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Skjern Bank
Annual Report • Jan 30, 2020
3464_10-k_2020-01-30_44a75caa-4048-4fa1-a265-2e424ffbe291.pdf
Annual Report
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ANNUAL REPORT 2019
Annual report 2019 1
Especially satisfactory results
| 2019 | Profit before tax of DKK 165 million of which are extraordinary capital gains of DKK 21 million relat ing to sale of shares in Sparinvest Holdings SE |
|---|---|
| EQUITY | Equity yielded interest of 17.3 % before tax and 15.0 % excluding extraordinary capital gains |
| KR. CORE EARNINGS |
Core earnings amounted to DKK 146 million |
| NET INTEREST AND KR. FEE INCOME |
Increased by 8.5 % to DKK 334 million |
| IMPAIRMENT | Reduced to DKK 17 million, correspond ing to 0.2 % of loans and guarantees |
| LENDING | Loans amounted to DKK 4,326 million and deposits amounted to DKK 6,224 |
| CAPITAL | Satisfactory capital ratio of 18.6 % and individual solvency requirements of 9.6 % |
| CORE EARNINGS EXPECTATIONS |
Core profit in 2020 is expected to be in the range of DKK 125 - 140 million |
Annual report 2019
Content
| Management's financial report for 2019 . | 7 |
|---|---|
| Endorsement of the Annual Report by the Management . | 22 |
| Profit and loss account . | 23 |
| Statement of comprehensive income . | 23 |
| Proposal for distribution of profit . | 23 |
| Balance Sheet . | 24 |
| Information on changes in equity . | 26 |
| Notes . | 29 |
| 5 years in summary . | 67 |
| 5 years financial ratios . | 68 |
| Quarterly overviews . | 69 |
| Financial Calendar 2020 . | 70 |
| Committee of representatives . | 71 |
| List of board members' managerial offices . | 72 |
Management's financial report for 2019
MANAGEMENT'S FINANCIAL REPORT FOR 2019
A profit before tax of DKK 165 million is considered especially satisfactory. Profit was positively affected by the growth in the bank's net interest and fee income and positive exchange rate adjustments, partially as a result of realised capital gains of approximately DKK 21 million through the sale of some of the bank's shares in Sparinvest Holdings SE.
In light of the acceptable profit, the Annual General Meeting recommends that dividends of DKK 3 per share be distributed. The bank also paid dividends of DKK 3 per share due to acceptable profit in 2018. Dividend payments follow the bank's dividend policy, and have been made, as the bank is now in an earnings and capital situation that enables dividend payments. The distribution amounts to DKK 28.9 million.
Interest income on lending was marginally reduced by DKK 0.3 million, corresponding to 0.16 %, while lending was reduced by DKK 33.9 million, corresponding to 0.8 %. The number of customers has successfully been significantly increased, and in particular the share of private customers has increased satisfactorily. Despite this, lending has declined, which is primarily due to ordinary repayment of some large business loans and a strong focus on savings, resulting in limited demand for loans with the bank's many existing and new customers.
Interest income on deposits increased from DKK 0.2 million in 2018 to DKK 2.1 million in 2019. The low interest rate in society means that the bank's placement of surplus liquidity in certificates of deposit in Nationalbanken bore a negative interest rate of 0.75 %. Because of this, at the end of the year it was necessary to impose negative interest rates of up to 0.75 % on many of the bank's corporate customers and associations' deposits in the bank. In 2020, negative interest rates were also announced to the bank's private customers without a NEM account, which has also limited placement of bank transactions in Skjern Bank that could not create positive profitability in the customer relationship.
Net interest income has been maintained at DKK 185.2 million. That it has not increased is largely due to the Bank's interest expenses for placing surplus liquidity in Nationalbanken increasing by DKK 3.1 million, amounting to DKK 7.4 million in 2019.
Net interest and fee income increased by DKK 26.2 million, which is very satisfactory. The main reasons for this are the reduction of deposit interest expenses and the increasing income on fees as a result of increased activity with the bank's many new and existing customers. In 2019, the opportunities for restructuring mortgage financing have been favourable, and many of the bank's customers have chosen to take advantage of this. The high number of conversions, combined with the large influx of new customers with mortgage financing, has resulted in an increase in loan case fees of DKK 15.2 million.
The bank's goal has been to increase fee earnings compared to interest income through increased activity in the areas of real estate, securities, pension and insurance. The bank's earnings from fees have gone from 27% in 2013 to 43 % in 2019, which is very satisfactory.
The bank's expenses were unchanged at DKK 191.8 million, though this is due to the bank having an extraordinary IT expense of DKK 12 million in 2018. Disregarding this, expenses have increased by about 12 million in 2019, corresponding to an increase of 6.7 %. The increase is due to higher IT expenses of about DKK 6 million as well as strategic activity expansions, including more employees, with resulting administrative costs in the form of advertising, IT equipment etc. Hirings have primarily been in customer-oriented positions, where the bank is well equipped to handle the strong influx of customers, but internal positions have also been reinforced to ensure management of the increasingly complicated and highly resource-intensive sets of rules.
The impairment need has decreased to DKK 16.8 million, corresponding to 0.2 % of the bank's loans and guarantees. The low impairment need is seen as a strong indication of a good economic trend in society and this includes an increasing quality of the bank's lending portfolio.
The impairment in 2019 is largely attributable to the agricultural segment, despite the terms of trade having significantly improved in 2019, particularly in pig farming. The prices of milk in 2019 have also been at a level where the bank generally considers most of the bank's customers within this production branch to have an operational balance. On the other hand, the prices of mink have been so low that it has been very difficult to create an operational balance in this segment.
However, agriculture continues to be challenged in connection with previous years' poor settlement prices and the high indebtedness in the industry in previous years, as well as the relatively low turnover of agricultural property. The impairments in the agricultural segment have been done according to the applicable guidelines from the Danish Financial Supervisory Authority, though the bank has chosen to add extra management estimates so that additional impairments have been done for the businesses that have been hardest hit by the economic trends. Mink producers are also expected to be challenged by low settlement prices in 2020, whereas dairy and pig producers are expected to be able to maintain a sound operating balance.
At the beginning of 2019, the bank expected a core earnings in the range of DKK 130 – 145 million. In the half-year report, the expected core earnings were adjusted to the upper part of the range of DKK 135 – 150 million. Core earnings were realised at DKK 146.1 million. The core earnings have thus increased by DKK 26.5 million compared to 2018, though this has been negatively affected by
the extraordinary IT expense of DKK 12 million. Adjusted for this, the profit increase amounted to DKK 14.5 million. This is very satisfactory and is due to several different factors, though primarily an extraordinarily high number of conversions of customers' mortgage financing due to the low interest level.
At the beginning of 2019, the expectations for profit for the year before tax were in the range of DKK 115 – 130 million, and over the course of the year this was adjusted upwards three times, the first time in June 2019 to the range of DKK 135 – 150 million, in October to the range of DKK 150 – 160 million and in January 2020, it was adjusted upwards to the middle of the range of DKK 160 – 170 million. The announced profit expectations were met with DKK 165 million.
Profit before tax amounted to DKK 164.9 million compared to DKK 164.6 million in 2018. Profit before tax for the year, less interest expenses in the bank's hybrid core capital, which are recorded under equity in the accounts, is DKK 158.3 million, compared with DKK 158.0 million in 2018.
Both the achieved core earnings and the profit before tax are considered especially satisfactory.
As a result of particularly satisfactory profit, the capital coverage was increased in the course of 2019 compared to the individual solvency requirements, from 8.0 % points in 2018 to 9.0 % points in 2019. After deduction of the capital conservation buffer of 2.5 percentage points, cyclical buffer of 1.0 % and NEP supplement of 0.625 %, the capital coverage at the end of 2019 amounted to 4.875 percentage points. The bank has a goal of a coverage relative to the capital requirements of at least 4 percentage points with a long-term goal of 5 percentage points. In 2019, the bank has increased the capital base by DKK 109.3 million to DKK 1,032.7 million. The increase in the capital base is due to earnings in 2019 less proposed dividends of DKK 28.9 million.
The bank's capital ratio amounted to 18.6 % at the end of 2019 and has thus increased by 1.2 percentage points compared to the end of 2018. Primarily as a result of the increasing guarantees and despite the marginally reduced lending volume, the bank has increased the risk-weighted assets by a total of DKK 241 million which, viewed in isolation, reduces the capital ratio by 0.85 percentage points. The bank's solvency requirements are estimated at 9.6 %. Overall, the bank's capital base is considered solid and adequate.
With regard to the bank's capital position in general, refer to note 28.
FUTURE CAPITAL RESERVES
At the end of 2019, the bank had a solid capital base with a capital coverage including capital conservation buffer, cyclical buffer and NEP supplement of 4.875 %. In the next 3 years, the following capital buffers will be phased in to the bank's capital requirements in the requirement for the bank's capital base:
- 1.00 percentage point is the announcement that the cyclical buffer will increase during 2020 and will then be phased in with 2.0 % and can at most constitute 2.5 percentage points when fully phased in.
- Up to 6.0 % points, NEP supplement. In its latest announcement on this, the Danish Financial Supervisory Authority has calculated the supplement for the bank to be 5.6 %.
- Added to this is the bank's solvency requirements, the already fully phased-in capital conservation buffer of 2.5 % and the bank's own requirements for additional buffers.
The bank thus expects that the requirements for the bank's future capital ratio in 2022, including any Tier III capital raised to cover the NEP supplement and including a buffer of 5 %, will be at the level of 24 - 25 %, corresponding to 5.4 - 6.4 percentage points higher than the current capital ratio of 18.6 %. It is the bank's expectation that, based on the very satisfactory development in the earnings base in recent years, in the coming years the bank will be in a position to sufficiently increase the capital base to maintain a satisfactory capital coverage, primarily through its own earnings, but also through raising Tier III capital to partially cover the NEP supplement.
EXPECTATIONS FOR 2020
The bank has had a particularly satisfactory 2019, where expectations for the vast majority of areas have been met and exceeded. Because of this, the bank is optimistic about 2020 and expects a continued increase in business volume and balanced lending growth. Partly due to the high activity with conversion of customers' mortgage financing and extraordinarily positive exchange rate adjustments, the profit in 2019 was very satisfactory, and for this reason a lower earnings in 2020 is expected to be realised than in 2019.
Core earnings in 2020 are expected in the range of DKK 125 – 140 million and a profit before tax in the range of DKK 115 – 130 million, assuming positive exchange rate adjustments at the level of DKK 5 million and impairment in the range of DKK 15 – 20 million.
The bank's expectation of a lower profit in 2020 than in 2019 is due to expectations of lower fee income from loan cases and lower exchange rate adjustments.
The bank has established the strategic and profit-related goals for the coming year, of which the most significant are listed below.
In light of the very satisfactory customer growth, based on ambassador referrals and personal knowledge of the bank's employees and key values, the management is very confident in terms of continuing to attract new customers and increasing business volume with the many existing and loyal customers. For this reason, the bank expects an organic growth in lending at a level of 2 %. The focus is on strengthening the bank's earnings and increasing capital provisioning in order to secure our position as the independent and local West and South Jutland bank, which makes a difference
in the local areas where the bank's branches are, as well in the long term.
The bank is pleased to note that the private customers in the bank's local areas still have a robust economy, which is supported by stable housing prices and general financial accountability and diligence. The bank is experiencing strong growth in the number of and business volume with private customers and does not expect significant challenges with lending to these customers in 2020 as this has not been the case in previous years.
The bank still has close ties to the agricultural industry, which represents a significant customer group.
Easily the largest of the bank's customer groups in agriculture is milk producers, who have generally had profitability in operations in 2019, which is expected to continue in 2020. The forecasts for pig producers in 2020 are very positive and because of this, there is expected to be continued positive terms of trade and solid operating profit. In mink production, the forecasts for 2020 are also more uncertain and the price of mink has reached a level in 2019 that is significantly below the production price. However, the bank's lending to this segment is modest and most of the customers are financially sound.
Overall, the bank expects quite a reasonable year in agriculture, and is confident with regard to how the bank's customers will meet the challenges in the coming years. However, there will still be customers for whom it will be difficult to achieve profitability in 2020 and here the bank will continue, out of loyalty and respect and in close cooperation with individual farmers, to try to find the best possible solutions.
The framework conditions in agriculture can fluctuate strongly and quickly and this places high demands on individual farmers. However, we still assess that the bank's agricultural portfolio very much have the prerequisite skills for being part of the future agricultural industry.
Lending to agriculture accounts for 12 % of the total lending, where the distribution is 6.7 % to cattle farming, 1.5 % to mink production, 1.5 % to pig farming, 1.6 % to crop farming and 0.7 % to other forms of production. As with any other industry, the bank has made a careful review of the exposures and the management is confident in the measurement of these exposures.
The bank's loans within the real estate segment amounted to 13.4 %, compared with 12.8 % at the end of 2018. The bank's exposures in real estate are primarily within rental for residential purposes and the bank's individual project financing, before initiation, are typically guaranteed to be sold after the completion of the project or where there is sufficient liquid collateral available.
Financing of alternative energy has been a positive and important business area for the bank. The
share of lending to this was 2.1 % at the end of 2019, compared with 4.4 % in 2018. In the future, the bank also wants to support green initiatives and invest in sustainability through its financing.
The bank's other business segments are generally considered to be in good development, where lending is distributed amongst many small and medium businesses in a wide variety of industries.
The bank's liquidity is solid, and there will be an unchanged focus on maintaining a satisfactory liquidity reserve, primarily via a balanced relationship between the total deposit and lending volumes. In the future, the bank wants to base essentially all of its liquidity provision on customer deposits.
The satisfactory capital coverage of 4.875 percentage points after the capital conservation buffer is expected to decrease marginally to the level of 4.75 % at the end of 2020, provided that the profit is realised as reported under expectations for 2020 and provided that TIER III capital is raised of nominally DKK 50 million. The fact that the capital reserves are not expected to increase as a result of this is due to the increase of the cyclical buffer of 1 % to 2 % and the increase of the NEP supplement by 1.25 % to a total of 1.875 % in 2020. This is fully in accordance with the bank's long-term capital plan and the capital coverage is considered to be fully adequate to ensure flexibility in terms of capital for the development of the bank.
ACTIVITIES AND BUSINESS VOLUME
SkThe bank has not established new branches in 2019 and the bank's branches are thus still located in Skjern, Varde, Esbjerg, Bramming, Ribe, Hellerup and Virum. The bank's employees in all branches are strongly anchored and have many years of seniority right in their local areas.
The branch network is not expected to be expanded in 2020.
Skjern Bank Leasing is financial leasing of most types of assets to the bank's business customers. The administrative management of the bank's leasing activities are outsourced to a well-established player in the industry.
The business volume of Skjern Bank Leasing continues to increase and at the end of 2019, a total remaining lease liability of over DKK 100 million was realised and the development is expected to continue to take in volume and earnings in 2020.
Overall, 2020 is expected to lead to a satisfactory increase in the bank's business volume and earnings. It is also expected that the sale of insurance and pension products will continue the positive trend of recent years.
BUSINESS VOLUME IN CONTROLLED DEVELOPMENT
The bank's business model and credit policy were essentially unchanged in 2019. The focus is, and will continue to be, to be ready to participate in our customers' goals for financing etc. when this can be done in a prudent and risk-acceptable manner.
Demand for loans has been satisfactory during the year, even though there has not been success in increasing the net lending volume, primarily due to the ordinary repayments of individual corporate loans. A significant part of the increasing demand for loans comes from new customers who have chosen Skjern Bank, but increasing activity from existing customers has also been noted.
Overall, lending decreased by 0.8 % or DKK 33.9 million to DKK 4.326 million. Deposits from customers increased by 14.0 % or DKK 766 million to DKK 6,224 million. The total guarantees for customers increased by DKK 836 to DKK 2,379 million.
CAPITAL GOALS AND DIVIDEND POLICY
Due to the satisfactory operating earnings, the Bank has achieved a satisfactory capital coverage, primarily consisting of a solid actual core capital of 15.8 % compared with the individual solvency requirements of 9.6 %, which, added to the capital conservation buffer of 2.5%, cyclical buffer of 1 % and NEP requirement of 0.625%, amounts to total capital requirements of 13.425 percentage points and a capital coverage relative to the capital requirements of 4.875 percentage points. In the future, the management will also have the utmost focus on ensuring that the bank has a solid capital base to support the continued development of the bank's activities and implementation of current and future regulatory capital requirements.
The capital base will continue to be largely based on actual core capital, but raising foreign capital will also be included in the future capital structure.
After a number of years of satisfactory and increasing earnings, the bank paid dividends of DKK 3 per share to shareholders, corresponding to DKK 28.9 million, based on the financial year 2018. The bank still has a satisfactory capital coverage, and therefore it is the management's assessment that there is a sufficient base to also reward the bank's many shareholders with an appropriate portion of the realised operating profit going forward.
Therefore, the bank's management has decided to maintain the following capital goals and dividend policy:
CAPITAL GOALS
It is the Bank's goal to be well capitalised to ensure the Bank's strategic goals and also to accommodate regulatory requirements in future recessions. The management will continuously assess the adequacy of the capital base, including the distribution between equity and foreign capital, to ensure the optimal distribution between returns to shareholders and sufficient increase of the Bank's actual core capital.
DIVIDEND POLICIES
In light of the Bank's capital goals, the Bank wants to be stable in payments of dividends. The goal is for distribution, either as share buy-backs or cash distributions, to amount to 30-50 % of the annual profit after tax, which exceeds a return on equity of 6 %.
THE BANK'S IMPORTANT STAKEHOLDERS
The Bank's management considers the cooperation with and involvement of the Bank's many stakeholders and the running of a well-functioning local Bank to be equally important.
The bank has always had a very strong focus on creating value for the bank's stakeholders. This focus works and in 2019 led to a satisfactory increase in the business volume of all of the bank's branches.
The bank's goal is controlled growth of good customers, which is to the benefit of all 4 stakeholder groups. When the customers choose the way Skjern Bank runs the bank, it increases the profits in the form of higher earnings capacity, to the benefit of the shareholders. The local community benefits from this in the form of the bank's local backing as well as lending services to local businesses and private customers. The employees benefit from this in the form of job retention and an exciting job where they can develop. The customers express that it is valuable to have a local bank that knows their needs and where they have an advisor who knows them and who back the local community's activities.
SHAREHOLDERS
he bank's approximately 16,000 shareholders have been very loyal to the bank and have shown great patience with regard to direct returns on their shares in the bank. As described under the capital and dividend policies, in the future the management wants to distribute portions of the future earnings to the shareholders.
The management recognises the importance of a stable and loyal shareholder community and, taking into account the bank's capital adequacy, aims to give them competitive returns on their investment. The shareholders' loyalty and continued backing, from small shareholders to major professional investors, is extremely important to the continued development of the bank.
The bank's management proposes a cash dividend of DKK 3 per share, a total of DKK 28.9 million, for the financial year 2019.
CUSTOMERS
The bank has a great many private customers in most of the country, though primarily in local areas and small and medium-sized business customers in the bank's local areas. The bank is largely chosen by new customers who, like the bank's many existing customers, want a local bank where they know their adviser and where they have time for them.
Through a close familiarity with individual customers and their needs, the bank wants to make a difference when our customers are facing important financial decisions, but also in daily life when online banking, mobile banking and cards have to work. The bank wants to be close to the customers, to have short response times and to find the products and financing solutions that work for each customer.
At Skjern Bank, we define this by our key values: customer focus, presence, drive and decency.
All the employees at the bank are very thankful and humbled by the trust shown by the customers when they refer their family, friends and acquaintances to the bank in large numbers via the bank's ambassador concept. The references from satisfied customers is the biggest reason why the bank experiences high and satisfactory customer growth year after year.
EMPLOYEES
As of 31 December 2019, the bank employs 164 employees, which is an increase of 7 employees in 1 year. All employees are offered employment terms that conform to the market as well as relevant training and continuing education in order to always ensure a high level of professionalism.
Employee job satisfaction is very important for the Bank and there are annual measurements of the development in employee satisfaction in each department and the Bank as a whole. It is a strategic goal for the bank to have employees who feel the bank is a good place to work and who are proud to work there. There is a very high level of employee satisfaction, which is an important foundation for always being able to offer advice and service at the high level expected by the customers, the employees and the bank.
LOCAL COMMUNITIES
The bank's goal is to play an important role in all of the bank's local communities, both as a partner for the many business owners, but of course also for the local population in general. It is important for the bank to back local initiatives and the bank helps a great number of new local businesses with counselling and financing, so that entrepreneurs' ideas have the best chance of being realised.
The bank is also a partner for more than 400 of the local communities' associations and organisations and supports both sports and culture and associations in general. The bank's commitment to and support for local communities is largely based on reciprocity, such that financial backing of any size is given in anticipation of and is subject to the bank being rewarded with customer referrals and a generally positive attitude towards the bank.
The foundation for banking operations in Skjern Bank is the many shareholders, customers, talented employees and the local community. The bank is aware that all stakeholders play an important role both now and in the future and the bank views it as an important community role to encourage the many stakeholders to work together for the benefit of both the stakeholders and the bank.
NET INTEREST INCOME
Net interest income is at the same level as last year and amounts to DKK 185.3 million.
Interest income on customer lending is maintained at DKK 202 million, which is satisfactory for a year in which lending has gone down marginally. On the other hand, bond interest income decreased by DKK 1.9 million. In total, interest income including other adjustments was reduced by DKK 2 million, corresponding to 1 %. The bank's proportion of lending where the interest rate calculation was reduced or capped as a result of customers' weak ability to pay was reduced and the interest from this amounts to DKK 10.5 million in 2019 compared with DKK 9.3 million in 2018.
In terms of accounting, the bank's negative interest rates on deposits are placed under interest income in a special line in the statement of profit or loss. The bank has realised DKK 2.1 million on this in 2019, compared with DKK 0.2 million in 2018. Interest expenses decreased by 24.6 % to DKK 10.0 million, which is due to lower interest expenses on deposits of DKK 3.1 million.
The bank's interest expenses for deposits in Nationalbanken increased by DKK 3.1 million to DKK 7.4 million in 2019, and in terms of accounting the expenses were placed in a special line in the statement of profit or loss.
FEE INCOME
Income from fees and commissions has increased satisfactorily by 19.4 % to DKK 146.9 million. The increase in fees is primarily due to an increase in loan case fees of DKK 15.2 million to a total of DKK 68.9 million as a result of the increased number of loan cases in 2019, but also increased volume in mortgage financing. The number of customers and the activity of the bank's customers also increased satisfactorily, with an increase in other fees of a total of DKK 3.7 million as a result.
The bank's income from guarantee provisions are partly due to the increased number of loan cases for converting mortgage loans, increased by a satisfactory DKK 3.5 million.
DIVIDENDS
Dividends in 2019 increased by DKK 2.4 million and amounted to DKK 5.9 million.
NET INTEREST AND FEE INCOME
Net interest and fee income including dividends increased by 8.5 % to DKK 334.4 million, which is very satisfactory.
EXCHANGE RATE ADJUSTMENTS
In 2019, securities markets were characterised by optimism and increasing share prices as well as stable bond prices. In the bank's shareholdings, a capital gain of DKK 40.0 million was realised, including capital gains of approximately DKK 21 million from the bank's sale of some of the ownership of Sparinvest Holdings SE. The bank wants a continued low share price exposure and the bank's investment in shares is thus still of a modest size.
Exchange rate adjustments on bond portfolios have been negative in 2019 by DKK 4.6 million. The bank continues to have a cautious investment policy for bonds, which dictates short maturities and low interest rate risk.
The total exchange rate adjustments amount to DKK 40.2 million and, in addition to the exchange rate adjustments on bonds and shares, consist of earnings on currency and financial instruments of DKK 4.8 million. In 2018, the total exchange rate adjustments amounted to DKK 69.3 million, of which approximately DKK 60 million consisted of capital gains from the bank's sale of shares in Value Invest Asset Management S.A.
COSTS
Staff and administration expenses are at the same level as last year and amount to DKK 191.9 million, compared with DKK 191.6 million in 2018.
Salary expenses have increased by DKK 4.7 million, corresponding to 4.3 %, due to an increasing number of employees, collective bargaining wage increases and an increase in payroll tax.
Other administration expenses decreased by DKK 4.3 million in 2019 to DKK 79.5 million. This is due to the bank having an extraordinary one-time expense to the bank's data centre Bankdata of DKK 12 million in 2018, adjusted for this, the bank's other administrative expenses increased by DKK 7.7 million.
DEPRECIATION AND WRITE-DOWNS
In 2019, there was depreciation and impairment on tangible fixed assets of DKK 2.8 million, compared with DKK 3.0 million in 2018.
IMPAIRMENT
Impairment on loans and customer receivables etc. amounted to 0.2 % of the total loans and guarantees, which corresponds to DKK 16.8 million, compared with DKK 19.7 million the previous year. The level is considered satisfactory and no major decrease in impairment was realised because extra was reserved as a management estimate on the bank's most challenged agricultural exposures and on the industry in general.
Reversal of impairment from previous accounting years amounted to DKK 91.9 million, while recorded losses amounted to DKK 52.9 million, of which DKK 48.9 million had not been previously written down. In total, the bank has provisioned DKK 336 million to accommodate future losses, which corresponds to 4.7 % of the bank's total lending and guarantees.Impairment for the year is calculated according to the IFRS 9 impairment rules on lending and guarantees. According to IFRS 9, impairment is done according to principles of expected loss, and thus impairment is attributed to all the bank's exposures regardless of credit quality. Please refer to accounting policies used and note 31 for a more detailed specification of the principles for impairment.
CORE EARNINGS
At the beginning of 2019, the bank expected a core earnings in the range of DKK 130 – 145 million. With the publication of the half-year report, earnings forecasts were adjusted upwards to the upper part of the range of DKK 135 – 150 million. Core earnings amount to DKK 146.1 million in 2019, compared with DKK 119.6 million in 2018. However, in 2018 an extraordinary IT expense of DKK 12 million was realised.
The increase is primarily due to very satisfactory customer growth and increased loan case fees. In addition, there were no extraordinary IT expenses in 2019. Core earnings are considered to be very satisfactory.
PROFIT BEFORE TAX
At the beginning of 2019, the expectations for profit for the year before tax were in the range of DKK 115 – 130 million, and over the course of the year this was adjusted upwards three times. The first upwards adjustment occurred in June 2019 to the range of DKK 135 – 150 million. In October, the range was raised to DKK 150 – 160 million and in January 2020, it was adjusted upwards to the middle of the range of DKK 160 – 170 million, assuming that impairment of DKK 15-20 million and exchange rate adjustments of DKK 5 million, in addition to capital gains of DKK 21 million, were realised through the sale of Sparinvest Holdings SE.
The bank's profit before tax amounted to DKK 165 million compared to DKK 164.6 million in 2018. The profit is considered to be particularly satisfactory and, as announced in the upwards adjustment on 6 January 2020, was realised in the middle of the range of DKK 160 – 170 million.
CAPITAL
At the end of 2019, the bank's equity amounted to DKK 1,026.6 million, of which DKK 60.0 million was raised hybrid core capital, which for accounting purposes is included under equity. At the end of 2018, equity was DKK 926.7 million. The increase is due to the realised profit in 2019, after deduction of proposed dividends.
The capital base, which consists of equity and supplemental borrowing, amounted to DKK 1,032.6 million at the end of 2019 and the total risk exposure amounted to DKK 5.551.2 million. The capital ratio is calculated at 18.6 % and the core capital at 16.9 %. The solvency requirements amounted to 9.6 %, whereby there is a satisfactory coverage in relation to the solvency requirement of 9.0 percentage points, corresponding to DKK 499 million. At the end of 2019, in addition to the solvency requirements, the bank will also add a capital conservation buffer of 2.5 %, a cyclical buffer of 1 % and a NEP supplement of 0.625 %. Including this, the solvency coverage relative to the total capital requirements amounts to 4.875 percentage points, corresponding to DKK 271 million.
The solvency requirements, which are calculated according to the Danish Financial Supervisory Authority's credit reservation method, are recognised at DKK 444.1 million, corresponding to 8.0 % for the Column 1 requirement (Søjle 1-kravet). In addition, DKK 69.6 million was provisioned for credit risk, DKK 1.6 million for interest risk, DKK 0.4 million for share risk, DKK 13.8 million for credit spread risk under the market risk and DKK 5.0 million for reservations under the operational risk. The other risk groups have not given rise to additional solvency reserves.
The bank's goal for capital coverage relative to the calculated solvency requirements plus the current phased-in capital requirements is at least 4 percentage points with a long-term goal of 5 percentage points. The capital requirements will increase significantly in the coming years, with an additional 1 % cyclical buffer in 2020, which constitutes 2 % and can potentially be up to 2.5 %, as well as up to 6 % in NEP supplement phased in in 2022. At the same time, the bank has a goal of organic growth in business volume at a level of 2 % in the coming years, which increases the requirements for the capital base.
Over the coming years, the bank wants to increase the capital base with earnings and, depending on growth, also supplement it with foreign capital in the form of either hybrid capital, subordinated capital or Tier III capital, depending on what is most valuable in terms of capital and earnings.
The management considers the bank to have a solid capital foundation, but there is a constant focus on whether the bank currently has an appropriate capital structure and coverage. For more information on capital and solvency requirements, please refer to the bank's website: www.skjernbank.dk/banken/investor/solvensbehov
LIQUIDITY
The bank's goal is to maintain liquidity reserves at a continued sufficient and solid level, mainly based on deposits from the bank's customers. In 2019, the goal was met by increasing the total deposits to a total of DKK 6.224 million.
The bank's liquidity reserves are solid. The LCR (Liquidity Coverage Ratio) of DKK 1.847 million exceeds both the regulatory requirements and the stricter liquidity goals established by the bank's Board of Directors.
The liquidity coverage ratio shows how the bank is able to meet its payment obligations for an upcoming 30-day period without access to market funding. The ratio is calculated by comparing the bank's cash reserves and liquid assets with the bank's payment obligations for the next 30 days calculated according to certain rules. Skjern Bank has established an internal limit for the minimum liquidity reserves of 175 %, which exceeds the minimum requirements of 100 % in the Danish Financial Supervisory Authority's Supervisory Diamond. The bank achieved the goal and as of 31 December 2019 has an LCR financial ratio of 357 %.
MAJOR SHAREHOLDERS
The Bank has a major shareholder - Investeringsselskabet af 15. maj (AP Pension Livsforsikringsaktieselskab, København Ø.) - who at the last ownership announcement possessed 20.75% and 5 % of the voting rights.
LIQUIDATION RESERVE
n connection with establishing the statutory liquidation reserve, the bank has prepared business procedures and implemented tests to ensure compliance with the special requirements resulting from the legislation. This has been done in cooperation with the bank's data centre, and it is the management's assessment that the bank is in compliance with the requirements.
UPCOMING ACCOUNTING RULES – IFRS 16
As of 1 January 2020, all of the bank's significant leased and rented assets must be recognised in the statement of financial position. The asset is initially recognised at present value of the lease liability and the present value of lease payments is recognised as a liability. The exception is shortterm leases. As of 1 January 2020, the present value of the bank's rentals and leases amounts to a total of DKK 14.2 million.
EVENTS OCCURRING AFTER 31 DECEMBER 2019
No events have occurred after 31 December 2019 that significantly affect the bank's circumstances.
AUDIT
The Danish version of the Annual Report for 2019 is equipped with internal audit statements and independent auditors' statement. The statements are without reservations and complementary information.
Endorsement of the Annual Report by the Management
We have today discussed and approved the annual report for the period 1 January – 31 December 2019 for Skjern Bank A/S.
The annual report has been prepared in accordance with the Danish legislation on financial activities, including executive order on financial reports for credit institutes and stock broker companies, etc. Furthermore, the annual report has been prepared in accordance with additional Danish requirements regarding information in annual reports for financial companies listed on the Stock Exchange.
We consider the accounting practice chosen to be appropriate so that the annual report gives a correct impression of the bank's assets, liabilities, financial position as at the 31st December 2019 and of the result of the bank's activities for the accounting year 1 January – 31 December 2019.
The management report includes a correct presentation of the development of the bank's activities and financial conditions together with a description of the material risks and uncertainties by which the bank may be affected.
The annual report is recommended for approval by the General Meeting.
Skjern, the 30 January 2020
22 Annual report 2019
The board of Skjern Bank A/S
Per Munck Manager
Skjern, the 30 January 2020
The board of Skjern Bank A/S
Hans Ladekjær Jeppesen Bjørn Jepsen
Chairman Vice-chairman
Niels Christian Poulsen Niels Erik Kjærgaard
Lars Skov Hansen Carsten Jensen Michael Tang Nielsen
Profit and loss account
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| 2 | Interest receivable | 200.586 | 202.618 |
| Interest receivable deposits | 2.157 | 245 | |
| 3 | Interest payable | 10.032 | 13.311 |
| Interest payable central banks | 7.424 | 4.310 | |
| Net income from interest | 185.287 | 185.242 | |
| Dividend on shares and other holdings | 5.863 | 3.476 | |
| 4 | Charges and commission receivable | 146.937 | 123.024 |
| Charges and commission payable | 3.680 | 3.509 | |
| Net income from interest and charges | 334.407 | 308.233 | |
| 5 | Value adjustments | 40.225 | 69.389 |
| Other ordinary income | 1.945 | 1.503 | |
| 6 | Staff costs and administrative expenses | 191.861 | 191.626 |
| Depreciation and write-downs on intangible and tangible assets | 2.821 | 3.004 | |
| Other operating expenses total | 112 | 127 | |
| Contribution to the Guarantee Fund for deposits | 112 | 52 | |
| Other operating expenses | 0 | 75 | |
| 9 | Write-downs | 16.831 | 19.729 |
| Result before tax | 164.952 | 164.639 | |
| 10 | Tax | 29.469 | 22.126 |
| Net-result for the financial year | 135.482 | 142.513 | |
| Of which are holders of shares of hybrid core capital instruments etc. | 6.626 | 6.626 | |
| PROPOSAL FOR DISTRIBUTION OF PROFIT | |||
| Dividends | 28.920 | 28.920 | |
| Holders of hybrid core capital instruments | 6.626 | 6.626 | |
| Transferred to/from retained earnings | 99.936 | 106.967 | |
| Total distribution of the amount available | 135.482 | 142.513 | |
| STATEMENT OF COMPREHENSIVE INCOME | |||
| Profit for the financial year | 135.482 | 142.513 | |
| Total comprehensive income | 135.482 | 142.513 |
Balance Sheet
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| ASSETS | |||
| Cash in hand and demand deposits with central banks | 229.494 | 184.106 | |
| 11 | Receivables at credit institutions and central banks | 1.673.392 | 795.467 |
| 12 | Loans and other receivables at amortised cost | 4.325.613 | 4.359.561 |
| 13 | Bonds at fair value | 1.045.717 | 1.016.994 |
| 14 | Shares etc. | 225.094 | 220.498 |
| 15 | Holdings in associated enterprises and group enterprises | 47.140 | 48.488 |
| Investment properties | 2.961 | 2.961 | |
| Owner-occupied properties | 44.179 | 45.527 | |
| 16 | Other tangible assets | 3.323 | 4.094 |
| Current tax assets | 4.804 | 11.865 | |
| 17 | Deferred tax assets | 0 | 1.922 |
| Other assets | 58.396 | 58.815 | |
| Prepayments | 1.107 | 1.763 | |
| Total assets | 7.614.080 | 6.703.573 |
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| LIABILITIES | |||
| DEBT | |||
| 18 | Debt to credit institutions and central banks | 206.536 | 160.750 |
| 19 | Deposits and other debts | 6.223.604 | 5.457.413 |
| Other liabilities | 44.386 | 48.832 | |
| Prepayments | 1.386 | 442 | |
| Total debt | 6.475.912 | 5.667.437 | |
| PROVISIONS | |||
| 20 | Provisions for deferred tax | 675 | 0 |
| 12 | Provisions for loss on guarantees | 13.590 | 9.420 |
| Total provisions | 14.265 | 9.420 | |
| SUBORDINATED DEBT | |||
| 21 | Subordinated loan capital | 97.334 | 99.976 |
| Total subordinated debt | 97.334 | 99.976 | |
| EQUITY | |||
| 22 | Share capital | 192.800 | 192.800 |
| Revaluation reserves | 417 | 417 | |
| Retained earnings | 744.402 | 644.923 | |
| Proposed dividend | 28.920 | 28.920 | |
| Capital owners share of equity | 966.539 | 867.060 | |
| Holders of hybrid capital | 60.030 | 59.680 | |
| Total equity | 1.026.569 | 926.740 | |
| Total liabilities | 7.614.080 | 6.703.573 |
Information on changes in equity
| DKK 1,000 | 2019 | 2018 |
|---|---|---|
| Share capital beginning-of-year | 192.800 | 192.800 |
| Share capital end-of-year | 192.800 | 192.800 |
| Revaluation reserves beginning-of-year | 417 | 417 |
| Revaluation reserves end-of-year | 417 | 417 |
| Retained earnings beginning-of-year | 644.923 | 561.785 |
| Changed accounting policy for impaiment charges | 0 | -23.823 |
| Profit or loss for the financial year | 99.936 | 106.967 |
| Dividend own shares | 30 | 0 |
| Purchase of own funds | -487 | -6 |
| Retained earnings end-of-year | 744.402 | 644.923 |
| Dividend beginning-of-year | 28.920 | - |
| Proposed dividend | 28.920 | 28.920 |
| Dividends paid | -28.920 | 0 |
| Dividend end-of-year | 28.920 | 28.920 |
| Holders of hybrid capital beginning-of-year | 59.680 | 59.330 |
| Net profit or loss for the year (interest hybrid capital) | 6.626 | 6.626 |
| Paid interest | -6.276 | -6.276 |
| Holders of hybrid capital end-of-year | 60.030 | 59.680 |
| Total equity | 1.026.569 | 926.740 |
Notes
| 1 | Accounting policies . | 29 |
|---|---|---|
| 2 | Interest income . | 39 |
| 3 | Interest expenses . | 39 |
| 4 | Fees and commission income . | 39 |
| 5 | Value adjustments . | 39 |
| 6 | Staff costs and administrative expenses | 40 |
| 7 | Incentive and bonus schemes . | 41 |
| 8 | Audit fee . | 41 |
| 9 | Write-downs on loans and receivables . | 41 |
| 10 | Tax . | 42 |
| 11 | Receivables at credit institutions and central banks . | 42 |
| 12 | Loans and other debtors at amortised cost price . | 43 |
| 13 | Bonds at fair value . | 45 |
| 14 | Shares etc. . | 45 |
| 15 | Land and buildings . | 45 |
| 16 | Other tangible assets . | 46 |
| 17 | Deferred taxation . | 46 |
| 18 | Debt to credit institutions and central banks | 46 |
| 19 | Deposits and other debts . | 46 |
| 20 | Deferred taxation . | 47 |
| 20 | Subordinated debt . | 47 |
| 21 | Share capital | 47 |
| 22 | Holders of hybrid capital . | 47 |
| 23 | Own capital shares . | 48 |
| 24 | Contingent liabilities | 48 |
| 25 | Lawsuits etc. | 49 |
| 26 | Related parties | 49 |
| 27 | Capital requirement . | 50 |
| 28 | Current value of financial instruments . | 51 |
| 29 | Risks and risk management | 52 |
| 30 | Credit Risk | 53 |
| 31 | Market risks and sensitivity information | 64 |
| 32 | Derivate financial instruments . | 65 |
| 33 | Coperative agreements . | 67 |
| 34 | 5 years in summary . | 67 |
| 35 | 5 years of financial ratio . | 68 |
| 36 | Quarterly overviews . | 69 |
1. ACCOUNTING POLICIES
The Financial Statements have been prepared in accordance with the Danish Financial Business Act and the Executive Order on financial reports for credit institutions and investment companies, etc.
The Financial Statements have been prepared in accordance with additional Danish legal requirements for Financial Statements for listed financial companies.
The Financial Statements are presented in DKK and rounded to the nearest DKK 1,000.
Changed accounting treatment of interest income deposits and interest expenses central banks
Interest income deposits and interest expenses central banks have previously been presented under interest expenses due to their insignificant nature. Interest income deposits have been offset in interest expenses deposits and other debt, and interest expenses central banks have been presented separately in the note under interest expenses.
Both items will now be separately presented in the statement of profit or loss under interest income deposits and interest expenses central banks. The change in the presentation of interest income and interest expense has no effect on profit.
Information on rules that have not yet entered into force:
Leasing
The Danish Financial Supervisory Authority's amending Executive Order of 3 December 2018 enters into force for accounting periods beginning 1 January 2020 or later, but with the option of early implementation of the Executive Order.
The amending Executive Order introduces new leasing rules which, compared to the previous rules, means that the way lessees are handled in terms of accounting no longer requires a distinction between financial leasing and operational leasing. All lease agreements must be recognised by the lessee in the form of a leasing asset that represents the value of the right of use. The asset is initially recognised at present value of the lease liability including costs and any prepayments.
At the same time, the present value of the agreed lease payments are recognised as a liability. Assets leased on short-term contracts and leased assets of low value are excluded from the requirement for recognition of a lease asset.
Skjern Bank has decided to apply the new leasing rules with effect from 1 January 2020. The effect of the upcoming leasing rules is estimated to be DKK 14.2 million.
General information on recognition and measurement
Assets are recognised in the statement of financial position when it is probable that future economic benefits will flow to the bank and the asset's value can be measured reliably.
Liabilities are recognised in the statement of financial position when they are likely and can be measured reliably. Assets and liabilities are initially recognised at fair value. However, tangible assets are measured at cost at the time of initial recognition. Measurement after initial recognition occurs as described for each item below.
Foreseeable risks and losses which may arise before the Financial Statements are reported and which confirm or invalidate conditions existing on the balance date are taken into account in recognition and measurement.
Income is recognised in the statement of profit or loss and other comprehensive income as it is earned, while expenses are recognised at the amounts which relate to the financial year.
Purchases and sales of financial instruments are recognised on the transaction date and are no longer recognised when the right to receive/deliver cash to or from the financial asset or liability has expired or, if it is transferred, the bank has transferred all significant risks and rewards of ownership. The bank has not used the rules for reclassification of certain financial assets at fair value to amortised cost.
Determination of fair value
The fair value is the amount to which an asset can be converted or at which a liability can be settled in a transaction under normal conditions between knowledgeable, willing and independent parties.
The fair value of financial instruments for which there is an active market is usually determined as the closing price on the Balance Sheet date or, if not available, another published price considered to best correspond to this.
For financial instruments for which there is an active market, fair value is established using generally accepted valuation techniques which are based on relevant observable market data.
Accounting estimates
When determining the carrying amount of certain assets and liabilities, discretion is used as to how future events will affect the value of the assets and liabilities on the balance date.
The estimates used are based on assumptions which the management considers to be reasonable, but which are associated with some uncertainty.
Therefore, the actual final results may differ from the estimates used, because the bank is affected by risk and uncertainty, which can affect this.
The areas which involve a greater degree of assessments/assumptions and estimates are impairment of loans and receivables, determination of fair value of unlisted financial instruments, corporate and investment properties and provisions.
Although the carrying amounts are calculated in accordance with the Danish Executive Order on the Presentation of Financial Statements, particularly including appendices 9 and 10 and related guidelines, there is uncertainty and estimates associated with these carrying amounts, as they are based on a number of assumptions. If these assumptions change, the financial reporting may be affected and the impact may be significant. Changes may occur through a change in practice or interpretation by the authorities and amended principles from the management - for example, the value of collateral may entail changes to the calculations.
Foreign currency
Assets and liabilities in foreign currencies are recognised on the balance date at the National Bank of Denmark's listed rates. Foreign currency spot transactions are adjusted on the balance date based on the spot rate. Currency translation adjustments are recognised on an ongoing basis in the statement of profit or loss and other comprehensive income.
STATEMENT OF PROFIT OR LOSS
Interest, fees and commissions, etc.
Interest income and expenses are recognised in the statement of profit or loss and other comprehensive income in the period to which they relate.
Received interest on credit-impaired loans on which impairment has occurred are passed to the impaired part of the loan in question under the item "Impairment of loans and receivables" and are thus offset in impairment for the year.
Commissions and fees which are an integral part of the effective interest rate of a loan are recognised as part of the amortised cost and are therefore part of interest income under loans.
Commissions and fees which are part of an ongoing service are accrued over the loan period.
Other fees and commissions and dividends are recognised in the statement of profit or loss and other comprehensive income when the rights to them are acquired.
Staff and administration expenses
Staff and administration expenses include wages and salaries, social costs, pensions, IT costs and administrative and marketing costs.
Pension schemes
The bank has entered into defined contribution schemes with the employees. In defined contribution schemes, fixed contributions are paid to an independent pension fund. The bank has no obligation to make further contributions.
Tax
Tax for the year, which consists of current tax for the year and movements in deferred tax, is recognised in the statement of profit or loss and other comprehensive income as the portion which is attributable to the net profit for the year and directly in equity as the portion which is attributable to items in equity.
Current tax liabilities and current tax receivables are recognised in the Balance Sheet as tax calculated on taxable income for the year adjusted for tax paid on account.
Deferred tax is recognised on all temporary differences between carrying values and tax values of assets and liabilities.
Deferred tax assets, including the tax value of tax loss carry forwards, are recognised in the statement of financial position at the value at which the asset is expected to be realised, either against deferred tax liabilities or as net assets.
STATEMENT OF FINANCIAL POSITION
Classification and measurement
According to the IFRS 9-compatible accounting regulations, classification and measurement of financial assets is done based on the business model for the financial assets and the contractual cash flows relating to the financial assets. This means that financial assets must be classified into one of the following two categories:
- Financial assets that are held to generate the contractual payments, and where the contractual payments exclusively consist of interest and repayments on the outstanding amount, are measured at amortised cost after the date of first recognition. This category includes loans at amortised cost and receivables from credit institutions.
- Financial assets that do not meet the above criteria for the business model or where the contractual cash flows do not exclusively consist of interest and repayments on the outstanding amount are initially recognised at fair value through the statement of profit or loss.
Skjern Bank does not have financial assets that are included in the measurement category for recognition of financial assets at fair value through other comprehensive income. Instead, the bank's bond portfolio is measured at fair value through the statement of profit or loss because they are included in a trading portfolio.
Receivables from credit institutions and central banks
Initially recognised at fair value plus transaction costs and minus origination fees, etc. and subsequently measured at amortised cost.
Loans
The accounting item consists of loans disbursed directly to the borrower.
Loans are measured at amortised cost, which usually corresponds to the nominal value minus origination fees etc. and minus provisions for losses expected but not yet realised.
Model for impairment for expected credit losses
In accordance with the IFRS 9-compatible impairment rules, impairment is done for expected credit losses on all financial assets that are recognised at amortised cost and provisions are made according to the same rules for expected credit losses on unused credit lines, loan commitments and financial guarantees. The impairment rules are based on an expectation-based model.
For financial assets recognised at amortised cost, impairment for expected credit losses is recognised in the statement of profit or loss and the value of the asset is reduced in the statement of financial position. Provisions for losses on unused credit lines, loan commitments and financial guarantees are recognised as a liability.
Stages of development in credit risk
The expectation-based impairment rules means that a financial asset etc. at the time of first recognition is impaired by an amount corresponding to the expected credit loss over 12 months (stage 1). If there is subsequently a significant increase in the credit risk compared to the time of first recognition, the financial asset is impaired by the amount corresponding to the expected credit loss in the asset's remaining life (stage 2). If impaired credit (stage 3) is discovered for the instrument, the asset is written down by an amount corresponding to the expected credit loss in the asset's remaining life, and interest income is recognised in the statement of profit or loss according to the effective interest method based on the impaired amount.
Placement in stages and calculation of the expected loss is based on the bank's rating models, which were developed by the data centre Bankdata and the bank's internal credit management.
Assessment of significant increase in credit risk
In the assessment of the development of credit risk, it is assumed that a significant increase in credit risk has occurred in relation to the time of initial recognition when a downwards adjustment of the bank's internal rating of the debtor corresponds to one rating class in the Danish Financial Supervisory Authority's rating classification guidelines.
If the credit risk on the financial asset is considered to be low on the reporting date, the asset is kept at stage 1, where a significant increase in credit risk has not occurred. Skjern Bank considers the credit risk to be low when the bank's internal rating of the customer corresponds to 2a or better, though an overdraft for more than 30 days for a customer with an internal rating of 2a will lead to a significantly impaired credit risk. The category of assets with low credit risk also includes lending and receivables that meet the rating criterion, as well as receivables from Danish credit institutions. New customers are always placed in stage 1 unless they are credit impaired.
Definition of credit impairment and default
An exposure is defined as being impaired and as being in default if it meets at least one of the following criteria:
- The borrower is experiencing significant financial difficulties, and the bank assesses that the borrower will not be able to pay their liabilities as agreed.
- The borrower has committed a breach of contract, such as in the form of non-compliance with payment obligations for principal and interest or repeated overdrafts.
- The bank has granted the borrower easier terms than it would have granted were it not for the borrower's financial difficulties.
- It is likely that the borrower will go bankrupt or be subject to other financial reorganisation.
- The exposure has been in arrears/overdrawn for more than 90 days by an amount that is considered significant.
However, financial assets where the customer has significant financial difficulties or where the bank has offered easier terms
due to the customer's financial difficulties are kept at stage 2 if losses are not expected in the most likely scenario.
The definition of credit impairment and default that the bank uses when measuring the expected credit loss and for transfer to stage 3 is in line with the definition used for internal risk management purposes. This means that an exposure that is considered to be credit impaired is always placed in stage 3.
Calculation of expected loss
The calculation of impairment on exposures in stages 1 and 2, except for the weakest exposures in stage 2, are made on a portfolio-based calculation model, while the impairment on the rest of the exposures are made through a manual, individual assessment based on three scenarios (basic scenario, a more positive scenario and a more negative scenario) with the associated likelihood that the scenarios will occur.
The portfolio model calculation is based on the bank's division of customers into different rating classes and an assessment of the risk of loss in each rating class. The calculation occurs in a setup that is developed and maintained in Bankdata, supplemented with a predictive macroeconomic module, which is developed and maintained by LOPI, and which forms the basis for the incorporation of management's expectations for the future.
The macroeconomic module is based on a series of regression models that establish the historical correlation between impairment for the year within a number of sectors and industries and a number of explanatory macroeconomic variables. Estimates are then applied to the regression models for the macroeconomic variables based on forecasts from consistent sources such as Det Økonomiske Råd [The Danish Economic Council], Danmarks Nationalbank etc. where the forecasts are generally for two years in the future and include variables such as increase in public consumption, increase in GDP, interest rates etc. The expected impairment is thereby calculated for up to two years in the future for each sector and industry. For maturities longer than two years and up to year 10, a projection of the impairment percentage is made such that it converges towards a normal level in year 10. Maturities longer than 10 years are given the same impairment percentage as in year 10. The predictive macroeconomic module generates a series of adjustment factors which are multiplied by the data centre's "raw" estimates, which are then adjusted in relation to the starting point.
Model uncertainty and managerial estimates
In addition to establishing expectations for the future, write-downs in stages 1 and 2 are also subject to uncertainty because the model does not account for all relevant circumstances. As there is still limited historical data as a basis for the models, it has been necessary to supplement the model's calculations with management estimates. Assessment of the effect of the long-term probability of default on customers and segments through improved and deteriorated outcomes of macroeconomic scenarios is associated with estimates.
Please refer to the more detailed description in note 31.
Changes in write-downs are adjusted in the statement of profit or loss and other comprehensive income under the item "Impairment of loans and receivables etc".
Practice for writing off financial assets from the statement of financial position
Financial assets that are measured at amortised cost are wholly or partially written off from the statement of financial position if the bank no longer has reasonable expectations that the outstanding amount will be wholly or partially covered. Recognition ceases based on specific, individual assessment of each exposure. For private and corporate customers, the bank will typically write off losses when the pledged collateral is realised and the residual receivable is unsustainable. When a financial asset is written off from the statement of financial position in whole or in part, the impairment on the financial asset is removed from the calculation of accumulated impairment, cf. note 9.
The bank continues its collection efforts after the assets have been written off, with the measures depending on the specific situation. The bank essentially tries to enter a voluntary agreement with the customer, including renegotiation of terms or reconstruction of a business, such that debt collection or bankruptcy proceedings are only put to use when other measures have been tried.
Bonds and shares, etc.
Bonds and shares traded on a listed stock exchange are measured at fair value. Fair value is usually determined as the official closing price on the balance date.
Unlisted securities and other equity investments (including level 3 assets) are also recognised at fair value, calculated based on what the transaction price would be in a trade between independent parties. If there is no current market data, the fair value is determined based on the published financial reports or on a return model which is based on cash flows and other available information.
Value adjustments on bonds and shares, etc. are recognised on an ongoing basis in the statement of profit or loss and other comprehensive income under the item "Exchange rate adjustments".
Land and buildings
Land and buildings include
- "Owner-occupied properties", which consist of the properties from which the bank conducts banking activities, and
- "Investment properties", which consist of all other properties the bank owns.
Owner-occupied properties are measured in the statement of financial position at revalued amount, which is the fair value determined based on the return method with a rate of return in the range of 5.6 - 7 % less accumulated depreciation and any impairment loss. Depreciation is recognised in the statement of profit or loss and revaluation is done so frequently that there are no significant differences in fair value. Increases in the owner-occupied properties' revalued amount are recognised under revaluation reserve in equity. If an increase in the revalued amount corresponds to an earlier case and is thus recognised in the statement of profit or loss in a previous year, the increase is recognised in the statement of profit or loss. A decrease in the revalued amount is recognised in the statement of profit or loss and other comprehensive income, unless there is a reversal of previous revaluations. Owner-occupied properties are depreciated linearly over 50 years based on the cost adjusted for any value adjustments where residual values are not used.
Investment properties are measured in the statement of financial position at fair value determined based on the return method. Ongoing changes in fair value of investment properties are recognised in the statement of profit or loss and other comprehensive income.
Establishment of the revalued amount of owner-occupied properties and the fair value of investment properties are associated with significant estimates. The estimates particularly relate to the establishment of required rate of return.
Other tangible fixed assets
Other tangible fixed assets, including plant and machinery, are recognised at the acquisition at cost.
Then, other tangible assets and conversion of rented premises are recognised at cost minus accumulated depreciation.
A linear amortisation is done over 3-5 years based on the cost and amortisations and impairment losses recognised in the statement of profit or loss.
Other assets
Other assets include interest receivable and provisions and positive market value of derivative financial instruments.
Prepayments and accrued income
Prepayments and accrued income recognised under assets include costs relating to subsequent financial years. Prepayments and accrued income recognised under liabilities include prepaid interest and guarantee provisions relating to subsequent financial years.
Payables to credit institutions and central banks as well as deposits and other debt
The items are measured at amortised cost.
Subordinated debt
Items are measured at amortised cost.
Hybrid core capital under equity
Hybrid core capital that meets the rules in CRR to be classified as additional tier I capital with indefinite maturity and where the payment of interest is voluntary is classified as equity.
Interest on hybrid core capital is deducted from equity.
The tax effect of the interest is recognised under current tax in the statement of profit or loss.
Other liabilities
Other liabilities include interest payable and provisions and negative market value of derivative financial instruments.
Provisions
Assurances, guarantees and other liabilities which are uncertain in terms of size or time of settlement are recognised as provisions when it is probable that the liability will result in financial resources flowing out from the bank and the liability can be measured reliably. The liability is calculated at the present value of the costs required to settle the liability.
Treasury shares
Acquisition and disposal and dividends from treasury shares are recognised directly under equity.
Derivative financial instruments
All derivative financial instruments, including forward contracts, futures and options in bonds, shares or currency, as well as interest and currency swaps, are measured at fair value on the balance date.
Exchange rate adjustments are included in the statement of profit or loss and other comprehensive income.
Positive market values are recognised under other assets, while negative market values are recognised under other liabilities.
Contingent liabilities
The bank's outstanding guarantees are disclosed in the notes under the item "Contingent liabilities". The liability relating to outstanding guarantees which are assessed to lead to a loss for the bank is provisioned under the item "provisions for loss on guarantees". The liability is expensed in the statement of profit or loss under "Impairment of loans and receivables etc". Non-financial guarantees, cf. IFRS 9, are not included in stages 1 and 2.
Financial highlights
Key figures and ratios are presented in accordance with the requirements in the Danish Executive Order on the Presentation of Financial Statements.
Notes
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| 2 | INTEREST INCOME | ||
| Loans and other receivables | 202.138 | 202.458 | |
| Loans (interest conc. the written-down part of loans) | -10.512 | -9.288 | |
| Bonds | 6.521 | 8.454 | |
| Other derivative financial instruments, total of which | 2.439 | 994 | |
| Interest-rate contracts | |||
| Currency contracts | 2.755 | 155 | |
| Other interest income | -316 | 839 | |
| Total | 200.586 | 202.618 | |
| 3 | INTEREST EXPENSES | ||
| Deposits | 3.506 | 6.575 | |
| Subordinated debt | 6.525 | 6.560 | |
| Other interest expenses | 1 | 176 | |
| Total | 10.032 | 13.311 | |
| No income or expenses are entered from genuine purchase or repurchase contracts in notes 2 and 3. | |||
| 4 | FEES AND COMMISSION INCOME | ||
| Securities trading and custody accounts | 16.238 | 15.489 | |
| Payment services | 12.423 | 11.704 | |
| Loan fees | 68.877 | 53.674 | |
| Guarantee commission | 16.918 | 13.376 | |
| Other fees and commission | 32.481 | 28.781 | |
| Total | 146.937 | 123.024 | |
| 5 | VALUE ADJUSTMENTS | ||
| Other loans | 0 | 0 | |
| Bonds | -3,615 | -3,615 | |
| Total shares | 68,361 | 68,361 | |
| - Shares in sectorcompanies etc | 10,413 | 10,413 | |
| - Other shares | 57,948 | 57,948 | |
| Foreign currency | 4,649 | 4,649 | |
| Other financial instruments | -6 | -6 | |
| Total | 69,389 | 69,389 |
As the bank essentially operates deposits and lending activity in its local areas, the division of market areas is not specified for notes 2-5.
| DKK 1,000 | 2019 | 2018 |
|---|---|---|
| STAFF COSTS AND ADMINISTRATIVE EXPENSES | ||
| Salaries and remuneration of board of directors, audit committee, managers etc. | ||
| Board of managers (1 person - the board of manager has a company car) | 3.285 | 3.013 |
| Fixed fees | 3.285 | 2.978 |
| Pension contributions | 0 | 35 |
| Management board | 1.303 | 1.163 |
| Audit Committee | 80 | 58 |
| Committee of representatives | 177 | 180 |
| Total salaries and remuneration of board etc | 4.845 | 4.414 |
| Board of Directors' remuneration | ||
| Hans Ladekjær Jeppesen | 349 | 268 |
| Bjørn Jepsen | 195 | 107 |
| Niels Christian Poulsen | 105 | 0 |
| Niels Erik Kjærgaard | 122 | 0 |
| Lars Skov Hansen | 142 | 118 |
| Carsten Jensen | 124 | 107 |
| Michael Tang Nielsen | 102 | 0 |
| Søren Dalum Tinggard | 132 | 107 |
| Jens Okholm | 40 | 191 |
| Finn Erik Kristiansen | 25 | 118 |
| Troels Bülow-Olsen | 25 | 98 |
| Lars Lerke | 22 | 107 |
| I alt | 1.383 | 1.221 |
| Staff costs | ||
| Wages and salaries | 82.245 | 79.875 |
| Pensions | 9.138 | 8.698 |
| Social security costs | 1.182 | 919 |
| Payroll tax | 14.859 | 13.683 |
| Total staff costs | 107.424 | 103.175 |
| Salary to special risk takers (11 persons in 2019, 11 persons in 2018) | 9.288 | 8.524 |
| Pensions to special risk takers (11 persons in 2019, 11 persons in 2018) | 1.022 | 938 |
| Other administrative expenses | ||
| IT expenses | 41.013 | 47.808 |
| Rent, electricity, heating etc | 5.396 | 6.012 |
| Postage, telephony etc | 987 | 1.168 |
| Other administrative expenses | 32.196 | 29.049 |
| Total other administrative expenses | 79.592 | 84.037 |
| Total staff costs and administrative expenses | 191,626 | 191,626 |
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
Pension and severance terms for the executive board
Upon retirement, Skjern Bank pays a severance payment equivalent to 6 months' salary. The management may retire at 62 years. Skjern Bank's notice period to the management is 36 months, but may be 48 months in special circumstances. The management's notice period to the bank is 6 months.
The Board's pension terms
No pension is paid to the Board
Special risk takers' pension terms
The special risk takers receive 11% of their respective salary grades in annual pension, which is contributionbased through a pension company in which the payments are expensed continually.
| Average number of employees during the financial year converted into full-time employees | |||
|---|---|---|---|
| Employed in credit institution business | 150 | 147 | |
| Total | 150 | 147 | |
| 7 | INCENTIVE AND BONUS SCHEMES | ||
| The bank does not have any incentive or bonus schemes. | |||
| 8 | AUDIT FEE | ||
| Total fee to the firm of accountants, elected by the annual meeting, that per form the statutory audit |
626 | 796 | |
| Honorariums for statutory audits of financial statements | 550 | 685 | |
| Honorariums for assurance services | 38 | 18 | |
| Honorariums for tax consultancy | 38 | 31 | |
| Honorariums for other services | 0 | 62 | |
| Fees for other statements with certainty regarding statutory statements to public authorities. Fees for tax advice include advice | |||
| on various VAT and tax matters. | |||
| 9 | WRITE-DOWNS ON LOANS AND RECEIVABLES | ||
| Write-downs and provisions during the year | 116.865 | 84.486 | |
| Reversal of write-downs made in previous years | -91.928 | -55.706 | |
| Finally lost, not previously written down | 3.998 | 2.146 | |
| Interest on the written-down portion of loans | -10.512 | -9.288 | |
| Recoveries of previously written off debt | -1.592 | -1.909 | |
| Total | 16.831 | 19.729 |
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| 10 | TAX | ||
| Calculated tax of income of the year | 27.076 | 16.539 | |
| Adjustment of deferred tax | 2.597 | 3.894 | |
| Adjustment of tax calculated in previous years | -204 | 1.693 | |
| Total | 29.469 | 22.126 | |
| Tax paid during the year | 25.814 | 16.008 | |
| EFFECTIVE TAX RATE (%) | (Pct.) | (Pct.) | |
| Tax rate currently paid by the bank | 22,00 | 22,00 | |
| Non deductable costs and not taxable income | -4,19 | -10,27 | |
| Adjustment of tax calculated for previous years | -0,12 | 1,53 | |
| Deferred tax activation | 0,00 | 0,00 | |
| Other adjustments | 0,18 | 0,18 | |
| Effective tax rate | 17,87 | 13,44 | |
| 11 | RECEIVABLES AT CREDIT INSTITUTIONS AND CENTRAL BANKS | ||
| Deposits with central banks | 1.632.136 | 763.096 | |
| Receivables at credit institutions | 41.256 | 32.371 | |
| Total | 1.673.392 | 795.467 | |
| Remaining period | |||
| Demand | 1.673.392 | 795.467 | |
| Total | 1.673.392 | 795.467 |
No assets related to genuine purchase and resale transactions included.
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| 12 | LOANS AND OTHER DEBTORS AT AMORTISED COST PRICE | ||
| Remaining period | |||
| Claims at call | 1.558.453 | 1.698.592 | |
| Up to 3 months | 148.123 | 115.651 | |
| Over 3 months and up to 1 year | 340.160 | 372.104 | |
| Over 1 year and up to 5 years | 864.441 | 883.861 | |
| Over 5 years | 1.414.436 | 1.289.353 | |
| Total loans and other debtors at amortised cost price | 4.325.613 | 4.359.561 |
DEVELOPMENT IN WRITE-DOWNS AND PROVISIONS RELATING TO FINANCIAL ASSETS AT AMORTIZED COST AND OTHER CREDIT RISKS
ASSETS INCLUDED IN IFRS9
| STAGE 1 IMPAIRMENT CHARGES | ||
|---|---|---|
| Stage 1 impairment charges at the end of the previous financial year | 16.768 | - |
| Changed accounting policy for impairment charges | - | 14.750 |
| Stage 1 impairment charges / value adjustment during the period | 11.997 | 10.134 |
| -hereby new facilities in the period 8,209 TDKK | ||
| Stage 1 impairment reversed during the period | -8.760 | -8.116 |
| Cummulative stage 1 impairment total | 20.005 | 16.768 |
| STAGE 2 IMPAIRMENT CHARGES | ||
| Stage 2 impairment charges at the end of the previous financial year | 48.650 | - |
| Changed accounting policy for impairment charges | - | 44.112 |
| Stage 2 impairment charges / value adjustment during the period | 36.250 | 24.510 |
| Stage 2 impairment reversed during the period | -21.824 | -19.972 |
| Cummulative stage 2 impairment total | 63.076 | 48.650 |
| STAGE 3 IMPAIRMENT CHARGES* | ||
| Stage 3 impairment charges at the end of the previous financial year | 286.140 | 313.345 |
| Changed accounting policy for impairment charges | - | -8,357 |
| Stage 3 and impairment charges / value adjustment during the period | 63.590 | 69.360 |
| Reversal of stage 3 impairment charges during the period | -60.576 | -47.228 |
| Recognised as a loss, covered by stage 3 impairment charges | -48.902 | -40.980 |
| Cummulative stage 3 impairment total | 240.252 | 286.140 |
| Total cumulative impairment charges IFRS9 | 323.333 | 351.558 |
| Note DKK 1,000 |
2019 | 2018 | |
|---|---|---|---|
| GUARANTEES | |||
| Provisions beginning of the year | 9.420 | 2.578 | |
| Changed accounting policy for provisions for losses on guarantees | 0 | 6.556 | |
| Loss on guarantees | 9.193 | 5.384 | |
| Transferred to liabilities | -5.023 | -5.098 | |
| Guarantees end of year | 13.590 | 9.420 | |
| Total cumulative impairment charges IFRS9 and guarantees | 336.923 | 360.978 | |
| Loans etc. with suspended calculation of interest | 83.586 | 120.839 |
The development in Stadie 2 is mainly due to the fact that some large exposures have improved from being credit impaired in Stadie 3 to being rated 2C-RedT, and thus included in Stadie 2.
In addition, the macro factor has increased significantly and a management estimate has been allocated, both of which increase the impairment in Stage 2.
The development in Stage 3 is mainly due to write-offs of 44 million in the operating year of previously written-down receivables. The amount is thus deducted from write-downs at year-end.
| DKK 1,000 |
|---|
| ----------- |
Note DKK 1,000 2019 2018
| Stage 1 | Stage 2 (due to migration) |
Stage 2 (due to overdraft) |
Stage 2 (weak) |
Stage 3 | Total | |
|---|---|---|---|---|---|---|
| Beginning | ||||||
| Impairment | 16.768 | 26.816 | 1 | 21.833 | 286.140 | 351.558 |
| - in % of total impairment | 5% | 8% | 0% | 6% | 81% | 100% |
| Maximum credit risk | 6.118.782 | 813.150 | 211 | 164.961 | 679.984 | 7.777.088 |
| - in % of maximum credit risk | 79% | 10% | 0% | 2% | 9% | 100% |
| Rating, weighted average | 3,3 | 5,6 | 1,4 | 10,0 | 10,0 | 4,3 |
| End | ||||||
| Impairment | 20.005 | 44.916 | 13 | 18.147 | 240.252 | 323.333 |
| - in % of total impairment | 6% | 14% | 0% | 6% | 74% | 100% |
| Maximum credit risk | 6.546.649 | 903.469 | 2.026 | 182.988 | 571.517 | 8.206.649 |
| - in % of maximum credit risk | 80% | 11% | 0% | 2% | 7% | 100% |
| Rating, weighted average | 3,3 | 5,9 | 2,0 | 10,0 | 10,0 | 4,2 |
| Mortgage credit bonds Other bonds Total bonds at fair value The bank has no held-to-maturity assets |
925.108 114.867 1.045.717 |
903.640 107.676 1.016.994 |
||||
| SHARES ETC | ||||||
| Quoted on Nasdaq OMX Copenhagen A/S | 38.881 | 28.756 | ||||
| Quoted on other stock exchanges | 18.178 | 17.485 | ||||
| Sectorshares recorded at fair value | 168.035 | 174.257 | ||||
| Total shares etc | 225.094 | 220.498 | ||||
| LAND AND BUILDINGS | ||||||
| Investment properties | ||||||
| Fair value - end of previous financial year | 2.961 | 2.961 | ||||
| Acquisitions during the year incl. improvements | 0 | 0 | ||||
| Disposals during the year | 0 | 0 | ||||
| Adjustment of fair value for the year | 0 | 0 | ||||
| Fair value end-of-year | 2.961 | 2.961 | ||||
| Owner occupied properties | ||||||
| Reassessed value - end of previous financial year | 45.527 | |||||
| Acquisitions during the year incl. improvements Depreciations |
73 -1.421 |
46.428 520 -1.421 |
External experts have not been involved by measurement of investment- and owner-occupied properties.
Return method is used for measurement of investment and owner-occupied properties where used required rate of return between 5.6-7 %.
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| 16 | OTHER TANGIBLE ASSETS | ||
| Total cost price beginning-of-year | 25.903 | 25.553 | |
| Acquisitions during the year incl. Improvements | 909 | 880 | |
| Reduction during the year | -465 | -530 | |
| Total cost price beginning-of-year | 26.347 | 25.903 | |
| Total write-ups/downs and depreciations beginning-of-year | 21.809 | 20.395 | |
| Depreciations during the year | 1.401 | 1.583 | |
| Reversal of depreciations | -186 | -169 | |
| Total write-ups/downs and depreciations end-of-year | 23.024 | 21.809 | |
| Book value end-of-year | 3.323 | 4.094 | |
| 17 | DEFERRED TAXATION | ||
| (Tax amount) | |||
| Tangible assets | 0 | -556 | |
| Loans and other receivables | 0 | 2.611 | |
| Other | 0 | -133 | |
| Other deficits carried forward | 0 | 0 | |
| Total deferred taxation | 0 | 1.922 | |
| 18 | DEBT TO CREDIT INSTITUTIONS AND CENTRAL BANKS | ||
| Debt to credit institutions Total debt to credit institutions and central banks |
206.536 206.536 |
160.750 160.750 |
|
| Term to maturity | |||
| Demand | 206.536 | 160.750 | |
| Total debt to credit institutions and central banks | 206.536 | 160.750 | |
| No liabilities related to genuine sale and repurchase transactions included | |||
| 19 | DEPOSITS AND OTHER DEBTS | ||
| Demand | 5.398.876 | 4.810.000 | |
| At notice | 18.591 | 18.604 | |
| Time deposits | 562 | 1.582 | |
| Special types of deposits | 805.575 | 627.227 | |
| Total deposits and other debts | 6.223.604 | 5.457.413 | |
| Term to maturity | |||
| Demand | 5.415.150 | 4.827.196 | |
| Desposits redeemable at notice: | |||
| Up to 3 months | 108.404 | 100.333 | |
| Over 3 months and up to 1 year | 11.819 | 11.609 | |
| Over 1 year and up to 5 years | 44.656 | 30.141 | |
| Over 5 years Total deposits and other debts |
643.575 6.223.604 |
488.134 5.457.413 |
|
No liabilities related to genuine sale and repurchase transactions included.
| Note | DKK 1,000 | 2019 | 2018 | ||
|---|---|---|---|---|---|
| 20 | DEFERRED TAXATION | ||||
| (Tax amount) | |||||
| Tangible assets | 2.800 | 0 | |||
| Loans and other receivables | -2.762 | 0 | |||
| Other | 637 | 0 | |||
| Total deferred taxation | 0 | 1.922 | |||
| 21 | SUBORDINATED DEBT Supplementary capital DKK 100 mio |
97.334 | - | ||
| Rate | 6,4573% | - | |||
| Due date | 20.05.2030 | - | |||
| The loan may be paid early with the Danish Financial Supervisory Authority's approval starting on 20 May 2025 and then on each interest payment date. |
|||||
| The interest rate is determined as the 6-year swap rate plus a premium of 6.3 percentage points, valid for 6 years from date of issue. |
|||||
| Supplementary capital DKK 100 mio | - | 99.976 | |||
| Rate | - | 6,595 % | |||
| Due date | - | 21.05.2024 | |||
| The loan is paid early with the Danish Financial Supervisory Authority's approval on 21 May 2019 | |||||
| Subordinated debt total | 97.334 | 99.976 | |||
| Subordinated debt that may be included in the capital base | 97.334 | 99.976 | |||
| Interest on subordinated liabilities recognised in income | 6.525 | 6.560 | |||
| 22 | SHARE CAPITAL | 192.800 | 192.800 | ||
| Number of shares is 9,640,000 at DKK 20 each | |||||
| The bank has pr. 31. December 2018 16,071 registered shareholders. 98.55% of the share capital are registered on name |
|||||
| 23 | HOLDERS OF HYBRID CAPITAL | ||||
| Hybrid core capital Rate |
60.030 10.4593 % |
59.680 10.4593 % |
On September 15 2020, the interest rate is changed to a halfyearly variable coupon rate equal to the CIBOR rate published by Nasdaq OMX for a maturity of six months plus 9.75% pa.
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| 24 | OWN CAPITAL SHARES | ||
| Purchase and sales of own shares | |||
| Holdings beginning of the year | |||
| Number of own shares | 10.000 | 10.000 | |
| Nominal value of holding of own shares (DKK 1,000) | 200 | 200 | |
| Own shares proportion of share capital | 0,10 | 0,11 | |
| Addition | |||
| Number of own shares | 6.957 | 0 | |
| Nominal value of holding of own shares (DKK 1,000) | 139 | 0 | |
| Own shares proportion of share capital | 0,07 | 0,00 | |
| Purchase price (DKK 1,000) | 488 | 0 | |
| Disposal | |||
| Number of own shares | 0 | 0 | |
| Nominal value of holding of own shares (DKK 1,000) | 0 | 0 | |
| Own shares proportion of share capital | 0,00 | 0,00 | |
| Sale price (DKK 1,000) | 0 | 0 | |
| Holdings end of the year | |||
| Number of own shares | 16.957 | 10.000 | |
| Nominal value of holding of own shares (DKK 1,000) | 339 | 200 | |
| Own shares proportion of share capital | 0,18 | 0,10 |
At the Annual General Meeting, the bank requests that shareholders be allowed to acquire up to a total nominal value of 3% of the bank's share capital, cf. the provisions in the Danish Budget Act (finansloven), Section 13, paragraph 3. The bank has asked the Danish Financial Supervisory Authority for a framework for holding of treasury shares of 0.25% of the bank's total share capital. The bank wants this authorisation in order to always be able to meet customers' and investors' demand for purchasing and selling Skjern Bank shares and the net acquisitions in 2019 are a consequence of this.
25 CONTINGENT LIABILITIES
| Guarantees | ||
|---|---|---|
| Finance guarantees | 512.488 | 327.288 |
| Guarantees against losses on mortgage credit loans | 663.378 | 555.950 |
| Registration and conversion guarantees | 961.248 | 492.324 |
| Other contingent liabilities | 242.054 | 167.762 |
| Total | 2.379.168 | 1.543.324 |
| Other binding engagements | ||
| Irrevocable credit-undertakings | 121.121 | 185.344 |
| Total | 121.121 | 185.344 |
| Note DKK 1,000 |
2019 | 2018 | |
|---|---|---|---|
| -- | ------------------- | ------ | ------ |
Assets pledged as collateral
The bank has pledged cash for a total of DKK 10 million.
Contract Legal obligations
As a member of Bankdata, the bank is due to a possible resgination required to pay a withdrawal benefit with the addition of the bank's part of capitalized development costs.
Like other Danish financial institutions, Skjern Bank is liable for loss sustained by the Deposit Guarantee Fund. The most recent calculation of Skjern Bank's share of the industry's assurances to the Deposit Guarantee Fund is 0.467 %.
In 2019, Skjern Bank paid 120 TDKK to Afviklingsformuen (Settlement Assets).
The Bank is a tenant in two leases, which can be terminated with 6 months' notice, the yearly lease is 888 TDKK. The Bank is a tenant in one leases, which can be terminated with 12 months' notice, the yearly lease is 155 TDKK. The third lease is irrevocable until 31 December 2021, and the yearly lease is 1,8 mio. DKK.
26 LAWSUITS ETC.
As part of ordinary operations, the bank is involved in disputes and lawsuits. The bank´s risk in these cases are evaluated by the bank´s soliciters and management on an ongoing basis, and provisions are made on the basis of an evaluation of the risk of loss.
27 RELATED PARTIES
Loans and warranties provided to members of the bank's management board, board of directors and committee of representatives are on marked-based terms.
Transactions with related parties
There have during the year not been transactions with related parties, apart from wages and salaries, etc. and loans and similar.
Wages and considerations to the bank's management board, board of directors, audit commitee and committee of representatves can be found in note no. 6.
There are no related with control of the bank.
Amount of loans, mortgages, guarantees, with accompanying security for members of the management and related parties mentioned below:
| Management: | 2019 | 2018 |
|---|---|---|
| Loans | 0 | 85 |
| Bid Bond | 0 | 0 |
| Rate of interest | - | 6,75 % |
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| Board of directors: | |||
| Loans | 22.228 | 5.933 | |
| Bid Bond | 41.211 | 3.638 | |
| Rate of interest | 0,5349-8,0 % | 0,6459-8,0 % | |
| Holding of shares in Skjern Bank: | |||
| The board of managers - Per Munck | 28.545 | 28.545 | |
| The board of directors | |||
| Hans Ladekjær Jeppesen | 11.115 | 11.115 | |
| Bjørn Jepsen | 5.286 | 5.286 | |
| Niels Christian Poulsen | 32.681 | 32.681 | |
| Niels Erik Kjærgaard | 300 | 300 | |
| Lars Skov Hansen | 710 | 710 | |
| Carsten Jensen | 1.976 | 1.976 | |
| Michael Tang Nielsen | 100 | 100 | |
| 28 | CAPITAL REQUIREMENT | ||
| Equity | 1.026.569 | 926.740 | |
| Proposed dividend | -28.920 | -28.920 | |
| Revaluation reserves | -417 | -417 | |
| Holders of hybrid capital | -60.030 | -59.680 | |
| Deferred tax assets | 0 | -1.922 | |
| Deduction for the sum of equity investments etc. above 10 % | -59.007 | -69.502 | |
| CVA deduction | -1.119 | -1.076 | |
| Deduction of trading framework for own sharers | -1.499 | -1.470 | |
| Core tier 1 capital | 875.577 | 763.753 | |
| Holders of hybrid capital | |||
| Tier 1 capital | 59.768 935.345 |
59.680 823.433 |
|
| Subordinated loan capital | 97.334 | 99.976 | |
| Capital base | 1.032.679 | 923.409 | |
| Weighted items | |||
| Credit risk | 4.510.623 | 4.306.575 | |
| Market risk | 367.033 | 386.226 | |
| Operational risk | 673.608 | 617.429 | |
| Weigthed items total | 5.551.264 | 5.310.230 | |
| Core tier 1 capital ratio (excl. hybrid core capital) | 15,8 | 14,4 | |
| Tier 1 capital ratio | 16,9 | 15,5 | |
| Solvency ratio - Tier 2 | 18,6 | 17,4 |
29 CURRENT VALUE OF FINANCIAL INSTRUMENTS
Note
Financial instruments are measured in the statement of financial position at either fair value or at cost. Fair value is the price which would be received from the sale of an asset or which will be paid to transfer a liability in a normal transaction between market participants on the measurement date. For financial assets and liabilities valued on active markets, the fair value is calculated based on observable market prices on the market date. For financial instruments valued on active markets, the fair value is calculated based on generally accepted valuation methods.
Shares, etc. and derivative financial instruments are measured in the accounts at fair value so that recognised values correspond to fair value. Loans are recorded in the bank's statement of financial position at amortised cost. The difference to fair value is calculated as fees and commissions received, expenses incurred through lending transactions, interest receivable which is first due for payment after the end of the financial year and for fixed-rate loans, also the variable interest rate, which is calculated by comparing the current market rate with the loans' nominal interest rate.
The fair value of receivables from credit institutions and central banks is determined by the same method as for loans, since the bank does not currently recognise impairments on receivables from credit institutions and central banks.
Bonds issued and subordinated liabilities are measured at amortised cost. The difference between the carrying amount and fair value is calculated based on rates in the market of its own listed emissions.
For floating rate financial liabilities in the form of lending and payables to credit institutions measured at amortised cost, the difference fair value is estimated to be interest payable which is first due for payment after the end of the financial year.
For fixed-rate financial liabilities in the form of lending and payables to credit institutions measured at amortised cost, the difference to fair value is estimated to be interest payable which is first due for payment after the end of the financial year and the variable interest rate.
| DKK 1,000 | 2019 | 2018 | |||
|---|---|---|---|---|---|
| Book value | Fair value | Book value | Fair value | ||
| Financial assets | |||||
| Cash in hand+claims at call on central banks | 229.494 | 229.494 | 184.106 | 184.106 | |
| Claims on credit institutes and central banks 1) | 1.673.392 | 1.673.392 | 795.467 | 795.467 | |
| Loans and other debtors at amort. costprice 1) | 4.326.873 | 4.332.998 | 4.362.392 | 4.368.636 | |
| Bonds at current value 1) | 1.048.316 | 1.048.316 | 1.020.315 | 1.020.315 | |
| Shares etc. | 225.094 | 225.094 | 220.498 | 220.498 | |
| Derivative financial instruments | 2.764 | 2.764 | 4.513 | 4.513 | |
| Total financial assets | 7.505.933 | 7.512.058 | 6.587.291 | 6.593.535 | |
| Financial liabilities | |||||
| Debt to credit institutions and central banks 1) | 206.536 | 206.536 | 160.750 | 160.750 | |
| Deposits and other debts 1) | 6.223.606 | 6.224.785 | 5.457.439 | 5.458.488 | |
| Derivative financial instruments | 1.157 | 1.157 | 1.103 | 1.103 | |
| Subordinated debt 1) 2) | 99.649 | 99.649 | 104.341 | 104.341 | |
| Total financial liabilities | 6.530.948 | 6.532.127 | 5.723.633 | 5.724.682 |
1) The entry includes calculated interest on the balance sheet date, which is included in "Other assets" and "Other liabilities".
2) Applied the latest quoted trading price at the balance sheet date
| Note | DKK 1,000 | 2018 | 2017 |
|---|---|---|---|
30 RISKS AND RISK MANAGEMENT
Skjern Bank is exposed to various types of risks which are controlled at various levels within the organisation. Skjern Bank's financial risks consist of:
Credit risk:
Risk of losses due to debtors' or counterparties' default on payment obligations.
Market risk:
Risk of losses resulting from the fair value of financial instruments and derivative financial instruments fluctuating due to changes in market prices. Skjern Bank classifies three types of risk for the market risk area: Interest rate risk, equity risk and currency risk.
Liquidity risk:
Risk of losses due to financing costs rising disproportionately, the risk that Skjern Bank is prevented from maintaining the adopted business model due to a lack of financing/funding or ultimately, the risk that Skjern Bank cannot honour incoming payment obligations when due as a result of a lack of financing/funding.
Evaluation of securities:
The bank is exposed to the sectors agriculture and real-estate. The Bank has in the assessment of collateral in agricultural exposures used acres of arable land prices in the range of 90 TDKK - 140 TDKK. In the real-estate sector is used return requirement in the range 4.5% - 10%. Valuations in both agricultural exposures as real-estate exposures are made in accordance with the FSA's current guidance. The Bank notes that estimating the value of collateral is generally associated with uncertainty.
The following notes to the annual report contain some additional information and a more detailed description of the bank's credit- and market risks.
| Note | Figures in pct. | 2019 | 2018 |
|---|---|---|---|
| 31 | CREDIT RISKS | ||
| Loans and guarantees distributed on sectors | |||
| Public authorities | 0,0 | 0,0 | |
| Business: | |||
| Agriculture, hunting, forestry & fishing | 12,0 | 11,2 | |
| - Plant production | 1,6 | 1,2 | |
| - Cattle farming | 6,7 | 6,0 | |
| - Pig farming | 1,5 | 1,4 | |
| - Mink production | 1,5 | 1,6 | |
| - Other agriculture | 0,7 | 1,0 | |
| Industry and mining | 4,0 | 2,8 | |
| Energy | 2,6 | 7,0 | |
| Building and constructions | 6,2 | 6,7 | |
| Wholesale | 5,9 | 6,4 | |
| Transport, hotels and restaurants | 1,7 | 1,5 | |
| Information and communication | 0,2 | 0,3 | |
| Financial and insurance business | 5,1 | 5,7 | |
| Real-esate | 13,4 | 12,8 | |
| Other business | 4,9 | 5,1 | |
| Total business | 56,0 | 59,5 | |
| Private persons | 44,0 | 40,5 | |
| Total | 100,0 | 100,0 |
The industry breakdown is based on Danmarks Statistik's industry codes etc.
Furthermore, an individual assessment is made of the individual exposures, which has resulted in some adjustment.
Added credit exposures classified by loan, guarantees and credit-undertakings
| 2019 | 2019 | 2019 | |
|---|---|---|---|
| (DKK 1,000) | (DKK 1,000) | (DKK 1,000) | |
| Exposure | Guarantees | Credit-under | |
| takings | |||
| Public authorities | 0 | 0 | 0 |
| Business - agriculture | 871.218 | 174.002 | 0 |
| Business - other | 3.196.503 | 825.446 | 87.023 |
| Private persons | 2.300.904 | 1.379.720 | 34.098 |
| 6.368.625 | 2.379.168 | 121.121 | |
Which recognized in the balance after deduction of depreciation 4.325.613
Note
| 2018 | 2018 | 2018 | |
|---|---|---|---|
| (DKK 1,000) | (DKK 1,000) | (DKK 1,000) | |
| Exposure | Guarantees | Credit-under takings |
|
| Public authorities | 0 | 0 | 0 |
| Business - agriculture | 787.029 | 87.041 | 10.000 |
| Business - other | 3.231.285 | 568.597 | 138.814 |
| Private persons | 2.165.149 | 887.686 | 36.530 |
| 6.183.463 | 1.543.324 | 185.344 | |
| Which recognized in the balance after deduction of depreciation | 4.359.561 | ||
| Description of collateral | |||
| 2019 | 2019 | 2019 | |
| Business, | Business, | ||
| Security distributed by type (DKK 1,000) | agriculture | other | Private |
| Securities | 14.678 | 177.844 | 75.303 |
| Real property | 456.066 | 987.160 | 890.612 |
| Chattels, vehicles and rolling stock | 59.801 | 544.676 | 362.073 |
| Guarantees | 11.738 | 52.658 | 2.927 |
| Other forms of security | 104.189 | 632.486 | 446.216 |
| 646.472 | 2.394.824 | 1.777.131 | |
| 2018 | 2018 | 2018 | |
| Business, | Business, | ||
| Security distributed by type (DKK 1,000) | agriculture | other | Private |
| Securities | 12.464 | 192.332 | 77.651 |
| Real property | 426.754 | 993.007 | 822.582 |
| Chattels, vehicles and rolling stock | 60.117 | 439.240 | 324.852 |
| Guarantees | 13.553 | 78.461 | 3.727 |
| Other forms of security | 79.792 | 596.218 | 355.305 |
| 592.680 | 2.299.258 | 1.584.117 |
As a general rule, the bank receives security in the funded asset. In addition, security is taken in the form of guarantees and mortgagesin parts and shares. The above list reflects the loan value attributable to the individual exposures.
The loan value reflects the fair value calculated in accordance with the bank's business process with a security margin of 10 - 60%,though less by government bonds.
The bank strives to reduce the calculated balance (maximum credit exposure excluding credit commitments less value of collateral andtotal write-downs) across the entire customer portfolio.In 2019, this resulted in a blank of DKK 3,.593 million. This is an increase of DKK 704 million. DKK compared to 2018.
Note DKK 1,000
| 31.12.2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Financial assets, loan commitments and financial guarantees. Instruments without significant increase in credit risk (stage 1) | |||||||||||
| Rating classification | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Total |
| Industry group | |||||||||||
| Agriculture | 133.476 | 79.357 | 58.283 | 24.525 | 151.757 | 59.638 | 42.224 | 14.144 | 95.164 | 0 | 658.568 |
| Property | 116.709 | 231.639 | 171.207 | 181.128 | 69.313 | 18.173 | 30.830 | 24.657 | 6.530 | 0 | 850.186 |
| Other | 446.224 | 743.755 | 205.582 | 176.806 | 343.816 | 98.486 | 36.836 | 39.943 | 35.870 | 0 | 2.127.318 |
| Private | 494.800 | 620.547 | 346.085 | 542.822 | 447.527 | 137.236 | 52.228 | 86.738 | 43.926 | 0 | 2.771.909 |
| Deposits at Danmarks Nationalbank | 111.389 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 111.389 |
| Accounts with other banks | 2.957 | 75.000 | 70.443 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 148.400 |
| Instruments without significant increase in credit risk (stage 2) |
1.290.269 | 1.704.876 | 848.780 | 888.587 | 1.000.834 | 313.533 | 156.118 | 162.162 | 181.490 | 0 | 6.546.649 |
| Instruments for which impairment has been recognised corresponding to expected credit losses in their lifetime (stages 2 and ) | |||||||||||
| Rating classification | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Total |
| Industry group | |||||||||||
| Agriculture | 0 | 0 | 835 | 9.925 | 25.873 | 14.371 | 6.850 | 3.892 | 71.267 | 0 | 133.013 |
| Property | 0 | 0 | 0 | 12.432 | 45.759 | 10.767 | 350 | 330 | 5.650 | 0 | 75.288 |
| Other | 117 | 0 | 7 | 125.528 | 110.651 | 61.169 | 9.767 | 44.280 | 66.879 | 0 | 418.398 |
| Private | 899 | 338 | 297 | 96.058 | 107.512 | 16.156 | 1.965 | 3.950 | 40.370 | 0 | 267.545 |
| Accounts with other banks | 0 | 0 | 0 | 7.252 | 4.000 | 0 | 0 | 0 | 0 | 0 | 11.252 |
| Instruments with significant increase in | |||||||||||
| credit risk (stage 2) | 1.016 | 338 | 1.139 | 251.195 | 293.795 | 102.463 | 18.932 | 52.452 | 184.166 | 0 | 905.496 |
| Industry group | |||||||||||
| Agriculture | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 179.532 | 179.532 |
| Property | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 212.277 | 212.277 |
| Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 224.823 | 224.823 |
| Private | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 137.873 | 137.873 |
| Credit-impaired instruments (stages 3 and 2 weak) |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 754.505 | 754.505 |
| Instruments for which impairment has | |||||||||||
| been recognised corresponding to expect | |||||||||||
| ed credit losses in their lifetime) | 1.016 | 338 | 1.139 | 251.195 | 293.795 | 102.463 | 18.932 | 52.452 | 184.166 | 754.505 | 1.660.001 |
| Total financial assets, loan commit | |||||||||||
| ments and financial guarantees. | 1.291.285 | 1.705.214 | 849.919 | 1.139.782 | 1.294.629 | 415.996 | 175.050 | 214.614 | 365.656 | 754.505 | 8.206.650 |
| Work guarantees etc. not covered by IFRS9 | |||||||||||
| Rating classification | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | Total |
| Total | 133.895 | 265.862 | 92.471 | 239.783 | 174.410 | 37.600 | 16.092 | 14.580 | 23.028 | 37.457 | 1.035.178 |
| Total | 1.425.180 | 1.971.076 | 942.390 | 1.379.565 | 1.469.039 | 453.596 | 191.142 | 229.194 | 388.684 | 791.962 | 9.241.828 |
Of which included in the balance
Receivables from credit institutions and central banks 111.389
Loans and other receivables at amortised cost 4.325.613
Total 4.437.002
Note DKK 1,000
31.12.2018
| Financial assets, loan commitments and financial guarantees. Instruments without significant increase in credit risk (stage 1) | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Rating classification | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | I alt |
| Industry group | |||||||||||
| Agriculture | 117.802 | 83.443 | 74.350 | 12.188 | 143.934 | 41.055 | 18.176 | 436 | 83.202 | 0 | 574.586 |
| Property | 121.392 | 241.789 | 128.830 | 27.430 | 167.675 | 16.960 | 54.794 | 9.974 | 79.071 | 0 | 847.915 |
| Other | 469.889 | 792.143 | 143.453 | 133.297 | 272.056 | 82.539 | 46.807 | 19.677 | 44.390 | 0 | 2.004.251 |
| Private | 426.848 | 526.472 | 298.460 | 453.212 | 373.910 | 173.599 | 61.846 | 69.423 | 56.096 | 0 | 2.439.866 |
| Deposits at Danmarks Nationalbank | 99.871 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 99.871 |
| Accounts with other banks | 4.053 | 77.000 | 71.240 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 152.293 |
| Instruments without significant increase | |||||||||||
| in credit risk (stage 2) | 1.239.855 | 1.720.847 | 716.333 | 626.127 | 957.575 | 314.153 | 181.623 | 99.510 | 262.759 | 0 | 6.118.782 |
| Instruments for which impairment has been recognised corresponding to expected credit losses in their lifetime (stages 2 and ) | |||||||||||
| Rating classification | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | I alt |
| Industry group | |||||||||||
| Agriculture | 0 | 0 | 0 | 8.818 | 32.508 | 14.156 | 4.866 | 164 | 24.219 | 0 | 84.731 |
| Property | 0 | 0 | 1 | 17.821 | 24.302 | 3.662 | 6.272 | 500 | 9.771 | 0 | 62.329 |
| Other | 1 | 4 | 0 | 161.159 | 54.702 | 41.394 | 8.918 | 3.805 | 76.660 | 0 | 346.643 |
| Private | 159 | 4 | 61 | 109.377 | 115.278 | 23.085 | 5.665 | 4.384 | 51.295 | 0 | 309.308 |
| Accounts with other banks | 0 | 0 | 0 | 7.250 | 3.100 | 0 | 0 | 0 | 0 | 0 | 10.350 |
| Instruments with significant increase in | |||||||||||
| credit risk (stage 2) | 160 | 8 | 62 | 304.425 | 229.890 | 82.297 | 25.721 | 8.853 | 161.945 | 0 | 813.361 |
| Industry group | |||||||||||
| Agriculture | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 259.547 | 259.547 |
| Property | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 205.450 | 205.450 |
| Other | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 226.677 | 226.677 |
| Private | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 153.271 | 153.271 |
| Credit-impaired instruments (stages 3 | |||||||||||
| and 2 weak) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 844.945 | 844.945 |
| Instruments for which impairment has | |||||||||||
| been recognised corresponding to expect | |||||||||||
| ed credit losses in their lifetime) | 160 | 8 | 62 | 304.425 | 229.890 | 82.297 | 25.721 | 8.853 | 161.945 | 844.945 | 1.658.306 |
| Total financial assets, loan commit ments and financial guarantees. |
1.240.015 | 1.720.855 | 716.395 | 930.552 | 1.187.465 | 396.450 | 207.344 | 108.363 | 424.704 | 844.945 | 7.777.088 |
| Work guarantees etc. not covered by IFRS9 | |||||||||||
| Rating classification | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | I alt |
| Total | 83.342 | 136.357 | 40.768 | 121.807 | 166.989 | 17.868 | 4.916 | 8.776 | 14.665 | 21.750 | 617.238 |
| Total | 1.323.357 | 1.857.212 | 757.163 | 1.052.359 | 1.354.454 | 414.318 | 212.260 | 117.139 | 439.369 | 866.695 | 8.394.326 |
Of which included in the balance
Receivables from credit institutions and central banks 132,242
Loans and other receivables at amortised cost 4.359.561
Total 4,491,803
Note
Credit-quality on loans which are neither in arrears not written down *
*) Calculated based on the guidelines for accounting reports for credit institutions and investment companies, etc. regarding thresholds for reporting credit quality classes. Where high credit quality is the classes 3 and 2a, medium credit quality is class 2b and low credit quality is class 2c.
| 2019 | 2019 | 2019 | |
|---|---|---|---|
| Exposure | |||
| before | |||
| write-down | Write-downs | Securities | |
| Significant financial difficulties | 437.887 | 205.884 | 203.303 |
| Breach of contract | 7.850 | 4.930 | 804 |
| Reductions in terms | 14.310 | 6.378 | 6.809 |
| Probability of bankruptcy | 120.137 | 41.207 | 79.628 |
| Total | 580.184 | 258.399 | 290.544 |
| 2018 | 2018 | 2018 | |
| Exposure | |||
| before | |||
| write-down | Write-downs | Securities | |
| Significant financial difficulties | 491.937 | 217.563 | 258.810 |
| Breach of contract | 11.689 | 5.667 | 3.428 |
| Reductions in terms | 25.318 | 7.286 | 13.258 |
| Probability of bankruptcy | 161.993 | 77.457 | 98.655 |
Reasons for individual write-downs and provisions
| Note | Beløb i 1.000 kr. | 2019 | 2018 |
|---|---|---|---|
I ovennævnte opgørelse medregnes værdi af kautioner og transporter ikke. Sikkerheder er opgjort på kundeniveau.
Belåningsværdien afspejler dagsværdien opgjort jvf. bankens forretningsgang med en sikkerhedsmargin på 10 - 60 %.
| Arrears amount for loans, which have not been written down | ||
|---|---|---|
| ------------------------------------------------------------ | -- | -- |
| 0-90 days | 17.606 | 13.042 |
|---|---|---|
| >90 days | 945 | 25 |
| Total | 18.551 | 13.067 |
| Loans and arrears amount for loans, which have not been written down | ||
| 0-90 days | 161.847 | 164.958 |
| >90 days | 5.784 | 2.656 |
| Total | 167.631 | 167.614 |
Practice for managing credit risk
The bank's credit risk is managed by debtors and other counterparties being rated based on various models that are mainly based on the debtor's/counterparty's financial capacity.
In addition to the models, a number of checks are made to ensure a correct rating. The ratings, both in the models and the checks, are largely based on the Danish Financial Supervisory Authority's guidelines on risk classification. However, the bank uses a 10-step rating scale that can be compared with the Danish Financial Supervisory Authority's scale in the following way:
| The bank's rating class | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
| The Danish Financial Supervisory Authority's risk class |
3/2A | 3/2A | 3/2A | 2B | 2B | 2B | 2B | 2B | 2C | 1 |
Rating 1 is assets with very good credit quality, while rating 10 is impaired assets.
The credit risk is assessed to have increased significantly if the rating has deteriorated since initial recognition corresponding to one step on the Danish Financial Supervisory Authority's risk scale.
However, this does not apply to assets with low credit risk, which are defined as the Danish Financial Supervisory Authority's risk classes 3 and 2A.
Whether or not it is an asset with a low credit risk, the credit risk is considered to have increased significantly if the asset is overdrawn for more than 30 days, though arrears on loans are essentially considered an impairment. Examples of assets with and without significantly impaired credit risk:
| Example 1 | Example 2 | Example 3 | |
|---|---|---|---|
| Starting risk class | 3 | 2A | 2A |
| Current risk class | 2A | 2A | 2B |
| Overdrawn for 30 days | No | Yes | No |
| Significantly impaired credit risk | No | Yes | Yes |
Assets with and without significantly impaired credit risk, but which are not impaired, are grouped by industry in the following groups based on DS industries:
| Industry |
|---|
| Government Agencies |
| Agriculture etc. |
| Industry and raw materials |
| Energy |
| Building and construction |
| Transport |
| Information and communication |
| Financing |
| Property etc. |
| PI and mortgage |
| Other industries |
| Private |
| Private |
At least once a year, all assets with a rating of 9 (the Danish Financial Supervisory Authority's risk class 2C) are reviewed to assess whether the asset is impaired. In addition to this, a sample is taken from the other rating classes once a year for the same purpose.
All loan options that are handled in the Credit Department by the bank's Executive Board or Board of Directors are also assessed for any impairment. A financial asset is considered impaired if one or more events have occurred that have a negative impact on the expected cash flows from the asset.
Common to the assets is that the following factors are included in the assessment:
- Arrears, overdrafts and/or the bank has discontinued repayment for the asset
- Other creditors have granted a deferment or other easier terms
- The customer is only in this financial context due to a variable-interest loan or repayment freedom, or because the loan has otherwise been offered on easier terms
- The customer is in RKI (Ribers Credit Information), has significant tax debt or distraint has been levied
- The customer is associated with other customers who have impaired credit
When assessing business customers, the following factors are included:
- Negative or fragile equity ratio
- Negative or decreasing consolidation
- Tight liquidity
- Uncertain/negative future
- The customer applies for reconstruction or an agreement to avert bankruptcy
- The customer is bankrupt
When assessing private customers, the following factors are included:
- Negative assets and/or small available amount
- Uncertain future e.g. due to unemployment, divorce or illness
- The customer takes out loans to cover expenditures
- The customer applies for debt relief or an agreement to avert bankruptcy
Information base, assumptions and assessment methods in assessing expected credit loss
Assets with or without significant increase in credit risk
The bank's credit losses are measured based on the following formula: ECL = PD x LGD x EAD
Where:
- PD is the probability that the asset will impaired
- LGD is the expected loss, provided the asset is impaired
- EAD is the expected exposure in terms of loss
The probability that the asset will be impaired (PD) is composed of several factors:
- PD at 12 months of credit loss = PD 12 months x macro factors
- PD in the asset's lifetime = PD 12 months x macro factors x extension factors
Calculation of 12 months of credit loss or credit loss in the asset's lifetime is determined as described in "Practice for managing credit risk". Three factors are used for this: Starting risk class, current risk class and overdraft for 30 days. Information base, assumptions and assessment methods for each factor are described in the overview below.
| Factor | Information base | Assumptions | Assessment methods |
|---|---|---|---|
| PD - 12 months | The bank's statistics on cus tomers for 2017 and 2018 and the first to quarters of 2019 distributed by rating class and private and business by DS industry codes |
The proportion of custom-ers with impaired credit during the period and the selected groups are repre-sentative of the upcoming 12 months. However, see "Macro factors". |
PD is the proportionate num-ber of customers in the men-tioned groups who have impaired credit during the period. |
| Extension factors | Calculated extension factors from BankData |
The factors are representa-tive of the bank's custom-ers. The bank has provided data for the calculations. |
Calculated based on histori-cal PD figures from 6 small finan cial institutions in the years 2010-2016. |
| The asset's lifetime | Settlement agreements for assets, as well as calculated average maturities from BankData |
Loans are settled as agreed (otherwise the loan is im paired). Credits with renegoti ation typically run longer than the initial negotiation. |
A loan with a calculated residual maturity of 8 years will have loss estimated for 8 years, with the balance ex-pected for each year. A credit with renegotiation of 10 months will be calculated with the size of the credit on the reporting date in 5 years. |
Note
| Factor | Information base | Assumptions | Assessment methods |
|---|---|---|---|
| Macro factors | Factors calculated with Lo kale Pengeinstitutter's (The Association of Local Banks, Savings Banks and Coop era-tive Banks in Denmark) mac-ro-tools based on forecasts. |
The factors are representa-tive of the bank's custom-ers in the near future. The factors were phased out of the model over 10 years, as the exten sion factors are considered to contain suffi-cient cyclical balancing. |
The two variables that must be entered in the tool were selected based on the bank's historical loss data in the years 2006-2018. Factor 1 will limit the increase in the macro from year to year. Factor 1 was chosen based on the greatest increase experienced during the period, so there is not actually a limitation. Factor 2 is a conversion factor between the bank's impair ment and realised loss. Factor 2 is set to 100, as there are indications, but not docu mentation, that the bank's impairment have historically been greater than the realised loss. Both are thus deter mined based on a principle of caution. |
| LGD | The bank's statistics for real ised loss on assets that were impaired during the period 1/1/2011 to 30/09/2018. The loss rates are divided into private and business according to DS industry codes. |
The loss rate is representa-tive of the future loss in the men tioned groups. |
The loss rate is the realised loss in relation to EAD. To the degree possible, EAD is cal-cu lated based on the expo-sure one year before the asset was found to be im-paired, and the value of the collateral is not deducted so that it is consist ent with the application of the loss calculation. |
| EAD | EAD is calculated based on exposures divided by type. Each type is multiplied by a Credit Conversion Factor, which is determined based on the principles of article 11 of CRR. The value of collat-eral is not deducted when calculating expected loss. |
EAD in relation to the ex po-sure's size divided by type of asset is expected to remain unchanged in the future |
For example, EAD for a credit will be calculated as: Used part x 100% + unused part x 20%. All exposures except for non-financial guarantees are included in the calculation of EAD. |
| Factor | Information base | Assumptions | Assessment methods |
|---|---|---|---|
| Starting risk class | The as the asset's initial rec ognition date is the exposure's establishment date or the date the exposure is subsequently extended by 50% or more. Since June 2017, assets have been labelled with a starting rating. To the degree possible, previous labels are entered based on the bank's methods for rating on the date of initial recognition. |
The return on the asset reflects the risk on the date of establishment (and when there are major increases). |
Ratings over time are care-ful ly converted to the current 10-step scale. If there is no initial rating, the loss is rec ognised in the asset's lifetime, except for assets with low risk (Rating class 1-3) |
| Current risk class | The customer's rating class on the reporting date |
The rating reflects the credit risk |
See "Practice for managing credit risk" |
| Overdrawn for 30 days | The facility's balance and credit facility |
If the facility is overdrawn for 30 days or more, the credit risk has increased significantly |
There is no minimum thresh old for overdrafts or off set-ting of any deposits on the customer's other facilities |
When using the mentioned macro factors, predictive information is taken into account. No changes to important assumptions and assessment methods have occurred during the accounting period.
Assets that are impaired
See "Practice for managing credit risk" regarding assessment of whether the asset is impaired. When calculating the credit loss, the available existing information on the reporting date is used, as well as expectations for future development.
The credit loss on impaired exposures is calculated based on the following criteria:
| Exposure in thou-sands of DKK | Industry | Calculation |
|---|---|---|
| 0-150 | Everyone | The entire exposure is written off as a credit loss |
| 150 - | Private | The credit loss is calculated weighted based on a minimum of 3 scenarios determined by the cause of the credit impairment |
| 150- | Industries except agriculture | The credit loss is calculated weighted based on a minimum of 3 scenarios determined by the cause of the credit impairment |
| 150- | Agriculture | The credit loss is calculated weighted based on a minimum of 3 scenarios |
The calculations include the following parameters:
Cause of credit impairment, scenario weight, EAD, value of collateral, expected settlement ability/dividends.
Information base, assumptions and assessment methods for each parameter are described in the overview below.
Note
Note
| Factor | Information base | Assumptions | Assessment methods |
|---|---|---|---|
| Cause of credit impairment | The cause of the customer's credit impairment registered by the bank |
The probability of each scenario is the same for each cause: Probability of bankruptcy, breach of contract, easier terms and significant financial difficulties |
When stating the reason the guidelines in Appendix 10 of the Executive Order are followed |
| Scenario weight | Exposures that have impaired credit during the period 1/1/2011 – 30/09/2019 where the case has been closed |
The historical distribution of scenarios is representative of the credit loss on custom ers with similar causes and industries. The number of zero-losses fluctuates with the economic trend. |
The distribution of exposures by percentage is calculated based on a placement in one of the three scenarios: Zero-loss, Sale and Collapse. The percentage of zero-losses is then reduced in relation to a cyclical factor calculated based on the bank's impair ment and provisions during the period 2007-2018. |
| EAD | Exposure on the reporting date |
See under EAD in the table above |
See under EAD in the table above |
| Value of collateral | Current assessments less costs and expected reductions. There are generally greater reductions for a collapse sce nario than a sales scenario. |
The actual assessment is the closest we can get to a real selling price until the sale is final. Less reductions are expected if the customer cooper-ates with a sale than if it is a forced sale |
For agriculture, reductions are used based on histori-cal documentation. There are little experience with other exposures. Reduc-tions are thus estimated based on a precautionary principle. |
| Expected settlement abil-ity/ dividends |
Availability calculations for private customers, operating profit and budgets/periodic re sults for business custom-ers, dividend statements from bankruptcies |
The basis indicates something about the ability to settle the expo-sure |
Great caution is taken with recognition. If the customer is no longer cooperating with the bank, the settlement abili ty is generally not recognised |
When using the cyclical factors under "Scenario weight", predictive information is taken into account.
32 MARKET RISKS AND SENSITIVITY INFORMATION
In connection with Skjern Bank's monitoring of market risk, a number of sensitivity calculations, which include market risk variables, have been carried out.
Interest rate risk
In the event of a general increase in interest rates by 1 percentage point in the form of a parallel shift of the yield curve, equity is affected as shown below
| Note | DKK 1,000 | 2019 | 2018 |
|---|---|---|---|
| Interest rate risk on debt instruments etc - total | 15.206 | 13.869 | |
| Interest rate risk in pct of core capital after deductions | 1,6 | 1,7 | |
| Interest rate risk split in currencies with highest risk: | |||
| DKK | 14.504 | 13.019 | |
| EUR | 770 | 935 | |
| CHF | -55 | -75 | |
| SEK | 0 | -6 | |
| JPY | -2 | -2 | |
| USD | -11 | -1 | |
| Others | 0 | -1 | |
| Total | 15.206 | 13.869 | |
| Foreign currency risk | |||
| Total assets in foreign currency | 270.450 | 312.653 | |
| Total liabilities in foreign currency | 66.419 | 22.177 | |
| In the event of a general change in exchange rates of 10%, and in the euro of 2.25%, | |||
| Currency Indicator 1 will also be increased | 2.022 | 1.590 | |
| Currency indicator 1 in pct of core capital after deductions | 0,2 | 0,2 | |
| In the event of a general change in exchange rates of 10%, and in the euro of 2.25%, | |||
| Currency Indicator 2 will also be increased | 24 | 16 | |
| Currency indicator 2 in pct of core capital after deductions | 0,0 | 0,0 |
Currency Indicator 1 represents the sum of the respective positions in the currencies in which the bank has a net asset position, and currencies where the bank has net debt.
Currency Indicator 2 expresses the bank's currency risk more accurately than indicator 1, as it takes into account the different currencies' volatility and covariation.
A value of indicator 2 of TDKK 25 means that as long as the bank does not change its currency positions in the following 10 days, there is a 1% chance that the institution will get a capital loss greater than TDKK 25, which will affect the bank's profit and equity.
Equity Risk
| Quoted on other stock exchanges 1.818 Unquoted shares recorded at fair value 16.804 |
1.749 17.426 |
|---|---|
33 DERIVATE FINANCIAL INSTRUMENTS
Derivatives are used solely to hedge the bank's risks. Currency and interest rate contracts are used to hedge the bank's currency and interest rate risks. Cover may not be matched 100%, so the bank has own risk. However, this risk is minor.
| DKK 1,000 | 2019 | 2019 | 2019 | 2019 | 2018 | 2018 | 2018 | 2018 |
|---|---|---|---|---|---|---|---|---|
| Net | Market- | Market- | Net | Market- | Market | |||
| Nominal | market- | value- | value- | Nominal | market- | value- | value | |
| value | value | positive | negative | value | value | positive | negative | |
| Currency-contracts | ||||||||
| Up to 3 months | 222.510 | 1.387 | 1.672 | 285 | 233.535 | 3.292 | 3.503 | 211 |
| Over 3 months and up to 1 year | 6.772 | 28 | 36 | 8 | 2.562 | 30 | 42 | 12 |
| Over 1 year and up to 5 years | ||||||||
| Over 5 years | ||||||||
| Average market value | 2.418 | 660 | 5.311 | 484 | ||||
| Interest-rate contracts | ||||||||
| Up to 3 months | ||||||||
| Over 3 months and up to 1 year | ||||||||
| Over 1 year and up to 5 years | ||||||||
| Over 5 years | 3.852 | 519 | 519 | 4.204 | 567 | 567 | ||
| Average market value | 1.493 | 1.311 | 1.000 | 943 | ||||
| DKK 1,000 | 2019 | 2018 | ||||||
| Credit risk on derivative financial instruments | ||||||||
| Positive market value, counterparty with risk weighting of 0 % | 0 | 0 | ||||||
| Positive market value, counterparty with risk weighting of 20% | 430 | 650 | ||||||
| Positive market value, counterparty with risk weighting of 100% | 2.334 | 3.863 | ||||||
| Total | 2.764 | 4.513 | ||||||
| Unsettled spot transactions | Market- | Market- | Market | |||||
| Nominal | value- | value- | value | |||||
| value | positive | negative | net | |||||
| Foreign-exchange transactions, purchase | 13.712 | 1 | 2 | -1 | ||||
| Foreign-exchange transactions, sale | 3.562 | 5 | 1 | 4 | ||||
| Interest-rate transactions, purchase | 15.743 | 5 | 116 | -111 | ||||
| Interest-rate transactions, sale | 10.793 | 24 | 2 | 22 | ||||
| Share transactions, purchase | 3.934 | 19 | 57 | -38 | ||||
| Share transactions, sale | 4.561 | 80 | 19 | 61 | ||||
| Total 2019 | 52.305 | 134 | 197 | -63 | ||||
| Total 2018 | 44.109 | 220 | 203 | 17 |
34 COPERATIVE AGREEMENTS
Skjern Bank cooperates with receives commission relating to paymnet transfers from, and is co-owner of some of the following companies: Totalkredit A/S, Nykredit A/S, DLR Kredit A/S, BRF Kredit A/S, Privatsikring A/S, Eurocard, PFA Pension, Sparinvest A/S, Valueinvest Asset Management S.A., BI Asset Management Fondsbørsmæglerselskab A/S, Jyske Invest, Forvaltningsinstituttet for Lokale Pengeinstitutter, Sydinvest A/S, HP Fondsbørsmæglerselskab A/S, Investeringsforeningen Maj Invest, Stonehenge Fondsmæglerselskab A/S, Investeringsforeningen Falcon Invest, SEB Invest A/S, Investeringsforeningen BIL Danmark, Codan, Dankort A/S, Nets A/S, Visma Enterprise, Krone Kapital, Købstædernes Forsikring og Visa International.
35 5 YEARS IN SUMMARY
| Profit and loss account | |||||
|---|---|---|---|---|---|
| Net income from interest | 185.287 | 185.242 | 171.972 | 163.745 | 162.228 |
| Dividend on shares | 5.863 | 3.476 | 10.020 | 12.493 | 11.692 |
| Charges and commission, net | 143.257 | 119.515 | 114.620 | 98.280 | 81.316 |
| Income from core business | 334.407 | 308.233 | 296.612 | 274.518 | 255.236 |
| Value adjustments | 40.225 | 69.389 | 31.045 | 17.216 | 11.536 |
| Other ordinary income | 1.945 | 1.503 | 1.031 | 1.592 | 1.610 |
| Staff cost and admin. expenses | 191.861 | 191.626 | 161.052 | 148.990 | 139.680 |
| Depreciation of intangible and tangible assets | 2.821 | 3.004 | 3.071 | 3.746 | 3.924 |
| Other operating expenses | 112 | 127 | 52 | 255 | 9.066 |
| - Contribution to the Guarantee Fund for deposits | 112 | 52 | 52 | 52 | 8.926 |
| - Other operating expenses | 0 | 75 | 0 | 203 | 140 |
| Write-downs on loans etc. (net) | 16.831 | 19.729 | 19.886 | 36.172 | 63.098 |
| Profit on equity investments in nonaffiliated | |||||
| and affiliated companies | 0 | 0 | 0 | 490 | -760 |
| Operating result | 164.952 | 164.639 | 144.627 | 104.653 | 51.044 |
| Taxes | 29.469 | 22.126 | 20.804 | 22.543 | 10.929 |
| Profit for the year | 135.482 | 142.513 | 123.823 | 82.110 | 40.115 |
| Of which are holders of shares of hybrid | |||||
| core capital instruments etc. | 6.626 | 6.626 | 5.168 | 6.626 | 1.831 |
| Balance as per 31st December | |||||
| Summary | |||||
| Total assets | 7.614.080 | 6.703.573 | 6.367.636 | 5.860.191 | 5.424.729 |
| Loans and other receivables | 4.325.613 | 4.359.561 | 3.924.509 | 3.687.509 | 3.511.175 |
| Guarantees etc | 2.379.168 | 1.543.324 | 1.125.541 | 841.088 | 792.047 |
| Bonds | 1.045.717 | 1.016.994 | 1.072.833 | 926.950 | 707.428 |
| Shares etc | 225.094 | 220.498 | 245.686 | 219.447 | 179.233 |
| Deposits and other debts | 6.223.604 | 5.457.413 | 5.240.913 | 4.871.359 | 4.483.104 |
| Subordinated debt | 97.334 | 99.976 | 99.797 | 99.618 | 169.439 |
| Total equity | 1.026.569 | 926.740 | 814.332 | 695.313 | 619.425 |
| - of which proposed dividend | 28.920 | 28.920 | 0 | 0 | 0 |
| Capital Base | 1.032.679 | 923.409 | 819.582 | 703.871 | 663.076 |
| Note | 2019 | 2018 | 2017 | 2016 | 2015 | |
|---|---|---|---|---|---|---|
| 36 | FINANCIAL RATIO (FIGURES IN PCT.) | |||||
| Solvency ratio | 18,6 | 17,4 | 17,8 | 16,5 | 16,3 | |
| Core capital ratio | 16,9 | 15,5 | 15,8 | 14,6 | 14,4 | |
| Return on equity before tax* | 17,3 | 19,5 | 19,8 | 16,4 | 9,1 | |
| Return on equity after tax* | 14,1 | 16,8 | 17,1 | 12,6 | 7,1 | |
| Return on assets | 1,8 | 2,1 | 1,9 | 1,4 | 0,7 | |
| Earning/expense ratio in DKK | 1,78 | 1,77 | 1,75 | 1,52 | 1,23 | |
| Interest rate risk | 1,6 | 1,7 | 1,9 | 0,8 | -0,8 | |
| Foreign currency position | 0,2 | 0,2 | 0,1 | 0,2 | 0,4 | |
| Foreign currency risk | 0,0 | 0,0 | 0,0 | 0,0 | 0,0 | |
| Loans etc. against deposits | 74,6 | 86,3 | 81,4 | 82,7 | 86,4 | |
| Statutory liquidity surplus | - | 165,1 | 191,6 | 185,4 | 174,8 | |
| LCR** | 357 | 247 | 262 | 334 | 355 | |
| Total large commitments | 136,5 | 144,1 | 55,1 | 10,3 | 23,4 | |
| Loans and debtors at reduced interest | 1,2 | 1,9 | 2,2 | 2,5 | 3,1 | |
| Accumulated impairment ratio | 4,7 | 5,8 | 6,3 | 7,0 | 7,8 | |
| Impairment ratio for the year | 0,2 | 0,3 | 0,4 | 0,7 | 1,4 | |
| Increase in loans etc. for the year | -0,8 | 11,1 | 6,4 | 5,0 | -3,8 | |
| Ratio between loans etc. and capital funds | 4,2 | 4,7 | 4,8 | 5,8 | 6,3 | |
| (value per share 100 DKK) | ||||||
| Earnings per share* | 66,8 | 70,5 | 61,5 | 39,2 | 19,9 | |
| Book value per share* | 502 | 450 | 390 | 330 | 291 | |
| Rate on Copenhagen Stock Exchange | 311 | 305 | 368 | 268 | 168 | |
| Dividend per share | 15 | 15 | 0 | 0 | 0 | |
| Market value/net income per share | 4,7 | 4,3 | 6,0 | 6,8 | 8,4 | |
| Market value/book value* | 0,62 | 0,68 | 0,94 | 0,81 | 0,58 | |
| (value per share 20 DKK) | ||||||
| Earnings per share* | 13,4 | 14,1 | 12,3 | 7,8 | 4,0 | |
| Book value per share* | 100 | 90 | 78 | 66 | 58 | |
| Rate on Copenhagen Stock Exchange | 62,2 | 61,0 | 73,5 | 53,6 | 33,6 |
*) Key ratios are calculated as if the hybrid core capital is accounted for as an obligation with which the key figures are calculated based on the shareholders' share of earnings and equity. Shareholders' share of earnings and equity is stated in the equity statement.
**) New calculation formula from the beginning of 2018 cf. the Danish Financial Supervisory Authority's guidance.
| Note | DKK 1,000 | 4Q 2019 | 3Q 2019 | 2Q 2019 | 1Q 2018 | 4Q 2018 |
|---|---|---|---|---|---|---|
| 37 | QUARTERLY OVERVIEWS | |||||
| Profit and loss account | ||||||
| Net income from interest | 46.713 | 45.425 | 46.196 | 46.953 | 46.633 | |
| Div. on shares and other holdings | 76 | 981 | 4.471 | 335 | 79 | |
| Charges and commissions (net) | 37.368 | 36.974 | 33.759 | 35.156 | 31.487 | |
| Net inc. from int. & charges | 84.157 | 83.380 | 84.426 | 82.444 | 78.199 | |
| Value adjustments | 3.432 | 22.587 | 2.615 | 11.591 | -3.196 | |
| Other ordinary income | 593 | 368 | 720 | 264 | 514 | |
| Staff costs and administrative expenses | 51.156 | 48.320 | 46.750 | 45.635 | 63.833 | |
| Depreciation of intangible and tangible assets | 526 | 765 | 765 | 765 | 709 | |
| Other operating expenses | 0 | 0 | 112 | 0 | 75 | |
| Operating expenses | 0 | 0 | 112 | 0 | 0 | |
| Guarantee commission first guarantee scheme | 0 | 0 | 0 | 0 | 75 | |
| Write-downs on loans etc. (net) | 5.629 | 4.009 | 3.463 | 3.730 | 5.790 | |
| Operating profit | 30.871 | 53.241 | 36.671 | 44.169 | 5.110 | |
| Taxes | 4.591 | 7.093 | 8.068 | 9.717 | 1.688 | |
| Profit for the period | 26.279 | 46.148 | 28.603 | 34.452 | 3.422 | |
| Of which are holders of shares of hybrid core capital | 1.919 | 1.569 | 1.569 | 1.569 | 1.919 | |
| instruments etc. | ||||||
| Balance | ||||||
| Loans and other debts | 4.325.613 | 4.289.001 | 4.330.603 | 4.331.256 | 4.359.561 | |
| Deposits | 6.223.604 | 5.772.673 | 5.821.940 | 5.495.332 | 5.457.413 | |
| Subordinated cap. investments | 97.334 | 99.209 | 97.083 | 100.000 | 99.976 | |
| Equity | 1.026.569 | 1.002.122 | 957.456 | 935.940 | 926.740 | |
| Total assets | 7.614.080 | 7.332.658 | 7.192.148 | 6.761.185 | 6.703.573 | |
| Guarantees etc. | 2.379.168 | 2.262.047 | 2.048.683 | 1.669.526 | 1.543.324 | |
| Core earnings | ||||||
| Core income | 85.832 | 85.026 | 86.360 | 83.721 | 79.964 | |
| Total costs | -51.682 | -49.085 | -47.627 | -46.400 | -64.617 | |
| Core earnings | 34.150 | 35.941 | 38.733 | 37.321 | 15.347 |
FINANCIAL CALENDER 2020
| 21st January | Deadline for submission of items for the agenda for the Annual General Meeting |
|---|---|
| 7th February | Announcement of Annual Report 2019 |
| 4th March | General Meeting – Ringkøbing-Skjern Kulturcenter |
| 9th May | Announcement of quarterly report 1st quarter 2019 |
| 15th August | Announcement of half-yearly report 2019 |
| 31st Ocotober | Announcement of quarterly report 3rd quarter 2019 |
AUDIT COMMITTEE
| Name | Jobposition | City |
|---|---|---|
| Niels Erik Kjærgaard (chairman) | Former city manager | Skjern |
| Niels Christian Poulsen | Mink farmer | No |
| Lars Skov Hansen | Advisor | Esbjerg |
COMMITTEE OF REPRESENTATIVES
| Name | Jobposition | City | Elected | Born |
|---|---|---|---|---|
| Hans L. Jeppesen (board chairman)* | Lawyer | Skjern | 2011 | 1964 |
| Ole Strandbygaard (board vice-chairman) | Printer | Ringkøbing | 2008 | 1972 |
| Michael Albrechtslund | Manager | Rungsted | 2016 | 1964 |
| Jørgen Søndergaard Axelsen | Real estate agent | Skjern | 2002 | 1960 |
| Nicolai Berg | Equity Analyst | Aahus | 2019 | 1993 |
| Jens Bruun | Former manager | Aarhus | 2007 | 1952 |
| Heine Delbing | Manager | Odense | 2019 | 1953 |
| Poul Frandsen | Manager | Herning | 2012 | 1967 |
| Orla Varridsbøl Hansen | Manufacturer | Tarm | 2002 | 1949 |
| Christian Hede | Nationaløkonom | Silkeborg | 2019 | 1977 |
| Kasper Herrestrup | Chief Investmest Officer | Brabrand | 2019 | 1982 |
| Tom Jacobsen | Manager | Tarm | 2010 | 1970 |
| Mike Jensen | Bookseller | Skjern | 2005 | 1966 |
| Jonas Højhus Jeppesen | Finance Manager | Morud | 2019 | 1989 |
| Bjørn Jepsen* | Farmer | Borris | 2011 | 1964 |
| Niels Erik Kjærgaard* | Former city manager | Skjern | 2002 | 1954 |
| Birgitte Kloster | Former logisticdirector | Ribe | 2018 | 1966 |
| Dorte H. Knudsen | Nurse | Hviding | 2006 | 1956 |
| Jakob Møller | Investment Manager | Vejle | 2019 | 1988 |
| Tommy Noer | Technical teacher | Esbjerg | 2005 | 1954 |
| Jens Christian Ostersen | Farmer | Stauning | 1992 | 1954 |
| Morten Henrik Pedersen | Merchant | Holte | 2019 | 1963 |
| Jens Kirkegaard Pedersen | Manager | Hemmet | 2013 | 1971 |
| Niels Christian Poulsen* | Mink farmer | No | 2006 | 1963 |
| Jesper Ramskov | Manager | Esbjerg | 2005 | 1964 |
| Bente Tang | Farmer | Hanning | 2006 | 1969 |
| Birte Bruun Thomsen | Manager | Esbjerg | 2014 | 1966 |
| Poul Thomsen | Former trader | Skjern | 1993 | 1952 |
| Helle Vingolf | Manager | Esbjerg | 2018 | 1968 |
*Members of the board of directors
BOARD OF DIRECTORS
Hans Ladekjær Jeppesen, lawyer, Skjern
Board chairman Born 11th September 1964 Elected on the board in 2011 Current term expires in 2019
Other management duties: Board chairman of ODJ Holding ApS Board chairman of PE Trading A/S Board chairman of Grønbjerg Grundinvest A/S Board chairman of Byggefirmaet Ivan V. Mortensen A/S Board chairman of LHI Invest A/S Board chairman of Grey Holding 2 A/S Board chairman of Specialfabrikken Vinderup A/S Board chairman of Roslev Trælasthandel A/S Board chairman of Gråkjær A/S Board chairman of Gråkjær Holding A/S Board chairman of Gråkjær Landbrug A/S Board chairman of Gråkjær Erhverv A/S Board chairman of Gråkjær Aqua A/S
Board member of Skjern Håndbold A/S Board member of Carl C A/S Board member of Carl C Ejendomme ApS Board member of Grønbjerg Ejendomsselskab A/S Board member of AA Properties A/S Board member of AA Ejendomme 1 A/S Board member of Advokatpartnerselskabet Kirk Larsen & Ascanius Board member of Kastrup A/S Board member of Kastrup Ejendomme ApS Board member of Kastrup Vinduet Holding ApS
Bjørn Jepsen, farmer, Borris
Vice board charimann Born 17 October 1963 Elected on the board in 2012 Current term expires in 2020
Other management duties: Board member of Arla Foods AmbA Board member of Kvægafgiftsfonden Board member of Danmarks Kvægforskningscenter Board member of SEGES- kvæg Board member of Landbrug og Fødevarer virksomhedsbestyrelse
Niels Christian Poulsen, mink farmer, No
Born 6 February 1963 Elected on the board in 2019 Current term expires in 2020
Other management duties:
Board member of Holstebro Minkfodercentral AmbA Board member ofP/F Hovla Fish - Færøerne Board member of K/S Holmen Vindmølle 4 Board member of Vindmølle Holmen ApS Board member of Nørhede-Hjortmose Vind I/S Board member of Heager Kærs Pumpeinteressentskab
Niels Erik Kjærgaard, former city manager, Skjern
Born on 3 July 1954 Elected on the board in 2019 Current term expires in 2020
Other management duties:
Board chairman of Ejendomsfonden for oplevelsesparken Naturkraft Board chairman of Investeringsselskabet Lionek A/S Board chairman of Iværksætterselskabet K&S ApS Board chairman of Ringkøbing-Skjern Kulturcenter
Board member of Ejendomsselskabet Husumparken A/S Board member of Ejendomsselskabet Husumparken af 2000 A/S Board member of Skjern Udviklingsforum
Lars Skov Hansen, advisor, Esbjerg Employee-selected
Born 17 May 1973 Elected on the board in 2011 Current term expires in 2023
Carsten Jensen, advisor, Skjern Employee-selected
Born 29 April 1980 Elected on the board in 2015 Current term expires in 2023
MANAGEMENT
Michael Tang Nielsen, finance manager, Velling Employee-selected
Born 17 December 1977 Elected on the board in 2019 Current term expires in 2023
Per Munck, banking executive, Skjern
Born 12 November 1954 Hired 1 November 1999
Other management duties: Board chairman of Value Invest Luxembourg S.A. Board chairman of Foreningen Bankdata Board chairman of Forvaltningsinstituttet for Lokale Pengeinstitutter
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