Bonum Bank Plc

BOARD OF

DIRECTORS’ REPORT

AND FINANCIAL

STATEMENTS

1 January - 31 December 2023

CONTENTS

BOARD OF DIRECTOS’ REPORT 1 JANUARY  31 DECEMBER 2023 ................................................................................ 4

POP Bank Group and amalgamation of POP Banks ........................................................................................................................... 4

Operating environment ......................................................................................................................................................................................................... 7

Financial position ............................................................................................................................................................................................................................8

Credit rating .......................................................................................................................................................................................................................................11

Shareholdings and equity ................................................................................................................................................................................................... 11

Risk and capital adequacy management and risk position .................................................................................................12

Internal control ..................................................................................................................................................................................................................................16

Internal audit ....................................................................................................................................................................................................................................16

Bonum Bank’s management and personnel .............................................................................................................................................16

Audit.. ............................................................................................................................................................................................................................................................16

Corporate governance ..........................................................................................................................................................................................................17

Remuneration ................................................................................................................................................................................................................................... 17

Key outsourced operations ........................................................................................................................................................................................... 18

Social responsibility .................................................................................................................................................................................................................19

Outlook for 2024 ..........................................................................................................................................................................................................................19

Board of directors’ proposal on the disposal of the result for the period .............................................................19

BONUM BANK PLC’S FINANCIAL STATEMENTS 31 DECEMBER 2023 ...........................................................................20

Income statement .......................................................................................................................................................................................................................20

Statement of comprehensive income ................................................................................................................................................................20

Balance sheet .................................................................................................................................................................................................................................... 21

Statement of changes in equity ...............................................................................................................................................................................22

Cash ﬂow statement ............................................................................................................................................................................................................... 23

NOTES....... ........................................................................................................................................................................................................................................................... 25

Note 1 Accounting policies .............................................................................................................................................................................................. 25

Note 2 Risk management ...................................................................................................................................................................................................35

NOTES TO INCOME STATEMENT ...................................................................................................................................................................................48

Note 3 Interest income and expenses ...............................................................................................................................................................48

Note 4 Net commissions and fees .........................................................................................................................................................................49

Note 5 Net investment income ...................................................................................................................................................................................49

Note 6 Other operating income ................................................................................................................................................................................ 50

Note 7 Personnel expenses ............................................................................................................................................................................................. 50

Note 8 Other operating expenses ...........................................................................................................................................................................51

Note 9 Depreciation, amortisation and impairment ........................................................................................................................ 51

Note 10 Income tax ................................................................................................................................................................................................................... 52

Note 11 Net income and expenses of ﬁnancial assets and ﬁnancial

liabilities by measurement category .................................................................................................................................................................53

NOTES TO ASSETS ............................................................................................................................................................................................................................53

Note 12 Classiﬁcation of ﬁnancial assets and ﬁnancial liabilities ...............................................................................54

Note 13 Classiﬁcation of ﬁnancial assets and ﬁnancial liabilities

and fair values by valuation technique ........................................................................................................................................................... 56

Note 14 Impairment losses on ﬁnancial assets ....................................................................................................................................62

Note 15 Liquid assets ..............................................................................................................................................................................................................67

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 2

Note 16 Loans and advances ........................................................................................................................................................................................67

Note 17 Investments assets ...........................................................................................................................................................................................68

Note 18 Intangible assets .................................................................................................................................................................................................. 69

Note 19 Property, plant and equipment ........................................................................................................................................................... 70

Note 20 Other assets ..............................................................................................................................................................................................................71

Note 21 Deferred taxes ........................................................................................................................................................................................................71

NOTES FOR LIABILITIES AND EQUITY ...................................................................................................................................................................... 74

Note 22 Liabilities to credit institutions and customers ............................................................................................................. 74

Note 23 Derivative contracts and hedge accounting ...................................................................................................................75

Note 24 Debt securities to the public ................................................................................................................................................................. 77

Note 25 Provisions and other liablities ............................................................................................................................................................ 78

Note 26 Equity capital ......................................................................................................................................................................................................... 78

OTHER NOTES ......................................................................................................................................................................................................................................... 80

Note 27 Collaterals given and received .......................................................................................................................................................... 80

Note 28 Off-balance sheet commitments ................................................................................................................................................80

Note 29 Leasing ............................................................................................................................................................................................................................. 81

Note 30 Related party disclosures ........................................................................................................................................................................ 83

Note 31 Events after the closing date .............................................................................................................................................................84

SIGNATURES ...............................................................................................................................................................................................................................................85

AUDITOR’S REPORT .........................................................................................................................................................................................................................86

This document is a translation of the original Finnish version “Bonum Pankki Oyj:n toimintakertomus ja

tilinpäätös 1.1-31.12.2023”. In case of discrepancies, the Finnish version shall prevail.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 3

BOARD OF DIRECTOS’ REPORT

1 JANUARY – 31 DECEMBER 2023

Bonum Bank Plc (hereinafter “Bonum Bank”) is

part of the amalgamation of POP Banks and is re-

sponsible for providing 18 POP Banks with cen-

tral credit institution services, obtaining external

funding for the POP Bank Group, handling pay-

ments, issuing payment cards to the customers of

the POP Banks and providing centralised servic-

es for the Group. In addition, Bonum Bank grants

unsecured consumer credit and secured debt se-

curities to retail customers. The purpose of Bonum

Bank’s internal service production is to limit the

Group’s dependence on external service providers

and enhance the efﬁciency of the whole Group’s

cost structure. In its external business operations,

Bonum Bank provides services that are in line with

the Group’s strategy and supplement its offering.

Bonum Bank operates as the central credit insti-

tution for the banks of the amalgamation, arrang-

ing funding from the capital markets for the mem-

ber banks. During 2023 the operating model and

the pricing model of the POP Bank Groups internal

funding was clariﬁed and simpliﬁed. In July, Bonum

Bank issued a ﬁve-year directed bond of EUR 50

million within its EUR 750 million bond programme.

Bonum Bank also acquired funding by issuing

short-term certiﬁcates of deposit under its EUR

250 million certiﬁcates of deposit programme and

by accepting money market deposits. During 2023,

Bonum Bank also executed interest rate swaps as

part of its interest rate risk management. Bonum

Bank is responsible for managing of the liquidity

puffer (LCR portfolio) of the amalgamation. Dur-

ing the reporting period Bonum Bank made mate-

rial investments in LCR eligible assets and assets

eligible as central bank collateral on behalf of the

member banks.

The mortgage bank of POP Bank Group, POP

Mortgage Bank, continued issuing covered bonds

in 2023 by issuing EUR 250 million secured bond in

April. POP Mortgage Bank has close cooperation

with Bonum Bank’s treasury and its need to imple-

ment issues of securities is determined in Bonum

Bank’s Treasury.

In addition to providing central credit institution

services, Bonum Bank is responsible for issuing

payment cards and card credit facilities to the

POP Banks’ customers, as well as for maintaining

these services. Volumes in the card business de-

veloped favourably during 2023. The signiﬁcance

of digital card-related services continued to in-

crease, and customers have actively adopted mo-

bile payment features.

Bonum Bank’s business operations outside the

Group mainly consist of the issue of secured

bonds and unsecured consumer credits. During

2023 the amount of unsecured consumer loans

grew in controlled manner.

Bonum Bank’s Service Centre in Vaasa is the pro-

vider of the Group’s centralised services, such as

centralised client service for the cards. POP Bank

Group’s anti-money laundering measures of the

Group’s banks are produced centrally by Bonum

Bank. Centralised services and monitoring sys-

tems ensure that the prevention of money laun-

dering and terrorist funding is always state-of-

the-art and that asset transfers are monitored

with maximum efﬁciency.

On 5th October 2023 S&P Global Ratings revised

its outlook on the ratings on Bonum Bank from

stable to positive. At the same time, the credit rat-

ing agency afﬁrmed ‘BBB/A-2’ long- and short-

term issuer credit ratings on Bonum Bank.

Bonum Bank’s Annual General Meeting was held

in March 2023. The Annual General Meeting dealt

with statutory matters and elected Jaakko Pulli,

Hanna Linna, Kirsi Salo and Ilkka Lähteenmäki to

the Board of Directors. Jaakko Pulli has served as

Chair of the Board.

POP BANK GROUP AND

AMALGAMATION OF POP BANKS

The POP Bank Group is a Finnish ﬁnancial group

that offers retail banking services for private cus-

tomers and small and medium-sized enterprises.

The POP Banks are cooperative banks owned by

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 4

their member customers. The POP Banks’ mission

is to promote their customers’ ﬁnancial well-being

and prosperity, as well as local success.

STRUCTURE OF POP BANK GROUP

POP Bank Group consists of the POP Banks, POP

Bank Centre coop and their controlled entities. The

POP Banks are member credit institutions of POP

Bank Centre coop. POP Bank Centre coop and its

member credit institutions are mutually liable for

their debts and liabilities in line with the Act on the

Amalgamation of Deposit Banks. The POP Banks,

POP Bank Centre coop and their controlled service

companies constitute the amalgamation of POP

Banks.

POP Bank Centre coop is the central institution of

the amalgamation of POP Banks and is responsible

for steering and supervising the POP Bank Group.

POP Bank Centre coop has two subsidiaries, Bonum

Bank Plc and POP Mortgage Bank Plc, which are al-

so its member credit institutions.

Bonum Bank Plc serves as the central credit institu-

tion of POP Banks and acquires external funding for

the Group by issuing unsecured bonds. Bonum Bank

Plc is also responsible for the POP Banks’ card busi-

ness and the Group’s payment transactions and

centralised services, in addition to granting credit

to retail customers. POP Mortgage Bank Plc is re-

sponsible for the Group’s mortgage-backed fund-

ing, which it acquires by issuing covered bonds.

POP Bank Group also includes POP Holding Ltd

owned by POP Banks and POP Bank Centre coop.

POP Holding Ltd owns 30 per cent of Finnish P&C

Insurance Ltd that belongs to LocalTapiola Group

and uses the auxiliary business name of POP Insur-

ance. POP Holding Ltd is not a member of the amal-

gamation of POP Banks and is not included in the

scope of joint liability.

The following ﬁgure shows the structure of POP

Bank Group and the entities included in the amal-

gamation and covered by joint mutual responsibility.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 5

CHANGES IN GROUP STRUCTURE

During the review period, in May 2023, POP Bank

Group relinquished control over Finnish P&C Insur-

ance Ltd and continues as a minority sharehold-

er in the company. Subsequently, Finnish P&C In-

surance Ltd will be consolidated as an associat-

ed company into POP Bank Group’s consolidated

IFRS ﬁnancial statements.

One merger was completed within POP Bank

Group during the review period. At the end of

May 2023, Jämijärven Osuuspankki merged with

Kurikan Osuuspankki. After the merger, POP Bank

Group consists of 18 cooperative banks. The

merger was an intra-Group arrangement and had

no impact on the POP Bank Group’s consolidated

ﬁnancial information.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 6

OPERATING ENVIRONMENT

The global economy grew slowly in 2023. The

growth slowed down particularly in China, which

has been the driving force of the global econ-

omy in recent years. The surge in inﬂation in Eu-

rope and the subsequent rise in interest rates, as

well as the energy crisis, were reﬂected as weak-

er growth in the eurozone. In particular, Germany,

Europe’s largest economy, has begun to struggle,

and therefore Finland’s economy is not getting the

boost it needs from exports. Russia’s war of ag-

gression against Ukraine continued and the un-

certainty it has caused is reﬂected in both eco-

nomic performance and the security environment.

In 2023, there was a clear turn for the worse in

the Finnish economy. High inﬂation continued

to weaken households’ purchasing power, even

though wage agreements increased nominal wag-

es more than before. The rapid rise in interest rates

also meant that consumers started to feel more

pessimistic about economic development.

Purchases of housing and consumer durables de-

creased markedly during the year, which weighed

heavily on many sectors, especially residen-

tial construction and trade. However, in terms of

household spending, there was a cautiously pos-

itive signal towards the end of the year when the

European Central Bank put an end to the series

of interest rate increases, and the market started

waiting for interest rates to fall. The inﬂation rate

also slowed signiﬁcantly towards the end of the

year. In Finland, energy prices and availability im-

proved on the previous year, as the wind and nu-

clear power generation capacity increased.

Construction activity in Finland was exceptional-

ly high in the early 2020s, but the ﬁrst signs of a

downturn in construction had already become vis-

ible by the end of 2022. The high inﬂation and ris-

ing interest rates following the pandemic led to a

steep decrease in the number of building permits

and construction starts in 2023, and at the same

time buyers also became more cautious than be-

fore. In addition, as housing investors, which make

up a major group of buyers, largely disappeared

from the housing market, housing prices contin-

ued to decline in 2023. The construction sector

is very important for the Finnish economy, so the

slowdown in construction weighed on GDP devel-

opment, especially towards the end of the year.

Agricultural input prices fell in 2023 from the pre-

vious year, but the declining trend in producer

prices in most types of production and rising in-

terest rates have kept investments at a low level.

Proﬁtability differences between farms continued

to grow. The price of timber was at a historical-

ly high level as competition between timber buy-

ers has increased since the end of timber imports

from Russia.

Although households’ purchasing power was weak

in 2023, unemployment continued to remain under

control. In general, households have continued to

manage their loans well. However, the number of

company bankruptcies turned to a clear increase,

and the weakened economic situation also led to

an increase in the number of lay-offs. The weak-

ened economic cycle is reﬂected in the amounts

of banks’ non-performing loans and credit losses.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 7

FINANCIAL POSITION

PERFORMANCE

Bonum Bank’s proﬁt for the ﬁnancial year was EUR 2,406 thousand, whereas last year that was EUR

3,383 thousand. The proﬁt for the ﬁnancial year primarily consists of interest and commission income on

central credit institution services provided for POP Banks, income from unsecured lending and proﬁt on

the card business and payments. Bonum Bank’s cost-to-income ratio was 74.3 (74.2) per cent.

The bank’s key income statement items have developed as follows, compared with year 2022:

Operating income totalled EUR 24,623 (22,101)

thousand. The increase in income, due to the fa-

vourable development of the bank’s net interest

income, which amounted to EUR 12,999 (10,161)

thousand. This represents an increase of 27.9 per

cent year-on-year. The growth of net interest in-

come was mainly due to growth of income in cen-

tral credit institution services, unsecured lending

and card business.

Net commission income was stable EUR 7,226

(7,285) thousand. Commission income consists

mostly of income from the cards business and

payment transmission fees.

Net investment income decreased to EUR -769

(459) thousand. Net investment income consists

of mainly net gains from foreign currency transac-

tions and net income from derivatives. Other op-

erating income totalled to EUR 5,167 (4,196) thou-

sand. The increase in other operating income is

due to the growth of the Group’s internal services.

Operating expenses totalled at EUR 18,302

(16,395) thousand. The increase in operating ex-

penses comes mainly from ICT expenses and oth-

er operating expenses. Personnel expenses, that

are composed of salary expenses and pension

and other indirect employee expenses, increased

to EUR 5,409 (4,583) thousand. On 31 December

2023, Bonum Bank had 88 (66) employees.

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Interest income 74,665 18,800

Interest expenses -61,665 -8,639

Net interest income 12,999 10,161

Net commissions and fees 7,226 7,285

Net investment income -769 459

Other operating income 5,167 4,196

Total operating income 24,623 22,101

Personnel expenses -5,409 -4,583

Other operating expenses -11,982 -10,863

Depreciation and amortisation -911 -949

Total operating expenses -18,302 -16,395

Impairment losses on ﬁnancial assets -3,306 -1,485

Proﬁt before taxes 3,015 4,221

Income tax expense -609 -838

Proﬁt for the period 2,406 3,383

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 8

Depreciations and impairment losses on tangible

and intangible assets were EUR 911 (949) thou-

sand.

Impairment losses on ﬁnancial assets increased to

EUR 3,306 (1,485) during the year. Active collec-

tion measures are being targeted at receivables

recognised as credit losses.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 9

BALANCE SHEET

At the end of the year 2023, Bonum Bank’s bal-

ance sheet stood at EUR 1,837,618 (1,574,594)

thousand.

The amount of liquid assets grew during the re-

view period to EUR 485,020 (436,911) thousand.

Loans and receivables from credit institutions

were EUR 849,549 (778,257) thousand. This item

includes the funding provided by Bonum Bank to

other member banks of POP Bank Group. Loans

and receivables from customers totalled to EUR

193,373 (170,485) thousand. This item includes

the credit used on credit cards issued by Bonum

Bank and other loan products issued by Bonum

Bank to its customers.

Liabilities to credit institutions increased up to

EUR 1,424,772 (1,122,965) thousand. This item in-

cludes deposits from the other member banks

of POP Bank Group, TLTRO loans from the Eu-

ropean Central Bank and deposits from the oth-

er banks outside the Group. The amount of debt

securities issued to the public was EUR 283,896

(322,214) thousand at the end of the review pe-

riod.

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Assets

Liquid assets 485,020 436,911

Loans and advances to credit institutions 849,549 778,257

Loans and advances to customers 193,373 170,485

Derivatives 9,220 0

Investment assets 259,963 163,891

Intangible assets 329 1,057

Property, plant and equipment 648 359

Other assets 39,309 23,118

Tax assets 207 515

Total assets 1,837,618 1,574,594

Liabilities

Liabilities to credit institutions 1,424,772 1,122,965

Liabilities to customers 33,435 55,930

Derivatives

1,798 5,975

Debt securities issued to the public 283,896 322,214

Other liabilities 42,970 20,003

Tax liabilities 203 850

Total liabilities 1,787,075 1,527,938

Equity capital

Share capital 10,000 10,000

Reserves 30,001 28,520

Retained earnings 10,543 8,136

Total equity capital 50,543 46,657

Total liabilities and equity capital 1,837,618 1,574,594

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 10

KEY FIGURES AND THE FORMULAS OF KEY FIGURES

COSTTOINCOME RATIO, % =

Total operating expenses

Total operating income

RETURN ON ASSETS ROA, % =

Result for the period

Balance sheet total (average of beginning and end of year)

RETURN ON EQUITY ROE, % =

Result for the period

Equity (average of beginning and end of year)

CAPITAL ADEQUACY RATIO TC, % =

Total capital (TC)

Total minimum capital requirement

EQUITY RATIO, % =

Equity

Balance sheet total

x 100

CREDIT RATING

In October, 2023 S&P Global Ratings revised its

outlook on the ratings on Bonum Bank from sta-

ble to positive. At the same time, the credit rating

agency afﬁrmed ‘BBB/A-2’ long- and short-term

issuer credit ratings on Bonum Bank.

SHAREHOLDINGS AND EQUITY

On 31 December 2023, Bonum Bank had 1,400,000

shares, all of them held by POP Bank Centre coop.

Bonum Bank holds no own shares.

At the end of the ﬁnancial year, Bonum Bank’s share

capital was EUR 10,000 thousand (10,000). Equity

totalled EUR 50,543 (46,657) thousand.

31 Dec 2023 31 Dec 2022 31 Dec 2021 31 Dec 2020

Cost-to-income -ratio, % 74.3 74.2 71.4 71.4

ROA, % 0.14 0.3 0.09 0.09

ROE, % 4.95 8.3 2.13 2.13

Capital adequancy ratio (TC) %

19.4 20.0 21.8 24.1

Equity ratio, % 2.8 3.0 3.4 3.4

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 11

RISK AND CAPITAL ADEQUACY

MANAGEMENT AND RISK

POSITION

PRINCIPLES AND ORGANISATION OF RISK

AND CAPITAL MANAGEMENT

The POP Bank Group’s strategy outlines the Group’s

risk appetite. Business activities are carried out at

a moderate risk level so that the risks can be man-

aged in full. The purpose of Bonum Bank’s risk man-

agement is to ensure that all risks are identiﬁed,

measured and monitored and that they are propor-

tionate to Bonum Bank’s and the amalgamation’s

risk-bearing capacity and capital adequacy posi-

tion. Risk management processes must be able to

identify all signiﬁcant risks of the business opera-

tions and assess, measure and monitor these reg-

ularly. The most signiﬁcant risks associated with

Bonum Bank’s operations are credit risk, liquidity

risk and interest rate risk.

As the central institution, POP Bank Centre coop

supervises the sufﬁciency and functioning of the

risk management systems at the level of the mem-

ber credit institutions and the amalgamation and

is liable for the Group’s risk and capital adequacy

management in accordance with section 17 of the

Amalgamation Act. The central institution of the

amalgamation issues binding instructions concern-

ing risk and capital adequacy management, corpo-

rate governance and internal control to the mem-

ber credit institutions to secure their solvency and

capital adequacy. Furthermore, common business

controlling thresholds have been established for the

member institutions to ensure that the risks taken

by an individual member institution are within ac-

ceptable limits.

Bonum Bank is the central credit institution and a

member credit institution of the amalgamation of

POP Banks. Bonum Bank’s risk management’s goal

is to ensure that the bank complies with laws, de-

crees, instructions and regulations issued by the

authorities, their own rules and the internal binding

guidelines issued by the central institution of the

amalgamation in its activities. In addition to central

institution’s independent functions, Bonum Bank

has own separate risk control unit to monitor risk

position and a compliance contact person.

The purpose of capital adequacy management is to

ensure the sufﬁcient amount, type and efﬁcient use

of the capital of the Bonum Bank. A sufﬁcient level

of capital covers the material risks arising from im-

plementation of the bank’s business plan in accord-

ance with its strategy, and also secures the uninter-

rupted operation of the bank in the case of unex-

pected losses. The goal is pursued through a docu-

mented and systematic capital adequacy manage-

ment process that is integrally linked to the strate-

gy process, business planning and management at

the level of the amalgamation.

The amalgamation’s risk management and capital

adequacy management are described in more de-

tail in Note 4 to POP Bank Group’s ﬁnancial state-

ments. Furthermore, information concerning risks

speciﬁed in the EU Capital Requirements Regulation

(EU 2019/876) is presented in a separate Pillar III re-

port. Copies of the ﬁnancial statements of POP Bank

Group are available online at www.poppankki.ﬁ

or from the ofﬁce of POP Bank Centre coop, ad-

dress Hevosenkenkä 3, 02600 Espoo, Finland.

BUSINESS RISKS

CREDIT RISKS

Bonum Bank’s credit risk exposure grew during the

ﬁnancial period. Balance sheet items exposed to

credit risk totalled EUR 460,510 (340,175) thou-

sand at the end of 2023. Bonum Bank’s off-bal-

ance sheet credit commitments totalled EUR

171,533 (160,498) thousand, consisting mainly of

unrestricted credit facilities related to card cred-

it and the POP Banks’ liquidity facilities. Bonum

Bank’s most signiﬁcant credit risks are related to

investment activities and unsecured credits.

At the end of the ﬁnancial period, Bonum Bank’s

investment assets totalled EUR 259,963 (163,890)

thousand. The investment asset items in the li-

quidity reserve include debt securities issued by

governments, municipalities, credit institutions

and companies. Some of these debt securities are

accepted as collateral by the ECB. The credit risk

related to investment activities is managed main-

ly by limiting the creditworthiness of investments

and distributing investment assets across sectors,

counterparties and instrument classes.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 12

The retail banking segment’s loan portfolio in-

creased by 13.4 per cent during the ﬁnancial pe-

riod, amounting to EUR 193,373 (170,485) thou-

sand. Most of the lending was unsecured lending,

which represented 59.3 per cent of the loan portfo-

lio. Loans granted to private customers represent-

ed 86.3 (83.1) per cent of the loan portfolio.

Expected credit losses (ECL) on loans, receiva-

bles and off-balance sheet items increased by

EUR 2,194 thousand during the ﬁnancial period,

amounting to EUR 7,094 thousand. Expected cred-

it losses in IFRS stage 3 increased to EUR 4,954

(2,883) thousand. In 2023 ﬁnal write offs were in

total EUR 1,111 (-113) thousand. Final write offs are

under active collection procedures.

Credit risk monitoring in banking operations is

based on the continuous monitoring of non-per-

forming receivables, payment delays and for-

bearance, and on monitoring the quality of the

loan portfolio. Monitoring the amount of expected

credit losses is an important part of the credit risk

management process. Foreseeable credit man-

agement problems are addressed as early as pos-

sible.

LIQUIDITY RISKS

Bonum Bank as the central credit institution is re-

sponsible for fulﬁlling liquidity coverage require-

ments and liquidity risk management at POP Bank

Group level. Liquidity risks are prepared for by main-

taining a sufﬁcient liquidity reserve comprising of

LCR eligible high-quality liquid assets, assets eligi-

ble as central bank collateral, and short-term bank

receivables.

POP Bank Group’s liquidity position remained strong

during the ﬁnancial period. The liquidity requirement

(Liquidity Coverage Ratio, LCR) for the amalgama-

tion of POP Banks was 273.9 (184.8) per cent on 31

December 2023, with the minimum level being 100

per cent. At the end of the ﬁnancial period, Bonum

Bank had EUR 887.2 (691.6) million in LCR-eligible

liquid assets before haircuts, of which 55.9 (64.8)

per cent consisted of cash and receivables from the

central bank and 37.1 (31.0) per cent consisted of

highly liquid Tier 1 securities. In addition, the mem-

ber credit institutions of the amalgamation had

EUR 28.3 (39.8) million in unpledged securities out-

side the LCR portfolio.

The requirement for stable funding, NSFR, meas-

ures the maturity mismatch of assets and liabilities

on the balance sheet and aims to ensures that the

level of stable funding is sufﬁcient to meet fund-

ing needs over a one-year period, thus preventing

over-reliance on short-term wholesale funding. The

consortium’s NSFR ratio on 31 December 2023 was

132.7 (133.5) per cent.

Bonum Bank provides the member banks of the

amalgamation with access to long-term wholesale

funding, in addition to serving as an internal bank

for member credit institutions. The planning of the

bank’s funding structure is based on liquidity and

funding planning of the whole amalgamation as well

as the strategic goals and limits set by the central

institution.

At the end of the year, Bonum Bank had EUR 255

(255) million outstanding in an unsecured senior

loan issued as part of its EUR 750 million bond pro-

gramme. Of the bank’s EUR 250 million certiﬁcate of

deposit programme, EUR 29.0 (67.3) million was out-

standing at the end of the review period. In addition,

Bonum Bank has a EUR 22.3 million loan programme

with the Nordic Investment Bank (NIB). At the end of

the ﬁnancial period, Bonum Bank had a total of EUR

78.4 (128.4) million in TLTRO III funding from the Eu-

ropean Central Bank.

MARKET RISKS

The most signiﬁcant market risk related to Bonum

Bank’s business operations is the interest rate

risk associated with the banking book. The inter-

est rate risk refers to the impact of changes in in-

terest levels on the market value of balance sheet

and off-balance-sheet items, or on net interest

income. Banking book consists of loans and de-

posits, wholesale funding and liquidity portfolio in-

vestments.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 13

Bonum Bank’s business operations do not include

trading activities. Any use of derivatives is limited

to hedging banking book items interest rate risk.

The Bank executed derivative hedges during the

ﬁnancial year to decrease banking book interest

rate risk in member banks balance sheet.

Bonum Bank monitors the interest rate risk us-

ing the present value method and the dynamic

income risk model on monthly basis. The present

value method measures how changes in interest

rates affect the constructed market value of the

balance sheet. In the present value method, the

market value of the balance sheet is calculated

as the present value of the expected cash ﬂows of

individual balance sheet items. Interest rate sen-

sitivity indicators are used to monitor the market

value changes caused by changes in the interest

rates and credit spreads of investment items in

different interest rate scenarios. The income risk

model predicts future net interest income and its

changes in various market rate scenarios within a

time frame of ﬁve years.

OPERATIONAL RISKS

The objective of the management of operation-

al risks is to identify essential operational risks

in business operations and minimise their mate-

rialisation and impact. The objective is pursued

through continuous personnel development and

comprehensive operating instructions and internal

control measures.

The operational risks associated with Bonum

Bank’s most signiﬁcant new products, servic-

es, functions, processes, and systems are identi-

ﬁed in the assessment process for a new product

or service. The bank carries out an annual self-as-

sessment of operational risks based on business

risks assessments, in which the monitoring of op-

erational risk incidents is utilised. The risk assess-

ment also aims to evaluate the risks related to

Bonum Bank’s most signiﬁcant outsourced opera-

tions. Some of the potential losses caused by op-

erational risks are hedged through insurance. Risks

caused by malfunctions in information systems

are prepared for through continuity planning.

CAPITAL ADEQUACY

Bonum Bank’s capital adequacy was at a good

level at the end of 2023. Both capital adequa-

cy ratio and core capital adequacy ratio were 19.4

(20.0) per cent. At the end of 2023, the bank’s own

funds totalled EUR 47,515 (41,981) thousand, con-

sisting entirely of CET1 capital.

Bonum Bank’s risk weighted assets increased dur-

ing 2023 mainly because of increase in retail credit

portfolio. The growth in the retail credit portfolio is

expected to continue in 2024, which will increase

the amount of its risk weighted receivables ac-

cordingly.

Bonum Bank’s own funds consist of share cap-

ital, retained earnings and other non-restrict-

ed reserves. In line with the practice followed by

the amalgamation, the bank does not include

the proﬁt for the ﬁnancial year in its own funds.

Based on permission from the Financial Supervi-

sory Authority, the member credit institutions of

the amalgamation are exempted, by a decision of

the central institution, from the own funds require-

ment for intra-group items, and from the restric-

tions imposed on major counterparties concerning

items between the central credit institution and

the member banks.

The statutory minimum for capital adequacy ra-

tio is 8 per cent and 4.5 per cent for CET1 capital.

In addition to the minimum capital adequacy ratio,

Bonum Bank is subject to ﬁxed additional capital

requirement, which is 2.5 per cent in accordance

with the Act on Credit Institutions, and to the var-

iable country-speciﬁc additional capital require-

ments for foreign exposures. All additional capital

requirements have to be covered in full with tier 1

capital.

Bonum Bank’s leverage ratio was 4.6 (4.9) per cent

on 31 December 2023, as the required minimum

level is 3 per cent. With special permission from

the Financial Supervisory Authority, intra-amal-

gamation items are deducted from the amount of

leverage exposure in the calculation of the lever-

age ratio.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 14

Bonum Bank Plc

Summary of capital adequacy (EUR 1,000) 31 Dec 2023 31 Dec 2022

Own funds

Common Equity Tier 1 capital before deductions 48,137 43,274

Deductions from Common Equity Tier 1 capital -622 -1,293

Total Common Equity Tier 1 capital (CET1) 47,515 41,981

Additional Tier 1 capital before deductions - -

Deductions from Additional Tier 1 capital - -

Additional Tier 1 capital (AT1) - -

Tier 1 capital (T1 = CET1 + AT1) 47,515 41,981

Tier 2 capital before deductions - -

Deductions from Tier 2 capital - -

Total Tier 2 capital (T2) - -

Total capital (TC = T1 + T2) 47,515 41,981

Total risk weighted assets 244,745 210,283

of which credit risk 196,019 171,065

of which credit valuation adjustment risk (CVA) 6,658 3,433

of which market risk (exchange rate risk) 1,248 0

of which operational risk 40,820 35,785

Fixed capital conservation buffer according to Act on Credit

institutions (2.5%)

6,119 5,257

Countercyclical capital buffer 65 26

CET1 Capital ratio (%) 19.4% 20.0%

T1 Capital ratio (%) 19.4% 20.0%

Total capital ratio (%) 19.4% 20.0%

Capital requirement

Total capital 47,515 41 ,981

Capital requirement * 25,764 22,115

Capital buffer 21,752 19,865

Leverage ratio

Tier 1 capital (T1) 47,515 41 ,981

Leverage ratio exposure 1,024,580 858,279

Leverage ratio, % 4.6% 4.9%

* The capital requirement comprises the minimum requirement of 8%, the capital conservation buffer of 2.5% and the

country-speciﬁc countercyclical capital requirements of foreign exposures.

SUMMARY OF CAPITAL ADEQUACY

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 15

INTERNAL CONTROL

The purpose of the Bonum Bank’s internal control

is to ensure that the bank, in a systematic and ef-

fective manner, works towards the goals and im-

plements the procedures conﬁrmed by senior

management. Internal control aims to ensure that

the organisation complies with regulations and

manages risks comprehensively, and that its oper-

ations are efﬁcient and reliable.

Internal control is implemented at all levels of the

organisation. Internal control is implemented by

the Board of Directors, the CEO and other man-

agement and personnel, as well as the risk man-

agement and compliance functions independent-

ly of business operations. As part of internal con-

trol, the amalgamation has implemented a whis-

tle-blowing mechanism that enables the bank’s

employees to report, internally through an inde-

pendent channel, suspected violations of rules and

regulations concerning the ﬁnancial market in the

central institution or a member credit institution.

INTERNAL AUDIT

Within the amalgamation, POP Bank Centre coop

is centrally responsible for the steering and or-

ganisation of internal audit in the bank centre,

member credit institutions and other companies

of the amalgamation. Bonum Bank’s internal au-

dit is based on the internal audit guidelines con-

ﬁrmed by the Board of Directors and the Supervi-

sory Board of POP Bank Centre coop as well as on

the audit plan approved by the Board of Directors

of POP Bank Centre coop.

The purpose of internal audit is to assess the scope

and sufﬁciency of the internal control of Bonum

Bank’s operational organisation and to monitor

and assess the functionality of risk management

systems. Internal audit reports its observations

primarily to the bank’s Board of Directors. After

audits, the Bank’s Board of Directors discusses the

summaries prepared as a result of the internal au-

dit. Internal Audit reports of its activity and ob-

servations regularly to central institution’s Super-

visory Board, central institution’s Board and CEO.

The internal audits conducted in the Bank during

the year were carried out by the internal audit unit

of the central institution.

BONUM BANK’S MANAGEMENT

AND PERSONNEL

Bonum Bank’s Annual General Meeting of 23 March

2023 adopted the ﬁnancial statements for 2022

and granted discharge from liability to the Bonum

Bank’s Board members and the CEO. The Board of

Directors of Bonum Bank had four members. Dur-

ing the year, the Board has convened 19 times.

Regular board members were:

Jaakko Pulli, CEO

Chairman of the Board

Hanna Linna, CEO

Vice Chairman of the Board

Ilkka Lähteenmäki, Adjunct Professor

Member of the Board

Kirsi Salo, CEO

Member of the Board

Bonum Banks CEO is Pia Ali-Tolppa and CEO’s

deputy is Timo Hulkko.

On 31 December 2023, Bonum Bank had 88 em-

ployees, of which 87 with permanent employment

contract and 1 with ﬁxed term agreement. Out of

the total of 88 employees, 77 worked full-time. Em-

ployees’ professional competence is maintained

and developed in line with the bank’s needs and

changing operating environment, as well as with

employees’ individual competence requirements

and changes therein.

AUDIT

The company’s auditor was KPMG Oy Ab, author-

ized public accountants, with Tiia Kataja, author-

ised public accountant, as the principal auditor.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 16

CORPORATE GOVERNANCE

Bonum Bank’s functions are controlled by its

shareholder, which exercises its decision-making

power at the General Meeting in accordance with

the Finnish Limited Liability Companies Act and

the Articles of Association. The Annual General

Meeting decides on the distribution of the Bank’s

proﬁt and elects the members of the Board of Di-

rectors.

Bonum Bank is represented by and directed by

the Board of Directors. Operational decisions con-

cerning the Bank’s business operations and stra-

tegic issues are made by the bank’s Board of Di-

rectors. The work of the Board of Directors is based

on the bank’s Articles of Association, decisions of

the General Meeting and applicable legislation.

The bank’s CEO manages the Bank’s operational

activities in accordance with the instructions pro-

vided by the Board of Directors.

The investigation of the independence of Board

members and the CEO takes place in accord-

ance with regulations issued by the Finnish Finan-

cial Supervisory Authority. Board members and the

CEO shall provide an account of the entities in

which they operate when they are elected to their

ofﬁce. In addition, Board members and the CEO

shall provide an account of ﬁtness and propriety

according to the regulation by the Financial Su-

pervisory Authority when they accept their duties.

Bonum Bank’s annual corporate governance state-

ment is available at www.poppankki.ﬁ.

REMUNERATION

The Board of Directors of Bonum Bank is respon-

sible for matters related to remuneration. Bonum

Bank does not have a remuneration committee

appointed by the Board to manage its remuner-

ation scheme. It has not been deemed necessary

to establish a remuneration committee, consider-

ing the quality, scope and diversity of the bank’s

operations. Bonum Bank’s Board of Directors mon-

itors compliance with the remuneration scheme

and assesses its functionality annually.

The central institution’s internal audit function

veriﬁes at least once a year whether the remuner-

ation scheme, as approved by the Board of Direc-

tors, has been complied with. The compensation of

control functions’ personnel is independent of the

business area being supervised.

RELATIONSHIP BETWEEN REMUNERATION AND

RESULT

The remuneration scheme must be in line with

Bonum Bank’s business strategy, goals, values and

long-term interests and support the bank’s long-

term beneﬁt. It must also be consistent with and

promote the bank’s sound and effective risk man-

agement and risk-bearing capacity The remuner-

ation scheme must also support good corporate

governance

CRITERIA USED IN THE ASSESSMENT OF

PERFORMANCE, RISKBASED CHANGES TO THE

AMOUNT OF REMUNERATION, POSTPONEMENT

PRACTICES AND PAYMENT CRITERIA

At Bonum Bank, variable bonuses paid to an in-

dividual are not allowed to exceed EUR 100,000

over a one-year earnings period. The bank may

decide not to pay any variable bonuses in full or

in part if its ﬁnancial position has become weaker

to such an extent that, based on the Board’s esti-

mate, the payment of performance bonuses would

be unreasonable, considering the bank’s situation.

Severance pay or other compensation payable to

an employee can be paid if employment termi-

nates prematurely. The principles of Act on Cred-

it Institutions chapter 8 are taken into account in

payment, and the payment criteria are laid down

so that compensation is not paid for failed perfor-

mance.

FIXED AND VARIABLE COMPENSATION

In Bonum Bank’s remuneration scheme, variable

bonuses may not exceed 100% of the ﬁxed annu-

al salary.

KEY PARAMETERS AND CRITERIA APPLIED

IN THE SPECIFICATION OF VARIABLE

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 17

COMPENSATION AND OTHER FRINGE BENEFIT

Bonum Bank’s variable compensation is subject to

the following principles

1. The payment criteria for variable compensation

will be determined and communicated to the re-

cipients in advance. The Board may also reward

employees for exceptional performance without

such predetermined grounds with a bonus equal-

ling no more than one month’s salary.

2. The compensation must be based on an over-

all assessment of the performance of the recipient

and the related function. Their performance must

be evaluated over the long term.

3. When determining the bonus amounts, the risks

known at the time of the assessment must be

taken into account, as well as future risks, capital

costs and the necessary solvency.

4. The compensation beneﬁciary may be entitled

to variable compensation, which can be only paid

if the compensation beneﬁciary has not violated

the regulations, instructions or operating princi-

ples and procedures deﬁned by the credit insti-

tutions, which generate obligations to the credit

institution, or contributed to such action through

their acts or failure to act. It must also be possi-

ble to not pay or to recover the variable compen-

sation if the credit institution becomes aware of

such action only after the compensation has been

determined or paid.

5. The Bank may commit to unconditional payment

of compensation (non-recoverable compensation)

only for particularly weighty reasons and provid-

ed that the promised compensation only targets

the ﬁrst year of employment of the compensation

beneﬁciary.

AGGREGATE INFORMATION ON

COMPENSATION TO THE MANAGEMENT AND

MEMBERS OF PERSONNEL WHO HAVE A

SIGNIFICANT IMPACT ON THE BANK’S RISK

PROFILE

Bonum Bank maintains a list of the following per-

sons and the compensation paid to them:

6. CEO and members of the management team,

7. Other persons whose actions have a signiﬁcant

impact on the risk position of the central institu-

tion or amalgamation,

8. Persons who work in the risk control function,

risk management tasks, compliance function or

internal audit function,

9. Another person whose total amount of compen-

sation is not signiﬁcantly different from the total

amount of compensation of the persons referred

to in items 1 and 2.

PAID COMPENSATION

During the ﬁnancial period, Bonum Bank has paid

variable compensation payments in total EUR

91,200. No start-up payments were paid during

ﬁscal year. The bank did not pay compensation

of over EUR 1 million during the ﬁnancial period.

KEY OUTSOURCED OPERATIONS

Bonum Bank’s bank system is outsourced to Sam-

link Ltd. Bonum Bank’s accounting is managed at

Figure Taloushallinto Ltd., which POP Bank Group

owns together with other customer banks of the

company. Payment message handling at Bonum

Bank is carried out through SWIFT Service Bureau

provided by Tietoevry Oyj and SEPA Instant Pay-

ment Gateway and, excluding internal payments

within the POP Bank Group. In addition, the Bank

uses a platform service provided by a subsidiary

of Google Inc. for customer data management and

payment monitoring system provided by SAS In-

stitute Oy. Some card business services are out-

sourced to Samlink Ltd., Nets Denmark A/S Finnish

Branch, Intrum Justitia Ltd. and Evry Card Servic-

es Ltd.

DEPOSIT GUARANTEE

Bonum Bank is a member of the Deposit Guaran-

tee Fund, which protects the deposits of custom-

ers to a maximum of EUR 100 thousand. The de-

posit banks that are members of the amalgama-

tion of deposit banks are considered to be a single

deposit bank in terms of deposit guarantee. There-

fore, the deposit guarantee concerning a depos-

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 18

itor’s deposits in all member credit institutions of

the amalgamation of POP Banks (POP Banks and

Bonum Bank) totals EUR 100 thousand. Bonum

Bank’s operations focus on central credit institu-

tion services provided for the member banks of

the amalgamation. Therefore, the Deposit Guaran-

tee Fund is of minor signiﬁcance.

SOCIAL RESPONSIBILITY

POP Bank Group’s social responsibility is de-

scribed in the Group’s ﬁnancial statements.

Bonum Bank’s social responsibility refers to the

Bank’s responsibility for the effects of its opera-

tions on the surrounding society and the compa-

ny’s stakeholders. By acting as the central credit

institution for POP Banks, Bonum Bank contrib-

utes to supporting the social responsibility of lo-

cal POP Banks.

Bonum Bank holds Green Ofﬁce environ-

mental management system certiﬁcation by

the WWF. The themes of the bank’s programme

include enhanced recycling and reduced ener-

gy consumption, as well as a reduction in emis-

sions caused by mobility. The goals also include

increasing environmental awareness across the

bank’s organisation and among partners through

effective communication.

EVENTS AFTER THE CLOSING

DATE

Bonum Bank’s Board of Directors is not aware of

any events having taken place after the closing

date that would have a material impact on the in-

formation presented in the ﬁnancial statements.

OUTLOOK FOR 2024

Global economic growth is expected to pick up in

2024, but remain lower than usual. However, the

Finnish economy is expected to contract, and in-

ﬂation is expected to slow down. The main factors

affecting the Finnish economy are a weaker export

outlook and a decline in investment. The European

Central Bank has stopped key interest rate hikes

for the time being, and expectations of a decrease

in key interest rates have increased. The rapid fall

in market interest rates at the end of 2023 has

stabilised in early 2024, but interest rates are ex-

pected to continue to fall at a moderate pace.

Bonum Bank will use the available funding sourc-

es diversely during 2024. The goal is to keep the

average price of funding for the group as low as

possible. The mortgage bank enables the amalga-

mation to obtain long-term wholesale funding at a

competitive price for its business growth by issu-

ing covered bonds.

The general focus will be on increasing operation-

al efﬁciency and improving proﬁtability. Bonum

Bank’s personnel are involved in POP Bank Group’s

core banking system reform project to a signiﬁ-

cant degree.

The full-year result for 2024 is expected to be pos-

itive.

BOARD OF DIRECTORS’

PROPOSAL ON THE DISPOSAL OF

THE RESULT FOR THE PERIOD

Bonum Bank’s distributable funds were EUR

40,213,698.11. Bonum Banks Board of Direc-

tors proposes to the Annual General Meeting

that the proﬁt EUR 2,406,077.04 for the period

of which EUR 1,406,077.04 be recognised in re-

tained earnings and EUR 1,000,000.00 paid out

as dividends.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 19

BONUM BANK PLC’S FINANCIAL STATEMENTS 31 DECEMBER 2023

INCOME STATEMENT

STATEMENT OF COMPREHENSIVE INCOME

(EUR 1,000) Note 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Interest income 74,665 18,800

Interest expenses -61,665 -8,639

Net interest income 3 12,999 10,161

Net commissions and fees 4 7,226 7,285

Net investment income 5 -769 459

Other operating income 6 5,167 4,196

Total operating income 24,623 22,101

Personnel expenses 7 -5,409 -4,583

Other operating expenses 8 -11,982 -10,863

Depreciation and amortisation 9 -911 -949

Total operating expenses -18,302 -16,395

Impairment losses on ﬁnancial assets 14 -3,306 -1,485

Proﬁt before taxes 3,015 4,221

Income tax expense 10 -609 -838

Proﬁt for the period 2,406 3,383

(EUR 1,000) Note 1 Jan - 31 Dec 2023

1 Jan - 31 Dec 2022

Proﬁt for the ﬁnancial period 2,406 3,383

Other comprehensive income

Items that will not be reclassiﬁed to

proﬁt or loss

Net changes in fair value of equity

instruments

26 141 -154

Capital gains and losses for equity

instruments

26 0 -1,538

Deferred taxes 21 -28 338

Total 113 -1,354

Items that may be reclassiﬁed to proﬁt or

loss

Movement in fair value reserve for liability

instruments

26 1,368 -2,247

Total 1,368 -2,247

Other comprehensive income items total 1,481 -3,601

Comprehensive income for the ﬁnancial

year

3,887 -217

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 20

BALANCE SHEET

(EUR 1,000) Note 31 Dec 2023 31 Dec 2022

Assets

Liquid assets 15 485,020 436,911

Loans and advances to credit institutions 12, 16 849,549 778,257

Loans and advances to customers 12, 16 193,373 170,485

Derivatives 13 9,220 0

Investment assets 12, 17 259,963 163,891

Intangible assets 1 329 1,057

Property, plant and equipment 19 648 359

Other assets 20 39,309 23,118

Tax assets 21 207 515

Total assets 1,837,618 1,574,594

Liabilities

Liabilities to credit institutions 12,13,22 1,424,772 1,122,965

Liabilities to customers 12,13,22 33,435 55,930

Derivatives

23 1,798 5,975

Debt securities issued to the public 24 283,896 322,214

Other liabilities 25 42,970 20,003

Tax liabilities 21 203 850

Total liabilities 1,787,075 1,527,938

Equity capital

Share capital 10,000 10,000

Reserves 30,001 28,520

Retained earnings 10,543 8,136

Total equity capital 26 50,543 46,657

Total liabilities and equity capital 1,837,618 1,574,594

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 21

STATEMENT OF CHANGES IN EQUITY

(EUR 1,000)

capital

Fair value

reserve

Other

reserves

Retained

earnings

Total

equity

Balance 1 Jan 2023 10,000 -1,480 30,000 8,136 46,656

Comprehensive income for the

ﬁnancial year

Proﬁt for the ﬁnancial year

2,406 2,406

Other comprehensive income 1,481 1,481

Total comprehensive income for

the ﬁnancial year

1,481 2,406 3,887

Balance 31 Dec 2023 10,000 1 30,000 10,543 50,543

(EUR 1,000)

capital

Fair value

reserve

Other

reserves

Retained

earnings

Total

equity

Balance 1 Jan 2022 10,000 2,121 20,000 3,215 35,336

Comprehensive income for the

ﬁnancial year

Proﬁt for the ﬁnancial year

3,383 3,383

Other comprehensive income -3,601 -3,601

Total comprehensive income for

the ﬁnancial year

-3,601 3,383 -217

Investment in the unrestricted

equity fund

10,000 10,000

Other changes

1,538 1,538

Balance 31 Dec 2022 10,000 -1,480 30,000 8,136 46,656

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 22

CASH FLOW STATEMENT

(EUR 1,000) Note

1 Jan - 31 Dec

2023

1 Jan - 31 Dec

2022

Cash ﬂow from operating activities

Proﬁt for the ﬁnancial year 2,406 3,383

Adjustments to proﬁt for the ﬁnancial year 6,507 3,688

Increase (-) or decrease (+) in operating assets 189,257 -373,740

Advances to credit institutions 16 325,834 -333,871

Advances to customers 16 -26,140 -55,480

Investment assets 17 -94,247 28,722

Other assets 20 -16,191 -13,111

Increase (+) or decrease (-) in operating liabilities 287,525 488,080

Liabilities to credit institutions 22 287,465 455,764

Liabilities to customers 22 -22,495 20,349

Other liabilities 25 22,555 11,966

Income tax paid -1,318 -706

Total cash ﬂow from operating activities 484,377 120,705

Cash ﬂow from investing activities

Investments in shares and other equity, decreases -21 1,993

Purchase of PPE and intangible assets 0 102

Total cash ﬂow from investing activities -21 2,095

Cash ﬂow from ﬁnancing activities

Payment of lease liabilities 29 -175 -167

Debt securities issued, increase 24 129,273 338,923

Debt securities issued, decrease 24 -168,219 -301,853

Equity investment 26 0 10,000

Total cash ﬂow from ﬁnancing activities -39,121 46,903

Change in cash and cash equivalents

Cash and cash equivalents at period-start 443,523 273,820

Cash and cash equivalents at the end of the period 888,758 443,523

Net change in cash and cash equivalents 445,235 169,703

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 23

(EUR 1,000) Note

1 Jan - 31 Dec

2023

1 Jan - 31 Dec

2022

Cash and cash equivalents

Liquid assets 15 485,020 436,911

Receivables from credit institutions payable on

demand

403,738 6,612

Total 888,758 443,523

ADDITIONAL INFORMATION OF

THE CASH FLOW STATEMENT

Interest received 62,884 14,059

Interest paid 46,413 4,331

Dividends received 7 71

ADJUSTMENTS TO RESULT FOR

THE FINANCIAL YEAR

Non-cash items and other adjustments

Change in deferred taxes -20 -1

Net changes in fair value 944 -198

Income taxes 629 1,224

Impairment losses on receivables 3,306 1,485

Depreciation 911 949

Other 738 230

Adjustments to proﬁt for the ﬁnancial year 6,507 3,688

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 24

GENERAL

BONUM BANK PLC AND POP BANK GROUP

Bonum Bank Plc (hereinafter ‘Bonum Bank’) is

a subsidiary wholly owned by POP Bank Cen-

tre coop and a member credit institution in the

amalgamation of POP Banks, acting as the cen-

tral credit institution for the member banks of

POP Bank Centre coop (POP Banks). Bonum Bank

takes care of POP Banks’ payment transfer ac-

counts and transfers payment transactions be-

tween the customers of POP Banks and other

banks, makes the minimum reserve deposits for

POP Banks in the Bank of Finland, receives depos-

its for POP Banks and grants credits to POP Banks

that they need to ensure their liquidity. In addition,

Bonum Bank manages the liquidity of the amalga-

mation of POP Banks and operates in the ﬁnanc-

ing wholesale market by issuing unsecured senior

bonds. Bonum Bank’s duties also include opera-

tions related to Visa cards of POP Banks’ custom-

ers. Bonum Bank’s registered ofﬁce is Espoo. Copy

of Bonum Bank’s ﬁnancial statements are availa-

ble from its ofﬁce at Hevosenkenkä 3, FI-02600

Espoo, and online at www.poppankki.ﬁ.

Bonum Bank belongs to POP Bank Group. POP

Bank Group consists of the amalgamation of POP

Banks and companies over which it has control.

The Group is engaged in banking business. The

central institution for the amalgamation of POP

Banks is POP Bank Centre coop. Its members con-

sist of Bonum Bank and 18 co-operative banks

and POP Mortgage Bank Plc. The amalgamation of

POP Banks is an economic entity speciﬁed in the

Act on the Amalgamation of Deposit Banks, the

members of which are jointly liable for each other’s

debts and commitments.

The central institution of POP Banks has prepared

POP Bank Group’s consolidated ﬁnancial state-

ments in accordance with the Act on the Amal-

gamation of Deposit Banks. Copies of the ﬁnan-

cial statements of POP Bank Group are availa-

ble online at www.poppankki.ﬁ or from the ofﬁce

of the central institution, address Hevosenken-

kä 3, 02600 Espoo, Finland. POP Bank Group will

present information concerning risks speciﬁed

in the EU Capital Requirements Regulation (EU

2019/876) (CRR) in a separate Pillar III report.

BASIS OF PREPARATION OF FINANCIAL

STATEMENTS

Bonum Bank’s ﬁnancial statements have been

prepared in accordance with International Finan-

cial Reporting Standards (IFRS) approved in the

EU and the related Interpretations (IFRIC). The ap-

plicable Finnish accounting and corporate legisla-

tion and regulatory requirements have also been

taken into account when preparing the notes to

the ﬁnancial statements.

Figures in the notes are rounded, whereby the sum

total of individual ﬁgures may deviate from the

sum total presented in the calculations and tables.

Assets and liabilities denominated in currencies

other than euro have been translated into euro at

the exchange rate of the balance sheet date. Ex-

change rate differences resulting from measure-

ment have been recognised in net investment in-

come in the income statement.

Bonum Bank has no subsidiaries or associated

companies.

ACCOUNTING POLICIES REQUIRING

MANAGEMENT’S JUDGEMENT AND

UNCERTAINTY FACTORS AFFECTING

ESTIMATES

The application of the IFRS requires the manage-

ment to make estimates and assumptions con-

cerning the future that affect the amounts of

items presented in ﬁnancial statement calcula-

tions, as well as the information provided in the

notes. The management’s key estimates concern

the future and key uncertainties related to the

values on the balance sheet date. Such key es-

NOTES

NOTE 1 ACCOUNTING POLICIES

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 25

timates are related to fair value measurement in

particular, as well as the impairment of ﬁnancial

assets and intangible assets. The management’s

estimates and assumptions are based on the best

view at the balance sheet date, which may differ

from the actual result.

DETERMINING FAIR VALUE

The management must assess whether the mar-

kets for ﬁnancial instruments are active or not. Fur-

thermore, the management must assess whether

an individual ﬁnancial instrument is subject to ac-

tive trading and whether the price information ob-

tained from the market is a reliable indication of

the instrument’s fair value. When the fair value of ﬁ-

nancial instruments is determined using a valuation

technique, the management’s judgement is need-

ed in the choice of the valuation technique to be

applied. Insofar as there is no market input availa-

ble for the techniques, management must evaluate

how other data can be used for the valuation.

IMPAIRMENT

Calculation of the expected credit losses includes

parameters requiring management’s consideration.

Management has to determine the method of tak-

ing macroeconomic information into consideration

in the calculations, the principles of evaluating sig-

niﬁcant increases in the credit risk, the assessment

of loss in default and the credit conversion factors

applied to credit cards.

The policies on impairment of ﬁnancial assets have

been presented in detail in chapter Impairment of

ﬁnancial assets.

The amount recoverable from intangible assets is

determined in the impairment assessment on the

basis of the use value or fair value of the asset. Im-

pairment testing requires management’s judge-

ment and assessment of the recoverable amount

of the asset in question, as well as the interest rate

used for discounting. In addition, management’s

judgement is required for the evaluation of intangi-

ble assets under development.

CHANGES IN ACCOUNTING POLICIES

NEW IFRS STANDARDS AND INTERPRETATIONS

No new IFRS standards were adopted during the

ﬁnancial year in Bonum Bank’s ﬁnancial state-

ments. POP Bank Group will adopt from 1 January

2024 the changes in IAS 1 presentation of Financial

Statements, IAS 7 Statement of Cash Flows and IF-

RS 7 Financial Instruments: Disclosures, if they have

been approved for application in the EU before the

effective date. The changes are not expected to

have a material impact on POP Bank Group’s ﬁnan-

cial statements

FINANCIAL INSTRUMENTS

CLASSIFICATION AND RECOGNITION

Financial assets are classiﬁed on initial recognition

into following measurement categories based on

the business model followed in their management

and the debt instruments’ cash ﬂow characteris-

tics:

● Financial assets at amortised cost

● Financial assets at value through other com-

prehensive income

● Financial assets recognized at fair value

through proﬁt and loss.

In accordance with the IFRS 9 Financial instru-

ments, Financial liabilities are classiﬁed on initial

recognition into following measurement categories:

● Financial liabilities at amortised cost

● Financial liabilities at fair value through proﬁt

and loss

On initial recognition, all ﬁnancial assets and ﬁnan-

cial liabilities are recognised at fair value. Transac-

tion costs from other ﬁnancial instruments are in-

cluded in the acquisition cost.

Purchases and sales of ﬁnancial instruments are

recognised on the settlement date. Loans grant-

ed are recognised in the balance sheet on the date

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 26

when the customer draws down the loan. Instru-

ments issued are recognised in the balance sheet

on the date when the customer makes the sub-

scription.

Financial assets and ﬁnancial liabilities are offset

in the balance sheet if Bonum Bank currently has

a legally enforceable right of set-off in the normal

course of business and in the event of default, in-

solvency or bankruptcy, and it has the intention and

ability to settle the asset and liability on a net ba-

sis. Bonum Bank has not offset the ﬁnancial assets

and ﬁnancial liabilities on the balance sheet.

A ﬁnancial asset is derecognised when the con-

tractual rights to the cash ﬂows from the ﬁnancial

asset expire, or when the rights have been trans-

ferred to another party so that substantially all the

risks and rewards of ownership of the ﬁnancial as-

set are transferred. In addition, an agreement in-

cluded in ﬁnancial assets is derecognised on the

balance sheet if the rights to cash ﬂows that are

based on the agreement are transferred to anoth-

er party or if the agreement includes an obligation

to pay the cash ﬂows in question to one or several

recipients. If a consideration is received, but all the

risks and rewards of ownership of the transferred

asset are substantially retained, the transferred as-

set is recognised in its entirety and a ﬁnancial li-

ability is recognised for the consideration received.

Impaired ﬁnancial assets are derecognised when

no further payments are expected and the actu-

al ﬁnal loss can be determined. In connection to

derecognition, the previously recognised expected

credit loss is cancelled and the ﬁnal credit loss is

recognised. Payments on derecognised receivables

received later are recognised in the income state-

ment as an adjustment of impairment losses.

Financial liabilities are derecognised when the re-

lated obligations have been fulﬁlled and they have

been extinguished. An exchange of a debt instru-

ment with substantially different terms or substan-

tial modiﬁcation of the terms of an existing ﬁnan-

cial liability is accounted for as an extinguishment

of the original ﬁnancial liability and the recognition

of a new ﬁnancial liability.

BUSINESS MODELS FOR MANAGING FINANCIAL

ASSETS AND MEASUREMENT

According to IFRS 9, an entity’s business model re-

fers to how an entity manages its ﬁnancial assets

in order to generate cash ﬂows. That is, entity’s

business model determines whether cash ﬂows will

result from collecting contractual cash ﬂows, sell-

ing ﬁnancial assets or both. The business model is

determined at a level that reﬂects how ﬁnancial as-

set groups are managed together to achieve a par-

ticular business objective.

In Bonum Bank, ﬁnancial assets are managed ac-

cording to three business models:

1. Financial assets held (objective to collect cash

ﬂows)

2. Combination of ﬁnancial assets held and sold

(objective to collect cash ﬂows and sale)

3. Other long-term investments

Financial assets held -business model includes

loans and receivables and debt instruments held

to maturity, which pass the SPPI-test (Solely Pay-

ments of Principal and Interest) for their cash ﬂow

characteristics. In the SPPI test it is determined

whether the asset’s contractual cash ﬂows are

solely payments of principal and interest on the

principal amount outstanding.

Combination-business model includes debt in-

struments with contractual cash ﬂows being solely

payments of principal and interest, held to maturity

or close to maturity or sold for example to reach the

targets of the investment strategy.

Other long-term investments -business model in-

cludes shares and other instruments, whose cash

ﬂows do not consist solely on payments of princi-

pal and interest.

Bonum Bank does not actively trade ﬁnancial as-

sets. The purpose of Bonum Bank’s investment ac-

tivities is to invest liquidity surplus with long-term

objective and to maintain investment portfolio for

liquidity purposes.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 27

Financial assets measured at amortised cost

Financial assets measured at amortised cost in-

cludes loans and receivables and the debt instru-

ments, which are, according to the investment

policy, intended to be held to maturity with terms

of regular payments of interest and principal ei-

ther in part or entirety (SPPI-test). In addition, liq-

uid assets, in which the liquidity does not have to

be tested by regular sales, may be classiﬁed to

this measurement class.

Financial assets measured at fair value through

other comprehensive income

Financial assets measured at fair value through

other comprehensive income includes debt instru-

ments, which are, according to the investment pol-

icy, intended to be held in order to collect contrac-

tual cash ﬂows or sold, if necessary, for reaching

the objectives of the business model (combina-

tion-business model). Classiﬁcation requires, that

the contractual terms of the instrument include

regular payments of interest and principal either in

part or in entirety (SPPI-test).

Among other things, investments which can be sold

to cover liquidity needs, for example, and liquid as-

sets which have to be tested on regular sales in or-

der to demonstrate the liquidity of those assets are

classiﬁed to this measurement class.

Changes in ﬁnancial instrument’s fair value is rec-

ognised in items of other comprehensive income.

The increase and decrease of expected credit loss-

es are recognised in the income statement and in

items of other comprehensive income. Proﬁt and

loss from foreign currencies are also recognised

in other comprehensive income. When sold, the

chance in fair value as well as the proﬁt and loss

from foreign currencies are recognised from other

comprehensive income to net investment income in

the income statement and expected credit loss in

impairment losses on ﬁnancial assets in the income

statement.

Financial assets measured at fair value through

proﬁt or loss

Financial asset is measured at fair value through

proﬁt or loss unless it is measured at amortised

cost or at fair value through other comprehensive

income. Financial assets measured at fair value

through proﬁt or loss include shares and partici-

pations and debt instruments, which do not meet

the SPPI-test. An exception is made with regards

to shares which are measured at fair value through

other comprehensive income.

Bonum Bank does not have ﬁnancial assets held

for trading purposes or ﬁnancial assets measured

at fair value through proﬁt or loss. Derivative con-

tracts used for hedging are measured at fair value

through proﬁt or loss.

Equity instrument assets measured at fair value

through other comprehensive income

Bonum Bank has adopted the exception in IFRS 9,

according to which changes in fair value of invest-

ments in shares may be recognised in other com-

prehensive income. The exception is adopted to in-

vestments in shares regarded strategic to Bonum

Bank’s business operations.

Changes in fair value are recognised in other com-

prehensive income. In case such an investment is

subsequently sold, the result of the sale is recog-

nised in equity. The election can be made only at in-

itial recognition and it is irrevocable.

Financial liabilities measured at amortised cost

Bonum Bank’s ﬁnancial liabilities are measured at

amortised cost according to the effective interest

rate method. Financial liabilities measured at am-

ortised cost includes deposits and debt securities

issued to the public, liabilities to credit institutions

as well as other ﬁnancial liabilities. Bonum Bank

has no ﬁnancial liabilities measured at fair value

through proﬁt or loss.

Financial liabilities measured at fair value

Derivative contracts used for hedging are meas-

ured at fair value through proﬁt or loss. Bonum

Bank has no other ﬁnancial liabilities measured at

fair value through proﬁt or loss.

DETERMINING FAIR VALUE

Fair value is the price that would be attained if the

asset was sold or would be paid to transfer the lia-

bility from one market party to another in a stand-

ard business transaction taking place on a valua-

tion day.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 28

The fair value of a ﬁnancial instrument is deter-

mined on the basis of prices quoted in an active

market or, where no active market exists, using

standard valuation techniques. A market is con-

sidered as active if price quotes are readily and

regularly available and represent actual and reg-

ularly occurring market transactions on an arm’s

length basis. Current bid price is used as the quot-

ed market price of ﬁnancial assets.

If the market has a well-established valuation

technique for a ﬁnancial instrument for which

there is no direct market price available, the fair

value is based on the commonly used valuation

model and on the market quotations of the input

data used in the model.

If there is no well-established valuation technique

in the market, fair value is determined based on

a speciﬁc valuation model created for the prod-

uct in question. The valuation models are based

on widely used measuring techniques, incorporat-

ing all the factors that market participants would

consider when setting a price. The valuation pric-

es used include market transaction prices, the dis-

counted cash ﬂow method, as well as the fair value

of another substantially similar instrument at the

reporting date. The valuation methods take into

account an estimate of the credit risk, applicable

discount rates, early repayment options, and oth-

er such factors that may impact reliable determi-

nation of the fair value of the ﬁnancial instrument.

The fair values of ﬁnancial instruments are divided

into three hierarchical levels depending on how the

fair value is deﬁned:

● Quoted fair values in active markets for iden-

tical assets or liabilities (Level 1)

● Fair values that are determined using oth-

er input data than the quoted prices at Level

1, which are observable for the assets or lia-

bilities either directly (e.g. prices) or indirectly

(e.g. derived from prices) (Level 2)

● Fair values determined by the input data,

which is essentially not based on the observa-

ble market data (Level 3).

The fair value hierarchy level into which an item

measured at fair value is fully classiﬁed is de-

termined by the input data, which is at the low-

est level and is signiﬁcant in respect to the whole

item. The signiﬁcance of the input data is evaluat-

ed considering the whole item, which is valued at

fair value.

IMPAIRMENT OF FINANCIAL ASSETS

TA loss allowance on ﬁnancial assets measured at

amortized cost or fair value through other com-

prehensive income and off-balance sheet cred-

it commitments is recognized on the basis of ex-

pected credit losses. The expected credit loss of

a ﬁnancial instrument is determined as the dif-

ference between the contractual cash ﬂows that

the entity is entitled to receive under the contract

and the cash ﬂows expected to be received by the

entity at the original effective interest rate at the

time of reporting.

To determine expected credit losses, ﬁnancial in-

struments are classiﬁed in stages from 1 to 3.

Stage 1 represents ﬁnancial instruments whose

credit risk has not increased signiﬁcantly since

the initial recognition. Expected credit losses are

determined for such ﬁnancial instruments based

on expected loan losses for 12 months. Stage 2

represents ﬁnancial instruments whose credit risk

has increased signiﬁcantly after the initial rec-

ognition on the basis of qualitative or quantita-

tive criteria and, for stage 3, ﬁnancial instruments

whose counterparty has been declared as default.

Expected credit losses are determined for ﬁnan-

cial instruments classiﬁed in Stage 2 and 3 based

on the expected credit losses over the entire life of

the instrument.

Calculating expected credit losses in Bonum Bank

is based on three main segments::

● Private customers

● Corporate customers

● Investment portfolio

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 29

The calculation of expected credit losses is based

on the probability of default (PD), the loss ratio

(LGD, loss given default) and the exposure at de-

fault (EAD) for each contract on main segments.

The probability of default (PD) is measured by the

historical credit rating model. The credit rating

models are deﬁned for the three main segments

described above. Credit rating models constructed

using statistical methods are used to estimate the

PD of private and corporate customers.

Loss given default (LGD) refers to the expected

portion of the loan loss on the remaining capital if

the counterparty is classiﬁed as default. The pa-

rameters for calculating loss shares in POP Bank

Group are determined on the basis of expert esti-

mates. Industry-speciﬁc LGD data from the Finnish

market have been used to determine LGD values.

The exposure at default (EAD) is calculated for

each loan and off-balance sheet item separately

on the basis of repayments under the terms of the

contract, with the exception of contracts without

maturity whose lifecycle is determined on the ba-

sis of expert judgment. In the EAD calculation of

off-balance sheet items, CCF coefﬁcients shall

be applied in accordance with the standardised

credit risk standard for the credit risk calculation,

with the exception of card credits for which a CCF

value has been determined on the basis of expert

judgment.

Estimated credit losses are estimated using future

information available with reasonable ease. For the

purpose of calculating expected credit losses, POP

Bank Group has developed a model based on three

macroeconomic scenarios and related implemen-

tation probabilities to correct the parameters used

in the calculation when estimating expected cred-

it losses. The macroeconomic scenarios are based

on the projected growth rate of Finland’s Gross Do-

mestic Product over the next three years.

In the measurement of expected credit losses, a

transition will be made from the recognition of ex-

pected credit losses over 12 months to the rec-

ognition of expected credit losses throughout the

lifetime of the contract as the credit risk increas-

es signiﬁcantly after the initial recognition, after

which the contract is transferred from stage 1 to

stage 2. The credit risk is considered to have in-

creased signiﬁcantly, when forbearance meas-

ures to the contract have been made less than 12

months ago, contract has been overdue for more

than 30 days, or another qualitative risk factor has

been identiﬁed in the customer’s situation such as

a signiﬁcant change in the customer’s business

that is not yet reﬂected in the payment delay. In

addition, the credit risk is considered signiﬁcantly

increased if the counterparty credit rating has de-

teriorated signiﬁcantly. The threshold value deter-

mined by expert estimation of signiﬁcant impair-

ment is based on the change in PD value between

the time of reporting and the time of the contract

origination.

Bonum Bank applies the deﬁnition of default in ac-

cordance with Article 178 of Regulation 575/2013

of the European Parliament and of the Council

when calculating expected credit losses. Liabili-

ties are classiﬁed in stage 3 when they meet the

deﬁnition criteria. For non-retail customers, which

are customers with a turnover of more than EUR

50 million and liabilities of more than EUR 1 million,

the deﬁnition of default applies at customer lev-

el and to retail customers at contract level. How-

ever, all receivables from a retail customer are re-

corded as defaulted (customer-level default) if the

amount of the customer’s liabilities exceeds 20

per cent of the customer’s total liabilities.

The contract is considered defaulted at the lat-

est when the liability under the default criteria has

been continuously delayed for more than 90 days.

In addition, a customer is considered defaulted

when repayment is considered unlikely for exam-

ple if the customer has been declared bankrupt

or similar proceedings, or if the customer has for-

bearance measures that causes a change in the

present value of the liability of more than 1 per

cent. The contract or customer is considered de-

faulted for a period of 90 days after the conditions

for default have ceased to exist.

Bonum Bank does not have contracts that are

originated as impaired.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 30

If the customer has not fulﬁlled the criteria for de-

fault for at least 3 months, the customer’s liability

will return to either stage 2 or stage 1, depending

on whether the exposures meet a signiﬁcant in-

crease in the credit risk criteria at the time of re-

turn. The contract will return from stage 2 to stage

1 without a separate trial period if the contract no

longer meets the criteria for signiﬁcant credit risk

growth.

Bonum Bank applies an exception to ﬁnancial as-

sets at fair value through proﬁt or loss other than

IFRS 9, in which all instruments with a low credit risk

are classiﬁed in stage 1 and instruments with high-

er credit risk are classiﬁed in stage 2.

A loss allowance on ﬁnancial assets recognised

at amortised cost and fair value through other

comprehensive income and for off-balance sheet

items is recognised in the income statement. Loss

allowance in the income statement consists of the

expected credit loss calculated for the ﬁnancial

asset, where the expected credit losses previously

recognized have been deducted. A loss allowance

is cancelled if a ﬁnal credit loss is recognized for

the ﬁnancial asset. The loss allowance on ﬁnancial

assets recognized at amortized cost reduces the

carrying amount of the ﬁnancial assets. The loss

allowance for ﬁnancial assets at fair value through

other comprehensive income is recognised in the

statement of comprehensive income. The loss al-

lowance on off-balance sheet commitments is

recognised as a provision in other provisions and

liabilities.

INTANGIBLE ASSETS

Intangible assets included in Bonum Bank’s balance

sheet mainly consist of acquisition costs of infor-

mation systems. The most important intangible as-

sets are the information systems for central cred-

it institution operations and card business. An in-

tangible asset is recognized in the balance sheet at

acquisition cost if it is probable that the expect-

ed economic beneﬁts associated with the asset will

ﬂow to the Bonum Bank and the acquisition cost

of the asset can be measured reliably. Acquisition

cost includes all costs that are directly attributable

to bringing the asset to its working condition for its

intended use. Bonum Bank has capitalised also in-

ternally produced intangible assets. The capitalised

expenditures for internally produced intangible as-

sets includes, for example, purchased services, in-

house work and other external costs related to pro-

jects.

All of Bonum Bank’s intangible assets have a limit-

ed economical lifetime. The acquisition cost of in-

tangible assets is amortised in the income state-

ment on the basis of the estimated economical

lifetime of assets. The estimated economical life-

time is 3–5 years for information systems and 3–4

years for other intangible assets. The estimated

economical lifetime of the basic banking systems

may be longer, but not more than 10 years.

The amortisation of the acquisition cost of intan-

gible assets begins when the asset is ready to be

taken into use. Indications of impairment of intan-

gible assets are examined annually and intangible

assets are tested for impairment when necessary.

Research costs are recorded as expenses as they

occur.

Conﬁguration and customization costs related to

Software as a Service (SaaS) cloud service agree-

ments are recognized as prepayments or expens-

es, depending on whether the conﬁguration and

customization services are distinct from the ac-

tual cloud service agreement. In the cloud service

arrangement, the software is controlled by a third

party, and the software’s conﬁguration and cus-

tomization functions are not capitalized as an in-

tangible asset. The prepayment recognized under

the cloud service agreement is released as an ex-

pense during the agreement period from the time

the asset is ready for use.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment included in Bonum

Bank’s balance sheet consist of machinery and

equipment, which are measured at acquisition

cost less depreciation and impairment. Depre-

ciation is based on the useful life of the assets.

The economic life for machinery and equipment is

3–10 years.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 31

Depreciation and impairment on property, plant

and equipment are recognised in the income

statement on depreciation, amortisation and im-

pairment.

LEASES

Bonum Bank has acquired ofﬁce equipment and

business facilities for its use through contracts

classiﬁed as leases. At the time of establishing a

contract, Bonum Bank assesses whether the con-

tract is a lease or includes a lease. A contract is

a lease if it conveys the right to control the use

of an identiﬁed asset for a period of time in ex-

change for a consideration.

Bonum Bank a lessee is required to recognise on

its balance sheet a right-of-use asset and a lease

liability arising from a lease. Lease liabilities are

presented under other liabilities and the relat-

ed interest expenses under net interest income.

The right-of-use asset is presented under proper-

ty, plant and equipment and depreciation is pre-

sented under depreciation and impairment losses.

Bonum Bank has applied the exemptions included

in the standard, according to which leases with a

term of 12 months or less, or leases where the un-

derlying asset is of low value, need not be recog-

nised on the balance sheet. The expenses arising

from these leases are recognised under other op-

erating income.

A right-of-use asset is initially measured at ac-

quisition cost. After the beginning of the contract,

right-of-use assets are measured at acquisition

cost less accumulated depreciation and impair-

ment losses. Depreciation on a right-of-use as-

set is recognised using the straight-line method.

Depreciation period for commercial premises with

lease valid until further notice is generally 2 years.

For ﬁxed-term contracts, the depreciation period

is in principle the contractual period. Depreciation

times for ofﬁce equipment vary from 2 to 5 years.

A lease liability is initially measured at the pres-

ent value of the lease payments remaining unpaid

at the beginning of the contract. The incremental

borrowing rate of interest is used in the calcula-

tion of lease liabilities. The interest rate used for

additional credit is the interest rate determined for

credits granted within the group.

The economic lifetime of a leased asset is taken in-

to consideration when determining the lease period.

The management’s estimates are signiﬁcant, par-

ticularly when determining the lease period for con-

tracts valid until further notice and the incremen-

tal borrowing rate of interest. Contracts valid until

further notice are assigned a lease period based

on the management’s estimate in cases when it is

reasonably certain that they are entered into for a

period that exceeds their notice period.

EMPLOYEE BENEFITS

Bonum Bank’s employee beneﬁts consist mainly

of short-term employee beneﬁts, such as salaries,

holiday pay and bonus payments, which are ex-

pected to be paid in connection with the work per-

formance they are related to or within the following

12 months.

Post-employment beneﬁts consist of pensions

and other beneﬁts paid out after the termination

of employment. Statutory pension cover is ar-

ranged through external pension insurance com-

panies. Bonum Bank’s pension plans are deﬁned

contribution plans. Expenses from deﬁned contri-

bution plans are recognised in personnel expenses

in the period during which they are charged by the

insurance company. Bonum Bank has no deﬁned

beneﬁt pension plans.

PRINCIPLES FOR RECOGNISING INCOME

AND EXPENSES

Interest income and expenses

Interest income and expenses are amortised over

the maturity of the contract using the effective

interest rate method, in proportion to the remain-

ing carrying amount in the balance sheet. Interest

income and expenses are recognised in net inter-

est income.

Negative interest income paid by Bonum Bank is

shown in interest expenses, and the negative in-

terest expense charged to the customer bank is

shown in interest income.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 32

Commission income and expenses

Commission income and expenses are general-

ly recognised on an accrual basis when the relat-

ed services are performed. Commissions and fees

relating to services performed over several years

are amortised over the service period. Commis-

sions and fees that are considered as an integral

part of the effective interest of a ﬁnancial instru-

ment are accounted for as an adjustment to the

effective interest. However, commissions and fees

relating to ﬁnancial instruments measured at fair

value through proﬁt or loss are recognised in the

income statement on initial recognition.

Dividends

Dividends are primarily recognised when the Gen-

eral Meeting of Shareholders of the distributing

entity has made a decision on dividend pay-out

and the right to receive dividends has emerged.

Dividend income is recognised in net investment

income.

Income from development charges

Bonum Bank has collected development charges

included in other operating income from its cus-

tomer banks for the development of the central

credit institution operations and the card business.

These payments have not been recognised insofar

as they are used for covering expenses included in

the acquisition cost of an intangible asset. Unrec-

ognised payments have been treated as advances

and included in other liabilities in the balance sheet.

These payments are recognised when Bonum Bank

uses the intangible asset to earn income.

Presentation of income statement items in the ﬁnancial statements:

Net interest income

Interest income and expenses on ﬁnancial assets and liabilities, the

amount of amortisation on the difference between the nominal and

acquisition values, interest on interest-rate derivatives and fees

that are accounted as part of the ﬁnancial asset’s effective inter-

est

Commission income and ex-

penses

Commission income from lending, deposits, commission income

and expenses from payments and card business, commission in-

come from securities

Net investment income

Sales gains and losses and dividend income from ﬁnancial in-

struments measured at fair value, net gains from foreign currency

transactions

Other operating income

Income from central credit institution services, development charg-

es collected from banks and other operating income

Personnel expenses Wages and salaries, social expenses and pension expenses

Other operating expenses

Other administrative expenses, expenses related to low-value and

short-term leases, development expenses, charges to ﬁnancial au-

thorities and other expenses related to business operations

Impairment losses on ﬁnan-

cial assets

Impairment losses on ﬁnancial assets, expected credit losses and

realised credit losses and cancellations of credit losses

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 33

INCOME TAXES

The income statement includes taxes on Bonum

Bank’s taxable income for the ﬁnancial year, ad-

justments to taxes from previous ﬁnancial years

and changes in deferred taxes. Tax expenses are

recognised in the income statement except when

they are directly linked to items entered into equi-

ty capital or other items in the statement of com-

prehensive income, in which case the tax effect is

also included in these items.

Deferred tax liabilities and assets are calculated

on taxable and deductible temporary differenc-

es between the carrying amount and the tax ba-

sis. Deferred tax assets are recognised to the ex-

tent that it is probable that taxable income will be

available against which the deductible temporary

difference can be utilised.

Deferred tax assets and liabilities are measured at

the tax rate that is expected to apply at the time

when the temporary difference is reversed.

A deferred tax asset is recognised for the carry

forward of unused tax losses to the extent that fu-

ture taxable proﬁt will be probable and unused tax

credits can be utilised.

SEGMENT REPORTING

Bonum Bank is engaged in the banking business.

Thus, the bank has only one operational segment,

which is why its ﬁnancial statements do not in-

clude segment reporting.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 34

NOTE 2 RISK MANAGEMENT

RISK AND CAPITAL ADEQUACY

MANAGEMENT POLICIES

The purpose of Bonum Bank’s risk management is

to ensure that the bank does not take such risks

in its operations that would result in a materi-

al threat to the capital adequacy or solvency of a

member credit institution, the central institution or

the entire amalgamation and support the strate-

gic target of risk management in POP Bank Group

and ensure for its own part the continuation the

operations at all circumstances. Risk-bearing ca-

pacity is built upon risk management proportion-

ated to the scope and complexity of the institu-

tion and adequate capitalization based on proﬁt-

able business operations. The purpose of the risk

management process is to ensure that all signif-

icant risks resulting from business activities are

identiﬁed, assessed, measured and monitored on

a regular basis and that they are proportionate to

the risk-bearing capacity of the Bonum Bank and

the amalgamation.

The purpose of capital adequacy management is

to ensure the adequate amount, quality and efﬁ-

cient use of the capital of the Bonum Bank. Cap-

ital is held to cover the material risks arising from

the Bank’s and amalgamation’s business strate-

gy and plan and to secure the uninterrupted op-

eration of the Bank and amalgamation in case of

unexpected losses. The goal is pursued through a

documented and systematic capital adequacy

management process that is integrally linked to

the amalgamation’s and other member credit in-

stitutions’ business planning and management.

POP Bank Centre Coop, the central institution

of the amalgamation, is responsible for the risk

and capital adequacy management of POP Bank

Group. The central institution provides guidance to

the member credit institutions to ensure risk man-

agement and supervises that the member institu-

tions operate in accordance with regulation, their

own rules, guidelines issued by the central institu-

tion and in accordance with appropriate and eth-

ically acceptable procedures. Bonum Bank, with-

in limits set by conﬁrmed business risk thresh-

olds, carries its business risks independently in its

operations and is liable for its capital adequacy.

The capital adequacy, liquidity coverage ratio and

customer risks of the Bonum Bank are supervised

both at the level of individual member institutions

and at the consolidated amalgamation level. Vio-

lations of the risk management principles and lim-

its are addressed in accordance with the agreed

operating models.

Bonum Bank conducts an extensive identiﬁcation

and evaluation of risks related to its operations

and sets risk-bearing capacity to match the total

amount of the risks. In order to secure the capital

adequacy, bank sets risk-based capital objectives

and prepares a capital plan to achieve these ob-

jectives. Calculation methods deﬁned by the cen-

tral institution’s risk monitoring function are used

when preparing the capital plan.

The most signiﬁcant risks associated with Bonum

Bank’s operations are credit risk, liquidity risk, in-

terest rate risk and operational risk. The risk strat-

egy conﬁrmed by the Board of Directors of the

central institution outlines the risk appetite of the

operations, within which the Board of Directors of

the Bonum Bank sets its own guidelines and re-

strictions. Business activities are carried out at a

moderate risk level so that the risks can be man-

aged in full.

Risk and capital adequacy management is regu-

lated by EU legislation, Act on Credit Institutions

(610/2014), Act on the Amalgamation of Depos-

it Banks (24.6.2010/599; hereinafter referred to as

the “Amalgamation Act”) and the standards, regu-

lations and guidelines issued by the Financial Su-

pervisory Authority.

Risk management is an essential part of the inter-

nal controls of Bonum Bank. The purpose of inter-

nal controls is to ensure that the institution com-

plies with regulations, carries out comprehensive

risk management and operates efﬁciently and re-

liably. Moreover, internal controls serve to ensure

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 35

that the objectives and goals set for different lev-

els of the amalgamation are achieved in accord-

ance with internal guidelines.

ORGANISATION OF RISK AND CAPITAL

ADEQUACY MANAGEMENT

Bonum Bank is the central credit institution and

a member credit institution of the amalgamation

of POP Banks and a subsidiary of POP Bank Cen-

tre Coop. The central institution issues binding in-

structions concerning risk and capital adequacy

management, corporate governance and internal

control to the member credit institutions to secure

their solvency and capital adequacy. Furthermore,

common business controlling thresholds have

been established for the member institutions to

ensure that the risks taken by an individual mem-

ber institution are within acceptable limits.

Bonum Bank’s Board of Directors conﬁrms the ob-

jectives of the business operations, guidelines,

limits to the risk levels of the operations as well as

the risk-taking authorities. The Board of Directors

is also responsible for proactive capital planning

and adapting the capital adequacy management

planning and proactive capital planning into reli-

able governance and guidance. The Board of Di-

rectors assesses the appropriateness, extent and

reliability of capital adequacy management. The

Board of Directors sets the target level for capi-

tal adequacy and conﬁrms the level and structure

of capital required by the risk proﬁle. The executive

management is responsible for the risk manage-

ment of the daily operations within the scope of

the risk limits and risk-taking authority.

The executive management is responsible for the

practical implementation, continuous monitor-

ing, supervision and reporting of capital adequa-

cy and risk management to the Board of Directors

of the amalgamation. The executive management

also ensures that the responsibilities, authoriza-

tions, processes and reporting relationships relat-

ed to capital adequacy management have been

clearly deﬁned and sufﬁciently described and that

the employees are familiar with capital adequa-

cy management and the related processes and

methods to the extent required by their duties.

Bonum Bank’s independent risk monitoring is re-

sponsible for monitoring the risk limits and capital

adequacy in the business operations as well as re-

porting them to the Board of Directors and the in-

dependent risk management function of the cen-

tral institution of the amalgamation. The assign-

ment of Bonum Bank’s risk monitoring function is

to form a comprehensive view of the risks includ-

ed in the central credit institution services provid-

ed to the amalgamation’s member credit institu-

tions and the bank’s other operations, develop risk

management methods and processes for identify-

ing, measuring and monitoring risks in accordance

with the principles issued by the central institution.

The centralized compliance function of the central

institution supervises that the bank complies with

applicable laws, decrees, instructions and regula-

tions issued by the authorities, their own rules and

the internal binding guidelines issued by the cen-

tral institution of the amalgamation in its activ-

ities. As the central institution, POP Bank Centre

coop supervises the sufﬁciency and functioning of

the risk management systems in all the member

credit institutions in accordance with section 17 of

the Amalgamation Act.

The principles, organisation and internal control

measures of amalgamation’s risk and capital ad-

equacy management are described in more de-

tail in Note 4 to POP Bank Group’s ﬁnancial state-

ments. Material information regarding capital ad-

equacy as speciﬁed in the Capital Requirements

Regulation (EU 575/2013) is presented in a sepa-

rate Pillar III report. Material information regarding

capital adequacy as speciﬁed in the Capital Re-

quirements Regulation (EU575/2013) is presented

in a separate Pillar III report. Copies of the ﬁnan-

cial statements of the POP Bank Group are avail-

able from the ofﬁce of the central institution, ad-

dress Hevosenkenkä 3, 02600 Espoo or through

the website www.poppankki.ﬁ

CAPITAL ADEQUACY MANAGEMENT

The objective of capital adequacy management is

to ensure that the Bonum Bank has an adequate

capital buffer to achieve its business strategy

and to cover the material risks arising from them

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 36

in all circumstances. The capital adequacy posi-

tion is managed in accordance with the Bonum

Bank Board of Directors’ and Financial State-

ments Report for 1 January – 31 December 2020

35 risk-taking framework set by the central insti-

tution of the amalgamation.

The monitoring and control of the capital adequa-

cy position has been implemented by setting the

control thresholds for the adequacy in accordance

with the limits set by the central institution of

the amalgamation. The capital adequacy targets

(control limits) are set for the capital adequa-

cy ratio in accordance with Capital Requirements

Regulation (EU 575/2013) and it’s reformative reg-

ulation 2019/876 (hereinafter the EU Capital Re-

quirements Regulation) and for the economic cap-

ital requirement which is based on the internal risk

assessment (Pillar 2).

Capital adequacy management is pursued

through a systematic capital adequacy manage-

ment process that is integrally linked to the amal-

gamation’s and other member credit institutions’

business planning and management. As part of

the capital adequacy management process the

aim is to identify all material risks and assess their

magnitude and required capital levels.

Under the supervision of the central institution,

Bonum Bank prepares its own capital plan and

stress tests on an annual basis using harmonized

principles deﬁned by the central institution. The

process ensures that the Bank’s growth, proﬁta-

bility and risk-bearing capacity objectives are ap-

propriate and consistent. Capital is held to cover

the material risks arising from the Bank’s business

strategy and plan and to secure the uninterrupt-

ed operation of the Bank and amalgamation in

case of unexpected losses. The baseline scenario

of the capital plan forms the basis for budgeting

for Bonum Bank.

PILLAR I CAPITAL ADEQUACY RATIO

The most signiﬁcant Pillar I capital requirements of

Bonum Bank arises from retail banking receivables

as well as receivables in liquidity reserve investment

operations. The amalgamation applies the stand-

ardised approach for the calculation of the capital

requirement for credit risk, and the basic indicator

approach for calculating the capital requirement to

the operational risk. Bonum Bank does not engage

in trading activities, so the capital requirement for

market risk is only calculated for the foreign ex-

change risk. In the standardised approach for credit

risk, the exposures are divided into exposure class-

es with limits having been set for the minimum di-

versiﬁcation of lending in the retail exposure class.

Bonum Bank’s own funds consist of share capi-

tal, retained earnings and other non-restricted re-

serves, less the deductible items in accordance

with the EU’s Capital Requirements Regulation (No.

575/2013). The bank does not include the proﬁt ac-

crued during the ﬁnancial period in its own funds.

Bonum Bank releases the essential information in

terms of capital adequacy calculation annually as

part of its Board of Directors’ report and notes to

the ﬁnancial statements.

BUSINESS RISKS

CREDIT RISK

Bonum Bank’s most signiﬁcant risk is credit and

counterparty risk. Credit risk refers to a situation

in which a counterparty cannot fulﬁl its contractu-

al obligations.

The most signiﬁcant source of credit risk is loans,

but credit risk can also arise from other kinds of

receivables, such as bonds, short-term debt secu-

rities and off-balance-sheet commitments, such

as unused credit facilities and overdraft limits and

guarantees.

The credit risk of Bonum Bank’s operations con-

sists of liquidity reserve investment operations

as well as retail banking operations, for the most

part formed of unsecured lending. Balance sheet

items exposed to credit risk totalled EUR 460,510

(340,175) thousand at the end of 2023. Bonum

Bank’s off-balance sheet credit commitments

amounted to EUR 171,533 (160,498) thousand.

These consisted primarily of unused credit card

limits and POP Banks’ liquidity commitments.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 37

MANAGEMENT OF CREDIT RISK

The Board of Directors of the central institution

controls the credit risk management of the mem-

ber credit institutions, the methods used in it and

the control and reporting of credit risk. The Board

of Directors of Bonum Bank approves the cred-

it risk strategy deﬁned by the central institution,

specifying the target risk level and the principles

concerning guidelines on risk-taking, customer

selection and collateral. Credit risk management

aims at limiting the effects of credit risks resulting

from lending activities on proﬁt and balance sheet

to an acceptable level.

Credit risk strategy and other operative cred-

it risk guidelines specify the maximum limits for

risk concentrations and act as guidelines for the

targeting of lending by customer sector, industry

and credit grade. These guidelines form the ba-

sis of credit strategy and deﬁnes the customer

group and industry division principles and risk and

monitoring limits of the credit portfolio used in the

monitoring the quality of the credit portfolio. The

credit risk strategy is updated at least annually or

whenever there are essential changes in the oper-

ating environment or business model of the amal-

gamation, legislation or regulatory.

Automated lending credit decisions are made

based on an assessment of the customer’s cred-

it worthiness and with application scoring model,

as well as other credit criteria. Credit risk manage-

ment is implemented through active management

of credit policy and automated decision-mak-

ing guidelines based on monitoring and analy-

sis of credit risks. Credit monitoring is based on

continuous monitoring of payment behaviour and

non-performing receivables, monitoring the qual-

ity of the credit portfolio, as well as monitoring of

the amount of expected credit losses and ﬁnal

credit losses.

Credit decisions are based on the customer’s

credit worthiness and ability to pay and the ful-

ﬁlment of the other credit policy criteria, such as

collateral requirements. Collaterals are valued pru-

dently at fair value, and the development of val-

ues is monitored regularly. The collateral valuation

coefﬁcients are harmonized in the member credit

institutions of the amalgamation. Credit decisions

are made within the decision-making authoriza-

tions conﬁrmed by the Bank’s Board of Directors.

Credit risk of investment operations is mainly

managed by limiting the credit rating of invest-

ments and allocating investment assets by indus-

try, counterparty, credit rating and instrument cat-

egory. The allocation and limits of credit risks are

deﬁned in the investment plan and investment in-

structions approved by the Board of Directors. In-

vestment decisions are made within investment

plan and investment instructions approved by the

Board of Directors, by diversifying risks.

Monitoring expected credit losses is an essen-

tial part of the credit risk management. Principles

of impairment and calculation of expected cred-

it losses are described in Note 1 Accounting pol-

icies under IFRS. Impairment losses on loans and

receivables, off-balance sheet items and changes

during the ﬁnancial year are presented in Note 14

Impairment of ﬁnancial assets.

Risk management function reports exposures of

customers, expected credit losses and non-per-

forming receivables regularly to the Boards of Di-

rectors. The reports include, amongst other things,

the amount and development of credit risk by

customer group, industry sector and credit grade

category.

CREDIT RISK POSITION

At the end of the ﬁnancial year, Bonum Bank’s

total investment assets totalled EUR 259,963

(163,890) thousand. Investment assets increased

during the year due to the increase in the liquidity

reserve. The investment assets included in the li-

quidity reserve include certiﬁcates of receivables

issued by governments, municipalities, credit insti-

tutions and corporations, some of which are se-

cured and ECB-eligible loans.

The credit risk position of banking operations has

increased because of the growth of the retail loan

portfolio. Total amount of expected credit losses

and ﬁnal write offs grew due to grown loan port-

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 38

folio and non-performing loans. The credit risk po-

sition of banking operations is expected to grow in

line with the planned growth in the loan portfolio.

The loan portfolio of retail banking operations in-

creased by 13.4 per cent during the ﬁnancial year,

reaching EUR 193,373 (170,485) thousand. Loans

granted to retail customers accounted for 86.3

(83.1) per cent of the loan portfolio.

Loans and receivables are categorised in rating

categories 1–8 by probability of default (PD) of

the receivable. Rating category 1 represents the

receivables of the lowest risk and risk category 8

represents the receivables of the highest risk. Both

the customer and the receivable are categorised

as defaulted (rating category 8), if default crite-

ria described in accounting policies is met. Receiv-

ables categorised as defaulted are classiﬁed in

stage 3 as per IFRS 9 in the calculation of except-

ed credit losses. Receivables with a signiﬁcant in-

crease in credit risk are classiﬁed in stage 2. Other

receivables are classiﬁed in stage 1.

At the end of the ﬁnancial year, the gross amount

of loans and receivables, certiﬁcates of receiva-

bles and off-balance sheet items in the highest

risk category 8 totalled EUR 12,660 (7,523) thou-

sand.

The tables below show receivables from custom-

ers, debt securities and off-balance sheet com-

mitments in accordance with the stages deﬁned

in the calculation of expected credit losses by risk

category. The table also shows the lower and up-

per limits of the PD for each risk category.

RECEIVABLES FROM CREDIT INSTITUTIONS

(EUR 1,000,

gross value)

PD 31 Dec 2023 31 Dec 2022

Rating Class Lower Upper Stage 1 Stage 2 Stage 3 Total Total

1-4

0.00 1.50 404,708 292 0 405,000 724,860

1.50 5.00 0 0 0 0 -

5.00 25.00 0 0 0 0 -

25.00 100.00 0 0 0 0 -

100.00 100.00 0 0 0 0 -

Total

404,708 292 0 405,000 724,860

ECL

0 1 0 1 1

Total 404,708 291 0 404,999 724,859

Loans and advances to credit institutions consist of intra-POP Bank Group items, the amount of which

decreased by 44.1 per cent during the ﬁnancial year.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 39

OFF-BALANCE SHEET COMMITMENTS

(EUR 1,000,

gross value)

PD 31 Dec 2023 31 Dec 2022

Rating Class Lower Upper Stage 1 Stage 2 Stage 3 Total Total

1-4

0.00 1.50 165,702 979 0 166,680 156,598

1.50 5.00 2,890 468 0 3,358 2,885

5.00 25.00 101 688 0 789 584

25.00 100.00 0 29 0 29 41

100.00 100.00 0 0 396 396 391

Total

168,693 2,164 396 171,253 160,498

ECL

194 42 70 306 277

Total 168,499 2,122 326 170,947 160,221

Off-balance sheet receivables mainly consist of unused credit card facilities 84.5 (84.1) per cent and in-

tra-group items 13.1 (14.4) per cent.

RECEIVABLES FROM CUSTOMERS

(EUR 1,000,

gross value)

PD 31 Dec 2023 31 Dec 2022

Rating Class Lower Upper Stage 1 Stage 2 Stage 3 Total Total

1-4

0.00 1.50 99,378 168 0 99,546 102,907

1.50 5.00 46,356 1,563 0 47,918 30,303

5.00 25.00 34,554 4,148 0 38,702 31,468

25.00 100.00 742 920 0 1,662 3,253

100.00 100.00 0 0 12,264 12,264 7, 1 33

Total

181,029 6,800 12,264 200,093 175,064

ECL

1,667 168 4,884 6,720 4,578

Total 179,362 6,631 7,380 193,373 170,485

Receivables from customers mainly consist of unsecured loans 59.3 (50.9) per cent. The amount of the

three lowest risk categories (risk categories 6-8) in receivables decreased to 27.2 (23.9) per cent during

the ﬁnancial year. The amount of stage two and three receivables increased to 9.9 (7.4) per cent.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 40

DEBT SECURITIES

(EUR 1,000,

gross value)

PD 31 Dec 2023 31 Dec 2022

Rating Class Lower Upper Stage 1 Stage 2 Stage 3 Total Total

1-4

0.00 1.50 258,757 293 0 259,051 158,439

1.50 5.00 0 0 0 0 -

5.00 25.00 0 0 0 0 -

25.00 100.00 0 0 0 0 -

100.00 100.00 0 0 0 0 -

Total

258,757 293 0 259,051 158,439

ECL

43 0 0 43 13

Total 258,714 293 0 259,007 158,426

Debt securities included in the liquidity reserve fall into the four highest risk categories. Tier 2 certiﬁ-

cates are commercial papers used for liquidity management.

DOUBTFUL RECEIVABLES, FORBEARANCES

AND IMPAIRMENT LOSSES

In 2023, impairment losses recorded from loans

and receivables were EUR 3,306 thousand. Dur-

ing the ﬁnancial period the total amount of credit

losses were EUR 1,111 (-113) thousand. Expected

credit losses (ECL) on loans and receivables and

off-balance sheet commitments increased EUR

2,195 thousand to EUR 7,094 (4,899) thousand

during the ﬁnancial year.

Bank’s receivables overdue for more than 90 days

accounted for 6.5 (3.9) per cent of the loan port-

folio. At the end of 2023, the Bank’s receivables

overdue for 30–90 days accounted for 1.7 (0.8)

per cent of the loan portfolio. The total amount

of doubtful receivables in proportion to the total

credit portfolio reported during the ﬁnancial year

increased due to receivables risk scoring method

which delays ﬁnal write off bookings.

(EUR 1,000) 31 Dec 2023 31 Dec 2022

31-90 days 3,255 1,386

over 90 days 12,606 6,703

Total 15,861 8,089

OVERDUE RECEIVABLES

Expected credit losses (ECL) on loans and receiv-

ables and off-balance sheet commitments in ECL

Stage 3 were EUR 4,954 (2,883) thousand. In ECL

calculation, loans with more than 90 days over-

due payments are classiﬁed to stage three. The

amount of expected credit losses and the chang-

es in them are presented in Note 14.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 41

COUNTERPARTY DISTRIBUTION OF LIQUID ASSETS

(EUR 1,000) 31 Dec 2023 31 Dec 2022

From central banks 485,020 436,911

Governments and public bodies 105,838 72,533

Credit institutions 156,835 94,067

From companies 2,355 3,087

Total 750,047 606,599

LIQUIDITY RISKS

Liquidity risk refers to Bonum Bank’s ability to fulﬁl

its commitments. Liquidity risk can be divided into

short-term liquidity risk and long-term structural

ﬁnancing risk. Short-term liquidity risk refers to a

situation in which the bank cannot without difﬁ-

culty fulﬁl its liabilities to pay. Structural ﬁnancing

risk refers to a reﬁnancing risk that arises from the

difference in the maturities of balance sheet re-

ceivables and liabilities.

Managing liquidity risks

Bonum Bank’s Board of Directors approves the li-

quidity strategy and liquidity management guide-

lines prepared by the central institution at the

amalgamation level, which deﬁnes the principles,

methods, restrictions and implementation for li-

quidity management. The Board of Directors of

the central institution manages the implementa-

tion of the amalgamation’s liquidity management,

the methods used in it and monitors the adequacy

and composition of the liquidity reserve.

Bonum Bank as the central credit institution is re-

sponsible for coordinating of the liquidity strate-

gy of the amalgamation and supervises and mon-

itors the fulﬁlment of the liquidity strategy of the

member credit institutions. The central credit in-

stitution coordinates the payment transactions of

the member credit institutions and the acquisition

and balancing of liquidity in the amalgamation.

The task of the amalgamation’s independent risk

control function is to supervise and monitor the li-

quidity risk.

Bonum Bank as the central credit institution is

responsible for managing the regulatory mini-

mum levels of liquidity coverage ratio (LCR) and

net stable funding ratio (NSFR) in the amalga-

mation level. The Central institution has released

the member banks from the regulatory demands

of liquidity coverage and net stable funding ratio

with permission granted by the Finnish Financial

Supervision Authority. According to the permis-

sion regulatory demands in liquidity risk have to be

ﬁlled at amalgamation level only.

The central institution’s Board of Directors ap-

proves the funding plan and the liquidity contin-

gency plan written out by the management of the

central credit institution. The central institution’s

risk monitoring function plans, develops and tests

methods used in liquidity risk management and is

responsible for risk reporting to the Board of Di-

rectors of the central institution. The central cred-

RISK CONCENTRATIONS

Credit risk concentration arises when the coun-

terparties are ﬁnancially dependent on each other

and operate in a similar operating environment, in

which case individual events can have effects on a

signiﬁcant number of counterparties at the same

time. Similar concentration risk may also arise

when similar collateral is held for credit facilities.

The total amount of credit granted by Bonum Bank

to a single customer and/or group of connected

clients is managed through amalgamation level

limits, in consideration with regulation in force.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 42

it institution and its executive management assist

the risk control function in this process. The Board

of Directors of the central institution’s approves

the liquidity strategy and the methods used in im-

plementing the principles of liquidity management.

The central credit institution reports on the liquid-

ity situation to the Board of Directors of the cen-

tral credit institution and is responsible for the

planning of the liquidity position and funding of

the amalgamation. The Board of Directors of the

central credit institution is responsible for moni-

toring the implementation of the liquidity strategy

at the central credit institution.

Liquidity risk

The liquidity management of the Bonum Bank fol-

lows the principles set out in the liquidity strat-

egy, which aims to limit risk through a diversiﬁed

ﬁnancial structure. The most important means of

securing liquidity position are maintaining a suf-

ﬁcient and high-quality liquidity reserve and di-

versifying funding sources. Intra-day liquidity, li-

quidity reserve and liquidity coverage ratio are

the key means to limit and measure the liquidity

risk. The internal limits and controls of the amal-

gamation limits the liquidity risk associated with

the business activities of the amalgamation and

the member credit institutions and ensure that the

regulatory requirements related to liquidity risk are

met.

The key ratios for measuring short-term liquidity

risk are the liquidity coverage ratio (LCR), speci-

ﬁed in the EU’s Capital Requirements Regulation

and The Net Stable Funding Ratio (NSFR). LCR

measures short-term liquidity risk and is responsi-

ble for ensuring that the liquidity reserve, consist-

ing of high-quality liquid assets under LCR regula-

tion, is sufﬁcient to cover outﬂow net cash ﬂows in

stress situations for 30 days. The NSFR measures

the mismatch of assets and liabilities on the bal-

ance sheet with maturity more than one year and

is responsible for ensuring that long-term lend-

ing is adequately funded by long-term funding.

LCR AND NSFR RATIO

(per cent) 31 Dec 2023 31 Dec 2022

LCR 274 185

NSFR 133 134

The liquidity reserve of the amalgamation consists

of high-quality liquid assets in accordance with

the EU Capital Requirements Regulation, which

can meet the liquidity need in stress situations ei-

ther by selling the securities or by pledging them

as collateral for central bank funding. In addition

to the assets on the central credit institutions bal-

ance sheet, the amalgamation’s liquidity reserve

also includes liquid assets in the balance sheet of

the other member credit institutions, that can be

managed by the central credit institution on the

basis of internal agreements. At the end of 2023,

the market value of non-pledged ﬁnancial assets

and cash included in the liquidity reserve were in

total of EUR 1,032.7 (779.7) million.

Bonum Bank supervises the intra-day liquidity

coverage by monitoring the balances of the pay-

ment accounts of the member credit institutions.

The member credit institutions follow continuously

their intra-day liquidity position.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 43

MATURITY DISTRIBUTION OF FINANCIAL LIABILITIES

(EUR 1,000)

31 Dec 2023

To central

banks

3-12

months 1-5 years

Over 5

years Total

To central banks 70,000 8,400 0 0 78,400

Deposits 15,000 0 0 0 15,000

Issued debt

instruments

83,965 0 199,931 0 283,896

Liabilities to credit

institutions

411,611 12,700 748,399 173,662 1,346,372

Derivatives 0 0 1,798 0 1,798

Lease liabilities 55 208 353 0 616

Total 580,632 21,308 950,482 173,662 1,726,083

Structural funding risk

The central credit institution’s business involves

funding risk arising from ﬁnancial intermediation

and the maturity transformation of lending activ-

ities. Bonum Bank acts as an internal bank of the

amalgamation, provides wholesale funding to POP

Banks, maintains a liquidity reserve and engages

in retail banking and investment activities.

The table below shows the maturities of the

Bonum Bank liabilities with interests. Instant de-

posits are assumed to mature immediately.

(EUR 1,000)

31 Dec 2022

Under 3

months

3-12

months 1-5 years

Over 5

years Total

To central banks 0 50,000 78,400 0 128,400

Deposits 20,000 13,400 0 0 33,400

Issued debt

instruments

49,953 67,369 204,892 0 322,214

Liabilities to credit

institutions

382,226 29,800 576,710 5,828 994,565

Lease liabilities 40 123 166 0 329

Total 452,220 160,692 866,144 5,828 1,484,883

MATURITY DISTRIBUTION OF FINANCIAL LIABILITIES

At the end of the ﬁnancial year, Bonum Bank had

EUR 255 (255) million in unsecured senior loans is-

sued under the EUR 750 million bond program.

EUR 28.9 (67.3) million of the Bank’s EUR 250 mil-

lion certiﬁcates of deposits program was issued. In

addition, Bonum Bank has a EUR 22.2 million loan

program with the Nordic Investment Bank NIB. At

the end of 2023, Bonum Bank had European Cen-

tral Bank’s TLTRO III funding for EUR 78.4 (128.4)

million.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 44

MARKET RISKS

Market risk refers to the probability of loss result-

ing from changes in interest rates or other market

prices. The market risk classes are interest rate,

currency, equity and commodity risk.

The objective of market risk management is to

identify and assess market risks related to the

business operations, mitigate the risks to an ac-

ceptable level and timely monitoring of the risk

exposures. Within the amalgamation of POP

Banks, the central institution’s Board of Directors

conﬁrms the market risk strategy and market risk

management guidelines, which create the founda-

tion for market risk management at Bonum Bank.

Bonum Bank’s Board of Directors conﬁrm the

maximum levels for market risks and the invest-

ment policy within the investment plan according

to the market risk strategy. The capital adequacy

management process is a central process for the

measurement and monitoring of the market risks

in the balance sheet, involving capital allocation

for market risk.

In the amalgamation, market risk exposure is lim-

ited in terms of trading, interest rate risk, curren-

cy risk, derivatives, structured products and com-

modity risk. Bonum Bank does not engage in trad-

ing activities. The use of derivatives is limited to

hedging purposes only.

Currency risk is not taken at all in lending; all loans

are granted in euros. Currency risk arises to a

small extent through strategic shareholdings and

from customers foreign currency payments. Com-

modity risk is not allowed.

Interest rate risk in the banking book

The interest rate risk is the most signiﬁcant mar-

ket risk in Bonum Bank’s business operations. In-

terest rate risk refers to the effect of changes in

interest rate levels on the market value or net in-

terest income of balance sheet items and off-bal-

ance sheet items. Interest rate risk arises from dif-

ferences in the interest terms of receivables and

liabilities and mismatches in interest rate repricing

and maturity dates. Interest rate risk arises from

the liquidity reserve investment activities and the

banking book operations.

Bonum Bank monitors the interest rate risk by

with present value method and dynamic income

risk model on a monthly basis. The present value

method measures how changes in interest rates

change the constructed market value of the bal-

ance sheet. In the present value method, the mar-

ket value of the balance sheet is calculated as

the present value of the expected cash ﬂows of

individual balance sheet items. Interest rate sen-

sitivity indicators are primarily used to monitor

the market value changes caused by the chang-

es in the interest rates and credit spreads of in-

vestment items in different interest rate scenari-

os. The income risk model predicts the future net

interest income and its changes in various market

rate scenarios within a time frame of ﬁve years.

The amount of interest rate risk taken is assessed

with the effect of diverse interest rate shocks on

the net interest income and net present value. The

effect of early loan prepayments and the behav-

iour of non-maturity deposits have been consid-

ered in the analysis.

The objective of interest rate management is

to stabilise the interest rate risk involved in the

bank’s balance sheet to a level at which business

is proﬁtable, but proﬁt or capital adequacy are not

threatened even in considerable changes of the

interest rate environment.

Interest rate risk is managed primarily by planning

the balance sheet structure, such as the inter-

est rate ﬁxing or maturity of assets and liabilities.

During the ﬁnancial period, Bonum Bank executed

derivative hedges to decrease interest rate risk in

member banks’ banking book.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 45

31 Dec 2023

(EUR 1,000) Change Effect on result Effect on equity

Interest rate risk

+1 percentage point -563 -375

Interest rate risk -1 percentage point 567 355

31 Dec 2022

(1 000 euroa) Change Effect on result Effect on equity

Interest rate risk

+1 percentage point -401 -1,238

Interest rate risk -1 percentage point 395 1,290

INTEREST RATE SENSITIVITY ANALYSIS, EFFECT OF 1 PERCENTAGE POINT PARALLEL

CHANGE IN INTEREST RATE

INTEREST RATE SENSITIVITY ANALYSIS, EFFECT OF 1 PERCENTAGE POINT PARALLEL

CHANGE IN INTEREST RATE

The impact of the interest rate risk on operating

income has been calculated as a change to the

12-month forecast of the net interest income, as-

suming one percentage point upward or downward

parallel interest rate level shift. The effect on own

funds has been determined through present val-

ue change in balance sheet with the same interest

rate shocks.

Investment and liquidity portfolio

The investment and liquidity portfolio of the cen-

tral credit institution consists of liquid securities

and other investments included in the banks’ bal-

ance sheet. Market risk emerges in these invest-

ment activities, consisting mainly of counterpar-

ty and interest rate risks. The objective in invest-

ing activities is to obtain a competitive return on

investment in terms of yield/risk ratio on a long-

term perspective.

Risks arising from the investment and liquidi-

ty portfolio are managed by limits deﬁned by the

amalgamation, which ensures the diversiﬁcation

of investments in terms of timing, asset catego-

ry, risk type and counterparty. Investment risks

are also monitored through sensitivity analysis.

The purpose of the limitation is that the effect of

changes in interest rates or share prices on proﬁt

will not threaten the capital adequacy or proﬁta-

bility of the bank or the entire amalgamation.

Risk appetite in the investment portfolio is as-

sessed in relation to the earnings and own funds.

The breakdown of investment assets is described

in Note 17 Investment Assets.

OPERATIONAL RISKS

Operational risks refer to ﬁnancial losses or oth-

er harmful consequences to business that may

be caused by internal inadequacies or errors in

systems, processes, procedures and the actions

of personnel, or by external factors affecting the

business. All business processes, including cred-

it and investment processes, involve operation-

al risks. The operational risk of Bonum Bank also

arises from outsourced operations and major ICT

and business projects.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 46

Bonum Bank’s Board of Directors approves the

principles of operational risk management and

other guidelines as binding instructions given by

the central institution. Targeted risk level is mod-

erate.

Risk identiﬁcation and assessment as well as eval-

uation of functionality and sufﬁciency of controls

is essential in operative risk management. Bonum

Bank assesses the probability of occurrence and

impact of the identiﬁed operational risks in risk

self-assessment based on the relevant business

processes.

The operational risks associated with the key

products, services, functions, processes, and sys-

tems are identiﬁed in the assessment process

concerning a new product or service carried out by

the business function and reviewed by compliance

and risk monitoring function.

Some of the losses caused by operational risks

are hedged through insurance. Risks caused by

malfunctions of information systems are prepared

for by continuity planning.

Bonum Banks’ executive management monitors

operational risks by collecting information on op-

erational risk events, incidents, ﬁnancial losses

and any malpractices encountered, in order to as-

sess the risk involved and take timely mitigating

actions if necessary. Risk Control reports signiﬁ-

cant operative risk events and risk assessment re-

sults to the board as well as to the central institu-

tions compliance function.

STRATEGIC RISK

Strategic risk refers to losses caused by choosing

wrong strategy or business model in relation to the

development of the bank’s operating environment.

The losses may also be caused by unsuccessful

implementation of strategy, unexpected changes

in the competitive environment or responding too

slowly to changes.

Bonum Bank aims to minimise strategic risks by

means of regular updates of its strategic and an-

nual plans. Analyses of the condition and devel-

opment of POP Bank Group, as well as other anal-

yses and estimates concerning the development

of the sector, competition and ﬁnancial operating

environment are utilized in the planning.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 47

NOTE 3 INTEREST INCOME AND EXPENSES

NOTES TO INCOME STATEMENT

Income and expense by measurement category is presented in Note 11.

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Interest income

Loans and advances to credit institutions 44,038 7,662

Loans and advances to customers 14,683 8,805

Debt securities

At amortised cost 2,539 361

At fair value through proﬁt or loss 3,934 627

Hedging derivatives 9,469 1,360

Other interest income 1 -15

Total interest income 74,665 18,800

of which positive interest expense 0 1,164

Interest expenses

Liabilities to credit institutions -37,172 -4,279

Liabilities to customers

-491 -512

Debt securities issued to the public -11,673 -2,924

Hedging derivatives -12,253 -897

Other interest expenses -76 -28

Total interest expenses -61,665 -8,639

of which negative interest income -7 -847

Net interest income 12,999 10,161

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 48

NOTE 4 NET COMMISSIONS AND FEES

NOTE 5 NET INVESTMENT INCOME

* Dividend income from equity shares measured at fair value through other comprehensive income held

in the end of the ﬁnancial period is EUR 7 (71) thousand.

Net investment income includes net income from ﬁnancial instruments except interest income from

debt securities recognised in net interest income

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Commissions and fees

Lending 988 619

Card business 4,964 5,275

Payment transfers 4,130 4,030

Other commission income 0 1

Total commissions and fees 10,082 9,925

Commissions expenses

Card business -1,932 -1,806

Payment transfers -819 -792

Other commission expenses -105 -42

Total commission expenses -2,856 -2,639

Net commissions and fees 7,226 7,285

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

At fair value through proﬁt or loss

Derivatives

Fair value gains and losses -1 -

Total -1 0

At fair value through other comprehensive income

Debt securities

Transferred from fair value reserve to the income

statement

0 -2

Shares and participations

Dividend income* 7 71

Total 7 69

Net income from foreign exchange trading 169 192

Net income from hedge accounting

Change in hedging instruments' fair value 13,399 -5,975

Change in hedged items' fair value -14,343 6,173

Total -944 198

Total net investment income -769 459

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 49

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Business development fees from banks 0 19

Central credit institution services excl. payment

transfer

57 62

Other income 5,109 4,116

Total other operating income 5,167 4,196

(1 000 euroa) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Wages and salaries -4,441 -3,762

Indirect personnel expenses -186 -150

Pension costs

Deﬁned contribution plans -783 -671

Total personnel expenses -5,409 -4,583

NOTE 6 OTHER OPERATING INCOME

NOTE 7 PERSONNEL EXPENSES

The “Other income” item includes mainly intra-group charges and service fees.

On 31 December 2023, the bank had 88 (66) employees. On average, during year 2023, the bank had 81

(59) employees.

Related party fees are speciﬁed in Note 30 Related party disclosures.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 50

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Other operating expenses

Other personnel expenses -401 -267

Ofﬁce expenses -2,026 -1,950

ICT expenses -8,109 -7,509

Telecommunications -422 -368

Entertainment and marketing expenses -101 -80

Other administrative expenses total -11,058 -10,174

Other operating expenses

Rental expenses -145 -106

Audit fees -33 -36

Other operating expenses -746 -547

Other operating expenses total -923 -689

Total other operating expenses -11,982 -10,863

Audit fees

Audit services -33 -29

Audit-related services according to

Auditing Act 1.1,2 §

0 -7

Tax advisory 0 0

Other services 0 0

Total audit fees -33 -36

NOTE 8 OTHER OPERATING EXPENSES

Expenses from items covered by exemptions providing practical relief are presented in the rental ex-

penses and expenses from owner-occupied properties.

Other than audit services from KPMG Oy Ab totalled to EUR 0 (0) thousand during the ﬁnancial year

2023.

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Machinery and equipment -18 -17

Right of use assets -159 -159

Intangible assets -729 -773

Total depreciation, amortisation and impairment

-911 -949

NOTE 9 DEPRECIATION, AMORTISATION AND IMPAIRMENT

More detailed information about right off use assets is provided in Note 29.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 51

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Current tax -617 -1,206

Tax for prior ﬁnancial years -9 1

Withholding tax paid outside Finland -2 -19

Change in deferred tax assets 20 -3

Change in deferred tax liabilities 0 389

Total income tax expense

-609 -838

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Proﬁt before tax 3,015 4,221

Income tax rate 20% 20%

Tax calculated at the tax rate -603 -844

Taxable income not included in the proﬁt - -384

Change in deferred tax liability - 384

Deductible expenses not included in the proﬁt 4 5

Tax for prior ﬁnancial years -9 1

Tax expense in the income statement

-609 -838

RECONCILIATION BETWEEN TAX EXPENSE IN THE INCOME STATEMENT AND TAX EXPENSE

CALCULATED USING THE APPLICABLE TAX RATE

NOTE 10 INCOME TAX

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 52

(EUR 1,000)

Financial assets 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

At fair value through other comprehensive income

Interest income and expenses 6,417 535

Transferred from fair value reserve 0 -2

Dividend income 7 71

Expected credit loss 6 5

Total 6,430 609

At amortised cost

Interest income and expenses 21,038 12,086

Other income 2,807 2,315

Expected credit loss -2,170 -1,603

Total

21,675 12,798

Financial liabilities 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

At amortised cost

Interest income and expenses -11,673 -2,924

Total -11,673 -2,924

At fair value through proﬁt or loss

Hedging derivatives

Fair value gains and losses -944 198

Interest income and expenses -2,784 463

Total -3,728 661

Net income from foreign exchange operation 169 192

Total

12,874 11,336

NOTE 11 NET INCOME AND EXPENSES OF FINANCIAL ASSETS AND

FINANCIAL LIABILITIES BY MEASUREMENT CATEGORY

NOTES TO ASSETS

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 53

NOTE 12 CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL

LIABILITIES

* Expected credit loss of EUR 30 thousand from debt securities have been recorded in the fair value reserve.

FINANCIAL ASSETS 31 DEC 2023

(EUR 1,000)

At amortised

cost

At fair value

through profit

or loss

At fair value

through other

comprehensive

income

Expected cre-

dit loss

Total carrying

amount

Liquid assets 485,020 - - 485,020

Loans and advances to

credit institutions

849,550 - -1 849,549

Loans and advances to

customers

200,093 - -6,720 193,373

Derivatives - 9,220 - - 9,220

Debt securities* 144,655 114,368 -16 259,0 07

Shares and

participations

- 956 - 956

Financial assets total 1,679,317 9,220 115,324 -6,736 1,797,126

Other assets 40,493

Total assets 1,837,618

* Expected credit loss of EUR 24 (30) thousand from debt securities have been recorded in the fair value reserve.

FINANCIAL ASSETS 31 DEC 2022

(EUR 1,000)

At amortised

cost

At fair value

through profit

or loss

At fair value

through other

comprehensive

income

Expected cre-

dit loss

Total carrying

amount

Liquid assets 436,911 - - 436,911

Loans and advances to

credit institutions

778,258 - -1 778,257

Loans and advances to

customers

175,064 - -4,578 170,485

Debt securities* 50,853 112,234 -11 163,076

Shares and

participations

- 815 - 815

Financial assets total 1,441,086 113,049 -4,590 1,549,544

Other assets 25,050

Total assets 1,574,594

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 54

FINANCIAL LIABILITIES 31 DEC 2023

(EUR 1,000)

At fair value through

other comprehensive

income

At amortised

cost

Total carrying

amount

Liabilities to credit institutions - 1,424,772 1,424,772

Liabilities to customers - 33,435 33,435

Derivatives 1,798 - 1,798

Debt securities issued to the public - 283,896 283,896

Financial liabilities total 1,798 1,742,104 1,743,902

Other liabilities 43,173

Total liabilities 1,787,075

FINANCIAL LIABILITIES 31 DEC 2022

(EUR 1,000)

At fair value through

other comprehensive

income

At amortised

cost

Total carrying

amount

Liabilities to credit institutions - 1,122,965 1,122,965

Liabilities to customers - 55,930 55,930

Derivatives 5,975 - 5,975

Debt securities issued to the public - 322,214 322,214

Financial liabilities total 5,975 1,501,109 1,507,085

Other liabilities 20,853

Total liabilities 1,527,938

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 55

NOTE 13 CLASSIFICATION OF FINANCIAL ASSETS AND FINANCIAL

LIABILITIES AND FAIR VALUES BY VALUATION TECHNIQUE

FINANCIAL ASSETS

FINANCIAL LIABILITIES

31 Dec 2023 31 Dec 2022

(EUR 1,000)

Carrying amount

Fair value

Carrying amount

Fair value

Liquid assets 485,020 485,020 436,911 436,911

Loans and advances to

credit institutions

849,549 849,549 778,257 778,257

Loans and advances to

customers

193,373 191,872 170,485 168,477

Investment assets 9,220 9,220 - -

At amortised cost

At fair value through proﬁt

or loss

144,639 147,546 50,842 50,170

To ta l 115,324 115,324 113,049 113,049

Total 1,797,126 1,798,530 1,549,544 1,546,864

31 Dec 2023 31 Dec 2022

(EUR 1,000)

Carrying amount

Fair value

Carrying amount

Fair value

Liabilities to credit

institutions

1,424,772 1,424,750 1,122,965 1,122,911

Liabilities to customers

33,435 33,435 55,930 55,930

Derivatives 283,896 280,693 322,214 315,109

Debt securities issued to the

public

1,798 1,798 5,975 5,975

Total 1,743,902 1,740,676 1,507,085 1 ,499,926

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 56

LIABILITIES RECURRENTLY MEASURED AT FAIR VALUE 31 DEC 2023

(EUR 1,000) Level 1 Level 2 Level 3 Total fair value

At fair value through proﬁt or loss

Derivatives - 1,798 - 1,798

Total ﬁnancial liabilities 0 1,798 0 1,798

ASSETS RECURRENTLY MEASURED AT FAIR VALUE 31 DEC 2022

(EUR 1,000) Level 1 Level 2 Level 3 Total fair value

At fair value through other comprehensive

income

Shares and participations - - 815 815

Debt securities 68,591 43,642 - 112,234

Total 68,591 43,642 815 113,049

LIABILITIES RECURRENTLY MEASURED AT FAIR VALUE 31 DEC 2022

(EUR 1,000) Level 1 Level 2 Level 3 Total fair value

At fair value through proﬁt or loss

Derivatives - 5,975 - 5,975

Total ﬁnancial liabilities 0 5,975 0 5,975

ASSETS RECURRENTLY MEASURED AT FAIR VALUE 31 DEC 2023

(EUR 1,000) Level 1 Level 2 Level 3 Total fair value

At fair value through other comprehensive

income

Derivatives 9,220 9,220

At fair value through other comprehensive

income

Shares and participations - - 956 956

Debt securities 80,549 33,819 - 114,368

Total 80,549 43,039 956 124,545

FAIR VALUE HIERARCHY LEVELS OF ITEMS RECURRENTLY RECOGNISED AT FAIR VALUE

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 57

ASSETS MEASURED AT AMORTISED COST 31 DEC 2022

(EUR 1,000) Level 1 Level 2 Level 3

Total fair

value

Carrying

amount

Loans and advances to

credit institutions

- 778,257 - 778,257 778,257

Loans and advances to

customers

- 168,477 - 168,477 170,485

Debt securities - 50,170 - 50,170 50,842

Total - 996,904 - 996,904 999,585

LIABILITIES MEASURED AT AMORTISED COST 31 DEC 2023

(EUR 1,000) Level 1 Level 2 Level 3

Total fair

value

Carrying

amount

Liabilities to credit

institutions

- 1,424,772 - 1,424,750 1,424,772

Liabilities to customers - 33,435 - 33,435 33,435

Debt securities issued

to the public

- 283,896 - 280,693 283,896

Total - 1,742,104 - 1,738,878 1,742,104

LIABILITIES MEASURED AT AMORTISED COST 31 DEC 2022

(EUR 1,000) Level 1 Level 2 Level 3

Total fair

value

Carrying

amount

Liabilities to credit

institutions

- 1,122,911 - 1,122,911 1,122,965

Liabilities to customers - 55,930 - 55,930 55,930

Debt securities issued

to the public

- 315,109 - 315,109 322,214

Total - 1,493,950 - 1,493,950 1,501,109

ASSETS MEASURED AT AMORTISED COST 31 DEC 2023

(EUR 1,000) Level 1 Level 2 Level 3

Total fair

value

Carrying

amount

Loans and advances to

credit institutions

- 849,549 - 849,549 849,549

Loans and advances to

customers

- 193,373 - 191,872 193,373

Debt securities - 144,639 - 147,546 144,639

Total - 1,187,562 - 1,188,966 1,187,562

FAIR VALUE HIERARCHY LEVELS OF ITEMS RECOGNIZED AT AMORTISED COST

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 58

FAIR VALUE HIERARCHIES

Level 1 includes ﬁnancial instruments that are measured on the basis of quotations obtained from liquid

markets. A market is considered as liquid if quotations are regularly available. This group included all se-

curities with publicly quoted prices.

Level 2 includes ﬁnancial instruments measures using generally approved measurement techniques or

models which are based on assumptions made on the basis of observable market prices. For example,

the fair value of a ﬁnancial instrument allocated to Level 2 may be based on the value derived from the

market quotation of components of an instrument. This group includes interest derivatives and other in-

struments that are not traded in liquid markets.

Level 3 includes ﬁnancial instruments and other assets and liabilities that are not measured using mar-

ket quotations or values determined on the basis of observable market prices using measurement tech-

niques or models. The assumptions applied in the measurement techniques often involve insecurity. The

fair value of assets allocated to Level 3 is often based on price information obtained from a third par-

ty. This group includes unlisted shares and funds and investment properties.

TRANSFERS BETWEEN FAIR VALUE HIERARCHIES

Transfers between hierarchy levels are considered to have taken place on the date of the occurrence

of the event that caused the transfer or the date when the circumstances changed.

FAIR VALUE DETERMINATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets are recorded in the balance sheet either at fair value or at amortised cost. The classiﬁ-

cation and measurement of ﬁnancial instruments is described in more detail in Note 2 POP Bank Group’s

accounting policies.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 59

CHANGES IN FINANCIAL ASSETS RECURRENTLY MEASURED AT FAIR

VALUE CLASSIFIED INTO LEVEL 3

(EUR 1,000)

At fair value

through profit

or loss

At fair value

through other

comprehensive

income Total

Carrying amount 1 Jan 2023 815 815

Changes in value recognised in other

comprehensive income

141 141

Carrying amount 31 Dec 2023 956 956

(EUR 1,000)

At fair value

through profit

or loss

At fair value

through other

comprehensive

income Total

Carrying amount 1 Jan 2022 2,962 2,962

Purchases 310 310

Sales -765 -765

Changes in value recognised in other

comprehensive income

230 230

Realised changes in value recognised

in retained earnings

-1,922 -1,922

Carrying amount 31 Dec 2022 815 815

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 60

SENSITIVITY ANALYSIS OF FINANCIAL ASSETS AT LEVEL 3

31 DEC 2023

Possible effect on equity capital

(EUR 1,000) Carrying amount Positive Negative

At fair value through other

comprehensive income

956 143 -143

Total 956 143 -143

Possible effect on equity capital

(EUR 1,000) Carrying amount Positive Negative

At fair value through other

comprehensive income

815 122 -122

Total 815 122 -122

The sensitivity of ﬁnancial assets recurrently measured at fair value at level 3 has been calculated for

interest rate linked investments by assuming a 1 percentage points change in interest rates and for ot-

her investments by assuming the market price of the security to change by 15%.

Bonum Bank does not have assets measured non-recurrently at fair value.

31 DEC 2022

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 61

NOTE 14 IMPAIRMENT LOSSES ON FINANCIAL ASSETS

During the ﬁnancial year, EUR -1,111 (113) thousand was recognised as ﬁnal credit loss. Recollection

measures are attributed to the whole amount of credit losses.

Changes in expected credit loss (ECL) during the ﬁnancial period are presented in the tables below.

Stage 1 represents ﬁnancial instruments whose credit risk has not increased signiﬁcantly since the ini-

tial recognition. Expected credit losses are determined for such ﬁnancial instruments based on expected

loan losses for 12 months. Stage 2 represents ﬁnancial instruments whose credit risk has increased sig-

niﬁcantly after the initial recognition on the basis of qualitative or quantitative criteria and, for stage 3,

ﬁnancial instruments whose counterparty has been declared as default. Expected credit losses are de-

termined for ﬁnancial instruments classiﬁed in Stage 2 and 3 based on the expected credit losses over

the entire life of the instrument.

The principles for calculating expected credit losses and determining the probability of default are pre-

sented in IFRS ﬁnancial statements of the Bonum Bank on 31 December 2023, Note 1 Accounting poli-

cies.

IMPAIRMENT LOSSES RECORDED DURING THE REPORTING PERIOD

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Change of ECL due to write-offs 568 231

Change of ECL, receivables from customers

and off-balance sheet items

-2,738 -1,834

Change of ECL, debt securities -25 6

Final credit losses -1,111 113

Impairment losses on ﬁnancial assets total -3,306 -1,485

RECEIVABLES FROM CUSTOMERS

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2023

1,549 213 2,816 4,578

Transfers to stage 1 47 -57 -369 -379

Transfers to stage 2 -163 70 -129 -222

Transfers to stage 3 -159 -57 2,172 1,956

Increases due to origination 769 65 952 1,786

Decreases due to derecognition -305 -43 -599 -948

Changes due to change in credit risk (net) -70 -22 608 516

Decreases due to write-offs

0 0 -568 -568

Total 118 -44 2,068 2,141

ECL 31 Dec 2023 1,667 168 4,884 6,720

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 62

OFF-BALANCE SHEET COMMITMENTS

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2023 172 39 67 277

Transfers to stage 1 3 -20 -35 -52

Transfers to stage 2 -3 13 -1 10

Transfers to stage 3 -1 -1 16 14

Increases due to origination 39 20 19 78

Decreases due to derecognition -1 0 -1 -1

Changes due to change in credit risk (net) -15 -8 5 -19

Total 22 3 3 29

ECL 31 Dec 2023 194 42 70 306

RECEIVABLES FROM CREDIT INSTITUTIONS

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2023

1 0 0 1

Changes due to change in credit risk (net) -1 1 0 0

Total -1 1 0 0

ECL 31 Dec 2023 0 1 0 1

ECL 1 Jan 2023 1,765 251 2,883 4,899

ECL 31 Dec 2023 1,929 211 4,954 7,094

DEBT SECURITIES

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2023 43 0 0 43

Increases due to origination

46 0 0 46

Decreases due to derecognition

-9 0 0 -9

Changes due to change in credit risk (net) -12 0 0 -12

Total 25 0 0 25

ECL 31 Dec 2023 68 0 - 68

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 63

RECEIVABLES FROM CUSTOMERS

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2022

1,265 119 1,632 3,016

Transfers to stage 1 7 -20 -125 -138

Transfers to stage 2 -140 64 -33 -109

Transfers to stage 3 -116 -44 1,493 1,333

Increases due to origination 915 131 255 1,301

Decreases due to derecognition -283 -34 -427 -745

Changes due to change in credit risk (net) -99 -3 253 151

Decreases due to write-offs

0 0 -231 -231

Total 284 94 1,185 1,563

ECL 31 Dec 2022 1,549 213 2,816 4,578

OFF-BALANCE SHEET COMMITMENTS

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2022 187 10 36 233

Transfers to stage 1 1 -5 -13 -17

Transfers to stage 2 -10 17 -1 6

Transfers to stage 3 -1 0 16 14

Increases due to origination 27 19 27 73

Decreases due to derecognition -8 0 0 -8

Changes due to change in credit risk (net) -25 -1 3 -23

Total -15 29 31 44

ECL 31 Dec 2022 172 39 67 277

DEBT SECURITIES

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2022 48 1 0 49

Increases due to origination

15 0 0 15

Decreases due to derecognition

-19 0 0 -19

Changes due to change in credit risk (net) -1 -1 0 -2

Total -5 -1 0 -6

ECL 31 Dec 2022 43 0 - 43

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 64

The table above summarizes the exposure to credit risk and the amount of the expected credit loss in

relation to the amount of the exposure in stages. The coverage ratio illustrates the relative share of the

ECL in the amount of exposure. There were no signiﬁcant changes in the coverate ratio during the pe-

riod.

CREDIT RISK BY STAGES 31 DEC 2023

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

Receivables from customers

Private 143,138 6,678 12,144 161,960

Corporate 37,891 122 120 38,133

Receivables from customers total 181,029 6,800 12,264 200,093

ECL 31 Dec 2023 1,667 168 4,884 6,720

Coverage ratio 0,9% 2.5% 39.8% 3.4%

Off-balance sheet commitments

Private 160,317 2,082 380 162,779

Corporate 8,657 82 15 8,754

Off-balance sheet commitments total 168,974 2,164 396 171,533

ECL 31 Dec 2023 194 42 70 306

Coverage ratio 0.1% 1.9% 17.6% 0.2%

Debt securities

ECL 31 Dec 2023 68 0 - 68

Coverage ratio 0.0% 0.0% 0.0% 0.0%

Receivables from credit institutions 404,708 292 0 405,000

ECL 31 Dec 2023 0 1 0 1

Coverage ratio 0.0% 0.0% 0.0% 0.0%

Credit risk by stages total 1,013,468 9,549 12,660 1,035,677

RECEIVABLES FROM CREDIT INSTITUTIONS

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

ECL 1 Jan 2022

4 0 0 4

Decreases due to derecognition -1 0 0 -1

Changes due to change in credit risk (net) -3 0 0 -3

Total -4 0 0 -3

ECL 31 Dec 2022 1 0 0 1

ECL 1 Jan 2022 1,504 130 1,668 3,302

ECL 31 Dec 2022 1,765 251 2,883 4,899

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 65

CREDIT RISK BY STAGES 31 DEC 2022

(EUR 1,000) Stage 1 Stage 2 Stage 3 Total

Receivables from customers

Private 124,766 5,684 7,048 137,498

Corporate 37,385 96 84 37,566

Receivables from customers total 162,151 5,780 7,133 175,064

ECL 31 Dec 2022 1,549 213 2,816 4,578

Coverage ratio 1.0% 3.7% 39.5% 2.6%

Off-balance sheet commitments

Private 151,604 1,725 386 153,715

Corporate 6,698 81 5 6,784

Off-balance sheet commitments total 158,302 1,806 391 160,498

ECL 31 Dec 2022 172 39 67 277

Coverage ratio 0.1% 2.1% 17.1% 0.2%

Debt securities 153,791 300 0 154,091

ECL 31 Dec 2022 43 0 - 43

Coverage ratio 0.0% 0.0% 0.0% 0.0%

Receivables from credit institutions 724,641 219 0 724,860

ECL 31 Dec 2022 1 0 0 1

Coverage ratio 0.0% 0.0% 0.0% 0.0%

Credit risk by stages total 1,198,884 8,105 7,524 1,214,513

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 66

NOTE 15 LIQUID ASSETS

NOTE 16 LOANS AND ADVANCES

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Cash 0 0

Receivables from central banks repayable on demand 485,020 436,911

Total cash and cash equivalents 485,020 436,911

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Loans and advances to credit institutions

Deposits

Repayable on demand 444,549 53,397

Other 405,000 724,860

Total loans and advances to credit institutions 849,549 778,257

Loans and advances to customers

Loans 135,530 117,518

Credit card receivables 57,823 51,400

Other receivables 20 1,568

Total loans and advances to customers 193,373 170,485

Total loans and advances 1,042,922 948,743

Cash and cash equivalents include cheque account with the Bank of Finland.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 67

NOTE 17 INVESTMENTS ASSETS

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Measured at amortised cost

Debt securities 144,639 50,842

At fair value through other comprehensive income

Debt securities 114,368 112,234

Shares and participations 956 815

Investment assets total 259,963 163,891

(EUR 1,000)

At amortised cost

At fair value through other

comprehensive income

Debt securities Debt securities

Shares and

participations Total

Quoted

Public sector

entities

24,309 24,309

Other 144,639 60,174 204,814

Other

Public sector

entities

29,885 29,885

Other 956 956

Total investments 144,639 114,368 956 259,963

INVESTMENTS 31 DEC 2023

INVESTMENTS 31 DEC 2022

(EUR 1,000)

At amortised cost

At fair value through other

comprehensive income

Debt securities Debt securities

Shares and

participations Total

Quoted

Public sector

entities

24,273 24,273

Other 50,842 44,319 95,160

Other

Public sector

entities

43,642 43,642

Other 815 815

Total investments 50,842 112,234 815 163,891

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 68

NOTE 18 INTANGIBLE ASSETS

Bonum Bank’s intangible assets are information systems over which Bonum Bank has control as referred

to in IAS 38 Intangible assets. The information systems are implemented by POP Bank Group’s partners

of which the most important is Samlink Ltd.

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Information systems 329 1,057

Total intangible assets 329 1,057

(EUR 1,000)

Tieto-

järjestelmät

Keskeneräiset

aineettomat

hyödykkeet

Muut

aineettomat

hyödykkeet Yhteensä

Acquisition cost 1 Jan 6,431 0 20 6,451

Acquisition cost 31 Dec 6,431 0 20 6,451

Accumulated amortisation

and impairments 1 Jan

-5,374 - -20 -5,394

Amortisation -729 - 0 -729

Accumulated amortisation

and impairments 31 Dec

-6,102 - -20 -6,122

Carrying amount 1 Jan 1,057 0 0 1,057

Carrying amount 31 Dec 329 0 0 329

CHANGES IN INTANGIBLE ASSETS 2023

(EUR 1,000)

Tieto-

järjestelmät

Keskeneräiset

aineettomat

hyödykkeet

Muut

aineettomat

hyödykkeet Yhteensä

Acquisition cost 1 Jan 6,431 102 20 6,553

Transfers 0 -102 - -102

Acquisition cost 31 Dec 6,431 0 20 6,451

Accumulated amortisation

and impairments 1 Jan

-4,606 - -14 -4,621

Amortisation -768 - -6 -773

Accumulated amortisation

and impairments 31 Dec

-5,374 - -20 -5,394

Carrying amount 1 Jan 1,825 102 6 1 ,933

Carrying amount 31 Dec 1,057 0 0 1,057

CHANGES IN INTANGIBLE ASSETS 2022

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 69

NOTE 19 PROPERTY, PLANT AND EQUIPMENT

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Machinery and equipment 38 35

Right-of-use assets 610 324

Total property, plant and equipment 648 359

(EUR 1,000)

Right-of-use

items

Machinery and

equipment

Total

Acquisition cost 1 Jan 867 195 1,062

Increases 451 21 472

Acquisition cost 31 Dec 1,318 216 1,535

Accumulated depreciation and

impairment 1 Jan

-543 -160 -704

Depreciation -165 -18 -183

Accumulated depreciation and

impairment 31 Dec

-708 -178 -886

Carrying amount 1 Jan 324 35 359

Carrying amount 31 Dec 610 38 648

CHANGES IN PROPERTY, PLANT AND EQUIPMENT 2023

The right of use assets, according IFRS 16, are included in Property, Plant and Equipment. An itemisation

of ﬁxed asset items is provided in Note 29.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 70

(EUR 1,000)

Right-of-use

items

Machinery

and equip-

ment Total

Acquisition cost 1 Jan 693 195 888

Increases 174 0 174

Acquisition cost 31 Dec 867 195 1,062

Accumulated depreciation and

impairment 1 Jan

-384 -143 -527

Depreciation -159 -17 -176

Accumulated depreciation and

impairment 31 Dec

-543 -160 -704

Carrying amount 1 Jan 309 52 361

Carrying amount 31 Dec 324 35 359

CHANGES IN PROPERTY, PLANT AND EQUIPMENT 2022

NOTE 20 OTHER ASSETS

NOTE 21 DEFERRED TAXES

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Accrued income and prepaid expenses

Interest 20,303 8,282

Other accrued income and prepaid expenses 4,001 4,779

Other assets 15,005 10,057

Total other assets 39,309 23,118

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Tax assets

Deferred tax assets 207 515

Total tax assets 207 515

Tax liabilities

Deferred tax liabilities 186 144

Income tax liabilities 17 706

Total tax liabilities 203 850

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 71

(EUR 1,000) 1 Jan 2023

Recognised

through profit

or loss

Recognised

in other

comprehensive

income

31 Dec 2023

At fair value through other

comprehensive income

514 - -329 186

Deferred tax assets on losses 1 20 - 21

Advances received 0 0 - 0

Deferred tax assets total 515 20 -329 207

(EUR 1,000) 1 Jan 2023

Recognised

through profit

or loss

Recognised

in other

comprehensive

income

31 Dec 2023

At fair value through other

comprehensive income

131 - 42 172

Intangible assets 13 - - 13

Deferred tax liabilities total 144 0 42 186

(EUR 1,000) 1 Jan 2022

Recognised

through profit

or loss

Recognised

in other

comprehensive

income

31 Dec 2022

At fair value through other

comprehensive income

517 -384 -386 131

Intangible assets

18 -5 - 13

Deferred tax liabilities total 535 -389 -386 144

(EUR 1,000) 1 Jan 2022

Recognised

through profit

or loss

Recognised

in other

comprehensive

income

31 Dec 2022

At fair value through other

comprehensive income

0 - 514 514

Deferred tax assets on losses 0 1 - 1

Advances received 4 -4 - 0

Deferred tax assets total 5 -3 514 515

DEFERRED TAX ASSETS

DEFERRED TAX LIABILITIES

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 72

(EUR 1,000) Gross change

Deferred tax

Net change

Fair value reserve 1,851 -370 1,481

Amounts recognised in other

comprehensive income, total

1,851 -370 1,481

(EUR 1,000) Gross change

Deferred tax

Net change

Fair value reserve -4,501 900 -3,601

Amounts recognised in other

comprehensive income, total

-4,501 900 -3,601

AMOUNTS RECOGNISED IN OTHER COMPREHENSIVE INCOME AND RELATED DEFERRED

TAXES 2023

AMOUNTS RECOGNISED IN OTHER COMPREHENSIVE INCOME AND RELATED DEFERRED

TAXES 2022

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 73

NOTE 22 LIABILITIES TO CREDIT INSTITUTIONS AND CUSTOMERS

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Liabilities to credit institutions

To central banks 78,400 128,400

To other credit institutions

Repayable on demand 347,519 326,780

Not repayable on demand 998,853 667,785

Total liabilities to credit institutions 1,424,772 1,122,965

Liabilities to customers

Deposits

Repayable on demand 33,435 55,930

Total liabilities to customers 33,435 55,930

Total liabilities to credit institutions and customers 1,458,207 1,178,895

Liabilities to central banks includes secured TLTRO III funding total of EUR 78,400 thousand. The funding

matures in, March 2024 (EUR 70,000 thousand) and June 2024 (EUR 8,400 thousand) but for which ear-

ly repayment has been possible from January 2023 onwards. The interest rate for TLTRO funding is ba-

sed on the ECB’s deposit rate and the growth of the bank’s net lending.The interest rate on the ﬁnancing

period from 24 June 2020 to 23 June 2022 may be the ECB’s deposit rate (-0.5%) less an additional in-

terest rate of 0.5%. ECB recalibrated the conditions of the third series of targeted longer-term reﬁnan-

cing operations (TLTRO III) from 11/2022 onwards. POP Bank Group has used ECB deposit rate as inte-

rest rate for the loans for 2023. The ﬁnal interest rate on the loan will be reviewed when the loan matures.

The loan has been treated in accordance with IFRS 9 Financial Instruments -standard.

NOTES FOR LIABILITIES AND EQUITY

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 74

NOTE 23 DERIVATIVE CONTRACTS AND HEDGE ACCOUNTING

Bonum Bank uses interest rate swap agreements for interest rate hedging and hedge accounting for

fair value hedging. The hedged instruments have ﬁxed interest rate.The nominal value of the fair value

hedged instruments at the end of the reporting period was EUR 624,900 thousand. This item is included

in ”Loans and advances to credit institutions”. The nominal values of the derivative contracts match with

the nominal values of the hedged instruments.

NOMINAL VALUES OF UNDERLYING ASSETS AND FAIR VALUES OF DERIVATIVES

31 DEC 2023

Nominal value / Remaining maturity Fair value

(EUR 1,000)

Less

than 1

year

1-5

years

than 5

years Total

Assets

Liabilities

Hedging derivatives

Fair value hedging

Interest rate

derivatives

- 524,900 100,000 624,900 9,220 1,798

Derivatives total - 524,900

100,000

624,900 9,220 1,798

31 DEC 2022

Nominal value / Remaining maturity Fair value

(EUR 1,000)

Less

than 1

year

1-5

years

than 5

years Total

Assets

Liabilities

Hedging derivatives

Fair value hedging

Interest rate

derivatives

- 200,000 - 200,000 - 5,975

Derivatives total - 200,000 - 200,000 - 5,975

EFFECTS OF HEDGE ACCOUNTING ON FINANCIAL POSITION AND RESULT

Fair value hedging (EUR 1,000) 31 Dec 2023 31 Dec 2022

Liabilities

Carrying amount of hedged liabilities to customers 633,069 193,827

of which the accrued amount of hedge adjustments 8,169 -6,173

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 75

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

31 DEC 2023

Amounts which are not offset but are

subject to enforceable master netting

arrangements or similar agreements

(EUR 1,000)

Recognised

financial

assets, gross

Recognised

financial

liabilities offset

in balance

sheet, gross

Carrying

amount in

balance

sheet, net

Financial

instruments

Financial

instruments

held as

collateral

Cash

held as

collateral

Net

amount

Assets

Derivatives 16,575 0 16,575 6,104 11,790 0 0

Total 16,575 0 16,575 6,104 11,790 0 0

Liabilities

Derivatives 6,104 0 6,104 6,104 0 0 0

Total 6,104 0 6,104 6,104 0 0 0

In 2022 derivative contracts have been reported as assets and liabilities.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 76

NOTE 24 DEBT SECURITIES TO THE PUBLIC

DEBT SECURITIES ISSUED TO THE PUBLIC

Name Issue date Due date

Interest

Nominal Currency

BONUM 17012024 3.6.2020 17.1.2024

EB 12 months + 1.20%

55,000 EUR

BONUM 26102026 20.10.2021 20.10.2026 EB 3 months + 0.85% 20,000 EUR

BONUM 16112025 16.11.2021 16.11.2025 EB 3 months + 0.75% 30,000 EUR

BONUM 05042025 5.4.2022 5.4.2025 EB 3 months + 1.40% 50,000 EUR

BONUM 22042027 22.4.2022 22.4.2027

EB 12 months + 1.25%

50,000 EUR

Debt securities issued during the reporting period

BONUM 19072028 19.7.2023 19.7.2028 EB 6 months + 1.11% 50,000 EUR

(EUR 1,000)

31 Dec 2023 31 Dec 2022

Debt securities issued to the public 254,931 254,892

Certiﬁcates of deposits 28,965 67,323

Total debt securities issued to the public 283,896 322,214

DEBT SECURITIES PRESENTED IN CASH FLOW RECONCILIATION TO BALANCE SHEET

(EUR 1,000)

31 Dec 2023 31 Dec 2022

Balance 1 Jan 322,214 284,920

Debt securities issued, increase 49,994 99,911

Certiﬁcates of deposits, increase 79,279 239,012

Total increase 129,273 338,923

Debt securities issued, decrease -50,000 -100,000

Certiﬁcates of deposits, decrease -118,219 -201,853

Total decrease -168,219 -301,853

Total changes of cash ﬂow -38,946 37,070

Valuation 629 224

Balance at the end of period 283,896 322,214

At the end of reporting period there are 3 pcs of Certiﬁcates of deposits, total nominal value EUR

29,000 (67,500) thousand, value between EUR 2,000-20,000 thousand and average maturity 9,3 mon-

ths.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 77

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Provision for expected credit loss 402 277

Other liabilities

Payment transfer liabilities 1,461 925

Rental liabilities, right of use items 329 329

Accrued expenses

Interest payable 20,555 5,062

Advances received 438 409

Other accrued expenses 2,717 1,801

Other

Liabilities on card transactions 16,087 10,740

Other 694 460

Total provisions and other liabilities 42,970 20,003

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Share capital 10,000 10,000

Fair value reserve

From measurement of equity instruments 527 414

From measurement of liability instruments -526 -1,894

Non-restricted reserves

Reserve for invested non-restricted equity 30,000 30,000

Retained earnings

Proﬁt of sale of shares - 1,538

Proﬁt (loss) for previous ﬁnancial years 8,136 3,215

Proﬁt (loss) for the period 2,406 3,383

Total equity 50,543 46,657

NOTE 25 PROVISIONS AND OTHER LIABLITIES

NOTE 26 EQUITY CAPITAL

Lease liabilities are presented in Note 29.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 78

SHARE CAPITAL

Share capital includes the paid share capital. Bonum Bank has a total of 1,400,000 shares. There was no

change during the ﬁnancial year.

RESTRICTED RESERVES

Fair value reserve

The fair value reserve includes the cumulative net change in the fair value of equity securities measured at

FVOCI and the cumulative net change in the fair value of debt securities measured at FVOCI. The change

in the fair value can be positive or negative. Cumulative gains and losses recognised in OCI are transferred

to retained earnings on disposal of an investment. An expected credit loss on debt security is recognised

in the income statement and added to the fair value reserve. The fair value reserve also includes chang-

es in the fair value of equity securities recognised in the fair value of comprehensive income, which are not

transferred to retained earnings upon later disposal.

NON-RESTRICTED RESERVES

The reserve for invested non-restricted equity includes the portion of subscription price that is not

recognised in share capital, as well as other equity investments which are not recognised in other reserves.

RETAINED EARNINGS

Retained earnings are earnings accrued in previous ﬁnancial years that have not been transferred to

equity reserves or distributed to shareholders.

SPECIFICATION OF CHANGES IN FAIR VALUE RESERVE 1 JAN - 31 DEC 2023

(EUR 1,000)

Liability

instruments

Equity

instruments Total

Fair value reserve 1 Jan -1,894 39 -1,855

Fair value change, increases 3,030 358 3,388

Fair value change, decreases -1,315 -217 -1,531

Expected credit loss -6 0 -6

Deferred taxes -342 -28 -370

Fair value reserve 31 Dec -526 152 -374

SPECIFICATION OF CHANGES IN FAIR VALUE RESERVE 1 JAN - 31 DEC 2022

(EUR 1,000)

Liability

instruments

Equity

instruments Total

Fair value reserve 1 Jan 353 1,768 2,121

Fair value change, increases 1,628 1,719 3,347

Fair value change, decreases -4,434 -1,536 -5,970

Transferred from fair value reserve to

the income statement

2 0 2

Transferred from fair value reserve to

the retained earnings

0 -1,876 -1,876

Expected credit loss -5 0 -5

Deferred taxes 562 -37 525

Fair value reserve 31 Dec -1,894 39 -1,855

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 79

NOTE 27 COLLATERALS GIVEN AND RECEIVED

NOTE 28 OFF-BALANCE SHEET COMMITMENTS

The expected credit losses of off-balance sheet commitments are presented in Note 14.

Collaterals received from banks of POP Bank Group are long-term money market deposits related to

the offering of central credit institution services and made by the banks in the POP Bank Group to

the Bonum Bank. The amount of deposit liabilities in relation to the balance sheet total is conﬁrmed

annually.

OTHER NOTES

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Given on behalf of own liabilities and commitments

Debt securities 143,199 162,940

Other given collaterals 0 5,150

Total collateral given 143,199 168,090

Collaterals received

Other received collaterals 11,790 0

Collaterals received from POP Banks 68,208 67,958

Total collateral given 79,998 67,958

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Loan commitments 171,533 160,498

Total off-balance sheet commitments 171,533 160,498

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 80

NOTE 29 LEASING

RIGHT-OF-USE ASSETS 31 DEC 2023

(EUR 1,000) Office Buildings Total

Acquisition cost 1 Jan 867 867

Increases 451 451

Acquisition cost 31 Dec 1,318 1,318

Accumulated depreciation and impairment 1 Jan -543 -543

Depreciation -165 -165

Accumulated depreciation and impairment 31 Dec -708 -708

Carrying amount 1 Jan 324

Carrying amount 31 Dec 610

RIGHT-OF-USE ASSETS 31 DEC 2022

(EUR 1,000) Office Buildings Total

Acquisition cost 1 Jan 693 693

Increases 174 174

Acquisition cost 31 De 867 867

Accumulated depreciation and impairment 1 Jan -384 -384

Depreciation -159 -159

Accumulated depreciation and impairment 31 Dec -543 -543

Carrying amount 1 Jan 309

Carrying amount 31 Dec 324

BONUM BANK PLC AS LESSEE

Bonum Bank Plc has leased mainly business premises.

Presented in Property, Plant and Equipment

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 81

(EUR 1,000) 31 Dec 2023 31 Dec 2022

Lease liabilities 1 Jan 329 315

Increases 451 174

Decreases -164 -160

Lease liabilities 31 Dec 616 329

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Depreciation

Ofﬁce Buildings -165 -159

Total -165 -159

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Total cash outﬂow for leases -175 -167

LIABILITIES / LEASE LIABILITIES

AMOUNTS RECOGNISED IN PROFIT OF LOSS

AMOUNTS RECOGNISED IN STATEMENT OF CASH FLOWS

Presented in Other liabilities

Presented in Depreciation, Amortisation and Impairment of Property, Plant and Equipment

Presented in other operating expenses.

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Interest on lease liabilities -11 -6

Presented in Net interest Income

(EUR 1,000) 1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Variable lease payments not included in the

measurement of lease liabilities

-62 -49

Expenses relating to short-term leases -6 -5

Expenses relating to leases of low-value assets -35 -26

Total -102 -80

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 82

NOTE 30 RELATED PARTY DISCLOSURES

The related parties of Bonum Bank comprise the members of the company’s Board of Directors and

Executive Group and members of their immediate families. In addition, related parties include Bonum

Bank’s parent entity POP Bank Centre Coop, as well as its managing director and deputy managing di-

rector. Furthermore, related parties include those entities over which key persons included in the man-

agement and/or members of their immediate families have control or joint control. Key persons included

in the management comprise Bonum Bank’s Board of Directors, CEO and Executive Group. In addition,

key persons include POP Bank Centre Coop managing director and deputy managing director. Also en-

tities in the same group with Bonum Bank belong to the related parties.

In the ﬁnancial period 2023, Bonum Bank granted housing and consumption loans to related parties at

employee terms. These loans are tied to generally applied reference rates.

BUSINESS TRANSACTIONS WITH RELATED PARTY KEY PERSONS

(EUR 1,000)

Key persons in management

Other

31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022

Assets 7,918

Loans 271 284 0 219

ECL 0 0 1 0

Liabilities

Deposits 34 5 30,905 5,601

Off-balance-sheet commitments

Loan commitments 8 8 250 250

COMPENSATION TO KEY PERSONS IN MANAGEMENT

(EUR 1,000)

1 Jan - 31 Dec 2023 1 Jan - 31 Dec 2022

Short-term employee beneﬁts 1,036 1,030

Total 1,036 1,030

COMPENSATION TO CEO AND MEMBERS OF THE BOARD

(EUR 1,000) Salaries and remuneration

Ali-Tolppa Pia, CEO 240

Pulli Jaakko, Chairman of the Board 36

Linna Hanna, Vice Chairman of the Board 27

Lähteenmäki Ilkka, member of the Board 24

Kirsi Salo, member of the Board 24

Total 350

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 83

NOTE 31 EVENTS AFTER THE CLOSING DATE

Bonum Bank’s Board of Directors is not aware of other events having taken place after the closing date

that would have a material impact on the information presented in the ﬁnancial statements.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 84

SIGNATURES TO THE FINANCIAL STATEMENTS

AND BOARD OF DIRECTORS’ REPORT

Espoo, February 15th 2024

Board of Directors of Bonum Bank Plc

Auditor’s note

A report on the audit performed has been issued today.

Espoo, February 15th, 2024

KPMG OY AB

Tiia Kataja

APA

Jaakko Pulli

Chairman of the Board

Pia Ali-Tolppa

CEO

Ilkka Lähteenmäki Kirsi Salo

Hanna Linna

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 85

To the Annual General Meeting of Bonum Bank Plc

REPORT ON THE AUDIT OF THE FINANCIAL

STATEMENTS

OPINION

We have audited the ﬁnancial statements of

Bonum Bank Plc (business identity code 2192977-

5) for the year ended 31 December, 2023. The ﬁ-

nancial statements comprise the balance sheet,

income statement, statement of comprehensive

income, statement of changes in equity, state-

ment of cash ﬂows and notes, including material

accounting policy information.

In our opinion the ﬁnancial statements give a true

and fair view of the company´s ﬁnancial position,

ﬁnancial performance and cash ﬂows in accord-

ance with IFRS Accounting Standards as adopted

by the EU.

Our opinion is consistent with the additional re-

port submitted to the Board of Directors.

BASIS FOR OPINION

We conducted our audit in accordance with good

auditing practice in Finland. Our responsibilities

under good auditing practice are further described

in the Auditor’s Responsibilities for the Audit of the

Financial Statements section of our report.

We are independent of the company in accord-

ance with the ethical requirements that are appli-

cable in Finland and are relevant to our audit, and

we have fulﬁlled our other ethical responsibilities

in accordance with these requirements.

We have not provided any non-audit services to

the company.

AUDITOR’S REPORT We believe that the audit evidence we have ob-

tained is sufﬁcient and appropriate to provide a

basis for our opinion.

MATERIALITY

The scope of our audit was inﬂuenced by our ap-

plication of materiality. The materiality is deter-

mined based on our professional judgement and

is used to determine the nature, timing and extent

of our audit procedures and to evaluate the effect

of identiﬁed misstatements on the ﬁnancial state-

ments as a whole. The level of materiality we set

is based on our assessment of the magnitude of

misstatements that, individually or in aggregate,

could reasonably be expected to have inﬂuence on

the economic decisions of the users of the ﬁnan-

cial statements. We have also taken into account

misstatements and/or possible misstatements

that in our opinion are material for qualitative rea-

sons for the users of the ﬁnancial statements.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our

professional judgment, were of most signiﬁcance

in our audit of the ﬁnancial statements of the cur-

rent period. These matters were addressed in the

context of our audit of the ﬁnancial statements as

a whole, and in forming our opinion thereon, and we

do not provide a separate opinion on these mat-

ters. The signiﬁcant risks of material misstatement

referred to in the EU Regulation No 537/2014 point

of key audit matters below.

We have also addressed the risk of management

override of internal controls. This includes consid-

eration of whether there was evidence of man-

agement bias that represented a risk of material

misstatement due to fraud.

This document is an English translation of the Finnish auditor’s report. Only the Finnish version of the

report is legally binding.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 86

THE KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED IN THE

AUDIT

Loans and receivables from customers (notes 2, 12, 13, 14 and 16 to ﬁnancial statements)

● Loans and receivables from customers

amounted to EUR 193,4 million. Interest and

fee and commission income on receivables

from customers represent a signiﬁcant

part of Bonum Bank’s revenue.

● The calculation of expected credit loss-

es in accordance with IFRS 9 Financial In-

struments is based on the valuation mod-

els used by the POP Bank Group and on

expert estimates. The calculation involves

assumptions, estimates and manage-

ment judgement, in particular regarding the

probability of expected credit losses and

the determination of signiﬁcant increases

in credit risk.

● The components of the expected loss cal-

culation are updated and reﬁned based on

actual credit risk developments, the de-

velopment of the calculation process, and

regulatory changes and requirements.

● Due to the signiﬁcance of the carrying

amount of receivables involved, the com-

plexity of the calculation methods used

and management judgement, the valuation

of receivables is addressed as a key audit

matter.

● We evaluated compliance with lending

guidelines, credit risk management, and

policies and controls for recording and

monitoring receivables.

● We gained understanding of the control

environment for outsourced process ele-

ments based on ISAE 3402 reports.

● We assessed the models and underlying

key assumptions for calculating expected

credit losses, as well as tested the controls

over the calculation process and credit risk

models for expected credit losses.

● We involved our own IFRS and ﬁnancial in-

struments specialists.

● Furthermore, we considered the appropri-

ateness of the notes in respect of receiva-

bles and expected credit losses.

RESPONSIBILITIES OF THE BOARD OF

DIRECTORS AND THE MANAGING DIRECTOR

FOR THE FINANCIAL STATEMENTS

The Board of Directors and the Managing Direc-

tor are responsible for the preparation of ﬁnan-

cial statements that give a true and fair view in

accordance with IFRS Accounting Standards as

adopted by the EU, and that ﬁnancial statements

comply with statutory requirements. The Board of

Directors and the Managing Director are also re-

sponsible for such internal control as they deter-

mine is necessary to enable the preparation of ﬁ-

nancial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the ﬁnancial statements, the Board of

Directors and the Managing Director are responsi-

ble for assessing the company’s ability to continue

as a going concern, disclosing, as applicable, mat-

ters relating to going concern and using the going

concern basis of accounting. The ﬁnancial state-

ments are prepared using

the going concern basis of accounting unless

there is an intention to liquidate the company or

cease operations, or there is no realistic alterna-

tive but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT

OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance

about whether the ﬁnancial statements as a whole

are free from material misstatement, whether due

to fraud or error, and to issue an auditor’s report

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 87

that includes our opinion. Reasonable assurance is

a high level of assurance but is not a guarantee

that an audit conducted in accordance with good

auditing practice will always detect a material

misstatement when it exists. Misstatements can

arise from fraud or error and are considered ma-

terial if, individually or in the aggregate, they could

reasonably be expected to inﬂuence the economic

decisions of users taken on the basis of the ﬁnan-

cial statements.

As part of an audit in accordance with good au-

diting practice, we exercise professional judgment

and maintain professional skepticism throughout

the audit. We also:

● Identify and assess the risks of material mis-

statement of the ﬁnancial statements, wheth-

er due to fraud or error, design and perform

audit procedures responsive to those risks,

and obtain audit evidence that is sufﬁcient

and appropriate to provide a basis for our

opinion. The risk of not detecting a materi-

al misstatement resulting from fraud is higher

than for one resulting from error, as fraud may

involve collusion, forgery, intentional omis-

sions, misrepresentations, or the override of

internal control.

● Obtain an understanding of internal control

relevant to the audit in order to design audit

procedures that are appropriate in the cir-

cumstances, but not for the purpose of ex-

pressing an opinion on the effectiveness of

the company’s internal control.

● Evaluate the appropriateness of accounting

policies used and the reasonableness of ac-

counting estimates and related disclosures

made by management.

● Conclude on the appropriateness of the Board

of Directors’ and the Managing Director’s use

of the going concern basis of accounting and

based on the audit evidence obtained, wheth-

er a material uncertainty exists related to

events or conditions that may cast signiﬁcant

doubt on the company’s ability to continue as

a going concern. If we conclude that a mate-

rial uncertainty exists, we are required to draw

attention in our auditor’s report to the relat-

ed disclosures in the ﬁnancial statements or,

if such disclosures are inadequate, to modi-

fy our opinion. Our conclusions are based on

the audit evidence obtained up to the date of

our auditor’s report. However, future events or

conditions may cause the company to cease

to continue as a going concern.

● Evaluate the overall presentation, structure

and content of the ﬁnancial statements, in-

cluding the disclosures, and whether the ﬁ-

nancial statements represent the underlying

transactions and events so that the ﬁnancial

statements give a true and fair view.

We communicate with those charged with govern-

ance regarding, among other matters, the planned

scope and timing of the audit and signiﬁcant au-

dit ﬁndings, including any signiﬁcant deﬁciencies

in internal control that we identify during our audit.

We also provide those charged with governance

with a statement that we have complied with rele-

vant ethical requirements regarding independence,

and communicate with them all relationships and

other matters that may reasonably be thought to

bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those

charged with governance, we determine those

matters that were of most signiﬁcance in the au-

dit of the ﬁnancial statements of the current pe-

riod and are therefore the key audit matters. We

describe these matters in our auditor’s report un-

less law or regulation precludes public disclosure

about the matter or when, in extremely rare cir-

cumstances, we determine that a matter should

not be communicated in our report because the

adverse consequences of doing so would reason-

ably be expected to outweigh the public interest

beneﬁts of such communication.

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 88

OTHER REPORTING REQUIREMENTS

INFORMATION ON OUR AUDIT ENGAGEMENT

We were ﬁrst appointed as auditors by the share-

holders’ meeting on 27 of June 2013, and our ap-

pointment represents a total period of uninter-

rupted engagement of 11 years.

OTHER INFORMATION

The Board of Directors and the Managing Direc-

tor are responsible for the other information. The

other information comprises the report of the

Board of Directors.

Our opinion on the ﬁnancial statements does not

cover the other information.

In connection with our audit of the ﬁnancial

statements, our responsibility is to read the oth-

er information and, in doing so, consider wheth-

er the other information is materially inconsist-

ent with the ﬁnancial statements or our knowl-

edge obtained in the audit, or otherwise appears

to be materially misstated. Our responsibility also

includes considering whether the report of the

Board of Directors has been prepared in accord-

ance with the applicable laws and regulations.

In our opinion, the information in the report of the

Board of Directors is consistent with the infor-

mation in the ﬁnancial statements and the report

of the Board of Directors has been prepared in

accordance with the applicable laws and regula-

tions.

If, based on the work we have performed, we con-

clude that there is a material misstatement of the

report of the Board of Directors, we are required

to report that fact. We have nothing to report in

this regard.

Helsinki February 15, 2024

KPMG OY AB

Tiia Kataja

Authorised Public Accountant, KHT

Bonum Bank Plc’s Board of directors’ report and ﬁnancial statements 1 January - 31 December 2023 89