Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
The bank's objectives in managing capital are:
- To safeguard the bank's ability to continue as a going concern so that it can continue to provide returns
for the shareholder and benefits for other stakeholders; and
- To provide an adequate return to the shareholder commensurately with the level of risk.
The table below summaries the minimum required capital and the regulatory capital held. 2016
2017 5,000,000
Regulatory minimum capital requirement (N'000) 5,000,000
Actual qualifying capital (N'000) 00
Actual Capital Ratio (times) 00
Based on the revised guidelines for Primary Mortgage Banks (PMB) in Nigeria issued by Central Bank of Nigeria
(CBN), the new minimum capital requirement shall be N5,000,000,000 (Five Billion Naira Only) for National PMB
and N2,500,000,000 (Two Billion and Five Hundred Million Naira Only) for State PMB.
Legal Risk
Legal risk is the risk that the company will be exposed to contractual obligations which have not been provided for
The bank has a policy of ensuring all contractual obligations are documented and appropriately evidenced
to agreements with the relevant parties to the contract.
All significant contracted claims are reviewed by independent legal resources and amounts are provided for
if there is consensus as to any possible exposure. At 31 December 2017, the directors are not aware of any
significant obligation not provided for.
Taxation Risk
Taxation risk is the risk of suffering a loss, financial or otherwise, as a result of an incorrect interpretation
and application of taxation legislation or due to the impact of new taxation legislation on existing products.
Taxation risk occurs in the following key areas;
- Transactional risks;
- Operational risk;
- Compliance risk; and
- Financial accounting risk.
41
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
- Transactional Risks;
The risk which concerns specific transactions entered into by the bank, including restructuring projects
and reorganizations.
- Operational Risks;
The underlying risks of applying tax laws, regulations and decisions to the day-to-day business operations
of the bank.
- Compliance Risks;
The risk associated with meeting the company's statutory obligations.
- Financial Accounting Risk
The risk relates to the inadequancy of proper internal controls over financial reporting, including
tax provisioning.
In managing the bank's taxation risk, the bank tax policy is as follows:
The bank will fulfil its responsibilities under tax law in each of the jurisdictions in which it operates, whether
in relation to compliance, planning or client service matters.Tax law includes all responsibilities which the
bank may have in relation to company taxes, personal taxes, capital gains taxes, indirect taxes and tax
administration.
Compliance with this policy is aimed at ensuring that:
- All taxes due by the company are correctly identified, calculated, paid and accounted for in accordance
with the relevant tax legislation;
- The bank continually reviews its existing operations and planned operations in this context; and
- The bank ensures that, where clients participate in company products, these clients are either aware of
the probably tax consequences, or are advised to consult with independent professionals to assess these
consequences, or both.
The identification and management of tax risk is the primary objective of the company tax function, and this
objective is achieved through the application of a formulated tax risk approach, which measures the
fulfilment of tax responsibilities against the specific requirements of each category of tax to which the
company is exposed, in the context of the various types of activities the company conducts.
42
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
Accounting Risk
Accounting Risk is the risk that the company fails to explain the current events of the business in the
financial statements.
Accounting risk can arise from the failure of management to:
- Maintain proper books and records, accouting system and to have proper accounting policies;
- Establish proper internal accounting controls;
- Prepare periodic fiancial statements that reflect an accurate financial position; and
- Be transparent and fully disclose all important and relevant matters.
Measures to control accounting risk are the use of proper accounting systems, books and records based
on proper accounting policies as well as the establishment of proper internal accounting controls. Proposed
accounting changes are researched by accounting resources, and if required external resources, to identify
and advise on any material impact on the bank.
Financial statements are prepared in a transparent manner that fully disclose all important and relevant
matters as well as accurately reflecting the financial position, results and cash flows of the bank.
(ii) Business Environment
Reputational Risk
Reputational Risk is the risk of loss caused by a decline in the reputation of the bank or any of its specific
business units from the perspective of its stakeholders, shareholders, customers, staff, business partners or
the general public.
Reputational risk can both cause and result from losses in all risk categories such as market or credit risk.
Strategic Risk
Strategic Risk is the risk of an unexpected negative change in the bank value, arising from the adverse effect
of executive decisions on both business strategies and their implementation.
This risk is a function of the compatibility between strategic goals, the business strategies developed to
achieve those goals and the resources deployed to achieve those goals. Strategic risk also includes the ability
of management to effectively analyse and react to external factors, which could impact the future direction of
the relevant business units.
43
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
Company Risk identifies and assesses both those risks qualitaively as part of a quartely evaluation. On
the basis of this evaluation, company risk creates an overview of local and global risks which also includes
reputational risks, analyses the risk profile of the bank and regularly informs directors and management.
(iii) Operational Risk
Operational Risk is the risk of direct or indirect loss resulting from inadequate or failed internal
processes, people and systems or from external events.
The initiation of all transactions and their administration is conducted on the foundation of segregation of
duties that has been designated to ensure materially the completeness, accuracy and validity of all
transactions. These controls are augmented by management and executive review of control accounts and
systems, electronic and manual checks and controls, back-up facilities and contingency planning. The
internal control systems and procedures are also subjected to regular internal audit reviews.
(iv) Market Risk
Market Risk includes asset liability matching risk, currency risk, interest rate risk and equity price risk.
The bank is exposed to market risk through its financial assets and financial liabilities. The most important
components of this risk are interest rate risk and market risk. These risks arise from open positions in interest
rate, currency and equity products, all of which are exposed to general and specific market movements.
Interest Rate and Market Price Risk
These risks have very different impacts on the various categories of business used in the bank's Assets and
Liabilities Management framework. Interest rate and market price risk have been discussed together since
they interact on certain types of liabilities.
Interest Rate Risk
Interest rate risk is the risk that the value and cash flow of a financial instrument will fluctuate due to changes
in market interest rates.
Equity Price Risk
Equity price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in
market prices.
44
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
Foreign Currency Risk
In respect of other monetary assets and liabilities held in currencies other than the Naira, the company
ensures that the net exposure is kept to an acceptable level, by buying or selling foreign currencies at
spot rates, where necessary, to address short-term imbalances.
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a loss to the other party by failing
to discharge an obligation.
Key areas where the bank is exposed to credit risk are:
* Certain classes of financial assets such as bonds, term deposits and
cash and cash equivalents and
* Certain accounts within trade and other receivables.
Financial Assets
Various debt instruments are entered into by the company in order to invest surplus shareholder funds.
The company is exposed to the issuer's credit standing on these instruments.
The following policy and procedure is in place to mitigate the bank's exposure to this credit risk:
* Exposure to outside financial institutions concerning financial instrument is monitored in accordance
with parameters which have been approved by the bank's Audit Committee and the bank's board.
Other Receivables
Investment sale debtors are protected by the security of the underlying investment not being transferred to
the purchaser prior to payment.
Liquidity Risk
Liquidity risk is the risk that the company will encounter difficulty in raising funds to meet
commitments associated with financial instruments.
The bank is registered mortgage banker and is required to hold minimum liquid capital. The Central Bank
of Nigeria (CBN) is the regulatory authority that regularly reviews compliance with these minimum capital
requirements.
45
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
Sensitivities
Management applies a number of sensitivity tests to the earnings of the bank to better understand the
exposure to and importance of each of the main drivers of profitability.
IFRS 7 requires management to report on the changes in the net income after tax following "reasonable
possible" changes in each of the factors to which the bank is exposed. Management has set the upside and
downside movements for each factor at a level which represents the amount by which management believes
that factor could reasonable change over the year following the valuation date. These opinions have been
informed by an analysis of historical one year changes in those factors. The upper and lower limits have been
set the 75th and 25th percentiles of observed changes as these bound and interval which may be expected to
contain 50% of the changes in the coming year. Management believes this represents in some sense what is
"reasonably possible", though it is important to note that this opinion is based on past experience and the
tested range is not sensitive to all the relevant information in the market at the reporting date.
Management has considered the impact of upside and downside movements in foreign
exchange rates. In relation to these sensitivities:
* The earnings are sensitive to changes in both the shape and level of the yield curve. Management has not
considered changes in the shape of the yield curve due to several costraints although this may be
reviewed in the following year.
* The foreign exchange movements have been considered together in the same sensitivity. Observed
historic negative correlations between factors would tend to dampen the effects presented. These
correlations are not very large and they have not been adjusted for. This treatment has resulted in the
presentation of a slightly more extreme view of what could reasonably occur over the following year.
Future rates of expense inflation, catastrophes and tax assumptions were considered but no sensitivities
are presented as it is unlikely, in management's opinion that, these assumptions will change over the
following year.
It should be noted that each impact on profit after tax is shown individually for each sensitivity being changed,
keeping all other assumptions constant. In practice this is unlikely to occur, as changes in some of the variables
may be correlated.
46
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
2017 2016
₦'000 ₦'000
5 INTEREST INCOME 5,508 652
Cash and cash equivalent 234,399 252,075
Loans and advances to customers
Treasury Bills and Investment Securities 133 16,451
Others 175,797 269,680
6 INTEREST EXPENSE 415,837 538,858
Deposit from customers ========= =========
Others
369,712 336,700
86,205 87,958
Net Interest (expense) / Income 455,917 424,658
========= =========
(40,080) 114,200
========= =========
Interest expenses were primarily incurred from various customers deposit accounts which
attracts different interest rates based on the amount, tenure and deposit type.
7 FEE AND COMMISSION INCOME 2017 2016
Credit related fees ₦'000 ₦'000
Commission on turnover
Asset Management Fee 2,656 105,431
Others 4,797 688
306
904 800
568
8,925 107,225
========= =========
8 FEE AND COMMISSION EXPENSE 399 5,671
Credit related expenses 1,008 7,560
Asset Management expenses
1,407 13,231
========= =========
Net Fee and Commission Income 7,518 93,994
========= =========
i. Fees and commission income were earned from credit related fees, commission on turnover and asset
management fees. Other income comprises professional fees, draft commission, returned cheque
commission, commitment fees, extension fees, redacos commission and standing order charges.
i. Fee and commission expenses were incured on credit products, NHF processing expenses and
project management expenses.
47
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
2017 2016
₦'000 ₦'000
9 INVESTMENT INCOME 43 1,486
Dividend income 11,120 14,075
Rental income
11,163 15,561
========= =========
Investment income were rentals mainly derived from investment properties.
10 OTHER INCOME - 286
Penalty charges - 77
Search fees -
Cheque book charges - 216
Saving Passbook/Slips charges - 225
Account closure charges
SMS income account 5 40
Debit Card Income Account (RSL) - 645
Corresponding ATM Income Account - 1,045
Other income 54,648
7
219,808
54,653 222,349
========= =========
11 ALLOWANCE AND IMPAIRMENT LOSS 118,708 135,798
Investment securities 53,890 143,420
Loans and advances to customers
172,598 279,218
========= =========
Impairment loss has been provided based on the recoverability of the asset being less than the carrying
value of the Bank's assets. Allowance for impairment of loan is made in accordance with the 2011 Revised
Guideline for Primary Mortgage Banks in Nigeria issued by the Central Bank of Nigeria (CBN).
12 PERSONNEL EXPENSES 2017 2016
Salaries and wages ₦'000 ₦'000
Gratuity and Productivity Incentive
Pension contribution 266,317 194,454
60,497 176,107
21,224
50,116
348,038 420,677
========= =========
48
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
2017 2016
12 PERSONNEL EXPENSES (CONT'D) Number Number
Average number of personnel employed (including directors): 5 7
8 8
Directors
Management 51 116
Others
64 131
========= =========
Key Management includes the Bank's Managing Director, the General Manager and Assistant
General Manager, Managers and or Heads of Units, Departments and Branches.
2017 2016
13 OTHER OPERATING EXPENSES ₦'000 ₦'000
Auditors' Remuneration 4,000 4,000
Audit fee
4,000 4,000
========= =========
Professional Fees 143,068 43,551
========= =========
* Other Expenses 272,901 292,129
========= =========
Directors' Emoluments
Non-Executive Directors' Emolument - -
Executive Directors' Emolument 3,939 27,310
3,939 27,310
========= =========
Total Other Operating Expenses 423,909 366,990
========= =========
* Other expenses comprised of rent and rates, advert and promotions, business development,
transport cost, motor running, Bank/Financial charges, statutory charges, printing and stationery,
fuel and lubricants.
2017 2016
₦'000 ₦'000
14 DEPRECIATION AND AMORTISATION
Depreciation 8,734 12,321
Building 6,077 5,248
Office equipment 1,757 4,528
IT Equipment 1,973
Furniture and Fittings -
Motor vehicle 5,471 32,123
22,039 56,193
========= =========
49
Notes to the Financial Statements
(Continued) For the year ended
31 December, 2017 2 0 1 7 2 0
14 DEPRECIATION AND AMORTISATION ₦'000 16
(CONT'D) Amortisation ₦'000
Computer Software
45 47
Total depreciation and
amortisation 45 47
========= =========
22,085 56,241
========= =========
The Bank's depreciation policy is consistent with prior year and the applicable rates have been applied
on property, plant and equipment. Items of property, plant and equipment are depreciated from the date
they are available for use or, in respect of self- constructed assets, from the date that the assets are
completed and ready for use. Depreciation is calculated to write off the cost of items of property, plant
and equipment less their estimated residual values using the straight line basis over their estimated
15 useful lives. Depreciation is recognised in profit or loss. 2 017 2016
CASH AND CASH EQUIVALENTS ₦'000 ₦'000
Cash on hand 6,571 5,988
Cash and balances with other Banks 95,659 105,612
Money Market Placements 1,674 1,602
103,90 113,202
4 ========
======
=
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-
term, highly liquid investments that are readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value.
16 LOANS AND ADVANCES 2 0 1 2 016
(a) Analysis of Loans and Advances by Nature 7 ₦'000
Mortgage loans ₦'000
Commercial Real Estate Financing
2,440,4 2,865,80
Others 97 0
3,963,8 1,137,20
04 5
240,99 251,837
4
Gross loans 6,645,2 4,254,8
42
======
==
The increase in risk assets is majorly as a result of reversal of written off directors' related loans in line
with Central Bank of Nigeria (CBN) directive. 2 0 1 2 0 16
Collective impairment (Note 16 7 ₦'000
₦'000
(41,243)
(c) Specific impairment (Note 16 (67,155 (739,785)
(c) )
(2,834,91 (781,028)
9) ========
======= 3,473,814
==
Net Loans ========
(b) Loans and Advances to customers at Gross Impairment Carrying
amortised cost As at 31 December, 2017 Amount Allowance Amount
Mortgage loans ₦'000 ₦'000 ₦'000
Commercial Real Estate 2,440,497 217,013 2,223,484
Financing Others 2,493,57
3,963,804 1,470,229
240,994 5 116,663
6,645,295 124,331 3,810,376
2,834,91
9
50
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
(b) Loans and Advances to customers at amortised Gross Impairment Carrying
cost As at 31 December, 2016 Amount Allowance Amount
Mortgage loans ₦'000 ₦'000 ₦'000
Commercial Real Estate Financing 2,865,800 443,245 2,422,555
Others 1,137,205 237,673
100,110 899,532
(c) Impairment allowance on loans and advances 251,837 151,727
781,028
Collective Impairment 4,254,842 3,473,814
As at 1 January
Impairment Loss for the year: 2017 2016
₦'000 ₦'000
Charge for the year
41,243 39,599
25,912 1,644
As at 31 December 67,155 41,243
Specific Impairment ========== =========
As at 1 January
Impairment Loss for the year: =
Charge for the year 739,785 598,009
* Write-back (Regulatory directive)
27,979 141,776
2,000,000 -
As at 31 December 2,767,764 739,785
========== ========
* In line with Central Bank Of Nigeria directive, the impairment on Directors' related
loans earlier written-off were written back during the year.
(d) Analysis of Loans and Advances by Security: 3,511,226 3,411,877
Secured against Real Estate 3,134,069 842,965
Otherwise secured
6,645,295 4,254,842
========= ========
(e) The regulatory body, Central Bank of Nigeria (CBN)/Nigeria Deposit Insurance Corporation (NDIC),
stipulates that impairment charges recognized in the profit or loss account shall be determined based
on the requirements of IFRS. The IFRS impairment should be compared with impairment determined
under the prudential guidelines and the expected impact/changes in general reserve should be treated
as follows:
(i)
Prudential Provisions is greater than IFRS provisions: transfer the difference from the general reserve to a
non-distributable regulatory reserve.
(ii) Prudential Provisions is less than IFRS provisions: the excess charges resulting should be transferred
from the regulatory reserve account to the general reserve to the extent of the non-distributable
reserve previously recognized.
2017 2016
₦'000 ₦'000
Transfer to Non-distributable Regulatory Reserve
Prudential provision 66,453 42,548
General provision - 1%
Specific provision 8,834,884 6,845,542
Total pudential provision 8,901,337 6,888,090
======== ========
51
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
2017 2016
₦'000 ₦'000
Transfer to Non-distributable Regulatory Reserve (Cont'd)
IFRS Provision 67,155 41,243
Collective impairment 2,767,764 739,785
Specific impairment
Total IFRS provision 2,834,919 781,028
======== ========
Total prudential provision
IFRS impairment 8,901,337 6,888,090
( 2,834,919 ) ( 781,028 )
6,066,419 6,107,062
======== ========
Movement in regulatory risk reserve
At 1 January 6,107,062 2,354,996
Transfer to regulatory risk reserve (40,643) 3,752,066
At 31 December 6,066,419 6,107,062
========== =========
=
(f) Analysis of Loans and Advances by Performance
(Prudential Guideline)
As at 31 December, 2017 Gross Principal Interest in Total
Loans Allowance Suspense
Watch list Allowanc
Sub-standard ₦'000 ₦'000 ₦'000 e
Doubtful 10,947 - ₦'000
Very doubtful 388,418
Lost 158,857 26,401 109 109
2,116,110 73,766
2,767,763 1,426,307 12,441 38,842
2,767,763
5,663 79,429
160,775 1,587,082
- 2,767,763
Performing 5,442,095 4,294,237 178,988.00 4,473,225
Other provisioning 1,203,200 - - -
6,645,295
4,294,237 178,988.00 4,473,225
- - - 4,428,112
6,645,295 4,294,237 178,988.00 8,901,337
As at 31 December, 2016 Gross Principal Interest in Total
Loans Allowance
Watch list Suspense Allowanc
Substandard ₦'000 ₦'000
Doubtful 36,500 - e
Very doubtful 35,464 -
Lost 285,362 ₦'000 ₦'000
Performing 2,286,461 126,208
Other provisioning 698,540 1,644,217 365 365
3,342,327
912,514 501,183 3,546 3,546
4,254,842 2,271,608
16,473 142,681
- -
2,271,608 70,629 1,714,846
4,254,842
- 197,357 698,540
288,371 2,559,979
2,271,608
--
288,371 2,559,979
- 4,328,111
288,371 6,888,090
52
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
(g) Analysis of Loans and Advances by Maturity
Under 1 month 2017 2016
₦'000 ₦'000
1 -3 months 2,918,223 811,745
3 -6 months
6 - 12 months 487,216 395,112
Over 12 months 326,163 264,504
350,712 284,413
2,562,981 2,499,068
6,645,295 4,254,842
======== =========
=
(h) Classification of Loans and Advances by Performance
(Prudential Guideline)
As at 31 December, 2017
Mortgage Real Othe
Estate r
Financing Financing Loans Total
₦'000 ₦'000 ₦'000 ₦'000
Performing 1,266,221 10,331 2,116 1,278,668
Watch list 111,881 4,246 211 116,338
Substandard 722,187 160,997 2,207 885,391
Doubtful 28,426 311,004 15,000 354,430
Very doubtful 100,117 500,111 45,217 645,445
Lost 211,665 2,977,115 176,243 3,365,023
2,440,497 3,963,804 240,994 6,645,295
As at 31 December, 2016 Mortgage Real Othe Total
₦'000
Performing Financing Estate r
Watch list ₦'000 Financing Loans 912,514
Substandard ₦'000 36,501
Doubtful 711,332 176,337 ₦'000 35,464
Very doubtful 2,758 25,994 24,845
Lost 3,220 285,363
22,984 73,900 7,749 2,286,461
199,287 300,119 9,260
1,712,887 12,176 698,539
311,888 12,998 273,455
4,254,842
2,961,136 592,568 373,653
701,138
Loans and advances are measured at amortised cost using the effective interest methods less a
provision for impairment. At each reporting period, the Bank assesses whether there is objective
evidence that the loan are impaired. The criteria used to determine if objective evidence of
impairment loss exists include; significant financial difficulty of the obligor, delinquency in interest or
principal payment and or it becomes probable that the borrower will enter bankruptcy or other
financial reorganisation. If such evidence exists, the Bank recognises an impairment loss. The loss is
the difference between the cost of the loan or advance and the present value of the estimated future
cash flows discounted using the instrument's original effective interest rates and or determined
provision using the Central Bank Of Nigeria (CBN) specified benchmark for loan loss provision for
primary mortgage banks. The carrying amount of the loan are reduced by the amount, through the
use of allowance account.
The impairment loss are reversed in subsequent period if the amount of the loss decreases and
the decrease can be related
As at 31 December, 2017, N2,531,248,739 (2016: N2,549,903.696) included in mortgage financing
are FMBN loans disbursed to NHF customers.
53
Notes to the Financial Statements
(Continued) For the year ended
31 December, 2017 2 0 1 7 2 0
16
(i) Insider-Related Credits ₦'000 ₦'000
Aggregate amount of insider related credits
outstanding At 31 December:
2,573,77 574,734
Non performing (note 31) 2,568,52 474,480
The details of non-performing insider related credits are analysed in note 31 of these financial
statements in conformity with the Central Bank of Nigeria Circular BSD/1/2004.
The value of insider related credits increased due to Central Bank of Nigeria (CBN) directive that
the written-off values for Directors' related account in 2011 be reinstated until approved by CBN.
17 INVESTMENT SECURITIES 2017 2016
Available for Sale Investment Securities ₦'000
₦'000
Equities securities with readily determinable 444,527
fair values Unquoted Equity Securities at 444,52
cost 1,953,228
7
1,953,22
8
17.1 Equities securities with readily determinable fair values 2,397,75 2,397,755
At 1 January 5
Additions during the ====== =========
year Less: Disposal == =
Less: Impairment --
Carrying value --
--
17.2 Unquoted Equity Securities at fair value
At 1 January --
Additions during the --
year Less: Disposal
--
Less: Impairment ====== =========
Carrying value == =
426,20 662,004
6
--
- ( 100,000 )
426,20 562,004
6
( ( 135,798 )
118,708
)
Total Allowance for impairment 307,49 426,206
Prudential provision 8
Transfer to non-distributable Regulatory Reserve ======== =========
== =
17.3 Analysis of impairments for the year
At 1 January 307,49 426,206
Additions during the year 8
====== =========
== =
( 1,273,280
426,206
The Bank's securities classified as quoted are securities listed and traded on the Nigerian Stock Exchange
and the fair value of the securities have been determined using valuation techniques. The Bank has used
the market value approach to value these securities, based on weighted average price of stocks purchased
during the period. The market value have ascertained by reference to quoted stock prices ruling as at 31
December, 2017.
Also included in unquoted investment that have been designated at cost is the Banks equities investment in
Resort Developers Limited. This investment (2016: N200 million; 2015: N200 million) represents equity
holding in investee company that gives the Bank 100% voting right of the investee. The property
development subsidiary is currently being managed by the Bank.
54
Notes to the Financial Statements
(Continued)
For the year ended 31 December, 2017
2017 2016
₦'000 ₦'000
18 NON-CURRENT ASSETS HELD FOR SALE 1,659,117 1,749,884
Net fair value at 1 January
Additions during the year 19,000 5,251
Disposal
( 31,765 ) ( 96,018 )
1,646,352 1,659,117
========= =========
=
In compliance with the Central Bank of Nigeria (CBN) directive prohibiting all Primary Mortgage Banks
from project management for real estate development, the Board has designated the investment properties
for sale.
2017 2016
19 OTHER ASSETS ₦'000 ₦'000
Interest receivables 137,820 118,417
Prepayments 8,034 1,283
Other 1,066,022 1,737,530
1,211,876 1,857,230
======== =========
=
20 INTANGIBLE ASSETS 39,192 39,192
- -
Purchased Software
(a) Cost
Balance as at 1 January
Acquisitions
Balance as at 31 December 39,192 39,192
(b) Accumulated amortisation and impairment losses ======== ========
Balance as at 1 January
Amortisation for the year 38,796 38,749
45 47
Balance as at 31 December 38,841 38,796
======== ========
Carrying Amounts 351 396
======== ========
There were no capitalised borrowing costs related to acquisition of software in 2017 (2016:
nil).
55
Notes to the Financial Statements
(Continued) For the year ended
31 December, 2017
21 PROPERTY, PLANT AND EQUIPMENT
a) COST Land Building IT Office Motor Furnitu Total
N'000 N'000 equipme equipme vehicles re & N'000
nt nt N'000 fittings
N'000 N'000 N'000
At 1 January, 2017 60,155 176,783 170,410 117,393 190,004 74,308 789,05
3
Additions - - 35 44 - -
Disposals - - - - (3,700) - 79
(3,700)
At 31 December, 2017 60,155 176,783 170,445 117,437 186,304 74,308 785,43
2
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-- --------------
---
DEPRECIATION - 133,372 166,659 106,614 184,532 74,715 665,892
To 1 January, 2017 - 8,734 1,757 6,077 - - 22,039
Charge for the year 5,471 Disposals - - - (3,700)
- (3,700)
To 31 December, 2017 - 142,106 168,416 112,691 186,303 74,715 684,231
-------------
----------------- ------------- -------------- --------------- ------------ --------------
----
CARRYING AMOUNT
At 31 December, 2017 60,155 34,677 2,030 4,746 1 (407) 101,20
========= 1
======== ======== ======== =========
======== ========
== =
==
There were no capitalised borrowing costs related to acquisition of property, plant and equipment during the year (2016:
nil).
IT Office Motor Furnitu
Land Building equipment equipment vehicles & re Tot
b) COST N'000 N'000 N'000 N'000 N'000 fitting al
s N'00
At 1 January, 2016 60,155 176,781 169,824 117,132 212,319 N'000 0
Additions -- 587 260 -
Disposals -- - - (22,315) 74,30 810,521
8 847
At 31 December, 2016 60,155 176,781 170,411 117,392 190,004 - (22,315)
----------------- --------------- ---------------- ---------------- --------------- -
DEPRECIATION 74,308 789,05
To 1 January, 2016 3
- 162,132 101,366 174,72 ------------ ---------------
Charge for the year 121,05 4,528 5,248 4 -- ---
Disposals 0 - -
- 32,12 72,742 632,01
3 4
12,32 1,973 56,193
1 (22,31 - (22,315)
5)
--
To 31 January, 2016 - 166,661 106,614 184,53 74,715 665,89
--------------- 2 2
133,37
0 ---------------- ------------ ---------------
---
-------------- ------------------
CARRYING AMOUNT
At 31 December, 2016 60,155 43,411 3,751 10,777 5,472
=======
========= ========== ========== =========
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
2017 2016
₦'000 ₦'000
22 DEPOSITS FROM CUSTOMERS 641,764 282,066
Retail customers: 1,156,423 1,150,733
Current deposits 1,915,162 1,695,076
Saving deposits
Term deposits 775,302 395,920
8,338 7,372
Corporate customers:
Current deposits 763,889 677,036
Saving deposits
Term deposits
5,260,878 4,208,204
========= =========
Maturity profile of deposit liabilities
Under 1 month 1,411,298 967,12
2,122,886 2
1-3 months 1,724,99
722,475 6
3-6 months 439,222 787,33
564,997 1
6 - 12 months 505,13
2
Over 12 months 223,62
3
5,260,878 4,208,20
4
========= =========
=
23 INCOME TAX 87,044 72,518
(i) Income tax liabilities 14,056 14,626
Balance as at 1 January
Charge for the year
Payment during the year 101,100 87,144
- (100)
Balance as at 31 101,100 87,044
December
= =========
(ii) Income tax expenses
Company income tax =
Education tax
Information Technology =
Levy =
=
=
=
=
=
14,056 14,626
- -
- -
Deferred tax 14,056 14,626
charge/(credit) - -
Charge to income 14,056 14,626
statement ========= =========
(iii.) The charge for taxation in these financial statements is based on the provision of the Companies Income Tax Act. The charge
for education tax is based on the provision of the Education Tax Act. Tax expense recognised in profit or loss comprises the
sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.
(iv.) The Nigerian Information Technology Development Agency (NITDA) Act 2007 stipulates that, specified companies
contribute 1% of their profit before taxation to the Nigerian Information Technology Development Agency.
57
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
INCOME TAX (CONT'D)
The deferred tax has been assessed in accordance with the International Financial Reporting Standards (IFRS).
The Bank has a history of tax losses and temporary differences resulting to deferred tax asset. The deferred tax
23 asset has not been recognised, as there are no assurance
(v.)
2017 2016
₦'000 ₦'000
24 OTHER LIABILITIES
Creditors and accruals 287,306 479,46
1
Employee retirement benefits obligation 118,307 77,301
Provision for gratuity 179,315 179,31
Non-verified deposit for investment 5
- 650,00
0
Others 1,781,931 1,552,99
6
2,366,859 2,939,07
3
========= =========
=
The Bank operates defined benefit pension plan based on employee pensionable earnings and length of service
and defined contribution plans based on employer and employee (18% of basic salary, housing and transport
allowances) contributions.
The provision for gratuity of N179.315 million (2016: N179.315 million) are provision for post employment benefits.
These balances were however not professionally valued by an Actuaries for the year ended 31 December, 2017 as
required by IAS 19.
25 LONG-TERM BORROWINGS 2,531,249 2,549,90
Federal Mortgage Bank of Nigeria 4
2,531,249 2,549,90
4
======== =========
=
This represent funds obtained from Federal Mortgage Bank of Nigeria and disbursed to beneficiaries of
National Housing Fund (NHF). Interest rate is 4%. Interest and principal are payable monthly.
26 SHARE CAPITAL 10,000,000 10,000,000
Authorized ========= =========
20,000,000,000 (2016: 20,000,000,000) ordinary shares of 50k each
5,664,866 5,664,866
Issued and fully paid ========= =========
11,329,732,404 (2016: 11,329,732,404) ordinary shares of 50k each
As at 31 December, 2017 the Bank's authorised share capital comprised 20,000,000,000 ordinary shares
(2016:20,000,000,000) while the issued share capital is 11,329,732,404 (2016:11,329,732,404). All issued shares
are fully paid, holders of ordinary shares are entitled to receive
The holders of ordinary shares are entitled to one vote per share at meeting of the Bank. All shares rank equally
with regard to the Bank's residual assets.
27 COMMITMENTS AND CONTINGENCIES
There are litigations and claims against the Bank as at 31 December, 2017. These claims arose in the normal course
of business and are being contested by the Bank. The Directors, having sought advice of professional counsels, are
of the opinion that no significant liability will crystalise
58
Notes to the Financial Statements (Continued)
For the year ended 31 December, 2017
28 RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability to control the other party or exercise influence over
the other party in making financial and operational decisions, or one other party controls both. The definition
includes directors and key management personnel among
The related party loans as at 31 December, 2017 are shown on page 60.
29 CONTRAVENTIONS
The CBN revised Guidelines for Primary Mortgage Banks in Nigeria with respect to the submission of
audited financial statements was
30 EVENTS AFTER REPORTING DATE
There were no events after the reporting date which could have a material effect on the financial position of the
Bank as at 31 December, 2017.
59
Notes to the Financial Statements
(Continued)
for the year ended 31 December, 2017
31 DIRECTORS/SISTER'S COMPANY LOANS
S/N NAME OF ELATION FACILIT DATE EXPIRY AMOUNT STATUS
Y
BORROWERS SH DUE AS AT
TYPE
OF GRANTE DATE 12/31/2017
Term =N
BORROWER Loan D =
Overdraft
THE i
Term i
BANK
Loan
1. Resort Securities & Mortgag 12/29/20 59,715,555.94 Non-perform
Trust Ltd 19
e
2. Resort Securities & 233,582,577.79 Non-perform
Mortgag
Trust Ltd 12/29/20 135,722,509.72 Non-perform
e 11,779,873.26 Non-perform
3. DVCF Oil & Gas Plc 19
Overdraft 12/31/20 11,998,010.55 Non-perform
4. Idudu manikomewe Overdraft
Overdraft 10 87,767,528.28 Non-perform
5. Idudu Oghenakpobo 26,686,323.90 Non-perform
Overdraft 12/31/20 63,897,035.48 Non-perform
Jonathan
10 7,229,750.11 Non-perform
6. Talitha Limited
7. Warewater Limited
8. Idudu manikomewe
Linley
9. Idudu Oghenakpobo
Note: The value of related Parties loan increase due to Central Bank of Nigeria directive that the written
off values for Directors' related account in 2011 financial year be reinstated until approved by them (CBN).
60