INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF FINANCIAL POSITION as at 31 March 2015 Economic Entity The Bank Note ASSETS Cash and short-term funds 2,941,959 3,333,472 2,941,959 3,333,472 Derivative financial assets 13 171 12 171 12 Financial investments available-for-sale 14 1,502,564 1,532,500 1,502,564 1,532,500 Financial investments held-to-maturity 15 84,195 82,754 84,195 82,754 Financing, advances and other financing 16 7,297,001 7,163,621 7,297,001 7,163,621 Other assets 17 80,742 48,315 80,742 48,315 Amount due from holding company 419,895 242,058 419,895 242,058 Amount due from joint ventures 22,160 14,855 22,160 14,855 Tax recoverable 2-2 - Deferred tax assets 414 2,900 414 2,900 Statutory deposits with Bank Negara Malaysia 327,000 298,000 327,000 298,000 Investment in joint ventures - - 650 650 Property and equipment 3,081 3,261 3,081 3,261 Intangible assets 775 891 775 891 TOTAL ASSETS 12,679,959 12,722,639 12,680,609 12,723,289 LIABILITIES AND EQUITY Deposits from customers 18 9,614,027 9,870,394 9,614,027 9,870,394 Deposits and placements of banks and other financial institutions 19 2,238,948 2,045,720 2,238,948 2,045,720 Derivative financial liabilities 20 220 34 220 34 Other liabilities 21 27,033 30,358 27,033 30,358 Provision for taxation 4,158 4,071 4,158 4,071 TOTAL LIABILITIES 11,884,386 11,950,577 11,884,386 11,950,577 Share capital 360,000 360,000 360,000 360,000 Reserves 22 435,573 412,062 436,223 412,712 TOTAL EQUITY 795,573 772,062 796,223 772,712 TOTAL LIABILITIES AND EQUITY 12,679,959 12,722,639 12,680,609 12,723,289 COMMITMENTS AND CONTINGENCIES 29 2,303,297 2,112,921 2,303,297 2,112,921 Capital Adequacy CET1 capital ratio 32 12.423% 12.456% 12.429% 12.465% Tier 1 capital ratio 32 12.423% 12.456% 12.429% 12.465% Total capital ratio 32 13.650% 13.674% 13.650% 13.674% 1
INTERIM FINANCIAL STATEMENTS UNAUDITED INCOME STATEMENTS for the financial quarter ended 31 March 2015 Individual Quarter Cumulative Quarter Economic Entity Economic Entity Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Note Income derived from investment of depositors' funds and others 23 128,697 113,869 128,697 113,869 Income derived from investment of shareholders' funds 24 8,932 7,695 8,932 7,695 Allowances for losses on financing, advances and other financing 25 (1,659) (162) (1,659) (162) Total distributable income 135,970 121,402 135,970 121,402 Income attributable to the depositors 26 (82,964) (72,008) (82,964) (72,008) Total net income 53,006 49,394 53,006 49,394 Other operating expenses 27 (29,484) (28,379) (29,484) (28,379) Profit before zakat and taxation 23,522 21,015 23,522 21,015 Zakat - - - - Profit before taxation 23,522 21,015 23,522 21,015 Taxation (5,757) (3,217) (5,757) (3,217) Net profit after zakat and taxation 17,765 17,798 17,765 17,798 Attributable to: Equity holders of the Bank 17,765 17,798 17,765 17,798 Earnings per share (sen): - Basic 4.9 4.9 4.9 4.9 2
INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME for the financial quarter ended 31 March 2015(continued) Individual Quarter Cumulative Quarter Economic Entity Economic Entity Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Profit after zakat and taxation 17,765 17,798 17,765 17,798 Other comprehensive income: Items that may be reclassified subsequently to profit and loss: Net fair value change in financial investments available-for-sale 7,560 1,318 7,560 1,318 Deferred tax on financial investments available-for-sale (1,814) (316) (1,814) (316) Other comprehensive income for the financial period, net of tax 5,746 1,002 5,746 1,002 Total comprehensive income for the financial period 23,511 18,800 23,511 18,800 Attributable to equity holders of the Bank: - Total comprehensive income 23,511 18,800 23,511 18,800 3
INTERIM FINANCIAL STATEMENTS UNAUDITED INCOME STATEMENTS for the financial quarter ended 31 March 2015 (continued) Individual Quarter Cumulative Quarter The Bank The Bank Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Note Income derived from investment of depositors' funds and others 23 128,697 113,869 128,697 113,869 Income derived from investment of shareholders' funds 24 8,932 7,695 8,932 7,695 Allowances for losses on financing, advances and other financing 25 (1,659) (162) (1,659) (162) Total distributable income 135,970 121,402 135,970 121,402 Income attributable to the depositors 26 (82,964) (72,008) (82,964) (72,008) Total net income 53,006 49,394 53,006 49,394 Other operating expenses 27 (29,484) (28,379) (29,484) (28,379) Profit before zakat and taxation 23,522 21,015 23,522 21,015 Zakat - - - - Profit before taxation 23,522 21,015 23,522 21,015 Taxation (5,757) (3,217) (5,757) (3,217) Net profit after zakat and taxation 17,765 17,798 17,765 17,798 Attributable to: Equity holders of the Bank 17,765 17,798 17,765 17,798 Earnings per share (sen): - Basic 4.9 4.9 4.9 4.9 4
INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF COMPREHENSIVE INCOME for the financial quarter ended 31 March 2015(continued) Individual Quarter Cumulative Quarter The Bank The Bank Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Profit after zakat and taxation 17,765 17,798 17,765 17,798 Other comprehensive income: Items that may be reclassified subsequently to profit and loss: Net fair value change in financial investments available-for-sale 7,560 1,318 7,560 1,318 Deferred tax on financial investments available-for-sale (1,814) (316) (1,814) (316) Other comprehensive income for the financial period, net of tax 5,746 1,002 5,746 1,002 Total comprehensive income for the financial period 23,511 18,800 23,511 18,800 Attributable to equity holders of the Bank: - Total comprehensive income 23,511 18,800 23,511 18,800 5
INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF CHANGES IN EQUITY for the financial quarter ended 31 March 2015 Attributable to Equity Holders of the Bank AFS Share Statutory revaluation Regulatory Retained capital reserves reserves reserves profits Total Economic Entity At 1 January 2015 360,000 206,324 (5,876) 49,020 162,594 772,062 Net profit for the financial period - - - - 17,765 17,765 Other comprehensive income (net of tax) - Financial investments available-for-sale - - 5,746 - - 5,746 Total comprehensive income - - 5,746-17,765 23,511 Transfer to regulatory reserves - - - 2,194 (2,194) - At 31 March 2015 360,000 206,324 (130) 51,214 178,165 795,573 AFS Share Statutory revaluation Regulatory Retained capital reserves reserves reserves profits Total Economic Entity At 1 January 2014 360,000 173,026 (6,925) - 178,316 704,417 - - - - - - 360,000 173,026 (6,925) - 178,316 704,417 Net profit for the financial period - - - - 17,798 17,798 Other comprehensive income (net of tax) - Financial investments available-for-sale - - 1,002 - - 1,002 Total comprehensive income - - 1,002-17,798 18,800 At 31 March 2014 360,000 173,026 (5,923) - 196,114 723,217 6
INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF CHANGES IN EQUITY for the financial quarter ended 31 March 2015 (continued) Non-distributable Distributable AFS Share Statutory revaluation Regulatory Retained capital reserves reserves reserves profits Total The Bank At 1 January 2015 360,000 206,324 (5,876) 49,020 163,244 772,712 Net profit for the financial period - - - - 17,765 17,765 Other comprehensive income (net of tax) - Financial investments available-for-sale - - 5,746 - - 5,746 Total comprehensive income - - 5,746-17,765 23,511 Transfer to regulatory reserves - - - 2,194 (2,194) - At 31 March 2015 360,000 206,324 (130) 51,214 178,815 796,223 AFS Share Statutory revaluation Regulatory Retained capital reserves reserves reserves profits Total The Bank At 1 January 2014 360,000 173,026 (6,925) - 178,966 705,067 Net profit for the financial period - - - - 17,798 17,798 Other comprehensive income (net of tax) - Financial investments available-for-sale - - 1,002 - - 1,002 Total comprehensive income - - 1,002-17,798 18,800 At 31 March 2014 360,000 173,026 (5,923) - 196,764 723,867 7
INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF CASH FLOWS for the financial quarter ended 31 March 2015 CASH FLOWS FROM OPERATING ACTIVITIES Economic Entity The Bank 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Profit before taxation 23,522 21,015 23,522 21,015 Adjustments for items not involving the movement of cash and cash equivalents: Finance income and hibah from: - financial investments available-for-sale (11,228) (11,930) (11,228) (11,930) - financial investments held-to-maturity (1,441) (1,440) (1,441) (1,440) Accretion of discount less amortisation of premium: - financial investments available-for-sale (3,107) 52 (3,107) 52 Gain on sale: - financial investments available-for-sale (119) (669) (119) (669) Gain on unrealised foreign exchange 27 124 27 124 Depreciation of property and equipment 254 203 254 203 Amortisation of intangible assets 116 194 116 194 Net individual impairment 2,397 (1,316) 2,397 (1,316) Net collective impairment (601) 1,540 (601) 1,540 Bad debt on financing written-off - 1-1 Operating profit before changes in working capital 9,820 7,774 9,820 7,774 Decrease/(increase) in operating assets: Deposits and placements with banks and other financial institutions - 120,016-120,016 Foreign exchange transaction - 410-410 Financing, advances and other financing (135,176) (365,774) (135,176) (365,774) Other assets (30,204) 5,094 (30,204) 5,094 Statutory deposits with Bank Negara Malaysia (29,000) (21,700) (29,000) (21,700) Amount due from holding company (177,837) (65,814) (177,837) (65,814) Amount due from joint ventures (7,305) (7,638) (7,305) (7,638) Derivative financial instruments 27 124 27 124 (Decrease)/Increase in operating liabilities: Deposits from customers (256,367) (514,232) (256,367) (514,232) Deposits and placements of banks and other financial institutions 193,228 (644,976) 193,228 (644,976) Amount due to holding company - (60,115) - (60,115) Other liabilities (2,764) 5,466 (2,764) 5,466 Cash used in operations (435,578) (1,541,365) (435,578) (1,541,365) Zakat paid (559) (850) (559) (850) Tax refund - 1,937-1,937 Tax paid (5,000) (5,000) (5,000) (5,000) Net cash used in operating activities (441,137) (1,545,278) (441,137) (1,545,278) 8
INTERIM FINANCIAL STATEMENTS UNAUDITED STATEMENTS OF CASH FLOWS for the financial quarter ended 31 March 2015 (continued) Economic Entity The Bank 31/3/2015 31/3/2014 31/3/2015 31/3/2014 CASH FLOWS FROM INVESTING ACTIVITIES Finance income and hibah received from: - financial investments available-for-sale 11,228 11,930 11,228 11,930 - financial investments held-to-maturity 1,441 1,440 1,441 1,440 Redemption of financial investments held-to-maturity (1,441) (1,440) (1,441) (1,440) Net sale/(purchase) of financial investments available-for-sale 40,719 (16,766) 40,719 (16,766) Purchase of property and equipment (74) (64) (74) (64) Net cash generated from/(used in) investing activities 51,873 (4,900) 51,873 (4,900) Net decrease in cash and cash equivalents (389,264) (1,550,178) (389,264) (1,550,178) Net decrease in foreign exchange (2,249) (706) (2,249) (706) Cash and cash equivalents at beginning of the financial period 3,333,472 4,506,301 3,333,472 4,506,301 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 2,941,959 2,955,417 2,941,959 2,955,417 9
1 BASIS OF PREPARATION This unaudited condensed interim financial information for the 3 months ended 31 March 2015 has been prepared in accordance with MFRS134 Interim Financial Reporting issued by the Malaysian Accounting Standards Board ('MASB') Approved Accounting Stardards in Malaysia for Entities Other Than Private Entities, Bank Negara Malaysia ('BNM') Guidelines and the requirements of the Companies Act, 1965 in Malaysia. The financial statements of the Bank have been prepared under the historical cost convention, unless otherwise indicated in this summary of significant accounting policies. The unaudited condensed interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2014, which have been prepared in accordance with the Malaysian Financial Reporting Standards ('MFRS'). The explanatory notes to this interim financial statements provide an explanation of events and transactions that are significant to an understanding of the changes in the Bank since the year ended 31 December 2014. 2 ACCOUNTING POLICIES The consolidated financial statements include the financial statements of the Bank and a joint ventures, made up to the quarter ended 31 March 2015. The presentation of the comparative financial statements of the Bank has been restated to conform with the current period's pesentation. The new and revised Malaysian Financial Reporting Standards ('MFRS') which became effective for the financial period beginning 1 January 2015 are as follows: Amendment to MFRS 11 'Joint arrangements' (effective from 1 January 2016); Amendment to MFRS 116 'Property, plant and equipment' and MFRS 138 'Intangible assets' (effective from 1 January 2016); Amendment to MFRS 10 and MFRS 128 regarding sale or contribution of assets between an investor and its associate or joint venture (effective from 1 January 2016); MFRS 9 'Financial Instruments' (effective from 1 January 2018) will replace MFRS 139 'Financial instruments : Recognition and Measurement' and MFRS 15 'Revenue from contracts with customers' (effective from 1 January 2017) replaces MFRS 118 'Revenue' and MFRS 111 'Construction contracts'. The Bank will apply these standards when effective. The adoption of the above standards, amendments to published standards and interpretations to existing standards are not expected to have any significant impact on the financial statements of the Bank except for MFRS 9. The financial effect of adoption of MFRS 9 is still being assessed by the Bank. 3 QUALIFICATION OF PRECEDING ANNUAL FINANCIAL STATEMENTS The auditors' report on the audited annual financial statements for the financial year ended 31 December 2014 was not qualified. 4 SEASONAL OR CYCLICAL FACTORS The business operations of the Bank are not subject to material seasonal or cyclical fluctuation. 10
5 EXCEPTIONAL ITEMS There was no exceptional items for the quarter ended 31 March 2015. 6 CHANGES IN ACCOUNTING POLICIES AND ADJUSTMENT Refer to Note 2 7 CHANGES IN DEBTS AND EQUITY SECURITIES There were no purchases or disposal of quoted securities for the quarter ended 31 March 2015 other than in the ordinary course of business. 8 DIVIDENDS There were no interim dividend declared. 9 SUBSEQUENT MATERIAL EVENT There is no material subsequent event after the quarter ended 31 March 2015 that have material financial impact. 10 CHANGES IN THE COMPOSITION OF THE BANK There is no changes in the composition of the Bank between now and 31 December 2014 audited accounts. 11 PURCHASE AND SALE OF QUOTED SECURITIES There were no purchases or disposals of quoted securities for the quarter ended 31 March 2015 other than in the ordinary course of business. 12 STATUS OF CORPORATE PROPOSAL There were no corporate proposals announced but not completed during the period ended 31 March 2015. 11
13 DERIVATIVE FINANCIAL ASSETS Current Financial Quarter Previous Financial Year End Contract/ Contract/ notional notional amount Assets amount Assets At fair value Foreign exchange derivatives - Currency forwards 80,778 171 12,960 12 80,778 171 12,960 12 14 FINANCIAL INVESTMENTS AVAILABLE-FOR-SALE At fair value Money market instruments: Malaysian Government treasury bills 25,235 25,004 Malaysian Government investment issues 494,784 501,536 Sukuk Perumahan Kerajaan 158,406 79,139 Bank Negara Malaysia Monetary Notes 146,912 284,878 Khazanah Sukuk 161,782 120,169 987,119 1,010,726 Unquoted securities: Shares in Malaysia 575 575 Private debt securities - in Malaysia 515,420 521,749 1,503,114 1,533,050 Allowance for impairment losses (550) (550) 1,502,564 1,532,500 Movement in Allowance for Financial Investments Available-For-Sale At beginning of the financial period 550 - Allowance made during the financial period - 550 At end of the financial period 550 550 12
15 FINANCIAL INVESTMENTS HELD-TO-MATURITY At amortised cost Unquoted securities: Private debt securities in Malaysia 84,195 82,754 84,195 82,754 16 FINANCING, ADVANCES AND OTHER FINANCING (i) By type Cash line 221,474 203,963 Term financing - House financing 1,877,132 1,832,181 - Hire purchase receivables 2,164,245 2,044,709 - Syndicated financing 265,587 262,031 - Other term financing 1,961,092 1,919,442 Bills receivables 10,319 12,189 Trust receipts 27,624 19,848 Claims on customers under acceptances credits 105,716 121,416 Staff financing (of which RM Nil to Directors) 9,464 9,629 Revolving credits 724,331 807,125 Gross financing, advances and other financing 7,366,984 7,232,533 Allowance for impairment losses - Individual (33,191) (31,519) - Collective (36,792) (37,393) Total net financing, advances and other financing 7,297,001 7,163,621 13
16 FINANCING, ADVANCES AND OTHER FINANCING (ii) By maturity structure Maturing within one year 1,124,564 1,207,258 One year to three years 533,196 516,323 Three years to five years 1,039,373 935,083 Over five years 4,669,851 4,573,869 7,366,984 7,232,533 (iii) By contract Bai' Bithamin Ajil (deferred payment sale) 1,608,183 1,665,341 AITAB 2,164,245 2,044,708 Murabahah (cost-plus) 1,329,059 1,356,948 Others 2,265,497 2,165,536 7,366,984 7,232,533 (iv) By type of customer Domestic non-banking institutions - Others 176,272 211,956 Domestic business enterprises - Small medium enterprises 685,608 638,244 - Others 2,303,162 2,343,458 Government and statutory bodies 63,498 59,427 Individuals 3,985,119 3,850,269 Other domestic entities 21,976 4,192 Foreign entities 131,349 124,987 7,366,984 7,232,533 14
16 FINANCING, ADVANCES AND OTHER FINANCING (continued) (v) By profit rate sensitivity Fixed rate - House financing 60,091 62,282 - Hire purchase receivables 2,164,245 2,044,708 - Other fixed rate financing 723,223 642,523 Variable rate - BFR - plus 3,164,641 3,091,739 - Cost - plus 1,254,784 1,391,281 7,366,984 7,232,533 (vi) By economic sectors Primary agriculture 268,134 267,052 Mining and quarrying 5,892 796 Manufacturing 207,540 234,966 Electricity, gas and water supply 52,362 53,113 Construction 585,947 579,112 Real estate 688,277 603,377 Wholesale & retail trade and restaurants & hotels 213,143 201,228 Transport, storage and communication 37,616 135,235 Finance, insurance and business activities 699,155 753,653 Education, health and others 574,430 523,044 Household 4,013,508 3,877,834 Others 20,980 3,123 7,366,984 7,232,533 15
16 FINANCING, ADVANCES AND OTHER FINANCING (continued) (vii) By economic purpose Purchase of securities 2,824 2,949 Purchase of transport vehicles 2,179,733 2,052,279 Purchase of landed property of which: - Residential 1,889,701 1,843,107 - Non-residential 900,937 907,558 Fixed assets other than land and building 96,705 67,074 Personal use 37,336 34,883 Construction 572,452 683,323 Working capital 1,513,888 1,496,671 Others 173,408 144,689 7,366,984 7,232,533 (viii) By geographical distribution Perlis 72,719 98,027 Kedah 450,884 424,678 Pulau Pinang 164,706 156,894 Perak 341,737 334,133 Selangor 2,638,987 2,602,144 Wilayah Persekutuan 1,940,556 1,925,410 Negeri Sembilan 241,335 220,038 Melaka 109,173 103,272 Johor 342,799 320,150 Pahang 283,177 274,964 Terengganu 407,154 399,613 Kelantan 161,751 167,266 Sarawak 25,220 24,109 Sabah 83,792 84,378 Labuan 66 70 Outside Malaysia 102,928 97,387 7,366,984 7,232,533 16
16 FINANCING, ADVANCES AND OTHER FINANCING (continued) (ix) Movements of impaired financing At beginning of the financial period 129,157 131,630 Classified as impaired 27,014 90,964 Reclassified as non-impaired (18,561) (54,830) Amount recovered (2,832) (34,076) Amount written-off (2,383) (4,531) At end of the financial period 132,395 129,157 Ratio of gross impaired financing, advances and other financing to gross financing, advances and other financing 1.80% 1.79% Gross financing, advances and other financing 7,366,984 7,232,533 RPSIA (596,169) (608,590) 6,770,815 6,623,943 Less: - Individual impairment allowance (33,191) (31,519) - Collective impairment allowance on impaired financing (16,319) (16,273) Total net financing, advances and other financing 6,721,305 6,576,151 Net impaired financing, advances and other financing as a percentage of net financing, advances and other financing 1.23% 1.24% 17
16 FINANCING, ADVANCES AND OTHER FINANCING (continued) (x) Movements in allowance for impairment on financing Individual impairment At beginning of the financial period 31,519 34,584 Allowance made during the financial period 2,437 1,509 Amount recovered (40) (3,782) Amount written-off (2,383) (1,813) Unwinding of income (29) (763) Exchange differences 1,687 1,784 At end of the financial period 33,191 31,519 Collective impairment At beginning of the financial period 37,393 33,719 (Amount recovered)/allowance made during the financial period (601) 6,383 Amount written-off - (2,709) At end of the financial period 36,792 37,393 As a percentage of gross financing and advances 0.55% 0.57% (excluding RPSIA financing) less individual assesment allowance The gross exposure of the assets under RPSIA is RM807.2 million (31 December 2014 : RM807.2 million). There were no collective allowance and individual allowance made for the RPSIA. 18
16 FINANCING, ADVANCES AND OTHER FINANCING (continued) (xi) Impaired financing by economic sectors Primary agriculture 96 117 Manufacturing 343 2,703 Construction 74,599 70,279 Wholesale & retail trade and restaurants & hotels 1,774 358 Transport, storage and communication 209 294 Finance, insurance and business activities 604 626 Education, health and others 262 - Household 54,508 54,780 132,395 129,157 (xii) Impaired financing by economic purpose Purchase of transport vehicles 12,274 12,220 Purchase of landed property of which: - Residential 41,790 42,081 - Non-residential 1,332 1,086 Personal use 473 480 Construction 74,080 70,030 Working capital 2,446 3,260 132,395 129,157 19
16 FINANCING, ADVANCES AND OTHER FINANCING (continued) (xiii) Impaired financing by geographical distribution Perlis 166 252 Kedah 943 1,300 Pulau Pinang 2,074 1,996 Perak 4,230 4,037 Selangor 28,192 29,098 Wilayah Persekutuan 6,263 5,071 Negeri Sembilan 3,582 2,866 Melaka 275 175 Johor 2,918 2,699 Pahang 1,063 3,446 Terengganu 3,915 4,309 Kelantan 4,072 3,362 Sarawak 488 325 Sabah 134 189 Outside Malaysia 74,080 70,032 132,395 129,157 17 OTHER ASSETS Other debtors, deposits and prepayments 1,085 900 Clearing accounts 79,262 47,020 Foreclosed properties (a) 395 395 80,742 48,315 (a) Foreclosed properties At beginning/end of the financial period 395 395 20
18 DEPOSITS FROM CUSTOMERS (i) By type of deposit Non-Mudharabah Demand deposits 2,506,487 2,664,058 Savings deposits 405,507 395,338 Negotiable islamic debt certificate ('NIDC') - 249,412 Murabahah term deposits 5,654,020 5,190,631 Commodity Murabahah 922,533 1,030,814 Mudharabah General investment deposits 125,480 340,141 9,614,027 9,870,394 (ii) Maturity structure of general investment deposits and NID Due within six months 4,619,119 4,569,492 Six months to one year 1,109,755 973,791 One year to three years 50,226 236,252 Three years to five years 400 649 5,779,500 5,780,184 (iii) By type of customer Government and statutory bodies 3,114,398 3,399,344 Business enterprise 3,904,728 3,777,844 Individuals 1,240,958 1,192,904 Domestic banking institutions 19 249,413 Domestic non-banking financial institutions 971,500 976,957 Foreign entities 56,609 60,455 Others entities 325,815 213,477 9,614,027 9,870,394 21
19 DEPOSITS AND PLACEMENTS OF BANKS AND OTHER FINANCIAL INSTITUTIONS Mudharabah Licensed banks (*) 1,714,560 1,446,838 Other financial institutions 524,388 598,882 2,238,948 2,045,720 Maturity structure of deposits are as follows: Due within six months 1,900,764 1,710,730 One year to three years 230,983 228,787 Three years to five years 107,201 106,203 2,238,948 2,045,720 * Inclusive of Restricted Profit Sharing Investment Account ("RPSIA") placed by the parent amounting to RM 596.2 million (31 December 2014 : RM661.9 million) to fund certain specific financing. The contract used is based on the Mudharabah principle between two parties to finance a financing where the depositor (i.e.'affin BANK') act as an investor solely provides capital and the business venture is managed solely by the bank (i.e. AFFIN Islamic) act as an entrepreneur. Both parties share the profit of the business venture based on pre-agreed ratio. Any losses will be borned by the depositor. 20 DERIVATIVE FINANCIAL LIABILITIES Current Financial Quarter Previous Financial Year End 31/3/2015 31/12/2014 Contract/ Contract/ notional notional amount Liabilities amount Liabilities At fair value Foreign exchange derivatives - Currency forwards 72,104 220 11,072 34 72,104 220 11,072 34 22
21 OTHER LIABILITIES Margin and collateral deposits 12,545 10,996 Other creditors and accruals 5,132 7,211 Sundry creditors 5,431 7,383 Provision for zakat 3,481 4,040 Defined contribution plan (a) 418 702 Accrued employee benefits (b) 23 23 Charity funds 3 3 27,033 30,358 (a) Defined contribution plan The Bank contributes to the Employee Provident Fund ('EPF'), the national defined contribution plan. Once the contributions have been paid, the Bank has no further payment obligations. (b) Accrued employee benefits This refers to the accruals for short-term employee benefits for leave entitlement. Under employment contract, employees earn their leave entitlement which they are entitled to carry forward and will lapse if not utilised in the following accounting period. Accruals are made for the estimated liability for unutilised annual leave. 23
22 RESERVES Economic Entity The Bank Retained profits 178,165 162,594 178,815 163,244 AFS revaluation reserves (130) (5,876) (130) (5,876) Statutory reserves 206,324 206,324 206,324 206,324 Regulatory reserves 51,214 49,020 51,214 49,020 435,573 412,062 436,223 412,712 Statutory reserves At beginning of the financial period 206,324 173,026 206,324 173,026 Transfer from retained profits - 33,298 (2,194) 33,298 At end of the financial period 206,324 206,324 204,130 206,324 (a) As at 31 March 2015, the Bank has a tax exempt account balance of RM11,869,772 (2014: RM11,869,772) under Section 12 of the Income Tax (Amendment) Act 1999, subject to agreement by the Inland Revenue Board. (b) The statutory reserves of the Bank are maintained in compliance with the provisions of the Islamic Financial Services Act 2013 and are not distributable as cash dividends. (c) AFS revaluation reserves represent the unrealised gains or losses arising from the change in fair value of investments classified as financial investment available-for-sale.the gains or losses are transferred to the income statement upon disposal or when the securities become impaired. The depositors' portion of net unrealised gains or losses on 'Available-for-sale' at the end of financial year is net unrealised losses of RM159,110 (2014: net unrealised losses of RM7,217,763). (d) The Bank is required to maintain in aggregate collective impairment allowances and regulatory reserves of no less than 1.2% of total outstanding financing, advances and other financing, net of individual impairment allowances. 24
23 INCOME DERIVED FROM INVESTMENT OF DEPOSITORS' FUNDS AND OTHERS Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Income derived from investment of depositors' funds and others 128,697 113,869 128,697 113,869 Income attributable to depositors (82,964) (72,008) (82,964) (72,008) Income derived from investment of shareholders' funds 8,932 7,695 8,932 7,695 54,665 49,556 54,665 49,556 of which: Profit earned on impaired financing, advances and other financing 125 159 125 159 23 INCOME DERIVED FROM INVESTMENT OF DEPOSITORS' FUNDS AND OTHERS Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Income derived from investment of: - General investment deposits (i) 78,981 72,478 78,981 72,478 - Other deposits (ii) 49,716 41,391 49,716 41,391 128,697 113,869 128,697 113,869 25
23 INCOME DERIVED FROM INVESTMENT OF DEPOSITORS' FUNDS AND OTHERS (continued) (i) INCOME DERIVED FROM INVESTMENT OF GENERAL INVESTMENT DEPOSITS Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Finance income and hibah Financing, advances and other financing 52,615 46,900 52,615 46,900 Financial investments available-for-sale 6,443 7,113 6,443 7,113 Financial investments held-to-maturity 827 858 827 858 Money at call and deposits with other financial institutions 13,643 15,299 13,643 15,299 73,528 70,170 73,528 70,170 Accretion of discount less amortisation of premium 1,783 (31) 1,783 (31) Total finance income and hibah 75,311 70,139 75,311 70,139 Other operating income Fee income: Commission 319 206 319 206 Service charges and fees 929 786 929 786 Guarantee fees 311 260 311 260 1,559 1,252 1,559 1,252 Income from financial instruments: Gains on arising on financial investments available-for-sale: - net gain on disposal 68 399 68 399 68 399 68 399 Other income: Foreign exchange profit: - realised 1,710 463 1,710 463 - unrealised (15) (74) (15) (74) Other non-operating income 348 299 348 299 2,043 688 2,043 688 78,981 72,478 78,981 72,478 26
23 INCOME DERIVED FROM INVESTMENT OF DEPOSITORS' FUNDS AND OTHERS (continued) (ii) INCOME DERIVED FROM INVESTMENT OF OTHER DEPOSITS Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Finance income and hibah Financing, advances and other loans 33,119 26,784 33,119 26,784 Financial investments available-for-sale 4,056 4,062 4,056 4,062 Financial investments held-to-maturity 521 490 521 490 Money at call and deposits with other financial institutions 8,588 8,737 8,588 8,737 46,284 40,073 46,284 40,073 Accretion of discount less amortisation of premium 1,122 (18) 1,122 (18) Total finance income and hibah 47,406 40,055 47,406 40,055 Other operating income Fee income: Commission 201 118 201 118 Service charges and fees 585 449 585 449 Guarantee fees 196 148 196 148 982 715 982 715 Income from financial instruments: Gains on arising on financial investments available-for-sale: - net gain on disposal 43 228 43 228 43 228 43 228 Other income: Foreign exchange profit: - realised 1,076 264 1,076 264 - unrealised (10) (42) (10) (42) Other non-operating income 219 171 219 171 1,285 393 1,285 393 49,716 41,391 49,716 41,391 27
24 INCOME DERIVED FROM INVESTMENT OF SHAREHOLDERS' FUNDS Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Finance income and hibah Financing, advances and other financing 5,950 4,980 5,950 4,980 Financial investments available-for-sale 729 755 729 755 Financial investments held-to-maturity 94 91 94 91 Money at call and deposits with other financial institutions 1,543 1,624 1,543 1,624 8,316 7,450 8,316 7,450 Accretion of discount less amortisation of premium 202 (3) 202 (3) Total finance income and hibah 8,518 7,447 8,518 7,447 Other operating income Fee income: Commission 36 22 36 22 Service charges and fees 105 83 105 83 Guarantee fees 35 28 35 28 176 133 176 133 Income from financial instruments: Gains on arising on financial investments available-for-sale: - net gain on disposal 8 42 8 42 8 42 8 42 Other income: Foreign exchange profit: - realised 193 49 193 49 - unrealised (2) (8) (2) (8) Other non-operating income 39 32 39 32 230 73 230 73 8,932 7,695 8,932 7,695 28
25 ALLOWANCES FOR LOSSES ON FINANCING Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Individual impairment - made in the financial period 2,437 649 2,437 649 - written-back (40) (1,965) (40) (1,965) Collective impairment - (written back)/made in the financial period (601) 1,540 (601) 1,540 Bad debts on financing - recovered (137) (63) (137) (63) - written-off - 1-1 1,659 162 1,659 162 26 INCOME ATTRIBUTABLE TO DEPOSITORS Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Deposits from customers - Mudharabah 344 50,014 344 50,014 - Non-mudharabah 64,139 8,418 64,139 8,418 Deposits and placements of banks and other financial institutions - Mudharabah 18,304 13,084 18,304 13,084 Others 177 492 177 492 82,964 72,008 82,964 72,008 29
27 PERSONNEL EXPENSES Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Wages, salaries and bonuses 14,825 14,307 14,825 14,307 Defined contribution plan ('EPF') 2,426 2,333 2,426 2,333 Other personnel costs 1,761 1,529 1,761 1,529 19,012 18,169 19,012 18,169 28 OTHER OVERHEADS AND EXPENDITURES Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Establishment costs Rental of premises 1,133 1,239 1,133 1,239 Equipment rental 13 13 13 13 Repair and maintenance 1,236 1,316 1,236 1,316 Depreciation of property and equipment 254 203 254 203 Amortisation of intangible assets 116 194 116 194 IT consultancy fees 2,301 2,270 2,301 2,270 Dataline rental 177 174 177 174 Security services 831 829 831 829 Electricity, water and sewerage 428 432 428 432 Licence fee 94 55 94 55 Insurance/takaful and indemnities 3 10 3 10 Other establishment costs 766 864 766 864 7,352 7,599 7,352 7,599 Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Marketing expenses Business promotion and advertisement 275 175 275 175 Entertainment 105 103 105 103 Traveling and accommodation 156 209 156 209 Other marketing expenses 150 149 150 149 686 636 686 636 30
28 OTHER OVERHEADS AND EXPENDITURES (continued) Individual Quarter Cumulative Quarter Current Preceding Year Current Preceding Year Financial Corresponding Financial Corresponding Quarter Quarter Quarter Quarter 31/3/2015 31/3/2014 31/3/2015 31/3/2014 Administration and general expenses Telecommunication expenses 192 291 192 291 Auditors' remuneration 87 110 87 110 Professional fees 320 194 320 194 Mail and courier charges 169 148 169 148 Stationery and consumables 550 570 550 570 Commissions expenses 74 56 74 56 Brokerage expenses 347 67 347 67 Directors' fees and allowances 380 325 380 325 Donations 30 6 30 6 Settlement, clearing and bank charges 208 154 208 154 Operational and litigation write-off expenses 40-40 - Other administration and general expenses 37 54 37 54 2,434 1,975 2,434 1,975 29 COMMITMENTS AND CONTINGENCIES 10,472 10,210 10,472 10,210 In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with legal recourse to their customers. No material losses are anticipated as a result of these transactions. These commitments and contingencies are not secured over the assets of the Bank. The commitments and contingencies consist of: Economic Entity and The Bank Principal Principal amount amount Direct credit substitutes (*) 10,184 9,936 Transaction-related contingent items (*) 148,040 152,164 Short-term self-liquidating trade related contingencies 390,681 401,519 Irrevocable commitments to extend credit: - maturity less than one year 1,296,240 1,212,792 - maturity more than one year 305,270 312,478 Foreign exchange related contracts (#): - less than one year 152,882 24,032 2,303,297 2,112,921 * Included in direct credit substitutes as above are financial guarantee contracts of RM10.2 million at the Bank (2014: RM9.9 million), of which fair value at the time of issuance is zero. # The fair value of these derivatives have been recognised as "derivative financial assets" and "derivative financial liabilities" in the statement of financial position and disclosed in Note 13 and 20 to the financial statements. 31
30 FAIR VALUE MEASUREMENTS The following table presents assets and liabilities measured at fair value and classified by level of the following fair value measurement hierarchy:- (a) Level 1 - quoted prices (unadjusted) in active markets for identical assets and liabilities (b) Level 2 -quoted prices for identical or similar instruments in markets that are not active: and model-derived valuations in which inputs other than quoted prices included within Level 1 that are observable for the aset or liability, either directly or indirectly. (c) Level 3 - valuations derived from valuation techniques in which one or more significant inputs are not based on observable market data. Level 1 Level 2 Level 3 Total 31/3/2015 Assets Derivative financial assets 171 171 Financial investments available-for-sale - Money market instruments - 987,119-987,119 - Equity securities - - 25 25 - Private debt securities - 515,420-515,420-1,502,710 25 1,502,735 Liabilities Derivative financial liabilities - 220-220 - 220-220 Level 1 Level 2 Level 3 Total 31/12/2014 Assets Derivative financial assets 12 12 Financial investments available-for-sale - Money market instruments - 1,010,726-1,010,726 - Equity securities - - 25 25 - Private debt securities - 521,749-521,749-1,532,487 25 1,532,512 Liabilities Derivative financial liabilities - 34-34 - 34-34 * Net of allowance for impairment. Financial instruments are classified as Level 1 if their value is oberservable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted prices is readily available, and the price represents actual and regularly occuring market transactions. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an on-going basis. These would include actively traded listed equites and actively exchangetraded derivatives. Where fair value is determined using unquoted market price in less active markets or quoted prices for similar assets and liabilities, such instruments are generally classified as Level 2. In cases where quoted prices are generally not available, the Bank then determine fair value based upon valuation techniques that use as inputs, market parameters including but not limited to yield curves, volatilities and foreign exchange rates. The majority of valuation techniques employ only observable market data and so reliability of the fair value measurement is high. Financial instruments as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). Such inputs are generally determined based on observable inputs of a similar nature, historical observations on the level of the input or other analytical techniques. 32
30 FAIR VALUE MEASUREMENTS (continued) This category includes unquoted shares held for socio economic reasons. Fair values for shares held for socio economic reasons are based on the net tangible assets of the affected companies. The Bank exposure to financial instruments classified as Level 3 comprised a small number of financial instruments which constitute an insignificant component of the Bank's portfolio of financial instruments. hence, changing one or more of the inputs to reasonable alternative assumptions would not change the value significantly for the financial assets in Level 3 of the fair value hierarchy. The Bank recognise transfers between levels of the fair value hierarchy at the end of the reporting period during which the transfer has occurred. Transfers between fair value hierarchy primarily due to change in the level of trading activity, change in observable market activity related to an input, reasessment of available pricing information and change in the significance of the unobservable input. There were no transfers between Level 1, 2 and 3 of the fair value hierarchy during the financial year (2014: Nil) The following table present the changes in Level 3 instruments for the financial year ended: Economic Entity and The Bank As at beginning of the financial year 25 69 Total gains recognised in Other Comprehensive Income - 506 Allowance for impairment losses - (550) As at end of the financial year 25 25 Effect of changes in significant unobservable assumptions to reasonably possible alternatives As at reporting date, financial instruments measured with valuation techniques using significant unobservable inputs (Level 3) mainly include unquoted shares held for socio economic purposes. Qualitative information about the fair value measurements using significant unobservable inputs (Level 3): Fair value assets Valuation Unobservable Description techniques inputs Inter-relationship between significant unobservable inputs and fair value measurement Economic Entity and The Bank Financial investments available-for-sale Unquoted shares 25 25 Net tangible Net tangible Higher net tangible assets assets assets results in higher fair value In estimating its significance, the Bank used an approach that is currently based on methodologies used for fair value adjustments. These adjustments reflects the values that the Bank estimate is appropriate to adjust from the valuations produced to reflect for uncertainties in the inputs used. The methodologies used can be a statistical or other relevant approved techniques. 33
31 CAPITAL MANAGEMENT With effect from 1 January 2013, the total capital and capital adequacy ratios of the Bank are computed in accordance with Bank Negara Malaysia's Capital Adequacy Framework (Capital Components) dated 28 November 2012. The Bank is currently adopting Standardised Approach for Credit Risk and Market Risk, the Basic Indicator Approach for Operational Risk. In line with the transitional arrangements under the Bank Negara Malaysia's Capital Adequacy Framework (Capital Components), the minimum capital adequacy requirement for Common Equity Tier 1 Capital Ratio ('CET 1') and Tier 1 Capital Ratio are 4.5% and 6.0% respectively for year 2015. The minimum regulatory capital adequacy requirement remains at 8.0% (2014 : 8.0%) for total capital ratio. The Bank has adopted and to comply with the Guidelines and are subject to the transition arrangements as set out by BNM. The Bank's objectives when managing capital, are: To comply with the capital requirements set by the regulators of the banking markets where the entities within the Bank. To safeguard the Bank's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and To maintain a strong capital base to support the development of its business. The Bank maintains a ratio of total regulatory capital to its risk-weighted assets above a minimum level agreed with the management which takes into account the risk profile of the Bank. The table in Note 32 below summarises the composition of regulatory capital and the ratios of the Bank for the financial quarter ended 31 March 2015.. 32 CAPITAL ADEQUACY The capital adequacy ratios are as follows: Economic Entity The Bank Paid-up share capital 360,000 360,000 360,000 360,000 Statutory reserves 206,324 206,324 206,324 206,324 Retained profits 160,399 162,594 161,049 163,244 Unrealised gains and losses on AFS (170) (7,730) (170) (7,730) 726,553 721,188 727,203 721,838 Less: Goodwill and other intangibles (775) (891) (775) (891) Deferred tax assets (414) (2,900) (414) (2,900) Investment in joint ventures - - (260) (130) CET1 Capital 725,364 717,397 725,754 717,917 Tier 1 Capital 725,364 717,397 725,754 717,917 34
32 CAPITAL ADEQUACY (continued) Economic Entity The Bank Collective impairment ^ 20,473 21,120 20,473 21,120 Regulatory adjustments 51,214 49,020 51,214 49,020 Less: Investment in joint ventures - - (390) (520) Tier II capital 71,687 70,140 71,297 69,620 Total capital 797,051 787,537 797,051 787,537 CET1 capital ratio 12.423% 12.456% 12.429% 12.465% Tier 1 capital ratio 12.423% 12.456% 12.429% 12.465% Total capital ratio 13.650% 13.674% 13.650% 13.674% CET1 capital ratio (net of proposed dividends) 12.423% 12.456% 12.429% 12.465% Tier 1 capital ratio (net of proposed dividends) 12.423% 12.456% 12.429% 12.465% Total capital ratio (net of proposed dividends) 13.650% 13.674% 13.650% 13.674% Risk-weighted assets for: Credit risk 5,463,747 5,390,103 5,463,747 5,390,103 Market risk 1,249 2,590 1,249 2,590 Operational risk 374,049 366,578 374,049 366,578 Total risk-weighted assets 5,839,045 5,759,271 5,839,045 5,759,271 ^ Qualifying collective impairment is restricted to allowances on unimpaired portion of the financing, advances and other financing. 35
33 REVIEW OF PERFORMANCE OF THE BANK (Analysis of financial performance of current quarter comparing to previous year's corresponding quarter) During the 1st quarter of 2015, the Bank registered a profit before tax of RM23.5 million as compared to the previous year's correponding quarter of RM21.0 million, an increase of RM2.5 million or 11.9%. This was due to: i) higher income derived from investment of depositors' funds and others by RM14.8 million. ii) higher income derived from investment of shareholders' funds by RM1.3 million. The above was off-setted by: i) higher income attributable to the depositors' funds by RM11.0 million. ii) higher operating expenses by RM1.1 million. iii) higher allowances for losses on financing by RM1.5 million. 34 COMMENT ON FINANCIAL RESULTS (Analysis of financial performance of current quarter comparing to immediate preceding quarter) The Bank's profit before tax for 1st quarter of 2015 stood at RM23.5 million as compared to RM28.0 million reported in the 4th quarter of 2014, a decrease of RM4.5 million or 16.0%. Decrease in profit before tax as compared to immediate preceding quarter was due to: i) lower income derived from investment of depositors' funds and others by RM0.4 million. ii) higher income attributable to the depositors' funds by RM5.1 million. The above was off-setted by: i) lower other operating expenses by RM0.3 million. ii) lower allowances for losses on financing by RM0.7 million. 36
35 PROSPECT FOR THE CURRENT FINANCIAL YEAR The Malaysian economy is expected to post healthy growth again in year 2015. Moving forward, the Bank expects the upcoming financial year to present many challenges but it also see huge opportunities ahead. Recent economic development on oil prices, Ringgit depreciation, subsidy rationalization as well as the implementation of Goods and Services Tax ('GST') in the second quarter of 2015, will give an impact to the Banking industry as a whole. It would also expect a moderation in household demand and potential stress in asset quality. 2015 is going to be a challenging year for the Bank with greater competition in both retail and corporate sector. The Bank maintains a positive outlook for the Islamic Banking industry and is therefore optimistic of continued growth in its Shariah based banking business. It continues to focus on existing businesses and providing new range of competitive product packages and quality customer services. On deposit taking activities, the Bank will undertake more pro-active strategies to source for more low cost deposits for a more efficient and stable funding position. The Bank will also introduce Investment Account products to broaden its product offering. The Bank will continue its efforts to promote fee based products this year including bancatakaful, Islamic trade finance products and Islamic will writing services. As it explore new collaboration and opportunities within the Group, it will continued to tap on the Group s wide branch network of 107 branches, superior delivery standards and efficient delivery channels to grow its business. The Bank is also continuously enhancing its network presence for better customer service and actively seeking out for the new growth opportunities domestically and beyond Malaysian shore. 36 VARIANCE OF ACTUAL PROFIT FROM FORECAST PROFIT The Bank's profit before tax registered an adverse variance of RM3.8 million. The main contributing factors are follows: Net income and other operating income The net income and other operating income showed an adverse variance of RM3.1 million. Other operating expenses Operating costs showed an favourable variance of RM1.0 million. Allowance for losses on financing Allowance for losses on financing showed an adverse variance of RM1.1 million. Impairment losses on securities Impairment losses on securities showed an adverse variance of RM0.6 million. 37