Skjern Bank

Annual Report • Feb 7, 2013

(Extract)

Solid liquidity, capital and acceptable results

• Solvency of 19.6% and individual solvency requirement of 11.9%, calculated according to the Danish Financial Supervisory Authority new 8+ model, results in 64% coverage
• Individual solvency requirement of 10.5% according to previous used capital adequacy model
• Solid liquidity reserves of DKK 1,501 million, corresponding to 265.6%
• Annual profit before tax of DKK 12.3 million
• Core earnings add up to DKK 81.2 million
• Devaluation of loans DKK 69.2 million
• Loans remained largely unchanged and deposits increased by DKK 1 billion compared to 2011
• The share capital increase was fully subscribed in December
• The Danish Financial Supervisory Authority's annual survey was successfully completed
• The Danish Financial Supervisory Authority allow repayment of government hybrid loan capital of DKK 65 million
• Core profit in 2013 is expected to be in the range of DKK 90 100 million

Content

Management's financial report for 2012 .	4
Endorsement of the Annual Report by the Management .	5
Profit and loss account .	6
Statement of comprehensive income .	6
Proposal for distribution of profit .	6
Balance Sheet .	7
Information on changes in equity .	8
Notes .	9
5 years in summary .	28
5 years financial ratios .	29
Financial Calendar 2013 .	30
Committee of representatives .	31
List of board members' managerial offices .	31

Management's financial report for 2012

Main activity

Skjern Bank's main activity is offering bank products to private customers, corporate and institutional customers and public companies. The customers are primarily based in West and South Jutland and the Hellerup area north of Copenhagen. The bank wants to offer the customers a wide assortment of products combined with professional consulting.

2012 in brief

A profit of 12.3 million before tax is acceptable and in accordance with the bank's reported expectations for the year and the bank's development is generally considered satisfactory. The bank's management has approved the annual accounts for 2012 and commented with satisfaction that the bank is continuing on the right track in all areas.

At the beginning of 2012, the bank expected a base profit in the interval of DKK 80 – 95 million. In the third quarterly report, the expectation materialised at about DKK 80 million, which was realised as DKK 92.0 million before the underwriting commission to the state and DKK 81.2 million after the underwriting commission.

In the course of autumn 2012, the bank strengthened its capital base through an increase in shares of a total of DKK 170.2 million. The interest in participating in the increase in shares from existing and new shareholders was overwhelming, which is why the management is pleased to announce that the increase in shares was fully subscribed and therefore all offered shares were subscribed. With the capital increase, the bank is extremely well padded and equipped for future regulatory capital requirements, with a capital adequacy ratio of 19.6. The individual solvency requirement is calculated in accordance with the Danish Financial Supervisory Authority's new 8+ model and amounts to 11.9%, therefore the bank has a capital coverage of 64%. There was also a lot of effort spent in 2012 to create a solid liquidity based on stable customer deposits. This is why it is very satisfying to report that at the end of the year, there was a deposit surplus of DKK 255 million. The deposit growth in 2012 has been almost DKK 1 billion, primarily obtained through high-interest deposits with long maturities, which ensures a stable liquidity over the next year.

In the course of 2012, the bank repaid a total of DKK 652 million on a state-guaranteed loan, and with the current liquidity reserve of 265.6%, is padded to be able to repay the rest of the state-guaranteed loan in March and April 2013, totalling DKK 844 million.

In autumn 2012, the Danish Financial Supervisory Authority conducted a regular survey of the bank in which all significant areas were reviewed. The bank's management is pleased to report that the Danish Financial Supervisory Authority's report, which can be viewed on the bank's website, validates both the bank's measurement of loans and the bank's report of capital adequacy requirements. The Danish Financial Supervisory Authority ordered a number of changes in terms of administration, which will all be implemented in the course of the first quarter of 2013.

In 2012, the bank realised a slight decline in core earnings compared to 2011. The bank's earning capacity was negatively affected by declining loans and loans at reduced interest rates while interest expenses have simultaneously been increasing as a result of the bank's high liquidity surplus prior to the repayment of the state-guaranteed loan. The bank wanted to pay early midway through 2012, but the lender would only accept regular payments in March and April 2013.

Compared to 2011, the bank's net interest and fee income was roughly at the same level, while the cost level was reduced.

Devaluation losses increased to DKK 69 million, which the management describes as a high level. It can be noted that some of the bank's identified weak involvements have developed negatively in the course of 2012, but also that certain involvements are in a weak recovery. Against this background, it is management's opinion that the need for devaluations in 2013 will be lower.

The Supervisory Diamond, which was introduced in 2010 as a future benchmark for the status of the health of financial institutions, was calculated as of 31 December 2012 and shows that the bank is within the established limit values in all five areas. However, the Supervisory Diamond first takes effect as of 01 January 2013 in accordance with the Danish Financial Supervisory Authority's regulations.

Expectations for 2013

After the implemented improvements in capital and liquidity, the bank is looking optimistically at 2013 and expects a significant profit increase compared with the profit in 2012, partly as a result of the reduction of the bank's liquidity surplus to a lower but still solid level. The bank has established the strategic and profit-related goals for the coming year, of which the most significant are listed below. Ambitious goals have been set for 2013 based on careful organic growth with a focus on strengthening the bank's position as an independent and local West and South Jutland bank that makes a difference in its local areas.

The repressed Danish competitiveness and restrained domestic consumption discourage willingness to invest in both industrial and private consumers. The job creation in the bank's market area is still hardly of such a size in 2013 that unemployment can be reduced. However, the private customers in the West and South Jutland areas have continued with a very robust economy, which is supported by relatively low and stable housing prices and general economic caution. The bank does not expect significant challenges in lending to private customers in 2013.

The bank has and has always had close ties to the agricultural industry, which represents a significant loan exposure. Over time, credit lending to the industry has been relatively unproblematic and has only led to loss for the bank to a limited extent.

However, parts of the Danish agriculture industry continue to have difficulty. The industry's restrictive environment, economic exchange conditions and high debt burden means that a significant number of agricultural operations continue to have a hard time achieving overall profitability in 2013.

The bank will continue – out of loyalty and respect – and in close cooperation with individual farmers, to aim to find the best possible solutions to the challenges that will arise.

The bank has loans to agriculture of 14.4% of the total loans. The bank has conducted a careful review of agricultural involvements, just like any other industry, that makes the management generally confident about the bank's agricultural involvements.

Audit

The Danish version of the Annual Report for 2012 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 2012 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 addi-tional 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 20112 and of the result of the bank's activities for the accounting year 1 January – 31 December 2012.

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 uncertain-ties by which the bank may be affected.

The annual report is recommended for approval by the General Meeting.

Skjern, the 7th February 2013 Executed Board of Skjern BankA/S

Per Munck / Thomas Baun Chief Financial Officer

Skjern, the 7th February 2013

The Board of Skjern Bank A/S

Hans L. Jeppesen Jens Okholm Chairman Vice-Chairman

Bjørn Jepsen Finn Erik Kristiansen Lars Skov Hansen Lars Lerke

	Profit and loss account	2012	2011
Note:		(DKK 1,000)	(DKK1,000)
2 I	nterest receivable	262,374	268,016
3 I	nterest payable	109,368	106,970
	Net income from interest	153,006	161,046
D	ividend on shares and other holdings	5,414	3,287
4 C	harges and commission receivable	61,215	55,451
C	harges and commission payable	5,919	5,726
	Net income from interest and charges	213,716	214,058
5 V	alue adjustments	8,096	94
O	ther ordinary income	1,130	1,683
6 S	taff costs and administrative expenses	132,557	134,124
D	epreciation and write-downs on intangible and tangible assets	3,709	3,578
O	ther operating expenses total	5,292	1,052
	ontribution to the Guarantee Fund for deposits C	4,843	1,052
	ther operating expenses O	449	0
9	Write-downs	69,204	52,181
10	Profit on equity investments in non-affiliated and affiliated companies	91	-14,208
	Result before tax	12,272	10,692
11 T	ax	2,433	5,838
	Net-result for the financial year	9,839	4,854

Statement of comprehensive income

Total comprehensive income	9,839	4,854
O ther comprehensive income after tax	0	0
Profit for the financial year	9,839	4,854

Proposal for distribution of profit

D ividends	0	0
T ransferred to/from retained earnings	9,839	4,854
Total distribution of the amount available	9,839	4,854

Balance Sheet
----------------------	--

Balance Sheet	2012	2011
Note:	(DKK 1,000)	(DKK 1,000)
Assets

Total assets	6,004,480	5,249,140
Prepayments	3,430	116
ther assets	75,207	86,939
ssets temporarily acquired	0	1,000
eferred tax assets	44,198	46,010
ther tangible assets	8,276	10,755
wner-occupied properties O	60,068	60,177
nvestment properties I	9,361	9,361
and and buildings (total)	69,429	69,538
Holdings in group enterprises	3,233	3,365
Holdings in associated enterprises	633	3,111
hares etc.	203,258	167,857
Bonds at fair value	1,270,360	887,607
oans and other receivables at amortised cost	3,498,499	3,526,544
eceivables at credit institutions and central banks	22,094	378,716
ash in hand and demand deposits with central banks	805,863	67,582

Liabilities

	Debt
20 D	ebt to credit institutions and central banks	399,806	149,061
21 D	eposits and other debts	4,499,426	3,509,897
	eposits D	3,753,560	2,767,346
	ther debts O	745,866	742,551
22	Bonds issued at amortised cost	102,640	775,838
O	ther liabilities	86,433	90,650
	Prepayments	197	248
	Total debt	5,088,502	4,505,694
	Provisions
13	Provisions for loss on guarantees	10,517	5,208
	Total provisions	10,517	5,208
23	Subordinated debt
	Subordinated loan capital	223,475	222,749
	Hybrid core capital	135,000	134,772
	Total subordinated debt	358,475	357,521
	Equity
24 S	hare capital	192,800	22,560
R	evaluation reserves	417	417
	Proposed dividend	0	0
R	etained earnings	353,769	357,740
	Total equity	546,986	380,717
	Total liabilities	6,004,480	5,249,140

	Information on changes in equity	2012	2011
Note:		(DKK 1,000)	(DKK 1,000)
24 S	hare capital beginning-of-year	22,560	22,560
S	hare issue	170,240	0
24	Share capital end-of-year	192,800	22,560
R	evaluation reserves beginning-of-year	417	417
	Additions related to reassessed value	0	0
O	ther movements	0	0
	Revaluation reserves end-of-year	417	417

	Total equity	546,986	380,717
	Retained earnings end-of-year	353,769	357,740
C	osts share issue	-15,450	0
25	Purchase of own funds	- 5,483	-12,280
S	ale of own funds	7,123	7,722
25	Profit or loss for the financial year	9,839	4,854
R	etained earnings beginning-of-year	357,740	357,444

Notes

		Page
1 A	ccounting policies .	10
2 I	nterest income .	13
3 I	nterest expenses .	13
4	Fees and commission income .	13
5 V	alue adjustments .	13
6 S	taff costs and administrative expenses .	13
7 I	ncentive and bonus schemes .	14
8 A	udit fee .	14
9	Write-downs on loans and receivables .	15
10	Profit on equity investments in non-affiliated and affiliated companies .	15
11 T	ax .	15
12 R	eceivables at credit institutions and central banks .	15
13 L	oans and other debtors at amortised cost price .	15
14	Bonds at fair value .	16
15 S	hares etc. .	16
16 E	quity investments in non-affiliated and affiliated companies .	16
17 L	and and buildings .	17
18 O	ther tangible assets .	17
19 D	eferred taxation .	18
20 D	ebt to credit institutions and central banks .	18
21 D	eposits and other debts .	18
22	Bonds issued at fair value .	18
23 S	ubordinated debt .	18
24 S	hare capital .	19
25 O	wn capital shares	19
26 C	ontingent liabilities .	20
27 L	awsuits etc. .	20
28 R	elated parties .	20
29 C	apital requirement .	21
30 C	urrent value of financial instruments .	22
31 R	isks and risk management .	23
32 C	redit Risk .	23
33	Market risks and sensitivity information .	26
34 D	erivate financial instruments .	27
35 C	operative agreements .	27
36	5 years in summary .	28
37	5 years of financial ratio .	29

1. Accounting Policies

The annual report is prepared in accordance with the Financial Business Act, including the notes on financial reports for credit institutions and investment companies, etc. The financial statements have been prepared in accordance with additional Danish disclosure requirements that apply to listed financial companies. The annual reports are presented in Danish kroner and rounded to the nearest DKK 1,000.The accounting policies remain unchanged since last fiscal year.In connection with the amendment of the notice of financial reports of credit institutions and investment companies, etc., on January 11, 2011, the bank has not fully applied the new notice for the Annual Report 2010. The bank has applied only § 93a, § 134 and § 129 for the presentation of the Annual Report 2010, even though the changes are only effective for Annual Reports filed on January 1, 2011 onward.

General notes on recognition and measurement

Assets are recognised on the balance sheet when it is probable that future economic assets will come to the bank and the assets can be measured reliably.

Liabilities are recognised on the balance sheet when they are probable and can be measured reliably.

On initial recognition, assets and liabilities are measured at fair value. However, intangible and tangible activities at the time of initial recognition are measured at cost. Measuring after initial recognition is done as described below for each item.

The recognition and measurement methods take into account foreseeable risks and losses that arise before the Annual Report is presented, and which confirm or deny conditions that existed on the balance sheet date.

In the income statement, income is measured as it is earned, while expenses are recognised at the amounts that apply to the financial year. Increases in value in occupied properties are accounted for directly to equity.

Purchases and sale of financial instruments are recognised on the day of the trade, and the recognition ends when the right to receive/deliver the cash flows from the financial asset or liability expires, or if it is transferred, and the bank in all material respects has transferred all risks and rewards of ownership. The Bank has not applied the rules for reclassification of certain financial assets from fair value to amortised cost price.

Changing comparative

After presentation of the annual report for 2010, the Bank has revised the accounting treatment of losses on Amagerbanken and now estimates that Amagerbanken collapse is an adjusting event after the balance sheet date that require recognition in the 2010 accounts. The comparative figures for 2010 are as a consequence changed as follows:

Losses on Amagerbanken 6,000 TDKK are expensed under "Other operating expenses". The tax is reduced by 1,500 TDKK, retained earnings were reduced by 4,500 TDKK and equity has been reduced by 4,500 TDKK.

Skjern Bank's profit for 2011 is substantially affected by the revised estimate of the loss on Amagerbanken.

Bank financial ratio for 2010 and 2011 have been adjusted as a consequence of the above.

Determination of fair value

Fair value is the amount at which an asset could be exchanged or a liability settled in a trade under normal circumstances, and between informed, willing and non-related parties.

The fair value of financial instruments for which an active market exists is set at the closing price on the balance date, or, if there is no such price, another publicly available rate that can be assumed to be the closest equivalent.

For financial instruments where no active market exists, fair value is found using generally accepted valuation techniques based on observable current market data.

Accounting estimates

When determining the carrying amounts of certain assets and liabilities, estimates are used with regards to how future events may affect the value of the assets and liabilities at the balance sheet date.

The estimates are based on assumptions which management believes are reasonable, although not certain. Final actual results can therefore differ from the estimates, since the bank is exposed to risks and uncertainties which may affect them.

Areas involving a higher degree of assessments/assumptions and estimates include write-downs on loans and receivables, unlisted financial instruments, and provisions.

Foreign currencies

Assets and liabilities in foreign currencies are listed at the Danish National Bank exchange rate on the balance sheet date.

Currency spot transactions are revalued at spot price on the balance sheet date.

Currency translation adjustments are made as needed throughout the income statement.

Income statement

Interest, fees and commissions, etc.

Income and expenses from interest are recognised in the income statement for the period to which they belong.

Interest received on loans in which a write-down has been made is listed for the written-own portion of the loan under the item "Impairment losses on loans and receivables", and is depreciated and deducted in the following year's write-downs.

Provision and fees that are an integral part of the effective interest rate on a loan are recognised as part of the amortised cost, and therefore as a proportion of interest income from loans.

Provisions and fees that are part of continuous service are accrued over the term.

Other fees and commissions, as well as dividends, are recognised as income when they are received.

Staff and administrative expenses

Expenses for staff and administration include expenditure on wages and salaries, social charges, pension plans, computer costs etc.

Pension plans

The bank has entered into defined pension plans with the majority of employees. For the plans based on contribution, fixed contributions are paid to an independent pension fund. The bank is under no obligation to make further contributions.

Tax

Income tax for the year, which is made up of current tax and deferred tax expenses, is accounted for in the annual accounts with the portion attributable to the year's results, and directly to owners' equity for income that can be attributed directly to owners' equity.

Current tax payable, or unpaid current tax, is included in the balance sheet as tax calculated on the taxable income adjusted for prepaid tax.

Deferred tax is recognised on all temporary differences between the book and tax values of assets and liabilities. Deferred tax assets, including the tax value of tax loss carry forwards, are recognised in the balance sheet using the value that is expected to be realised, either against deferred tax liabilities or against net assets.

The bank is taxed jointly with all Danish companies where it has a controlling influence. Current Danish corporate tax is allocated between the jointly taxed Danish companies in proportion to their taxable income (full allocation with reimbursement for tax losses).

Balance sheet

Dues with credit institutions and central banks

Receivables are measured at current value.

Loans

The "Loan" item consists of loans on which payment has been made directly to the borrower.

Loans are measured at amortised cost, which normally corresponds to the nominal value less front fees, etc., and write-downs for that have been incurred but not yet realised.

Loans, etc. are written down either individually or on a group basis when there is objective evidence suggesting inability to pay, resulting in a reduction in the expected future cash flows, established from an assessment of the most likely outcome.

For loans and receivables that are not individually written down, a collective assessment is made of whether the group is subject to an objective indication of impairment.

The group assessment is made based on groups of loans and receivables with similar credit risk characteristics. There are 11 groups divided into one group of public authorities, one group of residential customers and 9 groups of business customers, where the business customers are broken down by industry.

The group assessment is made by a segmentation model developed by the Association of Local Banks, which is responsible for its ongoing maintenance and development. The segmentation model determines the connection within each group between actual losses and a number of significant explanatory macroeconomic variables through linear regression analysis. The explanatory macroeconomic variables include unemployment rates, housing prices, interest rates, and number of bankruptcies/forced sales etc.

The macroeconomic segmentation model is basically calculated on the basis of loss data for the entire banking sector. The bank has therefore concluded that the model estimates accurately reflect the credit risk of the bank's lending portfolio.

For each group of loans and credits, an estimate is made which reflects the percentage of impairment associated with a given group of loans and receivables at the reporting date. By comparing the individual loan's current loss risk with the loan's original loss risk and loan loss risk at the beginning of the current accounting period, the individual loan's contribution to the collective impairment is found. Impairment is calculated as the difference between the carrying value and the discounted value of expected future payments.

Changes in impairment charges are regulated in the income statement under "Impairment of loans and receivables, etc."

Bonds and shares etc.

Bonds and shares traded on a registered stock exchange are measured at market rate. The market rate is the official closing price on the balance sheet date.

Mortgages held to maturity are measured at amortised cost. Unlisted shares are taken at fair value on the balance sheet date. Value adjustments on bonds and equities are recognised in the income statement under "Adjustments".

Investments in subsidiaries and associates

Investments in subsidiaries and associates are recognised and measured under the equity method, which means that investments are measured at the proportionate share of the net asset value at the end of the year.

The balance sheet includes the bank's share of corporate profit.

Land and buildings

Land and buildings include

• "Occupied properties", which consists of the properties from which the bank conducts banking activities, and

• "Investment property", which consists of all other properties owned by the bank.

Occupied properties are measured at revalued amounts, which is the fair value measured by the return method on 5-7 %, less accumulated depreciation and any impairment losses. Depreciation is recognised in the income statement. Reassessments are made so frequently that there are no significant deviations from fair value.

Increases in occupied properties are revalued by the amount recognised in the revaluation reserve under equity. If an increase in the revalued amount is matched by an earlier fall, and thus is recognised in income in prior years, the increase is included in the income statement.

A decrease in the revalued value is included in the income statement, unless it is a reversal of previous revaluations.

Occupied properties are depreciated over 50 years on the basis of cost, adjusted for any value changes.

Investment properties are measured at fair value according to the return method.

Ongoing changes in fair value of investment property are recognised in the income statement.

Other tangible fixed assets

Other tangible fixed assets, including assets used in operations, are recognised at cost.

Subsequently, other tangible assets and the conversion of leasehold improvements are valued at cost, less accumulated depreciation.

A linear depreciation is carried out over 3-5 years on the basis of cost. Depreciation and impairment losses are recognised in the income statement.

Other assets

Other assets include outstanding interest and commissions, as well as the positive market value of derivative financial instruments.

Prepayment items

Prepayments posted under assets include costs relating to subsequent financial years.

Prepayments posted under liabilities include prepaid interest and guarantee provisions relating to subsequent financial years.

Amounts owed to credit institutions and central banks/depos-

its and other debt issued bonds/subordinated debt

These items are measured at amortised cost.

Other liabilities

Other liabilities include due interest and commissions as well as the negative market value of financial instruments.

Provisions

Commitments, guarantees and other liabilities whose size and timing are uncertain are recognised as provisions when it is probable that the obligation will require an outflow of the bank's financial resources, and the obligation can be reliably measured. The liability is determined as the present value of the costs that must be incurred to meet the obligation.

Guarantees are not measured lower than the commission received for guarantee accrued over the guarantee period.

Treasury shares

Purchase and sales prices and dividends on shares are recognised directly under equity.

Derivative financial instruments

All derivative financial instruments, including forwards, futures and options in both bonds, shares as currency and interest rate and currency swaps are measured at their fair value on the balance sheet date.

Adjustments are included in the income statement.

Positive market values are recognised under other assets, while negative market values are recognised under other liabilities.

Contingent obligations

The bank's outstanding guarantees are reported under "Contingency obligations". Outstanding guarantees, which are believed to lead to a loss for the bank, are listed under "Provisions for losses on guarantees" and expensed in the income statement under "Impairment losses on loans and receivables".

Financial highlights

Financial highlights are presented in accordance with accounting order requirements.

Note
		2012	2011
		(DKK 1,000)	(DKK 1,000)
2	Interest income
R	eceivables at credit institutions and central banks	1,366	4,535
L	oans and other receivables	247,138	241,567
L	oans (interest conc. the written-down part of loans)	-9,200	-7,200
	Bonds	21,266	21,465
O	ther derivative financial instruments, total of which	1,804	5,649
	urrency contracts C	1,184	3,276
	nterest-rate contracts I	620	2,373
	Total	262,374	268,016
3	Interest expenses
C	redit institutions and central banks	1,396	1,656
D	eposits	76,069	61,194
	Bonds, issued	9,215	20,788
S	ubordinated debt	22,683	23,332
O	ther interest expenses	5	0
	Total	109,368	106,970
4	Fees and commission income
S	ecurities trading and custody accounts	15,976	18,493
	Payment services	6,201	5,637
L	oan fees	21,970	18,076
G	uarantee commission	7,497	6,682
O	ther fees and commission	9,571	6,563
	Total	61,215	55,451
5	Value adjustments
	Bonds	-745	3,418
T	otal shares	5,451	-4,831
	- Shares in sectorcompanies etc.	4,406	3,433
	- Other shares	1,045	-8,264
	Foreign currency	3,676	2,557
O	ther financial instruments	-286	-1,050
	Total	8,096	94
	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. No income or expenses are entered from genuine purchase or repurchase contracts in notes 2 and 3.
6	Staff costs and administrative expenses
	Salaries and remuneration of board of directors, managers etc.
	Board of managers (1 person)*	2,830	2,830
	Fixed fees.	2,790	2,790
	Pension contributions	40	40
	Management board	606	637
A	udit Committee	50	50
C	ommittee of representatives	168	184
	Total salaries and remuneration of board etc.	3,654	3,701
	*The Board of manager has a company car
	Board of Directors' remuneration
	Hans Ladekjær Jeppesen	143	12
	Jens Okholm	131	122
	Bjørn Jespsen Finn Erik Kristiansen	77 100	0 91

Lars Skov Hansen............................................................................ 100 91 Lars Lerke .................................................................................... 69 0

Carsten Thygesen ........................................................................... 0 17

Jens Christian Ostersen .................................................................... 19 142 Metha Thomsen ............................................................................. 17 111

Børge Lund Hansen ......................................................................... 0 101 Total ........................................................................................ 656 687

Note
		2012	2011
		(DKK 1,000)	(DKK 1,000)
6	Staff costs and administrative expenses (continued)
	Staff costs
	Wages and salaries	59,891	62,078
	Pensions	6,739	7,242
S	ocial security costs	776	798
	Payroll tax	7,406	7,460
	Total staff costs	74,812	77,578
S	alary to special risk takers (6 persons in 2012, 5 persons in 2011)	4,627	3,491
	Pensions to special risk takers (6 persons in 2012, 5 persons in 2011)	495	371
	Other administrative expenses
	IT expenses	25,935	23,609
R	ent, electricity, heating etc.	4,177	2,936
	Postage, telephony etc.	1,607	1,414
O	ther administrative expenses	22,372	24,887
	Total other administrative expenses	54,091	52,845
	Total staff costs and administrative expenses	132,557	134,124

With reference to the conditions for participation in the second guarantee scheme for banks in Denmark, it should be noted that tax has been deducted from remuneration of the executive board in the amount of TDKK 1,415 in connection with the priliminary statement of taxable income for the 2012 accounting period. This is unchanged compared to the 2011 accounting period.

Pension and severance terms for the executive board

The management receives 11% of salary grade 31 in annual pension, which is contribution-based through a pension company. Therefore, Skjern Bank has no pension obligations to the management, since there is regular payment to a pension company as indicated. Upon retirement, Skjern Bank pays a severance payment equivalent to 6 months' salary. The management may retire at 62 years and must retire at 70 years in accordance with the applicable contract. 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 pen-sion, which is contribution-based through a pension company in which the payments are expensed continually.

E	Average number of employees during the financial year converted into full-time employees mployed in credit institution business	122	129
E	mployed in other business	1	2
	Total	123	131
7	Incentive and bonus schemes
T	he bank does not have any incentive or bonus schemes.
8	Audit fee
T	otal fee to the firm of accountants, elected by the annual meeting,
	that perform the statutory audit	2,068	772
	Honorariums for statutory audits of financial statements	500	656
	Honorariums for assurance services	20	41
	Honorariums for services other than audits	1,548	75

Note

		2012	2011
9	Write-downs on loans and receivables	(DKK 1,000)	(DKK 1,000)
	Write-downs and provisions during the year	123,490	118,890
R	eversal of write-downs made in previous years	-47,431	-61,522
	Finally lost, not previously written down	4,111	6,977
I	nterest on the written-down portion of loans	-9,200	-7,200
R	ecoveries of previously written off debt	-1,766	-4,964
	Total	69,204	52,181
10	Profit on equity investments in non-affiliated and affiliated companies
	Profit on equity investments in non-affiliated companies	224	-10,828
	Profit on equity investments in affiliated companies	-133	-3,380
	Total	91	-14,208
11	Tax
C A	alculated tax of income of the year djustment of deferred tax	571 2,328	0 5,074
A	djustment of tax calculated in previous years	1,003	764
	Total	3,902	5,838
T	ax paid during the year	113	0
	Effective tax-rate	(Pct.)	(Pct.)
C	urrent tax rate	25.00	25.00
N	on-liable income relating from increasing in reassessed value	-1.60	-10.09
N N	on-deductible write-downs and depreciations on-liable income and -deductive costs	2.91 -2.68	8.47 -3.55
	Total effective tax rate	23.63	19.83
12	Receivables at credit institutions and central banks
D R	eposits with central banks	0	349,980
	eceivables at credit institutions	22,094	28,736
	Total	22,094	378,716
	Remaining period
D	emand	19,781	359,649
O	ver 1 year and up to 5 years	2,313	19,067
	Total	22,094	378,716
N	o assets related to genuine purchase and resale transactions included.
13	Loans and other debtors at amortised cost price
C	Remaining period laims at call	1,536,696	1,465,336
U	p to 3 months	29,517	36,225
O	ver 3 months and up to 1 year	789,602	838,443
O	ver 1 year and up to 5 years	681,311	710,247
O	ver 5 years	461,373	476,293
	Total loans and other debtors at amortised cost price	3,498,499	3,526,544
N	o assets related to genuine purchase and resale transactions included
	Individual write-downs and provisions
	Write-downs beginning of the year	278,332	264,439
	Write-downs during the year	115,390	117,441
R	eversal of write-downs made in previous years	-47,431	-61,522
	Write-downs in previous years - now lost	-122,779	-42,026
	Write-downs end of year	223,512	278,332
	Group write-downs and provisions Write-downs - beginning of the year	14,718	13,268
	Write-downs during the year	-1,835	1,450
	Group write-downs - end of year	12,883	14,718
	Total write-downs	236,395	293,050

Note
		2012 (DKK 1,000)	2011 (DKK 1,000)
13	Loans and other debtors at amortised cost price (continued)
	Guarantees
	Provisions beginning of the year	5,208	6,000
	Provisions during the year*	8,660	5,208
T	ransferred to liabilities	-3,351	-6,000
	Guarantees end of year	10,517	5,208
	*) Provisions to the Guarantee Fund for deposits represents 517 TDKK in 2012 and 1,857 TDKK in 2011.
	Loans etc. with suspended calculation of interest	189,831	202,692
	Loans and other debtors with an objective indication of impairment included in the balance sheet at a book value greater than zero
	Individual written-down loan
	Balance for loans and other debtors before write-downs	618,925	640,217
	Write-downs	-233,512	-278,331
	Balance for loans and other debtors after write-downs	395,413	361,886
	Group written-downs loans
	Balance for loans and other debtors before write-downs	3,115,969	3,179,376
	Write-downs	-12,883	-14,718
	Balance for loans and other debtors after write-downs	3,103,086	3,164,658
T	here are no write-downs of receivables from credit institutions, or any other receivables.
14	Bonds at fair value
	Mortgage credit bonds	1,128,519	823,190
O	ther bonds	141,841	64,417
	Total bonds at fair value	1,270,360	887,607
T	he bank has no held-to-maturity assets
15	Shares etc
	Quoted on Nasdaq OMX Copenhagen A/S	19,912	8,738
	Quoted on other stock exchanges	10,923	0
U O	nquoted shares recorded at fair value ther shares	162,409 10,015	148,894 10,225
	Total shares etc.	203,259	167,857
16	Equity investments in associated and affiliated companies	2012	2012
A		ssociated A	ffliated
		companies	companies
	Total cost price beginning-of-year	(DKK 1,000) 19,860	(DKK 1,000) 6,988
A	cquisitions during the year	0	0
R	eduction during the year	0	0
	Total cost price end-of-year	19,860	6,988
	Total write-ups/downs and depreciations beginning-of-year	-16,749	-3,623
R	esult	-3,069	-132
C	orrection 2011-result	-163	0
T	rade-costs deducted	-2,315	0
	Part of composition Further writedowns	5,569 -2,500	0 0
	Total write-ups/downs and depreciations end-of-year	-19,227	-3,755
	Book value end-of-year	633	3,233
	of this credit institutions	0	0
	Book value beginning-of-year	3,111	3,365
	of this credit institutions	0	0

Note		2012	2011
16	Equity investments in associated and affiliated companies (continued)	(DKK 1,000)	(DKK 1,000)
	Overview of all significant capital shares in associated and affiliated companies
V T T T T T	Associated companies alue Estate A/S, Esbjerg he company invests in real property he bank's share of the capital amounts to 47.6 %. he company's net result for the accounting year 2011 amounts to -8,038 TDKK. he company's equity as at the 31st December 2011 amounts to 269 TDKK. he company's debt to Skjern Bank amounts at 31st December 2012 to 52,429 TDKK.
A	ll agreements and transactions with affiliated undertakings is entered into on market terms.
17	Land and buildings
I A D A	nvestment properties Fair value - end of previous financial year cquisitions during the year incl. improvements isposals during the year djustment of fair value for the year Fair value end-of-year	9,361 6 0 -6 9,361	9,361 56 0 -56 9,361
R A D D C	Owner occupied properties eassessed value - end of previous financial year cquisitions during the year incl. improvements isposals during the year epreciations hanges in value recognized in income	60,177 524 0 -1,420 787	60,626 206 0 -1,410 755
	Reassessed value end-of-year	60,068	60,177
	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 5-7 %.
18 T A R	Other tangible assets otal cost price beginning-of-year cquisitions during the year incl. Improvements eduction during the year Total cost price beginning-of-year	39,736 888 -470 40,154	31,059 8,677 0 39,736
T D R	otal write-ups/downs and depreciations beginning-of-year epreciations during the year eversal of depreciations Total write-ups/downs and depreciations end-of-year	28,981 3,071 -174 31,878	26,100 2,881 0 28,981
	Book value end-of-year	8,276	10,755

(DKK 1,000) (DKK 1,000) 19 Deferred taxation (Tax amount) T angible assets 470 -78 L oans and other receivables 1,918 1,862 O ther -353 -4,263 O ther deficits carried forward 42,163 48,489 Total deferred taxation 44,198 46,010 The activated deficit is expected to be utilised within the next 3-5 years. 20 Debt to credit institutions and central banks Debt to credit institutions and central banks Debt to central banks 250,126 0 D ebt to credit institutions 149,680 149,061 Total debt to credit institutions and central banks 399,806 149,061 Term to maturity D emand 69,680 69,061 O ver 1 year and up to 5 years 330,126 80,000 Total debt to credit institutions and central banks 399,806 149,061 o liabilities related to genuine sale and repurchase transactions included. Deposits and other debts emand 2,898,183 2,187,950 t notice 18,174 25,652 ime deposits 969,004 770,602 S pecial types of deposits 614,065 525,693 Total deposits and other debts 4,499,426 3,509,897 Term to maturity D emand 2,912,101 2,219,730 D esposits redeemable at notice: U p to 3 months 809,613 47,172 O ver 3 months and up to 1 year 51,681 35,102 O ver 1 year and up to 5 years 261,118 809,053 O ver 5 years 464,913 398,840 Total deposits and other debts 4,499,426 3,509,897 No liabilities related to genuine sale and repurchase transactions included. The post "Time deposits" includes government guaranteed bonds totalling TDKK 745.866 The bonds were issued in 2010 and mature in march 2013. 22 Bonds issued at fair value Term to maturity Up to 3 months 1,648 0 O ver 3 months and up to 1 year 97,940 1,797 O ver 1 year and up to 5 years 3,052 754,041 Total bonds issued at amortised cost 102,640 755,838 The entry includes government guaranteed bonds totalling TDKK 97.940. The bonds were issued in 2010 and mature in april 2013. 23 Subordinated debt Supplementary capital DKK 25 mio. 25,000 25,000 R ate 2,876% 3.995%	Note	2012	2011
	N
	21 D A T

ue date	01.11.2014	01.11.2014
Supplementary capital DKK 100 mio ate	100,000 3,30%	100,000 2.72%
ue date he interest rate is a halfyearly variable coupon rate equal to the CIBOR rate	03.12.2015	03.12.2015

published by Nasdaq OMX for a maturity of 6 months plus 2,80% pa.

Note		2012	2011
23	Subordinated debt (continued)	(DKK 1,000)	(DKK 1,000)
R D	Supplementary capital DKK 100 mio ate ue date	98,475 8.00% 14.12.2017	97,749 8.00% 14.12.2017
O	With FSA approval, bonds can be redeemed before maturity on 14 December 2014. n December 14 2014, the interest rate is changed to a quarterly variable coupon rate equal to the CIBOR rate published by .Nasdaq OMX for a maturity of three months plus 6,442% pa.
	Hybrid core capital DKK 70 mio	70,000	70,000
R D	ate ue date N	6.09% o due date N	6.09% o due date
T O	he loan can be repaid prematurely by the bank on the 1st May 2016. n May 1 2016, the interest rate is changed to a quarterly variable coupon rate equal to the CIBOR rate published by .Nasdaq OMX for a maturity of three months plus 2.73% pa.
	Hybrid core capital DKK 65 mio	65.000	64,772
R D	ate ue date N	10.82% o due date N	10.82% o due date
T I I A	he loan can be repaid prematurely by the bank at the followning price: n the period 24.11.2012 - 23.11.2014 at price 100 n the period 24.11.2014 - 23.11.2015 at price 105 fter 24.11.2015 at price 110
	Subordinated debt total	358,475	357,521
S	ubordinated debt that may be included in the capital base	320,975	351,271
C I	osts related to admission nterest on subordinated liabilities recognised in income	0 22,683	0 23,332
24 N	Share capital umber of shares is 9,640,000 at DKK 20 each	192,800	22,560
T	he bank has pr. 31. December 2012 14,818 registered shareholders. 96.4 % of the share capital are registered on name.

Due to the optional Bank Package II, the bank has restricted dividends in the period with added government hybrid capital. Dividends may only be paid to the extent that the benefits can be financed by the bank's net profits after taxes, which constitute the distributable reserves, generated in the period after October 1, 2010.

25 Own capital shares

Purchase and sales of own shares

Holdings beginning of the year

N umber of own shares	97,102	57,458
N ominal value of holding of own shares (DKK 1,000) O wn shares proportion of share capital	1,942 8.61	1,146 5.09
Addition
N umber of own shares	77,223	103,540
N ominal value of holding of own shares (DKK 1,000)	1,544	2,071
O wn shares proportion of share capital	0.80	9.18
urchase price (DKK 1,000)	5.483	12,280
Disposal
N umber of own shares	94,435	63,896
N ominal value of holding of own shares (DKK 1,000)	1,889	1,278
O wn shares proportion of share capital	0.98	5.66
S ale price (DKK 1,000)	7,123	7,722

Note		2012	2011
25	Own capital shares (continued)	(DKK 1,000)	(DKK 1,000)
N N O A	Holdings end of the year umber of own shares ominal value of holding of own shares (DKK 1,000) wn shares proportion of share capital t the annual meeting the bank asks the shareholders the permission to	78,890 1,598 0.83	97,102 1,942 8.61
T S	acquire up to a total nominal value of 3 % of the banks share capital, refer to the regulations in the Companies Act § 48. he bank wish to receive this power, in order that the bank always is able to grant the requests from our customers and investors to buy respectively to sell shares in kjern Bank, and the net-purchase during 2011 is only in consequence hereof.
26	Contingent liabilities
	Contingent liabilities
	Finance guarantees	56,694	37,248
G	uarantees against losses on mortgage credit loans	154,992	125,724
R	egistration and conversion guarantees	82,309	86,097
O	ther contingent liabilities	198,161	235,587
	Total	492,156	484,656
	Other binding engagements
I	rrevocable credit-undertakings	22,085	123,200
	Total	22,085	123,200
	Assets pledged as collateral

Assets pledged as collateral

From the security portfolio, the bank has pr. 31. December 2012 put as collateral for clearing with Danmarks Nationalbank, securities with a total market value of DKK 133 million. In addition, there is pledged loans for a total of DKK 117 million.

Contract Legal obligations

As a member of Bankdata, the bank is due to a possible resgination required to pay a withdrawal benefit.

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 0.308 %.

The Bank is a tenant in three leases, two of which can be terminated with 6 months' notice, the yearly lease is 783 TDKK. The third lease is irrevocable until 31 December 2021, and the yearly lease is 1.774 TDKK.

27 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.

28 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.

28	Related parties (continued)	2012 (DKK 1,000)	2011 (DKK 1,000)
A	mount of loans, mortgages, guarantees, with accompanying security for members of the management and related parties mentioned below.
	Management:
L	oans	0	200
R	Bid Bond ate of interest	0 0,00%	0 6.19%
	Board of directors:
L	oans	3,207	6,403
R	Bid Bond ate of interest/interest range	2,240 2.2595 - 6.72%	2,980 5.69%
		Holding of shares in Skjern Bank	Holding of shares in Skjern Bank
T	he board of managers
	Per Munck	28,545	3,781
T	he board of directors
	Hans Ladekjær Jeppesen	11,115	10
	Jens Okholm	13,022	1,274
	Bjørn Jepsen	4,536	16
	Finn Erik Kristiansen	2,748	376
L	ars Sov Hansen	710	186
L	ars Lerke	10,382	715
29	Capital requirement
	Core capital
E	quity	546,986	380,717
R	evaluation reserve	-417	-417
D	eferred tax assets	-44,198	-46,010
	Hybrid core capital (applied)	135,000	134,773
	Half of equity investments in other financial companies in compliance
	with law concerning financial activity	-38,180	-37,849
	Core capital after statutory deduction	599,191	431,214
S	ubordinated debt	185,974	216,499
	Hybrid core capital (remainder)	0	0
R	evaluation reserves	417	417
	Half of equity investments in other financial companies in compliance
	with law concerning financial activity	-38,180	-37,849
	Capital base after deduction	747,404	610,283
	Weighted items
	Risk-weighted exposure in total	3,141,679	3,208,854
	Weighted items with market risk	268,129	244,302
	Weighted items with operational risk	419,148	435,513
G	roup write-downs	-12,883	-14,718
	Weighted items total	3,816,073	3,873,951
	Core capital	15.7	11.1
	Solcency ratio	19.6	15.8

30 Current value of financial instruments

Financial instruments are measured in the balance sheet at either current value or amortised cost price. The current value is the amount at which a financial asset can be sold or the amount at which a financial liability can be redeemed between agreed independent parties.

The current values of financial assets and liabilities valued on active markets are calculated on the basis of observed market prices on the balance sheet date. The current values of financial instruments which are not valued on active markets are calculated on the basis of generally recognised methods of valuation.

Shares etc. and derivative financial instruments are measured in the accounts at market value such that included book values correspond to current values.

The write-downs on loans are assessed such that they correspond to changes in credit quality. The difference from current value is assessed as fees and commissions received, costs incurred in lending activities, and, for fixed-interest loans, the value adjustment which is independent of the interest level and which can be calculated by comparing the actual market interest rate with the nominal rate applying to the loans.

The current value of claims on credit institutions and central banks is determined under the same method as for loans, but the bank has not currently made any write-downs on claims on credit institutions and central banks.

Issued bonds and subordinated debt are measured at amortised cost price. The difference between book and current values is calculated on the basis of prices on the market for own listed issues.

For variable-interest financial liabilities in the form of deposits and debts to credit institutions measured at amortised cost price, it is estimated that the book value corresponds to the current value.

For fixed-interest financial liabilities in the form of deposits and debts to credit institutions measured at amortised cost price, the difference from current values is estimated to be the value adjustment which is independent of interest level.

	31. december 2012		31. december 2011
	Book value	Fair value	Book value	Fair value
	(DKK 1,000)	(DKK 1,000)	(DKK 1,000)	(DKK 1,000)
Financial assets
C ash in hand+claims at call on central banks	805,863	805,863	67,582	67,582
C laims on credit institutes and central banks 1)	22,094	22,094	378,716	378,716
L oans and other debtors at amort. costprice 1)	3,506,255	3,511,536	3,534,637	3,536,319
Bonds at current value 1) .	1,282,909	1,282,909	897,724	897,724
S hares etc. .	203,258	1,282,909	167,857	167,857
C apital shares in associated companies .	633	633	3,111	3,111
C apital shares in group companies .	3,233	3,233	3,365	3,365
D erivative financial instruments .	42,448	42,448	55,431	55,431
Total financial assets	5,866,693	5,871,974	5,108,423	5,362,074
Financial liabilities
D ebt to credit institutions and central banks 1)	399,899	400,213	149,230	149,587
D eposits and other debts .	4,524,153	4,605,059	3,521,651	3,546,207
I ssued bonds at amortised cost price 1) 2) .	102,787	102,787	758,495	758,495
D erivative financial instruments .	16,857	16,587	28,584	28,584
S ubordinated debt 1) 2) .	363,190	362,190	362,318	351,318
Total financial liabilities .	5,406,616	5,486,836	4,820,278	4,834,191

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

31 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 - 125 TDKK. In the real-estate sector is used return requirement in the range 5% - 9%. 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.

32 L	Credit risks oans and guarantees distributed on sectors	2012 (Pct)	2011 (Pct)
	Public authorities	1.5	1.2
	Business:
A	griculture, hunting, forestry & fishing
	- Plant production	1.6	1.5
	- Cattle farming	7.1	7.0
	- Pig farming	3.3	3.2
	- Mink production	0.6	1.0
	- Other agriculture	1.8	1.5
I	ndustry and mining	4.8	3.4
E	nergy	2.7	3.6
	Building and constructions	4.0	5.0
	Wholesale	7.2	7.9
T	ransport, hotels and restaurants	2.0	1.0
I	nformation and communication	0.3	0.3
	Financial and insurance business	7.7	8.3
R	eal-esate	20.4	20.6
O	ther business	4.9	4.5
	Total business	68.4	68.8
	Private persons	30.1	30.0
	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.

From the above sectoral distribution represents alternative energy 6.13 % in 2012 and 5.7 % in 2011.

32 Credit risks (continued)

Maximum credit exposure classified by loan, guarantees and credit-undertakings

		2012	2012	2012
		(DKK 1,000)	(DKK 1,000)	(DKK 1,000)
L		oans G		uarantees Credit-undertakings
	Public authorities	48,168	10,022	0
	Business	2,326,860	389,621	22,085
	Private persons	1,123,471	92,513	0
		3,498,499	492,157	22,085
	Which recognized in the balance after deduction of depreciation	3,990,655
		2011	2011	2011
		(DKK 1,000)	(DKK 1,000)	(DKK 1,000)
L		oans G		uarantees Credit-undertakings
	Public authorities	44,082	5,846	0
	Business	2,361,863	361,722	111,682
	Private persons	1,120,599	117,088	11,518
		3,526,544	484,656	123,200
	Which recognized in the balance after deduction of depreciation	4,011,200
Description of collateral
Security distribyted by type		2012 (DKK 1,000)	2012 (DKK 1,000)	2012 (DKK 1,000)

		Public	Business	Private
		authorities
S	ecurities	2,783	105,839	45,180
R	eal property	35,608	2,145,600	1,035,030
C	hattels, vehicles and rolling stock	9,181	138,973	181,415
O	ther chattels	800	404,055	2,500
G	uarantees	967	97,445	21,399
O	ther forms of security	2,167	131,656	63,264
		51,506	3,023,568	1,348,788

	Security distribyted by type	2011	2011	2011
		(DKK 1,000)	(DKK 1,000)	(DKK 1,000)
		Public	Business	Private
		authorities
S	ecurities	2,830	130,283	42,495
R	eal property	40,599	2,405,391	965,547
C	hattels, vehicles and rolling stock	11,281	163,646	160,126
O	ther chattels	1,500	327,105	500
G	uarantees	867	79,887	23,776
O	ther forms of security	2,046	109,889	63,488
		59,123	3,216,201	1,255,932

.As a general rule, the bank is secured by financed assets and is also secured by sureties,

mortgages and shares. The above listing refers to nominal securities, but transferable securities are recorded at fair value.

32 Credit risks (continued)

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.

Reasons for individual write-downs and provisions

	2012 Exposure before	2012	2012
	write-down	Write-downs	Securities
S ignificant financial difficulties	328,174	103,642	182,924
Breach of contract	. 43,958	23,834	32,846
R eductions in terms	. 39,677	15,005	23,774
Probability of bankruptcy	. 234,653	91,032	131,867
Total	646,462	233,513	371,411

Reference is made to relevant sections on the bank's credit risk on loans on page 8-9 in the Danish management report.

	201	2011	2011
	Exposure before write-down	Write-downs	Securities
S ignificant financial difficulties	240,557	98,844	143,828
Breach of contract	. 62,913	34,722	18,077
R eductions in terms	101,173	43,587	23,175
Probability of bankruptcy	. 235,574	101,178	91,339
Total	640,217	278,331	276,419

Credit risks (continued)	2012 (DKK 1,000)	2011 (DKK 1,000)
Arrears amount for loans, which have not been written down 0-90 days >90 days	42,827 11,181	65,587 12,161
Total	54,008	77,748
Market risks and sensitivity information n 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 n 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
	2012 (DKK 1,000)	2011 (DKK 1,000.)
nterest rate risk on debt instruments etc - total nterest rate risk in pct of core capital after deductions	-16,508 2.7	-183 0.0
nterest rate risk split in currencies with highest risk:
KK	-15,406	1,633
HF	-188	-601
JPY	-874 -16	-1,134 -81
	-23	1
thers	1	-1
Total	-16,506	-183
Foreign currency risk
Total assets in foreign currency	743,506	955,870
otal liabilities in foreign currency	822,952	800,304
n the event of a general change in exchange rates of 10%, and in the euro of 2.25%,
urrency Indicator 1 will also be increased urrency indicator 1 in pct of core capital after deductions	5,405 0.9	11,028 2.6
n the event of a general change in exchange rates of 10%, and in the euro of 2.25%,
urrency Indicator 2 will also be increased urrency indicator 2 in pct of core capital after deductions	5 0.0	19 0.0
urrency 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.
urrency Indicator 2 expresses the bank's currency risk more accurately than indicator 1, as it takes into account the different currencies' volatility and covariation.
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
If stock prices change by 10 percentage points, equity is affected as shown below.
Quoted on Nasdaq OMX Copenhagen A/S	1,992	873
Quoted on other stock exchanges	1,092	0
nquoted shares recorded at fair value ther shares	16,240 1,001	14,889 1,023
Total shares etc.	20,325	16,785

34 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.

N		2012	2012 et	2012 Market-	2012 Market- N	2011	2011 et	2011 Market-	2011 Market-
N		ominal	market-	value	value N	ominal	market-	value	value
		value	value	positive	negative	value	value	postive	negative
	Currency-contracts
	Up to 3 months	790,641	26,011	39,157	13,146	886,301	27,066	36,621	9,557
	Over 3 months and up to 1 year					1,090	-14	21	35
	Over 1 year and up to 5 years	2,264	193	193		4,721	-1	600	601
O	ver 5 years
	Average market value			29,611	2,863			48,930	11,648
	Interest-rate contracts
	Up to 3 months					41,914	2	4,966	4,964
	Over 3 months and up to 1 year	17,185	15	811	796	51,904	92	531	439
	Over 1 year and up to 5 years	219,974	-187	12,496	12,683	151,977	-398	6,445	6,843
	Over 5 years	5,994	-1	890	891	87,466	98	6,148	6,050
A	verage market value			13,031	13,300			16,129	15,848

Share contracts

Up to 3 months Over 3 months and up to 1 year Over 1 year and up to 5 years Over 5 years Average market value

	2012	2011
	(DKK 1,000)	(DKK 1,000)
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%	4,031	3,874
Positive market value, counterparty with risk weighting of 100%	38,417	51,557
Total	42,448	55,431

Unsettled spot transactions

DKK 1,000	Nominal value	Market- value Positive	Market- value Negative	Net market- value
Foreign-exchange transactions, purchase	1,290	2	-	2
Foreign-exchange transactions, sale	6,966	-	5	-5
I nterest-rate transactions, purchase	14,638	12	62	-50
I nterest-rate transactions, sale	3,388	2	4	-2
S hare transactions, purchase	4,926	25	225	-200
S hare transactions, sale	4,429	113	24	89
Total 2012	35,637	154	320	-166
Total 2011	33,290	99	96	3

35 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, DLR Kredit A/S, Privatsikring A/S, Eurocard, PFA Pension, SparInvest, A/S, Investeringsforeningen Valueinvest Asset Management S.A., Investeringsforeningen Dexia Invest, BI Asset Management Fondsbørsmæglerselskab A/S, Jyske Invest, Forvaltningsinstituttet for Lokale Pengeinstitutter, Sydinvest A/S, Garanti Invest A/S, Investeringsforeningen Egns-Invest, HP Fondsbørsmæglerselskab A/S, Investeringsforeningen Danske Invest, Investeringsforeningen Maj Invest, Tiedemann Independent A/S, Codan, Dankort A/S, Nets A/S, Multidata A/S, Visa International, Dansk Lokalleasing A/S and Deltaq A/S.

Note
	5 years in summary (DKK 1,000)	2012	2011	2010	2009	2008
	Profit and loss account
	et income from interest	153,006	161,046	158,120	167,948	156,870
	ividend on shares	5,414	3,287	2,053	3,405	8,254
	harges and commission, net	55,296	49,725	48,654	46,637	46,672
	Income from core business	213,716	214,048	208,827	217,990	211,796
	alue adjustments	8,096	94	21,835	29,311	-60,948
	ther ordinary income	1,1,31	1,683	1,199	18,825	1,958
	taff cost and admin. expenses	132,557	134,124	131,507	129,711	139,618
	epreciation of intangible and tangible assets	3,709	3,578	2,535	4,078	9,138
	ther operating expenses	5,292	1,052	19,434	15,615	6,465
	- Contribution to the Guarantee Fund for deposits	4,843	1,052	6,148	85	71
	- Other operating expenses	449	0	13,286	15,530	6,394
	Write-downs on loans etc. (net)	69,204	52,181	73,085	218,119	69,572
	- Write-downs on loans and outstanding accounts etc.	69,204	52,181	62,831	207,868	66,076
	- Write-downs regarding first guarantee scheme	0	0	10,254	10,251	3,496
	Profit on equity investments in non-	91	-14,208	-1,117	-892	-4,636
	affiliated and affiliated companies
	Operating result	12,272	10,692	4,183	-119,289	-76,623
	axes	2,433	5,838	982	-28,443	-18,741
	Profit for the year	9,839	4,854	3,201	-90,849	-58,152
	Balance as per 31st December
	summary
	otal assets	6,004,480	5,249,140	5,496,049	4,988,301	5,618,617
	oans and other receivables	3,498,499	3,526,544	3,623,212	3,677,046	3,770,132
	uarantees etc	482,156	484,656	465,178	626,997	1,067,385
	Bonds	1,270,360	887,607	843,058	424,626	383,051
	hares etc.	203,258	167,857	185,014	186,323	184,695
	eposits and other debts.	4,499,426	3,509,897	3,569,671	2,990,783	3,087,535
	ubordinated debt	358,475	357,521	356,546	355,625	195,000
	Total equity	546,986	380,717	380,421	373,387	463,661
	- of which proposed dividend	0	0	0	0	0
	Capital Base	747,404	610,283	612,597	613,285	568,491

Note
		2012	2011	2010	2009	2008
38	Financial ratio (figures in pct.)
S	olvency ratio	19.6	15.8	16.1	15.6	12.4
C	ore capital ratio	15.7	11.1	11.2	10.4	10.2
R	eturn on equity before tax	2.7	2.8	1.1	-28.5	-15.3
R	eturn on equity after tax	2.1	1.3	0.9	-21.7	-11.6
E	arning/expense ratio in DKK	1.06	1.06	1.02	0.68	0.66
I	nterest rate risk	-2.8	0.0	1.0	1.3	0.7
	Foreign currency position	0.9	2.6	1.5	2.6	2.8
	Foreign currency risk	0.0	0.0	0.0	0.0	0.1
L	oans etc. against deposits	83.0	108.7	109.3	132.4	126.8
S	tatutory liquidity surplus	265.6	159.8	198.3	124.3	143.8
T	otal large commitments	13.1	34.8	38.5	88.2	110.6
L	oans and debtors at reduced interest	11.9	4.7	5.2	4.0	1.8
A	ccumulated impairment ratio	5.8	6.8	6.4	6.4	3.0
I	mpairment ratio for the year	1.6	1.2	1.7	4.7	1.4
I	ncrease in loans etc. for the year	-0.8	-2.7	-1.5	-2.5	-3.8
R	atio between loans etc. and capital funds	6.4	9.4	9.5	9.8	8.1
	(value per share 100 DKK)
E	arnings per share	5.1	21.5	14.2	-439.6	-279.6
	Book value per share	286	1,847	1,778	1.810	2.271
R	ate on Copenhagen Stock Exchange	120	403	800	900	675
D	ividend per share	0	0	0	0	0
	Market value/net income per share	23.5	18.7	56.4	-2.0	-2.4
	Market value/book value	0.42	0.22	0.45	0.50	0.30

Financial Calendar 2013

	Financial Calendar 2013	2013
7th February	Announcement of Annual Report 2012	2013
4th March:	General Meeting – Skjern Kulturcenter	2013
2nd May:	Announcement of quarterly report 1st quarter 2013
15th August:	Announcement of half-yearly report 2013
7th November:	Announcement of quarterly report 3rd quarter 2013

2013

Committee of representatives

Bente Tang, Hanning, Skjern, farmer, head of the committee of representatives Ole Strandbygaard, Ringkøbing, printer, vice-head of the committee of representatives Jørgen Søndergaard Axelsen, Skjern, real estate agent Jens Bruun, Viby J, Manager Ole Eg, Varde, consultant Kaj Eriksen, Vemb, police officer Jens Chr. Fjord, Skjern, former bicycle dealer Poul Frandsen, Herning sales manager Elmo Flaskager Hansen, Skjern, senior teacher Børge Lund Hansen, Skjern, manager Orla Varridsbøl Hansen, Tarm, manufacturer Helle Svenstrup Husted, Skjern, manager Børge Lund Hansen, Skjern, manager Tom Jacobsen, Tarm, manager Mike Jensen, Skjern, bookseller Niels Erik Kjærgaard, Skjern, city manager Dorte H. Knudsen, Hviding, Ribe, hospital nurce Viggo Nielsen, Borris, Skjern, former mayor Tommy Noer, Esbjerg, technical teacher Torben Ohlsen, Tjæreborg, manager Jens Christian Ostersen, Stauning, farmer Niels Chr. Poulsen, No, Ringkøbing, mink farmer Jesper Ramskov, Esbjerg, manager Christen Spangsberg Sørensen, Hanning, Skjern, farmer Poul Thomsen, Skjern, trader in men's clothing Carsten Thygesen, Skjern, manager Jesper Ørnskov, Århus, manager Board of directors *)

Hans Ladekjær Jeppesen, Skjern, lawyer, board chairman Jens Okholm, Ribe, adviser, board vice-chairman Bjørn Jepsen, Borris, farmer Finn Erik Kristiansen, Varde, bookseller Lars Skov Hansen, Esbjerg, advisor, employee-selected Lars Lerke, Skjern, head of finance, employee-selected

Audit Committee

Jens Okholm, Ribe, adviser Finn Erik Kristiansen, Varde, bookseller Lars Skov Hansen, Esbjerg, advisor, employee-selected

Management

Per Munck, banking executive

*) Shareholder-selected board of directors are a part of the Committee of representatives.

List of board members' managerial offices in companies as per December 31, 2012

Lawyer Hans Ladekjær Jeppesen: Manager of BVLHLJ Holding ApS Boardchairman of Gråkjær Retail A/S Boardchairman of PE Trading A/S Boardchairman of Skautrup Holding A/S Boardchairman of Grønbjerg Grundinvest A/S Boardchairman of Byggefirmaet Ivan V. Mortensen A/S Boardchairman of LHI Invest A/S Boardchairman of Grey Holding 1 A/S Boardchairman of Grey Holding 2 A/S Boardchairman of Grey Partner A/S Boardchairman of Krogsgaard Kompagni A/S Boardchairman of Specialfabrikken Vinderup A/S Boardchairman of AP Company A/S Board member of Skjern Håndbold A/S Board member of Gråkjær A/S Board member of Gråkjær Ejendomme A/S Board member of Gråkjær Industribyg A/S Board member of Gråkjær Staldbyg A/S Board member of BS Invest af 1992 A/S Board member of Carl C A/S Board member of Carl C Ejendomme ApS Board member of Actona Company A/S Board member of AA Holding, Herning A/S Board member of Dahlholm Holding ApS Board member of Grønbjerg Ejendomsselskab A/S Board member of Spizy A/S Board member of AA Properties A/S Board member of AA Ejendomme 1 A/S Board member of A/S VQX af 8. november 1986 Board member of Advokatpartnerselskabet Kirk Larsen & Ascanius

Consultant Jens Okholm: Boardchairman af CN Maskinfabrik A/S Boardchairman of Logitrans A/S Boardchairman of Dansk Halbyggeri A/S Boardchairman of Dansk Halbyggeri Holding ApS Boardchairman of Gourmandiet A/S

Boardchairman of Mineralvandsfabrikken Frem A/S Boardchairman of Frem Produktion A/S Boardchairman of Frem Ejendom A/S Boardchairman of Hansen & Bay Byg A/S Boardchairman of J.T.I. Gulventreprise A/S

Bookseller Finn Erik Kristiansen: Manager of Indeks Retail Invest A/S Manager of Indeks Retail Butik A/S Manager and board member of Kristiansen Ejendomme A/S Manager of Bordin Holding ApS Boardchairman of Kristiansen Bog & Idé A/S Boardchairman of Flensborg A/S Board member of Boghandlerforeningen

Farmer Bjørn Jepsen Board member of Arla Foods AmbA Board member of Kvægafgiftsfonden Board member of Kvægbrugets Forsøgscenter Board member of Videnscenter for Landbrug - kvæg

Banking executive Per Munck,

Boardchairman of Knud Eskildsen Ejendomme A/S Board member of BankData Board member of Dansk Lokalleasing A/S, Bogense Board member of Value Invest Luxembourg S.A. Board member of Forvaltningsinstituttet for Lokale Pengeinstitutter Board member of Den erhvervsdrivende Fond Ringkøbing Fjord Innovationscenter

CVR NR. 45 80 10 12

Skjern Bank, Skjern: Banktorvet 3 · 6900 Skjern Ph. +45 9682 1333

Skjern Bank, Ribe: J. Lauritzens Plads 1 · 6760 Ribe Ph. +45 9682 1600

Skjern Bank, Bramming: Storegade 20 · 6740 Bramming tlf. 9682 1580

Skjern Bank, Esbjerg: Kongensgade 58 · 6700 Esbjerg Ph. +45 9682 1500

Skjern Bank, Varde: Bøgevej 2 · 6800 Varde tlf. 9682 1640

Skjern Bank, Hellerup: Strandvejen 143 · 2900 Hellerup tlf. 9682 1450