INTERIM REPORT for the period January -

3674Bank of Åland Plc STOCK EXCHANGE RELEASE August 16 2002, at 09.00 hrs INTERIM REPORT for the period January - June 2002 Earnings During the report period, consolidated income from financial operations amounted to EUR 15.8 million. This was a decline of EUR 1.1 M or 6.3 per cent compared to the same period of 2001. The main reason for lower earnings was that the margin between interest rates on deposits and lending narrowed, due to the low prevailing interest rates. Tough competition also further squeezed customer margins. Dividend income amounted to EUR 0.7 M (0.6). Commission income rose by EUR 1.4 M or 32.1 per cent to EUR 5.7 M. Income from asset management services rose the most. Net income from the Bank's own securities trading amounted to EUR 0.1 M (0.4). Net income on foreign exchange dealing, which totalled EUR 0.4 M, fell slightly. Other operating income amounted to EUR 0.7 M. Total income - net income from financial operations and other income - declined by 1.2 per cent or EUR 0.2 M to EUR 23.5 M. New staff recruitments and salary adjustments in compliance with collective agreements raised staff costs by 6.7 per cent or EUR 0.5 M to EUR 8.2 M. Other administrative expenses (office costs, marketing, telecommunications and computer costs) rose by EUR 0.5 M to EUR 4.5 M, mainly due to higher computer and marketing costs. Depreciation rose marginally to EUR 1.5 M and other operating expenses rose by EUR 0.4 M to E UR 2.0 M. Total expenses including planned depreciation rose by EUR 1.5 M or 10.0 per cent to EUR 16.7 M. Net loan losses amounted to EUR 0.1 M. During the year-earlier period, the corresponding item was a net recovery of EUR 0.6 M. Taken together, this caused net operating profit to decline by EUR 2.4 M to EUR 6.8 M. Return on equity for the report period was 15.1 per cent. The Bank of Åland thus yielded a return on its shareholders' equity at a level about 10 percentage points higher than five-year bond yields. Deposits Deposits from the public, including bonds issued and certificates of deposit, declined during the 12 months to June 30, 2002 by 4.6 per cent to EUR 1,322 M (1,386). Deposit accounts declined by 2.5 per cent to EUR 1,072 M (1,100). During the report period, deposit accounts declined by 2.2 per cent. During the year, the Bank floated bond issues with a nominal value of EUR 22.9 M. Lending During the 12 months to June 30, 2002, the Bank's volume of lending to the public increased by 11.5 per cent to EUR 1,169 M (1,049). Most of the increase went towards residential financing. During the report period, total lending volume rose by EUR 59.5 M or 5.4 per cent. Private households accounted for 66.9 (65.7) per cent of the Bank's total loans outstanding. Personnel At the end of June 2002 the number of employees, recalculated as full-time equivalents, was 363, compared to 355 on the same date in 2001, that is, an increase of 8 positions. Insider rules The Bank's Board of Directors has accepted the Helsinki Stock Exchange's insider regulations and has meanwhile established trading restrictions concerning the Bank's securities, by which a Bank insider is not entitled to trade in the Bank's securities during a period of 14 days before publication of the Bank's annual accounts or Interim Report. Capital adequacy The Group's capital adequacy according to the Credit Institutions Act: Jun 30, Jun 30, Dec 31, 2002 2001 2001 Capital base, EUR M Core capital 73.5 69.9 72.4 Supplementary capital 23.2 28.7 28.2 Total capital base 96.8 98.6 100.5 Risk-weighted volume, EUR M 838.7 788.0 804.2 Total capital ratio, % 11.5 12.5 12.5 Core capital ratio as % of risk-weighted volume 8.8 8.9 9.0 Profit for the report period is not included in core capital. Nonperforming loans, EUR M Jun 30, Jun 30, Dec 31, 2002 2001 2001 2.3 2.5 2.6 Nonperforming loans amounted to 0.2 per cent of total loans and contingent liabilities. Financial ratios etc Jun 30, Jun 30, 2002 2001 Net operating profit per share, 0.48 0.65 EUR1 Equity cap ital per share, EUR2 8.18 8.16 Income/expense ratio - before loan losses 1.42 1.56 - after loan losses 1.41 1.63 1 Net operating profit minus imputed taxes / Average number of shares, adjusted for new issue 2 Equity capital and reserves minus imputed taxes on reserves and accumulated profit for the year / Number of shares on balance sheet date, adjusted for new issue Tapiola Group buys licence for Bank of Åland banking computer system The Tapiola Group, a Finnish insurance company, is choosing the Bank of Åland's basic banking and Internet banking systems for its new Tapiola Bank. A letter of intent was signed on June 19, 2002. The aim is to enter into a final contract during the autumn of 2002. According to plans, Tapiola Bank's operations will start during the first half of 2004. The Bank of Åland will be responsible for operating the computer systems, which will first be adapted entirely to Tapiola Bank's mission and needs. The business agreement is estimated to be worth a total at least EUR 20 M during the contract period. Forecast for the year Income from financial operations and other income are being squeezed by low prevailing interest rates, tough competition and low demand for capital market products. Staff costs and other expenses are expected to increase, compared to the previous year. Loan losses are projected to remain at a low level. Operating income is nevertheless expected to be on the same level as the previous year, providing that the deal concerning banking systems with Tapiola Group is implemented according to the plans. Mariehamn, Åland, Finland, August 16, 2002 THE BOARD OF DIRECTORS Statement of opinion We have conducted a review of the Interim Report of the Bank of Åland Plc (Ålandsbanken Abp) for the period January 1 - June 30, 2002. This review included an analytical examination of the balance sheet and income statement items in the Interim Report. Such a review is significantly more limited in scope than a statutory audit. Nothing has emerged that indicates that the Interim Report does not fulfil the regulations in force. Mariehamn, August 16, 2002 Leif Hermans Authorised Public Accountant Per-Olof Johansson Authorised Public Accountant Marja Tikka Authorised Public Accountant INCOME STATEMENT (EUR M) The Group 1-6/02 1-6/01 1-12/01 Net income from financial 15.8 16.9 33.4 operations Income from investment in form of equity capital 0.7 0.6 0.6 Commission income 5.7 4.3 8.9 Net income from securities trans- actions and foreign exchange 0.5 0.9 2.0 dealing Other operating income 0.7 1.0 2.8 TOTAL INCOME 23.5 23.7 47.8 Commission expenses -0.6 -0.6 -1.2 Staff costs -8.2 -7.7 -15.5 Other administrative expenses -4.5 -4.0 -8.2 Depreciation -1.5 -1.4 -2.8 Other operating expenses -2.0 -1.6 -3.5 TOTAL EXPENSES -16.7 -15.2 -31.2 Loan and guarantee losses -0.1 0.6 -0.1 Share in operating results of company consolidated according to equity 0.2 0.0 0.8 method NET OPERATING PROFIT 6.8 9.2 17.4 Extraordinary income 0.0 0.0 0.0 PROFIT BEFORE APPROPRIATIONS AND TAXES 6.8 9.2 17.4 BALANCE SHEET (EUR M) The group 6/02 6/01 12/01 ASSETS Cash 61 33 40 Claims usable as collateral at central bank 168 267 216 Claims on credit institutions 207 216 235 Claims on the public and public sector entities 1,169 1,049 1,109 Leasing assets 1 1 1 Debt securities 32 33 26 Shares and participations 16 15 15 Shares and participations in associ- ated companies and subsidiaries 2 1 2 Intangible assets 4 5 5 Tangible assets 15 16 15 Other assets 14 25 9 Accrued income and prepayments 12 16 12 TOTAL ASSETS 1,702 1,677 1,686 LIABILITIES AND EQUITY CAPITAL Liabilities Liabilities to credit institutions and central banks 110 83 96 Liabilities to the public and public sector entities 1,078 1,107 1,103 Debt sec urities issued to the public 348 315 319 Other liabilities 22 30 29 Accrued expenses and deferred income 20 19 12 Subordinated liabilities 22 22 22 Imputed taxes due 7 6 7 Minority interests 1 0 0 Equity capital Share capital 20 20 20 Share premium reserve 14 13 13 Revaluation reserve 0 1 0 Reserve fund 25 25 25 Capital loan 10 10 10 Profit brought forward 18 16 16 Other equity capital 6 9 13 TOTAL LIABILITIES AND EQUITY 1,702 1,677 1,686 CAPITAL OFF-BALANCE SHEET COMMITMENTS 92 92 87 INCOME STATEMENT (EUR M) Q II Q I Q IV Q III Q II The Group 2002 2002 2001 2001 2001 Net income from financial 8.0 7.8 8.2 8.3 8.4 operations Income from investment in form of equity capital 0.4 0.3 0.0 0.0 0.4 Commission income 3.1 2.6 2.7 1.9 2.1 Net income from securities trans- actions and foreign exchange -0.8 1.2 1.2 0.0 0.3 dealing Other operating income 0.3 0.4 1.3 0.5 0.5 TOTAL INCOME 11.1 12.3 13.5 10.6 11.7 Commission expenses -0.3 -0.3 -0.3 -0.3 -0.3 Staff costs -4.1 -4.1 -3.9 -3.9 -3.9 Other administrative expenses -2.5 -2.0 -2.5 -1.7 -2.1 Depreciation -0.7 -0.7 -0.7 -0.7 -0.7 Other operating expenses -1.0 -1.0 -1.1 -0.8 -0.5 TOTAL EXPENSES -8.7 -8.0 -8.6 -7.4 -7.4 Loan and guarantee losses -0.1 0.0 -0.7 0.0 0.6 Share in operating results of company consolidated according to equity method 0.1 0.1 0.0 0.8 0.0 NET OPERATING PROFIT 2.4 4.4 4.2 4.0 4.9