Central 1 reports 2024 second quarter financial results

/EIN News/ -- VANCOUVER, British Columbia, Aug. 23, 2024 (GLOBE NEWSWIRE) -- Central 1 Credit Union (Central 1) today reported its second quarter performance reflecting stable results consistent with strategic plans and expectations.

“Led by strong treasury performance and robust payments results, Central 1’s second quarter financial performance remained stable and in line with expectations,” said Sheila Vokey, Central 1’s President and CEO. “With our core focus on delivering value through scale and as a connector to critical services for our members and clients, we remain committed to providing reliable solutions where our clients need them.”

Year-to-date 2024 compared with year-to-date 2023:

• Net income of $42.0 million, compared with net income of $19.7 million
• Net fair value gain¹ of $53.2 million, compared with net fair value gain¹ of $26.3 million
• Net interest income of $24.3 million, compared with net interest income of $21.7 million
• Return on average equity² of 5.4 per cent, compared with 2.8 per cent
• Total assets of $11.2 billion at June 30, 2024, compared with $11.2 billion at December 31, 2023
  

Second quarter 2024 compared with second quarter 2023:

• Net income of $13.1 million, compared with net income of $18.5 million
• Net fair value gain¹ of $18.8 million, compared with net fair value gain¹ of $32.6 million
• Net interest income of $9.8 million, compared with net interest income of $9.8 million
• Return on average equity² of 3.3 per cent, compared with 5.1 per cent

Central 1’s second quarter and year-to-date (YTD) continue to report strong financial performance across business lines in 2024, reflecting consistent results for the fee-for-service businesses. The net fair value gain¹ from financial instruments, which was largely due to the credit spreads movements, continued to be the major driver impacting Central 1’s net income. In the second quarter, net fair value gain¹ was $13.8 million lower compared to the same quarter last year. However, on a YTD basis, it was $26.9 million higher compared to the same period in 2023.

Core Business & Financial Performance

Treasury

In our Treasury business, we continue to see strong profitability in 2024. For the second quarter, Treasury reported a net income of $19.6 million. Credit spreads narrowed during the quarter which resulted in Treasury reporting an $18.8 million net fair value gain¹. Net interest income and non-interest income, which includes revenue generated from Treasury’s fee-for-service based business, remained consistent year-over-year. Spending in strategic initiatives¹ has been aligned with Central 1’s strategic priorities. Non-interest expense, excluding strategic initiatives¹, was also largely in line with the same period last year.

On a YTD basis, net income stands at $54.1 million, up $21.0 million from the same period in 2023. The primary driver to this increase is a $26.9 million rise in net fair value gain¹ on financial instruments. Net interest income has increased by $2.3 million, while non-interest income and non-interest expenses have remained stable year over year.

Payments & Digital Banking

Central 1’s Payments and Digital Banking businesses showed mixed performance with an overall loss of $2.4 million for the second quarter. The loss was driven by the Digital Banking business and partially offset by the earnings in the Payments business.

On a YTD basis, the Payments and Digital Banking business reported a net loss of $5.6 million, compared to a $11.0 million loss reported in the same period last year.

Non-interest income, excluding strategic initiatives¹, remained steady year-over-year on both quarterly and YTD basis, supported by relatively stable transaction volumes and the adoption of new products in digital and payments.

Investments in strategic initiatives¹ were consistent with our priorities and reflective of a lower spend in 2024, which was driven by the pause in the Real-Time Rail project as detailed scope is still pending from Payments Canada, a slow-down in Payments Modernization work to plan for future work, and reduced professional fees related to Digital Strategy and Forge Implementations.

In the second quarter of 2024, Central 1’s Payments team continued to develop and test our payments growth strategy to provide value to new clients outside of the credit union system as well as our existing clients. This includes progressing our transition to a platform model of delivering payments to our clients. Through this model, we will give our clients and partners access to a modern hub or portal, centralizing access to our products and services.

The second quarter saw continued strong results for fraud prevention as Central 1’s Enterprise Fraud Management (EFM) provides fraud prevention to more than 200 clients through our advanced EFM solution, and fraud prevention to other clients through Interac for e-Transfers.

We continued our work on the strategic digital banking review. During the quarter, we shared an update with clients and members informing them of our progress and next steps in our journey. Central 1 continues Forge public website implementations and modernization work on Forge to ensure it has the resilient core infrastructure needed to give clients and members options and flexibility in the future.

Non-GAAP and Other Financial Measures

Management of Central 1 uses a number of financial measures and ratios to assess overall performance. Some of these measures do not have a standardized definition prescribed by Generally Accepted Accounting Principles (GAAP) and might not be comparable to similar measures presented by other companies. Presenting non-GAAP financial measures and ratios provides readers with an enhanced understanding of how management analyzes Central 1’s results and assesses the underlying business performance. The discussions of non-GAAP financial measures and ratios that Central 1 uses in evaluating its operating results are presented as footnotes in the respective sections of this MD&A together with the required disclosure below in accordance with National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure.

Non-GAAP Financial Measures
The following non-GAAP financial measures exclude certain items from the financial results prepared in accordance with IFRS Accounting Standards. The tables below present reconciliations of these measures to their respective most directly comparable financial measures disclosed in Central 1’s Interim Consolidated Financial Statements.

Net Fair Value Gain

Net fair value gain used across this MD&A is comprised of gain on disposal of financial instruments plus changes in fair value of financial instruments reported in the Consolidated Statement of Income. Reporting them combined provides better information on the fair value movements of Central 1’s financial instruments to the readers.

											For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024			2023			Change
Gain on disposal of financial instruments as reported	$	27.7		$	5.4		$	22.3			$	57.9		$	16.4		$	41.5
Change in fair value of financial instruments as reported		(8.9)			27.2			(36.1)				(4.7)			9.9			(14.6)
Net fair value gain	$	18.8		$	32.6		$	(13.8)			$	53.2		$	26.3		$	26.9

Non-Interest Income, excluding Strategic Initiatives
Non-interest income, excluding strategic initiatives, presented in the Overall Performance and Results by Segment sections of this MD&A is derived by excluding Central 1’s income from investments in strategic initiatives. Excluding income from strategic initiatives allows readers to better understand Central 1’s recurring financial performance and related trends.

Overall Performance

											For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024			2023			Change
Non-interest income as reported	$	40.4		$	38.1		$	2.3			$	82.1		$	79.8		$	2.3
Less: strategic initiatives income		1.2			0.4			0.8				2.2			0.7			1.5
Non-interest income, excluding strategic initiatives	$	39.2		$	37.7		$	1.5			$	79.9		$	79.1		$	0.8

Results by Segment

Payments & Digital Banking

											For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024			2023			Change
Non-interest income as reported	$	32.7		$	30.7		$	2.0			$	64.3		$	59.2		$	5.1
Less: strategic initiatives income		1.2			0.5			0.7				2.2			0.8			1.4
Non-interest income, excluding strategic initiatives	$	31.5		$	30.2		$	1.3			$	62.1		$	58.4		$	3.7

Non-Interest Expense, excluding Strategic Initiatives

Non-interest expense, excluding strategic initiatives, presented in the Overall Performance and Results by Segment sections of this MD&A is derived by excluding Central 1’s investments in strategic initiatives to develop and deliver solutions to support the growth of the credit union system. Excluding strategic initiatives allows readers to better understand Central 1’s recurring financial performance and related trends.

Overall Performance

											For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024			2023			Change
Non-interest expense as reported	$	51.6		$	54.9		$	(3.3)			$	102.8		$	106.7		$	(3.9)
Less: strategic initiatives spend		5.7			9.5			(3.8)				12.5			20.7			(8.2)
Non-interest expense, excluding strategic initiatives	$	45.9		$	45.4		$	0.5			$	90.3		$	86.0		$	4.3

Results by Segment

Treasury

											For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024			2023			Change
Non-interest expense as reported	$	10.5		$	10.8		$	(0.3)			$	20.6		$	20.7		$	(0.1)
Less: strategic initiatives spend		0.6			1.0			(0.4)				0.9			1.4			(0.5)
Non-interest expense, excluding strategic initiatives	$	9.9		$	9.8		$	0.1			$	19.7		$	19.3		$	0.4

Payments & Digital Banking

											For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024			2023			Change
Non-interest expense as reported	$	35.3		$	38.2		$	(2.9)			$	70.7		$	76.7		$	(6.0)
Less: strategic initiatives spend		2.4			6.0			(3.6)				4.8			13.9			(9.1)
Non-interest expense, excluding strategic initiatives	$	32.9		$	32.2		$	0.7			$	65.9		$	62.8		$	3.1

System Affiliates & Other

										For the six months ended June 30
$ millions	Q2 2024			Q2 2023			Change				2024		2023				Change
Non-interest expense as reported	$	5.9		$	5.9		$	0.0			$	11.5		$	9.3		$	2.2
Less: strategic initiatives spend		2.8			2.5			0.3				6.8			5.4			1.4
Non-interest expense, excluding strategic initiatives	$	3.1		$	3.4		$	(0.3)			$	4.7		$	3.9		$	0.8

Central 1’s second quarter Management’s Discussion and Analysis (MD&A) and Financial Statements have been filed on Central 1’s SEDAR profile at www.sedarplus.com and are also available at central1.com/investor-relations.

About Central 1
Central 1 cooperatively empowers credit unions and other financial institutions who deliver banking choice to Canadians. With assets of $11.2 billion as of June 30, 2024, Central 1 provides critical services at scale to enable a thriving credit union system. We do this by collaborating with our clients, developing strategies, products, and services to support the financial well-being of their more than 5 million diverse customers in communities across Canada. For more information, visit www.central1.com. 

Notes
¹ These are non-GAAP financial measures and non-GAAP financial ratios. Refer to the "Non-GAAP and Other Financial Measures" section of this release or the MD&A for more information.
² This is a non-GAAP financial ratio. Refer to the "Non-GAAP and Other Financial Measures" section of this MD&A for more information.

Caution Regarding Forward Looking Statements
This press release and announcement contain historical and forward-looking statements. All statements other than statements of historical fact are or may be based on assumptions, uncertainties, and management’s best estimates of future events. Central 1 has based the forward-looking statements on current plans, information, data, estimates, expectations, and projections about, among other things, results of operations, financial condition, prospects, strategies and future events, and therefore undue reliance should not be placed on them. These include, without limitation, statements relating to our financial and non-financial performance objectives, vision and strategic goals and the economic, market and regulatory review and outlook for the Canadian economy and the provincial economies in which our member credit unions operate, 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 and regulatory considerations. 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 (including legislative and regulatory developments), risks and uncertainty from the impact of rising or falling interest rates, international conflicts, natural disasters or pandemic, geopolitical uncertainty, information technology and cyber risks, environmental and social risk (including climate change), digital disruption and innovation, reputation risk, competitive risk, privacy, data and third-party related risks, risks related to business and operations, 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. 

Contacts

Media:
Heather Merry
Senior Manager, Communications
Central 1 Credit Union
T 1.800.661.6813 ext. 2355
E communications@central1.com

Investors:
Brent Clode
Chief Investment Officer
Central 1 Credit Union
T 905.282.8588 or 1.800.661.6813 ext. 8588
E bclode@central1.com