UNITY BANK LIMITED 2022 Financial Report UNITY BANK LIMITED 2022 Financial Report
ABN 11 087 650 315
ABN 11 087 650 315
In addition to specific provisions against individually significant financial assets, the Bank makes collective assessments for each financial asset portfolio segmented by similar risk characteristics. Statement of financial position provisions are maintained at a level that management deems sufficient to absorb probable incurred losses in the Bank ’s loan portfolio from homogenous portfolios of assets and individually identified loans. A provision for incurred losses is established on all past due loans after a specified period of repayment default where it is probable that some of the capital will not be repaid or recovered. Specific loans and portfolios of assets are provided against depending on a number of factors including deterioration in country risk, changes in a counterparty’s industry, and technological developments, as well as identified structural weaknesses or deterioration in cash flows. The provisions for impaired and past due exposures relate to the loans to members. P ast due value is the ‘on statement of financial position ’ loan balances which are past due by 90 days or more. Details are as set out in Note 12. Bad debts Amounts are written off when collection of the loan or advance is considered to be remote. All write offs are on a case by case basis, taking account of the exposure at the date of the write off. On secured loans, the write off takes place on ultimate realisation of collateral value, or from claims on any lenders mortgage insurance. A reconciliation in the movement of both past due and impaired exposure provisions is provided in Note 12. Collateral securing loans A sizeable portfolio of the loan book is secured on residential property in Australia. Therefore, the Bank is exposed to risks in the reduction of the Loan to Value Ratio (LVR) cover should the property market be subject to a decline. The risk of losses from the loans undertaken is primarily reduced by the nature and quality of the security taken. Note 11(b) describes the nature and extent of the security held against the loans held as at the balance date. Concentration risk – individuals Concentration risk is a measurement of the Bank ’s exposure to an individual counterparty (or group of related parties). If prudential limits are exceeded as a proportion of the Bank ’s regulatory capital (10 per cent) a large exposure is considered to exist. No additional capital is required to be held against these, but the APRA must be informed. APRA may impose additional capital requirements if it considers the aggregate exposure to all loans over the 10% capital benchmark, to be higher than acceptable. The aggregate value of large exposure loans is set out in Note 11. The Bank holds two large exposures in the construction and building industries representing 14.52% and 12.60% of Tier 1 Capital respectively. Together, these total $31.20m and 27.12% of Tier 1 Capital. The Bank also has a large exposure to a pool of personal loans funded through Plenti RE Ltd. The exposure totals $14.8m (12.90% of Tier 1 capital). Concentration exposures to counterparties are closely monitored with annual reviews being prepared for all exposures over 5 per cent of the capital base. The Bank ’s policy on exposures of this size is to insist on an initial Loan to Valuation ratio (LVR) below 80 per cent and bi-annual reviews of compliance with this policy are conducted.
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