2016-17 Annual Report
Big heart,
big future.
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The purpose of this annual report is to explain Auswide Bank’s strategy and operations, and the performance of
the business during 2016-17. The report also sets out our strategic objectives and business priorities for 2017-18.
Contents
Auswide Bank – what we do
2016-17 Performance Highlights
Five Year Performance History
Chairman and Managing Director’s Report
Strategic Direction
Customer Experience
Supporting Our Community
Empowering Our People
Investing in Technology
Managing Risk
Board of Directors
Leadership Team
Directors’ Statutory Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Summary
Shareholder Information
Financial Glossary
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4
6
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10
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13
15
16
17
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46
94
95
100
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AUSWIDE BANK – 30 JUNE 2017
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Auswide Bank
what we do
AT AUSWIDE BANK WE BELIEVE IN THE POWER
OF SMALL, BECAUSE SMALL IS REAL AND SMALL
IS SINCERE. BUT BEING SMALL DOESN’T MEAN
WE CAN’T ACHIEVE BIG THINGS.
Through the power of small we have delivered on our
commitment to being a bank that makes a big difference.
We have supported our communities through our community
grants program, giving back to those who made us who we are
today. We continue to deliver competitive financial products for
personal and business customers that help them grow and thrive.
As the big hearted bank we provide choice for customers seeking
a genuine alternative for their banking needs.
Our shareholders and business partners have enabled us to
grow from a building society focused on regional Queensland
into a bank with national reach. Despite our size, Auswide Bank
continues to surprise as we lead with innovation in technology,
deliver award winning products and create strategic partnerships
that will ensure we continue to grow well into the future.
Auswide Bank. Discover the power of small.
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/ ANNUAL REPORT
MISSION
Our Mission is to demonstrate the ‘power of small’ by
placing our customers at the centre of everything we do.
VISION
Our Vision is to be the Bank that our customers, staff
and partners want their friends, family and colleagues
to bank with.
VALUES
Our Values are based on the word EMPOWER and provide
a guide to staff on how we treat our customers and will assist
to achieve our Mission and Vision.
Empowering
customers and staff
to initiate change
Make decisions and
adapt quickly to meet our
customers’ needs
Identify your
purpose and be
passionate about it
Own our actions,
decisions, customers
and outcomes
Exceed our customers’
expectations and celebrate
their successes and our own
A commitment to be
ethical and operate in a
sustainable workplace
Build open and honest
relationships and deliver
on our promises
AUSWIDE BANK – 30 JUNE 2017
/ 3
2016-17
Performance highlights
AUSWIDE BANK REPORTED A SOLID FINANCIAL
PERFORMANCE FOR THE 2016-17 FINANCIAL YEAR
BASED ON STRENGTHENING OUR REVENUE STREAMS,
INVESTING TO IMPROVE CUSTOMER EXPERIENCE, AND
TAKING A DISCIPLINED APPROACH TO MANAGE OUR
CAPITAL POSITION AND OPERATING COSTS.
6.7%
11.4%
NET INTEREST REVENUE of
$57.509 million (2015-16: $53.893 million),
represents growth of 6.7%
UNDERLYING NPAT of $15.636 million
(2015-16: $14.041m), an increase of 11.4%
190 basis
points
3.5%
NET INTEREST MARGIN declined
6 basis points – a solid performance in
highly competitive home lending markets
Underlying COST TO INCOME RATIO
decreased to 65.6% (2015-16: 69.1%)
through disciplined cost management
Footnote: All comparisons are with 2015-16 figures.
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/ ANNUAL REPORT
4.0%
LOAN BOOK growth of 4.0% resulted
in total loan book value of $2.773 billion
(2015-16: $2.666 billion)
14.42%
CAPITAL ADEQUACY RATIO increased
to 14.42% (2015-16: 14.31%) and Tier 1
Capital Ratio increased to 12.06%
(2015-16: 11.90%)
31c
Fully franked TOTAL DIVIDEND of
31 cents per share, an increase of
1 cent per share from the previous
financial year
0.72%
TOTAL LOAN ARREARS greater
than 30 days past due decreased
to $20.1 million (2015-16: $26.6 million)
or 0.72% of Total Loan Book
(2015-16: 0.99%)
AUSWIDE BANK – 30 JUNE 2017
/ 5
Five-year
performance history
A CONSISTENT STRATEGIC FOCUS ON
CUSTOMER EXPERIENCE, OPERATIONAL
IMPROVEMENT AND ORGANIC GROWTH
HAS SUPPORTED A SOLID FINANCIAL
PERFORMANCE AND SHAREHOLDER RETURNS.
NET INTEREST INCOME ($M)
LOANS PORTFOLIO ($M)
60
50
40
30
20
10
0
$50.9
$49.7
$51.2
$57.5
$53.9
2,666
2,773
2,229
2,224
2,330
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2013
2014
2015
2016
2017
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
NET INTEREST INCOME
has shown consistent
improvement as a
result of our focus
on organic growth
LOAN PORTFOLIO
Our focus on customer
experience in highly
competitive lending
markets has underpinned
an expansion of more than
24% in our loan portfolio
over five years
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/ ANNUAL REPORT
DIVIDEND (CENTS PER SHARE)
CAPITAL ADEQUACY RATIO (%)
30.0
30.0
31.0
28.0
15.0
16.0
16.0
17.0
17.0
4.0
13.0
13.0
14.0
14.0
14.0
35
30
25
20
15
10
5
0
2013
2014
2015
2016
2017
DIVIDEND
Auswide Bank’s strong
operating performance and
capital position continue
to support a sustainable
dividend for shareholders
Tier 1
Tier 2
13.53
2.66
14.29
2.61
15.15
2.56
14.31
2.41
14.42
2.36
10.87
11.68
12.59
11.90
12.06
15
10
5
0
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
CAPITAL POSITION
Risk management and
capital strength are critical
priorities, and Auswide Bank
has maintained a strong
capital position relative to its
peer group and regulatory
requirements
LOANS ARREARS ($M)
NET INTEREST MARGIN (%)
100
80
60
40
$34.0
$13.0
30–60 days past due
60–90 days past due
Over 90 days past due
$20.2
$7.3
$15.5
20
$40.9
0
$11.9
$3.2
$7.2
$15.4
$6.7
$4.4
$10.8
$2.9
$6.4
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
LOAN ARREARS
Auswide Bank’s Arrears
Project has delivered
consistent improvements,
reducing arrears greater
than 30 days past due
from $87.9 million in
2012-13 to $20.1 million
in 2016-17
NIM (bps)
RBA Cash Rate (%)
3.0
2.5
2.0
1.5
1.0
/-
-/
0
Jun 13
Jun 14
Jun 15
Jun 16
Jun 17
NET INTEREST MARGIN
Auswide Bank has
maintained a solid
Net Interest Margin
despite intense
competition and
historically low
interest rates
AUSWIDE BANK – 30 JUNE 2017
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Chairman and Managing
Director’s Report
AUSWIDE BANK DELIVERED A STRONG
IMPROVEMENT IN FINANCIAL PERFORMANCE
DURING THE 2016-17 FINANCIAL YEAR.
This positive outcome was a direct result of our strategic focus
on investing to improve customer experience combined with
rigorous internal disciplines for managing our capital position,
risk profile and operating costs.
Net Interest Margin declined by six basis points over the
course of the financial year to 190 basis points, which
represents a good performance in highly competitive
market conditions.
We are pleased to inform shareholders that Auswide
Bank reported an underlying cash net profit after tax
(NPAT) of $15.636 million for the 2016-17 financial year,
an improvement on the previous year of 11.4 per cent.
Statutory NPAT for the consolidated group was
$15.149 million. Compared with the previous year’s figure
of $11.699 million, this was an increase of 29.5 per cent.
Net Interest Revenue increased by 6.7 per cent to
$57.509 million, compared with $53.893 million in
the previous financial year.
Strict management disciplines around cost controls are
an important element of our Strategic Plan and delivered
a pleasing 3.5 per cent improvement in the Bank’s cost to
income ratio, from 69.1 per cent in 2015-16 to 65.6 per cent
for 2016-17.
Our loan book grew by 4.0 per cent to $2.773 billion at
30 June 2017, from $2.666 billion at the end of the previous
financial year. The growth was achieved mainly in the
second half of the financial year, with performance in the
first half restricted with the focus on implementing the new
LendFast origination system. For the first time, the loan
book incorporated a full year of YCU’s contribution after
we completed the integration of the acquired business into
Auswide Bank.
Auswide Bank continues to focus on diversifying income and
improving medium term returns through growth in consumer
lending and business banking. Our consumer loan book is
growing but remains a small part of the total loan portfolio.
The business banking segment is also expanding in central
and south-east Queensland through targeted finance and
banking services for small to medium enterprise customers.
We have also employed a business banker in our Brisbane
branch to focus on this segment.
Our continued focus on risk management culture and
systems across the business allowed us to grow with higher
quality loan origination while maintaining a very healthy
arrears position. Total statutory arrears greater than 30 days
past due decreased from $26.6 million to $20.2 million,
which represents 0.72 per cent of the total loan book
(2015-16: 0.99 per cent). The Board is satisfied that the
provisions set aside cover the risks arising from current
and future doubtful debts.
The Australian banking market remains intensely competitive.
Our investments in improving customer experience by
enhancing our capabilities and technology platforms,
support Auswide Bank’s competitive position and underpin
our solid performance for shareholders. Additionally the
appointment of a Chief Customer Officer in July 2016, which
brought together all of our customer-facing teams and
customer channels, has contributed to increased focus on
customer needs and service levels, helping us to increase
customer numbers by more than 5,500 to 85,215 during
the financial year.
After the merger with Your Credit Union (YCU) was completed
in May 2016, the integration of the systems, products and
customer data of that business into a single Auswide Bank
platform was finalised within five months, on 30 September
2016. The merger is delivering benefits for our customers
and synergies for our business. Customer retention has been
quite exceptional with overwhelmingly positive feedback.
This reflects our bank’s values and culture and together with
the potential financial value their members would receive,
confirms our belief that other mutual credit unions, building
societies or banks considering a merger partner should
consider Auswide Bank as a compelling option.
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/ ANNUAL REPORT
These market dynamics represent both challenges and
opportunities for Auswide Bank. We believe there are clear
opportunities for us to positively differentiate Auswide Bank
from competitors.
We also remain optimistic that we can continue organic
growth of our loan book in 2017-18. We expect to maintain
a similar pattern of home loan growth to the 2017 financial
year with a stronger second half, and will concentrate on
origination quality to maintain a low-risk loan book.
Our business continues to grow and create value for
shareholders because we put our customers first. This is a
core value of Auswide Bank and is illustrated by our Mission
to demonstrate the ‘power of small’ by placing our customers
at the centre of everything we do. This year, we will build
on the momentum we have achieved in 2016-17 to further
deliver benefits for our customers and our shareholders.
Together we would like to thank the people who work for
Auswide Bank and bring our competitive advantage to life
every day in everything they do for our customers. We also
acknowledge the support of our business partners for
your important contribution to another successful year.
We also thank the Auswide Bank Board for your guidance
throughout the year. Most importantly, we thank our two most
important stakeholders, our shareholders and our customers,
for your support for and advocacy of Auswide Bank.
John Humphrey
Chairman
Martin Barrett
Managing Director
Regulatory changes have been significant in the past
few years with additional focus during the financial year.
The announcement by our prudential regulator, the
Australian Prudential Regulation Authority (APRA) of new
“unquestionably strong” capital benchmarks in July 2017
is expected to increase Auswide Bank’s minimum capital
requirement by around 50 basis points. Our capital position
is among the strongest in the banking sector and we are
therefore well positioned to absorb any announced changes.
APRA also introduced new supervisory measures in
March 2017 which place increased lending restrictions
on investor and interest only loans. While Auswide Bank
was an early responder to the new measures, we believe the
limits that have been imposed unduly impact smaller banks
and will restrict our ability to effectively compete with the
four large banks. Auswide Bank will continue to engage in
conversation with APRA to assist in the future consideration
of regulatory measures.
On the basis of our strong capital position and improved
financial performance and total assets, the Auswide
Bank Board has declared a fully franked final dividend of
17.0 cents per share. This brings the total dividend for
2016-17 to 31.0 cents per share, compared with last year’s
figure of 30.0 cents per share. This represents a fully franked,
full year yield of 6.03% to shareholders. Auswide Bank
underwrites the Dividend Reinvestment Plan in respect
of the 2016-17 final dividend. The Plan allows shareholders to
re-invest their dividends to purchase additional shares
at a discount of 2.5 per cent. The capital raised through the
underwritten Plan will strengthen Auswide Bank’s Tier 1
capital position and the proceeds will be used to assist
future growth and regulatory results.
Outlook
The three-year Strategic Plan endorsed by the Board
in March 2016 has guided our actions through the
2016-17 financial year and underpinned an improved financial
performance. In the year ahead, we will maintain our focus
on enhancing the experience we provide for our customers
and growing our business, as well as strengthening the Bank
through enhanced management capabilities, risk processes,
and cost controls. We will also continue to review merger
& acquisition opportunities which align with this Plan and
benefit both the business and our shareholders.
The financial landscape is currently defined by a combination
of historic low interest rates and intense competition, with
the sector also experiencing increasing regulatory pressures,
particularly in relation to standards of accountability, capital
requirements and risk management.
Auswide Bank will continue to place a high priority on
ongoing improvements to our risk management culture
and maintaining a strong capital position.
AUSWIDE BANK – 30 JUNE 2017
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Strategic direction
IN MARCH 2016, THE AUSWIDE BANK BOARD
ENDORSED AN UPDATED THREE-YEAR STRATEGIC
PLAN THAT BUILDS ON THE PROGRESS ACHIEVED
OVER THE COURSE OF THE INITIAL 2013-2016 PLAN.
The new plan maintains our focus on the structure,
transformation, growth and strength of the Bank.
The 2017-18 operational priorities under our strategic
direction are set out below.
These aims will be met through a range of priorities that
have been progressed throughout 2016-17 as set out in
this report, and which will continue to be our focus over
the life of the plan.
These priorities include:
HOME LOANS
RESTRUCTURING the Bank’s sales channels, products
and marketing to better allocate resources to improve
customer experience
IMPLEMENTING and re-engineering the end-to-end
home loan process
AUTOMATING processes and simplifying products
CONSUMER
LOANS
BUILDING the Auswide Bank brand through consistent
messaging and enhanced customer service
CONTINUING to invest in technology, skills and training
STRENGTHENING the Bank through management
capabilities, risk and audit processes, and capital strength
EXPENSE
MANAGEMENT
REDUCING the Bank’s cost to income ratio
REVIEWING M&A and fintech opportunities as they arise.
FUNDING
OPTIMISATION
Continue to focus on growth
in our home loan book
»
LendFast upgrade
» Apply Online capability
»
» Third-party service improvement
Process optimisation
Drive growth through an
increase in branch capacity
and technology investment
»
Launch on-balance sheet
credit card
»
Increase in branch-based
and digital capability
» Margin optimisation
A key priority as we adopt further
transformation practices and
reduce cost-to-income ratio
»
Focused expense management
» Continue transformation projects
»
Reduce cost-to-income ratio
Manage funding mix of retail and
wholesale sources with expected
continued growth in customer deposits
» Continue growth in customer
deposits
» Maintain efficient management
of funding and mix of wholesale
liabilities
» Maximise return on liquid
investments
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/ ANNUAL REPORT
AUSWIDE BANK – 30 JUNE 2017
/ 11
Customer experience
AS A REGIONAL BANK WITH A STRONG
COMMUNITY FOCUS, AUSWIDE BANK’S ABILITY
TO PROVIDE OUTSTANDING CUSTOMER
SERVICE IS A KEY COMPETITIVE ADVANTAGE.
With the establishment of a Chief Customer Office in July
2016, the customer-facing channel has been transformed.
This has already resulted in better outcomes for our
customers and helped the Bank grow its customer base by
5,500 to 85,215 during the financial year.
Auswide Bank has 23 branches and agencies across
Queensland as well as broker relationship managers in Sydney
and Melbourne. As part of the ongoing improvement of this
retail network, the customer leadership and executive team
continues to review our branch footprint to ensure it aligns
to opportunities. In July 2017, this review process saw the
Caboolture (north of Brisbane) and Maroochydore (Sunshine
Coast) branches amalgamated and relocated to new premises
at North Lakes. This decision was designed to provide more
opportunity in a targeted population growth area.
Auswide Bank has strengthened its third party broker
channel with improved performance during the financial
year driving growth in home loan applications. The solid
growth in third party relationships is a result of technology
enhancements and increasing the number of broker
relationship managers who service this channel. Our new
on-boarding process has delivered significant benefits for
mortgage brokers by streamlining the application process
and visibility of loans placed through our lending system. This
process also results in a better customer experience, helping
to retain customers introduced by mortgage brokers, many
of whom are having their first experience with Auswide Bank.
We place customers at the heart of everything we do and the
results of our customer satisfaction and brand awareness
research have shown that this focus has been rewarded.
Survey results for 2017 highlighted a positive customer mood
score of 84 per cent and a 40 per cent increase in brand
recognition among non-customers. Seventy-six per cent of
customers surveyed were ‘not likely’ to leave Auswide Bank
for another institution in the next six months, which is a
significant indicator of success in the customer channel.
Meeting the financial needs of customers and creating
innovative products remains a critical focus for Auswide Bank.
On-balance sheet credit cards have been a major product
development focus and these products are expected to launch
in late 2017. This will allow personal banking customers to
access Auswide Bank issued Low Rate and Cash Rewards
credit cards. Auswide Bank will maintain its partnership with
Citigroup Card Services to support the existing card portfolio
and Platinum Rewards MasterCards.
Our unique RBA Rate Tracker Home Loan won the
‘Innovative Mortgage Offering of the Year’ category at
the 27th annual Australian Retail Banking Awards. The
Bank’s Freedom Package was also recognised by financial
comparison website, mozo.com.au as one of the best value
home loans in Australia in their annual Experts Choice Home
Loan Awards. These awards recognise the small things we do
that are making a big difference for our customers.
Customer Geographic Distribution
20.4%
NORTH QLD
28.7%
SOUTH QLD
2.5%
VICTORIA
3.8%
NEW SOUTH
WALES
1.6%
OTHER
43.0%
CENTRAL QLD
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/ ANNUAL REPORT
Supporting
our community
SUPPORTING OUR LOCAL
COMMUNITIES DEMONSTRATES
‘THE POWER OF SMALL’ AND OUR
COMMITMENT TO CUSTOMERS.
Our support comes in the form of sponsorships, staff
volunteering and in-kind contributions to help schools,
groups and clubs to benefit their communities.
In 2016-17, Auswide Bank’s ‘Our Community’ Grants Scheme
supported more than 45 projects that have a lasting impact
on our local communities. Further contribution was provided
to community events through in-kind assistance and support.
QLD Young Achievers Awards
For the second year running, Auswide Bank has been
a key sponsor of the Queensland Young Achievers
Awards, which encourages the positive achievements of
people under 29 years of age in a range of endeavours.
To reinforce our dedication to this important program for
young people, a commitment has been made to support
the Awards in 2017-18.
Fundraising
Encouraging community service and fundraising initiatives
gives our staff an opportunity to develop leadership skills
and gain a sense of purpose and connection to their local
communities. In 2016-17 Auswide Bank staff were actively
involved in fundraising campaigns for a range of causes.
For more than a decade, we have supported both the Jeans
4 Genes fundraiser for the Children’s Medical Research
Institute and the Bundaberg Mayor’s Christmas Appeal. In
addition, our people have raised funds for dementia research
through the Miles for Memories campaign and the Salvation
Army’s annual Red Shield Appeal.
CQUniversity Scholarships
Auswide Bank is in the second year of a three-year
agreement valued at $50,000 with CQUniversity to provide
scholarships for business, finance or accounting students.
Our scholarship agreement represents an investment in our
local youth and community. These students represent an
important customer demographic for our future, and they
are potential leaders and employees in our local regions.
Disaster Relief
Natural disasters have a long lasting impact on the
communities they affect. In March 2017 many towns and
cities in north Queensland were devastated by Tropical
Cyclone Debbie. Auswide Bank contributed to the Salvation
Army appeal for recovery efforts and coordinated support
and assistance packages for customers experiencing
hardships as a result of the disaster.
Auswide Bank has always been actively involved in our
local communities and we are proud to contribute by
supporting appropriate not-for-profit organisations to
achieve their goals.
Photo: CQUniversity scholarships winners Brooke
Eden, Ryan Paul and Caitlin Turnbull with Dean of
Business and Law Professor Lee Di Milia and Auswide
Bank Managing Director Martin Barrett
AUSWIDE BANK – 30 JUNE 2017
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CUSTOMER AND COMMUNITY CASE STUDIES
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/ AUSWIDE BANK – 30 JUNE 2017
AFTER BUNDABERG HAIRDRESSER CHANEL SMITH FROM HAIR SYNERGY LOST EVERYTHING IN THE 2013 FLOODS, AUSWIDE BANK HELPED HER REBUILD BETTER THAN EVERChanel has been a customer of Auswide Bank since 1992 and in that time we have helped her build three family homes and acquire her current business premises. Chanel had owned her business premises for just five months when the 2013 floods hit:“Auswide Bank assisted in helping me re-build my salon quickly so we could be back up and trading ASAP, which kept cash flowing and my staff employed. “Auswide Bank assisted me to manage my loan repayments during this stressful period which was very much appreciated. “I have found Auswide Bank staff go out of their way to help, especially during tough times. I would recommend Auswide Bank to anyone as I’ve always been very happy and grateful for the service they have provided through the years.” PRINT MARKETING AND PROMOTIONAL COMPANY, CHAMELEON GROUP RECENTLY MADE THE SWITCH TO AUSWIDE BANKChris Krieger, CEO of Chameleon Group was looking for a local bank doing good things and made the switch to Auswide Bank 12 months ago.“We’re a Queensland based company employing over 60 people locally with six offices from Rockhampton to the Sunshine Coast. We invest in innovation and strive to provide excellent customer service.“We looked around and Auswide Bank were a local bank supporting the community with very competitive fees and rates.“From a business point of view their fees are very low or non-existent and more importantly, the service is very friendly and prompt.“Auswide Bank is just an easy bank to get along with and are very professional to deal with at all levels.”AUSWIDE BANK’S CONNECTION WITH CQUNIVERSITY HAS GROWN FROM A PRESENTATION ON MARKETING CAREERS INTO AN OPPORTUNITY TO DEVELOP THE NEXT GENERATION OF LOCAL BUSINESS LEADERS.Associate Lecturer, Tim Whan worked with Auswide Bank to provide a real world learning experience for CQU students on the Bank’s re-branding. Now, Auswide Bank provides scholarships to support local students to focus on their career goals. “The staff at Auswide Bank have an incredible culture and a real understanding of doing business in regional Australia. “Coupled with a commitment to supporting their communities, this means that Auswide Bank really is the big hearted bank - a quality quite unique in the finance industry.” Empowering
our people
EMPOWERING OUR PEOPLE PROVIDES
A PLATFORM FOR AUSWIDE BANK TO
CONSISTENTLY ACHIEVE ITS MISSION
STATEMENT OF PLACING CUSTOMERS
AT THE CENTRE OF EVERYTHING WE DO.
Our Values (see page 3) support this philosophy together
with a focus on professional development, training and
coaching of our people.
We believe that the responsibility of delivering such
outstanding customer service starts with our leaders.
The bank during 2016/17 focused on developing our leaders
through the introduction of the Leadership Empowerment
Series. Fifty leaders from across the bank attended 2 sessions
– Empower Our Leaders and Empower You and Others. This
series will continue through 2017-18 to improve employee
engagement, coaching through positive performance to
outcome strategies, brand and risk culture awareness and
attracting and retaining the best ‘bank fit talent.
The annual Auswide Bank Employee Engagement survey
was conducted in August with more than 90 per cent of
staff participating. The response rate achieved places
Auswide Bank in the top percentile among Australian
companies with our people taking the opportunity to
provide feedback and comments that will contribute to
building a better bank. The Bank will continue to maintain
its focus on creating a positive culture and environment that
supports our people, our customers and our shareholders.
Staff Survey Highlights
80%
83%
84%
90%
90%
92%
94%
are proud to be part of Auswide Bank
believe strongly in the mission
and vision of the Bank
fully support our company
values “Empower”
don’t promise things to our
customers we cannot deliver
constantly looking for better
ways to service their customers
work beyond what is required
to help the Bank succeed
understand how their work contributes
to the Bank’s business objectives
Total number of
staff (headcount)
Customer facing vs
support staff
Gender distribution
(all staff)
Gender distribution
(management)
244
Figures as at 30 June
52%
SUPPORT
48%
CUSTOMER
FACING
23%
MALE
77%
FEMALE
65%
MALE
35%
FEMALE
AUSWIDE BANK – 30 JUNE 2017
/ 15
Investing in technology
AUSWIDE BANK MADE A STEP CHANGE IN
DELIVERING SUPERIOR CUSTOMER SERVICE
THROUGH OUR TECHNOLOGY INVESTMENTS
AND IMPROVEMENTS DURING 2016-17.
Our Strategic Plan directs our approach to investing in and
managing technology so that we:
• deliver superior customer service
• offer competitive products and services
• maintain secure and efficient systems
•
leverage data to better understand and address
our customers’ needs.
In the first half of the financial year, major system upgrades
were completed and we consolidated YCU’s customer
systems into our unified banking platform. During the second
half of the financial year, our focus shifted to enabling digital
products and services through enhanced omni-channel
capabilities. That simply means our customers can choose
when and where they interact with us, and we can offer them
products and services that better match their needs.
Auswide Bank deployed a new automated loan origination
system called LendFast in the first half of the 2016-17
financial year, which has generated significant processing
time and cost efficiencies. Loan origination now utilises
automated valuation request and fulfilment, credit policy
assessment and exception management, as well as loan
tracking functionality for brokers and lenders. Through these
technologies and process improvements, loans to Auswide
Bank customers are now originated through our branches
and contact centre using more automation and paperless
technology than ever before. We are also working to extend
this capability to digital channels for mortgages, business
and consumer lending products. Our customers can also
choose to receive updates at milestones in the loan process
as well as electronic document capture and assessment.
Auswide Bank also continued to invest in online banking
capabilities in 2016-17. To enhance the experience for our
customers, we upgraded our online banking platform with
a refreshed interface and additional self-serve capabilities
including password re-set, card activation, card locking, and
easy access to historical account interest information.
TECHNOLOGY
DELIVERABLES
ACHIEVED IN
H1 2016-17
TECHNOLOGY
DELIVERABLES
ACHIEVED IN
H2 2016-17
TECHNOLOGY
DELIVERABLES
PLANNED FOR
2017-18
• Upgrade to LendFast platform, resulting in increased automation, efficiency and speed for many
mortgage origination functions
• Data Centre refresh program providing the latest technology hardware, maintenance and support
through to 2021, enabling fast and secure processing across the business to improve customer
service and capture operating efficiencies
• Consolidated YCU customer data and accounts onto Auswide Bank’s unified banking platform,
to activate the benefits of the merger for customers and the Bank
• Deployed BankFast 5, an upgrade to our internet and mobile banking services
• Enabled customers to self-serve, card management and other functions
• Enabled near real-time reporting across customers and accounts through enhancements
to our business intelligence and data analytics capabilities
• Online statements through internet banking
• Online account opening
• Further optimisation and automation of loan origination
16
/ ANNUAL REPORT
Managing risk
STRENGTHENING RISK
MANAGEMENT IS A KEY
ELEMENT OF AUSWIDE
BANK’S STRATEGIC PLAN.
Auswide Bank has a comprehensive
risk and compliance management
program to actively identify and
eliminate risk where possible, and
mitigate and minimise the impact of
those risks that cannot be eliminated.
Auswide Bank takes a proactive
approach to risk management,
demonstrated by the early adoption
of various methodologies to curtail
excessive exposures to segments such
as High LVR (loan to valuation ratio)
and Interest Only lending. We are well
placed to manage the risks associated
with these loan products prior to
the introduction of APRA of tighter
regulatory controls over residential
mortgages. We have revised our credit
policies and introduced new pricing
mechanisms to control growth in high
LVR products and investor lending,
and manage interest only in particular
for owner occupied loans.
In addition, we continue to enhance
the way we measure, monitor and
report risk related matters.
The Board Risk Committee provides
rigorous oversight of this process
and the risk framework across
the organisation.
Our people have a strong orientation
to take responsibility for risk
management across each business
unit, and this culture underpins our
Strategic Plan. It is supported by the
Bank’s ‘Three Lines of Defence’ risk
management model.
LINE 1
BUSINESS UNITS
Business units own and manage risk, and are responsible for maintaining and executing effective
internal control processes as part of their normal operations. They identify, assess, control and
mitigate risks by implementing internal policies and processes. Business units are also responsible
for implementing corrective actions to address process and control deficiencies.
LINE 2
RISK AND
COMPLIANCE
MANAGEMENT
Auswide Bank’s dedicated Risk and Compliance Management team:
• maintains an integrated risk management framework
• measures risk exposures to support business decision making
• provides risk management support, supervision and expertise to the business
• provides reporting to the Board and leadership team
• makes credit risk decisions under approved delegations and loan portfolio management.
LINE 3
AUDIT
MANAGEMENT
Auswide Bank maintains an independent internal audit function, outsourced to
PricewaterhouseCoopers. This ensures the Bank has industry leading capabilities
to review internal controls, risk management processes and governance systems.
AUSWIDE BANK – 30 JUNE 2017
/ 17
Board of directors
John Humphrey LL.B
Chairman
Member of the Audit Committee
Board Member since February 2008
Professor Humphrey was appointed
Chairman of the Board following the
2009 Annual General Meeting. He was
a senior partner in the Brisbane office
of international law firm, King & Wood
Mallesons until 1 January 2013, where
he specialised in commercial law and
corporate mergers and acquisitions.
He is now Executive Dean of the Faculty
of Law at Queensland University of
Technology and is currently a Non-
Executive Director of Horizon Oil
Limited and Downer-EDI Limited.
Martin Barrett BA (Econ),
MBA
Managing Director
Board Member since September 2013
Director of MoneyPlace Holdings
Pty Ltd
Mr Barrett has extensive experience in
the banking sector, having previously
held the positions of Managing
Director (Queensland, Western
Australia and National Motor Finance
Business) and General Manager
NSW/ACT Corporate and Business
Bank at St George Bank Ltd. Prior to
working at St George Bank, Mr Barrett
held senior roles at regional financial
institutions in the United Kingdom
and at National Australia Bank.
Barry Dangerfield
Non-Executive Director
Chairman of the Group Board
Remuneration Committee
Member of the Audit Committee
Member of the Risk Committee
Board Member since November 2011
Director of MoneyPlace Holdings
Pty Ltd
Mr Dangerfield had a successful
39 year banking career with Westpac
Banking Corporation having held
positions across Queensland and
Northern Territory as Regional
Manager of Business Banking, Head
of Commercial and Agribusiness, and
Regional General Manager of Retail
Banking. Mr Dangerfield is a Director
of the Bundaberg Friendly Society
Medical Institute which operates the
Friendly Society Private Hospital and
Pharmacies in Bundaberg.
18
/ ANNUAL REPORT
Greg Kenny GAICD,
GradDipFin
Non-Executive Director
Chairman of the Risk Committee
Member of the Audit Committee
Member of the Group Board
Remuneration Committee
Board Member since November 2013
Director of MoneyPlace Holdings
Pty Ltd
Mr Kenny had a long and successful
career with Westpac Banking
Corporation and St George Bank
Ltd, and prior to that with Bank of
New York and Bank of America in
Australia. At St George Bank, he held
the positions of Managing Director
(NSW and ACT), General Manager
Corporate and Business Bank, and
General Manager Group Treasury
and Capital Markets.
Sandra Birkensleigh BCom,
CA, GAICD, ICCP (Fellow)
Non-Executive Director
Chairperson of the Audit Committee
Member of the Risk Committee
Member of the Group Board
Remuneration Committee Board
Member since February 2015
Ms Birkensleigh was a partner
at PricewaterhouseCoopers for
16 years until 2013. During her career,
her predominant industry focus was
Financial Services (Banking and Wealth
Management). Ms Birkensleigh has
also advised on risk management
in other sectors such as retail and
consumer goods, retail and wholesale
electricity, resources, and education.
Ms Birkensleigh is currently a Non-
Executive Director MLC Insurance
Limited, the National Disability
Insurance Agency, Horizon Oil Limited,
7-11 Holdings and its subsidiaries
and the Sunshine Coast Children’s
Therapy Centre. She is an independent
member of the Audit Committee of
the Reserve Bank of Australia, and a
Council Member of the University of
the Sunshine Coast.
AUSWIDE BANK – 30 JUNE 2017
/ 19
Leadership team
Martin Barrett
Managing Director
Bill Schafer
Chief Financial Officer and
Company Secretary
• Group Accounting
and Treasury
• Budgeting and
financial analysis
• Financial and
management reporting
• Statutory, ASX and
regulatory reporting
• Capital, funding and
liquidity planning strategy
•
Investor Relations
Mark Rasmussen
Chief Operating Officer
Damian Hearne
Chief Customer Officer
• Lending Services
• Customer experience
• Banking Services
• Mortgage Origination
Services
• Support Services
Operations including
Business Continuity
Planning
• Reengineering Services
strategy and management
• Retail and business
banking sales and
distribution
• Mortgage broker and
third party relationships
• Marketing, products
and partnerships
20
/ ANNUAL REPORT
• Strategy development
and implementation
• Risk culture and
management
• Group operational and
• Customer satisfaction
financial performance
and growth
• Regulatory engagement
• Shareholder returns
Martin Barrett
Managing Director
Stephen Caville
Chief Information Officer
Gayle Job
Chief People Officer
Craig Lonergan
Chief Risk Officer
• Group Information
Technology strategy
and management
• People engagement
and performance
• Risk profile within Board
approved risk appetite
• Payroll management,
• Risk management strategy
•
IT Strategic Plan
remuneration and benefits
and practices
• Key technology project
• Talent acquisition,
implementation
recruitment and retention
strategies
• Learning and
development
• Employment law
regulation and compliance
• Staff wellbeing and
workplace health
and safety
• Risk management and
compliance framework
and control systems
• Risk culture awareness
• Credit portfolio review
AUSWIDE BANK – 30 JUNE 2017
/ 21
Directors’ statutory report
REVIEW AND RESULTS OF OPERATIONS
The underlying cash NPAT for the consolidated entity for financial year 2016-17 was $15.636m compared to $14.041m for
2015/16. This represents an increase of 11.4% from 2015/16.
The statutory consolidated net profit after income tax for the 2016-17 financial year was $15.149m compared to the result
of $11.699m for the 2015/16 year.
There were one-off expense items in the 2016-17 financial year totalling $0.579m before tax ($0.487m after tax). These
one-off expenses were as follows:
•
•
•
professional fees – MoneyPlace controlling interest: $0.188m;
professional fees – YCU acquisition: $0.126m;
stamp duty – YCU acquisition: $0.265m.
The loan book of Auswide Bank Ltd increased from $2.666b at 30 June 2016 to $2.773b at 30 June 2017. Despite modest loan
book growth in the first half of the financial year due to the implementation of the new LendFast loan origination system, the
annualised loan book growth for the 2016-17 financial year was 4.01%.
Home loan approvals across the 2016-17 financial year totalled $553.799m, a decrease of 6.39% on the $591.571m in home
loans approvals for the 2015/16 financial period.
Personal loans
The personal loan book continues to grow and although not material to the total loan portfolio, reached $15.061m at the
conclusion of the financial year. Personal loan book growth improved during the 2016-17 financial year in terms of Auswide
Bank’s own originations. Personal loans have not been reported as a separate segment for the financial year.
An uplift in loan originations through the MoneyPlace platform has resulted in an increased return on Auswide Bank’s
investment. The investment in MoneyPlace has grown from $1.412m at 30 June 2016 to $14.042m at 30 June 2017,
representing an increase of $12.630m.
Customers
In keeping with the Company’s Strategic Plan, Auswide Bank’s appointment of a Chief Customer Officer in 2016, has allowed
the bank to increase its focus and strategy on customer experience and growth. This appointment, which united all customer-
facing channels and customer support teams including customer operations, marketing, products & partnerships has increased
alignment and coordination of resources and planning which is resulting in better customer outcomes.
Customer numbers increased from 79,508 at 30 June 2016 to 84,101 at 30 June 2017. This represents an increase of 5.77%
over the year.
Home loan recognition
Auswide Bank has received national recognition for its innovative and market leading home loans. The unique RBA Rate Tracker
home loan won the ‘Innovative Mortgage Offering of the Year’ category at the prestigious 27th annual Australian Retail Banking
Awards. The Bank’s Freedom Package was also recognised by financial comparison website mozo.com.au as one of the ‘best
value’ home loans in Australia in their annual Experts Choice Home Loan Awards.
Business banking
Auswide Bank continues to grow the business banking segment through central and south-east Queensland via selective
provision of finance and banking services to SME’s. The establishment of the Brisbane branch following the acquisition of
YCU and the employment of a full time business banker based in Brisbane will strengthen this focus in 2017/18.
Mortgage Risk Management Pty Ltd (MRM)
The Board announced on 13 August 2015 the effective date of 30 September 2015 to wind up the captive lenders’ mortgage
insurance subsidiary, MRM.
MRM was Auswide Bank Ltd’s wholly owned lenders’ mortgage insurer, which ceased writing new business in August 2012.
In response to a formal application by MRM, APRA revoked the authorisation under subsection 12(2) of the Insurance Act 1973,
to carry on insurance business in Australia, effective 17 December 2015.
22
/ ANNUAL REPORT
30 JUNE 2017 PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES
Auswide Bank Ltd is an approved deposit-taking institution and licensed credit and financial services provider. Auswide Bank
provides deposit, credit, insurance and banking services to personal and business customers across Australia, principally in
regional and metropolitan Queensland, Sydney and Melbourne.
Funding for loans is raised through a combination of retail and wholesale deposits as well as through securitisation markets.
In June 2017 Auswide Bank settled $300m in new residential mortgage backed securities via ABA Trust 2017-1. The residential
mortgage loans were originated by Auswide Bank’s branch network and brokers with all underwriting completed by Auswide
Bank loans consultants.
Following the progress made with the implementation of the strategies contained in the three year strategic plan adopted in
May 2013, a refreshed three year strategic plan was adopted by the Board in March of 2016.
The strategic plan focused on the structure, transformation, growth and strength of the bank, which is to be achieved by:
•
•
•
•
•
•
•
•
Restructuring of the sales channels, products and marketing to provide better allocation of resources to improve customer
experience;
Implementation and re-engineering of the end to end home loan process;
Automation of process and simplification of products, including online loans and account opening;
Building the ‘Auswide Bank’ brand with consistency of messaging and enhanced customer service;
Continued investment in technology, skills and training;
Strengthening the bank through management capabilities, risk and audit processes and capital strength;
Continued drive to lower, and further enhance, the cost to income ratio; and
Review of M&A and Fintech opportunities as they arise.
Merger implementation
In December 2015 the Group entered into a Merger Implementation Agreement with YCU. On 19 May 2016 the court
approved Scheme of Arrangement was implemented, and Auswide Bank acquired 100% of the shares of YCU. The transaction
represented the first merger between a listed ADI and a mutual in 11 years.
The integration of the systems and products and YCU customer data was fully consolidated with Auswide Bank’s core banking
system on 30 September 2016. The merger was a strategic acquisition for Auswide Bank with the addition of a branch in the
Brisbane CBD, strong customer retention, along with deposit book growth and capitalisation of financial synergies.
Investment in MoneyPlace
In December 2015 the Group announced it would be entering into a strategic relationship and equity investment with
MoneyPlace Holdings. Auswide Bank Ltd acquired a 19.3% equity stake in MoneyPlace which settled on 4 January 2016.
In February 2017 Auswide Bank made a follow-on investment and acquired an additional 44.0% equity stake in MoneyPlace,
via a subscription agreement. This bought the total investment to 63.3%, and resulted in the Group obtaining a controlling
interest in MoneyPlace Holdings.
MoneyPlace commenced loan originations in January 2016 after receiving its retail and wholesale Australian Financial Service
Licence and provides loans of $5,000 to $35,000 through its peer-to-peer (P2P) platform. MoneyPlace is Australia’s second
fully licensed P2P lender.
The strategic alliance with MoneyPlace provides a technically advanced personal loan system solution to a niche consumer
finance market. The relationship provides an avenue to increase the Group’s consumer lending ambitions and provides
significant opportunities for platform collaboration and value accretion.
Branch network
The company has a diversified Branch Network consisting of 23 branches and agencies across Queensland, and a business
centre in Brisbane. The company also employs Business Development Managers in Sydney and Melbourne to conduct interstate
business. All regional loan staff and panel valuers are locally based ensuring an in depth knowledge of the local economy and
developments in the real estate market.
During the 2016-17 financial year the Caboolture and Maroochydore branches were amalgamated and relocated to new
premises at North Lakes. This restructure was undertaken with a view to provide more opportunity in a targeted growth area.
There is an ongoing review of the existing branch footprint to ensure it is better aligned to customer demographics and trends
whilst delivering strong performance for both shareholders and customers.
AUSWIDE BANK – 30 JUNE 2017
/ 23
Directors’ statutory report (continued)
30 JUNE 2017
PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES (CONTINUED)
Technology
Auswide Bank has invested in the deployment of a new automated loan origination system, LendFast, generating increased
and significant processing efficiencies. Loan origination now uses automated valuation request and fulfilment, credit policy
assessment and exception management, as well as loan tracker access for lenders and customers. Through use of the LendFast
origination platform, Auswide Bank can now originate loans through branches, contact centres and soon in digital channels
across mortgages, business and consumer lending. Further stakeholder benefits include back channel messaging at origination
milestones, and electronic document capture and assessment.
Auswide Bank continued its investment in online banking throughout the 2016-17 financial year. Recent upgrades to the
online banking platform provide a refreshed interface and facilitate an enhanced customer experience. Additional self-serve
capabilities such as password reset, card activation and locking, and historical interest information increase online capabilities
and self-serve functionality.
Credit cards
Auswide Bank’s development of on-balance sheet credit card products is progressing with successful testing of cards and origination
processes. The project which has been principally developed in-house will allow personal banking customers to apply for Auswide
Bank Bank credit cards prior to the close of the 2017 calendar year. Credit cards complement the bank’s existing financing activities
and will build stronger banking relationships with customers. The bank will maintain its partnership with Citibank Card Services in
respect of its existing card portfolio and providing Platinum rewards credit cards to customers.
Net Interest Margin
The Net Interest Margin (NIM) continued to decline across the sector exacerbated by interest rates at historic lows and the
continuance of highly competitive housing finance markets across the 2016-17 financial year. In order to maintain stability in NIM,
the Product Pricing Committee closely monitors the competitive pricing of products whilst Treasury continues to proactively
manage assets and liabilities.
The net margin and interest spread for the 2016-17 year was 1.90% compared to 1.96% in the 2015/16 financial year.
Arrears and collections
The Arrears Project implemented in prior years has continued to deliver positive results in the arrears of the Group. In
accordance with data disclosed in the financial accounts of the bank, total arrears greater than 30 days past due (excluding
the effects of hardship accounts) decreased from $26.6m to $20.1m. Arrears have decreased as a percentage of the Group’s
total loan book from 0.99% at 30 June 2016 to 0.72% at 30 June 2017.
The Board is satisfied that the provisions set aside cover the risks arising from current and future doubtful debts.
Risk
While Auswide Bank has a robust risk culture, further strengthening the risk management of the organisation has been a focus
of the Board and management of Auswide Bank in the 2016-17 financial year, and continues to remain a key focus for the
2017/18 financial year.
Auswide Bank takes a proactive approach to risk management, which can be demonstrated by the Group’s adoption of various
methodologies to curtail excessive exposures to risky product markets. The introduction of Investor, High LVR and Interest Only
lending initiatives ensured that Auswide Bank was well placed to manage the risks associated with its lending portfolio well
ahead of APRA tightening regulatory controls over residential mortgages.
In addition, there has been an increase in measurement, monitoring and reporting of risk related matters throughout the
financial year. The Board Risk Committee provides strong oversight of this process and of the risk framework across the
organisation. The Board remains focused on the improvement of credit quality as the loan book grows.
ACQUISITIONS
The Board will continue to monitor opportunities to acquire loan books or suitable institutions as they arise and the Board
will review any offers made which may complement the overall operations of the Group.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
There has been no other matter or circumstance since the end of the financial year that will significantly affect the results
of operations in future years or the state of affairs of the company.
24
/ ANNUAL REPORT
CAPITAL
The capital adequacy ratio for the Auswide Bank Group at 30 June 2017 was 14.42% (2016: 14.31%). The tier 1 capital ratio
at 30 June 2017 was 12.06% (2016: 11.90%).
The total capital level remains strong and in excess of the Board target of 13.50%.
DIVIDENDS
A fully franked interim dividend of 14.0 cents per ordinary share was declared and paid on 30 March 2017 (30 March 2016 –
14.0 cents). A fully franked final dividend of 17.0 cents per ordinary share has been declared by the Board and will be paid on
22 September 2017 (30 September 2016 – 16.0 cents).
Auswide Bank has entered into an agreement to underwrite Auswide Bank’s Dividend Reinvestment Plan (DRP) in respect of the
2017 Final Dividend. The capital raised through the underwritten DRP will strengthen the Bank’s Tier 1 Capital position and the
proceeds will be used for the general business purposes of the Bank.
DIRECTORS
The names and particulars of the Directors of the Company in office during or since the end of the financial year are:
Professor John S Humphrey LL.B
Professor Humphrey was appointed to the Board on 19 February 2008, and was appointed Chairman following the 2009
Annual General Meeting. He was a senior partner in the Brisbane office of international law firm, King & Wood Mallesons (until
1 January 2013), where he specialised in commercial law and corporate mergers and acquisitions. He is now Executive Dean
of the Faculty of Law at Queensland University of Technology. He was a Non-Executive Director of Downer-EDI Limited (until
November 2016) and is currently a Non-Executive Director of Horizon Oil Limited. Professor Humphrey is a member of the Audit
Committee and is an independent Director.
Mr Barry Dangerfield
Mr Dangerfield was appointed to the Board on 22 November 2011. Mr Dangerfield has had a successful 39 year banking career
with Westpac Banking Corporation having held positions across Queensland and the Northern Territory of Regional Manager
Business Banking, Head of Commercial and Agribusiness and Regional General Manager Retail Banking. Mr Dangerfield is a
Director of MoneyPlace Holdings Pty Ltd, and a Director of the Bundaberg Friendly Society Medical Institute which operates
the Friendly Society Private Hospital and Pharmacies in Bundaberg and is Chairman of the Institute’s Audit and Risk Committee.
Mr Dangerfield is the Chairman of the Group Board Remuneration Committee, a member of the Audit Committee, a member
of the Risk Committee and is an independent Director.
Mr Gregory N Kenny GAICD, GradDipFin
Mr Kenny was appointed to the Board on 19 November 2013. Mr Kenny has had a long and successful career with Westpac
Banking Corporation and St George Bank Ltd, and prior to that with Bank of New York and Bank of America in Australia.
At St George Bank he held the positions of Managing Director (NSW and ACT), General Manager Corporate and Business Bank
and General Manager Group Treasury and Capital Markets. Mr Kenny is currently a Director of MoneyPlace Holdings Pty Ltd.
Mr Kenny is the Chairman of the Risk Committee, a member of the Audit Committee, a member of the Group Board
Remuneration Committee and is an independent Director.
Mr Martin J Barrett BA(ECON), MBA
Mr Barrett commenced as Chief Executive Officer of Wide Bay Australia Ltd (now Auswide Bank Ltd) on 4 February 2013, and
was subsequently appointed Managing Director on 19 September 2013. Mr Barrett has extensive experience in the banking
sector, having previously held the positions of Managing Director (Queensland, Western Australia and National Motor Finance
Business) and General Manager NSW/ACT Corporate & Business Bank at St George Bank Ltd. Prior to working at St George
Bank, Mr Barrett held senior roles at regional financial institutions in the United Kingdom and at National Australia Bank.
Mr Barrett is currently a Director of MoneyPlace Holdings Pty Ltd. Mr Barrett is an Executive Director.
Ms Sandra C Birkensleigh BCom, CA, GAICD, ICCP (Fellow)
Ms Birkensleigh was appointed to the Board on 2 February 2015. Ms Birkensleigh was previously a partner at
PricewaterhouseCoopers for 16 years until 2013. During her career her predominant industry focus has been Financial Services
(Banking and Wealth Management). Ms Birkensleigh has also advised on risk management in other sectors such as retail and
consumer goods, retail and wholesale electricity companies, resources and the education sector.
AUSWIDE BANK – 30 JUNE 2017
/ 25
Directors’ statutory report (continued)
30 JUNE 2017
DIRECTORS (CONTINUED)
Ms Birkensleigh is currently a Non-Executive Director of MLC Insurance Limited, the National Disability Insurance Agency,
Horizon Oil Limited, 7-11 Holdings and its subsidiaries and the Sunshine Coast Children’s Therapy Centre. She is an independent
member of the Audit Committee of the Reserve Bank of Australia, and a Council Member of the University of the Sunshine
Coast. Ms Birkensleigh is the Chairperson of the Audit Committee, a member of the Group Board Remuneration Committee,
a member of the Risk Committee and is an independent Director.
COMPANY SECRETARY
Mr William R Schafer BCom, CA
Mr Schafer was appointed Company Secretary in August 2001. He has extensive experience in public accounting and
management. He is an Associate of the Institute of Chartered Accountants.
DIRECTORS’ MEETINGS
During the financial year, 12 meetings of the Directors, 6 meetings of the Audit Committee, 3 meetings of the Remuneration
Committee and 7 meetings of the Risk Committee were held, in respect of which each Director attended the following number:
JS Humphrey
B Dangerfield
GN Kenny
MJ Barrett
SC Birkensleigh
Board
Audit
Remuneration
Risk
Held
Attended
Held
Attended
12
12
12
12
12
12
12
11
12
12
6
6
6
6
6
6
5
6
6*
6
Held
n/a
3
3
n/a
3
Attended
n/a
3
3
n/a
3
Held
n/a
7
7
7
7
Attended
n/a
7
7
7*
7
* Mr Barrett who is not a member of the Audit or Risk Committees, attended the Audit and Risk Committee meetings by invitation.
DIRECTORS’ SHAREHOLDINGS
The Directors currently hold shares of the Company in their own name or a related body corporate as follows:
JS Humphrey
MJ Barrett
B Dangerfield
GN Kenny
Ordinary Shares
31,551
149,818
43,291
15,000
RELATED PARTY DISCLOSURE
No persons or entities related to key management personnel provided services to the Company during the year.
REMUNERATION REPORT
The Board Remuneration Committee consists of independent Directors Mr Barry Dangerfield, Mr Greg Kenny and Ms Sandra
Birkensleigh. Mr Barry Dangerfield is Chairman of the Committee.
The objective of the Board Remuneration Policy is to maintain behaviour that supports the sustained financial performance and
security of Auswide Bank Ltd and to reward efforts which increase shareholder and customer value. This objective is upheld by:
•
•
•
•
•
•
appropriately balanced measures of performance weighted towards long-term shareholder interests;
variable performance based pay for the Executive Management Team involving a long-term incentive plan subject to an
extended period of performance assessment;
recognition and reward for strong performance;
a considered balance between the capacity to pay and the need to pay to attract and retain capable staff at all levels;
the exercise of Board discretion as an ultimate means to mitigate unintended consequences of variable pay and to preserve
the interests of the shareholders; and
short-term and long-term incentive performance criteria are structured within the overall risk management framework
of the Company.
26
/ ANNUAL REPORT
Remuneration of Non-Executive Directors
The fees payable for Non-Executive Directors are determined with reference to industry standards, the size of the Company,
performance and profitability. The Directors’ fees are approved by the shareholders at the Annual General Meeting in the
aggregate and the individual allocation is approved by the Board. The Company’s Non-Executive Directors receive only fees
(including superannuation) for their services. They are not entitled to receive any benefit on retirement or resignation (other
than superannuation) and do not participate in any share based remuneration.
Remuneration of Executive Directors and Senior Executives
Remuneration of the Managing Director for 2016-17 was subject to review and recommendation of the Remuneration
Committee and ratification by the Board. Remuneration of the Executive Management Team for 2016-17 was subject to
ratification by the Remuneration Committee. The Remuneration Policy for executives uses a range of components to focus the
Managing Director and the Executive Management Team toward achieving Auswide Bank’s strategy and business objectives.
Auswide Bank’s overall philosophy is to adopt, where possible, a Total Target Reward methodology which links remuneration
directly to the performance and behaviour of an individual with Auswide Bank’s results.
The Total Target Reward framework is designed to:
•
•
•
•
reward those who deliver the highest relative performance through the Company’s incentive programs;
attract, recognise, motivate and retain high performers;
provide competitive, fair and consistent rewards, benefits and conditions; and
align the interests of senior executives and shareholders through ownership of Company shares.
In setting an individual’s Total Target Reward, the Committee considers:
•
•
•
•
input from the Company’s Managing Director on the Total Target Reward for the Executive Management Team who report
directly to the Managing Director;
market data from comparable roles in the financial services industry;
the performance of both the individual and Auswide Bank Ltd over the last year; and
general remuneration market environment and trends.
Each individual’s actual remuneration will reflect:
•
•
•
•
the degree of individual achievement in meeting key performance measures under the performance management framework;
parameters approved by the Board based on the Company’s financial and risk performance and other qualitative factors;
Auswide Bank Ltd’s share price performance and relative shareholder returns; and
the timing and level of deferral in relation to any vesting conditions applicable.
Components of the Total Target Reward include:
•
•
•
Fixed Annual Remuneration (FAR) provided as cash and benefits (including employer superannuation and fringe benefits);
cash based Short-Term Incentives (STI) reflecting both individual and business performance for the current year that
supports the longer term objectives of Auswide Bank; and
equity based Long-Term Incentives (LTI) provided to drive management decisions focused on the long-term prosperity of
Auswide Bank through the use of challenging performance hurdles.
Short Term Incentives (STI)
Payment of STIs is conditional upon the achievement of key performance measures tailored to the respective role. The performance
measures and objectives are selected to provide a robust link between executive reward and the key business drivers of long term
shareholder value. The KPls are measured relating to Company and personal performance accountabilities and include financial,
strategic, operational and customer/stakeholder measures. These measures are chosen and weighted to best align the individual’s
reward to the KPls of the Company and its overall performance.
The financial performance objectives are profit before and after income tax compared to budgeted amounts and management of
costs in line with divisional organisational budgets. These measures reasonably capture the effects of a number of material risks and
minimise actions that promote short-term results at the expense of longer-term business growth and success. The non-financial
objectives vary with position and responsibility and include measures such as achieving strategic outcomes, compliance and support
of the Company’s risk management policies and compliance culture, customer satisfaction, communication and staff development.
AUSWIDE BANK – 30 JUNE 2017
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Directors’ statutory report (continued)
30 JUNE 2017
REMUNERATION REPORT (CONTINUED)
Short Term Incentives (STI) (continued)
Performance based payments were made to the Executive Management Team under the STI scheme as an incentive payment
to recognise and reward the achievement of KPI targets relating to the financial year ended 30 June 2016. Cash payments were
granted on the 23 September 2016, and allocated to the Executive Management Team as follows;
•
•
•
•
Mr MJ Barrett (Managing Director): $25,000;
Mr WR Schafer (Chief Financial Officer): $15,298;
Mr SM Caville (Chief Information Officer): $13,260;
Mrs GM Job (Chief People Officer): $13,298;
• Mr CA Lonergan (Chief Risk Officer): $15,000; and
• Mr MS Rasmussen (Chief Operating Officer): $15,721.
The payment of STIs is at the complete discretion of the Board and can be adjusted downwards to zero, if necessary, to protect
the financial soundness of the Company and taking into account a qualitative overlay that reflects Auswide Bank’s management
of business risks, shareholder expectations and quality of the financial results.
Executive Long Term Incentive Plan (ELTIP)
The ELTIP was established by the Board to encourage the Executive Management Team to drive the long-term prosperity of
Auswide Bank and have a greater involvement in the achievement of the Company’s objectives.
Under the ELTIP an offer may be made to the members of the Executive Management Team every year as determined by the
Board. The maximum value of the offer is determined as a percentage of the FAR of each member of the Executive Management
Team. The maximum percentages used are up to 50.0% for the Managing Director and up to 30.0% for Executive Managers.
In order for the shares to vest, certain performance criteria must be satisfied within a predetermined performance period.
KPI targets were considered by the Remuneration Committee to be appropriate measures of performance, as they had been
specifically chosen for each executive with the aim of achieving the strategy and business objectives of the Company. The
KPI targets for the Managing Director were assessed by the Remuneration Committee. The KPI targets for the other senior
executives were assessed by the Managing Director and then ratified by the Remuneration Committee.
Any reward payable to the Executive Management Team under the ELTIP offer will be calculated as follows:
•
•
•
no reward will be payable if Total Shareholder Return (TSR) is negative irrespective of the benchmark group performance;
Auswide Bank’s share price performance baseline for TSR calculation for the financial year ELTIP offer is below the set value;
Auswide Bank’s NPAT performance baseline for growth calculation for the financial year ELTIP offer is below the set value.
28
/ ANNUAL REPORT
Actual and potential ELTIP allocations
Share based payment arrangements affecting remuneration of key management personnel in the current year or future financial
years are detailed in the following table.
Offer
2014
KMP
Barrett, MJ
Performance
period
1 July 2014 to
30 June 2018
2015
Barrett, MJ
1 July 2015 to
30 June 2019
2016
Barrett, MJ
1 July 2016 to
30 June 2020
Schafer, WR
Caville, SM
Job, GM
Lonergan, CA
Rasmussen, MS
Maximum value
$
Vesting date
Vested in the
16/17 financial
year
$
Not yet
assessed for
vesting
$
25,000
1/07/2016
25,000
–
25,000
25,000
30,000
30,000
30,000
25,000
25,000
25,000
5,000
5,000
5,000
4,333
4,333
4,333
4,333
4,333
4,333
5,000
5,000
5,000
5,000
5,000
5,000
1/07/2017
1/07/2018
1/07/2017
1/07/2018
1/07/2019
1/07/2018
1/07/2019
1/07/2020
1/07/2018
1/07/2019
1/07/2020
1/07/2018
1/07/2019
1/07/2020
1/07/2018
1/07/2019
1/07/2020
1/07/2018
1/07/2019
1/07/2020
1/07/2018
1/07/2019
1/07/2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,000
25,000
30,000
30,000
30,000
25,000
25,000
25,000
5,000
5,000
5,000
4,333
4,333
4,333
4,333
4,333
4,333
5,000
5,000
5,000
5,000
5,000
5,000
Grant date
30/06/2014
30/06/2014
30/06/2014
30/06/2015
30/06/2015
30/06/2015
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
1/09/2016
Vesting of shares to key management personnel is at the complete discretion of the Board and can be adjusted downwards,
to zero if necessary, to protect the financial soundness of the Company and taking into account a qualitative overlay that reflects
Auswide Bank’s management of business risks, shareholder expectations and quality of the financial results.
The remuneration report includes 27 fortnightly pays for the year ended 30 June 2017.
AUSWIDE BANK – 30 JUNE 2017
/ 29
Directors’ statutory report (continued)
30 JUNE 2017
REMUNERATION REPORT (CONTINUED)
Details of the nature and amount of each major element of the remuneration of each Director and each of the named Officers
of the company receiving the highest remuneration and the key management personnel are:
Short-term employee benefits
Post
employment
benefits
2017
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Other long
term benefits
$
Share based
payments
$
Total
$
SPECIFIED DIRECTORS
Humphrey, JS Chairman (non-exec)
Dangerfield, B Director (non-exec)
Kenny, GN Director (non-exec)
Performance
based
Fixed
146,119
91,324
91,324
–
–
–
Barrett, MJ Managing Director
550,364
25,000
Birkensleigh, S Director (non-exec)
91,324
–
Total remuneration –
Specified Directors
970,455
25,000
OTHER KEY MANAGEMENT PERSONNEL
Schafer, WR Chief Financial Officer
Caville, SM Chief Information Officer
Hearne, D Chief Customer Officer
Job, GM Chief People Officer
Lonergan, CA Chief Risk Officer
Rasmussen, MS Chief
Operating Officer
Total remuneration –
Specified Executives
2016
SPECIFIED DIRECTORS
Humphrey, JS Chairman (non-exec)
Dangerfield, B Director (non-exec)
Kenny, GN Director (non-exec)
325,872
187,149
272,940
187,682
195,060
221,877
15,298
13,260
–
13,298
15,000
15,721
1,390,580
72,577
146,119
91,324
91,324
–
–
–
Barrett, MJ Managing Director
519,400
25,000
Birkensleigh, S Director (non-exec)
91,324
–
Total remuneration –
Specified Directors
939,491
25,000
OTHER KEY MANAGEMENT PERSONNEL
Schafer, WR Chief Financial Officer
Caville, SM Chief Information Officer
Lonergan, CA Chief Risk Officer
Rasmussen, MS Chief
Operating Officer
Nevis, CM General Manager
Third Party
305,810
177,567
186,001
210,383
15,000
15,000
17,500
10,000
168,164
10,000
McArdle, AJ General Manager Sales
& Distribution (ceased 28/08/2015)
50,485
–
Total remuneration –
Specified Executives
1,098,410
67,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30
/ ANNUAL REPORT
Performance
based
13,881
8,676
8,676
19,616
8,676
–
–
–
–
–
–
160,000
100,000
100,000
10,834
25,003
630,817
–
–
100,000
59,525
10,834
25,003
1,090,817
19,616
18,082
19,616
18,120
18,321
19,616
7,833
4,529
4,880
5,369
3,673
4,294
113,371
30,578
–
–
–
13,881
8,676
8,676
19,308
8,676
–
–
–
–
–
–
–
–
–
–
368,619
223,020
297,436
224,469
232,054
261,508
1,607,106
160,000
100,000
100,000
11,277
37,504
612,489
–
–
100,000
59,217
11,277
37,504
1,072,489
19,308
17,101
17,416
19,308
7,802
4,947
3,850
4,262
16,232
3,445
3,471
–
92,836
24,306
–
–
–
–
–
–
–
347,920
214,615
224,767
243,953
197,841
53,956
1,283,052
Employment contracts
All named Key Management Personnel and the Managing Director have employment contracts. Major provisions of those
agreements are summarised below:
Current personnel
Managing Director – M J Barrett
• Original contract dated – 4 February 2013
• Amended contract dated – 15 July 2016
• Term of agreement – no fixed term
•
•
•
•
Auswide Bank Ltd or M J Barrett may terminate this agreement by providing six months written notice or provide payment
in lieu of the notice period.
Payment of six months redundancy pay on termination of employment if position is made redundant.
Short Term Incentive (STI) – Up to a maximum of $150,000 on achieving KPIs on the basis of percentage allocation in
terms of CEO scorecard and measured by populating actual results and discretionary. The CEO must complete a full year
of service to be eligible to receive the STI for each applicable financial year, the bonus entitlement will be calculated based
on the 30th June results and the overall performance including discretionary as determined by the Board Remuneration
Committee and paid on the 30th September.
Long Term Incentive (LTI) – Grant of performance rights up to a maximum value of $150,000 (or such other amount
determined by the Board), and as determined by the Board Remuneration Committee. The grant of performance rights,
under the terms of Auswide Bank Performance Rights Plan Rules, to subscribe for or be transferred at no cost one share
for every performance right exercised. The Managing Director must complete a full year of service to be eligible to receive
the LTI for each applicable financial year, the bonus entitlement will be calculated based on the 30th June results and overall
performance including discretionary as determined by the Board Remuneration Committee and paid on the 1st July.
The performance rights carry no dividend or voting rights. Subject to the vesting conditions 33.33% of the performance
rights vest on the second anniversary of the measured performance year, 33.33% on the third anniversary and 33.33%
on the fourth anniversary. The vesting conditions are as follows:
•
•
•
the Managing Director must be employed at the vesting date;
any personal income tax payable on exercise of the performance rights is payable by the Managing Director.
the number of performance rights will be adjusted for any capital reconstructions (eg consolidation or splits).
Chief Financial Officer & Company Secretary – W R Schafer
•
•
•
•
•
•
•
Original contract dated – 28 May 2007
Amended contract dated – 6 December 2016
Term of agreement – no fixed term
Auswide Bank Ltd or W R Schafer may terminate this agreement by providing four months written notice or provide
payment in lieu of the notice period.
Payment on early termination due to a takeover and not being offered ongoing employment in Bundaberg in an equivalent
position, equal to six months salary plus two weeks salary per year of service with a minimum payment of 20 weeks and a
maximum payment of 104 weeks.
Short Term Incentive (STI) – Payment under the STI Scheme will be subject to the Company’s performance as well as the
individual’s own performance in accordance with KPIs determined by the Company and advised on an annual basis. STI up
to 15.0% of base salary to the 30th June each year on satisfaction of the KPIs as in place from time to time assessed and
determined in the sole and absolute discretion of the Board Remuneration Committee.
Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide Bank Performance Rights Plan
Rules, is subject to the Company’s performance and the individual’s own performance in accordance with KPIs agreed
between the individual and the Company on an annual basis. LTI up to a maximum value of $30,000 or such other amount
determined by the Board Remuneration Committee. Awards made under the LTI are at the absolute and sole discretion of
the Board. The right to participate in the LTI on an ongoing basis is subject to the discretion of the Board. The granting
of an award to an individual under the LTI in one year does not guarantee that similar awards will be made in the future.
AUSWIDE BANK – 30 JUNE 2017
/ 31
Directors’ statutory report (continued)
30 JUNE 2017
REMUNERATION REPORT (CONTINUED)
Employment contracts (continued)
Current personnel (continued)
Chief Risk Officer – C A Lonergan
•
•
•
•
•
•
•
Original Contract dated – 10 February 2014
Amended contracts dated – 1 July 2014, 9 December 2016
Term of agreement – no fixed term
Auswide Bank Ltd or C A Lonergan may terminate this agreement by providing three months written notice or provide
payment in lieu of the notice period.
Payment of six months redundancy pay on termination of employment if position is made redundant.
Short Term Incentive (STI) – Payment under the STI Scheme will be subject to the Company’s performance as well as the
individual’s own performance in accordance with KPIs determined by the Company and advised on an annual basis. STI up to
15.0% of base salary to the 30th June each year on satisfaction of the KPIs as in place from time to time assessed and determined
in the sole and absolute discretion of the Board Remuneration Committee.
Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide Bank Performance Rights Plan
Rules, is subject to the Company’s performance and the individual’s own performance in accordance with KPIs agreed
between the individual and the Company on an annual basis. LTI up to a maximum value of $30,000 or such other amount
determined by the Board Remuneration Committee. Awards made under the LTI are at the absolute and sole discretion of
the Board. The right to participate in the LTI on an ongoing basis is subject to the discretion of the Board. The granting of
an award to an individual under the LTI in one year does not guarantee that similar awards will be made in the future.
Chief Information Officer – S M Caville
•
•
•
•
•
•
•
Original contract dated – 1 November 2010
Amended contract dated – 8 December 2016
Term of agreement – no fixed term
Auswide Bank Ltd or S M Caville may terminate this agreement by providing four months written notice or provide payment
in lieu of the notice period.
Payment on early termination due to a takeover and not being offered ongoing employment in Bundaberg in an equivalent
position, equal to six months salary plus two weeks salary per year of service with a minimum payment of 20 weeks and a
maximum payment of 104 weeks.
Short Term Incentive (STI) – Payment under the STI Scheme will be subject to the Company’s performance as well as the
individual’s own performance in accordance with KPIs determined by the Company and advised on an annual basis. STI up to
15.0% of base salary to the 30th June each year on satisfaction of the KPIs as in place from time to time assessed and determined
in the sole and absolute discretion of the Board Remuneration Committee.
Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide Bank Performance Rights Plan
Rules, is subject to the Company’s performance and the individual’s own performance in accordance with KPIs agreed
between the individual and the Company on an annual basis. LTI up to a maximum value of $30,000 or such other amount
determined by the Board Remuneration Committee. Awards made under the LTI are at the absolute and sole discretion of
the Board. The right to participate in the LTI on an ongoing basis is subject to the discretion of the Board. The granting of
an award to an individual under the LTI in one year does not guarantee that similar awards will be made in the future.
Chief Operating Officer – M S Rasmussen
•
•
•
•
Original contract dated – 3 February 2014
Amended contracts dated – 29 January 2015, 12 December 2016
Term of agreement – no fixed term
Auswide Bank Ltd or M S Rasmussen may terminate this agreement by providing three months written notice or provide
payment in lieu of the notice period.
•
Payment of six months redundancy pay on termination of employment if position is made redundant.
32
/ ANNUAL REPORT
•
•
Short Term Incentive (STI) – Payment under the STI Scheme will be subject to the Company’s performance as well as the
individual’s own performance in accordance with KPIs determined by the Company and advised on an annual basis. STI up
to 15.0% of base salary to the 30th June each year on satisfaction of the KPIs as in place from time to time assessed and
determined in the sole and absolute discretion of the Board Remuneration Committee.
Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide Bank Performance Rights Plan
Rules, is subject to the Company’s performance and the individual’s own performance in accordance with KPIs agreed
between the individual and the Company on an annual basis. LTI up to a maximum value of $30,000 or such other amount
determined by the Board Remuneration Committee. Awards made under the LTI are at the absolute and sole discretion of
the Board. The right to participate in the LTI on an ongoing basis is subject to the discretion of the Board. The granting of
an award to an individual under the LTI in one year does not guarantee that similar awards will be made in the future.
Chief Customer Officer – D Hearne
•
•
•
•
•
•
Contract dated – 20 June 2016
Term of agreement – no fixed term
Auswide Bank Ltd or D Hearne may terminate this agreement by providing four months written notice or provide payment in
lieu of the notice period.
Payment of six months redundancy pay on termination of employment if position is made redundant.
Short Term Incentive (STI) – Payment under the STI Scheme will be subject to the Company’s performance as well as the
individual’s own performance in accordance with KPIs determined by the Company and advised on an annual basis. STI up
to 25.0% of base salary to the 30th June 2017 adjusted on a pro-rata basis depending on length of service completed and
on satisfaction of the KPIs as in place from time to time assessed and determined in the sole and absolute discretion of the
Board Remuneration Committee.
Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide Bank Performance Rights Plan
Rules, is subject to the Company’s performance and the individual’s own performance in accordance with KPIs agreed
between the individual and the Company on an annual basis. LTI up to a maximum value of 15.0% of your base salary up to
30th June 2017 adjusted on a pro-rata basis depending on length of service completed (or such other amount determined
by the Board Remuneration Committee). Awards made under the LTI are at the absolute and sole discretion of the Board.
The right to participate in the LTI on an ongoing basis is subject to the discretion of the Board. The granting of an award to
an individual under the LTI in one year does not guarantee that similar awards will be made in the future.
Chief People Officer – G M Job
• Original contract dated – 4 June 2007
• Amended contract dated – 6 December 2016
• Term of agreement – no fixed term
•
•
•
•
Auswide Bank Ltd or G M Job may terminate this agreement by providing three months written notice or provide payment in
lieu of the notice period.
Payment on early termination due to a takeover and not being offered ongoing employment in Bundaberg in an equivalent
position, equal to four months salary plus two weeks salary per year of service with a minimum payment of 16 weeks and a
maximum payment of 104 weeks.
Short Term Incentive (STI) – Payment under the STI Scheme will be subject to the Company’s performance as well as the
individual’s own performance in accordance with KPIs determined by the Company and advised on an annual basis. STI up
to 15.0% of base salary to the 30th June each year on satisfaction of the KPIs as in place from time to time assessed and
determined in the sole and absolute discretion of the Board Remuneration Committee.
Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide Bank Performance Rights Plan
Rules, is subject to the Company’s performance and the individual’s own performance in accordance with KPIs agreed
between the individual and the Company on an annual basis. LTI up to a maximum value of $30,000 or such other amount
determined by the Board Remuneration Committee. Awards made under the LTI are at the absolute and sole discretion of
the Board. The right to participate in the LTI on an ongoing basis is subject to the discretion of the Board. The granting of
an award to an individual under the LTI in one year does not guarantee that similar awards will be made in the future.
AUSWIDE BANK – 30 JUNE 2017
/ 33
Directors’ statutory report (continued)
30 JUNE 2017
REMUNERATION REPORT (CONTINUED)
Consequences of performance on shareholder wealth
The tables below set out summary information about the Consolidated Entity’s earnings from continuing and discontinued
operations and movements in shareholder wealth for the five years to 30 June 2017:
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Interim dividend
Final dividend
Basic earnings per share
Diluted earnings per share
30 June
2017
$’000
21,708
15,149
30 June
2017
$5.08
$5.14
14.00 cps
17.00 cps
37.35 cps
37.35 cps
30 June
2016
$’000
17,606
11,699
30 June
2016
$5.05
$5.08
14.00 cps
16.00 cps
31.20 cps
31.20 cps
30 June
2015
$’000
19,028
13,262
30 June
2015
$5.50
$5.05
14.00 cps
16.00 cps
36.07 cps
36.07 cps
30 June
2014
$’000
20,192
14,062
30 June
2014
$5.25
$5.50
13.00 cps
15.00 cps
38.75 cps
38.75 cps
30 June
2013
$’000
3,728
2,887
30 June
2013
$5.81
$5.25
13.00 cps
4.00 cps
6.78 cps
6.78 cps
Dividends franked to 100% at 30% corporate income tax rate.
Loans to key management personnel
The following table outlines the aggregate of loans to key management personnel. Details are provided on an individual basis
for each of the key management personnel whose indebtedness exceeded $100,000 at any time during this reporting period.
Loans have been made in accordance with the normal terms and conditions offered by the company and charged at 135 basis
points below the standard variable rate or 20 basis points below the standard fixed rate on applicable loan types, available
to the general public at any time. Similar rates are, however, available to the general public, therefore this interest rate would
approximate an arm’s length interest rate offered by the Company.
Loans are also made in accordance with the Staff Share Plan approved by shareholders in 1992. The loans are repayable over
5 years at 0% interest, with the loans being secured by a lien over the relevant shares. Such loans are only available to
employees of the company and there is no applicable arm’s length interest to take into account.
Loans for the year ended 30 June 2017
Directors
Executives
Total: Key management personnel
Loans for the year ended 30 June 2016
Directors
Executives
Total: Key management personnel
Individuals with loans above $100,000
in reporting period
Directors
MJ Barrett
Executives
WR Schafer
Balance*
30 June 2016
$
(1,910,317)
(1,618,330)
(3,528,647)
Balance*
30 June 2015
$
(694,675)
(1,643,366)
(2,338,041)
Balance*
30 June 2016
$
Interest
charged
$
62,203
18,546
80,749
Interest
charged
$
8,291
46,264
54,555
Write-off
$
–
–
–
Balance*
30 June 2017
$
(1,806,591)
(589,242)
(2,395,833)
Number in Group
30 June 2017
1
4
5
Write-off
$
Balance*
30 June 2016
$
Number in Group
30 June 2016
$
-
-
-
(1,910,317)
(1,618,330)
(3,528,647)
1
5
6
Interest**
charged
$
Write-off
$
Balance*
30 June 2017
$
Highest
in period
$
(1,910,317)
62,203
(495,318)
17,815
–
–
(1,806,591)
(1,910,317)
(478,247)
(499,802)
Does not include SM Caville, GM Job or CA Lonergan as their loans were less than $100,000.
* Balance at financial year end or the date the individuals ceased being key management personnel.
** Actual interest charged is affected by the use of the company’s offset account.
Balances are for the period individuals were considered key management personnel.
34
/ ANNUAL REPORT
Equity holdings and transactions
The following table is in respect of ordinary shares held directly, indirectly or beneficially by key management personnel.
Directors
JS Humphrey
MJ Barrett
GN Kenny
B Dangerfield
Executives
WR Schafer
SM Caville
GM Job
CA Lonergan
Total
Balance
30 June 2016
Received as
remuneration
Options
exercised
Net change
other
Balance*
30 June 2017
31,551
143,148
15,000
43,291
29,290
44,240
99,521
2,000
–
4,160
–
–
–
–
–
–
408,041
4,160
–
–
–
–
–
–
–
–
–
–
2,510
–
–
4,710
–
6,449
6,064
19,733
31,551
149,818
15,000
43,291
34,000
44,240
105,970
8,064
431,934
* Balance at financial year end or the date the individuals ceased being key management personnel.
AUSWIDE BANK – 30 JUNE 2017
/ 35
Directors’ statutory report (continued)
30 JUNE 2017
INDEMNITIES AND INSURANCE PREMIUMS FOR OFFICERS AND AUDITORS
During the financial year the Company has paid premiums to cover directors and officers for losses arising from claims or
allegations made against them for wrongful acts committed or alleged to have been committed by them in their capacities
as directors or officers of the Company. The policy will also reimburse the Company where it is permitted by law to indemnify
Insured Persons in relation to such claims or allegations. Cover is provided for the costs of defending such claims or allegations.
During the reporting period and subsequent to 30 June 2017, no amounts have been paid pursuant to the policy.
NON-AUDIT SERVICES
During the year, Deloitte Touche Tohmatsu, the Company’s Auditor, performed certain other services in addition to their
statutory duties.
The Board has considered the non-audit services provided during the year by the Auditor, and in accordance with advice
provided by the Board Audit Committee, is satisfied that the provision of those non-audit services during the year by the
Auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001
for the following reasons:
•
•
All non-audit services were subject to the Corporate Governance procedures adopted by the Company and have been
reviewed by the Board Audit Committee to ensure they do not impact the integrity and objectivity of the Auditor, and
The non-audit services provided do not undermine the general principles relating to auditor independence as set out in
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board,
as they did not involve reviewing or auditing the Auditor’s own work, acting in a management or decision making capacity
for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
A copy of the Auditor’s Independence Declaration, as required under Section 307C of the Corporations Act 2001, is included in
the Directors’ Statutory Report.
Non-audit services paid to Deloitte Touche Tohmatsu are as follows:
Services provided in connection with:
Tax advisory services
Other assurance services
2017
$000
77
102
179
2016
$000
61
52
113
36
/ ANNUAL REPORT
This Report is signed for and on behalf of the Board of Directors in accordance with a resolution of the Board of Directors.
JS Humphrey
Director
Brisbane
18 August 2017
SC Birkensleigh
Director
AUSWIDE BANK – 30 JUNE 2017
/ 37
Auditors’ independence declaration
30 JUNE 2017
The Board of Directors
Auswide Bank Ltd
PO Box 1063
Bundaberg
QLD 4760
18 August 2017
Dear Board Members
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
Level 25
123 Eagle Street
Brisbane QLD 4000
GPO Box 1463
Brisbane QLD 4001 Australia
Tel: +61 7 3308 7000
Fax: +61 7 3308 7002
www.deloitte.com.au
Auswide Bank Ltd
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the
following declaration of independence to the directors of Auswide Bank Ltd.
As lead audit partner for the audit of the financial statements of Auswide Bank Ltd for the financial
year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been
no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
David Rodgers
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
38
/ ANNUAL REPORT
18
Consolidated statement of profit or loss
and other comprehensive income
FOR THE YEAR ENDED 30 JUNE 2017
Interest revenue
Interest expense
Net interest revenue
Other non interest income
Employee benefits expense
Depreciation expense
Amortisation expense
Occupancy expense
Bad and doubtful debts expense
Fees and commissions
General and administration expenses
Other expenses
Profit before income tax expense
Income tax expense
Notes
2
2
3
10
3
4
Profit for the year from continuing operations
Profit/(loss) for the year from discontinued operations
34
Profit for the year
Other comprehensive income, net of income tax
Items that may be reclassified to profit or loss
Revaluation of cash flow hedge to fair value
Revaluation of RMBS investments to fair value
Income tax relating to these items
Other comprehensive income/(loss) for the year,
net of income tax
Consolidated
Company
2017
$’000
125,909
(68,400)
57,509
10,222
19,088
1,918
848
2,358
979
9,690
10,984
158
21,708
6,699
15,009
–
15,009
861
(12)
(255)
594
2016
$’000
124,293
(70,400)
53,893
9,103
18,692
1,708
429
2,627
(568)
9,001
13,672
322
17,113
5,759
11,354
345
11,699
347
(64)
(85)
198
2017
$’000
125,905
(68,397)
57,508
9,760
18,935
1,918
662
2,353
979
9,682
10,701
158
21,880
6,677
15,203
–
15,203
861
(12)
(255)
594
2016
$’000
124,293
(70,514)
53,779
9,523
18,692
1,696
429
2,688
(568)
9,001
13,638
322
17,404
5,725
11,679
–
11,679
347
(64)
(85)
198
Total comprehensive income for the year
15,603
11,897
15,797
11,877
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interests
Earnings per share
From continuing and discontinued operations
Basic (cents per share)
Diluted (cents per share)
From continuing operations
Basic (cents per share)
Diluted (cents per share)
15,149
(140)
15,009
15,743
(140)
15,603
37.35
37.35
37.35
37.35
11,699
–
11,699
11,897
–
11,897
31.20
31.20
30.28
30.28
26
26
26
26
15,203
–
15,203
15,797
–
15,797
11,679
–
11,679
11,877
–
11,877
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
AUSWIDE BANK – 30 JUNE 2017
/ 39
Consolidated statement of financial position
AS AT 30 JUNE 2017
ASSETS
Cash and cash equivalents
Due from other financial institutions
Accrued receivables
Financial assets
Loans and advances
Other investments
Property, plant and equipment
Other intangible assets
Deferred tax assets
Other assets
Goodwill
Total assets
LIABILITIES
Deposits and short term borrowings
Payables and other liabilities
Loans under management
Current tax liabilities
Deferred income tax liabilities
Provisions
Subordinated capital notes
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Equity attributable to owners of the Company
Non-controlling interests
Contributed equity
Retained profits
Total non-controlling interests
Total equity
Notes
6
7
8
9
10
11
12
15
4
13
14
16
17
10
4
4
18
19
20
21
22
Consolidated
Company
2017
$’000
120,065
11,763
6,735
2016
$’000
67,792
22,014
12,818
2017
$’000
121,142
11,763
6,714
291,948
225,045
322,334
2016
$’000
67,792
22,014
11,534
252,186
2,773,220
2,666,412
2,773,390
2,664,697
1,069
14,606
7,935
5,256
8,406
48,975
512
15,544
2,719
5,441
7,751
46,363
5,153
14,606
2,564
5,256
8,260
46,363
1,771
15,544
2,719
5,441
7,751
46,363
3,289,978
3,072,411
3,317,545
3,097,812
2,304,604
2,183,902
2,304,604
2,184,224
18,637
708,020
1,222
2,947
2,840
25,355
613,821
(411)
2,210
2,879
18,325
738,406
1,222
1,580
2,758
24,921
640,962
(411)
2,210
2,879
28,000
28,000
28,000
28,000
3,066,270
2,855,756
3,094,895
2,882,785
223,708
216,655
222,650
215,027
184,752
13,978
23,687
222,417
1,431
(140)
1,291
182,629
13,358
20,668
216,655
–
–
–
184,752
14,167
23,731
222,650
–
–
–
182,629
13,572
18,826
215,027
–
–
–
223,708
216,655
222,650
215,027
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
40
/ ANNUAL REPORT
Consolidated statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2017
Consolidated
Company
Notes
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Cash flows from operating activities
Interest received
Dividends received
Other non interest income and receivables
Interest paid
Cash paid to suppliers and employees
(inclusive of goods and services tax)
Income tax paid
Net cash provided by / (used in) operating activities
23
Cash flows from investing activities
Net movement in investment securities
Net movement in amounts due from other financial
institutions
Net movement in loans and advances
Net movement in other investments
Payments for non current assets
Proceeds from sale of property, plant and equipment
126,296
123,576
126,292
123,576
–
9,350
(71,532)
(40,470)
(4,398)
19,246
(65,623)
10,251
–
6,795
(71,604)
(36,293)
(5,038)
17,436
(7,344)
(12,798)
–
11,898
(71,529)
(41,406)
(5,743)
19,512
(70,159)
10,251
420
6,955
(71,718)
(30,289)
(4,886)
24,058
(10,454)
(12,798)
(113,241)
(336,100)
(113,842)
(334,783)
(557)
(6,001)
–
(118)
(5,268)
2,767
(3,382)
(1,537)
–
13,882
(5,276)
532
Net cash provided by / (used in) investing activities
(175,171)
(358,861)
(178,669)
(348,897)
Cash flows from financing activities
Net movement in deposits and short-term borrowings
Net movement in amounts due to other financial
institutions and other liabilities
Proceeds from share issue
Dividends paid
Net cash provided by / (used in) financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of
the financial year
124,012
94,191
349
(10,354)
208,198
52,273
67,792
330,622
36,468
477
(9,845)
357,722
16,297
51,495
125,109
97,411
349
(10,362)
212,507
53,350
67,792
317,540
36,574
477
(9,845)
344,746
19,907
47,885
Cash and cash equivalents at end of the financial year
6
120,065
67,792
121,142
67,792
For the purposes of the consolidated statement of cash flows, cash includes cash on hand and deposits on call.
The cash at the end of the year can be agreed directly to the consolidated statement of financial position.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
AUSWIDE BANK – 30 JUNE 2017
/ 41
Consolidated statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2017
6
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Th
AUSWIDE BANK – 30 JUNE 2017
/ 45
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The financial statements are general purpose financial
statements that have been prepared in accordance with
the requirements of the Corporations Act 2001, Australian
Accounting Standards and Interpretations, and comply with
other requirements of the law.
The financial statements comprise the consolidated financial
statements of the Group (or the ‘Consolidated Entity’),
consisting of Auswide Bank Ltd (‘the Company’) and
subsidiaries, and the separate financial statements of Auswide
Bank Ltd as an individual parent entity. Auswide Bank Ltd is a
for-profit listed public company, incorporated and domiciled
in Australia.
The financial statements comply with all International Financial
Reporting Standards (‘IFRS’) in their entirety.
The financial statements have been prepared on an accrual
basis and are based on historical costs, except for land and
buildings, hedging instruments, financial assets held at fair
value through profit or loss, and available-for-sale financial
assets that have been measured at fair value.
The presentation currency of the financial statements is
Australian Dollars (AUD).
The following is a summary of the material accounting policies
applied by the Group in the preparation of the financial
statements. Except where stated, the accounting policies
have been consistently applied.
(b) Principles of consolidation
The consolidated financial statements comprise the financial
statements of Auswide Bank Ltd (‘the Company’), being the
parent entity, and entities controlled by the Company and its
subsidiaries. The Company and its subsidiaries together are
referred to in these financial statements as the Group.
Control is achieved when the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its
involvement with the investee; and
The Company reassesses whether it has control of an
investee if facts and circumstances indicate changes to
the aforementioned elements have occurred. A list of the
controlled entities is provided in Note 11.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. Subsidiaries are fully
consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that
control ceases. Intercompany transactions, balances and
unrealised gains or losses on transactions between Group
entities are fully eliminated on consolidation. When necessary,
adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line
with the Group’s accounting policies.
Equity interests in a subsidiary not attributable, directly
or indirectly, to the consolidated entity are presented as
‘non-controlling interests’. The consolidated entity initially
recognises non-controlling interests that are present
ownership interests in subsidiaries and are entitled to
a proportionate share of the subsidiary’s net assets on
liquidation at either fair value or at the non-controlling
interests’ proportionate share of the subsidiary’s net assets.
Subsequent to initial recognition, non-controlling interests are
attributed their share of profits or loss and each component
of other comprehensive income. Non-controlling interests are
shown separately within the equity section of the statement
of financial position and statement of profit or loss and other
comprehensive income.
(c) Goodwill
Goodwill acquired in a business combination is initially
measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities
recognised at the date of the acquisition.
Goodwill is subsequently measured at cost less any
accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated
to each of the Group’s cash-generating units (or groups of
cash-generating units) that is expected to benefit from the
• has the ability to use its power to affect its returns.
synergies of the business combination.
The Company has power when it has rights that give it the
current ability to direct the activities that significantly affect
the investee’s returns. The Group not only has to consider
its holdings and rights but also the holdings and rights of
other shareholders in order to determine whether it has the
necessary power for consolidation purposes. The existence
and effect of potential voting rights where the Group has
the practical ability to exercise them are considered when
assessing whether the Group controls another entity.
A cash-generating unit or groups of cash-generating
units to which goodwill has been allocated are tested for
impairment annually, or more frequently if events or changes
in circumstances indicate that goodwill might be impaired.
If the recoverable amount of the cash-generating unit is less
than its carrying amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated to the
unit and then to the other assets of the unit pro rata based on
the carrying amount of each asset in the unit. Any impairment
loss for goodwill is recognised directly in profit or loss. An
impairment loss recognised for goodwill is not reversed in
subsequent periods.
46
/ ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2017 (d) Investments in associates
(f) Leases
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee
but is not control or joint control over those policies.
Leases of fixed assets where substantially all the risks and
benefits incidental to the ownership of the asset, but not the
legal ownership, are transferred to the Group are classified
as finance leases.
An investment in an associate is accounted for using the
equity method of accounting from the date on which the
investee becomes an associate. The financial statements of the
associate are used by the Group to apply the equity method.
The reporting dates and accounting policies of the associate
have been aligned to that of the Group where necessary.
Finance leases are capitalised at the lease’s inception at the
fair value of the leased property or, if lower, the present value
of the minimum lease payments, including any guaranteed
residual values. The corresponding lease payments are
allocated between the reduction of the lease liability and the
lease interest expense for the period.
Investments in an associate are carried in the consolidated
and parent entity statement of financial position at cost plus
post-acquisition changes in the Group’s share of net assets of
the associate, less any impairment in value. The consolidated
and parent entity profit or loss reflects the Group’s share of
the results of operations of the associate.
Leased assets are depreciated on a straight-line basis over
the asset’s expected useful life where it is likely that the Group
will obtain ownership of the asset at the end of the lease term
or over the shorter of the asset’s expected useful life and the
lease term where there is no reasonable certainty that the
Group will obtain ownership at the end of the lease term.
Where there has been a change recognised directly in
the associate’s equity, the Group recognises its share of
any changes and discloses this, when applicable, in the
consolidated and parent entity statement of changes in equity.
Lease payments for operating leases, where substantially
all the risks and benefits remain with the lessor, are charged
to profit or loss on a straight line basis over the period of
the lease.
Rental income from operating leases where the Group is
lessor is recognised in profit or loss on a straight-line basis
over the lease term. The respective leased assets are included
in the Statement of Financial Position based on their nature.
Initial direct costs incurred in negotiating and arranging an
operating lease are added to the carrying amount of the
leased asset and recognised on a straight-line basis over
the lease term.
(g) Employee benefits
Provision is made for the liability for employee benefits
arising from services rendered by employees to the end
of the reporting period.
Short-term employee benefits
Liabilities for wages, salaries, sick leave and bonuses, that
are expected to be settled wholly within twelve months of the
end of the reporting period are recognised in the statement
of financial position in respect of employee services provided
to the end of the reporting period and are measured at the
amounts expected to be paid when the liability is settled,
plus related on-costs.
(e) Revenue recognition
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can
be reliably measured. Revenue is measured at the fair value of
the consideration received or receivable.
Interest revenue:
Loan interest revenue is calculated on the daily loan balance
outstanding and charged in arrears to the customer’s loan
account. Loan interest revenue is recognised as it accrues
using the effective interest method, which is the rate that
exactly discounts estimated future cash receipts over the
expected life of the financial asset to the net carrying amount
of the financial asset.
When a loan is classified as impaired, the Group generally
ceases to recognise interest and other income earned but not
yet received. Loan interest is generally not brought to account
if a loan has been transferred to a debt collection agency, or a
judgement has been obtained.
Dividend revenue:
Dividend revenue is recognised when the shareholder’s
right to receive the payment is established.
Fees and commissions:
Fees and commissions are recognised on an accrual basis
once a right to receive consideration has been attained or
when service to the customer has been rendered.
All revenue is stated net of the amount of goods and services
tax (GST).
AUSWIDE BANK – 30 JUNE 2017
/ 47
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(g) Employee benefits (continued)
Deferred tax assets are only recognised for deductible
temporary differences and unused tax losses if it is probable
that future taxable profits will be available against which
deductible temporary differences and losses can be utilised.
The amount of benefits brought to account or which may
be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and
the anticipation that the economic entity will derive sufficient
future assessable income to enable the benefit to be realised
and comply with the conditions of deductibility imposed by
the law.
Current and deferred tax are recognised in profit or loss,
except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case
the current and deferred tax are also recognised in other
comprehensive income or directly in equity, respectively. Where
current tax or deferred tax arises from the initial accounting
for a business combination, the tax effect is included in the
accounting for the business combination.
Tax consolidation legislation
The Company and all its wholly-owned Australian resident
entities have formed an income tax consolidated Group under
the Australian Consolidation System as of the financial year
ended 30 June 2008. Auswide Bank Ltd is the head entity in
the tax consolidated Group, and as a consequence recognises
current and deferred tax amounts relating to transactions,
events and balances of the wholly-owned Australian controlled
entities in this Group as if those transactions, events and
balances were its own, in addition to the current and deferred
tax amounts arising in relation to its own transactions, events
and balances. The tax consolidated Group has not entered
into a tax sharing agreement.
(i) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of GST, except where the amount of GST incurred is
not recoverable from the Australian Taxation Office. In these
circumstances, the GST is recognised as part of the cost of
acquisition of the asset or as part of an item of the expense.
Receivables and payables in the Statement of Financial
Position are shown inclusive of GST.
Cash flows are presented in the Consolidated Statement of
Cash Flows on a gross basis, except for the GST component
of investing and financing activities, which are disclosed as
operating cash flows.
(j) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with banks and other short-term highly liquid
investments with original maturities of three months or less.
Long-term employee benefits
Liabilities for long service leave and annual leave are not
expected to be settled within twelve months of the end of
the reporting period. They are recognised as provisions for
employee benefits and are measured at the present value
of the expected future payments to be made in respect
of services provided to the end of the reporting period.
Consideration is given to expected future salary and wage
increases and periods of service.
Regardless of when settlement is expected to occur, liabilities
for long service leave and annual leave are presented as current
liabilities in the Statement of Financial Position if the entity does
not have an unconditional right to defer settlement for at least
twelve months after the end of the reporting period.
Superannuation
Contributions are made by the Group to an employees’
superannuation fund and are charged as an expense when
incurred. The Group has no legal obligation to cover any
shortfall in the fund’s obligation to provide benefits to
employees on retirement.
(h) Taxation
Income tax expense for the period is the tax payable on the
current period’s taxable income based on the applicable
income tax rate adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences between
the tax base of assets and liabilities and their carrying
amounts in the financial statements, and to unused tax losses.
The income tax expense is calculated on the basis of the
tax laws enacted or substantively enacted at the end of
the reporting period. Provisions are established where
appropriate on the basis of amounts expected to be paid
to the tax authorities.
Deferred income tax loss is recognised in full, using the
liability method, on temporary differences, between the
carrying amounts of assets and liabilities in the consolidated
financial statements and their respective tax bases. However,
deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting
nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the end of
the reporting period and are expected to apply to the period
when the asset is realised or liability is settled. Deferred tax is
credited to profit or loss except where it relates to items that
may be credited directly to equity, in which case the deferred
tax is adjusted directly against equity.
48
/ ANNUAL REPORT
(k) Financial instruments
Recognition
Financial assets and financial liabilities are recognised when
a group entity becomes a party to the contractual provisions
of the instrument.
Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted
from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition. Transaction costs
directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss. Subsequent to initial
recognition these instruments are measured as set out below.
Financial assets
Financial assets at fair value through profit or loss
A financial asset is classified as fair value through profit or loss
(FVTPL) if acquired principally for the purpose of selling in the
short term or if so designated by management. Financial assets
at FVTPL are stated at fair value, with realised and unrealised
gains and losses arising from changes in the fair value included
in profit or loss in the period in which they arise.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an
active market. These instruments are measured at amortised
cost using the effective interest rate method, less any
impairment losses.
Held-to-maturity investments
Investment with fixed maturities that the Group has the
positive intent and ability to hold to maturity are classified as
held-to-maturity investments. These investments are stated
at amortised cost using the effective interest rate method,
less any impairment losses.
Available-for-sale financial assets
Available-for-sale investments are non-derivative investments
that are not designated as another category of financial
assets.
Unquoted equity securities, whose fair value cannot be
reliably measured, are carried at cost. Other available-for-
sale assets that are traded in an active market are stated at
fair value. Unrealised gains and losses arising from changes
in fair value are taken directly through equity through other
comprehensive income.
Financial liabilities and equity instruments
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual agreement.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the asset of an entity after deducting all of its
liabilities. Equity instruments issued by the Group entity are
recognised at the proceeds received, net of direct issue costs.
Equity instruments include contributed equity.
Financial liabilities
Financial liabilities are classified as either financial liabilities
‘at FVTPL’ or ‘other financial liabilities’.
Financial liabilities are classified at FVTPL when the liability
is either held for trading or is designated as at FVTPL.
These liabilities are stated at fair value, with any gains or
losses arising on remeasurement recognised in profit or loss.
Other financial liabilities, including borrowings, trade
payables and other non-derivative financial liabilities are
originally measured at fair value. Other financial liabilities are
subsequently measured at amortised cost, using the effective
interest method.
Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers
the rights to receive the contractual cash flows on the financial
asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred.
Any interest in transferred financial assets that is created or
retained by the Group is recognised as a separate asset or
liability. On derecognition of a financial asset in its entirety,
the difference between the asset’s carrying amount and
the sum of the consideration received and receivable and
the cumulative gain or loss that had been recognised in
other comprehensive income and accumulated in equity is
recognised in profit or loss.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable
is recognised in profit or loss.
AUSWIDE BANK – 30 JUNE 2017
/ 49
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Financial instruments (continued)
Amounts previously recognised in other comprehensive
income and accumulated in equity are reclassified to profit
or loss in the periods when the hedged item affects profit
or loss, in the same line as the recognised hedged item.
However, when the hedged forecast transaction that is
hedged results in the recognition of a non-financial asset
or a non-financial liability, the gains and losses previously
recognised in other comprehensive income and accumulated
in equity are transferred from equity and included in the initial
measurement of the cost of the non-financial asset or non-
financial liability.
Hedge accounting is discontinued when the consolidated
entity revokes the hedging relationship, when the hedging
instrument expires or is sold, terminated, or exercised, or
when it no longer qualifies for hedge accounting. Any gain
or loss recognised in other comprehensive income and
accumulated in equity at that time remains in equity and
is recognised when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is
no longer expected to occur, the gain or loss accumulated in
equity is recognised immediately in profit or loss.
(l) Property, plant and equipment
Freehold land and buildings are stated in the consolidated
statement of financial position at their revalued amounts,
being the fair value at the date of revaluation, less any
subsequent depreciation for buildings and subsequent
accumulated impairment losses. Freehold land is not
depreciated. Revalued amounts are based on periodic, but
at least triennial, valuations by external independent valuers.
Any accumulated depreciation at the date of revaluation is
eliminated against the gross carrying amount of the asset
and the net amount is restated to the re-valued amount
of the asset.
Plant and equipment are measured on the cost basis less
depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed
annually by directors to ensure it is not in excess of the
recoverable amount from these assets. The recoverable
amount is assessed on the basis of the expected net cash
flows that will be received from the asset’s employment and
subsequent disposal. The expected net cash flows have been
discounted to their present values in determining recoverable
amounts.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can
be measured reliably. All other repairs and maintenance are
charged to profit or loss during the financial period in which
they are incurred.
Impairment
Other than for assets held at FVTPL, the Group assess
whether there is objective evidence that a financial instrument
has been impaired, at each reporting date. Financial assets
are considered to be impaired where there is objective
evidence that, as a result of one or more events that occurred
after the initial recognition of the financial asset, the estimated
future cash flows of the investment have been affected.
In the case of available-for-sale financial instruments, a
prolonged decline in the value of the instrument is considered
to determine whether an impairment has arisen. Impairment
losses are recognised in the consolidated statement of profit
or loss and other comprehensive income.
Refer to Note 1(n) for further details regarding impairment
of financial assets.
Derivative financial instruments
The Group enters into derivative financial instruments,
including interest rate swaps, to manage its exposure to
interest rate risk.
Derivatives are initially recognised at fair value at the date
the derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting
period. The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective
as a hedging instrument, in which event the timing of the
recognition in profit or loss depends on the nature of the
hedge relationship.
Hedge accounting
The Group designates certain hedging instruments, which
include interest rate swaps, as cash flow hedges.
At the inception of the hedge relationship, the entity
documents the relationship between the hedging instrument
and the hedged item, along with its risk management
objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the
hedging instrument is highly effective in offsetting changes in
cash flows of the hedged item attributable to the hedged risk.
Hedge accounting (continued)
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in other comprehensive income and accumulated
under the heading of cash flow hedging reserve. The gain
or loss relating to the ineffective portion is recognised
immediately in profit or loss, and is included in the ‘other
gains and losses’ line item.
50
/ ANNUAL REPORT
Any revaluation increase arising on the revaluation of freehold
land and buildings is recognised in other comprehensive
income and accumulated within equity, except to the extent
that it reverses a revaluation decrease for the same asset
previously recognised in profit or loss, in which case the
increase is credited to profit or loss to the extent of the
decrease previously expensed. A decrease in the carrying
amount arising on the revaluation of such land and buildings
is recognised in profit or loss to the extent that it exceeds
the balance, if any, held in the properties revaluation reserve
relating to a previous revaluation of that asset.
The depreciable amount of all fixed assets including building
and capitalised lease assets, but excluding freehold land, is
depreciated on a straight line basis over their useful lives to
the economic entity commencing from the time the asset is
held ready for use. Leasehold improvements are depreciated
over the shorter of either the unexpired period of the lease or
the estimated useful lives of the improvements.
The depreciation periods used for each class of depreciable
assets are:
• Buildings – 40 years
• Plant and equipment – 4 to 6 years
• Leasehold improvements – 4 to 6 years or the term of the
lease, whichever is the lesser
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Gains
and losses on disposals are determined by comparing
proceeds with the carrying amount. These gains and losses
are included in profit or loss. When revalued assets are sold,
amounts included in the revaluation reserve relating to that
asset are transferred to retained earnings.
(m) Intangible assets
Purchased items of computer software which are not integral
to the computer hardware owned by the Group are classified
as intangible assets. Intangible assets are stated in the
statement of financial position at cost less any accumulated
depreciation and impairment.
Computer software has a finite life and accordingly is
amortised on a straight line basis over the expected useful
life of the software. Amortisation periods ranging from 4 to 6
years are applied.
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use or disposal.
Gains or losses arising from derecognition are measured as
the difference between the net disposal processes and the
carrying amount of the assets and are taken to profit or loss
at the date of derecognition.
No internally generated intangible assets are recognised by
the Group.
(n) Impairment of assets
At the end of each reporting period, the Board assesses
whether there is any indication that its tangible and intangible
assets may be impaired. The assessment will include the
consideration of external and internal sources of information,
including dividends received from subsidiaries, associates
or jointly controlled entities. If such an indication exists, an
impairment test is carried out on the asset by comparing
the recoverable amount of the asset, being the higher of
the asset’s fair value less costs to sell and value in use,
to the asset’s carrying amount. Any excess of the asset’s
carrying amount over its recoverable amount is recognised
immediately in profit or loss, unless the asset is carried at a
revalued amount in accordance with another standard (for
example, in accordance with the revaluation model in AASB
116 ‘Property, Plant and Equipment’). Any impairment loss
of a revalued asset is treated as a revaluation decrease in
accordance with that other standard.
Where it is not possible to estimate the recoverable amount
of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill, intangible
assets with indefinite lives and intangible assets not yet available
for use.
Further impairment considerations are discussed within the
respective policy note throughout this section.
Loans and advances – doubtful debts
A provision for losses on impaired loans is recognised when
objective evidence is available that a loss event has occurred
and as a consequence it is not likely that all amounts owed will
be received.
Specific provisions for doubtful debts are recognised for
individual loans that are identified as impaired by undertaking
an assessment of estimated future cash flows.
Collective provisions are determined by segmenting
the portfolio into asset classes with similar credit risk
characteristics. Each exposure within each segment is
allocated a probability of default and a loss given default
percentage to calculate an expected loss. Key elements
determining the segmentation of an exposure include the
product type, LVR, whether the exposure is covered by
Lenders’ Mortgage Insurance and the arrears position.
AUSWIDE BANK – 30 JUNE 2017
/ 51
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Impairment of assets (continued)
(q) Fair value of assets and liabilities
Where loan terms have been renegotiated (e.g. loans provided
hardship relief), impairment provisioning is determined on the
basis of the arrears position as if the renegotiation had not
taken place. Restructured loans are returned to performing
status after meeting restructured terms for a minimum six
month period.
A reserve for credit losses is also maintained to cover
risks inherent in the loan portfolio. Movements in the
reserve for credit losses are recognised as an appropriation
of retained earnings.
Bad debts are written off, as determined by management,
when it is reasonable to expect that the recovery of the debt is
unlikely. All write-offs are on a case-by-case basis, taking into
account the exposure at the date of the write-off. On secured
loans, the write-off takes place following ultimate realisation
of collateral value.
Bad debts are written off against the provision for impairment
where impairment has previously been recognised in relation
to a loan. If no provision for impairment has previously been
recognised, write-offs for bad debts are recognised as expenses
in profit or loss.
(o) Deposits
Deposits are initially measured at fair value plus transaction
costs and subsequently measured at their amortised cost
using the effective interest rate method.
Interest on deposits is recognised on an accruals basis.
Interest accrued at reporting date is shown as part of
deposits.
(p) Securitisation
Where the Group enters into transactions that transfer
substantially all the risks and rewards of ownership of
the transferred assets, the Group derecognises the
transferred assets.
Where the Group enters into transactions that transfer
assets recognised on its Statement of Financial Position,
but retains substantially all of the risks and rewards of
ownership of the transferred assets, the transferred assets
are not derecognised and a secured liability for funds raised
is recognised.
In transactions in which the Group neither retains nor transfers
substantially all the risks and rewards of ownership of a
financial asset and it retains control over the asset, the Group
continues to recognise the asset to the extent of its continuing
involvement.
Refer to Note 10 for further details regarding the securitisation
structure in place.
The Group measures some of its assets and liabilities at fair
value on either a recurring or non-recurring basis, depending
on the requirements of the applicable Accounting Standard.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly (i.e. unforced)
transaction between independent, knowledgeable and willing
market participants at the measurement date.
As fair value is a market-based measure, the closest equivalent
observable market pricing information is used to determine
fair value. Adjustments to market values may be made having
regard to characteristics of the specific asset or liability. The
fair values of assets and liabilities that are not traded in an
active market are determined using one or more valuation
techniques. These valuation techniques maximise, to the
extent possible, the use of observable market data.
To the extent possible, market information is extracted from
either the principal market for the asset or liability (i.e. the
market with greatest volume and level of activity for the asset
or liability) or, in the absence of such a market, the most
advantageous market available to the entity at the end of the
reporting period (i.e. the market that maximises the receipts
from the sale of the asset or minimises the payments made to
transfer the liability, after taking into account transaction costs
and transport costs).
For non-financial assets, the fair value measurement also
takes into account a market participant’s ability to use the
asset in its highest and best use or to sell it to another market
participant that would use the asset in its highest and best use.
In measuring fair value, the Group uses valuation techniques
that maximise the use of observable inputs and minimise the use
of unobservable inputs.
Assets and liabilities measured at fair value are classified,
into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements.
Classifications are received at each reporting date and
transfers between levels are determined based on a
reassessment of the lowest level input that is significant
to the fair value measurement. The categories are as follows:
Level 1
Measurements based on quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date.
Level 2
Measurements based on inputs other than quoted prices
included in Level 1 that are observable for the asset or liability,
either directly or indirectly.
52
/ ANNUAL REPORT
Level 3
Measurement based on unobservable inputs for the asset
or liability.
The fair values of assets and liabilities that are not traded
in an active market are determined using one or more
valuation techniques. These valuation techniques maximise,
to the extent possible, the use of observable market data.
If all significant inputs required to measure fair value are
observable, the asset or liability is included in Level 2. If one or
more significant inputs are not based on observable market
data, the asset or liability is included in Level 3.
Valuation techniques:
The Group selects a valuation technique that is appropriate in
the circumstances and for which sufficient data is available to
measure fair value. The availability of sufficient and relevant
data primarily depends on the specific characteristics of the
asset or liability being measured. The valuation techniques
selected by the economic entity are consistent with one or
more of the following valuation approaches:
Market approach
Valuation techniques that use prices and other relevant
information generated by market transactions for identical
or similar assets or liabilities.
Income approach
Valuation techniques that convert estimated future cash
flows or income and expenses into a single discounted
present value.
Cost approach
Valuation techniques that reflect the current replacement
cost of an asset at its current service capacity.
Each valuation technique requires inputs that reflect the
assumptions that buyers and sellers would use when pricing
the asset or liability, including assumptions about risks. When
selecting a valuation technique, the Group gives priorities
to those techniques that maximise the use of observable
inputs and minimise the use of unobservable inputs. Inputs
that are developed using market data (such as publicly
available information on actual transactions) and that reflect
the assumptions that buyers and sellers would generally use
when pricing the asset or liability are considered observable,
whereas inputs for which market data is not available and
therefore are developed using the best information available
about such assumptions are considered unobservable.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise is
ether not available or when the valuation is determined to
be significant. External valuers are selected based on market
knowledge and reputation.
The fair value of liabilities and the entity’s own equity
instruments (excluding those related to share-based payment
arrangements) may be valued, where there is no observable
market price in relation to the transfer of such financial
instrument, by reference to observable market information
where such instruments are held in assets. Where this
information is not available, other valuation techniques are
adopted and where significant, are detailed in the respective
note to the financial statements.
(r) Business combinations
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a
business combination is measured at fair value which is
calculated as the sum of the acquisition-date fair values of
assets transferred by the Group, liabilities incurred by the
Group to the former owners of the acquiree and the equity
instruments issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit or
loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value,
except that:
• deferred tax assets or liabilities and assets or liabilities
related to employee benefit arrangements are recognised
and measured in accordance with AASB 112 ‘Income
Taxes’ and AASB 119 ‘Employee Benefits’ respectively;
•
liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based
payment arrangements of the Group entered into to
replace share-based payment arrangements of the
acquiree are measured in accordance with AASB 2 ‘Share-
based Payment’ at the acquisition date; and
• assets (or disposal groups) that are classified as held for
sale in accordance with AASB 5 ‘Non-current Assets Held
for Sale and Discontinued Operations’ are measured in
accordance with that Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed.
If, after reassessment, the net of the acquisition-date amounts
of the identifiable assets acquired and liabilities assumed
exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair
value of the acquirer’s previously held interest in the acquiree
(if any), the excess is recognised immediately in profit or loss
as a bargain purchase gain.
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(r) Business combinations (continued)
(s) Rounding of amounts
Non-controlling interests that are present ownership
interests and entitle their holders to a proportionate share
of the entity’s net assets in the event of liquidation may be
initially measured either at fair value or at the non-controlling
interests’ proportionate share of the recognised amounts
of the acquiree’s identifiable net assets. The choice of
measurement basis is made on a transaction-by-transaction
basis. Other types of non-controlling interests are measured
at fair value or, when applicable, on the basis specified in
another Standard.
Where the consideration transferred by the Group in a
business combination includes assets or liabilities resulting
from a contingent consideration arrangement, the contingent
consideration is measured at its acquisition-date fair value.
Changes in the fair value of the contingent consideration that
qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against
goodwill. Measurement period adjustments are adjustments
that arise from additional information obtained during the
‘measurement period’ (which cannot exceed one year from the
acquisition date) about facts and circumstances that existed
at the acquisition date.
The subsequent accounting for changes in the fair value of
contingent consideration that do not qualify as measurement
period adjustments depends on how the contingent
consideration is classified. Contingent consideration that
is classified as equity is not remeasured at subsequent
reporting dates and its subsequent settlement is accounted
for within equity. Contingent consideration that is classified
as an asset or liability is remeasured at subsequent reporting
dates in accordance with AASB 139 ‘Financial Instruments:
Recognition and Measurement’, or AASB 137 ‘Provisions,
Contingent Liabilities and Contingent Assets’, as appropriate,
with the corresponding gain or loss being recognised in profit
or loss.
Where a business combination is achieved in stages, the
Group’s previously held equity interest in the acquiree
is remeasured to its acquisition date fair value and the
resulting gain or loss, if any, is recognised in profit or loss.
Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognised in other
comprehensive income are reclassified to profit or loss where
such treatment would be appropriate if that interest were
disposed of.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts
for the items for which the accounting is incomplete. Those
provisional amounts are adjusted during the measurement
period (see above), or additional assets or liabilities are
recognised, to reflect new information obtained about facts
and circumstances that existed as of the acquisition date that,
if known, would have affected the amounts recognised as of
that date.
The company is a company of the kind referred to in ASIC
Corporations (Rounding in Financials/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in
accordance with that Corporations Instrument amounts in the
directors’ report and the financial statements are rounded off
to the nearest thousand dollars, unless otherwise indicated.
(t) Comparative figures
When required by Accounting Standards, comparative figures
have been adjusted to conform to changes in presentation for
the current financial year.
(u) Critical accounting estimates and
judgements
The preparation of financial statements in conformity with
AASBs requires management to make judgements, 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 and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Revisions
to accounting estimates are recognised in the period in which
the estimates are revised and in any future periods affected.
Management have made critical accounting estimates when
applying the Group’s accounting policies with respect to
the impairment of financial assets, loans and advances,
other investments and goodwill- refer Notes 9, 10, 11 and 14,
respectively.
Management have made significant judgements when
applying the Group’s accounting policies with respect to loans
assigned to a special purpose vehicle used for securitisation
purposes - refer to Note 10.
Management have made critical accounting estimates and
judgements in relation to the assessment of the fair value
of the assets and liabilities on the date of acquisition of
MoneyPlace Holdings Pty Ltd (MoneyPlace). The Board of
Directors considered a range of valuations in relation to the
Available for Sale (AFS) financial asset. Key judgements were
applied to determine the entities that the Group controlled
and valuation adopted - refer to Note 33.
Management have made critical accounting estimates and
judgements in relation to the assessment of the fair value of the
assets and liabilities on the date of acquisition of Queensland
Professional Credit Union (YCU) – refer to Note 33.
In addition, details on critical estimates and judgements in
respect of credit risk are disclosed in Note 32.
54
/ ANNUAL REPORT
(v) Application of new and revised Accounting Standards
Amendments to AASBs and the new interpretations that are mandatorily effective for the current year
The Group applied, for the first time, certain standards and amendments which are effective for annual periods beginning on or
after 1 July 2016.
• AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interest in Joint Operations
• AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and
Amortisation
• AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements
• AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards
2012-2014 Cycle
• AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101
• AASB 1057 Application of Accounting Standards and AASB 2015-9 Amendments to Australian Accounting Standards –
Scope and Application Paragraphs
The adoption of these standards and interpretations did not have any material impact on the current or any prior period and are
not likely to materially affect future periods.
Standards and Interpretations in issue not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2017
reporting period and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards
and interpretations is set out below.
Standard/Interpretation
AASB 9 Financial Instruments
Effective for
annual reporting
periods beginning
on or after
Expected to be
initially applied
in the financial
year ending
1 January 2018
30 June 2019
AASB 15 Revenue from Contracts with Customers (and the related clarifications)
1 January 2018
30 June 2019
AASB 16 Leases
AASB 2016-1 Amendments to Australian Accounting Standards –
Recognition of Deferred Tax Assets for Unrealised Losses
AASB 2016-2 Amendments to Australian Accounting Standards –
Disclosure Initiative: Amendments to AASB 107
AASB 2016-4 Amendments to Australian Accounting Standards –
Recoverable Amount of Non-Cash Generating Specialised Assets of Not-for-Profit Entities
AASB 2017-2 Amendments to Australian Accounting Standards –
Further Annual Improvements 2014-2016 Cycle
AASB 2016-5 Amendments to Australian Accounting Standards –
Classification and Measurement of Share-based Payment Transactions
1 January 2019
30 June 2020
1 January 2017
30 June 2018
1 January 2017
30 June 2018
1 January 2017
30 June 2018
1 January 2017
30 June 2018
1 January 2018
30 June 2019
AASB 2017-1 Amendments to Australian Accounting Standards –
Transfer of Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments
1 January 2018
30 June 2019
AASB Interpretation 22 Foreign Currency Transactions and Advance Consideration
1 January 2018
30 June 2019
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v) Application of new and revised Accounting
Standards (continued)
AASB 15 Revenue from Contracts with Customers (effective
for annual periods beginning on or after 1 January 2018)
AASB 9 Financial Instruments (effective for annual periods
beginning on or after 1 January 2017)
The AASB has issued complete AASB 9. The new standard
includes revised guidance on the classification and
measurement of financial assets, including a new Expected
Credit Loss (ECL) model for calculating impairment, and
supplements the new general hedge accounting requirements
previously published. This supersedes AASB 9 (issued in
December 2009- as amended) and AASB 9 (issued in
December 2010).
The AASB 9 impairment requirements are based on an
Expected Credit Loss model (ECL) that replaces the incurred
loss model under the current accounting standard. The Group
will be generally required to recognise either a 12-month
or lifetime ECL, depending on whether there has been a
significant increase in credit risk since initial recognition.
AASB 9 will change the Group’s current methodology for
calculating the provision for doubtful debts, in particular for
collective provisioning.
AASB 9 Financial Instruments (effective for annual periods
beginning on or after 1 January 2017) (continued)
The overall impact of transitioning to AASB 9 on the Group’s
financial statements is still being assessed; however, the level
of provisioning for doubtful debts on assets is expected to
increase with any adjustments that arise as a result of the
transition process being recognised in either retained earnings
or an appropriate equity reserve at the date of transition.
The standard contains a single model that applies to contracts
with customers and two approaches to recognition revenue:
at a point in time or over time. The model features a contract-
based five-step analysis of transactions to determine whether,
how much and when revenue is recognised.
Management’s current assessment of this standard indicates
that no material financial implications are expected.
AASB 16 Leases (effective for annual periods beginning on or
after 1 January 2019)
The standard introduces a model for the identification of
lease arrangements and accounting treatments for both
lessors and lessees. This standard will supersede the current
lease guidance including IAS 17 Leases and the related
interpretations when it becomes effective.
AASB 16 distinguishes lease and service contracts on the basis
of whether an identified asset is controlled by a customer.
Operating and finance lease distinctions are replaced by a
model where a right-of-use asset and a corresponding liability
have to be recognised for all leases by lessees, except for
short-term leases and leases of low value assets.
Management have identified operating leases that will be
required to be recognised on balance sheet. However, the
Group has not quantified the financial impact, as this standard
does not mandatorily apply before 1 January 2019.
Other standards
The Group has not yet assessed the impact of the other listed
Standards; however, none are expected to have a material
impact on future or prior periods.
56
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 2
INTEREST REVENUE AND INTEREST EXPENSE
The following tables show the average balance for each of the major categories of interest bearing assets and liabilities, the
amount of interest revenue or expense and the average interest rate from continuing operations. Month end averages are used
as they are representative of the entity’s operations during the period.
Interest revenue 2017
Deposits with other financial institutions
Investment securities
Loans and advances
Other
Interest expense 2017
Deposits from other financial institutions
Customer deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
Subordinated notes
Net interest revenue 2017
Interest revenue 2016
Deposits with other financial institutions
Investment securities
Loans and advances
Other
Interest expense 2016
Deposits from other financial institutions
Customer deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
Subordinated notes
Net interest revenue 2016
Average
balance
$’000
64,836
205,709
2,729,706
34,245
3,034,496
614,050
1,953,439
184,868
85,667
28,000
2,866,023
47,661
187,762
2,494,616
21,463
2,751,502
611,521
1,700,730
218,333
47,917
27,000
2,605,500
Average
interest rate
%
1.41
2.38
4.36
3.15
4.15
3.15
2.07
2.45
2.63
6.34
2.39
1.96
2.89
4.71
2.16
4.52
3.45
2.37
2.71
2.69
6.48
2.70
Interest
$’000
894
4,896
119,042
1,077
125,909
19,371
40,466
4,532
2,257
1,775
68,400
57,509
935
5,435
117,458
465
124,293
21,095
40,346
5,924
1,287
1,749
70,400
53,893
The following tables show the net interest margin, and are derived by dividing the difference between interest revenue and
interest expenditure by the average balance of interest earning assets.
Interest margin and interest spread 2017
Interest revenue
Interest expense
Net interest spread
Benefit of net interest-free assets, liabilities and equity
3,034,496
2,866,023
125,909
68,400
Net interest margin – on average interest earning assets
3,034,496
57,509
Interest margin and interest spread 2016
Interest revenue
Interest expense
Net interest spread
Benefit of net interest-free assets, liabilities and equity
2,751,502
2,605,500
124,293
70,400
Net interest margin – on average interest earning assets
2,751,502
53,893
4.15
2.39
1.76
0.13
1.90
4.52
2.70
1.82
0.14
1.96
AUSWIDE BANK – 30 JUNE 2017
/ 57
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 3 PROFIT BEFORE INCOME TAX
Profit before income tax from continuing operations includes the following revenues and expenses whose disclosure is relevant
in explaining the financial performance of the Consolidated Group.
Included in the profit before income tax are the following revenue items:
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Other non interest income
Dividends
Controlled entities
Fees and commissions
Other income
–
9,259
963
10,222
–
8,310
793
9,103
–
9,057
703
9,760
The profit before income tax is arrived at after charging the following items:
Other expenses
Provisions for employee entitlements
Superannuation contributions paid
Consolidated
Company
2017
$’000
158
158
1,455
2016
$’000
322
322
1,441
2017
$’000
158
158
1,455
NOTE 4
INCOME TAX RELATING TO CONTINUING OPERATIONS
(a) Income tax recognised in profit or loss
(i) Major components of income tax expense for the year are:
Current income tax
Deferred income tax
Income tax expense reported in profit or loss
Consolidated
Company
2017
$’000
6,319
380
6,699
2016
$’000
4,606
1,153
5,759
2017
$’000
6,431
246
6,677
(ii) Numerical reconciliation of income tax expense to prima facie tax payable:
Tax on profit before income tax at 30% (2016: 30%)
Tax effect of permanent differences
Add non-deductible expenses:
Depreciation of buildings
Merger expenses
Less:
Intra-group dividend (MRM)
Other items – net
Income tax expense
Consolidated
Company
2017
$’000
6,512
49
80
–
58
6,699
2016
$’000
5,134
53
590
–
(18)
5,759
2017
$’000
6,564
49
80
–
(16)
6,677
420
8,310
793
9,523
2016
$’000
322
322
1,441
2016
$’000
4,572
1,153
5,725
2016
$’000
5,221
53
590
(126)
(13)
5,725
58
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
(b) Income tax recognised in other comprehensive income
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Current income tax
Other
Deferred income tax
Arising on items that may be reclassified to profit or loss:
Fair value remeasurement of available-for-sale financial assets
Fair value remeasurement of hedging instruments entered into
for cash flow hedges
Arising on items that will not be reclassified to profit or loss:
Total income tax recognised directly in other
comprehensive income
(c) Current tax assets and liabilities
Current tax liabilities
Current tax liabilities
–
–
(3)
258
255
–
255
–
–
(19)
104
85
–
85
–
–
(3)
258
255
–
255
Consolidated
Company
2017
$’000
1,222
1,222
2016
$’000
(411)
(411)
2017
$’000
1,222
1,222
(d) Deferred tax balances
Deferred tax balances are presented in the statement of financial position as follows:
Deferred tax assets
Deferred income tax liabilities
Deferred income tax assets
Employee leave provisions
Other provisions
Property, plant & equipment
Unrealised losses on investments
Project acquisition costs
Premium on loans purchased (First Mac)
Subordinated notes prepaid expenses
Other items
Consolidated
Company
2017
$’000
5,256
(2,947)
2,309
2016
$’000
5,441
(2,210)
3,231
2017
$’000
5,256
(1,580)
3,676
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
815
1,294
729
1,886
280
131
24
97
864
1,514
598
1,886
136
138
14
291
815
1,294
729
1,886
280
131
24
97
–
–
(19)
104
85
–
85
2016
$’000
(411)
(411)
2016
$’000
5,441
(2,210)
3,231
2016
$’000
864
1,514
598
1,886
136
138
14
291
5,256
5,441
5,256
5,441
AUSWIDE BANK – 30 JUNE 2017
/ 59
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 4
INCOME TAX RELATING TO CONTINUING OPERATIONS (CONTINUED)
(d) Deferred tax balances (continued)
In respect of each temporary difference the adjustment was charged to income.
Deferred tax liabilities
Asset revaluation reserve
Prepayments
Available for sale reserve
Cash flow hedging reserve
Revaluation of financial assets
Consolidated
Company
2017
$’000
1,433
179
45
(77)
1,367
2,947
2016
$’000
1,434
1,064
48
(336)
–
2,210
2017
$’000
1,433
179
45
(77)
–
1,580
2016
$’000
1,434
1,064
48
(336)
–
2,210
In respect of each temporary difference the adjustment was charged to income, except for the revaluations of the RMBS
investments which were charged to the ‘available for sale’ reserve in equity, the revaluations of hedging instruments entered into
for cash flow hedges which were charged to the ‘cash flow hedge’ reserve in equity, and the revaluations of land and buildings
which were charged to the asset revaluation reserve in equity.
NOTE 5 DIVIDENDS PAID
Dividends paid during the year
Interim for current year
Final for previous year
Consolidated
Company
2017
$’000
5,696
6,440
12,136
2016
$’000
5,200
5,927
11,127
2017
$’000
5,696
6,440
12,136
2016
$’000
5,200
5,927
11,127
Dividends paid are fully franked on ordinary shares.
In accordance with Accounting Standards, dividends are only provided for as declared or paid. Subsequent to the reporting
date, the Board declared a dividend of 17.0 cents per ordinary share ($6.917m), for the six months to 30 June 2017, payable on
22 September 2017.
Auswide Bank has entered into an agreement to underwrite Auswide Bank’s Dividend Reinvestment Plan (DRP) in respect of the
2017 Final Dividend.
The capital raised through the underwritten DRP will strengthen the Bank’s Tier 1 Capital position and the proceeds will be used
for the general business purposes of the Bank.
The final dividend for the six months to 30 June 2016 ($6.440m) was paid on 30 September 2016, and was disclosed in the
2015/16 financial accounts in accordance with Accounting Standards.
The tax rate at which the dividends have been franked is 30% (2016: 30%).
The amount of franking credits available for the subsequent financial year are:
Balance as at the end of the financial year
Credits/(Debits) that will arise from the payment of income tax
payable per the financial statements
Debits that will arise from the payment of the proposed dividend
Consolidated
Company
2017
$’000
24,761
(411)
(2,964)
21,386
2016
$’000
16,925
(411)
(2,760)
13,754
2017
$’000
24,761
(411)
(2,964)
21,386
2016
$’000
16,925
(411)
(2,760)
13,754
60
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
Dividends - cents per share
Dividend proposed
Fully franked dividend on ordinary shares
Interim dividend paid during the year
Fully franked dividend on ordinary shares
Final dividend paid for the previous year
Fully franked dividend on ordinary shares
Consolidated
Company
2017
2016
2017
2016
17.0
14.0
16.0
16.0
14.0
16.0
17.0
14.0
16.0
16.0
14.0
16.0
NOTE 6 CASH AND CASH EQUIVALENTS
For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks.
Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be
reconciled to the related items in the consolidated statement of financial position as follows:
Cash at bank and in hand
Deposits on call
Consolidated
Company
2017
$’000
29,825
90,240
120,065
2016
$’000
13,752
54,040
67,792
2017
$’000
30,902
90,240
121,142
Cash held within securitised trusts at 30 June 2017 of $22.996m (2016: $19.335m) is restricted for use only by the trusts.
NOTE 7 DUE FROM OTHER FINANCIAL INSTITUTIONS
Deposits with Special Service Providers (SSPs)
Subordinated loans
Bank term deposits
Maturity analysis
No maturity specified
Consolidated
Company
2017
$’000
11,638
125
–
11,763
11,763
11,763
2016
$’000
9,966
547
11,501
22,014
22,014
22,014
2017
$’000
11,638
125
–
11,763
11,763
11,763
2016
$’000
13,752
54,040
67,792
2016
$’000
9,966
547
11,501
22,014
22,014
22,014
Following the acquisition of shares in Queensland Professional Credit Union Ltd on 19 May 2016, $11.501m of term deposits
were transferred to Auswide Bank Ltd at fair value as part of the transfer of assets. These term deposits have since matured
and funds have been utilised in various alternate investing activities.
NOTE 8 ACCRUED RECEIVABLES
Interest receivable
Securitisation receivables
Other
Consolidated
Company
2017
$’000
4,509
1,606
620
6,735
2016
$’000
4,682
1,448
6,688
12,818
2017
$’000
4,509
1,606
599
6,714
2016
$’000
4,682
1,448
5,404
11,534
AUSWIDE BANK – 30 JUNE 2017
/ 61
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 9 FINANCIAL ASSETS
Held to maturity financial assets carried at amortised cost
Certificates of deposit
253,440
199,924
253,440
199,924
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Available for sale financial assets carried at fair value
External RMBS investments
Investment in Managed Investment Scheme (MIS)
Financial assets at fair value through profit or loss
designated on initial recognition
Financial assets at amortised cost
Notes – Securitisation program & other
Maturity analysis
Up to 3 months
From 1 to 5 years
Later than 5 years
1,470
14,042
2,373
3,413
1,470
14,042
2,373
3,413
22,996
291,948
159,240
94,200
38,508
291,948
19,335
225,045
87,724
112,200
25,121
225,045
53,382
322,334
159,240
94,200
68,894
322,334
46,476
252,186
87,724
112,200
52,262
252,186
Cash held within securitised trusts at 30 June 2017 of $22.996m (2016: $19.335m) is restricted for use only by the trusts.
The investment in management investment schemes represents the notes held in the consideration of the funding provided to
the schemes managed by Moneyplace. At the date of this report, the Group holds 88% of the total notes on issue and could be
seen to have control of the scheme. This position is expected to be temporary as additional funders increase their share of the
Moneyplace scheme investment notes. If the scheme had been consolidated the impact would have been an increase in assets
and liabilities of $1.7 million which represents 0.04% of the total assets of the Group. The scheme does not make residual profits
and accordingly there would be no impact on net profit from consolidation of the scheme.
62
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 10 LOANS AND ADVANCES
Term loans
Loans to controlled entities
Continuing credit loans
Provision for impairment
Total loans
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
2,631,078
2,506,507
2,631,079
2,506,507
–
146,456
2,777,534
–
197
(1,695)
164,952
2,671,459
146,428
2,777,704
164,932
2,669,744
(4,314)
(5,047)
(4,314)
(5,047)
2,773,220
2,666,412
2,773,390
2,664,697
On 30 September 2015 all risks and provisions of Mortgage Risk Management Pty Ltd were transferred to the Statement of
Financial Position of Auswide Bank Ltd.
Provision for impairment
Specific provision
Opening balance
Bad and doubtful debts unwound / (provided for) during the year
Total provision for impairment
Charge to profit or loss for bad and doubtful debts comprises:
Specific provision
Bad debts recognised directly
Maturity analysis
Up to 3 months
From 3 to 12 months
From 1 to 5 years
Later than 5 years
Consolidated
Company
2017
$’000
(5,047)
733
(4,314)
733
(1,712)
(979)
2016
$’000
(1,719)
(3,328)
(5,047)
(3,328)
3,896
568
2017
$’000
(5,047)
733
(4,314)
733
(1,712)
(979)
2016
$’000
(1,719)
(3,328)
(5,047)
(3,328)
3,896
568
2,928
1,870
41,536
2,726,886
2,773,220
2,658
1,119
31,920
2,630,715
2,666,412
2,928
1,870
41,536
2,727,056
2,773,390
2,658
1,119
31,920
2,629,000
2,664,697
Following the acquisition of shares in Queensland Professional Credit Union Ltd on 19 May 2016, a loan book of $130.737m was
transferred to Auswide Bank Ltd at fair value as part of the transfer of assets.
The Group has entered into securitisation transactions on residential mortgage loans that do not qualify for derecognition.
The special purpose entity established for the securitisation is considered to be controlled in accordance with Australian
Accounting Standards & Australian Accounting Interpretations. The Company is entitled to any residual income of the
securitisation program after all payments due to investors and costs of the program have been met; to this extent the
economic entity retains credit and liquidity risk.
The impact on the Group is an increase in liabilities - Loans under management – of $708.020m (30 June 2016 – $613.821m).
B notes of $30.385m which are owned by the Company have been eliminated from the consolidated figures.
Concentration of risk
The loan portfolio of the company does not include any loan which represents 10% or more of capital.
AUSWIDE BANK – 30 JUNE 2017
/ 63
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 11 OTHER INVESTMENTS AND RELATED PARTIES
Unlisted shares – at cost
Controlled entities – at directors' valuation
(a) Controlled entities
Consolidated
Company
2017
$’000
1,069
–
1,069
2016
$’000
512
–
512
2017
$’000
1,069
4,084
5,153
2016
$’000
512
1,259
1,771
Place of
incorporation
and operation
Proportion of ownership
and voting power
held by the Company
Contribution to
consolidated operating
profit after income tax
Investment carrying value
2017
%
2016
%
2017
$’000
2016
$’000
2017
$’000
2016
$’000
Australia
–
–
15,203
11,258
Australia
Australia
Australia
Australia
Australia
100.0
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
–
–
–
–
Australia
62.4
19.3
(236)
424
–
16
–
–
–
-
–
–
–
–
–
4,083
–
–
–
1,259
–
–
–
Name
Company
Auswide Bank Ltd
Controlled entities
Mortgage Risk
Management Pty Ltd
MPBS Insurance Pty Ltd
MPBS Holdings Pty Ltd
Widcap Securities Pty Ltd
Auswide Bank Performance
Rights Pty Ltd
MoneyPlace Holdings
Pty Ltd (MoneyPlace)
All wholly-owned subsidiaries are members of the tax consolidated group.
The carrying amounts of unlisted shares were reassessed by the directors as at 30 June 2017 with the reassessments being
based on whether there were internal or external indicators that the investment was impaired.
MoneyPlace Holdings Pty Ltd (MoneyPlace)
MoneyPlace commenced loan originations in January 2016 after receiving its retail and wholesale Australian Financial Service
Licence and provides loans of $5,000 to $35,000 through its peer-to-peer (P2P) platform. MoneyPlace is Australia’s second
fully licenced P2P lender.
In December 2015 the Group announced it would be entering into a strategic relationship and equity investment with
MoneyPlace Holdings. Auswide Bank Ltd acquired a 19.3% equity stake in MoneyPlace which settled on 4 January 2016.
In February 2017 Auswide Bank made a follow-on investment and acquired an additional 44.0% equity stake in MoneyPlace,
via a subscription agreement. This bought the total investment to 63.3%, and resulted in the Group obtaining a controlling
interest in MoneyPlace. As a result of a share issue to minority holders, the proportion of ownership in MoneyPlace at
30 June 2017 was 62.4%. Further explanation can be found at Note 33.
The strategic alliance with MoneyPlace provides a technically advanced personal loan system solution to a niche consumer
finance market. The relationship provides an avenue to increase the Group’s consumer lending ambitions and provides
significant opportunities for platform collaboration and value accretion.
Mortgage Risk Management Pty Ltd (MRM)
MRM is a wholly owned subsidiary of Auswide Bank Ltd and was previously registered as a Lenders’ Mortgage Insurance
provider. MRM has been in wind-down since ceasing to write insurance business in 2012, and is no longer actively trading.
On 13 August 2015 Auswide Bank announced the effective date of 30 September 2015 to wind-up MRM. All risks and provisions
were transferred to the Statement of Financial Position of Auswide Bank on that date. The capital invested in MRM was returned
to Auswide Bank.
In response to a formal application by MRM, APRA revoked the authorisation under subsection 12(2) of the Insurance Act 1973,
to carry on insurance business in Australia, effective 17 December 2015. Further information in relation to this entity is disclosed
in Note 34.
64
/ ANNUAL REPORT
MPBS Holdings Pty Ltd
MPBS Holdings Pty Ltd was a wholly owned subsidiary of Auswide Bank Ltd which held the property at 73 Victoria Street,
Mackay. This property was sold on 19 October 2015 for $2.32m. MPBS Holdings Pty Ltd was deregistered effective 21 May 2017,
pursuant to section 601AA(4) of the Corporations Act 2001.
MPBS Insurance Pty Ltd
MPBS Insurance Pty Ltd was a wholly owned subsidiary which is no longer actively trading. MPBS Insurance Pty Ltd was
deregistered effective 21 May 2017, pursuant to section 601AA(4) of the Corporations Act 2001.
Widcap Securities Pty Ltd
Widcap Securities Pty Ltd is a wholly owned subsidiary which acts as the manager and custodian for Auswide Bank’s public
RMBS and Warehouse Securitisation programs.
Auswide Bank Performance Rights Pty Ltd
Auswide Bank Performance Rights Pty Ltd is the trustee company for the Auswide Bank Performance Rights Plan, set up to
assist in the retention and motivation of executives, senior managers and qualifying employees.
(b) Warehouse and securitisation trusts
Auswide Bank has an external securitisation program which is comprised of the following trusts:
• Wide Bay Trust No. 5
• Wide Bay Trust No. 6
• WB Trust 2006-1 (matured 16 May 2016)
• WB Trust 2008-1
• WB Trust 2009-1
• WB Trust 2010-1
• WB Trust 2014-1
• ABA Trust 2017-1
These trusts are fully consolidated at the reporting date.
(c) Details of material associates
Details of each of the Group’s material associates at the end of the reporting period are as follows:
Name of associate
Principal activity
Place of incorporation
and operation
Proportion of ownership interest and
voting power held by the Group
J1-Plan Pty Ltd (formerly Financial Technology
Securities Pty Ltd (FTS))
Financial Planning
Australia
Finance Advice Matters Group Pty Ltd (FAM)
Financial Planning
Australia
30/06/2017
30/06/2016
25.0%
25.0%
25.0%
25.0%
J1-Plan Pty Ltd (formerly FTS) is accounted for using the equity method in these consolidated financial statements.
Financial Advice Matters Group Pty Ltd (FAM) purchased the financial planning business from J1-Plan Pty Ltd on 29 October 2015.
AUSWIDE BANK – 30 JUNE 2017
/ 65
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 11 OTHER INVESTMENTS AND RELATED PARTIES (CONTINUED)
(d) Investments accounted for using the equity method
Summarised financial information in respect of each of the Group’s material associates is set out below. The summarised financial
information below represents amounts shown in the associates’ financial statements prepared in accordance with AASBs.
J1-Plan Pty Ltd
Share of associate’s balance sheet:
Current assets
Current liabilities
Non-current liabilities
Net assets
Share of associate’s revenue and profit:
Revenue
Profit / (loss) before income tax
Profit / (loss) after income tax
Total comprehensive income for the year
Dividends received from associate during the year
The above figures were based on the unaudited accounts of J1-Plan Pty Ltd.
Financial Advice Matters Group Pty Ltd (FAM)
Share of associate’s balance sheet:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Share of associate’s revenue and profit:
Revenue
Profit / (loss) before income tax
Income tax
Profit / (loss) after income tax
Total comprehensive income for the year
Dividends received from associate during the year
2017
$’000
326
(5)
–
321
2017
$’000
194
65
65
65
114
2017
$’000
352
528
(206)
(357)
317
2017
$’000
1,348
78
(22)
56
56
129
2016
$’000
637
(99)
(43)
495
2016
$’000
595
106
106
106
13
2016
$’000
273
462
(707)
(14)
14
2016
$’000
908
23
(10)
13
13
–
The above figures were based on the unaudited accounts of Financial Advice Matters Group Pty Ltd (FAM).
(e) Related party transactions
Balances and transactions between the company and its subsidiaries which are related parties of the company, have been
eliminated on consolidation and are not disclosed in this note.
66
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 12 PROPERTY, PLANT AND EQUIPMENT
Carrying amounts of:
Freehold land and buildings
Plant and equipment
Freehold land and buildings
At independent valuation – June 2015
Provision for depreciation
Movement in carrying amount
Opening net book amount
Disposals
Depreciation charge
Carrying amount at end of year
Plant and equipment
At cost
Provision for depreciation
Movement in carrying amount
Opening net book amount
Additions
Additions due to business combinations
Disposals
Depreciation charge
Carrying amount at end of year
Consolidated
Company
2017
$’000
8,399
6,207
14,606
2016
$’000
8,568
6,976
15,544
2017
$’000
8,399
6,207
14,606
Consolidated
Company
2017
$’000
8,750
(351)
8,399
8,568
–
(169)
8,399
2016
$’000
8,750
(182)
8,568
11,368
(2,618)
(182)
8,568
2017
$’000
8,750
(351)
8,399
8,568
–
(169)
8,399
Consolidated
Company
2017
$’000
27,896
(21,689)
6,207
6,976
1,023
–
(42)
(1,750)
6,207
2016
$’000
27,099
(20,123)
6,976
4,757
3,600
350
(205)
(1,526)
6,976
2017
$’000
27,896
(21,689)
6,207
6,976
1,023
–
(42)
(1,750)
6,207
2016
$’000
8,568
6,976
15,544
2016
$’000
8,750
(182)
8,568
9,121
(383)
(170)
8,568
2016
$’000
27,099
(20,123)
6,976
4,757
3,600
350
(205)
(1,526)
6,976
All land and buildings were revalued as at 3 June 2015 by certified practicing valuers Jim Webster and Richard Lysnar of Propell
National Valuers QLD. The valuations were assessed to fair market values. The Company’s policy is to engage external experts to
comprehensively revalue freehold land and buildings every three years with an assessment performed by the Board of Directors
in intervening years.
NOTE 13 OTHER ASSETS
Prepayments
Consolidated
Company
2017
$’000
8,406
8,406
2016
$’000
7,751
7,751
2017
$’000
8,260
8,260
2016
$’000
7,751
7,751
AUSWIDE BANK – 30 JUNE 2017
/ 67
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 14 GOODWILL
(a) MoneyPlace Holdings Pty Ltd
Auswide Bank Ltd acquired a 19.3% equity stake in MoneyPlace which settled on 4 January 2016. In February 2017 Auswide
Bank made a follow-on investment and acquired an additional 44.0% equity stake in MoneyPlace, via a subscription agreement.
This bought the total investment to 63.3%, and resulted in the Group obtaining a controlling interest in MoneyPlace.
Upon gaining a controlling interest in MoneyPlace, an independent valuation was procured. After applying the principles of
acquisition accounting, the initial equity investment was revalued to facilitate the calculation of the consideration transferred.
The independent valuation identified the net assets (including intangible assets such as software and customer contracts), and
it was established that the resultant difference be recognised as goodwill on consolidation.
The financial accounting for this business combination was prepared in accordance with Australian Accounting Standards and
as set out in Notes 1(c) & (r), and recognises the acquisition date as 28 February 2017.
(b) Queensland Professional Credit Union Ltd (YCU)
On 19 May 2016, the Group acquired 100% of the shares of Queensland Professional Credit Union Ltd trading as Your Credit
Union (YCU), via a court approved Scheme of Arrangement which involved the demutualisation of YCU and resulted in Auswide
Bank Ltd obtaining control of YCU. All of YCU’s assets, liabilities and obligations, whether actual or contingent were transferred
to Auswide Bank Ltd. In addition, all duties, obligations, immunities, rights and privileges which apply to YCU, had YCU
continued in existence, apply to Auswide Bank Ltd as a continuation of, and the same legal entity as YCU.
The financial accounting for this business combination was prepared in accordance with Australian Accounting Standards and
as set out in Notes 1(c) & (r), and recognises the acquisition date as 19 May 2016.
(c) Mackay Permanent Building Society Ltd (MPBS)
Pursuant to a bidder’s statement lodged with the Australian Securities & Investments Commission on 15 November 2007, the
company issued an off-market takeover offer for 100% of the ordinary shares in Mackay Permanent Building Society Ltd (MPBS).
On 11 January 2008 the company announced the fulfilment of conditions pertaining to the off-market takeover offer set out in
the bidder’s statement and gave notice that the offer was unconditional effective 10 January 2008.
In accordance with APRA’s approval for the transfer of business the financial and accounting records of the entities were
merged on 1 June 2008.
The financial accounting for this business combination was prepared in accordance with Australian Accounting Standards and
as set out in Notes 1(c) & (r), and recognises the acquisition date as 10 January 2008.
Movements in Goodwill:
Balance at the beginning of the year
Additional Goodwill due to the acquisition of MoneyPlace
Balance at the end of the year
Impairment testing
Consolidated
Company
2017
$’000
46,363
2,612
48,975
2016
$’000
46,363
–
46,363
2017
$’000
46,363
–
46,363
2016
$’000
46,363
–
46,363
The cash-generating unit selected for impairment testing of goodwill was the Auswide Bank Ltd parent entity, as it is impractical
to identify a separate MPBS cash generating unit, or YCU cash generating unit, within the Company and Consolidated entities.
A separate cash generating unit has been identified as a result of the acquisition of MoneyPlace. Upon the acquisition, an
independent valuation was procured and goodwill was assessed as part of this process.
The goodwill disclosed in the Statement of Financial Position at 30 June 2017 was supported by the impairment testing and no
impairment adjustment was required.
68
/ ANNUAL REPORT
Impairment testing of goodwill was carried out by comparing the net present value of cash flows from the cash-generating unit
to the carrying value of the cash generating unit. The cash flows were based on projections of future earnings before taxation,
depreciation and amortisation, minus forecast capital expenditure.
The cash flows have been projected over a period of three years. The terminal value of the business beyond year three has been
determined using a constant growth perpetuity.
The key assumptions used in carrying out the impairment testing were as follows:
•
Budgeted trading result for the
financial years ending 30 June 2018/19
Represents the cash-generating potential of the parent entity based on the
forecast approved by the Board of Directors.
•
Estimated growth rate
5.0% (2016: 6.0%) represents growth in cash-generating unit cash flows over
years one to three (beyond 30 June 2017).
(Such growth is considered to be reasonable by management and the Board
of Directors given historical loan book growth and strategic long-term growth
targets).
•
Terminal growth rate
5.0% (2016: 6.0%) represents the terminal growth rate (beyond three years).
•
Pre-tax discount rate
12.2% (2016: 12.0%) is the pre-tax discount rate used in impairment testing
representing the Cost of Equity to the consolidated group at 30 June 2017.
The trigger points at which the carrying value of the cash-generating unit would exceed its recoverable amount, while holding
all other variables constant, are as follows:
•
terminal growth rate – 4.0% (2016: 1.9%); and
• discount rate – 13.1% (2016: 15.6%).
NOTE 15 OTHER INTANGIBLE ASSETS
Carrying amounts of:
Software
Software
At cost
Provision for amortisation
Movement in carrying amount
Balance at 1 July
Additions
Additions due to business combinations
Disposals
Amortisation
Balance at 30 June
Consolidated
Company
2017
$’000
7,935
7,935
2016
$’000
2,719
2,719
2017
$’000
2,564
2,564
Consolidated
Company
2017
$’000
14,427
(6,492)
7,935
2,719
905
5,160
–
(849)
7,935
2016
$’000
8,549
(5,830)
2,719
1,822
1,326
–
–
(429)
2,719
2017
$’000
9,056
(6,492)
2,564
2,719
507
–
–
(662)
2,564
2016
$’000
2,719
2,719
2016
$’000
8,549
(5,830)
2,719
1,822
1,326
–
–
(429)
2,719
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 16 DEPOSITS AND SHORT TERM BORROWINGS
Call deposits
Term deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
Maturity analysis
On call
Up to 3 months
From 3 to 12 months
From 1 to 5 years
Consolidated
Company
2017
$’000
726,103
1,331,229
147,272
100,000
2016
$’000
675,823
1,218,062
215,017
75,000
2017
$’000
726,103
1,331,229
147,272
100,000
2016
$’000
676,145
1,218,062
215,017
75,000
2,304,604
2,183,902
2,304,604
2,184,224
909,521
613,597
756,275
25,211
820,408
801,872
538,954
22,668
909,521
613,597
756,275
25,211
820,730
801,872
538,954
22,668
2,304,604
2,183,902
2,304,604
2,184,224
The Company’s deposit portfolio does not include any deposit which represents 10% or more of total liabilities.
Following the acquisition of shares in Queensland Professional Credit Union Ltd on 19 May 2016, $178.728m of call and term
deposits were transferred to Auswide Bank Ltd at fair value as part of the transfer of liabilities.
NOTE 17 PAYABLES AND OTHER LIABILITIES
Trade creditors
Accrued interest payable
Other creditors
Maturity analysis
Up to 3 months
From 3 to 12 months
From 1 to 5 years
Consolidated
Company
2017
$’000
3,235
10,814
4,588
18,637
12,473
5,987
177
18,637
2016
$’000
4,686
13,947
6,722
25,355
17,954
7,189
212
25,355
2017
$’000
3,032
10,814
4,479
18,325
12,231
5,917
177
18,325
2016
$’000
4,678
13,947
6,296
24,921
17,520
7,189
212
24,921
70
/ ANNUAL REPORT
NOTE 18 PROVISIONS
Employee entitlements
Balance at beginning of year
Provided for during the year
Used during the year
Balance at end of year
Maturity analysis
Current provision
Non-current provision
Unearned direct premiums and outstanding claims
Balance at beginning of year
Transfers to/(from) the provision during the year
Payments from the provision during the year
Balance at end of year
Other provisions
Total provisions
Consolidated
Company
2017
$’000
2,881
575
(656)
2,800
2,439
361
2,800
–
–
–
–
40
2,840
2016
$’000
2,647
527
(293)
2,881
2,492
389
2,881
4,456
(4,344)
(112)
–
(1)
2,879
2017
$’000
2,881
493
(656)
2,718
2,357
361
2,718
–
–
–
–
40
2,758
2016
$’000
2,647
527
(293)
2,881
2,492
389
2,881
–
–
–
–
(1)
2,879
The provision for employee benefits represents annual leave and long service leave entitlements accrued.
As at 30 June 2017 the unearned direct premiums and outstanding claims provision is nil due to the wind down of Mortgage
Risk Management Pty Ltd.
Premium revenues are earned over 10 years in accordance with actuarial advice based on historical claim patterns. The unearned
portion is recognised as unearned premium liability.
The outstanding claims liability is based on independent actuarial advice and estimates of claims incurred but not settled at
balance date. The estimation is based on statistical analyses of historical experience.
NOTE 19 SUBORDINATED CAPITAL NOTES
Inscribed debenture stock
Maturity analysis
Later than 5 years
Consolidated
Company
2017
$’000
28,000
2016
$’000
28,000
2017
$’000
28,000
2016
$’000
28,000
28,000
28,000
28,000
28,000
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 20 CONTRIBUTED EQUITY
Fully paid ordinary shares
Balance at beginning of year
Issued during the year
Staff share plan
Dividend reinvestment plan
YCU merger shares*
Balance at end of year
2017
Shares
No.
2017
Shares
$’000
2016
Shares
No.
2016
Shares
$’000
40,251,196
182,629
37,040,654
166,637
77,095
357,742
–
349
1,774
–
99,479
264,423
2,846,640
40,686,033
184,752
40,251,196
478
1,281
14,233
182,629
* Refer to Note 33 for information as to the issue of shares in relation to the merger with YCU.
Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised
capital. Accordingly, the company does not have authorised capital or par value in respect of its issued shares.
All ordinary shares have equal voting, dividend and capital repayment rights.
(a) Staff Share Plan
9 November 2016 – 77,095 ordinary shares were issued.
Shares issued pursuant to the company’s staff share plan were at a price of 90% of the weighted average price of the company’s
shares traded on the Australian Securities Exchange for the 10 days prior to the issue of the invitation to subscribe for the shares.
The members of the company approved a staff share plan in 1992 enabling the staff to participate to a maximum of 10% of the
shares of the company. The share plan is available to all employees under the terms and conditions as decided from time to time
by the Directors, but in particular, limits the maximum loan to each participating employee to 40% of their gross annual income.
The plan requires employees to provide a deposit of 10% with the balance able to be repaid over a period of 5 years at no interest.
The total number of shares issued to employees
since the inception of the staff share plan
The total number of shares issued to employees
during the financial year
The total market value at date of issue,
9 November 2016 (1 December 2015)
The total amount paid or payable for the shares at that date
(b) Dividend Reinvestment Plan (DRP)
Consolidated
Company
2017
Shares
No.
2016
Shares
No.
2017
Shares
No.
2016
Shares
No.
2,861,007
2,783,912
2,861,007
2,783,912
77,095
99,479
77,095
99,479
$’000
$’000
$’000
$’000
393
349
536
478
393
349
536
478
The Board of Directors resolved to maintain the DRP for the final dividend payable on 30 September 2016 for the 2015/16
financial year. The Board of Directors resolved to suspend the DRP for the interim dividend payable on 30 March 2017 for
the 2016-17 financial year.
30 September 2016 – 357,742 ordinary shares were issued.
Shares issued under the plan rank equally in every respect with existing fully paid permanent ordinary shares and participate
in all cash dividends declared after the date of issue. The shares issued under the DRP on 30 September 2016 were issued at
a discount of 2.5% on the weighted sale price of the company’s shares sold during the five trading days immediately following
the Record Date.
(c) Auswide Bank Performance Rights Pty Ltd
As at the reporting date Auswide Bank Performance Rights Pty Ltd holds 28,920 shares ($189,268) for the purpose of
facilitating the Executive LTI scheme.
72
/ ANNUAL REPORT
NOTE 21 RESERVES
Available for sale reserve
Asset revaluation reserve
Cash flow hedge reserve
Share-based payment reserve
Statutory reserve
General reserve
Doubtful debts reserve
Movements in reserves:
Available for sale reserve
Balance at beginning of year
Increase/(decrease) due to revaluation of
RMBS investments to mark-to-market
Deferred tax liability adjustment on
revaluation of RMBS investments
Balance at end of year
Consolidated
Company
2017
$’000
105
3,345
(181)
(189)
2,676
5,834
2,388
13,978
113
(12)
4
105
2016
$’000
113
3,345
(784)
(214)
2,676
5,834
2,388
13,358
158
(64)
19
113
2017
$’000
105
3,345
(181)
–
2,676
5,834
2,388
14,167
113
(12)
4
105
2016
$’000
113
3,345
(784)
–
2,676
5,834
2,388
13,572
158
(64)
19
113
The balance of this reserve represents the excess of the mark-to-market valuation over the original cost of the RMBS investments.
Asset revaluation reserve
Balance at beginning of year
Decrease due to transfer to retained profits of
revaluation of assets since sold
Balance at end of year
3,345
–
3,345
3,897
(552)
3,345
3,345
–
3,345
3,504
(159)
3,345
The balance of this reserve represents the excess of the independent valuation over the original cost of the land and buildings.
Cash flow hedge reserve
Balance at beginning of year
Gain/(loss) arising on changes in fair value of hedging
instruments entered into for cash flow hedges
Interest rate swaps
Deferred tax related to gains/losses recognised in
other comprehensive income
Balance at end of year
(784)
(1,026)
(784)
(1,026)
861
(258)
(181)
347
(105)
(784)
861
(258)
(181)
347
(105)
(784)
The cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of
hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the hedging
instruments that are recognised and accumulated under the heading of cash flow hedging reserve will be reclassified to profit or
loss only when the hedged transaction affects the profit or loss, or is included as a basis adjustment to the non-financial hedged
item, consistent with the relevant accounting policy.
There were no cumulative gains/losses arising on changes in fair value of hedging instruments reclassified from equity into profit
or loss during the year.
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 21 RESERVES (CONTINUED)
Share based payments reserve
Balance at beginning of year
Increase in reserve on acquisition of shares
Issue of shares held by entity to employees
Balance at end of year
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
(214)
–
25
(189)
(108)
(166)
60
(214)
–
–
–
–
–
–
–
–
The share based payments reserve relates to shares available for long term incentive (LTI) based payments to employees.
Statutory reserve
Balance at end of year
2,676
2,676
2,676
2,676
This is a statutory reserve created on a distribution from the Queensland Building Society Fund.
General reserve
Balance at end of year
5,834
5,834
5,834
5,834
A special reserve was established upon the company issuing fixed share capital in 1992. The special reserve represented accumulated
members’ profits at that date and was transferred to the general reserve over a period of 10 years being finalised in 2001/2002.
Doubtful debts reserve
Balance at end of year
2,388
2,388
2,388
2,388
Under APRA Prudential Standard 220, the company is required to hold a general reserve for credit losses. The current reserve
has been assessed and meets the requirements of Auswide Bank’s impairment policy.
Total reserves
13,978
13,358
14,167
13,572
22
NON-CONTROLLING INTEREST
Reconciliation of non-controlling interest in controlled entities:
Non-controlling interests arising on the
acquisition of MoneyPlace
Share of operating profit/(loss) for the year
Balance at end of year
Consolidated
2017
$’000
1,431
(140)
1,291
2016
$’000
–
–
–
74
/ ANNUAL REPORT
NOTE 23 CASH FLOW STATEMENT
Reconciliation of profit from ordinary activities after tax to the net cash flows from operations:
Profit after tax from continuing operations
Depreciation and amortisation
Bad debts expense
(Profit)/loss on disposal of non-current assets
Movement in assets
Accrued interest on investments
Prepayments and other receivables
Deferred tax asset
Movement in liabilities
Creditors and accruals
Deferred tax payable
Income tax payable
Employee benefit provisions
Other provisions
Reserves
Net cash generated from operating activities
Consolidated
Company
2017
$’000
15,149
2,790
979
28
173
(658)
185
(1,396)
738
1,633
(81)
(39)
(255)
19,246
2016
$’000
11,699
2,136
(568)
56
(757)
(2,759)
462
10,807
647
(155)
234
(4,281)
(85)
17,436
2017
$’000
15,203
2,603
979
28
173
2,352
185
(2,475)
(630)
1,633
(163)
(121)
(255)
2016
$’000
11,679
2,124
(568)
56
(757)
(2,107)
262
12,383
817
(155)
234
175
(85)
19,512
24,058
Cash flows arising from the following activities are presented on a net basis:
• Deposits to and withdrawals from customer deposit accounts.
• Advances and repayments on loans, advances and other receivables.
• Sales and purchases of investment securities.
•
•
Insurance and reinsurance premiums.
(Profit)/loss on disposal of fixed assets.
NOTE 24 EXPENDITURE COMMITMENTS
Capital expenditure commitments
Capital expenditure contracted for within one year
Lease expenditure commitments (as Lessee)
Non-cancellable operating leases
Up to 1 year
From 1 to 2 years
From 2 to 5 years
Later than 5 years
Consolidated
Company
2017
$’000
1,463
2016
$’000
1,288
2017
$’000
1,463
Consolidated
Company
2017
$’000
2,166
1,669
1,813
74
5,722
2016
$’000
2,449
1,853
2,867
163
7,332
2017
$’000
2,166
1,669
1,813
74
5,722
2016
$’000
1,288
2016
$’000
2,449
1,853
2,867
163
7,332
Non-cancellable operating leases relate to leases of branches across Queensland and other states of Australia.
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 25 CONTINGENT LIABILITIES AND CREDIT COMMITMENTS
Approved but undrawn loans
Approved but undrawn credit limits
Bank guarantees
NOTE 26 EARNINGS PER SHARE
Basic earnings per share
From continuing operations
From discontinued operations
Total basic earnings per share
Diluted earnings per share
From continuing operations
From discontinued operations
Total diluted earnings per share
Basic earnings per share
Consolidated
Company
2017
$’000
55,264
88,364
550
144,178
2016
$’000
53,951
93,706
191
147,848
2017
$’000
55,264
88,364
550
144,178
2016
$’000
53,951
93,706
191
147,848
2017
Cents per share
2016
Cents per share
37.35
–
37.35
37.35
–
37.35
30.28
0.92
31.20
30.28
0.92
31.20
2016
$’000
11,699
11,699
(345)
11,354
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are
calculated as follows:
Profit for the year attributable to owners of the Company
Earnings used in the calculation of basic earnings per share
Profit for the year from discontinued operations used in the calculation of
basic earnings per share from discontinued operations
Earnings used in the calculation of basic earnings per share from continuing operations
2017
$’000
15,149
15,149
–
15,149
Weighted average number of ordinary shares for the purposes of basic earnings per share
40,567,981
37,491,046
2017
Shares No.
2016
Shares No.
76
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
Diluted earnings per share
The earnings used in the calculation of diluted earnings per share are as follows:
Earnings used in the calculation of basic earnings per share
Earnings used in the calculation of diluted earnings per share
Profit for the year from discontinued operations used in the calculation of
diluted earnings per share from discontinued operations
Earnings used in the calculation of diluted earnings per share from continuing operations
2017
$’000
15,149
15,149
–
15,149
2016
$’000
11,699
11,699
(345)
11,354
The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted
average number of ordinary shares used in the calculation of basic earnings per share as follows:
Weighted average number of ordinary shares for the purposes of basic earnings per share
40,567,981
37,491,046
Shares deemed to be issued for no consideration
–
–
Weighted average number of ordinary shares used in the calculation of diluted earnings per share
40,567,981
37,491,046
2017
Shares No.
2016
Shares No.
NOTE 27 KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Details of key management personnel
Key management personnel have been taken to comprise the Directors and members of Executive Management who are
collectively responsible for the day-to-day financial and operational management of the Group and the Company.
The following were key management personnel for the entire reporting period unless otherwise stated.
(i) Directors
JS Humphrey
Chairman – Non-executive Director
MJ Barrett
Managing Director
B Dangerfield
Director – Non-executive
GN Kenny
Director – Non-executive
SC Birkensleigh Director – Non-executive
(ii) Executives
WR Schafer
Chief Financial Officer, Company Secretary
SM Caville
Chief Information Officer
D Hearne
GM Job
Chief Customer Officer
Chief People Officer
CA Lonergan
Chief Risk Officer
MS Rasmussen
Chief Operating Officer
Each of the key management personnel, relatives of key management personnel and related business entities which hold share
capital and/or deposits with the Company do so on the same conditions as those applying to all other members of the Company.
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 27 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(b) Key management personnel compensation
The aggregate compensation made to directors and other members of key management personnel of the Company and the
Group is set out below.
Short term benefits
Cash salary and fees
Cash bonus
Post employment benefits
Superannuation
Share based payments
Other long term benefits
Consolidated
Company
2017
$’000
2,361
98
173
25
41
2016
$’000
2,038
93
152
38
36
2017
$’000
2,361
98
173
25
41
2,698
2,357
2,698
2016
$’000
2,038
93
152
38
36
2,357
Remuneration is calculated based on the period each employee was classified as key management personnel. Remuneration to
Directors was approved at the previous Annual General Meeting of the Company.
(c) Other transactions with key management personnel
Interest has been paid on terms and conditions no more favourable than those available on similar transactions to members
of the general public.
The Bank’s policy for receiving deposits from other related parties and in respect of other related party transactions is that
all transactions are approved and deposits are accepted on the same terms and conditions that apply to members of the
general public for each type of deposit.
Dividends of $126,363 (2016: $90,697) were paid to key management personnel and associates. These were made on terms
no more favourable than those made on dividend payments to other shareholders.
There were no other transactions in which key management personnel provided services to the Company.
78
/ ANNUAL REPORT
NOTE 28 REMUNERATION OF AUDITORS
Amounts received or due and receivable by the auditors of
Auswide Bank Ltd, Deloitte Touche Tohmatsu, are as follows:
Audit and review of financial statements
Tax advisory services
Other assurance services
Amounts received or due and receivable by the auditors of
Mortgage Risk Management Pty Ltd, KPMG, are as follows:
Audit and review of the financial statements
Total auditors' remuneration
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
417
77
102
596
–
–
596
325
61
52
438
11
11
449
417
77
102
596
–
–
596
325
61
52
438
–
–
438
NOTE 29 EVENTS SUBSEQUENT TO BALANCE DATE
The financial statements were approved by the Board of Directors on the date the directors’ declaration was signed.
NOTE 30 BUSINESS AND GEOGRAPHICAL SEGMENT INFORMATION
The company operates predominantly in one industry. The principal activities of the company are confined to the raising of funds
and the provision of finance for housing, personal loans and business banking.
The company commenced funding personal loans in May 2013. The personal loans portfolio was immaterial at balance date and
has not been reported as a segment.
Funding of business loans commenced in April 2014. The business loans portfolio was immaterial at balance date and has not
been reported as a segment.
The company operates principally within the states of Queensland, New South Wales and Victoria.
NOTE 31 CONCENTRATION OF ASSETS AND LIABILITIES AND
OFF BALANCE SHEET ITEMS
The Directors are satisfied that there is no undue concentration of risk by way of geographical area, customer group or
industry group.
NOTE 32 FINANCIAL INSTRUMENTS
The Group has exposure to the following risks from its use of financial instruments:
• Capital risk
• Market risk
• Liquidity risk
• Credit risk
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(a) Capital risk management
The Board and Management of Auswide Bank Ltd are responsible for instituting a Risk Management Framework (RMF) including
policies and processes to reduce such risks to prudent levels at both a Company and Group level. The Board has established the
following committees and delegated responsibilities to develop and monitor risk within their relevant areas and consistent with
the Group wide Risk Management Framework:
The Board Risk Committee;
• assists the Board in the effective discharge of its responsibilities to set and oversee the risk profile and the risk management
framework of Auswide Bank;
• ensures management have appropriate risk systems and practices to effectively operate within the Board approved risk
profile for Auswide Bank; and
• deals with, and where applicable resolve, determine and recommend, all matters falling within the scope of its purpose and
duties as set out in the Charter and other matters that may be delegated by the Board to the Committee from time to time.
The Board Audit Committee;
• overviews the management of the financial reporting and disclosure practices;
• overviews the internal audit functions;
•
reviews compliance with APRA reporting and other statutory requirements;
• oversight of financial accounts;
• addresses changes in the adoption of accounting principles and the application thereof in interim and annual reports;
•
•
reviews reports from the External Auditors; and
reviews reports from the Internal Auditor, the Internal Audit program and any Management responses to issues raised.
The Asset and Liability Management Committee (ALCO);
•
reviews the balance sheet and recommends changes with regard to capital management, funding and securitisation
activities (including product related issues); and
•
reviews measures of liquidity and capital adequacy position against the policy and guidelines established in the Board policy.
APRA’s Prudential Standard APS 110 Capital Adequacy aims to ensure the Authorised Deposit-taking Institutions (ADI’s)
maintain adequate capital, on both an individual and group basis, to act as a buffer against the risks associated with the group’s
activities. APRA requires capital to be allocated against credit, market and operational risk, and the group has adopted the
‘standard model’ approach to measure the capital adequacy ratio.
The Board of Directors takes responsibility to ensure the Company and Group maintain a level and quality of capital
commensurate with the type, amount and concentration of risks to which the company and consolidated group are exposed
from their activities. The Board has regard to prospective changes in the risk profile and capital holdings.
The Company’s management prepares a three year capital plan and monitors actual risk-based capital ratios on a monthly basis
to ensure the capital ratio complies with Board targets. The Board’s target is for the capital adequacy ratio to be maintained
above 13.5%. During the 2017 and 2016 financial years the capital adequacy ratios of both the Group and Company were
maintained above the target ratio, with the exception of the month ended 31 May 2016 where the ratio temporarily fell below
the board target due to a delay in the issue of a Tier 2 Capital Instrument. At all times the capital ratio was in excess of APRA’s
Prescribed Capital Ratio (PCR).
The capital adequacy calculations at 30 June 2017 and 30 June 2016 have been prepared in accordance with the revised
prudential standards incorporating the Basel III principles.
APRA Prudential Standards and Guidance Notes for ADIs provide guidelines for the calculation of capital and specific
parameters relating to Tier 1, Common Equity Tier 1 and Total Capital. Tier 1 capital comprises the highest quality components
of capital and includes ordinary share capital, general reserves and retained earnings less specific deductions. Tier 2 capital
comprises other capital components including general reserve for credit losses and cumulative subordinated debt.
80
/ ANNUAL REPORT
Consistent with Basel III, the approach to capital assessment provides for a quantitative measure of the capital adequacy
and focuses on:
• credit risk arising from on-balance sheet and off-balance sheet exposures;
• market risk arising from trading activities;
• operational risk associated with banking activities;
•
•
securitisation risks; and
the amount, form and quality of capital held to act as a buffer against these and other exposures.
Details of the capital adequacy ratio on a Company and consolidated basis are set out below:
Total risk weighted assets
Capital base
Risk-based capital ratio
(b) Market risk management
Consolidated
Company
2017
$’000
2016
$’000
2017
$’000
2016
$’000
1,289,918
1,262,861
1,283,508
1,261,387
186,007
14.42%
180,695
14.31%
184,532
14.38%
178,541
14.15%
Market risk is the risk, that changes in market prices, such as interest rates, will affect Auswide Bank Ltd’s income or the worth of its
holdings of financial instruments. The Board’s objective is to manage market risk exposures while optimising the return on risk.
Interest rate risk
Interest rate risk is the potential for loss of earnings to Auswide Bank Ltd due to adverse movements in interest rates.
The Asset and Liability Management Committee (ALCO) is responsible for the analysis and management of interest rate risk
inherent in the balance sheet through balance sheet and financial derivative alternatives. These risks are quantified in the
Visual Risk Report. The ALCO’s functions and roles include:
(i) review measures of profitability, particularly net interest and fee income including strategies and directives;
(ii) review management interest rate view as well as asset and liability repricing data;
(iii) receive and review reports from management concerning the organisation’s credit risk;
(iv) receive and review management reports on interest rate risk against guidelines and limits established in Board policy;
(v) consider and approve pricing on interest bearing assets and liabilities as well as fee revenue attached to these products
in co-operation with the Product Pricing sub-committee;
(vi) oversee lending and depositing activities, including the provision of discretion pursuant to Board policies;
(vii) receive and review reports from management regarding significant asset and liability exposure;
(viii) oversee securitisation activities for the organisation, including recommendations for future securitisation transactions;
(ix) review and maintain liquidity and capital management plans, including contingency measures;
(x) make recommendations to the Board on changes to the following policies;
• Lending;
• Term Deposits;
• Finance related policies (including capital and liquidity).
At the reporting date, if interest rates had been 2.0% higher or lower and all other variables were held constant, the Group’s
net profit would decrease by $7.547m or increase by $6.781 (2016: decrease by $10.955m or increase by $10.453). This is mainly
due to the company’s exposures to fixed and variable rate loans, and deposit and securitisation liabilities.
The sensitivity analysis was derived from the Visual Risk Report which calculates risk associated with movements in interest rates
through the input of parameters for all financial assets and liabilities. The parameters used were consistent with those adopted
for the prior period.
AUSWIDE BANK – 30 JUNE 2017
/ 81
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(c) Liquidity risk management
The Board of Directors have approved an appropriate liquidity risk management framework for the management of the Group’s
short, medium and long-term funding and liquidity management requirements. The group manages liquidity risk by maintaining
adequate reserves, credit facilities and reserve borrowing facilities, and daily monitoring and forecasting cash flows.
Liquidity is monitored by management and a projection of near future liquidity (30 days) is calculated daily. This information is
used by management to manage expected liquidity requirements.
An additional reserve equivalent to a minimum of 6% of the company’s liability base assessed on a quarterly basis is set aside
and isolated as additional liquidity available in a crisis situation via the RBA repurchase facility (Repo).
The undrawn limits on the securitisation warehouses were as follows:
Securitisation trust
Wide Bay Trust No. 5
Wide Bay Trust No. 6
Total
Maturity analysis
Up to 1 year
2017
$’000
168,647
143,326
311,973
2016
$’000
52,688
8,657
61,345
311,973
61,345
The maturity analysis for the respective groups of financial assets and liabilities have been included in the notes to the
financial statements.
Counterparty risk
As part of Auswide Bank Ltd’s investment policy individual counterparties need to have the appropriate investment grading
and are monitored in respect of their credit rating. Further, limits are placed on the amount of funds which may be placed with
institutions with certain credit ratings.
(d) Credit risk management
Under the direction of the Board of Directors, management has developed risk management policies and procedures to
establish and monitor the credit risk of the company. The risk management procedures define the credit principles, lending
policies and the decision making processes which control the credit risk of the company.
Credit risk is minimised by the availability and application of insurances including lenders’ mortgage insurance, property
insurance, mortgage protection insurance and consumer credit insurance. Credit risk in the loan portfolio is managed by
generally protecting all loans in excess of 80% LVR with one of the recognised mortgage insurers and by securing the loans
by first mortgages of residential property.
The company has a diversified Branch Network consisting of 23 branches and agencies across Queensland, and a business
centre in Brisbane city. The company also employs Business Development Managers in Sydney and Melbourne to conduct
interstate business. All regional loan staff and panel valuers are locally based ensuring an in depth knowledge of the local
economy and developments in the real estate market.
The Board of Directors and management receive reports on a monthly basis to monitor and supervise the past due loans in the
portfolio and ensure credit procedures are adhered to on a timely and accurate basis.
The economic entity’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset
is the carrying amount of those assets as indicated in the balance sheet. The maximum credit risk exposure does not take into
account the value of any security held or the value of any mortgage or other insurance to cover the risk exposure.
82
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
The past due loans and advances for the Group (excluding effects of hardship accounts) comprise:
30 days and less than 60 days
60 days and less than 90 days
90 days and less than 182 days
182 days and less than 273 days
273 days and less than 365 days
365 days and over
Consolidated
Company
2017
$’000
6,418
2,867
4,676
2,234
278
3,676
20,149
2016
$’000
4,401
6,714
8,223
2,266
553
4,406
26,563
2017
$’000
6,418
2,867
4,676
2,234
278
3,676
20,149
2016
$’000
4,401
6,714
8,223
2,266
553
4,406
26,563
As at 30 June 2017 there were 14 loans totalling $3.208m (30 June 2016: 13 loans totalling $4.023m) on which interest was not
being accrued due to impairment.
Concentration of credit risk
The company minimises concentrations of credit risk in relation to loans receivable by undertaking transactions with a large
number of customers principally within the states of Queensland, New South Wales and Victoria.
The concentration of the loans and advances throughout Australia are as follows:
Queensland
New South Wales
Victoria
South Australia
Western Australia
Tasmania
Northern Territory
2017
%
78.9
9.9
7.7
0.9
1.8
0.1
0.7
2016
%
81.1
9.0
6.9
0.8
1.6
0.1
0.5
100.0
100.0
AUSWIDE BANK – 30 JUNE 2017
/ 83
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(e) Terms, conditions and accounting policies
The economic entity’s accounting policies, including the terms and conditions of each class of financial asset, financial liability
and equity instrument, both recognised and unrecognised at the balance date, are as follows:
Recognised
financial instruments
Notes to
accounts
Accounting
policies
Terms and
conditions
FINANCIAL ASSETS
Short term deposits
6, 7
Accrued receivables
Bills of exchange and
promissory notes
Certificates of deposit
Notes
RMBS investments
8
9
9
9
9
Loans and advances
10
FINANCIAL LIABILITIES
Deposits
Payables and
other liabilities
16
17
Dividends payable
5
Short term deposits are stated at amortised cost.
Interest is recognised when earned.
Short term deposits have an effective interest rate
of 1.17% (2016 – 1.72% ).
Amounts receivable are recorded at their
recoverable amount.
Bills of exchange and promissory notes are stated
at amortised cost.
Bills of exchange and promissory notes have an
effective interest rate of 0% (not applicable for
2017) (2016 – 0%).
Certificates of deposit are carried at amortised
cost. Interest revenue is recognised when earned.
Certificates of deposit have an effective interest
rate of 2.07% (2016 – 3.47%).
Notes are carried at amortised cost.
These notes are an overcover required as part of
the securitisation of loans. They have an effective
interest rate of 3.41% (2016 – 3.71%).
RMBS investments are recorded at fair value
through the Available for Sale Reserve.
Loan interest is calculated on the closing daily
outstanding balance and is charged in arrears
to the customer's account on a monthly basis.
Loans and advances are recorded at
amortised cost.
New mortgage loans approved with an LVR
in excess of 80% will be insured under an
arrangement with QBE, and are secured by first
mortgage over residential property. Personal loans
are approved on both a secured and unsecured
basis and are not insured. Loans made for the
purchase of staff shares are secured by the shares
themselves. Certain of the company's loans have
been securitised and continue to be managed by
the company. Further details are disclosed in
Note 10. The securitisation notes have a maturity
period of greater than 30 years. The securitisation
notes are eligible for repayment once the balance
of the trust falls below 10% of the invested amount.
Interest paid to the note holders is repriced on a
monthly basis at a set margin above BBSW.
Deposits are recorded at the principal amount.
Interest is brought to account on an accrual basis.
Details of maturity of the deposits are set out in
Note 16. Interest is calculated on the daily balance.
Liabilities are recognised for amounts to be paid
in the future for goods and services received,
whether or not billed to the economic entity.
Dividends payable are recognised when declared
by the company.
Trade creditors are normally settled on
30 day terms.
Details of the final dividend declared by the
company for the financial year ended
30 June 2017 are disclosed in Note 5.
These notes are issued for a period of 10 years non
call 5 years, at which time they can be redeemed.
Interest is repriced quarterly at a set margin above
90 day BBSW.
Subordinated
capital notes
19
The subordinated capital notes are inscribed
debenture stock.
84
/ ANNUAL REPORT
(f) Derivatives
Each of the securitisation trusts has an Interest Rate Swap in place to hedge against fixed rate loans held in the trust.
The mark-to-market values at the end of the year were as follows:
Wide Bay Trust No. 5
WB Trust 2008-1
WB Trust 2009-1
WB Trust 2010-1
WB Trust 2014-1
ABA Trust 2017-1
2017
$’000
2016
$’000
48
864
77
43
269
43
39
755
110
52
268
–
Auswide Bank enters into interest rate swaps from time to time and has International Swaps and Derivatives (ISDAs) in place
with the ANZ and Wesptac Banks. Auswide Bank currently has three interest rate swaps, two with ANZ and one with Westpac
Bank. These are designated as effective hedges and are accounted for as cash flow hedges. Refer to Note 1(k) for further details.
(g) Interest rate risk
The Group is exposed to interest rate risk because entities in the Group borrow and lend funds at both fixed and variable interest
rates. The risk is managed by the Group by maintaining an appropriate mix between fixed and variable rate assets and liabilities
and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and
defined risk appetite, ensuring the most cost effective hedging strategies are applied. The Group’s exposures to interest rates
on financial assets and financial liabilities are detailed in the risk management section of this note.
The Group’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities,
both recognised and unrecognised at the balance date, are as follows:
AUSWIDE BANK – 30 JUNE 2017
/ 85
Notes to the consolidated financial statements (continued)
30 JUNE 2017
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(h) Financial instruments
This section provides information about how the Group determines the fair values of various financial assets and financial
liabilities.
Methods & assumptions used to determine net fair values
Carrying amount approximates fair value
due to short term to maturity.
Estimated using discounted cash flow analysis based
on current lending rates for similar types of investments.
Fair value approximates carrying value due to
short term nature.
Fair value is quoted market price (if available)
adjusted for any realisation costs.
Total carrying amount
per balance sheet
Aggregate
net fair value
2017
$’000
2016
$’000
2017
$’000
2016
$’000
120,065
67,792
120,065
67,792
11,763
22,014
11,763
22,014
6,676
12,766
6,676
12,766
291,948
225,045
293,261
226,490
Estimated using discounted cash flow analysis based
on current lending rates for similar types of loans.
2,777,534
2,671,459
2,788,979
2,678,922
Carrying amount considered to be a
reasonable estimate of net fair value.
1,069
552
1,069
552
3,209,055
2,999,628
3,221,813
3,008,536
Financial assets
Cash and cash equivalents
Due from other
financial institutions
Accrued receivables
Financial assets
Loans and advances
Other investments
Total financial assets
Financial liabilities
Deposits and
short term borrowings
Estimated using discounted cash flow analysis based
on current lending rates for similar types of deposits.
2,304,604
2,183,902
2,298,306
2,177,906
Payables and
other liabilities
Securitised loans
For short term liabilities, carrying value approximates
fair value. For the liabilities which are long term the fair
value is estimated using discounted cash flow analysis,
based on current rates for similar types of liabilities.
Estimated using discounted cash flow analysis based
on current lending rates for similar types of loans.
18,637
25,355
18,637
25,355
708,020
613,821
710,937
615,536
Provisions
Carrying amount approximates fair value.
2,840
2,879
2,841
2,879
Subordinated capital notes
Carrying amount approximates fair value.
Total financial liabilities
28,000
28,000
28,000
28,000
3,062,101
2,853,957
3,058,721
2,849,676
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(h) Financial instruments (continued)
Fair value of the Group’s financial assets and financial liabilities that are measured at fair value on a recurring basis:
Some of the Group’s financial assets and financial liabilities are measured at fair value at the end of each reporting period.
The following table gives information about how the fair values of these financial assets and financial liabilities are determined
(in particular the valuation technique(s) and inputs used).
Consolidated entity
Financial assets
Financial assets held to maturity:
Fair value
FV hierarchy
Valuation technique(s) and key input(s)
2017
$’000
2016
$’000
Certificates of deposit
253,440
199,924
Level 1
Quoted price
Financial assets held at amortised cost:
Notes – securitisation program
22,996
19,335
Level 2
Held at amortised cost
Loans and advances
2,788,979
2,678,922
Level 3
Held at amortised cost
Financial assets at fair value
through profit or loss:
Investment in floating rate notes
–
–
Level 2
Shares in unlisted companies
1,069
512
Level 3
Financial assets available for sale:
External RMBS investments
1,470
2,373
Level 2
Investment in Managed
Investment Scheme (MIS)
Total
Financial liabilities
Financial liabilities held at amortised cost:
14,042
3,413
Level 3
3,081,996
2,904,480
Mark-to-market value based on consideration,
maturity and interest rates
Market approach using recent observable
market data including cost value or net
present value of future cash flows
Mark-to-market value based on consideration,
maturity and interest rates
Market approach using recent observable
market data including cost value and net
present value of future cash flows
Deposits and short term borrowings
2,298,306
2,177,906
Level 3
Held at amortised cost
Securitised loans
Total
710,937
615,536
Level 2
Held at amortised cost
3,009,243
2,793,442
88
/ ANNUAL REPORT
Notes to the consolidated financial statements (continued)
30 JUNE 2017
Company
Financial assets
Financial assets held to maturity:
Fair value
FV hierarchy
Valuation technique(s) and key input(s)
2017
$’000
2016
$’000
Certificates of deposit
253,440
199,924
Level 1
Quoted price
Financial assets held at amortised cost:
Notes – securitisation program
53,382
46,476
Level 2
Held at amortised cost
Loans and advances
2,788,979
2,678,922
Level 3
Held at amortised cost
Financial assets at fair value through profit or loss:
Shares in unlisted companies
5,153
1,771
Level 3
Financial assets available for sale:
External RMBS investments
1,470
2,373
Level 2
Investment in Managed Investment Scheme (MIS)
14,042
3,413
Level 3
Market approach using recent observable
market data including cost value or net
present value of future cash flows
Mark-to-market value based on
consideration, maturity and interest rates
Market approach using recent observable
market data including cost value and net
present value of future cash flows
Total
Financial liabilities
Financial liabilities held at amortised cost:
3,116,464
2,932,879
Deposits and short term borrowings
2,310,901
2,190,219
Level 3
Held at amortised cost
Securitised loans
Total
710,937
615,536
Level 2
Held at amortised cost
3,021,838
2,805,755
Reconciliation of Level 3 fair value measurements:
Shares in unlisted companies
Investments in MIS
Consolidated entity
Opening balance
Total gains or losses:
– in profit or loss
– in other comprehensive income
Purchases
Disposals
Closing balance
Company
Opening balance
Total gains or losses:
– in profit or loss
– in other comprehensive income
Purchases
Disposals
Closing balance
2017
$’000
512
–
–
557
–
1,069
2016
$’000
395
–
–
118
–
512
2017
$’000
3,413
–
–
12,629
(2,000)
14,042
Shares in unlisted companies
Investments in MIS
2017
$’000
1,771
–
–
4,640
(1,259)
5,153
2016
$’000
15,654
–
–
118
(14,000)
1,771
2017
$’000
3,413
–
–
12,629
(2,000)
14,042
2016
$’000
–
–
–
3,413
–
3,413
2016
$’000
–
–
–
3,413
–
3,413
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 33 BUSINESS COMBINATION
(a) MoneyPlace Holdings Pty Ltd
In December 2015 the Group announced it would be entering into a strategic relationship and equity investment with MoneyPlace
Holdings (MoneyPlace). Auswide Bank Ltd acquired a 19.3% equity stake in MoneyPlace which settled on 4 January 2016.
In February 2017 Auswide Bank made a follow-on investment and acquired an additional 44.0% equity stake in MoneyPlace,
via a subscription agreement. This bought the total investment to 63.3%, and resulted in the Group obtaining a controlling
interest in MoneyPlace Holdings.
MoneyPlace commenced loan originations in January 2016 after receiving its retail and wholesale Australian Financial Service
Licence and provides loans of $5,000 to $35,000 through its peer-to-peer (P2P) platform. MoneyPlace is Australia’s second
fully licenced P2P lender.
The strategic alliance with MoneyPlace provides a technically advanced personal loan system solution to a niche consumer
finance market. The relationship provides an avenue to increase the Group’s consumer lending ambitions and provides
significant opportunities for platform collaboration and value accretion.
Consideration Transferred
The consideration paid to obtain 44.0% of MoneyPlace Holdings Pty Ltd equalled $4.344m which was made up of cash,
convertible shares and the fair value of previously held investments.
The initial investment of 19.3% was independently revalued to $2.260m on acquisition date in accordance with AASB 3
‘Business Combinations’, and the resulting gain recognised in profit or loss.
As the investment in additional equity holdings gave the Group control of MoneyPlace, the initial investment must be revalued to
fair value before effecting the acquisition accounting. An independent valuation was obtained and fair value movements taken to
profit or loss and the updated value of the initial tranche was reflected in the consideration applied in the purchase price accounting.
The estimate recognised takes into account all current information available and represents the Group’s best estimate based
on following a defined process.
The fair value of MoneyPlace was estimated with reference to the following valuation approaches;
•
triangulation of discounted cash flow analysis (DCF) and expected returns analysis (3 and 5 year scenarios);
• high level multiple of cumulative loan originations (Loan Multiples) range based on those observed for comparable
companies at a similar stage of operation;
• values implied by historical fund raisings and indicative offers implied by recent negotiations with institutional funders.
Acquisition related costs for MoneyPlace amounting to $0.188m have been excluded from the consideration transferred and have
been recognised as an expense in profit or loss in the current year, within the ‘General and administration expenses’ line item.
Assets acquired and liabilities assumed at the date of acquisition at fair value
Current assets
Cash and cash equivalents
Other assets
Non-current assets
Intangible assets
Current liabilities
Payables and other liabilities
Deferred income tax liabilities
Provisions
Net assets
No contingent liabilities have been identified from the acquisition of MoneyPlace.
90
/ ANNUAL REPORT
2017
$’000
4
97
5,160
(1,083)
(1,345)
(97)
2,736
Notes to the consolidated financial statements (continued)
30 JUNE 2017
Non-Controlling Interests
The non-controlling interest (36.7% ownership interest in MoneyPlace Holdings Pty Ltd) recognised at acquisition date was
measured by reference to the fair value of the non-controlling interest and amounted to $1.005m.
Goodwill arising on acquisition
Consideration transferred
Plus: non-controlling interests (36.7% in MoneyPlace)
Less: fair value of identifiable net assets acquired
Goodwill arising on acquisition
2017
$’000
4,344
1,005
2,736
2,613
Upon gaining a controlling interest in MoneyPlace, an independent valuation was procured. After applying the principles of acquisition accounting,
the initial equity investment was revalued to facilitate the calculation of the consideration transferred. The independent valuation identified the net
assets (including intangible assets such as software and customer contracts), and it was established that the resultant difference be recognised as
goodwill on consolidation.
None of the goodwill arising on the acquisition of MoneyPlace is expected to be deductible for tax purposes.
Net cash outflow on acquisition
Consideration paid in cash
Less: cash and cash equivalent balances acquired
Net cash outflow on acquisition
Impact of acquisition on the results of the Group
2017
$’000
1,799
4
1,795
Included in the profit (before tax) for the year is a loss of $0.430m attributable to MoneyPlace. Revenue for the year includes
$0.206m in respect of MoneyPlace. The controlling interest portion of the loss is $0.270m, and revenue is $0.129m.
Had this business combination been in effect at 1 July 2016, the revenue from the Group arising from continuing operations
would have been $136.433m, and the profit for the year from continuing operations would have been $13.222m. The directors of
the Group consider these ‘proforma’ numbers to represent an approximate measure of the performance of the combined Group
on an annualised basis and to provide a reference point for comparison in future periods.
(b) Queensland Professional Credit Union Ltd
On 19 May 2016, the Group acquired 100 per cent of the shares of Queensland Professional Credit Union Ltd trading as
Your Credit Union (YCU), via a court approved Scheme of Arrangement which involved the demutualisation of YCU and
resulted in Auswide Bank Ltd obtaining control of YCU. All of YCU’s assets, liabilities and obligations, whether actual or
contingent were transferred to Auswide Bank Ltd. In addition, all duties, obligations, immunities, rights and privileges which
apply to YCU, had YCU continued in existence, apply to Auswide Bank Ltd as a continuation of, and the same legal entity
as YCU. The acquisition is expected to provide geographic diversification of earnings, cost synergies and revenue opportunities.
Consideration Transferred
Cash
Fully paid ordinary shares in Auswide Bank Ltd
Total
2016
$’000
16,585
14,233
30,818
The ordinary shares were issued in part satisfaction of the payment of the consideration under the Scheme of Arrangement
between YCU and its members on the acquisition date of 19 May 2016. The fair value of ordinary shares issued was based
on the share price of the Group at 19 May 2016, of $5.0001 per share.
AUSWIDE BANK – 30 JUNE 2017
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Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 33 BUSINESS COMBINATION (CONTINUED)
(b) Queensland Professional Credit Union Ltd (continued)
Acquisition related costs amounting to $2.499m have been excluded from the consideration transferred and have been
recognised as an expense in profit or loss in the current year, within the ‘General and administration expenses’ line item.
Assets acquired and liabilities assumed at the date of acquisition at fair value
Current assets
Cash and cash equivalents
Loans and advances
Trade and other receivables
Investments
Deferred tax assets
Non-current assets
Plant and equipment
Current liabilities
Creditors and borrowings
Members deposits
Term deposits
Provision for taxation
Non-current liabilities
Provisions
Net assets
No contingent liabilities have been identified from the acquisition of YCU.
Goodwill arising on acquisition
Consideration transferred
Less: fair value of identifiable net assets acquired
Goodwill arising on acquisition
2016
$’000
107
130,737
899
74,246
92
350
(1,593)
(141,785)
(36,943)
454
(52)
26,511
2016
$’000
30,818
26,512
4,306
Goodwill arose in the acquisition of YCU, in part due to existing synergies between Auswide Bank Ltd and YCU, which may
not have been paid by potential purchasers as opposed to the goodwill inherent in YCU’s business on a stand alone basis.
In addition, the consideration paid for the combination effectively included amounts in relation to the benefit of expected
synergies, revenue growth, and future market developments. These benefits are not recognised separately from goodwill
because they do not meet the recognition criteria for identifiable intangible assets.
None of the goodwill arising on this acquisition is expected to be deductible for tax purposes.
Net cash outflow on acquisition
Consideration paid in cash
Less: cash and cash equivalent balances acquired
92
/ ANNUAL REPORT
2016
$’000
16,575
107
16,468
Notes to the consolidated financial statements (continued)
30 JUNE 2017
NOTE 34 DISCONTINUED OPERATION
MRM has been in wind-down since ceasing to write insurance business in 2012.
On 13 August 2015 Auswide Bank announced the effective date of 30 September 2015 to wind up MRM. All risks and provisions
were transferred to the Statement of Financial Position of Auswide Bank on that date. The capital invested in MRM was returned
to Auswide Bank, further strengthening the capital position of the Bank.
In response to a formal application by MRM, APRA revoked the authorisation under subsection 12(2) of the Insurance Act 1973,
to carry on insurance business in Australia, effective 17 December 2015.
The results of the discontinued operations included in the profit for the year are set out below. The comparative profit and cash flows
from discontinued operations have been re-presented to include those operations classified as discontinued in the current year.
Profit for the year from discontinued operations
Revenue
Expenses
Profit/(loss) before income tax
Income tax expense
Profit for the year from discontinued operations (attributable to owners of the Company)
Cash flows from discontinued operations
Net cash inflows/(outflows) from operating activities
Net cash inflows/(outflows) from investing activities
Net cash inflows/(outflows) from financing activities
Net cash inflows
Consolidated
2017
$’000
–
–
–
–
–
2017
$’000
–
–
–
–
2016
$’000
1,799
(1,306)
493
(148)
345
2016
$’000
(6,035)
3,953
(14,420)
(16,502)
AUSWIDE BANK – 30 JUNE 2017
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Directors’ declaration
30 JUNE 2017
In accordance with a resolution of the Directors of Auswide Bank Ltd (‘the Company’), we declare that:
(a) the financial statements comprising of the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of financial position, consolidated statement of cash flows, consolidated statement of changes in
equity and accompanying notes, and the remuneration disclosures that are contained in the Remuneration Report are in
accordance with the Corporations Act 2001, and:
(i)
give a true and fair view of the financial position of the company and consolidated entity as at 30 June 2017 and of the
performance for the year ended on that date; and
(ii) comply with Australian Accounting Standards (including the Australia Accounting Interpretations) and the Corporations
Regulations 2001;
(b) the financial report complies with International Financial Reporting Standards (IFRS) as disclosed in Note 1; and
(c) in the Directors’ opinion there are reasonable grounds to believe that the Company and its subsidiaries will be able to pay
its debts as and when they become due and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing
Director and Chief Financial Officer for the financial year ended 30 June 2017.
The declaration is made in accordance with a resolution of the Board of Directors made pursuant to Section 295(5) of the
Corporations Act 2001, and is signed for and on behalf of the Directors by:
JS Humphrey
Director
Brisbane
18 August 2017
SC Birkensleigh
Director
94
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Independent auditor’s report
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
Level 25
123 Eagle Street
Brisbane QLD 4000
GPO Box 1463
Brisbane QLD 4001 Australia
Tel: +61 7 3308 7000
Fax: +61 7 3308 7002
www.deloitte.com.au
Independent Auditor’s Report to
the Members of Auswide Bank Ltd
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Auswide Bank Ltd (the “Company”) and its subsidiaries (the “Group”) which comprises
the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive profit or loss
and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies
and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of their financial performance for
the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the
ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors
of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
AUSWIDE BANK – 30 JUNE 2017
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Independent auditor’s report (continued)
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How the scope of our audit responded to
the Key Audit Matter
Loan impairment provisions
Our audit procedures included, but were not limited to:
As at 30 June 2017 the Group has a loan loss impairment
provision of $4.3m as disclosed in Note 10.
Significant judgement is required in the application of
assumptions, including:
– Historic loss rates;
– Expected future cash flows;
– Availability of Lenders Mortgage Insurance; and
– The recoverability of loans
• Testing the controls relevant to the approval, recording
and monitoring of loans and advances to customers;
• Evaluating the controls over the determination and review
of both specific impairment provisions and the collective
impairment models;
• Testing on a sample basis, the data used in the
determination of collective impairments and evaluating
whether the modelling assumptions used, considered
relevant risks and were reasonable;
• Assessing loans specifically provided for by identifying
loans that met the criteria set out by the Group’s
accounting policies;
• Recalculating on a sample basis the specific provision
impairment calculation focusing on:
– expected future cash flows from customers,
– the availability of Lenders Mortgage Insurance; and
– the realisation of collateral held.
• Evaluating both the individual and collective impairment
provisions against historic loan loss experience; and
• Assessing the recoverability of collateral.
We also assessed the appropriateness of the disclosures in
Note 10 to the financial statements.
Impairment of non current assets
Our audit procedures included, but were not limited to:
As at 30 June 2017 the Group’s goodwill balance of $48.9m
comprises goodwill relating to the acquisitions of Mackay
Permanent Building Society (MBPS), Queensland Professional
Credit Union (YCU) and MoneyPlace Pty Ltd as disclosed in
Note 14.
The recovery of non-current assets requires significant
judgement due to the high level of assumptions and
estimates involved in preparing a discounted cash flow
model (‘value in use’), including:
• Future cash flows for the Cash Generating Unit (‘CGU’);
• Discount rates; and
• Terminal value growth rates.
•
•
•
•
•
Evaluating the appropriateness of management’s
identification of the Group’s CGU and tested key controls
over the impairment assessment process, including
identifying indicators of impairment;
Assessing the reasonableness of cash flow projections
and assessed growth rates against external economic
and financial data and the Group’s own historical
performance;
Engaging our valuation specialists to assess the key
assumptions and methodology used by management
in the impairment model, in particular the weighted
average cost of capital, the cost of debt and the
terminal growth rate;
Evaluating the value in use estimate determined by
the Group against its market capitalisation; and
Testing the mathematical accuracy of the impairment
model.
We also assessed the appropriateness of the disclosures
in Note 14 to the financial statements.
96
/ ANNUAL REPORT
Key Audit Matter
How the scope of our audit responded to
the Key Audit Matter
Acquisition of MoneyPlace
Our audit procedures included, but were not limited to:
On 28 February 2017, Auswide Bank gained control of the
MoneyPlace group, increasing its percentage of voting
rights held from 19.3% to 63.3%. Management has assessed
that the acquisition should be accounted for as a business
combination achieved in stages (a step acquisition) as
disclosed in Note 33.
• Reading the Sale Purchase Agreement to assess the
accounting treatment applied by management;
• Evaluating the fair value of the initial investment as
calculated by management including the assessment
of the fair value applied to the convertible notes
already held;
As a result the company is required to judgementally
remeasure its previously held interests at fair value at the date
it obtained control of MoneyPlace Group with any difference
between fair value and the carrying value of the existing
investment recognised in the Statement of Profit or Loss.
In addition, following an assessment of the existing
group structure, a purchase price accounting exercise
was conducted where the fair value of all acquired assets
was estimated.
• Assessing the independent valuations obtained for both
the business acquired and the assets of that business;
• Evaluating the independence, competence and objectivity
of the valuer commissioned by management to value the
MoneyPlace business and the assets acquired;
• Assessing the group structure to determine the
entities within the structure that were required to
be fully consolidated;
• Evaluating the purchase price allocation performed by
management including the assessment of the fair values
applied to the assets and liabilities acquired;
• Performing sensitivity analysis on the key assumptions
in both the business valuation and the purchase price
allocation for reasonableness; and
• Engaging our valuation specialists to assess the key
assumptions and methodology used by management
in determining the valuation of the original investment
derecognised and the valuation of the separately
identifiable assets recognised.
We also assessed the appropriateness of the disclosures
in Note 33 to the financial statements.
Other Information
The directors are responsible for the other information. The other information comprises the Directors’ Report which we
obtained prior to the date of this auditor’s report, and also includes the following information which will be included in
the Group’s annual report (but does not include the financial report and our auditor’s report thereon): Chairman’s Report,
Managing Director’s Report, Corporate Governance Summary and Shareholder Information, which is expected to be made
available to us after that date.
Our opinion on the financial report does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained
in the audit, or otherwise appears 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 auditor’s 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.
AUSWIDE BANK – 30 JUNE 2017
/ 97
Independent auditor’s report (continued)
When we read the Chairman’s Report, Managing Director’s Report, Board of Directors and Leadership Team, Corporate
Governance Summary and Shareholder Information, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and use our professional judgement to determine the appropriate action.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group 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 Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is 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 the Australian Auditing Standards
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 this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, 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 Group’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 directors’ 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 Group’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 financial report 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 Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
98
/ ANNUAL REPORT
We communicate with the directors 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.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit
of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s
report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 26 to 35 of the Directors’ Report for the year ended 30 June 2017.
In our opinion, the Remuneration Report of Auswide Bank Ltd for the year ended 30 June 2017, complies with section 300A
of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
David Rodgers
Partner
Chartered Accountants
Brisbane, QLD
18 August 2017
AUSWIDE BANK – 30 JUNE 2017
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Corporate governance summary
Auswide Bank Ltd maintains corporate governance policies and practices which follow the recommendations outlined by the
Australian Securities Exchange (ASX) and which comply with the Corporations Act 2001, the ASX Listing Rules and APRA
Prudential Standards CPS 510 Governance.
The Board of Directors of Auswide Bank Ltd has adopted a Corporate Governance Statement which sets out the Company’s
compliance with the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance Principles
and Recommendations. The Corporate Governance Statement is available under the Governance section of the Company’s
website located at www.auswidebankltd.com.au.
The Governance section also details other relevant corporate governance information, including the Board and Committee
Charters, policies and codes of conduct. The following is a summary of Auswide Bank’s compliance with the principles outlined
in ASX’s Corporate Governance Principles and Recommendations (3rd edition):
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT
The Board Charter, together with the Corporate Governance Statement set out the roles and responsibilities of the Board and
separate functions of management and delegated responsibilities. The Corporate Governance Statement also details checks
undertaken and provision of material information to shareholders prior to recommendation and appointment of Directors.
In accordance with the regulatory standards, the Board has established a Group Board Remuneration Committee which carries
out a performance evaluation of the Managing Director and review of the performance evaluations of other senior executives,
which is provided to the Board following a report of discussions between the Chairman of the Committee and the Managing
Director. A performance evaluation of the Board, the Board Committees and each individual Director’s contribution to the
Board is performed annually as outlined in the Corporate Governance Statement.
Auswide Bank recognises that a gender balanced diverse and inclusive workforce with a wide array of perceptions resulting from
such diversity, promotes innovation and a positive and successful business environment. Auswide Bank’s Diversity Policy
is available in the Corporate Governance section of its website at www.auswidebankltd.com.au. The measurable objectives
and Auswide Bank’s progress in achieving them, are outlined in the Corporate Governance Statement.
Auswide Bank is in compliance with Principle 1 and full details are available in the Corporate Governance Statement,
Board Charter, Remuneration Committee Charter, together with other policies and codes located in the Governance section
at www.auswidebankltd.com.au.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Auswide Bank’s Board Charter outlines the structure of the board and its composition, together with the Board Renewal policy.
Details of Directors’ skills, knowledge, experience, independence and diversity are discussed in the Corporate Governance
Statement and in the Directors’ Statutory Report of this Annual Report.
The Board does not have a separate formal Nomination Committee, with the full Board addressing such issues that would be
otherwise considered by the Nomination Committee. These matters include Board succession issues and ensuring that the
Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its
duties and responsibilities effectively.
Auswide Bank is in compliance with Principle 2 and full details are available in the Corporate Governance Statement and Board
Charter, together with other charters, policies and codes located in the Governance section at www.auswidebankltd.com.au.
The Directors’ Statutory Report of this Annual Report also provides details relevant to this principle.
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
Auswide Bank promotes and supports a culture of honest and ethical behaviour. The standards of behaviour expected of all
Directors, management and employees are detailed in the bank’s Codes of Conduct.
Auswide Bank is in compliance with Principle 3 and full details are available in the following Codes of Conduct –
‘Corporate Code of Conduct’ and ‘Code of Conduct for Directors and Key Executives’ located in the Governance section
at www.auswidebankltd.com.au.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE REPORTING
The Audit Committee has a documented Charter, approved by the Board. The Audit Committee’s focus is on the issues relevant
to verifying and safeguarding the integrity of Auswide Bank’s financial operations and reporting structure. The names and
qualifications of the members of the Audit Committee, the number of meetings held and the number of meetings attended
are set out in the Directors’ Statutory Report.
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Declarations have been signed by the Managing Director and Chief Financial Officer before approval by the Board of Auswide
Bank’s financial statements for the financial period as detailed in the Corporate Governance Statement.
Auswide Bank is in compliance with Principle 4 and full details are outlined in the Board Audit Committee Charter, Corporate
Governance Statement and ‘Appointment of External Auditors and Rotation of External Partners’ statement located in the
Governance section at www.auswidebankltd.com.au. The Directors’ Statutory Report also provides details relevant to this principle.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
Auswide Bank is committed to the promotion of investor confidence by providing equal, timely, balanced and meaningful
disclosure to the market. The Company’s Continuous Disclosure Policy outlines its processes for complying with its continuous
disclosure obligations under the Listing Rules.
Auswide Bank is in compliance with Principle 5 and full details are outlined in the Continuous Disclosure Policy and Corporate
Governance Statement located in the Governance section at www.auswidebankltd.com.au.
PRINCIPLE 6: RESPECT THE RIGHTS OF SECURITY HOLDERS
Auswide Bank believes it is important for its shareholders to make informed decisions about their investment in the company
and aims to provide shareholders with access to quality information and encourage two-way communication.
Auswide Bank is in compliance with Principle 6 and full details are outlined in the Governance section at www.auswidebankltd.com.au,
including the Corporate Governance Statement.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
The Risk Committee has a documented Charter, approved by the Board. The Risk Committee has the responsibility to set and
oversee the risk profile and the risk management framework of the Company, and to ensure management have appropriate
risk systems and practices to effectively operate within the Board approved risk profile. The Risk Committee reviews the
Group’s Risk Management Framework at least annually to satisfy itself that the framework continues to be sound.
The names and qualifications of the members of the Risk Committee, the number of meetings held and the number of meetings
attended are set out in the Directors’ Statutory Report.
Auswide Bank is in compliance with Principle 7 and full details are outlined in the Board Risk Committee Charter and
Corporate Governance Statement located in the Governance section at www.auswidebankltd.com.au, together with the
Charter for Corporate Social Responsibility located in the Social Responsibility section at www.auswidebankltd.com.au.
The Directors’ Statutory Report of this Annual Report also provides details relevant to this principle.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
The Remuneration Committee has a documented Charter, approved by the Board. The Remuneration Committee’s primary
function is to assist the Board in fulfilling its responsibilities to shareholders and regulators in relation to remuneration,
by ensuring that Auswide Bank has clear remuneration policies and practices that fairly and responsibly reward individuals
having regard to performance, the Group’s Risk Management Framework, the law and the highest standards of governance.
The names and qualifications of the members of the Remuneration Committee, the number of meetings held and the number
of meetings attended are set out in the Directors’ Statutory Report. Further information in relation to the Company’s policies
and practices regarding the remuneration of Non-Executive Directors, Executive Directors, and other Senior Executives can be
found in the Remuneration Report section of the Directors’ Statutory Report, together with employment contract details of the
Managing Director and Key Management Personnel.
Auswide Bank is in compliance with Principle 8 and full details are outlined in the Board Remuneration Committee Charter and
Corporate Governance Statement located in the Governance section at www.auswidebankltd.com.au. The Directors’ Statutory
Report of this Annual Report also provides details relevant to this principle.
AUSWIDE BANK – 30 JUNE 2017
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Shareholder information
A. REGISTERED OFFICE
The registered office and principal place of business of Auswide Bank Ltd is:
Level 5 Auswide Bank Head Office
16-20 Barolin Street
Bundaberg QLD 4670
Australia
Ph 07 4150 4000
Fax 07 4152 356
Email auswide@auswidebank.com.au
Website www.auswidebank.com.au
B. SECRETARY
The Secretary is:
William (Bill) Ray Schafer BCom CA
C. AUDITOR
The principal auditors are:
Deloitte Touche Tohmatsu
Level 25 Riverside Centre
123 Eagle Street
Brisbane QLD 4000
Ph 07 3308 7000
Fax 07 3308 700
Website www.deloitte.com.au
D. 2017 ANNUAL GENERAL MEETING
The 2017 Annual General Meeting is to be held on Wednesday 22 November at 11.00am EST at:
Auswide Bank Ltd,
Level 3, 16-20 Barolin Street
Bundaberg QLD
Voting rights of shareholders
A shareholder is entitled to exercise one vote in respect of each fully paid ordinary permanent share held in accordance with the
provisions of the Constitution.
Key dates
Annual General Meeting
22 November 2017
Full year results and final dividend announcement
18 August 2017
Ex dividend date
Record date
4 September 2017
5 September 2017
Participation in DRP (final date for receipt of application)
6 September 2017
Dividend payment
22 September 2017
Half year results and interim dividend announcement
23 February 2017
Ex dividend date
Record date
6 March 2017
7 March 2017
Participation in DRP (final date for receipt of application)
Suspended
Dividend payment
30 March 2017
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E. SECURITIES INFORMATION
Share Register
The register of holders of Permanent Ordinary shares is kept at the office of:
Computershare Investor Services Pty Limited
117 Victoria Street
West End QLD 4101
Issued shares
Ph 1300 552 270
Fax 07 3237 2152
Online Contact www-au.computershare.co/Investor/Contact
Website www.computershare.com.au
The Company’s securities listed on the Australian Stock Exchange (ASX) as at 15 September 2017 are:
Class of security
Permanent ordinary shares
Distribution of Shareholdings
Permanent Ordinary Shares
15 September 2017
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total number of shareholders
Top 20 Shareholders
Permanent Ordinary Shares
15 September 2017
Name
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Hancock, RE & LP
Citicorp Nominees Pty Limited
Hancock, RE
Milton Corporation Limited
Sawyer, K
GDC & DMC Super Pty Ltd ATF Graham Cockerill S/F A/c
Chantilly One Pty Ltd ATF RG Sprake & Co S/F A/c
Cloud 7 Nominees Pty Ltd ATF Peter Sawyer Famacct No2 A/c
Hancock, RE & LP ATF The Hancock Family A/c
Sawfam Pty Ltd ATF Sawyer Super Fund No2 A/c
Ron Hancock Super Pty Ltd ATF The Hancock Superfund A/c
JW & GJ Kennedy Super Pty Ltd
Hestearn Pty Ltd
BNP Paribas Noms Pty Ltd ATF DRP
Olsen, N
Cran, D
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Drenwood Pty Ltd
Top 20 Permanent Shareholders
ASX Code
ABA
Number
40,686,033
No of
Shareholders
3,771
1,911
630
482
52
6,846
No. of Shares
2,861,841
1,463,985
875,560
814,738
773,707
677,241
433,570
432,719
410,046
382,577
328,486
320,000
316,362
316,300
313,654
308,543
298,866
279,520
264,074
258,985
%
7.03
3.60
2.15
2.00
1.90
1.66
1.07
1.06
1.01
0.94
0.81
0.79
0.78
0.78
0.77
0.76
0.73
0.69
0.65
0.64
12,130,774
29.82
AUSWIDE BANK – 30 JUNE 2017
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Shareholder information (continued)
E. SECURITIES INFORMATION (CONTINUED)
Substantial Shareholders
The Company’s Register of Substantial Shareholders recorded the following substantial shareholders interests:
Permanent Ordinary Shares
15 September 2017
Name
National Nominees Ltd
Hancock, RE (associated entities + associates)
On-Market Buyback
There is no on-market buy back.
Dividend Reinvestment Plan
No. of Shares
% of Total
2,861,841
2,348,779
7.03
5.77
The Directors resolved to maintain the Dividend Reinvestment Plan (DRP). The DRP allows shareholders to reinvest all or part
of their dividends in additional Auswide Bank Ltd shares. Auswide Bank has entered into an agreement to underwrite Auswide
Bank’s Dividend Reinvestment Plan in respect of the 2017 Final Dividend. The Terms and Conditions of the Plan and past DRP
discounts and share issue process are available at www.auswidebankltd.com.au under Shareholder Information.
Shareholder Online Investor Centre
We encourage shareholders to take advantage of the Computershare Investor Centre website available at
www.computershare.com.au where you can register and:
• View your shareholding, dividend and transaction history online
• Update your registered address, TFN and dividend instructions
• Elect to receive eCommunications about your shareholding
• Retrieve copies of dividend payment statements.
Alternatively, please contact Computershare Investor Services Pty Limited directly on 1300 552 270.
Annual Report Mailing
The Company’s Annual Report is available online at www.auswidebankltd.com.au under Shareholder Information. The default
option for receiving Annual Reports is via this website. You have the choice of receiving an email when the Annual Report
becomes available online or electing to receive a printed Annual Report by mail. To change your Annual Report elections online
visit www.computershare.com.au/easyupdate/aba
If you do not have internet access call 1300 308 185 and follow the voice instructions.
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Financial glossary
For your reference, this glossary provides definitions for some of the terms used in financial reporting, particularly by financial
institutions listed on the ASX. Not all terms may have been used in the Annual Report and Financial Statements.
ADI
AGM
APRA
ASIC
Asset
ASX
Bad Debt
Basel
Basis Point
An Authorised Deposit-taking Institution is a corporation authorised under the Banking Act 1959 and includes banks,
building societies and credit unions regulated by APRA.
Annual General Meeting.
Australian Prudential Regulation Authority.
Australian Securities and Investments Commission.
A resource which has economic value and can be converted to cash. Assets for an ADI include its loans because income is
derived from the loan fees and interest payments generated.
Australian Securities Exchange Limited (ABN 98 008 624 691).
The amount that is written off as a loss and classified as an expense, usually as a result of a poor-performing loan.
The Basel Accords are the recommendations on banking laws and regulations issued by the Basel Committee on Banking
Supervision, which has the purpose of improving the consistency of capital regulations internationally.
One hundredth of one percent or 0.01 percent. The term is used in money and securities markets to define differences in
interest rates or yields.
Capital Adequacy
Ratio
A ratio of an ADI's capital to its risk, obtained by dividing total capital by risk-weighted assets. This ratio shows an ADI's
capacity to meet the payment terms of liabilities and other risks.
Cost-to-income
Ratio
Obtained by dividing operating cost by operating income, this ratio shows a company's costs in relation to its income.
A lower ratio can be an indication that a company is better at controlling its costs.
Credit Rating
An analysis of a company's ability to repay debt or other obligations.
Dividend
A portion of a company's profits that may be paid regularly by the company to its shareholders.
Dividend Payout
Ratio
The amount of dividends paid to shareholders relative to the amount of total net income of a company, represented
as a percentage.
Dividend Yield
Computed by dividing the annual dividend by the share price.
DRP
A Dividend Reinvestment Plan allows shareholders to reinvest some or all of their dividends into additional shares.
Earnings per Share
The amount of company earnings per each outstanding share of issued ordinary shares.
Ex-Dividend Date
The date used to determine a shareholder's entitlement to a dividend.
Liability
Liquidity
A company's debts or obligations that arise during the course of business operations. Liabilities for ADIs include
interest-bearing deposits.
For an ADI, liquidity is a measure of the ability of the ADI to fund growth and repay debts when they fall due,
including the paying of depositors.
Market Capitalisation The total value of a company's shares calculated by multiplying the shares outstanding by the price per share.
NCD
A Negotiable Certificate of Deposit is a short term security typically issued by an ADI to a larger institutional investor
in order to raise funds.
Net Interest Income
The difference between the revenue that is generated from an ADI's assets, and the expenses associated with
paying out its liabilities.
Net Interest
Margin (NIM)
Net Profit After
Tax (NPAT)
The difference between the interest income generated by an ADI and the amount of interest the ADI pays out to their
depositors, divided by the amount of their interest-earning assets.
Total revenue minus total expenses, with tax that will need to be paid factored in.
Net Tangible Asset
Backing per Share
An indication of the company's net worth, calculated by dividing the underlying value of the company (total assets minus
total liabilities) by the number of shares on issue.
Non Interest Income
Income derived primarily from fees and commissions, rather than income from interest-earning assets.
Price-to-Earnings
Ratio (P/E Ratio)
A measure of the price paid for a share relative to the annual income or profit earned by the company per share.
Record Date
The date used to identify shares traded and registered up until Ex-Dividend Date.
Return on Average
Ordinary Equity
A measurement of how well a company uses the funds provided by its shareholders, represented by a ratio of the company's
profit to shareholder's equity.
RMBS
Securitisation
SSP
Subordinated
Capital Notes
Tier 1 Capital
Tier 2 Capital
Underlying
Cash NPAT
Residential mortgage-backed securities are a type of bond backed by residential mortgages on residential, rather than
commercial, real estate.
Refers to setting aside a group of income-generating assets, such as loans, into a pool against which securities are issued.
Securitisation is performed by an ADI in order to raise new funds.
Special Service Provider such as an authorised settlement clearing house.
Subordinated notes or subordinated debentures, are a type of capital represented by debt instruments. Subordinated
notes have a claim against the borrowing institution that legally follows the claims of depositors. Subordinated notes or
debentures come ahead of stockholders.
Describes the capital adequacy of an ADI. Tier 1 Capital is core capital and includes equity capital and disclosed reserves.
Describes the capital adequacy of an ADI. Tier 2 Capital is secondary capital that includes items such as undisclosed
reserves, general loss reserves, subordinated term debt and more.
The actual reflection of a company's profit. One-off items may be removed from the statutory profit for the company to
arrive at this profit figure.
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AUSWIDE BANK LTD
ABN 40 087 652 060
Australian Financial Services &
Australian Credit Licence 239686
Head Office
Auswide Bank
16 – 20 Barolin Street
PO Box 1063
Bundaberg QLD 4670
T 07 4150 4000
F 07 4152 3499
E auswide@auswidebank.com.au
1300 138 831
auswidebank.com.au (Retail Website)
auswidebankltd.com.au (Corporate Website)