NPF MICROFINANCE BANK PLC UNAUDITED MANAGEMENT ACCOUNT AS AT 30 SEPTEMBER 2016

Transcription

1 NPF MICROFINANCE BANK PLC UNAUDITED MANAGEMENT ACCOUNT AS AT 30 SEPTEMBER 2016

2 Annual Report - 30 September 2016 Contents Page Corporate information 1 Directors' Report 2 Corporate Governance Report 7 Statement of Directors' Responsibilities 14 Report of the Audit Committee 15 Independent Auditor's Report 16 Statement of Financial Position 18 Statement of Comprehensive Income 19 Statement of Changes in Equity 20 Statement of Cash Flows 21 Notes to the Financial Statements 22 Other National Disclosures: Value Added Statement 62 Financial Summary 63

3 Annual Report - 30 September 2016 Corporate Information Directors: Mr. Azubuko Joel Udah (Esq.) Chairman Mr. Akinwunmi Lawal Managing Director Mr. Jude C. Ohanehi Executive Director Mr. E.C. Wabali Non-Executive Director Prince Jude Ifeanyi Eke Non-Executive Director Mr. Audu Abubakar Non-Executive Director Mr. Mohammed D. Saeed Non-Executive Director Mrs. Dorothy Gimba Non-Executive Director Mr. Joseph Daramola Non-Executive Director Company Secretary: Registered Office: Auditors: Bankers: Registrars: Mrs. Osaro J. Idemudia Aliyu Atta House 1, Ikoyi Road, Obalende Kagos Aliyu Atta House 1,Ikoyi Road, Obalende Lagos KPMG Professional Services KPMG Tower, Bishop Aboyade Cole Street, Victoria Island, Lagos Sterling Bank PLC First Bank of Nigeria PLC United Bank for Africa PLC CardinalStone Registrars Limited 358, Herbert Macaulay Way Yaba Lagos. 1

4 DIRECTORS' REPORT The directors are pleased to submit their report together with the financial statements for theperiod ended 30 September ) LEGAL FORM The Bank was incorporated in Nigeria as a Private Limited Liability Company on 19 May 1993 under the provision of the Companies and Allied Matters Act CAP C20 LFN 2004 with RC No It obtained a provisional license as a Community Bank from the Central Bank of Nigeria on 12 July 1993 with License No. FC and commenced operations on 20 August It obtained its final license from the Central Bank of Nigeria on 24 January It was registered as a Public Limited Company on 13 July The Bank was given approvalin-principle as a Microfinance Bank on 10 May 2007 and obtained the final license on 4 December The shares of the Bank became listed on the Nigerian Stock Exchange on 1 December ) PRINCIPAL ACTIVITIES The principal activity of the Bank is the provision of banking and other permissible financial services to poor and low income households and micro enterprises with emphasis on members of the Nigerian Police Community. Such services include retail banking, granting of loans, advances and other allied services. The Bank currently has 18 branches nationwide from which it operates. 3) OPERATING RESULTS The profit before tax recorded by the Bank for the period ended 30 June 2016 was 454 million (31 December 2015: 689 million). Highlights of the Bank s operating results for the period ended 30 June 2016 are as follows: September December In thousands of naira Profit before tax 687, ,899 Tax expense - (174,301) Profit after tax 687, ,598 Total comprehensive income 687, ,447 Basic and diluted earnings per share (kobo) ) DIVIDENDS The Board of Directors, subsequent to the reporting date did not propose/ approve of any dividend. 5) DIRECTORS The following Directors served during the year under review:- NAME DESIGNATION Mr. Azubuko Joel Udah (Esq.)* Chairman (Appointed on 23 July 2015) Mr. E.C. Wabali Non-Executive Director Prince Jude Ifeanyi Eke Non-Executive Director Mr. Audu Abubakar** Non-Executive Director (Appointed on 10 March 2015) Mr. Mohammed D. Saeed Non - Executive Director (Independent Director) Mrs. Dorothy Gimba Non - Executive Director (Appointed on 23 July 2015) Mr. Joseph Daramola Non - Executive Director (Appointed on 23 July 2015) Mr. Akinwunmi Lawal Managing Director Mr. Jude C. Ohanehi Executive Director, Operations 2

5 6) DIRECTORS' INTEREST IN SHARES The interest of Directors in the issued share capital of the Bank as recorded in the Register of members were as follows:- September 2016 December 2015 NAME OF DIRECTOR DIRECT (units) INDIRECT (units) DIRECT (units) INDIRECT (units) Mr. Azubuko Joel Udah (Esq.) Mr. E.C. Wabali 2,080,000-2,080,000 - Prince Jude Ifeanyi Eke 2,252,000-2,252,000 - Mr. Audu Abubakar Mr. Mohammed D. Saeed 1,580,000-1,580,000 - Mr. Usman I. Baba (Resigned) 1,727,000 1,480,718,606 1,727,000 1,480,718,606 Mr. M.G. Mukaddas (Resigned) 2,000,000-2,000,000 - Mrs. Dorothy Gimba Mr. Joseph Daramola Mr. Akinwunmi Lawal 5,025,861-5,025,861 - Mr. Jude C. Ohanehi 3,870,456-3,870,456 - *Mrs. Dorothy Gimba and Mr. Joseph Daramola currently represent the interest of the Nigerian Police Cooperative Society Limited, which owns 1,480,718,606 ordinary shares of 50 kobo each in the issued share capital of the Bank. Save as disclosed above, none of the directors has notified the Bank of any disclosable interest in the Bank s share capital as at 30 June ) DIRECTOR S INTEREST IN CONTRACTS None of the Directors has notified the Bank for the purpose of section 277 of the Companies and Allied Matters Act of Nigeria (CAMA) of any direct or indirect interest in contracts in which the Bank was involved during the year under consideration. 8) RETIREMENT OF DIRECTORS In accordance with S.259 (1) & (2) of the Companies and Allied Matters Act, Mr. Emmanuel C. Wabali, Prince Ifeanyi Eke and Mr. Mohammed D. Saeed retire by rotation and being eligible, offer themselves for re-election. The profile of each Director to be re-elected is contained in the Annual Report. 10) SUBSTANTIAL INTEREST IN SHARES According to the register of Members as at 30 September 2016, no shareholder held more than 5% of the issued share capital of the Bank except the following: Shareholder 01-Sep-16 Shareholding No. of Shares (%) December 2015 Shareholding No. of Shares (%) Nigerian Police Co-operative Society Limited 1,480,718, ,480,718, NPF Welfare Insurance Scheme 234,305, ,305,

6 11) ANALYSIS OF SHAREHOLDING The shareholding structure of the Bank as at 30 September,2016 is as stated below Range Holders % Units From To , ,417, ,684, , ,801, ,524, ,918, ,280, ,189, ,783,842,039 6, ,286,657,766 4

7 12) SHARE CAPITAL HISTORY The following changes have taken place in the Bank s authorized and issued capital since incorporation. AUTHORISED ISSUED & FULLY PAID NOMINAL REMARKS DATE ISSUED FROM TO FROM TO VALUE '000 '000 '000 '000 '000 ' CASH & KIND ,000-17, CASH ,000 17,996 21, BONUS 1: ,000 80,000 21,571 40, CASH ,000 40,186 58, CASH , ,000-58, CASH ,000-58, CASH ,000 58, ,958 BONUS 1: & CASH , , , , ,000 1,000, , , BONUS 1: ,000,000 2,000, , , CASH ,000, , ,000, ,192 1,143, CASH ,000,000 1,143,328-50K SHARE- SPLIT 1: ,000,000 1,143,328 50K SHARE- SPLIT 1: ,000,000 1,143,328 50K ,000,000 1,143,328-50K ,000, ,000,000 1,143,328-50K ,000,000 1,143,328-50K ,000,000 1,143,328-50k 13) PROPERTY AND EQUIPMENT Information relating to changes in property and equipment is given in Note 19 of the financial statements. 13) DONATIONS The Bank made contributions to charitable and non-political organizations amounting to 4,379,000 (2015: 2,420,000) during the period as listed below: NPF Scholarship Foundation 1,000,000 Alhaji Attah's son's wedding 300,000 Police games ,500,000 Pacelli school for the blind 175,000 St Monica's Orphanage 150,000 Philip Gloria Ngozi 200,000 Police College 103,000 Police cooperative 455,000 Police Children school 270,000 DEPSS 20,000 NPF Education Unit 10,000 Book Launch for Chairman 120,000 Photo Coverage fro Microfinance Banks 76,000 4,379,000 5

8 6 NPF Microfinance Bank PLC

9 CORPORATE GOVERNANCE REPORT INTRODUCTION At NPF Microfinance Bank Plc ( the Bank ), we remain committed to institutionalising Corporate Governance principles. The Bank continues to adhere to the implementation of Corporate Governance rules of the Central Bank of Nigeria (CBN), the Nigerian Stock Exchange and the Securities and Exchange Commission. As a Bank publicly quoted on the Nigerian Stock Exchange, we remain dedicated to our duties and pledge to safeguard and increase investors value through transparent Corporate Governance practices. The Bank complies with the requirement of the Central Bank of Nigeria for the internal review of its compliance status with defined Corporate Governance practices and submits reports on the Bank s compliance status to the Audit Committee quarterly. The Board operates in line with its responsibilities as contained in regulatory codes of Corporate Governance, the Bank s Articles of Association and the Companies and Allied Matters Act. Its oversight of the operations and activities of the Bank are carried out transparently without undue influence. An annual board appraisal is conducted by an independent consultant appointed by the Bank whose report is submitted to the CBN and presented to the Shareholders at the Annual General Meeting of the Bank in compliance with the provision of the CBN Code of Corporate Governance. The Bank has an entrenched culture of openness in which healthy interaction is promoted and employees are encouraged to report improper activities. The Bank continues to serve customers, its communities and create returns for stakeholders. Our belief is that success is achieved through a process supported and sustained with the right values and this is the key to keeping public trust and confidence in our Bank resulting in our continued long term success. GOVERNANCE STRUCTURES THE BOARD The Board of Directors is responsible for the governance of the Bank and is accountable to shareholders. Having the right people with an appropriate balance of skills, knowledge and experience is an important consideration in having an effective Board and the Bank continues to ensure this in order to drive it in the desired direction. The Board plays a central role in conjunction with Management in ensuring that the Bank is financially strong. This synergy between the Board and Management fosters interactive dialogue in setting broad policy guidelines in the running of the Bank to enhance optimal performance and ensure that associated risk are well managed. The Board of Directors currently consists of nine (9) members, seven (7) non-executive directors and two (2) executive directors. One of the non-executive directors chairs the Board. The Board has delegated the day to day management of the Bank to the Managing Director/Chief Executive Officer who is assisted by the Management Team. The Management led by the Managing Director executes the powers delegated to them without undue interference and are accountable to the Board for the development and implementation of strategies and policies. 7

10 ROLE OF THE BOARD The traditional role of the Bank s Board is to provide the Bank with leadership within a framework of prudent and effective controls which enables risk to be assessed and managed while deploying the Bank s resources to profitable use. The Bank s Board outlines the Bank s strategic and corporate aims, ensures that the necessary financial and human resources are in place for the Bank to meet its objectives and reviews management performance on a continuous basis. The Bank s Board also sets the Bank s values and standards and ensures that its obligations to its shareholders and others are understood and met. The Board meets quarterly and additional meetings are convened as the need arises. In furtherance of the above roles, the Board met three (3) times in the period under review on 26/1, 8/3, and 21/4. Attendance at the Board meetings during the year were as follows: No. Members Designation No. of Meetings Attendance 1 Mr. Azubuko Joel Udah (Esq.)* Chairman Mr. E.C. Wabali Non-Executive Director Mr. Mohammed D. Saeed Indep.Non - Executive Director Prince Jude Ifeanyi Eke Non-Executive Director Mr. Audu Abubakar Non-Executive Director Mrs. Dorothy Gimba*** Non-Executive Director Mr. Joseph Daramola**** Non-Executive Director Mr. Akinwunmi Lawal Managing Director Mr. Jude C. Ohanehi Executive Director 3 3 BOARD APPRAISAL An effective Board of Directors is a critical factor in ensuring a well governed, well directed and successful Bank. A periodic evaluation of the effectiveness and performance of the Board of Directors and its committees, is consistent with good corporate governance. In furtherance of the best Corporate Governance practice, the Board commissioned DCSL Coporate Services Limited to carry out Board evaluation for the financial period ended 30 June Their report is communicated to the shareholders at the Annual General Meeting. TENURE OF DIRECTORS In pursuance of the Bank s drive to continually imbibe best Corporate Governance practices, the tenure of the Non-Executive Directors is limited to a maximum of three (3) terms of three (3) years each. INDUCTION AND CONTINOUS TRAINING On appointment to the Board, all Directors receive an induction tailored to meet the requirement of their position as Directors. This induction which is arranged by the Company Secretary includes presentation by Senior Management staff to assist Directors in building a detailed understanding of the Bank s operations, it s strategic plan, business environment and key issues faced by the Bank and to introduce directors to their fiduciary duties and responsibilities. Training and Education of Directors on issues pertaining to their oversight function is a continuous process in order to update their knowledge and skills and keep them informed of new developments in the Bank s business and operating environment. These trainings are carried out through external, local and international courses. 8

11 BOARD COMMITTEES In the discharge of its roles and responsibilities, the Board is assisted by four (4) standing committees. These committees have their clearly defined terms of reference setting out their roles, responsibilities, functions and reporting procedures to the Board. The Board committees in operation during the period under review were: - Board Finance and General Purpose Committee - Board Risk Management Committee - Board Audit Committee Board Governance and Remuneration Committee The roles and responsibilities of these committees are discussed below. Finance and General Purpose Committee This Committee has the responsibility for monitoring all financial aspects of the Bank. Its responsibilities also include:- To formulate and shape the strategy of the Bank and make recommendations to the Board Review the budget of the Bank and make recommendations to Board for approvals Monitor performance of the Bank against the budget Consider and approve expenses above the limits of Management and make recommendations to the board for approval above its limits Consider and approve significant IT investments and expenditure to be made by the Bank Review the Assets and Liability Committee report Review the Bank s investment portfolio annually Approve all policies relating to finance for the Bank Oversee the development and maintenance of IT Strategic Plan Review and approve within its approved limits the annual manpower plan for the Bank Approve compensation policy and review compensation for all officers of the Bank (excluding Executive and Non - Executive Directors) The Committee meets at least once in each quarter during the period which were as follows: No. Members Designation No. of Meetings Attendance 1 Mr. E. C. Wabali Chairman Prince Jude Ifeanyi Eke Member Mr. Audu Abubakar Member Mrs. Dorothy Gimba Member Mr. Akinwunmi Lawal Member Mr. Jude C. Ohanehi Member 1 1 9

12 Board Risk Management Committee The responsibilities of this Committee are:- Review and recommend risk management policies including risk appetite and risk strategy to the full Board for approval Review the adequacy and effectiveness of risk management and controls Monitor the Bank s compliance level with applicable laws and regulatory requirements Periodic review of changes in the economic and business environment, including trends and other factors relevant for the Bank s risk profile Review and recommend for approval of the Board risk management procedures and controls for new products and services Approve lending, investment decisions credit products and new processes Oversight of management's process for the identification of significant risks across the Bank and the adequacy of prevention, detection and reporting mechanism Review and approve the framework for the management of credit risk, market risk, liquidity risk, operational risk, reputation risk and other risk types as appropriate Review and oversee the development of loan loss provision policy and annually assess the appropriateness and application of such policy in the light of the credit risk imbedded in the overall loan portfolio Review and monitor the effectiveness and application of credit risk management policies, related standards and procedures, and control environment with respect to credit decisions and review internal audit reports with respect thereto; and Review and approve or decline credit applications submitted by the Management s Credit Committee for loans to new individual borrowers or additional requests for existing borrowers The Board Risk Management Committee meets quarterly and Membership of the Committee and attendance at its meetings during the period were as follows:- No. Members Designation No. of Meetings Attendance 1 Prince Jude Ifeanyi Eke Chairman Mr. E. C. Wabali Member Mr. Akinwunmi Lawal Member Mr. Joseph Daramola * Member Mrs. Dorothy Gimba * Member Mr. Jude C. Ohanehi * Member 1 1 Board Audit Committee The Audit Committee is responsible for maintaining oversight regarding the integrity of the Bank s financial statements, ensuring compliance with legal and other regulatory requirements, assessment of qualification and independence of the external auditor, and assessment of performance of the Bank s internal audit function as well as that of the external auditors. Its responsibilities also includes; Establish an internal audit function and ensure that there are other means of obtaining sufficient assurance of regular review or appraisal of the system of internal control in the Bank Ensure the development of a comprehensive internal control framework for the Bank, obtain assurance and report the operating effectiveness of the Bank s internal control framework to the Board Review and ensure that adequate whistle-blowing procedures are in place and that a summary of issues reported are highlighted to the Board Preserve auditor independence, and set clear hiring policies for employees and /or former employees of independent auditors Consider any related-party transactions that may arise within the Bank or any of its related companies 10

13 Invoke its authority to investigate any matter within its terms reference for which purpose the Bank must make available the resources to the internal auditors with which to carry out this functions including access to external advice when necessary This committee consist of only Non-Executive Directors and is required to meet at least once every quarter. Members of the Committee and attendance at its meetings during the period were are as follows :- No. Members Designation No. of Meetings Attendance 1 Mr. Mohammed D. Saeed Chairman Prince Jude Ifeanyi Eke Member Mr. Audu Abubakar Member Mrs. Dorothy Gimba Member Mr. Joseph Daramola Member 3 3 Board Governance and Remuneration Committee The responsibilities of the Committee are: Make recommendations on the appropriate compensation structure for the Managing Director and other senior executives Make recommendations to the Board on the Bank s policy framework of executive remuneration and its cost Review and report to the Board on the succession planning process for the positions of chairman, Chief Executive Officer/Managing Director, Executive Directors and any other key managerial position Periodically evaluate the skills, knowledge and experience required on the Board Establish the criteria for Board and Board committee membership, review candidates qualifications and any potential conflict of interest, assess the contributions of current Directors in connection with their re-connection and make recommendation to the Board Monitor the development, alignment, satisfaction and productivity of the Bank s employees with a view to competitive excellence Develop and constantly review and make recommendation to the Board on policies and procedures to maintain high standard of management by the Bank Monitor on a continuous basis and make recommendations to the Board concerning the corporate governance of the Bank Perform other oversight functions as may from time to time be expressly requested by the Board The Board Governance and Remuneration Committee meets at least once in each quarter. Statutory Audit Committee In compiance with section 359(6) of the Companies and Allied Matters Act (CAMA) CAP C 20 LFN 2004, an audit committee comprising two (2) representatives of shareholders elected annually at the Annual General Meetings (AGM) and two (2) Non- Executive Directors is in place. 11

14 The responsibilities of the Committee are as contained in the Companies and Allied Matters Act (CAMA) of Nigeria. The Statutory Audit Committee meets at least once in each quarter. However, additional meetings are conveyed as required. Membership of the Committee and attendance at its meetings during the period were as follows: No. Members Designation No. of Meeting Attendance 1 Mr. Lazarus Nnadozie Onwuka Chairman Alhaji Abdulquadri Sanni Member Mr. E.C.Wabali Member Mr. Audu Abubakar Member 2 2 MANAGEMENT COMMITTEES The committees comprise senior management staff of the Bank. These committees provide inputs for the respective Board committees of the Bank and ensure that recommendations of the Board committees are effectively and efficiently implemented. They meet as frequently as necessary to take action and decisions within the confines of their powers. The standing management committees are:- - Assets and Liabilities Committee -Management Credit Committee -Finance and Expenditure Committee -IT Steering and Business Development Committee -Staff Committee WHISTLE-BLOWING PROCESS The Bank is committed to the highest standards of openness, probity and accountability hence the need for an effective and efficient whistle blowing process as a key element of good corporate governance and risk management. Whistle blowing process is a mechanism by which suspected breaches of the Bank s internal policies, processes, procedure and unethical activities by any stakeholder (staff, customers, suppliers and applicants) are reported for necessary actions. It ensures a sound, clean and high degree of integrity and transparency in order to achieve efficiency and effectiveness in our operations. The reputation of the Bank is of utmost importance and every staff of the Bank has a responsibility to protect the Bank from any person or act that might jeopardize its reputation. Staff are encouraged to speak up when faced with information that would help protect the Bank s reputation. An essential attribute of the process is the guarantee of confidentiality and protection of the whistle blower s identity and rights. It should be noted that the ultimate aim of this policy is to ensure efficient service to the customer, good corporate image and business continuity in an atmosphere compliant to best industry practice. The Bank has a Whistle Blowing channel via its website, dedicated telephone hotlines and address in compliance with Section of the Central Bank of Nigeria (CBN) post-consolidation Code of Corporate Governance for Banks in Nigeria. The Bank s Head of Internal Audit is responsible for monitoring and reporting on whistle blowing. SECURITIES TRADING BY INTERESTED PARTIES The Bank has adopted a code of conduct regarding securities transactions by its Directors on terms no less exacting than the required standard set out in the Nigeria Stock Exchange Listing Rules. The Bank s code of Conduct stipulates that it is not only unethical but also illegal for all those to whom the code applies including Directors to use non-public information for personal financial benefits or to tip others who might make investment decisions on the basis of this information. 12

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16 Statement of Directors responsibilities in relation to the financial statements for the year ended 30 September 2016 The Directors accept responsibility for the preparation of the annual financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, 2011, the Banks and Other Financial Institutions Act of Nigeria and relevant Central Bank of Nigeria circulars. The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria, 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. The Directors have made assessment of the Bank s ability to continue as a going concern and have no reason to believe that the Bank will not remain a going concern in the year ahead. SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY: Mr. Akinwunmi Lawal Mr. Azubuko Joel Udah (Esq.) Managing Director/Chief Executive Officer Chairman FRC/2014/CIBN/ FRC/2016/NBA/ October October

17 Monthly Report - 30 SEPTEMBER 2016 STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2016 SEPTEMBER DECEMBER In thousands of naira Note AUDITED ASSETS Cash and cash equivalents 14 3,392,529 4,388,448 Pledged assets , ,038 Loans and advances to customers 16 8,867,045 7,881,519 Investment securities 17 37,024 38,154 Prepayments and other assets , ,969 Property and equipment , ,070 Deferred tax assets 21(c) - 35,411 TOTAL ASSETS 14,259,146 13,667,609 - LIABILITIES Deposits from customers 20 6,213,223 6,610,113 Current tax liabilities 21(b) 65, ,983 Retirement benefit obligations Deferred tax Liabilities (35,412) - Other liabilities 23 2,293,383 1,986,225 Borrowings , ,795 Funding - - Deposit for Shares 718,911 TOTAL LIABILITIES 9,707,475 9,416,116 CAPITAL AND RESERVES Share capital 25 1,143,328 1,143,328 Share premium 26(a) 1,517,485 1,517,485 Retained earnings 26(b) 801, ,216 Other reserves 26(c) - (d) 1,088,999 1,114,464 TOTAL EQUITY 4,551,671 4,251,493 TOTAL LIABILITIES AND EQUITY 14,259,146 13,667,609 F.C. Nelson FRC/2014/ICAN/

18 Monthly Report - 30 SEPTEMBER 2016 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR PERIOD 30 SEPTEMBER 2016 Share Share Retained Statutory Actuarial Regulatory Risk Total Capital Premium Earnings Reserve Reserve Reserve Balance at 1 January ,143,328 1,517, ,260 1,006, ,066 3,884,537 Profit for the period , ,040 Other comprehensive income, net of tax - - (19,906) (19,906) Total comprehensive income , ,134 1,143,328 1,517, ,394 1,006, ,066 4,551,671 Contributions by and distributions to equity holders Dividend paid Transfer to regulatory risk reserve - - (12,752) ,752 - Transfer from actuarial reserve ,217 - (38,217) Balance at 30 SEPTEMBER ,143,328 1,517, ,859 1,006,398 (38,217) 120,818 4,551,671 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2015 Balance at 1 January 2015 Share Share Retained Statutory Actuarial Regulatory Risk Total Capital Premium Earnings Reserve Reserve Reserve 1,143,328 1,517, , ,748 38,217 95,314 4,079,893 Profit for the year , , ,598 Other comprehensive income, net of tax Total comprehensive income , , ,598 1,143,328 1,517, ,749 1,006,398 38,217 95,314 4,594,491 Contributions by and distributions to equity holders Dividend paid - - (342,998) (342,998) Transfer to regulatory risk reserve - - (12,752) ,752 - Transfer from actuarial reserve ,217 - (38,217) - - 1,143,328 1,517, ,216 1,006, ,066 4,251,493 20

19 REPORT OF THE AUDIT COMMITTEE TO THE MEMBERS OF NPF MICROFINANCE BANK PLC In compliance with section 359(6) of the Companies and Allied Matters Act CAP C20 LFN 2004, we the members of the Audit Committee of NPF Microfinance Bank Plc report as follows: We have reviewed the scope and planning of the audit requirements and we found them adequate. We have reviewed the financial statements for the period ended 30 September 2016 and are satisfied with the explanations obtained. We reviewed the external auditors Management Letter for the period ended 30 September 2016 and management responses thereto and are satisfied that management is taking appropriate steps to address the issues raised. We ascertained that the accounting and reporting policies of the Bank for the year ended 30 September 2016 are in accordance with legal requirements and agreed ethical practices. The external auditors confirmed having received full cooperation from management in the course of their statutory audit. Mr. Lazarus Nnadozie Onwuka Chairman, Audit Committee FRC/2014/ICSAN/ October 2016 Other members of the Audit Committee: Alhaji Abdulquadri Sanni Mr. E.C. Wabali Mr. Audu Abubakar Mrs. O.J. Idemudia (Company Secretary) acted as Secretary to the Committee 15

20 Monthly Report - 30 SEPTEMBER 2016 STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 SEPTEMBER 2016 SEPTEMBER DECEMBER In thousands of naira Note AUDITED Interest income 7 1,446,220 1,795,895 Interest expense 8 (165,838) (263,360) Net interest income 1,280,382 1,532,535 Fee and commission income 9 503, ,443 Other revenue , ,356 Net operating income 1,933,431 2,329,334 Net impairment (loss)/write-back on financial and other assets 11 (83,505) (68,005) Personnel expenses 12 (661,526) (978,277) Depreciation 19 (68,898) (75,851) Administration and general expenses 13 (432,463) (518,302) Total operating expenses (1,246,392) (1,640,435) Profit before tax 687, ,899 Tax expense 21(a) (174,301). Profit for the year 687, ,598 Other comprehensive income Items that will never be reclassified to profit or loss Remeasurement gains on net defined benefit liability (123,073) Related tax - 36,922 - (86,151) Items that are or may be reclassified to profit or loss - - Other comprehensive income for the year, net of tax - (86,151) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 687, ,447 Basic and diluted earnings per share (kobo) The accompanying notes are an integral part of these financial statements. 19

21 Monthly Report - 30 SEPTEMBER 2016 STATEMENT OF CASH FLOWS FOR THE MONTH ENDED 30 SEPTEMBER 2016 SEPTEMBER DECEMBER In thousands of naira Note AUDITED Cash flows from operating activities Profit for the year 687, ,598 Adjustments for: Depreciation of property and equipment 19 37,117 75,851 Net impairment loss/(write-back) on loans and advances to customers 11 82,374 50,225 Net impairment loss/(write-back) on investment securities 11 1,131 9,109 Net impairment loss/(write-back) on other assets 11-8,671 Net interest income 7, 8 (1,280,382) (1,532,535) Dividend income 10 (106) (1,472) Net charge on retirement benefit obligations Loss/(profit) on sale of property and equipment 13, 10-5,893 Tax expense 21(a) - 174,301 Total Cashflow for Operating Activity (472,826) (695,359) Change in pledged assets 15-52,052 Change in loans and advances 16 (515,576) (1,368,905) Change in prepayments and other assets ,940 (160,867) Change in deposits from customers ,674 1,806,739 Borrowing 82,268 Current tax liability Changes in retirement benefit obligations 22 (116,304) (89,448) Change in other liabilities ,559 1,172,727 (258,713) 716,939 Interest received 1,446,220 1,760,266 Interest paid (111,083) (305,541) Tax paid 21(b) (176,002) (199,432) Retirement benefit obligations paid 22 (308,866) (192,562) Net cash from operating activities 609,797 1,779,670 Cash flows from investing activities Proceeds from disposal of investment securities - - Acquisition of property and equipment 19 (92,242) (105,509) Proceeds from disposal of property and equipment - 1,026 Dividends received 106 1,472 Net cash used in investing activities (92,136) (103,011) Cash flows from financing activities borrowings repayment (118,176) - Dividend paid - (342,998) Net cash used in financing activities (118,176) (342,998) Net increase in cash and cash equivalents 399,485 1,333,661 Cash and Cash equivalents as at 3,540,991 3,054,787 Cash and Cash equivalents as at 30 SEPTEMBER 14 3,940,486 4,388,448 The accompanying notes are an integral part of these financial statements. 21

22 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER Reporting entity NPF Microfinance Bank Plc ("the Bank") is a public limited liability company domiciled in Nigeria. The Bank's registered office is at Aliyu Atta House, 1 Ikoyi Road, Obalende, Lagos. The Bank is engaged in the provision of banking services to members of the police community, to poor and low income households and micro-enterprises of the public at large. Such services include retail banking, granting of loans, advances and allied services. The Bank currently operates from its registered office and has eighteen (18) branches located at Obalende, Ikeja, Garki-Abuja, Wuse- Abuja, Port-Harcourt, Kano, Osogbo, Benin, Akure, Onitsha, Sokoto, Lokoja, Lafia, Bauchi, Yola, Enugu, Kaduna, Oji River. 2 Changes in accounting policies The Bank has consistently applied the accounting policies as set out in note 3 to all periods presented in these financial statements. There were new standards and amendments to standards that affect annual periods beginning 1 January 2016 as follows: IAS 19 Employee Benefits: Amendment to employee contributions for defined benefit plans The amendment further explains that professional judgement should be used in determining where and in what order information should be presented in the financial statements. The amendment did not have any impact on the Bank's financial statements. Annual improvements cycle and cycle The IASB issued various amendments and clarifications to existing IFRS, non of which had a material impact on the Bank's financial statements. 3 Significant Accounting Policies The Bank has consistently applied the following accounting policies to all periods presented in these financial statements, unless otherwise stated. The principal accounting policies adopted in the preparation of these financial statements are set out below. (a) Basis of preparation (i) Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by International Accounting Standards Board (IASB) and in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, 2011, the Banks 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. (ii) Basis of measurement These financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position: The financial statements were approved by the directors on 10 September Investment securities (available-for-sale financial assets) measured at fair value Loans and receivables from customers measured at amortised cost Borrowings measured at amortised cost (iii) Functional and presentation currency These financial statements are presented in Naira, which is the Bank s functional currency. Except where indicated, financial information presented in Naira has been rounded to the nearest thousand. 22

23 (iv) Use of estimates and judgments The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. 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. Information about significant areas of estimation uncertainties and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in note 5. (b) Interest Interest income and expense on financial instruments are recognised 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, the next repricing date) 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 instruments but not future credit losses. The calculation of the effective interest rate includes contractual fees and points paid or received, transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability. Interest income and expense presented in the statement of comprehensive income include: - Interest income on financial assets measured at amortised cost calculated on an effective interest rate basis - Interest income on available-for-sale investment securities calculated on an effective interest rate basis - Interest expense on deposits and borrowings on an effective interest rate basis (c) Fees and commission Fees and commission income that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate which is used in the computation of interest income. Other fees and commission income, including loan account servicing fees, investment management fees, etc. are recognised as the related services are performed. (d) Other revenue The total sum includes reenue from income on salary administration, service fees and charges, profit on disposal of property and equipment and dividend income.they are recognised as the related services are performed. (e) Tax expense Tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that they relate to items recognised directly in equity or in other comprehensive income. (i) Current income tax Income tax payable is calculated on the basis of the applicable tax law in the respective jurisdiction and is recognised as an expense for the period and adjustments to past years except to the extent that current tax relates to items that are charged or credited in other comprehensive income or directly to equity. In these circumstances, current tax is charged or credited to other comprehensive income or to equity (for example, current tax on available for sale investment). Where the Bank has tax losses that can be relieved only by carry forward against taxable profits of future periods, a deductible temporary difference arises. Those losses carried forward are set off against deferred tax liabilities carried in the statement of financial position. The Bank evaluates positions stated in tax returns; ensuring information disclosed are in agreement with the underlying tax liability, which has been adequately provided for in the financial statements. 23

24 (ii) Deferred tax Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred income tax is determined using tax rates enacted or substantively enacted at the reporting date and are expected to apply when the related deferred tax liability is settled. Deferred tax is not recognised for the following temporary differences: - temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; - temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and - taxable temporary differences arising on the initial recognition of goodwill. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset them, 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 deferred tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised 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 it can be utilised. 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 realised. (iii) Tax exposures In determining the amount of current and deferred tax, the Bank takes into account the impact of uncertain tax position and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Bank to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. (f) Financial assets and financial liabilities (i) Classification Financial assets The classification of financial instruments depends on the purpose and management s intention for which the financial instruments were acquired and their characteristics. The Bank classifies its financial assets into one of the following categories: - loans and receivables - held to maturity investments - available-for-sale financial assets - at fair value through profit or loss and within the category as: - held for trading; or - designated at fair value through profit or loss. Financial liabilities The Bank classifies its financial liabilities, other than financial guarantees and loan commitments, as either financial liabilities at fair value through profit or loss or other financial liabilities measured at amortised cost. (ii) Recognition Initial recognition The Bank initially recognises its financial instruments on the trade date at which the Bank becomes a party to the contractual provisions of the instrument. All financial assets or financial liabilities are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities recorded at fair value through profit or loss. Subsequent recognition of financial assets and liabilities is at amortised cost or fair value, depending on the classification. 24

25 Subsequent measurement See accounting policies (g) - (k) for the Bank's accounting policies on subsequent measurement of financial assets. See accounting policy (n) for the Bank's accounting policies on subsequent measurement of financial liabilities. (iii) De recognition Financial assets The Bank derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Bank is recognised as a separate asset or liability. On derecognition 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 the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss. The Bank enters into transactions whereby it transfers assets recognised 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 derecognised. 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 recognise 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. Financial liabilities The Bank derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. (iv) Offsetting Financial assets and liabilities are set off 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 amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from the group of similar transactions such as in the Bank's trading activity. (v) Amortised cost measurement The amortised 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 amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. (vi) Fair value Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Bank has access at that date. The fair value of a liability reflects its non-performance risk. When available, the Bank measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. If there is no quoted price in an active market, then the Bank uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction. 25

26 The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price i.e. the fair value of the consideration given or received. If the Bank determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out. Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Bank on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio. The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. The Bank recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. (vii) Identification and measurement of impairment At each reporting date, the Bank assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss 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. Objective evidence that financial assets are impaired can include; (a) a breach of contract, such as a default or delinquency in interest or principal payments; (b) significant financial difficulty of the issuer or obligor; (c) the lender, for economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; (d) it becomes probable that the borrower will enter bankruptcy or other financial reorganisation; (e) the disappearance of an active market for that financial asset because of financial difficulties; or (f) observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) adverse changes in the payment status of borrowers in the portfolio; and (ii) national economic conditions that correlate with defaults on the assets in the portfolio. (g) In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. The estimated period between a loss occurring and its identification is determined by management for each identified portfolio. In general, the periods used vary between one month and three months; in exceptional cases, longer periods are warranted. Assets classified as loans and receivables and held-to-maturity investment securities The Bank first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Bank determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. 26

27 The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan or held to maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Bank may measure impairment on the basis of an instrument s fair value using an observable market price. For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (that is, on the basis of the Bank s grading process that considers asset type, industry, geographical location, collateral type, past due status and other relevant factors).those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors ability to pay all amounts due according to the contractual terms of the assets being evaluated. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Bank and historical loss experience for assets with credit risk characteristics similar to those in the Bank. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist. Estimates of changes in future cash flows for groups of assets should reflect and be directionally consistent with changes in related observable data from period to period (for example, changes in unemployment rates, property prices, payment status, or other factors indicative of changes in the probability of losses in the Bank and their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Bank to reduce any differences between loss estimates and actual loss experience. When a loan is uncollectible, it is written off against the related allowance for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Impairment charges are classified in Net impairment loss on financial and other assets. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the statement of comprehensive income. Assets classified as available-for-sale The Bank assesses at each date of the statement of financial position whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is objective evidence of impairment resulting in the recognition of an impairment loss. If any such evidence exists for available for sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss is removed from equity and recognised in the statement of comprehensive income. Impairment losses recognised in the statement of comprehensive income on equity instruments are not reversed through profit or loss. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the statement of comprehensive income. (g) Cash and cash equivalents Cash and cash equivalents include bank notes and coins on hand, unrestricted balances held with central groups and highly liquid financial assets with original maturities of less than three months, which are subject to 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 amortised cost in the statement of financial position. The reconciliation of the opening cash and cash equivalents to the closing cash and cash equivalents in the statement of cash flows is done using the indirect method. 27

28 (h) Financial assets and liabilities at fair value through profit or loss This category comprises two sub categories: financial instruments classified as held for trading, and financial assets designated by the Bank at fair value through profit or loss upon initial recognition. (i) Trading assets and liabilities 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. Trading assets and liabilities are initially recognised and subsequently measured at fair value in the statement of financial position with transaction costs recognised in profit or loss. All changes in fair value are recognised as part of net trading income in the statement of comprehensive income. (ii) Designation at fair value through profit or loss The Bank designates certain financial assets upon initial recognition at fair value through profit or loss (fair value option). This designation cannot subsequently be changed. According to IAS 39, the fair value option is only applied when the following conditions are met: - the application of the fair value option reduces or eliminates an accounting mismatch that would otherwise arise or - the financial assets are part of a portfolio of financial instruments which is risk managed and reported to management on a fair value basis (iii) Reclassification of financial assets and liabilities The Bank may choose to reclassify a non derivative financial asset held for trading out of the held for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held for trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the Bank may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held for trading or available for sale categories if the Bank has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification. Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held to maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively. (i) Pledged assets Financial assets transferred to external parties that do not qualify for de recognition are reclassified in the statement of financial position from their original class held-for-trading to assets pledged as collateral, if the transferee has received the right to sell or re pledge them in the event of default from agreed terms. Initial and subsequent measurement of assets pledged as collateral is at fair value. (j) Loans and receivables Loans and advances are non derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Bank does not intend to sell immediately or in the near term. Loan and receivables are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method. When the Bank is the lessor in a lease agreement that transfer 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 recognised 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 borrowing ), the arrangement is accounted for as a loan or advance, and the underlying asset is not recognised in the Bank s financial statements. 28

29 (k) Investment securities Investment securities are initially measured at fair value plus, in case of investment securities not at fair value through profit or loss, incremental direct transaction costs and subsequently accounted for depending on their classification as either held to maturity, fair value through profit or loss or available for sale. (i) Held to maturity Held to maturity investments are non derivative assets with fixed or determinable payments and fixed maturity that the Bank has the positive intent and ability to hold to maturity, and which are not designated at fair value through profit or loss or available for sale. Held to maturity investments are carried at amortised cost using the effective interest method. A sale or reclassification of a significant amount of held to maturity investments would result in the reclassification of all held to maturity investments as available for sale, and prevent the Bank from classifying investment securities as held to maturity for the current and the following two financial years. However, sales and reclassifications in any ofthe following circumstances would not trigger a reclassification to available-for-sale: - Sales or reclassifications that are so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset s fair value - Sales or reclassifications after the Bank has collected substantially all the asset s original principal. - Sales or reclassification attributable to non recurring isolated events beyond the Bank s control that could not have been reasonably anticipated. (ii) Fair value through profit or loss The Bank does not currently have any investment securities (or other financial assets) as at fair value through profit or loss. (iii) Available for sale Available for sale investments are non derivative investments that are not designated as another category of financial assets. Unquoted equity securities whose fair value cannot be reliably measured are carried at cost. All other available for sale investments are carried at fair value. Interest income is recognised in profit or loss using the effective interest method. Dividend income is recognised in profit or loss when the Bank becomes entitled to the dividend. Other fair value changes are recognised directly in other comprehensive income until the investment is sold or impaired whereupon the cumulative gains and losses previously recognised in other comprehensive income are recognised to profit or loss as a reclassification adjustment. A non derivative financial asset may be reclassified from the available for sale category to the loans and receivable category if it otherwise would have met the definition of loans and receivables and if the Bank has the intention and ability to hold that financial asset for the foreseeable future or until maturity. (l) Property and equipment (i) Recognition and measurement Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. 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 are recognized net within other income in profit or loss. The assets carrying values and useful lives are reviewed, and written down if appropriate, at each date of the statement of financial position. Assets are impaired whenever events or changes in circumstances indicate that the carrying amount is less than the recoverable amount; see note (n) on impairment of non financial assets. 29

30 (ii) Subsequent costs The cost of replacing part of an item of property or equipment is recognised 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 derecognised. The costs of the day to day servicing of property and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is recognised in profit or loss on a straight line basis to write down the cost of each asset, to their residual values over the estimated useful lives of each part of an item of property and equipment. Depreciation begins when an asset is available for use and ceases at the earlier of the date that the asset is derecognised or classified as held for sale in accordance with IFRS 5. A non current asset or disposal group is not depreciated while it is classified as held for sale. Freehold land is not depreciated. The estimated useful lives for the current and comparative periods of significant items of property and equipment are as follows: Leasehold land Buildings Computer hardware Furniture, fittings and Motor vehicles Over the shorter of the useful life of the item or lease term 50 years 3 years 5 years 4 years Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted if appropriate. (iv) De recognition An item of property and equipment is derecognised on disposal or when no future economic benefits are expected from its use or (m) Impairment of non financial assets The Bank s non financial assets with carrying amounts 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. For goodwill and intangible assets that have indefinite useful lives or that are available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. A cash generating unit is the smallest identifiable asset Bank that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. 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. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods 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 amortisation, if no impairment loss had been recognised. (n) Deposits and borrowings Deposits and borrowings are the Bank s sources of funding. When the Bank sells a financial asset and simultaneously enters into a repo or lending agreement to repurchase the asset (or a similar asset) at a fixed price on a future date, the arrangement is accounted for as a deposit, and the underlying asset continues to be recognised in the Bank s financial statements. Deposits and borrowings are initially measured at fair value plus transaction costs, and subsequently measured at their amortised cost using the effective interest method, except where the Bank chooses to carry the liabilities at fair value through profit or loss. 30

31 (o) Prepayments and other assets Prepayments include costs paid in relation to subsequent financial periods and are measured at cost less amortization for the period. The Bank recognises prepaid expense in the accounting period in which it is paid. Other assets comprise other recoverables. (p) Provisions Provisions for restructuring costs and legal claims are recognised when: the Bank has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. The Bank recognises no provisions for future operating losses. (q) Expenditure Expenses are recognised in the profit or loss as they are incurred unless they create an asset from which future economic benefits will flow to the Bank. An expected loss on a contract is recognised immediately in profit or loss. (r) Employee benefits (i) Defined contribution plan A defined contribution plan is a post-employment benefits plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as personnel expenses in profit or loss in the period during which related services are rendered. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (ii) Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised 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 service provided by the employees and the obligation can be estimated reliably. (s) Share capital and reserves (i) Share issue costs Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instrument. (ii) Dividend on the Bank s ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank s shareholders. Dividends for the year that are declared after the date of the statement of financial position are dealt with in the subsequent events note. Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in accordance with the requirements of the Companies and Allied Matters Act of Nigeria. (t) Earnings per share The Bank presents basic 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. (u) Segment reporting Segment information is provided on the basis of operating and reportable segments in the manner the Bank manages its business. The financial statements of the Bank reflect the management structure of the Bank and the way in which the Bank's management reviews business performance. Invariably, management considers its retail banking operations, whose results are shown in the statement of financial position and statement of comprehensive income, as its only operating segment. 31

32 (v) New standards and interpretations not yet adopted A number of new Standards, Amendments to Standards, and Interpretations are effective for annual periods beginning after 1 January 2015 and early application is permitted; however, the Bank has not applied the new or amended standards in preparing these financial statements. Those Standards, Amendments to Standards, and Interpretations which may be relevant to the Bank are set out below: Standard not yet effective IFRS 9 Financial instruments Summary of the requirements and impact assessment On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB s project to replace IAS 39 Financial Instruments: Recognition and Measurement. Effective date 1 January 2018 Early adoption is permitted IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The Bank is yet to carry-out an assessment to determine the impact that the initial application of IFRS 9 could have on its business; however, the Bank will adopt the standard for the year ending 31 December IFRS 15 Revenue from Contracts with Customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue Barter of Transactions Involving Advertising Services. The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. This new standard will most likely have a significant impact on the Bank, which will include a possible change in the timing of when revenue is recognised and the amount of revenue recognised. The Bank is yet to carry-out an assessment to determine the impact that the initial application of IFRS 15 could have on its business; however, the Bank will adopt the standard for the year ending 31 December January 2018 Early adoption is permitted The following new or amended standards are not expected to have a significant impact on the Bank's financial statements: IFRS 14 Regulatory Deferral Accounts - Effective application date: 1 January 2016 Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) - Effective application date: 1 January 2016 Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) - Effective application date: 1 January 2016 Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) - Effective application date: 1 January 2016 Equity Method in Separate Financial Statements (Amendments to IAS 27) - Effective application date: 1 January 2016 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) - Effective application date: 1 January 2016 Disclosure Initiative (Amendments to IAS 1) - Effective application date: 1 January 2016 Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) - Effective application date: 1 January 2016 Annual Improvements to IFRSs Cycle various standards - Effective application date: 1 January 2016 IFRS 16 Leases - Effective application date: 1 January

33 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER Financial risk management (a) Introduction and overview The Board of Directors has overall responsibility for the establishment and oversight of the Bank's risk management framework. The Bank's risk management policies are established to identify and analyze the risks faced by the Bank, to set appropriate limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect the changes in market conditions and the Bank's activities. The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Board also oversees how management monitors compliance with the risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Bank. The Board is assisted in its oversight role by the Board Risk Management Committee, which undertakes both regular and ad-hoc reviews of risk management controls and procedures. The risk management framework of the Bank identifies risk culture as the foundation upon which the pillars of risk and control processes and extreme events management lie. The general organisational structure can be seen below: Head of ERM Market Risk and ALM Credit and Investment Risk Management Operational Risk Management The Bank's risk management governance structure is as shown below: Board Audit Committee Board Board Risk Management Committee Managing Director Internal Audit (Risk Based) ERM Unit Enterprise Risk Management Committee ALCO Credit and Investment Risk Management Operational Risk Marketing and ALM Risk Management The Board of Directors are responsible for developing and monitoring the Bank's risk management policies. (i) The Bank's approach to risk The Bank addresses the challenge of risks comprehensively through an enterprise-wide risk management framework by applying leading practices that is supported by a robust governance structure consisting of the board and executive management committees. The Board drives the risk governance and compliance process through management. The audit committee provides oversight on the systems of internal control, financial reporting and compliance. The Board also sets the risk philosophy, policies and strategies as well as provides guidance on the various risk elements and their management. Executive management drives the management of the financial risks (market, liquidity and credit risk), operational risks as well as strategic and reputational risks. 33

34 The key features of the Bank s risk management framework are: The Board of Directors provide overall risk management direction and oversight. The Bank s risk appetite is approved by the Board of Directors. Risk management is embedded in the Bank as an intrinsic process and is a core competency of all its employees. The Bank manages its credit, market, operational and liquidity risks in a co-ordinated manner within the organization. The Bank s risk management function is independent of the business divisions. The Bank s internal audit function reports to the Board; providing independent validation of the business units compliance with risk policies and procedures and the adequacy and effectiveness of the risk management framework on an enterprise-wide basis. The Board of Directors is committed to managing compliance with a robust compliance framework to enforce compliance with applicable laws, rules and standards issued by the industry regulators and other law enforcement agencies, market conventions, codes of practices promoted by industry associations and internal policies. The compliance function, under the leadership of the Head of Internal audit of the Bank has put in place a robust compliance framework, which includes: Comprehensive compliance manual, the manual details the roles and responsibilities of all stakeholders in the compliance process, Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure business is conducted professionally. (ii) Risk Appetite The Bank's risk appetite is reviewed by the Board of Directors annually, at a level that minimizes erosion of earnings or capital due to avoidable losses or from frauds and operational inefficiencies. This reflects the conservative nature of the Bank as far as risk taking is concerned. (iii) Risk Management Philosophy, Culture and Objectives The Bank considers sound risk management to be the foundation of a long lasting institution. The Bank continues to adopt a holistic and integrated approach to risk management and therefore, brings all risks together under one or a limited number of oversight functions. Risk management is a shared responsibility. Therefore the Bank aims to build a shared perspective on risks that is grounded in consensus. There is clear segregation of duties between market facing business units and risk management functions. Risk Management is governed by well defined policies which are clearly communicated within the Bank. Risk related issues are taken into consideration in all business decisions. The Bank shall continually strive to maintain a conservative balance between risk and revenue consideration. The Bank has exposure to the following risks from its financial instruments: - Credit risk - Liquidity risk - Market risk - Operational risk (b) Credit risk Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Bank's loans and receivables from customers. The Bank has exposure to credit risk as it routinely executes transactions with counterparties which comprise mainly of public service employers and employees as well as private sector employees. (i) Credit risk limits The Bank applies credit risk limits, among other techniques in managing credit risk. This is the practice of stipulating a maximum amount that the individual or counterparty can obtain as loan. Internal and regulatory limits are strictly adhered to. Through this, the Bank not only protects itself, but also in a sense, protects the counterparty from borrowing more than they are capable of paying. The Bank continues to focus on its concentration and intrinsic risks and further manage them to a more comfortable level. This is very important due to the serious risk implications that intrinsic and concentration risk pose to the Bank. A thorough analysis of economic factors, market forecasting and prediction based on historical evidence is used to mitigate the crystallization of these risks. The Bank has in place various portfolio concentration limits (which is subject to periodic review). These limits are closely monitored and reported on from time to time. 34

35 The Bank s internal credit approval limits for the various authority levels are as indicated below. Approval Limit RANK MICRO MACRO Officer 1 100, ,000 Assistant Manager 200, ,000 Deputy Manager 200, ,000 Manager 200, ,000 Senior Manager 200, ,000 Manager 500,000 1,500,000 Executive Director 500,000 1,800,000 Managing Director (MD) 500,000 2,000,000 Management Risk Committee/ Managing Director. Board Risk Management Committee Full Board 500,000 & Above 2,000,000 Above 2 NIL million to 10 Above 10 NIL million These internal approval limits are set and approved by the Bank's Board and are reviewed regularly as the state of affairs of the Bank and the wider financial environment demands. (ii) Exposure to credit risk The Bank's exposure to credit risk is influenced mainly by the characteristics of the counterparties. Management considers the default risk of the industry in which the counterparty operates based on economic factors as this may have an influence on credit risk. The Bank is exposed to credit risk on its loans and receivables balances due from its its customers in the public and private sectors. The Bank has dedicated credit standards, policies and procedures to control and monitor intrinsic and concentration risks through all credit levels of selection, underwriting, administration and control. Utilization of the services of portfolio managers whom are educated on the risk appetite of the Bank and thus ensure that all investments are in low risk grade securities. Ensuring that all investments entered are of a low to medium duration and thus minimising the risk of default. All treasury investments undergo a formal credit analysis process that would ensure the proper appraisal of the facility. The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staff and implemented. All conflict of interest situations must be avoided. (ii) Held to maturity investments (HTM) The Bank via its portfolio managers limits its exposure to credit risk by investing only in highly liquid money market instruments with counterparties that have a good credit rating. The portfolio managers actively monitors credit ratings and ensures that the Bank has only made investment in line with the Bank's investment policy as approved by Board which approves investment in short term fixed deposit, placement with local banks and Federal Government Treasury Bills. (iii) The Bank did not have any held to maturity investments that were impaired as at 31 December Cash and cash equivalents The Bank held cash and cash equivalents with maturity profile of less than 3 months, held with local banks and assessed to have good credit ratings based on the Bank's policy. (iv) Loans and receivables from customers and other receivables The Bank has classified loans to customers, staff loans and other receivables warehoused in other assets as loans and receivables and other receivables. These are evaluated periodically for impairment in line with its accounting policy as disclosed in note 3(f)(vii). Impairment losses have been recognized in profit or loss and reflected in an allowance account against receivables. The total impairment allowance during the year was approximately N198 million (31 December 2014: N139 million). These figures are inclusive of impairment allownace on other receivables. (iv) Collateral security All financial assets held by the Bank are normally unsecured. Our comfort on the treasury bills is the issuer's credit rating, which is the Federal Government of Nigeria, while for the loans and advances, we obtain comfort from the fact that the loans are backed by the salary accounts of serving officers domiciled with the Bank. Staff loans are also recovered through salary deductions and staff mortgage loans are secured against the property purchased. (v) Write-off policy 35

36 The Bank writes off a loan balance when the Bank's Credit Department determines that the loan is uncollectible and had been declared delinquent and subsequently classified as lost. The write-off process is a critical component of the Bank's credit management activities. The policy requires a periodic review and identification of classified loans deemed to be uncollectible with long outstanding balances of principal and interest. The determination is made after considering information such as the continous deterioration in the customer's financial position, such that the customer can no longer pay the obligation, or that the proceeds from the collateral will not be sufficient to pay back the entire exposure. Board approval is required for such write-off. The loan recovery department continues with its recovery efforts and any loan subsequently recovered is treated as other income. (vi) Maximum exposure to credit risk The carrying amount of the Bank's financial assets, which represents the maximum exposure to credit risk at the reporting date was as follows: In thousands of naira Note 30-Sept Dec-15 Cash and cash equivalents 14 3,392,529 2,763,122 Pledged assets , ,090 Loans and advances to customers 16 8,867,045 6,527,210 Investment securities 17 37,024 47,265 Prepayments and other assets ,999 38,708 13,667,122 10,011,395 36

37 (vii) Geographical Sectors The following table breaks down the Bank s main credit exposure at their gross amounts (Loans and advances to customers and due from banks) as categorised by geographical region. ''Due from banks'' here represents current account balances with other banks, money market placements and investments in treasury bills through Kakawa Discount House. For this table, the Bank has allocated exposures to regions based on the region of domicile of the Bank's counterparties. In thousands of naira Due from Banks 30-Sep-16 Loans and advances to customers Total Due from Banks Loans and advances to customers South South 234, , ,333 32, , ,211 South West 2,946,328 3,292,652 6,238,980 2,193,287 3,169,869 5,363,156 South East 56, , ,774 66, , ,639 North Central 805,629 2,164,095 2,969, ,925 1,438,829 1,896,754 North West 221,805 1,079,243 1,301, , , ,394 North East 64, , ,564 22, , ,164 (viii) Credit Quality 31 December 2014 Total 4,330,071 8,043,353 12,373,423 2,991,529 6,638,789 9,630,318 The following table breaks down the Bank s main credit exposure at their gross amounts ("Due from banks" at carrying amount), as categorised by performance as at 31 December 2015 and 2014 respectively. In thousands of naira Due from Banks 30-Sep-16 Loans and advances to customers Total Due from Banks 31 December 2014 Loans and advances to customers Total Neither past due nor impaired 3,356,835 7,806,238 11,163,073 2,991,529 6,259,350 9,250,879 Impaired Individually impaired - 162, , , ,782 Collectively impaired - 74,392 74,392-20,657 20,657 Gross 3,356,835 8,043,353 11,400,188 2,991,529 6,638,789 9,630,318 Impairment allowance Specific impairment - (165,418) (165,418) - (83,618) (83,618) Collective impairment - (75,502) (75,502) - (27,961) (27,961) 3,356,835 7,802,433 11,159,268 2,991,529 6,527,210 9,518,739 (c) Liquidity risk Liquidity risk is the potential loss arising from the Bank s inability to meet its obligations as they fall due or to fund increases in assets without incurring unacceptable cost or losses. Liquidity risk is not viewed in isolation, because financial risks are not mutually exclusive and liquidity risk is often triggered by consequences of other Bank's risks such as credit, market and operational risks. (i) Liquidity risk management process The Bank has a sound and robust liquidity risk management framework that ensures that sufficient liquidity, including a cushion of unencumbered and high quality liquid assets, are maintained at all times to enable the Bank withstand a range of stress events, including those that might involve loss or impairment of funding sources. The Bank s liquidity risk exposure is monitored and managed by senior management on a regular basis. This process includes: - Projecting cash flows and considering the level of liquid assets necessary in relation thereto - Monitoring balance sheet liquidity ratios against internal and regulatory requirements; - Managing the concentration and profile of debt maturities; - Maintaining liquidity and funding contingency plans. These plans identify early indicators of stress conditions and describe actions to be taken in the event of difficulties arising from systemic or other crises while minimizing any adverse long-term implications for the business. - Regular conduct of stress testing, coupled with testing of contingency funding plans from time to time. The Bank maintains adequate liquid assets sufficient to manage any liquidity stress situation. The liquidity ratio remains one of the best among its peer companies. (ii) Maturity analysis for financial liabilities The following are the remainig maturities of financial liabilities at the reporting date. These are the carrying amounts which includes interest payments and exclude the impact of netting agreements. 37

38 30 September 2016 In thousands of naira Non-derivative financial liabilities Note Carrying amount Total Up to 3 months Expected cash flows 3-6 months 6 months - 1 year Over 1 year Deposits from customers 20 6,213,223 (6,627,930) (6,585,311) (17,667) (24,952) - Other liabilities 23 2,266,455 (1,887,796) (1,573,104) (69,339) (64,005) (181,348) Borrowings ,643 (660,411) (518,882) (1,501) (6,329) (133,699) 8,931,322 (9,176,137) (8,677,297) (88,507) (95,286) (315,047) 31 December 2014 In thousands of naira Non-derivative financial liabilities Note Carrying amount Total Up to 3 months Expected cash flows 3-6 months 6 months - 1 year Over 1 year Deposits from customers 20 6,610,113 (4,933,199) (3,290,365) (258,755) (413,208) (970,871) Other liabilities 23 1,839,793 (1,839,793) (1,839,793) Borrowings ,795 (733,415) (505,908) (2,521) (44,959) (180,027) 9,080,701 (7,506,407) (5,636,066) (261,276) (458,167) (1,150,898) The above analysis is based on the Bank's expected cash flows on the financial liabilities, which do not vary significantly from the contractual cash flows. As part of the management of its liquidity risk, the Bank holds liquid assets comprising cash and cash equivalents and other financial assets to meet its liquidity requirements. (iii) Exposure to liquidity risk The key measure used by the Bank for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose, 'net liquid assets' includes cash and cash equivalents and investment-grade debt securities for which there is an active and liquid market less any deposits from banks, debt securities issued, other borrowings and commitments maturing within the next month. In thousands of naira At 31 December 55% 65% Average for the period #DIV/0! 71% Maximum for the period 251% 79% Minimum for the period 42% 65% (d) Market risk Market risk is the risk that changes in market prices such as foreign exchange rates and interest rate will affect the Bank's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing returns. 38

39 The Bank's portfolio managers assess, monitor, manage and report on market risk taking activities within the Bank. The Bank has continued to enhance its market risk management framework. The operations of the fund managers in connection with the management of market risk is guided by the Bank's culture of reducing the risk of losses associated with market risk-taking activities, and optimizing risk-reward trade-off. The Bank's market risk objectives, policies and processes are aimed at instituting a model that objectively identifies, measures and manages market risks in the Bank and ensure that: 1 The individuals who take or manage risk clearly understand it. 2 The Bank's risk exposure is within established limits. 3 Risk taking decisions are in line with business strategy and objectives set by the Board of Directors. 4 The expected payoffs compensate for the risks taken. 5 Sufficient capital, as a buffer, is available to take risk. Our market risks exposures are broadly categorised into: (i) Trading market risks - These are risks that arise primarily through trading activities and market making activities. These include position taking in fixed income securities (Bonds and Treasury Bills). (ii) Non trading market risks - These are risks that arise from assets and liabilities that are usually on our books for a longer period of time, but where the intrinsic value is a function of the movement of financial market parameters. 39

40 (i) Measurement of market risk The Bank currently adopts non-var (Value At Risk) approach for quantitative measurement and control of market risks in both trading and non trading books. The measurements includes: Duration and Stress Testing. The measured risks using these two methods are monitored against the pre-set limits on a monthly and weekly basis respectively. All exceptions are investigated and reported in line withthe Bank's internal policies and guidelines. Limits are sets to reflect the risk appetite that is approved by the Board of Directors. These limits are reviewed at least annually or at a more frequent intervals. Some of the limits include: Aggregate Control Limits (for Securities); Management Action Trigger (MAT) and Duration. (ii) Exposure to foreign exchange risk Foreign Exchange risk is the exposure of the Bank s financial condition to adverse movements in exchange rates. The Bank is exposed to foreign exchange risk through any asset, investment and bank balance domiciled in foreign currency. Currently, the Bank does not have transactions in any other currency except the Bank's reporting currency i.e. Naira. Hence, it is not exposed to foreign exchange risk. (iii) Exposure to interest rate risk The Bank is exposed to a considerable level of interest rate risk (i.e. the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates). Similar to the last financial year, interest rate was fairly volatile. These changes could have a negative impact on the net interest income, if not properly managed. The Bank however, has a significant portion of its loans and advances to customers in non-rate sensitive assets. This greatly assists it in managing its exposure to interest rate risks. Sensitivity analyses are carried out from time to time to evaluate the impact of rate changes on the net interest income. The assessed impact has not been significant on the capital or earnings of the Bank. The table below summarizes the Bank's interest rate gap position: 30 September 2016 In thousands of naira Assets Note Carrying amount Total Up to 3 months Contractual cash flows 3-6 months 6 months - 1 year Over 1 year Cash and cash equivalents 14 3,392,529 4,389,920 4,389, Pledged assets , , , Loans and advances to customers 16 8,867,045 9,190,265 1,561,243 1,205,868 2,172,300 4,250,854 Investment securities 17 37,024 37,024 37, ,872,123 14,201,772 6,572,750 1,205,868 2,172,300 4,250,854 Liabilities Deposits from customers 20 (6,213,223) (6,627,930) (6,585,311) (17,667) (24,952) - Other liabilities 23 (2,266,455) (1,887,796) (1,573,104) (69,339) (64,005) (181,348) Borrowings ,643 (660,411) (518,882) (1,501) (6,329) (133,699) (8,028,035) (9,176,137) (8,677,297) (88,507) (95,286) (315,047) 31 December ,844,088 5,025,635 (2,104,547) 1,117,361 2,077,014 3,935,807 Carrying amount Up to 3 months Contractual cash flows 6 months - 1 year In thousands of naira Note Total 3-6 months Over 1 year Assets Cash and cash equivalents 14 3,054,787 3,060,679 3,060, Pledged assets , , , Loans and advances to customers 16 7,881,519 7,860, , ,479 1,496,840 5,563,679 Investment securities 17 47,265 47,265 47, ,566,609 11,605,236 4,166, ,479 1,496,840 5,563,679 Liabilities Deposits from customers 20 (6,610,113) (4,933,199) (3,290,365) (258,755) (413,208) (970,871) Other liabilities 23 (1,839,793) (665,927) - (665,927) - - Borrowings 24 (672,976) (733,415) (505,908) (2,521) (44,959) (180,027) (9,122,882) (6,332,541) (3,796,273) (927,203) (458,167) (1,150,898) 2,443,727 5,272, ,965 (548,724) 1,038,673 4,412,781 40

41 The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Bank s financial assets and liabilities to various standard and non standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include a 200 basis point (BP) parallel fall or rise in all yield curves. The Bank's sensitivity to an increase or decrease in interest rates by 200 basis points: 31-Dec Dec-14 In thousands of naira Increase in interest rate by 200 basis points (+2%) 24,599 39,192 Decrease in interest rate by 200 basis point (-2%) (24,599) (39,192) Interest rate movement affects reported income by causing an increase or decrease in net interest income and fair value changes. (e) Operational risk Operational risk is the risk of loss resulting from inadequate and /or failed internal processes, people and systems or from external events, including legal risk and any other risks that is deemed fit on an ongoing basis but exclude reputation & strategic risk. Operational risk exists in all products and business activities. Operational risk is considered as a critical risk faced by the Bank. The Bank proactively identifies, assesses and manages all operational risks by aligning the people, technology and processes with best risk management practices towards enhancing stake holder's value and sustaining industry leadership. Operational risk objectives includes the following: - To provide clear and consistent direction in all operations of the Bank - To provide a standardized framework and appropriate guidelines for creating and managing all operational risk exposures - To enable the Bank identify and analyse events (both internal and external) that impact on its business. The basic principles that guide the operational risk activities include: Operational risks are identified by the assessments covering risks facing each business unit and risks inherent in processes, activities and products. Risk assessment incorporates a regular review of risks identified to monitor significant changes. Risk mitigation, including insurance, is considered where this is cost-effective. The Operational Risk Unit constantly identifies and assesses the operational risk inherent in all material products, activities, processes and systems. It also ensures that before new products, activities, processes and systems are introduced or undertaken, the operational risk inherent in them is identified clearly and subjected to adequate assessment procedures. The techniques employed by the Bank in its measurements include the following: Risk Control Self Assessment (RCSA): Key Risk Indicators (KRIs) and the Risk Register. These tools have been quite useful in the identification, measurement and analyses of operational risk in the Bank. These are subject to review from time to time. There was no significant operational risk incidence during the financial year. (i) Strategic risk Strategic risk examines the impact of design and implementation of business models and decisions, on earnings and capital as well as the responsiveness to industry changes. This responsibility is taken quite seriously by the Board and Executive management of the Bank and deliberate steps are taken to ensure that the right models are employed and appropriately communicated to all decision makers in the Bank. The execution, processes and constant reviews ensures that strategic objectives are achieved. This has essentially driven the Bank s sound capital management culture and performance record to date. (ii) Legal risk Legal risk is defined as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil) incurred during operations by the inability of the organization to enforce its rights, or by failure to address identified concerns to the appropriate authorities where changes in the law are proposed. The Bank manages this risk by monitoring new legislation, creation of awareness of legislation amongst employees, identification of significant legal risks as well as assessing the potential impact of these. Legal risks management in the Bank is also being enhanced by appropriate product risk review and management of contractual obligations via well documented Service Level Agreements and other contractual documents. The Bank's legal matters are handled by the Company Secretariat. (iii) Reputational risk It is recognized that the Bank s reputation may suffer adversely due to bad publicity, non-compliance with regulatory rules and legislation, which may lead to a significant drop in new business and/or a significant increase in the number of lapses and/or withdrawals. The Bank promotes sound business ethics among its employees. 41

42 The Bank also strives to maintain quality customer services and procedures, and business operations that enable compliance with regulatory rules and legislation in order to minimize the risk of a drop in the reputation of the Bank. The Bank did not record any issue with major reputational effect in the financial year. (iv) Taxation risk Taxation risk refers to the risk that new taxation laws will adversely affect the Bank and/or the loss of non-compliance with tax laws. The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the Bank to comply with taxation laws and, where required, seeking the advice of tax specialists. This risk is well managed within the Bank. (v) Regulatory risk The Bank manages the regulatory risk it is potentially exposed to by monitoring new regulatory rules and applicable laws, and the identification of significant regulatory risks. The Bank strives to maintain appropriate procedures, processes and policies that enable it to comply with applicable regulation. The Bank has continued to maintain zero tolerance posture for any regulatory breaches in all its area of operations. (vi) IT and technological risks The Bank is exposed to IT and technological risks; these risks could stem mainly from failure to implement effective information and cyber security policies and procedures. This could disrupt operations and cause financial losses that could result in a decrease in earnings. An externally caused information security incident, such as a hacker attack or virus could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information and could result in material financial loss, loss of competitive position, regulatory actions, breach of client contracts, reputational harm or legal liability, which, in turn, could cause a decline in the Bank s earnings. Appropriate policies and IT controls are however in place to check any form of information risk and or disruption to operations. Capital management The strategy for assessing and managing the impact of our business plans on present and future regulatory capital forms an integral part of the Bank s strategic plan. Specifically, the Bank considers how the present and future capital requirements will be managed and met against projected capital requirements. This is based on the Bank's assessment and against the supervisory/regulatory capital requirements taking account of the Bank business strategy and value creation to all its stakeholders. Capital adequacy The Capital Adequacy Ratio is the quotient of the capital base of the Bank and the Bank's risk weighted asset base. In accordance with Central Bank of Nigeria regulations, the regulatory capital of a national Microfinance Bank is 2 billion, while a minimum ratio of 10% is to be maintained. (i) The Bank prides itself in maintaining very healthy capital adequacy ratio in all its areas of operations. Capital levels are determined either based on internal assessments or regulatory requirements. (ii) The capital adequacy of the Bank is reviewed regularly to meet regulatory requirements and standard of international best practices in order to adopt and implement the decisions necessary to maintain the capital at a level that ensures the realization of the business plan with a certain safety margin. (iii) The Bank undertakes a regular monitoring of capital adequacy. The Bank has consistently met and surpassed the minimum capital adequacy requirements applicable in all areas of operations. (iv) The Bank s capital plan is linked to its business expansion strategy which anticipates the need for growth and expansion in its branch network and IT infrastructure. The capital plan sufficiently meets regulatory requirements as well as providing adequate cover for the Bank s risk profile. The Bank's capital adequacy remains strong and the capacity to generate and retain reserves continues to grow. In thousands of naira Note 30-Sept Dec-14 Tier 1 capital Ordinary share capital 25 1,143,328 1,143,328 Share premium 26 1,517,485 1,517,485 Retained earnings , ,801 Regulatory risk reserves ,818 95,314 Statutory reserves 26 1,006, ,748 Other reserves 26-38,217 Less: Deferred tax assets 21(c) - (34,734) Total regulatory capital (Tier 1) 4,589,888 4,045,159 Tier 2 capital Collective impaiment 16(c) 75,502 27,961 Total tier 2 capital 75,502 27,961 42

43 Total regulatory capital (Tier 2) 4,665,390 4,073,121 Risk-weighted assets 6,744,660 7,729,970 Capital ratios Total regulatory capital expressed as a percentage of total risk-weighted assets 67% 53% Total tier 1 capital as a percentage of total risk-weighted assets 66% 52% FOCUS 2016 In 2016, the Enterprise Risk Management (ERM) Unit will be focused on ensuring the efficient management of the Bank's risk exposure. The following targets have been set for 2016: 1 Detailed review of the ERM framework 2 Detailed review of all risk policies 3 Automation of the risk monitoring and reporting process Continuous bank-wide risk acculturation to increase staff risk awareness Continuous risk profiling and risk mapping Continuous review of the Bank s AML/CFT and KYC policies to meet the new micro finance CBN policy guidelines Constant enhancement of the Bank s credit standard, practices, and systems with a focus on improving risk asset quality and reducing loan loss Development and adoption of an enhanced integrated risk types relationship between risk types and to support business planning and decisions in the Bank 9 Timely identification of risk elements inherent in the operations and processes of the Bank in order to minimise their negative impact on the assets of the Bank 43

44 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER Use of estimates and judgments The preparation of the financial statements in conformity with IFRS 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 recognised in the period in which the estimates are revised and in any future periods affected. Management discusses the development, selection and disclosure of the Bank s critical accounting policies and their application and assumptions made relating to major estimation uncertainties with the Bank Audit Committee. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year and about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is disclosed below. These disclosures supplement the commentary on financial risk management (see note 4). Key sources of estimation uncertainty (a) Impairment Financial assets accounted for at amortised cost are evaluated for impairment on a basis described in the significant accounting policy. The specific component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgements about a debtor s financial situation and the net realisable value of any underlying collateral. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the credit risk function. The collective component of the total impairment allowable is established for: - groups of homogeneous loans that are not considered individually significant; and - groups of assets that are individually significant but that were not found to be individually impaired (incurred but not reported - IBNR). Collective allowance for groups of homogeneous loans is established using statistical methods such as roll rate methodology or, for small portfolios with insufficient information, a formula approach based on historic loss rate experience. The roll rate methodology uses statistical analysis of historical data on delinquency to estimate the amount of loss. The estimate of loss arrived at on the basis of historical information is then reviewed to ensure that it appropriately reflects the economic conditions and product mix at the reporting date. Roll rates and loss rates are regularly benchmarked against actual loss experience. Collective allowance for groups of assets that are individually significant but that were not found to be individually impaired (IBNR) cover credit losses inherent in portfolios of loans and advances with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired loans and advances, but the individually impaired items cannot yet be identified. In assessing the need for collective loss allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based on historical experience and current economic conditions. The accuracy of the allowances depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances. Investments in equity securities are evaluated for impairment on the basis described in note 3. For an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence (f)(vii) of impairment. In this respect, the Bank regards a decline in fair value in excess of 40 percent to be significant and a decline in a quoted market price that persists for 12 months or longer to be prolonged. 40

45 An assessment as to whether an investment in debt securities is impaired may be complex. In making such an assessment, the Bank considers the following factors: - The market s assessment of credit worthiness as reflected in the instrument yields. - The rating agencies assessments of the creditworthiness. - The ability of the country to access the capital market for new debt issuance. - The probability of debt being restructured resulting in holders suffering losses through voluntary or mandatory debt forgiveness. (b) Fair value The determination of fair value for financial assets and financial liabilities for which there is no observable market price requires the use of valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. The Bank's accounting policy on fair value measurement is discussed in Note 3 (f)(vi). The Bank measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the requirements. - Level 1: Quoted market price in an active market for an identical instrument. - Level 2: Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. - Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instruments valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Bank determines fair value using valuation techniques. Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist, Black-Scholes and polynomial option pricing models and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date, that would have been determined by market participants acting at arm's length. Availability of observable market prices and model inputs reduces the need for management judgment and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets. Valuation models that employ significant unobservable inputs require a higher degree of management judgment and estimation in the determination of fair value. Management judgment and estimation are usually required for selection of the appropriate valuation of model to be used, determination of expected future cash flows on the financial instrument being valued, determination of probability of counterparty default and prepayments and selection of appropriate discount rates. The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised: In thousands of naira Note Level 1 Level 2 Level 3 Total 2016 ASSETS Investment securities 17 25,624 11,400-37,024 25,624 11,400-37,024 41

46 2015 ASSETS Investment securities 17 35,865 11,400-47,265 35,865 11,400-47,265 There was no financial instrument measured in Level 3 of the fair value hierarchy, hence there is no table to show a reconciliation from the beginning balance to the ending balances for fair value measurements in level 3 of the fair value hierarchy. Financial instruments not measured at fair value The table below sets out the fair value of financial instruments not measured at fair value and analyses them by level in the fair value hierarchy into which each fair value measurement is categorised. (d) Determination of impairment of property and equipment, and other non-financial assets Management is required to make judgements concerning the cause, timing and amount of impairment. In the identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services and other circumstances that could indicate that impairment exists. The Bank applies the impairment assessment to its separate cash generating units. This requires management to make significant judgements and estimates concerning the existence of impairment indicators, separate cash generating units, remaining useful lives of assets, projected cash flows and net realisable values. Management s judgement is also required when assessing whether a previously recognised impairment loss should be reversed. 42

47 (e) Income taxes The Bank is subject to income taxes in numerous jurisdictions. Significant estimates are required in determining the Bank wide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Bank recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. (f) Determination of regulatory risk reserves Provisions under prudential guidelines are determined using the time based provisioning regime prescribed by Central Bank of Nigeria's (CBN) Amended Regulatory and Supervisory Guidelines for Microfinance Banks. This is at variance with the incurred loss model required by IFRS under IAS 39. As a result of the differences in the methodology/provision regime, there will be variances in the impairments allowances required under the two methodologies. (i) For recognition of deferred tax assets, judgment is exercised to assess the availability of future taxable profit against which tax losses carried forward can be used. Paragraph 12.4 of the revised Prudential Guidelines for Deposit Money Banks in Nigeria stipulates that Banks would be required to make provisions for loans as prescribed in the relevant IFRS Standards when IFRS is adopted. However, Banks would be required to comply with the following: Provisions for loans recognised in the profit and loss account should be determined based on the requirements of IFRS. However, the IFRS provision should be compared with provisions determined under prudential guidelines and the expected impact/changes in general reserves should be treated as follows: Prudential provisions is greater than IFRS provisions: the excess provision resulting should be transferred from the retained reserve account to a "regulatory risk reserve". Prudential provisions is less than IFRS provisions: IFRS determined provision is charged to the statement of comprehensive income. The cumulative balance in the regulatory risk reserve is thereafter reversed to the retained reserve account. (ii) The non-distributable reserve should be classified under Tier 1 as part of the core capital. 43

48 Prudential adjustments for the year ended 30 June 2016 In thousands of naira Note Loans & advances: Specific impairment allowances on loans to customers 16 (c) 83,618 Collective impairment allowances on loans to customers 16 (c) 27,961 Total impairment allowances on loans (a) 111,579 Total regulatory impairment based on prudential guidelines (b) 206,893 Required balance in regulatory risk reserves (c = b - a) 95,314 Balance, 1 January ,281 Addition during the year 23,033 Balance, 31 December ,314 44

49 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER Financial assets and liabilities Accounting classification measurement basis and fair values The table below sets out the carrying amounts and fair values of the Bank s financial assets and liabilities: 30 SEPT 2016 In thousands of naira Note Fair value through profit or loss Held to maturity investments Loans and receivables Available for sale financial assets Other financial liabilities Total carrying amount Fair value Cash and cash equivalents ,392, ,392,529 3,352,248 Pledged assets , , ,594 Loans and advances to customers ,867, ,867,045 7,471,254 Investment securities ,024-37,024 37, ,835,099 37,024-12,872,123 11,437,120 Deposits from customers ,213,223 6,213,223 6,213,223 Other liabilities ,266,455 2,266,455 2,266,455 Borrowings , , , ,664,866 6,664,866 6,844, December 2015 In thousands of naira Note Fair value through profit or loss Held to maturity investments Loans and receivables Available for sale financial assets Other financial liabilities Total carrying amount Fair value Cash and cash equivalents ,388, ,388,448 3,058,679 Pledged assets , , ,563 Loans and advances to customers ,881, ,881,519 7,260,077 Investment securities ,154-38,154 38, ,905,057 38,154-12,943,211 10,987,473 Deposits from customers ,610,113 6,610,113 6,610,113 Other liabilities ,839,793 1,839,793 1,839,793 Borrowings , , , ,240,908 7,240,908 7,287,058 Financial instruments at fair value (including those held for trading, designated at fair value, available for sale) are either priced with reference to a quoted market price for that instrument or by using a valuation model. Where the fair value is calculated using a valuation model, the methodology is to calculate the expected cash flows under the terms of each specific contract and then discount these values back to a present value. The expected cash flows for each contract are determined either directly by reference to actual cash flows implicit in observable market prices or through modelling cash flows using appropriate financial markets pricing models. Wherever possible, these models are used as the basis of observable market prices and rates including, for example, interest rate, yield curves, equities and prices. 45

50 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 DECEMBER SEPTEMBER 2015 In thousands of naira 2016 AUDITED 7 Interest income Loans and advances 1,389,530 1,631,945 Bankers acceptances 10,403 71,001 Placements with local banks 46,287 92,949 1,446,220 1,795,895 Included in the above interest income for the year ended 31 December 2015 is a total of 11.4 million (2014: 4.7 million) relating to impaired financial assets. 8 Interest expense Term deposits 138, ,643 Current accounts 5,968 6,131 Savings 7,333 8,268 Borrowings 14,425 62, , ,360 9 Fees and commission income Credit-related fees and commission 416, ,523 Deposit-related fees and commission 86,787 87, , , Other revenue Income on salary administration 125, ,059 Service fees and charges 22,684 56,825 Profit on disposal of property and equipment 1,857 0 Dividend income 106 1, , , Net impairment loss/(write-back) on financial and other assets Loans and advances to customers: Charge/(write-back) on specific impairment (see 16(c)) 82,374 56,097 Write-back on collective impairment (see 16(c)) - (5,872) 82,374 50,225 Impairment loss on investments (see note 17(b)) 1,131 9,109 Impairment loss on other assets (see note 18(a)) - 8,671 83,505 68, Personnel expenses Short term employee benefits 548, ,839 Post-employment benefits: Defined benefit plan - gratuity (see note 22) 17,377 95,226 Defined contribution plan - pension cost 26,238 32,543 Other staff cost 69,128 88, , ,278 46

51 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 SEPTEMBER DECEMBER In thousands of naira Administration and general expenses Repairs and maintenance cost 47,677 65,041 Vehicle and generator running cost 42,017 45,684 Office expenses 49,959 49,604 Computer expenses 31,097 21,025 Travel expenses 25,657 22,661 AGM and year-end expenses 22,418 24,029 Directors' expenses 55, ,683 Bank charges 17,979 30,487 Publicity expenses 36,038 33,218 Professional fees 12,019 19,607 Subscription fees 2,414 5,668 Charges and levies 2,278 1,043 Insurance cost 16,012 16,834 NDIC premium 22,086 21,137 Rent and rates 15,611 13,998 Corporate social responsibility Auditor's remuneration 11,289 12,000 Income tax - 5, Other expenses (see note a) 22,216 26, , ,302 (a) Other expenses includes the following Donations 4,379 2,410 Electricity expenses 6,987 8,886 Recruitment expenses ATM damaged cards Loan recovery expenses Fines 2, Stamp duties Legal expenses 987 4,397 SMS alerts 5,481 7,299 Amortizn. Of pre-operatrional exp 1,725 - Fraud and forgery expense - - Share listing expenses - 2,010 WHT expense ,216 26, Cash and cash equivalents Cash-in-hand 35,694 58,377 Current account balances with other banks 2,126,884 2,863,067 Money market placements 890,303 1,168,830 Treasury Bills 339, ,174 3,392,529 4,388,448 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 less than three months. 47

52 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 SEPTEMBER DECEMBER In thousands of naira Pledged assets represent placements and Treasury Bills with banks that serve as collateral for the Bank's borrowings, use of NIBSS platform and ATM transactions as analysed below: Underlying transaction Counterparty Asset description BOI concessionary loan Sterling Bank Plc Treasury Bills 238, ,502 CBN concessionary loan Zenith Bank Plc Fixed placement 148, ,790 CBN concessionary loan Firct City Monument Bank PFixed placement 99,804 99,804 CBN concessionary loan First Bank of Nigeria Plc Fixed placement - - CBN concessionary loan United Bank for Africa Plc Fixed placement - - NIBSS Platform First Bank of Nigeria Plc Fixed placement 74,942 74,942 ATM Transactions Sterling Bank Plc Call placement 20,000 20, Loans and advances to customers (a) Loans and advances to customers comprise: 582, ,038 Loan and advances to customers at amortised cost 8,867,045 7,881,519 8,867,045 7,881,519 Current 3,172,882 1,624,636 Non-current 5,694,163 6,256,883 8,867,045 7,881,519 (b) Loans and advances to customers at amortised cost: Gross Amount Impairmen t Allowance Carrying Amount Gross Amount Impairment Allowance Carrying Amount Term loans 8,553,431 (97,667) 8,455,764 7,044,592 (51,373) 6,993,219 Overdrafts 554,534 (143,253) 411, ,471 (81,721) 901,750 9,107,965 (240,920) 8,867,045 8,028,063 (133,094) 7,894,970 (c ) Movement in allowances for impairment Specific allowances for impairment Balance at 1 January 90,324 90,324 Impairment loss for the year: Charge/ (write-back) during the year (see note 11) 75, ,418 90,324 Collective allowances for impairment Balance at 1 January 42,770 - Impairment loss for the year: Write-back during the year (see note 11) 32,702 42,770 Balance at 30 June ,502 42, , ,094 48

53 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 SEPTEMBER DECEMBER In thousands of naira Investment securities (a) Investment securities comprise: Available-for-sale equities: Listed equities 354, ,523 Unlisted equities 22,499 22, , ,022 Specific impairment allowance (see note (b) below) -339, ,868 37,024 38,154 Current - - Non-current 37,024 38,154 37,024 38,154 (b) Movement in specific allowances for impairment: Balance at 1 January 338, ,759 Impairment loss for the year: Charge during the year (see note 11) 1,131 9,109 Balance at 30 June 339, , Prepayments and other assets Prepayments 160, ,222 Other assets (see note (a) below) 46,272 28,748 Other receivables (see note (b) below) 794, ,654 1,001, ,624 Impairment allowance on other receivables (see note (c ) below) (37,897) (36,655) (a) (b) 963, ,969 Current 869, ,565 Non-current 93, , , ,969 Other asset comprise dividend receivables,stock of atm cards, stock of credit cards and inventories which includes stock of cheques, books/journals/cds, stock of office stationeries,stock of micr cheques and non micr cheques. Other receivables includes staff cash advance,sundry debtors,head office control ledger, discount instrument maturity suspense, consumer loan suspense, fraud-forgery account and customer salary suspense. (c) Movement in specific allowances for impairment Balance, beginning of year 36,655 27,984 Charge during the year (see note 11) - 8,671 Balance, end of period 37,897 36,655 49

54 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 In thousands of naira 19 Property and Equipment Land and Building Furniture and Fittings Motor Vehicles Computer and office Equipment Total Cost: Balance as at 1 January ,609 67, , , ,620 Additions during the year - 6,354 69,649 35, ,068 Disposals - (1,669) (8,100) - (9,769) Balance at 31 December ,609 72, , , ,913 Balance as at 1 January ,609 72, , , ,913 Additions during the year - 7,946 47,283 53, ,274 Disposals - (2,999) - (15,414) (18,413) Balance at 30 SEPTEMBER ,609 77, , , ,774 Accumulated Depreciation: Balance at 1 January ,415 45,885 64,832 85, ,285 Charge for the year 4,692 9,491 29,564 32,356 76,103 Disposals - (1,669) (1,181) - (2,850) Balance at 31 December ,107 53,707 93, , ,538 Balance at 1 January ,107 53,707 93, , ,538 Charge for the year 3,519 7,429 30,897 27,054 68,899 Disposals - (2,999) - (15,197) (18,196) Balance at 30 SEPTEMBER ,626 58, , , ,241 Net Book Value: 31 December ,502 18,450 94,645 61, ,375 Net Book Value: 30 SEPTEMBER ,983 18, ,031 87, ,533 There were no capitalised borrowing cost related to the acquisition of property and equipment during the year (2014: Nil) There were no impairment losses on any class of property and equipment during the year (2014: Nil) DECEMBER SEPTEMBER AUDITED Current - - Non-current 423, , , ,070 50

55 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 DECEMBER SEPTEMBER 2015 In thousands of naira 2016 AUDITED 20 Deposits from customers Current 2,134,972 2,613,129 Savings 1,912,163 1,685,963 Term 2,166,090 2,311,021 6,213,225 6,610,113 Current 6,213,225 6,610,113 Non-current - - 6,213,225 6,610, Income taxes (a) Amounts recognized in profit or loss Current tax expense Company income tax - 155,537 Education tax - 12,621 National Information Technology Development Agency (NITDA) levy - 6, ,979 Deferred tax expense Origination and reversal of temporary differences - (Credit)/Charge - (678) - (678) Tax expense - 174,301 The Bank believes that its accrual for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax laws and prior experience. (b) Movement in current tax liabilities Beginning of the year 188, ,434 Income tax expense (see note (a) above) - 174,979 Tax paid (176,002) (199,432) End of the year 12, ,983 51

56 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 In thousands of naira (c) Movement in deferred tax balances 2016 Net balance at 1 January Recognized in profit or loss Recognized in (see (a)) OCI Balance as at 31 December Property and equipment 56,689 10,543-67,232 Loans and advances (6,820) (6,636) Employee benefits (84,602) (11,405) - (96,007) Other items Deferred tax liabilities/(assets) (34,733) (678) - (35,411) 2015 Net balance at 1 January Recognized in profit or loss Recognized in (see (a)) OCI Balance as at 31 December Property and equipment 49,442 7,247-56,689 Loans and advances (9,030) 2,210 - (6,820) Employee benefits 21,784 (69,464) (36,922) (84,602) Deferred tax liabilities/(assets) 62,196 (60,007) (36,922) (34,733) (d) Reconciliation of effective tax rate In thousands of naira Profit before tax 687, ,899 Tax using the Company's domestic tax rate 30.00% 206, % 185,252 Non-deductible expenses 7.76% 54, % 40,978 Tax-exempt income % -70, % -74,052 Tax incentives -5.21% -35, % -32,699 Tertiary education tax 0.00% % 14,028 NITDA Tax 0.00% % 6, % 154, % 139,691 52

57 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 SEPTEMBER In thousands of naira Retirement benefit obligations Defined contribution plan The Bank operates a defined contribution pension plan based on the Pension Reform Act, The Bank had no outstanding obligations in respect of the plan as at year-end. Defined benefit plan The Bank had a defined benefit (gratuity) scheme for its staff which it discontinued effective 30 June The defined benefit obligations under the scheme was actuarially determined upon the termination of the scheme in 2015 by HR Nigeria Limited, a firm of certified actuaries and consultants with Financial Reporting Council number, FRC/NAS/ The related actuarial losses held in reserves were transferred to retained earnings after the discontinuation of the benefit plan. The outstanding liability under the scheme was partially settled in 2015 using the existing plan assets of million as at the discontinuance date. Additional 116.3m has been paid in 2016.The outstanding balance, payable to the staff over a period of 3 years at an annual interest rate of 10%, was reclassified to other liabilities as staff benefits payable. Movement in the account 2016: Defined benefit obligation Balance at 1 January ,348 Included in profit or loss (see note 12) 17,377 Included in OCI - Revaluation Difference 95,224 Benefits paid (308,866) Reclassification to staff benefits payable in other liabilities (see note 23) -331,083 Balance at 30 June Defined benefit obligation Fair value of plan assets Net defined benefit liability Balance at 1 January , , ,058 Included in profit or loss Current service cost 35,531-35,531 Interest cost (income) 31,695 (13,347) 18,348 67,226 (13,347) 53,879 Included in OCI Remeasurement (gains)/losses Actuarial gain arising from: - assumptions 56,250-56,250 - experience adjustment 176,119 (173,513) 2,606 Return on plan assets excluding interest income , , ,088 Other Benefits paid Balance at 30 June , , ,482 53

58 Monthly Report - 30 SEPTEMBER 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 SEPTEMBER 2016 DECEMBER SEPTEMBER 2015 In thousands of naira 2016 AUDITED 23 Other liabilities ATM Suspense (see note (a) below) 1,794,241 1,333,588 Accounts payable 256,907 24,820 Productivity bonus (see note (b) below) - 120,297 Deferred income - - Stale cheques 26,928 26,135 Sundry creditors 16,157 16,531 Staff benefits payable (see note 22 and note (c ) below) - 320, Other liabilities (see note (d) below) 199, ,827 2,293,383 1,986,225 (a) (b) (c) (d) Current 2,322,639 1,772,874 Non-current 279, , ,293,383 1,986,225 ATM Suspense represents suspense accounts used to manage settlement of ATM transactions with Sterling Bank to be refunded to the Head Office by branches. It is the amount withdrawn by branch customers, accumulated over time. It also includes balance pf NIBSS outflow account of 875million This amounts represents provision made at the end of the year for payment of productivity bonus to employees of the Bank. It is linked to the performance of the Bank. A constructive obligation exists for the payment of this amount. Staff benefits payable comprise the outstanding liabilities on the staff defined benefits plan discontinued during the year and reclassified from retirement benefit obligations. Other liabilities comprises : Accruals 103,681 33,550 Other payables 15,982 42,536 Deferred income on fees 94,563 68,518 Unearned income (15,076) , , Borrowings BOI concessionary loan (see note (a) below) 50, ,393 CBN concessionary loan (see note (b) below) 401, ,402 (a) 451, ,795 Current - - Non-current 451, , , ,795 The Bank of Industry (BOI) loan was availed the Bank on 14 May The amount availed was 200 million at a rate of 5 percent per annum for a duration of 3 years. This loan is for on-lending to the Bank's customers. It is for the benefit of small and medium sized enterprises to grow their businesses and to become financially independent. (b) The Central Bank of Nigeria (CBN), Micro Small and Medium sized Enterprises Development Fund (MSMEDF) loan of 500 million was also availed the Bank on 9 October 2014 at a rate of 3 percent and is due on demand. The loan is also for on-lending to the Bank's customers for the benefit of small and medium sized enterprises to help grow their businesses and become financially independent. 54

59 Monthly Report - 30 SEPTEMBER Share capital Authorised: 6,000,000,000 units of ordinary shares of 50 kobo each 3,000,000 3,000,000 Issued and fully paid: 2,286,657,766 units of ordinary shares of 50 kobo each 1,143,328 1,143, Share premium and reserves The nature and purpose of the share premium and reserve accounts in equity are as follows: (a) Share premium The share premium warehouses the excess paid by shareholders over the nominal value for their shares. Premiums from the issue of shares are reported in share premium. (b) Retained earnings Retained earnings comprise the undistributed profits from previous years, which have not been reclassified to the other reserves noted below. (c) Statutory reserve The Nigerian banking regulations require the Bank to make an annual appropriation to a statutory reserve. As stipulated by S of the Amended Regulatory and Supervisory Guidelines for Microfinance Banks issued by the Central Bank of Nigeria (CBN), an appropriation of 50% of profit after tax is made if the statutory reserve is less than 50% of its paid up share capital, 25% of profit after tax if the statutory reserve is greater than 50% but less than 100% of its paid-up share capital and 12.5% of profit after tax if the statutory reserve is greater than the paid up share capital. In line with the CBN requirement, the Bank transferred 25% of its profit after tax to statutory reserves as at year-end. (d) Regulatory risk reserve The regulatory risk reserve warehouses the excess of the impairment allowance on loans and advances computed based on the Central Bank of Nigeria prudential guidelines over that computed based on the incurred loss model under IFRS. 55

60 56 NPF Microfinance Bank PLC Annual Report - 31 March 2016

61 57 NPF Microfinance Bank PLC Annual Report - 31 March 2016

62 NOTES TO THE FINANCIAL STATEMENTS FOR THE MONTH ENDED 30 JUNE EMPLOYEES AND DIRECTORS EMPLOYEES (a) The average number of persons employed during the year by category: Number Number Executive directors 2 2 Management Non-management (b ) The number of employees of the Bank, including executive directors, who received emoluments in the following ranges were: Number Number Less than N500, ,001-1,000, ,000,001-2,500, ,500,001-3,500, ,500,001-4,500, ,500,0001-5,500, ,500,001 and above (d) Diversity in Employment i). A total of 87 women were employed by the Bank during the financial period ended 30 september 2016 which represents 40% of the total workforce. ii). A total of 3 women were in the top management position as at the period ended 30 September 2016, which represents 23% of the total top management workforce in this position. There was no woman on the Board of Directors as executive director (see note (iii) below). iii). The analysis by grade is as shown below: September 2016 December 2015 GRADE LEVEL Male Female Total Male Female Total Manager (M) Senior Manager (SM) Assistant General Manager (AGM) Deputy General Manager (DGM) General Manager (GM) TOTAL iv). The Bank is committed to maintaining a positive work environment and to conduct business in a positive, professional manner and will ensure equal employment opportunity. DIRECTORS Analysis of directors by gender: September 2016 December 2015 Male Female Total Male Female Total Managing Director Executive Director Non - Executive Directors TOTAL

63 The remuneration paid to the directors of the Bank (excluding pension and certain allowances) was: 29 Compliance with banking and other regulations During the year, the Bank paid a penalty in respect of delay in submission of 2015 Audited Financial Statement by the Securities and Exchange Commission. 30 Events after reporting period There was no event which could have a material effect on the financial position of the Bank as at 30 September 2016 or the profit for the year then ended on that date, that have not been adequately provided for or disclosed in the financial statements. 31 Litigations and claims The Bank in its ordinary course of business is presently involved in 13 cases (December 2015:15) as a co-defendant. The directors of the Bank are of the opinion that none of the aforementioned cases is likely to have material adverse effect on the Bank and are not aware of any other pending and or threatened claims or litigations which may be material to the financial statements. 32 Operating segments Segment information is provided on the basis of operating and reportable segments in the manner the Bank manages its business. The financial statements of the Bank as presented above reflects the management structure of the Bank and the way in which the Bank's management reviews business performance. Invariably, management considers its retail banking operations, whose results are shown in the statement of financial position and statement of comprehensive income, as its only operating segment. 33 Earnings per share Basic earnings per share (EPS) is calculated by dividing the net profit attributable to shareholders by the weighted average number of ordinary shares in issue during the year. September Net profit attributable to shareholders ( in thousands of naira) 2016(UNAUDITED)2015(AUDITED 687, ,816 Number of shares in issue as at 30 June (in thousands) 2,286,656 2,286,656 Weighted average number of shares in issue as at 30 June (in thousands) 2,286,656 2,286,656 Basic earnings per share (kobo) The Bank did not have potential dilutive shares as at 30 June

64 OTHER NATIONAL DISCLOSURES

65 Monthly Report - 30 SEPTEMBER 2016 OTHER NATIONAL DISCLOSURES: VALUE ADDED STATEMENT FOR THE MONTH ENDED 30 SEPTEMBER 2016 DECEMBER 2015 SEPTEMBER AUDITED '000 % '000 % Gross earnings 752,698 2,592,694 Bought-in-materials and services - local (159,151) (586,307) Value added 593, ,006, Distribution of value added: To employees - As salaries and other benefits 265, , To providers of finance - As interests 59, , To the Government - As taxes ,301 9 Retained in the business - Asset replacement (depreciation) 26, , Profit for the year (including statutory reserves) 242, , Value added 593, ,006, This statement represents the distribution of the wealth created with the Bank's assets through its own and its employees' efforts. 62

66 Monthly Report - 30 SEPTEMBER 2016 OTHER NATIONAL DISCLOSURES: FINANCIAL SUMMARY In thousands of naira SEPTEMBER DECEMBER AUDITED STATEMENT OF FINANCIAL POSITION ASSETS Cash and cash equivalents 3,392,529 4,388,448 3,054,787 2,477,012 2,235,258 Pledged assets 575, , ,090 20,000 20,000 Loans and advances to customers 8,867,045 7,881,519 6,527,210 5,559,453 4,780,336 Investment securities 37,024 38,154 47,265 61, ,577 Prepayments and other assets 963, , , , ,509 Property and equipment 423, , , , ,306 Deferred tax assets - 35,411 34, TOTAL ASSETS 14,259,144 13,667,609 10,865,189 8,680,638 7,690,986 LIABILITIES Deposits from customers 6,213,223 6,610,113 4,803,374 3,858,052 3,271,585 Current tax liabilities 65, , , , ,704 Retirement benefit obligations - 188, , , ,109 Deferred tax Liabilities (35,412) ,196 46,932 Other liabilities 2,293, , , ,815 Borrowings 451,643 1,986, , Deposit for shares TOTAL LIABILITIES 9,188,564 9,416,116 6,785,296 4,763,744 4,000,145 CAPITAL AND RESERVES Share capital 1,143,328 1,143,328 1,143,328 1,143,328 1,143,328 Share premium 1,517,485 1,517,485 1,517,485 1,517,485 1,517,485 Retained earnings 801, , , , ,986 Other reserves 1,088,999 1,114,464 1,011, , ,042 TOTAL EQUITY 4,551,671 4,251,493 4,079,893 3,916,894 3,690,841 TOTAL LIABILITIES AND EQUITY 13,740,235 13,667,609 10,865,189 8,680,638 7,690,986 STATEMENT OF COMPREHENSIVE INCOME Gross income 2,099,269 2,592,694 1,934,059 1,631,284 1,236,477 Profit before taxation 687, , , , ,317 Profit after taxation 687, , , , ,716 Dividend - 342, , , ,666 Basic and diluted earnings per share (kobo) Dividend per share (kobo) Net assets per share (kobo)

67 NPF MICROFINANCE BANK PLC Month End: SEPTEMBER 30, 2016 Trial balance - by mapping number 2016 Account Unadjusted Adjustments Adjusted (Absolute)Adjusted (Rounded) 1 Assets 14,259,145, ,259,145, ,259, Cash and cash equivalents 3,392,531, ,392,531, ,392, Cash in hand 35,695, ,695, , PETTY CASH 14, , CASHIER TELLER-1-6,605, ,605, , CASHIER TELLER CASHIER TELLER-3 5,096, ,096, , CASHIER TELLER-4 13,199, ,199, , CASHIER TELLER-5-3,692, ,692, , CASHIER TELLER-7-34,678, ,678, , CASHIER TELLER-8-1,862, ,862, , CASHIER TELLER-9-11,165, ,165, , CASHIER TELLER 10-8,159, ,159, , CASHIER DIFEERENCE TELLER-1-194, , CASHIER DIFEERENCE TELLER-2-42, , CASHIER DIFEERENCE TELLER-3-24, , CASHIER DIFEERENCE TELLER-4 135, , CASHIER DIFEERENCE TELLER-5 59, , CASHIER DIFEERENCE TELLER-6 8, , CASHIER DIFEERENCE TELLER CASH IN VAULT 83,608, ,608, , Held-to-Maturity Treasury Bills 339,648, ,648, , TREASURY BILL PURCHASE 339,648, ,648, , Current balances with other banks 2,126,884, ,126,884, ,126, FBN GARKI MKT BRANCH -11,865, ,865, , FIRST BANK CURRENT ACCOUNT 1 1,415,330, ,415,330, ,415, FBN CURRENT ACCOUNT OBALENDE BRANCH 32,550, ,550, , U.B.A PLC CURRENT A/C 62,325, ,325, , STERLING BANK 249,960, ,960, , STERLING BANKS ACCOUNT OBALENDE BRANCH 7,872, ,872, , FBN CLEARING A/C 23,913, ,913, , ATM WORKING CAPITAL -STERLING BANK (DEBIT 1,223,889, ,223,889, ,223, ATM WORKING CAPITAL CREDIT CARD-BRANCH -908,505, ,505, , POS WORKING CAPITAL 2,542, ,542, , FBN NIP SETTLEMENT ACCOUNT 28,872, ,872, ,872 64

68 1.1.6 Money market placements 890,302, ,302, , CALL ACCOUNT-FBN 590,465, ,465, , CALL ACCOUNT-UBA CALL ACCOUNT-STERLING 70,512, ,512, , FIXED DEPOSIT (PLACEMENT) 202,071, ,071, , CALL PLACEMENTS 27,253, ,253, , Allowance for Impairment on Doubtful Placements PROVISION FOR DOUBTFUL BALANCE RECOVERAB Pledged Assets 575,524, ,524, , ATM COLLATERAL ACCOUNT 20,000, ,000, , Pledged asset- CBN Loan 323,939, ,939, , Pledged asset- BOI Loan 231,585, ,585, , Loans and advances to customers 8,867,045, ,867,045, ,867, Term loans 8,553,432, ,553,432, ,553, Term loans 3,914,634, ,914,634, ,914, TERM-LOANS 3,876,236, ,876,236, ,876, ADVANCES UNDER LEASES 1,992, ,992, , TERM LOAN MIGRATED FROM REALM 12, , Interest Receivable on term loans 36,394, ,394, , Micro loans 4,483,939, ,483,939, ,483, MICRO-LOANS 252,522, ,522, , MICRO LOANS- WEEKLY 5,496, ,496, , CONSUMER LOANS 116,343, ,343, , BOI MICRO LOANS 77,446, ,446, , CBN LOAN 13,523, ,523, , OTHER MICRO LOAN 4,033,883, ,033,883, ,033, WE-WE LOANS 941, , BOI MICRO LOAN -(IFRS) -16,218, ,218, , XX Interest receivable on micro loans Staff loans 154,858, ,858, , STAFF HOUSING LOANS 32,827, ,827, , STAFF SHARE LOAN 1,432, ,432, , STAFF MOTOR VEHICLE LOAN 85,550, ,550, , STAFF PERSONAL LOAN 35,046, ,046, , Overdrafts 554,533, ,533, , OVERDRAWN CURRENT ACCOUNT 554,533, ,533, , XX Interest receivable on Overdrafts Allowance for impairment on loans and advances -240,920, ,920, ,920 65

69 Allowance for specific impairment -165,418, ,418, , Allowance for specific impairment - term loans -47,703, ,703, , INT. IN SUSP NON PERFORMING CONTRA COLLECTIVE IMPAIRMENT INTEREST IN SUSPENSE -416, , SPECIFIC IMPAIRMENT-LOANS -47,287, ,287, , Allowance for specific impairment - overdrafts -117,715, ,715, , SPECIFIC PROVISION ON OVERDRAFT -117,715, ,715, , Allowance for collective impairment -75,501, ,501, , Allowance for collective impairment - term loans -49,963, ,963, , COLLECTIVE IMPAIRMENT-2 2,973, ,973, , COLLECTIVE IMPAIRMENT-1 46,660, ,660, , COLLECTIVE IMPAIRMENT-3-99,597, ,597, , Allowance for collective impairment - overdrafts -25,538, ,538, , % PROV. ON PERFORMING OVERDRAFT -25,538, ,538, , Investment Securities 37,023, ,023, , Available for Sale Investments 37,023, ,023, , AFS: Listed equities 354,521, ,521, , DIRECT INVESTMENT 354,521, ,521, , AFS Unlisted equities - cost 22,499, ,499, , UNQUOTED INVESTMENT 22,499, ,499, , Impairment allowance on AFS assets -339,997, ,997, , PROVISION FOR DIMINUTION IN THE VALUE OF INV -339,997, ,997, ,997 1.J.10 Property and equipment 423,533, ,533, , J.10.1 Property and Equipment - Cost 763,774, ,774, ,774 1.J Land and buildings - Cost 234,609, ,609, , FREEHOLD ON LAND AND BUILDING 234,609, ,609, , CONSTRUCTION OF HEAD OFFICE J Office equipment - Cost 108,980, ,980, , OFFICE EQUIPMENT 108,980, ,980, ,981 1.J Computer equipment - Cost 107,595, ,595, , COMPUTER EQUIPMENT 107,595, ,595, ,596 66

70 1.J Furniture and fittings - Cost 77,445, ,445, , FURNITURE AND FIXTURES 77,332, ,332, , VAULT SAFE 113, , J Motor vehicles - Cost 235,143, ,143, , MOTOR VEHICLES 235,143, ,143, ,143 1.J.10.2 Property and Equipment - Accumulated Depreciation -340,241, ,241, ,241 1.J Land and buildings - Accum Dep -28,626, ,626, , CUMM. DEPRE. LEASEHOLD ON LAND AND BUILDI -28,626, ,626, ,627 1.J Office equipment - Accum Dep -68,801, ,801, , CUMM. DEPRE. OFFICE EQUIPMENT -68,801, ,801, ,802 1.J Computer equipment - Accum Dep -59,769, ,769, , CUMM. DEPRE. COMPUTER EQUIPMENT -59,769, ,769, ,769 1.J Furniture and Fittings - Accum Dep -58,931, ,931, , CUMM. DEPRE. FURNITURE & FITTINGS -58,139, ,139, , CUMM. DEPRE. VAULT SAFE -792, , J Motor vehicles - Accum Dep -124,112, ,112, , CUMM. DEPRE. MOTOR VEHICLES -124,112, ,112, ,112 1.K.11 Intangible assets X1 Intangible Assets - Accum Ammort XX Intangible Assets - Cost Y.13 Other assets 963,488, ,488, ,486 1.Y.13.1 Prepayments 160,114, ,114, , PREPAYMENTS- 23,486, ,486, , PREPAYMENTS OF UPFRONT 30,588, ,588, , PREPAYMENT -OTHER INSURANCE 3,503, ,503, , PREPAYMENT -COMPUTER PREPAYMENT RENT ABUJA 11,416, ,416, , PREPAYMENT -VEH. INSURANCE ONGOING PROJECTS 1,199, ,199, , PREPAYMENT (STAFF COST) 82,558, ,558, , NDIC PREMIUM 7,362, ,362, , xxx PREPAYMENT RENT ENUGU PREPAYMENT RENT ABA Y.13.2 Inventory 46,271, ,271, , STOCKS OF CHEQUES 188, , BKS/JNLS/CASSATES/CDS STOCK OF OFFICE STATIONARIES 4,872, ,872, ,872 67

71 STOCK OF MICR CHEQUES 3,316, ,316, , STOCK OF NON MICR CHEQUES 8,624, ,624, , DIVIDEND RECEIVABLE STOCK OF ATM CARDS 15,551, ,551, , STOCK OF CREDIT CARD 13,718, ,718, ,718 1.Y.13.3 Other receivables 737,268, ,268, , STAFF CASH ADVANCE A/C 5,249, ,249, , SUNDRY DEBTORS 79,230, ,230, , HEAD OFFICE 680, , BENIN ONITSHA BRANCH Discount Instrument Maturity Suspense 15,620, ,620, , CONSUMER LOANS SUSPENSE 254, , FRAUD-FORGERY ACCOUNT 176, , PRE-OPERATIONAL EXPENSES BAUCHI PRE-OPERATIONALEXPENSES LAFIA PRE-OPERATIONALEXPENSES ENUGU PREPAYMENT RENT IBADAN PEPAYMENT RENT ABEOKUTA 10, , PREPAYMENT RENT IKORODU 7,752, ,752, , ATM WORKING CAPITAL-STERLING BANK-CREDIT 595,186, ,186, , TELLER SUSPENSE TAKE ON SUSPENSE STAFF TERMINAL BENEFIT - PLAN ASSET PREPAYMENT GRATUITY ATM WORKING CAPITAL - STERLING -DEBIT CARD NIBSS OUTFLOW SUSPENSE ACCOUNT FIXED ASSET SUSPENSE 33,117, ,117, , NIBSS INFLOW SUSPENSE ACCOUNT -10, , Y.13.4 Allowance for impairment on other assets -37,896, ,896, ,897 68

72 SPECIFIC PROVISION-OTHER ASSETS -37,896, ,896, ,897 1.Y.13.5 Pre-Operational expenses 57,730, ,730, , PRE-OPERATIONALEXPENSES -ikj 2 1,898, ,898, , PRE-OPERATIONALEXPENSES -TEJUOSHO 29,173, ,173, , PRE-OPERATIONALEXPENSES -KADUNA 11,674, ,674, , PRE-OPERATIONALEXPENSES -ORJI RIVER 574, , PRE-OPERATIONALEXPENSES -ABA 5,610, ,610, , PRE-OPERATIONALEXPENSES -ASABA 8,799, ,799, ,800 2 Liabilities 9,707,473, ,707,473, ,707, Deposits from Customers 6,213,222, ,213,222, ,213, Demand Deposits 2,134,969, ,134,969, ,134, CLEARING NPF SAL MSS 388, , CLEARING OTHERS CLEARING CIVIL SERV. SAL 1,743, ,743, , MSS1 Senior OFCR Sal Clearing 155, , MSS3 OTHERS SAL CLEARING 160, , CURRENT ACCOUNT INDIVIDUAL 123,298, ,298, , STAFF CURRENT ACCOUNT 8,569, ,569, , CURRENT ACCOUNT CORPORATE 626,775, ,775, , CURRENT ACCOUNT MGT STAFF 6,919, ,919, , LOAN DISBURSEMENT A/C 22,932, ,932, , SALARY CURRENT ACCOUNT 1,153,284, ,153,284, ,153, PAY ADVANCE ON CARD 10,017, ,017, , NPWIS CLEARING ACCOUNT 177,563, ,563, , NPWIS CLEARING CHEQUE 3,159, ,159, , X Excess COT-Sundry Deposits Term deposits 2,166,090, ,166,090, ,166, NON BANK CALL DEPOSIT 215,674, ,674, , IGP MAT.ACCOUNT I.G.P PREMIUM BOND 1,950,314, ,950,314, ,950, FIXED DEPOSIT 101, , Interest Payable on Term deposits INTEREST PAYABLE ON IGP DEPOSIT Savings deposits 1,912,163, ,912,163, ,912, REGULAR SAVINGS A/C 240,775, ,775, , PASA SAVINGS 61,468, ,468, , POFA SAVINGS 22,948, ,948, , SAVINGS A/C STAFF 11, , STAFF SAVINGS A/C 4,016, ,016, , SALARY SAVINGS 20,068, ,068, , WE-WE ACCOUNT 3,080, ,080, , DAILY CONTRIBUTIONS SAVINGS 62,275, ,275, , LOAN GUARANTEE SAVINGS 11,036, ,036, , CARD SAVINGS 1,436, ,436, ,436 69

73 MICRO LOANS GUARANTEE SAVINGS A/C 47,714, ,714, , TERM LOAN GUARANTY SAVINGS A/C 576,165, ,165, , OTSA SAVINGS 618,013, ,013, , MICRO SAVING 186,666, ,666, , FESTIVAL PROMO ACCOUNT 11,413, ,413, , UNCLARIFIED CREDITS IN BANK STATEMENTS 37,751, ,751, , CUSTOMER SAL. SUSPENSE 7,318, ,318, , Borrowings 467,527, ,527, , BOI CONCESSIONARY LOAN 50,516, ,516, , CBN CONCESSIONARY LOAN 401,126, ,126, , PROVISION FOR BOI INTEREST 1,168, ,168, , PROVISION FOR MSMEDF INTEREST 14,715, ,715, , Other liabilities 2,996,409, ,996,409, ,996, Accounts payable 1,018,902, ,018,902, ,018, ACCOUNT PAYABLE 4,468, ,468, , PAYEE

74 NHF 8,574, ,574, , STALED CHEQUE 26,927, ,927, , SUNDRY CREDITORS 16,156, ,156, , ATM EXCESS DEPOSIT 666, , TB DIFFERENCE STALED CHEQUE FBN 1,376, ,376, , DRAFT SUSPENSE INTEREST PAYABLE ON TERMINAL BENEFIT 11,642, ,642, , RETIREMENT BENEFIT OBLIGATION (CURRENT) 106,675, ,675, , RETIREMENT BENEFIT OBLIGATION (NON - CURRE 123,503, ,503, , FIXED ASSET SUSPENSE DEPOSIT FOR SHARES(POLICE COOPERATIVE) 718,910, ,910, , Accruals 103,680, ,680, , PROVISION FOR WITHOLDING TAX INDIVIDUAL 852, , PROVISION FOR WITHOLDING TAX COY 6,171, ,171, , PROVISION FOR AUDIT FEES 9,887, ,887, , Provision for AGM Expenses -1,764, ,764, , PROVISION YEAR END EXPENSES 12,349, ,349, , PROVISION FOR PROFIT SHARE 25,182, ,182, , PROVISION FOR VAT 9,238, ,238, , PROVISION FOR 13TH MONTH 35,041, ,041, , PROVISION FOR INSURANCE PREMIUM 7,431, ,431, , PROVISION FOR STAMP DUTY 141, , PROVISION FOR BOI LOAN INSURANCE 420, , PROVISION FOR ITF -1,359, ,359, , PROVISION FOR CBN LOAN INSURANCE 88, , PROVISION FOR STAFF TERMINAL BENEFITS Other Current Liabilities 1,873,826, ,873,826, ,873, Unearned income -15,076, ,076, , DEFERRED INCOME ON ATM -15,076, ,076, , Other payables 97, , SEARCH FEE SUSPENSE 97, , CUSTOMER SAL. SUSPENSE Deferred Income on Fees 94,563, ,563, , DEFFERED INCOME ON MANAGEMENT FEE 76,399, ,399, , DEFFERED INCOME ON LEGAL FEE 18,163, ,163, , ATM Suspense Account 1,794,241, ,794,241, ,794, ATM SETTLEMENT ACCOUNT 544,701, ,701, , ATM SETTLEMENT ACCOUNY (DEBIT CARD) 315,115, ,115, , ATM SETTLEMENT ACCOUNT (CREDIT CARD) 15,370, ,370, , NIBSS OUTFLOW SUSPENSE ACCOUNT 860,787, ,787, , NIBSS OUTFLOW SUSPENSE ACCOUNT 2 58,266, ,266, ,266 71

75 Provisons PROVISION FOR PRODUCTIVITY BONUS

76 2.4.6 RBO LIABILITIES YY RBO Liabilities (Current) ZZ RBO Liabilities (Non-current) Deferred tax liabilities/(assets) -35,411, ,411, , PROVISION FOR DEFERRED TAX -35,411, ,411, , Current Income tax liability 65,726, ,726, , PROVISION FOR TAXATION 65,726, ,726, , Retirement benefit obligations PENSION Staff Terminal Benefits - Plan Assets Staff Terminal Benefits - liability Capital and reserves -3,864,632, ,864,632, ,864, Share Capital -1,143,328, ,143,328, ,143, ISSUED AND FULLY PAID-UP CAPITAL -1,143,328, ,143,328, ,143, Share premium -1,517,484, ,517,484, ,517, SHARE PREMIUM A/C -1,517,484, ,517,484, ,517, Retained earnings -89,354, ,354, , GENERAL RESERVE 19,906, ,906, , RETAINED PROFIT -109,260, ,260, , Fair value reserve AVAILABLE FOR SALE RESERVES Other reserves -1,114,464, ,114,464, ,114, XX ACTUARIAL RESERVE STATUTORY RESERVES -1,006,398, ,006,398, ,006, REGULATORY RESERVE -108,066, ,066, , REMEASUREMENT GAIN/(LOSS) Income -2,099,270, ,099,270, ,099, Interest & similar income -1,446,222, ,446,222, ,446, Interest income on loans & advances to customers -1,389,531, ,389,531, ,389, INTEREST INCOME ON MICRO- LOANS -102,879, ,879, , INTEREST INCOME ON SME-LOANS -50, , INTEREST ON OVERDRAFT -116,880, ,880, , INTEREST ON STAFF PERSONAL LOANS -567, , INTEREST ON STAFF HOUSING LOANS -1,040, ,040, , INTEREST ON SHARE LOANS INTEREST ON STAFF VEHICLE LOANS -3,540, ,540, ,540 73

77 INTEREST ON LOANS/ADVANCES -643,679, ,679, , INTEREST INCOME ON LEASES -416, , INTEREST ON CONSUMER LOANS -27,653, ,653, , INTEREST ON BOI LOAN -5,772, ,772, , INTEREST ON CBN LOAN -2,389, ,389, , INTEREST INCOME ON MICRO LOANS WEEKLY -1,672, ,672, , INTEREST ON DIRECTORS LOANS INCOME ON RECOVERED LOANS -30, , INTEREST INCOME ON OTHER MICRO- LOANS -463,011, ,011, , INCOME ON WRITTEN-OFF LOANS -150, , INTEREST INCOME ON WE-WELOAN -220, , INTEREST ON INVESTEMENT UNDER LIEN -19,577, ,577, , INCOME ON RECOVERED LOAN Interest income on investment securities -56,690, ,690, , INTEREST INCOME ON I/B PLC CALL -2,929, ,929, , INTEREST INCOME ON BANK C/A INTEREST INCOME ON CALL A/C BANK C/A -29,583, ,583, , INTEREST INCOME ON T/BILLS -13,774, ,774, , INTEREST INCOME ON OTHER NON RD INVS INTEREST INCOME ON C/P -10,403, ,403, , Credit-related Fees and Commissions income -416,279, ,279, , LOAN AGREEMENT FORM FEE LOAN COMMITMENT FEE -121,191, ,191, , MANAGEMENT FEE ON OVERDRAFT -91,998, ,998, , LOAN PROCESSING FEE -105,750, ,750, , LOAN INSURANCE FEES -26,952, ,952, , LOAN LEGAL FEES -59,507, ,507, , INCOME CREDIT BUREAU FEE -10,383, ,383, , PASKBOOK FEES -410, , LOAN PENALTIES -84, , Deposit-related Fees and Commissions income -86,787, ,787, , Commission on turnover -25,597, ,597, , ACCOUNT MAINTENANCE FEE -25,597, ,597, ,598 74

78 Admin. and management fees -61,189, ,189, , GENERAL COMMISSIONS -15, , COMMISSION ON ATM CARD -5,513, ,513, , INCOME ON ATM CREDIT CARDS -2,907, ,907, , ACCOUNT OPENING FORM FEES -14, , INCOME ON NIP TRANSFER -3,534, ,534, , LEDGER CARD FEE LEDGER FEES SAVINGS TRANSACTION FEE ATM ACCOUNT MAINTENANCE FEE -10,170, ,170, , INCOME ON VIOLATION OF CASHLESS POLICY - IND -1,491, ,491, , INCOME ON VIOLATION OF CASHLESS POLICY - CO -702, , DAY INCOMEON WE-WE SAVINGS -219, , SMS INCOME -36,619, ,619, , ATM TRANSACTION FEE (NOU) Other operating income -149,981, ,981, , Dividend income on AFS securities -105, , DIVIDEND INCOME -105, , (Profit)/loss on disposal of property & equipment -1,857, ,857, , INCOME/LOSS ASSET DISPOSAL -1,857, ,857, , Other income -148,018, ,018, , BUSINESS ADVISORY SERVICES -1,198, ,198, , SUNDRY INCOME MISCE. INCOME OPS -15,908, ,908, , MISCE. INCOME ACCOUNTS -5,577, ,577, , INCOME ON SALARY ADMIN -125,333, ,333, , INT. INCOME ON CAPITAL MARKET Expenses 1,412,230, ,412,230, ,412, Interest expense 165,837, ,837, ,838 75

79 5.2.2 Interest expense - current accounts 5,968, ,968, , INTEREST EXPENSE ON CURRENT A/C 5,926, ,926, , INTEREST EXPENSE ON MGT CURRENT A/C 41, , Interest expense - time deposits 138,111, ,111, , INTEREST EXPENSE ON IGP DEPOSIT 103,534, ,534, , INTEREST EXPENSE ON CALL/FIXED DEPOSIT 3,820, ,820, , INTEREST EXPENSE ON POFA 547, , INTEREST EXPENSE ON PASA 1,360, ,360, , INTEREST EXPENSES ON TERM LOAN GUARANTEE 8,539, ,539, , INTEREST EXPENSES ON OTSA 20,308, ,308, , INTEREST EXPENSE IGP PREM. BOND INTEREST INCOMEON BANK C/A Interest expense - borrowings 14,425, ,425, , INTEREST EXPENSE ON BORROWED FUNDS 3,290, ,290, , INTEREST EXPENSE CBN BORROWED FUNDS 11,134, ,134, , XX9 Interest on RBO Interest expense - savings account 7,332, ,332, , INTEREST EXPENSE ON SAVINGS 7,105, ,105, , INTEREST EXPENSE ON FESTIVALPROMO ACCOUN 226, , Depreciation and amortisation 68,898, ,898, , Depreciation 68,898, ,898, , DEPRECIATION LAND & BUILDING 3,519, ,519, , DEPRECIATION FURNITURE AND FITTINGS 7,428, ,428, , DEPRECIATION MOTOR VEHICLES 30,896, ,896, , DEPRECIATION OFFICE EQUIPMENT 15,321, ,321, , DEPRECIATION COMPUTER EUIPMENT 11,731, ,731, , DEPRECIATION VAULT SAFE Other operating expenses 432,464, ,464, , Repairs and maintenance 47,677, ,677, , REPAIRS & MAINTENANCE BUSINESS PREMISES 6,020, ,020, , REPAIRS & MAINTENANCE (HARDWARE) 3,764, ,764, , REPAIRS & MTCE BUSINESS PREMISES MAINTENANCE SOFTWARE 18,879, ,879, , REPAIRS & MAINTENANCE OFFICE EQUIP. 4,089, ,089, , REPAIRS & MAINT. FURNITURE AND FITTINGS 5,379, ,379, , MOTOR VEHICLE EXPENSES 9,543, ,543, , Vehicle and generator running cost 42,017, ,017, , GENERATOR RUNNING EXPENSES 26,955, ,955, , FUELING MOTOR VEHICLE 15,062, ,062, ,062 76

80 Office expenses 49,958, ,958, , COMMUNICATION TELEPHONE 3,578, ,578, , GENERAL OFFICE EXPENSES 11,474, ,474, , NEWSPAPERS, BOOKS & PERIODICALS 1,259, ,259, , OFFICE MAINTENANCE ENTERTAINMENT 3,357, ,357, , OFFICE STATIONERY 127, , GENERAL OFFICE SUPPLIES 317, , SPECIE AND SECURITY 12,364, ,364, , COMM. TELEX AND CABLE 1,462, ,462, , CLEANING EXPENSES 2,627, ,627, , COMMUNICATION/POSTAGE & STAMPS 3,541, ,541, , PRINTING & STATIONARY 9,846, ,846, , Computer Expenses 31,097, ,097, , COMPUTER CONSUMABLES 2,258, ,258, , IT COMMUNICATION (WAN) 28,838, ,838, , Travel expenses 25,657, ,657, , OUT OF STATION ALLOWANCE 13,156, ,156, , OUT OF STATION TRAVEL EXP 8,316, ,316, , LOCAL TRANSPORT FARES 4,183, ,183, , AGM & Year end Expenses 22,417, ,417, , AGM EXPENSES 10,405, ,405, , YEAR END EXPENSES 12,012, ,012, , Bank Charges 17,979, ,979, , BANK CHARGES 17,979, ,979, , Publicity Expenses 36,038, ,038, , ADVERTISEMENT & POSTERS 1,304, ,304, , MARKETING EXPENSES 28,969, ,969, , P/R ACCOUNT 5,765, ,765, , Professional Fees 12,019, ,019, , CONSULTANCY FEES 12,019, ,019, ,019 Insurance Costs 16,011, ,011, , INSURANCE VEHICLE INSURANCE 7,665, ,665, , INSURANCE OTHERS INSURANCE 8,346, ,346, ,347 NDIC Premium 22,086, ,086, , NDIC PREMIUM EXPENSES 22,086, ,086, ,086 Rents and Rates 15,611, ,611, , RENT 15,611, ,611, ,611 Subscription fees 2,414, ,414, , PROF. ORG. SUBSCRIPTION FEES 2,342, ,342, ,342 77

81 SUBSCRIPTION/SOCIAL CLUBS 72, , Charges and levies 2,277, ,277, , XX1 ITF Levy Expense CHARGES ON TREASURY BILL 302, , NIBSS OPERATION 1,974, ,974, ,975 Other expenses 22,715, ,715, , BAD DEBTS WRITTEN OFF DONATION 4,379, ,379, , ELECTRICITY 6,987, ,987, , RECRUITMENT EXPENSES 46, , ATM DAMAGED CARDS 13, , LOAN RECOVERY EXPENSES 101, , FINES 2,445, ,445, , STAMP DUTIES-FILLING FEES 49, , LEGAL EXPENSES 986, , AMORTIZATION OF PRE-OPERATIONAL EXP. 1,725, ,725, , SMS ALERT 5,480, ,480, , FRAUD,FORGERY AND THEFT SHARE LISTING EXPENSES XXXX WHT Auditors remuneration 11,288, ,288, , AUDIT EXPENSES 11,288, ,288, ,289 Directors emoluments 55,196, ,196, , DIRECTOR'S SITTING ALLOWANCE 21,273, ,273, , DIRECTORS EXPENSES 33,300, ,300, , SITTING ALLOWANCE OTHERS 623, ,

82 5.6 Personnel expenses 661,524, ,524, , Salaries and wages 635,287, ,287, , SALARY AND WAGES 151,845, ,845, , HOUSING ALLOWANCE 86,198, ,198, , TRANSPORT ALLOWANCE 28,783, ,783, , UTILITY ALLOWANCE 10,408, ,408, , LUNCH SUBSIDY 15,868, ,868, , DRESSING ALLOWANCE 11,182, ,182, , FURNITURE ALLOWANCE 7,225, ,225, , EDUCATION ALLOWANCE 8,234, ,234, , DOMESTIC SERVANT ALLOWANCE 3,349, ,349, , ENTERTAINMENT ALLOWANCE 3,869, ,869, , TRAINING EXPENSES 7,438, ,438, , OTHER ALLOWANCES 48,108, ,108, , ACCOUNTING ALLOWANCE STAFF MEDICAL EXPENSES 26,167, ,167, , STAFF WELFARE 28,996, ,996, , LEAVE ALLOWANCE 33,511, ,511, , PRODUCTIVITY BONUS ACTING ALLOWANCE 1,064, ,064, , TERMINAL BENEFITS 17,376, ,376, , STAFF TRANSFER EXPENSES 11,491, ,491, , PROFIT SHARE 76,397, ,397, , TH MONTH 35,041, ,041, , SUPPORT SERVICE 22,596, ,596, , SALARY&WAGES SUSPENSE 134, , XX8 OTHER STAFF COST NEW Retirement benefit costs 26,236, ,236, , COY CONTRIBUTION PENSION 25,796, ,796, , COY CONTRIBUTION NSITF 440, , XX7 COY GRATUITY Income tax expense INCOME TAX BLANK (4530) Deferred taxation BLANK (4531) Education taxation BLANK (4427) Information Technology levy

83 5.8 Allowance for impairment (p&l) 83,505, ,505, , Allowance for impairment - loans (P/L) 82,374, ,374, , PROVISION FOR BAD DEBTS EXPENSES 65,455, ,455, , PROVISION FOR OVERDRAFT EXPENSES 4,125, ,125, , % NCOLLECTIVE IMPAIRMENT 12,793, ,793, ,793 BLANK (4961) Write back on impairment XX PROV INDI IMPAIRMENT LOAN XX PROV INDI IMPAIRMENT O/D Allowance for impairment - Placements (P/L) XX ALLOWANCE ON DOUBTFUL PLACEMENTS Allowance for impairment - Other assets (P/L) XX ALLOWANCE FOR DOUBTFUL OTHER ASSETS Allowance for impairment - Investments (P/L) 1,130, ,130, , DIMINUTION-CAPITAL MARKET INVESTMENT 1,130, ,130, , AFS EQUITY VALUE CHANGE (EXPENSE) Corporate Social Responsibilty 500, , CORPOATE SOCIAL RESPONSIBILITY 500, , PAT -687,040, ,040, ,039 PBT -687,040, ,040, ,040 Total assets 14,259,145, ,259,145, ,259,146 Total liabilities 9,707,473, ,707,473, ,707,473 Total equity 4,551,672, ,551,672, ,551,672 Total liabilities and equity 14,259,145, ,259,145, ,259,146 Difference - 80

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