Central 1's Q3 2020 Net Income Declines Sequentially Due To Smaller Unrealized Gains On Investments
Central 1 Credit Union (Central 1) reported lower Q3 2020 net income of $25.6 million, which was down compared with $72.1 million in Q2 2020, driven by lower mark-to-market gains on its net asset position and lower profit from discontinued operations, which represent earnings associated with the Mandatory Liquidity Pool (MLP). Quarterly earnings can be volatile for Central 1 given the sensitivity of its net asset position to changes in credit spreads. Positively, quarterly earnings benefitted from a recovery of provision for credit losses. DBRS Morningstar notes that Central 1 remains on track to segregate credit union deposits placed under the MLP by the end of this year as planned. Furthermore, Central 1 has obtained regulatory approval for a phased-in approach for the segregation to occur no later than June 30, 2021, should the process result in market valuation losses in excess of $5 million.
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