Churches Cooperative Credit Union posted a net surplus of $117 million at the end of its financial year in 2008, a near seven per cent decline over the previous period, brought on by a larger portfolio of non-performing loans.

In 2007 when the credit union made $125.6 million, its loan provisions stood at $16.2 million.

But at year end December 31, 2008, those provisions more than tripled to $46.4 million, as more loans went bad.

For the year under review, Churches sold loans of $586.76 million, an improvement on the $509 million issued in 2007.

Net revenues rose to $538 million (2007: $495m), even with the larger write-off for impairment on its loan portfolio.

Balvin Vanriel, treasurer of the credit union, said Wednesday at the 35th annual general meeting in Kingston that the surplus generated at year end 2007 was actually $11.39 million off target.

Churches, which is managed by Basil Naar, had, it seemed, hoped to return a surplus of $128 million.

All four branches - the head office in Kingston, and operations in Montego Bay, Portmore, and Spanish Town plus its Old Harbour sub-branch - all returned a profit.

Loan delinquencies

Vanriel said the main factors that sent the numbers off track were loan delinquencies and a $32.86 million increase in the provisions to cover them, as well as higher interest rates paid out on members deposits to remain competitive and fee income and interest on members loans which were below budget.

The credit union's membership stood at 115,000 in the year.

A bright spot in the operations was the cambio business, for which the profits made, though relatively small, reached $995,000 in 2008, compared to $602,000 in the year prior - an increase of $383,000 or 65.3 per cent over 2007.

Vanriel attributed this to an increase in the number of transactions and effective management of margins to attract and maintain business activities.

Orville Hill, president of the credit union earlier in his board of directors report had said Churches was not spared the economic downturn, as was evident in the tripled loan impairment provisions.

Looking ahead, he saw no light at the end of the tunnel this year, and told the members to brace for another difficult period.

"As we look forward, the landscape is irregular given what is happening in our economic environment. It is fair to say that the visibility as we look forward is very poor," said the credit union president.

"But what we do know is that our credit union is solid, it is strong and it is secure."

Vanriel said the ratio of past due loans to the total loan portfolio was 7.5 per cent compared to 5.1 per cent for the previous year.

Industrywide, the past due rate on loans for 2008, he said, stood at 5.0 per cent.

In the meantime, the credit union closed the year with member shares and deposits of $2.88 billion, an increase of $295 million or 11 per cent. Hill said the increase was in consistent with prior year.

Modest growth

"Growth in loans of $204 million or eight per cent was modest and reflected the economic climate and management decisions," said Hill.

The loan portfolio at year end was $2.76 billion while total assets rose to $3.6 billion up from $3.3 billion the previous year.

Churches capital base also rose to $1.99 billion (2007: $1.3b), built up by a $100 million increase in share capital to $1.4 billion, as well as additional institutional capital.

Customer deposits also rose to $1.46 billion, up from $1.26 billion.

Hill announced a dividend of four per cent on ordinary shares, amounting to $51.3 million and eight per cent on permanent shares, a near $3.5 million payout.

dionne.rose@gleanerjm.com