LocalTapiola Bank Ltd

Transcription

Close to you
throughout
your life
Annual Report 2013
LocalTapiola Bank
LocalTapiolaBankbeganoperatingin2004.Thebank'sserviceshave
expandedtocoverallprivatecustomerservicesfromaccountsand
cardstoinvestmentsandsecuritiesbrokerage,aswellasservicesfor
smallcompaniesandfarmers.SBankandTapiolaBankhavemerged
toformanewSBank.
Close to you throughout
your life
LocalTapiolaincludesenthusiasticdrivers,mothersandfathers,athletes,pet
owners,boaters,housebuilders,worldtravellers,investorsandentrepreneurs.
Therefore,weofferthesamesolutionswewantanduseourselves.Wehandle
yourmostimportantmatterswithcompetenceandgenuinecare.
Table of Contents
Review by the Managing Director
4
Report by the Board of Directors 1 January – 31 December 2013
6
Tapiola Bank Ltd – financial statements of the Bank Group
11
Balance sheet and consolidated profit and
loss account of the Bank Group
11
Bank Group cash flow statement
15
Key figures of the Bank Group
16
Notes to the financial statements of the Bank Group
17
Notes on the principles used in the
preparation of financial statements
17
Transitioning from the IFRS standards
to the use of the FAS norms
21
Notes on the risk management of the Bank Group
25
Notes on the Bank Group's solvency management
31
Notes to the consolidated profit and loss account
and balance sheet of the Bank Group
34
Balance sheet and profit and loss account
of LocalTapiola Bank Plc
44
Cash flow statement of LocalTapiola Bank Plc
48
Key figures of LocalTapiola Bank Plc
49
Notes to the financial statements of LocalTapiola Bank Plc
50
Notes on the principles used in the preparation of
LocalTapiola Bank Plc´s financial statements
50
Notes relating to the balance sheet and
profit and loss account of LocalTapiola Bank Plc
50
Signatures to the annual report and financial statements
61
Auditor’s note
62
Auditor’s report
63
LocalTapiola in
brief
LocalTapiolaGroupisamutual
groupofcompaniesownedby
itscustomers.itservesprivate
customers,farmers,entrepreneurs,
corporatecustomersand
organisations.Weoffernon-lifeand
lifeinsuranceservicesaswellas
investmentandsavingservices.We
alsoprovidepensioninsuranceand
bankingservices.
LocalTapiola's
online reporting
LocalTapiola'sonlineannualreport
2013andthecompanies'annual
reportsandinvestmentreviewswillbe
availableduringweek15inpDFformat
atthefollowingaddress:
www.vuosiraportti
2013.lahitapiola.fi
LocalTapiola Bank is
now S Bank
S Bank and LocalTapiola Bank have merged to form a new S Bank.
S Group owns 75 per cent and LocalTapiola Group 25 per cent
of the new bank, which will begin operating in 2014. S Bank and
LocalTapiola Bank merged on 1 May 2014.
The merger does not require customers to take any action. In
other words, the existing customer relationships will remain
unchanged.
Services for
individuals
• Accounts and cards. Current account, interest payable
on daily balance
• Comprehensive, easy to use online and mobile services
• Loans for various purposes
• Savings and investments, brokerage services
Services for
entrepreneurs
and farmers
• Accounts, saving, investment and financing
solutions for agriculture and forestry
• Savings, investment and financing solutions for
entrepreneurs
• Accounts for self-employed people and payment
transaction services
• Online services
3
ANNUALREpORT2013
LOCALTApiOLABANKLTD
A pivotal year
for LocalTapiola
Bank
ForLocalTapiolaBank,2013wasatimeof
numerouschanges.Despitethis,wewereable
tomaintainahighlevelofcustomersatisfaction.
87percentofourcustomersratedthebankas
goodorverygood.
Themaineventoftheyearwastheagreement
betweenSBankandLocalTapiolaBankto
mergeandformanewSBank.LocalTapiola
Groupowns25percentofthenewbankandS
Groupowns75percent.
ThenewSBankbeganoperatingon1May2014.
Marjapajulahti,ManagingDirector
N ewregulationsonbankingmarkets,solutions
tothecreditcrisisandaweakeningeconomic
climatehaveallcontributedtoincreasing
refinancingcostsforbanksandhaveresultedinincreased
marginsonnewloanstomaintainprofitability.Lowinterest
rateshavereducedthebank'snetinterestincome,which
hasservedtoweakentheresult.Asaresultofthedecrease
innetinterestincome,bankshaveattemptedtoboost
theirprofitabilitywithcommissionincomeandincome
fromothersources,aswellasbyincreasingtheiroperating
eﬃ
ciency.
LocalTapiolaBankhasalsobeeninvolvedinthe
aforementionedtrend.in2013,ourfocusshiftedfrom
sellingloanstosellinginvestmentsandothercommissionbasedactivities.Theresultwasamarkedimprovementin
investmentsales,which,forourVaurasassetmanagement
concept,were150%betterthanthepreviousyear'ssales.
Thenumberofcustomersofoursecuritiesbrokerage
businessalsoincreasedsteadilythroughouttheyear.
investmentsaleshaveplayedtheirpartincreating
opportunitiestoincreaseprofitability,whilealsoboosting
LocalTapiola'sprofileasaproviderofsavingandinvestment
services.inadditiontosavingsaccounts,ourinvestment
productsincludedLocalTapiolaVauras,whichisintendedfor
customersinvestingEUR20,000–100,000.Ourinvestment
customersalsohadaccesstofivedifferentinvestment
depositproductslastyear.
4
Investment
sales
increased by
2.5
partiallyduetoinvestmentsales,thebankgainedatotal
ofalmost20,000newcustomersandoverallprofitability
improved.TheresultwasonlyEUR4million.Thiswas
weakenedbyprovisionsforupcomingnon-recurringcosts
duetotheSBankmerger.Theresultwasalsoaffectedby
extraordinarycostsduetothetransferofbankemployees
whohadbeenworkinginLocalTapiola'soﬃ
cesaround
Finlandandwhomovedtothebankaspartofthebusiness
transferthatwasimplementedon1September2013.
Customer satisfaction remained good
Wedidnotreachourobjectiveofincreasingthenumber
ofactivecustomers,althoughcustomersatisfaction
remainedgoodin2013.87percentofourcustomersrated
LocalTapiolaBankasgoodorverygood.TheBank'smessage
isthatitisareliableandactivepartnerforourownercustomersastheymanagetheireverydayfinances.
2013
2012
2011
Turnover, EUR m
60.4
65.5
67.1
Operating profit/loss,
4.0
6.4
4.5
EUR m
Borrowing and lending,
public and public
corporations, EUR m
Deposits
1,754.6 1,643.8 1,509.1
Credit portfolio
1,840.3 1,671.3 1,500.4
Customer benefits, EUR m
10.3
12.1
11.8
Number of customers
274,002 254,729 233,256
274,002
1,634.7
1,754.6
Number of LocalTapiola Bank customers
233,256
At the turn of 2013, development was underway to bring
LocalTapiola Bank closer to customers by working with
the regional companies. As a result of this, a preliminary
agreement on the bank merger was made in spring 2013
and the agreement was confirmed at the end of the year.
Work on the merger began with permit processes
and preliminary reports on approximately 30 different
integration projects. The new S Bank will begin operating on
1 May 2014.
LocalTapiola Bank key figures
254,729
The merger with S Bank was confirmed
Key figures
1,509.1
The customer satisfaction rating shows that we have
succeeded in offering personal service via our extensive
service network and easy-to-use online services. Customers
can choose to contact us in the manner that suits them best.
For everyday financial matters, they continued to favour
online services and mobile services. This is borne out by the
fact that our online banking system handled 7.7 million user
log-ins last year.
The bank changed its name to LocalTapiola Bank on 8
June 2013. The change in name also necessitated a project
to make large-scale system changes. At the same time, the
online service and the bank's mobile service were updated.
Customer feedback has generally been good.
2011 2012 2013
Number of customers
Deposit base, EUR m
Objectives for 2014
The main event in 2014 will
be the merger with S Bank.
In connection with this, it
is important to ensure
that LocalTapiola Bank's
customers are satisfied
and are receiving a good
standard of service. The
bank merger will also cause
changes for investment
sales as LocalTapiola's
funds will be transferred to
FIM, a subsidiary of S Bank.
The role of the regional
companies as providers of
banking services will also
become clearer in 2014.
Building the new S Bank
Maintaining high customer service levels and
ensuring that customer satisfaction remains good.
Utilising the
regional companies
as providers of
banking services
Making the most of local
expertise and networking.
Continuing
investment sales
Customer interest in
investment services
continues to grow.
5
ANNUAL REPORT 2013
REPORT OF THE BOARD OF DIRECTORS 1 JANUARY–31
DECEMBER 2013
Bank Group and LocalTapiola Group
LocalTapiola Bank Plc is a subsidiary of LocalTapiola General
Mutual Insurance Company (LocalTapiola General) and is
the parent company of the Bank Group. The Bank Group
includes the subsidiary LocalTapiola Asset Management Ltd,
wholly owned by LocalTapiola Bank Plc, and the associated
undertaking Ab Compass Card Oy Ltd, of which LocalTapiola
Bank Plc owns 34%.
Besides the aforementioned LocalTapiola General,
LocalTapiola Bank and LocalTapiola Asset Management,
LocalTapiola Group consists of LocalTapiola Mutual Life
Insurance Company, LocalTapiola Real Estate Asset
Management Ltd, Tapiola Data Ltd and 19 regional
companies engaged in non-life insurance operations.
The domicile of LocalTapiola Bank Plc is Espoo and its
business ID is 1795059-8.
The financial statements are drawn up in accordance
with Finnish legislation and the regulations of the Finnish
Financial Supervisory Authority. In its meeting on 24
October 2013, the Board of Directors decided to use the FAS
norms instead of the IFRS standards in the preparations of
the 2013 consolidated financial statements. The change
harmonised the financial statement practices of
LocalTapiola Bank and S Bank. The bridge calculations for
the transition are presented in the financial statements.
Change of company form
In its meeting on 11 April 2013, the General Meeting of
Tapiola Bank Ltd decided on a change of company form to a
public limited company as of 8 June 2013. The company's
name is:
LähiTapiola Pankki Oyj
LokalTapiola Bank Abp in Swedish
LocalTapiola Bank Plc. in English
Operating environment
In 2013, there were two major turning points in the
operating environment of financial markets, the first of
which was the strengthening of global growth prospects.
The extraordinarily long recession in the eurozone ended in
the second quarter of the year and the acute economic
crisis began to subside, even in the most problematic
countries. Thanks to Europe's recovery, a global recovery
was no longer entirely dependent on US economic growth.
On the other hand, the economic outlook in emerging
economies remained highly uncertain and began to stabilise
only at the very end of the year. In addition, the impact of
the global economic recovery on Finland's overall
production was less marked than expected, and there was
no substantial improvement in the economic outlook during
2013.
The other major turning point occurred in central banks'
monetary policy. In the spring, the US Federal Reserve
began to signal that they may have to cut back on stimulus
6
measures for the monetary economy. The Fed's new policy
also had a major impact on financial markets as the liquidity
offered by central banks had significantly supported
increases in asset values. During the summer, interest rates
increased and risk premiums widened. Fixed-income
investment markets in emerging economies, which had
perhaps benefited the most from abundant liquidity over
the previous years, were hardest hit by the repricing of
risks. The equity markets recovered quite rapidly from the
decrease in share prices in February as macroeconomic
indicators encouraged risk-taking in the financial markets.
The increase in risky assets accelerated in the autumn
when the US Federal Reserve surprised the markets by
announcing that, for the time being, it will not cut back on
quantitative stimulus measures. Long-term interest rates in
the US and Germany decreased clearly from the summer's
peak levels. Not even the US federal budget dispute and
government shutdown at the beginning of October were
able to cause major disruptions in the markets.
Shares were clearly the best-performing asset class in
2013. Share prices in developed economies returned an
average of over 19 per cent in euro terms. Emerging
markets suffered from the structural slowdown of growth
and fears of a tighter monetary economy. Share prices in
emerging markets decreased by an average of almost seven
per cent in euro terms. In fixed-income investments,
government bonds in the eurozone yielded an average of
2.2 per cent. On the foreign exchange market, the euro
strengthened against all major currencies. The US dollar
weakened by 4.4 per cent against the euro, by 2.1 per cent
against the UK pound and by 20.8 per cent against the
Japanese yen.
Interest rates and mutual fund market
Reference rates remained low throughout 2013. The 12month Euribor interest rate was 0.556 per cent (0.543%) on
31 December 2013. The LocalTapiola Prime rate decreased
from 1.500 per cent to 1.400 per cent on 24 June 2013 and
to 1.200 per cent on 25 October 2013.
Low interest rates over the long term have restricted
banks' interest income on lending. The expenses of asset
management have not decreased correspondingly.
Therefore, banks' interest margin development has been
based on increased loan margins.
Banks' expenses have been increased by more extensive
regulation and bank tax, among other factors. Due to
increased expenses, the interest margins charged on
lending have increased.
Capital in funds registered in Finland amounted to
EUR 75.1 billion (EUR 66.3 billion) at the end of the year.
Net subscriptions to funds registered in Finland amounted
to EUR 4.6 billion and the impact of the increase in market
values was EUR 4.2 billion.
LocalTapiola Bank Group
Outlook for 2014
Global economic growth accelerated in the second half of
2013 and, based on anticipatory indicators in developed
economies, economic conditions are also expected to
strengthen in the early part of 2014. All in all, 2014 will be
better than the previous year in terms of economic growth.
In the eurozone, the basic economic trend is more
favourable than in the previous year. However, there is no
strong upswing in sight – only slightly positive growth at
best. High unemployment and a moderate increase in
salaries will slow down the recovery of consumer demand.
On the other hand, weak growth prospects do not
encourage investments and public authorities will have no
choice but to tighten their belts. Global trade was affected
by competitive devaluations, which put a brake on
eurozone exports. Sources of sustainable growth will
continue to be scarce.
During 2014, GDP development in the most important
emerging economies will set out on a new path of long-term
growth. This means growth of 6 to 7 per cent for China and
India and a growth rate of 3 to 4 per cent for Brazil and
Russia. Within emerging markets, the focus of growth is
shifting from the BRIC countries to new, less developed
areas. In the BRIC countries, growth is restricted by several
structural problems, such as sloped demand structures,
ineffective public sectors and labour expertise bottlenecks.
However, many African countries are entering a phase of
stronger growth.
From the point of view of the financial markets, the
outlook for the operating environment continues to be
rather favourable: there are positive changes, but economic
growth in the main market areas will remain so low that
central banks will not be able to tighten their monetary
policies to a large extent for quite some time. Investment
risks, however, will be increased by structural economic
changes and the associated political risks, as well as by the
weaker predictability of the global economic cycle.
Services
LocalTapiola Bank Plc and its subsidiary LocalTapiola Asset
Management Ltd offer the customers of LocalTapiola Group
a comprehensive branch network and a telephone service
for banking and investment services. A branch network
covering the whole country serves borrowers and investors.
Our online services are available 24 hours per day for
handling accounts, loans, funds and insurance, and there is
also a securities service. In addition to our online services,
debit cards, credit cards and mobile services are also
available to our customers. Our online and mobile services
were updated in June. The update improved the usability of
our banking services. We offer asset management to our
customers through the Private and Vauras (Wealth)
investment concepts.
In October, LocalTapiola Asset Management Ltd
established a new fixed-income fund, LocalTapiola Nordic
Corporate Interest. The main focus of the fund's
investments is Nordic corporate bonds.
The Bank is registered as the insurance agent of
LocalTapiola General and LocalTapiola Life Insurance
Company.
4 (60)
Customers
The Bank Group acquired 19,273 new customers, having
274,002 (254,729) banking customers at the end of the
year.
The number of customers of LocalTapiola's funds
increased by 2,999 to 34,422 (31,423). The number of unit
holders rose to 70,070 (63,249).
Risk management in the Bank Group
The Boards of Directors of LocalTapiola Bank Group's
companies bear overall responsibility for risk management.
The Boards determine the risk management targets, limits
of risk taking, responsibilities, indicators and monitoring
principles for each activity. Risk management plans are
drawn up annually in the companies and approved by the
Boards of Directors. The Boards also monitor the status of
risk management and the development of key risks on a
regular basis.
The Bank Group's Risk Management Committee and
Balance Sheet Management Committee monitor and
manage risk management. The Group's corresponding
organs direct the work of the Committees.
Risks which may threaten operations or goals are
identified and analysed in business units in connection with
both strategic and annual planning and daily activities. The
importance of preparing for risks is assessed by analysing
the probability and implications of the risks occurring. The
risk management measures and related responsibilities are
defined in the risk management plans.
Risk management supervision is the responsibility of the
Risk Management Director, who is not responsible for
operational business activities. Internal Audit supports the
management and Board of Directors in implementing and
developing risk management. The Audit Committee, which
assists the Cooperation Committee of LocalTapiola Group's
Supervisory Boards, also monitors and evaluates risks.
The most significant risks in the Bank Group's
operations are related to credit granting. Other risk types of
importance from the operational point of view are market
risks, operational risks, risks related to the operating
environment and strategic risks.
No significant changes took place in risk management
principles compared to the previous year.
Risk mapping
Capital adequacy requirements are calculated for strategic
and operational risks on the basis of risk mapping and the
scope of the operations. Capital adequacy requirements are
part of the economic capital calculation model.
The internal solvency management process (ICAAP) of
the Bank Group, which is used to define the amount of
economic capital, has been described in greater detail in the
notes to the financial statements
More detailed description of risk management
The notes to the financial statements regarding risk include
a more detailed description of the organisation of risk
management, the monitoring of different risk classes and
risk levels.
7
ANNUAL
REPORT
LocalTapiola
Bank2013
Group LocalTapiola Bank Ltd
5 (60)
Key figures and solvency
The solvency ratio of the Bank Group was 16.4 per cent
(12.7%) and the ratio of primary own funds was 15.3 per
cent (10.9%).
The development of key solvency figures has been
affected by the growth in the credit portfolio and corporate
receivables, as well as by the strengthening of capital and
reserves through a share issue.
Key figures
Bank Group
Interes t ma rgi n, EUR m
Opera ti ng profi t, EUR m
Cos t/return ra ti o
Return on equi ty (ROE),
%
Ra ti o of pri ma ry own
funds , %
2013
2012
2011
18.9
7.5
0.9
19.3
5.9
0.9
17.8
4.7
0.9
5.5
5.6
4.9
15.3
10.9
10.5
Solvency %
16.4
12.7
14.1
The Bank Group's return on equity (ROE) was 5.5 per cent
(5.6%). The cost/return ratio remained the same, being 0.9.
The key figures and solvency calculation are presented in
more detail in the financial statements and the notes
thereto.
Certificates of claim, including those with entitlements to
central bank financing, totalled EUR 153.5 million (EUR
170.3 million).
31/12/2013 31/12/2012
EUR m
EUR m
change
%
153.5
170.3
-9.8 %
1,840.3
1,825.5
1,671.3
1,665.4
10.1 %
9.6 %
1,766.9
1,751.9
143.6
2,177.8
1,696.0
1,634.4
108.3
2,057.1
4.2 %
7.2 %
32.6 %
5.9 %
79.1
80.5
-1.8 %
Receivables from the public and public corporations
increased by EUR 169.0 million, standing at EUR 1,840.3
million (EUR 1,671.3 million) at the end of the year. The loan
portfolio increased by 9.6 per cent, which exceeds the
average growth for the sector in household loans (2.2%).
The deposit base increased by 7.2 per cent. At the same
time, the deposit base of households decreased (-0.7%) in
the sector. Liabilities to the public and public corporations
totalled EUR 1,766.8 million (EUR 1,696.0 million), of which
deposits accounted for EUR 1,751.9 million (EUR 1,634.4
million). There were EUR 79.1 million (EUR 80.5 million) of
off-balance-sheet commitments.
The Bank Group's capital and reserves amounted to EUR
143.6 million (EUR 108.3 million). In the share issue of 24
June 2013, equity capital and distributable reserves were
8
The Bank has one series of shares, whose ownership is
divided as follows:
Division of LocalTapiola
Shares, pcs
Share of
Bank Plc's share capital
stock and
votes, %
LocalTapiola General
Mutual Insurance Company
59,242
78.0
LocalTapiola Mutual Life
Insurance Company
12,122
16.0
LocalTapiola Mutual
Pension Insurance
Company
4,544
6.0
Total
75,908
100.0
No treasury shares were received or taken as pledge by the
company, nor were any shares ceded or annulled.
The managed assets of the Bank Group grew by 9.6 per
cent to EUR 10,547.8 million (EUR 9,627.2 million) during
the year.
Managed assets
Bank Group
Depos i ts
Other fi na nci a l l i a bi l i ti es
Balance sheet, off-balance-sheet
commitments and managed assets of the
Bank Group
Balance sheet
Bank Group
Certi fi ca tes of cl a i m,
tota l
Recei va bl es from the
publ i c a nd publ i c
corpora ti ons , tota l
Loa ns
Li a bi l i ti es to the publ i c
a nd publ i c
corpora ti ons , tota l
Depos i ts
Ca pi ta l a nd res erves
Ba l a nce s heet tota l
Off-ba l a nce-s heet
commi tments
increased by EUR 9.0 million and EUR 21.0 million
respectively. The equity capital increase was registered on 3
September 2013. The company's owners were the
beneficiaries of the share issue. Of the change in capital and
reserves, EUR 7.0 million came from profit for the financial
year and the rest from the change in the fair value reserve.
Bonds i s s ued to the publ i c
Other cus tomer a s s ets
Total
31/12/2013
EUR m
1,751.9
62.6
31/12/2012
EUR m
1,634.4
104.9
change
%
7.2 %
-40.3 %
139.9
8,593.4
10,547.8
131.7
7,756.1
9,627.2
6.2 %
10.8 %
9.6 %
The most significant growth in managed assets (EUR 837.3
million) was in other customer assets. They consist of the
fund capital and customer assets managed by LocalTapiola
Asset Management, which grew by a total of 10.8 per cent
to EUR 8,593.4 million (EUR 7,763.2 million). Fund capital in
the mutual funds managed by LocalTapiola Asset
Management Ltd increased by 23.7 per cent to EUR 2,972.8
million (EUR 2,403.7 million) during the financial year. Net
subscriptions amounted to EUR 358.5 million (EUR 524.9
million).
LocalTapiola Asset Management was the eighth largest
fund management company in Finland.
Result for the financial year
The operating profit of the Bank Group was EUR 7,528
thousand (EUR 5,879 thousand) and the profit for the
financial year was EUR 6,970 thousand (EUR 5,907
thousand).
Profit and loss account
Bank Group
Opera ti ng profi t
(before ta xes )
Profi t for the fi na nci a l
yea r
Interes t ma rgi n
Commi s s i on i ncome,
net
Admi ni s tra ti ve
expens es
Va l ue a djus tment
l os s es
1-12/2013
1,000 €
1-12/2012
1,000 €
change
%
7,528
5,879
28.0 %
6,970
18,876
5,907
19,330
18.0 %
-2.3 %
35,761
27,947
28.0 %
-46,763
-41,156
13.6 %
89
-220
-140.5 %
The low interest rates, which were offset by the rise in
margins, burdened the development of the interest margin.
The interest margin decreased by 2.3 per cent to EUR
18,876 thousand (EUR 19,330 thousand).
Net commission income grew by 28.0 per cent to EUR
35,761 thousand (EUR 27,947 thousand). Commission
income increased thanks to a non-recurring item that
reduced the commission income of LocalTapiola Asset
Management in the comparison period, an increase in fund
capital and the recovery of the financial markets.
LocalTapiola's integration also promoted growth in fund
unit subscriptions.
Administrative expenses came to EUR 46,763 thousand
(EUR 41,156 thousand). The share of personnel expenses
was EUR 18,189 thousand (EUR 13,269 thousand).
Credit losses remained low. Credit losses and value
adjustment losses from credit decreased to EUR 89
thousand (EUR -220 thousand) thanks to payments
received. The joint effect of the entries made in 2013
improved operating profit in the profit and loss account.
The Bank's management,
personnel and branch network
As of 11 April 2013, the Board of Directors of LocalTapiola
Bank Plc consisted of six members, whose term is three
years. The Credit Institutions Act stipulates that the Board
members must have general knowledge of the operations
of credit institutions to the extent required by their nature
and scope. The Board of Directors met 43 times in 2013. The
attendance rate at the meetings was 92.5%.
Members of the Board of Directors of
LocalTapiola Bank Plc:
Harri Lauslahti (b. 1961)
Chairman as of 11 April 2013
• Master of Science in Economics
• Group Director, LocalTapiola Group
Leevi Ainasoja (b. 1960)
• MBA
• Managing Director, LocalTapiola Kainuu-Koillismaa
Mutual Insurance Company
Jari Eklund (b. 1963), Chairman until 11 April 2013
• Group Director, LocalTapiola Group
Hanna Hiidenpalo (b. 1966)
• Group Director, Investment Operations, LocalTapiola
Pension
Jukka Kinnunen (b. 1957)
• Managing Director, LocalTapiola General
Erik Valros (b. 1973)
• Managing Director, LocalTapiola Uusimaa Mutual
Insurance Company
Matti Inha (b. 1949), until 11 April 2013
• Master of Laws
• Managing Director of the Mortgage Society of Finland
6 (60)
Members of the Management Group of
LocalTapiola Bank Ltd:
Marja Pajulahti (b. 1966), Managing Director
• Master of Laws
Eero Saloranta (b. 1962), Acting Managing Director
• Engineer, MBA
• Capital Market Director
Sanna Holm (b. 1974) as of 1 April 2013
• Private Customer Business Director
Heikki Honkanen (b. 1950)
• Master of Science in Economics, MBA
• Financial Director
Päivi Hyvärinen (b. 1966) as of 1 July 2013
• Master of Political Sciences, eMBA
• Risk Management Director
Kaija Jokiharju (b. 1964)
• Vocational Qualification in IT, Business and
Administration
• IT and Network Service Director
Antti Kalliokoski (b. 1969)
• Master of Science in Engineering
• Corporate and Farming Business Director
Tapani Nyrhi (b. 1962)
• Master of Laws, MBA
• Lending Director
Satu Norhomaa (b. 1974) until 1 June 2013
• Bachelor of Business Administration
• Savings and Investments Director
During the financial year, the Group had an average of
230 employees. The strong growth is due to the transfer of
the customer telephone service, legal services, financial
management, risk management and branch network
personnel from LocalTapiola General to the Bank. As a
result of these business transfers, a total of 190 people
were transferred during the spring and autumn.
Average number of
personnel
Ba nki ng
As s et Ma na gement
Total
2013
179
2012
113
change %
58.4
51
230
50
163
1.6
41.0
In addition, the Bank Group purchases services from the
other companies in the Group in order to maintain the
service network around Finland.
The Bank Group complies with LocalTapiola Group's
salary and compensation schemes. The schemes are
planned and prepared under the leadership of HR in
cooperation with financial and risk management services
and representatives of business operations, including
representation from the regional companies and the
Cooperation Committee of the Supervisory Boards. If
necessary, external consultants are used. The Supervisory
Boards' Cooperation Committee decides on LocalTapiola
Group's salary and compensation schemes, as well as the
compensation for the President and members and deputy
members of the Board of Directors. Otherwise, decisions
are made by the companies' Boards of Directors.
Remuneration for managers is based on the Group's
strategy. The merit pay indicators are based on the key
figures relating to the targets of the business operations.
9
ANNUAL REPORT 2013 LocalTapiola Bank Ltd
The remuneration is established as the product of the
outcome rate of the above-mentioned elements, the
maximum remuneration percentage based on the position
and the annual salary. The maximum remuneration
percentages vary between 30 and 83 per cent.
The amount of merit pay granted to clerical employees
may not exceed seven per cent of the annual salary, except
for some experts in investments and asset management, as
well as in risk management, whose maximum merit pay may
not exceed 83 per cent of the annual salary. Objectives are
determined on the basis of the Group's strategy and can be
either team-specific or personal. The achievement of
targets is evaluated in performance review discussions.
Some employees in the Group's investment
organisation have their own long-term merit pay model, in
which the merit pay has been determined for a three-year
period on the basis of investment returns compared to an
index. Bonus levels varied annually between 10 and 33 per
cent of the annual salary.
Based on the results, annual payments are also made to
LocalTapiola Group's personnel fund, established in 1991.
This profit bonus item is mainly determined by the
companies' profits in accordance with the Act on Personnel
Funds. Other elements include efficiency and growth. The
payment is subtracted from the preliminary estimate of the
result of the financial year.
LocalTapiola Bank Plc has reported on its corporate
governance in accordance with recommendation 54
concerning Finnish listed companies' corporate governance
(15 June 2010). LocalTapiola Bank adheres to good
corporate governance, which is based on legislation
concerning the banking sector, as well as the regulations
and guidelines issued by the Finnish Financial Supervisory
Authority. The report and the information required by the
recommendations can be found in their entirety on the
company's website at www.lahitapiola.fi.
The auditor of LocalTapiola Bank Plc is Authorised
Public Accountants KPMG Oy Ab, and the auditor with
principal responsibility, appointed by KPMG Oy Ab, is Mikko
Haavisto, APA.
Upcoming events
A set of agreements was concluded between LocalTapiola
Group and S Group, which was announced on 6 June 2013.
The parties also agreed to merge S Bank and LocalTapiola
Bank to form a new S Bank. S Group owns 75 per cent and
LocalTapiola Group 25 per cent of the new bank, which
began operating on 1 May 2014. At the same time, the
parties agreed to transfer LocalTapiola Asset Management's
mutual fund operations to the S Group (FIM Asset
Management Ltd) and to sell LocalTapiola Asset
Management's shares to other companies of LocalTapiola
Group. The intention is to execute the transfer on 1 March
2014. LocalTapiola Asset Management Ltd will continue to
operate as an independent and visionary asset manager.
Furthermore, it will continue to manage the investment
operations of the funds it currently manages as well as the
investment portfolios of other asset management
customers. The changes do not require customers to take
any action.
10
7 (60)
In connection with the management of the funds being
transferred, the company will give up its fund management
licence and apply for an investment company licence.
Proposal of the Board of Directors to the 2014
General Meeting
The Board of Directors proposes to the 2014 General
Meeting that the profit of LocalTapiola Bank Plc for the
financial year, EUR 3,999,210.39, be transferred to the
profit and loss account and that no dividend be paid.
8 (60)
LOCALTAPIOLA BANK PLC – FINANCIAL STATEMENTS OF THE
BANK GROUP
Balance sheet and profit and loss account of the Bank Group (FAS)
BALANCE SHEET
ASSETS
Cash assets
Certificates of claim entitling to central bank financing
Government obligations
Other
Receivables from credit institutions
Payable on demand
Other
Payable on demand
Other
Leased property
Certificates of claim
From others
Shares and holdings
Shares and holdings in participating interests
Derivative contracts
Intangible assets
Other long-term expenditure
Intangible assets
Tangible assets
Other tangible assets
Tangible assets
Other assets
Prepayments and accrued income
Deferred tax assets
TOTAL ASSETS
31/12/2013
1,000 €
31/12/2012
1,000 €
(Appendix number)
126,149
91,228
(K20)
13,104
113,388
126,492
27,838
50,867
78,705
(K3, K17, K18, K19, K20)
765
19,813
20,578
27,756
52,108
79,864
(K1, K17, K18, K20)
14,777
1,825,505
1,840,282
13,936
5,907
1,665,365
1,671,271
9,597
27,021
27,021
492
1,961
1,248
91,566
91,566
8,623
1,852
564
7,171
7,171
9,949
9,949
289
289
5,601
4,606
2,000
459
459
7,508
4,571
1,372
2,177,824
2,057,129
(K2, K17, K18, K20, K45, K47)
(K4)
(K3, K17, K18, K19, K20)
(K5, K19, K20)
(K5, K19, K20, K47, K48)
(K6, K18, K19, K20)
(K7, K8)
(K8)
(K9, K41)
(K10)
(K11)
11
CAPITAL AND RESERVES AND LIABILITIES
LIABILITIES
Liabilities to credit institutions
To central banks
To credit institutions
Payable on demand
Other
Liabilities to the public and public corporations
Deposits
Payable on demand
Other
Deposits
Other liabilities
Other
Other liabilities
Bonds issued to the public
Bonds
Other
Derivative contracts and other
liabilities retained for business purposes
Other liabilities
Other liabilities
Other liabilities
Accruals and deferred income
Liabilities that have lower priority than other liabilities
Other
Deferred tax liabilities
LIABILITIES, TOTAL
12
9 (60)
(Appendix number)
31/12/2013
1,000 €
31/12/2012
1,000 €
30,000
30,000
132
17,500
17,632
47,632
28
13,250
13,278
43,278
1,448,422
303,431
1,751,853
1,269,347
365,076
1,634,423
15,000
15,000
1,766,853
61,593
61,593
1,696,016
(K17, K18, K20)
2,435
137,442
139,877
2,380
129,345
131,725
(K12, K17, K18, K20)
1,252
549
(K13, K18, K19, K20)
43,514
43,514
10,032
44,023
44,023
7,738
(K14, K41)
25,000
25,000
20
25,000
25,000
500
(K16, K17, K18, K20, K24)
2,034,180
1,948,828
(K17, K18, K20)
(K15)
(K11)
10 (60)
31/12/2013
1,000 €
31/12/2012
1,000 €
(Appendix number)
49,340
48,100
40,370
48,100
(K21, K22, K23, K25)
CAPITAL AND RESERVES AND MINORITY INTEREST
Equity capital
Premium fund
Other restricted reserves
Current value reserve
From valuation at current value
Unrestricted reserves
Invested distributable reserves
Profit (loss) brought forward
Profit (loss) for the financial year
-100
-100
-100
1,528
1,528
1,528
70,104
70,104
-30,769
6,970
49,073
49,073
-36,676
5,907
CAPITAL AND RESERVES AND MINORITY INTEREST, TOTAL
143,644
108,302
2,177,824
2,057,129
11,920
12,266
67,170
68,282
79,090
80,547
CAPITAL AND RESERVES AND LIABILITIES, TOTAL
OFF-BALANCE-SHEET COMMITMENTS
Commitments given in favour of third parties on behalf of
the customer
Sureties and pledges
Irrevocable commitments given in favour of the customer
Other
OFF-BALANCE-SHEET COMMITMENTS, TOTAL
(K21)
(K21)
(K21)
(K21)
(K21)
(K37, K40)
13
ANNUAL REPORT
2013 LocalTapiola Bank Ltd
LocalTapiola
Bank Group
PROFIT AND LOSS ACCOUNT
Interest income
Interest expenses
INTEREST MARGIN
Return on equity investments
Commission income
Commission expenses
Net income from securities trading and currency operations
Net income from securities trading
Net income from currency operations
Net income from saleable financial assets
Other business income
Administrative expenses
Personnel expenses
Salaries and remuneration
Other personnel expenses
Pension expenses
Personnel expenses
Other administrative expenses
Depreciation and value adjustments on tangible and
intangible assets
Other business expenses
Value adjustment loss on credits and other commitments
Share of profit/loss of associated undertakings
OPERATING PROFIT (LOSS)
Income taxes
Profit (loss) from ordinary activities, after taxes
Profit (loss) from ordinary activities
after minority interest
PROFIT (LOSS) FOR THE FINANCIAL YEAR
14
11 (60)
1.1.-31.12.2013
1,000 €
31,787
-12,911
18,876
121
40,364
-4,603
1.1.-31.12.2012
1,000 €
40,675
-21,345
19,330
87
32,446
-4,499
7
141
148
1,213
7,012
-13
70
57
184
5,793
-14,520
-10,572
-2,990
-679
-3,669
-18,189
-28,574
-46,763
-2,221
-476
-2,697
-13,269
-27,887
-41,156
-3,955
-5,082
89
109
7,528
-558
6,970
-2,358
-3,713
-220
-73
5,879
28
5,907
6,970
6,970
5,907
5,907
(Appendix number)
(K26, K27)
(K26)
(K28)
(K29)
(K29)
(K30)
(K31)
(K32)
(K38, K44, K46)
(K42)
(K8, K34)
(K33, K50)
(K2, K35)
(K47, K48)
(K11)
12 (60)
Cash flow statement of the Bank Group
INDIRECT CASH FLOW STATEMENT
2013
1,000 €
2012
1,000 €
7,528
5,879
4,929
325
236
989
-169,198
-4,338
-39,126
8,240
3,616
-200,806
-171,209
-1,622
74,952
-15
-4,740
-102,634
4,354
70,801
8,487
-3,090
80,551
23,841
70,570
15,919
9,245
119,575
-107,473
24,045
-1,146
268
-1,132
87
-878
-1,046
30,001
0
0
-10,000
30,001
-10,000
-78,350
12,999
225,077
146,727
212,078
225,077
-78,350
12,999
126,149
765
19,813
0
146,727
91,228
27,756
52,108
53,986
225,077
43
-1,076
-121
3,955
187
2,049
-109
4,929
58
-1,359
-87
2,358
314
-1,122
73
236
Cash flow from operations
Operating profit (loss)
Adjustments made to operating profit
Income taxes paid
Business asset increase(-)/decrease(+)
Leased property
Shares and holdings
Other assets
Business asset increase(-) / decrease(+)
Increase (+) / decrease (-) in the liabilities of the business
Other liabilities
Cash flow from operations (A)
Cash flow from investments
Investments (-)
Decrease in and income on investments (+)
Cash flow from investments (B)
Cash flow from financing activities
Increase in capital and reserves (share issue) (+)
Decrease in financial liabilities (-)
Cash flow from financing activities (C)
Change in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
Change in cash and cash equivalents (A+B+C) increase (+) / decrease (-)
Notes to the cash flow statement
The cash and cash equivalents included in the cash flow statement
include the following:
Cash assets
Receivables from credit institutions payable on demand
Receivables from credit institutions to be included in cash and cash
Certificates of claim to be included in cash and cash equivalents
Total
Adjustments in operating profit, itemised:
Interest income
Interest expenses
Dividends
Depreciation on tangible and intangible assets
Value adjustment losses
Other adjustments
Total
15
ANNUAL
REPORT
LocalTapiola
Bank2013
13 (60)
Key figures of the Bank Group
KEY FIGURES DESCRIBING FINANCIAL DEVELOPMENT
Receivables from credit institutions, EUR m
Receivables from the public and public corporations, EUR m
Liabilities to credit institutions, EUR m
Liabilities to the public and public corporations, EUR m
Capital and reserves, EUR m
Balance sheet total, EUR m
Contingent liabilities, EUR m
Interest margin, EUR m
Turnover, EUR m
Operating profit/loss, EUR m
of turnover, %
Return on equity (ROE), %
Return on assets (ROA), %
Equity ratio, %
Cost/return ratio
SOLVENCY in accordance with Basel II
Primary own funds, total, EUR m
Secondary own funds, total, EUR m
Minimum requirement for own funds, EUR m
Capital adequacy ratio primary own funds, %
Capital adequacy ratio, %
Calculation of key figures
16
31/12/2013
31/12/2012
31.12.2011
20.6
1,840.3
47.6
1,766.9
143.6
2,177.8
79.1
79.9
1,671.3
43.3
1,696.0
108.3
2,057.1
80.5
123.0
1,500.4
19.4
1,625.5
101.5
1,942.8
74.1
18.9
80.6
7.5
9.3
19.3
79.2
5.9
7.4
17.8
81.0
4.0
4.9
5.5
0.3
6.6
0.9
5.6
0.3
5.3
0.9
4.9
0.2
5.2
0.9
31/12/2013
31/12/2012
31/12/2011
133.6
8.9
69.7
15.3
16.4
94.5
15.6
69.6
10.9
12.7
87.4
29.7
66.5
10.5
14.1
Notes to the financial statements of the Bank
Group
1.
Notes on the principles used in the preparation
of financial statements
1.1. General information
LocalTapiola Bank Plc is a subsidiary of LocalTapiola General
Mutual Insurance Company (LocalTapiola General).
The parent company of LocalTapiola Bank Group is
LocalTapiola Bank Plc (business ID 1795059-8) and its
domicile is Espoo. The address of the company is
Revontulentie 7, 02100 Espoo, Finland.
LocalTapiola Bank Group includes the Bank's subsidiary
LocalTapiola Asset Management Ltd (100%) and the
associated undertaking Ab Compass Card Oy Ltd (34%).
The Board of Directors of LocalTapiola Bank Plc agreed
to publish these financial statements in its meeting on 26
February 2014. In accordance with the Finnish Companies
Act, shareholders have the opportunity to accept or reject
the financial statements at a General Meeting to be held
after the statement has been published. The General
Meeting is also able to decide on changes to the financial
statements.
1.2. Summary of significant accounting principles
The following section describes the key principles applied in
these consolidated financial statements. They have been
consistently followed during all financial years to be
presented, unless stated otherwise.
The consolidated financial statements of LocalTapiola
Bank Plc have been prepared in accordance with the Finnish
Accounting Act and accounting decree, the Act on Credit
Institutions, the decree of the Ministry of Finance on the
financial statements, consolidated financial statements and
report of the Board of Directors of credit institutions and
investment firms, the Finnish Financial Supervisory
Authority's regulations and instructions, and the general
instructions of the Accounting Board.
In its meeting on 24 October 2013, the Board of
Directors decided to use the FAS norms instead of the IFRS
standards in the preparations of the 2013 consolidated
financial statements. The change harmonised the financial
statements practices of LocalTapiola Bank and S Bank. The
bridge calculations for the transition are presented in the
financial statements.
1.2.1.
Principles used in preparing the financial
statements
The consolidated financial statements have been prepared
using the valuation principle of original acquisition costs,
unless otherwise stated in the principles used in preparing
the statements. The financial statements information is
presented in thousands of euros, unless otherwise stated.
LocalTapiola Bank Group presents the Pillar III solvency
information required by the regulations of the Finnish
Financial Supervisory Authority as part of the financial
statements and in the annual report, as applicable.
1.2.2.
Preparing the consolidated financial statements
The consolidated financial statements consist of the parent
company, LocalTapiola Bank Plc, and its subsidiary, Tapiola
Asset Management Ltd (100% owned by Tapiola Bank Ltd),
14 (60)
as well as the associated undertaking Ab Compass Card Oy
Ltd (34% owned by Tapiola Bank Ltd).
Subsidiaries include all companies in which the Group
has the right to dictate the principles of finance and
operations. The Group is considered to have a controlling
interest when its shareholding yields more than half of the
voting rights. The subsidiaries are included in the
consolidated financial statements.
Mergers of business operations are handled using the
acquisitions method. The financial assets and liabilities as
well as the contingent assets and liabilities of the acquired
business are valued at current value at the time of
acquisition. The amount by which the payment exceeds the
Group's share of the current value of the acquired net
wealth is recorded on the balance sheet as goodwill.
Consolidated goodwill has been depreciated following
straight-line depreciation at 10 years.
Business transactions, receivables and liabilities
between companies in the Group, as well as profits and
expenses, are eliminated. The principles used to prepare
financial statements for the subsidiaries have, if necessary,
been changed to correspond with those used by the Group.
Associated undertakings include all companies in which
the Group has 20 to 50 per cent of the voting rights.
Investments made in associated undertakings are handled
using the equity method and are stated at cost. The Group's
shares in the associated undertakings also include the
goodwill defined at the time of acquisition with any possible
value adjustments. The Group's share of the profit and loss
of the associated undertakings after the acquisition are
stated in the profit and loss account. If the Group's share of
the losses of an associated undertaking is equal to or
greater than its share of the associated undertaking,
including any unsecured claims, the Group does not record
any more losses unless it has a legal or actual obligation to
do so, and it has not made payments on behalf of the
associated undertaking.
The part corresponding to the share owned by the
Group will be eliminated from the unrealised profits
between the Group and its associated undertakings.
Unrealised losses are also eliminated unless business
transactions indicate a value adjustment of the investment.
1.2.3.
Foreign currency items
The Group only operates in Finland. The operational
currency of all companies in the Group is the euro, which is
also the currency used in the consolidated financial
statements.
The Group has no business transactions in foreign
currencies, with the exception of some accounts in foreign
currencies used for payments. Business transactions in
foreign currencies are converted into transactions in the
operational currency at the rate on the transaction date or,
if the items have been revalued, at the rate on the valuation
date. Exchange gains or losses from payments connected
with business transactions and from converting foreign
currency monetary assets and liabilities to the exchange
rate on the day of closing of the accounts are recorded in
the profit and loss account as net income from currency
operations.
17
1.2.4.
Cash and cash equivalents
The cash and cash equivalents entered in the cash flow
statement consist of a chequeing account at the Bank of
Finland, bank deposits that can be withdrawn on demand
and other highly liquid investments with an original run
time of no more than three months.
1.2.5.
Principles for classifying, valuing and recording
financial instruments
For bookkeeping valuation purposes, the balance sheet
items related to the Group's financial assets and liabilities
are classified into the following groups: financial assets and
liabilities to be entered in the profit and loss account at fair
value, loans and other receivables, saleable financial assets,
investments kept until their due date and financial liabilities
valued at the allocated acquisition cost. The classification
depends on the purpose for which the financial assets in
question have been acquired. The management decides on
the classification of the financial assets when initially stating
them.
Financial assets to be entered in the profit and loss
account at current value consist of investments held for the
purpose of trade. An item belonging to financial assets is
classified in this group if it has been acquired mainly for the
purpose of selling it in the near future. Derivative contracts
are also considered financial assets held for trading
purposes, unless they have been defined as hedging
instruments.
The Group's derivatives contracts in the balance sheet
have not been defined as hedging instruments.
Saleable financial assets are assets not included in
derivatives contracts, which have either specifically been
classified in this group or have not been classified in any
other group. For example, investments in bonds,
commercial papers, shares and holdings, have been
classified in this group.
Investments kept until their due date are assets
classified in this group, which fall due on a specified date
and which the management of the Group intends and is
able to hold until then.
Loans and other receivables are financial assets not
included under derivatives. The payments related to these
are either fixed or to be determined and the assets are not
listed on a market. Receivables from credit institutions,
receivables from the public and public corporations, liquid
assets, other prepayments and accrued income, as well as
other assets, are classified as loans and other receivables.
Financial liabilities to be entered in the profit and loss
account at current value consist of embedded derivatives
separated from the main agreement.
Purchases and sales of financial assets are recognised on
the date in question. Investments in financial assets which
are not entered in the profit and loss account at fair value
are initially entered at fair value plus transaction costs.
Financial assets which are entered in the profit and loss
account at current value are originally entered at current
value, and the transactional costs are entered as an expense
in the profit and loss account.
Financial assets are removed from the balance sheet
when the rights to the cash flow of the investments have
expired or have been transferred to another party, and the
Group has, in relevant parts, transferred the risks and
benefits related to owning the asset to another party.
18
15 (60)
Saleable financial assets and financial assets to be
entered in the balance sheet at current value are later
valued at current value. Loans and other receivables, as well
as investments kept until their due date, are valued using
the effective interest of allocated acquisition cost method.
Changes in the fair value of saleable financial assets are
adjusted for tax effects and entered under capital and
reserves in the balance sheet item 'fair value reserve'. The
interest calculated using the effective interest method is
stated as interest income. When securities classified as
saleable are sold or value adjustments are recorded on
them, the change in the fair value reserve entered in capital
and reserves is transferred to the net income of the
financial assets available for sale in the profit and loss
account.
The financial assets to be kept until their due date and,
for financial liabilities, the liabilities to be valued at the
allocated acquisition cost are originally stated at fair value
with transaction costs subtracted. After this, they are valued
at the allocated acquisition cost using the effective interest
method.
1.2.6.
Value adjustments for financial assets
At the end of each reporting period, it is estimated whether
there is objective proof of a value adjustment on an item or
group in the financial assets.
Criteria for objective proof include significant financial
difficulties on the part of the debtor and violation of
agreement terms, such as delays in the payment of interest,
repayment or non-payment. Other criteria are if the Group
grants the debtor concessions that it would not normally
approve, for financial or legal reasons related to the
financial difficulties of the debtor, and if bankruptcy or
other financial restructuring becomes likely on the part of
the debtor.
The Group first estimates, item by item, whether there
is any objective proof of value adjustments of those
financial assets which are individually significant.
In the second phase, the value adjustment of financial
asset groups with similar credit risk properties is estimated
by group. The estimate is based on a historical analysis of
insolvency and its likelihood for different loan types.
The scope of value adjustment losses is defined as the
difference between the book value and the fair value of the
corresponding cash flows, discounted with the original
effective interest, of the financial asset item in question.
The fair value of the security is also taken into account in
the calculation, after which the book value of the financial
asset is reduced and the loss is entered into the profit and
loss account.
If the value of equity investments classified as saleable
financial assets is deemed to have decreased significantly or
the decrease is prolonged, the accrued losses are entered
from equity into the profit and loss account item 'value
adjustment losses on credit and other commitments'.
Cancellations of value adjustment losses are entered in the
profit and loss account under financial assets if the decrease
in the value adjustment can objectively be linked with an
event that has taken place since the value adjustment.
Leasing objects are entered at acquisition cost, less
depreciation. The planned depreciation on leased items is
calculated using the annuity method in such a way that the
depreciation corresponds to the calculated repayment of
capital included in the leasing fees. The risk of reducing
balance for the leasing stock is borne by the lessee, as
defined in the leasing contract.
1.2.7.
Tangible assets
Tangible assets consist of office furniture and vehicles.
Tangible assets are stated at cost less planned depreciation.
Cost includes the immediate costs of acquiring the tangible
assets.
Machinery and equipment are depreciated in
accordance with the Finnish standard (EVL) using the net
expenditure depreciation method.
1.2.8.
Intangible assets
Goodwill is the amount by which the acquisition cost
exceeds the Group's share of the fair value of the net
wealth of the acquired subsidiary at the time of acquisition.
The goodwill generated by acquiring subsidiaries in the
intangible assets has been removed entirely.
The other intangible assets consist of specified
computer software under the control of the Group, the
acquisition cost of which includes licence payments, the
costs of making the software ready to use and the costs of
development work performed on the software.
Furthermore, renovation costs related to rented premises
are also entered in other intangible assets. Maintenance
costs related to the software are entered as costs when
they are realised.
Other intangible assets are entered as expenses under
planned depreciation for the length of their expected useful
lives over a period of 10 years. The residual value and the
financial implications of the other intangible assets are
checked on the final day of each reporting period and
changed, if necessary.
1.2.9.
Equity capital
Shares are classified as a part of capital and reserves. The
direct transaction costs of issuing new shares are entered
into capital and reserves as deductions on received
payments, adjusted with tax effects.
Dividends to be distributed to shareholders are entered
as debt in the consolidated financial statements for the
period during which the general meeting approves the
dividends.
1.2.10. Interest income and expenses
Interest income and expenses are entered for all financial
instruments that accrue interest on the basis of the passage
of time, using the effective interest method. Interest
income accruing from value-adjusted loan receivables is
entered according to the original effective interest.
1.2.11. Commission income and expenses
Commission income consists of management commissions
for mutual funds, from which refunds of management fees
have been deducted, and commission income from asset
management, brokerage services, issue of securities,
insurance operations, sureties and similar. It is recorded
when a service or a separate operation has been
performed. The amount of commission income is the
current value of the remuneration received.
Various service charges and fees and commission
expenses paid to third parties are recorded under
16 (60)
commission expenses deducted from the income received
from customers as service or handling fees.
1.2.12. Dividend income
Dividend income and other similar profit shares are entered
when the right to receive remuneration is realised. Such
income is presented as net income in the financial assets
and liabilities.
1.2.13.
Lease agreements
The Group as the lessee
The Group has leased business offices and IT equipment
under agreements which state that the lessor will retain a
significant part of the risks and benefits typical of
ownership. The agreements are classified as other lease
agreements. The fees paid on the basis of other lease
agreements are entered in the profit and loss account in
equal instalments during the course of the lease agreement.
The Group as the lessor
The Group has signed car lease agreements where the
typical risks and benefits of ownership have been
transferred to the lessee insofar as is relevant. The leased
property is presented in the balance sheet item 'leasing
objects', and it is entered at the current rate of the future
receivables. Financial income from the agreement is
released to the interest income of the interest margin,
which, in the parent company, is specified under the profit
and loss account item 'net income from leasing operations'.
1.2.14. Taxes
Taxes include taxes based on the taxable profit of the period
and deferred taxes. Taxes are entered in the profit and loss
statement, unless they relate to fair value reserve items or
directly to capital and reserve items. In this case, the tax is
similarly entered directly in the capital and reserves.
Income taxes are entered on the basis of the estimated
taxable income for the year. Deferred taxes are entered at
full value on the basis of the temporary differences
between the taxable values of assets and liabilities and their
book value in accordance with the consolidated financial
statements using the liability method.
According to the precautionary principle, deferred taxes
are entered only insofar as there is taxable profit against
which the deferred taxes will be paid.
1.2.15.
Employment benefits
Pension benefits
All of the Group's pension arrangements are defined
contribution plans. The personnel's statutory pension cover
has been arranged through basic Employees Pensions Act
(TyEL) insurance taken out from LocalTapiola Mutual
Pension Insurance Company (Elo Mutual Pension Insurance
Company as of 1 January 2014), where benefits include oldage, disability and survivors' pension, as well as death
benefit for family members. Supplementary pension cover
has been arranged through defined contribution insurance
with LocalTapiola Mutual Life Insurance Company. As a rule,
the supplementary pension increases the pension by 0.2 per
cent of the annual income on which the pension as defined
in the Employees Pensions Act is based. All employees are
19
ANNUAL
REPORT
LocalTapiola
Bank2013
entitled to the additional benefit after five years of
employment. The supplementary pension encompasses the
entire period of service. Past service cost is immediately
entered in the profit and loss account, except if a change
made in a pension arrangement requires the employment
to continue for a defined period (period required for a paidup policy). In this case, past service cost is entered as cost in
equal instalments during the period required for a paid-up
policy. The payments are entered as personnel expenses
when they are due for payment. Payments made in advance
are entered as assets in the balance sheet, as they can be
regained as returns or as deductions on future payments.
The retirement age of the members of the Board of
Directors is either 60 or the standard retirement age in
Finland of 63–68 years. The retirement age of the managing
directors is 63 years. The retirement age of other directors
is the standard retirement age in Finland: 63–68 years.
Other employment benefits
The Group companies use a merit pay model for the
compensation of both management and clerical employees.
Furthermore, the Bank Group participates in LocalTapiola
Group's joint personnel fund. The Group companies do not
offer benefits after the end of employment, such as health
care services for retired employees. There were no other
benefits, such as profit share arrangements or share-based
incentive systems.
1.2.16. Provisions
Provisions are entered when the Group has, on the basis of
actual events, a legal or actual obligation in force and it is
likely that the fulfilment of the obligation will become actual
and the amount of the obligation has been reliably
estimated. The amount to be entered as provision is the
current value of the costs expected to be incurred when
fulfilling the obligation.
1.2.17.
Bank guarantees and other off-balance-sheet
commitments
A bank guarantee obligates the guarantor to pay certain
fees to compensate the recipient of the guarantee for losses
incurred when the debtor neglects payment due in
accordance with the original or amended terms of the
liability instrument. Bank guarantees are granted to banks
on behalf of the customers to guarantee loans and credit
accounts as well as job guarantees. Prudent collateral is
required to secure the guarantees.
By and large, guarantee provisions are paid in advance
as a single payment. The commission received corresponds
to the current value of the guarantee at the time of
concluding the agreement. The guarantee commission
received is entered as commission income. The guarantee is
later valued as the entered amount, which corresponds to a
cautious estimate of the costs incurred by fulfilling the
existing obligation on the end date of the reporting period,
or as the originally entered amount, if this is the greater.
20
17 (60)
2.
18 (60)
Transitioning from the IFRS standards to the use of the FAS norms
By decision of the Board of Directors, LocalTapiola Bank Plc's
financial statements of 31 December 2013 were prepared in
accordance with the Finnish financial statement norms (FAS).
A bridge calculation has been made for the transition.
THE BANK GROUP'S FAS TRANSITION CALCULATION
BALANCE SHEET
FAS
31/12/2012
1,000 €
ASSETS
Cash assets
Leased property
Shares and holdings
Intangible assets
Consolidated goodwill
Other long-term expenditure
Intangible assets
Tangible assets
Other assets
Deferred tax assets
TOTAL ASSETS
effect of the
transition
91,228
78,705
79,864
1,671,271
9,597
91,566
8,623
1,852
564
(1)
(3)
(2) (3)
(4)
IFRS
FAS
31/12/2012
1,000 €
01/01/2012
1,000 €
91,228
78,705
79,864
1,671,271
9,597
91,566
8,623
1,852
564
0
54,989
123,039
1,500,377
7,975
226,378
7,393
1,925
469
IFRS
effect of the
transition
01/01/2012
1,000 €
0
54,989
123,039
1,500,377
7,975
226,378
7,393
1,925
469
0
9,949
9,949
459
7,508
4,571
1,372
-4,096
0
-4,096
-43
4,096
9,949
14,046
502
7,508
4,571
1,372
0
11,633
11,633
139
3,521
3,719
1,252
-4,096
67
-4,029
-91
4,096
11,566
15,662
230
3,521
3,719
1,252
2,057,129
-4,140
2,061,269
1,942,809
-4,120
1,946,929
21
ANNUAL REPORT 2013
19 (60)
LIABILITIES
Other liabilities
(4)
LIABILITIES, TOTAL
CAPITAL AND RESERVES AND MINORITY INTEREST
Equity capital
Premium fund
(1) (2) (4)
CAPITAL AND RESERVES AND MINORITY INTEREST, TOTAL
31/12/2012
1,000 €
31/12/2012
1,000 €
01/01/2012
1,000 €
01/01/2012
1,000 €
43,278
43,278
19,437
19,437
1,696,016
131,725
1,696,016
131,725
1,625,549
115,848
1,625,549
115,848
549
44,023
7,738
25,000
500
-11
549
44,023
7,738
25,000
511
441
37,555
7,266
35,000
207
-6
441
37,555
7,266
35,000
213
1,948,828
-11
1,948,838
1,841,302
-6
1,841,308
40,370
48,100
1,528
49,073
-36,676
5,907
-4,114
-15
40,370
48,100
1,528
49,073
-32,562
5,922
40,370
48,100
640
49,073
-40,805
4,130
-3,373
-742
40,370
48,100
640
49,073
-37,433
4,871
108,302
-4,129
112,431
101,507
-4,114
105,621
2,057,129
-4,140
2,061,269
1,942,809
-4,120
1,946,929
Commitments given in favour of third parties on behalf of the custom
12,266
68,282
12,266
68,282
8,299
65,843
8,299
65,843
80,547
80,547
74,143
74,143
22
20 (60)
THE BANK GROUP'S FAS TRANSITION CALCULATION
INTEREST MARGIN
Commission income
Commission expenses
Depreciation and value adjustments on consolidated goodwill
Depreciation and value adjustments on tangible and intangible
assets
Value adjustment loss on credits and other commitments
Income taxes
(reference
number)
(1)
(2)
(4)
FAS
1.1.-31.12.2012
1,000 €
19,330
87
32,446
-4,499
57
184
5,793
-41,156
0
-2,358
-3,713
-220
-73
5,879
28
5,907
5,907
effect of the
transition
IFRS
0
1,000 €
0
19,330
87
32,446
-4,499
57
184
5,793
-41,156
0
-20
-20
5
-15
-15
-2,338
-3,713
-220
-73
5,898
24
5,922
5,922
23
ANNUAL REPORT 2013
21 (60)
Reconciliation of retained earnings and the result for 2012 between FAS and IFRS
Retained earnings 1 Jan 2012, IFRS
Correction of consolidated goodwill
Correction of deductions
Correction of deferred taxes
Retained earnings 1 Jan 2012, FAS
Result for the 2012 financial year, IFRS
Amortisation of consolidated goodwill
Correction of deductions
Correction of deferred taxes
Result for the 2012 financial year, FAS
(1)
(2)
(4)
(1)
(2)
(4)
-32,562
-4,096
-24
6
-36,676
5,922
0
-20
5
5,907
Explanations of the effects of the transition to FAS
(1) The last consolidated goodwill depreciations according to the FAS norms were made in 2011. The consolidated goodwill handling difference of EU* +4,096 thousand between
FAS and IFRS can be seen in the result of the previous financial years.
(2) The depreciations of machinery and equipment have been entered as EVL depreciations in FAS instead of the 4-year straight-line depreciations of IFRS (financial impact: EUR 20 thousand).
(3) The activated renovation costs contained in the opening balance sheet of 1 January 2012 have been transferred to intangible assets in FAS instead of the tangible assets of IFRS.
The classification has no effect on results.
(4) The deferred taxes resulting from the handling difference (reference 2) of the depreciations of FAS and IFRS have been discontinued in FAS (financial impact: EUR +5 thousand).
24
3.
Notes on the Bank Group's risk management
3.1. Basis for risk management
The purpose of risk management is to prepare for threats
and opportunities arising from changes in the internal and
external circumstances, within the defined willingness to
take risks, in order to achieve strategic and operational
targets.
LocalTapiola Bank Group's risk management is based on
risk management concepts, the purpose of risk
management, strategic intent and the willingness to take
risks defined in LocalTapiola Group, as well as official
regulations. The aim is to promote customers' ongoing
financial security and help the Group to reach its
operational and financial targets. Good solvency is
particularly important due to the mutual company form of
the company at the head of the financial group.
Risk management refers to active and proactive
operations that aim to identify, assess, limit, utilise and
monitor business threats and new opportunities arising
from changing external and internal conditions or
LocalTapiola's strategic intent.
The willingness of the Bank Group to take risks is based
on the following principles:
• Risk-taking supports the financial and operational
realisation of the strategy and operational plans
• Risks do not threaten the operations of the companies
or operations of the Group, or economic stability
• Group companies and functions remain within the risk
limits specified for them
• The effects of risks on all parts of the Group are
identified
• Risk linkages between various parts of the Group are
clear
In accordance with the principles of corporate
responsibility, LocalTapiola Bank Group manages its risks
and provides reliable information on them and their
management to its customers and other stakeholders.
The procedures and risk management methods are
based on clear principles that take into account the nature
and scope of LocalTapiola Bank's operations.
3.2. Key areas of risk management
The key areas of risk management are common to the Bank
Group and the financial conglomerate.
22 (60)
Risks associated with the operating environment and
strategy
• Risks associated with the general operating
environment
• Risks associated with the markets and customer
behaviour
• Risks caused by the nature of competition and by
competitors
• Risks related to strategic choices
• Risks relating to operating as a Group and group
investments
Financial risks
• Risks relating to solvency management
• Market risks
• Credit risks
• Liquidity risks
• Concentration risks
• Insurance risks
Operational risks
• Risks relating to business planning
• Process risks
• Systemic risks
• Personnel risks
• Legal and compliance risks
• Risks of accident and damage
LocalTapiola Bank complies with the Organisation of
Internal Audit and Risk Management (4.1) and Operational
Risk Management (4.4b) standards set by the Finnish
Financial Supervisory Authority, as well as LocalTapiola
Group's risk management policy and other risk management
guidelines of the Group, either in their original form or
applied to banking operations.
In accordance with its rules of procedure, LocalTapiola
Bank's Board of Directors annually confirms the company's
risk management plan and the related guidelines and plans,
ensures that they are taken into account in the annual
operational plans and monitors the implementation of risk
management.
Furthermore, on the basis of the Management Group's
proposal, the Board of Directors decides on new product
and service concepts, marketing policies, pricing principles
and customer benefits, as well as any substantial changes to
be made to these.
3.3. Risk management organisation of the Bank Group
The Bank's operations are guided by the strategy, annual
risk management, investment and business plans and
operating principles, as well as the principles, limits and
decision-making principles concerning crediting and
investments, and related monitoring measures as approved
by the Board of Directors of the Bank. The Bank's
management implements the Bank's internal audit, taking
account of legislation, official regulations and the Bank's
Articles of Association, as well as the decisions and
guidelines issued by the Board of Directors.
The Bank's Managing Director is responsible for
organising the risk management function. The Risk
Management Director acts as the chairman of the Risk
Management Committee. In accordance with its rules of
25
ANNUAL
REPORT
LocalTapiola
Bank2013
procedure, the Committee prepares and supervises risk
management guidelines and compliance with them. In dayto-day business operations, the responsibility for risk
management is placed with the Credit Director as regards
credit risks, the Balance Sheet Management Committee as
regards balance sheet risks, and the head of each business
3.3.1.
26
Risk management organisation
23 (60)
area as regards operational risks. This division of
responsibility has been implemented in order to ensure that
risk management is comprehensive, as well as to identify all
material risks and their combined effect on the Bank's
operational result and own funds.
The Bank Group's internal control refers to the planned
daily monitoring of business operations. The risk events are
registered and reported to the management group and the
Group's risk management. The internal control process also
entails giving feedback and participating in risk reduction
measures.
3.3.2.
The Bank's Balance Sheet Management
Committee
The Balance Sheet Management Committee is an expert
organ of managing, monitoring and reviewing the
company's balance sheet risks. It is established by the
Bank's Board of Directors and reports directly to it. The
Committee is responsible for ensuring that the company's
balance sheet management is organised in an appropriate
manner and that risks are at the desired level in relation to
the expected profit.
The Committee monitors the liquidity situation and the
ratio of the Bank's lending to other investment assets and
fund-raising. Monitoring takes place by tracking and
measuring the behaviour of the company's balance sheet
items and the risk of value changes in relation to
operational minimum solvency requirements and those set
by the authorities.
The Committee is responsible for ensuring the suitability
and timeliness of the calculation methods and IT systems
needed in monitoring, as well as for ensuring the sufficiency
of other monitoring resources. The Committee reports on
matters relating to balance sheet management and
participates in the preparation of the investment plan and
risk budgeting as well as in liquidity and solvency
management.
The ordinary members of the Balance Sheet
Management Committee are the managing director
(chairman), CFO, risk management director, senior
economist and capital market director. In addition, a
representative of the Bank's Board of Directors attends the
meetings in a monitoring capacity. The Bank's executive
assistant acts as secretary to the Committee. The Interest
Committee, working under the guidance of the Balance
Sheet Management Committee, decides on the directive
level of the interest rates applied in business operations.
The organisation of the Bank's management is
confirmed by the Board of Directors. The structure of the
organisation reflects the need to separate operations and
assignments and ensure expedient organisation of
monitoring. The powers of decision and responsibilities are
defined in the Rules of Procedure for the Board of Directors,
the Rules of Procedure for the management group verified
by the Board of Directors, and the roles and role
descriptions of the other personnel.
The annual operational plan of the Bank sets the
internal quantitative and qualitative goals based for the
various operations of the Bank, the actualisation of which is
continuously monitored. The Bank’s management group
reviews risk reports monthly and the Board of Directors
reviews them quarterly.
3.4. Risk types, measurement and management
Risk management includes the identification, assessment,
prevention and monitoring of risks.
24 (60)
3.4.1.
Strategic risks
Strategic risk refers to a situation where a chosen strategy is
incorrect in relation to the Bank's ability to take risks, and its
technical and human resources (for instance, the wrong
strategy, slow action, centralised control, weak or narrow
leadership). One element of strategic risk is the risk to
reputation, which is regularly monitored using customer
satisfaction questionnaires and measuring of market
awareness.
The strategic risks of the Group companies are mapped
at least once a year according to the rules. The mapping is
performed using a common method for the financial group,
based on the use of model scenarios.
Risk mapping is performed for each risk aspect in the
operational environment. These aspects are as follows:
• Risks associated with the general operating
environment
• Risks associated with the markets and customer
behaviour
• Risks caused by the nature of competition and by
competitors
• Risks related to strategic choices
• Risks related to integration
The strategic intent of the Bank has two main elements in
accordance with the practice of the Group: the core of the
strategy and the special part to be defined for a three-year
period. The core strategy includes the business idea, values,
unique selling points and vision. The section to be defined
for the three-year period includes the elements of strategic
choices and a strategy card, which is divided into four
perspectives. These perspectives are (1) the benefits and
services expected by the customer, (2) the know-how and
wellbeing of personnel, (3) the efficiency and quality of
processes, and (4) financial conditions and market position.
The reputation of the Bank is included in all of the
strategic elements described above. This means that risks
related to reputation and corporate image can be realised in
many different ways.
To reduce the risk to reputation, the Bank regularly
measures the above-mentioned strategic elements on the
market and among the clientele. The results are reported
regularly to the Board of Directors and the management
when reviewing whether the goals of the strategy have
been reached and when reviewing the results of the risk
management process.
If necessary, actions for reducing the risk to reputation
are linked with a specific procedure to measures in the
aforementioned strategy card and in the annual strategy
card.
3.4.2.
Credit risk
Credit risk refers to the risk of a loss caused by the Bank's
contracting parties not being able to discharge their
payment obligations and the collateral received being
insufficient to cover the receivables. Credit-granting and the
quality of the credit process are essential for credit risk
management.
LocalTapiola Bank was founded to supplement the
Group's service range, particularly in the private sector. As a
result of the Local Insurance merger, the range of services
offered to farmers and small companies has expanded. The
27
ANNUALREpORT2013 LOCALTApiOLABANKLTD
Bank's customers include those that centralise their
business in the Group, as well as new customers coming to
the Bank on the basis of the new opportunities offered by it.
The customers are households and the main credit product
is housing loans.
As a rule, unsecured credit risks are not taken. The
customer's solvency and financial buffers must secure a
low-risk loan portfolio for the Bank. Careful credit-granting
is based on the customer's credit rating, a centralised credit
decision process, careful insurance policies and safe creditgranting authorisations.
The credit-granting function of LocalTapiola Bank is
based on centralised decision-making and credit-granting
authorisations. This harmonises risk-taking and speeds up
reaction times in situations of change. When credit is
drawn, a "four eyes" principle, centralised archiving of
documents and post-checking procedure are in use in
accordance with special instructions. There are clear
operational principles and goals set for the monitoring of
regional credit operations. Credit operations is a key area of
the internal auditing of the bank and a part of the annual
risk management self-assessment report delivered to the
Board of Directors.
The granting of credit is directed and implemented in
accordance with the credit-granting strategy and financial
products approved by the Board of Directors.
The principle in calculating the need for capital is to take
into account the extended debt-servicing ability of the
counterparties, including the total assets of the customer,
all liabilities and net income. In corporate financing, the
operational preconditions of the company are similarly
assessed. The development of customers’ overall wealth
and the assessment of their future cash flows are central
concepts in the review. The goal is to establish, as reliably as
possible, the credit risk of the Bank's entire credit portfolio
and the capital required to cover this. The credit-granting
guidelines have separate regulations on the collateral
required for individual credit products.
The credit-granting to private persons and the
assessment of the need for capital relating to credits are
based on the risk classification applied since the start of the
Bank's operations. The borrower’s solvency and financial
buffers are taken into account in the risk classification. Both
classification criteria use a five-class evaluation scale, so
there are a total of 25 risk classes in the matrix. A value of
1–25 has been defined for each cell in the matrix, which is
used in the reports when risk classes are combined.
Three risk classes are used in regular reporting. A
relative maximum limit has been set in the risk
management plan for the loans with the highest risk
content.
In the table below, the risk classes have been combined
into three main classes. Normal risk level requires that the
customer's assets are twice the amount of the loan applied
for, or that no more than 30% of the customer's income is
spent on living expenses and managing the loan.
Risk level
Lower tha n norma l
Norma l
Hi gher tha n norma l
Total
28
31/12/2013 31/12/2012
EUR share EUR share
928 53%
748 45%
626 36%
733 44%
192 11%
192 11%
1,746 100% 1,673 100%
25 (60)
The risk class is used to guide the margin requirement.
In addition to the prudent collateral requirement, the
customer's solvency after a possible rise in interest rate
levels is assessed in risk classification, among other things.
The management group modifies the guidelines for credit
pricing in accordance with the risk management plan and
the general market situation.
In accordance with the credit-granting guidelines, all
housing loans must have a real security to cover the amount
or supplementary credit insurance, or a guarantee.
Residential property is estimated as prudent collateral for
70 per cent of its current value. Of the Bank's credit
portfolio (loans and receivables), 76.7 per cent consists of
housing loans. For these loans, the average loan-tocollateral ratio is approximately 57 per cent. Therefore,
housing loans have better collateral than the credit-granting
policies require. The effect of the trend of decreasing prices
on the capital adequacy requirement is being tested by
calculating the amount of the value of the housing that
remains outside the limit of securing collateral.
The private sector accounted for 91.3 (95.8) per cent of
the loan portfolio at the end of the financial year. The figure
below shows the division of the loan portfolio according to
the intended use.
The obligations outside the credit portfolio and the balance
sheet in millions of euros using the risk adjustments used in
solvency calculations are as follows:
Risk adjustments
0%
10%
20%
35%
50%
75%
100%
150%
Total liabilities, EUR m
31.12.2013
EUR m
157
24
120
1,619
0
216
111
4
2,250
31.12.2012
EUR m
136
25
122
1,475
0
186
187
3
2,134
26 (60)
The risk adjustment classes mainly include the following
items:
Government, municipalities
0%
Collateralised bonds
10 %
Credit institutions
20 %
Residential mortgage-backed credits
35 %
Companies (Class A)
50 %
Other small loans
75 %
Companies
100 %
Unorganised receivables
150 %
The number of household loans where no value
adjustments had been made (including the balance sheet
values of the property pledged as collateral) were as
follows:
Unmanaged credits
EUR m
43.6
32.7
49.3
30–90 da ys
3.4
3.9
4.1
Over 90 da ys
5.1
5.5
4.2
52.1
42.1
57.6
Proportion of credit portfolio
%
%
%
Unma na ged, tota l
2.82
2.51
3.83
Over 90 da ys
0.27
0.33
0.28
The amount of individual receivables with a reduced
value decreased by EUR 0.7 million during the review
period, and the total amount at the end of the period was
EUR 0.4 million. After depreciation, the credit portfolio does
not include unsecured loans, except for a small number of
short-term consumer credit accounts.
Geographically, the loan portfolio is divided as follows:
Loan portfolio
31/12/2013
EUR m
421.2
1,419.1
1,840.3
Grea ter Hel s i nki Area
Fi nl a nd, other
Total
31/12/2012
EUR m
384.9
1,286.4
1,671.3
LocalTapiola Prime
The Bank's Balance Sheet Management Committee makes
decisions concerning the LocalTapiola Prime interest rate.
The decisions are communicated at least two weeks before
they take effect.
%
30.9.13
0.00
31.12.13
0.00
30.6.13
0.50
31.3.13
0.50
30.9.12
1.00
31.12.12
1.00
30.6.12
1.50
31.3.12
1.50
30.9.11
2.00
31.12.11
2.00
30.6.11
2.50
31.3.11
2.50
31.12.10
1,600
1,634.7
1,840.3
1,754.6
1,671.3
1,509.1
1,500.4
1,400
600
400
200
0
Deposits
12/2011
Deposits
12/2012
Deposits
12/2013
Euribor
Lending
12/2011
Prime
Lending
12/2012
Lending
12/2013
Fixed
The relative proportion of Euribor-linked deposits and credit
increased. The popularity of the Prime interest rate
decreased, especially in new housing loans.
3.4.3.
Market risks
Interest rate risk
Interest rate risk refers to the Bank's performance changing
when the interest rate level changes in an unfavourable
direction (including maturity, reference rate and interest
rate adjustment period risks). Interest rate risk is measured
both as cash flow interest rate risk based on current values
and as 12-month income risk. In the calculation of both risk
indicators, a one per cent interest rate change (+/-) from
the next interest rate adjustment day has been applied to
the interest-sensitive items on the balance sheet. The risk
indicators illustrate the vulnerability of the Group's results
to a rise or fall in interest rates on an annual level. Limits in
relation to the Bank’s own funds have been set for the risk
indicators. In addition to these, the impact of various linear
standard shocks on the Bank’s balance sheet are monitored.
The resulting risk figures are compared to the Bank’s own
funds.
The following table depicts the interest rate risk of the
balance sheet calculated as 12-month income risk if the
interest rate drops by one per cent.
Bank
Development of market interest rates in 2011–2013
Euribor 12 months
1,800
800
EUR m
Total
EUR m
2,000
1,000
EUR m
Les s tha n 30 da ys
LocalTapiola Bank's lending and deposits by interest linkage
1,200
31.12.2013 31.12.2012 31.12.2011
Duration of delay
The 12-month Euribor interest rate was 0.556 (0.543) per
cent at the turn of the year. The LocalTapiola Prime interest
rate was lowered twice during 2013. At the end of the year,
it was 1.2 per cent.
Own funds , Ti er I, EUR m
Own funds , Ti er II, EUR m
Income ri s k, EUR m
Ri s k i n Ti er I a s s ets , %
Ri s k i n Ti er I + II a s s ets , %
31.12.2013
EUR m
139.1
8.3
2.0
1.4
1.3
31.12.2012
EUR m
104.1
14.9
2.7
2.6
2.3
All the monitored interest risk indicators are at safe levels.
Financing risk
Financing risk arises when the maturities of receivables and
liabilities are different. Financing risk is monitored on the
basis of maturity classes. In each of the maturity classes to
be monitored, underfunding may not exceed the amount
defined in the risk management plan. If the risk limit is
29
ANNUAL
REPORT
LocalTapiola
Bank2013
Group LocalTapiola Bank Ltd 27 (60)
exceeded, the deficit can be covered with the financial
conglomerate’s internal financing limit. The conglomerate’s
internal financing limit must cover the deficit created in
total.
As regards financing risk, the Bank’s financial resources
are sufficient.
Liquidity risks
The liquidity risk is managed in accordance with a strategy
approved by the Board of Directors and a contingency plan
safeguarding the implementation of the strategy.
LocalTapiola Bank maintains a sufficient liquidity
reserve, which covers sudden changes in the cash situation.
The principle is to determine the size of the reserve in such
a way that at least one month's unanticipated market
disturbance can be managed with it.
Scenario 1 depicts liquidity stress in which ten per cent
of the on-demand deposits is lost immediately. The Bank
must have liquid assets amounting to at least 1.5 times the
bank run and at least ten per cent of the balance sheet.
Scenario 1
Level 1 ca pi ta l 100%
LCR's l evel 1 ca pi ta l
As s ets i n other ba nks (under 1
month)
Level 2 ca pi ta l 85%
LCR's l evel 2 ca pi ta l
Items s ui ta bl e for the Centra l Ba nk
but not LCR
Level 3 ca pi ta l 50%, more extens i ve
tha n LCR
Fi na nci ng l i mi ts
Liquidity reserve, total
Scena ri o's ba nk run
Ca pi ta l ma rket i ns ta bi l i ty
Other a ddi ti ona l s tres s es
Income fl ows
Liquidity stress
LCRmod %
31.12.2013
EUR m
157.6
157.2
0.4
24.8
20.5
4.3
49.4
160.0
391.7
85.7
221.7
4.0
-6.6
304.7
129%
LocalTapiola Bank maintains a sufficient liquidity
reserve, which covers sudden changes in the cash situation.
The principle is to determine the size of the reserve in such
a way that at least one month's unanticipated market
disturbance can be managed with it. The sufficiency of
liquid assets is assessed using two different indicators. For
both of these, the liquidity reserve must exceed the amount
of liquid assets required as indicated by the liquidity stress.
Scenario 1 reviews the liquidity claim (LCR) when
applied in such a way that both the reserve and stress take
account of the Bank's own view of the required assets and
credible stress. Unlike the official indicator (LCR), the
reserve of the scenario takes into account the securities of
credit counterparties, among other things. Correspondingly,
stress coefficients are partly increased compared to the
official indicator.
In scenario 2, ten per cent of the on-demand deposits is
lost within a month. The bank run is compared to the Bank's
liquid assets, which must amount to at least 1.5 times the
bank run and at least ten per cent of the balance sheet.
30
Scenario 2
Depos i ts pa ya bl e on dema nd
Bank run (of on demand-deposits 10%)
31.12.2013
EUR m
1,451.2
145.1
Depos i ts a t the Ba nk of Fi nl a nd
Items enti tl i ng to centra l ba nk fi na nci ng
Short-term recei va bl es (under 1 month)
Fi na nci ng l i mi ts
Liquid assets, total
144.1
126.5
50.8
160.0
481.4
Required liquidity reserve
Liquidity ratio
217.7
221%
Ba nk's ba l a nce s heet
Share of liquid assets in the bank's balance
2,182.0
221%
According to liquidity scenarios, the Bank's liquidity is at
a safe level. In 2013, liquidity risk was also monitored
internally using indicators that comply with the forthcoming
Basel III regulations.
Currency risks
Overall and currency-specific limits have been set for
currency operations.
Country risks
At the end of the review period, the Group had investments
in the eurozone only in fixed-income instruments issued by
the Finnish government and companies operating in Finland
as well as financial institutions operating in Finland or
Sweden. The Group had no country risk in terms of credit
granted outside of Finland. Limits have been set for country
risks in investment operations.
Price risks
Price risk refers to the risks connected with changes in the
market value of investments and holdings. In fixed-income
investments, price risk may affect the fair value of
investments as a result of changes in credit, interest rate or
spread risks. The Group's most significant price risk mainly
concerns the fixed-income investments managed by the
Bank's treasury and the related interest rate risk. The
purpose of the investments is to act as the Group's liquidity
reserve. The limits set in the risk management plan set the
limits for investment activities.
The price risk is at a moderate level in accordance with
the risk management policy.
3.4.4.
Operational risk
Operational risk refers to the possibility that deficiencies in
the Bank's systems or internal monitoring cause unexpected
losses (for instance, operational risks, operational
stoppages, mistakes, erroneous systems, failure of
monitoring, system failures, poor skills).
The operational risks of the Bank and the asset
management operations are mapped by activity in
accordance with the risk mapping method for financial
conglomerates, including legal and sales organisations.
According to the rules, this procedure is performed annually
in conjunction with the annual planning and whenever a
specific reason for it is detected.
Operational risks are mapped from operational
perspectives. The perspectives used in the mapping include:
• Process risks
• Personnel risks
• Systemic risks
• Legal risks
• Risks of damage
• Other risks related to tactical choices in annual and
periodic planning
The mapping is based on the descriptions prepared of
operational processes. Process descriptions and risk
mapping are intended to seek the risk points critical for
guaranteeing the quality of operations, to plan the
procedures required for maintaining quality and to appoint
responsible parties or persons. In addition, the sufficiency of
risk management measures is assessed.
Mapping operational risks and the related action plans
is part of the companies' risk management plan related to
annual planning. The practical monitoring related to
operational risks in the companies' operations is the
responsibility of the management group. The internal
auditing function within the Group also performs audits on
specific functions as regards operational risks.
The quality of risk management is maintained by
monitoring and continuity planning. In the continuity plans,
operational processes and key systems have been
prioritised by activity and recovery times have been defined
for them. In addition, descriptions have been prepared of
the measures to be taken in typical problematic situations,
along with the personnel responsible for such measures.
Summaries of the operational risks for the entire Bank are
prepared on the basis of activity- and region-specific
mapping.
3.4.5.
Cyclical risks
Cyclical risks refer to the negative effect of economic trends
on the finances of the Bank's customers and their
relationship with the Bank.
LocalTapiola Bank grants credit mainly for housing. The
greatest cyclical risk is therefore an unfavourable change in
housing prices. The price development does not directly
weaken customers’ ability to pay, but it is an indication of
other financial uncertainties and potential difficulties in
paying. Price development has been chosen as an indicator
to be followed at the Bank, as it anticipates changes in the
economy faster than, for example, the unemployment rate.
The effect of decreasing prices on the risk classification of
new credit is defined in the risk management instructions of
the Bank.
This cyclical risk indicator is also used in part to manage
the concentration risk of the bank's credit portfolio.
The Bank monitors the effect the decreasing prices have
on the value of housing collateral and the resulting capital
requirements. Of the credit granted by the Group, 76.7
(79.8) per cent was housing loans in 2013. According to the
credit-granting guidelines, loans must have prudent
collateral. Residential property is estimated as prudent
collateral for 70 per cent of its fair value. If needed, the
collateral can be supplemented with credit insurance or a
secure guarantee. The policy on collateral reduces the
immediate risks caused by economic fluctuations to the
Group's core business.
28 (60)
The operational conditions of LocalTapiola Asset
Management Ltd are based on the development of the
financial markets. Weaker markets could result in a reduced
number of assignments and, thus, lower profits. Changes
can have significant effects. Market trends are monitored
primarily using the OMX Helsinki index.
3.4.6.
Legal and compliance risks
Legal and compliance risks include the interpretation of
laws and decrees, the validity and content of agreements
and the legal risks related to the Bank's marketing that may
cause losses, liability for damages or loss of reputation or
esteem. Risks can be related to the whole business and can
arise from external factors or the Bank's own operations.
Legal risks are mapped at the same time as operational
risks, using a shared method.
4.
Notes on the Bank Group's solvency
management
The Bank Group's solvency management is based on
monitoring in accordance with the Basel II, Pillar I norms
and an internal capital sufficiency assessment process
(ICAAP). The need for capital required by the various
operational risks is assessed with an internal process. The
assessment is used in solvency planning. The solvency
strategy is updated annually.
The following table depicts the solvency ratios:
• Requirement of economic capital, ICAAP
• BASEL II, Pillar I solvency ratio
ICAAP requirement of economic capital
BASEL II, Pillar I solvency ratio
2.20
2.1
2.00
1.9
1.8
1.80
1.60
1.6
1.6
1.3
1.40
1.20
1.00
2011
2012
ICAAP
2013
BASEL
Solvency management is guided by the conglomerate's
risk management group. The goal of the management group
is to support comprehensive risk management that aims to
use the best practices in risk management.
The capital management process assesses the
sufficiency of capital, taking into account operational risks in
a comprehensive manner (Pillar II, ICAAP). These risks refer
to, for example, the risks included in Pillar I (credit and
operational risks) and the risks remaining outside Pillar I,
such as interest-rate risk, development risk and strategic
risks of the financial balance sheet. Furthermore, the
sufficiency of capital is assessed as needed through
separate stress tests that take into account changes in the
market situation or stress tests defined by the Finnish
Financial Supervisory Authority.
31
ANNUAL
REPORT
LocalTapiola
Bank2013
Group LocalTapiola Bank Ltd 4.1. Requirements and goals related to solvency
Solvency management is based on current legislation on
solvency. When calculating the solvency of the Bank Group,
the standard method is applied to credit risks and the basic
method to operational risks. In addition, the goals of the
financial conglomerate and the Bank Group as regards
solvency are also taken into account in solvency
management.
The solvency requirements for credit institutions and
investment services stated in the following laws apply to
LocalTapiola Bank and LocalTapiola Asset Management:
• The amount and quality of the bank's own capital must
always be sufficient to cover the risks faced by the bank
(the Act on Credit Institutions, Section 5)
• The total amount of own capital for asset management
must always be equal to the decreed minimum capital
(Act on Common Funds, chapter 4. a)
4.2. Internal goals for solvency
The following ratios have been set as internal goals for
solvency in the Bank Group:
• The Basel II, Pillar I solvency ratio must be a minimum of
twelve per cent.
• The solvency ratio of primary own funds must be at
least eleven per cent
The Group's solvency was good in 2013. The Group's equity
increased in 2013 in line with the requirements set by the
expansion of the business operations. In 2013, the solvency
ratio of the Bank Group was 16.4 (12.7) per cent and the
ratio with primary own funds was 15.3 (10.9) per cent.
The ICAAP calculation is performed monthly and the
development of the capital requirement is estimated based
on result and solvency predictions and stress tests.
In addition to fulfilling the requirements and objectives
concerning solvency, the goal is to arrange the supervision
and management of solvency in compliance with the
following principles. Solvency supervision and management
• Covers all material risks related to business and the
operating environment;
• Takes into account the strategic and operational plans,
while also influencing strategic and operational targetsetting;
• Covers both the short and long term;
• Applies to operations under normal conditions (as
defined in business plans) and in unusual situations.
Solvency is monitored and managed on the basis of these
principles by the risk management group and the Balance
Sheet Management Committee using stress tests and
reporting processes.
The reports also present conclusions on the capital
adequacy ratio and on necessary actions for maintaining
solvency.
32
29 (60)
4.3. Publishing solvency information
Solvency information in accordance with the Credit
Institutions Act and the Finnish Financial Supervisory
Authority's standards is included in the financial statements
and annual report of LocalTapiola Bank Group. The financial
statements of the Group, including solvency information,
are prepared by the Bank's financial administration under
the leadership of the CFO. The financial statements are
handled by the management group of the Bank and
approved by the Board of Directors.
After this, the auditors of the Bank audit the financial
statements. The auditors also verify the correctness of the
solvency information while auditing the financial
statements.
4.4. Significant changes to the information during the
financial period
If such material changes in the solvency information of the
Bank Group occur during the financial period as may have
significance to stakeholders, such as customers, partners
and owners, the solvency information is also published in
the interim report. The information is published in the
interim report concerning the time period when the
material changes have occurred. If a material change has
occurred only in a single piece of information concerning
solvency, it is not essential to publish the other information.
Thus, only the relevant information can be published in the
interim report, with a mention that the other information
remains unchanged. The Board of Directors decides when
the changes that have occurred in the information are
significant enough that they must be published during the
financial period.
4.5. Information to be published
As a rule, the information listed in Finnish Financial
Supervisory Authority standard 4.5, Publishing solvency
information to the markets, is published as solvency
information. However, information that is not relevant to
the solvency of the Group is not published. This includes
information that is not relevant to the Bank Group’s
stakeholders and which is not otherwise relevant on the
basis of the type and scope of the Group’s operations and
risks. With regard to information deemed irrelevant, the
financial statement information includes a brief explanation
as to why the information has not been included in the
financial statements. The Board of Directors makes the
decision on information that is deemed irrelevant and thus
will not be published. Similarly, the Board of Directors
makes the decision on information deemed to be business
secrets or to fall under the purview of confidentiality.
The financial statements and annual report of the Bank
Group are published on the internet pages of LocalTapiola
Group (www.localtapiola.fi), along with the solvency
information, thus ensuring that these are available online to
stakeholders.
4.6. Calculating economic capital
The requirement for economic capital is based on the
combined capital requirements of the various areas of
business. The ICAAP process handles the following risks and
their capital requirements:
• Credit and counterparty risks
• Operative risks
• Legal risks
• Market risks
• Residual risks
• Cyclical risks
• Quality and concentration of credit portfolio
4.7. Solvency calculation
30 (60)
• Industry-specific risk
• Strategic risks, including risk to reputation
• New business
The model calls for the sum of the capital required by the
various risks to be calculated, thereby assuming that it is
possible for all of the risks to occur simultaneously.
The requirement for economic capital is calculated
monthly and published as part of the management's risk
reporting. The risk reporting follows the capital
requirements according to both the ICAAP and Basel II
norms.
SOLVENCY CALCULATION
1,000 €
Own funds
31/12/2013
31/12/2012
142,513
110,129
Primary own funds
Capital and reserves
167,544
137,543
Adjusted profit/loss brought forward
-25,799
-32,141
Deduction from primary own funds
-7,171
-9,949
134,574
95,453
Total
Secondary own funds
Higher secondary own funds
-100
1,528
Lower secondary own funds
10,000
15,000
9,900
16,528
-1,961
-1,852
Total
Deductions from primary and secondary own funds
Primary own funds for solvency calculation
133,593
94,527
8,919
15,602
Minimum requirement for own funds
69,700
69,598
Requirement for own funds for credit and counterparty
risks (standard method)
Secondary own funds for solvency calculation
61,994
62,415
Receivables from credit institutions and investment firms
2,046
2,101
Receivables from companies
5,402
5,721
Retail portfolio
6,761
5,762
44,759
40,699
Mortgages
Receivables due
450
463
Short-term receivables from companies
582
5,208
Mutual fund investments
28
679
Other items
1,965
1,782
Requirement for own funds for operative risks (basic
method)
7,707
7,183
72,813
40,530
Capital adequacy ratio primary own funds (%)
15.3
10.9
Capital adequacy ratio (%)
16.4
12.7
Surplus/deficit of own funds
33
ANNUAL
REPORT
LocalTapiola
Bank2013
Group LocalTapiola Bank Ltd 5.
31 (60)
Notes to the consolidated profit and loss account and balance sheet of the Bank Group
All figures are presented in thousands of euros, unless stated otherwise.
Notes concerning balance sheet items
K1.
From the central bank
From Finnish credit institutions
From foreign credit institutions
Receivables from credit institutions, total
K2.
K3.
2013 Total
2012 Total
17,918
1,895
19,813
17,918
2,347
314
20,578
16,809
62,742
313
79,864
2013
2012
Corporate customers and housing associations
Financial and insurance institutions
Households
Non-profit-making corporations
Foreign countries
Receivables from the public and public corporations, total
91,203
9
1,740,478
3,391
5,201
1,840,282
67,685
376
1,595,937
2,131
5,142
1,671,271
Value adjustments on 1 Jan.
Increase in receivable-specific value adjustments
Receivable-specific cancellations of value adjustments
Change in group-specific value adjustments
-1,925
-80
154
-77
-1,818
-110
82
-79
Value adjustments included in the balance sheet item on 31 Dec.
-1,928
-1,925
Increases in credit losses recognised for the financial year
-30
-125
Cancellations of credit losses recognised for the financial year
121
12
2013
2012
13,104
27,838
1,025
-
2,222
110,140
50,867
126,492
78,705
16,972
4,990
5,058
27,021
26,471
59,969
5,126
91,566
153,512
170,271
2013
13,936
13,936
2012
9,597
9,597
Certificates of claim, not entitling the company to central
bank financing
Issued by parties other than public corporations
Saleable, publicly listed
- Commercial papers issued by banks
- Commercial papers
- Bonds issued by banks
- Other certificates of claim
Other certificates of claim, total
Certificates of claim, total
Property leased under financial leasing agreements
Machinery and equipment
Total
34
Other
Issued by public corporations
- Government-issued bonds
Kept until due date, publicly listed
- Bonds issued by companies
Certificates of claim entitling the company to central bank
financing, total
K4.
Payable on
demand
----451
314
765
K5.
Shares and holdings
Balance sheet item
Shares and holdings
Saleable
Shares and holdings in Group companies
Total
- of which at acquisition cost
K6.
32 (60)
Publicly listed
Other
of which in
credit
2013
Total
2012
Total
-
492
1,961
2,453
492
1,961
1,961
1,961
492
0
1,961
2,453
492
8,623
0
1,852
10,475
495
2013
2012
1,248
1,248
564
564
Share derivatives
Assets retained for business purposes
Option contracts
Purchased
Total
Concluded for purposes other than
hedging *)
Share derivatives
Option contracts
Purchased
Total
- where the counterparty is a company in the same
Group
Nominal value of underlying asset
Remaining maturity
under 1 year
1–5 years
Current value of derivative
Total
positive
negative
17,645
17,645
19,010
19,010
36,655
36,655
1,248
1,248
-
-
-
-
-
-
2013
7,171
7,171
2012
9,949
9,949
2013
2012
14,084
1,081
15,165
-4,135
-3,859
-7,994
7,171
9,949
13,900
521
-337
14,084
-2,267
337
-2,205
-4,135
9,949
11,633
2013
2012
750
66
-140
676
-291
-96
-388
289
459
277
567
-94
750
-138
-153
-291
459
139
2013
5,601
5,601
2012
7,508
7,508
* comprising options sold and equivalent options bought for investment deposits and index-linked bonds. The embedded derivatives
related to the main agreement of the released investment deposits and index-linked bonds have been separated from the main
agreement.
K7.
Intangible assets
Intangible assets
IT expenses
Total
K8.
Changes in tangible and intangible assets during the financial
year
INTANGIBLE ASSETS
Acquisition cost on 1 Jan.
Increase
Transfers between items
Acquisition cost on 31 Dec.
Accumulated depreciation and value adjustments on 1 Jan.
Accumulated depreciation related to deductions and transfers
Depreciation for the financial year
Accumulated depreciation and value adjustments on 31 Dec.
Book value on 31 Dec.
Book value on 1 Jan.
TANGIBLE ASSETS
Increase
Deductions
K9.
Other assets
Other assets
Other receivables
Total
35
ANNUAL REPORT
LocalTapiola
Bank 2013
K10. Prepayments and accrued income
Interest receivables
Other prepayments and accrued income
Prepayments paid
Total
2013
4,262
325
19
4,606
2012
3,418
1,153
4,571
2013
2012
2,000
2,000
1,372
1,372
Recorded from the current value reserve
Deferred tax liabilities in total
-20
-20
-500
-500
Deferred taxes in the profit and loss account
628
120
-3
-1
26,184
31,464
2013
2012
137,442
137,650
129,345
129,700
2,435
2,601
139,877
2,380
2,601
131,725
2013
2012
1,252
1,252
549
549
2013
37,844
5,670
43,514
2012
39,454
4,569
44,023
2013
1,753
8,278
0
10,032
2012
2,531
5,205
2
7,738
K11. Deferred tax liabilities and tax assets
Deferred tax assets
Recorded confirmed losses
Deferred tax assets
The off-balance-sheet deferred tax liability of the current
value reserve
Confirmed loss from previous years
Deferred tax profits will be recorded on the unused tax liabilities up to the amount for which the
company is likely to receive tax profits on the basis of taxable income.
Deferred tax assets are recognised using a 20% tax base.
Other deferred tax profits on the confirmed losses of LocalTapiola Bank Plc have been left unrecorded.
They may be used against taxable income collected in the future. The losses expire in 2014–2017.
K12. Bonds issued to the public
Certificates of deposit and commercial papers
book value
nominal value
Bonds
book value
nominal value
Total book values
K13. Derivative contracts and other liabilities retained for business
purposes
Share derivatives
Derivative liabilities managed together with
financial assets held for trading
Total
Embedded derivatives
Sold options
Total
Group
Nominal value of the main contract
Remaining maturity
under 1 year
1–5 years
Total
17,577
19,000
36,577
17,577
19,000
36,577
-
-
-
K14. Other liabilities
Other liabilities
Liabilities on payment intermediation
Other
Total
K15. Accruals and deferred income
Interest payable
Other accruals and deferred income
Prepayments received
Total
36
34 (60)
K16. Liabilities that have lower priority than other liabilities
2013
2013
2012
Tier II value
book value
book value
Tapiola Bank Ltd debenture loan 1/2006, nominal value EUR 10,000,000
Loan period 30 June 2006 to 30 June 2016, right to premature repayment
after 5 years, interest 12-month Euribor + 0.25% units p.a. until 30 June
2011 and 12-month Euribor + 1.00 % units p.a. thereafter
4,000
10,000
10,000
Loan period 30 June 2011 to 30 June 2016, interest 12month Euribor rate + 1.35 % units until 30 June 2016
6,000
15,000
15,000
10,000
25,000
25,000
5–10 years over 10 years
11,936
251,529
1,403,833
-
2013
Total
126,492
20,578
1,840,282
27,021
Total
In the solvency calculation, loans have been grouped under Tier II.
K17. Maturity distribution of financial assets and liabilities
Maturity distribution
under 3 months 3–12 months
4,532
4,068
20,578
29,534
8,608
9,011
11,973
8,132
1,618,801
50,785
-
9,500
125,963
86,657
-
1–5 years
105,956
146,777
6,037
-
-
47,632
1,766,853
139,877
25,000
Foreign of which from
the same
currency
2013 Total
2012 Total
30,000
22,088
2,435
25,000
K18. Specification of balance sheet items into Finnish and foreign-currency items
and items from the same Group
Balance sheet item, Finnish currency
Finnish
currency
Group
Other assets, incl. cash assets
Assets, total
20,398
1,840,282
153,512
1,248
162,203
2,177,644
180
180
2,747
8
2,756
20,578
1,840,282
153,512
1,248
162,203
2,177,824
79,864
1,671,271
170,271
564
135,159
2,057,129
Derivative contracts and liabilities retained for business
purposes
Other liabilities
Liabilities, total
47,632
1,766,853
139,877
-
2,747
-
47,632
1,766,853
139,877
43,278
1,696,016
131,725
1,252
53,566
25,000
2,034,180
0
8
2,756
1,252
53,566
25,000
2,034,180
549
52,261
25,000
1,948,828
K19. Current values of financial assets and liabilities
Assets and liabilities that, after the original recognition, are valued in the balance sheet at current value repeatedly or one-off
The current values of the level 1 instruments are based totally on the quoted prices of identical assets or
liabilities on actual markets, such as prices on the stock exchange, at brokers or in price information
services. The instruments on level 1 mainly consist of domestic quoted equity investment liabilities that
have been listed for sale. The bid price at the time is used as the market price for the quoted financial
assets.
The current values of the level 2 instruments have been calculated using value methods and are derived from quoted
prices on the markets. Level 2 instruments consist of OTC derivatives and embedded derivative liabilities.
Current values to be repeatedly determined using significant input data other than the
observable ones (level 3)
The recorded values of the level 3 holdings or liabilities are not based on verifiable market information. Level 3 includes
equity instruments that have valued at acquisition cost because they have no market price quoted on the actual markets
and their current value cannot be determined reliably.
37
ANNUAL REPORT
LocalTapiola
Bank 2013
K20. Current values and book values of financial assets and liabilities as well as current value hierarchy
2013
Current value
2013
Book value
2012
Book value
126,149
126,149
91,228
20,578
20,578
79,864
1,840,282
1,840,282
1,671,271
153,512
153,512
170,271
Shares and holdings
492
492
8,623
1,944
1,944
1,852
0
0
0
1,248
1,248
564
Current values of financial assets and liabilities
Financial assets
Cash assets
Financial liabilities
47,632
47,632
43,278
1,766,853
1,766,853
1,696,016
purposes
140,721
139,877
131,725
1,252
1,252
549
24,915
25,000
25,000
Level 3
2013
Financial instruments valued at current value in the balance sheet
Financial assets
Certificates of claim, classified as saleable
Level 1
Level 2
152,487
152,487
Shares and holdings
492
492
1,944
1,944
0
purposes
0
1,248
1,248
1,252
1,252
Gains and losses unrealised during the period (level 3)
0
K21. Capital and reserves items
Equity capital
At the
beginning of
40,370
48,100
+ Increase
- Decrease
8,970.00
-
Premium fund
1,528
-1,628
0
-100
1,528
-1,628
1,528
-1,628
0
-
-100
49,073
21,031
49,073
21,031
-
Profit or loss brought forward
Profit or loss for the financial year
Total
-36,676
Transfers At the end of
between the financial
49,340
48,100
-100
0
-
70,104
5,907
-30,769
70,104
5,907
6,970
-5,907
6,970
108,302
35,343
-5,907
143,644
In Group accounting, a bridge calculation has been made for the transition from IFRS to FAS. The calculation is presented in Appendix 2.
K22. Equity capital
Equity capital at the beginning of the financial year
Share issue realised during the financial year
Equity capital at the end of the financial year
Share type code
Number of shares at the beginning of the financial year
Change in the number of shares in the share issue, pcs
Number of shares at the end of the financial year
Number of votes for a share
Shares have no nominal value
Limitations regarding the acquisition of shares
redemption clause in the articles of association
Shareholder's priority for new shares when equity capital
according to shares of ownership
is increased
Right to dividend
equal to all shares
The Bank's shares are not held by the Bank, its subsidiary or associated companies
38
2013
2012
40,370
8,970
49,340
62,108
13,800
75,908
75,908
40,370
40,370
62,108
62,108
62,108
36 (60)
K23. Issues of shares, option rights and issues of convertible bonds
concerning shares
At the Extraordinary General Meeting held on 14 June 2013, it was decided to increase the equity capital from EUR 40,370,200 to EUR 49,340,200.
The equity capital increase was registered on 3 September 2013.
No option rights, or authorisations to issue convertible bonds, were granted in 2013.
K24. Companies Act 624/2006, Chapter 8, sections 5 and 8
Unlike the annual report, the notes to the financial statements make
mention of the fact that the Group companies have no subordinated loans.
K25. Major shareholders and
distribution of shareholdings
The division of the Bank's share capital is as follows:
LocalTapiola General Mutual Insurance Company
LocalTapiola Mutual Life Insurance Company
LocalTapiola Mutual Pension Insurance Company
Total
2013
Share, %
of stock and
votes
78.0
16.0
6.0
100.0
2013
Number of
shares
2012
Number of
shares
59,242
12,122
4,544
75,908
45,442
12,122
4,544
62,108
2013
2012
199
29,014
2,221
31,434
501
35,458
4,297
40,255
209
201
15
-
334
10,988
831
419
17,912
1,977
231
526
0
12,911
240
797
0
21,345
-
0
2013
4,424
-4,076
6
0
354
2012
8,343
-7,940
18
-1
420
2013
121
2012
87
121
87
Notes concerning income statement items
K26. Specification of interest income and expenses by balance sheet item
Interest income
Interest income, total
of which from subsidiaries and associated undertakings
in the same Group
Recorded from value-adjusted credits and other
receivables
Interest expenses
purposes
Other interest expenses
Interest expenses, total
of which for subsidiaries and associated undertakings in
the same Group
K27. Net income from leasing operations
Net income from leasing operations
Rental income
Planned depreciation of leased property
Other income
Other expenses
Investment income
K28. Return on equity investments
Dividend income from investments in shares and holdings
From investments classified as saleable
From companies in the same Group and participating
interests
Total
39
ANNUAL REPORT
2013 LocalTapiola Bank Ltd LocalTapiola
Bank Group
37 (60)
K29. Commission income and expenses
2013
2012
Commission income
From credit-granting
From deposits
From payment transactions
From funds
From asset management
From trading in securities
From granting of sureties
From other operations
Total
3,517
323
2,319
14,954
7,222
803
159
11,066
40,364
2,303
336
2,185
8,200
6,021
779
107
12,515
32,446
Commission expenses
From service charges paid
From other
Total
963
3,640
4,603
932
3,567
4,499
K30. Net income from securities trading
Other items
2013 Total
2012 Total
-18
-18
106
Other
changes in
current value
682
-656
26
-
35
663
-656
7
141
-205
193
-13
70
87
26
35
148
57
2013
2012
0
0
184
184
From shares and shareholdings
From transfers (profit/loss)
From transfers from current value reserves
Total
1,213
0
1,213
0
0
0
1,213
184
2013
7,012
7,012
2012
5,793
5,793
2013
1,434
1,394
2,255
5,082
2012
1,222
1,209
1,281
3,713
2012
2012
3,859
2,205
96
3,955
153
2,358
From derivative contracts
From liabilities retained for business purposes
Net income from securities trading, total
Capital gains
and losses
K31. Net income from saleable financial assets
From certificates of claim
Total
K32. Other business income
Other income
Total
K33. Other business expenses
Rent expenses
Deposit Guarantee Fund payments
Other expenses
Total
K34. Depreciation and value adjustments on tangible and intangible
assets
Intangible assets
Planned depreciation
Tangible assets
Depreciation in total
40
38 (60)
K35. Value adjustment losses from credits, other commitments and
other financial assets
2013
Receivables from the public and public corporations,
credit losses
Receivables from the public and public corporations, other
value adjustments
Value adjustment losses, total
2012
Contractspecific
gross
Group- Recorded in Recorded in
specific the profit and the profit and
gross
loss
loss
decreases
30
-121
-
-91
113
80
110
-155
-276
77
77
2
-89
107
220
Value adjustment losses also includes credit losses
recorded off the balance sheet. Value adjustment on credits
is presented in Appendix K2.
K36. Information on business areas and geographical market areas
The Group's business areas are banking and asset management.
The companies do not have a service network outside Finland.
Asset
Banking management
business
business
47,465
22,129
3,371
4,849
2,182,144
15,524
2,032,548
4,388
271
50
Specification for the Group by business sector,
uneliminated
Income for the financial year, total
Assets, total
Assets, total
Average number of personnel
Notes concerning guarantees and contingent liabilities
K37. Guarantees given
Pledges
Mortgages
2013
Other
collateral
Pledged for the company's own loans
Other liabilities
Pledged for the company's for own liabilities, total
-
-
55,000
1,295
56,295
30,000
1,299
31,299
Given for other reasons on the company's behalf
-
-
9,600
23,000
Pledged on behalf of others
of which to members who are insiders
-
-
11,920
-
12,266
-
Balance sheet item
2013
2013
2012
Other
collateral
K38. Pension liabilities
The personnel's statutory and supplementary pension covers have been arranged through insurance.
Basic TyEL insurance from LocalTapiola Mutual Pension Insurance Company
(Elo Mutual Pension Insurance Company as of 1 January 2014)
Supplementary pension insurance from LocalTapiola Mutual Life Insurance Company
K39. Leasing and other rental liabilities
Off-balance-sheet commitments are presented in Appendix K42 and other lease agreements are short-term.
K40. Off-balance-sheet commitments
the customer
Guarantees
Unused credit facilities
Off-balance-sheet commitments, total
on beha l f of
2013
2012
a compa ny i n Commitments, Commitments,
the s a me
total
total
Group
6,036
6,036
11,920
67,170
79,090
12,266
68,282
80,547
41
ANNUAL
REPORT
LocalTapiola
Bank2013
K41. Receivables and liabilities on payment intermediation
Savings as per the Long-Term Savings Act
On deposit accounts
Total
Due to sales and acquisitions of assets executed on behalf
of customers
Accounts receivable
Trade creditors
2013
2012
86
86
45
45
8
101
10
23
2013
2012
1,633
-
2,709
-
2013
289
19
13
321
2012
153
12
12
177
2013
2012
756
8
675
20
K42. Other off-balance-sheet facilities
Contractual liability related to fees for service providers
The Group's annual core business system expenses are
linked to a fixed or indexed annual price until 2016.
The agreements for system providers contain separate
termination clauses.
As regards data centre and system integrator services,
LocalTapiola Bank and LocalTapiola Asset Management
follow the agreements signed by LocalTapiola Group.
No significant changes occurred in the agreements
between the companies and service providers.
Annual expenses are presented in the profit and loss
account item "Other administrative expenses".
Joint liability relating to collective registering for valueadded taxation (ALV 188 §)
Within one year
on behalf of a company in the Bank Group
Notes concerning personnel, management and related parties
K43. Number of personnel
average
Permanent full-time personnel
Permanent part-time personnel
Fixed-term personnel
Total
K44. Salaries and remuneration paid to the management
Management's salaries and remunerations
Managing director and acting managing director
Ordinary and deputy Board members
K45. Credits and off-balance-sheet commitments granted to
management
2013
2012
Managing director and acting managing director as well
as ordinary and deputy Board members
Loans on 1 Jan.
increase
deductions
Loans on 31 Dec.
1,169
570
-137
1,602
617
598
-45
1,169
Guarantees and other off-balance-sheet commitments
granted to management
-
-
Credits granted to management
K46. Pension commitments of the management
The management's statutory and supplementary pension cover has been arranged through insurance.
The retirement age of the managing directors is 63 years.
42
40 (60)
K47. Loans and other financial receivables from members who are insiders, as well as investments made in these, and guarantees and securities issued for these
Receivables
from the
public and
public
corporations
16,964
2,834
19,799
-
Grounds for being an insider
Controlling interest
Significant influence
Parent company
Key persons who are part of related party companies' management
Total
Equity
investments
Other
receivables
0
1,961
1,961
-
8
253
1,476
1737
-
Transactions between an insider (under the IAS 24 definition) and the parent company are reported only
if they are substantive and have not been executed under customary commercial terms.
Credits, guarantees and other off-balance-sheet commitments granted to the management are presented in Appendix K45.
Credits and guarantees granted to natural persons who are insiders have been granted under customary terms and conditions.
Loans granted to related party companies have been itemised in accordance with the grounds for being an insider.
Credits granted to a related-party company based on ownership of a credit institution are unsecured.
In other respects, loan agreements are concluded under customary commercial terms.
Undrawn credits and guarantees granted to related-party companies are presented in Appendix K40.
Other off-balance-sheet commitments with related-party companies are presented in Appendix K42.
The related-party companies in which investments have been made are presented in more detail in Appendix K48.
K48. Holdings in other companies
Shareholdings
Domicile
LocalTapiola Asset Management Ltd Espoo
Ab Compass Card Oy Ltd
Mariehamn
Share of
ownership
100.0 %
34.0 %
Capital and Profit for the
reserves 31 financial year
Dec 2013
11,137
3,663
5,761
313
Other notes
K49. Information on notarial services and the total amount of held
customer assets
LocalTapiola Asset Management Ltd provides discretionary
asset management and contract? based investment advice
to its customers.
Asset management services
Customer assets in asset management
Discretionary asset management
2013
2012
8,593,379
7,756,165
In asset management on the basis of another contract
Customer assets, total
731
8,594,110
743
7,756,909
2013
50
77
143
18
288
2012
106
77
15
199
K50. Auditor's fees
Auditor's fees
Auditing
Assignments within the meaning of the provisions of the Auditing Act
Tax advice
Additional services
Total
K51. Business information concerning the Group's supervised company
The parent company in these consolidated financial statements, LocalTapiola Bank Plc, belongs as a
subsidiary to a Group whose the parent company is LocalTapiola General Mutual Insurance Company.
The domicile of both is Espoo, Finland. The consolidated financial statements are available on the
The consolidated financial statements are available online at the following address: http:/www.lahitapiola.fi
43
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
LocalTapiola Bank Ltd 41 (60)
Balance sheet and profit and loss account of LocalTapiola Bank Ltd
BALANCE SHEET
ASSETS
Cash assets
Government obligations
Other
Payable on demand
Other
Payable on demand
Other
Leased property
From others
Shares and holdings
Shares and holdings in Group
companies
Intangible assets
Tangible assets
Tangible assets
Other assets
Deferred tax assets
TOTAL ASSETS
44
31/12/2013
1,000 €
31/12/2012
1,000 €
(Appendix number)
126,149
91,228
(P20)
13,104
113,388
126,492
27,838
50,867
78,705
(P3, P17, P18, P19, P20)
428
19,813
20,241
27,696
52,108
79,804
(P1, P17, P18, P20)
14,777
1,825,505
1,840,282
13,936
5,907
1,665,365
1,671,271P2, P17, P18, P20, P45, P47)
(P4)
9,597
19,042
19,042
138
3,230
85,087
85,087
8,268
3,230
15,819
1,248
6,972
15,819
564
8,557
265
265
2,037
4,293
2,000
288
288
5,191
3,507
1,372
2,182,144
2,062,488
(P3, P17, P18, P19, P20)
(P5, P19, P20)
(P5, P19, P20)
(P5, P19, P20, P47, P48)
(P6, P18, P19, P20)
(P7, P8)
(P8)
(P9, P41)
(P10)
(P11)
LocalTapiola Bank Plc
LIABILITIES
To central banks
Payable on demand
Other
Deposits
Payable on demand
Other
Deposits
Other liabilities
Other
Other liabilities
Bonds
Other
Other liabilities
Other liabilities
Other liabilities
Other
LIABILITIES, TOTAL
42 (60)
(Appendix number)
31/12/2013
1,000 €
31/12/2012
1,000 €
30,000
30,000
132
17,500
17,632
47,632
28
13,250
13,278
43,278
1,451,169
303,431
1,754,600
1,269,668
365,076
1,634,744
15,000
15,000
1,769,600
61,593
61,593
1,696,336
(P17, P18, P20)
2,435
137,442
139,877
2,380
129,345
131,725
(P12, P17, P18, P20)
1,252
549
(P13, P18, P19, P20)
43,169
43,169
5,998
43,511
43,511
4,376
(P14, P41)
25,000
25,000
20
25,000
25,000
500
(P16, P17, P18, P20, P24)
2,032,548
1,945,275
(P17, P18, P20)
(P15)
(P11)
45
ANNUAL REPORT
LocalTapiola
Bank 2013
Plc
31/12/2013
1,000 €
31/12/2012
1,000 €
(Appendix
49,340
48,100
40,370
48,100
(P21, P22, P23, P25)
CAPITAL AND RESERVES
Equity capital
Premium fund
-85
-85
-85
1,532
1,532
1,532
70,104
70,104
-21,862
3,999
49,073
49,073
-28,377
6,516
TOTAL CAPITAL AND RESERVES
149,596
117,213
2,182,144
2,062,488
the customer
Sureties and pledges
11,920
12,266
Other
67,170
68,282
79,090
80,547
46
number)
(P21)
(P21)
(P21)
(P21)
(P21)
(P37, P40)
Interest income
Interest expenses
INTEREST MARGIN
From companies in the same group
From other companies
Commission income
Commission expenses
Net income from securities trading and currency operation
Personnel expenses
Salaries and remuneration
Pension expenses
Personnel expenses
Other administrative expenses
Depreciation and value adjustments on tangible and
intangible assets
Value adjustment loss on credits and other receivables
Income taxes
44 (60)
(Appendix number)
1.1.-31.12.2013
1,000 €
31,408
354
-12,911
18,850
1.1.-31.12.2012
1,000 €
40,192
420
-21,345
19,267
801
98
899
18,757
-3,946
800
65
865
18,697
-4,145
(P28)
7
141
148
1,221
7,590
-13
70
57
200
5,165
(P30)
-9,884
-6,361
-2,072
-472
-2,544
-12,428
-20,642
-33,070
-1,251
-298
-1,549
-7,910
-20,543
-28,453
-2,754
-4,412
89
3,371
628
3,999
3,999
-2,074
-2,963
-220
6,396
120
6,516
6,516
(P26)
(P27)
(P26)
(P29)
(P29)
(P31)
(P32)
(P38, P44, P46)
(P42)
(P8, P34)
(P33, P49)
(P2, P35)
(P11)
47
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
Cash flow statement of LocalTapiola Bank Plc
INDIRECT CASH FLOW STATEMENT
2013
2012
1,000 €
1,000 €
3,371
6,396
3,058
-900
-169,198
-4,338
-37,616
8,240
4,112
-198,801
-171,209
-1,622
79,158
-15
-4,375
-98,063
4,354
73,227
8,487
-2,085
83,983
23,841
70,502
15,919
7,610
117,871
-108,388
25,304
-1,146
906
-989
865
-240
-124
30,001
0
0
-10,000
30,001
-10,000
Cash flow from operations
Adjustments made to operating profit
Business asset increase(-)/decrease(+)
Leased property
Shares and holdings
Other assets
Business asset increase(-) / decrease(+)
Other liabilities
Cash flow from operations (A)
Cash flow from investments
Investments (-)
Decrease in and income on investments (+)
Cash flow from investments (B)
Cash flow from financing activities
Increase in capital and reserves (share issue) (+)
Decrease in financial liabilities (-)
Cash flow from financing activities (C)
Change in cash and cash equivalents
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
Change in cash and cash equivalents (A+B+C) increase (+) / decrease (-)
-78,627
15,181
225,017
146,389
209,836
225,017
-78,627
15,181
126,149
428
91,228
27,696
19,813
0
146,389
52,108
53,986
225,017
43
-1,076
-899
2,754
187
2,049
3,058
58
-1,359
-865
2,074
314
-1,122
-900
Notes to the cash flow statement
The cash and cash equivalents included in the cash flow statement
include the following:
Cash assets
Receivables from credit institutions payable on demand
Receivables from credit institutions to be included in cash and
cash equivalents
Certificates of claim to be included in cash and cash equivalents
Total
Adjustments in operating profit, itemised:
Interest income
Interest expenses
Dividends
Depreciation on tangible and intangible assets
Other adjustments
Total
48
46 (60)
Key figures of LocalTapiola Bank Plc
KEY FIGURES DESCRIBING FINANCIAL DEVELOPMENT
Receivables from credit institutions, EUR m
Receivables from the public and public corporations, EUR m
Liabilities to credit institutions, EUR m
Liabilities to the public and public corporations, EUR m
Capital and reserves, EUR m
Balance sheet total, EUR m
Contingent liabilities, EUR m
Interest margin, EUR m
Turnover, EUR m
Operating profit/loss, EUR m
of turnover, %
Return on equity (ROE), %
Return on assets (ROA), %
Equity ratio, %
Cost/return ratio
SOLVENCY in accordance with Basel II
Primary own funds, total, EUR m
Secondary own funds, total, EUR m
Minimum requirement for own funds, EUR m
Capital adequacy ratio primary own funds, %
Capital adequacy ratio, %
31/12/2013
31/12/2012
31/12/2011
20.2
1,840.3
47.6
1,769.6
149.6
2,182.1
79.1
79.8
1,671.3
43.3
1,696.3
117.2
2,062.5
80.5
123.0
1,500.4
19.4
1,625.9
109.8
1,949.0
74.1
18.9
60.4
3.4
5.6
19.3
65.6
6.4
9.7
17.7
67.1
4.5
6.7
3.0
0.2
6.9
0.9
5.7
0.3
5.7
0.8
5.4
0.3
5.6
0.9
31/12/2013
31/12/2012
31/12/2011
139.1
8.3
68.5
16.3
17.2
104.1
14.9
68.5
12.2
13.9
96.3
29.0
65.5
11.8
15.3
49
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
Notes concerning LocalTapiola Bank Plc
1.
Notes on the principles used in the preparation of LocalTapiola Bank Plc's financial statements
The financial statements of LocalTapiola Bank Plc have been
prepared in accordance with the Finnish Accounting Act and
accounting decree, the Act on Credit Institutions, the decree
of the Ministry of Finance on the financial statements,
consolidated financial statements and report of the Board
of Directors of credit institutions and investment firms, the
Finnish Financial Supervisory Authority's regulations and
instructions, and the general instructions of the Accounting
Board.
The principles used in the preparation of the Bank
Group's statements have been used as the defining
principles of LocalTapiola Bank Plc.
2.
Notes concerning the balance sheet and profit and loss account of LocalTapiola Bank Plc
All figures are presented in thousands of euros, unless stated otherwise.
Notes concerning balance sheet items
P1.
From the central bank
From Finnish credit institutions
From foreign credit institutions
Receivables from credit institutions, total
P2.
50
Payable on
demand
----114
314
428
Other
2013 Total
2012 Total
17,918
1,895
19,813
17,918
2,009
314
20,241
16,809
62,681
313
79,804
2013
2012
Corporate customers and housing associations
Financial and insurance institutions
Households
Non-profit-making corporations
Foreign countries
Receivables from the public and public corporations, total
91,203
9
1,740,478
3,391
5,201
1,840,282
67,685
376
1,595,937
2,131
5,142
1,671,271
Value adjustments on 1 Jan.
Increase in receivable-specific value adjustments
Receivable-specific cancellations of value adjustments
Change in group-specific value adjustments
-1,925
-80
154
-77
-1,818
-110
82
-79
Value adjustments included in the balance sheet item on 31 Dec.
-1,928
-1,925
Increases in credit losses recognised for the financial year
-30
-125
Cancellations of credit losses recognised for the financial year
121
12
P3.
48 (60)
Issued by public corporations
- Government-issued bonds
Kept until due date, publicly listed
- Bonds issued by companies
Certificates of claim entitling the company to central bank
financing, total
Certificates of claim, not entitling the company to central
bank financing
- Commercial papers issued by banks
- Commercial papers
- Other certificates of claim
Other certificates of claim, total
27,838
1,025
-
110,140
2,222
50,867
-
126,492
78,705
19,992
59,969
5,126
85,087
145,534
163,792
2013
13,936
13,936
2012
9,597
9,597
Shares and holdings
Balance sheet item
Shares and holdings
Saleable
Total
- of which at acquisition cost
P6.
13,104
Machinery and equipment
Total
P5.
2012
8,994
4,990
5,058
19,042
Certificates of claim, total
P4.
2013
Publicly listed
Other
of which in
credit
2013
Total
2012
Total
-
138
15,819
3,230
19,187
19,187
3,230
3,230
3,230
138
15,819
3,230
19,187
19,187
8,268
15,819
3,230
27,317
19,190
2013
2012
1,248
1,248
564
564
Share derivatives
Assets retained for business purposes
Option contracts
Purchased
Total
Contracts concluded for purposes other than hedging *)
Share derivatives
Option contracts
Purchased
Total
Group
Nominal value of underlying asset
Remaining maturity
under 1 year
1–5 years
Current value of derivative
Total
positive
negative
17,645
17,645
19,010
19,010
36,655
36,655
1,248
1,248
-
-
-
-
-
-
2013
6,972
6,972
2012
8,557
8,557
* comprising options sold and equivalent options bought for investment deposits and index-linked bonds. The embedded derivatives
related to the main agreement of the released investment deposits and index-linked bonds have been separated from the main
agreement.
P7.
Intangible assets
Intangible assets
IT expenses
Total
51
ANNUAL REPORT 2013
P8.
LocalTapiola Bank Ltd Changes in tangible and intangible assets during the financial
year
INTANGIBLE ASSETS
2013
2012
12,293
1,081
13,374
-3,737
-2,666
-6,402
6,972
8,557
11,969
521
-196
12,293
-1,955
196
-1,978
-3,737
8,557
10,014
2013
2012
401
66
467
-114
-88
-202
265
288
71
330
401
-18
-96
-114
288
53
2013
2,037
2,037
2012
5,191
5,191
2013
4,262
13
18
4,293
2012
3,418
89
3,507
2013
2012
2,000
2,000
1,372
1,372
Recorded from the current value reserve
Deferred tax liabilities in total
-20
-20
-500
-500
Deferred taxes in the profit and loss account
628
120
-
-
26,184
31,464
2013
2012
137,442
137,650
129,345
129,700
2,435
2,601
139,877
2,380
2,601
131,725
Increase
Transfers between items
TANGIBLE ASSETS
Increase
Deductions
P9.
49 (60)
Other assets
Other assets
Other receivables
Total
P10. Prepayments and accrued income
Interest receivables
Other prepayments and accrued income
Prepayments paid
Total
P11. Deferred tax liabilities and tax assets
Deferred tax assets
Recorded confirmed losses
Deferred tax assets
The off-balance-sheet deferred tax liability of the current
value reserve
Confirmed loss from previous years
Deferred tax profits will be recorded on the unused tax liabilities up to the amount for which the company is likely to
receive tax profits on the basis of taxable income.
Deferred tax assets are recognised using a 20% tax base.
Other deferred tax profits on the confirmed losses of LocalTapiola Bank Plc have been left unrecorded.
They may be used against taxable income collected in the future. The losses expire in 2014–2017.
P12. Bonds issued to the public
Certificates of deposit and commercial papers
book value
nominal value
Bonds
book value
nominal value
Total book values
52
50 (60)
P13. Derivative contracts and other liabilities retained for business
purposes
Share derivatives
Derivative liabilities managed together with financial
assets retained for business purposes
Total
2013
2012
1,252
1,252
549
549
2013
37,844
5,324
43,169
2012
39,454
4,058
43,511
2013
1,753
4,245
0
5,998
2012
2,531
1,843
2
4,376
Nominal value of the main contract
Remaining maturity
under 1 year
1–5 years
Total
17,577
19,000
36,577
17,577
19,000
36,577
Embedded derivatives
Sold options
Total
Group
-
-
-
P14. Other liabilities
Other liabilities
Liabilities on payment intermediation
Other
Total
P15. Accruals and deferred income
Interest payable
Other accruals and deferred income
Prepayments received
Total
P16. Liabilities that have lower priority than other liabilities
2013
2013
2012
Tier II value
book value
book value
Loan period 30 June 2006 to 30 June 2016, right to premature repayment
after 5 years, interest 12-month Euribor + 0.25% units p.a. until 30 June
2011 and 12-month Euribor + 1.00% units p.a. thereafter
4,000
10,000
10,000
Loan period 30 June 2011 to 30 June 2016,
interest 12-month Euribor rate + 1.35 % units until 30 June 2016
6,000
15,000
15,000
10,000
25,000
25,000
5–10 years over 10 years
11,936
251,529
1,403,833
-
2013
Total
126,492
20,241
1,840,282
19,042
Total
In the solvency calculation, loans have been grouped under Tier II.
P17. Maturity distribution of financial assets and liabilities
nder 3 months 3–12 months
Maturity distribution
4,532
4,068
20,241
29,534
8,608
9,011
3,995
8,132
1,621,549
50,785
-
9,500
125,963
86,657
-
1–5 years
105,956
146,777
6,037
30,000
22,088
2,435
25,000
-
-
47,632
1,769,600
139,877
25,000
53
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
P18. Specification of balance sheet items into Finnish and foreigncurrency items and items from the same Group
Balance sheet item, Finnish currency
Finnish
currency
Foreign of which from
the same
currency
2013 Total
2012 Total
Group
Other assets, incl. cash assets
Assets, total
20,061
1,840,282
145,534
1,248
174,838
2,181,964
180
180
2,747
8
2,756
20,241
1,840,282
145,534
1,248
174,838
2,182,144
79,804
1,671,271
163,792
564
147,057
2,062,488
purposes
Other liabilities
Liabilities, total
47,632
1,769,600
139,877
-
2,747
-
47,632
1,769,600
139,877
13,278
1,696,336
131,725
1,252
49,187
25,000
2,032,548
0
8
2,756
1,252
49,187
25,000
2,032,548
549
78,388
25,000
1,945,275
2013
Current value
2013
Book value
2012
Book value
126,149
126,149
91,228
20,241
20,241
79,804
1,840,282
1,840,282
1,671,271
145,534
145,534
163,792
Shares and holdings
138
138
8,268
3,230
3,230
3,230
15,819
15,819
15,819
1,248
1,248
564
P19. Current values of financial assets and liabilities
Assets and liabilities that, after the original recognition, are valued in the balance sheet at current value repeatedly or one-off
The current values of the level 1 instruments are based totally on the quoted prices of identical assets
or liabilities on actual markets, such as prices on the stock exchange, at brokers or in price
information services. The instruments on level 1 mainly consist of domestic quoted equity investment
liabilities that have been listed for sale. The bid price at the time is used as the market price for the
quoted financial assets.
The current values of the level 2 instruments have been calculated using value methods and are derived from quoted
prices on the markets. Level 2 instruments consist of OTC derivatives and embedded derivative liabilities.
Current values to be repeatedly determined using significant input data other than the observable ones
(level 3)
The recorded values of the level 3 holdings or liabilities are not based on verifiable market information. Level 3
includes equity instruments that have valued at acquisition cost because they have no market price quoted on the
actual markets and their current value cannot be determined reliably.
P20. Current values and book values of financial assets and liabilities as well as current value hierarchy
Current values of financial assets and liabilities
Financial assets
cash assets
47,632
47,632
43,278
1,769,600
1,769,600
1,696,336
purposes
140,721
139,877
131,725
1,252
1,252
549
24,915
25,000
25,000
54
Financial instruments valued at current value in the balance sheet
Financial assets
Certificates of claim, classified as saleable
52 (60)
Level 1
Level 2
Level 3
144,509
144,509
Shares and holdings
purposes
2013
138
138
3,230
3,230
15,819
15,819
1,248
1,248
1,252
1,252
Gains and losses unrealised during the period (level 3)
0
P21. Capital and reserves items
Transfers At the end of
between the financial
items
year
Equity capital
At the
beginning of
the financial
year
40,370
Premium fund
48,100
8,970
-
-
48,100
1,532
-1,617
0
-85
1,532
-1,617
1,532
-1,617
0
-
-85
49,073
21,031
21,031
-
0
-
70,104
49,073
6,516
-21,862
6,516
3,999
-6,516
3,999
117,213
32,383
-6,516
149,596
Profit or loss brought forward
Profit or loss for the financial year
Total
-28,377
+ Increase
- Decrease
49,340
-85
70,104
P22. Equity capital
Equity capital at the beginning of the financial year
Share issue realised during the financial year
Equity capital at the end of the financial year
Share type code
Number of shares at the beginning of the financial year
Change in the number of shares in the share issue, pcs
Number of shares at the end of the financial year
Number of votes for a share
Shares have no nominal value
Limitations regarding the acquisition of shares
redemption clause in the articles of association
Shareholder's priority for new shares when equity capital
according to shares of ownership
is increased
Right to dividend
equal to all shares
The Bank's shares are not held by the Bank, its subsidiary or associated companies
2013
2012
40,370
8,970
49,340
62,108
13,800
75,908
75,908
40,370
40,370
62,108
62,108
62,108
P23. Issues of shares, option rights and issues of convertible bonds
concerning shares
At the Extraordinary General Meeting held on 14 June 2013, it was decided to increase the equity capital from EUR 40,370,200 to EUR 49,340,200.
The equity capital increase was registered on 3 September 2013.
No option rights, or authorisations to issue convertible bonds, were granted in 2013.
P24. Companies Act 624/2006, Chapter 8, sections 5 and 8
Unlike the annual report, the notes to the financial statements make
mention of the fact that the company has no subordinated loans.
P25. Major shareholders and distribution of shareholdings
The division of the Bank's share capital is as follows:
LocalTapiola General Mutual Insurance Company
LocalTapiola Mutual Life Insurance Company
LocalTapiola Mutual Pension Insurance Company
Total
2013
Share, %
of stock and
votes
78.0
16.0
6.0
100.0
2013
Number of
shares
2012
Number of
shares
59,242
12,122
4,544
75,908
45,442
12,122
4,544
62,108
55
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
Notes concerning income statement items
P26. Specification of interest income and expenses by balance sheet item
Interest income
Interest income, total
of which from subsidiaries and associated undertakings
in the same Group
Recorded from value-adjusted credits and other
receivables
Interest expenses
purposes
Other interest expenses
Interest expenses, total
of which for subsidiaries and associated undertakings in
the same Group
2013
2012
199
29,014
2,196
31,408
501
35,458
4,234
40,192
209
201
15
0
334
10,988
831
419
17,912
1,977
231
526
12,911
240
797
21,345
-
0
2013
4,424
-4,076
6
0
354
2012
8,343
-7,940
18
-1
420
2013
98
2012
65
801
899
800
865
P27. Net income from leasing operations
Rental income
Planned depreciation of leased property
Other income
Other expenses
Investment income
P28. Return on equity investments
Dividend income from investments in shares and holdings
From investments classified as saleable
From companies in the same Group and participating
interests
Total
P29. Commission income and expenses
2013
2012
Commission income
From credit-granting
From deposits
From payment transactions
From funds
From asset management
From trading in securities
From granting of sureties
From other operations
Total
3,517
323
2,321
10
557
803
159
11,066
18,757
2,303
336
2,187
11
461
779
107
12,515
18,697
Commission expenses
From service charges paid
From other
Total
958
2,987
3,946
929
3,216
4,145
Other items
2013 Total
2012 Total
P30. Net income from securities trading
From derivative contracts
From liabilities retained for business purposes
Net income from securities trading, total
56
Capital gains
Changes in
and losses current value
-18
-18
106
682
-656
26
-
35
663
-656
7
141
-205
193
-13
70
87
26
35
148
57
54 (60)
P31. Net income from saleable financial assets
2013
2012
0
0
184
184
From shares and shareholdings
From transfers from current value reserves
Total
1,213
8
1,221
0
15
15
1,221
200
2013
7,590
7,590
2012
5,165
5,165
2013
1,055
1,394
1,964
4,412
2012
692
1,209
1,062
2,963
2012
2012
2,666
1,978
88
2,754
96
2,074
2013
2012
From certificates of claim
Total
P32. Other business income
Other income
Total
P33. Other business expenses
Rent expenses
Deposit Guarantee Fund payments
Other expenses
Total
P34. Depreciation and value adjustments
on tangible and intangible assets
Intangible assets
Tangible assets
Depreciation in total
P35. Value adjustment losses from credits, other commitments and
other financial assets
Receivables from the public and public corporations,
credit losses
Receivables from the public and public corporations, other
value adjustments
Value adjustment losses, total
Group- Recorded in Recorded in
specific the profit and the profit and
gross
loss
loss
Contractspecific
gross
decreases
30
-121
-
-91
113
80
110
-155
-276
77
77
2
-89
107
220
Value adjustment losses also includes credit losses
recorded off the balance sheet. Value adjustment on credits
is presented in Appendix P2.
P36. Information on business areas and geographical market areas
The company's business area is banking in Finland.
The company does not have a service network outside Finland.
Notes concerning personnel information have been reported in Appendix P43.
57
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
Notes concerning guarantees and contingent liabilities
P37. Guarantees given
Pledges
Mortgages
2013
Other
collateral
Pledged for the company's own loans
Other liabilities
Pledged for the company's for own liabilities, total
-
-
55,000
1,295
56,295
30,000
1,299
31,299
Given for other reasons on the company's behalf
-
-
9,600
23,000
Pledged on behalf of others
of which to members who are insiders
-
-
11,920
-
12,266
-
Balance sheet item
2013
2013
2012
Other
collateral
P38. Pension liabilities
The personnel's statutory and supplementary pension covers have been arranged through insurance.
P39. Leasing and other rental liabilities
Off-balance-sheet commitments are presented in Appendix P42 and other lease agreements are short-term.
40. P40. Off-balance-sheet commitments
the customer
Guarantees
Unused credit facilities
Off-balance-sheet commitments, total
on beha l f of
2012
2013
a compa ny i n Commitments, Commitments,
the s a me
total
total
Group
6,036
6,036
11,920
67,170
79,090
12,266
68,282
80,547
2013
2012
86
86
45
45
8
101
10
23
2013
2012
1,651
18
2,736
27
P41. Receivables and liabilities on payment intermediation
Savings as per the Long-Term Savings Act
On deposit accounts
Total
Due to sales and acquisitions of assets executed on behalf
of customers
Accounts receivable
Trade creditors
P42. Other off-balance-sheet facilities
Contractual liability related to fees for service providers
The annual core business system expenses of the
banking business are linked to a fixed or indexed annual
price until 2016.
The agreements for system providers contain separate
termination clauses.
As regards data centre and system integrator services,
the company follows the agreements signed by
LocalTapiola Group.
No significant changes occurred in the agreements
between the Bank and service providers.
Annual expenses are presented in the profit and loss
account item "Other administrative expenses".
Joint liability relating to collective registering for valueadded taxation (ALV 188 §)
Within one year
on behalf of a company in the Bank Group
58
56 (60)
Notes concerning personnel, management and related parties
P43. Number of personnel
average
Permanent full-time personnel
Permanent part-time personnel
Fixed-term personnel
Total
2013
247
14
10
271
2012
107
6
9
122
2013
2012
352
334
P44. Salaries and remuneration paid to the management
Management's salaries and remunerations
P45. Credits and off-balance-sheet commitments granted to
management
2013
2012
Loans on 1 Jan.
increase
deductions
Loans on 31 Dec.
457
570
-94
933
264
220
-26
457
Guarantees and other off-balance-sheet commitments
granted to management
-
-
Credits granted to management
P46. Pension commitments of the management
The management's statutory and supplementary pension cover has been arranged through insurance.
The retirement age of the managing director is 63 years.
P47. Loans and other financial receivables from members who are insiders, as well as investments made in these, and guarantees and securities issued for these
Receivables
from the
public and
public
corporations
16,964
2,165
19,130
-
Grounds for being an insider
Controlling interest
Significant influence
Parent company
Key persons who are part of related party companies' management
Total
Equity
investments
Other
receivables
15,819
3,230
19,049
-
8
253
1,131
1392
-
Transactions between an insider (under the IAS 24 definition) and the parent company are reported
only if they are substantive and have not been executed under customary commercial terms.
Credits, guarantees and other off-balance-sheet commitments granted to the management are presented in Appendix P45.
Credits and guarantees granted to natural persons who are insiders have been granted under customary terms and conditions.
Loans granted to related party companies have been itemised in accordance with the grounds for being an insider.
Credits granted to a related-party company based on ownership of a credit institution are unsecured.
In other respects, loan agreements are concluded under customary commercial terms.
Undrawn credits and guarantees granted to related-party companies are presented in Appendix P40.
Other off-balance-sheet commitments with related-party companies are presented in Appendix P42.
The related-party companies in which investments have been made are presented in more detail in Appendix P48.
P48. Holdings in other companies
Shareholdings
Domicile
LocalTapiola Asset Management Ltd Espoo
Ab Compass Card Oy Ltd
Mariehamn
Share of
ownership
100.0 %
34.0 %
Capital and Profit for the
reserves 31 financial year
Dec 2013
11,137
3,663
5,761
313
59
ANNUAL
REPORT
LocalTapiola
Bank2013
Plc
Other notes
P49. Auditor's fees
Auditor's fees
Auditing
Assignments within the meaning of the provisions of the Auditing Act
Tax advice
Additional services
Total
P50. Business information concerning the Group's supervised company
The parent company in these consolidated financial statements, LocalTapiola Bank Plc, belongs as a
subsidiary to a Group whose the parent company is LocalTapiola General Mutual Insurance Company.
The domicile of both is Espoo, Finland. The consolidated financial statements are available on the
Internet at www.lahitapiola.fi.
60
2013
30
4
138
12
185
2012
95
1
13
109
58 (60)
SIGNATURES TO THE ANNUAL REPORT AND FINANCIAL
STATEMENTS
Espoo, 26 February 2014
Harri Lauslahti
Chairman of the Board of Directors
Leevi Ainasoja
Jari Eklund
Jukka Kinnunen
Erik Valros
Hanna Hiidenpalo
Marja Pajulahti
Managing Director
61
ANNUAL REPORT 2013
59 (60)
LocalTapiola Bank Ltd AUDITOR'S NOTE
A report has been issued today on the audit performed.
Espoo, 26 February 2014
KPMG Oy Ab
Authorised Public Accountants
Mikko Haavisto
Authorised Public Accountant
62
Auditors’ report
Auditors’ report
To the Annual General Meeting of LocalTapiola Bank Plc
We have audited the accounting records, financial statements, the report of the Board of Directors and the administration
of LocalTapiola Bank Plc for the financial year 1 January – 31 December 2013. The financial statements comprise the
balance sheets, profit and loss accounts, cash flow statements and notes to the financial statements for both the
consolidated company and the parent company.
Responsibility of the Board of Directors and the Managing Director
The Board of Directors and the Managing Director are responsible for the preparation of financial statements and the
report of the Board of Directors that give a true and fair view in accordance with the laws and regulations governing the
preparation of the financial statements and the report of the Board of Directors in Finland. The Board of Directors is
responsible for the appropriate arrangement of the control of the company’s accounts and finances, and the Managing
Director shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have
been arranged in a reliable manner.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial statements, on the consolidated financial statements and on the
report of the Board of Directors based on our audit. The Auditing Act requires that we comply with the requirements of
professional ethics. We conducted our audit in accordance with good auditing practice in Finland. Good auditing practice
requires that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and
the report of the Board of Directors are free from material misstatement, and whether the members of the Board of
Directors of the parent company and the Managing Director are guilty of an act or negligence which may result in liability in
damages towards the company, or whether they have violated the Companies Act or the articles of association of the
company.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements and the report of the Board of Directors. The procedures selected depend on the auditor’s judgment, including
the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation of financial statements and report of the Board of
Directors that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements and the report of the Board of
Directors.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Statement
In our opinion, the financial statements and the report of the Board of Directors give a true and fair view of both the
consolidated and the parent company’s financial performance and financial position in accordance with the laws and
regulations governing the preparation of the financial statements and the report of the Board of Directors in Finland. The
information in the report of the Board of Directors is consistent with the information in the financial statements.
Espoo, 26 Fabruary 2014
KPMG OY AB
Mikko Haavisto
Authorised Public Accountant
63
LocalTapiola is close to
you throughout your life
LocalTapiola is close to you everywhere in Finland.
Our regional companies offer comprehensive
insurance, savings and investment services. We
also provide banking services. We are your partner
in matters related to security, well-being and the
economy.
Welcome to the new LocalTapiola.
LocalTapiola Group
Street address: Revontulenkuja 1
FI-02100 Espoo
Postal address: FI-02010 LocalTapiola
Tel: +358 9 4531
www.localtapiola.fi

LocalTapiola Bank Ltd

Transcription

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