Oldenburgische Landesbank AG Interim Financial Report as of June 30, 2016

Transcription

1 Oldenburgische Landesbank AG Interim Financial Report as of June 30, 2016

2 OLB AG at a Glance as of June 30, 2016 EUR m 6 / 30 / / 31 / 2015 Change Change (%) Total assets 13, , Receivables from banks Total customer lendings 10, , Securities 2, , Liabilities to banks 4, , Liabilities to customers 7, , Securitized liabilities Subordinated debt Funding for general bank risks Equity Subscribed capital Capital reserves Revenue reserves Net retained profits EUR m 1 / 1 / / 30 / / 1 / / 30 / 2015 Change Change (%) Net interest income Net commission income Net operating trading income or expense Operating income Personnel expenses Other administrative expenses Write-downs of tangible fixed assets General administrative expenses Net other operating income (+) and expenses ( ) n / a Operating result before risk provisions Risk provisions for credit business Gain (+) / loss ( ) on securities in the liquidity reserve n / a Expenses for the credit business and liquidity reserve n / a Net operating result Other result n / a Extraordinary result Profit before taxes Taxes Net income for first half Cost income ratio (in %) n / a 6 / 30 / / 31 / 2015 Core capital ratio per Sec. 10 of the German Banking Act (%) Aggregate capital ratio per Sec. 10 of the German Banking Act (%) Number of employees 2,212 2,236 Full-time equivalents 1,771 1,801 Branches of Oldenburgische Landesbank AG

3 Contents To Our Shareholders 004 Letter to Our Shareholders 004 Interim Management Report 006 Report on Economic Conditions 006 Business Performance 007 Results of Operations 007 Net Assets and Financial Position 010 Projected Developments 011 Interim Financial Statements 012 Balance Sheet 012 Income Statement 016 Notes to the Financial Statements 018 Management s Statement of Responsibility 025 Production Information 026

4 004 Letter to Our Shareholders Letter to Our Shareholders During the first half of 2016, consumer spending was the mainstay of the moderate level of growth shown by the German economy in general, and by Northwest Germany in particular. The global economy, on the other hand, provided little stimulus for our region s economy. Moreover, the results of the British referendum on exiting the EU highlighted the political and economic risks in Europe, which were reflected in volatile financial markets. The European Central Bank pushed further ahead with its expansive monetary policy. The consequence: In June 2016, for the first time in history, all German Federal bonds with a maturity of ten years or less showed a negative yield. Interest levels in general fell to new lows in many segments. Consequently, banks once again saw their interest margins shrink. Investor uncertainty in particular was triggered by unanswered questions about every aspect of the British decision on Brexit. The securities business performed modestly in the first half. All in all, these developments put further pressure on income from the interest and commissions business. From the other direction, costs were driven up by the implementation of more rigorous regulatory requirements. Amid this situation, the market environment for the entire banking industry remains very challenging. Your OLB got off to a good start in the difficult first half of Calculated by German GAAP (under the Commercial Code, HGB), the profit before taxes rose 19 %, from the prior year s EUR 20.9 million to EUR 24.9 million, and net income for the first half climbed from EUR 12.1 million to EUR 18.1 million as of June 30, The external stresses described above were countered in part by rising net income from long-term financial assets and nonrecurring income from long-term equity investments. The year s performance also reflected the first implementation of measures under our OLB 2019 program for the future. These included the gradual job cutbacks that we had announced earlier. Staff downsizing yielded savings for the first half of 2016 on personnel expenses, which decreased by EUR 2.0 million to EUR 68.2 million. In business operations, sales initiatives and accelerated loan processing procedures helped us increase total lendings by about EUR 150 million, to EUR 10.3 billion. We also revised our website at made it more user-friendly, optimized it for mobile devices, and expanded it with digital services that are much in demand. Clients can now close a current account directly online, and conveniently establish their identification for the purpose within a few minutes via a video chat. We will be expanding our online product range step by step, and will also be offering free Wi-Fi access for our clients at our branch offices. How did further factors relevant to performance develop? Net interest income came to EUR million, compared to last year s EUR million. This figure reflects the positive influence of a further final nonrecurring distribution of EUR 4.8 million from our longterm equity interest in a card service provider. Net commission income came to EUR 35.6 million, compared to last year s EUR 35.9 million. This item includes a one-time payment of

5 Letter to Our Shareholders 005 EUR 1.2 million for terminating our function as a liability umbrella for independent Allianz agents sales of Allianz Global Investors products. The Other result rose from a net income of EUR 0.3 million for last year to a net income of EUR 12.9 million. Here, in expectation of growth in new lending business, OLB took advantage of the strategic positioning it had developed in long-term financial assets to realize trading gains by selling existing positions in long-term securities and replacing them with higher-yield customer lending business. The Bank also generated a gain of EUR 3.0 million from Visa Inc. s takeover of Visa Europe Ltd., through the contribution of OLB s shares. Risk provisions for the credit business were within expectations, at EUR 19.3 million, compared to last year s EUR 20.0 million. Further additions were within planned limits, thanks to the hedges we had already established for the shipping portfolio. Our core capital ratio rose 0.1 percentage point, to EUR 10.9 %, while the aggregate capital ratio improved by 0.3 percentage points, to 14.2 %. This robust capital base is an important foundation for the further expansion of our total lendings, so that we can continue to assist our customers growth. The evolution of risk provisions is an important factor for the further evolution of our business. It depends in part on charter rates in the shipping industry. We regularly review their impact on the valuation of the shipping portfolio, and thus on profits. Based on the net result for the first half, and assuming that risk provisions remain within expectations and that the financial markets at year s end remain at a level comparable to that at mid-year, we expect a pretax profit for 2016 as a whole, on an HGB basis, that will be above the prior year s level. Patrick Tessmann Chairman of the Board of Managing Directors

6 006 Interim Management Report Report on Economic Conditions Interim Management Report Report on Economic Conditions According to the leading German economic institutes, the German economy continued its moderate growth course, driven by consumer spending, during the first half of Domestic demand profited from good conditions in the job market, considerable increases in wage and transfer income, and increases in buying power thanks to lower energy prices. Additional impetus came from public expenditures to feed and house refugees. Investments in housing construction expanded substantially, with support from interest rates, which remained at very low levels. Corporate investment activity, on the other hand, held back. The global economy provided little in the way of stimulus for Germany. When signs began appearing at the beginning of the year of a possible cooling of the global economy, and especially of the Chinese economy, the stock markets reacted by losing considerable value. The DAX German stock index dropped from nearly 10,500 points at the beginning of the year to 8,700 by mid-february. The financial markets gradually calmed down again over the further course of the year. The European Central Bank (ECB) increased its monthly bond buys from EUR 60 billion to EUR 80 billion, and at the same time extended its buying to include corporate paper. It thus again increased the pressure on interest rates. In June 2016, for the first time in history, all German Federal bonds with maturities of ten years or less showed a negative yield. According to surveys by the regional Chambers of Industry and Commerce, the Northwest German economy likewise seemed in stable condition for the first six months of the year. The orders situation in the construction industry remained good. Demand for residential construction in particular was undiminished. Retail benefited from friendly consumer sentiment, although a further shift of market share from bricks-and-mortar retailers to online providers was evident. The region s investing activity remained stable, with the emphasis on replacement investments and rationalization. Companies were inclined to take a wait-and-see position on expansive investments. This reflected the fact that though the environment was good otherwise, prospects were uncertain, and these are likely to counter more dynamic growth in the second half. The results of the British referendum in June 2016 on exiting from the EU particularly revealed new political and economic risks in Europe. But also the political consequences of the attempted coup in Turkey, as well as a variety of reports of terrorist attacks, represented events at mid-year that might lower economic expectations over the further course of the year. Nevertheless, aside from slight corrections, the leading economic research institutes projections for the German economy continue to point upward. On the one hand, the effects of these events on business conditions are difficult to estimate at present, and are limited, at least for the short term. On the other, the factors behind the upswing driven by domestic business, as described at the start above, remain intact. The ECB also cannot be expected to reverse its expansive monetary policy for the time being. Consequently, the leading German economic institutes projections of moderate growth of 1.6 percent for the country s economy in 2016 continue to appear plausible.

7 Business Performance Interim Management Report 007 Business Performance Results of Operations EUR m 1 / 1 / / 30 / / 1 / / 30 / 2015 Change Change (%) Net interest income Net commission income Net operating trading income or expense Operating income Personnel expenses Other administrative expenses Write-downs of tangible fixed assets General administrative expenses Net other operating income (+) and expenses ( ) n / a Operating result before risk provisions Risk provisions for credit business Gain (+) / loss ( ) on securities in the liquidity reserve n / a Expenses for the credit business and liquidity reserve n / a Net operating result Other result n / a Extraordinary result Profit before taxes Taxes Net income for first half OLB got off to a good start in the first half of 2016 amid an environment that was very challenging for the banking industry as a whole. The measures included in the OLB 2019 strategic program for the future have lent impetus to business operations. The first half of the year was dominated by the impact on earnings in the customer business as a result of the further reduction of interest rates and extensive turbulence in the stock markets, as well as another increase in the costs associated with regulatory requirements. On the other hand, the Bank generated a very positive contribution to earnings from its financial investments, which is reflected in the Other result. With additional support from nonrecurring income from long-term equity investments, and reversals of charges for pension provisions, the profit before taxes for the first six months increased 19 %, to EUR 24.9 million (prior year: EUR 20.9 million). The net income for the first half rose to EUR 18.1 million (prior year: EUR 12.1 million).

8 008 Interim Management Report Business Performance EUR m 1 / 1 / / 30 / / 1 / / 30 / 2015 Change Change (%) Interest (and similar income) Interest expense (and similar charges) Net interest income Customer lending volume at end of period (before risk provisions) 10, , In business operations, net interest income was again lowered by interest rates, which decreased again from last year, and also to a greater degree than had been projected. Short-term money market rates, which are significant for OLB s results of operations, reached new lows. The associated decrease in interest margins was especially hard on the deposits business. In the lending business, the growth strategy initiated with OLB 2019 has been meeting with success. As the economic picture and construction conditions remained good, new business for construction financing and investment loans grew about 50 percent from the first half of Total customer lendings (before risk provisions) at June 30, 2016, rose to EUR 10.3 billion. The effect from these countered the decline in net interest income. In this connection, in expectation of growth in new lending business, OLB took advantage of the strategic positioning it had developed in long-term financial assets to realize trading gains by selling existing positions in long-term securities and replacing them with higher-yield customer lending business. In the second half of 2015, OLB received a nonrecurring distribution from a long-term equity interest in a card service provider. In May 2016, the Bank received a further, final distribution of EUR 4.8 million. Thus, at EUR million, net interest income was up 1.7 % in total at June 30, 2016, from the equivalent figure last year (EUR million). EUR m 1 / 1 / / 30 / / 1 / / 30 / 2015 Change Change (%) Securities business Asset management Payment traffic Foreign business and foreign exchange business Insurance, home loan and savings, real estate business Credit card business Other Net commission income

9 Business Performance Interim Management Report 009 In light of the substantial losses on the stock markets at the beginning of the year and again occasioned by the British referendum on exiting the EU customers in the securities business remained wary. The Bank was able to compensate with a further expansion of asset management and a successful retirement planning business in the life insurance sector. Net commission income in payment traffic was pulled down by rising expenses and by regulatory fee caps in the credit card business. As a consequence of an internal corporate-group reorganization, the Bank stopped providing the regulatory liability umbrella for the sale of Allianz Global Investors products by independent Allianz agents as of July 1, The Bank received a nonrecurring payment of EUR 1.2 million in connection with the termination of that activity. All in all, net commission income therefore came to EUR 35.6 million (prior year: EUR 35.9 million). With a view to administrative expenses, OLB has systematically adjusted personnel expenses to counteract reductions on the earnings side of the ledger. The gradual implementation of the announced job cutbacks under the OLB 2019 program for the future yielded further savings on current salary expenses. All in all, personnel expenses decreased to EUR 68.2 million. Other administrative expenses, however, rose to EUR 41.6 million (prior year: EUR 38.7 million). Consistent cost management on one side was countered by investments in modernizing the Bank and, as an important cost driver, a new increase in the bank levy by about 50 % from last year, which was recognized against profits, as well as increases in the contribution rates for deposit insurance. Here it must be borne in mind that the bank levy was paid in full in the first half of Write-downs of tangible fixed assets came to EUR 7.2 million (prior year: EUR 7.2 million). The statutory change in the measurement of pension provisions altered the net balance of other operating income and expenses. An amendment of Sec. 253 of the German Commercial Code (HGB) that took effect on March 17, 2016, requires valuation as of 2016 to be based on a market interest rate derived from the average over the past ten years (the average was formerly taken over the past seven years). This interest rate at June 30, 2016, was 4.18 %, and thus above the 3.89 % estimated in the 2015 annual financial statements, so that the measurement of pension obligations resulted in nonrecurring valuation income of EUR 6.9 million. In comparison to last year, this change yielded a positive balance of EUR 3.5 million for other operating income and expenses. Risk provisions for the credit business came to EUR 19.3 million. Because of the provisioning for the shipping portfolio that had already been completed, further net risk provisions for that portfolio came to EUR 8.4 million, as planned, while provisions for the corporate customer business came to EUR 10.7 million. Risk provisions overall were within expectations. The measurement of the Bank s special funds for the first half of 2016 yielded a loss because of the massive pressure on the financial markets during this period, leading to a net result of EUR 8.9 million from securities in the liquidity reserve. For the first half of 2015, the net result from securities in the liquidity reserve had benefited from an auspicious stock market, yielding a substantial positive change of EUR million.

10 010 Interim Management Report Business Performance The Other result rose from last year s net income of EUR 0.3 million to EUR 12.9 million at June 30, In expectation of growth in new lending business, OLB took advantage of the strategic positioning it had developed in long-term financial assets to realize trading gains by selling existing positions in long-term securities and replacing them with higher-yield customer lending business. This approach produced substantial trading gains, which compensated for the pressure on net interest income from the customer business. Additionally, OLB profited from Visa Inc. s takeover of Visa Europe Ltd., which was completed in the first half of In the course of that transaction, the Bank realized a gain of about EUR 3.0 million for its contributed share of Visa Europe. The Extraordinary result includes the year s proportionate conversion effect from changes in the measurement of pension provisions under the 2010 Accounting Law Modernization Act (the BilMoG Effect, after the German acronym for the new act). This figure also includes changes in restructuring provisions that are recognized in profit or loss. All in all, these effects, at EUR 1.3 million, remained at the same level as last year s figure of EUR 1.1 million. Other than the termination of the agreement for OLB to provide the regulatory liability umbrella for the sale of Allianz Global Investors products by independent Allianz agents, there were no material changes in related-party transactions in comparison to December 31, Net Assets and Financial Position The Bank s total assets grew from the figure at December 31, 2015, to EUR billion (end of prior year: EUR billion). Thanks to successful new business, total customer lendings grew 1.4 %, to EUR 10.3 billion. The Bank s management practices continued to focus strongly on improving the portfolio s risk structure. OLB also saw a gain in the deposit business with customers in comparison to the end of 2015, with an increase of EUR million to EUR 7.5 billion. With EUR 2.7 billion in securities, OLB has a comfortable liquidity reserve. That fact is also reflected in the liquidity ratio, which at 1.21 was well above the regulatory minimum of 1.0, and it is evident as well in the second liquidity figure that is relevant for regulatory purposes, the liquidity coverage ratio (LCR): While the regulatory minimum for the LCR is 70 %, OLB s figure for the first half was %. OLB strengthened its capital base by reinvesting EUR 13.0 million, as resolved at the Annual Shareholders Meeting on May 11, The core capital ratio of 10.9 % at June 30, 2016, remains well above the regulatory minimum. On-balance-sheet equity at the reporting date came to EUR million.

11 Business Performance Interim Management Report 011 Projected Developments In view of the opportunities and risks described in the Financial Report 2015, OLB anticipates a slight decrease in pretax income after allowing for conservatively planned risk provisions and last year s nonrecurring income from long-term equity investments. At the projection date, an additional substantial positive contribution to earnings had been expected to result from a pending reregulation of the measurement of pension provisions, which has now taken place. The continuing expansive monetary policy of the European Central Bank, together with the uncertainty in the financial markets in association with the British referendum on exiting the EU, kept average interest rates during the first half well below the planning assumptions described in the combined management report at December 31, The Bank expects this trend to continue in the second half. Thus, the current pressure on interest income will continue to intensify. As part of its assets and liabilities management, the Bank was able to counteract this development because of its successful new lending business through gains from the realization of long-term financial assets in the first half of Unexpected charges for regulatory cost increases were countered by nonrecurring income from a distribution by a financial service provider and by a gain on the sale of an equity interest in Visa Europe Ltd.; neither of these had been included in the planning. The positive impact on earnings from the conversion of the measurement of pension obligations, a prospect that had been raised by the German Commercial Code, was indeed realized through the change in the statutory valuation requirements in March There were essentially no changes in the opportunities and risks for fiscal 2016 as described in the report on anticipated developments, opportunities and risk. However, specific developments differed from plans in some points. Business performance in the second half will be shaped primarily by the evolution of interest rates and by developments in the financial markets and in risk provisioning. Changes in risk provisions depend in part on charter rates in the shipping industry. The Bank regularly reviews their impact on the valuation of the shipping portfolio, and thus on profits. Based on the net result for the first half, and assuming that risk provisions remain within expectations and that the financial markets at year s end remain at a level comparable to that at mid-year, OLB expects a pretax profit on an HGB basis for 2016 as a whole that will be above the prior year s level.

12 012 Interim Financial Statements Balance Sheet Interim Financial Statements Balance Sheet of Oldenburgische Landesbank AG at June 30, 2016 Assets EUR 6 / 30 / / 31 / Cash reserve 173,095, ,730, a) Cash on hand 94,581, ,297, b) Balances with central banks 78,513, ,432, of which: with Deutsche Bundesbank 78,513, ,432, c) Credits with postal check offices 2. Debt instruments from public entities and notes approved for refinancing with central banks a) Treasury notes, non-interest-bearing treasury warrants and similar debt instruments from public entities b) Bills 3. Receivables from banks 228,295, ,423, a) Demand deposits 197,918, ,576, b) Other receivables 30,377, ,846, Receivables from customers 10,307,647, ,163,142, a) of which: secured with land liens 5,417,909, ,311,411, of which: public-sector loans 82,594, ,400, Bonds and other fixed-income securities 2,493,025, ,599,920, a) Money market paper aa) from public issuers of which: acceptable as collateral by Deutsche Bundesbank ab) from other issuers of which: acceptable as collateral by Deutsche Bundesbank b) Other bonds 2,493,025, ,599,920, ba) from public issuers 1,369,859, ,432,730, of which: acceptable as collateral by Deutsche Bundesbank 1,369,859, ,432,730, bb) from other issuers 1,123,165, ,167,189, of which: acceptable as collateral by Deutsche Bundesbank 1,123,165, ,167,189, c) Own debt instruments Nominal amount 6. Stocks and other non-fixed-income securities 183,108, ,115, a. Trading portfolio 26,276, ,087, Long-term equity investments 461, , of which: in banking institutions 122, , of which: in financial services institutions 8. Shares in affiliated companies 52, , of which: in banking institutions of which: in financial services institutions 9. Trust assets 2,790, ,161, of which: trust loans 890, , Compensation receivables from government entities, including debt instruments from the exchange of those receivables

13 Balance Sheet Interim Financial Statements 013 Assets EUR 6 / 30 / / 31 / Intangible fixed assets 9,125, ,800, a) Internally generated industrial rights and similar rights and assets b) Purchased concessions, industrial and similar rights and assets, and licenses in such rights and assets 9,125, ,800, c) Goodwill d) Prepayments 12. Tangible fixed assets 78,706, ,595, Capital called but not yet paid 14. Other assets 392,995, ,052, Prepaid expenses 7,739, ,088, Deferred tax assets 17. Excess of plan assets over post-employment benefit liabilities 18. Deficit not covered by equity Total assets 13,903,321, ,752,632,552.51

14 014 Interim Financial Statements Balance Sheet Equity and liabilities EUR 6 / 30 / / 31 / Liabilities to banks 4,606,790, ,540,539, a) Demand deposits 307,335, ,109, b) with agreed maturity or notice period 4,299,455, ,475,429, Liabilities to customers 7,470,869, ,366,547, a) Savings deposits 1,687,318, ,868,618, aa) with agreed withdrawal notice of three months 1,514,619, ,701,313, ab) with agreed withdrawal notice of more than three months 172,698, ,305, b) Other liabilities 5,783,551, ,497,928, ba) Demand deposits 4,860,239, ,615,731, bb) with agreed maturity or notice period 923,312, ,197, Securitized liabilities 675,668, ,239, a) Bonds issued 675,668, ,239, b) Other securitized liabilities of which: Money market paper of which: Own acceptances and promissory notes in circulation 3a. Trading portfolio 4. Trust liabilities 2,790, ,161, of which: Trust loans 890, , Other liabilities 21,273, ,067, Deferred income 35,483, ,159, a. Deferred tax liabilities 7. Provisions 190,144, ,390, a) Provisions for pensions and similar obligations 137,883, ,264, b) Provisions for taxes 3,766, ,489, c) Other provisions 48,494, ,636, Subordinated debt 255,294, ,799, Profit participation rights outstanding of which: Due within two years 11. Funding for general bank risks 12,782, ,782, of which: Special item per Sec. 340e (4) of the Commercial Code (HGB) 12. Equity 632,224, ,944, a) Called capital 60,468, ,468, Subscribed capital 60,468, ,468, Less outstanding contributions not called b) Capital reserves 208,306, ,306, c) Revenue reserves 345,354, ,402, ca) Legal reserve 171, , cb) Reserves for shares in a parent or majority investor cc) Reserves provided for by the Articles of Incorporation cd) Other revenue reserves 345,183, ,231, d) Net retained profits / net accumulated losses 18,094, ,766, Total equity and liabilities 13,903,321, ,752,632,552.51

15 Balance Sheet Interim Financial Statements 015 Below-the-line items EUR 6 / 30 / / 31 / Contingent liabilities 316,156, ,902, a) Contingent liabilities from rediscounted bills of exchange b) Obligations under suretyships and guarantees 316,156, ,902, c) Liability from collateral furnished for third-party liabilities 2. Other obligations 796,234, ,725, a) Repurchase obligations from non-genuine sale and repurchase agreements b) Placement and underwriting commitments c) Committed credit facilities 796,234, ,725,862.26

16 016 Interim Financial Statements Income Statement Income statement of Oldenburgische Landesbank AG for the period January 1 June 30, 2016 EUR 1 / 1 / / 30 / / 1 / / 30 / Interest income from a) Lending and money market transactions 185,069, ,653, Less negative interest from lending and money market transactions 1,111, ,958, , b) Fixed-income securities and book-entry securities 15,213, ,830, Less negative interest from fixed-income securities and book-entry securities 15,213, ,172, ,459, Interest expenses Interest expenses from banking business 88,767, ,616, Less positive interest 2,805, , ,961, ,989, Current income from a) Stocks and other non-fixed-income securities 1,278, ,763, b) Long-term equity investments 4,829, , c) Shares in affiliated companies 103, ,108, ,892, Income from profit pooling, profit transfer or partial profit transfer agreements 150, , Commission income 48,921, ,715, Commission expense 13,323, ,865, Net operating trading income or expense 103, ,885, of which: Allocation or reversal of special item per Sec. 340g of the Commercial Code (HGB) 8. Other operating income 9,286, ,557, General administrative expenses a) Personnel expenses aa) Wages and salaries 55,255, ,641, ab) Social security, pension provisions and other employee benefit costs 12,945, ,200, ,540, of which: for pension provisions benefits 3,208, ,458, b) Other administrative expenses 41,581, ,662, ,782, ,844, Amortization and write-downs of intangible fixed assets and write-downs of tangible fixed assets 7,192, ,223, Other operating expenses 5,741, ,040, Write-downs of receivables and certain securities and allocations to provisions in the credit business 28,168, ,218, Income from additions to receivables and certain securities and from the reversal of provisions in the credit business 15. Write-downs of long-term equity investments, shares in affiliated companies and securities treated as long-term financial assets 16. Income from additions to long-term equity investments, shares in affiliated companies and securities treated as long-term financial assets 12,887, , Expenses for assumption of losses 19. Result from ordinary activities 26,253, ,011,173.90

17 Income Statement Interim Financial Statements 017 EUR 1 / 1 / / 30 / / 1 / / 30 / Extraordinary income 287, Extraordinary expenses 1,335, ,368, Extraordinary result 1,335, ,080, Taxes on income 6,412, ,421, Other taxes not included under Item , , ,823, ,821, Income from assumption of losses 26. Profits transferred under profit pooling or a profit transfer or partial profit transfer agreement 27. Net income / net loss for the fiscal year 18,094, ,108, Retained profits / accumulated losses brought forward 18,094, ,108, Withdrawals from capital reserves 18,094, ,108, Withdrawals from revenue reserves a) from legal reserve b) from reserves for shares in a parent or majority investor c) from reserves provided for by the Articles of Incorporation d) from other revenue reserves 18,094, ,108, Withdrawals from profit participation capital 18,094, ,108, Allocations to revenue reserves a) to the legal reserve b) to reserves for shares in a parent or majority investor c) to reserves provided for by the Articles of Incorporation d) to other revenue reserves 18,094, ,108, Replenishment of profit participation capital 34. Net retained profits / net accumulated losses 18,094, ,108,537.88

18 018 Interim Financial Statements Notes to the Interim Financial Statements Notes to the Financial Statements 01 Basis of preparation Financial reporting regulations The Bank prepared its interim financial statements in accordance with the German Commercial Code (HGB) in conjunction with the German Bank Reporting Regulation (RechKredV) and in compliance with the terms of the German Stock Corporation Act (AktG). The present interim financial statements and interim management report have not been reviewed by an auditor. Changes in presentation and recognition Beginning with fiscal 2016, the Bank s Board of Managing Directors has decided to forgo the voluntary preparation of consolidated interim financial statements in accordance with international accounting standards. These interim financial statements are therefore prepared on the basis of the above legal requirements. Now that external reporting follows the German Commercial Code only, changes in presentation and recognition result which will be detailed further here. Choice of vertical presentation format The German Regulation on Financial Reporting for Banking Institutions and Financial Services Institutions (RechKredV) provides that an income statement in the financial statements may be presented either in the horizontal (account) format or the vertical format. In the past, the Bank has always used the horizontal presentation format. However, the organizational arrangement in the vertical format permits a more meaningful presentation of various items of profit and loss whose contents belong together, with reference to income and the corresponding expenses. For example, interest income and interest expenses, as well as commission income and commission expenses, are presented vertically below one another in this format, instead of on two different pages of the account. The vertical presentation format does not alter the figures from the prior year. Recognition of amounts from the reversal of provisions With its original focus on international accounting, the Bank paralleling the relationship of national to international accounting formerly recognized reversals of provisions in the item of the income statement where those provisions were originally formed. For certain material matters, the present interim financial statements recognize the reversal under Other operating income. This particularly applies to provisions relating to personnel. This change does not affect reversals of provisions relating to interest (e. g., for interest rates graduated across the duration of an investment), reversals of risk provisions (e. g., for provisions for granted guarantee lines), and reversals for extraordinary items (e. g., in the net result from restructuring).

19 Notes to the Interim Financial Statements Interim Financial Statements 019 Corresponding prior-year figures have been restated for better comparability and transparency. These can be found in the following table. They did not result in any changes in the net profit for the fiscal year. EUR 1 / 1 / / 30 / 2015 adjusted 1 / 1 / / 30 / 2015 originally 1 / 1 / / 30 / 2015 Adjustment 6. Commission expense 14,865, ,474, , Other operating income 9,557, ,346, ,210, General administrative expenses a) Personnel expenses aa) Wages and salaries 56,641, ,932, ,708, ab) Social security, pension provisions and other employee benefit costs 13,540, ,429, , Definitions of terms for the income statement presentation in the management report in accordance with the guidelines of the European Securities and Markets Authority (ESMA) for Alternative Performance Measures (APM) Under ESMA Guideline 05 / 10 / 2015 ESMA//2015 / 1415de, financial performance indicators must be explained that are not defined or specified in the framework reporting concept to be applied. In its presentation of the income statement in the financial statements, the Bank is bound to the format provided under the German Bank Reporting Regulation (RechKredV). The presentation of the income statement in the management report furthermore uses additional reporting figures, performance indicators and partial results to enhance the transparency and comprehensibility of the reporting. These are derived as follows from the items in the income statement form under the German Bank Reporting Regulation (RechKredV): Net interest income (per Items of the RechKredV) 1. Interest income from a) Credit and money market transactions less negative interest from credit and money market transactions b) Fixed-income securities and book-entry securities less negative interest from fixed-income securities and book-entry securities 2. Interest expenses Interest expenses from the banking business less positive interest 3. Current income from a) Stocks and other non-fixed-income securities b) Long-term equity investments c) Shares in affiliated companies 4. Income from profit pooling, profit transfer or partial profit transfer agreements

20 020 Interim Financial Statements Notes to the Interim Financial Statements Net commission income (per Items 5 6 of the RechKredV) 5. Commission income 6. Commission expense Net operating trading income or expense (per Item 7 of the RechKredV) 7. Net operating trading income or expense Operating income (subtotal) Net interest income + Net commission income + Net operating trading income or expense Personnel expenses (per Item 10.a of the RechKredV) 10. General administrative expenses a) Personnel expenses Other administrative expenses (per Item 10.b of the RechKredV) 10. General administrative expenses b) Other administrative expenses Write-downs of tangible fixed assets (per Item 11 of the RechKredV) 11. Amortization and write-downs of intangible fixed assets and write-downs of tangible fixed assets General administrative expenses (subtotal) Personnel expenses + Other administrative expenses + Write-downs of tangible fixed assets Net other operating income (+) and expenses ( ) (per Items 8 12 of the RechKredV) 8. Other operating income 12. Other operating expenses Operating result before risk provisions (subtotal) Operating income General administrative expenses + Net other operating income (+) and expenses ( ) Risk provisions for credit business (per Items of the RechKredV, of which pertaining to the credit business, without netting per Sec. 340f of the HGB) 13. Write-downs of receivables and certain securities and allocations to provisions in the credit business 14. Income from additions to receivables and certain securities and from the reversal of provisions in the credit business

21 Notes to the Interim Financial Statements Interim Financial Statements 021 Gain (+) / loss ( ) on securities in the liquidity reserve (per Items of the RechKredV, of which pertaining to the liquidity reserve, without netting per Sec. 340f of the HGB) 13. Write-downs of receivables and certain securities and allocations to provisions in the credit business 14. Income from additions to receivables and certain securities and from the reversal of provisions in the credit business Expenses for the credit business and liquidity reserve (subtotal) Risk provisions for the credit business Gain (+) / loss ( ) on securities in the liquidity reserve Net operating result (subtotal) Operating result before risk provisions Expenses for the credit business and liquidity reserve Other result (per Items of the RechKredV) 15. Write-downs of long-term equity investments, shares in affiliated companies and securities treated as long-term financial assets 16. Income from additions to long-term equity investments, shares in affiliated companies and securities treated as long-term financial assets 17. Expenses for assumption of losses 25. Income from assumption of losses 26. Profits transferred under profit pooling or a profit transfer or partial profit transfer agreement Extraordinary result (per Item 22 of the RechKredV) 22. Extraordinary result Profit before taxes (Subtotal) Net operating result + Other result + Extraordinary result Taxes (per items of the RechKredV) 23. Taxes on income 24. Other taxes not included under Item 12 Net income for the fiscal year or Net income for the half (per Item 27 of the RechKredV) 27. Net income / net loss for the fiscal year Cost income ratio or CIR (ratio stated in %) General administrative expenses / Operating income

22 022 Interim Financial Statements Notes to the Interim Financial Statements 02 Breakdown of maturities of balance sheet items by time remaining to maturity (Sec. 9 of the RechKredV) EUR m 6 / 30 / / 31 / 2015 Receivables from banks b) Other receivables of which with a remaining time to maturity of three months or less more than three months to one year more than one year to five years more than five years Receivables from customers 10, ,163.1 with indefinite maturities with a time to maturity of three months or less more than three months to one year more than one year to five years 2, ,700.1 more than five years 5, ,641.9 Bonds and other fixed-income securities 2, ,599.9 of which maturing in fiscal Liabilities to banks 4, ,540.5 b) with agreed maturity or notice period 4, ,475.4 of which with a remaining time to maturity of three months or less 1, ,220.4 more than three months to one year more than one year to five years ,025.8 more than five years 1, ,330.9 Liabilities to customers 7, ,366.5 a) Savings deposits 1, ,868.6 ab) with agreed withdrawal notice of more than three months of which with a remaining time to maturity of three months or less more than three months to one year more than one year to five years more than five years b) Other liabilities 5, ,497.9 bb) With an agreed maturity or notice period of which with a remaining time to maturity of three months or less more than three months to one year more than one year to five years more than five years Securitized liabilities a) Bonds issued of which maturing in fiscal b) Other securitized liabilities of which with a remaining time to maturity of three months or less more than three months to one year more than one year to five years more than five years

23 Notes to the Interim Financial Statements Interim Financial Statements 023 EUR m Total 6 / 30 / 2016 Quoted in a market Not quoted in a market 03 Securities and long-term financial assets Bonds and other fixed-income securities 2, ,493.0 Stocks and other non-fixed-income securities Trading portfolio Long-term equity investments Shares in affiliated companies Other assets The items recognized under stocks and other non-fixed-income securities are the Bank s two special funds, for which a redemption price is determined daily on a market-value basis. The Other assets include bonds of OLB redeemed and intended for retirement. EUR m Cost Additions fiscal year Reclassifications fiscal year Disposals fiscal year Reversals of writedowns fiscal year Depreciation, amortization and write-downs Total Fiscal year Remaining carrying amount 6 / 30 / / 31 / Statement of changes in fixed assets Long-term securities Long-term equity investments Shares in affiliated companies Land and buildings Operating and office equipment Intangible assets % of land and buildings (equivalent to a corresponding value of EUR 46.4 million) are used for our own activities. 2 Depreciation, amortization and write-downs for the year include write-downs of EUR 0.0 thousand for leased items.

24 024 Interim Financial Statements Notes to the Interim Financial Statements 05 Statement of changes in provisions EUR m 1 / 1 / 2016 Used Reversed Additions Notional interest rate Effect of changes in interest rates Conversions 6 / 30 / 2016 a) Provisions for pensions and similar obligations b) Provisions for taxes c) Other provisions Uncertain liabilities Provisions for credit business Other Total

25 Management s Statement of Responsibility 025 Management s Statement of Responsibility To the best of our knowledge, and in accordance with the applicable reporting principles for interim reports, the interim financial statements give a true and fair view of the net assets, financial position, and results of operations, and the interim management report includes a fair review of the development and performance of the business and the position of OLB AG, together with a description of the principal opportunities and risks associated with the Bank s expected development during the remainder of the fiscal year. Oldenburg, August 12, 2016 Oldenburgische Landesbank AG The Board of Managing Directors Patrick Tessmann Dr. Thomas Bretzger Karin Katerbau Hilger Koenig Chairman

26 026 Production Information Publisher Oldenburgische Landesbank AG Stau 15 / Oldenburg Germany Telephone Telefax olb@olb.de Contact Corporate Communications Date of publication August 12, 2016 This report is available in German and English. Both versions may be downloaded from the Internet.

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