2021 Annual Report
Future Focused
Message from the CEO
As 2021 has come to a close and we have entered a new year, I wish to thank you, our terrific Members for your Membership and business with our great Credit Union. I wish you, your families and loved ones, good health, well-being and prosperity as 2022 unfolds. I’m grateful for the resilience of our Members and for DUCA’s terrific Employees who continued to deliver financial care as well as deliver on our mighty purpose to help people, businesses and communities do more, be more and achieve more!
At DUCA we also wish to send a message of solidarity with the people of Ukraine. Our thoughts and well wishes are with all Ukrainians here in Canada, those residing in Ukraine, and abroad during this very difficult time of unprovoked attack on a Sovereign Nation. As a show of support and our solidarity, DUCA has donated $10,000 to the Red Cross Ukraine Humanitarian Crisis Appeal.
Business highlights
Thanks to you, our Members, the efforts of our fantastic Employees, and the support of our dedicated Board of Directors, DUCA continued to grow. We finished 2021 strong, with pre-tax operating earnings (income before taxes, profit sharing-patronage and other comprehensive income items) of $31.7 million, compared to $17.3 million in 2020 - an 83% year-over-year increase.
We saw robust growth in key areas of the business. Our Specialized Lending business, a new business launched just a year prior in 2020, grew to over $61 million. Our Commercial loan portfolio exceeded $1 billion, and we grew our Wealth Management assets under administration (AUA) to exceed $500 million. Loan and deposit growth were 17% and 19% respectively and total assets (on-balance sheet and wealth management AUA) reached just over $6 billion. The results of our ongoing investments in people, process and technology can be seen in this impressive growth, which we’ve continued to experience despite the headwinds brought on by COVID-19.
The Board declared dividends of 4.25% on our Class B Series 4 and 3.0% on Class B Series 1 shares, declared profit-sharing patronage and a 2% dividend on Class A profit-sharing shares totaling $1.5 million. DUCA is delighted to report that over our history including the current year's declarations, a total of $103 million of profit share distributions and Class B dividends have been returned and/or paid to you, our Members.
We realize that DUCA’s ability to create a great Member Experience can only be achieved if we deliver a positive experience for our Employees, allowing them to be their best. In 2021, we stayed diligent with health and safety measures to protect our Employees against COVID-19, and we boosted the available supports for employees’ health and well-being through special events and resources. To create a workplace that is as rewarding and welcoming as possible to people of all backgrounds, we progressed our diversity and inclusion efforts by conducting a Diversity & Inclusion survey among our employees, which will help us identify areas of improvement and develop corresponding action plans. We continued efforts towards establishing a hybrid-mode of work across the organization wherever possible and practical for our teams. And, in an effort to encourage each of us to reflect on our nation’s history, we made a decision to observe National Day for Truth and Reconciliation on September 30 and Remembrance Day on November 11 with the closure of business.
Giving back
I am delighted to report that by the end of 2021, DUCA more than doubled its total Community giving over the previous year, increasing the total to $1.1 million. In addition, DUCA’s Charitable foundation - the DUCA Impact Lab - reached a milestone of surpassing $1 million to date in impact funding. With three years of operations now under our belt, we've seen this impact funding make a real difference to the people and businesses benefitting from the pilot projects that were launched:
- In 2021, the Escalator Loan pilot funded a total of $189,000 in personal loans and assisted an additional 39 individuals in getting out of a predatory debt cycle and achieving greater financial stability.
- Our Invoice Factoring pilot provided $450,000 of small business financing, allowing small businesses to expand their capacity to grow.
The results of our pilots to date have provided important insights into ways in which we can continue to move forward with our mission of building banking that benefits all. As we move into Year 4 of operations, we look forward to moving the DUCA Impact Lab out of its start-up phase and into a growth phase, focusing efforts on programming that's having the most impact.
Acquisition of Continental Currency Exchange (CCE) and the launch of DUCA’s new branch in Hamilton
During January of 2022 we were delighted to announce DUCA’s acquisition of CCE with a closing date of March 31, 2022. The addition of CCE as a wholly owned subsidiary of DUCA, means we will be able to provide better foreign exchange services to our Members, and support CCE in its continued growth going forward. CCE brings with it 19 outlets to complement DUCA’s branch network that now totals 17.
In March 2022 we opened our newest branch in Hamilton. This new branch includes a commercial banking centre and marks our first entry into the City of Hamilton. We are delighted to now be a part of the Hamilton Community and to help Hamiltonians do more, be more and achieve more!
Looking forward, while the COVID-19 pandemic is yet to fully resolve itself and there are economic and geo-political uncertainties ahead, our great Credit Union is in a wonderful position to continue its growth momentum, delivering care to more and more Members, helping you do more, be more and achieve more! I remain grateful for the loyalty of our terrific and growing Membership, for the talent and dedication of the amazing DUCA team, and the great support of our Board of Directors. I am enormously proud of our great Credit Union and energized about our potential, our opportunities, and the challenges ahead – here’s to an even more successful 2022!
Message from the Chair
Through another year of uncertainty and some turbulence, I will start this message similarly to last year’s by commending you, our Members, for your resilience and your loyalty in choosing DUCA as your banking partner. I also wish to thank my fellow Directors of the Board for their support of the terrific DUCA team whose tireless work and dedication go toward making DUCA the best it can be, delivering trusted financial care to those we serve, sometimes under challenging circumstances.
On behalf of the Board of Directors, I echo our CEO, Doug Conick’s message of well-wishes and solidarity with all Ukrainians here in Canada, residents of Ukraine and those who are abroad. DUCA stands with Ukraine and the Nations of the free world that support the independent sovereignty of the Ukrainian Nation.
Turning to Our Credit Union’s performance; 2021 was another year of robust growth and progress toward the vision of becoming a high-touch and high-tech financial services provider. DUCA continued to diversify revenue streams by growing key areas of the business including Specialized Lending, Commercial Lending and Wealth Management. Also in 2021, DUCA’s Management group laid the groundwork for the acquisition of Continental Currency Exchange announced in early 2022 and expanded our branch footprint with the launch of the new Hamilton Branch in March of 2022.
DUCA is proud of our profit sharing and dividend paying track-record. As DUCA continues its business growth and increase in distributable earnings, we will continue to pay-back profits to our Members and give back to our Communities. The Board was delighted to declare dividends and profit-sharing patronage during 2021 which made a further contribution toward the cumulative total of $103 million of profit-sharing and dividends distributed over our history.
We also take great pride in our Community giving efforts. Despite the challenges brought on by COVID, we were able to almost double our philanthropy over the course of 2021 to exceed $1 million and we continued to grow the impact of DUCA’s charitable foundation – the DUCA Impact Lab. In 2021, the DUCA Impact Lab achieved a new milestone exceeding $1 million in social impact financing. The innovative pilots underway in the DUCA Impact Lab are making a tangible difference in people’s lives, helping dozens of Ontarians to achieve greater financial stability.
Your Board remained diligent in its governance, oversight, and support of Management as DUCA continued its growth in 2021. The Board, along with DUCA’s Management group are committed to diversity and inclusion and so we continue to take steps in parallel with Management initiatives to achieve that goal. Your Board will continue to focus on continuous improvement in practices, policies, and strategic engagement as we work with and support Management in its efforts of preparing the Credit Union for ongoing success in the face of the many changes and developments the future will bring.
On behalf of the board, I wish to express gratitude and appreciation for our loyal and growing Membership, for our talented and dedicated DUCA team who tirelessly strive to deliver financial care to those we serve, and for the terrific prospects for our Credit Union in the years ahead. I and my fellow Directors are delighted to be playing our role in DUCA’s pursuit of the mighty purpose: helping People, Businesses, and Communities do more, be more, and achieve more!
Business Highlights
Growth and Diversification
DUCA reported a strong year-end to 2021, with a pre-tax income of $31.7 million, representing an 83% year-over-year increase from 2021. Our continuing strong financial performance has resulted in a 18% 5-year compound average growth from year-ended 2016 for total assets under management which include on-balance sheet assets and wealth management assets under administration – well above the sector average.
Both loans and deposits experienced impressive year-over-year growth, with loans growing by 17% and deposits by 19%. DUCA has been systematically diversifying and strengthening our channels of distribution complementing our DUCA-Direct proprietary channels (branch, mobile teams, Member-Connect, Commercial / Business Banking Account Managers and Wealth Management Advisors) with strategic distribution partners and brokerages. The diversification of our distribution channels served us very well in 2021 supporting our strong, profitable growth result. We also saw good Membership growth, gaining 2,478 new Members, to arrive at a total Membership of 82,561. During the year we started construction on our new Hamilton branch, marking the next step in the expansion of our retail branch footprint in southern Ontario. The new branch in Hamilton had its Grand Opening in March of 2022.
We also reached a number of other milestones in 2021 including:
- Growing the Commercial loan portfolio to exceed $1 billion;
- Growing our Specialized Lending business (a new business first launched in 2020) with net new loan volumes exceeding $60 million.
- Growing our Wealth assets under administration to exceed $500 million.
2021 also saw the groundwork set for DUCA’s acquisition of Continental Currency Exchange (CCE). The transaction closed on March 31, 2022, and is another contribution to DUCA’s strategic focus of diversifying revenue streams, improving service experiences and furthering the growth of Members and profits.
Engaging Our Employees
In 2021, our Member-facing Employees continued to deliver the passion and energy behind DUCA’s purpose to our Members, helping them do more, be more and achieve more at a time of so much disruption and change. Many Employees continued the remote work routines they started the year prior, as we made plans for longer-term flexible work arrangements to be rolled out when the COVID-19 environment allowed it.
Throughout the challenging times brought on by the pandemic, we’ve remained grounded by Our Values: 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. These are the pillars that we continue to celebrate with “Cheers for Peers,” our peer-to-peer recognition program that invites Employees to recognize one another for living Our Values In Action and has become a great tool for spreading positivity and encouragement at DUCA.
More highlights:
- We partnered with the Canadian Centre for Diversity and Inclusion (CCDI) to conduct a confidential online survey aimed at capturing information about the diversity and degree of inclusiveness at DUCA. The survey results will give us insight about Employees’ demographic representation and their sentiments regarding the inclusiveness of our Credit Union. The information gathered will allow DUCA to identify potential areas of improvement and develop action plans to continue making DUCA as welcoming as possible to people of all backgrounds.
- We began to lay the groundwork for a return to the office at 5255 Yonge St this spring and are in the process of rolling out more flexible work arrangements in preparation for a full reopening. The future of work at DUCA now includes more flexibility for many roles, wherever possible and practical, with the first step towards that future being a 4-week pilot designed to model the desired longer-term hybrid state as closely possible.
- A key theme being discussed among the Executive Leadership Team (ELT) are the mechanisms through which we collect and action feedback from Employees so that this feedback leads directly to trackable action and measurable results, and meaningful progress to improving Employees’ day-to-day experience. To that end, we’ve formally kicked off the Employee Experience Feedback Loop Initiative. The goal of the initiative is to ensure that the ELT knows what the top Employee Experience issues are, that we have a process in place to resolve these top issues, and that we communicate progress back to Employees. This is all in an effort to reinforce DUCA’s Values and create the best possible Employee experience.
- With rekindled perspective on our nation’s history, as of 2021, we’ll be recognizing National Day of Truth and Reconciliation on September 30 and Remembrance Day on November 11 with the closure of our business.
DUCA Impact Lab
The DUCA Impact Lab is a registered charity that focuses on finding solutions for better financial inclusion and equity in the banking system. With a mission to ‘Build Banking that Benefits All’, the DUCA Impact Lab collaborates with our partners in the community and technology sectors to design and test impact lending solutions. The purpose of what we pilot is to evaluate solutions for their social impact and test viability as financial solutions for those in our community who are not able to access mainstream banking services. In 2021, the DUCA Impact Lab offered pilot solutions for those in trouble with predatory debt like pay day lending and for underbanked businesses in a cash flow crunch.
The DUCA Impact Lab is pleased to report that by the end of 2021, we reached a milestone of surpassing $1 million to date in impact funding. Now with three years of operations under our belt, we’ve seen this impact funding make a real difference to the people and businesses benefitting from the pilot projects that have been launched:
- In 2021, the Escalator Loan pilot funded a total of $189,000 in personal loans and assisted an additional 39 individuals in getting out of a predatory debt cycle and achieving greater financial stability.
- Our Invoice Factoring pilot provided $450,000 of small business financing, allowing small businesses to expand their capacity to grow.
As we move into Year 4 of operations, we look forward to moving the Lab out of its start-up phase and into a growth phase, focusing efforts on programming that’s having the most impact.
DUCA Impact Lab Pilot Example: The Escalator Loan
The Escalator Loan Program provides loans of up to $15,000 so that individuals in trouble with predatory debt can break the pay day loan cycle and move forward with their lives. It is a partnership between the DUCA Impact Lab and Credit Canada Debt Services with the aim to develop a fairly priced product and advisory service for individuals who have challenges accessing mainstream financial services. The pilot targets individuals with a lower credit score who would typically be ineligible for unsecured lending at a mainstream financial institution. Through improved credit, enhanced cash flow management skills and increased trust in mainstream lenders, this Program positions borrowers for improved access to mainstream financial services.
Read what two Escalator Loan borrowers had to say about the Program:
(1) “The DUCA Loan completely changed my debt repayment and took SO much stress off of me. One of my debts had an interest rate so high that after a full year I had barely paid off any! ……It makes me feel so encouraged and less terrified that I was trapped and actually really helped me with my self-esteem… AND I got a small check in the mail based on my interest which was a fun surprise. I would highly recommend it and think others will benefit from the relief that it brings! Thanks so much!”
(2) “Thanks again for arranging payment to a very difficult creditor with a loan from Duca….Credit Canada & Duca have made my life more manageable thank you very much!”
Social Return on Investment of the Escalator Loan
When we think about return on investment in banking most people think of financial returns. While this is certainly an important measure, it misses the fact that fair, purpose driven lending also enables a significant amount of social value as well. Improved mental health, stabilized housing, better access to health care and access to quality childcare are all outcomes that can be enabled by the right type of lending but aren’t captured in typical return on investment analysis. In the Escalator Loan pilot, we observed the changes the loans were enabling and wanted this reflected in our ‘Return on investment’ calculation. This is why we worked with our Impact Lab partners and Social Value Canada to establish a ‘Social Return on Investment’ Analysis for the Escalator Loan program. Using this framework, for every dollar spent on the Escalator loan program in 2021 there was $11.90 in social value created, a ratio of $11.9 : $1.
Profits with a Purpose
DUCA’s origins as a community driven financial institution are a big part of our history and shapes how we operate today. For the DUCA team and our Members, the driving philosophy of ‘profits with a purpose’ is a foundational reason why we are so passionate about our purpose to help our Members and communities Do more, Be more and Achieve more.
With the end of 2021, we are all nearing the end of the pandemic’s second year. It has been a challenging time for many in the DUCA community, but also a time of renewed purpose and desire to make things better. With so much happening, DUCA not only increased the investment we made in communities from the Credit Union itself, but also the impact we were able to have through our charitable impact lending foundation, the DUCA Impact Lab. Through the philanthropic and impact lending programs at DUCA and the DUCA Impact Lab, we were able to almost double our investment in communities over the course of 2021. The details of these investments are outlined in the tables below:
| DUCA Impact Lab | 2021 | 2020 | % Change |
|---|---|---|---|
| Total DUCA Impact Lab Community Contributions | 784,086 | 264,170 | 196.8% |
| Donations | 15,000 | 25,000 | -40.0% |
| Community Sponsorships | 115,000 | 25,000 | 360.0% |
| Escalator loan | 195,948 | 147,832 | 32.5% |
| Invoice Factoring | 458,138 | 66,338 | 590.6% |
| DUCA Credit Union | 2021 | 2020 | % Change |
|---|---|---|---|
| Total DUCA and Impact Lab | 355,123 | 328,261 | 8.2% |
| Donations | 143,393 | 137,649 | 4.2% |
| Community Sponsorships | 150,556 | 98,140 | 53.4% |
| In-Kind | 35,256 | 55,813 | -36.8% |
| Program Management Costs | 25,918 | 36,659 | -29.3% |
| Total DUCA and Impact Lab | 1,139,209 | 592,431 | 92.3% |
DUCA Leadership Team
Executive Leadership Team
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Doug Conick -
Yan Xu -
Phil Taylor -
Karey Carson -
Pippa Nutt
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Riz Ahmad -
Aron Rogers -
Michael Creasor -
Mo Mauri -
Afzal Hussain
Board of Directors
Committees
In accordance with the Credit Union’s by-laws, the Board of Directors established the following Committees in 2021:
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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 CompensationHuman 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
| 2017 | 2018 | 2019 | 2020 | 2021 |
|---|
| 1.0 | Key Financial Results and Metrics ($ in thousands) | |||||
| 1.1 | DUCA Net Income Consolidated | $12,974 | $10,996 | $12,032 | $12,838 | $25,702 |
| 1.2 | DUCA Net Income1 | $12,183 | $10,996 | $12,032 | $12,838 | $25,702 |
| 1.3 | ROE1,2 | 7.85% | 7.20% | 5.78% | 4.07% | 7.38% |
| 1.4 | Efficiency Ratio1 | 68.47% | 72.14% | 82.71% | 76.47% | 67.89% |
| 1.5 | Leverage Ratio | 6.26% | 5.36% | 7.32% | 7.05% | 6.77% |
| 1.6 | Risk Weighted Ratio | 12.23% | 11.82% | 16.50% | 17.38% | 14.18% |
| 1.7 | Liquidity Ratio | 15.39% | 16.70% | 12.21% | 20.50% | 13.50% |
| 2.0 | Balance Sheet Performance ($ in millions) | |||||
| 2.1 | Assets | $2,776 | $3,374 | $4,056 | $5,112 | $5,552 |
| 2.2 | Loans | $2,423 | $3,007 | $3,507 | $4,129 | $4,848 |
| 2.3 | Deposits | $2,027 | $2,559 | $3,005 | $3,841 | $4,555 |
| 2.4 | Securitization Debt | $536 | $630 | $605 | $698 | $463 |
| 2.5 | Regulatory Capital | $174 | $181 | $297 | $360 | $374 |
| 3.0 | Earnings Performance ($ in thousands) | |||||
| 3.1 | Net Interest Income | $48,060 | $49,745 | $49,026 | $66,789 | $84,294 |
| 3.2 | Fee and other income1 | $8,650 | $6,988 | $17,350 | $12,282 | $14,412 |
| 3.3 | Loan impairment charges | $(417) | $(320) | $(462) | $1,315 | $37 |
| 3.4 | Operating Expenses1 | $38,827 | $40,930 | $54,902 | $60,466 | $67,012 |
| 3.5 | Pre-tax income before patronage1 | $18,300 | $16,123 | $11,936 | $17,290 | $31,657 |
1 excluding ZBC
2 computed using income before patronage
Expansion & Acquisition
DUCA opened the doors of our 17th branch in Hamilton last month, another terrific milestone as we expand our footprint in southwestern Ontario! The new branch marks another step forward in our high touch/high tech Member experience strategy and enables further Membership and business growth.
Establishing a presence in Hamilton makes sense for DUCA for a number of reasons: it's a densely populated area and is expected to grow by over 30% to 769,000 by 2046; it's a region with significant business and opportunity, particularly in the manufacturing sector; plus, there's room for Credit Union market share – in our selected branch area for example, only 2.8% of residents have a bank account with a Credit Union.
The continued expansion of a physical ‘bricks & mortar’ branch network is in line with DUCA's strategic direction toward building a high touch and high tech Credit Union. DUCA's most recent new branch experiences (Mount Albert launched in August 2018, Erin Mills launched in 2010, and the Newmarket branch relocated in 2012) all point to the value that physical branches contribute to Member experience and business growth. Members continue to interact with DUCA through our branches, sometimes for transactions, but increasingly, for advice. This new branch also includes our first commercial banking centre!
We are delighted to now be a part of the Hamilton Community and to help Hamiltonians do more, be more and achieve more!
DUCA continues to pursue a growth and business diversification strategy to broaden our product and service offering to better meet the continuum of needs of our Members and to bring our mission to as many as possible: helping individuals and businesses do more, be more and achieve more! On March 31st 2022, DUCA took another important step forward in that journey with the acquisition of Continental Currency Exchange, Ltd. (CCE), a partnership that holds exciting opportunities for collaboration and growth for both parties.
CCE is one of Canada's leading retailers of foreign exchange services, with 19 branch locations across Ontario. The company offers foreign exchange conversion services, including international bill payments, online ordering, pre-authorized debit and deposit transactions, foreign cheques and drafts, money transfers and wire payments in approximately 160 currencies, in addition to a growing suite of digital products. The company's Privilege Program offers clients no service fees on all cash transactions, premium discounted exchange rates, and lower prices on services including money transfers and wires.
This transaction will enable both organizations to enhance growth opportunities, diversify revenues and expand product and service solutions for the best interests of those we serve. DUCA's Membership base has a healthy demand for efficient and effective currency exchange services and there is great potential to introduce DUCA to CCE's customer base. Overall, this great fit will serve the mighty purpose of helping People and Businesses do more, be more and achieve more!
CCE will continue to operate as a standalone, wholly owned subsidiary of DUCA. We are working closely with CCE to pave the way for our ongoing collaboration.
