CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars)
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Table of Contents March 31, 2024 Pages Independent Auditors’ Report 1 - 3 Statement of Financial Position 4 Statement of Changes in Head Office Account 5 Statement of Profit or Loss and Other Comprehensive Income or Loss 6 Statement of Cash Flows 7 Notes to the Financial Statements 8 - 54
PricewaterhouseCoopers East Caribbean, Unit 111 Johnsons Centre, No 2 Bella Rosa Road, P.O. Box BW 304, Gros Islet, St. Lucia, West Indies T: +758-722-6700, www.pwc.com/bb A full listing of the partners of PricewaterhouseCoopers East Caribbean Firm is available upon request. Independent auditors’ report To the Directors of Capita Financial Services Inc. Our opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Capita Financial Services Inc. (St. Lucia Branch) (the Branch) as at March 31, 2024, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards. What we have audited The Branch’s financial statements comprise: • the statement of financial position as at March 31, 2024; • the statement of profit or loss and other comprehensive income or loss for the year then ended; • the statement of changes in head office account for the year then ended; • the statement of cash flows for the year then ended; and • the notes to the financial statements, comprising material accounting policy information and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Branch in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Responsibilities of management and those charged with governance for the financial statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS Accounting 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.
2 In preparing the financial statements, management is responsible for assessing the Branch’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Branch or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Branch’s financial reporting process. Auditors’ responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Branch’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Branch’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Branch to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
3 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Chartered Accountants Castries, St. Lucia July 18, 2024
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Statement of Financial Position As at March 31, 2024 (expressed in Eastern Caribbean dollars) Assets Cash resources Loans and advances Corporation tax recoverable Due from related com p any Property and e q uipment Other assets Total assets Liabilities and Equity Liabilities Customer de p osits Other liabilities Loans payable Total liabilities Equity Due to Head Office Accumulated deficit Total equity Total liabilities and equity See accompanyin g notes to the financial statements. Approved by the o j rd of Directors on July 4, 2024. 4 \"" L--=-\ --==--3'....!.L---, __ -4--___ _ _Director Notes 4 5 6 7 8 9 11 6 2024 $ 5,511,967 30,652,572 13,909 1,325,266 638,787 268,658 38,411,159 34,128,072 260,796 1,587,530 35,976,398 3,431,450 (996,689) 2,434,761 38,411,159 2023 (Restated) $ 5,197,502 29,716,002 13,909 675,567 805,045 310,703 36,718,728 32,438, I 01 223,444 1,653,084 34,314,629 3,396,545 ( 992,446 ) 2,404,099 36,718,728 � -----�+----, <----,---.,.,c.----- - -Director 4
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Statement of Changes in Head Office Account For the year ended March 31, 2024 (expressed in Eastern Caribbean dollars) 5 Due to Head Office $ Accumulated deficit $ Total $ Balance at April 1, 2022 4,954,419 (928,573) 4,025,846 Prior period adjustment (i) 85,180 (85,180) – Balance restated at April 1, 2022 5,039,599 (1,013,753) 4,025,846 Repayments to head office (Note 6 (iv)) (1,643,054) – (1,643,054) Profit for the year restated – 21,307 21,307 Balance restated at March 31, 2023 3,396,545 (992,446) 2,404,099 Balance restarted at April 1, 2023 3,396,545 (992,446) 2,404,099 Repayments due to head office (Note 6 (iv)) 34,905 – 34,905 Loss for the year – (4,243) (4,243) Balance at March 31, 2024 3,431,450 (996,689) 2,434,761 See accompanying notes to the financial statements. (i) The prior period adjustment for 2022 refers to audit fees paid by Head Office which were under accrued at the Branch level. These amounts have now been fully adjusted for in these financial statements. Note 19 (i) also reflects any changes with respect to the same and the impact on other operating expenses.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Statement of Profit or Loss and Other Comprehensive Income or Loss For the year ended March 31, 2024 (expressed in Eastern Caribbean dollars) 6 Notes 2024 $ (Restated) 2023 $ Interest income 14 2,232,566 2,325,859 Interest expense 15 (1,131,454) (1,142,135) Net interest income 1,101,112 1,183,724 Other income 16 466,310 594,474 Net interest and other income 1,567,422 1,778,198 Operating expenses Salaries and other staff costs 17 416,553 381,898 Expected credit loss expense/(recovery) 18 250,888 (12,602) Other operating expenses 19 737,216 1,075,313 Depreciation 7 167,008 312,282 Total operating expenses 1,571,665 1,756,891 (Loss)/profit before taxation (4,243) 21,307 Taxation charge 11 – – (Loss)/profit for the year, being total comprehensive (loss)/income for the year (4,243) 21,307 See accompanying notes to the financial statements.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Statement of Cash Flows March 31, 2024 (expressed in Eastern Caribbean dollars) 7 Notes 2024 $ (Restated) 2023 $ Cash flows from operating activities (Loss)/profit before taxation (4,243) 21,307 Adjustments for: Depreciation 7 167,008 312,282 Gain on disposal of equipment (11,400) – Interest income 14 (2,232,566) (2,325,859) Interest expense 15 1,131,454 1,142,135 Expected credit loss expense/(recovery) 18 250,888 (12,602) (698,859) (862,737) Changes in operating assets and liabilities: Increase in loans and advances (876,102) (433,634) Decrease in other assets 42,045 298,859 Increase in customer deposits 1,648,241 581,551 (Increase)/decrease in due from related company (649,699) 1,487,424 Increase in other liabilities 37,352 164,778 Net cash (used in)/from operations (497,022) 1,236,241 Interest received 1,921,210 2,140,427 Interest paid (1,089,723) (1,100,191) Net cash from operating activities 334,465 2,276,477 Cash flows from investing activities Decrease/(increase) in other term deposits 1,707,254 (130,200) Proceeds from the sale of fixed assets 11,594 – Purchase of property and equipment 7 (944) (219,470) Net cash from/(used in) investing activities 1,717,904 (349,670) Cash flows from financing activities Transfers from/(to) head office 34,905 (1,643,054) Repayment of loans payable (65,555) (63,173) Payment on lease liability – (191,494) Net cash used in financing activities (30,650) (1,897,721) Net increase in cash and cash equivalents 2,021,719 29,086 Cash and cash equivalents - beginning of year 2,074,176 2,045,090 Cash and cash equivalents - end of year 4 4,095,895 2,074,176 See accompanying notes to the financial statements.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 8 1 Reporting entity Effective August 2010, CAPITA Financial Services Inc. (the “Head Office”), an entity incorporated in Barbados and registered under Part III of the Financial Institutions Act, Cap 324A., purchased CAPITA Financial Services Inc. (St. Lucia Branch) (“the Branch”), an entity licenced under Section 3 (3) of the Banking Act 2015 of Saint Lucia to carry on banking business in the Eastern Caribbean Currency Union. Its ultimate parent is Barbados Public Workers’ Cooperative Credit Union Limited (BPWCCUL), a company incorporated in Barbados. The principal place of business is No. 8, William Peter Boulevard, Castries, St. Lucia. 2 Material accounting policy information a) Basis of accounting These financial statements of the Branch have been prepared in accordance with IFRS Accounting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). They were authorised for issue by the Board of Directors on July 4, 2024. New and amended standards and interpretations A number of new standards, amendments to standards and interpretations became effective during the financial year but these did not have a significant effect on the financial statements of the Branch in the period of adoption. Standards in issue but not yet effective No new standards or amendments to standards that are not yet effective and have not been early adopted by the Branch are expected to have a significant impact on the Branch’s financial statements in the year of adoption. b) Financial assets and financial liabilities i) Recognition and initial measurement The Branch initially recognises loans and advances, deposits and loans payable on the date on which they are originated. All other financial instruments are recognised on the trade date, which is the date on which the Branch becomes a party to the contractual provisions of the instrument. A financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue. The fair value of a financial instrument at initial recognition is generally its transaction price.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 9 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued ii) Classification Financial assets On initial recognition, a financial asset is classified as measured at: amortised cost, fair value through other comprehensive income (FVOCI), or fair value through profit or loss (FVTPL). A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: - the asset is held within a business model whose objective is to hold assets to collect the contractual cash flows; and - the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI). A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at FVTPL: - the asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and - the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI. On initial recognition of an equity investment that is not for trading, the Branch may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on an investment-byinvestment basis. All other financial assets are classified as measured at FVTPL. In addition, on initial recognition, the Branch may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 10 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued ii) Classification … continued Business model assessment The Branch makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The information considered includes: - the stated policies and objectives for the portfolio and the operation of those policies in practice. In particular, whether management’s strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of the assets; - how the performance of the portfolio is evaluated and reported to the Branch’s management; - the risks that affect the performance of the business model (and the financial assets held within that business model) and its strategy for how those risks are managed; - how managers of the business are compensated (e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected); and - the frequency, volume and timing of sales in prior periods, the reason for such sales and its expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Branch’s stated objective for managing the financial assets is achieved and how cash flows are realised. Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual cash flows and to sell financial assets. Assessment of whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin. In assessing whether the contractual cash flows are SPPI, the Branch considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment, the Branch considers: - contingent events that would change the amount and timing of cash flows; - leverage features; - prepayment and extension terms; - terms that limit the Branch’s claim to cash flows from specified assets; and - features that modify consideration of the time value of money (e.g. periodical reset of interest rates).
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 11 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued ii) Classification … continued Assessment of whether contractual cash flows are solely payments of principal and interest …continued The Branch holds a portfolio of long-term fixed-rate loans for which the Branch has the option to propose to revise the interest rate at periodic reset dates. These reset rights are limited to the market rate at the time of revision. The borrowers have an option to either accept the revised rate or redeem the loan at par without penalty. The Branch has determined that the contractual cash flows of these loans are SPPI because the option varies the interest rate in a way that is consideration for the time value of money, credit risk, other basic lending risks and costs associated with the principal amount outstanding. Applicability to the Branch The Branch classifies its financial assets into the following measurement category: • Amortized cost Financial assets measured at amortized cost The Branch’s non-derivative financial assets measured at amortized cost comprise cash and cash equivalents, other receivables and due from related party. The Branch measures these assets at amortized cost as its business model is to hold them to collect contractual cash flows. Its contractual terms also gives rise to the receipt of principal and interest on specified dates. These financial assets are not reclassified subsequent to their initial recognition unless the Branch changes its business model for managing these financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. For purchased or originated credit-impaired (POCI) financial assets - assets that are credit impaired at initial recognition, the Branch calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated cash flows. Reclassifications Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Branch changes its business model for managing financial assets. Financial liabilities Financial liabilities are measured at amortised cost and include deposits from customers and loans payable. Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expires.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 12 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued iii) Derecognition Financial assets The Branch derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Branch neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss. Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated at FVOCI is not recognised in profit or loss on derecognition of such securities. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Branch is recognised as a separate asset or liability. The Branch enters into transactions whereby it transfers assets recognised on its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. In such cases, the transferred assets are not derecognised. Financial liabilities The Branch derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. iv) Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Branch currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a group of similar transactions such as in the Branch’s trading activity.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 13 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued v) Impairment The Branch recognises loss allowance for expected credit losses (ECL) on the following financial instruments that are not measured at FVTPL: - financial assets that are debt instruments; - loan commitments issued. No impairment loss is recognised on equity investments. The Branch measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are measured as 12-month ECL: - debt investment securities that are determined to have low credit risk at the reporting date; and - other financial instruments on which credit risk has not increased significantly since their initial recognition. The Branch considers a debt investment security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade’. The Branch does not apply the low credit risk exemption to any other financial instruments. 12-month ECL are the portion of lifetime ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date. Financial instruments for which a 12-month ECL is recognised are referred to as ‘Stage 1 financial instruments’. Financial instruments allocated to Stage 1 have not undergone a significant increase in credit risk since initial recognition and are not credit-impaired. Lifetime ECL are the ECL that result from all possible default events over the expected life of the financial instrument or the maximum contractual period of exposure. Financial instruments for which lifetime ECL are recognised but that are not credit-impaired are referred to as ‘Stage 2 financial instruments’. Financial instruments allocated to Stage 2 are those that have experienced a significant increase in credit risk since initial recognition but are not credit-impaired. Financial instruments for which lifetime ECL are recognised and that are credit-impaired are referred to as ‘Stage 3 financial instruments’.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 14 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued v) Impairment …continued Measurement of ECL ECL are a probability-weighted estimate of credit losses. They are measured as follows: - financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Branch expects to receive); - financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows; and - undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Branch if the commitment is drawn down and the cash flows that the Branch expects to receive; Restructured financial assets If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be derecognised and ECL measured as follows: - if the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset. - if the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the new asset is treated as the final cash flows from the existing financial asset at the time of its derecognition. This amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the expected date of derecognition to the reporting date using the original effective interest rate of the existing financial asset. Credit-impaired financial assets At each reporting date, the Branch assesses whether financial assets carried at amortised cost and debt financial assets carried at FVOCI are credit-impaired (referred to as ‘Stage 3 financial assets’). A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: - significant financial difficulty of the borrower or issuer; - a breach of contract such as a default or past due event; - the restructuring of a loan or advance by the Branch on terms that the Branch would not consider otherwise; - it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or - the disappearance of an active market for a security because of financial difficulties.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 15 2 Material accounting policy information …continued b) Financial assets and financial liabilities …continued v) Impairment …continued Credit-impaired financial assets …continued A loan that has been renegotiated due to a deterioration in the borrower’s condition is usually considered to be credit-impaired unless there is evidence that the risk of not receiving contractual cash flows has reduced significantly and there are no other indicators of impairment. In addition, a retail loan that is overdue for 90 days or more is considered credit-impaired even when the regulatory definition of default is different. In making an assessment of whether an investment in sovereign debt is credit-impaired, the Branch considers the following factors: - The market’s assessment of creditworthiness as reflected in bond yields. - The rating agencies’ assessments of creditworthiness. - The country’s ability to access the capital markets for new debt issuance. - The probability of debt being restructured, resulting in holders suffering losses through voluntary or mandatory debt forgiveness. - The international support mechanisms in place to provide the necessary support as ‘lender of last resort’ to that country, as well as the intention, reflected in public statements, of governments and agencies to use those mechanisms. This includes as assessment of the depth of those mechanisms and, irrespective of the political intent, whether there is the capacity to fulfil the required criteria. Presentation of allowance for ECL in the statement of financial position Loss allowances for ECL are presented in the statement of financial position as follows: - Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets; - Loan commitments and financial guarantee contracts: generally, as a provision. - Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of financial position because the carrying amount of these assets is their fair value. However, the loss allowance is disclosed and is recognised in the fair value reserve. Write-off Loans and debt securities are written off (either partially or in full) when there is no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the case when the Branch determines that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. This assessment is carried out at the individual asset level. Recoveries of amounts previously written off are recognised when cash is received and are included in ‘impairment losses on financial instruments’ in profit or loss. Financial assets that are written off could still be subject to enforcement activities in order to comply with the Branch’s procedures for recovery of amounts due.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 16 2 Material accounting policy information …continued c) Cash resources Cash and cash equivalents are short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risks of change in value. These are shown at cost, which is equivalent to fair value. Cash and cash equivalents also comprise cash balances which are payable on demand and deposits with maturities of three months or less from the date of acquisition. Other term deposits are liquid investments which have original maturity dates in excess of 90 days, but which are available on demand with penalty. d) Property and equipment Property and equipment is stated at cost less accumulated depreciation. Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent expenditure is capitalised, only if it is probable that the future economic benefits associated with the expenditure will flow to the Branch. Ongoing repairs and maintenance are expensed as incurred. Depreciation is provided on the straight-line basis at rates which are expected to write off the cost of equipment less salvage over their expected useful lives as follows: Leasehold improvements - 10% Furniture and equipment - 10% - 33⅓% Motor vehicles - 20% Right of use assets - Life of the lease The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. e) Impairment of non-financial assets Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 17 2 Material accounting policy information …continued f) Leases At inception of a contract, the Branch assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Branch acting as a lessee At commencement or on modification of a contract that contains a lease component, the Branch allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property, the Branch has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. The Branch recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove any improvements made to branches or office premises. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Branch by the end of the lease term or the cost of the right-of-use asset reflects that the Branch will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the transition date, however, is discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Branch’s uses incremental borrowing rate. Generally, the Branch uses its incremental borrowing rate as the discount rate. The Branch determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and the type of the asset leased. Lease payments included in the measurement of the lease liability comprise the following: - fixed payments, including in-substance fixed payments; - variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; - amounts expected to be payable under a residual value guarantee; and - the exercise price under a purchase option that the Branch is reasonably certain to exercise, lease payments in an optional renewal period if the Branch is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Branch is reasonably certain not to terminate early.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 18 2 Material accounting policy information …continued f) Leases …continued Branch acting as a lessee …continued The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Branch’s estimate of the amount expected to be payable under a residual value guarantee, if the Branch changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Branch presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ and lease liabilities in ‘other liabilities’ in the statement of financial position. Short term leases and leases of low-value assets The Branch has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Branch recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. g) Foreign currency translation The financial statements are presented in Eastern Caribbean dollars which is the Branch’s functional currency. Monetary assets and liabilities denominated in foreign currencies are translated into Eastern Caribbean dollars at the rates of exchange ruling at the reporting date. Transactions arising during the year denominated in foreign currencies are translated into Eastern Caribbean dollars and recorded at the rates of exchange prevailing on the dates of the transactions. Differences arising from fluctuations in exchange rates are included in profit or loss. h) Fee and commission income The Branch offers to its customers certain value-added services for which a fee or commission is derived either directly from the customer or by way of the specific nature of the transaction via a third party provider. Those which are customer specific are currently limited to loan commitment fees, administrative fees and negotiation fees.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 19 2 Material accounting policy information …continued i) Interest income and expense Interest income and expense are recognised on an accrual basis using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. In calculating this rate, cash flows are estimated considering all contractual terms of the financial instrument but not considering future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate as well as transaction costs. Once a financial asset has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. j) Dividend income Dividend income is recognised when the Branch’s right to receive the dividend is established. k) Taxation Deferred income taxes are accounted for under tax effect accounting using the liability method. Deferred tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes using the rates that have been enacted or substantially enacted by the reporting date and are expected to apply when the asset is realised or liability settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the asset can be utilised. l) Defined contribution plan A defined contribution plan is a pension plan under which the Branch pays fixed contributions into a separate entity. The Branch has no legal or constructive obligation to pay further contributions if the plan does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Branch’s contributions to its defined contribution plan are charged to profit or loss in the year to which they relate.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 20 3 Critical Accounting Estimates and Judgments The Branch makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The most significant uses of judgment and estimates are as follows: a) Expected credit losses (ECL) The measurement of the expected credit loss allowance for financial assets measured at amortised cost is an area that requires the use of complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of customers defaulting and the resulting losses). Explanation of the inputs, assumptions and estimation techniques used in measuring ECL is detailed in note 2(b). A number of significant judgments are also required in applying the accounting requirements for measuring ECL, such as: • The Branch’s criteria for determining if there has been a significant increase in credit risk and hence whether impairment allowances for financial assets should be measured on a lifetime expected credit loss (ECL) basis. • Choosing appropriate models and assumptions for the measurement of expected credit losses, including post model adjustments. • Determination of associations between macroeconomic scenarios and, economic inputs, such as unemployment rates, inflation and GDP levels, and their effect on PDs, EADs and LGDs. • Establishing the number and relative weightings of forward-looking macroeconomic scenarios for each type of product or market and the associated ECL; and • Establishing groups of similar financial assets for the purposes of measuring ECL. In determining ECL, management’s judgment is applied, using objective, reasonable and supportable information about current and forecast economic conditions. Incorporation of forward-looking information When determining whether the risk of default has increased significantly since initial recognition, both quantitative and qualitative information is considered, including expert credit assessment, forward looking information and analysis based on the Branch’s historical loss experience.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 21 3 Critical Accounting Estimates and Judgments …continued a) Expected credit losses (ECL) …continued The Branch formulated three economic scenarios: a base case, which is the central scenario, developed internally based on consensus forecasts, and two less likely scenarios, one upside and one downside scenario. The central scenario is aligned with information used by the Branch for other purposes such as strategic planning and budgeting. External information considered includes economic data and forecasts published by governmental bodies and monetary authorities in the region where the Branch operates, international organisations such as the International Monetary Fund and selected private-sector forecasts. The scenario probability weightings applied in measuring ECL are as follows: 2024 March 31 Upside Central Downside Scenario probability weighting 20% 50% 30% 2023 March 31 Upside Central Downside Scenario probability weighting 20% 50% 30% GDP growth rates, inflation rates and price indices. Forward looking macro-economic information and assumptions have been considered in these scenarios when forecasting both 12-month and lifetime expected credit losses. Periodically, the Branch carries out stress testing of more extreme shocks to calibrate its determination of the upside and downside representative scenarios.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 22 4 Cash Resources Cash resources consist of the following: 2024 $ 2023 $ Bank balances 4,095,895 1,538,416 Short term deposits – 535,760 Cash and cash equivalents 4,095,895 2,074,176 Other term deposits 1,419,356 3,126,610 5,515,251 5,200,786 Less: Expected credit loss allowance (3,284) (3,284) Total cash resources 5,511,967 5,197,502 At March 31, 2024, cash resources carry interest at rates varying between 0.0% and 4.5% per annum (2023 - 0.0% to 4.5%). The movement in expected credit loss allowance on deposits is as follows: 2024 $ 2023 $ Balance at beginning of year 3,284 2,342 Expected credit loss- charge – 942 Balance at end of year 3,284 3,284 The expected credit loss allowance of $3,284 (2023 - $3,284) at March 31, 2024 relate to term deposits classified as stage 1.
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 23 5 Loans and Advances Loans and advances are comprised of the following: 2024 Consumer $ Business $ Mortgages $ Total $ Gross loans 15,692,072 2,480,431 12,201,163 30,373,666 Less: ECL allowance (328,827) (52,892) (227,358) (609,077) 15,363,245 2,427,539 11,973,805 29,764,589 Add: Interest receivable 887,983 30,652,572 2023 Consumer $ Business $ Mortgages $ Total $ Gross loans 16,296,765 1,507,215 12,019,641 29,823,621 Less: ECL allowance (542,106) (35,841) (106,299) (684,246) 15,754,659 1,471,374 11,913,342 29,139,375 Add: Interest receivable 576,627 29,716,002
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 24 5 Loans and Advances …continued The Branch’s loans and advances portfolio as at March 31, are in the following staging categories. 2024 Stage 1 $ Stage 2 $ Stage 3 $ Total $ Consumer 13,880,159 502,199 1,309,714 $15,692,072 Business 2,239,877 – 240,554 2,480,431 Mortgages 10,232,887 – 1,968,276 12,201,163 Gross loans 26,352,923 502,199 3,518,544 30,373,666 Less: ECL allowance (93,922) (25,476) (489,679) (609,077) 26,259,001 476,723 3,028,865 29,764,589 Add: Interest receivable 887,983 30,652,572 2023 Stage 1 $ Stage 2 $ Stage 3 $ Total $ Consumer 13,599,276 1,100,060 1,597,429 16,296,765 Business 1,163,874 259,170 84,171 1,507,215 Mortgages 10,030,584 470,111 1,518,946 12,019,641 Gross loans 24,793,734 1,829,341 3,200,546 29,823,621 Less: ECL allowance (105,582) (83,065) (495,599) (684,246) 24,688,152 1,746,276 2,704,947 29,139,375 Add: Interest receivable 576,627 29,716,002 In October 2015, the Branch entered into a Deed of Sale and Administration agreement with the Eastern Caribbean Home Mortgage Bank (ECHMB), wherein the Branch sold its rights to 100% of the cash flows arising on a portfolio of loans amounting to $3,256,555. The agreement provides that the Branch could repurchase and replace any loan included in the loan portfolio subject to the mutual agreement of the parties. The Branch has determined that substantially all the risks and rewards of the said loan portfolio have been retained by the Branch and consequently, the loans were not derecognised. The Branch accounted for the transaction as collateralized borrowing and recorded the cash received from such agreement as loans payable reported in the statement of financial position. As of March 31, 2024, the remaining balance is $1,587,530 (2023 - $1,653,084). (See Note 11).
CAPITA FINANCIAL SERVICES INC. (ST. LUCIA BRANCH) Notes to the Financial Statements March 31, 2024 (expressed in Eastern Caribbean dollars) 25 5 Loans and Advances …continued In November 2015, the Branch’s Head Office entered into a Deed of Sale and Administration agreement with the Barbados Public Workers’ Co-operative Credit Union Limited (BPWCCUL), its ultimate parent, for the acquisition of a portfolio of real estate loans amounting to $26,864,082 starting the fiscal year 2016-2017. The Head Office concurrently entered into an Intra Company Loan Allocation and Administrative agreement, allocating a portion of those loans to the Branch applied in three tranches totalling $10,702,900. Management determined that substantially all the risks and rewards of the said loan portfolio have been transferred to the Branch. In September 2021 the ultimate parent BPWCCUL repurchased a portion loans in the sum of $1,907,893, and in February 2023 repurchased the remaining loans totaling $4,921,510. The Head Office retained the funds from the repurchase of those facilities and replaced those loans with Capita Barbados land loans in two tranches of $2,144,541 and $4,001,096 under a revised Intra Company Loan Allocation and Administration agreement. The remaining amount of $683,766 owed to the Branch after the replacement of the loans, was applied to reduce the balance owed to Head Office. The sum of $5,408,042 (2023 - $5,770,852) representing the balance after loan repayment is included on the statement of financial position of the Branch at year end. The movement in the expected credit loss allowance is as follows: 2024 Consumer $ Business $ Mortgages $ Total $ Balance, beginning of year 542,106 35,841 106,299 684,246 Amounts charged/written off (326,057) – – (326,057) Expected credit loss (note 18) 103,399 28,357 119,132 250,888 Balance, end of year 319,448 64,198 225,431 609,077 2023 Consumer $ Business $ Mortgages $ Total $ Balance, beginning of year 588,549 – 109,241 697,790 Amounts charged/written off – – – – Expected credit loss (note 18) (46,443) 35,841 (2,942) (13,544) Balance, end of year 542,106 35,841 106,299 684,246 The effective rate of interest on mortgages and land loans varies between 4.0% and 10.0% (2023 - 4.0% and 10.0%) per annum, the rate on business loans varies between 5.0% to 9.5% (2023 -5.0% to 9.0%) whilst the rates on consumer loans vary between 6.0% and 13.0% (2023 - 6.0% and 13.0%) per annum. The term of mortgage loans does not exceed 30 years.
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