, said Central 1.
Market volatility has resulted in mark-to-market losses on the fair value of financial instruments held by Central 1. Under the new accounting rules, securities must be recorded as "mark-to-market" or current market value, which led to a $109.7 million loss in fair value of Central 1's financial investments.
However, Central 1's securities are being held to maturity and the losses won't be realized. Also, its portfolio of bonds are diversified among government (45%-50%) , major banks (40%), and corporate bonds, Chief Investment Officer Charles Milne told the Vancouver Sun
In its press release, Central 1 noted it does not hold any European sovereign debt. It is well-capitalized, with a regulatory capital base of $675.4 million and a ratio of regulatory capital to risk-weighted assets of 34.8%.
Central 1 also reported these financial highlights:
- Total assets at year-end were $14.6 billion, up from $13.7 billion in 2010.
- Return on average equity was 2.6%, compared with 7.4% in 2010.
- Central 1 paid $7 million in dividends to its member shareholders.
- After taxes and dividends, Central 1 transferred $4.6 million to retained earnings, bringing that total to $304.7 million at year-end.