Izola Bank p.l.c.
Annual Report
and
Financial Statements
2024
Company Registration Number: C 16343
Izola Bank p.l.c.
Annual Report 2024
Contents
Directors’ and Other Statutory Reports
Financial Statements
Independent Auditor’s Report
Appendices
Izola Bank p.l.c.
Directors’ and
Other Statutory Reports
2024
Izola Bank p.l.c.
Page
Chairperson’s Statement i
Directors’ Report iv
Directors’ Statement of Compliance with the Code of Principles viii
of Good Corporate Governance
Report of the Remuneration and Nomination Committee xvii
Independent Auditors’ Report - Report required by Capital Markets Rule 5.98 113
issued by the Malta Financial Services Authority
Izola Bank p.l.c.
Chairperson’s Statement
For the Year Ended 31 December 2024
i
On behalf of the Board of Directors, I am pleased to present the Chairperson’s Statement for Izola Bank p.l.c.
for the financial year ended 31 December 2024.
Financial Performance Overview
2024 proved to be a testing period for the banking sector, and Izola Bank was not immune to the external
pressures stemming from heightened market volatility, record-high interest rates, and increased operational
costs across the industry.
The Bank incurred a loss before tax of €4.1 million for the year (2023: loss of €2 million). This performance
primarily reflected a significant rise in funding costs, coupled with a higher cost base driven mainly by
regulatory compliance obligations.
While the Bank succeeded in growing interest and similar income by 18% to €22.4 million (2023: €19.0
million), this was offset by the cost of funding. Net interest income decreased by 11.6% to €6.2 million
(2023: €7.0 million), largely attributable to the increase in interest expense, which rose to €16.2 million
(2023: €12.1 million). 2024 was characterised by historically high interest rates across the Eurozone, which
continued to exert upward pressure on the Bank’s cost of funding, particularly in the context of a
competitive deposit environment.
Fee and commission income increased to €0.23 million (2023: €0.16 million), reflecting a growing
contribution from the Bank’s diversified service offering. Operating expenses increased notably during the
year, reflecting the Bank’s continued investment in strengthening its operational capabilities and regulatory
framework. Employee compensation and benefits rose to €3.4 million (2023: €3.1 million), while other
administrative expenses amounted to €5.4 million (2023: €4.5 million). The increase in other costs was
primarily attributable to higher regulatory-related expenses, which rose to €1.75 million (2023: €1.16
million), increased IT support and maintenance costs of €1.24 million (2023: €1.11 million), and credit
servicing fees of €0.72 million (2023: €0.55 million), reflecting the Bank’s ongoing focus on regulatory
compliance, technological resilience, and credit operations. Amortisation and depreciation charges reached
€1.2 million, reflecting continued investment in technology and infrastructure.
After accounting for an income tax credit of €1.1 million (2023: €0.7 million), the Bank incurred a loss after
tax of €3 million (2023: loss of €1.2 million).
Importantly, total comprehensive income — after including other comprehensive income of €1.8 million
(2023: €1.8 million) — resulted in a reduced total comprehensive loss of €1.2 million (2023: profit of €0.5
million). The Bank's other comprehensive income was positively impacted by gains from property
revaluations and favourable movements in the fair value of financial instruments.
Izola Bank p.l.c.
Chairperson’s Statement
For the Year Ended 31 December 2024
ii
Balance Sheet Strength and Capital Position
Despite the challenges faced in 2024, Izola Bank maintained a robust balance sheet, with total assets
increasing marginally to €508.7 million (2023: €507.9 million).
Loans and advances to customers rose to €194.0 million (2023: €181.0 million), underlining the Bank’s
ongoing commitment to supporting businesses and individuals through tailored financing solutions.
Factored receivables remained stable at €138.2 million (2023: €140.0 million).
Customer deposits — the Bank’s principal source of funding — increased to €448.6 million (2023: €429.7
million), demonstrating sustained customer trust and loyalty.
During the year, the Bank strengthened its capital position through the successful issuance of €3 million in
perpetual capital notes, complemented by an additional €2 million capital contribution from its
shareholders. As a result, total equity increased to €35.6 million (2023: €31.9 million), as the Bank continues
to navigate a period of consolidation and transformation.
The Bank closed the year with a Tier 1 ratio of 14.20%, above the minimum requirement of 12.82%. This was
a marked improvement over the 11.24% recorded as of 30 June 2024.
Strategic Developments
During 2024, the Bank undertook several significant initiatives to strengthen its financial and operational
foundations, positioning the organisation for sustainable growth in the years ahead.
The Bank made substantial progress in its digital transformation journey, with the project now at an
advanced stage. The transformation initiative, which is expected to be concluded in the second half of 2025,
is focused on replacing the Bank’s core and internet banking platform and data warehouse enhancing
customer digital experience, and improving operational efficiency.
Furthermore, the Bank implemented a comprehensive capital action plan to improve its financial
performance and strengthen its regulatory capital position. The plan focuses on optimising existing
processes, improving cost efficiency, consolidating its balance sheet, and ensuring long-term sustainability
and competitiveness.
A key milestone this year was the successful relocation of the Bank’s Head Office to Castile Place in Valletta.
This move provides the Bank with a modern, collaborative, and client-focused working environment,
reflecting its commitment to operational excellence and future growth.
These strategic developments, together with the Bank’s continued investment in strengthening governance,
risk management, and talent development, reflect Izola Bank’s clear focus on building a resilient, agile, and
customer-centric financial institution capable of navigating an increasingly dynamic operating environment.
Izola Bank p.l.c.
Chairperson’s Statement
For the Year Ended 31 December 2024
iii
Outlook for 2025 and beyond
Looking ahead, the Bank remains firmly focused on improving its financial performance, enhancing
operational efficiency, and delivering sustainable long-term growth. The external environment is expected
to remain dynamic, with persistent macroeconomic uncertainty,
evolving regulatory expectations, and heightened competition continuing to shape the banking landscape.
The Bank enters 2025 with a clear and deliberate strategic roadmap centred around concluding discussions
with a potential new strategic partner. This prospective partnership is expected to strengthen the Bank’s
capital position further and support its future growth ambitions.
In parallel, the Bank’s senior management team remains fully committed to driving long-term value creation
for all stakeholders. This will be underpinned by a focus on cost discipline, prudent liquidity management,
and robust capital planning, ensuring that the Bank is well-positioned to navigate a changing operating
environment.
Moreover, the Bank will continue to prioritise prudent risk management, conclude its digital transformation
efforts, and foster deeper customer engagement — all while maintaining a disciplined and agile approach
to operational excellence.
The Board is confident that the strategic actions being undertaken will reinforce the Bank’s resilience and
lay a solid foundation for sustainable growth in 2025 and beyond.
Conclusion
On behalf of the Board of Directors, I would like to take this opportunity to express our sincere gratitude to
our customers for their ongoing trust, to our shareholders for their continued support, and to our employees
for their commitment, dedication, and resilience during a very challenging year.
I remain confident that Izola Bank is well-positioned to navigate future challenges and capitalise on new
opportunities continuing to deliver on its mission of providing innovative and client-focused financial
solutions.
Ms. Caroline Van Marcke
Chairperson/Director
Izola Bank p.l.c.
29 April 2025
Izola Bank p.l.c.
iv
Directors’ Report
For the Year Ended 31 December 2024
The directors have prepared this report for Izola Bank p.l.c. ("the Bank") in accordance with Article 177 of
the Companies Act 1995 (Chapter 386, Laws of Malta) ("the Act") including the further provisions as set out
in the sixth schedule of the Act, together with the financial statements of the Bank for the year ended 31
December 2024.
Board of directors
The directors who served throughout the year were as follows:
Members
Ms. Caroline Van Marcke (Chairperson)
Ms. Magdalena De Roeck
Mr. Simon Azzopardi
Mr. Francis Gouder (resigned 29 April 2025)
Mr. Alain Malschaert
Mr. Andrew Mifsud
Mr. Guido Mizzi
Mr. Patrick H. Van Leynseele
Company secretary
Mr. Calvin Bartolo
Principal activities
Izola Bank p.l.c. is registered in Malta as a public limited liability company under the Companies Act, 1995
(Chapter 386, Laws of Malta). The Bank is licensed by the Malta Financial Services Authority to carry out the
business of banking in terms of the Banking Act, 1994 (Chapter 371, Laws of Malta).
The Bank is principally engaged in providing corporate banking and factoring services to resident and non-
resident customers, including to related parties, with simple and easy to use savings products for both local
and foreign individuals and businesses.
Operational Review
A review of the business of the Bank for the year ended 31 December 2024 and an indication of future
developments are provided in the Chairperson’s Statement, which can be found in the front section of this
Annual Report.
Izola Bank p.l.c.
v
Directors’ Report – continued
For the Year Ended 31 December 2024
Principal risks and uncertainties
The main risks that the Bank has identified are credit risk arising from changes in credit quality and the
recoverability of loans and amounts due from Maltese and Belgian counterparties, concentration risk arising
from an uneven distribution of counterparties and liquidity and interest rate risks which are inherent in the
nature of the business of banking. Other risks which are closely monitored by management include foreign
exchange risk and investment price risk, reputational risk, operational risk as well as cyber-security and
business continuity risks.
Risk management policies have been established to identify and analyse the risks faced by the Bank, to set
out appropriate risk limits and controls, and to monitor risks and adherence to limits. A detailed overview
of these risks, together with the respective financial metrics are outlined in Note 4 of the Financial
Statements.
Directors' responsibilities for the financial statements
The Directors are required by the Companies Act, 1995 to prepare financial statements which give a true
and fair view of the state of affairs of the Bank as at the end of each reporting period and of the profit or
loss for that period. In preparing the financial statements, the Directors are responsible for:
• ensuring that the financial statements have been drawn up in accordance with International
Financial Reporting Standards as adopted by the EU;
• selecting and applying appropriate accounting policies;
• making accounting estimates that are reasonable in the circumstances; and
• ensuring that the financial statements are prepared on the going concern basis unless it is
inappropriate to presume that the Bank will continue in business as a going concern.
The Directors are also responsible for designing, implementing and maintaining such internal controls as
they deem necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and that comply with the Companies Act, 1995 and the
Banking Act, 1994. They are also responsible for safeguarding the assets of the Bank and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements of the Bank for the year ended 31 December 2024 are included in this Annual
Report and made available on the Bank’s website. The Directors are responsible for the maintenance and
integrity of the Annual Report on the website in view of their responsibility for the controls over, and the
security of, the website. Access to information published on the Bank’s website is available in other countries
and jurisdictions where legislation governing the preparation and dissemination of financial statements may
differ from requirements or practice in Malta.
Izola Bank p.l.c.
vi
Directors’ Report – continued
For the Year Ended 31 December 2024
Dividends and reserves
In the interest of preservation of capital and liquidity, the Directors have neither declared an interim
dividend nor proposed the payment of a final dividend for the financial year 31 December 2024.
Going concern pursuant to Capital Markets Rule 5.62
As required by the Capital Markets Rule 5.62, upon due consideration of the Bank’s performance, financial
position, capital adequacy and solvency, the Directors confirm that, at the time of approving these Financial
Statements, the Bank is capable of continuing to operate as a going concern for the foreseeable future.
Information pursuant to Capital Markets Rule 5.64
The Bank does not have any listed securities carrying voting rights.
Statement of the Directors pursuant to Capital Markets Rule 5.68
The Directors confirm that, to the best of their knowledge:
• the financial statements give a true and fair view of the financial position of the Bank as at 31
December 2024, and of its financial performance and its cash flows for the year then ended in
accordance with International Financial Reporting Standards as adopted by the EU; and
• the Annual Report provides a fair review of the Bank’s business development and performance, as
well as its financial position, together with a description of the principal risks and uncertainties
faced during the year.
Information pursuant to Capital Markets Rule 5.70.1
The Bank provides a range of banking services to the Van Marcke Group, of which the Bank itself is a
member. Ms. Magdalena de Roeck, Ms. Caroline Van Marcke and Mr. Patrick Van Leynseele are indirectly
interested in this business relationship by virtue of their directorships of various companies within the Van
Marcke Group.
Further details can be found within Note 31 of the Financial Statements.
Izola Bank p.l.c.
vii
Directors’ Report – continued
For the Year Ended 31 December 2024
Information pursuant to Capital Markets Rule 5.68
Pursuant to Capital Markets Rule 5.68, we, the undersigned, declare that to the best of our knowledge the
financial statements included in the Annual Report, and prepared in accordance with the requirements of
International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Bank, and that the Directors’ Report includes a fair
review of the development and performance of the business and position of the Bank, together with a
description of the principal risks and uncertainties that it faces.
Auditors
BDO Malta have expressed their willingness to continue in office. A resolution proposing the re-
appointment of BDO Malta as auditors of the Bank will be submitted at the forthcoming Annual General
Meeting.
Signed on behalf of the Board of Directors on 29 April 2025 by Mr. Andrew Mifsud (Chief Executive
Officer/Director) and Mr. Guido Mizzi (Director) as per the Directors' Declaration on ESEF Annual Financial
Report submitted in conjunction with the Annual Financial Report.
Registered Address
4 Castille Place,
Valletta
VLT 1062
Malta
Tel: +356 27922040
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
viii
Pursuant to Capital Markets Rule 5.97 as issued by the Malta Financial Services Authority, Izola Bank p.l.c.
(the ‘Bank’) hereby includes a Statement of Compliance reporting on the extent to which the Bank has
adopted the Code of Principles of Good Corporate Governance appended as Appendix 5.1 to the said
Capital Markets Rules (the ‘Principles’) and the effective measures that the Bank has taken to ensure
compliance with these Principles during the financial year under review.
Introduction
The adoption of the Principles is not mandatory, however the Board of Directors (the ‘Board’) of Izola Bank
p.l.c. believes that the adoption of these Principles is in the best interest of the Bank and its shareholders.
The Bank applies all the provisions of the Code of Principles of Good Corporate Governance (the
"Principles"), save where there exist circumstances that warrant non-adherence thereto, as outlined in Part
Two of this Statement. During the financial year under review, the Bank did not apply any corporate
governance practices beyond the provisions under national law.
PART ONE - Compliance with the Code
Principle 1: The Board
The Bank is headed by an effective Board and all directors exercise prudent controls which enable risk to be
assessed and managed. The Board is composed of members who are honest and competent, making them
fit and proper to conduct the business of the Bank. The directors are of the appropriate calibre, having the
necessary experience to provide leadership, integrity, and judgement in directing the Bank. All directors are
responsible for determining the Bank’s strategic aims and its organisational structure. The directors
regularly review management performance and ensure that the Bank has the appropriate mix of financial
and human resources to meet its objectives. Every director is conversant with the statutory and regulatory
requirements connected to the business of the Bank and regularly attends meetings of the Board. Directors
are appointed by the shareholders during the Bank’s Annual General Meeting for a period of one year.
The Board delegates specific responsibilities to the Audit and Risk Committee, the Remuneration and
Nomination Committee, the Credit Committee, the Strategy Committee and the Asset and Liability
Committee. Each Committee has its own terms of reference which are in turn approved by the Board.
Principle 2: Chairperson and Chief Executive Officer (‘CEO’)
The Bank’s current organisational structure incorporates the position of a CEO and that of a Chairperson,
both occupied by two different individuals. In line with the Board of Directors’ terms of reference, there is
a clear division of responsibilities between the running of the Board and the CEO’s responsibility in managing
the Bank’s business. The separation of the roles of the Chairperson and the CEO avoids the concentration
of authority and power in one individual.
The Chairperson is responsible for leading the Board and setting out the agenda, and ensuring that the
directors receive precise, timely and objective information so that they can take sound decisions and
effectively monitor the performance of the Bank. During the Board meeting, the Chairperson encourages
active engagement by all Board members and ensures that the opinions of all the directors are considered
in the discussion of complex or contentious issues.
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
ix
Principle 2: Chairperson and Chief Executive Officer (‘CEO’) – continued
The CEO is responsible for driving and delivering performance within strategic goals and business plans
agreed by the Board. He actively leads the senior management in the day-to-day running of the Bank and
the execution of the agreed strategy. He makes decisions in all matters affecting the operations,
performance, and strategy of the business, except for those matters reserved for the Board or specifically
delegated by the Board to its Committees.
Principle 3: Composition of the Board
The Board considers that it is of sufficient size for the requirements of the business and its members possess
the required diversity of knowledge and experience to properly execute their duties as directors. Each of
the directors is skilful, competent, knowledgeable, and experienced to fulfil the role diligently. The CEO was
appointed to the Board of Directors in 2019 and provides the Board with all necessary management and
operational information.
During the year under review, the Board consisted of four independent Non-Executive Directors, three Non-
Independent, Non-Executive Directors including the Chairperson (as set out in the Directors’ Report) and
one Executive Director, being the CEO. In determining the independence of its directors, the Board has
referred to the principles relating to independence contained in the Code. Each independent non-executive
director has made a declaration in writing to that effect in line with the requirements emanating from Code
Provisions 3.4. All directors shall disclose their interests and external commitment, both ahead of their
appointment and, where significant changes arise, during their tenure as directors. This ensures that
directors’ business interests and commitments do not give rise to potential conflicts of interest and allow
them to devote the necessary time and attention to properly execute their duties on the Board.
Principle 4: Responsibilities of the Board
The Board’s role and responsibility is to execute the four basic roles of corporate governance namely:
accountability, monitoring, strategy formation and policy development.
The Board regularly reviews and evaluates corporate strategy, major operational and financial plans, risk
policy and performance objectives, and monitors implementation and corporate performance within the
parameters of all relevant laws, regulations, and codes of best business practice. The Board ensures that
policies and procedures are in place to maintain the highest standards of corporate conduct, including
compliance with laws, regulations, business and ethical standards by the Bank and its employees. Board
members are provided with regular training and information sessions on topical matters such as
developments in banking regulation and emerging trends in the business of banking.
The Board requires management to constantly monitor performance and report to its satisfaction, at least
on a quarterly basis, fully and accurately on the key performance indicators (‘KPIs’). Business risks and KPIs
are benchmarked against industry norms so that the Bank’s performance can be effectively evaluated.
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
x
Principle 4: Responsibilities of the Board – continued
The Board delegates specific responsibilities to the following Committees:
Board Committees
Audit and Risk Committee
The Audit and Risk Committee’s Terms of Reference include the monitoring of the financial reporting
process, the effectiveness of the Bank’s internal control, internal audit and risk management systems, and
the statutory audit of the Bank’s annual financial statements. The vetting and approvals of related party
transactions, which remain consistent from year to year, are handled by the same Committee.
The Audit and Risk Committee protects the interests of the Bank’s shareholders and assists the directors in
conducting their role effectively so that the Bank’s decision-making capability and the accuracy of its
reporting and financial results are maintained at a high level at all times. It ensures that the Bank maintains
a robust finance function responsible for accounting and financial data. This Committee has non-executive
responsibility for oversight of, and advice to, the Board on matters relating to financial reporting. The
Committee monitors the integrity of the Bank’s financial statements, any formal announcements relating
to the Bank’s financial performance and reviews significant financial reporting judgements contained
therein.
The Committee approves the internal audit work plan, which will include an assessment of controls relating
to financial reporting and other risks as appropriate. The Audit and Risk Committee is also responsible for
providing recommendations to the Board regarding the appointment of the external auditors, reviewing
and monitoring their independence, and assessing the effectiveness of the statutory audit process.
In terms of Capital Markets Rules 5.117, 5.118 and 5.119, the Audit and Risk Committee is composed of
three non-executive directors. Mr. Guido Mizzi and Mr. Simon Azzopardi serve as non-executive directors
and are considered independent, as they are free from any business, family or other relationships with the
Bank or its management that may could give rise to a conflict of interest or impair their judgement. The
Chairman of the Audit and Risk Committee is appointed by the Board of Directors.
In terms of Capital Markets Rule 5.119, Mr. Guido Mizzi is the director whom the Board considers as
independent of the Bank and competent in accounting, given his extensive experience as a former managing
partner of a local accountancy firm. Mr. Van Leynseele is a partner in a Brussels law firm and a member of
the Bar in both Brussels and New York. Mr. Azzopardi has an extensive background in product development,
predominantly in the financial services sector and technology-focused businesses.
All three directors have experience serving on various other boards and are considered competent to fulfil
their responsibilities as members of the Audit and Risk Committee of the Bank. The Board thus considers
that the committee members have the competence relevant to the banking sector.
Meetings held: 6
Members Attended
Mr. Guido Mizzi (Chairperson) 6
Mr. Simon Azzopardi 6
Mr. Patrick H. Van Leynseele 6
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
xi
Principle 4: Responsibilities of the Board – continued
Other Board members have a right to attend the meetings. The Audit and Risk Committee has direct access
to the Head of Finance and Treasury, who is responsible for the preparation and integrity of financial
statements, and a direct reporting line to the Head of Risk and Compliance, who is responsible for ensuring
proper execution of the risk management and control framework. The Head of IT, who is responsible for the
maintenance of internal controls in relation to Information and Communications Technology (‘ICT’), attends
meetings when ICT-related topics are discussed. Both the internal and external auditors are also invited to
attend meetings on an ad-hoc basis. The Company Secretary acts as Secretary to the Committee.
Remuneration and Nomination Committee
In its nomination function, the Committee is primarily tasked with identifying and nominating new Board
candidates for the approval of the Board. The Committee periodically assesses the structure, size,
composition, and performance of the Board and makes recommendations to the Board regarding any
changes. The Committee is also responsible to periodically assess the skills, knowledge, and experience of
individual directors, and of the Board collectively, and report on this to the Board. It is also tasked with
reviewing the remuneration structure for the Bank’s senior management and all staff, evaluating the
impacts of remuneration considerations on its overall risk profile and corporate culture.
The Remuneration and Nomination Committee is composed of three non-executive directors, two of whom
are independent and meets at least once a year. The Remuneration and Nomination Committee is tasked
with oversight of performance and remuneration practices, making proposals to the Board on the
remuneration policy for directors and leading the process for Board appointments. The Committee also
assesses the size, composition and performance of the Board and the individual and collective suitability of
directors. The terms of reference of this Committee are in line with Code Provisions of 8.A.2 - 8.A.6 and
8.B.2 - 8.B.8. Further information on the Bank’s remuneration practices is included within the Report of the
Remuneration and Nomination Committee immediately following the Directors’ Statement of Compliance
with the Code of Principles of Good Corporate Governance.
Meetings held: 1
Members Attended
Mr. Francis Gouder (Chairperson) 1
Ms. Caroline Van Marcke 1
Mr. Patrick H. Van Leynseele 1
The Company Secretary acts as Secretary to the Committee.
Credit Committee
The Credit Committee is composed of a minimum of three members, the majority of whom shall be
directors. In order to secure management representation, the Chief Executive Officer shall be a member of
the Credit Committee ex officio. The Head of Risk and Compliance shall be a non-voting member. The
Chairperson shall be an independent non-executive director. It operates within Board-approved credit
sanctioning limits. Proposals falling outside the Committee’s limits are referred, together with the
Committee’s recommendations, to the Board for consideration and determination.
Meetings held: 5
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
xii
Principle 4: Responsibilities of the Board – continued
Members Attended
Mr. Alain Malschaert (Chairperson) 5
Mr. Francis Gouder 3
Mr. Andrew Mifsud 5
Mr. John Abdilla (appointed on 25 March 2024) 5
The Head of Credit regularly attends the meetings, whereas the Company Secretary acts as Secretary to the
Committee.
Strategy Committee
The Committee is responsible for making recommendations to the Board of Directors in respect of the
Bank’s business model and forward-looking strategy, taking into consideration the risks and opportunities
related to various strategies. The Committee is also responsible for analysing the implementation of the
business model and strategy or any changes thereto, including any potential ICT implications.
It is composed of three directors and meets at least once a year. The Bank’s Senior Management team and
other bank executives may be invited to attend meetings. The Company Secretary acts as Secretary to the
Committee.
Meetings held: 1
Members Attended
Mr. Simon Azzopardi (Chairperson) 1
Ms. Caroline Van Marcke 1
Mr. Andrew Mifsud 1
Asset and Liability Management Committee (ALCO)
The ALCO meets at least quarterly to monitor the Bank’s financial performance, and review and manage
financial risks in accordance with Bank policies, namely: interest rate, liquidity and funding risk, solvency,
market sector and country risk; and counterparty and foreign exchange risk. The ALCO reports to the Board
on a quarterly basis.
The ALCO is chaired by the CEO and is composed of the Head of Finance and Treasury, the Head of Strategy
and Value together with the Senior Finance and Treasury Manager. The Company Secretary acts as Secretary
to the Committee. The Assistant Treasury Manager also regularly attends the meetings.
Meetings held: 13
Members Attended
Mr. Andrew Mifsud (Chairperson) 13
Mr. Calvin Bartolo 13
Mr. Kurt Grima 13
Mr. Clarence Attard (resigned on 26 June 2024) 10
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
xiii
Principle 5: Board Meetings
During the financial year ended 31 December 2024 the Board met seven times. Notice of the dates of
forthcoming meetings, together with all board papers, was circulated well in advance to the directors so
that they had ample opportunity to consider the information and prepare for each meeting. After each
Board meeting and before the next meeting, minutes that faithfully recorded attendance and decisions
were prepared and circulated to all directors.
Attendance of the Board members during the financial year ended 31 December 2024 was as follows:
Meetings Held: 7
Members Attended
Ms. Caroline Van Marcke (Chairperson) 7
Ms. Magdalena De Roeck 6
Mr. Simon Azzopardi 5
Mr. Francis Gouder 5
Mr. Alain Malschaert 6
Mr. Andrew Mifsud 7
Mr. Guido Mizzi 7
Mr. Patrick H. Van Leynseele 6
Company Secretary
Calvin Bartolo
Principle 6: Information and Professional Development
The CEO and Company Secretary brief all new directors on the Bank’s organisation and activities and their
responsibilities as directors.
When they judge it necessary, all directors can access independent professional advice at the Bank’s
expense to enable them to discharge their responsibilities as directors. All directors also have access to the
services of the Company Secretary for advice on all governance matters.
The Bank is committed to providing for the development and training of management and employees. The
Board is updated at least annually with the latest staff development programme. In accordance with Code
Provision 6, the Board is responsible for the appointment of the CEO whilst, in line with Code Provision 6.5,
the CEO is responsible for the recruitment and appointment of senior management. Training of
management and employees is a priority, and, in this respect, access to internal and external training is
provided by the Bank to management and employees. The Bank also has a system in place which monitors
management and staff engagement. As part of succession planning and talent management, the Board and
the CEO ensure that the Bank implements appropriate schemes to recruit, retain and motivate high-quality
staff members.
Principle 7: Evaluation of the Board’s Performance
The Board has set up the Remuneration and Nomination Committee to periodically review and monitor the
effectiveness of the Bank’s Board suitability policy and to guide the execution of suitability assessments of
directors. The Chairperson reports on the Committee’s activities and submits recommendations on areas
falling within its remit upon request of the Board of Directors. In line with its policies, the Bank performs a
suitability assessment every 2-3 years, with the most recent performed in September 2024.
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
xiv
Principle 7: Evaluation of the Board’s Performance – continued
The Committee may request information or reports from internal departments to facilitate discussions and
decision-making. It may also provide guidance on how policies pertaining to performance, remuneration
and training are to be communicated internally.
Principle 8: Committees
The Board established a Remuneration and Nomination Committee to oversee matters of remuneration
and nomination in line with best practice. More detailed information regarding remuneration is presented
in the Report of the Remuneration and Nomination Committee following the Directors’ Statement of
Compliance with the Code of Principles of Good Corporate Governance.
Principles 9 and 10: Relations with Shareholders and with the Market and Institutional Shareholders
The Bank provides the market with regular, timely, accurate and detailed information in accordance with
the requirements of the Capital Markets Rules by way of company announcements.
The Bank communicates with its shareholders through the Bank’s Annual General Meeting as well as by way
of the Annual Report and Financial Statements.
The Bank has an Internal Code of Dealing Policy to give guidance to the Bank’s directors and employees on
procedures to be followed when dealing in the Bank’s securities and on the treatment of Inside Information
in line with the provisions of the Prevention of Financial Markets Act and any related subsidiary legislation
and regulations.
The Bank’s shareholders are not custodians, banks, financial institutions, fund managers, stockbrokers, or
investment managers and as a result, Principle 10 is not applicable.
Principle 11: Conflicts of Interest
The directors are always strongly aware of their responsibility to act in the interest of the Bank and its
shareholders and of their obligation to avoid conflicts of interest. The latter may and do arise on specific
matters. In such instances, the Bank ensures that such conflicts, actual or potential, are managed in the best
interest of the Bank. Each director is required to disclose in full any matter where there is a potential or
actual conflict of interest, whether such conflict arises from personal interests or the interests of the
companies in which such person is a director or officer. Directors do not participate in a discussion
concerning matters in which they have a conflict of interest unless the Board finds no objection to the
presence of such director. In any event, the director shall refrain from voting on the matter.
On joining the Board and regularly thereafter, the directors are informed of their obligations on dealing in
securities of the Bank within the parameters of the law, including the Capital Markets Rules, and the
directors follow the required procedures. Interests of directors are disclosed within Note 31 - Related Parties
- to the accompanying Financial Statements.
Principle 12: Corporate Social Responsibility
Over the past 30 years, the Bank has transformed itself to be in a better position to deliver on its purpose:
enabling purposeful growth. This value is at the heart of the Bank’s CSR initiatives, as it continues to provide
both tangible and immediate contributions to the community’s welfare. The Bank’s approach to CSR is
through investing in community-based organisations that directly address pressing issues within the country
– issues if left unattended would have dire consequences for people in need.
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
xv
Principle 12: Corporate Social Responsibility - continued
Foodbank Lifeline Foundation
Since 2018, the Bank has proudly served as an official sponsor of Foodbank Lifeline Foundation Malta, an
esteemed NGO dedicated to providing essential food assistance to individuals in immediate need,
irrespective of their background. Over the years, the Bank’s collaboration with Foodbank Lifeline has
deepened, reflecting its unwavering commitment to addressing food insecurity in Malta. Beyond financial
contributions, Izola Bank has actively engaged in practical initiatives to bolster the Foundation's vital
services, extending support to thousands of beneficiaries annually. Demonstrating a hands-on approach,
one of our team members also serves on the NGO's Board of Directors, symbolising our shared vision for a
future without hunger in Malta.
Fostering Digital Empowerment for Foodbank Lifeline
As part of our comprehensive support, the Bank sponsors the design, development and maintenance of
Foodbank Lifeline's digital platforms, including its informative website and active social media channels. By
facilitating online referrals and disseminating valuable resources, we aim to enhance accessibility to
Foodbank Lifeline's services and amplify its outreach within the community. Additionally, our financial
backing has enabled the Foundation to cultivate a robust online presence, garnering significant engagement
and support from over 13,000 followers across various platforms. Through strategic campaigns and
promotions organised by Izola Bank, we strive to mobilise donations and elevate public awareness of
Foodbank Lifeline's mission.
Reverse Advent Calendar Campaign
An annual highlight during the festive season, the Reverse Advent Calendar Campaign is a hallmark initiative
co-led by Izola Bank and Foodbank Lifeline. Embraced eagerly by local stakeholders, including schools and
businesses, this campaign embodies the spirit of giving and solidarity within our community. As stewards of
this initiative, the Bank orchestrates the campaign's logistical aspects, from media coordination to social
media management, ensuring its seamless execution and widespread impact. Reflecting on the success of
the 2024 Christmas period, the Bank reaffirms its steadfast commitment to fostering compassion and
support for those in need through collaborative endeavours like the Reverse Advent Calendar Campaign.
Spare A Bag Campaign
In 2024, the Bank continued its collaboration with Foodbank Lifeline by joining the Foundation’s ‘Spare A
Bag’ campaign. This initiative aims to collect reusable bags for distributing essential food supplies to families
in need across Malta and Gozo. The campaign also provided a convenient solution for individuals working
in Valletta or shopping in the capital, allowing them to easily drop off extra bags at the Bank’s reception.
Supporting the Sporting Community
Izola Bank proudly sponsored the Ta’ Xbiex Futsal Team for the 2023 – 2024 season to promote an active
lifestyle and support the local sporting community. The partnership with the team underscores the Bank’s
commitment to fostering health and wellness initiatives in Malta. Moreover, Izola Bank took the initiative
to bring the Ta’ Xbiex Futsal Team and Foodbank Lifeline Foundation together through the organisation of
a 10-hour Football and Futsal Marathon, which was held in April 2024, aimed at raising vital funds for
Foodbank Lifeline. Under the ‘Goals for Good’ slogan, this event targeted companies, sporting associations
and the public to get involved in a good cause.
Izola Bank p.l.c.
Directors’ Statement of Compliance
with the Code of Principles of Good Corporate
Governance
xvi
PART TWO – Non-Compliance with the Code
Principle 2 – Code Provision 2.3
The Chairperson of the Bank cannot be considered independent in accordance with the principles relating
to independence contained in the Code.
Principle 4 – Code Provision 4.2.7
The Code Provision recommends that the Board develops a succession policy for the future composition of
the Board and particularly the executive component thereof, for which the Chairman should hold key
responsibility. The Board does not have a succession policy in place for the future composition of the Board
of Directors. This approach may be revised in the future in line with changes to the Bank’s size and/or
organisational structure.
Principle 6 – Code Provision 6.4.4
Code Provision 6.4.4 recommends that the CEO establishes a succession plan for senior management. The
Bank does not have a formal succession plan in place for senior management. This approach may be revised
in the future in line with changes to the Bank’s size and/or organisational structure.
Principle 7 – Code Provision 7.3
Code Provision 7.3 recommends that the non-executive directors be responsible for the evaluation of the
Chairperson, taking into account the views of the executive director. This evaluation has not been adopted
but may be revised with future policy changes.
Capital Markets Rule 5.97.4
The information required by this Capital Markets Rule is found in the Directors’ Report, within the Directors’
Responsibilities section.
The Directors’ Statement of Compliance with the Code of Principles of Good Corporate Governance was
approved by the Board of Directors on 29 April 2025.
Izola Bank p.l.c.
Report of the Remuneration and Nomination Committee
For the Year Ended 31 December 2024
xvii
Governance
The Bank’s Remuneration and Nomination Committee comprises three non-executive directors and is
tasked with overseeing the Bank’s remuneration and nomination practices. Information regarding the
Committee's functions, composition, and attendance at meetings is disclosed within the Directors’
Statement of Compliance with the Code of Principles of Good Corporate Governance.
The Remuneration and Nomination Committee's report was approved by the Board of Directors at its
meeting on 23 July 2024.
Remuneration Policy
The Bank’s Remuneration Policy aims to increase transparency in remuneration matters, to support the
business goals of the Bank through efficient remuneration structures, and to create common basic values
and guidelines for the Bank when offering remuneration and benefits to the senior management team and
Directors of the Bank.
Remuneration Statement
Executive Management
Reference to senior management shall mean the CEO, the Head of Finance & Treasury, the Head of
Operations, the Head of Credit, the Head of IT, the Head of Risk and Compliance, the Head of HR and the
Head of Strategy & Value. The Board is of the opinion that the remuneration packages for senior
management are in line with local market expectations and are at an appropriate level to attract and retain
executives with the appropriate skills, qualities, and experience to ensure the effective management of the
Bank.
The terms and conditions of senior management employment are set out in the respective indefinite
employment contracts. Senior management is not entitled to share options or profit sharing. There are no
supplementary pension or early retirement schemes in place, and notice periods are as established by law.
Senior management is eligible for an annual salary increase and discretionary performance bonus (not
exceeding fixed remuneration) in line with the Bank’s overall performance, individual performance and
general market remuneration trends.
Senior management is entitled to non-cash benefits, including the use of a company car or equivalent car
cash allowance. Other benefits afforded to all staff members, including senior management, are personal
accident, life, and health insurance coverage.
Loans amounting to €1,359,518 were advanced to key management personnel as disclosed in Note 31.3 to
the financial statements.
There have been no significant changes in the Bank’s remuneration policy for senior management during
the year under review. During 2024, the Bank continued offering all staff members, including senior
management, subsidies on home loan interest rates.
Izola Bank p.l.c.
Report of the Remuneration and Nomination Committee
For the Year Ended 31 December 2024
xviii
Remuneration Statement - continued
Executive Management - continued
Total emoluments of senior management for the year ended 31 December 2024 are as follows:
Fixed Remuneration
Variable Remuneration
Share Options
Others
€730,247
€103,028
None
Non-cash benefits
referred to
immediately above.
During the year under review, no special payments (sign-on and/or severance pay), payments exceeding €1
million or any payments subject to deferral were made to key management personnel.
Directors
As of 31 December 2024, the Board was composed of non-executive directors and one executive director.
The maximum annual aggregate emoluments that may be paid to the directors are approved by the
shareholders in a General Meeting. This amount was fixed at an aggregate sum of €175,000 at the Annual
General Meeting held on 28 March 2024.
None of the directors had service contracts with the Bank as at the end of the financial year.
Furthermore, none of the directors, in their capacity as directors of the Bank, are entitled to profit sharing,
share options, pension benefits or any other remuneration.
In line with the Bank’s Remuneration Policy, none of the Directors are eligible to receive variable
remuneration as Directors. In this respect, there is no formal provision for the reclamation of variable
remuneration.
Total emoluments received by directors relative to their directorship of the Bank in respect of the financial
year ended 31 December 2024 are disclosed in the table below:
Fixed Remuneration
Variable Remuneration
Share Options
Others
€140,000
None
None
None
Izola Bank p.l.c.
Financial Statements
2024
Izola Bank p.l.c.
Page
Financial Statements:
Statement of Profit or Loss and Other Comprehensive Income 1
Statement of Financial Position 2
Statement of Changes in Equity 3
Statement of Cash Flows 5
Notes to the Financial Statements 7
Independent Auditors’ Report 113
1
Izola Bank p.l.c.
Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 31 December
Notes
2024
2023
€
€
Interest and similar income
5
22,354,878
19,039,346
Interest expense
5
(16,177,770)
(12,052,370)
Net interest income
6,177,108
6,986,976
Fee and commission income
6
233,584
157,529
Fee and commission expense
6
(145,966)
(141,096)
Net fee and commission income
87,618
16,433
Net trading income
7
(186,045)
(37,800)
Other Operating Income
8
(124,213)
129,864
Total operating income
5,954,468
7,095,473
Depreciation of property and equipment
18
(301,862)
(181,399)
Amortisation of intangible assets
19
(848,309)
(872,615)
Changes in expected credit losses and other credit
impairment charges
9
(42,279)
(441,180)
Employee compensation and benefits
10
(3,397,525)
(3,054,488)
Other administrative expenses
10
(5,446,469)
(4,515,169)
Loss before tax
(4,081,976)
(1,969,378)
Income tax credit
11
1,112,204
727,010
Loss for the year
(2,969,772)
(1,242,368)
Other comprehensive income
Items that will not be reclassified to profit or loss
Gain on property revaluation
1,000,000
1,170,375
Income taxes
(228,112)
(180,305)
771,888
990,070
Items that may be reclassified subsequently to profit or loss
Debt instruments measured at fair value through
other comprehensive income:
Net movement in fair value, before tax
1,553,255
1,171,649
- Income taxes
(543,639)
(410,077)
Movement in expected credit losses, before tax
1,865
47,509
- Income taxes
(653)
(16,628)
1,010,828
792,453
Other comprehensive income for the year, net of tax
1,782,716
1,782,523
Total comprehensive income for the year, net of tax
(1,187,056)
540,155
Earnings per share
12
(5c12)
(2c14)
The accompanying notes on pages 7 to 112 are an integral part of these financial statements.
2
Izola Bank p.l.c.
Statement of Financial Position
As at 31 December
Notes
2024
2023
€
€
ASSETS
Balances with Central Bank of Malta and cash
13
57,483,508
56,242,720
Loans and advances to banks
14
4,168,921
6,757,337
Financial Investments
15
89,144,374
101,589,059
Factored receivables
16
138,236,733
140,049,872
Loans and advances to customers
17
194,013,127
180,964,061
Property and equipment
18
11,157,880
13,939,136
Investment Property held for sale
18
4,838,007
-
Intangible assets
19
4,155,696
3,630,203
Deferred tax asset
25
2,993,326
2,993,32574,2527
744
2,200,649
Current tax asset
74,252
183,341
Other assets
20
2,456,536
2,391,355
Total assets
508,722,360
507,947,733
LIABILITIES
Amounts owed to institutions
21
-
20,000,000
Amounts owed to banks
22
-
271,105
Amounts owed to customers
23
448,613,950
429,743,262
Debt securities in issue
24
16,773,480
16,861,501
Deferred tax liability
25
1,174,806
808,0578,393,356
6,558,062
808,057
Accruals and other liabilities
26
6,558,061
8,393,356
Total liabilities
473,120,297
476,077,281
EQUITY
Called up share capital
27
29,000,000
29,000,000
Capital contribution reserve
27
2,032,675
32,675
Perpetual capital notes
27
3,000,000
-
Property revaluation reserve
27
4,739,260
3,967,372
Fair value reserve
27
(697,493)
(1,708,321)
Depositor compensation scheme reserve
27
-
1,038,647
Reserve for general banking risk
27
-
55,025
Accumulated losses
27
(2,472,379)
(514,946)
Total equity
35,602,063
31,870,452
Total liabilities and equity
508,722,360
507,947,733
Memorandum items
Commitments
28
179,182,237
187,954,041
The accompanying notes on pages 7 to 112 are an integral part of these financial statements.
The financial statements on pages 7 to 112 were approved and authorised for issue by the Board of Directors
on 29 April 2025. The financial statements were signed on behalf of the Bank's Board of Directors by Mr.
Andrew Mifsud (Chief Executive Officer) and Mr. Guido Mizzi (Director) as per the Directors' Declaration on
ESEF Annual Financial Report submitted in conjunction with the Annual Report and Financial Statements
2024.
3
Izola Bank p.l.c.
Statement of Changes in Equity
For the Year Ended 31 December 2024
Property
Fair
Depositor
Capital
Perpetual
Reserve for
Share
revaluation
value
compensation
Contribution
Capital notes
general banking
Accumulated
Notes
Capital
reserve
reserve
scheme reserve
re
reserve
risks
losses
Total
€
€
€
€
€
€
€
€
€
Balance at 1 January 2024
29,000,000
3, 967,372
(1,708,321)
1,038,647
32,675
-
55,025
(514,946)
31,870,452
Total comprehensive income
Loss for the year
-
-
-
-
-
-
-
(2,969,772)
(2,969,772)
Other comprehensive income
Gain arising on property revaluation, net of tax
-
771,888
-
-
-
-
-
-
771,888
Financial investments measured at fair value through other
comprehensive income
- Net movement in fair value, net of tax
-
-
1,009,616
-
-
-
-
-
1,009,616
- Movement in expected credit losses, net of tax
-
-
1,212
-
-
-
-
-
1,212
-
Total other comprehensive income
-
771,888
1,010,828
-
-
-
-
-
1,782,716
Total comprehensive income for the year
-
771,888
1,010,828
-
-
-
-
(2,969,772)
(1,187,056)
Transfers within reserves
Other transfers
-
-
-
(1,038,647)
-
-
(55,025)
1,093,672
-
Total transfers within reserves
-
-
-
(1,038,647)
-
-
- (55,025)
1,093,672
-
Transactions with owners
Contributions by owners
-
-
-
-
2,000,000
-
-
-
2,000,000
Issue of perpetual capital notes
-
-
-
-
-
3,000,000
-
-
3,000,000
Distributions to owners
Interest paid on perpetual capital notes
-
-
-
-
-
-
-
(81,333)
(81,333)
Total transactions with owners recognised directly in equity
-
-
-
-
2,000,000
3,000,000
-
(81,333)
4,918,667
Balance at 31 December 2024
29,000,000
4,739,260
(697,493)
-
2,032,675
3,000,000
-
(2,472,379)
35,602,063
The accompanying notes on pages 7 to 112 are an integral part of these financial statements.
4
Izola Bank p.l.c.
Statement of Changes in Equity
For the Year Ended 31 December 2023
Property
Fair
Depositor
Capital
Reserve for
Share
revaluation
value
compensation
contribution
general banking
Accumulated
Notes
Capital
reserve
reserve
scheme reserve
reserve
risks
losses
Total
€
€
€
€
€
€
€
€
Balance at 1 January 2023
29,000,000
2,977,302
2,977,302
(2,500,774)
831,860
32,675
72,782
916,452
31,330,297
Total comprehensive income
Loss for the year
-
-
-
-
-
-
(1,242,368)
(1,242,368)
Other comprehensive income
Gain arising on property revaluation, net of tax
-
990,070
-
-
-
-
-
990,070
Financial investments measured at fair value through other
comprehensive income
- Net movement in fair value, net of tax
-
-
761,572
-
-
-
-
761,572
- Movement in expected credit losses, net of tax
-
-
30,881
-
-
-
-
30,881
- Net gains reclassified to profit or loss on disposal, net of tax
-
-
-
-
-
-
-
-
Total other comprehensive income
-
990,070
792,453
-
-
-
-
1,782,523
Total comprehensive income for the year
-
990,070
792,453
-
-
-
-
540,155
Transfers within reserves
Transfer of revaluation surplus on disposal of property, net of tax
-
-
-
-
-
-
-
-
Derecognition of deferred tax on fair value of property
-
-
-
-
-
-
-
-
Other transfers
27
-
-
-
206,787
-
(17,757)
(189,030)
-
Total transfers within reserves
-
-
-
206,787
-
(17,757)
(189,030)
-
-
Balance at 31 December 2023
29,000,000
3,967,372
(1,708,321)
1,038,647
32,675
55,025
(514,946)
31,870,452
The accompanying notes on pages 7 to 112 are an integral part of these financial statements.
5
Izola Bank p.l.c.
Statement of Cash Flows
For the Year Ended 31 December
Note
2024
2023
€
€
Cash used in/from operating activities
29
(17,121,158)
36,459,100
Income tax paid
-
(85,248)
Income tax refunds
109,089
533,219
Net cash flows (used in)/generated from operating activities
(17,012,069)
36,907,071
Cash flows from/used in investing activities
Payments to acquire property and equipment and
intangible assets
(2,900,137)
(3,765,160)
Payments to acquire investments
(399,300)
(100,000)
Proceeds from disposal of investment securities
13,247,605
1,302,167
Interest received from financial investments
2,037,701
2,152,107
Net cash flows generated from/(used in) investing activities
11,985,869
(410,886)
Cash flows from/used in financing activities
Redemption of debt securities
(129,200)
-
Interest paid on perpetual capital notes
(81,333)
-
Interest paid on debt securities in issue
(839,790)
(843,370)
Capital contributions
Issue of perpetual capital notes
2,000,000
-
Issue of perpetual capital notes
3,000,000
-
Net cash flows generated from/(used in) financing activities
3,949,677
(843,370)
Net (decrease)/increase in cash and cash equivalents
(1,076,523)
35,652,815
Cash and cash equivalents at beginning of year
61,208,388
25,555,573
Cash and cash equivalents at end of year
30
60,131,865
61,208,388
The accompanying notes on pages 7 to 112 are an integral part of these financial statements.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
6
Page
Page
1
Reporting entity
7
18
Properties
95
2
Basis of preparation
7
19
Intangible assets
98
3
Material accounting policies
10
20
Other assets
98
4
Financial risk management and
review
31
21
Amounts owed to institutions
99
5
Net interest and similar income
87
22
Amounts owed to banks
99
6
Net fee and commission income
87
23
Amounts owed to customers
99
7
Net trading income
88
24
Debt securities in issue
99
8
Other operating income
88
25
Deferred tax assets and liabilities
100
9
Changes in expected credit losses
and other credit impairment
charges
89
26
Accruals and other liabilities
102
10
Loss before tax
89
27
Share capital and reserves
102
11
Income tax expense
90
28
Commitments
103
12
Earnings per share
91
29
Net cash absorbed by / from
operating activities
104
13
Balances with Central Bank of
Malta and cash
92
30
Cash and cash equivalents
105
14
Loans and advances to banks
92
31
Related parties
105
15
Financial investments
92
32
Operating segments
107
16
Factored receivables
94
33
Critical accounting estimates and
judgements
110
17
Loans and advances to customers
94
34
Subsequent events
112
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
7
1 Reporting entity
Izola Bank p.l.c. (the “Bank”) is a public limited liability company domiciled and incorporated in
Malta. The Bank is a credit institution licenced in Malta and is primarily involved in the provision of
lending and factoring services to corporate and retail customers, as well as the raising of deposits
from retail customers.
2 Basis of preparation
2.1 Statement of compliance with IFRSs as adopted by the European Union
These financial statements have been drawn up in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”),
including interpretations issued by the IFRS Interpretations Committee (“IFRIC”), and as adopted
by the European Union (“EU”).
These financial statements have also been prepared and presented in accordance with the
provisions of the Companies Act, 1995 (Chapter 386, Laws of Malta) and the Banking Act, 1994
(Chapter 371, Laws of Malta).
2.2 Basis of measurement
These financial statements have been prepared on a historical cost basis, except for:
• Financial investments measured at fair value through other comprehensive income
(“FVOCI”);
• Financial investments designated at FVOCI or at fair value through profit or loss (“FVTPL”);
and
• Property within ‘Property and equipment’ and ’Investment Property held for sale’
measured at revalued amount and fair value, respectively.
2.3 Standards, interpretations and amendments to published standards effective in 2024
The following new standards, amendments and interpretations are effective for the first time in
these financial statements, but none have had a material effect on the Bank’s accounting policies:
Issued on
Effective from
Amendments to IAS 1 Presentation of
Financial Statements: Classification of
liabilities as Current or Non-current
23/01/2020
01/01/2024
Amendments to IAS 1 Presentation of
Financial Statements: Classification of
liabilities as Current or Non-current –
deferral of effective date
15/07/2020
01/01/2024
Amendments to IAS 1 Presentation of
Financial Statements: Non-current liabilities
with covenants
31/10/2022
01/01/2024
Amendments to IFRS 16 Leases: Lease
Liability in a Sale and Leaseback
22/09/2022
01/01/2024
Amendments to IAS 7 Statement of Cash
flows and IFRS 7 Financial Instruments:
Disclosures: Supplier Finance Arrangements
25/05/2023
01/01/2024
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
8
2 Basis of preparation – continued
2.4 Standards, interpretations and amendments to published standards that are not yet effective
Certain new accounting standards and interpretations have been published, which are not
mandatory for 31 December 2024 reporting periods and have not been early adopted by the Bank.
The IASB has published a number of minor amendments to IFRSs that are effective from 1 January
2025, which have been endorsed by the EU, and other minor amendments to IFRSs that are
effective from 1 January 2025, which have not yet been endorsed by the EU.
New standards, interpretations and amendments as adopted by EU but not yet effective:
Issued on
Effective from
Amendments to IAS 21 The effects of
changes in foreign exchange rates: lack of
exchangeability
15/08/2023
01/01/2025
Amendments to IFRS 9 and IFRS 7,
Amendments to the Classification and
Measurement of Financial Instruments
30/05/2024
01/01/2026
Contracts Referencing Nature-dependent
Electricity – Amendments to IFRS 9 and
IFRS 7
18/12/2024
01/01/2026
Annual Improvements Volume 11
18/07/2024
01/01/2026
New standards, interpretations and amendments issued by IASB but not yet adopted by EU:
Issued on
Effective from
IFRS 18 Presentation and Disclosure in
Financial Statements
09/04/2024
01/01/2027
IFRS 19 Subsidiaries without Public
Accountability: Disclosures
09/05/2024
01/01/2027
The Bank has not early adopted all these revisions to the requirements of IFRSs and the Bank’s
management is of the opinion that there are no requirements that will have a possible significant
impact on the Bank’s financial statements in the period of initial application.
2.5 Functional and presentation currency
These financial statements are presented in Euro (€), which is the Bank’s functional and
presentation currency.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
9
2 Basis of preparation – continued
2.6 Use of judgements and estimates
The preparation of financial statements in conformity with IFRSs as adopted by the EU requires the
use of certain accounting estimates. In this respect, management is required to exercise their
judgement in the process of applying the Bank’s accounting policies. This requires assumptions to
estimate the carrying amount of assets and liabilities, as well as the recognition of income and
expenses. Due to the inherent uncertainty and high level of subjectivity involved in making such
judgements, actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates
are recognised prospectively.
Information about critical accounting judgements, assumptions and estimation uncertainties as at
31 December 2024 is disclosed within Note 33 – Critical accounting estimates and judgements in
applying the Bank’s accounting policies, as well as within the following notes to the financial
statements:
• Expected credit losses on factored receivables and loans and advances to customers: Note 4.3
• Valuation of financial instruments: Note 4.7
• Valuation of property within ‘Property and equipment’ and ‘Investment Property held for
sale’: Note 4.7 and Note 18.
2.7 Going Concern
The financial statements are prepared on a going concern basis, as the Directors are satisfied that
the Bank has the resources to continue in business for the foreseeable future. In making this
assessment, the Directors have considered a wide range of information relating to present and
future conditions, including future projections of profitability, cash flows, capital requirements and
capital resources. These considerations include the application of stressed scenarios that reflect
existing economic uncertainties triggered by the escalation of the military conflict between Russia
and Ukraine, as well as considering potential impacts from other top and emerging risks, including
exposure to interest rate hikes, drops in asset prices, and local jurisdiction risks, and the related
impact on profitability, capital and liquidity.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
10
3 Material accounting policies
3.1 Financial assets
3.1.1 Recognition and initial measurement
The Bank recognises a financial asset in its statement of financial position when it becomes a party
to the contractual provisions of the instrument. Regular way purchases and sales of financial assets
are recognised on trade date, being the date on which the Bank commits to purchase or sell the
asset. Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Bank has transferred substantially all the risks
and rewards of ownership. A financial asset or financial liability is measured initially at fair value
plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or
issue. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss.
3.1.2 Classification and measurement
At initial recognition, the Bank classifies its financial assets in the following measurement
categories:
• Financial assets measured at FVTPL;
• Financial assets measured at FVOCI; and
• Financial assets measured at amortised cost.
The classification of investments in debt instruments depends on the Bank’s business model for
managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI.
For investments in equity instruments that are not held for trading, this will depend on whether
the Bank has made an irrevocable election at the time of initial recognition to account for the equity
investment at FVOCI.
The Bank reclassifies debt instruments when and only when its business model for managing those
assets changes.
Debt instruments
Subsequent measurement of debt instruments depends on the Bank’s business model for
managing the asset and the cash flow characteristics of the asset.
Business model assessment
The Bank performs an assessment of the objective of a business model in which an asset is held at
a portfolio level and in specific circumstances at an instrument level since this is deemed to best
reflect the way the business is managed and the monitoring of financial information by
management.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
11
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.2 Classification and measurement – continued
The information considered in the performance of this assessment includes:
• the stated policies and objectives for the portfolio and the operation of those policies in
practice. In particular, management considers whether the strategy focuses on earning
contractual interest revenue, maintaining a particular interest rate profile, matching the
duration of the financial assets to the duration of the liabilities that are funding those
assets, or realising cash flows through the sale of assets;
• the manner in which the performance of the portfolio is evaluated and reported to the
Bank's management;
• the risks that affect the performance of the business model (and the financial assets held
within that business model) and its strategy for how those risks are managed;
• how managers of the business are compensated for business performance (e.g. whether
compensation is based on the fair value of the assets managed or the contractual cash
flows collected); and
• the frequency, volume, and timing of sales transacted in prior periods, the reasons for
such sales and management’s expectations in respect of future sales activity. Information
about sales activity is not considered in isolation but as part of an overall assessment of
how the Bank's stated objective for managing the financial assets is achieved and how
cash flows are realised.
Financial assets that are held for trading or financial assets that are managed and whose
performance is evaluated on a fair value basis are measured at FVTPL since such assets are neither
held with the objective to collect contractual cash flows nor held with the objective to collect
contractual cash flows and sell financial assets.
Assessment of whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on
initial recognition. 'Interest' is defined as consideration for the time value of money and for the
credit risk associated with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit
margin that is consistent with a basic lending arrangement.
In assessing whether the contractual cash flows are solely payments of principal and interest
(“SPPI”), the Bank considers the contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this condition. In making the assessment, the
Bank considers:
• contingent events that would change the amount and timing of cash flows;
• leverage features;
• prepayment and extension terms;
• terms that limit the Bank's claim to cash flows from specified assets; and
• variable interest rates and features that modify consideration of the time value of money.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
12
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.2 Classification and measurement – continued
In some cases, loans originated by the Bank that are secured by collateral limit the Bank's claim to
cash flows from the underlying collateral (non-recourse loans). The Bank applies judgement in
assessing whether non-recourse loans meet the SPPI criterion.
The Bank typically considers the following information when making this judgement:
• whether the contractual arrangement specifically defines the amounts and dates of the
cash payments of the loan;
• the fair value of the collateral relative to the amount of the secured financial asset;
• the ability and willingness of the borrower to make contractual payments,
notwithstanding a decline in the value of collateral;
• whether the borrower is an individual or a substantive operating entity or is a special-
purpose entity;
• the Bank's risk of loss on the asset relative to a full-recourse loan;
• the extent to which the collateral represents all or a substantial portion of the borrower's
assets; and
• whether the Bank will benefit from any upside from the underlying assets.
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it meets both of the following conditions and is
not designated at FVTPL:
• the financial asset is held within a business model where the objective is to hold financial
assets to collect contractual cash flows; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that
are SPPI.
Interest income from these financial assets is recognised in ‘Interest income’ using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or
loss. Impairment losses are presented as a separate line item in the statement of profit or loss.
The 'amortised cost' of a financial instrument is the amount at which the financial instrument is
measured on initial recognition minus the principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between that initial amount and
the maturity amount and, for financial assets, adjusted for any expected credit loss (“ECL”)
allowance.
Such financial assets comprise primarily ‘Balances with Central Bank of Malta’, ‘Loans and advances
to banks’, debt securities at amortised cost within ‘Financial investments’, ‘Factored receivables’
and ‘Loans and advances to customers’.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
13
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.2 Classification and measurement – continued
Financial assets measured at fair value through other comprehensive income
A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not
designated at FVTPL:
• the financial asset is held within a business model where the objective is achieved by both
collecting contractual cash flows and selling financial assets; and
• the contractual terms of the financial asset give rise on specified dates to cash flows that
are SPPI.
Movements in the carrying amount are taken through OCI, except for the recognition of
impairment gains or losses, interest income and foreign exchange gains and losses, 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 or loss and recognised in ‘Other
operating income’. Interest income from these financial assets is recognised in ‘Interest income’
using the effective interest rate method. Foreign exchange gains and losses are presented in ‘Other
operating income’, and impairment losses are presented as a separate line item in the statement
of profit or loss.
Such financial assets comprise primarily debt securities measured at FVOCI and classified within
‘Financial investments’.
Equity investments designated at fair value through other comprehensive income
The Bank subsequently measures all equity investments at fair value. On initial recognition of an
equity investment that is not held for trading, the Bank may irrevocably elect to present
subsequent changes in fair value in OCI. This election is made on an instrument-by-instrument basis
and is irrevocable.
Where the Bank’s management has elected to present fair value gains and losses on equity
investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or
loss following the derecognition of the investment. Dividends from such investments continue to
be recognised in profit or loss as ‘Other operating income’ when the Bank’s right to receive
payments is established.
Such financial assets comprise primarily equity investments designated at FVOCI and classified
within ‘Financial investments’.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
14
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.2 Classification and measurement – continued
Financial assets measured at fair value through profit or loss
Debt instruments that do not meet the criteria for amortised cost or FVOCI are automatically
classified and measured at FVTPL. The Bank may irrevocably designate a financial asset that
otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if
doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. A
gain or loss on a debt instrument that is subsequently measured at FVTPL is recognised in profit or
loss and presented net within ‘Other operating income’ in the period in which it arises.
In addition, equity investments that are not designated at FVOCI at initial recognition are also
classified and measured at FVTPL. Changes in the fair value of financial assets measured at FVTPL
are recognised in ‘Other operating income’ in the statement of profit or loss as applicable.
Such financial assets comprise primarily equity investments designated at FVTPL at initial
recognition and classified within ‘Financial investments’.
3.1.3 Derecognition
The Bank derecognises a financial asset when the contractual rights to the cash flows from the
financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction
in which substantially all of the risks and rewards of ownership of the financial asset are transferred
or in which the Bank neither transfers nor retains substantially all of the risks and rewards of
ownership and it does not retain control of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or
the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the
consideration received (including any new asset obtained less any new liability assumed) and (ii)
any cumulative gain or loss that had been recognised in OCI, is recognised in profit or loss.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated
at FVOCI is not recognised in profit or loss on derecognition of such securities. Any interest in
transferred financial assets that qualify for derecognition that is created or retained by the Bank is
recognised as a separate asset or liability.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
15
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.4 Modifications of terms
If the contractual terms of a financial asset are modified, the Bank evaluates whether the cash flows
arising from the modified asset are substantially different than those arising from the original
contractual terms of the asset. The Bank applies judgement in assessing whether a change in
contractual terms (such as a change in interest rates or the remaining term of the loan) is
substantial enough to represent an expiry of the original instrument by considering, among others:
• If the borrower is in financial difficulty, whether the modification merely reduced the
contractual cash flows to amounts the borrower is expected to be able to pay;
• Whether any new terms that substantially affect the risk profile of the asset are
introduced;
• Significant extensions to the term of the financial instrument when the borrower is not in
financial difficulty;
• Significant changes to the interest rate;
• Changes in the currency in which the asset is denominated; and
• The insertion of collateral, other security or credit enhancements that significantly affect
the associated credit risk.
If the cash flows are substantially different, the contractual rights to cash flows from the original
financial asset are deemed to have expired. In this case, the original financial asset is derecognised
(Note 3.1.3) and a new financial asset is recognised at fair value plus any eligible transaction costs.
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 Bank also assesses whether the new financial
asset recognised 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.
Any fees received as part of the modification are accounted for as follows:
• fees that are considered in determining the fair value of the new asset and fees that
represent a reimbursement of eligible transaction costs are included in the initial
measurement of the asset; and
• other fees are included in profit or loss as part of the gain or loss on derecognition.
If the modification of a financial asset measured at amortised cost or FVOCI is not deemed to be
substantial and therefore does not result in the derecognition of the financial asset, the Bank
recalculates the gross carrying amount of the financial asset using the original effective interest
rate of the asset and recognises the resulting adjustment as a modification gain or loss in profit or
loss. For floating-rate financial assets, the original effective interest rate used to calculate the
modification gain or loss is adjusted to reflect current market terms at the time of the modification.
Any costs or fees incurred and fees received in relation to the modification of contractual terms
are reflected in an adjustment to the gross carrying amount of the modified financial asset and
amortised over the remaining term of the modified financial asset. Modification gains or losses are
presented within ‘Interest income’ in profit or loss.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
16
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.4 Modifications of terms – continued
If cash flows are modified in view of concessions granted to borrowers experiencing financial
difficulties, the objective of the modification is usually to maximise recovery of the original
contractual terms rather than to originate a new asset with substantially different terms. If the
modification of the financial asset results in the forgiveness of cash flows, the Bank considers
whether a portion of the asset should be written off before the modification takes place. This
approach impacts the result of the quantitative assessment and means that the derecognition
criteria are not usually met in such cases. Modification gains or losses arising as a result of
renegotiations in response to financial difficulties experienced by a borrower are presented
together with impairment losses in profit or loss.
3.1.5 Impairment
The Bank assesses on a forward-looking basis the expected credit losses (“ECL”) associated with its
debt instruments carried at amortised cost and FVOCI and with the exposure arising from loan
commitments, including:
• Loans and advances to banks;
• Debt instruments classified within ‘Financial investments’;
• Factored receivables; and
• Loans and advances to customers.
The Bank recognises credit loss allowances in respect of the above portfolios of financial assets at
each reporting date. No credit loss allowances are recognised in respect of equity investments.
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.
The Bank measures credit loss allowances at an amount equal to lifetime ECL except for the
following financial instruments, in respect of which credit loss allowances are measured as 12-
month ECL:
• debt securities classified within ‘Financial investments’ that are determined to have low
credit risk at the reporting date; and
• financial instruments that have not had a significant increase in credit risk (“SICR”) since
initial recognition.
Balances held with credit institutions in reputable jurisdictions classified within ‘Loans and
advances to banks’ and debt securities classified within ‘Financial investments’ are considered to
have low credit risk when the financial instrument is assigned an ‘investment-grade’ credit risk
rating. The Bank does not apply the low credit risk exemption to any other financial instrument.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
17
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.5 Impairment – continued
12-month ECLs are a portion of lifetime ECLs and represent the lifetime cash shortfalls that result
from default events on a financial instrument that are possible within 12 months from reporting
date. Financial instruments for which a 12-month ECL is recognised are referred to as 'Stage 1’
financial instruments.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of the
financial instrument. Financial instruments for which a lifetime ECL is recognised but which are not
credit-impaired are referred to as 'Stage 2’ financial instruments.
Note 4.3 provides more detail in respect of the methodology applied for the measurement of credit
loss allowances. Credit loss allowances are presented in the statement of financial position as
follows:
• Financial assets measured at amortised cost: as a deduction from the gross carrying
amount of the assets;
• Undrawn loan commitments: generally, as a provision, measured as the present value of
the difference between the contractual cash flows that are due to the Bank if the
commitment is drawn down and the cash flows that the Bank expects to receive;
• Financial instruments having both a drawn and undrawn component, whereby the Bank
cannot identify the ECL on the loan commitment component separately from those on the
drawn component: the Bank presents a combined credit loss allowance for both
components as a deduction from the gross carrying amount of the drawn component;
• Debt instruments measured at FVOCI: no loss allowance is recognised in the statement of
financial position against the carrying amount of the asset because the carrying amount
of these assets represents their fair value. An amount equal to the allowance that would
arise if the assets were measured at amortised cost is recognised in other comprehensive
income as an accumulated impairment amount, with a corresponding charge to profit or
loss; and
• Financial guarantee contracts: generally, as a provision, measured as the expected
payments to reimburse the holder less any amounts that the Bank expects to recover.
Renegotiated financial assets
The Bank renegotiates loans and advances to customers in financial difficulties (referred to as
‘forbearance activities’) to maximise collection opportunities and minimise the risk of default. This
practice is not applied to exposures classified within ‘Factored receivables’.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
18
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.5 Impairment – continued
If the terms of a financial asset are renegotiated or an existing financial asset is replaced with a new
one due to financial difficulties of the borrower, an assessment is performed to determine whether
the financial asset should be derecognised. The implications on the ECL calculation depend on
whether the renegotiation leads to derecognition or otherwise, as follows:
• If the restructuring does not result in the derecognition of the existing asset, renegotiated
loans are typically considered credit-impaired and accordingly classified as Stage 3 assets
unless no unlikeliness-to-pay (“UTP”) events are deemed to have occurred. Assets that are
credit-impaired at the time of renegotiation remain in Stage 3 post renegotiation. The
credit loss allowance in respect of such exposures is estimated by reference to the
expected cash flows arising from the modified financial asset. When evidence suggests
that the renegotiated loan is no longer credit-impaired, the asset is transferred out of
Stage 3 based on an assessment of historical and forward-looking information and an
evaluation of the credit risk over the expected life of the asset, including information
about the circumstances that led to the renegotiation.
• If the restructuring results in derecognition of the existing asset, the restructured asset is
considered a ‘new’ financial asset. Any new financial assets that arise following
derecognition events as a result of substantial modification to the terms of the instrument
are classified as Stage 1 assets, unless the new financial asset is credit-impaired on initial
recognition, in which case it will be classified as a purchased or credit-impaired (“POCI”)
financial asset. A loss is booked in profit or loss (normally as a write-off) since the new
instrument is recognised at fair value.
Other than originated credit-impaired loans, all other modified loans can be transferred out of
Stage 3 if they no longer exhibit any evidence of being credit-impaired and, in the case of
renegotiated loans, there is sufficient evidence to demonstrate a significant reduction in the risk of
non-payment of future cash flows over the minimum observation period, and there are no other
indicators of impairment.
Credit-impaired financial assets
At each reporting date, the Bank assesses whether financial assets carried at amortised cost and
debt instruments classified within ‘Financial investments’ and measured at FVOCI are credit-
impaired (referred to as 'Stage 3 financial assets'). A financial asset is classified as 'credit-impaired'
when one or more events that have a detrimental impact on the estimated future cash flows of the
financial asset have occurred.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
19
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.5 Impairment – continued
Evidence that a financial asset is credit-impaired includes the following observable information:
• significant financial difficulty of the borrower or issuer;
• a breach of contract such as a default or past due event;
• the restructuring of a loan or advance by the Bank on terms that the Bank would not
consider otherwise;
• it is becoming probable that the borrower will enter bankruptcy or other financial
reorganisation; or
• the disappearance of an active market for a security because of financial difficulties.
A loan that has been renegotiated due to a deterioration in the borrower's condition is usually
considered to be credit-impaired unless there is evidence that the default risk has reduced
significantly and if there are no other impairment indicators. In addition, a loan that is overdue for
90 days or more is considered credit-impaired.
In assessing whether a financial investment is credit-impaired, the Bank considers the following
factors:
• The market's assessment of creditworthiness as reflected in bond yields;
• The rating agencies' assessments of creditworthiness, if available;
• The issuer’s ability to access the capital markets for new debt issuance;
• The probability of debt restructuring, resulting in holders suffering losses through
voluntary or mandatory debt forgiveness; or
• In case of sovereign debt issuers, the international support mechanisms in place to
provide the necessary support as 'lender of last resort' to that country, as well as the
intention, reflected in public statements, of governments and agencies to use those
mechanisms. This includes an assessment of the depth of those mechanisms and,
irrespective of the political intent, whether there is the capacity to fulfil the required
criteria.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
20
3 Material accounting policies – continued
3.1 Financial assets – continued
3.1.5 Impairment – continued
Write-off
Loans and debt securities are written off (either partially or in full) when there is no reasonable
expectation of recovering a financial asset in its entirety or a portion thereof. This is generally the
case when the Bank determines that the borrower does not have assets or sources of income that
could generate sufficient cash flows to repay the amounts subject to the write-off. Indicators that
there is no reasonable expectation of recovery include (i) the cessation of enforcement activity and
(ii) instances where the Bank’s recovery method is foreclosing on collateral and the value of the
collateral is such that there is no reasonable expectation of recovering in full. This assessment is
performed at the individual asset level.
Recoveries of amounts previously written off are presented within 'Change in expected credit
losses and other credit impairment charges' in profit or loss.
Financial assets that are written off could still be subject to enforcement activities to comply with
the Bank's procedures for recovery of amounts due.
3.2 Financial liabilities
3.2.1 Initial recognition, classification and measurement
The Bank recognises a financial liability on the statement of financial position when it becomes a
party to the contractual provisions of the instrument. Financial liabilities not at fair value through
profit or loss are recognised initially at fair value, being the fair value of consideration received, net
of transaction costs that are directly attributable to the acquisition or the issue of the financial
liability.
The Bank classifies its financial liabilities, other than financial guarantees and loan commitments,
as subsequently measured at amortised cost. Financial liabilities measured at amortised cost
principally comprise ‘Amounts owed to institutions’, ‘Amounts owed to banks’, ‘Amounts owed to
customers’, ‘Debt securities in issue’, together with ‘Accruals’.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
21
3 Material accounting policies – continued
3.2 Financial liabilities - continued
3.2.2 Derecognition
The Bank derecognises a financial liability when its contractual obligations are discharged,
cancelled, or expired.
In addition, the Bank derecognises a financial liability when its terms are modified, and the
contractual cash flows of the modified liability are substantially different. 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. In this case,
a new financial liability based on the modified terms is recognised at fair value. The difference
between the carrying amount of the financial liability derecognised and consideration paid is
recognised in profit or loss. Any costs or fees incurred are recognised as part of the gain or loss on
the extinguishment.
If the modification of a financial liability is not deemed to be substantial and therefore does not
result in the derecognition of the original financial liability, the amortised cost of the financial
liability is recalculated by discounting the modified cash flows at the original effective interest rate
and the resulting gain or loss is recognised in profit or loss. For floating-rate financial liabilities, the
original effective interest rate used to calculate the modification gain or loss is adjusted to reflect
current market terms at the time of the modification. Any costs and fees incurred are recognised
as an adjustment to the carrying amount of the liability and amortised over the remaining term of
the modified financial liability by re-computing the effective interest rate on the instrument.
3.3 Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount presented in the statement
of financial position when, and only when, the Bank currently has a legally enforceable right to set
off the amounts and it intends either to settle them on a net basis or to realise the asset and settle
the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFRS, or for gains
and losses arising from a group of similar transactions, such as in the Bank's trading activity.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
22
3 Material accounting policies – continued
3.4 Fair value measurement
'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or, in
its absence, the most advantageous market to which the Bank has access at that date. The fair
value of a liability reflects its non-performance risk.
When one is available, the Bank measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as 'active' if transactions for the asset
or liability take place with sufficient frequency and volume to provide pricing information on an
ongoing basis.
If there is no quoted price in an active market, then the Bank uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all the factors that market participants would take into
account in pricing a transaction.
The best evidence of the fair value of a financial instrument on initial recognition is normally the
transaction price - i.e. the fair value of the consideration given or received. If the Bank determines
that the fair value on initial recognition differs from the transaction price and the fair value is
evidenced neither by a quoted price in an active market for an identical asset or liability nor based
on a valuation technique for which any unobservable inputs are judged to be insignificant in
relation to the measurement, then the financial instrument is initially measured at fair value,
adjusted to defer the difference between the fair value on initial recognition and the transaction
price.
Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of
the instrument but no later than when the valuation is wholly supported by observable market
data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Bank
measures assets and long positions at a bid price and liabilities and short positions at an ask price.
Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk
that are managed by the Bank on the basis of the net exposure to either market or credit risk are
measured on the basis of a price that would be received to sell a net long position (or paid to
transfer a net short position) for the particular risk exposure. Portfolio-level adjustments - e.g. bid-
ask adjustment or credit risk adjustments that reflect the measurement on the basis of the net
exposure - are allocated to the individual assets and liabilities on the basis of the relative risk
adjustment of each of the individual instruments in the portfolio.
The fair value of a financial liability with a demand feature (e.g. a demand deposit) is not less than
the amount payable on demand, discounted from the first date on which the amount could be
required to be paid.
The Bank recognises transfers between levels of the fair value hierarchy as of the end of the
reporting period during which the change has occurred.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
23
3 Material accounting policies – continued
3.5 Property and equipment
3.5.1 Recognition and measurement
All property and equipment is initially recorded at historical cost, including transaction costs.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Items of property and equipment are measured at cost or revalued amount less accumulated
depreciation and any accumulated impairment losses.
Freehold property is subsequently measured at fair value based on periodic valuations by external
independent valuers, less subsequent depreciation. A revaluation is carried out if there is an
indication that the fair value of the property differs materially from the carrying amount as at the
reporting date. 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.
Equipment is subsequently stated at historical cost less accumulated depreciation and impairment
losses.
3.5.2 Revaluation surplus or deficit
Increases in the carrying amount arising on revaluation of property are credited to the Property
revaluation reserve within equity. Decreases that offset previous increases of the same individual
asset are recognised in the Property revaluation reserve in equity; all other decreases are expensed
in profit or loss. Any subsequent increases are credited to profit or loss up to the amount previously
debited, at which point such increases continue to be credited to the Property revaluation reserve.
Upon disposal of the premises, the relevant portion of the revaluation reserve realised is released
and transferred from the Property revaluation reserve to retained earnings.
Where parts of an item of property and equipment have different useful lives, these are accounted
for as separate items of property and equipment.
3.5.3 Subsequent costs
The cost of replacing a component of an item of property and equipment is recognised in the
carrying amount of the item if it is probable that the future economic benefits emanating from
such component will flow to the Bank and its cost can be measured reliably. The carrying amount
of the replaced part is derecognised. The costs of the day-to-day servicing of property and
equipment are recognised in profit or loss as incurred.
3.5.4 Depreciation
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives
of each part of an item of property and equipment from the date they are available for use.
Land is not depreciated. Upon revaluation of property, accumulated depreciation is eliminated
against the gross carrying amount of the asset.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
24
3 Material accounting policies – continued
3.5 Property and equipment – continued
3.5.4 Depreciation – continued
The estimated useful lives for the current and comparative years are as follows:
Premises and improvements 10 – 100 years
Computer hardware 5 years
Motor vehicles 5 years
Other equipment 5 – 7 years
Items with an initial cost of less than €250 (including taxes) are expensed immediately.
3.5.5 Derecognition
Property and equipment are derecognised upon disposal or when no future economic benefits are
expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in
profit or loss in the year during which the asset is derecognised. The asset’s residual value, useful
life and method is reviewed, and adjusted if appropriate, at each financial year end.
3.6 Investment Property
Investment property is property held to earn rentals or for capital appreciation or both. Investment
property is recognised as an asset when it is probable that the future economic benefits that are
associated with the investment property will flow to the entity and the cost can be measured
reliably. Investment property is initially measured at cost and subsequently at fair value with any
change therein recognised in the profit or loss. Any gain on disposal of investment property
(calculated as the difference between the net proceeds from disposal and the carrying amount of
the item) is recognised in profit or loss.
Investment property is derecognised on disposal or when it is permanently withdrawn from use
and no future economic benefits are expected from its disposal. Gains or losses on derecognition
represent the difference between the net disposal proceeds, if any, and the carrying amount, are
recognised in profit or loss in the period of derecognition.
Transfers are made to (or from) investment property only when there is a change in use. If owner-
occupied property becomes an investment property, the Bank accounts for such property in
accordance with the policy stated under property and equipment up to the date of change in use.
3.6.1 Investment Property held for sale
The Bank classifies assets and disposal groups as held for sale if their carrying value will be
recovered principally through a sale transaction rather through continuing use. The criteria for held
for sale classification is regarded as met only when the sale is highly probable, and the asset or
disposal group is available for immediate sale in its present condition. Actions required to complete
the sale should indicate that it is unlikely that significant changes to the sale will be made or that
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
25
3 Material accounting policies – continued
3.6 Investment Property – continued
3.6.1 Investment Property held for sale - continued
the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset
and the sale expected to be completed within one year from the date of the classification. IFRS 5’s
classification, presentation and disclosure requirements apply to all recognised assets and disposal
groups, however, the measurement provisions of the standard do not apply to assets that are
accounted for in accordance with the fair value model is IAS 40 Investment Property.
3.7 Intangible assets - software
Software acquired by the Bank is stated at cost less accumulated amortisation and any
accumulated impairment losses.
Subsequent expenditure on software assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is
expensed as incurred.
Software is amortised on a straight-line basis in profit or loss over its estimated useful life, from
the date on which it is available for use. The estimated useful life of software for the current and
comparative periods is three to fifteen years.
Amortisation methods, useful lives and residual values are reviewed at each financial year end and
adjusted if appropriate.
3.8 Impairment of non-financial assets
The carrying amounts of the Bank’s non-financial assets, other than deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, the asset’s recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset.
For impairment testing, assets that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets.
An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (“CGU”)
exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss.
Impairment losses recognised in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
26
3 Material accounting policies – continued
3.9 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
ordinary shares are recognised as a deduction from equity net of any tax effects. The Bank presents
basic earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to the Bank’s ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period.
3.10 Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in presentation
in the current year.
3.11 Financial guarantees and loan commitments
'Financial guarantees' are contracts that require the Bank to make specified payments to reimburse
the holder for a loss that it incurs because a specified debtor fails to honour payment commitments
when due in accordance with the terms of a debt instrument. 'Loan commitments' are firm
commitments to provide credit under pre-specified terms and conditions.
Financial guarantees issued or commitments to provide a loan at below-market interest rates are
initially measured at fair value. Subsequently, they are measured at the higher of the credit loss
allowance determined in accordance with IFRS 9 and the amount initially recognised less, when
appropriate, the cumulative amount of income recognised in accordance with the principles of IFRS
15. Loan commitments provided by the Bank are measured as the amount of the credit loss
allowance.
Liabilities arising from financial guarantees and loan commitments are included within provisions.
3.12 Interest income and expense
Effective interest rate
Interest income and expense are recognised in profit or loss using the effective interest method.
The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument to:
• the gross carrying amount of the financial asset; or
• the amortised cost of the financial liability.
When calculating the effective interest rate for financial instruments other than POCI financial
assets, the Bank estimates future cash flows by reference to the contractual terms of the financial
instrument, excluding expected credit losses. For POCI financial assets, a credit-adjusted effective
interest rate is calculated by reference to estimated future cash flows also taking into consideration
expected credit losses.
The calculation of the effective interest rate includes transaction costs and fees paid or received
that are an integral part of the effective interest rate. Transaction costs include incremental costs
that are directly attributable to the acquisition or issue of a financial asset or financial liability.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
27
3 Material accounting policies – continued
3.12 Interest income and expense - continued
Calculation of interest income and expense
The effective interest rate of a financial asset or financial liability is calculated on initial recognition
of a financial asset or a financial liability. In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-
impaired) or to the amortised cost of the liability. The effective interest rate is revised because of
periodic re-estimation of cash flows of floating rate instruments to reflect movements in market
rates of interest.
However, for financial assets that are classified as credit-impaired after initial recognition, interest
income is calculated by applying the effective interest rate to the net carrying amount of the
financial asset after deducting ECL. If the asset is no longer credit-impaired, then the calculation of
interest income reverts to the gross basis.
For financial assets that were credit-impaired on initial recognition, interest income is calculated
by applying the credit-adjusted effective interest rate to the amortised cost of the asset. The
calculation of interest income does not revert to a gross basis, even if the credit risk of the asset
improves.
Presentation
Interest income calculated using the effective interest method presented in profit or loss includes:
• interest on financial assets measured at amortised cost; and
• interest on debt instruments measured at FVOCI.
Interest expense presented in profit or loss represents interest in respect of financial liabilities
measured at amortised cost.
3.13 Fees and commission income and expense
Fees and commission income and expense that are integral to the effective interest rate on a
financial asset or liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, credit administration charges
and similar fees, are recognised as the related services are performed. When a loan commitment
is not expected to result in the drawdown of a loan, the related loan commitment fees are
recognised on a straight-line basis over the commitment period.
A contract with a customer that results in a recognised financial instrument may be partially in
scope of IFRS 9 and partially in scope of IFRS 15. In such an event, the Bank first applies IFRS 9 to
separate and measure the part of the contract that is in scope of IFRS 9 and then applies IFRS 15
to the residual.
Other fee and commission expense relates mainly to transaction and service fees, which are
expensed as the services are received.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
28
3 Material accounting policies – continued
3.14 Other operating income
The line item primarily comprises realised gains on disposal of financial instruments measured at
FVOCI; foreign exchange differences attributable to the translation of monetary assets and
liabilities to the Bank’s functional currency at reporting date or foreign currency transactions; and
fair value movements, interest income, dividend income and foreign exchange differences
attributable to financial instruments measured at FVTPL.
3.15 Dividend income
Dividend income is recognised when the right to receive income is established. Usually, this is the
ex-dividend date for quoted equity investments. Dividends are presented in other operating
income. Dividends on equity instruments designated as at FVOCI that clearly represent a recovery
of part of the cost of the investment are presented in other comprehensive income.
3.16 Leases
At inception of a contract, the Bank assesses whether a contract is, or contains, a lease. A contract
is, or contains, a lease if the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration. To assess whether a contract conveys the right to
control the use of an identified asset, the Bank uses the definition of a lease in IFRS 16.
The Bank does not have right-of-use over assets that span over a long term or that are of significant
value.
Short term leases and leases of low-value assets
The Bank has elected not to recognise right-of-use assets and lease liabilities for leases of low-value
assets and short-term leases. The Bank recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.
3.17 Employee benefits
The Bank contributes towards the State pension defined contribution plan in accordance with local
legislation and to which it has no commitment beyond the payment of fixed contributions.
Obligations for contributions to the defined contribution plan are recognised as an expense in
profit or loss as they fall due.
3.18 Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax are
recognised in profit or loss except to the extent that it relates to items recognised directly in equity,
or in other comprehensive income.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the
year and any adjustment to the tax payable or receivable in respect of previous years. The amount
of current tax payable or receivable is the best estimate of the tax amount expected to be paid or
received that reflects uncertainty related to income taxes, if any. It is measured using tax rates
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
29
3 Material accounting policies – continued
3.18 Income tax - continued
enacted or substantively enacted at the reporting date. Current tax also includes any tax arising
from dividends. Current tax assets and liabilities are offset only if certain criteria are met.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be available
against which they can be used. Future taxable profits are determined based on the reversal of
relevant taxable temporary differences. If the amount of taxable temporary differences is
insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for
reversals of existing temporary differences, are considered, based on business plans. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised. Such reductions are reversed when the
probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the
extent that it has become probable that future taxable profits will be available against which they
can be used. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, using tax rates enacted or substantively enacted at the reporting
date. Deferred tax assets and liabilities are only offset when they arise in the same tax reporting
group and relate to income taxes levied by the same taxation authority, and when the Bank has a
legal right to offset.
3.19 Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the Bank at the
spot exchange rates at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency at the spot exchange rate at the reporting date. The foreign currency gain or loss on
monetary items is the difference between the amortised cost in the functional currency at the
beginning of the year, adjusted for effective interest and payments during the year, and the
amortised cost in the foreign currency translated at the spot exchange rate at the end of the year.
Non-monetary assets and liabilities that are measured at fair value in a foreign currency are
translated into the functional currency at the spot exchange rate at the date on which the fair
value is determined. Non-monetary items that are measured based on historical cost in a foreign
currency are translated using the spot exchange rate at the date of the transaction.
Foreign currency differences arising on translation are generally recognised in profit or loss save
for foreign currency differences arising from equity investments in respect of which an election
has been made to present subsequent changes in fair value in other comprehensive income.
3.20 Cash and cash equivalents
Cash and cash equivalents comprise notes and coins in hand, unrestricted balances held with the
Central Bank of Malta and highly liquid financial assets with original maturities of three months or
less from the date of acquisition that are subject to an insignificant risk of changes in their fair
value, and are used by the Bank in the management of its short-term commitments.
Cash and cash equivalents are carried at amortised cost in the statement of financial position.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
30
3 Material accounting policies – continued
3.21 Segment reporting
An operating segment is a component of the Bank that engages in business activities from which it
may earn revenues and incur expenses, including revenue and expenses that relate to transactions
with any of the Bank’s other components, whose operating results are reviewed regularly by the
Bank’s Board of Directors (being the chief operating decision maker), to make decisions about
resources allocated to each segment and assess its performance, and for which discrete financial
information is available.
3.22 Dividend distribution
Dividend distribution to the Bank’s shareholders is recognised as a liability in the Bank’s financial
statements in the period in which the dividends are approved by the Bank’s shareholders.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
31
4 Financial risk management and review
4.1 Organisation
The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s
risk management framework. The Board has established the Audit and Risk Committee and the
Credit Committee with the responsibility for monitoring risk in their specified areas. Non-executive
directors sit on these Committees whereas the Chief Executive Officer (“CEO”) is either a member
of, or otherwise attends, all Committees. The Committees report regularly to the Board of
Directors on their activities. The Board has also established an Asset and Liability Management
Committee (“ALCO”) which is a management committee that reports to the Board of Directors on
a quarterly basis.
Risk management policies have been established to identify and analyse the risks faced by the
Bank, to set out appropriate risk limits and controls, and to monitor risks and adherence to limits.
The risk management policies and systems are reviewed regularly to reflect changes in market
conditions, products and services offered. The Bank has developed appropriate risk management
training for the needs of the relevant staff members.
4.2 Risk exposure
The Bank is exposed to a number of risks, which it manages at different organisational levels.
The main categories of risk are:
• Credit risk;
• Market risk;
• Liquidity risk; and
• Operational risk.
4.3 Credit risk
Credit risk is the risk of financial loss to the Bank if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Bank’s factored
receivables, loans and advances to customers and banks, investment debt securities, and loan
commitments arising from lending activities. For risk management reporting purposes, the Bank
considers and consolidates all elements of credit risk exposure (such as individual obligor default
risk, country and sector risk).
The Bank follows standards, policies and procedures established by the Bank’s Board of Directors
for the control and monitoring of credit risk. The Board of Directors has delegated the
responsibility for the management of credit risk to the Credit Committee within a Board-approved
credit sanctioning limit. The Bank’s management reports to the Credit Committee and the Board
of Directors in respect of their responsibility for the management and oversight of credit risk
within the Bank’s portfolios of financial instruments. The responsibilities comprise the following:
• Formulating credit policies in consultation with business units, in respect of collateral
requirements, credit risk assessments, risk grading and reporting, legal procedures, and
compliance with regulatory and statutory requirements.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
32
4 Financial risk management and review – continued
4.3 Credit risk – continued
• Establishing the authorisation structure for the approval and renewal of credit facilities.
Authorisation limits are allocated to the CEO, the Head of Finance and Treasury, the Credit
Committee or the Board of Directors, as appropriate.
• Reviewing and assessing credit risk: the Bank’s Credit department assesses the level of
credit risk exposure in respect of all credit exposures, both prior to origination as well as
thereafter. In this respect, the Credit department performs credit risk reviews on a
periodic basis to monitor the level of credit risk subsequent to origination date. Exposures
in excess of designated limits are referred for approval to the Credit Committee or the
Board of Directors, as necessary.
• Limiting concentrations of exposure to counterparties, geographies and industries (for
lending exposures) and to issuers, credit rating bands, markets and countries (for financial
investments).
• Developing and maintaining the Bank's risk gradings to categorise exposures according to
the degree of default risk. The current risk grading framework consists of 5 grades
reflecting varying degrees of default risk, as described in Note 4.3.4 of the financial
statements. The responsibility for setting risk grades lies with the final approving executive
or committee, as appropriate. Risk grades are subject to regular reviews by senior
management.
• Developing and maintaining the Bank's processes for measuring expected credit losses
(“ECLs”), including:
• The initial approval, regular validation and back-testing of the models used;
• The identification of SICR and UTP events; and
• The incorporation of forward-looking information in the ECL calculation.
• Reviewing compliance of departments with agreed exposure limits, including those for
selected industries, country risk and product types. Regular reports on the credit quality
of the Bank’s portfolios are provided to the Credit Committee, which may require
appropriate corrective action to be taken. These include reports containing estimates of
ECL allowances.
• Providing advice, guidance and specialist skills to departments to promote best practice
throughout the Bank in respect of the management of credit risk.
The Bank’s principal exposure to credit risk arises from the ‘Factored receivables’ portfolio as well
as the Bank’s lending portfolio classified as ‘Loans and advances to customers’. The former portfolio
comprises two sub-portfolios, both of which represent factoring of receivables on a non and with
recourse basis: i) factoring of local bills of exchange (hereinafter referred to as the “Bills of
exchange factoring” sub-portfolio) amounting to € 102.3 million as at 31 December 2024 (2023:
€98.6 million); and ii) factoring of invoices issued by local and foreign customers (hereinafter
referred to as the “Invoice factoring” sub-portfolio) amounting to €35.9 million as at 31 December
2024 (2023: €41.4 million).
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
33
4 Financial risk management and review – continued
4.3 Credit risk – continued
‘Loans and advances to customers’ comprises the sanctioning of term loans, advances and
overdraft facilities to corporate customers, amounting to €164.9 million as at 31 December 2024
(2023: €161.3 million), of which €49.5 million were provided to related parties on an arm’s length
basis (2023: €42 million). These exposures to local and foreign corporate customers are managed
in a similar manner for credit risk management purposes and are hereinafter collectively referred
to as the “Corporate lending” sub-portfolio.
‘Loans and advances to customers’ also comprises retail mortgage lending and other consumer
loans amounting to €29.1 million as of 31 December 2024 (2023: €19.7 million). Given that retail
mortgage lending exposures (hereinafter referred to as the “Retail mortgage lending” sub-
portfolio) are managed in a different manner than corporate lending facilities, the Bank’s credit
risk management activities in respect of the former sub-portfolio are being described and
presented separately from the latter.
In this respect, the Bank has continued to support its customers and adapted its credit risk
management processes accordingly to enable the identification of deterioration in credit risk within
its portfolios as early as possible and estimating credit loss allowances using the best possible
judgement.
The Bank continued to individually rate borrowers deemed mostly impacted by the heightened
levels of economic uncertainty through individual credit risk assessments, on the basis of recently
obtained management information and, where available, forecasts, enabling management to
assess borrower-specific credit risk levels and identify SICR or UTP events.
In respect of the Bills of exchange factoring sub-portfolio, the Bank assesses credit risk at
origination through a scorecard designed to assess the individual debtor’s level of credit risk by
reference to the debtor’s net disposal income and employment status, amongst other factors
featuring in the scorecard.
4.3.1 Credit risk measurement
Measurement of credit risk considers that an exposure varies with changes in market conditions,
expected cash flows and the passage of time. The Bank’s internal models measure expected credit
losses by portfolio using probability of default (“PD”), exposure at default (“EAD”) and loss given
default (“LGD”) parameters.
(a) Loans and advances to customers
The Bank uses internal credit risk grades (refer to Note 4.3.4) to reflect its assessment of the
probability of default of individual counterparties or facilities. Internal credit risk gradings are based
on payment behaviour, loan specific information and expert judgement of the Bank’s Credit
Committee.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
34
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.1 Credit risk measurement – continued
For corporate lending exposures, information considered by the Bank when determining the
internal credit risk grades includes the payment behaviour of the borrower, compliance with
financial covenants, and other information impacting a corporate borrower’s creditworthiness
assessment, including historical information in respect of its financial performance and financial
position as well as forecasted financial information. Management also takes into consideration
non-financial indicators in the performance of credit risk assessments, such as the timeliness of the
provision of financial information, the industry-specific outlook and the impact of general
macroeconomic conditions on the borrower’s financial performance.
The internal credit risk grades are calibrated such that they reflect the increased risk of default at
each higher risk grade. The rating is determined at borrower level through the performance of a
creditworthiness assessment of the borrower in each periodic review, performed at least annually.
For retail mortgage lending exposures, internal credit risk grades are determined on the basis of
payment behaviour and days past due. Refer to Note 4.3.4 for the definition of the internal retail
credit risk grades used by the Bank.
(b) Factored receivables
Unlike corporate exposures classified within ‘Loans and advances to customers’, bills of exchange
factoring and invoice factoring facilities classified within ‘Factored receivables’ are not managed on
a credit-by-credit basis due to the high volume of relatively low value and homogeneous exposures.
In respect of bills of exchange factoring facilities, the credit risk assessment after the date of initial
recognition is based on the payment behaviour of debtors, which is monitored on an ongoing basis.
The Bank therefore distinguishes between ‘problematic’ and ‘non-problematic’ exposures by
reference to the number of overdue monthly bill payments at any given point in time.
In respect of invoice factoring facilities, the Bank performs its credit risk assessment at the debtor
level by (i) monitoring the payment behaviour of any particular debtor by reference to the
proportion of invoices which are past due at any given point in time; and (ii) determining PDs by
reference to a credit score assigned to each debtor, which credit score is sourced from a third party
external vendor and captures other information about the borrower which impacts their
creditworthiness, such as financial performance and previous delinquency history.
(c) Other financial assets
Other financial assets include balances with the Central Bank of Malta, loans and advances to banks
and financial investments. The Bank considers public credit ratings determined by external credit
rating agencies to assess the probability of default of individual counterparties. Such public credit
ratings are continuously monitored and updated, with the associated PD being determined by
reference to realised default rates over the prior 12 months. In determining the probability of
default of individual counterparties, the Bank distinguishes between investment-grade and sub-
investment grade counterparties.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
35
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement
IFRS 9 outlines a ‘three-stage’ model for impairment based on changes in credit quality since initial
recognition as summarised below:
• A financial instrument that is not credit-impaired upon initial recognition is classified in
‘Stage 1’.
• 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.
Refer to Note 4.3.2.1 for a description of how the Bank determines when a SICR has
occurred.
• If the financial instrument becomes credit-impaired, the financial instrument is moved to
‘Stage 3’. Refer to Note 4.3.2.2 for the Bank’s definition of credit-impaired.
• Financial instruments in ‘Stage 1’ have their ECL measured at an amount equal to the
portion of lifetime expected credit losses that result from default events possible within
the next 12 months. Instruments in ‘Stage 2’ or ‘Stage 3’ have their ECL measured based
on expected credit losses on a lifetime basis. Refer to Note 4.3.2.3 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 forward-looking
information is considered. Note 4.3.2.4 includes an explanation of how the Bank has
incorporated forward looking information into ECL models.
• Purchased or originated credit-impaired financial assets are those financial assets that are
credit-impaired upon initial recognition. The ECL in respect of POCI exposures is always
measured on a lifetime basis (‘Stage 3’).
The expected credit loss requirements apply to financial assets measured at amortised cost and
FVOCI, and certain loan commitments. At initial recognition, a credit loss allowance (or provision
in the case of loan commitments) is required for ECL resulting from default events that are possible
within the next 12 months (“12-month ECL”). In the event of a significant increase in credit risk, an
allowance (or provision) is required for ECL resulting from all possible default events over the
expected life of the financial instrument (“lifetime ECL”).
The Bank recognises credit loss allowances at an amount equal to 12-month ECL for debt
investment securities that are determined to have low credit risk at the reporting date. The Bank
considers a debt security to have low credit risk when it is considered ‘investment-grade’, as
defined by external credit rating agencies. The following diagram summarises the impairment
requirements under IFRS 9 (other than POCI financial assets):
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
36
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.1 Significant increase in credit risk
When determining whether the risk of default on a financial instrument has increased significantly
since initial recognition, the Bank considers reasonable and supportable information that is
relevant and available without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Bank's historical experience and expert credit assessment
and including forward-looking information.
For Corporate lending exposures classified within ‘Loans and advances to customers’, the Bank
primarily identifies whether a SICR has occurred since initial recognition by reference to the internal
risk gradings determined on an individual borrower level. The Bank allocates each exposure to an
internal credit risk grade based on financial and non-financial information which is deemed to be
predictive of the risk of default. Amongst other things, reference is made to audited financial
statements, management accounts, budgets and projections. Management applies expert credit
judgement in assessing the level of credit risk attributable to specific borrowers. Exposures are
subject to ongoing monitoring, which may result in an exposure being moved to a different internal
rating grade (refer to Note 4.3.4).
The Bank classifies non-defaulted exposures into ‘Stage 2’ when the borrower is classified within
the ‘Substandard’ internal credit risk grade and / or forbearance measures have been granted to
the borrower, unless additional UTP events have been identified.
In relation to retail mortgage lending exposures classified within ‘Loans and advances to customers’
and ‘Factored receivables’, SICR is generally determined on the basis of delinquency related
indicators since less information is available at asset level to enable the timely identification of a
SICR.
Due to the short-term nature of facilities within the invoice factoring portfolio, the Bank does not
distinguish between exposures classified within Stage 1 or Stage 2 since the lifetime PD is deemed
to be equivalent to the 12-month PD.
In the case of other financial assets (including loans and advances to banks and debt investment
securities), the Bank applies the low credit risk simplification to exposures having an ‘investment
grade’ public credit rating. In this respect, such exposures are not subject to the SICR assessment.
Moving from ‘investment-grade’ to ‘sub-investment grade’ does not automatically trigger a SICR.
4.3.2.2 Definition of default and credit-impaired assets
The Bank’s assessment to determine the extent of increase in credit risk of a financial instrument
since initial recognition is performed by considering the change in the risk of default occurring over
the remaining life of the financial instrument.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
37
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.2 Definition of default and credit-impaired assets – continued
The Bank applies the definition of default in a consistent manner with internal credit risk
management practice for the relevant instruments and the definition considers qualitative and
quantitative factors where appropriate.
The Bank determines that a financial instrument is credit-impaired or in default, and accordingly
classified as Stage 3, by considering relevant objective evidence, primarily:
• whether contractual payments of either principal or interest are past due for more than
90 days for any material credit obligations to the Bank; and
• for corporate lending exposures classified within loans and advances to customers,
whether there are other indicators that the borrower is unlikely to pay without realisation
of collateral, such as an observed deterioration in the financial performance and / or
financial position of the borrower; covenant breaches; and concessions granted to a
borrower experiencing financial difficulties.
As described earlier, the staging determination in respect of retail mortgage lending exposures and
factored receivables is based on payment behaviour, since these portfolios comprise exposures
which are homogeneous and individually low in value.
The default definition is applied consistently when modelling PD, EAD and LGD parameters
throughout the Bank’s expected credit loss calculations.
Due to the elevated level of uncertainty induced by the current economic environment, as well as
the potential delayed default emergence due to the implementation of government support
schemes, the Bank performed borrower-level assessments in respect of corporate lending
exposures classified within loans and advances to customers to determine whether the economic
shock may transform into long-term borrower financial difficulties, thereby potentially requiring a
downgrade of individual exposures to Stage 3 to reflect the level of change in credit risk.
An instrument is considered to have cured from defaulted status when it no longer meets any of
the default criteria for a period of three consecutive months and, in case of forborne exposures, a
period of 12 consecutive months.
The Bank considers other financial assets to be in default when a payment (including a coupon
payment) becomes overdue by 1 day or more.
4.3.2.3 Measurement of ECL
The key inputs into the measurement of ECL comprise the PD, LGD and EAD, with the term structure
being determined in respect of each parameter.
ECL for exposures in Stage 1 is calculated by multiplying the 12-month PD by LGD and EAD. Lifetime
ECL is calculated by multiplying the lifetime PD by LGD and EAD.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
38
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.3 Measurement of ECL – continued
ECL is determined by projecting the PD, LGD and EAD for each future period until maturity and for
each individual exposure. These three components are multiplied and adjusted for the likelihood
of survival (i.e. the exposure has not prepaid or defaulted in an earlier month). This effectively
calculates ECL for each future month, which are then discounted back to the reporting date. The
discount rate used in the ECL calculation is the original effective interest rate.
Probability of default
The PD represents the likelihood of a borrower defaulting on its financial obligation (as defined in
Note 4.3.2.2), either over the next 12 months (12-month PD) or over the remaining lifetime
(lifetime PD) of the obligation.
The Bank adopts a credit risk modelling solution developed by an external vendor to estimate PDs
in respect of corporate lending exposures classified within loans and advances to customers, in
view of the lack of internal history of defaults within this sub-portfolio.
In this respect, the Bank employs statistical models to analyse financial statement data collected in
respect of each individual borrower and assign a credit score accordingly. Specifically, the Bank
benchmarks the borrower’s financial statements with those of an underlying model dataset
comprising obligors which are comparable to the Bank’s corporate borrowers in terms of size and
industry. Borrower-specific credit scores are then mapped to a PD, which is first adjusted to capture
country- and industry-specific credit risk characteristics and then assigned to each obligor. The
credit score to PD matrices are calibrated based on historical default data observed in the market,
where the data was sourced from publicly available information.
As described in Note 4.3.2, the determination of staging is based on a qualitative assessment
performed at borrower level. In this respect, the estimation of 12-month or lifetime PDs in respect
of any given borrower is determined by reference to assigned internal credit risk grades.
Lifetime PDs are estimated by applying a scalar to the 12-month PD. The scalar, which is based on
historical observed data and is assumed to be the same across all assets within a portfolio, looks at
how defaults develop on a portfolio from the point of initial recognition throughout the lifetime of
the loans.
For retail mortgage lending exposures, PDs are determined by reference to comparable portfolios
at peer banks, as well as a hybrid matrix incorporating information from credit rating agencies,
given that the portfolio is still in its infancy and the Bank does not have any internally observable
default data.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
39
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.3 Measurement of ECL – continued
In the case of bills of exchange factoring facilities, the Bank’s PDs are determined by reference to
an internally developed statistical model based on a Markov chain approach. In this respect, 12-
month transition matrices were derived from internal historical data. Default is considered to be
an absorbing state, whereby if an exposure is defaulted, it subsequently remains in default for the
purposes of estimation of PDs.
A five-tier rating scale has been developed, designed to capture different potential states of
delinquency, ranging from a ‘current’ status to a ‘360DPD+’ status. Exposures classified within each
of the five-tier rating scales are assigned a PD determined on the basis of internal historical
delinquency information. Each tier is then mapped to a relative stage, as described in Note 4.3.4.
A cure rate is also applied, also estimated by reference to internal historical delinquency
information in respect of this portfolio.
In the case of invoice factoring facilities, PDs are sourced from an external vendor. In this respect,
a debtor-specific credit score is assigned by the external vendor based on borrower-specific
information. PDs are then determined by reference to the debtor-specific credit score. Due to the
short-term maturity profile of such exposures, no distinction is made between 12-month and
lifetime PDs for the purposes of the ECL calculation.
For financial investments issued by corporates, the PD is estimated using the same methodology
applied in respect of exposures classified within loans and advances to customers. In this respect,
PDs are determined through the use of a credit risk modelling solution developed by an external
vendor.
For sovereign debt securities, the Bank estimates PDs by reference to market data issued by
external credit rating agencies. In this respect, the PDs used in the ECL calculation reflects historical
default rates determined by external credit rating agencies for issuers assigned an external credit
rating which is equivalent to the Bank’s financial investments. If a counterparty or exposure
migrates between external credit ratings, this will lead to a change in PD.
As described in further detail in Note 4.3.2.4, the 12-month and lifetime PDs estimated in respect
of loans and advances to customers and bills of exchange factoring facilities also take into
consideration forward-looking economic information.
Loss given default
The LGD represents the Bank’s expectation of the extent of the loss on a defaulted exposure. LGD
is expressed as a percentage loss per unit of exposure at the time of default (EAD). The Bank
estimates the LGD on the basis of historical recovery rates of claims against defaulted
counterparties. The estimation of LGD considers the structure and seniority of the claim, together
with the nature and recoverability / enforceability of collateral and associated recovery costs.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
40
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.3 Measurement of ECL – continued
Loans and advances to customers are primarily secured by residential and / or commercial real
estate, as well as cash pledges. In respect of the former, the LGD takes into consideration projected
collateral values, historical discounts to market values to reflect a deduction in future proceeds due
to costs to sell and potential loss in value in a forced sale scenario, and time to repossession. A key
determinant for the LGD applied to exposures secured by real estate is the Loan-to-Value ratio of
individual facilities, where the value of the property takes into account the expected recovery from
the sale of the property.
The Bank applies LGDs developed by an external vendor and determined by reference to the
carrying amount of tangible assets recognised on the borrower’s balance sheet. Expected
recoveries from the sale of such assets are used to determine the expected loss and are modelled
by reference to assumptions in relation to different haircuts to sale proceeds depending on asset
type and the time value of money. The LGD determined through the use of statistical techniques
by the external vendor also takes into consideration a correlation factor between PDs and LGDs,
with higher LGDs being assigned to borrowers to whom a higher PD is determined by the model.
For bills of exchange factoring facilities, the LGD is determined by reference to the value of the
motor vehicle being financed. Specifically, it is assumed that the original value of the motor vehicle
is depreciated on a straight-line basis over its useful life. In addition, the LGD calculation also takes
into consideration the collateral provided by the factoring clients, which comprises pledged cash
held with the Bank to cover potential losses from factored bills of exchange.
In the case of invoice factoring facilities, the Bank purchases credit insurance from a foreign third-
party underwriter which provides insurance cover in respect of losses up to 95% of each eligible
invoice. In this respect, the LGD applied to invoice factoring facilities is determined on this basis.
Exposure at default
EAD represents the expected exposure in the event of a default. The EAD of a financial asset is its
gross carrying amount at the time of default. For lending commitments, the EAD reflects an
estimation of potential future drawdowns permissible in terms of the contract, which are
estimated based on historical observations and forward-looking expectations.
For loans and advances to customers, the Bank estimates the EAD by reference to the expected
balance at default. In this respect, the EAD for term lending exposures (including retail mortgage
exposures) takes into consideration the current exposure to the counterparty as well as future
expected drawdowns of committed facilities, with different drawdown factors applied to partially
drawn and fully unutilised facilities. For revolving exposures, the EAD is estimated by reference to
the maximum potential exposure at default.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
41
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.3 Measurement of ECL – continued
For bills of exchange factoring facilities, the Bank estimates the EAD by reference to the current
exposure to the counterparty and potential changes to the exposure due to contractual
repayments.
For invoice factoring facilities, the EAD is assumed to be equal to the gross carrying amount of the
exposure at reporting date, since repayments from each facility are expected to be made in one
instalment in line with the invoice credit terms.
Period over which ECL is measured
The Bank measures ECL considering the risk of default over the maximum contractual period over
which it is exposed to credit risk (including any extension options), even if, for credit risk
management purposes, the Bank considers a longer period. The maximum contractual period
extends to the date at which the Bank has the right to require repayment of an advance or
terminate a loan commitment.
However, for revolving facilities that include both a loan and an undrawn commitment component,
the Bank measures ECL over a period longer than the maximum contractual period if the Bank's
contractual ability to demand repayment and cancel the undrawn commitment does not limit the
Bank's exposure to credit losses to the contractual notice period. These facilities do not have a fixed
term or repayment structure and are managed on a collective basis. The Bank can cancel them with
immediate effect, albeit this contractual right is not enforced in the normal day-to-day
management unless the Bank becomes aware of an increase in credit risk at facility level. This
longer period is estimated considering the credit risk management actions that the Bank expects
to take, and that serve to mitigate ECL. These include a reduction in limits, cancellation of the
facility and/or turning the outstanding balance into a loan with fixed repayment terms.
4.3.2.4 Forward-looking information incorporated in the ECL model
The calculation of ECL incorporates forward-looking information. The Bank performs a historical
analysis to identify the key economic variables affecting credit risk and expected credit losses for
each portfolio. These economic variables and their associated impact on ECL may vary by portfolio.
Expert judgement has been applied in the process.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
42
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.4 Forward-looking information incorporated in the ECL model - continued
The key drivers of credit risk and credit losses for each portfolio were determined on the basis of a
statistical regression analysis of historical relationships between macroeconomic variables and
market default data. These key macroeconomic variables determined in respect of each portfolio
are disclosed below:
• The Bank estimates forward-looking ECL by reference to the GDP growth rate,
unemployment rate, inflation rate, and interest rates, all specific to the local Maltese
economy, reflecting the impact of general economic activity on the financial performance
of corporate entities; and
• Bills of exchange factoring: the Euro area real GDP, which is deemed to be a good indicator
of general economic activity.
Given the short-term nature of invoice factoring facilities, the impact of forward-looking
information on the estimation of ECL in respect of these exposures is not deemed to be significant.
Similarly, the impact of forward-looking information on the estimation of ECL in respect of retail
mortgage lending exposures classified within loans and advances to customers is also deemed to
be insignificant due to the fact that the portfolio is still in its infancy.
Three possible scenarios are considered to capture non-linearity across credit portfolios. The
‘baseline’ scenario represents the most-likely outcome. Macroeconomic forecasts in respect of
these macroeconomic variables are sourced from an authoritative source on a semi-annual basis,
providing the best estimate view of the economy over a forecasted time horizon.
As a result of the implementation of the new model developed by an external vendor and used to
estimate ECLs for corporate lending exposures classified within loans and advances to customers,
macroeconomic forecasts are modelled over a 12-month time horizon. The macroeconomic
modelling approach used to estimate ECL for bills of exchange factoring exposures remains
unchanged.
In addition to the ‘baseline’ scenario, the Bank considers an ‘upside’ and a ‘downside’
macroeconomic scenario, which respectively represent a more optimistic and a more pessimistic
outcome, reflecting economically plausible upside and downside scenarios. The relative paths for
the macroeconomic variables in the ‘upside’ and ‘downside’ scenarios are determined through
statistical variance analysis techniques applied to the ‘baseline’ scenario.
Each scenario is weighted by a probability of occurrence, determined by a combination of
macroeconomic research and expert credit judgment, taking into account the range of possible
outcomes each chosen scenario represents. The ECL under each scenario is multiplied by the
appropriate scenario weighting to determine a probability-weighted ECL.
As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high
degree of inherent uncertainty and, as a result, the actual outcomes may be significantly different
to those projected.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
43
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.4 Forward-looking information incorporated in the ECL model – continued
The heightened level of macroeconomic uncertainty experienced in both global and local
economies has had varying effects on different industry sectors. At the same time, measures
designed to soften the extent of the damage to economic activity and the labour market were
announced by the Maltese government in the form of subsidised energy prices.
In view of the above, a significant judgement within the Bank’s estimation of credit loss allowances
relates to the determination of forward-looking scenarios reflecting potential future economic
conditions under different scenarios and their impact on the ECL calculation. The Bank considers
these forecasts to represent its best estimate of the possible outcomes. The most significant year
end assumptions used for the ECL estimate as at 31 December 2024 and 31 December 2023 are set
out below.
As at 31 December 2024
Projection for Malta in 2025
Baseline
Upside
Downside
GDP growth rate
3.6
4.5
0.5
Unemployment rate
3.1
2.4
4.7
Inflation rate
2.1
1.6
5.2
Interest rates
3.0
2.3
4.6
As at 31 December 2024
Euro area real GDP growth rate (%)
Baseline
Upside
Downside
2025
1.1
1.8
-0.2
2026
1.4
2.2
0.2
2027
1.3
2
0.1
As at 31 December 2023
Projection for Malta in 2024
Baseline
Upside
Downside
GDP growth rate
3.6
4.5
0.5
Unemployment rate
3.0
1.6
4.2
Inflation rate
3.1
2.0
6.0
Interest rates
4.0
3.5
5.0
As at 31 December 2023
Euro area real GDP growth rate (%)
Baseline
Upside
Downside
2024
1.5
3.5
-3.1
2025
1.8
2.6
-3.0
2026
2.0
2.2
1.9
The weightings assigned to the ‘baseline’, ‘upside’ and ‘downside’ scenarios are 50% (2023: 50%),
25% (2023: 25%) and 25% (2023: 25%) respectively.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
44
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.2 Expected credit loss measurement – continued
4.3.2.4 Forward-looking information incorporated in the ECL model – continued
Economic scenarios sensitivity analysis of ECL estimates
The outcome of the Bank’s credit loss allowances estimation process is sensitive to judgements and
estimations made throughout the incorporation of forward-looking economic conditions.
Management has assessed the sensitivity of ECLs by assigning a 100% weighting to the baseline,
downside and upside scenarios respectively. The Bank’s credit loss allowances would increase by
€556,123 (2023: €568,688) if these had to be estimated solely on the basis of the downside
scenario and would reduce by €391,694 (2023: €372,278) if these had to be estimated solely on
the basis of the upside scenario.
4.3.3 Maximum exposure to credit risk
The Bank’s maximum credit risk exposure to on and off-balance sheet financial instruments, before
taking account of any collateral held or other credit enhancements, can be classified in the
following categories:
• Financial assets recognised in the statement of financial position comprise balances with
Central Bank of Malta, loans and advances to banks, financial investments, factored
receivables, and loans and advances to customers. The maximum exposure to credit risk in
respect of these financial assets equals their carrying amount.
• Commitments in respect of factored receivables, overdrafts, and loans - the maximum
exposure to credit risk is the full amount of the committed facilities (Note 28).
The following table presents the maximum exposure to credit risk from on-balance sheet and off-
balance sheet financial instruments before taking account of any collateral held or other credit
enhancements.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
45
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.3 Maximum exposure to credit risk – continued
Accrued income substantially arises from factored receivables and loans and advances to
customers. Expected credit losses in respect of accrued income, which are not deemed material,
have been allocated to factored receivables and loans and advances to customers. Similarly,
expected credit losses in respect of undrawn commitments are also allocated to loans and
advances to customers.
2024
2023
Gross
Gross
carrying
Allowance
carrying
Allowance
amount
For ECL
amount
For ECL
€
€
€
€
Credit risk exposure relating to
on-balance sheet assets
Subject to IFRS 9 impairment
requirements
Financial assets measured at
amortised cost
Balances with Central
Bank of Malta
57,513,990
(30,482)
56,242,720
-
Debt securities
51,245,889
(26,718)
51,432,880
(24,853)
Loans and advances to banks
4,213,710
(44,789)
6,757,337
-
Factored receivables
- Bills of exchange factoring
102,667,483
(368,281)
98,966,063
(349,673)
- Invoice factoring
36,369,185
(431,654)
41,940,634
(507,152)
Loans and advances to
customers
- Corporate Lending
165,751,166
(836,284)
162,154,516
(853,130)
- Retail mortgages
29,137,446
(39,201)
19,680,912
(18,237)
Accrued income
1,860,854
-
1,630,780
-
Debt securities measured at
FVOCI
37,863,530
(59,543)
49,824,772
(94,191)
Credit risk exposure
486,623,253
(1,836,952)
488,630,614
(1,847,236)
Credit risk exposure relating to
off-balance sheet instruments
Undrawn commitments to lend
179,182,237
-
187,954,041
-
Total credit risk exposure
665,805,490
(1,836,952)
676,584,655
(1,847,236)
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
46
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.3 Maximum exposure to credit risk – continued
4.3.4 Credit quality analysis
As described in Note 4.3, the Bank’s internal credit risk grades are designed to highlight exposures
which require closer management attention because of their greater probability of default and
potential loss. The credit quality of the Bank’s portfolios of financial instruments is assessed by
reference to the Bank’s standard credit rating system, as described below:
Credit quality
Financial
Bills of exchange
Invoice factoring /
classification
investments
factoring
Retail mortgage lending
Regular
B+ and above
0 to 30 days past due
0 to 30 days past due
Watch
B to CCC-
31 to 60 days past due
31 to 60 days past due
Substandard
61 to 90 days past due
61 to 90 days past due
Doubtful
CC+ and
below till
Default
Past due by more than
90 days
Past due by more than
90 days
Loss
Amount partially or fully
written off
Amount partially or fully
written off
2024
2023
Fair
Fair
Value
value
€
€
Credit risk exposure relating to on-balance sheet assets not
subject to IFRS 9 impairment requirements
Equity investments designated at FVOCI
16,079
38,800
Equity investments measured at FVTPL
45,594
317,461
Credit risk exposure
61,673
356,261
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
47
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
The credit quality of loans and advances to customers is managed by the Bank’s Credit department
using internal credit ratings, defined as follows.
Credit quality
Risk attributes
classification
Regular
A customer having overdue repayments by up to 30 days. Regular
exposures are typically deemed to have minimal risk of future losses
based on a strong financial position and performance.
Watch
A customer having overdue balances by more than 30 days and less
than 60 days. ‘Watch’ exposures typically exhibit initial signs of
financial difficulties and necessitate closer monitoring and follow up.
Substandard
A customer having overdue balances by more than 60 days and less
than 90 days. ‘Substandard’ exposures typically exhibit a potentially
prolonged deterioration in financial position and performance which
raises concerns in respect of settlement of the outstanding Invoice,
without recourse to the Insurer.
Doubtful
A customer having overdue balances by more than 90 days and less
than 120 days. ‘Doubtful’ exposures are considered to be defaulted
whereby it becomes evident that the Bank will potentially encounter
notable difficulty in obtaining settlement of the outstanding Invoice
without recourse to the Insurer.
Loss
Amount partially or fully written off
The following tables summarise the credit loss allowances recognised as at 31 December 2024 and
2023 in respect of each class of financial instruments by stage distribution.
The credit loss allowances in respect of balances with Central Bank of Malta and Loans and
advances to banks is deemed to be minimal, given the current account nature of the balances and
the ongoing transaction activity.
The following tables present information in respect of the credit quality of financial assets
measured at amortised cost and debt securities measured at FVOCI.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
48
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
As at 31 December 2024
Stage 1
Stage 2
Stage 3
Total
Balances with Central Bank of
Malta and cash measured at
amortised cost
€
€
€
€
Grade 1: Regular
57,513,990
-
-
57,513,990
Gross carrying amount
57,513,990
-
-
57,513,990
Allowance for ECL
(30,482)
-
-
(30,482)
Net carrying amount
57,483,508
-
-
57,483,508
As at 31 December 2023
Stage 1
Stage 2
Stage 3
Total
Balances with Central Bank of
Malta and cash measured at
amortised cost
€
€
€
€
Grade 1: Regular
56,242,720
-
-
56,242,720
Gross carrying amount
56,242,720
-
-
56,242,720
Allowance for ECL
-
-
-
-
Net carrying amount
56,242,720
-
-
56,242,720
As at 31 December 2024
Stage 1
Stage 2
Stage 3
Total
Loans and advances to banks
measured at amortised cost
€
€
€
€
Grade 1: Regular
4,213,710
-
-
4,213,710
Gross carrying amount
4,213,710
-
-
4,213,710
Allowance for ECL
(44,789)
-
-
(44,789)
Net carrying amount
4,168,921
-
-
4,168,921
As at 31 December 2023
Stage 1
Stage 2
Stage 3
Total
Loans and advances to banks
measured at amortised cost
€
€
€
€
Grade 1: Regular
6,757,337
-
-
6,757,337
Gross carrying amount
6,757,337
-
-
6,757,337
Allowance for ECL
-
-
-
-
Net carrying amount
6,757,337
-
-
6,757,337
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
49
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
As at 31 December 2024
Stage 1
Stage 2
Stage 3
Total
Debt securities measured at
FVOCI
€
€
€
€
Grade 1: Regular
37,863,530
-
-
37,863,530
Fair value
37,863,530
-
-
37,863,530
Allowance for ECL
(59,543)
-
-
(59,543)
As at 31 December 2023
Stage 1
Stage 2
Stage 3
Total
Debt securities measured at
FVOCI
€
€
€
€
Grade 1: Regular
49,824,772
-
-
49,824,772
Fair value
49,824,772
-
-
49,824,772
Allowance for ECL
(94,191)
-
-
(94,191)
As at 31 December 2024
Stage 1
Stage 2
Stage 3
Total
Debt securities measured
at Amortised Cost
€
€
€
€
Grade 1: Regular
51,245,889
-
-
51,245,889
Gross carrying amount
51,245,889
-
-
51,245,889
Allowance for ECL
(26,718)
-
-
(26,718)
51,219,171
-
-
51,219,171
As at 31 December 2023
Stage 1
Stage 2
Stage 3
Total
Debt securities measured
at Amortised Cost
€
€
€
€
Grade 1: Regular
51,432,880
-
-
51,432,880
Gross carrying amount
51,432,880
-
-
51,432,880
Allowance for ECL
(24,854)
-
-
(24,854)
51,408,026
51,408,026
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
50
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
The following tables present information in respect of the credit quality of financial assets
measured at amortised cost or at FVOCI.
As at 31 December 2024
Stage 1
Stage 2
Stage 3
Total
Loans and advances to
customers measured
at amortised cost
€
€
€
€
Corporate lending
Grade 1: Regular
157,661,709
-
-
157,661,709
Grade 2: Watch
-
-
-
-
Grade 3: Substandard
-
6,696,080
-
6,696,080
Grade 4: Doubtful
-
-
1,393,377
1,393,377
Grade 5: Loss
-
-
-
-
Gross carrying amount
157,661,709
6,696,080
1,393,377
165,751,166
Allowance for ECL
(652,633)
(49,328)
(134,323)
(836,284)
Net carrying amount
157,009,076
6,646,752
1,259,054
164,914,882
Retail lending, including
retail mortgages
Grade 1: Regular
28,613,787
-
-
28,613,787
Grade 2: Watch
212,248
-
-
212,248
Grade 3: Substandard
-
-
-
-
Grade 4: Doubtful
-
-
311,411
311,411
Grade 5: Loss
-
-
-
-
Gross carrying amount
28,826,035
-
311,411
29,137,446
Allowance for ECL
(38,525)
-
(676)
(39,201)
Net carrying amount
28,787,510
-
310,735
29,098,245
Total
Grade 1: Regular
186,275,496
-
-
186,275,496
Grade 2: Watch
212,248
-
-
212,248
Grade 3: Substandard
-
6,696,080
-
6,696,080
Grade 4: Doubtful
-
-
1,704,788
1,704,788
Grade 5: Loss
-
-
-
-
Gross carrying amount
186,487,744
6,696,080
1,704,788
194,888,612
Allowance for ECL
(691,158)
(49,328)
(134,999)
(875,485)
Net carrying amount
185,796,586
6,646,752
1,569,789
194,013,127
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
51
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
As at 31 December 2023
Stage 1
Stage 2
Stage 3
Total
Loans and advances to
customers measured
at amortised cost
Corporate lending/Total
€
€
€
€
Grade 1: Regular
159,104,649
-
-
159,104,649
Grade 2: Watch
-
-
-
-
Grade 3: Substandard
-
1,674,070
-
1,674,070
Grade 4: Doubtful
-
-
1,375,797
1,375,797
Grade 5: Loss
-
-
Gross carrying amount
159,104,649
1,674,070
1,375,797
162,154,516
Allowance for ECL
(739,103)
-
(114,027)
(853,130)
Net carrying amount
158,365,546
1,674,070
1,261,770
161,301,386
Retail lending, including
retail mortgages
Grade 1: Regular
19,680,912
-
-
19,680,912
Gross carrying amount
19,680,912
-
-
19,680,912
Allowance for ECL
(18,237)
-
-
(18,237)
Net carrying amount
19,662,675
-
-
19,662,675
Total
Grade 1: Regular
178,785,562
-
-
178,785,562
Grade 2: Watch
-
-
-
-
Grade 3: Substandard
-
1,674,070
-
1,674,070
Grade 4: Doubtful
-
-
1,375,797
1,375,797
Grade 5: Loss
-
-
-
-
Gross carrying amount
178,785,562
1,674,070
1,375,797
181,835,429
Allowance for ECL
(757,341)
-
(114,027)
(871,368)
Net carrying amount
178,028,221
1,674,070
1,261,770
180,964,061
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
52
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
As at 31 December 2024
Stage 1
Stage 2
Stage 3
Total
Factored receivables
measured at amortised
cost
€
€
€
€
Grade 1: Regular
103,932,493
-
-
103,932,493
Grade 2: Watch
2,271,064
-
-
2,271,064
Grade 3: Substandard
-
17,387,578
-
17,387,578
Grade 4: Doubtful
-
-
13,092,152
13,092,152
Grade 5: Loss
-
-
2,353,381
2,353,381
Gross carrying amount
106,203,557
17,387,578
15,445,533
139,036,668
Allowance for ECL
(98,918)
(74,712)
(626,305)
(799,935)
Net Carrying amount
106,104,639
17,312,866
14,819,228
138,236,733
As at 31 December 2023
Stage 1
Stage 2
Stage 3
Total
Factored receivables
measured at
amortised cost
€
€
€
€
Grade 1: Regular
77,384,377
-
-
77,384,377
Grade 2: Watch
17,419,983
-
-
17,419,983
Grade 3: Substandard
-
26,378,541
-
26,378,541
Grade 4: Doubtful
-
-
19,723,796
19,723,796
Grade 5: Loss
-
-
-
-
Gross carrying amount
94,804,360
26,378,541
19,723,796
140,906,697
Allowance for ECL
(81,277)
(53,807)
(721,741)
(856,825)
Net Carrying amount
94,723,083
26,324,734
19,002,055
140,049,872
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
53
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.4 Credit quality analysis – continued
The following tables present information in respect of the overdue status of the gross carrying
amount of factored receivables and loans and advances to customers analysed by stage
distribution.
4.3.5 Reconciliation of changes in gross carrying amount and allowances for ECL
The credit loss allowance recognised 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 during 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 in respect of financial instruments derecognised during the period;
• impact on the measurement of ECL due to changes in PD, LGD or EAD during the period;
• impacts on the measurement of ECL due to changes made to models and assumptions; and
• write-offs of allowances related to assets that were written off during the period.
The allowance for ECL in respect of loans and advances to customers as at 31 December 2024
increased marginally compared to the prior year, resulting in an ECL charge for the financial year
ended 31 December 2024 amounting to €4,117 (2023: €37,677).
As at December 2024
As at December 2023
Factored receivables
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
€
€
€
€
€
€
€
€
Current
103,932,493
-
-
103,932,493
77,384,377
-
-
77,384,377
Overdue < 30 days
2,271,064
-
-
2,271,064
17,419,983
-
-
17,419,983
Overdue > 30 days
-
17,387,578
-
17,387,578
-
26,378,541
-
26,378,541
Overdue > 90 days
-
-
15,445,533
15,445,533
-
-
19,723,796
19,723,796
Total
106,203,557
17,387,578
15,445,533
139,036,668
94,804,360
26,378,541
19,723,796
140,906,697
Loans and advances to
customers
Current
185,587,673
5,637,408
87,006
191,312,088
178,785,562
1,674,070
-
180,459,632
Overdue < 30 days
900,071
613,531
-
1,513,602
-
-
-
-
Overdue > 60 days
-
445,141
-
445,141
-
-
-
-
Overdue > 90 days
-
-
1,617,781
1,617,781
-
-
1,375,797
1,375,797
Total
186,487,744
6,696,080
1,704,788
194,888,612
178,785,562
1,674,070
1,375,797
181,835,429
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
54
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.5 Reconciliation of changes in gross carrying amount and allowances for ECL - continued
In addition, the reconciliation of ECL in respect of loans and advances to customers also shows
downward migrations of borrowers from Stage 1 to Stage 2 and 3.
The allowance for ECL in respect of factored receivables as at 31 December 2024 decreased
compared to the prior year, resulting in an ECL reversal for the financial year ended 31 December
2024 amounting to €56,890 (2023: €48,563).
Refinements to the Bank’s ECL methodology during the financial year ended 31 December 2023
resulted in a downward migration of borrowers from Stage 1 to Stages 2 or 3 within the bills of
exchange factoring portfolio. Notwithstanding that, the impact on the ECL in respect of these
borrowers was immaterial due to the fact that, as described in more detail in section 4.3.2.3, the
LGD calculation takes into consideration the cash collateral pledged by factoring clients to cover
potential losses from factored bills of exchange. Specifically in respect of the invoice factoring
portfolio, the Bank reviewed long outstanding exposures as at 31 December 2024 in order to assess
their recoverability, resulting in write-offs amounting to €145,288 (2023: €530,435).
The following tables provide a reconciliation of the gross carrying amount and credit loss
allowances relating to loans and advances to customers and factored receivables. A full
reconciliation of changes in expected credit losses and other credit impairment charges is
presented in Note 9 of the financial statements.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
55
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.5 Reconciliation of changes in gross carrying amount and allowances for ECL – continued
Stage 1
Stage 2
Stage 3
Total
Gross
Gross
Gross
Gross
carrying
Allowance
carrying
Allowance
carrying
Allowance
carrying
Allowance
amount
for ECL
amount
for ECL
amount
for ECL
amount
for ECL
Loans and advances to customers
€
€
€
€
€
€
€
€
At 1 January 2024
178,785,561
(757,341)
1,674,070
-
1,375,798
(114,027)
181,835,429
(871,368)
New and further lending
33,468,411
(66,183)
554,622
(49,328)
45,331
(20,972)
34,068,364
(136,483)
Repayments and disposals
(21,460,610)
132,366
(94,153)
-
(30,550)
-
(21,585,313)
132,366
Transfers of financial instruments:
Stage 1 to Stage 2
(4,561,541)
-
4,561,541
-
-
-
-
-
Stage 1 to Stage 3
(314,209)
-
-
-
314,209
-
-
-
Stage 2 to Stage 3
-
-
-
-
-
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
Parameters
-
-
-
-
-
-
-
-
Net impact from effective interest rate
method
570,132
-
-
-
-
-
570,132
-
Amounts written off
-
-
-
-
-
-
-
-
At 31 December 2024
186,487,744
(691,158)
6,696,080
(49,328)
1,704,788
(134,999)
194,888,612
(875,485)
Total income statement charge for the
year
(4,117)
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
56
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.5 Reconciliation of changes in gross carrying amount and allowances for ECL – continued
Stage 1
Stage 2
Stage 3
Total
Gross
Gross
Gross
Gross
carrying
Allowance
carrying
Allowance
carrying
Allowance
carrying
Allowance
amount
for ECL
amount
for ECL
amount
for ECL
amount
for ECL
Loans and advances to customers
€
€
€
€
€
€
€
€
At 1 January 2023
157,680,103
(722,657)
1,481,010
(22,202)
2,001,860
(88,832)
161,162,973
(833,691)
New and further lending
41,816,724
(34,684)
-
-
12,330
-
41,829,054
(34,684)
Repayments and disposals
(21,058,360)
-
(413,499)
22,202
(50,590)
(25,195)
(21,522,449)
(2,993)
Transfers of financial instruments:
Stage 1 to Stage 2
-
-
-
-
-
-
-
-
Stage 1 to Stage 3
(18,757)
-
-
-
18,757
-
-
-
Stage 2 to Stage 3
-
-
606,559
-
(606,559)
-
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
parameters
-
-
-
-
-
-
-
-
Net impact from effective interest rate
method
365,851
-
-
-
-
-
365,851
-
Amounts written off
-
-
-
-
-
-
-
-
At 31 December 2023
178,785,561
(757,341)
1,674,070
-
1,375,798
(114,027)
181,835,429
(871,368)
Total income statement charge for the
year
(37,677)
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
57
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.5 Reconciliation of changes in gross carrying amount and allowances for ECL – continued
Stage 1
Stage 2
Stage 3
Total
Gross
Gross
Gross
Gross
carrying
Allowance
carrying
Allowance
carrying
Allowance
carrying
Allowance
amount
for ECL
amount
for ECL
amount
for ECL
amount
for ECL
Factored receivables
€
€
€
€
€
€
€
€
At 1 January 2024
94,804,161
(102,481)
26,378,542
(56,815)
19,723,995
(697,529)
140,906,698
(856,825)
New and further lending (*)
78,569,977
(204,085)
10,618,379
(62,491)
2,302,757
(822,652)
)
91,491,113
(1,089,228)
Repayments and disposals
(56,517,628)
171,171
(27,678,903)
20,418
(9,019,324)
954,529
(93,215,855)
1,146,118
Transfers of financial instruments:
Stage 1 to Stage 2
(12,619,457)
11,826
12,619,457
(11,826)
-
-
-
-
Stage 1 to Stage 3
(1,004,049)
26,067
-
-
1,004,049
(26,067)
-
-
Stage 2 to Stage 1
1,488,297
(1,397)
(1,488,297)
1,397
-
-
-
-
Stage 2 to Stage 3
-
-
(3,054,297)
35,253
3,054,297
(35,253)
-
-
Stage 3 to Stage 1
1,482,256
(19)
-
-
(1,482,256)
19
-
-
Stage 3 to Stage 2
-
-
(7,303)
(648)
7,303
648
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
Parameters
-
-
-
-
-
-
-
-
Amounts written off
-
-
-
-
(145,288)
-
(145,288)
-
At 31 December 2024
106,203,557
(98,918)
17,387,578
(74,712)
15,445,533
(626,305)
139,036,668
(799,935)
Total income statement charge for the
year
56,890
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
58
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.5 Reconciliation of changes in gross carrying amount and allowances for ECL – continued
Stage 1
Stage 2
Stage 3
Total
Gross
Gross
Gross
Gross
carrying
Allowance
carrying
Allowance
carrying
Allowance
carrying
Allowanc
e
amount
for ECL
amount
for ECL
amount
for ECL
amount
for ECL
Factored receivables
€
€
€
€
€
€
€
€
At 1 January 2023
70,329,555
(221,559)
29,141,787
-
19,802,550
(683,829)
119,273,892
(905,388)
New and further lending (*)
59,105,199
135,198
26,094,725
(53,712)
8,674,532
(32,923)
93,874,456
48,563
Repayments and disposals
(42,192,892)
-
(22,581,985)
-
(6,936,338)
-
(71,711,215)
-
Transfers of financial instruments:
Stage 1 to Stage 2
(9,490)
166
9,490
(166)
-
-
-
-
Stage 1 to Stage 3
(1,658,851)
163
-
-
1,658,851
(163)
-
-
Stage 2 to Stage 1
6,251,270
(2,703)
(6,251,270)
2,703
-
-
-
-
Stage 2 to Stage 3
-
-
(537,360)
258
537,360
(258)
-
-
Stage 3 to Stage 1
2,979,370
(13,746)
-
-
(2,979,370)
13,746
-
-
Stage 3 to Stage 2
-
-
503,155
(5,898)
(503,155)
5,898
-
-
Net remeasurement of ECL arising from
stage transfers and changes in risk
parameters
-
-
-
-
-
-
-
-
Amounts written off
-
-
-
-
(530,435)
-
(530,435)
-
At 31 December 2023
94,804,161
(102,481)
26,378,542
(56,815)
19,723,995
(697,529)
140,906,698
(856,825)
Total income statement charge for the
year
48,563
*New and further lending classified within Stages 2 and 3 in the tables above represents exposures originated during the financial years ended 31 December 2024 and 31
December 2023, and migrated to Stages 2 and 3 on the basis of missed repayments.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
59
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.6 Renegotiation of financial instruments and forbearance
The contractual terms of a loan may be modified for several reasons, including changing market
conditions, customer retention and other factors not related to a current or potential credit
deterioration of the customer. Where terms have been modified, an existing exposure may be
derecognised if the modification is deemed to be substantial, with the renegotiated instrument
being recognised as a new instrument measured at the fair value as at the date of modification and
allocated to Stage 1 (assuming it is not credit-impaired at that time).
When the terms of an instrument are modified and the modification does not result in
derecognition, the determination of whether the asset's credit risk has increased significantly
reflects comparison of:
• the residual lifetime PD at the reporting date based on the modified terms; with
• the residual lifetime PD estimated based on data on initial recognition and the original
contractual terms.
The Bank has aligned its policies with the European Securities and Markets Authority (“ESMA”)
Public Statement on the Treatment of Forbearance Practices in IFRS Financial Statements of
Financial Institutions. Under certain circumstances, the Bank may renegotiate the terms and
conditions of a loan in response to actual or perceived financial difficulties of a customer.
Renegotiations of exposures to customers in financial difficulties (referred to as 'forbearance
activities') are designed to maximise collection opportunities and minimise the risk of default.
Under the Bank's forbearance policy, loan forbearance is granted on a selective basis if the debtor
is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor
made all reasonable efforts to pay under the original contractual terms and the debtor is expected
to be able to meet the revised terms.
The revised terms usually include maturity extensions, changes to the timing of interest payments,
and amendments to the terms of loan covenants. Both retail and corporate loans are subject to
the forbearance policy. The Credit Committee regularly reviews reports on forbearance activities.
For financial assets modified as part of the Bank's forbearance policy, the Bank assesses whether
the modification has improved or restored the Bank's ability to collect interest and principal and
the probability of default in view of previous experience of similar forbearance activity. As part of
this process, the Bank evaluates the borrower's payment performance against the modified
contractual terms and considers various behavioural indicators.
Generally, forbearance is a qualitative indicator of a significant increase in credit risk and may
constitute evidence that an exposure is credit-impaired. A renegotiated loan is typically presented
as credit-impaired when there has been a change in contractual cash flows as a result of a
concession which the lender would otherwise not consider and it is probable that, without the
concession, the borrower would be unable to meet contractual payment obligations in full.
Accordingly, this will represent a significant concern regarding the borrower’s ability to meet
contractual payments, and the loan will be classified as credit-impaired, unless the concession
granted is insignificant.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
60
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.6 Renegotiation of financial instruments and forbearance – continued
Renegotiated loans are classified as non-credit impaired where the renegotiation has resulted from
significant concern about a borrower’s ability to meet contractual payment terms, but contractual
cash flows are expected to be collected in full following the renegotiation and no other unlikely-to-
pay indicators are evident.
In the event that a forborne exposure is deemed to be credit-impaired, the renegotiated loan will
continue to be disclosed as credit-impaired until there is sufficient evidence to demonstrate a
significant reduction in the risk of non-payment of future cash flows, and there are no other
indicators of impairment. In this respect, a customer needs to demonstrate consistently good
payment behaviour over a period before the exposure is no longer considered to be credit
impaired.
As at 31 December 2024 and 2023, there were no forborne exposures within the factored
receivables portfolio.
As at 31 December 2024, forborne loans and advances to customers comprised exposures with five
borrowers (2023: two borrowers), operating within the wholesale and retail trade industry. The
carrying amount in respect of these exposures, as at 31 December 2024, is €6,222,713 (2023:
€1,152,249). Credit loss allowances in respect of these exposures amount to €18,504 as at 31
December 2024 (2023: €11,845).
Interest income recognised during the financial year ended 31 December 2024 in respect of
forborne exposures amounted to €110,109 (2023: €33,999).
The movement in the carrying amount of forborne loans and advances, before impairment
allowances, is analysed below. Exposures eligible for a general payment moratorium of €3,550,179
(2023: nil) are not considered to be forborne loans and are therefore not included in the table
below.
Forborne exposures
2024
2023
€
€
At 1 January
1,152,249
1,219,230
Increase/(Decrease) in exposure amount
5,070,464
(66,981)
At 31 December
6,222,713
1,152,249
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
61
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.7 Analysis of collateral
The Bank employs a range of policies and practices to mitigate credit risk. The most common of
these is accepting collateral for funds advanced. The Bank has internal policies on the acceptability
of specific classes of collateral or credit risk mitigation.
The Bank’s policies regarding obtaining collateral have not changed during the reporting period
and there has been no significant change in the overall quality of the collateral held by the Bank
since the prior period.
Loans and advances to customers
The Bank holds collateral against loans and advances to customers in the form of pledges over
deposits held with the Bank, charges over real estate and corporate receivables. In response to the
Covid-19 pandemic, the Bank provided support to its customers by offering loans originated in
terms of the Malta Development Bank (“MDB”) Covid-19 Guarantee Scheme (“CGS”). In this
respect, up to 90% of such exposures are guaranteed by the Government of Malta, with the
guarantee amount capped to 50% of all MDB CGS exposures originated by the Bank. The following
is an analysis of the extendible value of the collateral (capped at the carrying amount of the loan)
held by the Bank against exposures of loans and advances to customers:
Carrying amounts
2024
2023
€
€
Loans and advances to customers (Gross carrying
amount)
194,888,612
181,835,428
Of which secured by:
Real estate
101,921,820
93,286,508
Cash deposits held with the Bank
43,426,968
35,341,728
MDB CGS guarantee
5,718,313
10,947,313
Bills of exchange with recourse
16,618,990
14,936,273
Assignment of receivables and others
5,734,952
5,403,556
Total carrying amount secured by collateral
173,421,043
159,915,377
Residual unsecured exposure amounts
21,467,569
21,920,051
Allowance for ECL
(875,485)
(871,368)
During 2020, the Bank had confirmed its participation in the MDB CGS, whereby the risk of newly
originated loans under the scheme to viable businesses experiencing liquidity pressures resulting
from the effects of the pandemic are mitigated by a government guarantee. In this respect, as at
31 December 2024, gross loans subject to the MDB CGS amounted to €6,353,681 (2023:
€12,163,581), of which a maximum of €5,718,313 (2023: €6,081,791) is considered guaranteed. As
at 31 December 2024, gross loans originated under this scheme classified as Stage 1 and Stage 2
amounted to €4,298,015 (2023: €9,711,859) and €765,405 (2023: €1,153,149) respectively. As at
31 December 2024, loans originated under this scheme classified in Stage 3 amounted to
€1,290,260 (2023: €1,298,673).
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
62
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.7 Analysis of collateral – continued
The allowance for ECL in respect of the corresponding loans classified as Stage 1, Stage 2 and Stage
3 amounted to €168 (2023: €847), €nil (2023: €193) and €1,734 (2023: €2,242) respectively.
Factored receivables
Factored receivables comprise bills of exchange and invoices factored on a no-recourse basis. The
former sub-portfolio is secured by the motor vehicles being financed, with a pledge on cash
deposits placed by factoring clients and held with the Bank also providing coverage on a first loss
basis. The value of motor vehicles held as collateral in respect of factored bills of exchange as at 31
December 2024 and 2023, estimated by reference to the depreciated value of the motor vehicle
to capture the loss in value through use, is presented in the table below.
2024
2023
€
€
Type of collateral
Motor vehicles
101,854,220
101,705,114
Invoice factoring facilities are secured by credit insurance from a foreign third-party underwriter
providing insurance cover in respect of losses up to 95% of each eligible invoice.
Collateral held in respect of credit-impaired financial assets
The Bank closely monitors collateral held for financial assets considered to be credit-impaired, as
it becomes more likely that the Bank will take possession of collateral to mitigate potential credit
losses. Financial assets that are credit-impaired and in respect of which related collateral is held in
order to mitigate potential losses are shown below:
As at 31 December 2024
Extendible
Gross
value of
Carrying
Allowance
Carrying
collateral
Amount
for ECL
amount
held
€
€
€
€
Loans and advances to customers
Overdrafts
103,116
-
103,116
-
Fixed term loans
1,601,671
(134,999)
1,466,672
470,000
Factored receivables
Bills of exchange factoring
Invoice factoring
12,756,154
(289,662)
12,466,492
9,631,500
Invoice factoring
2,689,379
(336,644)
2,352,735
2,108,326
17,150,320
(761,305)
16,389,015
12,209,826
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
63
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.7 Analysis of collateral – continued
As at 31 December 2023
Extendible
Gross
value of
carrying
ECL
Carrying
collateral
amount
allowance
amount
held
€
€
€
€
Loans and advances to customers
Overdrafts
51,464
-
51,464
-
Fixed term loans
1,324,333
(114,027)
1,210,306
1,601,350
Factored receivables
Bills of exchange factoring
11,865,713
(281,279)
11,584,434
7,985,487
Invoice factoring
7,858,083
(440,462)
7,417,621
5,288,398
21,099,593
(835,768)
20,263,825
14,875,235
The LTV ratio in respect of credit-impaired loans and advances to customers as at 31 December
2024 is 334% (2023: 79%). As at 31 December 2024, credit-impaired loans and advances to
customers comprise three exposures (2023: one) with a carrying amount of €1,393,377 (2023:
€572,457) classified as forborne stage 3 exposure and another nine exposures (2023: three) with a
carrying amount of €310,735 (2023: €803,340) classified as non-forborne stage 3 exposures. These
exposures are secured by commercial, residential real estate, and others which are secured by the
MDB CGS guarantee and cash collateral.
Credit-impaired invoice factoring facilities are secured by credit insurance cover procured from
third party insurers up to 95% of credit losses in respect of each insured exposure.
No collateral is held in respect of financial investments and loans and advances to banks.
4.3.8 Write-off policy
The Bank writes off a loan, security and/or factored receivable balances (and any related credit loss
allowances) when management determines that the loan, security and/or factored receivable is
uncollectible. This determination is reached after considering information such as occurrence of
significant changes in the borrower’s/issuer’s financial position such that the borrower/issuer can
no longer pay the obligation, or that proceeds from collateral will not be sufficient to pay back the
entire exposure. During the current year, amounts receivable of €145,288 (2023: €530,435) were
written off by the Bank.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
64
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.9 Settlement risk
'Settlement risk' is the risk of loss due to the failure of an entity to honour its obligations to deliver
cash, securities or other assets as contractually agreed. The Bank's activities do not expose it to
significant settlement risk.
4.3.10 Industry concentration
The following table analyses the Bank’s loans and advances to customers and factored receivables
by business segment:
2024
2023
€
%
€
%
Accommodation and food services
-
-
686,005
1%
Construction and real estate activities
48,617,487
15%
55,259,689
17%
Households and individuals
128,163,547
38%
103,748,754
32%
Manufacturing
14,001,862
4%
16,416,298
4%
Services
52,267,545
16%
55,107,680
17%
Transportation
2,902,473
1%
2,008,052
1%
Wholesale and retail trade
43,084,418
13%
47,091,184
15%
Other sectors
43,212,528
13%
40,696,271
13%
332,249,860
100%
321,013,933
100%
The following table analyses the Bank’s investment portfolio by business segment:
2024
2023
€
%
€
%
Sovereign debt
70,634,821
79%
72,474,849
71%
Local corporate bonds:
- Real estate
6,819,500
8%
11,488,100
11%
- Financial services
4,929,300
6%
5,130,000
5%
- Tourism
2,539,800
3%
3,753,970
3%
- Telecommunications
2,363,325
3%
3,833,592
4%
- Other
1,795,955
1%
4,552,287
5%
Equity investments
61,673
-
356,261
1%
89,144,374
100%
101,589,059
100%
4.3.11 Concentration risk
In addition to industry concentration mentioned in Note 4.3.10, the Bank monitors concentration
of credit risk by counterparty and by geographic location. An analysis of credit risk concentration
(net of credit loss allowances) is shown on the next page.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
65
4 Financial risk management and review – continued
4.3 Credit risk – continued
4.3.11 Concentration risk – continued
Loans and advances
Loans and advances
to customers
Factored receivables
to banks
Financial investments
2024
2023
2024
2023
2024
2023
2024
2023
€
€
€
€
€
€
€
€
Carrying amount
194,013,127
180,964,061
138,236,733
140,049,872
4,168,921
6,757,337
89,144,374
101,589,059
Concentration by counterparty
Corporates
164,914,881
159,459,544
43,952,027
55,892,592
-
-
13,518,580
23,627,949
Private individuals
29,098,246
21,504,517
91,966,700
82,257,858
-
-
-
-
Sovereign
-
-
2,318,006
1,899,422
-
-
70,634,821
72,474,849
Banks and financial services
-
-
-
-
4,168,921
6,757,337
4,990,973
5,486,261
Concentration by
location
Europe:
- Malta
144,098,801
136,569,215
110,166,933
107,232,489
3,384,581
3,545,973
87,591,856
99,491,554
- Belgium
40,651,076
35,552,942
21,961,199
27,055,083
711,965
1,133,218
16,079
38,800
- France
3,500,000
3,500,000
2,704,019
811,507
-
-
42,313
42,313
- Other
5,763,250
5,341,061
3,404,582
4,950,793
72,375
2,078,146
1,494,125
2,016,392
USA
-
843
-
-
-
-
-
-
Concentration by location for loans and advances to customers and banks and investment securities is measured based on the location of the borrower or issuer of the security.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
66
4 Financial risk management and review – continued
4.4 Market risk
Market risk comprises the risk of losses in value caused by unexpected changes in market prices
(interest rates, equity prices, foreign exchange rates and credit spreads) before the affected
positions can be closed out or hedged.
Market risk for the Bank consists of three elements:
• Interest rate risk, which is the risk of losses because of changes in interest rates.
• Exchange rate risk, which is the risk of losses on the Bank’s positions in foreign currency
because of changes in exchange rates.
• Investment price risk, which is the risk of losses because of changes in investments prices.
4.4.1 Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in
market interest rates. 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 re-price at
different times or at different amounts. The Bank accepts deposits from customers at both fixed
and floating rates and for varying maturity periods. This risk is managed through the matching of
the interest resetting dates on assets and liabilities. However, the Bank seeks to maximise the
spread over the cost of capital by investing funds in a portfolio of securities and loans and
receivables with a longer tenure than the liabilities (therefore carrying a negative maturity gap
position) through the efficient management of shorter-term liabilities over the medium to longer
term. The table on the next page summarises re-pricing mismatches at reporting date together
with the effective interest rates where applicable.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
67
4 Financial risk management and review – continued
4.4 Market risk – continued
4.4.1 Interest rate risk – continued
2024
Carrying
amount
Average
effective
interest
rate
Less than
three months
Between
three months
and one year
Between one
year and five
years
More than
five years
€
%
€
€
€
€
Assets
Balances with Central Bank of Malta
57,483,508
5%
57,483,508
-
-
-
Loans and advances to banks
4,168,921
2%
4,168,921
-
-
-
Financial investments:
- Debt securities measured at Amortised Cost
51,219,171
1%
-
-
24,477,586
26,741,585
- Debt Securities measured at FVOCI
37,863,530
4%
-
5,297,825
14,441,251
18,124,454
Factored receivables
138,236,733
7%
42,226,707
9,344,527
73,859,194
12,806,305
Loans and advances to customers
194,013,127
5%
136,781,010
27,205,000
850,001
29,177,116
Total assets
482,984,990
240,660,146
41,847,352
113,628,032
86,849,460
Liabilities
Amounts owed to institutions
-
-
-
-
-
-
Amounts owed to banks
-
-
-
-
-
-
Amounts owed to customers
448,613,950
3%
309,678,003
69,327,564
55,430,196
14,178,187
Debt securities in issue
16,773,480
5%
-
3,054,530
-
13,718,950
Total liabilities
465,387,430
309,678,003
72,382,094
55,430,196
27,897,137
Interest repricing gap
(69,017,857)
(30,534,742)
58,197,836
58,952,323
Cumulative gap
(69,017,857)
(99,552,599)
(41,354,763)
17,597,560
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
68
4 Financial risk management and review – continued
4.4 Market risk – continued
4.4.1 Interest rate risk – continued
2023
Carrying
amount
Average
effective
interest rate
Less than
three months
Between
three months
and one year
Between one
year and five
years
More than
five years
€
%
€
€
€
€
Assets
Balances with Central Bank of Malta
56,242,720
4%
56,242,720
-
Loans and advances to banks
6,757,337
0%
6,757,337
-
Financial investments:
- Debt securities at Amortised Cost
51,408,027
1%
-
-
20,284,817
31,123,210
- Debt Securities at FVOCI
49,824,772
3%
-
3,365,067
25,418,263
21,041,442
Factored receivables
140,049,872
6%
60,917,844
21,434,957
57,566,144
130,927
Loans and advances to customers
180,964,062
4%
130,718,490
2,015,320
44,841,775
3,388,476
Total assets
485,246,790
254,636,391
26,815,344
148,110,999
55,684,055
Liabilities
Amounts owed to institutions
20,000,000
5%
20,000,000
-
-
-
Amounts owed to banks
271,105
2%
271,105
-
-
-
Amounts owed to customers
429,743,262
3%
149,768,151
192,247,057
70,460,769
17,267,285
Debt securities in issue
16,861,501
5%
-
-
3,179,192
13,682,310
Total liabilities
466,875,868
170,039,256
192,247,057
73,639,961
30,949,595
((
Interest repricing gap
84,597,135
(165,431,713)
74,471,038
24,734,460
Cumulative gap
62,145,521
(119,153,890)
(6,363,540)
18,730,920
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
69
4 Financial risk management and review – continued
4.4 Market risk – continued
4.4.1 Interest rate risk – continued
4.4.1.1 Interest rate profile
The interest rate profile of the Bank’s interest-bearing financial instruments as at 31 December
2024 and 2023 is presented below:
2024
2023
€
€
Fixed
Variable
Fixed
Variable
Interest-earning assets
Financial investments – debt
securities
89,144,374
-
101,232,799
-
Factored receivables:
- Invoice factoring
35,937,531
-
41,433,481
-
- Bills of exchange factoring
102,299,202
-
98,616,390
-
Loans and advances to
customers:
- Corporate
53,190,499
111,724,383
47,771,845
113,529,541
- Retail
25,880,846
3,217,399
17,009,840
2,652,835
Balances with Central Bank of
Malta and cash
-
57,483,508
-
56,242,720
Loans and advances to banks
-
4,168,921
-
6,757,337
306,452,452
176,594,211
306,064,355
179,182,433
Interest-bearing liabilities
Amounts owed to institutions
-
-
(16,861,501)
-
Amounts owed to customers
(264,224,707)
(184,389,243)
(302,065,672)
(127,677,591)
Debt securities in issue
(16,773,480)
-
(16,861,501)
-
Amounts owed to banks
-
-
-
(271,105)
(280,998,187)
(184,389,243)
(335,788,674)
(127,948,696)
4.4.1.2 Fair value sensitivity analysis for fixed rate instruments
Financial instruments issued at fixed interest rates potentially expose the Bank to fair value interest
rate risk. Balances with Central Bank of Malta, loans and advances to customers and to banks,
amounts owed to Central Bank of Malta, customers and banks, and debt securities in issue are
measured at amortised cost and are therefore not subject to fair value interest rate risk.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
70
4 Financial risk management and review – continued
4.4 Market risk – continued
4.4.1 Interest rate risk – continued
4.4.1.2 Fair value sensitivity analysis for fixed rate instruments - continued
In this respect, the fair value sensitivity for fixed rate instruments is only performed in respect of
debt financial investments measured at FVOCI. An increase of 250 basis points (2023: 250 basis
points) in the yield to maturity of each respective debt security would lead to a decrease in value
of debt financial investments measured at FVOCI amounting to €3,457,208 (2023: €5,370,842).
Likewise, a decrease of 250 basis points (2023: 250 basis points) in interest rates would lead to an
increase in value of debt financial investments measured at FVOCI amounting to €5,018,105 (2023:
€8,002,290). Such increases or decreases in fair value would be recognised in other comprehensive
income and in equity.
4.4.1.3 Cash flow sensitivity analysis for variable rate instruments
The Bank is exposed to cash flow interest rate risk principally in respect of financial assets and
liabilities subject to variable interest rates. Taking cognisance of the nature of the Bank’s financial
assets and liabilities, a sensitivity analysis in respect of interest rate changes in relation to the
Bank’s variable rate financial assets is presented hereunder in line with the requirements
emanating from IFRS 7.
The Bank manages its exposure to interest rate risk using interest rates repricing gaps and both
economic value and earnings-based measures. The Bank’s interest rate risk management
framework is in line with the relevant guidelines issued by the EBA. The following tables show the
impact on the Bank’s economic value and earnings under different interest rate scenarios. The
Bank’s interest rate risk management framework follows relevant EBA Guidelines. These Guidelines
outline six shock scenarios that set out the change in interest rates under which the impact on the
economic value of equity is assessed. The scenarios are reviewed periodically by Management to
ensure that these capture all plausible scenarios.
2024
Parallel shift
up 200bp
Parallel shift
down 200bp
Flattener
Steepener
Short-term
upward
Short-term
downward
Economic
value
measures
1,908,914
(1,908,914)
(287,184)
1,241,641
(287,184)
287,184
Earnings
measures
(328,539)
328,539
(164,270)
-
(164,270)
164,270
2023
Parallel shift
up 200bp
Parallel shift
down 200bp
Flattener
Steepener
Short-term
upward
Short-term
downward
Economic
value
measures
(1,206,824)
1,206,824
(11,553)
(591,859)
(11,553)
11,553
Earnings
measures
(2,042,501)
2,042,501
(1,021,251)
-
(1,021,251)
1,021,251
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
71
4 Financial risk management and review – continued
4.4 Market risk – continued
4.4.2 Currency risk
Currency risk is the risk that the value of a financial instrument fluctuates due to changes in foreign
exchange rates. The Bank holds and deals in foreign currency with the aim to service the foreign
exchange buying and selling activity of its clients. The Bank does not speculate on its foreign
exchange holdings. The Bank’s foreign exchange exposure is mainly limited to the United States
Dollar and Swiss Francs, originating from the Bank's corporate banking business. The Bank manages
this risk by ensuring that its foreign currency denominated liabilities are matched to corresponding
assets in the same currency.
Exposure to foreign currencies is maintained at minimum levels and within the prescribed limits
set by the Bank’s Board of Directors. In the scenario whereby all foreign currencies fluctuate
upwards or downwards by 20% against the Euro, the carrying amounts of financial assets and
liabilities would fluctuate upwards or downwards by €11,505 (2023: €245,808) respectively.
The following table provides an analysis of the financial assets and liabilities of the Bank into
relevant currency groupings:
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
72
4 Financial risk management and review – continued
4.4 Market risk – continued
4.4.2 Currency risk – continued
2024
2023
Euro
Other
currencies
Total
Euro
Other
currencies
Total
€
€
€
€
€
€
Financial assets
Balances with Central Bank of
Malta and cash
57,483,508
-
57,483,508
56,242,720
-
56,242,720
Loans and advances to banks
2,209,271
1,959,650
4,168,921
5,997,378
759,959
6,757,337
Financial investments:
- Debt securities measured
at Amortised Cost
51,219,171
-
51,219,171
51,408,027
-
51,408,027
- Debt Securities measured at
FVOCI
37,863,530
-
37,863,530
49,824,772
-
49,824,772
Factored receivables
138,236,733
-
138,236,733
139,264,653
785,219
140,049,872
Loans and advances
to customers
194,013,127
-
194,013,127
180,963,218
843
180,964,061
Other assets
2,456,536
-
2,456,536
2,391,356
-
2,391,356
483,481,876
1,959,650
485,441,526
486,092,124
1,546,021
487,638,145
Financial liabilities
Financial liabilities
Amounts owed to institutions
-
-
-
20,000,000
-
20,000,000
Amounts owed to banks
-
-
-
271,105
-
271,105
Amounts owed to customers
446,711,824
1,902,126
448,613,950
429,426,282
316,980
429,743,262
Debt securities in issue
16,773,480
-
16,773,480
16,861,501
-
16,861,501
Other liabilities
6,558,061
-
6,558,061
8,393,356
-
8,393,356
470,043,365
1,902,126
471,945,491
474,952,244
316,980
475,269,224
Net currency position
13,438,511
57,524
13,496,035
11,139,880
1,229,041
12,368,921
As at 31 December 2024 and 2023, the Bank was not exposed to any significant currency risk in
respect of off-balance sheet exposures. Balances under other currencies represent exposures
predominantly to the US Dollar.
4.4.3 Investment price risk
The exposure of the Bank to this risk is not significant. Frequent management reviews are carried
out to ensure high quality of the portfolio.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
73
4 Financial risk management and review – continued
4.5 Liquidity risk
Liquidity risk is the risk that the Bank’s obligations to repay liabilities or fund new loans exceeds the
Bank’s ability to raise funds from either the liquidation of assets or the acceptance of new deposits.
Liquidity risk arises primarily due to mismatches in the maturity profile of a bank’s financial assets
and liabilities, which exposes a bank to the risk that it might not be able to meet its liabilities as
they become due or will have to do so at excessive cost. Liquidity risk may also be affected by the
depth of the market in which the Bank operates.
Liquidity risk is divided into two categories:
• Market (product) liquidity risk: risk of losses arising from difficulties in accessing a product
or market at the required time, price and volume.
• Funding liquidity risk: risk of losses arising from a timing mismatch in respect of the
maturities of financial assets and liabilities, resulting in a risk that the Bank does not meet
obligations when due or will have to raise funding at higher than normal rates.
The Bank’s approach to managing liquidity risk is to ensure, as far as possible, that it always has
sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Bank’s reputation. The key
elements of the Bank's liquidity strategy are as follows.
• Maintaining a diversified funding base consisting of customer deposits (both retail and
corporate) and wholesale market deposits, whilst also maintaining contingency facilities.
• Carrying a portfolio of highly liquid assets, diversified by currency and maturity.
• Monitoring maturity mismatches, behavioural characteristics of the Bank's financial assets
and financial liabilities, and the extent of asset encumbrance which might prevent financial
assets from being used as collateral to obtain further funding.
• Stress testing of the Bank's liquidity position against various exposures and global, country-
specific and Bank-specific events.
Liquidity policies and procedures are reviewed by internal audit. All liquidity policies are subject to
review by the Asset and Liability Management Committee and the approval of the Board of
Directors.
The Bank’s liquidity and funding risk management framework employs two key measures to define,
monitor and control the liquidity and funding risk:
• The Liquidity Coverage Ratio (“LCR”), which measures the Bank’s level of High-Quality Liquid
Assets (“HQLAs”) against expected net cash outflows over a one-month period. This ratio is
used to gauge the short-term resilience of the Bank’s liquidity profile in terms of the
requirements emanating from European Commission (‘EC’) Delegated Regulation 2015/61.
• The Net Stable Funding Ratio (“NSFR”) is used to monitor the structural long-term funding
position of the Bank. The NSFR requires institutions to maintain sufficient stable funding
relative to required stable funding, and reflects a bank’s long-term funding profile (funding
with a term of more than a year). It is designed to complement the LCR.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
74
4 Financial risk management and review – continued
4.5 Liquidity risk – continued
Details of the Bank’s ratios at the reporting dates and during the reported periods are presented
below:
LCR
NSFR
2024
2023
2024
2023
As at 31 December
1,967%
1,948%
141%
153%
Average for the year
2,775%
1,571%
155%
162%
Maximum for the year
6,254%
3,054%
181%
182%
Minimum for the year
1,254%
240%
141%
135%
4.5.1 Contractual maturity ladder
The Bank also monitors the contractual maturity ladder, which provides insight into the extent to
which the Bank relies on maturity transformation in respect of contractual cash flows. More
precisely, the maturity ladder is used to determine the availability of liquid assets to meet liquidity
gaps for diverse time horizons.
The following table provides an analysis of the financial assets and liabilities of the Bank into
relevant remaining maturity groupings based on the ability of recovery or repayment:
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
75
4 Financial risk management and review – continued
4.5 Liquidity risk – continued
4.5.1 Contractual maturity ladder – continued
At 31 December 2024
Less than one
month
Between one and
three months
Between three
months and one
year
Between one and
five years
More than five
years
No maturity date
Total
€
€
€
€
€
€
€
Financial assets
Balances with Central Bank of Malta
55,962,944
-
-
-
-
1,520,564
57,483,508
Loans and advances to banks
4,168,921
-
-
-
-
-
4,168,921
Financial investments:
- Equity investments
-
-
-
-
-
61,673
61,673
- Debt securities at amortised cost
-
-
-
24,477,586
26,741,585
-
51,219,171
- Debt securities at FVOCI
-
-
5,297,825
14,441,251
18,124,454
-
37,863,530
Factored receivables
31,053,288
11,173,419
9,344,527
73,859,194
12,806,305
-
138,236,733
Loans and advances to customers
22,694,875
11,382,434
54,441,152
32,382,759
73,111,907
-
194,013,127
Other assets
2,456,536
-
-
-
-
-
2,456,536
Total assets
116,336,564
22,555,853
69,083,504
145,160,790
130,784,251
1,582,237
485,503,199
Financial liabilities
Amounts owed to customers
201,803,194
107,874,809
69,327,564
55,430,196
14,178,187
-
448,613,950
Debt securities in issue
-
-
3,054,530
-
13,718,950
-
16,773,480
Other liabilities
6,558,061
-
-
-
-
-
6,558,061
Total liabilities
208,361,255
107,874,809
72,382,094
55,430,196
27,897,137
-
471,945,491
Liquidity gap
(92,024,691)
(85,318,956)
(3,298,590)
89,730,594
102,887,114
1,582,237
13,557,708
Cumulative gap
(92,024,691)
(177,343,647)
(180,642,237)
(90,911,643)
11,975,471
13,557,708
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
76
4 Financial risk management and review – continued
4.5 Liquidity risk – continued
4.5.1 Contractual maturity ladder – continued
At 31 December 2023
Less than one
month
Between one and
three months
Between three
months and one
year
Between one and
five years
More than five
years
No maturity date
Total
€
€
€
€
€
€
€
Financial assets
Balances with Central Bank of Malta
54,722,156
-
-
-
-
1,520,564
56,242,720
Loans and advances to banks
6,757,337
-
-
-
-
-
6,757,337
Financial investments:
- Equity investments
-
-
-
-
-
356,260
356,260
- Debt securities at amortised cost
-
-
-
20,309,670
31,123,210
(24,853)
51,408,027
- Debt securities at FVOCI
220,363
-
3,365,067
25,197,900
21,041,442
-
49,824,772
Factored receivables
13,054,659
25,411,571
5,567,259
51,166,920
44,849,463
-
140,049,872
Loans and advances to customers
23,441,492
514,149
44,929,982
51,613,213
60,465,226
-
180,964,061
Other assets
1,630,780
-
-
-
-
-
1,630,780
Total assets
99,826,787
25,925,720
53,862,308
148,287,703
157,479,341
1,851,971
487,233,830
Financial liabilities
Amounts owed to institutions
20,000,000
-
-
-
-
-
20,000,000
Amounts owed to banks
271,105
-
-
-
-
-
271,105
Amounts owed to customers
149,768,151
35,472,282
156,774,775
70,460,769
17,267,285
-
429,743,262
Debt securities in issue
-
-
-
3,179,192
13,682,310
-
16,861,502
Other liabilities
8,393,356
-
-
-
-
-
8,393,356
Total liabilities
178,432,612
35,472,282
156,774,775
73,639,961
30,949,595
-
475,269,225
Liquidity gap
(78,605,825)
(9,546,562)
(102,912,467)
74,647,742
126,529,746
1,851,971
11,964,605
Cumulative gap
(78,605,825)
(88,152,387)
(191,064,854)
(116,417,112)
10,112,634
11,964,605
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
77
4 Financial risk management and review – continued
4.5 Liquidity risk – continued
4.5.1 Contractual maturity ladder – continued
Amounts owed to customers of €124,061,541 (2023: €127,677,591) as at 31 December 2024 are repayable on demand and included in the ‘less than one month’ bucket in the
tables above. However, the Bank’s experience is that a significant portion of such deposits remains stable. Additionally, a significant part of other deposits maturing within 3
months from the end of the reporting period is typically renewed.
4.5.2 Cash flows payable by the Bank under financial liabilities by residual maturity
The table below shows a maturity analysis of undiscounted cash flows payable in respect of financial liabilities by residual contractual maturities of the instruments:
Carrying amount
Gross nominal
outflow
Repayable on
demand
Less than three
months
Between three
months and
one year
Between one
and five years
More than five
years
€
€
€
€
€
€
€
At 31 December 2024
Amounts owed to customers
448,613,950
(456,934,694)
(124,061,541)
(186,179,327)
(70,502,670)
(59,392,613)
(16,798,543)
)
Debt securities in issue
16,773,480
(22,313,926)
-
-
(3,123,309)
-
(19,190,617)
Other liabilities
6,558,061
(6,558,061)
-
(6,558,061)
-
-
-
471,945,491
(485,806,681)
(124,061,541)
(192,737,388)
(73,625,979)
(59,392,613)
(35,989,160)
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
78
4 Financial risk management and review – continued
4.5 Liquidity risk – continued
4.5.2 Cash flows payable by the Bank under financial liabilities by residual maturity – continued
Carrying
amount
Gross nominal
outflow
Repayable on
demand
Less than
three months
Between three
months and
one year
Between one
and five years
More than
five years
€
€
€
€
€
€
€
At 31 December 2023
Amounts owed to institutions
20,000,000
(20,007,500)
-
(20,007,500)
-
-
-
Amounts owed to banks
Amo
271,105
(271,105)
(271,105)
-
-
-
-
Amounts owed to customers
429,743,262
(437,977,363)
(437,977,363)
(437,
(127,677,591)
(57,762,867)
(158,663,379)
(73,499,254)
(20,374,272)
Debt securities in issue
16,861,501
(23,589,121)
-
-
-
(3,403,843)
(20,185,278)
Other liabilities
8,393,356
(8,393,356)
-
(8,393,356)
-
-
-
475,269,224
(490,238,445)
(127,948,696)
(86,163,723)
(158,663,379)
(76,903,097)
(40,559,550)
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
79
4 Financial risk management and review – continued
4.6 Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated
with the Bank’s processes, personnel, technology, and infrastructure, as well as from external
factors other than credit, market, and liquidity risks, such as risks arising from legal and regulatory
requirements and generally accepted standards of corporate behaviour. Operational risks arise
from all the Bank’s operations.
Management of operational risk
The Bank’s objective is to manage operational risk to balance the avoidance of financial losses and
damage to the Bank’s reputation with overall cost effectiveness. The Bank’s operational risk
management activities comprise actions to:
• Adopt policies, processes, and procedures to control and/or mitigate material operational
risks.
• Identify and assess the operational risk inherent in all material products, activities,
processes, and systems. Before new products, activities, processes, and systems are
introduced or undertaken, the inherent operational risk is subject to adequate assessment.
• Monitor all potential operational risks and material exposures to losses.
• Monitor whether there is motive, means and opportunity within the overall control
environment to commit fraudulent acts.
• Adopt contingency and business continuity plans to ensure the Bank’s ability to operate on
an ongoing basis and limit losses in the event of severe business disruption.
The primary responsibility for the development and implementation of controls to address
operational risk is assigned to senior management. Periodic operational risk reports are submitted
to the Bank’s Audit and Risk Committee. A financial measurement of this risk is estimated by the
Bank for the purpose of allocating risk capital using the Basic Indicator Approach under the Capital
Requirements Directive rules. The capital requirement for operational risk under this method was
calculated at €1,040,473 as at 31 December 2024 (2023: €1,061,965).
4.7 Fair value measurement of financial instruments
The fair value of financial assets that are traded in active markets are based on quoted market
prices or dealer price quotations. For all other financial instruments, the Bank determines fair value
using other valuation techniques.
(a) Valuation models
The Bank measures fair value using the following fair value hierarchy, which reflects the significance
of the inputs used in making the measurements:
• Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical
instruments.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
80
4 Financial risk management and review – continued
4.7 Fair value measurement of financial instruments – continued
• Level 2: inputs other than quoted prices included within Level 1 that are observable either
directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes
instruments valued using: quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that are considered less than
active; or other valuation techniques in which all significant inputs are directly or indirectly
observable from market data.
• Level 3: inputs that are unobservable. This category includes all instruments for which the
valuation technique includes inputs that are not observable, and the unobservable inputs
have a significant effect on the instrument's valuation. This category includes instruments
that are valued based on quoted prices for similar instruments for which significant
unobservable adjustments or assumptions are required to reflect differences between the
instruments.
Valuation techniques include net present value and discounted cash flow models. Assumptions and
inputs used in valuation techniques include risk-free and benchmark interest rates.
Fair values reflect the credit risk of the instrument and include adjustments to take into account
the credit risk of the counterparty as appropriate.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price
that would be received to sell the asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the principal or, in its absence, the most
advantageous market to which the Bank has access at that date.
(b) Valuation framework
The Bank’s financial assets measured at fair value comprise investments in Malta Government
Stocks, corporate bonds listed on the Malta Stock Exchange, and collective investment schemes. A
selected group of Malta Government Stocks, corporate bonds and unquoted equity investments
are classified as financial investments measured at FVOCI. Equity investments representing units in
collective investment schemes are classified as financial investments measured at FVTPL. The Head
of Finance and Treasury has overall responsibility for independently verifying the results of all fair
value measurements.
(c) Financial instruments measured at fair value
The table below analyses financial instruments measured at fair value at the reporting date by fair
value measurement categorisation within the fair value hierarchy. The amounts reflect the carrying
amount recognised in the statement of financial position.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
81
4 Financial risk management and review – continued
4.7 Fair value measurement of financial instruments – continued
Level 1
Level 2
Level 3
Total
€
€
€
€
31 December 2024
Financial investments:
- Debt securities
37,863,530
-
-
37,863,530
- Equity investments
-
-
16,079
16,079
37,863,530
-
16,079
37,879,609
31 December 2023
Financial investments:
- Debt securities
49,824,772
-
-
49,824,772
- Equity investments
317,461
-
38,800
356,261
50,146,233
-
38,800
50,185,033
Financial investments – Corporate Debt securities and sovereign debt securities held within a held-
to-collect and sell business model
This category of assets is carried at fair value, measured primarily by reference to quoted market
prices as at 31 December 2024 and 2023.
Financial investments – Equity investments
The Bank has an interest in an open-ended investment fund as disclosed in Note 15.5, which is
carried at fair value, determined by reference to the net asset value of the fund as at 31 December
2024 and 2023. The Bank’s exposure to unquoted equity investments is deemed immaterial as at
31 December 2024 and 2023.
No transfers of financial instruments between different levels of the fair value hierarchy have
occurred during the financial years ended 31 December 2024 and 2023, except for an investment
of €2,000,000 representing a subscription for an investment during an initial public offering and
subsequently converted into a holding during 2023, with the fair value determined by reference
quoted market prices.
(d) Financial instruments not measured at fair value
Sovereign debt securities held within a held-to-collect business model
The fair value of the these securities as at 31 December 2024 amounted to €43,704,546 (2023:
€42,713,946) whilst the carrying amount of these debt securities was €51,219,171 (2023:
€51,408,026).
Debt securities in issue
The fair value of the debt securities in issue as at 31 December 2024 amounted to €17,056,800
(2023: €17,122,280) whilst the carrying amount of these debt securities was €16,773,480 (2023:
€16,861,501). The fair value has been determined by reference to the market price (level 1).
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
82
4 Financial risk management and review – continued
4.7 Fair value measurement of financial instruments – continued
Balances with Central Bank of Malta, loans and advances to banks and factored receivables
These categories of assets are reported net of credit loss allowances to reflect the estimated
recoverable amounts. Balances with Central Bank of Malta and loans and advances to banks re-
price within 3 months, whilst factored receivables are relatively short-term in nature. The carrying
amounts of these financial assets are therefore deemed to be a reasonable approximation of their
fair value.
Loans and advances to customers
Loans and advances to customers are carried at amortised cost in the statement of financial
position. The board considers the carrying amounts of these loans to be a reasonable estimate of
their fair value in view of the relatively short periods to repricing or maturity from the end of the
reporting periods.
Amounts owed to institutions
Amounts owed to institutions amounting to nil (2023: €20,000,000) represent loans contracted in
terms of the ‘Eurosystem Monetary Policy Operations - Central Bank of Malta Directive No.8’ and
are carried at amortised cost. These amounts are secured by a pledge on a portion of the Bank’s
portfolio of investments in Malta Government Stocks as disclosed in Note 15.2. The fair value of
these amounts is deemed to approximate the carrying amount in view of the short-term nature of
the financial liability.
Amounts owed to customers
This category of liabilities is carried at amortised cost and amounts to €448,613,950 (2023:
€429,743,262). The majority of the customer deposits reprice within one year or less and, in this
respect, their carrying amount is deemed to be a reasonable approximation of their fair value.
Amounts owed to banks
This category of liabilities is carried at amortised cost and amounts to nil (2023: €271,105). These
liabilities are short-term in nature and, in this respect, their carrying amount is deemed to
approximate their fair value.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
83
4 Financial risk management and review – continued
4.7 Fair value measurement of financial instruments – continued
(e) Non-financial instruments measured at fair value
The judgements and estimates made in determining the fair values of property classified within
‘Property and equipment’ and ‘Investment Property held for sale’, which is recognised and
measured at fair value in the statement of financial position are described hereunder.
The Bank engages external, independent and qualified valuers to determine the fair value of its
properties at least every five years. At the end of each reporting period, the directors update their
assessment of the fair value of each property, taking into account the most recent independent
valuations and other market factors.
The Bank is required to analyse non-financial assets carried at fair value by level of the fair
value hierarchy within which the recurring fair value measurements are categorised in their
entirety (Level 1, 2 or 3). The different levels of the fair value hierarchy have been defined as fair
value measurements using:
• Quoted prices (unadjusted) in active markets for identical assets (Level 1);
• Inputs other than quoted prices included within Level 1 that are observable for the
asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2);
• Inputs for the asset that are not based on observable market data (i.e. unobservable
inputs) (Level 3).
The Bank’s property, classified within ‘Property and equipment’, comprises the Bank’s offices and
other operational premises. The last independent valuation of this property was performed as at
19 July 2024. During 2024, the carrying value of the 4, Castille Place property, was adjusted to
reflect the updated valuation, resulting in a net increase of €1,000,000 in the carrying values for
the Bank. The Bank’s property, classified within ‘Investment Property held for sale’, comprise the
53-58, East Street, Valletta properties. These two adjacent properties were used as the Bank’s
offices up until June 2024. The last independent valuation of these properties was performed as
at 26 June 2024. During 2023, the carrying values of the properties, classified within property and
equipment, was adjusted to the valuations and the net resultant adjustment comprised an
increase of €1,170,375 in the carrying value for the Bank. For all Bank properties, their current
use equates to the highest and best use.
A reconciliation from the opening balance to the closing balance of land and buildings for recurring
fair value measurements categorised within Level 3 of the fair value hierarchy, is reflected in Note
18.1 and 18.2. The principal movements reflect changes in fair value, additions, disposals and
depreciation charge for the years ended 31 December 2024 and 2023.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
84
4 Financial risk management and review – continued
4.7 Fair value measurement of financial instruments – continued
The external valuations of the Level 3 property have been performed using predominantly the
traditional residual method of valuation. In view of the limited market information available, the
valuations have been performed using unobservable inputs. In relation to the capitalised rentals
approach, the significant unobservable inputs include:
• a capitalisation rate applied at 5-6% (2023: 6%) which is effectively the discount rate
adjusted for anticipated growth; and
• the expected annual rental value (“ERV”) taking into account the rental rate per square
metre for comparable properties located in proximity to the Bank’s property with
adjustments for differences in the size, age, exact location and condition of the property.
The assumed monthly rental rate per square metre is €20.83 - €41.67 (€250/sqm to
€500/sqm on an annual basis) (2023: monthly rental rate of €23.24/sqm or €280/sqm on
an annual basis).
Effectively, the capitalisation rate indicates the return the investor expects to receive through
annual rental value.
4.8 Capital base
The Bank is a licensed credit institution and must therefore comply with the minimum capital
requirements prescribed by the Capital Requirements Regulation. The Bank has adopted the
Standardised Approach to calculate its capital requirements for credit risk and the Basic Indicator
Approach for operational risk and foreign exchange risk in order to calculate the Pillar 1 minimum
capital requirements.
4.8.1 Capital management
The Bank is required to maintain sufficient capital to comply with regulatory capital requirements.
The Bank’s capital management processes ensure an efficient use of capital in relation to risk
appetite as well as business development. The Bank’s regulatory capital comprises Tier 1 capital
and Tier 2 capital, which includes ordinary share capital, the capital contribution reserve, retained
earnings, other reserves and subordinated debt.
All financial instruments arising from the Bank’s operations are categorised as banking book
exposures, and risk-weighted assets are determined according to specified requirements that seek
to reflect the varying levels of risk attached to assets and to exposures not recognised in the
statement of financial position.
In 2023 and during 2024, the Bank's Tier 1 Capital ratio dropped below the Pillar 2 guidance. In
response, the Board of Directors approved a capital management plan, which included issuing an
8% €3 million Additional Tier 1 Note and a further capital contribution injection of €2 million. This
action successfully addressed the shortfall and strengthened the Bank’s capital position.
Furthermore, the Tier 1 ratio from 1 January to 30 June 2024 was revised to 11.24%, down from
the previously reported 11.69%, as outlined in Company Announcement number 122 on the Malta
Stock Exchange dated 12 December 2024. Furthermore, as at end of 2024 the Bank’s Tier 1 ratio
amounted to 14.20%, a marked improvement over the 11.24% as the end of June 2024.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
85
4 Financial risk management and review – continued
4.8 Capital base – continued
4.8.2 Calculation of minimum capital requirement and risk-weighted assets
Minimum capital requirements are computed for credit, market and operational risks. The Banking
Act, 1994 requires a bank to maintain a ratio of total regulatory capital to risk-weighted assets and
instruments (the Capital requirements ratio) at or above the prescribed minimum of 8%.
The Bank is compliant with the CRD IV capital requirements and in addition to the prescribed
minimum, Banking Rule BR/15: ‘Capital Buffers of Credit Institutions authorised under the Banking
Act 1994’ requires Banks to hold additional buffers, namely the ‘capital conservation buffer’ and
the ‘countercyclical buffer’. Automatic restrictions on capital distributions apply if the Bank’s CET1
capital falls below the level of its CRD IV combined buffer.
The Bank is required to maintain a capital conservation buffer of 2.5% and the institution-specific
countercyclical buffer as determined by Article 140(1) of Directive 2013/36/EU which is composed
of CET1 capital. These buffers were phased in over the period from 1 January 2016 to 31 December
2020.
CRD IV contemplates a countercyclical buffer in line with Basel III, in the form of an institution-
specific countercyclical buffer and the application of increased requirements to address macro-
prudential or systemic risk. This is expected to be set in the range of 0-2.5% of relevant credit
exposure risk-weighted assets, whereby the rate shall consist of the weighted average of the
‘countercyclical buffer’ rates that apply in the jurisdiction where the relevant exposures are
located. The Bank's current 'countercyclical buffer' rate amounts to 0.15%
On 27 April 2023, the Bank received from the MFSA a SREP Decision letter, whereby in addition to
the regulatory requirements stated above, the Bank is expected to maintain a Pillar 2 Requirement
(P2R) of 3.25% to be held in excess of the minimum own funds requirement and to be maintained
at all times in accordance with Article 104a of the EU’s Capital Requirements Directive (CRD V). In
addition, a Pillar 2 Guidance (P2G) of 1.50% and made up entirely of CET 1 Capital is to be held over
and above the Overall Capital Requirement (OCR) of 13.85%.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
86
4 Financial risk management and review – continued
4.8 Capital base – continued
4.8.2 Calculation of minimum capital requirement and risk-weighted assets - continued
The following is an analysis of the Bank’s Capital Base in accordance with the CRD’s requirements,
as reported by the Bank in the COREP return:
2024
2023
€
€
Tier 1 Capital
Ordinary share capital
29,000,000
29,000,000
Capital Contribution
2,032,675
32,675
Accumulated Losses (excluding Depositor
compensation scheme)
(3,987,094)
(514,946)
Property revaluation reserve
4,739,260
3,967,372
Fair value movement reserve
(697,493)
(1,708,321)
Perpetual capital notes
3,000,000
-
Other reserves
-
55,025
Deductions related to intangible assets
(3,537,293)
(2,597,835)
Deductions in relation to deferred tax assets that
rely on future profitability
(1,971,077)
(663,291)*
Total Tier 1 Capital
28,578,978
27,570,679
Tier 2 Capital
Subordinated debt
14,000,000
14,000,000
Total Tier 2 Capital
14,000,000
14,000,000
Total Own Funds
42,578,978
41,570,679
Based on the regulatory returns submitted to the MFSA for the financial year ending 31 December
2024, as well as those submitted up to the date of signing these financial statements for reporting
periods after 31 December 2024, the Bank is considered to have fulfilled all minimum capital
requirements up to the signing date. Further information in respect of the Bank's capital ratios may
be found in sections 3 and 4 of Appendix 1 - Pillar 3 disclosures as at 31 December 2024.
*Following a review of its own funds requirements in accordance with Regulation (EU) No 575/2013 (the
“CRR”), the Bank reclassified certain items within its Tier 1 Capital and risk-weighted assets. This
reclassification led to revisions in the previously reported Tier 1 ratio in the Bank’s 2023 Financial Statements.
Specifically, for the year ended 31 December 2023, the Tier 1 ratio was adjusted to 12.53%, compared to the
previously reported 12.63%. The adjusted ratio constituted a margin breach of 0.03% below the Pillar 2
guidance level of 12.56%.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
87
5 Net interest income
2024
2023
€
€
Interest income
Factored Receivables
9,067,716
7,858,688
Loans and advances to customers
8,739,303
7,325,706
Amounts owed to institutions
3,076,377
2,124,743
Financial assets measured at amortised cost
434,329
434,329
Financial assets measured at FVOCI
1,385,325
1,695,553
Amortisation of premium on financial assets
(348,172)
(399,673)
Total interest income
22,354,878
19,039,346
Interest expense
On amounts owed to banks
-
(1,361)
On amounts owed to customers
(15,296,801)
(11,157,738)
On debt securities in issue
(839,790)
(852,092)
Amortisation of debt issuance costs
(41,179)
(41,179)
Total interest expense
(16,177,770)
(12,052,370)
Net interest income
6,177,108
6,986,976
6 Net fee and commission income
2024
2023
€
€
Account maintenance and other bank charges
233,584
157,529
Fee and commission income
233,584
157,529
SWIFT and bank charges
(145,966)
(141,096)
Fee and commission expense
(145,966)
(141,096)
Net fee and commission income
87,618
16,433
Performance obligations and revenue recognition policies
Fee and commission income from contracts with customers is measured based on the consideration
specified in a contract with a customer. The Bank recognises revenue when it transfers control over a
service to a customer.
The following table provides information about the nature and timing of the satisfaction of
performance obligations in contracts with customers, including significant payment terms, and the
related revenue recognition policies.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
88
6 Net fee and commission income – continued
Type of service
Nature and timing of satisfaction of performance
obligations, including significant payment terms
Revenue recognition under IFRS 15
Retail and
corporate
banking service
The Bank provides banking services to corporate
customers, including the provision of credit facilities,
foreign currency transactions, account maintenance
and servicing fees.
Transaction-based fees for foreign currency
transactions and credit facilities are charged to the
customer's account when the transaction takes place.
Servicing fees are charged on a periodical basis and are
based on fixed rates reviewed annually by the Bank.
No fees are charged to the Bank’s retail customer base.
Revenue from account maintenance 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.
7 Net trading income
2024
2023
€
€
Net loss from other financial instruments at FVTPL
(226,574)
(12,779)
Net gain/(loss) from foreign exchange
40,529
(25,021)
(186,045)
(37,800)
8 Other operating income
2024
2023
€
€
Other income
(124,213)
129,864
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
89
9 Changes in expected credit losses and other credit impairment charges
2024
2023
€
€
Changes in expected credit losses:
Factored receivables
56,890
48,563
Loans and Advances to customers
(4,117)
(37,677)
Debt financial investments measured at amortised cost
(1,865)
(47,509)
Debt financial investments measured at FVOCI
34,649
(24,853)
Balances with the Central Bank and other banks
(75,272)
-
10,285
(61,476)
Other credit impairment charges:
Write-offs
- Factored receivables
(145,288)
(530,437)
- Loans and advances to customers
(7,568)
-
Recoveries
- Factored receivables
96,453
150,733
- Loans and advances to customers
3,839
-
(52,564)
(379,704)
(42,279)
(441,180)
10 Loss before tax
10.1 Loss before income tax is stated after fees, exclusive of VAT, charged by the Bank’s statutory
auditor in relation to the financial years ended 31 December 2024 and 2023, which comprise the
following:
2024
2023
€
€
Auditors’ remuneration
84,000
78,000
Other assurance services
2,832
-
86,832
78,000
10.2 Employee compensation and benefits incurred by the Bank during the respective financial years
are analysed as follows:
2024
2023
€
€
Directors’ fees
140,000
140,000
Staff costs:
- wages, salaries and allowances
3,066,037
2,737,513
- defined contribution social security costs
191,488
176,975
3,397,525
3,054,488
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
90
10 Loss before tax - continued
10.3 The weekly average number of persons employed by the Bank during the respective financial years
was as follows:
2024
2023
€
€
Managerial
8
8
Supervisory and clerical
69
66
77
74
10.4 Other expenses incurred by the Bank during the respective financial years are analysed as follows:
2024
2023
€
€
Credit servicing fees
724,642
548,076
IT support and maintenance costs
1,235,814
1,113,324
Marketing expenses
553,822
584,644
Professional fees
516,503
388,765
Regulatory related fees
1,754,194
1,158,229
Other expenses
661,494
722,131
5,446,469
4,515,169
Regulatory related fees are inclusive of Depositor Compensation Scheme contributions of
€1,110,825 (2023: €482,501).
11 Income tax expense
11.1 Total income tax expense
2024
2023
€
€
Income Statement
Current income tax – current year expense
-
(10,187)
Deferred tax credit
1,112,204
737,197
1,112,204
727,010
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
91
11 Income tax expense - continued
11.2 The income tax expense for the year and the result of the accounting profit multiplied by the tax
rate applicable in Malta, the Bank’s country of incorporation, are reconciled as follows:
2024
2023
€
€
Loss before income tax
(4,081,976)
(1,969,378)
Tax at the applicable tax rate of 35%
1,428,692
689,282
Tax effect of:
- Non-deductible expenses
(8,951)
(15,847)
- Tax at source
-
(10,187)
- Other differences
(307,537)
63,762
1,112,204
727,010
12 Earnings per share
Earnings per share is calculated by dividing the profit or loss after tax attributable to ordinary
shareholders of the Bank by the number of ordinary shares in issue and ranking equally for dividend
during the year.
Note
2024
2023
€
€
Income Statement
Net loss attributable to equity holders of the
Bank
(2,969,772)
(1,242,368)
Number of ordinary shares in issue
27
58,000,000
58,000,000
Earnings per share
(5c12)
(2c14)
The comparative information has been restated to reflect the bonus issue, share split and the
capitalisation from the capital contribution reserve effected during the current financial year and
the impact on the number of shares in issue, referred to in Note 27, retrospectively.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
92
13 Balances with Central Bank of Malta and cash
2024
2023
€
€
Balances with Central Bank of Malta
57,483,508
56,242,720
Balances with the Central Bank of Malta comprise mandatory reserve deposits of € 1,520,564
(2023: €1,520,564) and are not available for use in the Bank’s day-to-day operations. During the
current and prior years, the Bank has been compliant with the reserve deposit requirement. These
balances also comprise an amount of €1,520,564 (2023: €990,089) pledged in favour of the
Depositor Compensation Scheme. Credit loss allowances in respect of balances with the Central
Bank of Malta are deemed to be negligible. At 31 December 2024, expected credit loss allowances
in respect of Balances with Central Bank of Malta measured at amortised cost amounted to €30,482
(2023: Nil).
14 Loans and advances to banks
2024
2023
€
€
Repayable on call and at short notice
4,168,921
6,757,337
At 31 December 2024, expected credit loss allowances in respect of loans and advances to banks
measured at amortised cost amounted to €44,789 (2023: Nil).
15 Financial investments
15.1 Composition of investment portfolio
2024
2023
€
€
Debt securities measured at FVOCI
37,863,530
49,824,772
Debt securities measured at amortised cost
51,219,171
51,408,026
Equity investments designated at FVOCI
16,079
38,800
Equity investments designated at FVTPL
45,594
317,461
89,144,374
101,589,059
15.2 Debt financial investments measured at FVOCI comprise:
2024
2023
€
€
Malta Government Stocks
19,415,650
21,066,823
Local corporate bonds listed on the Malta Stock Exchange
18,447,880
28,757,949
37,863,530
49,824,772
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
93
15 Financial investments – continued
15.2 Debt financial investments measured at FVOCI - continued
At 31 December 2024, expected credit loss allowances in respect of debt securities measured
at FVOCI amounted to €59,543 (2023: €94,191).
The Bank’s holdings of debt financial investments measured at FVOCI represent securities
quoted on the Malta Stock Exchange and Euronext Dublin.
As at 31 December 2024, a portion of the Bank’s investment in Malta Government Stocks with
a fair value of €63,120,196 (2023: €62,504,627) was pledged in favour of the Central Bank of
Malta as collateral held in respect of the Bank’s participation in the Main Refinancing
Operations (“MROs”) nil (2023: 20,000,000) as at that date.
15.3 Debt financial investments measured at amortised cost comprise:
2024
2023
€
€
Malta Government Stocks
51,219,171
51,408,026
At 31 December 2024, expected credit loss allowances in respect of debt securities measured
at amortised cost amounted to €26,718 (2023: €24,853).
The Bank’s holdings of debt financial investments measured at amortised cost represent
securities quoted on the Malta Stock Exchange.
15.4 Equity investments designated at FVOCI comprise:
2024
2023
€
€
Unquoted equity holding
(Society for Worldwide Interbank Financial
Telecommunications SCRL – SWIFT)
16,079
38,800
15.5 Equity investments measured at FVTPL comprise:
2024
2023
€
€
Collective investment schemes
45,594
43,871
Unrated financial investments
-
273,589
45,594
317,461
Collective investment schemes represent holdings in investment-grade money market funds as
part of the active liquidity management of the Bank. Furthermore, the unrated financial
investments disclosed above represent equity investments listed on the Malta Stock Exchange
which are unrated by international credit rating agencies.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
94
15 Financial Investments – continued
15.6 The table below summarises the movement in financial investments:
2024
2023
€
€
At 1 January
101,589,059
103,542,260
Acquisitions
399,300
100,000
Disposals / Maturities
(13,247,605)
(1,302,167)
Amortisation of premium
(348,172)
(399,673)
Net fair value movement
751,792
351,361
At 31 December
89,144,374
101,589,059
16 Factored receivables
2024
2023
€
€
Receivables factored on a non-recourse basis:
- Invoice factoring
36,369,185
41,940,634
- Bills of exchange factoring
102,667,483
98,966,063
Allowance for ECL
(799,935)
(856,825)
138,236,733
140,049,872
17 Loans and advances to customers
17.1 Loan and advances at amortised cost:
2024
2023
€
€
Term loans and advances to third parties
96,217,660
92,699,611
Term loans and advances to related parties
53,087,963
42,003,298
Overdrafts
45,582,989
47,132,520
Allowance for ECL
(875,485)
(871,368)
194,013,127
180,964,061
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
95
18 Properties
18.1 Property and equipment
Premises and
Computer
Motor
Other
Total
improvements
hardware
vehicles
equipment
€
€
€
€
€
Cost/revalued
amount
At 1 January 2023
13,455,358
11,599,721
985,828
104,924
764,885
Acquisitions
1,237,935
829,818
251,592
-
156,525
Premises revaluation
1,170,375
1,170,375
-
-
-
At 31 December 2023
15,863,668
13,599,914
1,237,420
104,924
921,410
At 1 January 2024
15,863,668
13,599,914
1,237,420
104,924
921,410
Acquisitions
1,356,339
643,244
160,357
-
552,738
Premises revaluation
1,000,000
1,000,000
-
-
-
Disposals / write-offs
(112,953)
-
-
-
(112,953)
Transfers to investment
property held for sale*
(5,097,785)
(5,097,785)
-
-
-
At 31 December 2024
13,009,269
10,145,373
1,397,777
104,924
1,361,195
Depreciation
At 1 January 2023
1,743,133
291,241
764,000
82,606
605,286
Charge for the year
181,399
54,629
112,874
5,966
7,930
At 31 December 2023
1,924,532
345,870
876,874
88,572
613,216
At 1 January 2024
1,924,532
345,870
115,612
876,874
88,572
613,216
Charge for the year
301,862
115,612
145,814
6,015
34,421
Depreciation released
(115,227)
-
-
-
(115,227)
Transfers*
(259,778)
(259,778)
-
-
-
At 31 December 2024
1,851,389
201,704
1,022,688
94,587
532,410
Carrying amount
At 1 January 2023
11,712,225
11,308,480
221,828
22,318
159,599
At 31 December 2023
13,939,136
13,254,044
360,546
16,352
308,194
At 31 December 2024
11,157,880
9,943,669
375,089
10,337
828,785
* The transfers during the year ending 31 December 2024 relate to the revalued amount and accumulated depreciation
of the two adjacent and prestigious houses – Nos. 53 and 58 in East Street, Valletta. Until June 2024, these properties
were utilised by the Bank as its offices. Following the completion of the multi-year refurbishment project, the Board
resolved to change the Bank's registered office to 4, Castille Place, Valletta, VLT1062, Malta.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
96
18 Properties – continued
18.1 Property and equipment - continued
The Bank’s property, classified within ‘Property and equipment’, comprises the Bank’s offices and
other operational premises. The last independent valuation of this property was performed as at
19 July 2024. During 2024, the carrying value of the 4, Castille Place property, was adjusted to
reflect the updated valuation, resulting in a net increase of €1,000,000 in the carrying values for
the Bank.
During 2023, the carrying values of the properties, classified within property and equipment, were
adjusted to reflect the updated valuations and the net resultant adjustment comprised an
increase of €1,170,375 in the carrying values for the Bank.
The carrying amount of premises and improvements that would have been included in the
financial statements had these assets not been revalued (see Note 3.5) but had been carried at
cost less depreciation would have been:
2024
2023
€
€
Cost
9,511,538
9,202,190
Accumulated depreciation
(204,520)
(302,398)
9,307,018
8,899,792
18.2 Investment Property held for sale
2024
2023
€
€
Opening balance as at 1 January
-
-
Transfer from Property and equipment (Note
18.1) - revalued amount, net of accumulated
depreciation
4,838,007
-
Closing balance as at 31 December
4,838,007
-
The Bank’s property, classified within ‘Investment Property held for sale', as at 31 December 2024
comprise of the two adjacent and prestigious houses - 53-58 in East Street, Valletta. These are close
to the Lower Barrakka Gardens and with views of the Grand Harbour and the Three Cities. The
buildings date back to the eighteenth century and are structurally sound and complete of finishes
of a very high standard. These properties were used as the Bank’s offices up until June 2024
(Company Announcement number 118 on the Malta Stock Exchange dated 21 June 2024). The
properties were transferred to ‘Investment Property held for sale’ as management feel that the
criteria as held-for-sale have been met. In August 2024, the Bank entered into a promise of sale
agreement to sell the properties, and signing of the final deed is expected towards the second half
of 2025.
The last independent valuation of these properties were performed as at 26 June 2024. During
2023, the carrying values of the properties were classified within property and equipment, were
adjusted to the valuations and the net resultant adjustment comprised an increase of €1,170,375
in the carrying values for the Bank.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
97
18 Properties – continued
18.3 Revaluation of premises
The Bank’s premises and investment property held for sale are measured at fair value based on
open market values provided periodically, at least every five years, by independent valuers.
Information in respect of the fair value measurement of the properties measured at revalued
amount is disclosed in Note 4.7. For all Bank properties, their current use equates to the highest
and best use.
The valuations were determined by using an asset-based approach with reference to market
prices based on a database of valuations and sales of properties in the relevant area, as applicable.
Valuation
technique
Significant
unobservable
inputs
Range
Sensitivity’s narrative
Premises and
improvements
Asset-based
Price per square
meter per annum
€250/sqm to
€500/sqm
The higher the price per
sqm, the higher the fair
value.
Investment
Property held
for sale
Asset-based
Price per square
meter per annum
€250/sqm to
€500/sqm
Rent growth per
annum
5-6%
The higher the discount
rate, the lower the fair
value
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
98
19 Intangible assets
Computer
software
€
Cost
At 1 January 2023
6,141,433
Acquisitions
2,527,225
At 31 December 2023
8,668,658
At 1 January 2024
8,668,658
Acquisitions
1,543,798
Disposals/write-off
(169,996)
At 31 December 2024
10,042,460
Amortisation
At 1 January 2023
4,165,840
Charge for the year
872,615
At 31 December 2023
5,038,455
At 1 January 2024
5,038,455
Charge for the year
848,309
At 31 December 2024
5,886,764
Carrying amount
At 1 January 2023
1,975,593
At 31 December 2023
3,630,203
At 31 December 2024
4,155,696
As at 31 December 2024, commitments in respect of capital expenditure authorised and contracted
for amounted to €748,401 (2023: €811,097). The bulk of this expenditure will be directed toward
the procurement and development of the core banking system.
20 Other assets
2024
2023
€
€
Accrued interest
1,273,106
1,452,670
Prepayments
595,682
760,575
Other receivables
587,748
178,110
2,456,536
2,391,355
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
99
21 Amounts owed to institutions
The Bank participates in the ECB MROs, LTROs and PELTROs. In this respect, a portion of the Malta
Government Stocks held by the Bank as at 31 December 2024 and 2023 (see Note 15) were pledged
in favour of the Central Bank of Malta as collateral in respect of the Bank’s participation in the
MROs, LTROs and PELTROs. As at 31 December 2024, MROs amounted to nil (2023: €20,000,000).
22 Amounts owed to banks
2024
2023
€
€
Repayable on demand
-
271,105
23 Amounts owed to customers
2024
2023
€
€
Repayable on demand
127,395,740
127,677,591
Term deposits
321,218,210
302,065,671
448,613,950
429,743,262
24 Debt securities in issue
2024
2023
€
€
At 1 January
16,861,501
16,820,322
Debt securities purchased and cancelled
(129,200)
-
Amortisation of debt issuance costs during the year (Note 5)
41,179
41,179
At 31 December
16,773,480
16,861,501
On 6 July 2022, the Bank announced the issue of €14,000,000 5% unsecured subordinated bonds
maturing on 15 September 2032 with an early redemption option held by the Bank on 15
September 2027 and annually thereafter. These debt securities, which are listed on the Malta
Stock Exchange, are denominated in Euro, pay interest at a fixed rate of 5% and are redeemable
at par. The €14,000,000 5% unsecured subordinated bonds will, in the event of winding up of the
Bank, be subordinated to the claims of depositors and all other creditors. As at 31 December 2024
and 2023, the contractual amount due at maturity is of € 14,000,000. At the close of the last trading
day for the year 2024 and 2023, the quoted price of the €14,000,000 5% unsecured subordinated
bonds was €100 (2023: €100).
During the year, the Bank purchased and cancelled an additional amount of bonds of €129,200
(2023: Nil) in nominal amount from the 4.5% Unsecured Bonds 2025 maturing in June 2025, in
accordance with the prospectus dated 18 May 2015 (Company Announcements numbers 115 – 117
and 119 on the Malta Stock Exchange dated 6 May 2024, 30 May 2024, 13 June 2024 and 29 July
2024, respectively). As at 31 December 2024 and 2023, the contractual amount due at maturity is
of €3,056,800 (2023: €3,186,000). At the close of the last trading day for the year 2024 and 2023,
the quoted price of the 4.5% Unsecured Bonds was €100 (2023: €98).
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
100
24 Debt securities in issue – continued
The Bank has not had any defaults of interest or any other breaches with respect to these debt
securities during the financial years ended 31 December 2024 and 2023.
25 Deferred tax assets and liabilities
The recognised deferred tax assets and liabilities are expected to be recovered or settled
principally after more than 12 months from the end of the reporting period, and are attributable
to the following:
Assets
Liabilities
Net
Assets
Liabilities
Net
2024
2024
2024
2023
2023
2023
€
€
€
€
€
€
Depreciation of property and
equipment and amortisation
of intangible assets
-
(385,958)
(385,958)
-
(185,458)
(185,458)
Revaluation of properties
-
(788,848)
(788,848)
-
(616,719)
(616,719)
Fair value changes on financial
investments
- measured at FVOCI
405,717
-
405,717
919,865
-
919,865
- measured at FVTPL
-
-
-
-
(5,880)
(5,880)
Unutilised tax losses & capital
allowances
675,616
-
675,616
663,291
-
663,291
Allowance for ECL
1,911,993
-
1,911,993
617,493
-
617,493
2,993,326
(1,174,806)
1,818,520
2,200,649
(808,057)
1,392,592
Deferred taxes are calculated on all temporary differences under the liability method and are measured at
the tax rates that are expected to apply to the period when the asset is realised or the liability is settled
based on tax rates (and tax laws) that have been substantively enacted by the end of the reporting period.
The principal tax rate used is 35 % (2023: 35%), with the exception of deferred taxation on the fair valuation
of non-depreciable property, which is computed on the basis applicable to disposals of immovable property
mainly giving rise to a tax effect of 10% of the transfer value (2023: 10%).
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
101
25 Deferred tax assets and liabilities – continued
Movement in temporary differences relates to:
At 1 January
Recognised
in
Recognised
in
At 31
December
2024
profit or
loss
OCI
2024
€
€
€
€
Depreciation of property and equipment
and amortisation of intangible assets
(185,458)
(200,500)
-
(385,958)
Revaluation of properties
(616,719)
-
(172,129)
(788,848)
Fair value changes on financial
investments
- measured at FVOCI
919,865
-
(514,148)
405,717
- measured at FVTPL
(5,880)
(5,880)
-
-
Unutilised tax losses & capital allowances
663,291
1,314,299
-
1,977,590
Allowance for ECL
617,493
(7,474)
-
610,019
1,392,592
1,112,204
(686,277)
1,818,520
At 1 January
Recognised
in
Recognised
in
At 31
December
2023
profit or loss
OCI
2023
€
€
€
€
Depreciation of property and equipment
and amortisation of intangible assets
(242,851)
57,393
-
(185,458)
Revaluation of properties
(436,414)
-
(180,305)
(616,719)
Fair value changes on financial
investments
1,346,572
-
(426,707)
919,865
- measured at FVOCI
(4,779)
(1,101)
-
(5,880)
- measured at FVTPL
-
663,291
-
663,291
Other charges for the year
-
25,137
-
-
Allowance for ECL
625,016
(7,523)
-
617,493
1,287,544
737,197
(607,012)
1,392,592
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
102
26 Accruals and other liabilities
2024
2023
€
€
Accrued interest payable
6,040,709
6,149,250
Accrued expenses & other payables
517,352
2,244,106
6,558,061
8,393,356
27 Share capital and reserves
27.1 Share capital
2024
2023
No. of
Shares
€
No. of
Shares
€
Authorised
Ordinary shares of €0.50 each
120,000,000
60,000,000
120,000,000
60,000,000
Issued and fully paid up
Ordinary shares of €0.50 each
58,000,000
29,000,000
58,000,000
29,000,000
At 31 December 2024 and 2023, the authorised and issued share capital comprised 120,000,000
and 58,000,000 ordinary shares of €0.50 each respectively. The holders of ordinary shares are
entitled to receive dividends as declared from time to time and are entitled to one vote per share
at shareholders’ meetings of the Bank.
27.2 Capital contribution reserve
On 9 December 2024, one of the shareholders of the Bank contributed €2,000,000 as a capital
contribution to the distributable reserves of the Bank (Company Announcement number 122 on
the Malta Stock Exchange dated 12 December 2024). These amounts represent irrevocable and
unconditional contributions by the shareholders and are interest free and are repayable at the sole
discretion of the Bank.
27.3 Perpetual Note
On 28 August 2024, the Bank issued €3,000,000 Fixed Rate Perpetual Additional Tier 1 Capital Notes
in denomination of €10,000 each, all fully paid up to one of its shareholders (Company
announcement number 122 on the Malta Stock Exchange dated 12 December 2024). The notes
have no fixed date for redemption and carry interest at a rate of 8% per annum subject to an
'interest cancellation' clause.
These capital instruments qualify as additional Tier 1 instruments in accordance with the
requirements of Articles 51 to 54 of the Regulation (EU) No. 575/2013 and are categorised as equity
within the Bank's Statement of Financial Position under the requirements of IFRS as adopted by the
EU.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
103
27 Share capital and reserves - continued
27.4 Property revaluation reserve
The property revaluation reserve represents the surplus arising on the revaluation of the Bank’s
premises, net of related deferred tax effects. This reserve is not available for distribution.
27.5 Fair value reserve
The fair value reserve, comprises:
• the cumulative movement in the fair value of equity investments measured at FVOCI, net
of deferred tax; and
• the cumulative movement in the fair value of debt securities measured at FVOCI net of
deferred tax and allowances for ECL.
27.6 Retained Earnings
Retained earnings represent retained profits which are available for distribution to Shareholders
subject to qualification as realised profits in accordance with the requirements of the Companies
Act, Cap. 386 of the Laws of Malta.
Retained earnings for the year 2024 is inclusive of €1,514,715 (2023: €1,038,647) set aside for
Depositor Compensation Scheme. This represents funds with the Central Bank of Malta and
pledged in favour of the Depositor Compensation Scheme.
The General Banking Risk under Banking Rule BR/09/2013 (2023: €55,025) required Banks to hold
a reserve for General Banking Risks, calculated as a percentage of non-performing loans. The
General Banking Risk reserve was repealed by the revised BR/09: ‘Measures addressing non-
performing exposures and forborne exposures’ which was published in January 2023. This has been
reflected with other transfers in 2024.
27.7 Dividends
No dividends are being declared in respect of the financial year ended 31 December 2024 (2023:
Nil).
28 Commitments
2024
2023
€
€
Unutilised factoring, overdraft and loan facilities’
commitments
179,182,237
187,954,041
The Bank may unconditionally cancel undrawn factoring commitments at 31 December 2024
amounting to €109,995,135 (2023: €97,454,180) at its discretion.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
104
29 Net cash absorbed by/from operating activities
2024
2023
€
€
Loss for the year
(2,969,772)
(1,242,368)
Adjustments for:
Depreciation of property and equipment
301,862
181,399
Amortisation of intangible assets
848,309
872,615
Income tax credit
(1,112,204)
(727,010)
Allowance for ECL
(26,055)
13,967
Interest income on debt financial investments
(1,819,654)
(2,129,882)
Interest expense on debt securities in issue
839,790
843,370
Net unrealised loss from financial investments measured
at FVTPL
226,574
12,779
Amortisation of premiums and discounts on debt financial
investments
348,172
399,673
Amortisation of debt issuance costs
(88,020)
41,179
(3,450,998)
(1,734,278)
Movements in reserve deposit with Central Bank of Malta
Movements in loans and advances to customers
(13,053,183)
(20,672,456)
Movements in factored receivables
1,870,029
(21,637,585)
Movements in amounts owed to institutions
(20,000,000)
(20,000,000)
Movements in amounts owed to customers
18,870,688
94,543,720
Movements in other assets and other liabilities
(1,357,694)
5,959,699
(17,121,158)
36,459,100
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
105
30 Cash and cash equivalents
2024
2023
€
€
Balances with Central Bank of Malta
55,962,944
54,722,156
Loans and advances to banks with contractual
maturity of three months or less
4,168,921
6,757,337
Amounts owed to banks
-
(271,105)
60,131,865
61,208,388
Balances with the Central Bank of Malta exclude mandatory reserve deposits of € 1,520,564 (2023:
€1,520,564) which are not available for use in the Bank’s day-to-day operations. Balances with the
Central Bank of Malta also comprise an amount of € 1,514,715 (2023: €1,038,647) pledged in favour
of the Depositor Compensation Scheme.
31 Related parties
31.1 Identity of related parties, and parent and ultimate controlling party
Related parties of the Bank include the ultimate parent, all entities controlled by the ultimate
parent, key management personnel, close family members of key management personnel and
entities which are controlled or jointly controlled by key management personnel or their close
family members.
Key management personnel are defined as those persons having authority and responsibility for
planning, directing and controlling the activities of the Bank, being the directors and the Bank’s
executive management. Reference to executive management shall mean the CEO, the Head of
Finance & Treasury, the Head of Strategy & Value, the Head of Operations, the Head of Credit, the
Head of Information & Technology, the Head of Risk and Compliance and the Head of Human
Resources.
The Bank’s immediate parent is IBL T Limited, the registered office of which is 4, Castille Place,
Misrah Kastilja, Valletta, VLT 1062, Malta.
The financial results and assets and liabilities of the Bank are included in the consolidated financial
statements of Carlenco Finance NV, with registration number 0755.471.533, the registered office
of which is Lar Blok Z5, 8511 Kortrijk, Belgium.
Magdalena De Roeck and Caroline Van Marcke have an indirect beneficial interest in the
shareholding of the Bank and have significant control in the ultimate parent.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
106
31 Related parties - continued
31.2 Related party transactions
Interest, fees, and other income/expenses in respect of related parties, principally comprising
entities within the Van Marcke Group, in the statement of profit or loss and other comprehensive
income comprise:
2024
2023
€
€
Interest and similar income
5,037,821
4,280,461
Fee and commission income
76,550
78,325
Other operating income
-
112,141
Interest expense
422,525
407,438
31.3 Related party balances
The statement of financial position includes outstanding loans on an arm’s length basis,
transactions and balances with related parties, principally comprising entities within the Van
Marcke Group, as follows:
2024
2023
€
€
Assets
Loans and advances to customers
49,541,213
41,305,410
Prepayments and accrued income
511,756
526,160
Liabilities
Amounts owed to customers
47,905,527
36,285,602
Debt securities held by directors
364,300
364,300
Accruals
4,157
5,743
Loans and advances to customers include nine (2023: eight) outstanding loans to key management
personnel amounting to € 1,359,518 (2023: €947,426). Three loans are secured against property in
Malta and are provided at subsidised home loan interest rates. All three loans are repayable after
more than five years from the reporting date. The remaining amounts are unsecured and bear
interest.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
107
31 Related parties - continued
31.4 Transactions with key management personnel
2024
2023
€
€
Directors’ fees
140,000
140,000
Compensation to key management personnel - salaries
833,275
840,535
32 Operating segments
32.1 The segment reporting of the Bank is presented in terms of the following business segments,
determined in accordance with the disclosure requirements in respect of reportable segments
under IFRS 8 – Operating Segments:
Reportable segment
Description of activities
Factoring
Principally factoring of bills of exchange and invoices on a no-recourse
basis
Lending
Principally lending to corporate clients and mortgages
Other
Principally treasury and other central functions
Revenues earned and expenses incurred in respect of each of the reportable business segments
are presented in the table below. No reconciliation is required since there are no differences
between the measurements of the reportable segments’ profits or losses and the information
disclosed in the statement of profit or loss and other comprehensive income.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
108
32 Operating segments – continued
32.1 Operating Segments - continued
2024
2024
2024
2024
2023
2023
2023
2023
Total
Lending
Factoring
Other
Total
Lending
Factoring
Other
€
€
€
€
€
€
€
€
Interest and similar income
Loans and advances to customers
8,739,303
8,739,303
-
-
7,325,706
7,325,706
-
-
Factored receivables
9,067,716
-
9,067,716
-
7,858,688
-
7,858,688
-
Amounts owed to institutions
3,076,377
-
-
3,076,377
2,124,743
-
-
2,124,743
Financial assets measured at amortised cost
434,329
-
-
434,329
434,329
-
-
434,329
Financial assets measured at FVOCI
1,385,325
-
-
1,385,325
1,695,553
-
-
1,695,553
Amortisation on financial assets measured at FVOCI
(348,172)
-
-
(348,172)
(399,673)
-
-
(399,673)
Total interest income
22,354,878
8,739,303
9,067,716
4,547,859
19,039,346
7,325,706
7,858,688
3,854,952
Interest expense
Loans and advances to banks
-
-
-
-
(1,361)
(507)
(392)
(462)
Amounts owed to customers
(15,296,801)
(6,143,879)
(4,377,589)
(4,775,333)
(11,157,738)
(4,156,295)
(3,216,811)
(3,784,632)
Debt securities issued
(839,790)
(337,297)
(240,328)
(262,164)
(852,092)
(317,407)
(245,661)
(289,024)
Amortisation of debt issuance costs
(41,179)
(16,539)
(11,784)
(12,855)
(41,179)
(15,339)
(11,872)
(13,968)
Total Interest expense
(16,177,770)
(6,497,715)
(4,629,702)
(5,050,353)
(12,052,370)
(4,489,548)
(3,474,736)
(4,088,085)
Net interest income
6,177,108
2,241,588
4,438,015
(502,495)
6,986,976
2,836,158
4,383,952
(233,133)
Net fee and commission income/(expense)
87,618
176,521
(59,208)
(29,695)
16,432
103,483
(58,243)
(28,808)
Net trading income
(186,045)
-
-
(186,045)
(37,800)
-
-
(37,800)
Other operating income
(124,213)
-
-
(124,213)
129,864
-
-
129,864
Operating profit/(loss)
5,954,468
2,418,109
4,378,807
(842,448)
7,095,472
2,939,641
4,325,709
(169,877)
Depreciation and amortisation
(1,150,171)
(459,887)
(480,197)
(210,087)
(1,054,014)
(393,664)
(465,637)
(194,712)
Changes in expected credit losses and other credit
impairment charges
(42,279)
(4,117)
4,326
(42,488)
(441,180)
(37,677)
(331,141)
(72,362)
Employee compensation and benefits
(3,397,525)
(1,367,187)
(1,493,481)
(536,857)
(3,054,488)
(1,063,321)
(1,362,642)
(628,524)
Other administrative expenses
(5,446,469)
(1,857,825)
(2,507,251)
(1,081,393)
(4,515,169)
(1,545,671)
(2,077,751)
(891,746)
(Loss)/profit before tax
(4,081,976)
(1,270,907)
(97,796)
(2,713,273)
(1,969,379)
(100,694)
88,537
(1,957,222)
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
109
32 Operating segments – continued
32.1 Operating Segments - continued
2024
2024
2024
2024
Total
Lending
Factoring
Other
€
€
€
€
Assets
Segment assets
483,046,664
194,013,127
138,236,733
150,796,803
Unallocated assets
25,675,696
-
-
-
Total Assets
508,722,360
194,013,127
138,236,733
150,796,803
Liabilities
Segment liabilities
465,387,431
186,920,390
133,183,071
145,283,970
Unallocated liabilities
7,732,866
-
-
-
Total Liabilities
473,120,297
186,920,390
133,183,071
145,283,970
2023
2023
2023
2023
Total
Lending
Factoring
Other
€
€
€
€
Assets
Segment assets
485,603,049
180,964,061
140,049,872
164,589,116
Unallocated assets
22,344,685
-
-
-
Total Assets
507,947,734
180,964,061
140,049,872
164,589,116
Liabilities
Segment liabilities
466,875,868
173,912,836
134,601,785
158,361,248
Unallocated liabilities
9,201,413
-
-
-
Total Liabilities
476,077,281
173,912,836
134,601,785
158,361,248
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
110
32 Operating segments – continued
32.2 Geographical information
The Bank provides all its services from Malta. In presenting information on the basis of geographical
segments, segment revenue is based on the geographical location of customers. Segment assets
are based on the geographical location of the assets.
2024
2023
€
€
Revenue
Malta
18,631,905
14,627,788
Belgium
4,761,578
4,661,150
23,393,483
19,288,939
Non-current assets
Malta – tangible and intangible assets
20,151,583
17,569,338
Further geographical information about Loans and advances to customers, Factored receivables,
Loans and advances to banks, and Financial Investments is set out in Note 4.3.11.
The Bank’s major customer is the Van Marcke Group of which it forms part. Belgium is the country
of domicile of this Group.
Information about revenues, expenses, and balances as a result of transactions with the Group is
set out in Note 31.
33 Critical accounting estimates and judgements
The preparation of financial statements in accordance with the requirements emanating from
IFRSs as adopted by the EU requires the use of accounting estimates which, by definition, will
seldom equal the actual results. Management also needs to exercise judgement in applying the
Bank’s accounting policies.
This note provides an overview of the areas that involved a higher degree of judgement or
complexity, and of items which are more likely to be materially adjusted due to estimates and
assumptions turning out to be wrong. Detailed information about these estimates and judgements
is included in other notes together with information about the basis of calculation for affected line
items in the financial statements.
Measurement of ECL in respect of loans and advances to customers and factored receivables
The estimation of credit loss allowances in respect of loans and advances to customers and
factored receivables is an area that requires the use of complex models and significant
assumptions about future economic conditions and credit behaviour.
A number of significant judgements are required in the measurement of ECL, including:
• The determination of criteria for the identification of significant increase in credit risk and
unlikeliness-to-pay events;
• The choice of appropriate models and assumptions for the measurement of ECL; and
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
111
33 Critical accounting estimates and judgements – continued
• The selection of forward-looking scenarios used in the estimation of credit loss
allowances, including judgements and assumptions in relation to the number and severity
of scenarios as well as the relative probability weights assigned to each scenario.
The measurement of the credit loss allowances is an area that requires the use of complex models
and of statistical analyses of historical information, supplemented with significant management
judgement, to assess whether current and future macroeconomic conditions are such that the level
of ECL is likely to be greater or less than historical experience. The ECL models are reviewed
regularly in light of differences between loss estimates and actual loss experience, although
available information in respect of the Bank’s historical loss experience since the initial adoption of
IFRS 9 is still contained.
A detailed description of the inputs, assumptions and estimation techniques used in measuring ECL
in respect of loans and advances to customers and factored receivables is disclosed in Note 4.3.2.
The underlying risk factors have a high degree of interdependency and there is no single factor to
which credit loss allowances as a whole is sensitive.
Significant judgement is required in establishing the number, severity and relative weightings of
forward-looking economic scenarios in the context of the heightened level of macroeconomic
uncertainty being experienced. The level of expert judgement required is exacerbated by the
heightened level of uncertainty around predictions in respect of the potential impacts of
assumptions in relation to inflation and interest rates, particularly the potential market response
to further increases in interest rates, and of the effectiveness of government support schemes
together with the impacts of their unwinding, on key macroeconomic variables and, as a result on
forward-looking PDs. The determination of economic forecasts in the current environment thus
represents a significant source of uncertainty, which in turn significantly increases the level of
subjectivity around the estimation of credit loss allowances in respect of loans and advances to
customers and factored receivables.
For loans and advances to customers, the Bank performs periodic credit assessments at borrower
level by reference to recent historical management information and financial forecasts, where
available. As part of these credit assessments, judgement is exercised in evaluating all relevant
information on indicators of impairment, particularly where factors indicate deterioration in the
financial condition and outlook of borrowers affecting their ability to pay. In particular, corporate
borrowers operating in industry sectors which are most likely to be impacted by inflationary
pressures and an increasing interest rate environment, as well as being most reliant on the Maltese
government’s subsidization of energy prices, were monitored closely in order to determine
whether these economic shocks may transform into long-term financial difficulties.
In relation to factored receivables, ECL models are generally reliant on the assumption that default
emergence is directly impacted by delinquency related indicators since less information is available
at asset level to enable the timely identification of SICR or UTP events. For credit-impaired loans
and advances to customers, management estimates credit loss allowances by reference to the
realisable value of security under different scenarios. Judgement is applied in estimating the
forecasted recoveries from the sale of collateralised properties, including around valuation
haircuts and time to recovery.
Izola Bank p.l.c.
Notes to the Financial Statements
For the Year Ended 31 December 2024
112
34 Subsequent events
There are no subsequent events up to the date of approval of the financial statements.
Tel: +356 2131 3060
Fax: +356 2131 3064
Email: info@bdo.com.mt
www.bdo.com.mt
Triq it-Torri
Msida MSD 1824
Malta
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
BDO Malta, a civil partnership, is a member of BDO International Limited, a UK company limited by guarantee,
and forms part of the international BDO network of independent member firms.
The firm is registered as a firm of Certified Public Accountants in terms of the Accountancy Profession Act.
Partners: John J. Attard, Mark Attard, Josef Mercieca, Sam Spiridonov, Andrew Zarb Cousin
113
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Izola Bank Plc («the Bank»), set out on pages 7 to
112, which comprise:
◼ the statement of financial position as at 31 December 2024;
◼ the statement of comprehensive income, statement of changes in equity, and
statement of cash flows for the year then ended; and
◼ notes to the financial statements, including material accounting policy and other
explanatory information.
In our opinion, the accompanying financial statements give a true and fair view of the financial
position of the Bank as at 31 December 2024, and of its financial performance and its cash
flows for the year then ended in accordance with the International Financial Reporting
Standards as adopted by the EU (EU IFRSs) and have been prepared in accordance with the
requirements of the Companies Act (Cap. 386), and the Banking Act (Cap. 371) of the Laws of
Malta.
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 Financial Statements section of our report. We are independent of the Bank in
accordance with the International Code of Ethics for Professional Accountants issued by the
International Ethics Standards Board for Accountants (IESBA Code) together with the ethical
requirements that are relevant to our audit of the financial statements in accordance with the
Accountancy Profession (Code of Ethics for Warrant Holders) Directive issued in terms of the
Accountancy Profession Act (Cap. 281) in Malta, and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
An overview of the scope of our audit
We apply the concept of materiality both in planning and performing the audit, and in
evaluating the effect of material misstatements on our audit and on the financial statements.
For the purposes of determining whether the financial statements are free from material
misstatements we define materiality as the magnitude of misstatement that makes it probable
that the economic decisions of a reasonably knowledgeable person, relying on the financial
statements, would be changed or influenced.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the current period. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. We have fulfilled
the responsibilities described in the Auditor’s responsibilities for the audit of the financial
statements section of our report, including in relation to these matters. Accordingly, our audit
included the performance of the procedures designed to respond to our assessment of the risks
of material misstatement of the financial statements. The result of our audit procedures,
including the procedures performed to address the matters below, provide the basis for the
audit opinion on the accompanying financial statements.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
(continued)
114
1
Expected credit loss allowances on loans and advances to customers
and factored receivables
Key Audit Matter
Most of the Bank’s assets comprise of the loans provided to customers and factored
receivables. The Bank has adopted a specific impairment assessment approach by way of an
internally developed expected credit losses (ECL) model The assessment involved significant
management judgements and estimates.
Related Disclosures
Refer to note 9, 16 and 17 of the accompanying financial statements.
Audit Response
▪ We obtained an understanding of the Bank’s credit policy and tested the design and
TOC over the processes in Bank.
▪ We analysed the impairment model, data input and management assumptions.
▪ We assessed the impact of management decisions on business rules updated during the
year under review.
▪ We have tested the mathematical accuracy of the expected credit loss model.
▪ We have assessed, compared to historical actuals and challenged management’s view
of credit risk that impacts the recognition of expected losses upon initial recognition
over the life of the loans.
▪ We have performed sensitivity analysis in relation to the key forward looking
assumptions.
▪ We have assessed the adequacy of the disclosures outlining the uncertainty relating to
expected loan losses.
▪ We have audited the parameters and assumptions made within the model.
▪ We have also obtained and tested, on a sample basis, the parameters in relation to
the aging of loans and advances to customers as well as performed a recalculation.
We have found the approach adopted by the management reasonable based on information
made available up till the date of this audit report.
Our application of materiality
We determine materiality for the Bank’s performance to be EUR 447,000 which is
approximately 2% of gross revenue, and for the Bank’s financial position to be EUR 7,630,800
which is approximately 1.5% of the total assets. Our evaluation of materiality requires
professional judgement and necessarily takes into account qualitative as well as quantitative
considerations implicit in the definition. On the basis of risk assessments, our judgement was
that overall performance materiality for the Bank should be 70% of planning materiality, and
clearly trivial error threshold set at 3.5%.
Other Information
The directors are responsible for the other information. The other information comprises the
directors’ report, Chairperson’s Statement, Directors’ Report, Directors’ Statement of
Compliance with the Code of Principles of Good Corporate Governance, Report of the
Remuneration and Nomination Committee and Appendices, but does not include the financial
statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and we do not express any form of assurance conclusion thereon
except as explicility stated within the “Report on Other Legal and Regulatory Requirements”.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
(continued)
115
with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated.
With respect to the Directors’ Report, we also considered whether the Directors’ Report
includes the disclosures required by Article 177 of the Maltese Companies Act (Cap. 386) and
the Sixth Schedule to the Act. Based on the work we have performed, in our opinion:
▪ the information given in the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
▪ the directors’ report has been prepared in accordance with the Maltese Companies Act
(Cap.386).
In addition, in light of the knowledge and understanding of the Bank and its environment
obtained in the course of the audit, we are required to report if we have identified material
misstatements in the directors’ report. We have nothing to report in this regard.
We have nothing to report to you in respect of the other responsibilities, as explicitly stated
within the Other information section.
With respect to Report of the Remuneration and Nomination Committee, we are required to
consider whether the information that should be provided within the Remuneration report, as
required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets Rules, has been
included.
In our opinion, the Report of the Remuneration and Nomination Committee has been properly
prepared in accordance with the requirements of the Capital Markets Rules issued by the Malta
Financial Services Authority.
Responsibilities of the Directors
The directors are responsible for the preparation of the financial statements that give a true
and fair view in accordance with EU IFRS and the requirements of the Maltese Companies Act
(Cap.386), and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Bank’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 the directors either intend to
liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
The directors are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an
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 financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
(continued)
116
▪ Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
▪ Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Bank’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 Bank’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 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 Bank to cease to continue as a going concern.
▪ Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
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.
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, actions taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with governance, we determine those
matters that were of most significance in the audit of the 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.
Report on Other Legal and Regulatory Requirements
Report on compliance with the requirements of the European Single Electronic Format
Regulatory Technical Standard (the “ESEF RTS”), by reference to Capital Markets Rule 5.55.6
We have undertaken a reasonable assurance engagement in accordance with the requirements
of Directive 6 issued by the Accountancy Board in terms of the Accountancy Profession Act
(Cap. 281) - the Accountancy Profession (European Single Electronic Format) Assurance
Directive (the “ESEF Directive 6”) on the Annual Report of the Bank for the year ended 31
December 2024, entirely prepared in a single electronic reporting format.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
(continued)
117
Responsibilities of the directors
The Directors are responsible for the preparation of the Report and Financial Statements and
the relevant mark-up requirements therein, by reference to Capital Markets Rule 5.56A, in
accordance with the requirements of the ESEF RTS.
Our responsibilities
Our responsibility is to obtain reasonable assurance about whether the Report and Financial
Statements, complies in all material respects with the ESEF RTS based on the evidence we have
obtained. We conducted our reasonable assurance engagement in accordance with the
requirements of ESEF Directive 6.
Our procedures included:
▪ Obtaining an understanding of the entity's financial reporting process, including the
preparation of the Report and Financial Statements, in accordance with the requirements
of ESEF RTS.
▪ Obtaining the Annual Report and performing validations to determine whether the Annual
Report have been prepared in accordance with the requirements of the technical
specifications of the ESEF RTS (in XHTML format).
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Opinion
In our opinion, the Annual Report for the year ended 31 December 2024 has been prepared, in
all material respects, in accordance with the requirements of the ESEF RTS (in XHTML format).
Report on the Statement of Compliance with the Code of Principles of Good Corporate
Governance
The Capital Markets Rules issued by the Malta Listing Authority require the Directors to prepare
and include in their Annual Report a Statement of Compliance with the Code of Principles of
Good Corporate Governance providing an explanation of the extent to which they have adopted
the Code of Principles of Good Corporate Governance and the effective measures that they
have taken to ensure compliance throughout the accounting period with those Principles within
Appendix 5.1 to Chapter 5 of the Capital Markets Rules. The Statement’s required minimum
contents are determined by reference to Capital Markets Rule 5.97.
The Capital Markets Rules also require us, as the auditor of the Company, to include a report on
the Statement of Compliance with the Code of Principles of Good Corporate Governance
prepared by the Directors by expressing an opinion as to whether, in light of the knowledge
and understanding of the Company and its environment obtained in the course of the audit, we
have identified any material misstatements with respect to the information referred to in
Capital Markets Rules 5.97.4 and 5.97.5, giving an indication of the nature of any such
misstatements.
We read the Statement of Compliance with the Code of Principles of Good Corporate
Governance and consider the implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial statements included in the Annual
Report. Our responsibilities do not extend to considering whether this statement is consistent
with any other information included in the Annual Report.
We are not required to, and we do not, consider whether the Board’s statements on internal
control included in the Statement of Compliance with the Code of Principles of Good Corporate
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
(continued)
118
Governance cover all risks and controls, or form an opinion on the effectiveness of the
Company’s corporate governance procedures or its risk and control procedures.
In our opinion, the Statement of Compliance with the Code of Principles of Good Corporate
Governance has been properly prepared in accordance with the requirements of the Capital
Markets Rules.
We have nothing to report to you in respect of the other responsibilities, as explicitly stated
within the Other information section.
Other matters on which we are required to report by exception
We also have responsibilities under the Companies Act, Cap 386 to report to you if, in our
opinion:
▪ adequate accounting records have not been kept
▪ the financial statements are not in agreement with the accounting records
▪ we have not received all the information and explanations we require for our audit
▪ certain disclosures of directors’ remuneration specified by law are not made in the
financial statements, giving the required particulars in our report.
We also have responsibilities in terms of Capital Markets Rules to review the statement made
by the Directors that the business is a going concern together with supporting assumptions or
qualifications as necessary.
We have nothing to report to you in respect of these responsibilities.
Appointment
We were appointed as the statutory auditor of the Bank for the financial year ended 31
December 2023, at the annual general meeting held by the shareholders. This appointment will
be renewed on an annual basis by the shareholders. The total uninterrupted engagement
periods as statutory auditor, including previous renewals and reappointments amounts to 2
years.
Consistency with the additional report to the audit committee
Our audit opinion on the financial statements expressed herein is consistent with the additional
report to the audit committee of the Bank which was issued on 22 April 2025.
Non-audit services
No prohibited non-audit services referred to in Article 18A(1) of the Accountancy Profession Act
(Cap.281) were provided by us to the Bank and we remain independent of the Bank as
described in the Basis for the Opinion section of our report.
No other services besides statutory audit services and services disclosed in the annual report
and in the financial statements, were provided by us to the Bank.
Other matter — Use of this report
Our report, including the opinion, has been prepared for and only for the Bank’s shareholders
as a body in accordance with Article 179 of the Maltese Companies Act (Cap.386) and for no
other purpose. We do not, in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it may come
save where expressly agreed by our prior written consent.
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Izola Bank Plc
(continued)
119
Sam Spiridonov
on behalf of
BDO Malta
Certified Public Accountants
Registered Audit Firm
Triq It Torri
Msida MSD 1824
Malta
29 April 2025
Izola Bank p.l.c.
Appendices
2024
Izola Bank p.l.c.
Page
Appendix I - Five-Year Summary i
Appendix II – Supplementary Financial Information v
Izola Bank p.l.c.
Appendix I - Five-Year Summary
i
Statement of Profit or Loss and Other Comprehensive Income
2024
2023
2022
2021
2020
€
€ € € €
Interest receivable and
similar income
22,354,878
19,039,346 13,087,771 10,704,557 10,575,188
Interest payable and
similar charges
(16,177,770)
(12,052,370) (5,412,645) (4,513,733) (5,011,314)
----------------- ----------------- ----------------- ----------------- -----------------
Net interest income
6,177,108
6,986,976 7,675,126 6,190,824 5,563,874
Fee and commission income
87,618
16,433 55,912 (10,195) 66,892
Net trading income and
(186,045)
(37,800) 8,490 473,563 237,661
Net (losses)/gains on disposal
Of financial investments at FVTPL
Other operating income
(124,213)
129,864 101,325 97,746 73,437
Other operating charges
(9,994,165)
(8,623,671) (7,309,512) (5,546,089) (5,164,175)
Changes in expected credit
Losses and other credit
Impairment charges
(42,279)
(441,180) (919,147) (385,692) (172,797)
----------------- ----------------- ----------------- ----------------- -----------------
(Loss)/Profit before tax
(4,081,976)
(1,969,378) (387,806) 820,157 604,892
Income tax credit/(expense)
1,112,204
727,010 103,587 (372,176) (219,671)
----------------- ----------------- ----------------- ----------------- -----------------
(Loss)/Profit for the year
(2,969,772)
(1,242,368) (284,219) 447,981 385,221
========== ========== ========== ========== =========
Other comprehensive income
for the year, net of income tax
1,782,716
1,782,523 (9,596,928) (1,251,797) 27,507
----------------- ----------------- ----------------- ----------------- -----------------
Total comprehensive income
for the year
(1,187,056)
540,155 (9,881,147) (803,816) 412,727
========== ========= ========= ========= =========
Earnings per share
(5c12)
(2c14) (0c49) 1c12 0c96
========== ========= ========= ========= =========
Izola Bank p.l.c.
Appendix I - Five-Year Summary
ii
Statement of Financial Position
2024
2023
2022
2021
2020
€
€
€ € €
ASSETS
Balances with Central Bank of Malta
and cash
57,483,508
56,242,720 17,598,287 16,193,768 18,612,618
Financial investments
89,144,374
101,589,059 103,542,260 117,280,712 109,304,630
Loans and advances to banks
4,168,921
6,757,337 10,214,993 25,420,282 22,695,594
Factored receivables
138,236,733
140,049,872 118,363,724 95,051,834 99,155,608
Loans and advances to customers
194,013,127
180,964,061 160,329,282 131,369,341 121,555,833
Property and equipment
11,157,880
13,939,136 11,712,225 12,565,395 11,994,449
Investment Property held for sale
4,838,007
- - - -
Intangible assets
4,155,696
3,630,203 1,975,593 1,774,370 1,550,091
Other assets
2,456,536
2,391,356 3,181,811 1,971,720 3,603,758
Deferred tax asset
2,993,326
2,200,649 1,971,588 - -
Current tax asset
74,252
183,341 641,499 793,029 824,359
----------------- ----------------- ------------------- ------------------- -------------------
Total assets
508,722,360
507,947,733 429,531,262 402,420,451 389,296,940
========== ========== =========== =========== ===========
LIABILITIES
Amounts owed to institutions
-
20,000,000 40,000,000 55,000,000 -
Amounts owed to banks
-
271,105 275,815 274,715 250,576
Amounts owed to customers
448,613,950
429,743,262 335,660,870 297,780,509 304,384,729
Debt securities in issue
16,773,480
16,861,501 16,820,322 11,940,167 11,923,078
Deferred tax liability
1,174,806
808,057 684,044 170,011 845,309
Accruals and other liabilities
6,558,061
8,393,356 4,759,914 3,975,122 2,809,505
------------------ ------------------ ------------------- ------------------- -------------------
Total liabilities
473,120,297
476,077,281 398,200,965 369,140,524 355,213,197
========== ========== =========== =========== ===========
EQUITY
Called up share capital
29,000,000
29,000,000 29,000,000 10,000,000 10,000,000
Property revaluation reserve
4,739,260
3,967,372 2,977,302 3,521,238 3,521,238
Perpetual capital notes
3,000,000
- - - -
Fair value reserve
(697,493)
(1,708,321) (2,500,774) (612,547) 639,250
Depositor compensation scheme reserve
-
1,038,647 831,860 1,288,168 1,707,717
Reserve for general banking risk
-
55,025 72,782 45,091 3,860
Capital contribution reserve
2,032,675
32,675 32,675 17,032,675 17,032,675
(Accumulated Losses)/Retained Earnings
(2,472,379)
(514,946) 916,452 2,005,302 1,179,003
------------------ ------------------ ------------------- ------------------- -------------------
Total equity attributable to
equity holders of the Bank
35,602,063
31,870,452 31,330,297 33,279,927 34,083,743
========== ========= ======== ======== ========
Total liabilities and equity
508,722,360
507,947,733 429,531,262 402,420,451 389,296,940
========== ========= ======== ======== ========
Memorandum items Commitments
179,182,237
187,954,041 185,068,135 92,738,305 96,000,451
========== ========= ======== ======== ========
Izola Bank p.l.c.
Appendix I - Five-Year Summary
iii
Statement of Cash Flows
2024
2023 2022 2021 2020
€
€ € € €
Net cash from operating activities
(17,012,069)
36,907,071 (30,370,480) 9,818,579 (8,670,571)
------------------ ------------------ ------------------ ------------------ ------------------
Cash flows from investing activities
Payments to acquire property,
equipment and intangible assets
(2,900,137)
(3,765,160) (2,478,688) (1,639,455) (1,022,616)
Proceeds from disposal of property
-
- 2,204,000 - -
Payments to acquire investments
(399,300)
(100,000) (40,740,036) (85,996,927) (87,424,082)
Proceeds from disposals of investments
13,247,605
1,302,167 51,362,776 76,537,399 59,299,332
Interest received from financial investments
2,037,701
2,152,107 1,612,389 2,066,104 1,529,179
Payments on investments which are
traded but not yet acquired
-
- - - (1,500,000)
------------------ ------------------ ------------------ ------------------ ------------------
Net cash from/(used in) investing activities
11,985,869
(410,886) 11,960,441 (9,032,879) (29,118,187)
------------------ ------------------ ------------------ ------------------ ------------------
Cash flows from financing activities
Proceeds from issue of debt securities
-
- 13,633,597 - -
Redemption of debt securities
(129,200)
(8,814,000) - -
Interest and premium paid on debt
Conversion - - (284,663) - -
Interest paid on perpetual capital notes
(81,333)
- - - -
Interest paid on debt securities
(839,790)
(843,370) (540,000) (540,000) (540,000)
Capital contributions
2,000,000
- - - -
Issue of Perpetual capital notes
3,000,000
-
- - -
------------------ ------------------ ------------------ ------------------ ------------------
Net cash from / (used in)
financing activities
3,949,677
(843,370) 3,994,934 (540,000) (540,000)
------------------ ------------------ ------------------ ------------------ ------------------
Net movement in cash and
cash equivalents
(1,076,523)
35,652,815 25,555,573 245,700 (38,328,758)
========== ========== ========== ========== ===========
Izola Bank p.l.c.
Appendix I - Five-Year Summary
iv
Accounting Ratios
2024
2023
2022
2021
2020
%
%
% % %
Net interest income and other
operating income to total assets
1.17
1.40 1.81 1.68 1.53
Operating expenses to total assets
1.97
1.78 1.92 1.47 1.37
Profit before tax to total assets
(0.80)
(0.39) (0.09) 0.20 0.16
Pre-tax return on capital employed
(11.47)
(6.18) (1.24) 2.82 2.14
Profit after tax to equity
(8.34)
(3.90) (0.91) 1.35 1.13
Izola Bank p.l.c.
Appendix II – Supplementary Financial Information
Directors’ interest in the share capital of the Bank or in any related company as at 31
December 2024
v
No director has a direct beneficial or non-beneficial interest in the share capital of the Bank.
Magdalena De Roeck and Caroline Van Marcke have an indirect beneficial interest in the shareholding of
the Bank through their indirect shareholding in Carlenco Finance NV, a company registered in Belgium with
registration number 0755.471.533.
Furthermore, Magdalena De Roeck and Caroline Van Marcke are also directors of IBL I Limited and IBL T
Limited and other companies forming part of the Group.
Shareholder holding 5% or more of the Share Capital as at 31st December 2024
IBL T Limited
Ordinary
As at date of publication of the annual report, no changes were effected to the shareholding structure.