Auswide Bank
Annual Report 2020
New Brisbane CBD Branch
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ABOUT AUSWIDE BANK
OUR BOARD OF DIRECTORS
OUR LEADERSHIP TEAM
2020: YEAR IN REVIEW
Our Financial Performance
Our Operational Performance
Our COVID-19 Response
Our Strategy
The Year Ahead
SUSTAINABILITY
Conduct and Ethics
Social Responsibility
Managing Risk
DIRECTORS’ STATUTORY REPORT
AUDITOR’S INDEPENDENCE DECLARATION
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
CORPORATE GOVERNANCE SUMMARY
SHAREHOLDER INFORMATION
FINANCIAL GLOSSARY
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Auswide Bank Annual Report 2020
ABOUT
AUSWIDE
BANK
For over 50 years Auswide Bank has been providing
an extensive range of banking products and financial
services to our valued customers. Auswide Bank is not a
big bank and we do not want to be like one.
We believe it is the small things that reveal who each of us are. Small is real. Small is sincere. It is the
smile on a familiar face and knowing how hard you have worked to get ahead. Small is finding your
voice and meaning what you say.
At Auswide Bank, we are here to help our customers find that voice, to tell their story and at last be
heard. We want our customers to discover a whole new way to engage with a bank.
Established in 1966
Auswide Bank provides home loans, consumer lending and a range of personal and business banking
services nationally - in branch, online, over-the-phone and through distribution partnerships and a
national mortgage broker network.
Strong legacy
Our heartland is in regional Queensland and we have a growing presence in South East
Queensland, New South Wales and Victoria.
$3.7b in assets
Representing a high quality loan book.
Partnerships
Establishing mutually beneficial partnerships such as Queensland Rugby League.
Industry-leading
Staff engagement score of 96%.
Our Mission
Our Vision
To demonstrate the ‘power of
small’ by placing our customers at
the centre of everything we do.
To be the Bank that our customers,
staff and partners want their friends,
family and colleagues to bank with.
Our Values
Empowering customers and staff to
initiate change.
Exceed our customers’ expectations and
celebrate their successes and our own.
Make decisions and adapt quickly to
meet our customers’ needs.
A commitment to be ethical and
operate in a sustainable workplace.
Identify your purpose and be passionate
about it.
Build open and honest relationships and
deliver on our promises.
Own our actions, decisions, customers
and outcomes.
Financial Highlights
NPAT1
Excluding the
effects of Covid-19
STATUTORY
NPAT1
COST TO
INCOME RATIO
CAPITAL
LOAN BOOK
CUSTOMER
DEPOSITS
$20.114m
$18.504m
62.5%
12.95%
$3.266b2
$2.620b
16.9%
7.6%
2%
0.8%
4.3%
10.4%
1.
2.
Difference between Statutory NPAT and NPAT excluding the effects of COVID-19 due to additional provisioning related to COVID-19
Grossed up for Investments in Managed Investment Schemes (MISs) reported in Financial Assets in Balance Sheet
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Auswide Bank Annual Report 2020
OUR
BOARD OF
DIRECTORS
John Humphrey LL.B | Chairman
Mr Humphrey was appointed to the Board on 19 February 2008,
and was appointed Chairman following the 2009 Annual General
Meeting. He is a Senior Consultant in the Brisbane office of
international law firm, King & Wood Mallesons, where he specialises
in commercial law, corporate mergers and acquisitions. He served
as Executive Dean of the Faculty of Law at Queensland University
of Technology (until June 2019). He was a Non-Executive Director
of Downer-EDI Limited (until November 2016) and a Non-Executive
Director of Horizon Oil Limited (until November 2018). Mr Humphrey
is a member of the Audit Committee and is an independent Director.
Barry Dangerfield | Director
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
MoneyPlace 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 he is Chairman of the Institute’s
Audit and Risk Committee and Chairman of the Institute’s
Remuneration Committee.
Greg Kenny GAICD, GradDipFin | Director
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.
Martin Barrett BA(ECON), MBA | Managing Director
Mr Barrett commenced as Chief Executive Officer of Wide Bay
Australia Ltd (now Auswide Bank Ltd) on 4 February 2013 and was
subsequently appointed Managing Director on 19 September 2013.
Mr Barrett has extensive experience in the banking sector having
previously held the positions of Managing Director (Queensland,
Western Australia and National Motor Finance Business) and
General Manager NSW/ACT Corporate & Business Bank at St
George Bank Ltd. Prior to working at St George Bank, Mr Barrett
held senior roles at regional financial institutions in the United
Kingdom and at National Australia Bank. Mr Barrett is currently a
Non-Executive Director of Impact Community Services and served
as a Director of MoneyPlace Holdings Pty Ltd until January 2018. Mr
Barrett is an Executive Director.
Sandra Birkensleigh BCom, CA, GAICD, ICCP (Fellow) | Director
Ms Birkensleigh was appointed to the Board on 2 February 2015
and 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. She 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.
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Auswide Bank Annual Report 2020
OUR
LEADERSHIP
TEAM
Managing
Director
Martin Barrett |
Strategy development and
implementation
Group operational and financial
performance
Regulatory engagement
Risk culture and management
Social responsibility and sustainability
Customer satisfaction and growth
Shareholder returns
Chief Financial Officer and
Company Secretary
Chief Operating Officer
Chief Customer Officer
Chief People & Property
Officer
Chief Risk
Officer
Chief Information
Officer (Acting 09.04.20)
Bill Schafer |
Mark Rasmussen |
Damian Hearne |
Gayle Job |
Craig Lonergan |
Scott Johnson |
Group Accounting and
Treasury
Budgeting and financial
analysis
Financial and management
reporting
Statutory, ASX and
regulatory reporting
Capital, funding and
liquidity planning strategy
Investor relations
Customer operations
Customer experience
Retail and business
banking sales and
distribution
Mortgage broker and third
party relationships
Marketing and products
Community and strategic
partnerships
Customer Hub and Digital
Bank
Lending services
Lending origination
services
Support services
operations
Support services
performance
Business Continuity
Planning (BCP) and
Management (BCM)
Key outsourcing
Partnership Management
(Support Services functions)
PEXA management and
processing
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Risk profile within Board
approved risk appetite
Risk management strategy
and practices
Risk management and
compliance framework and
control systems
Risk culture awareness
Credit portfolio review
Group Information
Technology management
IT strategic planning
Key technology project
implementation
People engagement and
performance
Payroll management,
remuneration and benefits
Talent acquisition,
recruitment and retention
strategies
Learning and development
Employment law regulation
and compliance
Employee wellbeing and
workplace health & safety
Property portfolio
management of leased and
bank owned assets
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Auswide Bank Annual Report 2020
2020:
YEAR IN
REVIEW
John Humphrey | Chairman
Martin Barrett | Managing Director
Financial year 2020 has
been another successful
year for Auswide Bank - a
year where we delivered
on all our key financial
targets.
Improving our attraction and delivery to customers
resulted in outstanding growth in lending and
customer deposits and an equally outstanding year
in profitability.
Significantly, these outcomes were achieved
during a period of record low interest rates and
unprecedented volatility with the second half marked
by the coronavirus COVID-19 pandemic.
We responded rapidly to support our customers
and staff to ensure their wellbeing and safety. Our
COVID-19 assistance packages provided immediate
financial relief to many customers and we are proud
of that.
We are celebrating another year of quality growth
in our balance sheet and profitability demonstrating
our consistent progress and which, in recent times,
we believe positively defies the industry norm.
Our Financial Performance
We are pleased to report that our statutory Net
Profit after Tax (NPAT) was up 7.6% to $18.5 million
compared to $17.2 million in the 2018/19 year.
Our NPAT excluding the effects of COVID-19 was up
16.9% to $20.1 million.
The positive result was based on growth with the
loan book increasing by 4.3% to $3.26 billion, or 1.5
x system growth in a highly competitive market.
We achieved this in conjunction with a 10 basis point
increase in the Net Interest Margin (NIM), up to 197
basis points from 187 basis points in 2018/2019, as
active management of our funding costs continued
to deliver significant benefits.
Based on growth in our loan book and the significant
increase in our NIM, our Net Interest Revenue
was $70.5 million, up by $7.3 million compared to
2018/19, an increase of 11.6%.
The competitive environment has not affected our
ability to grow our customer deposit base which
increased by 10.4% to $2.62 billion, taking our self-
funding ratio to 74.5%. This represents an increase
of more than 300 basis points over the prior year
allowing us to reduce more expensive funding lines
such as securitisation.
Our Cost to Income Ratio continues to fall and at
62.5% we are making good progress towards our
60% goal.
Underlying Earnings per Share (EPS) was 47.6 cents
when the effects of COVID-19 are excluded. EPS
on a statutory basis was up 3.0 cents per share to
43.8 cents per share comparing very favourably
to our peers. Our EPS has improved steadily on a
continuing operations basis since 2016 when it was
31.2 cents per share or 40% lower than 2019/2020.
Another medium-term goal we have previously
flagged is Return on Net Tangible Assets (RONTA)
of 10%. NPAT excluding the effects of COVID-19
demonstrated a RONTA of 10.6%. Using statutory
NPAT, RONTA improved from 9.1% to 9.7%.
Our performance means your Board declared a
final fully franked dividend of 10.75 cents per share
payable on 18 September 2020, representing a
payout ratio of 49.3% of our second half year
statutory NPAT.
Our full financial year dividends amounted to 27.75
cents per share representing a payout ratio of
63.4%. This lower final dividend in the context of
higher profits, seeks to achieve the balance required
to manage our capital prudently and to operate
within the guidelines announced by the Australian
Prudential Regulation Authority (APRA) on 29 July
2020 in response COVID-19 economic conditions.
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1. FY20 results excluding the effects of COVID-19
Our Operational Performance
Lending
Home loans were up 3.5% to $3.05 billion
representing over 93% of the total book. Our growth
was driven by strong mortgage broker flows and
our successful participation in the First Home Loan
Deposit Scheme (FHLDS).
In December 2019, we received approval from the
National Housing Finance Investment Corporation
(NHFIC) to join the Scheme lending panel. From 1
February 2020, we commenced offering home loans
to eligible first homebuyers with the FHLDS providing
a government guarantee for any loan monies above
80% LVR. The FHLDS contributed to a 25.8%
increase in approvals and a 9.9% increase in home
loan settlements for the year.
Consumer lending, including funding of consumer
loans through managed investment schemes,
materially increased totalling $80.5 million at the
end of year, up from $62.3 million from 30 June
2019.
Business lending, including residentially secured
lending to business customers, was up to $135.9
million. A strategic decision was made at the end
of the year to pause new business lending to non-
customers as part of our risk management response
to COVID-19.
We are committed to maintaining quality lending and
risk management of our loan book.
Total arrears were $12.6 million at 30 June 2020,
representing 39 basis points of the loan book. This
figure excludes COVID-19 related assistance in
accordance with APRA guidelines. It compares to
total arrears of 46 basis points of loans at June 2019
and is 53% down compared to June 2016. Our
arrears compare favourably with our peers with the
SPIN index for >30 days past due for “Other Banks”
at 131 basis points and for “Regional Banks” at 173
basis points.
One quarter of our loan book securities are now
situated outside of Queensland, principally Sydney
and Melbourne, and we continue to diversify our
historical concentration away from our regional
Queensland heartland, with New South Wales and
South East Queensland representing significant
growth opportunities.
Our home lending book remains mature with 72%
of home loans having an LVR of 80% or less. An
increase in loans with LVR over 90% was due to
the success of the FHLDS, however the government
guarantee provides for any loan monies above 80%
LVR. The majority of other home loans with an LVR
over 80% are covered with a recognised Lenders
Mortgage Insurer.
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1. Covid-19 loan deferrals not included based on APRA guidelines
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Funding
Capital
During the year, we prudently managed our funding
and we saw an ongoing shift in our funding mix as
customer deposits increased by 10.4% to $2,620
million and securitisation continued to fall.
Customer deposits now represent 74.5% of funding,
driven largely by the strong growth in at-call savings
accounts which increased by 24.8% to $1.13 billion.
Regulators have responded decisively to the
COVID-19 pandemic with the Reserve Bank
announcing a Term Funding Facility for banks at
0.25%, which provide an attractive and very cost-
effective funding line.
We have maintained a strong capital adequacy ratio
of 12.95% and CET1 of 11.09% at 30 June 2020,
meeting ‘unquestionably strong’ regulatory targets.
Our capital ratio reduced from 13.79% at 30
June 2019 due to our loan book growth and the
suspension of the Dividend Reinvestment Plan for the
2018/19 final dividend.
Our capital position remains comfortably in excess of
the Board’s target. We will continue to support loan
book growth with capital supply drivers including
a Tier 2 subordinated debt transaction and the
Dividend Reinvestment Plan for our 2019/20 final
dividend.
Our COVID-19 Response
We have responded to the
coronavirus pandemic by
supporting our customers
and staff.
The health and wellbeing of all our personnel and
customers was an early priority with the rapid
development of a response plan and continuous
oversight of the situation. Our branches remained
open with the appropriate safety measures in place
and our office staff worked remotely where possible.
Our assistance packages for customers are
consistent with our peers and included deferral of
payments or change to interest only terms. We
responded with urgency and without the need for
further evidence. We are proud that, in most cases,
we responded to our customers within three days.
As at 30 June 2020, just below 9% of our loan book
was placed on assistance, slightly lower than the
average for the industry. This represented 1014
loan accounts for $288 million. The majority of
requests were made in March slowing materially into
April.
Significantly, given how the pandemic has rolled
out differently across the States, nearly 75% of our
loan book is concentrated in Queensland with only
8% located in Victoria. Our loans are also heavily
concentrated on residential lending representing
over 95% of support that has been provided.
Our total Provision for Doubtful Debts increased from
$4.9 million in December 2019 to $7.1million in
June 2020 with an additional $2.3 million included
for the effects of COVID-19, including a $1million
overlay to provide for uncertainty going forward.
The modelling for the provisions included stressed
scenarios and the prescribed provisions required
under APRA standards.
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In 2019, we commenced the first year of our
community partnership with Queensland Rugby
League (QRL). The three year agreement includes
Auswide Bank Naming Rights sponsorship of the
under 18’s Mal Meninga Cup and sponsorship of the
Queensland Maroons team. In 2019, approximately
9,537,000 viewers were exposed to the Auswide
Bank brand on television, with the three State
of Origin Games being the three most watched
programs of the year. We are leveraging this
exposure to the QRL membership and fan base to
drive new customer acquisition and in January 2020
launched our ‘Club Rewards Program’ where QRL
affiliated clubs can benefit when their members refer
home loans and personal loans to us.
Unfortunately, the second year of our partnership
with QRL has been impacted by COVID-19. The Mal
Meninga Cup was cancelled and the 2020 State of
Origin series delayed until November. This impacted
our engagement and marketing opportunity, so
we were pleased to negotiate an extension of our
agreement with QRL for an additional year.
Our Strategy
We are making substantial
progress on our
2019/2022 strategic
plan which seeks to work
with the strengths of the
organisation.
Our plan determines our direction, resource
allocation and prioritisation and has already
supported our financial performance. It has also
helped us address challenges and work more
collaboratively as an organisation with a common
purpose.
Our strategic goals are being delivered with a
number of clearly defined focuses.
Brand Awareness
Our goal is to grow our brand awareness across
Queensland to over 60% by the end of 2022. We
were pleased to see a 31.23% improvement in brand
recognition in July 2019 compared to the same time
in 2018.
We are growing brand awareness through consistent
messaging about our value proposition, through
advocacy off the back of enhanced customer service,
by extending our brand through partnerships, and
by differentiating our brand from the ‘Big 4’ through
community engagement.
We were again the recipient of several awards that
provided national recognition for our products and
as at May 2020 rated 4.4 out of 5 stars across online
and branch reviews on ProductReview.com.au
We are building our presence on online and social
media platforms with our Facebook following
growing around 11%, our LinkedIn following
growing around 31%, and our Instagram and Twitter
following both growing around 23% for the year.
Partnerships
We will continue to identify and work with strategic
partners that meet our criteria and where we believe
we can create opportunity to reach our strategic and
operational objectives.
During the year, we strengthened our partnership
governance framework to ensure appropriate
assessment and ongoing management of these
relationships. Our strategic partnerships can be
broadly divided into: product partnerships where
we seek to more fully meet the financial needs of
our customers; distribution partnerships where we
promote our products and services via our partner’s
networks; community partnerships that support our
brand and our commitment to social responsibility;
and managed investments where we provide funding,
for example to peer to peer lenders.
Apart from our partnership with QRL, two examples
of how partnerships have supported our growth and
financial performance in 2019/20 are the National
Housing Finance and Investment Corporation
(NHFIC) and National Seniors Australia (NSA).
As advised earlier, our participation in the First
Home Loan Deposit Scheme administered by
NHFIC contributed significantly to our home loan
program. It has been exciting to see the quality of
applications from a variety of backgrounds including
a good proportion of young professionals and we
congratulate the federal government on the initiative.
In December 2019, we announced a partnership
with National Seniors Australia, the peak national
advocacy group representing the interests of older
Australians. The principal partnership focus was to
provide their members and supporters with a range
of ‘white label’ fixed interest term deposits. With
NSA support, we have seen solid growth of these
deposits. It has been pleasing to note that the
majority of deposits have been sourced outside of
Queensland helping diversify our deposit base. This
partnership together with similar partnerships where
our term and on-call deposits are marketed and
distributed have greatly supported our shift away
from higher cost forms of funding and have directly
supported the growth in our 2019/20 NIM.
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The Year Ahead
In 2020/21, we will remain
focused on all the key
planks of our three-year
strategic plan.
In addition, we will continue to provide the
appropriate level of support to our people and any
customers affected by COVID-19.
We have a relatively simple business. Scale and
complexity in this environment is not the competitive
advantage it once was. Today simplicity and
nimbleness backed by good value products that
are distributed efficiently via multiple channels,
both proprietary and partner, is the opportunity for
Auswide Bank.
The impact of COVID-19 on the economy and on
consumer confidence will be a very important factor
for the future. At the time of writing, Queensland
and New South Wales, where 88% of our loan book
is located, have not been as negatively impacted by
the crisis and have not experienced any material
impacts to housing markets and prices. In fact,
regional Queensland is showing resilience with
several markets experiencing increased land sales
and housing construction. We are well placed to
take advantage of this growth.
We have in the past held out four medium term
financial targets including a Cost to Income Ratio
of 60%, a stable NIM, a RONTA of 10% and above
system loan growth. Despite the challenges and
uncertainty, we expect to continue our momentum in
all of these areas in the year ahead.
As we progress into the year ahead, we both extend
our appreciation to the Auswide Bank team and
our fellow Directors for your contribution and your
dedication to achieving Auswide Bank’s mission,
vision and values.
Thank you also to our customers, shareholders and
to our partners for your continuing support.
JS Humphrey
MB Barrett
Director
Managing Director
Digital Innovation and Customer Hub
A significant driver of growth, retention and
efficiency is technology. Our digital banking journey
is simply to collaborate with those that have made
the investment and that can assist us with digital
distribution, improve customer experience, create
efficiency and deliver to our customers what they
want and need to improve their experience with us.
However, we are mindful of return on investment
from technology spend and will continue to invest
prudently.
During the year, we continued to improve customer
experience through capable digital implementation
and supporting customer transition from branch
to digital channel. An example includes our roll
out of a digital identification solution that allows
customers to meet identification requirements
using their mobile device without having to visit a
branch or Australia Post. The solution also helps us
mitigate fraud via a ‘liveliness’ test that ensures the
legitimacy of the customer.
We also enhanced our Bundaberg-based Customer
Hub with additional technologies to maximise
service levels and opportunities in order to grow our
customer base over-the-phone and via online and
partnership origination. A significant focus for our
Customer Hub and the bank as a whole has been
to improve our customer retention capability and
early intervention that is particularly important in a
competitive market.
Our core banking system upgrade is targeted for late
2020. We expect to make considerable headway in
our digital capability with a number of projects set to
be delivered.
Efficiency
Apart from seeking efficiency through technology, we
continue to review our products and processes.
In particular, this year we have reduced the
processing cost per loan while consistently providing
very good turnaround times.
In May 2019, we initiated a Broker Journey Review
by engaging with mortgage brokers who helped us
identify key areas that would deliver efficiency as
well as a better customer and broker experience.
Since then, a raft of technology and process
optimisation initiatives have been progressively
rolled out and we have consistently improved our
turnaround times delivering an average of five
business days to decision since February 2020.
This year, we also commenced testing of ‘just in
time’ customer experience surveys with a goal
of understanding our customer experiences and
identifying additional areas of improvement for our
products and processes.
We continued our simplification program with the
conversion of multiple legacy products and the
winding up of products and product features that we
considered are low value. This also supports our
risk and compliance management given increasingly
more complex product compliance requirements
such as Open Banking and product Design and
Distribution Obligations in the year ahead.
Strength
We have maintained our focus on strengthening the
bank by enhancing staff capabilities through our
learning and development program and by fostering
the right culture that continues to balance our
stakeholder demands.
We ensured continued focus on incident reporting,
reducing errors, developing risk audit processes,
enhancing cyber risk resilience and building our
fraud detection capability.
We revamped our customer feedback and dispute
resolution processes to ensure timely and effective
responses.
Non-Organic Growth
We continue to review potential merger and
acquisition, fintech and other partnering
opportunities as an opportunity to grow scale and
this remains an important part of our strategy.
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Social Responsibility
We are very conscious
of the impacts that our
business activities have
on people and the world
around us.
Our People
We are passionate about increasing professional
and personal development of the teams
responsible for managing our relationships.
Our learning and development program is
designed to improve the knowledge and
capability of our staff and to support them in
carrying out their roles effectively and efficiently.
We maintain a number of human resource
policies to assist our people to act responsibly,
to protect them and our customers, and in which
they commit to helping us meet our obligations.
In working together, we ask that our people
understand and commit to our Mission, Vision
and Values – EMPOWER.
We also continue to adopt strategies to improve on
the social and emotional health and wellbeing of our
people by playing our role in keeping our employees
engaged, healthy and productive both at work and in
their everyday life. In particular, the support of our
people during the COVID-19 pandemic has been a
significant focus for us.
SUSTAINABILITY
Conduct and Ethics
We are committed to
achieving outstanding
customer service,
performance standards
and returns to provide
value to our shareholders.
In achieving these outcomes, we always strive to not
compromise our values, ethics and principles.
Under our Code of Conduct and Ethics, we ask all
our employees and business partners to demonstrate
honesty, integrity and trust in all their dealings. We
ask them to set an example for others to follow. We
also seek to recognise those that demonstrate these
positive behaviours.
We encourage our people to speak up without fear of
retribution when these behaviours are threatened or are
compromised. Our Whistle-blower Protection Policy allows
employees to make confidential, anonymous submissions
regarding any misconduct or dishonest or illegal activity
that has occurred.
We seek to comply with relevant laws in relation to
workplace conditions. This includes supporting diversity
in the workplace and a zero tolerance for any form of
discrimination or harassment.
We are also committed to developing, maintaining and
improving systems and processes to avoid being complicit
in human rights violations. In 2019/20, in keeping with
the Modern Slavery Act 2018, we undertook actions
to mitigate the potential for our activities to indirectly
support slavery and human trafficking. This included
identifying and reviewing agreements with high-risk
suppliers and developing policies and processes which are
designed to assist us to identify, assess and mitigate this
risk.
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Our Customers
Our desire to grow our business is underpinned
by positive customer experiences, loyalty and
advocacy as well as supporting customers in
socially responsible ways.
Financial Wellbeing
Apart from providing products and services that
help our customers manage their finances, we are
committed to supporting their overall financial
wellness. Our products can also help them grow
their wealth for tomorrow or we can arrange to
provide protection to insure their assets against
unexpected loss.
We have never been more conscious of supporting
the financial wellbeing of our customers than
through the COVID-19 pandemic where some of
our customers were left concerned about their
finances and financial future. This includes changes
to superannuation, investments and government
benefits, job changes and losses and impacts on
household budgets.
Apart from the measures we adopted to support
loan customers, we directed customers towards
Government support and provided access to other
resources that helped them to make appropriate
financial decisions.
Through our partner National Seniors Australia,
we directed our senior customers to the Older
Australians COVID-19 Support Hotline (1800 171
866) launched in conjunction with the Federal
Government Department of Health. The Hotline
is available to seniors needing a listening ear, a
friendly voice or help on what COVID-19 means for
their circumstances.
For customers seeking more personalised financial
advice, we were able to direct customers to our
partners at Alliance Wealth and Financial Advice
Matters (FAM). FAM have also been supporting
employers with financial wellness education for
workplaces.
Complaints & Dispute Resolution
We see feedback, including complaints, as an
opportunity to help and understand our customers
and to improve our products, procedures and
services. Effective resolution means we also retain
customers who might otherwise go elsewhere.
Our Complaints Management Policy and dispute
resolution process includes assignment of
responsibility, full transparency and a commitment
to agreed resolution timeframes.
We are also a member of the Australian Financial
Complaints Authority for when complaints remain
unresolved.
Responsible Lending
As an Australian Credit Licensee and under the
National Consumer Credit Protection Act (NCCP),
we will always seek to meet our responsible lending
obligations.
To achieve this our credit approval processes
include making reasonable enquiries about the
consumer and making a preliminary assessment
whether the proposed credit is “not unsuitable” for
the consumer.
These responsible lending obligations are
incorporated into our lending policies and
procedures and relevant staff are required to
participate in appropriate training.
Financial Hardship
We maintain policies and procedures to support
borrowers who may be unable to meet their
obligations under a credit contract due to illness,
unemployment, natural disasters, pandemic events
such as COVID19 or another reasonable cause.
We assess and manage hardship applications by
working with the customer to arrive at a reasonable
solution to assist them to overcome their hardship.
Our Community
We originated in regional Queensland communities
and community is part of our DNA. Where possible,
we support community organisations and events
through our Community Grant Scheme and we
actively encourage our staff to support worthy
causes.
In 2019/20 we participated in events such as the
Central Queensland University Open Day and the
Fraser Coast Expo, and supported causes such
as the Queensland and New South Wales Bushfire
Appeals; Jeans for Genes Day, R U OK Day, Breast
Cancer Awareness, Movember, NAIDOC Week and
the Salvation Army Red Shield Appeal.
We also launched our Community Rewards
program designed to financially benefit not-for-
profit organisations who provide referrals to us
through their network of members and supporters.
Our Environment
We are very conscious of our impact on the
environment, our community’s expectations and the
need to set an example to other businesses.
As a responsible corporate citizen, we understand
our responsibility to reduce our environmental
impact and be transparent about our environmental
approaches and performance.
We are conscious that any increase in natural
disasters and negative environmental impacts from
climate change, will impact the well-being and
livelihood of our customers.
For shareholders there is the additional risk that our
loans portfolio will be at heightened risk if major
natural disasters occur, damaging security properties
or our customer’s place of work, impacting on
their ability to meet loan repayments. Increased
likelihood of disasters such as flood or fire in
vulnerable locations also means the additional cost
of risk measures such as insurance for the bank and
our customers as well as reducing opportunity for
consumers as we seek to manage these risks. We
have a range of policies that assist in mitigating risk
in high disaster prone areas.
We proactively seek to reduce our environmental
footprint through secure destruction and recycling
of documents; promoting digital alternatives such
as eStatements; utilising energy efficient lighting
and switching off air-conditioning and electrical
appliances when not in use.
We do not finance companies engaged principally
in the exploration, mining, manufacture or export
of thermal coal or coal seam gas and we do not
intentionally invest directly in companies specialising
in these areas.
During 2020/21 we will develop a sustainable
environmental policy and associated targets.
|22
Auswide Bank Annual Report 2020
|23
Auswide Bank Annual Report 2020
Managing Risk
In protecting our
operations and
stakeholders, we have a
comprehensive risk and
compliance management
program to actively
identify and eliminate risk
where possible, and to
mitigate and minimise the
impact of those risks that
cannot be eliminated.
Strengthening our risk management approach is a
high priority with a strong Board oversight of the
risk profile and risk management, particularly with
reference to the Board determined risk appetite.
Our Risk Management Framework is underpinned by
the ‘three lines of defence’ risk management model
with accountabilities for risk ownership (the ‘first
line’), functional oversight (the ‘second line’) and
assurance (the ‘third line’).
Compliance
Following various commissions of enquiry over
recent years, the regulatory landscape is increasingly
complex for our sector. We are working hard
to remain compliant across the broad range of
obligations and expectations.
We maintain a range of internal policies and
processes that help us ensure compliance and which
support good governance.
In 2020/21, the Open Banking regime will create
further compliance obligations and challenges, but
also provide us with opportunities in the future.
Business Continuity
We strive to maintain a minimum level of operational
capacity including the provision of services for
key stakeholders by minimising the impact that a
disruptive event could have on the viability of our
organisation and provision of customer services.
Our Business Continuity framework includes
ensuring the welfare of our personnel and customers;
protecting our reputation; maintaining customer
satisfaction; enhancing organisational stability;
reducing risk exposures and potential economic
losses; minimising legal liabilities and anticipating
and satisfying future regulatory requirements.
Data Security
Privacy
We are committed to protecting the data we hold and
manage, particularly in a digital world.
We have embedded a culture of privacy in keeping
with the Australian Privacy Principles.
Our IT security risk management framework
addresses our approach to managing data security
through a range of policies, standards, guidelines
and procedures. This framework is based on
clearly defined security principles and defined roles
and responsibilities to ensure the achievement of
effective IT and data security risk management
outcomes.
Risk assessments are completed regularly and
applicable controls and security vulnerabilities are
assessed regularly using various monitoring and
testing techniques.
Our Privacy Policy is our commitment to customers,
while our Privacy Management Plan provides a
framework to ensure we are able to meet that
commitment.
All our people are provided with privacy training to
understand obligations and considerations relevant
to identifying, assessing and managing privacy risks.
|24
Auswide Bank Annual Report 2020
|25
Auswide Bank Annual Report 2020
FINANCIAL
REPORT
28
44
47
48
49
50
54
DIRECTORS’ STATUTORY REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
56
108
110
116
118
122
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
CORPORATE GOVERNANCE SUMMARY
SHAREHOLDER INFORMATION
FINANCIAL GLOSSARY
|26
Auswide Bank Annual Report 2020
|27
Auswide Bank Annual Report 2020
DIRECTORS’
STATUTORY
REPORT FOR
THE YEAR
ENDED 30 JUNE
2020
Review and results of operations
The continued successful implementation of our strategy
has led to a further year of strong operational performance
for the company with improvement across all key
performance areas. We have continued to achieve success
in balancing our funding costs with our lending growth
despite a low growth and highly competitive market and we
will continue to invest for growth and improved customer
outcomes.
COVID-19 has had a material impact on some of our
customers and we have provided support as we assist
these customers work through the challenges the
pandemic has created. Consequently, our statutory Net
Profit After Tax (NPAT) has been impacted as we have
prudently provisioned for possible impacts to our loan
book. Nonetheless, business momentum has been strong,
funding costs materially improving and the bank has
improved profitability for a further year.
Strategically the environment has led us to re-consider
our Business Banking growth strategy. Subsequently we
have withdrawn from new customer acquisition and have
reduced our resources in the area. Future focus will be on
servicing our existing customers. This will allow greater
attention to areas identified as future growth opportunities
for the organisation.
Results
Our financial results are strong.
NPAT (adjusted for the increase in expected credit loss
assumptions adopted due to the effects of COVID-19)
for the consolidated entity for financial year 2019/20
was $20.114m. Specific forward looking macroeconomic
environment adjustments of $2.3m to expected credit
losses have been excluded and no other adjustments have
been made to statutory profit. This corresponding figure in
the prior year was $17.201m. This represents an increase
of 16.9%.
The statutory consolidated NPAT for the 2019/20 financial
year was $18.504m compared to the result of $17.201m
for the 2018/19 year. This represents an increase of 7.6%.
The loan book of Auswide Bank Ltd (grossed up for
Investments in Managed Investment Schemes reported
in Other financial assets in the Statement of Financial
Position) increased from $3.131b at 30 June 2019 to
$3.266b at 30 June 2020, an increase of $135m. This
represents growth of 4.3% for the 2019/20 financial
year. The loan book growth compares favourably with the
Reserve Bank of Australia (RBA) Financial Aggregates
data which discloses credit provided to the private sector
increased by 2.9% over the 12 months to June 2020.
Digital branch and automation
Arrears and collections
Home loan settlements across the financial year totalled
$677.180m, an increase of 9.93% on the $616.036m in
home loan settlements for 2019/20.
Net Interest Margin
The Net Interest Margin (NIM) has been strongly managed
and despite interest rates at historic lows and the
continuance of highly competitive housing finance markets
across the 2019/20 financial year our NIM improved.
Uncertainty around the impact of COVID-19 has also added
to margin pressure. In order to achieve stable or improving
NIM, the bank closely monitors the competitive pricing of
products and continues to proactively manage assets and
liabilities.
The net interest margin for the 2019/20 year was 1.97%
compared to 1.87% in the 2018/19 financial year.
Consumer lending
The consumer lending portfolio increased from $62.312m
at 30 June 2019 to $80.508m at 30 June 2020, an
increase of $18.196m. The growth in consumer lending
has contributed significantly to the operating results of the
Company, with $6.459m in interest income derived from
the portfolio in the financial year.
Deposits and funding
Customer deposits have increased significantly during
the year from $2.373b at 30 June 2019 to $2.620b,
an increase of $247m. This has increased the level of
customer deposits as a percentage of total funding base
from 71.45% at 30 June 2019 to 74.51% at 30 June
2020.
Auswide Bank has utilised the RBA term funding facility
(TFF) by drawing $49.793m in two tranches by 30 June
2020. There are plans to further utilise this funding source
by drawing a further $40m by September 2020, which will
take the total funding utilised by Auswide Bank to its limit
of $90m. The funding under this facility is locked in at a
rate of 0.25% for a period of three years.
The increase in customer deposits and utilisation of the
RBA TFF has allowed Auswide Bank to diversify its funding
sources and further reduce its reliance on securitisation
funding.
Customers
The review of the Broker home lending business has
continued to improve the customer experience and end to
end processes and operations. There have been significant
improvements in the volume of applications processed and
the average days to decision on loan files throughout the
financial year.
Ongoing investment in the Broker business technology
includes artificial intelligence learning to analyse, validate,
redact and categorise documents and improved document
management systems.
Technology
The upgrade of the core banking system is on schedule
for completion in Q1 of FY21. This will enable the Open
Banking processes and services which commence in
October 2020 as well as providing the platform for the bank
to advance the payments and on-line services provided to
customers.
The Auswide Bank branch network delivers a customised
service within the Queensland footprint. The strategic goal
is to create an end-to-end digital banking experience and
the bank has initiated projects to deliver online application
capabilities to provide services to customers Australia wide.
Total arrears greater than 30 days past due (excluding the
effects of hardship accounts) decreased from $14.302m
to $12.559m. Arrears have decreased as a percentage of
the Group’s total loan book from 0.46% at 30 June 2019 to
0.39% at 30 June 2020.
Key components of the digital banking strategy are:
Support for customers during COVID-19
• the Apply program which allows existing and new
customers to apply for Auswide Bank products online;
• the Interact program to provide solutions that satisfy the
“digital savvy” customer interaction expectations;
• the Transact program which provides customers with a
new digital experience for their day-to-day transacting
activities; and
• the Personalise program which provides a method to
have a deeper understanding of customers’ wants and
needs and delivers at exactly the right moment.
Capital
The capital adequacy ratio for the Auswide Bank Group
at 30 June 2020 was 12.95% (2019: 13.79%). The
tier 1 capital ratio at 30 June 2020 was 11.09% (2019:
11.76%). The capital remains materially above the Board’s
capital targets and meets APRA’s unquestionably strong
minimums.
The final dividend for FY20 will be accompanied by
a Dividend Reinvestment Plan and the bank will be
completing a tier 2 Subordinated Debt placement in Q1
of FY21 which will further strengthen the group’s capital
position.
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.
Lending Outlook
The growth in the loan book across FY20 is expected to
be strong across the first half of FY21. This growth will
be assisted by Auswide Bank’s participation in the First
Home Loan Deposit Scheme. This scheme allows eligible
borrowers to be able to apply for loan funding with higher
than usual loan to valuation ratios without the requirement
to pay the lender’s mortgage insurance (LMI) because up
to 15% of the value of the property being purchased that is
financed can be covered via federal government guarantee.
Branch network
The Company has a diversified branch network consisting
of 18 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.
There is focus on ensuring future investments are aligned
with growth opportunities and strategic initiatives, ensuring
a consistent review of historical investments including
branches.
The bank maintained a focus on supporting customers
and staff during the period of the COVID-19 pandemic. All
branches remained open and office staff worked remotely
where possible until restrictions were eased across
Queensland.
Customers were assisted with repayment deferrals and
interest only conditions to assist during this period of
uncertainty and financial stress.
Support was provided to 1,014 account holders
representing a total loan value of $288m or 9% of the total
loan book. There were 926 residential loan accounts valued
at $275m (9%), 40 Business Banking accounts totalling
$12m (16%) and 48 personal loan accounts amounting to
$1m (4%) which were in receipt of supportive measures.
Of the loans receiving assistance, Queensland represented
74% or 787 loans ($212m). New South Wales accounted
for 14% or 102 loans ($41m) and Victoria represented 8%
of the total, or 87 loans ($23m) which were in receipt of
support. The remainder was allocated to loans across other
states.
In preparation for the end of the deferral period, Auswide
staff are personally contacting customers to discuss the
current status of the loans and assistance offered. Early
trends indicate that more than 85%of customers have
already commenced repayments or will resume regular
loan repayments at the end of the deferral period.
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 higher risk locations, products or services.
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 the opportunity
presents itself and the Board will review any offers made
which may complement the overall operations of the Group.
Dividends
A fully franked interim dividend of 17.0 cents per ordinary
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Ltd
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Financial
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|28
Auswide Bank Annual Report 2020
|29
Auswide Bank Annual Report 2020
share was declared and paid on 16 March 2020 (25 March
2019: 16.0 cents).
A fully franked final dividend of 10.75 cents per ordinary
share has been declared by the Board and will be paid on
18 September 2020 (20 September 2019: 18.5 cents).
The Board has adopted a conservative approach to the final
dividend recognising current uncertainties and stresses in
the market. Guidance from APRA that ADIs seek to retain
at least half of their earnings when making decisions on
capital distributions has also been taken into consideration
in declaring the final dividend.
Going concern
The Board of Directors of Auswide Bank have assessed that
the going concern basis of accounting remains appropriate,
with no material uncertainty.
The strength of the financial results for H1 of FY20
continued across H2 reflecting robust operations during
Q4. Despite the impacts of COVID-19 in the 4 months
for June 2020, the FY20 NPAT was $18.504m, up 7.6%
on the $17.201m reported for FY19. The underlying
NPAT (excluding the COVID-19 related provisions) was
$20.114m, up 16.9% on the $17.201m for FY19. There
are also indicators to support confidence in operations for
FY21, including forecast performance and cash flows, as
well as actual loan flows, NIM maintenance and expense
management in July 2020.
Liquidity also remains strong, with various facilities
available to be utilised if required. COVID-19 has not had a
material impact on Auswide’s ability to perform its banking
activities, with branches remaining open and lending
business continuing with no significant issues experienced.
Any loan contract changes relating to COVID-19 have not
resulted in any material impact to ongoing operations or
performance.
Despite the economic impact of COVID-19, Auswide has
performed well and expects that this will continue; the
Board of Directors have therefore been able to assess that
Auswide Bank remains a going concern.
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. However, the Board of Directors continues
to remain vigilant of any unforeseen risks which may arise
as a result of rapidly evolving situations arising from the
economic impact of COVID-19.
Directors
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.
Directors’ meetings
During the financial year, 20 meetings of the Directors, 6 meetings of the Audit Committee, 4 meetings of the Remuneration
Committee and 5 meetings of the Risk Committee were held, in respect of which each Director attended the following
number:
BOARD
AUDIT
REMUNERATION
RISK
HELD
ATTENDED
HELD
ATTENDED
JS Humphrey
B Dangerfield
GN Kenny
MJ Barrett
SC Birkensleigh
20
20
20
20
20
19
20
20
20
20
6
6
6
6
6
5
6
6
6*
6
HELD
n/a
4
4
4
4
ATTENDED
n/a
4
3
1*
4
HELD
n/a
5
5
5
5
ATTENDED
n/a
5
5
5*
5
* Mr Barrett who is not a member of the Audit, Risk or Remuneration Committees, attended the Audit, Risk and
Remuneration 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
187,589
43,291
15,000
Related party disclosure
No persons or entities related to key management personnel provided services to the Company during the year.
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Ltd
Corporate
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Financial
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The names and particulars of the Directors of the Company
in office during or since the end of the financial year are:
Mr John S Humphrey LL.B
Mr Humphrey was appointed to the Board on 19 February
2008, and was appointed Chairman following the 2009
Annual General Meeting. He is a Senior Consultant in the
Brisbane office of international law firm, King & Wood
Mallesons, where he specialises in commercial law,
corporate mergers and acquisitions. He served as Executive
Dean of the Faculty of Law at Queensland University of
Technology (until June 2019). He was a Non-Executive
Director of Downer-EDI Limited (until November 2016)
and a Non-Executive Director of Horizon Oil Limited (until
November 2018). Mr 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 he is Chairman of the
Institutes Audit and Risk Committee and Chairman of the
Institutes Remuneration 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. He has 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 is currently a Non-Executive Director of
Impact Community Services, and served as a Director of
MoneyPlace Holdings Pty Ltd until January 2018. Mr Barrett
is an Executive Director.
|30
Auswide Bank Annual Report 2020
|31
Auswide Bank Annual Report 2020
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 KPIs towards long-term shareholder interests;
• variable performance based pay for Senior Executives
including a short term incentive and a long-term
incentive plan subject to an extended period of
performance assessment. Short-term and long-
term incentives performance criteria are aligned to
performance measures and targets based on a number
of differently weighted criteria including financial,
sustainability including risk and compliance gateways,
staff and customer focused and satisfaction of BEAR
accountability obligations;
• 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; and
• the exercise of Board discretion as an ultimate means
to mitigate unintended consequences of variable
remuneration and to preserve the interests of
shareholders.
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 variable STI
or LTI share based remuneration.
Remuneration of Key Management Personnel
Key Management Personnel (KMP) are defined as persons
having authority and responsibility for planning, directing
and controlling the activities of the entity, directly or
indirectly, including any Director (whether Senior Executive
or otherwise) of the entity. As such, the KMP comprises of
the non-Executive Directors, the Managing Director and
directly reporting Senior Executives.
Managing Director
The Managing Director’s remuneration package includes
fixed annual remuneration, variable remuneration in short-
term and long-term incentives, benefits, superannuation,
retirement and termination compensation as determined
by the Board on the advice of the Board Remuneration
Committee (the Committee). At its discretion, the
Committee will seek external advice on the appropriate
level and structure of the Managing Director’s total
remuneration package.
remuneration arrangements for the Managing Director with
due consideration to the law and corporate governance
provisions to ensure that:
• there are sufficiently robust performance measures and
targets that encourage superior performance and ethical
accountable behaviour;
• that the performance of the Managing Director is
measured against individual and company targets; and
• any new or varied contract is disclosed in accordance
with any governance, accounting and legal requirements.
Remuneration of the Managing Director for 2019/20 was
subject to review and recommendation of the Remuneration
Committee and ratification by the Board.
Senior Executives / Key Personnel
The remuneration packages of the Senior Executives
who report directly to the Managing Director, including
Executive Directors, and any other Responsible Persons
(as defined by APRA’s Prudential Standards), Accountable
Persons (as defined by BEARS) and any other key persons
considered by Auswide Bank to be in a role with material
influence, are reviewed and recommended to the Board on
the recommendations of the Committee and the Managing
Director.
Similarly, the Committee and Managing Director may seek
external advice on the appropriate level and structure of
the Senior Executives remuneration packages.
An annual review and recommendations to the Board in
relation to the remuneration structure will apply to Senior
Executives to:
• establish and maintain a process to set robust
performance measures and targets that encourage
superior executive performance and ethical behaviour;
and
• oversee the process for the measurement and
assessment of performance.
The remuneration for Senior Executives in 2019/20 was
subject to ratification by the Remuneration Committee.
Remuneration Reward Framework
Auswide Bank’s Remuneration Reward framework includes
a range of components to focus the Managing Director
and Senior Executives on achieving Auswide Bank’s
strategy and business objectives. Auswide Bank’s overall
philosophy is to adopt, where possible, a performance
based methodology using a balanced scorecard which
links remuneration to the Bank’s financial results and non-
financial criteria.
The Remuneration Reward framework is designed to:
• reward those who deliver the highest relative
performance consistent with Auswide Bank’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 variable remuneration - short term incentives
(STI) and long term incentives (LTI) performance rights
with deferred vesting.
On an annual basis, a review will be performed of the
In setting an individual’s Remuneration Reward framework,
the Committee considers:
• input from Auswide Bank’s Managing Director on the
balanced scorecard for Senior Executives who report
directly to the Managing Director;
• market data from comparable roles in the financial
services industry;
• individual and Auswide Bank’s performance; and
• external remuneration advice, where necessary.
Each individual’s actual remuneration will reflect:
• the degree of individual achievement in meeting
key performance measures under the performance
management framework and balanced scorecard;
• parameters approved by the Board based on Auswide
Bank’s financial and risk performance and other
qualitative factors;
• satisfaction of ‘Accountability Obligations’ under section
37CA of the Treasury Laws Amendment (Banking
Executive Accountability and Related Measures) Act
2018 for the vesting of any Performance Rights;
• Auswide Bank’s Earnings per Share (EPS) and Return on
Equity (ROE) over a defined period; and
• the timing and level of vesting of Performance Rights and
deferral of shares.
Components of the Remuneration Reward framework
The components of the Remuneration Reward framework
consists of the following:
• Fixed Annual Remuneration (FAR) provided as cash and
any contracted additional benefits (including employer
superannuation);
• variable remuneration in cash based short-term
incentives (STI) reflecting both individual and business
performance for the current financial year that supports
the longer term strategic objectives of Auswide Bank;
and
• variable remuneration in equity based long-term
incentives (LTI) provided to drive management decisions
focused on the long-term prosperity of Auswide Bank
through the use of challenging long term performance
hurdles (EPS & ROE) and satisfaction of accountability
obligations under BEAR.
Variable Remuneration - Short Term Incentives (STI)
Each year, key performance indicators including financial
and non-financial measures (KPIs) for the Managing
Director are set by the Board Remuneration Committee and
approved by the Board. The Managing Director sets KPIs
for the Senior Executives which is presented to the Board
Remuneration Committee for approval.
The STI is a maximum contracted value calculated as a
percentage of the FAR and is payable annually in respect of
each financial year as cash. Payment of STI 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 Senior Executive reward
and the key business drivers of long term shareholder
value. The KPls are measured relating to the Bank’s
financial performance and non-financial performance
accountabilities and objectives. The measures are chosen
and weighted to best align the individual’s reward to the
KPls of the Company and its overall performance. KPls are
weighted towards the achievement of profit growth targets.
The financial performance objectives are determined in
line with the yearly financial budget set and approved by
the Board. The non-financial objectives vary with position
and responsibility and include measures such as achieving
strategic outcomes, customer results, sustainability which
includes compliance and support of the Company’s risk
management policies and culture, customer satisfaction,
communication and staff development.
Impact of individual performance on STI rewards
At the end of the financial year, the Committee assesses the
actual performance of the Bank and the Managing Director
against the KPI balanced scorecard set at the beginning
of the financial year. Based upon that assessment, a
recommendation is made to the Board Remuneration
Committee as to the STI payment.
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After individual assessment of their performance measures,
the Managing Director will recommend to the Committee
the STI payments for Senior Executives for approval by the
Board Remuneration Committee.
Financial
statements
Impact of Business Performance on STI rewards
Payment of an STI to the Managing Director and Senior
Executives 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 - e.g. at a minimum
to ensure that no breach of capital adequacy or liquidity
policy thresholds occurs.
For the purposes of calculating the STI pool each year, the
financial performance of Auswide Bank is determined by
a mix of targeted financial earnings, EPS and ROE. 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.
STI Risk Adjustment
STI reward outcomes can be adjusted for risk at a number
of levels.
Individual Scorecards - Senior Executives will have specific
risk related measures related to their role included in their
scorecard and are aligned with the Risk Appetite Statement
where appropriate.
Compliance Gateway - Senior Executives must support
Auswide Bank’s risk and compliance culture. Individuals
who do not pass the compliance expectations of their role
will have their STI reduced in part, or in full, depending on
the severity of the breach.
Risk Adjustment of Business Outcomes - whilst
performance is assessed against compliance with the
agreed risk measures and Risk appetite, the Committee
may recommend to the Board an adjustment of the
financial outcomes upon which STI rewards are determined
based on a qualitative overlay that reflects the Auswide
Bank’s management of business risks, shareholder
expectations and the quality of the financial results.
Notes to the
financial
statements
Directors’
declaration
Independent
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report to the
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Corporate
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summary
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|32
Auswide Bank Annual Report 2020
|33
Auswide Bank Annual Report 2020
Serious Breach of Duty
The Board also has discretion to adjust the STI payment
down (potentially to zero) in the event that the Managing
Director or a Senior Executive commits a serious breach of
duty including their accountability obligations under BEAR.
If the results on which any STI reward was based are
subsequently found by the Board to have been the subject
of deliberate management misstatement, the Board may
require repayment of the relevant STI, in addition to any
other disciplinary actions.
Short Term Incentive payments relating to the financial
year ended 30 June 2019
Performance based payments were made to Senior
Executives 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 2019. Cash
payments were paid on the 03 October 2019, and allocated
to Senior Executives as follows;
• Mr MJ Barrett (Managing Director): $60,000;
• Mr WR Schafer (Chief Financial Officer): $18,563;
• Mr SM Caville (Chief Information Officer) (cease date
17/04/2020): $12,052;
• Mr D Hearne (Chief Customer Officer): $15,308;
• Mrs GM Job (Chief People and Property Officer):
$12,086;
• Mr CA Lonergan (Chief Risk Officer): $12,270; and
• Mr MS Rasmussen (Chief Operating Officer): $12,692.
Long term Incentive (LTI) - Performance Rights Plan
(PRP)
The Auswide Bank Performance Rights Plan (PRP) was
established by the Board to encourage the Executive
Management Team, comprising of the Managing Director
and Senior Executives, to drive the long-term prosperity
of Auswide Bank and have a greater involvement in the
achievement of the Bank’s objectives.
Offers under the Performance Rights Plan
Under the PRP invitation, an offer may be made to
members of the Executive Management Team each year as
determined by the Board. The maximum value of the offer
is determined in the executive’s contract. The maximum
value of the LTI is up to the maximum contracted amount
for the Managing Director and up to the contracted
percentage or fixed amount for the Senior Executives.
The number of performance rights granted will be
calculated based on the volume weighted average price
of Auswide Bank shares over the first five trading days
following the release of Auswide Bank’s annual results
announcement (exclusive of announcement date).
Each performance right will entitle the Senior Executive
to receive one Auswide Bank share upon vesting (or the
cash equivalent value), subject to the satisfaction of the
vesting conditions over the vesting period. To the extent
that performance rights vest, the relevant number of shares
will be allocated. Shares allocated following vesting will be
subject to a disposal and trading restriction until the fourth
anniversary of the grant date (the restriction period).
Performance rights do not give the Senior Executive any
legal or beneficial interest in any shares unless and until
they are vested and shares are delivered or allocated. They
will not receive any dividends or other shareholder benefits,
including voting in respect of their performance rights.
The PRP provides for the Trustee of the Auswide Bank Ltd
employee share trust to acquire, allocate and hold shares,
as relevant. The Trustee is funded by the Company to
acquire shares, as directed by the Board, either by way of
purchase from other shareholders on market, or issue by
the Company.
Upon vesting, the Trustee will allocate shares to each
member of the Senior Executive Team. Any shares to be
allocated to the Managing Director under this Plan may
require prior shareholder approval in accordance with ASX
Listing Rules.
Vesting of performance rights
In general, performance rights will vest on the vesting date
based on satisfaction of the following vesting conditions:
• achievement of the applicable performance
measurements and conditions over the vesting period;
and
• continued employment with a Group member until the
vesting date (provided the Senior Executive has not given
notice of resignation and has not received a notice of
termination of employment).
The PRP invitation offer letter provides for the allocation
to the Senior Executive Team of fully paid ordinary shares
in the Bank upon vesting of performance rights where
accountability obligations, performance and vesting
conditions specified by the Board are satisfied over a set
vesting period. In addition, a further restriction period will
apply to the shares following vesting and during this period,
the accountability obligation must be satisfied, otherwise
shares may be clawed back, the vesting period and
restriction period will be outlined in the PRP invitation offer
letter and will be in line with any deferred remuneration
obligations under BEAR for Accountable Persons.
Both the vesting period and restriction period are set by the
Board at the time of offer and are at its absolute discretion.
Satisfaction of conditions - accountability obligations
Vesting of performance rights will be subject to obligations
that apply to ‘Accountable Persons’ under section 37CA
of the Treasury Laws Amendment (Banking Executive
Accountability and Related Measures) Act 2018, which are
to:
• act with honesty, integrity, and with due skill, care and
diligence;
• deal with APRA in an open, constructive and cooperative
way; and
• take reasonable steps in conducting business to prevent
matters from arising that would adversely affect the
ADI’s prudential standard or reputation.
In addition, during the Restriction Period, the obligations
must also be satisfied, otherwise shares may be clawed
back.
Testing of vesting performance measurements and
conditions on PRP offers 2019
Testing of the performance measurements and conditions
will occur shortly after the end of the vesting period (which
will normally occur once the full year annual results have
been finalised). Based on the testing results, and provided
the Senior Executive remains employed with the Bank until
vesting date (being the date on which Board determines
that the vesting conditions are met), the number of rights
that will be eligible to vest (if any) will be determined by the
Board.
Upon vesting of performance rights, the Senior Executive
will be allocated the relevant number of shares in respect of
vested performance rights (or receive the cash equivalent
value). The number of shares received may be adjusted in
certain circumstances (such as if the Company undertakes
a consolidation, bonus issue or capital reconstruction) as
set out in the PRP rules.
The Board retains discretion to adjust the number of
performance rights which vest down (including to zero) to
protect the financial soundness of the Company, including
to ensure that breaches of capital adequacy or liquidity
policy thresholds do not occur. In addition, any reward
payable to any member of the Senior Executive Team under
any PRP offer is subject to reassessment and possible
forfeiture, if the results on which the LTI reward was
based, are subsequently found to have been the subject of
deliberate management misstatement.
to the resultant equity price risk before the equity-linked
remuneration is fully vested and able to be sold for cash by
the recipient.
Any person who breaches this requirement will constitute
a breach of duty and as such will involve disciplinary action
and the risk of dismissal under the terms of the Executive’s
contract.
Treatment of performance rights in other circumstances
in PRP offers 2019
If a Senior Executive ceases employment prior to the
vesting date, the treatment of unvested performance rights
will depend on the circumstances of cessation.
Where employment is ceased prior to the relevant vesting
date due to resignation, termination for cause or gross
misconduct, all of the unvested performance rights will
lapse at cessation (subject to the Board’s discretion to
apply a different treatment, in accordance with the PRP
rules).
Where employment is ceased for any other reason before
performance rights vest, a pro-rata number of unvested
performance rights (based on the vesting period elapsed)
will continue “on-foot”, and will be tested at the original
vesting date and vest to the extent that the relevant vesting
conditions have been satisfied (ignoring any service-related
conditions). Note that the PRP rules provide the Board with
discretion to determine that a different treatment should
apply in respect of performance rights.
Restriction period for sale of shares once vested on PRP
offers 2019
The PRP rules also contain provisions in relation to:
• treatment of awards in the event of a variation of capital
or a change of control; and
• treatment of awards due to fraud, gross misconduct or
material misstatement.
The treatment of awards under the PRP rules will be subject
to the requirements of the BEAR.
Actual and potential LTI 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.
Shares allocated upon vesting of the performance rights
will be subject to trading restrictions until the end of the
restriction period which is generally the fourth anniversary
of the grant date.
However, the restriction period may end earlier in certain
circumstances including:
• the date on which the Board determines an Event has
occurred (refer rule 11 of the PRP Rules), subject to the
requirements of the BEAR accountability obligations; and
• any other date determined by the Board, subject to the
requirements of BEAR.
Senior Executives cannot sell, transfer or otherwise deal
with their shares until the end of the restriction period.
During this period, Senior Executives will still be entitled
to receive dividends and exercise their voting rights along
with other shareholders.
The trading restriction may be enforced during the
restriction period by either imposing a holding lock on
the shares held by the Senior Executive or by the shares
being held in the employee share trust on behalf the Senior
Executive.
Shares will remain subject to the requirements of the BEAR
throughout the restriction period, including the ability for
the Board to clawback shares if there is a failure to meet
“Accountability Obligations”.
Prohibition from Hedging
The Board Remuneration Policy prohibits persons covered
by paragraph 57(a) of APRA Prudential Standard CPS510
- Governance who receive equity or equity-linked deferred
remuneration from hedging their economic exposures
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|34
Auswide Bank Annual Report 2020
|35
Auswide Bank Annual Report 2020
MJ BARRETT
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
CA LONERGAN
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
2015 offer
2016 offer
2017 offer
2018 offer
5,608
4,762
4,762
2,446
2,446
2,446
5,811
5,811
5,812
2019 offer
21,154
1/7/2019
1/7/2019
1/7/2020
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
5,608
4,762
-
2,446
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,762
-
2,446
2,446
5,811
5,811
5,812
21,154
WR SCHAFER
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
2016 offer
2017 offer
2018 offer
2019 offer
998
998
1,044
1,044
1,044
1,220
1,220
1,221
5,288
1/7/2019
1/7/2020
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
998
-
1,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
998
-
1,044
1,044
1,220
1,220
1,221
5,288
SM CAVILLE
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
2016 offer
2017 offer
2018 offer
2019 offer
GM JOB
2016 offer
2017 offer
2018 offer
2019 offer
865
865
1,044
1,044
1,044
1,220
1,220
1,221
5,288
1/7/2019
1/7/2020
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
865
-
1,044
-
-
-
-
-
-
-
865
-
1,044
1,044
1,220
1,220
1,221
5,288
-
-
-
-
-
-
-
-
-
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
815
815
1,044
1,044
1,044
1,220
1,220
1,221
5,288
1/7/2019
1/7/2020
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
815
-
1,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
815
-
1,044
1,044
1,220
1,220
1,221
5,288
2016 offer
2017 offer
2018 offer
2019 offer
971
971
1,044
1,044
1,044
1,220
1,220
1,221
5,288
1/7/2019
1/7/2020
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
971
-
1,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
971
-
1,044
1,044
1,220
1,220
1,221
5,288
MS RASMUSSEN
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
2016 offer
2017 offer
2018 offer
2019 offer
998
998
1,044
1,044
1,044
1,220
1,220
1,221
5,288
1/7/2019
1/7/2020
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
998
-
1,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
998
-
1,044
1,044
1,220
1,220
1,221
5,288
DR HEARNE
No. shares
Vesting date
Vested in 19/20
year
Lapsed/ forfeited
in 19/20 year
Not yet assessed
for vesting
2017 offer
2018 offer
2019 offer
1,247
1,247
1,247
1,312
1,312
1,312
7,040
1/7/2019
1/7/2020
1/7/2021
1/7/2020
1/7/2021
1/7/2022
1/7/2022
1,247
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,247
1,247
1,312
1,312
1,312
7,040
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Corporate
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Shareholder
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Financial
glossary
|36
Auswide Bank Annual Report 2020
|37
Auswide Bank Annual Report 2020
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|38
Auswide Bank Annual Report 2020
|39
Auswide Bank Annual Report 2020
Loans to key management personnel
Equity holdings and transactions
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 rates
available to the general public; therefore, this interest rate would approximate an arm’s length interest rate offered by the
Company.
In addition, loans to staff 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 2020
Directors
Executives
Total: Key management
personnel
Balance
30 June
2019
(1,762,889)
(1,913,024)
Interest
charged
$
55,409
53,845
(3,675,913)
109,254
Loans for the year ended
30 June 2019
Directors
Executives
Total: Key management
personnel
Balance
30 June 2018
$
(1,846,339)
(172,494)
(2,018,833)
Individuals with loans
above $100,000 in
reporting period
Balance
30 June 2019
$
Interest
charged
$
68,040
30,207
98,247
Interest
charged
$
Write-off
$
-
-
-
Write-off
$
-
-
-
Balance
30 June
2020
(1,655,187)
(2,306,636)
(3,961,823)
Balance
30 June 2019
$
(1,762,889)
(1,913,024)
(3,675,913)
Number in
Group
30 June
2020
1
6
7
Number in
Group
30 June
2019
1
6
7
Write-off
$
Balance
30 June 2020
$
Highest in
period
$
Directors
MJ Barrett
Executives
WR Schafer
DR Hearne
CA Lonergan
(1,762,889)
55,409
(388,483)
(1,411,469)
-
8,581
44,059
1,206
-
-
-
-
(1,655,187)
(1,732,044)
(341,582)
(388,483)
(1,386,820)
(1,411,469)
(530,635)
(534,099)
* Actual interest charged is affected by the use of the Company’s offset account.
Does not include SM Caville, GM Job or MS Rasmussen as their loans were less than $100,000.
The following table is in respect of ordinary shares held directly, indirectly or beneficially by key management personnel.
Balance 30 June
2019
Received as
remuneration
Options
exercised
Net change
other
Balance
30 June 2020
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Directors
JS Humphrey
B Dangerfield
GN Kenny
MJ Barrett
Executives
WR Schafer
SM Caville (ceased
09/04/2020)
GM Job
CA Lonergan
MS Rasmussen
DR Hearne
Total
31,551
43,291
15,000
173,773
34,998
45,105
118,383
14,000
4,498
-
480,599
-
-
-
12,816
2,042
1,909
1,859
2,015
2,042
1,247
23,930
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,551
43,291
15,000
Directors’
statutory
report
1,000
187,589
(998)
-
944
(2,015)
(2,640)
(1,247)
(4,956)
36,042
47,014
121,186
14,000
3,900
-
499,573
* Balance at financial year end or the date the individuals ceased being key management personnel.
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 2020:
30 June
2020
$'000
26,498
30 June
2019
$'000
24,638
30 June
2018
$'000
25,158
30 June
2017
$'000
21,870
30 June
2016
$'000
17,606
Net profit before
tax
Net profit after tax
18,504
17,201
17,886
15,149
11,699
30 June
2020
$5.13
30 June
2019
$5.63
30 June
2018
$5.14
30 June
2017
$5.08
30 June
2016
$5.05
$4.84
$5.13
$5.63
$5.14
$5.08
17.00 cps
10.75 cps
43.80 cps
16.00 cps
18.50 cps
40.81 cps
16.00 cps
18.00 cps
42.83 cps
14.00 cps
17.00 cps
37.35 cps
14.00 cps
16.00 cps
31.20 cps
43.80 cps
40.81 cps
42.83 cps
37.35 cps
31.20 cps
Share price at
start of year
Share price at end
of year
Interim dividend
Final dividend
Basic earnings
per share
Diluted earnings
per share
Dividends franked to 100% at 30% corporate income tax rate.
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|40
Auswide Bank Annual Report 2020
|41
Auswide Bank Annual Report 2020
Indemnities and insurance premiums for officers and auditors
This Report is signed for and on behalf of the Board of Directors in accordance with a resolution of the Board of Directors.
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 2020, 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
Consulting services
2020
$
65,612
89,002
154,614
2019
$
64,449
112,344
176,793
JS Humphrey
Director
SC Birkensleigh
Director
Brisbane
26 August 2020
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|42
Auswide Bank Annual Report 2020
|43
Auswide Bank Annual Report 2020
AUDITOR’S
INDEPENDENCE
DECLARATION
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 4670
26 August 2020
Dear Board Members
Auditor’s Independence Declaration to 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.
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
As lead audit partner for the audit of the financial report of Auswide Bank Ltd for the year ended 30
June 2020, I declare that to the best of my knowledge and belief, there have been no contraventions
of:
Directors’
declaration
(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 faithfully
DELOITTE TOUCHE TOHMATSU
David Rodgers
Partner
Chartered Accountants
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|44
Auswide Bank Annual Report 2020
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network.
|45
Auswide Bank Annual Report 2020
20
FINANCIAL
STATEMENTS
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
ACCOUNT FOR THE YEAR ENDED 30 JUNE 2020
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Interest revenue
Interest expense
Net interest revenue
Other non-interest income
Total operating income
Employee benefits expense
Depreciation expense
Amortisation expense
Occupancy expense
Fees and commissions
General and administration expenses
Other expenses
Operating expenses less loan impairment
expense
Loan impairment expense
Total operating expenses
Profit before income tax expense
Income tax expense
Net profit after tax
Profit for the year attributable to:
Owners of the Company
Earnings per share
From continuing operations
Basic (cents per share)
Diluted (cents per share)
Consolidated
Company
Notes
2.1
2.1
2020
$’000
2019
$’000
2020
$’000
2019
$’000
126,252
136,352
126,252
136,352
(55,736)
(73,167)
(55,736)
(73,167)
Directors’
statutory
report
70,516
9,959
80,475
21,584
3,324
710
1,533
11,524
10,406
1,051
63,185
9,464
72,649
20,564
1,920
685
3,307
10,045
9,759
588
70,516
9,959
80,475
21,584
3,324
710
1,533
11,524
10,406
1,051
63,185
9,464
72,649
20,564
1,920
685
3,307
10,045
9,759
588
4.5.5
2.3
50,132
46,868
50,132
46,868
3,845
53,977
26,498
7,994
18,504
1,143
48,011
24,638
7,437
17,201
3,845
53,977
26,498
7,985
18,513
1,143
48,011
24,638
7,437
17,201
18,504
17,201
18,513
17,201
2.4
2.4
43.80
43.80
40.81
40.81
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|46
Auswide Bank Annual Report 2020
|47
Auswide Bank Annual Report 2020
The above consolidated statement of profit or loss account should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Profit for the year
18,504
17,201
18,513
17,201
ASSETS
Consolidated
Company
Notes
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Consolidated
Company
Notes
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Other comprehensive income, net of income tax
Items that may be reclassified to profit or loss
Revaluation of cash flow hedge to fair value
3.5.4
(1,174)
(221)
(1,174)
(221)
Revaluation of FVTOCI investments to fair value
Income tax relating to these items
2.3.3
-
352
(2)
67
-
352
(2)
67
Other comprehensive income/(loss) for the year,
net of income tax
(822)
(156)
(822)
(156)
Total comprehensive income for the year
17,682
17,045
17,691
17,045
Total comprehensive income attributable to:
Owners of the Company
17,682
17,045
17,691
17,045
Cash and cash equivalents
Due from other financial institutions
Other financial assets
Current income tax 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
Other borrowings
Payables and other liabilities
Loans under management
Deferred tax liabilities
Provisions
Subordinated capital notes
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profits
Total equity
4.1.1
4.1.2
4.1.3
4.1.4
4.1.5
3.1
3.2
2.3.5
6.5
3.3
4.1.6
4.1.7
4.1.8
4.1.4
2.3.5
6.4
4.1.9
3.4
3.5
106,478
104,389
106,478
104,389
16,293
20,994
378,266
317,059
3,344
1,575
16,293
396,258
3,345
20,994
349,445
1,575
3,205,775
3,086,158
3,206,167
3,086,324
1,379
21,394
1,198
5,726
3,250
1,321
14,363
1,763
4,952
4,465
1,379
21,394
1,198
5,726
3,247
1,321
14,363
1,763
4,952
4,466
46,363
46,363
46,363
46,363
3,789,466
3,603,402
3,807,848
3,635,955
3,018,508
2,802,605
3,018,518
2,802,608
49,793
25,645
-
39,093
49,793
25,643
420,731
490,412
438,723
1,786
3,009
1,404
3,347
1,404
3,347
28,000
-
39,090
522,798
1,786
3,009
28,000
28,000
28,000
3,547,428
3,364,905
3,565,428
3,397,291
242,038
238,497
242,420
238,664
193,261
191,936
193,433
192,021
14,431
34,346
15,143
31,418
14,667
34,320
15,251
31,392
242,038
238,497
242,420
238,664
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statutory
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independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
|48
Auswide Bank Annual Report 2020
|49
Auswide Bank Annual Report 2020
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Auswide Bank Annual Report 2020
|51
Auswide Bank Annual Report 2020
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QUICK
LINKS >>>
Directors’
statutory
report
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Financial
statements
Notes to the
financial
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declaration
Independent
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report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
i
.
s
e
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o
n
g
n
y
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a
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|52
Auswide Bank Annual Report 2020
|53
Auswide Bank Annual Report 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
Notes
Consolidated
2020
$’000
2019
$’000
Company
2020
$’000
2019
$’000
Cash flows from operating activities
Interest received
Other non-interest income
received
Interest paid
Income tax paid
Cash paid to suppliers and
employees (inclusive of goods
and services tax)
Net cash provided by / (used in)
operating activities
6.1
Cash flows from investing activities
Net movement in investment
securities
Net movement in amounts due
from other financial institutions
Net movement in loans and
advances
Net movement in other
investments
Proceeds from sale of property,
plant and equipment
127,029
136,446
127,029
136,446
10,670
14,605
10,670
14,605
(60,529)
(10,313)
(70,785)
(10,227)
(60,529)
(10,304)
(70,785)
(10,227)
(59,689)
(34,394)
(59,689)
(34,388)
7,168
35,645
7,177
35,651
(61,207)
(61,483)
(46,813)
(61,483)
4,701
(5,605)
4,701
(5,605)
(124,549)
(168,924)
(124,774)
(168,948)
(57)
-
(177)
4
(57)
-
(177)
4
Payments for non current assets
(2,847)
(1,219)
(2,847)
(1,219)
THIS PAGE IS LEFT BLANK INTENTIONALLY
Net cash provided by / (used in)
investing activities
Cash flows from financing activities
Net movement in deposits and
short term borrowings
Net movement in amounts due
to other financial institutions and
other liabilities
Principal payment of lease
liabilities
Proceeds from share issue
Dividends paid
Movement in share capital due to
employee incentive scheme
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
Cash and cash equivalents at
end of the financial year
(183,959)
(237,404)
(169,790)
(237,428)
265,695
351,670
265,705
351,638
(71,022)
(117,883)
(85,288)
(117,776)
(2,152)
-
-
275
(2,152)
-
-
275
(13,554)
(14,324)
(13,563)
(14,332)
(87)
49
-
-
178,880
219,787
164,702
219,805
2,089
18,028
2,089
18,028
104,389
86,361
104,389
86,361
4.1.1
106,478
104,389
106,478
104,389
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.
|54
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NOTES TO THE
FINANCIAL
STATEMENTS
30 JUNE 2020
1 GENERAL INFORMATION
58
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
Reporting entity
Statement of compliance
Basis of preparation
Basis of consolidation
Rounding of amounts
Goods and Services Tax (GST)
Application of new and revised Accounting Standards
Comparative figures
Reclassification of comparative figures
1.10
Going concern
58
58
58
58
58
58
59
60
60
60
2 FINANCIAL PERFORMANCE 61
2.1
2.2
2.3
2.4
2.5
Interest revenue and interest expense
Other non-interest income
Income taxes
Earnings per share
Business and geographical segment information
3
INVESTMENTS AND
FINANCING
3.1
3.2
3.3
3.4
3.5
3.6
Property, plant and equipment
Other intangible assets
Goodwill
Contributed equity
Reserves
Dividends paid
61
62
63
66
66
67
67
69
70
71
72
74
4 FINANCIAL ASSETS, LIABILITIES
AND RELATED FINANCIAL RISK
MANAGEMENT
75
4.1
4.2
4.3
4.4
4.5
4.6
Categories of financial instruments
Capital risk management
Market risk management
Liquidity risk management
Credit risk management
Fair value measurements
5 GROUP STRUCTURE AND
RELATED PARTIES
5.1
5.2
Subsidiaries, associates and other related parties
Key management personnel disclosures
6 OTHER FINANCIAL
INFORMATION
6.1
6.2
6.3
6.4
6.5
6.6
6.7
Cash flow statement reconciliation
Expenditure commitments
Contingent liabilities and credit commitments
Provisions
Other non-financial assets
Remuneration of auditors
Events subsequent to balance date
75
80
81
83
87
97
102
102
103
105
105
105
105
106
106
107
107
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1 GENERAL INFORMATION
1.1
Reporting entity
Auswide Bank Ltd (the Company) is a for-profit listed public company, incorporated and domiciled in Australia. The
consolidated financial statements of Auswide Bank Ltd for the year ended 30 June 2020 comprises Auswide Bank Ltd and
its subsidiaries (the Group or the Consolidated Entity).
1.2
Statement of compliance
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 comply with all International Financial Reporting Standards (IFRS) in their entirety.
1.3
Basis of preparation
These financial statements have been prepared on an accrual basis and are based on historical cost, except for land and
buildings, hedging instruments, financial instruments held at fair value through profit or loss or other comprehensive
income that have been measured at fair value.
The accounting policies and methods of computation in the preparation of these financial statements are consistent with
those adopted and disclosed in the financial statements for the year ended 30 June 2019, unless otherwise stated.
1.4
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company, being the parent entity and
entities controlled by the Company.
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 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 is 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 Section 5.1.1 - Controlled entities.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Subsidiaries are fully
consolidated from the date 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.
1.5
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.
All amounts are presented in Australian dollars.
1.6
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.
1.7
Application of new and revised Accounting Standards
1.7.1
Standards and interpretations that are mandatorily effective for the current year
New and revised standards and amendments to standards effective for the current financial year which have been applied in
the preparation of these financial statements that are relevant to the Group include:
• AASB 16 Leases (AASB 16)
AASB 16 Leases
The Group applied AASB 16 with a date of initial application of 1 July 2019 using the modified retrospective approach,
under which the cumulative effect of initial application is recognised in retained earnings at 1 July 2019. As a result, the
Group has changed its accounting policy for lease contracts as detailed below.
Definition of lease
Previously, the Group determined at contract inception whether an arrangement is or contains a lease under AASB 117.
Under AASB 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease.
On transition to AASB 16, the Group elected to apply the practical expedient to grandfather the assessment of which
transactions are leases. It applied AASB 16 only to contracts that were previously identified as leases. Contracts that were
not identified as leases under AASB 117 were not reassessed for whether there is a lease. Therefore, the definition of a
lease under AASB 16 was applied only to contracts entered into or changed on or after 1 July 2019.
Summary of key changes to the accounting policy
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the
lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group.
Under AASB 16, the Group recognises right-of-use assets and lease liabilities for most leases, as a result, these leases are
now recognised on-balance sheet.
The Group decided to apply recognition exemptions to short-term leases of less than twelve months. For leases of other
assets, which were classified as operating under AASB 117, the Group recognised right-of-use assets and lease liabilities.
At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the
Group’s incremental borrowing rate as at 1 July 2019. Right-of-use assets are measured at either:
• an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments; or
• their carrying amount as if AASB 16 had been applied since the commencement date, discounted using the lessee’s
incremental borrowing rate at the date of initial application. The Group has applied this approach to all leases.
The Group used the following practical expedients when applying AASB 16 to leases previously classified as operating
leases under AASB 117;
• applied a single discount rate to a portfolio of leases with similar characteristics;
• applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease
term; and
• excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
Impact on the financial statements
On transition to AASB 16, the Group recognised an additional $4.043m of right-of-use assets and $4.907m of lease
liabilities. The difference of $0.864m has been recognised against opening retained earnings, net of its related deferred tax
impact of $0.254m resulting in a net decrease in retained earnings of $0.610m on 1 July 2019.
When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at 1 July 2019.
The weighted-average rate applied to properties and vehicles on transition was 5.50% and 6.42% respectively.
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Operating lease commitment at 30 June 2019 as disclosed in the Group’s consolidated
financial statements
Discounted using the incremental borrowing rate at 1 July 2019
Recognition exemptions for:
- Impact of GST and other outgoings
- Impact of increasing lease rentals
- Impact of options expected to be exercised
- Impact of rent discount in agreement
- Impact of leases not recognised as a commitment in prior year
Lease liabilities recognised on 1 July 2019
1 July 2019
Shareholder
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Financial
glossary
$'000
5,585
5,235
(1,000)
210
423
(136)
175
4,907
|58
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|59
Auswide Bank Annual Report 2020
1.8
Comparative figures
The adoption of AASB 16 Leases from 1 July 2019 resulted in changes to accounting policies and adjustments to the
amounts recognised in the financial statements. In accordance with the transitional provisions in AASB 16, comparative
figures have not been restated. A one off adjustment of $0.864m has been recognised against opening retained earnings,
net of the related tax impact of $0.254m, resulting in a net decrease to retained earnings of $0.610m on 1 July 2019.
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for
the current financial year.
1.9
Reclassification of comparative figures
Certain accounts in the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended
30 June 2019, which are included in the 2020 financial statements for comparative purposes, have been reclassified to
conform to the nature of accounts. The significant reclassifications are as follows:
Statement of Profit or Loss and Other
Comprehensive Income
Employee benefits expense
Occupancy expense
Fees and commissions
General and administration expense
Other expenses
Before reclassification
Reclassification
After reclassification
$'000
20,327
2,361
9,884
10,905
786
$'000
237
946
161
(1,146)
(198)
$'000
20,564
3,307
10,045
9,759
588
The reclassifications have been made because, in the opinion of management, the new classifications are more appropriate
to the Company’s business.
1.10
Going concern
The financial statements are prepared on a going concern basis. The group has net assets of $242m, recorded positive
operating and total cashflows and has disclosed its liquidity risk management policy in Note 4.4. As a consequence of this,
the Directors are of the view that the Group is well placed to manage its business risks successfully despite the current
economic climate. Accordingly, they believe the going concern basis is appropriate.
2 FINANCIAL PERFORMANCE
2.1
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 year. Disclosures on a Company basis have not been
separately disclosed as the amounts do not differ materially from those of the Consolidated entity.
Consolidated entity
Interest revenue 2020
Deposits with other financial institutions
Investment securities
Loans and advances
Other
Interest expense 2020
Deposits from other financial institutions
Customer deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
RBA term funding facility
Subordinated capital notes
Lease liabilities
Net interest revenue 2020
Consolidated entity
Interest revenue 2019
Deposits with other financial institutions
Investment securities
Loans and advances
Other
Interest expense 2019
Deposits from other financial institutions
Customer deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
Subordinated capital notes
Net interest revenue 2019
Average balance
$’000
72,027
264,243
3,151,103
97,825
3,585,198
453,037
2,475,794
306,994
122,346
7,674
28,000
4,137
3,397,983
56,502
223,722
3,017,419
76,103
3,373,746
550,996
2,203,601
297,275
105,154
28,000
3,185,026
Average interest
rate
%
0.60
1.34
3.72
5.10
3.52
2.50
1.47
1.31
1.87
0.21
4.90
5.69
1.64
1.59
2.43
4.19
4.59
4.04
3.23
1.97
2.37
2.90
6.42
2.30
Interest
$’000
435
3,552
117,278
4,987
126,252
11,334
36,461
4,027
2,291
16
1,372
235
55,736
70,516
897
5,430
126,533
3,492
136,352
17,798
43,478
7,039
3,054
1,798
73,167
63,185
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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.
Consolidated entity
Interest margin and interest spread 2020
Interest revenue
Interest expense
Net interest spread
3,585,198
3,397,983
126,252
55,736
Benefit of net interest-free assets, liabilities and equity
Net interest margin - on average interest earning assets
3,585,198
70,516
Interest margin and interest spread 2019
Interest revenue
Interest expense
Net interest spread
3,373,746
3,185,026
136,352
73,167
Benefit of net interest-free assets, liabilities and equity
Net interest margin - on average interest earning assets
3,373,746
63,185
3.52
1.64
1.88
0.09
1.97
4.04
2.30
1.74
0.13
1.87
Accounting policies
Interest income and interest expense
Interest income and expense for all financial instruments except for those classified as held for trading and those measured
or designated at FVTPL are recognised in net interest income as interest income and interest expense in the profit or loss
account using the effective interest method.
The effective interest rate (EIR) is the rate that discounts estimated future cash flows of a financial instrument over its
expected life or, where appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.
The future cash flows are estimated taking into account the contractual terms of the instrument.
The calculation of the EIR includes all fees paid or received between parties to the contract that are incremental and directly
attributable to the specific lending arrangement, transaction costs, and all other premiums or discounts. For financial assets
at FVTPL transaction costs are recognised in profit or loss at initial recognition.
The interest income/ interest expense is calculated by applying the EIR to the gross carrying amount of non-credit impaired
financial assets (i.e. the amortised cost of the financial asset before adjusting for any expected credit loss allowance), or to
the amortised cost of financial liabilities. For credit-impaired financial assets the interest income is calculated by applying
the EIR to the amortised cost of the credit-impaired financial assets (i.e. the gross carrying amount less the allowance for
expected credit losses (ECLs)). For financial assets originated or purchased credit-impaired (POCI) the EIR reflects the ECL
in determining the future cash flows expected to be received from the financial asset.
2.2
Other non-interest income
Consolidated
Company
2020
$’000
9,206
753
9,959
2019
$’000
8,959
505
9,464
2020
$’000
9,206
753
9,959
2019
$’000
8,959
505
9,464
Other non-interest income
Fees and commissions
Other income
Accounting policies
Other non-interest income
Fee and commission income and expense include fees other than those that are an integral part of EIR (see above). The
fees included in this part of the Group’s Consolidated Statement of Profit or Loss and Other Comprehensive Income include
among other things fees charged for servicing a loan, non-utilisation fees relating to loan commitments when it is unlikely
that these will result in a specific lending arrangement and loan syndication fees.
Income from these sources is measured based on the consideration specified in a contract with a customer and excludes
amounts collected on behalf of third parties. The Group recognises revenue when it transfers control of a product or service
to a customer which is typically at the time when the underlying transaction to which the fee and commission relates is
executed as specified in the contract.
2.3
Income taxes
2.3.1
Components of income tax expense
Current income tax
Deferred income tax
Income tax expense reported in profit or loss
Accounting policies
Taxation
Consolidated
Company
2020
$’000
8,540
(546)
7,994
2019
$’000
7,465
(28)
7,437
2020
$’000
8,531
(546)
7,985
2019
$’000
7,465
(28)
7,437
The 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 for 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 determined using 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.
A 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 its wholly-owned Australian resident entities (with the exception of Auswide Performance Rights Pty Ltd)
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.
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2.3.2
Numerical reconciliation of income tax expense to prima facie tax payable
Tax on profit before income tax at 30% (2019: 30%)
Tax effect of permanent differences
Add non-deductible expenses:
Depreciation of buildings
Less:
Tax offset for franked dividends
Other items - net
Income tax expense
2.3.3
Income tax recognised in other comprehensive income
Current income tax
Other
Deferred income tax
Arising on items that may be reclassified to profit or
loss:
Fair value remeasurement of FVTOCI financial assets
Fair value remeasurement of hedging instruments
entered into for cash flow hedges
Arising on items that will not be reclassified to profit
or loss:
Total income tax recognised directly in other
comprehensive income
2.3.4
Current tax assets and liabilities
Current tax assets/ (liabilities)
Current income tax assets/ (liabilities)
2.3.5
Deferred tax balances
Deferred tax assets
Deferred tax liabilities
Consolidated
Company
2020
$’000
7,949
58
1
(14)
7,994
2019
$’000
7,392
58
1
(14)
7,437
2020
$’000
7,949
58
2
(24)
7,985
2019
$’000
7,392
58
1
(14)
7,437
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
-
-
-
(352)
(352)
-
(352)
-
-
(1)
(66)
(67)
-
(67)
-
-
-
(352)
(352)
-
(352)
-
-
(1)
(66)
(67)
-
(67)
Consolidated
Company
2020
$’000
3,344
3,344
2019
$’000
1,575
1,575
2020
$’000
3,345
3,345
2019
$’000
1,575
1,575
Consolidated
Company
2020
$’000
5,726
(1,404)
4,322
2019
$’000
4,952
(1,786)
3,166
2020
$’000
5,726
(1,404)
4,322
2019
$’000
4,952
(1,786)
3,166
Deferred tax assets
Employee leave provisions
Expected credit losses
Property, plant and equipment
Capital losses available
Project acquisition costs
Premium on loans purchased
Subordinated capital notes prepaid expenses
Net lease liabilities
Performance rights prepaid expenses
Other items
Deferred tax liabilities
Asset revaluation reserve
Prepayments
Investment revaluation reserve (AASB139: available-
for-sale reserve)
Cash flow hedging reserve
2019
$’000
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Company
2020
$’000
993
2,032
681
1,466
3
115
44
205
72
115
2019
$’000
891
1,396
858
1,466
91
122
39
-
-
89
2020
$’000
993
2,032
681
1,466
3
115
44
205
72
115
891
1,396
858
1,466
91
122
39
-
-
89
5,726
4,952
5,726
4,952
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
1,867
1,867
1,867
1,867
70
43
(576)
1,404
99
43
(223)
1,786
70
43
(576)
1,404
99
43
(223)
1,786
In respect of each temporary difference the adjustment was charged to income, except for the revaluations of the external
RMBS investments which were charged to the investment revaluation 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.
Movement in deferred tax balances
Notes
Balance at beginning of year
Deferred income tax income/ (expense)
recognised directly in profit or loss
Deferred tax recognised in other
comprehensive income
Deferred tax arising on:
First time adoption of AASB 16
1.7
First time adoption of AASB 9
Prior period adjustments
Balance at end of year
Consolidated
Company
2020
$’000
3,166
546
352
254
-
4
2019
$’000
2,682
28
67
-
384
5
2020
$’000
3,166
546
352
254
-
4
2019
$’000
2,682
28
67
-
384
5
4,322
3,166
4,322
3,166
Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|64
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2.4
Earnings per share
Basic and diluted earnings per share
From continuing operations
Total basic and diluted earnings per share
2020
Cents per share
2019
Cents per share
43.80
43.80
40.81
40.81
3
INVESTMENTS AND FINANCING
3.1
Property, plant and equipment
Consolidated
Company
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per
share are calculated as follows:
Property and equipment owned
Right-of-use assets
Profit for the year attributable to owners of the Company
Earnings used in the calculation of basic and diluted earnings per
share from continuing operations
Weighted average number of ordinary shares for the purposes of basic
and diluted earnings per share
2.5
Business and geographical segment information
2020
$’000
18,504
18,504
2019
$’000
17,201
17,201
2020
Shares No.
2019
Shares No.
42,248,700
42,154,629
The Group only has one major business and operating segment being ‘Retail Banking’. The principal activities of the Group
are confined to the raising of funds and the provision of finance for housing, consumer lending and business banking. For
the purpose of performance evaluation, risk management and resource allocation, the decisions are based predominantly
on the key performance indicators at the Group level.
The Group operates in one geographical segment which is the Commonwealth of Australia.
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
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
2020
$’000
15,135
6,259
21,394
Consolidated
2020
$’000
9,277
5,858
15,135
Consolidated
2020
$’000
9,690
(413)
9,277
9,477
(200)
9,277
2019
$’000
14,363
-
14,363
2019
$’000
9,477
4,886
14,363
2019
$’000
9,690
(213)
9,477
9,676
(199)
9,477
2020
$’000
15,135
6,259
21,394
Company
2020
$’000
9,277
5,858
15,135
Company
2020
$’000
9,690
(413)
9,277
9,477
(200)
9,277
2019
$’000
14,363
-
14,363
2019
$’000
9,477
4,886
14,363
2019
$’000
9,690
(213)
9,477
9,676
(199)
9,477
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
22,790
27,990
22,790
27,990
(16,932)
(23,104)
(16,932)
(23,104)
5,858
4,886
5,858
4,886
4,886
2,702
(125)
(1,605)
5,858
5,900
726
(20)
(1,720)
4,886
4,886
2,702
(125)
(1,605)
5,858
5,900
726
(20)
(1,720)
4,886
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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.
Financial
glossary
The Board of Directors have assessed the market and the effects COVID-19 has had on regional Queensland and have
concluded that the valuations remain appropriate.
Accounting policies
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,
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valuations by external independent valuers.
3.1.2
Lease liabilities
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 revalued amount of the asset.
The carrying amount of plant and equipment is reviewed annually by the 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.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
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 asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Gains and losses on disposals are determined by comparing the 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.
3.1.1
Right-of-use assets
Consolidated entity
Right-of-use assets at cost
Balance as at 1 July 2019
Additions during the year
Variable lease payment adjustments
Balance as at 30 June 2020
Accumulated depreciation
Depreciation charge for the year
Right-of-use assets as at 30 June 2020
Company
Right-of-use assets at cost
Balance as at 1 July 2019
Additions during the year
Variable lease payment adjustments
Balance as at 30 June 2020
Accumulated depreciation
Depreciation charge for the year
Right-of-use assets as at 30 June 2020
Property
$’000
Vehicles
$’000
3,924
3,546
34
7,504
(1,416)
6,088
Property
$’000
3,924
3,546
34
7,504
(1,416)
6,088
119
155
-
274
(103)
171
Vehicles
$’000
119
155
-
274
(103)
171
Total
$’000
4,043
3,701
34
7,778
(1,519)
6,259
Total
$’000
4,043
3,701
34
7,778
(1,519)
6,259
Details of associated lease liabilities recognised in respect of the right-of-use assets are presented below:
Consolidated
Company
2020
$’000
2020
$’000
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities
Lease liabilities included in statement of financial position
Current
Non-current
Amounts recognised in statement of comprehensive income
Interest on lease liabilities
Amounts recognised in statement of cash flows
Total cash outflow for leases
1,898
5,289
568
7,755
1,844
5,100
6,944
235
235
2,387
2,387
3.2
Other intangible assets
Carrying amounts of:
Software
Software
At cost
Provision for amortisation
Movement in carrying amount
Balance at beginning of year
Additions
Disposals
Amortisation
Balance at end of year
Accounting policies
Intangible assets
Consolidated
Company
2020
$’000
1,198
1,198
Consolidated
2020
$’000
7,152
(5,954)
1,198
1,763
145
-
(710)
1,198
2019
$’000
1,763
1,763
2019
$’000
9,630
(7,867)
1,763
1,956
492
-
(685)
1,763
2020
$’000
1,198
1,198
Company
2020
$’000
7,152
(5,954)
1,198
1,763
145
-
(710)
1,198
1,898
5,289
568
7,755
1,844
5,100
6,944
235
235
2,387
2,387
2019
$’000
1,763
1,763
2019
$’000
9,630
(7,867)
1,763
1,956
492
-
(685)
1,763
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 proceeds and the
carrying amount of the assets and are taken to profit or loss at the date of derecognition.
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No internally generated intangible assets are recognised by the Group.
Impairment testing is performed annually for intangible assets with indefinite lives and intangible assets not yet available
for use.
3.3 Goodwill
Goodwill
Representing goodwill arising on the acquisition of:
Queensland Professional Credit Union Ltd (YCU)
Mackay Permanent Building Society Ltd (MPBS)
Consolidated
Company
2020
$’000
46,363
46,363
4,306
42,057
46,363
2019
$’000
46,363
46,363
4,306
42,057
46,363
2020
$’000
46,363
46,363
4,306
42,057
46,363
2019
$’000
46,363
46,363
4,306
42,057
46,363
3.3.1
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 recognises the acquisition date as 19 May 2016.
3.3.2
Mackay Permanent Building Society Ltd (MPBS)
Pursuant to a bidder’s statement lodged with the Australian Securities and 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 recognises the acquisition date as 10 January 2008.
Accounting policies
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 on 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.
Impairment testing for goodwill is performed annually, or earlier if there is an impairment indicator.
Key estimates and judgements
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.
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Impairment testing of goodwill was carried out by comparing the carrying amount of the cash generating unit to the
recoverable amount. The recoverable amount is determined based on fair value less cost to sell, using an earnings-multiple
applicable to the type of business and a reasonable control premium. The category of this fair value is Level 3 as defined in
Section 4.6 - Fair value measurements .
Earnings multiples relating to Group’s banking business are sourced from publicly available data associated with Australian
businesses displaying similar characteristics to those of Auswide Bank Ltd, and are applied, together with a control
premium, to current earnings.
The key assumptions under this approach are:
• Price-Earnings (P/E) multiple observed for these businesses, which for the banking businesses were in the range of 11.3-
17.9x. Management has applied P/E multiple of 12x, lower than the historical average, as a most prudent estimate of the
assumption considering economic impacts of COVID-19.
• Control premium which based on management’s best estimate informed by independent advice of a professional services
firm is 20%.
Sensitivity to changes in assumptions
Under above value of the assumption, the estimated recoverable amount of the CGU exceeds its carrying amount by $19m.
A reasonably possible change in any one of these assumptions can result in the carrying amount to exceed the recoverable
amount:
• if all other assumptions remain the same, should the multiples estimate decrease to 11.1x the carrying value will exceed
the recoverable amount by $0.5m; and
• if all other assumptions remain the same, should the control premium estimate decrease to 11% the carrying value will
exceed the recoverable amount by $0.5m.
3.4
Contributed equity
Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially from those of
the Consolidated entity.
Consolidated entity
Fully paid ordinary shares
Balance at beginning of year
Issued during the year
Staff share plan
Dividend reinvestment plan
Gain/ (loss) in share capital on disposal
of treasury shares
Treasury shares
Notes
3.4.1
3.4.2
2020
Shares
No.
2020
Shares
$’000
2019
Shares
No.
2019
Shares
$’000
42,172,922
191,936
42,108,972
191,612
-
252,231
-
-
1,412
(12)
53,745
-
-
275
-
(29)
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Movement in treasury shares
3.4.3
(15,315)
(75)
10,205
78
Balance at end of year
42,409,838
193,261
42,172,922
191,936
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.
3.4.1
Staff Share Plan
On 19 October 2018, 53,745 ordinary shares were issued pursuant to the Company’s staff share plan. Shares were issued
at a price of 90% of the weighted average price of the Company’s shares traded on the Australian Securities Exchange for
the 10 days prior to the issue of the invitation to subscribe for the shares.
The members of the Company approved a staff share plan in 1992 enabling the staff to participate to a maximum of 10%
of the shares of the Company. The share plan is available to all employees under the terms and conditions as decided from
time to time by the Directors, but in particular, limits the maximum loan to each participating employee to 40% of their
gross annual income. The plan requires employees to provide a deposit of 10% with the balance able to be repaid over a
period of five years at no interest.
Corporate
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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 (19 October
2018)
The total amount paid or payable for the shares at
that date
Consolidated
Company
2020
Shares
No.
2019
Shares
No.
2020
Shares
No.
2019
Shares
No.
2,974,418
2,974,418
2,974,418
2,974,418
-
53,745
-
53,745
$'000
$'000
$'000
$'000
-
-
299
275
-
-
299
275
3.4.2
Dividend Reinvestment Plan (DRP)
The Board of Directors resolved to suspend the Dividend Reinvestment Plan (DRP) in respect of the final dividend for the
2018/19 financial year, payable on 20 September 2019. The Board resolved to reintroduce the DRP for the interim dividend
payable on 16 March 2020 for the 2019/20 financial year.
16 March 2020 - 252,231 ordinary shares were issued
Shares issued under the plan rank equally in every respect with existing fully paid permanent ordinary shares and
participate in all cash dividends declared after the date of issue. The shares issued under the DRP on 16 March 2020
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.
3.4.3
Treasury shares
As at the reporting date Auswide Performance Rights Pty Ltd holds 24,878 shares, $131,051 (Jun 19: 9,563 shares,
$55,942) for the purpose of facilitating the Executive LTI scheme.
3.5
Reserves
Available-for-sale reserve
Investment revaluation reserve
Asset revaluation reserve
Cash flow hedge reserve
Share based payment reserve
Statutory reserve
General reserve
Doubtful debts reserve
Notes
3.5.1
3.5.2
3.5.3
3.5.4
3.5.5
3.5.6
3.5.7
3.5.8
Consolidated
Company
2020
$’000
-
101
4,357
(1,343)
418
2,676
5,834
2,388
2019
$’000
-
101
4,357
(521)
308
2,676
5,834
2,388
2020
$’000
-
101
4,357
(1,343)
654
2,676
5,834
2,388
2019
$’000
-
101
4,357
(521)
416
2,676
5,834
2,388
14,431
15,143
14,667
15,251
3.5.1
Available-for-sale reserve
Available-for-sale reserve
Balance at beginning of year
Adjustment on adoption of AASB 9 (net of tax)
Balance at end of year
-
-
-
102
(102)
-
-
-
-
102
(102)
-
The available-for-sale reserve was a former classification under AASB 139. The previous balance of this reserve represented
the excess of the mark-to-market valuation over the original cost of the external RMBS investments.
3.5.2
Investment revaluation reserve
Investment revaluation reserve
Balance at beginning of year
Adjustment on adoption of AASB 9 (net of tax)
Increase/(decrease) due to mark-to-market of
external RMBS investments
Deferred tax liability adjustment on revaluation of
external RMBS investments
Balance at end of year
Consolidated
Company
2020
$’000
101
-
-
-
101
2019
$’000
-
102
(2)
1
101
2020
$’000
101
-
-
-
101
2019
$’000
-
102
(2)
1
101
The investment revaluation reserve materialised as a result of the adoption of AASB 9. The balance of this reserve
represents the excess of the mark-to-market valuation over the original cost of the external RMBS investments.
3.5.3
Asset revaluation reserve
Asset revaluation reserve
Balance at beginning of year
Balance at end of year
4,357
4,357
4,357
4,357
4,357
4,357
4,357
4,357
The balance of this reserve represents the excess of the independent valuation over the original cost of the land and
buildings.
3.5.4
Cash flow hedge reserve
Cash flow hedge reserve
Balance at beginning of year
Gain/(loss) arising on changes in fair value of interest
rate swaps entered into for cash flow hedges
(521)
(366)
(521)
(366)
Interest rate swaps
(1,174)
(221)
(1,174)
Income tax related to gains/losses recognised in
other comprehensive income
352
66
352
Balance at end of year
(1,343)
(521)
(1,343)
(221)
66
(521)
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.
3.5.5
Share based payments reserve
Share based payments reserve
Balance at beginning of year
Expensed during the year
Vested during the year
Balance at end of year
308
238
(128)
418
241
175
(108)
308
416
238
-
654
241
175
-
416
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The share based payments reserve relates to shares available for long term incentive (LTI) based payments to employees.
3.5.6
Statutory reserve
This is a statutory reserve created on a distribution from the Queensland Building Society Fund.
3.5.7
General reserve
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.
3.5.8
Doubtful debts reserve
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.
3.6
Dividends paid
Dividends paid during the year
Interim for current year
Final for previous year
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
7,171
7,804
14,975
6,749
7,583
14,332
7,171
7,804
14,975
6,749
7,583
14,332
Dividends paid are fully franked on ordinary shares.
Dividends are provided for as declared or paid. Subsequent to the reporting date, the Board declared a dividend of 10.75
cents per ordinary share ($4.562m), for the six months to 30 June 2020, payable on 18 September 2020.
The final dividend for the six months to 30 June 2019 ($7.804m) was paid on 20 September 2019, and was disclosed in the
2018/19 financial accounts.
The tax rate at which the dividends have been franked is 30% (2019: 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
Consolidated
Company
2020
$’000
33,931
2019
$’000
30,025
2020
$’000
33,931
2019
$’000
30,025
(3,244)
(1,575)
(3,244)
(1,575)
(1,955)
(3,344)
(1,955)
(3,344)
28,732
25,106
28,732
25,106
Fully franked dividend on ordinary shares
10.75
18.50
10.75
18.50
Interim dividend paid during the year
Fully franked dividend on ordinary shares
17.00
16.00
17.00
16.00
Final dividend paid for the previous year
Fully franked dividend on ordinary shares
18.50
18.00
18.50
18.00
4 FINANCIAL ASSETS, LIABILITIES AND
RELATED FINANCIAL RISK MANAGEMENT
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4.1
Categories of financial instruments
Notes Classification
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Directors’
statutory
report
Financial assets
Cash and cash equivalents
4.1.1
Due from other financial institutions
4.1.2
Other financial assets;
4.1.3
- Certificates of deposit
- External RMBS investments
- Investments in Managed Investment
Schemes
- Notes – securitisation program and
other
- Derivative assets
- Interest receivable
Loans and advances
4.1.4
Amortised
cost
Amortised
cost
Amortised
cost
FVTOCI
106,478
104,389
106,478
104,389
16,293
20,994
16,293
20,994
Auditor’s
independence
declaration
293,172
256,156
293,172
256,156
-
533
-
533
Financial
statements
FVTPL
60,613
44,569
60,613
44,569
Amortised
cost
FVTPL
Amortised
cost
Amortised
cost
24,074
14,624
42,066
47,010
141
266
589
588
141
266
589
588
Notes to the
financial
statements
3,205,775
3,086,158
3,206,167
3,086,324
Other investments;
- Unlisted shares
Total financial assets
Financial liabilities
Deposits and other short term
borrowings
Other borrowings
Payables and other liabilities
- Payables and creditors
- Derivative liabilities
Loans under management
Subordinated capital notes
Total financial liabilities
Accounting policies
Financial instruments
4.1.5
FVTOCI
918
918
918
918
3,707,730
3,529,518
3,726,114
3,562,070
4.1.6
4.1.7
4.1.8
4.1.4
4.1.9
Amortised
cost
Amortised
cost
Amortised
cost
FVTPL
Amortised
cost
Amortised
cost
3,018,508
2,802,605
3,018,518
2,802,608
49,793
-
49,793
-
23,586
37,761
23,584
37,758
2,059
1,332
2,059
1,332
420,731
490,412
438,723
522,798
28,000
28,000
28,000
28,000
3,542,677
3,360,110
3,560,677
3,392,496
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Recognised 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 FVTPL) are added to, or deducted from, the fair value on recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at FVTPL are recognised immediately in profit or loss.
If the transaction price differs from fair value at initial recognition, the Group will account for such differences as follows:
• if fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation
technique that uses only data from observable markets, then the difference is recognised in profit or loss on initial
recognition (i.e. day 1 profit or loss); and
|74
Auswide Bank Annual Report 2020
|75
Auswide Bank Annual Report 2020
• in all other cases, the fair value will be adjusted to bring it in line with the transaction price (i.e. day 1 profit or loss will be
deferred by including it in the initial carrying amount of the asset or liability).
After initial recognition, the deferred gain or loss will be released to profit or loss on a rational basis, only to the extent that
it arises from a change in a factor (including time) that market participants would take into account when pricing the asset
or liability.
Financial assets
Financial assets are recognised on the trade date when the purchase is under a contract whose terms require delivery of
the financial asset within the timeframe established by the market concerned. Financial assets are initially measured at fair
value, plus transaction costs, except for those financial assets classified as at FVTPL. Transaction costs directly attributable
to the acquisition of financial assets classified as at FVTPL are recognised immediately in profit or loss.
All recognised financial assets that are within the scope of AASB 9 are required to be subsequently measured at amortised
cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow
characteristics of the financial assets.
Specifically:
• debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and
that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding
(SPPI), are subsequently measured at amortised cost;
• debt instruments that are held within a business model whose objective is both to collect the contractual cash flows and
to sell the debt instruments, and that have contractual cash flows that are SPPI, are subsequently measured at FVTOCI;
and
• all other debt instruments (e.g. debt instruments managed on a fair value basis, or held for sale) and equity investments
are subsequently measured at FVTPL.
• However, the Group may make the following irrevocable election/ designation at initial recognition of a financial asset on
an asset-by-asset basis:
• the Group may irrevocably elect to present subsequent changes in fair value of an equity investment that is neither held
for trading nor contingent consideration recognised by an acquirer in a business combination to which AASB 3 applies, in
OCI; and
• the Group may irrevocably designate a debt instrument that meets the amortised cost or FVTOCI criteria as measured at
FVTPL if doing so eliminates or significantly reduces an accounting mismatch (referred to as the fair value option).
Debt instruments at amortised cost or at FVTOCI
The Group assesses the classification and measurement of a financial asset based on the contractual cash flow
characteristics of the asset and the Group’s business model for managing the asset.
For an asset to be classified and measured at amortised cost or at FVTOCI, its contractual terms should give rise to cash
flows that are solely payments of principal and interest on the principal outstanding (SPPI). For the purpose of SPPI test,
principal is the fair value of the financial asset at initial recognition. That principal amount may change over the life of the
financial asset (e.g. if there are repayments of principal). Interest consists of consideration for the time value of money,
for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic
lending risks and costs, as well as a profit margin. The SPPI assessment is made in the currency in which the financial asset
is denominated.
Contractual cash flows that are SPPI are consistent with a basic lending arrangement. Contractual terms that introduce
exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement, such as
exposure to changes in equity prices or commodity prices, do not give rise to contractual cash flows that are SPPI. An
originated or an acquired financial asset can be a basic lending arrangement irrespective of whether it is a loan in its legal
form.
An assessment of business models for managing financial assets is fundamental to the classification of a financial asset.
The Group determines the business models at a level that reflects how groups of financial assets are managed together to
achieve a particular business objective. The Group’s business model does not depend on management’s intentions for an
individual instrument, therefore the business model assessment is performed at a higher level of aggregation.
When a debt instrument measured at FVTOCI is derecognised, the cumulative gain/loss previously recognised in OCI is
reclassified from equity to profit or loss.
Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to impairment.
Financial assets at FVTPL
Financial assets at FVTPL are:
• assets with contractual cash flows that are not SPPI; or/and
• assets that are held in a business model other than held to collect contractual cash flows or held to collect and sell; or
• assets designated at FVTPL using the fair value option.
Such assets are measured at fair value, with any gains/losses arising on remeasurement recognised in profit or loss.
Equity investments
On initial recognition, the Group classifies the investment in equity instruments either at FVTPL if it is held for trading
or at FVTOCI if designated as measured at FVTOCI. When an equity investment designated as measured at FVTOCI is
derecognised, the cumulative gain/loss previously recognised in OCI is not subsequently reclassified to profit or loss but
transferred within equity.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the asset’s cash flows expire (including expiry
arising from a modification with substantially different terms), or when the financial asset and substantially all the risks and
rewards of ownership of the asset are transferred to another entity. If the Group neither transfers nor retains substantially
all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained
interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
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/loss that had been recognised in OCI and accumulated in
equity is recognised in profit or loss, with the exception of equity investment designated as measured at FVTOCI, where the
cumulative gain/loss previously recognised in OCI is not subsequently reclassified to profit or loss.
Reclassifications
If the business model under which the Group holds financial assets changes, the financial assets affected are reclassified.
The classification and measurement requirements related to the new category apply prospectively from the first day of the
first reporting period following the change in business model that results in reclassifying the Group’s financial assets. During
the current financial year and previous accounting period there was no change in the business model under which the
Group holds financial assets and therefore no reclassifications were made.
Financial liabilities
A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial assets or
financial liabilities with another entity under conditions that are potentially unfavourable to the Group or a contract that
will or may be settled in the Group’s own equity instruments and is a non-derivative contract for which the Group is or may
be obliged to deliver a variable number of its own equity instruments, or a derivative contract over own equity that will or
may be settled other than by the exchange of a fixed amount of cash (or another financial asset) for a fixed number of the
Group’s own equity instruments.
Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. The Group does not have
any financial liabilities which are classified at FVTPL.
Other financial liabilities, including deposits and borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method.
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of
its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
Repurchase of the Group’s own equity instruments is recognised and deducted directly in equity. No gain/loss is recognised
in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.
Shareholder
information
4.1.1
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:
Financial
glossary
Cash at bank and in hand
Deposits on call
Consolidated
Company
2020
$’000
61,878
44,600
2019
$’000
39,689
64,700
2020
$’000
61,878
44,600
2019
$’000
39,689
64,700
106,478
104,389
106,478
104,389
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Auswide Bank Annual Report 2020
|77
Auswide Bank Annual Report 2020
4.1.2
Due from other financial institutions
Deposits with Special Service Providers (SSPs)
Consolidated
Company
2020
$’000
16,293
16,293
2019
$’000
20,994
20,994
2020
$’000
16,293
16,293
2019
$’000
20,994
20,994
Unlisted shares
Equity accounted investment
In accordance with our undertakings with the RBA and APRA the Deposits with Special Service Providers represents the
mandated prudential funds held with Australian Settlements Limited (ASL).
4.1.6
Deposits and short term borrowings
4.1.3
Other financial assets
Certificates of deposit
External RMBS investments
Investments in Managed Investment Schemes (MIS)
Notes - securitisation program and other
Derivative assets
Interest receivable
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
293,172
256,156
293,172
256,156
-
60,613
24,074
141
266
533
44,569
14,624
589
588
-
60,613
42,066
141
266
533
44,569
47,010
589
588
378,266
317,059
396,258
349,445
Call deposits
Term deposits
Negotiable certificates of deposit (NCDs)
Floating rate notes (FRNs)
4.1.7
Other borrowings
Cash held within securitised trusts at 30 June 2020 of $24.074m (2019: $14.624m) is restricted for use only by the trusts.
RBA Term Funding Facility (TFF)
Consolidated
Company
2020
$’000
918
461
1,379
2019
$’000
918
403
1,321
2020
$’000
918
461
1,379
2019
$’000
918
403
1,321
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
1,118,565
880,811
1,118,575
880,814
1,501,841
1,492,106
1,501,841
1,492,106
267,102
131,000
311,188
118,500
267,102
131,000
311,188
118,500
3,018,508
2,802,605
3,018,518
2,802,608
Consolidated
Company
2020
$’000
49,793
49,793
2019
$’000
-
-
2020
$’000
49,793
49,793
2019
$’000
-
-
4.1.4
Loans and advances
Term loans
Continuing credit loans
Interest receivable
Deferred mortgage broker commissions
Loans to controlled entities
Expected credit loss
Total loans and advances
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
3,100,117
2,963,721
3,100,115
2,963,722
102,778
117,371
102,778
117,371
4,218
5,451
-
4,603
4,954
-
4,218
5,451
394
4,603
4,954
165
3,212,564
3,090,649
3,212,956
3,090,815
(6,789)
(4,491)
(6,789)
(4,491)
3,205,775
3,086,158
3,206,167
3,086,324
For details on ECL recognised against loans and advances see Section 4.5 - Credit risk management.
Loans and advances include an amount of $108.8m of which have been issued under the federal government’s First Home
Loan Deposit Scheme by National Housing Finance and Investment Corporation (NHFIC) since 1 January 2020. The scheme
provides a guarantee for any loan monies above 80% LVR. Auswide Bank has applied to participate in the scheme and is
limited to issuing loans under the scheme by the number of places that have been allocated by NHFIC, the eligibility criteria
that has been established and ongoing reporting requirements.
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 and Australian Accounting Interpretations. The Company is entitled to any residual income
of the securitisation program after all payments due to investors and costs of the program have been met; to this extent the
economic entity retains credit and liquidity risk.
The impact on the Group is an increase in liabilities - Loans under management - of $420.731m (2019: $490.412m). Class
B notes of $17.992m (2019: $32.386m) which are owned by the Company and which represent the Group’s exposure on
the securitised mortgages have been eliminated from the consolidated figures.
4.1.5
Other investments
This represents investments in equity securities which have been classified at fair value through other comprehensive
income.
The RBA term funding facility (TFF) funds, subject to the pledging of eligible collateral, for a period of three years at a rate of
0.25%. Interest is payable to the RBA at the end of the funding period.
4.1.8
Payables and other liabilities
Trade creditors
Derivative liabilities
Accrued interest payable
Other creditors
Lease liabilities
4.1.9
Subordinated capital notes
Inscribed debenture stock
Consolidated
Company
2020
$’000
2,881
2,059
10,357
3,404
6,944
25,645
2019
$’000
7,272
1,332
15,140
15,349
-
39,093
2020
$’000
2,879
2,059
10,357
3,404
6,944
25,643
2019
$’000
7,269
1,332
15,140
15,349
-
39,090
Consolidated
Company
2020
$’000
28,000
28,000
2019
$’000
28,000
28,000
2020
$’000
28,000
28,000
2019
$’000
28,000
28,000
Subordinated capital notes are inscribed debenture stock which are issued for a period of ten years non call five years,
at which time they can be redeemed. Interest is repriced quarterly at a set margin above the 90 day bank bill swap rate
(BBSW).
The Group did not have any defaults of principal or interest or other breaches with respect to its subordinated liabilities
during the years ended 30 June 2019 and 2020.
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|78
Auswide Bank Annual Report 2020
|79
Auswide Bank Annual Report 2020
4.2
Capital risk management
Details of the capital adequacy ratio on a company and consolidated basis are set out below:
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 accounting principles and the application 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);
Total risk weighted assets
Capital base
Risk-based capital ratio
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
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1,631,807
1,498,370
1,632,124
1,498,133
211,382
12.95%
206,639
13.79%
211,766
12.97%
206,801
13.80%
Directors’
statutory
report
The loan portfolio of the Company does not include any loan which represents 10% or more of capital.
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 company’s website at www.
auswidebank.com.au.
Auditor’s
independence
declaration
4.3
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.
Financial
statements
4.3.1
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:
Notes to the
financial
statements
• reviews the balance sheet and recommends changes with regard to capital management, funding and securitisation
(i)
review measures of profitability, particularly net interest and fee income including strategies and directives;
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 2020 and 2019 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 2020 and 30 June 2019 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.
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.
(ii)
review management interest rate view as well as asset and liability repricing data;
(iii)
receive and review reports from management concerning the organisation’s credit risk;
(iv) receive and review management reports on interest rate risk against guidelines and limits established in Board policy;
(v)
consider and approve pricing on interest bearing assets and liabilities as well as fee revenue attached to these
products in co-operation with the Product Pricing sub-committee;
(vi) oversee lending and depositing activities, including the provision of discretion pursuant to Board policies;
(vii)
receive and review reports from management regarding significant asset and liability exposure;
(viii) oversee securitisation activities for the organisation, including recommendations for future securitisation
transactions;
(ix) review and maintain liquidity and capital management plans, including contingency measures; and
(x) make recommendations to the Board on changes to the following policies;
• Lending;
• Term Deposits; and
• Finance related policies (including capital and liquidity).
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
The Group’s exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both
recognised and unrecognised at the balance date, are as follows:
Shareholder
information
Financial
glossary
|80
Auswide Bank Annual Report 2020
|81
Auswide Bank Annual Report 2020
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Each of the following 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:
e
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Wide Bay Trust No. 5
WB Trust 2008-1
WB Trust 2009-1
WB Trust 2014-1
WB Trust 2010-1
ABA Trust 2017-1
2020
$’000
(546)
10,442
-
117
85
(36)
2019
$’000
(145)
1,548
54
73
34
(61)
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
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. These are designated as effective hedges and are accounted for as cash flow
hedges.
Assets and liabilities arising from the mark-to-market valuation of interest rate swaps are $0.141m and $2.059m
respectively (2019: $0.589m and $1.332m).
Accounting policies
Cash flow hedges
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.
Notes to the
financial
statements
The effective portion of changes in the fair value of derivatives and other qualifying hedging instruments that are designated
and qualify as cash flow hedges is recognised in the cash flow hedging reserve, a separate component of OCI, limited to the
cumulative change in fair value of the hedged item from inception of the hedge less any amounts recycled to profit or loss.
Amounts previously recognised in OCI 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. If the Group no longer expects the
transaction to occur that amount is immediately reclassified to profit or loss.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the
qualifying criteria (after rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold,
terminated or exercised, or where the occurrence of the designated hedged forecast transaction is no longer considered to
be highly probable. The discontinuation is accounted for prospectively. Any gain/loss recognised in OCI 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/loss accumulated in equity is reclassified and
recognised immediately in profit or loss.
4.4
Liquidity risk management
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Liquidity risk refers to the possibility that the Group will be unable to meet its financial obligations as they fall due.
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.
Shareholder
information
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 maximum of 25% 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).
Financial
glossary
The undrawn limits on the securitisation warehouses were as follows:
Securitisation trust
Wide Bay Trust No. 5
ABA Trust No. 7
Total
2020
$’000
84,235
23,503
107,738
2019
$’000
38,058
31,237
69,295
|82
Auswide Bank Annual Report 2020
|83
Auswide Bank Annual Report 2020
Concentration risk
The Company’s deposit portfolio does not include any deposit which represents 10% or more of total liabilities.
The maturity analysis for the respective groups of financial assets and liabilities based on contractual maturity are as
follows:
Consolidated entity
30 June 2020
Financial assets
Cash and cash
equivalents
Due from other
financial institutions
Other financial
assets
Loans and advances
On call
$’000
106,478
-
-
-
Up to 3
months
$’000
3-12
months
$’000
1 - 5 years
$’000
Later than
5 years
$’000
No maturity
specified
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
106,478
16,293
16,293
169,638
15,091
108,850
84,687
7,914
6,521
37,633
3,153,707
-
-
378,266
3,205,775
Total
106,478
177,552
21,612
146,483
3,238,394
16,293
3,706,812
Financial liabilities
Deposits and short
term borrowings
Other borrowings
Payables and other
liabilities*
Loans under
management
Subordinated capital
notes
1,118,565
927,945
826,619
145,379
-
-
-
-
-
-
-
10,454
49,793
5,534
51,497
175,754
193,480
-
-
28,000
-
-
2,708
-
-
Total
1,118,565
979,442
1,012,827
422,186
2,708
-
-
-
-
-
-
3,018,508
49,793
18,696
420,731
28,000
3,535,728
* The maturity analysis for the contractual undiscounted cash flows of lease liabilities are separately disclosed in Section
3.1.2.
Consolidated entity
30 June 2019
Financial assets
Cash and cash
equivalents
Due from other
financial institutions
Other financial assets
Loans and advances
On call
$’000
104,389
-
-
-
Up to 3
months
$’000
3-12
months
$’000
1 - 5 years
$’000
Later than
5 years
$’000
No
maturity
specified
$’000
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LINKS >>>
Total
$’000
-
-
-
-
-
-
-
-
-
104,389
20,994
20,994
Directors’
statutory
report
148,593
8,167
22,567
4,932
86,172
59,727
39,125
3,033,934
-
-
317,059
3,086,158
Total
104,389
156,760
27,499
125,297
3,093,661
20,994
3,528,600
Financial liabilities
Deposits and short
term borrowings
Payables and other
liabilities*
Loans under
management
Subordinated capital
notes
880,811
870,471
992,731
58,592
-
-
-
-
-
28,624
8,666
1,803
37,917
144,725
36,944
270,826
-
-
28,000
-
Total
880,811
937,012
1,146,122
125,339
270,826
-
-
-
-
-
2,802,605
39,093
490,412
28,000
3,360,110
Company
30 June 2020
Financial assets
Cash and cash
equivalents
Due from other
financial institutions
Other financial assets
Loans and advances
On call
$’000
106,478
-
-
-
Up to 3
months
$’000
3-12
months
$’000
1 - 5 years
$’000
Later than
5 years
$’000
No
maturity
specified
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
106,478
16,293
16,293
169,638
15,091
108,850
102,679
7,914
6,521
37,633
3,154,099
-
-
396,258
3,206,167
Total
106,478
177,552
21,612
146,483
3,256,778
16,293
3,725,196
Financial liabilities
Deposits and short
term borrowings
Other borrowings
Payables and other
liabilities*
Loans under
management
Subordinated capital
notes
1,118,575
927,945
826,619
145,379
-
-
-
-
-
-
-
10,454
49,793
5,534
55,511
189,732
193,480
-
-
28,000
-
-
2,708
-
-
Total
1,118,575
983,456
1,026,805
422,186
2,708
-
-
-
-
-
-
3,018,518
49,793
18,696
438,723
28,000
3,553,730
* The maturity analysis for the contractual undiscounted cash flows of lease liabilities are separately disclosed in Section 3.1.2.
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
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Auswide Bank Annual Report 2020
Company
30 June 2019
Financial assets
Cash and cash
equivalents
Due from other
financial institutions
Other financial assets
Loans and advances
On call
$’000
104,389
-
-
-
Up to 3
months
$’000
3-12
months
$’000
1 - 5 years
$’000
Later than
5 years
$’000
No
maturity
specified
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
104,389
20,994
20,994
148,593
8,167
22,567
4,932
86,172
92,113
39,125
3,034,100
-
-
349,445
3,086,324
Total
104,389
156,760
27,499
125,297
3,126,213
20,994
3,561,152
Financial liabilities
Deposits and short
term borrowings
Payables and other
liabilities*
Loans under
management
Subordinated capital
notes
880,814
870,471
992,731
58,592
-
-
-
-
-
28,621
8,666
1,803
39,917
175,111
145,408
162,362
-
-
28,000
-
Total
880,814
939,009
1,176,508
233,803
162,362
-
-
-
-
-
2,802,608
39,090
522,798
28,000
3,392,496
4.5
Credit risk management
Credit risk is the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group’s main income generating activity is lending to customers and therefore credit risk is a principal risk.
Credit risk mainly arises from loans and advances, debt investments, lease receivables, contract assets, loan commitments
and financial guarantees. The Group considers all elements of credit risk exposure such a counterparty default risk,
geographical risk and sector risk for risk management purposes.
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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.
Directors’
statutory
report
Credit risk exists predominantly on the Group’s loan portfolio. Other assets that are subject to credit risk include cash and
cash equivalents, amounts due from other financial institutions, receivables, certificates of deposit, securitisation notes and
deposits, loan commitments and bank guarantees.
The loan portfolio consists of mortgage lending, personal lending and commercial lending. Loan commitments and bank
guarantees are off balance sheet exposures of the loan portfolio, which are also subject to credit risk. These groupings, by
product type, have been assessed as reflecting similar performance behaviours, based on the Group’s analysis of its loan
portfolio.
Auditor’s
independence
declaration
Credit risk on mortgage lending is minimised by the availability and application of insurances including lenders’ mortgage
insurance, property insurance and mortgage protection insurance. Credit risk in the mortgage loan portfolio is managed by
generally protecting all loans in excess of 80% LVR with one of the recognised mortgage insurers and securing the loans by
first mortgages on residential property.
Financial
statements
The company has a diversified branch network consisting of 18 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, as well as economic forecasts, and ensures credit procedures are adhered to on a timely and accurate basis.
The Group’s maximum exposure to credit risk at balance date in relation to each class of financial asset is the carrying
amount of those assets as recognised on the balance sheet. In relation to off balance sheet loan commitments, the
maximum exposure to credit risk is the maximum committed amount as per terms of the agreement. 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
mitigate the risk exposure.
The Group 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. Diversification of the
mortgage portfolio assists in minimising credit risk by reducing security concentrations in particular geographic locations.
Credit risk on personal lending is minimised by the availability of consumer credit insurance, as well as the lending policies
and processes in place.
Commercial lending credit risk is minimised requiring collateral as security, which is mostly residential property, in addition
to the use of bank guarantees in some circumstances. The risk management policies and decision making procedures also
aid in minimising credit risk on commercial exposures.
Off balance sheet loan commitments and bank guarantees are also subject to credit risk, which is minimised by following
credit guidelines for issuing credit, as well as monitoring and following review processes for exposures in relation to bank
guarantees and undrawn credit.
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Credit risk on cash, cash equivalents and amounts due from other financial institutions have been assessed as low risk with
a negligible probability of default, due to amounts being invested with investment grade credit institutions with a no loss
history.
Shareholder
information
Credit risk on certificates of deposit is assessed as low and probability of default negligible. Risk is minimised by using
clearly defined policies for investment grade rated credit institutions, combined with the current economic outlook and on
the basis of no prior losses in the Group’s history on these investments.
External securitised notes are subject to low credit risk and negligible probability of default due to securitisation trusts
having a structure that utilises an excess income reserve to absorb any losses, reducing the risk of note balances being
affected. The securitisation deposits are made with investment grade rated credit institutions.
During the year, the Group recognised an additional provision of $1.0 million for the potential impact of COVID-19 on
the lending portfolio taking into account stress on the economy introduced by COVID-19 and the mitigating impact of
Government and industry assistance packages and support, such as loan repayment deferral arrangements.
4.5.1
Sources of credit risk
Key sources of credit risk for the Group predominantly emanate from its business activities including loans and advances
to customers, debt investments, loan commitments etc. The Group monitors and manages credit risk by class of financial
Financial
glossary
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Auswide Bank Annual Report 2020
instrument. The table below outlines such classes of financial instruments identified, their relevant financial statement line
item, maximum exposure to credit risk at the reporting date and expected credit loss recognised.
Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially from those of
the Consolidated entity.
Maximum
exposure
to credit
risk
2019
$’000
Expected
credit loss
2019
$’000
Expected
credit loss
2020
$’000
-
-
-
-
-
-
104,389
20,994
256,156
533
14,624
588
-
-
-
-
-
-
4,437
4,437
54
-
54
Consolidated entity
Financial statement
line
Notes
Class of financial instrument
Cash and cash equivalents
4.1.1
Cash and cash
equivalents
Due from other financial
institutions
4.1.2
Due from other
financial institutions
Maximum
exposure
to credit
risk
2020
$’000
106,478
16,293
Certificates of deposit
4.1.3 Other financial assets
293,172
External RMBS investments
4.1.3 Other financial assets
-
Notes – securitisation program
and other
Interest receivable
Loans and advances
Total
4.1.3 Other financial assets
24,074
4.1.3 Other financial assets
266
4.1.4 Loans and advances
3,457,232
6,592
3,315,110
3,897,515
6,592
3,712,394
Off-balance sheet exposures
Loans approved not advanced
(LANA)
Bank guarantees
Total
6.3
6.3
Accounting policies
Impairment of financial assets
114,807
591
115,398
197
-
197
66,874
1,405
68,279
The Group recognises loss allowances for ECLs on the following financial instruments that are not measured at FVTPL:
• loans and advances; and
• issued loan commitments and loans approved and not yet advanced.
ECLs are required to be measured through a loss allowance at an amount equal to:
• 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within
12 months after the reporting date, (referred to as stage 1); or
• lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument, (referred
to as stage 2 and stage 3).
A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has
increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal to
the 12-month ECL.
Definition of default
The Group considers the following as constituting an event of default:
• the borrower is past due more than 90 days on any material credit obligation to the Group; or
• the borrower is unlikely to pay its credit obligations to the Group in full.
The definition of default is appropriately tailored to reflect different characteristics of different types of assets. Overdrafts
are considered as being past due once the customer has breached an advised limit or has been advised of a limit smaller
than the current amount outstanding.
When assessing if the borrower is unlikely to pay its credit obligation, the Group takes into account both qualitative and
quantitative indicators. The information assessed depends on the type of the asset, for example in corporate lending a
qualitative indicator used is the breach of covenants, which is not relevant for retail lending. Quantitative indicators, such as
overdue status and non-payment on another obligation of the same counterparty are key inputs in this analysis.
Write off
Loans and advances and debt securities are written off when the Group has no reasonable expectations of recovering the
financial asset (either in its entirety or a portion of it). This is the case when the Group determines that the borrower does
not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.
A write-off constitutes a derecognition event. The Group may apply enforcement activities to financial assets written off.
Recoveries resulting from the Group’s enforcement activities will result in impairment gains.
Key estimates and judgements
Significant increase in credit risk
ECL are measured as an allowance equal to 12-month ECL for stage 1 assets, or lifetime ECL assets for stage 2 or stage 3
assets. An asset moves to stage 2 when its credit risk has increased significantly since initial recognition. AASB 9 does not
define what constitutes a significant increase in credit risk. In assessing whether the credit risk of an asset has significantly
increased the Group takes into account qualitative and quantitative reasonable and supportable forward looking
information.
Repayment deferral availed by the borrowers as a result of COVID-19 does not in itself constitute a significant increase in
credit risk unless the exposure meets the above criteria.
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Directors’
statutory
report
Auditor’s
independence
declaration
Models and assumptions used
The Group uses various models and assumptions in measuring fair value of financial assets as well as in estimating ECL.
Judgement is applied in identifying the most appropriate model for each type of asset, as well as for determining the
assumptions used in these models, including assumptions that relate to key drivers of credit risk.
Financial
statements
Forward looking scenarios
When measuring ECL the Group uses reasonable and supportable forward looking information, which is based on
assumptions for the future movement of different economic drivers and how these drivers will affect each other.
Probability of default (PD)
PD constitutes a key input in measuring ECL. PD is an estimate of the likelihood of default over a given time horizon, the
calculation of which includes historical data, assumptions and expectations of future conditions.
Loss Given Default (LGD)
LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due
and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit
enhancements.
4.5.2
Measurement of Expected Credit Loss (ECL)
The key inputs used for measuring ECL are:
• probability of default (PD);
• loss given default (LGD); and
• exposure at default (EAD).
These figures are derived from internally developed statistical models and other historical data and they are adjusted to
reflect probability-weighted forward-looking information.
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. The Group
has developed a PD model for loans and advances based on the likelihood of a default event occurring within the next 12
months, based on the current status of each loan. A lifetime PD is also computed where appropriate. Historical data on loan
behaviours is captured to enable projections on loans going into default. This provides statistical data that is used in the PD
model for calculating the probability of default.
LGD is an estimate of the loss arising on default. The Group has developed a single LGD model, which includes judgements
and estimates based on industry statistics and historical performance of the Bank’s portfolio. Given the Group’s loan
portfolio, market data on LGDs of other institutions has also been applied in management’s assessment of LGD.
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
EAD is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after
the reporting date, including repayments and principal and interest, and expected drawdowns on committed facilities. The
Group has developed a single EAD model to cover all applicable loan exposures.
Financial
glossary
The Group measures ECL considering the risk of default over the maximum contractual period (including extension options)
over which the entity is exposed to credit risk and not a longer period. The risk of default is assessed by considering
historical data as well as forward looking information through a macroeconomic overlay and management judgement.
The Group’s risk function constantly monitors the ongoing appropriateness of the ECL model and related criteria, where any
proposed amendments will be reviewed and approved by the Group’s management committees.
Incorporation of forward looking information
Repayment deferral availed by the borrowers as a result of COVID-19 does not in itself constitute a default or credit
impairment event unless the exposure meets the above criteria.
The Group uses forward-looking information that is available without undue cost or effort in its assessment of significant
increase of credit risk as well as in its measurement of ECL. The Group uses this information to generate a ‘base case’
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Auswide Bank Annual Report 2020
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Auswide Bank Annual Report 2020
scenario of future forecast of relevant economic variables along with a representative range of other possible forecast
scenarios.
The Group applies probabilities to the forecast scenarios identified. The base case scenario is the single most-likely outcome
and consists of information used by the Group for strategic planning and budgeting.
The Group has identified and documented key drivers of credit risk and credit losses for each lending portfolio using a
statistical analysis of historical data and has estimated relationships between macro-economic variables, credit risk and
credit losses.
The principal macroeconomic indicators included in the economic scenarios used are GDP, GDP index, GDP index change
and unemployment. Management have derived that GDP has economic correlations to inflation and unemployment, which
generally have a corresponding impact on loan performance. Scenarios are compiled using APRA quarterly statistics and
ADI Performance Statistics for losses data, ABS statistics for GDP, CPI (as proxy for GDP index) and unemployment rates,
along with forecast reports from the market.
The base case scenario is derived from forecasted changes to GDP, CPI and unemployment rates, using management’s
judgement. Adjustments to these forecasts are made to develop a further two scenarios for less likely but plausible
economic expectations. A weighting is applied to each scenario, based on management’s judgement as to the probability of
each scenario occurring. These economic forecasts are then applied to a statistical model to determine the macroeconomic
effects on the expected loss allowance on the lending portfolios.
The incorporation of forward looking information on the assessment of ECL on other assets required to be assessed for
impairment is a qualitative approach. A range of economic outlooks, from an economist, the RBA and OECD, have been
considered in making an assessment of whether there are economic forecasts that would indicate a potential impairment on
the assets being assessed.
Sensitivity analysis and forward looking information
The following table shows the reported ECL based on the probability weighting of scenarios, with the sensitivity range
reflecting the ECL impacts assuming a 100% weighting is applied to the base case scenario, the downside scenario or the
severe downside scenario (with all other assumptions held constant). As at 30 June 2020, the probability weighted ECL is a
blended outcome taking into consideration the respective scenarios.
The base case scenario incorporates a reasonable level of portfolio stress driven by forecast macro-economic factors,
including potential impacts of the COVID-19 pandemic, additional funding opportunities with the RBA and the governments
commitment to supporting jobs, incomes and businesses as Australia responds to COVID-19.
Scenario
ECL
Macroeconomic forecast
Reported ECL
100% base case
Jun 20 $m
6,789
6,490 Includes a reasonable level of portfolio stress.
Unemployment is expected to rise to above 8% in mid-2020 with modest
recovery occurring but broadly to remain above pre-COVID-19 levels over
the next few years.
Australian GDP expected to fall considerably by 6.3% in the June 2020
quarter the biggest economic contraction since the 1930’s resulting in the
2020 GDP contracting 4.0% with GDP forecast to recover with growth of
3.0% in the 2021 calendar year.
100% downside
7,140 Assumes a moderate but reasonable level of portfolio stress.
100% severe downside
8,000 Assumes a more severe and prolonged downturn including elevated levels of
unemployment and GDP decline.
Assumptions
The following table summarises the key judgements and assumptions in relation to the model inputs and highlights
significant changes during the current period.
The judgements and associated assumptions have been made within the context of the impact of COVID-19, and reflect
historical experience and other factors that are considered to be relevant, including expectations of future events that are
believed to be reasonable under the circumstances. In relation to COVID-19, judgements and assumptions include the
extent and duration of the pandemic, the impacts of actions of governments and other authorities, and the responses of
businesses and consumers in different industries. Accordingly, the Group’s ECL estimates are inherently uncertain and, as a
result, actual results may differ from these estimates.
Judgement/
Assumption
Description
Changes and considerations during the year
ended 30 June 2020
In the measurement of ECL, judgement is
involved in setting the rules and trigger
points to determine whether there has been
a SICR since initial recognition of a loan,
which would result in the financial asset
moving from ‘stage 1’ to ‘stage 2’. This is a
key area of judgement since transition from
stage 1 to stage 2 increases the ECL from an
allowance based on the probability of default
in the next 12 months, to an allowance for
lifetime expected credit losses.
Subsequent decreases in credit risk resulting
in transition from stage 2 to stage 1 may
similarly result in significant changes in the
ECL allowance. The setting of precise trigger
points requires judgement which may have
a material impact upon the size of the ECL
allowance.
ECL is a function of the probability of
default (PD), the loss given default (LGD)
and the exposure at default (EAD) which
are point-in-time measures reflecting
the relevant forward looking information
determined by management. Judgement
is involved in determining which forward
looking information variables are relevant
for particular lending portfolios and for
determining the sensitivity of the parameters
to movements in these forward looking
variables.
Determining
when a significant
increase in credit
risk (SICR) has
occurred
Measuring both
12-month and
lifetime credit
losses
Base case
economic forecast
The Group derives a forward looking “base
case” economic scenario which reflects
Auswide’s view of the most likely future
macro-economic conditions.
Probability
weighting of each
scenario (base
case, downside and
severe downside
scenarios)
Management
overlays
Probability weighting of each scenario is
determined by management considering the
risks and uncertainties surrounding the base
case scenario.
Management overlays to the ECL allowance
are used where it is judged that existing
inputs, assumptions and model techniques
do not adequately capture the risk factors in
the lending portfolio.
Various initiatives, such as loan repayment holidays
and deferrals have been offered to customers in
this half year recognising the potential detrimental
impact of COVID-19. Such offers, if accepted, are
not automatically considered to indicate SICR.
The PD, EAD and LGD models are subject to the
Group’s model risk policy that stipulates periodic
model monitoring, periodic re-validation and
defines approval procedures and authorities
according to model materiality. There were no
material changes to the policies during the year
ended 30 June 2020.
There were no changes to behavioural lifetime
estimates during the half year ended 30 June 2020.
There have been no changes to the types of
forward looking variables (key economic drivers)
used as model inputs in the current year.
As at 30 June 2020, the base case assumptions
have been updated to reflect the rapidly evolving
situation with respect to COVID-19. This includes
an assessment of the impact of central bank
(monetary policy), governments (wage subsidies),
and institution specific responses (such as payment
holidays). These are considered in determining
the length and severity of the forecast economic
downturn.
The key consideration for probability weightings
in the current period is the continuing impact of
COVID-19. The base case forecast reflects largely
the negative economic consequences of COVID-19.
Management have assessed the weightings applied
to the downside and severe downside scenarios
and determined that these remained appropriate
An overlay for model error risk continues to
be applied. In assessing the potential impacts
of COVID-19, management have applied an
additional overlay, increasing the ECL, allowing
for the increased uncertainty in future economic
conditions.
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|90
Auswide Bank Annual Report 2020
|91
Auswide Bank Annual Report 2020
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|92
Auswide Bank Annual Report 2020
|93
Auswide Bank Annual Report 2020
.
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*
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
4.5.3
Movement in gross carrying amounts
The following tables show movements in gross carrying amounts of financial assets subject to impairment requirements.
Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially from those of
the Consolidated entity.
Consolidated entity
Stage 1
12-month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Loans and advances at amortised cost*
Gross carrying amount at beginning of year
3,050,753
Transfer to stage 1
Transfer to stage 2
Transfer to stage 3
Financial assets that have been derecognised
during the period including write-offs
New financial assets originated
Adjustments for repayments and interest
Net carrying amount as at 30 June 2020
10,785
(5,914)
(4,472)
(436,929)
685,733
(118,054)
3,181,902
* Excludes interest receivable and deferred mortgage brokers commissions.
17,257
(7,542)
6,192
(4,096)
(4,550)
310
(51)
7,520
Total
$’000
3,081,092
-
-
-
13,082
(3,243)
(278)
8,568
(5,895)
(447,374)
847
392
13,473
686,890
(117,713)
3,202,895
Consolidated entity
Stage 1
12-month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Loans and advances at amortised cost *
Gross carrying amount at beginning of year
2,822,007
73,538
Transfer to stage 1
Transfer to stage 2
Transfer to stage 3
134,593
(133,250)
(180,769)
(16,153)
199,788
(10,115)
18,499
(1,343)
(19,019)
26,268
Total
$’000
2,914,044
-
-
-
Financial assets that have been derecognised
during the period including write-offs
New financial assets originated
Adjustments for repayments and interest
Net carrying amount as at 30 June 2019
(357,587)
(4,138)
(5,716)
(367,441)
579,400
69,262
3,050,753
-
(108,566)
17,257
-
(5,607)
13,082
579,400
(44,911)
3,081,092
* Excludes interest receivable and deferred mortgage brokers commissions.
There has been no significant movement in the carrying amount of other financial assets in the general business operations
of the Group and therefore the movement has not been disclosed.
4.5.4
Movement in expected credit losses
The following tables show movements in expected credit loss financial assets subject to impairment requirements.
Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially from those of
the Consolidated entity.
Consolidated entity
Loans and advances at amortised cost*
Loss allowance at beginning of year
Transfer to stage 1
Transfer to stage 2
Transfer to stage 3
Financial assets derecognised during the
period including write-offs
New financial assets originated
Changes in model risk assessment
Loss allowance as at 30 June 2020
Stage 1
12-month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
Total
$’000
2,232
269
(7)
(17)
(826)
727
684
3,062
734
(260)
8
(218)
(242)
1
240
263
1,525
4,491
(9)
(1)
235
-
-
-
(1,055)
(2,123)
363
2,209
3,267
1,091
3,133
6,592
* Excludes interest receivable and deferred mortgage brokers commissions.
Loans and advances at amortised cost*
Loss allowance at beginning of year
Transfer to stage 1
Transfer to stage 2
Transfer to stage 3
Financial assets derecognised during the
period including write-offs
New financial assets originated
Changes in model risk assessment
Loss allowance as at 30 June 2019
Stage 1
12-month ECL
$’000
Stage 2
Lifetime ECL
$’000
Stage 3
Lifetime ECL
$’000
1,940
1,043
(2,877)
(675)
(488)
376
2,913
2,232
619
(903)
3,844
(926)
(188)
-
(1,712)
734
1,873
(140)
(967)
1,601
(943)
-
101
1,525
Total
$’000
4,432
-
-
-
(1,619)
376
1,302
4,491
* Excludes interest receivable and deferred mortgage brokers commissions.
No ECL is recognised on any other financial asset, as this has been assessed as immaterial in both the current and
comparative periods.
4.5.5
Summary of movements in expected credit loss by financial instrument
The following table summarises the movement in expected credit loss by financial instruments for the reporting period.
Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially from those of
the Consolidated entity.
Consolidated entity
Expected credit loss
Loss allowance at beginning of year
Loss allowance recognised/ (reversed) during the year
Bad debts written off
Loss allowance as at 30 June 2020
Consolidated entity
Expected credit loss
Loss allowance at beginning of year
Adjustment on adoption of AASB 9
Loss allowance recognised/ (reversed) during the year
Bad debts written off
Loss allowance at 30 June 2019
Loans and
advances
$’000
4,437
3,702
(1,547)
6,592
Loans and
advances
$’000
3,197
1,210
1,159
(1,129)
4,437
LANA
$’000
54
143
-
197
LANA
$’000
-
70
(16)
-
54
Total
$’000
4,491
3,845
(1,547)
6,789
Total
$’000
3,197
1,280
1,143
(1,129)
4,491
4.5.6
Credit risk concentrations
An analysis of the Group’s credit risk concentrations on loans and advances is provided in the following table. The amounts
in the table represent gross carrying amounts, with the exception of loan commitments, which are recorded as the amount
committed. Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially
from those of the Consolidated entity.
Consolidated entity
Loans and advances at amortised cost*
Concentration by sector
Mortgage lending
Personal lending
Commercial lending
Total
* Excludes interest receivable and deferred mortgage brokers commissions
Consolidated
2020
$’000
2019
$’000
3,112,850
2,996,371
21,926
68,119
17,536
67,185
3,202,895
3,081,092
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Corporate
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Consolidated entity
Loans and advances at amortised cost*
Concentration by region
Queensland
New South Wales
Australian Capital Territory
Victoria
South Australia
Western Australia
Tasmania
Northern Territory
Total
Consolidated
2020
$’000
2019
$’000
2,371,985
2,342,240
360,263
38,542
281,021
29,272
82,506
12,779
26,527
317,552
33,618
245,124
29,342
77,708
9,603
25,905
3,202,895
3,081,092
* Excludes interest receivable and deferred mortgage brokers commissions.
LANA of $114.807m (2019: $66.874m) is an additional exposure under AASB 9 not recognised on the balance sheet, but is
immaterial to the concentrations in the above tables.
4.5.7
Specific provision
The Group has complied with the provisioning requirements under the APRA prudential standard APS220 Credit Quality and
includes a specific provision amounting to $3.577m (2019: $2.012m) determined in accordance with the aforementioned
prudential standard.
4.5.8
Financial instruments classified at FVTPL
The maximum exposure to credit risk of the notes held in MISs designated at FVTPL is their carrying invested amount, which
was $60.613m at 30 June 2020 (2019: $44.569m). The change in fair value due to credit risk for the MISs designated at
FVTPL is $1.051m for the year (2019: $0.558m). The Group uses the performance of the portfolio to determine the change
in fair value attributable to changes in credit risk of its MISs designated at FVTPL.
4.5.9
Equity instruments classified at FVTOCI
The maximum exposure to credit risk of the equity instrument designated at FVTOCI is their carrying amount.
4.5.10 Analysis of financial instrument by days past due status
Under the Group’s monitoring procedures a significant increase in credit risk is identified before the exposure has defaulted
and at the latest when the exposure becomes 30 days past due. The table below provides an analysis of the gross carrying
amount of loans and advances by past due status, that are over 30 days past due.
Consolidated entity
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
2020
$’000
1,609
903
3,333
1,265
549
4,900
2019
$’000
4,638
3,229
2,175
1,941
718
1,601
2020
$’000
1,609
903
3,333
1,265
549
4,900
2019
$’000
4,638
3,229
2,175
1,941
718
1,601
12,559
14,302
12,559
14,302
4.5.11 Collateral held as security and other credit enhancements
Mortgage lending
The Group holds residential properties as collateral for the mortgage loans it grants to its customers. The Group monitors
its exposure to retail mortgage lending using the LVR (loan to value ratio), which is calculated as the ratio of the gross
amount of the loan to the value of the collateral. The valuation of the collateral excludes any adjustments for obtaining and
selling the collateral. The value of the collateral for residential mortgage loans is typically based on the collateral value at
origination. For credit-impaired loans the value of collateral is based on the most recent appraisals. Subsequent appraisals
are performed on securities held for credit-impaired loans, to more closely monitor the Group’s exposure. The Group will
take possession of security property in line with its MIP (mortgagee in possession) policy and any loss resulting from
subsequent sale will be recorded as an expense, resulting in a reduction in any provision that was held for that exposure.
There are also procedures in place for the recovery of bad debts written off; debt recovery processes are performed
internally as well as through the use of third parties. The table below shows the exposures from mortgage loans by ranges
of LVR. Disclosures on a Company basis have not been separately disclosed as the amounts do not differ materially from
those of the Consolidated entity.
Consolidated entity
Mortgage lending LVR ratio
Less than 50%
51-70%
71-90%
91-100%
More than 100%
Total
Personal lending
Gross carrying amount
Expected credit loss
2020
$’000
2019
$’000
417,192
920,521
401,837
861,832
1,414,594
1,472,048
329,318
31,243
227,859
32,795
3,112,868
2,996,371
2020
$’000
496
1,047
1,802
166
1,657
5,168
2019
$’000
795
820
969
78
1,448
4,110
The Group’s personal lending portfolio consists of secured and unsecured term loans and unsecured credit cards. For
loans with a purpose of purchasing vehicles and the like, the vehicle can be used as security for a secured personal loan,
if acceptable under the applicable lending policy. The personal lending portfolio exhibits similar traits and behaviours
regardless of whether the loan is secured or unsecured.
Commercial lending
The Group requests collateral, which is usually in the form of residential property, as security for corporate lending. Bank
guarantees are also used at times, which utilise cash, residential or commercial mortgages as security. The table below
shows the exposures from commercial loans by ranges of LVR. Disclosures on a Company basis have not been separately
disclosed as the amounts do not differ materially from those of the Consolidated entity.
Gross carrying amount
Expected credit loss
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Consolidated entity
Commercial lending LVR ratio
Less than 50%
51-70%
71-90%
91-100%
More than 100%
Total
Other financial assets
2020
$’000
20,604
24,078
13,278
3,380
6,779
68,119
2019
$’000
17,366
24,108
12,910
4,003
8,798
67,185
2020
$’000
92
94
68
473
374
1,101
The Group holds other financial assets at amortised cost with a carrying amount of $440.284m (2019: $369.751m) and
at FVTOCI with a carrying amount of $0.918m (2019: $1.451m). These are high quality investments and as per policy the
Group only invests in certain types of financial assets which are investment grade and of lower credit risk.
4.6
Fair value measurements
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 provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped by fair value hierarchy level.
2019
$’000
Directors’
declaration
43
91
46
90
17
287
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
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4.6.1
Financial instruments measured at fair value on recurring basis
Consolidated entity
30 June 2020
Financial assets mandatorily measured at FVTPL
Investments in Managed Investment Schemes
Derivative assets
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
Financial liabilities mandatorily measured at FVTPL
Derivative liabilities
Total liabilities
Consolidated entity
30 June 2019
Financial assets mandatorily measured at FVTPL
Investments in Managed Investment Schemes
Derivative assets
Investments at FVTOCI - (debt and equity instruments)
External RMBS investments
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
Financial liabilities mandatorily measured at FVTPL
Derivative liabilities
Total liabilities
Company
30 June 2020
Financial assets mandatorily measured at FVTPL
Investments in Managed Investment Schemes
Derivative assets
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
Financial liabilities mandatorily measured at FVTPL
Derivative liabilities
Total liabilities
Company
30 June 2019
Financial assets mandatorily measured at FVTPL
Investments in Managed Investment Schemes
Derivative assets
Investments at FVTOCI - (debt and equity instruments)
External RMBS investments
Equity instruments designated at FVTOCI
Unlisted shares
Total assets
Financial liabilities mandatorily measured at FVTPL
Derivative liabilities
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
-
-
-
-
-
141
-
141
2,059
2,059
60,613
-
918
61,531
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
-
-
589
533
-
1,122
1,332
1,332
44,569
-
-
918
45,487
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
-
141
-
141
2,059
2,059
60,613
-
918
61,531
-
-
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
-
-
-
-
-
-
589
533
-
1,122
1,332
1,332
44,569
-
-
918
45,487
-
-
60,613
141
918
61,672
2,059
2,059
Total
$’000
44,569
589
533
918
46,609
1,332
1,332
Total
$’000
60,613
141
918
61,672
2,059
2,059
Total
$’000
44,569
589
533
918
46,609
1,332
1,332
Accounting policies
Fair value measurements
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).
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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.
Financial
statements
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, and
• 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.
4.6.2
Reconciliation of Level 3 fair value measurements of financial assets and financial liabilities
Consolidated entity
Balance at beginning of year
Total gains or losses:
- in profit or loss
- in other comprehensive income
Purchases
Disposals
Balance at end of year
FVTOCI
FVTPL
Unlisted shares
Managed investment schemes
2020
$’000
918
-
-
-
-
918
2019
$’000
793
-
-
125
-
918
2020
$’000
44,569
3,851
-
26,400
(14,207)
60,613
2019
$’000
25,886
2,320
-
27,150
(10,787)
44,569
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
There have been no transfers of between level 1 and level 2 categories of financial instruments.
|98
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Company
Balance at beginning of year
Total gains or losses:
- in profit or loss
- in other comprehensive income
Purchases
Disposals
Balance at end of year
FVTOCI
FVTPL
Unlisted shares
Managed investment schemes
2020
$’000
918
-
-
-
-
918
2019
$’000
793
-
-
125
-
918
2020
$’000
44,569
3,851
-
26,400
(14,207)
60,613
2019
$’000
25,886
2,320
-
27,150
(10,787)
44,569
4.6.3
Financial instruments not measured at fair value
The following table provides an analysis of financial assets and liabilities that are not measured at fair value.
Consolidated entity
30 June 2020
Financial assets
Cash and cash equivalents
Due from other financial
institutions
Other financial assets
Loans and advances
Total financial assets
Financial liabilities
Deposits and short-term
borrowings
Other borrowings
Payables and other liabilities
Loans under management
Subordinated capital notes
Total financial liabilities
Consolidated entity
30 June 2019
Financial assets
Cash and cash equivalents
Due from other financial
institutions
Other financial assets
Loans and advances
Total financial assets
Financial liabilities
Deposits and short-term
borrowings
Payables and other liabilities
Loans under management
Subordinated capital notes
Total financial liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total fair
value
$’000
Total carrying
amount
$’000
106,478
16,293
327,968
-
450,739
-
-
-
-
-
-
-
-
106,478
106,478
16,293
16,293
327,968
317,512
3,217,658
3,217,658
3,205,775
3,217,658
3,668,397
3,646,058
-
-
-
-
-
-
3,008,456
48,859
-
-
-
23,586
422,668
28,000
-
-
3,008,456
3,018,508
48,859
23,586
422,668
28,000
49,793
23,586
420,731
28,000
3,507,983
23,586
3,531,569
3,540,618
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total fair
value
$’000
Total carrying
amount
$’000
104,389
20,994
271,368
-
396,751
-
-
-
-
-
-
-
-
3,093,625
3,093,625
104,389
104,389
20,994
20,994
271,368
3,093,625
3,490,376
271,368
3,086,158
3,482,909
-
-
-
-
-
2,794,520
-
2,794,520
2,802,605
-
37,761
490,412
28,000
-
-
37,761
490,412
28,000
37,761
490,412
28,000
3,312,932
37,761
3,350,693
3,358,778
4.6.4
Summary of valuation methodologies applied in determining fair value of financial instruments
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.
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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:
Financial
statements
• •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; and
• cost approach - valuation techniques that reflect the current replacement cost of an asset at its current service capacity.
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
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summary
Shareholder
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Financial
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5 GROUP STRUCTURE AND RELATED
PARTIES
5.1
Subsidiaries, associates and other related parties
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.
5.1.1
Controlled entities
Name
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
2020
%
2019
%
2020
$’000
2019
$’000
2020
$’000
2019
$’000
Widcap Securities Pty Ltd
Australia
Auswide Performance Rights Pty Ltd
Australia
100.0
100.0
100.0
100.0
-
-
-
-
-
-
-
-
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
external RMBS and Warehouse Securitisation programs.
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.
5.1.2
Warehouse and securitisation trusts
Auswide Bank has an external securitisation program which is comprised of the following trusts. These trusts are fully
consolidated at the reporting date.
• Wide Bay Trust No. 5
• WB Trust 2008-1
• WB Trust 2010-1
• WB Trust 2014-1
• ABA Trust 2017-1
• ABA Trust No. 7
5.1.3
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
Finance Advice Matters Group Pty Ltd
(FAMG)
Financial Planning
Australia
Proportion of ownership interest and
voting power held by the Group
2020
25.0%
2019
25.0%
Financial Advice Matters Group Pty Ltd (FAMG) is accounted for using the equity method in these consolidated financial
statements.
Accounting policies
Investment in associates
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.
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.
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.
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.
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Summarised financial information in respect of FAMG is set out below. The summarised financial information below
represents amounts shown in the FAMG’s financial statements prepared in accordance with AASBs.
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
2020
$’000
552
537
(204)
(63)
822
2020
$’000
1,194
160
(44)
116
116
50
2019
$’000
471
529
(190)
(54)
756
2019
$’000
1,157
136
(39)
97
97
38
The above figures were based on the unaudited accounts of FAMG as at 30 June 2020.
5.2
Key management personnel disclosures
5.2.1
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.
Directors
JS Humphrey
MJ Barrett
B Dangerfield
GN Kenny
Chairman - Non-executive Director
Managing Director
Director - Non-executive
Director - Non-executive
SC Birkensleigh
Director - Non-executive
Executives
WR Schafer
Chief Financial Officer, Company Secretary
SM Caville (cease date 17/04/20)
Chief Information Officer
D Hearne
GM Job
CA Lonergan
MS Rasmussen
Chief Customer Officer
Chief People and Property Officer
Chief Risk Officer
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.
Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|102
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|103
Auswide Bank Annual Report 2020
5.2.2
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
2020
$’000
2,546
143
181
133
46
3,049
2019
$’000
2,435
251
181
114
46
3,027
Company
2020
$’000
2,546
143
181
133
46
3,049
2019
$’000
2,435
251
181
114
46
3,027
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.
5.2.3
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 Group’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 $177,935 (2019: $161,305) 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.
6 OTHER FINANCIAL INFORMATION
6.1
Cash flow statement reconciliation
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
2020
$’000
18,504
4,033
3,845
125
784
706
(521)
(18,847)
(382)
(1,769)
339
(1)
352
2019
$’000
17,201
2,601
1,143
16
102
5,133
5
11,604
356
(2,757)
87
87
67
2020
$’000
18,513
4,033
3,845
125
781
709
(521)
(18,847)
(382)
(1,769)
339
(1)
352
2019
$’000
17,201
2,601
1,143
16
102
5,133
5
12,071
(105)
(2,757)
87
87
67
Net cash generated from operating activities
7,168
35,645
7,177
35,651
Accounting policies
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.
6.2
Expenditure commitments
Capital expenditure commitments
Capital expenditure contracted for within one year
6.3
Contingent liabilities and credit commitments
Approved but undrawn loans
Approved but undrawn credit limits
Bank guarantees
Consolidated
Company
2020
$’000
1,096
1,096
2019
$’000
563
563
2020
$’000
1,096
1,096
Consolidated
Company
2020
$’000
114,807
87,808
591
2019
$’000
66,874
85,096
1,405
2020
$’000
114,807
87,808
591
2019
$’000
563
563
2019
$’000
66,874
85,096
1,405
203,206
153,375
203,206
153,375
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|104
Auswide Bank Annual Report 2020
|105
Auswide Bank Annual Report 2020
6.4
Provisions
6.6
Remuneration of auditors
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
2,969
628
(289)
3,308
2,873
435
3,308
39
3,347
2,883
265
(179)
2,969
2,643
326
2,969
40
3,009
2,969
628
(289)
3,308
2,873
435
3,308
39
3,347
2,883
265
(179)
2,969
2,643
326
2,969
40
3,009
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
Accounting policies
Employee provisions
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.
Long-term employee benefits
Liabilities for long service leave and annual leave are not expected to be settled within twelve months of the end of the
reporting period. They are recognised as provisions for employee benefits and are measured at the present value of the
expected future payments to be made in respect of services provided to the end of the reporting period. Consideration is
given to expected future salary and wage increases and periods of service.
Regardless of when settlement is expected to occur, liabilities for long service leave and annual leave are presented as
current liabilities in the Statement of Financial Position if the entity does not have an unconditional right to defer settlement
for at least twelve months after the end of the reporting period.
Superannuation
Contributions are made by the Group to an employees’ superannuation fund and are charged as an expense when incurred.
The Group has no legal obligation to cover any shortfall in the fund’s obligation to provide benefits to employees on
retirement.
6.5
Other non-financial assets
Prepayments
Other
Consolidated
Company
2020
$’000
2,969
281
3,250
2019
$’000
3,787
678
4,465
2020
$’000
2,966
281
3,247
2019
$’000
3,788
678
4,466
Amounts received or due and receivable by the auditors of Auswide Bank Ltd, Deloitte Touche Tohmatsu Limited, are as
follows:
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Audit or review of financial reports:
Group
Subsidiaries and joint operations
Statutory assurance services required by legislation
to be provided by the auditors
Other assurance and agreed upon procedures under
other legislation or contractual arrangements
Other services:
Tax compliance services
Consulting services
Total auditors' remuneration
Consolidated
Company
2020
$’000
2019
$’000
2020
$’000
2019
$’000
286,194
20,600
306,794
285,390
20,000
305,390
286,194
20,600
306,794
77,250
75,000
77,250
77,250
75,000
77,250
13,690
13,690
65,612
89,002
154,614
552,348
3,285
3,285
64,449
112,344
176,793
560,468
13,690
13,690
65,612
89,002
154,614
552,348
285,390
20,000
305,390
75,000
75,000
3,285
3,285
64,449
112,344
176,793
560,468
6.7
Events subsequent to balance date
The financial statements were approved by the Board of Directors on the date the directors’ declaration was signed.
Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|106
Auswide Bank Annual Report 2020
|107
Auswide Bank Annual Report 2020
DIRECTORS’
DECLARATION
FOR THE YEAR ENDED
30 JUNE 2020
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)
(ii)
give a true and fair view of the financial position of the company and consolidated entity as at 30 June
2020 and of the performance for the year ended on that date; and
comply with Australian Accounting Standards (including the Australia Accounting Interpretations) and
the Corporations Regulations 2001;
(b)
(c)
the financial report complies with International Financial Reporting Standards (IFRS) as disclosed in Section 1.2 -
Statement of compliance; and
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 2020.
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
SC Birkensleigh
Director
Brisbane
26 August 2020
|108
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|109
Auswide Bank Annual Report 2020
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INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF
AUSWIDE BANK LTD
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|115
Auswide Bank Annual Report 2020
CORPORATE
GOVERNANCE
SUMMARY
Auswide Bank Ltd maintains corporate governance policies and practices which follow the recommendations outlined by
the Australian Securities Exchange (ASX) and which comply with the Corporations Act 2001, the ASX Listing Rules and
APRA Prudential Standards CPS 510 Governance.
The Board of Directors of Auswide Bank Ltd has adopted a Corporate Governance Statement which sets out the Company’s
compliance with the Australian Securities Exchange (ASX) Corporate Governance Council’s Corporate Governance
Principles and Recommendations. The Corporate Governance Statement is available under the Governance section of the
Company’s website located at www.auswidebankltd.com.au.
The Governance section also details other relevant corporate governance information, including the Board and Committee
Charters, policies and codes of conduct. The following is a summary of Auswide Bank’s compliance with the principles
outlined in ASX’s Corporate Governance Principles and Recommendations (3rd edition):
Principle 1: Lay solid foundations for management and oversight
The Board Charter, together with the Corporate Governance Statement set out the roles and responsibilities of the Board
and separate functions of management and delegated responsibilities. The Corporate Governance Statement also details
checks undertaken and provision of material information to shareholders prior to recommendation and appointment of
Directors.
In accordance with the regulatory standards, the Board has established a Group Board Remuneration Committee which
carries out a performance evaluation of the Managing Director and review of the performance evaluations of other senior
executives, which is provided to the Board following a report of discussions between the Chairman of the Committee
and the Managing Director. A performance evaluation of the Board, the Board Committees and each individual Director’s
contribution to the Board is performed annually as outlined in the Corporate Governance Statement.
Auswide Bank recognises that a gender balanced diverse and inclusive workforce with a wide array of perceptions resulting
from such diversity, promotes innovation and a positive and successful business environment. Auswide Bank’s Diversity
Policy is available in the Corporate Governance section of its website at www.auswidebankltd.com.au. The measurable
objectives and Auswide Bank’s progress in achieving them, are outlined in the Corporate Governance Statement.
Auswide Bank is in compliance with Principle 1 and full details are available in the Corporate Governance Statement, Board
Charter, Remuneration Committee Charter, together with other policies and codes located in the Governance section at
www.auswidebankltd.com.au.
Principle 2: Structure the board to add value
Auswide Bank’s Board Charter outlines the structure of the board and its composition, together with the Board Renewal
policy. Details of Directors’ skills, knowledge, experience, independence and diversity are discussed in the Corporate
Governance Statement and in the Directors’ Statutory Report of this Annual Report.
The Board does not have a separate formal Nomination Committee, with the full Board addressing such issues that would
be otherwise considered by the Nomination Committee. These matters include Board succession issues and ensuring
that the Board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to
discharge its duties and responsibilities effectively.
Auswide Bank is in compliance with Principle 2 and full details are available in the Corporate Governance Statement and
Board Charter, together with other charters, policies and codes located in the Governance section at www.auswidebankltd.
com.au. The Directors’ Statutory Report of this Annual Report also provides details relevant to this principle.
Principle 3: Act ethically and responsibly
Auswide Bank promotes and supports a culture of honest and ethical behaviour. The standards of behaviour expected of all
Directors, management and employees are detailed in the bank’s Codes of Conduct.
Auswide Bank is in compliance with Principle 3 and full details are available in the following Codes of Conduct - ‘Corporate
Code of Conduct’ and ‘Code of Conduct for Directors and Key Executives’ located in the Governance section at www.
auswidebankltd.com.au.
Principle 4: Safeguard integrity in corporate reporting
The Audit Committee has a documented Charter, approved by the Board. The Audit Committee’s focus is on the issues
relevant to verifying and safeguarding the integrity of Auswide Bank’s financial operations and reporting structure.
The names and qualifications of the members of the Audit Committee, the number of meetings held and the number of
meetings attended are set out in the Directors’ Statutory Report.
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.
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statements
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statements
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declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|116
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|117
Auswide Bank Annual Report 2020
SHAREHOLDER
INFORMATION
A.
Registered office
The registered office and principal place of business of Auswide Bank Ltd is:
Level 3 Auswide Bank Head Office
16-20 Barolin Street
Bundaberg QLD 4670
Australia
Ph 07 4150 4000
Fax 07 4152 3566
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.
2020 Annual General Meeting
On 5 May 2020, the Federal Treasurer announced a Determination which allows companies to hold their Annual General
Meetings using online technologies to facilitate Shareholder engagement and participation in meetings, regardless
of location. Given the coronavirus (COVID-19) pandemic and restrictions placed on travel, public gatherings and the
importance of social distancing, Auswide Bank will be holding its 2020 Annual General Meeting as a virtual meeting. The
Annual General Meeting is scheduled to take place on Tuesday 17 November 2020 at 11:00am (Queensland time).
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
17 November 2020
Full year results and final dividend announcement
27 August 2020
Ex dividend date
Record date
03 September 2020
04 September 2020
Participation in DRP (final date for receipt of application)
07 September 2020
Dividend payment
18 September 2020
Half year results and interim dividend announcement
19 February 2020
Ex dividend date
Record date
27 February 2020
28 February 2020
Participation in DRP (final date for receipt of application)
02 March 2020
Dividend payment
16 March 2020
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 4100
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 18 September 2020 are:
Class of security
Permanent ordinary shares
ASX Code
ABA
Number
42,572,088
Distribution of shareholdings
Permanent ordinary shares
18 September 2020
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Less than marketable parcel of $500
No. of shareholders
3,790
2,125
670
569
52
7,206
312
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statements
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financial
statements
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declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|118
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|119
Auswide Bank Annual Report 2020
Top 20 shareholders
Permanent ordinary shares
18 September 2020
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
National Nominees Limited
Citicorp Nominees Pty Limited
Ronald Ernest Hancock & Lorraine Pearl Hancock
Ronald Ernest Hancock
Craig Thomas Kennedy
JP Morgan Nominees Australia Pty Limited
GDC & DMC Super Pty Ltd ATF Graham Cockerill S/F A/c
Kathleen Sawyer
HSBC Custody Nominees (Australia) Limited
Ron Hancock Super Pty Ltd ATF The Hancock Superfund A/c
Cloud 7 Nominees Pty Ltd ATF Peter Sawyer Famacct No2 A/c
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
Delma Cran
Lohse Holdings Pty Ltd ATF Peter Lohse Super Fund A/c
Horrie Pty Ltd ATF Horrie Superannuation A/c
Noela Olsen
19 Warambul Super Co Pty Ltd ATF Warambul Super Fund A/c>
20
Graham & Suzanne Messer Superannuation Fund Pty Ltd ATF G
Messer Super Fund A/C
No. of shares
% of total
3,191,948
1,366,356
890,750
706,816
509,045
492,851
440,065
432,719
396,886
365,932
328,486
320,000
308,543
296,362
264,074
260,000
258,068
257,520
226,873
226,066
7.50
3.21
2.09
1.66
1.20
1.16
1.03
1.02
0.93
0.86
0.77
0.75
0.72
0.70
0.62
0.61
0.61
0.60
0.53
0.53
Top 20 holders of fully paid ordinary shares
11,539,360
27.10
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)
(1) Substantial shareholder notice dated 06/10/2017.
(2) Substantial shareholder notice dated 19/05/2016.
No. of shares
% of total
2,906,102
2,182,863
6.91
5.42
On-market buyback
There is no on-market buy back.
Dividend reinvestment plan
The Board of Directors resolved to maintain the Dividend Reinvestment Plan (DRP). The DRP allows shareholders to reinvest
all or part of their dividends in additional Auswide Bank Limited shares. The Terms and Conditions of the Plan and past DRP
discounts and share issue processes are available online at www.auswidebank.com.au under Shareholder Information.
Shareholder online investor centre
We encourage shareholders to take advantage of the Computershare Investor Centre website available at
www.computershare.com.au where you can register and:
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• 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.
Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
Directors’
declaration
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
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FINANCIAL
GLOSSARY
For your reference, this glossary provides definitions for some of the terms used in financial reporting, particularly by financial
institutions listed on the ASX.
ADI
AGM
APRA
ASIC
Asset
ASX
Bad Debt
Basel
Basis Point
An Authorised Deposit-taking Institution is a corporation authorised under the Banking
Act 1959 and includes banks, building societies and credit unions regulated by APRA.
Annual General Meeting.
Australian Prudential Regulation Authority.
Australian Securities and Investments Commission.
A resource which has economic value and can be converted to cash. Assets for an ADI
include its loans because income is derived from the loan fees and interest payments
generated.
Australian Securities Exchange Limited (ABN 98 008 624 691).
The amount that is written off as a loss and classified as an expense, usually as a result of
a poor-performing loan.
The Basel Accords are the recommendations on banking laws and regulations issued by
the Basel Committee on Banking Supervision, which has the purpose of improving the
consistency of capital regulations internationally.
One hundredth of one percent or 0.01 percent. The term is used in money and securities
markets to define differences in interest rates or yields.
Capital Adequacy Ratio
A ratio of an ADI's capital to its risk, obtained by dividing total capital by risk-weighted
assets. This ratio shows an ADI's capacity to meet the payment terms of liabilities and
other risks.
Cost-to-income Ratio
Obtained by dividing operating cost by operating income, this ratio shows a company's
costs in relation to its income. A lower ratio can be an indication that a company is better
at controlling its costs.
Credit Rating
An analysis of a company's ability to repay debt or other obligations.
Dividend
A portion of a company's profits that may be paid regularly by the company to its
shareholders.
Dividend Payout Ratio
The amount of dividends paid to shareholders relative to the amount of total net income
of a company, represented as a percentage.
Dividend Yield
Computed by dividing the annual dividend by the share price.
DRP
A Dividend Reinvestment Plan allows shareholders to reinvest some or all of their
dividends into additional shares.
Earnings per Share
The amount of company earnings per each outstanding share of issued ordinary shares.
Ex-Dividend Date
The date used to determine a shareholder's entitlement to a dividend.
Liability
Liquidity
A company's debts or obligations that arise during the course of business operations.
Liabilities for ADIs include interest-bearing deposits.
For an ADI, liquidity is a measure of the ability of the ADI to fund growth and repay debts
when they fall due, including the paying of depositors.
Market Capitalisation
The total value of a company's shares calculated by multiplying the shares outstanding by
the price per share.
NCD
A Negotiable Certificate of Deposit is a short term security typically issued by an ADI to a
larger institutional investor in order to raise funds.
Net Interest Income
The difference between the revenue that is generated from an ADI's assets, and the
expenses associated with paying out its liabilities.
Net Interest Margin (NIM)
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.
Net Profit After Tax (NPAT)
Total revenue minus total expenses, with tax that will need to be paid factored in.
Net Tangible Asset Backing per
Share
An indication of the company's net worth, calculated by dividing the underlying value of
the company (total assets minus total liabilities) by the number of shares on issue.
Non Interest Income
Income derived primarily from fees and commissions, rather than income from interest-
earning assets.
Price-to-Earnings Ratio (P/E
Ratio)
A measure of the price paid for a share relative to the annual income or profit earned by
the company per share.
Record Date
The date used to identify shares traded and registered up until Ex-Dividend Date.
Return on Average Ordinary Equity A measurement of how well a company uses the funds provided by its shareholders,
represented by a ratio of the company's profit to shareholder's equity.
Return on Net Tangible Assets
(RONTA)
Computed by dividing Net Profit After Tax by average Net Tangible Assets. Net Tangible
Assets equals net assets less goodwill. RONTA is equivalent to Return on Tangible Equity.
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Directors’
statutory
report
Auditor’s
independence
declaration
Financial
statements
Notes to the
financial
statements
RMBS
Securitisation
Residential mortgage-backed securities are a type of bond backed by residential
mortgages on residential, rather than commercial, real estate.
Directors’
declaration
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.
SSP
Special Service Provider such as an authorised settlement clearing house.
Subordinated Capital Notes
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.
Tier 1 Capital
Tier 2 Capital
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 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.
Independent
auditor’s
report to the
members of
Auswide Bank
Ltd
Corporate
governance
summary
Shareholder
information
Financial
glossary
|122
Auswide Bank Annual Report 2020
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Auswide Bank Annual Report 2020
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
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auswidebank.com.au
(Retail Website)
auswidebankltd.com.au
(Corporate Website)