PALESTINE COMMERCIAL BANK P.L.C.
FINANCIAL STATEMENTS
DECEMBER 31, 2012
P.O. Box 1373
7th Floor,
PADICO House Bldg. – Al-Masyoun
Ramallah-Palestine
Tel: +972 22421011
Fax: +972 22422324
www.ey.com
Independent Auditors' Report to the Shareholders of
Palestine Commercial Bank P.L.C.
We have audited the accompanying financial statements of Palestine Commercial
Bank P.L.C. (the Bank) which comprise the statement of financial position as at
December 31, 2012 and the income statement, statement of comprehensive
income, statement of changes in equity and statement of cash flows for the year
then ended, and a summary of significant accounting policies and other
explanatory information.
Board of Directors’ Responsibility for the Financial Statements
The Board of Directors is responsible for the preparation and fair presentation of
these financial statements in accordance with International Financial Reporting
Standards, and for such internal control as management determines is necessary
to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit in accordance with International Standards on
Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the financial statements. The procedures selected
depend on the auditors' judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Bank as at December 31, 2012 and its financial
performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards.
Emphasis of a Matter
Without modifying our opinion, as described in note (39) to the accompanying
financial statements, the Board of Directors of the Bank is considering several
alternatives to increase paid capital to U.S. $ 50 million to comply with Palestinian
Monetary Authority regulations.
Ernst & Young –Middle East
March 20, 2013
Ramallah, Palestine
A member firm of Ernst & Young Global Limited
Palestine Commercial Bank P.L.C.
Statement of Financial Position
As at December 31, 2012
Notes
ASSETS
Cash and balances at Palestine Monetary
Authority
Balances at banks and financial institutions
Financial assets at fair value through profit or
loss
Direct credit facilities
Financial assets at fair value through other
comprehensive income
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Total Assets
LIABILITIES AND EQUITY
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid-in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Fair value reserve
Accumulated losses
Net Equity
Total Liabilities and Equity
2012
U.S. $
2011
U.S. $
5
6
51,431,986
38,508,961
24,016,780
60,736,653
7
8
1,154,625
74,159,491
1,303,025
56,448,400
9
10
11
12
13
12,449,333
4,234,871
1,117,543
3,112,402
186,169,212
875,720
16,703,752
4,641,278
1,117,543
2,960,485
168,803,636
14
15
16
17
18
19
20
28,119,901
110,521,971
12,596,536
2,614,726
1,021,751
933,019
2,292,658
158,100,562
19,261,646
105,821,447
9,476,190
1,883,892
1,194,343
1,324,424
1,775,239
140,737,181
1
21
21
21
21
9
30,026,056
1,069,087
99,658
1,187,630
366,797
(4,680,578)
28,068,650
186,169,212
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
168,803,636
The accompanying notes from 1 to 42 are an integral part of these financial statements
1
Palestine Commercial Bank P.L.C.
Income Statement
For the year ended December 31, 2012
Notes
22
23
Interest income
Interest expense
Net interest income
Net commission income
Net interest and commission income
24
Foreign currency gains
Financial assets (losses) gains
Recovery (Provision) for legal cases
Other income
Recoveries of impaired credit facilities
Gross profit
25
26
8
Expenses
Personnel expenses
Other operating expenses
Depreciation and amortization
Credit facilities impairment losses
Total expenses
Profit before tax
Tax expense
Profit for the year
27
28
29
8
19
Basic and diluted earnings per share
30
2012
2011
U.S. $
6,748,748
(1,503,668)
5,245,080
893,402
6,138,482
U.S. $
6,352,924
(1,425,089)
4,927,835
904,135
5,831,970
418,414
(976,630)
192,858
461,064
241,928
6,476,116
50,685
19,922
(114,245)
572,604
140,531
6,501,467
3,377,725
2,415,553
569,101
51,570
6,413,949
62,167
62,167
2,937,829
2,011,086
511,067
208,971
5,668,953
832,514
(243,387)
589,127
0.002
0.020
The accompanying notes from 1 to 42 are an integral part of these financial statements
2
Palestine Commercial Bank P.L.C.
Statement of Comprehensive Income
For the year ended December 31, 2012
Profit for the year
2012
2011
U.S. $
U.S. $
62,167
589,127
Other comprehensive income:
Unrealized losses on financial investments
Loss from sale of financial assets at fair value
through other comprehensive income
(59,972)
(400,000)
184,252
-
Other comprehensive income
124,280
(400,000)
Total comprehensive income for the year
186,447
189,127
The accompanying notes from 1 to 42 are an integral part of these financial statements
3
Palestine Commercial Bank P.L.C.
Statement of Changes in Equity
For the year ended December 31, 2012
Paid in share
capital
U.S. $
Statutory
U.S. $
Reserves
General
banking
Voluntary
risks
U.S. $
U.S. $
ProFair value
cyclicality reserve
U.S. $
U.S. $
Accumulated
losses
U.S. $
Net
Equity
U.S. $
2012
Balance at January 1, 2012
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transferred to reserves
30,026,056 1,062,870
6,217
99,658
-
957,251 357,472
230,379
9,325
(124,280)
124,280
124,280
-
(4,312,572) 28,066,455
62,167
62,167
(184,252)
(59,972)
(122,085)
2,195
(245,921)
-
Balance at December 31, 2012
30,026,056 1,069,087
99,658 1,187,630 366,797
-
(4,680,578) 28,068,650
Balance at January 1, 2011
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transferred to reserves
30,026,056 1,003,957
58,913
99,658
-
795,381 269,103
161,870 88,369
275,720
(400,000)
(400,000)
-
(4,592,547) 27,877,328
589,127
589,127
(400,000)
589,127
189,127
(309,152)
-
Balance at December 31, 2011
30,026,056 1,062,870
99,658
957,251 357,472
(124,280)
(4,312,572) 28,066,455
2011
The accompanying notes from 1 to 42 are an integral part of these financial statements
4
Palestine Commercial Bank P.L.C.
Statement of Cash Flows
For the year ended December 31, 2012
Notes
Operating activities
Profit before tax
Adjustments for:
Depreciation and amortization
Financial assets losses (gains)
Credit facilities (recoveries) provision
Sundry provisions
Gains from sale of property and equipment
Other non cash items
Changes in assets and liabilities:
Restricted balances with banks and financial
institutions
Statutory cash reserve at PMA
Direct credit facilities
Other assets
Customers' deposits
Cash margins
Loans and borrowings
Other liabilities
Net cash (used in) from operating activities
before provisions and tax payments
Sundry provisions paid
Taxes paid
Net cash (used in) from operating activities
Investing activities:
Deposits with banks and financial institutions
maturing after 3 months
Purchase of property and equipment
Purchase of intangible assets
Purchase of financial assets at amortized cost
Proceeds from sale financial assets at amortized
cost
Proceeds from sale financial assets at fair value
through other comprehensive income
Proceeds from sale of property and
equipment
Cash dividends received
Net cash from investing activities
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
31
2012
2011
U.S. $
U.S. $
62,167
832,514
569,101
976,630
(190,358)
9,052
(3,064)
(27,099)
1,396,429
511,067
(19,922)
68,440
297,922
(16,617)
1,673,404
58,328
(13,524,756)
(17,520,733)
(98,738)
4,700,524
3,120,346
730,834
517,419
(256,609)
5,536,878
(7,025,097)
1,267,145
2,465,995
2,026,899
692,917
(839,246)
(20,620,347)
(181,644)
(391,405)
(21,193,396)
5,542,286
(11,655)
(304,946)
5,225,685
(334,982)
(296,770)
(131,622)
(9,427,619)
(2,127,317)
(1,425,393)
(74,426)
(24,120,895)
12,841,014
36,528,310
815,748
-
215,583
39,893
3,721,245
23,838
48,044
8,852,161
(17,472,151)
47,583,634
30,111,483
14,077,846
33,505,788
47,583,634
The accompanying notes from 1 to 42 are an integral part of these financial statements
5
Palestine Commercial Bank P.L.C.
Notes to the Financial Statements
December 31, 2012
1.
General
Palestine Commercial Bank P.L.C. (the Bank) is a public shareholding company
located in Ramallah – Palestine and registered and incorporated in 1992 under
registration number 562600387. The Bank provides banking services within the
prevailing laws in Palestine.
The Bank is carrying out all of its banking and financial activities through its
Headquarter in Ramallah and its six branches.
The Bank’s authorized share capital comprises U.S. $ 65 million. Total paid-in share
capital as at December 31, 2012 amounted to U.S. $ 30,026,056.
The Bank’s staff comprises 148 and 143 employees as at December 31, 2012 and
2011, respectively.
The financial statements of the bank for the year ended December 31, 2012 were
authorized for issuance by the Bank’s Board of Directors on March 20, 2013.
2.1
Basis of preparation
The accompanying financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) and in conformity with the
prevailing local laws and Palestine Monetary Authority (PMA) regulations.
The financial statements have been prepared under the historical cost basis, except
for financial assets at fair value through profit or loss and financial assets at fair
value through other comprehensive income that have been measured at fair value
as of the financial statements date.
The financial statements have been presented in U.S. Dollars, which is the
functional currency of the Bank.
2.2 Changes in accounting polices
The accounting policies adopted are consistent with those used in the previous year
except that the Bank has adopted the following new and amended IFRSs during the
year:
IFRS 1 First-Time Adoption of International Financial Reporting Standards
(Amendment)
IAS 12 - Income Taxes (Amendment) – Deferred Taxes: Recovery of Underlying
Assets
IFRS 7 - Financial Instruments: Disclosures — Enhanced Derecognition Disclosure
Requirements.
The following standards have been issued but are not yet mandatory, and have not
been adopted by the Bank. These standards are those that the Bank reasonably
expects to have an impact on disclosures, financial position or performance when
applied at a future date:
6
IAS 1 Presentation of Items of Other Comprehensive Income (Amended)
The amendments to IAS 1 change the grouping of items presented in other
comprehensive income. Items that could be reclassified (or ‘recycled’) to income
statement at a future date would be presented separately from items that will
never be reclassified. The amendment affects presentation only and has no impact
on the Bank’s financial position or performance. This amendment will be effective
for annual periods beginning on or after 1 July 2012.
IFRS 13 Fair Value Measurement
IFRS 13 provides guidance on how to measure fair value under IFRS when fair value
is required or permitted. The Bank is currently assessing the impact that this
standard will have on the financial position and performance. This standard will be
effective for financial year beginning on January 1, 2013.
2.3
Summary of significant accounting policies
Revenues and expenses recognition
Interest income is recognized as the interest accrues using the effective interest
method except for interest and commission income on non-performing facilities
which is suspended and not recorded as revenues.
Commission income is recognized when the services are rendered. Dividends
income is recognized when the right to receive dividends is established.
Expenses are recognized when incurred based on the accrual basis of accounting.
Credit facilities
Credit facilities are presented net of allowance for impairment losses and interest
in suspense.
Allowance for impairment losses is made to cover impairment for direct credit
facilities when there are one or more events that occurred after the initial
recognition of the facilities that has an impact on the estimated future cash flows
of the facilities that can be reliably estimated. Impairment losses is recognized in
the income statement.
Interest and commission on non-performing facilities are suspended in accordance
with PMA regulations. Recognition of interest and commission revenues is
suspended for customer facilities against which the bank has taken legal actions.
Credit facilities and related allowance are written off when collection procedures
become ineffective according to PMA regulations. The excess in the allowance for
impairment losses, if any, is transferred to the income statement. Collections of
previously written off credit facilities are recognized as revenues.
According to PMA instructions, non- performing direct credit facilities defaulted for
more than 6 years along with the related suspended interest, and allowances are
excluded from the bank’s financial statements.
Recognition of financial assets
Purchases and sales of financial assets are recognized on the trade date, (which is
the date that the Bank commits to purchase or sell the financial assets).
7
Financial Assets
Financial assets at amortized cost
Debt instruments are measured at amortized cost if both of the following
conditions are met:
-
The asset is held within a business model whose objective is to hold assets in
order to collect contractual cash flows; and
The contractual terms of the instrument give rise on specified dates to cash
flows that are solely payments of principal and interest on the principal amount
outstanding.
If either or both of the two conditions are not met the financial instrument is
classified as at FVTPL. Even if the instrument meets the two conditions, the Bank
has the option to classify the financial asset as at FVTPL if this designation reduces
any inconsistency recognition.
Financial assets at fair value
They are equity instruments and financial derivatives that are recognized at
FVTPL. The entity can irrevocably elect to designate equity instruments not held
for trading through other comprehensive income.
If the Bank elects to designate equity instruments at fair value through other
comprehensive income (FVOCI), the Bank recognizes change in fair value in a
special account in equity. Where the asset is disposed of, the gain or loss is not
reclassified to the income statement, but is reclassified directly to retained
earnings.
Dividends on these investments in equity instruments are recognized in the income
statement when the Bank’s right to receive the dividends is established.
Fair value of financial instruments
The fair value of investments that are actively traded in active financial markets is
determined by reference to quoted market bid prices at the close of business on
the statement of financial position.
For financial instruments where there is no active market, fair value is normally
determined based on one of the following methods:
-
Comparison with the current market value of a highly similar financial
instrument.
-
The estimated cash flows discounted at current rates applicable for items with
similar terms and risk characteristics.
The estimation methods aim to obtain a fair value that reflects the market
anticipation taking into consideration the market factors and any expected risks or
benefits. In case the fair value of an investment cannot be reliably measured, it is
stated at cost or less any impairment in value.
Fair value of interest bearing financial instruments is estimated by discounting
future cash flows using rates currently available for debt on similar terms.
8
Property and equipment
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful lives of
the assets (except for land) as follows:
Furniture, equipment, and leasehold improvements
Computers
Motor vehicles
Years
6-25
6
6
The useful lives of the property and equipment are reviewed at the end of each
financial year; changes in the expected useful life are treated as changes in
accounting estimates and reflected in subsequent years.
The carrying values of property and equipment are reviewed for impairment when
events or changes in circumstances indicate that the carrying values may not be
recoverable. If any such indication exists and where the carrying values exceed the
estimated recoverable amount, the assets are written down to their recoverable
amount being the higher of their fair value less costs to sell and their value in use.
Impairment in property and equipment is recognized in the income statement.
Expenditure incurred to replace a component of an item of property and equipment
that is accounted for separately is capitalized and the carrying amount of the
component that is replaced is written off. Other subsequent expenditures are
capitalized only when they increase future economic benefits of the related item of
property and equipment. All other expenditures are recognized in the income
statement as the expense is incurred.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost.
The cost of intangible assets acquired in a business combination is its fair value as
at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortization and any accumulated
impairment losses.
The useful lives of the intangible assets are assessed to be either finite or
indefinite.
Intangible assets with indefinite useful lives
basis. Such intangibles are not amortized.
reviewed annually to determine whether
supportable. If not, the change in useful life
prospective basis.
are tested for impairment on annual
The assessment of indefinite life is
the indefinite life continues to be
from indefinite to finite is made on a
Intangible assets with finite lives are amortized over the useful economic life and
assessed for impairment whenever there is an indication that the intangible asset
may be impaired. The amortization period and the amortization method for an
intangible asset with a finite useful life is reviewed at least at each financial year
end. The amortization expense on intangible assets with finite lives is recognized
in the income statement.
The Bank’s intangible assets comprise computer system and software. The Bank’s
management estimates the economic life for each intangible asset. Amortization
expense is calculated on a straight line basis over 3 years.
Assets obtained by the Bank by calling on collateral
Assets obtained by the Bank by calling on collateral are stated in the statement of
financial position under “Other assets” at the lower of the carrying value or fair
value. These assets are revaluated individually at the date of the financial
statements at fair value. Any impairment loss is recorded in the income statement.
9
However, any appreciation in the assets’ value is not recorded as income.
Subsequently, the increase resulting from the appreciation of the assets value is
recorded in the income statement to the extent of the impairment loss previously
recorded.
Offsetting
Financial assets and financial liabilities are offset and the net amount is reported in
the statement of financial position if, and only if there is a currently enforceable
legal right to offset the recognized amounts and the Bank intends to either settle
on a net basis, or to realize the asset and settle the liability simultaneously.
Provisions
Provisions are recognized when the Bank has a present obligation (legal or
constructive) arising from a past event and the costs to settle the obligation are
both probable and can be reliably measured.
Tax provision
The Bank provides for income tax in accordance with Palestinian Income Tax Law
and IAS 12 which requires recognizing the temporary differences, at the statement
of financial position date, as deferred taxes.
Income tax expense is calculated on the basis of taxable income. Taxable income
differs from the accounting income declared in the financial statements because
the accounting income includes non-taxable revenues or non-deductable expenses
in the current year but deductible in subsequent years, accumulated losses
acceptable by the tax law, and items not accepted for tax purposes or subject to
tax.
Deferred income tax is provided using the liability method on temporary
differences at the statement of financial position date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the asset is realized or the liability is settled,
based on tax rates (and tax laws) that have been enacted or substantively enacted
at the statement of financial position date.
Foreign currencies
-
Transactions dominated in foreign currencies occurring during the year, are
recorded at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the exchange rate ruling at the statement of financial position
date.
Non-monetary items measured at fair value and denominated in a foreign
currency are translated using the exchange rates at the date when the fair
value was determined.
Any foreign currency exchange gains or losses are recognized in the income
statement.
Currency exchange differences for non-monetary assets and liabilities items
(such as shares) are recognized in the statement of comprehensive income.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, balances at Palestine Monetary
Authority, balances with banks and financial institutions maturing within three
months, less banks and financial institutions’ deposits maturing within three
months and restricted deposits.
10
3. Use of estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of financial assets and liabilities
and the disclosure of contingent liabilities. These estimates and assumptions also
affect the revenues and expenses and the resultant provisions as well as fair value
changes reported in equity. In particular, considerable judgment by management is
required in the estimation of the amount and timing of future cash flows. Such
estimates are necessarily based on assumptions about several factors involving
varying degrees of judgment and uncertainty. Therefore, actual results may differ
resulting in future changes in such provisions.
Management believes that estimates are reasonable and are as follows:
-
Allowance for impairment losses: The Bank reviews its provision for credit
facilities according to Palestine Monetary Authority regulations and IAS 39.
-
Property and equipment are impaired based on current assessments of
accredited real estate appraisers, and the decline is revised on a regular basis.
-
Tax provisions are calculated based on prevailing tax laws and regulations in
Palestine and IFRS.
-
Management reviews, on a regular basis, the useful lives of the tangible and
intangible assets in order to assess the depreciation and amortization for the
year based on the asset’s condition, useful life and future economic benefits.
Any impairment loss is recognized in the income statement.
-
Lawsuits provision is established to provide for any legal obligations, if any,
based on the opinion of the Bank’s lawyer.
4. Segments information
A segment is a distinguished component of the bank that is engaged either in
providing products and/or services (business segment) or in providing products
and/or services within a particular economic environment (geographic segment)
which is subject to risks and rewards that are different from those of other
segments.
5. Cash and balances at Palestine Monetary Authority
This item represents the following:
2012
U.S. $
Cash on hand
24,943,012
Balances at PMA:
Current and demand accounts
481,607
Time deposit
2,000,000
Statutory cash reserve
24,007,367
51,431,986
2011
U.S. $
12,633,685
900,484
10,482,611
24,016,780
According to PMA circular (67/2010), the Bank shall maintain statutory cash
reserves with PMA at 9% of total customers' deposits. The PMA commits the Bank
to maintain cash reserves with PMA 20% of total customers’ deposit because the
Bank did not increase its capital up to U.S. $ 50 million according to PMA circular
(7/2009). PMA does not pay interest on statutory cash reserve and current
accounts.
Time deposits at PMA are interest-bearing deposits with interest rates based on
current market interest rates less PMA’s commission of 0.25%.
11
6. Balances at banks and financial institutions
Local banks and financial institutions:
Current and demand accounts
Deposits maturing within 3 months
Deposits maturing after 3 months
Foreign banks and financial institutions:
Current and demand accounts
Deposits maturing within 3 months
Deposits maturing after 3 months
2012
U.S. $
2011
U.S. $
165,326
17,739,394
4,541,487
22,446,207
298,301
32,042,992
3,500,000
35,841,293
6,141,765
7,151,799
2,769,190
16,062,754
38,508,961
2,551,137
18,868,528
3,475,695
24,895,360
60,736,653
-
Non-interest bearing balances at banks and financial institutions amounted to
U.S. $ 2,192,448 and U.S. $ 2,437,379 as at December 31, 2012 and 2011,
respectively.
-
Restricted balances at banks and financial institutions amounted to U.S. $
391,519 and U.S. $ 449,847 as at December 31, 2012 and 2011,
respectively.
7. Financial assets at fair value through profit or loss
2012
U.S. $
1,154,625
Quoted shares at Palestine Exchange
2011
U.S. $
1,303,025
8. Direct credit facilities
Individuals
Overdraft accounts
Loans and discounted bills*
Credit cards
Corporate
Overdraft accounts
Loans and discounted bills*
Real estate loans
Government and public sector
Suspended interest
Allowance for impairment losses
2012
U.S. $
2011
U.S. $
4,705,514
18,360,925
66,361
4,513,445
13,537,604
4,338
9,569,522
16,118,820
14,934,782
10,877,419
74,633,343
(213,068)
(260,784)
74,159,491
7,098,671
12,254,609
9,802,055
9,908,118
57,118,840
(212,586)
(457,854)
56,448,400
*
Loans and discounted bills are presented net of their related interest and
commissions received in advance in the amount of U.S. $ 9,797 and U.S. $
55,638 as at December 31, 2012 and 2011, respectively.
-
Non-performing direct credit facilities net of suspended interest according to
PMA regulations amounted to U.S. $ 1,825,032 and U.S. $ 1,628,213 as at
December 31, 2012 and 2011, respectively, Which represents (2.45%) and
(2.86%) of total direct credit facilities net of suspended interest as at
December 31, 2012 and 2011, respectively.
12
-
According to PMA circular number (1/2008), defaulted credit facilities for
more than 6 years were excluded from the financial statements. These
defaulted facilities amounted to U.S.$ 19,092,632 as at December 31, 2012.
The balance of impairment provision and suspended interest for defaulted
accounts amounted to U.S.$ 9,513,434 and U.S. $9,579,198, respectively.
-
Credit facilities granted to Palestinian National Authority and by its guarantee
amounted to U.S. $ 10,877,419 , representing (14.62%) of total direct credit
facilities as at December 31, 2012 compared to U.S. $ 9,908,118
representing (17.41%) of total direct credit facilities as at December 31,
2011.
-
Credit facilities granted to non-residents amounted to U.S. $ 133,966 and
U.S. $ 169,397 as at December 31, 2012 and 2011, respectively.
-
Fair value of collaterals obtained in lieu of credit facilities, amounted to U.S. $
33,135,704 and U.S. $ 23,410,848 as at December 31, 2012 and 2011,
respectively.
Suspended interest
Movement on the suspended interest during the year was as follow:
2012
Balance, beginning of year
Suspended interest during the year
Suspended interest transferred to revenues
Write off of suspended interest
Write off of suspended interest of loans
defaulted for more than 6 years
Balance, end of year
2011
Balance, beginning of year
Suspended interest
Suspended interest transferred to revenues
Write off of suspended interest
Write off of suspended interest of loans
defaulted for more than 6 years
Balance, end of year
Retail
U.S. $
66,814
7,564
(3,192)
(11,750)
Corporate
U.S. $
145,772
8,117
-
Total
U.S. $
212,586
15,681
(3,192)
(11,750)
(257)
59,179
153,889
(257)
213,068
Retail
U.S. $
184,686
10,312
(77)
(361)
Corporate
U.S. $
155,390
-
Total
U.S. $
340,076
10,312
(77)
(361)
(127,746)
66,814
(9,618)
145,772
(137,364)
212,586
Allowance for impairment losses
Movement on the allowance for impairment losses during the year was as follow:
Retail
U.S. $
2012
Corporate
U.S. $
Total
U.S. $
Balance, beginning of year
Provision for the year
Recovery during the year
Loans defaulted written off
232,268
47,298
(17,762)
(2,779)
225,586
4,272
(224,166)
(1,420)
457,854
51,570
(241,928)
(4,199)
Balance, end of year
(2,513)
256,512
4,272
(2,513)
260,784
Write off of loans defaulted for more than
6 years
13
Retail
U.S. $
2011
Balance, beginning of year
Provision for the year
Recovery during the year
Write off of loans defaulted for more than
6 years
Balance, end of year
Corporate
U.S. $
Total
U.S. $
549,905
205,537
(68,411)
332,099
3,434
(72,120)
882,004
208,971
(140,531)
(454,763)
232,268
(37,827)
225,586
(492,590)
457,854
Following is the movement on the allowance for impairment losses of loans
defaulted for more than 6 years:
2012
2011
U.S. $
U.S. $
Balance, beginning of year
9,929,208
10,136,709
Addition
2,513
492,590
Deduction
(418,287)
(700,091)
Balance, end of year
9,513,434
9,929,208
Following is the distribution of credit facilities net of suspended interest by
economic sector:
2012
U.S. $
2011
U.S. $
Public Sector
Palestine National Authority
Real Estate Development
Real estate for residency
Real estate for investment
Industry and Trade
Manufacturing
Trade
Agriculture
Services
Tourism and restaurants
Financial services
Telecommunications
Public utilities
Professionals practices
Consumers’ Loans
Cars loans
Credit cards
Others
14
10,877,419
9,908,118
9,108,935
5,825,847
5,596,656
4,205,399
4,462,737
12,160,148
598,835
5,365,056
8,061,885
594,838
8,049,139
2,082,863
3,000,000
2,093,687
1,428,871
3,056,768
2,205,623
4,128,370
1,294,532
1,119,751
959,580
66,059
13,706,155
74,420,275
721,846
4,036
10,643,376
56,906,254
9. Financial assets at fair value through other comprehensive income
2012
2011
U.S. $
Equity instruments traded in foreign financial markets
-
Following is the movement on the fair value reserve during the year:
2012
U.S. $
Balance, beginning of year
(124,280)
Unrealized losses
(59,972)
Loss from sale of financial assets at fair value
through other comprehensive income
184,252
Balance, end of year
-
U.S. $
875,720
875,720
2011
U.S. $
275,720
(400,000)
(124,280)
10. Financial assets at amortized cost
Quoted bonds traded in foreign financial
markets
Local unquoted bonds
2012
U.S. $
2011
U.S. $
10,449,333
2,000,000
12,449,333
14,703,752
2,000,000
16,703,752
Average interest on financial assets at amortized cost ranges between 5% to 7.8%,
and their maturity dates range between 3 to 5 years.
11. Property and equipment
The movement on property and equipment during the year was as follows:
Furniture,
equipment
and leasehold
improvement
U.S. $
Land
U.S. $
2012
Cost:
At January 1, 2012
Additions
Disposals
At December 31, 2012
Accumulated depreciation:
At January 1, 2012
Depreciation charge for the
year
Disposals
At December 31, 2012
Net book value
At December 31, 2012
Computers
U.S. $
Motor
vehicles
U.S. $
Total
U.S. $
752,729
752,729
6,863,431
199,228
(223,155)
6,839,504
1,342,846
75,791
(46,059)
1,372,578
320,845
21,751
(15,500)
327,096
9,279,851
296,770
(284,714)
9,291,907
-
3,324,194
1,097,908
216,471
4,638,573
-
392,022
(10,636)
3,705,580
67,158
(46,059)
1,119,007
31,478
(15,500)
232,449
490,658
(72,195)
5,057,036
752,729
3,133,924
253,571
94,647
4,234,871
15
2011
Cost:
At January 1, 2011
Additions
Disposals
Reclassification
At December 31, 2011
Accumulated depreciation:
At January 1, 2011
Depreciation charge for the
year
Disposals
At December 31, 2011
Net book value
At December 31, 2011
Furniture,
equipment
and leasehold
improvement
U.S. $
Computers
U.S. $
Motor
vehicles
U.S. $
752,729
752,729
5,629,376
1,289,676
(22,962)
(32,659)
6,863,431
1,280,425
106,717
(76,955)
32,659
1,342,846
352,231
29,000
(60,386)
320,845
8,014,761
1,425,393
(160,303)
9,279,851
-
3,002,184
1,109,834
235,394
4,347,412
-
344,732
(22,722)
3,324,194
58,048
(69,974)
1,097,908
41,463
(60,386)
216,471
444,243
(153,082)
4,638,573
752,729
3,539,237
244,938
104,374
4,641,278
Land
U.S. $
Total
U.S. $
12. Deferred tax assets
Deferred tax assets are computed based on direct facilities impairment allowance.
Movements on the deferred tax assets as follows:
2012
U.S. $
1,117,543
127,578
(127,578)
1,117,543
Balance, beginning of year
Additions
Amortization
Balance, end of year
2011
U.S. $
1,117,543
1,117,543
13. Other assets
2012
Checks under collection
Accrued interest
Tax advances
Assets obtained by the Bank by calling on collateral *
Prepaid expenses
Intangible assets**
Others
U.S. $
1,066,573
301,092
839,941
239,032
351,475
314,289
3,112,402
2011
U.S. $
1,290,437
306,961
626,000
90,807
224,510
298,296
123,474
2,960,485
* This items represent Land No. (719) – Mahalet Altufah / Gaza strip, which was sold
during the year.
** Movement on intangible assets was as follow:
2012
Balance, beginning of year
Additions
Amortization
U.S. $
298,296
131,622
(78,443)
2011
U.S. $
290,694
74,426
(66,824)
Balance, end of year
351,475
298,296
16
14. Banks and financial institutions’ deposits
2012
2011
U.S. $
2,144,772
2,144,772
PMA Deposits
Local banks and financial institutions
Deposits maturing within 3 months
Foreign banks and financial institutions
Current and demand accounts
U.S. $
-
20,853,414
20,853,414
19,127,687
19,127,687
5,121,715
5,121,715
28,119,901
133,959
133,959
19,261,646
2012
U.S. $
52,404,649
1,179,072
23,303,704
33,634,546
110,521,971
2011
U.S. $
45,609,598
2,125,164
22,253,402
35,833,283
105,821,447
15. Customers' deposits
Current and demand accounts
Overdraft accounts-Temporary credit
Saving deposits
Time deposits
-
Public sector deposits amounted to U.S. $ 12,395,522 and U.S $ 10,501,760
representing 11% and 10% of the total deposits as at December 31, 2012 and 2011,
respectively.
-
Non-interest bearing deposits amounted to U.S. $ 53,393,883 and U.S. $
47,718,987 representing 48% and 45% of the total deposits as at December 31, 2012
and 2011, respectively.
16. Cash margins
This item represents cash margins against the following facilities:
2012
U.S. $
10,988,488
Direct credit facilities
Indirect credit facilities
1,033,867
Others
574,181
12,596,536
2011
U.S. $
7,212,573
1,677,462
586,155
9,476,190
17. Loans and borrowings
Balance in U.S. $
Gross
December 31, 2012
Palestine Mortgage and
Housing Corporation
Ltd.
December 31, 2011
Palestine Mortgage and
Housing Corporation
Ltd.
2,998,382
2,233,382
Outstanding
2,614,726
1,883,892
Number of installments
Gross
5,572
4,862
Outstanding
4,011
3,526
17
Installment
due date
Monthly
Monthly
Type of
interest
Collateral
Interest
rate
Variable
First grade
real estate
mortgage
4.38%
Variable
First grade
real estate
mortgage
4.38%
18. Sundry provisions
This item represents the following provisions:
December 31, 2012
Provision for employees’ indemnity
Provision for legal cases
December 31, 2011
Provision for employees’ indemnity
Provision for legal cases
Balance,
beginning of
year
U.S. $
Additions
(recovery)
U.S. $
Payments
U.S. $
Balance, end
of year
U.S. $
824,897
369,446
1,194,343
201,910
(192,858)
9,052
(5,056)
(176,588)
(181,644)
1,021,751
1,021,751
652,875
255,201
908,076
183,677
114,245
297,922
(11,655)
(11,655)
824,897
369,446
1,194,343
19. Tax provisions
2012
U.S. $
1,324,424
(391,405)
933,019
Balance, beginning of year
Current year provision
Tax paid during the year
Balance, end of year
2011
U.S. $
1,385,983
243,387
(304,946)
1,324,424
Tax included in the income statement represents the following:
2012
U.S. $
Current year provision
Deferred tax assets amortized
Deferred tax assets additions
Balance, end of year
127,578
(127,578)
-
2011
U.S. $
243,387
243,387
The reconciliation between accounting income and taxable income is as follows:
2012
2011
U.S. $
U.S. $
Accounting profit
62,167
832,514
Income subject to Value Added Tax (VAT)
(1,358,001)
(844,829)
VAT- recovery
174,128
106,987
Income subject to income tax
1,088,551
1,595,771
Balance subject to income tax
(95,322)
857,929
Income Tax
128,689
Total taxes for the year
21,702
Provision for the year
243,387
Effective tax rate
29%
During 2011, the Bank reached a final settlement with the Income Tax and Value
Added Tax departments on its results of operations for the years from 1998
through 2007. To the date of these financial statements, the Bank did not reach
settlement with the Income Tax and Value-Added Tax departments for the years
from 2008 through 2011.
18
20. Other liabilities
2012
U.S. $
972,557
659,827
178,063
83,049
80,688
8,933
309,541
2,292,658
Certified checks
Employees’ provident fund *
Accrued interest
Accrued payroll tax
Accrued expenses
Incoming transfers
Others
*
2011
U.S. $
671,984
502,197
127,268
26,620
355,657
11,911
79,602
1,775,239
The Bank deducts 5% from the employees’ monthly basic salaries and
contributes an additional 5% of the employees’ monthly basic salaries for the
provident fund.
21. Reserves
Statutory reserve
As required by the Companies’ Law and Banking Law, 10% of the net profit is
transferred to the statutory reserve and shall continue until the total reserve
balance equals the Bank’s paid-in share capital. The reserve is not to be utilized
without PMA’s prior approval.
General banking risk reserve
This reserve is appropriated in accordance with PMA instruction (5/2008) based on
1.5% of direct credit facilities after deducting allowance for impairment losses and
suspended interest and 0.5% of indirect credit facilities after deducting checks
under collection, letters of guarantees, acceptances, and financial derivatives. The
reserve is not to be utilized in any manner without PMA’s prior approval.
Pro-cyclicality reserve
This reserve is appropriated in accordance with PMA instruction (1 / 2011) based
on 15% of net profit after tax, to strengthen the bank's capital against the risks
surrounding the banking business. The reserve is not to be utilized or reduced
without PMA prior approval. The appropriation shall continue until total reserve
balance equals 20% of paid in share capital.
22. Interest income
This item represents interest income on the following accounts
Individuals
Overdraft accounts
Loans and discounted bills
Corporate
Overdraft accounts
Loans and discounted bills
Real estate loans
Government and public sector
Balances at PMA
Balances at banks and financial institutions
Bonds
19
2012
U.S. $
2011
U.S. $
545,221
1,475,901
2,021,122
581,202
976,670
1,557,872
967,804
774,659
1,742,463
414,390
732,124
4,910,099
33
790,737
1,047,879
6,748,748
905,636
572,304
1,477,940
246,837
709,471
3,992,120
8,242
832,080
1,520,482
6,352,924
23. Interest expense
This item comprise of interest expense on the following accounts:
Customers’ deposits:
Current and demand accounts
Saving accounts
Time deposits
Banks and financial institutions’ deposits
Cash margins
2012
U.S. $
2011
U.S. $
1,844
119,753
906,981
372,413
102,677
1,503,668
1,133
116,572
971,478
311,332
24,574
1,425,089
24. Net commission income
2012
U.S. $
Commission income
Direct credit facilities
Indirect credit facilities
Returned and post-dated checks
Accounts’ management
Transfers
Other banking services
439,922
132,792
162,756
226,067
69,313
13,485
1,044,335
(150,933)
893,402
Commission expense
2011
U.S. $
453,310
129,100
143,560
201,067
60,817
23,002
1,010,856
(106,721)
904,135
25. Financial assets (losses) gains
Unrealized loss from financial assets at fair value
through profit or loss
(Losses) gains from sale of financial assets
Cash dividends
2012
2011
U.S. $
U.S. $
(148,400)
(868,123)
39,893
(976,630)
(168,919)
140,797
48,044
19,922
26. Other income
Recoveries of written off loans
Check books
Safety deposit box rental income
Small business lending program
Sundry
2012
2011
U.S. $
279,356
81,929
14,637
5,354
79,788
461,064
U.S. $
432,435
62,974
16,468
3,350
57,377
572,604
2012
2011
27. Personnel expenses
Salaries and related expenses
VAT on salaries
Provision for employees’ indemnity
Bank’s contribution to the provident fund
Health insurance
Training expenses
Travel and transportation
Bank’s contribution to the employees’ social committee
20
U.S. $
2,534,432
347,650
201,910
85,179
94,125
14,126
87,553
12,750
3,377,725
U.S. $
2,193,460
297,636
183,677
79,025
87,277
4,851
79,803
12,100
2,937,829
28. Other operating expenses
2012
2011
U.S. $
562,584
432,180
196,825
188,896
186,877
174,827
166,327
144,126
95,287
82,725
52,044
30,574
27,119
16,720
58,442
2,415,553
Rent
Board of Directors’ expenses
Telephone and postage
Utilities
Professional fees
Fees, licenses and subscriptions
Maintenance and repairs
Merger expenses*
Advertisements and marketing
Stationary and printings
Insurance
Hospitality
Cash shipment
Donations
Others
U.S. $
550,021
129,698
215,805
182,253
239,057
155,359
131,555
151,421
86,542
41,045
33,097
19,683
60,623
14,927
2,011,086
* This item represents realized expenses to merge with another bank, This merge did
not complete.
29. Depreciation and amortization
2012
Depreciation
Amortization
2011
U.S. $
490,658
78,443
569,101
U.S. $
444,243
66,824
511,067
2012
2011
30. Basic and diluted earnings per share
U.S. $
62,167
Profit for the year
Weighted average number of subscribed shares
Basic and diluted earnings per share
589,127
Shares
30,026,056
30,026,056
U.S. $
0.002
0.020
31. Cash and cash equivalents
2012
U.S. $
2011
U.S. $
Cash and balances at PMA
51,431,986
24,016,780
Add: Balances at banks and financial institutions
maturing within 3 months
31,198,284
53,760,958
(28,119,901)
(19,261,646)
(391,519)
(24,007,367)
30,111,483
(449,847)
(10,482,611)
47,583,634
Less: Due to banks and financial institutions
maturing within 3 months
Restricted balances at banks and financial
institutions
Statutory cash reserve
21
32. Related party transactions
Related parties represent major shareholders, directors and key management personnel of
the Bank, and entities controlled, jointly controlled or significantly influenced by such
parties. Transactions with related parties during the year represented by deposits and
credit facilities are as follows:
Statement of financial position
items:
Direct credit facilities
Deposits
Commitment and Contingencies:
Letters of credit and guarantee
Nature of relationship
Executive Management
and Board of Directors
Executive Management
and Board of Directors
Executive Management
and Board of Directors
2012
U.S. $
2011
U.S. $
1,476,849
1,190,854
910,543
1,128,310
100,000
135,039
84,467
60,597
3,170
257
Income statement items:
Executive Management
and Board of Directors
Executive Management
Interest and commission expense and Board of Directors
Interest and commission income
-
Direct credit facilities granted to related parties as at December 31, 2012 and
2011 accounted for 1.98% and 2.09% respectively of the total direct credit
facilities. Noting that credit facilities granted to related parties are for
members of board of directors and the executive management or in their
capacity as guarantors.
-
Direct credit facilities granted to related parties as at December 31, 2012 and
2011 accounted for 5.80% and 4.87% respectively of the capital base.
-
Interest rate on U.S. $ credit facilities ranges between 5% to 8%.
Key management compensation:
Executive management salaries and related benefits
Executive management indemnity
Board of Directors’ expenses*
2012
2011
U.S. $
370,432
20,000
432,180
U.S. $
345,443
24,670
129,698
*Following are the details of the board of directors’ remuneration and meeting
allowances:
2012
2011
Mahmoud Malhas
Fahd Malhas
Basem Malhas
Maher Atari
Hani Nassar
Deema Mifleh
Khalid Anabtawi
Transportation, accommodation and phone expenses
Others
22
U.S. $
120,000
68,392
67,405
45,000
7,898
7,405
5,924
67,489
42,667
432,180
U.S. $
9,873
8,392
8,392
2,962
8,886
91,193
129,698
33. Fair Value of Financial Instruments
The table below represents a comparison by class of the carrying amounts and fair
values of financial instruments carried in the financial statements as at December
31, 2012 and 2011:
Carrying amount
2012
2011
U.S. $
U.S. $
Financial assets
Cash and balances at PMA 51,431,986 24,016,780
Balances at banks and
financial institutions
38,508,961 60,736,653
Financial assets at fair
value through profit or
loss
1,154,625
1,303,025
Direct credit facilities
74,159,491 56,448,400
Financial assets at fair
value through other
comprehensive income:
Quoted equity instruments
875,720
Financial assets at
amortized cost:
Quoted bonds traded in
10,449,333 14,703,752
foreign markets
2,000,000
2,000,000
Local unquoted bonds
1,367,665
1,597,398
Other financial assets
Total assets
179,072,061 161,681,728
Financial liabilities
Banks and financial
institutions deposits
Customers’ deposits
Cash margins
Loans and borrowings
Other financial liabilities
Total liabilities
-
-
-
Fair value
2012
U.S. $
2011
U.S. $
51,431,986
24,016,780
38,508,961
60,736,653
1,154,625
74,159,491
1,303,025
56,448,400
-
875,720
10,511,750
2,000,000
1,367,665
179,134,478
11,131,021
2,000,000
1,597,398
158,108,997
28,119,901 19,261,646
110,521,971 105,821,447
12,596,536
9,476,190
2,614,726
1,883,892
1,531,603
1,196,516
28,119,901
110,521,971
12,596,536
2,614,726
1,531,603
19,261,646
105,821,447
9,476,190
1,883,892
1,196,516
155,384,737 137,639,691
155,384,737
137,639,691
The fair value of the financial assets and liabilities are included at the
amount at which the instruments could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation
sale.
Fair values of balances at PMA, balances at banks and financial institutions
and other financial assets, banks and financial institutions’ deposits,
customers’ deposits, cash margins, and other financial liabilities
approximate their carrying amounts largely due to the short–term
maturities of these instruments.
The fair value of the financial assets that has a market price was based on
price quotations at the reporting date.
Loans and borrowings and financial assets at amortized cost were measured
by discounting future expected cash flows using prevailing market interest
rates.
23
The hierarchy of fair values:
The Bank uses the following hierarchy for determining and disclosing the fair value
of its financial instruments:
-
Level 1: Quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2: Using inputs other than quoted prices that are observable, either
directly or indirectly.
Level 3: Techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
During the year, the Bank used only Level 1 to determine and disclose the fair
values of the financial assets at fair value through profit or loss and financial
assets at fair value through other comprehensive income. Levels 2 and 3 were not
used during the year.
24
34. Concentration of assets and liabilities
Assets
Cash and balances at PMA
Balances at banks and financial institutions
Financial asset at fair value through profit or loss
Direct credit facilities
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Total Assets
Domestic
U.S. $
51,431,986
22,446,207
1,154,625
74,159,491
2,000,000
4,234,871
1,117,543
3,112,402
159,657,125
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Accumulated losses
Net Equity
Total liabilities and equity
Commitment and contingencies
Guarantees
Letters of credit
Irrevocable commitment to extend credit
Jordan
U.S. $
2012
Europe
U.S. $
Israel
U.S. $
America
U.S. $
Other Countries
U.S. $
1,499,891
1,499,891
Total
U.S. $
51,431,986
38,508,961
1,154,625
74,159,491
12,449,333
4,234,871
1,117,543
3,112,402
186,169,212
28,119,901
110,521,971
12,596,536
2,614,726
1,021,751
933,019
2,292,658
158,100,562
7,355,179
7,355,179
4,581,002
4,581,002
2,626,682
10,449,333
13,076,015
-
22,998,186
110,521,971
12,596,536
2,614,726
1,021,751
933,019
2,292,658
152,978,847
5,017,523
5,017,523
-
-
104,192
104,192
-
30,026,056
1,069,087
99,658
1,187,630
366,797
(4,680,578)
28,068,650
181,047,497
5,017,523
-
-
104,192
-
30,026,056
1,069,087
99,658
1,187,630
366,797
(4,680,578)
28,068,650
186,169,212
-
-
-
10,632,079
200,000
5,122,124
15,954,203
10,632,079
200,000
5,122,124
15,954,203
-
-
25
-
-
Assets
Cash and balances at PMA
Balances at banks and financial institutions
Financial asset at fair value through profit or loss
Direct credit facilities
Financial assets at fair value through other
comprehensive income
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Total Assets
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Fair value reserve
Accumulated losses
Net Equity
Total liabilities and equity
Commitment and contingencies:
Guarantees
Letters of credit
Irrevocable commitment to extend credit
10,692,428
-
6,189,096
-
6,514,000
-
2,000,000
4,641,278
1,117,543
2,960,485
128,328,803
10,692,428
6,189,096
14,703,752
21,217,752
19,127,687
105,821,447
9,476,190
1,883,892
1,194,343
1,324,424
1,775,239
140,603,222
-
-
-
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
168,669,677
-
-
16,092,204
259,078
6,293,552
22,644,834
Jordan
U.S. $
2011
Europe
U.S. $
Domestic
U.S. $
24,016,780
35,841,292
1,303,025
56,448,400
Israel
U.S. $
-
-
26
America
U.S. $
-
Other Countries
U.S. $
1,499,837
-
Total
U.S. $
24,016,780
60,736,653
1,303,025
56,448,400
-
875,720
2,375,557
875,720
16,703,752
4,641,278
1,117,543
2,960,485
168,803,636
133,959
133,959
-
19,261,646
105,821,447
9,476,190
1,883,892
1,194,343
1,324,424
1,775,239
140,737,181
-
133,959
-
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
168,803,636
-
-
-
16,092,204
259,078
6,293,552
22,644,834
35. Risk Management
The Bank’s risk management committee, which comprise of member of the Board
of Directors together with executive management of the bank, supervises the
general framework of risk management. The committee monitors and evaluates
credit risks, operating and market risks and any other future risks. The bank is
developing its risk management function through programs, control and
monitoring.
I.
Credit Risks
Credit risks are those risks resulting from the default of counterparties to the
financial instrument to repay their commitment to the Bank. The Bank, through
credit risk management, sets ceilings for direct credit facilities (retail or corporate)
and total loans granted to each sector and each geographical area. The Bank also
monitors credit risks and continuously evaluates the credit standing of customers.
The Bank also obtains appropriate collaterals from customers.
1. Exposures to credit risks
Statement of financial position Items
Balances at PMA
Balances at banks and financial institutions
Direct credit facilities
Financial assets at amortized cost
Other assets
Commitments and Contingencies
Letters of guarantee
Letters of credit
Irrevocable commitments to extend credit
2012
U.S. $
2011
U.S. $
26,488,974
38,508,961
74,159,491
12,449,333
1,367,665
152,974,424
11,383,095
60,736,653
56,448,400
16,703,752
1,597,398
146,869,298
10,632,079
200,000
5,122,124
15,954,203
168,928,627
16,092,204
259,078
6,293,552
22,644,834
169,514,132
2. Credit risk exposure for each risk rating:
Credit risk exposure for each risk rating distributed as follows:
December 31, 2012
Performing
Acceptable risk
From which is due
Watch list
Non-performing:
Substandard
Doubtful
Loss
Total
Suspended interest and
commissions
Allowance for
impairment losses on
credit facilities
Retail
U.S. $
Real estate
U.S. $
Corporate
U.S. $
Government
and public
sector
U.S. $
Total
U.S. $
4,427,975
17,599,268
113,050
-
14,860,555
37,786
-
6,300,825
18,529,201
57,887
-
10,877,419
4,267,542
-
36,466,774
36,128,469
4,476,265
-
-
-
-
-
1,105,557
23,132,800
74,227
14,934,782
310,234
548,082
25,688,342
(59,179)
-
(153,889)
10,877,419
-
(182,285)
22,891,336
(74,227)
14,860,555
(4,272)
25,530,181
10,877,419
27
-
310,234
1,727,866
74,633,343
(213,068)
(260,784)
74,159,491
December 31, 2011
Performing
Acceptable risk
From which is due
Retail
U.S. $
Real estate
U.S. $
Corporate
U.S. $
6,716,699
14,597,259
9,726,715
-
24,445
-
-
12,008,962
-
66,796
-
-
-
-
2,320,288
Watch list
Non-performing:
Substandard
Doubtful
Loss
Total
Suspended interest
and commissions
Allowance for
impairment losses on
credit facilities
Government
and public
sector
U.S. $
9,908,118
-
Total
U.S. $
28,671,820
26,606,221
-
91,241
-
-
-
-
1,137,840
18,055,387
75,340
9,802,055
627,619
19,353,280
9,908,118
1,840,799
57,118,840
(66,814)
-
(145,772)
-
(212,586)
(156,928)
(75,340)
9,726,715
(225,586)
18,981,922
9,908,118
(457,854)
56,448,400
17,831,645
3. Distribution of collaterals fair value against credit facilities is as follows:
December 31, 2012
Collaterals against:
Performing
Acceptable risk
Watch list
Non-performing:
Substandard
Doubtful
Loss
Total
Comprising of:
Cash margins
Real estate
Quoted equity instrument
Vehicles and equipment
Guarantees
Retail
U.S. $
Real estate
U.S. $
Corporate
U.S. $
3,840,401
509,096
-
14,825,825
-
5,890,360
6,522,862
-
24,556,586
7,031,958
-
-
-
-
-
864,093
5,213,590
14,825,825
272,640
410,427
13,096,289
272,640
1,274,520
33,135,704
14,825,825
5,858,202
5,033,752
9,512,296
20,264,480
14,825,825
1,304,943
189,691
709,701
13,096,289
1,304,943
1,103,690
950,295
33,135,704
-
3,654,094
404,903
913,999
240,594
5,213,590
28
Total
U.S. $
December 31, 2011
Real
estate
U.S. $
Retail
U.S. $
Collaterals against:
Performing
Acceptable risk
Watch list
Non-performing:
Substandard
Doubtful
Loss
Total
Comprising of:
Cash margins
Real estate
Quoted equity instrument
Vehicles and equipment
Guarantees
Corporate
U.S. $
2,320,287
444,080
-
9,709,307
-
-
Total
U.S. $
-
6,563,804
3,268,295
-
18,593,398
3,712,375
-
-
-
-
846,294
3,610,661
9,709,307
258,781
10,090,880
1,105,075
23,410,848
1,882,380
828,542
5,000
456,832
437,907
3,610,661
9,709,307
9,709,307
3,869,578
2,074,271
1,304,943
147,862
2,694,226
10,090,880
5,751,958
12,612,120
1,309,943
604,694
3,132,133
23,410,848
4. Concentration in risk exposures according to the geographical area
Domestic
U.S. $
Arab
Countries
U.S. $
Europe
U.S. $
Others
U.S. $
Total
U.S. $
Balances at PMA
Balances at banks
and
financial institutions
26,488,974
-
-
-
26,488,974
22,446,207
8,855,070
2,626,682
4,581,002
38,508,961
Direct credit facilities
Financial assets at
amortized cost
74,159,491
-
-
-
74,159,491
2,000,000
-
10,449,333
-
12,449,333
1,367,665
-
-
-
1,367,665
Total as at December
31, 2012
126,462,337
8,855,070
13,076,015
4,581,002
152,974,424
Total as at December
31, 2011
106,991,210
12,227,458
21,459,812
6,190,818
146,869,298
Other assets
29
5. Concentration in risk exposures according to economic sectors:
Balances at PMA
Balances at banks and financial
institutions
Direct credit facilities
Financial assets at amortized cost
Other assets
Total as at December 31, 2012
Total as at December 31, 2011
Financial
U.S. $
26,488,974
Industrial
U.S. $
Commerce
U.S. $
-
-
-
-
-
Total
U.S. $
26,488,974
38,508,961
31,368,561
12,449,333
1,367,665
4,449,558
-
12,033,704
-
14,859,442
-
570,807
-
10,877,419
-
38,508,961
74,159,491
12,449,333
1,367,665
110,183,494
4,449,558
12,033,704
14,859,442
570,807
10,877,419
152,974,424
113,137,346
5,365,056
8,061,885
9,802,055
594,838
9,908,118
146,869,298
30
Real estate
U.S. $
Agriculture
U.S. $
Government
U.S. $
II.
Market risk
Market risk arises from changes in interest rates, exchange rates of foreign
currencies and stock prices, The Bank’s board of directors sets the limits for
acceptable risks. This is periodically monitored by the Bank’s management.
1. Interest rate risk
Interest rate risk arises from the effects of changes in interest rates on the value of
financial instruments. The Bank is exposed to interest rate risk as a result of
mismatch or the existence of a gap between assets and liabilities according to their
maturities, or re-pricing interest rates in certain periods. The Bank manages this
risk by reviewing the interest rate on assets and liabilities through its strategy on
risk management.
Interest rates on assets and liabilities are reviewed periodically and the Bank
regularly follows up the actual cost of funds and takes appropriate decisions
regarding pricing based on the prevailing prices.
The effect of decreases in interest rate is expected to be equal and opposite to the
effect of the increase shown below:
2012
Currency
U.S. $
Israeli Shekel
Jordanian Dinar
Other currencies
Increase in
interest rate
(basis points)
+10
+10
+10
+10
31
Interest
income
sensitivity
(profit and
loss)
297,975
(52,718)
(53,345)
13,501
2011
Increase in
interest rate
(basis points)
+10
+10
+10
+10
Interest
income
sensitivity
(profit and
loss)
7,173
(3,096)
19,790
2,549
December 31, 2012
Assets
Cash and balances at PMA
Balances at banks and financial
institutions
Financial asset at fair value through profit
or loss
Direct credit facilities
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Fair value reserve
Accumulated losses
Interest rate re-pricing sensitivity
From 6 months
From 1 month From 3 months
to
From 1 year to
to 3 months
to 6 months
1 year
3 years
U.S. $
U.S. $
U.S. $
U.S. $
Less than 1
Month
U.S. $
More than 3
years
U.S. $
Non-interest
bearing
U.S. $
Total
U.S. $
2,000,000
-
-
-
-
-
49,431,986
51,431,986
22,246,394
6,759,442
2,777,048
4,533,629
-
-
2,192,448
38,508,961
-
-
-
-
-
-
1,154,625
8,143,641
-
2,535,217
-
5,413,343
45,618,369
74,159,491
-
8,514,840
-
1,154,625
-
12,449,333
-
-
-
4,234,871
4,234,871
-
-
-
-
-
12,449,333
-
-
-
-
-
1,117,543
1,117,543
-
-
-
-
-
-
3,112,402
3,112,402
32,390,035
9,294,659
6,711,129
13,048,469
5,413,343
58,067,702
61,243,875
186,169,212
-
-
53,393,883
28,119,901
110,521,971
-
-
3,934,081
-
-
-
-
6,130,174
11,362,356
-
2,279,975
-
797,754
-
35,299
-
80,818
-
50,018
-
51,346
-
663,545
-
-
-
-
-
-
-
-
-
76,973,377
11,443,174
2,329,993
-
-
-
28,119,901
42,688,003
12,596,536
1,733,700
6,466,362
-
-
1,021,751
1,021,751
-
-
933,019
933,019
-
-
849,100
663,545
1,733,700
2,292,658
64,107,673
2,292,658
158,100,562
-
-
-
-
30,026,056
30,026,056
-
-
-
-
-
1,069,087
1,069,087
-
-
-
-
-
-
99,658
99,658
-
-
-
-
-
-
1,187,630
1,187,630
-
-
-
-
-
-
-
-
-
-
-
-
366,797
-
366,797
-
-
-
-
-
-
-
-
-
-
-
Net Equity
Total liabilities and equity
-
-
76,973,377
11,443,174
2,329,993
Interest rate re-pricing sensitivity gap
Cumulative gap
(44,583,342)
(44,583,342)
(2,148,515)
(46,731,857)
4,381,136
(42,350,721)
32
849,100
12,199,369
(30,151,352)
663,545
4,749,798
(25,401,554)
1,733,700
56,334,002
30,932,448
(4,680,578)
28,068,650
92,176,323
(30,932,448)
-
2,614,726
(4,680,578)
28,068,650
186,169,212
-
December 31, 2011
Assets
Cash and balances at PMA
Balances at banks and financial institutions
Financial asset at fair value through profit or
loss
Direct credit facilities
Financial assets at fair value through other
comprehensive income
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Total Assets
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Fair value reserve
Accumulated losses
Net Equity
Total liabilities and equity
Interest rate re-pricing sensitivity gap
Cumulative gap
Less than 1
Month
U.S. $
-
From 1 month
to 3 months
U.S. $
-
From 3 months
to 6 months
U.S. $
-
42,941,154
8,382,425
2,475,858
Interest rate re-pricing sensitivity
From 6 months
to
From 1 year to 3
1 year
years
U.S. $
U.S. $
4,499,837
More than 3
years
U.S. $
-
Non-interest
bearing
U.S. $
24,016,780
2,437,379
Total
U.S. $
24,016,780
60,736,653
1,303,025
-
1,303,025
56,448,400
875,720
-
875,720
16,703,752
4,641,278
1,117,543
2,960,485
168,803,636
-
-
-
-
-
-
4,895,649
1,508,322
2,301,599
10,719,469
14,060,022
22,963,339
-
-
3,011,012
-
-
-
13,692,740
-
47,836,803
9,890,747
7,788,469
15,219,306
14,060,022
36,656,079
17,661,646
45,947,648
-
1,600,000
8,868,473
-
12,390
-
-
-
846,441
825,112
61,052
-
-
-
19,682
-
2,439,898
2,095,826
29,606
-
388,980
-
1,372,182
-
63,621,684
10,488,155
4,565,330
1,732,605
388,980
1,372,182
-
-
-
-
-
-
1,732,605
13,486,701
327,551
388,980
13,671,042
13,998,593
1,372,182
35,283,897
49,282,490
63,621,684
(15,784,881)
(15,784,881)
10,488,155
(597,408)
(16,382,289)
4,565,330
3,223,139
(13,159,150)
33
4,641,278
1,117,543
2,960,485
37,352,210
47,718,987
6,555,252
1,194,343
1,324,424
1,775,239
58,568,245
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
86,634,700
(49,282,490)
-
19,261,646
105,821,447
9,476,190
1,883,892
1,194,343
1,324,424
1,775,239
140,737,181
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
168,803,636
-
2. Equity price risk
Equity price risk results from changes in fair value of equity instruments. The effect of the
expected decrease in equity instrument prices is equal and opposite to the effect of the
increase stated below:
2012
Market
Palestine Exchange
Foreign financial
markets
2011
Change in
indicator
(%)
+10
Effect on
profit and
loss
(USD)
115,463
Effect
on
equity
(USD)
-
Change
in
indicator
(%)
+10
Effect on
profit
and loss
(USD)
130,303
Effect
on
equity
(USD)
-
+10
-
-
+10
-
87,572
3. Foreign currency risk
These are the risks of the change in value of financial instruments resulting from the
change in foreign exchange rates. The U.S $ is the functional currency of the Bank. The
board of directors sets the limit of the financial position for each currency at the Bank, and
such position is monitored on a daily basis and hedging strategies are used to ensure
maintaining the foreign currency position within the set limits.
The Jordanian Dinar (JOD) exchange rate is pegged to US Dollar exchange rate, so foreign
currency risk of (JOD) is not material on the bank’s financial statements.
The effect of the expected decrease in exchange rates is equal and opposite to the effect of
the increase stated below:
Currency
ILS
Other currencies
Change
in
currency
rate (%)
+5
+5
2012
Effect on
profit
and loss
(USD)
10,337
73,407
34
Change
in
currency
rate (%)
+5
+5
2011
Effect on
profit
and loss
(USD)
(9,312)
75,309
Following is the foreign currencies position of the Bank:
December 31, 2012
Assets
Cash and balances at PMA
Balances at banks and
financial institutions
Financial asset at fair value through
profit or loss
Direct credit facilities
Financial assets at amortized cost
Other assets
Total Assets
Liabilities
Banks and financial institutions’
deposits
Customers’ deposits
Cash margins
Other liabilities
Total Liabilities
Statement of financial position
concentration
Commitment and contingencies
December 31, 2011
Total assets
Total liabilities
Statement of financial position
concentration
Commitment and contingencies
JOD
U.S. $
ILS
U.S. $
Other
currencies
U.S. $
Total
U.S. $
6,630,523
32,132,620
936,256
39,699,399
14,513,452
(4,727,392)
2,716,615
12,502,675
1,012,956
4,116,912
195,584
26,469,427
27,737,319
1,026,679
56,169,226
463,073
3,560
4,119,504
1,012,956
32,317,304
1,225,823
86,758,157
7,909,900
24,198,979
3,038,023
241,992
35,388,894
6,660,745
45,830,837
3,005,530
465,372
55,962,484
2,553,871
88,954
8,538
2,651,363
14,570,645
72,583,687
6,132,507
715,902
94,002,741
(8,919,467)
245,573
206,742
5,731,395
1,468,141
1,345,672
(7,244,584)
7,322,640
JOD
U.S. $
ILS
U.S. $
Other
currencies
U.S. $
Total
U.S. $
34,513,503
35,352,392
47,076,465
47,262,706
5,722,988
4,216,808
87,312,956
86,831,906
(838,889)
394,814
(186,241)
7,987,944
1,506,180
2,030,391
481,050
10,413,149
35
III.
Liquidity risk
Liquidity risk is the risk that the Bank will be unable to meet its payment obligations when they fall due. To limit this risk, management has
arranged diversified funding sources, manages assets with liquidity in mind, and monitors future cash flows and liquidity and maintains
sufficient amount of cash and cash equivalents and liquid financial assets.
Liquidity management policy at the Bank aims to maximize sources of liquidity at the lowest possible cost. Liquidity management aims to
maintain stable sources of funding that is considered reliable with an appropriate cost.
Liquidity is measured, controlled and managed on the basis of normal and emergency conditions. This includes the use of analysis of the
maturities of the assets and liabilities and various financial ratios.
The table below summarizes the allocation of liabilities (undiscounted) on the basis of the remaining contractual liability as at the financial statements date:
December 31, 2012
Liabilities:
Banks and financial institutions’ deposits
Less than 1
month
U.S. $
Customers’ deposits
96,198,579
12,605,725
Tax provisions
35,428
From 3 months
to 6 months
U.S. $
-
28,157,458
Cash margins
Loans and borrowings
From 1 month
to 3 months
U.S. $
-
803,458
-
81,408
-
50,566
-
52,470
-
Total liabilities
137,930,209
11,470,844
2,338,692
89,047,564
9,294,660
6,711,128
December 31, 2011
Liabilities:
-
From 1 month
to 3 months
U.S. $
-
From 3 months
to 6 months
U.S. $
-
Banks and financial institutions’ deposits
17,688,749
1,601,700
Customers’ deposits
93,722,743
2,454,232
6,555,252
8,903,208
-
12,420
-
19,777
-
29,821
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total liabilities
Total assets
1,324,424
-
-
2,288,126
-
Other liabilities
Less than 1
month
U.S. $
From 1 year to
3 years
U.S. $
11,389,436
-
933,019
-
Total assets
From 6 months
up to 1 year
U.S. $
2,941,968
-
369,446
-
-
-
-
More than 3
years
U.S. $
Without
maturity
U.S. $
Total
U.S. $
-
-
-
-
-
-
-
-
-
750,735
-
1,961,508
-
-
12,605,725
2,932,115
933,019
-
855,928
1,410,562
1,961,508
-
155,967,743
13,048,469
5,413,343
58,067,702
4,586,346
186,169,212
From 1 year to
3 years
U.S. $
-
856,387
61,937
-
More than 3
years
U.S. $
Without
maturity
U.S. $
-
-
-
-
-
-
-
-
-
400,260
-
1,411,975
-
-
-
502,197
-
659,827
Total
U.S. $
-
19,290,449
105,936,570
9,497,220
1,936,190
369,446
1,324,424
-
-
138,856,496
168,803,636
119,303,588
10,524,685
5,795,467
918,324
902,457
1,411,975
-
80,249,439
9,890,748
7,788,469
15,219,305
14,060,022
36,656,079
4,939,574
36
110,679,599
659,827
From 6 months
up to 1 year
U.S. $
-
28,157,458
502,197
36. Segment information
a.
Information on the Bank’s activities
For management purposes, the Bank is organized into three major business segments:
Retail banking:
Includes handling individual customers’ deposits, and providing consumer type loans, overdrafts, credit cards facilities and other
services;
Corporate banking: Includes handling loans, credit facilities, deposits and current accounts for corporate and institutional customers;
Treasury:
Includes providing trading and treasury services and the management of the Bank’s funds.
Following is the Bank’s business segments according to operations:
Gross revenue
Recovery (Provision) of credit facilities
Segment results
Unallocated expenses
Profit before tax
Tax expense
Profit for the year
Other segment information:
Segment assets
Segment liabilities
Capital expenditures
Depreciation and amortization
Retail
U.S. $
2,435,512
(29,536)
2,094,734
Corporate
U.S. $
2,474,587
219,894
1,874,468
Treasury
U.S. $
1,280,433
-
Other
U.S. $
1,698,257
-
908,020
1,547,324
31,926,044
79,725,216
42,233,447
43,393,291
103,544,905
28,119,901
8,464,816
6,862,154
Total
2012
2011
U.S. $
U.S. $
7,888,789
7,892,746
190,358
(68,440)
6,424,546
6,292,496
(6,362,379)
(5,459,982)
62,167
832,514
(243,387)
62,167
589,127
186,169,212
158,100,562
428,392
569,101
168,803,636
140,737,181
1,499,819
511,067
b.
Geographical distribution information
The following is the distribution of the Bank’s revenues, assets and capital expenditures according to geographical sector:
Gross revenues
Total assets
Capital expenditures
Domestic
2012
2011
U.S. $
U.S. $
7,453,093
5,953,525
159,657,125
128,328,803
428,392
1,499,819
37
Foreign
2012
2011
U.S. $
U.S. $
435,696
1,939,221
26,512,087
40,474,833
-
Total
2012
2011
U.S. $
U.S. $
7,888,789
7,892,746
186,169,212
168,803,636
428,392
1,499,819
37. Maturities of assets and liabilities
The following table depicts the analysis of assets and liabilities according to their maturities:
December 31, 2012
Assets
Cash and balances at PMA
Balances at banks and financial institutions
Financial asset at fair value through profit or
loss
Direct credit facilities
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Total Assets
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Fair value reserve
Accumulated losses
Net Equity
Total liabilities and equity
Interest rate re-pricing sensitivity gap
Cumulative gap
Less than 1
Month
U.S. $
27,424,619
24,438,842
From 1 month
to 3 months
U.S. $
-
From 3 months
to 6 months
U.S. $
-
From 6 months
to
1 year
U.S. $
-
6,759,442
2,777,048
4,533,629
From 1 year to 3
years
U.S. $
-
More than 3
years
U.S. $
-
Non-interest
bearing
U.S. $
24,007,367
-
Total
U.S. $
51,431,986
38,508,961
1,154,625
-
1,154,625
74,159,491
-
12,449,333
4,234,871
1,117,543
3,112,402
186,169,212
-
-
-
-
-
-
8,143,641
2,535,217
8,514,840
5,413,343
45,618,369
-
-
3,934,081
-
-
1,117,543
-
12,449,333
-
9,294,659
6,711,129
13,048,469
6,530,886
58,067,702
2,760,927
62,768,029
28,119,901
96,081,886
6,130,174
35,299
-
-
-
-
11,362,356
-
2,279,975
50,018
-
-
-
933,019
-
797,754
6,466,362
51,346
-
663,545
-
1,733,700
-
80,818
-
2,292,658
132,659,918
11,443,174
3,263,012
7,315,462
663,545
1,733,700
-
-
-
-
-
-
7,315,462
5,733,007
(62,859,280)
663,545
5,867,341
(56,991,939)
1,733,700
56,334,002
(657,937)
132,659,918
(69,891,889)
(69,891,889)
11,443,174
(2,148,515)
(72,040,404)
3,263,012
3,448,117
(68,592,287)
38
4,234,871
351,475
29,748,338
1,021,751
1,021,751
28,119,901
110,521,971
12,596,536
2,614,726
1,021,751
933,019
2,292,658
158,100,562
30,026,056
1,069,087
99,658
1,187,630
366,797
-
30,026,056
1,069,087
99,658
1,187,630
366,797
-
(4,680,578)
28,068,650
29,090,401
657,937
-
(4,680,578)
28,068,650
186,169,212
-
December 31, 2011
Assets
Cash and balances at PMA
Balances at banks and financial institutions
Financial asset at fair value through profit or
loss
Direct credit facilities
Financial assets at fair value through other
comprehensive income
Financial assets at amortized cost
Property and equipment
Deferred tax assets
Other assets
Total Assets
Liabilities
Banks and financial institutions’ deposits
Customers’ deposits
Cash margins
Loans and borrowings
Sundry provisions
Tax provisions
Other liabilities
Total Liabilities
Equity
Paid in share capital
Statutory reserve
Voluntary reserve
General banking risks reserve
Pro-cyclicality reserve
Fair value reserve
Accumulated losses
Net Equity
Total liabilities and equity
Interest rate re-pricing sensitivity gap
Cumulative gap
Less than 1
Month
U.S. $
13,534,169
45,378,533
From 1 month
to 3 months
U.S. $
8,382,425
From 3 months
to 6 months
U.S. $
2,475,858
From 6 months
to 1 year
U.S. $
4,499,837
From 1 year to 3
years
U.S. $
-
4,895,649
1,508,322
2,301,599
10,719,469
2,662,189
66,470,540
9,890,747
3,011,012
7,788,469
17,661,646
93,666,635
6,555,252
12,390
1,775,239
119,671,162
1,600,000
8,868,473
19,682
369,446
10,857,601
2,439,898
2,095,826
29,606
1,324,424
5,889,754
119,671,162
(53,200,622)
(53,200,622)
10,857,601
(966,854)
(54,167,476)
5,889,754
1,898,715
(52,268,761)
39
More than 3
years
U.S. $
-
Non-interest
bearing
U.S. $
10,482,611
-
Total
U.S. $
24,016,780
60,736,653
14,060,022
22,963,339
1,303,025
-
1,303,025
56,448,400
15,219,306
1,117,543
15,177,565
13,692,740
36,656,079
875,720
4,641,278
298,296
17,600,930
875,720
16,703,752
4,641,278
1,117,543
2,960,485
168,803,636
846,441
825,112
61,052
1,732,605
388,980
388,980
1,372,182
1,372,182
824,897
824,897
19,261,646
105,821,447
9,476,190
1,883,892
1,194,343
1,324,424
1,775,239
140,737,181
1,732,605
13,486,701
(38,782,060)
388,980
14,788,585
(23,993,475)
1,372,182
35,283,897
11,290,422
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
28,891,352
(11,290,422)
-
30,026,056
1,062,870
99,658
957,251
357,472
(124,280)
(4,312,572)
28,066,455
168,803,636
-
38. Bank’s development policies
The bank continues its development policies through research and development in
all aspects to ensure the development of different banking services to serve all
customers through continuing the development of technology environment. During
the year the bank adopted the following new systems and developments:
Implementing the Master card system which provides several benefits to
holders and can be used in centers and ATMs around the world.
Establishing an independent cards department which specializes in
providing a high quality services to the bank customers.
The bank was granted the global VISA cards license which will be issued
soon.
Implementing high quality systems to protect the bank’s internal network.
The preparation of new branch in Rfedyah - Nablus.
Developing the banking system and approving new systems.
The Bank continues to develop the following:
- Staff.
- Develop and create new services.
- Continuation of the development strategy and the technological progress.
- Geographic expansion and operating in all of the Palestinian territories.
- Stimulate the lending portfolio to serve the economic sectors.
39. Capital management
The primary objective of the Bank's capital management is to ensure that it
maintains adequate capital ratios in order to support its business and maximize
shareholder value.
The Bank manages its capital structure and makes adjustments to it in light of
changes in business conditions. Capital comprises share capital, other reserves
and accumulated losses and is measured at USD 28,068,650 as at December 31,
2012 (2011: USD 28,066,455).
The Bank was not able to complete the compliance with PMA’s instruction No.
(7/2009) regarding maintaining paid-in share capital of a minimum of USD 50
million, despite the efforts made by the Bank’s Board of Directors during 2012 to
merge with one of the regional banks operating in Palestine which was not
completed. The Board of Directors is considering several alternatives to increase
capital to the required amount in coordination with the Palestinian Monetary
Authority.
The capital adequacy ratio is computed in accordance with the PMA’s regulations
derived from Basel Committee regulations computed as follows:
2012
Amount
Regulatory capital
Basic capital
U.S. $
25,469,039
25,412,002
Percentage
to risk –
weighted
assets
Percentage
to assets
%
13.68
13.65
%
24.47
25.41
40
2011
Amount
U.S. $
24,470,904
25,817,645
Percentage
to assets
%
14.50
15.29
Percentage
to risk –
weighted
assets
%
24.21
25.54
40. Commitments and contingent liabilities
The total outstanding commitments and contingent liabilities as at the financial
statements date are as follows:
2012
U.S. $
10,632,079
200,000
5,122,124
15,954,203
Guarantees
Letters of credit
Irrevocable commitment to extend credit
2011
U.S. $
16,092,204
259,078
6,293,552
22,644,834
41. Legal cases against the Bank
In the normal course of business, the Bank appears as a defendant in a number of
law suits amounting to U.S $ 390,549 and U.S $ 770,570 as at December 31,
2012 and 2011, respectively. The Bank’s management and its legal advisor
believes that the Bank maintain adequate provisions against the lawsuits.
42. Concentration of risk in geographical area
The Bank carries out its activities in Palestine. The political and economical
destabilization in the area increases the risk of carrying out business and could
adversely affect performance.
41