#1Vi går vår egen väg Bank of Åland Investor Presentation March 2021 ALANDSBANKEN#2Table of Contents 2 1. Bank of Åland in Brief 2. Bank of Åland - Strategy and Market Position 3. Bank of Åland and Sustainability 3 7 16 4. Performance 19 5. Asset Quality 34 6. Liquidity and Funding 39 7. Capital Position 44 8. Proposed AT1 Transaction 52 9. Contact Details 54 10. Appendix 56 ÀLANDSBANKEN#33 1. Bank of Åland in Brief ÀLANDSBANKEN#4Bank of Åland in Brief 4 Bank of Åland Plc MTN Programme Economy and Markets • • A Finnish bank targeting high net worth and affluent individuals • Top ranked in customer loyalty Tradition of stability and very low credit losses 11.6 % ROE and all time high net operating profit of EUR 39.7 M in 2020, despite Covid-19 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 The Covid-19 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 Covid-19 the demand-led Finnish and Swedish economies were growing strongly Finnish house prices have risen moderately compared to the Nordic neighbors. A trend explained by the fast amortizing plans of Finnish mortgages ALANDSBANKEN#5Scorecard December 31, 2020 5 Capital • Strong capital position CET1 capital ratio 14.3 % IRB method for credit risk capital requirement not yet approved for the Swedish credit portfolio Liquidity and Funding • • Loan/ deposit ratio of 121 % Liquidity reserve at 19% of total assets LCR at 159 % . NSFR at 106 % • BBB bank rating with positive outlook AAA rating with a stable outlook on Covered Bonds Risk Management . Long history of having the lowest loan loss level of all Finnish banks Loan loss level was 0.11% in 2020 including EUR 2.0 M Covid-19 provision (0.08 % in 2019) 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 • • . • Positive earnings trend Challenging interest rate environment Net operating profit of EUR 12.3 M in Q4 2020 (EUR 9.1 in Q4 2019) ROE 13.6 % in Q4 2020 (11.4 % in Q4 2019) ÀLANDSBANKEN#6Standard & Poor's Rating on Bank of Åland Finnish banks Business position - 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 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 Bank of Åland Covered Bonds rating A- -2 +1 -1 0 BBB positive +9/+8 6 AAA stable ÀLANDSBANKEN#72. Bank of Åland 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#9Bank 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 6,035 M, as of December 31, 2020 9 • · An Overview Actively managed assets of EUR 7,436 M, as of December 31, 2020 Approximately 800 full time employees • Operations in the Åland Islands, Finnish mainland and Sweden 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 Covid-19 customers continue to appreciate Bank's expertise, personalized service, high ethical standards and sustainability work ÀLANDSBANKEN#10Bank 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 250 million Customers Globally • Banks and other companies with over 250 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 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 . • • 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 ÀLANDSBANKEN#15Bank of Åland Group Legal Structure and Ownership Structure 15 Crosskey Banking Solutions Ab Ltd 100% S-Crosskey Ab 60% Ålandsbanken Abp (Bank of Åland Plc) Ålandsbanken Fondbolag Ab Major owners as of 05.01.2021 Wiklöf Anders with companies Alandia Försäkring The Family Kamprad Foundation Fennogens Investments S.A. (Family Ehrnrooth) Pensionsförsäkringsaktiebolaget Veritas Model IT Oy 100% 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% Share of capital Share of votes Approximately 10,500 shareholders in total, half of them from the Åland Islands 21,3% 29,7% 6,8% 11,1% 6,0% 0,7% 4,7% 8,3% 2,5% 2,0% 41,3% 51,8% ÀLANDSBANKEN#163. Bank of Åland and Sustainability 16 ÀLANDSBANKEN#17Bank of Åland "World Champion" in Sustainability Y eurobest the european awards for creative excellence CANNES LIONS INTERNATIONAL FESTIVAL OF CREATIVITY D&AD Impact 17 ÖSTERSJÖPROJEKTET ITÄMERIPROJEKTI BALTICSEAPROJECT.ORG 0 GULDAGGET SVERIGES KOMMUNIKATIONSBYRÅER 2017 FEMTIOSJÄTTE UPPLAGAN GULDNYCKELN ARETS INSATS 2017 I SUPPORT A CLEAN BALTIC SEA ORROW TOM SUSTAINABLE BRAND INDEX ENGLISH MEMBER 543211 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 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#21Q4 2020: "Ending the year in style" • Net operating profit, EUR 12.3 M (9.1 M), +35 % • ROE 13.6 % (11.4 %) . • Earnings per share, EUR 0.63 (0.46), +35 % CET1 ratio increased to 14.3 % (13.4 %) 21 Future outlook: Net operating profit in 2021 is expected to be at about the same level as in 2020. There is some uncertainty about the Bank's current forecast due to concerns about economic developments in a number of important markets ÀLANDSBANKEN#222020 in Summary Net operating profit, EUR M 22 +12% 133.9 150.1 +20% 39.7 33.2 +51 % +8% -3.2 + -4.9 Income Expenses Loan losses Net operating profit -97.5 -105.6 2019 12020 +17% 7,436 6,343 Volumes, EUR M +7% +7% 4,378 4,110 3,605 3,368 Actively managed Deposits Lending assets 2019 2020 ÀLANDSBANKEN#23Higher Income 23 EUR M 133.9 5.0 8.3 0.5 4.5 2.1 150.1 2019 Net interest income Net commission income Net income from financial items at fair value IT income Other income 2020 ÀLANDSBANKEN#24Higher Expenses 24 EUR M 97.5 3.9 0.9 1.3 1.2 5.8 105.6 2019 Crosskey Stability fee Travel and representation Depreciation/amortisation Others 2020 ÀLANDSBANKEN#25Bank of Åland Business Segments, Net Operating Profit 2018-2020, EUR M 25 19.1 21.2 29.4 9.9 6.6 6.2 Private Banking Premium Banking 2.9 3.1 1.9 2018 2019 2020 IT 2.6 1.0 Others -1.9 ÀLANDSBANKEN#26Business Volume 2018-2020, EUR M 26 2,638 3,286 3,997 2,539 4,378 4,110 4,022 3,605 3,439 3,304 3,368 3,057 Discretionary & Advisory mandates Mutual funds Deposits Lending Dec-18 Dec-19 Dec-20 ÀLANDSBANKEN#27Bank of Åland, ROE %, 2018-2020 27 7.0 11.5 11.5 10.3 10.3 7.6 12.3 13.6 12.3 11.8 11.4 8.4 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q1 2020 Stability fee: EUR 2.6 M Q1 2018, EUR 2.3 M Q1 2019, EUR 2.0 M Q1 2020 and EUR 0.6 M Q2 2020 Q3 2019 Q4 2019 Q2 2020 Q3 2020 Q4 2020 ALANDSBANKEN#28Net Operating Profit, Rolling 12 Months, EUR M 28 39.7 36.5 35.4 34.3 33.2 31.8 29.9 29.6 29.0 27.8 27.3 26.0 23.8 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 ALANDSBANKEN#2929 ROE, Rolling 12 Months, % 9.4 9.4 9.1 8.2 10.0 9.9 9.8 11.0 11.0 10.9 10.7 10.5 11.6 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 ALANDSBANKEN#3030 Ålandsbanken ROE 2020, % 11.6 11.4 10.3 10.0 8.4 7.1 6.7 Swedbank SEB Adjusted for large non-recurring items, e g fines (Swedbank and SEB 2020) Handelsbanken DNB Nordea Aktia Danske 2.6 ÀLANDSBANKEN#3131 Net Operating Profit 2020, % Ålandsbanken 20 20 Handelsbanken 8 Nordea -12 Swedbank Adjusted for large non-recurring items, e g fines (Swedbank and SEB 2020) SEB DNB Aktia -15 -16 -24 -27 -54 Danske ÀLANDSBANKEN#3232 SEB Net Interest Income 2020, % 10 9 Ålandsbanken Nordea 5 UT Aktia 4 3 Swedbank Danske 0 DNB Handelsbanken -2 ÀLANDSBANKEN#33Empty#345. Asset Quality 34 ÀLANDSBANKEN#35. 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 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 35 Many small loans are preferred to few large loans ÀLANDSBANKEN#3636 5000 4500 4000 Balanced Growth in the Credit Portfolio Total lending was EUR 4,378 M, as of December 31, 2020 • 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 Bank of Åland's strong brand and market reputation • Corporate lending at Åland Islands, 7 % of total lending . • Loan loss level 0.11% in 2020 and 0.08 % in 2019 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 Receivables Receivables from the Companies Other industry and crafts M EUR 3500 3000 2500 Σ 2000 1500 1000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Public and non-profit sector Companies Private individuals M EUR 1400 1200 1000 800 600 400 200 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 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 ALANDSBANKEN#37Geographical Distribution of Mortgage Lending . . • • Clear concentration to the wealthiest parts of Finland and Sweden As of December 31, 2020 approximately • 58% of the loan portfolio in Finland 42% of the loan portfolio in Sweden 16% 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 37 Gothenburg 12% Malmö Vaasa 3% Tampere 13% Stockholm 69% Åland Islands 21 % Turku 16% 16% +3% in other parts of Sweden Helsinki 47 % ÀLANDSBANKEN#38Stage 3 Credits 2018-2020 38 EUR M 60 50 40 0.93 0.85 0.81 0.81 1.30 0.89 toondoli 20 0.46 0.69 0.57 0.49 0.51 0.52 1.4 1.2 1.0 0.8 30 0.6 0.4 10 0.2 0 0.0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 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#396. Liquidity and Funding 39 ÀLANDSBANKEN#40Group Funding Profile December 31, 2020 • Demand deposits and time deposits from core private customers and their companies are the main funding sources • Strong capitalization Covered Bonds are the main long-term funding instrument 40 1% 5% 6% 7% 4% 15% Deposits Covered Bonds Short term banks Subordinated Senior unsecured TLTRO II Own capital 62 % ÀLANDSBANKEN#41• Funding 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 1 098 M as of December 31, 2020 Bank of Åland issues also preferred senior unsecured bonds to maintain a balanced funding mix • Themes 2021 41 • Centralbanks are offering cheap loans Demand conditions and the market situation favour issuance in Covered Bonds The balanced funding mix is maintained Bank of Åland has not received any MREL requirements. There are no foreseen authority or regulatory requirements which would have effect on the funding of the bank ÀLANDSBANKEN#42Liquidity Management • Well-diversified maturity profile • Limited exposure to short term whole sale funding • 42 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 Maturing long funding December 31, 2020 350 300 250 200 150 100 50 50 2021 2022 2023 2024 2025 ■ Covered bonds ■Senior unsecured ÀLANDSBANKEN#43Liquidity Position Very high quality in liquidity reserves • The most liquid and tradable assets • LCR target reached • Conservative approach to market risk within liquidity reserves Assets with short duration Well diversified counterparty risk profile • LCR 159 % as of December 31, 2020 • Coordinated cash pools between Finland and Sweden • NSFR 106 % as of December 31, 2020 43 Composition of the liquidity reserve Cash and central banks Bonds issued by governments and official institutions Bonds issued by financial institutions Bonds issued by companies Covered bonds Deposits 31.12.2020 31.12.2020 31.12.2019 31.12.2019 EUR M of total EUR M of total 665 57 % 490 43 % 140 12 % 83 7% 4 0% 42 4 % 6 1% 0 0% 334 28 % 495 44 % 26 2% 20 2% 1175 100 % 1129 100 % ÀLANDSBANKEN#447. Capital Position 44 ÀLANDSBANKEN#45Commitment to a Strong Capital Ratio Percent 2019 2020 Q4 2021 Pillar 1 requirement 4.5 4.5 4.5 . Bank of Åland is committed to a strong capital ratio Capital conservation buffer 2.5 2.5 2.5 • • • The bank will continue to build up its capital base, improve and diversify earnings, and uphold a sound approach to risk Conservative pay-out policy is to safeguard the capital position CET1 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 to have strong risk-adjusted capitalization Counter cyclical capital buffer 1.2 0.0 0.0 Systemic risk buffer 1.0 0.0 0.0 Pillar 2 requirement 1.5 1.5 0.6 F CET1 CAPITAL RATIO REQUIREMENT Pillar 1 requirement 10.7 8.5 7.6 1.5 1.5 1.5 Capital conservation buffer Counter cyclical capital buffer Systemic risk buffer Pillar 2 requirement 0.2 12.9 13.0 14.2 15.4 15.8 16.5 AT1 capital ratio requirement 1.5 1.5 1.7 2.2 T1 CAPITAL RATIO REQUIREMENT 12.2 10.0 9.3 1.3 2.4 2.4 0.9 1.2 Pillar 1 requirement 2.0 2.0 2.0 Capital conservation buffer Counter cyclical capital buffer 12.0 12.9 13.0 13.4 14.3 11.8 Systemic risk buffer Pillar 2 requirement 0.3 T2 capital ratio requirement 2.0 2.0 2.3 TOTAL CAPITAL RATIO REQUIREMENT 14.2 12.0 11.5 2015 2016 2017 2018 2019 2020 T2 CET1 LEVERAGE RATIO REQUIREMENT 3.0 45 ALANDSBANKEN#46S&P View of the Total Capital Base • According to S&P the capital position of Bank of Aland is strong 46 • Strong risk-adjusted capitalization • Low credit losses RAC ratio 13.8 % (June 30, 2020) remains a rating strength to Bank of Åland • S&P (January 22, 2021) has indicated that they could raise the rating if 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#47Bank of Aland has an empty pocket for AT1 capital • Within the basic Pillar 1 requirements of 8.0 % total capital of REA, 1.5 % of REA can be AT1 capital • Of the Pillar 2 requirements added by the Finnish FSA 18.75 % can be AT1 capital from January 1, 2021. The Pillar 2 requirement is today 1.5 % of REA but will be lowered to 1.0 % of REA by September 30, 2021 In the absence of AT1 capital, the minimum requirement of AT1 capital within T1 capital (today 1.8 % of REA and as of September 30, 2021 1.7 % of REA) is financed by CET1 capital ⚫ Ålandsbanken has until now not issued any AT1 capital. • 1.8% of REA as of December 31, 2020 is equal to EUR 30 M • 1.7% of REA as of December 31, 2020 is equal to EUR 28 M 47 ÀLANDSBANKEN#48Bank of Aland capital base, EUR M and capital ratios, % 48 Capital base, EUR M Capital ratios, % EUR 30 M AT1 added pro forma 2021 305.5 18.3 275.5 37.0 16.5 2.2 247.7 15.6 37.0 30.0 2.2 1.8 0.0 2.3 36.2 0.0 0.0 0.0 238.5 238.5 14.3 14.3 211.5 13.4 2019 2020 pro forma 2021 2019 2020 pro forma 2021 CET1 AT1 T2 CET1 AT1 T2 ÀLANDSBANKEN#49CET1 ratio and T1 ratio, % 49 10.7 2019 13.4 CET1 ratio, % 8.5 2020 Requirement 14.3 ■Bank of Aland 7.6 14.3 12.2 13.4 T1 ratio, % 10.0 14.3 EUR 30 M AT1 added pro forma 2021 9.3 16.1 2021 pro forma 2019 2020 2021 pro forma Requirement I Bank of Aland ÀLANDSBANKEN#50Total capital ratio, % 50 14.2 15.6 12.0 16.5 11.5 18.3 2019 2020 2021 pro forma Requirement Bank of Aland EUR 30 M AT1 added pro forma 2021 ÀLANDSBANKEN#51Leverage ratio, % 51 2019 4.2 3.7 3.0 4.8 2020 2021 pro forma Requirement Bank of Aland EUR 30 M AT1 added pro forma 2021 ÀLANDSBANKEN#528. Proposed AT1 Transaction 52 ÀLANDSBANKEN#53Indicative Term Sheet Issuer Currency and Exp. Deal Size Maturity First Call Date Optional Redemption Dates Special Event Redemption Status Loss Absorption Mechanism Write-Down Coupon Stucture/ Interest Governing Law Listning Target Market Denomination Documentation Alandsbanken Abp (Ticker: AABHFH) SEK 300 M Perpetual [ ] 2026 The Issuer may redeem all, but not some only, of the notes on the first call date (as defined in the Final Terms) or on any subsequent interest payment date thereafter at their redemption price subject to the Competent Authority approval The issuer may redeem all, but not some only, of the notes at their redemption price at any time on the relevant date fixed for redemption in case of a Capital Event subject to the Competent Authority approval. The issuer may redeem some or all of the notes at their redemption price at any time on the relevant date fixed for redemption in case of a Tax Event subject to the Competent Authority approval Deeply subordinated Senior only to holders of the Issuer's CET1 Instruments and any other obligations or capital instruments of the Issuer that rank or are expressed to rank junior to the AT1 Notes Permanent full write-down upon breach of 7.125% CET1 Ratio of the Issuer or the Group Floating Rate Notes/ Floating (quarterly) Any payment of the interest can only take place from the Issuer's Distributable Items and may be cancelled at the Issuer's discretion or mandatorily as required by Applicable Banking Regulation Finnish Law Helsinki Stock Exchange MiFID II professionals/eligible counterparties only (all distribution channels). No PRIIPs key information document (KID) has been prepared as not available to retail in EEA SEK 2,000,000 Under the Issuer's EUR 3,000,000,000 Medium Term Note, Covered Bond, Tier 2 Note and Additional Tier 1 Capital Note Programme dated 12 March 2021 53 ÀLANDSBANKEN#549. Contact Details 54 ÀLANDSBANKEN#55Contact 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 55 ÀLANDSBANKEN#5610. Appendix 56 ÀLANDSBANKEN#57Key Figures - Bank of Åland 2020 2019 2018 2017 2016 Return on equity (ROE), % 11.6 10.7 9.8 9.1 9.1 Cost/income ratio, % 70 73 77 78 76 Loan loss level, % 0.11 0.08 0.02 0.06 0.11 Core funding ratio, % 96 90 90 88 89 Equity/assets ratio, % 4.8 4.6 4.4 4.4 4.3 Core Tier 1 capital ratio, % 14.3 13.4 13.0 12.9 11.8 Total capital ratio, % 16.5 15.8 15.4 14.2 13.0 Earnings per share, EUR Equity per share, EUR 2.02 1.69 1.48 1.35 1.29 18.76 16.61 15.67 15.14 14.50 Lending to the public, EUR M 4,378 4,110 4,022 3,979 3,808 Deposits from public, EUR M 3,605 3,368 3,304 3,148 3,028 Shareholders' equity, EUR M Risk-weighted assets, EUR M 292 258 242 234 1,671 1,583 1,578 1,538 222 1,576 FTE 751 700 691 691 683 57 ÀLANDSBANKEN#58Income Statement EUR M Net interest income Net comission income Other income 2020 2019 2018 2017 2016 58.9 53.9 54.5 55.9 55.1 66.3 58.0 54.3 52.9 48.0 24.9 22.0 18.8 19.2 17.3 150.1 133.9 127.6 128.0 120.4 Staff costs Other expenses Total expenses -62.9 -57.0 -57.1 -59.8 -57.0 -42.7 -40.5 -40.7 -40.0 -34.3 -105.6 -97.5 -97.8 -99.8 -91.3 Profit before impairment losses 44.6 36.4 29.8 28.2 29.2 Impairment losses on financial assets, net -4.9 -3.2 -0.8 -2.1 -4.1 Net operating profit 39.7 33.2 29.0 26.0 25.1 Income taxes -8.2 -6.9 -6.1 -5.3 -5.4 Profit for the period 31.5 26.3 22.9 20.7 19.7 Non-controlling interests 0.0 0.0 0.0 0.0 0.0 Attributable to the shareholders 31.5 26.3 22.9 20.7 19.7 58 ÀLANDSBANKEN#59Long-Term Funding December 31, 2020 Cover pool FIN ISIN XS0876678391 XS1496878742 F14000375241 Nominal Amt 100 000 000 250 000 000 300 000 000 Settlement date 30-01-2013 29-09-2016 19-03-2019 Maturity date 30-01-2023 Coupon 2.75 29-09-2023 19-03-2024 0 0.125 Currency EUR eq amt Time to maturity EUR 100 000 000 2.08 EUR 250 000 000 2.75 EUR 300 000 000 3.22 650 000 000 2.86 Cover pool SWE ISIN SE0010598474 Nominal Amt Settlement date 2 500 000 000 SE0013359627 2 000 000 000 22-11-2017 12-05-2020 Maturity date 22-11-2022 QUARTLY STIB +53.0 12-05-2025 QUARTLY STIB + 50.0 Coupon Currency EUR eq amt Time to maturity SEK 249 145 431 1.89 SEK 199 316 345 4.36 448 461 776 2.99 Senior Unsecured ISIN F14000348966 59 Nominal Amt 250 000 000 Settlement date 13-09-2018 Maturity date 13-09-2021 Coupon 0.5 Currency EUR EUR eq amt Time to maturity 250 000 000 250 000 000 0.70 0.70 ALANDSBANKEN#60Disclaimer • • 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. 60 ÀLANDSBANKEN