Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698926190705.pdf (Trinidad and Tobago)
First Citizens Holdings Limited And Its Subsidiaries Consolidated Financial Statements 30 September 2019 (Expressed in Trinidad and Tobago dollars) 1 First Citizens Holdings Limited And Its Subsidiaries Contents Statement of Management Responsibility Independent Auditor’s Report Consolidated Statement of Financial Position Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Page 1 2 - - 15 16 - 17 18 - 116 2 First Citizens Holdings Limited And Its Subsidiaries Statement of Management Responsibility Management is responsible for the following:  Preparing and fairly presenting the accompanying consolidated financial statements of First Citizens Bank Limited and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at 30 September 2018, the consolidated income statement, consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information;  Ensuring that the Group keeps proper accounting records;   Selecting appropriate accounting policies and applying them in a consistent manner; Implementing, monitoring and evaluating the system of internal control that assures security of the Group’s assets, detection/prevention of fraud, and the achievement of company operational efficiencies;  Ensuring that the system of internal control operated effectively during the reporting period;  Producing reliable financial reporting that comply with laws and regulations, including the Companies Act and the Financial Institution Act (FIA ) 2008; and  Using reasonable and prudent judgement in the determination of estimates.
In preparing these audited consolidated financial statements, management utilised the International Financial Reporting Standards, as issued by the International Accounting Standards Board and adopted by the Institute of Chartered Accountants of Trinidad and Tobago.

Where International Financial Reporting Standards presented alternative accounting treatments, management chose those considered most appropriate in the circumstances.
Nothing has come to the attention of management to indicate that the Group will not remain a going concern for the next twelve months from the reporting date; or up to the date the accompanying consolidated financial statements have been authorised for issue, if later.

Management affirms that it has carried out its responsibilities as outlined above.
Group Chief Executive Officer 19 December 2018 Group Chief Financial Officer 19 December 2018 (1) Independent Auditor’s Report To the shareholders of First Citizens Holdings Limited Report on the audit of the consolidated financial statements Our opinion In our opinion, the consolidated financial statements present fairly, in all material respects the consolidated financial position of First Citizens Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”), as at 30 September, 2018, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.
What we have audited The Group’s consolidated financial statements comprise:       the consolidated statement of financial position as at 30 September, 2018; the consolidated income statement for the year then ended; the consolidated statement of comprehensive income for the year then ended; the consolidated statement of changes in equity for the year then ended; the consolidated statement of cash flows for the year then ended; and the notes to the consolidated financial statements, which include a summary of significant accounting policies.
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 Auditor’s responsibilities for the audit of the consolidated 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 Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code).

We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

Our audit approach Overview Overall group materiality: TT$50 million, which represents 5% of profit before tax.
Materiality  The group audit included full scope audits of four significant components, three domiciled in Trinidad and Tobago and one in Barbados.

 The group audit covered 92% of profit before tax and 99% of total assets.
Group scoping Key audit matters   Implementation of IFRS 9 ‘Financial Instruments’ Impairment of Government of Barbados financial assets  Expected credit loss for individually significant loans  Valuation of unquoted investments Audit scope As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated financial statements.
In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.

As in all of our audits, we also addressed the risk of management override of internal controls, including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
How we tailored our group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates.

Our assessment of the components of the Group focused primarily on the Group’s legal entities.
The following components below were considered individually financially significant components and were subject to full scope audits for group audit purposes:  First Citizens Bank Limited  First Citizens Investment Services Limited  First Citizens Asset Management Limited First Citizens Bank Barbados Limited was considered a significant component based on risk.
In establishing the overall group audit strategy and plan, we determined the type of work that is needed to be performed at the components by the group engagement team and by component auditors.

Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work.

Our group scoping provided coverage of approximately 92% of profit before tax and 99% of total assets of the Group.
We also performed Group level risk assessment analytical procedures over the remaining components.

Materiality The scope of our audit was influenced by our application of materiality.

An audit is designed to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

Misstatements may arise due to fraud or error.


They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

(3) Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole.
Overall group materiality TT$50 million How we determined it 5% of profit before tax Rationale for the materiality benchmark applied We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured by users, and is a generally accepted benchmark.

We chose 5% which is within a range of acceptable benchmark thresholds.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above TT$2.5 million, as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period.
These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter How our audit addressed the key audit matter Implementation of IFRS 9 ‘Financial Instruments’ Refer to note 2.e.i.

& 3.a.

to the consolidated financial statements for disclosures of related accounting policies and balances.
The Group adopted the accounting standard IFRS 9 ‘Financial instruments’ during the financial year.

The standard introduces new requirements around two main aspects of how financial instruments are treated - measurement and classification and impairment.

IFRS 9 introduces a new classification and measurement approach for financial assets that reflects the business model in which the financial assets are managed and the underlying cashflow characteristics.
IFRS 9 contains three principal classification categories for financial assets: - Measured at amortised cost, - Fair value through other comprehensive income (FVOCI); and - Fair value through profit and loss (FVPL).

IFRS 9 introduces new impairment rules which prescribe a new, forward looking, expected credit loss (‘ECL’) impairment model which takes into account reasonable and supportable forward looking information which will generally result in the earlier recognition of impairment provisions.
With respect to the measurement and classification of the financial assets and liabilities, we read the relevant accounting policies adopted by the Group and compared them to the requirements of the standard.

We obtained an understanding of the Group’s business model assessment and for a sample of instruments verified the inputs into the solely payments of principal and interest test performed by the client with original contracts.
We tested the opening equity adjustments in relation to the adoption of the new standard’s classification and measurement requirements.
With respect to the ECL model, our audit approach was as follows: - We read the Group’s impairment provisioning policies and compared them to the requirements of IFRS 9; (4) We have focused on this area, because there are a number of significant judgements which management will need to determine as a result of the requirements in measuring ECL under IFRS 9: - Determining the criteria for a significant increase in credit risk; - Techniques used to determine probability of default (PDs) and loss given default (LGD); and - Factoring in possible future economic scenarios.
These judgements have required new models to be built and implemented to measure the expected credit losses on loans and investments measured at amortised cost in addition to investments measured at fair value through other comprehensive income.

Management engaged a credit modeller expert to assist in the more complex aspects of the expected credit loss model.
There is a large increase in the data inputs of these models which increases the risk that the data used to develop assumptions and operate the model is not complete or accurate.

The impact on net assets from the implementation of the measurement and classification aspects of the standard was not material.
Differences between previously reported and new carrying amounts of financial instruments as a result of the implementation of the new ECL model as at 1 October 2017 of TT$146M have been recognised in the opening retained earnings.

- We tested the ratings used in the ECL model for a sample of instruments.

For investment ratings, the Group’s ratings were compared to publically available S&P data.
For loans, source documents used in the Group’s internal rating process were verified; - For a sample of instruments, we tested whether the significant increase in credit risk and default definitions were appropriately applied and the resulting impact of this on the staging of the instruments.

- We tested the loss given default in the ECL calculation for a sample of instruments, including the value of collateral where appropriate.
- In assessing the reasonableness of the probability of default, we verified the critical data inputs into the vintage analysis against source documents.

- We obtained an understanding of the method used to estimate the impact of prepayment features and undrawn commitments on the exposure at default and tested its application for a sample of instruments.
- For the forward looking assumptions, we obtained an understanding of the relevance of the macro economic indicators used and tested the application of the assumptions in the model.

- We tested the critical data fields used in the ECL model, such as origination date, date of maturity, credit rating, date of default if any, principal, interest rate, collateral type and value, by tracing data back to source documents.
- We tested the completeness of the amounts assessed for impairment, including off balance sheet credit exposures.

We utilised the services of our accounting specialists to assess whether the financial statement disclosures arising on adoption of IFRS 9 are in accordance with the requirements of the standard.
Based on the procedures described above, no material exceptions were noted in our assessment of the Group’s implementation of IFRS 9, including its provisioning in accordance with its newly adopted expected credit loss.

(5) Impairment of Government of Barbados financial assets Refer to notes 4.c.

to the consolidated financial statements for disclosures of related accounting policies and balances.
Within the Group’s holdings of investment securities and cash and due from banks there are financial assets amounting to TT$921 million before ECL (comprised of TT$885 million of Barbados dollar debt & TT$36 million of US dollar debt) issued by the Government of Barbados (GOB).

During the financial year, GOB announced its intention to restructure both local and foreign currency denominated debt.
Subsequent to the financial year end, restructure terms were agreed on for debt denominated in Barbados dollars.

The restructure terms resulted in an exchange of financial instruments.

As at the financial year end, the carrying value of the existing Barbados dollars instruments was based on the fair value of the new instruments.

Management determined the fair value of these new instruments by applying an estimated discount rate to the future cashflows outlined in the restructure terms.
The carrying value of the US dollar denominated instruments was based on an estimated loss given default which was derived from an analysis of historical sovereign defaults conducted by a reputable international rating agency.

The facility was considered to be in default thereby resulting in a PD of 100%.

The exposure at default was the outstanding principal and accrued interest for these instruments at the end of the financial year.
We focused on this area because of the significant judgement involved in arriving at the estimated values and the limited external evidence to support the Group’s valuations.

With respect to the Barbados dollar denominated debt, with the assistance of our valuation experts, we developed an independent yield curve in order to estimate the time value of money for the defaulted instruments.
The independently developed yield curve was arrived at by finding the average of 3 relevant proxy curves: - Historical spread between the US curve and another regional sovereign that experienced a default in the last 5 years; - Historical spread between the US curve and the - Barbados curve Standard B rated curve from a reputable international valuation provider.

The independently developed yield curve was then applied to the cashflows outlined in the restructure agreement.
We inspected the restructure agreement and compared our understanding of the revised terms and conditions to management’s application of the accounting for the bonds.

The resulting net present value derived from the independently developed yield curve was compared to the Group’s ECL was within an acceptable range of outcomes.

In the absence of restructure terms for the US dollar denominated debt, the ECL model was used to estimate the impairment loss on those instruments.
For the US dollar denominated debt, the loss given default percentage that was used to arrive at the expected credit loss was compared to publically available information from a reputable international credit rating agency on historical recoveries of defaulted instruments and found to be reasonable.

The mathematical accuracy of the ECL calculation was also tested and no material exceptions were identified.

(6) Expected credit loss for individually significant loans Refer to notes 2.e.i.

& 3.a.
& 3.a.

to the consolidated financial statements for disclosures of related accounting policies and balances.

Included in the statement of financial position are loans that have been individually assessed for impairment and provisioning amounting to TT$4.9 billion.

Individually significant loans are considered by the Group to be individual credit facilities in excess of TT$100M.
On an annual basis, the Group assesses whether there is objective evidence that individual loans and advances or groups of loans are impaired.

The probability of default for individually significant loans was derived in accordance with the newly adopted ECL model.

A vintage analysis, that allows for performance comparisons between portfolio segments was performed in order to assess the likelihood of corporate facilities defaulting in the future.
In order to estimate the loss given default, management uses independent valuators to estimate the value of collateral held for these facilities.

The loss given default also takes into consideration the historical recovery rate of charged off accounts.

Valuation of real estate property pledged as collateral is a significant repayment source for impaired loans.
The estimation of collateral values are impacted by market trends as well as the circumstances of the specific property and involves judgment and specialised skills.

The key assumptions used by management are:  rental rates per square foot  discount rates used in the valuation to determine the fair value of these properties.

 time to liquidate the pledged collateral Another form of collateral that is material to these facilities is government guarantees.
We focused on this area, because of the complex and significant judgement required by management over the assessment of the value and timing of the estimated future cash flows that contribute to the estimation of the size of such impairment.

In assessing the reasonableness of the probability of default used in the ECL calculation for individually significant loans, we tested the critical data inputs into the vintage analysis to source documents.
For the loss given default, we assessed the reputation, independence, competence and experience of management’s valuators and found no evidence to suggest that the objectivity of the valuator in the performance of the valuations of collateral was compromised.

We examined the valuations and evaluated the reasonableness of the key assumptions such as rental rates per square foot and discount rates used in those valuations.
Where comparable market data was available, we compared the values used by management and noted that they were consistent with market data.

We also challenged the timing of management’s forecasted cash flows by comparing their estimate to the time to dispose of similar types of collateral in the past.

We tested a sample of the historical data used in arriving at the estimated recovery rates for individually significant loans.
For the facilities where government guarantees were in place, we verified the guarantees for a sample of the facilities with the original unconditional guarantee issued by the government.

We considered events up to the audit report date in our evaluation of management’s forecasted cash flows and there were no subsequent events identified that contradicted information used in management’s cash flow assessment.

No material differences were noted in testing the ECL for individually significant loans.
(7) Valuation of financial instruments carried at fair value not quoted in an active market Refer to notes 2.e., 4.a.

& 8 to the consolidated financial statements for disclosures of related accounting policies and balances.

As at the financial year end, investments carried at fair value not quoted in an active market were valued at TT$9.7 billion.

For financial instruments not traded in an active market, the Group determines fair value using a valuation model.
The Group’s internally developed model uses the discounted cash flow method to determine the fair value of financial instruments not actively traded.

Some of the inputs of this model may not be market observable and are therefore based on assumptions.

This method discounts the cash flows of the instrument using a yield and credit spread which requires significant management judgement.
We focused on this area because of the significant judgement involved in arriving at the estimated values and the limited external evidence to support the Group’s valuations.

With the assistance of our valuation experts, we compared the Group’s valuation methodology, with industry practice and found it to be an acceptable model to use in valuing the unquoted instruments.
We tested the data used to determine the yield curves, credit spreads and credit ratings which are used in arriving at the prices of the unquoted instruments.

We also evaluated the reasonableness of the assumptions used in management’s fair value calculations by comparing them to publicly available information on the issuers of the unquoted investments.

We tested the inputs into the pricing formula applied within the model.

There were no material differences identified.


We assessed the disclosures included in the consolidated financial statements with respect to the change in valuation methodology and they are consistent with the requirements of the relevant accounting standards.

We considered events up to the audit report date in our evaluation of management’s fair values of the unquoted investments and no contradictory information was identified.

Other information Management is responsible for the other information.
The other information comprises the annual report (but does not include the consolidated financial statements and our auditor’s report thereon), which is expected to be made available to us after the date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.
(8) Responsibilities of management and those charged with governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 consolidated financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit.
We also:  Identify and assess the risks of material misstatement of the consolidated 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 Group’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 Group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated 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 auditor’s report.

However, future events or conditions may cause the Group to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit.

We remain solely responsible for our audit opinion.

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.
(9) We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Dwayne Rodriguez-Seijas.
xx December 2018 Port of Spain, Trinidad, West Indies (10) First Citizens Holdings Limited And Its Subsidiaries Consolidated Statement of Financial Position (Expressed in Trinidad and Tobago dollars) Notes 2019 $’000 Assets Cash and due from other banks Statutory deposits with Central Banks Investment Securities - Hold to collect and sell - Fair value through profit or loss - Hold to collect Loans and receivables less allowances for losses: -Loans to customers -Loan notes Other assets Investment accounted for using equity methods Tax recoverable Property, plant and equipment Intangible assets Total assets Liabilities Customers’ deposits Other funding instruments Due to other banks Creditors and accrued expenses Taxation payable Retirement benefit liability Bonds payable Deferred income tax liability Total liabilities Share capital Capital contributions Statutory reserves Retained earnings Other reserves Shareholders’ equity Non-controlling interest Total shareholders’ equity 6 7 8(a) 8(b) $’000 4,816,122 4,243,111 10,524,104 13,852 4,590,400 16,014,956 273,943 505,670 185,256 67,330 603,083 219,871 42,057,698 25,499,591 4,386,739 1,512,249 748,639 132,869 24,733 2,865,766 194,261
 35,364,847 23,205 46,317 586,780 1,288,398 2,340,991 4,285,691 2,407,160 6,692,851 Total liabilities & shareholders’ equity 43,400,357 42,057,698 The notes on pages 18 to 116 are an integral part of these consolidated financial statements.
On 12 December 2019, the Board of Directors of First Citizens Holdings Limited authorised these consolidated financial statements for issue.
Director Director (11) First Citizens Holdings Limited And Its Subsidiaries Consolidated Income Statement (Expressed in Trinidad and Tobago dollars) Interest income Interest expense Net interest income Fees and commissions Gains from investment securities Other Income Total net income Credit impairment losses on loans Credit impairment write back /(losses) on other financial assets Administrative expenses Other operating expenses Operating profit Share of profit in associate Share of profit in joint ventures Profit before taxation Taxation Profit for the year Profit attributable to: - Owners of the parent - Non-controlling interests Profit for the year Year ended 30-Sep Notes 2019 $’000 2018 $’000 29 30 31 32 10 33 34 35 13(a) 36 2,032,425 (401,004) 1,631,421 467,561 24,303 150,661 2,273,946 (22,257) 1,884,550 (328,125) 1,556,425 435,310 77,794 144,779 2,214,308 (73,013) 36,733 (105,011) (766,260) (482,440) 1,039,722 15,821 4,100 1,059,643 (311,048) (609,708) (438,637) 987,939 13,919 4,319 1,006,177 (336,346) 748,595 669,831 499,537 249,058 748,595 446,978 222,853 669,831 The notes on pages 18 to 116 are an integral part of these consolidated financial statements.
(12) First Citizens Holdings Limited And Its Subsidiaries Consolidated Statement of Comprehensive Income (Expressed in Trinidad and Tobago dollars) Profit for the year Other comprehensive income Items that will not be reclassified to profit or loss Re-measurement of defined benefit obligation Net gains on investments in equity instruments designated at FVOCI Revaluation of property, plant and equipment, net of tax Items that may be reclassified to profit or loss Amortisation of loss on hold to collect assets, net of tax Exchange difference on translation Net gains /(loss) on financial assets measured at FVOCI Reclassified to profit or loss on disposal Year ended 30 September 2019 $’000 2018 $’000 748,595 669,831 25,916 8,240 1,725 35,881 2,567 10,887 3,061 16,515 (3,339) (10,325) 198,630 (24,303) (1,189) (2,201) (102,220) (77,794) 160,663 (183,404) Total other comprehensive income/(loss) for the year 196,544 (166,889) Total comprehensive income for the year 945,139 502,942 Attributable to: - Owners of the parent - Non-controlling Interests Total comprehensive income for the year 630,691 314,448 335,613 167,329 945,139 502,942 The notes on pages 18 to 116 are an integral part of these consolidated financial statements.
(13) First Citizens Holdings Limited And Its Subsidiaries Consolidated Statement of Changes in Equity (Expressed in Trinidad and Tobago dollars) Share capital $’000 Capital contribution Statutory reserve $’000 Fair value reserve $’000 Re-measurement of defined benefits $’000 Revaluation surplus $’000 Other reserve $’000 Retained earnings $’000 Total Shareholders equity $’000 Minority Interest $’000 Total equity $’000 Balance as at 1 October 2018 23,205 46,317 586,780 2,102,976 76,585 109,677 51,753 1,288,398 4,285,691 2,407,160 6,692,851 Profit for the year Other comprehensive income/for the year Other comprehensive income Total other comprehensive income Transactions with owner Capital contribution Transfer to statutory reserve Dividend Paid -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 119,599 (1,537) 118,062 -- -- -- 499,537 499,537 249,058 748,595 17,294 1,151 (6,890) -- 131,154 65,390 196,544 -- -- -- 1,537 -- -- -- 17,294 1,151 (6,890) 501,074 630,691 314,448 945,139 7,462 -- -- -- 3,573 -- -- -- -- -- -- -- -- -- -- -- -- -- -- (3,573) 7,462 -- -- -- 7,462 -- (277,400) (277,400) (138,305) (415,705) Balance at 30 September 2019 23,205 53,779 590,353 2,221,038 93,879 110,828 44,863 1,508,499 4,646,444 2,583,303 7,229,747 The notes on pages 18 to 116 are an integral part of these consolidated financial statements.
(14) First Citizens Holdings Limited And Its Subsidiaries Consolidated Statement of Changes in Equity (Expressed in Trinidad and Tobago dollars) Share capital $’000 Capital contribution Statutory reserve $’000 Fair value reserve $’000 Re-measurement of defined benefits $’000 Revaluation surplus $’000 Other reserve $’000 Retained earnings $’000 Total Shareholders equity $’000 Minority Interest $’000 Total equity $’000 Balance as at 1 October 2017 23,205 38,255 586,780 2,242,288 74,872 107,634 53,222 1,239,784 4,366,040 2,451,239 6,817,279 Change on initial application of IFRS9 -- -- -- (25,660) -- -- -- (97,357) (123,017) (61,333) (184,350) Restated Balance as at 1 October 2017 23,205 38,255 586,780 2,216,628 74,872 107,634 53,222 1,142,427 4,243,023 2,389,906 6,632,929 Profit for the year Other comprehensive income/for the year -- -- -- -- -- -- -- (113,652) Total other comprehensive income 23,205 38,255 586,780 (113,652) -- 1,713 1,713 -- -- 446,978 446,978 222,853 669,831 2,043 (1,469) -- (111,365) (55,524) (166,889) 2,043 (1,469) 446,978 335,613 167,329 502,942 Transactions with owner Capital contribution Dividend Paid -- -- 8,062 -- -- -- -- -- -- -- -- -- -- -- -- 8,062 -- 8,062 (301,007) (301,007) (150,075) (451,082) Balance at 30 September 2018 23,205 46,317 586,780 2,102,976 76,585 109,677 51,753 1,288,398 4,285,691 2,407,160 6,692,851 The notes on pages 18 to 116 are an integral part of these consolidated financial statements.
(15) First Citizens Holdings Limited And Its Subsidiaries Consolidated Statement of Cash Flows (Expressed in Trinidad and Tobago dollars) Profit before taxation Adjustments to reconcile profit to net cash provided by operating activities: Share of profit in associate Share of profit in joint ventures Interest income Interest received Interest expense Interest paid Depreciation and amortisation (Gain)/loss on disposal of property, plant and equipment Gain on sale of available-for-sale financial assets Amortisation of premium on investment securities Amortisation of bond issue cost Amortisation of intangible asset Net change in Impairment allowances on other financial assets Net pension expense Net movement in allowance for loan loss Cash flows from operating activities before changes in operating assets and liabilities Net change in loans to customers Net change in customers’ deposits Net change in other funding instruments Net change in other assets Net change in statutory deposits with Central Bank Dividends received Net change in creditors and accrued expenses Pension contributions paid Taxes paid Notes Year ended 30 September 2019 $’000 2018 $’000 1,059,642 1,006,177 (15,821) (4,100) (2,032,424) 2,009,873 401,004 (392,717) 87,424 (32) (24,303) (3,874) 1,721 20,969 (320,913) 53,911 3,166 843,526 (2,612,475) 349,890 (211,727) 144,799 735,533 535 (97,521) (29,888) (399,280) (13,919) (4,319) (1,884,549) 1,860,604 328,125 (308,017) 47,942 372 (77,794) (6,818) 1,224 23,966 105,015 4,634 59,628 1,142,271
 (1,519,684) 1,523,179 55,634 (139,002) (855,410) 404 182,775 (32,213) (280,712) 14 15 20 20 Net cash flows (used in)/generated from operating activities (1,276,608) 77,242 (16) Year ended 30 September Notes 2019 $’000 2018 $’000 8(a) 9 8(b) (7,543,891) (1,623,169) (529) (10,199,821) (1,084,925) (13,462) First Citizens Holdings Limited And Its Subsidiaries Consolidated Statement of Cash Flow (continued) (Expressed in Trinidad and Tobago dollars) Cash flows from investing activities Purchase of Investments - Hold to
 collect and sell - Hold to collect - Fair value through profit or loss Proceeds from sale of investments - Hold to collect and sell - Fair value through profit or loss Proceeds from maturity/redemption of Hold to collect Repayment on loan notes receivable Net change in short-term investments Proceeds from disposal of property, plant and equipment Purchase of intangible assets Purchase of property, plant and equipment and intangibles Net cash flows from investing activities Cash flows from financing activities Net change in debt securities Capital contribution Ordinary dividend paid Preference dividend paid Net cash (outflows)/ inflows from financing activities Effect of exchange rate changes Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of period 8(a) 8(b) 9 15 14 7,421,241 13,465 1,589,507 68,486 55,762 1,175 (24,064) (80,431) (122,448) 63,089 7,462 (413,754) (1,952) (345,155) 2,379 (1,741,832) 2,841,056 Cash and cash equivalents at end of period 6 1,099,224 The notes on pages 18 to 116 are an integral part of these consolidated financial statements.
10,339,451 618 977,584 73,700 24,389 3,566 (32,744) (59,007) 29,349 1,460,552 8,062 (449,130) (1,952) 1,017,532 (10,508) 1,113,615 1,727,441 2,841,056 (17) First Citizens Holdings Limited and its Subsidiaries Notes to the Consolidated Financial Statements 30 September 2018 (Expressed in Trinidad and Tobago dollars) 1 General information First Citizens Holdings Limited (the Company) was incorporated in Trinidad and Tobago in May 1994 and is wholly owned by the Government of Trinidad and Tobago.
The Company is the ultimate parent of the First Citizens Group.

The Company acquired 96% of the share capital of First Citizens Bank Limited (the “Bank”) as part of the restructuring of the Workers Bank (1989) Limited, National Commercial Bank of Trinidad and Tobago Limited and Trinidad Co- operative Bank Limited in September 1993.

In 2013, the Company disposed of 20.0% of its ordinary share holdings interest and a further 13% was sold in May 2017 reducing its continuing interest to 64.4%.
The Company’s principal activity is investment holding.

The First Citizens Group provides retail, commercial and corporate banking as well as investment banking services.

The Group operates primarily Trinidad and Tobago, Barbados and the Eastern Caribbean region.
The Group currently comprises the following entities: Entity Nature of operations First Citizens Bank Limited First Citizens Depository Services Limited First Citizens Bank (Barbados) Limited Banking, including the provision of mortgages for residential and commercial properties The Company acts as custodian to third parties and provides paying agent services.
Banking, including the provision of mortgages for residential and commercial properties First Citizens Costa Rica SA Service related transactions First Citizens Financial Services (St. Lucia) Limited Selected banking and financial service operations First Citizens Investment Services Limited and its subsidiaries Investment & asset management services and repo business First Citizens Trustee Services Limited Provision of trustee, administration and paying agency services The Group also has investments in the following entities: Infolink Services Limited Trinidad and Tobago Interbank Payment System Limited Provision of automated banking reciprocity services Automated clearing house Country of incorporation Ownership interest Trinidad & Tobago Trinidad & Tobago 64.4% 100% Barbados 100% Costa Rica St. Lucia Trinidad & Tobago Trinidad & Tobago Trinidad & Tobago Trinidad & Tobago 100% 100% 100% 100% 25% 14% St. Lucia Electricity Services Limited Provision of electrical power to consumers St. Lucia 19% (18) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.

a.

Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretation Committee (IFRS IC) applicable to companies reporting under IFRS.

These financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements are prepared under the historical cost convention as modified by the revaluation of freehold premises, available-for-sale financial assets and financial assets classified at fair value through profit or loss (FVTPL).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.

It also requires management to exercise its judgment in the process of applying the Group’s accounting policies.
The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

(i) Standards, amendment and interpretations which are effective and have been adopted by the Group in the accounting period:  IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018).

This standard provides a single, principles based five-step model to be applied to all contracts with customers.
The five steps in the model are as follows: Identify the contract with the customer Identify the performance obligations in the contract    Determine the transaction price  Allocate the transaction price to the performance obligations in the contracts  Recognise revenue when (or as) the entity satisfies a performance obligation.

 IFRS 2 - Classification and Measurement of Share-based Payment Transactions (Amendments effective 1 January 2018).
This amendments is to clarify the standard in relation to the accounting for cash-settled share-based payment transactions that include a performance condition, the classification of share-based payment transactions with net settlement features, and the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.
(ii) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group The following standards, amendments and interpretations to existing standards are not yet effective for accounting periods beginning on or after 1 January 2019 and have not been early adopted by the Group:   IFRS 16 Leases (effective 1 January 2019).

This standard specifies how an IFRS reporter will recognise, present and disclose leases.
The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term in 12 months and less or the underlying assets has a low value.

Lessors continue to classify leases as operating or finance.

IFRIC 23 – Uncertainty over Income Tax Treatments (Effective 1 January 2019).
The interpretation addresses the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.
It specifically considers: o Whether tax treatments should be considered collectively o Assumptions for taxation authorities' examinations o The determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates o The effect of changes in facts and circumstances (19) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) a.
Basis of preparation (continued) (ii) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group (continued)   IFRS 9 Amendment- Prepayment Features with Negative Compensation (Effective 1 January 2019).
This amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments.

IAS 28 Amendments - Long-term Interests in Associates and Joint Ventures (Effective 1 January 2019).
This amendment clarifies that an entity applies IFRS 9 Financial Instruments to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied.

 Amendments to IAS 1 and IAS 8) - Definition of Material (Effective 1 Jnauary 2020).
The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards.

 IAS 19 Amendments - Plan Amendment, Curtailment or Settlement (effective 1 January 2019).
The amendments in Plan Amendment, Curtailment or Settlement (Amendments to IAS 19) are: o o If a plan amendment, curtailment or settlement occurs, it is now mandatory that the current service cost and the net interest for the period after the remeasurement are determined using the assumptions used for the remeasurement.

In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling.
 Amendments to IAS 1 and IAS 8) - Definition of Material (Effective 1 January 2020).

The amendments in Definition of Material (Amendments to IAS 1 and IAS 8) clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards.

 Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform (Effective 1 January 2020).
The amendments in Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) clarify that entities would continue to apply certain hedge accounting requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows from the hedging instrument are based will not be altered as a result of interest rate benchmark reform.
The Group is in the process of assessing the impact of the new and revised standards not yet effective on the Financial Statements, we do not anticipate any material impact.

(20) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) b.
Consolidation (i) Principles of consolidation The consolidated financial statements include the accounts of the Bank and its wholly owned subsidiaries as outlined in Note 1.

The financial statements of the consolidated subsidiaries used to prepare the consolidated financial statements were prepared as of the parent company’s reporting date.

The consolidation principles are unchanged as against the previous years’.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.

Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred.

The accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(ii) Investment in subsidiaries Subsidiaries are all entities, (including structured entities) over which the Group has control.

The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations.

The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group.

The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognises any non- controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non- controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.
(iii) Business combinations and goodwill Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration in relation to financial instruments to be transferred by the Group is recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income.

Contingent consideration that is classified as equity is not re- measured, and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.
If the total of consideration transferred, non- controlling interest recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated income statement.
(21) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) b.

Consolidation (continued) (iv) Transactions and non-controlling interests Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners.
The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.

Gains or losses on disposals to non-controlling interests are also recorded in equity.

(v) Investment in joint ventures The Group has applied IFRS 11 to all joint arrangements as of 1 October 2012.
Under IFRS 11 investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor.

The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

Joint ventures are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income.
When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
(vi) Investment in associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Investments in associates are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income.

The Group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired.
If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/ (loss) of associates’ in the consolidated income statement.

Profits and losses resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s interests in the associates.
Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
(22) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) c. Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency).
The consolidated financial statements are presented in Trinidad and Tobago dollars, which is the Group’s presentation currency.

The exchange rate between the TT dollar and the US dollar as at the date of these statements was TT$6.6926 = US$1.00 (2018 - TT$6.6926 = US$1.00), which represent the Group’s mid rate.

The exchange rate between the TT dollar and the Barbados dollar as at the date of these statements was TT$3.4102 = BB$1 (2018 - TT$3.4102 = BB$1.00), which represent the Group’s mid rate.
(ii) Transactions and balances Foreign currency transactions are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated income statement.
Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security.

Translation differences related to changes in the amortised cost are recognised in profit or loss and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary items such as equities classified as available-for-sale financial assets are included in other comprehensive income.
(iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper- inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; (b) income and expenses for each income statement are translated at average cover exchange rates for the financial year, and (c) all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Exchange differences arising are recognised in other comprehensive income.

d. Derivative financial instruments Derivative financial instruments including swaps are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Fair values are obtained from quoted market prices, discounted cash flow models and options pricing models as appropriate.

All derivatives are carried as assets when their fair value is positive and as liabilities when negative.
(23) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) e. Financial assets and financial liabilities (i) Financial assets The Group classifies its financial assets based on the following business model:  Hold for trading  Hold to collect and sell or  Hold to collect Based on these factors, the Group classifies its assets into one of the following three measurement categories: - Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest (SPPI)), and that are not designated at FVPL are measured at amortised cost.
The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured as described in note 3.a.v.

Interest income from these financial assets is included in “Interest income” using the effective interest rate method.
- Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets cash flows represents solely payments of principal and interest, and that are not designated at FVPL, are measured at fair value through other comprehensive income (FVOCI).
Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument’s amortised cost which are recognised in profit or loss.

When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit and loss and recognized in “Net Investment Income”.
The interest income from these financial assets is included in “interest Income’ using the effective interest rate method.

- Fair value through profit or loss Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss.
A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the “income statement within “Gains from investments securities” in the period in which it arises, unless it arises from debt instruments that were designated at fair value or which are not held for trading, in which case they are presented in Investment Interest Income.
Interest income from these financial assets is included in “Interest income” using the effective interest rate method.

a) Debt Instruments Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government and corporate bonds.

Classification and subsequent measurement of debt instruments depend on: (i) (ii) the Group’s business model for managing the asset; and the cash flow characteristics of the asset.
(24) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) e. Financial assets and financial liabilities (continued) (i) Financial assets (continued) Group’s Business model The business model reflects how the Group manages the assets in order to generate cash flows.
An assessment is made at a portfolio level and includes an analysis of factors such as:  The stated objective and policies of the portfolio and the operation of those in practice.

More specifically whether the Group’s objective is solely to collect the contractual cash flows from the assets or it to collect both the contractual cash flows and cash flows arising from the sale of the assets.

 Past experience on how the cash flows for these assets were collected.
 Determination of performance targets for the portfolio, how evaluated and reported to key management personnel.

 Managements identification of and response to various risks, which includes but not limited to, liquidity risk, market risk, credit risk, interest rate risk.
 Management classify its assets based on historical sales and forecasted liquidity requirements Arising out of the assessment the portfolios were deemed to have the business models identified as follows: Hold to Collect Hold to Collect & Sell Hold for Trading Corporate and Commercial Loans OMO Actively Traded (Capital Gains) Portfolio Retail Loans Credit Cards Treasury Notes Bonds Issued by or guaranteed by Government of Trinidad & Tobago Floating NAV Funds* Fixed NAV Funds** - cash & cash equivalents Bonds Issued by or guaranteed by Government of Trinidad & Tobago (GOTT) Non-Eurobonds maturing in greater than 3 years at recognition Eurobonds Treasury Bills Loans & receivables Canadian Treasury Bills Securities sold under repurchase agreements to clients and brokers Long Term Borrowings from brokers in the form of Total Return Swaps Medium Term Notes Non-Eurobonds maturing in less than 3 years Cash (25) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) e. Financial assets and financial liabilities (continued) Solely payments of principal and interest (SPPI) Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Group assesses whether flows represent solely payment of principal and interest (SPPI test).
In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement i.e.

interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement.
Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

The Group reclassifies debt investments when and only when its business model for managing those assets changes.
The reclassification takes place from the start of the first reporting period following the change.

Such changes are expected to be very infrequent and none occurred during the period.

b) Equity instruments Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets.
Examples of equity instruments include shareholdings with Visa and Caricris.

The Group subsequently measures all equity investments at fair value through profit or loss, except where the Group’s management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income.

The Group’s policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns.
When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal.

Dividends, when representing a return on such investments, continue to be recognized in profit or loss as other income when the Group’s right to receive payments is established.

Gain and losses on equity investments classified as FVPL are included in the consolidated income statement.
(26) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) e. Financial assets and financial liabilities (continued) (i) Financial assets (continued) c) Impairment The Group assesses on a forward-looking basis the expected credit losses (ECL) associated with its assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts.
The Group recognises a loss allowance for such losses at each reporting date.

The measurement of ECL reflects:  An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;  The time value of money; and  Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
 Note 3.a.v provides more detail of how the expected credit loss allowance is measured.

(i) Modification of loans The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers.

When this happens, the Group assesses whether or not the new terms are substantially different to the original terms.
The Group does this by considering, among others, the following factors:  If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay.

 Significant extension of the loan term when the borrower is not in financial difficulty.

 Significant change in the interest rate.

 Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Group derecognises the original financial asset and recognizes a ‘new’ asset at fair value and recalculates a new effective interest rate for the asset.

The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred.
However, the Group also assesses whether the new financial asset recognized is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the borrower being unable to make the originally agreed payments.

Differences in the carrying amount are also recognized in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Group recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in profit or loss.
The new gross carrying amount is recalculated by discounting the modified cash flows at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets).

The impact of modifications of financial assets on the expected credit loss calculation is discussed in note 3.a.xv.
(27) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) e. Financial assets and financial liabilities (continued) (i) Financial assets (continued) c) Impairment (continued) (ii) Derecognition other than on a modification Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and rewards of ownership, or (ii) the Group neither transfers nor retains substantially all the risks and rewards of ownership and the Group has not retained control.
The Group enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards.
These transactions are accounted for as ‘pass through’ transfers that result in derecognition if the Group: (i) Has no obligation to make payments unless it collects equivalent amounts from the assets; (ii) (iii) Has an obligation to remit any cash it collects from the assets without material delay.
Is prohibited from selling or pledging the assets; and Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met.

This also applies to certain securitisation transactions in which the Group retains a subordinated residual interest.
(ii) Financial liabilities (i) Classification and subsequent measurement In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:  Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial liabilities held for trading (e.g.

short positions in the trading booking) and other financial liabilities designated as such at initial recognition.
Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability).
This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;  Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer.
In subsequent periods, the Group recognises any expense incurred on the financial liability; and  Financial guarantee contracts and loan commitments (see note 2.f).
(28) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) e. Financial assets and financial liabilities (continued) (ii) Financial liabilities (ii) Derecognition Financial liabilities are derecognised when they are extinguished (i.e.

when the obligation specified in the contract is discharged, cancelled or expires).
The exchange between the Group and its original lenders of debt instruments with substantially different terms, as well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
The terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective interest rate, is at least 10% different from the discounted present value of the remaining cash flows of the original financial liability.
In addition, other qualitative factors, such as the currency that the instrument is denominated in, changes in the type of interest rate, new conversion features attached to the instrument and change in covenants are also taken into consideration.

If an exchange of debt instruments or modification of terms is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment.
If the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the liability and are amortised over the remaining term of the modified liability.
f. Financial guarantee contracts and loan commitments Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.

Such financial guarantees are given to banks, financial institutions and others on behalf of customers to secure loans, overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and subsequently measured at the higher of:   The amount of the loss allowance (calculated as described in note 3.a.iii); and The premium received on initial recognition less income recognised in accordance with the principles of IFRS 15.

Loan commitments provided by the Group are measured as the amount of the loss allowance (calculated as described in note 3.a.i.a).
The Group has not provided any commitment to provide loans at a below-market interest rate, or that can be settled net in cash or by delivering or issuing another financial instrument.

For loan commitments and financial guarantee contracts, the loss allowance is recognised as a provision.
However, for contracts that include both a loan and an undrawn commitment and the Group cannot separately identify the expected credit losses on the undrawn commitment component from those on the loan component, the expected credit losses on the undrawn commitment are recognised together with the loss allowance for the loan.

To the extent that the combined expected credit losses exceed the gross carrying amount of the loan, the expected credit losses are recognised as a provision.
g. Impairment of non-financial assets Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.

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 other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
(29) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) h. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position where there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
i.

Sale and repurchase agreements and lending of securities Securities sold subject to sale and repurchase agreements (repos) are retained on the consolidated statement of financial position as investment securities and the counterparty liability is included in other funding instruments.

Securities purchased under agreements to resell (reverse repos) are recorded as loans to other banks or customers as appropriate.
The difference between sale and repurchase price is treated as interest and accrued over the life of the repo agreement using the effective interest method.

j.

Lease transactions Leases are accounted for in accordance with IAS 17 and IFRIC 4.

They are divided into finance leases and operating leases.

Leases in which a significant portion of the risks and methods of ownership are retained by another party, the lessor, are classified as operating leases.
Leases of assets where the Group has substantially all the risk and rewards of ownership are classified as finance leases.

(i) The Group as the lessee The Group has entered into operating leases where the total payments made under operating leases are charged to the consolidated income statement on a straight-line basis over the period of the lease.
When an operating lease is terminated before the period has expired, any penalty payment made to the lessor is recognised as an expense in the period in which termination takes place.

When assets are held subject to a finance lease, an asset and liability is recognised in the consolidated statement of financial position at amounts equal at inception to the fair value of the leased asset or, if lower, the present value of the minimum lease payments.
Lease payments are apportioned between the finance charge and the outstanding liability so as to achieve a constant rate on the finance balance outstanding.

The interest element of the finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.

(ii) The Group as the lessor When assets are held subject to a finance lease, the present value of the lease payments is recognised as a receivable.

The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.
Lease income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant periodic rate of return on the remaining balance of the asset for each period.
(30) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) k. Property, plant and equipment Freehold premises are shown at fair value based on assessments performed by management or by independent valuators every three years, less subsequent depreciation for buildings.
Valuations are performed with sufficient regularity to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.

Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the assets and the net amount is restated to the revalued amount of the asset.

All other property, plant and equipment are stated at historical cost less depreciation.
The valuation of freehold premises is reviewed annually to ensure it approximately equates to fair value.

The valuations of freehold premises are re-assessed when circumstances indicate there may be a material change in value.

Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

All other repairs and maintenance are charged to the consolidated income statement during the financial period in which they are incurred.
Increases in the carrying amount arising on revaluation of freehold premises are credited to fair value reserves in shareholders’ equity.

Decreases that affect previous increases of the same assets are charged against fair value reserves directly in equity; all other decreases are charged to the consolidated income statement.
Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset.

Leasehold improvements and equipment are recorded at cost less accumulated depreciation.

Depreciation and amortisation are computed on all assets except land.
The provision for depreciation and amortisation is computed using the straight line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:- Buildings Equipment and furniture Computer equipment and motor vehicles Leasehold improvements 50 years 4- 5 years 3- 5 years Amortised over the life of the lease The assets’ residual and useful lives are reviewed and adjusted if appropriate at each reporting date.
Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

The recoverable amount is the higher of the assets fair value less cost to dispose and value in use.
Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are recognised within the consolidated income statement.

When revalued assets are sold, the amounts included in fair value reserves are transferred to retained earnings.
(31) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) l. Income tax The tax expense for the period comprises current and deferred tax.

Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.
In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Bank and its subsidiaries operate and generate taxable income.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Generally the Group is unable to control the reversal of the temporary difference for associates.
Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the foreseeable future and there is sufficient taxable profit available against which the temporary difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
m. Employee benefits (i) Pension plans The Group operates a defined benefit plan, which is a pension plan that defines an amount of pension benefits that an employee will receive on retirement, usually dependent on one or more factors, such as age, years of service and compensation.

This pension plan is funded by payments from employees and by the Group, taking account of the recommendations of independent qualified actuaries.
Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
(32) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) m. Employee benefits (continued) (i) Pension plans (continued) The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The present value of the defined benefit obligation is calculated based on cash outflows allocated to current or prior periods using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
In countries where there is no deep market in such bonds, the market rates on government bonds are used.

(ii) Profit sharing and bonus plans The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Group's shareholders after certain adjustments.

The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(iii) Employee share ownership plan The Group established a cash-settled based remuneration plan for its employees.

A liability is recognised for the fair value of the cash-settled transactions.

The fair value is measured initially and at each reporting date up to and including the settlement date, with changes in the fair value recognised in the income statement.

The fair value is expensed over the period until the vesting date with recognition of a corresponding liability.
n. Cash and cash equivalents For purposes of the consolidated statement of cash flows, cash and cash equivalents comprise of cash balances on hand, deposits with other banks and short-term highly liquid investments with original maturities of three months or less when purchased net of balances “due to other banks”.

o.
o.

Interest income and expense Interest income and interest expense are recognised in the consolidated income statement for all interest bearing instruments on an accrual basis using the effective interest method based on the initial carrying amount.

Interest income includes coupons earned on fixed income investments, loans and accrued discount and premium on treasury bills and other discounted instruments.
The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e.

its amortised cost before any impairment allowance) or the amortised cost of a financial liability.
The calculation does not consider expected credit losses and include transaction costs, premium, discounts and fees and point paid or received that are integral to the effective interest rate, such as origination fees.

For financial assets that are credit impaired (stage 3), interest income is calculated by applying the effective interest rate (EIR) to the carrying value net of the expected credit loss provision.
For financial assets classified as Purchased or Originated Credit Impaired (POCI), interest income is calculated by applying a credit-adjusted EIR (based on an initial expectation of credit losses) to the amortised cost of these POCI assets.

Credit-Adjusted Effective Interest Rate (CAEIR) is lower than the effective interest rate as the cash flows of the instruments are adjusted downwards for the impact of expected credit losses.
(33) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) IFRS15 Revenue from Contracts with Customers (effective 1 January 2018).

This standard provides a single, principles based five-step model to be applied to all contracts with customers.
The five steps in the model are as follows: Identify the contract with the customer Identify the performance obligations in the contract    Determine the transaction price  Allocate the transaction price to the performance obligations in the contracts  Recognise revenue when (or as) the entity satisfies a performance obligation.

Fees and commissions income from contracts with customers is measured based on the consideration specified in a contract with a customer.
The group recognise revenue when it transfers control over a service to a customer.
The information about the nature of the type of services and the timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms and related revenue recognition policies are as follows:- (i) Retail and corporate banking services The Group provides banking services to retail and corporate customers, including account management, provision of overdraft facilities, foreign currency transactions, credit card and servicing fees.
Fees for ongoing account management are charged to the customer’s account on a monthly basis.

The Group sets the rates separately for retail and corporate banking customers in each jurisdiction.

Transaction-based fees for interchange, foreign currency transactions and overdrafts are charged to the customer’s account when the transaction takes place.

However the bonus (loyalty) points attached to the credit card transactions are issued quarterly to cardholders.
Servicing fees are charged on a monthly basis and are based on fixed rates, as per the Group’s “Rates and Charges”.

Revenue from account service and servicing fees is recognised over time as the services are provided.

Revenue related to transactions is recognised at the point in time when the transaction takes place.
(ii) Investment banking service The Group’s investment banking segment provides various finance-related services, including loan administration and agency services, administration of a loan syndication, execution of client transactions with exchanges and securities underwriting.

Fees for ongoing services are charged annually at the end of the calendar year to the customer’s account.
However, if a customer terminates the contract before the expiration date, then on termination it is charged the fee for the services performed to date.

Transaction-based fees for administration of a loan syndication, execution of transactions, and securities underwriting are charged when the transaction takes place.

However, the bonus Revenue from administrative agency services is recognised over time as the services are provided.

The amounts is collected upfront and is recognised as deferred income.
Revenue related to transactions is recognised at the point in time when the transaction takes place.

(iii) Asset management service The Group provides asset management services.

Fees for asset management services are calculated based on a fixed percentage of the value of assets managed and deducted from the customer’s account balance on a monthly basis.

In addition, the Group charges a non-refundable up-front fee when opening an account.
Revenue from asset management services is recognised over time as the services are provided.

Non-refundable up-front fees give rise to material rights for future services and are recognised as revenue over the period for which a customer is expected to continue receiving asset management services.
(34) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) q.

Dividend income Dividends are recognised in the consolidated income statement when the entity’s right to receive payment is established.

r. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred.
Subsequently, borrowings are stated at amortised cost and any difference between proceeds net of transactions costs and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest method.

s. Acceptances Acceptances comprise undertakings by the Group to pay bills of exchange drawn on customers.

The Group expects most acceptances to be settled simultaneously with the reimbursement from the customers.
Acceptances are accounted for as off-balance sheet transactions and are disclosed as contingent liabilities and commitments.

t. Dividend distribution Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank’s Board of Directors.

Dividends for the year, which are declared after the year end, are disclosed in the subsequent events note when applicable.

u.

Preference shares Preference shares are non-convertible and non-redeemable are classified as equity.
v. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of the obligation as a whole.
A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

The increase in the provision due to the passage of time is recognised as interest expense.
w. Intangible assets Intangible assets comprise separately identifiable items arising from business combinations, computer software licenses and other intangible assets.

Intangible assets are recognised at cost.

The cost of an intangible asset acquired in a business combination is its fair value at the date of acquisition.
Intangible assets with a definite useful life are amortised using the straight line method over the period that the benefits from these assets are expected to be consumed, generally not exceeding 20 years.

Intangible assets with an indefinite useful life are not amortised.

At each date of the consolidated statement of financial position, intangible assets are reviewed for indications of impairment or changes in estimated future economic benefits.
If such indications exist, the intangible assets are analysed to assess whether their carrying amount is fully recoverable.

An impairment loss is recognised if the carrying amount exceeds the recoverable amount.

The Group chooses to use the cost model for the measurement after recognition.
(35) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) w. Intangible assets (continued) Intangible assets with indefinite useful life are tested annually for impairment and whenever there is an indication that the asset may be impaired.
(i) Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination.

Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.

The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal.

Any impairment is recognised immediately as an expense and is not subsequently reversed.
(ii) Other Intangible assets Other intangible assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured reliably and in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits attributes to the assets with flow from their use.
The value of intangible assets which are acquired in a business combination is generally determined using income approach methodologies such as the discounted cash flow method.

Other intangible assets are stated at cost less amortisation and provisions for impairment, if any, plus reversals of impairment, if any.

They are amortised over their useful lives in a manner that reflects the pattern to which they contribute to future cash flow.
(iii) Computer software Costs associated with maintaining computer software programmes are recognised as an expense when incurred.

However, expenditure that enhances or extends the benefits of computer software programmes beyond their original specifications and lives is recognised as a capital improvement and added to the original cost of the software.
Computer software development costs recognised as assets when the following criteria are met:- o o Management intends to complete the software and use it o There an ability to use the software o Adequate technical, financial and other resources to complete the development and to use it o The expenditure attributable to the software during its development can be reliably measured.
It is technically feasible to complete the software and use it The software development costs are amortised using the straight-line method over their useful lives but not exceeding a period of three years.

x.

Fiduciary activities The Group acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions.
These assets and income arising thereon are excluded from these consolidated financial statements, as they are not assets of the Group (Note 3.d).

y.

Earnings per share Earnings per share is calculated by dividing the profit attributable to the equity holders, by the weighted average number of ordinary shares in issue during the year.
(36) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 2 Summary of significant accounting policies (continued) z.

Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

3 Financial risk management The Group’s activities expose it to a variety of financial risks and those activities involve the analysis, evaluation, acceptance and management of some degree of risk or combination of risks.
Taking risk is core to the financial business, and operational risks are an inevitable consequence of being in business.

The Group’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group’s financial performance.
The Group’s risk management policies are designed to identify and analyse these risks, to set appropriate risk limits and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems.

The Group regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.
Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
To assist the Board of Directors in fulfilling its duties, two Board Sub-Committees are in place to monitor and report to the Board of Directors on the overall risks within the Group - the Board Enterprise Risk Management Committee and the Board Credit Committee; and two Senior Management Committees – the Senior Management Enterprise Risk Committee and the Asset Liability Committee.
The Group Enterprise Risk Management Unit, headed by the Group Chief Risk Officer , reports to both Sub- Committees through the Senior Management Enterprise Risk Management Committee.

This unit is responsible for the management, measurement, monitoring and control of credit, market and operational risks for the Group through the Group Credit Risk Administration Unit, Group Market Risk Unit, Group Operational Risk and Controls Unit.
The unit also facilitates the monitoring of the Group’s risk profile in relation to its risk appetite and the impact of developments in the aforementioned risk areas on strategy and how strategy should be adjusted in light of these developments.

The Asset Liability Committee’s (ALCO) role is to manage and monitor the policies and procedures that address the financial risks associated with changing interest rates, foreign exchange rates and any factors that can affect the Group’s liquidity.
The ALCO seeks to limit risk to acceptable levels by monitoring and anticipating possible pricing differences between assets and liabilities across the Group via the Group Treasury and International Trade Centre.

The Group Treasury and International Trade Centre’s primary role and responsibility is to actively manage the Group’s liquidity and market risks.

The ALCO is also supported in some specific areas of activity by the Market Risk Committee.
As part of its mandate, the Board establishes written principles for overall risk management, as well as ensuring that policies are in place covering specific areas of risk, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments.
In addition, the Group Internal Audit Department is responsible for the independent review of risk management and the control environment, and reports its findings and recommendations to the Board Audit Committee.

The most significant important types of risk are credit risk, liquidity risk, market risk and operational risk.

Market risk includes currency risk, interest rate risk and other price risks including commodity and equity risk.
(37) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.

Credit risk Credit risk is the risk of suffering financial loss, should any of the Group’s customers, clients or market counterparties fail to fulfil their contractual obligations to the Group.
Credit risk arises mainly from interbank, commercial and consumer loans and advances, and loan commitments arising from such lending activities, but can also arise from credit enhancement provided, financial guarantees, letters of credit, endorsements and acceptances.
The Group is also exposed to other credit risks arising from investments in debt securities and other exposures arising from its trading activities (‘trading exposures’) including non-equity trading portfolio assets and derivatives as well as settlement balances with market counterparties and reverse repurchase agreements.

Credit risk is the single largest risk for the Group’s business; management therefore carefully manages its exposure to credit risk.
The credit risk management and control are centralised in a Group Credit Risk Management team which reports regularly to the Group Chief Risk Officer and the Board Credit Committee.

(i) Credit risk management In its management of credit risks, the Group has established an organisational structure which supports the lending philosophy of the Group.
This structure comprises the Board of Directors, the Board Credit Committee (BCC), Senior Management Enterprise Risk Committee (SMERC), the Group Chief Risk Officer (GCRO), the Group Credit Risk Management Unit and the Internal Audit Department.
The Board of Directors maintains general oversight to ensure that policies and procedures are consistent with the strategic direction and credit philosophy of the Group and that they serve to bring the required level of protection over assets that are exposed to credit risks.

To facilitate day to day decision making and timely implementation of decisions, the Board has delegated authority for specific areas to specific committees and/or officers with an appropriate reporting system to the Board.
The BCC focuses primarily on credit risk appetite and in so doing sanctions amendments to credit policies, delegation of lending authority to senior management and credit requests exceeding the authority of management.

The SMERC together with the GCRO monitors the effectiveness of credit policies and procedures and may direct changes to strategies to improve the effectiveness of policies.
The major focus of the Credit Risk Management Unit is to formulate credit policies, monitor compliance with them and on a continuous basis to assess their relevance to the changing business environment.

Most of these policies are established and communicated through the Group’s written Credit Policy Manual.

This document sets out in detail the current policies governing the lending function and provides a comprehensive framework for prudent risk management of the credit function.
Major areas of focus are General Credit Policy Guidelines, Exercise of Lending Authority, Credit Review Process, Credit Risk Rating and Classification System, among others.

(a) Loans and advances (including loan commitments and guarantees) The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the exposure varies with changes in market conditions, expected cash flows and the passage of time.
The assessment of credit risk of a portfolio of assets entails further estimations as to the likelihood of defaults occurring, of the associated loss ratios and of default correlations between counterparties.

The Group measures credit risk using Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD).

This is similar to the approach used for the purposes of measuring Expected Credit Loss (ECL) under IFRS 9 (note 3.a.v).
(38) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.

Credit risk (continued) (ii) Credit risk grading The Group uses internal credit risk gradings that reflect its assessment of the risk profile of the individual counterparties.

The Group uses internal rating models tailored to the various categories of counterparty.
Borrower and loan specific information collected at the time of application (such as asset base, credit history and industry type for corporate/commercial exposures) is fed into this rating model.

External data such as credit bureau scoring information is used for individual borrowers.

In addition, the models enable expert judgement to be fed into the final internal credit rating for each exposure.

This allows for considerations which may not be captured as part of the other data inputs into the model.
The credit grades are calibrated such that the risk of default increases exponentially at each higher risk grade.

For example, this means that the difference in the PD between a 1- 4 rating grade is lower than the difference in the PD between a 5 and 6 rating grade.

The following are additional considerations for other types of portfolio held by the Group: Corporate/Commercial For corporate/commercial business, the rating is determined at the borrower level.
The business’s relationship management team will incorporate any updated or new information/credit assessments into the credit system on an ongoing basis.

In addition, the relationship management team will also update information about the creditworthiness of the borrower every year from sources such as financial statements.

This will determine the updated internal credit rating and a subsequent PD is derived based on historical default experience of the grade.
Treasury and investments For debt securities in the Treasury and the Investment portfolios, external rating agency credit grades are used.

These published grades are continuously monitored and updated.

The PD’s associated with each grade are determined based on realised default over the prior 12 months, as published by the rating agency.
(39) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (iii) Expected credit loss measurement IFRS 9 outlines a ‘three stage’ model; for impairment based on changes in credit quality since initial recognition as summarized below:  A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1 and has its credit risk continuously monitored by the Group.
  If a significant increase in credit risk (‘SICR’) since initial recognition is identified, the financial instrument is moved to ‘Stage 2’ but is not yet deemed to be credit-impaired.

Please refer to note 3.a.

v for a description of how the Group determines when a significant increase in credit risk has occurred.

If the financial instrument is credit-impaired, the financial instrument is then moved to ‘Stage 3’.
Please refer to note 3.a.vi for a description of how the Group defines credit-impaired and default.

 Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of lifetime expected credit losses within the next 12 months.

Instruments in Stages 2 or 3 have their ECL measured based on expected credit losses on a lifetime basis.

Please refer to note 3.a.vii for a description of inputs, assumptions and estimation techniques used in measuring the ECL.
 A pervasive concept in measuring ECL in accordance with IFRS 9 is that it should consider forward- looking information.

Note 3.a.viii includes an explanation of how the Group has incorporated this in its ECL model.

 Purchased or originated credit-impaired financial assets are those financial assets that are credit- impaired on initial recognition.

Their ECL is always measured on a lifetime basis (Stage 3).
Further explanation is also provided of how the Group determines appropriate groupings when ECL is measured on a collective basis (refer to note 3.a.ix).
The following diagram summarises the impairment requirements under IFRS 9 (other than purchased or originated credit-impaired financial assets): Change in credit quality since initial recognition Stage 1 (initial Recognition) Stage 2 (Significant increase in credit risk) Stage 3 (Credit - impaired assets) 12 month expected credit losses Lifetime expected credit losses Lifetime expected credit losses (40) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (iii) Expected credit loss measurement (continued) Significant increase in credit risk (SICR) The Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following criteria have been met: Loans - FCTT Criteria Relative Measure Retail Loans ( incl Credit Cards) n/a Absolute Measure 31 days past due/ Classified Special Mention Commercial/Corporate Loans 3- or higher- Downgrades such that the BRR gets to 4 or lower 4+ and lower- Three notches downgrade on the internal scale 31 days past due/ Classified Special Mention Loans – FCBB Criteria Absolute Measure Retail ( incl Credit Cards) 31 days past due/ Classified Special Mention Commercial/Corporate Loans 31 days past due/ Classified Special Mention Investments – Group wide Criteria Investment Grade Portfolio Absolute Measure PD- 15% or higher Single “B” Speculative Grade Portfolio PD -25% or higher AND Relative Measure AND One notch downgrade (internal rating scale) AND One notch downgrade (internal rating scale) OR OR OR Special Consideration Eurobonds with Trigger 3 Breaches Eurobonds with Trigger 3 Breaches The Group has not used the low credit risk exemption for any financial instruments in the year ended 30 September 2018.
With respect to the cure for SICR, the Group considers a significant decrease in credit risk has occurred when the following happens: Loans Retail Loans ( incl Credit Cards) Payments received for six months consecutively Commercial/Corporate Loans Payments received for six months consecutively Loan classification upgrade to Pass Loan classification upgrade to Pass Borrower’s BRR returned to original rate just prior to the SICR (41) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) Significant increase in credit risk (SICR) (continued) Investments Criteria Investment Grade Portfolio Absolute Measure PD- 12.5% or lower Single “B” Speculative Grade Portfolio PD -25% or lower AND Relative Measure OR Special Consideration AND Credit rating reverts to level just prior being deemed an having an SICR AND One notch downgrade (internal rating scale) OR OR No credit stop loss breaches No credit stop loss breaches (iv) Definition of default and credit-impaired assets The Group defines a financial instrument as in default, which is fully aligned with the definition of credit- impaired, when it meets one or more of the following criteria: - Quantitative criteria The borrower is more than 90 days past due on its contractual payments.
- Qualitative criteria The borrower meets unlikeliness to pay criteria, which indicates the borrower is in significant financial difficulty.

These are instances where: The borrower formally files for bankruptcy or there is a commencement of foreclosure proceedings.

The obligation is classified Doubtful or worse as per the Group’s classification process.
   A modification to the terms and conditions of the original agreement that would not normally be considered is executed  Restructure proceedings or an indication of the intention to restructure is initiated by the issuer (investments only).

The criteria above have been applied to all financial instruments held by the Group and are consistent with the definition of default used for internal credit risk management purposes.
The default definition has been applied consistently to model the Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD), throughout the Group’s expected loss calculations.

A loan instrument is considered to no longer be in default (i.e.

to have cured) when it no longer meets any of the default criteria for a consecutive period of six months.

An investment instrument is considered to no longer be in default (i.e.

to have cured) when it has been restructured.


An exception exists for credit impaired facilities at origination.

(42) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (v) Measuring ECL - Explanation of inputs, assumptions and estimation techniques The Expected Credit Loss (ECL) is measured on either a 12-month (12M) or lifetime basis depending on whether a significant increase in credit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired.
Expected credit losses are the discounted product of the Probability of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD), defined as follows:  The PD represents the likelihood of a borrower defaulting on its financial obligation (as per “Definition of default and credit-impaired” above), either over the next 12 months (12M PD), or over the remaining lifetime (Lifetime PD) of the obligation.
 EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months (12M EAD) or over the remaining lifetime (Lifetime EAD).

For example, for a revolving commitment, the Group includes the current drawn balance plus any further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur.

 Loss Given Default (LGD) represents the Group’s expectation of the extent of loss on a defaulted exposure.
LGD varies by seniority of claim and product type, while the availability of collateral is factored before LGD is considered.

A robust system for recovering on all delinquent facilities managed by specialized units ensures that early measures are taken to contain loss.

The recovery on the various products managed by the Group are recorded and this historical information is used to determine LGD.
LGD is expressed as the percentage of loss expected to be made if the default occurs over the remaining expected lifetime of the loan.

(v) Measuring ECL - Explanation of inputs, assumptions and estimation techniques (continued) The ECL is determined by multiplying the PD, LGD and EAD after taking into consideration the discounted present value of the EAD and collateral enhancements.

The EAD is determined by reducing the outstanding balance from the discounted collateral value.
The cost of disposal of the collateral item is factored together with the time frame for disposal before discounting to present values.

The discount rate used in the ECL calculation is the original effective interest rate.

The lifetime and 12-month PDs are determined differently for loans and investments.
The investments PDs are taken from the Standard & Poors (S&P) transition matrix, while the loans’ PDs are derived from the historical experience of the Group over a period, calculated using a vintage analysis methodology.

The EAD is considered as follows:    For amortising products and bullet repayment loans, this is based on the contractual repayments owed by the borrower over a 12 month or lifetime basis.

This will also be adjusted for any expected overpayments made by a borrower.
Early repayment assumptions are also incorporated into the calculation.

For revolving products, the exposure at default is calculated by taking current drawn balance and adding a” credit conversion factor” which allows for the expected drawdown of the remaining limit by the time of default.

These assumptions vary by product type and current limit utilisation band, based on an analysis of the product’s usage over a two year period.
(Note 3.a.vi) The 12 month and lifetime LGDs are determined based on the factors which impact the recoveries made post default.

These vary by product type and are influenced by the collection strategies of the specialist units managing the process.

(Note 3.a.vi) (43) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (vi) Forward-looking information incorporated in the ECL models The calculation of ECL incorporates forward-looking information.

The Group has performed historical analysis and identified the key economic variables impacting credit risk and expected credit losses for each portfolio.

Loan portfolio For this portfolio, a scorecard model was developed, with the macro-economic factors and the weights attached to them, being chosen based on management’s judgment and experience.
Weights were assigned to distinguish those factors which would have a higher impact when compared to others.

Management notes that different weightings were applied to the Retail loan portfolio and the Corporate/Commercial loan portfolio, since in its view, the impact of the chosen macro-economic factors differs significantly for these two portfolios.

For each jurisdiction, four macro-economic factors were used.
Unemployment rate, real GDP growth and inflation were used in all jurisdictions, while the remaining factor differed for each country.

Oil Price, Tourist Arrivals and FX Spot were used as the country specific indicator for Trinidad & Tobago, Barbados, and Costa Rica and Latin America (LATAM) respectively.

In management’s assessment of the retail loan portfolio, unemployment was adjudged to have a direct impact on recoverability and was assigned the highest weighting.
Similarly, for the corporate/commercial loan portfolio real GDP growth was adjudged to have the highest impact and weighting.

In management’s view, inflation would also have an impact on loan defaults and while not as significant as some of the other factors, it was also included in the assessment.

Outlooks were provided for each of these variables to derive a weighted adjustment factor that was then applied to the loans to reflect the macro –economic effect.
The tables below show the macroeconomic factors selected and attendant weights: RETAIL LOAN PORTFOLIO Trinidad and Tobago Unemployment rate Real GDP Growth Inflation Oil Price Total Barbados Unemployment rate Real GDP Growth Inflation Tourist Arrivals Weight 0.7 0.1 0.05 0.15 1 CORPORATE COMMERCIAL LOAN PORTFOLIO Trinidad and Tobago Unemployment rate Real GDP Growth Inflation Barbados Costa Rica and LATAM Unemployment rate Real GDP Growth Inflation Unemployment Rate Real GDP Growth Inflation Oil Price Tourist Arrivals FX Spot Total Weight 0.1 0.7 0.05 0.15 1 (44) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (vi) Forward-looking information incorporated in the ECL models (continued) The weighting assigned to each economic scenario as at September 30 2018 were as follows:- Loans Base 80% Upside 10% Downside 10% The weighting assigned to each economic scenario as at September 30 2017 were as follows:- Loans Base 80% Upside 10% Downside 10% The Group also made the following key assumptions in its assessment:- Determination of macroeconomic scenarios and probabilities For each country in which the Group has investment securities, management performs scenario analysis to determine the impact of future economic conditions on the probability of defaults in these countries.
A macro-economic indicator is determined, which is statistically linked to the credit risk of that sovereign.

Correlation analysis is conducted between this macro-economic indicator and key sovereign credit risk metrics, to determine which are most significant.

Three selected sovereign credit risk metrics were identified as sovereign credit rating drivers To quantify the impact of the lead macro- economic indicator on each credit risk driver, ordinary least squares (OLS) regression is conducted.
To establish scenarios the lead macroeconomic indicator is ‘shocked’, such that the official forecast for each year moves up and down by a multiple of the historical standard deviation to establish a best- and worse-case.

The new values derived are run through a regression model to quantify relationship between credit rating and the scenarios.

Credit ratings were forecasted for the next three years using these macro-economic scenarios.
The weightings applied to the forecasted ratings were 60% for year 1, 20% each for year 2 and 3.

These weightings were determined based on management’s judgment and experience.

These economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument.

Management judgment has also been applied in this process.
Forecasts of these economic variables (the “base economic scenario”) are provided by Research & Analytics on a periodic basis and provide the best estimate view of the economy over the next three years.

After three years, to project the economic variables out for the full remaining lifetime of each instrument, a mean reversion approach has been used.
The impact of these economic variables on the PD, EAD and LGD has been determined by performing regression analysis to understand the impact changes in these variables have had historically on default rates and LGD.

Economic assumptions The most significant period-end assumptions used for the ECL estimate as at 30 September 2019 are set out below.

The scenarios “base”, ‘best” and “worst” were used for the investment portfolios.
(45) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (vi) Forward-looking information incorporated in the ECL models (continued) Sensitivity analysis The most significant assumptions affecting the ECL allowance are as follows: Retail portfolios (i) Unemployment rate, given its impact on secured and unsecured borrowers’ ability to meet their contractual repayments.
Corporate/Commercial portfolios (i) GDP, given the significant impact on companies performance and collateral valuations; Set out below are the changes to the ECL as at 30 September 2019 that would result from reasonably possible changes in these parameters from the actual assumptions used in the Group’s economic variable assumptions (for example, the impact on ECL of increasing the estimated unemployment rate by 1% in each of the base, best and worst): Unemployment Rates September 2019 PDs GDP -1% "000 1,655 -5% "000 3,436 No Change "000 --- 1% "000 1,655 LGDs No Change "000 -- 5% "000 3,436 September 2018 PDs No Change "000 --- LGDs No Change "000 -- -1% "000 40,029 -5% "000 2,854 1% "000 40,029 5% "000 2,854 (46) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (vii) Grouping of instruments for losses measured on a collective basis For expected credit loss provisions modelled on a collective basis, a grouping of exposures is performed on the basis of shared risk characteristics, such that risk exposures within a group are homogeneous.

In performing this grouping, the characteristic of the risk profile was taken into consideration.
The grouping was done for one main product type as outlined below: Groupings for collective measurement  Credit Cards - All Stages  Retail– All stages The following exposures are assessed individually:  Corporate/Commercial – All stages  Investment Securities The appropriateness of grouping of instruments is monitored and reviewed on a periodic basis by the Group Credit Risk Management Unit.
(viii) Risk limit control and mitigation policy The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, groups of borrowers, industry and country segments.

The Group monitors its concentration of credit exposure so that no single borrower or industry default will have a material impact on the Group.
These limits are implemented and monitored by the Credit Risk Management Unit via the stipulations of the Group Credit Policy Manual.

In instances where it is strategically beneficial and adequately documented, the Group would seek approval on an exception basis for variation to its standard approved limits from the Board of Directors.
(a) Single borrower and borrower group exposure limits Limits established by regulatory authorities have been incorporated into the credit policies where concentration is restricted by limiting credit amounts to a percentage of the capital base.

This is supported by a stringent reporting requirement and is further enhanced by policies requiring periodic review of all commercial credit relationships.
(b) Industry exposure limits These limits have been established based on a ranking of the riskiness of various industries.

The ranking is guided by a model developed for the Group for this purpose.

The model utilises a scale incorporating scores of 1 to 6 with 1 being the least risky.

Exposure limits as a percentage of the total credit portfolio have been established to the various Industry exposure categories based on the risk ranking.
(c) Country exposure limits Exposure limits have been established for selected countries which are considered to be within the Group’s target market.

Three (3) risk categories have been developed and the selected countries have been assigned to these categories based either on ratings issued by acceptable rating agencies or the Group’s own internal assessment of the strategic direction of the Group.
Maximum cross border exposure has been limited to a pre-determined portion of total assets and this amount is allocated to the various risk categories with a larger share being allocated to the more highly rated categories.

(47) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (viii) Risk limit control and mitigation policy (continued) (d) Collateral The Group employs a range of policies and practices to mitigate credit risk.

The most common of these is accepting collateral for funds advanced.

The Group has internal policies on the acceptability of specific classes of collateral or credit risk mitigation.

The Group requires a valuation of the collateral obtained as part of the loan origination process.

This assessment is reviewed periodically.


The principal collateral types for loans and advances are: • Mortgages over residential properties; • Charges over cash and cash convertible instruments.

• Charges over business assets such as premises, inventory and accounts receivable; and Charges over financial instruments such as debt securities and equities.

Longer-term finance and lending to corporate/commercial entities are generally secured; revolving individual credit facilities are generally unsecured.
Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument.

Debt securities, treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which are secured by portfolios of financial instruments.
The Group’s policies regarding obtaining collateral have not changed significantly during the period and there has been no significant change in the overall quality of the collateral held by the Group since the prior period.
(e) Liquidity support agreement The terms of the Liquidity Support Agreement (LSA) under which First Citizens Bank Limited (the Bank) acquired Caribbean Money Market Brokers Limited (CMMB), now First Citizens Investment Services Limited (FCIS), outlined certain financial assurances given by the Government of Republic of Trinidad and Tobago (GORTT) to the Bank, that provided for the indemnification of the Bank against various claims, losses or liabilities if incurred by FCIS within a stipulated period of time after the date of acquisition in relation to obligations existing or default on assets owned by FCIS at the date of the acquisition.
The LSA dated 15 May 2009 and made between the GORTT, the Central Bank of Trinidad and Tobago (CBTT) and the Bank provided that all reasonable claims by the Bank in respect of such losses were expected to be settled, once the Bank had made all reasonable efforts to recover or resist such claims, losses or liabilities.

The Bank committed to reimburse FCIS for any losses incurred by FCIS against which the Bank has been indemnified.
Losses which are covered under the LSA include losses in respect of balances due from CL Financial and its affiliates accruing from the date that CMMB was acquired by the Bank to the greater of the maturity date of the obligation or 6 years from the date of completion of the share transfer of CMMB to the Bank.
(48) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) Financial risk management (continued) 3 a.
Credit risk (continued) (viii) Risk limit control and mitigation policy (continued) (e) Liquidity support agreement (continued) The Ministry of Finance continues to recognise its commitment under the LSA agreement by way of granting consecutive extensions under the Liquidity Support Agreement for the periods: 16 May 2015 to 15 November 2016 and subsequently for the period 15 November 2016 to 14 November 2017, 15 November 2017 to 14 November 2018, 15 November 2018 to 14 November 2019 and 14 November 2019 to 28 February 2021.
Additionally, the Ministry of Finance has made good and settled in full subsequent claims made for losses and expenses incurred resulting from obligations commensurate with the Liquidity Support Agreement.

The Ministry of Finance in letter dated 3 September 2019 has agreed to another extension for a fifteen and one half month period effective from 15 November 2019 to 28 February 2021 commensurate under the Liquidity Support Agreement dated 15 May 2009.
As at the date of this statement of financial position, the amount of the Promissory Notes due was US $100.8M (2018: US $97.8M) and the Commercial Paper was TT $241.2M (2018: TT $232.6M).

(f) Credit-related commitments The primary purpose of these instruments is to ensure that funds are available to a customer as required.

Guarantees and standby letters of credit carry the same credit risk as loans.
Documentary and commercial letters of credit – which are written undertakings by the Group on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions – are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.

(viii) Impairment and provisioning policies The Group’s impairment provision policy is covered in detail in Note 2(e.i.c).
(ix) Maximum exposure to credit risk before collateral held or other credit enhancement Credit risk exposures relating to financial assets carried on the Group’s consolidated statement of financial position are as follows: Cash and bank balances Statutory Deposit with Central Bank Investment instruments Hold to collect and sell Hold to collect Hold for trading Loans to customers Loan notes Other assets Credit Commitments Financial Guarantees Total credit risk exposure Gross maximum exposure 2019 $'000 Gross maximum exposure 2018 $'000 3,710,569 3,507,579 4,816,122 4,243,111 10,883,119 4,966,021 10,507,714 4,912,938 18,872,781 205,457 343,686 905,072 215,695 16,260,306 273,943 466,510 1,560,259 209,281 43,609,979 43,250,184 The above table represents a worst case scenario of credit risk exposure to the Group without taking account of any collateral held or other credit enhancements attached.
(49) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) Financial risk management (continued) 3 a.

Credit risk (continued) (x) Loans to customers and other financial assets The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised.
The gross carrying amount of financial assets below also represents the Group’s maximum exposure to credit risk on these assets.
Stage 1 12-month ECL $'000 Retail September 30 2019 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 1,829,247 355,423 1,812,659 72,162 1,137,397 5,206,888 (17,571) 5,189,317 125,568 35,361 147,566 3,898 95,955 408,348 (7,078) 401,270 73,651 73,742 49,806 8,887 137,888 343,974 (166,829) Total $'000 2,028,466 464,526 2,010,031 84,947 1,371,240 5,959,210 (191,478) 177,145 5,767,732 Stage 1 12-month ECL $'000 Commercial & Corporate September 30 2019 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 10,282,300 282,380 10,564,680 (12,040) 10,552,640 1,919,368 199,414 2,118,782 (4,141) 2,114,641 208,036 22,073 12,409,704 503,867 230,109 (40,857) 12,913,571 (57,038) 189,252 12,856,533 Installment loans Demand loans Overdrafts Credit Card Mortgages Gross loans Loss allowance Carrying balance Type of facility Demand Loan Overdraft Gross loans Loss allowance Carrying balance Investments 30 September 2019 Stage 1 Stage 2 Stage 3 Purchased or originated Total 12-month ECL Lifetime ECL Lifetime ECL credit impaired $'000 $'000 $'000 $'000 $'000 11,880,390 3,148,868 35,399 50,408 -- -- -- -- -- 12,586 -- 70,020 -- -- 651,385 -- 11,915,789 3,211,862 651,385 70,020 15,029,258 85,807 82,606 651,385 15,849,056 Credit Rating Investment grade Standard monitoring Special monitoring Default Gross Loans Loss Allowance (18,283) (8,118) (47,763) -- (74,164) Carrying Balance 15,010,975 77,689 34,844 651,385 15,774,892 (50) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial
 Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) Financial risk management (continued) 3 a.
Credit risk (continued) (x) Loans to customers and other financial assets (continued) Installment loans Demand loans Overdrafts Credit Card Mortgages Gross loans Loss allowance Carrying balance Type of facility Demand Loan Overdraft Gross loans Loss allowance Carrying balance Credit rating Investment grade Standard monitoring Special monitoring Default Gross lnvestments Loss allowance Carrying balance Stage 1 12-month ECL $'000 1,529,412 244,312 3,229 511,795 2,384,397 4,673,145 (15,897) 4,657,248 Retail September 30 2018 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 1,709,061 357,365 22,475 563,224 2,794,804 55,540 82,878 18,665 36,279 128,262 321,424 5,446,929 (153,962) (176,577) 167,462 5,270,352 124,109 30,375 581 15,150 282,145 452,360 (6,718) 445,642 Stage 1 12-month ECL $'000 Commercial & Corporate September 30 2018 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 9,710,502 215,728 9,926,230 (11,771) 9,914,459 493,129 173,763 666,892 (7,644) 659,248 206,389 13,866 10,410,020 403,357 220,255 10,813,377 (49,358) (68,773) 170,897 10,744,604 Stage 1 12-month ECL $'000 13,180,593 1,267,228 -- -- 14,447,821 Investments September 30 2018 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 34,945 -- 83,030 -- 117,975 -- -- -- 856,514 856,514 13,215,538 1,267,228 83,030 856,514 15,422,310 (19,586) (10,075) (365,415) (395,073) 14,428,235 107,900 491,102 15,027,237 (51) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial
 Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3.Financial risk management (continued) a) Credit risk (continued) September 30 2019 September 30 2018 Retail Gross Balance ECL Allowance Carrying Balance Gross Balance ECL Allowance $'000 $'000 $'000 $'000 $'000 IG 60 65 80 85 90 95 98 Credit Cards DDA Gross Loans 120,721 (39,310) 92,482 67,933 2,383,447 2,032,328 (16,559) (1,621) (67,155) (10,772) 646,189 (213) 121 -- 599,512 16,477 (47,212) (8,636) IG 60 65 80 85 90 95 98 81,411
 75,923 66,312 2,316,292 2,021,556 645,976 121 552,300 Carrying Balance $'000 106,862 (33,273) 73,589 80,297 (10,865) 69,432 54,490 (1,152) 53,338 2,023,027 (54,914) 1,968,113 1,931,749 (14,670) 1,917,079 668,552 (250) 668,302 954 -- 954 Credit Cards 563,225 (43,680) 519,545 7,841 DDA 17,773 (17,773) -- 5,959,210 (191,478) 5,767,732 Gross Loans 5,446,929 (176,577) 5,270,352 (52) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3.Financial risk management (continued) b) Credit risk (continued) Commercial & Corporate September 30 2019 BRR Gross Loans Loss Allowance Carrying Balance IG- ratings Gross Loans Loss Allowance Carrying Balance Total carrying balance BRR Gross Loans Loss Allowance Carrying Balance IG- ratings Gross Loans Loss Allowance Carrying Balance Total carrying balance 1 $'000 4,865 -- 4,865 2 $'000 134,160 -- -- 134,160 3 $'000 3,334,162 3,334,162 60 $'000 30,752 (11,619) 19,133 19,133 65 $'000 127,454 (13,748) 113,706 118,571 80 $'000 28,463 (1,067) 27,396 161,556 85 $'000 437,217 (2,871) 434,346 3,768,508 Commercial & Corporate September 30 2018 4 $'000 4,632,203 (8,774) 4,623,429 90 $'000 362,882 (670) 362,212 4,985,641 5 $'000 2,588,334 (7,076) 2,581,258 95 $'000 63,144 (82) 63,062 2,644,320 6 $'000 1,168,689 (11,130) 1,157,558 98 $'000 1,246 -- 1,246 1,158,805 Total $'000 11,862,412 (26,980) 11,835,431 Total $'000 1,051,158
 (30,057) 1,021,101 12,856,534 1 $'000 -- -- 0 2 $'000 187,393 -- 187,393 3 $'000 3,635,553 4 $'000 2,098,461 -- (3,078) 2,095,384 3,635,553 5 $'000 2,104,483 (4,923) 2,099,560 6 $'000 1,233,952 (9,828) 1,224,124 Total $'000 9,259,842 (17,829) 9,242,014 60 $'000 25,336 (15,230) 10,106 10,106 65 $'000 97,915 (12,170) 85,745 85,745 80 $'000 84,898 (1,030) 83,868 271,261 85 $'000 559,537 (17,562) 541,975 4,177,528 90 $'000 562,305 (2,572) 559,733 2,655,117 95 $'000 222,774 (2,380) 220,394 2,319,954 98 Total
 $'000 $'000 1,553,535 769 -- (50,944) 1,502,591 10,744,605 769 1,224,893 (53) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3.Financial risk management (continued) c) Credit risk (continued) (xi) Maximum exposure to credit risk The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that the Group will take possession of collateral to mitigate potential credit losses.
Financial assets that are credit-impaired and related collateral held in order to mitigate potential losses are shown below: Credit impaired assets 30 September 2019 Individual (retail customers) Instalment loans Demand loans Overdrafts Credit cards Mortgages Sub-total Corporate & Commercial Other loans Mortgages Sub-total Gross exposure Impairment allowance Carrying amount Fair value of collateral held $’000 $’000 $’000 $’000 73,651 73,742 9,681 38,989 147,911 (63,720) (20,914) (9,506) (38,989) (33,700) 9,931 52,828 175 -- 22,710 76,156 627 -- 114,211 175,681 343,974 (166,829) 177,145 275,174 208,036 (34,725) 173,311 507,975 22,073 (6,132) 15,941 59,894 230,109 (40,857) 189,252 567,869 Total loans to customers 574,083 (207,688) 366,387 843,043 (54) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xi) Maximum exposure to credit risk - Credit impaired assets 30 September 2018 Individual (retail customers) Instalment loans Demand loans Overdrafts Credit cards Mortgages Sub-total Corporate & Commercial Other loans Mortgages Sub-total Gross exposure $’000 Impairment allowance Carrying amount Fair value of collateral held $’000 $’000 $’000 55,540 (45,788) 82,675 (30,723) 18,665 (6,097) 36,279 (36,279) 9,752 51,952 12,568 -- 128,265 (35,075) 93,190 321,424 (153,962) 167,462 57,488 70,953 164 -- 164,628 293,233 194,893 (38,314) 156,579 452,322 25,362 (11,044) 14,318 220,255 (49,358) 170,897 38,726 491,048 784,281 Total loans to customers 541,679 (203,320) 338,359 The following table shows the distribution of Loan to Value ratios (LTV) for the Group’s mortgage credit-impaired portfolio:- Mortgage Portfolio -LTV distribution Credit-impaired (Gross carrying amount) Credit-impaired (Gross carrying amount) Lower than 50% 50 to 60% 60 to 70% 70 to 80% 80 to 90% 90 to 100% greater than 100% Total 2019 $'000 9,064 31,483 23,247 12,234 10,309 9,448 52,129 147,914 2018 $'000 15,930 21,405 19,497 11,556 12,540 12,174 82,450 175,552 (55) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) Financial risk management (continued) 3 a.
Credit risk (continued) (xii) Loss allowance The loss allowance recognised in the period is impacted by a variety of factors, as described below:  Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases) of credit risk or becoming credit-impaired in the period, and the consequent step up (or step down) between 12 month and lifetime ECL;  Additional allowances for new financial instruments recognised during the period, as well as releases for financial instruments de-recognised in the period;  Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from periodic refreshing of inputs to models; currently ten years of data for PDs are being used (2018: nine years were used), and management’s intention is to maintain this ten year rolling average for the PDs.
 Impacts on the measurement of ECL due to changes made to models and assumptions;  Discount unwind within ECL due to the passage of time, as ECL is measured on a present value basis;     Foreign exchange retranslations for assets denominated in foreign currencies and other movements; and Financial assets that were written off during the period (3.a.xiii).

The Government of Barbados bonds were recognised as at 1 October 2018 as Purchased or Originated Credit Impaired (POCI).
These bonds originated at a deep discount that reflects incurred credit losses.

An effective interest rate based in the expected cash flows net of expected credit losses is used.

This is known as at Credit Adjusted Effective Interest Rate (CAEIR).
The total amount of undiscounted expected credit losses at initial recognition for Originated credit- impaired financial assets recognised during the period was $296.8M The following tables explain the changes in the loss allowance between the beginning and the end of the annual period due to these factors: Retail Stage 1 Stage 2 12-month ECL Lifetime ECL $'000 $'000 Stage 3 Lifetime ECL $'000 Total $'000 Loss allowance as at 1 October 2018 15,897 6,718 153,962 176,577 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 New financial assets originated Change in PDS/LGDs/EADs Repayments Unwind of discounts FX and other movements Total net P&L charge during the period Other movement with no P&L impact Write-offs Loss allowance as at 30 September 2019 (477) (323) 267 -- 1 -- 6,280 (246) (2,325) (1,505) -- 1,674 -- 17,571 1,659 -- (1,487) (1,304) -- 131 2,405 -- (679) (365) -- 360 -- 7,078 -- 7,781 -- 15,822 (237) (2,122) 15,594 -- (7,381) (2,076) -- 27,381 (14,514) 166,829 1,182 7,458 (1,220) 14,518 (236) (1,991 24,279 (246) (10,385) (3,946) -- 29,415 (14,514) 191,478 (56) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Commercial & Corporate Stage 1 12-month ECL $'000 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 Loss allowance as at 1 October 2018 11,771 7,644 49,358 68,773 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 New financial assets originated Change in PDS/LGDs/EADs Repayments Unwind of discounts FX and other movements Total net P&L charge during the period Other movement with no P&L impact Write-offs Loss allowance as at 30 September 2019 (454) (5) 6 -- -- -- 7,064 (844) (792) (4,706) -- 269 1,926 -- (196) (283) -- 3 1,625 -- (447) (6,131) -- (3,503) -- 4,964 -- 431 (52) (84) 282 3,834 (15,404) (96) -- (6,125) 1,472 4,959 (190) 148 (52) (81) 8,971 2,990 (16,643) (10,933) -- (9,359) -- -- (2,376) (2,376) 12,040 4,141 40,857 57,038 (57) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Investments Loss Allowances as at October 1 2018 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 New financial assets originated Change in PDS/LGDs/EADs/Collateral App Repayments Unwind of discounts Writeoff Loss allowance as at September 30 2019 Other movement with no P&L impact Financial assets derecognised during the period Write-offs Loss allowance as at 30 September 2019 Stage 1 12-month ECL $'000 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 19,585 10,073 365,412 395,070 (2,252) -- 1,392 -- -- -- 1,571 (1,314) (699) -- -- (1,302) 2,252 -- (3,990) -- -- -- -- 3,064 (3,281) -- -- (1,955) -- -- -- -- -- -- (13,433) -- -- 91 (13,342) -- -- -- (2,598) -- -- -- 1,571 (11,683) (3,980) -- 91 (16,599) -- -- 21,550 -- -- 8,118 (296,008) (8,299) 47,763 (296,008) (8,299) 74,164 (58) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Retail Stage 1 Stage 2 Stage 3 12-month ECL $'000 Lifetime ECL $'000 Lifetime ECL $'000 Total $'000 Loss allowance as at 1 October 2017 14,538 4,537 119,713 138,788 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 New financial assets originated Change in PDS/LGDs/EADs Repayments Unwind of discounts FX and other movements Total net P&L charge during the period Other movement with no P&L impact Write-offs Loss allowance as at 30 September 2018 (1,137) (324) 807 -- 23 -- 6,676 (230) (2,273) (2,183) -- 1,359 -- 15,897 1,820 -- (942) (614) -- 31 2,258 143 (816) 301 -- 2,181 -- 6,718 -- 16,256 -- 10,427 (989) (579) 21,938 (101) (3,128) (1,610) -- 42,214 683 15,932 (135) 9,813 (966) (548) 30,872 (188) (6,217) (3,492) -- 42,754 (7,965) 153,962 (7,965) 176,577 (59) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Commercial & Corporate Stage 1 12-month ECL Stage 2 Lifetime ECL Stage 3 Lifetime ECL $'000 $'000 $'000 Total $'000 Loss allowance as at 1 October 2017 8,595 4,396 33,943 46,934 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 2 New financial assets originated Change in PDS/LGDs/EADs Repayments Unwind of discounts FX and other movements Total net P&L charge during the period Other movement with no P&L impact Write-offs Loss allowance as at 30 September 2018 (300) (446) 12 -- -- 5,632 (174) (1,081) (467) -- 3,176 -- 11,771 2,255 -- (11) (1,293) -- 4,939 - (2,553) (89) -- 3,248 -- 7,644 -- 12,165 -- 13,257 (8) 3,924 (42) (8,298) (1,376) -- 19,622 (4,207) 49,358 1,955 11,719 1 11,964 (8) 14,495 (216) (11,932) (1,932) -- 26,046 (4,207) 68,773 (60) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Investments Stage 1 12-month ECL $'000 Stage 2 Stage 3 Lifetime ECL $'000 Lifetime ECL $'000 Total $'000 Loss allowance as at 1 October 2017 100,602 154,856 34,599 290,057 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 New financial assets originated Change in PDS/LGDs/EADs Repayment FX and other movements Total net P&L charge during the period Other movement with no P&L impact Write-offs (12,093) (12,379) 77 -- -- 56 (56,677) -- 15,107 (120,904) (1,044) (23,788) 195 (9,189) (5,158) -- -- 181,856 -- 35,816 104,663 8,478 -- -- 3,014 48,573 (967) 12,028 104,858 (655) (61,835) -- (81,016) (144,781) 330,813 105,016 -- -- -- -- Loss allowance as at 30 September 2018 19,586 10,075 365,412 395,073 (61) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Significant changes in the gross carrying amount of financial assets that contributed to changes in the loss allowance were as follows:  New loans facilities originated during the period, increased the gross carrying amount of the relative books by 32.6%, with a corresponding $45.5M increase in loss allowance measured.
 The write-off of loans and investments with a total gross carrying amount of $25.1M resulted in the reduction of the Stage 3 loss allowance by the same amount.

 The de-recognisation of financial assets with a gross carrying amount of $919.5M, resulted in the reduction of the Stage 3 allowance by $296.0M.
The following table further explains changes in the gross carrying amount of the loan portfolio to help explain their significance to the changes in the loss allowance for the same portfolio as discussed above: Retail September 30 2019 Stage 1 12-month ECL $'000 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 4,673,145 452,360 321,424 5,446,929 (190,621) (57,166) -- 12,611 -- 132,262 1,648,256 (538,407) (473,192) -- 167,248 -- (63,684) -- 13,196 (152,394) 69,461 (56,108) (21,731) -- 49,033 52,474 (13,490) (13,750) (23,373) (8,133) (11,210) (879) (554) -- (20,132) 14,345 1,732,062 (40,067) (634,582) (11,482) (506,405) -- (14,513) (14,513) 5,206,888 408,348 343,974 5,959,210 Gross carrying amount as at 1 October 2018 Transfers: Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 Transfer from stage 2 to stage 1 New financial assets originated Repayments Unwind of discounts Write-offs Gross carrying amount as at 30 September 2019 (62) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) Financial risk management (continued) 3 a.
Credit risk (continued) (xii) Loss allowance (continued) Commercial & Corporate 30 September 2019 Stage 1 Stage 2 12-month ECL Lifetime ECL Lifetime ECL $'000 Stage 3 $'000 $'000 Total $'000 Gross carrying amount as at as at 1 October 2018 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 New financial assets originated Repayments Unwind of discounts Write off Gross carrying amount as at 30 September 2019 9,926,230 666,892 220,255 10,813,377 (1,543,841) (33,685) 83,572 -- 323 -- 5,215,290 (2,533,388) (549,821) -- 1,328,251 -- (98,299) (31,491) -- 32,162 301,642 (57,814) (22,561) -- 27,891 -- 30,172 (281) (19,950) 39,365 (53,020) (11,947) (2,376) (215,590) (5,794) (14,727) (1,319) 42 12,212 5,556,297 (2,644,222) (584,329) (2,376) 10,564,680 2,118,782 230,109 12,813,571 Investments Gross carrying Balance as at October 1 2018 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 New financial assets originated Repayments Unwind of discounts FX and other movements Financial assets derecognized Write off Loss allowance as at September 30 2019 Stage 1 12-month ECL $'000 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Purchased or originated credit impaired $'000 Total $'000 14,447,821 117,975 856,514 -- 15,422,310 (36,137) -- 56,418 --
 7,193,923 (7,307,188) 807,983 (133,562) -- -- 15,029,258 36,137 -- (56,418) (2,943) -- (12,378) 127 3,307 -- -- 85,807 -- -- -- 2,989 -- (3,637) 1,778 152,763 (919,502) (8,299) 82,606 -- -- -- -- 628,299 -- 23,086 (185,078) -- -- -- -- -- 46 7,822,222 (7,323,203) 832,974 22,508 (919,502) (8,299) 651,385 15,849,056 (63) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Retail Gross carrying amount as at 1 October 2017 Transfers: Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 Transfer from stage 2 to stage 1 New financial assets originated Repayments Unwind of discounts Write-offs Gross carrying amount as at 30 September 2018 Commercial & Corporate Gross carrying amount as at as at 1 October 2017 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 Transfer from stage 3 to stage 1 Transfer from stage 3 to stage 2 New financial assets originated Repayments Unwind of discounts Write-offs Gross carrying amount as at 30 September 2018 30 September 2018 Stage 1 12-month ECL $'000 Stage 2 Lifetime ECL $'000 Stage 3 Lifetime ECL $'000 Total $'000 4,263,335 521,516 262,043 5,046,894 (237,661) (56,468) -- 5,069 -- 208,513 1,348,355 (476,004) (381,994) -- 209,954 -- (47,490) -- 4,522 (238,904) 82,499 (61,931) (17,806) -- (27,707) 47,187 37,811 (5,072) (8,124) -- (9,281) (9,679) (3) (3,602) (30,391) 28,928 1,459,782 (22,609) (560,544) (10,775) (410,575) -- (7,965) (7,965) 4,673,145 452,360 321,424 5,446,929 30 September 2018 Stage 1 Stage 2 12-month ECL Lifetime ECL Lifetime ECL $'000 Stage 3 $'000 $'000 Total $'000 8,399,112 1,112,276 182,340 9,693,728 (214,958) (59,211) 270,141 -- 744 -- 3,898,577 (1,755,392)
 (612,783) -- 190,531 -- (339,904) (39,358) -- 848 64,550 (302,503) (19,548) -- -- 61,943 -- 27,116 (879) (966) 8,080 (33,407) (19,895) (4,077) (24,427) 2,732 (69,763) (12,242) (135) (118) 3,971,207 (2,091,302) (652,226) (4,077) 9,926,230 666,892 220,255 10,813,377 (64) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xii) Loss allowance (continued) Investments 30 September 2018 Stage 1 Stage 2 12-month ECL Lifetime ECL Lifetime ECL $'000 Stage 3 $'000 $'000 Total $'000 Gross carrying amount as at as at 1 October 2017 Movement with P&L Impact Transfer from stage 1 to stage 2 Transfer from stage 1 to stage 3 Transfer from stage 2 to stage 1 Transfer from stage 2 to stage 3 New financial assets originated Repayments Unwind of discounts FX and other movements Total net P&L charge during the period Gross carrying amount as at as at 30 September 2018 15,568,808 170,500 60,724 15,800,032 (99,674) (52,858) 26,406 -- 10,847,178 (11,522,151) (1,409) (318,479) 99,674 -- (26,406) (87,689) -- (35,709) -- (2,395) -- 52,858 -- 87,689 -- -- -- -- 657,680 -- 11,504,858 (11,557,860) -- (2,437) (1,409) (323,311) (1,120,987) (52,525) 753,176 (377,722) 14,447,821 117,975 856,514 15,422,310 (65) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) a.
Credit risk (continued) (xiii) Write-off policy The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery.

Indicators that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii) where the Group’s effort to dispose of repossessed collateral is such that there is no reasonable expectation of recovering in full.
The Group may write-off financial assets that are still subject to enforcement activity.

The outstanding contractual amounts of such assets written off during the year ended 30 September 2019 was $25.2 million.

The Group still seek to recover amounts it is legally owed in full, but which have been partially written off due to no reasonable expectation of full recovery.
(xiv) Modification & Replacements of financial assets The Group sometimes modifies the terms of loans provided to customers due to commercial renegotiations, or for distressed loans, with a view to maximising recovery (note 2.e.c.i).

The Group continues to monitor if there is a subsequent significant increase in credit risk in relation to such assets through the Classified Credit Management Review process.
xv) Concentration of risks of financial assets with credit risk exposure The following table breaks down the Group’s main credit exposure as categorised by industry sectors of counter parties:- Cash and due from other banks Statutory deposits Consumer Agriculture Petroleum Manufacturing Construction Distribution Hotels and guest houses Transport, storage and communications Finance, insurance and real estate Other business services Personal services Real estate mortgages Government related Credit commitments Financial guarantees Other assets 2019 Gross maximum exposure $'000 3,710,569 3,507,579 3,748,261 157,828 1,677,953 879,812 1,488,978 935,906 1,215,476 687,088 6,905,737 2,712,767 26,077 3,352,729 11,138,766 905,072 215,695 343,686 2018 Gross maximum exposure $'000 4,816,122 4,243,111 3,252,787 138,862 681,062 579,083 2,378,059 611,742 725,684 1,145,310 5,873,164 1,189,873 27,004 3,352,617 11,368,113 1,560,259 209,281 466,509 Total 43,609,979 42,605,407 (66) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) b.
Market risk The Group takes on exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risks arise from open positions in interest rate, currency, commodity and equity products, all of which are exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates, credit spreads, foreign exchange rates, commodity prices and equity prices.

The Group separates exposures to market risk into either trading or non-trading portfolios.
The market risks arising from trading and non-trading activities are measured separately by the Group Market Risk Unit who submit reports to the SMERC on a regular basis and also reports via the Group Enterprise Risk Management Unit to the Board Enterprise Risk Management Committee to enable Board oversight of market risk issues.
Additionally, on a monthly basis, the Group’s Pricing Committee reviews and approves the yield curves used to value all investment securities and reports on this into the Group ALCO.

This Committee also provides for the consideration of the Group ALCO technical information that may be relevant to current and developing market conditions from time to time.

Trading portfolios include those portfolios arising from market-making transactions where the Group acts as a principal with clients or with the market.
Trading portfolios are those positions entered into primarily to take advantage of market movements to generate capital gains.

Non-trading portfolios primarily arise from the interest rate management of the Group’s retail and commercial banking assets and liabilities.

Non-trading portfolios also consist of interest rate, foreign exchange and equity risks arising from the Group’s financial assets available-for-sale.
(i) Currency risk The Group takes on exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.

It is the policy of the Group not to engage in speculative foreign exchange activities, since its primary focus is to supply foreign currency to customers at a profit with the US dollar dominating trading.

However, as supply usually lags behind customer demand, the Group may find itself in an overbought or oversold position.
The Group’s strategy of managing this risk is to buy low and sell high; establish relationships with corporate foreign exchange earners; limit foreign exchange exposure; avoid speculation with an aim to keep a balanced position; and match foreign currency denominated assets with foreign currency denominated liabilities.

The Group does not currently engage in any hedging activities to mitigate currency risk.
(67) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) b.
Market risk (continued) Foreign currency exposure for financial assets, financial liabilities and off balance sheet items: As at 30 September 2019 Financial assets Cash and due from other banks Statutory deposits with central banks Investment Securities - Hold to collect and sell - Hold to collect - Fair value through profit or loss Loans to customers Loan notes Other assets Investment accounted for using equity methods TT$ $’000 US$ $’000 Other $’000 Total $’000 435,160 3,401,865 2,567,712 4,021 707,697 101,693 3,710,569 3,507,579 6,393,450 2,401,282 21,946 10,550,225 205,457 458,479 34,635 4,350,880 971,693 176 6,568,238 -- (93,833) 157,297 1,567,255 396 169,398 10,913,728 4,940,230 22,518 1,505,802 18,624,265 205,457 385,671 191,932 -- 21,025 -- Total financial assets 23,902,499 14,526,184 4,073,266 42,501,949 Financial liabilities Customers’ deposits Other funding instruments Due to other banks Bonds payable Creditors and accrued expenses 17,677,847 1,178,030 198,477 2,260,755 520,691 5,755,402 1,354,974 1,985,399 605,011 46,127 2,416,232 25,849,481 4,175,011 1,642,007 2,204,290 20,414 2,928,855 63,089 661,654 94,836 Total financial liabilities 21,835,800 9,746,913 4,236,578 35,819,291 Net on balance sheet position 2,066,699 4,779,271 (163,312) 6,682,658 Off balance sheet items 150,196 63,052 2,446 215,694 Credit commitments 373,261 329,682 202,129 905,072 (68) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in
 Trinidad and Tobago dollars) 3 Financial risk management (continued) b.
Market risk (continued) (i) Currency risk (continued) As at 30 September 2018 Financial assets Cash and due from other banks Statutory deposits with central banks Investment Securities - Hold to collect and sell - Hold to collect - Fair value through profit or loss Loans to customers Loan notes Other assets Investment accounted for using equity methods TT$ $’000 US$ $’000 Other $’000 Total $’000 1,295,210 4,127,955 2,644,466 4,461 876,446 110,695 4,816,122 4,243,111 6,931,600 2,425,009 5 10,697,648 273,943 335,226 32,439 3,393,792 875,121 13,557 3,828,051 -- 98,168 152,817 1,290,270 290 198,712 10,524,104 4,590,400 13,852 1,489,257 16,014,956 273,943 466,509 185,256 -- 33,115 -- Total financial assets 26,119,035 11,010,433 3,998,785 41,128,253 Financial liabilities Customers’ deposits Other funding instruments Due to other banks Bonds payable Creditors and accrued expenses 18,419,173 1,317,590 198,458 2,260,755 607,123 4,466,713 1,607,862 1,278,888 605,011 47,698 2,613,705 25,499,591 4,386,739 1,461,287 1,512,249 34,903 2,865,766 -- 748,639 93,818 Total financial liabilities 22,803,099 8,006,172 4,203,713 35,012,984 Net on balance sheet position 3,315,936 3,004,261 (204,928) 6,115,269 Off balance sheet items 130,748 76,083 2,450 209,281 Credit commitments 157,818 1,211,330 191,111 1,560,259 Included in the “Other” category are assets and liabilities held in UK pound sterling, Canadian dollars, Euros, Barbados, Eastern Caribbean Dollars and Yen.
A 1% increase or decrease in any of these currencies would not significantly impact the Group’s profit.

If the TT$ appreciates by 250 basis points against the US$, the profit would decrease by $115.4 million (2018: $70.0 million).

The average change for the last three (3) years was 19 basis point (2018: 207 basis points).

There was no change in 2019.


(ii) Interest rate risk Interest rate risk management focuses on potential changes in net interest income resulting from changes in interest rates, product spreads and mismatches in the re-pricing between interest rate sensitive assets and liabilities The Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and future cash flows.
Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of the changes in market interest rates.

Cashflow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of the changes in market interest rate.

The Group takes on exposure to the effects of fluctuations in the prevailing level of market interest rates on both its fair value and cash flow risks.
(69) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) b.

Market risk (continued) (ii) Interest rate risk (continued) The Group’s objective in the management of its interest rate risk is to reduce the sensitivity of its earnings and overall portfolio value to fluctuations in the interest rate.
The strategy employed to achieve this involves the active pricing of deposit and loan products, increasing market share of loans and funding, diversifying portfolios, changing the mix of products in accordance with market trends and reducing funding mismatch through long- term instruments.

The table below summarises the Group’s exposure to interest rate risk.

The assets and liabilities are categorised by the earlier of the repricing date and the maturity date.
As at 30 September 2019 Financial assets Cash and due from other banks Statutory deposits with central banks Investment Securities - Hold to collect and sell - Hold to collect - Fair value through profit or loss Loan to customers and finance leases Loan notes Investment accounted for using equity methods Other assets Up to 1 month $’000 1 to 3 months $’000 3 to 12 months $’000 1 to 5 years $’000 Over 5 years $’000 Non-interest bearing $’000 Total $’000 2,878,395 4,021 147,755 -- 407,762 -- -- -- -- -- 276,657 3,503,558 3,710,569 3,507,579 7,648 12,696 21,975 2,455,237 -- 743,771 949,119 -- 1,396,186 -- 1,671,541 134,585 -- 3,265,276 68,486 2,800,892 1,126,764 -- 6,957,749 136,971 5,654,431 2,717,066 -- 4,798,333 -- 35,445 -- 543 (248,516) -- 10,913,728 4,940,230 22,518 18,624,265 205,457 -- 404 -- -- -- -- -- -- -- -- 191,932 385,267 191,932 385,671 Total financial assets 5,380,376 3,236,831 5,547,650 11,022,376 13,169,830 4,144,886 42,501,949 Financial liabilities Customers’ deposits Other funding instruments Due to other banks Bonds payable Creditors and accrued expenses 21,040,066 332,612 25,774 -- 74,079 1,167,565 444,350 18,889 -- -- 2,344,215 2,709,984 1,102,597 63,089 -- 470,209 688,065 1,037,353 2,865,766 83 Total financial liabilities 21,472,531 1,630,804 6,219,885 5,061,476 148 -- -- -- -- 148 827,277 -- 19,677 -- 587,492 25,849,481 4,175,011 2,204,290 2,928,855 661,654 1,434,447 35,819,291 Interest sensitivity gap (16,092,155) (100,979) (672,235) 5,960,900 13,169,682 (70) First Citizens Holdings
 Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) b.
Market risk (continued) (iii) Interest rate risk (continued) As at 30 September 2018 Financial assets Cash and due from other banks Statutory deposits with central banks Investment Securities - Hold to collect and sell - Hold to collect - Fair value through profit or loss Loan to customers and finance leases Loan notes Investment accounted for using equity methods Other assets Up to 1 month $’000 1 to 3 months $’000 3 to 12 months $’000 1 to 5 years $’000 Over 5 years $’000 Non-interest bearing $’000 Total $’000 3,160,345 4,461 783,248 -- 435,019 -- -- -- -- -- 437,510 4,238,650 4,816,122 4,243,111 52,446 -- 149 1,763,992 70,827 155,755 894,361 -- 1,082,186 837 2,046,174 27,645 -- 2,852,173 632,906 3,085,086 1,113,806 -- 5,827,690 (448,730) 5,181,651 2,700,480 13,413 4,728,836 18,103 2,992 (145,892) 290 (239,921) -- 10,524,104 4,590,400 13,852 16,014,956 273,943 -- 503 -- -- -- -- -- -- -- -- 185,256 466,006 185,256 466,509 Total financial assets 5,052,723 2,916,387 5,993,917 9,577,852 12,642,483 4,944,888 41,128,253 Financial liabilities Customers’ deposits Other funding instruments Due to other banks Bonds payable Creditors and accrued expenses 20,758,169 144,217 61,511 -- 31,397 1,224,624 768,178 1,016,074 -- -- 2,281,941 2,806,399 1,719 -- -- 421,760 667,945 432,945 1,260,755 228 648 -- -- 1,605,011 -- 812,449 -- -- -- 717,014 25,499,591 4,386,739 1,512,249 2,865,766 748,639 Total financial liabilities 20,995,294 3,008,876 5,090,059 2,783,633 1,605,659 1,529,463 35,012,984 Interest sensitivity gap
 (15,942,571) (92,489) 903,858 6,794,219 11,036,824 Interest rate risk management focuses on the potential changes in net interest income resulting from changes in interest rates, product spreads and mismatch in the re-pricing between interest rate sensitive assets and liabilities.
A 100 basis point increase in interest rates will cause a decrease in profit of $8.1 million (2018: $0.8 million) and a decrease in reserves of $443.5 million (2018: $345.1 million).

(71) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) b.
Market risk (continued) (iii) Other price risk Other price risk arises due to the possibility that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
The Group is affected by changing prices of equity instruments mainly classified as available-for-sale securities with fair value movements recognised in shareholders’ equity.

Management has determined that the impact of the price risk on equity instruments classified as available for sale is immaterial at the end of both periods reported.
c. Liquidity risk Liquidity risk is the risk that the Group will be unable to generate or obtain sufficient cash or its equivalent in a timely and cost-effective manner to meet its commitments when they fall due under normal and stress circumstances and arises from fluctuations in cash flows.
The Group is exposed to daily calls on its available cash resources from overnight deposits, current accounts, maturing deposits and other funding instruments, loan draw downs, guarantees and from margin and other calls on cash settled derivatives.

The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty.
Liquidity risk management process The Group’s liquidity management process is carried out by the Treasury and International Trade Centre and monitored by the Group’s Asset and Liability Committee (ALCO).

The Group’s liquidity management framework is designed to ensure that there are adequate reserves of cash and other liquid securities to satisfy current and prospective commitments arising from either on-balance sheet or off-balance sheet liabilities.
The Group relies on a broad range of funding sources and applies prudent limits to avoid undue concentration.

Current and projected cash flows are monitored, together with diversification of funding and contingency planning, and ensuring that funding disturbances are minimised.
The Group manages liquidity risk using both expected and contractual cash flows, by preserving a large and diversified base of core deposits from retail and commercial customers, by maintaining ongoing access to wholesale funding and by maintaining a liquid pool of marketable securities dedicated to mitigating liquidity risk as a contingency measure.
Fallback mechanisms include access to the local interbank and institutional markets and stand-by lines of credit with external parties and the ability to close out or liquidate market positions.

Compliance with liquidity policies and risk limits is tracked by Group Market Risk and reported into the Senior Management Enterprise Risk Management Committee and via the Group Enterprise Risk Management Unit to the Board Enterprise Risk Management Committee.
(76) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) c. Liquidity risk (continued) (i) Financial assets and liabilities The table below analyses financial assets and liabilities of the Group into relevant maturity groupings based on the remaining period at the year end to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows.
As at 30 September 2019 Financial liabilities Up to 1 month $’000 1 to 3 Months $’000 3 to 12 months $’000 1 to 5 years $’000 Over 5 years $’000 Total $’000 Customers’ deposits 21,871,133 1,172,505 2,373,808 485,792 160 25,903,398 Other funding instruments 337,618 883,032 2,321,052 740,206 Bonds payable Due to other Banks 22,864 7,255 131,974 3,141,742 45,450 1,291,992 880,496 Creditors and accrued expenses 604,427 55,471 -- -- -- -- -- -- -- 4,281,908 3,303,835 2,217,938 659,898 Total financial liabilities 22,881,492 3,410,255 5,707,330 4,367,740 160 36,366,977 Financial assets Cash and due from other banks 3,157,151 150,573 417,860 Statutory deposits with central banks 105,714 -- -- -- -- -- 3,725,584 3,401,865 3,507,579 Investment Securities - Hold to collect and sell 352,482 873,441 2,094,991 4,039,517 6,503,779 13,864,210 - Hold to collect 18,563 992,366 162,029 1,582,230 3,228,703 5,983,891 - Fair value through P&L 21,975 -- 543 -- -- 22,518 Loan to customers and finance leases 2,357,000 1,563,987 3,958,938 9,563,942 5,153,508 22,597,375 Loan notes Other assets -- 385,662 -- 21 90,203 156,650 2,114 12,508 -- 161 246,853 400,466 Total financial assets 6,398,547 3,580,388 6,726,678 15,354,847 18,288,016 50,348,476 Liquidity gap (16,482,945) 170,133 1,019,348 10,987,107 18,287,856 13,981,499 (77) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) c.
 Liquidity risk (continued) (i) Financial assets and liabilities (continued) As at 30 September 2018 Financial liabilities Up to 1 month $’000 1 to 3 Months $’000 3 to 12 months $’000 1 to 5 years $’000 Over 5 years $’000 Total $’000 Customers’ deposits 21,577,409 1,237,140 2,303,489 434,349 697 25,553,084 Other funding instruments 149,587 770,736 2,863,038 707,791 -- 4,491,152 Bonds payable Due to other Banks 22,861 7,250 67,178 1,626,366 1,611,330 3,334,985 61,511 1,019,320 15,628 445,085 -- -- 1,541,544
 748,639 Creditors and accrued expenses 743,788 4,558 185 108 Total financial liabilities 22,555,156 3,039,004 5,249,518 3,213,699 1,612,027 35,669,404 Financial assets Cash and due from other banks 3,597,163 789,029 446,321 Statutory deposits with central banks 115,156 -- -- -- -- -- 4,832,513 4,127,955 4,243,111 Investment Securities - Hold to collect and sell - Hold to collect 94,190 224,791 2,362,661 4,773,545 6,044,298 13,499,485 19,026 806,302 473,976 1,264,864 2,907,890 5,472,058 - Fair value through P&L 134 - 408 2,168 14,888 17,598 Loan to customers and finance leases 1,662,216 1,234,095 3,507,000 8,208,391 6,159,103 20,770,805 Loan notes Other assets -- 466,509 -- -- 98,015 246,854 -- -- -- -- 344,869 466,509 Total financial assets 5,954,394 3,054,217 6,888,381 14,495,822 19,254,134 49,646,948 Liquidity gap (16,600,762) 15,213 1,638,863 11,282,123 17,642,107 13,977,544 (78) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) c. Liquidity risk (continued) (ii) Assets held for managing liquidity risk The Group holds a diversified portfolio of cash and high-quality highly-liquid securities to support payment obligations and contingent funding in a stressed market environment.
The Group’s assets held for managing liquidity risk comprise:  Cash and balances with central banks;  Certificates of deposit;  Government bonds and other securities that are readily acceptable in repurchase agreements with central banks; and  Secondary sources of liquidity in the form of highly liquid instruments in the Group’s investment portfolios.
(iii) Off-Balance sheet items The table below analyses the contingent liabilities and commitments of the Group into relevant maturity groupings based on the remaining period at the year end to the contractual maturity date.
As at 30 September 2019 Credit commitments Acceptances Guarantees Letters of credit Operating leases Capital commitments Up to 1 month $’000 1 to 3 months $’000 702,943 25,384 86,662 2,008 2,779 -- -- 8,079 1,715 5,470 5,556 -- 3 to 12 months $’000 202,129 11,568 11,485 12,352 25,006 53,508 1 to 5 years $’000 Over 5 years $’000 Total $’000 -- -- 50,327 624 58,794 -- -- 905,072 45,031 -- 150,210 21 20,454 -- 117,920 53,508 -- 25,785 Total 819,776 20,820 316,048 109,745 25,806 1,292,195 As at 30 September 2018 Up to 1 month $’000 1 to 3 months $’000 3 to 12 months $’000 1 to 5 years $’000 Over 5 years $’000 Total $’000 Credit commitments Acceptances Guarantees Letters of credit Operating leases Capital commitments 1,369,148 6,252 97,863 -- 2,701 -- -- 10,107 28,972 -- 5,402 -- 191,111 2,159 20,050 14,360 24,318 67,935 -- -- 28,880 617 50,572 -- -- -- 21 -- 13,047 -- 1,560,259 18,518 175,786 14,977 96,040 67,935 Total 1,475,964 44,481 319,933 80,069 13,068 1,933,515 The ECL on the financial guarantees are nil, as all guarantees executed are secured by cash.
The newly committed assets assessments are based on the clients risk profile, PDs, LGD and collateral position.

There were no exposure, as a result they were classified under stage 1 with no ECL.

d. Fiduciary activities The Group provides custody, trustee and investment management services to third parties which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial instruments.
Those assets that are held in a fiduciary capacity are not included in these consolidated financial statements.

The assets under administration at 30 September 2019 totalled $31.0 billion (2018 - $29.7 billion).
(79) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) e. Operational risk Operational risk is the risk of direct or indirect loss arising from system failure, human error, fraud and external events.
The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and innovation.
The Group manages this risk by developing standards and guidelines in the following areas:- Training and development of staff  Appropriate segregation of duties and access  Reconciling and monitoring of transactions  Documentation of controls and procedures   Reporting of operational losses and proposed remedial actions  Development of contingency plans   Assessments of the processes  Business continuity planning Information security f. Capital management The Group’s objectives when managing capital, which is a broader concept than the equity on the face of the statement of financial position, are:-  To comply with the capital requirement set by the regulators in the differing jurisdictions in which the Group operates;  To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns to shareholders and benefits for other stakeholders;  To ensure that the Group can remain solvent during periods of adverse earnings or economic decline; and  To ensure that the Group is adequately capitalised to cushion depositors and other creditors against losses.
Capital adequacy and the use of regulatory capital are monitored monthly by the Group ALCO, employing techniques based on the guidelines developed by the Basel Committee on Banking Regulations and Supervisory practices, as implemented by the Central Bank of Trinidad and Tobago for supervisory purposes.

The required information is filed with the Central Bank of Trinidad & Tobago on a monthly basis.
The Central Bank of Trinidad & Tobago requires each financial institution to:-  Maintain a ratio of qualifying capital to risk adjusted assets of not less than the minimum standard of 8%.

 Core capital must not be less than fifty percent (50%) of qualifying capital i.e.

supplementary capital must not exceed core capital.
The Central Bank of Barbados requires each financial institution to:-  Maintain a ratio of qualifying capital to risk-weighted assets of not less than the minimum standard of 8%, of which the core capital shall be at least 4%.

The Group’s regulatory capital is comprised of:-  Tier 1 (Core) Capital:-share capital, retained earnings and reserves created by appropriations of retained earnings.
 Tier 2 (Supplementary) Capital – qualifying subordinated loan capital, impairment allowances and unrealised gains arising on the fair valuation of available-for-sale securities and property, plant and equipment.
(80) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) f. Capital management (continued) Tier 1 (Core) Capital Share capital Capital contribution Statutory reserve Retained earnings Non-controlling interest Less: Intangible assets Total Tier 1 Tier 2 (Supplementary) Capital Fair value reserves Eligible reserve provision Total Tier 2 Capital Total Capital Ratios Risk adjusted assets Qualifying capital to risk adjusted assets Core capital to qualifying capital 2019 $’000 23,205 53,779 2018 $’000 23,205 46,317 590,353 586,780 1,508,499 1,288,398 2,583,303 2,407,160 (222,688) (219,871) 4,536,451 4,131,989 907,290 39,850 947,140 826,398 119,784 946,182 5,483,591 5,078,171 17,154,591 16,577,673 31.67% 30.63% 82.73% 81.37% As at 30 September 2019 the Bank and its qualifying subsidiaries were in compliance with these requirements.
In August 2019, the parent company, First Citizens Bank made a capital injected of USD 1.25 million into First Citizens Bank Barbados limited (FCBB) to address a deficient capital adequacy ratio.

As at 30 September 2019, FCBB was in compliance with a ratio of 9.5%.
(81) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) g. Fair value of financial assets and liabilities (i) Financial instruments not measured at fair value The following table summarises the carrying amounts and fair values of those financial assets and liabilities presented on the Group’s consolidated statement of financial position at an amount other than their fair value.
Financial assets Cash and due from other banks Statutory deposits with Central Banks Financial instruments - Loans to customers - investments- hold to collect - Loan notes Other assets Financial liabilities Customers’ deposits Other funding instruments Bonds payable Due to other Banks Creditors and accrued expenses Carrying value Fair value 2019 $’000 2018 $’000 2019 $’000 2018 $’ All fair values fall into level 3 of the fair value hierarchy except for Held to Maturity investments which are level 2.
The fair values of the Group’s financial instruments are determined in accordance with International Accounting Standard (IAS) 39 “Financial instruments: Recognition and Measurement”.

See note 4 for further details of the fair value measurements.

Financial instruments where carrying value is equal to fair value Due to their liquidity and short-term maturity, the carrying values of certain financial instruments approximate their fair values.
Financial instruments where carrying value is approximately equal to fair value include cash and due from other banks and statutory deposits with Central Banks.

Loans to customers less allowance for loan losses Loans to customers are net of specific and other provisions for impairment, which reflects the additional credit risk.

The estimated fair value of these loans represents the discounted amount of future cash flows based on prevailing market rates.
Investments –hold to collect Fair value for held-to-maturity assets is based on market prices or broker/dealer price quotations.

Where this information is not available, fair value is estimated using a discounted cash flow valuation methodology where all cash-flows of the instruments are discounted at an appropriate yield plus a credit spread where applicable.

The fair value of the held to maturity portfolio is computed for disclosure purposes only.

See note 3.g.ii for Fair Value Hierarchy.


(82) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) g. Fair value of financial assets and liabilities (continued) (I) Financial instruments not measured at fair value (continued) Other loans and receivables Other loans and receivables are net of provisions for impairment.
The estimated fair value of receivables represents the discounted amount of estimated future cash flows expected to be received.

Expected cash flows are discounted at current market rates to determine fair value.

Receivables are generally for a period of less than one year.

Loan notes The fair value of these notes are calculated using discounted cash flow analyses of comparable government borrowing rates for the terms indicated.
Customer deposits Due to their liquidity and short-term maturity, the carrying values of some customer deposits approximate their fair value.

The fair value of the other customer deposits are computed using discounted cash flow analyses at current market interest rates.

Bonds payable The fair value of bonds payable is calculated using discounted cash flow analyses assuming the ‘yield-to-call’ method of valuation, when call options are in the money.
When they are not in the money, the yield to maturity method of valuation is used.

These bonds carry fixed interest rates and have been discounted using the prevailing market rate of similar instruments.

Note due to parent company This note is payable on demand (no maturity stated).

The fair value of this note approximates its carrying value.
(ii) Fair value hierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable or unobservable.

Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions.

These two types of inputs have created the following fair value hierarchy:-    Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
This level includes listed equity securities and debt instruments on exchanges.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

This level includes debt instruments.

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
This level includes equity investments and debt instruments with significant unobservable components.

This hierarchy requires the use of observable market data when available.

The Group considers relevant and observable market prices in its valuations where possible.
(83) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) g. Fair value of financial assets and liabilities (continued) (ii) Fair value hierarchy (continued) The following table shows an analysis of financial instruments measured at fair value by level of the fair value hierarchy: As at 30 September 2019 Financial assets Financial assets at fair value - Debt securities - Equity securities Fair value through OCI: Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 -- -- -- 21,975 543 22,518 -- -- -- 21,975 543 22,518 - - Investment securities – debt Investment securities – equity 805,826 64,237 9,725,944 2,701 302,977 12,043 10,834,747 78,981 Total financial assets 870,063 9,751,163 315,020 10,936,246 870,063 9,728,645 315,020 10,913,728 As at 30 September 2018 Financial assets Financial assets at fair value - Debt securities - Equity securities Fair value through OCI: - - Investment securities – debt Investment securities – equity Total financial assets Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 -- -- -- 13,413 439 13,852 -- -- -- 13,413 439 13,852 797,775 56,051 9,331,296 2,629 327,652 8,701 10,456,723 67,381 853,826 9,333,925 336,353 10,524,104 853,826 9,347,122 336,353 10,537,956 Transfer of debt securities to level 3 were due to observable inputs being less readily available.
(84) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 3 Financial risk management (continued) There were no transfers between Level 1 and Level 2 during the year.
Reconciliation of Level 3 items are as follows:- 30 September 2019 Opening balance Fair Value through OCI Fair Value through P & L Exchange Purchased Settlement Expected credit losses Total losses – Other Comprehensive Income Accrued interest Amortisation Debt Securities $'000 Equity $'000 Total $'000 327,652 5 798 -- 79,432 (106,075) (176) 900 (380) 821 8,701 3,228 -- (8) 1,086 -- (964) -- -- -- 336,353 3,233 798 (8) 80,518 (106,075) (1,140) 900 (380) 821 Closing balance 302,977 12,043 315,020 30 September 2018 Debt Securities $'000 Equity $'000 Fair value $'000 Total $'000 Opening balance Change on initial application of IFRS 9 Restated opening balance Fair Value through OCI Fair Value through P & L Exchange Purchased Settlement Expected credit losses Total losses – Other comprehensive income Transfer to amortised cost Amortisation Closing balance 1,552,275 (855,875) 696,400 (76,598) (180) -- 124,195 (229,446) (8,217) (792) (178,840) 1,130 327,652 8,937 -- 8,937 (233) -- (3) -- -- -- -- -- -- 8,701 -- -- -- -- -- -- -- -- -- -- -- -- -- 1,561,212 (855,875) 705,337 (76,831) (180) (3) 124,195 (229,446) (8,217) (792) (178,840) 1,130 336,353 (85) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 4 Critical accounting estimates and judgements The Group makes estimates and assumptions about the future.
The resulting accounting estimates will, by definition, rarely equal the related actual results.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are outlined below: a.

Financial assets at FVOCI The Group uses the discounted cash flow method to determine the fair value of available-for-sale financial assets not traded in active markets.
The discounted cash flow method discounts the cash-flows of the financial assets at an appropriate yield plus a credit spread where applicable.

The carrying amount of available-for-sale financial assets would decrease by $443.5 million if the discount rate used in the discounted cash flow analysis is increased by 100 basis points from management’s estimates (2018 - $345.1 million).

The Group’s credit spread methodology utilises gradient tenors and currency specific spreads.
The appropriate credit spread for the agency or corporate fixed income security is determined using a cubic spline interpolation of the appropriate currency and credit rating category in the credit spread matrix based on the remaining tenor of the facility.

This singular credit spread is then added to the discount spot rates to value the facility using the discounted cashflow method.
In June 2017 Group Market Risk revised this methodology to reflect the credit risk of the facility as the credit risk on a per cash flow basis, and no longer on the full maturity of the facility.

This resulted in moving from applying a single credit spread based on term to maturity, to multiple credit spreads based on each cash flow’s term to maturity.
These financial statements include estimates of fair values of Government of Barbados instruments issued on 1 October 2018 in exchange for previously defaulted instruments.

The fair values were obtained by identifying the relevant cashflows on each new instrument and discounting them to present values using the term structure of the derived Barbados dollar yield curve.

The models used to determine fair values are validated and periodically reviewed by experienced personnel at Group Market Risk.

b.
b.

Purchase Originated Credit-Impaired (POCI) POCI financial assets are those for which one or more events that have a detrimental impact on the estimated future cash flows have already occurred.
Indicators include: • • • • • • Borrower or issuer is experiencing significant financial difficulty; A breach of contract, such as a default or past due event; The granting of an uncustomary concession(s) by the lender(s) as a result of the borrower's financial difficulty; A high likelihood of bankruptcy or other financial reorganization by the borrower; The loss of an active market for that financial asset because of financial difficulties; or The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
In June 2018, the Government of Barbados (GoB) selectively defaulted on both its local and foreign currency denominated debt.

First Citizens received new GoB instruments in connection with an IMF supported debt restructure effective 1 October 2018.

Under the terms of the restructure, the First Citizens Group received new instruments with maturities ranging from fifteen to thirty-five years.
The Group recorded an impairment of approximately BBD 87M on these instruments in the audited financial statements for year ended 30 September 2018.

The GoB Series D bonds amortized price as at October 1, 2018 was 64.63, the effective interest rate was determined at 7.56% using an adjusted blended yield curve.

However, because these bonds have been recognized as POCI, the effective interest rate needed to be adjusted to reflect the expected cash flows- net of expected credit losses.
Lifetime expected credit losses were used in the estimated cash flows for the purposes of calculating the effective interest rate– resulting in a Credit-Adjusted Effective Interest Rate (CAEIR).

As at September 2019, the CAEIR is 6.55%.


(86) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 4 Critical accounting estimates and judgements (continued) b .Purchase Originated Credit-Impaired (POCI) Interest revenue was calculated on the net carrying amount at the credit-adjusted effective interest rate i.e.

including expected credit losses.


September 2019 the CAEIR interest income on the cash flows represented an accretion value of BBD 4.18.

The repayment of the cash flows amounted to BBD1.32 as per contractual terns.

The Expected Credit Losses which are implicit in the CAEIR needed to be adjusted based on the repayments and changes to the expected cash flow projections due to changes in Probability of Default and the Assumptions/Macro-economic overlay scenarios (see Note 3.a.v).
c. Valuation of the Government of Barbados Instruments Credit-Impaired As at 1 October 2018, the Government of Barbados instruments received in the debt exchange, were priced at initial recognition POCI, which was determined by discounting the expected cashflows using a suitable yield curve.

The curve utilized was constructed using a methodology that captured a market participant’s perspective.
This took into consideration the risk appetite, and compensations thereof, of investors who participated in similar restructures of sovereign debt and the resulting observations of their yield curves, post–restructure.

The curve was constructed using the inputs obtained up to the fifteen year point from FCIS Research and Analytics Department’s market reads process.
Due to the limitation of available data beyond the fifteen year point, another sovereign of similar credit rating that underwent a restructure was combined through interpolation/extrapolation to produce a blended curve.

The amortization schedule for the POCIs held by the group was arrived by the following:-   The instruments had irregular cash flow schedules.

This meant that it was highly sensitive to rounding errors, often leading to amplification of small changes in inputs.
Inherent in these instruments is constant revision.

While our modelled cash flows predicted immediate coupon haircuts, these did not materialize as actual cash flows were as contractually promised.

 Hence the modelled cash flows had to be adjusted for actuals being different from expected; as well as changes to future expectations.
The amortised prices were as follows:- Instrument Price at origination – 1 October 2018 Effective Interest Rate Credit Adjusted Effective Interest Rate Calculated Price at 30th September 2019 Price Movement for Year Breakdown of Price Movement: Unwind of discount computed at 1 October 2018 to 30 September 2019 Changes to expected cash flow projections due to changes in Probability of Default Assumptions/Macro-economic overlay scenarios Rounding Series B Series D 65.16 7.91% 6.69% 69.83 4.67 3.33 1.33 0.01 4.67 64.63 7.56% 6.55% 69.76 5.13 2.8 2.32 0.01 5.13 d. Measurement of the expected credit loss allowance The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI 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 further detailed in note 3.a.v, which also sets out key sensitivities of the ECL to changes in these elements.
(87) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 4 Critical accounting estimates and judgements (continued) d. Measurement of the expected credit loss allowance(continued) A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:  Determining criteria for significant increase in credit risk;  Choosing appropriate models and assumptions for the measurement of ECL;  Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated ECL; and  Establishing groups of similar financial assets for the purposes of measuring ECL.
 Determination of macroeconomics drivers and forecasting macroeconomic scenarios  Recovery rates on unsecured exposures  Drawdown of approved facilities Loss Given Default The Loss Given Default rate on corporate senior unsecured bonds is estimated to be 60% based on the International Swaps and Derivatives Association standard Credit Default Swap contract specification for North American corporate issuers.
The Loss Given Default rate on sovereign senior unsecured bonds is estimated to be 46% based on the average Loss Given Default rate on Sovereign bonds during the period 1983 to 2016 as reported by Moody’s Investors Service (note 3.a.vi).

Valuation of Stage 3 facilities The proposed cash flows were discounted using the BBD yield curve derived using the Group’s Pricing Methodology for Non Eurobond Securities..
The sum of these discounted cash flows represented the Fair Value (as given by the NPV) of the New Instrument.

The Impairment was determined as the difference between the NPV of the restructured bonds and the book value of the existing Government of Barbados bonds.

A 100bps shift in the curve would result in the market value decreasing by $40.4 million.
e.. Income taxes Management judgment is required in determining provisions for income taxes and there are many transactions and calculations for which the ultimate tax determination is uncertain.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.
When appropriate, particularly where the ultimate tax determination is uncertain, management also obtains opinions or advice from leading tax advisors and regularly reassesses its strategy in relation to such exposures.

The Group is subject to income tax in variance jurisdictions.

Tax is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date.
Substantive enactment is considered to be achieved when further steps in the enactment process will not change the outcome of a proposed change in tax law.

Management considers the legislative process applicable in each jurisdiction in which it operates in determining at what point a proposed change in tax law will be considered substantively enacted by identifying the point after which further steps in the enactment process will not affect the outcome of the proposed change.
In January 2018, the Corporation tax rate for financial institutions in Trinidad and Tobago was increased to 35%.

In November 2018, the Government of Barbados announced the reduction of corporate income tax rates to a sliding scale of 5.50% to 1.00% for fiscal years beginning January 1, 2019.
(88) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 4 Critical accounting estimates and judgements (continued) f. Retirement benefits The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions.

Any changes in these assumptions will impact the carrying amount of pension obligations.
The assumptions used in determining the net cost (income) for pensions include the discount rate, salary and pension increases.

The Group determines the appropriate discount rate at the end of each year.

This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations.
In determining the appropriate discount rate, the Group considers the interest rates of high-quality corporate bonds, and where no deep corporate market exist, the Government bonds are used, that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability.

In determining the salary increases, the Group considered long-term salary inflation, age, merit and promotion (note 19.j for sensitivity).
The Bank’s Board of Directors approved an increase in the retirement age from 60 to 65 effective 1 January 2019.

The impact of this change is a one-off reduction in the defined benefit obligation, which is recognised in the “past service cost/(credit)” of $57.2 million (note 20.b.)

g. Fair valuation of properties The best evidence of fair value is current prices in an active market for similar lease and other contracts.
In the absence of such information, the Bank determines the amount within a range of reasonable fair value estimates.
In making the judgement, the Bank considers information from a variety of sources including: (i) Current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences; (ii) Recent prices of similar properties in less active market, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and (iii) Discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.
(iv) The Group engaged external, independent and qualified valuators to determine the fair value of the Group’s land and buildings.

The valuations were performed in August 2018.

The Group’s policy is to obtain independent valuations for freehold land and buildings at least every three years.

(note 14(a) ii).

The valuations are based on current market conditions and thus may change in the future (note 14 (a) ii).
h. Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in note 2 b (iii).

The recoverable amounts of cash-generating units have been determined based on value-in- use calculations.
If the discounted rate used in the value-in-use calculation was increased by 100 basis points from management’s estimates, the value in use calculation will still exceed the fair value less cost to sell calculation, and there will be no impairment of goodwill.
(89) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 5 Segment analysis For management purposes, the Group is organized into five business segments based on products and services as follows:-  Retail banking: includes loans and mortgages, deposit, foreign exchange transactions, credit and debit cards and card merchant acquiring business with retail and commercial customers.
 Corporate banking: loans and credit facilities and deposits and current accounts for corporate and institutional customers.

 Treasury management and investment banking: Liquidity management and investment banking services including corporate finance, and specialised financial trading.

 Trustee and Asset management: Investment products and services to institutional investors and intermediaries.

 Group function: Finance, legal, and other centralised functions.
Other Group operations comprise fund management, institutional finance and providing computer services, none of which constitutes a separately reportable segment and business activities from head office.
As the Group’s segment operations are all financial with a majority of revenues deriving from interest and the Group Chief Executive Officer relies primarily on net interest revenue to assess the performance of the segment, the total interest income and expense for all reportable segments is presented on a net basis.

There were no changes in the reportable segments during the year.

Transactions between the business segments are carried out at arm’s length.
The revenue from external parties reported to the Group Chief Executive Officer is measured in a manner consistent with that in the consolidated income statement.

The segmental information is reported gross and therefore consolidation adjustments have not been eliminated.

Funds are ordinarily allocated between segments, resulting in funding cost transfers disclosed in inter-segment net interest income.

Interest charged for these funds is based on the Group’s average cost of funding.
There are no other material items of income or expense between the business segments.

Internal charges and transfer pricing adjustments have been reflected in the performance of each business.

Revenue- sharing agreements are used to allocate external customer revenues to a business segment on a reasonable basis.
The Group’s management reporting is based on a measure of operating profit comprising net interest income, loan impairment charges, net fee and commission income, other income and non-interest expenses.

The information provided about each segment is based on the internal reports about segment profit or loss, assets and other information, which are regularly reviewed by the Executive Management.
Segment assets and liabilities comprise operating assets and liabilities, being the majority of the consolidated statement of financial position.

(90) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2018 (Expressed in Trinidad and Tobago dollars) 5 Segment analysis (continued) a.
Segment results of operations The segment information provided to the Executive Management for the reportable segments for the year ended 30 September 2019 is as follows:- Year ended 30 September 2019 Net interest income Inter-segment net interest income Net fee and commission income Foreign exchange gains Other income Total income Retail banking $’000 Corporate banking $’000 Treasury & investments banking $’000 Trustee & asset management $’000 Group functions $’000 615,192 131,994 197,405 49,073 387 699,417 314,950 (139,232) 49,558 2,334 7,238 96,605 94,984 4,387 -- 129,298 54 (975) -- 3,634 510 11 136,224 1,701 274,687 Total $’000 1,632,971 -- 476,500 146,955 413,010 994,051 612,088 650,001 135,440 277,856 2,669,436 Loan impairment charges (22,283) 2,180 6,457 (964) -- (14,610) Depreciation and amortisation expense (41,965) (489) (46,251) (1,267) (14,484) (104,456) Administrative expenses (237,158) (25,088) (201,683) (25,289) (179,534) (668,752) Other operating expenses (306,233) (17,411) (90,615) (13,746) (58,215) (486,220) Total non-interest expenses (607,639) (40,808) (332,092) (41,266) (252,233) (1,274,038) Profit before taxation 386,412 571,280 317,909 94,174 25,623 1,395,398 Income tax expense Profit for the year As at 30 September 2019 Total assets Total liabilities 382 (436) (272,094) (31,314) -- (303,462) 386,794 570,844 45,815 62,860 25,623 1,091,936 9,135,619 13,717,347 21,787,422 647,079 863,061 46,150,528 16,906,096 4,759,252 15,929,744 173,461 69,069 37,837,622 (91) First Citizens Holdings
 Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2018 (Expressed in Trinidad and Tobago dollars) 5 Segment analysis (continued) a.
Segment results of operations (continued) Year ended 30 September 2018 Net interest income Inter-segment net interest income Net fee and commission income Foreign exchange gains Other income Total income Loan impairment charges Depreciation and amortisation expense Retail banking $’000 Corporate banking $’000 Treasury & investment s banking $’000 Trustee & asset management $’000 Group functions $’000 Total $’000 589,532 120,332 184,758 43,581 422 938,625 (130,574) (42,314) 622,651 (92,849) 17,253 1,994 1,031 550,080 (13,181) (482) 343,911 (27,483) 70,802 85,903 3,531 -- 137,797 1 (1,650) 1,557,975 -- 3,476 1,126 -- 414,086 132,605 233,657 8,637 91 243,838 706,790 149,966 3,043 2,348,504 (34,269) -- -- (178,024) (7,583) (1,482) (16,118) (67,979) Administrative expenses (231,912) (17,297) (106,059) (22,040) (169,648) (546,956) Other operating expenses (284,285) (15,053) (95,237) (15,153) (32,688) (442,416) Total non-interest expenses (689,085) (46,013) (243,148) (38,675) (218,454) (1,235,375) Profit before taxation Income tax expense Profit for the year As at 30 September 2018 Total assets Total liabilities 249,540 504,067 463,642 111,291 (215,411) 1,113,129 7,792 (400) (307,921) (37,656) (13) (338,198) 257,332 503,667 155,721 73,635 (215,424) 774,931 8,755,042 11,993,180 22,757,612 825,448 817,668 45,148,950 17,715,188 4,342,133 14,881,034 376,035 62,150 37,376,540 (92) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in
 Trinidad and Tobago dollars) 5 Segment analysis (continued) b. Reconciliation of segment results of operations to consolidated results of operations Year ended 30 September 2019 Net interest income Non-interest income Impairment losses Non-interest expenses Operating profit Share of profit of associates and joint ventures accounted for by the equity method Income tax expense Profit for the year As at 30 September 2019 Total assets Total liabilities Year ended 30 September 2018 Net interest income
 Non-interest income Impairment losses Non-interest expenses Operating profit Share of profit of associates and joint ventures accounted for by the equity method Income tax expense Profit for the year As at 30 September 2018 Total assets Total liabilities Total management reporting $’000 Adjustments and eliminations $’000 Total consolidated $’000 1,632,971 (1,550) 1,631,421 1,036,465 (393,940) (14,610) (1,259,428) 29,086 10,728 1,395,398 (355,676) -- (303,462) 19,921 (7,586) 1,091,936 (343,341) 642,525 14,476 (1,248,700) 1,039,722 19,921 (311,048) 748,595 46,150,528 (2,750,171) 43,400,357 37,837,622 (1,667,012) 36,170,610 Total management reporting $’000 Adjustments and eliminations $’000 Total consolidated $’000 1,557,975 (1,550) 790,529 (132,646) (178,024) (1,057,351) -- 9,006 1,113,129 (125,190) -- (338,198) 18,238 1,852 774,931 (105,100) 1,556,425 657,883 (178,024) (1,048,345) 987,939 18,238 (336,346) 669,831 45,148,950 (3,091,252) 42,057,698 37,376,540 (2,011,693) 35,364,847 (93) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 6 Cash and due from other banks Cash and bank balances Short-term investments Short-term investments: - Maturity within 3 months - Maturity over 3 months 2019 $’000 2018 $’000 2,214,864 1,495,705 1,667,817 3,148,305 3,710,569 4,816,122 1,088,650 407,055 2,685,488 462,817 1,495,705 3,148,305 The average effective
 interest rate on short-term bank deposits was 209% (2018: 1.0%); these deposits have an average maturity of 90 days (2018: 90 days).
Cash and cash equivalents include the following for the purposes of the consolidated statement of cash flow: Cash and bank balances Short-term investments – maturity within 3 months Due from/(to) other banks 2,214,864 1,088,650 (2,204,290) 1,667,817 2,685,488 (1,512,249) 1,099,224 2,841,056 7 Statutory deposits with central bank Under the provisions of Financial Institutions Act 2008 (Trinidad and Tobago), the Bank and its subsidiary (First Citizens Depository Services Limited) are required to maintain as a deposit with the Central Bank of Trinidad and Tobago restricted cash balances.
These balances represent a ratio of certain deposit liabilities held in such form and to such extent as the Central Bank may prescribe from time to time.

As of 30 September 2019, the current ratio was 17% for First Citizens Bank Limited and 9% for First Citizens Depository Services Limited.

Under the provisions of the Act, it can be waived for a specified period of time and on such conditions as may be determined by the Central Bank.
In Barbados, under the provisions of the Financial Institution Act, 1996-16, the Bank’s subsidiary, First Citizens Bank (Barbados) Limited, is required to maintain as a deposit with the Central Bank of Barbados restricted cash balances.

This balance represents a ratio of customers deposit balances (both domestic and foreign currency) held in such form and to such extent as the Minister, on advice of the Central Bank may prescribe from time to time.
As at 30 September 2019, the ratio was 15% of total domestic customer deposit balances (comprising 10% government securities and 5% cash) plus 2% of total foreign customer deposit balances.
As at 30 September 2019 the Bank and its qualifying subsidiaries were in compliance with these requirements (94) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 8 (a) Investments –Hold to collect and sel Securities of/or guaranteed by the Government of the Republic of Trinidad and Tobago Listed investments Unlisted investments Portfolio allowance Debt securities Listed Unlisted Equity securities Listed Unlisted Total securities Current portion Non current portion 2019 $’000 7,710,046 2,645,130 607,888 10,963,064 (49,336) 2018 $’000 7,982,705 2,166,547 447,387 10,596,639 (72,535) 10,913,728 10,524,104 3,381,972 7,452,775 3,495,621 6,939,558 10,834,747 10,435,179 64,237 14,744 78,981 77,594 11,331 88,925 10,913,728 10,524,104 2,421,959 8,491,769 2,265,776 8,258,328 10,913,728 10,524,104 Investment securities totalling $4,113 million (2017: $4,053 million) are pledged to secure the repurchase agreements (see Note 17).
Interest rates on these repos range from 0.20% to 5.89% in 2018 (2017: 0.20% to 5.89%).
Balance at beginning of the year IFRS 9 adjustments- reclassification IFRS 9 adjustments- remeasurements -ECL Revised opening balance Exchange differences Additions Disposals Reclassification to FVTPL Net movements in provisions Net amortisation of premiums Gains from changes in FV Balance at end of year Fair value losses based on: Quoted market prices Other techniques The movement in the impairment allowance is as follows: Allowance at beginning of the year IFRS 9 remeasurements Revised opening balance Exchange difference Charge for the year Write off Allowance at the end of year 8 (b) Financial assets at fair value at OCI 10,524,104 -- -- 10,524,104 131 7,543,891 (7,421,241) (21,459) 23,199 -- 265,103 10,913,728 12,466,933 (1,380,392) (49,384) 11,037,157 1,400 10,199,821 (10,432,062) -- (5,241) (180) (276,791) 10,524,104 16,328 248,775 265,103 (42,044) (234,747) (276,791) 72,535 -- 72,535 -- (14,900) (8,299) 49,336 17,909 49,384 67,293 1 5,241 -- 72,535 (95) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) Bond Listed - equity The movement in investment securities may be summarized as follows: At beginning of year IFRS 9 reclassifications Additions Disposals Reclassification Gains from changes in fair value Impairments At end of year 2019 $’000 21,975 543 22,518 13,852 -- 13,852 529 (13,465) 21,459 143 -- 22,518 2018 $’000 13,413 439 13,852 655 396 1,051 13,462 (618) -- (60) 17 13,852
 The above securities are managed and their performance evaluated on a fair value basis in accordance with a documented risk management strategy, and information about the groups of financial instruments is reported to management on that basis.
9 Investments – Hold to collect Securities of/or guaranteed by the Government of the Republic of Trinidad and Tobago Unlisted investments Listed investments Corporate Individuals Provision for impairment Current portion Non current portion Balance at beginning of the year Reclassification Remeasurements- Reserve Remeasurements - ECL Balance at start of year Exchange differences Additions Disposals Amortisation of unrealised gains Net Amortisation of discounts/(premiums) Reclassification to Hold to collect Net movement in provision Balance at end of year The movement in the impairment allowance is as follows: Allowance at beginning of the year IFRS 9 reclassification Revised opening balance Net gains on derecognition of financial assets (Write back) /Charge for the year Allowance at the end of year 1,257,531 2,145,601 87,662 1,462,640 12,587 4,966,021 (25,791) 4,940,230 1,083,705 3,856,525 4,940,230 4,590,400 -- -- -- 4,590,400 18 1,623,168 (1,590,040) 11,141 8,796 -- 296,747 4,940,230 322,538 -- 322,538 (296,008) (739) 25,791 1,982,195 1,905,784 96,366 914,457 14,136 4,912,938 (322,538) 4,590,400 922,006 3,990,932 4,912,938 3,222,099 1,539,237 (52,606) (216,810) 4,491,920 (14) 1,084,925 (977,584) (3,088) 1,404 92,611 (99,774) 4,590,400 5,954 216,810 222,764 -- 99,774 322,538 (96) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 10 Loans to customers Performing loans Non-performing loans
 Allowance for loan losses Loans analysed by sector Consumer Agriculture Petroleum Manufacturing Construction Distribution Hotels and guest houses Transport, storage and communications Finance, insurance and real estate Other business services Personal services Real estate mortgage Current portion Non current portion Allowance for loan losses Allowance at beginning of the year IFRS 9 adjustment effective October 1, 2017 Revised opening balance Charge for the year Loans written off during the year Allowance at
 the end of year Impairment loss on loans net of recoveries Charge for the year Amounts recovered during the year 2019 $’000 18,298,698 574,083 18,872,781 (248,516) 2018 $’000 15,718,627 541,679 16,260,306 (245,350) -- 245,350 30,286 (27,120) 248,516 30,286 (8,029) 22,257 306,039 (120,317) 185,722 80,017 (20,389) 245,350 80,017 (7,004) 73,013 (97) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 11 Loan notes The loan notes due to the Group comprise the following: (i) Taurus Services Limited 204,457 273,943 (i) This represents several interest bearing notes issued by Taurus Services Limited as consideration for assets sold to Taurus Services Limited as part of the restructuring of the three former banks and Government support for the Company on its formation (See Note 1).
2019 $’000 2018 $’000 The terms of the original notes, dated 30 September 1994, were as follows: - - - - Government guarantee.

Tenor of 15 years with effect from 30 September 1994; Interest rate of 4.5% below prime with a floor rate of 11.5% per annum; A moratorium of 5 years on principal payments; and On 1 October 2000, a new agreement was entered into whereby the GORTT made a bullet payment to reduce part of the interest accrued.
The unpaid portion of the interest up to that date of $150 million was capitalised.

Thereafter, accrued interest was capitalised semi-annually until 30 September 2002 (the end of the moratorium) and this totalled $198.4 million.

The new principal balance outstanding on the restructured loan notes as at 30 September 2004 which includes all capitalised interest to date amounted to $1,267 million.
The terms of this new agreement are as follows: - Tenor of 22 years with effect from 1 October 2000; - Interest rate of 4.5% below prime with a floor rate of 11.5% per annum; - A moratorium of 2 years on both principal and interest; - Payment of principal and interest in semi-annual intervals thereafter; and - Government guarantee.

To date, these notes have been serviced in accordance with the new agreement.

These notes are not transferable.


On 8 November 2007, the Group was informed of the GORTT’s intention to early repay these notes.

To date, there have been no further developments.

The ECL for the Taurus note was computed using the PD for the GORTT, which is a counterparty of this agreement.

This is classified under Stage 1 with no impact.


12 Other assets Prepayments Accounts receivable Accrued interest 13 Investment accounted for using equity methods Investment in Joint Venture Investment in Associate 13 a.
Investment in joint ventures Infolink Services Limited (ISL) (i) (ii) Trinidad & Tobago Interbank Payment System Limited (TTIPS) Beginning of the year Share of profit after tax Dividend received from Joint Ventures At end of year 2019 $’000 41,983 103,562 240,126 385,671 34,635 157,297 191,932 33,115 1,520 34,635 32,439 4,100 (1,904) 34,635 2018 $’000 39,161 238,398 228,112 505,670 32,439 152,817 185,256 31,077 1,362 32,439 30,314 4,320 (2,195) 32,439 (98) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 13 a.
Investment in joint ventures (continued) (i) This investment represents 25% of the equity capital of Infolink Services Limited, a company incorporated in Trinidad and Tobago whose principal activity is the provision of electronic banking reciprocity.

Infolink’s reporting period is December.

The financial information below reflects the results as at August 2019.
(ii) This investment represents 14.29% in the equity capital of Trinidad & Tobago Inter-bank Payment System Limited whose principal activity is operation of an automatic clearings house.

TTIPS reporting period is October.

The financial information below reflects the results as at August 2019.
Country of incorporation Assets $’000 Liabilities $’000 Revenues $’000 Profits $’000 % Interest held Trinidad & Tobago Trinidad & Tobago 137,315 10,985 4,857 347 29,535 3,588 15,767 1,107 25 14.29 Trinidad & Tobago Trinidad & Tobago 130,263 9,930 5,956 399 29,465 3,424 16,666 1,064 25 14.29 Name 2019 ISL TTIPS 2018 ISL TTIPS 13 b.
Investment in associates Beginning of the year Share of profit after tax Dividend received from associate At end of year 2019 $’000 152,817 15,821 (11,341) 157,297 2018 $’000 149,447 13,919 (10,546) 152,817 St Lucia Electricity Services Limited is listed on the Eastern Caribbean Securities Exchange, The investment in associate at 30 September 2019 includes goodwill of $4.6 million (2018: $4.6 million).

The reporting period for St Lucia Electricity Services Limited is December.
The information below reflects The Group’s share of the results of associate and its share of the assets (including goodwill and liabilities) as at August 2019, are as follows: Name Country of incorporation Assets $’000 Liabilities $’000 Revenues $’000 Profits $’000 % Interest held 2019 St. Lucia Electricity Services Limited St. Lucia 2018 St. Lucia Electricity Services Limited St. Lucia 1,319,506 520,728 797,260 82,817 19.11 1,264,101 488,764 761,534 72,837 19.11 The fair value of the investment in associate at 30 September 2019 is $157.3 million (2018: $152.8 million).
(99) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 14 Property, plant and equipment Freehold premises $’000 Leasehold premises $’000 Motor vehicles & equipment $’000 Work in progress $’000 Total $’000 Year ended 30 September 2019 Opening net book amount Additions Disposals Transfer Revaluation surplus Depreciation charge Closing net book amount As at 30 September 2019 Cost/valuation 448,553 53,793 -- 1,993 1,725 (44,756) 461,308 36,985 337 (24) 8,474 -- (6,859) 38,913 46,764 603,083 70,781 19,501 (854) 6,800 -- 27,264 (37,731) -- (35,809) -- -- 80,431 (878) -- 1,725 (87,424) 80,883 15,833 596,937 545,806 139,729 579,647 15,833 1,281,015 Accumulated depreciation (84,498) (100,816) (498,764) -- (684,078) Net book amount 461,308 38,913 80,883 15,833 596,937 Year ended 30 September 2018 Opening net book amount Additions Disposals Transfer Revaluation surplus Depreciation charge Closing net book amount As at 30 September 2018 Cost/valuation 435,287 15,004 43,897 146 -- -- 4,174 (5,912) 448,553 -- -- -- (7,058) 36,985 71,463 22,219 (2,676) 14,747 -- (34,972) 39,873 21,638 -- (14,747) -- -- 590,520 59,007 (2,676) -- 4,174 (47,942) 70,781 46,764 603,083 485,585 134,073 534,684 46,764 1,201,106 Accumulated depreciation (37,032) (97,088) (463,903) -- (598,023) Net book amount 448,553 36,985 70,781 46,764 603,083 As at 30 September 2017 Cost/valuation 467,727 133,348 502,859 39,873 1,143,807
 Accumulated depreciation (32,440) (89,451) (431,396) -- (553,287) Net book amount 435,287 43,897 71,463 39,873 590,520 (100) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 14 Property, plant and equipment (continued) a. Recognised fair value measurements (i) Fair value hierarchy This note explains the judgements and estimates made in determining the fair values of the non-financial assets that are recognised and measured at fair value in the financial statements.
To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its non financial assets carried at fair value into the three levels prescribed under the accounting standards.

An explanation of each level is provided in note 3.f.ii.
Level 3 Land and building Building on Lease Land Freehold Land 2019 $’000 421,036 38,022 2,250 461,308 2018 $’000 424,534 21,769 2,250 448,553 The Group’s policy is to recognise transfers into and transfers out of fair values hierarchy levels as at the end of the reporting period.

There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.
(ii) Valuation techniques used to determine level 2 and level 3 fair values As at 30 September 2019, the Group’s freehold premises were stated at revalued amounts determined by management.

Valuations were made on the basis of open market value.

Open market values are determined by considering the current market condition.

Changes in fair value are recorded in the statement of comprehensive income.
The Group’s policy is to obtain independent valuations for its freehold land and buildings at least every three years.

At the end of each reporting period, management update their assessment of the fair value of each property, taking into account the most recent independent valuations.

Management determine a property’s value within a range of reasonable fair value estimates.

The best evidence of fair value is current prices in an active market for similar properties.
Where such information is not available Management consider information from a variety of sources including:   current prices in an active market for properties of different nature or recent prices of similar properties in less active markets, adjusted to reflect those differences; discounted cash flow projections based on reliable estimates of future cash flows.
(iii) Transfer between level 2 and 3 and change in valuation techniques There were no transfers between levels 2 and 3 for recurring fair value measurements nor change in the valuation technique during the financial year.

Level 3 fair values of land and retail units have been derived using the sales comparison approach.

Sales prices of comparable land and buildings in close proximity are adjusted for differences in key attributes such as property size.
The most significant input into this valuation approach is price per square foot.

If the price per square foot increase by 100 basis points, the fair value will increase by $13.0M (2018:$16.3M) with a corresponding entry in the reserve in shareholders’ equity.
(101) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 14 Property, plant and equipment (continued) If freehold premises were stated on the historical cost basis, the amounts would be as follows: Cost Accumulated depreciation Net book amount 15 Intangible assets As at 30 September 2019 Acquisition cost Accumulated amortisation Net book amount Period ended 30 September 2019 Opening net book amount Additions Disposal Amortisation charge 2019 $’000 381,181 (148,725) 232,456 2018 $’000 327,264 (103,969) 223,295 Goodwill $’000 Software $’000 Other intangible assets $’000 Total $’000 156,886 -- 156,886 156,886 -- -- -- 302,565 (245,487) 36,284 (27,560) 495,735 (273,047) 57,078 8,724 222,688 50,324 24,064 (276) (17,032) 12,661 -- -- (3,937) 219,871 24,064 (276) (20,969) Closing net book amount 156,886 57,078 8,724 222,688 As at 30 September 2018 Acquisition cost Accumulated amortisation Net book amount Period ended 30 September 2018 Opening net book amount Additions Disposal Amortisation charge Closing net book amount 156,886 -- 156,886 156,886 -- -- -- 156,886 278,778 (228,454) 36,284 (23,623) 471,948 (252,077) 50,324 12,661 219,871 38,872 32,744 (1,263) (20,029) 50,324 16,598 -- -- (3,937) 12,661 212,356 32,744 (1,263) (23,966) 219,871 Goodwill is reviewed annually for impairment or more frequently when there are indicators that impairment may have occurred.
(102) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 15 Intangible assets (continued) Impairment test for goodwill Goodwill is allocated for impairment testing purposes for the following cash generating units as follows:- Goodwill First Citizens Investment Services (FCIS) 2019 $’000 156,886 156,886 2018 $’000 156,886 156,886 The recoverable amounts of the cash generating units were determined based on value-in-use.
Cash flow projections used in the value-in-use calculations were based on financial projections by management covering a five (5) year period and a discount rate.

Cash flow beyond that five year period have been extrapolated using the growth rate for the respective units.
The key estimates used in the value-in-use calculations are as follows:- Estimates used in the value for use Net interest margin growth Growth rate Discount factors 2019 2018 FCIS 8.79% 8.36% 4.69% 12.58% 8.22% 5.69% These assumptions were used for the analysis of each cash generating unit.

Management determined the net interest margin and growth rate based on past performance and its expectations of the market developments.
Goodwill is reviewed annually for impairment, or more frequently when there are indicators that impairment may have occurred.

The impairment test carried out as at 30 September 2019 for FCIS, revealed that the value in use is in excess of the carrying amount.
16 Customers’ deposits Deposits are analysed by sector as follows: Public institutions Private institutions Consumers Current portion Non current portion 2019 $’000 10,405,833 6,546,497 8,899,569 2018 $’000 7,606,407 9,384,185 8,508,999 25,849,481 25,499,591 25,379,141 470,340 25,077,206 422,385 25,849,481 25,499,591 Deposits due to customers only include financial instruments classified as liabilities at amortised cost.

Deposits amounting to $6.4 billion (2018: $4.7 billion) are at fixed rates.
All other deposits amounting to $19.5 billion (2018: $20.8 billion) are at variable rates.
(103) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 17 Other funding instruments Repurchase agreements Funds under management USD Fixed Rate Note Other funding instruments are analysed by sector as follows: Public institutions Private institutions Consumers Current portion Non-current portion 2019 $’000 3,900,512 25,748 248,751 2018 $’000 4,112,559 25,429 248,751 4,175,011 4,386,739 1,110,100 1,974,936 1,089,975 1,456,884 1,933,834 996,021 4,175,011 4,386,739 3,382,134 792,877 4,175,011 3,719,197 667,542 4,386,739 The securities sold under the repurchase agreements only include financial instruments classified at amortised cost (see Note 8a).
Interest rates on these repos range from 0.20% to 5.89% in 2019 (2018: 0.20% to 5.89%).

18 Due to other Banks Short term Medium term 1,769,580 434,710 2,204,290 1,077,586 434,663 1,512,249 Short-term borrowings represented demand facilities via a number of financial institutions.

Medium-term borrowings represents unsecured borrowings of US$35.1 million, and TT$197.7 million from clients for a period of three years.

The average interest rate for 2019 was 3.63% (2018: 3.21%).
19 Creditors and accrued expenses Accrued expenses Other liabilities Interest payable Due to GOTT Due to brokers Funds payable to bondholders 193,750 228,572 85,845 23,171 5,247 125,069 661,654` 132,881 229,371 75,310 21,478 8,645 280,954 748,639 The amount due to GORTT relates to what is owed by the Bank with respect to payments made on claims which were subsequently recovered pursuant to Liquidity Support Agreement outlined in note 3 a.

(iv) (e).
(iv) (e).

(104) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 20 Retirement benefit asset a.

Net liability in balance sheet Present value of obligation Pension plan assets at fair value Value of deficit Net defined benefit liability b.
Movement in present value of defined benefits obligation: Beginning of year Current year service cost Interest cost Members contributions Past service credit Re-measurements - Experience adjustments - Actuarial gains from change in financial assumptions Benefits paid 2019 $’000 2018 $’000 (1,402,687) 1,393,802 (1,368,439) 1,343,706 (8,885) (24,733) (8,885) (24,733) 1,368,439 50,484 75,757 14,198 -- (59,656) -- (46,535) 1,368,808 55,935 75,979 14,041 (57,215) (5,258) (39,473) (44,378) Defined benefit obligation at end of year 1,402,687 1,368,439 c. The defined benefit obligation is allocated between the Plan's members as follows: - Active - Deferred members - Pensioners 68% 7% 25% 68% 7% 25% The weighted average duration of the defined benefit obligation at year end 18.6 years 19.3 years 96% of the benefits for active members are vested 40% of the defined benefit obligation for active member is conditional on future salary increases d. Movement in fair value of plan assets: Beginning of year Interest income Return of plan assets, excluding interest income Company's contributions Members contributions Benefits paid Expense allowance Fair value of plan assets at end of year 1,343,706 73,797 (19,785) 29,888 14,198 (46,535) (1,467) 1,393,802 1,300,217 71,523 (28,452) 32,213 14,041 (44,378) (1,458) 1,343,706 Actual return on plan asset 54,012 43,071 (105) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago
 dollars) 20 Retirement benefit asset (continued) e. Asset allocation Local and regional equity securities Oversea equities (outside CARICOM) TT$ denominated bonds US$ denominated bonds Cash and cash equivalents Other (annuities, mortgages etc.)
2019 $'000 397,162 224,683 667,973 40,353 63,361 270 2018 $'000 379,434 236,052 664,239 28,803 34,924 254 Fair value of plan assets at end of year 1,393,802 1,343,706 All asset values as at 30 September 2018 were based on unaudited accounts provided by First Citizens Trustee Services Limited.

Overseas equities have quoted prices in active markets.

Local equities also have quoted prices but the market is relatively illiquid.
The Plan’s investment manager calculates the fair value of the Government bonds and corporate bonds by discounting expected future proceeds using a constructed yield curve.

The majority of the Plan’s government bonds were issued by the Government of Trinidad & Tobago, which also guarantees many of the corporate bonds held by the Plan.

The Plan’s assets are invested using a strategy agreed with the Plan’s Trustee and Management Committee.
This strategy is largely dictated by statutory constraints (at least 80% of the assets must be invested in Trinidad & Tobago and no more than 50% in equities) and the availability of suitable investments.

There are no asset-liability matching strategies used by the Plan.
f. Expenses recognised in profit or loss Current service costs Net interest on net defined benefit liability/asset Past service credit Administrative expenses Net pension cost g. Re-measurement recognized in other comprehensive income Experience gains Total amount recognised in other comprehensive income h. Reconciliation of opening and closing balance sheet entries Opening defined benefit liability Net pension cost Re-measurements recognised in other comprehensive income Company contribution paid Closing defined benefit liability 2019 $'000 50,484 1,960 -- 1,467 53,911 (39,871) (39,871) (24,733) (53,911) 39,871 29,888 (8,885) 2018 $'000 55,935 4,456 (57,215) 1,458 4,634 (16,279) (16,279) (68,591) (4,634) 16,279 32,213 (24,733) (106) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 20 Retirement benefit asset (continued) i.
Summary of principal assumptions as at 30 September Discount rate Average individual salary increases Future pension increases 2019 $'000 2018 $’000 5.5% 5.5% 1.25% 5.5% 5.5% 1.25% Assumptions regarding future mortality are based on published mortality tables.
The life expectancies underlying the value of the defined benefit obligation as at 30 September 2018 are as follows: Life expectance at age 60 for current pension in years - Male - Female Life expectance at age 60 for current members age 40 in years - Male - Female j.

Sensitivity analysis 21.0 25.1 21.4 25.4 21.0 25.1 21.4 25.4 The calculation of the defined benefit obligation is sensitive to the assumptions used.
The following table summarises how the defined benefit obligation as at 30 September 2019 would have changed as a result of a change in the assumptions used.

Discount rate Future salary increases Future pension increases 1% pa decrease 1% pa increase 284,210 (210,716) (90,868) (123,506) 108,244 142,325 An increase of 1 year in the assumed life expectancies shown above would increase the defined benefit obligation at 30 September 2019 by $25.1 million (2018: $23.8 million).
These sensitivities were calculated by re-calculating the defined benefit obligations using the revised assumptions.

k. Funding The Bank meets the balance of the cost of funding the defined benefit Pension Plans and the Bank must pay contributions at least equal to those paid by members, which are fixed.

The funding requirements are based on regular (at least every 3 years) actuarial valuations of the Plans and the assumptions used to determine the funding required may differ from those set out above.
The Bank expects to pay $35.9 million to the Pension Plans during 2019/20.
(107) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 21 Bonds payable (i) Fixed Rate Bond TTD 400 Million (Series 1) (ii) Fixed Rate Bond TTD 100 Million (Series 2) (iii) Fixed Rate Bond TTD 900 Million (iv) Fixed Rate Bond USD 90.4 Million (v) Fixed Rate Bond TTD 860.7 Million vi) Mutliple Series BBD Bond Current portion Non current portion 2019 $’000 400,000 100,000 900,000 605,011 860,755 63,089 2018 $’000 400,000 100,000 900,000 605,011 860,755 -- 2,928,855 2,865,766 63,089 2,865,766 -- 2,865,766 2,928,855 2,865,766 (i) TTD Fixed Rate Bond Series 1 – In August 2014, this bond for $400 million was issued.
This bond is unsecured and carries a fixed rate of 3.10 % with a tenor of seven (7) years.

Interest is payable semi-annually in arrears.

Principal will be repaid in a bullet payment at maturity.

(ii) TTD Fixed Rate Bond Series 2 – In August 2014, this bond for $100 million was issued.

This bond is unsecured and carries a fixed rate of 3.25 % with a tenor of ten (10) years.

Interest is payable semi-annually in arrears.

Principal will be repaid in a bullet payment at maturity.
A onetime call option exists on the 7th anniversary subject to the minimum notice of 90 days.

(iii) TTD Fixed Rate Bond – In October 2015, this bond for $900 million was issued.

This bond is unsecured and carries a fixed rate of 4.25 % with a tenor of seven (7) years.

Interest is payable semi-annually in arrears.

Principal will be repaid in a bullet payment at maturity.

A onetime call option exists on the 5th anniversary subject to the minimum notice of 60 days.
(iv) USD Fixed Rate Bond – In January 2018, this bond for $90.4 million was issued.

This bond is unsecured and carries a fixed rate of 4.25 % with a tenor of five (5) years.

Interest is payable semi-annually in arrears.

Principal will be repaid in a bullet payment at maturity.

A prepayment option exists after the 2nd anniversary subject to the minimum notice of 60 days.

(v) TTD Fixed Rate Bond – In April 2018, this bond for $860.7 million was issued.
This bond is unsecured and carries a fixed rate of 4.50 % with a tenor of six (6) years.

Interest is payable semi-annually in arrears.

Principal will be repaid in a bullet payment at maturity.

A prepayment option exists after the 5th anniversary subject to the minimum notice of 60 days.

(vi) BBD Series 1 Bond – In September 2019, this bond for BBD$18.5 million was issued.

This bond is unsecured and carries a fixed rate of 2.25% with a tenor of one (1) year.
Interest is payable semi-annually in arrears.

Principal will be repaid in a bullet payment at maturity.

A prepayment option exist for each Series of the facility in whole on any interest payment date subject to a notice of 30 days.
(108) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 22 Deferred income tax Deferred income taxes are calculated on all temporary differences under the liability method using the applicable tax rate for each subsidiary.
The movement on the deferred income tax account is as follows: At beginning of year Impact of revaluation adjustments recorded directly to shareholders’ equity: - Revaluation on hold to collect and sell financial assets - Revaluation on hold to collect financial assets - Revaluation on property, plant and equipment - Remeasurement of defined benefit liability Credit to consolidated statement of income (note 34) At end of year Deferred income tax assets and liabilities are attributable to the following items: 2019 $’000 2018 $’000 (194,261) (252,429) (80,298) 934 -- (13,955) 11,841 76,805 476 (462) (13,713) (4,938) (275,739) (194,261) Deferred income tax assets Provisions Fair value measurement of assets through profit or loss Deferred income tax liabilities Retirement benefit asset Re-measurement of defined benefit liability Fair value measurement of hold to collect and sell Fair value measurement of hold to collect Intangible asset recognised on business combination Zero coupon instruments Accelerated tax depreciation Unrealised exchange and other gains Revaluation gain on property, plant and equipment Revaluation of PPE – Associates Balance at 1.10.18 $’000 (Charge)/credit to income statement $’000 (Charge)/credit to other comprehensive income $’000 Balance at 30.09.19 $’000 5,532 374 5,906 (20,047) (61,799) (38,575) (4,453) (4,128) (37,099) (20,585) (6,036) (4,174) (3,271) (5,358) -- (5,358) 8,407 -- (21) -- 1,921 (2,091) 8,976 7 -- -- -- -- -- -- (13,955) (80,298) 934 -- -- -- -- -- -- 174 374 548 (11,640)
 (75,754) (118,894) (3,519) (2,207) (39,190) (11,609) (6,029) (4,174) (3,271) (200,167) 17,199 (93,319) (276,287) Net deferred income tax liability (194,261) 11,841 (93,319) 275,739 (109) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 22 Deferred income tax (continued) Deferred income tax assets Provisions Fair value measurement of assets through profit or loss Deferred income tax
 liabilities Retirement benefit asset Re-measurement of defined benefit liability Fair value measurement of available for sale Fair value measurement of held to maturity Intangible asset recognised on business combination Zero coupon instruments Accelerated tax depreciation Unrealised exchange and other gains Revaluation gain on property, plant and equipment Revaluation of PPE – Associates Balance at 1.10.17 $’000 (Charge)/credit to income statement $’000 (Charge)/credit to other comprehensive income $’000 Balance at 30.09.18 $’000 985 366 1,351 (10,394) (48,086) (115,380) (4,929) (5,980) (33,248) (23,001) (5,997) (3,494) (3,271) 4,547 8 4,555 (9,653) -- -- -- 1,852 (3,851) 2,416 (39) (218) -- -- -- -- -- (13,713) 76,805 476 -- -- -- -- (462) -- 5,532 374 5,906 (20,047) (61,799) (38,575) (4,453) (4,128) (37,099) (20,585) (6,036) (4,174) (3,271) (253,780) (9,493) 63,106 (200,167) Net deferred income tax liability (252,429) (4,938) 63,106 (194,261) 23 Share capital Authorised 50,000,000 ordinary shares of no par value Issued and fully paid 23,205,000 shares of no par value 24 Capital contribution Balance at beginning of year Capital contribution Balance at end of year 2019 $’000 2018 $’000 23,205 23,205 46,317 7,462 53,779 38,255 8,062 46,317 Payments made by the Government of the Republic of Trinidad & Tobago (GORTT) on behalf of the Company towards its loan obligations are treated as capital contributions since the GORTT, as the Company’s only shareholder.
25 Statutory reserves The Financial Institutions Act 2008, Part VI, Section 56 1(a) (Trinidad and Tobago) stipulates that a Bank must transfer at the end of each financial year no less than 10% of its profits after taxation to a Reserve Fund until the amount standing to the credit of the Reserve Fund is not less than the stated capital or assigned capital of the Bank.
In accordance with the Financial Institutions Act 1996-16, the Bank’s subsidiary, First Citizens Bank (Barbados) Limited, is required to transfer to a reserve fund a minimum of 25% of the net income for the year, wherever the amount of the reserve fund is less than the stated capital.

The FIA 2008 Section 60.1, also indicated that no licensee shall incur, deposit liabilities of an amount exceeding twenty (20) times the sum of its stated capital or assigned capital and Statutory Reserve Fund.
(110) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 26 Retained earnings The retained earnings is the accumulated net income that is retained by the group at a particular point of time, such as at the end of the reporting period.

At the end of that period, the net income (or net loss) at that point is transferred from the Profit and Loss Account to the retained earnings account.
27 Other reserves i Fair value reserve- For debt instruments, the fair value reserve comprises the cumulative net change in the fair value of investment securities measured at FVOCI, less ECL allowances recognised in profit or loss, net deferred tax, until the assets are derecognised or impaired.

For equity financial assets which are measured at FVOCI, these are not recycled to the statement of income.
ii Fair value reserve-Hold to collect The fair value reserve comprises the cumulative gains on hold to collect financial assets, net deferred tax.

These gains are being amortised during the life of the relevant instruments.

iii Revaluation reserve The revaluation reserve relates to the revaluation of the freehold property.
iv Re-measurement of defined benefit reserve The remeasurements of the defined benefit represents actuarial gains and losses, returns on plan assets (outside of any changes recorded as net interest) and any changes in the asset ceiling (outside of any changes recorded as net interest).
v Translation reserve The translation reserve comprises all foreign currency differences arising from translation of the financial statements of foreign operations, as well as in a separate component in equity in the consolidated financial statements.
28 Non-controlling interest Opening balance IFRS 9 adjustment Revised opening balance Share of total comprehensive income Dividend paid (note 2.29) 29 Interest income Loans to customers Financial assets (hold to collect and sell, hold to collect and FVTPL) Loan notes 2019 $’000 2018 $’000 2,407,160 -- 2,407,160 314,448 (138,305) 2,451,239 (61,333) 2,389,906 167,329 (150,075) 2,583,303 2,407,160 1,217,088 785,832 29,505 1,085,494 761,651 37,405 2,032,425 1,884,550 (111) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 30 Interest expense Customers’ deposits Other funding instruments Notes payable Bonds payable 31 Fees and commissions 2019 $’000 110,876 160,454 9,328 120,346 401,004 2018 $’000 88,435 140,935 9,328 89,427 328,125 The following table of fees and commissions from contracts with customers in the scope of IFRS 15 is disaggregated by major type of services.
The table also includes a reconciliation of the disaggregated fees and commission income with the Group’s operating reporting segments (Note 5).
Year ended 30 September 2019 Account service fees Transaction fees Asset Management fees Underwriting & Brokerage fee Total income Financial guarantees & Loan Commitments Retail banking Corporate banking $’000 42,406 123,682 9,097 -- 175,185 $’000 836 9,520 705 21,971 33,032 Treasury & investments banking $’000 Trustee & asset management $’000 Group Functions $’000 2,019 8,588 75,713 13,427 99,747 -- -- 129,298 -- 129,298 -- -- (8,939) -- (8,939) Total $’000 45,261 141,790 205,874 35,398 428,323 22,220 16,526 492 -- -- 39,238 Total fees and commission 197,405 49,558 100,239 129,298 (8,939) 467,561 Year ended 30 September 2018 Retail banking Corporate banking Treasury & investments banking Trustee & asset management Group functions Account service fees Transaction fees Asset Management fees Underwriting & Brokerage fee $’000 $’000 $’000 $’000 48,944 107,353 9,147 -- 934 243 790 -- 1,873 43,379 12,793 44,577 -- -- 137,797 -- Total income 165,444 1,967 102,622 137,797 -- -- (9,166) -- (9,166) Total $’000 51,751 150,975 151,361 44,577 398,664 Financial guarantees & Loan Commitments 19,314 15,287 2,045 -- -- 36,646 Total fees and commission 184,758 17,254 104,667 137,797 (9,166) 435,310 All fees and commissions are specific to the service contract and are recognised at a point in time, with the exception of asset management and agency services fee Income which are recognised as per the performance obligation and the fees are recognised over time (note 2.p).
(112) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 32 Other income Foreign Exchange Transaction gains less losses Foreign Exchange Translation gains less losses Other income Unrealised gains on financial assets FVPL 2019 $’000 160,274 (13,320) 3,638 69 2018 $’000 143,913 (11,308) 42,563 -- 150,661 175,168 33 Impairment loss on other financial assets Impairment allowances Write back to income allowances Net gains on derecognition of financial assets Loss on the recognition of credit impairment on origination assets 34 Administrative expenses Staff expenses Pension expenses Other administrative expenses Depreciation/Amortisation The number of permanently employed staff as at the year-end was as follows: -- 37,525 296,008 (296,800) 36,733 551,066 57,259 53,479 104,456 766,260 (105,011) -- -- -- (105,011) 482,495 7,420 51,820 67,973 609,708 First Citizens Bank Limited Subsidiaries 35 Other operating expenses Property expenses Technical and professional Advertising expenses Hardware and software maintenance Deposit insurance (see below) Credit card expenses Equipment rental & maintenance Communication charges Security services Stationery and service related expenses Tax on assets Operating expenses 2019 Employees 1,588 345 1,933 % 82 17 100 2018 Employees 1,538 326 1,864 % 83 17 100 2019 $’000 92,325 27,754 12,256 38,466 38,000 82,553 21,252 17,168 14,426 17,060 8,270 112,910 2018 $’000
 75,244 20,469 13,741 31,474 36,721 74,205 26,681 17,006 16,158 15,337 8,638 102,963 482,440 438,637 The Central Bank and Financial Institutions (Non-Banking) (Amendment) Act, 1986 of Trinidad & Tobago established a Deposit Insurance Fund for the protection of depositors.
By the Central Bank (Deposit Insurance) Order 1986, dated 17 September 1986, an annual premium of 0.2% of the average deposit liabilities outstanding as at the end of each quarter of the preceding year is levied.

The Barbados Deposit Insurance Corporation (BDIC), established under the Deposit Insurance Act-29 of 2006, came into operation on 8 June 2007.
The deposit insurance initial contribution and premium was set at 0.05% of the insurable deposits held by the member during the calendar year preceding the calendar year for which the premium is payable.
(113) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 36 Taxation Current tax Prior period (over)/under provision Deferred tax (Note 22) 2019 $’000 310,456 12,433 (11,841) 311,048 2018 $’000 334,828 (3,420) 4,938 336,346 The tax on profit before tax differs from the theoretical amount that would arise using the basic rate of tax as follows: Profit before taxation 1,059,643 1,006,177 Tax calculated at 35% (2018: 35%) Income exempt from tax Expenses not deductible for tax purposes Prior year under/(over) provision Effects of different tax rates in other countries (i) 370,875 (101,162) 63,969 11,804 (34,438) 311,048 352,162 (75,494) 88,454 (3,420) (25,356) 336,346 (i) This represents the difference in tax charged in St Lucia at 1% versus Trinidad and Tobago at 25/30/35%.
37 Dividends Ordinary dividend paid – final for prior period Ordinary dividend paid – interim for current period Preference dividend paid 38 Related party transactions and balances a.

Directors and key management personnel Salaries and other short-term employee benefits Loans and receivables Interest income Customers’ deposit Interest expense Other funding instruments Interest expenses – other funding b.
Transactions with associate Interest income c. Pension Plan 117,413 296,341 1,952 415,706 115,938 333,192 1,952 451,082 51,066 12,063 600 13,078 159 690 11 50,648 12,902 591 11,510 121 676 14 -- 844 Employer’s contribution (Note 20.d) 29,888 32,213 (114) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 38 Related party transactions and balances (continued) d. Government of the Republic of Trinidad and Tobago As stated in note 1, on the formation of the Bank it was agreed that the assets and liabilities of the predecessor financial institutions would be transferred to the Bank and the non-performing portfolio sold to a liquidating company in consideration for an equivalent amount of Government-guaranteed notes and commercial paper.
In 2009, the Bank entered into a Liquidity Support Agreement with GORTT and the Central Bank in relation to the acquisition of the shares of Caribbean Money Market Brokers Limited, now First Citizens Investment Services Limited which provided indemnification of the Bank against certain losses (note 3.a.vi).
The current amount outstanding on these arrangements and obligations and the related income and expenses are disclosed below:- $’000 2019 2018 $’000 Assets Loan notes with Taurus Services Limited (Note 11 (i)) Liabilities Due to GORTT (Note 19) Interest income 205,457 273,942 23,171 21,478 Loan notes with Taurus Services Limited 29,529 37,405 e. Other transactions with the Government of the Republic of Trinidad and Tobago In addition to the balances in (d) above, the Group in its ordinary course of business enters into lending, deposit and investment transactions with the GORTT, other state owned institutions, state agencies and local government bodies.
Transactions and balances between the Group and these related parties are as follows: Loans and receivables Interest income Customers’ deposits Interest expense Financial assets - Hold to collect and sell Financial assets - Hold to collect Investment income 39 Commitments .a.
Capital commitments 2019 $’000 3,882,926 254,995 7,399,019 32,175 7,744,061 513,242 429,255 2018 $’000 2,915,876 199,926 7,151,386 24,638 8,663,210 514,768 409,655 Capital expenditure approved by the Directors but not provided for in these accounts b.
Credit commitments 53,508 67,255 Commitments for loans approved not yet disbursed 905,072 1,560,259 (115) First Citizens Holdings Limited And Its Subsidiaries Notes to the Consolidated Financial Statements (continued) 30 September 2019 (Expressed in Trinidad and Tobago dollars) 40 Contingent liabilities a.

Litigation The Group is involved in claims and counterclaims arising from the conduct of its business.
Based on the facts now known to the Group, the Directors believe that the outcome of these matters would not have a material adverse effect on the position of the Group.

b. Customers’ liability under acceptances, guarantees and letters of credit These represent the Group’s potential liability, for which there are claims against its customer in the event of a call on these commitments.
Acceptances Guarantees Letters of credit 41 Lease rentals 2019 $’000 45,031 150,210 20,454 215,695 2018 $’000 18,518 175,786 14,977 209,281 The Group leased certain premises under non-cancellable operating leases expiring in various years up to 2027.

The leases contain renewal options from five to twenty-five years.

Rental expense incurred under lease agreements amount to $40.2 million for the year 2019 (2018: $37.3 million).
The future lease obligations under non-cancellable leases are summarised below: - Up to one year - One year to five years - Over five years 42 Subsequent events 2019 $’000 33,341 58,794 25,785 117,920 2018 $’000 32,425 50,571 13,047 96,043 On 12 December 2019, the Board of Directors declared a final dividend payment of $3.40 per share payable to shareholders.

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