549300TK038P6EV4YU51 2021-01-01 2021-12-31 549300TK038P6EV4YU51 2022-01-01 2022-12-31 549300TK038P6EV4YU51 2022-12-31 549300TK038P6EV4YU51 2022-12-31 ifrs-full:IssuedCapitalMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:IssuedCapitalMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:SharePremiumMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:SharePremiumMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:TreasurySharesMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:TreasurySharesMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:CapitalReserveMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:CapitalReserveMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:StatutoryReserveMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:StatutoryReserveMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:OtherEquityInterestMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:OtherEquityInterestMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:RetainedEarningsMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:RetainedEarningsMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:NoncontrollingInterestsMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:NoncontrollingInterestsMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:IssuedCapitalMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:SharePremiumMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:TreasurySharesMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:CapitalReserveMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:StatutoryReserveMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:OtherEquityInterestMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:RetainedEarningsMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300TK038P6EV4YU51 2020-12-31 ifrs-full:NoncontrollingInterestsMember 549300TK038P6EV4YU51 2020-12-31 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:IssuedCapitalMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:SharePremiumMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:TreasurySharesMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:CapitalReserveMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:StatutoryReserveMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:OtherEquityInterestMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:RetainedEarningsMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:NoncontrollingInterestsMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:IssuedCapitalMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:SharePremiumMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:TreasurySharesMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:CapitalReserveMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:ReserveOfGainsAndLossesOnFinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncomeMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:StatutoryReserveMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:OtherEquityInterestMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:RetainedEarningsMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:EquityAttributableToOwnersOfParentMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:NoncontrollingInterestsMember 549300TK038P6EV4YU51 2021-12-31 549300TK038P6EV4YU51 2020-12-31 ifrs-full:CapitalRedemptionReserveMember 549300TK038P6EV4YU51 2021-01-01 2021-12-31 ifrs-full:CapitalRedemptionReserveMember 549300TK038P6EV4YU51 2021-12-31 ifrs-full:CapitalRedemptionReserveMember 549300TK038P6EV4YU51 2022-01-01 2022-12-31 ifrs-full:CapitalRedemptionReserveMember 549300TK038P6EV4YU51 2022-12-31 ifrs-full:CapitalRedemptionReserveMember iso4217:EUR iso4217:EUR xbrli:shares
Tilžės 149, LT-76348 Šiauliai
Tel. (8 41) 595 607, faks. (8 41) 430 774
El. paštas info@sb.lt
www.sb.lt
FINANCIAL STATEMENTS AND
ANNUAL REPORT
31 December 2022
CONTENTS
2
FINANCIAL STATEMENTS ...................................................................................................................................................4
THE GROUP’S AND THE BANK’S INCOME STATEMENTS..............................................................................................5
THE GROUP’S AND THE BANK’S STATEMENTS OF COMPREHENSIVE INCOME .......................................................6
THE GROUP’S AND THE BANK’S STATEMENTS OF FINANCIAL POSITION .................................................................7
THE GROUP’S STATEMENT OF CHANGES IN EQUITY ..................................................................................................8
THE BANK’S STATEMENT OF CHANGES IN EQUITY......................................................................................................9
THE GROUP’S AND THE BANK’S STATEMENTS OF CASH FLOWS ............................................................................10
GENERAL INFORMATION................................................................................................................................................11
ACCOUNTING POLICIES .................................................................................................................................................12
FINANCIAL RISK MANAGEMENT ....................................................................................................................................23
1. Credit risk ...................................................................................................................................................................24
2. Market risk .................................................................................................................................................................52
3. Liquidity risk ...............................................................................................................................................................59
4. Fair value of financial assets and liabilities................................................................................................................64
5. The risk inherent in insurance activities.....................................................................................................................69
6. Operational risk..........................................................................................................................................................71
7. IT risk .........................................................................................................................................................................72
8. Compliance risk .........................................................................................................................................................72
9. Model risk...................................................................................................................................................................72
10. ESG risk...................................................................................................................................................................72
11. Stress tests ..............................................................................................................................................................73
12. Capital management................................................................................................................................................73
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS..........................................................................................73
SEGMENT INFORMATION ...............................................................................................................................................75
NOTE 1
NET INTEREST INCOME ...................................................................................................................................77
NOTE 2
NET FEE AND COMMISSION INCOME .............................................................................................................77
NOTE 3
NET GAIN FROM TRADING ACTIVITIES ..........................................................................................................78
NOTE 4
OTHER OPERATING EXPENSES .....................................................................................................................79
NOTE 5 REVENUE AND EXPENSES RELATED TO INSURANCE ACTIVITIES .............................................................79
NOTE 6
OTHER INCOME.................................................................................................................................................80
NOTE 7
IMPAIRMENT LOSSES ......................................................................................................................................81
NOTE 8
INCOME TAX ......................................................................................................................................................82
NOTE 9
EARNINGS PER SHARE ....................................................................................................................................83
NOTE 10
CASH AND CASH EQUIVALENTS ...................................................................................................................84
NOTE 11 DUE FROM OTHER BANKS..............................................................................................................................86
NOTE 12
FINANCIAL ASSETS AND LIABILITIES IN THE TRADING BOOK ..................................................................86
NOTE 13
LOANS TO CUSTOMERS ................................................................................................................................89
NOTE 14
FINANCE LEASE RECEIVABLES ..................................................................................................................103
NOTE 15
INVESTMENT SECURITIES...........................................................................................................................107
NOTE 16
INVESTMENTS IN SUBSIDIARIES ................................................................................................................110
NOTE 17
INTANGIBLE ASSETS....................................................................................................................................111
NOTE 18
PROPERTY, PLANT AND EQUIPMENT ........................................................................................................112
NOTE 19
OTHER ASSETS.............................................................................................................................................115
NOTE 20
DUE TO OTHER BANKS AND FINANCIAL INSTITUTIONS ..........................................................................116
NOTE 21
DUE TO CUSTOMERS ...................................................................................................................................117
NOTE 22
SPECIAL AND LENDING FUNDS...................................................................................................................117
NOTE 23
DEBT SECURITIES IN ISSUE ........................................................................................................................118
NOTE 24
LIABILITIES RELATED TO INSURANCE ACTIVITIES...................................................................................118
NOTE 25
OTHER LIABILITIES .......................................................................................................................................119
NOTE 26
INVESTMENT PROPERTY ............................................................................................................................120
NOTE 27
CAPITAL .........................................................................................................................................................121
NOTE 28
CONTINGENT LIABILITIES AND COMMITMENTS .......................................................................................122
NOTE 28
CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)...................................................................123
NOTE 29
DIVIDENDS.....................................................................................................................................................123
NOTE 30
RELATED-PARTY TRANSACTIONS .............................................................................................................123
NOTE 31
FINANCIAL GROUP INFORMATION .............................................................................................................126
NOTE 32
EVENTS AFTER BALANCE SHEET DATE ....................................................................................................129
CONSOLIDATED ANNUAL REPORT FOR 2022 .............................................................................................................130
CONTENTS
3
ANNUAL ACTIVITY RESULTS........................................................................................................................................131
REGARDING INVASION OF RUSSIA TO UKRAINE ......................................................................................................133
RATINGS .........................................................................................................................................................................134
RISK MANAGEMENT, COMPLIANCE WITH PRUDENTIAL REQUIREMENTS ............................................................134
ACTIVITY PLANS AND FORECASTS.............................................................................................................................135
AUTHORIZED CAPITAL, SHAREHOLDERS..................................................................................................................135
DIVIDENDS .....................................................................................................................................................................137
AGREEMENTS WITH SECURITIES
PUBLIC TRADING INTERMEDIARIES................................................................137
MANAGEMENT OF THE BANK ......................................................................................................................................138
THE COMMITTEES FORMED WITHIN THE BANK,
AREAS OF THEIR ACTIVITIES ...................................................140
INTERNAL CONTROL ASSESSMENT ...........................................................................................................................141
EXTERNAL AUDIT ..........................................................................................................................................................141
EMPLOYEES...................................................................................................................................................................141
REMUNERATION POLICY..............................................................................................................................................146
MAIN INVESTMENTS DURING
THE REPORTING PERIOD ........................................................................................153
COMPANIES COMPRISING GROUP .............................................................................................................................153
OTHER INFORMATION, PUBLISHED
INFORMATION AND MAJOR EVENTS............................................................154
ANNEXES........................................................................................................................................................................154
SOCIAL RESPONSIBILITY REPORT FOR 2022..............................................................................................................154
REPORT ON THE BANK’S CORPORATE GOVERNANCE FOR 2022...........................................................................155
REMUNERATION REPORT FOR 2022.............................................................................................................................178
REMUNERATION OF MEMBERS OF THE SUPERVISORY BODY...............................................................................180
REMUNERATION OF MEMBERS
OF THE MANAGEMENT BODY ..............................................................................181
CHANGES IN
THE BANK’S RESULTS AND AVERAGE REMUNERATION AMOUNT .....................................................183
CONFIRMATION FROM THE RESPONSIBLE PERSONS ..............................................................................................184
FINANCIAL STATEMENTS
31 December 2022
Tilžės 149, LT-76348 Šiauliai
Tel. (8 41) 595 607, fax (8 41) 430 774
E-mail info@sb.lt
www.sb.lt
FINANCIAL STATEMENTS 31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
5
THE GROUP’S AND THE BANK’S INCOME STATEMENTS
Year ended
31 December 2022
31 December 2021
Notes
Group
Bank
Group
Bank
Continuing operations
Interest income calculated using the effective interest method
1
107,650
92,845
83,035
69,951
Other similar income
1
12,041
11,878
8,861
8,719
Interest expense and similar charges
1
(12,910)
(12,918)
(10,979)
(10,972)
Net interest income
106,781
91,805
80,917
67,698
Fee and commission income
2
26,295
27,239
24,617
25,193
Fee and commission expense
2
(7,593)
(7,409)
(7,457)
(7,239)
Net fee and commission income
18,702
19,830
17,160
17,954
Net gain from trading activities
3
4,354
8,973
11,936
9,188
Net gain (loss) from derecognition of financial assets
6
1,034
254
4,363
2,729
Net gain (loss) from disposal of tangible assets
6
810
514
3,736
66
Revenue related to insurance activities
5
9,298
-
8,137
-
Other operating income
6
1,658
1,496
1,310
1,136
Salaries and related expenses
(31,583)
(27,773)
(27,105)
(23,640)
Depreciation and amortization expenses
(4,848)
(4,403)
(4,440)
(3,972)
Expenses related to insurance activities
5
(2,763)
-
(8,032)
-
Other operating expenses
4
(21,968)
(17,095)
(16,643)
(12,268)
Operating profit before impairment losses
81,475
73,601
71,339
58,891
Allowance for impairment losses
on loans and finance lease receivables
7
(5,409)
(3,691)
(4,354)
(973)
(Allowance for)/ reversal of allowance for impairment losses on other
assets
7
464
(1)
277
(1)
Allowance for impairment losses on investments in subsidiaries
7, 16
-
-
-
-
Share of the profit or loss of investments in subsidiaries accounted for
using the equity method
16
-
5,373
-
8,830
Profit from continuing operations before income tax
76,530
75,282
67,262
66,747
Income tax expense
8
(12,916)
(11,703)
(12,039)
(10,742)
Net profit from continuing operations for the year
63,614
63,579
55,223
56,005
Profit (loss) from discontinued operations, net of tax
-
-
-
-
Net profit for the year
63,614
63,579
55,223
56,005
Net profit attributable to:
Owners of the Bank
63,614
63,579
55,223
56,005
From continuing operations
63,614
63,579
55,223
56,005
From discontinued operations
-
-
-
-
Non-controlling interest
-
-
-
-
Basic earnings per share (in EUR per share) attributable to owners of
the Bank
9
0.11
0.09
From continuing operations
0.11
0.09
From discontinued operations
-
-
Diluted earnings per share (in EUR per share) attributable to owners of
the Bank
9
0.11
0.09
From continuing operations
0.11
0.09
From discontinued operations
-
-
Chief Executive Officer Vytautas Sinius
Chief Financial Officer Donatas Savickas
6 March 2023
The accounting policies and notes on pages 11 to 129 constitute an integral part of these financial statements.
FINANCIAL STATEMENTS 31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
6
THE GROUP’S AND THE BANK’S STATEMENTS OF COMPREHENSIVE INCOME
Chief Executive Officer Vytautas Sinius
Chief Financial Officer Donatas Savickas
6 March 2023
The accounting policies and notes on pages 11 to 129 constitute an integral part of these financial statements.
Year ended
31 December 2022
31 December 2021
Notes
Group
Bank
Group
Bank
Net profit for the year
63,614
63,579
55,223
56,005
Other comprehensive income (loss):
Items that may be subsequently reclassified to profit or loss:
Financial assets valuation gains (losses) taken to other comprehensive
income
15
(9,554)
(9,554)
(1,026)
(1,027)
Financial assets valuation result transferred to profit or loss
15
161
161
(185)
(185)
Deferred income tax on gain (loss) from revaluation of financial assets
8, 15
1,879
1,879
240
240
Items that may not be subsequently reclassified to profit or loss:
Fair value changes of financial liabilities at fair value through profit or loss
attributable to changes in their credit risk
-
-
-
-
Other comprehensive income (loss), net of deferred tax
(7,514)
(7,514)
(971)
(972)
Total comprehensive income for the year
56,100
56,065
54,252
55,033
Total comprehensive income attributable to:
Owners of the Bank
56,100
56,065
54,252
55,033
Non-controlling interest
-
-
-
-
56,100
56,065
54,252
55,033
FINANCIAL STATEMENTS 31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
7
THE GROUP’S AND THE BANK’S STATEMENTS OF FINANCIAL POSITION
31 December 2022
31 December 2021
Notes
Group
Bank
Group
Bank
ASSETS
Cash and cash equivalents
10
384,758
383,518
965,723
964,849
Securities in the trading book
12
58,301
27,287
48,181
15,099
Due from other banks
11
2,733
2,733
1,196
1,196
Derivative financial instruments
12
897
897
2,121
2,121
Loans to customers
13
2,391,629
2,370,762
1,908,681
1,889,629
Finance lease receivables
14
242,448
242,192
195,174
194,909
Investment securities at fair value
15
90,225
90,225
82,988
82,951
Investment securities at amortized cost
15
969,033
956,332
705,398
692,226
Investments in subsidiaries and associates
16
100
31,441
-
31,668
Intangible assets
17
8,283
6,450
4,834
3,114
Property, plant and equipment
18
16,151
15,525
14,760
14,118
Investment property
26
1,827
-
2,229
344
Current income tax prepayment
6
-
847
820
Deferred income tax asset
8
5,659
5,234
1,593
1,250
Other financial assets
19
5,815
5,620
16,398
16,271
Other non-financial assets
19
6,516
3,104
11,739
8,289
Assets classified as held for sale
19
150
150
620
620
Total assets
4,184,531
4,141,470
3,962,482
3,919,474
LIABILITIES
Due to other banks and financial institutions
20
685,075
686,559
697,738
703,271
Derivative financial instruments
12
7,152
7,152
96
96
Due to customers
21
2,784,968
2,789,348
2,679,183
2,681,586
Special and lending funds
22
14,184
14,184
6,667
6,667
Debt securities in issue
23
171,231
171,231
95,212
95,212
Current income tax liabilities
4,374
4,036
1,084
962
Deferred income tax liabilities
8
1,463
-
1,452
-
Liabilities related to insurance activities
24
39,313
-
41,409
-
Other financial liabilities
25
27,419
24,491
25,053
21,775
Other non-financial liabilities
25
7,656
1,685
7,251
1,414
Grants
20
-
-
910
910
Total liabilities
3,742,835
3,698,686
3,556,055
3,511,893
EQUITY
Share capital
27
174,211
174,211
174,211
174,211
Share premium
27
3,428
3,428
3,428
3,428
Treasury shares (-)
27
-
-
(516)
(516)
Reserve capital
27
756
756
756
756
Statutory reserve
27
37,113
36,922
21,893
21,770
Financial instruments revaluation reserve
(8,097)
(8,111)
(583)
(597)
Reserve for acquisition of own shares
27
20,000
20,000
10,000
10,000
Other equity
27
2,355
1,917
3,288
2,870
Retained earnings
211,930
213,661
193,950
195,659
Non-controlling interest
-
-
-
-
Total equity
441,696
442,784
406,427
407,581
Total liabilities and equity
4,184,531
4,141,470
3,962,482
3,919,474
Chief Executive Officer Vytautas Sinius
Chief Financial Officer Donatas Savickas
6 March 2023
The accounting policies and notes on pages 11 to 129 constitute an integral part of these financial statements.
FINANCIAL STATEMENTS 31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
8
THE GROUP’S STATEMENT OF CHANGES IN EQUITY
Notes
Share capital
Share premium
Treasury shares
(-)
Reserve capital
Financial
instruments
revaluation
reserve
Statutory reserve
Reserve for
acquisition of
own shares
Other equity
Retained
earnings
Total
Non-controlling
interest
Total equity
Attributable to Bank‘s shareholders
1 January 2021
174,211
3,428
-
756
388
14,427
10,000
2,359
149,497
355,066
-
355,066
Transfer to/from statutory reserve
-
-
-
-
-
7,466
-
-
(7,466)
-
-
-
Acquisition of own shares
27
-
-
(516)
-
-
-
(234)
-
-
(750)
-
(750)
Share-based payment
27
-
-
-
-
-
-
234
929
-
1,163
-
1,163
Payment of dividends
29
-
-
-
-
-
-
-
-
(3,304)
(3,304)
-
(3,304)
Total comprehensive income
-
-
-
-
(971)
-
-
-
55,223
54,252
-
54,252
Net profit
-
-
-
-
-
-
-
-
55,223
55,223
-
55,223
Other comprehensive income
-
-
-
-
(971)
-
-
-
-
(971)
-
(971)
31 December 2021
174,211
3,428
(516)
756
(583)
21,893
10,000
3,288
193,950
406,427
-
406,427
Transfer to statutory reserve
-
-
-
-
-
15,220
-
-
(15,220)
-
-
-
Transfer to reserve for
acquisition of own shares
27
-
-
-
-
-
-
10,000
-
(10,000)
-
-
-
Acquisition of own shares
27
-
-
(1,557)
-
-
-
(234)
-
-
(1,791)
-
(1,791)
Share-based payment
27
-
-
2,073
-
-
-
234
(933)
11
1,385
-
1,385
Payment of dividends
29
-
-
-
-
-
-
-
-
(20,425)
(20,425)
-
(20,425)
Total comprehensive income
-
-
-
-
(7,514)
-
-
-
63,614
56,100
-
56,100
Net profit
-
-
-
-
-
-
-
-
63,614
63,614
-
63,614
Other comprehensive income
-
-
-
-
(7,514)
-
-
-
-
(7,514)
-
(7,514)
31 December 2022
174,211
3,428
-
756
(8,097)
37,113
20,000
2,355
211,930
441,696
-
441,696
The accounting policies and notes on pages 11 to 129 constitute an integral part of these financial statements.
FINANCIAL STATEMENTS 31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
9
THE BANK’S STATEMENT OF CHANGES IN EQUITY
Notes
Share capital
Share premium
Treasury shares (-)
Reserve capital
Financial instruments
revaluation reserve
Statutory reserve
Reserve for acquisition
of own shares
Other equity
Retained earnings
Total
1 January 2021
174,211
3,428
-
756
375
14,246
10,000
2,066
150,482
355,564
Transfer to statutory reserve
-
-
-
-
-
7,524
-
-
(7,524)
-
Acquisition of own shares
27
-
-
(516)
-
-
-
(234)
-
-
(750)
Share-based payment
27
-
-
-
-
-
-
234
804
-
1,038
Payment of dividends
29
-
-
-
-
-
-
-
-
(3,304)
(3,304)
Total comprehensive income
-
-
-
-
(972)
-
-
-
56,005
55,033
Net profit
-
-
-
-
-
-
-
-
56,005
56,005
Other comprehensive income
-
-
-
-
(972)
-
-
-
-
(972)
31 December 2021
174,211
3,428
(516)
756
(597)
21,770
10,000
2,870
195,659
407,581
Transfer to statutory reserve
-
-
-
-
-
15,152
-
-
(15,152)
-
Transfer to reserve for acquisition of own shares
27
-
-
-
-
-
-
10,000
-
(10,000)
-
Acquisition of own shares
27
-
-
(1,557)
-
-
-
(234)
-
-
(1,791)
Share-based payment
27
-
-
2,073
-
-
-
234
(953)
-
1,354
Payment of dividends
29
-
-
-
-
-
-
-
-
(20,425)
(20,425)
Total comprehensive income
-
-
-
-
(7,514)
-
-
-
63,579
56,065
Net profit
-
-
-
-
-
-
-
-
63,579
63,579
Other comprehensive income
-
-
-
-
(7,514)
-
-
-
-
(7,514)
31 December 2022
174,211
3,428
-
756
(8,111)
36,922
20,000
1,917
213,661
442,784
The accounting policies and notes on pages 11 to 129 constitute an integral part of these financial statements.
FINANCIAL STATEMENTS 31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
10
THE GROUP’S AND THE BANK’S STATEMENTS OF CASH FLOWS
Year ended
31 December 2022
31 December 2021
Notes
Group
Bank
Group
Bank
Operating activities
Interest received on loans and advances
105,774
91,308
81,902
68,699
Interest received on finance leases
9,573
9,543
8,218
8,195
Interest received on debt securities in the trading book
1,521
1,388
496
372
Interest paid
(10,421)
(10,434)
(11,498)
(11,498)
Fees and commissions received
26,295
27,239
24,582
25,193
Fees and commissions paid
(7,593)
(7,409)
(7,457)
(7,239)
Net cash inflows from trade in securities in the trading book
(19,196)
(11,842)
(1,527)
(7,040)
Net inflows from foreign exchange trading
9,642
9,511
4,512
4,439
Net inflows from derecognition of financial assets
1,034
254
4,363
2,729
Net inflows from derecognition of non-financial assets
810
514
3,736
66
Cash inflows related to other activities of Group companies
10,956
1,496
10,757
1,136
Cash outflows related to other activities of Group companies
(2,763)
-
(8,032)
-
Recoveries on loans previously written off
403
237
1,126
541
Salaries and related payments to and on behalf of employees
(31,289)
(27,479)
(26,396)
(22,931)
Payments related to operating and other expenses
(21,968)
(17,095)
(22,223)
(17,678)
Income tax paid
8
(10,870)
(9,796)
(11,914)
(10,625)
Net cash flow from operating activities before change in
operating assets and liabilities
61,908
57,435
50,645
34,359
Change in operating assets and liabilities:
(Increase) decrease in due from other banks
(1,537)
(1,537)
402
402
Increase in loans to customers
(477,054)
(475,433)
(314,018)
(300,088)
Decrease (increase) in finance lease receivable
(48,600)
(48,609)
(36,149)
(39,380)
Decrease (increase) in other financial assets
10,583
10,651
(11,703)
(11,993)
(Increase) decrease in other non-financial assets
3,901
2,089
6,177
5,207
Increase in due to banks and financial institutions
(14,827)
(18,876)
469,915
472,001
Increase in due to customers
105,753
107,730
332,301
333,110
Increase (decrease) in special and lending funds
7,517
7,517
918
918
Increase (decrease) in other financial liabilities
2,708
1,180
1,878
2,494
Increase (decrease) in other non-financial liabilities
(10,646)
(2,289)
(8,533)
(3,857)
Change
(422,202)
(417,577)
441,188
458,814
Net cash flow from operating activities
(360,294)
(360,142)
491,833
493,173
Investing activities
Acquisition of property, plant and equipment, investment property and
intangible assets
(3,424)
(3,132)
(1,014)
(866)
Disposal of property, plant and equipment, investment property and
intangible assets
1,916
1,559
8,028
378
Acquisition of debt securities at amortized cost
15
(396,788)
(396,538)
(100,202)
(99,382)
Proceeds from redemption or sale of debt securities at amortized cost
15
133,303
130,244
100,755
100,039
Interest received on debt securities at amortized cost
15
8,465
8,178
9,473
9,323
Dividends received
24
5,724
-
5,000
Acquisition of investment securities at fair value
(38,478)
(37,275)
(100,447)
(89,161)
Sale or redemption of investment securities at fair value
13,055
8,986
50,297
40,425
Interest received on investment securities at fair value
1,350
1,208
649
403
Disposal of subsidiaries
16
-
-
5,478
5,428
Establishment of subsidiary
16
(100)
(100)
-
-
Net cash flow from (used in) investing activities
(280,677)
(281,146)
(26,983)
(28,413)
Financing activities
Payment of dividends
29
(20,382)
(20,382)
(3,299)
(3,299)
Acquisition of own shares
27
(1,557)
(1,557)
(750)
(750)
Interest on debt securities in issue
23
(2,015)
(2,015)
(1,230)
(1,230)
Issue of debt securities
23
85,000
85,000
75,000
75,000
Principal elements of lease payments
10
(1,040)
(1,089)
(1,432)
(1,281)
Net cash flow (used in) from financing activities
10
60,006
59,957
68,289
68,440
Net increase (decrease) in cash and cash equivalents
(580,965)
(581,331)
533,139
533,200
Cash and cash equivalents at 1 January
965,723
964,849
432,584
431,649
Cash and cash equivalents at 31 December
10
384,758
383,518
965,723
964,849
The accounting policies and notes on pages 11 to 129 constitute an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
11
GENERAL INFORMATION
Šiaulių Bankas AB was registered as a public company in the Enterprise Register of the Republic of Lithuania on 4 February 1992. The
Bank is licensed by the Bank of Lithuania to perform all banking operations provided for in the Law on Banks of the Republic of Lithuania
and the Charter of the Bank. In this document Šiaulių Bankas AB is referred to as the Bank, Šiaulių Bankas AB and its subsidiaries -the
Group.
The Head Office of the Bank is located in Šiauliai, Tilžės str. 149, LT-76348. At the end of the reporting period the Bank had 56 customer
service outlets (2021: 56 outlets). As at 31 December 2022 the Bank had 817 employees (31 December 2021: 789). As at 31 December
2022 the Group had 908 employees (31 December 2021: 882 employees).
The Bank accepts deposits, issues loans, makes money transfers and documentary settlements, exchanges currencies for its clients,
issues and processes debit and credit cards, is engaged in trade finance and is investing and trading in securities, as well as performs
other activities set forth in the Law on Banks of the Republic of Lithuania and the Charter of the Bank. Subsidiary companies of the Group
perform consumer financing, life insurance and real estate management activities.
The Bank’s shares are listed on the Baltic Main List of the NASDAQ Stock Exchange.
As of 31 December 2022 the Bank owned the following
directly controlled subsidiaries:
As of 31 December 2021 the Bank owned the following
directly controlled subsidiaries:
1. SB Draudimas UAB (life insurance activities),
2. SB Lizingas UAB (consumer financing activities),
3. Šiaulių Banko Lizingas UAB (lease activities),
4. SB Turto Fondas UAB (real estate management
activities),
5. SB Modernizavimo Fondas UAB (multi-apartment
renovation financing)*
1. SB Draudimas UAB (name changed Bonum Publicum
GD UAB; life insurance activities),
2. SB Lizingas UAB (consumer financing activities),
3. Šiaulių Banko Lizingas UAB (lease activities),
4. SB Turto Fondas UAB (name changed from Šiaulių
Banko Turto Fondas UAB; real estate management
activities)
As of 31 December 202
2 the Bank owned the
following
indirectly controlled subsidiaries:
As of 31 December 2021 the Bank owned the following
indirectly controlled subsidiaries:
6. Šiaulių Banko Investicijų Valdymas UAB (investment
management activities).
5. Šiaulių Banko Investicijų Valdymas UAB
(investment
management activities),
6. Sandworks UAB (real estate management activities)
.
*not consolidated under IFRS 10 requirements
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
12
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these financial statements are set out below.
Basis of preparation
The financial statements of the Group and the Bank have been prepared in accordance with International Financial Reporting Standards
as adopted by the EU. The financial statements have been prepared under the historical cost convention as modified for the fair value of
financial assets and liabilities at fair value through profit or loss and investment securities at fair value through other comprehensive
income.
The preparation of financial statements in conformity with International Financial Reporting Standards require the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are
based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates.
These financial statements combine the consolidated financial statements for the Group and separate financial statements of the Bank.
Such format of reporting was adopted to ensure consistency of presentation with the format prescribed by the Bank of Lithuania and
applied for statutory reporting.
Neither the Bank’s shareholders, nor any other party have power to amend the financial statements after issue. According to local
legislation, the financial statements are subject to approval in the general meeting of shareholders, but the approval/disapproval cannot
result in amendment of the financial statements.
Amounts shown in these financial statements are presented in the national currency the euro (EUR), which is the Bank’s and Group‘s
functional and presentation currency.
Amendments to existing standards and interpretations effective in 2022
A number of new standards are effective from 1 January 2022 but they do not have a material effect on the Group’s financial statements:
x Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
x Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
x Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41);
x Reference to Conceptual Framework (Amendments to IFRS 3).
Standards and amendments to existing standards that are not yet effective and have not been early adopted by the Group
A number of new standards are effective for annual periods beginning after 1 January 2022 and earlier application is permitted; however,
the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.
IFRS 17, Insurance Contracts (effective for annual periods beginning on or after 1 January 2023, including IFRS 17 amendments,
issued on 9 December 2021): IFRS 17 replaces IFRS 4, which has given companies dispensation to carry on accounting for insurance
contracts using existing practices. As a consequence, it was difficult for investors to compare the financial performance of similar
insurance companies. IFRS 17 is a single principle-based standard to account for all types of insurance contracts, including reinsurance
contracts that an insurer holds. The standard requires recognition and measurement of groups of insurance contracts at: (i) a risk-adjusted
present value of the future cash flows (the fulfilment cash flows) that incorporates all of the available information about the fulfilment cash
flows in a way that is consistent with observable market information; plus (if this value is a liability) or minus (if this value is an asset) (ii)
an amount representing the unearned profit in the group of contracts (the contractual service margin). Insurers will be recognising the
profit from a group of insurance contracts over the period they provide insurance coverage, and as they are released from risk. If a group
of contracts is or becomes loss-making, an entity will be recognising the loss immediately. The Group is currently assessing the impact
of the amendments on its financial statements.
The following new and amended standards are not expected to have a significant impact on the Group’s and Bank's financial statements:
x Liability in a Sale and Leaseback (Amendment to IFRS 16; not adopted by EU)
x Classification of Liabilities as Current or Non-current (Amendments to IAS 1; not adopted by EU);
x Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
x Definition of Accounting Estimates (Amendments to IAS 8);
x Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
13
ACCOUNTING POLICIES (CONTINUED)
Consolidation of subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the group
is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as
transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant
share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling
interests are also recorded in equity.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests
issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-
acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s
identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in
the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised
in profit or loss.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value
of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with
the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the
portion of the cash-generating unit retained.
If the total of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair
value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income
statement.
Inter-company transactions, balances and unrealised gains on transactions between the Group companies (including subsidiaries
classified as held for sale) are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment
of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Bank.
Subsidiaries in the stand-alone financial statements are accounted for using equity method. Investment is initially recognized at cost, and
adjusted thereafter for the post-acquisition change in the Bank’s share of net assets of the subsidiary. the share of the profit or loss is
included in the value of investments in subsidiaries and Bank’s income statement, dividends paid by the subsidiary to the Bank are
subtracted from the value of investment in subsidiary and not included in Bank’s income statement.
The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post acquisition movements
in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount
of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made
payments on behalf of the associate.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
14
ACCOUNTING POLICIES (CONTINUED)
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in the euro,
which is the Bank’s functional and presentation currency. Euro also is functional and presentation currency of all the subsidiaries of
the Bank included in the consolidated financial statements.
(b) Transactions and balances
All monetary assets and liabilities denominated in foreign currencies are translated into the euro (EUR) at the official daily euro
foreign exchange reference rates (published by the European Central Bank) prevailing at the end of the reporting period. Gains and
losses arising from this translation are included in the income statement for the reporting period. All non-monetary liabilities and
assets are translated using the exchange rate prevailing on the date of acquisition.
Foreign currency transactions are recorded in the euro using the exchange rate ruling on the date of the transaction. Exchange differences
arising from the settlement of transactions denominated in foreign currency are charged to the income statement at the time of transaction
using the exchange rate ruling at that date.
Off-setting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
Recognition of income and expenses
Interest income and expense are recognised in the income statement on debt instruments at amortized cost or at fair value through other
comprehensive income on an accrual basis using the effective interest method based on the actual purchase price. The effective interest
method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or
interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or
receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the
financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual
terms of the financial instrument (for example, prepayment options). The calculation includes all fees and points paid or received between
parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
Loan origination fees are accounted for as an adjustment to the effective interest rate calculation for each issued loan separately. Other
commission fees and other similar income and expenses are recognised as gained or incurred.
For financial assets interest income is calculated by applying the effective interest rate to the gross carrying amount, except for financial
assets that are credit-impaired (Stage 3), for which interest income is calculated by applying the effective interest rate to the net carrying
amount (i.e. gross carrying amount reduced by the allowance for impairment), and purchased or originated credit-impaired (POCI) assets,
for which the credit-adjusted effective interest rate is applied to the amortized cost of the financial asset.
Revenues from contracts with customers consist primarily of service-related fees and are reported as Commission income, including fees
for settlement services, service plans, cash operations, cards, account servicing fees, services related to securities, collection of utility
and similar payments and others. The revenues reflect the consideration which is expected to be received in exchange for those services
or transactions. The recognition in Income statement depends on whether the Group's obligations are provided. Revenue from such
services is recognised over time on a straight-line basis when the services are provided to the customer. Revenue related to transactions
is recognised at a point in time when the transaction takes place. Fee income for settlement services, cash operations, documentary
collection, collection of utility and similar payments, services related to securities and other is recognised at a point in time when the
Group satisfies its performance obligation upon execution of the specified transaction.
Insurance income and expense recognition is disclosed under Technical provisions section.
Revenue from other activities of the Group comprise sale of apartments or other developed real estate projects. This revenue is
recognized at a point of time upon transfer of completed property to client.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
15
ACCOUNTING POLICIES (CONTINUED)
Dividend income
Dividends are recognised in the income statement when the Bank’s or Group’s right to receive payments is established.
Share-based payment
Employees whose professional activities and/or decisions might have a significant impact on the risk accepted by the Group, receive
deferred variable remuneration. The grant-date fair value of equity-settled shares-based payment arrangements granted to these
employees is recognised as salaries and related expenses in income statement with a corresponding increase in other equity line in the
statement of financial position, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the
number of awards for which the service and conditions (not directly based on market performance of shares) are expected to be met,
such that the amount ultimately recognised is based on the number of awards that meet the related service and conditions at vesting
date. Any deviation from the original approval due to modifications of original terms and conditions are recognised in Income statement
and a corresponding adjustment is recognised in other equity.
Taxation
a) Income tax
In accordance with the Lithuanian Law on Corporate Profit Tax, taxable profit for 2019 period is subject to income tax at a rateof
15%. Expenses related to taxation charges and included in these financial statements are based on calculations made by the
management in accordance with the Lithuanian regulatory legislation on taxes. From year 2020 commercial banks operating in
Lithuania are be subject to income tax of 20%.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability is settled (20% for deferred income tax assets and liabilities recognized
at 31 December 2022 and at 31 December 2021).
The principal temporary differences arise from carry forward of unused tax losses, revaluation of securities, difference between net
book value and tax base of tangible fixed assets and accrued charges. The rates enacted or substantively enacted at the balance
sheet date are used to determine deferred income tax. However, the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
Deferred tax assets are recognised where it is probable that future taxable profit will be available against which the temporary
differences can be utilised.
b) Other taxes
Real estate tax rate is up to 1% on the tax value of tangible fixed assets and foreclosed assets. The Bank is also obliged to pay land
and land lease taxes, make payments to guarantee fund and social security contributions. These taxes are included in other
expenses in the income statement.
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with less than three months’ maturity from
the date of acquisition, including cash and non-restricted balances with the Bank of Lithuania, treasury bills and other eligible bills,
amounts due from banks and financial institutions and short-term government securities.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
16
ACCOUNTING POLICIES (CONTINUE
D)
Financial assets
Financial assets are classified into 3 categories:
x financial assets at fair value through profit and loss (the Group and the Bank have debt and equity securities which are
included to trading book, and equity securities which are included to investment securities portfolio),
x financial assets at fair value through other comprehensive income (the Group and the Bank have only debt securities of this
category, these are included to Investment securities portfolio) and
x financial assets at amortized cost.
Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit
or loss. The classification is based on the cash flow characteristics of the asset and the Group’s business model for managing the asset.
Financial assets at fair value through profit or loss
Trading book (trading sub-portfolio) includes debt securities which were acquired either for generating a profit from short-term fluctuations
in price or dealer’s margin.
Trading book (other assets sub-portfolio) includes debt and equity assets of the subsidiary involved in life insurance activities. These
assets are managed on behalf of customers and were designated at fair value through profit or loss in order to significantly reduce the
accounting mismatch between these securities and unit-linked provisions.
Investment portfolio includes non-trading (investment) equities that were acquired for generating a profit in longer term fluctuations or in
line with other purposes with the Group (e.g. to have participation in entities that provide services to the group, or other).
Securities at fair value through profit or loss are initially recognised at fair value, which is based on transaction price and are subsequently
measured at fair value based on quoted bid prices or derived from a discounted cash flow model if market price is unreliable measure.
All related realised and unrealised gains and losses are included in net trading income. Interest earned is reported as interest income.
Dividends received are included in dividend income. The instruments are derecognised when the rights to receive cash flows have
expired or the Group has transferred substantially all the risks and rewards of ownership and the transfer qualifies for derecognising.
All purchases and sales of securities at fair value through profit or loss that require delivery within the time frame established by regulation
or market convention (‘regular way’ purchases and sales) are recognised at settlement date, which is the date when payment is made
for assets purchased or sold. All other purchases and sales are recognised as derivative forward transactions until settlement. Changes
in the asset's fair value between the trade date and the settlement date are recognized as trading gains/losses in the income statement.
Financial assets at fair value through other comprehensive income
Debt securities that are held for collection of contractual cash flows and for selling them, where the assets’ cash flows represent solely
payments of principal and interest, and that are not designated at fair value through profit or loss, are measured at fair value through
other comprehensive income. Movements in the carrying amount are taken through other comprehensive income, except for recognition
of impairment gains or losses, interest income and foreign exchange gains or losses on the financial instrument’s amortised cost which
are recognized in profit or loss. When the debt asset is derecognized, the cumulative gain or loss previously recognized in other
comprehensive income is reclassified from equity to profit or loss and recognized in Net gain (loss) in operations from securities. Interest
income from these financial assets is included in Interest income using the effective interest rate method.
The Group did not designate any equities at fair value through other comprehensive income.
Financial assets at amortized cost
Loans to customers and finance lease receivables that are the main strategic direction of Group's business and debt securities that are
held for collecting cash flows in line with prescribed business model to generate long-term yield and to serve as secondary liquidity
reserves constitute the major part of Group's assets and are attributable to financial assets at amortized cost (as well as other qualifying
assets such as cash equivalents, due from banks, other financial assets). These assets may be sold, but sales (other than sales low in
volume or sales as part of problem debt recovery activities) are rare and infrequent. Financial assets at amortized cost are non-derivative
financial assets that pass the “Solely payments of principal and interest” (SPPI) test other than: (a) those that the bank classifies as fair
value through profit or loss due to intention for short-term sale or reduction of accounting mismatch; (b) those that the bank
upon initial
recognition designates at fair value through other comprehensive income; or (c) those for which the holder may not recover substantially
all of its initial investment, other than because of credit deterioration. In the case of impairment, the impairment loss is reported as a
deduction from the carrying value of the asset and recognised in the income statement as ‘Allowance for impairment losses’. Financial
assets at amortized cost are derecognized when the contractual rights to receive the cash flow from the assets expire, or the assets are
written-off, or the Group has transferred substantially all the risks and rewards of ownership and the transfer qualifies for derecognising.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
17
ACCOUNTING POLICIES (CONTINUED)
Impairment of financial assets
The Group assesses on a forward-looking basis the expected credit losses (ECL) associated with its debt instrument assets carried at
amortized cost and fair value through other comprehensive income and with exposure arising from loan commitments and financial
guarantee contracts. The Group recognizes a loss allowance for such losses at each reporting date. The measurement of ECL reflects
an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money
and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current
conditions and forecasts of future economic condition. Section 1.3 of the Financial risk management disclosure provides more details on
the ECL measurement.
Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the
rights to receive the contractual cash flows in a transaction in which substantially all risks and rewards of ownership of the financial asset
are transferred or in which the Group neither transfers nor retains substantially all of risks and rewards of ownership and it does not retain
control of the financial asset. On derecognition of a financial asset the difference between the carrying amount (measured at the date of
derecognition) and the consideration received (including any new asset obtained less any new liability assumed) and any cumulative
gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.
Write-offs of financial assets
Loans and receivables are regularly reviewed and written-off from the balance sheet when the total loan balance or a part of it is
considered as uncollectible under the most optimistic scenario using expert judgement on each exposure. Typically, the judgement that
there is no reasonable expectation for recovery is applied for the exposures where there are no clear indications of possible cash flows
from the borrower and to the extent that the collateral is deemed insufficient. 100% impairment provision against the carrying amount of
the exposure must be recognized before an uncollectible exposure (or part of it that is considered to be uncollectible) can be written-off.
Written-off exposures are accounted for as off-balance sheet claims (“accumulated write-offs”) until the legal right to claim the amounts
from the borrower expires.
Modifications of financial assets
The Bank sometimes modifies the payment terms of loans to customers due to commercial renegotiations, or for distressed loans, with
a view to maximising recovery. Modification practices are based on criteria which, in the judgement of management, indicate that payment
will most likely continue. Legal treatment for loan contract amendments is followed, i.e. amended loan contracts are accounted for as
modifications - i.e. date of signing the original contract remains the point for loan parameters at origination used to assess significant
increase of credit risk. On modification, the gross carrying amount of the loan is recalculated as the present value of the modified
contractual cash flows that are discounted at the loan’s original effective interest rate. The resulting modification gain or loss is included
in other income line in the income statement. The modification of loan contract does not automatically impact its credit stage assignment
if it done on a commercial negotiations basis or according to public or sectoral moratoria, but the loans subject to modification are checked
if it is done because of borrower's inability to serve the loan by its original schedule. If this is the case, significant increase credit risk
(Stage 2) is recognized. Additional scenarios for moving the loans the loans that were modified due to customers problems to Stage 3
are in place, and additional observation periods are in place for recognizing improvement in staging for such loans.
Impairment of non-financial assets
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Goodwill is tested for impairment at least annually. An impairment loss is recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows (cash-generating units). The impairment test also can be performed on a single asset when the fair value less cost to sell
or the value in use can be determined reliably. Non-financial assets other than goodwill that suffered impairment are reviewed
for possible
reversal of the impairment at each reporting date.
Reverse repurchase transactions
Securities purchased under agreements to resell (“reverse repos”) are recorded as loans and advances to other banks or customers, as
appropriate. The difference between purchase and repurchase price is treated as interest and accrued over the life of agreement using
the effective interest method. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties,
in which case the purchase and sale are recorded with the gain or loss included in trading income.
Reverse repurchase agreements are classified as loans and receivables and are accounted for using the amortised cost method.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
18
ACCOUNTING POLICIES (CONTINUED)
Intangible assets
Intangible assets are stated at cost less accumulated amortisation. Intangible assets are amortised using the straight-line method over
their estimated useful life (see note 17).
Property, plant and equipment
Tangible fixed assets are stated at historical cost less accumulated depreciation. Depreciation is provided on a straight-line basis to write
off proportionally the cost of each asset over its estimated useful life.
Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less
costs to sell and value in use.
Gains and losses on disposals of fixed assets are determined by reference to their carrying amount and are charged to the Income
statement.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Asset maintenance
costs are charged to the income statement when they are incurred. Significant improvements of assets are capitalised and depreciated
over the remaining useful life period of the improved asset. Useful lives of property, plant and equipment are disclosed in note 18.
Leases
a) Group company is the lessee
Right-of-use assets and liabilities arising from lease are initially measured on present value basis, discounted using the interest rate
implicit in the lease (the weighted average lessee's incremental borrowing rates: 31 December 2022: Group 0.87%, Bank 0.80%; 31
December 2021: Group 0.60%, Bank 0.26%;). Lease liabilities include fixed and variable payments (based on consumer index or
inflation rate). Lease payments to be made under reasonably certain extension options are also included in the measurement of the
liability. The discount influence is recognised in finance cost as interest expense in income statement. Right-of-use assets are
measured at cost comprising the amount of the initial measurement of lease liability, any initial direct costs, adjusted by advance
payments. Right-of-use assets are depreciated using the straight-line method over rent period. The depreciation charge is recognised
as depreciation expenses in income statement. The duration of rent agreements are adjusted by the Group‘s management
assumptions on contract extensions. The expenses related to short-term leases or to leases of low-value assets are included in
other operating expenses in income statement. Right-of-use assets are included in Property, plant and equipment, lease liabilities
are included in Other financial liabilities.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an
extension option, or not exercise a termination option. Extension options are only included in the lease term if the lease is reasonably
certain to be extended (or not terminated). If any leasehold improvements are expected to have a significant remaining value, the
Group is typically reasonably certain to extend (or not terminate). Otherwise, the Group considers other factors including the plans
to continue an activity. Contracts may contain both lease and non-lease components. The Group allocates the consideration in the
contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for
which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a
single lease component.
b) Group company is the lessor
Operating leases
Assets leased out under operating leases are included in tangible fixed assets in the statement of financial position. They are
depreciated over their expected useful lives on a basis consistent with similar owned fixed assets. Rental income is recognised on
a straight-line basis over the lease term.
Finance leases
A finance lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset. Title may or may not
eventually be transferred. When assets are held subject to a finance lease, the present value of the lease payments is recognised as a
receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance
income. Lease income is recognised over the term of the lease using the net investment method (before tax), which reflects a constant
periodic rate of return.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
19
ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories of the Group consist mainly of apartments held for sale and property for development. They are stated at the lower of cost
and net realizable value. Net realizable value for apartments held for sale are calculated as based on market value of apartments less
costs to sell. Net realizable value of property for development are calculated as discounted cash inflows to be received from developed
property less discounted cash outflows related to the development and selling of a property.
Financial liabilities
The Group’s financial liabilities consist of those designated at fair value and those carried at amortised cost. Financial liabilities are
derecognised when extinguished.
Financial liabilities at fair value through profit or loss
The group can designate certain liabilities upon initial recognition as at fair value through profit or loss (fair value option); this
designation cannot be changed subsequently.
Other liabilities measured at amortised cost
Financial liabilities that are not classified as at fair value through profit or loss fall into this category and are measured at amortised
cost. Financial liabilities measured at amortised cost are deposits from banks or customers, debt securities in issue, liabilities to
special and lending funds as well as other various financial liabilities. Initially they are recognised at fair value, and subsequently
stated at amortised cost, with any difference between net proceeds and the redemption value recognised in the Income statement
over their period using the effective interest method.
Provisions
Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and the amount of the obligation can be reliably estimated.
Technical provisions
Technical provisions are computed in accordance with Lithuanian insurance supervisory authority (Bank of Lithuania) requirementsand
are based on assumptions and estimates, the adequacy of which is evaluated based on observations of historical and current data and
the use of projection methods that consider developing trends in experience and that adjust for changes in circumstances.
a) Unearned premiums reserve
Unearned premiums reserve represents the part of premiums written which relates to the period of risk subsequent to the accounting
period. Unearned premiums reserve is calculated for every contract separately by proportionate distribution of the written premium
throughout the risk period. The part of unearned premiums reserve attributable to the reinsurers is calculated by the same method.
b) Outstanding claims reserve
Outstanding claims reserve represents amounts payable for claims outstanding. Provision covers all anticipatory payments for claims
reported but not settled, claims incurred but not reported, claims reported, settled but not paid, including amounts required for claims
settlement according to all above mentioned claims as of the financial statement date.
Base for calculation of provision for claims reported but not settled is an individual evaluation of every reported claim, according to
the information available at the moment of calculation of this technical provision.
The part of provision for claims incurred, not reported is calculated using “Chain-ladder”, Bornhuetter – Ferguson or Loss-ratio
methods for insurance products separately.
The part of outstanding claims reserve attributable to the reinsurers is calculated under reinsurance contracts.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
20
ACCOUNTING POLICIES (CONTINUED)
c) Life insurance mathematical provision
Life insurance mathematical provision is calculated individually for every policy applying an actuarial conservative perspective
assessment. Life insurance mathematical provision is a difference of the actuarially discounted value of the future policy benefits
less the discounted value of the future premium payments.
The method of assessment can be described as prospective net premium method. For the calculations Zillmer adjustment method
is applied. Thus deferred acquisition costs reduce life insurance mathematical technical reserve.
When computing the life insurance mathematical technical provision assumptions determined on insurance contract conclusion date
are used. Guaranteed interest rate is applied according to agreements but no more than 3.5%.
According to the profit (surplus) sharing rules, contracts of the endowment, pure endowment, pension and scholarship insurance,
pension annuities insurance participates in the profit (surplus) sharing of the insurer. The insurers profit share calculated for the
insurance agreement is not paid at once but increases the claims in case of death or/and survival till the end of insurance period,
also the surrender values are increased respectively. The profit (surplus) calculated for insurance product, is ascribed to the
mathematical technical provision. For endowment contract with guaranteed interest insurer’s profit part generated from investing
capital accrued under these insurance contracts, can be distributed. Accrued capital of insurance contract is increased by insurer’s
profit part attributable to the insurance contract.
d) Technical provision for unit-linked life insurance policies
Technical provision for unit-linked life insurance policies is calculated using retrospective method. Technical provision is calculated
by adding invested premiums less charges applied to the policy holder to cover expenses and the risk assumed. The technical
provision is expressed in investment units which are reprised in accordance with changes in market values of related investments.
Insurance contracts
Bank’s subsidiary SB Draudimas (the company) is engaged in life insurance activities and offers various insurance contracts, main
categories of which include:
a) Long-term insurance contracts with fixed and guaranteed terms
These contracts insure events associated with human life (for example death or survival) over a long period. Premiums are
recognized as revenue when they become payable by the contract holder. Premiums are presented before deduction of commission.
Benefits are recorded as expenses when they are incurred. Expenses related to the Insurance activities for claims incurred are
recognized as an expense in the period in which they are paid.
A liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognized. Life
insurance mathematical provision for these insurance contracts is calculated as described in accounting policies above.
The liabilities are recalculated at each balance sheet date using the assumptions established at inception of the contract.
Acquisition costs include costs incurred in concluding insurance contracts. These costs include the salaries of employees working
directly on insurance contracts, related fees, commissions, advertising and other related costs.
b) Long-term insurance contracts without fixed terms – unit-linked
These contracts insure human life events (for example death or survival) over a long duration. The company does not unbundle
deposit component separately from insurance component as:
• deposit element is not clearly identifiable from the terms of the contract;
• contracts of this kind are a single product, regulated as insurance business by insurance supervisory authority and should
be treated in a similar way for financial reporting;
• the information about gross premium inflows is considered to be important as an aid to economic decisions.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
21
ACCOUNTING POLICIES (CONTINUED)
Expenses related to Long-term insurance contract without fixed terms – unit linked such as death benefits, injuries are recognized
in the period in which they are paid.
Commission fees for Long-term insurance contract without fixed terms are accounted for as deferred acquisition costs. These
deferred acquisition costs are recognized as an expense during the first three years from the effective date of the insurance contract
in the following proportions: 1 year - 34%, 2 years - 33%, 3 years - 33%.
c) Liability adequacy test
At each balance sheet date, liability adequacy tests are performed to ensure the adequacy of the contract liabilities net of related
deferred acquisition costs. In performing these tests, current best estimates of future contractual cash flows and claims handling
expenses, as well as investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged to
profit or loss initially by writing off deferred acquisition costs and by subsequently establishing a provision for losses arising from
liability adequacy tests (the unexpired risk provision).
As mentioned above, long-term insurance contracts with fixed terms are measured based on assumptions set out at the inception
of the contract. When the liability adequacy test requires the adoption of new best estimate assumptions, such assumptions (without
margin for adverse deviation) are used for the subsequent measurement of these liabilities.
Any deferred acquisition costs written off as a result of this test cannot subsequently be reinstated.
For the years ended 31 December 2022 and 2021 the liability adequacy test and the changes were as follows:
Technical provisions
Deferred acquisition
cost
Best estimate of future cas
h flows
Excess of technical
provisions
At 31 December 2021
41,409
1,688
30,849
8,872
Change for the period
(2,096)
893
(4,920)
1,931
At 31 December 2022
39,313
2,581
25,929
10,803
Dividends
Dividends on the Bank’s shares are recorded in equity in the period in which they are declared.
Employee benefits
a) Social security contributions
The Group companies pay social security contributions to the state Social Security Fund (the Fund) on behalf of their employees
based on the defined contribution plan in accordance with the local legal requirements. A defined contribution plan is a plan under
which the Group pays fixed contributions into the Fund and will have no legal or constructive obligations to pay further contributions
if the Fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior period.
The social security contributions are recognised as an expense on an accrual basis and are included within salaries and related
expenses. Social security contributions each year are allocated by the Fund for pension, health, sickness, maternity and
unemployment payments.
b) Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated before the normal retirement date or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it can
no longer withdraw the offer of those benefits; or when recognises costs for a restructuring that involves the payment of termination
benefits. Benefits falling due more than 12 months after balance sheet date are discounted to present value. Termination benefits
are included within salaries and related expenses in the income statement and within other liabilities in the statement of financial
position.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
22
ACCOUNTING POLICIES (CON
TINUED)
Segment information
Operating segments are reported in accordance with the information analysed by the Executive Board (the chief operating decision-
maker) of the Group, which is responsible for allocating resources to the reportable segments and assesses its performance.
The Group has four main business segments:
• Traditional banking operations and lending – includes traditional retail and corporate banking operations such as issuing loans
and providing banking services to the customers and finance, lease and consumer financing services provided to customers of
the Group (includes financial information of the Bank allocated to this segment and financial information of Šiaulių Banko
Lizingas UAB and SB Lizingas UAB);
• Treasury – includes banking treasury operations such as managing securities and liquidity portfolio, currency exchange etc.
(includes financial information of the Bank allocated to this segment);
• Non-core banking activities - includes other banking operations not included in traditional lending and treasury segments such
as lending to subsidiaries (except for lending to leasing and consumer financing subsidiaries), revenues/expenses related to
investment in subsidiaries (dividends, impairment of investment in subsidiaries), engagement in one-off projects, managing
problem loans (includes financial information of the Bank allocated to this segment);
• Other activities – includes other activities performed by Group companies not included in previous segments – i.e. real estate
operations, life insurance, investment management (includes financial information of the subsidiaries not mentioned above).
As the Group’s segment operations, except for real estate development are all financial with a majority of revenues deriving from interest
and the Group Executive Board relies primarily on net interest revenue to assess the performance of the segment, the total interest
income and expense for all reportable segments is presented on a net basis. Also all other main items of the income statement are
analysed by the management of the Group on segment basis therefore they are presented in the segment reporting.
Transactions between the business segments are carried out at arm’s length. The revenue from external parties reported to the Group
Executive Board is measured in a manner consistent with that in the consolidated income statement. Funds are ordinarily allocated
between segments, resulting in funding cost transfers disclosed in inter-segment net interest income. Interest charged for these funds is
based on the Group’s cost of capital. There are no other material items of income or expense between the business segments.
The Group’s management reporting is based on a measure of profit before taxes comprising net interest income, net fee and commission
income, loan impairment charges, operating expenses, amortization and depreciation expenses and other net income.
As the Group focuses on domestic activities, no geographical concentration is observed in Group‘s decision making. Due to the nature
of Group‘s activities (financial services), capital expenditures are not important in the decision making process therefore not used in the
segment reporting and total assets is more relevant indicator than the fixed asset amount.
Fiduciary activities
Assets and income arising thereon together with related undertakings to return such assets to customers are excluded from these
financial statements where the Group acts in a fiduciary capacity such as nominee, trustee or agent.
Fair value of assets and liabilities
Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.
Financial guarantee contracts, letters of credit and undrawn loan commitments
Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs
because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Such financial
guarantees are given to banks, financial institutions and other bodies on behalf of customers to secure loans, overdrafts and other banking
facilities.
Financial guarantees are initially recognised in the financial statements at fair value on the date the guarantee was given. Subsequent to
initial recognition, the Bank’s liabilities under such guarantees are measured at the higher of the amount of loss allowance and the
premium received on initial recognition less income recognized in accordance with principles of IFRS 15.
Undrawn loan commitments and letters of credits are commitments under which, over the duration of the commitment, the Bank is
required to provide a loan with pre-specified terms to the customer.
These contracts are in the scope of the ECL impairment recognition requirements.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
23
ACCOUNTING POLICIES (CONTINUED)
Share issue costs
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their carrying amount is to be recovered principally
through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less
costs to sell.
Investment properties
Properties that are held for long-term rental yields or for capital appreciation or both, and that are not occupied by the entities in the
consolidated group, are classified as investment properties. Investment properties comprise buildings for commercial activities and land
plots for undetermined future use.
Some properties may be partially occupied by the Group, with the remainder being held for rental income or capital appreciation. If that
part of the property occupied by the Group can be sold separately, the Group accounts for the portions separately. The portion that is
owner-occupied is accounted for under IAS 16, and the portion that is held for rental income or capital appreciation or both is treated as
investment property under IAS 40. When the portions cannot be sold separately, the whole property is treated as investment property
only if an insignificant portion is owner-occupied. The Group considers the owner-occupied portion as insignificant when the property is
more than 95% held to earn rental income or capital appreciation. In order to determine the percentage of the portions, the Group uses
the size of the property measured in square meters.
Recognition of investment properties takes place only when it is probable that the future economic benefits that are associated with the
investment property will flow to the entity and the cost can be measured reliably. This is usually the day when all risks are transferred.
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing parts
of an existing investment property at the time the cost has incurred if the recognition criteria are met; and excludes the costs of day-to-
day servicing of an investment property. Subsequent to initial recognition, investment properties are measured at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis to write off proportionally the cost of each asset over its estimated useful
life. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.
In addition, investment properties are tested for impairment. These valuations are performed annually by external or internal appraisers.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently
remeasured at their fair value. Fair values are obtained from quoted market prices in active markets (for example, for exchange-traded
options), including recent market transactions, and valuation techniques (for example for non-traded options), including discounted cash
flow models and options pricing models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities
when fair value is negative. All derivative financial instruments are classified as held for trading.
FINANCIAL RISK MANAGEMENT
Strategy in using financial instruments
The Bank’s and the Group’s activities are principally related to the use of financial instruments. The Group accepts deposits from
customers and borrows from other financial institutions at both fixed and floating rates and for various periods and seeks to earn above
average interest margins by investing these funds in high quality assets. The Group seeks to increase these margins by consolidating
short-term funds and lending for longer periods at higher rates whilst maintaining sufficient liquidity to meet all claims that might fall due.
Strategic decisions related to financing and investing activities of the Bank and the Group is made by the Board of the Bank. Operating
financing and investment decisions are made on division level. Divisions of the Group are presented in Segment information. Decisions
on risk management are made by the Risk Management Committee of the Bank.
The Bank and the Group also seeks to raise its interest margins by obtaining above average margins, net of provisions, through lending
to commercial and retail borrowers with a range of credit standings. Such exposures involve not just on-balance sheet loans and advances
but the Group also enters into guarantees and other commitments such as letters of credit and other guarantees.
The Group analyses, evaluates, accepts and manages the risk or combination of risks it is exposed to. Risk management at the Group
aims at ensuring a sufficient return on equity following the conservative risk management policy. While implementing an advanced risk
management policy the Group focuses not only on minimising potential risk but also on improving pricing and achieving efficient capital
allocation.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
24
FINANCIAL RISK MANAGEMENT (CONTINUED)
The Risk Management Policy approved by the Council of the Bank as well as by the procedures to manage different types of risks
prepared on its basis ensures the integrity of the risk management process in the Group.
The purpose of risk management policy is to define the risks as well as their management principles in the Group’s activities. Due to the
fact that various risks experienced by the Group are interdependent their management is centralized. Organization and coordination of
the experienced risk management system is one of the main goals of the Bank’s Risk Management Committee.
The Group reviews its risk management procedures and systems to reflect changes in markets, products and emerging best practice on
regular basis, at least annually.
The Group performs self assessment each year. This process analyses types of risks that could potentially arise from banking activities
and have material impact to the Group. The most important types of risk the Group is exposed to are credit risk, market risk, liquidity risk,
concentration risk, operational risk, IT risk, model risk, compliance risk and ESG risk. Market risk includes currency risk, interest rate and
securities price risk. Other types of risk are considered immaterial by the Group and, therefore, are not assessed.
In order to avoid a conflict of interest the Bank’s subdivisions that implement risk management functions are separated from those
subdivisions the direct activities of which are connected with the up rise of various types of banking risks.
1. CREDIT RISK
Credit risk is defined as the risk for the Group to incur losses due to the Group’s customers’ failure to fulfil their financial obligations
towards the Group. Credit exposures arise principally in lending activities and it is the most significant risk in the Group’s banking activities.
There is also credit risk in investment activities that arise from debt securities and in the Group’s asset portfolio as well as in the off-
balance sheet financial instruments, such as loan commitments, guarantees and letters of credit.
The Bank regularly reviews its credit risk management policies which include lending policies, credit risk limit control, other credit risk
mitigation measures as well as the internal control and internal audit of credit risk management.
The Bank’s Board has approved the credit risk management policies and procedures which lay down the principles for credit risk
management and control, establish an acceptable level of credit risk and credit risk’s structure and determine credit risk mitigation
measures and their interaction. This ensures a uniform understanding of the principles for taking on exposure to credit risk and allows
achieving consistency with the nature and complexity of the Bank’s lending policy and the prudential requirements.
The Bank takes risks only in the fields, which are well known to it and where it has long-term experience, trying to avoid excessive risk
in transactions that can have negative influence to the big portion of shareholders’ equity but seeks the sufficient profitability which, in
terms of increasing competition, would ensure the stable Bank’s position in the market and would increase the Bank’s value. In assessing
exposure to credit risk, the Bank adheres to the principle of prudence.
The Bank’s lending policy is focused on small and medium-size business clients, seeking to provide them with the better funding terms
and long-term support, at the same time paying attention to Bank’s potential to grow.
Large entities are defined as entities employing more than 250 employees. Small and medium size entities are defined as entities
employing less than 250 employees and the balance sheet total does not exceed EUR 43 million or annual turnover does not exceed
EUR 50 million.
New types of activities or products are launched only after the assessment of the arising risk. All lending products and processes at the
Bank are regulated and documented pursuant to the requirements of risk assessment and internal control policy. Special procedures are
established with respect to each lending product.
The aim of the Bank’s credit risk management policy is to ensure that the conflict between interests of staff or structural units is avoided.
With respect to provision of credits to clients, the principle stating that profit should not be earned at the expense of excessive credit risk
is observed.
The Bank’s credit risk management policy is based on regulatory requirements to adequate risk management policy and the best practice
in risk management of other banks. Therefore, the Bank’s employees continuously enhance their knowledge of credit risk management
systems of Lithuanian and foreign banks and the results of their application.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
25
FINANCIAL RISK MANAGEMENT (CONTINUED)
1.1. Credit risk measurement
(a) Loans and receivables
The Bank applies credit risk management measures, which could be divided into two types:
1) Measures that help to avoid decisions to grant loans with higher risk potential;
2) Measures ensuring the effective monitoring system of the Bank’s asset quality.
Measures that help to avoid decisions to grant loans with higher risk potential:
1) Multi-stage decision-making and its approval system;
2) Defined credit risk appetite, credit risk indicators and risk allocation among structural levels – limit establishment;
3) Customer risk assessment requirements set by internal procedures;
4) Regulation of acceptable risk criteria for separate products;
5) Security measures for credit repayment (collateral).
Multi-stage decision-making and its approval system has an aim not to make one-man decisions regarding credit granting by authorized
persons but to make them be discussed by the collegial bodies of the Bank and, as the case may be, by the Bank’s Loan Committee,
the Bank’s Board or Council. There are certain limits to authorized persons established regarding credit granting implementation as well
as approval limits to collegial bodies. Limit establishment depends on the authorized persons’ qualification, experience and the
effectiveness of their managed branches; while in the Branch Committees and the Bank Loan Committee the attention is paid to the
Committee members’ qualification, experience and economic activity of the region, where the branch is located, the quality of loan
portfolio and other factors.
It is very important to precisely analyse all the information about the customer before granting the credit. The goal of credit analysis is to
do the best in evaluating the customer’s creditworthiness, status and prospects in the field where he/she provides his/her goods or
services. Every credit decision is based on the adequate assessment of credit repayment possibilities proportionate to the size of
exposure and level of possible risk. Providing credit first of all the Bank analyses the borrower’s financial capacity from the borrower’s
cash flows. The repayment of credits granted by the Bank must be enough secure in order to minimize possible credit repayment risks.
A security measure has to be chosen in accordance with the credit type. Providing credit first of all the Bank analyses the borrower’s
financial capacity and credit repayment possibilities from the borrower’s cash flows.
Credit administration and constant credit monitoring is the main principle in the Bank’s security and reliability maintenance. The proper
credit administration includes the timely updating of the borrower’s credit file, providing with the latest financial information, the timely
introduction of latest financial information to the database and preparation of the various documents and their amendments.
The Bank’s Credit Risk Department collects and, if necessary, provides to responsible managerial personnel information on external
conditions, the growth of the credit portfolio and fulfilment of targeted profit, expenses associated with risks, the largest amounts due
from clients, distribution of credits by the type of economic activity, repayment terms past due, the largest clients with default possibilities,
analysis of the credit portfolio by risk groups, changes in risk groups over a certain time period and other credit risk metrics.
The Bank establishes and implements the procedures, improves information systems for monitoring separate credits as well as loan
portfolio. These procedures include the criteria for early indication of potentially impaired loans and other transactions.
(b) Debt securities
Credit risk exposures with respect to debt securities are managed by carrying out counterparty analysis when decision for acquisition of
securities is made. The concentration risk together with lending exposure arising from debt securities portfolio is analysed and monitored
on a regular basis by the Risk Management Committee of the Bank.
(c) Credit-related commitments
Other credit-related commitments assumed by the Group include guarantees, letters of documentary credit, commitments to grant a
credit which expose the Group to the same credit risk as the loans do. The key aim of these instruments is to ensure that funds are
available to a customer as required. The above guarantees and letters of documentary credit are usually collateralised by clients’ funds
in the Bank accounts. With regards to commitments to grant credit the Bank is exposed to loss equal to the unused commitment amount.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
26
FINANCIAL RISK MANAGEMENT (CONTINUED)
1.2. Control of risk limits and risk mitigation policy
(a) Concentrations
The Group manages, limits and controls concentration of credit risk – in particular, to individual counterparties and groups of the
associated counterparties as well as to economic sectors.
In addition to the supervisory requirements to limit the exposures to a single borrower and large exposures, the Group also sets exposure
requirement, which to a single borrower may not exceed 15 percent of the Bank’s capital. The Bank’s Council must approve the higher
limits. Prudential maximum exposure requirement to a single borrower is 25 percent. Concentration of credit risk of the Bank is disclosed
in Section 1.8. of Financial Risk Management disclosure.
The Group also sets limits to industry segments, i.e. a possible concentration in certain industries at the Group’s level is restricted by the
internal lending limits. The percentage and volume of lending limits are set for individual industries to ensure that the Group is not overly
exposed to any particular economic sector in the country.
The geographical concentration risk is not recognised in the Group’s business since the principle of focusing on domestic customers is
followed.
Some other specific control and mitigation measures are outlined below.
b) Collateral
The Group mitigates credit risk by taking security for loans granted. The types of collateral considered by the Group as the most
acceptable for loans and advances are the following:
• Real estate (mainly residential properties, commercial and industrial real estate);
• Business assets (equipment, inventory, transport vehicles);
• Property rights over financial instruments (debt securities, equities);
• Third party guarantees.
Long-term financing and lending to corporate entities are generally secured; revolving facilities and consumer loans to private individuals
are generally unsecured. In order to minimize the credit loss as the impairment indicators for the relevant individual loans and advances
are noticed the Group seeks for additional collateral from the counterparty.
While calculating a decrease in value for the loan the repayment of which is secured by the collateral, a cash flow from the security
measure is also taken into consideration when determining the LGD factor. If several loans are insured with the same security measure
(collateral), such security measure (collateral) is allocated according to rank of the pledge.
Debt securities, treasury and other eligible bills are generally unsecured.
For finance lease receivables the lender remains the owner of the leased object. Therefore, in case of customer’s default the lender is
able to gain control on the risk mitigation measures and realize them in rather short period.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
27
FINANCIAL RISK MANAGEMENT (CONTINUED)
1.3. Impairment and provisioning policies
a) ECL model used by the Group
Upon assessing impairment losses on loans, due to banks, debt securities at amortized cost and at fair value through other
comprehensive income and other assets the Group follows the requirements expected credit loss (ECL) model prescribed in IFRS 9
Financial Instruments. The Group and the Bank carries out valuation of assets on a monthly basis, based on valuation policies approved
by the Board of the Bank.
The ECL is measured by the formula:
PD x LGD x EAD = ECL
Where:
PD – probability of default. It represents the likelihood of a borrower on defaulting on its financial obligation;
LGD – loss given default. It represents the extent of loss the Group is likely to incur in case the borrower defaults;
EAD – exposure at default. It represents expected exposure at the time of the default.
The financial assets are grouped into 3 stages:
1) Stage 1 financial assets – no significant increase in credit risk is observed since initial recognition. The Group uses low credit
risk exemption and assigns all of the exposures with external investment grade credit rating or exposures with Standard
internal credit rating to Stage 1. 12 months PDs apply to Stage 1 exposures;
2) Stage 2 financial assets – significant increase in credit risk is observed since initial recognition. The Group uses multiple
criteria to assess whether the credit risk has increased. Main criteria include: credit rating decrease (external credit rating
decrease by >=3 notches; internal credit rating decrease by 1 notch), payment delays (>30 days past due financial assets are
classified to Stage 2 unless there is observable evidence indicating otherwise), other observable criteria (restructuring,
forbearance, inclusion in Watch List, other qualitative factors showing increased credit risk). Lifetime PDs apply to Stage 2
exposures;
3) Stage 3 financial assets – credit-impaired financial assets. Main criteria for inclusion the asset in Stage 3 include: bankruptcy
of the customer; termination of the contract; payment delay >90 days; non-performing exposure status by regulatory rules (i.e.
the exposure is unlikely to be repaid in full without collateral realisation (irrespective of any past-due amount or of the number
of days past-due)); other observable criteria. For Stage 3 exposures, the PD ratio is always equal to 1. Minimal provisions are
also calculated in accordance to regulatory requirements for older non-performing loans.
In case observable evidence is available, Group’s employees responsible for impairment calculations can rank certain exposures to
better or worse stage.
The exposure ceases to be Stage 3 when it no longer meets the criteria for the consecutive period of at least 3 months. It should be
noted that some of the regulatory non-performing exposure criteria have their own exit periods, therefore the period for an exposure to
be classified out of Stage 3 may actually be longer.
The Group calculates its own PDs for loans to customers, finance lease receivables and other assets and uses PDs published by the
rating agencies for debt securities and due to banks.
PDs for loans to customers and finance lease receivables are calculated using the historical data of Group’s own lending portfolio. Full
approach is applied for finance lease receivables as financial leases are part of Group’s main activities. For this purpose, the Group uses
migration matrices for the exposures grouped by the economic sector. The Group uses PDs published by rating agencies for debt
securities and due from banks. For other financial assets, a simplified model derived from Group’s lending data is used.
For loans to customers and finance lease receivables, LGDs are estimated by the Group using the value of collateral available for each
exposure individually and discounting by certain ratios over certain period of time. Ratios and recovery periods depend on the type of
collateral and are derived from Group’s own recovery experience. For consumer financing exposures, the LGDs are estimated on a
exposure group level using the ultimate recovery rate historical data. For debt securities and due from banks, LGDs from rating agencies
are used.
For lending portfolio, Stage 1 EAD represents the expected exposure value over 12 month period and assumptions on the expected use
of the off-balance sheet credit commitments; Stage 2 EAD represents the expected exposure value over the term of the loan and
assumptions on the expected use of the off-balance sheet credit commitments. Stage 3 EAD is estimated as the total balance and off-
balance sheet exposure. For debt securities, due from banks and other assets, gross exposure value is used as EAD estimate.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
28
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group’s PD estimates incorporate forward-looking information. The Group transfers its historical (“through the cycle”) data to economic-
situation specific (“point-in-time”) data by using models based on the expected economic development scenarios. The economic variables
and their associated impact on the PD vary by financial instrument. The impact of economic variables on PD has been determined by
performing statistical regression analysis. Expert judgement is also applied in the process.
To include the impact of economic variables, the Group uses 3 economic scenarios (base case, optimistic, pessimistic) that are based
on the forecasts published by the institutions that publish economic forecasts (i.e. Bank of Lithuania, Ministry of Finance of Lithuania,
etc.) and derives a single scenario based on the probabilities assigned to these scenarios. These probabilities are approved in ECL
calculation procedure, any deviation from procedure is approved by the Board of the Bank. Base case scenario for GDP, unemployment
rate and wage changes are aligned to the base case forecasts published by the institutions and optimistic and pessimistic scenarios are
calibrated by expert judgement of Group’s employees.
The most significant assumptions used for the ECL estimates as at 31 December 2022 are presented in the tables below:
GDP growth
Unemployment
Chang
e in
manufacturing
output
Change in
housing prices
Change in
salaries
At 31 December 2022:
Base scenario
0.70%
7.00%
6.00%
-0.53%
8.40%
Optimistic scenario
1.30%
6.70%
20.30%
13.40%
9.10%
Pessimistic scenario
-2.80%
7.90%
-1.45%
-15.18%
4.60%
Scenario probabilities and weighted average GDP growth:
2023
2024
2025
2026
2027
At 31 December 2022:
GDP
Probability
GDP
Probability
GDP
Probability
GDP
Probability
GDP
Probability
Base scenario
0.70%
60 %
3.00%
60 %
3.00%
60 %
2,30%
60 %
2,30%
60 %
Optimistic scenario
1.30%
15 %
3.80%
15 %
3.80%
15 %
3,10%
15 %
3,10%
15 %
Pessimistic scenario
-2.80%
25 %
1.10%
25 %
1.10%
25 %
0,10%
25 %
0,10%
25 %
Weighted average GDP
growth
-0.09% 2.65% 2.65% 1.95% 1,95%
The most significant assumptions used for the ECL estimates as at 31 December 2021 are presented in the tables below:
GDP growth
Change in
agricultural
production
Unemployment
Inflation
Change in
manufacturing
output
Change in
housing prices
Change in
freight
Change in
salaries
At 31 December 2021:
Base scenario
3.60 %
-1.80 %
6.7 %
5.10 %
17.40 %
2.12 %
7.55 %
8.20 %
Optimistic scenario
3.80 %
9.10 %
6.40 %
7.60 %
17.40 %
9.60 %
12.20 %
8.20 %
Pessimistic scenario
1.10 %
-5.98 %
8.00 %
2.60 %
-1.80 %
-15.20 %
-3.30 %
4.00 %
Scenario probabilities and weighted average GDP growth:
2022
2023
2024
2025
2026
At 31 December 2021:
GDP
Probability
GDP
Probability
GDP
Probability
GDP
Probability
GDP
Probability
Base scenario
3.60 %
50 %
3.50 %
50 %
3.50 %
50 %
2.40 %
50 %
2.40 %
50 %
Optimistic scenario
3.80 %
5%
3.80 %
5%
3.80 %
5%
3.80 %
5%
3.80 %
5%
Pessimistic scenario
1.10 %
45 %
1.10 %
45 %
1.10 %
45 %
1.10 %
45 %
1.10 %
45 %
Weighted average GDP
growth
2.49% 2.44% 2.44% 1.89% 1.89%
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
29
FINANCIAL RISK MANAGEMENT (CONTINUED)
The assumptions underlying ECL calculations are subject to frequent review, the models used in ECL calculation are back tested against
the actual performance data. In case of need, changes are made to the models. In 2022, PD calculations were modified by removing the
cure rate from PD and adding cure rate to the LGD calculations. In 2021, the scenario composition approach was changed (previously,
probabilities were assigned to 4 scenarios in a way that the resulting scenario would match the dominant base case forecast by the
institutions; currently, scenarios based on those published by the institutions are assigned probabilities by Group’s employees
judgement). EAD calculation models were revised in 2021 (likely usage off-balance sheet commitments was added to Stage 1 EAD
calculation, Stage 2 EAD calculation was modified to include the average gross value of the loan through its lifetime instead of gross
value at the moment of calculation; forward looking information inclusion in PD calculation models principles were revised; LGD models
were revised to include forward looking information on the recovery prices, estimated recovery costs and a possibility of unsuccessful
recovery.
b) Impairment loss sensitivity
The most significant assumptions affected the estimated ECL allowance are GDP, given the significant impact on the borrowers
performance; real estate price level, given the significant impact on the collateral values and consumer financing portfolio recovery rates,
given the significant impact on the ultimate recoveries of the unsecured borrowings. The table below provides an sensitivity analysis of
the above factors.
2022
2021
Group
Bank
Group
Bank
Scenario 1: GDP growth
increases by 0.5 p.p.
ECL decreases by EUR 624
thousand, equity
increases
by EUR 499 thousand
ECL decreases by EUR 623
thousand, equity incr
eases
by EUR 498 thousand
ECL decreases by EUR 323
thousand, equity increases
by EUR 258 thousand
ECL decreases by EUR 323
thousand, equity increases
by EUR 258 thousand
Scenario
2: GDP growth
decreases by 0.5 p.p.
ECL increases by EUR 360
thousand, equity decreases
by 288 thousand
ECL increases by EUR 358
thousand, equity decreases
by EUR 286 thousand
ECL increases by EUR 323
thousand, equity decreases
by 258 thousand
ECL increases by EUR 323
thousand, equity decreases
by EUR 258 thousand
Scenario 3: rea
l estate prices
increase by 5%
ECL decreases by EUR
1,
039 thousand, equity
increases by EUR 831
thousand
ECL decreases by EUR -
1,
039 thousand, equity
increases by EUR 831
thousand
ECL decreases by EUR 776
thousand, equity increases
by EUR 621 thousand
ECL decreases by EUR 776
thousand, equity increases
by EUR 621 thousand
Scenario 4: real estate prices
decrease by 5%
ECL increases by EUR
1,
171 thousand, equity
decreases by EUR
937
thousand
ECL increases by EUR
1,
171 thousand, equity
decreases by EUR 937
thousand
ECL increases by EUR 679
thousand, equity decreases
by EUR 543 thousand
ECL increases by EUR 679
thousand, equity decreases
by EUR 543 thousand
Scenario 5: consumer
financing portfolio recoveries
increase by 5 p.p.
ECL decreases by EUR 820
thousand, eq
uity increases
by EUR 656 thousand
ECL decreases by EUR 11
thousand, equity increases
by EUR 9 thousand
ECL decreases by EUR 776
thousand, equity
increases
by EUR 621 thousand
ECL decreases by EUR 14
thousand, equity increases
by EUR 11 thousand
Scenario 6: consumer
financing portfolio recoveries
decrease by 5 p.p.
ECL increases by EUR 816
thousand, equity decreases
by EUR 653 thousand
ECL increases by EUR 11
thousand, equity decreases
by EUR 9 thousand
ECL increases by EUR 776
thousand, equity decreases
by EUR 621 thousand
ECL increases by EUR 14
thousand, equity decreases
by EUR 11 thousand
c) write-offs
The accumulated write-offs, including any amount constituting legal claims to the borrowers even if those amounts were never recognized
on the balance sheet (the most common example of such cases is the difference between gross value and acquisition value of credit-
impaired loans acquired by the Group) is presented in the table below:
2022
2021
Group
Bank
Group
Bank
Total accumulated write-offs subject to enforcement
81,514
81,259
81,589
81,111
of which: amounts written-off during the year subject to enforcement
8,263
8,249
3,426
3,220
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
30
FINANCIAL RISK MANAGEMENT (CONTINUED)
1.4. Maximum exposure to credit risk before collateral held or other credit enhancements
2022
2021
Group
Bank
Group
Bank
Cash equivalents:
307,443
306,303
898,862
897,988
Balances in bank correspondent accounts
179,235
178,095
31,068
30,194
Placements with Central Bank
128,208
128,208
867,794
867,794
Loans and advances to banks
2,733
2,733
1,196
1,196
Loans and advances to customers:
2,391,629
2,370,762
1,908,681
1,889,629
Loans and advances to financial institutions
18,079
195,352
6,947
124,816
Loans to individuals (Retail):
1,113,969
915,829
690,008
553,087
Consumer loans
201,152
3,012
143,462
6,541
Mortgages
663,328
663,328
455,126
455,126
Other (reverse repurchase agreements, other loans backed by
securities, other)
249,489
249,489
91,420
91,420
Loans to business customers:
1,259,581
1,259,581
1,211,726
1,211,726
Large corporates
103,647
103,647
127,772
127,772
SME
1,073,266
1,073,266
947,985
947,985
Central and local authorities, administrative bodies and other
82,668
82,668
135,969
135,969
Finance lease receivables
242,448
242,192
195,174
194,909
Individuals
27,458
27,458
26,630
26,630
Business customers
214,990
214,734
168,544
168,279
Securities in the trading book:
Debt securities in the trading book
30,148
27,056
20,454
14,622
Derivative financial instruments
897
897
2,121
2,121
Investment securities at fair value
Debt securities at fair value through other comprehensive income
85,271
85,271
78,126
78,126
Investment securities at amortized cost
Debt securities at amortized cost
969,033
956,332
705,398
692,226
Other financial assets
5,815
5,620
16,398
16,271
Credit risk exposures relating to off –balance sheet items are as follows:
Financial guarantees
52,655
52,716
52,931
52,992
Letters of credit
5,756
5,756
1,308
1,308
Loan commitments and other credit related liabilities
490,944
492,592
397,225
407,440
At 31 December
4,584,772
4,548,230
4,277,874
4,248,828
The table above represents a worst-case scenario of credit risk exposure at 31 December 2022 and 2021, without taking into account
any collateral held or other credit enhancements attached. For on-balance sheet assets, the exposures presented above are net carrying
amount as reported in the balance sheet.
1.5. Loans to customers
Loans to customers are summarised as follows:
2022
2021
Group
Bank
Group
Bank
Gross loans to customers
2,425,858
2,397,467
1,944,377
1,917,766
Allowance for loan impairment
(34,229)
(26,705)
(35,696)
(28,137)
Net loans to customers
2,391,629
2,370,762
1,908,681
1,889,629
During the year ended 31 December 2022, the Group’s gross loans and advances increased by 25%. The Group’s total impairment
provision for loans and advances amounts to EUR 34,229 thousand (2021: EUR 35,696 thousand) and it accounts for 1.41% of the
respective portfolio (2021: 1.84%).
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
31
FINANCIAL RISK MANAGEMENT (CONTINUED)
a) Credit grades
The Group and the Bank examines the potential borrower’s financial performance before issuing a loan and monitors any development
in financial performance during the whole loan service period. The Group and the Bank evaluates the borrower’s financial performance
at least annually. Consumer loans to individuals are assessed based on application scorings when decision is made. After they are
granted they are monitored based on their past due status.
The Bank uses internal grade system that has 11 internal grades (1 – best, 11 – worst). During the first quarter of 2021, internal credit
rating procedures were enhanced: an updated legal customer financial status methodology was implemented. Main change in the
methodology – increased number of grades: there were 5 internal grades under previous methodology, updated methodology has 11
grades. This allows for more granular assessment of borrowers. Clear links between internal credit grades and credit stages have been
established – exposures assigned to internal credit rating grades 7 – 9 are in credit stage 2, exposures assigned internal grades 10 – 11
are in credit stage 3.
Group loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
1,724,435
27,458
100
1,751,993
1,367,332
42,311
1,118
1,410,761
Watch
294,474
33,957
460
328,891
173,164
74,411
476
248,051
Substandard
164,085
114,386
5,139
283,610
101,949
118,552
5,088
225,589
Problem
-
-
61,368
61,368
6
335
59,636
59,977
Gross
2,182,994
175,801
67,067
2,425,862
1,642,451
235,609
66,318
1,944,378
Less: allowance for impairment
(13,539)
(2,412)
(18,282)
(34,233)
(12,468)
(3,911)
(19,318)
(35,697)
Net
2,169,455
173,389
48,785
2,391,629
1,629,983
231,698
47,000
1,908,681
Bank loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
1,710,732
204,615
-
1,915,347
1,354,300
159,981
1,034
1,515,315
Watch
266,409
33,615
-
300,024
148,178
73,902
177
222,257
Substandard
9,574
111,158
-
120,732
3,190
115,762
1,286
120,238
Problem
-
-
61,368
61,368
6
335
59,615
59,956
Gross
1,986,715
349,388
61,368
2,397,471
1,505,674
349,980
62,112
1,917,766
Less: allowance for impairment
(9,427)
(1,676)
(15,606)
(26,709)
(8,275)
(2,659)
(17,204)
(28,138)
Net
1,977,288
347,712
45,762
2,370,762
1,497,399
347,321
44,908
1,889,628
Group loans to individuals (retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
880,302
11,260
100
891,662
550,733
6,044
1,118
557,895
Watch
47,236
2,214
460
49,910
28,711
2,355
476
31,542
Substandard
164,103
4,661
5,139
173,903
99,364
4,721
5,088
109,173
Problem
-
-
10,022
10,022
-
-
1,217
1,217
Gross
1,091,641
18,135
15,721
1,125,497
678,808
13,120
7,899
699,827
Less: allowance for impairment
(5,964)
(814)
(4,750)
(11,528)
(5,575)
(1,357)
(2,887)
(9,819)
Net
1,085,677
17,321
10,971
1,113,969
673,233
11,763
5,012
690,008
Bank loans to individuals (retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
866,599
11,144
-
877,743
537,700
5,846
1,034
544,580
Watch
19,171
1,872
-
21,043
3,725
1,846
177
5,748
Substandard
9,592
1,433
-
11,025
605
1,931
1,286
3,822
Problem
-
-
10,022
10,022
-
-
1,196
1,196
Gross
895,362
14,449
10,022
919,833
542,030
9,623
3,693
555,346
Less: allowance for impairment
(1,852)
(78)
(2,074)
(4,004)
(1,382)
(105)
(773)
(2,260)
Net
893,510
14,371
7,948
915,829
540,648
9,518
2,920
553,086
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
32
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group loans to individuals (retail): Consumer loans
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
16,618
195
100
16,913
19,525
375
125
20,025
Watch
28,071
344
460
28,875
24,996
513
299
25,808
Substandard
154,513
3,228
5,140
162,881
98,764
2,790
3,809
105,363
Problem
-
-
186
186
-
-
71
71
Gross
199,202
3,767
5,886
208,855
143,285
3,678
4,304
151,267
Less: allowance for impairment
(4,169)
(739)
(2,795)
(7,703)
(4,336)
(1,288)
(2,181)
(7,805)
Net
195,033
3,028
3,091
201,152
138,949
2,390
2,123
143,462
Bank loans to individuals (retail): Consumer loans
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
2,915
79
-
2,994
6,494
176
40
6,710
Watch
6
2
-
8
10
4
-
14
Substandard
3
-
-
3
6
-
6
12
Problem
-
-
186
186
-
-
71
71
Gross
2,924
81
186
3,191
6,510
180
117
6,807
Less: allowance for impairment
(57)
(3)
(119)
(179)
(143)
(36)
(88)
(267)
Net
2,867
78
67
3,012
6,367
144
29
6,540
Group loans to individuals (retail): Mortgages
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
646,625
7,538
-
654,163
443,015
5,016
819
448,850
Watch
2,902
1,368
-
4,270
1,550
1,449
163
3,162
Substandard
133
922
-
1,055
527
1,760
781
3,068
Problem
-
-
5,762
5,762
-
-
996
996
Gross
649,660
9,828
5,762
665,250
445,092
8,225
2,759
456,076
Less: allowance for impairment
(759)
(37)
(1,126)
(1,922)
(448)
(59)
(443)
(950)
Net
648,901
9,791
4,636
663,328
444,644
8,166
2,316
455,126
Bank loans to individuals (retail): Mortgages
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
646,625
7,538
-
654,163
443,013
5,017
820
448,850
Watch
2,902
1,368
-
4,270
1,550
1,449
163
3,162
Substandard
133
922
-
1,055
527
1,760
781
3,068
Problem
-
-
5,762
5,762
-
-
996
996
Gross
649,660
9,828
5,762
665,250
445,090
8,226
2,760
456,076
Less: allowance for impairment
(759)
(37)
(1,126)
(1,922)
(448)
(59)
(443)
(950)
Net
648,901
9,791
4,636
663,328
444,642
8,167
2,317
455,126
Group loans to individuals (retail): Other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
217,059
3,527
-
220,586
88,193
653
174
89,020
Watch
16,263
502
-
16,765
2,165
393
14
2,572
Substandard
9,457
511
(1)
9,967
73
171
498
742
Problem
-
-
4,074
4,074
-
-
150
150
Gross
242,779
4,540
4,073
251,392
90,431
1,217
836
92,484
Less: allowance for impairment
(1,036)
(38)
(829)
(1,903)
(791)
(10)
(263)
(1,064)
Net
241,743
4,502
3,244
249,489
89,640
1,207
573
91,420
Bank loans to individuals (retail): Other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
217,059
3,527
-
220,586
88,193
653
174
89,020
Watch
16,263
502
-
16,765
2,165
393
14
2,572
Substandard
9,456
511
-
9,967
72
171
499
742
Problem
-
-
4,074
4,074
-
-
129
129
Gross
242,778
4,540
4,074
251,392
90,430
1,217
816
92,463
Less: allowance for impairment
(1,036)
(38)
(829)
(1,903)
(791)
(10)
(242)
(1,043)
Net
241,742
4,502
3,245
249,489
89,639
1,207
574
91,420
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
33
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
17,771
-
-
17,771
3,210
3,819
-
7,029
Watch
317
-
-
317
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Problem
-
-
-
-
-
-
-
-
Gross
18,088
-
-
18,088
3,210
3,819
-
7,029
Less: allowance for impairment
(9)
-
-
(9)
(64)
(18)
-
(82)
Net
18,079
-
-
18,079
3,146
3,801
-
6,947
Bank loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
17,771
177,273
-
195,044
3,211
121,687
-
124,898
Watch
317
-
-
317
-
-
-
-
Substandard
-
-
-
-
-
-
-
-
Problem
-
-
-
-
-
-
-
-
Gross
18,088
177,273
-
195,361
3,211
121,687
-
124,898
Less: allowance for impairment
(9)
-
-
(9)
(64)
(18)
-
(82)
Net
18,079
177,273
-
195,352
3,147
121,669
-
124,816
Group loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
826,362
16,198
-
842,560
813,389
32,448
-
845,837
Watch
246,921
31,743
-
278,664
144,453
72,056
-
216,509
Substandard
(18)
109,725
-
109,707
2,585
113,831
-
116,416
Problem
-
-
51,346
51,346
6
335
58,419
58,760
Gross
1,073,265
157,666
51,346
1,282,277
960,433
218,670
58,419
1,237,522
Less: allowance for impairment
(7,566)
(1,598)
(13,532)
(22,696)
(6,829)
(2,536)
(16,431)
(25,796)
Net
1,065,699
156,068
37,814
1,259,581
953,604
216,134
41,988
1,211,726
Bank loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
826,362
16,198
-
842,560
813,389
32,448
-
845,837
Watch
246,921
31,743
-
278,664
144,453
72,056
-
216,509
Substandard
(18)
109,725
-
109,707
2,585
113,831
-
116,416
Problem
-
-
51,346
51,346
6
335
58,419
58,760
Gross
1,073,265
157,666
51,346
1,282,277
960,433
218,670
58,419
1,237,522
Less: allowance for impairment
(7,566)
(1,598)
(13,532)
(22,696)
(6,829)
(2,536)
(16,431)
(25,796)
Net
1,065,699
156,068
37,814
1,259,581
953,604
216,134
41,988
1,211,726
Group loans to business customers: Large corporates
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
72,453
455
-
72,908
89,073
4,392
-
93,465
Watch
1,822
8,005
-
9,827
(1)
16,987
-
16,986
Substandard
(18)
21,504
-
21,486
2,586
14,365
-
16,951
Problem
-
-
1,596
1,596
-
-
1,925
1,925
Gross
74,257
29,964
1,596
105,817
91,658
35,744
1,925
129,327
Less: allowance for impairment
(301)
(273)
(1,596)
(2,170)
(537)
(140)
(878)
(1,555)
Net
73,956
29,691
-
103,647
91,121
35,604
1,047
127,772
Bank loans to business customers: Large corporates
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
72,453
455
-
72,908
89,073
4,392
-
93,465
Watch
1,822
8,005
-
9,827
(1)
16,987
-
16,986
Substandard
(18)
21,504
-
21,486
2,586
14,365
-
16,951
Problem
-
-
1,596
1,596
-
-
1,925
1,925
Gross
74,257
29,964
1,596
105,817
91,658
35,744
1,925
129,327
Less: allowance for impairment
(301)
(273)
(1,596)
(2,170)
(537)
(140)
(878)
(1,555)
Net
73,956
29,691
-
103,647
91,121
35,604
1,047
127,772
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
34
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group loans to business customers: SME
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
673,520
15,175
-
688,695
592,410
26,465
-
618,875
Watch
245,088
23,738
-
268,826
144,359
55,052
-
199,411
Substandard
-
86,866
-
86,866
(1)
97,371
-
97,370
Problem
-
-
48,308
48,308
6
335
55,029
55,370
Gross
918,608
125,779
48,308
1,092,695
736,774
179,223
55,029
971,026
Less: allowance for impairment
(7,200)
(1,312)
(10,917)
(19,429)
(5,866)
(2,321)
(14,854)
(23,041)
Net
911,408
124,467
37,391
1,073,266
730,908
176,902
40,175
947,985
Bank loans to business customers: SME
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
673,520
15,175
-
688,695
592,410
26,465
-
618,875
Watch
245,088
23,738
-
268,826
144,359
55,052
-
199,411
Substandard
-
86,866
-
86,866
(1)
97,371
-
97,370
Problem
-
-
48,308
48,308
6
335
55,029
55,370
Gross
918,608
125,779
48,308
1,092,695
736,774
179,223
55,029
971,026
Less: allowance for impairment
(7,200)
(1,312)
(10,917)
(19,429)
(5,866)
(2,321)
(14,854)
(23,041)
Net
911,408
124,467
37,391
1,073,266
730,908
176,902
40,175
947,985
Group loans to business customers: Central and local authorities and other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
80,389
568
-
80,957
131,906
1,591
-
133,497
Watch
11
-
-
11
95
17
-
112
Substandard
-
1,355
-
1,355
-
2,095
-
2,095
Problem
-
-
1,442
1,442
-
-
1,465
1,465
Gross
80,400
1,923
1,442
83,765
132,001
3,703
1,465
137,169
Less: allowance for impairment
(65)
(13)
(1,019)
(1,097)
(426)
(75)
(699)
(1,200)
Net
80,335
1,910
423
82,668
131,575
3,628
766
135,969
Bank loans to business customers: Central and local authorities and other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
80,389
568
-
80,957
131,906
1,591
-
133,497
Watch
11
-
-
11
95
17
-
112
Substandard
-
1,355
-
1,355
-
2,095
-
2,095
Problem
-
-
1,442
1,442
-
-
1,465
1,465
Gross
80,400
1,923
1,442
83,765
132,001
3,703
1,465
137,169
Less: allowance for impairment
(65)
(13)
(1,019)
(1,097)
(426)
(75)
(699)
(1,200)
Net
80,335
1,910
423
82,668
131,575
3,628
766
135,969
For analysis of debt securities according to the credit quality see Notes 12 and 15.
b) Payment delays
The tables below provide an analysis of loans and advances to customers by payment delays. The Group considers a loan to be past
due when the following criteria are met: for loans to individuals – overdue amount is higher than the lower of EUR 100 or 1% of total
exposure; for loans to business customers – overdue amount is higher than the lower of EUR 500 or 1% of total exposure.
Group loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
2,146,375
155,834
31,904
2,334,113
1,598,066
220,436
28,330
1,846,832
Past due up to 30 days
36,399
9,680
10,932
57,011
43,495
8,966
17,334
69,795
Past due 31-90 days
218
10,283
1,527
12,028
888
6,208
2,936
10,032
Past due more than 90 days
-
-
22,707
22,707
-
-
17,718
17,718
Gross
2,182,992
175,797
67,070
2,425,859
1,642,449
235,610
66,318
1,944,377
Less: allowance for impairment
(13,538)
(2,410)
(18,282)
(34,230)
(12,467)
(3,911)
(19,318)
(35,696)
Net
2,169,454
173,387
48,788
2,391,629
1,629,982
231,699
47,000
1,908,681
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
35
FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
1,961,096
332,429
30,030
2,323,555
1,474,265
338,305
27,006
1,839,576
Past due up to 30 days
25,618
9,340
9,992
44,950
30,785
8,966
16,557
56,308
Past due 31-90 days
-
7,615
875
8,490
623
2,710
1,471
4,804
Past due more than 90 days
-
-
20,472
20,472
-
-
17,078
17,078
Gross
1,986,714
349,384
61,369
2,397,467
1,505,673
349,981
62,112
1,917,766
Less: allowance for impairment
(9,426)
(1,674)
(15,605)
(26,705)
(8,274)
(2,659)
(17,204)
(28,137)
Net
1,977,288
347,710
45,764
2,370,762
1,497,399
347,322
44,908
1,889,629
Group loans to individuals (retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
1,070,574
9,237
4,570
1,084,381
650,343
6,797
2,719
659,859
Past due up to 30 days
20,847
1,100
1,501
23,448
27,891
804
1,282
29,977
Past due 31-90 days
218
7,796
1,196
9,210
571
5,521
2,139
8,231
Past due more than 90 days
-
-
8,456
8,456
-
-
1,759
1,759
Gross
1,091,639
18,133
15,723
1,125,495
678,805
13,122
7,899
699,826
Less: allowance for impairment
(5,963)
(813)
(4,750)
(11,526)
(5,574)
(1,357)
(2,887)
(9,818)
Net
1,085,676
17,320
10,973
1,113,969
673,231
11,765
5,012
690,008
Bank loans to individuals (retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
885,295
8,559
2,696
896,550
526,542
6,797
1,395
534,734
Past due up to 30 days
10,066
760
561
11,387
15,181
804
505
16,490
Past due 31-90 days
-
5,128
544
5,672
306
2,023
674
3,003
Past due more than 90 days
-
-
6,221
6,221
-
-
1,119
1,119
Gross
895,361
14,447
10,022
919,830
542,029
9,624
3,693
555,346
Less: allowance for impairment
(1,851)
(77)
(2,073)
(4,001)
(1,381)
(105)
(773)
(2,259)
Net
893,510
14,370
7,949
915,829
540,648
9,519
2,920
553,087
Group loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
18,088
-
-
18,088
3,211
3,818
-
7,029
Past due up to 30 days
-
-
-
-
-
-
-
-
Past due 31-90 days
-
-
-
-
-
-
-
-
Past due more than 90 days
-
-
-
-
-
-
-
-
Gross
18,088
-
-
18,088
3,211
3,818
-
7,029
Less: allowance for impairment
(9)
-
-
(9)
(64)
(18)
-
(82)
Net
18,079
-
-
18,079
3,147
3,800
-
6,947
Bank loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
18,088
177,273
-
195,361
3,211
121,687
-
124,898
Past due up to 30 days
-
-
-
-
-
-
-
-
Past due 31-90 days
-
-
-
-
-
-
-
-
Past due more than 90 days
-
-
-
-
-
-
-
-
Gross
18,088
177,273
-
195,361
3,211
121,687
-
124,898
Less: allowance for impairment
(9)
-
-
(9)
(64)
(18)
-
(82)
Net
18,079
177,273
-
195,352
3,147
121,669
-
124,816
Group loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
1,057,713
146,597
27,334
1,231,644
944,512
209,821
25,611
1,179,944
Past due up to 30 days
15,552
8,580
9,431
33,563
15,604
8,162
16,052
39,818
Past due 31-90 days
-
2,487
331
2,818
317
687
797
1,801
Past due more than 90 days
-
-
14,251
14,251
-
-
15,959
15,959
Gross
1,073,265
157,664
51,347
1,282,276
960,433
218,670
58,419
1,237,522
Less: allowance for impairment
(7,566)
(1,597)
(13,532)
(22,695)
(6,829)
(2,536)
(16,431)
(25,796)
Net
1,065,699
156,067
37,815
1,259,581
953,604
216,134
41,988
1,211,726
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
36
FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
1,057,713
146,597
27,334
1,231,644
944,512
209,821
25,611
1,179,944
Past due up to 30 days
15,552
8,580
9,431
33,563
15,604
8,162
16,052
39,818
Past due 31-90 days
-
2,487
331
2,818
317
687
797
1,801
Past due more than 90 days
-
-
14,251
14,251
-
-
15,959
15,959
Gross
1,073,265
157,664
51,347
1,282,276
960,433
218,670
58,419
1,237,522
Less: allowance for impairment
(7,566)
(1,597)
(13,532)
(22,695)
(6,829)
(2,536)
(16,431)
(25,796)
Net
1,065,699
156,067
37,815
1,259,581
953,604
216,134
41,988
1,211,726
c) Stage 3 loans and advances to customers
The breakdown of the gross amount of Stage 3 loans and advances by class, along with the fair value of related collateral held by the
Group and the Bank as security is as follows:
31 December 2022
Group
Bank
Gross value
Allowance for
impairment
Net value
Fair value
of
collateral
Gross
value
Allowance for
impairment
Net value
Fair value
of
collateral
Loans and advances to financial
institutions
-
-
-
-
-
-
-
-
Loans to individuals (Retail):
15,723
(4,750)
10,973
8,932
10,022
(2,074)
7,948
8,932
Consumer loans
5,887
(2,795)
3,092
34
186
(119)
67
34
Mortgages
5,762
(1,126)
4,636
5,684
5,762
(1,126)
4,636
5,684
Other
4,074
(829)
3,245
3,214
4,074
(829)
3,245
3,214
Loans to business customers:
51,346
(13,532)
37,814
50,213
51,346
(13,532)
37,814
50,213
Large corporates
1,596
(1,596)
-
1,596
1,596
(1,596)
-
1,596
SME
48,308
(10,917)
37,391
47,436
48,308
(10,917)
37,391
47,436
Central and local authorities,
administrative bodies and other
1,442
(1,019)
423
1,181
1,4
42
(1,019)
423
1,181
Total loans to customers
67,069
(18,282)
48,787
59,145
61,368
(15,606)
45,762
59,145
31 December 2021
Group
Bank
Gross value
Allowance for
impairm
ent
Net value
Fair value
of
collateral
Gross
value
Allowance for
impairment
Net value
Fair value
of
collateral
Loans and advances to financial
institutions
-
-
-
-
-
-
-
-
Loans to individuals (Retail):
7,899
(2,887)
5,012
3,497
3,693
(773)
2,920
3,497
Consumer loans
4,304
(2,181)
2,123
14
117
(88)
29
14
Mortgages
2,759
(443)
2,316
2,687
2,760
(443)
2,317
2,687
Other
836
(263)
573
796
816
(242)
574
796
Loans to business customers:
58,419
(16,431)
41,988
55,130
58,419
(16,431)
41,988
55,130
Large corporates
1,925
(878)
1,047
1,925
1,925
(878)
1,047
1,925
SME
55,029
(14,854)
40,175
51,740
55,029
(14,854)
40,175
51,740
Central and local authorities,
administrative bodies and other
1,465
(699)
766
1,465
1,465
(699)
766
1,465
Total loans to customers
66,318
(19,318)
47,000
58,627
62,112
(17,204)
44,908
58,627
Impairment loss by class of financial assets for loans is disclosed in Note 13.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
37
FINANCIAL RISK MANAGEMENT (CONTINUED)
d) Information about loan collateral
The method for collateral valuation is selected by the Group and the Bank based on specifics of collateral and existing market conditions
on the day of valuation. Based on collateral characteristics and the purpose of its valuation the following valuation methods are used:
comparable sales price method or income capitalisation method. Fair values of the collateral are updated regularly in line with the Bank’s
procedures.
If loan is secured by several different types of collateral, priority in their recognition is based on their liquidity. Cash deposits are treated
as having the highest liquidity followed by guarantees, residential real estate and then other real estate. Securities that have no active
market and other assets are treated as having the lowest liquidity.
Unsecured loans also include loans secured by other types of collateral (e.g. future inflow of funds into the borrowers’ Bank accounts
(controlled by the Bank), third party warrantees, bills of exchange, etc.). The total amount of loans to individuals and business customers
secured by the above security measure but disclosed as unsecured as at 31 December 2022 amounted to EUR 33 million (2021: EUR
39 million). Totally unsecured loans comprise only consumer loans and loans issued by the Bank to its subsidiaries.
31 December 2022
Group loans to individuals (retail)
Consumer loans
Mortgages
Other
Total
Unsecured loans
208,855
-
115,789
324,644
Loans collateralised by:
-
665,250
135,603
800,853
residential real estate -
-
639,916
2,547
642,463
other real estate -
-
25,334
2,062
27,396
securities -
-
-
-
-
guarantees -
-
-
130,961
130,961
cash deposits -
-
-
-
-
other assets -
-
-
33
33
Total
208,855
665,250
251,392
1,125,497
Group loans to business customers
SME
Large corporates
Financial
institutions
Central and local authorities and
other
Total
Unsecured loans
-
-
-
64,141
64,141
Loans collateralised by:
1,092,695
105,817
18,088
19,624
1,236,224
residential real estate -
90,876
1,048
-
523
92,447
other real estate -
1,001,819
104,769
18,088
18,781
1,143,457
securities -
-
-
-
-
-
guarantees -
-
-
-
228
228
cash deposits -
-
-
-
92
92
other assets -
-
-
-
-
-
Total
1,092,695
105,817
18,088
83,765
1,300,365
Bank loans to individuals (retail)
Consumer loans
Mortgages
Other
Total
Unsecured loans
3,191
-
115,789
118,980
Loans collateralised by:
-
665,250
135,603
800,853
residential real estate -
-
639,916
2,547
642,463
other real estate -
-
25,334
2,062
27,396
securities -
-
-
-
-
guarantees -
-
-
130,961
130,961
cash deposits -
-
-
-
-
other assets -
-
-
33
33
Total
3,191
665,250
251,392
919,833
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
38
FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank loans to business customers
SME
Large corporates
Financial
institutions
Central and local authorities and
other
Total
Unsecured loans
-
-
177,273
64,141
241,414
Loans collateralised by:
1,092,695
105,817
18,088
19,624
1,236,224
residential real estate -
90,876
1,048
-
523
92,447
other real estate -
1,001,819
104,769
18,088
18,781
1,143,457
securities -
-
-
-
-
-
guarantees -
-
-
-
228
228
cash deposits -
-
-
-
92
92
other assets -
-
-
-
-
-
Total
1,092,695
105,817
195,361
83,765
1,477,638
31 December 2021
Group loans to individuals (retail)
Consumer loans
Mortgages
Other
Total
Unsecured loans
151,267
972
81,840
234,079
Loans collateralised by:
-
455,104
10,644
465,748
residential real estate -
-
431,102
6,341
437,443
other real estate -
-
19,128
2,493
21,621
securities -
-
4
-
4
guarantees -
-
4,768
1,773
6,541
cash deposits -
-
102
32
134
other assets -
-
-
5
5
Total
151,267
456,076
92,484
699,827
Group loans to business customers
SME
Large corporates
Financial
institutions
Central and local authorities and
other
Total
Unsecured loans
46,150
5,264
7,029
105,541
163,984
Loans collateralised by:
924,876
124,063
-
31,628
1,080,567
residential real estate -
48,060
248
-
307
48,615
other real estate -
676,807
99,085
-
5,665
781,557
securities -
1,509
-
-
-
1,509
guarantees -
177,744
9,082
-
25,656
212,482
cash deposits -
2,503
-
-
-
2,503
other assets -
18,253
15,648
-
-
33,901
Total
971,026
129,327
7,029
137,169
1,244,551
Bank loans to individuals (retail)
Consumer loans
Mortgages
Other
Total
Unsecured loans
6,807
972
81,818
89,597
Loans collateralised by:
-
455,104
10,645
465,749
residential real estate -
-
431,102
6,341
437,443
other real estate -
-
19,128
2,493
21,621
securities -
-
4
-
4
guarantees -
-
4,768
1,773
6,541
cash deposits -
-
102
33
135
other assets -
-
-
5
5
Total
6,807
456,076
92,463
555,346
Bank loans to business customers
SME
Large corporates
Financial
institutions
Central and local authorities and
other
Total
Unsecured loans
46,149
5,264
124,898
105,541
281,852
Loans collateralised by:
924,877
124,063
-
31,628
1,080,568
residential real estate -
48,060
248
-
307
48,615
other real estate -
676,807
99,085
-
5,665
781,557
securities -
1,509
-
-
-
1,509
guarantees -
177,745
9,082
-
25,656
212,483
cash deposits -
2,503
-
-
-
2,503
other assets -
18,253
15,648
-
-
33,901
Total
971,026
129,327
124,898
137,169
1,362,420
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
39
FINANCIAL RISK MANAGEMENT (CONTINUED)
Following tables show the distribution of LTV (loan to collateral value) ratios for the Group’s loan portfolio:
Group loans to customers – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
1,100,547
154,771
53,158
1,308,476
510,681
147,653
39,690
698,024
50% to 60%
135,814
3,817
1,773
141,404
233,293
54,457
3,838
291,588
60% to 70%
118,142
2,019
514
120,675
174,198
8,951
1,636
184,785
70% to 80%
150,547
2,379
268
153,194
103,670
10,926
1,279
115,875
80% to 90%
141,316
1,585
546
143,447
87,644
2,210
3,646
93,500
90% to 100%
13,084
529
53
13,666
20,162
1,881
618
22,661
higher than 100%
171,091
6,126
4,494
181,711
179,515
3,169
10,968
193,652
no collateral
352,451
4,571
6,264
363,286
333,286
6,363
4,643
344,292
Total gross
loans
2,182,992
175,797
67,070
2,425,859
1,642,449
235,610
66,318
1,944,377
Bank loans to customers – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
1,100,547
154,771
53,158
1,308,476
510,681
147,653
39,690
698,024
50% to 60%
135,814
3,817
1,773
141,404
233,293
54,457
3,838
291,588
60% to 70%
118,142
2,019
514
120,675
174,198
8,951
1,636
184,785
70% to 80%
150,547
2,379
268
153,194
103,670
10,926
1,279
115,875
80% to 90%
141,316
1,585
546
143,447
87,644
2,210
3,646
93,500
90% to 100%
13,085
529
53
13,667
20,163
1,881
618
22,662
higher than 100%
171,091
6,126
4,494
181,711
179,515
3,168
10,970
193,653
no collateral
156,172
178,158
563
334,893
196,509
120,735
435
317,679
Total gross
loans
1,986,714
349,384
61,369
2,397,467
1,505,673
349,981
62,112
1,917,766
Group loans to individuals (Retail) – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
197,868
6,304
4,152
208,324
170,879
6,698
1,344
178,921
50% to 60%
66,256
371
1,068
67,695
48,992
1,111
674
50,777
60% to 70%
98,483
934
514
99,931
69,661
980
406
71,047
70% to 80%
148,017
2,043
190
150,250
80,405
220
338
80,963
80% to 90%
138,719
668
546
139,933
79,272
89
70
79,431
90% to 100%
2,302
6
53
2,361
2,606
25
145
2,776
higher than 100%
162,202
3,904
3,124
169,230
2,188
370
593
3,151
no collateral
277,792
3,903
6,076
287,771
224,802
3,629
4,329
232,760
Total gross
loans
1,091,639
18,133
15,723
1,125,495
678,805
13,122
7,899
699,826
Bank loans to individuals (Retail) – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
197,868
6,304
4,152
208,324
170,879
6,698
1,344
178,921
50% to 60%
66,256
371
1,068
67,695
48,992
1,111
674
50,777
60% to 70%
98,483
934
514
99,931
69,661
980
406
71,047
70% to 80%
148,017
2,043
190
150,250
80,405
220
338
80,963
80% to 90%
138,719
668
546
139,933
79,272
89
70
79,431
90% to 100%
2,303
6
53
2,362
2,607
25
145
2,777
higher than 100%
162,202
3,904
3,124
169,230
2,188
369
595
3,152
no collateral
81,513
217
375
82,105
88,025
132
121
88,278
Total gross
loans
895,361
14,447
10,022
919,830
542,029
9,624
3,693
555,346
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
40
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group loans to individuals (Retail) : Consumer loans – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
-
-
-
-
-
-
-
-
50% to 60%
-
-
-
-
-
-
-
-
60% to 70%
-
-
-
-
-
-
-
-
70% to 80%
-
-
-
-
-
-
-
-
80% to 90%
-
-
-
-
-
-
-
-
90% to 100%
580
6
11
597
2,001
24
6
2,031
higher than 100%
85
15
23
123
146
41
9
196
no collateral
198,537
3,746
5,852
208,135
141,138
3,613
4,289
149,040
Total gross
loans
199,202
3,767
5,886
208,855
143,285
3,678
4,304
151,267
Bank loans to individuals (Retail) : Consumer loans – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
-
-
-
-
-
-
-
-
50% to 60%
-
-
-
-
-
-
-
-
60% to 70%
-
-
-
-
-
-
-
-
70% to 80%
-
-
-
-
-
-
-
-
80% to 90%
-
-
-
-
-
-
-
-
90% to 100%
580
6
11
597
2,001
24
6
2,031
higher than 100%
84
15
23
122
145
41
9
195
no collateral
2,260
60
152
2,472
4,364
115
102
4,581
Total gross
loans
2,924
81
186
3,191
6,510
180
117
6,807
Group loans to individuals (Retail) : Mortgages – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
193,191
5,752
3,684
202,627
165,172
6,420
1,220
172,812
50% to 60%
66,007
367
901
67,275
48,304
920
615
49,839
60% to 70%
98,141
922
404
99,467
69,239
536
302
70,077
70% to 80%
148,002
2,043
135
150,180
80,351
218
9
80,578
80% to 90%
138,719
668
527
139,914
79,261
89
68
79,418
90% to 100%
1,713
-
19
1,732
571
-
-
571
higher than 100%
1,837
13
92
1,942
1,233
31
545
1,809
no collateral
2,050
63
-
2,113
961
11
-
972
Total gross
loans
649,660
9,828
5,762
665,250
445,092
8,225
2,759
456,076
Bank loans to individuals (Retail) : Mortgages – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
193,191
5,752
3,684
202,627
165,172
6,420
1,220
172,812
50% to 60%
66,007
367
901
67,275
48,304
920
615
49,839
60% to 70%
98,141
922
404
99,467
69,239
536
302
70,077
70% to 80%
148,002
2,043
135
150,180
80,351
218
9
80,578
80% to 90%
138,719
668
527
139,914
79,261
89
68
79,418
90% to 100%
1,713
-
19
1,732
571
-
-
571
higher than 100%
1,837
13
92
1,942
1,233
31
546
1,810
no collateral
2,050
63
-
2,113
959
12
-
971
Total gross
loans
649,660
9,828
5,762
665,250
445,090
8,226
2,760
456,076
Group loans to individuals (Retail) : Other – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
4,677
552
468
5,697
5,707
278
124
6,109
50% to 60%
249
4
167
420
688
191
59
938
60% to 70%
342
12
110
464
422
444
104
970
70% to 80%
15
-
55
70
54
2
329
385
80% to 90%
-
-
19
19
11
-
2
13
90% to 100%
10
-
23
33
35
1
139
175
higher than 100%
160,281
3,877
3,008
167,166
810
297
39
1,146
no collateral
77,205
95
223
77,523
82,704
4
40
82,748
Total gross
loans
24
2,779
4,540
4,073
251,392
90,431
1,217
836
92,484
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
41
FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank loans to individuals (Retail) : Other – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
4,677
552
468
5,697
5,707
278
124
6,109
50% to 60%
249
4
167
420
688
191
59
938
60% to 70%
342
12
110
464
422
444
104
970
70% to 80%
15
-
55
70
54
2
329
385
80% to 90%
-
-
19
19
11
-
2
13
90% to 100%
10
-
23
33
35
1
139
175
higher than 100%
160,281
3,877
3,009
167,167
810
297
40
1,147
no collateral
77,204
95
223
77,522
82,703
4
19
82,726
Total gross
loans
242,778
4,540
4,074
251,392
90,430
1,217
816
92,463
Group loans to financial institutions – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
17,756
-
-
17,756
1,553
3,432
-
4,985
50% to 60%
317
-
-
317
-
-
-
-
60% to 70%
-
-
-
-
-
-
-
-
70% to 80%
-
-
-
-
-
-
-
-
80% to 90%
-
-
-
-
-
-
-
-
90% to 100%
-
-
-
-
-
-
-
-
higher than 100%
-
-
-
-
-
-
-
-
no collateral
15
-
-
15
1,657
387
-
2,044
Total gross
loans
18,088
-
-
18,088
3,210
3,819
-
7,029
Bank loans to financial institutions – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
17,756
-
-
17,756
1,553
3,432
-
4,985
50% to 60%
317
-
-
317
-
-
-
-
60% to 70%
-
-
-
-
-
-
-
-
70% to 80%
-
-
-
-
-
-
-
-
80% to 90%
-
-
-
-
-
-
-
-
90% to 100%
-
-
-
-
-
-
-
-
higher than 100%
-
-
-
-
-
-
-
-
no collateral
15
177,273
-
177,288
1,658
118,255
-
119,913
Total gross
loans
18,088
177,273
-
195,361
3,211
121,687
-
124,898
Group loans to business customers – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
884,923
148,467
49,006
1,082,396
338,249
137,523
38,346
514,118
50% to 60%
69,241
3,446
705
73,392
184,301
53,346
3,164
240,811
60% to 70%
19,659
1,085
-
20,744
104,537
7,971
1,230
113,738
70% to 80%
2,530
336
78
2,944
23,265
10,706
941
34,912
80% to 90%
2,597
917
-
3,514
8,372
2,121
3,576
14,069
90% to 100%
10,782
523
-
11,305
17,556
1,856
473
19,885
higher than 100%
8,889
2,223
1,370
12,482
177,327
2,799
10,375
190,501
no collateral
74,644
669
187
75,500
106,826
2,348
314
109,488
Total gross
loans
1,073,265
157,666
51,346
1,282,277
960,433
218,670
58,419
1,237,522
Bank loans to business customers – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
884,923
148,467
49,006
1,082,396
338,249
137,523
38,346
514,118
50% to 60%
69,241
3,446
705
73,392
184,301
53,346
3,164
240,811
60% to 70%
19,659
1,085
-
20,744
104,537
7,971
1,230
113,738
70% to 80%
2,530
336
78
2,944
23,265
10,706
941
34,912
80% to 90%
2,597
917
-
3,514
8,372
2,121
3,576
14,069
90% to 100%
10,782
523
-
11,305
17,556
1,856
473
19,885
higher than 100%
8,889
2,223
1,370
12,482
177,327
2,799
10,375
190,501
no collateral
74,644
669
187
75,500
106,826
2,348
314
109,488
Total gross
loans
1,073,265
157,666
51,346
1,282,277
960,433
218,670
58,419
1,237,522
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
42
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group loans to business customers: Large corporates – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
57,160
29,508
1,596
88,264
38,505
20,065
347
58,917
50% to 60%
6,518
-
-
6,518
16,541
9,367
1,578
27,486
60% to 70%
-
-
-
-
3,340
1,588
-
4,928
70% to 80%
-
1
-
1
91
4,724
-
4,815
80% to 90%
-
455
-
455
-
-
-
-
90% to 100%
9,754
-
-
9,754
10,275
-
-
10,275
higher than 100%
133
-
-
133
21,590
-
-
21,590
no collateral
692
-
-
692
1,316
-
-
1,316
Total gross
loans
74,257
29,964
1,596
105,817
91,658
35,744
1,925
129,327
Bank loans to business customers: Large corporates – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
57,160
29,508
1,596
88,264
38,505
20,065
347
58,917
50% to 60%
6,518
-
-
6,518
16,541
9,367
1,578
27,486
60% to 70%
-
-
-
-
3,340
1,588
-
4,928
70% to 80%
-
1
-
1
91
4,724
-
4,815
80% to 90%
-
455
-
455
-
-
-
-
90% to 100%
9,754
-
-
9,754
10,275
-
-
10,275
higher than 100%
133
-
-
133
21,590
-
-
21,590
no collateral
692
-
-
692
1,316
-
-
1,316
Total gross
loans
74,257
29,964
1,596
105,817
91,658
35,744
1,925
129,327
Group loans to business customers: SME – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
819,362
118,359
45,968
983,689
296,683
117,350
37,999
452,032
50% to 60%
62,723
3,446
705
66,874
167,713
43,403
1,586
212,702
60% to 70%
19,659
326
-
19,985
101,153
6,383
1,230
108,766
70% to 80%
2,530
335
78
2,943
23,174
5,982
941
30,097
80% to 90%
2,597
462
-
3,059
8,372
1,254
2,111
11,737
90% to 100%
1,028
523
-
1,551
7,281
1,856
473
9,610
higher than 100%
8,756
2,223
1,370
12,349
123,316
2,741
10,375
136,432
no collateral
1,953
105
187
2,245
9,082
254
314
9,650
Total gross
loans
918,608
125,779
48,308
1,092,695
736,774
179,223
55,029
97
1,026
Bank loans to business customers: SME – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
819,362
118,359
45,968
983,689
296,683
117,350
37,999
452,032
50% to 60%
62,723
3,446
705
66,874
167,713
43,403
1,586
212,702
60% to 70%
19,659
326
-
19,985
101,153
6,383
1,230
108,766
70% to 80%
2,530
335
78
2,943
23,174
5,982
941
30,097
80% to 90%
2,597
462
-
3,059
8,372
1,254
2,111
11,737
90% to 100%
1,028
523
-
1,551
7,281
1,856
473
9,610
higher than 100%
8,756
2,223
1,370
12,349
123,316
2,741
10,375
136,432
no collateral
1,953
105
187
2,245
9,082
254
314
9,650
Total gross
loans
918,608
125,779
48,308
1,092,695
736,774
179,223
55,029
971,026
Group loans to business customers: Central and local authorities, administrative bodies and other – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
8,401
600
1,442
10,443
3,061
108
-
3,169
50% to 60%
-
-
-
-
47
576
-
623
60% to 70%
-
759
-
759
44
-
-
44
70% to 80%
-
-
-
-
-
-
-
-
80% to 90%
-
-
-
-
-
867
1,465
2,332
90% to 100%
-
-
-
-
-
-
-
-
higher than 100%
-
-
-
-
32,421
58
-
32,479
no collateral
71,999
564
-
72,563
96,428
2,094
-
98,522
Total gross
loans
80,400
1,923
1,442
83,765
132,001
3,703
1,465
137,169
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
43
FINANCIAL RISK MA
NAGEMENT (CONTINUED)
Bank loans to business customers: Central and local authorities, administrative bodies and other – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
8,401
600
1,442
10,443
3,061
108
-
3,169
50% to 60%
-
-
-
-
47
576
-
623
60% to 70%
-
759
-
759
44
-
-
44
70% to 80%
-
-
-
-
-
-
-
-
80% to 90%
-
-
-
-
-
867
1,465
2,332
90% to 100%
-
-
-
-
-
-
-
-
higher than 100%
-
-
-
-
32,421
58
-
32,479
no collateral
71,999
564
-
72,563
96,428
2,094
-
98,522
Total gross loans
80,400
1,923
1,442
83,765
132,001
3,703
1,465
137,169
e) Loans to customers against which no impairment loss allowance is recognized
Loans to customers contain loans against which no loss impairment loss allowance was recognized because of sufficiency of collateral.
Such loans are summarized in the following table:
Group, as at 31 December 2022
Gross value
Stage 1
Stage 2
Stage 3
Total
LTV
Loans to financial institutions
15
-
-
15
0%
Loans to individuals:
1,063
2
1
1,066
13%
Mortgages -
3
-
-
3
0%
Other-
1,060
2
1
1,063
17%
Loans to business customers:
10
11,589
120
11,719
0%
Central and local authorities, administrative bodies and
other -
10
-
-
10
0%
Large corporates -
-
-
-
-
0%
SME -
-
11,589
120
11,709
0%
Total
1,088
11,591
121
12,800
6%
Group, as at 31 December 2021
Gross value
Stage 1
Stage 2
Stage 3
Total
LTV
Loans to financial institutions
15
-
-
15
0%
Loans to individuals:
2,154
467
1
2,622
0%
Mortgages -
6
-
-
6
0%
Other-
2,148
467
1
2,616
6%
Loans to business customers:
16,761
12,241
7
29,009
0%
Central and local authorities, administrative bodies and
other -
65
-
-
65
107%
Large corporates -
16,696
-
-
16,696
23%
SME -
-
12,241
7
12,248
3%
Total
18,930
12,708
8
31,646
19%
f) Purchased or originated credit-impaired (POCI) loans to customers
Loans to customers contain POCI loans to customers. Major part of these loans were acquired under the transaction transfer of assets,
rights, transactions and liabilities of Ūkio Bankas under a discount over their nominal value due to their non-performing status at the time
of transfer. Details on POCI loans are summarized in the following table:
As at 31 December 2022
As at 31 December 2021
Gross value
Impairment
Carrying
value
Gross value
Impairment
Carrying
value
Loans to financial institutions
-
-
-
-
-
-
Loans to individuals:
98
(9)
89
112
(3)
108
Consumer loans -
-
-
-
-
-
-
Mortgages -
91
(7)
84
99
(1)
98
Other-
8
(2)
5
13
(3)
10
Loans to business customers:
1,494
(82)
1,412
1,790
(84)
1,705
Central and local authorities, administrative bodies and
other -
-
-
-
-
-
-
Large corporates -
-
-
-
-
-
-
SME -
1,494
(82)
1,412
1,790
(84)
1,705
Total
1,592
(91)
1,502
1,902
(88)
1,814
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
44
FINANCIAL RISK MANAGEMENT (CONTINUED)
g) Modifications of loans to customers
Group follows legal treatment for loan contract amendments, i.e. amended loan contracts are accounted for as modifications.
The amortized cost before modification of loans with lifetime ECL whose cash flows were modified during 2022 as part of Group‘s
restructuring activities was EUR 87,667 thousand, these modifications resulted in a net gain of EUR 16 thousand. The amortized cost
before modification of loans with lifetime ECL whose cash flows were modified during 2021 as part of Group‘s restructuring activities was
EUR 91,824 thousand, these modifications resulted in a net loss of EUR 12 thousand.
1.6. Finance lease receivables
Finance lease receivables are summarised as follows:
2022
2021
Group
Bank
Group
Bank
Business customers
220,088
219,026
172,215
171,202
Individuals
27,660
27,660
26,746
26,746
Gross
247,748
246,686
198,961
197,948
Subtract: Allowance for impairment
(5,300)
(4,494)
(3,787)
(3,039)
Net
242,448
242,192
195,174
194,909
During the year ended 31 December 2022, finance lease receivables portfolio of the Group increased by 24.2% (2021: increased by
25.5 %). Total impairment provisions for finance lease receivables of the Group amount to EUR 5,300 thousand (2021: EUR 3,787
thousand) and account for 2.1% of the respective portfolio (2021: 1.9%).
a) Credit grades of finance lease receivables
The Bank uses internal grade system that has 11 internal grades (1 – best, 11 – worst). During the first quarter of 2021, internal credit
rating procedures were enhanced: an updated legal customer financial status methodology was implemented. Main change in the
methodology – increased number of grades: there were 5 internal grades under previous methodology, updated methodology has 11
grades. This allows for more granular assessment of borrowers. Clear links between internal credit grades and credit stages have been
established – exposures assigned to internal credit rating grades 7 – 9 are in credit stage 2, exposures assigned internal grades 10 – 11
are in credit stage 3.
Group finance lease receivables
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
193,762
2,104
-
195,866
138,756
2,323
154
141,233
Watch
33,555
4,096
-
37,651
31,880
10,580
-
42,460
Substandard
130
6,463
-
6,593
267
7,613
134
8,014
Problem
-
-
7,638
7,638
57
29
7,167
7,253
Gross
227,447
12,663
7,638
247,748
170,960
20,545
7,455
198,960
Less: allowance for
impairment
(1,881)
(285)
(3,134)
(5,300)
(966)
(239)
(2,581)
(3,786)
Net
225,566
12,378
4,504
242,448
169,994
20,306
4,874
195,174
Bank finance lease receivables
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
193,762
1,844
-
195,606
138,544
2,323
154
141,021
Watch
33,555
4,096
-
37,651
31,880
10,580
-
42,460
Substandard
130
6,463
-
6,593
267
7,613
134
8,014
Problem
-
-
6,836
6,836
57
29
6,366
6,452
Gross
227,447
12,403
6,836
246,686
170,748
20,545
6,654
197,947
Less: allowance for
impairment
(1,881)
(280)
(2,333)
(4,494)
(965)
(239)
(1,834)
(3,038)
Net
225,566
12,123
4,503
242,192
169,783
20,306
4,820
194,909
Group finance lease receivables – business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
169,026
1,642
-
170,668
114,404
1,074
-
115,478
Watch
33,288
2,502
-
35,790
31,492
10,432
-
41,924
Substandard
-
6,452
-
6,452
-
7,595
-
7,595
Problem
-
-
7,178
7,178
57
29
7,132
7,218
Gross
202,314
10,596
7,178
220,088
145,953
19,130
7,132
172,215
Less: allowance for
impairment
(1,799)
(263)
(3,036)
(5,098)
(911)
(225)
(2,535)
(3,671)
Net
200,515
10,333
4,142
214,990
145,042
18,905
4,597
168,544
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
45
FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank finance lease receivables – business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
169,026
1,382
-
170,408
114,192
1,074
-
115,266
Watch
33,288
2,502
-
35,790
31,492
10,432
-
41,924
Substandard
-
6,452
-
6,452
-
7,595
-
7,595
Problem
-
-
6,376
6,376
57
29
6,331
6,417
Gross
202,314
10,336
6,376
219,026
145,741
19,130
6,331
171,202
Less: allowance for
impairment
(1,799)
(258)
(2,235)
(4
,292)
(910)
(225)
(1,788)
(2,923)
Net
200,515
10,078
4,141
214,734
144,831
18,905
4,543
168,279
Group finance lease receivables – individuals
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
24,736
462
-
25,198
24,352
1,249
154
25,755
Watch
267
1,594
-
1,861
388
148
-
536
Substandard
130
11
-
141
267
18
134
419
Problem
-
-
460
460
-
-
35
35
Gross
25,133
2,067
460
27,660
25,007
1,415
323
26,745
Less: allowance for
impairment
(82)
(22)
(98)
(202)
(55)
(14)
(46)
(115)
Net
25,051
2,045
362
27,458
24,952
1,401
277
26,630
Bank finance lease receivables – individuals
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Standard
24,736
462
-
25,198
24,352
1,249
154
25,755
Watch
267
1,594
-
1,861
388
148
-
536
Substandard
130
11
-
141
267
18
134
419
Problem
-
-
460
460
-
-
35
35
Gross
25,133
2,067
460
27,660
25,007
1,415
323
26,745
Less: allowance for
impairment
(82)
(22)
(98)
(202)
(55)
(14)
(46)
(115)
Net
25,051
2,045
362
27,458
24,952
1,401
277
26,630
b) Payment delays of finance lease receivables
Group finance lease receivables
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
216,514
10,866
5,053
232,433
163,802
18,890
5,590
188,282
Past due up to 30 days
10,933
597
719
12,249
7,159
1,044
336
8,539
Past due 31-90 days
-
1,201
322
1,523
-
609
111
720
Past due more than 90 days
-
-
1,543
1,543
-
-
1,419
1,419
Gross
227,447
12,664
7,637
247,748
170,961
20,543
7,456
198,960
Less: allowance for
impairment
(1,881)
(285)
(3,134)
(5,300)
(966)
(239)
(2,581)
(3,786)
Net
225,566
12,379
4,503
242,448
169,995
20,304
4,875
195,174
Bank finance lease receivables
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
216,513
10,606
5,053
232,172
163,590
18,890
5,590
188,070
Past due up to 30 days
10,933
597
719
12,249
7,159
1,044
336
8,539
Past due 31-90 days
-
1,201
322
1,523
-
609
111
720
Past due more than 90 days
-
-
742
742
-
-
618
618
Gross
227,446
12,404
6,836
246,686
170,749
20,543
6,655
197,947
Less: allowance for
impairment
(1,881)
(280)
(2,333)
(4,494)
(965)
(239)
(1,834)
(3,038)
Net
225,565
12,124
4,503
242,192
169,784
20,304
4,821
194,909
Group finance lease receivables – business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
191,904
9,053
4,751
205,708
140,831
17,783
5,328
163,942
Past due up to 30 days
10,410
519
718
11,647
5,123
998
321
6,442
Past due 31-90 days
-
1,025
322
1,347
-
348
99
447
Past due more than 90 days
-
-
1,386
1,386
-
-
1,384
1,384
Gross
202,314
10,597
7,177
220,088
145,954
19,129
7,132
172,215
Less: allowance for
impairment
(1,799)
(263)
(3,036)
(5,098)
(911)
(225)
(2,535)
(3,671)
Net
200,515
10,334
4,141
214,990
145,043
18,904
4,597
168,544
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
46
FINANCIAL RISK
MANAGEMENT (CONTINUED)
Bank finance lease receivables – business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
191,903
8,793
4,751
205,447
140,619
17,783
5,328
163,730
Past due up to 30 days
10,410
519
718
11,647
5,123
998
321
6,442
Past due 31-90 days
-
1,025
322
1,347
-
348
99
447
Past due more than 90 days
-
-
585
585
-
-
583
583
Gross
202,313
10,337
6,376
219,026
145,742
19,129
6,331
171,202
Less: allowance for
impairment
(1,799)
(258)
(2,235)
(4,292)
(910)
(225)
(1,788)
(2,923)
Net
200,514
10,079
4,141
214,734
144,832
18,904
4,543
168,279
Group finance lease receivables – individuals
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
24,610
1,813
302
26,725
22,971
1,107
262
24,340
Past due up to 30 days
523
78
1
602
2,036
46
15
2,097
Past due 31-90 days
-
176
-
176
-
261
12
273
Past due more than 90 days
-
-
157
157
-
-
35
35
Gross
25,133
2,067
460
27,660
25,007
1,414
324
26,745
Less: allowance for
impairment
(82)
(22)
(98)
(202)
(55)
(14)
(46)
(115)
Net
25,051
2,045
362
27,458
24,952
1,400
278
26,630
Bank finance lease receivables – individuals
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Not past due
24,610
1,813
302
26,725
22,971
1,107
262
24,340
Past due up to 30 days
523
78
1
602
2,036
46
15
2,097
Past due 31-90 days
-
176
-
176
-
261
12
273
Past due more than 90 days
-
-
157
157
-
-
35
35
Gross
25,133
2,067
460
27,660
25,007
1,414
324
26,745
Less: allowance for
impairment
(82)
(22)
(98)
(202)
(55)
(14)
(46)
(115)
Net
25,051
2,045
362
27,458
24,952
1,400
278
26,630
c) Stage 3 Finance lease receivables
31 December 2022
Group
Bank
Gross value
Allowance
for
impairment
Net value
Fair value of
collateral
Gross value
Allowance
for
impairment
Net value
Fair value of
collateral
31 December 2022:
Business customers
7,178
(3,036)
4,142
460
6,376
(2,235)
4,141
460
Individuals
460
(98)
362
6,288
460
(98)
362
6,288
Total finance lease
receivables
7,638
(3,134)
4,504
6,748
6,836
(2,333)
4,503
6,748
31 December 2021
Group
Bank
Gross value
Allowance
for
impairment
Net value
Fair value of
collateral
Gross value
Allowance
for
impairment
Net value
Fair value of
collateral
31 December 2021:
Business customers
7,132
(2,535)
4,597
308
6,331
(1,788)
4,543
308
Individuals
323
(46)
277
6,306
323
(46)
277
6,306
Total finance lease
receivables
7,455
(2,581)
4,874
6,614
6,654
(1,834)
4,820
6,614
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
47
FINANCIAL RISK MANAGEMENT (CONTINUED)
d) Information about risk mitigation measures for finance lease receivables
Upon initial recognition of financial lease receivables, the fair value of risk mitigation measures is based on valuation approaches
commonly used for the corresponding types of assets. Market values are used for real estate and movable assets serving as risk
mitigation measures. In subsequent periods, the fair value of risk mitigation measures is updated based on their depreciation rates.
If exposure is secured by several different types of risk mitigation measures, priority in their recognition is based on their liquidity.
Transport vehicles are treated as having highest liquidity followed by residential real estate and then other real estate. Equipment and
other assets are treated as having lowest liquidity.
The lender remains the owner of the leased object. Therefore, in case of customer default it is able to gain control on the risk mitigation
measures and realize them in rather short period.
Following tables present the lower of lease receivable and collateral amount per agreement.
The Group
2022
2021
Individuals
Business
customers
Total
Individuals
Business
customers
Total
Unsecured finance lease receivables
571
4,735
5,306
440
3,116
3,556
Finance lease receivables secured by:
transport vehicles -
26,966
167,408
194,374
25,849
122,970
148,819
real estate -
107
15,459
15,566
398
18,073
18,471
equipment and other -
16
32,486
32,502
59
28,056
28,115
Total
27,660
220,088
247,748
26,746
172,215
198,961
The Bank
2022
2021
Individuals
Business
customers
Total
Individuals
Business
customers
Total
Unsecured finance lease receivables
571
4,735
5,306
440
3,116
3,556
Finance lease receivables secured by:
transport vehicles -
26,966
167,408
194,374
25,849
122,970
148,819
real estate -
107
15,459
15,566
398
18,073
18,471
equipment and other -
16
31,424
31,440
59
27,043
27,102
Total
27,660
219,026
246,686
26,746
171,202
197,948
The following tables present the LTV distributions of finance lease receivables:
Group finance lease receivables – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
113,182
7,154
5,861
126,197
86,169
15,874
6,026
108,069
50% to 60%
42,931
1,527
166
44,624
30,655
1,312
209
32,176
60% to 70%
25,190
1,490
402
27,082
20,594
1,425
56
22,075
70% to 80%
23,583
882
178
24,643
17,768
1,070
17
18,855
80% to 90%
15,289
1,018
44
16,351
9,395
432
83
9,910
90% to 100%
4,477
259
75
4,811
3,156
354
88
3,598
higher than 100%
2,671
74
23
2,768
2,749
43
957
3,749
no collateral
124
260
888
1,272
475
33
20
528
Total gross loans
227,447
12,664
7,637
247,748
170,961
20,543
7,456
198,960
Bank finance lease receivables – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
113,182
7,154
5,861
126,197
86,169
15,874
6,026
108,069
50% to 60%
42,931
1,527
166
44,624
30,655
1,313
209
32,177
60% to 70%
25,190
1,490
402
27,082
20,594
1,425
56
22,075
70% to 80%
23,583
882
178
24,643
17,768
1,069
17
18,854
80% to 90%
15,289
1,018
44
16,351
9,395
432
83
9,910
90% to 100%
4,477
259
75
4,811
3,156
354
88
3,598
higher than 100%
2,671
74
23
2,768
2,749
43
157
2,949
no collateral
123
-
87
210
263
33
19
315
Total gross loans
227,446
12,404
6,836
246,686
170,749
20,543
6,655
197,947
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
48
FINANCIAL RISK MANAGEMENT (CON
TINUED)
Group finance lease receivables: Individuals – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
17,200
1,399
381
18,980
17,515
905
274
18,694
50% to 60%
1,542
192
40
1,774
1,701
243
14
1,958
60% to 70%
1,980
247
21
2,248
1,965
114
-
2,079
70% to 80%
2,348
95
18
2,461
1,810
79
-
1,889
80% to 90%
922
122
-
1,044
859
51
9
919
90% to 100%
689
12
-
701
523
13
-
536
higher than 100%
345
-
-
345
525
9
19
553
no collateral
107
-
-
107
109
-
8
117
Total gross loans
25,133
2,067
460
27,660
25,007
1,414
324
26,745
Bank finance lease receivables: Individuals – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
17,200
1,399
381
18,980
17,515
905
274
18,694
50% to 60%
1,542
192
40
1,774
1,701
243
14
1,958
60% to 70%
1,980
247
21
2,248
1,965
114
-
2,079
70% to 80%
2,348
95
18
2,461
1,810
79
-
1,889
80% to 90%
922
122
-
1,044
859
51
9
919
90% to 100%
689
12
-
701
523
13
-
536
higher than 100%
345
-
-
345
525
9
20
554
no collateral
107
-
-
107
109
-
7
116
Total gross loans
25,133
2,067
460
27,660
25,007
1,414
324
26,745
Group finance lease receivables: Business customers – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
95,982
5,755
5,480
107,217
68,654
14,969
5,752
89,375
50% to 60%
41,389
1,335
126
42,850
28,954
1,069
195
30,218
60% to 70%
23,210
1,243
381
24,834
18,629
1,311
56
19,996
70% to 80%
21,235
787
160
22,182
15,958
991
17
16,966
80% to 90%
14,367
896
44
15,307
8,536
381
74
8,991
90% to 100%
3,788
247
75
4,110
2,633
341
88
3,062
higher than 100%
2,326
74
23
2,423
2,224
34
938
3,196
no collateral
17
260
888
1,165
366
33
12
411
Total gross loans
202,314
10,597
7,177
220,088
145,954
19,129
7,132
172,215
Bank finance lease receivables: Business customers – LTV distribution
2022
2021
LTV ratio:
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
lower than 50%
95,982
5,755
5,480
107,217
68,654
14,969
5,752
89,375
50% to 60%
41,389
1,335
126
42,850
28,954
1,070
195
30,219
60% to 70%
23,210
1,243
381
24,834
18,629
1,311
56
19,996
70% to 80%
21,235
787
160
22,182
15,958
990
17
16,965
80% to 90%
14,367
896
44
15,307
8,536
381
74
8,991
90% to 100%
3,788
247
75
4,110
2,633
341
88
3,062
higher than 100%
2,326
74
23
2,423
2,224
34
137
2,395
no collateral
16
-
87
103
154
33
12
199
Total gross loans
202,313
10,337
6,376
219,026
145,742
19,129
6,331
171,202
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
49
FINANCIAL RISK MANAGEMENT (CONTINUED)
e) Finance lease receivables against which no impairment loss allowance is recognized
Finance lease receivables contain receivables against which no loss impairment loss allowance was recognized because of sufficiency
of collateral. Such receivables are summarized in the following table:
At 31 December 2022:
Gross value
Stage 1
Stage 2
Stage 3
Total
LTV
Business customers
2,351
-
-
2,351
32%
Individuals
372
-
-
372
15%
Total
2,723
-
-
2,723
41%
At 31 December 2021:
Gross value
Stage 1
Stage 2
Stage 3
Total
LTV
Business customers
1,063
7
-
1,070
46%
Individuals
163
-
-
163
18%
Total
1,226
7
-
1,233
41%
1.7. Other financial assets
Other financial assets consist of amounts receivable. Their performance is monitored based on the past due status.
The Group
2022
2021
Individuals
Business
customers
Total
Individuals
Business
customers
Total
Stage 1
500
5,791
6,291
400
16,219
16,619
Stage 2
-
21
21
-
-
-
Stage 3
-
10
10
5
34
39
Gross
500
5,822
6,322
405
16,253
16,658
Less: allowance for impairment
-
(507)
(507)
(5)
(255)
(260)
Net
500
5,315
5,815
400
15,998
16,398
The Bank
2022
2021
Individuals
Business
customers
Total
Individuals
Business
customers
Total
Stage 1
490
5,586
6,076
400
16,065
16,465
Stage 2
-
21
21
-
-
-
Stage 3
-
10
10
-
34
34
Gross
490
5,617
6,107
400
16,099
16,499
Less: allowance for impairment
-
(487)
(487)
-
(228)
(228)
Net
490
5,130
5,620
400
15,871
16,271
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
50
FINANCIAL RISK MANAGEMENT (CON
TINUED)
1.8. Concentration of risks of financial assets with credit risk exposure
Industry sectors
The following table breaks down the main credit exposures at their carrying amounts, as categorized by the industry sectors of our
counterparties.
Group
Financial intermediation
Wholesale and retail
Manufacturing
Real estate and rent
Construction
Agriculture, hunting and
forestry
Public administration and
defence, compulsory social
security
Transport, storage and
communication
Health and social work
Loans to individuals
Other
Total
At 31 December 2022:
Cash equivalents
179,235
-
-
-
-
-
128,208
-
-
-
-
307,443
Loans and advances to banks
2,733
-
-
-
-
-
-
-
-
-
-
2,733
Loans and advances to customers:
28,127
157,785
164,053
343,459
105,693
88,377
72,270
63,380
30,279
1,037,919
300,287
2,391,629
Loans and advances to financial
institutions
18,079
-
-
-
-
-
-
-
-
-
-
18,079
Loans to individuals (Retail):
-
16
-
-
29
-
-
-
-
1,037,919
76,005
1,113,969
Consumer loans -
-
-
-
-
-
-
-
-
-
201,133
19
201,152
Mortgages -
-
16
-
-
29
-
-
-
-
655,949
7,334
663,328
Other -
-
-
-
-
-
-
-
-
-
180,837
68,652
249,489
Loans to business customers:
10,048
157,769
164,053
343,459
105,664
88,377
72,270
63,380
30,279
-
224,282
1,259,581
Large corporates -
-
-
70,679
2,434
3,333
-
-
2,959
11,375
-
12,867
103,647
SME -
10,048
157,758
93,373
335,830
102,331
88,377
-
60,421
15,596
-
209,532
1,073,266
Central and local authorities,
administrative bodies and other -
-
11
1
5,195
-
-
72,270
-
3,308
-
1,883
82,668
Finance lease receivables:
1,524
20,702
13,022
10,829
11,596
14,006
-
49,126
2,527
27,458
91,658
242,448
Individuals -
-
-
-
-
-
-
-
-
-
27,458
-
27,458
Business customers -
1,524
20,702
13,022
10,829
11,596
14,006
-
49,126
2,527
-
91,658
214,990
Securities in the trading book:
45,406
792
33
4,246
751
69
2,602
23
-
-
4,379
58,301
Debt securities -
17,354
792
-
4,201
751
69
2,602
-
-
-
4,379
30,148
Equity securities -
28,052
-
33
45
-
-
-
23
-
-
-
28,153
Derivative financial instruments
-
-
-
-
-
-
-
-
-
-
897
897
Investment securities at fair value:
30,226
468
-
-
-
-
52,570
-
-
-
6,961
90,225
Equity securities -
4,903
-
-
-
-
-
-
-
-
-
51
4,954
Debt securities -
25,323
468
-
-
-
-
52,570
-
-
-
6,910
85,271
Investment securities at amortized
cost:
43,853
1,406
36,433
1,215
-
-
821,781
3,011
3,213
201
57,920
969,033
Debt securities -
43,853
1,406
36,433
1,215
-
-
821,781
3,011
3,213
201
57,920
969,033
Other financial assets
3,286
107
65
28
52
10
6
12
2
181
2,066
5,815
Credit risk exposures relating to off –
balance sheet items are as follows:
-
Financial guarantees -
9,593
8,155
4,676
1,185
17,598
678
290
1,014
-
176
9,290
52,655
Letters of credit -
-
-
5,756
-
-
-
-
-
-
-
-
5,756
Loan commitments and other credit
related liabilities -
62,109
49,441
53,684
62,454
78,385
7,946
5,073
21,627
2,636
80,214
67,375
490,944
Total at 31 December2022
406,092
238,856
277,722
423,416
214,075
111,086
1,082,800
138,193
38,657
1,146,149
540,833
4,617,879
At 31 December 2021:
Cash equivalents
31,068
-
-
-
-
-
867,794
-
-
-
-
898,862
Loans and advances to banks
1,196
-
-
-
-
-
-
-
-
-
-
1,196
Loans and advances to customers:
23,378
136,813
177,686
288,946
58,148
97,323
81,814
57,388
31,027
688,525
267,633
1,908,681
Loans and advances to financial
institutions
6,947
-
-
-
-
-
-
-
-
-
-
6,947
Loans to individuals (Retail):
-
54
85
-
32
483
-
-
-
688,525
829
690,008
Consumer loans -
-
-
-
-
-
-
-
-
-
143,459
3
143,462
Mortgages -
-
-
-
-
-
-
-
-
-
455,126
-
455,126
Other -
-
54
85
-
32
483
-
-
-
89,940
826
91,420
Loans to business customers:
16,431
136,759
177,601
288,946
58,116
96,840
81,814
57,388
31,027
-
266,804
1,211,726
Large corporates -
-
-
87,358
-
13,783
-
-
3,491
12,571
-
10,569
127,772
SME -
16,431
136,740
90,240
288,917
44,321
96,839
(13,426)
53,897
14,813
-
219,213
947,985
Central and local authorities,
administrative bodies and other -
-
19
3
29
12
1
95,240
-
3,643
-
37,022
135,969
Finance lease receivables:
1,641
16,479
12,923
7,811
11,054
10,226
15
36,404
2,440
26,630
69,551
195,174
Individuals -
-
-
-
-
-
-
-
-
-
26,630
-
26,630
Business customers -
1,641
16,479
12,923
7,811
11,054
10,226
15
36,404
2,440
-
69,551
168,544
Securities in the trading book:
29,938
829
27
1,659
-
-
4,062
16
25
-
11,625
48,181
Debt securities -
2,597
829
-
1,622
-
-
4,062
-
-
-
11,343
20,453
Equity securities -
27,341
-
27
37
-
-
-
16
25
-
282
27,728
Derivative financial instruments
1,111
42
-
-
-
-
-
-
-
-
968
2,121
Investment securities at fair value:
11,978
585
-
-
-
-
53,991
-
-
-
16,434
82,988
Equity securities -
4,530
-
-
-
-
-
-
-
-
-
332
4,862
Debt securities -
7,448
585
-
-
-
-
53,991
-
-
-
16,102
78,126
Investment securities at amortized
cost:
58,260
1,614
36,290
1,010
-
-
535,006
3,012
3,006
-
67,200
705,398
Debt securities -
58,260
1,614
36,290
1,010
-
-
535,006
3,012
3,006
-
67,200
705,398
Other financial assets
2,755
51
79
13
17
13
77
13
17
539
12,824
16,398
Credit risk exposures relating to off –
balance sheet items are as follows:
-
Financial guarantees -
8,215
8,281
5,881
853
18,968
236
236
1,474
34
70
8,683
52,931
Letters of credit -
-
98
1,210
-
-
-
-
-
-
-
-
1,308
Loan commitments and other credit
related liabilities -
8
34,435
50,764
48,567
67,124
10,765
5,075
30,159
4,928
32,261
1
13,139
397,225
Total at 31 December2021
169,548
199,227
284,860
348,859
155,311
118,563
1,548,070
128,466
41,477
748,025
568,057
4,310,463
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
51
FINANCIAL RISK MANAGEMENT (CONTINUED)
Bank
Financial intermediation
Wholesale and retail
Manufacturing
Real estate and rent
Construction
Agriculture, hunting and
forestry
Public administration
and defence, compulsory
social security
Transport, storage and
communication
Health and social work
Loans to individuals
Other
Total
At 31 December 2022:
Cash equivalents
178,095
-
-
-
-
-
128,208
-
-
-
-
306,303
Loans and advances to banks
2,733
-
-
-
-
-
-
-
-
-
-
2,733
Loans and advances to customers:
205,400
157,785
164,053
343,459
105,693
88,377
72,270
63,380
30,279
839,779
300,287
2,370,762
Loans and advances to financial
institutions
195,352
-
-
-
-
-
-
-
-
-
-
195,352
Loans to individuals (Retail):
-
16
-
-
29
-
-
-
-
839,779
76,005
915,829
Consumer loans -
-
-
-
-
-
-
-
-
-
2,993
19
3,012
Mortgages -
-
16
-
-
29
-
-
-
-
655,949
7,334
663,328
Other -
-
-
-
-
-
-
-
-
-
180,837
68,652
249,489
Loans to business customers:
10,048
157,769
164,053
343,459
105,664
88,377
72,270
63,380
30,279
-
224,282
1,259,581
Large corporates -
-
-
70,679
2,434
3,333
-
-
2,959
11,375
-
12,867
103,647
SME -
10,048
157,758
93,373
335,830
102,331
88,377
-
60,421
15,596
-
209,532
1,073,266
Central and local authorities,
administrative bodies and other -
-
11
1
5,195
-
-
72,270
-
3,308
-
1,883
82,668
Finance lease receivables:
1,524
20,702
13,022
10,829
11,596
14,006
-
49,126
2,527
27,458
91,402
242,192
Individuals -
-
-
-
-
-
-
-
-
-
27,458
-
27,458
Business customers -
1,524
20,702
13,022
10,829
11,596
14,006
-
49,126
2,527
-
91,402
214,734
Securities in the trading book:
16,789
-
33
4,246
497
-
2,602
23
-
-
3,097
27,287
Debt securities -
16,659
-
-
4,201
497
-
2,602
-
-
-
3,097
27,056
Equity securities -
130
-
33
45
-
-
-
23
-
-
-
231
Derivative financial instruments
-
-
-
-
-
-
-
-
-
-
897
897
Investment securities at fair value:
30,226
468
-
-
-
-
52,570
-
-
-
6,961
90,225
Equity securities -
4,903
-
-
-
-
-
-
-
-
-
51
4,954
Debt securities -
25,323
468
-
-
-
-
52,570
-
-
-
6,910
85,271
Investment securities at amortized
cost:
41,271
1,004
34,953
1,011
-
-
821,781
3,011
3,005
-
50,296
956,332
debt securities -
41,271
1,004
34,953
1,011
-
-
821,781
3,011
3,005
-
50,296
956,332
Other financial assets
3,286
107
65
28
52
10
6
12
2
42
2,010
5,620
Credit risk exposures relating to off –
balance sheet items are as follows:
Financial guarantees -
9,654
8,155
4,676
1,185
17,598
678
290
1,014
-
176
9,290
52,716
Letters of credit -
-
-
5,756
-
-
-
-
-
-
-
-
5,756
Loan commitments and other credit
related liabilities -
72,186
49,441
53,684
62,454
78,385
7,946
5,073
21,627
2,636
80,214
58,946
492,592
Total at 31 December 2022:
561,164
237,662
276,242
423,212
213,821
111,017
1,082,800
138,193
38,449
947,669
523,186
4,553,415
At 31 December 2021:
Cash equivalents
30,194
-
-
-
-
-
867,794
-
-
-
-
897,988
Loans and advances to banks
1,196
-
-
-
-
-
-
-
-
-
-
1,196
Loans and advances to customers:
141,247
136,813
177,686
288,946
58,148
97,323
81,814
57,388
31,027
551,604
267,633
1,889,629
Loans and advances to financial
institutions
124,816
-
-
-
-
-
-
-
-
-
-
124,816
Loans to individuals (Retail):
-
54
85
-
32
483
-
-
-
551,604
829
553,087
Consumer loans -
-
-
-
-
-
-
-
-
-
6,538
3
6,541
Mortgages -
-
-
-
-
-
-
-
-
-
455,126
-
455,126
Other -
-
54
85
-
32
483
-
-
-
89,940
826
91,420
Loans to business customers:
16,431
136,759
177,601
288,946
58,116
96,840
81,814
57,388
31,027
-
266,804
1,211,726
Large corporates -
-
-
87,358
-
13,783
-
-
3,491
12,571
-
10,569
127,772
SME -
16,431
136,740
90,240
288,917
44,321
96,839
(13,426)
53,897
14,813
-
219,213
947,985
Central and local authorities,
administrative bodies and other -
-
19
3
29
12
1
95,240
-
3,643
-
37,022
135,969
Finance lease receivables:
1,641
16,479
12,868
7,811
11,054
10,226
15
36,404
2,440
26,630
69,341
194,909
Individuals -
-
-
-
-
-
-
-
-
-
26,630
-
26,630
Business customers -
1,641
16,479
12,868
7,811
11,054
10,226
15
36,404
2,440
-
69,341
168,279
Securities in the trading book:
1,869
-
27
1,659
-
-
4,062
16
25
-
7,441
15,099
Debt securities -
1,778
-
-
1,622
-
-
4,062
-
-
-
7,160
14,622
Equity securities -
91
-
27
37
-
-
-
16
25
-
281
477
Derivative financial instruments
1,111
42
-
-
-
-
-
-
-
-
968
2,121
Investment securities at fair value:
11,941
585
-
-
-
-
53,991
-
-
-
16,434
82,951
Equity securities -
4,493
-
-
-
-
-
-
-
-
-
332
4,825
Debt securities -
7,448
585
-
-
-
-
53,991
-
-
-
16,102
78,126
Investment securities at amortized
cost:
55,675
1,003
34,797
1,010
-
-
535,006
3,012
3,006
-
58,717
692,226
debt securities -
55,675
1,003
34,797
1,010
-
-
535,006
3,012
3,006
-
58,717
692,226
Other financial assets
2,755
51
79
13
17
13
77
13
17
400
12,836
16,271
Credit risk exposures relating to off –
balance sheet items are as follows:
Financial guarantees -
8,279
8,281
5,881
853
18,968
236
236
1,474
34
70
8,680
52,992
Letters of credit -
-
98
1,210
-
-
-
-
-
-
-
-
1,308
Loan commitments and other credit
related liabilities -
18,369
34,435
50,764
48,567
67,124
10,765
5,075
30,159
4,928
32,261
104,993
407,440
Total at 31 December 2021:
274,277
197,787
283,312
348,859
155,311
118,563
1,548,070
128,466
41,477
610,965
547,043
4,254,130
As at 31 December 2022 and 31 December 2021 the Group and the Bank were compliant with the internal limits.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
52
FINANCIAL RISK MANAGEMENT (CONTINUED)
Concentration exposure
As at 31 December 2022, the largest single exposure comprising loans to several related borrowers treated as a single borrower
amounted to EUR 52 million, i.e. 14.2% of the Bank’s calculated capital (2021: EUR 43 million or 12.3% of the Bank’s calculated capital).
2. MARKET RISK
The Group takes on exposure to market risk, which means the risk for the Group to incur losses due to the adverse fluctuations in the
market parameters such as currency exchange rates (foreign currency risk), interest rates (interest rate risk) or securities prices
(securities risk). Securities and interest rate risks are the most significant market risks for the Group while other market risks are of lower
significance.
2.1. Foreign exchange risk
The management of the currency exchange risk is regulated by the “Currency Exchange Risk Management Procedures” which specify
the principles allowing the Group to reduce the incurred foreign currency fluctuation risk to minimum. The Group is not engaged in any
speculative transactions through which it could expect to earn profit from the open currency positions after changes in currency rate. The
limits are imposed by the Risk Management Committee and subject to review on demand.
The Group and the Bank monitors the foreign currency risk by calculating open currency position. Open currency position (OCP) is equal
to assets in the balance sheet and off-balance sheet less balance sheet and off-balance sheet liabilities in a single currency. There are
two types of OCP, i.e. long and short. Long position means that Group’s assets exceed liabilities in given currency, whereas short position
means that liabilities exceed assets. The Group also calculates Overall net open position (ONOP), which is the higher of the total short
or total long positions. As at 31 December 2022 the Group’s ONOP to capital ratio was 0.07% (2021: 0.08%), the Bank’s ONOP to capital
ratio was 0.07% (2021: 0.10%).
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
53
FINANCIAL RISK MANAGEMENT (CONTINUED)
Open positions
The Group’s open positions of prevailing currencies were as follows:
USD
Other
currencies
Total
currencies
EUR
Total
At 31 December 2022:
Assets
Cash and cash equivalents
14,755
8,121
22,876
361,882
384,758
Due from other banks
-
-
-
58,301
58,301
Securities in the trading book
111
111
2,622
2,733
Derivative financial instruments
-
-
-
897
897
Loans granted to customers, finance lease receivables
690
-
690
2,633,387
2,634,077
Investment securities at fair value
192
-
192
90,033
90,225
Investment securities at amortized cost
-
-
-
969,033
969,033
Investments in subsidiaries
-
-
-
100
100
Intangible assets
-
-
-
8,283
8,283
Property, plant and equipment and investment property
-
-
-
17,978
17,978
Other assets
5
9
14
18,132
18,146
Total assets
15,753
8,130
23,883
4,160,648
4,184,531
Liabilities and shareholders’ equity
Due to other banks and financial institutions
5,766
686
6,452
678,623
685,075
Derivative financial instruments
-
-
-
7,152
7,152
Due to customers
111,131
16,003
127,134
2,657,834
2,784,968
Debt securities in issue
-
-
-
171,231
171,231
Special and lending funds
-
-
-
14,184
14,184
Liabilities related to insurance activities
-
-
-
39,313
39,313
Other liabilities
1,010
24
1,034
39,878
40,912
Shareholders’ equity
-
-
-
441,696
441,696
Total liabilities and shareholders’ equity
117,907
16,713
134,620
4,049,911
4,184,531
Net balance sheet position
(102,154)
(8,583)
(110,737)
110,737
-
Open currency exchange transactions
102,180
8,782
110,962
(116,949)
(5,987)
Net open position
26
199
225
(6,212)
(5,987)
At 31 December 2021:
Assets
Cash and cash equivalents
18,959
11,235
30,194
935,529
965,723
Due from other banks
1,218
158
1,376
46,805
48,181
Securities in the trading book
595
-
595
601
1,196
Derivative financial instruments
-
-
-
2,121
2,121
Loans granted to customers, finance lease receivables
10,194
34
10,228
2,093,627
2,103,855
Investment securities at fair value
412
-
412
82,576
82,988
Investment securities at amortized cost
1,333
-
1,333
704,065
705,398
Intangible assets
-
-
-
4,834
4,834
Property, plant and equipment and investment property
-
-
-
16,989
16,989
Other assets
278
14
292
30,905
31,197
Total assets
32,989
11,441
44,430
3,918,052
3,962,482
Liabilities and shareholders’ equity
Due to other banks and financial institutions
2,941
-
2,941
694,797
697,738
Derivative financial instruments
-
-
-
96
96
Due to customers
123,479
15,701
139,180
2,540,003
2,679,183
Debt securities in issue
-
-
-
95,212
95,212
Special and lending funds
-
-
-
6,667
6,667
Liabilities related to insurance activities
1,405
158
1,563
39,846
41,409
Other liabilities
2,866
244
3,110
32,640
35,750
Shareholders’ equity
-
-
-
406,427
406,427
Total liabilities and shareholders’ equity
130,691
16,103
146,794
3,815,688
3,962,482
Net balance sheet position
(97,702)
(4,662)
(102,364)
102,364
-
Open currency exchange transactions
97,608
4,888
102,496
(100,312)
2,184
Net open position
(94)
226
132
2,052
2,184
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
54
FINANCIAL RISK
MANAGEMENT (CONTINUED)
The Bank’s open positions of prevailing currencies were as follows:
USD
Other
currencies
Total
currencies
EUR
Total
At 31 December 2022:
Assets
Cash and cash equivalents
14,755
8,121
22,876
360,642
383,518
Due from other banks
-
-
-
27,287
27,287
Securities in the trading book
111
-
111
2,622
2,733
Derivative financial instruments
-
-
-
897
897
Loans granted to customers, finance lease receivables
690
-
690
2,612,264
2,612,954
Investment securities at fair value
192
-
192
90,033
90,225
Investment securities at amortized cost
-
-
-
956,332
956,332
Investments in subsidiaries
-
-
-
31,441
31,441
Intangible assets
-
-
-
6,450
6,450
Property, plant and equipment and investment property
-
-
-
15,525
15,525
Other assets
5
9
14
14,094
14,108
Total assets
15,753
8,130
23,883
4,117,587
4,141,470
Liabilities and shareholders’ equity
Due to other banks and financial institutions
5,766
686
6,452
680,107
686,559
Derivative financial instruments
-
-
-
7,152
7,152
Due to customers
111,131
16,003
127,134
2,662,214
2,789,348
Debt securities in issue
-
-
-
171,231
171,231
Special and lending funds
-
-
-
14,184
14,184
Other liabilities
1,010
24
1,034
29,178
30,212
Shareholders’ equity
-
-
-
442,784
442,784
Total liabilities and shareholders’ equity
117,907
16,713
134,620
4,006,850
4,141,470
Net balance sheet position
(102,154)
(8,583)
(110,737)
110,737
-
Open currency exchange transactions
102,180
8,782
110,962
(116,949)
(5,987)
Net open position
26
199
225
(6,212)
(5,987)
At 31 December 2021:
Assets
Cash and cash equivalents
18,959
11,235
30,194
934,655
964,849
Due from other banks
-
-
-
15,099
15,099
Securities in the trading book
595
-
595
601
1,196
Derivative financial instruments
-
-
-
2,121
2,121
Loans granted to customers, finance lease receivables
10,194
34
10,228
2,074,310
2,084,538
Investment securities at fair value
412
-
412
82,539
82,951
Investment securities at amortized cost
1,333
-
1,333
690,893
692,226
Investments in subsidiaries
-
-
-
31,668
31,668
Intangible assets
-
-
-
3,114
3,114
Property, plant and equipment and investment property
-
-
-
14,462
14,462
Other assets
278
14
292
26,958
27,250
Total assets
31,771
11,283
43,054
3,876,420
3,919,474
Liabilities and shareholders’ equity
Due to other banks and financial institutions
2,941
-
2,941
700,330
703,271
Derivative financial instruments
-
-
-
96
96
Due to customers
123,479
15,701
139,180
2,542,406
2,681,586
Debt securities in issue
-
-
-
95,212
95,212
Special and lending funds
-
-
-
6,667
6,667
Other liabilities
2,866
244
3,110
21,951
25,061
Shareholders’ equity
-
-
-
407,581
407,581
Total liabilities and shareholders’ equity
129,286
15,945
145,231
3,774,243
3,919,474
Net balance sheet position
(97,515)
(4,662)
(102,177)
102,177
-
Open currency exchange transactions
97,608
4,888
102,496
(100,312)
2,184
Net open position
93
226
319
1,865
2,184
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
55
FINANCIAL RISK MANAGEMENT (CONTINUED)
The Bank has also granted loans in foreign currency. Although they are usually financed in the same currency, depending on the main
currency of the debtor’s cash flows, the strengthening of foreign currency against the local currency may adversely affect the debtors’
ability to repay the loans, which increases the probability of future losses from loans.
Sensitivity of foreign exchange risk
Foreign exchange (FX) risk is limited by amounts of open FX positions. For calculation of sensitivity to FX risk all exposures shall be
converted into possible loss, i.e. open FX position is multiplied by possible FX rate change. The FX risk parameters for the Group (Bank)
have been established in view of the maximum fluctuations of currency exchange rate in 2018 - 2022 and forecast that exchange rate
fluctuations will have the same trends in 2023.
Currency
Annual reasonable shift, 2023
Annual reasonable shift, 2022
GBP
10.0%
5.5%
USD
5.5%
5.5%
Other currencies
6.0%
4.5%
CIS countries currencies
15.0%
8.5%
The following table presents Group (Bank) sensitivities of profit and loss and equity to reasonably possible changes in exchange rates
applied at the balance sheet date, with all other variables held constant:
31 December 2022
31 December 2021
Impact on profit or loss and
equity
Group
Bank
Group
Bank
USD
1
1
5
5
GBP
3
3
-
-
Other currencies
8
8
11
11
CIS countries currencies
15
15
7
7
Pre-tax impact
27
27
23
23
Total
27
27
23
23
2.2. Interest rate risk in the banking book
An interest rate risk is a risk to incur losses because of the mismatch of re-evaluation possibility between the Bank’s and the Group’s
assets and liabilities.
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market
interest rates. The Bank and the Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on
both its fair value and cash flow risks.
The risk management is regulated by the Procedures for Interest Rate Risk Management, which were updated in 2022. Bank uses a
system of internal risk limits and indicators, which establish methods of risk measurement and set up measures for risk management.
These procedures are approved by the Board of the Bank and define that:
x the Bank observes the principle to avoid the speculation with future interest rates;
x the risk is evaluated using a system of internal key risk indicator;
x Risk Department provides the information on regular basis to Risk Management Committee about compliance with internal
risk limits.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
56
FINANCIAL RISK MANAGEMENT (CONTINUED)
Sensitivity of interest rate risk
The table below summarises Group’s interest rates sensitive assets and liabilities based on reprising dates based on which cash flow
interest rate risk is estimated.
Group
Up to 1
month
From 1 to
3
months
From 3 to
6
months
From 6 to
12 months
More than
1
year
Non interest
bearing or
maturity
undefined
Total
31 December 2022
Total interest rate sensitive assets
233,184
581,664
850,464
182,035
1,863,294
414,692
4,125,333
Total interest rate sensitive liabilities
87,842
177,113
317,383
321,916
2,132,720
698,709
3,735,683
Net interest sensitivity gap at 31 December 2022
145,342
404,551
533,081
(139,881)
(269,426)
(284,017)
389,650
31 December 2021
Total interest rate sensitive assets
210,832
461,299
1,304,350
131,474
1,427,677
376,548
3,912,180
Total interest rate sensitive liabilities
86,626
121,728
789,186
278,913
1,588,831
690,675
3,555,959
Net interest sensitivity gap at 31 December 2021
124,206
339,571
515,164
(147,439)
(161,154)
(314,127)
356,221
Assessing the sensitivity of the Group's profit and other components of equity towards the change of interest rates, it has been assumed
that interest is to change by 1 percentage point.
The table below summarizes the effect on the Group's profit and other components of equity of interest rate risk in the banking book as
at 31 December 2022 and 31 December 2021.
31 December 2022
31 December 2021
Pre-tax
increase
(decrea
se) in
profit
Pre-tax increase
(decrease) in other
components of
equity
Total impact on
equity (post-tax)
Pre-tax
increase
(decrease) in
profit
Pre-tax increase
(decrease) in other
components of
equity
Total impa
ct on
equity (post-tax)
Interest rate increase by 1 p.p.
7,747
(2,249)
4,398
6,872
(3,170)
2,962
Interest rate decrease by 1
p.p.
(7,747)
2,375
(
4,298)
(6,872)
3,380
(2,794)
The table below summarises the Bank’s interest rates sensitive assets and liabilities based on reprising dates based on which cash flow
interest rate risk is estimated.
Bank
Up to 1
month
From 1 to
3
months
From 3 to
6
months
From 6 to
12 months
More than
1
year
Non interest
bearing or
maturity
undefined
Total
31 December 2022
Total interest rate sensitive assets
225,914
741,678
832,472
155,937
1,731,866
425,419
4,113,286
Total interest rate sensitive liabilities
87,842
177,113
317,423
321,937
2,133,220
653,999
3,691,534
Net interest sensitivity gap at 31 December 2022
138,072
564,565
515,049
(166,000)
(401,354)
(228,580)
421,752
31 December 2021
Total interest rate sensitive assets
204,946
564,388
1,289,635
112,420
1,341,072
389,793
3,902,254
Total interest rate sensitive liabilities
86,626
121,728
789,226
279,313
1,589,352
645,552
3,511,797
Net interest sensitivity gap at 31 December 2021
118,320
442,660
500,409
(166,893)
(248,280)
(255,759)
390,457
Assessing the sensitivity of the Bank's profit and other components of equity towards the change of interest rates, it has been assumed
that interest is to change by 1 percentage point.
The table below summarises the effect on the Bank's profit and other components of equity of interest rate risk in the banking book as at
31 December 2022 and 31 December 2021.
31 December 2022
31 December 2021
Pre-tax
increase
(decrease) in
profit
Pre-tax increase
(decrease) in other
components of
equity
Total impact on
equity (post-tax)
Pre-tax
increase
(decrease) in
profit
Pre-tax increase
(decrease) in other
components of
equity
Total impac
t on
equity (post-tax)
Interest rate increase by 1 p.p.
8,833
(2,249)
5,267
7,534
(3,170)
3,491
Interest rate decrease by 1
p.p.
(8,833)
2,375
(5,
166)
(7,534)
3,380
(3,323)
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
57
FINANCIAL RISK MANAGEMENT (CONTINUED)
2.3. Securities risk
Securities risk is the risk to incur losses from the investment in securities.
The management of the securities risk is regulated by the Investment in Securities Limits Procedure. In order to properly manage the
debt securities portfolio risk, the Bank uses an internal limit system that combines maturity/rating limits, geographical region limits imposed
on total debt securities portfolio, VaR ratio limits imposed on debt securities at amortized cost portfolio, and VaR and capital requirements
amount limits imposed on other debt securities portfolios. For the equity portfolio risk management, a limit system that combines decision
taking limits, issuer limits, portfolio limits is used. The compliance with limits must be checked before taking the investment decisions,
monthly reports on the compliance with the limits set are submitted to the Bank’s Risk Management Committee.
Securities concentrations
Sector concentration of the securities portfolio is disclosed in Financial Risk Management disclosure, section 1.8. Maturities concentration
of securities portfolio is disclosed in Financial Risk Management disclosure, section 3.2. Credit quality of the securities portfolio is
disclosed in Notes 12 and Note 15. Geographical concentration of the debt securities portfolio is presented in tables below, which contain
Top 20 countries in which the Group and the Bank have exposures:
Top 20 countries in which the Group has debt security exposures:
2022
2021
Name of the country
Sovereign
Corporate
Total
Name of the country
Sovereign
Corporate
Total
1.
Lithuania
746,540
43,829
790,369
Lithuania
537,372
22,390
559,762
2.
Latvia
101,228
9,280
110,508
Netherlands
-
32,828
32,828
3.
Germany
-
25,225
25,225
Germany
-
28,435
28,435
4.
USA
-
20,370
20,370
USA
-
27,462
27,462
5.
Netherlands
-
20,359
20,359
Latvia
14,680
8,002
22,682
6.
France
-
17,037
17,037
Great Britain
215
14,717
14,932
7.
Estonia
-
15,219
15,219
Estonia
-
13,136
13,136
8.
Great Britain
213
12,321
12,534
France
-
11,921
11,921
9.
Italy
6,429
3,686
10,115
Italy
8,014
3,723
11,737
10.
Poland
9,477
208
9,685
Poland
9,695
207
9,902
11.
Sweden
3,164
4,429
7,593
Bulgaria
9,325
296
9,621
12.
Ireland
-
7,292
7,292
Sweden
3,240
4,430
7,670
13.
Luxembourg
-
5,243
5,243
Ireland
-
7,335
7,335
14.
Spain
4,852
-
4,852
Spain
5,170
1,512
6,682
15.
Austria
-
4,434
4,434
Czech Republic
214
5,534
5,748
16.
Finland
-
4,030
4,030
Luxembourg
-
5,443
5,443
17.
Romania
4,004
-
4,004
Finland
-
5,053
5,053
18.
Mexico
3,813
-
3,813
Austria
-
4,435
4,435
19.
Czech Republic
212
3,452
3,664
Mexico
4,001
-
4,001
20.
Slovenia
63
3,284
3,347
Slovenia
166
3,354
3,520
Other countries
3,845
914
4,759
Other countries
9,603
2,069
11,672
Total
883,840
200,612
1,084,452
Total
601,695
202,282
803,977
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
58
FINANCIAL RISK MANAGEMENT (
CONTINUED)
Top 20 countries in which the Bank has debt security exposures:
2022
2021
Name of the country
Sovereign
Corporate
Total
Name of the country
Sovereign
Corporate
Total
1.
Lithuania
743,203
40,893
784,096
Lithuania
534,030
18,580
552,610
2.
Latvia
101,228
9,280
110,508
Netherlands
-
32,424
32,424
3.
Germany
-
24,712
24,712
Germany
-
27,917
27,917
4.
Netherlands
-
19,955
19,955
USA
-
26,612
26,612
5.
USA
-
19,735
19,735
Latvia
14,680
8,002
22,682
6.
France
-
16,215
16,215
Great Britain
-
14,516
14,516
7.
Estonia
-
15,031
15,031
Estonia
-
12,830
12,830
8.
Great Britain
-
12,120
12,120
France
-
11,082
11,082
9.
Italy
6,329
3,182
9,511
Italy
7,733
3,217
10,950
10.
Poland
9,477
-
9,477
Poland
9,695
-
9,695
11.
Ireland
3,164
4,025
7,189
Bulgaria
9,128
296
9,424
12.
Sweden
-
7,091
7,091
Ireland
3,240
4,027
7,267
13.
Luxembourg
-
4,993
4,993
Sweden
-
7,134
7,134
14.
Spain
4,357
-
4,357
Spain
4,507
1,512
6,019
15.
Austria
-
4,012
4,012
Czech Republic
-
5,329
5,329
16.
Finland
-
3,822
3,822
Luxembourg
-
4,991
4,991
17.
Slovenia
3,256
-
3,256
Finland
-
4,844
4,844
18.
Czech Republic
-
3,248
3,248
Austria
-
4,008
4,008
19.
Romania
3,112
-
3,112
Slovenia
3,322
-
3,322
20.
Mexico
-
3,081
3,081
Mexico
-
3,149
3,149
Other countries
2,827
311
3,138
Other countries
6,724
1,445
8,169
Total
876,953
191,706
1,068,659
Total
593,059
191,915
784,974
Sensitivity of securities risk
The sensitivity of debt securities portfolio (at fair value through profit or loss – i.e. trading book is included in profit and at fair value through
other comprehensive income is included in other components of equity) to parallel shift of the interest rate curve by 1 percentage point
is presented in the table below:
31 December 2022
31 December 2021
Pre-tax
increase
(decrease) in
profit
Pre-tax increase
(decrease) in other
components of
equity
Total impact on
equity (post-tax)
Pre-tax
increase
(decrease) in
profit
Pre-tax increase
(decrease) in other
components of
equity
Total impact on
equity (post-tax)
Group:
Interest rate increase by 1 p.p.
(318)
(2,249)
(2,054)
(411)
(3,170)
(2,865)
Interest rate decrease by 1
p.p.
325
2
,375
2,160
428
3,380
3,046
Bank:
Interest rate increase by 1 p.p.
(309)
(2,249)
(2,046)
(365)
(3,170)
(2,828)
Interest rate decrease by 1
p.p.
316
2
,375
2,153
379
3,380
3,007
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
59
FINANCIAL RISK MANAGEMENT (CONTINUED)
3. LIQUIDITY RISK
Liquidity risk means the risk that the Bank is unable to meet its financial obligations in time or that it will not manage to receive financial
resources during a short time by borrowing or selling the assets.
3.1. Liquidity risk management process
The liquidity risk management depends on the Bank’s ability to cover the cash shortage by borrowing from the market; and the liquidity
of the market itself. The Bank seeks not to depend on the ability to borrow in the market in case of liquidity problems and constructs its
liquidity strategy based on hypothetical scenario it does not have access to market funding. Due to that fact the Bank possesses a
significant debt securities portfolio, which is highly liquid and can be used either as collateral for borrowing by repos, or sold.
Liquidity risk management is regulated by the Procedures for Liquidity Risk Management approved by the Bank’s Board. Liquidity risk is
evaluated by analysing the dynamics of various liquidity ratios. A list of these ratios as well as recommended limits to their change are
defined in the above-mentioned procedures. Decisions regarding liquidity management issues are made by the Bank’s Risk Management
Committee with reference to the information submitted by the Bank’s Risk Department or by the Bank’s Board with reference to the
information submitted by the Risk Management Committee. Current liquidity (up to 7 days) risk management is based on short-term cash
flow analysis and projections. The Market and Treasury Department is responsible for this.
The Group controls short-term and long-term liquidity risk through established ratios and limits.
Starting from 2015, the Bank is subject to regulatory Liquidity coverage ratio (LCR). The Bank complied with this ratio with a substantial
cushion (requirement for the LCR is set at 100%). As of 31 December 2022, Bank’s LCR ratio (aggregate for all currencies) stood at
189% (31 December 2021: 242%).
Internal liquidity limit system was updated in 2019. It includes normative, prospective, quality and concentration ratios.
3.2. Structure of assets and liabilities by maturity
The structure of the Group’s assets and liabilities by maturity is presented in the table below. Maturity bands used in the table represent
maturities of assets and liabilities under most likely scenario, which is contractual maturities scenario adjusted for expectations. For
liabilities and assets with no payment breaches, contractual terms are used as the representation of most likely scenario unless
information indicating otherwise is available.
Past due part of the assets with payment breaches over 30 days and total amount of assets past due over 90 days are included in
“Maturity undefined” band.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
60
FINANCIAL RISK MANAGEMENT (CONTINUED)
On demand
Less than 1
month
1 to 3
months
3 to 6
months
6 to 12
months
1 to 3 years
More than 3
years
Maturity
undefined
Total
At 31 December 2022:
Assets
Cash and cash equivalents
384,758
-
-
-
-
-
-
-
384,758
Due from other banks
-
113
2,520
-
-
9
91
-
2,733
Securities in the trading book
-
114
230
2,916
9,262
17,626
-
28,153
58,301
Derivative financial instruments
-
775
51
71
-
-
-
-
897
Loans to customers, finance lease
receivables
-
58,039
105,825
132,248
252,654
715,203
1,359,570
10,538
2,634,077
Investment securities at fair value
-
15
9,884
121
1,750
39,277
34,224
4,954
90,225
Investment securities at amortized
cost
-
1,851
6,189
203,407
63,728
459,279
234,579
-
969,033
Investments in subsidiaries
-
-
-
-
-
-
-
100
100
Intangible assets
-
-
-
-
-
-
-
8,283
8,283
Property, plant and equipment and
investment property
-
-
-
-
-
-
-
17,978
17,978
Other assets
231
5,934
437
530
867
886
32
9,229
18,146
Total assets
384,989
66,841
125,136
339,293
328,261
1,232,280
1,628,496
79,235
4,184,531
Due to other banks and financial
institutions
34,898
3,544
888
145,540
3,435
483,696
13,074
-
685,075
Due to customers
1,863,831
84,316
176,354
164,740
320,918
155,905
18,904
-
2,784,968
Special and lending funds
14,184
-
-
-
-
-
-
-
14,184
Debt securities in issue
-
-
-
-
-
151,204
20,027
-
171,231
Liabilities related to insurance
activities
91
495
147
199
586
2,573
35,222
-
39,313
Other liabilities
7,879
12,777
2,794
2,264
4,930
7,836
9,584
-
48,064
Shareholders’ equity
-
-
-
-
-
-
-
441,696
441,696
Total liabilities and shareholders’
equity
1,920,883
101,132
180,183
312,743
329,869
801,214
96,811
441,696
4,184,531
Net liquidity gap
(1,535,894)
(34,291)
(55,047)
26,550
(1,608)
431,066
1,531,685
(362,461)
-
At 31 December 2021:
Assets
Cash and cash equivalents
965,723
-
-
-
-
-
-
-
965,723
Due from other banks
-
997
99
-
-
9
91
-
1,196
Securities in the trading book
-
36
125
299
1,167
13,128
5,699
27,727
48,181
Derivative financial instruments
-
769
1,039
313
-
-
-
-
2,121
Loans to customers, finance lease
receivables
-
46,496
70,009
136,232
220,457
606,574
1,014,486
9,601
2,103,855
Investment securities at fair value
-
3
5,986
66
3,111
29,164
39,796
4,862
82,988
Investment securities at amortized
cost
-
1,355
16,433
19,802
35,512
522,564
109,732
-
705,398
Intangible assets
-
-
-
-
-
-
-
4,834
4,834
Property, plant and equipment and
investment property
-
-
-
-
-
-
-
16,989
16,989
Other assets
12,327
5,860
66
53
374
505
3
12,009
31,197
Total assets
978,050
55,516
93,757
156,765
260,621
1,171,944
1,169,807
76,022
3,962,482
Due to other banks and financial
institutions
40,425
6,779
1,893
(30)
2,771
632,270
13,630
-
697,738
Due to customers
1,853,292
80,074
119,604
159,379
278,378
155,198
33,258
-
2,679,183
Special and lending funds
6,667
6,667
Debt securities in issue
-
-
-
-
-
-
95,212
-
95,212
Liabilities related to insurance
activities
74
374
349
288
1,307
2,168
36,849
41,409
Other liabilities
16,074
6,905
1,076
1,039
2,608
4,378
3,766
-
35,846
Shareholders’ equity
-
-
-
-
-
-
-
406,427
406,427
Total liabilities and shareholders’
equity
1,916,532
94,132
122,922
160,676
285,064
794,014
182,715
406,427
3,962,482
Net liquidity gap
(938,482)
(38,616)
(29,165)
(3,911)
(24,443)
377,930
987,092
(330,405)
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
61
FINANCIAL RISK MANAGEMENT (CONTINUED)
The Structure of the Bank's assets and liabilities by maturity was as follows:
On demand
Less than 1
month
1 to 3
months
3 to 6
months
6 to 12
months
1 to 3 years
More than 3
years
Maturity
undefined
Total
At 31 December 2022:
Assets
Cash and cash equivalents
383,518
-
-
-
-
-
-
-
383,518
Due from other banks
-
113
2,520
-
-
9
91
-
2,733
Securities in the trading book
-
109
13
2,814
7,689
16,431
-
231
27,287
Derivative financial instruments
-
775
51
71
-
-
-
-
897
Loans to customers, finance lease
receivables
-
50,704
265,718
114,427
227,379
644,823
1,309,549
354
2,612,954
Investment securities at fair value
-
15
9,884
121
1,750
39,277
34,224
4,954
90,225
Investment securities at amortized
cost
-
1,845
6,170
203,135
62,815
457,887
224,480
956,332
Investments in subsidiaries
-
-
-
-
-
-
-
31,441
31,441
Intangible assets
-
-
-
-
-
-
-
6,450
6,450
Property, plant and equipment and
investment property
-
-
-
-
-
-
-
15,525
15,525
Other assets
231
5,670
421
489
720
456
26
6,095
14,108
Total assets
383,749
59,231
284,777
321,057
300,353
1,158,883
1,568,370
65,050
4,141,470
Due to other banks and financial
institutions
36,342
3,544
888
145,580
3,435
483,696
13,074
-
686,559
Due to customers
1,867,690
84,316
176,354
164,740
320,939
156,405
18,904
-
2,789,348
Special and lending funds
14,184
-
-
-
-
-
-
-
14,184
Debt securities in issue
-
-
-
-
-
151,204
20,027
-
171,231
Other liabilities
7,490
5,973
2,643
2,194
2,666
7,152
9,246
-
37,364
Shareholders’ equity
-
-
-
-
-
-
-
442,784
442,784
Total liabilities and shareholders’
equity
1,925,706
93,833
179,885
312,514
327,040
798,457
61,251
442,784
4,141,470
Net liquidity gap
(1,541,957)
(34,602)
104,892
8,543
(26,687)
360,426
1,507,119
(377,734)
-
At 31 December 2021:
Assets
Cash and cash equivalents
964,849
-
-
-
-
-
-
-
964,849
Due from other banks
-
997
99
-
-
9
91
-
1,196
Securities in the trading book
-
28
16
284
93
10,225
3,976
477
15,099
Derivative financial instruments
-
769
1,039
313
-
-
-
-
2,121
Loans to customers, finance lease
receivables
-
40,465
173,185
121,519
201,381
558,542
988,501
945
2,084,538
Investment securities at fair value
-
3
5,986
66
3,111
29,164
39,796
4,825
82,951
Investment securities at amortized
cost
-
1,349
16,204
19,730
35,483
520,865
98,595
-
692,226
Investments in subsidiaries
-
-
-
-
-
-
-
31,668
31,668
Intangible assets
-
-
-
-
-
-
-
3,114
3,114
Property, plant and equipment and
investment property
-
-
-
-
-
-
-
14,462
14,462
Other assets
12,327
5,804
2
-
-
42
-
9,075
27,250
Total assets
977,176
49,415
196,531
141,912
240,068
1,118,847
1,130,959
64,566
3,919,474
Due to other banks and financial
institutions
45,018
6,779
1,893
10
3,171
632,770
13,630
-
703,271
Due to customers
1,855,674
80,074
119,604
159,379
278,378
155,219
33,258
-
2,681,586
Special and lending funds
6,667
-
-
-
-
-
-
-
6,667
Debt securities in issue
-
-
-
-
-
-
95,212
-
95,212
Other liabilities
15,615
773
953
501
845
3,404
3,066
-
25,157
Shareholders’ equity
-
-
-
-
-
-
-
407,581
407,581
Total liabilities and shareholders’
equity
1,922,974
87,626
122,450
159,890
282,394
791,393
145,166
407,581
3,919,474
Net liquidity gap
(945,798)
(38,211)
74,081
(17,978)
(42,326)
327,454
985,793
(343,015)
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
62
FINANCIAL
RISK MANAGEMENT (CONTINUED)
3.3. Non - derivative cash flows
Undiscounted cash flows in the table below describe contractual liability side outflows which are stated including nominal contract
amounts together with interest till the end of the contract.
Group
31 December
2022
Maturity
undefined
Up to 1 month
1-
3 months
3-
12 months
1-
5 years
Over 5 years
Total
Liabilities
Due to banks
-
38,514
905
164,559
494,652
9,770
708,400
Due to customers
-
1,932,631
176,680
488,507
174,329
5,567
2,777,714
Debt securities in issue
-
-
-
2,905
167,884
22,433
193,222
Special and lending funds
-
14,184
-
-
-
-
14,184
Liabilities related to insurance
activities
-
586
147
785
6,552
31,243
39,313
Total liabilities (contractual
maturity dates)
-
1,985,915
177,732
656,756
843,417
69,013
3,732,833
Group
31 December
2021
Maturity
undefined
Up to 1 month
1-
3 months
3-
12 months
1-
5 years
Over 5 years
Total
Liabilities
Due to banks
-
46,971
1,771
632,325
9,547
9,644
700,258
Due to customers
-
1,940,074
119,710
438,788
186,393
7,170
2,692,135
Debt securities in issue
-
-
-
2,015
82,095
23,690
107,800
Special and lending funds
-
6,667
-
-
-
-
6,667
Liabilities related to insurance
activities
-
448
349
1,595
5,822
33,195
41,409
Total liabilities (contractual
maturity dates)
-
1,994,160
121,830
1,074,723
283,857
73,699
3,548,269
Bank
31 December
2022
Maturity
undefined
Up to 1 month
1-
3 months
3-
12 months
1-
5 years
Over 5 years
Total
Liabilities
Due to banks
-
39,998
905
164,620
495,152
9,770
710,445
Due to customers
-
1,936,450
176,680
488,507
174,329
5,567
2,781,533
Debt securities in issue
-
-
-
2,905
167,884
22,433
193,222
Special and lending funds
-
14,184
-
-
-
-
14,184
Total liabilities (contractual
maturity dates)
-
1,990,632
177,585
656,032
837,365
37,770
3,699,384
Bank
31 December
2021
Maturity
undefined
Up to 1 month
1-
3 months
3-
12 months
1-
5 years
Over 5 years
Total
Liabilities
Due to banks
-
51,564
1,771
632,765
10,047
9,644
705,791
Due to customers
-
1,942,456
119,710
438,788
186,414
7,170
2,694,538
Debt securities in issue
-
-
-
2,015
82,095
23,690
107,800
Special and lending funds
-
6,667
-
-
-
-
6,667
Total liabilities (contractual
maturity dates)
-
2,000,687
121,481
1,073,568
278,556
40,504
3,514,796
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
63
FINANCIAL
RISK MANAGEMENT (CONTINUED)
3.4. Remaining contractual maturity off - balance sheet items
Analysis of off-balance sheet items by the remaining maturity is as follows:
Group
At 31 December
2022
Up to one
month
From 1 to 3
months
From 3 to 6
months
From 6 to 12
months
From 1
to 5 years
Over 5
years
Total
Loan commitments
149,368
30,992
46,338
90,702
173,424
120
490,944
Guarantees
5,940
3,382
5,718
13,195
21,661
2,759
52,655
Other commitments
5,696
-
60
-
-
-
5,756
Total
161,004
34,374
52,116
103,897
195,085
2,879
549,355
Group
At 31 December
2021
Up to one
month
From 1 to 3
months
From 3 to 6
months
From 6 to 12
months
From 1
to 5 years
Over 5
years
Total
Loan commitments
394,173
-
-
-
-
-
394,173
Guarantees
52,931
-
-
-
-
-
52,931
Other commitments
1,183
961
2,106
102
8
-
4,360
Total
448,287
961
2,106
102
8
-
451,464
Bank
At 31 December
2022
Up to one
month
From 1 to 3
months
From 3 to 6
months
From 6 to 12
months
From 1
to 5 years
Over 5
years
Total
Loan commitments
151,016
30,992
46,338
90,702
173,424
120
492,592
Guarantees
6,001
3,382
5,718
13,195
21,661
2,759
52,716
Other commitments
5,696
-
60
-
-
-
5,756
Total
162,713
34,374
52,116
103,897
195,085
2,879
551,064
Bank
At 31 December
2021
Up to one
month
From 1 to 3
months
From 3 to 6
months
From 6 to 12
months
From 1
to 5 years
Over 5
years
Total
Loan commitments
404,388
-
-
-
-
-
404,388
Guarantees
52,992
-
-
-
-
-
52,992
Other commitments
1,183
961
2,106
102
8
-
4,360
Total
458,563
961
2,106
102
8
-
461,740
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
64
FINANCIAL RISK MA
NAGEMENT (CONTINUED)
4. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
4.1. Financial assets and liabilities not measured at fair value
The table below summarizes the carrying amounts and fair values of those financial assets and liabilities not presented on the Bank’s
and Group’s balance sheets at their fair value. The valuation methods for the assets and liabilities are summarized below.
a) Loans and advances to banks
The carrying amount of floating rate placements and overnight deposits is a reasonable approximation of fair value.
The fair value of fixed interest bearing deposits is estimated using valuation technique attributable to Level 3 in the fair value hierarchy,
based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and remaining maturity.
b) Loans and advances to customers and finance lease receivables
Loans and advances and finance lease receivables are net of charges for impairment. The fair value of loans and advances to customers
and finance lease receivables is estimated using valuation technique attributable to Level 3 in the fair value hierarchy. The estimated fair
value of loans, advances and finance lease receivables represents the discounted amount of estimated future cash flows expected to be
received. Expected cash flows are discounted at current market rates (average interest rates on outstanding loans published by the Bank
of Lithuania) to determine fair value.
c) Investment securities
The fair value for held-to-collect assets is based on market prices or broker/dealer price quotations – i.e. it is estimated using valuation
technique attributable to Level 1 in the fair value hierarchy.
d) Deposits from banks, due to customers, debt securities in issue and special lending funds
The estimated fair value of deposits with no stated maturity, which includes non-interest bearing deposits, is the amount repayable on
demand.
The fair value of fixed interest-bearing deposits, debt securities in issue and special and lending funds not quoted in an active market is
estimated using valuation technique attributable to Level 3 in the fair value hierarchy based on discounted cash flows using interest rates
for new debts with similar remaining maturity. Interest rates for new deposits of Šiaulių bankas are used for calculation purposes as
discount rates.
e) Other financial assets and other financial liabilities
The fair value of lease liabilities is estimated using valuation technique attributable to Level 3 in the fair value hierarchy based on
discounted cash flows using interest rates for new leases with similar remaining maturity. The estimated fair value of other financial
assets and liabilities is similar to the carrying value due to short maturities of these assets and liabilities.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
65
FINANCIAL RISK MANAGEMENT (CONTINUED)
Group
As of 31 December 2022
As of 31 December 2021
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Due from other banks
2,733
2,733
1,196
1,196
Loans
2,391,629
2,506,401
1,908,681
1,931,722
Loans to individuals:
1,113,969
1,177,560
690,008
711,833
Consumer loans -
201,152
209,224
143,462
154,630
Mortgages -
663,328
717,006
455,126
466,770
Other -
249,489
251,330
91,420
90,433
Loans to business customers
1,259,581
1,311,294
1,211,726
1,212,983
Central and other authorities -
82,668
82,936
135,969
131,994
Large corporates -
103,647
105,571
127,772
127,381
SME -
1,073,266
1,122,787
947,985
953,608
Loans and advances to financial institutions
18,079
17,547
6,947
6,906
Finance lease receivables
242,448
254,733
195,174
194,999
Investment securities at amortized cost
969,033
914,070
705,398
698,867
Government bonds -
827,765
785,192
541,026
539,611
Corporate bonds -
141,268
128,878
164,372
159,256
Other financial assets
5,815
5,815
16,398
16,398
Liabilities
Due to other banks and financial institutions
685,075
673,102
697,738
697,736
Due to customers
2,784,968
2,784,796
2,679,183
2,683,626
Due to individuals
1,533,559
1,533,134
1,531,867
1,536,206
Due to private companies
950,874
951,163
860,965
861,003
Due to other enterprises
300,535
300,499
286,351
286,417
Debt securities in issue
171,231
180,405
95,212
95,201
Special and lending funds
14,184
14,184
6,667
6,667
Other financial liabilities
27,419
27,463
25,053
25,023
Bank
As of 31 December 2022
As of 31 December 2021
Carrying
amount
Fair value
Carrying
amount
Fair value
Assets
Due from other banks
2,733
2,733
1,196
1,196
Loans
2,370,762
2,478,019
1,889,629
1,901,449
Loans to individuals:
915,829
971,361
553,087
563,912
Consumer loans -
3,012
3,025
6,541
6,709
Mortgages -
663,328
717,006
455,126
466,770
Other -
249,489
251,330
91,420
90,433
Loans to business customers
1,259,581
1,311,294
1,211,726
1,212,978
Central and other authorities -
82,668
82,936
135,969
131,994
Large corporates -
103,647
105,571
127,772
127,381
SME -
1,073,266
1,122,787
947,985
953,603
Loans and advances to financial institutions
195,352
195,364
124,816
124,559
Finance lease receivables
242,192
254,466
194,909
194,727
Investment securities at amortized cost
956,332
915,508
692,226
698,408
Government bonds -
821,781
785,884
535,006
539,374
Corporate bonds -
134,551
129,624
157,220
159,034
Other financial assets
5,620
5,620
16,271
16,271
Liabilities
Due to other banks and financial institutions
686,559
674,586
703,271
703,269
Due to customers
2,789,348
2,789,176
2,681,586
2,686,029
Due to individuals
1,533,559
1,533,134
1,531,867
1,536,206
Due to private companies
954,733
955,022
863,347
863,385
Other
301,056
301,020
286,372
286,438
Debt securities in issue
171,231
180,405
95,212
95,201
Special and lending funds
14,184
14,184
6,667
6,667
Other financial liabilities
24,491
24,549
21,775
21,748
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
66
FINANCIAL RISK MANAGEMENT (CONTINUED)
4.2. Financial assets and liabilities measured at fair value
a) Fair value hierarchy
The table below analyses financial instruments carried at fair value, by a hierarchy of valuation techniques based on whether the inputs
to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources;
unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy:
x Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity
securities and debt instruments on exchanges (for example, NASDAQ Stock Exchange, London Stock Exchange, Frankfurt
Stock Exchange) or public price quotations (for example, for Lithuanian government bonds, average price quotations from the
most active banks that participate in the primary placement auctions of the Lithuanian Government securities are used).
x Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from prices). The Group uses fair value calculated based on Level 2 inputs for
accounting of currency derivatives and derivatives related to prices of equity instruments.
x Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level
includes Group’s investments into unlisted equity securities, derivatives related to interest rate floor in variable rate loan
contracts and liabilities designated at fair value through profit or loss. Details on fair value measurement of these instruments
are described in subsection “Details on the main models used in valuation of Level III instruments” (Financial Risk
Management disclosure, section 4.2.b), below.
b) Measurement of financial assets and liabilities according to the fair value hierarchy
2022
2021
Group
Bank
Group
Bank
LEVEL I
Financial assets in the trading book
Listed equity securities
213
213
449
449
Units of investment funds
27,922
-
27,250
-
Government bonds
2,880
2,602
6,071
4,062
Corporate bonds
9,380
6,566
7,465
3,642
Investment securities at fair value
-
-
Government bonds
52,570
52,570
53,991
53,991
Corporate bonds
31,052
31,052
24,425
24,425
Investment fund units
-
-
-
-
Total Level I financial assets
124,017
93,003
119,651
86,569
LEVEL II
Financial assets in the trading book
Derivative financial instruments
897
897
2,121
2,121
Total Level II financial assets
897
897
2,121
2,121
Financial liabilities at fair value through profit or loss
Derivative financial instruments
7,152
7,152
96
96
Total Level II financial liabilities
7,152
7,152
96
96
LEVEL III
Financial assets in the trading book
Corporate bonds
17,888
17,888
6,918
6,918
Unlisted equity securities
18
18
28
28
Investment securities at fair value
Corporate bonds
1,935
1,935
-
-
Unlisted equity securities
243
243
455
455
Investment fund units
4,425
4,425
4,117
4,080
Securitisation related financial assets (see Notes 13, 16)
Unlisted equity securities
100
100
-
-
Loans granted
2,058
2,058
-
-
Total Level III financial assets
26,667
26,667
11,518
11,481
There were no transfers between fair value hierarchy levels during 2022 and 2021.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
67
FINANCIAL RISK MANAGEMENT (CONTINUED)
The following table presents the changes in Level III instruments during 2022 and 2021:
The Group
Financial assets in the trading book
Investment securities at fair value
Corporate bonds
Unlisted equities
Corporate bonds
Unlisted equities
Investment fund
units
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Value as of 1 January
6,918
3,603
28
6
-
-
455
525
4,117
2,929
Additions / Recognition
45,172
20,288
7
46
2,000
-
-
-
31
1,148
Disposals
(33,979)
(15,157)
(6)
(23)
-
-
(212)
(127)
(98)
(378)
Conversion to shares
-
-
-
-
-
-
-
-
-
-
Derecognition
-
(1,892)
-
-
-
-
-
-
-
-
Changes due to interest
accrued/paid
550
73
-
-
23
-
-
-
-
-
Revaluations through profit or
loss
(773)
3
(11)
(1)
(88)
-
-
57
375
418
Value as of 31 December
17,888
6,918
18
28
1,935
-
243
455
4,425
4,117
The Bank
Financial assets in the trading book
Investment securities at fair value
Corporate bonds
Unlisted equities
Corporate bonds
Unlisted equities
Investment fund
units
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Value as of 1 January
6,918
2,249
28
6
-
-
455
398
4,080
2,929
Additions / Recognition
45,172
20,288
7
46
2,000
-
-
-
31
1,111
Disposals
(33,979)
(13,803)
(6)
(23)
-
-
(212)
-
(61)
(378)
Conversion to shares
-
-
-
-
-
-
-
-
-
-
Derecognition
(1,892)
-
-
-
-
-
-
-
-
Changes due to interest
accrued/paid
550
73
-
-
23
-
-
-
-
-
Revaluations through profit or
loss
(773)
3
(11)
(1)
(88)
-
-
57
375
418
Value as of 31 December
17,888
6,918
18
28
1,935
-
243
455
4,425
4,080
2022
2021
Group
Bank
Group
Bank
Total result from revaluation of Level III instruments included in the income statement
(497)
(497)
476
476
from trading securities (corporate bonds)
(784)
(784)
2
2
from investment securities at fair value (corporate bonds)
(88)
(88)
-
-
from investment securities at fair value (unlisted equities)
-
-
56
56
from investment securities at fair value (investment fund units)
375
375
418
418
Details on the main models used in valuation of Level III instruments:
Unlisted debt securities. Most commonly used fair value measures in the Group are assessment of discounted cash flows from the
security carried out by employees of the Group. The principles for the assessment of fair value of unlisted equity securities are stipulated
in the Instruction for Accounting of Securities.
Unlisted equity securities. Most commonly used fair value measures in the Group are valuations from external independent certified
appraisers or assessment of discounted cash flows from the security carried out by employees of the Group. The principles for the
assessment of fair value of unlisted equity securities are stipulated in the Instruction for Accounting of Securities.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
68
FINANCIAL
RISK MANAGEMENT (CONTINUED)
4.3. Offsetting financial assets and financial liabilities
As of 31 December 2022 and 31 December 2021, only currency derivative instruments were subject to master netting arrangements and
similar arrangements. As of 31 December 2022, derivative financial instruments classified as assets in amount of EUR 897 thousand
and derivative financial instruments classified as liabilities in amount of EUR 7,152 thousand were subject to those agreements. As of 31
December 2021, derivative financial instruments classified as assets in amount of EUR 2,121 thousand and derivative financial
instruments classified as liabilities in amount of EUR 96 thousand were subject to those agreements.
The Group receives collateral in the form of marketable securities in respect of reverse repurchase agreements, which are included in
loans to customers. Gross amount of reverse repurchase agreements: 31 December 2022: EUR 18,846 thousand; 31 December 2021:
EUR 10,308 thousand. Securities received as a collateral for reverse repurchase agreements can be pledged or sold during the term of
transaction but have to be returned on maturity of the transaction. The Group did not pledge or sell any collateral received for reverse
repurchase agreements during 2022 and 2021.
4.4. Classes of financial instruments
A table below provides reconciliation of items of financial assets and liabilities as presented in Statement of Financial Position to classes
of financial instruments:
31 December 2022
31 December 2021
Group
Bank
Group
Bank
FINANCIAL ASSETS
Financial assets mandatorily measured at fair value through profit or loss:
66,210
35,196
55,164
22,045
Trading securities
27,646
27,287
18,198
15,099
trading debt securities: government bonds -
2,880
2,602
2,020
11
trading debt securities: corporate bonds -
24,535
24,454
15,701
14,611
trading equities -
231
231
477
477
Other trading book securities
30,655
-
29,983
-
other trading book debt securities: government bonds -
2,733
-
2,733
-
other trading book equities -
27,922
-
27,250
-
Investment securities at fair value
4,954
4,954
4,862
4,825
non-trading equities -
4,954
4,954
4,862
4,825
Derivative financial instruments
897
897
2,121
2,121
Investment securities at fair value
2,058
2,058
-
-
loans granted -
2,058
2,058
-
-
Financial assets measured at fair value through other comprehensive income:
85,271
85,271
78,126
78,126
Debt securities at fair value through other comprehensive income
85,271
85,271
78,126
78,126
government bonds -
52,570
52,570
53,991
53,991
corporate bonds -
32,701
32,701
24,135
24,135
Financial assets measured at amortized cost:
3,751,910
3,716,907
3,597,396
3,564,171
Cash and cash equivalents
384,758
383,518
965,723
964,849
Due from other banks
2,733
2,733
1,196
1,196
Loans to customers
2,389,571
2,368,704
1,908,681
1,889,629
loans to financial institutions -
16,021
193,294
6,947
124,816
loans to individuals (retail): consumer loans -
201,152
3,012
143,462
6,541
loans to individuals (retail): mortgages -
663,328
663,328
455,126
455,126
loans to individuals (retail): other -
249,489
249,489
91,420
91,420
loans to business customers: SME -
1,073,266
1,073,266
947,985
947,985
loans to business customers: large corporates -
103,647
103,647
127,772
127,772
loans to business customers: central and local authorities and other -
82,668
82,668
135,969
135,969
Investment securities at amortized cost
969,033
956,332
705,398
692,226
government bonds -
827,765
821,781
541,026
535,006
corporate bonds -
141,268
134,551
164,372
157,220
Other financial assets
5,815
5,620
16,398
16,271
Finance lease receivables:
242,448
242,192
195,174
194,909
Finance lease receivables
242,448
242,192
195,174
194,909
individuals -
27,458
27,458
26,630
26,630
business customers -
214,990
214,734
168,544
168,279
TOTAL FINANCIAL ASSETS
4,145,839
4,079,566
3,925,860
3,859,251
FINANCIAL LIABILITIES
Financial liabilities mandatorily measured at fair value through profit or loss:
7,152
7,152
96
96
Derivative financial instruments
7,152
7,152
96
96
Financial liabilities measured at amortised cost:
3,682,877
3,685,813
3,503,853
3,508,511
Due to banks and financial institutions
685,075
686,559
697,738
703,271
Due to customers
2,784,968
2,789,348
2,679,183
2,681,586
due to individuals -
1,533,559
1,533,559
1,531,867
1,531,867
due to private companies -
950,874
954,733
860,965
863,347
other -
300,535
301,056
286,351
286,372
Special and lending funds
14,184
14,184
6,667
6,667
Debt securities in issue
171,231
171,231
95,212
95,212
Other financial liabilities
27,419
24,491
25,053
21,775
TOTAL FINANCIAL LIABILITIES
3,690,029
3,692,965
3,503,949
3,508,607
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
69
FINANCIAL RISK MANAGEMENT (CONTINUED)
5. THE RISK INHERENT IN INSURANCE ACTIVITIES
The Bank’s subsidiary GD UAB SB Draudimas (hereinafter - the company) is engaged in life insurance business.
Insurance risk
The insurance risk occurs from the uncertainty in estimation of the probability and timing of the insurance events used for the calculation
of the insurance premium. This risk is random and therefore unpredictable.
For the portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the
company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance
liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are
random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical
techniques.
The company issues the contracts with mortality, morbidity, survival, casualty risks.
The company manages acceptable insurance risk by valuating the health of the insured person, habits of living, and the history of the
health of his family. The company uses a system of several levels of risk to ensure that the payable premium would conform to the state
of health of the insured person.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected
outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The
company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these
categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.
At present, these risks do not vary significantly in relation to the location of the risk insured by the company. However, undue concentration
by amounts could have an impact on the severity of benefit payments on a portfolio basis.
Concentration of risk is measured by the insurance amount of the accepted risks:
2022
2021
Maturity
2.03 %
2.56 %
Death
34.40 %
32.88 %
Critical illness
9.30 %
10.09 %
Death in case of accident
14.74 %
14.75 %
Trauma
39.53 %
39.71 %
The company manages these risks through its underwriting strategy and reinsurance arrangements.
The underwriting strategy is intended to ensure that the risks underwritten are well diversified in terms of type of risk and the level of
insured benefits.
The company follows the principles of conservatism and prudence to settle the price for insurance risk therefore the increase in loss rate
of any insurance risk would not impact the result of the Group significantly.
Mortality, survival, casualty and morbidity risks
Mortality, morbidity, survival, casualty risks occur because the frequency or severity of claims and benefits are greater than estimated,
that will cause that future premiums will not be sufficient to cover the future claims in case of death, illnesses or trauma. For contracts
where death is the insured risk, the most significant factors that could increase the overall frequency of claims are epidemics (such as
AIDS or SARS) or wide spread changes in lifestyle, such as eating, smoking and exercise habits, resulting in earlier or more claims than
expected.
The survival insurance risk appears due to the longer life-time than planned. For contracts where survival is the insured risk, the most
significant factor is continued improvement in medical science and social conditions that would increase longevity.
The most significant factor that could increase the casualty insurance risk is the departure from occupational safety, use of obsolete
equipment, increasing rate of accidents.
As portfolio of the company has not significant number of events of death, trauma and casualty, for valuation of the mortality and casualty
insurance risks the company uses statistics on mortality and casualty of the population of Lithuania. For valuation of the morbidity
insurance risk the company uses morbidity tables of the reinsurance company that has a broad experience of similar activities.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
70
FINANCIAL RISK MANAGEMENT (CONTINUED)
Profit or loss and insurance liabilities are mainly sensitive to changes in mortality, disability/morbidity, lapse rates, expense rates, discount
rates which are estimated for calculating adequate value of insurance liabilities during the liability adequacy test.
Changes in variables represent reasonably possible changes in variables mentioned which could have occurred and would have led to
significant changes in insurance liabilities as at the end of the reporting period. These reasonably possible changes represent neither
expected changes in variables nor worst-case scenarios.
The analysis was prepared for a change in variables with all other assumptions remaining constant and ignores changes in the values of
the related assets.
Sensitivity was calculated for the worse direction in movement; therefore, sensitivity to changes was calculated for a 10% increase in
mortality, longevity, disability and morbidity, lapse rates and expense rates. Hence changes in discount rates are stated in 100 basis
points for both directions.
The company’s sensitivity to the changes in key variables that have a material impact, as of 31 December 2022:
Variable
Change in variable
Change in profit/loss
Change in insurance liability
Mortality
10%
(407)
407
Longevity
10%
(13)
13
Disability/Morbidity
10%
(423)
423
Lapse rate
10%
(274)
274
Expense rate
10%
(1,359)
1,359
Discount rate
100bp
928
(928)
(100bp)
(1,102)
1,102
The Company’s sensitivity to the changes in key variables that have a material impact, as of 31 December 2021:
Variable
Change in variable
Change in profit/loss
Change in insurance liability
Mortality
10%
(433)
433
Longevity
10%
(12)
12
Disability/Morbidity
10%
(432)
432
Lapse rate
10%
(314)
314
Expense rate
10%
(1,175)
1,175
Discount rate
100bp
1,311
(1,311)
(100bp)
(1,566)
1,566
Loss rate according to insurance groups:
2022 (%)
2021 (%)
Life insurance
Investment life insurance
15.2
13.5
Term life insurance
21.7
12.0
Endowment insurance
36.2
17.5
Annuities
70.2
60.5
Overall loss rate
20.0
15.7
Loss rates by insurance groups were calculated by dividing total claims costs (including change in outstanding claims reserve) per
insurance group by gross earned premiums.
Claims lag risk
Claims lag risk occurs when the event is incurred but not yet reported to the Company. If the part of incurred but not reported claims
would increase or decrease by 10% during the reporting year, the profit and the equity of the Company would decrease or increase by
EUR 9 thousand (2021 – EUR 7 thousand).
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
71
FINANCIAL RISK MANAGEMENT (CONTINUED)
Cancellation risk
Cancellation risk is a risk, when the insurance contract is terminated on the initiative of the policyholder earlier than the contract expires.
The surrender value, paid to the policyholder, in case of the contract cancellation, consisted of share from the total mathematical technical
provision (2022: 6.65%, 2021: 4.9%), except unearned premium technical provision for the end of the reporting year. Due to the fact that
technical provision for every contract is not less than the surrender amount in case of the contract cancellation, therefore, increased
number of cancellations shall not affect the results of the Company in the long run. Immediate profits in the current year are netted by
decrease in the future income of the Company.
The company manages such risk through the prevention of the cancellation, by notifying the policyholder of possible cancellation due
payment delay of a periodical insurance premium, by proposing to change the terms of the contract according to the present situation.
Technical provisions inadequacy risk
Technical provisions inadequacy risk is a risk that calculated insurance technical provisions will be insufficient to reflect (cover) company‘s
underwriting insurance liabilities. In order to reduce the technical provisions inadequacy risk the company periodically tests technical
provisions adequacy and ensures compliance with set limits.
6. OPERATIONAL RISK
Operational risk is the risk to incur losses due to inadequate internal control processes or failure to implement the process, errors and/or
unlawful acts of employees, malfunctioning of information systems or external incidents. Operational risk, unlike other types of risk (credit,
market, liquidity), is not taken on purposefully with the expectation of obtaining gain but arises spontaneously in the course of the Bank’s
business.
In 2022, the Bank continued to improve the operational and reputational risk management and event recording systems of the Bank and
the Bank’s subsidiaries and reviewed the indicators and limits of these risks. The Operational Risk Event Management Procedure, the
Instructions for the Registration and Administration of OREs in the AIS, the Procedure for Investigation of Particularly Significant
Operational Risk Events (OREs) have been updated, detailing the process of informing the Bank’s Committees. In order to improve the
process of purchasing outsourced services and the management and monitoring process of important outsourced services in the Bank,
the procedure for managing outsourcing services has been updated.
In 2022, significant attention was also paid to the review of the Bank’s Business Continuity Plan documentation and to the development
and testing of a comprehensive test scenario for Business Continuity Plans.
In view of the current geopolitical situation, the Bank established a working group on the war in Ukraine.
This year, further significant attention will be paid to the management of the continuity of the Bank's activities, risk management and
monitoring of important outsourced services, strengthening of the operational and reputational risk culture in the Bank.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
72
FINANCIAL RISK MANAGEMENT (CONTINUED)
7. IT RISK
Information technology (IT) risk – is a probability of loss due to breach of confidentiality, failure of integrity of systems and data,
inappropriateness or unavailability of systems and data or inability to change information technology (IT) within a reasonable time and
with reasonable costs when the environment or business requirements change. Main goal of Bank’s IT risk management – avoid or
minimize losses caused by IT related factors.
Bank’s IT risk is regulated by IT risk management procedure. System of key IT risk indicators (KRIs) helps in measurement and
management of IT risk level, this system is constantly improved.
In 2022 Bank continued implementing IT risk decreasing measures. Updated Bank IT risk management procedure was prepared. IT
continuity plan was updated, critical IT systems recovery plans was tested. All IT systems moved out from in house to external data
center. Risky outdated and end-of-life technologies were removed from Bank’s IT systems. Privileged access management system was
implemented, significantly elevating level of Bank’s IT security, IT systems user access management procedure was updated.
8. COMPLIANCE RISK
Compliance risk is the risk that the Bank's activities do not comply with the financial institution regulatory requirements set forth in the
national legal acts, the EBA (European Banking Authority), the ESMA (European Security and Markets Authority), Financial Crime
Investigation Service (FNTT) and Bank of Lithuania guidelines, positions and requirements. The Bank ensures compliance control and
puts efforts to avoid breaches of legal acts which could impair interests of the Bank or its clients, damage reputation of the Bank, cause
fines or other sanctions, generate financial or other losses to the Bank. The compliance function areas were established by the Bank
taking into consideration the volume of operations, the complexity of the activities, transactions executed and their risk level. The
compliance function performs compliance risk self-assessment using risk-based approach on a regular basis and informs Bank‘s
management about the identified risks and their mitigation measures. During 2022 compliance function was continuously active in area
of anti-money laundering (AML) and terrorist financing prevention, international financial sanctions implementation, personal data privacy,
financial instruments market, anti-corruption, anti-market abuse related activities and other areas. With aim to strengthen compliance
function on 15
th
November 2022 Legal and administration service was revoked within the Bank and new Legal, compliance and prevention
service was established instead, which is managed by the Bank’s Chief Compliance Officer. In 2022 changes in compliance function
were continued by transferring compliance function from Risks management service structure to newly established Legal, compliance
and prevention service structure, dividing compliance function into two departments: Compliance department and newly created Anti-
monetary laundering prevention compliance department, which activities cover financial crime prevention, including second defence line
compliance officers working in area of international financial sanctions implementation. Bank’s Anti-monetary laundering prevention
compliance department director is also appointed as the Bank’s and the Group’s AML Compliance Officer, to whom AML prevention
employees of Group entities are functionally reportable. AML Compliance Officer provides independent reports and has ability directly or
through management board member responsible for AML prevention raise questions and provided information to Bank’s governing
bodies.
9. MODEL RISK
The Bank defines model risk as the risk to incur a financial loss or to make incorrect business decisions, publish false reporting disclosures
because of the usage of models. Setup of models risk management was reviewed and enhanced in 2022. Models risk is managed within
the Bank using risk-based approach - the Bank maintains a list of its models and performs assessment of models importance based on
which independent validation of the selected models is prioritized.
10. ESG RISK
ESG (Environmental, social and governance) risks are the risks of any negative financial impact on the Bank stemming from the current
or prospective impacts of ESG factors on its counterparties or invested assets. The Environmental risk is further mainly defined as
Climate-related and environmental risk, consisting of physical and transition risk:
x Physical risk, which is the risks of any negative financial impact on the institution stemming from the current or prospective
impacts of the physical effects of environmental factors on its counterparties or invested assets.
x Transition risk, which is the risks of any negative financial impact on the institution stemming from the current or prospective
impacts of the transition to an environmentally sustainable economy on its counterparties or invested assets.
Detailed information on ESG risk and its management is provided in Bank‘s Social Responsibility Report.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
73
FINANCIAL RISK MANAGEMENT (CONTINUED)
11. STRESS TESTS
Besides the regular assessment of the risks and the capital requirement calculation, the Group also performs stress tests which are a
part of Internal Capital Adequacy Assessment Process (ICAAP). During this process it is determined if the Bank’s capital is sufficient to
cover the possible losses which may occur because of the financial status deterioration. Stress testing for all of the risks is performed at
least once a year in accordance with the prudential requirements. Ad hoc stress tests for separate risks are performed in case there is a
need to understand the possible impacts of underlying factors.
12. CAPITAL MANAGEMENT
The capital of the Bank and its subsidiaries in the prudential scope of calculation (Financial Group, please see Note 31) is calculated and
allocated for the risk coverage following the Capital requirements regulation and directive – CRR/CRD IV. The Bank’s objectives when
managing own funds are as follows:
x to comply with the own funds requirements set by the European Parliament and the Council of the European Union as well as
the internal target capital requirements;
x to safeguard the Bank’s and the Financial Group’s ability to continue as a going concern so that it can provide returns for
shareholders and benefits for other stakeholders;
x to support the development of the Group’s business with the help of the strong capital base.
Information regarding capital adequacy is submitted to the supervising authority quarterly in accordance with the CRR/CRD IV
requirements.
During the years ended 31 December 2022 and 31 December 2021, the Bank and the Financial Group complied with capital requirements
to which it was subject.
According to Solvency II directive Bank’s subsidiary SB Draudimas GD UAB has to ensure that all the time its own funds must be higher
than Solvency Capital Requirement and Minimum Capital Requirement, which enables the company to cover potential losses and
reasonably assure policyholders that payables will be paid out. Solvency II ratio is being calculated and reported quarterly to supervisory
authority, the Bank of Lithuania. During the years ended 31 December 2022 and 31 December 2021, Company complied with the
Solvency II ratio requirements to which it was subject.
Other companies comprising the Group are not subject to supervisory requirements on a company level. General principles stipulated in
the Republic of Lithuania Law on Limited Liability Companies apply – i.e. share capital of the company cannot be less than EUR 2.5
thousand, it the company’s shareholders’ equity becomes less than ½ of the share capital in the charter of the company, the company
has to remediate the situation over the prescribed period of time.
During the years ended 31 December 2022 and 31 December 2021, the Group and the Bank complied with prudential requirements to
which it was subject.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Impairment losses on loans and finance lease receivables. The Bank and the Group review their loan and finance lease portfolios to
assess impairment at least on a quarterly basis. In determining the impairment loss amount, the Group makes multiple judgements and
estimates, including forward looking assumptions. When making expected credit loss estimate, the Bank and the Group analyse financial
information received from a client and client’s performance in servicing its loans. The methodology and assumptions used (the credit
rating of the client; usage of low credit risk exemption for the loans that have 'standard' internal ratings; the recoverability ratio applied;
discounted market value of pledged assets) for assessment of client’s ability to service debt and estimating both the amount and timing
of future cash flows are reviewed regularly to reduce any difference between loss estimates and actual loss experience. However due to
inherent limitations of the methodology, the calculated impairment loss as at 31 December 2022 may be inadequate to reflect the losses
of the loan portfolio. Please see section 1.3.b of Financial risk management disclosure for the impairment loss sensitivity analysis.
Impairment losses on investments in subsidiaries. The Bank tests investments in its subsidiaries for impairment when impairment
indicators are identified. The Bank establishes recoverable amount of investments in subsidiary companies based on discounted future
estimated net cash flows to be earned by a subsidiary. Future net cash flows to be earned by investment management and real estate
development subsidiaries are based on estimated inflow from sales of financial and other assets held by these subsidiaries less estimated
cash outflow related to management and development costs. Future net cash flows from subsidiary involved in leasing operations are
estimated based on future expected interest income to be earned on lease portfolio less cash outflows related to financing activities and
administration costs. Discount rates are based on current cost of capital used for investments in these subsidiaries. The Group’s
management applies judgement in estimating cash flows and discount rates used in impairment testing.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
74
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Impairment of goodwill. Goodwill is tested for impairment annually. In order to determine if the value of goodwill has been impaired, the
cash-generating unit to which goodwill has been allocated is valued using present value techniques, which are further described in Note
17. The Group’s management applies judgement in estimating cash flows and discount rates used in impairment testing, changes in
these judgements and estimates can significantly affect the assessed value of goodwill. Increase of discount rate used in impairment
testing by 2% (other factors held constant) would decrease the net present value of cash generating unit by EUR 797 thousand and
would not result in additional impairment of goodwill (2021: decrease the value by EUR 826 thousand and would not result in additional
impairment of goodwill).
TLTRO-III borrowings. Based on the terms of the third series of the targeted longer-term refinancing operations (TLTRO-III) program of
the European Central Bank in comparison to market pricing for other similar collateralized borrowings available, the Group's management
concluded in 2021 that TLTRO-III borrowing (please see Note 20 for more details on the liability) contain a significant benefit relative to
market pricing and accounted for part of financial liabilities relating to TLTRO-III as grants under IAS 20 on initial recognition. For
subsequent measurement, IFRS 9 revision of estimates guidance applies, therefore the Group is no longer recognising grants element
related to TLTRO-III borrowings in 2022.
Liabilities related to insurance activities. The value of liabilities related to insurance activities (technical insurance provisions) is
determined by making assumptions and estimates that have impact on the reported amounts. These estimates and assumptions are
regularly reviewed and based on historic experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. Please see section 5. of Financial risk management disclosure for the liabilities related to insurance
activities sensitivity analysis.
Fair value measurements for Level 3 assets or liabilities. Measurement of the fair value of assets or liabilities assigned to Level 3 requires
usage of inputs that are not based on observable market data (unobservable inputs). The Group’s management applies judgement in
choosing appropriate methodology, estimating cash flows, discount rates and other parameters used in such valuations. Please see
section 4. of Financial risk management disclosure for the fair value approaches used.
Taxes. The tax authorities have carried out a full-scope tax audit at the Bank for the years 1998 to 2001 (income tax audit was done for
the period from 1998 to 2000). There were no significant remarks or disputes. The tax authorities may at any time inspect the books and
records within 5 years subsequent to the reported tax year and may impose additional tax assessments and penalties. The Bank's
management is not aware of any circumstances which may give rise to a potential material liability in this respect. The deferred tax assets
recognised at 31 December 2022 have been based on future profitability assumptions of the Bank over a five-year horizon. In the event
of changes to these profitability assumptions, the tax assets recognised may be adjusted.
Non-consolidated entities. During year 2022 the Bank has established 100 % owned entity UAB SB modernizavimo fondas. This entity
is not consolidated while performing consolidation of Group entities. Bank’s management concluded that due to restrictions put on
activities of UAB SB modernizavimo fondas in Operational Agreement signed between the Bank and European Investment Bank (EIB)
and contracts signed with investors investing in UAB SB modernizavimo fondas activities there will be no exposure to variable returns
attributable to the Bank in its role as equity shareholder. The Bank acts as an agent of EIB and other investors and is not principal in
activities related to UAB SB modernizavimo fondas and should thus not consolidate the investee (UAB SB modernizavimo fondas). More
information on activities related to UAB SB modernizavimo fondas and transactions with UAB SB modernizavimo fondas is disclosed in
Notes 13, 16 and 30.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
75
SEGMENT INFORMATION
Summary of major indicators for the main business segments of the Group included in the statement of financial position as at 31
December 2022 and in the income statement for the year then ended is presented in the table below.
Traditional banking
operations and lending
Treasury
Non-core
banking activities
Other
activities
Eliminations
Total
Continuing operations
Internal
(703)
-
(16)
10
709
-
External
106,361
11,063
1,890
369
-
119,683
Interest income
105,658
11,063
1,874
379
709
119,683
Internal
-
-
-
-
-
-
External
(8,251)
(4,630)
(21)
-
(12,902)
Interest expenses
(8,251)
(4,630)
(21)
-
-
(12,902)
Internal
(703)
-
(16)
10
709
-
External
98,110
6,433
1,869
369
-
106,781
Net interest income
97,407
6,433
1,853
379
709
106,781
Internal
801
-
-
51
(852)
-
External
18,912
-
-
(210)
-
18,702
Net fee and commission income
19,713
-
-
(159)
(852)
18,702
Internal
98
-
(16)
61
(143)
-
External
117,022
6,433
1,869
159
-
125,483
Net interest, fee and commissions
income
117,120
6,433
1,853
220
(143)
125,483
Internal
(208)
-
-
(144)
352
-
External
(46,494)
(4,487)
-
(5,333)
-
(56,314)
Operating expenses
(46,702)
(4,487)
-
(5,477)
352
(56,314)
Amortisation charges
(1,261)
(140)
-
(98)
-
(1,499)
Depreciation charges
(2,830)
(300)
-
(219)
-
(3,349)
Internal
-
-
-
-
-
-
External
(4,952)
-
(462)
469
-
(4,945)
Impairment expenses
(4,952)
-
(462)
469
-
(4,945)
Internal
5,543
-
134
(20)
(5,657)
-
External
10,357
(539)
2,130
5,206
-
17,154
Net other income
15,900
(539)
2,264
5,186
(5,657)
17,154
Profit (loss) before tax from
continuing operations
77,275
967
3,655
82
(5,449)
76,530
Income tax
(11,771)
(1,170)
-
25
-
(12,916)
Profit (loss) per segment after tax
from continuing operations
65,504
(203)
3,655
107
(5,449)
63,614
Profit or (loss) per segment after tax from
discontinued operations
-
-
-
-
-
-
Profit (loss) per segment
65,504
(203)
3,655
107
(5,449)
63,614
Non-controlling interest
-
-
-
-
-
-
Profit (loss) for the year attributable to the
owners of the Bank
65,504
(203)
3,655
107
(5,449)
63,614
Total segment assets
2,859,786
1,479,122
4,731
54,825
(213,933)
4,184,531
Total segment liabilities
2,560,536
1,320,982
4,225
40,898
(183,806)
3,742,835
Net segment assets (shareholders’
equity)
299,250
158,140
506
13,927
(30,127)
441,696
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
76
SEGMENT INFORMATION (CONTINUED)
A summary of major indicators for the main business segments of the Group included in the statement of financial position as at 31
December 2021 and in the income statement for the year then ended is presented below:
Traditional banking
operations and lending
Treasury
Non-core
banking activities
Other
activities
Eliminations
Total
Continuing operations
Internal
(529)
-
26
(33)
536
-
External
83,803
7,228
484
357
-
91,872
Interest income
83,274
7,228
510
324
536
91,872
Internal
-
-
-
-
-
-
External
(6,844)
(4,086)
(25)
-
(10,955)
Interest expenses
(6,844)
(4,086)
(25)
-
-
(10,955)
Internal
(529)
-
26
(33)
536
-
External
76,959
3,142
459
357
-
80,917
Net interest income
76,430
3,142
485
324
536
80,917
Internal
429
-
-
28
(457)
-
External
17,382
-
-
(222)
-
17,160
Net fee and commission income
17,811
-
-
(194)
(457)
17,160
Internal
(100)
-
26
(5)
79
-
External
94,341
3,142
459
135
-
98,077
Net interest, fee and commissions
income
94,241
3,142
485
130
79
98,077
Internal
(150)
-
-
(127)
277
-
External
(37,425)
(3,591)
-
(10,764)
-
(51,780)
Operating expenses
(37,575)
(3,591)
-
(10,891)
277
(51,780)
Amortisation charges
(1,160)
(129)
-
(57)
-
(1,346)
Depreciation charges
(2,544)
(268)
-
(282)
-
(3,094)
Internal
-
-
1,998
(821)
(1,177)
-
External
(4,211)
-
(140)
274
-
(4,077)
Impairment expenses
(4,211)
-
1,858
(547)
(1,177)
(4,077)
Internal
5,082
-
4,470
(809)
(8,743)
-
External
11,585
1,908
(539)
16,528
-
29,482
Net other income
16,667
1,908
3,931
15,719
(8,743)
29,482
Profit (loss) before tax from
continuing operations
65,418
1,062
6,274
4,072
(9,564)
67,262
Income tax
(10,758)
(1,074)
-
(207)
-
(12,039)
Profit (loss) per segment after tax
from continuing operations
54,660
(12)
6,274
3,865
(9,564)
55,223
Profit or (loss) per segment after tax from
discontinued operations
-
-
-
-
-
-
Profit (loss) per segment
54,660
(12)
6,274
3,865
(9,564)
55,223
Non-controlling interest
-
-
-
-
-
-
Profit (loss) for the year attributable to the
owners of the Bank
54,660
(12)
6,274
3,865
(9,564)
55,223
Total segment assets
2,288,855
1,766,700
5,582
61,010
(159,665)
3,962,482
Total segment liabilities
2,051,148
1,582,983
5,002
43,482
(126,560)
3,556,055
Net segment assets (shareholders’
equity)
237,707
183,717
580
17,528
(33,105)
406,427
Distribution of the Group’s assets and revenue according to geographical segmentation
All Bank’s and Group’s non-current assets other than financial instruments are located in Lithuania. No material revenue is earned by
the Group in foreign countries.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
77
NOTE 1
NET INTEREST INCOME
2022
2021
Group
Bank
Group
Bank
Interest revenue calculated using the effective interest method (on financial
assets at
amortized cost and fair value through other comprehensive
income):
107,650
92,845
83,035
69,951
on loans to other banks and financial institutions and placements with
credit institutions
3,491
7,373
2,135
4,922
on loans to customers
97,310
78,865
75,590
59,972
on debt securities at amortized cost
6,196
5,997
5,023
4,831
on debt securities at fair value through other comprehensive income
653
610
287
226
Other similar income:
12,041
11,878
8,861
8,719
on debt securities at fair value through profit or loss
1,521
1,388
498
372
on finance leases
9,702
9,672
7,656
7,633
other interest income
818
818
707
714
Total interest income
119,691
104,723
91,896
78,670
Interest expense:
on financial liabilities designated at fair value through profit or loss
-
-
-
-
on financial liabilities measured at amortised cost
(10,871)
(10,885)
(8,682)
(8,682)
on other liabilities
(2,039)
(2,033)
(2,297)
(2,290)
Total interest expense
(12,910)
(12,918)
(10,979)
(10,972)
Net interest income
106,781
91,805
80,917
67,698
NOTE 2
NET FEE AND COMMISSION INCOME
2022
2021
Group
Bank
Group
Bank
Fee and commission income:
for administration of loans of third parties
4,195
4,195
4,474
4,474
for settlement services
5,960
5,976
5,625
5,636
for cash operations
5,459
5,459
4,964
4,965
for account administration
4,794
4,794
4,276
4,276
for guarantees, letters of credit, documentary collection
808
808
909
909
for collection of utility and similar payments
256
256
290
290
for services related to securities
3,862
3,967
3,284
3,403
other fee and commission income
961
1,784
795
1,240
Total fee and commission income
26,295
27,239
24,617
25,193
Fee and commission expense:
for payment cards
(4,528)
(4,528)
(4,229)
(4,229)
for cash operations
(975)
(975)
(1,168)
(1,168)
for correspondent bank and payment system fees
(665)
(505)
(653)
(468)
for services of financial data vendors
(231)
(231)
(226)
(226)
for services related to securities
(780)
(780)
(791)
(791)
other fee and commission expenses
(414)
(390)
(390)
(357)
Total fee and commission expense
(7,593)
(7,409)
(7,457)
(7,239)
Net fee and commission income
18,702
19,830
17,160
17,954
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
78
NOTE 3
NET GAIN FROM TRADING ACTIVITIES
2022
2021
Group
Bank
Group
Bank
Net gain (losses) from operations with securities
(5,288)
(538)
4,583
1,908
Net gain from foreign exchange and related derivatives
(577)
(702)
(2,718)
(2,791)
Net gain (loss) from other derivatives
10,219
10,213
10,071
10,071
Total net gain from trading activities
4,354
8,973
11,936
9,188
NET GAIN FROM OPERATIONS WITH SECURITIES
2022
2021
Group
Bank
Group
Bank
Securities in the trading book:
Realised gain (loss) on equity securities
(198)
(36)
287
36
Unrealised gain (loss) on equity securities
(4,280)
(50)
2,635
106
Realised gain on debt securities
(248)
(261)
71
78
Unrealised gain (loss) on debt securities
(1,207)
(837)
(157)
(56)
Dividend and other income from equity securities in the trading book
11
12
24
24
Net gain (loss) on securities in the trading book
(5,922)
(1,172)
2,860
188
Investment securities:
Realised gain (loss) on investment equities at fair value through profit or loss
(43)
(43)
(102)
(102)
Unrealised gain on investment equities at fair value through profit or loss
363
363
224
224
Realised gain on debt securities at fair value through other comprehensive
income
(179)
(179)
283
280
Realised gain on debt securities at amortized cost
480
480
1,315
1,315
Dividend and other income from investment equities
13
13
3
3
Net gain on investment securities
634
634
1,723
1,720
Total
(5,288)
(538)
4,583
1,908
Group‘s net gain on operations with securities in the trading book includes investment result of the insurance company assets under unit-
linked contracts (see Note 5): net loss of EUR 4,674 thousand in 2022 and net gain of EUR 2,835 thousand in 2021.
Bank's internal policy allows frequent, but strictly limited in scale and infrequent but larger scale sales of debt securities at amortized cost.
NET GAIN FROM FOREIGN EXCHANGE AND RELATED DERIVATIVES
2022
2021
Group
Bank
Group
Bank
Net gain from foreign exchange
(577)
(702)
(2,718)
(2,791)
Net gain (loss) from derivatives related with foreign exchange
10,219
10,213
10,071
10,071
Total
9,642
9,511
7,353
7,280
Group‘s net gain from foreign exchange includes investment result of the insurance company assets under unit-linked contracts (see
Note 5): a net loss of EUR 2 thousand in 2022 and a net gain of EUR 4 thousand in 2021.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
79
NOTE 4
OTHER OPERATING EXPENSES
2022
2021
Group
Bank
Group
Bank
Rent of buildings and premises
(271)
(276)
(262)
(268)
Utility services for buildings and premises
(1,240)
(1,136)
(895)
(813)
Other expenses related to buildings and premises
(939)
(939)
(856)
(856)
Transportation expenses
(421)
(329)
(321)
(243)
Legal costs
(577)
(577)
(494)
(494)
Personnel and training expenses
(626)
(575)
(485)
(442)
IT and communication expenses
(8,473)
(7,701)
(6,660)
(5,976)
Marketing and charity expenses
(4,956)
(2,559)
(3,112)
(1,283)
Service organisation expenses
(2,912)
(2,729)
(1,934)
(1,812)
Non-income taxes, fines
(188)
460
(10)
667
Costs incurred due to debt recovery
(261)
(68)
(275)
(89)
Other expenses
(1,104)
(666)
(1,338)
(658)
Total
(21,968)
(17,095)
(16,643)
(12,268)
NOTE 5
REVENUE AND EXPENSES RELATED TO INSURANCE ACTIVITIES
Bank’s subsidiary SB Draudimas GD UAB (hereinafter - insurance company) is engaged in life insurance business. Revenue and
expenses from main activities of this company are presented in the tables below.
REVENUE RELATED TO INSURANCE ACTIVITIES
2022
2021
Group
Bank
Group
Bank
Revenue related to insurance activities
9,298
-
8,137
-
Total
9,298
-
8,137
-
EXPENSES RELATED TO INSURANCE ACTIVITIES
2022
2021
Group
Bank
Group
Bank
Expenses related to insurance activities:
change of the technical insurance provisions that covers the result of
investment of assets under unit-linked contracts*
4,501
-
(2,969)
-
other changes of the technical insurance provisions
(1,838)
-
(956)
-
insurance benefits paid
(4,230)
-
(3,035)
-
commission expenses incurred and other
(1,196)
-
(1,072)
-
Total
(2,763)
-
(8,032)
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
80
NOTE 5
REVENUE AND EXPENSES RELATED TO
INSURANCE ACTIVITIES (CONTINUED)
* The investment result of the insurance company assets under unit-linked contracts is included in the following income statement lines:
2022
2021
Group
Bank
Group
Bank
Interest and similar income
43
-
61
-
Net gain (loss) from operations with securities
(4,674)
-
2,835
-
Net gain from foreign exchange
130
-
73
-
Total
(4,501)
-
2,969
-
NOTE 6
OTHER INCOME
NET GAIN FROM DISPOSAL OF TANGIBLE ASSETS
In 2022 net gain on disposal of tangible assets (mostly real estate, accounted for as Property, plant and equipment, Investment property
or Inventories in the statement of financial position) at the Group amounted to EUR 810 thousand (Bank: net gain of EUR 514 thousand).
In 2021 net gain on disposal of tangible assets (mostly real estate, accounted for as Property, plant and equipment, Investment property
or Inventories in the statement of financial position) at the Group amounted to EUR 3,736 thousand (Bank: net gain of EUR 66 thousand).
NET GAIN FROM DERECOGNITION OF FINANCIAL ASSETS
Net gain from derecognition of financial assets (for the year ended 31 December 2022: Group EUR 1,034 thousand, Bank EUR 254
thousand; for the year ended 31 December 2021: Group EUR 4,363 thousand, Bank EUR 2,729 thousand) is based on the difference of
the carrying value of loans to customers (accounted at amortized cost) at the moment of sale and the proceeds from sale. Loans to
customers facing credit difficulties sold as part of the Group's problem loan recovery activities comprise the major part of loans sold.
Net gain from sale of debt securities at amortized cost as well as from other securities in included in trading income (Note 3).
OTHER OPERATING INCOME
2022
2021
Group
Bank
Group
Bank
Income from rent of investment property and other income from investment
property
171
100
181
69
Income from rent of other assets
80
185
121
178
Net gain (loss) from modification of financial assets
33
(3)
(35)
(31)
Portion of TLTRO III negative interest attributable to grant
910
910
587
587
Other income
464
304
456
333
Total
1,658
1,496
1,310
1,136
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
81
NOTE 7
IMPAIRMENT LOSSES
2022
2021
Group
Bank
Group
Bank
Impairment losses on loans:
Impairment charge for the year, net (see Note 13)
3,839
2,010
5,832
2,176
Recoveries of loans previously written off
(395)
(230)
(849)
(542)
Total impairment losses (reversals) on loans
3,444
1,780
4,983
1,634
Impairment losses on finance lease receivables:
Impairment charge for the year, net (see Note 14)
1,512
1,454
(797)
(802)
Recovered previously written-off finance lease receivables
-
-
-
-
Total impairment losses (reversals) on finance lease receivables
1,512
1,454
(797)
(802)
Total impairment losses (reversals) on loans and finance lease
receivables
4,956
3,234
4,186
832
Impairment losses on financial assets other than loans and finance
lease receivables:
Due from other banks: impairment charge, net (see Note 10)
(68)
(68)
64
64
Debt securities: impairment charge, net (see Note 15)
268
268
(10)
(11)
Other financial assets: impairment charge, net (see Note 19)
253
257
114
88
Total impairment losses on financial assets other than loans and
finance lease receivables:
453
457
168
141
Non-financial assets:
Goodwill: impairment charge
-
-
-
-
Non-financial assets other than goodwill: impairment charge
1
1
7
7
Non-financial assets other than goodwill: reversal of impairment charge
-
-
(828)
(6)
Total impairment losses on non-financial assets:
1
1
(821)
1
Provisions (see Note 25):
Provisions for pending legal issues: charge
-
-
-
-
Provisions for commitments and guarantees given: charge / (reversal)
(465)
-
544
-
Total provisions:
(465)
-
544
-
Total impairment losses on other assets
(11)
458
(109)
142
Impairment losses on subsidiaries (see Note 16):
Investments in subsidiaries: impairment charge
-
-
-
-
Investments in subsidiaries: reversal of impairment charge
-
-
-
-
Total impairment losses on subsidiaries
-
-
-
-
Total
4,945
3,692
4,077
974
The Bank and the Group held no significant direct loan positions in Russia, Belarus and Ukraine. However due to geopolitical factors and
indirect impact of Russia/Ukraine war impairment loss of EUR 458 thousand was recognized for the six months period ended 30 June
2022, part of which were reversed in second half of the year. For year ended 31 December 2022 impairment loss of EUR 390 thousand
was recognized due to these reasons. Because of these circumstances exposures with carrying value of EUR 16,391 thousand and EUR
9,629 thousand, respectively, were added to Watch List or Not Performing Exposures (NPE) list as of 30 June 2022. Since then financial
position of part of clients improved and risks related to geopolitical circumstances were managed therefore loans with carrying amount
of EUR 10,355 thousand were removed from Watch List at 31 December 2022. No new clients were added to Watchlist during second
half-year of 2022 because of geopolitical situation. Loans with carrying amount of EUR 5,840 were in NPE list due to geopolitical
circumstances as at 31 December 2022 (decreased compared to carrying amount of such loans at 30 June 2022 and reasons for
decrease were NPE status removal or partial repayment of loans).
Impairment losses on other non-financial assets other than goodwill include impairment of investment properties (Note 26), investments
classified as held for sale and other non-financial assets (Note 19).
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
82
NOTE 8
INCOME TAX
2022
2021
Group
Bank
Group
Bank
Current tax
15,203
13,919
11,032
9,981
Deferred taxes
(2,177)
(2,106)
930
684
Deferred tax adjustment due to change in tax rate
-
-
-
-
Adjustment of previous year income tax
(110)
(110)
77
77
Total
12,916
11,703
12,039
10,742
The tax on the Bank’s and the Group’s profit before tax differs from the theoretical amount that would arise using the basic tax rate as
follows:
2022
2021
Group
Bank
Group
Bank
Profit before income tax from continuing operations
76,531
75,282
67,262
66,747
Tax calculated at a tax rate of 15%
11,480
11,292
10,089
10,012
Tax calculated at a tax rate of 5%
2,748
2,748
2,427
2,427
Income not subject to tax
(4,133)
(2,042)
(4,144)
(2,687)
Expenses not deductible for tax purposes
4,086
970
3,618
941
Additional deduction of film, charity expenses
(1,155)
(1,155)
(28)
(28)
Adjustments of previous year income tax
(110)
(110)
77
77
Income tax charge
12,916
11,703
12,039
10,742
Deferred tax assets
Group
Bank
Revaluation of
financial instruments
and other assets
Impairment of
investment property
and inventories
Accruals
Right of use
Carryforward of
unused tax losses
Total
Accruals
Right of use
Revaluation of
financial instruments
and other assets
Total
At 1 January 2021
1,124
256
559
7
132
2,078
559
7
1,124
1,690
To be credited/(charged) to net
profit
(740)
(46)
59
-
(2)
(729)
56
-
(740)
(684)
To be credited/ (charged) to
other comprehensive income
244
-
-
-
-
244
-
244
244
At 31 December 2021
628
210
618
7
130
1,593
615
7
628
1,250
To be credited/(charged) to net
profit
1,821
(2)
284
-
85
2,188
285
-
1,821
2,106
To be credited/ (charged) to
other comprehensive income
1,878
-
-
-
-
1,878
-
1,878
1,878
At 31 December 2022
4,327
208
902
7
215
5,659
900
7
4,327
5,234
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
83
NOTE 8
INC
OME TAX (CONTINUED)
Deferred tax liabilities
Group
Right of use assets
Revaluation of financial
instruments and other
assets
Total
At 1 January 2021
-
(1,251)
(1,251)
To be credited/(charged) to net profit
-
(201)
(201)
To be credited/ (charged) to other comprehensive income
-
-
-
At 31 December 2021
-
(1,452)
(1,452)
To be credited/(charged) to net profit
-
(11)
(11)
To be credited/ (charged) to other comprehensive income
-
-
-
At 31 December 2022
-
(1,463)
(1,463)
Taxable losses of the Group and the Bank are carried forward for indefinite term through the use of future taxable profits. Management
of the Bank has estimated that future taxable profits of the Bank and the Group will be sufficient to realize the accumulated tax losses.
Therefore deferred tax asset from the accumulated tax losses was recognized.
Projected terms of expected utilization of deferred tax assets, netted with projected payment of deferred tax liabilities, are presented in
the table below:
2022
2021
Group
Bank
Group
Bank
Up to 1 year
841
2,184
(1,730)
(404)
2-5 years
3,355
3,050
1,871
1,654
Total
4,196
5,234
141
1,250
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities. The following amounts, determined after appropriate offsetting, are shown in the balance sheet:
2022
2021
Group
Bank
Group
Bank
Deferred tax assets
5,659
5,234
1,593
1,250
Deferred tax liabilities
(1,463)
-
(1,452)
-
NOTE 9
EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the net profit for the period by the weighted average number of ordinary shares in
issue during the period. There were no potential ordinary shares at 31 December 2022 and 31 December 2021, therefore the Group had
no dilutive potential ordinary shares and diluted earnings per share are equal to basic earnings per share.
The number of shares in issue for the year ended 31 December 2022 and 31 December 2021 was 600,726 thousand. Weighted average
number of shares in issue for the year ended 31 December 2022 was 599,840 thousand (2021: 600,462 thousand).
Basic earnings per share
Group
2022
2021
Net profit from continuing operations attributable to equity holders
63,614
55,223
Net profit (loss) from discontinued operations attributable to equity holders
-
-
Net profit attributable to equity holders
63,614
55,223
Weighted average number of shares in issue during the period (thousand units)
599,840
600,462
Basic earnings per share (EUR)
0.11
0.09
Basic earnings per share (EUR) from continuing operations
0.11
0.09
Basic earnings per share (EUR) from discontinued operations
-
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
84
NOTE 10
CASH AND CASH EQUIVALENTS
2022
2021
Group
Bank
Group
Bank
Cash and other valuables
77,315
77,215
66,861
66,861
Balances in bank correspondent accounts:
Gross value
179,260
178,120
31,089
30,215
Allowance for impairment
(25)
(25)
(21)
(21)
Total balances in bank correspondent accounts, net value
179,235
178,095
31,068
30,194
Placements with Central Bank:
Correspondent account with Central Bank
80,302
80,302
582,788
582,788
Mandatory reserves in local currency, gross value
47,919
47,919
285,091
285,091
Mandatory reserves in local currency, allowance for impairment
(13)
(13)
(85)
(85)
Total placements with Central Bank, net value
128,208
128,208
867,794
867,794
Total
384,758
383,518
965,723
964,849
The compulsory reserves held in the Bank of Lithuania are estimated on a monthly basis based on the value of indicated liabilities using
the established compulsory reserve rate. With effect from 1 January 2015, the compulsory reserve rate was set at 1%. The mandatory
reserves are held with the Bank of Lithuania in the form of current deposits. The Bank is free to use the funds held in the current account
with the Bank of Lithuania, the average monthly amount of which may be not less than the estimated compulsory reserves.
The balances in bank correspondent accounts and placements with Central Bank are classified as Stage 1 financial assets. Breakdown
of balances in bank correspondent accounts by credit rating is presented in the table below:
Rating *
2022
2021
Group
Bank
Group
Bank
From AA- to AA+
68,637
67,818
3,410
3,242
From A- to A+
87,292
86,980
6,755
6,484
From BBB- to BBB+
17,033
17,033
14,390
14,036
Lower than BBB-
386
386
2,433
2,433
No external credit rating (Standard internal rating)
179
179
321
321
No external rating (Substandard internal rating)
5,733
5,724
3,780
3,699
Total
179,260
178,120
31,089
30,215
* for local banks that are subsidiaries of foreign banks, credit rating of the parent institution is used in case no credit rating of the local
institution is available.
Reconciliation of allowance for impairment of cash and cash equivalents (including due from banks presented in Note 11) is presented
in the table below:
Group
Bank
Allowance for impairment of cash equivalents and due from banks as of 1 January 2021:
42
42
Change in allowance for impairment
64
64
FX and other movements
-
-
Allowance for impairment of cash equivalents and due from banks as of 31 December 2021:
106
106
Change in allowance for impairment
(68)
(68)
FX and other movements
-
-
Allowance for impairment of cash equivalents and due from banks as of 31 December 2022:
38
38
As of 31 December 2022, balances in correspondent accounts in amount of EUR 5,737 thousand (as of 31 December 2021 - EUR 3,778
thousand) were pledged for derivatives contracts.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
85
NOTE 10
CASH AND CASH EQUIVALENTS (CONTINUED)
Liabilities from financing activities
The table below sets out movements in the Group’s liabilities from financing activities for each of the periods presented. The items of
these liabilities are those that are reported as financing activities in the statement of cash flows.
2022
2021
Dividends
payable
Debt
securities in
issue
Lease
liabilities
Total
Dividends
payable
Debt
securities in
issue
Lease
liabilities
Total
As at 1 January
50
95,212
6,093
101,355
45
20,027
7,314
27,386
Dividends declared
20,425
-
-
20,425
3,304
-
-
3,304
Issuance in cash
-
85,000
-
85,000
-
75,000
-
75,000
Contract additions / terminations
-
-
2,525
2,525
-
-
185
185
Payment in cash
(20,381)
-
(1,040)
(21,421)
(3,299)
-
(1,432)
(4,731)
Redemption in cash
-
-
-
-
-
-
-
-
Accrued interest
-
2,225
25
2,250
-
1,415
26
1,441
Coupon payments in cash
-
(2,015)
-
(2,015)
-
(1,230)
-
(1,230)
As at of 31 December
94
180,422
7,603
188,119
50
95,212
6,093
101,355
The table below sets out movements in the Bank’s liabilities from financing activities for each of the periods presented. The items of these
liabilities are those that are reported as financing activities in the statement of cash flows.
2022
2021
Dividends
payable
Debt
securities in
issue
Lease
liabilities
Total
Dividends
payable
Debt
securities in
issue
Lease
liabilities
Total
As at 1 January
50
95,212
5,818
101,080
45
20,027
6,944
27,016
Dividends declared
20,425
-
-
20,425
3,304
-
-
3,304
Issuance in cash
-
85,000
-
85,000
-
75,000
-
75,000
Contract additions / terminations
-
-
2,578
2,578
-
-
136
136
Payment in cash
(20,381)
-
(1,089)
(21,470)
(3,299)
-
(1,281)
(4,580)
Redemption in cash
-
-
-
-
-
-
-
-
Accrued interest
-
2,225
21
2,246
-
1,415
19
1,434
Coupon payments in cash
-
(2,015)
-
(2,015)
-
(1,230)
-
(1,230)
As at of 31 December
94
180,422
7,328
187,844
50
95,212
5,818
101,080
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
86
NOTE 11
DUE FROM OTHER BANKS
2022
2021
Group
Bank
Group
Bank
Pledged deposits
2,520
2,520
-
-
Term deposits
103
103
101
101
Loans
110
110
1,095
1,095
Gross value
2,733
2,733
1,196
1,196
Allowance for impairment
-
-
-
-
Net value
2,733
2,733
1,196
1,196
Breakdown due from other banks by the maturity:
Short-term (up to 1 year)
2,633
2,633
1,096
1,096
Long-term (over 1 year)
100
100
100
100
Total
2,733
2,733
1,196
1,196
As of 31 December 2022 pledged deposits consisted of funds pledged for derivatives contracts. As of 31 December 2022, term deposits
amounting to EUR 103 thousand were pledged for the guarantees or letters of credit issued for the Bank’s clients. As of 31 December
2021, term deposits amounting to EUR 101 thousand were pledged for the guarantees or letters of credit issued for the Bank’s clients.
All amounts due from banks are classified as Stage 1 financial assets. Breakdown of balances due from banks by credit rating is presented
in the table below:
Rating *
2022
2021
Group
Bank
Group
Bank
From AA- to AA+
99
99
514
514
From A- to A+
110
110
680
680
From BBB- to BBB+
2,524
2,524
2
2
Total
2,733
2,733
1,196
1,196
* for local banks that are subsidiaries of foreign banks, credit rating of the parent institution is used in case no credit rating of the local
institution.
NOTE 12
FINANCIAL ASSETS AND LIABILITIES IN THE TRADING BOOK
Total balances of financial assets and liabilities in the trading book are presented in the table below:
2022
2021
Group
Bank
Group
Bank
Assets:
Derivatives:
897
897
2,121
2,121
currency derivatives
897
897
2,121
2,121
derivatives related to prices of financial instruments
-
-
-
-
Securities in the trading book
58,301
27,287
48,181
15,099
Liabilities:
Derivatives:
(7,152)
(7,152)
(96)
(96)
currency derivatives
(7,152)
(7,152)
(96)
(96)
derivatives related to prices of financial instruments
-
-
-
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
87
NOTE 12
FINANCIAL ASSETS AND LIABILITIES IN THE TRADING BOOK (CONTINUED)
Derivative Financial Instruments – Currency Derivatives
As of 31 December 2022 and 31 December 2021, the Group and the Bank had exposure to currency forwards, which represent
commitments to purchase and/or sell foreign and local currency in the future at a fixed price.
2022
2021
Group
Bank
Group
Bank
Currency forwards:
Assets
897
897
2,121
2,121
Liabilities
(7,152)
(7,152)
(96)
(96)
Notional amount
193,915
193,915
151,452
151,452
Net gain (loss) from currency derivatives in profit or loss
10,219
10,213
10,071
10,071
Securities in the Trading Book
2022
2021
Group
Bank
Group
Bank
Trading debt securities:
Government bonds
2,880
2,602
2,020
11
Corporate bonds
24,535
24,454
15,701
14,611
Other trading book debt securities:
Government bonds
2,733
-
2,733
-
Total debt securities
30,148
27,056
20,454
14,622
Trading equity securities
231
231
477
477
Other trading book equity securities
27,922
-
27,250
-
Total equity securities
28,153
231
27,727
477
Total securities in the trading book
58,301
27,287
48,181
15,099
Breakdown of debt securities by time remaining to maturity:
Short-term (up to 1 year)
12,522
10,625
421
421
Long-term (over 1 year)
17,626
16,431
20,033
14,201
Total
30,148
27,056
20,454
14,622
Securities in the trading book are comprised of trading securities and other securities that cover technical insurance provisions under
unit-linked insurance contracts of life insurance subsidiary. These securities are measured at fair value through profit or loss.
Securities in the trading book have not been pledged as at 31 December 2022 and 2021.
All of the securities in the trading book, except for unlisted securities, are accounted at fair value that is determined using level 1
requirements as described in fair value hierarchy in Section 4.2 of Financial Risk Management, i.e. fair value is based on quoted prices
in active markets for identical assets and liabilities. Unlisted securities are accounted at fair value that is determined using level 3
requirements.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
88
NOTE 12
FINANCIAL ASSETS
AND LIABILITIES IN THE TRADING BOOK (CONTINUED)
Breakdown of securities in the trading book as at 31 December 2022 and 2021:
2022
2021
Group
Bank
Group
Bank
Trading securities:
Debt securities
30,079
27,056
17,721
14,622
from AA- to AAA
-
-
-
-
from A- to A+
2,779
2,602
4,235
4,046
from BBB- to BBB+
588
-
830
207
from BB- to BB+
492
-
514
-
lower than BB-
-
-
-
-
no rating
26,220
24,454
12,142
10,369
Equity securities
231
231
477
477
listed
213
213
449
449
unlisted
18
18
28
28
units of investment funds
-
-
-
-
Total trading securities
30,310
27,287
18,198
15,099
Other trading book securities:
Debt securities
69
-
2,733
-
from AA- to AAA
-
-
-
-
from A- to A+
-
-
199
-
from BBB- to BBB+
-
-
1,726
-
from BB- to BB+
-
-
-
-
lower than BB-
-
-
-
-
no rating
69
-
808
-
Equity securities
27,922
-
27,250
-
listed
-
-
-
-
unlisted
-
-
-
-
units of investment funds
27,922
-
27,250
-
Total other trading book securities
27,991
-
29,983
-
TOTAL
58,301
27,287
48,181
15,099
Amount of change in its fair value that is attributable to changes in the credit risk of the asset of Group's other trading book debt securities:
2022
2021
During the year
Cumulative
During the year
Cumulative
Change in fair value attributable to credit risk
4
-
33
(4)
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
89
NOTE 13
LOANS TO CUSTOMERS
2022
2021
Group
Bank
Group
Bank
Gross loans to customers
2,423,800
2,395,409
1,944,377
1,917,766
Allowance for loan impairment
(34,229)
(26,705)
(35,696)
(28,137)
Net loans at amortized cost
2,389,571
2,368,704
1,908,681
1,889,629
Loans at fair value
2,058
2,058
-
-
NET LOANS TO CUSTOMERS
2,391,629
2,370,762
1,908,681
1,889,629
Breakdown of loans to customers according to maturity
Short-term (up to 1 year)
466,285
576,003
396,728
460,294
Long-term (over 1 year)
1,925,344
1,794,759
1,511,953
1,429,335
Total
2,391,629
2,370,762
1,908,681
1,889,629
In 2022 the Group‘s loan portfolio grew in significant rates, especially due to high demand for retail consumer and mortgage loans. Loan
portfolio quality remained improving – Stage 2 loans increased both in absolute number and relative size, and as inflows and outflows
for Stage 3 loans were similar, Stage 3 loans share in loan portfolio decreased due to portfolio growth. As the stage composition of loan
portfolio improved and portfolio structure changed (the share of mortgage loans, that have lower impairment coverage, increased), total
impairment to loans ratio decreased.
During second - fourth quarters of 2022 the Bank has provided loans as investment to securitization vehicle through Banks’s subsidiary
SB Modernizavimo Fondas UAB for financing multiapartment buildings renovation projects. Bank’s investments in securitization will be
provided in several tranches to different investment layers bearing different risk levels. Investments made so far were made into layer
bearing highest level of risk, therefore according to clauses in IFRS 9 applicable to contractually linked instruments, loans to SB
Modernizavimo Fondas UAB are accounted at fair value through profit and loss and are disclosed in statement of financial position within
line "Loans to customers". At initial recognition it was considered that fair value of these loans is equal to its acquisition value. Since initial
recognition there were no circumstances due to which fair value of loans granted to SB Modernizavimo Fondas UAB would change.
Reconciliation of the gross loan amount is presented in the following tables.
Group gross loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
1,642,451
235,609
66,318
1,944,378
1,282,582
251,850
114,014
1,648,446
Transfer between stages:
from Stage 1 to Stage 2
(57,904)
57,904
-
-
(133,971)
133,971
-
-
from Stage 1 to Stage 3
(8,730)
-
8,730
-
(3,936)
-
3,936
-
from Stage 2 to Stage 1
90,457
(90,457)
-
-
98,469
(98,469)
-
-
from Stage 2 to Stage 3
-
(12,589)
12,589
-
-
(4,403)
4,403
-
from Stage 3 to Stage 1
424
-
(424)
-
3,214
-
(3,214)
-
from Stage 3 to Stage 2
-
4,665
(4,665)
-
-
5,472
(5,472)
-
New loans originated or loan amounts increased
949,285
40,037
8,427
997,749
736,637
43,692
1,855
782,184
Loans derecognized during the period (other
than write-offs)
(432,987)
(59,305)
(18,664)
(510,956)
(340,542)
(96,396)
(36,390)
(473,328)
Loans written-off during the period
(1)
(61)
(5,244)
(5,306)
(2)
(106)
(12,818)
(12,926)
Reclassifications, FX and other movements
(1)
(2)
-
(3)
-
(2)
4
2
Gross carrying amount as at 31 December
2,182,994
175,801
67,067
2,425,862
1,642,451
235,609
66,318
1,944,378
Bank gross loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
1,505,673
349,980
62,112
1,917,765
1,267,972
247,570
114,642
1,630,184
Transfer between stages:
from Stage 1 to Stage 2
(55,860)
55,860
-
-
(234,322)
234,322
-
-
from Stage 1 to Stage 3
(6,077)
-
6,077
-
(2,364)
-
2,364
-
from Stage 2 to Stage 1
89,275
(89,275)
-
-
97,089
(97,089)
-
-
from Stage 2 to Stage 3
-
(11,846)
11,846
-
-
(3,744)
3,744
-
from Stage 3 to Stage 1
401
-
(401)
-
3,190
-
(3,190)
-
from Stage 3 to Stage 2
-
4,663
(4,663)
-
-
5,462
(5,462)
-
New loans originated or loan amounts increased
819,808
97,451
6,999
924,258
653,643
57,857
1,358
712,858
Loans derecognized during the period (other
than write-offs)
(366,503)
(57,442)
(17,162)
(441,107)
(279,533)
(94,395)
(39,482)
(413,410)
Loans written-off during the period
-
(3)
(3,439)
(3,442)
-
(1)
(11,867)
(11,868)
Reclassifications, FX and other movements
(2)
-
(1)
(3)
(1)
(2)
5
2
Gross carrying amount as at 31 December
1,986,715
349,388
61,368
2,397,471
1,505,674
349,980
62,112
1,917,766
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
90
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Group gross loans to individuals (retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
678,808
13,120
7,899
699,827
531,568
14,442
10,237
556,247
Transfer between stages:
from Stage 1 to Stage 2
(8,772)
8,772
-
-
(6,707)
6,707
-
-
from Stage 1 to Stage 3
(5,895)
-
5,895
-
(1,901)
-
1,901
-
from Stage 2 to Stage 1
2,885
(2,885)
-
-
5,739
(5,739)
-
-
from Stage 2 to Stage 3
-
(2,880)
2,880
-
-
(1,401)
1,401
-
from Stage 3 to Stage 1
424
-
(424)
-
606
-
(606)
-
from Stage 3 to Stage 2
-
195
(195)
-
-
1,270
(1,270)
-
New loans originated or loan amounts increased
494,845
5,931
3,875
504,651
272,351
2,237
629
275,217
Loans derecognized during the period (other
than write-offs)
(184,503)
(4,312)
(2,673)
(191,488)
(122,846)
(4,290)
(2,461)
(129,597)
Loans written-off during the period
(1)
(61)
(1,942)
(2,004)
(2)
(106)
(1,930)
(2,038)
Reclassifications, FX and other movements
113,850
255
406
114,511
-
-
(2)
(2)
Gross carrying amount as at 31 December
1,091,641
18,135
15,721
1,125,497
678,808
13,120
7,899
699,827
Bank gross loans to individuals (retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
542,030
9,623
3,693
555,346
412,013
10,162
5,690
427,865
Transfer between stages:
from Stage 1 to Stage 2
(6,728)
6,728
-
-
(4,364)
4,364
-
-
from Stage 1 to Stage 3
(3,242)
-
3,242
-
(329)
-
329
-
from Stage 2 to Stage 1
1,703
(1,703)
-
-
4,359
(4,359)
-
-
from Stage 2 to Stage 3
-
(2,137)
2,137
-
-
(742)
742
-
from Stage 3 to Stage 1
401
-
(401)
-
582
-
(582)
-
from Stage 3 to Stage 2
-
193
(193)
-
-
1,260
(1,260)
-
New loans originated or loan amounts increased
365,367
3,940
2,447
371,754
189,356
839
132
190,327
Loans derecognized during the period (other
than write-offs)
(118,018)
(2,449)
(1,171)
(121,638)
(59,586)
(1,900)
(1,032)
(62,518)
Loans written-off during the period
-
(3)
(137)
(140)
-
(1)
(325)
(326)
Reclassifications, FX and other movements
113,849
257
405
114,511
(1)
-
(1)
(2)
Gross carrying amount as at 31 December
895,362
14,449
10,022
919,833
542,030
9,623
3,693
555,346
Group gross loans to individuals (retail): Consumer loans
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
143,285
3,678
4,304
151,267
132,328
4,565
4,716
141,609
Transfer between stages:
from Stage 1 to Stage 2
(2,162)
2,162
-
-
(2,473)
2,473
-
-
from Stage 1 to Stage 3
(2,770)
-
2,770
-
(1,597)
-
1,597
-
from Stage 2 to Stage 1
1,234
(1,234)
-
-
1,484
(1,484)
-
-
from Stage 2 to Stage 3
-
(803)
803
-
-
(683)
683
-
from Stage 3 to Stage 1
24
-
(24)
-
49
-
(49)
-
from Stage 3 to Stage 2
-
8
(8)
-
-
44
(44)
-
New loans originated or loan amounts increased
130,287
2,006
1,457
133,750
83,633
1,402
552
85,587
Loans derecognized during the period (other
than write-offs)
(70,696)
(1,987)
(1,616)
(74,299)
(70,135)
(2,533)
(1,495)
(74,163)
Loans written-off during the period
(1)
(61)
(1,801)
(1,863)
(2)
(106)
(1,657)
(1,765)
Reclassifications, FX and other movements
1
(2)
1
-
(2)
-
1
(1)
Gross carrying amount as at 31 December
199,202
3,767
5,886
208,855
143,285
3,678
4,304
151,267
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
91
NOTE 13
LOANS TO CUS
TOMERS (CONTINUED)
Bank gross loans to individuals (retail): Consumer loans
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
6,510
180
117
6,807
12,773
285
190
13,248
Transfer between stages:
from Stage 1 to Stage 2
(118)
118
-
-
(130)
130
-
-
from Stage 1 to Stage 3
(117)
-
117
-
(25)
-
25
-
from Stage 2 to Stage 1
52
(52)
-
-
104
(104)
-
-
from Stage 2 to Stage 3
-
(60)
60
-
-
(24)
24
-
from Stage 3 to Stage 1
1
-
(1)
-
25
-
(25)
-
from Stage 3 to Stage 2
-
6
(6)
-
-
34
(34)
-
New loans originated or loan amounts increased
809
15
29
853
639
3
55
697
Loans derecognized during the period (other
than write-offs)
(4,213)
(123)
(113)
(4,449)
(6,873)
(143)
(68)
(7,084)
Loans written-off during the period
-
(3)
(17)
(20)
-
(1)
(52)
(53)
Reclassifications, FX and other movements
-
-
-
-
(3)
-
2
(1)
Gross carrying amount as at 31 December
2,924
81
186
3,191
6,510
180
117
6,807
Group gross loans to individuals (retail): Mortgages
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
445,092
8,225
2,759
456,076
287,749
6,923
3,892
298,564
Transfer between stages:
from Stage 1 to Stage 2
(4,684)
4,684
-
-
(4,083)
4,083
-
-
from Stage 1 to Stage 3
(2,040)
-
2,040
-
(296)
-
296
-
from Stage 2 to Stage 1
1,546
(1,546)
-
-
2,125
(2,125)
-
-
from Stage 2 to Stage 3
-
(1,711)
1,711
-
-
(679)
679
-
from Stage 3 to Stage 1
-
-
-
-
482
-
(482)
-
from Stage 3 to Stage 2
-
177
(177)
-
-
1,010
(1,010)
-
New loans originated or loan amounts increased
252,717
1,228
233
254,178
187,213
378
61
187,652
Loans derecognized during the period (other
than write-offs)
(42,971)
(1,229)
(737)
(44,937)
(28,099)
(1,365)
(637)
(30,101)
Loans written-off during the period
-
-
(67)
(67)
-
-
(37)
(37)
Reclassifications, FX and other movements
-
-
-
-
1
-
(3)
(2)
Gross carrying amount as at 31 December
649,660
9,828
5,762
665,250
445,092
8,225
2,759
456,076
Bank gross loans to individuals (retail): Mortgages
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
445,092
8,225
2,759
456,076
287,749
6,923
3,892
298,564
Transfer between stages:
from Stage 1 to Stage 2
(4,684)
4,684
-
-
(4,083)
4,083
-
-
from Stage 1 to Stage 3
(2,040)
-
2,040
-
(296)
-
296
-
from Stage 2 to Stage 1
1,546
(1,546)
-
-
2,125
(2,125)
-
-
from Stage 2 to Stage 3
-
(1,711)
1,711
-
-
(679)
679
-
from Stage 3 to Stage 1
-
-
-
-
482
-
(482)
-
from Stage 3 to Stage 2
-
177
(177)
-
-
1,010
(1,010)
-
New loans originated or loan amounts increased
252,717
1,228
233
254,178
187,212
379
61
187,652
Loans derecognized during the period (other
than write-offs)
(42,971)
(1,229)
(737)
(44,937)
(28,100)
(1,365)
(636)
(30,101)
Loans written-off during the period
-
-
(67)
(67)
-
-
(37)
(37)
Reclassifications, FX and other movements
-
-
-
-
1
-
(3)
(2)
Gross carrying amount as at 31 December
649,660
9,828
5,762
665,250
445,090
8,226
2,760
456,076
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
92
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Group gross loans to individuals (retail): Other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
90,431
1,217
836
92,484
111,491
2,954
1,629
116,074
Transfer between stages:
from Stage 1 to Stage 2
(1,926)
1,926
-
-
(151)
151
-
-
from Stage 1 to Stage 3
(1,085)
-
1,085
-
(8)
-
8
-
from Stage 2 to Stage 1
105
(105)
-
-
2,130
(2,130)
-
-
from Stage 2 to Stage 3
-
(366)
366
-
-
(39)
39
-
from Stage 3 to Stage 1
400
-
(400)
-
75
-
(75)
-
from Stage 3 to Stage 2
-
10
(10)
-
-
216
(216)
-
New loans originated or loan amounts increased
111,841
2,697
2,185
116,723
1,505
457
16
1,978
Loans derecognized during the period (other
than write-offs)
(70,836)
(1,096)
(320)
(72,252)
(24,612)
(392)
(329)
(25,333)
Loans written-off during the period
-
-
(74)
(74)
-
-
(236)
(236)
Reclassifications, FX and other movements
113,849
257
405
114,511
1
-
-
1
Gross carrying amount as at 31 December
242,779
4,540
4,073
251,392
90,431
1,217
836
92,484
Bank gross loans to individuals (retail): Other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
90,430
1,217
816
92,463
111,491
2,954
1,608
116,053
Transfer between stages:
from Stage 1 to Stage 2
(1,926)
1,926
-
-
(151)
151
-
-
from Stage 1 to Stage 3
(1,085)
-
1,085
-
(8)
-
8
-
from Stage 2 to Stage 1
105
(105)
-
-
2,130
(2,130)
-
-
from Stage 2 to Stage 3
-
(366)
366
-
-
(39)
39
-
from Stage 3 to Stage 1
400
-
(400)
-
75
-
(75)
-
from Stage 3 to Stage 2
-
10
(10)
-
-
216
(216)
-
New loans originated or loan amounts increased
111,841
2,697
2,185
116,723
1,505
457
16
1,978
Loans derecognized during the period (other
than write-offs)
(70,836)
(1,096)
(320)
(72,252)
(24,613)
(392)
(328)
(25,333)
Loans written-off during the period
-
-
(53)
(53)
-
-
(236)
(236)
Reclassifications, FX and other movements
113,849
257
405
114,511
1
-
-
1
Gross carrying amount as at 31 December
242,778
4,540
4,074
251,392
90,430
1,217
816
92,463
Group gross loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
3,210
3,819
-
7,029
14
4,827
-
4,841
Transfer between stages:
from Stage 1 to Stage 2
-
-
-
-
-
-
-
-
from Stage 1 to Stage 3
-
-
-
-
-
-
-
-
from Stage 2 to Stage 1
-
-
-
-
-
-
-
-
from Stage 2 to Stage 3
-
-
-
-
-
-
-
-
from Stage 3 to Stage 1
-
-
-
-
-
-
-
-
from Stage 3 to Stage 2
-
-
-
-
-
-
-
-
New loans originated or loan amounts increased
18,073
-
-
18,073
3,195
3,819
-
7,014
Loans derecognized during the period (other
than write-offs)
(3,194)
(3,819)
-
(7,013)
-
(4,827)
-
(4,827)
Loans written-off during the period
-
-
-
-
-
-
-
Reclassifications, FX and other movements
(1)
-
-
(1)
1
-
-
1
Gross carrying amount as at 31 December
18,088
-
-
18,088
3,210
3,819
-
7,029
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
93
NOTE 13
LOANS TO
CUSTOMERS (CONTINUED)
Bank gross loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
3,210
121,687
-
124,897
102,709
4,827
-
107,536
Transfer between stages:
from Stage 1 to Stage 2
-
-
-
-
(102,694)
102,694
-
-
from Stage 1 to Stage 3
-
-
-
-
-
-
-
-
from Stage 2 to Stage 1
-
-
-
-
-
-
-
-
from Stage 2 to Stage 3
-
-
-
-
-
-
-
-
from Stage 3 to Stage 1
-
-
-
-
-
-
-
-
from Stage 3 to Stage 2
-
-
-
-
-
-
-
-
New loans originated or loan amounts increased
18,073
59,405
-
77,478
3,195
19,382
-
22,577
Loans derecognized during the period (other
than write-offs)
(3,194)
(3,819)
-
(7,013)
-
(5,216)
-
(5,216)
Loans written-off during the period
-
-
-
-
-
-
-
Reclassifications, FX and other movements
(1)
-
-
(1)
1
-
-
1
Gross carrying amount as at 31 December
18,088
177,273
-
195,361
3,211
121,687
-
124,898
Group gross loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
960,433
218,670
58,419
1,237,522
751,000
232,581
103,777
1,087,358
Transfer between stages:
from Stage 1 to Stage 2
(49,132)
49,132
-
-
(127,264)
127,264
-
-
from Stage 1 to Stage 3
(2,835)
-
2,835
-
(2,035)
-
2,035
-
from Stage 2 to Stage 1
87,572
(87,572)
-
-
92,730
(92,730)
-
-
from Stage 2 to Stage 3
-
(9,709)
9,709
-
-
(3,002)
3,002
-
from Stage 3 to Stage 1
-
-
-
-
2,608
-
(2,608)
-
from Stage 3 to Stage 2
-
4,470
(4,470)
-
-
4,202
(4,202)
-
New loans originated or loan amounts increased
436,367
34,106
4,552
475,025
461,091
37,636
1,226
499,953
Loans derecognized during the period (other
than write-offs)
(245,290)
(51,174)
(15,991)
(312,455)
(217,696)
(87,279)
(33,929)
(338,904)
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(10,888)
(10,888)
Reclassifications, FX and other movements
(113,850)
(257)
(406)
(114,513)
(1)
(2)
6
3
Gross carrying amount as at 31 December
1,073,265
157,666
51,346
1,282,277
960,433
218,670
58,419
1,237,522
Bank gross loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
960,433
218,670
58,419
1,237,522
753,250
232,581
108,952
1,094,783
Transfer between stages:
from Stage 1 to Stage 2
(49,132)
49,132
-
-
(127,264)
127,264
-
-
from Stage 1 to Stage 3
(2,835)
-
2,835
-
(2,035)
-
2,035
-
from Stage 2 to Stage 1
87,572
(87,572)
-
-
92,730
(92,730)
-
-
from Stage 2 to Stage 3
-
(9,709)
9,709
-
-
(3,002)
3,002
-
from Stage 3 to Stage 1
-
-
-
-
2,608
-
(2,608)
-
from Stage 3 to Stage 2
-
4,470
(4,470)
-
-
4,202
(4,202)
-
New loans originated or loan amounts increased
436,367
34,106
4,552
475,025
461,092
37,636
1,226
499,954
Loans derecognized during the period (other
than write-offs)
(245,290)
(51,174)
(15,991)
(312,455)
(219,947)
(87,279)
(38,450)
(345,676)
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(11,542)
(11,542)
Reclassifications, FX and other movements
(113,850)
(257)
(406)
(114,513)
(1)
(2)
6
3
Gross carrying amount as at 31 December
1,073,265
157,666
51,346
1,282,277
960,433
218,670
58,419
1,237,522
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
94
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Group gross loans to business customers: Large corporates
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
91,658
35,744
1,925
129,327
67,219
42,423
1,856
111,498
Transfer between stages:
from Stage 1 to Stage 2
(9,612)
9,612
-
-
(18,739)
18,739
-
-
from Stage 1 to Stage 3
-
-
-
-
-
-
-
-
from Stage 2 to Stage 1
9,079
(9,079)
-
-
23,108
(23,108)
-
-
from Stage 2 to Stage 3
-
-
-
-
-
-
-
-
from Stage 3 to Stage 1
-
-
-
-
-
-
-
-
from Stage 3 to Stage 2
-
-
-
-
-
-
-
-
New loans originated or loan amounts increased
10,820
1,732
18
12,570
30,823
7,117
396
38,336
Loans derecognized during the period (other
than write-offs)
(24,941)
(8,045)
(347)
(33,333)
(10,755)
(9,425)
(327)
(20,507)
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
(2,747)
-
-
(2,747)
2
(2)
-
-
Gross carrying amount as at 31 December
74,257
29,964
1,596
105,817
91,658
35,744
1,925
129,327
Bank gross loans to business customers: Large corporates
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
91,658
35,744
1,925
129,327
67,219
42,423
1,856
111,498
Transfer between stages:
from Stage 1 to Stage 2
(9,612)
9,612
-
-
(18,739)
18,739
-
-
from Stage 1 to Stage 3
-
-
-
-
-
-
-
-
from Stage 2 to Stage 1
9,079
(9,079)
-
-
23,108
(23,108)
-
-
from Stage 2 to Stage 3
-
-
-
-
-
-
-
-
from Stage 3 to Stage 1
-
-
-
-
-
-
-
-
from Stage 3 to Stage 2
-
-
-
-
-
-
-
-
New loans originated or loan amounts increased
10,820
1,732
18
12,570
30,823
7,117
396
38,336
Loans derecognized during the period (other
than write-offs)
(24,941)
(8,045)
(347)
(33,333)
(10,755)
(9,425)
(327)
(20,507)
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
(2,747)
-
-
(2,747)
2
(2)
-
-
Gross carrying amount as at 31 December
74,257
29,964
1,596
105,817
91,658
35,744
1,925
129,327
Group gross loans to business customers: SME
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
736,774
179,223
55,029
971,026
569,835
188,541
100,413
858,789
Transfer between stages:
from Stage 1 to Stage 2
(39,508)
39,508
-
-
(106,671)
106,671
-
-
from Stage 1 to Stage 3
(2,835)
-
2,835
-
(2,035)
-
2,035
-
from Stage 2 to Stage 1
76,979
(76,979)
-
-
69,620
(69,620)
-
-
from Stage 2 to Stage 3
-
(9,709)
9,709
-
-
(3,002)
3,002
-
from Stage 3 to Stage 1
-
-
-
-
2,608
-
(2,608)
-
from Stage 3 to Stage 2
-
4,470
(4,470)
-
-
4,202
(4,202)
-
New loans originated or loan amounts increased
411,168
31,828
4,534
447,530
383,532
29,895
822
414,249
Loans derecognized during the period (other
than write-offs)
(185,291)
(42,363)
(15,621)
(243,275)
(180,111)
(77,464)
(33,602)
(291,177)
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(10,837)
(10,837)
Reclassifications, FX and other movements
(78,679)
(199)
(406)
(79,284)
(4)
-
6
2
Gross carrying amount as at 31 December
918,608
125,779
48,308
1,092,695
736,774
179,223
55,029
971,026
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
95
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Bank gross loans to business customers: SME
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
736,774
179,223
55,029
971,026
572,085
188,541
105,588
866,214
Transfer between stages:
from Stage 1 to Stage 2
(39,508)
39,508
-
-
(106,671)
106,671
-
-
from Stage 1 to Stage 3
(2,835)
-
2,835
-
(2,035)
-
2,035
-
from Stage 2 to Stage 1
76,979
(76,979)
-
-
69,620
(69,620)
-
-
from Stage 2 to Stage 3
-
(9,709)
9,709
-
-
(3,002)
3,002
-
from Stage 3 to Stage 1
-
-
-
-
2,608
-
(2,608)
-
from Stage 3 to Stage 2
-
4,470
(4,470)
-
-
4,202
(4,202)
-
New loans originated or loan amounts increased
411,168
31,828
4,534
447,530
383,532
29,895
822
414,249
Loans derecognized during the period (other
than write-offs)
(185,291)
(42,363)
(15,621)
(243,275)
(182,361)
(77,464)
(38,123)
(297,948)
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(11,491)
(11,491)
Reclassifications, FX and other movements
(78,679)
(199)
(406)
(79,284)
(4)
-
6
2
Gross carrying amount as at 31 December
918,608
125,779
48,308
1,092,695
736,774
179,223
55,029
971,026
Group gross loans to business customers: Central and local authorities and other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
132,001
3,703
1,465
137,169
113,946
1,617
1,508
117,071
Transfer between stages:
from Stage 1 to Stage 2
(12)
12
-
-
(1,854)
1,854
-
-
from Stage 1 to Stage 3
-
-
-
-
-
-
-
-
from Stage 2 to Stage 1
1,514
(1,514)
-
-
2
(2)
-
-
from Stage 2 to Stage 3
-
-
-
-
-
-
-
-
from Stage 3 to Stage 1
-
-
-
-
-
-
-
-
from Stage 3 to Stage 2
-
-
-
-
-
-
-
-
New loans originated or loan amounts increased
14,379
546
-
14,925
46,737
624
8
47,369
Loans derecognized during the period (other
than write-offs)
(35,058)
(766)
(23)
(35,847)
(26,831)
(390)
-
(27,221)
Loans written-off during the period
-
-
-
-
-
-
(51)
(51)
Reclassifications, FX and other movements
(32,424)
(58)
-
(32,482)
1
-
-
1
Gross carrying amount as at 31 December
80,400
1,923
1,442
83,765
132,001
3,703
1,465
137,169
Bank gross loans to business customers: Central and local authorities and other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Gross carrying amount as at 1 January
132,001
3,703
1,465
137,169
113,946
1,617
1,508
117,071
Transfer between stages:
from Stage 1 to Stage 2
(12)
12
-
-
(1,854)
1,854
-
-
from Stage 1 to Stage 3
-
-
-
-
-
-
-
-
from Stage 2 to Stage 1
1,514
(1,514)
-
-
2
(2)
-
-
from Stage 2 to Stage 3
-
-
-
-
-
-
-
-
from Stage 3 to Stage 1
-
-
-
-
-
-
-
-
from Stage 3 to Stage 2
-
-
-
-
-
-
-
-
New loans originated or loan amounts increased
14,379
546
-
14,925
46,736
624
8
47,368
Loans derecognized during the period (other
than write-offs)
(35,058)
(766)
(23)
(35,847)
(26,830)
(390)
-
(27,220)
Loans written-off during the period
-
-
-
-
-
-
(51)
(51)
Reclassifications, FX and other movements
(32,424)
(58)
-
(32,482)
1
-
-
1
Gross carrying amount as at 31 December
80,400
1,923
1,442
83,765
132,001
3,703
1,465
137,169
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
96
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Movements in allowance for loan impairment by separate class are provided below:
Group loss allowance against loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
12,468
3,911
19,318
35,697
7,574
6,989
28,220
42,783
Movements with impact to profit or loss:
New loans originated
11,548
1,855
132
13,535
6,332
526
191
7,049
Loans derecognized during the period (other than write-
offs)
(1,513)
(1,251)
(2,348)
(5,112)
(993)
(779)
(5,282)
(7,054)
Changes due to change in credit risk (net)
(6,649)
(745)
7,627
233
36
(3,118)
7,141
4,059
Update in the methodology for loss allowance estimation
(2,315)
(1,298)
(1,204)
(4,817)
(479)
399
1,866
1,786
Total movements with impact to profit or loss:
1,071
(1,439)
4,207
3,839
4,896
(2,972)
3,916
5,840
Movements without impact to profit or loss:
Loans written-off during the period
(1)
(61)
(5,244)
(5,306)
(2)
(106)
(12,818)
(12,926)
Reclassifications, FX and other movements
1
1
1
3
-
-
-
-
Total movements without impact to profit or loss:
-
(60)
(5,243)
(5,303)
(2)
(106)
(12,818)
(12,926)
Amount as at 31 December
13,539
2,412
18,282
34,233
12,468
3,911
19,318
35,697
Bank loss allowance against loans to customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
8,275
2,659
17,204
28,138
3,826
5,435
28,560
37,821
Movements with impact to profit or loss:
New loans originated
7,939
1,543
10
9,492
3,579
382
151
4,112
Loans derecognized during the period (other than write-
offs)
(821)
(623)
(938)
(2,382)
(378)
(272)
(3,951)
(4,601)
Changes due to change in credit risk (net)
(5,828)
(1,376)
3,996
(3,208)
1,367
(3,333)
2,373
407
Update in the methodology for loss allowance estimation
(138)
(525)
(1,227)
(1,890)
(119)
448
1,938
2,267
Total movements with impact to profit or loss:
1,152
(981)
1,841
2,012
4,449
(2,775)
511
2,185
Movements without impact to profit or loss:
Loans written-off during the period
-
(3)
(3,439)
(3,442)
-
(1)
(11,867)
(11,868)
Reclassifications, FX and other movements
-
1
-
1
-
-
-
-
Total movements without impact to profit or loss:
-
(2)
(3,439)
(3,441)
-
(1)
(11,867)
(11,868)
Amount as at 31 December
9,427
1,676
15,606
26,709
8,275
2,659
17,204
28,138
Group loss allowance against loans to customers: Loans to individuals (Retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
5,575
1,357
2,887
9,819
5,690
1,847
3,522
11,059
Movements with impact to profit or loss:
New loans originated
4,304
336
130
4,770
3,410
151
96
3,657
Loans derecognized during the period (other than write-
offs)
(731)
(647)
(1,520)
(2,898)
(678)
(541)
(1,904)
(3,123)
Changes due to change in credit risk (net)
(1,636)
617
5,582
4,563
(2,100)
52
3,122
1,074
Update in the methodology for loss allowance estimation
(2,360)
(789)
(481)
(3,630)
(745)
(46)
(19)
(810)
Total movements with impact to profit or loss:
(423)
(483)
3,711
2,805
(113)
(384)
1,295
798
Movements without impact to profit or loss:
Loans written-off during the period
(1)
(61)
(1,942)
(2,004)
(2)
(106)
(1,930)
(2,038)
Reclassifications, FX and other movements
813
1
94
908
-
-
-
-
Total movements without impact to profit or loss:
812
(60)
(1,848)
(1,096)
(2)
(106)
(1,930)
(2,038)
Amount as at 31 December
5,964
814
4,750
11,528
5,575
1,357
2,887
9,819
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
97
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Bank loss allowance against loans to customers: Loans to individuals (Retail)
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
1,382
105
773
2,260
1,961
294
1,191
3,446
Movements with impact to profit or loss:
New loans originated
695
24
8
727
657
7
56
720
Loans derecognized during the period (other than write-
offs)
(39)
(19)
(110)
(168)
(63)
(34)
(573)
(670)
Changes due to change in credit risk (net)
(815)
(14)
1,950
1,121
(789)
(164)
371
(582)
Update in the methodology for loss allowance estimation
(183)
(16)
(504)
(703)
(384)
3
53
(328)
Total movements with impact to profit or loss:
(342)
(25)
1,344
977
(579)
(188)
(93)
(860)
Movements without impact to profit or loss:
Loans written-off during the period
-
(3)
(137)
(140)
-
(1)
(325)
(326)
Reclassifications, FX and other movements
812
1
94
907
-
-
-
-
Total movements without impact to profit or loss:
812
(2)
(43)
767
-
(1)
(325)
(326)
Amount as at 31 December
1,852
78
2,074
4,004
1,382
105
773
2,260
Group loss allowance against loans to customers: Loans to individuals (Retail) – Consumer loans
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
4,336
1,288
2,181
7,805
4,047
1,621
2,424
8,092
Movements with impact to profit or loss:
New loans originated
3,618
313
128
4,059
2,988
144
90
3,222
Loans derecognized during the period (other than write-
offs)
(711)
(636)
(1,423)
(2,770)
(648)
(521)
(1,608)
(2,777)
Changes due to change in credit risk (net)
(865)
611
3,715
3,461
(1,658)
196
3,007
1,545
Update in the methodology for loss allowance estimation
(2,209)
(776)
(5)
(2,990)
(391)
(46)
(75)
(512)
Total movements with impact to profit or loss:
(167)
(488)
2,415
1,760
291
(227)
1,414
1,478
Movements without impact to profit or loss:
Loans written-off during the period
(1)
(61)
(1,801)
(1,863)
(2)
(106)
(1,657)
(1,765)
Reclassifications, FX and other movements
1
-
-
1
-
-
-
-
Total movements without impact to profit or loss:
-
(61)
(1,801)
(1,862)
(2)
(106)
(1,657)
(1,765)
Amount as at 31 December
4,169
739
2,795
7,703
4,336
1,288
2,181
7,805
Bank loss allowance against loans to customers: Loans to individuals (Retail) – Consumer loans
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
143
36
88
267
318
68
114
500
Movements with impact to profit or loss:
New loans originated
9
1
6
16
235
-
50
285
Loans derecognized during the period (other than write-
offs)
(19)
(8)
(34)
(61)
(33)
(14)
(277)
(324)
Changes due to change in credit risk (net)
(44)
(20)
104
40
(347)
(20)
256
(111)
Update in the methodology for loss allowance estimation
(32)
(3)
(28)
(63)
(30)
3
(3)
(30)
Total movements with impact to profit or loss:
(86)
(30)
48
(68)
(175)
(31)
26
(180)
Movements without impact to profit or loss:
Loans written-off during the period
-
(3)
(17)
(20)
-
(1)
(52)
(53)
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
(3)
(17)
(20)
-
(1)
(52)
(53)
Amount as at 31 December
57
3
119
179
143
36
88
267
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
98
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Group loss allowance against loans to customers: Loans to individuals (Retail) – Mortgages
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
448
59
443
950
578
181
665
1,424
Movements with impact to profit or loss:
New loans originated
422
-
2
424
413
5
6
424
Loans derecognized during the period (other than write-
offs)
(16)
(8)
(26)
(50)
(27)
(20)
(149)
(196)
Changes due to change in credit risk (net)
(111)
(22)
981
848
(177)
(115)
(82)
(374)
Update in the methodology for loss allowance estimation
16
8
(207)
(183)
(339)
8
40
(291)
Total movements with impact to profit or loss:
311
(22)
750
1,039
(130)
(122)
(185)
(437)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(67)
(67)
-
-
(37)
(37)
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
-
(67)
(67)
-
-
(37)
(37)
Amount as at 31 December
759
37
1,126
1,922
448
59
443
950
Bank loss allowance against loans to customers: Loans to individuals (Retail) – Mortgages
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
448
59
443
950
578
181
665
1,424
Movements with impact to profit or loss:
New loans originated
422
-
2
424
413
5
6
424
Loans derecognized during the period (other than write-
offs)
(16)
(8)
(26)
(50)
(27)
(20)
(149)
(196)
Changes due to change in credit risk (net)
(111)
(22)
981
848
(177)
(115)
(82)
(374)
Update in the methodology for loss allowance estimation
16
8
(207)
(183)
(339)
8
40
(291)
Total movements with impact to profit or loss:
311
(22)
750
1,039
(130)
(122)
(185)
(437)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(67)
(67)
-
-
(37)
(37)
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
-
(67)
(67)
-
-
(37)
(37)
Amount as at 31 December
759
37
1,126
1,922
448
59
443
950
Group loss allowance against loans to customers: Loans to individuals (Retail) – Other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
791
10
263
1,064
1,065
45
433
1,543
Movements with impact to profit or loss:
New loans originated
264
23
-
287
9
2
-
11
Loans derecognized during the period (other than write-
offs)
(4)
(3)
(71)
(78)
(3)
-
(147)
(150)
Changes due to change in credit risk (net)
(660)
28
886
254
(265)
(29)
197
(97)
Update in the methodology for loss allowance estimation
(167)
(21)
(269)
(457)
(15)
(8)
16
(7)
Total movements with impact to profit or loss:
(567)
27
546
6
(274)
(35)
66
(243)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(74)
(74)
-
-
(236)
(236)
Reclassifications, FX and other movements
812
1
94
907
-
-
-
-
Total movements without impact to profit or loss:
812
1
20
833
-
-
(236)
(236)
Amount as at 31 December
1,036
38
829
1,903
791
10
263
1,064
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
99
NOTE 13
LOANS TO CUSTOMERS (CONTIN
UED)
Bank loss allowance against loans to customers: Loans to individuals (Retail) – Other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
791
10
242
1,043
1,065
45
412
1,522
Movements with impact to profit or loss:
New loans originated
264
23
-
287
9
2
-
11
Loans derecognized during the period (other than write-
offs)
(4)
(3)
(50)
(57)
(3)
-
(147)
(150)
Changes due to change in credit risk (net)
(660)
28
865
233
(265)
(29)
197
(97)
Update in the methodology for loss allowance estimation
(167)
(21)
(269)
(457)
(15)
(8)
16
(7)
Total movements with impact to profit or loss:
(567)
27
546
6
(274)
(35)
66
(243)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(53)
(53)
-
-
(236)
(236)
Reclassifications, FX and other movements
812
1
94
907
-
-
-
-
Total movements without impact to profit or loss:
812
1
41
854
-
-
(236)
(236)
Amount as at 31 December
1,036
38
829
1,903
791
10
242
1,043
Group loss allowance against loans to customers: Loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
64
18
-
82
-
94
-
94
Movements with impact to profit or loss:
New loans originated
76
4
-
80
1
133
-
134
Loans derecognized during the period (other than write-
offs)
(141)
-
-
(141)
-
(156)
-
(156)
Changes due to change in credit risk (net)
37
(22)
-
15
49
39
-
88
Update in the methodology for loss allowance estimation
(27)
-
-
(27)
14
(92)
-
(78)
Total movements with impact to profit or loss:
(55)
(18)
-
(73)
64
(76)
-
(12)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
-
-
-
-
-
-
-
Amount as at 31 December
9
-
-
9
64
18
-
82
Bank loss allowance against loans to customers: Loans to financial institutions
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
64
18
-
82
-
94
-
94
Movements with impact to profit or loss:
New loans originated
76
4
-
80
1
133
-
134
Loans derecognized during the period (other than write-
offs)
(141)
-
-
(141)
-
(156)
-
(156)
Changes due to change in credit risk (net)
37
(22)
-
15
49
39
-
88
Update in the methodology for loss allowance estimation
(27)
-
-
(27)
14
(92)
-
(78)
Total movements with impact to profit or loss:
(55)
(18)
-
(73)
64
(76)
-
(12)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
-
-
-
-
-
-
-
Amount as at 31 December
9
-
-
9
64
18
-
82
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
100
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Group loss allowance against loans to customers: Loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
6,829
2,536
16,431
25,796
1,884
5,048
24,698
31,630
Movements with impact to profit or loss:
New loans originated
7,168
1,515
2
8,685
2,921
242
95
3,258
Loans derecognized during the period (other than write-
offs)
(641)
(604)
(828)
(2,073)
(315)
(82)
(3,378)
(3,775)
Changes due to change in credit risk (net)
(5,050)
(1,340)
2,045
(4,345)
2,087
(3,209)
4,019
2,897
Update in the methodology for loss allowance estimation
72
(509)
(723)
(1,160)
252
537
1,885
2,674
Total movements with impact to profit or loss:
1,549
(938)
496
1,107
4,945
(2,512)
2,621
5,054
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(10,888)
(10,888)
Reclassifications, FX and other movements
(812)
-
(93)
(905)
-
-
-
-
Total movements without impact to profit or loss:
(812)
-
(3,395)
(4,207)
-
-
(10,888)
(10,888)
Amount as at 31 December
7,566
1,598
13,532
22,696
6,829
2,536
16,431
25,796
Bank loss allowance against loans to customers: Loans to business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
6,829
2,536
16,431
25,796
1,865
5,047
27,369
34,281
Movements with impact to profit or loss:
New loans originated
7,168
1,515
2
8,685
2,921
242
95
3,258
Loans derecognized during the period (other than write-
offs)
(641)
(604)
(828)
(2,073)
(315)
(82)
(3,378)
(3,775)
Changes due to change in credit risk (net)
(5,050)
(1,340)
2,045
(4,345)
2,107
(3,208)
2,002
901
Update in the methodology for loss allowance estimation
72
(509)
(723)
(1,160)
251
537
1,885
2,673
Total movements with impact to profit or loss:
1,549
(938)
496
1,107
4,964
(2,511)
604
3,057
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(11,542)
(11,542)
Reclassifications, FX and other movements
(812)
-
(93)
(905)
-
-
-
-
Total movements without impact to profit or loss:
(812)
-
(3,395)
(4,207)
-
-
(11,542)
(11,542)
Amount as at 31 December
7,566
1,598
13,532
22,696
6,829
2,536
16,431
25,796
Group loss allowance against loans to customers: Loans to business customers – Large corporates
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
537
140
878
1,555
627
885
291
1,803
Movements with impact to profit or loss:
New loans originated
152
128
-
280
129
-
19
148
Loans derecognized during the period (other than write-
offs)
(76)
(445)
(19)
(540)
(4)
(33)
-
(37)
Changes due to change in credit risk (net)
(334)
504
737
907
(295)
(649)
551
(393)
Update in the methodology for loss allowance estimation
50
(54)
-
(4)
80
(63)
17
34
Total movements with impact to profit or loss:
(208)
133
718
643
(90)
(745)
587
(248)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
(28)
-
-
(28)
-
-
-
-
Total movements without impact to profit or loss:
(28)
-
-
(28)
-
-
-
-
Amount as at 31 December
301
273
1,596
2,170
537
140
878
1,555
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
101
NOTE 13
LOANS TO
CUSTOMERS (CONTINUED)
Bank loss allowance against loans to customers: Loans to business customers – Large corporates
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
537
140
878
1,555
627
885
291
1,803
Movements with impact to profit or loss:
New loans originated
152
128
-
280
129
-
19
148
Loans derecognized during the period (other than write-
offs)
(76)
(445)
(19)
(540)
(4)
(33)
-
(37)
Changes due to change in credit risk (net)
(334)
504
737
907
(295)
(649)
551
(393)
Update in the methodology for loss allowance estimation
50
(54)
-
(4)
80
(63)
17
34
Total movements with impact to profit or loss:
(208)
133
718
643
(90)
(745)
587
(248)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
(28)
-
-
(28)
-
-
-
-
Total movements without impact to profit or loss:
(28)
-
-
(28)
-
-
-
-
Amount as at 31 December
301
273
1,596
2,170
537
140
878
1,555
Group loss allowance against loans to customers: Loans to business customers – SME
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
5,866
2,321
14,854
23,041
1,155
4,136
23,739
29,030
Movements with impact to profit or loss:
New loans originated
6,998
1,384
2
8,384
2,703
218
76
2,997
Loans derecognized during the period (other than write-
offs)
(560)
(142)
(809)
(1,511)
(297)
(28)
(3,378)
(3,703)
Changes due to change in credit risk (net)
(4,609)
(1,819)
926
(5,502)
2,375
(2,712)
3,470
3,133
Update in the methodology for loss allowance estimation
59
(432)
(661)
(1,034)
(70)
707
1,784
2,421
Total movements with impact to profit or loss:
1,888
(1,009)
(542)
337
4,711
(1,815)
1,952
4,848
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(10,837)
(10,837)
Reclassifications, FX and other movements
(554)
-
(93)
(647)
-
-
-
-
Total movements without impact to profit or loss:
(554)
-
(3,395)
(3,949)
-
-
(10,837)
(10,837)
Amount as at 31 December
7,200
1,312
10,917
19,429
5,866
2,321
14,854
23,041
Bank loss allowance against loans to customers: Loans to business customers – SME
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
5,866
2,321
14,854
23,041
1,136
4,135
26,410
31,681
Movements with impact to profit or loss:
New loans originated
6,998
1,384
2
8,384
2,703
218
76
2,997
Loans derecognized during the period (other than write-
offs)
(560)
(142)
(809)
(1,511)
(297)
(28)
(3,378)
(3,703)
Changes due to change in credit risk (net)
(4,609)
(1,819)
926
(5,502)
2,395
(2,711)
1,453
1,137
Update in the methodology for loss allowance estimation
59
(432)
(661)
(1,034)
(71)
707
1,784
2,420
Total movements with impact to profit or loss:
1,888
(1,009)
(542)
337
4,730
(1,814)
(65)
2,851
Movements without impact to profit or loss:
Loans written-off during the period
-
-
(3,302)
(3,302)
-
-
(11,491)
(11,491)
Reclassifications, FX and other movements
(554)
-
(93)
(647)
-
-
-
-
Total movements without impact to profit or loss:
(554)
-
(3,395)
(3,949)
-
-
(11,491)
(11,491)
Amount as at 31 December
7,200
1,312
10,917
19,429
5,866
2,321
14,854
23,041
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
102
NOTE 13
LOANS TO CUSTOMERS (CONTINUED)
Group loss allowance against loans to customers: Loans to business customers – Central and local authorities and other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
426
75
699
1,200
102
27
668
797
Movements with impact to profit or loss:
New loans originated
18
3
-
21
89
24
-
113
Loans derecognized during the period (other than write-
offs)
(5)
(17)
-
(22)
(14)
(21)
-
(35)
Changes due to change in credit risk (net)
(107)
(25)
382
250
7
152
(2)
157
Update in the methodology for loss allowance estimation
(37)
(23)
(62)
(122)
242
(107)
84
219
Total movements with impact to profit or loss:
(131)
(62)
320
127
324
48
82
454
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
(51)
(51)
Reclassifications, FX and other movements
(230)
-
-
(230)
-
-
-
-
Total movements without impact to profit or loss:
(230)
-
-
(230)
-
-
(51)
(51)
Amount as at 31 December
65
13
1,019
1,097
426
75
699
1,200
Bank loss allowance against loans to customers: Loans to business customers – Central and local authorities and other
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
426
75
699
1,200
102
27
668
797
Movements with impact to profit or loss:
New loans originated
18
3
-
21
89
24
-
113
Loans derecognized during the period (other than write-
offs)
(5)
(17)
-
(22)
(14)
(21)
-
(35)
Changes due to change in credit risk (net)
(107)
(25)
382
250
7
152
(2)
157
Update in the methodology for loss allowance estimation
(37)
(23)
(62)
(122)
242
(107)
84
219
Total movements with impact to profit or loss:
(131)
(62)
320
127
324
48
82
454
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
(51)
(51)
Reclassifications, FX and other movements
(230)
-
-
(230)
-
-
-
-
Total movements without impact to profit or loss:
(230)
-
-
(230)
-
-
(51)
(51)
Amount as at 31 December
65
13
1,019
1,097
426
75
699
1,200
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
103
NOTE 14
FINANCE LEASE RECEIVABLES
As part of its lending services, the Bank offers its customers various types of finance lease contracts. Main finance lease model of the
Bank is to finance goods or services sold by vendors to the customers. The Bank acts as a lender, although legally it is the owner of the
assets leased.
No other material income except for the finance income (included in net interest income - see Note 1) is earned by the Bank from the
finance lease. The Bank does not provide any buy-back guarantees or residual value guarantees at its own risk. In some cases when
such guarantees are offered to customers that use Bank‘s finance lease products, the vendor of the assets leased provides such
guarantees. In such cases the Bank additionally assesses the vendor‘s capacities to meet such obligations.
Risk profile of finance lease contracts is described in detail in part 1.6. of the Financial Risk Management disclosure.
The Group
Up to 1 year
1-
2 years
2-
3 years
3-
4 years
4-
5 years
Over 5 years
Total
Gross investments in leasing:
Balance at 31 December 2021
84,707
51,129
35,584
23,909
15,546
842
211,717
Change during 2022
12,188
15,870
16,977
10,246
3,327
983
59,591
Balance at 31 December 2022
96,895
66,999
52,561
34,155
18,873
1,825
271,308
Unearned finance income on finance
leases:
Balance at 31 December 2021
(5,963)
(3,531)
(2,009)
(982)
(256)
(15)
(12,756)
Change during 2022
(4,597)
(3,154)
(1,942)
(817)
(242)
(52)
(10,804)
Balance at 31 December 2022
(10,560)
(6,685)
(3,951)
(1,799)
(498)
(67)
(23,560)
Net investments in leasing before
provisions:
At 31 December 2021
78,744
47,598
33,575
22,927
15,290
827
198,961
At 31 December 2022
86,335
60,314
48,610
32,356
18,375
1,758
247,748
Changes in provisions:
Balance at 31 December 2021
(1,861)
(673)
(474)
(322)
(215)
(242)
(3,787)
Provisions reversed / (additional provisions
charged)
(440)
(371)
(367)
(235)
(101)
(66)
(1,580)
Provisions for finance lease debts written
off
-
-
-
-
-
67
67
Balance at 31 December 2022
(2,301)
(1,044)
(841)
(557)
(316)
(241)
(5,300)
Net investments in leasing after provisions:
At 31 December 2021
76,883
46,925
33,101
22,605
15,075
585
195,174
At 31 December 2022
84,034
59,270
47,769
31,799
18,059
1,517
242,448
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
104
NOTE 14
FINANCE LEASE RECEIVABLES (CONTINUED)
The Bank
Up to 1 year
1-2 years
2-
3 years
3-
4 years
4-
5 years
Over 5 years
Total
Gross investments in leasing:
Balance at 31 December 2021
83,688
51,129
35,584
23,909
15,546
842
210,698
Change during 2022
12,139
15,870
16,977
10,246
3,327
983
59,542
Balance at 31 December 2022
95,827
66,999
52,561
34,155
18,873
1,825
270,240
Unearned finance income on finance
leases:
Balance at 31 December 2021
(5,957)
(3,531)
(2,009)
(982)
(256)
(15)
(12,750)
Change during 2022
(4,597)
(3,154)
(1,942)
(817)
(242)
(52)
(10,804)
Balance at 31 December 2022
(10,554)
(6,685)
(3,951)
(1,799)
(498)
(67)
(23,554)
Net investments in leasing before
provisions:
At 31 December 2021
77,731
47,598
33,575
22,927
15,290
827
197,948
At 31 December 2022
85,273
60,314
48,610
32,356
18,375
1,758
246,686
Changes in provisions:
Balance at 31 December 2021
(1,109)
(673)
(474)
(322)
(215)
(246)
(3,039)
Provisions reversed / (additional provisions
charged)
(382)
(371)
(367)
(235)
(101)
(66)
(1,522)
Provisions for finance lease debts written
off
-
-
-
-
-
67
67
Balance at 31 December 2022
(1,491)
(1,044)
(841)
(557)
(316)
(245)
(4,494)
Net investments in leasing after provisions:
At 31 December 2021
76,622
46,925
33,101
22,605
15,075
581
194,909
At 31 December 2022
83,782
59,270
47,769
31,799
18,059
1,513
242,192
Movements in provision for impairment of finance lease receivables by class are as follows:
Group loss allowance against finance lease receivables
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
966
239
2,581
3,786
800
931
2,854
4,585
Movements with impact to profit or loss:
New loans originated
1,081
66
-
1,147
711
330
64
1,105
Loans derecognized during the period (other than write-
offs)
(188)
(78)
(275)
(541)
(110)
(129)
(763)
(1,002)
Changes due to change in credit risk (net)
(682)
(2)
1,319
635
(246)
(343)
122
(467)
Update in the methodology for loss allowance estimation
704
60
(491)
273
(189)
(550)
305
(434)
Total movements with impact to profit or loss:
915
46
553
1,514
166
(692)
(272)
(798)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
(1)
(1)
Total movements without impact to profit or loss:
-
-
-
-
-
-
(1)
(1)
Loss allowance as at 31 December
1,881
285
3,134
5,300
966
239
2,581
3,786
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
105
NOTE 14
FINANCE LEASE RECEIVABLES (CONTINUED)
Bank loss allowance against finance lease receivables
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
965
239
1,834
3,038
799
931
2,112
3,842
Movements with impact to profit or loss:
New loans originated
1,081
54
-
1,135
710
330
64
1,104
Loans derecognized during the period (other than write-
offs)
(188)
(76)
(274)
(538)
(110)
(129)
(763)
(1,002)
Changes due to change in credit risk (net)
(681)
3
1,264
586
(245)
(343)
117
(471)
Update in the methodology for loss allowance estimation
704
60
(491)
273
(189)
(550)
305
(434)
Total movements with impact to profit or loss:
916
41
499
1,456
166
(692)
(277)
(803)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
(1)
(1)
Total movements without impact to profit or loss:
-
-
-
-
-
-
(1)
(1)
Loss allowance as at 31 December
1,881
280
2,333
4,494
965
239
1,834
3,038
Group loss allowance against finance lease receivables - individuals
2022
2021
Stage1
Stage2
Stage3
Total
Stage1
Stage2
Stage3
Total
Loss allowance as at 1 January
55
14
46
115
209
32
134
375
Movements with impact to profit or loss:
New loans originated
36
18
-
54
52
58
-
110
Loans derecognized during the period (other than write-
offs)
(7)
(1)
(19)
(27)
(15)
(2)
(48)
(65)
Changes due to change in credit risk (net)
(22)
3
100
81
(36)
21
(38)
(53)
Update in the methodology for loss allowance estimation
20
(12)
(29)
(21)
(155)
(95)
(2)
(252)
Total movements with impact to profit or loss:
27
8
52
87
(154)
(18)
(88)
(260)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
-
-
-
-
-
-
-
Loss allowance as at 31 December
82
22
98
202
55
14
46
115
Bank loss allowance against finance lease receivables – individuals
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
55
14
46
115
209
32
134
375
Movements with impact to profit or loss:
New loans originated
36
18
-
54
52
58
-
110
Loans derecognized during the period (other than write-
offs)
(7)
(1)
(19)
(27)
(15)
(2)
(48)
(65)
Changes due to change in credit risk (net)
(22)
3
100
81
(36)
21
(38)
(53)
Update in the methodology for loss allowance estimation
20
(12)
(29)
(21)
(155)
(95)
(2)
(252)
Total movements with impact to profit or loss:
27
8
52
87
(154)
(18)
(88)
(260)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
-
-
Total movements without impact to profit or loss:
-
-
-
-
-
-
-
-
Loss allowance as at 31 December
82
22
98
202
55
14
46
115
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
106
NOTE 14
FINANCE LEASE RECEIVABLES
(CONTINUED)
Group loss allowance against finance lease receivables – business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
911
225
2,535
3,671
591
899
2,720
4,210
Movements with impact to profit or loss:
New loans originated
1,045
48
-
1,093
659
272
64
995
Loans derecognized during the period (other than write-
offs)
(181)
(77)
(256)
(514)
(95)
(127)
(715)
(937)
Changes due to change in credit risk (net)
(660)
(5)
1,219
554
(210)
(364)
160
(414)
Update in the methodology for loss allowance estimation
684
72
(462)
294
(34)
(455)
307
(182)
Total movements with impact to profit or loss:
888
38
501
1,427
320
(674)
(184)
(538)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
(1)
(1)
Total movements without impact to profit or loss:
-
-
-
-
-
-
(1)
(1)
Loss allowance as at 31 December
1,799
263
3,036
5,098
911
225
2,535
3,671
Bank loss allowance against finance lease receivables – business customers
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Loss allowance as at 1 January
910
225
1,788
2,923
590
899
1,978
3,467
Movements with impact to profit or loss:
New loans originated
1,045
36
-
1,081
658
272
64
994
Loans derecognized during the period (other than write-
offs)
(181)
(75)
(255)
(511)
(95)
(127)
(715)
(937)
Changes due to change in credit risk (net)
(659)
-
1,164
505
(209)
(364)
155
(418)
Update in the methodology for loss allowance estimation
684
72
(462)
294
(34)
(455)
307
(182)
Total movements with impact to profit or loss:
889
33
447
1,369
320
(674)
(189)
(543)
Movements without impact to profit or loss:
Loans written-off during the period
-
-
-
-
-
-
-
-
Reclassifications, FX and other movements
-
-
-
-
-
-
(1)
(1)
Total movements without impact to profit or loss:
-
-
-
-
-
-
(1)
(1)
Loss allowance as at 31 December
1,799
258
2,235
4,292
910
225
1,788
2,923
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
107
NOTE 15
INVESTMENT SECURITIES
Investment securities are comprised of:
x non-trading equities. The Group chose to measure these securities at fair value through profit or loss;
x debt securities at fair value through other comprehensive income;
x debt securities at amortized cost (held to collect cash flows).
2022
2021
Group
Bank
Group
Bank
INVESTMENT SECURITIES AT FAIR VALUE:
Non-trading securities at fair value:
Debt securities at fair value through other comprehensive income:
85,271
85,271
78,126
78,126
Government bonds
52,570
52,570
53,991
53,991
Corporate bonds
32,701
32,701
24,135
24,135
Non-trading equity securities at fair value through profit or loss
4,954
4,954
4,862
4,825
Total non-trading securities at fair value
90,225
90,225
82,988
82,951
TOTAL INVESTMENT SECURITIES AT FAIR VALUE
90,225
90,225
82,988
82,951
INVESTMENT SECURITIES AT AMORTIZED COST:
Securities at amortized cost:
Debt securities:
969,033
956,332
705,398
692,226
Government bonds
827,765
821,781
541,026
535,006
Corporate bonds
141,268
134,551
164,372
157,220
Total securities at amortized cost
969,033
956,332
705,398
692,226
TOTAL INVESTMENT SECURITIES AT AMORTIZED COST
969,033
956,332
705,398
692,226
Breakdown of debt securities by time remaining to maturity:
Debt securities at fair value through other comprehensive income:
Short-term (up to 1 year)
11,770
11,770
9,166
9,166
Long-term (over 1 year)
73,501
73,501
68,960
68,960
Total debt securities at fair value through other comprehensive income
85,271
85,271
78,126
78,126
Debt securities at amortized cost:
Short-term (up to 1 year)
275,175
273,965
72,976
72,766
Long-term (over 1 year)
693,858
682,367
632,422
619,460
Total debt securities at amortized cost
969,033
956,332
705,398
692,226
As at 31 December 2022 government bonds at amortized cost with a carrying value of EUR 664,019 thousand were pledged for the
borrowing under third series of the targeted longer-term refinancing operations (TLTRO-III) program of the European Central Bank (as
at 31 December 2021 EUR 635,885 thousand; see Note 20).
Staging and impairment of the Group‘s/Bank’s investment debt securities:
Group investment debt securities at fair value through other comprehensive income
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Government bonds, gross
52,588
-
-
52,588
54,013
-
-
54,013
Less: allowance for impairment
(18)
-
-
(18)
(22)
-
-
(22)
Government bonds, net
52,570
-
-
52,570
53,991
-
-
53,991
Corporate bonds, gross
32,948
-
-
32,948
24,169
-
-
24,169
Less: allowance for impairment
(247)
-
-
(247)
(34)
-
-
(34)
Corporate bonds, net
32,701
-
-
32,701
24,135
-
-
24,135
Total, gross
85,536
-
-
85,536
78,182
-
-
78,182
Less: allowance for impairment
(265)
-
-
(265)
(56)
-
-
(56)
Total, net
85,271
-
-
85,271
78,126
-
-
78,126
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
108
NOTE 15
INVESTMENT SECURITIES (CONTINUED)
Bank investment debt securities at fair value through other comprehensive income
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Government bonds, gross
52,588
-
-
52,588
54,013
-
-
54,013
Less: allowance for impairment
(18)
-
-
(18)
(22)
-
-
(22)
Government bonds, net
52,570
-
-
52,570
53,991
-
-
53,991
Corporate bonds, gross
32,948
-
-
32,948
24,169
-
-
24,169
Less: allowance for impairment
(247)
-
-
(247)
(34)
-
-
(34)
Corporate bonds, net
32,701
-
-
32,701
24,135
-
-
24,135
Total, gross
85,536
-
-
85,536
78,182
-
-
78,182
Less: allowance for impairment
(265)
-
-
(265)
(56)
-
-
(56)
Total, net
85,271
-
-
85,271
78,126
-
-
78,126
Group investment debt securities at amortized cost
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Government bonds, gross
828,002
-
-
828,002
541,191
-
-
541,191
Less: allowance for impairment
(237)
-
-
(237)
(165)
-
-
(165)
Government bonds, net
827,765
-
-
827,765
541,026
-
-
541,026
Corporate bonds, gross
141,378
-
1,020
142,398
164,297
199
1,020
165,516
Less: allowance for impairment
(110)
-
(1,020)
(1,130)
(121)
(3)
(1,020)
(1,144)
Corporate bonds, net
141,268
-
-
141,268
164,176
196
-
164,372
Total, gross
969,380
-
1,020
970,400
705,488
199
1,020
706,707
Less: allowance for impairment
(347)
-
(1,020)
(1,367)
(286)
(3)
(1,020)
(1,309)
Total, net
969,033
-
-
969,033
705,202
196
-
705,398
Bank investment debt securities at amortized cost
2022
2021
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Government bonds, gross
822,014
-
-
822,014
535,167
-
-
535,167
Less: allowance for impairment
(233)
-
-
(233)
(161)
-
-
(161)
Government bonds, net
821,781
-
-
821,781
535,006
-
-
535,006
Corporate bonds, gross
134,651
-
-
134,651
157,334
-
-
157,334
Less: allowance for impairment
(100)
-
-
(100)
(114)
-
-
(114)
Corporate bonds, net
134,551
-
-
134,551
157,220
-
-
157,220
Total, gross
956,665
-
-
956,665
692,501
-
-
692,501
Less: allowance for impairment
(333)
-
-
(333)
(275)
-
-
(275)
Total, net
956,332
-
-
956,332
692,226
-
-
692,226
Reconciliation of allowance for impairment of investment debt securities is presented in the table below:
2022
2021
Group
Bank
Group
Bank
Allowance for impairment of investment debt securities as of 1
January:
1,352
332
1,370
343
Change in allowance for impairment
281
268
(11)
(11)
Update in the methodology for loss allowance estimation
-
-
-
-
Change in FX rates
(1)
(1)
(7)
-
Allowance for impairment of investment debt securities as of 31
December:
1,632
599
1,352
332
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
109
NOTE 15
INVESTMENT SECURITIES (CONTINUED)
Breakdown of the Group‘s/Bank’s investment securities as at 31 December 2022 and 2021:
2022
2021
Group
Bank
Group
Bank
Investment securities at fair value:
Debt securities
85,271
85,271
78,126
78,126
AAA
-
-
-
-
from AA- to AA+
-
-
-
-
from A- to A+
56,664
56,664
57,534
57,534
from BBB- to BBB+
10,387
10,387
9,696
9,696
from BB- to BB+
15,432
15,432
10,896
10,896
lower than BB-
-
-
-
-
no rating
2,788
2,788
-
-
Equities
4,954
4,954
4,862
4,825
listed
286
286
290
290
unlisted
243
243
455
455
units of investment funds
4,425
4,425
4,117
4,080
Total investment securities at fair value
90,225
90,225
82,988
82,951
Investment securities at amortized cost:
Debt securities
969,033
956,332
705,398
692,226
AAA
-
-
-
-
from AA- to AA+
3,369
3,164
3,101
2,896
from A- to A+
835,290
829,303
551,810
545,789
from BBB- to BBB+
128,864
123,865
148,969
143,541
from BB- to BB+
1,510
-
1,518
-
lower than BB-
-
-
-
-
no rating
-
-
-
-
Total investment securities at amortized cost
969,033
956,332
705,398
692,226
No material reclassifications between securities portfolios were performed during 2022 and 2021.
Movements in the financial instruments revaluation reserve:
The Group
The Bank
Financial
instruments
revaluation
reserve, before
taxes
Deferred income
tax asset
(liabilities)
Financial
instruments
revaluation
reserve, after
taxes
Financial
instruments
revaluation
reserve, before
taxes
Deferred income
tax asset
(liabilities)
Financial
instruments
revaluation
reserve, after
taxes
1 January 2021
479
(91)
388
466
(91)
375
Revaluation
(1,026)
-
(1,026)
(1,027)
-
(1,027)
Sale or redemption of securities
(185)
-
(185)
(185)
-
(185)
Deferred income tax
-
240
240
-
240
240
31 December 2021
(732)
149
(583)
(746)
149
(597)
Revaluation
(9,554)
-
(9,554)
(9,554)
-
(9,554)
Sale or redemption of securities
161
-
161
161
-
161
Deferred income tax
-
1,879
1,879
-
1,879
1,879
31 December 2022
(10,125)
2,028
(8,097)
(10,139)
2,028
(8,111)
Bank’s cash flows and other movements of investment securities at amortized cost:
2022
2021
Group
Bank
Group
Bank
As at 1 January
705,398
692,226
709,454
697,136
Acquisitions
396,788
396,538
100,202
99,382
Redemptions
(64,438)
(64,438)
(78,862)
(78,862)
Disposals
(66,271)
(65,806)
(21,177)
(21,177)
Accrued interest
6,235
6,058
5,128
4,951
Received coupon payment
(8,607)
(8,178)
(9,473)
(9,323)
Foreign currency exchange rate impact
-
-
105
105
Impairment
(62)
(58)
18
11
Reclassifications
(10)
(10)
3
3
As at 31 December
969,033
956,332
705,398
692,226
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
110
NOTE 16
INVESTMENTS IN SUBSIDIARIES
The Group consists of the Bank and its subsidiaries listed below in this note. All of the entities comprising the Group operate in Lithuania.
Carrying amount
Share in
equity
31 December
2022
31 December
2021
Bank
Gross amount
Impairment
Net carrying
amount
Gross amount
Impairment
Net carrying
amount
Investments in consolidated directly controlled
subsidiaries:
SB Draudimas GD UAB
100.00
%
11,732
-
11,732
11,788
-
11,788
SB Lizingas UAB
100.00
%
13,904
-
13,904
13,224
-
13,224
Šiaulių Banko Lizingas UAB
100.00
%
1,074
-
1,074
1,074
-
1,074
SB Turto Fondas UAB
100.00
%
4,631
-
4,631
5,582
-
5,582
Total investments in subsidiaries using equity
method
31,341
-
31,341
31,668
-
31,668
Investment in non-consolidated subsidiaries
SB Modernizavimo Fondas UAB
100.00
%
100
-
100
-
-
-
Total investments in subsidiaries at fair value
100
-
100
-
-
-
Total investments in subsidiaries
31,441
-
31,441
31,668
-
31,668
Reconciliation of Bank’s investment in subsidiary amounts is presented in the table below:
2022
2021
Net book value at 1 January
31,668
29,135
Share of the profit or loss of investments in subsidiaries accounted for using the equity method
5,373
8,830
Establishment of subsidiary
100
-
Dividends paid by the subsidiaries
(5,700)
(6,305)
Other changes (changes due constructive obligation to cover losses and rounding)
-
8
Net book value at 31 December
31,441
31,668
On April 5, 2022 the Bank established a special purpose entity - SB Modernizavimo Fondas UAB which started its activities on April 25,
2022 after respective agreements with investors were signed. Bank’s investment in share capital of SB Modernizavimo Fondas UAB is
EUR 100 thousand. The goal of establishment of the SB Modernizavimo Fondas is to manage fund to be set up to finance multi-apartment
buildings renovation projects. The aim of the unique multi-apartment building renovation financing fund is to lend funds raised from private
and institutional investors to energy efficiency projects in Lithuania. The Bank is the founder of the Fund and the administrator of the
renovation loans, while SB Modernizavimo Fondas UAB is the legal manager of loans portfolio. According to agreements with investors
and provision in IFRS 10, Bank holds no control in SB Modernizavimo Fondas UAB therefore it is not consolidated in Group’s consolidated
financial statements. According to clauses in IFRS 9 applicable to contractually linked instruments, investment in SB Modernizavimo
Fondas UAB is accounted at fair value through profit and loss and is disclosed in statement of financial position within line "Investments
in subsidiaries and associates". At initial recognition it was considered that fair value of this investment is equal to its acquisition value.
Since initial recognition there were no circumstances due to which fair value of investment in SB Modernizavimo Fondas UAB would
change.
The table below represents maximum credit risk exposure of Bank at 31 December 2022 related to securitisation project for which
implementation SB Modernizavimo Fondas UAB was established without taking into account any collateral held or other credit
enhancements attached. For on-balance sheet assets, the exposures presented above are net carrying amount as reported in the balance
sheet. In addition to items disclosed in table below, SB Modernizavimo Fondas UAB held deposits in amount of EUR 324 thousand at
Bank as Bank’s liabilities disclosed in financial position statement line “Due to customers” at 31 December 2022. For more information
on SB Modernizavimo Fondas UAB balances please see also Notes 13 and 30.
Statement of financial position line
Carrying value
Shares in equity
of subsidiary
Investments in subsidiaries and associates
100
Loans to subsidiary
Loans to customers
2,058
Off-balance commitments to grant loans to
subsidiary
-
42,625
Off-balance commitments to grant loans to users
of renovation loans
-
37,269
Following strategy to optimize Group's structure, in 2020, Group's management took a decision to sell its shares in Minera UAB and to liquidate Šiaulių
Banko Investicijų Valdymas UAB in 2021. On 31 March 2021 shares in Minera UAB were sold for EUR 2,828 thousand to purchaser from outside of the
Group generating net loss of EUR 348 thousand from disposal which was presented in Group’s income statement line "Net gain (loss) from derecognition
of financial assets" (disposal result in Bank’s accounts is nil). On date of disposal Minera UAB held cash balances of EUR 171 thousand, its total assets
(including cash balances) and total liabilities amounted to EUR 5,485 thousand and EUR 2,259 thousand, respectively.
On 9 July 2021 shares in Apželdinimas UAB were sold by Bank’s subsidiary SB turto fondas UAB for EUR 1,876 thousand to purchaser from outside of
the Group generating net gain of EUR 1,852 thousand from disposal which was presented in Group’s income statement line "Net gain (loss) from
derecognition of financial assets". On date of disposal Apželdinimas UAB held no cash balances, its total assets and total liabilities amounted to EUR
1,120 thousand and EUR 776 thousand, respectively. At 31 December 2020 due to major uncertainties regarding future cash flows Bank’s subsidiary SB
turto fondas UAB had recognized an impairment for the whole amount of investment in Apželdinimas UAB (impairment amount EUR 300 thousand). In
2021 impairment for investment in Apželdinimas UAB was reversed due to disposal of shares in Apželdinimas UAB and included in disposal result.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
111
NOTE 16
INVESTMENTS IN SUBSIDIARIES (CONTINUED)
On 30 September 2021 shares in Šiaulių Banko Investicijų Valdymas UAB were sold by Bank to subsidiary SB turto fondas UAB
generating net gain of EUR 418 thousand from disposal which was presented in Bank’s income statement line "Net gain (loss) from
derecognition of financial assets". Disposal of shares was performed at price determined by independent business appraiser.
After Group structure changes described above, at 31 December 2021 the Bank had indirectly controlled subsidiaries with 100% share
in equity: Šiaulių Banko Investicijų Valdymas UAB (directly controlled by SB turto fondas UAB), Sandworks UAB (directly controlled by
Šiaulių Banko Investicijų Valdymas UAB). Sandworks UAB was liquidated in first quarter of 2022, while Šiaulių Banko Investicijų
Valdymas UAB at 31 December 2022 is under liquidation process.
Bank’s subsidiary SB Draudimas GD UAB (previous name - Bonum Publicum GD UAB) was tested for impairment using embedded value
approach as of 31 December 2022 and 31 December 2021. No impairment was determined at these dates. Embedded value equals to
the value of in-force business plus the value of the free capital. Value of in-force business is calculated using management estimations
of the cash flows from the insurance portfolio and the income from capital-in-lock discounted to net present value using the discount rate
(2022: 9.30%, 2021: 7.42%) that reflects current market assessment of the time value of money and the related risks.
No impairment triggers were identified regarding other subsidiaries.
NOTE 17
INTANGIBLE ASSETS
Software and licences
Goodwill
Total
Group
Bank
Group
Bank
Group
Bank
As at 1 January 2021:
Cost
10,181
9,578
1,352
-
11,533
9,578
Accumulated amortisation
(5,804)
(5,348)
-
-
(5,804)
(5,348)
Net book value
4,377
4,230
1,352
-
5,729
4,230
Year ended 31 December 2021:
Net book value at 1 January
4,377
4,230
1,352
-
5,729
4,230
Acquisitions
451
173
-
-
451
173
Write-offs
-
-
-
-
-
-
Amortisation charge
(1,346)
(1,289)
-
-
(1,346)
(1,289)
Net book value at 31 December
3,482
3,114
1,352
-
4,834
3,114
As at 31 December 2021:
Cost
10,632
9,751
1,352
-
11,984
9,751
Accumulated amortisation
(7,150)
(6,637)
-
-
(7,150)
(6,637)
Net book value
3,482
3,114
1,352
-
4,834
3,114
Year ended 31 December 2022:
Net book value at 1 January
3,482
3,114
1,352
-
4,834
3,114
Acquisitions
4,947
4,736
-
-
4,947
4,736
Write-offs
(127)
(127)
-
-
(127)
(127)
Amortisation charge
(1,371)
(1,273)
-
-
(1,371)
(1,273)
Net book value at 31 December
6,931
6,450
1,352
-
8,283
6,450
As at 31 December 2022:
Cost
15,452
14,360
1,352
-
16,804
14,360
Accumulated amortisation
(8,521)
(7,910)
-
-
(8,521)
(7,910)
Net book value
6,931
6,450
1,352
-
8,283
6,450
Economic life (in years)
3–9
3–9
Goodwill impairment test
For the purpose of impairment testing, goodwill is allocated to one cash generating unit - subsidiary of the Bank SB Draudimas (name
changed from Bonum Publicum). The recoverable amount of cash generating unit is determined by applying the embedded value
calculations. Embedded value equals to the value of in-force business plus the value of the free capital. Value of in-force business is
calculated using management estimations of the cash flows from the insurance portfolio and the income from capital-in-lock discounted
to net present value using the discount rate of 9.30% (2021: 7.42%) that reflects current market assessment of the time value of money
and the risks related to cash generating unit.
No impairment loss for goodwill was identified in 2022 and 2021 as a result of the test.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
112
NOTE 18
PROPERTY, PLANT AND EQUIPMENT
Group
Buildings,
premises and
land
Vehicles
Office
equipment
Construction in
progress
Total
As at 1 January 2021:
Cost
7,040
2,939
6,395
76
16,450
Accumulated depreciation
(2,307)
(764)
(4,174)
-
(7,245)
Net book value
4,733
2,175
2,221
76
9,205
Year ended 31 December 2021:
Net book value at 1 January
4,733
2,175
2,221
76
9,205
Acquisitions
-
152
620
-
772
Reclassifications
168
(179)
11
-
-
Disposals and write-offs
-
(1)
(1)
-
(2)
Depreciation charge
(147)
(438)
(732)
-
(1,317)
Net book value at 31 December
4,754
1,709
2,119
76
8,658
As at 31 December 2021:
Cost
7,208
2,756
6,689
76
16,729
Accumulated depreciation
(2,454)
(1,047)
(4,570)
-
(8,071)
Net book value
4,754
1,709
2,119
76
8,658
Year ended 31 December 2021:
Net book value at 1 January
4,754
1,709
2,119
76
8,658
Acquisitions
32
586
541
-
1,159
Reclassifications
344
-
43
-
387
Disposals and write-offs
(4)
(633)
(639)
-
(1,276)
Depreciation charge
(154)
(78)
(212)
-
(444)
Net book value at 31 December
4,972
1,584
1,852
76
8,484
As at 31 December 2022:
Cost
7,580
2,709
6,634
76
16,999
Accumulated depreciation
(2,608)
(1,125)
(4,782)
-
(8,515)
Net book value
4,972
1,584
1,852
76
8,484
Economic life (in years)
15-50
5-12
3-20
-
-
Right-of-use assets and lease liabilities
From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group. The Group leases various offices, equipment and vehicles. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions. Rental contracts are typically made for fixed periods of 4 months to 8
years but may have extension options. The terminations of agreements by lessee mostly from 3 to 6 months notice. The lease agreements
do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not
be used as security for borrowing purposes.
Group: r
ight-of-use assets
Buildings, premises
and land
Vehicles
Office
equipment
Total
As at 1 January 2022
Cost
11,437
186
-
11,623
Accumulated depreciation
(5,408)
(113)
-
(5,521)
Net book value
6,029
73
-
6,102
Year ended 31 December 2022:
Net book value at 1 January
6,029
73
-
6,102
Contract additions
2,253
167
1,533
3,953
Contract terminations
(582)
(52)
-
(634)
Depreciation charge
(1,562)
(46)
(146)
(1,754)
Net book value at 31 December
6,138
142
1,387
7,667
As at 31 December 2022:
Cost
13,009
301
1,533
14,843
Accumulated depreciation
(6,871)
(159)
(146)
(7,176)
Net book value
6,138
142
1,387
7,667
Economic life (in years)
2-20
2-7
3
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
113
NOTE 18
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Amounts of lease liabilities recognized in Group’s statement of financial position:
31 December 2022
31 December 2021
Lease liabilities before prepayments
7,703
6,169
Short-term (up to 1 year)
2,383
1,433
Long-term (2-5 years)
4,335
3,359
Long-term (over 5 years)
985
1,377
Prepayments paid
(100)
(76)
Lease liabilities, carrying value
7,603
6,093
The Group recognized in its income statement for the year ended 31 December 2022 lease expense for the low value leases amounting
to EUR 4 thousand (for the year ended 31 December 2021 – EUR 3 thousand).
Bank
Buildings and
premises
Vehicles
Office equipment
Construction in
progress
Total
As at 1 January 2021:
Cost
7,208
2,362
6,120
76
15,766
Accumulated depreciation
(2,307)
(554)
(3,979)
-
(6,840)
Net book value
4,901
1,808
2,141
76
8,926
Year ended 31 December 2021:
Net book value at 1 January
4,901
1,808
2,141
76
8,926
Acquisitions
-
129
564
-
693
Disposals and write-offs
-
(179)
(16)
-
(195)
Depreciation charge
-
-
-
-
-
Reclassification to assets held for sale
(147)
(346)
(682)
-
(1,175)
Net book value at 31 December
4,754
1,412
2,007
76
8,249
As at 31 December 2021:
Cost
7,208
2,180
6,334
76
15,798
Accumulated depreciation
(2,454)
(768)
(4,327)
-
(7,549)
Net book value
4,754
1,412
2,007
76
8,249
Year ended 31 December 2022:
Net book value at 1 January
4,754
1,412
2,007
76
8,249
Acquisitions
32
523
523
-
1,078
Disposals and write-offs
344
-
1
-
345
Depreciation charge
(4)
(624)
(638)
-
(1,266)
Reclassifications
(154)
(4)
(157)
-
(315)
Net book value at 31 December
4,972
1,307
1,736
76
8,091
As at 31 December 2022:
Cost
7,580
2,699
6,701
76
17,056
Accumulated depreciation
(2,608)
(1,392)
(4,965)
-
(8,965)
Net book value
4,972
1,307
1,736
76
8,091
Economic life (in years)
15-50
5-12
3-20
-
-
Bank:
right-of-use assets
Buildings, premises
and land
Vehicles
Office equipment
Total
As at 1 January 2022:
Cost
10,945
186
-
11,131
Accumulated depreciation
(5,149)
(113)
-
(5,262)
Net book value
5,796
73
-
5,869
Year ended 31 December 2022:
Net book value at 1 January
5,796
73
-
5,869
Contract additions
1,785
167
1,533
3,485
Contract terminations
(213)
(52)
-
(265)
Depreciation charge
(1,463)
(46)
(146)
(1,655)
Net book value at 31 December
5,905
142
1,387
7,434
As at 31 December 2022:
Cost
12,517
301
1,533
14,351
Accumulated depreciation
(6,612)
(159)
(146)
(6,917)
Net book value
5,905
142
1,387
7,434
Economic life (in years)
2-20
2-7
-
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
114
NOTE 18
PROPERTY, PLANT
AND EQUIPMENT (CONTINUED)
Amounts of lease liabilities recognized in Bank’s statement of financial position:
31 December 2022
31 December 2021
Lease liabilities before prepayments
7,420
5,886
Short-term (up to 1 year)
2,233
1,283
Long-term (2-5 years)
4,202
3,226
Long-term (over 5 years)
985
1,377
Prepayments received
(92)
(68)
Lease liabilities, carrying value
7,328
5,818
Please see Note 10 for reconciliation of movements lease liabilities.
As at 31 December 2022 and 31 December 2021, there were no property, plant and equipment pledged to third parties.
Future minimum lease payments to be received under non-cancellable lease agreements for the Bank and the Group were as follows
(this includes investment property disclosed in Note 26):
2022
2021
up to 1 year
1-5 years
over 5 years
up to 1 year
1-5 years
over 5 years
Group
160
271
10
141
365
-
Bank
155
502
209
144
493
307
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
115
NOTE 19
OTHER ASSETS
2022
2021
Group
Bank
Group
Bank
Financial assets:
Amounts receivable
5,815
5,620
16,398
16,271
Breakdown of financial assets according to maturity
Short-term (up to 1 year)
4,751
4,556
15,188
15,061
Long-term (over 1 year)
1,064
1,064
1,210
1,210
Non-financial assets:
Breakdown of non-financial assets according to maturity
Short-term (up to 1 year)
3,773
2,974
7,566
7,097
Long-term (over 1 year)
2,743
130
4,173
1,192
Inventories
146
-
538
-
Deferred charges
1,004
974
1,274
1,243
Assets under reinsurance and insurance contracts
2,767
-
1,773
-
Prepayments
928
405
3,957
2,820
Foreclosed assets
468
464
103
54
Other
1,203
1,261
4,094
4,172
TOTAL OTHER ASSETS
12,331
8,724
28,137
24,560
Balances of other financial assets include impairment. Reconciliation of allowance for impairment of other financial assets is presented
in the table below:
Group
Bank
Allowance for impairment of other financial assets as of 1 January 2021:
161
153
Change in allowance for impairment
114
88
Other financial assets written-off during the period
(15)
(13)
Reclassifications and other movements
-
-
Allowance for impairment of other financial assets as of 31 December 2021
260
228
Change in allowance for impairment
253
257
Other financial assets written-off during the period
(13)
(3)
Reclassifications and other movements
6
7
Allowance for impairment of other financial assets as of 31 December 2022:
506
489
Inventories relate to real estate projects under development and real estate held for sale by the Bank’s subsidiary SB turto fondas UAB.
All inventories are accounted at lower of cost and net realisable value. Inventories are not pledged.
Net impairment expense reversal of EUR 20 thousand related to repricing inventories and other non-financial assets down to realisable
value was included in year 2022 income statement for the Group (the Bank – net expense reversal of EUR 7 thousand). In 2021, the
Group included net impairment on inventories and other non-financial assets of EUR 1 thousand in its income statement (the Bank – net
expense of EUR 1 thousand).
Assets held for sale and liabilities related to assets held for sale
Assets held for sale consist of:
2022
2021
Group
Bank
Group
Bank
Assets related to subsidiaries classified as held for sale
-
-
-
-
Real estate classified as held for sale
150
150
620
620
Total assets classified as held for sale
150
150
620
620
Liabilities attributable to subsidiaries classified as held for sale
-
-
-
-
Real estate properties that are planned to be sold within one year are included in assets classified as held for sale. They are included in
Traditional banking operations and lending segment. As of 31 December 2022, such real estate assets consisted of one property with a
fair value of EUR 180 thousand (as of 31 December 2021: four properties with a fair value of EUR 653 thousand). No impairment expense
related to the revaluation these properties down to the realisable value was recognized in 2022 (2021: no impairment expense was
recognized). No income or expenses related to these properties were recorded in profit or loss of discontinued operations. Valuations
performed by Group’s employees are used to assess the realizable value of these properties. Comparative price methods, i.e. valuation
techniques attributable to Level 3 are mostly used valuation techniques.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
116
NOTE 20
DUE TO OTHER BANKS AND FINANCIAL INSTITUTIONS
2022
2021
Group
Bank
Group
Bank
Correspondent accounts and deposits of other banks and financial institutions:
Correspondent accounts and demand deposits
34,024
35,508
39,133
43,726
Term deposits
1,076
1,076
5,833
6,773
Total correspondent accounts and deposits of other banks and financial
institutions
35,100
36,584
44,966
50,499
Due to central bank
624,986
624,986
625,167
625,167
Loans received from:
Other organisations
4,256
4,256
6,660
6,660
International organisations
20,733
20,733
20,945
20,945
Total loans received
24,989
24,989
27,605
27,605
Total
685,075
686,559
697,738
703,271
Breakdown of due to other banks and financial institutions according to maturity
Short-term (up to 1 year)
188,305
189,789
51,838
56,871
Long-term (over 1 year)
496,770
496,770
645,900
646,400
Total
685,075
686,559
697,738
703,271
As at 31 December 2022, the outstanding borrowing on the balance sheet under third series of the targeted longer-term refinancing
operations (TLTRO-III) program of the European Central Bank amounted to EUR 629 million. This amount consist of EUR 150 million
loan obtained in year 2020 with loan maturity date of 28 June 2023 with early repayment option starting on 29 September 2021 and EUR
479 million loan obtained on 29 September 2021 with maturity date of 25 September 2024 with early repayment option starting on 29
June 2022. The Bank does not intend to use the early repayment option. Interest rate on TLTRO III is positive since September 2022
and at the year-end is 2%. Interest rate on TLTRO III was -0.5% from June 2020 to June 2021 and for banks meeting the lending
thresholds, the interest rate for special interest period from June 2021 to June 2022 was -1%. The Bank concluded that during special
interest period, starting from June 2021, TLTRO III operations contain significant benefit in comparison to market pricing for other
similarly-collateralised borrowings available to the Bank. Bank concluded that the benefit should be accounted for as government grant
under IAS 20 because ECB is viewed as government agency or similar body and the benefit is conditional on compliance with certain
conditions relating to Bank‘s operating activities. Government grant element recognised under TLTRO-III program in 2022 income
statement line "Other operating income" amounts to EUR 915 thousand (in 2021 – EUR 587 thousand). Government grant element of
future periods amounting to EUR 910 thousand as of 31 December 2021 is presented in Bank‘s financial position statement in line
"Grants" (as of 31 December 2022 no grants were recognised). The TLTRO-III negative interest recorded in the 2022 income statement
line "Interest income" amounts to EUR 3,327 thousand (in 2021 - EUR 1,795 thousand). Since 14
th
September 2022 interest rates for
TLTRO-III borrowings are positive, TLTRO-III positive interest recorded in the 2022 income statement line "Interest expenses" amounts
to EUR 2,310 thousand. Securities with a carrying value of EUR 664,019 thousand were placed as a collateral for these borrowings.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
117
NOTE 2
1
DUE TO CUSTOMERS
2022
2021
Group
Bank
Group
Bank
Demand deposits:
National government institutions
59,258
59,258
53,063
53,063
Local government institutions
139,054
139,054
127,692
127,692
Governmental and municipal companies
33,252
33,252
32,046
32,046
Corporate entities
763,766
767,625
803,905
806,287
Non-profit organisations
42,535
42,535
37,567
37,567
Individuals
811,586
811,586
773,999
773,999
Unallocated amounts due to customers
13,473
13,994
24,968
24,989
Total demand deposits
1,862,924
1,867,304
1,853,240
1,855,643
Term deposits:
National government institutions
1,015
1,015
1,015
1,015
Local government institutions
3,803
3,803
3,077
3,077
Governmental and municipality companies
5,847
5,847
3,939
3,939
Corporate entities
187,108
187,108
57,060
57,060
Non-profit organisations
2,298
2,298
2,984
2,984
Individuals
721,973
721,973
757,868
757,868
Total term deposits
922,044
922,044
825,943
825,943
Total
2,784,968
2,789,348
2,679,183
2,681,586
Breakdown of due to customers according to maturity
Short-term (up to 1 year)
2,610,159
2,614,039
2,490,727
2,493,109
Long-term (over 1 year)
174,809
175,309
188,456
188,477
Total
2,784,968
2,789,348
2,679,183
2,681,586
NOTE 22
SPECIAL AND LENDING FUNDS
2022
2021
Group
Bank
Group
Bank
Special funds
14,184
14,184
6,667
6,667
Lending funds
-
-
-
-
Total
14,184
14,184
6,667
6,667
Breakdown of special and lending funds according to maturity
Short-term (up to 1 year)
14,184
14,184
6,667
6,667
Long-term (over 1 year)
-
-
-
-
14,184
14,184
6,667
6,667
The special funds consist of the funds from the mandatory social and health insurance funds. The special funds have to be returned to
the institutions which have placed them upon the first requirement of the latter.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
118
NOTE 23
DEBT SECURITIES IN ISSUE
At 31 December 2020 Bank subordinated debt securities issued, which consisted of a 10 year bond issue of EUR 20,000 thousand (ISIN
code LT0000404287). The bonds were issued on 23 December 2019, annual interest rate is 6.15%. The Bank has a right to call the
bonds after 5 years. From 29 April 2020 this issue was listed on Nasdaq Baltic Bond List.
On 29 September 2021 Bank has issued EUR 75,000 thousand subordinated debt securities which consisted subordinated bonds with
maturity term of 4 years and annual interest rate of 1.05% (ISIN code LT0000405771). The Bank has a right to call the bonds after 3
years. From 8 October 2021 these bonds are listed on Nasdaq Baltic Bonds List.
On 29 November 2022 Bank has completed partial issue of EUR 85,000 thousand subordinated debt securities which consisted
subordinated bonds with maturity term of 4 years and annual interest rate of 1.05% which were added to subordinated debt securities
emission in 2021 (ISIN code LT0000405771). Partial issue was placed with yield to maturity of 6.4%. Bonds maturity date is 7
th
October
2025. From 9 December 2022 these bonds are listed on Nasdaq Baltic Bonds List.
Cash flows and other movements of issued debt securities:
2022
2021
Group
Bank
Group
Bank
As at 1 January
95,212
95,212
20,027
20,027
Issuance
85,000
85,000
75,000
75,000
Redemptions
-
-
-
-
Accrued interest
2,225
2,225
1,415
1,415
Coupon payments
(2,015)
(2,015)
(1,230)
(1,230)
Discount
(9,191)
(9,191)
-
-
As at 31 December
171,231
171,231
95,212
95,212
NOTE 24
LIABILITIES RELATED TO INSURANCE ACTIVITIES
Technical insurance provisions:
Bank’s subsidiary SB Draudimas UAB is engaged in life insurance business. For the years ended 31 December 2022 and 2021 the
technical insurance provisions and their changes were as follows:
Unearned
premiums
Claims
outstanding
Mathematical
Unit-
linked
Investment
units
Total
Gross:
At 1 January 2021
14
264
10,533
23,649
1,816
36,276
Change during period
-
(50)
(224)
4,192
1,215
5,133
At 31 December 2021
14
214
10,309
27,841
3,031
41,409
Change during period
2
135
472
(3,174)
469
(2,096)
At 31 December 2022
16
349
10,781
24,667
3,500
39,313
Reinsurance share:
At 1 January 2021
(28)
(16)
(5)
-
-
(49)
Change during period
(7)
15
-
-
-
8
At 31 December 2021
(35)
(1)
(5)
-
-
(41)
Change during period
(11)
(118)
(2)
-
-
(131)
At 31 December 2022
(46)
(119)
(7)
-
-
(172)
Net value
At 31 December 2021
(21)
213
10,304
27,841
3,031
41,368
At 31 December 2022
(30)
230
10,774
24,667
3,500
39,141
Liabilities under unit-linked insurance contracts are fully covered with assets: other securities in the trading book and cash (31 December
2022: securities EUR 27,991 thousand, cash EUR 176 thousand, 31 December 2021: securities EUR 29,983 thousand, cash EUR 889
thousand).
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
119
NOTE 25
OTHER LIABILITIES
2022
2021
Group
Bank
Group
Bank
Financial liabilities:
Trade payables
4,644
2,991
1,857
-
Accrued charges
15,172
14,172
17,103
15,957
Lease liabilities (see Note 18)
7,603
7,328
6,093
5,818
Total financial liabilities
27,419
24,491
25,053
21,775
Breakdown of other financial liabilities according to maturity
Short-term (up to 1 year)
18,816
16,632
19,678
16,726
Long-term (over 1 year)
8,603
7,859
5,375
5,049
Non-financial liabilities:
Advance amounts received from the buyers of assets
4,758
-
4,332
-
Deferred income
1,353
769
1,307
729
Provisions
469
-
935
-
Other liabilities
1,076
916
677
685
Total non-financial liabilities
7,656
1,685
7,251
1,414
Breakdown of other non-financial liabilities according to maturity
Short-term (up to 1 year)
7,250
1,369
6,221
853
Long-term (over 1 year)
406
316
1,030
561
Total non-financial liabilities
7,656
1,685
7,251
1,414
Provisions are recognized as the Group‘s subsidiaries involved in the real estate activities grant service commitments for the properties
they develop and sell or for pending legal issues against the Group companies. The movement of provisions is presented in the table
below:
2022
2021
Group
Bank
Group
Bank
Provisions at 1 January
935
-
390
-
Additions/(reversals), including increases (decreases) in existing
provisions
(466)
-
545
-
Amounts used
-
-
-
-
Other movements (reclassifications)
-
-
-
-
Provisions at 31 December
469
-
935
-
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
120
NOTE 26
INVESTMENT PROPERTY
Investment property
Group
Bank
Year ended 31 December 2021:
Carrying amount at 1 January
5,552
362
Acquisitions
-
-
Reclassifications
(6)
(6)
Impairment
-
-
Depreciation charge
(70)
(12)
Disposals and write-offs
(3,247)
-
Carrying amount at 31 December 2021
2,229
344
As at 31 December 2021:
Cost
3,669
532
Accumulated depreciation
(1,440)
(188)
Net carrying amount
2,229
344
Estimated fair value at 31 December 2021
2,976
490
Year ended 31 December 2022:
Carrying amount at 1 January
2,229
344
Acquisitions
-
-
Reclassifications
(344)
(344)
Impairment
-
-
Depreciation charge
(58)
-
Disposals and write-offs
-
-
Carrying amount at 31 December 2022
1,827
-
As at 31 December 2022:
Cost
3,325
-
Accumulated depreciation
(1,498)
-
Net carrying amount
1,827
-
Estimated fair value at 31 December 2022
2,486
-
Economic life (in years)
20-50
20-50
Income from rent of investment property is included in the income statement line “Other operating income” (see Note 6 “Other income”).
Maintenance expenses related to investment property (Group: EUR 92 thousand in 2022, EUR 119 thousand in 2021; Bank: EUR 0
thousand in 2022, EUR 53 thousand in 2021) are included in the income statement line “Other operating expenses”. Future minimum
lease payments to be received under non-cancellable lease agreements disclosure in Note 18 includes the payments from the investment
property leases.
The Group tests the investment property for impairment mainly using valuations from external independent certified appraisers or
valuations performed by Group’s employees (as of 31 December 2022, 100% of the carrying value of the investment property was tested
for impairment using valuations from external independent certified appraisers; as of 31 December 2021 – 85%). Income or comparative
price methods, i.e. valuation techniques attributable to Level 3 (income method or comparative price method) are mostly used valuation
techniques to test the investment property for impairment both by external and internal valuators.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
121
NOTE 27
CAPITAL
As of 31 December 2022 and 31 December 2021 the Banks’s share capital amounted to EUR 174,210,616.27, it comprised 600,726,263
ordinary registered shares with par value of EUR 0.29 each.
At 31 December 2020 European Bank for Reconstruction and Development (EBRD) possessed 26.02% of the authorised capital and
votes of the Bank. On 22 December 2021 EBRD announced that it has agreed to sell an 18 % stake in Bank. EBRD has signed 3 separate
agreements with Invalda INVL, an asset management group, Nord Security, (part of the Tesonet group of companies and soon to be
renamed Tesonet Global), and ME Investicija, a holding company that owns Girteka Logistics, to sell stakes of 5.87%, 5.87% and 6.29%
in Bank, respectively. Acquisitions of shares will take place through a series of transactions until June 2024 and in some cases might be
subject to regulatory approvals. On 29 December 2021 ME Investicija announced about acquisition of 5.71% of Bank’s shares. After this
transaction as of 31 December 2022 EBRD possessed 20.00% of the authorised capital and votes of the Bank.
On 22 November the Bank and Invalda INVL signed an agreement to merge segments of their retail businesses. After transaction, Invalda
INVL will hold additional 62 270 383 shares of the Bank which represents 9,39% of the Bank shareholding. The Bank will issue new
shares to be acquired by the Invalda INVL group at EUR 0.645 per share (5% more than the Bank's share price on 22 November 2022
on the Nasdaq Vilnius). The transaction is expected to be completed within one year, subject to the necessary approvals from the banking
competition supervisory authorities, the adoption of the necessary resolutions by the extraordinary shareholders' meetings of the Bank
and Invalda INVL, and the fulfilment of the other conditions set out in the agreement. Following the completion of this and other planned
share acquisition transactions announced, the Invalda INVL Group will increase its shareholding in the Bank from the current 8% to
approximately 20%.
As at 31 December 2022, the Bank had 18,524 shareholders (as at 31 December 2021: 16,573).
Share premium
The share premium represents the difference between the issue price and nominal value of the shares issued by the Bank. Share
premium can be used to increase the Bank’s authorised share capital. In 2018, the share premium of EUR 3,428 thousand was
recognized in the subordinated loan conversion process.
Reserve capital
The reserve capital is formed from the Bank’s profit and its purpose is to ensure the financial stability of the Bank. The shareholders may
decide to use the reserve capital to cover losses incurred.
Statutory reserve
According to the Law of the Republic of Lithuania on Banks, allocations to the statutory reserve shall be compulsory and shall not be less
than 1/20 of the profit available for appropriation. The statutory reserve may, by a decision of extraordinary general or annual meeting of
the shareholders, be used only to cover losses of the activities.
Reserve for acquisition of own shares
On 28 March 2019 ordinary general meeting of shareholders made a decision to form a reserve for acquisition of own shares from
retained earnings. On 30 March 2022 ordinary general meeting of shareholders made a decision to increase reserve for acquisition of
own shares by EUR 10,000 thousand. The reserve can be used for two purposes – to preserve the market price of Bank‘s shares and to
acquire the shares that will be granted to Group‘s employees as part of variable remuneration. As of 31 December 2022 carrying value
of reserve for own shares acquisition amounts to EUR 20,000 thousand (as at 31 December 2021: EUR 10,000 thousand).
During twelve months period ended 31 December 2022 the Bank acquired 2,105 thousand units of own shares for EUR 1,557 thousand.
The acquired shares were granted to the employees of the Bank and its subsidiaries as a deferred part of variable remuneration for 2018.
As of 31 December 2022 the Bank held no own shares.
During twelve months period ended 31 December 2021 the Bank acquired 1,000 thousand units of own shares for EUR 750 thousand.
Part of acquired shares were granted to the employees of the Bank and its subsidiaries as a deferred part of variable remuneration for
2017. As of 31 December 2021 the Bank held 687 thousand own shares with carrying value of EUR 516 thousand.
Other equity
Other equity consists of amount that corresponds to the obligation to present Bank‘s shares to Group‘s employees as part of variable
remuneration.
The Group’s remuneration policy prescribes two main elements of remuneration – fixed remuneration and variable remuneration, and
various additional benefits. Employees whose professional activities and/or decisions might have a significant impact on the risk accepted
by the Group, receive deferred variable remuneration. The remuneration amounts are accrued as staff expenses in income statement.
Until 2018, Group’s incentive scheme included deferred payments in shares and cash of not less than 40% of variable remuneration
being paid in equal instalments during three-year period. From 2019 under the Group's incentive scheme employees whose professi
onal
activities and/or decisions may have a significant impact on the risk assumed be the Group receive 50% of the annual long term incentive
program in cash and 50% in form of Bank's shares options executable after 3 years. The number of share options is based on the
currency value of the achieved results divided by the weighted average price at which the Bank's shares are traded on Nasdaq Vilnius
during the period of five months prior the approval of renumeration. Each option is convertible into one ordinary share.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
122
NOTE 27
CAPITAL (CONTINUED)
The Group has assessed fair value of shares option by the Black-Scholes model which is attributable to Level 3 in fair value hierarchy.
The model inputs include:
x For the option granted 30 March 2022: grant date (30 March 2022), expiry day (11 April 2025), share price 0.656 on grant day,
exercise price 0.588, expected price volatility of the bank's shares 28%, risk free interest rate – 0.1%;
x For the option granted 31 March 2021: grant date (31 March 2021), expiry day (12 April 2024), share price 0.538 on grant day,
expected price volatility of the bank's shares 25%, risk free interest rate - 0.1%;
x For the option granted 31 March 2020: grant date (31 March 2020), expiry day (15 April 2023), share price 0.510 on grant day,
expected price volatility of the bank's shares 21%, risk free interest rate -0.1%.
The value of the option is included in other equity line in the statement of financial position. Other equity consists of.
2022
2021
Group
Bank
Group
Bank
Options
2,355
1,917
3,288
2,870
Shares distributable to the employees
-
-
-
-
Total
2,355
1,917
3,288
2,870
No options were forfeited or expired during years ended 31 December 2022 and 31 December 2021. During 12 months period ended 31
December 2022 2,792 thousand units of share options were exercised for benefit of Group’s defined employees (for benefit of Bank’s
defined employees – 2,468 thousand units) on exercise date at weighted average share price of 0.63 EUR. Weighted average option
exercise price was 0 EUR.
NOTE 28
CONTINGENT LIABILITIES AND COMMITMENTS
Contingent tax liabilities
The Tax Authorities have not carried out a full-scope tax audit of the Bank for the period from 2018 to 2022. The Tax Authorities may at
any time during 5 successive years after the end of the reporting tax year carry out an inspection of the Bank‘s books and accounting
records and impose additional taxes or fines. Management is not aware of any circumstances that might result in a potential material
liability in this respect.
Guarantees issued, letters of credit, commitments to grant loans and other commitments
2022
2021
Group
Bank
Group
Bank
Financial guarantees issued
52,655
52,716
52,931
52,992
Letters of credit
5,756
5,756
1,308
1,308
Commitments to grant loans
482,012
483,660
394,173
404,388
Other commitments
8,932
8,932
3,052
3,052
Total
549,355
551,064
451,464
461,740
Fair value of the guarantees amounts to EUR 425 thousand at 31 December 2022 (31 December 2021: EUR 638 thousand). It is
estimated as the amount of the guarantee fee to be paid by the customers less amortization over the contract period.
Staging of guarantees issued, letters of credit, commitments to grant loans and other commitments:
2022
2021
Group
Bank
Group
Bank
Financial guarantees issued:
52,655
52,716
52,931
52,992
Stage 1
52,655
52,716
52,931
52,992
Letters of credit:
5,756
5,756
1,308
1,308
Stage 1
5,756
5,756
1,308
1,308
Commitments to grant loans:
482,012
483,660
394,173
404,388
Stage 1
456,165
457,813
347,738
357,953
Stage 2
22,566
22,566
44,685
44,685
Stage 3
3,281
3,281
1,750
1,750
Other commitments:
8,932
8,932
3,052
3,052
Stage 1
8,932
8,932
3,052
3,052
Total
549,355
551,064
451,464
461,740
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
123
NOTE 28
CONTINGENT LIABILITIES AND COMMITMENTS (CONTINUED)
As the guarantees and letters of credit are either 100% secured by cash collaterals pledged by the customers to the Bank, or are issued
using the credit line that the Bank has granted to the customer (which has its own collaterals and impairment is calculated for the credit
line), no ECL impairment provisions are formed against these obligations. Commitments to grant loans are included in the EAD model in
loan ECL calculations and the impairment is calculated for the whole instrument that includes both on-balance and off-balance sheet
amounts, therefore the impairment for commitments to grant loans is included in the loan impairment amount.
The Group‘s liabilities include provisions for other contingent liabilities that are recognized using IAS 37 approach. Such provisions are
disclosed in Note 25.
NOTE 29
DIVIDENDS
Dividends are declared during the annual general meeting of shareholders of the Bank when appropriation of profit for the reporting
period is performed.
On 30 March 2022 ordinary general meeting of shareholders made a decision to pay EUR 0.034 (i.e. 11.7%) dividends per one ordinary
registered share with EUR 0.29 nominal value each.
On 31 March 2021 ordinary general meeting of shareholders made a decision to pay EUR 0.0055 (i.e. 1.9%) dividends per one ordinary
registered share with EUR 0.29 nominal value each.
The table below demonstrates movements in dividends for the years 2022 and 2021:
2022
2021
Unpaid dividend amount at 1 January:
50
45
Dividends declared
20,425
3,304
Dividends paid
(20,382)
(3,299)
Unpaid dividend amount at 31 December:
94
50
NOTE 30
RELATED-PARTY TRANSACTIONS
Related parties with the Bank are classified as follows:
a) members of the Bank’s Supervisory Council and Board (which also are the main decision makers of the Group), their close
family members and companies that are controlled, jointly controlled over by these related parties;
b) subsidiaries of the Bank, includes SB draudimas GD UAB, SB Lizingas UAB, Šiaulių Banko Investicijų Valdymas UAB, Šiaulių
Banko Lizingas UAB, SB turto fondas UAB, SB modernizavimo fondas UAB;
c) the shareholders holding over 20% of the Bank’s share capital or being a part of a voting group acting in concert that holds over
20% of voting rights therefore presumed to have a significant influence over the Group.
During 2022 and 2021, a certain number of banking transactions were entered into with related parties in the ordinary course of business.
These transactions include settlements, loans, deposits and foreign currency transactions.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
124
NOTE 30
RELATED-
PARTY TRANSACTIONS (CONTINUED)
The year-end balances of loans (incl. off-balance sheet commitments) granted to and deposits accepted from the Bank’s related parties,
except for subsidiaries, and ranges of annual interest rates were as follows (data of the Bank):
Deposits, at the
year
-end
Range of annual
interest rates, %
Loans, at the
year
-end
Range of annual
interest rates, %
Off-balance sheet
commitments, at the
year-end
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Members of the Council and
the Board
508
1,555
0.00
-
0.50
0.00
-
0.05
-
53
-
2
26
31
Other related parties
(excluding subsidiaries of
the Bank)
142
6,319
0.00
0.00
-
0.15
60
16,167
0.69
0.69
-
2.25
1
5
Total
650
7,874
-
-
60
16,220
-
-
27
36
% of regulatory capital
0.18%
2.25%
0.00%
4.64%
0.00%
0.00%
In 2022 EUR 236 thousand interest income were generated from transactions with related parties (except for subsidiaries, in 2021 – EUR
423 thousand).
As at 31 December 2022 loans to related parties (except for subsidiaries) with gross value before impairment provisions of EUR 60
thousand (31 December 2021: EUR 16,220 thousand) had collaterals.
At 31 December 2022 and 2021 Bank’s subsidiaries had no material transactions with the related parties except for the Bank and its
subsidiaries.
As at 31 December 2022 balance of allowances for impairment losses that are related to balances of loans to related parties, except for
subsidiaries, was equal to EUR 0 thousand. An impairment expense reversal of EUR 44 thousand related to these loans was recorded
profit or loss in 2022. As at 31 December 2021, balance of allowances for impairment losses that are related to balances of loans to
related parties, except for subsidiaries, was equal to EUR 44 thousand. An impairment expense reversal of EUR 7 thousand related to
these loans was recorded profit or loss in 2021.
Transactions with subsidiaries:
Balances of Bank’s transactions with the subsidiaries are given below:
Deposits, at the
year-end
Range of annual
interest rates, %
Loans, at the
year-end
Range of annual
interest rates, %
Off-balance sheet
commitments, at the
year-end
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Non-financial institutions
5,069
6,806
0.00
0.00
1,875
-
14.05
2.6
42,625
-
Financial institutions
1,119
1,129
0.00-1.90
0.00-1.90
177,273
117,868
2.6
2.6
10,077
18,361
No collateral is obtained on loans to subsidiaries.
Increase of balances of loans and off-balance sheet commitments in non-financial institutions line in table above in 2022 if compared to
2021 is related with transactions with newly established UAB SB modernizavimo fondas which is not consolidated due to IFRS 10
requirements however considered as related party under IAS 24 requirements.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
125
NOTE 30
RELATED-
PARTY TRANSACTIONS (CONTINUED)
Bank’s total balances with subsidiaries (see Note 16 for details on investment in subsidiaries):
2022
2021
Assets
Loans
179,148
117,868
Other assets
-
-
Bank’s investment in subsidiaries
31,441
31,668
Liabilities
Term deposits
561
1,710
Demand deposits
5,627
6,225
Other liabilities
-
-
Income and expenses arising from transactions with subsidiaries:
2022
2021
Income
Interest
3,949
2,697
Commission income
1,142
586
Income (losses) from foreign exchange operations
-
(13)
Share of the profit or loss of investments in subsidiaries accounted for using the equity method
5,373
8,830
Other income
313
352
Expenses
Interest
(16)
(17)
Operating expenses
25
-
Impairment (reversal of impairment) of loans
(258)
1,998
Impairment of an investment to subsidiaries
-
-
As at 31 December 2022 balance of allowances for impairment losses that are related to balances of loans to subsidiaries was EUR 271
thousand (as at 31 December 2021: EUR 13 thousand).
Remuneration of the management of the Group/Bank
According to the Bank's Remuneration Policy, the members of the management bodies are paid a fixed and annual variable remuneration.
The annual variable remuneration fund is formed based on the Bank's performance, taking into account current and future risks. During
2022 the total amount of fixed and annual variable renumeration (total of payments in cash and in shares of the Bank) to the Bank’s
Board members amounted to EUR 3,595 thousand (2021: EUR 2,121 thousand).
2022
2021
Fixed renumeration in cash
1,808
1,508
Variable renumeration in cash
1,128
560
Variable renumeration in shares of Bank
659
53
Total
3,595
2,121
No other post-employment benefit or long-term benefit were paid to members of Board (including management).
Liabilities related to long term benefits related to remuneration are presented in the table below:
2022
2021
Short-term (up to 1 year)
294
511
Long-term (over 1 year)
1,041
995
Total
1,335
1,506
Payment in cash due in:
Payment in shares due in:
Total
up to 1
year
1 to 2
years
2 to 3
years
Total
up to 1
year
1 to 2
years
2 to 3
years
Total
31 December 2021:
for year 2018 salaries and bonuses
-
-
-
-
511
-
-
511
511
for year 2019 salaries and bonuses
-
-
-
-
-
502
-
502
502
for year 2020 salaries and bonuses
-
-
-
-
-
-
493
493
493
Total liability at 31 December 2021
-
-
-
-
511
502
493
1,506
1,506
31 December 2022:
for year 2019 salaries and bonuses
-
-
-
-
294
-
-
294
294
for year 2020 salaries and bonuses
-
-
-
-
-
304
-
304
304
for year 2021 salaries and bonuses
-
-
-
-
-
-
737
737
737
Total liability at 31 December 2022
-
-
-
-
294
304
737
1,335
1,335
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
126
NOTE 31
FINANCIAL GROUP INFORMATION
According to local legislation the Bank is required to disclose certain information for the Financial group. As of 31 December 2022 and
31 December 2021 the Bank owned the following controlled subsidiaries included in the prudential scope of consolidation (the Bank and
four subsidiaries comprised the Financial group, all of the entities attributable to Financial Group operate in Lithuania):
1. Šiaulių Banko Lizingas UAB (lease activities),
2. Šiaulių Banko Investicijų Valdymas UAB (investment management activities),
3. SB Turto Fondas UAB (real estate management activities),
4. SB Lizingas UAB (consumer financing activities).
In the Financial Group financial statements, the subsidiaries of the Bank that are not included in the Financial Group are not consolidated
in full as would be required by IFRS 10 but presented on the consolidated balance sheet of the Financial Group as investments in
subsidiaries at cost less impairment, in the same way as presented on the balance sheet of the Bank. This presentation is consistent
with the regulatory reporting made by the Bank according to the Regulation (EU) No 575/2013 on prudential requirements for credit
institutions and investment firms (CRR).
STATEMENT OF FINANCIAL POSITION
31 December 2022
31 December 2021
Fin. Group
Bank
Fin. Group
Bank
ASSETS
Cash and cash equivalents
383,834
383,518
965,160
964,849
Securities in the trading book
27,287
27,287
15,099
15,099
Due from other banks
2,733
2,733
1,196
1,196
Derivative financial instruments
897
897
2,121
2,121
Loans to customers
2,391,629
2,370,762
1,908,681
1,889,629
Finance lease receivables
242,448
242,192
195,174
194,909
Investment securities at fair value
90,225
90,225
82,988
82,951
Investment securities at amortized cost
956,332
956,332
692,226
692,226
Investments in subsidiaries
11,832
31,441
11,788
31,668
Intangible assets
6,450
6,450
3,115
3,114
Property, plant and equipment
15,777
15,525
14,453
14,118
Investment property
1,827
-
2,229
344
Current income tax prepayment
6
-
820
820
Deferred income tax asset
5,657
5,234
1,591
1,250
Other financial assets
5,815
5,620
16,402
16,271
Other non-financial assets
3,740
3,104
9,953
8,289
Assets classified as held for sale
150
150
620
620
Total assets
4,146,639
4,141,470
3,923,616
3,919,474
LIABILITIES
Due to other banks and financial institutions
685,480
686,559
699,560
703,271
Derivative financial instruments
7,152
7,152
96
96
Due to customers
2,785,489
2,789,348
2,679,204
2,681,586
Special and lending funds
14,184
14,184
6,667
6,667
Debt securities in issue
171,231
171,231
95,212
95,212
Current income tax liabilities
4,336
4,036
1,084
962
Deferred income tax liabilities
1,463
-
1,452
-
Other financial liabilities
26,718
24,491
24,396
21,775
Other non-financial liabilities
7,548
1,685
7,234
1,414
Grants
-
-
910
910
Total liabilities
3,703,601
3,698,686
3,515,815
3,511,893
EQUITY
Capital and reserves attributable to owners of the Bank
Share capital
174,211
174,211
174,211
174,211
Share premium
3,428
3,428
3,428
3,428
Treasury shares (-)
-
-
(516)
(516)
Reserve capital
756
756
756
756
Statutory reserve
36,990
36,922
21,770
21,770
Financial instruments revaluation reserve
(8,111)
(8,111)
(597)
(597)
Reserve for acquisition of own shares
20,000
20,000
10,000
10,000
Other equity
2,287
1,917
3,242
2,870
Retained earnings
213,477
213,661
195,507
195,659
Total equity
443,038
442,784
407,801
407,581
Total liabilities and equity
4,146,639
4,141,470
3,923,616
3,919,474
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
127
NOTE 31
FINANCIAL GROUP INFORMATION (CONTINUED)
INCOME STATEMENT
2022
2021
Fin. Group
Bank
Fin. Group
Bank
Continuing operations
Interest revenue calculated using the effective interest method
107,487
92,845
82,867
69,951
Other similar income
11,908
11,878
8,744
8,719
Interest expense and similar charges
(12,922)
(12,918)
(10,975)
(10,972)
Net interest income
106,473
91,805
80,636
67,698
Fee and commission income
26,419
27,239
24,747
25,193
Fee and commission expense
(7,507)
(7,409)
(7,366)
(7,239)
Net fee and commission income
18,912
19,830
17,381
17,954
Net gain from trading activities
8,975
8,973
10,362
9,188
Net gain (loss) from derecognition of financial assets
1,034
254
4,735
2,729
Net gain (loss) from disposal of tangible assets
810
514
987
66
Other operating income
1,667
1,496
1,289
1,136
Salaries and related expenses
(30,405)
(27,773)
(25,889)
(23,640)
Depreciation and amortization expenses
(4,580)
(4,403)
(4,179)
(3,972)
Other operating expenses
(21,390)
(17,095)
(16,179)
(12,268)
Operating profit before impairment losses
81,496
73,601
69,143
58,891
Allowance for impairment losses on loans and other assets
(5,409)
(3,691)
(2,355)
(973)
(Allowance for)/ reversal of allowance for impairment losses on other assets
464
(1)
(545)
(1)
Allowance for impairment losses on investments in subsidiaries
-
-
-
-
Share of the profit or loss of investments in subsidiaries accounted for using
the equity method
(66)
5,373
1,242
8,830
Profit from continuing operations before income tax
76,485
75,282
67,485
66,747
Income tax expense
(12,870)
(11,703)
(11,879)
(10,742)
Net profit from continuing operations for the year
63,615
63,579
55,606
56,005
Profit (loss) from discontinued operations, net of tax
-
-
-
-
Net profit for the year
63,615
63,579
55,606
56,005
Net profit attributable to:
Owners of the Bank
63,615
63,579
55,606
56,005
From continuing operations
63,615
63,579
55,606
56,005
From discontinued operations
-
-
-
-
Non-controlling interest
-
-
-
-
STATEMENT OF COMPREHENSIVE INCOME
2022
2021
Fin. Group
Bank
Fin. Group
Bank
Profit for the year
63,615
63,579
55,606
56,005
Other comprehensive income (loss):
Items that may be subsequently reclassified to profit or loss:
Financial assets valuation gains taken to other comprehensive income
(9,554)
(9,554)
(1,027)
(1,027)
Financial assets valuation result transferred to profit or loss
161
161
(185)
(185)
Deferred income tax on gain (loss) from revaluation of financial asset
1,879
1,879
240
240
Items that may not be subsequently reclassified to profit or loss:
Fair value changes of financial liabilities at fair value through profit or loss
attributable to changes in their credit risk
-
-
-
-
Other comprehensive income (loss), net of deferred tax
(7,514)
(7,514)
(972)
(972)
Total comprehensive income
56,101
56,065
54,634
55,033
Total comprehensive income (loss) attributable to:
Owners of the Bank
56,101
56,065
54,634
55,033
Non-controlling interest
-
-
-
-
56,101
56,065
54,634
55,033
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
128
NOTE 31
FINANCIAL GROUP INFORMATION (CONTINUED)
STATEMENT OF CASH FLOWS
Year ended
31 December 2022
31 December 2021
Fin. Group
Bank
Fin. Group
Bank
Operating activities
(restated)
(restated)
Interest received on loans and advances
105,950
91,308
80,797
68,699
Interest received on finance leases
9,573
9,543
8,218
8,195
Interest received on debt securities in the trading book
1,388
1,388
372
372
Interest paid
(10,502)
(10,434)
(11,520)
(11,498)
Fees and commissions received
26,419
27,239
24,747
25,193
Fees and commissions paid
(7,507)
(7,409)
(7,366)
(7,239)
Net cash inflows from trade in securities in the trading book
(11,840)
(11,842)
(7,171)
(7,040)
Net inflows from foreign exchange trading
9,511
9,511
4,439
4,439
Net inflows from derecognition of financial assets
1,034
254
4,735
2,729
Net inflows from disposal of tangible assets
810
514
987
66
Cash inflows related to other activities of Group companies
1,667
1,496
1,289
1,136
Recoveries on loans previously written off
402
237
(545)
541
Salaries and related payments to and on behalf of employees
(30,111)
(27,479)
(25,180)
(22,931)
Payments related to operating and other expenses
(21,452)
(17,095)
(20,213)
(17,678)
Income tax (paid)
(10,851)
(9,796)
(11,909)
(10,625)
Net cash flow from operating activities before change in
operating assets and liabilities
64,491
57,435
41,680
34,359
Change in operating assets and liabilities:
Decrease in due from other banks
(1,537)
(1,537)
402
402
Increase in loans to customers
(479,169)
(475,433)
(302,727)
(300,088)
Increase in finance lease receivable
(48,600)
(48,609)
(36,149)
(39,380)
Decrease (increase) in other financial assets
10,587
10,651
(11,730)
(11,993)
Decrease (increase) in other non-financial assets
8,649
2,089
4,354
5,207
Increase in due to banks and financial institutions
(16,244)
(18,876)
469,417
472,001
Increase in due to customers
106,253
107,730
332,067
333,110
Increase (decrease) in special and lending funds
7,517
7,517
918
918
Increase (decrease) in other financial liabilities
786
1,180
1,960
2,494
Increase (decrease) in other non-financial liabilities
(8,046)
(2,289)
(1,981)
(3,857)
Change
(419,804)
(417,577)
456,531
458,814
Net cash flow from operating activities
(355,313)
(360,142)
498,211
493,173
Investing activities
(Acquisition) of property, plant and equipment, investment property and
intangible assets
(3,184)
(3,132)
(892)
(866)
Disposal of property, plant and equipment, investment property and
intangible assets
1,916
1,559
1,853
378
(Acquisition) of investment securities at amortized cost
(396,538)
(396,538)
(99,382)
(99,382)
Proceeds from redemption or sale of investment securities at
amortized cost
130,244
130,244
100,039
100,039
Interest received on investment securities at amortized cost
8,178
8,178
9,323
9,323
Dividends received
24
5,724
1,306
5,000
(Acquisition) of investment securities at fair value
(36,665)
(37,275)
(89,123)
(89,161)
Sale or redemption of investment securities at fair value
8,986
8,986
40,148
40,425
Interest received on investment securities at fair value
1,208
1,208
403
403
Disposal of subsidiaries
-
-
2,828
5,428
Establishment of subsidiary
(100)
(100)
-
-
Net cash flow from (used in) investing activities
(285,931)
(281,146)
(33,497)
(28,413)
Financing activities
Payment of dividends
(20,382)
(20,382)
(3,299)
(3,299)
Acquisition of own shares
(1,557)
(1,557)
(750)
(750)
Interest on debt securities in issue
(2,015)
(2,015)
(1,230)
(1,230)
Issue of debt securities
85,000
85,000
75,000
75,000
Redemption of debt securities issued
-
-
-
-
Principal elements of lease payments
(1,128)
(1,089)
(1,310)
(1,281)
Net cash flow (used in) from financing activities
59,918
59,957
68,411
68,440
Net increase (decrease) in cash and cash equivalent
(581,326)
(581,331)
533,125
533,200
Cash and cash equivalents at 1 January
965,160
964,849
432,035
431,649
Cash and cash equivalents at 31 December
383,834
383,518
965,160
964,849
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2022
(All amounts are in EUR thousand, unless otherwise stated)
129
NOTE 31
FINANCIAL GROUP INFORMATION (CONTINUED)
FINANCIAL GROUP‘S STATEMENT OF CHANGES IN EQUITY
Share capital
Share premium
Treasury shares
(-)
Reserve capital
Financial
instruments
revaluation
reserve
Statutory reserve
Reserve for
acquisition of
own shares
Other equity
Retained
earnings
Total
1 January 2021
174,211
3,428
-
756
375
14,304
10,000
2,325
150,670
356,069
Transfer to/from statutory reserve
-
-
-
-
-
7,466
-
-
(7,466)
-
Acquisition of own shares
-
-
(516)
-
-
-
-
-
-
(516)
Share-based payment
-
-
-
-
-
-
-
917
-
917
Payment of dividends
-
-
-
-
-
-
-
-
(3,304)
(3,304)
Total comprehensive income
-
-
-
-
(972)
-
-
-
55,606
54,634
Net profit
-
-
-
-
-
-
-
-
55,606
55,606
Other comprehensive income
-
-
-
-
(972)
-
-
-
-
(972)
31 December 2021
174,211
3,428
(516)
756
(597)
21,770
10,000
3,242
195,506
407,800
Transfer to statutory reserve
-
-
-
-
-
15,220
-
-
(15,220)
-
Transfer to reserve for acquisition of own shares
-
-
-
-
-
-
10,000
-
(10,000)
-
Acquisition of own shares
-
-
(1,557)
-
-
-
(234)
-
-
(1,791)
Share-based payment
-
-
2,073
-
-
-
234
(955)
1
1,353
Payment of dividends
-
-
-
-
-
-
-
-
(20,425)
(20,425)
Total comprehensive income
-
-
-
-
(7,514)
-
-
-
63,615
56,101
Net profit
-
-
-
-
-
-
-
-
63,615
63,615
Other comprehensive income
-
-
-
-
(7,514)
-
-
-
-
(7,514)
31 December 2022
174,211
3,428
-
756
(8,111)
36,990
20,000
2,287
213,477
443,038
COMPLIANCE WITH PRUDENTIAL REQUIREMENTS
During the years ended 31 December 2022 and 31 December 2021, the Financial group and the Bank complied with prudential requirements to which it
was subject.
NOTE 32
EVENTS AFTER BALANCE SHEET DATE
On 25- 26 January 2023 Bank has acquired 2,491 thousand units of own shares. Amount paid for the shares is EUR 1,868 thousand. Purpose of share
acquisition - granting shares to the employees of the Bank and the Bank's subsidiaries.
On 17 January 2023 and 1 February 2023 Mr. Mindaugas Raila and Mr. Tomas Okmanas, respectively, were confirmed by ECB as eligible to serve as
independent members of Bank’s supervisory council. On 18 January 2023 and 2 February 2023 Mr. Mindaugas Raila and Mr. Tomas Okmanas,
respectively, started serve as members of Bank’s supervisory council.
On 1 February 2023 the Competition Council of the Republic of Lithuania granted the authorisation to carry out the concentration by the Bank indirectly,
through the newly established company, acquiring the retail investment fund management and pension fund management businesses, conducted in
Lithuania by „Invalda INVL“ and indirectly, through life insurance UAB „SB draudimas“, by acquiring the life insurance business of „INVL Life“ and thus
acquiring sole control over these businesses, as well as acquiring the assets managed by UAB FMĮ "INVL Financial Advisors", which are necessary for
the execution and administration of the business to be acquired. As announced in the notice on 22 November 2022, the Bank and Invalda INVL signed
an agreement to merge segments of their retail businesses, stating that transaction is expected to be completed within one year, subject to the necessary
approvals from the supervisory authorities, the adoption of the necessary resolutions by the extraordinary shareholders' meetings of the Bank and Invalda
INVL, and the fulfilment of the other conditions set out in the agreement. The clearance of the Competition Council was one of the preconditions for the
completion of the transaction.
On 7 February 2023 new Šiaulių Bankas group company was established – UAB “SB Asset Management”, legal entity code: 306241274, registered office
address Gynėjų str. 14, Vilnius, whose sole founder, owning 100 percent of the shares, is the Bank. UAB "SB Asset Management" was established to
properly prepare for the implementation of the agreement signed on 22 November 2022 regarding the merger of AB “Invalda INVL” retail asset
management and life insurance businesses with AB Šiauliu bankas, and which after the transaction closing date would take over the management business
of pension funds and investment funds for its further development.
Shareholders of the Bank in extraordinary general meeting held on 22 February 2023 approved Master Agreement regarding merger of AB “Invalda INVL”
retail asset management and life insurance businesses with the Bank. In the same meeting shareholders of the Bank approved decisions related to the
merger of businesses mentioned above to increase authorised capital of the Bank by additional contributions, withdraw of shareholders’ pre-emption right
to acquire new shares, amend Articles of Association of the Bank.
On 23 February 2023 during Bank’s Council meeting Mrs. Agnė Duksienė was elected as Board member of the Bank. New Board member will start her
duties after permissions from regulatory authorities will be received.
After end of reporting period there were no other significant events which would have impact to these financial statements.
CONSOLIDATED ANNUAL REPORT
FOR 2022
31 December 2022
Tilžės 149, LT-76348 Šiauliai
Tel. (8 41) 595 607, faks. (8 41) 430 774
El. paštas info@sb.lt
www.sb.lt
CONSOLIDATED ANNUAL REPORT FOR 2022
131
The consolidated report of Šiaulių Bankas AB (hereinafter ― the Bank) covers the period 01 January 2022 to 31 December 2022.
The description of alternative performance indicators is available on the Bank's website at:
Homepage › Bank Investors › Financial Information › Alternative Performance Measures.
ANNUAL ACTIVITY RESULTS
x Šiaulių Bankas Group earned unaudited net profit of EUR 63.6 million last year, or 15% more than in 2021
x Loan portfolio increased by 25% year-on-year to over EUR 2.6 billion
x Proactive increase in deposit rates led to strong growth in the term deposit portfolio, while the total deposit portfolio grew by 4%
to EUR 2.8 billion
x Agreement was signed with Invalda INVL to merge retail businesses
Overview of the key performance indicators
“Just starting to recover from the pandemic, the economy has been hit again by the outbreak of the war. Despite external factors such
as rising energy prices, volatility on the stock exchanges or increases in base interest rates, Šiaulių Bankas was able to sustainably
adhere to its strategic goals and be closer to its clients throughout the year. The bank’s strong client-oriented position was also reflected
in the results of a mystery shopper survey performed by Dive Lietuva, which revealed that Šiaulių Bankas provides the best service to
clients visiting the bank’s branches. And this is not the only award in 2022 – The Banker magazine, published by the business daily The
Financial Times, named us the best bank of the year in Lithuania,” said Vytautas Sinius, CEO of Šiaulių Bankas.
Šiaulių Bankas Group earned unaudited net profit of EUR 63.6 million in 2022 (15% more than in 2021). Net profit for Q4 was EUR 16.5
million (49% more than in Q4 2021). Operating profit before impairment losses and income tax amounted to EUR 81.5 million (+14%
compared to 2021 – EUR 71.3 million).
Mainly due to strong growth in lending volumes, net interest income increased by 32% year-on-year to EUR 106.8 million. A steady
increase in the number of clients and their activity increased net service and commission income by 9% to EUR 18.7 million.
The impact of the assessment of specific client exposures led to provisions of EUR 2.5 million in Q4 and EUR 5 million for the year
(compared to provisions of EUR 4.1 million in 2021). The cost of risk (CoR) for the loan portfolio in 2022 was at the same level as in 2021
at 0.2%.
60.4 59.9 55.0 59.3 68.6
-7.7
-8.4
-12.0
-4.1
-4.9
52.6
51.5
43.0
55.2
63.6
-15
0
15
30
45
60
75
2018 2019 2020 2021 2022
EUR m
Impairment
losses
Net profit before
impairment
Net profit
62.8
72.4
75.7
80.9
106.8
14.2
16.7
16.0
17.2
18.7
7.9
15.0
11.6
11.9
4.4
20.0
14.4
9.7
17.5
12.8
-21.1
-22.8
-23.5
-27.1
-31.6
-18.1
-27.5
-24.7
-29.1
-29.6
-60
-30
0
30
60
90
120
150
2018 2019 2020 2021 2022
EUR m
Other expenses
Salary and related
expenses
Other income
Net gain from trading
activities
Net fee and commission
income
Net interest income
CONSOLIDATED ANNUAL REPORT FOR 2022
132
The Group’s cost to income ratio (excluding the impact of client portfolio of SB Draudimas) increased slightly during the year and stood
at 43.2% at year-end (42.8% in the previous year) and the return on equity increased to 15.2% (14.3% last year). Capital and liquidity
position remains sound and prudential regulations are met with the solid buffers.
Overview of Business Segments
Business and Private Clients Financing
Mainly due to strong growth in lending volumes, net interest income increased by 32% year-on-year to EUR 106.8 million. A steady
increase in the number of clients and their activity increased net service and commission income by 9% to EUR 18.7 million.
The impact of the assessment of specific client exposures led to provisions of EUR 2.5 million in Q4 and EUR 5 million for the year
(compared to provisions of EUR 4.1 million in 2021). The cost of risk (CoR) for the loan portfolio in 2022 was at the same level as in 2021
at 0.2%.
The Group’s cost to income ratio (excluding the impact of client portfolio of SB Draudimas) increased slightly during the year and stood
at 43.2% at year-end (42.8% in the previous year) and the return on equity increased to 15.2% (14.3% last year). Capital and liquidity
position remains sound and prudential regulations are met with the solid buffers.
Corporate lending volumes increased steadily during the year, with new business credit agreements worth almost EUR 0.8 billion signed
during the year (21% more than in 2021). The value of the portfolio increased by 4% in Q4 and by 18% year-on-year (to EUR 1.4 billion).
Credit risk indicators remained strong in Q4, and the results of the annual loan portfolio review did not have adverse effect on them. The
non-performing business loan portfolio declined throughout the year and stood at EUR 58 million at the end of 2021 (-10% year-on-year).
Despite decrease in housing loan sales in Q4 (compared to the first three quarters of the year), mainly due to the general economic
situation, rising energy prices, high inflation, or rising base interest rates, the housing loan portfolio grew by 9% in Q4, and by as much
as 46% in 2021, and exceeded EUR 660 million. New housing loan agreements were signed for EUR 255 million (30% more than in
2021).
In Q4, people were more cautious about their ability to borrow for consumption and more restrained in planning their purchases. Universal
credit, i.e., loan for a wide range of needs, is noticeably growing in popularity. In total, consumer credit agreements were signed for
almost EUR 190 million during the year, i.e., 48% more than in 2021.The consumer financing portfolio grew by 4% in Q4 and by 34% for
the whole of 2022, reaching almost EUR 230 million.
As the volume of applications for financing energy-efficient projects remains high, in Q4, the Bank offered a green housing loan for those
who want to live more sustainably and who are looking for a new home for the purpose of buying the most energy-efficient housing on
more favourable terms.
SB Modernizavimo Fondas continues to perform well, but due to a significant increase in construction prices and fewer projects ready
for financing on the market, agreements for the modernisation of multi-apartment buildings have been signed for a total amount of EUR
107 million (17% less than in 2021).
Daily Banking
Last year, net service and commission income grew to EUR 18.7 million, an increase of 9% compared to 2021. Income grew in all the
main fee and commission income groups – payments, cash transactions, accounts administration and investment services. More than
10 thousand new private and corporate clients started using the Bank’s services in 2022, bringing the total number of clients to 340
thousand. The number of clients subscribing to service plans generating stable commission income grew by 9% to 188 thousand.
The number of payments and turnover from payment cards, as well as the number of payment cards themselves, is growing, reaching
176 thousand, i.e., 2% more than a year ago. Among them, the fastest growing demand is for credit cards, the number of which grew by
33% year-on-year.
1,386 1,672 1,761 2,104 2,634
+21%
+5%
+19%
25%
0
400
800
1,200
1,600
2,000
2,400
2,800
31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022
EUR m
Loan and
finance lease
portfolio
CONSOLIDATED ANNUAL REPORT FOR 2022
133
The past year has seen a strong focus on digitisation and new, more user-friendly smart solutions. Throughout the year, the Bank
developed its digital channels in line with customer needs, expanding the number of services in the internet bank and the mobile
application. For example, remote client identification and remote bank account opening have been introduced. The number of clients
served this way is also steadily increasing.
Over the year, the Bank has been recognised both in Lithuania and abroad. The Banker, a magazine published by the British business
daily The Financial Times, has announced that the award for the best bank in Lithuania has once again gone to the Bank. In awarding
the Best Bank in Lithuania award, The Banker’s experts highlighted the Bank’s achievements in client service. Another important
assessment was revealed by the results of a mystery shopper survey commissioned by Dive Lietuva, which showed that the Bank is the
best in Lithuania in terms of face-to-face client service. The Bank achieved a 100% face-to-face client service quality indicator, the best
result among the six banks participating in the survey and 3.4 percentage points ahead of the banking sector average of 96.6%. According
to Dive Lietuva, the Bank has been ranked among the top three best-serving banks in Lithuania for the last six years when mystery
shopper surveys have been carried out (since 2017).
Saving and Investing
The deposit portfolio grew by 4% over the year (EUR 114 million) to almost EUR 2.8 billion at the end of the year. Demand deposits,
which make up the bulk of the portfolio, increased by 1% or EUR 10 million, while the term deposit portfolio grew by 12% or EUR 104
million. This increase in the term deposit portfolio is due to the proactive increase in interest rates to meet client needs in a rising base
rate environment.
Clients are increasingly directing their savings towards the Bank’s saving and investment products, with commission income from
securities-related services reaching almost EUR 4 million during the year (up 18% compared to 2021). Despite the volatile financial
markets, the value of client securities in the Bank’s custody continued to grow and exceeded EUR 0.9 billion at the end of the year.
In Q4, the Bank successfully placed an additional EUR 85 million bond issue to institutional investors, paying an annual interest at the
rate of 1.047%. With a tap issue the amount of the total outstanding bonds increased from EUR 75 million to EUR 160 million. The
additional bonds were issued at a yield to maturity of 6.4%. The bonds issued will help the Bank to meet future MREL requirements,
while strengthening the liability structure and broadening the investor base.
Merger of Retail Businesses
At the end of the year, the Bank and Invalda INVL signed an agreement to merge part of their retail businesses. Following the transaction,
Šiaulių Bankas Group, in addition to the financial services it already provides, will be managing second- and third-pillar pension and
investment funds in Lithuania and will expand its life insurance business. The transaction aims to create a new-generation modern, client-
oriented financial market participant that will increase competition and create value for the Lithuanian economy. Successful closing of
the transaction requires the fulfilment of all the necessary conditions, the obtaining of all the necessary permissions and the preparation
and implementation of an integration plan. On 1 February 2023, the Competition Council of the Republic of Lithuania already gave its
authorisation. The aim is to close the transaction by the end of 2023. In the meantime, the Bank’s strategy for 2024–2026 is to be updated.
REGARDING INVASION OF RUSSIA TO UKRAINE
The Bank monitors the tense geopolitical situation in order to properly and timely assess and identify the potential impact of Russia’s
invasion of Ukraine on the Bank’s operations and the quality of its portfolio due to the risks it poses to clients. The Bank has set up a
special Working Group to assess the situation. The Bank has no operations in Russia, Belarus or Ukraine and does not have significant
direct exposures in these countries. The Bank considers the secondary risk of direct insolvency of clients operating in Lithuania due to
the geopolitical situation to be low: the Bank’s largest clients are aware of the threats, the number of clients dependent on business
relations with Ukraine and Russia is low, and clients with business relations in the countries mentioned above are reducing their
dependence of their income on business transactions. To identify in a timely manner a potential increase in the risk of its clients, the
Bank applies the procedures set out in the Bank’s internal regulations, records Early Warning Indicators (EWI) for the impact of the
geopolitical situation on the clients that have a moderate or greater dependence on the aforementioned countries through their supply or
sales chains, or through their shareholding structure, and, in the event of a potentially significant risk, puts the client on the Watch List
1,849 2,041 2,353 2,685 2,799
+10%
+14%
14%
4%
0
500
1,000
1,500
2,000
2,500
3,000
31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022
EUR m
Deposit
portfolio
CONSOLIDATED ANNUAL REPORT FOR 2022
134
and implements enhanced monitoring for these clients, and approves action plans for the mitigation of risk. The greatest uncertainties
and potential negative impacts arise from tertiary effects, i.e., the impact of Russia’s invasion of Ukraine on the overall state of the
economy. The Bank uses scenario assessments and stress testing to assess these impacts. These assessments indicate that the Bank’s
capital position is strong and that the Bank would be able to withstand significant shocks related to economic downturns.
The increased monitoring is not limited to credit risk, but also includes a stronger monitoring of the bank's liquidity position (except for
the increased cash withdrawals a few days after the start of the invasion, there were no negative trends related to the invasion), increased
focus on business continuity and IT security (business continuity plans have been updated with a number of additional scenarios,
cybersecurity status is constantly being monitored, additional cyber-protection measures have been implemented, and testing of
measures and plans is ongoing). Also, due to the rapidly changing situation and the introduction of new sanction packages, the processes
and procedures for complying with the sanctions for clients and payments are under considerable scrutiny, which may in some cases
lead to longer process time.
The Russian invasion of Ukraine may further contribute to increased market volatility. The Bank has no direct investments (securities or
other financial instruments) in Russia, Belarus or Ukraine. The Bank has no or close to zero open currency exposure in these countries.
RATINGS
On 25 May 2022, the international rating agency Moody’s Investor Service (Moody’s) affirmed the Baa2 long-term deposit rating
previously granted to the Bank as well as its positive outlook. The Bank’s previous short-term deposit rating of P-2 has also been affirmed.
In its statement, Moody’s said that the rating affirmation reflects the Bank’s strong credit fundamentals relative to the rating level, which
are expected to remain resilient despite the Bank’s increasingly challenging operating environment and the high level of loan growth. It
also states that the Bank’s outlook reflects improved risk management and overall asset risk, with a significant reduction in non-performing
loans and maintaining a strong capital position.
RISK MANAGEMENT, COMPLIANCE WITH PRUDENTIAL REQUIREMENTS
A complete disclosure of all significant risks incurred by the Group is provided in the chapter Financial Risk Management of the
explanatory note of the financial statement for 2022.
Income was growing faster than its expenses which led to the high efficiency of the performance. Capital and liquidity position remain
robust - prudential requirements are implemented with adequate reserve. According to the data as of 31 December 2022 the Bank
complied with all the prudential requirements set out by the supervisory authority.
The main financial indicators of the Group:
31/12/2018
31/12/2019
31/12/2020
31/12/2021
31/12/2022
ROAA, %
2.4
2.1
1.5
1.6
1.6
ROAE, %
22.3
17.6
12.7
14.3
15.2
Cost to income ratio, %
37.3
42.5
42.7
44.1
42.9
Cost to income ratio (adjusted due to the impact of
the SB draudimas clients' portfolio), %
37.9
40.8
42.9
42.8
43.2
Loan to deposit ratio, %
75.1
82.2
75.0
78.6
94.6
At the end of year MREL requirement at Financial group level approved in June 2022 were effective, including the following MREL
requirements that shall be met by 1 January 2024:
x The minimum requirement for own funds and eligible liabilities of the resolution entity with which the Financial group shall
comply is 20.24% of total risk exposure (MREL-TREA) and 7.07% of leverage ratio exposure (MREL-LRE);
x Subordinated instruments shall comprise 13.50% of total risk exposure (MREL-TREA, subordinated) and 5.89% of leverage
ratio exposures (MREL-LRE, subordinated).
To ensure a linear build-up of own funds and eligible liabilities towards the requirements the supervisory authorities set intermediate
targets. For 1 January 2023, such targets comprise MREL-TREA of 15.43% and MREL-LRE of 5.89%, subordinated MREL-TREA of
13.50% and subordinated MREL-LRE of 5.79%. The levels of MREL requirements are revised by the supervisory authorities of the bank
each year. In February 2023, the Bank received an updated MREL requirement that shall be met by 1 January 2024.
The MREL targets for Financial group can be summarised as follows:
01/01/2023
01/01/2024
01/01/2024
(intermediate target)
(requirement)
(requirement updated at
February 2023)
MREL-TREA
15.43%
20.24%
21.49%
MREL-LRE
5.89%
7.07%
7.16%
MREL-TREA, subordinated
13.50%
13.50%
13.50%
MREL-LRE, subordinated
5.79%
5.89%
5.99%
CONSOLIDATED ANNUAL REPORT FOR 2022
135
On 29 November 2022, in the international financial markets, Šiaulių Bankas AB successfully supplemented the 4-year issue made in
2021 with an additional nominal value of EUR 85 million. Before this addition, this issue amounted to EUR 75 million, now it is EUR 160
million. The bond issue was aimed at meeting future MREL requirements set by the supervisory authorities of the bank. The bonds are
listed on the Nasdaq Baltic bond list, ISIN code LT0000405771.
Data on indicators are also available on the website of Šiaulių Bankas:
- on operating profitability indicators:
Homepage › Bank Investors › Financial Information › Profitability Ratios
- prudential requirements:
Homepage › Bank Investors › Financial Information › Prudential Standards
- the description of alternative performance indicators:
Homepage › Bank Investors › Financial Information › Alternative Performance Measures
ACTIVITY PLANS AND FORECASTS
In 2023, the Bank group will focus on the following priority areas:
 Implmentation of higher standard governance practices;
 Strengthening of its position in the retail business;
 Development of digital functionalities for external and internal customers;
 Financing remains one of the major areas, ensuring a stable source of interest income and a long-term relationship with
customers.
The reinforcing of these priority areas will allow ensuring sustainable and profitable activities of the Bank group, increasing the market
share, meeting the expectations of the regulator, investors and other stakeholders. At the end of 2022, the Bank signed an agreement
with Invalda INVL on the merger of some of their retail businesses. After the transaction is closed, the Bank group, in addition to the
financial services it already provides, will manage the 2
nd
pillar and the 3
rd
pillar pension funds, also investment funds in Lithuania, will
expand its life insurance business. The year 2023 will be spent getting ready for a smooth closing of the transaction and preparation of
the updated strategy.
AUTHORIZED CAPITAL, SHAREHOLDERS
As of 31 December 2022, the authorized capital of the Bank totalled to EUR 174,210,616.27 and is divided into 600,726,263 units of
ordinary registered shares with a nominal value of EUR 0.29 each (ISIN LT0000102253 Nasdaq CSD Lithuanian branch). The Charter
of the Bank were registered in the Register of Legal Entities on 13 December 2018 after the last increase of the authorized capital by
additional contributions. The authorized capital of the bank was not increased during 2022.
The rights granted by the Bank's shares are specified in the Bank's Charter, which is available on the Bank's website at:
Homepage › About Us › Important Documents
Authorized capital:
14/09/2015
26/05/2016
06/06/2017
01/06/2018
13/12/2018
Capital, EUR
91,226,381.99
109,471,658.33
131,365,989.88
157,639,187.74
174,210,616.27
As of 31 December 2022 the number if the Bank's shareholders was 18,524 (at the end of 2021 – 16,573). All issued shares grant the
shareholders equal rights foreseen by the Law on Companies of the The Republic of Lithuania of Lithuania and the Charter of the Bank:
Homepage › About Us › Important Documents
Legal
64%
Natural
36%
Shareholders by type
LT investors
55%
Foreign
investors
45%
Shareholders by residence
CONSOLIDATED ANNUAL REPORT FOR 2022
136
Shareholders owning more than 5% of the Bank‘s shares and votes as of 31 December 2022:
Share of shares and votes, %
EBRD, LEI code 549300HTGDOVDU60GK19
20.00
Invalda INVL AB, c.c. 121304349*
8.06
ME INVESTICIJA UAB, c.c. 302489393
5.71
Gintaras Kateiva**
5.39
Algirdas Butkus***
5.33
* Pursuant to the Law on Securities of the Republic of Lithuania, the shareholder's votes are counted together with the controlled companies: INVL LIFE UAB, c.c. 305859887
– 1.96%, INVL Asset Management UAB, c.c. 126263073 - 0.66% of the votes
** Votes are counted together with the votes held by the spouse
*** Votes are counted together with controlled companies: Prekybos namai AIVA UAB, c.c. 144031190 – 2.00%, Mintaka UAB, c.c. 144725916 - 0.88
%
There are no restrictions on the transfer of the Bank's shares.
There are no significant agreements to which the Bank is a party that would enter into force, change or terminate upon a change in
control of the Bank. At the same time, we would like to inform you that the Bank has concluded cooperation agreements with international
financial partners on financing and provision of guarantee instruments to the Bank, which include a change of control clause, which may
affect further cooperation.
Shares are granted to employees whose activities involve significant risk under continuing Employee option agreements.
Information on shares:
2018
2019
2020
2021
2022
Capitalization, m EUR
240.9
304.0
299.2
457.2
412.1
Turnover, m Eur
34.7
48.3
84.5
134.8
101.9
Share price on the last trading session day
0.401
0.506
0.498
0.761
0.686
Lowest share price during the reporting period
0.391
0.394
0.320
0.493
0.511
Highest share price during the reporting period
0.658
0.534
0.558
0.890
0.794
Average share price during the reporting period
0.521
0.473
0.442
0.663
0.624
Share book value
0.448
0.518
0.592
0.678
0.730
P/BV
0.9
1.0
0.8
1.1
0.9
P/E
4.6
5.9
7.0
8.3
6.5
Capital increase from retained earnings, %
-
-
-
-
-
* description of indicators is provided on the Bank's website: Homepage › Bank Investors › Financial Information › Alternative Performance Measures
Turnover and price of the Bank's shares 2020-2022:
As one of the most traded stocks in the Baltic market, the Bank's shares are included in the following Nasdaq indices:
x OMX Baltic Benchmark (OMXBBGI, OMXBBPI, OMXBBCAPGI, OMXBBCAPPI) - the Baltic benchmark index consists of the
largest and most traded stocks on the Nasdaq Baltic Market representing all sectors;
x OMX Baltic 10 (OMXB10) - is a tradable index of the Baltic states consisting of the 10 most actively traded stocks on the Baltic
exchanges;
x OMX Baltic (OMXBGI, OMXBPI) – is an all-share index consisting of all the shares listed on the Main and Secondary lists of
the Baltic exchanges with exception of the shares of the companies where a single shareholder controls at least 90% of the
outstanding shares;
0.000
0.500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Volume, m SAB OMXBBPI
CONSOLIDATED ANNUAL REPORT FOR 2022
137
x OMX Vilnius (OMXVGI) – is an all-share index which includes all the shares listed on the Main and Secondary lists on the
Nasdaq Vilnius with exception of the shares of the companies where a single shareholder controls at least 90% of the
outstanding shares;
x OMX Baltic Financials (B30GI, B30PI) – an index of the Baltic financial institutions;
x OMX Baltic Banks (B3010GI, B3010PI) - an index of the Baltic banks.
Return indices (RIs) represent the total return on the shares included in the index and reflect not only stock price movements but also
the dividends paid, making these indices a more complete measure of market performance than price indices. Price indices (PIs) only
reflect changes in the price of shares included in the index, regardless of dividends. There is a cap on the weight of the shares (CAP)
forming indices of a limited number of shares above which the number of shares included in the index is reduced to a cap.
Besides, the Bank's shares are included into such indices as STOXX Eastern Europe TMI, STOXX All Europe Total Market, STOXX
Eastern Europe 300, STOXX EU Enlarged TMI, STOXX Eastern Europe 300 Banks, STOXX Eastern Europe Small 100, STOXX Eastern
Europe TMI Small, STOXX Global Total Market, STOXX Lithuania Total Market, Bloomberg ESB Data Index, S&P Frontier BMI Index,
MSCI Frontier and Emerging Markets Select Index and in some FTSE Russell Frontier indices.
ACQUISITION OF OWN SHARES
On 26/01/2022, the Bank conducted a buy-back of its own shares on the Nasdaq Vilnius official offering market, the purpose of which
was to grant shares to employees of the Bank and the Bank's subsidiaries as a deferred portion of their annual variable remuneration.
The offer resulted in the purchase of 2,104,598 shares for EUR 1,557,403. Following this acquisition, together with the shares acquired
in August 2021, the Bank held 2,792,096 of its own shares. There were no outstanding own shares acquired by the Bank, Bank
subsidiaries or persons acting on behalf of the subsidiaries as of 31 December 2022.
DIVIDENDS
In 2018, the Supervisory Council approved the dividend policy. Carrying out its activities and planning the capital the Bank seeks to
ensure a competitive return on investment through dividends and increasing stock value. The Bank shall pay dividends on two
assumptions - when external and internal capital and liquidity requirements will be sustained, and the level of capital after dividends will
remain sufficient to carry out all approved investment and development plans and other capital-intensive activities. Taking into account
the above-mentioned principles and assumptions, the Bank shall seek to allocate at least 25 per cent of the earned annual profit to
dividends.
The General Meeting of Shareholders held on 30 March 2022 decided on the allocation of the Bank's profits. The profit allocation included
EUR 20.4 million for dividends, representing 36.5% of the net profit for 2021. This size of dividends is paid to compensate for the 7.7%
dividend on annual net profit not paid in 2019 and paid in 2020. Dividends of EUR 0.034 per ordinary registered share with a nominal
value of EUR 0.29.
Information on the dividends paid:
2017
2018
2019
2020
2021
Per cent from nominal value
1.72
10
-
1.90
11.72
Dividend amount per share, Eur
0.005
0.029
-
0.0055
0.034
Dividend amount, Eur
2,264,938
17,421,064
-
3,303,994
20,424,693
Yields from dividends, %
0.8
6.2
-
1.1
4.5
Dividends to Group net profit, per cent
7.1
33.0
-
7.7
37.0
The description of alternative performance indicators is available on the Bank's website at:
Homepage › Bank Investors › Financial Information › Alternative Performance Measures.
AGREEMENTS WITH SECURITIES
PUBLIC TRADING INTERMEDIARIES
Agreements with public circulation intermediaries regarding the accounting of securities issued by the Bank are, not concluded, this
accounting is managed by the Bank's Securities Accounting Department. The Bank has not entered into market-making agreements with
respect to securities issued by the Bank.
According to data as of 31 December 2022 the Bank itself, as an intermediary of public trading, under agreements with the companies
issuing securities conducted accounting of 750 companies which totalled to 1000 securities issues (including shares of public and private
companies, debt securities, investment fund units). The Bank also conducts market making on the Nasdaq Baltic under a market making
programme and under agreements with issuers. As of the end of 2022, the Bank was the market maker of 10 securities issues.
CONSOLIDATED ANNUAL REPORT FOR 2022
138
MANAGEMENT OF THE BANK
The Management Board bodies of the Bank are as follows: the General Meeting of the Shareholders of the Bank, Supervisory Council
of the Bank, Management Board of the Bank and Chief Executive Officer (CEO).
The General Meeting of Shareholders shall be convened annually, at the latest within 3 months after the end of the financial year. The
Board of the Bank, the Supervisory Council and the shareholders having at least 1/10 of all votes have the right to convene the Meeting.
The General Meeting of Shareholders is organized, voting is carried out at it, decisions are made in accordance with the procedure
established by the Law on Companies. More information on the rights of the General Meeting of Shareholders is provided in the annex
“Governance Report” to the consolidated annual report for 2022.
The Supervisory Council of the Bank is a collegial body supervising the activities of the Bank. The Supervisory Council is chaired by
the Chairperson. The Bank's Supervisory Council, consisting of eight members, is elected by the General Meeting of Shareholders for a
term of four years. The members of the Supervisory Council are nominated for the meeting by the initiators of the meeting or shareholders
holding 1/20 of the bank's shares. The Charter of the Bank provide that the number of terms of office of a member of the Supervisory
Council is not limited.
More information on the functions of the Supervisory Council is provided in the annex “Governance Report” to the consolidated annual
report for 2022.
On 7 March 2022, Šiaulių Bankas AB received a notice of resignation from the position of a member of the Supervisory Council from
Adriano Arietti. 29 March 2022 was the last day on which Adriano Arietti served as a member of the Bank’s Supervisory Council.
By the decision of the Ordinary General Meeting of Shareholders of Šiaulių Bankas AB of 30 March 2022, Valdas Vitkauskas was elected
as an independent member of the Bank’s Supervisory Council. He took up his duties on 1 June 2022 after obtaining the permission of
the Bank’s supervisory authority.
On 9 June 2022, Šiaulių Bankas AB received notices of resignation from the position of member of the Supervisory Council of the Bank
from Arvydas Salda and Martynas Česnavičius. 4 August 2022 was the last day on which Arvydas Salda and Martynas Česnavičius act
as members of the Supervisory Council of the Bank.
By the decision of the Extraordinary General Meeting of Shareholders of Šiaulių Bankas AB of 28 July 2022, Tomas Okmanas was
elected to the Bank's Supervisory Council as independent member and Mindaugas Raila was elected to the Bank's Supervisory Council
as member. (on 2 February 2023 permissions from the Supervisory Authority of the Bank were received).
At the meeting of the Bank's Supervisory Council held on 4 August 2022, Valdas Vitkauskas was elected as the Chairman of the Bank's
Supervisory Council, replacing Arvydas Salda, who had been a member of the Supervisory Council and Chairman of the Supervisory
Council of the Bank until 4 August 2022.
The Bank’s Supervisory Council, whose term of office expires on the day of the Ordinary General Meeting of Shareholders of
the Bank in 2024, composition for 31/12/2022 date was:
Name, Surname
Duties at t
he Supervisory
Council
Other current leading positions
Share of capital
under the right of
ownershi
p, %
(31/12/2022)
Share of votes
together with the
related persons, %
(31/12/2022)
Valdas Vitkauskas
Chairman
since 05/08/2022
-
- -
Gintaras Kateiva
Membe
r since 2008
Litagra UAB 304564478 Savanorių pr. 173, Vilnius (Chairman
of the Board)
5.37 5.39*
Ramunė Vilija
Zabulienė
Independent members since 2012
Ars Domina VšĮ 302897128 P. Vileišio str. 9-41, Vilnius
(Director);
Lewben Art Foundation VŠĮ 302969378 Antano Tum
ėno str.
4, Vilnius (Board member)
- -
Darius Šulnis
Member since 2016
Invalda INVL AB 121304349 Gynėjų str. 14, Vilnius (President,
Board member);
INVL Asset Management UAB 126263073 Gynėjų str. 14,
Vilnius (Chairman of the Board),
Litagra UAB 304564478
Savanorių pr. 173, Vilnius
(Board member);
INVL Baltic Farmland UAB 3032
99781 Gynėjų str. 14, Vilnius
(Board member)
--
Miha Košak
Independent member since 2017
-
-
-
Susan Gail Buyske
Independent member since 2020
SA Advans SICAR (Non-executive director)
-
-
* Pursuant to the Law on Securities of the Republic of Lithuania, votes are counted together with the votes held by the spouse
The Board of the Bank is a collegial management body of the Bank consisting of 7 members. It manages the Bank, manages its affairs
and is responsible for the execution of the Bank's financial services in accordance with the law. The rules of procedure of the Board shall
determine the Rules of Procedure of the Board. The Management Board of the Bank is elected for four years. The members of the Board
are elected, recalled and supervised by the Bank's Supervisory Council. The term of office of the Board shall be four years and the
CONSOLIDATED ANNUAL REPORT FOR 2022
139
number of terms is not limited. If individual members of the Board are elected, they are elected until the end of the term of office of the
existing Board.
On 4 August 2022 Šiaulių Bankas AB has received notifications of Algirdas Butkus and Ilona Baranauskienė about their resignation from
the Bank’s Management Board members. 18 August 2022 is the last day of Algirdas Butkus’s term of office as a member of the
Management Board and as a Deputy of the CEO of the Bank and 30 September is the last day of Ilona Baranauskienė‘s term of office
as a member of the Management Board and as a Head of Legal and Administration Division of the Bank.
At the Bank's Management Board meeting held on 4 August 2022, Vytautas Sinius, Chief Executive Officer of the Bank, was elected as
the Chairman of the Bank's Management Board and will take up his duties as Chairman of the Bank's Management Board from 19 August
2022.
More information on the functions of the Board is provided in the annex “Governance Report” to the consolidated annual report for 2022.
The Bank’s Board, whose term of office expires on the day of the Ordinary General Meeting of Shareholders of the Bank in
2024, composition for 31/12/2022 date was:
Name, Surname
Duties at the Board
Other current leading
positions at the
Bank
Share of capital under the
right of ownership, %
(31/12/2022)
Share of votes together with
the related persons, %
(31/12/2022)
Vytautas Sinius
Cha
irman since 19/08/2022
Chief Executive Officer
0.25
0.25
Donatas Savickas
Deputy Chairman since 1995
Deputy Chief Executive Officer,
Head of Finance Division
0.13
0.13
Daiva Šorienė
Member since 2005
Deputy Chief Executive Officer,
Head of Sales and Marketing Division
0.03
0.03
Mindaugas Rudys
Member since 2020
Head of
Service Development Division
0.05
0.05
Algimantas Gaulia
Member since 2021
Head of Risk Manageme
nt Division
<0.01
<0.01
In 2022, the Bank approved and applied the Diversity Policy, which, among other principles, also establishes the principle of increasing
the number of the under-represented gender in the Bank's management bodies. It has also been established that the Bank effectively
and consistently pursues increasing the gender balance in the Bank's management bodies, and sets 25% as the minimum criterion for
under-representation of the genders on the Bank's Supervisory Council and the Board, which starting with 2028, i.e. the outset of the
new term of office of the Bank’s Supervisory Council and the Board shall not be less than 30% (it should be noted that the current term
of office of the Bank's bodies is 2020-2024).
When selecting members of the supervisory and management body in the Bank, the provisions for the selection of the members of the
Board / Supervisory Council approved by the Bank's Supervisory Council are followed. Prior announcing the selection, the need for the
necessary competences, experience, knowledge and skills is assessed and the Nomination Committee prepares a description of
functions and competencies taking this into account the results of the assessment.
Considering the changes in the Bank's Board (resignation of 2 Board members), as of 31 December 2022, the Board consisted of 5 out
of 7 members. 31 December 2022 percentage of under-represented gender - 20 percent, which is calculated based on the number of
the members of the Bank's Board who actually held office at this day. In 2023 I quarter it is planned to elect a new member of the Board,
together seeking to meet the objective of the under-represented gender set in the Diversity Policy.
The composition of the members of the Bank's Supervisory Council in 2022 corresponds to the set goal of the under-represented gender.
The age, education and professional experience of the members of the supervisory and management bodies ensure diversity and
opportunities to share different views and perspectives.
In 2022, two new members were elected to the Supervisory Council (they will take up their duties when authorisations are obtained) and
will contribute to increasing the diversity of the supervisory body in all areas.
Diversity of members of the Bank's bodies*:
MEMBERS OF THE MANAGEMENT BOARD:
Gender
Age range
Education
Professional experience
Geographic diversity
1
women
4
men
Age range 40 – 60
(members fall into
the specified ranges
but do not reach the
cap)
Bachelor's and Master's degrees gained in the
following areas: economics
, management and
business administration, business management,
international economics
Experience of the members
of the supervisory /
management bodies
27 - 2
years.
Lithuania: Vilnius, Kaunas,
Šiauliai
MEMBERS OF THE SUPERVISORY COUNCIL:
Gender
Age range
Education:
Professional experience
Geographic diversity
2 women
4
men
Age range 50 – 70
(members fall into
the specified ranges
but do not reach the
cap)
Bachelor's
, Master's and PhD’s
degrees gained in
the following areas: applied mathematics,
e
conomics, business administration, pedagogy,
law, political science, public relations
Experience of the members
of the supervisory /
management
bodies 22 - 8
years.
Lithuania, Bulgaria / USA,
Slovenia / Great Britain
* Data on the diversity of the members of the Supervisory Council and the Board are presented by evaluating only the members of the Supervisory Council and the Board who
actually held office on December 31, 2022
CONSOLIDATED ANNUAL REPORT FOR 2022
140
THE COMMITTEES FORMED WITHIN THE BANK,
AREAS OF THEIR ACTIVITIES
Functions, procedures of formation and the policy of activities of the bank's committees are defined by the legal acts of the Republic of
Lithuania, legal acts of the Bank of Lithuania as well as provisions of the certain committees approved by the Management Board or
Supervisory Council of the Bank.
COMMITTEES UNDER AUTHORITY OF THE BANK'S SUPERVISORY COUNCIL
For the effective exercise of the functions and duties of the Supervisory Council, the Bank shall establish standing committees of the
Supervisory Council: (i) the Risk Committee; (ii) the Audit Committee; (iii) the Nomination Committee; (iv) the Remuneration Committee,
the members whereof shall be appointed by decision of the Supervisory Council. Considering the changes in the composition of the
Supervisory Council in 2022, the composition of the committees was revised and updated.
Information on the committee members as of 31 December 2022:
The Risk Committee advises the management bodies of the Bank on the overall current and future risk acceptable to the Bank and
strategy and assist in overseeing the implementation of the strategy at the Bank, verifies whether prices of liabilities and assets offered
to clients take fully into account the Bank’s business model and risk strategy and shall also carries out other functions provided for in its
provisions.
Name, surname
Chairman
Miha Košak
Independent member of the Supervisory Council
Members:
Susan Gail Buyske
Independent member of the Supervisory Council
Valdas Vitkauskas
Independent member of the Supervisory Council
Ramunė Vilija Zabulienė
Independent member of the Supervisory Council
The Internal Audit Committee monitors and discusses the process of financial statement preparation, the efficiency of the Bank’s
internal control, risk management and internal audit systems, the processes of the audit and internal audit performance on regular basis
and performs other functions foreseen by the legal acts of the supervisory authority and provisions of the Internal Audit Committee.
Following the laws and legal act of the supervisory authority the composition, competences and arrangement of activities of the internal
Audit Committee are formed and controlled by the Bank’s Supervisory Council.
Name, surname
Chairwoman
Ramunė Vilija Zabulienė
Independent member of the Supervisory Council
Members:
Valdas Vitkauskas
Independent member of the Supervisory Council
Susan Gail Buyske
Independent member of the Supervisory Council
The Nomination Committee nominates candidates to fill management body vacancies and recommends, for the approval of the
management bodies of the bank or for approval of the general meeting of shareholders, evaluates the balance of skills, knowledge and
experience of the management body of the Bank, submits comments and findings related to the matter, assesses the structure, size ,
composition, operating results of the Bank’s bodies and carries out other functions provided for in its provisions.
Name, surname
Chairman
Valdas Vitkauskas
Independent member of the Supervisory Council
Members:
Darius Šulnis
Member of the Supervisory Council
Miha Košak
Independent member of the Supervisory Council
The Remuneration Committee evaluates the variable remuneration policies, practices and incentives developed to manage the risk,
capital and liquidity of the Bank, supervises the variable remuneration of senior executives responsible for risk management and
compliance, drafts variable remuneration decisions and performs other functions set forth in its policies.
Name, surname
Chairman
Valdas Vitkauskas
Independent member of the Supervisory Council
Members:
Gintaras Kateiva
Member of the Supervisory Council
Ramunė Vilija Zabulienė
Independent member of the Supervisory Council
COMIMITTEES UNDER AUTHORITY OF THE BANK'S MANAGEMENT BOARD
Information on the committee members as of 31 December 2022:
The Loan Committee evaluates loan granting material / documents and loan risk, approves / rejects lending decisions and / or
amendments to terms and conditions, suggests regarding loan granting, loan interest rates, improvement of loan administration
procedures and performs other functions foreseen by its provisions.
CONSOLIDATED ANNUAL REPORT FOR 2022
141
Name, surname
Position
Chairman
Edas Mirijauskas
Director of Credit Department
Deputy
Diana Leonavičienė
Director of Regional Lending Unit
Members:
Mindaugas Rudys
Head of Service Development Division
Algimantas Gaulia
Head of Risk Management Division
Daiva Šorienė
Head of Sales and Marketing Division
Ramūnas Dešukas
Director of the Special Assets Department
Aurelija Geležiūnė
Director of the Legal Department
The Risk Management Committee performs functions related to the organization, coordination and control of the Bank's risk
management system, determines and controls risk measurement indicators corresponding to the risk appetite acceptable to the Bank,
as well as performs other functions provided for in its regulations:
Name, surname
Position
Chairman
Algimantas Gaulia
Head of Risk Management Division
Deputy
Dalia Udrienė
Director of Risk Department
Members:
Tomas Dautoras
Director of Non-Financial Risk Department
Agnė Duksienė
Head of Legal, Compliance and Prevention Division
Edas Mirijauskas
Director of Credit Department
Donatas Savickas
Head of Finance Division
Daiva Šorienė
Head of Sales and Marketing Division
Denis Zubovas
Director of Credit Risk Management & Control Department
INTERNAL CONTROL ASSESSMENT
The Bank's risk management and internal control process is based on a three-layer model. The first level of protection covers all the
Bank's risk management activities carried out by direct customer service units and their managers. The second level of protection is
provided by the Risk Management and Compliance function. The third level of protection is provided by the Internal Audit Service, which
carries out periodic independent audits of the Bank's governance and internal controls.
In 2022, the Bank focused on fostering a culture of Risk Management and Compliance and on strengthening the second line of defence,
which included strengthening the Bank's management of Risk Control and Compliance in particular.
EXTERNAL AUDIT
In 2022, the Bank was audited by KPMG Baltics UAB (company address: Lvivo g. 101, LT-08104 Vilnius, tel. (8 5) 2102 600, fax (8 5)
2012 659, the company was registered on June 24, 1994, company code 111494971).
This audit company was selected after the Board of the Bank interviewed other international audit companies and considered their
proposals. When choosing an audit company, reputation risk, price of services, other factors are considered.
The General Meeting of Shareholders of the Bank held on 31 March 2022 adopted a resolution to elect KPMG Baltics UAB for auditing
the consolidated annual financial statements of the Bank for 2022 and 2023 and the consolidated annual report.
EUR thou (excluding VAT costs)
Group
The Bank
2022
2021
2022
2021
Contractual auditing of financial statements
183
151
104
101
Cost for assurance and other related services
72
62
72
62
Costs for tax advice issues
-
-
-
-
Costs for other services
-
-
-
-
Total
255
213
176
163
EMPLOYEES
On 31 December 2022, the Bank had 817 employees and the Group – 908 employees (working under fixed-term and open-ended
employment contracts, including employees on maternity and parental leave). Compared to 31 December 2021, the number of employees
in the Bank increased by 3.5% and in the Group – by 2.9%. On 31 December 2022, there were 79.2% women and 20.8% men working
in the Group. The proportion remains similar, with a slight increase in the number of male employees.
CONSOLIDATED ANNUAL REPORT FOR 2022
142
Personnel strategy
The personnel management strategy is focused on the achievement of the Group’s long-term goals in order to attract and retain efficient
employees, develop and raise their level of expertise, motivate and involve them in the Group’s activities, forming a culture of achieving
high results.
Employee relations
The Bank maintains long-term employment relationships with its employees. On 31 December 2022, 22.6% of the Bank’s employees
had a seniority of 10 and more years. In 2022, the overall employee turnover in the Bank was 12.52% (11.2% in 2021). Loyalty to the
Bank is encouraged every five years by monetary gifts in accordance with a special loyalty program approved by the Bank.
The Bank has a Labour Council, the members of which are 9 employees of the Bank, elected by secret ballot of the Bank’s employees
holding various positions in the Bank. The Labour Council operates in accordance with the Rules of Procedure of the Labour Council.
The Labour Council cooperates with the Bank’s Personnel, Asset Management and Administration and other departments by submitting
its proposals and seeking the best solutions for the Bank’s employees.
Performance review
Once a year, the Bank conducts a formal discussion and review of the employees’ annual performance. During these interviews,
managers discuss with their employees the results of achieving the annual targets, implemented projects, competencies, identifying
strengths and areas for development, agreeing on specific educational tools, addressing career opportunities. The interviews are held
with the aim of encouraging the sharing of mutual feedback by strengthening open and value-based communication and collaboration.
In order for each employee to feel that their work contributes to and influences the overall results of the Bank and that everyone’s efforts
are directed in one direction, annual targets are set by agreement between the manager and the employee to contribute to the overall
goals and performance of the Bank.
The Bank also organises semi-annual performance reviews to discuss the status of the annual targets and, if necessary, to provide
additional measures and actions to achieve them.
The Bank is constantly developing a performance review IT system in order to meet the expectations of managers and employees,
digitise the process, and ensure timely analysis of performance reviews. In 2022, updates have been introduced to the Performance
Measurement System, allowing each of the annual targets to be assigned a weighting expressed as a percentage. The sum of the weights
of all the individual annual targets set for the staff member is 100%. This allows managers to determine the importance and relevance of
each objective for each employee.
Engagement
Engagement survey. In 2022, the Bank conducted an anonymous comprehensive engagement survey for the third time with the help
of an external partner, with the main objectives being:
 to self-assess the annual change in employee engagement and organisational evaluation.
 in accordance with the obtained survey results, to refine the priority areas of the organisation to be improved and to update the
action plan for their improvement.
 to ensure the targeted deployment of human and financial resources.
 after identifying the strengths, to develop the image of the employer first internally and then externally.
87%
6%
2%
5%
Distribution of the Group's
employees by education, per cent
Higher Post-secondary
Professional Secondary
18%
32%
28%
18%
4%
Distribution of the Group's
employees by age, per cent
< 30 years 31-40 years 41-50 years
51-60 years >61 years
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143
The survey questionnaire consisted of 69 questions and was completed by 95% of the Bank’s employees. Throughout the past year,
2022, we have been implementing the activities and initiatives provided for in the Bank’s action plan; therefore, the results of the survey
show that the employees’ trust in the organisation, strategic coherence and leadership have improved. The results were presented to
managers and all employees. In the assessment of the results of the 2022 survey, the areas of the Bank as an organisation to be
developed and its strengths were newly identified. Based on the survey results, the Bank prepares its action plan for 2023, i.e., what
should be changed, developed and how, which traditions should be maintained in order to further strengthen positive, feedback-based
communication and collaboration.
Pulse survey. To strengthen the feedback culture in the Bank and to better understand how employees feel in the short term, in June
2022 we started issuing short pulse surveys to all employees. It is a 4–5 question survey sent to employees on the first working day of
each month.
Pulse survey is an instant feedback measurement tool that measures employee job satisfaction on a regular (monthly) basis, and helps
to monitor whether employees are receiving enough communication from both the organisation and their supervisor at any given moment.
With pulse surveys, employees have the opportunity to provide more frequent feedback and we can respond more quickly without waiting
for the annual survey. Each survey has 3 fixed questions that remain unchanged, so we monitor the change in responses every month.
1–2 questions are variable, depending on the topical issues at the time.
Emotional health of employees. In 2022, the Bank placed great emphasis on strengthening the emotional health of its employees. We
have organised many lectures on topics related to this area, such as stress and anxiety – how to cope, work-life balance, getting a good
night’s sleep, etc. This area was particularly important at the beginning of the year, after the outbreak of the war in Ukraine, when there
was a lot of anxiety and uncertainty. We have also included psychological counselling in the health insurance for employees. During the
summer, we encouraged staff to relax and make time for the annual leave, with plenty of information about different types of holidays
and destinations; we also organised an internal Vacation Lottery. November 2022 was declared Emotional Health Month at the Bank,
when we had 9 lectures on different topics for our employees.
Management of the COVID-19 pandemic
The Bank, as well as the rest of Lithuania, has lifted the emergency situation as of 1 May 2022, but with the virus circulating in the
environment, the Bank has not abandoned the use of disinfectants (liquids, wipes), self-testing if necessary, and other protection
measures. The Bank continues to regulate physical flows of its clients.
The Bank also continues to monitor the requirements at country level, reminding staff of the importance of prevention in managing not
only the COVID pandemic, but also other cold season infectious diseases.
Organisational structure
The Bank and the Group constantly strive to work efficiently, to respond flexibly to regulatory requirements, changes and needs of the
external environment, to achieve the Bank’s strategic goals so that the organisational structure meets business needs as much as
possible, ensures optimal organisation of activities, process efficiency and employee competence. The Bank implemented structural
changes only after assessing their impact on the Bank’s operations and the effectiveness of its risk management processes. Before the
Board of the Bank took decisions on changes to the Bank’s organisational structure, a risk assessment was carried out with the
involvement of those responsible for internal control functions. In response to the recommendations made by the heads of the internal
control functions on the management of potential conflicts of interest following the implementation of the structural changes, the Board
of the Bank adopted a plan of measures.
In 2022, structural changes were implemented in the Bank’s business units in order to make the Bank’s operations more efficient, to
comply with regulatory requirements and recommendations, to ensure balanced composition of the divisions and to concentrate related
functions within the divisions:
x In view of the emergence of new functions as a result of the implementation of legislative requirements, the relocation and
redistribution of functions within the Anti-Money Laundering Department, and in order to more accurately reflect the specificities
of the unit's activities, the name of the Anti-Money Laundering Department has been changed to the Financial Crime Prevention
Department.
x To improve the efficiency of the Internal Audit function at the Bank Group level, taking into account the recommendations made
during the external evaluation and the corresponding expectation formulated by the Audit Committee, the centralisation of the
Internal Audit function within the Bank Group has been implemented after assessing the cost-effectiveness of the change.
x In the light of regulatory requirements to put in place an appropriate and effective organisational and operational structure
necessary to implement the AML/CFT strategy adopted by the Governing Body, with particular emphasis on sufficient powers
for the function of AML/CFT Compliance Officer, including the need for a dedicated AML/CFT Compliance Unit in the second
line of defence, with the aim of focusing on the concentration of the compliance, financial crime prevention, legal, and know-
your-client functions in one division, to strengthen the competences and compliance of day-to-day operations of the 1st line of
defence and to increase synergies among the units, enhancing regulatory compliance while maintaining the responsibilities and
autonomy of the 1st and 2nd lines of defence in different departments, the Legal and Administration Division was dissolved and
a new Legal, Compliance and Prevention Division was created, a new AML/CTF Compliance Department was established and
other changes in the subordination of business units were implemented accordingly:
o The Asset Management Department, with its functions, was placed under the authority of the Financial Division.
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144
o The Special Assets Department, with its functions, was placed under the authority of the Risk Management Division.
Employee training
The year 2022 remained a very active year in terms of training at the Bank, with many new and continuing training and development
programmes. We used a hybrid approach, i.e., organised live, distance training and e-training.
In 2022, we continued to pay a lot of attention to the development of managers at all levels. Taking into account the data from the
engagement survey and the overall trends, we have focused our management training on strengthening leadership, inter-managerial
cooperation, effective communication and other competences by continuing the Leadership Academy programme launched in 2021 with
lecturers from external partners. All managers included in the academy are responsible for the implementation of the Bank’s strategy
through the employees of their divisions. The programme consisted of 5 topics, such as Collaboration That Generates Maximum Value,
Situational Leadership, Public Speaking and Facilitation, System Thinking and Leadership. The duration of the academy is 1.5 years,
with over 100 executives of various levels participating. Over the course of the Leadership Academy project, we had 38 training days
(304 hours in total). Between 4 and 8 days (or between 36 and 64 hours) of training were allocated per manager.
The Leadership Academy also gave rise to several initiatives that have been translated into concrete actions, the results of which will
undoubtedly benefit the entire Bank. The first initiative is the Šiaulių Bankas Ambassadors’ Group. The initiative was born immediately
after the first management collaboration session, and has attracted as many as 20 volunteer Heads of Departments as members. During
the working sessions, the members of the Ambassadors’ Group identified priority areas for strengthening cooperation within the
organisation, identified measures for their implementation and shared responsibilities. The outcome of the work of the Ambassadors’
Group will be presented to the organisation in the first quarter of 2023. The second initiative born out of the Leadership Academy
programme is the annual collaboration sessions. These are annual working sessions for managers to share feedback. The sessions
were attended by the Department Directors, Regional Managers, CSC Managers, Regional Directors of Business and Private Clients,
Heads of Business Client Group, Head of Audit Division, Head of Process Management and Head of Project Portfolio Management.
Already after the first collaboration session in 2021, it became clear that the opportunity to give constructive feedback (both praise and
expectations) to others in the organisation builds consensus and cooperation, and so the session was held again in 2022.
In 2022, taking into account the data from the engagement survey, the changes in the Board of the Bank, and the needs expressed, we
strengthened the cooperation and communication competences of the Bank’s top management accordingly. To this end, a collaborative
session was held to explore team psychodynamics at the TOP management level, to review and update the team’s collaborative working
arrangements, and to agree on the cascading of information to the whole organisation and to target groups.
At the same time, to further strengthen leadership competences and respond to the needs expressed by managers, we invited all levels
of the Bank’s management to two Executive Breakfasts in 2022. The topic of the first breakfast was “Regular staff interviews – good
practices”. This breakfast provided managers with an overview of the benefits of regular meetings with staff; how often, for what purpose
and in what form they should take place; and what should be discussed during individual interviews with staff members. The topic of the
second breakfast was dedicated to managerial flexibility. The meeting focused on a common managerial challenge – how to balance the
needs of the organisation, the needs of the manager and the needs of the team in order to achieve the organisation’s goals, keep the
team engaged and the manager motivated. The personal and team growth coach presented flexibility as a managerial competency and
the importance of this competency to be able to function effectively in different situations and when dealing with different people.
Taking into account the expressed training needs of the target group, in 2022, it was decided to allow the members of the Board and
Supervisory Council of the Bank to independently plan their own individual training plan according to their needs.
As part of the Bank’s continued development of process management, in 2022, the training measures set out in the Process and
Operational Efficiency Training Strategy were implemented, with mandatory introductory e-training on process and operational efficiency
for all employees. Training materials on process architecture and modelling/plotting were also developed. The Head of Process
Management delivered five 1.5-day training sessions on advanced process management and improvement to targeted groups of the
Bank’s staff; ~10% of the Bank’s employees completed the training. To ensure the improvement of employees’ competences in the field
of efficiency, as well as to promote the search for efficiency in the Bank, an internal hackathon was organised, during which ideas for
operational and process improvement in 9 areas were developed, with the participation of ~10% of the Bank’s employees succes
sfully
gaining new experiences.
Project management capacity building also continued in 2022, with practical project management training based on the project
development and management procedures for the Bank’s staff working on small and very small projects.
In 2022, we continued to prioritise regulatory requirements for employee qualifications and experience. Therefore, in 2022, a new learning
management system (LMS) – Šiaulių Bankas Academy – was introduced in the Bank. Šiaulių Bankas Academy is a digital learning
platform designed to plan and manage the employee training process, to present educational materials, to assess training results and
other functions of the training management process. The system allows us to adapt more efficiently to constant change, to be faster and
to better manage the training process – from the provision of mandatory training, to the development of general and professional
competences, to the training of individual participants and their groups, and to the measurement of their progress afterwards. The digital
training platform, Šiaulių Bankas Academy, has replaced the Bank’s existing virtual learning environment and has a much broader
functionality.
In line with the 2022 training plan, to strengthen knowledge in the area of anti-money laundering and countering the financing of terrorism
(AML/CFT), more than one training session on the topics set out in the plan has been delivered to the target groups with the help of
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145
internal and external experts. In addition, a mandatory e-training course on anti-money laundering and countering the financing of
terrorism has been developed to maximise the basic knowledge of all the Bank’s employees in the area of AML/CFT. To build the
expertise of compliance professionals, personnel in the areas of money laundering prevention, know-your-client and financial settlement,
and to help them gain relevant knowledge and global best practices in risk management, anti-money laundering and financial crime
prevention, we have secured access for some of them to ICA, CFA and CAMS certifications, which are considered a benchmark of
excellence worldwide.
To ensure compliance with the GDPR and IT security requirements, we invited every employee of the Bank to attend the Šiaulių Bankas
Academy for a mandatory refresher course on Personal Data Protection (2 modules) and Digital Security. The purpose of this training
was to provide a thorough introduction to personal data protection and digital security requirements and practices. In 2022, the digital
security training module was expanded to include information on fraudulent emails (phishing) – how to spot them and avoid being
scammed.
In 2022, in line with the amendments to the Labour Code of the Republic of Lithuania, the Bank adopted the Rules for the Prevention of
Violence and Harassment, which set out the principles of ethical communication between the Bank’s employees and managers; they
also identify possible forms of violence and harassment, and the ways to identify them; describe the measures taken by the Bank to
prevent violence and harassment; detail the procedures for reporting and handling reports of violence and harassment; and outline the
safeguards taken by the Bank to protect persons who report and are victims of violence and harassment. To further explain and provide
more information on the topic of violence and harassment, we have also developed an e-training course Mobbing at Work: How to Spot
It. This training is compulsory for all Bank employees and introduces them to ways of identifying and dealing with mobbing, harassment,
psychological violence and other psychosocial factors that cause tension at work.
In 2022, the unique program Financing Solutions Forum organised by the Bank was continued, aimed at strengthening the functional
and general competencies of credit specialists. Two (spring and fall) sessions were held. And the Annual Šiaulių Bankas Conference
was dedicated to all the Bank employees in 2022. This year, the conference was held online again. Presentations of the speakers and
debates were broadcast live from a specially designed studio, and the broadcast could be watched by all employees of the Bank. The
conference focused on the importance of digitalisation in global, business and personal contexts. During the conference, we talked to
experts from the Bank, Lithuania and around the world about how to build the financial sector with innovative and digitised solutions,
examples around us, and why it is important not to lose sight of the people in the context of digitisation.
Strengthening professional, general and emotional competences is important for every Bank employee to be able to perform his or her
job effectively. In today’s uncertain and stressful environment, heavily influenced by the COVID-19 pandemic, the war in Ukraine and
other environmental factors, the vast majority of staff are facing physical or emotional challenges that undermine their psychological
resilience and their ability to maintain balance while working effectively. To help the Bank employees maintain their mental stability in the
face of war, in 2022, we invited them to receive e-training on how to prepare and behave in an emergency situation and in the event of
a nuclear or radiological accident. We also prepared a series of lectures on emotional health, where knowledgeable experts in their field
shared how to recognise your physical and emotional needs, how to balance them and how to create a healthy relationship with yourself
and your environment.
In 2022, we continued our tradition of organising sales training by internal and external speakers and ensuring the dissemination and
uptake of product expertise across the Network.
We also set up a product management training programme with external partners in order to create a common understanding of the role
of the product manager in the Bank and to introduce product managers to the principles of effective product portfolio management and
resource planning.
The staff of the Bank’s centre and network units raised their competence by participating in external conferences and seminars.
All new employees of the Bank were invited to two-day remote New Employees’ Days events every quarter, where representatives of the
Bank working in different
fields shared their professional experience, introduced new colleagues to the Bank’s structure, functions of the
departments, and presented the Bank’s services, products, processes, and ongoing projects. Around 140 employees participated in the
New Employees’ Days.
Recruiting
In 2022, we implemented an IT system for recruitment management in order to contribute to the Bank’s digital transformation and to
increase the efficiency of recruitment activities, as well as to strengthen the employer’s image and improve the candidate experience.
The system has helped us to unify and standardise the selection process, making it faster, simpler and more efficient. The system has
made it possible to ensure more efficient processing of candidates’ personal data in line with the General Data Protection Regulation
(GDPR). It allows us to ensure the consistency of the information we publish across different channels, to build and manage a database
of potential candidates and to ensure a positive candidate experience. Alongside the introduction of this system, we have updated the
Bank’s careers section, which boosts the Bank’s image as an employer.
External recruitment partners were used to attract staff, often in the areas of prevention, compliance, risk management and management
positions.
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146
Internship opportunities
In 2022, the Bank continued to cooperate with Lithuanian higher education institutions, providing opportunities for students to carry out
a wide range of internships at the Bank.
In 2022, 28 students completed compulsory or voluntary internships in various divisions of the Bank. Students had the opportunity to
carry out internships in various divisions of the Bank, gain practical work experience and establish professional contacts important for
their future careers. After the internship, the Bank provides opportunities for students to find employment and start a professional career.
In 2022, 9 students stayed with the Bank after their internships.
Also in 2022, the Bank’s representatives took part in career days organised by two educational institutions – University of Applied Social
Sciences (SMK) in Kaunas and Vilnius, and Vilnius University of Applied Sciences (VIKO).
Employee motivation
The majority of the Group’s employees may be granted quarterly and/or annual bonuses for achieving the unit’s and/or personal goals.
The employees can also be motivated by one-time bonuses for exceptional results, participation in projects significant to the Bank, etc.
The annual variable remuneration in cash and in the Bank’s shares may be granted only to the Nominated Employees. Nominated
Employees are the managers of the Bank and some of the Group’s companies and members of the Board of the Bank, as well as other
employees of the Bank whose professional activities have a significant impact on the risk profile of the Bank and the Group and for which
such employees are considered to be recipients of annual variable remuneration in accordance with the applicable legal acts of the
Republic of Lithuania and the European Union. For more information on remuneration of Nominated Employees, see the Remuneration
Policy section of this notice.
Fringe benefits within the Group are not based on an employee’s performance and are granted to all on the same terms or based on
certain criteria (position, seniority, etc.). In 2022, the Bank, as a socially responsible employer, provided health insurance to all employees
who successfully completed the probationary period and returned after paternity leave. Health insurance is one of the most important
additional incentive measures. It provides faster access to health-related services to the insured employees, for example, receiving
treatment in health care institutions of their choice, visiting specialists, getting various tests done, purchasing medicines, and accessing
other health promotion services.
The Group’s employees have the option of accruing additional retirement benefits in exceptional circumstances, with part of the
contribution paid by the employee and part paid by the employer. The long-term incentive programme Kaupkime Kartu has been
developed together with the Bank’s subsidiary SB Draudimas UAB (specialising in life insurance), in which more than 30 per cent of
employees participate.
Other fringe benefits available to the Bank’s employees that are not based on the employee’s performance:
x telework,
x flexible working hours,
x additional leave depending on the position for certain senior positions and for uninterrupted service,
x paid leave for training,
x one-time bonuses on personal celebrations and events significant for the Bank,
x new employee’s package, gifts to employees and their children on major holidays,
x one-time payments in the event of death of a family member, major accident, critical illness, etc.,
x payment at a higher rate for the first 2 days of sick leave,
x free flu vaccines and other discounts provided by the Bank’s partners,
x team-building events,
x opportunity to participate in interbank and other tournaments in various sports.
Also at the end of 2022, in view of the record high inflation and energy costs, the Group decided to grant one-off compensatory bonuses
during the three winter months to all the Group’s employees whose monthly salary does not exceed a certain amount
REMUNERATION POLICY
The information has been prepared and is provided in accordance with the Description of the Minimum Requirements for Remuneration
Policy of the Board of the Bank of Lithuania, the provisions of Article 450 of Regulation (EU) No. 575/2013 of the European Parliament
and of the Council, the Bank’s Articles of Association, the decisions of the Supervisory Council and the Board, and other legal acts
regulating the requirements for the Remuneration Policy of the Bank, as a financial institution and a stock company whose shares are
admitted to trading in the regulated market.
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147
Information relating to the decision-making process used to determine the Remuneration Policy, including the number of
meetings held by the main body overseeing remuneration during the financial year
In 2022, the Remuneration Policy was reviewed and updated in the light of the changes in the requirements governing the Remuneration
Policy of the Bank. The draft Remuneration Policy was submitted to the Board of the Bank and the Remuneration Committee for
consideration in accordance with internal legislation. Following approval by the Board of the Bank and the Remuneration Committee, the
Remuneration Policy was submitted to the Supervisory Council and the General Meeting of Shareholders of the Bank for approval. The
version of the Remuneration Policy, as approved by the Bank’s General Meeting of Shareholders on 30 March 2022, is effective as of
the date of its approval and applies to the full extent, except in respect of the awarding, approving and granting of remuneration to
Nominated Employees for their work/performance up to the year 2022, in which case the version of the Remuneration Policy as approved
by the Bank’s General Meeting of Shareholders on 31 March 2020 shall apply.
The Remuneration Policy is intended for and applies to the Bank and Group companies. The Group companies that are subject to special
remuneration requirements under other laws draw up and approve their own remuneration policies that apply jointly with this
Remuneration Policy. The approved Remuneration Policy is published on the website of the Bank.
The Supervisory Council of the Bank is responsible for setting the principles of the Remuneration Policy and the models of the
remuneration system, as well as for the periodic review of the Remuneration Policy in the Bank, and the Board of the Bank is responsible
for the implementation of the Remuneration Policy. The Bank’s Internal Audit Division regularly verifies the implementation of the
principles of the Remuneration Policy through annual internal audits.
External consultants were consulted in the preparation of the draft Remuneration Policy.
The Bank has formed a Remuneration Committee that carries out competent and independent assessments of variable remuneration
policy and practice and ensures that the remuneration system takes into account all types of risk, capital and liquidity, and is compatible
with sound and effective risk management as well as with the business strategy, objectives and the long-term interests of continuing
operations of the Bank or the Group company. The composition of the Remuneration Committee, the procedure for its formation, its
functions, rights, and responsibilities are set out in the Rules of Procedure of the Remuneration Committee approved by the Supervisory
Council of the Bank. The composition of the Remuneration Committee is approved by the Supervisory Council of the Bank, and the list
and functions of the committee members are set out in the section of the Annual Report entitled “Committees established in the Bank
and their areas of activity”. The Remuneration Committee held six (6) meetings in 2022.
Information on the link between remuneration and performance
The remuneration system is a complex of remuneration package elements used by the Group to attract, motivate, and retain the best
employees who would help implement the long-term objectives and the business strategy of the Group.
The Bank and Group companies have fixed remuneration and variable remuneration.
Fixed remuneration is the main portion of the Remuneration. Competence, experience, qualifications, specific knowledge, external and
internal equity, market trends, etc. are all taken into account when determining the remuneration of a given employee. Fringe benefits
are applied without regard to the individual performance of employees and without providing an incentive to take risks. Fringe benefits
are based on predefined criteria or apply to all employees.
Variable remuneration is paid to link the individual performance targets of employees to the long-term interests of the Group in order to
ensure sustainable business development and to encourage employees to act in and respectful, honest, transparent and professional
manner, respecting the rights and interests of customers.
The amount of variable remuneration is based on the overall assessment of the performance of the employee, the unit, and the Group.
The variable remuneration awarded to an employee may depend on the job position of the employee, the importance of his/her decisions
that may have a significant effect on the risk assumed by the Group. In addition to the personal financial result achieved, the assessment
of an individual employee’s annual objectives and achievements includes non-financial/non-quantitative contributions (e.g., relations with
clients, colleagues, adherence to standards, fulfilment of the requirements set out in internal documents, initiative, responsibility,
improvement of performance, etc.).
Principles for calculating variable remuneration are designed to meet the Group’s business strategy, objectives, values, the long-term
interests of continuing operations, and promote sound and effective risk management, help avoid conflicts of interest, ensure compliance
with the Code of Ethics and discourage employees from taking excessive risks that are unacceptable to the Group, also ensure the
principles of investor and customer protection in the provision of services by the Group and not harming the interests of custo
mers.
A variable remuneration fund is formed only after assessing the Group’s performance, taking into account current and future risks, costs
of the capital employed and liquidity support. The variable remuneration fund and its size must not limit the ability of the Group to
strengthen its capital base.
The Remuneration Policy seeks to promote responsible business, fair dealing with customers and avoiding conflicts of interest in relations
with customers, so that the monetary/non-monetary rewards do not become an incentive for employees to pursue their own interests,
the interests of the Bank or any other company of the Group to the detriment of customers’ interest.
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148
Key features of the remuneration structure, including information on the criteria used to assess performance, and risk
adjustment, deferral policies and award criteria. The ratio between fixed and variable remuneration.
The Bank and the Group companies, depending on their size, the nature, scale and complexity of their operations and the risks they
take, are subject to fixed remuneration and variable remuneration (remuneration components):
x Fixed remuneration for employees consists of (i) official remuneration and (ii) additional benefits.
x Fixed remuneration for the Supervisory Council members who are not employees consists of (i) official remuneration (ii)
supplement to the official remuneration.
x Variable remuneration of employees is defined as (i) annual variable remuneration, (ii) supplements, (iii) one-time bonuses.
x No variable remuneration is granted to members of the Supervisory Council of the Bank.
Detailed information on the components of remuneration at the Bank and Group companies is provided in the Remuneration Policy,
which is published on the Bank’s website.
Variable remuneration can be granted to all employees, while maintaining an appropriate balance between the ratio of fixed and variable
remuneration components, and the ability to pursue a flexible policy regarding variable remuneration components, i.e., the variable
remuneration granted during one (1) calendar year may not exceed 100 per cent of the amount of fixed remuneration components
received in the same one (1) calendar year for which variable remuneration was granted in order to promote sound and effective risk
management, unless the General Meeting of Shareholders of the Bank increases the maximum ratio of variable to fixed remuneration in
accordance with legal requirements up to 200 per cent.
The Group does not offer guaranteed variable remuneration.
The actual ratio between variable and fixed remuneration in the Group is calculated by adding up all components of the variable
remuneration awarded over a certain period and dividing their sum by the amount of the components of fixed remuneration awarded
during the same period. For calculating the ratio of variable to fixed remuneration for a Nominated Employee, the variable remuneration
is deemed to be the amount of severance pay in excess of the Bank’s obligations to the Nominated Employee in respect of the severance
pay arising out of the employment contract or the requirements of the applicable legislation. The calculation of the fixed remuneration
includes salary, holiday pay, sick leave, daily subsistence allowance, fringe benefits (pension insurance, health insurance contributions,
cash gifts/benefits, prizes, allowances, etc.), and the amount of the severance pay in accordance with the Bank’s obligations to the
Nominated Employee in respect of the severance pay arising out of the employment contract or from the requirements of any applicable
legislation. For the purpose of calculating the variable remuneration, the following is included: the annual variable remuneration awarded
for a given year of work (in cash and in financial instruments), supplements, lump-sum bonuses, and the amount of any severance pay
in excess of the Bank’s obligations to the Nominated Employee in respect of the severance pay arising from the employment contract or
from the requirements of any applicable legislation.
In accordance with the Bank’s Remuneration Policy, the salary, and the bonus to the salary of the members of the Supervisory Council
of the Bank is paid irrespective of the member’s status, age, nationality or experience:
x Salary paid to a member of the Supervisory Council of the Bank is an annual cash remuneration of EUR 50,000 (before
applicable taxes) paid to the member of the Supervisory Council for the performance of his/her duties as a member of the
Supervisory Council pro rata on a monthly or quarterly basis or at such other frequency as may be determined in the contract
between the Bank and the member of the Supervisory Council.
x A bonus to the salary paid to a member of the Supervisory Council is a monetary supplement paid for the performance of
additional functions while performing the duties of a member of the Supervisory Council. The annual bonus to the salary of a
member of the Supervisory Council for the position of Chairperson of the Supervisory Council is 200% of the annual salary. The
annual bonus to the salary of a member of the Supervisory Council for the position of Chairperson of a committee is 25% of the
annual salary. The annual bonus to the salary of a member of the Supervisory Council for the position of a member of a
committee is 15% of the annual salary. The annual bonus to the salary of a member of the Supervisory Council is paid on a pro
rata basis for the preceding month every quarter or at such other frequency as may be determined in the contract between the
Bank and the member of the Supervisory Council.
The annual amount of the salary and the percentage of bonuses to the salary paid to a member of the Supervisory Council is approved
for the entire term of office by the General Meeting of Shareholders of the Bank when approving the Remuneration Policy.
In accordance with the Bank’s Remuneration Policy, annual variable remuneration may only be granted to Nominated Employees, except
for members of the Supervisory Council of the Bank. Nominated Employees are the members of the Supervisory Council of the Bank,
managers and members of the Board of the Bank and part of the Group companies, as well as other employees of the Bank whose
professional activities have material impact on the risk profile of the Bank and the Group, due to which such employees are considered
to be recipients of variable annual remuneration for the purpose of the applicable laws of the Republic of Lithuanian and the European
Union and internal documents of the Bank. The list of Nominated Employees is drawn up in accordance with the qualitative and
quantitative criteria set out in the Delegated Regulation of the European Commission and additional criteria (if appropriate). The
assessment of the Group’s Nominated Positions/Employees is carried out by the Chief Risk Officer, the Chief Compliance Officer, and
representatives of the Legal and Human Resources Departments. The draft assessment and the Group’s List of Nominated Positions,
as appropriate, is submitted to the Remuneration Committee for approval and, subject to the approval of the Remuneration Committee,
to the Board of the Bank for approval. The Risk, Nomination and Audit Committees are given access to the draft assessment of the
Nominated Positions, and their observations, if any, are to be taken into account. All committees involved in the assessment process
CONSOLIDATED ANNUAL REPORT FOR 2022
149
may, if necessary, exchange available information related to the assessment of the Nominated Positions. Group companies, with due
regard to the applicable special regulatory requirements, designate the Nominated Employees of a specific Group company as well as
the principles of variable remuneration applicable to such persons. Such Nominated Employees are not considered to be the Nominated
Employees of the Group.
The annual variable remuneration, including the deferred portion thereof, may be awarded, paid and/or granted only provided the financial
position of the Bank is sustainable, upon application of ex-ante and post-ante measures for adjusting variable annual remuneration by
risk category (where applicable) and without prejudice to the requirements of other laws. The Bank’s assessment of current and potential
future risks, including ESG risk, arising from, or directly related to, the payment of annual variable remuneration is based on the Bank’s
assessment of quantitative and qualitative criteria. Quantitative criteria are the Bank’s capital and liquidity ratios, and qualitative criteria
are the Bank’s business continuity risk management indicators. Annual variable remuneration must be reduced or not paid at all upon
motion of the Bank’s management/supervisory bodies/Remuneration Committee, if the performance of the Group fails to meet the
indicators set out in the strategy, or where losses are recorded, where the Nominated Employee has acted in bad faith or where his/her
actions resulted in a loss to the Bank or the Group.
In 2022, no risk-adjustment measures have been applied to the annual variable remuneration for 2021, following ex-ante and ex-post
assessments.
In determining the annual variable remuneration of the members of the Bank’s bodies, heads of divisions (other than the Head of Internal
Audit Division and other heads of divisions performing internal control functions), significant business units, the Group’s performance has
a greater weight in the calculation of the annual variable remuneration than the performance of the unit/employee; in determining the
annual variable remuneration of control functions and other Nominated Employees, the performance of such employees has a greater
weight in the calculation of the annual variable remuneration than the performance of the Group; in determining the annual variable
remuneration of Nominated Employees of the Group companies, the performance of the Group company has a greater weight in the
calculation of the annual variable remuneration than the overall performance of the Group. The variable remuneration of employees
performing control functions is determined in accordance with the objectives of the respective control function and is not dependent on
the income generated by the business areas under their control but is partly dependent on the overall performance of the Group.
The annual variable remuneration is divided into two equal parts:
x the immediately payable portion amounting to 50 per cent of the total annual variable remuneration awarded, which is paid in
cash.
x for performance up to and including 2021, the deferred portion amounting to 50 per cent of the total annual variable remuneration
award is allocated in the Bank’s shares. The award of this part of the remuneration is deferred for a period of 3 years from the
date of award of the annual variable remuneration to the date of award of the deferred portion, taking into account the potential
risks associated with the employee’s annual appraisal performance.
In accordance with the new version of the Remuneration Policy (effective as of 30/03/2022):
x the immediately payable portion amounting to 50 per cent of the total annual variable remuneration awarded, which is paid in
cash.
x for performance in 2022, the deferred portion amounting to 50 per cent of the total annual variable remuneration award is
allocated in the Bank’s shares. Taking into account the potential risks related to the results of the annual assessment of the
Nominated Employee, as defined in the internal documents of the Bank, the award of this portion of the remuneration is deferred:
(i) in the case of the members of the Board of the Bank, the Head of Bank Administration and the senior management of the
Bank – for a period of five (5) years from the date of award of the annual variable remuneration until the grant of the deferred
portion, (ii) in the case of other Nominated Employees – for a period of four (4) years from the date of award of the annual
variable remuneration until the grant of the deferred portion.
x Where the option is available under the law, by decision of the body awarding the annual variable remuneration, the Nominated
Employees whose annual variable remuneration for a certain year of service does not exceed EUR 50,000 (gross) and does
not amount to more than one third (1/3) of the annual remuneration of the Nominated Employee, may be exempted from the
deferment of the annual variable remuneration and its payment in the Bank’s shares. In the second half of 2022, the
Remuneration Committee approved the proposal to grant the Heads of Control Functions (Nominated Employees), except for
the Head of Risk Management Division, who is also a member of the Board, an annual variable remuneration, without any
deferral and subject to the stipulated limits.
The deferred portion for a Nominated Employee is approved annually on a pro-rata basis or is not approved (where targets are not met,
i.e., the qualitative criterion is not met), even if the Bank’s financial targets are achieved. If the Nominated Employee or the Bank exceeds
the targets, the awarded deferred portion may not be increased, except in the case of ex-post adjustments related to shareholder events
or tax changes. Ex-post risk corrections and ex-post corrections related to the performance of the Nominated Employee may be sufficient
grounds for adjusting the deferred portion awarded to that Nominated Employee (with reduced or no remuneration at all).
The results of the performance appraisal of a Nominated Employee over the last 3 years as a minimum must be taken into account when
approving the deferred portion. Where the duration of the employment relationship or the contract with a Nominated Employee is less
than 3 years, account is taken of the available performance assessment data of the employee.
The amount of the annual variable remuneration for Nominated Employees is determined taking into account the results of the
assessment of the Group’s objectives, the results of the assessment of the achievement of the Group’s corporate/departmental/personal
objectives by the Nominated Employee and the weight assigned to these objectives, the base coefficients of the annual variable
CONSOLIDATED ANNUAL REPORT FOR 2022
150
remuneration approved by the respective body of the Bank, and possible adjustments to the calculated coefficient, which may also be
influenced by the employee’s non-financial/non-quantitative contribution. Annual variable remuneration is linked to the risk taken by the
unit/employee and the performance of the Group/Group company and the unit/employee. The criteria for calculating annual variable
remuneration and target ratios are affected by the job position and responsibility, the effect on operating performance as well as the
existing and future risks.
In case of expiry of an employment contract with a Nominated Employee, an agreement on the procedure for the payment of annual
variable remuneration and/or outstanding portions thereof is made. Any portions of variable remuneration unpaid/not awarded as at the
redundancy date of the Nominated Employee shall be paid/awarded taking into account the employee’s performance during the period
set by the Bank or Group company, his/her period of service during that year, and in such way that the employee is not remunerated if
his/her actions resulted in a loss to the Bank or the Group, except for statutory payments under the law. The award/approval of annual
variable remuneration takes place under the same procedure and at the same time as the award/approval of variable remuneration for
other employees. There is no possibility to recover variable remuneration paid to an employee.
Information on the performance assessment criteria on which the entitlement to shares, options or variable remuneration is
based.
The main criteria and reasons for the variable remuneration system and other fringe benefits.
Deferred annual variable remuneration in the Group is only applicable to Nominated Employees, except for members of the Bank’s
Supervisory Council, whose professional activities have a material impact on the risk profile of the organisation (Group). The annual
variable remuneration, including the deferred portion thereof, may be awarded, paid and/or granted only provided the financial position
of the Bank is sustainable, upon application of ex-ante and post-ante measures for adjusting variable annual remuneration by risk
category (where applicable) and without prejudice to the requirements of other laws. Annual variable remuneration must be reduced or
not paid at all upon motion of the Bank’s management/supervisory bodies/Remuneration Committee, if the performance of the Group
fails to meet the indicators set out in the strategy, or where losses are recorded, where the Nominated Employee has acted in bad faith
or where his/her actions resulted in a loss to the Bank or the Group. Entitlement to the Bank’s shares as part of variable remuneration
is based on the application of the same performance criteria that apply to the cash portion.
The deferred portion of remuneration is released to the Nominated Employee (the approved shares of the Bank are transferred to his/her
ownership) after the expiry of the deferment period. The deferred portion may be released to the Nominated Employee under an option
agreement (option contract) between the Bank and the employee whereby the Bank grants the Nominated Employee the right to acquire
the Bank’s shares free of charge upon the expiry of the deferment period, or other method established by the Board of the Bank may be
used. The Bank’s shares as a portion of the annual variable remuneration payable to Nominated Employees are awarded in accordance
with the Rules for Awarding Shares approved by the General Meeting of Shareholders of the Bank; they are awarded to ensure the
interest of the Group in increasing employee engagement, promoting long-term employment with the Group, and pursuing its long-term
strategic objectives.
Employees are prohibited from personally insuring themselves under insurance strategies or by taking out insurance cover against a
decrease of their variable remuneration in order to mitigate the risk determined through the application of the principles for calculating
their variable remuneration.
Amounts of payments related to employment termination/end of term of office and notice periods are determined based on the statutory
amounts of such payments and/or the duration of such notice periods established in the laws and the procedure laid down in the
Remuneration Policy. The maximum possible amount of severance pay to a Nominated Employee is his/her average salary for twelve
(12) months, unless the Supervisory Council issues a decision to award a higher payment on a case-by-case basis, without exceeding
the prescribed ratio of variable and fixed remuneration. The amount of severance payment and the procedure for awarding it is set out
in the internal documents of the Bank.
GENERAL QUANTITATIVE INFORMATION ON REMUNERATION
Average monthly remuneration of the Bank's and the Group's employees before taxes
Bank
Group
Managing employees
Other employees
Managing employees
Other employees
Average
number of
employees
Average monthly
remuneration,
EUR
Average
number of
employees
Average monthly
remuneration,
EUR
Average
number of
employees
Average monthly
remuneration,
EUR
Average
number of
employees
Average monthly
remuneration,
EUR
2021
74
7,765
643
1,867
89
7,391
725
1,882
2022
73
9,694
1
680
2,198
87
9,404
2
759
2,347
1,2
This figure excludes severance payments made to two members of the Board in 2022 in connection with the termination of their employment, which would result in an average
monthly salary of EUR 10,841 for the Bank and EUR 10,367 for the Group respectively.
Information on the salaries of employees of the Bank and the Group in 2021 and 2022, before taxes
In the tables below:
x Information on executives; members of the governing bodies exercising management functions, persons performing internal
control functions and persons performing administrative functions is presented separately but is also included in the data under
Business areas.
CONSOLIDATED ANNUAL REPORT FOR 2022
151
x Executives, members of the management body exercising the management function should be understood as members of the
Board of the Bank and the Bank’s Chief Executive Officer, members of the Board and the Director of SB Lizingas UAB, members
of the Board and the Director of SB Draudimas UAB; executives of the other companies in the Group are only represented in
the data under Business areas.
x Persons performing internal control functions should be understood as staff responsible and accountable to the management
body for the activities of the independent risk management function, the compliance function, or the internal audit function.
x Persons performing administrative functions should be understood as staff in charge of the division responsible for legal affairs,
finance, including tax and budget, the reliability of accounting policies and procedures, economic analysis, the prevention of
money laundering and terrorist financing, human resources, the development or implementation of remuneration policies,
information technology, information security, and the outsourcing of services related to essential or critical business functions.
x Fixed remuneration includes payments made in the respective year: main salary, payments for leave, payments for sick leave,
income in kind, fringe benefits (e.g., pension insurance, health insurance contributions, gratuities/cash benefits, prizes, funeral
allowances, etc.); a fixed/defined portion of the severance pay; the amount of the severance pay in accordance with the Bank’s
obligations to the Nominated Employee in respect of the severance pay arising out of the employment contract or from the
requirements of any applicable legislation.
x Variable remuneration includes payments made in the respective year: quarterly bonuses and premiums; cash portion of the
annual variable remuneration awarded (deferred portion of the annual variable remuneration awarded in shares is excluded);
deferred share-based components of annual variable remuneration paid; and the fixed/defined portion of the severance pay;
the amount of any severance pay in excess of the Bank’s obligations to the Nominated Employee in respect of the severance
pay arising from the employment contract or from the requirements of any applicable legislation.
x Values in the Total column are calculated by adding together the information under Business areas.
Managers;
Members of the
ma
nagement
body
performing the
management
function
Persons performing
internal control
functions
Persons
performing
administrative
functions
Business areas
Total
Traditional
banking and
lending
Treasury and
other activities
Business
management
function
Bank
Number of employees as at 31/12/2021
7
3
4
381
16
320
717
Fixed remuneration in 2021, thousand EUR
1,482
217
893
6,780
452
10,525
17,757
Variable remuneration in 2021, thousand EUR
649
71
301
1,385
103
2,061
3,549
Group
Number of employees as at 31/12/2021
14
3
8
424
70
320
814
Fixed remuneration in 2021, thousand EUR
2,079
217
1,106
7,983
1,789
10,525
20,297
Variable remuneration in 2021, thousand EUR
825
71
390
1,454
136
2,061
3,651
Bank
Number of employees as at 31/12/2022
5
6
4
347
16
406
774
Fixed remuneration in 2022, thousand EUR
1,854
449
791
7,809
520
12,723
22,906
Variable remuneration in 2022, thousand
EUR*
1,894
145
351
2,084
166
4,129
8,273
Group
Number of employees as at 31/12/2022
13
6
8
398
64
406
881
Fixed remuneration in 2022, thousand EUR
2,483
449
1,089
9,138
2,237
12,723
26,581
Variable remuneration in 2022, thousand
EUR*
2,270
145
530
2,619
253
4,129
9,271
Information on the remuneration of Nominated Employees of the Bank and the Group in 2022, before tax
As at 31 December 2022, the Group had 31 Nominated Employees, of whom: 24 at the Bank, 4 at SB Lizingas UAB, 3 at Gyvybės
Draudimo UAB SB Draudimas, holding the Nominated Positions, whose professional activities have a significant impact on the risk profile
of the Group, and that have been determined by the Board of the Bank in accordance with the applicable legislation of the Republic of
Lithuania and European Union, and the internal documents of the Bank.
The tables below show:
x information on the fixed remuneration of the members of the management body performing the Bank’s supervisory function
(members of the management body performing the Bank’s supervisory function do not receive variable remuneration).
x fixed and variable remuneration of Nominated Employees of the Bank and the Group, broken down by Business areas. The
Nominated Employees have been identified by their position at 31 December 2022, but for the period worked, the fixed and
annual variable remuneration data also includes information for the Nominated Employees made redundant in 2022.
x The information provided on persons performing internal control functions and persons performing administrative functions,
who are also executives; members of management bodies performing management functions, is duplicated in the relevant
columns but is also included in the data under Business areas.
x Information on executives; members of the governing bodies exercising management functions, persons performing internal
control functions and persons performing administrative functions is presented separately but is also included in the data
under Business areas.
x Values in the Total column are calculated by adding together information under Members of the management body performing
the supervisory function and under Business areas.
CONSOLIDATED ANNUAL REPORT FOR 2022
152
Members of the management
body performing supervisory
function
Employees taking significant risks (Nominated Employees)
Total
Bank
Managers; Members of the
management bo
dy
performing the management
function
Persons performing internal
control functions
Persons
performing
administrative functions
Business areas
Traditional banking
and lending
Treasury and other
activities
Business
management function
FIXED REMUNERATION in 2022, thousand EUR
576
1,854
449
791
946
135
2485
4,142
Number of beneficiaries
7
5
6
4
10
2
13
32
ANNUAL VARIABLE REMUNERATION for 2021 awarded in 2022, thousand EUR
-
1,142
116
448
688
96
1,332
2,116
Annual variable remuneration for 2021 paid out in cash in 2022, thousand EUR
-
571
58
224
344
48
666
1,058
Deferred annual variable remuneration for 2021 awarded in shares in 2022, thousand
EUR
-
571
58
224
344
48
666
1,058
Deferred annual variable remuneration for 2021 awarded in shares in 2022, number
of shares
-
766
77
301
461
64
892
1,417
Number of beneficiaries
-
7
4
3
10
2
11
23
Annual variable remuneration as % of fixed remuneration
-
62%
26%
57%
73%
71%
54%
51%
Payments related to termination in 2022, thousand EUR
-
1,005
-
-
-
-
1,005
1,005
Maximum amount per person, thousand EUR
-
717
-
-
-
-
717
717
Number of beneficiaries
-
2
-
-
-
-
-
2
Guaranteed variable remuneration in 2022, thousand EUR
-
-
-
-
-
-
-
-
Number of beneficiaries
-
-
-
-
-
-
-
-
Annual variable remuneration awarded in shares for 2018 paid in 2022, thousand
EUR
-
502
13
165
272
40
658
970
Deferred annual variable remuneration awarded in shares for 2019 outstanding at
31/12/2022, thousand EUR (awarded in 2020, to be paid in 2023)
-
493
40
162
306
42
641
989
Deferred annual variable remuneration awarded in shares for 2020 outstanding at
31/12/2022, thousand EUR (awarded in 2021, to be paid in 2024)
-
511
122
187
311
44
654
1,009
Deferred annual variable remuneration awarded in shares for 2021 outstanding at
31/12/2022, thousand EUR (awarded in 2022, to be paid in 2025)
-
450
45
177
271
38
570
879
In 2022, one Nominated Employee in the Bank was paid total remuneration (fixed and variable) in the range of EUR 1 million to EUR 1.5
million.
Members of the management
body performing supervisory
function
Employees taking significant risks
Total
Group
Managers; Members of the
management body performing
the management function
Persons performing internal
control functions
Persons performing
administrative functions
Business areas
Traditional banking and
lending
Treasury and other
activities
Business management
function
FIXED REMUNERATION in 2022, thousand EUR
576
2,435
449
1,062
1,313
384
2,485
4,758
Number of beneficiaries
7
13
6
7
14
5
13
39
ANNUAL VARIABLE REMUNERATION for 2021 awarded in 2022, thousand EUR
-
1,516
116
600
976
182
1,332
2,490
Annual variable remuneration for 2021 paid out in cash in 2022, thousand EUR
-
758
58
300
488
91
666
1,245
Deferred annual variable remuneration for 2021 awarded in shares in 2022, thousand
EUR
-
758
58
300
488
91
666
1,245
Deferred annual variable remuneration for 2021 awarded in shares in 2022, number
of shares
-
1016
77
375
654
121
892
1,667
Number of beneficiaries
-
7
4
3
10
2
11
23
Annual variable remuneration as % of fixed remuneration
-
62%
26%
56%
74%
47%
54%
52%
Payments related to termination in 2022, thousand EUR
-
1,005
-
-
-
-
1,005
1,005
Maximum amount per person, thousand EUR
-
717
-
-
-
-
717
717
Number of beneficiaries
-
2
-
-
-
-
2
2
Guaranteed variable remuneration in 2022, thousand EUR
-
-
-
-
-
-
-
-
Number of beneficiaries
-
-
-
-
-
-
-
-
Annual variable remuneration awarded in shares for 2018 paid in 2022, thousand
EUR
-
630
13
221
388
52
670
1,110
Deferred annual variable remuneration awarded in shares for 2019 outstanding at
31/12/2022, thousand EUR (awarded in 2020, to be paid in 2023)
-
634
40
223
431
58
657
1,146
Deferred annual variable remuneration awarded in shares for 2020 outstanding at
31/12/2022, thousand EUR (awarded in 2021, to be paid in 2024)
-
652
122
246
439
57
687
1,183
Deferred annual variable remuneration awarded in shares for 2021 outstanding at
31/12/2022, thousand EUR (awarded in 2022, to be paid in 2025)
-
597
45
237
384
71
603
1,058
CONSOLIDATED ANNUAL REPORT FOR 2022
153
MAIN INVESTMENTS DUR
ING
THE REPORTING PERIOD
The table below shows the main investments made by the Bank's group during the reporting period, in EUR thousand:
Acquisition of property, plant and equipment, investment property and intangible assets
3,424
Acquisition of debt securities at amortized cost
396,788
Acquisition of investment securities at fair value
38,478
COMPANIES COMPRISING GROUP
Nature of
activities
Registration
date
Company
code
Address
Tel.
e-
mail, website
Šiaulių Bankas AB
commercial banking
04/02/1992
112025254
Tilžės str.149
LT-76348 Šiauliai
+370 41 595 607
info@sb.lt,
www.sb.lt
The Bank directly controls the following subsidiaries
SB Lizingas UAB
finance lease, consumer
credits.
14/07/1997
234995490
Laisvės al. 80, LT-
44249 Kaunas
+370 37 407
200
info@sbl.lt,
www.sblizingas.lt
Šiauli
ų Banko Lizingas
UAB*
finance leases (leasing)
and operating leases.
16/08/1999
145569548
Vilniaus str. 167,
LT-
76352 Šiauliai
+370 41 598
010, +370 5 272
3015
lizingas@sb.lt,
www
.sb.lt
SB Turto Fondas UAB
real estate management
13/08/2002
145855439
Vilniaus str. 167,
LT-76352 Šiauliai
+370 41 525
322
turtofondas@sb.lt,
www.sbip.lt
Life insurance SB
draudimas UAB
life insurance
31/08/2000
110081788
Laisvės pr. 3, LT-
04215 Vilnius
+370 5 236
2723
info@sbdraudimas.lt,
www.sbdraudimas.lt
SB modernizavimo
fondas UAB**
multi-apartment
renovation financing
05/04/2022
306057616
Tilžės g. 149, LT-
76348 Šiauliai
+370 41 595
607
sbfondas@sb.lt
*in liquidation
**not consolidated under IFRS 10 requirements
The Bank indirectly controls the following subsidiaries:
Šiaulių Banko Investicijų
Valdymas UAB *
Investment managment
31/08/2000
145649065
Šeimyniškių st. 1A,
LT-09312 Vilnius
+370 5 272
2477
sbiv@sb.lt,
www.sbip.lt
*in liquidation
CONSOLIDATED ANNUAL REPORT FOR 2022
154
OTHER INFORMATION, PUBLISHED
INFORMATION AND MAJOR EVENTS
TRANSACTIONS WITH RELATING PARTIES
Information on these transactions with related parties is provided in note 30 to the Bank's financial statements for the year 2022.
INFORMATION ON SANCTIONS IMPOSED
During 2022, neither Šiaulių Bankas nor the Group companies were subject to any sanctions.
INFORMATION ON RESEARCH AND DEVELOPMENT ACTIVITIES
The Bank is constantly investing and looking for ways to ensure expansion and better operational efficiency.
INFORMATION ABOUT HARMFUL TRANSACTIONS
During the reporting period, no harmful transactions that were not in accordance with the Bank's objectives, normal market conditions,
harming the interests of shareholders or other groups of persons and which had or could have a negative impact on the Bank's activities
or results of operations were concluded. There were also no transactions where the Bank's executives, controlling shareholders or other
related parties would have been in a conflict of interest due to their different duties to the Bank and their private interests and / or duties.
REPORTS ON MATERAIL EVENTS
In accordance with the procedures set by the Charter of the Bank and the legal acts of the Republic of Lithuania reports on material
events are announced in the Central regulated information base and on the Bank‘s website at:
Homepage › Bank Investors › Reports on Stock Events
Other important events are available on the Bank’s website at:
Homepage › About Us › News
ANNEXES
ANNEX 1. Social Responsibility Report for 2022 https://www.sb.lt/en/investors/social-responsibility
ANNEX 2. Report on the Bank‘s Corporate Govenrnance for 2022
ANNEX 3. Remuneration Report for 2022
Chief Executive Officer Vytautas Sinius
2023-03-06
REPORT ON THE BANK’S
CORPORATE GOVERNANCE FOR 2022
(Annex to the Consolidated Annual Report for 2022)
Tilžės 149, LT-76348 Šiauliai
Tel. (8 41) 595 607, faks. (8 41) 430 774
El. paštas info@sb.lt
www.sb.lt
REPORT ON THE BANK‘S CORPORATE GOVERNANCE FOR 2022
(ANNEX TO THE CONSOLIDATED ANNUAL REPORT FOR 2022)
156
Following Article 23
1
s of the Law of the Republic of Lithuania on Financial reporting by Undertakings the Bank discloses its compliance
its specific provisions and recommendations.
Clause 1. Reference (s) to the applicable Corporate Governance Code (Codes) and where it is (they are) published and / or a reference
to all publicly available information on corporate governance practices.
The Bank’s shares are traded on a regulated market and are listed on the Nasdaq Baltic Main List. Following Article 12(3) of the Law on
Securities of the Republic of Lithuania and clause 25.4 of the Listing Rules of Nasdaq Vilnius, the Governance Code for the companies
quoted on the Nasdaq Vilnius applies to the Bank, which has been prepared by Nasdaq Vilnius in accordance with the Commission
recommendation 2014/208/ES dated 09 April 2014 approved by the European Commission regarding quality of governance reporting
provided by undertakings. The Bank follows the Corporate Governance Report form approved by the Board of Nasdaq Vilnius AB on 15
January 2019 which is prepared in accordance with the Governance Code for Listed Companies approved by the Board of Nasdaq
Vilnius on 15 January 2019.
Clause 2. In the event of a deviation from, and / or non-compliance with the applicable provisions of corporate governance code (s), the
provisions being deviated from and / or not complied with and the reasons for it.
Following Article 12(3) of the Law on Securities of the Republic of Lithuania and clause 25.4 of the Listing Rules of Nasdaq Vilnius AB,
the Bank discloses its compliance with the Governance Code for the companies quoted on the Nasdaq Vilnius AB, its specific provisions
and recommendations. Where the Bank does not meet some of its provisions or recommendations, it is indicated which specific provisions
or recommendations are not met and explanatory information is provided.
Free Form Summary of the Corporate Governance Report
According to the Articles of Association, the Bank’s bodies are the General Meeting of Shareholders, the Supervisory Council, the
Management Board and the Chief Executive Officer. The Bank’s Supervisory Council is a collegial eight-member supervisory body with
five independent members. The Management Board of the Bank is a seven-member collegiate executive body of the Bank, consisting of
the Chief Executive Officer, Deputy Chief Executive Officers and Heads of Bank Divisions. The Bank has 6 committees. 4 Committees –
Risk, Audit, Nomination, Remuneration – are formed by the decision of the Supervisory Council from the members of the Supervisory
Council, 2 Committees – Loan and Risk Management – by the decision of the Management Board.
The Supervisory Council is elected by the General Meeting of Shareholders for the term of 4 years. The Management Board of the Bank
is also elected by the Supervisory Council for a 4-year term. The Management Board elects and dismisses the Chief Executive Officer
and his/her Deputies, determines the remuneration of the Chief Executive Officer and other conditions of the employment contract.
More information on the Bank’s corporate governance, shareholders’ rights, activities of the Supervisory Council, Management Board
and Committees, members, internal control and risk management systems is provided in the Bank’s consolidated annual report for the
year ended 31 December 2022.
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Structured table for disclosure
PRINCIPLES/ RECOMMENDATI
ONS
YES
/NO/NOT
APPLICABLE
I Principle. General meeting of shareholders, equitable treatment of shareholders, and shareholders’ rights.
The corporate governance framework should ensure the equitable treatment of all shareholders. The corporate governance
framework should protect the rights of shareholders.
1.1. All shareholders should be provided with access to the information and/or documents established in the legal acts
on equal terms
.
COMMENT
The information required by legislation and the Bank’s documents is publicly available on the Bank’s website in
Lithuanian and English.
All shareholders have the same statutory rights to attend general meetings.
Yes
1.2. It is recommended that the company’s capital should consist only of the shares that grant the same rights to
voting, ownership, dividend and other rights to all of their holders
.
COMMENT
The Bank’s authorised capital consists of 600,726,263 ordinary registered shares with a par value of EUR 0.29
each. Each share grants one vote at
the ge
neral meeting. All shares of the Bank entitle the holders to equal
rights.
Yes
1.3. It is recommended that investors should have access to the information concerning the rights attached to the
shares of the new issue or those issued earlier in
advance, i.e. before they purchase shares.
COMMENT
The Bank’s website contains the Bank’s Articles of Association which establish the rights granted to the holders
of the Bank’s shares.
When new shares are issued, the rights granted by the shares
shall be disclo
sed in the prospectus and in other
publicly available issue documents.
Yes
1.4. Exclusive transactions that are particularly important to the company, such as transfer of all or almost all assets
of the company which in principle would mean the transfer of the company, should be subject to approval of the
general meeting of sharehold
ers.
COMMENT
When approving the Articles of Association of the Bank, the General Meeting of Shareholders transferred the
right to approve the decisions of the Management Board regarding the sale of a significant part of the assets to
the Supervisory Council of the Bank (without prejudice to the requirements of the Law on Companies of the
Republic of Lithuania). It should be noted that in the event of a particularly significant transaction, the Bank’s
bodies, the Management Board or the Supervisory Council, could decide to convene a GMS on this issue,
although such an obligation is not directly enshrined in the Bank’s Articles of Association.
No
1.5. Procedures for convening and conducting a general meeting of shareholders should provide shareholders with
equal opportunities to participate in the general meeting of shareholders and should not prejudice the rights and
interests of shareholders. The cho
sen venue, date and ti
me of the general meeting of shareholders should not prevent
active participation of shareholders at the general meeting. In the notice of the general meeting of shareholders being
convened, the company should specify the last day on
which the proposed dra
ft decisions should be submitted at the
latest.
COMMENT
The General Meetings of Shareholders of the Bank are held in Šiauliai at an address and time announced in
advance. Ordinary shareholders’ meetings are held at the end of
March (i.e., within 3 month
s after the end of
the financial year) extraordinary
–
when necessary. The notice convening the General Meeting of Shareholders
shall specify that the draft resolutions may be submitted in writing or by e
-mail before the time ind
icated on the
date of the meeting and shall be communicated to the chairperson after he/she has announced the agenda of
the meeting, until the meeting begins to discuss the agenda items.
Yes
1.6. With a view to ensure the right of shareholders living abroad to access the information, it is recommended, where
possible, that documents prepared for the general meeting of shareholders in advance should be announced publicly
not only in Lithuanian language but also in English and/or othe
r foreign languages in advance. It is recommende
d that
the minutes of the general meeting of shareholders after the signing thereof and/or adopted decisions should be made
available publicly not only in Lithuanian language but also in English and/or other foreign languages. It is recommended
that this information should be placed on the website of the company. Such documents may be published to the extent
that their public disclosure is not detrimental to the company or the company’s commercial secrets are not revealed.
Yes
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COMMENT
All information and documents of the General Meeting of Shareholders are drafted in Lithuanian and English and
are publicly available on the Bank’s website and through the GlobeNewswire information delivery system
regulated by the Nasdaq Baltic.
1.7. Shareholders who are entitled to vote should be furnished with the opportunity to vote at the general meeting of
shareholders both in person and in absentia. Shareholders should not be prevented from voting in writing in advance
by completing the general voting ballot
.
COMMENT
The Bank’s shareholders have the right to participate in the shareholders’ meeting both in person and through a
representative, by issuing a duly authorised proxy or concluding a transfer of voting rights in accordance with the
procedure established by legal acts. Shareholders are also be provided with the opportunity to vote in writing in
advance by completing the general ballot paper and submitting it to the Bank prior to the meeting.
Yes
1.8. With a view to increasing the shareholders’ opportunities to participate effectively at general meetings of
shareholders, it is recommended that companies should apply modern technologies on a wider scale and thus provide
shareholders with the conditions to participate and vote in general meetings of shareholders via electronic means of
communication. In such cases the security of transmitted information must be ensured and it must be possible to identify
the partic
ipating and voting person.
COMMENT
Due to the specific nature of the Bank’s share accounting, where voting is done through intermediaries and the
beneficial owners of part of the shares are not known to the Bank prior to the disclosure at the General Meeting
of Shareholders, the Bank does not itself encourage or initiate the possibility to participate and vote in General
Meetings of Shareholders by electronic means of communication. However, the Bank would be prepared to allow
shareholders to participate in the General Meeting of Shareholders and to vote by electronic means and to provide
voting instructions, if so requested by shareholders holding shares carrying at least 1/10 of the total votes.
No
1.9. It is recommended that the notice on the draft decisions of the general meeting of shareholders being convened
should specify new candidatures of members of the collegial body, their proposed remuneration and the proposed audit
company if these issues are included into the agenda of the general meeting of shareholders. Where it is proposed to
elect a new member of the collegial body, it is recommended that the information about his/her educational background,
work experience and other managerial positions held (or proposed) should be
provided.
COMMENT
The information made public together with the draft resolutions discloses information about the proposed
candidates, as well as data on the candidates’ education, professional experience and other positions held.
Information on the remuneration paid to the members of the Supervisory Council is set out in the Remuneration
Policy, which is approved by the Bank’s General Meeting of Shareholders and published on the Bank’s website.
In 2022, three (3) new members were elected to the Supervisory Council of the Bank, two (2) of whom are
independent, by submitting to the General Meeting of Shareholders information about the work experience and
other positions held by the candidates, along with the details of each candidate’s education. The name of the audit
company proposed for election to the General Meeting of Shareholders and the proposed remuneration for audit
services are provided in the draft resolution for the relevant item on the agenda of the meeting.
Yes
1.10. Members of the company’s collegial management body, heads of the administration
1
or other competent persons
related to the company who can provide information related to the agenda of the general meeting of shareholders should
take part in the general meeting of shareholders. Proposed candidates to member of the collegial body should also
participate in the general meeting of shareholders in case the election of new members is included into the agenda of
the general meeting of shareholders
.
COMMENT
General Meetings of Shareholders, which are organised and coordinated in advance, are always attended by
persons who can provide information re
lated to the agenda of the meeting.
Proposed candidates shall always attend the General Meeting of Shareholders who elect the members of the
Supervisory Council except in special cases (e.g., if physical attendance at the meeting would not possible due to
the quarantine regime or other important circumstances).
Yes
1
For the purposes of this Code, heads of the administration are the employees of the company who hold top level management positions.
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II Principle. Supervisory Council
2.1 Functions and liability of the supervisory council
The supervisory council f the company should ensure representation of the interests of the company and its shareholders,
accountability of this body to the shareholders and objective monitoring of the company’s operations and its management
bodies as well as constantly provide recommendations to the management bodies of the company.
The supervisor
y council should ensure the integrity and transparency of the company’s financial accounting and control
system.
2.1.1. Members of the supervisory board should act in good faith, with care and responsibility for the benefit and in the
interests of the com
pany and its shareholders and represent their interests, having regard to the interests of employees
and public welfare
.
COMMENT
The members of the Supervisory Council act in accordance with the principles of good governance and perform
their functions
taking into account the interests of the Bank and its
shareholders, depositors and other interested
third parties. The obligations specified in the recommendation are enshrined in the agreement on the activities of
a member of the Supervisory Council and in the Rules of Procedure of the Supervisory Council.
Yes
2.1.2. Where decisions of the Supervisory Council may affect the interests of the company's shareholders differently,
the Supervisory Council should treat all shareholders impartially. It should ensure that shareholders are properly
informed
about the company's strategy, risk management and control and resolution of conflicts of interest.
COMMENT
The Supervisory Council follows the recommendations. Before making decisions, the members of the Supervisory
Council assess their influence on the activities of the Bank and the shareholders of the Bank. The Bank shall
comply with the disclosure requirements of listed companies and shall ensure that the Bank’s shareholders are
properly informed about the Bank’s strategy, operations and risk management and control.
Yes
2.1.3. The supervisory council should be impartial in passing decisions that are significant for the company’s operations
and strategy. Members of the supervisory council should act and p
ass decisions without an
external influence from the
persons who elected them
.
COMMENT
When making decisions that have a bearing on the Bank’s operations and strategy, the Bank’s Supervisory Council
acts independently and follows the requirements of legal acts. The work and decisions of the members of the
Supervisory Council shall not be inf
luenced by the persons who elected them.
The Rules of Procedure of the Supervisory Council include the provision stating that each member shall be
prepared and able
to act objectively, critically and independently and to make informed, objective and indep
endent
decisions.
Yes
2.1.4. Members of the supervisory council should clearly voice their objections in case they believe that a decision of the
supervisory board
is against the interests of the company. Independent
2
members of the
supervisory board should: a)
maintain independence of their analysis and decision
-
making; b) not seek or accept any unjustified privileges that might
compromise their independence
.
KOMENTARAS
The members of the Supervisory Council have the right to express their opinion on all issues on the agenda of the
meeting, which must be duly reflected in the minutes of the meeting in accordance with the Rules of Procedure of
the Supervisory Cou
ncil. The Rules of Procedure of the Supervisory Council oblige the
members of the Supervisory
Council to constructively and critically evaluate the proposals, explanations and information submitted to the
Supervisory Council. Also, in the event of circumstances that could cause a conflict of interest between a member
of the Supervisory Council and the Bank, the member of the Supervisory Council must immediately inform the
Bank and the Supervisory Council in writing about such new circumstances. The obligations specified in the
recommendation are enshrined in the agreement on the activities of a member of the Supervisory Council and in
the Rules of Procedure of the Supervisory Council.
Yes
2.1.5. The supervisory council should oversee that the company’s tax planning strategies are designed and implemented
in
accordance with the legal acts in order to avoid faulty practice that is not related to the long-
term interests of the
company and its shareholders, which may give rise to reputational, legal or other r
isks.
COMMENT
The Bank’s Supervisory Council supervises the activities of the Bank’s bodies in the exercise of its responsibilities,
including that all the Bank’s strategies (as well as the tax planning strategy) are developed and implemented in
accordance with legal acts.
Yes
2.1.6. The company should ensure that the supervisory council is provided with sufficient resources (including financial
ones) to discharge their duties, including the right to obtain all the necessary information or to seek independent
professional advice from external legal, accounting or other experts on matters pertaining to the competence of the
supervisory council and its committees.
Yes
2
For the purposes of this Code, the criteria of independence of members of the supervisory board are interpreted as the criteria of unrelated parties defined in Article 31(7) and
(8) of the Law on Companies of the Republic of Lithuaniai.
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COMMENT
The Bank ensures the Supervisory Council is provided with the resources necessary for its activities – it technically
services the meetings of the Supervisory Council, ensures the secretarial function and providing all the necessary
information.
The Rules
of Procedure of the Supervisory Council also provide for the right of the Supe
rvisory Council to appoint
an expert/group of experts to audit and evaluate the financial accounts of the Bank, considering issues within the
competence of the Supervisory Council.
II Principle. Supervisory Council
2.2 Formation of the Supervisory
Council
The procedure of the formation of the supervisory board should ensure proper resolution of conflicts of interest and effective
and fair corporate governance.
2.2.1. The members of the supervisory council elected by the general meeting of shareholders should collectively ensure
the diversity of qualifications, professional experience and competences and seek for gender equality With a view to
maintain a proper balance between the qualifications of the members of the supervisory board, it should be ensured that
members of the supervisory council, as a whole, should have diverse knowledge, opinions and experience to duly
perform their tasks
.
COMMENT
Shareholders, in assessing the qualifications and professional experience of the members of the Supervisory
Council, shall vote accordingly at the General Meeting of Shareholders in respect of the proposed candidates to
the Supervisory Council.
Before recommending candidates to the Supervisory Council to the General Meeting of Shareholders, the
Nominati
on Committee evaluates the candidates for the members of the Superv
isory Council in accordance with
the applicable legal regulations and the Bank’s internal legal acts. The evaluation also includes a collective
evaluation of the Supervisory Council as a body. The diversity of the qualifications, professional experience and
competences of the members of the Supervisory Council is ensured by the fact that a member of the Supervisory
Council (nominated or already elected at the shareholders meeting) is allowed to start his/her duties only with the
permission of the supervisory authority. The supervisory authority shall also assess the individual and collective
suitability of the members of the Supervisory Council when issuing authorisations.
The composition of
the Supervisory Council is in line with the requirements set out in
the Bank’s Diversity Policy
adopted in 2022, including the criterion of under-representation of the genders in the Bank’s collegial body.
Yes
2.2.2. Members of the supervisory council should be appointed for a specific term, subject to individual re-election for a
new term in office in order to ensure necessary development of professional experience
.
COMMENT
The Supervisory Council is elected for four years. The number of terms of office of a person in the Supervisory
Council shall not be limited. The General Meeting of Shareholders may remove the entire Supervisory Council or
its individual members before the end of the term of office and may elect new members until the end of the term of
office of the existing Supervisory Council.
Yes
2.2.3. Chair of the supervisory council should be a person whose current or past positions constituted no obstacle to
carry out impartial activities. A former manager or management board member of th
e company should not be
immediately
appointed as chair of the supervisory council either. Where the company decides to depart from these recommendations,
it should provide information on the measures taken to ensure impartiality of the supervision
.
COMMENT
The other (former) duties of the Chair of the Supervisory Council do not prevent him/her from acting impartially as
the Chair of the Supervisory Council. The current Chairman of the Supervisory Council (the independent
Supervisory Council member) does
not hold any o
ther positions, either has not been the Chief Executive Officer
or a member of the Management Board of the Bank.
Yes
2.2.4. Each member should devote sufficient time and attention to perform his duties as a member of the supervisory
board. Each member of the supervisory board should undertake to limit his other professional obligations (particularly
the managing positions in other companies) so that they would not interfere with the proper performance of the duties of
a member of the supervisory board. Should a member of the supervisory board attend less than a half of the meetings
of the supervisory board throughout the financial year of the company, the shareholders of the company should be
notified thereof.
COMMENT
The members of the Supervisory Council devote sufficient time and attention to the duties of the member of the
Supervisory Council. Eight (8) meetings of the Supervisory Council were held in 2022, of which three (3) were
extraordinary and exclusively related to a transaction
with a related party (notice). All membe
rs of the Supervisory
Council attended four (4) ordinary meetings and seven (7) out of eight (8) attended one (1). Two (2) extraordinary
meetings of the Supervisory Council, convened as a matter of urgency, were attended by all members of the
Supervisory Council, while one (1) member of the Supervisory Council was absent from one (1) meeting. A member
of the Supervisory Council was also absent from all extraordinary meetings due to an identified conflict of interest.
Yes
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Note. From 5 August 2022 to 31 December 2022, six (6) members of the Supervisory Council served on the
Supervisory Council. On 31 December 2022, the two (2) new members of the Supervisory Council elected at the
Extraordinary General Meeting of 28 July 2022 were not yet approved by the supervisory authority.
2.2.5. When it is proposed to appoint a member of the supervisory board, it should be announced which members of the
supervisory board are deemed to be independent. The supervisory board may decide that, despite the fact that a
particular member meets all the criteria of independence, he/she cannot be considered independent due to special
personal or
company-related circumstances.
COMMENT
There are five (5)
3
independent members in the current eight (8)-member Supervisory Council, whose term is until
the ordinary General Meeting of Shareholders in 2024. This information is disclosed in the Bank’s consolidated
annual reports and the information published on the website of the Bank. The Supervisory Council has not decided
that any of the current independent members cannot be considered independent.
Yes
2.2.6. The amount of remuneration to members of the supervisory council for their activity and participation in meetings
of the supervisory board should be approved by the general meeting of shareholders
.
COMMENT
For their activities and participation in meetings, the members of the Supervisory Council are paid a fixed
remuneration which consists of a salary and a bonus paid for performing additional functions while holding the
position of a member of the Supervisory Council (Chair of the Supervisory Council, Chair of the Committee,
Committee member)
.
The annual amount of the official remuneration and the percentage of bonuses to the official remuneration paid to
a member of the Supervisory Council for the entire term of office shall be approved by the General Meeting of
Shareholders of the Bank when approving the Remuneration Policy.
Yes
2.2.7. Every year the supervisory board should carry out an assessment of its activities. It should include evaluation of
the structure of the supervisory board, its work organization and ability to act as a group, evaluation of the competence
and work efficiency of each member of the supervisory board, and evaluation whether the supervisory board has
achieved its objectives. The supervisory board should, at least once a year, make public respective information about
its internal structure and worki
ng procedures.
COMMENT
Each year, the members of the Supervisory Council participate in the overall process of assessing the effectiveness
of the Bank’s internal management system, which includes assessing its structure, organisation and ability to act
as a group, as well as assessing whether the Supervisory Council had achieved the set performance targets. The
composition and operating procedures of the Supervisory Council are specified in the Bank’s Articles of Association
and published in the annual reports.
Yes
III Principle. Management Board
3.1 Functions and liability of the management board
The management board should ensure the implementation of the company’s strategy and good corporate governance with
due regard to the interests of its shareholders, employees and other interest groups.
3.1.1. The management board should ensure the implementation of the company’s strategy approved by the supervisory
board if the latter has been formed at the company.
In such
cases where the supervisory board is not formed, the
management board is also responsible for the approval of the company’s strategy
.
COMMENT
The Bank’s Management Board ensures the implementation of the Bank’s strategy as approved by the Supervisory
Council.
Yes
3.1.2. As a collegial management body of the company, the management board performs the functions assigned to it by
the Law and in the articles of association of the company, and in such cases where the supervisory board is not formed
in the company, it performs inter alia the supervisory functions established in the Law. By performing the functions
assigned to it, the management board should take into account the needs of the company’s shareholders, employees
and other inter
est groups by respectively striving to achieve sustainable business development.
COMMENT
The Bank has a Supervisory Council, accordingly the Management Council, performs the functions assigned to it
by law and the Bank’s Articles of
Association.
The duty to act in good faith, diligently, responsibly and prudently, to make decisions for the benefit of the Bank
and its shareholders and taking into account their legitimate interests is enshrined in the Rules of Procedure of the
Management Board of the Bank.
Yes
3
Mr. Okmanas, who was elected as an independent member of the Supervisory Council at the Extraordinary General Meeting of Shareholders held on 28 July 2022, has not
yet been approved by the supervisory authority to take up his duties as at 31 December 2022
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3.1.3. The management board should ensure compliance with the laws and the internal policy of the company applicable
to the company or a group of companies to which this company belongs. It should also establish the respective risk
management and control measures a
imed at ensuring regular and direct liability of managers.
COMMENT
The Board of the Bank ensures compliance with laws and internal policies. As set out in the Bank’s Articles of
Association, the
Management Board monitors the implementation of the Bank’s
risk management policy,
independent risk management and compliance, effective functioning of the Bank’s internal control system, how
appropriate is governance structure, compliance with set principles, values, and code of conduct. The Management
Board monitors and supervises whether the actions of the Bank’s administration are in accordance with the Bank’s
strategy, policies, business plans, budget implementation and, where appropriate, special external or internal
factors (e.g., non
-standard financial sec
tor developments, regulatory changes, supervisory requirements,
substantial deviation from business plans, budget) may revoke decisions made by the Chief Executive Officer of
the Bank.
Yes
3.1.4. Moreover, the management board should ensure that the measures included into the OECD Good Practice
Guidance
4
on Internal Controls, Ethics and Compliance are applied at the
company in order to ensure adherence to the
applicable laws, rules and s
tandards.
COMMENT
The Management Board is responsible for enforcing applicable laws, regulations and standards in the areas of
internal control, ethics and compliance,
including those included in the OECD Guidelines.
The Bank has various documents in place to ensure internal control, ethics and compliance management
measures, such as: Code of Ethics; Policy for Anti
-
Corruption and Unacceptable Conduct; Compliance Policy of
the Šiaulių Bankas Group; Financial Crime Prevention and Sanctions Compliance Policy; Standard for Prevention
of Money Laundering and Terrorist Financing; Conflict of Interest Management Policy; Risk Management
Framework; Risk Management Strategy, etc.
Yes
3.1.5. On Internal Controls, Ethics and Compliance are applied at the company in order to ensure adherence to the
applicable laws, rules and standards
.
COMMENT
When appointing the Bank’s Chief Executive Officer, the Management Board of the Bank takes into account the
balance of his/her qualifications, skills, experience and competence, as well as his good reputation. It is also taken
into account whether the supervisory authority has not objected to such appointment.
Yes
III Principle. Management Board
3.2 Formation of the management board
3.2.1. The members of the management board elected by the supervisory board or, if the supervisory board is not
formed, by the general meeting of shareholders should
collectively ensure the required diver
sity of qualifications,
professional experience and competences and seek for gender equality. With a view to maintain a proper balance in
terms of the current qualifications possessed by the members of the management board, it should be ensured that the
members of the management board would have, as a whole, diverse knowledge, opinions and experience to duly perform
their tasks
.
COMMENT
The qualifications and professional experience of the members of the Management Board are assessed by the
Supervisory Council by voting in favour of the proposed candidates to the Management Board.
Before recommending candidates to the Management Board to the Supervisory Council, the Nomination
Committee evaluates the candidates to the Management Board in accordance with the applicable legal regulations
and the Bank’s internal legal acts. The evaluation also includes a collective evaluation of the Management Board
as a body. The diversity of the qualifications, professional experience and competences of the members of the
Management Board is ensured by the fact that a member of the Management Board (nominated or already elected
by the Supervisory Council) is allowed to start his/her duties only with the permission of the supervisory authority.
When granting authorisations, the supervisory authority assesses the individual and collective suitability of the
members of the Management Board of the Bank.
Yes
3.2.2. Names and surnames of the candidates to become members of the management board, information on their
educational background, qualifications, professional experience, current positions, other important professional
obligations and potential conflicts of interest should be disclosed without violating the requirements of the legal acts
regulating the handling of personal data at the meeting of the supervisory board in which the management board or
individual members of the management board are elected. In the event that the supervisory board is not formed, the
informatio
n specified in this paragraph should be submitted to
the general meeting of shareholders. The management
board should, on yearly basis, collect data provided in this paragraph on its members and disclose it in the company’s
annual report.
Yes
4
Link to the OECD Good Practice Guidance on Internal Controls, Ethics and Compliance: https://www.oecd.org/daf/anti-bribery/44884389.pdf
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COMMENT
Information on candidates to the Management Board of the Bank, including their curriculum vitae and declaration
of interests, shall be submitted to the meeting of the Bank’s Supervisory Council at which the Management Board
or its individual members are el
ected. Information about the positions held by the members
of the Management
Board or their participation in the activities of other companies is constantly collected, stored and presented in the
Bank’s consolidated annual report and on the Bank’s website.
3.2.3. All new members of the management board should be familiarized with their duties and the structure and
operations of the company
.
COMMENT
Members of the Management Board are familiarised with their duties, activities, organisational and governance
framework of the Bank, its strategy and operations.
Yes
3.2.4. Members of the management board should be appointed for a specific term, subject to individual re-election for a
new term in office in order to ensure necessary development of professional experience and frequent reapproval of their
statu
s.
COMMENT
According to the Bank’s Articles of Association, the Management Board of the Bank is elected for four years. The
number of terms of office of a person in the Management Board shall not be limited. The Supervisory Council may
remove the entire Management Board or its individual members before the end of the term of office and may elect
new members until the end of the term of office of the existing Management Board.
Yes
3.2.5. Chair of the management board should be a person whose current or past positions constitute no obstacle to carry
out impartial activity. Where the supervisory board is not formed, the former manager of the company should not be
immediately appointed as chair of the management board. When a company decides to depart from these
recommendations, it should furnish information on the measures it has taken to ensure the impartiality of supervision.
COMMENT
On 4 August 2022, a new Chairman of the Board of the Bank was elected and took up his office on 19 August
2022. The other (current and former) duties of the Chair of the Management Board of the Bank do not prevent
him/her from acting impartially as the Chair of the Management Board. The fact that the Chair of the Management
Board also is the Chief Executive Officer of the Bank ensures the compliance with the requirement set forth in
Article 33(2) of the Law on Banks of the Republic of Lithuania.
Yes
3.2.6. Each member should devote sufficient time and attention to the duties of a board member. If a board member
attended less than half of the board meetings during the financial year of the company, the company's supervisory
council should be informed a
bout it, if the supervisory council is not formed in the company –
the general meeting of
shareholders
.
COMMENT
Members of the Management Board devote sufficient time and attention to the performance of the duties of a
Management Board member.
The minutes of the company record the participation and voting of the members of the Management Board in
making decisions.
In 2022, 67 meetings of the Management Board were held, all of which were attended by at least five Management
Board members (according to the Rules of Procedure of the Management Board, a meeting may take place and
decisions may be taken when at least 2/3 of the members of the Management Board are present).
Yes
3.2.7. In the event that the management board is elected in the cases established by the Law where the supervisory
council is not formed at the company, and some of its members will be independent
5
, it s
hould be announced which
members of the management board are deemed as independent. The management board may decide that, despite the
fact that a particular member meets all the criteria of independence established by the Law, he/she cannot be considered
independent due to special personal or company
-related circumstances.
COMMENT
The Bank has a Supervisory Council.
Not
applicable
3.2.8. The amount of remuneration to members of the management board for their activity and participation in meetings
of
the management board should be approved by the general meeting of shareholders.
COMMENT
The Bank has a Supervisory Council, which is responsible for electing and removing members of the Management
Board. All members of the Management Board also hold other positions in the Bank. In accordance with the
Remuneration Policy approved by the General Meeting of Shareholders, the prior approval of the Supervisory
Council is required when determining the remuneration and other terms of the employment contract of the members
No
5
For the purposes of this Code, the criteria of independence of the members of the board are interpreted as the criteria of unrelated persons defined in Article 33(7) of the Law
on Companies of the Republic of Lithuania.
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of the Management Board holding other positions in the Bank. The Supervisory Council also approves the annual
variable remuneration of the members of the Management Board holding other positions in the Bank.
3.2.9. The members of the management board should act in good faith, with care and responsibility for the benefit and
the interests of the company and its shareholders with due regard to other stakeholders. When adopting decisions, they
should not act in their personal interest; they s
hould be subject to no-
compete agreements and they should not use the
business informati
on or opportunities related to the company’s operations in violation of the company’s interests.
COMMENT
In accordance with the Rules of Procedure of the Management Board, the Management Board acts in good faith,
with care and responsibly, in accordance with the principles of good governance, and performs its functions in the
interests of the Bank’s shareholders, clients and other interested third parties. A member of the Management Board
shall not have the right to vote and attend the Management Board meeting when dealing with issues related to
his/her activities on the Management Board or his/her responsibility, as well as matters in which the member may
have an inte
rest, or where the lack of objectivity of the member of the Management Board m
ay expose the Bank
to other risks.
Yes
3.2.10. Every year the management board should carry out an assessment of its activities. It should include evaluation
of the structure
of the management board, its work organization and ability to act as a
group, evaluation of the
competence and work efficiency of each member of the management board, and evaluation whether the management
board has achieved its objectives. The management board should, at least once a year, make public respective
information about its internal structure and working procedures in observance of the legal acts regulating the processing
of personal data
.
COMMENT
Each year, the members of the Management Board participate in the overall process of assessing the effectiveness
of the Bank’s internal management system, which includes assessing management structure, organisation and
ability to act as a group, as well as assessing whether the Management Board had achieved the set performance
targets. The composition and operating procedures of the Management Board are specified in the Bank’s Articles
of Association and published in the annual reports.
Yes
IV Principle. Rules of procedure of the supervisory board and the management board of the company
The rules of procedure of the supervisory board, if it is formed at the company, and of the management board should ensure
efficient operation and decision
-making of these bodies and promote active cooperation betwe
en the company’s
management bodies.
4.1. The management board and the supervisory board, if the latter is formed at the company, should act in close
cooperation in order to attain benefit for the company and its shareholders Good corporate governance requires an open
discussion between the management board and the supervisory board. The management board should regularly and,
where necessary, immediately inform the supervisory board about any matters significant for the company that are
related to planning,
business development, risk managemen
t and control, and compliance with the obligations at the
company. The management board should inform he supervisory board about any derogations in its business
development from the previously formulated plans and objec
tives by specifying the reasons for this.
COMMENT
The legal acts regulating the activities of the Supervisory Council and the Management Board, the Articles of
Association and the Rules of Procedure of the Bank, shall establish the principles and procedure of cooperation
between the Supervisory Council and the Management Board and ensure that the supervisory and management
bodies function properly for the maximum benefit of the Bank and its shareholders. The Management Board of the
Bank makes it possible
for the Chairman of the Superv
isory Council to attend its meetings without the right to vote,
if necessary. Management Board members are normally invited to attend meetings of the Supervisory Council.
Yes
4.2. It is recommended that meetings of the company’s collegial bodies should be held at the respective intervals,
according to the pre
-
approved schedule. Each company is free to decide how often meetings of the collegial bodies
should be convened but it is recommended that these meetings should be co
nvened at such intervals
that uninterruptable
resolution of essential corporate governance issues would be ensured. Meetings of the company’s collegial bodies
should be convened at least once per quarter
.
COMMENT
The Supervisory Council and the Management Board of the Bank act in accordance with the procedures
established in their Rules of Procedure.
Meetings of the Supervisory Council shall be held at least four times a year and at intervals not exceeding four
mo
nths. In 2022, 8 meetings of the Supervisory Council were held.
Meetings of the Management Board shall be convened periodically, but at least once a month, in accordance with
the Rules of Procedure of the Management Board. In 2022, 67 meetings of the Management Board were held.
Yes
4.3. Members of a collegial body should be notified of the meeting being convened in advance so that they would have
sufficient time for proper preparation for the issues to be considered at the meeting and a fruitful discussion could be
held and appropriate decisions could be adopted. Along with the notice of the meeting being convened all materials
Yes
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relevant to the issues on the agenda of the meeting should be submitted to the members of the collegial body. The
agenda of the meeting should not be changed or sup
plemented during the meeting, unless all members of the collegial
body present at the meeting agree with such change or supplement to the agenda, or certain issues that are important
to the company require immediate resolution
.
COMMENT
The Rules of Procedure of the Supervisory Council and the Management Board provide for a requirement that the
notice of the meetings being convened be given in advance.
Meetings of the Supervisory Council are held in accordance with a schedule agreed in advance with the
Supervisory Council. Extraordinary meetings are convened as necessary. The agenda of the meeting is prepared
by the secretary of the Supervisory Council, approved by the chair and submitted to the members of the
Supervisory Council in advance not later than four working days before the meeting, and in case the issue should
be solved by way of survey – not later than two working days. The meeting may take place and the resolutions
adopted at it will be considered valid even if this procedure is not observed if all members of the Supervisory
Council agree to it and this is indicated in the minutes of the meeting.
The Management Board meets according to a pre-agreed meeting schedule, i.e., every week. Extraordinary
meetings are convened as necessary, subject to prior agreement with the Chairman of the Management Board.
The agenda of the meeting is prepared by the Secretary of the Management Board, coordinated with the Chairman
of the Management Board, and made available to all members of the Management Board in advance, at least 3
days before the meeting. Additional urgent items may be included on the agenda of a Management Board meeting
only with the consent of the Chair of the Management Board.
4.4. In order to coordinate the activities of the company’s collegial bodies and ensure effective decision-making process,
the chairs of the company’s collegial supervision and management bodies should mutually agree on the dates and
agendas of the meetings and close cooperate in resolving other matters r
elated to co
rporate governance. Meetings of
the company’s supervisory board should be open to members of the management board, particularly in such cases
where issues concerning the removal of the management board members, their responsibility or remuneration are
disc
ussed.
COMMENT
The dates of all meetings of the Supervisory Council and the Management Board cannot be agreed due to the
different frequency of meetings of these bodies. The members of the Management Board are invited to attend all
meetings of the Supervisory Council, regardless of the issues discussed at the meeting.
Yes
V Principle. Nomination, remuneration and audit committees
5.1 Purpose and formation of committees
The committees formed at the company should
increase the work efficiency of the supervisory board or, where the
supervisory board is not formed, of the management board which performs the supervisory functions by ensuring that
decisions are based on due consideration and help organise its work in su
ch a way that the decisions it takes
would be free
of material conflicts of interest.
Committees should exercise independent judgment and integrity when performing their functions and provide the collegial
body with recommendations concerning the decisions
of the collegial body. However, the
final decision should be adopted
by the collegial body.
5.1.1. Taking due account of the company-related circumstances and the chosen corporate governance structure, the
supervisory board of the company or, in
cases where the supervisory board is not for
med, the management board which
performs the supervisory functions, establishes committees. It is recommended that the collegial body should form the
nomination, remuneration and audit committees
6
.
COMMENT
The Bank’s Supervisory Council has formed Audit, Risk, Nomination and Remuneration Committees which operate
in the Bank.
Yes
5.1.2. Companies may decide to set up less than three committees. In such case companies should explain in detail
why they
have chosen the alternative approach, and how the c
hosen approach corresponds with the objectives set for
the three different committees
.
COMMENT
See comment of clause 5.1.1.
Not
applicable
5.1.3. In the cases established by the legal acts the functions assigned to the committees formed at companies may be
performed by the collegial body itself. In such case the provisions of this Code pertaining to the committees (particularly
those related to their role, operation and transparency) should apply, where relevant, to the collegial body as a whole.
Not
applicable
6
The legal acts may provide for the obligation to form a respective committee. For example, the Law on the Audit of Financial Statements of the Republic
of Lithuania provides that public-interest entities (including but not limited to public limited liability companies whose securities are traded on a regulated
market of the Republic of Lithuania and/or of any other Member State) are under the obligation to set up an audit committee (the legal acts provide for the
exemptions where the functions of the audit committee may be carried out by the collegial body performing the supervisory functions).
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COMMENT
See comment of clause 5.1.1.
5.1.4. Committees established by the collegial body should normally be composed of at least three members. Subject
to the
requirements of the legal acts, committees could be comprised only of two membe
rs as well. Members of each
committee should be selected on the basis of their competences by giving priority to independent members of the
collegial body. The chair of the mana
gement board should not serve as the chair of committees.
COMMENT
The Nomination and Remuneration Committees have three members each, and the Risk and Audit Committees
has four members each. The committees are composed of members of the Supervisory Council who are appointed
to the committees taking into account their competence. The Remuneration and Nomination Committees have two
independent members of the Supervisory Council, the Risk Committee
–
three members, and the Audit Committee
is
fully comprised of the independent members. Chairs of all committees are independent members o
f the
Supervisory Council. The Chairman of the Supervisory Council is also the Chairman of the Nomination and
Remuneration Committees.
Yes
5.1.5. The authority of each committee formed should be determined by the collegial body itself. Committees should
perform their duties according to the authority delegated to them and regularly inform the collegial body about their
activities and performance on a regular basis. The authority of each committee defining its role and specifying its rights
and duties should be made public at least once a year (as part of the information disclosed by the company on its
governance structure and practice on an annual basis). In compliance with the legal acts regulating the processing of
personal data, companies should also include in their annual reports the statements of the existing committees on their
composition, the number of meetings and attendance over the year as well as the main directions of their activities and
performance
.
COMMENT
The recommendation is implemented through the committees of the Supervisory Council formed and operating in
the Bank. The powers (functions, rights and duties) of the committees of the Supervisory Council are determined
by the Supervisory Council by approving the operating regulations
of each committee.
The chairs of the committees shall present to the Supervisory Council information on the activities of each
committee between the meetings of the Supervisory Council at the beginning of each meeting of the Supervisory
Council, as well as
the annual reports of the committees to the Supervisory Council.
The powers of the committees, their composition and other information are published in the Bank’s annual and
semi-annual reports.
Yes
5.1.6. With a view to ensure the independence and impartiality of the committees, the members of the collegial body
who are not members of the committees should normally have a right to participate in the meetings of the committee
only if invited by the committee. A committee may invite or request that certain employees of the company or experts
would participate in the meeting. Chair of each committee should have the possibility to maintain direct communication
with the shareholders. Cases where such practice is to be applied should be specified in the rules regulating the activities
of the committee
.
COMMENT
Only Bank employees or other persons (experts) invited by the committee may attend and participate in the
meetings of the committees. The chairs of the committees are enabled to communicate directly with the
shareholders.
Yes
V Principle. Nomination, remuneration and audit committees
5.2 Nomination committee
5.2.1. The key functions of the nomination committee should be the following:
1) to select candidates to fill vacancies in the membership of s
upervisory and management bodies and the
administration and recommend the collegial body to approve
them. The nomination committee should evaluate
the balance of skills, knowledge and experience in the management body, prepare a description of the functions
and capabilities required to assume a particular position and assess the time commitment expected;
2)
assess, on a regular basis, the structure, size and composition of the supervisory and management bodies as
well as the skills, knowledge and activity of i
ts members, and provide the collegial body with recommendations
on how the required changes should be sought;
3) devote the attention necessary to ensure succession planning.
COMMENT
The main functions of the Bank’s Nomination Committee are in line with this recommendation.
Yes
5.2.2. When dealing with issues related to members of the collegial body who
have employment relationships
with the company and the heads of the administration, the manager of the company should be consulted
by granting him/her the right to submit proposals to the Nomination Committee.
Yes
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COMMENT
Consultations between the Nomination Committee and the Chief Executive Officer of the Bank take place through
the information and documents required for the decisions of the Nomination Committee which are prepared by the
Secretary of this Committee
– Director of the Bank’s Personne
l Department who coordinates all the issues relating
to employment relations with the Chief Executive Officer.
V Principle. Nomination, remuneration and audit committees
5.3 Remuneration committee
The main functions of the remuneration committee should be the following:
1)
submit to the collegial body proposals on the remuneration policy applied to members of the supervisory and
management bodies and the heads of the administration for approval. Such policy should include all f
orms of
remuneration, including the fixed-rate remuneration, performance-
based remuneration, financial incentive
schemes, pension arrangements and termination payments as well as conditions
which would allow the
company to recover the amounts or suspend th
e payments by specifying the circumstances under which it
would be expedient to do so;
2) submit to the collegial body proposals regarding individual remuneration for members of the collegial b
odies
and the heads of the administration in order to ensure that
they would be consistent with the company’s
remuneration policy and the evaluation of the performance of the persons concerned;
3) review, on a regular basis, the remuneration policy and its implementation.
COMMENT
The main functions of the Bank’s Remuneration Committee are in line with this recommendation.
Yes
V Principle. Nomination, remuneration and audit committees
5.4 Audit committee
5.4.1. The key functions of the audit committee are defined in the legal acts regulating the activities
7
of the audit
committee.
COMMENT
The key functions of the Bank’s Audit Committee are described in the Regulations of the Audit Committee and
correspond to those specified in legal acts.
Yes
5.4.2. All members of the committee should be provided with detailed information on specific issues of the company’s
accounting system, finances and operations. The heads of the company’s administration should inform the audit
committee about the methods of ac
counting for significant and unusual trans
actions where the accounting may be
subject to different approaches
.
COMMENT
As provided for in the Regulations of the Audit Committee, the members of the committee must be provided with
detailed information reg
arding the specifics of the Bank’s
accounting, financial and operational activities. The
Bank’s management staff and persons responsible for accounting and compiling of the financial statements are
required to inform the Audit Committee of the methods of a
ccounting for high-value and non-st
andard transactions,
if the accounting of these transactions can be managed by different methods as well as activities in preferential
trade zones and/or through specialist entities (enterprises, organisations) in order to find out whether such activity
is justified.
Yes
5.4.3. The audit committee should decide whether the participation of the chair of the management board, the manager
of the company, the chief finance officer (or senior employees responsible for financ
e and accounting), the
internal and
external auditors in its meetings is required (and, if required, when). The committee should be entitled, when needed, to
meet the relevant persons without members of the management bodies present
.
COMMENT
In accordance with the Regulations of the Audit Committee, other employees of the Bank may be invited to attend
the meetings of the Audit Committee (as observers or specialists), but they do not have the right to vote in decision
making. All those present at a meetin
g of the Aud
it Committee shall have access to information on the items on
the agenda for which they are invited. Furthermore, in carrying out its duties, the committee shall be entitled to use
the assistance of third parties for the purpose of conducting s
pecial inves
tigations or other tasks and obtaining the
necessary funding from the Bank.
Yes
7
Issues related to the activities of audit committees are regulated by Regulation No. 537/2014 of the European Parliament and the Council of 16 April 2014 on specific
requirements regarding statutory audit of public-interest entities, the Law on the Audit of Financial Statements of the Republic of Lithuania, and the Rules Regulating the
Activities of Audit Committees approved by the Bank of Lithuania.
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5.4.4. The audit committee should be informed about the internal auditor’s work program and should be furnished with
internal audit reports or periodic summaries
. The audit committee should also be informed about the work program of
external auditors and should receive from the audit firm a report describing all relationships between the independent
audit firm and the company and its group
.
COMMENT
The Bank’s Audit Committee, ensuring the effectiveness of the internal audit function, coordinates and periodically
assesses the work of internal audit function and discusses the results of inspections, assesses how the identified
deficiencies are being eliminated an
d
internal audit plans are being implemented, and, if necessary, takes
appropriate actions.
In supervising external auditors or audit firms, the committee shall be aware of the auditors’ work programme
including the scope of assignments in the financial st
a
tements audit, the materiality level applied, and the process
of identification of significant risks.
Yes
5.4.5. The audit committee should examine whether the company complies with the applicable provisions regulating the
possibility of lodging a complaint or reporting anonymously his/her suspicions of potential violations committed at the
company and should also ensure that there is a procedure in place for proportionate and independent investigation of
such issues and appropriate follow
-up actions.
COMMENT
The Audit Committee verifies if the Bank complies with the effective provisions concerning the possibility for
employees to submit complaints or anonymously report suspicions that significant violations are made within the
Bank and aims to ensure that procedures are established for a proportionate and independent investigation of
such issues and for
the necessary follow-
up. The Audit Committee also may demand information on major events
and non-compliance events, or whether they have been subject to appropriate measures in a timely manner.
Yes
5.4.6. The audit committee should submit to the supervisory board or, where the supervisory board is not formed, to the
management board its activity report at least once in every six months, at the time th
at annual and half-
yearly reports
are approved.
COMMENT
The Bank’s Audit Committee reports to the Supervisory Council once a year, when the financial statements are
submitted for approval to the Bank’s General Meeting of Shareholders.
No
VI Principle. Prevention and disclosure of conflicts of interest
The corporate governance framework should encourage members of the company’s supervisory and management bodies to
avoid conflicts of interest and ensure a transparent and effective mechanism of disclosure of conflicts of interest related to
membe
rs of the supervisory and management bodies.
The corporate governance framework should recognize the rights of the stakeholders as established by law and promote
active cooperation between the company and its st
akeholders in creating the company's well-
being, jobs and financial
stability. In the context of this principle, the term “stakeholders” includes investors, employees, creditors, suppliers,
customers, the local community and others with interests in a particular company.
Any member of the company’s supervisory and management body should avoid a situation where his/her personal
interests are or may be in conflict with the company’s interests. In case such a situation did occur, a member of the
company’s sup
ervisory or management body should,
within a reasonable period of time, notify other members of the
same body or the body of the company which elected him/her or the company’s shareholders of such situation of a
conflict of interest, indicate the nature of
interests and, where possible, their value.
COMMENT
The recommendations are followed. This is ensured by the provisions of the Rules of Procedure of the Supervisory
Council and the Management Board that a member of the Supervisory Council and the Management Board must
avoid activities that may cause a conflict of interest and that he/she must disclose to the Bank any information that
may cause or has already caused the conflict of interest and keep the information up to date.
The Bank has also approved
the Procedure for the M
anagement of Conflicts of Interest, which establishes
measures for the identification, prevention and management of conflicts of interest in the Bank, as well as the rights
and duties and responsibilities of the Bank’s collegial bodies and employees.
Yes
VII Principle. Remuneration policy of the company
The remuneration policy and the procedure for review and disclosure of such policy established at the company should
prevent potential conflicts of interest and abuse in
determi
ning remuneration of members of the collegial bodies and heads
of the administration, in addition it should ensure the publicity and transparency of the company’s remuneration policy and
its long-term strategy.
7.1. The company should approve and post the remuneration policy on the website of the company; such policy should
be reviewed on a regular basis and be consistent with the company’s long-term strategy.
Yes
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COMMENT
The Remuneration Policy approved by the General Meeting of Shareholders on 30 March 2022
8
is published on
the website of the Bank. This policy is in line with the long
-
term strategy of the Bank and is regularly reviewed in
accordance with the procedure and on terms provided for in the legal acts.
7.2. The remuneration policy should include all forms of remuneration, including the fixed-rate remuneration,
performance
-
based remuneration, financial incentive schemes, pension arrangements and termination payments as well
as the conditions specifying th
e cases where the company can recov
er the disbursed amounts or suspend the payments.
COMMENT
The Remuneration Policy covers all forms of remuneration applied by the Bank.
Yes
7.3. With a view to avoid potential conflicts of interest, the remuneration policy should provide that members of the
collegial bodies which perform the supervisory functions should not receive remuneration based on the company’s
performance.
COMMENT
The applicable Remuneration Policy provides for a fixed remuneration for the members of the Supervisory Council,
independent of the Bank's performance.
Yes
7.4. The remuneration policy should provide sufficient information on the policy regarding termination payments.
Termination payments should not
exceed a fixed amount or a fixed number of annual wages and in
general should not
be higher than the non
-
variable component of remuneration for two years or the equivalent thereof. Termination
payments should not be paid if the contract is terminated due t
o inadequate performance.
COMMENT
According to the Remuneration Policy, amounts of payments related to employment termination/end of term of
office and notice periods are determined based on the statutory amounts of such payments and/or the duration of
such notice periods established in the laws and the procedure laid down in the Remuneration Policy. The
Remuneration Policy also sets the maximum amount of severance pay available to a nominated employee at the
sum of twelve (12) months of his/her average salary, unless the Supervisory Council decides to grant a higher
amount on a case-by-case basis and subject to the fulfilment of other additional conditions set out in the policy.
Yes
7.5. In the event that the financial incentive scheme is applied at the company, the remuneration policy should contain
sufficient information about the retention of shares after the award thereof. Where remuneration is based on the award
of shares, shares should not be vested at least for three years after the award thereof. After vesting, members of the
collegial bodies and heads of the administration should retain a certain number of shares until the end of their term in
office, subject to the need to compen
sate for any costs related to the acquisition of shares.
COMMENT
The Bank has a system of payment of a part of the annual variable remuneration in the Bank’s shares. The
Remuneration Policy and other documents regulating the Bank’s remuneration system provide for the granting of
rights to shares four or five years after the initial appointment (through the Employee Options). The retention of
shares after the grant is not provided for the members of the Management Board and the Chief Executive Officer
and is in no way linked to the end of their term of office.
No
7.6. The company should publish information about the implementation of the remuneration policy on its website, with a
key focus on the remuneration policy in respect of the collegial bodies and managers in the next and, where relevant,
subsequent financial years. It should also contain a review of how the remuneration policy was implemented during the
previous financial year. The information of such nature should not include any details having a commercial value.
Particular attention should be paid on the major changes in the company’s remuneration policy, compared to the previous
financial year.
COMMENT
On 30 March 2022, the Bank’s General Meeting of Shareholders approved the Remuneration Policy, which
complies with the requirements of the Law on Companies of the Republic of Lithuania and other legislation
applicable
to the Bank. As of 2021, the Bank publishes information on the implementation of the R
emuneration
Policy.
Yes
7.7. It is recommended that the remuneration policy or any major change of the policy should be included on the agenda
of the general meeting
of shareholders. The schemes under which members and employees of a collegial body
receive
remuneration in shares or share options should be approved by the general meeting of shareholders.
COMMENT
In 2022, the Ordinary General Meeting of Shareholders approved new versions of the Remuneration Policy and
the Rules for Granting
Shares. These documents govern the share-
based payment option scheme for the
recipients of the annual variable remuneration.
Yes
8
This version of the Remuneration Policy, as approved by the Bank’s General Meeting of Shareholders on 30 March 2022, is effective as of the date of its approval and applies
to the full extent, except in respect of the awarding, approving and granting of remuneration to Nominated Employees for their work/performance up to the year 2022, in which
case the version of the Remuneration Policy as approved by the Bank’s General Meeting of Shareholders on 31 March 2020 shall apply
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Changes in the Rules for Granting Shares and Remuneration Policy are possible only by the decision of the
General Meeting of Shareholders.
VIII Principle. Role of stakeholders in corporate governance
The corporate governance framework should recognize the rights of stakeholders entrenched in the laws or mutual
agreements and encourage active cooperation between companies and stakeholders in creating the company value, jobs
and financial sustainability. In the context of this principle the concept “stakeholders” includes investors, employees,
creditors, suppliers, clients, local community and other persons having certain interests in the company concerned.
8.1. The corporate governance framework should ensure that the rights and lawful interests of stakeholders are
protected.
COMMENT
The Bank identifies employees, shareholders, customers, suppliers and partners, regulators, communities and the
public, associates and the media as key stakeholder groups. The rights and legitimate interests of all these groups
are respected, and this is more fully disclosed in the Social Responsibility Report.
Yes
8.2. The corporate governance framework should create conditions for stakeholders to participate in corporate
governance in the manner prescribed by law. Examples of participation by stakeholders in corporate governance include
the participation of employees or their representatives in the adoption of decisions that are important for the company,
consultations with employees or their representatives on corporate governance and other important matters, participation
of employees in the company’s authorized capital, involvement of creditors in corporate governance in the cases of the
company’s insolvency, etc.
COMMENT
Depending on the stakeholder group, participation is made possible. This is explained in more detail in the Social
Responsibility Report.
One of the Bank’s exclusive instruments is employee participation in the share capital through the payment of part
of the annual variable remuneration in the Bank’s shares.
Yes
8.3. Where stakeholders participate in the corporate governance process, they should have access to relevant
information
.
COMMENT
Stakeholders are given access to the necessary information, except where the information is confidential.
Yes
8.4. Stakeholders should be provided with the possibility of reporting confidentially any illegal or unethical practices to
the collegial body performing the supervisory function.
COMMENT
The Bank provides different stakeholder groups with different channels for reporting illegal or unethical practices.
For employees
– through the Bank’s internal information system AIS, for shareholders –
through investor relations
channels, for customers – through the Remote Call Centre, etc.
Yes
IX Principle. Disclosure of information
The corporate governance framework should ensure the timely and accurate disclosure of all material corporate issues,
including the financial situation, operations and governance of the company.
9.1. In accordance with the company’s procedure on confidential information and commercial secrets and the legal acts
regulating the processing of personal data, the information publicly disclosed by the company should include but not be
limited to the following:
9.1.1. operating and financial results of the company;
COMMENT
Disclosed quarterly in interim and annual financial statements.
Yes
9.1.2. objectives and non-financial information of the company;
COMMENT
Disclosed in interim and annual financial statements.
Yes
9.1.3. persons holding a stake in the company or controlling it directly and/or indirectly and/or together with related
persons as well as the structure of the group of companies and their relationships by specifying the final beneficiary.
COMMENT
It is disclosed on the Bank’s website and in its interim and annual statements. The acquisition or disposal of a
stake is also publicly announced when the person or group of persons who have acquired or lost the stake inform
the Bank thereof in accordance with the established procedure.
Yes
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9.1.4. members of the company’s supervisory and management bodies who are deemed independent, the manager of
the company, the shares or votes held by them at the company, participation in corporate governance of other
companies, their competence and remuneration;
COMMENT
It is disclosed on the Bank’s website and in its interim and annual statements.
Yes
9.1.5. reports of the existing committees on their composition, number of meetings and attendance of members during
the last year as well as the main directions an
d results of their activities;
COMMENT
Information on the composition and activities of the Committees is disclosed in an annual report. The number of
committee meetings and attendance by the members shall not be disclosed.
No
9.1.6. potential key risk factors, the company’s risk management and supervision policy;
COMMENT
Information on the Bank’s risk management and supervision is disclosed in the annual financial statements.
Yes
9.1.7. the company’s transactions with related parties;
COMMENT
It is disclosed on the Bank’s website in accordance with the criteria established by legal acts and internal
documents of the Bank.
Yes
9.1.8. main issues related to employees and other stakeholders (for instance, human resource policy, participation of
employees in corporate governance, award of the company’s shares or share options as incentives, relationships with
creditors, suppliers, local community, etc.);
COMMENT
It is disclosed on the Bank’s website in accordance with the criteria established by legal acts and internal
documents of the Bank.
Yes
9.1.9. structure and strategy of corporate governance;
COMMENT
It is disclosed on the Bank’s website and in its interim and annual statements.
Yes
9.1.10. initiatives and measures of social responsibility policy and anti-corruption fight, significant current or planned
investment projects.This list is deemed minimum and companies are encouraged not to restrict themselves to the
disclosure of information inc
luded into this list. This principle
of the Code does not exempt companies from their obligation
to disclose information as provided for in the applicable legal acts;
COMMENT
Information on environmental, social and governance (ESG) aspects and the management of these risks is
disclosed i
n the Social Responsibility Report.
Information on significant investment projects planned and implemented within the scope of the Bank’s activities
is published as essential information of the issuer through the regulated information publication system
administered by Nasdaq.
Yes
9.2. When disclosing the information specified in paragraph 9.1.1 of recommendation 9.1, it is recommended that the
company which is a parent company in respect of other companies should disclose information about the consolidated
results of the whole group of companie
s.
COMMENT
The Bank discloses consolidated results for the Group as a whole through consolidated interim and annual
statements and consolidated annual report.
Yes
9.3. When disclosing the information specified in paragraph 9.1.4 of recommendation 9.1, it is recommended that the
information on the professional experience and qualifications of members of the company’s supervisory and
management bodies and the manager of the company as well as potential conflicts of interest which could affect their
decisions should be provided. It is further recommended that the remuneration or other income of members of the
company’s s
upervisory and management bodies and the manager of the company should be disclosed, as provide
d for
in greater detail in Principle 7
.
COMMENT
Information on the professional experience, qualifications and potential conflicts of interest of the Bank’s
Supervisory Council, Management Board and Chief Executive Officer that could affect their decisions is disclosed.
The Consolidated Annual Report and the Consolidated Financial Statements disclose information on the total
personnel costs, the salaries paid to key executives of the Bank during the year; the Remuneration Report provides
detailed information on the remuneration received by each member of the collegial body.
Yes
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9.4. Information should be disclosed in such manner that no shareholders or investors are discriminated in terms of the
method of receipt and scope of information. Information should be disclosed to all parties concerned at the same time.
COMMENT
Information is provided to shareholders and investors to the same extent and simultaneously in the Lithuanian and
English languages and is publicly available on the Bank’s website.
Yes
X Principle. Selection of the company’s audit firm
The company’s audit firm selection mechanism should ensure the independence of the report and opinion of the audit firm.
10.1. With a view to obtain an objective opinion on the company’s financial condition and financial results, the company’s
annual financial statements and the financial information provided in its annual report should be audited by an
independent audit firm
:
COMMENT
The Bank’s consolidated financial statements are audited, and the financial information presented in the annual
report is audited by an independent firm of auditors in accordance with the International Standards on Auditing as
adopted by the EU.
Yes
10.2. It is recommended that the audit firm would be proposed to the general meeting of shareholders by the supervisory
board or, if the supervisory board is not
formed at the company, by the management board of the company.
COMMENT
The candidate audit firms are selected by the Audit Committee and proposed to the General Meeting of
Shareholders by the Supervisory Council.
Yes
10.3. In the event that the audit firm has received remuneration from the company for the non-audit services provided,
the company should disclose this publicly. This information should also be available to the supervisory board or, if the
supervisory board is not formed at the company, by the management board of the company when considering which
audit firm should be proposed to the general meeting of shareholders
.
COMMENT
The fee information for the audit firm for non-audit services (if any) would be disclosed publicly in the Bank’s
consolidated annual reports. The Supervisory Council and the Management Board have this information at their
disposal.
Yes
Clause 3. Information on risk scope and risk management - describes risk management related to financial reporting, risk mitigation
measures and the internal control system in place.
More details are provided in the Financial Risk Management disclosure in notes to the financial statements for the year 2022 and on the
internal control system in the Consolidated Annual Report 2022.
Clause 4. Information on significant direct or indirect holdings.
As of 31 December 2022, the following shareholdings have been declared in accordance with the procedure established in the Law on
Securities of the Republic of Lithuania and the disclosure rules of the Bank of Lithuania:
 European Bank for Reconstruction and Development (EBRD) holds 21.96% stake, which was reported on 30 December 2021.
As at 31 December 2022, the EBRD held a 20.00% shareholding.
 Algirdas Butkus together with his controlled companies Aiva Trading House UAB and Mintaka UAB holds a stake, the acquisition
of which was reported on 18 September 2019. The size of the stake on the reporting date was 5.59%, it accounted for 5.33%
of the Bank’s shares as at 31 December 2022.
 Gintaras Kateiva together with his spouse Vilinda Kateiviene own a 5.29% stake, the acquisition of which was reported on 18
September 2019; on 31 December 2022, it accounted for 5.39%.
 Invalda INVL AB owns a holding of more than 5 per cent of the shares, the acquisition of which was reported on 17 September
2015. The size of the stake on the reporting date was 6.79%; as of 31 December 2022, the holding of Invalda INVL AB owned
together with subsidiaries INVL Asset Management UAB and INVL Live UAB accounted for 8.06% of the Bank’s shares.
 ME Investicija UAB holds a 5.71% stake, which was reported on 29 December 2021.
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Clause 5. Information on related party transactions as provided for in Article 372 of the Law on Companies (identifying the parties to the
transaction (legal form, name, code, register of the legal entity, register where the data concerning this entity are collected and stored;
natural person's name, address for correspondence) and transaction value).
In 2022, the Bank published on its website three notices regarding significant transactions with parties related with the Bank:
NOTIFICATION 08/02/2022
Transactions concluded with SB Lizingas UAB, a subsidiary of
Šiaulių Bankas AB.
Registration No. 234995490, address: Karaliaus Mindaugo pr. 35, Kaunas.
Transaction information:
 credit limit: EUR 135,000,000 (maturity – 30/03/2023, interest rate – 2.6 per cent)
 credit limit: EUR 16,000,000 (maturity – 30/09/2022, interest rate – 2.6 per cent)
Credit transactions with the party related with Šiaulių Bankas AB were concluded in the ordinary course of business of Šiaulių Bankas
under standard market conditions.
According to the assessment of Šiaulių Bankas AB, credit tr
ansactions and credit transaction terms
and conditions are fair and reasonable in relation to Šiaulių Bankas AB and its shareholders who are not parties to these credit
transactions
NOTIFICATION 25/04/2022
Transactions concluded with SB Modernizavimo Fon
das UAB, a subsidiary of Šiaulių Bankas AB.
Registration number 306057616, address: Tilžės g. 149, Šiauliai.
Transaction information:
 loan of EUR 6,875,000 (maturity – 31/12/2032, interest rate – 1.4 per cent and 6-month EURIBOR*)
 loan of EUR 30,937,000 (maturity – 31/12/2038, interest rate – 2.7 per cent and 6-month EURIBOR*)
 loan of EUR 3,437,500 (maturity – 31/12/2038, interest rate – 2.7 per cent and 6-month EURIBOR*)
 loan of EUR 3,437,500 (maturity – 31/12/2046, interest rate – 12.53 per cent and 6-month EURIBOR*)
* If the EURIBOR value is negative, it is equalled to 0
Credit transactions with the party related with Šiaulių Bankas AB were concluded in the ordinary course of business of Šiaulių Bankas
under standard market conditions. According to the assessment of Šiaulių Bankas AB, credit transactions and credit transaction terms
and conditions are fair and reasonable in relation to Šiaulių Bankas AB and its shareholders who are not parties to these credit
transactions
NOTIFICATION 27/07/2022
Transactions concluded with SB Lizingas UAB, a subsidiary of Šiaulių Bankas A
B.
Registration No. 234995490, address: Karaliaus Mindaugo pr. 35, Kaunas.
Transaction
information:
 credit limit: EUR 165,000,000 (maturity – 30/03/2023, interest rate – 2.6 per cent)
 credit limit: EUR 7,000,000 (maturity – 30/09/2022, interest rate – 2.6 per cent)
Credit transactions with the parties related with Šiaulių Bankas AB were concluded in the ordinary course of business of Šiaulių Bankas
under standard market conditions. According to the assessment of Šiaulių Bankas AB, credit transactions and credit transaction terms
and conditions are fair and reasonable in relation to Šiaulių Bankas AB and its shareholders who are not parties to these credit
transactions
ADDITIONAL INFORMATION
22/11/2022On 22 November, Šiaulių Bankas AB and its associated
entity Invalda INVL AB (registration No. 121304349, address: Gy
nėjų
g. 16, Vilnius) signed an agreement to merge a part of their retail businesses. The value of the transaction is EUR 40.2 million. Following
the transaction, Invalda INVL will hold 62,270,383 shares of Šiaulių Bankas which represents 9.39 per cent of the authorised capital of
Šiaulių Bankas. For the purpose of closing the transaction, Šiaulių Bankas will issue a new special
-
purpose share issue, which will be
bought by Invalda INVL Group at E
UR 0.645 per share.
The transaction is expected to be closed within one year, subject to the receipt of the necessary approvals from the banking supervisors
and competition authorities, the adoption of the necessary resolutions by the extraordinary meetings of shareholders of Šiaulių Bankas
and Invalda INVL, and the fulfilment of the other conditions set out in the agreement
Clause 6. Information on and description of shareholders having special control rights.
There are no shareholders with special control rights in the Bank.
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Clause 7. Details of any existing restrictions on voting rights, such as restrictions on the exercise of voting rights by a certain percentage
or number of persons, the time limits by which voting rights may be exercised or the systems by which ownership of the securities is
separated from the shareholder.
As of 31 December 2022, the Bank was not aware of any restrictions on the voting rights attached to the Bank’s shares, the time limits
for exercising the voting rights, or any voting rights conferred by these shares separated from the shareholder under any systems.
Clause 8. Information on the rules governing the election and replacement of the members of the Board as well as amendments to the
Charter of the Company.
According to the Bank’s Articles of Association, the members of the Management Board are elected, removed and supervised by the
Bank’s Supervisory Council. The selection of the members of the Management Board is carried out in accordance with the Regulations
on the Selection of Management Board Members, and the evaluation of the candidates to the Management Board is carried out in
accordance with the Policy for the Assessment of Managers. In accordance with Policy for the Assessment of Managers, the Nomination
Committee evaluates the candidate and recommends that the appointing/electing person/body make a final decision on the respective
position in the Bank. A member of the Management Board must also obtain the permission of the supervisory authority before taking up
his/her duties at the Bank.
The Bank’s Articles of Association are amended by the General Meeting of Shareholders of the Bank. Decisions on the amendment of
the Articles of Association are adopted by a majority of votes, which may not be less than 2/3 of all votes granted by the shares of the
shareholders participating in the meeting.
Clause 9. Information on the powers of board members.
The Management Board of the Bank is a collegial management body of the Bank consisting of seven (7) members. The term of office of
the Management Board is four years and the number of terms is not limited. If individual members of the Management Board are elected,
they are elected until the end of the term of office of the existing Management Board. The Management Board acts in accordance with
its Rules of Procedure.
The Bank’s Management Board shall consider and approve:
 the Bank's annual report;
 the Bank's annual report;
 the governance structure of the Bank and positions of employees; positions for which persons are hired by holding
competitions;
 regulations of the branches, representative offices and other separate subdivisions of the Bank;
 the Bank’s lending procedure in accordance with the Lending Policy approved by the Bank’s Supervisory Council;
 the procedure for issuing guarantees, sureties and assuming other obligations;
 the procedure for writing off loans and other debt obligations;
 regulations of the Loan Committee and Risk Management Committee of the Bank;
The Management Board also elects/appoints and removes the Chief Executive Officer of the Bank and his/her deputies, determines the
remuneration of the Chief Executive Officer, other terms and conditions of his/her employment contract, approves his/her job description,
promotes him/her and imposes sanctions, determines which information is considered a trade secret and confidential information of the
Bank.
The Management Board shall adopt:
 decisions on the Bank becoming the promoter and/or participant of other legal entities;
 decisions on opening branches, representative offices and other separate subdivisions of the Bank and on terminating their
activities;
 decisions on the investment, transfer or lease of fixed assets with the book value exceeding 1/20 of the Bank’s authorised
capital (calculated separately for each type of transaction);
 decisions on the pledge and mortgage of fixed assets with the book value exceeding 1/20 of the Bank’s authorised capital (the
total amount of transactions is calculated);
 decisions on the issue of guarantees or sureties to secure obligations of other entities in the amount exceeding 1/20 of the
Bank’s authorised capital;
 decisions on the acquisition of fixed assets for a price exceeding 1/20 of the Bank’s authorised capital;
 decisions to issue non-convertible bonds;
 Rules of Procedure of the Management Board;
 decisions on other matters that are considered or decided by the Management Board under the laws and Articles of
Association of the Bank.
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The Management Board shall set forth:
 the terms and conditions of issue of the Bank’s shares;
 the procedure for issuing the Bank’s bonds. When the General Meeting decides on the issue of convertible bonds, the
Management Board shall have the right to determine additional terms and conditions of their issue and approve the
subscription agreements which the Chief Executive Officer or a person authorised by him/her is entitled to sign;
 the recruitment procedure and cases in which employees are hired by the Bank with the approval of the Management Board.
The Management Board shall execute resolutions passed by the General Meeting of Shareholders and the Supervisory Council.
The Management Board shall analyse and evaluate the materials submitted by the Chief Executive Officer of the Bank concerning:
 the strategic business plan of the Bank and information on its implementation;
 organisation of the Bank’s activities;
 the Bank’s financial position;
 results of economic activity, revenue and expenditure estimates, inventory and other records of changes in assets.
The Management Board analyses and evaluates the draft Rules for Granting Shares and submits it to the Supervisory Council and the
General Meeting of Shareholders along with the feedback and proposals. The Management Board, furthermore, analyses and assesses
the set of annual financial statements of the Bank and profit/loss distribution project, and submits them to the Supervisory Council and
the General Meeting of Shareholders together with the annual report of the Bank, and handles other matters related to the business of
the Bank if they do not fall within the competence of other bodies of the Bank under the laws or Articles of Association of the Bank.
The Management Board is responsible for convening and organising the General Meetings of Shareholders in a timely manner.
Clause 10. Information on the competence of the general meeting of shareholders, rights of shareholders and their implementation, if
not provided by law.
The competence of the General Meeting of Shareholders, the rights of shareholders and exercise thereof do not differ from those provided
by law.
Clause 11. Information on the composition of the management, supervisory bodies and their committees, areas of their and company
head’s activity.
The Supervisory Council is a collegial body supervising the activities of the Bank. The Supervisory Council is chaired by the
Chairperson. The Bank’s Supervisory Council, consisting of eight (8) members, is elected by the General Meeting of Shareholders for a
period of four years. The members of the Supervisory Council are proposed to the General Meeting by the initiators of the General
Meeting or shareholders holding 1/20 of the Bank’s shares.
Candidates are proposed before or during the meeting. Each candidate to the Supervisory Council shall inform the General Meeting of
his/her duties and responsibilities, as well as his/her other activities related to the Bank and other legal entities related to the Bank.
In the election of the members of the Supervisory Council, each shareholder shall have the number of votes attributable to the shares
he/she holds multiplied by the number of members of the Supervisory Council being elected. These votes are distributed at the
shareholder’s discretion, for one or more candidates. The candidates who receive most votes shall be elected.
Five (5) independent members
9
were elected to the Supervisory Council for this term. The Articles of Association of the Bank provide
that the number of terms of office of a member of the Supervisory Council shall not be limited.
The functions of the Supervisory Council are as follows:
 considers and approves the Bank’s business strategy, analyses and assesses information on the implementation of the Bank’s
business strategy, provides this information to the Ordinary General Meeting of Shareholders;
 elects members of the Management Board and removes them from office, submits proposals to the Management Board
regarding the candidacy of the Chairperson of the Management Board. Setting the remuneration and other terms and conditions
of employment contracts of the members of the Management Board who hold other positions in the Bank, the Chief Executive
Officer and his/her deputies requires prior approval of the Supervisory Council. If the Bank is operating at a loss, the Supervisory
Council must consider whether the members of the Management Board are suitable for the position;
 elects members of the Audit Committee;
 supervises activities of the Management Board and the Chief Executive Officer of the Bank;
 supervises the implementation of business plans of the Bank, analyses the Bank’s revenue and expenses, own investments
and capital adequacy issues;
 adopts the Rules of Procedure of the Supervisory Council of the Bank;
9
Mr. Okmanas, who was elected as an independent member of the Supervisory Council at the Extraordinary General Meeting of Shareholders held on 28 July 2022, has not
yet been approved by the supervisory authority to take up his duties as at 31 December 2022
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 approves business plans and annual budget of the Bank;
 approves any type of policies related to the Bank’s activities including the risk management policy;
 ensures that the Bank has an efficient internal control system in place;
 submits to the General Meeting of Shareholders feedback and proposals on the draft Rules for Granting Shares;
 makes proposals and comments to the General Meeting of Shareholders on the draft set of annual financial statements of the
Bank, profit/loss distribution project and report of the Bank, and the activities of the Management Board and Chief Executive
Officer;
 makes proposals to the Management Board and Chief Executive Officer to revoke their decisions that contradict the laws and
other legal acts, the Articles of Association of the Bank or decisions of the General Meeting of Shareholders;
 submits to the General Meeting of Shareholders and the Management Board comments and proposals regarding the draft
remuneration policy of public limited liability companies whose shares are admitted to trading on a regulated market and the
draft remuneration report;
 approves the lending policy and sets forth the procedure for lending that is subject to the approval of the Supervisory Council;
 makes proposals to the Management Board and Chief Executive Officer to revoke their decisions that contradict the laws and
other legal acts, Articles of Association of the Bank or decisions of the General Meeting of Shareholders;
 draws up the list of transactions and decisions of the management bodies of the Bank, the conclusion/adoption or execution of
which requires the approval of the Supervisory Council;
 passes decisions that fall within the competence of the Supervisory Council under the procedures approved by the Supervisory
Council, which the Supervisory Council is required to adopt in accordance with the laws, Articles of Association of the Bank and
decisions of the General Meeting of Shareholders;
 considers and decides on other matters that must be considered or decided on by the Supervisory Council under the laws,
Articles of Association of the Bank and decisions of the General Meeting of Shareholders.
Management Board of the Bank – see Clause 9.
Chief Executive Officer (CEO) is a single-person management body of the Bank who organises day-to-day activities of the Bank and
performs other actions necessary to perform his/her functions, implement the decisions of the Bank’s bodies and ensure the Bank’s
activities.
Functions of the Chief Executive Officer of the Bank:
 to organise day-to-day activities of the Bank;
 to hire and dismiss employees of the Bank, conclude and terminate employment contracts concluded with them, provide
incentives to them and impose sanctions on them. The CEO is entitled to authorise another Bank employee to perform actions
listed herein;
 to represent the Bank in dealings with other persons, in a court and arbitral tribunal without a separate authorisation;
 to issue and revoke authorisations to represent the Bank and powers of procurations;
 to issue orders;
 to perform other actions necessary to perform his/her functions, implement decisions of the Bank’s bodies and ensure the Bank’s
activities.
Chief Executive Officer is responsible for:
 organising the Bank’s activities and achieving its goals;
 drawing up a set of financial statements and annual report of the Bank;
 concluding an agreement with the audit firm;
 submitting information and documents to the General Meeting of Shareholders, the Supervisory Council and the Management
Board in the cases provided for in the laws or at the request of the respective bodies;
 submitting documents and data of the Bank to the manager of the Register of Legal Entities;
 submitting documents to the Bank of Lithuania and Lithuanian Central Securities Depository;
 publishing information required by laws and other regulations in sources specified in the Articles of Association of the Bank;

submitting information to the shareholders;
 fulfilling other duties provided for in laws and regulations, Articles of Association of the Bank and job description of the Chief
Executive Officer of the Bank.
The Chief Executive Officer of the Bank shall act on behalf of the Bank and shall have the right to conclude transactions unilaterally,
except as otherwise provided for in the Articles of Association of the Bank or decisions of the Bank’s bodies.
More information about the composition of management bodies and committees is provided in the summary to this report and the
consolidated annual report for 2022, section Bank Management.
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Clause 12. The selection of the chief executive officer, members of the management body and supervisory bodies shall be subject to a
diversity policy covering aspects such as age, gender, education, professional experience, description, objectives, methods of
implementation and results for the reporting period. If the diversity policy is not applied, the reasons for the exclusion shall be explained.
The Bank has a Diversity Policy approved by the Supervisory Council on 5 May 2022, which is publicly available on the Bank’s website.
Diversity in the Bank is understood in a broad sense, not only in terms of the diversity of the management bodies, but also across the
organisation and the Group. Diversity is a situation in which the characteristics of employees and members of management bodies,
including their age, gender, education, and professional experience, differ in such a way as to ensure a diversity of views within the Group
and, as appropriate, the management bodies. The geographical origin criterion is not mandatory as the Bank does not operate
internationally but is seen as an advantage by the Bank. The following Diversity Policy principles and objectives were identified: (i)
Fostering the diversity culture; (ii) Increasing the diversity of the management body; (iii) Equality; (iv) Achieving gender balance; (v)
Increase of the number of the under-represented gender in management bodies; and (vi) Zero-tolerance to discrimination. At least 25
per cent of the members of the Bank’s governing bodies must be women (under-represented gender), with a target of 30 per cent as of
2028 (it should be noted that the current term of office of the Bank’s governing bodies is 2020–2024).
Clause 13. Information on all the agreements between the shareholders (their substance, terms).
The Bank does not have any information about any mutual agreements between the shareholders related to the Bank’s shares effective
as of 31 December 2022.
REMUNERATION REPORT FOR 2022
(Annex to Annual Consolidated Report 2022)
Tilžės 149, LT-76348 Šiauliai
Tel. (8 41) 595 607, faks. (8 41) 430 774
El. paštas info@sb.lt
www.sb.lt
REMUNERATION REPORT FOR 2022
(ANNEX TO THE CONSOLIDATED ANNUAL REPORT FOR 2022)
179
This Remuneration Report of the Bank has been prepared and approved in accordance with the procedure set out in the Republic of
Lithuania Law on Companies and in compliance with the requirements for remuneration reports and their content laid down in the Republic
of Lithuania Law on Financial Statements of Undertakings (Article 23
3
).
After approval of the Bank’s and Group’s financial statements for 2022 by the General Meeting of Shareholders of the Bank, this
Remuneration Report will be published on the Bank’s website www.sb.lt, as an annex to the Consolidated Annual Report 2022, for 10
years.
This Remuneration Report for 2022 covering the period from 1 January 2022 until 31 December 2022 presents information on
remuneration paid to each member of all management and supervisory bodies (the Chief Executive Officer, the Management Board and
the Supervisory Council). Members of the management and supervisory bodies were identified based on their positions in the Bank as
of 31 December 2022; information on the members who started/stopped working in relevant positions in the court of 2022 is provided as
well.
On 30 March 2022, the General Meeting of Shareholders of the Bank did not express a disapproval of or any comments on the
Remuneration Report for 2021 which, as an annex to the Bank‘s Consolidated Annual Report, is published on the Bank’s website in a
document ‘Annual Report of Šiaulių bankas AB and the Bank‘s Group for 2021’.
The Remuneration Report does not include personal data on the members of management and supervisory bodies as well as personal
data that would show marital status of the members. Personal data on the Bank‘s management and supervisory bodies have been
included in the Remuneration Report as required by the Republic of Lithuania Law on Financial Statements of Undertakings.
Remuneration for the members of the Bank‘s management and supervisory bodies is regulated by the Bank’s Remuneration Policy. By
decision of the General Meeting of Shareholders of the Bank taken on 30 March 2022, a new version of the Remuneration Policy was
approved. It is applied in full except for the approval and payment of remuneration to nominated employees for their work/activities until
2022 (in these cases, the version of the Remuneration Policy approved by the Bank‘s General Meeting of Shareholders on 31 March
2020 is applied). Both versions of the Remuneration Policy are published on the Bank‘s website.
The model of the Group’s remuneration system is in line and is aligned with the Bank Group’s business and risk strategy, long-term
continuous business objectives and interests. A uniform remuneration system is applied without any discrimination on the basis of gender,
age, nationality, race, social status, religious, sexual orientation etc. The employee‘s pay is set having regard to this/her knowledge,
expertise, qualifications, responsibilities, decisions, and position. Successful implementation of the Remuneration Policy enables the
Bank to attract, motivate and retain best employees who make valuable contributions to the purposeful implementation of the Group‘s
long-term objectives and business strategy.
According to the Remuneration Policy, fixed salaries are paid to the members of the Bank‘s supervisory bodies; the members of the
management bodies receive both fixed and variable pay. The annual wage fund for the variable pay is formed upon assessment of the
Bank‘s performance results and having regard to existing and anticipated risks as well as capital costs and liquidity support costs.
Principles of calculation of the variable pay are formulated in line with the Group‘s business strategy, objectives, values and long-term
interests of continued activities, so that they promote a reliable and efficient risk management, help avoid conflicts of interests and ensure
compliance with the Code of Conduct, and recipients of variable pay are not encouraged to assume too high risks.
Variable pay for the year is granted to the members of the Bank‘s management body only on completion of the employee‘s annual
performance assessment and a review of results for the past three years. The amount of variable pay is based on a general assessment
of pre-set objectives of the Group, relevant division and the employee as well as results achieved. In the process of assessment of the
employee‘s individual annual objectives and performance, not only the personal financial result achieved but also non-financial/non-
quantified contribution (e. g. compliance with the Bank‘s Code of Conduct and values, relations with customers and colleagues,
compliance with standards and internal documents, showing initiative, leadership/participation in project activities, improvement of
activities) is evaluated.
As per Remuneration Policy of the Bank, the employees receive the annual variable pay in cash and the Bank‘s shares. This
Remuneration Report contains information on the annual variable pay granted in 2022 for the results of 2021. According to the
Remuneration Policy approved by decision of the Bank‘s General Meeting of Shareholders on 1 March 2020 and applied to the annual
variable remuneration for 2021, the granting of the share payable in the Bank‘s shares is deferred for 3 years after the date when the
annual variable pay was granted considering possible risks related to the employee‘s annual evaluation results. The deferred part of the
variable pay is paid out in the Bank‘s shares on expiry of the deferral period. The Bank grants its shares to the employees under option
agreements concluded with them. The variable pay granted to the employee must not exceed 100% of the employee’s fixed pay for the
calendar year.
REMUNERATION REPORT FOR 2022
(ANNEX TO THE CONSOLIDATED ANNUAL REPORT FOR 2022)
180
REMUNERATION OF MEMBERS OF THE SUPERVISORY BODY
According to the Bank‘s Remuneration Policy, the members of the Supervisory Council receive only fixed remuneration that consists of
the (i) the official remuneration and (ii) surplus to the official remuneration for performance of additional functions as a member of the
Supervisory Council. No variable remuneration is provided/paid to the members of the Bank’s Supervisory Council in the Remuneration
Policy.
Information on remuneration to the members of the Supervisory Council (current or having resigned in 2022) (before tax):
Name, Surname
Positions
at the Supervisory Council and Committees
Remuneration paid by
the Bank in 2022,
EUR
1
Remuneration paid in 2022 by a
company that is part of Group;
company name
Valdas Vitkauskas
Independent member of the Supervisory Council from 1 June 2022,
Chairperson of the Supervisory Council from 5 August 2022, Chairperson
of the Remuneration Committee and the Nomination Committee, member
of the Audit Committee and the Risk Committee.
96,203 -
Gintaras Kateiva
Member of the Supervisory Council, member of the Remuneration
Committee
57,500 -
Darius Šulnis
Member of the Supervisory Council, member of the Nomination Committee
61,956
-
Ramunė Vilija Zabulienė
Independent member of the Supervisory Council, Chairperson of the Audit
Committee, member of the Remuneration Committee and the Risk
Committee
77,500 -
Miha Košak
Independent member of the Supervisory Council, Chairperson of the Risk
Committee, member of the Nomination Committee
70,000 -
Susan Gail Buyske
Independent member of the Supervisory Council, member of the Risk
Committee and Audit Committee
60,544 -
Arvydas Salda
Chairperson of the Supervisory Council until 4 August 2022
89,113
500,008
2
Martynas Česnavičius
Independent member of the Supervisory Council, Chairperson of the
Remuneration Committee and the Nomination Committee, member of the
Audit Committee.
Worked in these positions until 4 August 2022
49,012 -
Adriano Arietti
Independent member of the Supervisory Council, member and Deputy
Chairman of the Risk Committee.
Worked in these positions until 29 March 2022
14,066 -
1 - Fixed remuneration was paid to the members of the Supervisory Council for their activities in accordance with the Remuneration Policy.
2 - The amount paid to Arvydas Salda includes the severance pay which he received on termination of his employment contract with Turto fondas UAB, the Group‘s company,
on 31 August 2022.
Information on changes in the remuneration to the members of the Supervisory Council (current or having resigned in 2022) in the period
2018 – 2022:
Name, Surname
Positions at the Supervisory Council and Committees
Changes in remuneration, %
1
2018
compared with
2017
2019
compared with
2018
2020
compared with
2019
2021
compared with
2020
2022
compared with
2021
Valdas Vitkauskas
2
Independent member of the Supervisory Council from 1 June 2022,
Chairperson of the Supervisory Council from 5 August 2022,
Chairperson of the Remuneration Committee and
the Nomination
Committee, member of the Audit Committee and the Risk Committee
-
-
-
-
-
Gintaras Kateiva
Member of the Supervisory Council, member of the Remuneration
Committee
43%
-2%
-3%
-7%
0%
Darius Šulnis
Member of the Supervisory Council, member of the Nomination
Committee
43%
-2%
2%
1%
-5%
Ramunė Vilija
Zabulienė
3
Independent member of the Supervisory Council, Chairperson of the
Audit Committee, member of the Remuneration Committee and the
Risk Committee
46%
2%
4%
-4%
0%
Miha Košak
Independent member of the Supervisory Council, Chairperson of the
Risk Committee, member of the Nomination Committee
186%
-9%
14%
4%
0%
Susan Gail Buyske
4
Independent member of the Supervisory Council, member of the Risk
Committee and Audit Committee
-
-
-
87%
5%
Arvydas Salda
5
Chairperson of the Supervisory Council until 4 August 2022
13%
-19%
0%
-1%
98%
Martynas
Česnavičius
Independent member of the Supervisory Council, Chairperson of the
Remuneration Committee and the Nomination Committee, member of
the Audit Committee.
Worked in these positions until 4 August 2022
43%
-9%
30%
8%
-
41%
Adriano Arietti
6
Independent member of the Supervisory Council, member and Deputy
Chairperson of the Risk Committee.
Worked in these positions until 29 March 2022
-
-
-
33%
-
76%
1 - Tantiemes were paid to the members of the Supervisory Council for their activities until 31 March 2020. The fixed remuneration according to the Remuneration Policy is
paid since 1 April 2020. The changes in the remuneration have been calculated by summing up the amounts paid in relevant years and comparing with previous years. Gross
amounts before taxes were used in the calculations.
2 - Valdas Vitkauskas was elected as an independent member of the Supervisory Council on 1 June 2022, therefore, no changes in his remuneration for 2018 - 2022 are
provided.
3 - The calculations include the additional pay for participation in the meetings of the Bank‘s Committees in the period 2017- QI 2020.
4 - Susan Gail Buyske was elected as an independent member of the Supervisory Council in 2020, therefore, no changes in her remuneration for 2018 - 2020 are provided.
5 - The calculations include the remuneration received for work in other positions in the companies of the Bank‘s Group in 2017 – 2022, also a severance benefit received in
2022 after termination of the employment contract with a Group‘s company on 31 August 2022.
6 - Adriano Arietti was elected as an independent member of the Supervisory Council in 2020, therefore, no changes in his remuneration for 2018 - 2020 are provided
REMUNERATION REPORT FOR 2022
(ANNEX TO THE CONSOLIDATED ANNUAL REPORT FOR 2022)
181
REMUNERATION OF MEMBERS
OF THE MANAGEMENT BODY
All members of the Bank‘s Management Board are employees of the Bank (Chief Executive Officer, Deputy Chief Executive Officer and/or
Heads of Divisions) and receive fixed and variable pay in accordance with the Remuneration Policy of the Bank. According to the Bank‘s
Remuneration Policy, salaries of the members of the Management Board working in other positions at the Bank, the Chief Executive
Officer and his Deputies are set subject to agreement of the Supervisory Council, and the annual variable pay is approved for the
Management Board‘s members by the Supervisory Council.
The annual variable pay of the members of the Bank‘s Management Board is related to risks assumed by relevant division/employee and
objectives set for the Bank/Group, the division and the employee as well as performance results. The criteria for the calculation of the
annual variable pay and the proportions of objectives are determined by the employee‘s position and responsibilities, influence over
performance results, and current and anticipated risks. Variable pay for the employees performing control functions is determined
according to the objectives set for the relevant control function and does not depend on the income earned by the business area for
which the employee is in charge; however, it partially depends on the Group‘s results.
Information on remuneration to the members of the Bank’s Management Board (current or having resigned in 2022) (before tax):
Name, Surname
Position
at the Management
Board and other
positions in the Bank
Fixed remuneration for
2022
Annual variable remuneration
allocated in 2022 for 2021
Other variable
remuneration
(surplus pay, one-
off bonuses,
severance pay)
paid in 2022
Deferred annual variable
remuneration paid in
2022
(for 2018)
Fixed and variable remuneration ratio
for 2021
3
, %
Fixed remuneration
(excluding
income in kind and fringe
benefits),
EUR
1
Income in kind and other
fringe benefits, EUR
2
Paid i
n cash, EUR
Deferred part in the form of
shares, allotment
(to be
granted in
2024), units
In cash, EUR
In cash, EUR
In
the form of
shares, units
Vytautas Sinius
4
Until 18 August 2022, Member of the
Management Board
–
Deputy Chairperson
of the Management Board and
Chief
Executive Officer. From 19 August 2022,
Chairperson of the Management Board
and Chief Executive Officer
305,123
10,764
127,800
192,241
-
186,180
295,055
94%
Donatas Savickas
Deputy Chairperson of the Management
Board, Deputy Chief Executive Officer –
Head of Division
131,788
7,168
54,600
73,196
-
78,985
125,175
96%
Daiva Šorienė
Member of the Management Board,
Deputy Chief Executive Officer
–
Head of
Division
154,816
7,719
63,600
85,262
-
92,526
146,634
94%
Mindaugas Rudys
5
Member of the Management Board, Head
of Division
143,675
6,050
54,600
73,196
- - -
93%
Algim
antas Gaulia
6
Member of the Management Board, Head
of Division
131,878
6,571
41,875
56,137
---
93%
Algirdas Butkus
Chairperson of the Management Board,
Deputy Chief Executive Officer. Worked in
this position until 18 August 2022
653,904
7
3,791
143,400
171,327
430,200
7
208,747
330,819
92%
Ilona Baranaus
-kienė
Member of the Management Board, Head
of Division. Worked in this position until 30
September 2022
286,756
8
3,881
63,600
85,262
148,588
8
92,526
146,634
94%
1 - The fixed remuneration (excluding income in kind and fringe benefits) includes salary paid in 2022 and leave pay, sick leave payments and part of the severance benefit
attributable to the fixed remuneration.
2 - Income in kind and fringe benefits include pension insurance, health insurance contributions, monetary gifts, death benefits and other payments under internal legal acts of
the bank.
3 - Information on the ratio between the fixed pay and the variable pay is provided for 2021 only as the annual variable pay for 2022 has not been granted as yet.
4 - Vytautas Sinius works in the positions of the Chairperson of the Management Board of the Bank and the Chief Executive Officer of the Bank (the single-handed management
body).
5 - Mindaugas Rudys stated working as a member of the Management Board on 31 March 2020, therefore, deferred annual variable remuneration paid in 2022 for 2018 is not
presented.
6 - Algimantas Gaulia stated working as a member of the Management Board on 30 July 2021, therefore, deferred annual variable remuneration paid in 2022 for 2018 is not
presented.
7 - On termination of the employment contract on 18 August 2022, Algirdas Butkus received a severance pay of EUR 717,000 (gross), a part of which corresponding to the
severance pay provided for in the employment contract is attributed to the fixed remuneration and the remaining part – to other variable remuneration.
8 - On termination of the employment contract on 30 September 2022, Ilona Baranauskiene received a severance pay of EUR 287,788 (gross), a part of which corresponding
to the severance pay provided for in the employment contract is attributed to the fixed remuneration and the remaining part – to other variable remuneration.
REMUNERATION REPORT FOR 2022
(ANNEX TO THE CONSOLIDATED ANNUAL REPORT FOR 2022)
182
Members of the Bank’s Management Board did not receive remuneration from the Group‘s companies for 2022 activities.
In accordance with the Remuneration Policy, there are no opportunities for recovering the variable remuneration paid, and no recovery
was applied to the members of the Bank‘s management body.
Information on shares assigned to the members of the Management Board (current or having resigned in 2022) rights granted under
share options, and transactions prices and dates for 2022:
Name, Surname
Position at the Management
Board
and other positions in the Bank
Number of shares (option)
granted as the annual
variable remuneration for
2018
1
Share options
2
Number of option rights
to
shares granted for
2021, with the option
right to be exercised on
11 April 2025 (after 3
approvals)
Approved 1/3 portion in
2021 for the option rights
to the shares granted in
2020, the option
implementation date 12
April 2024
Approved 1/3 portion in
2020 for the option rights
to the shares granted in
2019, the option
implementation date 14
April 2023
Vytautas Sinius
3
Until 18 August 2022, Member of the
Management Board
– Deputy
Chairperson of the Management Board
and
Chief Executive Officer
. From 19
August 2022, Chairperson of the
Management Board and
Chief
Executive Officer
295,055 171,327 76,660 82,865
Donatas Savickas
Deputy Chairperson of the
Management Board, Deputy
Chief
Executive Officer – Head of Division
125,175 73,196 32,751 35,403
Daiva Šorienė
Member of the Management Board,
Deputy Chief Executive Officer
–
Head
of Division
146,634 85,262 38,150 41,238
Mindaugas Rudys
4
Member of the Management Board,
Head of Division
- 73,196 32,751 -
Algimantas Gaulia
5
Member of the Management Board,
Head of Division
- 56,137 - -
Algirdas Butkus
Chairperson of the Management Board,
Deputy Chief Executive Officer. Worked
in this position until 18 August 2022
330,819 192,241 86,017 92,980
Ilona Baranauskienė
Member of the Management Board,
Head of Division. Worked in this
position until 30 September 2022
146,634 85,262 38,150 41,238
1 - Share granting date 12 April 2022, share price EUR 0.631 per share.
2 - Date of granting and approval of the option rights 8 April 2021. The option contract entitles the person to receive, on the option implementation date, the Bank‘s shares
free of charge (the recipient pays taxes on the shares applicable as of the option date) according to the legal acts in effect as of the granting date.
3 - Vytautas Sinius works as the Chairperson of the Management Board of the Bank and the Chief Executive Officer (single-handed management body).
4 - Mindaugas Rudys started working as a member of the Management Board of the Bank on 31 March 2020, therefore, information on the options rights to shares granted
for 2020 and 2021 is provided.
5 - Algimantas Gaulia started working as a member of the Management Board of the Bank on 30 July 2021, therefore, information on the options rights to shares granted for
2021 is provided.
No amendments to the option contracts with the members of the management body were executed.
Below is information on changes in remuneration of members of the Management Board of the Bank (current or having resigned in 2022)
during the period 2017–2021:
Name, Surname
Position at the Management Board and other positions
in the
Bank
Changes in remuneration, %
1
2017
compared
with 2016
2018
compared
with 2017
2019
compared
with 2018
2020
compared
with 2019
2021 compared
with 2020
Vytautas Sinius
2
Until 18 August 2022, Member of the Management Board – Deputy
Chairperson of the Management Board and Chief Executive Officer.
From 19 August 2022, Chairperson of the Management Board and
Chief Executive Officer
5,7% 10,9% 2,7% -7,8% 2.9%
Donatas
Savickas
Deputy Chairperson of the Management Board, Deputy Chief
Executive Officer – Head of Division
5,0% 9,9% 4,4% -6,7% 1.9%
Daiva Šorienė
Member of the Management Board, Deputy Chief Executive Officer –
Head of Division
4,9% 11,2% 1,8% -8,8% 3.0%
Mindaugas Rudys
3
Member of the Management Board, Head of Division
-
-
-
-
5.6%
Algimantas Gaulia
4
Member of the Management Board, Head of Division
-
-
-
-
-
Algirdas Butkus
Chairperson of the Management Board, Deputy Chief Executive
Officer. Worked in this position until 18 August 2022
5,1% 13,4% -2,0% -10,0% 7.5%
Ilona Baranauskienė
5
Member of the Management Board, Head of Division. Worked in this
position until 30 September 2022
-1,2% 13,3% -0,3% -6,5% 3.9%
1 - Changes in remuneration have been calculated by summing up the fixed remuneration paid in relevant years (salary, leave pay, sick leave benefits, income in kind, fringe
benefits) and variable remuneration (bonuses and the annual variable remuneration in cash and in shares for specific years, excluding the deferred parts of the annual
variable remuneration (in cash and shares) for previous years, compared with previous years. Amounts before taxes are provided. No changes in remuneration are provided
for 2022 as the annual variable remuneration for the 2022 results has not been determined as yet.
2 - Vytautas Sinius works as the Chairperson of the Management Board of the Bank and the Chief Executive Officer (single-handed management body).
3 - Mindaugas Rudys stated working as a member of the Management Board on 31 March 2020, therefore, no changes in remuneration are presented for the period before
2020.
4 - Algimantas Gaulia stated working as a member of the Management Board on 30 July 2021, therefore, no changes in remuneration are presented for the period before
2021.
5 - The calculations include the remunerations paid for work in other positions in the companies of the Group in 2016-2020.
REMUNERATION REPORT FOR 2022
(ANNEX TO THE CONSOLIDATED ANNUAL REPORT FOR 2022)
183
CHANGES IN THE BANK’S RESULTS
AND AVERAGE REMUNERATION AMOUNT
Information on the Bank’s results and the average monthly remuneration to the Bank’s employees who are not members of the Bank’s
management and supervisory bodies, for 2018 - 2022:
Net profit, in thousands EUR
Average monthly remuneration, EUR (before taxes)
2022
63,579
2,642
2021
56,005
2,251
2020
43,095
2,080
2019
53,103
2,028
2018
53,065
1,860
CON
FIRMATION FROM THE RESPONSIBLE
PERSONS
We, Chief Executive Officer of Šiaulių bankas AB Vytautas Sinius and Chief Financial Officer Donatas Savickas,
confirm hereby that the provided consolidated financial statements of Šiaulių bankas AB for 2022 are compiled
in compliance with applicable accounting standards, correspond to the reality and correctly reveal the assets,
liabilities, financial status, activity result and cash flows of Šiaulių bankas AB and its Group of Companies,
moreover, we confirm that the review of the business development and activities, the status of the Bank and the
Group, alongside with the description of the key risks and indeterminacies incurred, are correctly revealed in
the consolidated annual report.
Chief Executive Officer Vytautas Sinius
Chief Financial Officer Donatas Savickas
6 March 2023