Bank of Åland Plc STOCK EXCHANGE RELEASE 22.10.2007 09.00 hrs Interim report for the period January - September 2007 The report period in brief -Consolidated net operating profit rose by 23 per cent to 20.5 million euros (Jan - Sep 2006: EUR 16.6 M) -Net interest income increased by 20 per cent to EUR 28.8 M (24.1) -Commission income increased by 12 per cent to EUR 15.2 M (13.6) -Expenses increased by 17 per cent to EUR 33.2 M (28.5) -Loan losses amounted to EUR 0.9 M (recovery of 0.1) -Lending volume increased by 11 per cent to EUR 2,048 M (Sep 2006: 1,838) -Deposits increased by 2 per cent to EUR 1,790 M (Sep 2006: 1,750) -Mutual fund capital under management increased by 29 per cent to EUR 406 M (315) -Return on equity after taxes (ROE) was 16.1 per cent (14.3) -The expense/income ratio improved to 62 per cent (63) -The total capital ratio in compliance with Basel 2 amounted to 12.4 per cent -Earnings per share after taxes amounted to EUR 1.26 (1.06) EARNINGS AND PROFITABILITY This Interim Report has been prepared in compliance with the International Financial Reporting Standards (IFRSs) approved by the European Union, as well as with International Accounting Standard (IAS) 34, “Interim Financial Reporting”. Earnings summary for the report period During January-September 2007, consolidated net operating profit of the Bank of Åland Group rose by 23 per cent to EUR 20.5 M (16.6). This positive trend resulted from improved net interest income and higher income from mutual fund and asset management, capital gains and increases in the value of financial assets, while information technology (IT) operations had continued good earnings. Income increased by 21 per cent to EUR 54.4 M (44.8), while expenses rose by 17 per cent to EUR 33.2 M (28.5). Return on equity after taxes (ROE) increased to 16.1 (14.3) per cent, and earnings per share after taxes increased to EUR 1.26 (1.06). Net interest income During the report period, consolidated net interest income rose by 20 per cent to EUR 28.8 M (24.1). Increased deposit and lending volume as well as higher interest rates improved net interest income, while the lending margin continued its negative trend. Lending volume increased by 11 per cent to EUR 2,048 M (1,838). Other income Commission income rose by 12 per cent to EUR 15.2 M (13.6). Income on mutual fund and asset management as well as securities brokerage increased, due to higher trading volume and managed assets. Net income from securities trading for the Bank's own account was EUR 2.1 M (0.6). Net income from dealing in the foreign exchange market amounted to EUR 0.6 M (0.8). Net income from financial assets available for sale was EUR 0.9 M (0.2), and net income from investment properties increased to EUR 0.6 M (0.1). Other operating income also increased, to EUR 7.6 M (6.6), due to rising income from the sale and development of computer systems. The Group's total income rose by 21 per cent to EUR 54.4 M (44.8). Expenses Staff costs increased by 20 per cent to EUR 19.3 M (16.1). The increase was due to employee recruitment throughout the Group. A change in the fair value of assets in the Bank's pension fund, Ålandsbanken Abp:s Pensionsstiftelse, increased staff costs by EUR 0,2 M (-0,7). Other administrative expenses (office, marketing, communications and IT) increased to EUR 6.4 M (6.3). Production for own use totalled EUR 0.3 M (0.4) and was related to expenses for computer software, which in accordance with IFRS must be capitalised. Depreciation/amortisation increased to EUR 3.6 M (3.0). Other operating expenses amounted to EUR 4.2 M (3.5), of which rents and property expenses accounted for the largest increase. The Group's total expenses rose by 17 per cent to EUR 33.2 M (28.5). Expense/income ratio The expense/income ratio improved during the report period to 62 per cent, compared to 63 per cent during the corresponding period of 2006. During the full year 2006, the expense/income ratio was 66 per cent. Impairment loss on loans and other commitments Loan losses amounted to EUR 0.9 M (recovery of 0.1). Third quarter of 2007 The third quarter was affected by financial market turbulence, which resulted in a challenging funding situation and cautious investors in capital markets. The Group has taken steps to further strengthen its liquidity. Consolidated net operating profit fell by 13 per cent compared to the corresponding quarter of 2006, amounting to EUR 4.9 M (Q III 2006: 5.6). Gross operating profit was better than during the corresponding period of 2006, but net operating profit was adversely affected in the amount of EUR -0.3 M (0.4) by valuations according to the fair value option, lower fair value of assets in the Bank's pension fund, Ålandsbanken Abp:s Pensionsstiftelse, amounting to EUR -0.4 M (0.1) and higher loan losses in the amount of EUR 0.6 M (0.0). Income Total income increased by 13 per cent to EUR 16.5 M (14.6). A combination of higher interest rates and higher lending volume increased net interest income by 21 per cent to EUR 9.9 M (8.2). The increase was reduced by lower lending margins than in the year-earlier period. Commission income improved despite market turbulence and amounted to EUR 4.6 M (4.3). The increase consisted of higher commission income on management of mutual fund assets, while securities trading commissions fell. Net income from securities trading and foreign exchange operations was unchanged at EUR 0.1 M. Other operating income decreased to EUR 2.3 M (2.4) as a consequence of lower income from IT operations. Expenses Total expenses during the quarter increased by 23 per cent to EUR 11.1 M (9.1). During the quarter, staff costs amounted to EUR 6.5 M (5.2). The increase was due to the higher number of Group employees, salary hikes in accordance with collective agreements and lower fair value of assets in the Bank's pension fund, Ålandsbanken Abp:s Pensionsstiftelse, during the quarter. Other administrative expenses increased to EUR 2.1 M (1.8) during Q III 2007. Due to higher property expenses and rents, other operating expenses increased to EUR 1.4 M (1.2). Loan losses during the quarter were EUR 0.6 M (0.0). Balance sheet total and off-balance sheet obligations At the end of the report period, the Group's balance sheet total was EUR 2,569 M (2,293). The increase was due to both higher lending volume and deposit volume. During the period, the Group issued bond loans to the public in a nominal amount of EUR 34 M. As a consequence of higher obligations for guarantees and pledges, off-balance sheet obligations increased to EUR 192 M (178). Personnel Hours worked in the Group, recalculated to full-time equivalent positions, totalled 460 (439) during the report period. This represented an increase of 21 positions compared to the year-earlier period. Capital adequacy The Group is reporting capital adequacy in accordance with Pillar 1 in the Basel 2 regulations. Risk management under Pillar 2 will be reported in the Annual Report for 2007. According to Pillar 1 of Basel 2, the Group's total capital ratio at the end of September 2007 was 12.4 per cent. The capital requirement for credit risks is being calculated according to the standardised approach, and the capital requirement for operational risks is being calculated according to the basic indicator approach in the Basel 2 regulations. Deposits Deposits from the public, including bonds and certificates of deposit issued, continued to increase during the 12 months to September 30, 2007 by 2 per cent to EUR 1,790 M (1,750). Deposit accounts increased by 14 per cent to EUR 1,415 M (1,246). Bonds and certificates of deposit issued to the public decreased by 26 per cent to EUR 375 M (504). Lending The volume of lending to the public during the 12 months to September 30, 2007 increased by 11 per cent to EUR 2,048 M (1,838). Lending to private households increased by 10 per cent to EUR 1,421 M (1,295). Households accounted for 69 (70) per cent of the Group's total lending. Ab Compass Card Oy Ltd Ab Compass Card Oy Ltd is a subsidiary of the Bank of Åland Plc (Ålandsbanken Abp). The mission of the company is to issue credit and debit cards to private and institutional customers. The company is in the start-up phase and is expected to begin its operations during 2008. Crosskey Banking Solutions Ab Ltd Crosskey Banking Solutions Ab Ltd is a wholly-owned subsidiary of the Bank of Åland Plc. The mission of the company is to develop, sell and maintain banking computer systems − either as whole systems or in modules − to small and medium-sized banks in Europe, as well as sell operational services. Among Crosskey's current customers are Tapiola Bank, DnB NOR, S-Bank, the Bank of Åland, eQ Bank and EGET. Crosskey currently has 149 employees and offices in Mariehamn, Turku, Helsinki and Stockholm. Ålandsbanken Asset Management Ab Ålandsbanken Asset Management Ab is a subsidiary of the Bank of Åland Plc. The company offers discretionary and consultative asset management services to institutions and private individuals. The company also manages all of the Bank of Åland's mutual funds. The company currently has about 350 customers and EUR 900 M in managed assets. The company has strong growth. Ålandsbanken Fondbolag Ab Ålandsbanken Fondbolag Ab is a wholly-owned subsidiary of the Bank of Åland Plc. The mutual funds (unit trusts) that the company manages are registered in Finland and comply with the Act on Mutual Funds. At the end of the report period, the total number of unit holders was 14,372 (11,651). This represented an increase of 2,721 or 23 per cent. Total assets under management amounted to EUR 406 M (315), an increase of EUR 91 M or 29 per cent since 12 months earlier. Ålandsbanken Kapitalmarknadstjänster Ab In order to further strengthen the Bank of Åland's position in the capital market segment in Åland, Ålandsbanken Kapitalmarknadstjänster Ab has been merged with the Bank of Åland Plc. This merger was completed on October 1, 2007. Ålandsbanken Veranta Ab Ålandsbanken Veranta Ab is a subsidiary of the Bank of Åland Plc. The company's operations include estate agency, appraisal and consulting business. The company currently has 4 employees and an office in Helsinki. Outlook for 2007 The Group predicts higher interest rates during the final quarter of 2007, a continued positive trend in the mutual fund and capital markets as well as growth in the Group's IT operations. The cost level in the Group is expected to rise moderately. Competition in the banking market is expected to remain tough, which is reflected primarily in lending margins. Based on these factors, the Group is sticking to its earlier forecast that earnings in 2007 are expected to be substantially better than in the preceding year. The Group's assessment of the outlook for 2007 is based on its assumptions about future developments in the fixed-income and financial markets. General interest rates, the demand for lending, the trend of the capital and financial markets and the competitive situation are factors that the Group cannot influence. Mariehamn, October 22, 2007 THE BOARD OF DIRECTORS -------------------------------------------------------------------------------- | FINANCIAL RATIOS ETC | -------------------------------------------------------------------------------- | Bank of Åland Group | Jan-Sep | Jan-Sep | Jan-Dec | | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | Earnings per share before dilution, EUR 1 | 1.26 | 1.06 | 1.29 | -------------------------------------------------------------------------------- | Earnings per share after dilution, EUR 2 | 1.26 | 1.03 | 1.29 | -------------------------------------------------------------------------------- | Market price per share, end of period, EUR | | | | -------------------------------------------------------------------------------- | Series A | 33.00 | 24.50 | 26.50 | -------------------------------------------------------------------------------- | Series B | 26.53 | 23.50 | 24.50 | -------------------------------------------------------------------------------- | Equity capital per share, EUR 3 | 11.19 | 10.58 | 10.86 | -------------------------------------------------------------------------------- | Return on equity after taxes, % (ROE) 4 | 16.1 | 14.3 | 13.3 | -------------------------------------------------------------------------------- | Return on total assets (ROA), % 5 | 0.9 | 0.8 | 0.7 | -------------------------------------------------------------------------------- | Equity/assets ratio, % 6 | 5.0 | 5.1 | 5.6 | -------------------------------------------------------------------------------- | Total lending volume, EUR M | 2,048 | 1,838 | 1,912 | -------------------------------------------------------------------------------- | Total deposits from the public, EUR M | 1,790 | 1,750 | 1,599 | -------------------------------------------------------------------------------- | Equity capital, EUR M, | 129 | 117 | 122 | -------------------------------------------------------------------------------- | Total assets, EUR M | 2,569 | 2,293 | 2,189 | -------------------------------------------------------------------------------- | Expense/income ratio | | | | -------------------------------------------------------------------------------- | Including loan losses | 0.62 | 0.63 | 0.66 | -------------------------------------------------------------------------------- | Excluding loan losses | 0.61 | 0.63 | 0.66 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1 Profit for the period before dilution/ Average number of shares | -------------------------------------------------------------------------------- | 2 Profit for the period after dilution / (Average number of shares + shares | | outstanding) | -------------------------------------------------------------------------------- | 3 Equity capital / Number of shares on balance sheet date | -------------------------------------------------------------------------------- | 4 Net operating profit - taxes / Average equity capital | -------------------------------------------------------------------------------- | 5 Net operating profit - taxes / Average balance sheet total | -------------------------------------------------------------------------------- | 6 Equity capital / Total assets | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | CAPITAL ADEQUACY | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30 | Sep 30 | Dec 31 | | | 2007 | 2006 | 2006 | | | Basel 2 | Basel 1 | Basel 2 | -------------------------------------------------------------------------------- | Capital base, EUR M | | | | -------------------------------------------------------------------------------- | Core capital * | 95.2 | 87.0 | 88.3 | -------------------------------------------------------------------------------- | Supplementary capital | 51.4 | 53.0 | 53.4 | -------------------------------------------------------------------------------- | Total capital base | 146.6 | 140.0 | 141.7 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Capital requirement for credit risks | 86.9 | 100.5 | 74.9 | -------------------------------------------------------------------------------- | Capital requirement for operational risks | 8.0 | 0.0 | 7.3 | -------------------------------------------------------------------------------- | Total capital requirement | 94.9 | 100.5 | 82.2 | -------------------------------------------------------------------------------- | Total capital ratio, % | 12.4 | 11.1 | 13.8 | -------------------------------------------------------------------------------- | Core capital ratio, % | 8.0 | 6.9 | 8.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | * Core capital includes earnings during the report period minus estimated | | dividends to the shareholders. | -------------------------------------------------------------------------------- | Due to the introduction of new rules for calculating the total capital ratio | | (Basel 2), the figure for September 20, 2006 is not comparable to the other | | figures. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | SUMMARY BALANCE SHEET | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30 | Sep 30 | Dec 31 | | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | | | | -------------------------------------------------------------------------------- | ASSETS | | | | -------------------------------------------------------------------------------- | Liquid assets | 40 | 46 | 65 | -------------------------------------------------------------------------------- | Debt instruments eligible for | 184 | 161 | 57 | | refinancing with central banks | | | | -------------------------------------------------------------------------------- | Claims on credit institutions | 181 | 151 | 60 | -------------------------------------------------------------------------------- | Claims on the public and public sector | 2,048 | 1,838 | 1,912 | | entities | | | | -------------------------------------------------------------------------------- | Debt securities | 0 | 1 | 0 | -------------------------------------------------------------------------------- | Shares and participations | 3 | 4 | 4 | -------------------------------------------------------------------------------- | Shares and participations in associated | 2 | 2 | 2 | | companies | | | | -------------------------------------------------------------------------------- | Derivative instruments | 32 | 19 | 27 | -------------------------------------------------------------------------------- | Intangible assets | 5 | 4 | 5 | -------------------------------------------------------------------------------- | Tangible assets | 26 | 23 | 23 | -------------------------------------------------------------------------------- | Other assets | 24 | 25 | 17 | -------------------------------------------------------------------------------- | Accrued income and prepaid expenses | 23 | 18 | 16 | -------------------------------------------------------------------------------- | Deferred tax assets | 1 | 1 | 1 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | TOTAL ASSETS | 2,569 | 2,293 | 2,189 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | LIABILITIES AND EQUITY CAPITAL | | | | -------------------------------------------------------------------------------- | Liabilities to credit institutions | 124 | 62 | 62 | -------------------------------------------------------------------------------- | Liabilities to the public and public | 1,417 | 1,248 | 1,261 | | sector entities | | | | -------------------------------------------------------------------------------- | Debt securities issued to the public | 737 | 705 | 597 | -------------------------------------------------------------------------------- | Derivative instruments | 30 | 19 | 26 | -------------------------------------------------------------------------------- | Other liabilities | 43 | 51 | 35 | -------------------------------------------------------------------------------- | Accrued expenses and prepaid income | 24 | 17 | 12 | -------------------------------------------------------------------------------- | Subordinated liabilities | 52 | 61 | 60 | -------------------------------------------------------------------------------- | Deferred tax liabilities | 13 | 12 | 13 | -------------------------------------------------------------------------------- | TOTAL LIABILITIES | 2,440 | 2,176 | 2,066 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EQUITY CAPITAL AND MINORITY INTEREST | | | | -------------------------------------------------------------------------------- | Share capital | 23 | 22 | 23 | -------------------------------------------------------------------------------- | Share issue | 0 | 1 | 0 | -------------------------------------------------------------------------------- | Share premium account | 33 | 27 | 29 | -------------------------------------------------------------------------------- | Reserve fund | 25 | 25 | 25 | -------------------------------------------------------------------------------- | Fair value reserve | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Retained earnings | 31 | 28 | 28 | -------------------------------------------------------------------------------- | Profit for the period | 15 | 12 | 15 | -------------------------------------------------------------------------------- | Minority interest in capital | 2 | 1 | 2 | -------------------------------------------------------------------------------- | TOTAL EQUITY CAPITAL | 129 | 117 | 122 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | TOTAL LIABILITIES AND EQUITY CAPITAL | 2,569 | 2,293 | 2,189 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | SUMMARY INCOME STATEMENT | -------------------------------------------------------------------------------- | Bank of Åland Group | Jan-Sep | Jan-Sep | Jan-Dec | | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | | | | -------------------------------------------------------------------------------- | Net interest income | 28.8 | 24.1 | 32.7 | -------------------------------------------------------------------------------- | Income from equity instruments | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- | Commission income | 15.2 | 13.6 | 18.4 | -------------------------------------------------------------------------------- | Commission expenses | -1.5 | -1.2 | -1.7 | -------------------------------------------------------------------------------- | Net income from securities transactions and | 2.7 | 1.4 | 2.3 | | foreign exchange dealing | | | | -------------------------------------------------------------------------------- | Net income from financial assets available | 0.9 | 0.2 | 0.3 | | for sale | | | | -------------------------------------------------------------------------------- | Net income from investment properties | 0.6 | 0.1 | 0.2 | -------------------------------------------------------------------------------- | Other operating income | 7.6 | 6.6 | 9.4 | -------------------------------------------------------------------------------- | Total income | 54.4 | 44.8 | 61.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Staff costs | -19.3 | -16.1 | -22.5 | -------------------------------------------------------------------------------- | Other administrative expenses | -6.4 | -6.3 | -9.4 | -------------------------------------------------------------------------------- | Production for own use | 0.3 | 0.4 | 0.5 | -------------------------------------------------------------------------------- | Depreciation/amortisation | -3.6 | -3.0 | -4.0 | -------------------------------------------------------------------------------- | Other operating expenses | -4.2 | -3.5 | -5.4 | -------------------------------------------------------------------------------- | Total expenses | -33.2 | -28.5 | -40.9 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Impairment loss on loans and other | -0.9 | 0.1 | 0.0 | | commitments | | | | -------------------------------------------------------------------------------- | Share of profit/loss in associated | 0.3 | 0.3 | 0.3 | | companies | | | | -------------------------------------------------------------------------------- | Net operating profit | 20.5 | 16.6 | 21.1 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Income taxes | -5.4 | -4.2 | -5.4 | -------------------------------------------------------------------------------- | Profit for the period | 15.1 | 12.4 | 15.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders' interest in profit for the | 14.5 | 11.7 | 14.7 | | period | | | | -------------------------------------------------------------------------------- | Minority interest in profit for the period | 0.6 | 0.7 | 1.0 | -------------------------------------------------------------------------------- | Total | 15.1 | 12.4 | 15.7 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Earnings per share | -------------------------------------------------------------------------------- | Earnings per share before dilution, EUR 1 | 1.26 | 1.06 | 1.29 | -------------------------------------------------------------------------------- | Earnings per share after dilution, EUR 2 | 1.26 | 1.03 | 1.29 | -------------------------------------------------------------------------------- | 1 Profit for the period before dilution / Average number of shares | -------------------------------------------------------------------------------- | 2) Profit for the period after dilution / (Average number of shares + | | shares outstanding) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | INCOME STATEMENT BY QUARTER | -------------------------------------------------------------------------------- | Bank of Åland Group | Q III | Q II | Q I | Q IV | Q III | | | 2007 | 2007 | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | | | | | | -------------------------------------------------------------------------------- | Net interest income | 9.9 | 9.7 | 9.2 | 8.6 | 8.2 | -------------------------------------------------------------------------------- | Income from equity | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | | instruments | | | | | | -------------------------------------------------------------------------------- | Commission income | 4.6 | 5.2 | 5.4 | 4.9 | 4.3 | -------------------------------------------------------------------------------- | Commission expenses | -0.5 | -0.6 | -0.5 | -0.5 | -0.4 | -------------------------------------------------------------------------------- | Net income from | 0.1 | 1.7 | 0.9 | 0.8 | 0.1 | | securities transactions | | | | | | | and foreign exchange | | | | | | | dealing | | | | | | -------------------------------------------------------------------------------- | Net income from | 0.0 | 0.3 | 0.5 | 0.1 | 0.0 | | financial assets | | | | | | | available for sale | | | | | | -------------------------------------------------------------------------------- | Net income from | 0.0 | 0.5 | 0.1 | 0.2 | 0.1 | | investment properties | | | | | | -------------------------------------------------------------------------------- | Other operating income | 2.3 | 2.5 | 2.9 | 2.8 | 2.4 | -------------------------------------------------------------------------------- | Total income | 16.5 | 19.3 | 18.5 | 16.8 | 14.6 | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Staff costs | -6.5 | -6.7 | -6.0 | -6.5 | -5.2 | -------------------------------------------------------------------------------- | Other administrative | -2.1 | -2.4 | -1.9 | -3.1 | -1.8 | | expenses | | | | | | -------------------------------------------------------------------------------- | Production for own use | 0.1 | 0.1 | 0.1 | 0.1 | 0.1 | -------------------------------------------------------------------------------- | Depreciation/ | -1.3 | -1.1 | -1.3 | -1.0 | -1.0 | | amortisation | | | | | | -------------------------------------------------------------------------------- | Other operating expenses | -1.4 | -1.5 | -1.3 | -1.9 | -1.2 | -------------------------------------------------------------------------------- | Total expenses | -11.1 | -11.7 | -10.4 | -12.4 | -9.1 | -------------------------------------------------------------------------------- | | | | | | | -------------------------------------------------------------------------------- | Loss impairment on loans | -0.6 | -0.3 | -0.1 | -0.1 | 0.0 | | and other commitments | | | | | | -------------------------------------------------------------------------------- | Share of profit in | 0.0 | 0.1 | 0.1 | 0.1 | 0.0 | | associated companies | | | | | | -------------------------------------------------------------------------------- | Net operating profit | 4.9 | 7.5 | 8.1 | 4.5 | 5.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | CHANGES IN EQUITY CAPITAL | -------------------------------------------------------------------------------- | Bank of Åland | Shar | Shar | Shar | Lega | Fair | Retai | Minori | Total | | Group | e | e | e | l | value | ned | ty | | | | capi | issu | prem | rese | reser | earni | intere | | | | tal | e | ium | rve | ve | ngs | st | | | | | | acco | | | | | | | | | | unt | | | | | | | | | | | | | | | | -------------------------------------------------------------------------------- | (EUR M) | -------------------------------------------------------------------------------- | Equity capital, | 22.2 | 0.0 | 26.1 | 25.1 | 0.4 | 38.7 | 0.9 | 113.3 | | December 31, | | | | | | | | | | 2005 | | | | | | | | | -------------------------------------------------------------------------------- | Financial | | | | | | | | | | assets | | | | | | | | | | available for | | | | | | | | | | sale: | | | | | | | | | -------------------------------------------------------------------------------- | - change in | | | | | 0.2 | | | 0.2 | | fair value | | | | | | | | | -------------------------------------------------------------------------------- | - transferred | | | | | -0.2 | | | -0.2 | | to income | | | | | | | | | | statement | | | | | | | | | -------------------------------------------------------------------------------- | Profit for the | | | | | | 11.7 | 0.7 | 12.4 | | period | | | | | | | | | -------------------------------------------------------------------------------- | Total | | | | | 0.1 | 11.7 | 0.7 | 12.5 | | recognised | | | | | | | | | | income and | | | | | | | | | | expenses during | | | | | | | | | | the period | | | | | | | | | -------------------------------------------------------------------------------- | Dividend to | | | | | | -11.0 | -0.5 | -11.5 | | shareholders | | | | | | | | | -------------------------------------------------------------------------------- | Conversion of | 0.2 | 1.5 | 1.1 | | | | | 2.8 | | capital loan | | | | | | | | | -------------------------------------------------------------------------------- | Other change in | | | | | | | | | -------------------------------------------------------------------------------- | minority | | | | | | | 0.0 | 0.0 | | interest in | | | | | | | | | | equity capital | | | | | | | | | -------------------------------------------------------------------------------- | Equity capital, | 22.3 | 1.5 | 27.2 | 25.1 | 0.4 | 39.4 | 1.1 | 117.1 | | September 30, | | | | | | | | | | 2006 | | | | | | | | | -------------------------------------------------------------------------------- | Financial | | | | | | | | | | assets | | | | | | | | | | available for | | | | | | | | | | sale: | | | | | | | | | -------------------------------------------------------------------------------- | - change in | | | | | 0.0 | | | 0.0 | | fair value | | | | | | | | | -------------------------------------------------------------------------------- | - transferred | | | | | 0.0 | | | 0.0 | | to income | | | | | | | | | | statement | | | | | | | | | -------------------------------------------------------------------------------- | Profit for the | | | | | 0.0 | 3.0 | 0.3 | 3.3 | | period | | | | | | | | | -------------------------------------------------------------------------------- | Total | | | | | 0.0 | 3.0 | 0.3 | 3.2 | | recognised | | | | | | | | | | income and | | | | | | | | | | expenses during | | | | | | | | | | the period | | | | | | | | | -------------------------------------------------------------------------------- | Conversion of | 0.3 | -1.2 | 2.0 | | | | | 1.1 | | capital loan | | | | | | | | | -------------------------------------------------------------------------------- | Other change in | | | | | | | | | -------------------------------------------------------------------------------- | minority | | | | | | | 0.7 | 0.7 | | interest in | | | | | | | | | | equity capital | | | | | | | | | -------------------------------------------------------------------------------- | Equity capital, | 22.7 | 0.3 | 29.2 | 25.1 | 0.4 | 42.4 | 2.1 | 122.2 | | December 31, | | | | | | | | | | 2006 | | | | | | | | | -------------------------------------------------------------------------------- | Financial | | | | | | | | | | assets | | | | | | | | | | available for | | | | | | | | | | sale: | | | | | | | | | -------------------------------------------------------------------------------- | - change in | | | | | -0.2 | | | 0.1 | | fair value | | | | | | | | | -------------------------------------------------------------------------------- | - transferred | | | | | 0.1 | | | -0.2 | | to income | | | | | | | | | | statement | | | | | | | | | -------------------------------------------------------------------------------- | Profit for the | | | | | | 14.5 | 0.6 | 15.1 | | period | | | | | | | | | -------------------------------------------------------------------------------- | Total | | | | | 0.1 | 14.5 | 0.6 | 15.1 | | recognised | | | | | | | | | | income and | | | | | | | | | | expenses during | | | | | | | | | | the period | | | | | | | | | -------------------------------------------------------------------------------- | Dividend to | | | | | 0.0 | -11.5 | -1.0 | -12.6 | | shareholders 1 | | | | | | | | | -------------------------------------------------------------------------------- | Conversion of | 0.6 | -0.3 | 4.1 | | | | | 4.4 | | capital loan 2 | | | | | | | | | -------------------------------------------------------------------------------- | Other change in | | | | | | | | | -------------------------------------------------------------------------------- | minority | | | | | | | 0.0 | 0.0 | | interest in | | | | | | | | | | equity capital | | | | | | | | | -------------------------------------------------------------------------------- | Equity capital, | 23.3 | 0.0 | 33.3 | 25.1 | 0.4 | 45.4 | 1.6 | 129.1 | | September 30, | | | | | | | | | | 2007 | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1 The dividend payment for Series A shares was EUR 5.2 M and for Series B | | shares EUR 6.3 M. | -------------------------------------------------------------------------------- | 2 During the report period, 309,801 new Series B shares subscribed in | | exchange for convertible loan certificates were recorded in the Finnish | | Trade Registry. This was equivalent to an increase in equity capital of EUR | | 0.6 M and an increase in the share premium account by EUR 4.1 M. | -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED INTERIM REPORT 1. CORPORATE INFORMATION The Bank of Åland Plc (Ålandsbanken Abp) is a Finnish public company, organised in compliance with Finnish legislation and with its Head Office in Mariehamn. The Bank of Åland Plc is a commercial bank with a total of 25 offices. Through its subsidiary Crosskey Banking Solutions Ab Ltd, the Bank of Åland Group is also a supplier of modern banking computer systems for small and medium-sized banks. The Head Office has the following address: Bank of Åland Plc Nygatan 2 AX-22100 Mariehamn, Åland, Finland The Bank of Åland Plc is listed on the Helsinki Stock Exchange. The Interim Report for the financial period January 1-September 30, 2007 was approved by the Board of Directors on October 19, 2007. 2. BASIS FOR PREPARATION AND ESSENTIAL ACCOUNTING PRINCIPLES Basis for preparation The Interim Report for the period January 1-September 30, 2007 was prepared in compliance with IAS 34, “Interim Financial Reporting”. The Interim Report does not contain all information and notes required in annual financial statements and should be read together with the consolidated financial statements for the year ending December 31, 2006. Essential accounting principles The essential accounting principles used in preparing the Interim Report are the same as the essential accounting principles used in preparing the financial statements for the year ending December 31, 2006, except for the introduction of new standards and interpretations, which are described below. The introduction of new standards and interpretations has not materially affected the Group's results or financial position. The following new standards and interpretations have been introduced: IAS 1, “Presentation of Financial Statements” The standard has been revised in order to provide better information for analysis and comparison of companies. The Group will present its financial statements in compliance with the revised IAS 1 no later than for the financial period that begins on January 1, 2009. IFRS 7, “Financial Instruments: Disclosures” A new standard that deals with disclosure requirements for all risks arising through financial instruments, IFRS 7 applies to all companies that possess financial instruments. The Group has decided to apply IFRS 7 starting in 2007. IFRIC 10, “Interim Financing Reporting and Impairment” This interpretation is the result of a contradiction between the standard on interim reports, IAS 34, and the one on impairments, IAS 36. IFRIC 10 clarifies that an impairment loss recognised in an interim report may not be reversed in a later interim or full year financial report. The Group is applying IFRIC 10 starting in 2007. IFRIC 9, “Reassessment of Embedded Derivatives” This interpretation clarifies certain aspects of the treatment of embedded derivatives in compliance with IAS 39. The Group already meets the criteria according to IFRIC 9. IFRIC 14, “The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction” This interpretation clarifies the limit on asset value in case of a pension plan surplus, as well as how minimum pension plan funding requirements affect this value. The Group already meets the criteria stated in IFRIC 14. The Group is not affected by amendments to the following: IFRIC 7, “Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies” IFRIC 8, “Scope of IFRS 2 Share-based Payment” IFRIC 11, “IFRS 2 − Group and Treasury Share Transactions” IFRIC 12, “Service Concession Arrangement” IFRIC 13, “Customer Loyalty Programmes” IFRIC D22, “Hedges of a Net Investment in a Foreign Operation” 3. ESTIMATES AND JUDGEMENTS Preparation of financial statements in compliance with IFRS requires the company's Executive Team to make estimates and judgements that affect the recognised amounts of assets and liabilities, income and expenses as well as disclosures about commitments. Although these estimates are based on the best knowledge of the Executive Team on current events and measures, the actual outcome may diverge from these estimates. -------------------------------------------------------------------------------- | 4. ACQUISITIONS OF COMPANIES | | During the report period, the Group made the following acquisitions, which | | are reported in compliance with IFRS 3, “Business Combinations”. | -------------------------------------------------------------------------------- | Name of company | Line of | Acquisitio | Proportion | Cost, | | | business | n | of | EUR | | | | date | share | | | | | | capital | | -------------------------------------------------------------------------------- | Ålandsbanken | Asset | April 12, | 30 % 1 | 792,480 | | Kapitalmarknads- | management | 2007 | | | | tjänster Ab | | | | | -------------------------------------------------------------------------------- | Veranta Oy | Estate agency | June 13, | 84 % | 200,000 2 | | | | 2007 | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1 After this additional acquisition, Ålandsbanken Kapitalmarknadstjänster is | | a wholly-owned subsidiary. | -------------------------------------------------------------------------------- | 2 The cost consists of a capital contribution in the form of a targeted | | issue of new shares. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cost breakdown | -------------------------------------------------------------------------------- | EUR | Ålandsbanken | Veranta Oy | | | Kapitalmarknads- | | | | tjänster Ab | | -------------------------------------------------------------------------------- | Cash | 780,000 | 0 | -------------------------------------------------------------------------------- | Capital contribution to the | 0 | 200,000 | | company | | | -------------------------------------------------------------------------------- | Directly attributable costs | 12,480 | 0 | -------------------------------------------------------------------------------- | | 792,480 | 200,000 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net assets acquired | -------------------------------------------------------------------------------- | | Ålandsbanken | Veranta Oy | | | Kapitalmarknads- | | | EUR | tjänster Ab | | | | | | -------------------------------------------------------------------------------- | | Fair value | Carrying | Fair value | Carrying | | | | amount | | amount | -------------------------------------------------------------------------------- | Cash | 334,875 | 334,875 | 13 | 13 | -------------------------------------------------------------------------------- | Receivables | 53,266 | 53,266 | 953 | 953 | -------------------------------------------------------------------------------- | Share issue receivables | | | | 168,000 | -------------------------------------------------------------------------------- | Intangible assets | 0 | 0 | 655 | 655 | -------------------------------------------------------------------------------- | Tangible assets | 6,335 | 6,335 | 2,866 | 2,866 | -------------------------------------------------------------------------------- | Liabilities | 93,541 | 93,541 | 4,759 | 4,759 | -------------------------------------------------------------------------------- | Net assets acquired | 300,935 | 300,935 | 167,728 | 167,728 | -------------------------------------------------------------------------------- | Goodwill | -491,545 | -491,545 | -32,272 | -32,272 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Ålandsbanken Kapitalmarknadstjänster Ab has earned a profit of EUR 0.5 M | | since this acquisition. | -------------------------------------------------------------------------------- | Veranta Oy has earned a profit of EUR 0.0 M since this acquisition. | -------------------------------------------------------------------------------- | The acquisitions did not affect the Group's total income or profit for the | | report period. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill | -------------------------------------------------------------------------------- | EUR | 2007 | 2006 | | | | | | | | | -------------------------------------------------------------------------------- | Opening balance | | | -------------------------------------------------------------------------------- | Gross | 881,443 | 926,535 | -------------------------------------------------------------------------------- | | 881,443 | 926,535 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill recognised during the period | 523,818 | 0 | -------------------------------------------------------------------------------- | Impairment (write-down) | 0 | 0 | -------------------------------------------------------------------------------- | Renegotiation of purchase agreement | 0 | -45, 092 | | (estimated effect on opening balance) | | | -------------------------------------------------------------------------------- | Closing balance | 1,405,260 | 881,443 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 5. CASH FLOW STATEMENT | -------------------------------------------------------------------------------- | Bank of Åland Group | Jan-Sep | Jan-Sep | | | 2007 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | -------------------------------------------------------------------------------- | Cash and cash equivalents | | 130.2 | | 217.4 | -------------------------------------------------------------------------------- | Cash flow from operating activities | | | | | -------------------------------------------------------------------------------- | Net operating profit | 20.5 | | 16.6 | | -------------------------------------------------------------------------------- | Adjustment for net operating profit | 5.6 | | 4.3 | | | items not affecting cash flow | | | | | -------------------------------------------------------------------------------- | Gains from investing activities | -1.0 | | -0.9 | | -------------------------------------------------------------------------------- | Income taxes paid | -3.6 | | -3.5 | | -------------------------------------------------------------------------------- | Changes in assets and liabilities in | 61.2 | 82.7 | 62.2 | 78.8 | | operating activities | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow from investing activities | | -6.5 | | -1.3 | -------------------------------------------------------------------------------- | Cash flow from financing activities | | 92.2 | | -2.3 | -------------------------------------------------------------------------------- | Cash and cash equivalents, Sep 30 | | 298.6 | | 292.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 6. SEGMENT REPORT | | The Bank of Åland Group reports the various business segments as primary | | segments. A business segment is a group of departments and companies that | | supply products or services that have risks and returns that diverge from | | other business segments. Intra-Group transactions occur at market prices. | | The Bank of Åland Group does not report geographic segments as secondary | | segments, since all operations occur in Finland. | -------------------------------------------------------------------------------- | Bank of Åland Group | Jan − Sep 2007 | -------------------------------------------------------------------------------- | (EUR M) | Retail | IT | Other | Eliminat | Total | | | banking | operati | | ions | | | | operatio | ons | | | | | | ns | | | | | -------------------------------------------------------------------------------- | External income | 42.5 | 7.3 | 4.5 | | 54.4 | -------------------------------------------------------------------------------- | Internal income | 0.6 | 7.3 | | -7.9 | 0.0 | -------------------------------------------------------------------------------- | Total income | 43.1 | 14.6 | 4.5 | -7.9 | 54.4 | -------------------------------------------------------------------------------- | Costs incl. | -26.4 | -11.5 | -3.2 | 7.9 | -33.2 | | depreciation etc. | | | | | | -------------------------------------------------------------------------------- | Loan losses | -0.9 | | | | -0.9 | -------------------------------------------------------------------------------- | Share of profit in | | | 0.3 | | 0.3 | | associated companies | | | | | | -------------------------------------------------------------------------------- | Net operating profit | 15.8 | 3.1 | 1.6 | 0.0 | 20.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets | 2 050.4 | 9.4 | 510.1 | -0.6 | 2 569.3 | -------------------------------------------------------------------------------- | Liabilities | -2 154.4 | -4.8 | -281.8 | 0.7 | -2 440.2 | -------------------------------------------------------------------------------- | Equity capital | | | | | 129.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Bank of Åland Group | Jan − Sep 2006 | -------------------------------------------------------------------------------- | (EUR M) | Retail | IT | Other | Eliminat | Total | | | banking | operati | | ions | | | | operatio | ons | | | | | | ns | | | | | -------------------------------------------------------------------------------- | External income | 37.4 | 5.9 | 1.5 | | 44.8 | -------------------------------------------------------------------------------- | Internal income | 0.6 | 7.1 | | -7.8 | 0.0 | -------------------------------------------------------------------------------- | Total income | 38.1 | 13.0 | 1.5 | -7.8 | 44.8 | -------------------------------------------------------------------------------- | Costs incl. | -23.8 | -9.9 | -2.5 | 7.8 | -28.5 | | depreciation etc. | | | | | | -------------------------------------------------------------------------------- | Loan losses | 0.1 | | | | 0.1 | -------------------------------------------------------------------------------- | Share of profit/loss in | | | 0.3 | | 0.3 | | associated companies | | | | | | -------------------------------------------------------------------------------- | Net operating profit | 14.4 | 3.0 | -0.8 | 0.0 | 16.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets | 1,840.1 | 5.8 | 447.7 | -0.7 | 2,292.9 | -------------------------------------------------------------------------------- | Liabilities | -1,953.8 | -4.0 | -218.7 | 0.7 | -2,175.8 | -------------------------------------------------------------------------------- | Equity capital | | | | | 117.1 | -------------------------------------------------------------------------------- | The “Banking operations” segment includes banking and investment operations | | carried out at 25 bank offices plus the subsidiaries Ab Compass Card Oy Ltd, | | Ålandsbanken Asset Management Ab, Ålandsbanken Fondbolag Ab, Ålandsbanken | | Kapitalmarknadstjänster Ab and Ålandsbanken Veranta Ab. Reported in “IT | | operations” are Crosskey Banking Solutions Ab Ltd and S-Crosskey Ab, which | | supply modern banking computer systems to small and medium-sized banks. | | Reported in “Other” are the results of Treasury and portfolio management as | | well as the Group's management and related corporate expenses. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 7. INCOME TAXES | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30 | Sep 30 | | | 2007 | 2006 | -------------------------------------------------------------------------------- | (EUR K) | | | -------------------------------------------------------------------------------- | Taxes for the report period and earlier report | 5,653 | 4,131 | | periods | | | -------------------------------------------------------------------------------- | Change in deferred tax assets/liabilities | -283 | 102 | -------------------------------------------------------------------------------- | Income taxes | 5,370 | 4,233 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 8. DIVIDEND | -------------------------------------------------------------------------------- | Bank of Åland Group | 2006 | 2005 | -------------------------------------------------------------------------------- | (EUR) | | | -------------------------------------------------------------------------------- | Final dividend for 2006: EUR 1 (2005: EUR 1) | 11,536,122 | 11,009,649 | -------------------------------------------------------------------------------- | The dividend for 2006 was adopted by the Annual General Meeting on March 23. | | The record date was March 27 and the distribution date was April 3. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 9. DEPOSITS FROM THE PUBLIC AND PUBLIC SECTOR ENTITIES, | | including bonds issued and certificates of deposit | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30 | Sep.30 | Dec 31 | | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | | | | -------------------------------------------------------------------------------- | Deposit accounts from the public and | | | | | public sector entities | | | | -------------------------------------------------------------------------------- | Demand deposit accounts | 151 | 170 | 180 | -------------------------------------------------------------------------------- | Current accounts | 212 | 198 | 199 | -------------------------------------------------------------------------------- | Savings and Environmental Accounts | 87 | 99 | 99 | -------------------------------------------------------------------------------- | Prime Accounts | 487 | 415 | 445 | -------------------------------------------------------------------------------- | Time deposits | 412 | 288 | 268 | -------------------------------------------------------------------------------- | Total deposit accounts in euros | 1,349 | 1,170 | 1,191 | -------------------------------------------------------------------------------- | Deposit accounts in other currencies | 67 | 75 | 67 | -------------------------------------------------------------------------------- | Total deposit accounts | 1,415 | 1,246 | 1,259 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Bonds and subordinated debentures * | 181 | 183 | 180 | -------------------------------------------------------------------------------- | Certificates of deposit issued to the | 194 | 321 | 160 | | public * | | | | -------------------------------------------------------------------------------- | Bonds and certificates of deposit | 375 | 504 | 340 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | Total deposits | 1,790 | 1,750 | 1,599 | -------------------------------------------------------------------------------- | * This item does not include debt securities subscribed by credit | | institutions. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 10. LENDING TO THE PUBLIC AND PUBLIC SECTOR ENTITIES BY PURPOSE | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30 | Sep 30 | Dec 31 | | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | | | | -------------------------------------------------------------------------------- | BUSINESS AND PROFESSIONAL ACTIVITIES | | | | -------------------------------------------------------------------------------- | Service sector | | | | -------------------------------------------------------------------------------- | Shipping | 77 | 58 | 60 | -------------------------------------------------------------------------------- | Hotels, restaurants, tourist cottages etc | 12 | 12 | 12 | -------------------------------------------------------------------------------- | Wholesale and retail trade | 57 | 45 | 47 | -------------------------------------------------------------------------------- | Housing corporations | 52 | 53 | 54 | -------------------------------------------------------------------------------- | Real estate operations | 107 | 84 | 96 | -------------------------------------------------------------------------------- | Financial operations | 154 | 126 | 126 | -------------------------------------------------------------------------------- | Other service business | 85 | 79 | 83 | -------------------------------------------------------------------------------- | | 543 | 456 | 477 | -------------------------------------------------------------------------------- | Production sector | | | | -------------------------------------------------------------------------------- | Agriculture, forestry and fishing | 20 | 21 | 20 | -------------------------------------------------------------------------------- | Food processing etc | 6 | 6 | 7 | -------------------------------------------------------------------------------- | Construction | 21 | 22 | 22 | -------------------------------------------------------------------------------- | Other industry and crafts | 11 | 10 | 11 | -------------------------------------------------------------------------------- | | 57 | 59 | 60 | -------------------------------------------------------------------------------- | HOUSEHOLDS | | | | -------------------------------------------------------------------------------- | Home loans | 1,103 | 1,039 | 1,063 | -------------------------------------------------------------------------------- | Studies | 13 | 13 | 14 | -------------------------------------------------------------------------------- | Other purposes | 305 | 242 | 271 | -------------------------------------------------------------------------------- | | 1,421 | 1,295 | 1,347 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | PUBLIC SECTOR AND NON-PROFIT ORGANISATIONS | 26 | 27 | 27 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | TOTAL LENDING | 2,048 | 1,838 | 1,912 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 11. OFF-BALANCE SHEET COMMITMENTS | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30 | Sep 30 | Dec 31 | | | 2007 | 2006 | 2006 | -------------------------------------------------------------------------------- | (EUR M) | | | | -------------------------------------------------------------------------------- | Guarantees and pledges | 31 | 15 | 16 | -------------------------------------------------------------------------------- | Other commitments | 161 | 163 | 154 | -------------------------------------------------------------------------------- | | 192 | 178 | 170 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 12. DERIVATIVE CONTRACTS | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30, 2007 | Sep 30, 2006 | -------------------------------------------------------------------------------- | (EUR M) | For | Other | For | Other | | | hedging | | hedging | | | | purposes | | purposes | | -------------------------------------------------------------------------------- | Value of underlying property | | | | | -------------------------------------------------------------------------------- | Interest rate derivatives | | | | | -------------------------------------------------------------------------------- | Interest rate swap contracts | 322.3 | 8.6 | 323.8 | 7.6 | -------------------------------------------------------------------------------- | Currency derivatives | | | | | -------------------------------------------------------------------------------- | Forward contracts | 15.1 | 6.0 | 6.0 | 6.2 | -------------------------------------------------------------------------------- | Interest rate and currency swap | 0.0 | 0.2 | 0.5 | 1.2 | | contracts | | | | | -------------------------------------------------------------------------------- | Equity derivatives | | | | | -------------------------------------------------------------------------------- | Option contracts | | | | | -------------------------------------------------------------------------------- | Purchased | 166.8 | 0.0 | 156.1 | 0.0 | -------------------------------------------------------------------------------- | Written | 0.0 | 149.0 | 0.0 | 156.1 | -------------------------------------------------------------------------------- | | 504.2 | 163.9 | 486.4 | 171.1 | -------------------------------------------------------------------------------- | Equivalent credit values of the | | | | | | contracts | | | | | -------------------------------------------------------------------------------- | Interest rate derivatives | 6.2 | | 3.0 | | -------------------------------------------------------------------------------- | Currency derivatives | 0.4 | | 0.4 | | -------------------------------------------------------------------------------- | Equity derivatives | 39.5 | | 28.5 | | -------------------------------------------------------------------------------- | | 46.1 | | 31.9 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 13. MATURITY BREAKDOWN OF CLAIMS AND LIABILITIES | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30, 2007 | -------------------------------------------------------------------------------- | (EUR M) | < 3 mo | 3 - 12 | 1 - 5 | 5 - 10 | Over | Total | | | | mo | yrs | yrs | 10 yrs | | -------------------------------------------------------------------------------- | Claims | | | | | | | -------------------------------------------------------------------------------- | Debt securities | 123 | 6 | 54 | 0 | 0 | 184 | | eligible for | | | | | | | | refinancing with | | | | | | | | central banks | | | | | | | -------------------------------------------------------------------------------- | Credit institutions | 181 | 0 | 0 | 0 | 0 | 181 | | and central banks | | | | | | | -------------------------------------------------------------------------------- | The public and public | 174 | 196 | 743 | 906 | 29 | 2,048 | | sector entities | | | | | | | -------------------------------------------------------------------------------- | Other debt securities | 0 | 0 | 0 | 0 | 0 | 0 | -------------------------------------------------------------------------------- | | 479 | 202 | 797 | 906 | 29 | 2,413 | -------------------------------------------------------------------------------- | Liabilities | | | | | | | -------------------------------------------------------------------------------- | Credit institutions | 94 | 0 | 30 | 0 | 0 | 124 | | and central banks | | | | | | | -------------------------------------------------------------------------------- | The public and public | 1,309 | 95 | 12 | 1 | 0 | 1,417 | | sector entities | | | | | | | -------------------------------------------------------------------------------- | Debt securities | 456 | 169 | 112 | 0 | 0 | 737 | | issued to the public | | | | | | | -------------------------------------------------------------------------------- | Subordinated | 0 | 2 | 17 | 33 | 0 | 52 | | liabilities | | | | | | | -------------------------------------------------------------------------------- | | 1,859 | 267 | 172 | 34 | 0 | 2,331 | -------------------------------------------------------------------------------- | No estimates of maturity dates have been made. Spot deposits, for example, | | are found in the category < 3 months. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 14. INTEREST RATE REFIXING PERIODS | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30, 2007 | -------------------------------------------------------------------------------- | (EUR M) | < 3 mo | 3 - 6 | 6 - 12 | 1 - 5 | > 5 | Total | | | | mo | mo | yrs | yrs | | -------------------------------------------------------------------------------- | Assets | 1 827 | 226 | 423 | 262 | 44 | 2,783 | -------------------------------------------------------------------------------- | Liabilities | 2 078 | 136 | 204 | 214 | 43 | 2,675 | -------------------------------------------------------------------------------- | Difference between | -251 | 90 | 219 | 47 | 2 | 108 | | assets and | | | | | | | | liabilities | | | | | | | -------------------------------------------------------------------------------- | Shows the Bank's interest rate-related assets and liabilities, including | | derivatives, according to the interest rate refixing date as of September | | 30, 2007. | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 15. HOLDINGS OF DEBT SECURITIES | -------------------------------------------------------------------------------- | Bank of Åland Group | Sep 30, 2007 | -------------------------------------------------------------------------------- | (EUR M) | | -------------------------------------------------------------------------------- | Treasury bills | 79 | -------------------------------------------------------------------------------- | Treasury bonds | 53 | -------------------------------------------------------------------------------- | Domestic certificates of deposit | 50 | -------------------------------------------------------------------------------- | Other domestic debt securities | 2 | -------------------------------------------------------------------------------- | Total | 184 | -------------------------------------------------------------------------------- Review report To the shareholders of the Bank of Åland Abp We have conducted a review of the Interim Report of the Bank of Åland Abp for the period January 1 − September 30, 2007. The Interim Report, which was issued by the Board of Directors and the Managing Director, includes a condensed income statement, balance sheet, cash flow statement, changes in equity capital and certain additional disclosures. After completing our assignment, we are issuing our statement of opinion about the Interim Report. Our review was conducted in accordance with the recommendations of the Finnish Institute of Authorised Public Accountants concerning reviews. A review is planned and carried out on a sufficient scope to confirm that the Interim Report does not contain essential errors or omissions. A review is mainly limited to interviews with the staff of the Bank and analytical examination measures. We have not conducted a complete audit and will thus not issue an audit report. On the basis of this review, to our knowledge no circumstances have emerged that would give reason to assume that the Interim Report has not been prepared essentially in accordance with the accounting and valuation principles of the IFRS standards approved by the EU as well as other Finnish rules and regulations concerning Interim Reports and that the Interim Report should not provide accurate and sufficient disclosures about the operating results and financial position of the Bank. Mariehamn, October 22, 2007 Marja Tikka Authorised Public Accountant Leif Hermans Authorised Public Accountant Rabbe Nevelainen Authorised Public Accountant