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OMOLUABI MORTGAGE BANK PLC
TABLE OF CONTENTS
FOR THE YEAR ENDED 31 DEECMBER 2017
CONTENTS PAGE
Financial highlights
1
Independent auditors report 2
Statement of profit or loss and other comprehensive income 6
Statement of financial position 7
Statement of changes in equity 8
Statement of cash flows 9
Statement of prudential adjustments 10
Statement of significant accounting policies 11
Notes to the financial statements 29
Other national disclosures:
Statement of value added 51
Financial summary 52
Statement of directors' responsibilities in relation to the
preparation of the financial statements
OMOLUABI MORTGAGE BANK PLC
FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED 31 DECEMBER, 2017
2017 2016
N N
Major items in statement of financial position
Loans and advances 861,051,528 548,813,501
Property, plant & equipment 232,646,945 226,564,050
Assets held for sale 349,396,405 584,947,509
Due to customers 1,229,794,828 388,914,722
Borrowed funds 117,866,652 8,122,069
Share capital 2,500,000,000 2,500,000,000
Shareholders fund 2,608,320,211 2,433,239,503
Total assets 4,158,172,701 3,305,156,939
Major items in statement of comprehensive income
Gross earnings 518,378,573 304,930,527
Impairment charge 56,925,360 147,891,359
Profit before taxation 187,536,516 78,869,495
Taxation (14,074,029) (7,992,524)
Profit after taxation 173,462,487 70,876,971
Ratios % %
Cost to income 70.22 90.16
Return on assets 4.17 2.14
Return on shareholders fund 6.65 2.91
Capital adequacy 92.01 219.83
Liquidity 169.43 192.69
Earnings per share (kobo) 3.50 1.35
Others Number Number
Number of branches 3 3
Number of staff 61 57
Number of shares in issue 5,000,000,000 5,000,000,000
Dividend paid - -
Ratings BB+ N/A
1
1
To become an indisputably clear leader in the mortgage banking industry and make mortgage banking a worthwhile experience to our teeming clientele and lift the business to a world class standard.
Provide dedicated professionally oriented mortgage banking and financial services with a commitment towards ensuring all time
security of customers’ deposits.
25
OMOLUABI MORTGAGE BANK PLC is a specialized Mortgage Financial
Institution promoted initially by the Government of Osun State, Nigeria. The Bank was
initially incorporated as Osun Building Society Limited but later had several name changes
to LIVINGSPRING SAVINGS AND LOANS LIMITED, OMOLUABI SAVING AND LOANS
LIMITED, OMOLUABI SAVINGS AND LOANS Plc and very recently to OMOLUABI
MORTGAGE BANK Plc to reflect its transformation aims and the virtues of the people of
the State.
The Bank was licensed by the Federal Mortgage Bank of Nigeria (FMBN) in March 1999
and began operation on the 9th
of April, 1999. The Bank is regulated by the Central Bank of
Nigeria and supervised by the Other Financial Institution Supervision Department (OFISD)
Of the Central Bank of Nigeria.
The main objective of the Bank is to provide wholesome housing, Mortgage and property
debt solutions in particular and general banking services within Osun State and the
Nation. The Bank is totally committed to the provision of high quality banking and financial
services to her numerous customers. The Head- office of the organization is located at Old
Governor’s Office, Gbongan Road, Osogbo, Osun State, Nigeria.
26
Mr Adebayo Jimoh joined the services of John Holt PLC (A British Multinational Company) as a Management Trainee in 1983 from where he rose through the ranks in quick succession to become the Deputy General Manager in charge of Operations for the company in 1993.Mr Jimoh served as a General Manager for John Holt Ventures from 1994-1996 and thereafter moved to Yamaha Almarine Company as General Manager in 1997. He was later promoted as Chief Executive in Charge of Trade and Export for John Holt Group in Nigeria and West Africa before his appointment as Executive Director in charge of Group operations of John Holt PLC in 2003.
In May 2005,he was appointed Group Managing Director/CEO of Odua Investment Company Ltd, the Investment Basket of the Five South Western States in Nigeria. He served for a period of nine years and retired in October 2014.Adebayo Jimoh currently runs a Cotton Export Business under the name Synergy Cotton and Agro Allied Company in partnership with Plexus Cotton, UK. He is the Chairman of the Company. He is a Fellow of the Nigeria Institute of Management, Fellow of the National Institute of Marketing of Nigeria and a Member of the Institute of Directors.
Mr Adewumi Adesola is an efficient tax administrator and member of the pioneer tax consultants to Lagos State Government tax audit and administration since 1995 till date. A Managing Partner of Adesola Adewumi & Co. (Chartered Accountants) since 1995 and the Managing Director of Clear-Cut Solutions Ltd 1995 till date .He is also the Chairman of David Sons Paints & Chemical Industries Ltd since 2009.
He is a Fellow of the Institute of Chartered Accountants of Nigeria.
Mr Bola Oyebamiji is a fellow of Institute of Chartered Economists of Nigeria, A Chartered Banker and an Associate of Institute of Management and a Member, Nigerian Economic Submit Group (NESG).
He has over 28 years’ experience as a banker which includes Wema Bank Plc( Assistant Manager),Trans International Bank Plc ( Senior Manager) ,Trans International Bank Plc (Principal Manager), Spring Bank Plc Adeola Odeku (Corporate Branch) and Enterprise Bank Ltd (Regional Manager). He is the Managing Director of Osun State Investment Company Limited Osun-State since 2012 to date. He is also the current Commissioner for Finance of the state of Osun.
Mr Kolawole Obtained a Bachelors of Science degree in Accountancy from University of
27
Maiduguri. He started his career in the Civil Service as Accountant Grade 11 in 1987 and rose through the ranks and bcame a Deputy Director in 2005 and Director, Treasury and Pension Services from 2007 – 2012.
He has participated in several seminars and workshops both locally and internationally some of which include Financial Management Training Course at Obafemi Awolowo University, Ile- Ife, A workshop on financial Management & Disbursement for Project Financial Management Units ( PFMUs) organized by the World Bank(2005). Training Course on Public Finance Management, Issues and Solutions Organised by Crown Agents, London in 2006.
Mr Kolawole is the current Accountant – General, State of Osun from 2012 till date.
Ayo is a Chartered Accountant and started his career with KPMG Lagos in 2003 where he worked for 3 years and rose to the position of Audit Semi-Senior in the Assurance & Business Advisory Division. Afterwards, he worked as an Analyst in the Project Finance & Real Estate Unit of ARM. He joined PRI Project LLC in 2009 as the Vice President in the Lagos Office. He also worked as an Investment Analyst with Grofin Nigeria, a multi-national specialist SME Development Finance company offering risk capital to viable enterprises through its $250m Aspire funds and its 10 offices in 9 countries. He is Currently the Managing Director of Omoluabi Mortgage Bank since 2015.
Dr. D. O. Yinusa graduated with First Class Honours in Economics from Obafemi Awolowo University, Ile-Ife, Nigeria and obtained his PhD in Economics in 2005. He has won many academic distinctions and awards including the prestigious Fulbright Visiting Scholar, Graduate School of Arts and Science, Fordham University, NY, USA, South Africa-Norway Tertiary Education Development (SANTED) Programme, (2009).
Dr. Yinusa has served as consultant to a number of national and international organisations including UNDP (Botswana and Nigeria), Botswana National Productivity Centre, Botswana, African Development Bank (AfDB), Abidjan, C’ote d’Ivoire, African Capacity Building Foundation (ACBF), Harare, Zimbabwe, European Union (EU) – African University Network, Germany, West African Monetary Institute (WAMI), Ghana, National Bureau of Statistics (NBS), Nigeria and Centre for Gender and Social Policy Studies, Nigeria. He was the Special Adviser to Osun State Governor (Ogbeni Rauf Adesoji Aregbesola) on Commerce, Cooperatives and Empowerment, Osogbo between August 2011 – Nov 2014. Dr. Yinusa is currently an associate professor in Obafemi Awolowo University and the Commissioner for Economic Planning & Budget in the State of Osun
.
A former Legislator, State of Osun House of Assembly from 2012 - 2015 Hon Sijuwade was the Managing Consultant / Executive Director (Finance),Lagos State Passenger Personal Accident Insurance Programme from 2006- 2010 , Chief Executive Officer ,Monarch Ventures Limited, and also Chief Executive Officer ,Pathfinder Investment Network Limited- 2006 to 2010
28
He became the General Manager, Capital Market Operations in Abacus Securities Limited /Abacus Merchant Bank Ltd from1986 – 1999 and Manager in Charge of Operations of Arco Petroleum Limited (1984–1986). He was a member of the Presidential Trade Mission to France on the invitation extended to Abacus Merchant Bank to offer financial Advisory Services in 1989. Award winner of the Most Distinguished Legislator in Tourism decorated by the Government of Imo State in collaboration with Nigeria Media Links at the National Conference / Awards on Culture, Hospitality and Tourism Development in Nigeria.
He retired as General Manager, First Bank of Nig. Plc in 2003 after over 2 decades in the Banking Industry. In the course of his excellent career, he had attended professional courses both locally and internationally some of which are Advanced International Business Management: London – 1999, Strategic Management for Directors and Senior Managers, London – May 2003. Senior Bankers Course by Manchester Business School – 1990. He is a Member of the Nigeria Computer Society , a Member of the Chartered Institute of Bankers of Nigeria and also a Member of the Computer Professional Registration Council of Nigeria .
He is the Managing Consultant of GBADEBO Adekunle OLORI & Co from 2010 till date. A company that runs consultancy on project management, quality control, financial reporting and formulation of strategic policies on mortgages and other financial products.
He was formerly Chief Executive Officer, Eaziway Financial (UK), from Feb 2005-Dec 2009 and Managing Director, Budget Line Travels (UK), between 2001 and 2005. He was the Financial Controller, Zomax Incorporation (Ireland) from 2000 to 2001 with activities spanning from preparation of final accounts responsible for bills payables and receivables, trainings of subordinates all over Europe. Senior Consultant ,Petroleum Special Trust Fund (PTF) , 1996-1998, Senior Lecturer on Audit Practice, Taxation, Cost Accounting with student pye, (1996-2000).) Lecturer on mortgage practice with London Tower College, Hackney London between, 2004-2007.
29
Corporate Governance The Central Bank of Nigeria in its Circular BSD/04/2006 of March 2, 2006 released a new Corporate Governance Code which includes the protection of equity ownership, enhancement of sound organizational structure and promotion of industry transparency. The Code requires Banks to include in their annual report and accounts, compliance report to the Code of Corporate Governance. In compliance
therefore, we state below our Compliance Report as at December 31st 2017:
Compliance Status
In line with the provisions of the new Code, the Bank has put in place a robust internal control and risk management framework that will ensure optimal compliance with internationally acceptable corporate governance indices in all its operations. In the opinion of the Board of Directors, the Bank has substantially complied with the new Code of Corporate Governance during the 2017 financial year.
Statutory Bodies
Apart from the CBN Code of Corporate Governance, which the Bank has strived to comply with since inception, it further relies on other regulatory bodies to direct its policy thrust on Corporate Governance.
Shareholders’ meeting
The shareholders remain the highest decision making body of Omoluabi Mortgage Bank Plc., subject however to the provisions of the Memorandum and Articles of Association of the Bank, and other applicable legislation. At the Annual General Meetings (AGM), decisions affecting the Management and strategic objectives of the Bank are taken through a fair and transparent process. Such AGMs are attended by the shareholders or their proxies and proceedings at such meetings are monitored by members of the press and representatives of the Nigerian Stock Exchange, Central Bank of Nigeria, Nigeria Deposit Insurance Commission, Corporate Affairs Commission, Securities and Exchange Commission and the Bank’s statutory auditors.
Ownership Structure
Osun State Government and Osun State Local Government Councils represent public sector participation in the ownership of the Bank however they are not majority shareholders in the bank. The Bank is owned by shareholders in the private sector. The lists of shareholders consist of individuals, Public Sector and institutional investors.
Board of Directors
The Board of Directors consists of the Chairman, Managing Director/Chief Executive Officer (MD/CEO) and Non-Executive Directors (Non-EDs). The Directors have diverse background covering Economics, Management, Accounting, Psychology, Information Technology, Public Administration, Law, Engineering, and Business Administration. These competences have impacted on the Bank’s stability and growth. The office of the Chairman of the Board is distinct and separate from that of the Managing Director/Chief Executive Officer and the Chairman does not participate in running the daily activities of the Bank. There are no family
30
ties within the Board members. We confirm that the Chairman of the Board is not a member of any Board Committee and appointment to the Board is made by the shareholders at the Annual General Meeting upon the recommendation of the Board of Directors.
Membership of the Board of Directors
Memberships of the Board of Directors during the year ended 31 December, 2017 were as follows:
S/N NAME POSITION HELD
1. Adebayo Jimoh Chairman
2. Ayodele Olowookere Managing Director/CEO
3. Bola Oyebamiji Director (Non-Executive)
4. Dr. Olalekan Yinusa Director (Non-Executive)
5. Hon. (Prince) Adetilewa Sijuwade Director (Non-Executive)
6. Gbadebo Adekunle Director (Non-Executive)
7. Akintayo Kolawole Director (Non-Executive)
8. Micheal Omolaja Director (Non-Executive)
9. Adesola Adewunmi Director (Non-Executive)
Tenure of Office
The tenure of office of an Executive and a Non-Executive Director is a renewable term of 4 (Four) years each.
Delegation of Powers
The Board of Directors delegates any of their powers to Committees consisting of such members of their body as they think fit and have oversight functions on the Committees.
The Board also delegates authority to the Management in line with best practices, for the day-to-day Management of the Bank through the MD/CEO, who is supported in this task by the Four (4) Management Staff.
Standing Board Committees
The Board carries out its oversight responsibilities through Six (6) standing Committees whose terms of reference it reviews regularly. All the Committees have clearly defined terms of references, which set out their roles, responsibilities and functions, scope of authority and procedures for reporting to the Board.
In Compliance with Code No. 6 on industry transparency, due process, data integrity and disclosure requirement, the Board has in place the following Committees and reporting structures through which its oversight functions are performed:
Statutory Audit Committee;
Board Investment, Risk and Credit Committee;
Board Establishment, Finance and General Purpose Committee;
Statutory Audit Committee
This is a joint shareholders/Board Committee that comprise of an equal number of 3 (Three) shareholders and 3 (Three) Directors. The Committee has oversight function on Internal Control system and financial reporting. The Committee’s terms of reference are:
General
31
The Committee shall:
- Ensure that there is an open avenue of communication between the External Auditors and the Board and confirm the Auditors’ respective authority and responsibilities.
- Oversee and appraise the scope and quality of the audits conducted by the Internal and External Auditors.
- Review annually, and if necessary propose for formal Board adoption, amendments to the Committee’s terms of reference.
Whistle Blowing
- Review arrangements by which staff of the Bank may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters.
- As global best practice however that a direct channel of communication is established
between the whistle blower and the authority to take action, investigate or cause to be investigated the matter being blown, the Committee shall ensure that arrangements are in place for the proportionate and independent investigation and follow-up of such matters.
Regulatory Reports
The Committee shall also:
- Examine CBN/NDIC examination Reports and make recommendations thereof.
- Monitor and review the standards of risk management and internal control, including the processes and procedures for ensuring that material business risks, including risks relating to IT security, fraud and related matters, are properly identified and managed, the effectiveness of internal control, financial reporting, accounting policies and procedures, and the Bank’s statements on internal controls before they are agreed by the Board for each year’s Annual Report.
- Consider and review the process for risk management annually to ensure adequate oversight of risk faced by the Bank and the system of internal controls and reporting of those risks within the Bank.
- Receive regular Reports on significant litigation and financial commitments and potential liability (including tax) issues involving the Bank.
Membership
The Committee comprises of a total number of six (6) members made up of three (3) Non-Executive Directors and three (3) Shareholders as follows:
Non - Executive Directors: 1. Prince Sola Adewumi - Chairman
2. Tayo Kolawole - Member
3. Dr. Olalekan Yinusa - Member
Shareholders:
4. Mr. Odewale Odeyinka - Member
5. Mr. Olugbosun Ariyo - Member 6. Mr. Yaya Ajagbe Suraj - Member
32
Quorum : Four (4) members, 2 (Two) Non-executive directors and 2 (Two) shareholders. Board Investment, Risk and Credit Committee The Board Investment, Risk and Credit Committee is charged with the responsibility of evaluating and or approving all credits beyond the powers of Management from N25 Million to 150 Million for fund based facilities. The following are its terms of reference.
Roles The Roles of the Committee are:
i. Oversee Management’s establishment of policies and guidelines, to be adopted by the Board
ii. Articulating the Bank’s tolerances with respect to credit risk, and overseeing Management’s administration of, and compliance with, these policies and guidelines.
iii. Oversee Management’s establishment of appropriate systems (including policies, procedures, management and credit risk stress testing) that support measurement and control of credit risk.
iv. Periodic review of Management’s strategies, policies and procedures for managing credit risk, including credit quality administration, underwriting standards and the establishment and testing of provisioning for credit losses.
v. Overseeing the administration of the Bank’s credit portfolio, including Management’s responses to trends in credit risk, credit concentration and asset quality.
vi. Coordinate as appropriate its oversight of credit risk with the Board Risk Management Committee in order to assist the Committee in its task of overseeing the Bank’s overall management and handling of risk.
vii. Evaluate and or approve all credits beyond the powers of the Executive Management. viii. Ensure that a qualitative and profitable Credit Portfolio exist for the Bank.
ix. Evaluate and recommend to the Board all credits beyond the Committee’s powers.
x. Review of credit portfolio within its limit in line with set objectives. xi. Review of classification of credit advances of the Bank based on prudential guidelines
on quarterly basis. xii. Approving the restructuring and rescheduling of credit facilities within its powers;
xiii. Write-off and grant of waivers within powers delegated by the Board;
xiv. Review and monitor the recovery of non-performing insider related loans. xv. Overseeing the overall Risk Management of the Bank;
xvi. Reviewing periodically, Risk Management objectives and other specific Risk Policies for consideration of the full Board;
xvii. Evaluating the Risk Rating Agencies, Credit Bureau and other related Service Providers to be engaged by the Bank;
xviii. Approving the internal Risk Rating Mechanism.
xix. Reviewing the Risk Compliance reports for Regulatory Authorities; xx. Reviewing and approving exceptions to The Bank’s Risk Policies;
xxi. Review of policy violations on Risk issues at Senior Management Level;
xxii. Certifying Risk Reports for Credits, Operations, Market/Liquidity subject to limits set by the Board;
xxiii. Evaluating the risk profile and risk management plans for major projects and new ventures to determine the impact on the Bank’s risk profile.
xxiv. Ensuring compliance with global best practice standards as required by the Regulators. xxv. Monitoring the market, Operational, Reputational, Liquidity, Compliance, Strategic,
Legal and other Risks as determined by the Board. xxvi. Any other oversight functions as may, from time to time, be expressly requested by the
33
Board.
Membership
The Committee has 5 (Five) members comprising of 4 (Four) Non-Executive Directors, the Managing Director/CEO. The committee members are as follows:
1. Michael Omolaja - Chairman
2. Gbadebo Adekunle - Member
3. Dr. Olalekan Yinusa - Member
4. Prince Adetilewa Sijuwade - Member
5. Ayo Olowookere - Member
Quorum
3 (Three) members.
Board Establishment, Finance and General Purpose Committee: Roles
i) The committee is responsible for the overall governance and personnel function of the Board.
ii) To consider and make recommendations to the Board on acquisition of Fixed Assets, Review and recommend nomination of directors to the Board based on a proper selection process.
iii) To ensure adequate succession planning for Board of Directors and Chief Executive Officer.
iv) To ensure the orientation and continuous education of Directors.
v) To monitor the procedures established for compliance with regulatory requirements for related party transactions.
vi) To monitor staff compliance with the Code of Ethics and Business Conduct of the Bank. vii) To ensure compliance with regulatory standards of Corporate Governance and
regularly identify international best practices of corporate governance and close any identified gaps.
viii) Recruitment/ promotion of staff to Assistant General Manager level and above and to approval of the remuneration.
ix) To decide on the benefits and other terms and conditions of the service contracts of such officers recommend to the Board.
x) To determine the terms and conditions of the service contract including remuneration of the bank’s policies committed by staff of Assistant General Manager level and above and apply appropriate sanctions where necessary.
xi) To review and approve of policies on staff welfare and fringe benefits; annual review of the Board Charter.
xii) To ensure the annual review of the Board and board committees’ performance.
Membership
1. Bola Oyebamiji - Chairman
2. Gbadebo Adekunle - Member
3. Tayo Kolawole - Member
4. Michael Omolaja - Member
5. Ayo Olowookere - Member
34
Quorum
3 (Three) Members Remuneration of Directors The Shareholders, at the Bank’s Annual General Meeting, set and approved the annual remuneration of members of the Board of Directors. The annual emoluments of the Directors are stated in the Annual Report.
Internal Control The Bank has separate staff within the internal audit function from operational and management Internal control Charter for its internal audit exercise. The Charter isolates and insulates the Internal Audit Division from the control and influence of the Executive Management so as to independently review the Bank’s operations. Under the Charter, the Internal Auditors’ report is submitted directly to the Board Audit Committee.
Compliance The Bank has in place a compliance department in line with regulatory provisions. The compliance department is responsible for monitoring the Bank compliance to legislative and regulatory provisions, circulars and pronouncements. It is also responsible for monitoring compliance of the Bank’s operations, processes and procedures to internal policies. The compliance department is independent of the internal control function and reports directly to the Managing Director.
Executive Management Committee
The Executive Management Committee (EXCO) reviews and approves credit facilities up to its limit and an amount above its limit goes to the Board Credit Committee for review and approval. The Committee meets once a month or as the need arises.
Membership of the Executive Management Committee (EXCO) is made up of the Managing Director/Chief Executive Officer as Chairman with all Executive Management Staff
Risk Management
The Board of Directors and Management of Omoluabi Mortgage Bank Plc. are committed to establishing and sustaining best practices in Risk Management in line with international practice. For this purpose, the Bank operates a centralized Risk Management and Control Division, with responsibility to ensure that the Risk Management processes are implemented in compliance with Policies approved by the Board of Directors.
The Board of Directors determines the Bank’s goals, in terms of risk, by issuing a Risk Policy. The Policy both defines acceptable levels of risk for day-to-day operations as well as the Bank’s willingness to incur risk, weighed against the expected rewards. The Risk Policy is detailed in the Enterprise Risk Management (ERM) Framework, which is a structured approach to identifying opportunities, assessing
the risk inherent in these opportunities and managing these risks proactively in a cost effective manner. It is a top-level integrated approach to events identification, analysis, assessment, monitoring and identification of business opportunities. Specific policies are also in place for managing risks in the different risk area of Credit, Market and Operational Risks.
The evolving nature of Risk Management practices and the dynamic character of the
35
banking industry necessitate regular review of the effectiveness of each Enterprise Risk Management component. In the light of this, the Bank’s Enterprise Risk Management Framework is subject to continuous review to ensure effective Risk Management. The review is done in either or both of the following ways:
- Continuous self-evaluation and monitoring by the Risk Management Division in
conjunction with Internal Control; and - Independent evaluation by external Auditors and Examiners.
Implementation of Code of Corporate Governance
In compliance with Code No. 6.1.11, the Bank has a Compliance Department with responsibilities of implementing Code of Corporate Governance in addition to monitoring compliance of the Money Laundering requirements.
The Chairman of the Board does not serve as Chairman/Member of any of the Board Committees;
The Bank’s organizational chart approved by CBN reflects clearly defined lines of responsibility and hierarchy;
The Bank also has in place, a system of internal control, designed to achieve efficiency, effectiveness of operations, reliability of and regulations at all levels of financial reporting and compliance with applicable laws.
Breaches of the Code
The Bank is not aware of any violation to the Code of Corporate Governance.
Olabisi Fayombo FRC/2013/ICAN/00000002883 For: Adekunle Fagbile Company Secretary
CERTIFICATION PURSUANT
To Section 60(2) of the Investments and Securities Act No. 29 of 2007 FOR THE YEAR ENDED 31st
DECEMBER, 2017
We the undersigned hereby certify the following with regard to Audited Accounts for the year ended
31st December, 2017 that:
1. We have reviewed the report and to the best of our knowledge, the report does not contain: a. Any untrue statement of a material fact, or
b. Any omission of material fact, which would make the statements, misleading in the light of the circumstances under which such statements were made.
2. To the best of our knowledge, the financial statement and other financial information included in the report fairly present in all material respects the financial state and results of operations of the company as at and for the periods presented in the report.
3. We are responsible for: a. Establishing and maintaining internal controls
b. The design of such internal controls and to ensure that material information relating to the company is made known to the officers within the company particularly during the period in which the periodic reports are being prepared.
c. Evaluating the effectiveness of the company’s internal controls within 90 days prior to the report;
d. Presenting in the report our conclusions about the effectiveness of the company’s internal control based on our evaluation as of that date.
4. We have disclosed to the auditors of the company and Audit Committee:
a. All significant deficiencies in the design or operation of internal controls which would adversely affect the company’s ability to record process, summarize and report financial data and have identified for the Company’s Auditor any material weakness in internal controls, and
b. Any fraud, whether or not material, that involves management or other employees who have significant role in the company’s internal controls.
5. We have identified in the report whether or not there were significant changes in the internal controls or other factors that could significantly affect internal control subsequent to the date of our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
DATED THIS 25th DAY OF APRIL, 2018
OLUSOLA AFOLABI AYODELE OLOWOOKERE CHIEF FINANCIAL OFFICER MANAGING DIRECTOR/CEO
REPORT OF THE AUDIT COMMITTEE
In compliance with the provisions of Section 359(6) of the Companies and Allied matters Act, Cap C20 LFN 2004, we confirm that the accounting and reporting policies of the Bank were in accordance with statutory requirements and agreed ethical practices.
In our opinion, the scope and planning of both the internal and external audits for the year
ended 31st December 2017 were adequate. We have also received, reviewed and discussed the audit report on Management matters and were satisfied with the
departmental responses thereon.
The Members of the Audit Committee reviewed the Audited Report on related party transactions and are satisfied with their status as required by the Central Bank of Nigeria (CBN). The Committee also reviewed the IFRS disclosure requirements and is satisfied with the disclosures thereon.
The internal control system of the bank was also being constantly and effectively monitored.
Dated 25th April, 2018
Prince Sola Adewumi FCA, CFE (Chairman, Audit Committee) FRC/2016/ICAN/00000015608
Members of the Audit Committee
Mr. Tayo Kolawole (Director) Dr. Olalekan Yinusa (Director) Mr. Odewale Odeyinka (Member) Mr. Olugbosun Ariyo (Member) Mr.Yaya Ajagbe Suraj (Member)
Independent Auditor’s Report
To the Shareholders of Omoluabi Mortgage Bank Plc
Opinion
Basis for Opinion
Key audit matters
Key Audit Matter How the matter was addressed in the audit
1.
A significant part of the Bank's financial reporting
process is heavily reliant on IT systems with
automated processes and controls over the
capture, storage and extraction of information. A
fundamental component of these processes of
controls is ensuring appropriate user process and
change management protocols exist, and are being
adhered to.
We focused our audit on those IT systems and controls
that are significant for the Bank financial reporting
process.
As audit procedures over IT systems and controls
require specific expertise, we involved IT specialist in
our audit.
We have audited the financial statements of Omoluabi Mortgage Bank Plc which comprise the statement of financial
position at 31 December 2017, and the statement of profit or loss and other comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of
the Bank at 31 December 2017, and its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards (IFRSs) in compliance with the Financial Reporting
Council of Nigeria Act, No 6, 2011 and with the requirements of the Companies and Allied Matters Act, CAP C20,
LFN 2004,the Banks and other financial institutions Act, CAP B3 LFN and other relevant Central Bank of Nigeria
circular.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements
section of our report. We are independent of the Company in accordance with the International Ethics Standards
Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical
requirements that are relevant to our audit of the financial statements in Nigeria, and we have fulfilled our other
ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. The key audit matters below relate to the audit of the financial statements.
Information Technology (IT) systems and
control over financial reporting
We assessed and tested the design and operating
effectiveness of the Bank’s IT controls, including those
over users access and change management as well as
data reliability.
These protocols are important because they ensure
that access and changes to IT systems and related
data are made and authorised in an appropriate
manner.
2
Key Audit Matter How the matter was addressed in the audit
1.
2. Loans and other receivables-impairment
Our audit procedures included:
Other Information
3
The Bank uses a vendor customized Enterprise
Resource Planning application (EasyBank AX).
In a limited number of cases we adjusted our planned
audit approach as follows:
The Bank has an IT division to manage the IT
function, and/or to assist with operational
requirements (includes service providers for major
functions).
We extended our testing to identify whether there
had been unauthorised or inappropriate access or
changes made to critical IT systems and related data;
Information Technology (IT) systems and
control over financial reporting (Cont'd)
Loans and other receivables are stated at their
amortised cost less appropriate allowance for
impairment. As disclosed in note 10 and note 18
the Bank assesses at each reporting date whether
there is objective evidence that financial asset is
impaired. In carrying out this assessment,
management relies on entity-developed internal
models. For instance in assessing collective
impairment ,the company uses historical trend of
the probability of default, timing of recoveries and
the amount of loss incurred, adjusted for
management determined risk rating.
We focused our testing of the impairment of trade and
other receivables on the key assumptions made by the
management.
Understand, evaluate and validate controls over
recognition and measurement.
Understand, evaluate and validate contracts over
recognition and measurement.
Review, evaluate and validate agreement over credit
process including age analysis of loan customers.
Critically evaluating the determination of the
expected cash flows used in assessing and
estimating impairments and the reasonableness of
any assumptions.
Evaluate whether the model used to calculate the
recoverable amount complies with the requirement of
IAS 39.
The directors are responsible for the other information. The other information comprises the Chairman’s statement,
Directors’ Report; Audit Committee’s Report, Corporate Governance Report and Bank Secretary’s report but does
not include the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appeared to be materially misstated.
If based on the work we have performed on the other information that we obtained prior to the date of this auditors
report, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
There is significant measurement uncertainty
involved in this assessment, which makes it a key
audit matter.
In the event that the IT system failed, Business
operations will be disrupted/hampered until systems
are online.
Where automated procedures were supported by
systems with identified deficiencies, we extended our
procedures to identify and test alternative controls;
and
As our audit sought to place a high level of reliance
on IT systems and application controls related to
financial reporting, a high proportion of the overall
audit effort was in this area.
Where required, we performed a greater level of
testing to validate the integrity and reliability of
associated data reporting.
Responsibilities of the Directors and Those Charged with Governance for the Financial Statements
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
•
•
•
•
•
•
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
The directors are responsible for the preparation and fair presentation of the financial statements in accordance with
International Financial Reporting Standards in compliance with the Financial Reporting Council of Nigeria Act, No 6,
2011 and the requirements of the Companies and Allied Matters Act, CAP C20, LFN 2004, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Bank’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Bank or to cease operations, or have no realistic
alternative but to do so.
4
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Bank’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
Conclude on the appropriateness of the director’s use of the going concern basis of accounting and based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Bank to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the Bank to express an opinion
on the consolidated financial statements. We are responsible for the direction, supervision and performance of
the Bank audit. We remain solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
OMOLUABI MORTGAGE BANK PLC
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
Notes N N
Gross Revenue 518,378,573 304,930,527
Interest and similar income 6. 70,014,701 106,851,027
Interest and similar expense 7. (24,295,638) (321,425)
Net interest income 45,719,063 106,529,602
Net fee and commission income 8. 25,818,239 12,559,883
Other operating income 9. 422,545,633 185,519,617
Total operating income 494,082,935 304,609,102
Write back of credit loss expense 18. 56,925,360 147,891,359
Impairment losses on Other assets 10. (16,546,090) (98,999,342)
Net operating income 534,462,205 353,501,119
Personnel expenses 11. 129,487,037 125,864,937
Depreciation of property, plant and equipment 21. 33,103,308 14,491,816
Amortisation of intangible assets 22. 11,374,165 16,184,607
Other operating expenses 12. 172,961,179 118,090,264
Total operating expenses 346,925,689 274,631,624
Profit before tax 187,536,516 78,869,495
Income tax expense 13. (14,074,029) (7,992,524)
Profit for the year 173,462,487 70,876,971
Other Comprehensive income
Items that may be subsequently reclassified to profit or
loss
Net gains/(loss) on available for sales financial assets 1,618,221 (3,553,834)
Items that will not be subsequently reclassified to profit
or loss - -
Total comprehensive income 175,080,708 67,323,137
Earnings per share - Basic (Kobo) 14. 3.50 1.35
The accompanying notes and significant accounting policies form an integral part of these financial statements.
6
OMOLUABI MORTGAGE BANK PLC
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Available Regulatory
Issued Share Statutory Retained for Sale Risk
Capital Premium Reserves Earnings Reserves Reserves Total equity
N N N N N N N
At 1 January 2016 2,500,000,000 - 14,382,887 (148,466,521) - - 2,365,916,366
Profit for the year - - 70,876,972 - - 70,876,972
Other comprehensive Income - - - - (3,553,834) - (3,553,834)
Transfer (statutory) - - 14,175,394 (14,175,394) - - -
At 31 December, 2016 2,500,000,000 - 28,558,281 (91,764,943) (3,553,834) - 2,433,239,504
At 1 January 2017 2,500,000,000 - 28,558,281 (91,764,943) (3,553,834) - 2,433,239,504
-
Profit for the year - - 173,462,487 - - 173,462,487
Other comprehensive Income - - - - 1,618,221 1,618,221
Transfer (statutory) - - 34,692,497 (34,692,497) - - -
Proposed dividend - - - - - - -
At 31 December, 2017 2,500,000,000 - 63,250,779 47,005,046 (1,935,613) - 2,608,320,212
Statutory reserve
Regulatory risk reserve
Available for sale reserve
The revised guidelines for Primary Mortgage Banks in Nigeria require mortgage banks to make an annual appropriation to a statutory reserve. As
stipulated by section 5.4 of the of the revised guidelines, an appropriation of 20% of profit after tax is made if the statutory reserve is less than the paid
up share capital and 10% of profit after tax if the statutory reserve is equal to or in excess of the paid up capital.
The Central Bank of Nigeria stipulates that provisions for loans recognized in the profit or loss account be determined based on the requirements of
IFRS. The IFRS provision should then be compared with provision determined using the Prudential Guidelines and the expected impact/changes
treated in the retained earnings (See Statement of Prudential Adjustments).
Available For Sale (AFS) assets are measured at fair value in the balance sheet. Fair value changes on AFS assets are recognised directly in equity,
through the statement of changes in equity, except for interest on AFS assets (which is recognised in income on an effective yield basis), impairment
losses and (for interest-bearing AFS debt instruments) foreign exchange gains or losses. The cumulative gain or loss that was recognised in equity is
recognised in profit or loss when an available-for-sale financial asset is derecognised.
Attributable to equity holders
8
OMOLUABI MORTGAGE BANK PLC
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
Notes N N
Profit before tax 187,536,516 78,869,495
Adjustment for non-cash itemsWrite back of credit loss expense 10. (56,925,360) (147,891,359)
Impairments on other assets 20.1 15,278,132 109,592,666
Gain on disposal of assets 9. (231,300) -
Provisions for dimunition on quoted investment - 3,553,834
Profit on sales of quoted investment - (80,387)
Profit on disposal of Investment Held for sale (80,371,761) (2,560,000)
Loss on sales of mortgageable assets - 3,371,731
Depreciation of property, plant & equipment 21. 33,103,308 14,491,816
Amortisation of intangibles 22. 11,374,165 16,184,607
Cashflow before changes in working capital 109,763,700 75,532,403
Changes in working capital
Increase in loans and advances (312,238,027) (184,268,961)
Increase in other assets (436,372,137) (87,273,964)
Decrease/(increase) in non current assets 235,551,104 (383,571,384)
Increase in deposits 840,880,106 242,227,968
(Decrease)/increase other liabilities (263,604,443) 352,934,461
64,216,603 (59,951,880)
Tax paid 26. (9,085,193) (4,586,842)
Cash generated from operations 164,895,110 (64,538,722)
Cashflow from investing activities
Purchase of property, plant and equipment 21. (44,147,573) (177,650,566)
Purchase of intangible assets 22. (6,063,631) (34,615,458)
Disposal of asset held for sale - 29,371,731
Proceeds from disposal of property, plant and equipment 5,189,535 -
Proceeds from sale of held for sale assets 107,948,096 28,000,000
62,926,427 (154,894,293)
Cashflow from financing activities
Additional/(repayment of) borrowed funds 25. 109,744,583 (2,114,372)
109,744,583 (2,114,372)
Increase in cash and cash equivalent 337,566,120 (146,014,984)
Cash and cash equivalent as at beginning of period 1,696,067,590 1,842,082,574
Cash and cash equivalent as at end of period 2,033,633,710 1,696,067,590
Additional cash flow information
Cash and cash equivalent
Cash on hand (note 16) 16. 37,235,120 14,437,902
Balances with banks within nigeria 17. 341,692,030 415,382,967
Placements with banks 17. 1,654,706,560 1,266,246,721
2,033,633,710 1,696,067,590
The accompanying notes to the financial statement are an integral part of these financial statements.
Cash and cash equivalents comprise balances with less than three months' maturity from the date of acquisition,
including cash in hand, deposits held at call with other banks and other short-term highly liquid investments with original
maturities of less than three months.
9
OMOLUABI MORTGAGE BANK PLC
STATEMENT OF PRUDENTIAL ADJUSTMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
i)
ii)
2017 2016
N N
Prudential Impairment Provision 128,536,049 83,475,657
Total Prudential Impairment Provision 128,536,049 83,475,657
IFRS impairment provision
Individual Impairment on loans and advances 19,690,973 112,192,578
Collective Impairment on loans and advances 129,183,298 93,607,053
148,874,271 205,799,631
Difference in impairment provision balances (20,338,222) (122,323,974)
Movement in regulatory reserve
Balance at 1 January - -
Transfer to (from) regulatory risk reserve - -
Balance at 31 December - -
The Central Bank of Nigeria stipulates that provisions for loans recognized in the profit or loss account be
determined based on the requirements of IFRS. The IFRS provision should then be compared with provision
determined using the Prudential Guidelines and the expected impact/changes treated in the retained earnings
as follows:
Where the prudential impairment allowance is greater than IFRS impairment allowance: the difference should
be transferred from the retained earnings account to a non-distributable regulatory risk reserve.
Where the prudential impairment allowance is less than IFRS impairment allowance: The difference should
be transferred from the regulatory risk reserve account to the retained earnings to the extent of the non-
distributory reserve previously recognized.
10
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. Statement of significant accounting policies
1.1 Reporting entity
1.2 Basis of preparation
a) Statement of compliance
b) Basis of measurement
- Assets and liabilities held for trading are measured at fair;
-
-
-
- Liabilities for cash-settled share-based payment arrangements are measured at fair value;
- Available-for-sale financial assets are measured at fair value.
c) Functional and presentation currency
These financial statements are presented in Naira, which is the Bank’s functional currency.
2. Significant accounting judgments, estimates and assumptions
Going concern
Omoluabi Mortgage Bank Plc (the Bank) is a public limited liability company domiciled in Nigeria. The
address of the Bank’s registered office is Old Governor’s Office, Gbongon Road, Osogbo, Osun State.
The Bank obtained its licence to operate as a Mortgage Bank on the 24th of February, 1999 and
commenced operations in March 1999. The Bank became a public limited liability company on 13th
January, 2014.
The Bank is primarily involved in business of Residential and Commercial Mortgage financing as well as
construction finance among other financial services.
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) in the manner
required by the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria 2004,
the Financial Reporting Council of Nigeria Act, 2011, the Bank’s and Other Financial Institutions Act of
Nigeria, and Relevant Central Bank of Nigeria circulars. The IFRS accounting policies have been
consistently applied to all periods presented.
The financial statements have been prepared on the historical cost basis except for the following
material items in the statement of financial position:
Financial instruments designated at fair value through profit or loss are measured at fair value;
investments in equity instruments are measured at fair value;
Other financial assets not held in a business model whose objective is to hold assets to collect
contractual cash flows or whose contractual terms do not give rise solely to payments of principal
and interest are measured at fair value;
Recognized financial assets and financial liabilities designated as hedged items in qualifying fair
value hedge relationships are adjusted for changes in fair value attributable to the risk being
hedged;
The preparation of the financial statements in conformity with IFRSs requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised and in any future periods affected.
The Bank’s Management has made an assessment of the Bank’s ability to continue as a going concern
and is satisfied that the Bank has the resources to continue in business for the foreseeable future.
Furthermore, Management is not aware of any material uncertainties that may cast significant doubt upon
the Bank’s ability to continue as a going concern. Therefore, Management will continue to prepare the
financial statements on the going concern basis.
11
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Fair value of financial instruments
Impairment losses on loans and advances
Impairment of available-for-sale investments
Deferred tax assets
Determination of collateral value
The bank also records impairment charges on available–for–sale equity investments when there has been
a significant or prolonged decline in the fair value below their cost. The determination of what is
‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the bank evaluates, among other
factors, historical share price movements and duration and extent to which the fair value of an investment
is less than its cost.
Deferred tax assets are recognized in respect of tax losses to the extent that it is probable that taxable
profit will be available against which the losses can be utilized. Judgment is required to determine the
amount of deferred tax assets that can be recognized, based upon the likely timing and level of future
taxable profits, together with future tax planning strategies.
The monitoring of market value of collateral is done on a regular basis. Fair value is adjusted to reflect
current market conditions. The amount of collateral required depends on the assessment of the
counterparty credit risk.
The Bank reviews its individually significant loans and advances at each statement of financial position
date to assess whether an impairment loss should be recorded in the income statement. In particular,
Management judgment is required in the estimation of the amount and timing of future cash flows when
determining the impairment loss. These estimates are based on assumptions about a number of factors
and actual results may differ, resulting in future changes to the allowance. The Present Value of such
cash flows as well as the present value of the fair value of the collateral is then compared to the Exposure
at Default.
Loans and advances that have been assessed individually and found not to be impaired and all
individually insignificant loans and advances are then assessed collectively in buckets of assets with
similar risk characteristics, to determine whether provision should be made due to incurred loss events for
which there is objective evidence but whose effects are not yet evident. The collective assessment of
impaired insignificant loans is done with a PD of 100% and the historical LGD while the collective
assessment of unimpaired insignificant loans and significant loans is done with the historical PD and LGD.
The bank reviews its debt securities classified as available–for–sale investments at each statement of
financial position date to assess whether they are impaired. This requires similar judgment as applied to
the individual assessment of loans and advances.
Where the fair values of financial assets and financial liabilities recorded on the statement of financial
position cannot be derived from active markets, they are determined using a variety of valuation
techniques that include the use of mathematical models. The inputs to these models are derived from
observable market data where possible, but where observable market data are not available, judgment is
required to establish fair values.
The Bank divides its loan portfolio into significant and insignificant loans based on Management approved
materiality threshold. The Bank also groups its risk assets into buckets with similar risk characteristics for
the purpose of collective impairment of insignificant loans and unimpaired significant loans.
The Probability of Default (PD) and the Loss Given default (LGD) are then computed using historical data
from the loan buckets.
12
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
3. Accounting development and impact
3.1 Summary of Standards and Interpretations effective for the first time
a Amendments to IFRS 12 Disclosure of Interests in Other Entities
b Amendments to IFRS for SMEs
Three amendments are however of larger impact:
-
-
-
c Amendments to IAS 7 Statement of Cash Flows
d Amendments to IAS 12 Income Taxes
-
- The carrying amount of an asset does not limit the estimation of probable future taxable profits.
-
-
3.2
3.2.1 Amendments effective from annual periods beginning on or after 1 January 2018
This amendment clarifies the scope of the standard by specifying that the disclosure requirements in
the standard, except for those in paragraphs B10–B16, apply to an entity’s interests listed in paragraph 5
that are classified as held for sale, as held for distribution or as discontinued operations in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
The standard now allows an option to use the revaluation model for property, plant and equipment as
not allowing this option has been identified as the single biggest impediment to adoption of the IFRS
for SMEs in some jurisdictions in which SMEs commonly revalue their property, plant and equipment
and/or are required by law to revalue property, plant and equipment;
The main recognition and measurement requirements for deferred income tax have been aligned with
current requirements in IAS 12 Income Taxes (in developing the IFRS for SMEs, the IASB had
already anticipated finalization of its proposed changes to IAS 12, however, these changes were
never finalized); and
The main recognition and measurement requirements for exploration and evaluation assets have
been aligned with IFRS 6 Exploration for and Evaluation of Mineral Resources to ensure that the IFRS
for SMEs provides the same relief as full IFRSs for these activities.
Unrealized losses on debt instruments measured at fair value and measured at cost for tax purposes
give rise to a deductible temporary difference regardless of whether the debt instrument's holder
expects to recover the carrying amount of the debt instrument by sale or by use.
This amendment to IAS7 clarify that entities shall provide disclosures that enable users of financial
statements to evaluate changes in liabilities arising from financing activities
Standards and interpretations issued/amended but not yet effective.
Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible
temporary differences.
Amends to recognition of deferred tax assets for unrealized losses, IAS 12 Income Taxes clarify the
following aspects:
An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law
restricts the utilization of tax losses, an entity would assess a deferred tax asset in combination with
other deferred tax assets of the same type.
At the date of authorisation of these financial statements the following standards, amendments to existing
standards and interpretations were in issue, but not yet effective: This includes:
13
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
a Amendments to IFRS 2 Share-based Payment
b Amendments to IFRS 4 Insurance Contracts
-
Amends IFRS 4 Insurance Contracts provide two options for entities that issue insurance contracts within
the scope of IFRS 4:
An option that permits entities to reclassify, from profit or loss to other comprehensive income, some
of the income or expenses arising from designated financial assets; this is the so called overlay
Amends IFRS 2 Share-based Payment to clarify the standard in relation to the accounting for cash settled
share-based payment transactions that include a performance condition, the classification of share-based
payment transactions with net settlement features, and the accounting for modifications of share-based
payment transactions from cash-settled to equity-settled
14
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
-
c Amendments to IFRS 15 'Revenue from Contracts with Customers
- Identify the contract with the customer
- Identify the performance obligations in the contract
- Determine the transaction price
- Allocate the transaction price to the performance obligations in the contracts
- Recognize revenue when (or as) the entity satisfies a performance obligation.
d Amendments to IFRS 9 Financial Instruments
-
-
-
-
e Amendments to IAS 40 Investment Property
f Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards
Amends paragraph 57 to state that an entity shall transfer a property to, or from, investment property
when, and only when, there is evidence of a change in use. A change of use occurs if property meets, or
ceases to meet, the definition of investment property. A change in management’s intentions for the use of
a property by itself does not constitute evidence of a change in use. The list of examples of evidence in
Derecognition. The requirements for derecognition of financial assets and liabilities are carried
forward from IAS 39.
Amendments’ resulting from Annual Improvements 2014–2016 Cycle, the amendment deletes the short-
term exemptions in paragraphs E3–E7 of IFRS 1, because they have now served their intended purpose.
An optional temporary exemption from applying IFRS 9 for entities whose predominant activity is
issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.
The application of both approaches is optional and an entity is permitted to stop applying them before the
new insurance contracts standard is applied.
IFRS 15 provides a single, principles based five step model to be applied to all contracts with customers.
The five steps in the model are as follows:
Guidance is provided on topics such as the point in which revenue is recognized, accounting for variable
consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures
about revenue are also introduced.
Amends IFRS 15 Revenue from Contracts with Customers also clarify three aspects of the standard
(identifying performance obligations, principal versus agent considerations, and licensing) and to provide
some transition relief for modified contracts and completed contracts
A finalized version of IFRS 9 which contains accounting requirements for financial instruments, replacing
IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the
following areas:
Classification and measurement. Financial assets are classified by reference to the business model
within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9
introduces a 'fair value through other comprehensive income' category for certain debt instruments.
Financial liabilities are classified in a similar manner to under IAS 39; however there are differences in
the requirements applying to the measurement of an entity's own credit risk.
Impairment. The 2014 version of IFRS 9 introduces an 'expected credit loss' model for the
measurement of the impairment of financial assets, so it is no longer necessary for a credit event to
have occurred before a credit loss is recognized
Hedge accounting. Introduces a new hedge accounting model that is designed to be more closely
aligned with how entities undertake risk management activities when hedging financial and non-
financial risk exposures
15
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
g Amendments to IAS 28 Investments in Associates and Joint Ventures
3.2.2 Amendments effective from annual periods beginning on or after 1 January 2019
a
Effective for an annual periods beginning on or after 1 January 2019
- IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor
continues to classify its leases as operating leases or finance leases, and to account for those two types
of leases differently;
- IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to apply judgement
in deciding upon the information to disclose to meet the objective of providing a basis for users of financial
statements to assess the effect that lease;
- New standard that introduces a single lessee accounting model and requires a lessee to recognise
assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of
low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying
leased asset and a lease liability representing its obligation to make lease payments. A lessee measures
right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and
lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of
the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease
liability into a principal portion and an interest portion and presents them in the statement of cash flows
applying IAS 7 Statement of Cash Flows;
- IFRS 16 also requires enhanced disclosures to be provided by lessors that will improve information
disclosed about a lessor’s risk exposure, particularly to residual value risk;
- New standard that introduces a single lessee accounting model and requires a lessee to recognise
assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of
low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying
leased asset and a lease liability representing its obligation to make lease payments. A lessee measures
right-of-use assets similarly to other non-financial assets (such as property, plant and equipment) and
lease liabilities similarly to other financial liabilities. As a consequence, a lessee recognises depreciation of
the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease
liability into a principal portion and an interest portion and presents them in the statement of cash flows
applying IAS 7 Statement of Cash Flows.
- IFRS 16 contains expanded disclosure requirements for lessees. Lessees will need to
apply judgement in deciding upon the information to disclose to meet the objective of providing a basis for
users of financial statements to assess the effect that leases have on the financial position, financial
performance and cash flows of the lessee.
- IFRS 16 substantially
carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify
its leases as operating leases or finance leases, and to account for those two types of leases differently.
- IFRS 16 also requires enhanced disclosures to be provided by lessors
that will improve information disclosed about a lessor’s risk exposure, particularly to residual value risk.
- IFRS 16 supersedes the following Standards and
Interpretations:
a) IAS 17 Leases;
b) IFRIC 4 Determining whether an Arrangement contains a Lease;
c) SIC-15 Operating Leases—Incentives; and
d) SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
This amendment Clarifies that the election to measure at fair value through profit or loss an investment in
an associate or a joint venture that is held by an entity that is a venture capital organization, or other
qualifying entity, is available for each investment in an associate or joint venture on an investment by
investment basis, upon initial recognition.
IFRS 16 'Leases'
16
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
3.2.3 New standards, amendments and interpretations issued but without an effective date
a Amendments to IFRS 9 Financial Instruments
IFRS 9 introduces new requirements for classifying and measuring financial assets, as follows:
-
-
-
-
All other instruments (including all derivatives) are measured at fair value with changes recognized in
the profit or loss
Investments in equity instruments can be designated as 'fair value through other comprehensive
income' with only dividends being recognized in profit or loss
Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are
measured at amortised cost (the use of fair value is optional in some limited circumstances)
At the date of authorisation of these financial statements the following standards, amendments to existing
standards and interpretations were in issue, but without an effective: This includes:
Also a revised version of IFRS 9 incorporating requirements for the classification and measurement of
financial liabilities, and carrying over the existing derecognition requirements from IAS 39 Financial
Instruments: Recognition and Measurement.
The concept of 'embedded derivatives' does not apply to financial assets within the scope of the
Standard and the entire instrument must be classified and measured in accordance with the above
guidelines.
17
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
b
-
-
4. Significant accounting policies
4.1 Revenue recognition
These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or
contribution of assets occurs by an investor transferring shares in a subsidiary that holds the assets
(resulting in loss of control of the subsidiary), or by the direct sale of the assets themselves.
Require the partial recognition of gains and losses where the assets do not constitute a business, i.e.
a gain or loss is recognized only to the extent of the unrelated investors’ interests in that associate or
Amends IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint
Ventures (2011) to clarify the treatment of the sale or contribution of assets from an investor to its
associate or joint venture, as follows:
The revised financial liability provisions maintain the existing amortised cost measurement basis for most
liabilities. New requirements apply where an entity chooses to measure a liability at fair value through
profit or loss in these cases, the portion of the change in fair value related to changes in the entity's own
credit risk is presented in other comprehensive income rather than within profit or loss.
Amendments to IFRS 10 and IAS 28 Consolidated Financial Statements and Investments in
Associates and Joint Ventures
Require full recognition in the investor's financial statements of gains and losses arising on the sale or
contribution of assets that constitute a business (as defined in IFRS 3 Business Combinations)
The accounting policies set out below have been applied consistently to all periods presented in these
financial statements.
Interest income is recognized in profit or loss using the effective interest method. The effective interest
rate is the rate that exactly discounts the estimated future cash payments and receipts through the
expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying
amount of the financial asset or liability. When calculating the effective interest rate, the bank estimates
future cash flows considering all contractual terms of the financial instrument, but not future credit losses.
The calculation of the effective interest rate includes all transaction costs and fees and points paid or
received that are an integral part of the effective interest rate. Transaction costs include incremental costs
that are directly attributable to the acquisition or issue of a financial asset or liability.
Interest income and expense presented in the statement of comprehensive income include interest on
financial assets and financial liabilities measured at amortized cost calculated on an effective interest
basis. Interest income and expense on all trading assets and liabilities are considered to be incidental to
the bank’s trading operations and are presented together with all other changes in the fair value.
18
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
4.2 Fees and commission
4.3 Net trading income
4.4 Net income from other financial Instruments at fair value through profit or loss
4.5 Dividends
4.6 Lease payments
4.7 Tax expense
Dividend income is recognized when the right to receive income is established. Usually this is the ex-
dividend date for equity securities. Dividends are presented in net trading income or net income from other
financial instruments at fair value through profit or loss based on the underlying classification of the equity
investment. Dividends on equity instruments designated as at fair value through other comprehensive
income are presented in other revenue in profit or loss unless the dividend clearly represents a recovery of
part of the cost of the investment, in which case it is presented in other comprehensive income.
Payments made under operating leases are recognized in profit or loss on a straight-line basis over the
term of the lease. Lease incentives received are recognized as an integral part of the total lease expense,
over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and
the reduction of the outstanding liability. The finance expense is allocated to each period during the lease
term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Fees and commission income and expense that are integral to the effective interest rate on a financial
asset or a liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, investment management fees, sales
commission, placement fees and syndication fees, are recognized as the related services are performed.
When a loan commitment is not expected to result in the draw-down of a loan, the related loan
commitment fees are recognized on a straight-line basis over the commitment period.
Other fees and commission expense relate mainly to transaction and service fees, which are expensed as
the services are received.
Net trading income comprises gains less losses related to trading assets and liabilities, and includes all
realized and unrealized fair value changes, interest, dividends and foreign exchange differences.
Net income from other financial instruments at fair value through profit or loss relates to non-trading
derivatives held for risk management purposes that do not form part of qualifying hedge relationships,
financial assets mandatorily measured at fair value through profit or loss other than those held for trading,
and financial assets and liabilities designated at fair value through profit or loss. It includes all realized and
unrealized fair value changes, interest, dividends and foreign exchange differences.
Contingent lease payments are accounted for by revising the minimum lease payments over the
remaining term of the lease when the lease adjustment is confirmed.
Tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or
loss except to the extent that it relates to items recognized directly in equity or in other comprehensive
income.
Current tax is the expected tax payable or receivable on the taxable income or loss of the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect
of previous years. Current tax payable also includes any tax liability arising from the declaration of
dividends
19
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
4.8 Deferred taxation
4.9 Financial assets and financial liabilities
i) Recognition and initial measurement
ii) Classification
Financial assets:
-
- How management evaluates the performance of the portfolio;
- Whether management’s strategy focus on earning contractual interest revenues;
- The degree of frequency of any expected asset sales;
- The reason or any asset sales; and
-
Additional taxes that arise from the distribution of dividends by the Bank are recognized at the same time
as the liability to pay the related dividend is recognized.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences
to the extent that it is probable that future taxable profits will be available against which they can be
utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
The bank initially recognizes loans and advances, deposits, debt securities issued and subordinated
liabilities on the date at which they are originated. All other financial assets and liabilities (including
assets and liabilities designated at fair value through profit or loss) are initially recognized on the trade
date at which the bank becomes a party to the contractual provisions of the instrument.
A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value
through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
At inception a financial asset is classified as measured at amortized cost or fair value. A financial
asset qualifies for amortized cost measurement only if the asset is held within a business model
whose objective is to hold assets in order to collect contractual cash flows; and the contractual terms
of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
If a financial asset does not meet both of these conditions, then it is measured at fair value. The Bank
makes an assessment of a business model at a portfolio level as this reflects best the way the
business is managed and information is provided to management.
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by the reporting
date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities against current tax assets, and they relate to taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net
basis or their tax assets and liabilities will be realized simultaneously.
In making an assessment of whether an asset is held within a business model whose objective is to
hold assets in order to collect contractual cash flows, the bank considers:
Management’s stated policies and objectives for the portfolio and the operation of those policies in
practice;
Whether assets that are sold are held for an extended period of time relative to their contractual
maturity or are sold shortly after acquisition or an extended time before maturity.
20
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Financial liabilities
iii) De-recognition
The bank designates financial liabilities at fair value through profit or loss when liabilities contain
embedded derivatives that significantly modify the cash flows that would otherwise be required under
the contract.
Financial guarantees and commitments to provide a loan at a below-market interest rate are
subsequently measured at the higher of the amount determined in accordance with IAS 37 provisions,
Contingent Liabilities and Contingent Assets and the amount initially recognized less, when
appropriate, cumulative amortization recognized in accordance with IAS 18 Revenue.
The bank derecognizes a financial asset when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset in a transaction in which substantially all
the risks and rewards of ownership of the financial asset are transferred or in which the bank neither
transfers nor retains substantially all the risks and rewards of ownership and it does not retain control
of the financial asset. Any interest in transferred financial assets that qualify for de-recognition that is
created or retained by the bank is recognized as a separate asset or liability in the statement of
financial position. On de-recognition of a financial asset, the difference between the carrying amount
of the asset (or the carrying amount allocated to the portion of the asset transferred), and
consideration received (including any new asset obtained less any new liability assumed) is
recognized in profit or loss.
The bank enters into transactions whereby it transfers assets recognized on its statement of financial
position, but retains either all or substantially all of the risks and rewards of the transferred assets or a
portion of them. If all or substantially all risks and rewards are retained, then the transferred assets
are not derecognized. Transfers of assets with retention of all or substantially all risks and rewards
include, for example, securities lending and repurchase transactions.
In transactions in which the bank neither retains nor transfers substantially all the risks and rewards of
ownership of a financial asset and it retains control over the asset, the bank continues to recognize
the asset to the extent of its continuing involvement, determined by the extent to which it is exposed to
changes in the value of the transferred asset.
In certain transactions the bank retains the obligation to service the transferred financial asset for a
fee. The transferred asset is derecognized if it meets the de-recognition criteria. An asset or liability is
recognized for the servicing contract, depending on whether the servicing fee is more than adequate
(asset) or is less than adequate (liability) for performing the servicing.
Financial assets held for trading are not held within a business model whose objective is to hold the
asset in order to collect contractual cash flows.
The Bank has designated certain financial assets at fair value through profit or loss because the
designation eliminates or significantly reduces an accounting mismatch, which would otherwise arise.
Financial assets are not reclassified subsequent to their initial recognition, except when the bank
changes its business model or managing financial assets.
The bank classifies its financial liabilities as measured at amortized cost or fair value through profit or
loss.
The bank derecognizes a financial liability when its contractual obligations are discharged or cancelled
or expire.
Retained interests are measured at amortized cost or fair value with fair value changes recognized
profit or loss.
21
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
iv) Offsetting
v) Amortized cost measurement
vi) Fair value measurement
When available, the bank measures the fair value of an instrument using quoted prices in an active
market for that instrument. A market is regarded as active if quoted prices are readily and regularly
available and represent actual and regularly occurring market transactions on an arm’s length basis.
If a market for a financial instrument is not active, then the bank establishes fair value using a
valuation technique. Valuation techniques include using recent arm’s length transactions between
knowledgeable, willing parties (if available), reference to the current fair value of other instruments
that are substantially the same, discounted cash flow analysis and option pricing models. The chosen
valuation technique makes maximum use of market inputs, relies as little as possible on estimates
specific to the bank, incorporates all factors that market participants would consider in setting a price,
and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to
valuation techniques reasonably represent market expectations and measures of the risk-return
factors inherent in the financial instrument. The bank calibrates valuation techniques and tests them
for validity using prices form observable current market transactions in the same instrument or based
on other available observable market data.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction
price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument
is evidenced by comparison with other observable current market transactions in the same
instrument, i.e. without modification or repackaging, or based on a valuation technique whose
variables include only data from observable markets. When transaction price provides the best
evidence of fair value at initial recognition, the financial instrument is initially measured at the
transaction price and any difference between this price and the value initially obtained from a
valuation model is subsequently recognized in profit or loss on an appropriate basis over the life of the
instrument but not later than when the valuation is supported wholly by observable market data or the
transaction is closed out.
Any difference between the fair value at initial recognition and the amount that would be determined at
that date using a valuation technique in a situation in which the valuation is dependent on
unobservable parameters is not recognized in profit or loss immediately but is recognized over the life
of the instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or
the fair value become observable.
Assets and long positions are measured at a bid price; liabilities and short positions are measured at
an asking price.
Financial assets and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the bank has a legal right to set off the recognized amounts and it
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRSs, or for gains
and losses arising from a group of similar transactions such as in the bank’s trading activity.
The amortized cost of a financial asset or liability is the amount at which the financial asset or liability
is measured at initial recognition, minus principal repayments, plus or minus the cumulative
amortization using the effective interest method of any difference between the initial amount
recognized and the maturity amount, minus any reduction for impairment.
Fair value is price received to sell an asset, or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
22
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
vii) Identification and Measurement of Impairment
4.10 Cash and cash equivalents
4.11 Trading assets and liabilities
At each reporting date the bank assesses whether there is objective evidence that financial assets
carried at amortized cost are impaired. A financial asset or a group of financial assets is impaired
when objective evidence demonstrates that a loss event has occurred after the initial recognition of
the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be
estimated reliably.
Trading assets and liabilities are those assets and liabilities that the bank acquires or incurs principally for
the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed
together for short-term profit or position taking. Trading assets and liabilities are measured at fair value
with changes in fair value recognized as part of net trading income in profit or loss.
Objective evidence that financial assets are impaired can include significant financial difficulty of the
borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the
bank on terms that the bank would not otherwise consider, indications that a borrower or issuer will
enter bankruptcy, the disappearance of an active market for a security, or other observable date
relating to a group of assets such as adverse changes in the payment status of borrowers or issuers,
or economic conditions that correlate with defaults.
The bank considers evidence of impairment for loans and advances and investment securities
measured at amortized costs at both a specific asset and collective level. All individually significant
loans and advances and investment securities measured at amortized cost found not to be specifically
impaired are then collectively assessed for any impairment that has been incurred but not yet
identified. Loans and advances and investment securities measured at amortized cost that are not
individually significant are collectively assessed for impairment by grouping together loans and
advances and investment securities measured at amortized cost with similar risk characteristics.
In assessing collective impairment the bank uses statistical modeling of historical trends of the
probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s
judgment as to whether current economic and credit conditions are such that the actual losses are
likely to be greater or less than suggested by historical modeling. Default rates, loss rates and the
expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure
that they remain appropriate.
Impairment losses on assets carried at amortized cost are measured as the difference between the
carrying amount of the financial asset and the present value of estimated future cash flows discounted
at the asset’s original effective interest rate. Impairment losses are recognized in profit or loss and
reflected in an allowance account against loans and advances. Interest on impaired assets continues
to be recognized through the unwinding of the discount. When a subsequent event cause the amount
of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
The bank writes off loans and advances and investment securities when they are determined to be
uncollectible.
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with banks and
highly liquid financial assets with maturities of three months or less from the acquisition date that are
subject to an insignificant risk of changes in their fair value, and are used by the bank in the management
of its short term commitments. Cash and cash equivalents are carried at amortized cost in the statement
of financial position.
23
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
4.12 Loans and advances
4.13 Investment securities
Investment securities are measured at amortized cost using the effective interest method, if:
-
- They have not been designated previously as measured at fair value through profit or loss.
4.14 Property and equipment
i) Recognition and measurement
Loans and advances are non-derivative financial assets with fixed or determinable payments, other than
investment securities that are not held for trading.
When the bank is the lessor in a lease agreement that transfers substantially all of the risks and rewards
incidental to ownership of the asset to the lessee, the arrangement is classified as a finance lease and a
receivable equal to the net investment in the lease is recognized and presented within loans and
advances.
When the bank purchases a financial asset and simultaneously enters into an agreement to resell the
asset (or a substantially similar asset) at a fixed price on a future date (reverse repo or stock borrowing),
the arrangement is accounted for as a loan or advance, and the underlying asset is not recognized in the
Bank’s financial statements.
Subsequent to initial recognition loans and advances are measured at amortized cost using the effective
interest method, except when the bank recognizes the loans and advances at fair value through profit or
loss.
Subsequent to initial recognition investment securities are accounted for depending on their classification
s either amortized cost, fair value through profit or loss or fair value through other comprehensive income.
They are held within a business model with an objective to hold assets in order to collect contractual
cash flows and the contractual terms of the financial asset give rise, on specified dates, to cash flows
that are solely payments of principal and interest; and
The bank elects to present changes in fair value of certain investments in equity instruments held for
strategic purposes in other comprehensive income. The election is irrevocable and is made on an
instrument-by-instrument basis at initial recognition.
Items of property and equipment are measured at cost less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the assets to a working condition or their intended use, the costs of dismantling
and removing the items and restoring the site on which they are located, and capitalized borrowing
costs. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges
of foreign currency purchases of property and equipment. Purchased software that is integral to the
functionality of the related equipment is capitalized as part of that equipment.
When parts of an item of property or equipment have different useful lives, they are accounted for as
separate items (major components) of property and equipment. The gain or loss on disposal of an
item of property and equipment is determined by comparing the proceeds from disposal with the
carrying amount of the item of property and equipment, and is recognized in other income/other
expenses in profit or loss.
24
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
ii) Reclassification to investment property
iii) Subsequent costs
iv) Depreciation
The estimated useful lives for the current and comparative years are as follows:
Building 50 years
Plant & machinery 5 years
Leasehold improvement 5 years
Furniture & fittings 5 years
Computer and office equipment 5 years
Motor vehicles 4 years
4.15 Investment property
4.16 Intangible assets (computer software)
Software
The cost of replacing a component of an item of property or equipment is recognized in the carrying
amount of the item if it is probable that the future economic benefits embodied within the part will flow
to the bank and its cost can be measured reliably. The carrying amount of the replaced part is
derecognized. The costs of the day-to-ay servicing of property and equipment are recognized in profit
or loss as incurred.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property and equipment since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the asset. Leased assets under finance
leases are depreciated over the shorter of the lease term and their useful lives. Land is not
depreciated.
Depreciation methods, useful lives and residual values are reassessed at each reporting date and
adjusted if appropriate.
Investment property is property held either to earn rental income or for capital appreciation or for both, but
not for sale in the ordinary course of business, use in the production or supply of goods or services or for
administrative purposes. The bank holds some investment property as a consequence of the ongoing
rationalization of its retail branch network. Other property has been acquired through the enforcement of
security over loans and advances. Investment property is measured at cost on initial recognition and
subsequently at fair value with any change therein recognized in profit or loss as part of other revenue.
When the use of a property changes such that it is reclassified as property, plant and equipment, its fair
value at the date of reclassification becomes its cost for subsequent accounting.
Software acquired by the Bank is stated at cost less accumulated amortization and accumulated
impairment losses and depreciated over 5 years.
When the use of property changes from owner-occupied to investment property, the property is re-
measured to fair value and reclassified as investment property. Any gain arising on re-measurement
is recognized in profit or loss to the extent that it reverses a previous impairment loss on the specific
property, with any remaining gain recognized in other comprehensive income and presented in
revaluation reserve in equity. Any loss is recognized immediately in profit or loss.
Expenditure on internally developed software is recognized as an asset when the bank is able to
demonstrate its intention and ability to complete the development and use the software in a manner that
will generate future economic benefits and can reliably measure the costs to complete the development.
The capitalized costs of internally developed software include all costs directly attributable to developing
the software and capitalized borrowing costs, and are amortized over its useful life. Internally developed
software is stated at capitalized cost less accumulated amortization and impairment.
25
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
4.17 Leased assets – lessee
4.18 Impairment of non-financial assets
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset or cash generating unit.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into
the smallest group of assets that generates cash inflows from continuing use that are largely independent
of the cash inflows of other assets or cash generating unit.
The bank’s corporate assets do not generate separate cash inflows and are utilized by more than one
cash generating unit. Corporate assets are allocated to cash generating units on a reasonable and
consistent basis and tested for impairment as part of the testing of the cash generating unit to which the
corporate asset is allocated.
Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of cash
generating units are allocated first to reduce the carrying amount of the assets in the cash generating unit
on a pro rata basis.
Impairment losses recognized in prior periods (on assets other than good will) are assessed at each
reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortization, if no impairment
loss had been recognized.
Subsequent expenditure on software assets is capitalized only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful life of the
software, from the date that is available for use since this most closely reflects the expected pattern of
consumption of the future economic benefits embodied in the asset. The estimated useful life of software
is three to five years.
Amortization methods, useful lives and residual values are reviewed at each financial year-end and
adjusted if appropriate.
Leases in terms of which the bank assumes substantially all the risks and rewards of ownership are
classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to
the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial
recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and are not recognized in the Bank’s statement of financial position.
The carrying amounts of the bank’s non-financial assets, other than investment property and deferred tax
assets are reviewed at each reporting date to determine whether there is any indication of impairment. If
any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is
recognized if the carrying amount of an asset or its Cash Generating Unit exceeds its estimated
recoverable amount.
26
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
4.19 Deposits, debt securities issued and subordinated liabilities
4.20 Provisions
4.21 Financial guarantees
4.22 Employee benefits
i) Defined contribution plans
The bank makes use of defined contribution plans.
The bank classifies capital instruments as financial liabilities or equity instruments in accordance with the
substance of the contractual terms of the instruments. The bank’s convertible preference shares are
classified as equity. Subsequent to initial recognition deposits, debts securities issued and subordinated
liabilities are measured at their amortized cost using the effective interest method, except where the bank
designates liabilities at fair value through profit or loss.
When the bank designates a financial liability as at fair value through profit or loss, the amount of change
in the fair value of such liability that is attributable to its changes in credit risk is presented in other
comprehensive income. At inception of a financial liability designated as at fair value though profit or loss,
the bank assesses whether presentation of the amount of change in the fair value of the liability that is
attributable to credit risk in other comprehensive income would create or enlarge an accounting mismatch
in profit or loss. The assessment is first made qualitatively, on an instrument-by-instrument basis, as to
whether there is an economic relationship between the characteristics of the liability and the
characteristics of another financial instrument that would cause such an accounting mismatch. No such
mismatch has been identified in respect of the financial liabilities entered into by the bank and therefore no
further detailed analysis has been required.
A provision is recognized if, as a result of a past event, the bank has a present legal or constructive
obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
A provision for restructuring is recognized when the bank has approved a detailed and formal restructuring
plan, and the restructuring either has commenced or has been announced publicly. Future operating
losses are not provided for.
Financial guarantees are contracts that require the bank to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with
the terms of a debt instrument. Financial guarantee liabilities are recognized initially at their fair value, and
the initial fair value is amortized over the life of the financial guarantee. The financial guarantee liability is
subsequently carried at the higher of this amortized amount and the present value of any expected
payment when a payment under the guarantee has become probable. Financial guarantees are included
within other liabilities.
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution pension plans are recognized as an
employee benefit expense in profit or loss in the periods during which services are rendered by
employees. Employees contributes 8% their basic, housing and transport allowances while the Bank
contributes 10% of same. The total contribution is remitted to the Retirement Savings Accounts of the
employees in line with Pension Reform Act 2004 (as amended). Prepaid contributions are recognized
as an asset to the extent that a cash refund or a reduction in future payments is available.
Deposits, debt securities issued and subordinated liabilities are the bank’s sources of debt funding. When
the bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a
similar asset) at a fixed price on a future date (repo or stock lending), the arrangement is accounted for as
a deposit, and the underlying asset continues to be recognized in the bank’s financial statements.
27
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
ii) Termination benefits
iii) Short-term employee benefits
4.23 Share capital and reserves
i) Ordinary share capital
The Bank has issued ordinary shares that are classified as equity instruments.
ii) Share premium
iii) Convertible preference shares
iv) Share Issue costs
4.24 Earnings per share
4.25 Non-current assets held for sale
Property, plant and equipment and intangible asset classified as Held for sale are not depreciated or
amortized. The Bank recognizes all impairment losses for any initial or subsequent write down of the asset
to fair value less cost to sell, a gain is recognized in any subsequent increase in fair value less cost to sell
of an asset held for sale, up to the cumulative impairment loss that has been recognized. A gain or loss
not previously recognized by the date of the sale of a non-current asset shall be recognized at the date of
de-recognition. An impairment loss recognized will reduce the carrying amount of the non-current asset
held for sale.
Contributions to a defined contribution plan that are due more than 12 months after the end of the
reporting period in which the employees render the service are discounted to their present value at
the reporting date.
Termination benefits are recognized as an expense when the bank is committed demonstrably,
without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment
before the normal retirement date, or to provide termination benefits as a result of an offer made to
encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized if
the bank has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and
the number of acceptances can be estimated reliably. If benefits are payable more than 12 months
after the end of the reporting date, then they are discounted at their present value.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed
as the related service is provided. A liability is recognized for the amount expected to be paid under
short-term cash bonus or profit-sharing plans if the bank has a present legal or constructive obligation
to pay this amount as a result of past services provided by the employee and the obligation can be
estimated reliably.
This represents the excess of the proceeds from the issue of shares over the nominal value (par
value) of the share.
The Bank classifies capital instruments as financial liabilities or equity instruments in accordance with
the substance of the contractual terms of the instruments. The bank’s convertible preference shares
are not redeemable by holders. Accordingly, they are presented as a component of issued capital
within equity.
Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial
measurement of the equity instruments. Other costs are applied against the Bank’s share premium
reserves.
The bank presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank by the weighted
average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting
the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding for the effects of all dilutive potential ordinary shares, which comprise issued and fully
paid convertible preference shares.
28
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
4.25 Segment reporting
5. Segment Information
2017 2016
N N
6. Interest and similar income
National Housing Fund loans 2,735,936 1,540,209
Other mortgage loans and advances to customers 67,278,765 105,310,818
70,014,701 106,851,027
7. Interest and similar expense:
Mortgage loans from FMBN and borrowed funds 347,523 316,930
Fixed Deposits accounts 23,759,645 4,495
Saving Deposits 142,314 -
Karakata Access account 45,958 -
Current Account 198 -
24,295,638 321,425
An operating segment is a component of the Bank that engages in business activity from which it can
incur expenses and earn revenues and expenses including those that relate to transactions with any of
the Bank’s other components, whose operating results are reviewed regularly by the Bank’s
Management Committee to make decisions about resources allocated to each segment and assess its
performance, and for which specific information is available.
The Bank's operations are in Osun State only and thus operates in just one geographical segment. The
risks and reward of carrying on business in different locations in Osun State for the purpose of these
financial statements are considered equitable.
The Bank is also engaged in one major line of business which is Mortgage Banking hence all its results
are mortgage related.
Segment information is based on geographical segments or business segments as primary reporting
segments. A geographical segment is engaged in providing products and/or services within a particular
economic environment that are subject to risks and returns different from those of segments operating in
other economic environments.
The operating results of segments are monitored separately with the aim of making decisions about
resource allocation and performance assessment. Segment performance is evaluated based on
operating profits and losses which in certain respects are measured differently from operating profits or
losses in the financial statements. Reliance is placed primarily on growth in Deposit, Loans and Profit
before taxes as measures of performance.
All transactions between segments are conducted on an arms length basis; the internal charges and
transfer pricing adjustmenst are reflected in the performance of each segment units.
The activities of the segments are centrally financed, thus the cash flow is presented in the statement of
cash fllows for the whole entity.
29
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
8. Net fees and commission income
Fees and commission income
Credit related fees and commission 11,982,759 4,195,718
Commissions and Account maintenance Charges 13,835,480 8,364,165
25,818,239 12,559,883
9. Other operating income
Investment Income
- Government treasury bills 176,853,315 46,865,056
- Other investment income 70,236,826 33,755,888
Interest from bank placement 74,309,668 74,502,110
Rental income 1,049,500 1,145,000
Other income (Note 9.1) 19,493,263 29,251,563
Gain on disposal of non current assets held for sale 80,371,761 -
Profit on disposal of assets 231,300 -
422,545,633 185,519,617
9.1
10. Impairment losses
Write Back of credit loss expense 56,925,360 147,891,359
Credit loss expense - (20,527)
Other assets written off (16,546,090) (98,978,815)
40,379,270 48,892,017
11. Personnel expenses
Salaries and wages 92,565,092 89,268,512
Other staff costs 33,851,533 27,000,584
Pension costs – defined contribution plan 3,070,412 9,595,841
129,487,037 125,864,937
Other income include non interest and non commission incomes
earned in the deployment of banking services. These include
incomes from SMS alerts, E- business, chequebook issuance and
other electronic income.
Other staff costs include training expenses and other welfare costs
Credit related fees and commissions above exclude amounts
included in determining the effective interest rate on financial assets
that are not at fair value through profit or loss.
30
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
12. Other operating expenses
Water and other rates 95,100 161,500
Light and power 3,577,882 2,417,320
Title processing expenses 163,300 2,408,400
Office rent 896,515 31,000
Real estate management expenses 3,000 232,600
Office consumables 4,876,551 2,355,323
Travelling expenses 3,927,080 3,190,245
Hotel accommodation 5,557,682 3,670,950
Telephone expenses 1,527,900 308,600
Stamping & registration expenses 224,230 274,700
Advert and promotions 1,969,877 1,508,708
Tax consultancy charges 400,000 12,187,500
Legal fees expenses 1,750,500 10,000
Land, CRC & other search fee expenses 20,100 539,400
Audit fee expenses 2,500,000 2,500,000
Loan recovery expenses 4,063,448 487,699
Lease Rental 625,000 -
Business lunch & entertainment 1,482,755 1,040,000
Printing and stationery expenses 3,698,467 1,768,000
Newspapers/periodicals/books 167,500 218,450
Diesel, fuel and lubricant 8,957,685 9,081,655
Mortgage processing expenses 1,714,227 34,400
Registrations & subscriptions 11,333,460 7,704,217
Secretariat expenses 200,000 880,750
Postage & courier services expenses 480,834 496,980
Other IT related expenses 19,104,377 7,010,897
Professional fees & other related expenses 12,513,779 14,329,106
Public relations 463,225 2,202,300
Losses on disposal of fixed assets - 4,046,731
Sundry expenses - 1,995,630
Donation 7,427,815 -
Business development expenses 6,331,378 200,000
Fines from other regulatory agencies 4,770,980 3,113,733
Technology levy expenses 1,875,366 796,662
Bank & other non interest charges 8,271,681 7,760,817
Security services expenses 11,178,575 2,953,473
Insurance premium and licence expenses 6,532,064 1,874,385
VAT expenses - 2,867,767
Annual general meeting expenses 3,323,955 1,726,610
Repairs and maintenance expenses 11,168,149 4,999,662
Directors' Fee 5,130,835 2,616,694
Directors' Sitting Allowance 6,425,000 5,105,000
Other Directors' Expenses 8,230,907 982,400
172,961,179 118,090,264
31
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
13. Income tax
The components of income tax expense for the period ended
31 October, 2017 and 31 December 2016 are:
Company Income tax (Note 13i) 13,688,926 6,660,437
Education tax (Note 13ii) 385,103 1,332,087
Total current tax 14,074,029 7,992,524
Deferred tax
Origination/ reversal) of temporary differences -
Total income tax expense 14,074,029 7,992,524
i)
ii)
iii)
14. Earnings per share
Net profit attributable to ordinary shareholders for basic earnings 175,080,708 67,323,137
5,000,000,000 5,000,000,000
Basic earnings per ordinary share (kobo) 3.50 1.35
15. Dividends paid and proposed
16. Cash and bank balances
2017 2016
N N
The basis of income tax is the minimum tax of 0.5 per cent of the
Bank's net assets plus 0.125 on the excess of turnover that is above
N500,000. This is as provided by the Company Income Tax Act Cap
(C21,LFN 2004 as ammended).
The basis of the Education tax is 2% of adjusted profit as provided in
the Tertiary Education Trust Fund (Establishment) Act LFN 2011.
Basic earnings per share is calculated by dividing the net profit for the
year attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding at the reporting date. The
following reflects the income and share data used in the basic
earnings per share computations:
There have been no other transactions involving ordinary shares or
potential ordinary shares between the reporting date and the date of
completion of these financial statements.
Weighted average number of ordinary shares for basic earnings per
share
The National Information Technology Agency (NITDA) 2007,
stipulates that specified companies contribute 1% their profit before
tax to the National Information Technology Development Agency. In
line with the Act, the Bank has provided for Information Technology
levy at the specified rate.
In respect of the 2017 financial year, the Board of Directors recommend a dividend of 1 kobo per ordinary share
of 50 kobo each amounting to N50 million for approval at the Annual General Meeting. If approved, dividend will
be paid to Shareholders whose names appear on the Register of Members. The proposed dividend is subject to
Withholding Tax at the appropriate tax rate, which will be deducted before payment.
32
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
Cash and bank balances include:
Cash on hand 20,647,028 10,139,473
Cash reserves with the Central Bank of Nigeria (CRR) 16,588,092 4,298,429
37,235,120 14,437,902
17. Due from banks
Placements with banks 1,654,706,560 1,266,246,721
Balances with banks within Nigeria 341,692,030 415,382,967
1,996,398,590 1,681,629,688
18. Loans and advancesa) By product type
Mortgage loans 789,018,062 498,961,106
Other loans 220,907,737 255,652,026
Gross loans 1,009,925,799 754,613,132
Impairment (148,874,271) (205,799,631)
861,051,528 548,813,501
b) Analysis of Mortgage loans
Mortgage loans - NHF 142,578,499 40,115,126
Mortgage loans - Residential 569,487,385 385,030,797
Mortgage loans - Commercial 11,248,188 42,524,151
Mortgage Loan - Estate Development 30,000,000 -
Interest receivable 35,703,990 31,291,032
789,018,062 498,961,106
c) Analysis of other loans
Overdrafts 5,866,136 16,260,946
Term loans 104,179,635 181,710,364
Staff loans 108,976,866 56,238,621
Interest receivable 1,885,100 1,442,095
220,907,737 255,652,026
Deposits with Central Bank of Nigeria(CBN) and Federal Mortgage
Bank of Nigeria (FMBN) are restricted balances and are not available
for use in the Bank's day to day operations.
Included in placements with Banks are Bank Guarantees executed
and domiciled with Nigerian Banks in respect of the On lending
facilities given to the Bank by Federal Mortgage Bank of Nigeria. Such
Bank Guarantees are fully cash backed. The value of such Bank
Guarantees for year ended 2017 is N12,690,167
33
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
d) Individual impairment 19,690,973 112,192,578
Collective impairment 129,183,298 93,607,053
148,874,271 205,799,631
e) Impairment allowance for loans and advances to customers
Individual Impairment Allowance
At 1 January 112,192,578 257,554,465
Impairment charge for the year - -
Written off (92,501,605) (145,361,887)
Balance at 31 December 19,690,973 112,192,578
Collective impairment allowance
At 1 January 93,607,053 96,136,525
Impairment charge for the year 35,576,245 -
Written off - (2,529,472)
Balance at 31 December 129,183,298 93,607,053
f) Analysis by past due
Individually impaired 4,700,810 1,024,649
Past due but not impaired 23,931,062 61,090,316
Neither impaired nor past due 832,419,657 692,498,166
861,051,529 754,613,131
g) Age analysis of past due
Under 1 month 23,180,225 90,148
1-3 months 506,773 2,390,177
3-6 months 1,178,088 12,050,948
6-12 months - 46,559,044
Over 1 year 3,766,786 1,024,649
28,631,872 62,114,966
h) Analysis by Internal Rating
AA 832,419,657 693,522,815
A 23,931,062 90,148
CC 506,773 2,390,177
C 1,178,088 12,050,948
D 3,766,786 46,559,044
861,802,366 754,613,132
i) Analysis by security
Secured against real estate 816,211,991 378,089,075
Otherwise secured 91,154,514 205,922,503
Unsecured 102,559,295 170,611,698
1,009,925,800 754,623,276
A reconciliation of the allowance for impairment losses for loans and
advances, by class, is as follows:
34
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
j) Analysis by maturity
Under 1 month 90,024,837 53,121,613
1-3 months 7,658,266 65,376,785
3-6 months 1,450,142 9,968,016
6-12 months 35,987,915 4,261,131
Over 12 months 874,804,639 621,895,731
1,009,925,799 754,623,276
k) Analysis by IFRS buckets
Residential 626,452,261 385,030,797
Micro 51,379,956 170,141,452
Social 251,555,365 88,797,967
Commercial 50,538,218 110,653,060
Estate Development 30,000,000 -
1,009,925,800 754,623,276
l) Impairment analysis by IFRS buckets
Residential 121,823,910 71,718,880
Micro 14,770,301 102,377,145
Social 357,310 3,176,064
Commercial 11,922,750 28,527,542
148,874,271 205,799,631
m) Concentration of credit risk
Credit Risk concentration is measured in line with the provisions of the revised guidelines for Primary
Mortgage Banks in Nigeria as follows:
i Residential Mortgages - Not less than 75% of mortgage assets
iii Real Estate Construction finance - Not more than 25% of total assets
iii Single obligor - Individual - Not more than 5% of shareholders funds unimpaired by losses
iv Single obligor - Corporate - Not more than 20% of shareholders funds unimpaired by losses
2017 2016
% %
Residential Mortgages (75% floor) 90.25 85.21
Real Estate Construction finance (25% cap) 0.01 -
Single obligor - Individual (5% cap) 2.51 2.94
Single obligor - Corporate (20% cap) 1.15 0.58
2017 2016
N N
35
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
19. Financial Investments- Available for sale
Quoted Investment
Quoted equities at beginning 2,604,902 98,430,327
Addition/(Disposal) - -
Less: Allowance for impairment brought forward - (72,274,491)
Reclassification - (19,997,100)
Fair value gain/(loss) transferred to available for sale reserve 1,618,221 (3,553,834)
4,223,123 2,604,902
Unquoted investments
Unquoted equities at beginning 100,000,000 -
Additions/(Disposal) - 100,000,000
100,000,000 100,000,000
Fair value loss transferred to available for sale reserve - -
100,000,000 100,000,000
Total Financial Investment 104,223,123 102,604,902
2017 2016
N N
20. Other assets
Prepayments 105,003,343 30,243,345
stationery stocks 2,041,936 1,638,930
Other stocks 4,349,571 5,652,440
Account receivables 434,681,450 74,106,496
Debit balances in liabilities 669,450 -
546,745,750 111,641,211
Less: Allowance for impairment on other assets (Note 20.1) - (1,267,598)
546,745,750 110,373,613
Analysis by maturity
Under 1 month 669,450 -
1-3 months - -
3-6 months 2,041,936 1,638,930
6-12 months 544,034,364 110,002,281
Over 12 months - -
546,745,750 111,641,211
20.1 Allowance for impairments - Other assets
At 1 January 1,267,958 -
Additions 15,278,132 98,978,815
Write off (16,546,090) (97,710,857)
- 1,267,958
The Balance on unquoted equities represents the Bank's investment in the Nigeria Mortgage Refinancing
Company (NMRC) of which the Bank is a member. The NMRC was set up as a Public Private Partnership(PPP)
arrangement between the Federal Government, The Federal Ministry of Finance, Central Bank, local investors
and the World Bank. The World Bank has created a concesssional longterm credit of USD300 Million for NMRC
for 40 years through liquidity facility. In addition N6Billion will be provided by the private sector and the Federal
Ministry of Finance.
NMRC acts as a liquidity vehicle at injecting funds into the Nigerian Mortgage Sector. The objectives of the
NMRC shall be to support Mortgage Originators such as Primary Mortgage Banks (PMBs) and Deposit Money
Banks (DMBs) to increase Mortgage Lending by refinancing their mortgage loan portfolios and capital market
investors who typically are looking for long dated high equity securities.
36
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
21. Property, plant and equipment
Land
Work in
progress Buildings
Computer
Equipment
Plants &
Office
Equipments
Furniture &
FittingsMotor
Vehicles Total
N N N N N N N N
Cost
As at 1/1/2017 37,432,000 10,569,777 71,143,725 21,309,886 89,495,693 - 49,200,500 279,151,581
Reclassification - (10,569,777) - - (13,681,245) 24,251,022 - -
Addition - - 10,539,726 1,067,000 20,739,347 7,765,500 4,036,000 44,147,573
Disposals - - (131,000) - - (15,100,000) (15,231,000)
As at 31/12/2017 37,432,000 - 81,552,451 22,376,886 96,553,795 32,016,522 38,136,500 308,068,155
Depreciation
As at 1/1/2017 - - 7,425,498 15,511,252 18,717,157 - 10,933,624 52,587,531
Reclassification (3,525,448) 3,525,448 -
Charge for the year - - 1,527,071 1,753,918 15,528,441 5,264,253 9,029,625 33,103,308
Disposals - - - - - - (10,269,629) (10,269,629)
As at 31/12/2017 - - 8,952,569 17,265,170 30,720,150 8,789,701 9,693,620 75,421,210
Carrying value at:
31/12/2017 37,432,000 - 72,599,882 5,111,716 65,833,645 23,226,821 28,442,880 232,646,945
31/12/2016 37,432,000 10,569,777 63,718,227 5,798,634 70,778,536 - 38,266,876 226,564,050
All assets are carried at historical cost. Valuation of the assets are yet to be carried out based on open market approach.
Reclassification on plant & office equipments represents amount reclassified from work in progress and amount reclassified to Furniture and fittings
37
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N N
22. Intangible assets
Purchased Software
Cost
Balance at 1 January 74,048,258 39,432,800
Additions (Note 22a) 6,063,631 34,615,458
Balance at 31 December 80,111,889 74,048,258
Amortization
Balance at 1 January 38,262,484 22,077,877
Charge for the year 11,374,165 16,184,607
Balance at 31 December 49,636,649 38,262,484
Carrying amounts 30,475,240 35,785,774
22a
23. Non-current assets held for sale
At 1 January 584,947,509 201,376,126
Additions 183,495,664 290,381,558
Reclassifications - 122,561,556
Disposals (419,046,768) (29,371,731)
Balance at 31 December 349,396,405 584,947,509
24. Due to customers
2017 2016
N N
a) Analysis by type
Demand accounts 887,133,311 335,057,001
Savings accounts 62,546,517 50,147,446
Time deposits 280,115,000 3,710,274
1,229,794,828 388,914,722
Addition to intangible assets of N6.06 million represent amount
incurred on the purchase of ATM Monitoring Software Solution and
Interswitch Integration Software
The balance on non-current asset held for sale represent the stock of houses previously held by the Bank as
investment properties while additions represents necessary improvement on the properties to make it sellable to
willing buyers as well as assets reposessed from customers as a result of consistent default in repayment. In
line with CBN regulation on permissable business of PMBs, they were derecognised as investment properties
and classified as held for sale in line with IFRS 5. They were expected to have been sold before the year end,
but due to market conditions, some of them are still unsold at the financial year end. However, the Bank is still
committed to disposing them off. They are held at cost. No impairment have been recognised on the properties
since the market value is much higher than the cost.
38
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
b) Analysis by maturity
Under 1 month 949,679,828 385,204,448
1-3 months 280,115,000 -
3-6 months - 3,710,274
6-12 months - -
Over 12 months - -
1,229,794,828 388,914,722
25. Debt issued and other borrowed funds
2017 2016
N N
FMBN on lending account
Balance at 1 January 8,122,069 10,236,441 Additions 110,665,000 -
Less: Payments (920,417) (2,114,372)
Balance at 31 December 117,866,652 8,122,069
26. Current tax liabilitiesBalance at 1 January 20,100,362 15,898,019
Amounts recorded in the income statements 14,074,029 7,992,524
Technology levy expenses 1,875,366 796,662
Payments made on-account during the year (9,085,193) (4,586,843)
Underprovision/(Overprovision) 9,383,754 -
Balance at 31 December 36,348,318 20,100,362
Profit before income tax 187,536,516 78,869,495
26.1 Tax thereon at 30% (2016: 30%) 56,260,955 23,899,847
Non-deductible expenses 1,140,299 10,215,853
Non-taxable Income (53,145,171) (14,134,390)
Accelerated capital allowance - (13,320,873)
Effect of education tax levy 385,103 1,332,087
4,641,186 7,992,524
% %
26.2 Tax rate at 30% (2016: 30%) 30 30
Non-deductible expenses 0.02 0.43
Non-taxable Income (0.94) (0.59)
Accelerated capital allowance - (0.56)
Effect of education tax levy 0.01 0.06 Effective Tax Rate 29 29
The balance on the FMBN on lending account represents balance
owed to the Federal Mortgage Bank of Nigeria for amounts
disbursed to the Bank for on lending for duly prequalified and
approved National Housing Fund beneficiaries.
All loans from the Federal Mortgage Bank are secured by Bank
Guarantees with the exception of loans with Legal Mortgages.
39
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
26.3 Deferred taxation
27. Other liabilities
2017 2016
N NOther liabilities inlcude:
Accrued expenses 1,050,000 46,833,941
Sundry & other payables 132,746,736 199,320,935
Unearned incomes 30,587,802 203,452,733
164,384,538 449,607,609
27.1
28. Employee benefitsDefined contribution plan
2017 2016
N N
Retirement benefit plan
Opening defined contribution obligation 5,172,675 -
Contribution for the period 4,528,566 5,172,675
Payment to fund administrators (8,243,087) -
1,458,154 5,172,675
29. Share capital
Ordinary shares
a) Authorised11,000,000,000 ordinary shares of 50 kobo each 5,500,000,000 2,500,000,000
b) Issued and fully paid:5,000,000,000 ordinary shares of 50k each 2,500,000,000 2,500,000,000
Unearned income represent unrealised interest on Nigerian
Government treasury bills as well as interest on past due loan
facilities placed in suspense.
The Company has adopted the International Accounting Standard IAS 12 deferred taxation. The Computation
of the deferred taxation resulted in deferred tax asset of N2,120,192 (2016: N34,857,237) which is not
recognised in these financial statements, as it is not probable that taxable profit will be available in the
foreseable future against which the timing differences can be utilised.
A defined contribution plan is a pension plan under which the bank pays fixed contributions; There is no legal or
constructive obligation to pay further benefits. This is in compliance with the Pension Reform Act of 2004. Both
employees and employer contribute to the plan based on specified rates as stated in the Act. The employees
contribute 8% of basic, housing and transport allowances, while the Bank contributes 10% of same making a
total contribution of 18%, into employees RSA, maintained with Pension Fund Administrators.
The total expense charged to the income statement of N3.07 million represents contributions paid by the bank
to these plans.
40
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
29.1 Statutory reserve
2017 2016
N N
Movement in statutory reserve
At 1 January 28,558,281 14,382,887
Transfer from retained earnings 34,860,346 14,175,394
At 31 December 63,418,627 28,558,281
29.2 Retained earnings
Movement in retained earnings
At 1 January (91,764,944) (148,466,521)
Profit for the year 173,462,487 70,876,971
Transfer to statutory (34,860,346) (14,175,394)
At 31 December, 2017 46,837,197 (91,764,944)
29.3 Available for sale reserve
2017 2016
Movement in available for sale reserve N N
At 1 January (3,553,834) -
Net gains/(loss) on available for sales financial
assets 1,618,221 (3,553,834)
At 31 December (1,935,613) (3,553,834)
The revised guidelines for Primary Mortgage Banks in Nigeria
require mortgage banks to make an annual appropriation to a
statutory reserve. As stipulated by section 5.4 of the of the revised
guidelines, an appropriation of 20% of profit after tax is made if the
statutory reserve is less than the paid up share capital and 10% of
profit after tax if the statutory reserve is equal to or in excess of the
paid up capital.
Available For Sale (AFS) assets are measured at fair value in the
balance sheet. Fair value changes on AFS assets are recognised
through other comprehensive income.
41
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2017
30. Fair value of financial instruments
Financial instruments recorded at fair value
Financial investments – available for sale
Determination of fair value and fair value hierarchy
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
The Bank has no transactions fitting into these categories.
Carrying Carrying
amount Fair value amount Fair value
N N N N
Financial assets
Cash and balances with Central Bank 37,235,120 37,235,120 14,437,902 14,437,902
Due from banks 1,996,398,590 1,996,398,590 1,681,629,688 1,681,629,688
Loans and advances to customers 861,051,528 859,280,927 548,813,501 345,360,768
2,894,685,238 2,892,914,637 2,244,881,091 2,041,428,358
Financial investments
- Available for sale 104,223,123 104,223,123 102,604,902 102,604,902
2,998,908,361 2,997,137,760 2,347,485,993 2,144,033,260
Financial liabilities
Due to customers 1,229,794,828 1,229,794,828 388,914,722 388,914,722
Debt issued and other borrowed funds 117,866,652 117,866,652 8,122,069 8,122,069
1,347,661,480 1,347,661,480 397,036,791 397,036,791
The following is a description of how fair values are determined for financial instruments that are recorded at fair
value using valuation techniques. These incorporate the bank’s estimate of assumptions that a market participant
would make when valuing the instruments.
Set out below is a comparison, by class, of the carrying amounts and fair values of the bank’s financial instruments
that are not carried at fair value in the financial statements. This table does not include the fair values of non-
financial assets and non-financial liabilities.
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on
observable market data.
The Bank uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are
observable, either directly or indirectly.
Available for sale financial assets valued using valuation techniques or pricing models primarily consist of unquoted
equities.
These assets are valued using models that use both observable and un-observable data. The un-observable inputs
to the models include assumptions regarding the future financial performance of the investee, its risk profile, and
economic assumptions regarding the industry and geographical jurisdiction in which the investee operates.
2017 2016
41
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2017
Fair value of financial assets and liabilities not carried at fair value
i Assets for which fair value approximates carrying value
ii Fixed rate financial instruments
iii Fair value of financial assets attributable to changes in credit risk
31. Contingent liabilities, commitments and lease arrangements
a) Legal claims
b) Capital commitments
In respect of any net gain on Available for Sale Financial Assets (Debt Securities), recognised in equity, the fair
value changes are attributable to changes in market interest rate and not the credit risk of the issuer.
Litigation is a common occurrence in the banking industry due to the nature of the business undertaken. The bank
has formal controls and policies for managing legal claims. Once professional advice has been obtained and the
amount of loss reasonably estimated, the Bank makes adjustments to account for any adverse effects which the
claims may have on its financial standing.
The Bank in the ordinary course of business is presently involved in 9 litigation suits. All 9 cases were instituted by
the Bank against defaulting customers, which is not likely to give rise to any material contingent liability, or have any
material effect on the Bank. The Directors are not aware of any other pending or threatened claims and litigations.
As at 31 December 2017, the Bank has no capital commitments at the end of the year (2016:N0.00) in respect of
authorized and contracted capital projects.
The following describes the methodologies and assumptions used to determine fair values for those financial
instruments which are not already recorded at fair value in the financial statements:
For financial assets and financial liabilities that have a short term maturity (0-6months) it is assumed that the
carrying amounts approximate their fair value. This assumption is also applied to demand deposits, and savings
accounts without a specific maturity.
The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing
market interest rates when they were first recognised with current market rates for similar financial instruments.
42
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
32. Lease arrangements
Operating lease commitments – Bank as lessee
33. Related party disclosures
2017 2016
N N
a) Compensation of key management personnel of the Bank
Termination benefits - 18,380,362
- 18,380,362
b)
N N
Fees and sitting allowances 11,555,835 9,251,182
Other director expenses 8,230,907 1,677,653
19,786,742 10,928,835
c)
Loans and advances 73,897,066 13,500,000 Others 20,000,000 20,000,000
The Bank did not enter into commercial leases for premises and equipment during the financial year (2016:
NIL).
Parties are considered to be related if one party has the ability to control the other party or exercise influence
over the other party in making financial and operational decisions, or one other party controls both. The
definition include directors and key management personnel among others. Key management personnel is
defined to include executive and non executive directors of the Bank The bank enters into transactions,
arrangements and agreements involving directors, and their related concerns in the ordinary course of
business at commercial interest and commission rates.
The directors remuneration below relates to payment to non-executive
directors and charged as expense in the year. The non-executive directors
do not receive pension entitlements from the Bank.
The following table provides the total amount of transactions, which have
been entered into with key management personnel and their related
parties for the relevant financial years.
43
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
d) Insider related credits outstanding as at 31 December 2017
Further disclosure of related party transactions is shown in the table below in compliance with Central Bank of Nigeria circular BSD/1/2004.
31 December, 2017
Name of Borrower
Account
Number
Relationship to
reporting Institution Date granted Expiry Date
Authorised
Credit Nature of Credit
Outstanding
Balance Status
Interest
Rate Security Type / ValueN N
1 Ayodele Olowookere 0000196977 Managing Director 10/19/2017 19/10/2024 30,000,000 Housing Loan 28,995,304 Performing 4.5% C of O over a property
2 Afolabi Olusola Levi 0000199662 Chief Financial Officer 11/24/2017 11/24/2027 15,175,000 Housing Loan 7,274,815 Performing 4.5% C of O over the property
3 Prince Adewumi Adesola 0000198036 Non-Executive Director 10/31/2017 10/31/2021 9,140,000 Housing Loan 8,836,947 Performing 12% C of O over the property
4 Kolawole Akintayo 0000201604 Non-Executive Director 12/29/2017 12/29/2020 8,140,000 Housing Loan 8,140,000 Performing 12% C of O Over the Property
5 Oyebamiji Bola 0000197857 Non-Executive Director 10/30/2017 10/30/2037 20,650,000 Housing Loan 20,650,000 Performing 18% C of O Over a Property
83,105,000 73,897,066
Others
1 Morgan Capital N/A Major Shareholder 20/12/2016 N/A 20,000,000 Consultancy 20,000,000 N/A N/A N/A
At 31 December, 2017 103,105,000 93,897,066
At 31 December, 2016 33,500,000 9,592,695
34. Events after the reporting date
35. Capital management
i) Objectives
There were no significant events after the reporting date which could have had a material effect on the financial position of the Bank as at 31 December 2017 and profit attributable to shareholders on that
date which have not been adequately adjusted or disclosed.
The primary objectives of the bank’s capital management policy are to ensure that the bank complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital
ratios in order to support its business and to maximise shareholder value.
The Bank manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital
structure, the bank may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes have been made to the objectives, policies and
processes from the previous years. However, they are under constant review by the Board.
44
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
ii) Regulatory capital
The Bank's regulatory capital is analyzed into two tiers:
iii) Capital Adequacy Ratio (CAR)
2017 2016
N N
Regulatory capital
Tier 1 capital
Share capital 2,500,000,000 2,500,000,000
Statutory reserves 63,418,627 28,558,281
Retained earnings 46,837,197 (91,764,944)
Less: Intangible assets (30,475,240) (35,785,774)
Total qualifying Tier 1 capital 2,579,780,584 2,401,007,563
Tier 2 capital
Preference share - -
Long term loan 117,866,652 8,122,069
Available for sale reserve (1,935,613) -
Total qualifying Tier 2 capital 115,931,039 8,122,069
Total qualifying capital 2,695,711,623 2,409,129,632
Risk-weighted assets:On balance sheet 2,929,793,777 1,095,918,296
Ratio 92.01 219.83
Highest 99.04 219.83
Lowest 86.05 101.45
Average 92.54 160.64
The Bank maintains an actively managed capital base to cover risks inherent in the business and meet the
capital adequacy requirements of the local banking supervisor, Central Bank of Nigeria. The adequacy of the
Bank's capital is monitored using among other measures, the rules and ratios established by the Basel
Committee on Banking Supervision (BIS rules/ratios) and adopted by the Central Bank of Nigeria in
supervising Banks. The Central Bank of Nigeria requires the Bank to maintain a prescribed ratio of total
capital to total risk weighted assets.
Tier 1 Capital: This includes ordinary share capital, share premium, retained earnings, deductions for
intangibles and other regulatory adjustment relating to items that are included in equity but are treated
differently for capital purposes.
Tier 2 Capital: Which includes qualifying surbordinated liabilities, preference shares, revaluation reserves
and the element of the fair value reserve relating to unrealized gains on equity instruments classified as
available for sale.
Regulatory limits are applied to the capital base. The qualifying tier 2 cannot exceed tier 1 capital. There are
also restrictions on the amount of collective impairment that may be included as part of tier 2 capital.
This is the quotient of the capital base of the Bank and its risk weighted asset base. In compliance with the
Central Bank of Nigeria regulations, a minimum ratio of 10% is to be maintained.
During the year, the highest and lowest peaks of the Bank's
computed CAR are shown below:
45
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
36. Maturity profile of assets and liabilities
The table below shows an analysis of assets and liabilities analysed according to when they are expected to be recovered or settled.
a) As at 31 December 2017
Up to 1 1 to 3 3 to 6 6 to 12 Over 12 Total
Month Months Months Months Months
N N N N N N
Assets
Cash and balances with central banks 20,647,028 - - - 16,588,092 37,235,120
Due from banks 358,533,794 1,104,522,711 333,342,086 200,000,000 - 1,996,398,590
Loans and advances to customers 90,024,837 7,658,266 1,450,142 35,987,915 725,930,368 861,051,528
Financial investments - available-for-sale - - - - 104,223,123 104,223,123
Other assets 669,450 - 2,041,936 544,034,364 - 546,745,750
Property and equipment - - - 232,646,945 232,646,945
Intangible assets - - - - 30,475,240 30,475,240
Non current assets held for sale - - - 349,396,405 - 349,396,405
Total assets 469,875,109 1,112,180,977 336,834,164 1,129,418,684 1,109,863,768 4,158,172,701
Liabilities
Due to customers 949,679,828 280,115,000 - - - 1,229,794,828
Debt issued and other borrowed funds - - - - 117,866,652 117,866,652.00
Current tax liabilities - - - 36,348,318 - 36,348,318.00
Other liabilities - - - 164,384,538 - 164,384,538.08
Employee benefit liabilities - - 1,458,154 - - 1,458,154.00
Equity - - - - 2,608,320,211 2,608,320,210.92
Total liabilities 949,679,828 280,115,000 1,458,154 200,732,856 2,726,186,863 4,158,172,701
Gap (479,804,719) 832,065,977 335,376,010 928,685,828 (1,616,323,095) 0
46
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Up to 1 1 to 3 3 to 6 6 to 12 Over 12 Total
Month Months Months Months Months
N N N N N N
37b Maturity profile of assets and liabilities
As at 31 December 2016
Cash and balances with central banks 10,139,473 - - - 4,298,429 14,437,902
Due from banks 416,257,104 715,382,967 550,000,000 - - 1,681,640,071
Loans and advances to customers 53,121,613 65,376,785 9,968,016 4,261,131 416,085,955 548,813,501
Financial investments – available-for-sale - - - - 102,604,902 102,604,902
Other assets - - 1,638,930 154,242,421 929,316 156,810,667
Property and equipment - - - 226,564,049 226,564,049
Intangible assets - - - - 35,785,773 35,785,773
Non current assets held for sale - - - 584,947,510 - 584,947,510
Total assets 479,518,189 780,759,753 561,606,946 743,451,062 786,268,424 3,351,604,374
Liabilities
Due to customers 385,204,448 - 3,710,274 - - 388,914,722
Debt issued and other borrowed funds - - - - 8,122,069 8,122,069
Current tax liabilities - - - 20,100,363 - 20,100,363
Other liabilities - - - 449,607,605 - 449,607,605
Employee benefit liabilities - - 5,172,675 - - 5,172,675
Equity - - - - 2,433,239,503 2,433,239,503
Total liabilities 385,204,448 - 8,882,949 469,707,968 2,441,361,572 3,305,156,938
Gap 94,313,741 780,759,753 552,723,997 273,743,094 (1,655,093,148) 46,447,436
37. Currency risk
All transactions of the company have been carried out and consumated in the local currency which is Naira. Hence the Bank is not exposed to any currency
risk.
47
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
38. Interest rate risk
The table below shows an analysis of interest bearing assets and liabilities analysed according to when they are expected to be settled.
Up to 1 1 to 3 3 to 6 6 to 12 1 to 3
Month Months Months Months Years Total
N N N N N N
a) As at 31 December 2017
Assets
Due from Banks 358,533,794 1,104,522,711 333,342,086 200,000,000 - 1,996,398,590
Loans and advances to customers 90,024,837 7,658,266 1,450,142 35,987,915 725,930,368 861,051,528
448,558,631 1,112,180,977 334,792,228 235,987,915 725,930,368 2,857,450,118
Liabilities
Due to customers 949,679,828 280,115,000 - - - 1,229,794,828
Debt issued and other borrowed funds - - - - 117,866,652 117,866,652
949,679,828 280,115,000 - - 117,866,652 1,347,661,480
Gap (501,121,197) 832,065,977 334,792,228 235,987,915 608,063,716 1,509,788,638
48
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Up to 1 1 to 3 3 to 6 6 to 12 Over 12
Month Months Months Months Months Total
N N N N N N
b) As at 31 December 2016
Assets
Due from Banks 416,257,104 715,382,967 550,000,000 - - 1,681,640,071
Loans and advances to customers 53,121,613 65,376,785 9,968,016 4,261,131 416,085,955 548,813,501
469,378,717 780,759,753 559,968,016 4,261,131 416,085,955 2,230,453,572
Liabilities
Due to customers 385,204,448 - 3,710,274 - - 388,914,722
Debt issued and other borrowed funds - - - - 8,122,069 8,122,069
385,204,448 - 3,710,274 - 8,122,069 397,036,791
Gap 84,174,269 780,759,753 556,257,742 4,261,131 407,963,886 1,833,416,781
49
OMOLUABI MORTGAGE BANK PLC
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
Number Number
39. Employees
Directors 1 1
Management 6 4
Non-management 54 52
61 57
40. Contraventions
41. Imapct assessment of IFRS 9 adoption
Comparative figures
Certain comparative figures have been reclassified in order to have a more meaningful comparison.
STATEMENT OF FINANCIAL POSITION
IAS 39 IFRS 9
2017 2017
Assets N N
Cash and Bank balances 37,235,120 37,235,120
Due from banks 1,996,398,590 1,996,398,590
Loans and advances to customers 861,051,528 858,947,330
Financial investments 104,223,123 -
Other assets 546,745,750 546,745,750
Property and equipment 232,646,945 232,646,945
Intangible assets 30,475,240 30,475,240
3,808,776,296 3,702,448,975
Non current assets held for sale 349,396,405 349,396,405
Total Assets 4,158,172,701 4,051,845,380
Total equity 2,608,320,211 2,710,439,136
IAS 39 IFRS 9
2017 2017
N N
Gross Earnings 518,378,573 518,378,573
Total operating income 494,082,935 495,701,156
Operating expenses (346,925,689) (346,925,689)
Impairment write back/ (losses) 40,379,270 38,275,072
Profit before taxation 187,536,516 187,050,539
Taxation for the year (14,074,029) (14,074,029)
Profit/(Loss)after taxation 173,462,487 172,976,510
Other Comprehensive Income 1,618,221 -
Total Comprehensive Income 175,080,708 172,976,510
The average number of persons employed by the Bank during the year
was as follows:
The bank paid penalty amounting to N4,770,980 to various regulatators for some regulatory accumulated contravention of
past years, but no other contravention occurred during the year of such regulatory bodies like BOFIA, CBN, NDIC, or any
other body (2016 :N3,113,733.12).
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
50
OMOLUABI MORTGAGE BANK PLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Other national disclosures
OMOLUABI MORTGAGE BANK PLC
STATEMENT OF VALUE ADDED
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016
N % N %
Gross earnings 518,378,573 304,930,527
Interest expense (24,295,638) (321,425)
494,082,935 304,609,102
Net impairment 56,925,360 147,891,359
Bought-in-materials and services - local (223,358,802) (244,090,190)
327,649,493 100 208,410,271 100
Applied to pay:
Employees as salaries, wages and pensions 95,635,504 29 98,864,353 47
Government taxes 14,074,029 4 7,992,524 4
Retained in business:
- Depreciation and amortisation 44,477,473 14 30,676,423 15
- Profit for the year 173,462,487 53 70,876,971 34
327,649,493 100 208,410,271 100
Value Added is the Wealth created by the efforts of the Bank and its Employees. The statement shows the
allocation of the wealth amongst employees, government, capital providers and that retained in the business for
expansion and future wealth creation.
51
OMOLUABI MORTGAGE BANK PLC
FIVE YEARS FINANCIAL SUMMARY
31 December
2017
31 December
2016
31 December
2015
31 December
2014
31 December
2013
N N N N N
Assets
Cash and balances with Central Bank 37,235,120 14,437,902 4,830,469
Due from banks 1,996,398,590 1,681,629,688 1,837,252,102 1,702,219,474 2,128,193,623
Loans and advances to customers 861,051,528 548,813,501 364,544,540 670,158,307 396,389,541
Financial investments 104,223,123 102,604,902 26,155,836 58,716,023 97,417,363
Other assets 546,745,750 110,373,613 125,664,105 154,239,637 132,065,915
Property and equipment 232,646,945 226,564,050 63,405,299 55,914,521 46,749,884
Intangible assets 30,475,240 35,785,774 17,354,923 14,105,045 7,061,056
Deferred tax assets - - - - -
Non current assets held for sale 349,396,405 584,947,509 201,376,126 201,376,126 267,293,672
Total assets 4,158,172,701 3,305,156,939 2,640,583,400 2,856,729,133 3,075,171,054
Liabilities and equity
Liabilities
Due to customers 1,229,794,828 388,914,722 146,686,754 196,020,392 310,802,368
Debt issued and other borrowed funds 117,866,652 8,122,069 10,236,441 11,563,322 19,352,839
Current tax liabilities 36,348,318 20,100,362 15,898,019 12,363,165 9,772,583
Other liabilities 165,842,692 454,780,284 101,845,819 110,835,088 257,475,873
Total liabilities 1,549,852,490 871,917,437 274,667,033 330,781,967 597,403,663
Equity
Issued share capital 2,500,000,000 2,500,000,000 2,500,000,000 2,500,000,000 2,500,000,000
Share premium - - - - -
Statutory reserve 63,418,627 28,558,281 14,382,887 14,382,887 14,382,887
Retained earnings 46,837,197 (91,764,944) (148,466,520) 11,564,279 -36,615,496
Available for sale reserve (1,935,613) (3,553,834) - - -
Total equity 2,608,320,211 2,433,239,503 2,365,916,367 2,525,947,166 2,477,767,391
Total liabilities and equity 4,158,172,701 3,305,156,939 2,640,583,400 2,856,729,133 3,075,171,054
31 December 31 December 31 December 31 December 31 December
2017 2016 2015 2014 2013
N N N N N
Statement of comprehensive income
Gross earnings 518,378,573 304,930,527 214,153,285 255,355,559 84,712,604
Total operating income 494,082,935 304,609,102 214,047,301 254,409,150 83,631,629
Operating expenses (346,925,689) (274,631,624) (121,621,491) (191,676,737) (114,346,398)
Impairment write back / (losses) 40,379,270 48,892,017 (256,053,146) - -
Profit before taxation 187,536,516 78,869,495 (161,521,849) 62,732,413 (30,714,769)
Taxation for the year (14,074,029) (7,992,524) (6,514,265) (14,552,638) (6,806,116)
Profit/(Loss)after taxation 173,462,487 70,876,971 (168,036,114) 48,179,775 (37,520,885)
Other comprehensive income 1,618,221 (3,553,834) - - -
175,080,708 67,323,137 (168,036,114) 48,179,775 (37,520,885)
52