2020 Annual Report
Strength to achieve
Message from the CEO
As the COVID-19 pandemic continues through its cycle, I wish all our Members, Employees, Board of Directors, your families and friends the best of health and wellness. The pandemic will come to an end eventually and brighter days are ahead!
2020 was a year like no other. All of us had to find ways to adapt and build resiliency. Our Credit Union did the same –always centred by the purpose of helping people and businesses do more, be more and achieve more!
I’m proud of our Credit Union, our terrific Membership, our great team and Board of Directors. Our Credit Union finished off the year with a strong financial performance, made meaningful forward progress on our long-term growth strategy and learned great lessons about resiliency, ingenuity, and agility that we will use as we stride forward into the future. Thank you to all our terrific Members for your valuable business, and thank you to DUCA’s great Employees whose efforts have allowed us to continue to provide essential banking services throughout this pandemic. In particular, I want to thank our Member-facing Employees, to whom we owe a special gratitude for their unwavering dedication to our Members amidst so much change and challenging circumstances. In 2020 more than ever, DUCA could not have fulfilled its purpose without them.
Managing COVID-19
In 2020, our Credit Union demonstrated strength, ingenuity, and resilience to achieve more. There were many examples where seemingly impossible things were quickly made possible through the committed and capable efforts of our teams. At the onset of the pandemic, we became an agile organization almost overnight and completely transformed the way we work. Our Member-facing teams continued to serve our Members amid diligent precautions and safety measures, ensuring access to banking and financial guidance during a time of need for many. For Members experiencing financial hardship, our teams actively worked to help them and address the impacts to their personal and business finances.
Business Highlights
Our Credit Union achieved strong financial performance with pre-tax operating earnings (earnings before taxes, profit sharing-patronage and other comprehensive income items) reaching $17.3 million compared to $11.9 million in 2019. Net income after taxes (comprehensive net income) also increased to $12.8 million versus $12.0 million in 2019.
The Board declared dividends of 4.25% on our Class B Series 4 and 3.0% on Class B Series 1 shares, profit-sharing patronage of $1.4 million and a 2% dividend on Class A profit-sharing shares. We’re especially proud of our record of sharing profits with Members. Our 2020 total profit-sharing (patronage and Class A dividends) of $2.1 million represents 12% of DUCA’s 2020 pre-tax operating earnings. In total our Credit Union has provided profit-sharing and Class B investment share dividends totaling $93.6 million over its history to date.
DUCA’s total balance sheet assets grew by 26% year-over-year to exceed $5 billion, and our Membership increased by 7% to exceed 80,000.
In 2020 we also launched a new suite of specialized lending solutions as part of our wealth management offering and generated over $20 million in new loans. Our Credit Union also completed a massive transformational project, the most complex and largest scale initiative undertaken by DUCA in its 66-year history, with the implementation of our new core banking system. The legacy system that was reaching the end of its useful life was replaced with a new platform that we can build on to meet your needs and service you better in a high-touch and high-tech way as technology continues to change and advance into the future.
Giving Back
In 2018 our Credit Union established a unique charitable organization -the DUCA Impact Lab. Since its launch it has been another meaningful way for DUCA to live its values through contributions and investments in our Communities. The DUCA Impact Lab continued to provide financing for credit-challenged individuals and underserved small businesses; we helped kickstart an initiative that provided personal protective equipment to essential community service workers, and we released our second annual State of Fair Banking in Canada study. The study contains fascinating insights that will continue to inform initiatives at the Impact Lab and how we can better serve our Members through our Credit Union. In 2020, DUCA’s total philanthropic giving and community investment including DUCA Impact Lab initiatives, totaled approximately $592,000.
Organization Structure Update
Near the end of the year, we reset our organization structure to support the next chapters of DUCA’s growth and development. Several new roles were introduced, and a transition also occurred in the Chief Financial Officer role with a new leader stepping into the position in September. Our Credit Union has a strong, committed, and talented Leadership team dedicated to making DUCA the best it can be to serve and deliver care to you and our Communities.
Looking forward, DUCA is in a strong position to capture the terrific prospects ahead of us. I remain profoundly grateful for the continued support of our Members, for the guidance of our Board of Directors, for the tremendous efforts of our teams, and for the opportunity to lead this fantastic Credit Union. I am energized about the continued pursuit of our mighty purpose to help you do more, be more and achieve more!
Message from the Chair
I will start this message by wishing our Members, our Employees, Board of Directors and your families and friends health and well-being.
2020 presented many challenges for people around the world and indeed, for our Credit Union. It was a year that saw unprecedented and extraordinary challenges, but also impressive responses of resilience, adaptability and caring. DUCA also responded in inspiring ways demonstrating caring and strength as it navigated through one of the greatest social and economic disruptions in recent history.
I commend our Members and Communities for your resilience through the pandemic, DUCA’s CEO and Leadership team, and your Board of Directors for steering and guiding your Credit Union so skilfully through these uncertain times.
From the fast implementation of a work-from-home framework, the diligent application of health and safety measures, the uninterrupted delivery of essential services, and the provision of special care to address the pandemic’s impacts on Member finances, DUCA proved its ability to withstand challenges and continued to serve our Members and our Communities. Our strong financial results reflect DUCA’s resiliency, adaptability and strength to deal with obstacles and headwinds, grasp opportunities and most importantly, to serve and deliver care to our Members.
I’m proud of the way DUCA’s teams stepped up during the uncertain times of 2020, and I would be remiss if I didn’t give a special acknowledgement to our teams working on the frontlines. Through some very challenging days, they continued to assist our Members, creating a warm, safe and supportive environment. DUCA’s Member Connect call centre managed a higher-than-ever volume of calls; branch teams continued to serve Members who required in-person assistance –in some instances even assisting them in the branch’s parking lots, or even driving out to vulnerable Members’ homes to deliver documents. Their unflagging commitment to helping our Members truly demonstrates DUCA’s values as an organization and our mighty purpose of helping you do more, be more and achieve more.
I also want to celebrate some notable achievements in our journey towards a high-touch and high-tech Credit Union. I would like to applaud all DUCA’s teams on accomplishing a significant milestone on our digital transformation journey with the implementation of the new core banking system. This transition is an important part of what it will take to provide Members with a modern, digital experience, allowing you to engage with DUCA on your own terms and in a way that suits you best. The strides DUCA has taken towards its high-touch and high-tech future reflect its strategic goal to enhance and elevate your experience through technology that helps deliver positive-impact human interactions. This helps DUCA deliver financial care with your best interest at heart and when you need it most.
We recognize that for some of you, the transition to a new core banking system created extra challenges during the already uniquely challenging times posed by the pandemic. I thank all our Members for their patience and feedback following the introduction of the new core banking system. The teams at DUCA are focused on capturing feedback and suggestions and acting quickly to make further improvements so that you get the most out of these new technology platforms, which are key to enabling DUCA’s sustained growth and success into the future.
Times of crisis test the limits of a team, and as DUCA set sits sights on what’s next, I could not be prouder of the passion, dedication and resilience shown by DUCA’s Leadership team, Employees and your Board.
Our Credit Union remains financially strong, with a focused strategy and vision, supported by dedicated and talented people and a wonderful growing Membership base –all that we need to continue our growth and development while pursuing DUCA’s mighty purpose of helping you do more, be more and achieve more!
Business Highlights
Growth and Diversification
In spite of the rockiness of 2020, DUCA continued to find ways to extend our reach to a greater number of Members through developing new products, expanding our distribution channels and improving the way we do business.
Some of the highlights include:
- We launched specialized lending, a brand new suite of loan solutions, as part of our wealth management offering. We’re proud to have already produced over $20 million in net new loans from this line of business.
- We grew total net lending by $618.7 million, with loans on balance sheet increasing by 18% year-over-year. In 2020, we expanded the volume of loans through our own DUCA-direct channels (Branch, Member Connect, and Mobile Teams), and increased the proportion of loan and deposit volumes through strategic partners that serve as a great extension of our direct channels.
- We transitioned our partnership for underwriting and servicing of brokered residential mortgages to CMLS Financial – a leading privately-held Canadian mortgage company, underwriter, and servicer of residential and commercial mortgages – leading to greater efficiencies for our brokered mortgage processing.
- We increased our number of Members by over 5,000 to over 80,000. Almost a third of that Membership growth was added by our own Member Connect call centre, which often brings in Members from outside of DUCA’s Branch footprint.
- Despite facing constraints with being able to meet and reach out to our Members as we usually would, we were able to grow our assets by 26% to over $5.1 billion.
Engaging Our Employees
In 2020, much of our focus was on supporting our teams as they underwent great adjustments to the way they did their work at DUCA. Our Member-facing Employees were the fuel that kept our Credit Union fulfilling its purpose to help our Members do more, be more and achieve more amidst so much change. The transition to working from home for many of our Employees was not without its own challenges for some, but overall, the adjustment to remote work was a successful one for DUCA. Our response to the pandemic has been guided by our commitment to the health, safety and wellbeing of our Employees, our Members and our Community. Supporting our Employees through challenging times has included initiatives such as the rigorous monitoring and application of best-practice health and safety standards; more frequent employee communications about ongoing developments; expanding our benefits support for mental health services; and the introduction of premium pay for our frontline workers. At the time of writing, the question remains of when we will be able to welcome more Employees back to the office, which is a matter that is very much dependent on how the pandemic continues to unfold.
The great culture that we’ve built at DUCA, grounded by our shared values, continues to motivate us to succeed in the face of challenges. In 2020, we launched “Cheers for Peers,” a new informal recognition program to help further embed Our Values at DUCA: Do More –Bring out the best in others; Be more –Do what’s right even when it’s difficult; Achieve More –Make what’s possible happen. “Cheers for Peers” invites Employees to recognize their peers for living Our Values In Action, and has received great uptake and positive feedback among our teams.
In our annual Employee Engagement Pulse Survey conducted in Q4, we received a high response rate of 89%. Employees expressed many great thoughts about the supportive culture they experienced at DUCA throughout the pandemic, as well as excellent and constructive feedback on ways we can continue to make DUCA an even better place to work. With Member and Employee experience at the centre of our decision-making, we look forward to focusing on targeted action plans that continue to make DUCA the best it can be.
DUCA Impact Lab
The end of 2020 marks the second full year of operations for DUCA’s own charitable organization, the DUCA Impact Lab. The DUCA Impact Lab was set up as an important extension of DUCA’s history of Community-based banking and operates with a mission to “build banking that benefits all.” It explores creative solutions to solve the inequities that exist in today’s financial system. Working with a network of partners and fintechs focused on banking, financial health, credit scoring, financial technology, social innovation, and social services, the DUCA Impact Lab helps create better access to fair banking services for all members of our Community. In addition, it provides valuable insights for all like-minded organizations seeking to build greater financial health and resilience among the people they serve.
The DUCA Impact Lab conducts its own original research into a range of fair banking issues. It also runs longer term lending pilots to explore their risk, viability, and social impact. The DUCA Impact Lab’s initial pilot explorations were focused on helping consumers in trouble with predatory debt and providing working capital financing to underbanked entrepreneurs and social enterprises. Even with the COVID-19 disruption, these pilots provided $370,137 in financing to date and have started to produce interesting insights on the social impact of banking.
A great example of one of our long-term lending pilots is the “escalator loan” –intended for those looking to get out from under the weight of predatory debt. The pilot tests an innovative cashflow based approach to lending and is a result of an ongoing collaboration between Credit Canada Debt Solutions, Equifax, and CacheFlo, a fintech company. Launched in its current form in 2020, this pilot program deployed $148,000 in escalator loan financing in its first year, fully utilizing its budget.
Early signs of the impact of these loans have been promising. The loan borrower profile is primarily single income females, earning less than $40,000 per year who are renting their homes. So far, the loan has helped 93% of borrowers reduce their overall debt load by an average of 21%. It also helped improve quality of life with 87% of borrowers reporting greater ease in paying for basic expenses such as groceries and 40% reporting they were able to stabilize their housing situations.
In addition to our pilot work, the DUCA Impact Lab also launched several explorations into the following:
- The banking experiences of those working in the freelance or gig economy,
- Diversity and inclusion issues related to access to capital, done in partnership with Marigold and the Ontario Trillium Foundation and,
- Co-op conversion models for small-to medium-sized businesses with the University of Waterloo’s L3 Lab.
Our most extensive research to date has been the continuation of our unique “State of Fair Banking in Canada Study” comparing the perceptions of consumers to the perceptions of bankers on a number of different fair banking factors. For more information, please visit the DUCA Impact Lab.
Profits with A Purpose
DUCA’s purpose to help people and Communities do more, be more and achieve more means making a choice to not only generate impressive financial returns, but to do so in a way that benefits our Members, Employees, and Communities. In 2020, this focus took on a new light as we helped those we serve navigate a global pandemic –an unprecedented event that brought even more to light inequality in banking. There were a number of ways in which DUCA supported Members through the pandemic. Despite a difficult environment, it was important to DUCA as a whole, including our Members and Communities, that we continue our practice of allocating a significant portion of our earnings to support our philanthropic work such as the DUCA Impact Lab as well as many other charities and non-profits.
The total philanthropic giving and Community investment made by DUCA and the DUCA Impact Lab were $592,431 in 2020 and are highlighted below.
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Total Company Contributions$328,261
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Donations$137,649
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Community Sponsorships$98,140
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In-kind$55,813
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Program Management Costs$36,659
The COVID-19 pandemic introduced opportunities for the DUCA Impact Lab to help in new ways.
Unique Collaboration to provide PPE
One such initiative was a unique collaboration to address a key gap in personal protective equipment (PPE) supply efforts throughout the COVID-19 crisis. This initiative provided PPE for people working in essential Community services such as women’s and homeless shelters, meal programs, drop-ins, and others.
Unlike other services, including hospitals and long-term care homes, many social-service organizations weren’t prepared for COVID-19 with PPE on hand and, amid a global surge in demand, had little hope of acquiring any. To address this gap, DUCA, working through the DUCA Impact Lab and its partner the School for Social Entrepreneurs (SSE) in Canada, reached out to local Communities as well as contacts across continents to create a new PPE supply chain. This was accomplished by leveraging the BMW Foundation Herbert Quandt’s Responsible Leaders Network and the League of Intrapreneurs. Ultimately, we created a unique PPE supply chain that delivered this important equipment to a number of small organizations, coordinated through Toronto charity West Neighbourhood house.
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Total DUCA Impact Lab Community Contributions$264,170
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Donations$25,000
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Community Sponsorships$25,000
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Escalator loan financing provided$147,832
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Invoice Factoring financing provided$66,338
“Thanks to DUCA Credit Union, the DUCA Impact Lab and these incredible volunteers, we have PPE to keep our Personal Support Workers safe as they work in the homes of seniors; and our drop-in workers safe as they maintain support and connections with homeless people. It’s not medical care, but it’s essential care,” Executive Director Maureen Fair says.
DUCA Leadership Team
Our Leadership Team
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Doug Conick -
Yan Xu -
Phil Taylor -
Karey Carson -
Pippa Nutt
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Riz Ahmad -
Vinay Venugopal -
Michael Creasor -
Mo Mauri -
Afzal Hussain
Board of Directors
DUCA is governed by a Board of Directors (the “Board”) elected by our owners – the DUCA Members who bank with us. DUCA’s Board, comprised of nine Directors, elected to three-year terms, is your voice for how DUCA is governed.
The Board is responsible for ensuring the Credit Union is operated in a safe and prudent manner and adheres to standards of sound business and financial practices. In fulfilling its responsibilities, the Board ensures the Credit Union is operating in accordance with co-operative principles.
Directors
Committees
In accordance with the Credit Union’s by-laws, the Board of Directors established the following Committees in 2020:
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Audit
Audit Committee Standing committee of the Board to which the Board has delegated responsibility for overseeing DUCA’s financial reporting, control environment, and compliance.
The role of the Committee is to oversee and assess the:
(a) Integrity of the financial reporting process and financial statements;
(b) Adequacy of the internal and external audit functions;
(c) Adequacy and effectiveness of internal controls;
(d) Adequacy and effectiveness of the risk management process;
(e) Compliance with legal and regulatory requirements;
(f) External auditor’s qualifications and independence;
(g) Performance of the external auditors; and
(h) Performance of the internal audit function. -
Credit
Credit Committee Standing committee of the Board to which the Board has delegated responsibility for overseeing DUCA’s lending activities.
The role of the Committee is to:
(a) Provide oversight and advice to the Management Credit Committee and provide recommendations to the Board in relation to current and potential future credit risk exposures and strategy, including credit risk appetite and tolerance.
(b) Evaluate those loan applications that require review by the Committee in accordance with the Credit Risk Management Policy and approve those loans that it is permitted to approve under the Credit Risk Management Policy. -
Elections
Elections Committee Standing committee of the Board to which the Board has delegated responsibility for overseeing the Director nomination and election process. The primary role of the Committee is to source, recruit, and oversee the election of Directors to the Board who meet the qualifications for the role and who will address any competency gaps identified in the Board Competency Matrix (as developed by the Governance Committee).
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Governance
Governance Committee Standing committee of the Board to which the Board has delegated responsibility for overseeing the quality and effectiveness of DUCA’s corporate governance.The primary role of the Committee is to ensure that the Board of Directors provides for effective governance with respect to board composition, competency and oversight, as well as monitoring current, and evolving governance best practices.
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Human Resources and Compensation
Human Resources and Compensation Committee Standing committee of the Board to which the Board has delegated responsibility for overseeing DUCA’s human resources policies. The role of the Committee is to oversee and assess the compensation of the CEO and members of the Executive Leadership Team and to manage the process of evaluating the CEO.
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Risk
Risk Committee Standing committee of the Board to which the Board has delegated responsibility for overseeing the effective operation of all risk taking operations and risk management functions of the Credit Union and ensuring appropriate risk governance processes are executed effectively. The Committee shall review the risk activities of the Credit Union, the associated corporate policies and any significant and emerging events and related action plans and shall recommend any improvements or changes to the Board as deemed necessary or desirable.
Financial Snapshot
| 2016 | 2017 | 2018 | 2019 | 2020 |
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| 1.0 | Key Financial Results and Metrics ($ in thousands) | |||||
| 1.1 | DUCA Net Income Consolidated | $13,727 | $12,974 | $10,996 | $12,032 | $12,838 |
| 1.2 | DUCA Net Income1 | $11,541 | $12,183 | $10,996 | $12,032 | $12,838 |
| 1.3 | ROE1,2 | 7.63% | 7.85% | 7.20% | 5.78% | 4.07% |
| 1.4 | Efficiency Ratio1 | 63.32% | 68.47% | 72.14% | 82.71% | 76.47% |
| 1.5 | Leverage Ratio | 6.65% | 6.26% | 5.36% | 7.32% | 7.05% |
| 1.6 | Risk Weighted Ratio | 12.28% | 12.23% | 11.82% | 16.50% | 17.38% |
| 1.7 | Liquidity Ratio | 20.40% | 15.39% | 16.70% | 12.21% | 20.50% |
| 2.0 | Balance Sheet Performance ($ in millions) | |||||
| 2.1 | Assets | $2,476 | $2,776 | $3,374 | $4,056 | $5,112 |
| 2.2 | Member Loans (gross) | $2,067 | $2,422 | $2,998 | $3,496 | $4,115 |
| 2.3 | Deposits (gross) | $1,853 | $2,012 | $2,539 | $2,980 | $3,807 |
| 2.4 | Securitization Debt | $435 | $536 | $630 | $605 | $698 |
| 2.5 | Regulatory Capital | $165 | $174 | $181 | $297 | $360 |
| 3.0 | Earnings Performance ($ in thousands) | |||||
| 3.1 | Net Interest Income | $44,378 | $48,060 | $49,745 | $49,026 | $66,789 |
| 3.2 | Fee and other income1 | $7,229 | $8,650 | $6,988 | $17,350 | $12,282 |
| 3.3 | Loan impairment charges | $2,363 | $(417) | $(320) | $(462) | $1,315 |
| 3.4 | Operating Expenses1 | $32,679 | $38,827 | $40,930 | $54,902 | $60,466 |
| 3.5 | Pre-tax income before patronage1 | $16,565 | $18,300 | $16,123 | $11,936 | $17,290 |
1 Excluding ZBC
2 computed using income before patronage
Covid-19 Response
Throughout 2020 and ongoing now, DUCA has been operating under the new COVID-19 pandemic Provincial and health guidelines established by the Province of Ontario. Since the pandemic was declared in March 2020, all operational decisions have revolved around the desire to preserve the health and safety of DUCA’s Members and Employees while facilitating uninterrupted delivery of our essential services.
Despite a small reduction to Branch open hours and Member Connect availability (in order to better control the number of people in one location at a time), DUCA has continued to provide all banking services to Members throughout the pandemic. This section of our Annual Report sheds further light on how DUCA responded to COVID-19 in 2020, our current posture and our preparations for the future “new normal”.
We wish to acknowledge the supreme effort of our front-line essential service providers –health care workers and others –throughout this pandemic. We thank them all for their dedication and commitment. We also thank DUCA’s Employees, Leadership Team, Board of Directors, and our Branch and Member Connect Employees for their ongoing commitment to protect the health and safety of Members, Employees, and Communities while continuing to provide service and financial care.
Wishing good health and well being to you, your families, and our fellow citizens.
DUCA ended 2020 in a financially strong position with an increase in operating earnings and comprehensive income after taxes. Our business grew markedly again on both the lending and deposit funding side. Our capital position remains strong as we continued to build our retained earnings and by virtue of our highly successful class B series 4 investment share raise which by the closing in February, contributed $162.4 million to our capital base.
DUCA was proactive to help our Members who faced financial challenges caused by the pandemic disruption. We offered a significant volume of loan deferral arrangements to individuals and businesses and provided a range of other solutions including Government sponsored programs. As we reached the close of 2020, the loan deferral arrangements we had made have essentially all reverted to normal repayment terms. We are immensely grateful to see the progressing recovery for the Members we helped along the way and for the economy at large.
Our strong financial results and significant progress on key strategic initiatives means DUCA is very well positioned to adapt and thrive as the pandemic completes its cycle and the new normal for our Members, our Communities and the Marketplace reveals itself.
The lessons DUCA has learned through the COVID-19 pandemic, of resilience, ingenuity, adaptability and resourcefulness will serve us well as we look forward to the horizon. During the pandemic our Business Resiliency Plan and Procedures were put to the test and improved in real time. Should new developments arise with the pandemic, DUCA will be ready to respond quickly and effectively ensuring we protect health and safety, continue to provide essential services, progress on our strategic direction and fulfill our mighty purpose of helping People and Business do more, be more and achieve more!
DUCA is thinking forward and preparing itself for the new normal. We expect there will be lasting changes in needs, perceptions and behaviours among Members, consumers, Communities and businesses. This, coupled with an accelerating pace of technological change, are trends we are focusing on as we look to the future.
We are progressing our digital transformation journey with earnest so that we achieve our goal of becoming a high-touch and high-tech Credit Union to create the best possible positive-impact human interaction, delivering help and care with your best interest at heart at key moments of truth. We are sharpening our listening, acting and innovation skills and practices so that we better understand and anticipate your needs and we develop and adapt solutions to meet them, and we continue to build a culture that reflects our values so that a great Employee Experience is translated into a great Member Experience.
COVID-19 had far-reaching financial ramifications for individuals, families, and businesses in our Communities throughout 2020. In the same way that DUCA actively worked with Members to help alleviate financial stress due to COVID-19, the DUCA Impact Lab worked with its partners and Community stakeholders to help assist those who were unable to benefit from the assistance of their financial institution.
The DUCA Impact Lab saw a particular need for our Escalator Loan Pilot, an impact financing tool aimed at helping those individuals who are in trouble with high cost debt such as payday loans. In addition to financing this support, the DUCA Impact Lab helped launch a Personal Protection Equipment (PPE) supply chain for Community organizations unable to access PPE through other means. As expected, as the crisis moved along, we saw an emerging need for more of DUCA Impact Lab’s services, a trend we expect to continue in 2021. Feedback from our community partners tells us that the DUCA Impact Lab is uniquely positioned to assist in alleviating some of the financial strain of COVID-19 and that its work is more impactful and important than ever. We are exploring opportunities to expand the scale of our pilots through partnerships with funding partners that have a shared interest. The Impact Lab is a unique way DUCA and its Members can assist even more individuals and companies to weather the current situation. We Look forward to sharing updates as they become available.
In 2020, the DUCA Impact Lab was uniquely positioned to assist in alleviating some of the pandemic’s financial strain making our work more impactful and important than ever. As businesses and the Provincial economy re-opens, the DUCA Impact Lab will be there to continue to help the underbanked and small businesses recover.
