POP Mortgage Bank Plc

BOARD OF DIRECTORS

REPORT AND

FINANCIAL

STATEMENTS

1 January – 31 December 2023

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

CONTENTS

BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL PERIOD

1 JANUARY - 31 DECEMBER 2023 ...................................................................................................................................................................................... 3

POP Bank Group and amalgamation of POP Banks ...........................................................................................................................3

Operating environment ............................................................................................................................................................................................................5

Key ﬁgures and the formulas of key ﬁgures ...................................................................................................................................................6

Performance and balance sheet ..................................................................................................................................................................................8

Credit rating ..........................................................................................................................................................................................................................................8

Risk and capital adequacy management and risk position ........................................................................................................8

Business risks .......................................................................................................................................................................................................................................9

Internal control .................................................................................................................................................................................................................................12

Internal audit ...................................................................................................................................................................................................................................... 12

Management and personnel ...........................................................................................................................................................................................12

The bank’s corporate and governance system ........................................................................................................................................12

Audit . ............................................................................................................................................................................................................................................................13

Social responsibility ...................................................................................................................................................................................................................13

Events after the review period ......................................................................................................................................................................................13

Outlook for 2024 ...........................................................................................................................................................................................................................13

Board of directors’ proposal on the disposal of the result for the period .................................................................13

POP MORTGAGE BANK’S FINANCIAL STATEMENTS 1 JANUARY – 31 DECEMBER 2023 ....................... 14

POP Mortgage Bank’s income statement ..................................................................................................................................................... 14

POP Mortgage Bank’s balance statement ....................................................................................................................................................15

POP Mortgage Bank’s statement of changes in equity capital ...........................................................................................16

POP Mortgage Bank’s cash ﬂow statement .................................................................................................................................................17

NOTES ...................................................................................................................................................................................................................................................... 18

Note 1 Accounting policies ................................................................................................................................................................................... 18

Note 2 Risk management ........................................................................................................................................................................................23

Note 3 Interest income and expenses .....................................................................................................................................................29

Note 4 Net income from hedge accounting ....................................................................................................................................29

Note 5 Personnel expenses ...................................................................................................................................................................................29

Note 6 Other operating expenses ................................................................................................................................................................30

Note 7 Depreciation .......................................................................................................................................................................................................30

Note 8 Income tax ...........................................................................................................................................................................................................30

Note 9 Net income and expenses of ﬁnancial assets and ﬁnancial liabilities

by measurement category .....................................................................................................................................................................................31

Note 10 Classiﬁcation of ﬁnancial assets and liabilities ................................................................................................ 32

Note 11 Classiﬁcation of ﬁnancial assets and liabilities and fair values

by valuation technique ............................................................................................................................................................................................... 34

Note 12 Loans and receivables to credit institutions ............................................................................................................ 37

Note 13 Intangible assets ........................................................................................................................................................................................37

Note 14 Other assets ...................................................................................................................................................................................................38

Note 15 Debt securities issued to the public ..................................................................................................................................38

Note 16 Derivatives and hedge accounting .....................................................................................................................................39

Note 17 Other liabilities .............................................................................................................................................................................................. 41

Note 18 Equity capital ................................................................................................................................................................................................ 41

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

This document is a translation of the original Finnish version "POP Asuntoluottopankki toimintakerto-

mus ja tilinpäätös 2023". In case of discrepancies, the Finnish version shall prevail.

Note 19 Collateral given and received ....................................................................................................................................................42

Note 20 Distributable funds ................................................................................................................................................................................42

Note 21 Related party disclosures ............................................................................................................................................................... 43

Note 22 Events after the closing date ....................................................................................................................................................43

SIGNATURES ..............................................................................................................................................................................................................................................44

AUDITOR’S REPORT ...........................................................................................................................................................................................................................45

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 3

BOARD OF DIRECTORS’ REPORT

FOR THE FINANCIAL PERIOD OF 1

JANUARY – 31 DECEMBER 2023

The POP Mortgage Bank Plc (hereinafter ‘POP

Mortgage Bank’) engaged in mortgage banking

operations after it was authorised by the European

Central Bank on 25 May 2022 and had been grant-

ed an operating license pursuant to the Act on

Mortgage Banks and Covered Bonds on 30 June

2022. POP Mortgage Bank is a member credit in-

stitution within the POP Bank amalgamation.

POP Mortgage Bank is responsible for acquiring

external funding for the amalgamation in cooper-

ation with Bonum Bank Plc. POP Mortgage Bank is

also responsible for issuing secured bonds and for-

warding the acquired funding to member credit in-

stitutions belonging to the amalgamation of POP

Banks.

POP Mortgage Bank’s operations are based on

the intermediary loan model. Thus, the mort-

gage-backed loan portfolio provided as collateral

for bonds to be issued is not recognised on POP

Mortgage Bank’s balance sheet. Instead, it remains

on each member credit institution’s balance sheet.

During the review reporting period, in April 2023,

POP Mortgage Bank issued another EUR 250 mil-

lion bond under its EUR 1 billion covered bond pro-

gram. The ﬁrst issue was in September 2022. As of

the end of 2023, POP Mortgage Bank had issued a

total of 500 million euros in covered bonds.

POP Mortgage Bank recorded a proﬁt of EUR 0.1

million for the reporting period and balance sheet

totalled EUR 544.3 million at the end of the report-

ing period.

POP BANK GROUP AND

AMALGAMATION OF POP BANKS

POP Bank Group is a Finnish ﬁnancial group that

offers retail banking services for private custom-

ers as well as small and medium-sized companies.

POP Banks are cooperative banks owned by their

member customers. POP Bank Group’s mission

is to promote its customers’ ﬁnancial well-being,

prosperity and local success.

STRUCTURE OF POP BANK GROUP

POP Bank Group consists of POP Banks, POP

Bank Centre coop and their controlled entities.

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 according to the Act on

the Amalgamation of Deposit Banks. 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 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 institution of the POP

Banks and acquires external funding for the Group

by issuing unsecured bonds. Bonum Bank Plc is al-

so responsible for the POP Banks’ card business

and the Group’s payment transactions and cen-

tralised 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 from Finnish

P&C Insurance Ltd that belongs to LocalTapio-

la Group and uses the auxiliary business name of

POP Insurance. POP Holding Ltd is not a member

of the amalgamation of POP Banks and is included

in the scope of joint liability.

The following chart presents the structure of POP

Bank Group and the entities included in the amal-

gamation and scope of joint liability.

BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL PERIOD

1 JANUARY - 31 DECEMBER 2023

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 4

CHANGES IN POP BANK GROUP’S 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 shareholder in

the company. Subsequently, Finnish P&C Insurance

Ltd will be consolidated as an associated 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

POP Bank Group’s consolidated ﬁnancial informa-

tion.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 5

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 econo-

my 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 strug-

gle, and therefore Finland’s economy is not get-

ting the boost it needs from exports. Russia’s war

of aggression against Ukraine continued and the

uncertainty 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

wages 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 exception-

ally high in the early 2020s, but the ﬁrst signs of

a downturn in construction had already become

visible by the end of 2022. The high inﬂation and

rising interest rates following the pandemic led to

a steep decrease in the number of building per-

mits and construction starts in 2023, and at the

same time buyers also became more cautious

than before. In addition, as housing investors,

which make up a major group of buyers, large-

ly disappeared from the housing market, housing

prices continued to decline in 2023. The construc-

tion sector is very important for the Finnish econ-

omy, so the slowdown in construction weighed on

GDP development, 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.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 6

Alternative Performance Measures (APMs) are key ﬁgures other than those speciﬁed in the accounting

standards or other regulation and are used to describe the company’s ﬁnancial position and development.

The key ﬁgures presented by the POP Mortgage Bank are based on IFRS Financial Statement Reporting

standards. The calculation formulas for the key ﬁgures included in the annual report are described below.

31 Dec 2023 31 Dec 2022

Cost-to-income ratio, % 94% 610%

ROA, % 0.0% -1.0%

ROE, % 0.4% 7.9%

Capital adequancy ratio (TC) % 231.6% 307.1%

Equity ratio, % 3.1% 6.3%

KEY FIGURES AND THE FORMULAS OF KEY FIGURES

COSTTOINCOME RATIO, %

Total operating expenses

Total operating income

RETURN ON EQUITY ROE, %

Proﬁt for the ﬁnancial year

Equity capital and non-controlling interest (average of the

beginning and end of period)

RETURN ON ASSETS ROA, %

Proﬁt for the ﬁnancial year

Balance sheet total (average of the beginning and the end of the

period)

EQUITY RATIO, %

Equity capital and non-controlling interest

Balance sheet total

COMMON EQUITY TIER 1 CAPITAL RATIO CET1, %

Common Equity Tier 1 capital (CET1)

Risk weighted assets

TIER 1 CAPITAL RATIO T1, %

Tier 1 capital (T1)

Risk weighted assets

x 100

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 7

CAPITAL ADEQUACY RATIO TC, %

Total capital (TC)

Risk weighted assets

LEVERAGE RATIO, %

Tier 1 capital (T1)

Leverage ratio exposure

LIQUIDITY COVERAGE RATIO LCR, %

Liquid assets

Liquidity outﬂows - liquidity inﬂows under

stressed conditions

NET STABLE FUNDING RATIO NSFR, %

Stable funding

Required amount of stable funding

x 100

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 8

PERFORMANCE AND BALANCE

SHEET

PERFORMANCE

POP Mortgage Bank recorded a proﬁt of EUR 0.1

(-1.4) million for the reporting period.

POP Mortgage Bank’s net interest income was EUR

1.2 (0.3) million. Interest income consisted of EUR

17.6 (1.3) million in receivables from credit institu-

tions and EUR 12.8 (1.9) million in derivative con-

tracts. Interest expenses consisted of EUR 13.0

(1.8) million in bonds issued and EUR 16.2 (1.0) mil-

lion in derivative contracts.

POP Mortgage Bank’s operating expenses totalled

EUR 1.0 (1.6) million. Personnel expenses included

fees paid to the members of the Board of Directors.

Other operating expenses include EUR 0.3 (0.5)

million in ICT expenses and EUR 0.5 (0.9) million

in purchased services. Purchased services include

management services purchased from Bonum

Bank Plc and POP Bank Centre coop, among other

services. Depreciation and impairment include the

amortisation of intangible assets. Other operat-

ing expenses totalled EUR 0.1 (0.2) million, includ-

ing regulatory and consulting costs related to the

mortgage banking authorisation process, among

other expenses.

BALANCE SHEET AND FINANCIAL POSITION

POP Mortgage Bank’s balance sheet totalled EUR

544.3 (268.3) million at the end of the reporting pe-

riod.

Loans and receivables from credit institutions in-

clude EUR 26.3 (15.8) million mainly in deposits in

Bonum Bank and EUR 500.0 (250.0) million in in-

termediary loans granted to banks belonging the

amalgamation of POP Banks.

The item “Intangible assets” includes EUR 0.4 (0.5)

million in investments made by POP Mortgage

Bank in long-term ICT systems.

Derivative contracts consist of interest rate swaps

for hedging purposes. The accumulated change in

their fair value stood at EUR 10.6 (-6.5) million at

the end of the reporting period.

The bonds issued, at EUR 503.3 (243.0) million, in-

clude secured bonds issued in September 2022

and April 2023, with a nominal value of EUR 250

million each, and the change in the fair value of the

underlying asset in hedge accounting.

POP Mortgage Bank’s equity was EUR 16.9 (16.8)

million at the end of the reporting period.

CREDIT RATING

In April and October 2023, the credit rating agency

S&P Global Ratings conﬁrmed the ‘AAA’ credit rat-

ing with a stable outlook for POP Mortgage Bank’s

loan programme and the issued bonds.

RISK AND CAPITAL ADEQUACY

MANAGEMENT AND RISK POSITION

PRINCIPLES AND ORGANISATION OF RISK

MANAGEMENT

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 risk management is to

ensure the risk levels are proportionate to bank’s

and the amalgamation’s risk-bearing capacity and

capital adequacy position. Risk management pro-

cesses must be able to identify all signiﬁcant risks

of the business operations and assess, measure

and monitor these regularly.

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 adequa-

cy management in accordance with section 17 of

the Amalgamation Act. The central institution of

the amalgamation issues binding instructions con-

cerning risk and capital adequacy management,

corporate governance and internal control to the

member credit institutions to secure their solvency

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 9

and capital adequacy. Furthermore, common busi-

ness controlling thresholds have been established

for the member institutions to ensure that the risks

taken by an individual member institution are with-

in acceptable limits.

POP Mortgage Bank’s risk management goal is to

ensure that the bank complies with laws, decrees,

instructions and regulations issued by the authori-

ties, their own rules and the internal binding guide-

lines issued by the central institution of the amal-

gamation in its activities.

The purpose of capital adequacy management is

to ensure a sufﬁcient amount, type and efﬁcient

use of the capital of POP Mortgage Bank. Capital

is held to cover the material risks arising from the

amalgamation’s business strategy and plan and to

secure the uninterrupted operation of the amal-

gamation in case of unexpected losses. The goal

is pursued through a documented and systemat-

ic capital adequacy management process which is

integrally linked to the amalgamation’s and mem-

ber credit institutions’ strategy process and busi-

ness planning and management. POP Mortgage

Bank is responsible for member banks long-term

funding by issuing secured bonds. Issuing is based

on the funding needs of the amalgamation as an

entity due to which POP Mortgage Bank’s control

process of the capital adequacy is closely con-

nected to the strategy process of the amalgama-

tion as well as the planning and managing of the

business operations.

The amalgamation’s risk management and capi-

tal adequacy management are described in more

detail in Note 4 to the POP Bank Group’s ﬁnan-

cial statements. Furthermore, information con-

cerning risks speciﬁed in the EU Capital Require-

ments Regulation (2019/876) (CRR II) is presented

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

cial statements and the Pilar III report of POP Bank

Group are available online at www.poppankki.ﬁ/en

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

dress Hevosenkenkä 3, 02600 Espoo, Finland.

BUSINESS RISKS

CREDIT RISKS

POP Mortgage Bank’s credit risk consist of inter-

mediary loans granted to the member banks of

the amalgamation of POP Banks and from deriv-

atives.

POP Mortgage Bank engages in mortgage bank

operations under an intermediary loan model es-

tablished by the Act on Mortgage Banks and Cov-

ered Bonds (151/2022). Thus, the Bank may issue

secured bonds and use the acquired funds to of-

fer intermediary loans to the member banks of the

amalgamation.

Under the intermediary loan model, the mort-

gage-backed loans provided as collateral for se-

cured bonds remain on the member banks’ bal-

ance sheets and are not recognised on POP

Mortgage Bank’s balance sheet. The risks asso-

ciated with the mortgage-backed loans provided

as collateral are not transferred to POP Mortgage

Bank. The bonds are recognised as collateral for

the secured bonds issued. The intermediary loans

granted to member banks are presented under

“Receivables from credit institutions” on the bal-

ance sheet.

LIQUIDITY RISK

Bonum Bank Plc, the central credit institution

of the amalgamation, is responsible for liquid-

ity management. Liquidity risks are managed

by maintaining a liquidity reserve consisting of

LCR-eligible (Liquidity Coverage Ratio) liquid as-

sets, assets eligible as collateral for central bank

funding, and short-term bank receivables. Based

on an authorisation granted by the Financial Su-

pervisory Authority, the member credit institu-

tions of the amalgamation have been exempted

from the LCR and NSFR (Net stable funding ratio)

requirements by the decision of the central insti-

tution. The LCR and NSFR requirements are cal-

culated at the level of the amalgamation of POP

Banks.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 10

POP Bank Group’s liquidity position remained strong

during the ﬁnancial period. The liquidity coverage

ratio (LCR) for the amalgamation of POP Banks was

273.9 (184.8) per cent on 31 December 2023, with

the regulatory minimum level being 100 per cent.

The amalgamation’s Net Stable Funding Ratio (NS-

FR) was 132.7 (133.5) per cent on 31 December 2023.

MARKET RISK

POP Mortgage Bank’s most signiﬁcant market risk

is the interest rate risk associated with the banking

book. The interest rate risk refers to the impact of

changes in interest rate levels on the market value

of balance sheet and off-balance-sheet items, or

on net interest income. The banking book consists

of intermediary loans granted to the amalgama-

tion’s member banks and market-based ﬁnancing.

POP Mortgage Bank does not engage in trading ac-

tivities. The use of derivatives is limited to hedging

interest rate risk in the banking book.

POP Mortgage Bank monitors the interest rate risk

by using the present value method and the dynamic

income risk model. The present value method meas-

ures how changes in interest rates affect the con-

structed market value of the balance sheet. In the

present value method, the market value of the bal-

ance sheet is calculated as the present value of the

expected cash ﬂows of individual balance sheet

items. Interest rate sensitivity 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 sce-

narios within a time frame of ﬁve years. The amount

of interest rate risk taken is assessed with the ef-

fect of diverse interest rate shocks on the net inter-

est income and net present value.

OPERATIONAL RISKS

The objective of the management of operation-

al risks is to identify essential operational risks in

business operations and minimise their materialisa-

tion and impacts. The objective is pursued through

continuous personnel development and by means of

comprehensive operating instructions and internal

control measures, such as by segregating prepara-

tion, decision-making, implementation and control

from one another.

POP Mortgage Bank carries out an annual self-as-

sessment of operational risks based on the risks

assessments it performs, in which the monitoring of

operational risk incidents is utilised. The risk assess-

ment also aims to evaluate the risks related to POP

Mortgage Bank most signiﬁcant outsourced oper-

ations. 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 MANAGEMENT

At the end of the reporting period. POP Mortgage

Bank’s capital adequacy was at a good level. The

bank’s capital ratio was 231.6 (307.1) per cent and

the core capital adequacy ratio 231.6 (307.1) per

cent. On 31 December 2023, POP Mortgage Bank’s

own funds totalled EUR 16.4 (16.3) million consisting

entirely of CET1 capital adequacy.

POP Mortgage Bank’s own funds are comprised of

share capital, retained earnings and other non-re-

stricted reserves, less the deductible items in ac-

cordance with the CRR. Member credit institutions

of the amalgamation have been exempted from

the own funds requirements for intragroup items

and large exposures limits for exposures between

the central credit institution and the member cred-

it institutions based on a permission granted by the

FIN-FSA.

POP Mortgage Bank’s leverage ratio on 31 Decem-

ber 2023 was 158.5 (339.2) per cent. The minimum

level of regulation is 3 per cent.

The statutory minimum is 8 per cent for the capi-

tal adequacy ratio and 4.5 per cent for CET1 capi-

tal. In addition to the minimum capital adequacy ra-

tio, POP Mortgage Bank is subject to the ﬁxed ad-

ditional capital requirement, which is 2.5 per cent in

accordance with the Act on Credit Institutions, and

to the variable country-speciﬁc additional capital

requirements for foreign exposures.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 11

SUMMARY OF CAPITAL ADEQUACY

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

Own funds

Common Equity Tier 1 capital before deductions 16,793 16,793

Deductions from Common Equity Tier 1 capital -411 -529

Total Common Equity Tier 1 capital (CET1) 16,381 16,264

Additional Tier 1 capital before deductions - -

Deductions from Additional Tier 1 capital - -

Additional Tier 1 capital (AT1) - -

Tier 1 capital (T1 = CET1 + AT1) 16,381 16,264

Tier 2 capital before deductions - -

Deductions from Tier 2 capital - -

Total Tier 2 capital (T2) - -

Total capital (TC = T1 + T2) 16,381 16,264

Total risk weighted assets 7,074 5,296

of which credit risk 2,136 974

of which credit valuation adjustment risk (CVA) 3,344 2,657

of which market risk (exchange rate risk) - -

of which operational risk 1,594 1,666

Fixed capital conservation buffer according to Act on Credit

institutions (2.5%)

177 132

Countercyclical capital buffer - -

CET1 Capital ratio (%) 231.6% 307.1%

T1 Capital ratio (%) 231.6% 307.1%

Total capital ratio (%) 231.6% 307.1%

Capital requirement

Total capital 16,381 16,264

Capital requirement * 743 556

Capital buffer 15,639 15,707

Leverage ratio

Tier 1 capital (T1) 16,381 16,264

Leverage ratio exposure 10,338 4,794

Leverage ratio, % 158.5% 339.2%

* 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.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 12

INTERNAL CONTROL

The purpose of POP Mortgage Bank’s internal con-

trol is to ensure that the bank, in a systematic and

effective manner, works towards the goals and im-

plements the procedures conﬁrmed by senior man-

agement. Internal control aims to ensure that the

organisation complies with regulations and man-

ages risks comprehensively, and that its operations

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 management

and personnel, as well as the risk management and

compliance functions independently of business

operations. As part of internal control, the amalga-

mation has implemented a whistle-blowing mech-

anism that enables the bank’s employees to report,

internally through an independent channel, suspect-

ed 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 organ-

isation of internal audit in the bank centre, mem-

ber credit institutions and other companies of the

amalgamation. POP Mortgage Bank’s internal audit

is based on the internal audit guidelines conﬁrmed

by the Board of Directors and the Supervisory 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 POP Mort-

gage Bank’s operational organisation and to moni-

tor and assess the functionality of risk management

systems. Internal audit reports its observations pri-

marily to POP Mortgage Bank’s Board of Directors.

After audits, the bank’s Board of Directors discusses

the summaries prepared as a result of the internal

audit. Internal Audit reports of its activity and ob-

servations regularly to central institution’s Supervi-

sory Board, central institution’s Board and CEO.

MANAGEMENT AND PERSONNEL

POP Mortgage Bank’s Board of Directors during the

ﬁnancial year included:

● Juha Niemelä, Chairman of the Board

● Matti Vainionpää, Vice Chairman of the Board

● Marja Pajulahti, Member of the Board

POP Mortgage Bank does not have personnel. The

Deputy CEO of Bonum Bank Timo Hulkko has act-

ed as the CEO of POP Mortgage Bank. Tony Tötter-

ström has acted as the CEO’s deputy.

THE BANK’S CORPORATE AND

GOVERNANCE SYSTEM

POP Mortgage 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 Directors.

The 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 activi-

ties in accordance with the instructions provided by

the Board of Directors.

The investigation of the independence of Board

members and the CEO takes place in accordance

with regulations issued by the Finnish Financial Su-

pervisory 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 pro-

vide an account of ﬁtness and propriety according

to the regulation by the Financial Supervisory Au-

thority when they accept their duties.

POP Mortgage Bank’s Corporate Governance State-

ment is available online at www.poppankki.ﬁ/en.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

BOARD OF DIRECTOR’S REPORT 13

AUDIT

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

ised public accountants, with Tiia Kataja, authorised

public accountant, as the principal auditor.

SOCIAL RESPONSIBILITY

POP Mortgage Bank’s social responsibility refers to

the Bank’s responsibility for the effects of its oper-

ations on the surrounding society and the compa-

ny’s stakeholders. By acting as the mortgage bank

for POP Banks, POP Mortgage Bank contributes to

supporting the social responsibility of local POP

Banks. POP Bank Group’s social responsibility is in-

cluded in the Group’s ﬁnancial statements.

EVENTS AFTER THE REVIEW

PERIOD

Board of Directors of POP Mortgage Bank is not

aware of events after the closing date that would

have a material impact on the information present-

ed 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 stabi-

lised in early 2024, but interest rates are expected

to continue to fall at a moderate pace.

POP Mortgage Bank’s capital adequacy is expected

to stay at a high level and the quality of the collat-

eral for the issued bonds is expected to be good.

BOARD OF DIRECTORS’

PROPOSAL ON THE DISPOSAL OF

THE RESULT FOR THE PERIOD

POP Mortgage Bank’s distributable funds were EUR

6,855,165.29. POP Mortgage Bank’s Board of Direc-

tors proposes to the Annual General Meeting that

the proﬁt for the period EUR 62,540.20 be recog-

nised in retained earnings and that no dividends be

paid.

POP MORTGAGE BANK’S FINANCIAL STATEMENTS

1 JANUARY – 31 DECEMBER 2023

POP MORTGAGE BANK’S INCOME STATEMENT

POP Mortgage Bank has no items to be presented in the statement of other comprehensive income.

(EUR 1,000) Note

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

Interest income 30,419 3,216

Interest expenses -29,207 -2,878

Income statement 3 1,212 339

Net income from hedge accounting 4 -176 -69

Total operating income 1,037 270

Personnel expenses 5 -23 -25

Other operating expenses 6 -835 -1,557

Depreciation 7 -116 -68

Total operating expenses -974 -1,650

Proﬁt before taxes 63 -1,379

Income taxes 8 - -

Result for the period 63 -1,379

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 14

POP MORTGAGE BANK’S BALANCE STATEMENT

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

Assets

Loans and receivables to credit institutions 10, 11, 12 526,280 265,784

Derivatives 10, 11, 12 6,945 -

Intangible assets 13 398 514

Other assets 14 10,687 2,033

Total assets 544,310 268,332

Liabilities

Debt securities issued to the public 10, 11, 15 503,259 243,038

Debt to credit institutions 10 10,650 -

Derivatives 10, 11, 16 2,863 6,520

Other liabilities 17 10,682 1,981

Total liabilities 527,455 251,539

Equity capital

Share capital 18 10,000 10,000

Reserves 18 9,000 9,000

Retained earnings 18 -2,145 -2,207

Total equity capital 16,855 16,793

Total liabilities and equity 544,310 268,332

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 15

POP MORTGAGE BANK’S STATEMENT OF CHANGES IN EQUITY

CAPITAL

(EUR 1,000) Share capital

Reserve for

invested non-

restricted equity

Retained

earnings Total equity

Balance at 1 Jan 2023 10,000 9,000 -2,207 16,793

Proﬁt for the ﬁnancial year - - 63 63

Proﬁt for the ﬁnancial year

- - 63 63

Balance at 31 Dec 2023 10,000 9,000 -2,145 16,855

(EUR 1,000) Share capital

Reserve for

invested non-

restricted equity

Retained

earnings Total equity

Balance at 1 Jan 2022 10,000 9,000 -828 18,172

Proﬁt for the ﬁnancial year - - -1,379 -1,379

Proﬁt for the ﬁnancial year

- -

-1,379

Balance at 31 Dec 2022 10,000 9,000 -2,207 16,793

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 16

POP MORTGAGE BANK’S CASH FLOW STATEMENT

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

Cash ﬂow from operating activities

Proﬁt for the ﬁnancial year 63 -1,379

Adjustments to proﬁt for the ﬁnancial year 533 169

Increase (-) or decrease (+) in operating assets -257,354 -266,533

Receivable from credit institutions -248,700 -264,500

Other assets -8,654 -2,033

Increase (+) or decrease (-) in operating liabilities 19,352 1,866

Liabilities to credit institutions 10,650 -

Other liabilities 8,702 1,866

Total cash ﬂow from operating activities -237,4 07 -265,878

Cash ﬂow from investing activities

Purchase of PPE and intangible assets - -43

Total cash ﬂow from investing activities - -43

Cash ﬂow from ﬁnancing activities

Debt securities issued, increase 249,203 249,458

Total cash ﬂow from ﬁnancing activities 249,203 249,458

Change in cash and cash equivalents

Cash and cash equivalents at period-start 1,284 17,748

Cash and cash equivalents at the end of the period 13,080 1,284

Net change in cash and cash equivalents 11,796 -16,464

ADDITIONAL INFORMATION OF THE CASH

FLOW STATEMENT

Interest received 22,132 1,202

Interest paid 20,825 945

Adjustments to result for the ﬁnancial year

Changes in fair value 174 69

Depreciation 116 68

Other 243 32

Cash and cash equivalents

Receivables from credit institutions payable on

demand

13,080 1,284

Total 13,080 1,284

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 17

NOTES

GENERAL

POP MORTGAGE BANK PLC AND POP BANK

GROUP

POP Mortgage Bank Plc (hereinafter ‘POP Mortgage

Bank’) is a subsidiary wholly owned by POP Bank

Centre coop and a member credit institution in the

amalgamation of POP Banks, acting as the mort-

gage bank for the member banks of the POP Bank

Centre coop (POP Banks). POP Mortgage Bank has

been established on September 2, 2021. On 25 May

2022, POP Mortgage Bank Plc was authorised by

the European Central Bank to engage in mortgage

banking operations.

POP Mortgage Bank belongs to the POP Bank

Group. POP Bank Group consists of the amalgama-

tion 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 POP Mortgage Bank, Bonum Bank Plc and

18 co-operative banks. 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.

POP Mortgage Bank and Bonum Bank Plc are re-

sponsible for acquiring external funding for the

amalgamation. POP Mortgage Bank engages in

mortgage bank operations under an intermedi-

ary loan model established by the Act on Mortgage

Banks and Covered Bonds (151/2022). In the inter-

mediary loan model, POP Mortgage Bank distributes

the capital originating from the issued bond to the

member banks of amalgamation as an intermediary

loan. POP Mortgage Bank underwrites intermediary

loans on member banks balance sheets in securi-

ty for issued bonds. In the intermediary loan model,

member banks mortgage-backed loans capital and

associated risks are not transferred to POP Mort-

gage Bank. Intermediary loans will be stated to bal-

ance sheet item “Loans and receivables from credit

institutions”.

POP Mortgage Bank’s registered ofﬁce is Espoo.

Copy of POP Mortgage Bank’s ﬁnancial state-

ments are available from its ofﬁce at Hevosen-

kenkä 3, 02600 Espoo, Finland and online at

www.poppankki.ﬁ/en.

POP Bank Centre coop has prepared POP Bank

Group’s consolidated ﬁnancial statements in ac-

cordance with the Act on the Amalgamation of

Deposit Banks. Copies of the ﬁnancial state-

ments of POP Bank Group are available online at

www.poppankki.ﬁ/en or from the ofﬁce of the cen-

tral institution, address Hevosenkenkä 3, 02600

Espoo, Finland. POP Bank Group will present infor-

mation concerning risks speciﬁed in the EU Capital

Requirements Regulation (EU 2019/876) (CRR) in a

separate Pillar III report.

BASIS OF PREPARATION

POP Mortgage Bank’s ﬁnancial statements have

been prepared in accordance with International Fi-

nancial Reporting Standards (IFRS) approved in the

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

plicable Finnish accounting and corporate legis-

lation and regulatory requirements have also been

taken into account when preparing the notes to the

ﬁnancial statements.

The ﬁgures in the ﬁnancial statements are in thou-

sand euros, unless otherwise stated. The ﬁgures in

the calculations and tables are rounded, whereby

the sum total of individual ﬁgures may deviate from

the sum total presented. POP Mortgage Bank’s ac-

counting and operational currency is euro.

POP Mortgage Bank has no subsidiaries or associ-

ated 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 concern-

NOTE 1 ACCOUNTING POLICIES

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 18

ing the future that affect the reported amounts in

the ﬁnancial statements, as well as the information

included in the notes. The management’s main es-

timates concern the future and key uncertainties

related to the amounts at the balance sheet date.

Such key estimates are related to fair value meas-

urement, as well as the impairment of ﬁnancial as-

sets and intangible assets. The management’s es-

timates and assumptions are based on the best

view at the balance sheet date, which may differ

from the actual result.

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 ﬁnancial instruments is de-

termined using a valuation technique, the manage-

ment’s judgement is needed in the choice of the

valuation technique to be applied. Insofar as there

is no market input available for the techniques,

management must evaluate how other data can be

used for the valuation.

In the calculation of expected credit losses, the

management’s assessment has been used in de-

ciding that the probability of default of POP Banks

Group’s internal items is to be zero. The assessment

was made based on the structure of the Group and

the principles of risk management. The most sig-

niﬁcant item within the amalgamation to which the

principle is applied is the interim loans granted to

POP Banks, which are presented in Note 12 Loans

and receivables from credit institutions.

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 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

Purchases and sales of ﬁnancial instruments are

recognised on transaction date. Instruments issued

are recognised in the balance sheet on the date

when the customer makes the subscription.

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

asset 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-

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 19

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

asset groups are managed together to achieve a

particular business objective.

POP Mortgage Bank’s, ﬁnancial assets are

managed according 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 sole-

ly payments of principal and interest, held to ma-

turity 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.

POP Mortgage Bank does not actively trade ﬁ-

nancial assets.

Financial instruments 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.

POP Mortgage Bank’s ﬁnancial liabilities are

measured at amortised cost according to the ef-

fective interest rate method. Financial liabilities

measured at amortised cost includes deposits

and debt securities issued to the public, liabilities

to credit institutions as well as other ﬁnancial lia-

bilities.

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.

A ﬁnancial instrument’s fair value is based on price

quotations obtained from active markets or, if ac-

tive markets do not exist, via company’s own valua-

tion methods. A market is considered active if price

quotations are readily and regularly available and

if they reﬂect real and regularly occurring arm’s-

length market transactions. Current bid price is

used as the quoted market price of ﬁnancial assets.

If the market has a well-established valuation tech-

nique 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

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 20

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:

● Fair values quoted in the active markets for

identical 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

A 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.

POP Mortgage Bank’s ﬁnancial assets consist of

internal deposits of POP Banks Group. In the cal-

culation of expected credit losses (ECL), the prob-

ability of default (PD) of the group’s internal items

has been considered to be zero, based on the

group’s structure and risk management principles.

Calculation principles for expected credit losses

are described in more detail in Note 2 POP Bank

Group’s accounting policies to POP Bank Group’s

ﬁnancial statements.

DERIVATIVE CONTRACTS AND HEDGDE

ACCOUNTING

POP Mortgage Bank hedges its interest rate risk

against changes in fair value, primarily using in-

terest rate swaps. Hedge accounting is applied for

fair value hedging. The hedged instrument of fair

value hedging is ﬁxed-rate bonds issued. Deriva-

tive contracts are not made for trading purposes.

All derivative contracts are recognised and meas-

ured at fair value through proﬁt or loss. The pos-

itive fair values of derivative contracts are pre-

sented as assets under Derivatives and negative

fair values as liabilities under Derivatives. Changes

in the value of derivatives in hedge accounting are

recorded in the income statement under Net in-

come from Hedge accounting. Interest on hedging

derivatives is presented in the income statement

under interest income and expenses.

The hedging relationship between the hedging de-

rivative contract and the hedged instrument and

the objectives of risk management are document-

before hedge accounting is applied. If there is a

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 21

high correlation between the change in the value of

the hedging derivative and the hedged instrument,

the hedging is considered effective.

POP Mortgage Bank applies IFRS 9 Financial Instru-

ments to hedge accounting for all hedging relation-

ships.

INTANGIBLE ASSETS

Intangible assets are comprised information sys-

tems and licenses. An intangible asset is recog-

nized in the balance sheet at acquisition cost if it is

probable that the expected economic beneﬁts as-

sociated, 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.

Intangible assets have a limited useful life. The ac-

quisition cost of intangible assets is amortised in

the income statement on the basis of the estimat-

ed useful lives of assets. The estimated useful life is

3–5 years for information systems and licenses.

The amortisation of the acquisition cost of intangi-

ble assets begins when the asset is ready to be tak-

en into use. Indications of impairment of intangible

assets are examined annually and intangible assets

are tested for impairment when necessary.

EMPLOYEE BENEFITS

Employee beneﬁts are short-term employee bene-

ﬁts, such as remunerations for positions of respon-

sibility, which are expected to be paid in connection

with the work performance they are related to or

within the following 12 months.

POP Mortgage Bank does not have employees. The

company purchases the administrative and man-

agement services needed from its parent compa-

ny POP Bank Centre coop and its sister company

Bonum Bank Plc.

INCOME TAX

The income statement includes taxes on income for

the ﬁnancial year and changes in deferred taxes.

Deferred tax liabilities and assets are calculated on

taxable and deductible temporary differences be-

tween the carrying amount and the tax basis. De-

ferred tax assets are recognised to the extent 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 for-

ward of unused tax losses to the extent that future

taxable proﬁt will be probable and unused tax cred-

its can be utilised.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 22

NOTE 2 RISK MANAGEMENT

PRINCIPLES OF RISK MANAGEMENT AND

CAPITAL ADEQUACY MANAGEMENT

POP Mortgage Bank is the mortgage bank 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.

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 (2010/599; hereinafter referred to as the

“Amalgamation Act”) and the standards, regula-

tions and guidelines issued by the Financial Su-

pervisory Authority. POP Mortgage Bank also

complies with the Act on Mortgage Banks and

Covered Bonds (151/2022).

The purpose of risk management is to ensure that

the bank does not take such risks in its operations

that would result in a material threat to the capi-

tal adequacy or solvency. 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 appetite capacity of POP Mortgage Bank.

The purpose of capital adequacy management is

to ensure the sufﬁcient amount, type and efﬁcient

use of the capital of POP Mortgage Bank. Capi-

tal is held to cover the material risks arising from

POP Mortgage Bank’s business strategy and plan

and to secure the uninterrupted operation of POP

Mortgage Bank in case of unexpected losses. The

goal is pursued through a documented and sys-

tematic capital adequacy management process

that is integrally linked to the amalgamations and

other member credit institutions’ business plan-

ning and management.

The central institution 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. The special regula-

tions related to the operations of a mortgage bank

have been taken into account in the guidance of

the central cooperative and in the steering limits

and process requirements set for the business op-

erations of POP Mortgage Bank. The bank, with-

in limits set by conﬁrmed business risk thresholds,

carries its business risks independently in its op-

erations and is liable for its capital adequacy. The

capital adequacy, liquidity coverage ratio and cus-

tomer risks of POP Mortgage Bank are supervised

both at the level of individual member institutions

and at the consolidated amalgamation level. Vio-

lations of the risk management principles are ad-

dressed in accordance with the agreed operating

models.

POP Mortgage Bank conducts an extensive iden-

tiﬁcation and evaluation of risks related to its op-

erations 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 objectives. Calculation methods deﬁned by

the central institution’s risk monitoring function

are used when preparing the capital plan.

The most signiﬁcant risks associated with POP

Mortgage Bank’s operations are credit risk, liquid-

ity risk, interest rate risk and operational risk. The

risk strategy conﬁrmed by the Board of Directors

of the central institution outlines the risk appe-

tite of the operations, within which the Board of

Directors of the POP Mortgage Bank sets its own

guidelines and restrictions. Business activities are

carried out at a moderate risk level so that the

risks can be managed in full.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 23

Risk management is an essential part of the internal

controls of POP Mortgage Bank. The purpose of in-

ternal controls is to ensure that the institution com-

plies with regulations, carries out comprehensive risk

management and operates efﬁciently and reliably.

Moreover, internal controls serve to ensure that the

objectives and goals set for different levels of the

amalgamation are achieved in accordance with in-

ternal guidelines.

ORGANISATION OF RISK AND CAPITAL

ADEQUACY MANAGEMENT

POP Mortgage Bank’s Board of Directors conﬁrms

the objectives of the business operations, guide-

lines, limits to the risk levels of the operations as well

as the risk-taking authorities. The Board of Direc-

tors is also responsible for proactive capital planning

and adapting the capital adequacy management

planning and proactive capital planning into relia-

ble governance and guidance. The Board of Directors

assesses the appropriateness, extent and reliabili-

ty of capital adequacy management. The Board of

Directors sets the target level for capital adequacy

and conﬁrms the level and structure of capital re-

quired by the risk proﬁle. The executive management

is responsible for the risk management of the dai-

ly operations within the scope of the risk limits and

risk-taking authority.

The executive management is responsible for the

practical implementation, continuous monitoring,

supervision and reporting of capital adequacy and

risk management to the Board of Directors of the

amalgamation. The executive management also en-

sures that the responsibilities, authorizations, pro-

cesses and reporting relationships related to capital

adequacy management have been clearly deﬁned

and sufﬁciently described and that the employees

are familiar with capital adequacy management and

the related processes and methods to the extent re-

quired by their duties.

POP Mortgage Bank’s independent risk monitoring is

responsible 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 assignment

of Bonum Bank’s risk monitoring function is to form

a comprehensive view of the risks included in the

bank’s operations, develop risk management meth-

ods and processes for identifying, measuring, and

monitoring risks in accordance with the principles

issued by the central institution.

The centralised 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 activities.

As the central institution, POP Bank Centre coop

supervises the sufﬁciency and functioning of the

risk management systems in all the member cred-

it institutions in accordance with section 17 of the

Amalgamation Act. In addition, the supervision of a

mortgage bank takes into account the requirements

and special features of the regulation related to the

mortgage banking business.

The principles, organisation and internal control

measures of amalgamation’s risk and capital ad-

equacy management are described in more detail

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

ments. Material information regarding capital ade-

quacy as speciﬁed in the Capital Requirements Reg-

ulation (EU575/2013) is presented in a separate Pillar

III report. Copies of the ﬁnancial statements of the

POP Bank Group are available from the ofﬁce of the

central institution, address Hevosenkenkä 3, 02600

Espoo, Finland, and online at www.poppankki.ﬁ.

CAPITAL ADEQUACY MANAGEMENT

The objective of capital adequacy management is

to ensure that POP Mortgage Bank has an adequate

capital buffer to achieve its business strategy and

to cover the material risks arising from them in all

circumstances. In solvency management, POP Mort-

gage Bank complies with the solvency manage-

ment principles set by the central cooperative of the

amalgamation.

Capital adequacy management is pursued through

a systematic capital adequacy management pro-

cess that is integrally linked to the amalgamation’s

and other member credit institutions’ business plan-

ning and management. As part of the capital ade-

quacy management process the aim is to identify all

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 24

material risks and assess their magnitude and re-

quired capital levels.

Under the supervision of the central institution, POP

Mortgage Bank prepares its own capital plan and

stress tests on an annual basis using harmonized

principles deﬁned by the central institution. The pro-

cess ensures that POP Mortgage Bank’s growth,

proﬁtability and risk-bearing capacity objectives

are appropriate and consistent.

The most signiﬁcant capital requirements of POP

Mortgage Bank arise from receivables from in-

termediary loans granted to the member banks of

the amalgamation of POP Banks. The amalgama-

tion applies the standardised approach for the cal-

culation of the capital requirement for credit risk,

and the basic indicator approach for calculating

the capital requirement to the operational risk. POP

Mortgage Bank does not engage in trading activi-

ties.

POP Mortgage Bank’s own funds consist of share

capital, retained earnings and other non-restricted

reserves, less the deductible items in accordance

with the EU’s Capital Requirements Regulation (No.

575/2013).

POP Mortgage Bank releases the essential informa-

tion in terms of capital adequacy calculation an-

nually as part of its Board of Directors’ report and

notes to the ﬁnancial statements.

BUSINESS RISKS

CREDIT RISK

POP Mortgage Bank’s most signiﬁcant risk is cred-

it and counterparty risk. Credit risk refers to a situ-

ation in which a counterparty cannot fulﬁl its con-

tractual obligations. POP Mortgage Bank’s cred-

it risk consist of intermediary loans granted to the

member banks of the amalgamation of POP Banks

and from derivatives.

POP Mortgage Bank engages in mortgage bank

operations under an intermediary loan model es-

tablished in accordance with the Act on Mortgage

Credit Banks and Covered Bonds (151/2022). Thus,

the bank may issue secured bonds and use the

acquired funds to offer intermediary loans to the

member banks of the amalgamation. Under the in-

termediary loan model, the mortgage-backed loans

provided as collateral for secured bonds remain on

the member banks’ balance sheets and are not rec-

ognised on POP Mortgage Bank’s balance sheet.

The risks associated with the mortgage-backed

loans provided as collateral are not transferred to

POP Mortgage Bank. The loans are recognised as

collateral for the secured bonds issued. The inter-

mediary loans granted to member banks are pre-

sented under “Receivables from credit institutions”

on the balance sheet.

POP Mortgage Bank is responsible for monitoring

the amount and adequacy of the eligible loan port-

folio in POP Bank Group’s mortgage banking opera-

tions. The pool eligibility of collateral is reviewed on

a daily basis, based on the criteria of the business

operations and the Act on Mortgage Credit Banks.

POP Mortgage Bank has a framework agreement

with the member credit institutions of POP Bank

Group on the issue of secured bonds and the use

of mortgage-backed loans on the balance sheets

of the member banks as collateral for the bonds

to be issued. Credit decisions, credit management

and collateral assessment are carried out locally by

the member banks, based on the guidelines issued

by the central institution. Loan collateral is prudent-

ly valued at fair value, and market valuations are

monitored regularly using both statistical models

and good industry knowledge. The valuation factors

applied to collateral are consistent across all the

member credit institutions of the amalgamation.

The amalgamation’s risk management and capital

adequacy management are described in more detail

in Note 4 to POP Bank Group’s ﬁnancial statements.

Copies of the ﬁnancial statements of POP Bank

Group are available online at www.poppankki.ﬁ/en

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

dress Hevosenkenkä 3, 02600 Espoo, Finland.

MARKET RISKS

Market risk refers to the effect of changes in inter-

est rates or other market prices on the bank’s result

and capital adequacy. The market risk classes are

interest rate, currency, equity and commodity risk.

The objective of market risk management is to iden-

tify and assess market risks related to the business

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 25

operations, mitigate the risks to an acceptable level

and timely monitoring of the risk exposures. Within

the amalgamation of POP Banks, the central insti-

tution’s Board of Directors conﬁrms the market risk

strategy and market risk management guidelines,

which create the foundation for market risk man-

agement at POP Mortgage Bank.

In accordance with the Act on Mortgage Cred-

it Banks and Covered Bonds, the business of POP

Mortgage Bank is to issue euro-denominated se-

cured bonds and to grant intermediate loans to the

member credit banks of the Amalgamation of POP

Banks. POP Mortgage Bank does not have a trading

book, and it invests its excess liquid assets as de-

posits in Bonum Bank Plc, a member of the Amalga-

mation of POP Banks.

POP Mortgage Bank does not take stock risk, com-

modity risk or currency risk in its operations. Both

the secured bonds and intermediary loans issued

are denominated in euros. In its operations, POP

Mortgage Bank uses interest rates derivatives,

where necessary, to match the interest cash ﬂows

of issued bonds and intermediary loans to reduce

the interest rate risk.

The interest rate risk is the most signiﬁcant market

risk in POP Mortgage Bank’s business operations.

Interest rate risk refers to the effect of changes in

interest rate levels on the market value or net inter-

est income of balance sheet items and off-balance

sheet items. The banking book consists of loans

and receivables from credit institutions and mar-

ket-based ﬁnancing.

Interest rate risk arises from differences in the in-

terest terms of receivables and liabilities and mis-

matches in interest rate repricing and maturity

dates. The objective of interest rate risk manage-

ment is to stabilise the interest rate risk involved in

the bank’s balance sheet to a level at which the ef-

fect of open risk is minor in all circumstances and

meet the regulatory requirements set for mortgage

banks as well as stricter internal risk limits. Interest

rate risk is managed primarily by planning the bal-

ance sheet structure, such as the interest rate ﬁx-

ing or maturity of assets and liabilities or alterna-

tively by using interest rate derivatives for hedging

purposes. The information on the derivatives have

been disclosed in note 16 derivatives and hedge ac-

counting.

Interest rate risk in POP Mortgage Bank is monitored

using the net present value method and the net in-

terest income model. The net present value method

measures how changes in interest rates change the

calculated market value of balance sheet items. In

the net present value method, the market values of

each balance sheet item are expected to be formed

as the present value of the cash ﬂows generated

by the instrument in question. The net interest in-

come model predicts the future net interest income

as market interest rates change. The net interest in-

come forecast is calculated at the reporting date

using forward interest rates available in the market

for the following 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 INTEREST RATE SENSITIVITY ANALYSIS OF THE BANKING BOOK

Impact to interest margin 31 Dec 2023 31 Dec 2022

(EUR 1,000) Change 1-12 mo. 1-12 mo.

Interest rate risk +1% -point -65 34

Interest rate risk -1% -point 65 -34

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 down-

ward parallel interest rate level shift. The effect on

own funds has been determined through present

value change in balance sheet with the same in-

terest rate shocks.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 26

LIQUIDITY RISKS

Liquidity risk refers to POP Mortgage Bank’s abil-

ity 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 difﬁculty fulﬁl its liabilities to pay. Struc-

tural ﬁnancing risk refers to a reﬁnancing risk that

arises from the difference in the maturities of bal-

ance sheet receivables and liabilities.

The central institution of amalgamation applies

a permission by the Finnish Financial Superviso-

ry Authority to decide that the requirements laid

down in the sixth part of the EU Capital Require-

ments Regulation and EU’s statutory orders based

on the Regulation are not applied to its member

credit institutions. According to the permission,

the regulatory requirements for liquidity risk are

met at the amalgamation level only. The central

credit institution, Bonum Bank Plc, is responsible

for meeting the regulatory requirements.

Bonum Bank as the central credit institution is re-

sponsible for coordinating the implementation of

the liquidity strategy at the amalgamation level,

and it monitors and supervises the liquidity strat-

egy implemented by the member credit institu-

tions. The central credit institution coordinates

the payment transactions of the member cred-

it 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 liquidity risk.

MATURITY OF FINANCIAL LIABILITIES 31 DEC 2023

(EUR 1,000)

Less than

3 months

3-12

months

1-5

years

Over

5 years

Total

Debt securities issued to the

public

- - 503,259 - 503,259

Derivatives - - 2,863 - 2,863

Total

- - 506,123 - 506,123

MATURITY OF FINANCIAL LIABILITIES 31 DEC 2022

(EUR 1,000)

Less than

3 months

3-12

months

1-5

years

Over

5 years

Total

Debt securities issued to the

public

- - 243,038 - 243,038

Derivatives - - 6,520 - 6,520

Total

- - 249,558 - 249,558

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. The operational risk of POP Mortgage

Bank also arises from outsourced operations and

major business projects.

The objective of the management of operation-

al risks is to identify essential operational risks in

the business operations and minimise their ma-

terialisation and effects. The objective is pursued

by continuous personnel development, as well as

comprehensive operating instructions and internal

control measures, such as by segregating prepa-

ration, decision-making, implementation and con-

trol from each other, whenever possible.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 27

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 the com-

pliance and risk control function. The bank carries

out annual self-assessment of operational risks

on the basis of the risk assessments it performs, in

which the monitoring of operational risk incidents

is applied. Some of the losses caused by opera-

tional risks are hedged through insurance. Risks

caused by malfunctions of information systems

are prepared for by continuity planning.

Operational risks are monitored by collecting in-

formation on operational risk events, ﬁnancial

losses and any malpractices encountered. The ex-

ecutive management utilises reporting produced

by internal control on compliance with instructions

and information on changes in the operating envi-

ronment.

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.

In accordance with the strategic objectives speci-

ﬁed in the business plan, POP Mortgage Bank must

be able to secure the long-term funding needed

by the banks within the amalgamation. Potential

strategic threats have been considered when esti-

mating capital needs.

POP Mortgage Bank aims to minimise strategic

risks by means of regular updates of its strategic

and annual plans. Analyses of the condition and

development of POP Bank Group, as well as other

analyses and estimates concerning the develop-

ment of the sector, competition and ﬁnancial op-

erating environment are utilized in the planning.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 28

NOTE 3 INTEREST INCOME AND EXPENSES

NOTE 4 NET INCOME FROM HEDGE ACCOUNTING

NOTE 5 PERSONNEL EXPENSES

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

Interest income

Loans and receivables to credit institutions 17,631 1,344

Hedging derivatives 12,788 1,872

Total interest income 30,419 3,216

Interest expenses

Liabilities to credit institutions -20 -

Debt securities issued to the public

-12,964 -1,830

Hedging derivatives -16,223 -1,047

Other interest expenses 0 -

Total interest expenses -29,207 -2,878

Net interest income 1,212 339

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

Change in hedging instruments' fair value 10,602 -6,520

Change in hedged items' fair value -10,777 6,452

Net income from hedge accounting -176 -69

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

Wages and salaries -23 -25

Total personnel expenses -23 -25

The personnel costs consist of administrative fees. POP Mortgage Bank does not have personnel.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 29

NOTE 6 OTHER OPERATING EXPENSES

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

Purchased services -514 -905

ICT expenses -266 -470

Audit fees -20 -20

Other operating expenses -34 -162

Total other operating expenses -835 -1,557

Audit fees

Statutory audit -20 -20

Total audit fees -20 -20

NOTE 7 DEPRECIATION

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

Intangible assets -116 -68

Total depreciation -116 -68

NOTE 8 INCOME TAX

(EUR 1,000) 1 Jan - 31 Dec 2023 2 Sep - 31 Dec 2022

Proﬁt before tax 63 -1,379

Income tax rate 20% 20%

Tax calculated at the tax rate -13 276

+ Use of tax losses carried forward from previous years

13 -

- Deferred tax assets not recognised on losses - -276

Tax expense in the income statement - -

POP Mortgage Bank has reported negative results in previous ﬁscal years, but, in accordance with the

prudence principle, no deferred tax assets have been recognized for these losses. The bank has tax-ap-

proved losses totaling EUR 2,145 (2,158) thousand after deducting the ﬁscal year's result. As a result of

loss utilization, income taxes are not presented in the income statement.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 30

Financial assets (EUR 1,000) 1 Jan - 31 Dec 2023 2 Sep - 31 Dec 2022

At amortised cost

Interest income 17,631 1,344

Total 17,631 1,344

NOTE 9 NET INCOME AND EXPENSES OF FINANCIAL ASSETS AND

FINANCIAL LIABILITIES BY MEASUREMENT CATEGORY

Financial liabilities (EUR 1,000) 1 Jan - 31 Dec 2023 2 Sep - 31 Dec 2022

At amortised cost

Interest and expenses -12,984 -1,830

Total -12,984 -1,830

At fair value through proﬁt or loss

Derivatives

Fair value gains and losses -176 -69

Interest income and expenses -3,434 825

Total -3,610 756

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 31

FINANCIAL ASSETS 31 DEC 2023

(EUR 1,000)

Measured at

amortised

cost

At fair value

through

profit or loss

Measured

at fair value

through

other com-

prehensive

income

Total

carrying

amount

Loans and receivables to credit

institutions

526,280 - - 526,280

Derivative contracts - 6,945 - 6,945

Financial assets total 526,280 6,945 - 533,225

Other assets 11,085

Total assets 544,310

NOTE 10 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

FINANCIAL ASSETS 31 DECEMBER 2022

(1 000 euroa)

Measured at

amortised

cost

At fair value

through

profit or loss

Measured

at fair value

through

other com-

prehensive

income

Total

carrying

amount

Loans and receivables to credit

institutions

265,784 - - 265,784

Financial assets total 265,784 - - 265,784

Other assets 2,547

Total assets 268,332

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 32

FINANCIAL LIABILITIES 31 DEC 2023

(EUR 1,000)

Measured at

amortised cost

At fair value

through profit

or loss

Total

carrying

amount

Liabilities to credit institutions 10,650 - 10,650

Debt securities issued to the public 503,259 - 503,259

Derivative contracts - 2,863 2,863

Financial liabilities total 513,909 2,863 516,773

Other liabilities 10,682

Total liabilities 527,455

FINANCIAL LIABILITIES 31 DECEMBER 2022

(EUR 1,000)

Measured at

amortised cost

At fair value

through profit

or loss

Total

carrying

amount

Debt securities issued to the public 243,038 - 243,038

Derivative contracts - 6,520 6,520

Financial liabilities total 243,038 6,520 249,558

Other liabilities 1,981

Total liabilities 251,539

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 33

NOTE 11 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

AND FAIR VALUES BY VALUATION TECHNIQUE

FINANCIAL ASSETS MEASURED AT FAIR VALUE 31 DEC 2023

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

Total fair

value

Carrying

amount

Derivatives - 6,945 - 6,945 6,945

Total - 6,945 - 6,945 6,945

FINANCIAL LIABILITIES MEASURED AT FAIR VALUE 31 DEC 2023

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

Total fair

value

Carrying

amount

Derivatives - 2,863 - 2,863 2,863

Total - 2,863 - 2,863 2,863

FINANCIAL LIABILITIES MEASURED AT FAIR VALUE 31 DEC 2022

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

Total fair

value

Carrying

amount

Derivatives - 6,520 - 6,520 6,520

Total - 6,520 - 6,520 6,520

FAIR VALUE HIERARCHY LEVELS OF ITEMS RECURRENTLY RECOGNISED AT FAIR VALUE

POP Mortgage Bank had no ﬁnancial assets measured at fair value on 31 Dec 2022.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 34

LIABILITIES MEASURED AT AMORTISED COST 31 DECEMBER 2023

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

Total fair

value

Carrying

amount

Debt securities issued

to the public

- 498,934 - 498,934 498,934

Total - 498,934 - 498,934 498,934

ASSETS MEASURED AT AMORTISED COST 31 DECEMBER 2022

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

Total fair

value

Carrying

amount

Loans and receivables

to credit institutions

- 265,784 - 265,784 265,784

Total - 265,784 - 265,784 265,784

LIABILITIES MEASURED AT AMORTISED COST 31 DECEMBER 2022

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

Total fair

value

Carrying

amount

Debt securities issued

to the public

- 249,490 - 249,490 249,490

Total - 249,490 - 249,490 249,490

ASSETS MEASURED AT AMORTISED COST 31 DECEMBER 2023

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

Total fair

value

Carrying

amount

Loans and receivables

to credit institutions

- 526,280 - 526,280 526,280

Total - 526,280 - 526,280 526,280

FAIR VALUE HIERARCHY LEVELS OF ITEMS RECOGNISED AT AMORTISED COST

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 35

FAIR VALUE DETERMINATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets and liabilities are recognised in balance sheet at fair value or amortised cost. Classiﬁ-

cation and valuation of ﬁnancial instruments are described in more detail in Note 1 Accounting policies.

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 that are not measured using market quotations

or values determined on the basis of observable market prices using measurement techniques or mod-

els. 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 party.

TRANSFERS BETWEEN FAIR VALUE HIERARCHY LEVELS

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. There were no transfers

between levels during the reporting period.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 36

NOTE 12 LOANS AND RECEIVABLES TO CREDIT INSTITUTIONS

NOTE 13 INTANGIBLE ASSETS

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

Deposits

Repayable on demand 13,080 1,284

Other 13,200 14,500

Intermediary loans 500,000 250,000

Total 526,280 265,784

CHANGES IN INTANGIBLE ASSETS 2023

(EUR 1,000)

Information

systems

Incomplete

intangible assets

Total

Acquisition cost 1 January 582 - 582

Acquisition cost 31 December 582 - 582

Accumulated depreciation and

impairment 1 January

-68 - -68

- Depreciation -116 - -116

Accumulated depreciation and

impairment 31 December

-184 - -184

Carrying amount 1 January 514 - 514

Carrying amount 31 December 398 - 398

CHANGES IN INTANGIBLE ASSETS 2022

(EUR 1,000)

Information

systems

Incomplete

intangible assets

Total

Acquisition cost 1 January - 539 539

+ Increases - 43 43

+/- Transfers 582 -582 -

Acquisition cost 31 December 582 - 582

Accumulated depreciation and

impairment 1 January

- - -

- Depreciation -68 - -68

Accumulated depreciation and

impairment 31 December

-68 - -68

Carrying amount 1 January - 539 539

Carrying amount 31 December 514 - 582

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 37

NOTE 14 OTHER ASSETS

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

Accrued income and prepaid expenses

Interest 10,602 2,014

Other 86 19

Other assets total 10,687 2,033

NOTE 15 DEBT SECURITIES ISSUED TO THE PUBLIC

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

Covered bonds 503,259 243,038

Total debt securities issued to the public 503,259 243,038

DEBT SECURITIES ISSUED TO THE PUBLIC (EUR 1,000)

Bond Issue date Due date Interest Nominal Currency

POPA 22092025 22 Sep 2022 22 Sep 2025 2.625% / ﬁxed 250,000 EUR

POPA 26042028 26 Apr 2023 26 Apr 2028 3.625% / ﬁxed 250,000 EUR

DEBT SECURITIES PRESENTED IN CASH FLOW RECONCILIATION TO BALANCE SHEET

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

Balance sheet 1 Jan 243,038 -

Increase of bonds 249,203 249,490

Total changes of cash ﬂow of ﬁnancial activities 249,203 249,490

Valuations and accrued interests 11,019 -6,452

Balance sheet 31 Dec 503,259 243,038

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 38

NOTE 16 DERIVATIVES AND HEDGE ACCOUNTING

POP Mortgage Bank hedges its interest rate risk against changes in fair value, primarily using interest

rate swaps. Hedge accounting is applied for value hedging. The hedged instrument of fair value hedging

is ﬁxed-rate bonds issued.

31 DEC 2023 Nominal value / remaining maturity Fair value

(EUR 1,000)

Less than

1 year

1-5

years

More than

5 years Total Assets Liabilities

Hedging derivative

contracts

Fair value hedging

Interest rate derivatives

- 500,000 - 500,000 6,945 2,863

Derivatives total - 500,000 - 500,000 6,945 2,863

31 DEC 2022 Nominal value / remaining maturity Fair value

(EUR 1,000)

Less than

1 year

1-5

years

More than

5 years Total Assets Liabilities

Hedging derivative

contracts

Fair value hedging

Interest rate derivatives - 250,000 - 250,000 - 6,520

Derivatives total - 250,000 - 250,000 - 6,520

NOMINAL VALUES OF UNDERLYING ASSETS AND FAIR VALUES OF DERIVATIVES

The nominal value of the ﬁxed-rate bond subject to fair value hedging at the end of reporting period was

EUR 500 million. This item is included on the balance sheet under “ debt securities issued to the pub-

lic “. The nominal values of derivative instruments correspond to the nominal values of the objects to be

hedged.

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

Liabilities

Carrying amount of hedged debt securities issued to the public 503,259 243,038

of which the accrued amount of hedge adjustments 4,326 -6,452

EFFECTS OF HEDGE ACCOUNTING ON FINANCIAL POSITION AND RESULT

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 39

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

Master

agreements

Financial

instruments

held as

collateral

Cash

held as

collateral Net amount

Assets

Derivatives 14,903 - 14,903 5,219 10,650 - -

Total 14,903 - 14,903 5,219 10,650 - -

Liabilities

Derivatives 5,219 - 5,219 5,219 - - -

Total 5,219 - 5,219 5,219 - - -

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 40

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

Accrued expenses

Interest payable -10,314 -1,933

Other accrued expenses -368 -48

Total other liabilities -10,682 -1,981

NOTE 17 OTHER LIABILITIES

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

Share capital 10,000 10,000

Reserve for invested non-restricted equity 9,000 9,000

Retained earnings

Proﬁt (loss) for previous ﬁnancial years -2,207 -828

Proﬁt (loss) for the period 63 -1,379

Total equity 16,855 16,793

NOTE 18 EQUITY CAPITAL

SHARE CAPITAL

POP Mortgage Bank has one class of shares, and

each share has one vote and equal rights to div-

idend. Shares have no nominal value. All issued

shares have been fully paid. The total number of

shares issued is 500.

There are no restrictions on the use of equity

items.

The share subscription price received in connec-

tion with the share issues is entered in share cap-

ital to the extent that it has not been recorded in

the invested unrestricted equity reserve according

to the share issue decision.

INVESTED UNRESTRICTED EQUITY RESERVE

The invested unrestricted equity reserve includes

the subscription price of shares to the extent that

it has not been recorded in share capital accord-

ing to speciﬁc resolution.

RETAINED EARNINGS

Retained earnings are earnings accrued in previ-

ous ﬁnancial years that have not been transferred

to equity reserves or distributed to shareholders.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 41

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

Given on behalf of own liabilities and commitments

Mortgage-backed loan portfolio* 682,731 330,791

Other - 1,500

Total collateral given 682,731 332,291

Collateral received

Collaterals received from POP Banks* 676,731 330,791

Other 10,650 -

Total collateral received 687,381 330,791

NOTE 19 COLLATERAL GIVEN AND RECEIVED

*The collateral provided and received by POP Mortgage Bank is related to secured bonds issued under the

EUR 1 billion issuance programme established in September 2022 and to the interim loans based on it. The

collateral given and received consists of loans secured by real estate.

Other collateral is related to derivatives and are collateral given and received in cash.

NOTE 20 DISTRIBUTABLE FUNDS

DISTRIBUTABLE FUNDS

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

Proﬁt (loss) for the period 63 -1,379

Proﬁt (loss) for previous ﬁnancial years -2,207 -828

Reserve for invested non-restricted equity 9,000 9,000

Distributable funds total 6,855 6,793

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 42

NOTE 21 RELATED PARTY DISCLOSURES

The related parties of POP Mortgage 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 POP

Mortgage Bank’s parent entity POP Bank 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 manage-

ment and/or members of their immediate families have control or joint control. Also entities in the same

group with POP Mortgage Bank belong to the related parties.

Other

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

Assets

Loans 20,630 15,784

Liabilities

Debt securities issued to the public 8,000 -

Income statement

Income statement 145 65

Other operating expenses 171 227

BUSINESS TRANSACTIONS WITH RELATED PARTY KEY PERSONS

Salaries and remuneration

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

Juha Niemelä, Chairman of the Board 8 9

Matti Vainionpää, Vice Chairman of the Board 8 9

Marja Pajulahti, Member of the Board 8 8

Total 23 25

COMPENSATION TO MEMMBERS OF THE BOARD

NOTE 22 EVENTS AFTER THE CLOSING DATE

POP Mortgage Bank’s Board of Directors is not aware of other events having taken place after the clos-

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

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2023

FINANCIAL STATEMENT 43

SIGNATURES TO THE FINANCIAL STATEMENTS AND BOARD OF

DIRECTORS’ REPORT

Espoo, February 15th, 2024

Board of Directors of POP Mortgage Bank

Auditor’s note

A report on the audit performed has been issued today.

Espoo, February 15th, 2024

KPMG Oy Ab

Tiia Kataja

APA

Juha Niemelä

Chairman of the Board

Marja Pajulahti

Member of the Board

Timo Hulkko

CEO

Matti Vainionpää

Vice Chairman of the Board

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

AUDITOR’S REPORT

To the Annual General Meeting of POP Mortgage

Bank Plc

REPORT ON THE AUDIT OF THE FINANCIAL

STATEMENTS

OPINION

We have audited the ﬁnancial statements of

POP Mortgage Bank Plc (business identity code

3236645-3) for the year ended 31 December 2023.

The ﬁnancial statements comprise balance sheet,

income statement, statement of changes in equi-

ty, cash ﬂow statement and notes, including a ma-

terial accounting policy information.

In our opinion the ﬁnancial statements give a true

and fair view of the bank’s ﬁnancial performance

and ﬁnancial position and cash ﬂows in accord-

ance with IFRS Accounting Standards as adopted

by the EU and comply with statutory requirements.

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 only provided audit services to the POP

Mortgage Bank Plc.

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 re-

port is legally binding.

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

THE KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED

IN THE AUDIT

Receivables from credit institutions, Debt securities issued to the public (accounting policies, notes

10, 11, 12, 15 and 19 to ﬁnancial statements)

● Receivables from credit institutions, EUR

526 million, and Debt securities issued to

the public, EUR 503 million, are signiﬁcant

items on the POP Mortgage Bank’s balance

sheet. Receivables from credit institutions

mainly include intermediary loans issued to

POP Bank Group’s member banks, and Debt

securities issued to the public comprise co-

vered bonds.

● In the intermediary loan model, POP Mort-

gage Bank issues covered bonds and pro-

vides POP banks with intermediary loans

against property mortgages. The mortga-

ge-backed loans included in the cover pool

constituting the collateral for the covered

bonds are recorded on the balance sheets

of POP banks.

● POP Mortgage Bank manages the bond re-

gister, which includes not only bonds but

also collaterals given and received, as well

as intermediary loans. The company is res-

ponsible for ensuring that the collaterals

comply with the regulatory requirements at

all times.

● Due to the signiﬁcance of the carrying

amounts of Receivables from credit institu-

tions and Debt securities issued to the pub-

lic, the regulatory requirements for the in-

termediary loan process, Receivables from

credit institutions and Debt securities is-

sued to the public are addressed as a key

audit matter.

● We evaluated the intermediary loan process

of POP Mortgage Bank, including provision

of loans to POP banks, collateral manage-

ment for intermediary loans (cover pool) and

bond register management.

● We gained an understanding of POP Bank

Centre coop’s control environment for the

centralised lending process regarding POP

banks by performing centralised audit

procedures.

● The main areas of the audit were the asses-

sment of the monitoring process of collate-

ral valuations for covered bonds using da-

ta analyses, and inspection of intermediary

loan contracts on a sample basis.

● Furthermore, we considered the appropria-

teness of the notes provided by POP Mor-

tgage Bank in respect of Receivables from

credit institutions and Debt securities is-

sued to the public.

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 comply with statutory re-

quirements. The Board of Directors and the Man-

aging Director are also responsible for such inter-

nal control as they determine is necessary to en-

able the preparation of ﬁnancial statements that

are free from material misstatement, whether due

to fraud or error.

In preparing the ﬁnancial statements, the Board of

Directors and the Managing Director are 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

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

of accounting unless there is an intention to liqui-

date the company or cease operations, or there is

no realistic alternative 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

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.

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

OTHER REPORTING REQUIREMENTS

INFORMATION ON OUR AUDIT ENGAGEMENT

We were ﬁrst appointed as auditors by the Annu-

al General Meeting in 2021 and our appointment

represents a total period of uninterrupted engage-

ment of 3 years.

OTHER INFORMATION

The Board of Directors and the Managing Director

are responsible for the other information. The other

information comprises the report of the Board of

Directors.

Our opinion on the ﬁnancial statements does not

cover the other information.

In connection with our audit of the ﬁnancial state-

ments, our responsibility is to read the other infor-

mation and, in doing so, consider whether the oth-

er information is materially inconsistent with the

ﬁnancial statements or our knowledge obtained

in the audit, or otherwise appears to be materially

misstated. Our responsibility also includes consid-

ering whether the report of the Board of Directors

has been prepared in accordance with the appli-

cable laws and regulations.

In our opinion, the information in the report of the

Board of Directors is consistent with the informa-

tion in the ﬁnancial statements and the report of

the Board of Directors has been prepared in ac-

cordance with the applicable laws and regulations.

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, 15 February 2024

KPMG OY AB

Tiia Kataja

Authorised Public Accountant, KHT