Q1-Q vestjyskbank Quarterly Report

Transcription

1 Q1-Q vestjyskbank Quarterly Report

2 2 Management's Report Development of Activities and Financial Situation 3 Financial Highlights 5 Income Statement 9 Financial Calendar 15 Management's Statement 16 Auditors' Statements 17 Income Statement 19 Balance Sheet 20 Statement of Changes in Shareholders' Equity 22 Notes to the Quarterly Report 24

3 Management s Report 3 Development of Activities and Financial Situation Pre-tax profit for the period 1 January to 30 September 2009 amounts to DKK 29m while profit after tax amounts to DKK 22m. Taken in isolation, the third quarter of 2009 shows a negative result of DKK 6m before tax, compared with positive results of DKK 22m and DKK 13m for the second and first quarters of 2009, respectively. The declining result before tax from the second to the third quarters of 2009 is primarily due to lower "Other market value adjustments". As a result of the takeover of Bonusbanken as of 30 September 2008 and the merger with Ringkjøbing Bank on 2 December 2008, any comparison with previous years is not meaningful. Costs for the period amount to DKK 462m, corresponding to a cost percentage of 55.9, which is in line with expectations. Core earnings before impairment amount to DKK 366m for the period, which is at the lower end of the prediction interval. This is essentially a result of the negative market value adjustment of DKK 15.4m in sector shares in Sparinvest Holding A/S carried out in the first quarter of 2009 and the declining interest rate which has had a negative impact on net interest income during the period. From the first quarter to the second quarter of 2009, vestjyskbank increased its core earnings before impairment by 33%, and from the second quarter to the third quarter, core earnings decreased by 9% as a result of lower net fee income. On the basis of the realised result for the period and taking due account of the expected level of activity for the remainder of the financial year, the expectations for core earnings for 2009 have been narrowed. Consequently, vestjysk- BANK expects to realise core earnings of DKK m, compared to a previous figure of DKK m, before impairment of loans and advances and the cost of Banking Packages I and II in "Other market value adjustments" are positive to the tune of DKK 63m, which Executive Management deems satisfactory. The total business volume at the end of September 2009 amounts to DKK 47.1bn compared with DKK 47.4bn at the start of the year. As planned, and in line with expectations, the

4 Management s Report 4 difference between loans and advances and deposits has been reduced by DKK 2.0bn since the end of 2008 as a result of deposits increas ing by DKK 1.5bn and loans and advances being reduced by DKK 0.5bn. At the end of June, the span had been reduced by DKK 2.9bn. The difference is attributable to term deposits, which have decreased. The difference between loans and advances and deposits is expected to remain constant at the current level. Impairment of loans and advances for the period, excluding sector assignments, amounts to DKK 289m net which, when converted to a yearly basis, amounts to 1.32% of all loans and advances and guarantees. Thus, the impairment percentage is marginally lower than it was after the second quarter of 2009 and is in line with the latest reported expectations of an impairment percentage for the year in the region of %. The expectations are therefore maintained. As at 30 September 2009, the solvency ratio has been calculated as 15.5, which is an increase of 5.7 percentage points compared with the end of Essentially, this increase is due to the injection of hybrid core capital amounting to DKK 1,438bn from Banking Package II, which the Bank signed up to in the third quarter of Market conditions continue to be signifi cantly impacted by the substantial international slowdown. Despite an improvement in liquidity conditions and greater confidence in the money markets, real economies continue to be characterised by a decrease in GDP, increasing unemployment and a high degree of uncertainty. Nationally, the number of notified foreclosure auctions has increased considerably cf. Statistics Denmark, and although it is still on a limited scale, vestjyskbank's customers are being affected by this development. The series of interest rate reductions continued in the third quarter, including in Denmark, where Danmarks Nationalbank has reduced the rate further in order to narrow the interest rate differential with the EURO. Thus, Nationalbanken s rate of interest on loans and advances is now at a historically low level. In the short term, while the consequences of the economic downturn continue to impact on social development, vestjyskbank will focus on two areas. Firstly, the Bank will seek to limit risks and improve core earnings by focusing more intensely on margins and reducing costs. Secondly, we will seek to consolidate the Bank and ensure a smooth completion of the integration of the banks that make up the new vestjyskbank. In so doing, the intention is to realise synergy potentials of DKK 75m in 2010, and with the changes that have been implemented, we expect to achieve this goal. The IT consolidation of Ringkjøbing Bank and vestjyskbank took place in the third quarter of 2009 and proceeded satisfactorily.

5 Management s Report Financial Highlights 5 In the income statement for 2008 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 - Banking Package II 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 Q1-Q Q1-Q Full year Balance sheet (DKK m) Loans and advances Deposits Shareholders equity Total assets Guarantees Business volume 23,579 17,412 24,069 18,299 11,109 16,643 2,227 1,782 2,200 33,833 22,354 32,216 5,188 3,737 6,731 47,066 32,258 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 incl. depreciation and impairment of assets / 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 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 8 Sum of large commitments 7 Accumulated impairment percentage Accumulated impairment percentage incl. trade impairments in connection with merger Impairment percentage for the period Q1-Q Q1-Q Full year % 10.3% 9.8% 12.2% 7.3% 6.4% 1.7% 8.1% 13.0% 1.3% 6.4% 13.2% % 57.7% 54.6% % 2.1% 2.9% 6.2% 69.2% 25.4% 0.1% 0.1% 0.1% 150.2% 68.4% 71.6% 135.3% 158.4% 150.3% % 19.6% 65.3% 36.8% 105.7% 80.5% 4.2% 0.9% 3.0% 4.9% 0.9% 3.9% 1.1% 0.2% 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 - Banking Package II 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 Q Q Q Balance sheet (DKK m) Loans and advances Deposits Shareholders equity Total assets Guarantees Business volume 23,579 23,781 23,703 18,299 19,303 18,639 2,227 2,230 2,216 33,833 34,117 34,541 5,188 5,718 5,614 47,066 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 incl. depreciation and impairment of assets / 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 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 Q Q Q % 10.5% 10.5% 12.2% 6.9% 6.9% -1.2% 4.0% 2.4% -0.7% 3.2% 1.5% % 53.1% 60.7% % 1.9% 2.4% 6.2% 9.7% 23.2% 0.1% 0.1% 0.1% 150.2% 156.0% 173.9% 135.3% 129.1% 132.5% % 0.3% -1.5% 36.8% 61.9% 67.7% 4.2% 3.9% 3.4% 4.9% 4.5% 4.2% 0.3% 0.6% 0.2% 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 In the third quarter, realised core income was DKK 272m, which represents a decrease of 7% compared with the previous quarter. In the period Q1 Q3 2009, core income has been calculated as DKK 828m, which is in the lower region of budget expectations. In the period Q1 Q3 2009, net interest income is still 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 the funding costs. On top of this, there is the increased cost of the improved liquidity vestjyskbank achieved in the second and third quarters of During the period, fees and commission income were greater than expected which is due to the higher level of activity, predominantly in the second quarter. For the period, market value adjustment of foreign exchange and sector shares shows a positive result of DKK 40m despite the impairment of DKK 15.4m performed on shares in Sparinvest Holding A/S in the first quarter of Costs, including depreciation and impairment of tangible assets, amount to DKK 462m for the period, which corresponds to a cost percentage of Cost synergies, which organisational restructuring provided the fertile ground for, are not expected to be fully realised until the end of It is still vestjyskbank s goal to reduce the cost percentage to approximately 50. At the end of September 2009, the number of employees, converted to full-time employees, was 643 compared with 716 at the beginning of the year. For the third quarter of 2009, core earnings before impairment amount to DKK 366m. In the third quarter of 2009, core earnings were realised at 9% lower than in the second quarter as a result of lower net fee income. Thus, core earnings before impairment are in the lower end of the prediction interval. Impairment of loans, advances and accounts receivable, etc. amounts to DKK 289m for the period. Converted to an annual basis, impairment amounts to 1.32% of loans, advances and guarantees, which is marginally lower than after the first half-year of 2009 and on a par with the revised expectations of an impairment percentage of % for the whole of Impairment of loans, advances and accounts receivable, etc. is charged as an expense in the financial accounts for the period with an amount of DKK 343m, which is composed of the beforementioned net amount of DKK 289m and impairment relating to sector assignments of DKK 54m. Entries of income from trade impairments of loans and advances taken over from Ringkjøbing Bank, amounting to DKK 61m, are re corded under the item "Other operating income". The item arises when commitments from Ringkjøbing Bank, on which trade impairments have been made, are reduced or significantly improved. Accumulated impairment at the end of September 2009 amounts to DKK 1,179m, to which is added trade impairment of loans and advances from Ringkjøbing Bank of DKK 210m, and provisions on guarantees totalling DKK 85m, giving a total of DKK 1,474m. Accumulated impairments and provisions amount to 4.9% of loans,

10 Management's Report Income Statement 10 Loans, advances and guarantees as at 30/09/2009 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 18% 7% 2% 9% 5% 6% 11% 25% 17% advances and guarantees. Loans and advances with halted interest calculation amount to DKK 932m as at 30 September 2009, which corresponds to 4.0% of total loans and advances. Other market value adjustments show a total positive market value adjustment of DKK 63m for the period 1 January 30 September The item is composed of positive market value adjustment of bonds totalling DKK 77m, positive market value adjustment of shares amounting to DKK 36m, negative market value adjustment of financial instruments totalling DKK 51m and positive market value adjustment of other assets and obligations, etc. totalling DKK 1m for the period. Market value adjustments have been positively impacted by decreasing interest rate levels, the narrowing of the credit spread and a significant improvement in the stock market in the third quarter of between the average funding cost of senior loans and interest on the hybrid core capital of DKK 1.438bn from Banking Package II. Other interest costs in the form of average funding costs are included in core income. Balance Sheet As at 30 September 2009, vestjyskbank s balance sheet amounted to DKK 33.8bn compared with DKK 32.2bn at the end of Since the beginning of the year, total loans and advances have been reduced by DKK 490m to DKK 23.6bn. Thus, at the end of September, total loans and advances are slightly below expectations. Loans and advances distributed by sector are shown in the graph to the left. Banking Package I has been charged at DKK 135m, which is composed of guarantee commission totalling DKK 81m and impairment under the guarantee totalling DKK 54m. Banking Package II has been charged at DKK 11m, which represents the difference The sum of "large commitments", which, according to the legal definition, includes commitments that exceed 10% of the capital base, amounts to 36.8% and comprises three commitments.

11 Management's Report Income Statement 11 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, , , , ,020 1,444, ,824 1,973, ,744 2,461, ,216 3,690, ,061, ,623, ,731, ,830, ,923, ,609, , ,300 30,240, The sum of commitments totalling between DKK 0 2m represents 23.8% (22%) of the Bank s total loans, advances and guarantees. Commitments over DKK 2m and up to DKK 10m account for approximately 22% (22%). Commitments over DKK 10m and up to DKK 50m account for approximately 31% (30%) and commitments over DKK 50m account for approximately 23% (25%). The Bank s Executive Management considers this spread in the size of commitments to be satisfactory. The percentage rates in brackets show the corresponding figures as at 30 June The areas in which vestjyskbank has particular experience and competences include agriculture, wind turbines, camping and leisure, fishing and the private healthcare sector. For a long time now, earnings from the agriculture sector have been, and continue to be, unsatisfactory. No improvement in this segment is anticipated before The wind turbines financed by vestjyskbank are operating satisfactorily, and the settlement of loans is progressing more quickly than estimated. In the camping and leisure sectors, and in the private healthcare sector, earnings continue to

12 Management's Report Income Statement 12 Supplementary capital distributed by maturity date (final end date) ,000, ,000, ,767, ,665, ,000,000 PERP 1,532,305,000 2,648,737,000 Supplementary capital distributed by possible settlement date (1st call date) ,000, ,665, ,767, ,000, ,000, ,433,003, ,302,000 2,648,737,000 Senior loans distributed by maturity date ,250,000, ,451,000, ,000, ,374,000,000 8,015,000,000 be stable, while the fishing industry has been badly affected by low prices. Generally, other business sectors are still feeling the effects of a decrease in activity as a result of the economic crisis. Thus, no clear improvement in overall market conditions has yet been registered. From the end of 2008 to the end of September 2009, deposits increased by 10%, which is particularly satisfying. During the period, the difference between loans and advances and deposits was reduced from DKK 8.1bn to the current figure of DKK 6.1bn, meaning that the difference has been reduced by DKK 2bn. When calculated at the end of June 2009, the differ ence had been reduced by DKK 2.9bn. The increased difference is due to term deposits, which have decreased. The difference between loans and advances and deposits is expected to remain constant at the current level. The Bank s guarantees have decreased from DKK 6.7bn at the end of 2008 to DKK 5.2bn. The total business volume total loans, advances, deposits and guarantees subsequently amounts to DKK 47.1bn compared with DKK 47.4bn at end of Liquidity At the end of September 2009, vestjyskbank s liquidity was good. Excess coverage in compliance with statutory liquidity requirements is 150.2% compared with 71.6% at the end of vestjyskbank s liquidity target is a minimum excess coverage of 50% in compliance with the aforementioned requirements. Consequently, the Bank's liquidity requirement has been fulfilled. The Bank s Executive Management has decided to reduce the excess coverage in compliance with statutory liquidity requirements to around 100% by using surplus liquidity to reduce debt to credit institutions. The effect of Banking Package I on the liquidity situation has been felt in earnest in 2009 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 vestjyskbank has not yet decided whether the Bank will make use of this transitional scheme. However, in case of application the present interim report has been reviewed. The distribution of maturity dates on senior loans and committed lines is displayed in the tables to the left. The funding structure is displayed in the diagram on the following page. Solvency and Shareholders Equity At the end of the third quarter of 2009, vestjyskbank had a solvency ratio of 15.5% compared with 9.8% at the start of the year. Essentially, this increase can be attributed to the injection of hybrid core capital amounting to DKK 1.438bn from Banking Package II and a reduction in weighted assets. After addition of profit after tax for the period, shareholders' equity amounts to DKK 2.2bn as at 30 September Developments in share holders equity since the end of 2008 appear in the breakdown of shareholders equity.

13 Management's Report Income Statement 13 Funding structure as at 30 september 2009 Deposits DKK 17,520m Debt to credit institutions and central banks DKK 4,786m Issued bonds DKK 5,043m Capital base DKK 2,649m Shareholders' equity DKK 2,227m Total DKK 32,225m 16% 8% 15% 7% 9% 54% As at 30 September 2009, subordinated debt amounts to DKK 2.649bn. An overview of the maturity structure appears in the tables. After deductions, core capital amounts to DKK 4.3bn as at 30 September 2009, and weighted items amount to DKK 27.6bn as of the same date. Ownership As of 30 September 2009 there are 43,210 shareholders listed by name. Together, they own 98.8% of the share capital. Together, the 10 largest shareholders own 19.4% of the share capital, and 70% of the share capital is held by 4,302 shareholders. Thus, vestjysk- BANK 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 price of vestjyskbank shares increased from the closing rate of 46.0 at the end of 2008 to a closing price of on 30 September Expectations for 2009 On the basis of the realised result for the period and taking due account of the expected level of activity for the remainder of the financial year, the expectations for core earnings for 2009 have been narrowed. Consequently, vestjysk- BANK expects to realise core earnings of DKK m, compared to a previous figure of DKK m, before impairment of loans and advances and the cost of Banking Packages I and II in In connection with the half-year report for 2009, expectations for the impairment percentage were revised to % of loans, advances and guarantees. These expectations are maintained. There continues to be impairment on loans and advances to predominantly corporate customers who dominate the item as impairment on loans and advances to retail customers remains very limited. However, vestjyskbank expects that impairment of loans and advances to retail customers will increase if unemployment rises any further. The expectations outlined above are based on the assumption that the macro-economic conditions that were described at the beginning of this Management Report continue to apply throughout the remainder of Recognition and measuring Assets are recognised in the balance sheet when, as a consequence of an earlier occurrence, 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, and it is probable that future financial advantages will be set off against the Bank, and the value of the liability can be measured reliably. On the first recognition, assets and liabilities are measured at current value. However, tangible assets are, at the time of the first recognition, measured at cost price. For the purposes of recognition and measurement, the Bank makes allowance for any predictable risks or losses which occur before the Quarterly Report is presented and which confirm or invalidate circumstances existing on the date of the balance sheet.

14 Management's Report Income Statement 14 In the income statement, income is recognised as earned, whereas expenditures are recognised with the amounts relating to the accounting period. However, value increases in domicile properties are recognised directly in the shareholders equity. Financial instruments are recognised on the settlement date. No segment information is given, as neither activities nor geographical markets deviate mutually to a considerable extent. but due to the change in policy the accumulated impairment percentage has increased from 1.1% to 3.0%, as impairments stemming from Bonusbanken and Ringkjøbing Bank are now included in the key figure. The change of policy also means that reversal of impairments performed in Bonusbanken and in Ringkjøbing Bank are recorded as an income under the item "Impairment of loans, advances and accounts receivable, etc.". Previously, these were recorded under the item "Other operating income". Accounting Policies During the third quarter of 2009, the IT consolidation of vestjyskbank and Ringkjøbing Bank was completed. Among other things, this has meant that impairment made in Bonusbanken and Ringkjøbing Bank is now handled as other impairments (OIV impairments in vestjyskbank), as impairments can no longer be separated. The change in policy has come into effect as at 1 January 2009, and the comparative figures have been adjusted accordingly. The change in accounting policies does not affect the Bank's profit or shareholders' equity, Only reversals of the so-called trade impairments performed in connection with the merger between vestjyskbank and Ringkjøbing Bank are recorded under the item "Other operating income". The trade impairments were performed because the current value of a number of commitments was lower than the amortised cost price in Ringkjøbing Bank. The accounting policies have otherwise not been changed compared to the Annual Report 2008.

15 Financial Calendar 15 Financial Calendar February 2010 Annual Report for March 2010 Annual General Meeting 29 April 2010 Quarterly Report, Q August 2010 Half-year Report, 1st half October 2010 Quarterly report, Q1-Q3 2010

16 Management s Statement 16 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 September The 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 policies used are considered appropriate, inasmuch as the Report provides a fair view of the Bank s assets, liabilities, financial position and profit/loss. The Report has been reviewed. Lemvig, 28 October 2009 Executive Management Frank Kristensen Preben Knudsgaard Board of Directors Anders Kristian Bech Poul Hjulmand Peter Mortensen Kirsten Lundgaard-Karlshøj Carl Olav Birk Jensen Bjørn Albinus Peder Hesselaa Nielsen Peter Bækkelund Rasmussen

17 Auditors Statements 17 Internal Auditor s Statement We have performed a review of the Quarterly Report of Vestjysk Bank A/S for the period 1 January - 30 September 2009, which comprises Management s Report, Management s Statement, Income Statement, Balance Sheet, Statement of Changes in Shareholders' Equity and notes. statements and performance of analytical and other review procedures. The scope of a review is significantly less than that of an audit performed in accordance with Danish auditing standards and therefore provides less assur ance that we become aware of all material matters which could be disclosed by an audit. We have performed no audit. Consequently, we express no audit opinion. Management is responsible for the preparation and fair presentation of the Quarterly Report in accordance with the Danish Financial Business Act. Our responsibility is to express a conclusion on the Quarterly Report based on our review. Review Performed We conducted our review in accordance with the Danish auditing standard regarding reviews. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the Quarterly Report does not give a true and fair view of the Company s financial position at 30 September 2009 and of its results of operations for the period 1 January - 31 September 2009 in accordance with the Danish Financial Business Act. Lemvig, 28 October 2009 A review of interim financial statements comprises inquiries mainly to employees responsible for finances and presentation of financial Maren Bæk Holm Chief Auditor

18 Auditors Statements 18 Independent Auditor s Statement To the Shareholders of Vestjysk Bank A/S We have performed a review of the Quarterly Report of Vestjysk Bank A/S for the period 1 January - 30 September 2009, which comprises Management s Report, Management s Statement, Income Statement, Balance Sheet, Statement of Changes in Shareholders' Equity and notes. Management is responsible for the preparation and fair presentation of the Quarterly Report in accordance with the Danish Financial Business Act. Our responsibility is to express a conclusion on the Quarterly Report based on our review. Review Performed We conducted our review in accordance with the Danish Auditing Standard RS 2410 "Review of interim financial statements conducted by the Company s independent auditor". prises inquiries mainly to employees responsible for finances and presentation of financial statements and performance of analytical and other review procedures. The scope of a review is significantly less than that of an audit performed in accordance with Danish auditing standards and therefore provides less assur ance that we become aware of all material matters which could be disclosed by an audit. We have performed no audit. Consequently, we express no audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the Quarterly Report does not give a true and fair view of the Company s financial position at 30 September 2009 and of its results of operations for the period 1 January - 31 September 2009 in accordance with the Danish Financial Business Act. Holstebro, 28 October 2009 PricewaterhouseCoopers Statsautoriseret Revisionsaktieselskab A review of interim financial statements com- H.C. Krogh State Authorised Public Accountant

19 Income Statement 19 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 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. Result of activities in the course of liquidation Pre-tax profit 9 Tax Profit Q1-Q Q1-Q Full year ,350, ,018 1,456, , , , , , ,163 6,969 5,538 5, , , ,549 16,227 9,978 15, , , , ,475-28,052-58,001 64,830 1, ,147 60, ,338 3,930 1,712 2, , , ,384 14,233 5,638 13,272 81, , ,883 47, , , , ,729 6,596 22,188-3,672 22,259 83, ,401

20 Balance Sheet 20 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 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 30/ / / , , ,938 2,472, , ,252 23,578,758 17,411,951 24,069,237 4,568,554 2,681,969 4,535, , , , , , , , , , , ,523 9, , , , ,272 15,700 8,918 16,478 54,583 29,414 53, , ,752 7, , , ,893 28,069 13,126 24,111 33,833,425 22,354,404 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 4,785,956 6,688,276 7,349,500 17,520,116 11,108,626 15,991, , ,407 5,043,420 1,443,470 3,798, , ,354 1,001, ,852,591 19,810,917 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 20,677 11,065 20, , ,936 13,209 29, ,324 28,419 50,126

21 Balance 21 Note no. Subordinated debt 20 Subordinated debt 30/ / / ,648, ,796 1,172,462 Shareholders equity 21, 22 Share capital Revaluation reserves Earnings retained / loss brought forward Total shareholders equity 125,000 86, ,000 30,848 15,750 30,848 2,070,925 1,680,522 2,044,373 2,226,773 1,782,272 2,200,221 Total liabilities 33,833,425 22,354,404 32,215,933

22 Statement of Changes in Shareholders' Equity 22 Shareholders' equity, beginning of 2009 Movements in shareholders' equity in 2009: 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 22,259 22,259 22,259 22,259 Additions, sale of own shares Outflow, acquisition of own shares Tax relating to own shares Distributed dividends 132, , , ,771-3,009-3, Total movements in shareholders equity Shareholders' equity, end of Q , , ,000 30,848 2,070, ,226,773 Shareholders' equity, beginning of 2008 Movements in shareholders' equity in 2008: 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 1,714,041 83,735 83,735 83,735 83,735 Additions, sale of own shares Outflow, acquisition of own shares Tax relating to own shares Distributed dividends Other additions 146, , , ,264 11,449 11, ,000-42,034 14,964 14,964 Total movements in shareholders equity Shareholders' equity, end of Q ,231-43,000 68,231 86,000 15,750 1,680, ,782,272 Continued on following page

23 Statement of Changes in Shareholders' Equity 23 Shareholders' equity, beginning of 2008 Movements in shareholders' equity in 2008: 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 , , ,151 39,000 15, ,082-43, , ,000 30,848 2,044, ,200,221

24 Notes to the Quarterly Report 24 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 Q1-Q Q1-Q Full year ,171 17,964 26,818 1,134, ,832 1,262, ,372 86, ,638 38,551 11,407 23,670-1,281 12,180 13,185 37,270 23,587 36, ,503 1,350, ,018 1,456, , , , , , , ,144 70, ,549 57,693 30,943 46, , , ,489 38,438 23,696 40,930 27,474 17,849 27,124 40,231 13,057 18,565 59,766 40,452 54,956 14,819 8,133 15, , , ,549 77,550-65,194-12,426 43,700 5,962-27,016 32,772 18,309 10, ,058 8,070-53,888 14,421-39,895 2,371 2,599 3, ,084 18,078-27, , , , ,637 6,285 1,116 10,710-5,748-6,323-11, ,475-28,052-58,001

25 Notes to the Quarterly Report 25 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 Q1-Q Q1-Q Full year ,336 2,173 3,110 1, ,609 6,334 2,608 4, ,271 3,391 5, , , ,602 27,658 16,953 24,262 24,097 15,369 22, , , , , , , , , , , ,221 2,172 6,448 7,890 3,466 6,824 14,233 5,638 13,272

26 Notes to the Quarterly Report 26 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 2008, 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 Change due to change in policy Consequently, individual impairment of loans and advances and accounts receivable at beginning of year Impairment during period Reversal of impairment made during previous financial years Transferred in connection with merger 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, Q1-Q Q1-Q Full year , ,596 8,133-3, ,596 22,188-3, % 25.0% 25.0% 4.7% 0.1% 0.1% -8.6% -4.1% -1.8% 0.0% -0.1% -24.7% 1.8% 0.0% 0.0% 22.9% 20.9% -1.4% 288, , , , , , , ,109 77, , ,618-48,737-56, ,999 9,379 4,875 4,875-52,427-16,382-20,938 1,085, , ,428

27 Notes to the Quarterly Report 27 Note no. 10 cf. the liability item Provisions for losses on guarantees. In addition, provisions have been made for losses on unused credit facilities, cf. the liability item "Other provisions". 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 Transferred in connection with merger 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 trade impairments Trade impairments, Ringkjøbing Bank Total acquired trade impairments Total impairment of loans and advances and accounts receivable Accumulated impairment percentage incl. trade impairments 11 Reclassification of assets Reclassification was performed in the Annual Report 2008 as at 1 July 2008 and involves selected corporate bonds: The item Loans and advances and accounts receiv able at amortised cost price were increased by The item Bonds carried at current value were decreased by Booked value of reclassified assets, end of period During the financial period the reclassified assets have been impaired by Q1-Q Q1-Q Full year ,020 3,710 3,710 79,387 5,914 13,801-3,877-2,658-3, , ,593 7,258 18, % 1.1% 3.8% 210, , , ,345 1,389, ,964 1,211, % 1.1% 4.8% 32, ,606 32, ,606 19, ,606 12,

28 Notes to the Quarterly Report 28 Note no. 11 Current value of reclassified assets, end of period If reclassifikation had not been performed, profit for the period would have been affected by 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 30/ / / , , ,251 4,203,673 2,361,924 4,138, , , , ,974 4,568,554 2,681,969 4,535, ,327 1,006,361 1,641, , ,105 1,618, , , ,710 95,513 80,517 80,614 26,759 23,381 22, , , ,930 11,887 11,033 8, ,536 51, , , , ,974 14, , , , , ,610 4, , , ,407 10, ,294 7, , ,017 6, , , ,637

29 Notes to the Quarterly Report 29 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 Market value at balance sheet date 17 Domicile properties Revalued value at end of previous financial year Additions in course of period, including improvements 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 30/ / / ,842 14,964 14,964 96,590 96,590 96, , , , , , , , , , , , , , ,554 9, ,251 9, , , , ,189 30,437 34,316 89,401 5,221 2,172 3, , , , , ,272 28,409 15,492 15,492 7,617 4,763 16,321 4, ,404 31,897 19,323 28,409

30 Notes to the Quarterly Report 30 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/ / / / ,931 7,692 7,692 7,182 3,466 6, , ,585 16,197 10,405 11,931 15,700 8,918 16,478 9,477,211 6,181,224 8,646, , , ,305 5,778,632 3,103,299 4,785,713 2,156,638 1,451,440 2,135,092 17,520,116 11,108,626 15,991, , , , % 5.931% 5.944% 31/10/ /10/ /10/ ,005% 6,380% 7,433% 01/11/ /11/ /11/ , , , % 7.330% 6.990% 16/05/ /05/ /05/2014

31 Notes to the Quarterly Report 31 Note no. 20 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 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/ / / / , , , % 6.330% 7.383% 01/05/ /05/ /05/ , , , % 7.215% 6.673% 18/02/ /02/ /02/ , , , % 7.215% 6.673% 22/02/ /02/ /02/ ,000 25,000 25, % 7.098% 7.273% 03/03/ /03/ /03/ ,000 25,000 25, % 6.348% 6.523% 03/03/ /03/ /03/ ,000 50,000 50, % 6.532% 6.532% 01/11/ /11/ /11/ ,000 60, % 7.310% 20/08/ /08/2012

32 Notes to the Quarterly Report 32 Note no. 20 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 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. Hybrid core capital of DKK 1,438m Current interest rate No date of maturity The loan may, with the approval of the Danish Financial Supervisory Authority, be prepaid at the following price: During the period 25/08/ /08/2014 at the price of 100 During the period 25/08/ /08/2015 at the price of 105 During the period 25/08/2015 and onward at the price of 110 The premium has been recognised and amortised according to expected maturity date Total subordinated debt 30/ , , % 7.433% 01/11/ /11/ , , % 6.730% 01/09/ /09/ ,000 50, % 6.373% 31/10/ /10/ ,302 97, % 4.765% 1,433, % 30/ / ,648, ,796 1,172,462

33 Notes to the Quarterly Report 33 Note no. 20 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 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 30/ / / ,488, ,796 1,172,462 5, ,693 30,943 46,102 12,500,000 8,600,000 12,500, ,000 86, , ,946 3,353 3, % 3.9% 3.9% 1, ,215 18,135 7,113 12, % 8.3% 9.7% 124, , ,502 1, ,257 19,424 7,254 12, % 8.4% 10.0% 132, , , ,657 3,212 2, % 3.7% 2.4% 2,076,312 1,290,877 3,395, , , , , , ,303 1,822,123 1,254,415 1,766,468 5,187,777 3,737,037 6,730,712 5,181 3,331 10,544 5,181 3,331 10,544

34 Notes to the Quarterly Report 34 Note no. 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 30/ / / ,204,514 1,698,537 1,941, , ,401-30,848-15,750-30, , , , , ,751-78,578-79, ,255 1,532, ,041 3,377,962 1,575,124 1,892, , ,796 1,075,421 30,848 15,750 30,848 4,365, ,670 2,999,123-78,578-79, ,255 4,286,664 2,243,827 2,881,868 27,635,624 21,716,622 29,379, % 7.3% 6.4% 15.5% 10.3% 9.8%

35 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 643 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 47.1bn. 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