Annual Report • Mar 16, 2023
Annual Report
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| Fellow Bank in brief 3 | |
|---|---|
| A new digital bank 3 | |
| CEO's review 6 | |
| Highlights of 2022 8 | |
| Key figures 9 |
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| Calculation of key figures 10 | |
| Board of Directors´Report 11 | |
|---|---|
| Business environment 13 | |
| Financial performance 13 | |
| Capital adequacy and risk management 14 |
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| General meeting, Board of Directors, CEO and auditor 19 | |
| Shares and shareholders 20 | |
| Group structure 22 |
|
| Personnel and locations 22 | |
| Material events after the review period 22 | |
| Financial targets and outlook for 2023 23 |
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| Financial Statements 24 | |
| Group´s Financial Statements 24 | |
| Parent companys Financial Statements 66 | |
| Signatures of the Financial Statements 89 | |
| Auditor´s Report 90 | |
| Governance 95 | |
|---|---|
Fellow Bank is a new Finnish digital bank for a smoother everyday life. We help both personal and business customers manage their day-to-day finances, and we offer a competitive interest return on deposits. We take pride in providing our customers with an uncomplicated, clear and responsible service.
Fellow Bank Plc was established on 2 April 2022, when Fellow Finance, the leading crowdfunding and peer-to-peer lending platform in the Nordics, merged with the company that continued Evli Bank's deposit banking operations. In the new bank, the core competences of the two merged companies complement each other. Fellow Finance's solid experience in lending and developing digital services was combined with Evli's strong expertise in deposit banking operations and risk management of a credit institution. Fellow Bank continued to serve Evli's more than 10,000 deposit customers and Fellow Finance's more than 30,000 active loan customers. This provided a good starting point for banking operations and for building growth. At the end of 2022, the number of customers was approximately 48,200.
Our mission is to offer the smoothest everyday digital banking services on the market for individuals and SMEs. This means catering for the entire path, from becoming a customer to paying bills, applying for a loan and managing a loan. For the customer, banking at Fellow Bank is so fast and smooth that it is almost effortless.
Our vision is to be the bank that enables the smoothest everyday life for selected customer segments. In banking services, our focus is initially on the Finnish market, but in the next few years, our proven infrastructure and our know-how gained from lending in other markets will enable us to grow internationally, especially in Germany and Denmark.
Our strategy is based on four cornerstones, which give us a solid foundation to create a competitive advantage and grow our business:
We combine easy-to-use digital services with personal customer service that is knowledgeable and easy to understand.
Our service selection is tailored especially for individuals who appreciate easy-to-use everyday basic banking services and flexible financing; for SMEs that need flexible banking and financial services; and for savers looking for safe and competitive interest income.
With a digital operating model, modern IT systems and a targeted range of services, combined with efficient organization and competent personnel, we aim for high operational efficiency.
We are a trustworthy Finnish bank with committed and strong anchor owners. At the core of our operations is responsibility in lending and clarity in our customer communication.
When implementing the strategy, we are guided by the values we have created together. We focus on solving real problems – so that our customers' everyday lives become smoother. We innovate with an open-minded approach. We take responsibility for serving our customers in the best possible way, and we expect each employee to do their part towards achieving our common goals. We value all customers equally, and we appreciate the contribution and expertise of everyone in the workplace. In this way, we create a strong company culture and a good team spirit, which enable us to take firm steps towards our vision.
The bank for the smoothest everyday life
We solve real problems We innovate We take responsibility We value everyone
Superior customer experience High operational efficiency Profitable products for selected customer segments Financially solid, trustworthy Finnish bank
We offer the smoothest everyday digital banking services on the market for individuals and SMEs
In April 2022, we launched banking operations when Fellow Finance merged with the company that continued Evli Bank's banking business. Our first operational year as a bank was successful and in line with our objectives, and the bank's services have been well received by customers.
Profit performance was positive in the second half of the year. Our profit for the second half was still loss-making at EUR -2.4 million, but a substantial improvement compared to the first half, when the loss was EUR ‑7.4 million. The profit for the second half was still burdened by front-loaded credit loss reservations caused by the strong growth of the loan portfolio, and non-recurring costs associated with the expansion of banking operations. Our loan portfolio developed as expected, increasing to EUR 163.8 million by the end of the year. Our deposit portfolio remained stable at the target level and was EUR 246.8 million at the end of the financial year. The bank's liquidity position is strong: its liquid assets stood at EUR 126.5 million at the end of the year. The bank's capital adequacy was also at a solid level of 16.8%.
In terms of business areas, business customer base continued to grow steadily throughout the year. Our competitiveness and visibility improved as a result of banking operations, and this was clearly reflected in corporate lending, where many new customers started to use our financial services. In the second half, our lending volumes exceeded those of the first half by 43%. We also achieved the targeted increase of 46% in our loan portfolio for personal customers. Overall, we succeeded in increasing the number of bank customers, with the number of active customers totaling 48,200 at the end of the year.
Our operations are founded on strong risk management. After the start-up of our banking operations, we systematically focused lending on customers with lower credit risk. The bank's credit loss levels have remained at the forecast level, and we have not seen any significant weakening in liquidity within our customer base.
During 2022, the economic environment deteriorated due to the tightened geopolitical situation and the resulting acceleration of inflation. Despite the uncertain macroeconomic outlook, we expect employment to remain at a good level, and the operating conditions for small and medium-sized enterprises to remain relatively stable. We anticipate that the increase in inflation and the weakening of consumer purchasing power will turn around during 2023. Therefore, we believe that the liquidity of our customer base will remain
at a good level, though we will continue to monitor macroeconomic and client liquidity developments closely in our credit risk management. The general rise in interest rates seen in 2022 supports the bank's profitability due to the improvement in the interest margin. Our mission is to provide the most user-friendly everyday digital banking services to private individuals and small and medium-sized enterprises. Our strategic development projects have progressed as planned during our first year of operation. Our goal is to evolve from a finance provider into a comprehensive provider of everyday digital banking services for our selected customer segments. In connection with the start-up of our banking operations, we launched the mobile and online banks, which have received positive feedback from customers on their ease of use. The digital services combined with readily accessible personal customer service have delivered good results: our customer satisfaction was high in 2022 (Net Promoter Score: 57).
We continued systematically to develop the bank's digital services both during and after the review period. In early January 2023, we launched a credit card for our customers and during February 2023, we will launch payment accounts. These will provide a strong foundation for the bank's digital services in the future. In 2023, we will bring more new and innovative digital banking services to our customers, enabling us to differentiate and increase our competitive advantage on the market.
In September, we announced our first major cooperation agreement to provide BaaS banking services in collaboration with Talenom. This will allow Talenom's corporate customers to benefit from user-friendly banking services integrated directly into the financial management software. The banking services will be launched for Talenom's corporate customers during the first quarter. Our e-commerce payment solution has also been well received in the market. In August, we announced a distribution agreement with Paytrail, Finland's largest payment service provider, which will further expand our Fellow Invoice payment method to more than 20,000 Finnish online stores. Both initiatives support our strategy to use digital channels in acquiring new customers.
In our banking operations, we succeeded in recruiting the necessary highly competent and motivated employees during the year. Our personnel have shown admirable commitment and flexibility in the challenging start-up phase of banking operations. The scaling of our operations will not require a significant increase in the number of employees.
We aim to achieve a positive profit level during the first half of 2023. This requires the accumulation of a loan portfolio of around EUR 160-170 million, considering the bank's expense level and current lending interest rates.
We launched a cost reduction program in the Summer and succeeded in reducing the bank's fixed costs in terms of personnel costs and operating costs. Our goal is to further improve the operational efficiency of our bank, and our long-term strategic objective is to be the most operationally efficient bank on the market. We decided to wind down our business in Poland and we aim to complete the arrangements to discontinue the Polish business during the first half of 2023. In international markets, we will focus on developing our operations in Denmark and Germany.
In September, we strengthened the bank's capital adequacy by issuing a EUR 6.1 million Tier 2 debenture. Our capital adequacy ratio at the end of the year was 16.8%. As a result of our improved profitability and stabilised banking operations, we set our capital adequacy target at 16% (18%), well above the regulatory minimum.
Although our capital adequacy is supported by positive profit performance, to enable stronger growth, we are exploring arrangements to strengthen our equity during 2023. In 2023, we will focus on profitable growth and achieving a positive profit level. We will increase our credit portfolio in accordance with the requirements set by capital adequacy, taking account of macroeconomic uncertainties in credit risk management.
In addition, we will continue to develop our digital banking services. Our expanded service selection will allow us to provide our customers with innovative digital banking services that generate competitive advantage, combined with first-class customer service. I would like to thank our customers, shareholders, and personnel for the past year. We will continue our endeavours towards building the most user-friendly everyday bank.
Teemu Nyholm CEO
7
Start of cooperation with Raisin, a German Fintech, which brought Fellow Bank's time deposit products to German savers in the weltsparen.de online service
Fellow Bank is born in the merger of Fellow Finance and Evli Bank
Launch of a completely new mobile and net bank for customers
Agreement with Paytrail, Finland's leading provider of electronic payment services, which expands Fellow Invoice and Fellow Business Invoice payment methods to more than 20,000 online stores
Issuance of an unsecured Tier 2 debenture loan with a principal amount of EUR 6.1 million to strengthen solvency and enable strong growth of the credit portfolio
The purchase of the entire share capital of Mobify Invoices Oy to complement the features of the mobile bank and strengthen our mobile development
Cooperation agreement with Talenom, enabling Fellow Bank's banking and financial services to be available to Talenom's accounting customers in a unique service package
Piloting the credit card, which is implemented in cooperation with Enfuce
x 100
x 100
Profit for the year
Earnings per share (EPS), undiluted, EUR =
Adjusted earnings per share (adjusted EPS), undiluted, EUR =
Share split-adjusted average number of
| Loanportfolio | The gross book value of the loan portfolio, which is calculated by subtracting the expected credit losses from the claims on the public and public sector entities on the balance sheet. |
||
|---|---|---|---|
| Cost-income ratio, % | = | Equity Balance sheet total – prepayments received |
x 100 |
| Return on equity (ROE), % | = | Profit for the year Equity (average) |
x 100 |
| Share of impairment of receivables in the loan portfolio, % |
= | Impairment of receivables (annualized) Loan portfolio at the end of the period |
x 100 |
| Total capital (TC), % | Minimum liquidity buffer | |||
|---|---|---|---|---|
| = | Net cash and collateral outflows within 30 days |
x 100 | ||
| Total capital (TC), % | = | Own funds total (TC) Risk-weighted assets (RWA) total |
x 100 | |
| Common Equity Tier 1 (CET1) capital ratio, % |
= | Common Equity Tier 1 (CET1) capital Risk-weighted assets (RWA) total |
x 100 | |
| Leverage ratio, % | = | Tier 1 (T1) capital Exposures total |
x 100 | |
| Net stable funding ratio (NSFR), % | = | Available amount of stable funding Required amount of stable funding |
x 100 |
Fellow Bank Plc ("Fellow Bank" or "the company") is a new Finnish digital bank that makes everyday life easier. Fellow Bank serves private individuals and small and medium-sized enterprises, as well as savers seeking competitive interest income for their deposits.
Fellow Bank was formed through the merger of Evli Bank Plc's banking company ("Evli Bank") and Fellow Finance Plc ("Fellow Finance") on 2 April 2022 ("the merger"). Before the merger, Evli Plc ("Evli"), a new group focusing on asset management, was separated from Evli Bank through a partial demerger. More information about the arrangement is provided in a stock exchange release issued by Evli Bank on 25 March 2022.
Evli Bank was the legal acquirer in the merger. With respect to the year 2021 and the period between 1 January and 1 April 2022, the events concerning the parent company and its income statement, balance sheet, cash flow statement and notes presented in this Board of Directors' Report and these financial statements are all information of Evli Bank. In the consolidated IFRS reporting, the arrangement is treated as a reverse acquisition in which Fellow Finance is the accounting acquirer and Evli Bank is the accounting acquiree. The
consolidated income statement, balance sheet, cash flow statement and notes for 2021 and the period between 1 January and 1 April 2022 presented in this Board of Directors' Report and in these financial statements are figures of the Fellow Finance Group. The figures comply with the IFRS standards and have been adjusted afterwards to comply with the presentation method required by the regulations and guidelines issued by the Financial Supervisory Authority for the financial reporting of credit institutions.
At the time of the merger, Evli Bank's business consisted mainly of deposit taking and deposit management (deposits totalled EUR 244.0 million on 1 April 2022) and to a lesser extent from lending (the loan portfolio totalled EUR 5.3 million on 1 April 2022). At the time of the merger,
| EUR 1000 | 1.4.2022 |
|---|---|
| Total assets | 250 932 |
| Total liabilities | 244 484 |
| Equity | 6 449 |
At the time of the merger, Evli Bank's assets mainly consisted of cash assets, and its liabilities consisted of deposit liabilities to the public and public-sector entities. Evli Bank's profit before taxes for banking operations for the period between 1 January and 1 April 2022 was EUR -0.5 million due to interest expenses on deposits and the impact of business expenses. The table below shows the condensed income statement of the banking business for the beginning of the year before the merger. However, due to the IFRS reverse acquisition, the profit is not included in the Fellow Bank Group's H1 2022 profit.
| EUR 1000 | 1.1.–1.4.2022 |
|---|---|
| Total income | -161 |
| Total operating costs | -335 |
| Realised and expected credit losses | -1 |
| Profit before taxes | -497 |
The company's business model changed significantly after the merger. Consequently, the figures from the time before the merger are not comparable. The company stopped issuing new peer-to-peer loans and crowdfunding loans in March 2022. However, the company continues to manage its existing peer-to-peer loan portfolio. Under the new business model, loans are granted from Fellow Bank's balance sheet.
| CONSOLIDATED KEY FIGURES (EUR 1000) | 2022 | 2021 | 2020 |
|---|---|---|---|
| Net interest income | 9 053 | 2 650 | 3 504 |
| Net commission income and expenses | 1 511 | 4 497 | 4 076 |
| Total operating costs | -11 601 | -6 663 | -4 197 |
| Realised and expected credit losses | -8 321 | -1 989 | -3 703 |
| Profit before taxes | -9 684 | -1 464 | -321 |
| * Cost to income ratio, % | 113 | 93 | 55 |
| Balance sheet total | 291 661 | 22 418 | 28 232 |
| * Return on equity (ROE), % | neg. | neg. | neg. |
| Capital adequacy ratio (TC), % | 16,8 | - | - |
| * Common Equity Tier 1 (CET1) capital ratio, % | 12,6 | - | - |
| Number of employees at end of period | 73 | 66 | 54 |
| * Earnings per share (EPS), euros | -0,14 | -0,22 | -0,04 |
| * Credit losses / loan portfolio, % | 5,1 | 11,0 | 14,1 |
* The formulae for calculating the key figures and alternative key figures are presented in chapter The formulae of key figures.
Fellow Bank is a new Finnish digital bank for a smoother everyday life serving personal and business customers with their day-to-day finances, and offering a competitive interest return on deposits. Services are uncomplicated, clear and responsible.
The strategy is based on four cornerstones: superior customer experience, operational efficiency, profitable products for selected customer segments, and financial solidity, domesticity and responsibility.
In the 2022 financial year, the company's service selection included personal and SME customers lending services and savings account products. The company's service selection is constantly being developed. In terms of banking services, the company will initially focus on the Finnish market, but in the future years of infrastructure and know-how accumulated from lending in other markets also enable international growth.
The most important event of the financial year was the Merger and its implementation at the beginning of April. As a result, Fellow Bank's banking business in its current form started. When banking business started, mobile and online banks was launched to customers. A selection of digital services distribution channels have been developed during the financial period on a wide range of fronts:
In the summer, the company launched a cost-saving program. In connection with the program, the company had change negotiations in the autumn, which included the entire personnel of the group's parent company in Finland. As a result of the change negotiations, 13 jobs were terminated and 2 for rearranging the task.
During the financial year, the economic environment, which is recovering from the coronavirus pandemic, was challenged by the Russian invasion of Ukraine. The war has increased uncertainty in the operating environment and has caused the prices of raw materials and energy to increase, in addition to causing interruptions related to components and logistics.
Inflation also accelerated rapidly, and interest rates began to increase. In December 2022, the annual inflation rate for consumer prices was 9.1% in Finland, with the ECB's long-term target being 2%. Inflation and rising interest rates reduce consumers' purchasing power and confidence in economic development, in addition to curbing corporate investment. The era of negative interest rates came to an end and the ECB decided on several key interest rate increases during autumn 2022. In total, the key interest rate was raised from zero to 2.0% during the financial year in order to curb inflation. The 3-month Euribor, which is also used as the reference rate for lending, rose from ‑0.6% to 2.1% during the financial year. The ECB's interest rate hikes are likely to continue in the spring, but the slowing economic growth and wider interest rate differentials in the euro area will bring additional challenges. Uncertainty in the business environment is expected to continue during 2023.
Despite the economic uncertainty, the employment rate has so far developed favourably. The deteriorating economic situation and the reduction in real disposable income may affect the capacity of households to repay their loans according to the original plan.
In the Finnish market, 3.1% more consumer loans were granted than last year. The growth rate of household deposits slowed to 2.4% (in 2021: 5.1%). With the rise in interest rates, deposit interest rates also increased substantially for the first time in years.
Performance in the financial year was driven by the start-up of Fellow Bank's operations and the increase in own balance sheet loan portfolio, as well as customer acquisition and the establishment of operations in line with the new organisation.
The Group's income for the financial year – including interest margin, net fee and commission income, investment income and other operating income – was EUR 10.2 million (7.2). The strong growth of the loan portfolio also increased the amount of expected credit loss
provisions to EUR 4.4 million (1.4). In the profit, expected credit loss provisions are taken into account in a front-loaded manner in relation to returns. Realised credit losses were EUR 3.9 million (1.4).
Consolidated operating expenses were EUR 11.6 million (6.7) due to EUR 1.9 million nonrecurring costs related to corporate restructuring and investments related to the start-up of banking operations.
The direct impacts of the uncertainties in the business environment on Fellow Bank's operations and demand have been minor. The increase in the interest rate level will have a moderately positive impact on the development of the bank's net interest income.
The Group's balance sheet total stood at EUR 292.0 million (22.4) at the end of the reporting period.
Assets, EUR 292.0 million, mainly consisted of cash EUR 120.5 million and loans granted to customers (claims on the public and public sector entities EUR 154.7 million). Intangible assets, EUR 8.2 million, include EUR 6.0 million goodwill generated in business acquisitions and EUR 1.9 million of capitalized product development costs. During the period, EUR 0.8 million (EUR 1.3 million) of product development expenses were capitalized.
The Group's liabilities, EUR 265.7 million, mainly consisted of liabilities to the public and public-sector entities (EUR 246.8 million).
In October 2022, Fellow Bank issued a debenture loan with a capital of EUR 6.1 million subject to unsecured secondary capital (Tier 2) ("Debenture Loan"). The debenture loan is an instrument with a lower priority than Fellow Bank's other commitments, which belongs to the secondary capital referred to in the solvency regulations applicable to Fellow Bank. The loan term of the debenture loan is five years and it matures on October 17, 2027. The fixed annual interest rate of the debenture loan is 8 percent.
At the end of the review period, the company had no issued bonds. The bond raised in 2019 was due to be paid in May 2022 (EUR 7.6 million).
The Group's equity stood at EUR 28.3 million (11.8). The most significant part of the increase in equity was the directed share issue carried out in connection with the Merger, in which Evli Oyj, Taaleri Oyj and TN Ventures Oy capitalized Fellow Bank with a total of 11.7 million euros..
Fellow Bank operates in a constantly changing market environment, which subjects the company to risks caused by changes in the business environment and the company's own operations. Risk-taking is managed with principles and limits approved by the company's Board of Directors. Fellow Bank has defined a capital adequacy management process the aim of which is to secure the adequacy of the company's risk tolerance in relation to all the material risks of its operations.
Risk management refers to actions aimed at systematically surveying, identifying, analysing and preventing risks. The objective of risk management is to:
The main areas of risk management are: credit risk; market risk including interest rate risk, liquidity risk and financial risk; and strategic and operational risks.
The company's Board of Directors has primary responsibility for the Group's risk management. The Board of Directors confirms the principles and responsibilities of risk management, the Group's risk limits and other general guidelines according to which the risk management and internal control are organised. The aim is to manage risks through risk assessments and measures carried out on the basis of the assessments, systematic follow-up, and analysis of the operating environment and the market.
The aim of the risk control function is to promote systematic and proactive risk management that allows the company's business to be developed in a safe manner. In the company's organisation the Risk control function operates directly under the supervision of the CEO and reports to the Board of Directors, CEO and other members of the management.
Fellow Bank's risk management strategy is based on the objective, business strategy, risk management policy and guidelines adopted by the Board of Directors for the company, and risk reporting on key business areas. Fellow Bank focuses on retail banking operations and offers selected banking and financial services to both personal and business customers through its own balance sheet and through its partners. The company does not have customer or investment risk concentrations that exceed its financial capacity.
The Board of Directors sets the level of risk appetite by approving risk strategies for each risk area and the necessary risk limits and monitoring thresholds. The implementation of the risk strategy is regularly monitored through the management and reporting of risk limits and monitoring thresholds, which are carried out independently of the business area. The company maintains its capital adequacy at a safe level. The company's capital adequacy and risk tolerance are strengthened by profitable business activities, and also by debt and equity instruments that increase own funds. The Board of Directors is kept regularly informed about the different risks of the company and their levels. The Board of Directors also approves the authorisations and framework for risk-taking by defining permissible risk limits for credit and market risks. Within the authorisations, the responsibility for day-to-day risk monitoring and control rests with the senior management. The risk reporting practices meet the requirements set for risk management, taking into account the nature and scope of the company's operations. Independent control functions have been established in the company to ensure effective and comprehensive internal control.
Independent functions:
The company's Board of Directors has primary responsibility for the Group's risk management. The Board of Directors confirms the principles and responsibilities of risk management, the Group's risk limits and other general guidelines according to which the risk management and internal control are organised. The Risk Control function oversees daily business operations and compliance with the risk limits granted to the business units, as well as compliance with risk-taking policies and guidelines. The Risk Management function reports its observations to the Management Team and the company's Board of Directors. The independent Risk Management function is responsible for ensuring and monitoring that the company's risk management is adequate in relation to the nature, scope, diversity and risks of the company's business, and that all new and material risks not previously identified are brought within the scope of the risk management of the company's business areas.
The purpose of the Compliance function is to ensure compliance with regulations in the company by supporting the senior management and the business units in applying the provisions of the law, official regulations and internal guidelines. The Compliance function also participates in identifying, managing and reporting on any risks of insufficient compliance with regulations. The Risk Management and Compliance functions report directly to the CEO.
The Internal Audit assesses the functioning of the Group's internal control system, the appropriateness and efficiency of the functions and compliance with instructions. It does this by means of inspections that are based on the internal audit action plan adopted annually by the Board of the company.
Fellow Bank's business risks mainly consist of credit and counterparty risk as well as operational risks. In addition, the business involves a small amount of market risk, which mainly consists of the interest rate risk of the bank's financial balance.
The most significant risks in the near term are related to the uncertainties of the financial operating environment, such as the development of interest rates and inflation, which weaken the purchasing power of households and challenge the profitability and willingness of SMEs to invest. Uncertainties can be reflected in Fellow Bank's business as an unfavourable development of volumes and credit losses. The company has no significant liabilities related to Russia. The effects of the Russian war of aggression on Fellow Bank's business are indirect.
During Fellow Bank's first year of operation, the strong growth of the credit portfolio increased the amount of credit risk, but the relative credit risk position has nevertheless remained stable. Fellow Bank's customers are both private and SME customers. After ending peer-to-peer and crowdfunding activities, thanks to improved competitiveness, the company has systematically targeted lending towards customers with a lower credit risk. Due to the distributed customer base, there are no individual significant customer risks. At the end of the financial year, the company had one liability, the amount of which exceeded 10 percent of Tier 1 own funds and which has full collateral. The loan portfolio before the reduction of credit loss reservations was EUR 163.8 million at the end of the financial year.
Market risk mainly consists of the interest rate risk of the financial balance and a minor currency risk. The interest rate risk of the financial balance is not significant and it mainly consists of the differences between the interest rates and maturities of assets and liabilities. The company currently has less than a half of its loan base in fixed-rate loans, and the share is constantly decreasing. The new lending is mainly at floating rates and tied to the 3 month Euribor. Strong changes in market interest rates emphasize the importance of interest rate risk management. The company constantly monitors the development of the interest rate risk through, for example, the sensitivity analysis of changes in the current value of the balance sheet and net interest income. If the interest rate were to increase by two percentage points, the company's own funds would increase by 5.7 percent, due to positive earnings development based on the situation on December 31, 2022. If the interest rate were to decrease by two percentage points, own funds would decrease by 4.7 percent.
Fellow Bank has defined a capital adequacy management process the aim of which is to secure the adequacy of the company's risk tolerance in relation to all the material risks of its operations. In order to achieve this objective, Fellow Bank identifies and assesses all risks relevant to its operations and, based on these, calibrates its risk tolerance to correspond with Fellow Bank's overall risk position. The capital adequacy management process plays a key role in defining the company's overall risk position.
The internal capital requirements determined through the capital adequacy management process are based on the capital requirements of Pillar I of capital adequacy regulation and risks not included in Pillar I, such as balance sheet interest rate risk and business risk. In its internal assessment process, the company estimates the amount of capital that is sufficient to cover also those unexpected losses that arise from risks not included in Pillar I.
The company's Board of Directors has primary responsibility for the capital adequacy management. The Board of Directors confirms the general principles for organizing the capital management process.
The Board of Directors confirms the risk strategies and sets target levels for capital that cover all material risks arising from business operations and from changes in the external operating environment. The company's capital adequacy management is the responsibility of the Board of Directors, which also sets the risk limits for the company's operations. Every year, the Board of Directors reviews the risks related to the company's capital adequacy management, the capital plan and the limits set for the risks.
In capital adequacy calculation Fellow Bank uses the Standardised Approach for the credit risk calculation and the basic indicator approach for operational risks.
The figures for Fellow Bank Group's capital adequacy are presented for the situation ending on 31 December 2022. In the comparison period, Fellow Finance group issued the amount of capital necessary for payment institution operations in accordance with the laws and regulations concerning payment institutions. Fellow Finance's own funds were EUR 10.4 million, with the minimum requirement for own funds being EUR 0.5 million at the end of 2021.
Fellow Bank Group's total capital ratio was 16.8% and common equity tier 1 ratio were 12.6%, exceeding the total capital requirement for banks (10.5%). The bank´s total capital requirement consists of a minimum capital requirement (8.0%) in accordance with Pillar I and an additional capital requirement (2.5%) in accordance with the Act on Credit Institutions.
At the end of the review period, the group's capital structure was strong and mostly consisted of core capital (CET 1) and secondary capital (Tier 2). The group's own funds (TC) were EUR 23.5 million: primary capital (T1) EUR 17.7 million was entirely common equity Tier 1 ratio (CET1) and secondary capital (T2) EUR 5.8 million consisted of debenture loan.
A binding requirement for a leverage ratio of 3% entered into force as part of the updated Capital Requirement Regulation on 28 June 2021. Fellow Bank´s leverage ratio was 6.2% at the end of the review period.
| CAPITAL AND RISK POSITION, EUR 1,000 | 31 Dec 2022 |
|---|---|
| Common Tier 1 Capital before adjustments | 28 281 |
| Adjustments to Common Tier 1 Capital | -10 582 |
| Common Tier 1 Capital in total (CET1) | 17 700 |
| Additional Tier 1 Capital before adjustments | 0 |
| Adjustments to Tier 1 Capital | 0 |
| Additional Tier 1 Capital in total (AT1) | 0 |
| Total Capital (T1 = CET1 + AT1) | 17 700 |
| Tier 2 Capital before adjustments | 6 100 |
| Adjustments to Tier 2 Capital | -250 |
| Tier 2 Capital in total (T2) | 5 849 |
| Total risk weighted exposure amounts | |
| Credit and Counterparty risk | 120 512 |
| Market | 756 |
| Operational risk | 19 198 |
| Risk weighted exposures in total | 140 466 |
| Common Equity Tier 1 ratio (CET 1), % | 12,6 |
| Tier 1 ratio (T1), % | 12,6 |
| Total Capital Ratio (TC), % | 16,8 |
| LEVERAGE RATIO, EUR 1,000 | 31.12.2022 |
|---|---|
| Total Equity | 17 700 |
| Total Exposure Amount | 283 819 |
| Leverage ratio (LR), % | 6,2 |
Liquidity risk can be defined as a disparity in the balance of incoming and outgoing cash flows. The risk may materialise if the company is unable to meet its payment obligations as they fall due. The company's main liquidity risks arise from the maturity mismatch between borrowing and lending.
Sufficient liquidity is ensured by the limit set by the company's Board of Directors to the company's cash assets. The company prepares for the repayment of future debts by limiting new lending in the upcoming years as necessary, thereby ensuring its liquidity position. The company's liquidity remained stable during 2022.
The Group's Liquidity Coverage Ratio was 370% at the end of the review period, with the minimum requirement being 100%. Of its liquidity buffer, 100% consisted of Level 1 assets with a very high liquidity. The buffer consists of non-pledged, high-quality investments that can be sold very quickly.
Net stable funding ratio was 188.3% at the end of the reporting period, with the minimum requirement being 100%. The company has no outstanding bonds. The bond raised in 2019 (EUR 7.6 million) fell due in full in May 2022.
No minimum requirement for own funds and eligible liabilities (MREL) has been set for the company in resolution plan.
| LCR JA NSFR, EUR 1,000 | 31.12.2022 |
|---|---|
| Liquidity | |
| LCR-ratio (3 months average) % | 370 |
| Total high quality liquid assets (3 months average) | 129 607 |
| Cash outflow (3 months average) | 53 000 |
| Cash inflow (3 months average) | 17 729 |
| Total net cash outflow (3 months) | 35 271 |
| Net Stable Funding | |
| Total available stable funding | 240 656 |
| Total required stable funding | 127 778 |
| NSFR-ratio % | 188,3 |
At Evli Bank Plc's Extraordinary General Meeting of Shareholders held in Helsinki on 22 December 2021, an arrangement between Evli Bank and Fellow Finance Oy was agreed upon through which Evli Bank was divided, through a partial demerger, into a new group that focuses on asset management and will be listed, and a company that will continue banking operations and with which Fellow Finance was merged. In the context of this arrangement, the General Meeting decided on the matters related to the implementation of the merger and on increasing Fellow Bank's share capital immediately after the implementation of the merger. More information about the arrangement and the decisions of the General Meeting of Shareholders is provided in a stock exchange release issued by Evli Bank on 25 March 2022.
Evli Bank's Annual General Meeting was held in Helsinki on 9 March 2022. The Annual General Meeting approved the 2021 financial statements and discharged the Board members and CEO from liability. The Annual General Meeting resolved to distribute a dividend of EUR 1.06 per share for the financial year 1 January 2021 to 31 December 2021, making a total of EUR 25 228 883.20.
Until 1 April 2022, the Board of Directors of Evli Bank consisted of Henrik Andersin (Chairman), Fredrik Hacklin, Sari Helander, Robert Ingman and Teuvo Salminen. Maunu Lehtimäki was the CEO.
Until 1 April 2022, Fellow Finance's Board of Directors consisted of Kai Myllyneva (Chairman), Harri Tilev, Michael Schönach, Karri Haaparinne and Tero Weckroth. Teemu Nyholm was the CEO. The general meeting of Fellow Finance's shareholders held on 25
May 2022 adopted the financial statements for 2021 and for 1 January to 1 April 2022 (final account) and discharged Fellow Finance's former Board members and CEO from liability.
In addition, the Extraordinary General Meeting of Shareholders held on 22 December 2021 elected six (6) members to Fellow Bank's Board of Directors. Markku Pohjola, Teuvo Salminen, Lea Keinänen, Kai Myllyneva, Jorma Pirinen and Tero Weckroth were elected as ordinary members of the Board of Directors for a term that started on the date of registration of the implementation of the merger and ends at the close of the Annual General Meeting following the implementation date.
Fellow Bank's Board of Directors held a constitutive meeting on 4 April 2022 and elected Markku Pohjola as the Chairman of the Board, Teuvo Salminen as the Vice Chairman of the Board, and Teemu Nyholm as the CEO. Juha Saari is the Deputy to the CEO.
PricewaterhouseCoopers Oy, an auditing firm, is the auditor elected by the company, with Jukka Paunonen, Authorised Public Accountant, as the principally responsible auditor.
On 22 December 2021, the Extraordinary General Meeting of Shareholders decided to combine Evli Bank's series A and series B shares into a single share class. The 20 votes per share conferred by the series A shares were converted into one vote per share conferred by the share of the combined series, so that each share in the company has one (1) vote after the combination of the share classes.
The General Meeting of Shareholders authorised the Board of Directors to decide on the purchase of treasury shares in one or more tranches as follows: The total number of treasury shares to be purchased may not exceed 8 700 000 shares. The number of shares corresponds to a total of approximately 10 per cent of all shares in the company after the merger between the company and Fellow Finance Plc has been completed and the private placement in connection with the merger has been implemented. Under the authorisation, treasury shares may only be acquired with unrestricted equity. Treasury shares may be acquired at the price formed for them in public trading on the acquisition date or at a price otherwise determined by the market. The Board of Directors shall decide how treasury shares are acquired. Treasury shares may be acquired in a proportion other than that of the shares held by shareholders (directed acquisition).
The General Meeting of Shareholders authorised the Board of Directors to decide on the issue of shares and special rights entitling to shares as defined in chapter 10, section 1 of the Limited Liability Companies Act, in one or more tranches, either against payment or free of charge.
Based on the authorisation, the number of shares issued or transferred, including shares received on the basis of special rights, may total a maximum of 4 350 000 shares. The number of shares corresponds to approximately 5 per cent of all shares in the company after the merger between the company and Fellow Finance Plc has been completed and the private placement in conjunction with the merger has been implemented.
The authorisation enables the Board of Directors to decide on all the terms and conditions of the share issue and of the granting of special rights entitling to shares, including the right to deviate from shareholders' pre-emptive subscription rights. The Board of Directors may decide to issue either new shares or any treasury shares held by the company.
The authorisation cancels the previous unused authorisations to issue shares and stock options, and any other authorisations regarding issuance of special rights providing entitlement to shares. The authorisation is valid from the implementation of the merger between the company and Fellow Finance Plc until the next Annual General Meeting, but not later than 30 June 2023.
Trading in series B shares in Fellow Bank Plc on the main list of the Nasdaq Helsinki began on 4 April 2022under the ticker symbol FELLOW. One series B share entitles its holder to one vote at a General Meeting of Shareholders. The number of shares in the company was 88 332 182 at the end of December. The company's share capital stood at EUR 18.3 million at the end of December.
The number of shares held by Fellow Bank at the end of the financial year was 220 370, which corresponds to 0.2% of all the shares and votes conferred by shares in the parent company.
During the financial year, Fellow Bank purchased the entire share capital of Mobify Invoices Oy ("Mobify"). The purchase price was paid partly in cash and partly in Fellow Bank shares. Fellow Bank issued a total of 1 175 088 new shares as partial payment of the purchase price.
| Number of own shares held |
Number of shares in circulation |
|
|---|---|---|
| 1.1.2021 | 328 998 | 23 780 422 |
| Purchase of own shares | -77 015 | 77 015 |
| Other amendments | ||
| 31.12.2021 | 251 983 | 23 857 437 |
| Total number of shares | 24 109 420 | |
| 1.1.2022 | 251 983 | 23 857 437 |
| Merger consideration shares | 43 041 750 | |
| Share issue shares | 20 005 924 | |
| Purchase of shares in subsidiaries | 1 175 088 | |
| Other amendments | -31 613 | 31 613 |
| 31.12.2022 | 220 370 | 88 111 812 |
| Total number of shares | 88 332 182 |
The closing price of Fellow Bank's share was EUR 0.36 on 30 December 2022, the last trading day of the financial year. From 2 April 2022 onwards, its lowest trading price was EUR 0.33, with the highest trading price being EUR 0.58. Fellow Bank's market capitalisation was EUR 32.1 million at the end of the financial year.
The shareholders' holding information is based on the list of shareholders maintained by Euroclear Finland Ltd on 31 December 2022.
| Total number of shares | % of all shares | ||
|---|---|---|---|
| 1. | Evli Plc | 15 288 303 | 17,31 % |
| 2. | Taaleri Plc | 15 288 303 | 17,31 % |
| 3. | TN Ventures Oy | 5 497 354 | 6,22 % |
| 4. | Oy Prandium Ab | 4 754 100 | 5,38 % |
| 5. | Oy Scripo Ab | 4 754 100 | 5,38 % |
| 6. | OY T&T Nordcap Ab | 3 938 616 | 4,46 % |
| 7. | OP Fin Small Cap | 3 400 339 | 3,85 % |
| 8. | Skandinaviska Enskilda Banken AB (publ) Hgin sivukonttori |
2 001 139 | 2,27 % |
| 9. | Rausanne Oy | 1 149 054 | 1,30 % |
| 10. | Ingman Group Oy Ab | 1 125 395 | 1,27 % |
The Fellow Bank Group consists of the parent company Fellow Bank Plc and its wholly owned subsidiaries Mobify Invoices Oy, Lainaamo Oy, Fellow Finance Sp. z o.o., Fellow Finance Estonia OÜ, Fellow Finance Česko s.r.o. and Fellow Finance Deutschland GmbH.
On 4 July 2022, Fellow Bank announced its purchase of all shares in Mobify Invoices Oy ("Mobify"). Mobify is a Finnish company that offers an easy-to-use mobile app for comprehensive financial management. The functionalities of the Mobify app will be gradually integrated into Fellow Bank's digital service offering. The entire personnel (7 people) of Mobify transferred to the Fellow Bank Group. This will further accelerate the development of Fellow Bank's digital services. The purchase price of EUR 1.3 million was paid partly in cash and partly in Fellow Bank shares. Fellow Bank issued a total of 1 175 088 new shares as partial payment of the purchase price. Control of the company was transferred to Fellow Bank on 4 July 2022.
The Group had 73 employees at the end of December 2022 (12/2021: 66). Its number of employees increased by 11% within the financial year. The growth consisted both of employees who transferred from Evli Bank to Fellow Bank in the merger and of newly recruited employees. Of its employees, 65 (57) were based in Finland in the offices in Helsinki and Turku and 8 (9) in other countries of operation.
Fellow Bank publishes the Corporate Governance Statement and the Remuneration Policy and Statement on its website at the same time as the Annual Report Link.
On January 17, 2023, the company's board of directors decided on a new share-based incentive system for the group's key personnel, and on the planning of employee share issue for all personnel. The performance-based share-based incentive system for key personnel has three earning periods, the first of which rewards are based on the group's 2023 result, implementation of strategic projects, customer satisfaction (NPS) and set personal goals. In the earning period 2023, the target group includes approximately 11 key personnel, including the CEO and other members of the management team. In the planned personnel issue and additional share system (matching) offered to the entire staff, the staff would have the opportunity to subscribe for the company's shares at a reduced price and, by subscribing, would earn the right to receive additional shares from the company at a later date.
The shareholders' nomination committee proposes to the 2023 annual general meeting that the number of board members be confirmed at seven (7), and that Lea Keinänen, Jorma Pirinen, Markku Pohjola, Teuvo Salminen and Tero Weckroth be re-elected to the board. The nomination committee proposes to elect Sami Honkonen and Johanna Lamminen as new board members. Among the current members of the board, Kai Myllyneva is no longer a candidate for the board.
The company has entered a letter of intent to sell the Polish business. The size of Poland's loan portfolio at the end of December 2022 was EUR 3.4 million. The credit loss reservation of the loan portfolio was EUR 3.2 million.
In 2022, Fellow Bank built the foundation for growth and profitability in the coming years. The operation is stabilised and the result has developed in a positive direction.
In 2023, we aim for profitable growth. We increase the bank´s loan portfolio under the conditions of profitability and capital adequacy, taking into account the uncertainty of the financial situation in credit risk management. The growth of lending is supported by more comprehensive banking services for our customers and new digital service channels.
The bank's revenues are estimated to grow from 2022.
It is estimated that the financial performance will continue to be favorable, and on a monthly basis we will reach a positive profit level during the first half of 2023.
The target for the group´s total capital adequacy ratio is 16 percent. The aim is to strengthen the company's capital during 2023.
Fellow Bank focuses on profitable growth and business development within the framework of targeted capital adequacy. The company does not plan to distribute dividends in the short or medium term.
The parent company´s distributable assets on December 31, 2022 totalled EUR 3,176,807.99. The Board of Directors proposes to the Annual General Meeting of Shareholders that no dividend will be distributed for the financial year 2022.
The company's Annual General meeting of Shareholders will be held in Helsinki on April 20, 2023. The Financial Statements report will be available to the public in week 11.
Helsinki, 27 February 2023
Board of Directors Fellow Bank Plc
| Consolidated statement of comprehensive income |
25 |
|---|---|
| Consolidated balance sheet |
26 |
| Consolidated statement of changes in equity | 27 |
| Consolidated cash flow statement | 28 |
| G1: Accounting principles for the Consolidated Financial statements |
29 |
|---|---|
| G2: Group´s risk management | 42 |
| G3: Net interest income |
49 |
| G4: Fee and commission income and expenses | 49 |
| G5: Net income from investing activities |
50 |
| G6: Other operating income | 51 |
| G7: Personnel expenses | 51 |
| G8. Other administrative expenses | 53 |
| G9: Depreciation and impairment losses | 53 |
| G10: Other operating expenses | 53 |
| G11: Realized and expected credit losses | 53 |
| G12: Income taxes |
56 |
| G13: Earnings per share | 57 |
| G14: Classes of financial assets and liabilities and fair values | 58 |
| G15: Cash and cash equivalents | 58 |
|---|---|
| G16: Claims on credit institutions | 58 |
| G17: Claims on public and public sector entities | 58 |
| G18: Intangible assets |
59 |
| G19: Tangible assets | 60 |
| G20: Other assets |
60 |
| G21: Accrued income and prepayments | 60 |
| G22: Tax assets and liabilities | 61 |
| G23: Liabilities to the public and public sector entities |
61 |
| G24: Debt securities issued to the public |
61 |
| G25: Subordinated liabilities |
61 |
| G26: Other liabilities |
61 |
| G27: Accrued expenses deferred income | 61 |
| G28: Equity | 61 |
| G29: Off-balance sheet commitments |
62 |
| G30: Collaterals received |
62 |
| G31: Corporate structure | 62 |
| G32: Related parties |
63 |
| G33: Business combinations |
63 |
| G34: Significant events after the period | 65 |
| Note | 2022 | Adjusted 2021 | |
|---|---|---|---|
| Interest income | 11 101 | 3 415 | |
| Interest expenses | -2 048 | -766 | |
| Net interest income | K3 | 9 053 | 2 650 |
| Fee income | K4 | 3 885 | 7 443 |
| Fee expenses | K4 | -2 374 | -2 946 |
| Net fee and commission income | 1 511 | 4 497 | |
| Net income from investing activities | K5 | -349 | 0 |
| Other operating income | K6 | 24 | 41 |
| Total income | 10 239 | 7 188 | |
| Operating expenses | |||
| Personnel expenses | K7 | -5 378 | -3 248 |
| Other administrative expenses | K8 | -4 487 | -2 646 |
| Depreciation and amortization | K9 | -691 | -495 |
| Other operating expenses | K10 | -1 046 | -274 |
| Total operating expenses | -11 601 | -6 663 | |
| Realized and expected credit losses | K11 | -8 321 | -1 989 |
| Profit before taxes | -9 684 | -1 464 | |
| Income taxes | K12 | -901 | -101 |
| Result for the year | -10 585 | -1 564 |
| Note | 2022 | Adjusted 2021 | |
|---|---|---|---|
| Other comprehensive income/loss | |||
| Items that are or may be reclassified | |||
| subsequently to profit or loss | |||
| Foreign currency translation differences | 15 | 6 | |
| Other comprehensive income after taxes | 15 | 6 | |
| Comprehensive income, total | -10 570 | -1 558 | |
| Result for the year attributable to | |||
| Equity holders of parent company | -10 585 | -1 564 | |
| Total comprehensive income attributable to | |||
| Equity holders of parent company | -10 570 | -1 558 | |
| Earnings per share | K13 | ||
| Earnings per share (EPS), basic, EUR | -0,14 | -0,04 | |
| Earnings per share (EPS), diluted, EUR | -0,14 | -0,04 |
| Note | 2022 | Adjusted2021 | |
|---|---|---|---|
| Assets | |||
| Cash and equivalents | K15 | 120 528 | 0 |
| Claims on credit institutions | K16 | 5 941 | 3 457 |
| Claims on the public and public sector entities | K17 | 154 656 | 13 439 |
| Intangible assets and goodwill | K18 | 8 157 | 1 403 |
| Property, plant and equipment | K19 | 140 | 268 |
| Other assets | K20 | 1 438 | 2 560 |
| Accrued income and prepayments | K21 | 210 | 177 |
| Income tax assets | K22 | 461 | 81 |
| Deferred tax assets | K22 | 129 | 1 032 |
| Assets total | 291 661 | 22 418 |
| Note | 2022 | Adjusted2021 | |
|---|---|---|---|
| Liabilities | |||
| Liabilities to the public and public sector entities | K23 | 246 810 | 0 |
| Debt securities issued to the public | K24 | 0 | 8 402 |
| Subordinated liabilities | K25 | 6 203 | 0 |
| Other liabilities | K26 | 8 796 | 1 567 |
| Accrued expenses and deferred income | K27 | 3 867 | 583 |
| Income tax liabilities | K22 | 0 | 77 |
| Liabilities total | 265 675 | 10 629 | |
| Equity | K28 | ||
| Equity attributable to equity holders of the | |||
| parent | |||
| Share capital | 18 286 | 125 | |
| Fund of invested non-restricted equity | 19 917 | 13 361 | |
| Retained earnings | -12 218 | -1 696 | |
| Equity attributable to equity holders of the | |||
| parent | 25 985 | 11 790 | |
| Liabilities and equity total | 291 661 | 22 418 |
| Attributable to the equity holders of the parent | ||||||
|---|---|---|---|---|---|---|
| Reserve for invested unrestricted |
Translation | Retained | ||||
| Note Share capital |
equity | differences | earnings | Total | Total equity | |
| Equity on 1.1.2022 | 125 | 13 361 | 2 | -1 699 | 11 790 | 11 790 |
| Result for the year | -10 585 | -10 585 | -10 585 | |||
| Other comprehensive income | 15 | 15 | 15 | |||
| Total comprehensive income | 15 | -10 585 | -10 570 | -10 570 | ||
| Reverse acquisition* | 6 446 | 6 056 | 12 502 | 12 502 | ||
| Share issue | 11 715 | 11 715 | 11 715 | |||
| Other changes** | 500 | 500 | 500 | |||
| Share based payments | 51 | 51 | 51 | |||
| Equity on 31.12.2022 | 18 286 | 19 917 | 17 | -12 233 | 25 985 | 25 985 |
* The effect of the reverse acquisition consists of the amount of the fair value of the consideration for the acquisition, which takes into account the capital structure of the legal parent company, Fellow Bank Plc.
**Other changes from 2022 include the part of the purchase price paid in shares related to the acquisition of Mobify Invoices Oy, which is presented in the section Reserve for invested unrestricted equity.
| Note | Share capital | Reserve for invested unrestricted equity |
Translation differences |
Retained earnings |
Total | Total equity | |
|---|---|---|---|---|---|---|---|
| Equity on 1.1.2021 | 125 | 13 361 | -4 | -300 | 13 182 | 13 182 | |
| Result for the year | -1 564 | -1 564 | -1 564 | ||||
| Other comprehensive income | 6 | 6 | 6 | ||||
| Total comprehensive income | 6 | -1 564 | -1 558 | -1 558 | |||
| Share based payments | 165 | 165 | 165 | ||||
| Equity on 31.12.2021 | 125 | 13 361 | 2 | -1 699 | 11 790 | 11 790 |
| 2022 | Adjusted 2021 | 2022 | Adjusted 2021 | ||
|---|---|---|---|---|---|
| Cash flow from operating activities | Investing activities | ||||
| Profit (loss) for the period | -10 585 | -1 564 | Investments in tangible assets | -22 | -11 |
| Investments in intangible assets | -972 | -1 300 | |||
| Adjustments for items not included in cash flow | Acquisitions of subsidiaries | -772 | 0 | ||
| Depreciation and impairment | 572 | 495 | Cash flow from investing activities | -1 765 | -1 311 |
| Credit losses | 7 488 | 1 989 | |||
| Income taxes | 901 | 101 | Cash flow from financing activities | ||
| Other adjustments | 0 | 760 | Repayment of bond | -7 380 | -5 130 |
| Adjustments total | 8 961 | 3 344 | Issue of debenture loan | 6 100 | 0 |
| Paid directed share issue | 11 715 | 0 | |||
| Cash flows from operating activities before changes in | Repayments of lease liabilities | -119 | -115 | ||
| operating assets and liabilities | -1 623 | 1 780 | Cash flow from financing activities | 10 317 | -5 245 |
| Increase (-) or decrease (+) in operating assets | |||||
| Claims on the public and public sector entities | -141 982 | 2 240 | Change in cash and cash equivalents | 123 012 | -434 |
| Other assets | -444 | 1 103 | Cash and cash equivalents at the beginning of period | 3 457 | 3 769 |
| Increase (-) or decrease (+) in operating liabilities | Translation differences | 0 | 121 | ||
| Liabilities to the public and public sector entities | 246 810 | 0 | Cash and cash equivalents at the end of period | 126 469 | 3 457 |
| Other liabilities | 11 700 | 1 000 | |||
| Cash flow from operating activities | 114 461 | 6 122 | Cash and equivalents are formed by the following | ||
| items: |
| Cash and cash equivalents at the end of period | 126 469 | 3 457 |
|---|---|---|
| Claims on credit institutions | 5 941 | 3 457 |
| Cash and cash equivalents | 120 528 | 0 |
The growth of loan and deposits portfolio increased strongly cash flows from operating activities.
Fellow Bank Plc ("Fellow Bank") is a new Finnish digital bank that makes everyday life easier. Fellow Bank serves private individuals and small and medium-sized enterprises, as well as savers seeking competitive interest income for their deposits.
Fellow Bank was formed through the merger of Evli Bank Plc's banking company ("Evli Bank") and Fellow Finance Plc ("Fellow Finance") on 2 April 2022. Before the merger, Evli Plc ("Evli"), a new group focusing on asset management, was separated from Evli Bank through a partial demerger.
Evli Bank was the legal acquirer in the merger. In IFRS reporting, the arrangement is treated as a reverse acquisition in which Fellow Finance is the accounting acquirer and Evli Bank is the accounting acquiree. In this Financial statements report, income statement, balance sheet, cash flow statement and notes for 2021 and 1 January to 1 April 2022 are related to the Fellow Finance Group. The figures comply with the IFRS and the presentations is subsequently revised in accordance with the regulations and guidelines issued by the Financial Supervisory Authority for the financial reporting of credit institutions. The Fellow Bank Group consisted of the parent company Fellow Bank Plc and its wholly owned subsidiaries Mobify Invoices Oy, Lainaamo Ltd, Fellow Finance Sp. z o.o., Fellow Finance Estonia OÜ, Fellow Finance Deutschland GmbH and Fellow Finance Česko s.r.o.
Fellow Bank has been authorised by the Financial Supervisory Authority to engage in credit institution operations. In Germany, it has a credit intermediation licence (Kreditvermittelungslizens). Its subsidiary Lainaamo Ltd is registered in the creditor register maintained by the Regional State Administrative Agency for Southern Finland. Fellow Bank Plc offers its services to Denmark across the border as enabled by its license for credit institution operations.
Fellow Bank Plc is listed on the main list of the Nasdaq Helsinki. Fellow Bank Plc's head office is located at Pursimiehenkatu 4 A, 00150 Helsinki, Finland. The company's home country is Finland and its domicile is Helsinki. The legal form of the company is a public limited company.
Copies of the Financial Statements and Interim Reports are available on the Bank´s website www.fellowpankki.fi.
The consolidated financial statements have been prepared in compliance with IFRS (International Financial Reporting Standards), approved for application in the EU, and IAS (International Accounting Standards) valid at the end of 2021, together with their respective SIC (Standing Interpretations Committee) and IFRIC (International Financial Reporting Interpretations Committee) interpretations. The notes to the consolidated financial statements also include information required by Finnish accounting and limited liability company legislation and the supplementary requirements of authorities´requirements.
The consolidated financial statements have been prepared for a period of 12 months from 1 January to 31 December 2022. The accounting policies apply to 2022. The accounting policies for comparative figures are presented in the 2021 Financial Statements.
As a result of the business model that changed with the merger, the figures for the comparison periods are not comparable. Although there was a significant change in the company's earnings logic, however, the accounting principles in many respects remained unchanged. In the old business model, to the Fellow Finance group affiliated subsidiary Lainaamo Oy acted as one of the investors in peer-to-peer loans. Lainaamo Oy's the financial assets and liabilities on the balance sheet, as well as the related income and expenses, were recorded in at the Fellow Finance group, with the same accounting principles that Fellow Bank is using now.
The figures of the consolidated financial statements are presented in thousands of euros unless otherwise indicated, and the figures are rounded to the nearest thousand, and therefore the sum of individual figures may deviate from the presented total sum. The consolidated financial statements are presented in euros, which is the operating and presentation currency of the Company and the Group.
Fellow Bank presents financial information in accordance with the regulations and guidelines set by the Financial Supervisory Authority for financial reporting by credit institutions. In this Group Financial Statement report, the income statement, balance sheet, cash flow statement and accompanying information for the years 2021 and 1.1.-1.4.2022 are figures of the Fellow Finance group. The figures comply with IFRS regulation and they have been subsequently adjusted to the presentation method according to the regulations and instructions set by the Financial Supervisory Authority for financial reporting by credit institutions. The reclassifications of income statement and balance sheet items according to the regulations and guidelines set by the Financial Supervisory Authority for credit institutions' financial reporting are shown in the tables below.
During the financial year, the group has implemented a new accounting principle regarding goodwill.
Turnover (10,688) has been reclassified to interest income (3,244) and fee income (7,443). Materials and services (-2,946) have been reclassified to fee expenses (-2,946). Other operating expenses (-2,920) have been reclassified to other administrative expenses (-2,646) and other operating expenses (-274). Financial income (171) has been reclassified to interest income (171). Financial expenses (-758) have been reclassified to interest expenses (-758).
| 1.1.-31.12.2021 | |
|---|---|
| EUR THOUSAND | Fellow Finance historical |
| Revenue | 10 688 |
| Other operating income | 41 |
| Materials and services | -2 946 |
| Personnel expenses | -3 248 |
| Depreciation, amortisation and impairment | -495 |
| Impairment losses on financial assets | -1 989 |
| Other operating expenses | -2 920 |
| Operating result | -869 |
| Financial income | 171 |
| Financial expenses | -766 |
| Result before taxes | -1 464 |
| Income taxes | -101 |
| Result for the year | -1 564 |
| Items that are or may be reclassified subsequently to profit or loss | |
|---|---|
| Foreign currency translation differences - foreign operations | 6 |
| Other comprehensive income after taxes | 6 |
| Comprehensive income, total | -1 558 |
1.1.-31.12.2021
| EUR THOUSAND | Fellow Bank reclassified |
|---|---|
| Interest income | 3 415 |
| Interest expenses | -766 |
| NET INTEREST INCOME | 2 650 |
| Fee income | 7 443 |
| Fee expenses | -2 946 |
| Other operating income | 41 |
| TOTAL OPERATING INCOME | 7 188 |
| Operating expenses | |
| Personnel expenses | -3 248 |
| Other administrative expenses | -2 646 |
| Depreciation and amortization on tangible and intangible assets | -495 |
| Other operating expenses | -274 |
| Impairment of receivables | -1 989 |
| TOTAL OPERATING EXPENSES | -1 464 |
| PROFIT BEFORE TAXES | -1 464 |
| Income taxes | -101 |
| RESULT FOR THE YEAR | -1 564 |
| Items that are or may be reclassified subsequently to profit or loss | |
|---|---|
| Foreign currency translation differences - foreign operations | 6 |
| Total | 6 |
| Other comprehensive income after taxes | 6 |
| COMPREHENSIVE INCOME, TOTAL | -1 558 |
Long-term loan receivables (6,310) and short-term loan receivables (7,129) have been reclassified to receivables from the public and public entities. Trade receivables and other receivables (2,737) have been reclassified to other assets (2,561) and accruals and advances paid (177). Cash and cash equivalents (3,457) have been reclassified to receivables from credit institutions. Lease liabilities (294) have been reclassified to other liabilities. Accounts payable and other liabilities (1,914) have been reclassified to other liabilities (1,331) and accrued liabilities and advances received (583).
| 1.1.-31.12.2021 | 1.1.-31.12.2021 | ||
|---|---|---|---|
| EUR THOUSAND | Fellow Finance historical | EUR THOUSAND | Fellow Bank reclassified |
| ASSETS | ASSETS | ||
| Non-current assets | Claims on credit institutions | 3 457 | |
| Non-current loan receivables | 6 310 | Claims on the public and public sector entities | 13 439 |
| Intangible assets | 1 403 | Intangible assets and goodwill | 1 403 |
| Tangible assets | 268 | Property, plant and equipment | 268 |
| Deferred tax assets | 1 032 | Other assets | 2 560 |
| Total non-current assets | 9 014 | Accrued income and prepayments | |
| Current assets | Income tax assets | 81 | |
| Current loan receivables | 7 129 | Deferred tax assets | 1 032 |
| Trade and other receivables | 2 737 | ASSETS TOTAL | 22 418 |
| Income tax receivables | 81 | ||
| Cash and cash equivalents | 3 457 | LIABILITIES | |
| Total currents assets | 13 404 | Debt securities issued to the public | 8 402 |
| TOTAL ASSETS | 22 418 | Other liabilities | 1 567 |
| Accrued expenses and deferred income | 583 | ||
| LIABILITIES | Income tax liabilities LIABILITIES TOTAL |
77 10 629 |
|
| Non-current liabilities | |||
| Lease liabilities | 114 | EQUITY | |
| Total non-current liabilities | 114 | Share capital | 125 |
| Current liabilities | Fund of invested non-restricted equity | 13 361 | |
| Liabilities to public | 8 402 | Translation difference | -1 |
| Trade and other payables | 1 914 | Retained earnings | -1 695 |
| Lease liabilities | 122 | EQUITY TOTAL | 11 790 |
| Income tax payables | 77 | LIABILITIES AND EQUITY TOTAL | 22 418 |
| Total current liabilities | 10 515 | ||
| TOTAL LIABILITIES | 10 629 | ||
| EQUITY | |||
| Equity attributable to equity holders of the parent | |||
| Share capital | 125 | ||
| Fund for unrestricted equity | 13 361 | ||
| Retained earnings | -213 | ||
| Translation difference | 83 | ||
| Result for the year | -1 | ||
| Equity attributable to equity holders of the parent | 11 790 | ||
| TOTAL EQUITY | 11 790 | ||
| TOTAL EQUITY AND LIABILITIES | 22 418 |
In other respects, no new accounting principles have been introduced in the reporting period that would have a material impact on these Financial Statement Bulletin financial data. In the preparation of the financial information, the same accounting principles and calculation methods have been followed in other respects as in the preparation of the consolidated financial statements of Fellow Finance for the fiscal year ending on December 31, 2021.
In addition to the parent company, the consolidated financial statements include all the companies in which Fellow Bank Plc has control (subsidiaries). Fellow Bank Plc has control in a company if it is exposed to, or has rights to, the variable returns of an investee, and can affect the amount of returns it receives by using its power related to the investee.
Companies acquired during the financial year are consolidated to the consolidated financial statements from the moment they are acquired, and consolidation ends when Fellow Bank loses its control over the company. The consolidated financial statements have been prepared using the acquisition method. The consideration transferred, the identifiable assets of the acquired entity and liabilities taken for liability are valued at fair value at the time of acquisition. Any goodwill shall be recorded in the amount by which the cost exceeds the Group's share of the fair value of acquired assets and liabilities at the time of acquisition. Expenditure related to acquisition has been recorded as an expense.
The financial statements of subsidiaries are adjusted if necessary to correspond with the principles applied in the preparation of the consolidated financial statements. All intra-group transactions, assets and liabilities, and income and expenses from transactions between Group companies, are eliminated as part of the consolidation process.
Fellow Bank has only one reportable operating segment. The reported segment covers the entire group and the segment figures are consistent with the figures of the Fellow Bank Group and the management's reporting.
The bookkeeping and reporting of Group companies is carried out in the currency of their operating environment (operating currency). The consolidated financial statements are presented in euros, which is the operating l and presentation currency of the parent company. The importance of international operations to the group's financial position is
minor. During the accounting period, the group had active business operations abroad in Germany, Denmark and Poland. In the fiscal year, it was decided to focus on international markets only on Danish and German business.
In the consolidated financial statements, the income statements of foreign subsidiaries are converted into euros at the average rate of the financial year, and balance sheets are converted at the exchange rate of the balance sheet date. The difference in average exchange rates resulting from different exchange rates in the comprehensive income and balance sheet is recognised in other comprehensive income. The conversion differences arising from the consolidation of foreign subsidiaries and from post-acquisition cumulative changes in equity items are recognised in other comprehensive income.
Transactions denominated in foreign currencies are recognised in the operating currency using the exchange rate of the transaction date. Monetary items are translated into operating currency using the exchange rates at the end of the reporting period. Nonmonetary items are measured at the exchange rate on the date of the transaction. Foreign currency transactions are translated into the operating currency using the exchange rates prevailing on the date of the transaction. Monetary items are translated into the operating currency using the exchange rates at the end of the reporting period. Foreign exchange gains and losses incurred from payments related to transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at the exchange rate prevailing on the balance sheet date, are recognised in profit or loss. Foreign exchange gains and losses are presented in the income statement under net income from securities transactions.
The Group's financial assets and liabilities are classified in accordance with IFRS 9 Financial Instruments.
According to the IFRS 9 Financial Instruments standard financial assets are measured at amortized cost, fair value through other comprehensive income, or fair value through profit or loss.
In connection with the initial recognition, the financial assets are classified into one of the following three categories:
• The company has no financial assets to be recognized at fair value through comprehensive income.
• The company has no financial assets to be recognized at fair value through comprehensive income.
The company's lending took place until April 1, 2022 from the balance sheet of the subsidiary Lainaamo Oy. Lainaamo Oy acted as one of the loan investors on the peer-to-peer lending and crowdfunding platform maintained by the Company. In April 2022, the credit portfolio of Lainaamo Oy's balance sheet was sold to the parent company Fellow Bank.
The reclassifications of items are described in more detail in the New accounting principles section.
The classification and measurement of financial assets are based on the business model and an assessment of cash flow characteristics (SPPI test).
Fellow Bank has defined the business models it applies to financial instruments based on their intended purpose. The business model reflects how a group of financial instruments is managed in a business unit in order to meet financial objectives. The business model is not assessed on an individual instrument basis; instead, it is based on classes of financial assets grouped by the management. The business models defined by Fellow Bank depend on how well the company manages a financial asset class and whether the management intends to hold financial assets to collect cash flows, for trading, or both. According to the business
model applied to financial assets by Fellow Bank, financial instruments are managed in order to collect contractual cash flows. The Merger that took place in April 2022 did not change the business model from the point of view of the accounting treatment of financial assets.
The objective of the SPPI test is to evaluate the contractual cash flow characteristics of a cash asset, and to pass the SPPI test, cash flows must be solely payments of principal and interest. Fellow Bank assesses the contractual terms of financial assets in order to determine whether they pass the SPPI test.
If the contractual terms of the financial assets contain other terms that are not related to the primary loan arrangement and that do not consist only of principal payment and payment of interest on the remaining principal, the financial assets will be measured at fair value through profit or loss. If a financial asset does not pass the SPPI test, the agreement terms must cause a greater than minor exposure to risks or volatility in contractual cash flows. Fellow Bank's financial assets pass the SPPI test and their contractual terms meet the SPPI criteria.
A financial asset is measured at amortised cost if the item is held as part of a business model that aims to hold financial assets in order to collect contractual cash flows, and the cash flows are solely payments of principal and interest. Such items in Fellow Bank include e.g. loans to customers and purchased peer-to-peer loan portfolios.
Financial assets measured at amortised cost are initially recognised at fair value inclusive of expenses immediately caused by the acquisition, such as loan broker commissions. After initial recognition, the items are measured at amortised cost using the effective interest rate method. This refers to the interest rate at which the future payments that are expected to become payable or receivable during the financial instrument's expected exercise period are discounted at the financial instrument's net book value. Fellow Bank does not grant significantly long loans, such as mortgages. The book value is adjusted by a credit loss provision using the expected credit loss measurement model (see next section on impairment of financial assets).
Financial instruments are reclassified only if a business unit's business model changes substantially. The Merger that took place in April 2022 did not change the business model from the point of view of the accounting treatment of financial assets. Financial assets and liabilities are recorded according to the trading date. Previously recorded profits and losses are not modified retroactively. Financial assets and liabilities shall be offset and presented in net terms on the balance sheet only when the Company has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. There are no offset items in the consolidated balance sheet.
A financial asset is derecognised from the balance sheet only when the contractual rights to the asset's cash flows cease to exist, the contract is terminated, or the asset is transferred to another party and the transfer fulfils the requirements of derecognition.
According to the IFRS 9 Financial Instruments standard financial liabilities are initially recognised at fair value at trade date based on the consideration received inclusive of expenses immediately caused by the acquisition. After initial recognition, financial liabilities such as bonds issued by the Company and other financial liabilities are measured using the effective interest rate method at amortised cost.
In connection with initial recognition, financial liabilities are classified into one of the following items:
• The company has no financial assets to be recognized at fair value through comprehensive income.
The reclassifications of items are described in more detail in the New accounting principles section.
The Company must derecognise a financial liability or part of it from its balance sheet only if the liability has ceased to exist, in other words when the obligation specified in the contract is either discharged or cancelled or expires. Fellow Bank derecognises financial liabilities when the obligation specified in the contract is discharged.
The impairment model applied by the Company is based on calculating expected credit losses (ECL). In the Company, expected credit loss calculation is applied to financial assets measured at amortised cost, the most substantial part of which is loan receivables from customers. Impairments also concern off-balance sheet commitments, such as unused credit facilities related to overdraft facilities. Impairment is not applied to financial assets measured at fair value, unless they are measured at fair value through comprehensive income. A simplified impairment model is applied to accounts receivable.
The key components of the model based on expected losses are assessing substantial credit increases in credit risk, and the expected credit loss calculation model. The calculation model used by the Company is based on the historically verified credit risk of loans by risk class, historically verified quantitative factors that correlate increases in credit risk, and estimates provided by a forward-looking macroeconomic model.
Expected credit losses (ECL) are calculated using the following formula with weighted probabilities: EAD (amount of exposure at the time of default when realisation of collateral is included) * PD (probability of default) * LGD (loss % of exposure). The ECL is an indicator of the Company's estimate of how much less cash flow it will receive on the loan than it should under the contract.
A three-stage model is used to determine credit losses. In the first stage, the likelihood that the debtor will experience payment issues within the following 12 months is estimated. Stage 1 includes items where credit risk is estimated not to have materially increased after initial recognition or the credit risk of the item is estimated to be low. If the debtor's credit risk has materially increased after initial recognition, expected credit loss is estimated for the entire duration of the contract (stage 2). Assets in stage 3 are assets with impaired value regarding which matters have already come to light that will have a negative impact on future cash flows, including the insolvency of the counterparty.
The interest income on financial assets is presented for gross principal for financial assets in stages 1 and 2, and for net principal, i.e., after provisions, for items in stage 3.
A key component of the ECL model is the analysis of counterparties' credit risks and changes in credit risks that take place after a loan is granted. For individual loans, the Company monitors various quantitative factors, and macroeconomic trends that are estimated to be of significance in evaluating default risk. In these estimates, factors that are accessible without unreasonable expenses and effort are generally considered. In the event of a substantial increase in credit risk, receivables are classified based on the increase in the risk level of the loan receivable to stages 2 and 3.
If a loan's credit risk has increased substantially since the loan was issued, the exposure's risk level is raised to stage 2. In stage 2, the expected credit loss of the exposure or loan is estimated for the entire exercise period. The following criteria indicate that credit risk has increased substantially:
Individual loans whose values have verifiably declined are recognised in stage 3. One or several events have come to light with respect to the counterparty that will have a negative impact on future cash flows. These can include one of the following, for example:
In the Company, the application of elevated credit risk and insolvency criteria are primarily based on (in addition to the above-mentioned criteria) the delay in credit repayment, i.e., the number of days of delay. Technical past due situations are not considered in the evaluation of payment delay. A technical past due situation can be considered to have occurred if it
results from an error or system error of the Company, including failure of the payment system, delay in allocation of the payment on the customer's account, or any other similar situation. With respect to exposures, the Company applies the insolvency definition in relation to all the borrower's payment obligations, meaning that if there are defaults for one exposure, then all exposures to that debtor should be considered defaulted. The Company applies product-specific, euro-denominated thresholds to the volume of the default.
In order to evaluate the elevated credit risk associated with larger loans (business financing), the Company regularly monitors other factors that can cause credit risk to increase in addition to delayed payment, including substantial changes in the company's financial position, delays in payment of purchase invoices, and changes in external credit ratings or changes in collateral situation. For these, the Company uses the monitoring services of credit information registers, which provide alerts on defaults and changes in credit rating of credit customers. The Company reviews the situation of the credit portfolio monthly (delayed payments, negative changes in creditworthiness, notified customer defaults, collateral shortfalls and setting of additional collateral), and updates the estimated increase in credit risk for these loans, if necessary.
An impairment is recognised as a credit loss and written down in the balance sheet when the loan receivable has been sold to a third party at a discounted price, the debtor has been found insolvent in bankruptcy proceedings, it has closed operations, or the receivable has been waived in a voluntary or statutory loan arrangement.
Expected credit losses is an estimate, with weighted probabilities, of the difference between the following cash flows: contractual cash flows of the exposure – the cash flows that the bank expects to receive from a contract. The following formula is used to define the expected credit loss: ECL (expected credit loss) = PD (probability of default) * LGD (total loss when realisation of collateral is included) * EAD (amount of exposure at the time of default when realisation of collateral is included).
PD, LGD and EAD are evaluated separately for each contract and for each forthcoming year during the lifetime of each evaluated contract. These three components are multiplied together. The income received for each upcoming year (stages 2 and 3) or for only the first year (stage 1) is discounted at the time of reporting and added together. The discount rate applied in the ECL calculation is the effective interest rate of the repayment plan under the original contract.
The probability of default (PD) is the likelihood that the borrower will default on its future obligations within the following 12 months. The probability is defined separately for the subsequent years during the lifetime of the loan. For stage 2 and 3 loans, the annual probability of default is considered for the entire lifetime of the loan, while for stage 1 loans, the probability is considered only for the first year.
For consumer loans and corporate loans, the starting point for the PD percentage is defined as the proportion of non-performing loans of the loans historically issued by the company in each risk category, taking account of the payment history and the amount of time that the loan has already been repaid at the time of reporting. The PD figures are updated every six months. A high overall number of issued loans allows the PD percentage to be evaluated reliably for each risk category.
In addition, in the PD evaluation of stage 2 loans, the debtor's increased likelihood of default at the time of reporting on the basis of the debtor's payment delay at the time, taking into account all the debtor's loans and any payment arrangements that have been agreed upon, is taken into account.
The amount of exposure associated with a receivable at the time of default is defined as the unpaid principal of the receivable and the interest accrued at the time of reporting. A portion equivalent to the collateral coverage ratio of the collateral connected to the receivable is deducted from this value.
The collateral coverage ratios of the collateral of the receivable are estimated in accordance with separate guidelines on the measurement of collateral, and these are updated regularly.
Furthermore, for credit facility-type receivables, an estimate of the portion of the debtor's unused credit facility that the debtor will draw down during the following year is added to the exposure associated with the receivable. These off-balance sheet exposures and the associated credit loss provision are calculated and reported separately.
The determination of the final PD percentage also takes into account the impact of a forwardlooking macroeconomic model. In the applicable macroeconomic model, the key variable
is the unemployment rate and its development. A forecast produced by the Ministry of Economic Affairs and Employment is used as the basis for the future performance estimate. The Company evaluates macroeconomic trends and forms three scenarios based on them: a basic, negative and positive scenario. The scenarios estimate the probability with which the macroeconomic variable that correlates with the default risk of the target market performs as expected in the future. The effects of the scenarios on the PD percentage based on risk class are weighted in accordance with the Company's view.
Loss given default (LGD) determines the total loss in a payment default situation.
The most important variables that influence the calculation model with respect to LGD are the likely sale price of non-performing loans to collection agencies based on contracts that are in force with agencies, an evaluation of repayments of loans as a result of collection measures, and the payment delay on the loan at the time of reporting.
The probability of losses from stage 1 loans is defined by risk category and adjusted by the weighting of the macroeconomic scenario model. The probability of losses and the overall expected loss given default are applied to the cash flow statement of the loans for the next 12 months, which is discounted to the present value.
In stage 2, the probabilities of credit losses are first determined by risk category, after which they are adjusted by the weighting of the macroeconomic scenario model, and by the coefficient reflecting the observed increase in default risk. The probability of losses and the overall expected loss given default are applied to the loans' discounted cash flow statement for the entire exercise period.
In stage 3, the loans' probability of loss is 100 per cent. The exercise periods of nonperforming loans are evaluated and the cash flows, which are adjusted by the overall expected loss, are discounted to the present value.
The results produced by the calculation model are reported regularly in the Group's Management Team and Board of Directors. The Group's financial administration together with the Group risk management evaluates credit risks and maintains the calculation model.
A loan is recognised as an actual credit loss when it is likely that the corresponding amount will no longer be obtained. Generally, the credit losses of unsecured loans are recognised when the receivable falls due and the loan is terminated (generally when the payment delay exceeds 90 days), after which the receivable is sold to a collection agency. Alternatively, a credit loss can be recognised when the debtor is declared insolvent, for example due to filing an application for debt restructuring, or due to other circumstances on the basis of which the debtor is declared insolvent. The credit losses of secured receivables are recognised no earlier than when the collateral has been realised and allocated to the receivable. Even then, the final receivable is not necessarily recognised as a credit loss if a payment plan has been set up for it. Even though the receivable is recognised as a credit loss, the collection will still continue as post-collection. After the recognition of the credit loss of an individual loan, the loan in question is no longer included in the calculation of expected credit losses, and therefore, impairment recognition is no longer carried out on it.
On its crowdfunding and peer-to-peer lending platform, the Company applies a simplified impairment model in determining the impairment of fee receivables (accounts receivable) charged from borrowers. In the model, impairment is calculated using impairment percentages determined for individual products and markets that are tiered according to the payment delays of the accounts receivable at the time of reporting. The applicable impairment percentages reflect the Company's evaluation of the default risk posed to these accounts receivable as estimated on the basis of realised historical credit losses.
The group's income consists of net interest income, net fee and commission income, net income from investing activities and other operating income.
Interest income and expenses arising from financial assets and liabilities are essentially recorded using the effective interest method in the profit and loss account in net interest income. Fees that form a significant part of the effective interest rate on financial assets or liabilities, such as loan brokers commissions, are recognised using the effective interest method on the income statement under net interest income.
According to the nature of the service, the fees are recognised either over time or at one point in time, as a rule, on a performance basis, at one point in time, when control over the performance obligations of the services has been transferred to the customer.
Account management fees and the continuous commission for loans are recognised as income over time. In these services, the customer benefits from the service as it is produced. Fees for payment reminders are recognised as revenue at one time. A credit loss provision is applied to account management fees and fees for payment reminders because the receipt of these fees is subject to uncertainty.
The opening commissions of the loans are recognised as revenue over time and the payment obligation is fulfilled when the loan is drawn down. The amount of opening fees is small.
Additionally, the company collects other fees for additional services used by the borrower, such as changes in the repayment plan. These are charged to the borrower, as a rule, for the loan when the borrower changes the payment program or is added to the next loan repayment bill as a separate fee.
Fee expenses consist of, among other things, from external data sources utilized in the lending and loan management process and from bank charges of customer reserve accounts in the peer-to-peer lending business.
The Company practiced crowdfunding and peer-to-peer lending business until the Merger. After the merger, no new crowdfunding or peer-to-peer loans have been brokered. In the crowdfunding and peer-to-peer lending business the Company mainly acted as an agent of sold products, in which a loan investor (other party) is arranged to provide services (the loan) to the borrower (the customer). The Company also collects from the borrowers a recurring fee for peer-to-peer loans, which is formed from the difference between the interest received by the loan investor and the interest paid by the borrower (2%). This the fee is charged to the company when the borrower pays the loan interest together with the repayment of the loan capital. From the loan investor the company collects secondary market fees on the loan sold in the secondary market. The Company charges a secondary market fee from loan investors for selling loans on the secondary market. In secondary market trading, the seller of the loan pays the fee, which is deducted from the amount paid to the seller for the sale.
Recurring income from investments, valuation profit and losses and sales profit and losses are recorded as investment income. In addition, exchange rate income and expenses are recorded in this group.
Income that does not fall under the previous items is recognised as other operating income.
Intangible assets mainly consist of internally created information systems, related development work and intangible assets related to customer relationships recorded in the balance sheet in connection with business acquisitions. Intangible assets are recognised in the balance sheet at cost if their acquisition cost can be reliably measured and if it is probable that the intangible asset will produce future economic benefits. Expenses that were recognised in accordance with the requirements of IAS 38 Intangible Assets with respect to the own work portion related to IT projects were capitalised under data systems.
Intangible assets are amortised on a straight line basis over their estimated useful economic lives. Amortisation periods of intangible assets: Data systems and licence fees: 3–5 years. The Group evaluates the amortisation periods and amortisation methods at least at the end of each financial year. The amortisation is commenced when an asset is ready to be used. The unamortised acquisition cost of an asset is fully amortised in one single step if it is deemed that the intangible asset is no longer of benefit to the Group. If the benefit is deemed to have declined substantially in relation to the unamortised acquisition cost, then an impairment is recognised.
Separately acquired intangible assets are measured upon initial recognition in the accounts at acquisition cost. After the initial recognition, intangible assets are recognised at acquisition cost less accumulated amortisation and accumulated impairment losses. With the exception of capitalised development costs, internally generated intangible assets are not capitalised, and expenses related to them are reflected in profit or loss for the period in which the expenses were incurred.
The goodwill generated in business combinations is recorded in the amount by which the transferred consideration exceeds the fair value of the acquired net assets. Goodwill is tested annually and when an event or change in circumstances shows that the balance sheet value may not be recoverable. Depreciation according to the plan is not recorded on goodwill.
For impairment testing, goodwill is allocated to cash-generating units, or if it is a subsidiary, the goodwill is included in the acquisition cost of that subsidiary and the subsidiary forms a cash-generating unit. If for a cash-generating unit the amount of recorded goodwill exceeds the recoverable amount, the difference is recorded as a impairment.
Tangible assets consist mainly of ICT equipment and office furniture. Tangible assets are measured at historical cost less accumulated depreciation and any impairment. Acquisition cost includes the costs that are directly caused by the acquisition of the tangible asset in question.
Tangible assets are depreciated using the straight-line method based on their estimated useful economic lives. Depreciation times of tangible assets: Machinery and equipment: 4 years. The estimated useful lives and residual values are checked at least on the end date of each financial year. If these differ substantially from previous estimates, the depreciation periods are changed accordingly. Depreciation is discontinued when an asset is classified as for sale.
Sales profits or losses arising from the retirement of fixed assets are calculated as the difference between the selling price and the book value and are recognised through profit or loss in other operating income or costs.
In connection with the financial statements, the management reviews the impairment of tangible and intangible assets. Impairment tests require the management team's discretion and assessment of the amount of money accrued by the asset in the future, its financial useful life and used discount rate.
According to IFRS 16, a lease is a contract that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the inception of a contract and in situations in which the terms of a contract are amended, the Company evaluates whether the contract contains a lease. Fellow Bank assesses control of use on the basis of the following criteria in accordance with IFRS 16: the contract contains an identified asset in which substantially all the economic benefits from use of the identified asset are directed to Fellow Bank, and Fellow Bank has the right to direct the use of the asset. The lease term begins at the starting time specified in the lease. The date of termination of the lease is the date of termination according to the lease. If the lease is of an indefinite duration, the date of termination is evaluated on a lease-by-lease basis. The evaluation is based on the Company's strategic situation and on costs that would arise if a leased asset were replaced by another asset.
IFRS 16 contains two exemptions that facilitate recognition and measurement. Fellow Bank has elected that leases with a term of 12 months or less and right-of-use assets of a value of no more than approximately EUR 5,000 are not recognised in the balance sheet. These shortterm leases and right-of-use assets of low value are directly expensed during the lease term.
Fellow Bank's leases that are capitalised in the balance sheet are based on the Company's leased premises and parking spaces. At the starting time of the lease, right-of-use assets are measured at acquisition cost, which is based on the original nominal value of the lease liability. After the original measurement of fixed assets, fixed assets are measured at original cost less accumulated depreciation and actual impairment. Right-of-use assets are depreciated during the lease term and the depreciation is recognised as expenses in the income statement under depreciation, amortisation and impairment.
At the starting time of the lease, the original nominal value of the lease liability consists of the current value of leases payable during the lease term, discounted by the interest rate on Fellow Bank's additional credit. After the original nominal value of the lease liability is determined, lease liabilities are measured at the original nominal value less the principal portion of paid lease payments. The amount of the lease liability is reassessed if future lease payments change because of an index or price change, or as a result of an extension of the lease term, for example. If the amount of the lease liability is adjusted in conjunction with the reassessment, a corresponding adjustment will also be made to the right-of-use assets item. Interest expenses caused by the lease liability are recognised in the income statement under financial expenses.
Lease payments are discounted using the incremental borrowing rate because interest rates are not available for leases. The Group's incremental borrowing rate is determined on the basis of received financing offers and market conditions and is reviewed annually. The business premises lease agreement does not include options to extend, and any options to extend will be taken into account if the management considers it likely that they will be used.
Income taxes comprise current and deferred tax.
The current tax for the period is recognised in the income statement. Current tax is calculated for the period in accordance with the regulations of each country on the basis of the enacted tax rate. The tax liabilities or receivables that are based on the taxable profit for the period are recognised for the amount that is expected to be paid to the tax authorities or to be received from them as credit. The amount is determined using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date in countries in which the Group operates and produces taxable income.
The Group will recognise a deferred tax asset for deductible temporary differences only to the extent that it is probable that taxable income will be produced in the future against which the Group can utilise the temporary difference. The amount of the deferred tax asset and the probability that the deferred taxes can be utilised are re-evaluated at the end of each reporting period.
The undiluted earnings per share are calculated by dividing the profit for the financial year attributable to the parent company's shareholders by the average number of outstanding shares during the period.
When calculating the diluted earnings per share, the figures used in the calculation of the undiluted earnings per share are adjusted in order to take account of the after-tax impact of any items recognised through profit or loss in relation to ordinary shares, and also the weighted average number of the ordinary shares that would have also been outstanding if all dilutive potential ordinary shares had been converted into shares.
If the profit for the presented periods is negative, the earnings per share adjusted by the dilutive effect is the same as the undiluted earnings per share.
Employee benefits consist of short-term employee benefits and benefits related to termination of employment.
Short-term employment benefits such as salaries and fringe benefits, annual holidays and performance bonuses are expected to be paid in full within 12 months from the end of the accounting period during which the employees perform the relevant work. Benefits based on termination of employment consist of severance pay.
Fellow Bank has a share-based incentive program for the group's key personnel, where payments are partly share-based and partly as cash. The monetary contribution aims to cover the costs incurred by the key person from the remuneration taxes and tax-related payments. The benefits granted in the arrangement have been valued at the fair value at the time of their grant and recorded as an expense in the income statement for the period in which the employee has fulfilled the conditions. The amount to be recorded as an expense is based on an estimate of the number of the shares to which the right is expected to arise. The benefits are fully recorded as share-based program and the expense is carried forward over the entire period of the right. The expense is recognised under personnel expenses. On each reporting date, the Company revises its estimates on the amount of shares. The impact of the revision is recorded in income statement. The amount to be recorded as an expense will be adjusted later to correspond to the number of shares finally granted. The requirements of the IFRS 2 Share-based payments standard apply to the incentive system.
Equity consists of share capital, the invested unrestricted equity reserve, translation differences and retained earnings.
The drawing up of financial statements in accordance with IFRS standards requires that certain accounting assessments are made. In addition, management must use its judgement. Judgement affects the choice of accounting policies and their application, the amount
of assets, liabilities, income and expenses to be reported and the notes that must be presented. The management will exercise its judgement on the basis of estimates and assumptions that are based on earlier experience and the best view available to it on the balance sheet date concerning future performance. Estimates and decisions based on judgement are constantly monitored and they are based on actual performance and certain other factors such as expected future events that are reasonably anticipated to occur considering prevailing circumstances. Actual performance may deviate from estimates.
The accounting of expected credit loss in accordance with IFRS 9 is based on internal models that contain an assumption of a change in credit risk and probability of default. Information focusing on the future is also taken into account, as well as an evaluation of the performance of macro variables in various scenarios, and of the probability of each scenario taking place. Furthermore, in the determination of expected credit losses, management judgement is observed in the evaluation of the credit loss provisions of individual corporate loans with overdue payments, while also taking into account the business area management's analysis of the collateral coverage of the security set for loans, of the progress and situation of collection processes, as well as its overall judgement of a debtor's ability to pay.
The values of intangible assets and goodwill are regularly tested for impairment. Impairment testing requires management's judgment and assessment of the assets' futures cash flows and background assumptions.
Discretion has been applied in estimating the end dates of premise leases in order to recognise the leases in accordance with IFRS 16. Information on leases is provided in greater detail in the section Tangible assets.
On the balance sheet date, the company has no information regarding new standards or amendments that are not yet in force, and that are expected to significantly affect the Company's current or future reporting periods and foreseeable future business operations.
Fellow Bank focuses on retail banking operations and offers selected banking and financial services to both personal and business customers. Customer acquisition is based on both Fellow Bank's own and its partners digital channels. Risk management plays a key role in Fellow Bank's operations from the perspective of business management and managing changes in the operating environment. The primary risk categories are credit risk, operational risk, market risk and liquidity risk.
The Group's internal control, risks and risk management and the Pillar III disclosure requirements pursuant to Part 8 of EU Capital Requirements Regulation (575/2013), are set out in more detail in the Fellow Bank's Capital and Risk Management Report, which is published as a separate report in conjunction with the annual report.
The company's Board of Directors has primary responsibility for the Group's risk management. The Board of Directors confirms the principles and responsibilities of risk management, the Group's risk limits and other general guidelines according to which the risk management and internal control are organised.
The company's risk management is responsible for ensuring that the company's major risks are identified, evaluated, and measured and that risks are monitored and managed as part of the day-to-day management of the business areas. The company's Board of Directors regularly assesses the company's risk management strategy, risk tolerance and approach to risk-taking. The aim is to manage risks through risk assessments and measures, systematic follow-up, and analysis of the operating environment and the market. Functions that are independent of the business areas have been organised in a way that ensures efficient and comprehensive risk management and internal control as follows:
The aim of the Risk Management function is to promote systematic and proactive risk management that allows the company's business to be developed in a safe manner. In the company's organisation the Risk Management function operates directly under the supervision of the CEO and reports to the Board of Directors, the CEO and other members of the senior management.
The company's risk management is founded on the "three lines of defence" model:
The objective of Fellow Bank's capital adequacy management is to secure the sufficiency of the company's capital in relation to all material risks of its operations. In order to achieve this goal, the company identifies and evaluates all risks relevant to its operations and, based on these, measures its risk-bearing capacity to match the overall risk position. Capital adequacy management process plays a key role in defining the overall risk position. The capital adequacy management process is based on the capital requirements according to Pillar I of the solvency regulation and external risks, such as the interest rate risk of the financial balance and the business risk.
Fellow Bank continuously monitors that its equity is sufficient to cover the material risks affecting the company. Capital adequacy and operational risks are monitored by means of monthly reports in the Board of Directors and the Management Team. The reporting focuses on overall capital adequacy and Common Equity Tier 1 capital. The company's Board of Directors has confirmed an economic target of at least 16 per cent for the overall capital adequacy ratio. The aim is to ensure the sufficiency of capital also during downturns. The total capital requirement for banks consists of a minimum capital requirement of 8.0 % in accordance with Pillar I and an additional fixed capital requirement of 2.5 % in accordance with Act on the Credit Institutions. Fellow Bank Group's capital adequacy ratio was 16.8 % and the common equity Tier 1 ratio was 12.6 %, exceeding the banks' total capital requirement (10.5 %).
More detailed information on the Group's capital adequacy is available in the Board of Directors' Report and in the Capital and Risk Management Report.
The credit risk of the company's operations mostly stems from lending to its customers. Credit risk is defined as the risk of loss resulting from loan customers and other counterparties not being able to meet their contractual obligations, and from issued collateral not covering Fellow Bank's receivables.
During Fellow Bank's first year of operation, the strong growth of the credit portfolio increased the amount of credit risk, but the relative credit risk position has nevertheless remained stable. Fellow Bank's customers are both private and SME customers. After ending peer-to-peer and crowdfunding business, the company has systematically focused lending on customers with lower credit risk, in accordance with the risk appetite set by the government.
Fellow Bank has procedures and guidelines in place for identifying, measuring, managing, and monitoring credit risk. The company's credit risk management is based on the risk appetite specified in the risk management policy confirmed by the company's Board of Directors. In addition, the company's market- and product-specific risk policies specify the minimum criteria that the debtors must meet before a credit can be granted. Fellow Bank applies the standardised approach to the calculation of the credit risk.
Fellow Bank applies a definition of default in accordance with the EBA/GL/2016/07 guidelines. The definition is applied at the debtor level. Default is identified on the basis of the debtor's substantial payment delays, in accordance with the calculation of the days of delay or on the basis of the debtor's unlikeness to pay back. When the credit is overdue for more than 90 days and the debtor is considered default, the loan is placed in stage three in the ECL calculation. However, not all ECL stage three loans are necessarily default. Default means that the debtor's overdue loan obligation exceeds both the absolute and relative thresholds and is overdue for 90 consecutive days. About 2/3 of Fellow Bank's non-performing loans consist of foreign loans, and this position is diminishing. After the end of the financial year, a letter of intent has been signed for the sale of the Polish business. The goal of credit risk management is to limit the effects of risks arising from customer loans to an acceptable level.
In lending to consumer customers, the company applies statistical credit risk assessment methods (credit risk models) for assessing the expected default risk. The credit risk models assess the debtor's estimated default risk based on which the company assigns the debtors one of the five internal risk classes. In addition, the company always assesses the debtor's ability to pay back based on confirmed monthly income, loan expenses and assessment on the other expenses of the debtor's household.
In lending to businesses, the company assesses the debtor's credit risk by means of a careful credit analysis process specified in credit policies. The company uses information collected from external sources when evaluating the creditworthiness and ability to pay of business customers. Loans to business customers are monitored throughout the entire life cycle of the loan agreement. If significant changes are detected in the customer's financial situation, the customership will be taken for more detailed monitoring.
The company classifies all customers into risk classes based on the information available on the counterparty. The classification is based on the bank's internal assessment and external credit rating data. Monitoring is continuous and can lead to a transfer from one risk class to another.
The risk categories in use are defined as follows:
The unrated risk class item includes loans or proofs of claim for which the company has not determined a credit rating or for which no external credit rating is available.
| LOANPORTFOLIO BY RISKCLASSES | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Riskclass 5 | 34 592 | 823 |
| Riskclass 4 | 69 316 | 2 724 |
| Riskclass 3 | 45 486 | 2 613 |
| Riskclass 2 | 9 649 | 3 581 |
| Riskclass 1 | 4 750 | 3 165 |
| Non-performing loans | 5 211 | |
| Loanportfolio | 163 793 | 18 118 |
Risk concentrations arise or may arise, for example, when the credit portfolio contains large amounts of loans and other liabilities directly towards:
Risk concentrations are managed at Fellow Bank with the help of set limits, and these are monitored actively as part of the management's risk report. Fellow Bank's loan portfolio is focused on personal customers, mainly consisting of smaller loan amounts. With a distributed customer base, the significance of individual large customer risks is minor. At the end of the financial year, the company had one exposure, where the loan amount exceeded 10 percent of Tier 1 own funds, and which has full collateral. Loans to business customers the largest industries are construction, transport and storage, and manufacturing. Most of the business loan portfolio is sales invoice financing. Geographically, the responsibilities are divided in Fellow Bank as follows:
| EXPOSURE AND HOME COUNTRY 31.12.2022 | Amount of credit | More than 90 days past due |
|---|---|---|
| Private individuals Finland | 126 393 | 1 060 |
| Companies and entities Finland | 30 993 | 781 |
| Private individuals EU countries | 6 130 | 4 500 |
| Companies and entities EU countries | 277 | 239 |
| Total | 163 793 | 6 580 |
In recent years, Fellow Bank has not had a significant amount of active business in foreign markets. For this reason, the proportion of overdue receivables in the remaining foreign loan portfolio is significantly large. The share of the Polish loan portfolio is 3.4 million euros, of which capital credit loss reservation is 3.2 million euros. Poland's loan receivables are almost entirely included in ECL stage 3.
| EXPOSURE AND HOME COUNTRY 31.12.2021 | Amount of credit | More than 90 days past due |
|---|---|---|
| Private individuals Finland | 11 078 | 628 |
| Companies and entities Finland | 1 874 | 438 |
| Private individuals EU countries | 4 895 | 4 141 |
| Companies and entities EU countries | 181 | 0 |
| Total | 18 118 | 5 207 |
An operating model for monitoring the loans of customers with payment delays is outlined in the company's credit policy guidelines. Overdue loans refer to commitments for which repayment of the loan capital is overdue by more than 15 days.
In the event of payment delays by consumer customers, the company aims to assist customers to prevent financial difficulties. Consumer customers may be offered payment holidays and changes to the repayment schedule.
In lending to businesses, the aim is to find solutions well before the customer's possible financial difficulties affect their ability to repay the loan. Lending is guided by a policy on credit risk management and credit risk strategy.
The company regularly monitors overdue loans and reports them to the company's management and Board of Directors. Such loan receivables are also monitored if the customer has significant financial difficulties in fulfilling the repayment. The purpose of monitoring is to detect overdue loans or loans that become problem loans as early as possible.
Loans granted by Fellow Bank to personal customers are almost always unsecured. The credit risk of business lending is managed using collateral and guarantees. Guarantees are applied to exposures in order to secure repayment. In business lending, risk is often hedged by agreeing on a personal guarantee with the customer. The key features of the practices and processes for the assessment and management of eligible collateral are set out in the business lending credit policy guidelines. The collateral received is presented in the group's note K30.
The calculation of expected credit losses, i.e. the ECL calculation (Expected Credit Loss) is applied in the company to financial assets valued at amortized cost, of which the most significant item is loans receivable from customers. The calculation of expected credit losses is carried out monthly at the loan level. In the ECL calculation, the expected credit loss is calculated for each loan on a monthly basis based on the probability of default (PD) and the amount of loss caused by default (LGD).
When assessing whether the credit risk related to loan receivables has increased significantly, the change in the risk of defaults occurring during the expected validity period of the financial asset is examined. When making this assessment, the risk of default on the financial asset on the reporting date and the risk of default on the financial asset at the time the loan is granted are compared. A significant increase in credit risk leads to the transfer of the loan from stage 1 to stage 2. A significant increase in credit risk can be caused, for example, by a delay in payments by the borrower for more than 30 days, for reasons other than technical reasons, or changes in the counterparty's financial position, such as a substantial deterioration of creditworthiness and financial position.
Loans are recorded to stage 3 if the credit risk has significantly and provably increased. If there are one or more events that have occurred on the customer side, that will affect future cash flows negatively. These events can be for example:
If the customer has clear indications of uncertainty about repayment, the credit can be transferred directly from stage 1 to stage 3 on a discretionary basis.
The following tables present the company's loan portfolio by market and customer segment and by risk class. Risk class 5 represents the lowest default risk, risk class 1 the highest.
| EXPOSURE TO CREDITRISK BY RISK CLASS |
STAGE 1 | STAGE 2 | STAGE 3 | TOTAL LOAN RECEIVABLES |
|---|---|---|---|---|
| Risk class 5 | 33 823 | 109 | 660 | 34 592 |
| Risk class 4 | 65 375 | 1 614 | 2 327 | 69 316 |
| Risk class 3 | 41 864 | 1 672 | 1 950 | 45 486 |
| Risk class 2 | 7 168 | 591 | 1 890 | 9 649 |
| Risk class 1 | 2 816 | 261 | 1 673 | 4 750 |
| Loan portfolio | 151 045 | 4 248 | 8 500 | 163 793 |
| Expected credit losses | -1 825 | -1 673 | -5 639 | -9 137 |
| Claims on the public and | ||||
| public sector entities | 149 221 | 2 575 | 2 861 | 154 656 |
| EXPOSURE TO CREDIT RISK BY RISK CLASS (31.12.2021) |
STAGE 1 | STAGE 2 | STAGE 3 | TOTAL LOANS RECEIVABLE |
| Risk class 5 | 782 | 42 | 823 | |
| Risk class 4 | 2 603 | 121 | 2 724 | |
| Risk class 3 | 2 425 | 187 | 2 613 |
Risk class 2 3 279 302 3 581 Risk class 1 2 944 222 3 165 Non-performing loans 5 211 5 211 Gross carrying amount 12 032 874 5 211 18 118 ECL reservation -347 -200 -4 160 -4 708 Net book value 11 685 674 1 051 13 409
The calculation of expected credit losses is described in further detail in note K1 to the financial statements, Accounting policies of the consolidated financial statements. More information on the distribution of the credit loss provision and of the different stages of credit risks is provided in note 11, Impairment of receivables.
Liquidity risk can be defined as a lack of balance in incoming and outgoing cash flows. The risk may materialise if the company is unable to meet its payment obligations as they fall due. The company's main liquidity risks arise from the maturity mismatch between borrowing and lending.
Fellow Bank's liquidity risk management is based on its ability to gain enough competitively priced money for the short and long term. An important part of managing liquidity risk is planning a liquidity position for both the short and long term. Furthermore, establishing a liquidity reserve will prepare for market downturns and possible legislative changes. The company's liquidity reserve target is to cover at least the projected net outflows in a stressed scenario in which deposits flow out. The table below presents the company's contractual payments for financial assets and liabilities. The cash flows include capital and contractual interest. Liquidity risk management is supported by active risk management, balance sheet and cash flow monitoring and internal accounting models. In order to be able to manage its outgoing cash flows, it is crucial that the company continuously manages its liquidity situation.
Sufficient liquidity is ensured by the limit set by the company's Board of Directors to the company's cash assets. Liquidity adequacy is monitored and managed with the help of indicators such as: financing maturity differences, deposit outflow, LCR and NSFR ratios, and increase in financing costs. Liquidity indicators are monitored continuously and reported at least monthly to the management team and the Board of Directors as part of risk reporting. The company prepares for the repayment of future debts by limiting new lending in the upcoming years as necessary, thereby ensuring its liquidity position. The company's liquidity remained stable during 2022.
Monitoring and forecasting changes in market factors and market developments also play an important role in the company's liquidity risk management. If forecasts indicate a decline in market liquidity, the company may set stricter internal limits for liquidity risk management. Liquidity management also includes liquidity reserve management. This ensures that the company has sufficient liquid securities available to cover the collateral needs of its various business areas. Currently, Fellow Bank has no derivative exposures or collateral requirements.
| 31.12.2022 | LESS THAN 3 MONTHS |
3-12 MONTHS |
1-5 YEARS |
5-10 YEARS |
YLI 10 YEARS |
TOTAL |
|---|---|---|---|---|---|---|
| Assets | ||||||
| Cash and cash equivalents | 120 528 | 120 528 | ||||
| Claims on credit institutions | 5 941 | 5 941 | ||||
| Claims on the public and | ||||||
| public sector entities | 34 233 | 7 044 | 61 683 | 46 831 | 14 002 | 163 793 |
| Liabilities | ||||||
| Liabilities to the public and | ||||||
| public sector entities | 197 863 | 19 335 | 31 059 | 0 | 0 | 248 257 |
| Lease liabilities | 111 | 111 | ||||
| Off-balance sheet | ||||||
| commitments | 1 455 | 1 455 | ||||
| 31.12.2022 | LESS THAN 3 MONTHS |
3-12 MONTHS |
1-5 YEARS |
5-10 YEARS |
YLI 10 YEARS |
TOTAL |
| Assets | ||||||
| Cash and cash equivalents | 0 | 0 | ||||
| Claims on credit institutions | 3 457 | 3 457 | ||||
| Claims on the public and | ||||||
| public sector entities | 9 987 | 4 717 | 7 843 | 2 096 | 35 | 24 677 |
| Liabilities | ||||||
| Liabilities to the public and | ||||||
| public sector entities | 810 | 8 131 | 0 | 0 | 0 | 8 941 |
| Lease liabilities | 29 | 88 | 119 | 236 | ||
| Off-balance sheet | ||||||
| commitments | 1 912 | 1 912 |
Liquidity risk is measured by a liquidity buffer ratio (liquidity coverage ratio, LCR) and a minimum long-term funding requirement (net stable funding ratio, NSFR). In addition, the development of the liquidity indicators, such as the amount of deposits, the cost of financing and maturity differences, is monitored. The Group's liquidity coverage ratio (LCR) was at a good level, and was 370% at the end of 2022. The net stable funding ratio (NSFR) was 188,3 % in 2022. The company's internal risk limit for the LCR and NSFR indicators is 130%. The statutory limit is 100%. Over the past year, the LCR and NSFR indicators have followed a steady and predictable trend.
Market risk consists of interest rate risk on the financial account and foreign exchange risk. The financial balance consists of on- and off-balance-sheet items related to lending and borrowing, as well as a liquidity reserve.
Fellow Bank does not trade in shares for trading purposes. No sensitivity analysis of the equity price risk has been presented as it does not have a material effect on the Group's financial position.
Currency risks are maintained at a moderate level to prevent exchange rate fluctuations from causing significant financial losses. The largest currency positions on 31 December 2022 were: PLN (Polish zloty) EUR 0,2 m SEK (Swedish krona) EUR 0,4 m and DKK (Danish krone) EUR 0,9 m A fall of -10% in the exchange rates would cause a valuation loss of EUR 0,15 m.
The exchange rate of the currencies above correlates closely with the exchange rate of the euro, which reduces the risk. Altogether 99% of the loan portfolio was in euros. Other items in the balance sheet do not cause material exchange rate risks to the company.
The company's interest rate risk consists mainly of the interest rate risk on the financial account. Interest rate risk is caused by differences in the interest rates and maturities of assets and liabilities. In addition, market interest rates affect the market prices of securities in the portfolio. At the end of the financial year, the company has no securities in the investment portfolio whose valuation could be affected by changes in market interest rates.
The company aims to balance the interest bases of receivables and payables and to reduce unforeseen fluctuations in the interest margin. The pricing of borrowing and lending is a key issue for the development of the company's interest margin. The company currently has fixed-rate loans for less than half of its loan portfolio, and the share is constantly decreasing. New lending is mainly with variable interest rates and tied to the 3-month Euribor.
The amount of interest rate risk is regularly reported to the management team and the Board of Directors. Interest rate risk is monitored and measured regularly by means of interest rate risk limits set by the Board of Directors and by assessing the effects of interest rate shocks on the economic value of equity and net interest income. In the situation at the end of the financial year on 31.12.2022, the sensitivity of the interest rate risk relative to own funds was as follows: If the interest rate level were to rise by two percentage points, the economic value of the company's own funds would increase by 5.7 per cent due to the positive profit development. If interest rates were to fall by two percentage points, the economic value of own funds would fall by 4.7 per cent. The table below shows the standard scenarios determined by the European Banking Authority (EBA) on interest rate risk change sensitivities.
| INTEREST RATE SENSITIVITY ANALYSIS | 31.12.2022 |
|---|---|
| All rates rise by 200 b.p. | 1 336 |
| All rate decline by 200 b.p. | -1 116 |
| Short term rates decline by 250 b.p. and long-term rates decline by 100 b.p. | -9 |
| Short term rates rase by 250 b.p. and long-term rates decline by 100 b.p. | 224 |
| Short term rates rase by 250 b.p | 603 |
| Short term rates decline by 250 b.p | -403 |
A more detailed discussion on the disclosure requirements for interest rate risk (Pillar III) is available in the Group's Capital and Risk Management Report.
Operational risks mean a direct or indirect danger of financial loss that is caused by insufficient or failed internal processes, systems, personnel or external factors. Operational risks also include legal risks and compliance and data security risks.
The Board of Directors adopts the principles for the management of operational risks on an annual basis. In operational risk management, the company's main objective is to manage reputational risk and ensure business continuity and regulatory compliance in the short and long term. Operational risk management ensures that the company's values and strategy
are implemented throughout the business operations. Operational risk management covers all material risks related to the business.
Operational risk management is applied in all the business units of the company by identifying, measuring, monitoring, and assessing the operational risks associated with each unit. Business units also assess the likelihood of risks and their impacts if they materialise. The company-wide process enables management to assess the potential loss arising from operational risk in the event of a risk materialising.
As part of its operational risk management, the company aims to reduce the likelihood of operational risk events through internal guidelines and staff training. Each employee is responsible for managing operational risk in their own duties. Any operational risks that have materialised are reported to the management of the business unit.
New products, services and suppliers of outsourced services are separately approved through the company's formalised approval process before they are introduced. The approval process ensures that the risks associated with new products and services are appropriately identified and assessed. The same approval process will also apply when existing products are developed.
Operational risks are monitored, managed, and reported in the company's risk management. At least annually, the company's management receives the risk assessments of the business units and a report on the materialised risks, which are used to compile a separate report to the Board of Directors. The process created will enable the Board of Directors to gain an overview of the operational risks faced by the business and their potential impact on the company.
As a new Finnish digital bank, Fellow Bank is part of the Finnish financial sector. The financial sector plays an important role in building the economic and social stability of society, as well as taking into account climate and environmental issues in banking and financial operations.
Fellow Bank has high standards when conducting its business. Fellow Bank requires its business units and personnel to have a good understanding of compliance with applicable laws, regulations and standards in all markets and jurisdictions and strictly follows them, in which Fellow Bank operates.
For Fellow Bank, the well-being and commitment of the personnel are in a key position. We measure employee satisfaction regularly and actively make improvements based on the results. Our work community is equal, we do not accept discrimination in any form. We are committed to promoting equality and non-discrimination in all activities.
Customer satisfaction is in a key position, and Fellow Bank strives to communicate clearly and understandable to its customers. In personal and business customer lending, the aim is to find suitable solutions together with customers in the event of financial difficulties. Fellow Bank aims to ensure that customers' ability to pay is maintained by offering changes to the payment program or other necessary flexibility for loan repayment.
| Adjusted | |||
|---|---|---|---|
| GK3. NET INTEREST INCOME | 2022 | 2021 | |
| Interest income | |||
| Receivables from credit institutions | 480 | 0 | |
| Claims on the public and public sector entities | 10 622 | 3 244 | |
| Other interest income | 0 | 171 | |
| Total interest income using the effective interest | |||
| method | 11 101 | 3 415 | |
| Interest expenses | |||
| Liabilities to credit institutions | -219 | 0 | |
| Liabilities to the public and public sector entities | -1 520 | -291 | |
| Debt securities issued to the public | -283 | -456 | |
| Other interest expenses | -25 | -18 | |
| Interest expenses, total | -2 048 | -766 | |
| Net interest income | 9 053 | 2 650 | |
| GK4. FEE AND COMMISSION INCOME AND EXPENSES | 2022 | Adjusted 2021 |
|---|---|---|
| Fee and commission income | ||
| Lending | 1 615 | 0 |
| Peer to peer lending | 2 161 | 7 443 |
| Other fee and commission income | 108 | 0 |
| Fee and commission income, total | 3 885 | 7 443 |
| Fee and commission expenses Lending Peer to peer lending |
2022 -1 024 -1 108 |
Adjusted 2021 0 -2 946 |
| Other fee and commission expenses | -242 | 0 |
| Fee and commission expenses, total | -2 374 | -2 946 |
| Timing of revenue recognition | 2022 | Adjusted 2021 |
| At a point of time | 1 062 | 1 039 |
| Over time | 2 822 | 6 404 |
| Total | 3 885 | 7 443 |
| Governance | |||
|---|---|---|---|
| GK5. NET INVESTMENT INCOME | 2022 | Adjusted 2021 |
|---|---|---|
| Financial assets held for trading | 0 | 0 |
| Financial assets at fair value through profit or loss | -118 | 0 |
| Exchange rates losses | -232 | 0 |
| Net investment income, total | -349 | 0 |
| 2022 | |||
|---|---|---|---|
| Net investment income from securities | Gains and | Changes in fair | |
| transactions by instrument | losses on sales | value | Total |
| Debt securities | |||
| Shares and derivative contracts | -118 | 0 | -118 |
| Net income from securities transactions, total | -118 | 0 | -118 |
| Exchange rates losses | -232 | 0 | -232 |
| Net investemt income, total | -349 | 0 | -349 |
| Adjusted 2021 |
|||
|---|---|---|---|
| Net investment income from securities | Gains and | Changes in fair | |
| transactions by instrument | losses on sales | value | Total |
| Debt securities | 0 | ||
| Shares and derivative contracts | 0 | ||
| Net income from securities transactions, total | 0 | ||
| Exchange rates losses | 0 | ||
| Net investment income, total | 0 |
| Adjusted | ||
|---|---|---|
| G6. OTHER OPERATING INCOME | 2022 | 2021 |
| Allowance received | 0 | 41 |
| Other income | 24 | 0 |
| Other operating income total | 24 | 41 |
| Adjusted | ||
|---|---|---|
| G7. PERSONNEL EXPENSES | 2022 | 2021 |
| Salaries and fees | -4 468 | -2 733 |
| Pension expenses | -624 | -411 |
| Other social security costs | -235 | -160 |
| Share based payments | -51 | -165 |
| Activation of personnel costs | -0 | 221 |
| Personnel expenses total | -5 378 | -3 248 |
| Number of personnel during the period, average | 80 | 66 | |
|---|---|---|---|
| -- | ------------------------------------------------ | ---- | ---- |
| Board fees | 2022 | Adjusted 2021 |
|---|---|---|
| Markku Pohjola | -40 | |
| Fellow Bank Plc, Chairman of the Board, beginning 2 April 2022 | ||
| Karri Haaparinne | -8 | -8 |
| Fellow Finance Plc, Member of the Board until 1 April 2022 | ||
| Lea Keinänen | -27 | |
| Fellow Bank Plc, Member of the Board beginning 2 April 2022 | ||
| Kai Myllyneva | -37 | -25 |
| Fellow Finance Plc, Member of the Board until 1 April 2022 | ||
| Fellow Bank Plc, Member of the Board beginning 2 April 2022 | ||
| Jorma Pirinen | -29 | |
| Fellow Bank Plc, Member of the Board beginning 2 April 2022 | ||
| Teuvo Salminen | -32 | |
| Fellow Bank Plc, Member of the Board, vice-chairman of the Board | ||
| beginning 2 April 2022 | ||
| Michael Schönach | -8 | -8 |
| Fellow Bank Plc, Member of the Board, vice-chairman of the | ||
| Board beginning 2 April 2022 | ||
| Harri Tilev | -8 | -18 |
| Fellow Finance Plc, Member of the Board until 1 April 2022 | ||
| Tero Weckroth | -35 | -8 |
| Fellow Finance Plc, Member of the Board until 1 April 2022 | ||
| Fellow Bank Plc, Member of the Board beginning 2 April 2022 | ||
| Board fees total | -223 | -65 |
| Adjusted | ||
| CEO salaries and fees | 2022 | 2021 |
| Salaries and fees | -125 | -190 |
| Share based payments | 0 | 0 |
| CEO salaries and fees total | -125 | -190 |
| Adjusted | ||
| Executive group salaries and fees | 2022 | 2021 |
| Salaries and fees | -573 | -545 |
| Share based payments | -33 | -81 |
| Executive group salaries and fees total | -606 | -625 |
shares, which support Fellow Bank's strategy.
The board of Fellow Bank Plc has decided on the share-based plan for the group's key personnel from the incentive system, to which the group has applied IFRS 2 Share-based payments standard requirements in the accounting period. The new share bonus system replaces the Fellow Finance option programs in use before the merger, Option Program 2019 and Option Program 2020.
The old option programs were terminated. The target group of the share bonus system includes around 14 key person including members of the management team. The purpose is to combine the goals of the owners, management and personnel to increase the company's value in the long term, as well as to commit participants to the company and offer them competitive incentive systems based on earning and accumulating company
The valuation-based share bonus system 2022 has one earning period that started on July 4,
2022 and ends on March 31, 2024. In the system, it is possible for the target group to earn a share bonus based on the increase in the value of Fellow Bank Plc's shares. One share unit entitles one share to an increase in value. The share units are divided into classes 2022A (approx. 650,000 units) and 2022B (approx. 2,500,000 units). The increase in the value of the share is measured from the starting level of 1.27 euros (2022A) and 0.63 euros (2022B).
The increase in the value of the share units will be converted into Fellow Bank shares after the end of the earning period, and any bonuses will be paid deferred in accordance with the financial industry legislation after the end of the earning period in two equal installments, in April 2025 and April 2026. The payment of the bonus installments is followed by a one-year waiting period, during which the key person cannot hand over the shares paid as a bonus.
The rewards are paid partly in Fellow Bank Plc shares and partly in cash. The monetary shares of the rewards cover the taxes and statutory social insurance contributions incurred by the participants. If the participant's employment or management contract ends before the bonus is paid, the bonus is generally not paid.
expense in their entirety when they ended.
| 31.12.2022 | 31.12.2022 | 31.12.2021 | 31.12.2021 | ||
|---|---|---|---|---|---|
| PROGRAM | Share bonus system 2022 A |
Share bonus system 2022 B |
Option program 2019 | Option program 2020 | |
| TYPE | Share unit | Share unit | Option | Option | |
| Grant date | 4.7.2022 | 4.7.2022 | 19.6.2019 | 20.10.2020 | |
| Maximum contractual life | 31.3.2024 | 31.3.2024 | 28.2.2023 | 1.5.2025 | |
| Remaining contractual life, years | 1,3 | 1,3 | 1,2 | 3,5 | |
| Number of persons at the end of the reporting year | 5 | 10 | 9 | 13 | |
| Determination of fair value | |||||
| 2022 | 2021 | ||||
| Number of options at the beginning of the financial year | 408 073 | 455 110 | Share units are valued at fair value at the time of their grant. The fair value of the 2022 A stock reward system at the time of grant is 0.00/share unit and |
||
| Changes during the period | the fair value of the 2022 B stock reward system at the time of grant is 0.04/ | ||||
| Granted | 2 772 553 | 28 630 | share unit. The fair value of the granted share units has been determined | ||
| Forfeited | -329 378 | -75 667 | on the grant date using the Black&Scholes pricing model, applying the | ||
| Exercised | 0 | 0 | historical volatility of share prices of industry benchmarks (41.3%) and other | ||
| Number of options at the end of the financial year | 2 851 248 | 408 073 | parameters in accordance with the terms of the option program. | ||
| Effect of Share-based Incentives on the result and | Adjusted | Option programs during Fellow Finance | |||
| financial position during the year | 2022 | 2021 | |||
| Expenses for the financial year, share based payments, | The board of directors decided on the incentive system to replace the option | ||||
| equity settled | -51 | -165 | programs from the time of Fellow Finance, which ended prematurely before | ||
| the merger was implemented. The old option programs were recorded as an |
| 2022 | Adjusted 2021 |
|---|---|
| -226 | |
| -1 464 | -538 |
| -21 | 0 |
| -18 | -16 |
| -11 | -4 |
| -215 | -157 |
| -131 | -80 |
| -75 | -14 |
| -2 339 | -1 510 |
| -3 | -101 |
| -4 487 | -2 646 |
| -208 |
| Adjusted | ||
|---|---|---|
| Fees paid to the audit firm | 2022 | 2021 |
| Audit | -156 | -20 |
| Assignments referred to in section 1 subsection 1 section | ||
| 2 of the Audit Act | -70 | 0 |
| Other services | -11 | 0 |
| Fees paid to the audit firm total | -237 | -20 |
| Adjusted | ||
|---|---|---|
| G9. DEPRECIATION AND IMPAIRMENT | 2022 | 2021 |
| Intangible assets | -541 | -338 |
| Tangible assets | -32 | -42 |
| Right to use assets | -119 | -115 |
| Depreciation and impairment total | -691 | -495 |
The group has not experienced any depreciation of fixed assets realized during the accounting period.
| Adjusted | ||
|---|---|---|
| G10: OTHER OPERATING EXPENSES | 2022 | 2021 |
| Authorities expenses | -369 | -15 |
| Rent expenses | -108 | -63 |
| Other operating expenses | -568 | -196 |
| Other operating expenses total | -1 046 | -274 |
| Adjusted | ||
| G11. REALIZED AND EXPECTED CREDIT LOSSES | 2022 | 2021 |
| Realized credit losses on receivables | ||
| Realized credit losses on loans granted during the | ||
| financial year | -377 | -98 |
| Realized credit losses on loans granted before the | ||
| beginning of the financial year | -3 562 | -1 285 |
| Realized credit losses on receivables total | -3 939 | -1 383 |
| Expected credit losses change | -4 382 | -606 |
| Realized and expected credit losses total | -8 321 | -1 989 |
Credit losses increased due to the comparison period due to both the strong growth of the credit portfolio and corporate loans that were stated to be defaulted, for which expected the provision for existing credit losses had already been increased significantly. The company has systematically targeted lending towards customers with a lower credit risk.
Expected credit losses include both receivables from customers and off-balance sheet commitments. The increase in expected credit losses was mainly the result of a strong increase in the loan portfolio. Fellow Bank has purchased a peer-to-peer loan portfolio for its own balance sheet, where expected credit loss is recorded. In the comparison period, the credit loss was only recorded from the loan portfolio of Lainaamo Oy, a member of the Fellow Finance group.
The following reconciliations describe transitions and changes in expected credit losses per financial instrument category during the financial year.
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Loan receivables from customers 1.1.2022 | 12 032 | 874 | 5 211 | 18 118 |
| Transfers from stage 1 to stage 2 | -4 987 | 4 524 | 0 | -462 |
| Transfers from stage 1 to stage 3 | -1 353 | 0 | 1 257 | -97 |
| Transfers from stage 2 to stage 1 | 1 018 | -1 165 | 0 | -148 |
| Transfers from stage 2 to stage 3 | 0 | -298 | 280 | -18 |
| Transfers from stage 3 to stage 1 | 65 | 0 | -77 | -12 |
| Transfers from stage 3 to stage 2 | 0 | 9 | -11 | -2 |
| Increases due to origination and acquisition | 359 254 | 3 007 | 1 666 | 363 926 |
| Decreases due to derecognition | -209 943 | -1 117 | -288 | -211 349 |
| Decreases in the allowance account due to write-offs | -3 119 | -1 586 | -1 458 | -6 163 |
| Loan receivables from customers 31.12.2022 | 152 965 | 4 248 | 6 580 | 163 793 |
The credit portfolio grew strongly during the financial year both through the granting of new loans and the purchase of peer-to-peer loan portfolios. A small part of the purchased peer-topeer loans is recorded directly to steps 2-3. Additions due to original issuance and acquisition and deductions due to derecognition also include sales invoice financing quickly changes in the revolving loan stock.
A significant part of phase 3 loan receivables is related to foreign business operations. The amount of Poland's credit portfolio is EUR 3.4 million, of which EUR 3.2 million has been provisioned for bad debts. Poland's loan receivables are almost entirely included in phase 3.
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| Loan receivables from customers 1.1.2021 | 20 189 | 1 640 | 4 381 | 26 210 |
| Transfers from stage 1 to stage 2 | -695 | 553 | -142 | |
| Transfers from stage 1 to stage 3 | -672 | 611 | -60 | |
| Transfers from stage 2 to stage 1 | 173 | -339 | -166 | |
| Transfers from stage 2 to stage 3 | -394 | 366 | -28 | |
| Transfers from stage 3 to stage 1 | 18 | -79 | -61 | |
| Transfers from stage 3 to stage 2 | 5 | -7 | -2 | |
| Increases due to origination and acquisition | 11 338 | 316 | 4 235 | 15 889 |
| Decreases due to derecognition | -17 271 | -250 | -3 767 | -21 289 |
| Decreases in the allowance account due to write-offs | -1 049 | -658 | -528 | -2 235 |
| Loan receivables from customers 31.12.2021 | 12 032 | 874 | 5 211 | 18 118 |
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| ECL-reservation 1.1.2022 | 347 | 200 | 4 160 | 4 708 |
| Transfers from stage 1 to stage 2 | -139 | 905 | 767 | |
| Transfers from stage 1 to stage 3 | -146 | 827 | 681 | |
| Transfers from stage 2 to stage 1 | 9 | -169 | -160 | |
| Transfers from stage 2 to stage 3 | -86 | 185 | 99 | |
| Transfers from stage 3 to stage 1 | 0 | -51 | -50 | |
| Transfers from stage 3 to stage 2 | 1 | -7 | -7 | |
| Increases due to origination and acquisition | 3 108 | 668 | 1 304 | 5 080 |
| Changes in the ECL calculation model | 76 | 195 | 312 | 583 |
| Changes in credit risk | -409 | 373 | 495 | 458 |
| Decreases due to derecognition | -960 | -7 | -477 | -1 444 |
| Decreases in the allowance account due to write-offs | -63 | -406 | -1 110 | -1 579 |
| ECL-reservation 31.12.2022 | 1 825 | 1 673 | 5 639 | 9 137 |
The following tables describe the transfers and changes in expected credit losses during the review period. The tables show a reconciliation between the opening and closing balances of the loss deduction.
The growth of the credit base, both through the granting of new loans and the purchase of peer-to-peer loan portfolios, increased expected credit losses.
The update of the calculation model and parameters increased the amount of expected credit losses during the financial period by a total of 0.6 million euros. Model and parameter changes require management discretion. As a result of the changes, the calculation of expected credit losses will take into account the ever more strongly weakening economic cycle, as well as the level of prices and interest rates the expected impact of the increase on customers' ability to pay.
| Stage 1 | Stage 2 | Stage 3 | Total | |
|---|---|---|---|---|
| ECL-reservation 1.1.2021 Adjusted | 607 | 396 | 3 156 | 4 159 |
| Transfers from stage 1 to stage 2 | -25 | 131 | 106 | |
| Transfers from stage 1 to stage 3 | -30 | 416 | 386 | |
| Transfers from stage 2 to stage 1 | 2 | -65 | -63 | |
| Transfers from stage 2 to stage 3 | -125 | 276 | 150 | |
| Transfers from stage 3 to stage 1 | -51 | -51 | ||
| Transfers from stage 3 to stage 2 | 0 | 2 | -4 | -2 |
| Increases due to origination and acquisition | 83 | 42 | 277 | 401 |
| Changes due to credit risk during the stage (net) and decreases due to derecognition | -253 | -6 | 401 | 141 |
| Decreases in the allowance account due to write-offs | -37 | -174 | -309 | -520 |
| ECL-reservation 31.12.2021 | 347 | 201 | 4 162 | 4 707 |
The following table presents the company´s reporting period and comparison period macroeconomic model scenarios applied in the Company's ECL calculation, and the probabilities observed in the scenario weightings. The macroeconomic model applied by the Company is based on the trend in the gross domestic product rate.
| Gross domestic product % | ||||||
|---|---|---|---|---|---|---|
| MACROECONOMIC DEVELOPMENT SCENARIOS | Scenario weightings | 2022 | 2023 | 2024 | 2025 | 2026 |
| Positive | 20,00 % | 2,6 | 2,5 | 3,1 | 3,3 | 3,4 |
| Basic scenario (TEM) | 60,00 % | 2,1 | 0,5 | 1,1 | 1,3 | 1,4 |
| Negative | 20,00 % | 1,6 | 1,5 | 0,9 | 0,7 | 0,7 |
In its negative scenario the Company has anticipated a situation in which the war in Ukraine is still having a significantly negative impact on macroeconomic performance during 2023 and 2024, also reflecting the gross domestic product rate. However, the Company anticipates that the likelihood of this development is relatively small.
The table presents the sensitivity analysis of the ECL credit loss provision based on different scenarios.
| Adjusted | ||
|---|---|---|
| EXPECTED CREDIT LOSSES IN DIFFERENT SCENARIOS | 2022 | 2021 |
| Positive | 9 105 | 3 480 |
| Basic scenario (TEM) | 9 137 | 3 483 |
| Negative | 9 170 | 3 487 |
| K12. INCOME TAXES | 2022 | Adjusted 2021 |
|---|---|---|
| Income taxes | -13 | -200 |
| Deferred tax receivables | -888 | 100 |
| Taxes for previous period | 0 | -1 |
| Income taxes total | -901 | -101 |
| Tax rate reconcilation | 2022 | Adjusted 2021 |
|---|---|---|
| Result before taxes | -9 684 | -1 464 |
| Tax calculated at parent's tax rate of 20% | 1 937 | -293 |
| Tax for previous years | 0 | -1 |
| Effect on different tax rates in foreign subsidiaries | -51 | 96 |
| Non-deductible expenses | -11 | 0 |
| Change in deferred taxes from previous financial periods | -925 | 0 |
| Unrecognized deferred tax assets for losses | -1 937 | 0 |
| Other tax items | 86 | 97 |
| Taxes on income statement | -901 | -101 |
| DEFERRED TAXES | 1.1.2022 | Recognised in profit or loss |
31.12.2022 |
|---|---|---|---|
| Leases | 1 | 1 | 2 |
| Share-based payments | 68 | 10 | 78 |
| Expected credit losses | 925 | -925 | 0 |
| Other adjustments | 38 | 13 | 51 |
| Deferred taxes total | 1 032 | -901 | 129 |
| Adjusted 1.1.2021 |
Recognised in profit or loss |
Adjusted 31.12.2021 |
|
|---|---|---|---|
| Leases | 1 | 0 | 1 |
| Share-based payments | 35 | 33 | 68 |
| Expected credit losses | 832 | 93 | 925 |
| Other adjustments | 64 | -27 | 38 |
| Deferred taxes total | 932 | 100 | 1 032 |
Fellow Bank's fiscal status changed as part of the merger that took effect on April 2, 2022, which means that the company operates under a credit institution license. Before the merger took effect, the company operated under a payment institution license.
With the change, the provisions related to the company's credit losses are directly deductible in the company's taxation, taking into account the maximum amount set by law for deductible expenses related to the provision recorded. As a result of obtaining a credit institution license, the company's accounting does not create a temporary difference between accounting and taxation regarding the provision for credit losses. As a result of the change, the deferred tax receivables recorded in previous financial periods related to credit losses have also been written off during the 2022 financial year, as a result of which the group will report a tax expense for the financial year despite the loss.
The cumulative losses of the Fellow Bank Group, including the losses confirmed in the taxation of the previous fiscal years of the group companies and the estimated fiscal losses for the past fiscal year, are a total of 9,194,61.51 euros at the time of preparing the financial statements, and their average expiration period is 10 years. The group has not recorded a deferred tax asset for its cumulative confirmed losses.
| G13: EARNINGS PER SHARE | 2022 | 2021 (Adjusted) |
|---|---|---|
| Profit attributable to the shareholders of the parent | -10 585 | -1 564 |
| Weighted avarage number of the shares* | 77 009 574 | 43 041 750 |
| Share and option rights for share-based incentive | ||
| programs** | 2 851 248 | 0 |
| Earnings per share, basic | -0,14 | -0,04 |
| Earnings per share, diluted | -0,14 | -0,04 |
* The weighted average of the following numbers of shares has been calculated in earnings per share:
1) The number of shares in Fellow Finance at the time of the merger multiplied by the exchange ratio (6), and
2) The number of Fellow Bank's outstanding shares at the time of reporting. The EPS of the comparison period has been adjusted accordingly.
** Share-based incentive plans have no diluting effect when the company's result is lossmaking.
The undiluted earnings per share are calculated by dividing the profit for the financial period attributable to the parent company's shareholders by the average number of outstanding shares during the period. When calculating the diluted earnings per share, the figures used in the calculation of the undiluted earnings per share are adjusted in order to take account of the after-tax impact of any items recognised through profit or loss in relation to ordinary shares, and also the weighted average number of the ordinary shares that would have also been outstanding if all dilutive potential ordinary shares had been converted into shares.
| AND LIABILITIES AND FAIR VALUES | 31.12.2022 | |||
|---|---|---|---|---|
| Measured at | Value | |||
| Assets | Amortised cost | Total | fair value | hierarchies |
| Cash and cash equivalents | 120 528 | 120 528 | 120 528 | 3 |
| Claims on credit institutions Claims on the public and public sector |
5 941 | 5 941 | 5 941 | 3 |
| entities | 154 656 | 154 656 | 154 656 | 3 |
| Classes of financial assets and | ||||
| liabilities and fair values total | 281 125 | 281 125 | 281 125 |
| Liabilities | Amortised cost | Total | Measured at fair value |
Value hierarchies |
|---|---|---|---|---|
| Liabilities to the public and public sector | ||||
| entities | 246 810 | 246 810 | 246 810 | 3 |
| Debt securities issued to the public | 0 | 0 | 0 | 3 |
| Subordinated liabilities | 6 203 | 6 203 | 6 203 | 3 |
| Total | 253 013 | 253 013 | 253 013 |
| Adjusted 31.12.2021 |
||||
|---|---|---|---|---|
| Measured at | Value | |||
| Assets | Amortised cost | Total | fair value | hierarchies |
| Cash and cash equivalents | 0 | 0 | 0 | 3 |
| Claims on credit institutions | 3 457 | 3 457 | 3 457 | 3 |
| Claims on the public and public sector | ||||
| entities | 13 439 | 13 439 | 13 439 | 3 |
| Total | 16 896 | 16 896 | 16 896 |
| Measured at | Value | |||
|---|---|---|---|---|
| Liabilities | Amortised cost | Total | fair value | hierarchies |
| Liabilities to the public and public sector | ||||
| entities | 0 | 0 | 0 | 3 |
| Debt securities issued to the public | 8 450 | 8 450 | 8 402 | 3 |
| Subordinated liabilities | 0 | 0 | 0 | 3 |
| Total | 8 450 | 8 450 | 8 402 |
Level 1: The fair values of financial instruments (such as publicly quoted derivatives and shares) traded on the active market are based on market prices quoted at the end of the reporting period. The quoted market price of financial assets is the current bid price, and the quoted market price of financial liabilities is the ask price.
Level 2: For financial instruments not traded on the active market, the fair value is determined using the measurement method. These methods use as much observable market information as possible and rely as little as possible on company-specific assessments. If all the significant input data required to determine the fair value of an instrument are observable, the instrument is classified as level 2. The Company does not currently have any level 2 instruments.
Level 3: If one or several pieces of significant input data are not based on observable market data, the instrument is classified as level 3. These include all of the Company's loan receivables, as the Company has exercised significant judgement in determining their fair value.
| G15.CASH AND CASH EQUIVALENTS | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Current account in the Bank of Finland | 120 528 | 0 |
| Cash and cash equivalents total | 120 528 | 0 |
| G16. RECEIVABLES FROM CREDIT INSTITUTIONS |
31.12.2022 | Adjusted 31.12.2021 |
| Repayable on demand | 5 941 | 3 457 |
| Receivables from credit institutions total | 5 941 | 3 457 |
| G17. CLAIMS ON THE PUBLIC AND PUBLIC SECTOR ENTITIES |
31.12.2022 | Adjusted 31.12.2021 |
| Enterprises and public sector entities | 30 253 | 1 549 |
| Households | 122 449 | 9 294 |
| Foreigners | 1 954 | 2 597 |
| Claims on the public and public sector | ||
| entities total | 154 656 | 13 440 |
| G18. INTANGIBLE ASSETS 2022 | Goodwill | Development of IT software |
Customer relationships |
Other intangible assets |
Total |
|---|---|---|---|---|---|
| Acquisition cost at 1.1. | 0 | 2 773 | 0 | 121 | 2 894 |
| Increases | 0 | 913 | 0 | 0 | 913 |
| Acquisitions | 5 957 | 180 | 240 | 0 | 6 377 |
| Acquisition cost before depreciations | 5 957 | 3 866 | 240 | 121 | 10 184 |
| Accumulated depreciation 1.1. | 0 | -1 399 | 0 | -91 | -1 490 |
| Depreciation | 0 | -517 | -24 | 0 | -541 |
| Accumulated depreciation 31.12. | 0 | -1 913 | -24 | -91 | -2 027 |
| Acquisition cost at 31.12. | 5 957 | 3 866 | 240 | 121 | 10 184 |
| Accumulated depreciation 31.12. | 0 | -1 913 | -24 | -91 | -2 027 |
| Book value 31.12. | 5 957 | 1 953 | 216 | 30 | 8 157 |
| Development of | Customer | Other intangible | |||
|---|---|---|---|---|---|
| INTANGIBLE ASSETS ADJUSTED 2021 | Goodwill | IT software | relationships | assets | Total |
| Acquisition cost at 1.1. | 0 | 1 461 | 0 | 121 | 1 582 |
| Increases | 0 | 1 311 | 0 | 0 | 1 311 |
| Acquisition cost before depreciations | 0 | 2 773 | 0 | 121 | 2 894 |
| Accumulated depreciation 1.1. | 0 | -1 108 | 0 | -84 | -1 192 |
| Depreciation | 0 | -292 | 0 | -7 | -299 |
| Accumulated depreciation 31.12. | 0 | -1 399 | 0 | -91 | -1 490 |
| Acquisition cost at 31.12. | 0 | 2 773 | 0 | 121 | 2 894 |
| Accumulated depreciation 31.12. | 0 | -1 399 | 0 | -91 | -1 490 |
| Book value 31.12. | 0 | 1 373 | 0 | 30 | 1 403 |
| Goodwill | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Merger of Evli Pankki Oyj's banking business and Fellow Finance Oyj | 5 338 | 0 |
| Acquisition of Mobify Invoices Oy | 619 | 0 |
| Total | 5 957 | 0 |
The amount of goodwill at the end of 2022 was EUR 6.0 million (0) for the Fellow Bank group. In goodwill impairment testing, the balance sheet value of goodwill is compared to the amount of money that can be collected from the business. The amount of money that can be recovered is determined based on the market value of Fellow Bank at the closing date. Impairment testing found no need for a write-down.
| G19: TANGIBLE ASSETS 2022 MACHINERY AND EQUIPMENT |
Machinery and equipment |
Right-of-use property |
|---|---|---|
| Acquisition cost at 1.1. | 278 | 460 |
| Increases | 22 | 0 |
| Decreases | 0 | 0 |
| Acquisition cost before depreciations | 300 | 460 |
| Accumulated depreciation 1.1. | -240 | -230 |
| Depreciation | -32 | -119 |
| Accumulated depreciation 31.12. | -272 | -349 |
| Acquisition cost at 31.12. | 300 | 460 |
| Accumulated depreciation 31.12. | -272 | -349 |
| Tangible assets total, 31.12. | 28 | 111 |
| G19: TANGIBLE ASSETS 2021 MACHINERY AND EQUIPMENT |
Machinery and equipment |
Right-of-use property |
|---|---|---|
| Acquisition cost at 1.1. | 267 | 460 |
| Increases | 11 | 0 |
| Decreases | 0 | 0 |
| Acquisition cost before depreciations | 278 | 460 |
| Accumulated depreciation 1.1. | -199 | -115 |
| Depreciation | -41 | -115 |
| Accumulated depreciation 31.12. | -240 | -230 |
| Acquisition cost at 31.12. | 278 | 460 |
| Accumulated depreciation 31.12. | -240 | -230 |
| Tangible assets total, 31.12. | 37 | 230 |
| Lease liabilities | 31.12.2022 | Adjusted 31.12.2021 |
| Long-term lease liabilities | 114 | 114 |
| Short-term lease liabilities | 122 | 122 |
| Lease liabilities, total | 236 | 236 |
| Adjusted | |
|---|---|
| 31.12.2022 | 31.12.2021 |
| 179 | 0 |
| 1 255 | 2 514 |
| 183 | 46 |
| 1 438 | 2 560 |
| G21. ACCRUED INCOME AND PREPAYMENTS | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Interest receivables | 1 | 0 |
| Prepayments | 171 | 177 |
| Accrued income and prepayments total | 172 | 177 |
| G22: TAX ASSETS AND LIABILITIES | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Tax assets | ||
| Deferred tax assets | 129 | 1 032 |
| Current income tax receivables | 461 | 81 |
| Tax assets and liabilities total | 590 | 1 113 |
| G23. LIABILITIES TO THE PUBLIC AND PUBLIC SECTOR ENTITIES |
31.12.2022 | Adjusted 31.12.2021 |
| Deposits | 246 810 | 0 |
| Liabilities to the public and public sector entities | ||
| total | 246 810 | 0 |
| G24.DEBT SECURITIES ISSUED TO THE PUBLIC | 31.12.2022 | Adjusted 31.12.2021 |
| Bonds | 0 | 8 402 |
| Debt securities issued to the public total | 0 | 8 402 |
| G25. SUBORDINATED LIABILITIES | 31.12.2022 | Adjusted 31.12.2021 |
| Debentures | 6 203 | 0 |
| Subordinated liabilities total | 6 203 | 0 |
The debenture loan is an instrument with a lower priority than Fellow Bank's other commitments, which belongs to the secondary capital referred to in the solvency regulations applicable to Fellow Bank. The loan term of the debenture loan is five years and it matures on October 17, 2027. The fixed annual interest rate of the debenture loan is 8 percent.
| G26. OTHER LIABILITIES | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Lease liabilities | 111 | 114 |
| Personnel related | 7 | 0 |
| Accounts payable | 360 | 743 |
| Liabilities on peer-to-peer loans to investors | 5 684 | 0 |
| Other liabilities | 2 635 | 710 |
| Other liabilities total | 8 796 | 1 567 |
Liabilities to peer-to-peer loan investors and the increase in other liabilities mainly consisted of cash flows between borrowers and peer-to-peer loan investors related to peer-to-peer loans, which Fellow Bank processes as part of its own funds with the credit institution license. During Fellow Finance, the corresponding funds were kept in separate off-balance sheet customer asset accounts, the risks and benefits did not belong to Fellow Finance, in which case the accounts were off-balance sheet items.
| G27. ACCRUED EXPENSES AND DEFERRED INCOME | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Interest payable | 1 447 | 63 |
| Tax payable | 4 | 0 |
| Personnel related | 857 | 514 |
| Accrued expenses | 1 559 | 6 |
| Accrued expenses and prepayments total | 3 867 | 583 |
Other accrued liabilities consist of usual expense provisions and purchased credit base from the related periodization, which is discharged when the loan portfolio is removed from the balance sheet.
| G28. EQUITY | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Restricted equity | ||
| Share capital 1.1. | 125 | 125 |
| Reverse acquisition | 6 446 | 0 |
| Share issue | 11 715 | 0 |
| Share capital 31.12. | 18 286 | 125 |
| Total restricted equity | 18 286 | 125 |
| Unrestricted equity | ||
| Reserve for invested unrestricted equity | 19 917 | 13 361 |
| Other reserves | 0 | 0 |
| Retained earnings | -1 636 | -132 |
| Dividends | 0 | 0 |
| Result for the year | -10 585 | -1 564 |
| Total unrestricted equity | 7 698 | 11 665 |
| Total equity | 25 985 | 11 790 |
| G29. OFF-BALANCE SHEET ITEMS | 31.12.2022 | Adjusted 31.12.2021 |
|---|---|---|
| Unused credit facilities | 1 455 | 1 912 |
| Total | 1 455 | 1 912 |
Off-balance sheet commitments are overdraft facilities granted to customers that the customer has not withdrawn. The expected credit loss on off-balance sheet items is EUR 36 thousand (EUR 34 thousand).
| G30. COLLATERALS RECEIVED | 31.12.2022 |
|---|---|
| Real estate collateral | 4 419 |
| Guarantees received | 238 |
| Other | 15 839 |
| Collaterals received total | 20 496 |
Information on received guarantees is only available for the ended financial period. In the future the information is also presented for the comparison period.
| Subsidiaries consolidated into the group | 31.12.2022 | Adjusted 31.12.2021 | |
|---|---|---|---|
| Subsidiaries | Domestic | Group ownership | Group ownership |
| Lainaamo Ltd | Finland | 100,0 % | 100,0 % |
| Mobify Invoices Ltd | Finland | 100,0 % | 0,0 % |
| Fellow Finance Estonia Oü | Estonia | 100,0 % | 100,0 % |
| Fellow Finance Česko s.r.o | Czech Republic | 100,0 % | 100,0 % |
| Fellow Finance Polska Sp. z o.o. | Poland | 100,0 % | 100,0 % |
| Fellow Finance Deutschland GmbH | Germany | 100,0 % | 100,0 % |
Related party refers to key persons in a leading position in Fellow Bank and their family members, subsidiaries and companies in which a key person in a leading position has control or joint control. The key persons are the members of the board, the CEO and the CEO's deputy, and the rest of the management team.
During the review period, business transactions with related parties consisted of Fellow Bank's deposit liabilities and related interest. In the comparison period, business transactions include related party investments in Fellow Finance's bonds and related interest expenses.
| Adjusted | ||
|---|---|---|
| 31.12.2022 | 31.12.2021 | |
| Assets | 0 | 0 |
| Liabilities | 512 | 152 |
| Income | 0 | 0 |
| Expenses | 0 | 124 |
| Total | 513 | 276 |
On 14 July 2021, Fellow Finance Plc and Evli Bank Plc announced that they had agreed, by means of a merger agreement, on an arrangement through which Evli Bank would be divided, through a partial demerger, into Evli Plc, a new group that focuses on asset management and will be listed, and a company that will continue Evli Bank's banking operations and with which Fellow Finance will merge.
The demerger and merger were entered into the Trade Register maintained by the Finnish Patent and Registration Office on 2 April 2022, the day of implementation. In conjunction with the implementation of the merger, the name of Evli Bank Plc was changed to Fellow Bank Plc. In the merger, the legal acquiring party was Evli Bank. In IFRS reporting, the arrangement is treated as a reverse acquisition, where Fellow Finance is the accounting buyer and Evli Bank is the accounting object of the transaction. The goodwill generated in the merger is considered to reflect the significant benefits arising from the merger, especially from combining the ability to receive deposits enabled by Evli Bank's credit institution license and to lend from own balance sheet with Fellow Finance's customer base and technology, in addition to the skilled personnel who transferred from Evli. The amount of non-recurring expenses related to the merger was 1.9 million euros and they have been recorded under other administrative expenses and other operating expenses.
The acquisition has been treated in the consolidated financial statements as a business combination using the acquisition cost method. The consideration paid for the acquisition was 12,505 thousand euros. The consideration is based on Fellow Finance's share price on April 2, 2022 (3.15 euros) and the calculated number of shares that Fellow Finance would have had to issue in order to achieve the post-merger ownership structure (3,969,786).
| ACQUIRED BUSINESSES | EVLI PANKKI OYJ |
|---|---|
| Cash and equivalents | 245 606 |
| Claims on the public and public sector entities | 5 326 |
| Other receivables | 718 |
| Assets total | 251 650 |
| Liabilities to the public and public sector entities | 244 000 |
| Other liabilities | 484 |
| Liabilities total | 244 484 |
| Acquired net assets | 7 167 |
| Consideration paid for the acquisition | 12 505 |
| Allocation of the purhase price | |
| Total identified balance sheet items | 7 167 |
| Goodwill | 5 338 |
| Allocation total | 5 338 |
In connection with the preparation of the financial statements, the company has adjusted the preliminary values of the acquired assets by 718 thousand euros, the adjustment reduces the goodwill by a corresponding amount.
The profit before taxes of Evli Bank's banking business (IFRS 5 continuing operations) from January 1 to April 1, 2022 was EUR -0.5 million due to interest expenses on deposits and the impact of business expenses. The table below shows the summary income statement of the continuing operations in question for the beginning of the year before the merger. However, due to the IFRS reverse acquisition, the result in question is not included in Fellow Bank's H1 2022 result.
| 1.1.-1.4.2022 | |
|---|---|
| Total income | -161 |
| Operating expenses total | -335 |
| Impairment of receivables | -1 |
| Profit before taxes | -497 |
After the merger, the Company's business model changed substantially. For this reason, it is not possible to reliably estimate what the result of the group's reporting period would have been if the acquisition had taken place on January 1, 2022.
On July 4, 2022, Fellow Bank announced the acquisition of the entire share capital of Mobify Invoices Ltd ("Mobify"). Mobify is a Finnish company that offers an easy-to-use mobile application for comprehensive financial management. The functionalities of the Mobify application will be gradually integrated into Fellow Bank's digital service offering. Mobify's entire personnel (7) transfered to the Fellow Bank group, which will further accelerate the development of Fellow Bank's digital services. The purchase price EUR 1.3 million was paid partly in cash and partly in new shares of Fellow Bank. Fellow Bank issued a total of 1,175,088 new shares as a partial payment of the purchase price. The control of the company was transferred to Fellow Bank on July 4, 2022.
The acquisition has been treated in the consolidated financial statements as a business combination using the acquisition cost method. Of the purchase price, EUR 0.4 million has been allocated to existing balance sheet items and EUR 0.2 million to customer relationships. Goodwill amounted to EUR 0.6 million. The goodwill reflects the significant benefits arising from the merger in the development of the digital services of the entire Fellow Bank Group.
| ACQUIRED BUSINESSES | MOBIFY INVOICES OY |
|---|---|
| Cash and equivalents | 189 |
| Claims on the public and public sector entities | 124 |
| Intangible assets | 180 |
| Other assets | 4 |
| Accrued income and prepayments | 5 |
| Assets total | 502 |
| Liabilities to the public and public sector entities | 0 |
| Other liabilities | 69 |
| Liabilities total | 69 |
| Acquired net assets | 433 |
| Consideration paid for the acquisition | 1 292 |
| Allocation of the purhase price | |
| Total identified balance sheet items | 433 |
| Goodwill | 619 |
| Customer relationships | 240 |
| Allocation total | 859 |
On January 17, 2023, the company's board of directors decided on a new share-based incentive system for the group's key personnel, and on the planning of employee share issue for all personnel. The performance-based share-based incentive system for key personnel has three earning periods, the first of which rewards are based on the group's 2023 result, implementation of strategic projects, customer satisfaction (NPS) and set personal goals. In the earning period 2023, the target group includes approximately 11 key personnel, including the CEO and other members of the management team. In the planned personnel issue and additional share system (matching) offered to the entire staff, the staff would have the opportunity to subscribe for the company's shares at a reduced price and, by subscribing, would earn the right to receive additional shares from the company at a later date.
The shareholders' nomination committee proposes to the 2023 annual general meeting that the number of board members be confirmed at seven (7), and that Lea Keinänen, Jorma Pirinen, Markku Pohjola, Teuvo Salminen and Tero Weckroth be re-elected to the board. The nomination committee proposes to elect Sami Honkonen and Johanna Lamminen as new board members. Among the current members of the board, Kai Myllyneva is no longer a candidate for the board.
The company has entered a letter of intent to sell the Polish business. The size of Poland's loan portfolio at the end of December 2022 was EUR 3.4 million. The amount of the loan loss provision for the loan portfolio was EUR 3.2 million.
| Parent company´s income statement | 67 P18: Debt securities 79 |
|---|---|
| Parent company´s balance sheet | 68 P19: Shares and participations 80 |
| Parent company's statement of cash flow | 69 P20: Shares and participations in associates and joint ventures 80 |
| P21: Derivative contracts 81 |
|
| Parent company's notes | P22: Intangible assets 82 |
| P1: Parent Company's accounting policies | 70 P23: Tangible assets 83 |
| P2: Net interest income | 71 P24: Other assets 84 |
| P3: Fee and commission income and expenses | 71 P25: Accrued income and prepayments 84 |
| P4: Net investment income | 72 P26: Tax assets and liabilities 84 |
| P5: Other operating income | 72 P27: Liabilities to credit institutions and central banks 84 |
| P6: Personnel expenses | 73 P28: Liabilities to the public and public sector entities 84 |
| P7: Other administrative expenses | 73 P29: Debt securities issued to the public 84 |
| P8: Depreciation and impairment losses | 73 P30: Derivative contracts and other liabilities held for trading 84 |
| P9: Other operating expenses | 73 P31: Other liabilities 84 |
| P10: Realized and expected credit losses | 74 P32: Accrued expenses deferred income 85 |
| P11: Income taxes | 74 P33: Subordinated liabilities 85 |
| P12: Classes of financial assets and liabilities and fair values |
75 P34: Equity 85 |
| P13: Maturities of financial assets and liabilities | 77 P35: Securities lending 86 |
| P14: Assets and liabilities in domestic and foreign currencies |
78 P36: Assets pledged as collateral 87 |
| P15: Cash and cash equivalents | 78 P37: Off-balance sheet commitments 88 |
| P16: Claims on credit institutions | 79 |
| Note | 2022 | 2021 | |
|---|---|---|---|
| Interest income | 11 154 | 2 388 | |
| Interest expenses | -2 640 | -2 107 | |
| Net interest income | E2 | 8 514 | 281 |
| Income from equity investments | E3 | 0 | 12 887 |
| Fee and commission income | E3 | 14 442 | 46 782 |
| Fee and commission expenses | E3 | -2 471 | -3 862 |
| Net investment income | E4 | 21 597 | 3 410 |
| Other operating income | E5 | 740 | 4 867 |
| Total operating income | 42 822 | 64 364 | |
| Operating expenses | |||
| Personnel expenses | E6 | -7 382 | -19 498 |
| Other administrative expenses | E7 | -6 838 | -11 478 |
| Depreciation and amortization on tangible and | |||
| intangible assets | E8 | -1 077 | -2 783 |
| Other operating expenses | E9 | -1 802 | -2 667 |
| Realized and expected credit losses | E10 | -8 011 | 80 |
| Operating profit | 17 710 | 28 018 | |
| Profit before taxes | 17 710 | 28 018 | |
| Income taxes | E11 | -11 | -3 634 |
| Profit (loss) for the financial year | 17 699 | 24 385 |
| Note | 2022 | 2021 | Note | 2022 | 2021 | ||
|---|---|---|---|---|---|---|---|
| Assets | Liabilities | ||||||
| Cash and equivalents | E15 | 120 528 | 384 102 | Liabilities to credit institutions and central banks | E27 | 0 | 8 610 |
| Debt securities eligible for refinancing with | Liabilities to the public and public sector entities | E28 | 246 810 | 442 706 | |||
| central banks | 0 | 33 382 | Debt securities issued to the public | E29 | 0 | 91 015 | |
| Claims on credit institutions | E16 | 4 847 | 40 105 | Derivative contracts and other liabilities held for | |||
| Claims on the public and public sector entities | E17 | 155 080 | 98 087 | trading | E30 | 0 | 26 293 |
| Debt securities | E18 | 0 | 744 | Other liabilities | E31 | 8 751 | 70 829 |
| Shares and participations | E19 | 5 028 | 67 815 | Accrued expenses and deferred income | E32 | 3 791 | 12 045 |
| Shares and participation in associates and joint | Subordinated liabilities | E33 | 6 203 | 0 | |||
| ventures | E20 | 0 | 5 354 | Liabilities total | 265 555 | 651 498 | |
| Derivative contracts | E21 | 0 | 26 404 | ||||
| Intangible assets | E22 | 1 964 | 4 456 | Equity | E34 | ||
| Property, plant and equipment | E23 | 29 | 947 | Share capital | 18 289 | 30 194 | |
| Other assets | E24 | 1 092 | 72 172 | Share premium fund | 0 | 1 839 | |
| Accrued income and prepayments | E25 | 193 | 1 245 | Fund of invested non-restricted equity | 12 452 | 23 285 | |
| Income tax assets | E26 | 224 | 0 | Retained earnings | -25 011 | 3 640 | |
| Assets total | 288 985 | 734 813 | Profit (loss) for financial year | 17 699 | 24 385 | ||
| Equity total | 23 430 | 83 343 |
Liabilities and equity total 288 985 734 841
| 2022 | 2021 | |
|---|---|---|
| Cash flow from operating activities | ||
| Profit (loss) for the period | 17 699 | 28 018 |
| Adjustments for items not included in cash flow | ||
| Depreciation and impairment | 1 077 | 1 913 |
| Credit losses | 8 011 | 0 |
| Income taxes | 11 | -1 308 |
| Other adjustments | 0 | 1 762 |
| Adjustments total | 9 100 | 2 367 |
| Cash flows from operating from operating before | ||
| changes in operating assets and liabilities | 26 799 | 30 385 |
| Increase (-) or decrease (+) in operating assets | ||
| Claims on the public and public sector entities | 34 186 | 33 777 |
| Other assets | -179 | 6 998 |
| Increase (-) or decrease (+) in operating liabilities | ||
| Liabilities to the public and public sector entities | -72 126 | -4 913 |
| Other liabilities | -104 | 5 076 |
| Cash flow from operating activities | -11 424 | 71 323 |
| 2022 | 2021 | |
|---|---|---|
| Investing activities | ||
| Investments in tangible assets | -22 | -154 |
| Investments in intangible assets | -526 | -215 |
| Acquisitions of subsidiaries | -772 | -1 003 |
| Cash flow from investing activities | -1 319 | -1 373 |
| Cash flow from financing activities | ||
| Repayment of bond | -7 380 | 0 |
| Issue of debenture loan | 6 100 | 0 |
| Dividends paid to company´s shareholders | -25 229 | -17 415 |
| Paid directed share issue | 11 715 | 0 |
| Repayments of lease liabilities | 0 | 0 |
| Cash flow from financing activities | -14 794 | -17 415 |
| Change in cash and cash equivalents | -27 537 | 52 535 |
| Cash and cash equivalents at the beginning of period | 385 161 | 332 626 |
| Effects on business arragement | -232 249 | 0 |
| Translation differences | 0 | |
| Cash and cash equivalents at the end of period | 125 375 | 385 161 |
| Cash and equivalents are formed by the following | ||
| items: | ||
| Evli Bank Plc opening balance 1.1.2022 | 385 161 | |
| 1.1.-1.4. change of cash and cash equivalents | -139 555 | |
| Evli Bank Plc cash and cash equivalents after | ||
| partial demerger 2.4.2022 | 245 606 | |
| 2.4.-31.12. change of cash and equivalents | -120 231 | |
| Cash and cash equivalents 31.12.2022 | 120 528 | |
| Claims on credit institutions 31.12.2022 | 4 847 | |
| Fellow Bank Plc cash and cash equivalents | ||
| at the end of period | 125 375 |
Fellow Bank Plc ("company") domicile is in Helsinki and registered address is Pursimiehenkatu 4 A, 00150 Helsinki.
The parent company draws up separate financial statements in accordance with the provisions of the Accounting Act and Act on Credit Institutions, the Decree of the Ministry of Finance on financial statements and consolidated financial statements of credit institutions (698/2014) and Regulations and Guidelines 2/2016 of the Finnish Financial Supervisory Authority on accounting, financial statements and management reports for the financial sector.
The principles for preparing the parent company's financial statements correspond to the principles of the Fellow Group, with the exception of the exceptions presented below. The partial demerger of Evli Bank and the merger of Evli Bank's banking business and Fellow Finance was completed on April 2, 2022. Evli Bank Plc continues as the group's parent company, changing its name to Fellow Bank Plc. In the merger, Evli Bank Plc received assets and liabilities from Fellow Finance Plc on April 2, 2022. Transferred assets and liabilities are recorded at book values.
The parent company's accounting principles follows the accounting principles of Evli Bank Plc's financial statements for the period between January 1 and April 1, 2022. The accounting principles are described in Evli Bank Plc's 2021 financial statements. In particular, the balance sheet items listed below and the related income and expenses are subject to Evli Bank Plc's accounting principles from January 1 to April 1, 2022:
Deferred tax is generally calculated on all temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The largest temporary differences arise from the depreciation of fixed assets.
Leases of property, plant and equipment in which substantially all the company's risks and rewards of ownership are classified as finance leases. In financial statement, leases payable under these contracts are treated as rental expenses. Moreover, an asset acquired under a finance lease is not included in the balance sheet.
| P2: NET INTEREST INCOME | 2022 | 2021 | P3: FEE AND COMMISSION INCOME AND EXPENSES | 2022 | 2021 |
|---|---|---|---|---|---|
| Interest income | Income from equity investments | ||||
| At fair value through profit or loss | 0 | 338 | Dividends from associated companies | 0 | 1 682 |
| Interest income from other loans and claims | Dividends from financial assets valued at fair value | 0 | 37 | ||
| Claims on credit institutions | 352 | 69 | Dividends from group companies | 0 | 11 168 |
| Claims on the public and public sector entities | 10 803 | 1 529 | Income from equity investments total | 0 | 12 887 |
| Other interest income | 0 | 453 | |||
| Interest income Total | 11 154 | 2 388 | Fee and commission income | ||
| Credit related fees and commissions | 831 | 59 | |||
| Interest expenses | Peer to peer lending | 1 225 | 0 | ||
| Interest expenses from other borrowing | Income from payment transactions | 0 | 33 | ||
| Liabilities to the public and public sector entities and | Insurance brokerage | 47 | 0 | ||
| credit institutions | -2 421 | -1 965 | Advisory services | 0 | 1 740 |
| Debt securities issued to the public | -106 | -137 | Securities brokerage | 0 | 12 410 |
| Subordinated liabilities | -103 | 0 | Securities issue | 12 264 | 0 |
| Other interest expenses | -10 | -4 | Mutual funds | 0 | 25 925 |
| Interest expenses total | -2 640 | -2 107 | Asset management | 0 | 5 904 |
| Custody services | 0 | 464 | |||
| Net interest income | 8 514 | 281 | Other fee and commission income | 75 | 247 |
| Fee and commission income total | 14 442 | 46 782 | |||
| Fee and commission expenses |
| Fee and commission expenses total | -2 471 | -3 862 |
|---|---|---|
| Other fee and commission expenses | -968 | -3 077 |
| Trading fees paid to stock exchanges | -480 | -785 |
| Peer to peer lending | -158 | 0 |
| Lending | -865 | 0 |
| Fee and commission expenses | ||
| P4: NET INVESTMENT INCOME | 2022 | 2021 |
|---|---|---|
| Financial assets held for trading | 25 | 131 |
| Financial assets at fair value through profit or loss | 21 915 | 1 360 |
| Net income from foreign exchange operations | -343 | 1 918 |
| Net investment income total | 21 597 | 3 410 |
| Net investment income from securities transactions by instrument |
Gains and losses on sales |
Changes in fair value |
Total |
|---|---|---|---|
| Debt securities | |||
| Shares and derivative contracts | 22 218 | -255 | 21 963 |
| Net income from foreign exchange operations | -366 | 0 | -366 |
| Net investemt income total | 21 852 | -255 | 21 597 |
| Net investment income from securities transactions by instrument |
Gains and losses on sales |
Changes in fair value |
Total |
|---|---|---|---|
| Debt securities | -143 | -291 | -433 |
| Shares and derivative contracts | 1 515 | 410 | 1 925 |
| Net income from foreign exchange operations | 1 918 | 0 | 1 918 |
| Net investemt income total | 3 291 | 119 | 3 410 |
| P5: OTHER OPERATING INCOME | 2022 | 2021 |
|---|---|---|
| Other income | 740 | 4 867 |
| Other operating income total | 740 | 4 867 |
2021
| P6: PERSONNEL EXPENSES | 2022 | 2021 | |
|---|---|---|---|
| Wages and salaries | -7 006 | -15 659 | |
| - of which bonuses | 0 | -4 005 | |
| Other social security costs | -194 | -463 | |
| - of which relating to bonuses | 0 | -56 | |
| Pension expenses | -505 | -2 612 | |
| - of which relating to bonuses | 0 | -341 | |
| - defined contribution plans | 0 | -2 612 | |
| Activation of personnel costs | 323 | 0 | |
| Personnel expenses total | -7 382 | -19 498 | |
| Number of personnel, average | 2022 | 2021 | |
| Number of personnel during the period, average | 74 | 151 | |
| Number of personnel at the end of the period | 66 | 152 | |
| Employees by business segment at the end of the period | |||
| Advisory and Corporate Clients | - | 96 | |
| Wealth Management and Investor Clients | - | 6 | |
| Group Operations | - | 50 | |
| Total | - | 152 |
Fellow Bank Plc has only one segment to report 31.12.2022 and comparative number describes Evli Bank Plc´s reported segments 31.12.2021
| P7: OTHER ADMINSTRATIVE EXPENSES | 2022 | 2021 |
|---|---|---|
| Office expenses | -746 | -1 132 |
| IT and infosystems | -2 736 | -5 914 |
| Business expenses | -118 | -341 |
| Travel expenses | -63 | -70 |
| Car expenses | -1 | -33 |
| Other HR related expenses | -258 | -645 |
| Marketing expenses | -435 | -703 |
| Banking and custodian expenses | -141 | -638 |
| External services | -2 341 | -1 977 |
| Other administrative expenses total | -6 838 | -11 453 |
| FEES PAID TO THE AUDIT FIRM | 2022 | 2021 |
| Audit | -156 | -529 |
| Assignments referred to in section 1 subsection 1 section | ||
| 2 of the Audit Act | -70 | 0 |
| Other services | -11 | -260 |
| Fees paid to the audit firm total | -237 | -789 |
| P8: DEPRECIATION AND IMPAIRMENT LOSSES | 2022 | 2021 |
| Intangible assets | -1 014 | -2 612 |
| Tangible assets | -63 | -172 |
| Depreciation, amortization and impairment losses | ||
| total | -1 077 | -2 783 |
The group has not experienced any depreciation of fixed assets realized during the accounting period.
| P9: OTHER OPERATING EXPENSES | 2022 | 2021 |
|---|---|---|
| Authorities expenses | -390 | -453 |
| Rent expenses | -580 | -1 427 |
| Other operating expenses | -832 | -812 |
| Other operating expenses total | -1 802 | -2 692 |
| P10. REALISED AND EXPECTED CREDIT LOSSES | 2022 | 2021 |
|---|---|---|
| Realized credit losses on receivables | ||
| Realized credit losses on loans granted during the | ||
| financial year | -377 | 0 |
| Realized credit losses on loans granted before the | ||
| beginning of the financial year | -3 241 | 0 |
| Realised and expected credit losses and impairment | ||
| losses | -3 618 | 0 |
| Expected credit losses (ECL) change | -4 392 | 80 |
| Impairment of receivables total | -8 011 | 80 |
Expected credit losses are taken into account on expected credit losses from receivables from customers and on off-balance sheet commitments.
The increase in expected loan loss provisions was the result of strong growth in the loan portfolio. Fellow Bank has converted the peer-to-peer loan portfolio to its own balance sheet, whereby a provision for expected credit losses is also recorded. In the comparison period, the provision for expected credit losses was recorded only from the loan portfolio of the balance sheet of Lainaamo Ltd, a member of the Fellow Finance group.
| P11: INCOME TAXES | 2022 | 2021 |
|---|---|---|
| Income taxes | 0 | -3 616 |
| Other direct taxes | -11 | 0 |
| Taxes for previous period | 0 | -18 |
| Income taxes total | -11 | -3 634 |
| P12: CLASSES OF FINANCIAL ASSETS | |
|---|---|
| AND LIABILITIES AND FAIR VALUES | 31.12.2022 |
| Measured at | |||
|---|---|---|---|
| Assets | Amortised cost | Total | fair value |
| Cash and cash equivalents | 120 528 | 120 528 | 120 528 |
| Debt securities eligible for refinancing | |||
| with central banks | 0 | 0 | 0 |
| Claims on credit institutions | 4 847 | 4 847 | 4 847 |
| Claims on the public and public sector | |||
| entities | 155 080 | 155 080 | 155 080 |
| Debt securities | 0 | 0 | 0 |
| Shares and participations | 5 028 | 5 028 | 5 028 |
| Derivative contracts | |||
| Other assets | 1 092 | 1 092 | 1 092 |
| Total | 286 576 | 286 576 | 286 576 |
| Measured at | |||
|---|---|---|---|
| Liabilities | Amortised cost | Total | fair value |
| Liabilities to credit institutions and central | |||
| banks | 0 | 0 | 0 |
| Liabilities to the public and public sector | |||
| entities | 246 810 | 246 810 | 246 810 |
| Debt securities issued to the public | 0 | 0 | 0 |
| Derivative contracts and other liabilities | |||
| held for trading | 0 | 0 | 0 |
| Subordinated liabilities | 6 203 | 6 203 | 6 203 |
| Non-financial liabilities | 8 751 | 8 751 | 8 751 |
| Total | 261 764 | 261 764 | 261 764 |
| 31.12.2021 | |||
|---|---|---|---|
| Measured at | |||
| Assets | Amortised cost | Total | fair value |
| Cash and cash equivalents | 384 102 | 384 102 | 384 102 |
| Debt securities eligible for refinancing | |||
| with central banks | 33 382 | 33 382 | 33 382 |
| Claims on credit institutions | 40 105 | 40 105 | 40 105 |
| Claims on the public and public sector | |||
| entities | 98 087 | 98 087 | 98 087 |
| Debt securities | 744 | 744 | 744 |
| Shares and participations | 49 394 | 49 394 | 49 394 |
| Derivative contracts | 26 404 | 26 404 | 26 404 |
| Total | 632 219 | 632 219 | 632 219 |
| Measured at | |||
|---|---|---|---|
| Liabilities | Amortised cost | Total | fair value |
| Liabilities to credit institutions and central | |||
| banks | 8 610 | 8 610 | 8 610 |
| Liabilities to the public and public sector | |||
| entities | 442 706 | 442 706 | 442 706 |
| Debt securities issued to the public | 91 015 | 91 015 | 90 172 |
| Derivative contracts and other liabilities | |||
| held for trading | 26 293 | 26 293 | 26 293 |
| Total | 568 624 | 568 624 | 567 781 |
Level 1: The fair values of financial instruments (such as publicly quoted derivatives and shares) traded on the active market are based on market prices quoted at the end of the reporting period. The quoted market price of financial assets is the current bid price, and the quoted market price of financial liabilities is the ask price.
Level 2: For financial instruments not traded on the active market, the fair value is determined using the measurement method. These methods use as much observable market information as possible and rely as little as possible on company-specific assessments. If all the significant input data required to determine the fair value of an instrument are observable, the instrument is classified as level 2. The Company does not currently have any level 2 instruments.
Level 3: If one or several pieces of significant input data are not based on observable market data, the instrument is classified as level 3. These include all of the Company's loan receivables, as the Company has exercised significant judgement in determining their fair value.
| 2022 | 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| P13: MATURITIES OF FINANCIAL ASSETS AND LIABILITIES |
LESS THAN 3 MONTHS |
3-12 MONTHS |
1-5 YEARS |
5-10 YEARS |
OVER 10 YEARS |
TOTAL | LESS THAN 3 MONTHS |
3-12 MONTHS |
1-5 YEARS | 5-10 YEARS | OVER 10 YEARS |
TOTAL |
| Assets | ||||||||||||
| Financial liabilities at amortized cost | ||||||||||||
| Cash and cash equivalents | 120 528 | 120 528 | 384 102 | 0 | 0 | 0 | 0 | 384 102 | ||||
| Claims on credit institutions | 4 847 | 4 847 | 40 105 | 0 | 0 | 0 | 0 | 40 105 | ||||
| Claims on the public and public sector entities | 34 233 | 7 044 | 61 683 | 46 831 | 14 002 | 163 793 | 23 596 | 21 756 | 52 735 | 0 | 0 | 98 087 |
| Financial assets at fair value through profit or loss Debt securities eligible for refinancing with |
||||||||||||
| central banks | 0 | 8 021 | 9 934 | 15 428 | 0 | 0 | 33 382 | |||||
| Debt securities | 0 | 0 | 0 | 392 | 352 | 0 | 744 | |||||
| Shares and participations | 0 | 42 671 | 2 959 | 358 | 2 835 | 572 | 49 394 | |||||
| Derivative contracts | 0 | 23 854 | 671 | 1 879 | 0 | 0 | 26 404 | |||||
| Accrued interest | 0 | 282 | 59 | 0 | 0 | 0 | 341 | |||||
| Liabilities | ||||||||||||
| Financial liabilities at amortized cost | ||||||||||||
| Liabilities to credit institutions | 0 | 8 610 | 0 | 0 | 0 | 0 | 8 610 | |||||
| Liabilities to public | 197 863 | 19 335 | 31 059 | 0 | 0 | 248 257 | 442 706 | 0 | 0 | 0 | 0 | 442 706 |
| Debt securities issued to the public | 0 | 938 | 10 709 | 75 198 | 4 170 | 0 | 91 015 | |||||
| Subordinated liabilities | 6 203 | 6 203 | 23 746 | 669 | 1 879 | 0 | 0 | 26 293 | ||||
| Financial liabilities at fair value through profit or loss |
0 | 46 | 0 | 0 | 0 | 0 | 46 | |||||
| Accrued interest, debt | 1 455 | 1 455 | 12 029 | 6 005 | 3 067 | 0 | 0 | 21 100 | ||||
| Off-balance sheet commitments |
'Debt securities, loans and other claims, derivatives and financial liabilities at amortized cost are reported in the maturity class according to the maturity of the instrument. Shares and participations are reported so that quoted shares in the trading book and quoted mutual funds are in the shortest maturity period. Unquoted shares are reported according to the estimated liquidation period, and venture capital- and real estate funds are reported according to the expected ending day of the fund.
| 2022 | 2021 | |||||
|---|---|---|---|---|---|---|
| P14: ASSETS AND LIABILITIES DENOMINATED IN DOMESTIC AND FOREIGN CURRENCY |
DOMESTIC CURRENCY |
FOREIGN CURRENCY |
TOTAL | DOMESTIC CURRENCY |
FOREIGN CURRENCY |
TOTAL |
| Assets | ||||||
| Financial assets at amortized cost | ||||||
| Cash and cash equivalents | 120 528 | 120 528 | 384 102 | 0 | 384 102 | |
| Claims on credit institutions | 4 846 | 1 | 4 847 | 39 723 | 381 | 40 105 |
| Claims on the public and public sector entities | 155 080 | 155 080 | 98 087 | 0 | 98 087 | |
| Financial assets at fair value through profit or loss | ||||||
| Debt securities eligible for refinancing with central banks | 0 | 0 | 34 126 | 0 | 34 126 | |
| Debt securities | 0 | 0 | 0 | 0 | 0 | |
| Shares and participations | 5 028 | 5 028 | 48 250 | 1 144 | 49 394 | |
| Derivative contracts | 0 | 0 | 26 106 | 298 | 26 404 | |
| Other asset items | 3 501 | 3 501 | 102 104 | 491 | 102 595 | |
| Total | 288 984 | 1 | 288 985 | 732 500 | 2 314 | 734 813 |
| Liabilities | ||||||
| Financial liabilities at amortized cost | ||||||
| Liabilities to credit institutions | 0 | 0 | 8 610 | 0 | 8 610 | |
| Liabilities to the public and public sector entities | 246 810 | 246 810 | 430 839 | 11 867 | 442 706 | |
| Debt securities issued to the public | 0 | 0 | 91 015 | 0 | 91 015 | |
| Financial liabilities at fair value through profit or loss | 0 | 25 995 | 298 | 26 293 | ||
| Subordinated liabilities | 6 203 | 6 203 | 0 | |||
| Other liabilities items | 12 520 | 23 | 12 543 | 82 298 | 546 | 82 844 |
| Total | 265 533 | 23 | 265 555 | 638 757 | 12 711 | 651 468 |
| P15: CASH AND CASH EQUIVALENTS | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Balances with central banks | 120 528 | 384 079 |
| Other | 0 | 23 |
| Cash and cash equivalents total | 120 528 | 384 102 |
| P16: RECEIVABLES FROM CREDIT INSTITUTIONS | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Repayable on demand | 4 847 | 1 059 |
| Other than repayable on demand | 0 | 39 046 |
| Receivables from credit institutions total | 4 847 | 40 105 |
| P17: CLAIMS ON THE PUBLIC AND PUBLIC SECTOR ENTITIES |
31.12.2022 | 31.12.2021 |
| Other than repayable on demand | ||
| Enterprises and housing associations | 23 693 | 22 554 |
| Financial and insurance corporations | 0 | 1 368 |
| Households | 129 433 | 66 863 |
| Foreign countries | 1 954 | 7 302 |
| Other than repayable on demand total | 155 080 | 98 087 |
| Claims on the public and public sector entities total | 155 080 | 98 087 |
| 2022 | |||
|---|---|---|---|
| P18: DEBT SECURITIES | Publicly quote | Other | Total |
| Issued by other than public | |||
| corporations | |||
| Fair valued | |||
| Bonds issued by banks | 0 | ||
| Other debt securities | 0 | ||
| Issued by other than public | |||
| corporations | 0 | 0 | 0 |
| Debt securities total | 0 | 0 | 0 |
| 2021 | |||
|---|---|---|---|
| Publicly quote | Other | Total | |
| Issued by other than public corporations |
|||
| Fair valued | |||
| Bonds issued by banks | 33 382 | 58 | 33 441 |
| Other debt securities | 0 | 686 | 686 |
| Issued by other than public | |||
| corporations | 33 382 | 744 | 34 126 |
| Debt securities total | 33 382 | 744 | 34 126 |
| DEBT SECURITIES BY BALANCE SHEET CATEGORY | 2022 | 2021 |
|---|---|---|
| Debt securities eligible for refinancing with central banks | ||
| Other | 0 | 33 382 |
| Debt securities | ||
| Other | 0 | 744 |
| Total | 0 | 34 126 |
| Debt securities by country | ||
| Finland | 0 | 21 715 |
| Sweden | 0 | 5 346 |
| Denmark | 0 | 7 065 |
| Publicly quote | Other | Total | |
|---|---|---|---|
| Shares and participations | |||
| Valued at fair value through profit or | |||
| loss | 0 | ||
| Held for trading | 0 | ||
| Other | 0 | ||
| Shares and participations total | 0 | 0 | 0 |
| 2021 | |||
| Shares and participations | |||
| Valued at fair value through profit or loss | |||
| Held for trading | 2 | 0 | 2 |
| Other | 42 082 | 7 310 | 49 391 |
| Shares and participations total | 42 084 | 7 310 | 49 394 |
| ASSOCIATES AND JOINT VENTURES | 2022 | 2021 |
|---|---|---|
| At the beginning of the period | 5 354 | 4 354 |
| Effects on business arragement | -5 354 | 0 |
| Additions/Disposals | 0 | 1 001 |
| At the end of the period | 0 | 5 354 |
| At the beginning of the period | 18 465 | 18 463 |
|---|---|---|
| Effects on business arragement | -14 679 | 0 |
| Write-downs | -49 | 0 |
| Additions | 1 292 | 2 |
| At the end of the period | 5 028 | 18 465 |
Nominal value of underlying, gross
| REMAINING MATURITY | REMAINING MATURITY | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||||||||
| HELD FOR TRADING | LESS THAN 1 YEAR |
1-5 YEARS |
5-10 YEARS |
FAIR VALUE (+/-) |
ASSETS | LIABILITIES | LESS THAN 1 YEAR |
1-5 YEARS | 5-10 YEARS |
FAIR VALUE (+/-) |
ASSETS | LIABILITIES |
| Interest rate derivatives | ||||||||||||
| Interest rate swaps | 0 | 0 | 4 480 | 70 529 | 3 190 | 0 | 1 975 | 1 975 | ||||
| Equity-linked derivatives | ||||||||||||
| Futures | 0 | 0 | 2 180 | 1 040 | 0 | 0 | 353 | 353 | ||||
| Options bought | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
| Options sold | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||
| Currency-linked derivatives | 0 | 0 | 4 073 234 | 8 264 | 0 | 111 | 24 076 | 23 965 | ||||
| Held for trading total | 0 | 0 | 0 | 0 | 0 | 0 | 4 079 894 | 79 833 | 3 190 | 111 | 26 404 | 26 293 |
| Derivative contracts total | 0 | 0 | 0 | 0 | 0 | 0 | 4 079 894 | 79 833 | 3 190 | 111 | 26 404 | 26 293 |
Equity derivatives in the banking book hedge the equity risk in equity-linked bonds issued to the public. The interest rate derivatives hedge the interest rate risk in liabilities in the balance sheet.
Currency derivatives comprise commitments made against clients and the associated hedges, and contracts made to hedge currency risk in the balance sheet. The net open risk position of the total amount is small. The largest part of the contracts are in SEK (2,763MEUR), and in NOK (662 MEUR)
| 2022 | Goodwill | Leasehold improvements FAS |
Development of IT software |
Other intangible assets |
Total |
|---|---|---|---|---|---|
| Acquisition cost at 1.1. | 1 168 | 1 401 | 21 536 | 2 331 | 26 436 |
| Increases | 0 | 0 | 526 | 0 | 526 |
| Effects on business arragement | -1 168 | -1 401 | -17 510 | -2 331 | -22 411 |
| Acquisition cost before depreciations | 0 | 0 | 4 551 | 0 | 4 551 |
| Accumulated depreciation 1.1. | -760 | -1 390 | -17 734 | -2 096 | -21 980 |
| Depreciation | -60 | -11 | -388 | -53 | -511 |
| Effects on business arragement | 760 | 1 390 | 15 535 | 2 096 | 19 781 |
| Accumulated depreciation 31.12. | -60 | -11 | -2 587 | -53 | -2 711 |
| Acquisition cost at 31.12. | 0 | 0 | 4 551 | 0 | 4 551 |
| Accumulated depreciation 31.12. | -60 | -11 | -2 587 | -53 | -2 711 |
| Book value 31.12. | 0 | 0 | 1 964 | 0 | 1 964 |
| 2021 | |||||
| Acquisition cost at 1.1. | 1 168 | 1 401 | 21 321 | 2 331 | 26 221 |
| Increases | 0 | 0 | 215 | 0 | 215 |
| Acquisition cost before depreciations | 1 168 | 1 401 | 21 536 | 2 331 | 26 436 |
| Accumulated depreciation 1.1. | -520 | -1 259 | -15 704 | -1 886 | -19 369 |
| Depreciation | -240 | -132 | -2 030 | -210 | -2 612 |
| Accumulated depreciation 31.12. | -760 | -1 390 | -17 734 | -2 096 | -21 980 |
| Acquisition cost at 31.12. | 408 | 11 | 3 802 | 235 | 4 456 |
| Accumulated depreciation 31.12. | -760 | -1 390 | -17 734 | -2 096 | -21 980 |
| Book value 31.12. | 408 | 11 | 3 802 | 235 | 4 456 |
| 2022 | Machinery and equipment |
Other tangible assets |
Total |
|---|---|---|---|
| Acquisition cost at 1.1. | 1 668 | 601 | 2 269 |
| Increases | 22 | 0 | 22 |
| Effects on business arragement | -1 419 | -594 | -2 013 |
| Acquisition cost before depreciations | 272 | 7 | 279 |
| Accumulated depreciation 1.1. | -1 323 | 0 | -1 323 |
| Depreciation | -19 | 0 | -19 |
| Effects on business arragement | 1 099 | -7 | 1 092 |
| Accumulated depreciation 31.12. | -243 | -7 | -250 |
| Acquisition cost at 31.12. | 272 | 7 | 279 |
| Accumulated depreciation 31.12. | -243 | -7 | -250 |
| Book value 31.12. | 29 | 0 | 29 |
| 2021 | |||
| Acquisition cost at 1.1. | 1 514 | 601 | 2 115 |
| Increases | 154 | 0 | 154 |
| Acquisition cost before depreciations | 1 668 | 601 | 2 269 |
| Accumulated depreciation 1.1. | -1 151 | 0 | -1 151 |
| Depreciation | -172 | 0 | -172 |
| Accumulated depreciation 31.12. | -1 323 | 0 | -1 323 |
| Acquisition cost at 31.12. | 346 | 601 | 947 |
| Accumulated depreciation 31.12. | -1 323 | 0 | -1 323 |
| Book value 31.12. | 346 | 601 | 947 |
| P24: OTHER ASSETS | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Securities sale receivables | 0 | 1 518 |
| Commission receivables | 910 | 2 768 |
| Securities broking receivables | 0 | 55 665 |
| Other receivables | 182 | 12 221 |
| Other assets total | 1 092 | 72 172 |
| P25: ACCRUED INCOME AND PREPAYMENTS | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Interest | 6 | 341 |
| Staff-related | 39 | 8 |
| Other items | 148 | 896 |
| Accrued income and prepayments total | 193 | 1 245 |
| P26: TAX ASSETS AND LIABILITIES | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Deferred tax assets | 0 | 0 |
| Income tax assets | 224 | 0 |
| Deferred tax liabilities | 0 | 30 |
| Income tax liabilities | 0 | 0 |
| Tax assets and liabilities total | 224 | 30 |
| P27: LIABILITIES TO CREDIT INSTITUTIONS | ||
|---|---|---|
| AND CENTRAL BANKS | 31.12.2022 | 31.12.2021 |
| Credit Institutions | ||
| Other than rebayable on demand | 0 | 8 610 |
| Liabilities to credit institutions and central banks | ||
| total | 0 | 8 610 |
| P28: LIABILITIES TO THE PUBLIC AND | ||
|---|---|---|
| PUBLIC SECTOR ENTITIES | 31.12.2022 | 31.12.2021 |
| Liabilities to public | ||
| Repayable on demand | 246 810 | 442 706 |
| Liabilities to the public and public sector entities | ||
| total | 246 810 | 442 706 |
| P29: DEBT SECURITIES ISSUED TO THE PUBLIC | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Bonds | 0 | 91 015 |
| Debt securities issued to the public total | 0 | 91 015 |
| Changes in bonds issued to the public | ||
| Issues | 0 | 4 200 |
| Repurchases | 0 | 34 300 |
| P30: DERIVATIVE CONTRACTS AND OTHER LIABILITIES | ||
|---|---|---|
| HELD FOR TRADING | 31.12.2022 | 31.12.2021 |
| Derivative contracts | 0 | 26 293 |
| Derivative contracts and other liabilities held for | ||
| trading total | 0 | 26 293 |
| P31: OTHER LIABILITIES | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Securities broking liabilities | 0 | 61 566 |
| Securities purchase liabilities | 0 | 789 |
| Income tax payable | 0 | 63 |
| Personnel related | 0 | 392 |
| Other short-term liabilities | 8 582 | 7 299 |
| Prepayments of cash customers | 0 | 338 |
| VAT payable | 169 | 382 |
| Other liabilities total | 8 751 | 70 829 |
| P32: ACCRUED EXPENSES AND DEFERRED INCOME | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Personnel related | 820 | 8 797 |
| Tax payables | 0 | 2 264 |
| Interest expenses | 1 447 | 46 |
| Other accrued expenses | 1 525 | 937 |
| Accrued expenses and deferred income total | 3 791 | 12 045 |
| P33: SUBORDINATED LIABILITIES | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Debentures | 6 203 | 0 |
| Subordinated liabilities total | 6 203 | 0 |
| P34: EQUITY | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Restricted equity | ||
| Share capital 1.1. | 30 194 | 30 194 |
| Merger of Fellow Finance Plc | 125 | 0 |
| Effects on business arragement | -23 745 | 0 |
| Directed share issue | 11 715 | 0 |
| Share capital 31.12. | 18 289 | 30 194 |
| Share premium fund 1.1. | 1 839 | 1 839 |
| Effects on business arragement | -1 839 | 0 |
| Share premium fund 31.12. | 0 | 1 839 |
| Total restricted equity | 18 289 | 32 033 |
| Unrestricted equity | ||
| Fund of invested non-restricted equity 1.1. | 23 285 | 23 285 |
| Effect of partial demerger | -23 285 | 0 |
| Directed share issue | 500 | 0 |
| Merger of Fellow Finance Plc | 11 952 | 0 |
| Fund of invested non-restricted equity 31.12. | 12 452 | 23 285 |
| Retained earnings 1.1. | 28 025 | 21 055 |
| Effect of partial demerger | -27 807 | 0 |
| Dividends | -25 229 | -17 415 |
| Result for the year | 17 699 | 24 385 |
| Retained earnings 31.12. | -7 312 | 28 025 |
| Total unrestricted equity | 5 141 | 51 310 |
| Total equity | 23 430 | 83 343 |
| P34: EQUITY | 31.12.2022 | 31.12.2021 |
|---|---|---|
| Calculation of distributable equity | ||
| Retained earnings 1.1. | 28 025 | 21 055 |
| Effect of partial demerger | -27 807 | |
| Dividends | -25 229 | -17 415 |
| Result for the year | 17 699 | 24 385 |
| Reserve for invested unrestricted equity | 12 452 | 23 285 |
| Capitalized development expenditure | -1 964 | 0 |
| Total | 3 176 | 51 310 |
| Share capital of the company | 31.12.2022 | 31.12.2021 |
| The company's shares are quoted on the Nasdag Helsinki under the trading code FELLOW. |
| No. of shares (FELLOW) | 88.332.182 | 24.109.420 |
|---|---|---|
| Total | 88.332.182 | 24.109.420 |
Each share carries one vote at a General Meeting of Shareholders
On December 31, 2022 the company hold a total of 220.370 own shares.
| P35: SECURITIES LENDING | 2022 | 2021 |
|---|---|---|
| Market value of securities lending at 31.12., lent in | 0 | 2 264 |
| Market value of securities lending at 31.12., lent out | 0 | 0 |
| P36: ASSETS PLEDGED AS COLLATERAL 2022 |
2021 | |||||
|---|---|---|---|---|---|---|
| ASSETS | Fair value of encumbered assets |
Fair value of unencumbered assets |
of which usable as collateral |
Fair value of encumbered assets |
Fair value of unencumbered assets |
of which usable as collateral |
| Cash and cash equivalents | 0 | 120 528 | 118 066 | 0 | 384 102 | 379 546 |
| Debt securities eligible for refinancing with central banks | 0 | 0 | 0 | 33 382 | 0 | 0 |
| Claims on credit institutions | 0 | 4 847 | 4 847 | 39 046 | 1 059 | 1059 |
| Claims on the public and public sector entities | 0 | 155 080 | 0 | 0 | 98 087 | 0 |
| Debt securities | 0 | 0 | 0 | 0 | 744 | 0 |
| Shares and participations | 0 | 0 | 0 | 0 | 49 394 | 0 |
| Total | 0 | 280 456 | 122 913 | 72 428 | 533 386 | 380 605 |
| USAGE OF COLLATERAL | 2022 | 2021 |
|---|---|---|
| Markeplace collateral, stock- and derivatives trades | 0 | 1 638 |
| Collateral for OTC derivatives trades | 0 | 34 743 |
| Collateral for securities lending | 0 | 2 665 |
| Bank Of Finland, collateral for daily limit account | 0 | 33 382 |
| Total | 0 | 72 428 |
| Fair value of collateral | |||
|---|---|---|---|
| RECEIVED COLLATERAL ON BALANCE SHEET | received 2022 | 2021 | |
| Received cash | 0 | 38 264 |
| P37: OFF-BALANCE SHEET COMMITMENTS | 2022 | 2021 |
|---|---|---|
| Rental liabilities up to one year | 0 | 1 712 |
| Rental liabilities over one year and less than 5 years | 0 | 5 564 |
| Rental liabilities over 5 years | 0 | 106 |
| Leasing liabilities not later than one year | 0 | 0 |
| Leasing liabilities over year not later than five year | 0 | 0 |
| Commitments given to a third party on behalf of a | ||
| customer* | 0 | 398 |
| Irrevocable commitments given in favour of a customer | 0 | 2 565 |
| Guarantees on behalf of others | 0 | 14 |
| Unused credit facilities, given to clients | 1 455 | 18 123 |
| Total | 1 455 | 21 100 |
Off-balance sheet commitments are overdraft facilities granted to customers that the customer has not withdrawn. The expected credit loss on off-balance sheet items is EUR 26 thousand (EUR 34 thousand).
*Commitments given on behalf of a customer for a third party include collaterals for derivatives positions given on behalf of customers. The customers have covered their derivatives collateral to Evli Bank (2021) in full. Other irrevocable commitments given on behalf of a customer comprise subscription commitments guaranteed on behalf of customers.
Helsinki, February 27, 2023
Markku Pohjola Chairman of the Board
Teuvo Salminen Deputy Chairman of the Board
Kai Myllyneva
Jorma Pirinen
Lea Keinänen
Tero Weckroth Teemu Nyholm CEO
Auditor's Note Based on the auditing an audit report has been issued today.
Helsinki, March 15, 2023
PricewaterhouseCoopers Oy Authorised Public Accountants
Jukka Paunonen Authorised Public Accountant (KHT)
(Translation of the Finnish Original)
To the Annual General Meeting of Fellow Bank Plc
Our opinion is consistent with the additional report to the Audit Committee.
We have audited the financial statements of Fellow Bank Plc (business identity code 0533755-0) for the year ended 31 December 2022. The financial statements comprise:
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, the non-audit services that we have provided to the parent company and to the group companies are in accordance with the applicable law and regulations in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note G8 to the Financial Statements.
• Overall group materiality: € 1.5 million, which represents about 0,5 % of total assets
• The scope of group audit included the parent company, which covers the most significant part of the group's balance sheet and income statement items
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole.
| Overall group materiality | € 1.5 million |
|---|---|
| How we determined it | About 0,5 % of total assets |
| Rationale for the | We chose total assets as the benchmark because, in our view, it |
| materiality benchmark | is the benchmark against which the performance of the group is |
| applied | most commonly measured by users, and is a generally accepted |
| benchmark. We chose about 0,5 % which is within the range | |
| of acceptable quantitative materiality thresholds in auditing | |
| standards. |
We tailored the scope of our audit, taking into account the structure of the group, the accounting processes and controls, and the industry in which the group operates. We determined the type of work that needed to be performed at group companies by us, as the group engagement team. Audits were performed in group companies which were considered significant either because of their individual financial significance or due to their specific nature, covering the majority of revenue, assets and liabilities of the group. Analytical procedures were performed to cover the remaining group companies.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
| Key audit matter in the audit | How our audit addressed the key audit | ||
|---|---|---|---|
| of the group | matter | ||
| Loans and receivables from customers Group note G17 |
|||
| Loans and receivables from customers amounted to | We obtained an understanding of the loan | ||
| EUR 154,7 million. | origination process, credit risk management and the | ||
| The calculation of expected credit losses in accord | impairment allowances for loans and advances to | ||
| ance with IFRS 9 Financial Instruments is based on the | customers. | ||
| valuation models used by Fellow Bank and on expert | Based on risk, we selected individual loans and | ||
| estimates. The calculation involves assumptions, | performed detailed credit file reviews and assessed | ||
| estimates and management judgement, in particular | their credit risk. | ||
| regarding the probability of expected credit losses and | For ECL models, we involved our modelling specialists | ||
| the determination of significant increases in credit | to assess the methodology, challenge the underlying | ||
| risk. | assumptions and to independently reperform the | ||
| The components of the expected loss calculation | calculation for a sample of loans. | ||
| are updated and refined based on actual credit risk developments, the development of the calculation process, and regulatory changes and requirements. |
We have also assessed the disclosures related to impairment of loans. |
||
| Due to the significance of the carrying amount of receivables involved, the complexity of the calculation methods used and management judgement, the valuation of receivables is addressed as a key audit |
This is also a key audit matter with respect to our audit of the parent company financial statements.
matter.
| Key audit matter in the audit of the group |
How our audit addressed the key audit matter |
Key audit matter in the audit of the group |
How our audit addressed the key audit matter |
|---|---|---|---|
| Fellow Bank business combination in the group financial statements Group note G33 |
Accounting for the transferred assets and liabilities of Fellow Finance in the receiving parent company |
||
| Fellow Bank business combination was completed on April 2, 2022. Under IFRS, the transaction was accounted for as a reverse acquisition, where Fellow Finance was the accounting acquirer and Evli Bank the acquiree. The consideration transferred as well as the assets acquired and the liabilities assumed in a business combination were measured at acquisition date fair values. The management judgement related specifi cally to the identification of the acquired intangible assets and determination of the related fair values. Fellow Bank business combination was a key audit matter because the fair valuation included judgment and because of the significance of the acquisition to the financial statements. |
Our audit procedures in respect of Fellow Bank business combination included, among others: • Evaluation of the criteria for reverse acquisition accounting applied in the business combination. • Involvement of our valuation team to assist us in evaluation of - the valuation processes and methodologies used - the fair valuation of the consideration transferred - the identification and fair valuation of acquired assets and assumed liabilities. Evaluation of the adequacy of the disclosures of the business combination. |
Accounting for the transferred assets and liabilities of Fellow Finance in the receiving parent company Parent company notes E1, E20, E22, E23 and E34 The accounting principles and disclosures about the transferred assets and liabilities of Fellow Finance are included in the parent company's notes. In the merger of Fellow Finance, the assets and liabilities were transferred into the receiving Fellow Bank by using carrying values as of April 2, 2022. The total book value of net assets transferred amounted to EUR 12,1 million. The accounting for the transfer in the receiving parent company was a key audit matter because the transferred assets and |
Parent company notes E1, E20, E22, E23 and E34 Our audit procedures in respect of the accounting for the transferred assets and liabilities included, among others: • Assessment of the compliance of the merger against the Limited Liability Act and the merger plan. • Evaluation of the appropriateness of the transferred assets and liabilities by comparing them to the merger plan. Testing of the carrying amounts of transferred assets and liabilities by comparing the balances in the receiving entity to the balances in the merging entity. |
| liabilities had significant impact on the equity and balance sheet of Fellow Bank. |
There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014 with respect to the consolidated financial statements or the parent company financial statements.
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company's and the group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or to cease operations, or there is no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
We were first appointed as auditors by the annual general meeting on 13 March 2017. Our appointment represents a total period of uninterrupted engagement of 6 years.
The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion
If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard.
Helsinki 15th of March 2023 PricewaterhouseCoopers Oy Authorised Public Accountants
Authorised Public Accountant (KHT)
In addition to legislation and other regulations, Fellow Bank's operations and administration are guided by the Articles of Association and the company's values and internal operating principles. Fellow Bank also complies with the Corporate Governance Code 2020. The code can be viewed on the internet at www.cgfinland.fi/en.
Fellow Bank's highest decision-making power is exercised by the shareholders at the General Meeting. General Meetings are held at least once a year. In addition to the General Meeting, Fellow Bank's corporate governance model consists of the Board of Directors and the CEO. The Group's Management Team assists the CEO in the operative management of the company.
The Board of Directors is responsible for Fellow Bank's administration and appropriate organisation of operations. The Board of Directors has overall authority to decide on all matters related to the company's administration and other matters which, under the law or the Articles of Association, do not belong to the General Meeting or the CEO.
The Board of Directors meets regularly at least six times per year. If necessary, the Board of Directors can meet more often. The Board of Directors is quorate when more than half of the members are present. The Board of Directors is elected by the General Meeting.
In accordance with the Articles of Association, the company's Board of Directors shall consist of at least four (4) and at most eight (8) regular members whose term shall expire at the close of the Annual General Meeting that follows their election.
The company's corporate governance principles and a general description of governance before the merger have been published in a separate document, Fellow Bank Plc's Corporate Governance Statement, which can be found on the company's website, www.fellowbank.com
Fellow Bank Oyj began operations on April 2, 2022. In 2022, the company's board of directors included the following persons:
Markku Pohjola (Chairman of the Board) b. 1948 B.Sc. (Econ.)
Teuvo Salminen (Deputy Chairman of the Board) b. 1954 M.Sc. (Econ.)
Lea Keinänen b. 1966 graduate in business and marketing and MBA
Kai Myllyneva b. 1969 M.Sc. (Econ.)
Jorma Pirinen b. 1959 graduate in business and marketing and MBA
Tero Weckroth b. 1971 MBA
The Audit Committee is responsible for assisting the Board of Directors in ensuring that the company has an adequate internal control system covering all operations and that the company's risk management has been arranged appropriately, and it also monitors the financial statements reporting process.
The Chairman of the Audit Committee was Teuvo Salminen. The members of the committee were Jorma Pirinen and Tero Weckroth.
The Personnel Committee, which also acts as the Compensation Committee, is responsible for assisting the company's Board in the preparation of matters related to the terms of employment and remuneration of management and employees. The Personnel Committee monitors and assesses the company's wellbeing at work, personnel satisfaction and development.
The Chairman of the Personnel Committee was Markku Pohjola. The members were Lea Keinänen and Kai Myllyneva.
Fellow Bank Plc's Shareholders' Nomination Board prepares proposals regarding the election and remuneration of the members of the Board for the Annual General Meeting. In accordance with the charter of the Shareholders' Nomination Board, each of the four largest shareholders of the company shall appoint a member to the Shareholders' Nomination Board. The shareholders who are entitled to appoint a member are determined annually on the basis of the company's shareholder register maintained by Euroclear Finland Oy on the last working day of August each year
The CEO is responsible for the day-to-day management of the company in accordance with the Limited Liability Companies Act and the instructions, orders and authorisations issued by the Board. The CEO also ensures that the company's accounting practices are in compliance with the law and that the company's financial management has been arranged in a reliable manner.
The Board of Directors shall appoint the CEO and shall decide on the remuneration of the CEO and the other terms and conditions of the CEO's service contract.
The Management Team assists the CEO in the operational management. Teemu Nyholm was the CEO in 2022 (b. 1975, M.Sc. (Tech.) and B.Sc. (Econ. & Bus. Adm.)
Teemu Nyholm b. 1975 CEO M.Sc. (Tech.) and B.Sc. (Econ. & Bus. Adm.)
Antoni Airikkala b. 1985 Director, Deposit and Investor Customers M.Soc.Sc.
Riikka Järvinen b. 1974 Marketing Director M.Sc. (Econ. & Bus. Adm.) Member of the Management Team as of 19 April 2022.
Kukka Lehtimäki b. 1988 CFO (as of 2 May 2022) M.Sc. (Econ. & Bus. Adm.) Christina Wallenius was the interim CFO until 1 May 2022.
Juha Saari b. 1979 Director, Personal Customers; Deputy CEO Secondary-school graduate
Miikka Silvonen b. 1989 Director, Business Customers M.Sc. (Econ. & Bus. Adm.)
Piia Vuoti b. 1977 General Counsel (as of 8 August 2022) LL.M., Trained on the bench Linda Magnusson was the General Counsel until 13 May 2022.
Fellow Bank Plc Pursimiehenkatu 4 A
00150 Helsinki
P. +358 20 380 101 (0,1717 €/min)
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