Omoluabi Mortgage Bank Plc - Dec 2017 Audited Accounts€¦ · OMOLUABI MORTGAGE BANK PLC TABLE OF...

OSOGBO, NIGERIA

YEAR ENDED 31 DECEMBER 2017

OMOLUABI MORTGAGE BANK PLC

FINANCIAL STATEMENTS


TABLE OF CONTENTS

FOR THE YEAR ENDED 31 DEECMBER 2017

CONTENTS PAGE

Financial highlights

1

Independent auditors report 2

Statement of profit or loss and other comprehensive income 6

Statement of financial position 7

Statement of changes in equity 8

Statement of cash flows 9

Statement of prudential adjustments 10

Statement of significant accounting policies 11

Notes to the financial statements 29

Other national disclosures:

Statement of value added 51

Financial summary 52

Statement of directors' responsibilities in relation to the

preparation of the financial statements


FINANCIAL HIGHLIGHTS

FOR THE YEAR ENDED 31 DECEMBER, 2017

2017 2016

N N

Major items in statement of financial position

Loans and advances 861,051,528 548,813,501

Property, plant & equipment 232,646,945 226,564,050

Assets held for sale 349,396,405 584,947,509

Due to customers 1,229,794,828 388,914,722

Borrowed funds 117,866,652 8,122,069

Share capital 2,500,000,000 2,500,000,000

Shareholders fund 2,608,320,211 2,433,239,503

Total assets 4,158,172,701 3,305,156,939

Major items in statement of comprehensive income

Gross earnings 518,378,573 304,930,527

Impairment charge 56,925,360 147,891,359

Profit before taxation 187,536,516 78,869,495

Taxation (14,074,029) (7,992,524)

Profit after taxation 173,462,487 70,876,971

Ratios % %

Cost to income 70.22 90.16

Return on assets 4.17 2.14

Return on shareholders fund 6.65 2.91

Capital adequacy 92.01 219.83

Liquidity 169.43 192.69

Earnings per share (kobo) 3.50 1.35

Others Number Number

Number of branches 3 3

Number of staff 61 57

Number of shares in issue 5,000,000,000 5,000,000,000

Dividend paid - -

Ratings BB+ N/A

1

1

To become an indisputably clear leader in the mortgage banking industry and make mortgage banking a worthwhile experience to our teeming clientele and lift the business to a world class standard.

Provide dedicated professionally oriented mortgage banking and financial services with a commitment towards ensuring all time

security of customers’ deposits.

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OMOLUABI MORTGAGE BANK PLC is a specialized Mortgage Financial

Institution promoted initially by the Government of Osun State, Nigeria. The Bank was

initially incorporated as Osun Building Society Limited but later had several name changes

to LIVINGSPRING SAVINGS AND LOANS LIMITED, OMOLUABI SAVING AND LOANS

LIMITED, OMOLUABI SAVINGS AND LOANS Plc and very recently to OMOLUABI

MORTGAGE BANK Plc to reflect its transformation aims and the virtues of the people of

the State.

The Bank was licensed by the Federal Mortgage Bank of Nigeria (FMBN) in March 1999

and began operation on the 9th

of April, 1999. The Bank is regulated by the Central Bank of

Nigeria and supervised by the Other Financial Institution Supervision Department (OFISD)

Of the Central Bank of Nigeria.

The main objective of the Bank is to provide wholesome housing, Mortgage and property

debt solutions in particular and general banking services within Osun State and the

Nation. The Bank is totally committed to the provision of high quality banking and financial

services to her numerous customers. The Head- office of the organization is located at Old

Governor’s Office, Gbongan Road, Osogbo, Osun State, Nigeria.

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Mr Adebayo Jimoh joined the services of John Holt PLC (A British Multinational Company) as a Management Trainee in 1983 from where he rose through the ranks in quick succession to become the Deputy General Manager in charge of Operations for the company in 1993.Mr Jimoh served as a General Manager for John Holt Ventures from 1994-1996 and thereafter moved to Yamaha Almarine Company as General Manager in 1997. He was later promoted as Chief Executive in Charge of Trade and Export for John Holt Group in Nigeria and West Africa before his appointment as Executive Director in charge of Group operations of John Holt PLC in 2003.

In May 2005,he was appointed Group Managing Director/CEO of Odua Investment Company Ltd, the Investment Basket of the Five South Western States in Nigeria. He served for a period of nine years and retired in October 2014.Adebayo Jimoh currently runs a Cotton Export Business under the name Synergy Cotton and Agro Allied Company in partnership with Plexus Cotton, UK. He is the Chairman of the Company. He is a Fellow of the Nigeria Institute of Management, Fellow of the National Institute of Marketing of Nigeria and a Member of the Institute of Directors.

Mr Adewumi Adesola is an efficient tax administrator and member of the pioneer tax consultants to Lagos State Government tax audit and administration since 1995 till date. A Managing Partner of Adesola Adewumi & Co. (Chartered Accountants) since 1995 and the Managing Director of Clear-Cut Solutions Ltd 1995 till date .He is also the Chairman of David Sons Paints & Chemical Industries Ltd since 2009.

He is a Fellow of the Institute of Chartered Accountants of Nigeria.

Mr Bola Oyebamiji is a fellow of Institute of Chartered Economists of Nigeria, A Chartered Banker and an Associate of Institute of Management and a Member, Nigerian Economic Submit Group (NESG).

He has over 28 years’ experience as a banker which includes Wema Bank Plc( Assistant Manager),Trans International Bank Plc ( Senior Manager) ,Trans International Bank Plc (Principal Manager), Spring Bank Plc Adeola Odeku (Corporate Branch) and Enterprise Bank Ltd (Regional Manager). He is the Managing Director of Osun State Investment Company Limited Osun-State since 2012 to date. He is also the current Commissioner for Finance of the state of Osun.

Mr Kolawole Obtained a Bachelors of Science degree in Accountancy from University of

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Maiduguri. He started his career in the Civil Service as Accountant Grade 11 in 1987 and rose through the ranks and bcame a Deputy Director in 2005 and Director, Treasury and Pension Services from 2007 – 2012.

He has participated in several seminars and workshops both locally and internationally some of which include Financial Management Training Course at Obafemi Awolowo University, Ile- Ife, A workshop on financial Management & Disbursement for Project Financial Management Units ( PFMUs) organized by the World Bank(2005). Training Course on Public Finance Management, Issues and Solutions Organised by Crown Agents, London in 2006.

Mr Kolawole is the current Accountant – General, State of Osun from 2012 till date.

Ayo is a Chartered Accountant and started his career with KPMG Lagos in 2003 where he worked for 3 years and rose to the position of Audit Semi-Senior in the Assurance & Business Advisory Division. Afterwards, he worked as an Analyst in the Project Finance & Real Estate Unit of ARM. He joined PRI Project LLC in 2009 as the Vice President in the Lagos Office. He also worked as an Investment Analyst with Grofin Nigeria, a multi-national specialist SME Development Finance company offering risk capital to viable enterprises through its $250m Aspire funds and its 10 offices in 9 countries. He is Currently the Managing Director of Omoluabi Mortgage Bank since 2015.

Dr. D. O. Yinusa graduated with First Class Honours in Economics from Obafemi Awolowo University, Ile-Ife, Nigeria and obtained his PhD in Economics in 2005. He has won many academic distinctions and awards including the prestigious Fulbright Visiting Scholar, Graduate School of Arts and Science, Fordham University, NY, USA, South Africa-Norway Tertiary Education Development (SANTED) Programme, (2009).

Dr. Yinusa has served as consultant to a number of national and international organisations including UNDP (Botswana and Nigeria), Botswana National Productivity Centre, Botswana, African Development Bank (AfDB), Abidjan, C’ote d’Ivoire, African Capacity Building Foundation (ACBF), Harare, Zimbabwe, European Union (EU) – African University Network, Germany, West African Monetary Institute (WAMI), Ghana, National Bureau of Statistics (NBS), Nigeria and Centre for Gender and Social Policy Studies, Nigeria. He was the Special Adviser to Osun State Governor (Ogbeni Rauf Adesoji Aregbesola) on Commerce, Cooperatives and Empowerment, Osogbo between August 2011 – Nov 2014. Dr. Yinusa is currently an associate professor in Obafemi Awolowo University and the Commissioner for Economic Planning & Budget in the State of Osun

.

A former Legislator, State of Osun House of Assembly from 2012 - 2015 Hon Sijuwade was the Managing Consultant / Executive Director (Finance),Lagos State Passenger Personal Accident Insurance Programme from 2006- 2010 , Chief Executive Officer ,Monarch Ventures Limited, and also Chief Executive Officer ,Pathfinder Investment Network Limited- 2006 to 2010

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He became the General Manager, Capital Market Operations in Abacus Securities Limited /Abacus Merchant Bank Ltd from1986 – 1999 and Manager in Charge of Operations of Arco Petroleum Limited (1984–1986). He was a member of the Presidential Trade Mission to France on the invitation extended to Abacus Merchant Bank to offer financial Advisory Services in 1989. Award winner of the Most Distinguished Legislator in Tourism decorated by the Government of Imo State in collaboration with Nigeria Media Links at the National Conference / Awards on Culture, Hospitality and Tourism Development in Nigeria.

He retired as General Manager, First Bank of Nig. Plc in 2003 after over 2 decades in the Banking Industry. In the course of his excellent career, he had attended professional courses both locally and internationally some of which are Advanced International Business Management: London – 1999, Strategic Management for Directors and Senior Managers, London – May 2003. Senior Bankers Course by Manchester Business School – 1990. He is a Member of the Nigeria Computer Society , a Member of the Chartered Institute of Bankers of Nigeria and also a Member of the Computer Professional Registration Council of Nigeria .

He is the Managing Consultant of GBADEBO Adekunle OLORI & Co from 2010 till date. A company that runs consultancy on project management, quality control, financial reporting and formulation of strategic policies on mortgages and other financial products.

He was formerly Chief Executive Officer, Eaziway Financial (UK), from Feb 2005-Dec 2009 and Managing Director, Budget Line Travels (UK), between 2001 and 2005. He was the Financial Controller, Zomax Incorporation (Ireland) from 2000 to 2001 with activities spanning from preparation of final accounts responsible for bills payables and receivables, trainings of subordinates all over Europe. Senior Consultant ,Petroleum Special Trust Fund (PTF) , 1996-1998, Senior Lecturer on Audit Practice, Taxation, Cost Accounting with student pye, (1996-2000).) Lecturer on mortgage practice with London Tower College, Hackney London between, 2004-2007.

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Corporate Governance The Central Bank of Nigeria in its Circular BSD/04/2006 of March 2, 2006 released a new Corporate Governance Code which includes the protection of equity ownership, enhancement of sound organizational structure and promotion of industry transparency. The Code requires Banks to include in their annual report and accounts, compliance report to the Code of Corporate Governance. In compliance

therefore, we state below our Compliance Report as at December 31st 2017:

Compliance Status

In line with the provisions of the new Code, the Bank has put in place a robust internal control and risk management framework that will ensure optimal compliance with internationally acceptable corporate governance indices in all its operations. In the opinion of the Board of Directors, the Bank has substantially complied with the new Code of Corporate Governance during the 2017 financial year.

Statutory Bodies

Apart from the CBN Code of Corporate Governance, which the Bank has strived to comply with since inception, it further relies on other regulatory bodies to direct its policy thrust on Corporate Governance.

Shareholders’ meeting

The shareholders remain the highest decision making body of Omoluabi Mortgage Bank Plc., subject however to the provisions of the Memorandum and Articles of Association of the Bank, and other applicable legislation. At the Annual General Meetings (AGM), decisions affecting the Management and strategic objectives of the Bank are taken through a fair and transparent process. Such AGMs are attended by the shareholders or their proxies and proceedings at such meetings are monitored by members of the press and representatives of the Nigerian Stock Exchange, Central Bank of Nigeria, Nigeria Deposit Insurance Commission, Corporate Affairs Commission, Securities and Exchange Commission and the Bank’s statutory auditors.

Ownership Structure

Osun State Government and Osun State Local Government Councils represent public sector participation in the ownership of the Bank however they are not majority shareholders in the bank. The Bank is owned by shareholders in the private sector. The lists of shareholders consist of individuals, Public Sector and institutional investors.

Board of Directors

The Board of Directors consists of the Chairman, Managing Director/Chief Executive Officer (MD/CEO) and Non-Executive Directors (Non-EDs). The Directors have diverse background covering Economics, Management, Accounting, Psychology, Information Technology, Public Administration, Law, Engineering, and Business Administration. These competences have impacted on the Bank’s stability and growth. The office of the Chairman of the Board is distinct and separate from that of the Managing Director/Chief Executive Officer and the Chairman does not participate in running the daily activities of the Bank. There are no family

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ties within the Board members. We confirm that the Chairman of the Board is not a member of any Board Committee and appointment to the Board is made by the shareholders at the Annual General Meeting upon the recommendation of the Board of Directors.

Membership of the Board of Directors

Memberships of the Board of Directors during the year ended 31 December, 2017 were as follows:

S/N NAME POSITION HELD

1. Adebayo Jimoh Chairman

2. Ayodele Olowookere Managing Director/CEO

3. Bola Oyebamiji Director (Non-Executive)

4. Dr. Olalekan Yinusa Director (Non-Executive)

5. Hon. (Prince) Adetilewa Sijuwade Director (Non-Executive)

6. Gbadebo Adekunle Director (Non-Executive)

7. Akintayo Kolawole Director (Non-Executive)

8. Micheal Omolaja Director (Non-Executive)

9. Adesola Adewunmi Director (Non-Executive)

Tenure of Office

The tenure of office of an Executive and a Non-Executive Director is a renewable term of 4 (Four) years each.

Delegation of Powers

The Board of Directors delegates any of their powers to Committees consisting of such members of their body as they think fit and have oversight functions on the Committees.

The Board also delegates authority to the Management in line with best practices, for the day-to-day Management of the Bank through the MD/CEO, who is supported in this task by the Four (4) Management Staff.

Standing Board Committees

The Board carries out its oversight responsibilities through Six (6) standing Committees whose terms of reference it reviews regularly. All the Committees have clearly defined terms of references, which set out their roles, responsibilities and functions, scope of authority and procedures for reporting to the Board.

In Compliance with Code No. 6 on industry transparency, due process, data integrity and disclosure requirement, the Board has in place the following Committees and reporting structures through which its oversight functions are performed:

Statutory Audit Committee;

Board Investment, Risk and Credit Committee;

Board Establishment, Finance and General Purpose Committee;

Statutory Audit Committee

This is a joint shareholders/Board Committee that comprise of an equal number of 3 (Three) shareholders and 3 (Three) Directors. The Committee has oversight function on Internal Control system and financial reporting. The Committee’s terms of reference are:

General

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The Committee shall:

- Ensure that there is an open avenue of communication between the External Auditors and the Board and confirm the Auditors’ respective authority and responsibilities.

- Oversee and appraise the scope and quality of the audits conducted by the Internal and External Auditors.

- Review annually, and if necessary propose for formal Board adoption, amendments to the Committee’s terms of reference.

Whistle Blowing

- Review arrangements by which staff of the Bank may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.

- As global best practice however that a direct channel of communication is established

between the whistle blower and the authority to take action, investigate or cause to be investigated the matter being blown, the Committee shall ensure that arrangements are in place for the proportionate and independent investigation and follow-up of such matters.

Regulatory Reports

The Committee shall also:

- Examine CBN/NDIC examination Reports and make recommendations thereof.

- Monitor and review the standards of risk management and internal control, including the processes and procedures for ensuring that material business risks, including risks relating to IT security, fraud and related matters, are properly identified and managed, the effectiveness of internal control, financial reporting, accounting policies and procedures, and the Bank’s statements on internal controls before they are agreed by the Board for each year’s Annual Report.

- Consider and review the process for risk management annually to ensure adequate oversight of risk faced by the Bank and the system of internal controls and reporting of those risks within the Bank.

- Receive regular Reports on significant litigation and financial commitments and potential liability (including tax) issues involving the Bank.

Membership

The Committee comprises of a total number of six (6) members made up of three (3) Non-Executive Directors and three (3) Shareholders as follows:

Non - Executive Directors: 1. Prince Sola Adewumi - Chairman

2. Tayo Kolawole - Member

3. Dr. Olalekan Yinusa - Member

Shareholders:

4. Mr. Odewale Odeyinka - Member

5. Mr. Olugbosun Ariyo - Member 6. Mr. Yaya Ajagbe Suraj - Member

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Quorum : Four (4) members, 2 (Two) Non-executive directors and 2 (Two) shareholders. Board Investment, Risk and Credit Committee The Board Investment, Risk and Credit Committee is charged with the responsibility of evaluating and or approving all credits beyond the powers of Management from N25 Million to 150 Million for fund based facilities. The following are its terms of reference.

Roles The Roles of the Committee are:

i. Oversee Management’s establishment of policies and guidelines, to be adopted by the Board

ii. Articulating the Bank’s tolerances with respect to credit risk, and overseeing Management’s administration of, and compliance with, these policies and guidelines.

iii. Oversee Management’s establishment of appropriate systems (including policies, procedures, management and credit risk stress testing) that support measurement and control of credit risk.

iv. Periodic review of Management’s strategies, policies and procedures for managing credit risk, including credit quality administration, underwriting standards and the establishment and testing of provisioning for credit losses.

v. Overseeing the administration of the Bank’s credit portfolio, including Management’s responses to trends in credit risk, credit concentration and asset quality.

vi. Coordinate as appropriate its oversight of credit risk with the Board Risk Management Committee in order to assist the Committee in its task of overseeing the Bank’s overall management and handling of risk.

vii. Evaluate and or approve all credits beyond the powers of the Executive Management. viii. Ensure that a qualitative and profitable Credit Portfolio exist for the Bank.

ix. Evaluate and recommend to the Board all credits beyond the Committee’s powers.

x. Review of credit portfolio within its limit in line with set objectives. xi. Review of classification of credit advances of the Bank based on prudential guidelines

on quarterly basis. xii. Approving the restructuring and rescheduling of credit facilities within its powers;

xiii. Write-off and grant of waivers within powers delegated by the Board;

xiv. Review and monitor the recovery of non-performing insider related loans. xv. Overseeing the overall Risk Management of the Bank;

xvi. Reviewing periodically, Risk Management objectives and other specific Risk Policies for consideration of the full Board;

xvii. Evaluating the Risk Rating Agencies, Credit Bureau and other related Service Providers to be engaged by the Bank;

xviii. Approving the internal Risk Rating Mechanism.

xix. Reviewing the Risk Compliance reports for Regulatory Authorities; xx. Reviewing and approving exceptions to The Bank’s Risk Policies;

xxi. Review of policy violations on Risk issues at Senior Management Level;

xxii. Certifying Risk Reports for Credits, Operations, Market/Liquidity subject to limits set by the Board;

xxiii. Evaluating the risk profile and risk management plans for major projects and new ventures to determine the impact on the Bank’s risk profile.

xxiv. Ensuring compliance with global best practice standards as required by the Regulators. xxv. Monitoring the market, Operational, Reputational, Liquidity, Compliance, Strategic,

Legal and other Risks as determined by the Board. xxvi. Any other oversight functions as may, from time to time, be expressly requested by the

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Board.

Membership

The Committee has 5 (Five) members comprising of 4 (Four) Non-Executive Directors, the Managing Director/CEO. The committee members are as follows:

1. Michael Omolaja - Chairman

2. Gbadebo Adekunle - Member

3. Dr. Olalekan Yinusa - Member

4. Prince Adetilewa Sijuwade - Member

5. Ayo Olowookere - Member

Quorum

3 (Three) members.

Board Establishment, Finance and General Purpose Committee: Roles

i) The committee is responsible for the overall governance and personnel function of the Board.

ii) To consider and make recommendations to the Board on acquisition of Fixed Assets, Review and recommend nomination of directors to the Board based on a proper selection process.

iii) To ensure adequate succession planning for Board of Directors and Chief Executive Officer.

iv) To ensure the orientation and continuous education of Directors.

v) To monitor the procedures established for compliance with regulatory requirements for related party transactions.

vi) To monitor staff compliance with the Code of Ethics and Business Conduct of the Bank. vii) To ensure compliance with regulatory standards of Corporate Governance and

regularly identify international best practices of corporate governance and close any identified gaps.

viii) Recruitment/ promotion of staff to Assistant General Manager level and above and to approval of the remuneration.

ix) To decide on the benefits and other terms and conditions of the service contracts of such officers recommend to the Board.

x) To determine the terms and conditions of the service contract including remuneration of the bank’s policies committed by staff of Assistant General Manager level and above and apply appropriate sanctions where necessary.

xi) To review and approve of policies on staff welfare and fringe benefits; annual review of the Board Charter.

xii) To ensure the annual review of the Board and board committees’ performance.

Membership

1. Bola Oyebamiji - Chairman

2. Gbadebo Adekunle - Member

3. Tayo Kolawole - Member

4. Michael Omolaja - Member

5. Ayo Olowookere - Member

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Quorum

3 (Three) Members Remuneration of Directors The Shareholders, at the Bank’s Annual General Meeting, set and approved the annual remuneration of members of the Board of Directors. The annual emoluments of the Directors are stated in the Annual Report.

Internal Control The Bank has separate staff within the internal audit function from operational and management Internal control Charter for its internal audit exercise. The Charter isolates and insulates the Internal Audit Division from the control and influence of the Executive Management so as to independently review the Bank’s operations. Under the Charter, the Internal Auditors’ report is submitted directly to the Board Audit Committee.

Compliance The Bank has in place a compliance department in line with regulatory provisions. The compliance department is responsible for monitoring the Bank compliance to legislative and regulatory provisions, circulars and pronouncements. It is also responsible for monitoring compliance of the Bank’s operations, processes and procedures to internal policies. The compliance department is independent of the internal control function and reports directly to the Managing Director.

Executive Management Committee

The Executive Management Committee (EXCO) reviews and approves credit facilities up to its limit and an amount above its limit goes to the Board Credit Committee for review and approval. The Committee meets once a month or as the need arises.

Membership of the Executive Management Committee (EXCO) is made up of the Managing Director/Chief Executive Officer as Chairman with all Executive Management Staff

Risk Management

The Board of Directors and Management of Omoluabi Mortgage Bank Plc. are committed to establishing and sustaining best practices in Risk Management in line with international practice. For this purpose, the Bank operates a centralized Risk Management and Control Division, with responsibility to ensure that the Risk Management processes are implemented in compliance with Policies approved by the Board of Directors.

The Board of Directors determines the Bank’s goals, in terms of risk, by issuing a Risk Policy. The Policy both defines acceptable levels of risk for day-to-day operations as well as the Bank’s willingness to incur risk, weighed against the expected rewards. The Risk Policy is detailed in the Enterprise Risk Management (ERM) Framework, which is a structured approach to identifying opportunities, assessing

the risk inherent in these opportunities and managing these risks proactively in a cost effective manner. It is a top-level integrated approach to events identification, analysis, assessment, monitoring and identification of business opportunities. Specific policies are also in place for managing risks in the different risk area of Credit, Market and Operational Risks.

The evolving nature of Risk Management practices and the dynamic character of the

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banking industry necessitate regular review of the effectiveness of each Enterprise Risk Management component. In the light of this, the Bank’s Enterprise Risk Management Framework is subject to continuous review to ensure effective Risk Management. The review is done in either or both of the following ways:

- Continuous self-evaluation and monitoring by the Risk Management Division in

conjunction with Internal Control; and - Independent evaluation by external Auditors and Examiners.

Implementation of Code of Corporate Governance

In compliance with Code No. 6.1.11, the Bank has a Compliance Department with responsibilities of implementing Code of Corporate Governance in addition to monitoring compliance of the Money Laundering requirements.

The Chairman of the Board does not serve as Chairman/Member of any of the Board Committees;

The Bank’s organizational chart approved by CBN reflects clearly defined lines of responsibility and hierarchy;

The Bank also has in place, a system of internal control, designed to achieve efficiency, effectiveness of operations, reliability of and regulations at all levels of financial reporting and compliance with applicable laws.

Breaches of the Code

The Bank is not aware of any violation to the Code of Corporate Governance.

Olabisi Fayombo FRC/2013/ICAN/00000002883 For: Adekunle Fagbile Company Secretary

CERTIFICATION PURSUANT

To Section 60(2) of the Investments and Securities Act No. 29 of 2007 FOR THE YEAR ENDED 31st

DECEMBER, 2017

We the undersigned hereby certify the following with regard to Audited Accounts for the year ended

31st December, 2017 that:

1. We have reviewed the report and to the best of our knowledge, the report does not contain: a. Any untrue statement of a material fact, or

b. Any omission of material fact, which would make the statements, misleading in the light of the circumstances under which such statements were made.

2. To the best of our knowledge, the financial statement and other financial information included in the report fairly present in all material respects the financial state and results of operations of the company as at and for the periods presented in the report.

3. We are responsible for: a. Establishing and maintaining internal controls

b. The design of such internal controls and to ensure that material information relating to the company is made known to the officers within the company particularly during the period in which the periodic reports are being prepared.

c. Evaluating the effectiveness of the company’s internal controls within 90 days prior to the report;

d. Presenting in the report our conclusions about the effectiveness of the company’s internal control based on our evaluation as of that date.

4. We have disclosed to the auditors of the company and Audit Committee:

a. All significant deficiencies in the design or operation of internal controls which would adversely affect the company’s ability to record process, summarize and report financial data and have identified for the Company’s Auditor any material weakness in internal controls, and

b. Any fraud, whether or not material, that involves management or other employees who have significant role in the company’s internal controls.

5. We have identified in the report whether or not there were significant changes in the internal controls or other factors that could significantly affect internal control subsequent to the date of our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

DATED THIS 25th DAY OF APRIL, 2018

OLUSOLA AFOLABI AYODELE OLOWOOKERE CHIEF FINANCIAL OFFICER MANAGING DIRECTOR/CEO

REPORT OF THE AUDIT COMMITTEE

In compliance with the provisions of Section 359(6) of the Companies and Allied matters Act, Cap C20 LFN 2004, we confirm that the accounting and reporting policies of the Bank were in accordance with statutory requirements and agreed ethical practices.

In our opinion, the scope and planning of both the internal and external audits for the year

ended 31st December 2017 were adequate. We have also received, reviewed and discussed the audit report on Management matters and were satisfied with the

departmental responses thereon.

The Members of the Audit Committee reviewed the Audited Report on related party transactions and are satisfied with their status as required by the Central Bank of Nigeria (CBN). The Committee also reviewed the IFRS disclosure requirements and is satisfied with the disclosures thereon.

The internal control system of the bank was also being constantly and effectively monitored.

Dated 25th April, 2018

Prince Sola Adewumi FCA, CFE (Chairman, Audit Committee) FRC/2016/ICAN/00000015608

Members of the Audit Committee

Mr. Tayo Kolawole (Director) Dr. Olalekan Yinusa (Director) Mr. Odewale Odeyinka (Member) Mr. Olugbosun Ariyo (Member) Mr.Yaya Ajagbe Suraj (Member)

Independent Auditor’s Report

To the Shareholders of Omoluabi Mortgage Bank Plc

Opinion

Basis for Opinion

Key audit matters

Key Audit Matter How the matter was addressed in the audit

1.

A significant part of the Bank's financial reporting

process is heavily reliant on IT systems with

automated processes and controls over the

capture, storage and extraction of information. A

fundamental component of these processes of

controls is ensuring appropriate user process and

change management protocols exist, and are being

adhered to.

We focused our audit on those IT systems and controls

that are significant for the Bank financial reporting

process.

As audit procedures over IT systems and controls

require specific expertise, we involved IT specialist in

our audit.

We have audited the financial statements of Omoluabi Mortgage Bank Plc which comprise the statement of financial

position at 31 December 2017, and the statement of profit or loss and other comprehensive income, statement of

changes in equity and statement of cash flows for the year then ended, and notes to the financial statements,

including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of

the Bank at 31 December 2017, and its financial performance and its cash flows for the year then ended in

accordance with International Financial Reporting Standards (IFRSs) in compliance with the Financial Reporting

Council of Nigeria Act, No 6, 2011 and with the requirements of the Companies and Allied Matters Act, CAP C20,

LFN 2004,the Banks and other financial institutions Act, CAP B3 LFN and other relevant Central Bank of Nigeria

circular.

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under

those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements

section of our report. We are independent of the Company in accordance with the International Ethics Standards

Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical

requirements that are relevant to our audit of the financial statements in Nigeria, and we have fulfilled our other

ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit

evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the

consolidated financial statements of the current period. These matters were addressed in the context of our audit of

the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on

these matters. The key audit matters below relate to the audit of the financial statements.

Information Technology (IT) systems and

control over financial reporting

We assessed and tested the design and operating

effectiveness of the Bank’s IT controls, including those

over users access and change management as well as

data reliability.

These protocols are important because they ensure

that access and changes to IT systems and related

data are made and authorised in an appropriate

manner.

2

Key Audit Matter How the matter was addressed in the audit

1.

2. Loans and other receivables-impairment

Our audit procedures included:

Other Information

3

The Bank uses a vendor customized Enterprise

Resource Planning application (EasyBank AX).

In a limited number of cases we adjusted our planned

audit approach as follows:

The Bank has an IT division to manage the IT

function, and/or to assist with operational

requirements (includes service providers for major

functions).

We extended our testing to identify whether there

had been unauthorised or inappropriate access or

changes made to critical IT systems and related data;

Information Technology (IT) systems and

control over financial reporting (Cont'd)

Loans and other receivables are stated at their

amortised cost less appropriate allowance for

impairment. As disclosed in note 10 and note 18

the Bank assesses at each reporting date whether

there is objective evidence that financial asset is

impaired. In carrying out this assessment,

management relies on entity-developed internal

models. For instance in assessing collective

impairment ,the company uses historical trend of

the probability of default, timing of recoveries and

the amount of loss incurred, adjusted for

management determined risk rating.

We focused our testing of the impairment of trade and

other receivables on the key assumptions made by the

management.

Understand, evaluate and validate controls over

recognition and measurement.

Understand, evaluate and validate contracts over

recognition and measurement.

Review, evaluate and validate agreement over credit

process including age analysis of loan customers.

Critically evaluating the determination of the

expected cash flows used in assessing and

estimating impairments and the reasonableness of

any assumptions.

Evaluate whether the model used to calculate the

recoverable amount complies with the requirement of

IAS 39.

The directors are responsible for the other information. The other information comprises the Chairman’s statement,

Directors’ Report; Audit Committee’s Report, Corporate Governance Report and Bank Secretary’s report but does

not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of

assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in

doing so, consider whether the other information is materially inconsistent with the financial statements or our

knowledge obtained in the audit, or otherwise appeared to be materially misstated.

If based on the work we have performed on the other information that we obtained prior to the date of this auditors

report, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

There is significant measurement uncertainty

involved in this assessment, which makes it a key

audit matter.

In the event that the IT system failed, Business

operations will be disrupted/hampered until systems

are online.

Where automated procedures were supported by

systems with identified deficiencies, we extended our

procedures to identify and test alternative controls;

and

As our audit sought to place a high level of reliance

on IT systems and application controls related to

financial reporting, a high proportion of the overall

audit effort was in this area.

Where required, we performed a greater level of

testing to validate the integrity and reliability of

associated data reporting.

Responsibilities of the Directors and Those Charged with Governance for the Financial Statements

Those charged with governance are responsible for overseeing the Bank’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

•

•

•

•

•

•

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and

are considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these financial statements.

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with

International Financial Reporting Standards in compliance with the Financial Reporting Council of Nigeria Act, No 6,

2011 and the requirements of the Companies and Allied Matters Act, CAP C20, LFN 2004, and for such internal

control as the directors determine is necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Bank’s ability to continue as a

going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the Bank or to cease operations, or have no realistic

alternative but to do so.

4

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism

throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,

design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and

appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from

fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Bank’s internal control.

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by the directors.

Conclude on the appropriateness of the director’s use of the going concern basis of accounting and based on the

audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast

significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty

exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated

financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on

the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may

cause the Bank to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and

whether the financial statements represent the underlying transactions and events in a manner that achieves fair

presentation.

Obtain sufficient appropriate audit evidence regarding the financial information of the Bank to express an opinion

on the consolidated financial statements. We are responsible for the direction, supervision and performance of

the Bank audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the

audit and significant audit findings, including any significant deficiencies in internal control that we identify during our

audit.


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2017

2017 2016

Notes N N

Gross Revenue 518,378,573 304,930,527

Interest and similar income 6. 70,014,701 106,851,027

Interest and similar expense 7. (24,295,638) (321,425)

Net interest income 45,719,063 106,529,602

Net fee and commission income 8. 25,818,239 12,559,883

Other operating income 9. 422,545,633 185,519,617

Total operating income 494,082,935 304,609,102

Write back of credit loss expense 18. 56,925,360 147,891,359

Impairment losses on Other assets 10. (16,546,090) (98,999,342)

Net operating income 534,462,205 353,501,119

Personnel expenses 11. 129,487,037 125,864,937

Depreciation of property, plant and equipment 21. 33,103,308 14,491,816

Amortisation of intangible assets 22. 11,374,165 16,184,607

Other operating expenses 12. 172,961,179 118,090,264

Total operating expenses 346,925,689 274,631,624

Profit before tax 187,536,516 78,869,495

Income tax expense 13. (14,074,029) (7,992,524)

Profit for the year 173,462,487 70,876,971

Other Comprehensive income

Items that may be subsequently reclassified to profit or

loss

Net gains/(loss) on available for sales financial assets 1,618,221 (3,553,834)

Items that will not be subsequently reclassified to profit

or loss - -

Total comprehensive income 175,080,708 67,323,137

Earnings per share - Basic (Kobo) 14. 3.50 1.35

The accompanying notes and significant accounting policies form an integral part of these financial statements.

6


STATEMENT OF CHANGES IN EQUITY


Available Regulatory

Issued Share Statutory Retained for Sale Risk

Capital Premium Reserves Earnings Reserves Reserves Total equity

N N N N N N N

At 1 January 2016 2,500,000,000 - 14,382,887 (148,466,521) - - 2,365,916,366

Profit for the year - - 70,876,972 - - 70,876,972

Other comprehensive Income - - - - (3,553,834) - (3,553,834)

Transfer (statutory) - - 14,175,394 (14,175,394) - - -

At 31 December, 2016 2,500,000,000 - 28,558,281 (91,764,943) (3,553,834) - 2,433,239,504

At 1 January 2017 2,500,000,000 - 28,558,281 (91,764,943) (3,553,834) - 2,433,239,504

-

Profit for the year - - 173,462,487 - - 173,462,487

Other comprehensive Income - - - - 1,618,221 1,618,221

Transfer (statutory) - - 34,692,497 (34,692,497) - - -

Proposed dividend - - - - - - -

At 31 December, 2017 2,500,000,000 - 63,250,779 47,005,046 (1,935,613) - 2,608,320,212

Statutory reserve

Regulatory risk reserve

Available for sale reserve

The revised guidelines for Primary Mortgage Banks in Nigeria require mortgage banks to make an annual appropriation to a statutory reserve. As

stipulated by section 5.4 of the of the revised guidelines, an appropriation of 20% of profit after tax is made if the statutory reserve is less than the paid

up share capital and 10% of profit after tax if the statutory reserve is equal to or in excess of the paid up capital.

The Central Bank of Nigeria stipulates that provisions for loans recognized in the profit or loss account be determined based on the requirements of

IFRS. The IFRS provision should then be compared with provision determined using the Prudential Guidelines and the expected impact/changes

treated in the retained earnings (See Statement of Prudential Adjustments).

Available For Sale (AFS) assets are measured at fair value in the balance sheet. Fair value changes on AFS assets are recognised directly in equity,

through the statement of changes in equity, except for interest on AFS assets (which is recognised in income on an effective yield basis), impairment

losses and (for interest-bearing AFS debt instruments) foreign exchange gains or losses. The cumulative gain or loss that was recognised in equity is

recognised in profit or loss when an available-for-sale financial asset is derecognised.

Attributable to equity holders

8


STATEMENT OF CASH FLOWS


2017 2016

Notes N N

Profit before tax 187,536,516 78,869,495

Adjustment for non-cash itemsWrite back of credit loss expense 10. (56,925,360) (147,891,359)

Impairments on other assets 20.1 15,278,132 109,592,666

Gain on disposal of assets 9. (231,300) -

Provisions for dimunition on quoted investment - 3,553,834

Profit on sales of quoted investment - (80,387)

Profit on disposal of Investment Held for sale (80,371,761) (2,560,000)

Loss on sales of mortgageable assets - 3,371,731

Depreciation of property, plant & equipment 21. 33,103,308 14,491,816

Amortisation of intangibles 22. 11,374,165 16,184,607

Cashflow before changes in working capital 109,763,700 75,532,403

Changes in working capital

Increase in loans and advances (312,238,027) (184,268,961)

Increase in other assets (436,372,137) (87,273,964)

Decrease/(increase) in non current assets 235,551,104 (383,571,384)

Increase in deposits 840,880,106 242,227,968

(Decrease)/increase other liabilities (263,604,443) 352,934,461

64,216,603 (59,951,880)

Tax paid 26. (9,085,193) (4,586,842)

Cash generated from operations 164,895,110 (64,538,722)

Cashflow from investing activities

Purchase of property, plant and equipment 21. (44,147,573) (177,650,566)

Purchase of intangible assets 22. (6,063,631) (34,615,458)

Disposal of asset held for sale - 29,371,731

Proceeds from disposal of property, plant and equipment 5,189,535 -

Proceeds from sale of held for sale assets 107,948,096 28,000,000

62,926,427 (154,894,293)

Cashflow from financing activities

Additional/(repayment of) borrowed funds 25. 109,744,583 (2,114,372)

109,744,583 (2,114,372)

Increase in cash and cash equivalent 337,566,120 (146,014,984)

Cash and cash equivalent as at beginning of period 1,696,067,590 1,842,082,574

Cash and cash equivalent as at end of period 2,033,633,710 1,696,067,590

Additional cash flow information

Cash and cash equivalent

Cash on hand (note 16) 16. 37,235,120 14,437,902

Balances with banks within nigeria 17. 341,692,030 415,382,967

Placements with banks 17. 1,654,706,560 1,266,246,721

2,033,633,710 1,696,067,590

The accompanying notes to the financial statement are an integral part of these financial statements.

Cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition,

including cash in hand, deposits held at call with other banks and other short-term highly liquid investments with original

maturities of less than three months.

9


STATEMENT OF PRUDENTIAL ADJUSTMENTS


i)

ii)

2017 2016

N N

Prudential Impairment Provision 128,536,049 83,475,657

Total Prudential Impairment Provision 128,536,049 83,475,657

IFRS impairment provision

Individual Impairment on loans and advances 19,690,973 112,192,578

Collective Impairment on loans and advances 129,183,298 93,607,053

148,874,271 205,799,631

Difference in impairment provision balances (20,338,222) (122,323,974)

Movement in regulatory reserve

Balance at 1 January - -

Transfer to (from) regulatory risk reserve - -

Balance at 31 December - -

The Central Bank of Nigeria stipulates that provisions for loans recognized in the profit or loss account be

determined based on the requirements of IFRS. The IFRS provision should then be compared with provision

determined using the Prudential Guidelines and the expected impact/changes treated in the retained earnings

as follows:

Where the prudential impairment allowance is greater than IFRS impairment allowance: the difference should

be transferred from the retained earnings account to a non-distributable regulatory risk reserve.

Where the prudential impairment allowance is less than IFRS impairment allowance: The difference should

be transferred from the regulatory risk reserve account to the retained earnings to the extent of the non-

distributory reserve previously recognized.

10


NOTES TO THE FINANCIAL STATEMENTS


1. Statement of significant accounting policies

1.1 Reporting entity

1.2 Basis of preparation

a) Statement of compliance

b) Basis of measurement

- Assets and liabilities held for trading are measured at fair;

-

-

-

- Liabilities for cash-settled share-based payment arrangements are measured at fair value;

- Available-for-sale financial assets are measured at fair value.

c) Functional and presentation currency

These financial statements are presented in Naira, which is the Bank’s functional currency.

2. Significant accounting judgments, estimates and assumptions

Going concern

Omoluabi Mortgage Bank Plc (the Bank) is a public limited liability company domiciled in Nigeria. The

address of the Bank’s registered office is Old Governor’s Office, Gbongon Road, Osogbo, Osun State.

The Bank obtained its licence to operate as a Mortgage Bank on the 24th of February, 1999 and

commenced operations in March 1999. The Bank became a public limited liability company on 13th

January, 2014.

The Bank is primarily involved in business of Residential and Commercial Mortgage financing as well as

construction finance among other financial services.

The financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) in the manner

required by the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004,

the Financial Reporting Council of Nigeria Act, 2011, the Bank’s and Other Financial Institutions Act of

Nigeria, and Relevant Central Bank of Nigeria circulars. The IFRS accounting policies have been

consistently applied to all periods presented.

The financial statements have been prepared on the historical cost basis except for the following

material items in the statement of financial position:

Financial instruments designated at fair value through profit or loss are measured at fair value;

investments in equity instruments are measured at fair value;

Other financial assets not held in a business model whose objective is to hold assets to collect

contractual cash flows or whose contractual terms do not give rise solely to payments of principal

and interest are measured at fair value;

Recognized financial assets and financial liabilities designated as hedged items in qualifying fair

value hedge relationships are adjusted for changes in fair value attributable to the risk being

hedged;

The preparation of the financial statements in conformity with IFRSs requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the reported

amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimate is revised and in any future periods affected.

The Bank’s Management has made an assessment of the Bank’s ability to continue as a going concern

and is satisfied that the Bank has the resources to continue in business for the foreseeable future.

Furthermore, Management is not aware of any material uncertainties that may cast significant doubt upon

the Bank’s ability to continue as a going concern. Therefore, Management will continue to prepare the

financial statements on the going concern basis.

11




Fair value of financial instruments

Impairment losses on loans and advances

Impairment of available-for-sale investments

Deferred tax assets

Determination of collateral value

The bank also records impairment charges on available–for–sale equity investments when there has been

a significant or prolonged decline in the fair value below their cost. The determination of what is

‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the bank evaluates, among other

factors, historical share price movements and duration and extent to which the fair value of an investment

is less than its cost.

Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable

profit will be available against which the losses can be utilized. Judgment is required to determine the

amount of deferred tax assets that can be recognized, based upon the likely timing and level of future

taxable profits, together with future tax planning strategies.

The monitoring of market value of collateral is done on a regular basis. Fair value is adjusted to reflect

current market conditions. The amount of collateral required depends on the assessment of the

counterparty credit risk.

The Bank reviews its individually significant loans and advances at each statement of financial position

date to assess whether an impairment loss should be recorded in the income statement. In particular,

Management judgment is required in the estimation of the amount and timing of future cash flows when

determining the impairment loss. These estimates are based on assumptions about a number of factors

and actual results may differ, resulting in future changes to the allowance. The Present Value of such

cash flows as well as the present value of the fair value of the collateral is then compared to the Exposure

at Default.

Loans and advances that have been assessed individually and found not to be impaired and all

individually insignificant loans and advances are then assessed collectively in buckets of assets with

similar risk characteristics, to determine whether provision should be made due to incurred loss events for

which there is objective evidence but whose effects are not yet evident. The collective assessment of

impaired insignificant loans is done with a PD of 100% and the historical LGD while the collective

assessment of unimpaired insignificant loans and significant loans is done with the historical PD and LGD.

The bank reviews its debt securities classified as available–for–sale investments at each statement of

financial position date to assess whether they are impaired. This requires similar judgment as applied to

the individual assessment of loans and advances.

Where the fair values of financial assets and financial liabilities recorded on the statement of financial

position cannot be derived from active markets, they are determined using a variety of valuation

techniques that include the use of mathematical models. The inputs to these models are derived from

observable market data where possible, but where observable market data are not available, judgment is

required to establish fair values.

The Bank divides its loan portfolio into significant and insignificant loans based on Management approved

materiality threshold. The Bank also groups its risk assets into buckets with similar risk characteristics for

the purpose of collective impairment of insignificant loans and unimpaired significant loans.

The Probability of Default (PD) and the Loss Given default (LGD) are then computed using historical data

from the loan buckets.

12




3. Accounting development and impact

3.1 Summary of Standards and Interpretations effective for the first time

a Amendments to IFRS 12 Disclosure of Interests in Other Entities

b Amendments to IFRS for SMEs

Three amendments are however of larger impact:

-

-

-

c Amendments to IAS 7 Statement of Cash Flows

d Amendments to IAS 12 Income Taxes

-

- The carrying amount of an asset does not limit the estimation of probable future taxable profits.

-

-

3.2

3.2.1 Amendments effective from annual periods beginning on or after 1 January 2018

This amendment clarifies the scope of the standard by specifying that the disclosure requirements in

the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5

that are classified as held for sale, as held for distribution or as discontinued operations in accordance

with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

The standard now allows an option to use the revaluation model for property, plant and equipment as

not allowing this option has been identified as the single biggest impediment to adoption of the IFRS

for SMEs in some jurisdictions in which SMEs commonly revalue their property, plant and equipment

and/or are required by law to revalue property, plant and equipment;

The main recognition and measurement requirements for deferred income tax have been aligned with

current requirements in IAS 12 Income Taxes (in developing the IFRS for SMEs, the IASB had

already anticipated finalization of its proposed changes to IAS 12, however, these changes were

never finalized); and

The main recognition and measurement requirements for exploration and evaluation assets have

been aligned with IFRS 6 Exploration for and Evaluation of Mineral Resources to ensure that the IFRS

for SMEs provides the same relief as full IFRSs for these activities.

Unrealized losses on debt instruments measured at fair value and measured at cost for tax purposes

give rise to a deductible temporary difference regardless of whether the debt instrument's holder

expects to recover the carrying amount of the debt instrument by sale or by use.

This amendment to IAS7 clarify that entities shall provide disclosures that enable users of financial

statements to evaluate changes in liabilities arising from financing activities

Standards and interpretations issued/amended but not yet effective.

Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible

temporary differences.

Amends to recognition of deferred tax assets for unrealized losses, IAS 12 Income Taxes clarify the

following aspects:

An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law

restricts the utilization of tax losses, an entity would assess a deferred tax asset in combination with

other deferred tax assets of the same type.

At the date of authorisation of these financial statements the following standards, amendments to existing

standards and interpretations were in issue, but not yet effective: This includes:

13

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a Amendments to IFRS 2 Share-based Payment

b Amendments to IFRS 4 Insurance Contracts

-

Amends IFRS 4 Insurance Contracts provide two options for entities that issue insurance contracts within

the scope of IFRS 4:

An option that permits entities to reclassify, from profit or loss to other comprehensive income, some

of the income or expenses arising from designated financial assets; this is the so called overlay

Amends IFRS 2 Share-based Payment to clarify the standard in relation to the accounting for cash settled

share-based payment transactions that include a performance condition, the classification of share-based

payment transactions with net settlement features, and the accounting for modifications of share-based

payment transactions from cash-settled to equity-settled

14


















































-

c Amendments to IFRS 15 'Revenue from Contracts with Customers

- Identify the contract with the customer

- Identify the performance obligations in the contract

- Determine the transaction price

- Allocate the transaction price to the performance obligations in the contracts

- Recognize revenue when (or as) the entity satisfies a performance obligation.

d Amendments to IFRS 9 Financial Instruments

-

-

-

-

e Amendments to IAS 40 Investment Property

f Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards

Amends paragraph 57 to state that an entity shall transfer a property to, or from, investment property

when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or

ceases to meet, the definition of investment property. A change in management’s intentions for the use of

a property by itself does not constitute evidence of a change in use. The list of examples of evidence in

Derecognition. The requirements for derecognition of financial assets and liabilities are carried

forward from IAS 39.

Amendments’ resulting from Annual Improvements 2014–2016 Cycle, the amendment deletes the short-

term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose.

An optional temporary exemption from applying IFRS 9 for entities whose predominant activity is

issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.

The application of both approaches is optional and an entity is permitted to stop applying them before the

new insurance contracts standard is applied.

IFRS 15 provides a single, principles based five step model to be applied to all contracts with customers.

The five steps in the model are as follows:

Guidance is provided on topics such as the point in which revenue is recognized, accounting for variable

consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures

about revenue are also introduced.

Amends IFRS 15 Revenue from Contracts with Customers also clarify three aspects of the standard

(identifying performance obligations, principal versus agent considerations, and licensing) and to provide

some transition relief for modified contracts and completed contracts

A finalized version of IFRS 9 which contains accounting requirements for financial instruments, replacing

IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the

following areas:

Classification and measurement. Financial assets are classified by reference to the business model

within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9

introduces a 'fair value through other comprehensive income' category for certain debt instruments.

Financial liabilities are classified in a similar manner to under IAS 39; however there are differences in

the requirements applying to the measurement of an entity's own credit risk.

Impairment. The 2014 version of IFRS 9 introduces an 'expected credit loss' model for the

measurement of the impairment of financial assets, so it is no longer necessary for a credit event to

have occurred before a credit loss is recognized

Hedge accounting. Introduces a new hedge accounting model that is designed to be more closely

aligned with how entities undertake risk management activities when hedging financial and non-

financial risk exposures

15





























































g Amendments to IAS 28 Investments in Associates and Joint Ventures

3.2.2 Amendments effective from annual periods beginning on or after 1 January 2019

a

Effective for an annual periods beginning on or after 1 January 2019

- IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor

continues to classify its leases as operating leases or finance leases, and to account for those two types

of leases differently;

- IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to apply judgement

in deciding upon the information to disclose to meet the objective of providing a basis for users of financial

statements to assess the effect that lease;

- New standard that introduces a single lessee accounting model and requires a lessee to recognise

assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of

low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying

leased asset and a lease liability representing its obligation to make lease payments. A lessee measures

right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and

lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of

the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease

liability into a principal portion and an interest portion and presents them in the statement of cash flows

applying IAS 7 Statement of Cash Flows;

- IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information

disclosed about a lessor’s risk exposure, particularly to residual value risk;

- New standard that introduces a single lessee accounting model and requires a lessee to recognise

assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of

low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying

leased asset and a lease liability representing its obligation to make lease payments. A lessee measures

right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and

lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of

the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease

liability into a principal portion and an interest portion and presents them in the statement of cash flows

applying IAS 7 Statement of Cash Flows.

- IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to

apply judgement in deciding upon the information to disclose to meet the objective of providing a basis for

users of financial statements to assess the effect that leases have on the financial position, financial

performance and cash flows of the lessee.

- IFRS 16 substantially

carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify

its leases as operating leases or finance leases, and to account for those two types of leases differently.

- IFRS 16 also requires enhanced disclosures to be provided by lessors

that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.

- IFRS 16 supersedes the following Standards and

Interpretations:

a) IAS 17 Leases;

b) IFRIC 4 Determining whether an Arrangement contains a Lease;

c) SIC-15 Operating Leases—Incentives; and

d) SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

This amendment Clarifies that the election to measure at fair value through profit or loss an investment in

an associate or a joint venture that is held by an entity that is a venture capital organization, or other

qualifying entity, is available for each investment in an associate or joint venture on an investment by

investment basis, upon initial recognition.

IFRS 16 'Leases'

16




3.2.3 New standards, amendments and interpretations issued but without an effective date

a Amendments to IFRS 9 Financial Instruments

IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:

-

-

-

-

All other instruments (including all derivatives) are measured at fair value with changes recognized in

the profit or loss

Investments in equity instruments can be designated as 'fair value through other comprehensive

income' with only dividends being recognized in profit or loss

Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are

measured at amortised cost (the use of fair value is optional in some limited circumstances)

At the date of authorisation of these financial statements the following standards, amendments to existing

standards and interpretations were in issue, but without an effective: This includes:

Also a revised version of IFRS 9 incorporating requirements for the classification and measurement of

financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial

Instruments: Recognition and Measurement.

The concept of 'embedded derivatives' does not apply to financial assets within the scope of the

Standard and the entire instrument must be classified and measured in accordance with the above

guidelines.

17





b

-

-

4. Significant accounting policies

4.1 Revenue recognition

These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or

contribution of assets occurs by an investor transferring shares in a subsidiary that holds the assets

(resulting in loss of control of the subsidiary), or by the direct sale of the assets themselves.

Require the partial recognition of gains and losses where the assets do not constitute a business, i.e.

a gain or loss is recognized only to the extent of the unrelated investors’ interests in that associate or

Amends IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint

Ventures (2011) to clarify the treatment of the sale or contribution of assets from an investor to its

associate or joint venture, as follows:

The revised financial liability provisions maintain the existing amortised cost measurement basis for most

liabilities. New requirements apply where an entity chooses to measure a liability at fair value through

profit or loss in these cases, the portion of the change in fair value related to changes in the entity's own

credit risk is presented in other comprehensive income rather than within profit or loss.

Amendments to IFRS 10 and IAS 28 Consolidated Financial Statements and Investments in

Associates and Joint Ventures

Require full recognition in the investor's financial statements of gains and losses arising on the sale or

contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations)

The accounting policies set out below have been applied consistently to all periods presented in these

financial statements.

Interest income is recognized in profit or loss using the effective interest method. The effective interest

rate is the rate that exactly discounts the estimated future cash payments and receipts through the

expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying

amount of the financial asset or liability. When calculating the effective interest rate, the bank estimates

future cash flows considering all contractual terms of the financial instrument, but not future credit losses.

The calculation of the effective interest rate includes all transaction costs and fees and points paid or

received that are an integral part of the effective interest rate. Transaction costs include incremental costs

that are directly attributable to the acquisition or issue of a financial asset or liability.

Interest income and expense presented in the statement of comprehensive income include interest on

financial assets and financial liabilities measured at amortized cost calculated on an effective interest

basis. Interest income and expense on all trading assets and liabilities are considered to be incidental to

the bank’s trading operations and are presented together with all other changes in the fair value.

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4.2 Fees and commission

4.3 Net trading income

4.4 Net income from other financial Instruments at fair value through profit or loss

4.5 Dividends

4.6 Lease payments

4.7 Tax expense

Dividend income is recognized when the right to receive income is established. Usually this is the ex-

dividend date for equity securities. Dividends are presented in net trading income or net income from other

financial instruments at fair value through profit or loss based on the underlying classification of the equity

investment. Dividends on equity instruments designated as at fair value through other comprehensive

income are presented in other revenue in profit or loss unless the dividend clearly represents a recovery of

part of the cost of the investment, in which case it is presented in other comprehensive income.

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the

term of the lease. Lease incentives received are recognized as an integral part of the total lease expense,

over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and

the reduction of the outstanding liability. The finance expense is allocated to each period during the lease

term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Fees and commission income and expense that are integral to the effective interest rate on a financial

asset or a liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees, investment management fees, sales

commission, placement fees and syndication fees, are recognized as the related services are performed.

When a loan commitment is not expected to result in the draw-down of a loan, the related loan

commitment fees are recognized on a straight-line basis over the commitment period.

Other fees and commission expense relate mainly to transaction and service fees, which are expensed as

the services are received.

Net trading income comprises gains less losses related to trading assets and liabilities, and includes all

realized and unrealized fair value changes, interest, dividends and foreign exchange differences.

Net income from other financial instruments at fair value through profit or loss relates to non-trading

derivatives held for risk management purposes that do not form part of qualifying hedge relationships,

financial assets mandatorily measured at fair value through profit or loss other than those held for trading,

and financial assets and liabilities designated at fair value through profit or loss. It includes all realized and

unrealized fair value changes, interest, dividends and foreign exchange differences.

Contingent lease payments are accounted for by revising the minimum lease payments over the

remaining term of the lease when the lease adjustment is confirmed.

Tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or

loss except to the extent that it relates to items recognized directly in equity or in other comprehensive

income.

Current tax is the expected tax payable or receivable on the taxable income or loss of the year, using tax

rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect

of previous years. Current tax payable also includes any tax liability arising from the declaration of

dividends

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4.8 Deferred taxation

4.9 Financial assets and financial liabilities

i) Recognition and initial measurement

ii) Classification

Financial assets:

-

- How management evaluates the performance of the portfolio;

- Whether management’s strategy focus on earning contractual interest revenues;

- The degree of frequency of any expected asset sales;

- The reason or any asset sales; and

-

Additional taxes that arise from the distribution of dividends by the Bank are recognized at the same time

as the liability to pay the related dividend is recognized.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences

to the extent that it is probable that future taxable profits will be available against which they can be

utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no

longer probable that the related tax benefit will be realized.

The bank initially recognizes loans and advances, deposits, debt securities issued and subordinated

liabilities on the date at which they are originated. All other financial assets and liabilities (including

assets and liabilities designated at fair value through profit or loss) are initially recognized on the trade

date at which the bank becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value

through profit or loss, transaction costs that are directly attributable to its acquisition or issue.

At inception a financial asset is classified as measured at amortized cost or fair value. A financial

asset qualifies for amortized cost measurement only if the asset is held within a business model

whose objective is to hold assets in order to collect contractual cash flows; and the contractual terms

of the financial asset give rise on specified dates to cash flows that are solely payments of principal

and interest on the principal amount outstanding.

If a financial asset does not meet both of these conditions, then it is measured at fair value. The Bank

makes an assessment of a business model at a portfolio level as this reflects best the way the

business is managed and information is provided to management.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets

and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences

when they reverse, based on the laws that have been enacted or substantively enacted by the reporting

date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax

liabilities against current tax assets, and they relate to taxes levied by the same tax authority on the same

taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net

basis or their tax assets and liabilities will be realized simultaneously.

In making an assessment of whether an asset is held within a business model whose objective is to

hold assets in order to collect contractual cash flows, the bank considers:

Management’s stated policies and objectives for the portfolio and the operation of those policies in

practice;

Whether assets that are sold are held for an extended period of time relative to their contractual

maturity or are sold shortly after acquisition or an extended time before maturity.

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Financial liabilities

iii) De-recognition

The bank designates financial liabilities at fair value through profit or loss when liabilities contain

embedded derivatives that significantly modify the cash flows that would otherwise be required under

the contract.

Financial guarantees and commitments to provide a loan at a below-market interest rate are

subsequently measured at the higher of the amount determined in accordance with IAS 37 provisions,

Contingent Liabilities and Contingent Assets and the amount initially recognized less, when

appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue.

The bank derecognizes a financial asset when the contractual rights to the cash flows from the

financial asset expire, or when it transfers the financial asset in a transaction in which substantially all

the risks and rewards of ownership of the financial asset are transferred or in which the bank neither

transfers nor retains substantially all the risks and rewards of ownership and it does not retain control

of the financial asset. Any interest in transferred financial assets that qualify for de-recognition that is

created or retained by the bank is recognized as a separate asset or liability in the statement of

financial position. On de-recognition of a financial asset, the difference between the carrying amount

of the asset (or the carrying amount allocated to the portion of the asset transferred), and

consideration received (including any new asset obtained less any new liability assumed) is

recognized in profit or loss.

The bank enters into transactions whereby it transfers assets recognized on its statement of financial

position, but retains either all or substantially all of the risks and rewards of the transferred assets or a

portion of them. If all or substantially all risks and rewards are retained, then the transferred assets

are not derecognized. Transfers of assets with retention of all or substantially all risks and rewards

include, for example, securities lending and repurchase transactions.

In transactions in which the bank neither retains nor transfers substantially all the risks and rewards of

ownership of a financial asset and it retains control over the asset, the bank continues to recognize

the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to

changes in the value of the transferred asset.

In certain transactions the bank retains the obligation to service the transferred financial asset for a

fee. The transferred asset is derecognized if it meets the de-recognition criteria. An asset or liability is

recognized for the servicing contract, depending on whether the servicing fee is more than adequate

(asset) or is less than adequate (liability) for performing the servicing.

Financial assets held for trading are not held within a business model whose objective is to hold the

asset in order to collect contractual cash flows.

The Bank has designated certain financial assets at fair value through profit or loss because the

designation eliminates or significantly reduces an accounting mismatch, which would otherwise arise.

Financial assets are not reclassified subsequent to their initial recognition, except when the bank

changes its business model or managing financial assets.

The bank classifies its financial liabilities as measured at amortized cost or fair value through profit or

loss.

The bank derecognizes a financial liability when its contractual obligations are discharged or cancelled

or expire.

Retained interests are measured at amortized cost or fair value with fair value changes recognized

profit or loss.

21




iv) Offsetting

v) Amortized cost measurement

vi) Fair value measurement

When available, the bank measures the fair value of an instrument using quoted prices in an active

market for that instrument. A market is regarded as active if quoted prices are readily and regularly

available and represent actual and regularly occurring market transactions on an arm’s length basis.

If a market for a financial instrument is not active, then the bank establishes fair value using a

valuation technique. Valuation techniques include using recent arm’s length transactions between

knowledgeable, willing parties (if available), reference to the current fair value of other instruments

that are substantially the same, discounted cash flow analysis and option pricing models. The chosen

valuation technique makes maximum use of market inputs, relies as little as possible on estimates

specific to the bank, incorporates all factors that market participants would consider in setting a price,

and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to

valuation techniques reasonably represent market expectations and measures of the risk-return

factors inherent in the financial instrument. The bank calibrates valuation techniques and tests them

for validity using prices form observable current market transactions in the same instrument or based

on other available observable market data.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction

price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument

is evidenced by comparison with other observable current market transactions in the same

instrument, i.e. without modification or repackaging, or based on a valuation technique whose

variables include only data from observable markets. When transaction price provides the best

evidence of fair value at initial recognition, the financial instrument is initially measured at the

transaction price and any difference between this price and the value initially obtained from a

valuation model is subsequently recognized in profit or loss on an appropriate basis over the life of the

instrument but not later than when the valuation is supported wholly by observable market data or the

transaction is closed out.

Any difference between the fair value at initial recognition and the amount that would be determined at

that date using a valuation technique in a situation in which the valuation is dependent on

unobservable parameters is not recognized in profit or loss immediately but is recognized over the life

of the instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or

the fair value become observable.

Assets and long positions are measured at a bid price; liabilities and short positions are measured at

an asking price.

Financial assets and liabilities are offset and the net amount presented in the statement of financial

position when, and only when, the bank has a legal right to set off the recognized amounts and it

intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains

and losses arising from a group of similar transactions such as in the bank’s trading activity.

The amortized cost of a financial asset or liability is the amount at which the financial asset or liability

is measured at initial recognition, minus principal repayments, plus or minus the cumulative

amortization using the effective interest method of any difference between the initial amount

recognized and the maturity amount, minus any reduction for impairment.

Fair value is price received to sell an asset, or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

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vii) Identification and Measurement of Impairment

4.10 Cash and cash equivalents

4.11 Trading assets and liabilities

At each reporting date the bank assesses whether there is objective evidence that financial assets

carried at amortized cost are impaired. A financial asset or a group of financial assets is impaired

when objective evidence demonstrates that a loss event has occurred after the initial recognition of

the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be

estimated reliably.

Trading assets and liabilities are those assets and liabilities that the bank acquires or incurs principally for

the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed

together for short-term profit or position taking. Trading assets and liabilities are measured at fair value

with changes in fair value recognized as part of net trading income in profit or loss.

Objective evidence that financial assets are impaired can include significant financial difficulty of the

borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the

bank on terms that the bank would not otherwise consider, indications that a borrower or issuer will

enter bankruptcy, the disappearance of an active market for a security, or other observable date

relating to a group of assets such as adverse changes in the payment status of borrowers or issuers,

or economic conditions that correlate with defaults.

The bank considers evidence of impairment for loans and advances and investment securities

measured at amortized costs at both a specific asset and collective level. All individually significant

loans and advances and investment securities measured at amortized cost found not to be specifically

impaired are then collectively assessed for any impairment that has been incurred but not yet

identified. Loans and advances and investment securities measured at amortized cost that are not

individually significant are collectively assessed for impairment by grouping together loans and

advances and investment securities measured at amortized cost with similar risk characteristics.

In assessing collective impairment the bank uses statistical modeling of historical trends of the

probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s

judgment as to whether current economic and credit conditions are such that the actual losses are

likely to be greater or less than suggested by historical modeling. Default rates, loss rates and the

expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure

that they remain appropriate.

Impairment losses on assets carried at amortized cost are measured as the difference between the

carrying amount of the financial asset and the present value of estimated future cash flows discounted

at the asset’s original effective interest rate. Impairment losses are recognized in profit or loss and

reflected in an allowance account against loans and advances. Interest on impaired assets continues

to be recognized through the unwinding of the discount. When a subsequent event cause the amount

of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

The bank writes off loans and advances and investment securities when they are determined to be

uncollectible.

Cash and cash equivalents include notes and coins on hand, unrestricted balances held with banks and

highly liquid financial assets with maturities of three months or less from the acquisition date that are

subject to an insignificant risk of changes in their fair value, and are used by the bank in the management

of its short term commitments. Cash and cash equivalents are carried at amortized cost in the statement

of financial position.

23




4.12 Loans and advances

4.13 Investment securities

Investment securities are measured at amortized cost using the effective interest method, if:

-

- They have not been designated previously as measured at fair value through profit or loss.

4.14 Property and equipment

i) Recognition and measurement

Loans and advances are non-derivative financial assets with fixed or determinable payments, other than

investment securities that are not held for trading.

When the bank is the lessor in a lease agreement that transfers substantially all of the risks and rewards

incidental to ownership of the asset to the lessee, the arrangement is classified as a finance lease and a

receivable equal to the net investment in the lease is recognized and presented within loans and

advances.

When the bank purchases a financial asset and simultaneously enters into an agreement to resell the

asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock borrowing),

the arrangement is accounted for as a loan or advance, and the underlying asset is not recognized in the

Bank’s financial statements.

Subsequent to initial recognition loans and advances are measured at amortized cost using the effective

interest method, except when the bank recognizes the loans and advances at fair value through profit or

loss.

Subsequent to initial recognition investment securities are accounted for depending on their classification

s either amortized cost, fair value through profit or loss or fair value through other comprehensive income.

They are held within a business model with an objective to hold assets in order to collect contractual

cash flows and the contractual terms of the financial asset give rise, on specified dates, to cash flows

that are solely payments of principal and interest; and

The bank elects to present changes in fair value of certain investments in equity instruments held for

strategic purposes in other comprehensive income. The election is irrevocable and is made on an

instrument-by-instrument basis at initial recognition.

Items of property and equipment are measured at cost less accumulated depreciation and

accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-

constructed assets includes the cost of materials and direct labour, any other costs directly

attributable to bringing the assets to a working condition or their intended use, the costs of dismantling

and removing the items and restoring the site on which they are located, and capitalized borrowing

costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges

of foreign currency purchases of property and equipment. Purchased software that is integral to the

functionality of the related equipment is capitalized as part of that equipment.

When parts of an item of property or equipment have different useful lives, they are accounted for as

separate items (major components) of property and equipment. The gain or loss on disposal of an

item of property and equipment is determined by comparing the proceeds from disposal with the

carrying amount of the item of property and equipment, and is recognized in other income/other

expenses in profit or loss.

24




ii) Reclassification to investment property

iii) Subsequent costs

iv) Depreciation

The estimated useful lives for the current and comparative years are as follows:

Building 50 years

Plant & machinery 5 years

Leasehold improvement 5 years

Furniture & fittings 5 years

Computer and office equipment 5 years

Motor vehicles 4 years

4.15 Investment property

4.16 Intangible assets (computer software)

Software

The cost of replacing a component of an item of property or equipment is recognized in the carrying

amount of the item if it is probable that the future economic benefits embodied within the part will flow

to the bank and its cost can be measured reliably. The carrying amount of the replaced part is

derecognized. The costs of the day-to-ay servicing of property and equipment are recognized in profit

or loss as incurred.

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of

each part of an item of property and equipment since this most closely reflects the expected pattern of

consumption of the future economic benefits embodied in the asset. Leased assets under finance

leases are depreciated over the shorter of the lease term and their useful lives. Land is not

depreciated.

Depreciation methods, useful lives and residual values are reassessed at each reporting date and

adjusted if appropriate.

Investment property is property held either to earn rental income or for capital appreciation or for both, but

not for sale in the ordinary course of business, use in the production or supply of goods or services or for

administrative purposes. The bank holds some investment property as a consequence of the ongoing

rationalization of its retail branch network. Other property has been acquired through the enforcement of

security over loans and advances. Investment property is measured at cost on initial recognition and

subsequently at fair value with any change therein recognized in profit or loss as part of other revenue.

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair

value at the date of reclassification becomes its cost for subsequent accounting.

Software acquired by the Bank is stated at cost less accumulated amortization and accumulated

impairment losses and depreciated over 5 years.

When the use of property changes from owner-occupied to investment property, the property is re-

measured to fair value and reclassified as investment property. Any gain arising on re-measurement

is recognized in profit or loss to the extent that it reverses a previous impairment loss on the specific

property, with any remaining gain recognized in other comprehensive income and presented in

revaluation reserve in equity. Any loss is recognized immediately in profit or loss.

Expenditure on internally developed software is recognized as an asset when the bank is able to

demonstrate its intention and ability to complete the development and use the software in a manner that

will generate future economic benefits and can reliably measure the costs to complete the development.

The capitalized costs of internally developed software include all costs directly attributable to developing

the software and capitalized borrowing costs, and are amortized over its useful life. Internally developed

software is stated at capitalized cost less accumulated amortization and impairment.

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4.17 Leased assets – lessee

4.18 Impairment of non-financial assets

The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair

value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their

present value using a pre-tax discount rate that reflects current market assessments of the time value of

money and the risks specific to the asset or cash generating unit.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into

the smallest group of assets that generates cash inflows from continuing use that are largely independent

of the cash inflows of other assets or cash generating unit.

The bank’s corporate assets do not generate separate cash inflows and are utilized by more than one

cash generating unit. Corporate assets are allocated to cash generating units on a reasonable and

consistent basis and tested for impairment as part of the testing of the cash generating unit to which the

corporate asset is allocated.

Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash

generating units are allocated first to reduce the carrying amount of the assets in the cash generating unit

on a pro rata basis.

Impairment losses recognized in prior periods (on assets other than good will) are assessed at each

reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is

reversed if there has been a change in the estimates used to determine the recoverable amount. An

impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the

carrying amount that would have been determined, net of depreciation or amortization, if no impairment

loss had been recognized.

Subsequent expenditure on software assets is capitalized only when it increases the future economic

benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful life of the

software, from the date that is available for use since this most closely reflects the expected pattern of

consumption of the future economic benefits embodied in the asset. The estimated useful life of software

is three to five years.

Amortization methods, useful lives and residual values are reviewed at each financial year-end and

adjusted if appropriate.

Leases in terms of which the bank assumes substantially all the risks and rewards of ownership are

classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to

the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial

recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and are not recognized in the Bank’s statement of financial position.

The carrying amounts of the bank’s non-financial assets, other than investment property and deferred tax

assets are reviewed at each reporting date to determine whether there is any indication of impairment. If

any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is

recognized if the carrying amount of an asset or its Cash Generating Unit exceeds its estimated

recoverable amount.

26




4.19 Deposits, debt securities issued and subordinated liabilities

4.20 Provisions

4.21 Financial guarantees

4.22 Employee benefits

i) Defined contribution plans

The bank makes use of defined contribution plans.

The bank classifies capital instruments as financial liabilities or equity instruments in accordance with the

substance of the contractual terms of the instruments. The bank’s convertible preference shares are

classified as equity. Subsequent to initial recognition deposits, debts securities issued and subordinated

liabilities are measured at their amortized cost using the effective interest method, except where the bank

designates liabilities at fair value through profit or loss.

When the bank designates a financial liability as at fair value through profit or loss, the amount of change

in the fair value of such liability that is attributable to its changes in credit risk is presented in other

comprehensive income. At inception of a financial liability designated as at fair value though profit or loss,

the bank assesses whether presentation of the amount of change in the fair value of the liability that is

attributable to credit risk in other comprehensive income would create or enlarge an accounting mismatch

in profit or loss. The assessment is first made qualitatively, on an instrument-by-instrument basis, as to

whether there is an economic relationship between the characteristics of the liability and the

characteristics of another financial instrument that would cause such an accounting mismatch. No such

mismatch has been identified in respect of the financial liabilities entered into by the bank and therefore no

further detailed analysis has been required.

A provision is recognized if, as a result of a past event, the bank has a present legal or constructive

obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be

required to settle the obligation. Provisions are determined by discounting the expected future cash flows

at a pre-tax rate that reflects current market assessments of the time value of money and, where

appropriate, the risks specific to the liability.

A provision for restructuring is recognized when the bank has approved a detailed and formal restructuring

plan, and the restructuring either has commenced or has been announced publicly. Future operating

losses are not provided for.

Financial guarantees are contracts that require the bank to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with

the terms of a debt instrument. Financial guarantee liabilities are recognized initially at their fair value, and

the initial fair value is amortized over the life of the financial guarantee. The financial guarantee liability is

subsequently carried at the higher of this amortized amount and the present value of any expected

payment when a payment under the guarantee has become probable. Financial guarantees are included

within other liabilities.

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed

contributions into a separate entity and will have no legal or constructive obligation to pay further

amounts. Obligations for contributions to defined contribution pension plans are recognized as an

employee benefit expense in profit or loss in the periods during which services are rendered by

employees. Employees contributes 8% their basic, housing and transport allowances while the Bank

contributes 10% of same. The total contribution is remitted to the Retirement Savings Accounts of the

employees in line with Pension Reform Act 2004 (as amended). Prepaid contributions are recognized

as an asset to the extent that a cash refund or a reduction in future payments is available.

Deposits, debt securities issued and subordinated liabilities are the bank’s sources of debt funding. When

the bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a

similar asset) at a fixed price on a future date (repo or stock lending), the arrangement is accounted for as

a deposit, and the underlying asset continues to be recognized in the bank’s financial statements.

27




ii) Termination benefits

iii) Short-term employee benefits

4.23 Share capital and reserves

i) Ordinary share capital

The Bank has issued ordinary shares that are classified as equity instruments.

ii) Share premium

iii) Convertible preference shares

iv) Share Issue costs

4.24 Earnings per share

4.25 Non-current assets held for sale

Property, plant and equipment and intangible asset classified as Held for sale are not depreciated or

amortized. The Bank recognizes all impairment losses for any initial or subsequent write down of the asset

to fair value less cost to sell, a gain is recognized in any subsequent increase in fair value less cost to sell

of an asset held for sale, up to the cumulative impairment loss that has been recognized. A gain or loss

not previously recognized by the date of the sale of a non-current asset shall be recognized at the date of

de-recognition. An impairment loss recognized will reduce the carrying amount of the non-current asset

held for sale.

Contributions to a defined contribution plan that are due more than 12 months after the end of the

reporting period in which the employees render the service are discounted to their present value at

the reporting date.

Termination benefits are recognized as an expense when the bank is committed demonstrably,

without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment

before the normal retirement date, or to provide termination benefits as a result of an offer made to

encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized if

the bank has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and

the number of acceptances can be estimated reliably. If benefits are payable more than 12 months

after the end of the reporting date, then they are discounted at their present value.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed

as the related service is provided. A liability is recognized for the amount expected to be paid under

short-term cash bonus or profit-sharing plans if the bank has a present legal or constructive obligation

to pay this amount as a result of past services provided by the employee and the obligation can be

estimated reliably.

This represents the excess of the proceeds from the issue of shares over the nominal value (par

value) of the share.

The Bank classifies capital instruments as financial liabilities or equity instruments in accordance with

the substance of the contractual terms of the instruments. The bank’s convertible preference shares

are not redeemable by holders. Accordingly, they are presented as a component of issued capital

within equity.

Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial

measurement of the equity instruments. Other costs are applied against the Bank’s share premium

reserves.

The bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is

calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted

average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting

the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary

shares outstanding for the effects of all dilutive potential ordinary shares, which comprise issued and fully

paid convertible preference shares.

28




4.25 Segment reporting

5. Segment Information

2017 2016

N N

6. Interest and similar income

National Housing Fund loans 2,735,936 1,540,209

Other mortgage loans and advances to customers 67,278,765 105,310,818

70,014,701 106,851,027

7. Interest and similar expense:

Mortgage loans from FMBN and borrowed funds 347,523 316,930

Fixed Deposits accounts 23,759,645 4,495

Saving Deposits 142,314 -

Karakata Access account 45,958 -

Current Account 198 -

24,295,638 321,425

An operating segment is a component of the Bank that engages in business activity from which it can

incur expenses and earn revenues and expenses including those that relate to transactions with any of

the Bank’s other components, whose operating results are reviewed regularly by the Bank’s

Management Committee to make decisions about resources allocated to each segment and assess its

performance, and for which specific information is available.

The Bank's operations are in Osun State only and thus operates in just one geographical segment. The

risks and reward of carrying on business in different locations in Osun State for the purpose of these

financial statements are considered equitable.

The Bank is also engaged in one major line of business which is Mortgage Banking hence all its results

are mortgage related.

Segment information is based on geographical segments or business segments as primary reporting

segments. A geographical segment is engaged in providing products and/or services within a particular

economic environment that are subject to risks and returns different from those of segments operating in

other economic environments.

The operating results of segments are monitored separately with the aim of making decisions about

resource allocation and performance assessment. Segment performance is evaluated based on

operating profits and losses which in certain respects are measured differently from operating profits or

losses in the financial statements. Reliance is placed primarily on growth in Deposit, Loans and Profit

before taxes as measures of performance.

All transactions between segments are conducted on an arms length basis; the internal charges and

transfer pricing adjustmenst are reflected in the performance of each segment units.

The activities of the segments are centrally financed, thus the cash flow is presented in the statement of

cash fllows for the whole entity.

29




2017 2016

N N

8. Net fees and commission income

Fees and commission income

Credit related fees and commission 11,982,759 4,195,718

Commissions and Account maintenance Charges 13,835,480 8,364,165

25,818,239 12,559,883

9. Other operating income

Investment Income

- Government treasury bills 176,853,315 46,865,056

- Other investment income 70,236,826 33,755,888

Interest from bank placement 74,309,668 74,502,110

Rental income 1,049,500 1,145,000

Other income (Note 9.1) 19,493,263 29,251,563

Gain on disposal of non current assets held for sale 80,371,761 -

Profit on disposal of assets 231,300 -

422,545,633 185,519,617

9.1

10. Impairment losses

Write Back of credit loss expense 56,925,360 147,891,359

Credit loss expense - (20,527)

Other assets written off (16,546,090) (98,978,815)

40,379,270 48,892,017

11. Personnel expenses

Salaries and wages 92,565,092 89,268,512

Other staff costs 33,851,533 27,000,584

Pension costs – defined contribution plan 3,070,412 9,595,841

129,487,037 125,864,937

Other income include non interest and non commission incomes

earned in the deployment of banking services. These include

incomes from SMS alerts, E- business, chequebook issuance and

other electronic income.

Other staff costs include training expenses and other welfare costs

Credit related fees and commissions above exclude amounts

included in determining the effective interest rate on financial assets

that are not at fair value through profit or loss.

30




2017 2016

N N

12. Other operating expenses

Water and other rates 95,100 161,500

Light and power 3,577,882 2,417,320

Title processing expenses 163,300 2,408,400

Office rent 896,515 31,000

Real estate management expenses 3,000 232,600

Office consumables 4,876,551 2,355,323

Travelling expenses 3,927,080 3,190,245

Hotel accommodation 5,557,682 3,670,950

Telephone expenses 1,527,900 308,600

Stamping & registration expenses 224,230 274,700

Advert and promotions 1,969,877 1,508,708

Tax consultancy charges 400,000 12,187,500

Legal fees expenses 1,750,500 10,000

Land, CRC & other search fee expenses 20,100 539,400

Audit fee expenses 2,500,000 2,500,000

Loan recovery expenses 4,063,448 487,699

Lease Rental 625,000 -

Business lunch & entertainment 1,482,755 1,040,000

Printing and stationery expenses 3,698,467 1,768,000

Newspapers/periodicals/books 167,500 218,450

Diesel, fuel and lubricant 8,957,685 9,081,655

Mortgage processing expenses 1,714,227 34,400

Registrations & subscriptions 11,333,460 7,704,217

Secretariat expenses 200,000 880,750

Postage & courier services expenses 480,834 496,980

Other IT related expenses 19,104,377 7,010,897

Professional fees & other related expenses 12,513,779 14,329,106

Public relations 463,225 2,202,300

Losses on disposal of fixed assets - 4,046,731

Sundry expenses - 1,995,630

Donation 7,427,815 -

Business development expenses 6,331,378 200,000

Fines from other regulatory agencies 4,770,980 3,113,733

Technology levy expenses 1,875,366 796,662

Bank & other non interest charges 8,271,681 7,760,817

Security services expenses 11,178,575 2,953,473

Insurance premium and licence expenses 6,532,064 1,874,385

VAT expenses - 2,867,767

Annual general meeting expenses 3,323,955 1,726,610

Repairs and maintenance expenses 11,168,149 4,999,662

Directors' Fee 5,130,835 2,616,694

Directors' Sitting Allowance 6,425,000 5,105,000

Other Directors' Expenses 8,230,907 982,400

172,961,179 118,090,264

31




2017 2016

N N

13. Income tax

The components of income tax expense for the period ended

31 October, 2017 and 31 December 2016 are:

Company Income tax (Note 13i) 13,688,926 6,660,437

Education tax (Note 13ii) 385,103 1,332,087

Total current tax 14,074,029 7,992,524

Deferred tax

Origination/ reversal) of temporary differences -

Total income tax expense 14,074,029 7,992,524

i)

ii)

iii)

14. Earnings per share

Net profit attributable to ordinary shareholders for basic earnings 175,080,708 67,323,137

5,000,000,000 5,000,000,000

Basic earnings per ordinary share (kobo) 3.50 1.35

15. Dividends paid and proposed

16. Cash and bank balances

2017 2016

N N

The basis of income tax is the minimum tax of 0.5 per cent of the

Bank's net assets plus 0.125 on the excess of turnover that is above

N500,000. This is as provided by the Company Income Tax Act Cap

(C21,LFN 2004 as ammended).

The basis of the Education tax is 2% of adjusted profit as provided in

the Tertiary Education Trust Fund (Establishment) Act LFN 2011.

Basic earnings per share is calculated by dividing the net profit for the

year attributable to ordinary shareholders by the weighted average

number of ordinary shares outstanding at the reporting date. The

following reflects the income and share data used in the basic

earnings per share computations:

There have been no other transactions involving ordinary shares or

potential ordinary shares between the reporting date and the date of

completion of these financial statements.

Weighted average number of ordinary shares for basic earnings per

share

The National Information Technology Agency (NITDA) 2007,

stipulates that specified companies contribute 1% their profit before

tax to the National Information Technology Development Agency. In

line with the Act, the Bank has provided for Information Technology

levy at the specified rate.

In respect of the 2017 financial year, the Board of Directors recommend a dividend of 1 kobo per ordinary share

of 50 kobo each amounting to N50 million for approval at the Annual General Meeting. If approved, dividend will

be paid to Shareholders whose names appear on the Register of Members. The proposed dividend is subject to

Withholding Tax at the appropriate tax rate, which will be deducted before payment.

32




2017 2016

N N

Cash and bank balances include:

Cash on hand 20,647,028 10,139,473

Cash reserves with the Central Bank of Nigeria (CRR) 16,588,092 4,298,429

37,235,120 14,437,902

17. Due from banks

Placements with banks 1,654,706,560 1,266,246,721

Balances with banks within Nigeria 341,692,030 415,382,967

1,996,398,590 1,681,629,688

18. Loans and advancesa) By product type

Mortgage loans 789,018,062 498,961,106

Other loans 220,907,737 255,652,026

Gross loans 1,009,925,799 754,613,132

Impairment (148,874,271) (205,799,631)

861,051,528 548,813,501

b) Analysis of Mortgage loans

Mortgage loans - NHF 142,578,499 40,115,126

Mortgage loans - Residential 569,487,385 385,030,797

Mortgage loans - Commercial 11,248,188 42,524,151

Mortgage Loan - Estate Development 30,000,000 -

Interest receivable 35,703,990 31,291,032

789,018,062 498,961,106

c) Analysis of other loans

Overdrafts 5,866,136 16,260,946

Term loans 104,179,635 181,710,364

Staff loans 108,976,866 56,238,621

Interest receivable 1,885,100 1,442,095

220,907,737 255,652,026

Deposits with Central Bank of Nigeria(CBN) and Federal Mortgage

Bank of Nigeria (FMBN) are restricted balances and are not available

for use in the Bank's day to day operations.

Included in placements with Banks are Bank Guarantees executed

and domiciled with Nigerian Banks in respect of the On lending

facilities given to the Bank by Federal Mortgage Bank of Nigeria. Such

Bank Guarantees are fully cash backed. The value of such Bank

Guarantees for year ended 2017 is N12,690,167

33




2017 2016

N N

d) Individual impairment 19,690,973 112,192,578

Collective impairment 129,183,298 93,607,053

148,874,271 205,799,631

e) Impairment allowance for loans and advances to customers

Individual Impairment Allowance

At 1 January 112,192,578 257,554,465

Impairment charge for the year - -

Written off (92,501,605) (145,361,887)

Balance at 31 December 19,690,973 112,192,578

Collective impairment allowance

At 1 January 93,607,053 96,136,525

Impairment charge for the year 35,576,245 -

Written off - (2,529,472)


f) Analysis by past due

Individually impaired 4,700,810 1,024,649

Past due but not impaired 23,931,062 61,090,316

Neither impaired nor past due 832,419,657 692,498,166

861,051,529 754,613,131

g) Age analysis of past due

Under 1 month 23,180,225 90,148

1-3 months 506,773 2,390,177

3-6 months 1,178,088 12,050,948

6-12 months - 46,559,044

Over 1 year 3,766,786 1,024,649

28,631,872 62,114,966

h) Analysis by Internal Rating

AA 832,419,657 693,522,815

A 23,931,062 90,148

CC 506,773 2,390,177

C 1,178,088 12,050,948

D 3,766,786 46,559,044

861,802,366 754,613,132

i) Analysis by security

Secured against real estate 816,211,991 378,089,075

Otherwise secured 91,154,514 205,922,503

Unsecured 102,559,295 170,611,698

1,009,925,800 754,623,276

A reconciliation of the allowance for impairment losses for loans and

advances, by class, is as follows:

34




2017 2016

N N

j) Analysis by maturity

Under 1 month 90,024,837 53,121,613

1-3 months 7,658,266 65,376,785

3-6 months 1,450,142 9,968,016

6-12 months 35,987,915 4,261,131

Over 12 months 874,804,639 621,895,731

1,009,925,799 754,623,276

k) Analysis by IFRS buckets

Residential 626,452,261 385,030,797

Micro 51,379,956 170,141,452

Social 251,555,365 88,797,967

Commercial 50,538,218 110,653,060

Estate Development 30,000,000 -

1,009,925,800 754,623,276

l) Impairment analysis by IFRS buckets

Residential 121,823,910 71,718,880

Micro 14,770,301 102,377,145

Social 357,310 3,176,064

Commercial 11,922,750 28,527,542

148,874,271 205,799,631

m) Concentration of credit risk

Credit Risk concentration is measured in line with the provisions of the revised guidelines for Primary

Mortgage Banks in Nigeria as follows:

i Residential Mortgages - Not less than 75% of mortgage assets

iii Real Estate Construction finance - Not more than 25% of total assets

iii Single obligor - Individual - Not more than 5% of shareholders funds unimpaired by losses

iv Single obligor - Corporate - Not more than 20% of shareholders funds unimpaired by losses

2017 2016

% %

Residential Mortgages (75% floor) 90.25 85.21

Real Estate Construction finance (25% cap) 0.01 -

Single obligor - Individual (5% cap) 2.51 2.94

Single obligor - Corporate (20% cap) 1.15 0.58

2017 2016

N N

35




2017 2016

N N

19. Financial Investments- Available for sale

Quoted Investment

Quoted equities at beginning 2,604,902 98,430,327

Addition/(Disposal) - -

Less: Allowance for impairment brought forward - (72,274,491)

Reclassification - (19,997,100)

Fair value gain/(loss) transferred to available for sale reserve 1,618,221 (3,553,834)

4,223,123 2,604,902

Unquoted investments

Unquoted equities at beginning 100,000,000 -

Additions/(Disposal) - 100,000,000

100,000,000 100,000,000

Fair value loss transferred to available for sale reserve - -

100,000,000 100,000,000

Total Financial Investment 104,223,123 102,604,902

2017 2016

N N

20. Other assets

Prepayments 105,003,343 30,243,345

stationery stocks 2,041,936 1,638,930

Other stocks 4,349,571 5,652,440

Account receivables 434,681,450 74,106,496

Debit balances in liabilities 669,450 -

546,745,750 111,641,211

Less: Allowance for impairment on other assets (Note 20.1) - (1,267,598)

546,745,750 110,373,613

Analysis by maturity

Under 1 month 669,450 -

1-3 months - -

3-6 months 2,041,936 1,638,930

6-12 months 544,034,364 110,002,281

Over 12 months - -

546,745,750 111,641,211

20.1 Allowance for impairments - Other assets

At 1 January 1,267,958 -

Additions 15,278,132 98,978,815

Write off (16,546,090) (97,710,857)

- 1,267,958

The Balance on unquoted equities represents the Bank's investment in the Nigeria Mortgage Refinancing

Company (NMRC) of which the Bank is a member. The NMRC was set up as a Public Private Partnership(PPP)

arrangement between the Federal Government, The Federal Ministry of Finance, Central Bank, local investors

and the World Bank. The World Bank has created a concesssional longterm credit of USD300 Million for NMRC

for 40 years through liquidity facility. In addition N6Billion will be provided by the private sector and the Federal

Ministry of Finance.

NMRC acts as a liquidity vehicle at injecting funds into the Nigerian Mortgage Sector. The objectives of the

NMRC shall be to support Mortgage Originators such as Primary Mortgage Banks (PMBs) and Deposit Money

Banks (DMBs) to increase Mortgage Lending by refinancing their mortgage loan portfolios and capital market

investors who typically are looking for long dated high equity securities.

36




21. Property, plant and equipment

Land

Work in

progress Buildings

Computer

Equipment

Plants &

Office

Equipments

Furniture &

FittingsMotor

Vehicles Total

N N N N N N N N

Cost

As at 1/1/2017 37,432,000 10,569,777 71,143,725 21,309,886 89,495,693 - 49,200,500 279,151,581

Reclassification - (10,569,777) - - (13,681,245) 24,251,022 - -

Addition - - 10,539,726 1,067,000 20,739,347 7,765,500 4,036,000 44,147,573

Disposals - - (131,000) - - (15,100,000) (15,231,000)

As at 31/12/2017 37,432,000 - 81,552,451 22,376,886 96,553,795 32,016,522 38,136,500 308,068,155

Depreciation

As at 1/1/2017 - - 7,425,498 15,511,252 18,717,157 - 10,933,624 52,587,531

Reclassification (3,525,448) 3,525,448 -

Charge for the year - - 1,527,071 1,753,918 15,528,441 5,264,253 9,029,625 33,103,308

Disposals - - - - - - (10,269,629) (10,269,629)

As at 31/12/2017 - - 8,952,569 17,265,170 30,720,150 8,789,701 9,693,620 75,421,210

Carrying value at:

31/12/2017 37,432,000 - 72,599,882 5,111,716 65,833,645 23,226,821 28,442,880 232,646,945

31/12/2016 37,432,000 10,569,777 63,718,227 5,798,634 70,778,536 - 38,266,876 226,564,050

All assets are carried at historical cost. Valuation of the assets are yet to be carried out based on open market approach.

Reclassification on plant & office equipments represents amount reclassified from work in progress and amount reclassified to Furniture and fittings

37




2017 2016

N N

22. Intangible assets

Purchased Software

Cost

Balance at 1 January 74,048,258 39,432,800

Additions (Note 22a) 6,063,631 34,615,458


Amortization

Balance at 1 January 38,262,484 22,077,877

Charge for the year 11,374,165 16,184,607


Carrying amounts 30,475,240 35,785,774

22a

23. Non-current assets held for sale

At 1 January 584,947,509 201,376,126

Additions 183,495,664 290,381,558

Reclassifications - 122,561,556

Disposals (419,046,768) (29,371,731)


24. Due to customers

2017 2016

N N

a) Analysis by type

Demand accounts 887,133,311 335,057,001

Savings accounts 62,546,517 50,147,446

Time deposits 280,115,000 3,710,274

1,229,794,828 388,914,722

Addition to intangible assets of N6.06 million represent amount

incurred on the purchase of ATM Monitoring Software Solution and

Interswitch Integration Software

The balance on non-current asset held for sale represent the stock of houses previously held by the Bank as

investment properties while additions represents necessary improvement on the properties to make it sellable to

willing buyers as well as assets reposessed from customers as a result of consistent default in repayment. In

line with CBN regulation on permissable business of PMBs, they were derecognised as investment properties

and classified as held for sale in line with IFRS 5. They were expected to have been sold before the year end,

but due to market conditions, some of them are still unsold at the financial year end. However, the Bank is still

committed to disposing them off. They are held at cost. No impairment have been recognised on the properties

since the market value is much higher than the cost.

38




b) Analysis by maturity

Under 1 month 949,679,828 385,204,448

1-3 months 280,115,000 -

3-6 months - 3,710,274

6-12 months - -

Over 12 months - -

1,229,794,828 388,914,722

25. Debt issued and other borrowed funds

2017 2016

N N

FMBN on lending account

Balance at 1 January 8,122,069 10,236,441 Additions 110,665,000 -

Less: Payments (920,417) (2,114,372)


26. Current tax liabilitiesBalance at 1 January 20,100,362 15,898,019

Amounts recorded in the income statements 14,074,029 7,992,524

Technology levy expenses 1,875,366 796,662

Payments made on-account during the year (9,085,193) (4,586,843)

Underprovision/(Overprovision) 9,383,754 -


Profit before income tax 187,536,516 78,869,495

26.1 Tax thereon at 30% (2016: 30%) 56,260,955 23,899,847

Non-deductible expenses 1,140,299 10,215,853

Non-taxable Income (53,145,171) (14,134,390)

Accelerated capital allowance - (13,320,873)

Effect of education tax levy 385,103 1,332,087

4,641,186 7,992,524

% %

26.2 Tax rate at 30% (2016: 30%) 30 30

Non-deductible expenses 0.02 0.43

Non-taxable Income (0.94) (0.59)

Accelerated capital allowance - (0.56)

Effect of education tax levy 0.01 0.06 Effective Tax Rate 29 29

The balance on the FMBN on lending account represents balance

owed to the Federal Mortgage Bank of Nigeria for amounts

disbursed to the Bank for on lending for duly prequalified and

approved National Housing Fund beneficiaries.

All loans from the Federal Mortgage Bank are secured by Bank

Guarantees with the exception of loans with Legal Mortgages.

39




26.3 Deferred taxation

27. Other liabilities

2017 2016

N NOther liabilities inlcude:

Accrued expenses 1,050,000 46,833,941

Sundry & other payables 132,746,736 199,320,935

Unearned incomes 30,587,802 203,452,733

164,384,538 449,607,609

27.1

28. Employee benefitsDefined contribution plan

2017 2016

N N

Retirement benefit plan

Opening defined contribution obligation 5,172,675 -

Contribution for the period 4,528,566 5,172,675

Payment to fund administrators (8,243,087) -

1,458,154 5,172,675

29. Share capital

Ordinary shares

a) Authorised11,000,000,000 ordinary shares of 50 kobo each 5,500,000,000 2,500,000,000

b) Issued and fully paid:5,000,000,000 ordinary shares of 50k each 2,500,000,000 2,500,000,000

Unearned income represent unrealised interest on Nigerian

Government treasury bills as well as interest on past due loan

facilities placed in suspense.

The Company has adopted the International Accounting Standard IAS 12 deferred taxation. The Computation

of the deferred taxation resulted in deferred tax asset of N2,120,192 (2016: N34,857,237) which is not

recognised in these financial statements, as it is not probable that taxable profit will be available in the

foreseable future against which the timing differences can be utilised.

A defined contribution plan is a pension plan under which the bank pays fixed contributions; There is no legal or

constructive obligation to pay further benefits. This is in compliance with the Pension Reform Act of 2004. Both

employees and employer contribute to the plan based on specified rates as stated in the Act. The employees

contribute 8% of basic, housing and transport allowances, while the Bank contributes 10% of same making a

total contribution of 18%, into employees RSA, maintained with Pension Fund Administrators.

The total expense charged to the income statement of N3.07 million represents contributions paid by the bank

to these plans.

40




29.1 Statutory reserve

2017 2016

N N

Movement in statutory reserve

At 1 January 28,558,281 14,382,887

Transfer from retained earnings 34,860,346 14,175,394

At 31 December 63,418,627 28,558,281

29.2 Retained earnings

Movement in retained earnings

At 1 January (91,764,944) (148,466,521)

Profit for the year 173,462,487 70,876,971

Transfer to statutory (34,860,346) (14,175,394)

At 31 December, 2017 46,837,197 (91,764,944)

29.3 Available for sale reserve

2017 2016

Movement in available for sale reserve N N

At 1 January (3,553,834) -

Net gains/(loss) on available for sales financial

assets 1,618,221 (3,553,834)

At 31 December (1,935,613) (3,553,834)

The revised guidelines for Primary Mortgage Banks in Nigeria

require mortgage banks to make an annual appropriation to a

statutory reserve. As stipulated by section 5.4 of the of the revised

guidelines, an appropriation of 20% of profit after tax is made if the

statutory reserve is less than the paid up share capital and 10% of

profit after tax if the statutory reserve is equal to or in excess of the

paid up capital.

Available For Sale (AFS) assets are measured at fair value in the

balance sheet. Fair value changes on AFS assets are recognised

through other comprehensive income.

41



FOR THE PERIOD ENDED 31 DECEMBER 2017

30. Fair value of financial instruments

Financial instruments recorded at fair value

Financial investments – available for sale

Determination of fair value and fair value hierarchy

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

The Bank has no transactions fitting into these categories.

Carrying Carrying

amount Fair value amount Fair value

N N N N

Financial assets

Cash and balances with Central Bank 37,235,120 37,235,120 14,437,902 14,437,902

Due from banks 1,996,398,590 1,996,398,590 1,681,629,688 1,681,629,688

Loans and advances to customers 861,051,528 859,280,927 548,813,501 345,360,768

2,894,685,238 2,892,914,637 2,244,881,091 2,041,428,358

Financial investments

- Available for sale 104,223,123 104,223,123 102,604,902 102,604,902

2,998,908,361 2,997,137,760 2,347,485,993 2,144,033,260

Financial liabilities

Due to customers 1,229,794,828 1,229,794,828 388,914,722 388,914,722

Debt issued and other borrowed funds 117,866,652 117,866,652 8,122,069 8,122,069

1,347,661,480 1,347,661,480 397,036,791 397,036,791

The following is a description of how fair values are determined for financial instruments that are recorded at fair

value using valuation techniques. These incorporate the bank’s estimate of assumptions that a market participant

would make when valuing the instruments.

Set out below is a comparison, by class, of the carrying amounts and fair values of the bank’s financial instruments

that are not carried at fair value in the financial statements. This table does not include the fair values of non-

financial assets and non-financial liabilities.

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on

observable market data.

The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by

valuation technique:

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are

observable, either directly or indirectly.

Available for sale financial assets valued using valuation techniques or pricing models primarily consist of unquoted

equities.

These assets are valued using models that use both observable and un-observable data. The un-observable inputs

to the models include assumptions regarding the future financial performance of the investee, its risk profile, and

economic assumptions regarding the industry and geographical jurisdiction in which the investee operates.

2017 2016

41



FOR THE PERIOD ENDED 31 DECEMBER 2017

Fair value of financial assets and liabilities not carried at fair value

i Assets for which fair value approximates carrying value

ii Fixed rate financial instruments

iii Fair value of financial assets attributable to changes in credit risk

31. Contingent liabilities, commitments and lease arrangements

a) Legal claims

b) Capital commitments

In respect of any net gain on Available for Sale Financial Assets (Debt Securities), recognised in equity, the fair

value changes are attributable to changes in market interest rate and not the credit risk of the issuer.

Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The bank

has formal controls and policies for managing legal claims. Once professional advice has been obtained and the

amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the

claims may have on its financial standing.

The Bank in the ordinary course of business is presently involved in 9 litigation suits. All 9 cases were instituted by

the Bank against defaulting customers, which is not likely to give rise to any material contingent liability, or have any

material effect on the Bank. The Directors are not aware of any other pending or threatened claims and litigations.

As at 31 December 2017, the Bank has no capital commitments at the end of the year (2016:N0.00) in respect of

authorized and contracted capital projects.

The following describes the methodologies and assumptions used to determine fair values for those financial

instruments which are not already recorded at fair value in the financial statements:

For financial assets and financial liabilities that have a short term maturity (0-6months) it is assumed that the

carrying amounts approximate their fair value. This assumption is also applied to demand deposits, and savings

accounts without a specific maturity.

The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing

market interest rates when they were first recognised with current market rates for similar financial instruments.

42




32. Lease arrangements

Operating lease commitments – Bank as lessee

33. Related party disclosures

2017 2016

N N

a) Compensation of key management personnel of the Bank

Termination benefits - 18,380,362

- 18,380,362

b)

N N

Fees and sitting allowances 11,555,835 9,251,182

Other director expenses 8,230,907 1,677,653

19,786,742 10,928,835

c)

Loans and advances 73,897,066 13,500,000 Others 20,000,000 20,000,000

The Bank did not enter into commercial leases for premises and equipment during the financial year (2016:

NIL).

Parties are considered to be related if one party has the ability to control the other party or exercise influence

over the other party in making financial and operational decisions, or one other party controls both. The

definition include directors and key management personnel among others. Key management personnel is

defined to include executive and non executive directors of the Bank The bank enters into transactions,

arrangements and agreements involving directors, and their related concerns in the ordinary course of

business at commercial interest and commission rates.

The directors remuneration below relates to payment to non-executive

directors and charged as expense in the year. The non-executive directors

do not receive pension entitlements from the Bank.

The following table provides the total amount of transactions, which have

been entered into with key management personnel and their related

parties for the relevant financial years.

43




d) Insider related credits outstanding as at 31 December 2017

Further disclosure of related party transactions is shown in the table below in compliance with Central Bank of Nigeria circular BSD/1/2004.

31 December, 2017

Name of Borrower

Account

Number

Relationship to

reporting Institution Date granted Expiry Date

Authorised

Credit Nature of Credit

Outstanding

Balance Status

Interest

Rate Security Type / ValueN N

1 Ayodele Olowookere 0000196977 Managing Director 10/19/2017 19/10/2024 30,000,000 Housing Loan 28,995,304 Performing 4.5% C of O over a property

2 Afolabi Olusola Levi 0000199662 Chief Financial Officer 11/24/2017 11/24/2027 15,175,000 Housing Loan 7,274,815 Performing 4.5% C of O over the property

3 Prince Adewumi Adesola 0000198036 Non-Executive Director 10/31/2017 10/31/2021 9,140,000 Housing Loan 8,836,947 Performing 12% C of O over the property

4 Kolawole Akintayo 0000201604 Non-Executive Director 12/29/2017 12/29/2020 8,140,000 Housing Loan 8,140,000 Performing 12% C of O Over the Property

5 Oyebamiji Bola 0000197857 Non-Executive Director 10/30/2017 10/30/2037 20,650,000 Housing Loan 20,650,000 Performing 18% C of O Over a Property

83,105,000 73,897,066

Others

1 Morgan Capital N/A Major Shareholder 20/12/2016 N/A 20,000,000 Consultancy 20,000,000 N/A N/A N/A

At 31 December, 2017 103,105,000 93,897,066

At 31 December, 2016 33,500,000 9,592,695

34. Events after the reporting date

35. Capital management

i) Objectives

There were no significant events after the reporting date which could have had a material effect on the financial position of the Bank as at 31 December 2017 and profit attributable to shareholders on that

date which have not been adequately adjusted or disclosed.

The primary objectives of the bank’s capital management policy are to ensure that the bank complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital

ratios in order to support its business and to maximise shareholder value.

The Bank manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital

structure, the bank may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and

processes from the previous years. However, they are under constant review by the Board.

44




ii) Regulatory capital

The Bank's regulatory capital is analyzed into two tiers:

iii) Capital Adequacy Ratio (CAR)

2017 2016

N N

Regulatory capital

Tier 1 capital

Share capital 2,500,000,000 2,500,000,000

Statutory reserves 63,418,627 28,558,281

Retained earnings 46,837,197 (91,764,944)

Less: Intangible assets (30,475,240) (35,785,774)

Total qualifying Tier 1 capital 2,579,780,584 2,401,007,563

Tier 2 capital

Preference share - -

Long term loan 117,866,652 8,122,069

Available for sale reserve (1,935,613) -

Total qualifying Tier 2 capital 115,931,039 8,122,069

Total qualifying capital 2,695,711,623 2,409,129,632

Risk-weighted assets:On balance sheet 2,929,793,777 1,095,918,296

Ratio 92.01 219.83

Highest 99.04 219.83

Lowest 86.05 101.45

Average 92.54 160.64

The Bank maintains an actively managed capital base to cover risks inherent in the business and meet the

capital adequacy requirements of the local banking supervisor, Central Bank of Nigeria. The adequacy of the

Bank's capital is monitored using among other measures, the rules and ratios established by the Basel

Committee on Banking Supervision (BIS rules/ratios) and adopted by the Central Bank of Nigeria in

supervising Banks. The Central Bank of Nigeria requires the Bank to maintain a prescribed ratio of total

capital to total risk weighted assets.

Tier 1 Capital: This includes ordinary share capital, share premium, retained earnings, deductions for

intangibles and other regulatory adjustment relating to items that are included in equity but are treated

differently for capital purposes.

Tier 2 Capital: Which includes qualifying surbordinated liabilities, preference shares, revaluation reserves

and the element of the fair value reserve relating to unrealized gains on equity instruments classified as

available for sale.

Regulatory limits are applied to the capital base. The qualifying tier 2 cannot exceed tier 1 capital. There are

also restrictions on the amount of collective impairment that may be included as part of tier 2 capital.

This is the quotient of the capital base of the Bank and its risk weighted asset base. In compliance with the

Central Bank of Nigeria regulations, a minimum ratio of 10% is to be maintained.

During the year, the highest and lowest peaks of the Bank's

computed CAR are shown below:

45




36. Maturity profile of assets and liabilities

The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled.

a) As at 31 December 2017

Up to 1 1 to 3 3 to 6 6 to 12 Over 12 Total

Month Months Months Months Months

N N N N N N

Assets

Cash and balances with central banks 20,647,028 - - - 16,588,092 37,235,120

Due from banks 358,533,794 1,104,522,711 333,342,086 200,000,000 - 1,996,398,590

Loans and advances to customers 90,024,837 7,658,266 1,450,142 35,987,915 725,930,368 861,051,528

Financial investments - available-for-sale - - - - 104,223,123 104,223,123

Other assets 669,450 - 2,041,936 544,034,364 - 546,745,750

Property and equipment - - - 232,646,945 232,646,945

Intangible assets - - - - 30,475,240 30,475,240

Non current assets held for sale - - - 349,396,405 - 349,396,405

Total assets 469,875,109 1,112,180,977 336,834,164 1,129,418,684 1,109,863,768 4,158,172,701

Liabilities

Due to customers 949,679,828 280,115,000 - - - 1,229,794,828

Debt issued and other borrowed funds - - - - 117,866,652 117,866,652.00

Current tax liabilities - - - 36,348,318 - 36,348,318.00

Other liabilities - - - 164,384,538 - 164,384,538.08

Employee benefit liabilities - - 1,458,154 - - 1,458,154.00

Equity - - - - 2,608,320,211 2,608,320,210.92

Total liabilities 949,679,828 280,115,000 1,458,154 200,732,856 2,726,186,863 4,158,172,701

Gap (479,804,719) 832,065,977 335,376,010 928,685,828 (1,616,323,095) 0

46




Up to 1 1 to 3 3 to 6 6 to 12 Over 12 Total

Month Months Months Months Months

N N N N N N

37b Maturity profile of assets and liabilities

As at 31 December 2016

Cash and balances with central banks 10,139,473 - - - 4,298,429 14,437,902

Due from banks 416,257,104 715,382,967 550,000,000 - - 1,681,640,071


Financial investments – available-for-sale - - - - 102,604,902 102,604,902

Other assets - - 1,638,930 154,242,421 929,316 156,810,667

Property and equipment - - - 226,564,049 226,564,049

Intangible assets - - - - 35,785,773 35,785,773

Non current assets held for sale - - - 584,947,510 - 584,947,510

Total assets 479,518,189 780,759,753 561,606,946 743,451,062 786,268,424 3,351,604,374

Liabilities

Due to customers 385,204,448 - 3,710,274 - - 388,914,722

Debt issued and other borrowed funds - - - - 8,122,069 8,122,069

Current tax liabilities - - - 20,100,363 - 20,100,363

Other liabilities - - - 449,607,605 - 449,607,605

Employee benefit liabilities - - 5,172,675 - - 5,172,675

Equity - - - - 2,433,239,503 2,433,239,503

Total liabilities 385,204,448 - 8,882,949 469,707,968 2,441,361,572 3,305,156,938

Gap 94,313,741 780,759,753 552,723,997 273,743,094 (1,655,093,148) 46,447,436

37. Currency risk

All transactions of the company have been carried out and consumated in the local currency which is Naira. Hence the Bank is not exposed to any currency

risk.

47




38. Interest rate risk

The table below shows an analysis of interest bearing assets and liabilities analysed according to when they are expected to be settled.

Up to 1 1 to 3 3 to 6 6 to 12 1 to 3

Month Months Months Months Years Total

N N N N N N

a) As at 31 December 2017

Assets

Due from Banks 358,533,794 1,104,522,711 333,342,086 200,000,000 - 1,996,398,590


448,558,631 1,112,180,977 334,792,228 235,987,915 725,930,368 2,857,450,118

Liabilities

Due to customers 949,679,828 280,115,000 - - - 1,229,794,828


949,679,828 280,115,000 - - 117,866,652 1,347,661,480

Gap (501,121,197) 832,065,977 334,792,228 235,987,915 608,063,716 1,509,788,638

48




Up to 1 1 to 3 3 to 6 6 to 12 Over 12

Month Months Months Months Months Total

N N N N N N

b) As at 31 December 2016

Assets

Due from Banks 416,257,104 715,382,967 550,000,000 - - 1,681,640,071


469,378,717 780,759,753 559,968,016 4,261,131 416,085,955 2,230,453,572

Liabilities

Due to customers 385,204,448 - 3,710,274 - - 388,914,722


385,204,448 - 3,710,274 - 8,122,069 397,036,791

Gap 84,174,269 780,759,753 556,257,742 4,261,131 407,963,886 1,833,416,781

49




2017 2016

Number Number

39. Employees

Directors 1 1

Management 6 4

Non-management 54 52

61 57

40. Contraventions

41. Imapct assessment of IFRS 9 adoption

Comparative figures

Certain comparative figures have been reclassified in order to have a more meaningful comparison.

STATEMENT OF FINANCIAL POSITION

IAS 39 IFRS 9

2017 2017

Assets N N

Cash and Bank balances 37,235,120 37,235,120

Due from banks 1,996,398,590 1,996,398,590

Loans and advances to customers 861,051,528 858,947,330

Financial investments 104,223,123 -

Other assets 546,745,750 546,745,750

Property and equipment 232,646,945 232,646,945

Intangible assets 30,475,240 30,475,240

3,808,776,296 3,702,448,975

Non current assets held for sale 349,396,405 349,396,405

Total Assets 4,158,172,701 4,051,845,380

Total equity 2,608,320,211 2,710,439,136

IAS 39 IFRS 9

2017 2017

N N

Gross Earnings 518,378,573 518,378,573

Total operating income 494,082,935 495,701,156

Operating expenses (346,925,689) (346,925,689)

Impairment write back/ (losses) 40,379,270 38,275,072

Profit before taxation 187,536,516 187,050,539

Taxation for the year (14,074,029) (14,074,029)

Profit/(Loss)after taxation 173,462,487 172,976,510

Other Comprehensive Income 1,618,221 -

Total Comprehensive Income 175,080,708 172,976,510

The average number of persons employed by the Bank during the year

was as follows:

The bank paid penalty amounting to N4,770,980 to various regulatators for some regulatory accumulated contravention of

past years, but no other contravention occurred during the year of such regulatory bodies like BOFIA, CBN, NDIC, or any

other body (2016 :N3,113,733.12).

STATEMENT OF PROFIT OR LOSS AND OTHER

COMPREHENSIVE INCOME

50


FINANCIAL STATEMENTS


Other national disclosures


STATEMENT OF VALUE ADDED


2017 2016

N % N %

Gross earnings 518,378,573 304,930,527

Interest expense (24,295,638) (321,425)

494,082,935 304,609,102

Net impairment 56,925,360 147,891,359

Bought-in-materials and services - local (223,358,802) (244,090,190)

327,649,493 100 208,410,271 100

Applied to pay:

Employees as salaries, wages and pensions 95,635,504 29 98,864,353 47

Government taxes 14,074,029 4 7,992,524 4

Retained in business:

- Depreciation and amortisation 44,477,473 14 30,676,423 15

- Profit for the year 173,462,487 53 70,876,971 34

327,649,493 100 208,410,271 100

Value Added is the Wealth created by the efforts of the Bank and its Employees. The statement shows the

allocation of the wealth amongst employees, government, capital providers and that retained in the business for

expansion and future wealth creation.

51


FIVE YEARS FINANCIAL SUMMARY

31 December

2017

31 December

2016

31 December

2015

31 December

2014

31 December

2013

N N N N N

Assets

Cash and balances with Central Bank 37,235,120 14,437,902 4,830,469

Due from banks 1,996,398,590 1,681,629,688 1,837,252,102 1,702,219,474 2,128,193,623

Loans and advances to customers 861,051,528 548,813,501 364,544,540 670,158,307 396,389,541

Financial investments 104,223,123 102,604,902 26,155,836 58,716,023 97,417,363

Other assets 546,745,750 110,373,613 125,664,105 154,239,637 132,065,915

Property and equipment 232,646,945 226,564,050 63,405,299 55,914,521 46,749,884

Intangible assets 30,475,240 35,785,774 17,354,923 14,105,045 7,061,056

Deferred tax assets - - - - -

Non current assets held for sale 349,396,405 584,947,509 201,376,126 201,376,126 267,293,672

Total assets 4,158,172,701 3,305,156,939 2,640,583,400 2,856,729,133 3,075,171,054

Liabilities and equity

Liabilities

Due to customers 1,229,794,828 388,914,722 146,686,754 196,020,392 310,802,368

Debt issued and other borrowed funds 117,866,652 8,122,069 10,236,441 11,563,322 19,352,839

Current tax liabilities 36,348,318 20,100,362 15,898,019 12,363,165 9,772,583

Other liabilities 165,842,692 454,780,284 101,845,819 110,835,088 257,475,873

Total liabilities 1,549,852,490 871,917,437 274,667,033 330,781,967 597,403,663

Equity

Issued share capital 2,500,000,000 2,500,000,000 2,500,000,000 2,500,000,000 2,500,000,000

Share premium - - - - -

Statutory reserve 63,418,627 28,558,281 14,382,887 14,382,887 14,382,887

Retained earnings 46,837,197 (91,764,944) (148,466,520) 11,564,279 -36,615,496

Available for sale reserve (1,935,613) (3,553,834) - - -

Total equity 2,608,320,211 2,433,239,503 2,365,916,367 2,525,947,166 2,477,767,391

Total liabilities and equity 4,158,172,701 3,305,156,939 2,640,583,400 2,856,729,133 3,075,171,054

31 December 31 December 31 December 31 December 31 December

2017 2016 2015 2014 2013

N N N N N

Statement of comprehensive income

Gross earnings 518,378,573 304,930,527 214,153,285 255,355,559 84,712,604

Total operating income 494,082,935 304,609,102 214,047,301 254,409,150 83,631,629

Operating expenses (346,925,689) (274,631,624) (121,621,491) (191,676,737) (114,346,398)

Impairment write back / (losses) 40,379,270 48,892,017 (256,053,146) - -

Profit before taxation 187,536,516 78,869,495 (161,521,849) 62,732,413 (30,714,769)

Taxation for the year (14,074,029) (7,992,524) (6,514,265) (14,552,638) (6,806,116)

Profit/(Loss)after taxation 173,462,487 70,876,971 (168,036,114) 48,179,775 (37,520,885)

Other comprehensive income 1,618,221 (3,553,834) - - -

175,080,708 67,323,137 (168,036,114) 48,179,775 (37,520,885)

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