1st half vestjyskbank Half-year Report

Transcription

1 1st half vestjyskbank Half-year Report

2 Management's Report Development of Activities and Economic Situation 3 Financial Highlights 5 Income Statement 9 Management's Statement 15 Income Statement 16 Balance Sheet 17 Statement of Changes in Shareholders' Equity 19 Notes to the Half-year Report 21

3 Management s Report 3 Development of Activities and Economic Situation Pre-tax profit for the first half of amounts to DKK 35m while profit after tax amounts to DKK 26m. Pre-tax profit for the second quarter of alone amounts to DKK 22m. As a result of the takeover of Bonusbanken as of 30 September and the merger with Ringkjøbing Bank on 2 December, any comparison with previous years is not meaningful. For the first half of, core earnings before impairment amount to DKK 241m, which is less than expected, primarily as a result of negative market value adjustments amounting to DKK 15.4m on sector shares in Sparinvest Holding A/S made in the first quarter of. From the first quarter to the second quarter of, vestjyskbank increased its core earnings before impairment by 33%, which is regarded as satisfactory. The total business volume at the end of the first half of amounts to DKK 48.8bn compared with DKK 47.4bn at the start of the year. As planned, and in line with expectations, the difference between the Bank s loans and advances and the Bank s deposits has been reduced by DKK 2.9bn since the end of as a result of increased deposits. For the first half of, impairment of loans and advances amounts to DKK 204m net which, when converted to a yearly basis, corresponds to 1.38% of the total loans and advances and guarantees against an expected impairment percentage for the year in the region of 0.5-1%. The fact that realised impairments exceed expectations can primarily be attributed to expected increased losses on property-related loan commitments taken over from Bonusbanken. Therefore, vestjyskbank now expects total impairments for the financial year to amount to between % of loans and advances and guarantees. Impairments are partly offset by entries of income from trade impairment of loans taken over from Ringkjøbing Bank, a situation which is expected to continue in the second half of.

4 4 At the end of the first half of the year, the solvency ratio has been calculated as 10.5, which is an increase of 0.7 percentage points compared with the end of. As stated in the Annual Report for, vestjyskbank has applied to participate in Banking Package II. Consequently, in the third quarter of, it is expected that approximately DKK 1.4bn will be injected in the form of hybrid core capital, thus raising the core capital ratio to 12. vestjyskbank maintains the previously reported expectation for core earnings for the financial year of DKK m before impairment on loans and advances and expenses for Banking Package I and Banking Package II. In both the first and second quarters of, market conditions were significantly impacted by the severe international slowdown which took hold in earnest in the second half of. Even if the challenging conditions of sluggish liquidity and a weakened money market, both in Denmark and internationally, have started to ease in, the financial crisis has been replaced by a real economic crisis with declining GNP and increasing unemployment. Thus, nationally, the number of notified foreclosure auctions has increased considerably, cf. Statistics Denmark, but we have only seen this to a limited extent among vestjyskbank customers. To counteract the effect of the economic crisis, the world s central banks have decreased interest rates on a regular basis during the first half of, and on the political front, a number of initiatives and aid packages have been introduced, again with the aim of limiting the scope of the crisis. Despite the fact that the consumer confidence indicator has improved considerably compared with the low point in December, optimism in the business sector nevertheless remains cautious, and at the end of the first half of, the prospect of an improvement in the near future is very small. Consequently, the indicators suggest that we will have to wait until the end of 2010 before we can expect to see a lasting improvement. In the short term, while the consequences of the economic downturn continue to impact on social development, vestjyskbank will focus on two areas. Firstly, we will seek to limit risks and improve core earnings by focusing on marginals and reducing costs. Secondly, we will seek to consolidate the Bank and ensure the smooth integration of the banks that make up the new vestjyskbank. Thus, following the merger with Ringkjøbing Bank and the takeover of Bonusbanken s banking activities, will be a year of consolidation. During both the first and second quarters, a number of organisational changes have been made with a view to being able to realise a synergy potential of DKK 75m in These changes have proceeded satisfactorily, which is due - in no small part - to our employees living up to our core values of PRESENCE, COMPE- TENCE and DYNAMISM. Furthermore, there have been changes in our branch network in that the Nørreport branch in Holstebro has been closed down and amalgamated with the Store Torv branch in Holstebro. In addition, the opening hours of several smaller branches have been changed. The IT consolidation of Ringkjøbing Bank and vestjyskbank will take place in the third quarter of.

5 Management s Report Financial Highlights 5 In the income statement for Bonusbanken is included from 1 October and Ringkjøbing Bank from 2 December. Financial highlights Income statement (DKK m) Net interest income Net fee income Dividends from shares, etc. Market value adjustment of foreign exchange and sector shares Other operating income Core income Operating expenses and depreciation Core earnings before impairment Impairment of loans and advances and accounts receivable, etc. excl. sector assignments Core earnings after impairment Other market value adjustments Profit after market value adjustments Sector assignment - Banking Package I Sector assignment - Impairment of loans and advances and accounts receivable, etc. Profit after expenses to sector assignments Badwill resulting from merger recognised as income Trade impairments recognised as income Merger costs Profit before tax Tax Profit 1st half 1st half Full year Balance sheet (DKK m) Loans and advances Deposits Shareholders equity Total assets Guarantees Business volume 23,781 16,226 24,069 19,303 9,943 16,643 2,230 1,795 2,200 34,117 20,377 32,216 5,718 3,582 6,731 48,802 29,751 47,443

6 Management s Report Financial Highlights 6 1 On the basis of average shareholders equity 2 Ordinary income relative to ordinary costs Ordinary income = net interest and fee income + market value adjustments + other operating income Ordinary costs = staff costs and admin istrative expenses + depreciation and impairment of intangible and tangible assets + other operating expenses + impairment of loans and advances and accounts receivable, etc. 3 Operating expenses and depreciation / core income 4 Interest rate risk relative to core capital after deductions 5 Foreign Exchange Indicator 1 relative to core capital after deductions 6 Excess coverage in compliance with the 10% requirement of Section 152 of the Danish Financial Business Act 7 Commitments larger than 10% of the capital base relative to the capital base 8 Excl. transferred OEI-impairments and trade impairments in connection with merger 9 Growth in loans and advances relative to vestjyskbanks loans and advances at the beginning of the period Key figures Solvency ratio Core capital ratio Return on equity before tax p.a. 1 Return on equity after tax p.a. 1 Earnings/costs 2 Cost percentage 3 Employees calculated as full-time staff (average) Interest rate risk 4 Foreign exchange position 5 Foreign exchange risk Excess coverage in compliance with statutory liquidity requirements 6 Loans and advances plus impairment of these relative to deposits Loans and advances relative to shareholders equity Growth in loans and advances for the period 9 Sum of large commitments 7 Accumulated impairment percentage 8 Accumulated impairment percentage incl. transferred OEI-impairments and trade impairments in connection with merger Impairment percentage for the period 1st half 1st half Full year 10.5% 11.2% 9.8% 6.9% 8.3% 6.4% 3.2% 15.1% 13.0% 2.4% 11.7% 13.2% % 50.0% 54.6% % 2.4% 2.9% 9.7% 50.1% 25.4% 0.1% 0.1% 0.1% 156.0% 58.5% 71.6% 126.2% 164.8% 146.4% % 11.4% 65.3% 61.9% 102.1% 80.5% 2.1% 0.9% 1.1% 4.5% 0.9% 3.9% 1.1% 0.1% 0.6% Profit for the period, per share (unit size DKK 10) Equity value, per share (unit size DKK 10) Price of vestjyskbank shares at the end of the period Market price/profit for the period, per share (unit size DKK 10) Market price/equity value, per share (unit size DKK 10)

7 Management s Report Financial Highlights Distributed by Quarter 7 Financial highlights Income statement (DKK m) Net interest income Net fee income Dividends from shares, etc. Market value adjustment of foreign exchange and sector shares Other operating income Core income Operating expenses and depreciation Core earnings before impairment Impairment of loans and advances and accounts receivable, etc. excl. sector assignments Core earnings after impairment Other market value adjustments Profit after market value adjustments Sector assignment - Banking Package I Sector assignment - Impairment of loans and advances and accounts receivable, etc. Profit after expenses to sector assignments Badwill resulting from merger recognised as income Trade impairments recognised as income Merger costs Profit before tax Tax Profit Q2 Q Balance sheet (DKK m) Loans and advances Deposits Shareholders equity Total assets Guarantees Business volume 23,781 23,703 19,303 18,639 2,230 2,216 34,117 34,541 5,718 5,614 48,802 47,956

8 Management s Report Financial Highlights Distributed by Quarter 8 1 On the basis of average shareholders equity 2 Ordinary income relative to ordinary costs Ordinary income = net interest and fee income + market value adjustments + other operating income Ordinary costs = staff costs and admin istrative expenses + depreciation and impairment of intangible and tangible assets + other operating expenses + impairment of loans and advances and accounts receivable, etc. 3 Operating expenses and depreciation / core income 4 Interest rate risk relative to core capital after deductions 5 Foreign Exchange Indicator 1 relative to core capital after deductions 6 Excess coverage in compliance with the 10% requirement of Section 152 of the Danish Financial Business Act 7 Commitments larger than 10% of the capital base relative to the capital base 8 Excl. transferred OEI-impairments and trade impairments in connection with merger 9 Growth in loans and advances relative to vestjyskbanks loans and advances at the beginning of the period Key figures Solvency ratio Core capital ratio Return on equity before tax p.a. 1 Return on equity after tax p.a. 1 Earnings/costs 2 Cost percentage 3 Employees calculated as full-time staff (average) Interest rate risk 4 Foreign exchange position 5 Foreign exchange risk Excess coverage in compliance with statutory liquidity requirements 6 Loans and advances plus impairment of these relative to deposits Loans and advances relative to shareholders equity Growth in loans and advances for the period 9 Sum of large commitments 7 Accumulated impairment percentage 8 Accumulated impairment percentage incl. transferred OEI-impairments and trade impairments in connection with merger Impairment percentage for the period Q2 Q1 10.5% 10.5% 6.9% 6.9% 4.0% 2.4% 3.2% 1.5% % 60.7% % 2.4% 9.7% 23.2% 0.1% 0.1% 156.0% 173.9% 126.2% 129.3% % -1.5% 61.9% 67.7% 2.1% 1.5% 4.5% 4.2% 0.7% 0.4% Profit for the period, per share (unit size DKK 10) Equity value, per share (unit size DKK 10) Price of vestjyskbank shares at the end of the period Market price/profit for the period, per share (unit size DKK 10) Market price/equity value, per share (unit size DKK 10)

9 Management s Report Income Statement 9 Core income has been calculated at DKK 556m for the first half of, which is slightly above expectations. In the second quarter of, realised core income was DKK 294m, which represents an increase of 12% compared with the previous quarter. For the first half of, net interest income is marginally below expectations which is a result of fewer loans being taken out and higher funding costs. The higher funding costs are a result of the delay between the time of the reduction in the interest rate on loans, advances and deposits and the time at which the reduction affects other fund- ing costs. On top of this, there is the increased cost of the improved liquidity vestjyskbank achieved in the first quarter. A considerable number of fixed term deposits were made at the time when interest rates were at their highest, and this has had a negative impact on core income for the first half of the year. Conversely, fees and commission income in the first half of were realised higher than expected as a result of the increased level of activity. The distribution of this income is shown in the table below. Fees and commission income are distributed as follows: Guarantee commission Securities trading and custody Money transmission services Loan processing fees Other fees and commissions Q2 DKK m Q1 Percentage distribution Q2 Q For the first half of, market value adjustment of currency and sector shares show a positive result of DKK 25m. This result has been affected by an impairment of DKK 15.4 on the value of holdings in Sparinvest Holding A/S and positive market value adjustments of DKK 25.6 on currency. Costs, including depreciation and impairment of tangible assets amount to DKK 315m for the first half of, which corresponds to a cost percentage of As expected, the cost percentage is above the Bank s long-term goal of a cost percentage of approximately 50, which is due to the fact that savings made from the restructuring of the organisation will not become visible before the end of the year. At the end of the first half of the year, the number of employees was 642, compared with 716 at the beginning of the year. Core earnings before impairment for the first half of the year subsequently amount to DKK 241m. In the second quarter of, core earnings were realised 34% higher than in the first quarter. Impairment of loans, advances and accounts receivable, etc. amounts to DKK 204m net for the first half of. Converted to an annual basis, impairment amounts to 1.38% of loans, advances and guarantees, which is higher than expected. This increase can primarily be attributed to increased losses

10 Management s Report Income Statement 10 in the second quarter of on propertyrelated loan commitments taken over from Bonusbanken. Impairment of loans, advances and accounts receivable etc. amounting to DKK 204m net, to which can be added DKK 38m relating to sector assignments, appears in the financial accounts under the item "Impairment of loans and advances and accounts receivable, etc." with an expense of DKK 317m and under the item "Other operating income" with an income of DKK 75m. The reason for this is that all new impairments on loans and advances and previous impairments in the original vestjyskbank recognised as income have been recorded under the item "Impairment of loans and advances and accounts receivable, etc.". Positive entries of income relating to previous impairment of commitments that have been taken over from Bonusbanken and Ringkjøbing Bank are to be recorded under the item "Other operating income". Similarly, entries of income from trade impairment of loans and advances taken over from Ringkjøbing Bank, amounting to DKK 77m, have been recorded under the item "Other operating income". Trade impairments are taken to income, when the commitments, on which trade impairments have been performed, are redeemed or are transferred to impairments as a result of decrease in value. and impairments taken over from Bonusbanken and Ringkjøbing Bank. Accumulated impairment and provisions amount to 4.5% of loans, advances and guarantees. Loans and advances with halted interest calculation amount to DKK 824m, which corresponds to 3.3% of total loans and advances. Other market value adjustments for the first half of show an overall positive market value adjustment of DKK 31m following negative market value adjustments of DKK 23m after the first quarter of. The item is comprised of positive market value adjustment of bonds totalling DKK 53m, positive market value adjustment of shares totalling DKK 13m, negative market value adjustment of financial instruments totalling DKK 31m and negative market value adjustments on other assets and liabilities etc. totalling DKK 5m in the first half of the year. Market value adjustments have been positively impacted by decreasing interest rate levels and the fact that the credit spread narrowed in. At the same time, the stock market has become more positive. Banking Package I has been charged at DKK 91m, which comprises guarantee commission totalling DKK 53m and impairment of the guarantee totalling DKK 38m. Accumulated impairment after the first half of amounts to DKK 1,132m, to which is added trade impairment of loans and advances from Ringkjøbing Bank of DKK 188m, and impairment on guarantees totalling DKK 68m, giving a total of DKK 1,388m. Accumulated impairment and provisions are composed of impairments in vestjyskbank totalling DKK 639m

11 Management s Report Income Statement 11 Loans, advances and guarantees as at 30/06/ Private Agriculture, hunting, forestry and fishing Manufacturing industry, raw material extraction, power, gas, water, public utilities Construction and civil engineering contractors Trade, restaurant and hotel businesses Transport, post and telecommunications Credit and financing institutes and insurance businesses Property administration, real estate and business service Other industries 7% 2% 9% 17% 6% 4% 10% 29% 16% Balance Sheet As at 30 June, vestjyskbank s balance sheet amounts to DKK 34.1bn, compared with DKK 32.2bn at the end of. Since the beginning of the year, total loans and advances have been reduced by DKK 288m to DKK 23.8bn and are in line with expectations. As at 30 June, the sum of large commitments amounts to 61.9% compared with 80.5% at the end of. vestjyskbank has four commitments that exceed 10% of the capital base. Loans, advances and guarantees distributed by sector are shown in the graph to the left. A further breakdown of the spread of loans, advances and guarantees is shown in the table below. Loans, advances and guarantees Up to and incl. DKK 100,000 From DKK100,001 up to/incl. DKK 250,000 From DKK 250,001 up to/incl. DKK 500,000 From DKK 500,001 up to/incl. DKK 1,000,000 From DKK 1,000,001 up to/incl. DKK 2,000,000 From DKK 2,000,001 up to/incl. DKK 5,000,000 From DKK 5,000,001 up to/incl. DKK 10,000,000 From DKK 10,000,001 up to/incl. DKK 20,000,000 From DKK 20,000,001 up to/incl. DKK 50,000,000 From DKK 50,000,001 up to/incl. DKK 100,000,000 From DKK 100,000,001 up to/incl. DKK 200,000,000 From DKK 200,000,001 up to/incl. DKK 500,000,000 From DKK 500,000,001 up to/incl. DKK 1,000,000,000 Over DKK 1bn Total Number DDK t % of total Accumulated % of total 13, , , , ,005 1,344, ,758 1,797, ,877 2,489, ,332 3,712, ,891, ,625, ,701, ,255, ,087, ,642, ,059, ,718 30,888, The sum of commitments totalling between DKK 0 2m represents 22% of the Bank s total loans, advances and guarantees. Commitments over DKK 2m and up to DKK 10m account for approximately 22%. Commitments over DKK 10m and up to DKK 50m account for approximately 30%, and commitments over DKK 50m account for approximately 25%. We

12 Management s Report Income Statement 12 Supplementary capital distributed by maturity date (final end date) ,000, ,000, ,643, ,705, ,000,000 PERP 97,940,000 1,196,288,000 Supplementary capital distributed by possible settlement date (1st call date) 60,000, ,705, ,643, ,000, ,000, ,940,000 1,196,288,000 Senior loans distributed by maturity date 2,170,000, ,001,000, ,357,000, ,374,000,000 9,902,000,000 consider this spread in the size of commitments to be satisfactory. The areas in which vestjyskbank has particular competences include agriculture, wind turbines, camping and leisure, fishing and the private healthcare sector. Earnings from the agricultural sector have been and continue to be unsatisfactory, even though there has been an improvement in conditions for pig farmers. We do not expect to see significant improvements in this area before The wind turbines financed by vestjyskbank are operating satisfactorily, and the settlement of loans is progressing quicker than estimated. In the camping and leisure sector, and in the private healthcare sector, earnings continue to be stable, while the fishing industry has been badly hit by declining prices. In general, other sectors have seen a marked decline in the level of activity as a result of the economic crisis. From the end of to the end of the first half of, deposits increased by 16% which is particularly satisfying. Thus, the plan to reduce the gap between loans and advances and deposits, which in the first half of the year were reduced from DKK 8.1bn to a present level of DKK 5.2bn, is being adhered to. The Bank s guarantees have decreased from DKK 6.7bn at the end of to DKK 5.7bn. The total business volume total loans, advances, deposits and guarantees subsequently amounts to DKK 48.8bn compared with DKK 47.4 at the end of. With a view to locating the advisory function "Housing, investment and pension" in the same building as the other employees in Herning, vestjyskbank has during the second quarter of acquired further sections of the premises in Herning where the branch is located. The advisory function is currently accommodated in the original Bonusbanken building. The intention is to sell or lease this building. Liquidity At the end of the first half of, vestjysk- BANK s liquidity is good. Excess coverage in compliance with statutory liquidity requirements is 156.0% compared with 71.6% at the end of. vestjyskbank s liquidity is a minimum excess coverage of 50% in compliance with the aforementioned requirements. Consequently, the Bank's liquidity requirement has been fulfilled. The effect of Banking Package I on the liquidity situation has been felt in earnest in with a marked improvement compared to the end of. In Banking Package II there is an optional transitional scheme whereby the government will make available a separate guarantee for loans taken out before the end of 2010 at the latest. This guarantee will be applicable until the end of The Executive Management of vestjysk- BANK has not yet decided whether the Bank will make use of this transitional scheme. An overview of maturity dates on senior loans appears in the table to the left, while vestjysk- BANK's funding structure is depicted in the diagram on the following page. Solvency and shareholders' equity At the end of the first half of, vestjysk- BANK's solvency ratio was 10.5% compared with 9.8% at the start of the year. After addition of the profit for the period, shareholders' equity amounted to DKK 2.2bn as at

13 Management s Report Income Statement 13 Funding structure as at 30 June Deposits Debt to credit institutions and central banks Issued bonds Capital base Total 16% 17% 9% 18,593 DKKm 5,129 DKKm 5,350 DKKm 3,022 DKKm 32,094 DKKm 58% 30 June. Developments in shareholders equity since the end of appear in the breakdown of shareholders equity. As at 30 June, subordinated debt amounts to DKK 1,196m. An overview of the maturity structure appears in the tables. vestjyskbank has applied for participation in Banking Package II, and it is expected that approximately DKK 1.4bn will be injected in hybrid core capital during the third quarter of, with the result that the core capital ratio will be brought up to 12, and the solvency ratio will rise to approximately After deductions, core capital amounts to DKK 2.9bn as at 30 June, and weighted items amount to DKK 27.6bn as of the same date. Ownership As of 30 June there were 43,887 shareholders listed by name. Together, they own 96.2% of the share capital. The 10 largest shareholders own 20.7% of the share capital, and 70% of the share capital is held by 4,118 shareholders. Thus, vestjyskbank has a large number of shareholders with small shareholdings. In accordance with Article 28a of the Danish Public Companies Act, no shareholder has informed the Bank that they own more than 5% of the share capital or associated voting rights. The closing rate of vestjyskbank shares increased from the closing rate of 46.0 at the end of to a closing rate of 79.5 on 30 June. As of 1 July, Nasdaq OMX Copenhagen has decided to close the Plus segments where vestjyskbank was part of the Midcap+ segment. This means that vestjyskbank shares are no longer part of any special share index. Expectations for vestjyskbank maintains the previously reported expectations for core earnings for the year of DKK m before impairment of loans and advances and expenses for Banking Package I and Banking Package II. As outlined above, the need for impairment has proven to be greater than previously expected. Now, impairment is expected to amount to % of loans, advances and guarantees, compared with the previously forecast figure of %. There is a great degree of uncertainty regarding this item due to the uncertain economic situation. Up to now, impairment of loans and advances to retail customers has been very limited. It must be expected that the continued increase in unemployment will result in an increased need for impairment of loans and advances to retail customers, just as there is expected to be a greater need for impairment of loans and advances to corporate customers. However, impairments will in part be offset by entries of income from trade impairment of loans and advances taken over from Ringkjøbing Bank. The expectations outlined above are based on the assumption that the macro-economic conditions that were described at the beginning of this report from the management will continue to apply in the second half of. Recognistion and measuring Assets are recognised in the balance sheet when, as a consequence of an earlier occur-

14 Management s Report Income Statement 14 rence, it is probable that future financial benefits will accrue to the Bank, and the value of the asset can be measured reliably. Liabilities are recognised in the balance sheet when the Bank, as a consequence of an earlier occurrence, has a legal or actual liability to do so, and when it is probable that any future economic benefit will flow from the Bank, and the value of the liability can be measured reliably. Upon first recognition, assets and liabilities are measured at current value. However, tangible assets are measured at cost at the time of first recognition. For the purposes of recognition and measurement, the Bank makes allowance for any predictable risks or losses which occur before the Report is presented and which confirm or invalidate circumstances existing on the date of the balance sheet. In the income statement, income is recognised as earned, whereas the expenditure is recog nised with the amounts relating to the accounting period. However, any increase in the value of owner-occupied property is recognised directly in the shareholders' equity. Financial instruments are recognised on the day on which settlement occurs. The Bank does not practise segment reporting, as neither the Bank s activities nor its geographical markets deviate from each other to a considerable extent. Accounting policies The accounting policies have not changed in relation to last year. During the third quarter of, it is expected that the IT consolidation of vestjyskbank and Ringkjøbing Bank will be completed. In connection with this, there will be administrative changes in the way OEI-impairments from Bonusbanken and Ringkjøbing Bank are handled given that changes in these impairments will be recorded under the item "Impairment of loans and advances and accounts receivable, etc."

15 Management s Statement 15 Financial calendar 28 October Quarterly Report, Q1-3 Management's Statement The Board of Directors and the Executive Management have today reviewed and approved the report for Vestjysk Bank A/S for the period 1 January 30 June. The Half-year Report has been presented in accordance with the Danish Financial Business Act, including the Executive Order on Financial Reporting for Credit Institutions and Investment Companies, etc. and furthermore, the Danish disclosure requirements for interim financial reports for listed financial institutions. The Management's Report is considered as containing a fair review of the development in the Bank s activities and financial issues as well as a fair description of the significant risks and elements of uncertainty by which the Bank can be affected. The accounting policy used is considered appropriate, inasmuch as the Report provides a fair view of the Bank s assets, liabilities, financial position and profit/loss. The report has not been audited or reviewed. Lemvig, 5 August Executive Management Frank Kristensen Preben Knudsgaard The Board of Directors Anders Kristian Bech Poul Hjulmand Peter Mortensen Kirsten Lundgaard-Karlshøj Carl Olav Birk Jensen Peder Hesselaa Nielsen Peter Bækkelund Rasmussen

16 Income Statement 16 Note no. 1 Interest income 2 Interest expenses Net interest income Dividends of shares, etc. 3 Fees and commission income Paid fees and commission expenses Net interest and fee income 4 Market value adjustments Total other operating income Reversed acquired impairment Trade impairment Badwill resulting from merger Other operating income 5-7 Staff costs and administrative expenses 8 Depreciation and impairment of intangible and tangible assets Other operating expenses Impairment of loans and advances and accounts receivable, etc. Pre-tax profit 9 Tax Profit 1st half 1st half Full year 946, ,204 1,456, , , , , , ,163 6,830 5,416 5, ,852 73, ,549 10,418 6,784 15, , , ,185 56,338 10,733-58, ,029 1, ,978 74, , ,338 3,094 1,232 2, , , ,384 9,234 3,759 13,272 52, , ,539 13, ,031 35, , ,729 9,488 29,892-3,672 26, , ,401

17 Balance Sheet 17 Note no. Assets Cash in hand and demand deposits at central banks Accounts receivable at credit institutions and central banks 11 Loans and advances and other accounts receivable at amortised cost price 11, 12 Bonds carried at current value 13 Shares, etc. 14 Assets relating to pooled funds schemes 15 Intangible assets Total land and buildings 16 Investment properties 17 Domicile properties 18 Other tangible assets Current tax assets Deferred tax assets Assets in temporary possession Other assets Prepayments Total assets 31/12 701, , ,938 2,889, , ,252 23,780,952 16,226,125 24,069,237 4,238,106 2,759,714 4,535, , , , , , , , , , ,523 9, , , , ,272 15,673 7,044 16,478 54,583 17,935 53, , ,752 7, , , ,893 25,859 13,487 24,111 34,117,361 20,377,287 32,215,933 Liabilities Debt Debt to credit institutions and central banks 19 Deposits and other amounts due Deposits in pooled funds schemes Issued bonds carried at amortised cost price Current tax liabilities Other liabilities Prepayments Total debt 5,128,519 6,052,634 7,349,500 18,593,475 9,943,491 15,991, , ,407 5,349,780 1,500,750 3,798, , ,075 1,001, ,594,140 17,867,954 28,793,124 Provisions for liabilities Provisions for pensions and similar liabilities Provisions for deferred tax Provisions for losses on guarantees Other provisions for liabilities Total provisions for liabilities Continued on following page 20,592 10,984 20, , ,554 13,358 29,439 7, ,054 27,097 50,126

18 Balance Sheet 18 Note no. Subordinated debt 20, 22 Subordinated debt Shareholders equity 21, 22 Share capital Revaluation reserves Earnings retained / loss brought forward Total shareholders equity Total liabilities 31/12 1,196, ,581 1,172, ,000 86, ,000 30,848 15,750 30,848 2,074,031 1,692,905 2,044,373 2,229,879 1,794,655 2,200,221 34,117,361 20,377,287 32,215,933

19 Statement of Changes in Shareholders' Equity 19 Shareholders' equity, beginning of Movements in shareholders' equity in : Profit for the period Total income Share capital Revaluation reserves Earnings retained Proposed dividends Total shareholders equity 125,000 30,848 2,044, ,200,221 26,203 26,203 26,203 26,203 Additions, sale of own shares Outflow, acquisition of own shares Tax relating to own shares Distributed dividends Total movements in shareholders equity Shareholders' equity, end of Q2 96,687 96,687-92,415-92, , , ,000 30,848 2,074, ,229,879 Shareholders' equity, beginning of Movements in shareholders' equity in : Profit for the period Total income Share capital Revaluation reserves Earnings retained Proposed dividends Total shareholders equity 86,000 15,750 1,569,291 43,000 1,714, , , , ,933 Additions, sale of own shares Outflow, acquisition of own shares Tax relating to own shares Distributed dividends 125, , , ,578 8,911 8, ,000-42,036 Total movements in shareholders equity Shareholders' equity, end of Q ,614-43,000 80,614 86,000 15,750 1,692, ,794,655 Continued on following page

20 Statement of Changes in Shareholders' Equity 20 Shareholders' equity, beginning of Movements in shareholders' equity in : Appreciation after tax for the year Profit for the year Total income Share capital Revaluation reserves Earnings retained Proposed dividends Total shareholders equity 86,000 15,750 1,569,291 43,000 1,714,041 15,098 15, , ,401 15, , ,499 Additions, sale of own shares Outflow, acquisition of own shares Tax relating to own shares Distributed dividends 195, , , ,502 19,606 19, ,000-42,034 Shares issued in connection with merger Total movements in shareholders equity Shareholders' equity, end of 39, ,000 15, ,082-43, , ,000 30,848 2,044, ,200,221

21 Notes to the Half-year Report 21 Note no. 1 Interest income Accounts receivable at credit institutions and central banks Loans and advances and other accounts receivable Bonds Derivative financial instruments Foreign exchange contracts Interest rate contracts Total derivate financial instruments Other interest income Total interest income 2 Interest expenses Credit institutions and central banks Deposits and other amounts due Issued bonds Subordinated debt Other interest expenses Total interest expenses 3 Fees and commission income Securities trading and custody Money transmission services Loan processing fees Guarantee commission Other fees and commissions Total fees and commission income 4 Market value adjustments Bonds Shares, etc. Foreign exchange Derivative financial instruments Foreign exchange contracts Interest rate contracts Share contracts Raw material contracts Total derivate financial instruments Assets relating to pooled funds schemes Deposits in pooled funds schemes Other assets Other liabilities Total market value adjustments 1st half 1st half Full year 34,204 13,080 26, , ,019 1,262, ,563 54, ,638 29,541 5,198 23, ,593 13,185 30,463 13,791 36, , , ,204 1,456, , , , , , , ,002 46, ,549 31,241 19,218 46, , ,256 16,781 40,930 18,035 11,627 27,124 15,349 8,700 18,565 47,161 29,654 54,956 18,051 6,645 15, ,852 73, ,549 53,051-44,574-12,426 13,158 23,100-27,016 25,861 11,291 10,017 1,139 22,511 8,070-33,432 3,420-39,895 1,665 2,184 3, ,649 28,115-27,834 72, ,637-72, ,637 2,748-3,000 10,710-7,831-4,199-11,452 56,338 10,733-58,001

22 Notes to the Half-year Report 22 Note no. 5 Staff costs and administrative expenses Salaries and remuneration to the Board of Directors, Executive Management and Board of Representatives Board of Directors Executive Management: Salaries Pensions Total Executive Management The Bank does not uphold agreements with the Executive Management in relation to bonus or incentive schemes or similar renumeration schemes. Board of Representatives Total Staff costs Salaries Pensions Expenses for social security Total Other administrative expenses Total staff costs and administrative expenses 6 Number of employees The average number of employees in the financial period, calculated as fulltime employees 7 Pension conditions Members of the Executive Management may resign without notice before expiry of the year in which the member turns 62. The Bank is exempt from any pension liability in relation to resignation, be it on account of age, illness, disability or any other reason. 8 Depreciation and impairment of intangible and tangible assets Intangible assets Total land and buildings Other tangible assets Total depreciation and impairment of intangible and tangible assets 1st half 1st half Full year ,875 1,393 3,110 1, ,609 4,209 1,672 4, ,796 2,196 5, ,970 95, ,602 18,544 11,047 24,262 16,243 10,213 22, , , , ,028 70, , , , , ,147 1,407 6,448 5,339 2,352 6,824 9,234 3,759 13,272

23 Notes to the Half-year Report 23 Note no. 9 Tax Calculated tax of profit for the period Deferred tax Deferred adjustment of calculated tax from previous years Total tax Effective tax rate Current tax rate Adjustments to this: Non-deductible expenses Non-taxable incomes Badwill resulting from merger Property depreciation, etc. Total effective tax rate 10 Impairment of loans and advances and accounts receivable For, the item comprises impairment performed in Bonusbanken from 1 October and in Ringkjøbing Bank from 2 December. Individual impairment Individual impairment of loans and advances and other accounts receivable at beginning of year Impairment during period Reversal of impairment made during previous financial years Other movements Previous individual impairment finally lost Individual impairment of loans and advances and other accounts receivable at end of period No impairment charges have been recognised to accounts receivable at credit institutions or to other accounts receivable. However, provisions have been made for losses on guarantees, cf. the liability item Provisions for losses on guarantees. 1st half 1st half Full year 0 22, ,488 7,532-3, ,488 29,892-3, % 25.0% 25.0% 2.6% 0.1% 0.1% -1.8% -2.4% -1.8% 0.0% 0.0% -24.7% 0.8% 0.0% 0.0% 26.6% 22.7% -1.4% 288, , , ,977 36, ,526-54,042-33,974-56,288 9,474 4,875 4,875-18,201-13,282-20, , , ,429

24 Notes to the Half-year Report 24 Note no. 10 Collective impairment Collective impairment of loans and advances and other accounts receivable at beginning of year Impairment during period Reversal of impairment performed in previous financial year Other movements Collective impairment of loans and advances and other accounts receivable at end of period Accumulated impairment percentage for loans and advances and accounts receiveable Acquired OEI-impairments and trade impairments Acquired impairments, Bonusbanken Acquired OEI-impairments, Ringkjøbing Bank Trade impairments, Ringkjøbing Bank Total acquired OEI-impairments and trade impairments Total impairment of loans and advances and accounts receivable Accumulated impairment percentage incl. transferred OEI-impairments and trade impairments 11 Reclassification of assets Reclassification has been performed as at 1 July with the following amounts: The item Loans and advances and accounts receiv able at amortised cost price has been increased by The item Bonds carried at current value has been decreased by Booked value of reclassified assets, end of period Current value of reclassified assets, end of period 1st half 1st half Full year 14,143 3,710 3,710 30,195 3,996 13, ,962-3, ,401 6,036 14, % 1.0% 1.2% 286, , , , , , , ,221 1,320, ,276 1,211, % 1.0% 4.8% 32, ,606 32, ,606 19, ,606 11, ,355

25 Notes to the Half-year Report 25 Note no. 11 Difference, which has affected profit for the period before tax positively by The reclassified assets have been current value adjusted in the financial year with Reclassification has been performed on selected corporate bonds. 12 Bonds carried at current value Mortgage credit bonds Government bonds Additional bonds Total bonds at current value Pledged as security for drawing right at Danmarks Nationalbank: Total nominal value Total market value Of which charged 13 Shares, etc. Shares / investment units listed at Nasdaq OMX Copenhagen Shares / investment units listed at other stock exchanges Unlisted shares carried at current value Unlisted shares, etc. carried at cost price Additional shares Total shares, etc. 14 Assets relating to pooled funds schemes Cash deposit / not invested Bonds Shares, etc. Other assets Total assets relating to pooled funds schemes Profit of pooled funds: Interest income Dividends Market value adjustments Fees and commission expenses Total profit of pooled funds 31/12 2,169 19,251-12, ,867,954 2,382,785 4,138, , , , ,974 4,238,106 2,759,714 4,535, , ,357 1,641, , ,263 1,618, , ,710 86,735 89,685 80,614 25,242 26,332 22, , , ,930 11,887 10,718 8, ,472 48, , , , ,974 1, , , , , ,610 1, , , ,407 7, ,294 7, , ,017 4, ,214 72, ,637

26 Notes to the Half-year Report 26 Note no. 15 Intangible assets Customer relations in connection with takeover of Bonusbanken Goodwill in connection with takeover of Bonusbanken Total intangible assets Total cost price beginning of period Additions in course of period Total cost price end of period Depreciation and impairment beginning of period Depreciation and impairment for the period Depreciation and impairment end of period Booked holdings at balance sheet date 16 Investment properties Market value at end of previous financial period Additions in course of period Adjustment for the period at market value Market value at balance sheet date 17 Domicile properties Revalued value at end of previous financial year Additions in course of period, including improvements Outflow during course of period Depreciation Value adjustments recognised directly in the shareholders equity during course of period Value adjustments recognised in the income statement during course of period Revalued value at time of balance sheet 18 Other tangible assets Cost price Cost price at end of previous financial year Additions in course of period, including improvements Outflow during course of period Total cost price at balance sheet date 31/12 14, ,964 96, , , , , , , , , ,554 9, , , , , , ,189 26, , ,147 1,407 3, , , , , ,272 28,409 15,492 15,492 4,735 1,596 16,321 1, ,404 31,205 16,535 28,409

27 Notes to the Half-year Report 27 Note no. 18 Depreciation and impairment Depreciation and impairment at end of previous financial period Depreciation for the period Depreciation and impairment for the period of sold and withdrawn shares The period's reversal of impairment recognised during previous years, as well as reversal of total depreciation and impairment of assets sold or withdrawn during course of period Total depreciation and impairment at balance sheet date Booked holdings at balance sheet date 19 Deposits and other amounts due On demand At notice Time deposits Special deposits Total deposits 20 Subordinated debt Supplementary capital of EUR 15m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 31/10/2010. Supplementary capital of DKK 100m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 1/11/2010. Supplementary capital of NOK 135m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 16/05/2011. Supplementary capital of DKK 100m Current interest rate Date of maturity 31/12 11,931 7,692 7,692 5,214 2,352 6, , ,585 15,532 9,491 11,931 15,673 7,044 16,478 9,209,111 5,544,386 8,646, ,747 95, ,305 7,067,962 3,052,716 4,785,713 2,182,655 1,251,370 2,135,092 18,593,475 9,943,491 15,991, , , , % 5.931% 5.944% 31/10/ /10/ /10/ , , , % 6.073% 7.433% 01/11/ /11/ /11/ , , , % 7.240% 6.990% 16/05/ /05/ /05/ , , , % 6.023% 7.383% 01/05/ /05/ /05/2015

28 Notes to the Half-year Report 28 Note no. 20 The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 01/05/2012. Supplementary capital of DKK 100m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 18/02/2013. Supplementary capital of DKK 100m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 22/02/2013. Supplementary capital of DKK 25m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 03/03/2011. Supplementary capital of DKK 25m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 03/03/2013. Supplementary capital of DKK 50m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 01/11/2010. Supplementary capital of DKK 60m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 20/08/. Supplementary capital of DKK 100m Current interest rate Date of maturity 31/12 100, , , % 6.672% 6.673% 18/02/ /02/ /02/ , , , % 6.672% 6.673% 22/02/ /02/ /02/ ,000 25,000 25, % 6.672% 7.273% 03/03/ /03/ /03/ ,000 25,000 25, % 5.922% 6.523% 03/03/ /03/ /03/ ,000 50, % 6.532% 01/11/ /11/ ,000 60, % 7.310% 20/08/ /08/ , , % 7.433% 01/11/ /11/2013

29 Notes to the Half-year Report 29 Note no. 20 The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 01/11/2010. Supplementary capital of NOK 200m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 01/09/2011. Supplementary capital of DKK 50m Current interest rate Date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 31/10/2012. Hybrid core capital of DKK 100m Current interest rate No date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid on 15/11/2015. Total subordinated debt Subordinated debt to be stated as part of the capital base Costs in connection with raising loans Interest relating to subordinated debt included in the income statement 21 Share capital Number of shares of DKK 10 (no. of units) Total share capital 22 Own shares Beginning of period Number of own shares in units of 1,000 Face value in DKK 1,000 Percentage of share capital Additions Acquisition of own shares in units of 1,000 Face value in DKK 1,000 Percentage of share capital Total acquision price in DKK 1,000 31/12 165, , % 6.730% 01/09/ /09/ ,000 50, % 6.373% 31/10/ /10/ ,940 97, % 4.765% 1,196, ,581 1,172,462 1,196, ,581 1,172, ,241 19,218 46,102 12,500,000 8,600,000 12,500, ,000 86, , ,946 3,353 3, % 3.9% 3.9% 1, ,215 14,523 5,341 12, % 6.2% 9.7% 92, , ,502

30 Notes to the Half-year Report 30 Note no. 22 Outflow Sale of own shares in units of 1,000 Face value in DKK 1,000 Percentage of share capital Total sales price in DKK 1,000 End of period Number of own shares in units of 1,000 Face value in DKK 1,000 Percentage of share capital Trading of own shares is part of the Bank s general share trading. 23 Contingent liabilities Financial guarantees Loss guarantees for mortgage credit loans Land registration and conversion guarantees Other contingent liabilities Total Other contingent liabilities Other liabilities Total 24 Capital requirement Shareholders equity at end of year Earnings factored in Revaluation reserves Intangible assets Deferred capitalised tax assets Other deductions in core capital Hybrid core capital Core capital after deductions Subordinated loan capital Revaluation reserves Capital base before deductions Deductions in capital base Capital base after reductions Total weighted items Core capital after deductions in percent of total weighted items Solvency ratio according to section 124(2) of the Danish Financial Business Act 31/12 1, ,257 15,655 6,125 12, % 7.1% 10.0% 96, , , ,814 2,569 2, % 3.0% 2.4% 2,577,010 1,296,271 3,395, , , , , , ,303 1,803,129 1,432, ,468 5,717,716 3,582,136 6,730,712 6,246 2,803 10,544 6,246 2,803 10,544 2,203,676 1,692,722 1,941, , ,401-30,848-15,750-30, , , , , ,061-54, ,255 97, ,041 1,893,472 1,723,945 1,892,854 1,098, ,581 1,075,421 30,848 15,750 30,848 3,022,668 2,377,276 2,999, ,061-54, ,255 2,890,607 2,322,316 2,881,868 27,574,585 20,735,744 29,379, % 8.3% 6.4% 10.5% 11.2% 9.8%

31 In vestjyskbank, we are oriented towards sound growth and solid financial latitude for our customers as well as ourselves. Our Head Office is situated in Lemvig, while our branches are located in 24 towns in Jutland and on the island of Funen. The Bank has 642 employees, who work with approximately 110,000 retail customers and approximately 10,000 corporate customers. At present, the Bank has a business volume of DKK 47.9bn. vestjyskbank applies value-based management based on our three core values: PRESENCE, COMPETENCE and DYNAMISM. bureaufrydensberg.dk Head Office Torvet 4-5 DK-7620 Lemvig Phone Hvide Sande Bredgade 4 DK-6960 Hvide Sande Phone Ringkøbing Torvet 2 DK-6950 Ringkøbing Phone Thyborøn Bredgade 2 DK-7680 Thyborøn Phone Bøvlingbjerg Tangsøgade 23 DK-7650 Bøvlingbjerg Phone Ikast Sieferts Plads 1 DK-7430 Ikast Phone Silkeborg Borgergade 28 DK-8600 Silkeborg Phone Viborg St. Sct. Peder Stræde 4 DK-8800 Viborg Phone Esbjerg Kongensgade 70 DK-6700 Esbjerg Phone Kolding Esbjergvej 20 DK-6000 Kolding Phone Skjern Bredgade 38 DK-6900 Skjern Phone Videbæk Bredgade 38 DK-6920 Videbæk Phone Harboøre Søndergade 28 DK-7673 Harboøre Phone Lem Bredgade 62 DK-6940 Lem Phone Spjald Hovedgaden 43 DK-6971 Spjald Phone Ørnhøj Hovedgaden 37 DK-6973 Ørnhøj Phone Herning Dalgasgade 29 B DK-7400 Herning Phone Lemvig Torvet 4-5 DK-7620 Lemvig Phone Key Accounts Torvet 4-5 DK-7620 Lemvig Phone Århus Åboulevarden 67 DK-8000 Århus C Phone Holstebro Vestergade 1 DK-7500 Holstebro Phone Odense Holkebjergvej 75 DK-5250 Odense SV Phone Struer Vestergade 5 DK-7600 Struer Phone Horsens Grønlandsvej 1B DK-8700 Horsens Phone Randers Store Voldgade 4 DK-8900 Randers C Phone Thisted Jernbanegade 19 DK-7700 Thisted Phone