#1The Bank of Åland Investor Presentation July 2021 Going our own way ÀLANDSBANKEN#2Table of Contents 2 1. The Bank of Åland in Brief 2. Strategy and Market Position 3. Sustainability 4. Performance and Capital 5. Asset Quality 6. Liquidity and Funding 7. Contact Details 8. Appendix 3 7 16 19 32 37 42 44 ÀLANDSBANKEN#33 1. The Bank of Åland in Brief ÀLANDSBANKEN#4The Bank of Åland in Brief 4 Bank of Åland Plc A Finnish bank targeting high net worth and affluent individuals Top ranked in customer loyalty • Tradition of stability and very low credit losses MTN Programme • • • • 16.4 % ROE and net operating profit of EUR 13.6 M in Q2 2021 which was the best-ever Q2 result, despite Covid-19 pandemic BBB rating with a positive outlook from S&P EUR 3 bn combined Medium Term Note, Covered Bond, Tier 2 Note and Additional Tier 1 Capital Note Programme dated 12 March 2021 (Finnish Law) Two cover pools: Cover Pool FIN and Cover Pool SWE Legal LTV cap at 70 % and minimum 2 % over-collateralization • Published commitment to a strong over-collateralization and six months liquidity AAA (stable) rating from S&P on both Cover Pool FIN and Cover Pool SWE Economy and Markets • • The Covid-19 pandemic has already had and will continue to have its effects on the global economy. The Nordic economies have suffered less than most European peers Before the Covid-19 pandemic the demand-led Finnish and Swedish economies were growing strongly During Covid-19 pandemic Nordic housing and residential property values have increased, both in and outside the growth centres Finnish house prices tend to have risen moderately compared to the Nordic neighbors. A trend explained by the fast amortizing plans of Finnish mortgages ÀLANDSBANKEN#5Scorecard June 30, 2021 5 Capital • Strong capital position CET1 capital ratio 13.4 % IRB method for credit risk capital requirement not yet approved for the Swedish credit portfolio Liquidity and Funding • Loan/ deposit ratio of 119% • Liquidity reserve at 19% of total assets LCR at 152 % . NSFR at 110 % • BBB bank rating with positive outlook Risk Management . Long history of having the lowest loan loss level of all Finnish banks. Loan loss level was 0.05% in Q2 2021 (0.08 % in Q2 2020). EUR 2.0 M Covid-19 provision during 2020 • No trading positions or complex financial instruments Strict limits on exposures to financial institutions. Bulk of the exposure is to highly rated Nordic entities AAA rating with a stable outlook on Covered Bonds Profitability • • . • Positive earnings trend Challenging interest rate environment Net operating profit of EUR 13.6 M in Q2 2021 (EUR 9.8 M in Q2 2020) ROE 16.4% in Q2 2021 (11.8 % in Q2 2020) ÀLANDSBANKEN#6Standard & Poor's Rating on the Bank of Åland Finnish banks Business position A- -2 - Despite some geographic diversification, concentrated business focus on retail and private banking makes it vulnerable to cyclical swings in the segments Capital and earnings - Strong capital position - Strong earnings Risk position - Small customer base with concentration risks - Moderate geographic diversity Liquidity and funding - Stable core deposit base The Bank of Åland stand alone rating Cover Pool FIN, Cover Pool SWE - Very low credit losses and stable loan base - Commitment to strong over-collateralization - Commitment to six months liquidity buffer The Bank of Åland Covered Bonds rating 6 +1 -1 0 BBB positive +9 AAA stable ALANDSBANKEN#72. Strategy and Market Position 7 ÀLANDSBANKEN#8Three Markets - Two Strategies The Åland Islands • 2 offices, market share > 50 % 8 • Full product range offered • A bank for everyone Finland • . Sweden • • 6 offices in affluent parts of Finland, market share > 1% Full product range offered but "bread and butter" services only as complement to Private Banking and Premium Banking services offering Targeted segment: High Net Worth / Affluent Individuals and their companies 3 offices in Sweden's largest cities, market share < 1% Full product range offered but "bread and butter" services only as complement to Private Banking and Premium Banking services offering Targeted segment: High Net Worth / Affluent Individuals and their companies Vaasa Oulu Tampere Turku Parainen Helsinki Aland Islands Stockholm Gothenburg Malmö ÀLANDSBANKEN#9The Bank of Åland - a Relationship Bank with Focus on Private Banking and Premium Banking Customers · • • • Established in 1919 on Åland Islands Listed since 1942 on NASDAQ OMX Helsinki Total assets of EUR 6,261 M, as of June 30, 2021 Actively managed assets of EUR 8,541 M, as of June 30, 2021 Approximately 825 full time employees · An Overview • Operations in the Åland Islands, Finnish mainland and Sweden 9 The Vision How we do it • • • More than 200,000 customers and top-ranked in customer loyalty A long-standing tradition of stability and very low credit losses At the forefront for introducing new products in Finland Create value for ambitious individuals and companies that appreciate relations: • Private Banking since 1982 • Premium Banking since 2004 • Partnership Banking since 2016 Delivering a large bank's range of services with a small bank's thoughtfulness and good sense Bank's customer surveys show that also during the Covid-19 pandemic customers continue to appreciate Bank's expertise, personalized service, high ethical standards and sustainability work ÀLANDSBANKEN#10The Bank of Åland History of Strategic Decisions 10 10 From a local bank... Supporting development of Åland - a poor fishing and agrarian community 1942 1919 1994 2019 2016 2009 2004 Expansion to Fintech Dreams New Swedish IT company Sweden Crosskey Extended partnerships mortgage bank with partners Expansion to Finnish Ab Ltd Listing mainland Foundation ...to a Nordic banking group With wide product range and personal service targeting high net worth individuals ÀLANDSBANKEN#11Digitalization in Focus: Strategic Fintech Partners 11 Dreams The new way to save Reach your dream with money you didn't know you had GET IT ON Download on the Google Play App Store Trustly CONSUMER MERCHANT PARTNERS ABOUT US PRESS BLOG CAREERS MENU Buy an apartment 4 years and 250 000 kr left A banking service for everyday climate action Use a free revolutionary mobile banking service to reduce your carbon emissions day by day. Positive returns for both you and the planet. 55 089 kr SAVE USER SUPPORT Shop and pay from your bank account Fast, simple and secure WATCHES Early sign-up! DO About us Press FAQ English ▼ Compensate OCTOBER Supermarket -0.0 Pharma harmacy Florist taz -PM 8 AGANG DOO Invest 123 € 6.90 t Your total C Everyday Climate Action DCO Nathalie Green Doconomy mambo 00000222 Åland Index Solutions Share ÀLANDSBANKEN#12The Åland Index Reaches 356 million Customers Globally • Banks and other companies with over 356 million clients team up with Doconomy, a Swedish based start-up company, to enable customers to track their CO2-footprint through Åland Index Solution ⚫ The Åland Index Solution, originally developed and implemented by the Bank of Åland, offer a proven, independent climate calculation and is based upon leading financial data • To fuel this offering and fast track a global roll out, Mastercard made an equity investment in Doconomy • Co-operation with Standard & Poor's guarantees the best data quality Bank of the West, a subsidiary of BNP Paribas, is the first American Bank to become a partner with Doconomy Åland Index • Nordea is the first bank in the Nordics to make a similar agreement . We are discussing nowadays with over 200 banks 12 ÀLANDSBANKEN#13ANKEN FOR CLIMA Bankers for Climate @bankers4....5h v Well done @doconomy @alandsbanken for your strong product, enabling large banks such as @Nordea and @BankoftheWest @BNP Paribas to offer CO2-tracking for their customers @bencaldecott @shenningsson @EricPUsher @KajEmbren @GeorgeSerafeim @CFigueres Åland Index Solutions Banker med över 40 miljoner kunder ingår partnerskap med Doconomy f... mynewsdesk.com Per Bolund 173 6 ↑ Följ Telavox a sök 23:10 00 Frank Vang-Jensen - 2:a President & Group CEO at Nordea 1 mån Redigerad 62% 4 Nordea's modern mobile platform with more than 1 billion touchpoints per year gives an excellent opportunity to visualise the environmental impact of everyday spending to our customers. This is an example how we in Nordea strive to make sustainability concrete and real to our customers. We are continuously developing a growing number of sustainable products and services like green mortgages, green car loans and sustainable savings. #nordea #co2tracker #ålandindex Se översättning 140 39 kg ALAND INDEX C United Nations Climate Change United Nations Climate Change Partners Doconomy GARD facebook ART INTERNATIONAL IKEA HEADROLA Lace WHAT Qlik Q VISA DESIGN CAN DO LEAD WITH DATA Real Betis Balompié BNP Paribas Group @BNPPa... 6m [#BNPPCSR] « Consumers understand their purchasing actions have the power to impact positive change >> @Nandita Bakhshi @Bankofthewest now teams up w/ @doconomy to enable customers to track the CO2 impact of their purchases. bnpp.io/1tnF50xxwHu @herveduteil @LaurencePessez Bank of the West @Ba... 22h This just in: we're thrilled to be the first major U.S. bank teaming up with @doconomy to enable our customers to track and measure the CO2 impact of their purchases Learn more: bankofthewest.com/about-us/press... #PositiveBanking #EverydayClimateAction 13 @bolund Språkrör för Miljöpartiet, finansmarknadsminister och bostadsminister. AIK:are och basketälskare. Trucost @Trucost Individual carbon footprints now available to 3 million customers using Nordea's digital bankin... nordea.com Startsida Ditt nätverk Lägg upp Aviseringar Jobb Erik Gutwasser • 2:a Head of Nordics and Baltics at Mastercard 4 d. Feels great that we have invested in Doconomy, let's join efforts and leverage the global Mastercard network to work together to drive a true change for the climate. #mastercard #parisagreement #doconomy #cop25 Se översättning Bank of the West is one of the only major U.S. banks that has chosen to restrict the financing of activities harmful to the planet, making them the ideal partner for our entrance into North America. NATHALIE GREEN, CEO Doconomy 17 3 Just released: Trucost partners with Stockholm-based fintech, @doconomy to give banks new visibility of the carbon impact of consumer financial transactions to inform conscious decision making. Read more: ow.ly/MOUT50xwKMC #climateaction #cop25 #alandindex Trucost ESG Analysis S&P Global TM Mastercard and Doconomy Extend Collaboration to Deliver a More Sustainable Future newsroom.mastercard.com 3 minuters läsning +] ÀLANDSBANKEN#14New jointly owned mortgage company, Borgo, will be launched Borgo • Together with ICA Bank, Ikano Bank and Söderberg & Partners, the Bank of Åland • is developing the jointly owned mortgage company Borgo All four co-owners in Borgo will distribute their own mortgage loans via the new company Sparbanken Syd has signed a LOI and wants to join as a fifth partner • The Bank of Åland will be responsible for service deliveries to Borgo in the lending field, payments and account management as well as accounting and treasury operations • In March 2021 the Swedish Financial Supervisory Authority granted Borgo a permit as a credit market company and an issuer of covered bonds • The Bank of Åland has a distribution agreement with ICA Bank, under which ICA Bank is offering its mortgage loans through the Bank of Åland until Borgo has started its operations 14 00 O °5 why ÀLANDSBANKEN#15The Bank of Åland Group Legal Structure and Ownership Structure S-Crosskey Ab 60 % 15 Ålandsbanken Abp (Bank of Åland Plc) Major owners as of 30.06.2021 Share of capital Share of votes Wiklöf Anders with companies 21.3 % 29.7 % Alandia Försäkring 6.8% 11.1 % The Family Kamprad Foundation Fennogens Investment S.A. (Family Ehrnrooth) Pensionsförsäkringsaktiebolaget Veritas Approximately 10,500 shareholders in total, half of them from the Åland Islands 6.0% 0.7 % 4.7 % 8.3 % 2.5% 2.0% Crosskey Banking Solutions Abp Ltd 100 % Model IT Oy 100% Ålandsbanken Fondbolag Ab 100 % Ålandsbanken Fonder Ab, 100 % Ålandsbanken Fonder II Ab, 100 % Ålandsbanken Fonder III Ab, 100 % Associated companies consolidated in the Group: Åland Index Solutions AB, 50 %; Mäklarhuset Åland Ab, 29 %; IISÅ Holdco AB, 25 %; Borgo AB, 100% ÀLANDSBANKEN#163. Sustainability 16 ÀLANDSBANKEN#17The Bank of Åland "World Champion" in Sustainability eurobest the european awards for creative excellence CANNES LIONS INTERNATIONAL FESTIVAL OF CREATIVITY D&AD Impact D&AD Impact D&AD Impact D&AD Impact D&AD 17 ÖSTERSJÖPROJEKTET ITÄMERIPROJEKTI BALTICSEAPROJECT.ORG GULDNYCKELN ARETS INSATS 2017 I SUPPORT A CLEAN BALTIC SEA ORROW TOM SUSTAINABLE BRAND INDEX ENGLISH MEMBER 543211 0 GULDAGGET SVERIGES KOMMUNIKATIONSBYRÅER 2017 FEMTIOSJÄTTE UPPLAGAN SVANENMARKE Fond 3101 0027 ÀLANDSBANKEN#18THE UN SDGS AND OUR SUSTAINABILITY WORK 1 POVERTY 2 7 RENEWABLE ENERITY 8 JOBS AND ECONOMIC GROWTH CREDIT/DEBIT BEER COWUCHTET GOOD HEALTH QUALITY EDUCATION 5 QUALITY GENDER CLEAN WATER W 9 INNOVATION AND INFRASTRUCTURE 10 REDUCED INEQUALITIES SUSTAINABLE CITIES 1112 RESPONSIBLE CONSUMPTION I SUPPORT A CLEAN BALTIC SEA ORROW TOM 13 CLIMATE ACTION 14 LIFE BELOW WATER 15 ON LAND 16 PEACE AND JUSTICE 17 PARTNERSHIPS FOR THE GOALS THE GLOBAL GOALS For Sustainable Development Our sustainability work is based upon the UN's 17 sustainability development goals, including its 169 sub-targets. 250,000,000 customers globally are able to track the CO₂ footprint of their purchases through Åland Index Solutions. 18 UNEP PRINCIPLES FOR FINANCE RESPONSIBLE INITIATIVE BANKING #PRI Principles for Responsible Investment We have signed the UN Principles for Responsible Banking and the Principles for Responsible Investment. Quantity of carbon dioxide emissions caused by travel CO₂ in kg 225,000 200,000 175,000 150,000 125,000 100,000 ALAND INDEX S 75,000 50,000 25,000 0 2018 2019 2020 ÖSTERSJÖPROJEKTET BALTICSEAPROJECT ITÄMERIPROJEKTI € 2,800,000 funding good ideas for the environment since 1997. Train Aircraft Ship Our total target Due to the coronavirus pandemic, business travel virtually halted during the second quarter. This, in turn, was reflected by total carbon dioxide emissions, which decreased significantly in 2020. Emissions from all business travel fell from 124,548 kg to 33,688 kg, a 73 per cent decline. ÀLANDSBANKEN#194. Performance and Capital 19 ÀLANDSBANKEN#20Long-Term Financial Targets* ROE shall exceed 10 % . As a bank for investors, with financing know-how, the Bank of Åland has a business model that shall generate most earnings from operations with limited capital requirements. The Bank of Åland's earnings will benefit from higher interest rates The bank's capital adequacy, primarily defined as CET1 capital ratio under the Basel regulations, shall clearly exceed all regulatory requirements The payout ratio shall eventually amount to 50 % This payout ratio target is subject to the condition that the capital adequacy target continues to be achieved 20 During 2021 the Bank of Åland will review its long-term financial targets ÀLANDSBANKEN#21"Best Q2 2021 and H1 2021 results ever" • Net operating profit Q2, EUR 13.6 M (9.8 M), +39 % • ROE Q2, 16.4 % (11.8%) • • Net operating profit H1, EUR 24.4 M (16.7 M), +46 % ROE H1, 14.4 % (10.1 %) • Earnings per share, EUR 1.27 (0.85), +50% . 21 New record level of actively managed assets, lending and deposits A new office opened in Oulu on the Finnish mainland Dividends for 2019 and 2020 EUR 31.2 M (15.6 + 15.6) approved and distributed In March 2021, for the first time the Bank of Åland issued additional Tier 1 (AT1) capital instruments, totalling SEK 300 M In March 2021 the Swedish Financial Supervisory Authority granted Borgo, the new jointly owned mortgage company, a permit as a credit market company and an issuer of covered bonds. Sparbanken Syd wants to join as a fifth partner Working hours re-calculated to full-time equivalent positions increased by 81 FTE Q2 2021 vs. Q2 2020 ALANDSBANKEN#22H1 2021 in Summary +14% 74.2 84.6 Net operating profit, EUR M 22 -88% +46% 24.4 16.7 +13 % Income Expenses -4.6 -0.6 Loan losses Net operating profit -53.0 -59.7 2020 2021 +40% 8,541 6,107 Volumes, EUR M +8% 4,518 +10 % 4,188 3,801 3,459 Actively managed Deposits Lending assets 2020 2021 ÀLANDSBANKEN#23Higher Income 23 EUR M 74.2 1.2 5.9 1.7 2.7 84.6 2020 Net interest income Net commission income Net income from financial items at fair value IT income Other income 2021 ÀLANDSBANKEN#24Higher Expenses 24 EUR M 53.0 5.3 2.9 0.1 0.3 1.0 59.7 2020 Staff IT Stability fee Travel and representation Depreciation/ amortisation Others 2021 ÀLANDSBANKEN#25The Bank of Åland Business Segments, Net Operating Profit H1 2019-2021, EUR M 25 9.5 13.0 16.6 4.0 1.7 4.3 1.6 1.0 0.3 0.4 0.0 Others Private Banking Premium Banking IT 2019 ■2020 2021 3.2 ÀLANDSBANKEN#26Business Volume 2018-2021, EUR M 26 2,638 3,286 3,997 4,623 3,894 3,439 3,057 2,539 4,518 4,378 4,110 4,022 3,801 3,605 3,304 3,368 Discretionary & Advisory mandates Mutual funds Dec-18 Dec-19 ■Dec-20 Deposits Jun-21 Lending ÀLANDSBANKEN#27The Bank of Åland, ROE %, 2019-2021 27 7.6 12.3 11.5 11.4 8.4 13.6 12.3 11.8 12.5 16.4 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q2 2021 Q1 2021 Stability fee: EUR 2.3 M (Q1 2019), EUR 2.0 M (Q1 2020), EUR 0.6 M (Q2 2020), EUR 2.8 M (Q1 2021) and EUR -0.1 M (Q2 2021) ALANDSBANKEN#28Net Operating Profit, Rolling 12 Months, EUR M 28 39.7. 36.5 34.3. 35.4 33.2 31.8 29.9 29.0 29.6 43.7 47.4 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 ÀLANDSBANKEN#29ROE, Rolling 12 Months, % 29 10.9. 11.0 11.0 10.7 10.5 9.8 9.9 10.0 11.6 12.6 13.7 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 ÀLANDSBANKEN#30Commitment to a Strong Capital Ratio • The Bank of Åland is committed to a strong capital ratio • The bank will continue to build up its capital base, improve and diversify earnings, and uphold a sound approach to risk • In March 2021, for the first time the Bank of Åland issued additional Tier 1 (AT1) capital instruments, totalling SEK 300 M • • Conservative pay-out policy is to safeguard the capital position CET1 capital ratio for a small bank like the Bank of Åland is not comparable to larger banks with IRB methods. Standard & Poor's rating method considers the Bank of Åland to have strong risk-adjusted capitalization 30 16.5 16.6 15.4 15.8 14.2 2.2 1.5 2.4 2.4 1.7 1.3 14.3 12.9 13.0 13.4 13.4 2017 2018 2019 2020 2021 T2 AT1 ■CET1 ÀLANDSBANKEN#31• S&P View of the Total Capital Base According to S&P the capital position of the Bank of Åland is strong 31 • Strong risk-adjusted capitalization • Low credit losses • RAC ratio 13.9 % (Dec 31, 2020) remains a rating strength to the Bank of Åland S&P (January 22, 2021) has indicated that they could raise the rating if the Bank of Åland's capitalization improves, • as indicated by a sustained increase of its RAC ratio beyond 15 % threshold for a very strong capital and earnings over the next 24 months Nordic Banks RAC Ratio On June 30, 2020, Compared With Dec. 31, 2019 % 30.00 % 4 25.00 20.00 15.00 10.00 5.00 0.00 Storebreditt SBG Finland* Arion Bank Sparbanken Sjuharad Danmarks Skibskredit Bank Norwegian Swedish Export Credit Hypo ** Landshypotek Bank Sparbanken Skane Islandsbanki Bonum bank Landsbankinn ■Mid-year 2020 ■Year-end 2019 DLR Kredit Oma Savings Bank ■Change from year-end 2019 (right-scale) Data as of June 2020. *Savings Group Finland. ** The Mortgage Society Finland. Source: S&P Global Ratings.RAC-Risk adjusted capital. S-Bank DNB Bank OP Corporate Bank Lansforsakringar Bank Bank of Aland Nykredit Realkredit Aktia Bank Jyske Bank Nordea Bank Swedbank SBAB Bank Handelsbanken Danske Bank SEB 3 2 1 0 -1 -2 3 ÀLANDSBANKEN#325. Asset Quality 32 ÀLANDSBANKEN#33. • Lending Strategy The Bank of Åland is a relationship bank with primary focus on customers with investment needs in the Private Banking and Premium Banking segments. Serving the core customers' credit needs are part of our commitment The Bank of Åland is not granting credits as a standalone product to mass market clients or corporate clients • To have balanced growth in lending versus deposits in every business area (Åland Islands, Finland and Sweden) • To have residential mortgages or residential property as collateral in at least half of the lending in every business area 33 Many small loans are preferred to few large loans ÀLANDSBANKEN#34• Balanced Growth in the Credit Portfolio Total lending was EUR 4,518 M, as of June 30, 2021 • Selective lending to high quality borrowers, high net worth and affluent Private Banking clients • Asset quality prioritised over lending volume growth and higher returns • Lending must always be made in consideration of safeguarding the Bank of Åland's strong brand and market reputation • Corporate lending at Åland Islands, around 7 % of total lending . Loan loss level 0.05% in Q2 2021 and 0.08 % in Q2 2020 • Model-driven impairment losses on financial assets increased because of the expected effects of the Covid-19 pandemic. During the first quarter of 2020, the Bank made a group provision of EUR 2.0 M related to heightened risk of losses in the corporate loan portfolio. So far it has not been necessary to utilize these provisions Total Lending 5000 4500 4000 3500 3000 티 2500 Σ 2000 1500 1000 500 34 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q2 2021 Other industry and crafts Construction Agriculture, forestry and fishing Other service operations ■Hotel and restaurant operations ■Financial and insurance operations ■Other real estate operations ■Housing operations ■Wholesale and retail trade ■Shipping Lending to the Companies 1400 1200 1000 M EUR 800 600 400 ■Public and non-profit sector ■Companies 200 0 ■Private individuals 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q2 2021 ÀLANDSBANKEN#35Geographical Distribution of Mortgage Lending . . Clear concentration to the wealthiest parts of Finland and Sweden As of June 30, 2021 approximately 58% of the loan portfolio in Finland 42% of the loan portfolio in Sweden 20% of mortgage lending in Sweden is distributed by ICA Bank According to the business plan growth in the coming years will be mainly in Sweden 35 Gothenburg 13 % Vaasa 3% Stockholm 68 % Tampere 13% Malmö 15 % +4% in other parts of Sweden * Åland Islands 21 % Turku 15% Helsinki 44 % +4% in other parts of Finland Geographical distribution according to SW and Fl cover pools ÀLANDSBANKEN#36Stage 3 Credits 2018-2021 36 60 60 50 40 1.4 1.30 1.2 1.01 0.93 0.89 0.92 1.0 0.85 0.81 0.81 20 0.8 0.6 0.4 mill 30 0.69 0.57 20 0.46 10 0 0.49 0.51 0.52 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 0.2 0.0 Stage 3 credits, EUR M Share of Stage 3 credits of total lending, % Exposures in Stage 3 fulfil the Group's default definition, in which an exposure is regarded as in default when a payment related to a significant amount is more than 90 days late ÀLANDSBANKEN#376. Liquidity and Funding 37 ÀLANDSBANKEN#38Group Funding Profile June 30, 2021 • Demand deposits and time deposits from core private customers and their companies are the main funding sources . Covered Bonds are the main long-term funding instrument • Loans from central banks have grown during the time of Covid-19: 2 % -> 10 % • Strong capitalization 38 3% 0% 5% 10 % 4 % 15% Deposits Covered Bonds Short term banks Subordinated Senior unsecured Central banks Own capital 63 % ÀLANDSBANKEN#39Funding Strategy • Covered Bond programme was created in early 2012 in order to diversify funding sources and to form a reliable and cost efficient funding channel EUR- and SEK-denominated Covered Bonds total amount outstanding* EUR 897 M as of June 30, 2021 • A balanced funding mix is maintained with diversity of funding sources • Themes 2021 • Share of customer deposits will stay high on around 60 % of funding • . • • During the Covid-19 it has been a reasonable strategy to issue retained covered bonds and use those as collateral for funding from the central banks Demand conditions and the market situation favour issuance in Covered Bonds The balanced funding mix is maintained ⚫ The Bank of Åland will receive an MREL requirement from the beginning of 2022. The requirement will consist of a minimum of 9 % total capital requirement and a minimum of 3% leverage ratio. The MREL requirements have no material effect on the funding of the bank * Ex retained covered bonds 39 ÀLANDSBANKEN#40Liquidity Management • Well-diversified maturity profile • Limited exposure to short term whole sale funding • 40 The Bank of Åland is committed to continuously cover the next 180-day liquidity need in the cover pools for the Covered Bonds program Maturing long funding* June 30, 2021 M EUR 400 350 300 250 200 150 100 50 50 2021 2022 2023 2024 ■ Covered bonds ■Senior unsecured Ex retained covered bonds ÀLANDSBANKEN#41Liquidity Position Very high quality in liquidity reserves • The most liquid and tradable assets • LCR and NSFR targets reached • Conservative approach to market risk within liquidity reserves Assets with short duration Well diversified counterparty risk profile • LCR 152 % as of June 30, 2021 ' • Coordinated cash pools between Finland and Sweden • NSFR 110 % as of June 30, 2021 41 Composition of the liquidity reserve 30.6.2021 30.6.2021 31.12.2020 31.12.2020 EUR M of total EUR M of total Cash and central banks Bonds issued by governments and official institutions 749 63 % 665 57 % 86 7% 140 12 % Bonds issued by financial institutions Bonds issued by companies 4 0% 4 0 % 11 1 % 6 1 % Covered bonds Deposits 300 25 % 334 28 % 31 3% 26 2% 1,181 100 % 1,175 100 % ÀLANDSBANKEN#427. Contact Details 42 ÀLANDSBANKEN#43Contact Details Peter Wiklöf, CEO [email protected] +358 40 512 7505 Jan-Gunnar Eurell, CFO [email protected] +46 70 589 1209 Maria Rissanen, Head of Group Treasury [email protected] +358 50 538 8898 43 ÀLANDSBANKEN#448. Appendix 44 ÀLANDSBANKEN#45Key Figures – The Bank of Åland 45 H1 2021 2020 2019 2018 2017 2016 Return on equity (ROE), % 14.4 11.6 10.7 9.8 9.1 9.1 Cost/ income ratio, % 71 70 73 77 78 76 Loan loss level, % 0.03 0.11 0.08 0.02 0.06 0.11 CET1 capital ratio, % 13.4 14.3 13.4 13.0 12.9 11.8 Total capital ratio, % 16.6 16.5 15.8 15.4 14.2 13.0 Earnings per share, EUR 0.72 2.02 1.69 1.48 1.35 1.29 Equity per share, EUR 18.09 18.76 16.61 15.67 15.14 14.50 Lending to the public, EUR M 4,518 4,378 4,110 4,022 3,979 3,808 Deposits from public, EUR M 3,801 3,605 3,368 3,304 3,148 3,028 Shareholders'equity, EUR M Risk-weighted assets, EUR M 311 292 258 242 234 222 1,812 1,671 1,583 1,578 1,538 1,576 FTE 825 751 700 691 691 683 ÀLANDSBANKEN#46Income Statement 46 EUR M Q2 2021 Q2 2020 2020 2019 2018 2017 2016 Net interest income 15.2 14.8 58.9 53.9 54.5 55.9 55.1 Net comission income 18.9 15.7 66.3 58.0 54.3 52.9 48.0 Other income 9.1 5.8 24.9 22.0 18.8 19.2 17.3 Total income Staff costs Other expenses 43.2 36.3 150.1 133.9 127.6 128.0 120.4 -18.5 -15.6 -62.9 -57.0 -57.1 -59.8 -57.0 -10.7 -10.2 -42.7 -40.5 -40.7 -40.0 -34.3 Total expenses -29.2 -25.8 -105.6 -97.5 -97.8 -99.8 -91.3 Profit before impairment losses 14.1 10.6 44.6 36.4 29.8 28.2 29.2 Impairment losses on financial assets, net -0.5 -0.8 -4.9 -3.2 -0.8 -2.1 -4.1 Net operating profit 13.6 9.8 39.7 33.2 29.0 26.0 25.1 Income taxes -2.4 -2.0 -8.2 -6.9 -6.1 -5.3 -5.4 Profit for the period 11.2 7.8 31.5 26.3 22.9 20.7 19.7 Non-controlling interests 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Attributable to the shareholders 11.2 7.8 31.5 26.3 22.9 20.7 19.7 ÀLANDSBANKEN#47Long-Term Funding* June 30, 2021 47 Cover pool FIN ISIN Nominal Amt XS0876678391 XS1496878742 90 000 000 250 000 000 FI4000375241 300 000 000 Settlement date 30-01-2013 29-09-2016 19-03-2019 Maturity date 30-01-2023 Coupon 2.75 Currency EUR eq amt Time to maturity EUR 90 000 000 1.59 29-09-2023 0 EUR 250 000 000 2.25 19-03-2024 0.125 EUR 300 000 000 2.72 640 000 000 2.38 Cover pool SWE ISIN SE0010598474 Nominal Amt 2 500 000 000 Settlement date 22-11-2017 Maturity date 22-11-2022 Coupon QUARTLY STIB + 53.0 Currency SEK EUR eq amt 247 225 464 247 225 464 Time to maturity 1.40 1.40 Senior Unsecured ISIN FI4000348966 Nominal Amt 250 000 000 Settlement date 13-09-2018 Maturity date 13-09-2021 Coupon 0.5 Currency EUR EUR eq amt 250 000 000 250 000 000 Time to maturity 0.21 0.21 Ex retained covered bonds ÀLANDSBANKEN#48Disclaimer • The presentation was prepared by Bank of Åland Plc for use in investor relations. This presentation is not intended for retail customers This presentation has been prepared on the basis of publicly available information which the Bank of Åland considers to be reliable This presentation may contain forward-looking statements, which are subject to risks, uncertainties, and assumptions. This presentation is being presented solely for your information and is subject to change without notice. No representation or warranty, expressed or implied, is made and no reliance should be placed on the accuracy, actuality, fairness, or completeness of the information presented This presentation does not constitute an offer or invitation to purchase or subscribe for any shares or debt instruments of the Company, and no part of this presentation shall form the basis of or be relied upon in connection with any contract or commitment The contents of this presentation may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose 48 ÀLANDSBANKEN