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BOB_2017_SMALL

NOTES TO THE FINANCIAL

NOTES TO THE FINANCIAL STATEMENTS At December 31, 2017 Assets Up to 3 3 to 6 6 to 12 1 to 3 years Over 3 Total months months months years Cash in hand 398,001 - - - - 398,001 Balances with Central Bank of Kenya 56,911 - - - 3,919,032 3,975,943 Governement securities 2,706,126 3,809,128 4,381,309 5,482,837 30,170,219 46,549,619 Deposits and balances due from other 2,013,676 - - - - 2,013,676 banking institutions Other assets 132,553 128,270 66,134 197,933 69,694 594,584 Loans and advances to customers 22,299,332 895,545 1,188,135 5,318,228 12,506,040 42,207,280 Investment securities - - - - 94,393 94,393 Current tax receivable - - - - - - Intangible assets - - 862 862 2,587 4,312 Investment property - - - - - - Property and equipment - - 37,350 74,700 112,548 224,598 Deferred tax - - - - 69,694 69,694 Total assets 27,606,599 4,832,943 5,673,790 11,074,560 46,944,207 96,132,100 Liabilities and shareholders' equity Customer deposits 54,186,264 11,852,351 6,342,293 559,214 64,763 73,004,885 Deposits due to other banking institutions 3,170,031 748,634 770,273 - - 4,688,938 Other liabilities 300,322 - - 238,019 - 538,341 Shareholders' equity 989,717 (68,629) 3,922,996 706,320 12,349,532 17,899,936 Total liabilities and equity 58,646,334 12,532,356 11,035,562 1,503,553 12,414,295 96,132,100 Net liquidity gap as at December 31, 2016 (31,039,735) (7,699,413) (5,361,772) 9,571,007 34,529,912 - At December 31, 2016 Total assets 17,183,587 7,959,133 10,671,393 8,040,169 39,053,193 82,907,475 Total liabilities and equity 48,404,420 11,553,778 10,969,556 787,726 11,191,995 82,907,475 Net liquidity gap as at December 31, 2015 (31,220,833) (3,594,645) (298,163) 7,252,443 27,861,198 - Experience indicates that customer deposits are maintained for longer periods than the contractual maturity dates. The deposit base is considered to be of a stable and long term nature. 38

NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT AND FINANCIAL STATMENTS 2017 Interest rate risk The bank’s operations are subject to the risk of interest rate fluctuations to the extent that interest earning assets and interest bearing liabilities mature or reprice at different times or in differing amounts. Risk management activities are aimed at optimizing net interest income, given market interest rates levels consistent with the bank’s business strategies. The bank is exposed to various risks associated with the effects of fluctuation in the prevailing levels of market interest rates on its financial position and cash flows. The management closely monitors the interest rate trends to minimise the potential adverse impact of interest rate changes. The table summarises the exposure to interest rate risk at the balance sheet date. Included in the table are the assets and liabilities at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. The bank does not have any derivative financial instruments. The bank does not bear an interest rate risk on off balance sheet items. Cash flow interest rate risk At December 31, 2017 Up to 3 3 to 6 6 to 12 1 to 3 years Over 3 years Non-interest Total months months months bearing Assets Cash in hand 398,001 - - - - - 398,001 Balances with Central Bank of Kenya 56,911 - - - - 3,919,032 3,975,943 Governement securities 2,706,126 3,809,128 4,381,309 5,482,837 30,170,219 - 46,549,619 Deposits and balances due from other banking institutions 2,013,676 - - - - - 2,013,676 Other assets - - - - - 594,584 594,584 Loans and advances to customers 22,299,332 895,545 1,188,135 5,318,228 10,769,837 1,736,203 42,207,280 Investment securities - - - - - 94,393 94,393 Current tax receivable - - - - - - - Intangible assets - - - - - 4,312 4,312 Investment property - - - - - - - Property and equipment - - - - - 224,598 224,598 Deferred tax - - - - - 69,694 69,694 Total assets 27,474,046 4,704,673 5,569,444 10,801,065 40,940,056 6,642,816 96,132,100 Liabilities and shareholders' equity Customer deposits 48,575,823 11,852,351 6,342,293 559,214 64,763 5,610,441 73,004,885 Deposits due to other banking institutions 3,170,031 748,634 770,273 - - - 4,688,938 Other liabilities - - - 238,019 - 300,322 538,341 Shareholders' equity - - - - - 17,899,936 17,899,936 Total liabilities and equity 51,745,854 12,600,985 7,112,566 797,233 64,763 23,810,699 96,132,100 Interest sensitivity gap as at December 31, 2017 (24,271,808) (7,896,312) (1,543,122) 10,003,832 40,875,293 (17,167,883) - At December 31, 2016 Total assets 16,947,996 7,858,792 10,596,816 7,785,459 33,496,961 6,221,451 82,907,475 Total liabilities and equity 43,587,301 11,869,298 7,113,811 301,363 84,690 19,951,012 82,907,475 Interest sensitivity gap as at December 31, 2016 (26,639,305) (4,010,506) 3,483,005 7,484,096 33,412,271 (13,729,561) - 39