Affinity Credit Union gets credit rating

Affinity Credit Union has become the first credit union in Saskatchewan and only the third in the country to receive a credit rating from a national bond rating agency, the Saskatoonbased financial institution announced Tuesday.

The credit rating of R-1 (low) from Dominion Bond Rating Services (DBRS) is based on the Toronto-based credit-rating agency’s assessment of Affinity’s earnings power, risk profile, funding and liquidity, capitalization and franchise strength, which received a satisfactory rating, Affinity said in a news release.

Affinity wanted an independent, third-party assessment of its balance sheet and financial health to attract large institutional investors, according to Lise de Moissac, Affinity’s chief financial officer. “We almost exclusively fund our balance sheet through deposits. Over the course of time, we’re finding more and more interest in our institution from large institutional depositors and some individual depositors.”

While all credit union deposits are guaranteed 100 per cent by the Credit Union Deposit Guarantee Corp., “some of these larger depositors or investors are accustomed to dealing with large banks that have a credit rating,’’ de Moissac said. “To have a (credit) rating as a sign of the strength of the credit union to honour its obligations was helpful.’’

DBRS assigned Affinity a rating of R-1 (low) with a stable trend, the same rating as Coast Credit Union and Vancity Credit Union in B.C.

“The rating reflects Affinity’s generally satisfactory franchise strength that has a material market presence in its footprint in Saskatchewan. While membership growth has been negative over the past several years, exclusive of mergers and taking into account a 2014 file cleanup, revenue per member has strengthened, suggesting a deeper penetration of existing members,’’ DBRS said.

Like most credit unions, Affinity’s business model revolves around serving its membership base by providing deposits, loans and related financial services to individuals and small business members. Affinity’s assets are predominantly funded by deposits and totalled $4.8 billion in 2015, DBRS said.

“The credit union’s earnings power is considered passable because of its respectable profitability resilience over the past several years of low interest rates and its decent ability to absorb loan loss provisions under more adverse credit conditions,” DBRS said.

“Earnings have grown materially over the past five years as a result of mergers with other credit unions, although organic revenue growth is low.’’

Affinity reported earnings of $32.7 million in 2015, up 3.0 per cent from $31.7 million in 2014.

Affinity is the seventh largest credit union in Canada with $5.9 billion in managed assets and has the largest branch network in Saskatchewan.