Annual Report
2018
Contents
Auswide Bank – what we do
2017/18 performance highlights
Four-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
8
10
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14
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18
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AUSWIDE BANK – 30 JUNE 2018 1
Auswide Bank
what we do
For over 50 years Auswide Bank has been providing an extensive range of
personal and business banking products and services to our valued customers.
Auswide Bank isn’t a big bank and we don’t want to be.
We believe it’s the small things that reveal who each of us are. Small is real.
Small is sincere. It’s the smile on a familiar face and knowing how hard you’ve
worked to get ahead. Small is finding your voice and meaning what you say.
At Auswide Bank, we’re here to help you find that voice, to tell your story and
at last be heard. We want you to discover a whole new way to engage with your
bank. We want you to discover how powerful small can truly be.
Auswide Bank. Discover the power of small.
2 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 and partners want their friends,
family and colleagues to bank with.
OUR VALUES
EMPOWER
MAKE IT HAPPEN
PURPOSE
OWN IT
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
WOW
Exceed our customers’
expectations and celebrate
their successes and our own
ETHICAL
A commitment to be
ethical and operate in a
sustainable workplace
REAL
Build open and honest
relationships and deliver
on our promises
AUSWIDE BANK – 30 JUNE 2018 3
2017/18
performance
highlights
18.1%
5.0%
STATUTORY NET PROFIT AFTER TAX
up by 18.1% to $17.9m (2016–17: $15.1m)
LOAN BOOK GROWTH
of 5.0% to $2.911b (2016–17: $2.773b)
3 basis
points
NET INTEREST MARGIN
up by 3 basis points to 1.93%
14.89%
CAPITAL ADEQUACY RATIO
increased to 14.89%
6.1%
5.5c
NET INTEREST REVENUE
up 6.1% to $61.0m (2016–17: $57.5m)
STATUTORY EARNINGS PER SHARE
up by 5.5 cents per share to 42.8 cents
per share
1.9%
3c
UNDERLYING COST TO INCOME RATIO
down 1.9% to 63.3% (2016–17: 65.2%)
TOTAL DIVIDEND
up 3c to 34c per share.
4 ANNUAL REPORT
4 ANNUAL REPORT
Auswide Bank Limited delivered a strong result in 2017/18, continuing the
improvements in profitability and shareholder returns we have achieved over
the past few years.
AUSWIDE BANK – 30 JUNE 2018 5
AUSWIDE BANK – 30 JUNE 2018 5
Four-year
performance history
NET INTEREST INCOME ($M)
LOANS PORTFOLIO ($M)
$51.2
$53.9
$57.5
$61.0
80
70
60
50
40
30
20
10
0
2,666
2,773
2.911
2,330
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jun 15
Jun 16
Jun 17
Jun 18
Jun 15
Jun 16
Jun 17
Jun 18
NET INTEREST INCOME
LOAN PORTFOLIO
Focusing on organic growth
has supported consistent
improvement in Net Interest Income
Enhancing customer experience
is one of our strategic priorities,
supporting 25% growth in our
loan portfolio over four years
6 ANNUAL REPORT
June 17
12.06
2.36
DIVIDEND (CENTS PER SHARE)
CAPITAL ADEQUACY RATIO (%)
30.0
30.0
31.0
16.0
16.0
17.0
14.0
14.0
14.0
34.0
18.0
16.0
35
30
25
20
15
10
5
0
Tier 1
Tier 2
15.15
2.56
14.31
2.41
14.42
2.36
12.59
11.90
12.06
14.89
2..21
12.68
20
15
10
5
0
Jun 15
Jun 16
Jun 17
Jun 18
Jun 15
Jun 16
Jun 17
Jun 18
TOTAL DIVIDEND
CAPITAL ADEQUACY RATIO
Strong operating and financial
performance supported a 9.7% increase
in total dividend to 34 cents per share
The strength of Auswide Bank is a
priority of our Strategic Plan and we
have the strongest capital adequacy
ratio of Australia’s listed banks
LOANS ARREARS ($M)
30
25
20
15
10
5
0
30–60 days past due
60–90 days past due
Over 90 days past due
11.9
3.2
7.2
15.5
6.7
4.4
10.8
2.9
6.4
9.4
4.7
NET INTEREST MARGIN (%)
NIM (bps)
RBA Cash Rate (%)
2.5
2.5
2.0
2.0
1.5
1.5
/-
-/
0.0
Jun 15
Jun 16
Jun 17
Jun 18
Jun 15
Jun 16
Jun 17
Jun 18
LOAN ARREARS ($M)
NET INTEREST MARGIN (%)
Improving loan credit quality has
been a highlight of our performance,
with total arrears 30 days past due
decreasing to 0.48% of the total loan
book (2016/17: 0.72%)
Maintained solid Net Interest
Margin in spite of highly
competitive mortgage markets
and historically low interest rates
AUSWIDE BANK – 30 JUNE 2018 7
Chairman and
Managing Director’s
report
Auswide Bank Limited has delivered another year of strong
growth in all key financial metrics and improving returns for the
2017/18 financial year, based on a disciplined approach to net
interest margin, loan book growth and expense management.
Improvement in our cost to income ratio and earnings per
share growth over the year have been amongst the best in the
listed banking sector. This is a commendable performance in an
ongoing challenging environment. Additionally we maintain the
strongest capital adequacy position of the listed banks, which
positions us well for the uncertain economic and regulatory
times ahead.
Net Interest Margin for the 2017/18 financial year was
1.93 per cent compared to 1.90 per cent in the 2016–17 financial
year, which represents a very strong performance. Net Interest
Margin has been impacted by interest rates at historic lows and
the continuation of highly competitive housing finance markets
across the 2017/18 financial year, in addition to elevated funding
costs between February and June 2018.
We are pleased to inform shareholders that Auswide Bank
reported statutory net profit after tax (NPAT) of $17.886 million
for the 2017/18 financial year, an improvement on the previous
year of 18.1 per cent.
Underlying NPAT for the consolidated group was $17.108 million
compared to the previous year’s figure of $15.691 million,
representing an increase of 9.0 per cent.
Based on this strong financial performance, the Board is pleased
to be in a position to reward shareholders with a final dividend
for 2017/18 of 18 cents per share. Together with the increased
interim dividend of 16 cents per share, this brings the total
dividend for the year to 34 cents per share. This is an increase
of three cents per share from last financial year, and represents
a dividend yield of 6.04 per cent, fully franked.
Net Interest Revenue increased by 6.1 per cent to $61.020 million,
compared with $57.509 million in the previous financial year.
The Bank’s underlying cost to income ratio improved by a
pleasing 1.9 per cent, from 65.2 per cent to 63.3 per cent. This
can be attributed to strict cost management disciplines as a key
element of our Strategic Plan.
Our loan book grew by 5.0 per cent to $2.911 billion at 30 June
2018, from $2.773 billion at the end of the previous financial year.
It is a creditable performance to expand our loan book in line
with system growth while closely managing net interest margin
during a period of significant competition and volatility in Bank
Bill Swap Rates.
Consumer lending increased by $14.4 million, or 49.6 per cent
partially assisted by an uplift in loan originations through the
MoneyPlace platform. Our business banking book increased by
11.9 per cent from $107.5 million to $120.3 million.
8 ANNUAL REPORT
Our improving loan credit quality is a success story. We continue
to focus on our culture of risk management, prudent loan
underwriting standards and sound controls across the business
that allow us to grow the loan book and maintain a solid arrears
position. Total arrears greater than 30 days past due (excluding
the effects of hardship accounts) decreased from $20.1 million
dollars to $14.1 million dollars. Arrears have decreased as a
percentage of the Group’s total loan book from 0.72 per cent at
30 June 2017 to 0.48 per cent at
30 June 2018. The Board is satisfied that the provisions set aside
cover the risks arising from current and future doubtful debts.
Auswide Bank’s capital position provides headroom for loan
growth and is well above “unquestionably strong” benchmarks
determined by the prudential regulator. Capital increased during
the financial year, with a capital ratio of 14.89 per cent at 30 June
2018, which represents a 0.47 per cent improvement on the prior
corresponding period.
On 10 January 2018, the Group announced it had entered into an
agreement to divest its controlling equity stake in MoneyPlace.
The transaction was completed on 22 January 2018. The sale had
a one-off positive impact on full financial year results with a NPAT
contribution of $1.227 million. The sale also had a positive impact
on Auswide Bank’s strong capital position.
Auswide Bank will continue to receive income from its personal
loan investment in MoneyPlace. 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.
The Group has diversified the branch network, including
23 branches and agencies across Queensland, and a business
centre in Brisbane. Auswide Bank 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. We are
proud of our roots in regional Queensland communities, as we
grow a national presence.
Auswide Bank recognises that customers value online services
which provide speed, ease of use and accessibility of ‘banking
anywhere anytime’. In response, the customer team is preparing
a ‘Branch 25’ strategy which aims to create an end-to-end digital
banking experience for our customers. Auswide Bank is initiating
projects to deliver online application capabilities, allowing both
new and existing clients to apply for loans, transaction accounts
and savings products via the bank’s website. By delivering
the technical capabilities to support end-to-end customer
experience, Auswide Bank aims to deliver to its customers a truly
exceptional online experience which is seamless and stress free.
OUTLOOK
We remain optimistic that we can continue the growth of
our consumer loan book in 2018–19, to reach $60 million to
$70 million by 30 June 2019 with a blended gross interest rate
of approximately 8 per cent to 9 per cent. The business banking
pipeline remains a high priority and continues to improve,
and we expect to achieve above system growth in the current
financial year.
Net Interest Margin is targeted to remain stable across the
next financial year, but we expect to be challenged by funding
volatility and home lending markets that will continue to
be competitive.
Importantly, we are in an exceptionally strong capital position
which provides significant growth capability over the next
12 months without the need for additional capital.
We will maintain an ongoing focus on cost controls whilst
continuing to invest in the business for future growth and
improving customer experience. Our three-year cost to income
goal is 60 per cent as we manage current and emerging
opportunities as well as headwinds presented by uncertain
economic conditions, increasing regulatory activity and
significant competition.
Regulatory activity has been a prominent feature of the financial
services market during the reporting period, and we anticipate
that industry changes will continue in the current financial
year. However, Auswide Bank will be presented with customer
growth opportunities from the reputational challenges affecting
bigger banks over the period ahead. As a smaller bank with our
roots in serving customers and the community, Auswide Bank
has conducted operations in a way that has meant we have
not had to confront similar issues. The damage to customer
and community trust for the major players in the sector is an
opportunity as we extend our digital reach and customer value
proposition, backed by sound governance and risk management
and an ongoing focus on our customers.
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.
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 would also like to
thank the Board for their support and guidance throughout the
year. Most of all, we would like to thank our two most important
stakeholders, our customers and shareholders, for their
continuing support for Auswide Bank.
John Humphrey
Chairman
Martin Barrett
Managing Director
AUSWIDE BANK – 30 JUNE 2018 9
Strategic
direction
Our actions in managing Auswide Bank are guided by the
three-year Strategic Plan adopted by the Board in March 2016.
Its purpose is to ensure we remain focused on the structure,
transformation, growth and strength of the bank, and it has
underpinned our continued strong financial performance
in 2017/18.
Auswide Bank has completed a number of major operational initiatives over the life of the current three-year plan, that align with these strategic priorities.
Structure
• Appointed Chief Customer Officer to unite sales channels, product and marketing to drive enhanced
customer experience
• Project Swift reduced mortgage application processing time
•
Implemented executive leadership development program and talent matrix to manage succession planning
Transformation
• Streamlined online experience for home and personal loan customers and account opening
•
Introduced annual survey to identify and address key customer issues and increase customer retention
• Commenced product simplification project to better meet customer needs, create a competitive advantage for
Auswide and mitigate risk
• Progressed business banking process review with appointment of Business Banking Manager
Growth
• Brand campaign to increase awareness and make Auswide Bank a preferred option in customers’ initial consideration
set in targeted markets
• Customer Team Incentive Program rolled out to drive sustainable growth through behaviour, sales and service targets
• YCU integration successfully completed and ongoing engagement with other potential M&A partners
• Continued investment in new digital and online customer technology
Strength
• BBB+ (Fitch) and Baa2 (Moody’s) credit ratings to reflect funding strength
•
•
Introduced cyber-attack vigilance and protection programs, training and support
Internal Audit outsourced to PwC to leverage capability and industry best practice
• External Audit outsourced to Deloitte to leverage expertise and resources
•
Internal Capital Adequacy and Assessment Process (ICAAP) completed annually for submission to APRA
• Continued sophistication of risk management capabilities
• Maintain industry leading capital position
The next version of the Strategic Plan is currently being
developed, taking a three to six year view of the operating
environment and priorities for the business. As a challenger
bank, we see a challenging market outlook but sound growth
market outlook and growth opportunities for Auswide Bank over
that period.
The Strategic Plan will build on our progress to date in digital
transformation of customer experience and operating efficiency.
Digital banking services that extend our footprint beyond our
branch network and traditional regional markets will be a feature
of our competitive positioning in the future.
Lifting consumer awareness of the Auswide Bank brand will also
be an important element of the Strategic Plan. In an environment
in which the big banks face significant reputational challenges,
Auswide Bank’s focus on putting the customer at the centre of
everything we do has created a range of growth opportunities.
Auswide Bank has the strongest capital adequacy position
among Australia’s listed banks, which supports our plans to
continue to expand our presence in business banking and
consumer lending.
We have worked hard to develop a resilient, customer focused
culture within Auswide Bank, and our people are empowered and
supported to raise concerns about any element of our operations.
The Strategic Plan will consider the landscape for the financial
services industry and lessons from the ongoing regulatory
activities in the sector. Ongoing vigilance and attention to
positive organisational culture, governance and risk management
will continue to be central among our strategic priorities.
10 ANNUAL REPORT
The priorities over the life of the three-year Strategic Plan include:
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
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
CONTINUING
to reduce and further
enhance the Bank’s cost
to income ratio
REVIEWING
M&A and fintech
opportunities as they arise.
AUSWIDE BANK – 30 JUNE 2018 11
12 ANNUAL REPORT
Customer
experience
During the financial year, Auswide Bank commenced a
Customer Journey Strategy to enhance our customers’
experience of the bank’s products and services.
This process aligns with the Bank’s three-year Strategic Plan
goals to:
• restructure sales channels, products and marketing to
better allocate resources to improve customer experience
• automate processes and simplifying products
• build the Auswide Bank brand through consistent
messaging and enhanced customer service
• continue to reduce and further enhance the Bank’s cost
to income ratio.
The purpose of the strategy is to understand and map the
Customer Journey to:
• ensure our services and products meet the requirements
of their intended market segments
• personalise messaging for each audience
• evolve our technology to attract new customers and meet
their needs
• have real conversations in an omni-channel environment.
Following on from the Customer Journey Strategy, a Product
Simplification Project was commenced on 1 July 2018 to
review Auswide Bank’s current product set and remove
or modify products and services that are insufficiently
profitable, that unnecessarily increase complexity and lack
strong current or likely future demand. We anticipate that
the project will achieve a range of goals during the current
financial year, including:
• Simplify customer choice and ‘path to purchase’ while
continuing to meet their core needs
• Reduce number and complexity of management
and administration processes
• Allow our people to become Subject Matter Experts
on chosen products
• Provide a platform to allow Auswide Bank to better
deliver on chosen products
• Reduce compliance risks
• Reduce customer issues and complaints
• Reduce compliance, operations, support and other costs,
and refocus our people.
The Customer Journey Strategy
has four phases:
PHASE 1
Research & Development
PHASE 2
Product & Service Alignment
PHASE 3
Staff Roll Out/Opportunity
PHASE 4
Targeted Marketing/Touchpoints
AUSWIDE BANK – 30 JUNE 2018 13
CUSTOMER
PULSE
Customer Journey
Voice of the Customer
Real Conversation
Supporting
our community
Auswide Bank is proud to support local communities through
sponsorships, staff volunteering and in-kind contributions to
help schools, groups and clubs to benefit their communities.
In 2017/18 Auswide Bank contributed to over 40 community
events and projects across south-east and regional Queensland
with more than $137,000 in funding. Some of the highlights of
our community support are highlighted here.
Auswide Bank was proud to support the Queensland Young
Achievers Awards for the third consecutive year. These awards
encourage positive achievements of people under 29 years of
age in a range of endeavours.
In 2017/18 Auswide Bank staff were actively involved in
fundraising campaigns for a range of causes. We again donated
to the Salvation Army Red Shield Appeal. The Salvation
Army plays a pivotal role in regional communities and we
continue to enjoy a strong relationship with them. In addition,
Auswide Bank sponsored the Mackay Show and International
Cycling Spectacular.
The Central Queensland University student scholarship program
continued in 2017/18, with Auswide providing scholarships
for business, finance or accounting students. These students
represent an important customer demographic for our future,
and they are potential leaders and employees in our local
regions. We also continue to support Central Queensland
businesses through the Bundaberg Business Excellence Awards.
Auswide Bank was proudly the anchor sponsor of the
restoration of Bert Hinkler’s Armstrong Siddeley historical
vehicle. The 1926 model was called the “most significant
Armstrong Siddeley restoration of its type in the world” by the
Armstrong Siddeley Car Club of Australia. Our commitment
was a reflection of our roots in Bundaberg, Bert Hinkler’s
home town, and Auswide Bank was proud to be involved in this
special project.
From top to bottom: 2017/2018
Queensland Young Achiever
Awards; Bass Hill Soccer Club;
Bert Hinkler’s Historical Armstrong
Siddeley Car Restoration
14 ANNUAL REPORT
In 2017/18 Auswide Bank
contributed to over 40
community events and
projects across south-east
and regional Queensland.
AUSWIDE BANK – 30 JUNE 2018 15
The Bank will continue in
2018-2019 to maintain its
focus on creating a positive
culture and environment
that supports our people,
our customers and
shareholders.
16 ANNUAL REPORT
16 ANNUAL REPORT
Empowering
our people
The Bank has a strong commitment to provide regulatory
compliance and risk training, as well as increasing the
knowledge, capability, professional and personal development
of our people.
During 2017-2018 we continued to recognise the importance
of our people leadership, with the continuation of the
Leadership Empowerment Series. A strong focus this year
included understanding each leader’s behavioural profile
and how their leadership style affects and influences those
around them. In addition, our leaders now have an increased
awareness of:
• their individual motivating factors
• being able to leverage their strengths and manage
key self-development areas
• strategies for coaching and developing their people
• their own developmental learning style
• understanding their team dynamics.
The Bank continues to adopt strategies to improve on the
social and emotional health and wellbeing of our people
by playing our role in keeping them engaged, healthy
and productive both at work and in their everyday lives.
With our focus on increasing employee benefits, Wellness
Empowerment Days have been introduced throughout
the business.
The annual Auswide Bank Employee Engagement &
Satisfaction Survey was conducted with more than
96 per cent of staff engaging.
The response rate continues to place 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 in 2018-2019 to maintain its focus on
creating a positive culture and environment that supports our
people, our customers and shareholders.
AUSWIDE BANK – 30 JUNE 2018 17
AUSWIDE BANK – 30 JUNE 2018 17
Investing in
technology
Through our investments in technology during 2017/18,
Auswide Bank focused on the areas of customer acquisition
and on-boarding, as well as enhancing IT security and
fraud prevention.
Customer acquisition objectives include frictionless and efficient
customer on-boarding, development of Auswide Bank’s digital
products and dedicated customer support to deliver the same
level of convenience as branches.
IT security and fraud enhancements have involved
improvements to customer transactional security, fraud
detection and prevention. Additional layers of protection have
been added through multiple platforms and technologies to
make transacting online, by card and other channels safer
for customers.
Our digital branch, ‘Branch 25’, will create an end-to-end digital
banking experience for new and existing customers, combining
speed, ease of use, and ‘available anywhere anytime’ service.
This digital service will be accessible around Australia,
complementing our existing branch footprint.
We will be reviewing our current offering and implementing
new capabilities in FY19 with a focus on customer
transactional security improvements as well as fraud
detection and prevention.
Our investments in technology are guided by the Strategic Plan, as shown in the table below that
outlines deliverables completed in 2017/18 and our priorities for the current financial year.
H1
2017/18
H2
2017/18
1. New Collections capability
2. Enhanced Cyber Security uplift and Training
1. Enhanced document processing automation for Loan Origination
2. Credit Card product development and launch
3. Wearable payment technologies – pay-band
Future
1. Contact Centre technology uplift
2. Next generation Core Banking Upgrade
3. Online Lending capability uplift
18 ANNUAL REPORT
Managing risk
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.
Continuing to strengthen our risk management approach is
an important element of the Group’s Strategic Plan and a high
priority for the Board and management team.
Since 2013, changes to the bank’s business strategy and risk
appetite have resulted in a simpler business model and more
conservative underwriting actively reducing mortgages with
higher risk profiles, such as mortgages with interest-only
features and mortgages with high LVR (loan-to-valuation ratios).
Auswide Bank is well placed to manage the risks associated
with these loan product concentrations in line with established
risk appetite settings.
In addition, Auswide Bank continues to enhance the way we
measure, monitor and report risk related matters. The Board
Risk Committee provides strong oversight of the risk profile
and risk management of the bank with reference to the Board
determined risk appetite.
Our people have a strong inclination to take responsibility for
risk management across each business unit, and this culture
underpins our Strategic Plan. This is supported by the Bank’s
‘Three Lines of Defence’ risk management model with risk
management accountabilities allocated for risk ownership
(first line), functional oversight (second line) and assurance
(third line).
LINE 1
BUSINESS
UNITS
LINE 2
RISK AND COMPLIANCE
MANAGEMENT
LINE 3
AUDIT
MANAGEMENT
Business units
identify, assess,
control and mitigate
risks through
internal policies and
corrective actions to
address process and
control deficiencies.
Risk and Compliance Management maintains
a risk management framework, measures risk
exposures to support decision making, and
provides risk management support, supervision
and expertise to the business. They report to the
Board and leadership team and make credit risk
decisions under approved delegations and loan
portfolio management.
An independent internal
audit function, outsourced
to PricewaterhouseCoopers,
ensures the Bank has industry
leading capabilities to
review internal controls, risk
management processes and
governance systems.
AUSWIDE BANK – 30 JUNE 2018 19
Board of
Directors
John Humphrey LL.B
Chairman
Martin Barrett BA (Econ), MBA
Managing Director
Barry Dangerfield
Non-Executive Director
Member of the Audit Committee
Board Member since September 2013
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 QUT and is currently a non-
Executive Director and Chairman of
Spotless Holdings Ltd and Horizon Oil
Limited and a non-Executive Director of
Lynas Corporation Limited.
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.
Chairman of the Group Board
Remuneration Committee
Member of the Audit Committee
Member of the Risk Committee
Board Member since November 2011
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 and he is Chairman of the
Institutes Audit and Risk committee.
20 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
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 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.
AUSWIDE BANK – 30 JUNE 2018 21
Leadership
team
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
Mark Rasmussen
Chief Operating Officer
• Lending Services
• Banking Services
• Mortgage Origination Services
• Support Services Operations
including Business Continuity
Planning
• Capital, funding and liquidity
• Reengineering Services
planning strategy
•
Investor Relations
Damian Hearne
Chief Customer Officer
• Customer experience strategy and
management
• Retail and business banking sales
and distribution
• Mortgage broker and third party
relationships
• Marketing, products and
partnerships
22 ANNUAL REPORT
Martin Barrett
Managing Director
• Strategy development and implementation
• Group operational and financial performance
• Regulatory engagement
• Risk culture and management
• Customer satisfaction and growth
• Shareholder returns
Stephen Caville
Chief Information Officer
Gayle Job
Chief People & Property Officer
Craig Lonergan
Chief Risk Officer
• Group Information Technology
strategy and management
•
IT Strategic Plan
• Key technology project
implementation
• People engagement and
• Risk profile within Board approved
performance
risk appetite
• Payroll management, remuneration
• Risk management strategy and
and benefits
practices
• Talent acquisition, recruitment and
retention strategies
• Risk management and compliance
framework and control systems
• Learning and development
• Risk culture awareness
• Employment law regulation and
• Credit portfolio review
compliance
• Staff wellbeing and workplace health
and safety
• Property portfolio management of
leased and bank owned assets
AUSWIDE BANK – 30 JUNE 2018 23
Financial
Statements
24 ANNUAL REPORT
Contents
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
26
41
42
43
44
45
49
94
95
99
101
104
AUSWIDE BANK – 30 JUNE 2018 25
Directors’ statutory report
30 JUNE 2018
REVIEW AND RESULTS OF OPERATIONS
The underlying net profit after tax (NPAT) for the consolidated entity for financial year 2017/18 was $17.108m compared to
$15.691m for 2016/17. This represents an increase of 9.0%.
The statutory consolidated NPAT for the 2017/18 financial year was $17.886m compared to the result of $15.149m for the
2016/17 year, an increase of 18.1%.
The underlying NPAT has been calculated after adjusting for the effects of discontinued operations on the sale of MoneyPlace.
The operating losses arising from the bank’s controlling interest and the gain on sale of the investment in MoneyPlace have
been adjusted against the consolidated NPAT. In addition, there were professional fees and stamp duty relating to the M&A
transactions in the 2016/17 financial year and an amount $0.092m before tax ($0.064m after tax) representing professional fees
on the sale of MoneyPlace in the 2017/18 financial year.
The total loan book increased from $2.773b at 30 June 2017 to $2.911b at 30 June 2018. Despite modest loan book growth in
the first half of the financial year due to prudential restrictions on investor lending, the loan book growth for 2017/18 was 5.0%.
Home loan settlements across the financial year totalled $543.530m, an increase of 1.4% on the $536.066m in home loan
settlements for 2016/17.
Personal loans
The personal loan book growth improved during the 2017/18 financial year in terms of Auswide Bank’s own originations
reaching a balance of $17.638m, an increase of $2.577m across the financial year. Personal loans have not been reported
as a separate segment for the financial year.
An uplift in loan originations through MoneyPlace has resulted in an increased return on Auswide Bank’s investment.
The investment in MoneyPlace has grown from $14.042m at 30 June 2017 to $20.813m at 30 June 2018, representing an
increase of $6.771m.
Auswide Bank has entered into arrangements with additional consumer lenders and at 30 June 2018 $2.055m and $3.018m
had been provided to Ratesetter and SocietyOne respectively.
Customers
Auswide Bank implemented a Customer Service Strategy during the financial year. The key aspects of the strategy include
gaining a better understanding of the customer journey, ensuring the service and product objectives meet the requirements of
intended segments and evolving technology to attract customers and meet their needs. The successful execution of this strategy
will enrich the experience for customers of Auswide Bank.
The Digital Branch – Branch 25
Auswide Bank recognises that customers value online services which provide speed, ease of use and the accessibility of ‘banking
anywhere anytime’. In response, the customer team is preparing a ‘Branch 25’ strategy which aims to create an end-to-end
digital banking experience for our customers. Auswide Bank is initiating projects to deliver online application capabilities,
allowing both new and existing clients to apply for loans, transaction accounts and savings products via the bank’s website.
By delivering the technical capabilities to support an end-to-end customer experience, Auswide Bank aims to deliver to its
customers a truly exceptional online experience which is seamless and stress free.
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 during 2017/18 aided growth. The appointment
of a business banker in Mackay will continue this focus in 2018/19.
26 ANNUAL REPORT
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.
A refreshed three year strategic plan was adopted by the Board in March of 2016. The strategic plan focuses 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.
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 which resulted in the Group obtaining a controlling interest
in MoneyPlace Holdings.
On 10 January 2018, the Group announced that it had entered into an agreement to divest its equity stake in MoneyPlace.
The transaction was completed on 22 January 2018. The sale, which occurred in the Bank’s second half, had a one-off positive
impact on full financial year results with an NPAT contribution of $1.227m. The sale also had a positive impact on Auswide
Bank’s strong capital position.
Auswide Bank will continue to receive income from its personal loan investment in MoneyPlace. 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.
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.
Technology
Investment in technology continues with a focus on the areas of customer acquisition and on-boarding as well as enhancing IT
security and fraud prevention.
Customer acquisition objectives include frictionless and efficient customer on-boarding, development of Auswide Bank digital
products ‘available anywhere anytime’ and dedicated customer support to deliver the same level of convenience as branches.
IT security and fraud enhancements have involved improvements to customer transactional security, fraud detection and
prevention. Additional layers of protection have been added through multiple platforms and technologies to make transacting
online, by card and other channels safer for customers.
AUSWIDE BANK – 30 JUNE 2018 27
PRINCIPAL ACTIVITIES AND SIGNIFICANT CHANGES (CONTINUED)
Credit cards
Auswide Bank launched an ‘on-balance sheet’ credit card in April 2018. The Low Rate Visa credit card was developed and is
issued directly by Auswide Bank and includes unique features such as a Reserve Bank of Australia ‘cash rate’ tracker function
and a competitive interest rate on both purchases and cash advances. The credit card complements the Bank’s existing
financing activities and will build stronger banking relationships with eligible customers. The Bank has maintained its partnership
with Card Services, a division of Citigroup Pty Ltd Australian Credit Licence 238098, in respect of its existing card portfolio and
providing a premium platinum rewards credit card to eligible customers.
Net Interest Margin
The Net Interest Margin (NIM) has been impacted by interest rates at historic lows and the continuance of highly competitive
housing finance markets across the 2017/18 financial year, in addition to elevated funding markets in the last quarter of the
financial year. In order to maintain stability in NIM, the bank closely monitors the competitive pricing of products and continues
to proactively manage assets and liabilities.
The net interest margin for the 2017/18 year was 1.93% compared to 1.90% in the 2016/17 financial year.
Arrears and collections
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 $20.1m to $14.1m. Arrears have decreased as a percentage of the Group’s total
loan book from 0.72% at 30 June 2017 to 0.48% at 30 June 2018.
The Board is satisfied that the provisions set aside cover the risks arising from current and future doubtful debts.
Risk
Auswide Bank takes a proactive approach to risk management, which can be demonstrated by the Bank’s adoption of
methodologies to curtail excessive exposures to risky product markets.
The early introduction of Investor, High LVR and Interest Only lending initiatives together with continued review of underwriting
and serviceability assessments ensured that Auswide Bank was well placed to manage the risks associated with its lending
portfolio together with regulatory requirements.
The Board Risk Committee provides strong oversight of the risk framework across the organisation. The Board remains focused
on the portfolio quality as the loan book grows and this is highlighted by the continuing positive trend in relation to loan arrears.
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.
CAPITAL
The capital adequacy ratio for the Auswide Bank Group at 30 June 2018 was 14.89% (2017: 14.42%). The tier 1 capital ratio at
30 June 2018 was 12.68% (2017: 12.06%).
The Group's strong capital position allows for continued growth with significant capital headroom.
DIVIDENDS
A fully franked interim dividend of 16.0 cents per ordinary share was declared and paid on 26 March 2018 (30 March 2017 –
14.0 cents). A fully franked final dividend of 18.0 cents per ordinary share has been declared by the Board and will be paid on
21 September 2018 (22 September 2017 - 17.0 cents).
28 ANNUAL REPORT
Directors’ statutory report (continued)30 JUNE 2018 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 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 Dangerfield served as a Director of Money Place Holdings Pty Ltd until January 2018.
Mr Dangerfield is currently 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 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 served as a Director of MoneyPlace Holdings Pty Ltd until
January 2018. 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 served as a Director of MoneyPlace Holdings Pty Ltd until January 2018. 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.
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.
AUSWIDE BANK – 30 JUNE 2018 29
DIRECTORS’ MEETINGS
During the financial year, 15 meetings of the Directors, 5 meetings of the Audit Committee, 3 meetings of the Remuneration
Committee and 6 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
Held
Attended
Held
Attended
15
15
15
15
15
14
15
14
15
15
5
5
5
5
5
3
5
4
5*
5
n/a
3
3
n/a
3
n/a
3
3
n/a
3
n/a
n/a
6
6
6
6
6
6
6*
5
* 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
158,970
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.
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 2017/18 was subject to review and recommendation of the Remuneration
Committee and ratification by the Board. Remuneration of the Executive Management Team for 2017/18 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.
30 ANNUAL REPORT
Directors’ statutory report (continued)30 JUNE 2018 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 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 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.
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 2017. Cash payments were
granted on the 21 September 2017, and allocated to the Executive Management Team as follows:
• Mr MJ Barrett (Managing Director): $37,500;
• Mr WR Schafer (Chief Financial Officer): $23,400;
• Mr SM Caville (Chief Information Officer): $13,525;
• Mr D Hearne (Chief Customer Officer): $20,250;
• Mrs GM Job (Chief People Officer): $13,563;
• Mr CA Lonergan (Chief Risk Officer): $15,524; and
• Mr MS Rasmussen (Chief Operating Officer): $16,003.
AUSWIDE BANK – 30 JUNE 2018 31
REMUNERATION REPORT (CONTINUED)
Short Term Incentives (STI) (continued)
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.
32 ANNUAL REPORT
Directors’ statutory report (continued)30 JUNE 2018 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.
KMP
Maximum
value
$
Vesting
date
2014 Offer – June 2014
July 2014 – June 2018
Vested in the
17/18 financial
year
$
Not yet
assessed for
vesting
$
Barrett, MJ
2015 Offer – June 2015
Barrett, MJ
2016 Offer – September 2016
Barrett, MJ
Schafer, WR
Caville, SM
Job, GM
Lonergan, CA
Rasmussen, MS
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
July 2015 – June 2019
1/07/2017
1/07/2018
1/07/2019
July 2016 – June 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
1/07/2018
1/07/2019
1/07/2020
2017 Offer – September 2017
July 2017 – June 2021
Barrett, MJ
Schafer, WR
Caville, SM
Hearne, D
Job, GM
Lonergan, CA
Rasmussen, MS
12,500
12,500
12,500
5,333
5,333
5,333
5,333
5,333
5,333
6,374
6,374
6,374
5,333
5,333
5,333
5,333
5,333
5,333
5,333
5,333
5,333
1/07/2019
1/07/2020
1/07/2021
1/07/2019
1/07/2020
1/07/2021
1/07/2019
1/07/2020
1/07/2021
1/07/2019
1/07/2020
1/07/2021
1/07/2019
1/07/2020
1/07/2021
1/07/2019
1/07/2020
1/07/2021
1/07/2019
1/07/2020
1/07/2021
25,000
–
30,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,000
–
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
12,500
12,500
12,500
5,333
5,333
5,333
5,333
5,333
5,333
6,374
6,374
6,374
5,333
5,333
5,333
5,333
5,333
5,333
5,333
5,333
5,333
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.
AUSWIDE BANK – 30 JUNE 2018 33
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
2018
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Other long
term benefits
$
Share based
payments
$
Total
$
Performance
based
Fixed
Performance
based
SPECIFIED DIRECTORS
Humphrey, JS Chairman (non-exec)
Birkensleigh, S Director (non-exec)
Dangerfield, B Director (non-exec)
Kenny, GN Director (non-exec)
146,119
91,324
91,324
91,324
–
–
–
–
Barrett, MJ Managing Director
552,052
37,500
Total remuneration –
Specified Directors
972,143
37,500
OTHER KEY MANAGEMENT PERSONNEL
Schafer, WR Chief Financial Officer
Caville, SM Chief Information Officer
Hearne, D Chief Customer Officer
Job, GM Chief Customer Officer
Lonergan, CA Chief Risk Officer
Rasmussen, MS Chief
Operating Officer
Total remuneration –
Specified Executives
2017
SPECIFIED DIRECTORS
Humphrey, JS Chairman (non-exec)
Birkensleigh, S Director (non-exec)
Dangerfield, B Director (non-exec)
Kenny, GN Director (non-exec)
317,891
183,942
268,427
184,466
191,560
227,541
23,400
13,525
20,250
13,563
15,524
16,003
1,373,827
102,265
146,119
91,324
91,324
91,324
–
–
–
–
Barrett, MJ Managing Director
550,364
25,000
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 Customer Officer
Lonergan, CA Chief Risk Officer
Rasmussen, MS Chief Operating
Officer
Total remuneration –
Specified Executives
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34 ANNUAL REPORT
13,881
8,676
8,676
8,676
–
–
–
–
–
–
–
–
160,000
100,000
100,000
100,000
20,049
11,187
55,006
675,794
59,958
11,187
55,006
1,135,794
20,049
18,454
20,049
18,492
18,697
20,049
7,872
4,688
5,061
5,546
3,817
4,409
115,790
31,393
13,881
8,676
8,676
8,676
19,616
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
369,212
220,609
313,787
222,067
229,598
268,002
1,623,275
160,000
100,000
100,000
100,000
10,834
25,003
630,817
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
–
–
–
–
–
–
–
368,619
223,020
297,436
224,469
232,054
261,508
1,607,106
Directors’ statutory report (continued)30 JUNE 2018
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 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 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 2018 35
REMUNERATION REPORT (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 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 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.
• 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.
36 ANNUAL REPORT
Directors’ statutory report (continued)30 JUNE 2018 • Long Term Incentive (LTI) – The grant of performance rights, under the terms of Auswide 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 as at the 30th June each year 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 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 base salary as at the 30th June
each year (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 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 2018 37
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 2018:
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
2018
$’000
25,158
17,886
30 June
2018
$5.14
$5.63
16.00 cps
18.00 cps
42.83 cps
42.83 cps
30 June
2017
$’000
21,870
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
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 140 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 2018
Directors
Executives
Total: Key management personnel
Loans for the year ended 30 June 2017
Directors
Executives
Total: Key management personnel
Individuals with loans above $100,000
in reporting period
Directors
MJ Barrett
Executives
WR Schafer
Balance
30 June 2017
$
(1,806,591)
(589,242)
(2,395,833)
Balance
30 June 2016
$
(1,910,317)
(1,618,330)
(3,528,647)
Balance
30 June 2017
$
Interest
charged
$
64,387
7,079
71,466
Interest
charged
$
62,203
18,546
80,749
Write-off
$
–
–
–
Balance
30 June 2018
$
(1,846,339)
(172,494)
(2,018,833)
Number in Group
30 June 2018
1
4
5
Write–off
$
Balance
30 June 2017
$
Number in Group
30 June 2017
$
–
–
–
(1,806,591)
(589,242)
(2,395,833)
1
4
5
Interest*
charged
$
Write–off
$
Balance
30 June 2018
$
Highest
in period
$
(1,806,591)
64,387
(478,247)
6,593
–
–
(1,846,339)
(1,906,203)
(66,842)
(499,099)
Does not include SM Caville, GM Job or CA Lonergan as their loans were less than $100,000.
* Actual interest charged is affected by the use of the Company’s offset account.
38 ANNUAL REPORT
Directors’ statutory report (continued)30 JUNE 2018 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
B Dangerfield
GN Kenny
MJ Barrett
Executives
WR Schafer
SM Caville
GM Job
CA Lonergan
Total
Balance
30 June 2017
Received as
remuneration
Options
exercised
Net change
other
Balance
30 June 2018
31,551
43,291
15,000
149,818
34,000
44,240
105,970
8,064
431,934
–
–
–
9,152
–
–
–
–
9,152
–
–
–
–
–
–
–
–
–
–
–
–
–
8,000
–
6,494
3,936
18,430
31,551
43,291
15,000
158,970
42,000
44,240
112,464
12,000
459,516
* Balance at financial year end or the date the individuals ceased being key management personnel.
AUSWIDE BANK – 30 JUNE 2018 39
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 2018, 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
2018
$
88,841
87,166
176,007
2017
$
76,804
82,114
158,918
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
23 August 2018
SC Birkensleigh
Director
40 ANNUAL REPORT
Directors’ statutory report (continued)30 JUNE 2018
Auditors’ independence declaration
30 JUNE 2018
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Riverside Centre
Level 23
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
The Board of Directors
Auswide Bank Ltd
PO Box 1063
Bundaberg
QLD 4760
23 August 2018
Dear Board Members
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 2018, 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
AUSWIDE BANK – 30 JUNE 2018 41
Consolidated statement of profit or loss
and other comprehensive income
FOR THE YEAR ENDED 30 JUNE 2018
Consolidated
Company
Notes
2
2
3
10
4
35
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
Profit for the year from continuing operations
Profit/(loss) for the year from discontinued operations
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
Items that will not be reclassified to profit or loss
Revaluation of land and buildings to fair value
21
Income tax relating to this item
Other comprehensive income/(loss) for the year,
net of income tax
Total comprehensive income for the year
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)
22
22
26
26
26
26
2018
$’000
128,933
(67,913)
61,020
9,348
19,427
1,992
690
2,320
1,320
8,847
10,671
702
24,399
7,355
17,044
611
17,655
(265)
(3)
80
1,446
(434)
824
18,479
17,886
(231)
17,655
18,710
(231)
18,479
42.83
42.83
40.81
40.81
2017
$’000
125,905
(68,397)
57,508
9,760
18,935
1,918
662
2,353
979
9,594
10,701
246
21,880
6,677
15,203
(194)
15,009
861
(12)
(255)
–
–
594
15,603
15,149
(140)
15,009
15,743
(140)
15,603
37.35
37.35
37.48
37.48
2018
$’000
128,933
(67,913)
61,020
9,348
19,427
1,992
690
2,320
1,320
8,847
10,671
702
24,399
7,355
17,044
2,301
19,345
(265)
(3)
80
1,446
(434)
824
20,169
19,345
–
19,345
20,169
–
20,169
2017
$’000
125,905
(68,397)
57,508
9,760
18,935
1,918
662
2,353
979
9,594
10,701
246
21,880
6,677
15,203
–
15,203
861
(12)
(255)
–
–
594
15,797
15,203
–
15,203
15,797
–
15,797
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
42 ANNUAL REPORT
Consolidated statement of financial position
AS AT 30 JUNE 2018
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
2018
$’000
86,361
15,389
5,298
2017
$’000
120,065
11,763
6,735
2018
$’000
86,361
15,389
5,298
2017
$’000
121,142
11,763
6,714
254,293
291,948
286,679
322,334
2,910,847
2,773,220
2,910,990
2,773,390
1,144
15,576
1,956
4,573
8,475
46,363
1,069
14,606
7,935
5,256
8,406
48,975
1,144
15,576
1,956
4,573
8,476
46,363
5,153
14,606
2,564
5,256
8,260
46,363
3,350,275
3,289,978
3,382,805
3,317,545
2,446,825
2,304,604
2,446,860
2,304,604
26,007
607,166
721
1,891
2,923
18,637
708,020
1,222
2,947
2,840
26,000
639,552
1,182
1,891
2,923
18,325
738,406
1,222
1,580
2,758
28,000
28,000
28,000
28,000
3,113,533
3,066,270
3,146,408
3,094,895
236,742
223,708
236,397
222,650
191,612
15,232
29,898
236,742
–
–
–
184,752
13,978
23,687
222,417
1,431
(140)
1,291
191,746
15,232
29,419
236,397
–
–
–
184,752
14,167
23,731
222,650
–
–
–
236,742
223,708
236,397
222,650
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
AUSWIDE BANK – 30 JUNE 2018 43
Consolidated statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2018
Notes
Cash flows from operating activities
Interest 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 financial assets
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
Net cash inflow/(outflow) from discontinued
operations
Consolidated
Company
2018
$’000
128,674
17,721
(66,757)
(32,831)
(8,472)
38,335
37,651
(3,626)
2017
$’000
126,296
9,350
(71,532)
(40,470)
(4,398)
19,246
(65,623)
10,251
2018
$’000
128,674
19,089
(66,757)
(32,441)
(6,754)
41,811
35,651
(3,626)
2017
$’000
126,292
11,898
(71,529)
(41,406)
(5,743)
19,512
(70,159)
10,251
(141,788)
(113,241)
(141,762)
(113,842)
(75)
(1,679)
6,660
(557)
(6,001)
–
4,008
(1,679)
–
(3,382)
(1,537)
–
Net cash provided by/(used in) investing activities
(102,857)
(175,171)
(107,408)
(178,669)
Cash flows from financing activities
Net movement in deposits and short-term borrowings
Net movement in loans under management
Proceeds from share issue
Treasury shares
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
137,263
(99,656)
291
(134)
(6,946)
30,818
(33,704)
120,065
124,012
94,191
349
–
(10,354)
208,198
52,273
67,792
135,324
(97,845)
291
–
(6,954)
30,816
(34,781)
121,142
125,109
97,411
349
–
(10,362)
212,507
53,350
67,792
Cash and cash equivalents at end of the financial year
6
86,361
120,065
86,361
121,142
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.
44 ANNUAL REPORT
Consolidated statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2018
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AUSWIDE BANK – 30 JUNE 2018 45
Consolidated statement of changes in equity (continued)
FOR THE YEAR ENDED 30 JUNE 2018
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Notes to the consolidated financial statements
30 JUNE 2018
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
• has the ability to use its power to affect its returns.
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.
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 synergies
of the business combination.
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.
On disposal of the relevant cash-generating unit, the
attributable amount of goodwill is included in the determination
of the profit or loss on disposal.
AUSWIDE BANK – 30 JUNE 2018 49
Notes to the consolidated financial statements
30 JUNE 2018
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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.
(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.
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.
Interest revenue:
(g) Employee benefits
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.
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.
Dividend revenue:
Long-term employee benefits
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).
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.
50 ANNUAL REPORT
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.
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.
(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.
AUSWIDE BANK – 30 JUNE 2018 51
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k) Financial instruments (continued)
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.
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.
Available-for-sale financial assets
Impairment
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.
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 1n for further details regarding impairment of
financial assets.
Equity instruments
Derivative financial 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.
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.
52 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 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.
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.
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.
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.
AUSWIDE BANK – 30 JUNE 2018 53
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(l) Property, plant and equipment (continued)
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.
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.
54 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 (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.
(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
structures in place.
(q) Fair value of assets and liabilities
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.
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.
AUSWIDE BANK – 30 JUNE 2018 55
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(q) Fair value of assets and liabilities (continued)
• assets (or disposal groups) that are classified as held for
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
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.
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.
56 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 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.
(s) Rounding of amounts
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. Prior year figures
have been adjusted to recognise discontinued operations for
comparative purposes.
(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.
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.
In addition, details on critical estimates and judgements in
respect of credit risk are disclosed in Note 32.
(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 2017.
AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to AASB 107
The Group has applied these amendments for the first time in
the current year. The amendments require an entity to provide
disclosures that enable users of financial statements to
evaluate changes in liabilities arising from financing activities,
including both cash and non-cash changes.
The Group’s liabilities consist of borrowings (Note 16) and
certain other financial liabilities (Note 17). A reconciliation
between the opening and closing balances of these
items is provided in Note 16. Consistent with transition
provisions of the amendments, the Group has not disclosed
comparative information for the prior period. Apart from the
additional disclosures in Note 16, the application of these
amendments has had no impact on the Group’s consolidated
financial statements.
AASB 2016-1 Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses
The Group has applied these amendments for the first time in
the current year. The amendments clarify how an entity should
evaluate whether there will be sufficient future taxable profits
against which it can utilise a deductible temporary difference.
The application of these amendments has had no impact on
the Group’s consolidated financial statements as the Group
already assesses the sufficiency of future taxable profits in a
way that is consistent with these amendments.
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.
AASB 2017-2 Amendments to Australian Accounting
Standards – Further Annual Improvements 2014 – 2016 Cycle
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.
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
AUSWIDE BANK – 30 JUNE 2018 57
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(v)
Application of new and revised Accounting Standards (continued)
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 2018
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 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of
Share-based Payment Transactions
1 January 2019
30 June 2020
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
AASB 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)
AASB 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets.
AASB 9 was subsequently amended in October 2010 to include requirements for the classification and measurement of financial
liabilities and for derecognition, and in November 2013 to include the new requirements for hedge accounting. Another revised
version of AASB 9 was released in July 2014 mainly to include impairment requirements for financial assets and amendments to
the classification and measurement requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI)
measurement category for certain debt instruments.
Classification and measurement
The classification and measurement of financial assets is determined on the basis of the contractual cashflow characteristics and
the objective of the business model associated with holding the asset. Key changes include:
•
the Held to Maturity (HTM) and Available for Sale (AFS) asset categories will be removed;
• a new asset category measured at Fair Value through Other Comprehensive Income (FVOCI) is introduced. This applies to
financial asset debt instruments with contractual cashflow characteristics that are solely payments of principal and interest
and held in a model whose objective is achieved by both collecting contractual cashflows and selling financial assets;
• a new asset category for non-traded equity investments measured at FVOCI is introduced ;and
• all other financial assets and financial liabilities will continue to be measured on the same bases as is currently adopted
under IAS 39.
The classification and measurement of financial liabilities will remain largely unchanged for the Group.
The Group has identified the following assets as financial assets that are required to be assessed under AASB 9;
• cash and cash equivalents;
• due from other financial institutions;
•
•
loans and advances;
investments in managed investment schemes;
• certificates of deposits;
• external RMBS investments;
•
•
securitisation notes;
loans to controlled entities; and
• unlisted shares.
Assessments of each category of financial asset are underway; consideration is being given to the contractual cash flows
received as well as the intention of the business to hold these assets.
Significant progress has been made and the majority of assessments have been completed. Further consideration is required for
the classification of a limited number of instruments.
58 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 Impairment
Transition impact
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-months’
or lifetime ECL, depending on whether there has been a
significant increase in credit risk since initial recognition. The
ECL model will apply to debt instruments accounted for at
amortised cost or at FVOCI. AASB 9 will change the Group’s
current methodology for calculating the provision for doubtful
debts, in particular for collective provisioning.
The AASB 9 impairment requirements are based on an
expected credit loss model with a three stage approach to
measuring expected credit losses (ECL) on debt instruments
accounted for at amortised costs with assets migrating
through the following three stages based on the change in
credit quality since initial recognition;
(1) 12 month ECL – exposures where there has not been a
significant increase in credit risk since initial recognition,
and that are not credit impaired. Modelling has been
performed based on the probability of default events
occurring within the next 12 months is recognised.
(2) Lifetime ECL – not credit impaired – for credit exposures
where there has been a significant increase in credit
risk since initial recognition, but are not credit impaired.
Modelling has been performed on the probability of
default over the estimated life of the loan with a lifetime
ECL recognised.
(3) Lifetime ECL – credit impaired – financial assets are
assessed as credit impaired when one or more events
that have a detrimental impact on the estimated future
cash flows of that asset have occurred. The Bank’s
methodology for specific provisions remains unchanged.
Auswide Bank is now undertaking modelling for an
overlay for macroeconomic factors using reasonable and
supportable forecasts of future economic conditions including
management judgement to estimate the amount of the ECL.
It is expected that there will be an increase to the provision
for doubtful debts once this modelling is finalised. Any
increase to the provision as a result of adopting AASB 9 will
be recognised through an adjustment to opening retained
earnings, in accordance with AASB9.
Hedge Accounting
The new hedge accounting rules will align the accounting
for hedging instruments more closely with the group’s risk
management practices. As a general rule, more hedge
relationships might be eligible for hedge accounting, as the
standard introduces a more principles-based approach. The
group has confirmed that its current hedge relationships will
qualify as continuing hedges upon the adoption of AASB 9.
The information provided in this note is focused upon
material items; it does not represent a complete list of
expected adjustments.
Any adjustments that arise as a result of the transition
process will be recognised in either retained earnings or
an appropriate equity reserve at the date of transition. The
quantitative impact continues to be calculated and will be
recognised as an adjustment to opening retained earnings in
the financial results at 31 December 2018.
AASB 15 Revenue from Contracts with Customers (effective
for annual periods beginning on or after 1 January 2018)
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.
A significant portion of Auswide Bank’s revenues are outside
the scope of AASB 15 Revenue from contracts with customers,
as they are within the scope of AASB 9 Financial assets.
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 held for
branches and vehicles, with the exception of short-term leases
and leases of low value assets.
Management have identified operating leases held for
branches and vehicles 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.
AASB 2016-5 Amendments to Australian Accounting
Standards – Classification and Measurement of Share-based
Payment Transactions (effective for annual periods beginning
on or after 1 January 2018)
The Directors of the Company do not anticipate that the
application of the amendments in the future will have a
significant impact on the Group’s consolidated financial
statements as the Group does not have any cash-settled
share-based payment arrangements or any withholding
tax arrangements with tax authorities in relation to share-
based payments.
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.
AUSWIDE BANK – 30 JUNE 2018 59
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 2018
Deposits with other financial institutions
Investment securities
Loans and advances
Other
Interest expense 2018
Deposits from other financial institutions
Customer deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
Subordinated notes
Net interest revenue 2018
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
Average
balance
$’000
62,816
204,856
2,841,792
47,780
3,157,244
622,330
2,025,886
205,623
80,769
28,000
2,962,608
64,836
205,709
2,729,706
34,245
3,034,496
614,050
1,953,439
184,868
85,667
28,000
2,866,024
Average
interest rate
%
1.54
2.28
4.26
4.60
4.08
3.20
1.95
2.29
2.65
6.29
2.29
1.41
2.38
4.36
3.15
4.15
3.15
2.07
2.45
2.63
6.34
2.39
Interest
$’000
967
4,680
121,086
2,200
128,933
19,886
39,412
4,713
2,142
1,760
67,913
61,020
894
4,896
119,038
1,077
125,905
19,371
40,462
4,532
2,257
1,775
68,397
57,508
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 2018
Interest revenue
Interest expense
Net interest spread
Benefit of net interest-free assets, liabilities and equity
3,157,244
2,962,608
128,933
67,913
Net interest margin – on average interest earning assets
3,157,244
61,020
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
2,866,024
125,905
68,397
Net interest margin – on average interest earning assets
3,034,496
57,508
4.08
2.29
1.79
0.14
1.93
4.15
2.39
1.76
0.13
1.90
60 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 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:
Other non interest income
Fees and commissions
Other income
Consolidated
Company
2018
$’000
8,874
474
9,348
2017
$’000
9,057
703
9,760
2018
$’000
8,874
474
9,348
The profit before income tax is arrived at after charging the following items:
Provisions for employee entitlements
Superannuation contributions paid
Consolidated
Company
2018
$’000
323
1,474
1,797
2017
$’000
158
1,455
1,613
2018
$’000
323
1,474
1,797
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
2018
$’000
6,732
623
7,355
2017
$’000
6,431
246
6,677
2018
$’000
6,732
623
7,355
(ii) Numerical reconciliation of income tax expense to prima facie tax payable:
Tax on profit before income tax at 30% (2017: 30%)
Tax effect of permanent differences
Add non-deductible expenses:
Depreciation of buildings
Merger expenses
Less:
Other items – net
Income tax expense
Consolidated
Company
2018
$’000
7,320
49
–
(14)
7,355
2017
$’000
6,564
49
80
(16)
6,677
2018
$’000
7,320
49
–
(14)
7,355
2017
$’000
9,057
703
9,760
2017
$’000
158
1,455
1,613
2017
$’000
6,431
246
6,677
2017
$’000
6,564
49
80
(16)
6,677
AUSWIDE BANK – 30 JUNE 2018 61
NOTE 4
INCOME TAX RELATING TO CONTINUING OPERATIONS (CONTINUED)
(b) Income tax recognised in other comprehensive income
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
2017
$’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:
Fair value remeasurement of land and buildings
Total income tax recognised directly in other
comprehensive income
(c) Current tax assets and liabilities
Current tax liabilities
Current tax liabilities
–
–
(1)
(79)
(80)
434
434
354
–
–
(3)
258
255
–
–
255
–
–
(1)
(79)
(80)
434
434
354
Consolidated
Company
2018
$’000
721
721
2017
$’000
1,222
1,222
2018
$’000
1,182
1,182
(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
Capital losses available
Project acquisition costs
Premium on loans purchased
Subordinated notes prepaid expenses
Other items
62 ANNUAL REPORT
Consolidated
Company
2018
$’000
4,573
(1,891)
2,682
2017
$’000
5,256
(2,947)
2,309
2018
$’000
4,573
(1,891)
2,682
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
865
959
819
1,466
179
124
34
127
815
1,294
729
1,886
280
131
24
97
865
959
819
1,466
179
124
34
127
4,573
5,256
4,573
5,256
–
–
(3)
258
255
–
–
255
2017
$’000
1,222
1,222
2017
$’000
5,256
(1,580)
3,676
2017
$’000
815
1,294
729
1,886
280
131
24
97
Notes to the consolidated financial statements30 JUNE 2018 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
2018
$’000
1,867
137
44
(157)
–
1,891
2017
$’000
1,433
179
45
(77)
1,367
2,947
2018
$’000
1,867
137
44
(157)
–
1,891
2017
$’000
1,433
179
45
(77)
–
1,580
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
2018
$’000
6,740
6,917
13,657
2017
$’000
5,696
6,440
12,136
2018
$’000
6,740
6,917
13,657
2017
$’000
5,696
6,440
12,136
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 18.0 cents per ordinary share ($7.583m), for the six months to 30 June 2018, payable on
21 September 2018.
The final dividend for the six months to 30 June 2017 ($6.917m) was paid on 22 September 2017, and was disclosed in the
2016/17 financial accounts in accordance with Accounting Standards.
The tax rate at which the dividends have been franked is 30% (2017: 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
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
2018
$’000
26,266
721
(3,250)
23,737
2017
$’000
24,761
1,222
(2,964)
23,019
2018
$’000
26,266
1,182
(3,250)
24,198
2017
$’000
24,761
1,222
(2,964)
23,019
Consolidated
Company
2018
2017
2018
2017
18.0
16.0
17.0
17.0
14.0
16.0
18.0
16.0
17.0
17.0
14.0
16.0
AUSWIDE BANK – 30 JUNE 2018 63
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
2018
$’000
35,801
50,560
86,361
2017
$’000
29,825
90,240
120,065
2018
$’000
35,801
50,560
86,361
NOTE 7 DUE FROM OTHER FINANCIAL INSTITUTIONS
Deposits with Special Service Providers (SSPs)
Subordinated loans
Maturity analysis
No maturity specified
NOTE 8 ACCRUED RECEIVABLES
Interest receivable
Securitisation receivables
Other
Consolidated
Company
2018
$’000
15,264
125
15,389
15,389
15,389
2017
$’000
11,638
125
11,763
11,763
11,763
2018
$’000
15,264
125
15,389
15,389
15,389
Consolidated
Company
2018
$’000
4,850
–
448
5,298
2017
$’000
4,509
1,606
620
6,735
2018
$’000
4,850
–
448
5,298
2017
$’000
30,902
90,240
121,142
2017
$’000
11,638
125
11,763
11,763
11,763
2017
$’000
4,509
1,606
599
6,714
64 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 NOTE 9 FINANCIAL ASSETS
Held to maturity financial assets carried at amortised cost
Certificates of deposit
210,178
253,440
210,178
253,440
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Available for sale financial assets carried at fair value
External RMBS investments
Investment in Managed Investment Scheme (MIS)
Financial assets at amortised cost
Notes – Securitisation program & other
Maturity analysis
Up to 3 months
From 1 to 5 years
Later than 5 years
1,147
25,886
17,082
254,293
102,178
108,000
44,115
254,293
1,470
14,042
22,996
291,948
159,240
94,200
38,508
291,948
1,147
25,886
49,468
286,679
102,178
108,000
76,501
286,679
1,470
14,042
53,382
322,334
159,240
94,200
68,894
322,334
Cash held within securitised trusts at 30 June 2018 of $17.082m (2017: $22.996m) is restricted for use only by the trusts.
NOTE 10 LOANS AND ADVANCES
Term loans
Loans to controlled entities
Continuing credit loans
Provision for impairment
Total loans
Provision for impairment
Total 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:
Total 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
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2,782,321
2,631,078
2,782,322
2,631,079
–
131,723
2,914,044
–
146,456
2,777,534
142
131,723
2,914,187
197
146,428
2,777,704
(3,197)
(4,314)
(3,197)
(4,314)
2,910,847
2,773,220
2,910,990
2,773,390
(4,314)
1,117
(3,197)
1,117
(2,437)
(1,320)
(5,047)
733
(4,314)
733
(1,712)
(979)
(4,314)
1,117
(3,197)
1,117
(2,437)
(1,320)
3,039
12,259
39,045
2,856,504
2,910,847
2,928
1,870
41,536
2,726,886
2,773,220
3,039
12,259
39,045
2,856,647
2,910,990
(5,047)
733
(4,314)
733
(1,712)
(979)
2,928
1,870
41,536
2,727,056
2,773,390
The Group has entered into securitisation transactions on residential mortgage loans that do not qualify for derecognition.
The special purpose entities established for the securitisations are 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.
AUSWIDE BANK – 30 JUNE 2018 65
NOTE 10 LOANS AND ADVANCES (CONTINUED)
The impact on the Group is an increase in liabilities – Loans under management – of $607.166m (30 June 2017 – $708.020m).
B notes of $32.395m which are owned by the Company and which represent the Group’s exposure on the securitised mortgages
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.
NOTE 11 OTHER INVESTMENTS AND RELATED PARTIES
Unlisted shares – at cost
Controlled entities – at directors' valuation
Consolidated
Company
2018
$’000
1,144
–
1,144
2017
$’000
1,069
–
1,069
2018
$’000
1,144
–
1,144
2017
$’000
1,069
4,084
5,153
The carrying amounts of unlisted shares were reassessed by the directors as at 30 June 2018 with the reassessments being based on whether
there were internal or external indicators that the investment was impaired.
(a) Controlled entities
Name
Company
Auswide Bank Ltd
Controlled entities
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
2018
%
2017
%
2018
$’000
2017
$’000
2018
$’000
2017
$’000
Australia
–
–
17,044
15,203
Mortgage Risk Management
Pty Ltd
Australia
Widcap Securities Pty Ltd
Australia
Auswide Performance Rights
Pty Ltd
MoneyPlace Holdings Pty Ltd
(MoneyPlace)
Australia
Australia
MoneyPlace Holdings Pty Ltd (MoneyPlace)
100.0
100.0
100.0
100.0
100.0
100.0
–
–
–
–
–
–
–
62.4
842
(236)
–
–
–
–
–
–
–
–
–
4,083
In December 2015 the Group entered 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 43.7% equity stake in MoneyPlace, via a subscription agreement. This brought
the total investment to 63.3%, and resulted in the Group obtaining a controlling interest in MoneyPlace Holdings. As a result of
a share issue to minority holders, the proportion of ownership in MoneyPlace at 30 June 2017 was 62.4%.
In January 2018, the Group announced that it had entered into an agreement to divest its equity stake in P2P lender
MoneyPlace. This transaction was completed on 22 January 2018. The proceeds of the sale exceeded the carrying amount of the
related net assets and, accordingly, no impairment losses were recognised. Further information in relation to this entity can be
found in Notes 34 and 35.
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.
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.
66 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 Auswide Performance Rights Pty Ltd
Auswide Performance Rights Pty Ltd is the trustee company for the Auswide 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 2008-1
• WB Trust 2009-1
• WB Trust 2010-1
• WB Trust 2014-1
• ABA Trust 2017-1
• ABA Trust No. 7
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
Finance Advice Matters Group Pty Ltd (FAMG)
Financial Planning
Australia
2018
25.0%
2017
25.0%
J1-Plan has been liquidated and was deregistered by ASIC on 17 July 2018.
Financial Advice Matters Group Pty Ltd (FAMG) is accounted for using the equity method in these consolidated financial statements.
(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.
Financial Advice Matters Group Pty Ltd (FAMG)
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
2018
$’000
405
527
(178)
(59)
695
2018
$’000
1,203
102
(28)
74
74
–
2017
$’000
352
528
(206)
(357)
317
2017
$’000
1,348
78
(22)
56
56
129
The above figures were based on the unaudited accounts of Financial Advice Matters Group Pty Ltd (FAMG).
(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.
AUSWIDE BANK – 30 JUNE 2018 67
NOTE 12 PROPERTY, PLANT AND EQUIPMENT
Carrying amounts of:
Freehold land and buildings
Plant and equipment
Freehold land and buildings
At independent valuation – June 2018
Provision for depreciation
Movement in carrying amount
Opening net book amount
Revaluation increase
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
Disposals
Depreciation charge
Carrying amount at end of year
Consolidated
Company
2018
$’000
9,676
5,900
15,576
2017
$’000
8,399
6,207
14,606
2018
$’000
9,676
5,900
15,576
Consolidated
Company
2018
$’000
9,690
(14)
2017
$’000
8,750
(351)
2018
$’000
9,690
(14)
2017
$’000
8,399
6,207
14,606
2017
$’000
8,750
(351)
9,676
8,399
9,676
8,399
8,399
1,446
(169)
9,676
8,568
–
(169)
8,399
8,399
1,446
(169)
9,676
Consolidated
Company
2018
$’000
28,581
(22,681)
2017
$’000
27,896
(21,689)
2018
$’000
28,581
(22,681)
8,568
–
(169)
8,399
2017
$’000
27,896
(21,689)
5,900
6,207
5,900
6,207
6,207
1,620
(103)
(1,824)
5,900
6,976
1,023
(42)
(1,750)
6,207
6,207
1,620
(103)
(1,824)
5,900
6,976
1,023
(42)
(1,750)
6,207
All land and buildings were revalued as at 4 June 2018 by certified practicing valuers Henry Brown of Taylor Byrne Pty Ltd.
The valuations were assessed to fair market values based on comparable sales in regional Queensland and by capitalisation
of assessed net income. 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
2018
$’000
8,475
8,475
2017
$’000
8,406
8,406
2018
$’000
8,476
8,476
2017
$’000
8,260
8,260
68 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 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 43.7% equity stake in MoneyPlace, via a subscription agreement.
This brought the total investment to 63.3%, and resulted in the Group obtaining a controlling interest in MoneyPlace. Auswide
Bank’s interest in MoneyPlace was subsequently disposed of in January 2018.
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 beginning of the year
Derecognised on disposal of subsidiary
Recognised on acquisition of subsidiary
Balance at end of year
Impairment testing
Consolidated
Company
2018
$’000
48,975
(2,612)
–
46,363
2017
$’000
46,363
–
2,612
48,975
2018
$’000
46,363
–
–
2017
$’000
46,363
–
–
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 was 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. On disposal goodwill was
subsequently derecognised.
The goodwill disclosed in the Statement of Financial Position at 30 June 2018 was supported by the impairment testing and no
impairment adjustment was required.
AUSWIDE BANK – 30 JUNE 2018 69
NOTE 14 GOODWILL (CONTINUED)
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 five years. The terminal value of the business beyond year five 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 2019/20
Represents the cash-generating potential of the parent entity based on the
forecast approved by the Board of Directors.
•
Estimated growth rate
7.0% (2017: 5.0%) represents growth in cash-generating unit cash flows over
years one to five (beyond 30 June 2018). 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.
Due to an enhanced impairment testing model being developed for the 2018
financial year, the 7.0% growth rate is not directly comparable to the 5.0%
growth comparative from the prior year.
•
Terminal growth rate
2.0% (2017: 5.0%) represents the terminal growth rate (beyond five years).
•
Discount rate
11.25% (2017: 12.2%) is the discount rate used in impairment testing
representing the Cost of Equity to the consolidated Group at 30 June 2018
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 – 0.0% (2017: 4.0%); and
• discount rate – 13.3% (2017: 13.1%).
NOTE 15 OTHER INTANGIBLE ASSETS
Consolidated
Company
2018
$’000
1,956
1,956
2017
$’000
7,935
7,935
2018
$’000
1,956
1,956
Consolidated
Company
2018
$’000
9,138
(7,182)
1,956
7,935
587
–
(5,876)
(690)
1,956
2017
$’000
14,427
(6,492)
7,935
2,719
905
5,160
–
(849)
7,935
2018
$’000
9,138
(7,182)
1,956
2,564
82
–
–
(690)
1,956
2017
$’000
2,564
2,564
2017
$’000
9,056
(6,492)
2,564
2,719
507
–
–
(662)
2,564
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
70 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 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
2018
$’000
752,954
1,355,032
257,839
81,000
2017
$’000
2018
$’000
726,103
752,989
1,331,229
1,355,032
147,272
100,000
257,839
81,000
2017
$’000
726,103
1,331,229
147,272
100,000
2,446,825
2,304,604
2,446,860
2,304,604
752,954
859,632
800,335
33,904
909,521
613,597
756,275
25,211
752,989
859,632
800,335
33,904
909,521
613,597
756,275
25,211
2,446,825
2,304,604
2,446,860
2,304,604
The Company’s deposit portfolio does not include any deposit which represents 10% or more of total liabilities.
Reconciliation of liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in
the Group’s consolidated statement of cash flows as cash flows from financing activities.
Consolidated entity
Opening
balance 30
June 2017
$’000
Financing cash
flows
$’000
Others
changes
$’000
Consolidation
of subsidiary
$’000
Disposal of
subsidiary
$’000
Closing
balance 30
June 2018
$’000
Deposits and short term borrowings
2,304,604
Loans under management
708,020
137,262
(99,655)
6,968
(1,199)
(35)
–
(1,974)
2,446,825
–
607,166
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
2018
$’000
2,573
12,758
10,676
26,007
19,550
6,195
262
26,007
2017
$’000
3,235
10,814
4,588
18,637
12,473
5,987
177
18,637
2018
$’000
2,566
12,758
10,676
26,000
19,543
6,195
262
26,000
2017
$’000
3,032
10,814
4,479
18,325
12,231
5,917
177
18,325
AUSWIDE BANK – 30 JUNE 2018 71
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
Other provisions
Total provisions
Consolidated
Company
2018
$’000
2,800
238
(155)
2,883
2,547
336
2,883
40
2,923
2017
$’000
2,881
575
(656)
2,800
2,439
361
2,800
40
2,840
2018
$’000
2,718
320
(155)
2,883
2,547
336
2,883
40
2,923
2017
$’000
2,881
493
(656)
2,718
2,357
361
2,718
40
2,758
The provision for employee benefits represents annual leave and long service leave entitlements accrued.
NOTE 19 SUBORDINATED CAPITAL NOTES
Inscribed debenture stock
Maturity analysis
Later than 5 years
NOTE 20 CONTRIBUTED EQUITY
Fully paid ordinary shares
Balance at beginning of year
Issued during the year
Staff share plan
Dividend reinvestment plan
Share issue costs
Treasury shares
Treasury shares
Balance at end of year
Consolidated
Company
2018
$’000
28,000
2017
$’000
28,000
2018
$’000
28,000
2017
$’000
28,000
28,000
28,000
28,000
28,000
2018
Shares
No.
2018
Shares
$’000
2017
Shares
No.
2017
Shares
$’000
40,686,033
184,752
40,251,196
182,629
59,666
1,383,041
–
291
6,914
(211)
(19,768)
(134)
77,095
357,742
–
–
349
1,774
–
–
42,108,972
191,612
40,686,033
184,752
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
17 October 2017 – 59,666 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.
72 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018
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,
17 October 2017 (9 November 2016)
The total amount paid or payable for the shares at that date
(b) Dividend Reinvestment Plan (DRP)
Consolidated
Company
2018
Shares
No.
2017
Shares
No.
2018
Shares
No.
2017
Shares
No.
2,920,673
2,861,007
2,920,673
2,861,007
59,666
77,095
59,666
77,095
$’000
$’000
$’000
$’000
323
291
393
349
323
291
393
349
The Board of Directors resolved to underwrite the Dividend Reinvestment Plan (DRP) in respect of the final dividend for
the 2016/17 financial year, payable on 22 September 2017.
22 September 2017 – 1,383,041 ordinary shares were issued
The Board of Directors resolved to suspend the DRP for the interim dividend payable on 26 March 2018 for the 2017/18
financial year.
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 22 September 2017 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 Performance Rights Pty Ltd
As at the reporting date Auswide Performance Rights Pty Ltd holds 19,768 shares ($134,262) for the purpose of facilitating the
Executive LTI scheme.
AUSWIDE BANK – 30 JUNE 2018 73
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
2018
$’000
102
4,357
(366)
241
2,676
5,834
2,388
15,232
105
(3)
–
102
2017
$’000
105
3,345
(181)
(189)
2,676
5,834
2,388
13,978
113
(12)
4
105
2018
$’000
102
4,357
(366)
241
2,676
5,834
2,388
15,232
105
(3)
–
102
2017
$’000
105
3,345
(181)
–
2,676
5,834
2,388
14,167
113
(12)
4
105
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
Increase/(decrease) due to revaluation increment on land
and buildings
Deferred tax liability adjustment on revaluation increment on
land and buildings
Balance at end of year
3,345
1,446
(434)
4,357
3,345
–
–
3,345
3,345
1,446
(434)
4,357
3,345
–
–
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
(181)
(784)
(181)
(784)
(265)
80
(366)
861
(258)
(181)
(265)
80
(366)
861
(258)
(181)
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.
74 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 Share based payments reserve
Balance at beginning of year
Granted during the year
Vested during the year
Balance at end of year
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
2017
$’000
(189)
375
55
241
(214)
–
25
(189)
–
241
–
241
–
–
–
–
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
15,232
13,978
15,232
14,167
NOTE 22 NON-CONTROLLING INTEREST
Reconciliation of non-controlling interest in controlled entities:
Balance at beginning of year
Non-controlling interests arising on the acquisition of MoneyPlace
Share of operating profit/(loss) for the year
Deconsolidation of non-controlling interest on the disposal of MoneyPlace
Balance at end of year
Consolidated
2018
$’000
1,291
–
(231)
(1,060)
–
2017
$’000
–
1,431
(140)
–
1,291
In January 2018, Auswide Bank disposed of its holding in MoneyPlace. All holdings relating to the controlling interest in
MoneyPlace have been deconsolidated in the financial accounts at 30 June 2018. Further information can be found in Notes
34 and 35.
AUSWIDE BANK – 30 JUNE 2018 75
NOTE 23 CASH FLOW STATEMENT
Reconciliation of profit from ordinary activities after tax to the net cash flows from operations:
Consolidated
Company
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
2018
$’000
17,886
2,659
1,320
(1,188)
(341)
7,722
683
11,339
(1,056)
(501)
83
82
(353)
38,335
2017
$’000
15,149
2,790
979
28
173
(658)
185
(1,396)
738
1,633
(81)
(39)
(255)
19,246
2018
$’000
19,345
2,659
1,320
104
(341)
7,521
683
10,354
311
(40)
83
165
(353)
41,811
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
2018
$’000
227
2017
$’000
1,463
2018
$’000
227
Consolidated
Company
2018
$’000
2,092
1,143
949
–
4,184
2017
$’000
2,166
1,669
1,813
74
5,722
2018
$’000
2,092
1,143
949
–
4,184
Non-cancellable operating leases relate to leases of branches across Queensland.
2017
$’000
15,203
2,603
979
28
173
2,352
185
(2,475)
(630)
1,633
(163)
(121)
(255)
19,512
2017
$’000
1,463
2017
$’000
2,166
1,669
1,813
74
5,722
76 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 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
2018
$’000
104,447
90,479
985
195,911
2017
$’000
55,264
88,364
550
144,178
2018
$’000
104,447
90,479
985
195,911
2017
$’000
55,264
88,364
550
144,178
2018
Cents per share
2017
Cents per share
40.81
2.02
42.83
40.81
2.02
42.83
37.48
(0.13)
37.35
37.48
(0.13)
37.35
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
2018
$’000
17,886
17,886
(842)
2017
$’000
15,149
15,149
54
Earnings used in the calculation of basic earnings per share from continuing operations
17,044
15,203
Weighted average number of ordinary shares for the purposes of basic earnings per share
41,771,336
40,567,981
2018
Shares No.
2017
Shares No.
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
2018
$’000
17,886
17,886
(842)
2017
$’000
15,149
15,149
54
Earnings used in the calculation of diluted earnings per share from continuing operations
17,044
15,203
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 used in the calculation of basic earnings per share
41,792,633
40,567,981
Weighted average number of ordinary shares used in the calculation of diluted earnings per share
41,792,633
40,567,981
2018
Shares No.
2017
Shares No.
AUSWIDE BANK – 30 JUNE 2018 77
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.
(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
2018
$’000
2,346
140
176
55
43
2017
$’000
2,361
98
173
25
41
2018
$’000
2,346
140
176
55
43
2017
$’000
2,361
98
173
25
41
2,760
2,698
2,760
2,698
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 on loans to key management personnel 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 $148,507 (2017: $126,363) 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
Notes to the consolidated financial statements30 JUNE 2018 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
Other assurance services
Total audit and assurance services
Tax advisory services
Other services
Total non-audit services
Total auditors' remuneration
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
2017
$’000
342,436
14,000
356,436
88,841
87,166
176,007
532,443
417,210
19,486
436,696
76,804
82,114
158,918
595,614
342,436
14,000
356,436
88,841
87,166
176,007
532,443
417,210
19,486
436,696
76,804
82,114
158,918
595,614
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, consumer lending 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 commenced lending for credit cards in April 2018. The credit card 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 2018 79
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 management 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. During the 2018 and 2017 financial years the capital adequacy ratios of
both the Group and Company were maintained above the target ratio.
The capital adequacy calculations at 30 June 2018 and 30 June 2017 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
Notes to the consolidated financial statements30 JUNE 2018 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
Consolidated
Company
2018
$’000
2017
$’000
2018
$’000
2017
$’000
1,375,364
1,289,918
1,374,572
1,283,508
204,827
14.89%
186,007
14.42%
204,339
14.87%
184,532
14.38%
The APS 330 Pillar III Disclosures inclusive of the Capital Disclosure Template, Regulatory Capital reconciliation and the Capital
Instruments Disclosures are available in the Prudential Disclosures section of the Bank’s website at www.auswidebank.com.au.
(b) Market risk management
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)
(ii)
review measures of profitability, particularly net interest and fee income including strategies and directives;
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; and
(x) make recommendations to the Board on changes to the following policies;
• Lending;
• Term Deposits; and
• 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 $8.404m or increase by $7.336m (2017: decrease by $7.547m or increase by $6.781m). This is mainly
due to the Company's exposures to fixed and variable rate loans, and deposit and securitisation liabilities.
AUSWIDE BANK – 30 JUNE 2018 81
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(b) Market risk management (continued)
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.
(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
ABA Trust No. 7
Total
Maturity analysis
Up to 1 year
2018
$’000
25,360
–
27,032
52,392
2017
$’000
168,647
143,326
–
311,973
52,392
311,973
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 statements30 JUNE 2018 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
2018
$’000
4,682
–
1,682
1,994
1,874
3,826
14,058
2017
$’000
6,418
2,867
4,676
2,234
278
3,676
20,149
2018
$’000
4,682
–
1,682
1,994
1,874
3,826
14,058
2017
$’000
6,418
2,867
4,676
2,234
278
3,676
20,149
As at 30 June 2018 there were 11 loans totalling $2.792m (30 June 2017: 14 loans totalling $3.208m) 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
2018
%
77.0
10.6
8.1
1.0
2.3
0.2
0.8
2017
%
78.9
9.9
7.7
0.9
1.8
0.1
0.7
100.0
100.0
AUSWIDE BANK – 30 JUNE 2018 83
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(e) Terms, conditions and accounting policies
The Group'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
Certificates of deposit
Notes
RMBS investments
Managed investment
schemes
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 1.39% (2017 – 1.17%).
Amounts receivable are recorded at their
recoverable amount.
Certificates of deposit are carried at amortised
cost. Interest revenue is recognised when earned.
Certificates of deposit have an effective interest
rate of 1.97% (2017 – 2.07%).
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 3.33% (2017 – 3.41%).
RMBS investments are recorded at fair value
through the Available for Sale Reserve.
Investments in managed investment schemes 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.
These investments have an effective interest rate of
9.13% (2017 – 8.83%).
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
2018 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
Notes to the consolidated financial statements30 JUNE 2018 (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
ABA Trust 2017-1
WB Trust 2014-1
WB Trust 2010-1
2018
$’000
2017
$’000
9
850
31
17
156
42
48
864
77
43
269
43
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.
AUSWIDE BANK – 30 JUNE 2018 85
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Notes to the consolidated financial statements30 JUNE 2018
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AUSWIDE BANK – 30 JUNE 2018 87
NOTE 32 FINANCIAL INSTRUMENTS (CONTINUED)
(h) Financial instruments (continued)
Value of the Group's financial assets and financial liabilities:
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:
Value
FV hierarchy
Valuation technique(s) and key input(s)
2018
$’000
2017
$’000
Certificates of deposit
210,178
253,440
N/A
Quoted price.
Financial assets held at amortised cost:
Notes – securitisation program
17,082
22,996
Loans and advances
Financial assets at cost:
2,926,173
2,788,979
N/A
N/A
Held at amortised cost.
Held at amortised cost.
Shares in unlisted companies
1,144
1,069
N/A
Held at cost.
Financial assets available for sale:
External RMBS investments
1,147
1,470
Level 2
Investment in Managed Investment
Schemes (MIS)
25,886
14,042
Level 3
Mark-to-market value based on consideration,
maturity and interest rates.
The fair value is derived from the value of
the underlying assets within the managed
investment scheme.
Total
Financial liabilities
3,181,610
3,081,996
Financial liabilities held at amortised cost:
Deposits and short term borrowings
2,439,964
2,298,306
Securitised loans
Total
609,693
710,937
3,049,657
3,009,243
N/A
N/A
Held at amortised cost.
Held at amortised cost.
88 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 Company
Financial assets
Financial assets held to maturity:
Value
FV hierarchy
Valuation technique(s) and key input(s)
2018
$’000
2017
$’000
Certificates of deposit
210,178
253,440
N/A
Quoted price.
Financial assets held at amortised cost:
Notes – securitisation program
49,468
53,382
Loans and advances
Financial assets at cost:
2,926,173
2,788,979
N/A
N/A
Held at amortised cost.
Held at amortised cost.
Shares in unlisted companies
1,144
5,153
N/A
Held at cost.
Financial assets available for sale:
External RMBS investments
1,147
1,470
Level 2
Investment in Managed Investment Scheme (MIS)
25,886
14,042
Level 3
Mark-to-market value based on
consideration, maturity and interest rates.
The fair value is derived from the value of
the underlying assets within the managed
investment scheme.
Total
Financial liabilities
Financial liabilities held at amortised cost:
3,213,996
3,116,466
Deposits and short term borrowings
2,453,720
2,310,901
Securitised loans
Total
609,693
710,937
3,063,413
3,021,838
N/A
N/A
Held at amortised cost.
Held at amortised cost.
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
2018
$’000
1,069
–
–
75
–
1,144
2017
$’000
512
–
–
557
–
1,069
2018
$’000
14,042
–
–
11,844
–
25,886
Shares in unlisted companies
Investments in MIS
2018
$’000
5,153
–
–
75
(4,084)
1,144
2017
$’000
1,771
–
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4,640
(1,258)
5,153
2018
$’000
14,042
–
–
11,844
–
25,886
2017
$’000
3,413
–
–
12,629
(2,000)
14,042
2017
$’000
3,413
–
–
12,629
(2,000)
14,042
AUSWIDE BANK – 30 JUNE 2018 89
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 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 43.7% 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 43.7% of Money Place 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 statements30 JUNE 2018 Non-Controlling Interests
The non-controlling interest (36.7% ownership interest in Money Place 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
Divestment of equity stake in MoneyPlace
2017
$’000
1,799
(4)
1,795
In January 2018, the Group announced that it had entered into an agreement to divest its equity stake in P2P lender
MoneyPlace. This transaction was completed on 22 January 2018. The proceeds of the sale exceeded the carrying amount
of the related net assets and, accordingly, no impairment losses were recognised.
Auswide Bank will continue to receive income from its personal loan investment into MoneyPlace which is expected to continue
to grow over time.
Further explanation can be found in Note 35.
AUSWIDE BANK – 30 JUNE 2018 91
NOTE 34 DISPOSAL OF A SUBSIDIARY
In January 2018 the Group announced that it had entered into an agreement to divest its 62.4% equity stake in P2P lender
MoneyPlace. This transaction was completed on 22 January 2018.
Consideration received
The total consideration received upon the divestment was $6.805m.
Assets and liabilities over which control is lost as a result of this divestment
Cash
Other assets
Software development
Other intangibles
Goodwill
Deferred income tax liabilities
Loans
Payables and other liabilities
Net assets disposed of
Gain on disposal of a subsidiary
Consideration received
Net assets disposed of
Non-controlling interests
Gain on disposal
The gain on disposal is included in the profit for the year from discontinued operations, see Note 35 for further explanation.
Net cash inflow on disposal of a subsidiary
Consideration received in cash and cash equivalents
Less: cash and cash equivalent balances disposed of
2018
$’000
145
175
5,668
208
2,612
(1,298)
(85)
(723)
6,702
2018
$'000
6,805
(6,702)
1,084
1,187
2018
$'000
6,805
(145)
6,660
92 ANNUAL REPORT
Notes to the consolidated financial statements30 JUNE 2018 NOTE 35 DISCONTINUED OPERATION
In January 2018, the Group announced that it had entered into an agreement to divest its equity stake in P2P lender
MoneyPlace. This transaction was completed on 22 January 2018. The proceeds of the sale exceeded the carrying amount of the
related net assets and, accordingly, no impairment losses were recognised.
Auswide Bank will continue to receive income from its personal loan investment in MoneyPlace which has continued to increase.
The results of the discontinued operations included in the profit (loss) for the year are set out below. The comparative profit (loss)
and cash flows from discontinued operations have been re-presented to include those operations classified as discontinued in
the current year.
Consolidated
Company
Profit for the year from discontinued operations
Revenue
Expenses
Profit/(loss) before income tax
Income tax benefit/expense
Gain on disposal of MoneyPlace
Profit for the year from discontinued operations
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 increase in cash generated by the subsidiary
2018
$’000
280
(966)
(686)
110
(576)
1,187
611
(505)
(356)
285
(576)
2017
$’000
466
(638)
(172)
(22)
(194)
–
(194)
119
25
(1,221)
(1,077)
2018
$’000
2017
$’000
–
–
–
–
–
2,301
2,301
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
AUSWIDE BANK – 30 JUNE 2018 93
Directors’ declaration
30 JUNE 2018
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 2018 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 2018.
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
23 August 2018
SC Birkensleigh
Director
94 ANNUAL REPORT
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 2018, the consolidated statement of 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 2018 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 2018 95
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 2018 the Group has a loan loss impairment
provision of $3.2m 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.
Impairment of non current assets
As at 30 June 2018 the Group’s assets subject to impairment
tests include Goodwill of $46.4m, arising from the
acquisitions of Mackay Permanent Building Society (MPBS)
and Queensland Professional Credit Union (YCU) as
disclosed in Note 14.
The recovery of non-current assets requires significant
judgement due to assumptions required 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.
–
–
– 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 impairment model and
evaluating whether the modelling assumptions used and
the relevant risks considered were reasonable
– Assessing loans specifically provided for by identifying
loans that met the criteria set out by the Group’s relevant
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
the realisation of collateral held; and
- 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.
In conjunction with our valuation specialists, our audit
procedures included, but were not limited to:
–
–
Evaluating the appropriateness of management’s
identification of the Group’s CGU and testing of 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
Assessing the key assumptions and methodology used
by management supported by external specialists in the
externally prepared 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
management 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
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.
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.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance
of the Group’s audit. We remain solely responsible for our audit opinion.
AUSWIDE BANK – 30 JUNE 2018 97
Independent auditor’s report (continued)
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 30 to 39 of the Directors’ Report for the year ended 30 June 2018.
In our opinion, the Remuneration Report of Auswide Bank Ltd for the year ended 30 June 2018, 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
23 August 2018
98 ANNUAL REPORT
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.
AUSWIDE BANK – 30 JUNE 2018 99
Corporate governance summary
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.
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.
100 ANNUAL REPORT
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 7001
Website www.deloitte.com.au
D. 2018 ANNUAL GENERAL MEETING
The 2018 Annual General Meeting is to be held on Tuesday 20 November 2018 at 11.00am EST:
King & Wood Mallesons
Level 33 Waterfront Place
1 Eagle Street, Brisbane, Queensland.
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
20 November 2018
Full year results and final dividend announcement
24 August 2018
Ex dividend date
Record date
10 September 2018
11 September 2018
Participation in DRP (final date for receipt of application)
Suspended
Dividend payment
21 September 2018
Half year results and interim dividend announcement
23 February 2018
Ex dividend date
Record date
1 March 2018
2 March 2018
Participation in DRP (final date for receipt of application)
Suspended
Dividend payment
26 March 2018
AUSWIDE BANK – 30 JUNE 2018 101
Shareholder information
E. SECURITIES INFORMATION
Share Register
The register of holders of Permanent Ordinary shares is kept at the office of:
Computershare Investor Services Pty Limited
Level 1
200 Mary Street
Brisbane QLD 4000
Ph 1300 552 270
Fax 07 3237 2152
Online Contact www-au.computershare.co/Investor/Contact
Website www.computershare.com.au
Issued shares
The Company's securities listed on the Australian Stock Exchange (ASX) as at 15 September 2018 are:
Class of security
Permanent ordinary shares
Distribution of Shareholdings
Permanent Ordinary Shares
10 September 2018
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total number of shareholders
Less than marketable parcel of $500
Top 20 Shareholders
Permanent Ordinary Shares
10 September 2018
Name
National Nominees Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Ronald Ernest Hancock & Lorraine Pearl Hancock
Ronald Ernest Hancock
Milton Corporation Limited
Kathy Sawyer
GDC & DMC Super Pty Ltd ATF Graham Cockerill S/F A/c
Ron Hancock Super Pty Ltd ATF The Hancock Superfund A/c
Cloud 7 Nominees Pty Ltd ATF Peter Sawyer Famacct No2 A/c
JW & GJ Kennedy Super Pty Ltd
Ronald Ernest Hancock & Lorraine Pearl Hancock ATF The Hancock Family A/c
Hestearn Pty Ltd
Sawfam Pty Ltd ATF Sawyer Super Fund No2 A/c
BNP Paribas Noms Pty Ltd ATF DRP
Noela Olsen
Delma Cran
Charles Geoffrey Morris & Ann Lois Morris ATF C & A Morris Family A/c
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Lohse Holdings Pty Ltd ATF Peter Lohse Super Fund A/c
Top 20 holders of fully paid ordinary shares
102 ANNUAL REPORT
ASX Code
ABA
Number
42,128,740
No of
Shareholders
3,666
1,886
623
514
52
6,741
170
No. of Shares
3,306,486
1,194,492
1,162,511
1,110,033
890,750
706,816
433,570
432,719
410,046
337,056
328,486
324,321
320,000
308,543
296,362
285,793
279,520
264,074
258,985
250,000
%
7.85
2.84
2.76
2.63
2.11
1.68
1.03
1.03
0.97
0.80
0.78
0.77
0.76
0.73
0.70
0.68
0.66
0.63
0.61
0.59
12,900,563
30.62
E. SECURITIES INFORMATION (CONTINUED)
Substantial Shareholders
The following organisations have disclosed a substantial shareholding notice to the ASX.
Name
National Nominees Ltd ACF Australian Ethical Investments Limited(1)
RE Hancock (associated entities + associates)(2)
No. of Shares
% of Total
2,906,102
2,182,863
6.91
5.42
(1) Substantial shareholder notice dated 06/10/2017.
(2) Substantial shareholder notice dated 19/05/2016.
On-Market Buyback
There is no on-market buy back.
Dividend Reinvestment Plan
The Board of Directors resolved to suspend the dividend reinvestment plan for the final dividend payable for the half year ended
30 June 2018, due to the strength of the capital position.
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.auswidebank.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.
AUSWIDE BANK – 30 JUNE 2018 103
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
Credit Rating
lower ratio can be an indication that a company is better at controlling its costs.
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
Dividend Yield
a percentage.
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
Net Interest Income
Net Interest Margin
(NIM)
Net Profit After Tax
(NPAT)
Net Tangible Asset
Backing per Share
Non Interest Income
Price-to-Earnings Ratio
(P/E Ratio)
Record Date
Return on Average
Ordinary Equity
RMBS
Securitisation
SSP
Subordinated Capital
Notes
Tier 1 Capital
Tier 2 Capital
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.
The difference between the revenue that is generated from an ADI's assets, and the expenses associated with paying out
its liabilities.
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.
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.
Income derived primarily from fees and commissions, rather than income from interest-earning assets.
A measure of the price paid for a share relative to the annual income or profit earned by the company per share.
The date used to identify shares traded and registered up until Ex-Dividend Date.
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.
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.
Underlying Cash NPAT 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.
104 ANNUAL REPORT
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)