Interim Report, January - March 2004

6221Bank of Åland Plc STOCK EXCHANGE RELEASE 22.4.2004 14.00 hrs Interim Report, January - March 2004 Improved earnings · Consolidated net operating profit rose by 45.2 per cent to 5.0 million euros (Jan-Mar 2003: EUR 3.5 M) · Return on equity after taxes (ROE) was 14.7 per cent(11.7) · Other income increased by 49.9 per cent to EUR 5.6 M (3.7) · Expenses rose by less than 3 per cent to EUR 8.1 M (7.9) · Lending volume rose by 10.5 per cent to EUR 1,404 M (Mar 2003: 1,270) · Deposit accounts increased by 6.4 per cent to EUR 1,134 M (Mar 2003: 1,065) · The total capital ratio amounted to 11.0 (11.2) per cent · Earnings per share after taxes amounted to EUR 0.33(0.24) THE GROUP Earnings During the first quarter of 2004, consolidated net operating profit amounted to EUR 5 M (3.5). This was an increase of EUR 1.5 M or 45.2 per cent compared to the corresponding year- earlier period. The improvement in earnings was primarily due to increased commission income and growing income from the banking computer systems sales business area. Return on equity before taxes for the report period, measured as net operating profit divided by average equity capital and reserves, was 19 per cent. The Bank thus yielded a return on its shareholders' equity at a level about 16 percentage points higher than five-year bond yields. Net income from financial operations Due to larger total volume, net income from financial operations a mounted to an unchanged EUR 7.4 M, despite narrowing customer margins owing to tough competition. Other income Commission income amounted to SEK 3.1 M (2.2), an increase of EUR 0.9 M or 38.7 per cent. This increase derived mainly from securities brokerage and other capital market products. Other operating income totalled EUR 2.2 M (0.7). This included EUR 1.8 M (0.4) in income from the systems sales business area. Other income rose by EUR 1.9 M or 49.8 per cent to EUR 5.6 M (3.7). This included nonrecurring income of EUR 1.0 M. Total income - net income from financial operations and other income - amounted to EUR 13.0 M (11.1). Expenses Staff costs rose slightly, amounting to EUR 4.3 M (4.2). Other administrative expenses (office costs, marketing, telecommunications and computer costs) rose by EUR 0.2 M to EUR 2.0M (1.8). Depreciation/amortisation was EUR 0.2 M lower than the year before and amounted to EUR 0.5 M (0.7), while other operating expenses were unchanged at EUR 1.0 M. Total expenses including planned depreciation rose by EUR 0.2 M or 2.9 per cent to EUR 8.1 M (7.9). Loan losses Net loan losses amounted to EUR 0.01 M. Deposits Deposits from the public, including bonds issued and certificates of deposit, rose during the 12 months to March 31, 2004 by 3.8 per cent to EUR 1,402 M (1,351). Deposit accounts rose by 6.4 per cent to EUR 1,134 M (1,065). During the report period, total deposits volume rose by EUR 4.0 M or 0.3 per cent. During the year,the Bank float ed bond issues with a nominal value of EUR 16.0 M. Lending During the 12 months to March 31, 2004, the Bank's volume of lending to the public increased by 10.5 per cent to EUR 1,404 M (1,270). Most of the increase went towards residential financing. During the report period, total lending volume rose by EUR 18.2 M or 1.3 per cent. Private households accounted for 68.5 (66.9) per cent of total lending. Nonperforming receivables Total nonperforming receivables and other zero-interest receivables amounted to EUR 2.5 M (3.9), or 0.2 per cent of loans and guarantees outstanding. Personnel At the end of March 2004, the number of employees - recalculated as full-time equivalents - was 379. This was an increase of 11 positions, compared to the same date in 2003. Capital adequacy Capital adequacy rules require that the capital base in the form of equity capital and reserves total at least 8 per cent of risk-weighted receivables and contingent liabilities. At the end of March, the Group's capital adequacy according to the Credit Institutions Act was 11.0 (11.2) per cent. The core capital ratio was 9.1 (8.5) per cent. Profit during the report period is not included in core capital. The capital base amounted to EUR 104.8 M (98.1). Ålandsbanken Fondbolag Ab Ålandsbanken Fondbolag Ab is a wholly-owned subsidiary of the Bank of Åland Plc (Ålandsbanken Abp). The mutual funds (unit trusts) that the company manages are registered in Finland and comply with the Act on Mutual Funds. On Ma rch 31, 2004, the number of unit holders totalled 5,839 (Dec 31, 2003: 5,337), which represented an increase of 9.4 per cent. The total assets under management amounted to EUR M 140.9 (117.4), an increase of 20 per cent from the preceding year. Ålandsbanken Asset Management Ab Ålandsbanken Asset Management Ab is a subsidiary of the Bank of Åland Plc. The first quarter of 2004 was characterised by rising stock market prices and falling interest rates. During the quarter, the company received several institutional asset management mandates. This is a concrete indication that Ålandsbanken Asset Management Ab is perceived as a credible asset manager among institutional investors as well. In terms of earnings, the company's basic asset management operations also exceeded expectations, while its proportion of extraordinary income was approximately as expected. Corporate governance reform implemented The Bank's Annual General Meeting on March 18 approved the proposal to abolish the Bank's Supervisory Board. This means that the reform process that began just over one year ago has now been implemented. The Board of Directors will shortly begin the task of appointing a nomination committee, in compliance with the corporate governance rules recommended by the Helsinki Stock Exchange. Refund of surplus contributions At year-end 2003, the probable market value of the assets in Ålandsbanken Abps pensionsstiftelse, the Bank's pension fund, exceeded its actuarial liability by about EUR 4 M. The Bank has received permission from the Finnish Financial Supervision Authority to refund EUR 1.1 M in surplus contributions. The refund will occur during the second quarter of 2004. Forecast for the year Our earlier forecast for the year remains unchanged. Full-year 2004 earnings will probably reach the level of 2003 earnings. Mariehamn, April 22, 2004 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 - March 31, 2004. 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, April 22, 2004 Leif Hermans, Authorised Public Accountant Rabbe Nevalainen, Authorised Public Accountant Marja Tikka, Authorised Public Accountant FINANCIAL RATIOS ETC Jan-Mar Jan-Mar Full year Bank of Åland Group 2004 2003 2003 Net operating profit per share, 0.33 0.24 1.02 EUR 1 Market price per share, end of period, EUR Series A 16.82 16.20 18.65 Series B 17 .25 14.40 19.10 Equity capital per share, EUR 2 8.56 7.99 9.22 Return on equity after taxes, % 14.7 11.7 11.4 (ROE) 3 Total lending volume, EUR M 1,404 1,270 1,385 Total deposits from the public, 1,402 1,351 1,398 EUR M Equity capital, EUR M 93.8 81.3 100.9 Balance sheet total, EUR M 1,852 1,756 1,851 Income/expense ratio 1.6 1.4 1.4 Total capital ratio, % 11.0 11.2 11.4 1 Net operating profit minus imputed taxes / Average number of shares, adjusted for new issue 2 Equity capital and reserves minus imputed tax / Number of shares on balance sheet date, adjusted for new issue 3 Net operating profit minus inputed tax / Average equity capital CAPITAL ADEQUACY Jan-Mar Jan-Mar Full year Bank of Åland Group 2004 2003 2003 Capital base, EUR M Core capital 86.6 74.9 86.5 Supplementary capital 18.3 23.2 20.3 Total capital base 104.8 98.1 106.8 Risk-weighted volume, EUR M 955.7 876.7 932.7 Total capital ratio, % 11.0 11.2 11.4 Core capital as % of risk-weighted 9.1 8.5 9.3 volume Profit during the report period is not included in the capital base INCOME STATEMENT BY QUARTER Q 1 Q 4 Q 3 Q 2 Q 1 (EUR M) 2004 2003 2003 2003 2003 Net income from financial 7.4 7.4 7.4 7.4 7.4 operations Income from equity investments 0.1 0.2 0.3 0.4 0.3 Commission income 3.1 3.0 2.5 2.5 2.2 Net income from securities 0.2 0.7 1.0 0.4 0.5 transactions and foreign exchange dealing Other operating income 2.2 2.1 1.0 1.8 0.7 Total income 13.0 13.5 12.2 12.6 11.1 Commission expenses -0.3 -0.3 -0.3 -0.3 -0.3 Staff costs -4.3 -5.7 -4.5 -4.5 -4.2 Other administrative expenses -2.0 -2.6 -1.7 -2.1 -1.8 Depreciation/amortisation -0.5 -0.6 -0.5 -0.6 -0.7 Other operating expenses -1.0 -1.1 -0.9 -0.9 -1.0 Total expenses -8.1 -10.3 -7.9 -8.4 -7.9 Loan and guarantee losses 0.0 0.1 0.0 0.0 0.1 Share of operating results of 0.1 -0.2 0.1 0.1 0.2 companies consolidated according to equity method Net operating profit 5.0 3.1 4.4 4.2 3.5 SUMMARY INCOME STATEMENT Bank of Åland Bank of Åland Group Plc Jan- Jan- Full Jan- Jan- Full Mar Mar year Mar Mar year (EUR M) 2004 2003 2003 2004 2003 2003 Net income from financial 7.4 7.4 29.6 7.3 7.3 29.4 operations Income from equity 0.1 0.3 1.2 0.8 1.6 2.5 investments Commission income 3.1 2.2 10.3 2.5 1.9 8.5 Net income from securities 0.2 0.5 2.7 0.3 0.5 2.6 transactions and foreign exchange dealing Other operating income 2.2 0.7 5.6 2.2 0.7 5.6 Total income 13.0 11.1 49.4 13.1 12.0 48.6 Commission expenses -0.3 -0.3 -1.3 -0.3 -0.3 -1.1 Staff costs -4.3 -4.2 -18.9 -4.1 -4.0 -18.2 Other administrative -2.0 -1.8 -8.2 -1.9 -1.7 -7.9 expenses Depreciation/amortisation -0.5 -0.7 -2.3 -0.5 -0.6 -2.3 Other operating expenses -1.0 -1.0 -3.9 -0.9 -0.9 -3.8 Total expenses -8.1 -7.9 -34.4 -7.7 -7.6 -33.3 Loan and guarantee losses 0.0 0.1 0.1 0.0 0.1 0.1 Share of operating results 0.1 0.2 0.1 of companies consolidated according to equity method Net operating profit 5.0 3.5 15.2 5.3 4.5 15.5 Appropriations Income taxes -1.4 -1.0 -4.4 -1.5 -1.3 -4.5 Minority share of profit 0.0 0.0 -0.1 for the period Profit for the period 3.6 2.5 10.6 3.8 3.2 11.0 SUMMARY BALANCE SHEET Bank of Åland Group Bank of Åland Plc Mar Mar Dec Mar Mar Dec 31 31 31 31 31 31 (EUR M) 2004 2003 2003 2004 2003 2003 ASSETS Liquid assets 79 97 40 79 97 40 Debt securities eligible 185 174 263 185 174 263 for refinancing with central banks Claims on credit 91 134 77 91 134 77 institutions Claims on the public and 1,404 1,270 1,405 1,404 1,270 1,405 public sector entities Lease assets 1 1 1 1 1 1 Debt securities 8 22 8 7 22 7 Sha res and participations 11 16 15 11 16 14 Shares and participations 2 2 2 3 3 3 in associated and Group companies Intangible assets 4 4 3 3 4 3 Tangible assets 14 14 14 14 14 14 Other assets 45 11 15 45 11 15 Accrued income and prepaid 8 9 8 8 9 8 expenses 1,852 1,756 1,851 1,852 1,756 1,851 LIABILITIES AND EQUITY CAPITAL Liabilities Liabilities to credit 102 95 93 102 95 93 institutions and central banks Liabilities to the public 1,139 1,072 1,140 1,139 1,072 1,140 and public sector entities Debt securities issued to 406 424 433 406 424 433 the public Other liabilities 57 29 30 57 30 30 Accrued expenses and 14 16 14 14 16 14 prepaid income Subordinated liabilities 25 22 25 25 22 25 Imputed taxes due 7 7 7 Minority share of capital 0 0 0 Accumulated appropriations Reserves 23 23 23 Equity capital Share capital 22 21 22 22 21 22 Share premium account 25 15 25 25 15 25 Reserve fund 25 25 25 25 25 25 Capital loan 10 10 10 10 10 10 Profit brought forward 17 18 18 0 0 0 Profit for the period 4 2 11 4 3 11 1,852 1,756 1,851 1,852 1,756 1,851 Off-balance sheet commitments Guarantees and pledges 9 10 10 9 10 10 Other commitments 117 93 104 117 93 104 126 102 114 126 102 114 0