#1Bank of Åland ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY Debt Investor Presentation March 2019 ÀLANDSBANKEN#22 Table of Contents 1. Bank of Åland in Brief 2. Bank of Åland - Strategy and Market Position 3. Performance and Capital 4. Mortgage Market and Asset Quality 5. Cover Pool FIN 6. Liquidity and Funding 7. Contact Details 8. Appendix 3 7 12 25 32 42 48 50 ÀLANDSBANKEN#31. Bank of Åland in Brief ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#44 Bank of Åland in brief • A Finnish bank targeting high net worth and affluent individuals . Top ranked in customer loyalty Bank of Åland Plc . Tradition of stability and very low credit losses Covered Bond Program Economy and Markets • . • • • • • • • • Net Operating Profit increased 11 % to EUR 29 M in 2018, from EUR 26 M in 2017 BBB rating with a positive outlook from S&P EUR 2 bn combined Covered Bond/ Senior Medium Term Note Program 2018 (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 The demand-led Finnish economy has been growing strongly during the last years Unemployment has dropped from 9.2 % in 2015 to 5.4 % in 2018 Finnish house prices have risen moderately compared to the Nordic neighbors, as the demand has been strong in the low rate environment Sound Bank of Åland portfolio as at least half of the lending in every business area has residential mortgages or property as collateral and many small loans are preferred to few large loans ÀLANDSBANKEN#55 Scorecard Capital • S&P rating uplift for strong capital position Common Equity Tier 1 capital ratio 13.0% as of Dec 31, 2018 IRB method for credit risk capital requirement not yet approved for the Swedish credit portfolio Liquidity and Funding • . Core funding ratio of 90 % as of Dec 31, 2018 Liquidity reserve at 22 % of total assets as of Dec 31, 2018 LCR at 120 % as of Dec 31, 2018 NSFR at 113 % as of Dec 31, 2018 AAA rating on Covered Bonds Risk Management . Long history of having the lowest loan loss level of all Finnish banks. Loan loss level was 0.02% in 2018. • No trading positions or complex financial instruments Strict limits on exposures to financial institutions. Bulk of the exposure is to highly rated Nordic entities • • Profitability Challenging interest rate environment Positive earnings trend Net operating profit of EUR 29 M 2018 Return on equity 9.8 % 2018 ÀLANDSBANKEN#600 6 Standard & Poor's rating on Bank of Åland Finnish banks A- Business position -2 - Niche bank with geographical concentration to Finland and Sweden Capital and earnings +1 - Strong capital position positive - Strong equity to assets ratio Risk position - Geographical concentration to Finland and Sweden - Small customer base with concentration risks Liquidity and funding - Above average with very strong deposit base 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 month liquidity buffer Bank of Åland Covered Bonds rating -1 0 BBB positive +9 AAA ÀLANDSBANKEN#72. Bank of Åland Strategy and Market Position ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#8Three Markets - Two Strategies The Åland Islands • 3 offices + 2 rep offices, market share > 50 % • Full product range offered Finland A bank for everyone 5 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 Sweden • • 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 8 Vaasa Tampere Turku Parainen Helsinki Åland Islands Stockholm Gothenburg Malmö ÀLANDSBANKEN#99 Bank of Åland - a relationship bank with focus on Private Banking and Premium Banking customers An Overview The Vision • • • . Established in 1919 on Åland Islands Listed since 1942 on NASDAQ OMX Helsinki Total assets of EUR 5,558 M, as of Dec 31, 2018 Actively managed assets of EUR 5,177 M, as of Dec 31, 2018 Approximately 700 employees Operations in the Åland Islands, Finnish mainland and Sweden. 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 Core values Service Finance ➤ Lifestyle ➤ Safety ÀLANDSBANKEN#1010 Bank of Åland History of Strategic Decisions during the first 100 years. From a local bank.. supporting development of Åland - a poor fishing and agrarian community 1942 2016 2009 2004 1994 Expansion to Finnish 1919 Listing mainland Foundation Fintech Expansion to Dreams IT company Sweden Crosskey Ab Ltd ALANDSBANKEN 100 ÅR 199 ..to a Nordic banking group with wide product range and personal service targeting high net worth individuals ÀLANDSBANKEN#11Dreams Digitalization in focus: strategic fintech partners 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 11 MENU L Buy an apartment 4 years and 250 000 kr left 55 089 kr SAVE Trustly CONSUMER MERCHANT PARTNERS ABOUT US PRESS BLOG CAREERS USER SUPPORT Shop and pay from your bank account Fast, simple and secure WATCHES nce S 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. Early sign-up! DO About us Press FAQ English Compensate Invest OCTOBER Supermarket 4.02 123 € 6.90€ Florist 108 ·AM 25€ Hur total C Everyday Climate Action D Nathalie Green Doconomy member 00000322 ÀLANDSBANKEN#123. Earnings & Capital ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#1313 Long-term financial targets Return on equity after taxes (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 the core tier 1 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. At present, the Bank of Åland is prioritising balanced growth ÀLANDSBANKEN#1414 2018 in summary • Net operating profit EUR 29 M (26 M 2017), +11 % • Return on Equity after tax (ROE) 9.8 % (9.1), +0.7p.p. • Earnings per share EUR 1.48 (1.35), +10 % • Implementation of IT systems and ensuring compliance with new regulation • The net inflow of actively managed assets was strong in our Private Banking segment with focus on Sweden, EUR 397 M • Strengthening of the total capital base with SEK 200 M T2 capital • Digitalization: Ownership in the strategic partners Dreams Nordic AB and Doconomy . Green banking: Baltic sea card and Aland index widely recognized ÀLANDSBANKEN#1515 Bank of Åland "world champion" in sustainability eurobest the european awards for creative excellence CANNES LIONS INTERNATIONAL FESTIVAL OF CREATIVITY D&AD Impact GULDNYCKELN RETS INSATS 201 I SUPPORT A CLEAN BALTIC SEA ORROW TOM SUSTAINABLE BRAND INDEX ÖSTERSJÖPROJEKTET ITÄMERIPROJEKTI BALTICSEAPROJECT.ORG MEMBER 543211 D&AD Impact D&AD Impact GULDÄGGET SVERIGES KOMMUNIKATIONSBYRÅER 2017 FEMTIOSJÄTTE UPPLAGAN ÀLANDSBANKEN D&AD Impact D&ADI#162018 in summary 16 150 [ +6% 70% Operating profit, EUR M 100 50 50 0 -50 -100 | +9% ↑ -3% ↑ L-48% ↑π-61%↑ +4% %1+11% -150 Income Costs Loan losses Operating profit 2016 120,4 -91,3 -4,1 25,1 2017 128,0 -99,8 -2,1 26,0 2018 127,6 -97,8 -0,8 29,0 YoY Change, % ÀLANDSBANKEN#1717 2018: Unchanged earnings, lower expenses Total income, EUR M 128.0 2.8 1.3 2.1 0.6 1.4 0.8 2017 FX EURSEK Net interest income Net commission income Net income from financial items IT income Others 2018 Total Expenses, EUR M 0.2 1.3 1.7 1.5 2.4 1.5 0.4 127.6 99.8 2017 Stability fee FX EURSEK Severance pay Capitalization of costs Impairment losses IT costs Staff costs Others YoY Tot. income change: 0% +2% without FX-effect YoY Tot. Expenses change -2% 0% without FX-effect 97.8 2018 ÀLANDSBANKEN#18Bank of Åland business segments 2016 - 2018, Operating profit, EUR M 25 25 20 20 15 10 18 5 0 18.5 19.3 -5 17.7 3.3 5.6 9.9 2.4 1.7 1.4 1.9 1.4 0.7 0.2 -2.0 -1.9 Private Banking Premium Banking Asset Management IT Others 2016 2017 2018 ÀLANDSBANKEN#1919 Business volumes 2016 - 2018, EUR M 5,000 4,000 3,979 4,022 3,808 3,304 3,139 3,148 3,028 3,000 2,598 2,638 2,437 2,539 2,000 1,000 1,463 0 Discretionary & Advisory mandates Mutual funds ■2016 2017 2018 Deposits Lending ÀLANDSBANKEN#20Income statement A % vs. A % vs. EUR M Q4 2018 Q3 2018 Q4 2017 2018 2017 % YoY Q3 2018 Q4 2017 Net interest income 13.3 13.3 0% 14.1 -6% 54.5 55.9 -2% Net commission income 12.7 12.1 5% 12.6 1% 50.6 49.7 2% Net income from financial items 1.4 0.6 1.0 41% 5.2 3.1 67% Other income 4.9 4.1 20% 4.6 5% 17.4 19.3 -10% Total income 32.3 30 7% 32.4 0% 127.6 128.0 0% Staff costs -14.3 -13.2 8% -14.9 -4% -57.1 -59.8 -5% Other expenses -9.2 -7.7 20% -8.5 8% -33.4 -32.9 2% Depreciation/ amortisation -1.8 -1.8 0% -1.9 -3% -7.3 -7.1 3% Total expenses -25.2 -22.7 11% -25.3 0% -97.8 -99.8 -2% Profit before impairment losses 7.0 7.3 -4% 7.1 -2% 29.8 28.2 6% Net impairment losses on financial assets 0.1 -0.3 -0.6 -0.8 -2.1 -61% Net operating profit 7.1 7.0 1% 6.5 9% 29.0 26.0 11% Income taxes -1.4 -1.5 -5% -1.3 4% -6.1 -5.3 14% Profit for the report period 5.7 5.6 2% 5.2 10% 22.9 20.7 11% Attributable to the shareholders 5.7 5.6 2% 5.2 10% 22.9 20.7 11% 20 20 ÀLANDSBANKEN#2121 Bank of Åland 2016 - 2018 ROE, % 10.0 9.5 9.0 8.5 9.1 9.1 9.8 2016 2017 2018 ÀLANDSBANKEN#22Commitment to a strong capital ratio • . • • Bank of Åland is committed to a strong capital ratio Positive outlook on the rating reflects S&P view that the bank will continue to build up its capital base, improve earnings, and uphold a sound approach to risk over the next two years Conservative pay-out policy is to safeguard the capital position The core tier 1 capital ratio for a small bank like Bank of Åland is not comparable to larger banks with IRB methods. Standard & Poor's rating method considers Bank of Åland well capitalized, giving a rating uplift of one notch 16% 15.2% 15.4% 14.2% 12.9% 12.1% 4.4% 0.9% 13.0% 1.2% 2.4% 1.3% 12% 1.2% 8% 10.8% 10.9% 12.0% 12.9% 13.0% 11.8% 4% 0% 2013 2014 2015 2016 2017 2018 ■T2 ■CET1 22 22 2014: revised Basel-regulation ÀLANDSBANKEN#2323 S&P view of the total capital base • According to S&P the capital position of Bank of Aland is strong • Quality of capital is high Structure of the balance sheet is of low risk • Pay out policy is conservative Nordic Banks: RAC Ratios On Dec. 31, 2017, Versus June 30, 2017 30 15 2250 (%) 10 Landshypotek Bank Eiendomskreditt Storebrand Bank Gjensidige Bank Islandsbanki Arion Bank Landsbankinn Sparbanken Sjuharad Danmarks Skibskredit Sparbanken Skane Bonum Bank* Swedish Export Credit Central Bank of Savings Banks Finland* Oma Savings Bank Bank Norwegian The Mortgage Society of Finland Aktia Bank OP Corporate Bank* Bank of Aland Lansforsakringar Bank DNB Bank DLR Kredit Swedbank SBAB Bank ☐ Nykredit Realkredit Nordea Bank _ Danske Bank Skandinaviska Enskilda Banken Jyske Bank Svenska Handelsbanken 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 -3.0 (percentage points) ■Before diversification, Dec. 31, 2017 (left scale) -4.0 ■Before diversification, year- end 2017 versus June 30, 2017 (right scale) *RAC based on financials of a wider group. Source: Standard & Poor's: Nordic Banks Sport Strong Capital - And It's Not Likely To Soften, October 17, 2018 ÀLANDSBANKEN#24Capital structures in Nordic banks Dec 31, 2018 • Bank of Åland is heavy on CET1 in its capital base: There is no AT1 in the capital base 24 24 11% 16% 12% 16% 13% 10% 8% 9% 8% 84% 79% 80% 76% 78% Ålandsbanken Swedbank SEB Handelsbanken Nordea T2 AT1 T1 ÀLANDSBANKEN#254. Mortgage Market and Asset Quality ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#26Housing market in Finland • • . • • The accelerated economic growth has boosted the Finnish housing market in growth centers The low rate environment has also supported the demand in housing market The high supply of new properties in growth centers continued. This trend is starting to slow down The sparsely populated areas have not experienced similar pattern The rise of house prices in Finland has been moderate compared to the Nordic neighbors. No fear of overheating Price development of old dwellings in blocks of flats in Helsinki Metropolitan Area, index 2015=100 26 26 115 Helsinki Espoo Vantaa 110 105 100 95 2015 2016 2017 2018* *Preliminary data for the year 2018 Sources: Statistics Finland and Pellervo Economic Research PPT ÀLANDSBANKEN#2727 • • • Lending strategy • 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 Bank of Åland is not granting credits as a stand alone product to mass market clients or corporate clients Every business area (Åland Islands, Finland and Sweden) should have a balanced growth in lending versus deposits At least half of the lending in every business area should be residential mortgages or have residential property as collateral Many small loans are preferred to few large loans ÀLANDSBANKEN#2828 28 M EUR 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 • • Balanced growth in the credit portfolio Total lending to the public was EUR 4,022 M Dec 31 2018, an increase of 1% from a year ago • Selective lending to high quality borrowers • Asset quality prioritised over lending volume growth and higher returns • Lending must always be made in consideration of safeguarding Bank of Åland's strong brand and market reputation Loan loss level 0.02% in 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ■Public and non-profit sector ■Companies ■Private individuals M EUR 1,400 1,200 1,000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 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 ÀLANDSBANKEN#29• Lending 2014 - 2018 Lending to private individuals has increased from 65% of the credit portfolio in 2014 to 73 % in 2018 29 29 72.0 % 73.0 % 69.7 % 67.5 % 65.1 % 34.9 % 32.5 % 30.3 % 28.0 % 27.0 % 2014 2015 2016 2017 2018 -private individuals -companies ÀLANDSBANKEN#3030 30 • Geographical distribution of mortgage lending • Clear concentration to the wealthiest parts of Finland and Sweden As of Dec 31, 2018 approximately • • 70% of the loan portfolio in Finland 30% of the loan portfolio in Sweden According to the business plan growth in the coming years will be mainly in Sweden Gothenburg 11% Malmö 11% Vaasa 3 % Stockholm 71% Tampere 12% Åland Islands 20% Helsinki 46 % Turku 14 % ÀLANDSBANKEN#31Loans in arrears 2016 - 2018 60 60 50 50 40 40 EUR M 50 30 0.97 20 20 1.23 0.85 0.74 0.70 0.60 0.57 0.46 0.42 1.60 1.20 0.69 0.80 0.57 0.49 0.40 ÀLANDSBANKEN 0 0.00 Q1 Q2 Q3 2016 2016 Q4 Q1 2016 2016 2017 Q2 2017 Q3 2017 Q4 2017 Q1 Q2 Q3 Q4 2018 2018 2018 2018 Stage 3 credits Data for Q1 2016 - Q3 2017: loans in arrears > 90 days -Share of Stage 3 credits of total lending 10 31#325. Cover Pool FIN ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#3333 33 Bank of Åland EUR Covered Bond: Key Features Issuer Alandsbanken Abp (Ticker: AABHFH) Exp. Issue Rating AAA (S&P) Exp. deal size EUR 300 M Maturity Format Documentation Governing Law Listing Denomination Coupon Target Market 5 year Mortgage Covered Bond / Reg S Bearer, backed by 100% prime residential Finnish mortgages, ECB repo & LCR 2A eligible, UCITS compliant Under the Issuer's €2,000,000,000 Medium Term Note and Covered Bond Programme dated 05 October 2018 and supplemented on 30 October 2018, 12 February 2019 and 05 March 2019 Finnish Law Helsinki Stock Exchange EUR 100,000 and integral multiples of EUR 100,000 in excess thereof Fixed, Annual MiFID II professionals/ECPs-only (all distribution channels). No PRIIPs key information document (KID) has been prepared as not available to retail in EEA ALANDSBANKEN#34Cover pool characteristics, Dec 31, 2018 Cover Pool FIN Prime residential mortgages, % Total nominal amount, EUR M Weighted arithmetic average LTV Number of unique loans Number of borrowers Average loan size, EUR T Interest rate type, floating % Interest rate type, fixed % Impaired loans 34 =4 100 950 54.7 12,065 7,293 80 96 96 4 0 ÀLANDSBANKEN#3555 35 Credit quality and impaired loans Dec 31, 2018 Past due Loan volume, EUR M Share of loan volume, % Impaired loans Credit Quality 31-60 D 61-90 D 90+ D Sum 1.7 0.0 0.0 2 0.0 0.0 0.0 0.0 0.000% ÀLANDSBANKEN#3636 36 Commitment to high OC and strong liquidity • • • Bank of Åland is committed to an over-collateralization clearly over the legislative minimum of 2 %. Over-collateralization is kept to a level that allows the maximum uplift of 4 notches in Standard & Poor's Covered Bonds rating framework* or an AAA rating on the Covered Bonds. At Dec 31, 2018: actual OC 56.7 %, minimum committed OC 30.9% Bank of Åland is committed to maintain a liquidity buffer covering 180 days contractual outflows from the Covered Bonds issued. The liquidity buffer consists of contractual inflows and liquid assets in the cover pool Standard & Poor's: Covered Bonds Criteria 9.12.2014 ÀLANDSBANKEN#3737 LTV and loan size Cover Pool FIN, Dec 31, 2018 LTV distribution Loans by size 40% 37% 0-50 21% 21% 50-60 ■unidexed indexed % of Residential Loans 42% 39% 21% 60-70 EUR T 14% 18% ili 14% 9% 6% 0-50 50-100 100-150 150-200 200-250 250-300 >300 19% ÀLANDSBANKEN#3838 38 Regional distribution, Dec 31, 2018 46% Helsinki region, Southern Finland % of Residential Loans 20% 14% 12% 8% Tampere region, Pirkanmaa Turku region, Western Finland Åland Islands Other ÀLANDSBANKEN#3939 Cash flow characteristics, Dec 31, 2018 4% Interest Rate 96% 19% Repayment Type 81% Fixed rate Floating rate Bullet / interest only Amortising % of Residential Loans ÀLANDSBANKEN#40Reference rates in Cover Pool FIN Dec 31, 2018 40 40 13% 2% 8% 10% ■ Euribor12 Euribor6 Euribor3 PRIME Other .67% ÀLANDSBANKEN#4141 Breakdown by type, Dec 31, 2018 68% 4% 16% 11% Owner occupied Second home/Holiday houses Buy-to-let/Non-owner occupied Other % of Residential Loans ÀLANDSBANKEN#426. Liquidity and Funding ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#4343 • Group funding profile Dec 31, 2018 Demand deposits, time deposits and certificates of deposits from core private customers and their companies are the main funding sources • Strong capitalization • Covered Bonds are the main long term funding instrument 21 % 2 % 4 %1%5% 6 % 61 % Deposits Covered Bonds Senior unsecured TLTRO II Short term banks Subordinated Own capital ÀLANDSBANKEN#4444 · Funding strategy Covered Bond programme was created in early 2012 in order to diversify funding sources and to form a reliable and cost effective funding channel • Since the launch of the programme both EUR- and SEK- denominated Covered Bonds have been issued totalling EUR 1,114 M outstanding Bank of Åland has also issued senior unsecured to maintain a balanced funding mix • Themes 2019-2020 . Demand conditions and the market situation favour issuance in Covered Bonds • • The balanced funding mix is maintained Bank of Åland didn't get MREL requirements. There are no foreseen authority or regulatory requirements which would have an effect on the funding of the bank ÀLANDSBANKEN#4545 Long term funding Dec 31, 2018 Cover Pool FIN ISIN Nominal Amt EUR Settlement date Maturity date XS0999478372 XS1238023813 100,000,000 250,000,000 03/12/2013 03/06/2019 26/05/2015 26/05/2020 0.375 XS0876678391 100,000,000 XS1496878742 250,000,000 700,000,000 30/01/2013 30/01/2023 29/09/2016 29/09/2023 2.75 Coupon, % Currency 1.55 EUR 100,000,000 EUR 250,000,000 EUR 100,000,000 Amt EUR Term to Maturity 0.42 1.40 4.08 0.00 EUR 250,000,000 4.75 700,000,000 2.84 Cover Pool SWE ISIN Nominal Amt SEK Settlement date Maturity date XS1077864905 XS1155041004 1,000,000,000 750,000,000 23/06/2014 16/12/2014 SE0010598474 2,500,000,000 22/11/2017 Coupon, % Currency 25/03/2019 QUARTLY STIB + 0,55 16/12/2019 QUARTLY STIB + 0,50 22/11/2022 QUARTLY STIB + 0,53 Amt EUR Term to Maturity SEK 4,250,000,000 97,515,310 SEK 73,136,482 SEK 243,788,275 414,440,067 0.23 0.96 3.90 2.52 Senior unsecured ISIN Nominal Amt EUR Settlement date Maturity date Coupon, % Currency Amt EUR Term to Maturity XS1585198879 F14000348966 100,000,000 24/03/2017 250,000,000 13/09/2018 24/03/2020 QUARTLY EUR + 0,63 13/09/2021 EUR 100,000,000 1.23 0.5 EUR 250,000,000 2.70 350,000,000 350,000,000 2.28 ÀLANDSBANKEN#4646 46 • Liquidity management Well-diversified maturity profile Limited exposure to short term funding Bank of Åland is committed to continuously cover the next 180-day liquidity need in the cover pools for the Covered Bonds program M EUR 400 300 200 100 Maturing long funding 2019 2020 2021 2022 2023 2024 ■Covered bonds ■Senior unsecured ÀLANDSBANKEN#4747 • Liquidity position Very high quality in liquidity reserves The most liquid and tradable assets ⚫ LCR target reached • • • Coordinated cash pools between Finland and Sweden • Cash and central banks Conservative approach to market risk within liquidity reserves • Assets with short duration • Well diversified counterparty risk profile LCR 120 % as of 31 Dec 2018 NSFR 113 % as of 31 Dec 2018 Composition of the liquidity reserve Bonds issued by governments and official institutions Bonds issued by financial institutions Covered Bonds Deposits 2018 2017 EUR M of total EUR M of total 495.6 41% 523.8 49% 158.1 13% 131.7 12% 23.7 2% 0% 470.5 39% 342.7 32% 47.6 4% 67.4 6% 1,195.5 100% 1,065.6 100% ÀLANDSBANKEN#487. Contact Details ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#49Contact 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 49 49 ÀLANDSBANKEN#508. Appendix ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#5151 Economy in Finland • The economic situation in Finland is still positive and continues to be positive . • • • The demand-led Finnish economy has been growing 2.2 -2.9 %/ year during the last three years Unemployment has dropped from 9.2 % in 2015 to 5.4 % in 2018 The exports and construction investments have stimulated the economy. But now the pace is starting to slow down a bit The economy of Finland is expected to grow better than the average growth level among the Nordic countries. This has to do with the moderate wage increases and inflation in Finland GDP Annual Growth Rate (%) 3 2,5 2 1,5 1 0,5 0 Denmark Actual 2,2 Q1 2019 Q2 2019 Q3 2019 Q4 2019 2020 1,7 1,5 1,6 1,6 1,4 Finland 2,2 2 2,1 1,9 1,8 1,7 Norway 1,7 2,1 2,3 2,1 1,8 2,6 -Sweden 2,4 1,9 1,5 1,5 1,3 1,7 Sources: Statistics Finland, Pellervo Economic Research PPT and Trading Economics ÀLANDSBANKEN#52Key figures - Bank of Åland 2018 2017 2016 2015 2014 Return on equity (ROE), % 9.8 9.1 9.1 12.0 8.7 Cost/ income ratio, % 77 78 76 73 80 Loan loss level, % 0.02 0.06 0.11 0.09 0.06 Core funding ratio, % 90 88 89 100 105 Equity/assets ratio, % 4.4 4.4 4.3 4.6 4.6 Core Tier 1 capital ratio, % 13.0 12.9 11.8 12.0 10.9 Total capital ratio, % 15.4 14.2 13.0 12.9 12.1 Earnings per share, EUR 1.48 1.35 1.29 1.60 1.12 Equity per share, EUR 15.58 15.02 14.37 13.99 13.46 Lending to the public, EUR M 4,022 3,979 3,808 3,617 3,343 Deposits from public, EUR M 3,304 3,148 3,100 2,675 2,391 Shareholders' equity, EUR M 242 234 222 213 196 Risk-weighted assets, EUR M 1,578 1,538 1,576 1,581 1,554 52 52 FTE 691 691 685 663 644 ÀLANDSBANKEN#53Income statement - Bank of Åland EUR M 2018 2017 2016 2015 2014 Net interest income Net commission income Other income 54.5 55.9 55.1 54.0 49.3 50.6 49.7 44.9 46.5 46.2 22.5 22.4 20.4 24.4 25.1 Total income Staff costs Other expenses 127.6 128.0 120.4 124.9 120.6 -57.1 -59.8 -57.0 -56.0 -53.1 -40.7 -40.0 -34.2 -35.6 -43.3 Total expenses -97.8 -99.8 -91.3 -91.6 -96.4 Profit before loan losses 29.8 28.2 29.2 33.3 24.2 Impairment losses on loans -0.8 -2.1 -4.1 -3.0 -1.8 Operating profit 29.0 26.0 25.1 30.3 22.4 Income taxes -6.1 -5.3 -5.4 -6.0 -4.8 Profit for the period 22.9 20.7 19.7 24.3 17.6 Non-controlling interests 0.0 0.0 0.0 0.0 -1.5 Attributable to the shareholders 22.9 20.7 19.7 24.3 16.1 53 35 ÀLANDSBANKEN#54Thank you! ALANDSBANKEN 100 1919 YEARS 2019 GOING OUR OWN WAY ÀLANDSBANKEN#55• · Disclaimer • • • The presentation was prepared by Bank of Åland Ltd 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 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. 55 555 ÀLANDSBANKEN