Servus Credit Union’s net income fell 18.6 per cent in 2011 — to $40.3 million from $49.5 million — due mainly to a decision to scrap a new banking software system and a default on a major commercial loan.
But the credit union still managed to boost profit sharing payments to a record $44.3 million, up three per cent from the $43 million it distributed to members in 2010.
Servus, which was created in 2008 by the merger of Red Deer-based Community Savings with Servus Credit Union and Common Wealth Credit Union, will hold its annual general meeting in Medicine Hat on Thursday.
The financial institution’s report for its 2011 fiscal year — which ended Oct. 31 — indicates a 9.2 per cent jump in operating expenses, to $284.9 million from $260.8 million.
Much of this increase relates to a $10.3-million write-down related to software and related services that Servus purchased in 2010 to help bring the merged credit unions together on one banking system platform.
Michael Dickinson, director of corporate communications with Servus, said management became concerned about the timelines for the implementation of the system, as well as its “functionality,” and decided to instead adopt the system that the original Servus Credit Union had used.
Accounting rules necessitated a write-down of these costs now, although the amount could decrease in the future, he said.
“We are negotiating the terms of the settlement right now.”
Servus also had to increase its provision for credit losses to $16.4 million from $11.4 million.
“That was basically in response to a single large commercial loan issue,” said Dickinson, adding that he could not comment on the specifics of the loan.
“We do believe that there is good potential to recover some or all of that provision in the future,” he said, pointing out that Servus’s loan portfolio has otherwise done well.
“This has been the only one that’s been really problematic for us.”
Servus’s operating expenses were also pushed upward by a $10.9-million increase in personnel costs, to $157.7 million, in 2010.
Dickinson said this reflected Servus’s growing staff and increases in their compensation.
He pointed out that the 2008 merger was completed without job losses and that Servus retained all of its staff during the economic downturn, when many banks cut their payrolls.
Servus’s net interest income for 2011 grew 6.6 per cent to $300.8 million. Loans were up 6.3 per cent to $10 billion and deposits grew 3.8 per cent to $10.2 billion.
The credit union’s asset base was up 4.2 per cent to $11.2 billion, and member equity climbed 6.1 per cent to $883.3 million.
Servus has nearly 390,000 members and about 2,300 employees at more than 100 locations in 62 communities. Its annual general meeting on Thursday will take place at 7 p.m., with a live feed available on the Servus website (www.servus.ca) and at the Taylor Plaza branch in Red Deer.
hrichards@www.reddeeradvocate.com