Police Bank Ltd is using the post 1 January 2018 common disclosure template because it is fully applying the Basel III regulatory adjustments as implemented by APRA from 30 June 2013. This a change from previous quarterly reporting formats.

The information in this report is prepared based on the Police Bank’s financial records. The financial records are not audited for the Quarters ended 30 September, 31 December, and 31 March.

The report as at the 30 June is based on the financial statements as audited as at the 30 June.

For Consolidated Groups

The consolidated group comprises the Police Bank Ltd as well as the following entities

a. Included in the scope of regulatory and accounting scope

  • PTCL ATF PCU 2009-1 Trust – this trust not de-recognised for accounting reporting
  • Chelsea Wealth Management Pty – this company is not a material component of the group
Entity Total Assets $M Total Liabilities $M Principal Activity
PTCL ATF PCU 2009-1 Trust 159.0 151.4 Repo Trust
Chelsea Wealth Management Pty 7.3 0.4 Financial Planning

There are no restrictions on transfer of funds or regulatory capital.

Capital Base

The details of the components of the capital base are set out below as at the financial year ended 30 June 2017. These amounts coincide with the audited accounts.

The following table sets out the elements of the capital held by the Police Bank Ltd including the reconciliation of any adjustments required by the APRA Prudential Standards to the audited financial statements. Adjustments are usually in the form of deductions of assets not regarded as recoverable in the short term (such as intangible assets and deferred tax assets), and or discounts made to eligible capital of a short term nature.

All regulatory capital elements are consistent with the audited financial statements as at the last reporting date.

Common Equity Tier 1 Capital : instruments and reserves30th June 2017
  $M
1Directly issued qualifying ordinary shares (and equivalent for mutually-owned entities) capital0.4
2Retained earnings 138.8
3Accumulated other comprehensive income (and other reserves) 43.1
4Directly issued capital subject to phase out from CET1 (only applicable to mutually-owned companies) 0.0
5Ordinary share capital issued by subsidiaries and held by third parties (amount allowed in group CET1) 0.0
6Common Equity Tier 1 capital before regulatory adjustments on Equity Tier 1 capital : regulatory adjustments 182.3
7Prudential valuation adjustments0.0
8Goodwill (net of related tax liability) 0.0
9Other intangibles other than mortgage servicing rights (net of related tax liability)  
10Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability) 0.0
11Cash-flow hedge reserve 0.0
12Shortfall of provisions to expected losses 0.0
13Securitisation gain on sale (as set out in paragraph 562 of Basel II framework) 0.0
14Gains and losses due to changes in own credit risk on fair valued liabilities 0.0
15Defined benefit superannuation fund net assets 0.0
16Investments in own shares (if not already netted off paid-in capital on reported balance sheet) 0.0
17Reciprocal cross-holdings in common equity 0.0
18Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 5.3
19Significant investments in the ordinary shares of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold) 0.0
20Mortgage service rights (amount above 10% threshold) 0.0
21Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability) 0.7
22Amount exceeding the 15% threshold 0.0
23of which: significant investments in the ordinary shares of financial entities 0.0
24of which: mortgage servicing rights 0.0
25of which: deferred tax assets arising from temporary differences 0.0
26National specific regulatory adjustments (sum of rows 26a, 26b, 26c, 26d, 26e, 26f, 26g, 26h, 26i and 26j) [ Show deductions as Positive and additions as negative ]16.6
26a of which: treasury shares 0.0
26b of which: offset to dividends declared under a dividend reinvestment plan (DRP), to the extent that the dividends are used to purchase new ordinary shares issued by the ADI 0.0
26c of which: deferred fee income 0.0
26d of which: equity investments in financial institutions not reported in rows 18, 19 and 23 0.0
26e of which: deferred tax assets not reported in rows 10, 21 and 25 0.0
26f of which: capitalised expenses 1.7
26g of which: investments in commercial (non-financial) entities that are deducted under APRA rules 3.8
26h of which: covered bonds in excess of asset cover in pools 0.0
26i of which: undercapitalisation of a non-consolidated subsidiary 0.0
26j of which: other national specific regulatory adjustments not reported in rows 26a to 26i 11.1
27Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions 0.0
28Total regulatory adjustments to Common Equity Tier 1 22.6
29Common Equity Tier 1 Capital (CET1) 159.7
 Additional Tier 1 Capital: instruments  
30Directly issued qualifying Additional Tier 1 instruments  
31of which: classified as equity under applicable accounting standards  
32of which: classified as liabilities under applicable accounting standards  
33Directly issued capital instruments subject to phase out from Additional Tier 1  
34Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1) 0.0
35of which: instruments issued by subsidiaries subject to phase out 0.0
36Additional Tier 1 Capital before regulatory adjustments0.0
 Additional Tier 1 Capital: regulatory adjustments  
37Investments in own Additional Tier 1 instruments 0.0
38Reciprocal cross-holdings in Additional Tier 1 instruments 0.0
39Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 0.0
40Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions) 0.0
41National specific regulatory adjustments (sum of rows 41a, 41b and 41c) [ Show deductions as Positive and additions as negative ]0.0
41a of which: holdings of capital instruments in group members by other group members on behalf of third parties  
41b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidations not reported in rows 39 and 40  
41c of which: other national specific regulatory adjustments not reported in rows 41a and 41b  
42Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions  
43Total regulatory adjustments to Additional Tier 1 capital 0.0
44Additional Tier 1 capital (AT1) 0.0
45Tier 1 Capital (T1=CET1+AT1) 159.7
 Tier 2 Capital: instruments and provisions  
46Directly issued qualifying Tier 2 instruments  
47Directly issued capital instruments subject to phase out from Tier 2  
48Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group T2) 0.0
49of which: instruments issued by subsidiaries subject to phase out 0.0
50Provisions 2.7
51Tier 2 Capital before regulatory adjustments 2.7
 Tier 2 Capital: regulatory adjustments [ Show deductions as Positive and additions as negative ] 
52Investments in own Tier 2 instruments 0.0
53Reciprocal cross-holdings in Tier 2 instruments 0.0
54Investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the ADI does not own more than 10% of the issued share capital (amount above 10% threshold) 0.0
55Significant investments in the Tier 2 capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions 0.0
56National specific regulatory adjustments 0.0
56a of which: holdings of capital instruments in group members by other group members on behalf of third parties 0.0
56b of which: investments in the capital of financial institutions that are outside the scope of regulatory consolidation not reported in rows 54 and 55 0.0
56c of which: other national specific regulatory adjustments not reported in rows 56a and 56b 0.0
57Total regulatory adjustments to Tier 2 capital 0.0
58Tier 2 capital (T2) 2.7
59Total capital (TC=T1+T2) 162.4
60Total risk-weighted assets based on APRA standards 870.6
 Capital ratios and buffers  
61Common Equity Tier 1 (as a percentage of risk-weighted assets) 18.34%
62Tier 1 (as a percentage of risk-weighted assets) 18.34%
63Total capital (as a percentage of risk-weighted assets) 18.65%
64Institution-specific buffer requirement (minimum CET1 requirement plus capital conservation buffer plus countercyclical buffer requirements plus G-SIBs buffer requirement, expressed as a percentage of risk-weighted assets) 7%
65of which: capital conservation buffer requirement 2.50%
66of which: ADI-specific countercyclical buffer requirements N/A
67of which: G-SIB buffer requirement N/A
68Common Equity Tier 1 available to meet buffers (as a percentage of risk-weighted assets) 10.65%
 National minima (if different from Basel III)  
69National Common Equity Tier 1 minimum ratio (if different from Basel III minimum)  
70National Tier 1 minimum ratio (if different from Basel III minimum)  
71National total capital minimum ratio (if different from Basel III minimum)  
 Amount below thresholds for deductions (not risk-weighted)  
72Non-significant investments in the capital of other financial entities 0.0
73Significant investments in the ordinary shares of financial entities 0.0
74Mortgage servicing rights (net of related tax liability) 0.0
75Deferred tax assets arising from temporary differences (net of related tax liability) 0.0
 Applicable caps on the inclusion of provisions in Tier 2  
76Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised approach (prior to application of cap)  
77Cap on inclusion of provisions in Tier 2 under standardised approach 1.5
78Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap) 0.0
79Cap for inclusion of provisions in Tier 2 under internal ratings-based approach 0.0
 Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2018 and 1 Jan 2022) 
80Current cap on CET1 instruments subject to phase out arrangements  
81Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities  
82Current cap on AT1 instruments subject to phase out arrangements 0.0
83Amount excluded from AT1 instruments due to cap (excess over cap after redemptions and maturities) 0.0
84Current cap on T2 instruments subject to phase out arrangements  
85Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

CAPITAL INSTRUMENTS WITHIN THE ADI

The regulatory capital in the bank comprises is limited to

  • Retained earnings
  • General reserve for Credit Losses
  • Asset revaluation reserves

There are no capital instruments (shares, debt instruments) issued by the ADI.

Disclosure template for main features of Regulatory Capital instruments

Tier 1Tier 2
1Issuer Not applicable
2Unique identifier (eg CUSIP, ISIN or Bloomberg identifier for private placement) Not applicable
3Governing law(s) of the instrument Not applicable
Regulatory treatment
4Transitional Basel III rules Not applicable
5Post-transitional Basel III rules Not applicable
6Eligible at solo/group/group & solo Not applicable
7Instrument type (ordinary shares/preference shares/subordinated notes/other) Not applicable
8Amount recognised in Regulatory Capital (Currency in mil, as of most recent reporting date) Not applicable
9Par value of instrument Not applicable
10Accounting classification Not applicable
11Original date of issuance Not applicable
12Perpetual or dated Not applicable
13Original maturity date Not applicable
14Issuer call subject to prior supervisory approval Not applicable
15Optional call date, contingent call dates and redemption amount Not applicable
16Subsequent call dates, if applicable Not applicable
Coupons/dividends
17Fixed or floating dividend/coupon Not applicable
18Coupon rate and any related index Not applicable
19Existence of a dividend stopper Not applicable
20Fully discretionary, partially discretionary or mandatory Not applicable
21Existence of step up or other incentive to redeem Not applicable
22Noncumulative or cumulative Not applicable
23Convertible or non-convertible Not applicable
24If convertible, conversion trigger (s) Not applicable
25If convertible, fully or partially Not applicable
26If convertible, conversion rate Not applicable
27If convertible, mandatory or optional conversion Not applicable
28If convertible, specify instrument type convertible into Not applicable
29If convertible, specify issuer of instrument it converts into Not applicable
30Write-down feature Not applicable
31If write-down, write-down trigger(s) Not applicable

CAPITAL REQUIREMENTS

Capital requirements of Police Bank Ltd is determined by the risk weights of the relevant assets held with the minimum required capital to over 8% of the risk weighted assets. Police Bank maintains a capital policy level of a Minimum 14.5%. The current level of capital is 18.65%.

The risk weighted assets for each asset grouping as set out in the table below is determined by the APRA Prudential Standards APS 112. These are prescribed risk weights to measure the level of risk of based on the nature and level of security supporting the assets recovery.

The risk weighted assets held is as follows

Risk weighted value 30 June 2017 Risk weighted value 31 March 2017
Cash Items 0.0 0.0
Funds on Deposit in highly rated ADI's 35.6 28.7
Funds on Deposit in less highly rated ADI's 37.3 52.7
Residential Mortgages up to 80% LVR 310.6 293.5
Residential Mortgages over 80% LVR 148.0 147.1
Other Loans and Assets 173.9 168.6
Fixed Assets 22.2 22.6
Total Credit Risk Assets 727.60 713.20
Off-Balance Sheet assets 52.3 69.0
Operational Risk assets 90.7 88.3

Total risk weighted assets

870.6

870.5

The capital requires is as follows:

30 June 2017 Audited 31 March 2017 Unaudited
Deposits at Banks and other ADI's 5.8 6.5
Loans - Residential Mortgages 36.7 35.2
Other Assets and Claims 13.9 13.5
Fixed Assets 1.8 1.9
Off Balance Sheet Items 4.2 5.5
Capital requirements for Credit Risk (8% RWA) 62.4 62.6
Capital requirements for Market Risk - -
Capital requirements for Operational Risk (8% RWA) 7.2 7.0

Total Capital Required (8% RWA)

69.6

69.6

Capital held by the Police Bank

162.4

158.7

CAPITAL HELD

The capital held by Police Bank Ltd exceeds the policy and minimum capital prescribed by the APRA Prudential standards. This excess facilitates future growth.

The capital ratio is the amount of capital described in the Capital Base table divided by the risk weighted assets

Common Equity Tier 1

18.34%

17.92%

Tier 1

18.34%

17.92%

Total Capital Ratio

18.65%

18.23%

The level of capital ratio can be affected by growth in asset relative to growth in reserves and by changes in the mix of assets.

CREDIT RISK EXPOSURES

Surplus cash not invested in loans to members are held in high quality liquid assets. This included the funds required to be held to meet withdrawal of deposits by members of Police Bank.

Police Bank uses the ratings of reputable ratings agencies to assess the credit quality of all investment exposure, where applicable, using the credit quality assessment scale in APRA prudential Guidance APG112. The credit quality assessment scale within this standard has been complied with.

The exposure values associated with each credit quality step are as follows:

30 June 2017 31 March 2017 Average Exposure
Cuscal 13.0 22.1 17.6
Major Banks 90.2 71.2 80.7
Other Rated ADIS 101.7 106.6 104.2
Unrated Institutions 67.0 70.0 68.5

271.9

269.9

270.9

(ii) Loans The classes of loans entered into by Police Bank is limited to loans; commitments and other non-market off-balance sheet exposures. The analysis of the Police Bank’s loans by class, is as follows:
30 June 2017
Loans to Amount Outstanding Commitments, Redraws & Overdraft Facilities Undrawn Undrawn Value Average Exposure
Mortgage Secured Loans 1230.0 90.5 14.9 1203.9
Personal Loans 112.5 1.1 0 110.9
Overdrafts and Credit Cards 29.7 64.6 49.0 29.8
Corporate 0.5 53.8 - 52.8

Total to Members

1,372.7

210.0

63.9

1,397.5

31 March 2017
Loans to Amount Outstanding Commitments, Redraws & Overdraft Facilities Undrawn Undrawn Value Average Exposure
Mortgage Secured Loans 1,177.9 105.3 15.3 1,161.5
Personal Loans 109.4 2.6 0 105.8
Overdrafts and Credit Cards 29.9 63.6 48.3 29.5
Corporate 0.5 51.9 - 51.4

Total to Members

1,317.7

223.4

63.6

1,343.8

IMPAIRMENT DETAILS

The level of impaired loans by class of loan is set out below. In the Note below.

  • Carrying Value is the amount of the balance sheet gross of provision (net of deferred fees)
  • Past due loans is the ‘on balance sheet’ loan balances which are behind in repayments past due 90 days or more but not impaired
  • Impaired loans value is the ‘on balance sheet’ loan balances which are behind in repayments past due by 30 days or more
  • Provision for impairment is the amount of the impairment provision allocated to the class of impaired loans
  • The losses in the period equate to the additional provisions set aside for impaired loans, and bad debts written off in excess of previous provision allowances.
  • The impaired loans are generally not secured against residential property. Some impaired loans are secured by bill of sale over motor vehicles or other assets of varying value. It is not practicable to determine the fair value all collateral as at the balance date due to the variety of assets and condition

The analysis of Police Bank loans is as follows:

As at 30 June 2017
Impaired Loan Balance Past Due Loan Balances Collective Provision for Impairment Bad Debts Written Off
Mortgage Secured Loans 1.8 1.4 0.2 0.0
Personal Loans 0.6 1.5 0.3 0.1
Total to Members 2.4 2.9 0.5 0.1
As at 31 March 2017
Impaired Loan Balance Past Due Loan Balances Collective Provision for Impairment Bad Debts Written Off
Mortgage Secured Loans 2.1 1.5 0.4 0.0
Personal Loans 0.5 0.9 0.3 0.2
Total to Members 2.6 2.4 0.7 0.2

General Reserve for Credit Losses

In addition to the above provision for impairment, the board has recognised the need to make an allocation from retained earnings to ensure there is adequate protection for members against the prospect that some members will experience loan repayment difficulties in the future. The reserve is based on estimation of potential risk in the loan portfolio based upon the level of security taken as collateral.

The reserve has been determined on the basis of the past experience with the loan delinquency and amounts written off. The amounts of the reserve is currently $2,740,600 (Previous Quarter was $2,740,600).

The value of the reserve is amended to reflect the changes in economic conditions, and the relevant concentrations in specific regions and industries of employment within the loan book.

SECURITISATION ARRANGEMENTS

The Police Bank Ltd has entered into arrangements for securitised loans to support its liquidity requirements from time to time. The table below states the current value of securitised loans managed by Police Bank and the amount securitised.

30 June 2017 Loans Securitised in Current qtr, by type of securitisation Securitised Loans On-balance sheet exposure retained or purchased Securitised Loans Off- balance sheet exposures
Aggregate amount Aggregate amount
$M $M $M
Mortgage loans - - 0.8
Total - - 0.8
The recognised gain or loss on securitised arrangements entered into in the past quarter is $ Nil
Previous Quarter Loans Securitised in Current qtr, by type of securitisation Securitised Loans On-balance sheet exposure retained or purchased Securitised Loans Off- balance sheet exposures
Aggregate amount Aggregate amount
$M $M $M
Mortgage loans - - 0.9
Total - - 0.9