Annual Report
1. January – 31. December 2021
Vestjysk Bank A/S
Industrivej Syd 13c, DK-7400 Herning
CVR no. 34631328
Registered office: Herning
Telephone (+45) 96 63 20 00
www.vestjyskbank.dk
post@vestjyskbank.dk
Read or download this report at vestjyskbank.dk
The Vestjysk Bank Annual Report for 2021 is a translation of the
original report in Danish (Vestjysk Bank Årsrapport 2021).
In case of discrepancies, the Danish version prevails
2
Annual Report
Contents
Summary 3
Management's review 5
Financial highlights 5
Financial highlights by quarter 7
Financial review 9
Investor relations 26
Corporate governance 29
Organisation 37
Management’s statement 40
Auditors’ reports 42
Financial statements 47
Statements of income and comprehensive income 47
Statement of financial position at 31 December 48
Statement of changes in equity 50
Notes to the financial statements 52
Summary
Annual Report
3
2021 Highlights
Vestjysk Bank realised a very satisfactory profit after tax of DKK 1,080 million in 2021.
As mentioned in the 2021 interim reports, the performance was strongly affected by non-recurring income and costs in
connection with the merger with Den Jyske Sparekasse in January 2021. Adjusted for non-recurring items in that respect, the
profit after tax amounted to DKK 725 million.
The merger with Den Jyske Sparekasse proceeded according to plan. The expected synergies are being realised and non-
recurring costs in connection with the merger are lower than estimated. We consider the merger process to have been
completed.
Alongside the merger process, Vestjysk Bank’s efforts to develop the business focus have produced satisfactory results. In
addition to its focus on servicing both retail and business customers in local branches, the Bank is giving more attention to its
niche areas (healthcare, renewable energy, tourism, fisheries and agriculture), most recently by establishing a Fisheries Centre
in Thyborøn.
The profit for the year was not directly affected by the coronavirus pandemic. The profit was impacted by the impairment
provision for economic uncertainty caused by the pandemic. The growing uncertainty regarding African Swine Fever also caused
the Bank to increase its impairment provision at 31 December 2021. Since 30 September 2021, the Bank has increased its
impairment provision by DKK 67 million from DKK 258 million to DKK 325 million, corresponding to 1.9% of net loans, in response
to the economic uncertainty. The impairment provision covers economic uncertainties related to rising animal feeding and energy
prices for the Bank's business customers, and particularly piglet producers, the risk of further African Swine Fever outbreak, the
risk of bottleneck problems in the Danish labour market and, not least, the uncertainty surrounding the coronavirus pandemic.
In connection with the Bank's budget and forecast updates in Q4 2021, the deferred tax asset was increased by additional tax
income of DKK 113 million. Combined with the DKK 82 million tax income in connection with the merger, tax income for 2021
totalled DKK 195 million.
The highlights below were calculated after adjustment for non-recurring items resulting from the merger with Den Jyske
Sparekasse. Comparative figures have been stated at 31 December 2020 and have not been adjusted for Den Jyske Sparekasse.
Profit after tax of DKK 725 million (31 December 2020: DKK 303 million).
Return on equity of 14.7% p.a. after tax (31 December 2020: 9.8%).
Core income of DKK 1,538 million (31 December 2020: DKK 887 million).
Cost ratio of 60.8% (31 December 2020: 59.8%)
Core earnings before impairment allowances of DKK 614 million (31 December 2020: DKK 357 million).
Net reversals of impairment of loans and receivables, etc. of DKK 20 million (31 December 2020: net impairment of
DKK 29 million).
Common equity tier 1 capital ratio of 16.7% (31 December 2020: 20.9%).
Follow-up on outlook for 2021 and Vestjysk Bank’s outlook for 2022
In connection with the annual report for 2020, the Bank guided a profit after tax in the range of DKK 500-550 million for 2021,
adjusted for non-recurring items resulting from the merger with Den Jyske Sparekasse. The Bank also announced expectations
for overall profit after tax including non-recurring items of about DKK 800-900 million.
Summary
4
Annual Report
The Bank has subsequently upgraded the guidance three times – on 9 August 2021, 12 October 2021 and 13 January 2022. In
the most recent upgrade, the forecast profit after tax excluding non-recurring items relating to the merger with Den Jyske
Sparekasse was DKK 725 million, while the Bank’s expectations for the overall profit after tax including non-recurring items was
DKK 1,080 million.
The reported profit for 2021 was in accordance with the Bank’s forecast. Vestjysk Bank guides a profit before tax in 2022 of
around DKK 600-650 million. Vestjysk Bank’s profit guidance for 2022 is subject to uncertainty.
The uncertainty mainly relates to the Bank’s agricultural exposures. Particularly, uncertainties related to rising animal feeding
and energy prices and the risk of African Swine Fever spreading in Denmark and the declining pork settlement prices could have
a significant adverse impact on the Bank’s impairment losses.
Kim Duus Jan Ulsø Madsen
Chairman of the Board Chief Executive Officer
Management's review
Financial highlights
Annual Report
5
Key figures
2021
2020
2019
2018
2017
Statement of income (DKKm)
Net interest income 807
486
510
548
573
Net fee income 601
326
329
297
338
Dividends on shares, etc. 13
9
29
12
4
Value adjustments 108
65
185
35
23
Other operating income 486
1
2
17
7
Core income 2,015
887
1,055
909
945
Staff costs and administrative expenses 1,044
510
477
470
482
Other operating expenses and depreciation, amortisation and
impairment of property, plant and equipment and intangible assets 57
20
31
11
22
Operating expenses and operating depreciation and amortisation 1,101
530
508
481
504
Core earnings before impairment 914
357
547
428
441
Impairment of loans and receivables, etc. -20
29
64
186
270
Income from investments in associates 20
0
0
0
0
Profit/loss from operations in the process of being wound up 0
0
0
0
0
Profit before tax 954
328
483
242
171
Tax -126
25
5
-54
8
Profit after tax 1,080
303
478
296
163
Statement of financial position (DKKm)
Total assets 43,310
23,105
22,192
21,198
21,902
Loans 16,778
9,332
10,221
10,797
11,629
Deposits 26,024
13,409
13,043
12,902
13,506
Deposits, pooled schemes 9,223
5,426
5,233
4,681
4,890
Contingent liabilities 10,052
5,202
3,966
3,487
3,608
Custody services 19,809
10,040
8,708
7,585
8,713
Arranged mortgage loans 58,192
33,447
30,749
29,122
28,381
Business volume 62,077
33,369
32,463
31,867
33,633
Business volume including custody services and arranged mortgage
loans 140,078
76,856
71,920
68,574
70,727
Equity 5,396
3,245
2,956
2,589
2,515
In accordance with the accounting policies, the comparative figures 2016-2017 have not been restated in connection with
the implementation of IFRS 9 at 1 January 2018.
Management's review
Financial highlights
6
Annual Report
Financial ratios
2021
2020
2019
2018
2017
Solvency
Total capital ratio
18.4%
20.9%
17.6%
15.7%
15.2%
Tier 1 capital ratio
19.7%
22.1%
18.6%
17.4%
16.8%
Common equity tier 1 capital ratio
22.2%
24.7%
21.1%
19.7%
19.2%
MREL-capital
25.1%
24.7%
Earnings
Return on equity before tax, p.a.
1
18.7%
10.6%
17.4%
9.9%
8.5%
Return on equity after tax, p.a.
1
21.2%
9.8%
17.2%
12.1%
8.2%
Income-cost ratio
1.88
1.59
1.84
1.36
1.22
Cost ratio
2
54.1%
59.8%
48.2%
52.9%
53.3%
Return on assets
3.3%
1.3%
2.2%
1.4%
0.8%
Average number of employees (FTE)
657.4
394.7
377.9
385.8
421.9
Market risk
Interest rate risk
1.5%
1.6%
0.7%
-0.5%
-1.2%
Foreign exchange position
0.1%
0.2%
0.4%
0.3%
0.2%
Foreign exchange risk
0.0%
0.0%
0.0%
0.0%
0.0%
LCR
257.3%
180.3%
259.2%
195.3%
255.4%
NSFR
3
139.3%
120.6%
-
-
-
Credit risk
Loans plus impairment on loans relative to deposits
53.2%
60.8%
68.9%
76.3%
79.4%
Loans relative to equity
3.1
2.9
3.5
4.2
4.6
Lending growth for the period
79.8%
-8.7%
-5.3%
-5.6%
-7.2%
Sum of 20 largest exposures
4
106.0%
109.3%
102.7%
116.4%
-
Accumulated impairment ratio
6.9%
12.9%
14.5%
15.6%
16.5%
Impairment ratio
-0.1%
0.1%
0.3%
1.0%
1.5%
Vestjysk Bank share
Earnings per share 1.0
0.3
0.5
0.3
0.3
Book value per share
5
4.1
3.4
3.1
2.6
2.6
Share price at 31 December 3.4
2.8
3.1
2.0
2.7
Share price/earnings per share 3.4
8.2
5.8
5.9
8.7
Share price/book value per share 0.8
0.8
1.0
0.7
1.1
In accordance with the accounting policies, the comparative figures 2016-2017 have not been restated in connection with
the implementation of IFRS 9 at 1 January 2018.
1 Profit/loss / average equity, which is calculated on the basis of opening equity plus capital increase and recognised
negative
goodwill in connection with the merger with Den Jyske Sparekasse 15. January 2021.
2 Operating expenses and operating depreciation and amortisation/core income.
3 As the method of calculating NSFR was revised on 30 June 2021, the comparative figures are not directly comparable.
4 As from 2018, this financial ratio is calculated according to new rules
5 The ratio "Book value per share" is adjusted for the portion of equity (additional tier 1 capital), that is not part of the
shareholders’ share of equity.
Management's review
Financial highlights by quarter
Annual Report
7
Key figures
Q4
2021
Q3
2021
Q2
2021
Q1
2021
Q4
2020
Statement of income (DKKm)
Net interest income 211
201
207
188
123
Net fee income 158
149
152
142
87
Dividends on shares, etc. 0
0
13
0
0
Value adjustments 32
32
12
32
23
Other operating income 0
2
5
479
1
Core income 401
384
389
841
234
Staff costs and administrative expenses 267
224
259
294
141
Other operating expenses and depreciation, amortisation and
impairment of property, plant and equipment and intangible assets 22
9
13
13
10
Operating expenses and operating depreciation and amortisation 289
233
272
307
151
Core earnings before impairment 112
151
117
534
83
Impairment of loans and receivables, etc. 32
-18
-56
22
25
Income from investments in associates 2
4
13
1
0
Profit/loss from operations in the process of being wound up 0
0
0
0
0
Profit before tax 82
173
186
513
58
Tax -114
13
10
-35
5
Profit after tax 196
160
176
548
53
Statement of financial position (DKKm)
Total assets 43,310
40,796
41,061
39,484
23,105
Loans 16,778
16,655
16,429
16,849
9,332
Deposits 26,024
24,008
24,513
24,088
13,409
Deposits, pooled schemes 9,223
8,745
8,696
8,435
5,426
Contingent liabilities 10,052
9,753
9,940
9,328
5,202
Custody services 19,809
18,575
18,387
17,371
10,040
Arranged mortgage loans 58,192
57,095
56,585
56,093
33,447
Business volume 62,077
59,161
59,578
58,700
33,369
Business volume including custody services and arranged mortgage
loans 140,078
134,831
134,550
132,164
76,856
Equity 5,396
5,205
5,049
4,876
3,245
Management's review
Financial highlights by quarter
8
Annual Report
Financial ratios
Q4 2021
Q3 2021
Q2 2021
Q1 2021
Q4 2020
Solvency
Total capital ratio
18.4%
17.8%
17.9%
17.2%
20.9%
Tier 1 capital ratio
19.7%
19.1%
19.3%
18.5%
22.1%
Common equity tier 1 capital ratio
22.2%
21.7%
21.9%
21.1%
24.7%
MREL-capital
25.1%
23.9%
23.5%
21.9%
24.7%
Earnings
Return on equity before tax, p.a.
1
6.1%
13.4%
15.1%
43.0%
7.2%
Return on equity after tax, p.a.
1
14.6%
12.4%
14.2%
45.9%
6.5%
Income-cost ratio
1.25
1.81
1.86
2.56
1.33
Cost ratio
2
71.7%
60.0%
67.2%
36.5%
64.5%
Return on assets
0.5%
0.4%
0.4%
1.8%
0.2%
Average number of employees (FTE)
639.7
639.9
656.3
693.8
392.3
Market risk
Interest rate risk
1.5%
1.6%
1.2%
1.1%
1.6%
Foreign exchange position
0.1%
0.4%
0.5%
0.4%
0.2%
Foreign exchange risk
0.0%
0.0%
0.0%
0.0%
0.0%
LCR
257.3%
280.6%
291.9%
261.6%
180.3%
NSFR
3
139.3%
137.5%
135.6%
118.8%
120.6%
Credit risk
Loans plus impairment on loans relative to deposits
53.2%
57.6%
56.2%
61.1%
60.8%
Loans relative to equity
3.1
3.2
3.3
3.5
2.9
Lending growth for the period
0.7%
1.4%
-2.5%
80.6%
-3.6%
Sum of 20 largest exposures
106.0%
100.5%
87.1%
86.1%
109.3%
Accumulated impairment ratio
6.9%
7.9%
7.9%
7.9%
12.9%
Impairment ratio
0.1%
-0.1%
0.0%
0.1%
0.0%
Vestjysk Bank share
Earnings per share 0.2
0.1
0.1
0.5
0.1
Book value per share
5
4.1
4.0
3.8
3.7
3.4
Share price at 31 December 3.4
3.3
3.5
3.4
2.8
Share price/book value per share 0.8
0.8
0.9
0.9
0.8
1 Profit/loss / average equity,
which is
calculated on the basis of opening equity plus capital increase and recognised
negative goodwill in connection with the merger with Den Jyske Sparekasse at 15 January 2021
2 Operating expenses and operating depreciation and amortisation/core inco
me
3 As the method of calculating NSFR was revised on 30 June 2021, the comparative figures are not directly comparable.
4 The ratio "Book value per share" is adjusted for the portion of equity (additional tier 1 capital), that is not part of the
shareholders’ share of equity.
Management's review
Financial review
Annual Report
9
152
90
125
101
185
86
49
46
57
121
Securities trading
and custody
accounts
Payment services Loan processing
fees
Guarantee
commission
Other fees and
commissions
2021 (total 653 million)
2020 (total 359 million)
Statement of income
Comparative figures
In the below commentary on developments, the comparative figures do not include the results of Den Jyske Sparekasse at 31
December 2020. Differences will therefore in large part be explained by this fact.
Profit after tax
For 2021, the Bank reported profit after tax of DKK 1,080 million, compared with DKK 303 million for 2020.
As described in the interim reports for Q1, Q2 and Q3 2021, the performance was significantly affected by non-recurring income
and costs related to the merger with Den Jyske Sparekasse in January 2021. Adjusted for non-recurring items in that connection,
the profit after tax amounted to DKK 725 million, which was highly satisfactory.
In Q1 2021, non-recurring income was recognised at DKK 477 million, representing a positive difference between the purchase
price of the investment in Den Jyske Sparekasse and the value of the acquired net assets (negative goodwill). The calculated
negative goodwill is considered taxable income, on which DKK 37 million is payable in tax. At the merger date, the continuing
bank's increased earnings capacity gave rise to non-recurring tax income in the amount of DKK 82 million, which was recognised
as a deferred tax asset. Non-recurring costs in relation to the merger amounted to DKK 167 million. The merger resulted in net
non-recurring income of DKK 355 million for 2021.
In connection with the Bank's budget and forecast updates in Q4 2021, the deferred tax asset was increased by additional tax
income of DKK 113 million. Combined with the DKK 82 million tax income in connection with the merger, the total tax income
for 2021 amounted to DKK 195 million.
Core income
In 2021, Vestjysk Bank realised core income of DKK 2,015 million, against DKK 877 million in 2020. The core income was affected
by non-recurring income of DKK 477 million in connection with the merger with Den Jyske Sparekasse.
Net interest income amounted to DKK 807 million in 2021, against DKK 486 million in 2020.
Fee and commission income for 2021 amounted to DKK 653 million, against DKK 359 million in 2020. A breakdown of the Bank’s
fee income is shown in the figure below (DKK million).
Management's review
Financial review
10
Annual Report
Share dividends amounted to DKK 13 million in 2021, against DKK 9 million in 2020.
Value adjustments amounted to DKK 108 million in 2021, against DKK 65 million in 2020. Value adjustments for 2021 were mainly
related to positive value adjustments of the Bank’s sector shares.
Other operating income
The merger with Den Jyske Sparekasse resulted in non-recurring income of DKK 477 million representing the difference between
the purchase price of the investment in Den Jyske Sparekasse and the acquired net assets (negative goodwill) note 46. The non-
recurring item is included under other operating income.
Operating expenses and operating depreciation and amortisation
Total operating expenses and operating depreciation and amortisation amounted to DKK 1,101 million in 2021, against DKK 530
million in 2020.
Expenses in 2021 were particularly affected by non-recurring costs relating to the merger with Den Jyske Sparekasse.
During the period, a DKK 17 million impairment charge was recognised on the Bank’s properties as part of non-recurring costs
relating to the merger. Three branch offices were combined in connection with the merger, which meant that a few of the Bank’s
former owner-occupied properties are no longer used for banking operations, causing the value of the properties to be impaired.
With redundancies in 2021 and other synergies arising in connection with the merger, the Bank has achieved the expected
synergies. In 2022, synergies will amount to some DKK 150 million.
The average number of employees in 2021 was 657 FTEs, compared with 395 FTEs in 2020. The average number of employees
in Q4 2021 was 640.
Other administrative expenses excluding IT costs amounted to DKK 179 million in 2021, against DKK 63 million in 2020.
The table below shows a breakdown of operating expenses and operating depreciation and amortisation.
DKKm
2021
2020
Staff c
osts
553
307
IT costs 312
140
-
Of this amount BEC
309
130
Other administrative expenses 179
63
Operating depreciation and
52
17
Other operating expenses 5
3
Total
1.101
530
As mentioned above, the increase in expenses was due to non-recurring costs related to the merger and the fact that
comparative figures for 2020 do not comprise Den Jyske Sparekasse. IT costs related to the migration of the two banks to a
single IT platform contributed significantly to the increase – direct costs relating to BEC as well as indirect costs related to
training the Bank’s employees. Following the migration, the Bank has also implemented an updated workplace concept, which
also contributed to the increased expenses.
Core earnings before impairment
For 2021, the Bank’s core earnings before impairment amounted to DKK 914 million, compared with DKK 357 million in 2020.
The performance was significantly affected by the DKK 477 million non-recurring income in connection with the merger with Den
Jyske Sparekasse. Non-recurring costs in connection with the merger amounted to DKK 167 million, which meant that the net
effect of the merger amounted to income of DKK 310 million.
Annual Report
11
Impairment of loans and guarantees etc.
In 2021, the Bank made net reversals of impairment losses of DKK 20 million. The majority of these reversals were in the segment
other business as well as in real estate and retail banking, whereas there were impairment losses of DKK 167 million relating to
agricultural customers.
At 31 December 2021, the Bank’s total impairment provision in response to economic uncertainty amounted to DKK 325 million,
corresponding to 1.9% of total lending.
The Bank believes that the state of the economy remains subject to considerable risk, particularly in relation to the consequences
of the phase-out and winding up of the government’s coronavirus relief programmes. Uncertainty surrounding the supply chain
disruption and rising raw materials prices contributed to the risk exposure.
The table below shows a breakdown of the Bank’s loans and guarantees for and impairment allowances on agricultural
exposures by sub-sectors, real estate, other business and the retail banking segment.
Distribution of loans and
guarantees at 31 December 2021
(DKKm)
Loans and
guarantees before
impairment
Acc. impairment
Loans and
guarantees after
impairment
Impairment for the
period
Dairy farmers
1,911
445
1,466
123
Pig breeders
1.149
225
924
19
Other agriculture
867
148
719
25
Agriculture, total
3,927
818
3,109
167
Real estate
2,778
166
2,612
-27
Other business
7,980
621
7,359
223
Business, total
14,685
1,605
13,080
-83
Retail
14,134
384
13,750
63
Total
28,819
1,989
26,830
-20
The Bank’s accumulated impairment ratio at 31 December 2021 stood at 6.9%. At 31 December 2021, the Bank had
impairment losses taken over in mergers amounting to DKK 393 million, which were not included in accumulated impairment.
These impairment losses relate to stage 3 impairment losses taken over in connection with mergers – primarily the merger with
Den Jyske Sparekasse. If the DKK 393 million in impairment losses taken over were included, this would result in accumulated
impairment for the Bank of DKK 2,382 million, or an accumulated impairment ratio of 8.2%.
The sector distribution of accumulated impairment and provisions is shown below:
Accumulated Impairments and provisions
202
1
2021
2020
2020
by sector
DKKm
(%)
DKKm
(%)
Public authorities -
0%
-
0%
Agricult., hunt., forestry 817
41%
957
45%
Fishing 62
3%
114
5%
Manufac. indus., raw mat. Ext. 58
3%
46
2%
Energy supply 65
3%
56
3%
Constr., civil engin. contract. 52
3%
44
2%
Trade 88
5%
92
4%
Transp., restaurant., hotel busin. 82
4%
99
5%
Information and comm. -
0%
5
0%
Financing and insurance 147
7%
196
9%
Real estate 167
8%
195
9%
Other industries 67
4%
83
4%
Retail 384
19%
262
12%
Accumulated Impairments and provisions total 1,989
100%
2,149
100%
Management's review
Financial review
12
Annual Report
Statement of financial position
Vestjysk Bank’s total assets amounted to DKK 43.3 billion at 31 December 2021, against DKK 23.1 billion at 31 December 2020.
The increase was mainly due to the merger with Den Jyske Sparekasse.
Loans
At 31 December 2021, Vestjysk Bank’s net loans amounted to DKK 16.8 billion, against DKK 9.3 billion at 31 December 2020.
The merger with Den Jyske Sparekasse increased the loan portfolio by DKK 6.9 billion.
Loans to retail banking customers accounted for 51% of the Bank’s net loans and guarantees.
The Bank’s business lending is mainly concentrated within the agricultural and real estate sectors. Loans and guarantees to the
agricultural sector accounted for 12% of net loans and guarantees, while real estate accounted for 10%. The Bank complies
with the internal goal that no individual sector should exceed 15% of total net loans and guarantees.
The sector distribution of net loans and guarantees is shown below:
Loans and guarantees by sector
2021
2021
2020
2020
DKKm
(%)
DKKm
(%)
Public authorities -
0%
-
0%
Agricult., hunt., forestry 3,110
12%
1,891
11%
Fishing 708
3%
668
5%
Manufac. indus., raw mat. Ext. 789
3%
479
3%
Energy supply 834
3%
301
2%
Constr., civil engin. contract. 929
3%
488
4%
Trade 1,109
4%
639
5%
Transp., restaur., hotel busin. 615
2%
478
3%
Information and comm. 57
0%
79
1%
Financing and insurance 1,282
5%
510
4%
Real estate 2,612
10%
1,776
12%
Other industries 1,035
4%
779
5%
Retail 13,750
51%
6,445
44%
Loans and guarantees, Total 26,830
100%
14,534
100%
Retail banking’s share of net loans and guarantees was up from 44% to 51%.
The credit quality of the Bank’s total loans and guarantees is illustrated in the table below.
2021 2020
Loans and guarantees by credit quality DKKm
(%)
DKKm
(%)
Normal credit quality 21,931
54%
12,747
54%
Some signs of weakness 13,052
32%
6,513
28%
Significant signs of weakness without impairment 1,996
5%
762
3%
Impaired loans 3,587
9%
3,467
15%
Total 40,566
100%
23,489
100%
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13
Large exposures
The 20 largest exposures represented 106.0% of the Bank’s common equity tier 1 capital, which is below the FSA’s
supervisory diamond benchmark of 175%.
At 31 December 2021, the Bank had one exposure representing more than 10% of the common equity tier 1 capital. The
exposure represents 11.6% of the Bank’s common equity tier 1 capital.
Business volume including custody services
Vestjysk Bank’s business volume including custody services and arranged mortgage loans amounted to DKK 140 billion at 31
December 2021.
The positive trend in arranged mortgage loans continued. Mortgage lending, both to business customers and retail customers,
is growing.
Business volume
2021
2020
DKKm
DKKm
Net loans 16,778
9,332
Deposits 26,024
13,409
Pools 9,223
5,426
Contingent liabilities 10,052
5,202
Custody services 19,809
10,040
Arranged mortgage loans 58,192
33,447
Business volume, including custody accounts and arranged mortgaged
loans 140,078
76,856
Deferred tax asset
In 2021, Vestjysk Bank’s recognised DKK 195 million of its unrecognised deferred tax asset, which was driven by an increase in
the Bank’s expected future earnings capacity. The Bank is confident that the deferred tax asset can expectedly be utilised within
the next five years based on the Bank’s budgets and forecasts for the period 2022-2026. At 31 December 2021, the recognised
tax asset amounted to DKK 293 million, of which DKK 290 million related to unutilised tax losses set off against total capital.
Capital and liquidity
Equity
Vestjysk Bank’s equity stood at DKK 5,396 million at 31 December 2021, against DKK 3,245 million at 31 December 2020. The
positive development in equity since 31 December 2020 was attributable to the merger with Den Jyske Sparekasse and the
recognition of its profit in 2021. Developments in equity since 1 January 2020 are detailed in the statement of changes in equity.
Common equity tier 1 capital
At 31 December 2021, the Bank’s common equity tier 1 capital was DKK 4,313 million. Relative to the total risk exposure of DKK
23,450 million, this equalled a common equity tier 1 capital ratio of 18.4%.
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Annual Report
Additional tier 1 capital
The Bank’s additional tier 1 capital amounted to DKK 301 million at 31 December 2021 and was eligible for full inclusion in total
capital.
Tier 2 capital
The Bank’s tier 2 capital amounted to DKK 598 million at 31 December 2021 and was eligible for full inclusion in total capital.
Total capital
Overall, total capital amounted to DKK 5,211 million at 31 December 2021. Relative to the total risk exposure of DKK 23,450
million, this equalled a total capital ratio of 22.2.
Total capital is specified in note 28 to the financial statements.
Capital requirements
Adequate total capital amounted to DKK 2,393 million at 31 December 2021. Relative to the total risk exposure of DKK 23,450
million, this equalled an individual solvency need ratio of 10.2. At 31 December 2021, the capital conservation buffer stood at
2.5 percentage points and the countercyclical buffer had been reduced to 0 percentage point due to the coronavirus pandemic.
The capital requirements amounted to 12.7% in aggregate, corresponding to DKK 2,978 million.
Accordingly, Vestjysk Bank’s excess total capital cover was 9.5 percentage points or DKK 2,233 million.
As shown below in the shareholder information section, as of the end of May 2021, Vestjysk Bank is a part of the Arbejdernes
Landsbank Group. In connection with Arbejdernes Landsbank acquiring the majority shareholding of Vestjysk Bank, Arbejdernes
Landsbank has been designated a systemically important financial institution (SIFI). As a result of the SIFI designation,
Arbejdernes Landsbank and each bank within the Group must comply with a special SIFI buffer requirement of 1 percentage
point. The SIFI buffer requirement must be met by the end of 2022 with common equity tier 1 capital. For Vestjysk Bank, the
effect of the SIFI designation means that the target for common equity tier 1 capital will be raised to 15.5% from the current level
of 14.5%. At 31 December 2021, the Bank’s common equity tier 1 capital ratio was 18.4.
Minimum requirement for eligible liabilities (MREL)
The Danish FSA and Finansiel Stabilitet have prepared plans for the resolution of failing banks pursuant to the Danish Financial
Business Act. In relation to these plans, the authorities must for each bank lay down a minimum requirement for the amount of
eligible liabilities (MREL) in accordance with the specific resolution principle determined by the authorities for each individual
bank.
Vestjysk Bank’s current MREL add-on has been determined at 6% of risk-weighted exposures. The add-on will be fully phased
in at 1 July 2023. At 31 December 2021, the MREL add-on was phased in at 3.1 percentage points. With the addition of the
solvency need ratio, the Bank’s total MREL requirement at 31 December 2021 was 13.3% of risk-weighted exposures. As the
MREL and the combined buffer requirement must be met separately, the Bank faces a total requirement of 15.8%. At 31
December 2021, the Bank’s MREL capital ratio was 25.1.
Due to the above-referenced designation of Arbejdernes Landsbank as a SIFI, Vestjysk Bank has received a decision by the
Danish Financial Supervisory Authority on compliance with capital adequacy requirements for SIFI banks. This means that
Vestjysk Bank is subject to an MREL of the solvency need times two plus the combined buffer requirement less the contracyclical
buffer.
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15
For Vestjysk Bank, the requirement will be phased in over the period to 1 January 2026 (decision from FTA):
Date MREL
1 January 2022 13.2% of total risk exposure amount
1 January 2023 14.5% of total risk exposure amount
1 January 2024 17.5% of total risk exposure amount
1 January 2025 20.6% of total risk exposure amount
1 January 2026 23.6% of total risk exposure amount
The fully phased-in MREL of 23.6% has been calculated using figures from mid-2021 and is calibrated annually by the Danish
FSA.
The Bank’s capital plans provide for the issue of adequate non-preferred senior debt to cover the MREL requirement plus a
comfortable buffer. Some of the planned issues in the amounts of DKK 140 million, DKK 180 million, DKK 140 million and DKK
150 million, respectively, took place in March, June, September and December 2021.
Liquidity
At 31 December 2021, the Bank’s Liquidity Coverage Ratio (LCR) stood at 257.3%, relative to the LCR requirement of 100%.
The Bank’s Net Stable Funding Ratio (NSFR) was 139.3% at 31 December 2021 relative to the NSFR requirement of 100%.
Share capital
Vestjysk Bank’s share capital totals DKK 1,234 million. The share capital consists of 1,233,573,501 shares with a nominal value
of DKK 1 each, and the Bank has some 51,000 registered shareholders.
Arbejdernes Landsbank is Vestjysk Bank’s majority shareholder, holding approximately 72.7% of the share capital. Arbejdernes
Landsbank, domiciled in the municipality of Copenhagen, is Vestjysk Bank’s only major shareholder.
The Bank’s shares are listed as a component of the Nasdaq Nordics Mid Cap index.
Uncertainty in recognition and measurement
The most significant uncertainty factors in relation to recognition and measurement concern loan impairment and provisions for
guarantees. Other uncertainty factors concern the valuation of the Bank’s domicile property, financial instruments and the
measurement of deferred tax assets.
Management believes that assessments made in relation to the determination of impairment allowances at 31 December 2021
reflect FSA’s financial reporting rules and guidelines.
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Annual Report
The Financial Supervisory Authority’s Supervisory Diamond
Vestjysk Bank’s objective is to remain within the threshold values for the five indicators set out in the FSA’s Supervisory Diamond,
which all banks should generally comply with. Vestjysk Bank meets this objective.
Vestjysk Bank’s values relative to each of these threshold values are set out in the table below. Lending growth exceeds the
Danish FSA’s benchmark requirement because of the merger with Den Jyske Sparekasse.
Supervisory Diamond Benchmarks Danish FSA’s requirements
Vestjysk Bank
Sum of large exposures < 175%
106.0%
Lending growth < 20%
79.8%
Real estate exposure < 25%
10.6%
Liquidity benchmark >100%
250.5%
Other matters
Remuneration Policy
Vestjysk Bank’s policy in this area is described in the Bank’s remuneration policy, which is available at
https://www.vestjyskbank.dk/english/organisation
Financial reporting process
The Board of Directors and the Executive Board have the overall responsibility for the Bank’s control and risk management in
relation to the financial reporting process, including compliance with applicable legislation and other rules and regulations relating
to financial reporting. The Board of Directors has established an audit committee, which meets at least four times a year. The
Bank’s control and risk management systems can provide reasonable, but not absolute, assurance that misappropriation of
assets, losses and/or significant errors and omissions in the financial reporting are avoided.
The Board of Directors assesses the Bank’s organisational structure, the risk of fraud and the existence of internal rules and
guidelines. The Board of Directors and the Executive Board are responsible for approving general procedures and controls in
key areas in relation to the financial reporting process. The Executive Board monitors compliance with relevant legislation and
other financial reporting regulations and provisions on an ongoing basis and reports its findings to the Board of Directors.
The Board of Directors makes a general assessment of risk in relation to the financial reporting process. As part of its risk
assessment, the Board of Directors assesses the risk of fraud and the measures to be taken to reduce and/or eliminate such
risks. In connection with this, the Board discusses any incentive/motive Management may have to commit fraudulent financial
reporting or other types of fraud
Special circumstances applying to the Bank for the year, including the impact of the coronavirus crisis
In 2021, the Bank was not adversely affected by the coronavirus crisis, which spread rapidly in March 2020 and continued
throughout 2020 and 2021.
Despite the coronavirus crisis, the Bank has been able to maintain a reasonable level of operations, and the level of customer
activity has been high.
The Bank’s advisers have been in regular contact with business customers to ascertain what the Bank can do to help them
through the coronavirus crisis and to advise them in regard to the rescue packages provided by the Danish government and
parliament. So far, the crisis has not had any major direct impact on the Bank’s loans or individual impairment losses.
Annual Report
17
The sector distribution of the Bank’s lending has proved advantageous during the crisis. Most of the Bank’s lending is in sectors
that have not been particularly badly affected by the coronavirus crisis. The hotel, restaurant, transport and retail sectors are the
hardest hit, and these sectors account for some 4% of the Bank’s total loans and guarantees.
Vestjysk Bank’s two main sectors, agriculture and real estate, have so far been relatively unaffected by the coronavirus crisis.
The pandemic has devastated the mink industry, however, bringing an end to mink farming in Denmark. From an overall financial
perspective, the Danish government’s compensation package for mink farmers is considered adequate, and the package had a
positive effect on the Bank’s impairment losses relating to this industry in 2021. The Bank’s exposure to the mink industry
accounts for 0.4% of total exposure, corresponding to DKK 176 million.
Real estate and private residential rentals have not been significantly affected, and this is not expected to change significantly.
In the agricultural sector, dairy farmers experienced satisfactory settlement prices in 2021, while pig breeders have experienced
a significant fall in pork prices since Q3 2021. Piglet producers were particularly hard hit.
Part of the Bank’s loans to the fishing industry is affected by quota reductions, which are mainly due to the Brexit agreement
between the EU and the United Kingdom. A compensation package set up for the industry is considered adequate.
Vestjysk Bank has made a range of facilities available to retail banking customers in the form of loan repayment holidays,
temporary overdraft facilities and increased credit facilities to support customers directly hit by the lockdowns and restrictions.
Until now, these measures have seen limited use.
Customers in the private segment have proven equipped to the effects og the corona-crisis.
The Bank believes that the state of the economy remains subject to considerable risk, particularly in relation to the consequences
of the phase-out and winding up of the government’s coronavirus relief programmes. Uncertainty surrounding the supply chain
disruption and rising raw materials prices contributed to the risk exposure. The growing uncertainty regarding African Swine
Fever caused the Bank to increase its impairment provision at 31 December 2021.
Since 30 September 2021, the Bank has increased its impairment provision by DKK 67 million from DKK 258 million to DKK 325
million, corresponding to 1.9% of net loans, in response to the economic uncertainty. The impairment provision covers economic
uncertainties related to rising animal feeding and energy prices for the Bank's business customers, and particularly piglet
producers, the risk of further African Swine Fever outbreak, the risk of bottleneck problems in the Danish labour market and, not
least, the uncertainty surrounding the coronavirus pandemic.
The Bank’s DKK 325 million impairment provision for economic uncertainty is assessed to be sufficient.
Projections about the future consequences of the coronavirus crisis and African swine fever are naturally subject to considerable
uncertainty.
Merger with Den Jyske Sparekasse
After the merger with Den Jyske Sparekasse, Vestjysk Bank has become one of the largest banks in Denmark, and our ambitious
goal is to become the strongest local bank in Denmark for the benefit of our customers, shareholders, local areas and employees.
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Annual Report
The goals are to:
• Create a leading Group 2 bank delivering strong financial results;
• Offer valuable customer services and competitive products on the basis of deep knowledge of and proximity to
our customers;
• Continue the strong commitment to the Bank’s local communities;
• Be an attractive and stimulating workplace with highly skilled employees.
The merger will build the Bank’s scale and thus improve its ability to develop and offer customers new services and products.
The financial targets for 2022 are to:
• Profitability – a return on equity after tax of at least 9.0%;
• Efficiency – a cost ratio below 55%;
• Capital – a common equity tier 1 capital ratio of at least 15.5%;
• Dividend capacity – a payout ratio of between 25% and 50% of the profit for the year after tax.
Achieving the Bank’s goals will lead to high profitability and a strong capital base, creating a foundation for additional growth.
With the financial statements for 2021, the Bank remains on track to achieving these goals.
Events after the reporting date
No events have occurred in the period from the reporting date until today which may change the assessment of the annual
report.
Follow-up on outlook for 2021 and Vestjysk Bank’s outlook for 2022
In connection with the annual report for 2020, the Bank guided a profit after tax in the range of DKK 500-550 million for 2021,
adjusted for non-recurring items resulting from the merger with Den Jyske Sparekasse. The Bank also announced expectations
for overall profit after tax including non-recurring items of about DKK 800-900 million.
The Bank has subsequently upgraded the guidance three times – on 9 August 2021, 12 October 2021 and 13 January 2022. In
the most recent upgrade, the forecast profit after tax excluding non-recurring items relating to the merger with Den Jyske
Sparekasse was DKK 725 million. The Bank’s expectations for the overall profit after tax including non-recurring items was DKK
1,080 million.
The reported profit for 2021 was in accordance with the Bank’s forecast. Vestjysk Bank guides a profit before tax in 2022 of
around DKK 600-650 million. Vestjysk Bank’s profit guidance for 2022 is subject to uncertainty.
The uncertainty mainly relates to the Bank’s agricultural exposures. Particularly, uncertainties related to rising animal feeding
and energy prices and the risk of African Swine Fever spreading in Denmark and the declining pork settlement prices could have
a significant adverse impact on the Bank’s impairment losses.
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19
Risk management
Vestjysk Bank defines risk as any event that may have a material adverse impact on the Bank’s ability to achieve its business
objectives. The Bank is exposed to various types of risk, which are monitored and managed at various levels in the organisation.
Risk exposure is a key consideration in all the Bank’s transactions.
Vestjysk Bank’s Board of Directors establishes the overall framework for risk and capital structure and policies under which the
Bank’s Executive Board and other executives manage the Bank’s risks. The Board of Directors is briefed regularly on risk
developments and utilisation of allocated risk limits. Day-to-day risk management is performed by Finance, Markets and Credit.
Middle Office and the Credit Secretariat perform independent controls, and Risk and Compliance perform independent
monitoring.
Moreover, the Bank’s risk management is handled by the Risk Committee and the Audit Committee. The Audit Committee’s
duties include examining accounting and audit-related matters as well as monitoring the Bank’s internal control system. The
Risk Committee’s duties include monitoring the Bank’s internal risk management systems, advising the Board of Directors on
the general present and future risk profile and risk strategy and assisting the Board of Directors in ensuring that the Board of
Directors’ risk strategy is correctly implemented.
The Bank has established a risk management function and appointed a general manager with specific responsibility for the risk
management function as the Bank’s Risk Officer. Organisationally, it has been ensured that the Risk Officer is sufficiently
independent of the Bank’s functions, in order for the Risk Officer to have the means to appropriately execute his duties. As
needed, and at least once annually, the risk management function prepares a report to the Board of Directors on the Bank’s risk
management. The Risk Officer may express opinions and concerns and warn the Board of Directors, to the extent relevant, when
specific risks affect or may affect the Bank. The Risk Officer moreover assists the Risk Committee by providing it with
independent analyses and information.
The Executive Board has drafted a brief for the Risk Officer. The Risk Officer is charged with preparing an annual plan for the
risk areas that the function wishes to focus on.
Vestjysk Bank categorises risk as follows:
Credit risk
Extending credit is a key element of Vestjysk Bank’s business.
Credit risk is defined as the risk of a counterparty being unable or unwilling to meet an obligation and of any collateral being
insufficient to cover the obligations. A reduction of the value of collateral or illiquidity may result in losses and an increase of
impairment and provisions.
An increase of the Bank’s credit risks may result in losses for the Bank or impairment allowances, ultimate write-offs of already
impaired exposures or it may increase its need for capital coverage.
The Bank’s calculation of credit risk greatly relies on case-by-case assessments as to whether customers are able and willing
to meet their obligations and whether the requisite value and collateral are present.
In order to ensure adequate risk diversification across sectors and customers, the Bank does not accept exposures to
individual sectors in excess of 15% of total exposures. Similarly, the Bank does not accept exposures in excess of 10% of its
common equity tier 1 capital. Approved exposures in excess of the 10% must be accompanied by an action plan setting out
when and how the amount can be brought below 10%. This way, Vestjysk Bank seeks to continually ensure that no individual
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Annual Report
exposure, including to groups, poses a threat to the Bank’s future operations. At 31 December 2021, the Bank had one
exposure representing more than 10% of the common equity tier 1 capital. The exposure represents 11.6% of the Bank’s
common equity tier 1 capital.
The Bank’s credit policy comprises targets for a number of measures related to the Bank’s exposures.
When performing credit analyses, it is important to Vestjysk Bank that credit decisions are based on a thorough analysis of the
customer’s financial position and the collateral provided, so that adequate information is available for the assessment of the
customer’s creditworthiness and the risk attached to the exposure. Credit decisions should generally be based on the robustness
of the customer’s future earnings and liquidity, and less so on the provided collateral, which may decrease in value. Another
highly weighted factor is the trustworthiness and competences of the customer.
The Bank’s basic principles for extending credit to business customers are based on obtaining and objectively analysing relevant
financial documents from the company and assesses the company’s earnings, liquidity and capital position. The Bank also
evaluates the company’s management and forms an understanding of the company’s business model. The Bank needs to have
detailed insight into the customer’s financial circumstances and for that purpose obtains the following documents:
Internal and external financial statements
Statement of personal income and assets if the customer is taxed under the business tax scheme
Budgets
Interim reports
Business- and strategy plans
Financial documents for evaluation of guarantors or limited partners
In order to ensure an overview of business customer relationships, the Bank files minutes of meetings, discussions with
customers and other documentation electronically. Minutes must be taken of all meetings, and all significant agreements with
customers must be confirmed in writing.
For retail banking customers, the Bank must follow these basic principles when deciding whether to extend credit:
Have an insight into the customer’s annual tax assessment notice
Know the customer’s actual disposable amount and stressed disposable amount and loan-to-income
Know and critically assess the size of the customer’s assets
Have insight into the customer’s historical financial situation, which includes assessing the customer’s past payment
record and pattern of consumption
Be cautious of new customers’ motive when they contact Vestjysk Bank on their own initiative to obtain credit
Both spouses/cohabiting partners must be jointly liable if the financed asset is for their joint use or if settlement is
based on their combined income
Segmentation is an important element in the Bank’s credit risk management.
Of Vestjysk Bank’s loans and guarantees at 31 December 2021, 49% were to business customers and 51% to retail customers.
The Bank’s evaluation of collateral in real estate is based on an individual assessment of the property’s market value, primarily
through a cost-benefit analysis with an estimated factor based on, among other things, the property’s location, use as well as
potential alternative uses, layout, tenant credit quality and lease duration. The value of the Bank’s collateral in real estate is
therefore subject to uncertainty, as changes in market conditions may lead to a need to reassess the value of the collateral
provided. Even for exposures where the collateral provided is adequate according to the Bank’s present evaluation, the Bank’s
loans and guarantees to the real estate segment are subject to considerable risk going forward, as the value of the collateral
provided and any impairment allowances may change if the market changes.
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21
A drop in real estate prices, general economic conditions or other circumstances causing prices of securities or other collateral
to decline may cause the value of the collateral provided vis-a-vis the Bank to deteriorate and thus not be sufficient to cover the
customer’s liabilities. Where collateral is illiquid, it may not be possible to realise the collateral to cover the customer’s liabilities.
Vestjysk Bank wishes to maintain the overall exposure to real estate and will increase its credit exposure to customers based on
an objective overall risk assessment. The Bank will also continue to finance property purchases for customers’ own use (primarily
single-family and holiday houses for retail customers and domicile properties for business customers) if the customer’s future
earnings and assets are assessed to be stable.
The Bank engages in project financing with great caution, carefully assessing each project and the investors behind it. It also
imposes stricter requirements for collateral and self-financing.
The Bank is also exposed to significant risk on loans and guarantees to the agricultural sector.
Agriculture is cyclical in nature,
and changes in settlement prices affecting the debtor’s ability to pay can cause major fluctuations in exposure over a span of
years.
While the Bank generally intends to maintain its overall exposure to agricultural customers, the total exposure may not exceed
15%. The Bank will continue to add skilled and efficient existing and new customers to these exposures based on an objective
risk assessment of the individual farmer’s operational skills and earnings track record as well as their future earnings prospects.
The Bank wants to grow its existing portfolio in the fishing industry.
Weak and potentially impaired exposures must be identified on a timely basis, and any impairment loss recognised must be
appropriate. Any warning signs must immediately prompt measures to reduce risk. For all weak and impaired exposures, the
Bank must prepare an operational action plan for effective management of the exposure.
Evidence of individual impairment and provisions for credit exposures are assessed on an ongoing basis. The Bank complies
with the impairment provisions of IFRS 9.
At Vestjysk Bank, credit approval authority is based on a cautious delegation policy. The authority issued by the Board of
Directors to the Executive Board is delegated to the Credit Director, who in turn delegates authority to individual employees. In
addition, each branch manager is granted credit approval authority according to whether the branch is a retail or a business
banking branch. Commitments that exceed the branch manager’s credit approval authority are transferred to the Credit
Department for processing. Depending on the amount of the commitment, the credit inquiry will be approved by the Credit
Department, the Credit Director, the Credit Committee, the Executive Board or, ultimately, the Board of Directors.
An annual review of commitments is carried out according to defined criteria pre-approved by the Board of Directors. In addition
to this, the Credit Secretariat on a quarterly basis reports to the Executive Board and the Board of Directors on developments
and the status of credit-related risks. The Credit Secretariat furthermore regularly verifies compliance with the Bank’s credit
policy.
Market risk
The risk of changes to the market value of the Bank’s financial assets and liabilities as a result of changes in market conditions
is collectively referred to as “market risk”. Assuming market risk exposure is a natural part of the Bank’s activities, and it affects
the Bank’s total earnings.
Vestjysk Bank defines the following risks as market risks: interest rate risk, risk related to liquidity reserves, currency risk, equity
risk and other price risks, including in relation to commodities.
Vestjysk Bank’s policy is to maintain a low overall level of market risk.
Vestjysk Bank’s ambition is to only assume limited market risks not directly linked to the Bank’s ordinary operations.
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Annual Report
Vestjysk Bank accepts market risks related to the Bank’s ordinary operations. However, where possible, the Bank will endeavour
to mitigate a given risk or hedge it to such an extent that it cannot be characterised as high.
In specific areas, the Bank uses derivative financial instruments to hedge and manage market risks. The Bank’s customers also
use derivative financial instruments. Derivative financial instruments are included in the determination of the Bank’s market risk
for the underlying risk areas.
The Board of Directors has defined limits for the Bank’s market risk. Market risk is monitored, and the defined risk limits controlled
on a daily basis by Middle Office, which performs the following controls:
Daily follow-up on compliance with the Board of Directors’ instructions to the Executive Board
Daily follow-up on compliance with the Executive Board’s delegated instructions to the Markets Director and
Finance
Price verification relative to market prices for in securities and financial instruments trading
Ongoing evaluation and reporting of potential risks related to the Bank’s in securities and financial instruments
trading
The Board of Directors is briefed regularly on risk developments and utilisation of allocated risk limits.
The Executive Board receives daily reports on developments in material market risks as well as cases where the framework
provided by the Board of Directors to the Executive Board has been exceeded. Trades to and from the trading book are
monitored daily. Instances of limits being exceeded are reported to the Board of Directors.
Interest rate risk
Interest rate risk is defined as the loss incurred by the Bank in the event of a 1 percentage point rise in general interest rate
levels.
In connection with its ordinary operations, the Bank assumes interest rate risks in relation to the following activities: deposits,
lending, raising of tier 2 capital and funding as well as investing the Bank’s liquidity reserves in interest rate-dependent
instruments. The Bank may use financial instruments to hedge all or part the interest rate risk from these activities.
While the Bank accepts to assume interest rate risk in relation to the above activities, its policy is to maintain low overall interest
rate exposure.
The interest rate exposure related to the investment of the Bank’s liquidity reserves in interest rate-dependent instruments must
also be low.
The Bank’s overall interest rate exposure amounted to DKK 67.1 million at 31 December 2021. The Bank is thus exposed to a
general increase in interest rates.
Outside the trading book, Vestjysk Bank has negative interest rate risk of DKK 13.6 million, primarily related to subordinated
debt, which contributed a negative interest rate risk of DKK 18.7 million, while fixed-rate loans contributed a positive interest
rate risk of DKK 5.1 million.
All other things being equal, the direct profit/loss effect of a change in interest rates will solely be related to the interest rate risk
related to the trading book, which was a loss of DKK 80.7 million at 31 December 2021 and DKK 54.9 million at 31 December
2020.
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23
Outside the trading book, a change in interest rates would impact future earnings and equity, as a change in interest rates would
affect alternative funding and investment options.
The Bank based its calculation of interest rate risk on the FSA’s guidelines.
Foreign exchange risk
The Bank assumes foreign exchange risk related to assets and liabilities in foreign currencies.
Vestjysk Bank’s policy is to maintain a low overall level of foreign exchange risk. The Bank therefore makes extensive use of
financial instruments to hedge foreign exchange risk.
Exchange rate indicators are simplified measures of the amount of the Bank's positions relative to tier 1 capital. Exchange
rate indicators in respect of foreign currency amounted to DKK 5.1 million at 31 December 2021, against DKK 6.4 million at 31
December 2020.
Equity risk
The Bank’s equity risk arises from shares and derivative instruments in its trading book and outside its trading book.
Positions outside the trading book mainly comprise shares in financial sector companies with which the Bank has a strategic
partnership. They are typically shares in companies in which the Bank has an ownership interest equal to its proportionate share
of the partnership. The Bank accepts the risk associated with ownership interests in sector companies, less risk is accepted on
the trading book.
31 December 2021, equity risk as expressed in terms of the invested amount was DKK 859 million. Of this amount, sector
company shares amounted to DKK 810 million.
Other market risks
It is the Bank’s policy not to assume market risks via financial instruments other than those specified above. It is therefore the
Bank’s policy not to assume commodity risk via financial instruments.
The most important aspects of the Bank’s market risks are set out in notes 38-40 to the financial statements.
Operational risk
Operational risk is defined as the risk of losses associated with internal and external conditions resulting from inadequate or
failed internal processes, human or system errors as well as external events, including legal risk.
The general responsibility for operational risk resides with the Bank’s Middle Office. Vestjysk Bank considers dependence on
key employees a focus area. The Bank continually strives to minimise the dependence on key employees, for example by
establishing written business procedures, centralising tasks and outsourcing areas that do not affect the Bank’s competitiveness.
In an operational risk policy, the Board of Directors has defined procedures for identification, assessment, monitoring and
management of operational risks. The Bank’s goal is for operational risks to be continually limited taking into account associated
costs.
Vestjysk Bank’s policies and contingency plans concerning physical disasters and IT breakdowns are improved on an ongoing
basis. The Bank is a member of BEC Financial Technologies (BEC) which handles day-to-day IT system operations. The Bank
complies with the directions and recommendations it receives from BEC and does not develop proprietary IT systems.
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Annual Report
The Bank’s IT contingency plans address breakdowns at the head office and parts of the branch network. In case of a breakdown
at one or more branches, operations can be maintained from the remaining branches, and in case of a long-lasting breakdown
at the head office, vital functions can be maintained from a branch. The Bank’s contingency plan is reviewed by the Board of
Directors at least annually.
Among other things, operational risk is minimised by organisational segregation of the performance and control of activities.
The Bank has established a system for registering, categorising and reporting operational risks. Middle Office submits quarterly
reports to the Executive Board, and the risk management function annually reports on operational risks to the Board of Directors.
Liquidity risk
Liquidity risk is defined as the risk of the Bank not being able to meet its payment obligations by drawing on its normal liquidity
reserves.
Vestjysk Bank pursues a cautious liquidity policy, having defined a number of requirements as to the size and composition of
the liquidity reserve and Vestjysk Bank’s overall financing structure.
The liquidity buffer must be sufficiently robust that, under a projection of expected cash flows in a stress scenario, adequate
liquidity is available to maintain the LCR and NSFR requirements in force from time to time under the CRR as well as the liquidity
benchmark requirement over a three-month period. The Bank’s liquidity risk and cash resources are detailed in note 41 to the
financial statements.
The overriding purpose of Vestjysk Bank’s liquidity management is to monitor and manage the development of the Bank’s short-
term and long-term liquidity and to ensure that the Bank has sufficient liquidity at its disposal at all times in Danish kroner as well
as in foreign currency.
The Bank aims to maintain a sound asset structure and focus on strong liquidity. The liquidity must be adequate and sufficiently
cautious and support the selected business model.
The liquidity need is planned in both the long and the short term for the purpose of ensuring a sufficient and stable level of cash
resources. Liquidity is primarily raised via the Bank’s deposit account customers.
Business risk
Business risk is defined as the risk of losses caused by changes in external conditions or events that harm the Bank’s reputation
or earnings.
Strong relationships with all its stakeholders – shareholders, customers, suppliers, employees and thus also the local
communities in which the Bank operates – are considered the foundation of Vestjysk Bank’s continued success and
opportunities for growth.
Total capital risk
Total capital risk is defined as the risk of losses due to the Bank not having sufficient capital to meet the higher of the total capital
requirement and the solvency need. The Board of Directors has adopted a capital coverage policy establishing capital targets
for the Bank, with ongoing reporting to the Executive Board and monthly reporting to the Board of Directors.
The Bank’s total capital is determined in accordance with the Danish Executive Order on the Calculation of Risk Exposures, Own
Funds and Solvency Need (Bekendtgørelse om opgørelse af risikoeksponeringer, kapitalgrundlag og solvensbehov), and at 31
December 2021 total capital amounted to DKK 5,211 million. Risk-weighted exposures amounted to DKK 23.5 billion, resulting
in a total capital ratio of 22.2%.
Annual Report
25
Risk report 2021
Pursuant to the Danish Financial Business Act, the CRR disclosure requirements (Pillar III) and other executive orders and
guidelines, Vestjysk Bank is required to publish detailed disclosures on risks, capital structure, capital coverage, risk
management, etc. To meet these requirements, Vestjysk Bank has prepared “Risk Report 2021”. The report is published at the
same time as the Annual Report and is available at vestjyskbank.dk/english/reports.
Alternative performance measures
The Bank applies a number of alternative performance measures. These measures are applied where they provide greater
informational value about e.g. the Bank’s earnings, or if they are a common denomination of several items. The Bank is aware
of the need for these to be applied consistently and with comparative figures.
The applied performance measures are defined below.
Core income
The sum of Net interest and fee income, Dividends on shares,
etc., Value adjustments and Other operating income.
Operating expenses and operating depreciation and
amortisation
The sum of Staff costs and administrative expenses,
Depreciation, amortisation and impairment losses on
intangible and tangible assets and Other operating expenses.
Core earnings before impairment
Profit/loss before tax less Impairment of loans and
receivables, etc.
Business volume including custody services and arranged
mortgage loans
The sum of Loans, Guarantees, Deposits, including pooled
funds, Customer services and arranged mortgage loans.
Management's review
Investor relations
26
Annual Report
Investor relations
Through its Investor Relations (IR) activities, Vestjysk Bank aims to communicate a true and fair view of the Bank’s activities and
prospects to investors, analysts and other stakeholders in the capital markets.
Disclosure of information is subject to the rules of Nasdaq Copenhagen.
IR portal at Vestjysk Bank’s website
An IR portal is found at Vestjysk Bank’s website, where shareholders and other stakeholders can find relevant and up-to-date
information. Here, published company announcements, investor presentations, share price data, financial reports and other IR
information are available. Vestjysk Bank’s IR policy can be found at vestjyskbank.dk/irpolitik.
The Vestjysk Bank share
The Vestjysk Bank share is listed on Nasdaq Copenhagen. The 2021 year-end closing price was DKK 3.42. The share price/book
value ratio was 0.99. The transaction volume for 2021 was 222 million shares at a total market value of DKK 731 million.
Share capital
Vestjysk Bank’s share capital totals DKK 1,234 million. The share capital consists of 1,233,573,501 shares with a nominal value
of DKK 1 each, and the Bank has some 51,000 registered shareholders.
Arbejdernes Landsbank is Vestjysk Bank’s majority shareholder, holding approximately 72.7% of the share capital. Arbejdernes
Landsbank, domiciled in the municipality of Copenhagen, is Vestjysk Bank’s only major shareholder.
The Bank’s shares are listed as a component of the Nasdaq Nordics Mid Cap index.
Capital position
At 31 December 2021, Vestjysk Bank held 173,000 own shares, equivalent to 0.02% of the share capital, which was in line with
2020.
Dividend policy
Under the provisions of the Danish Companies Act, Vestjysk Bank is not permitted to distribute dividends during the first 12
months after Arbejdernes Landsbank’s acquisition of the majority shareholding. The annual report therefore does not comprise
any proposal for distribution of dividends.
The Bank’s goal is to distribute dividends of between 25% and 50% of profit for the year.
Each year, the Board of Directors considers the possibility of distributing dividend in consideration of the financial results for the
year, future capital requirements, etc.
Annual Report
27
Annual General Meeting
Vestjysk Bank hold a virtual AGM on 7 March 2022 at 3 p.m.
Financial calendar 2022
21 January Deadline for receipt of shareholders’ request for items for inclusion on agenda for the AGM
10 February Annual Report 2021
7 March Annual General Meeting
9 May Quarterly report, Q1 2021
17 August Half-year report
11 November Quarterly report, Q3 2021
Investor relations
The Bank’s Executive Board is responsible for Vestjysk Bank’s investor relations activities. Shareholders and other interested
parties are welcome to contact the Executive Board with questions or comments. The Bank’s communications with equity market
stakeholders and inquiries regarding the Bank’s IR policy are primarily handled by:
Jan Ulsø Madsen, Chief Executive Officer
Vestjysk Bank
Industrivej 13 C
DK-7400 Herning
Tel: (+45) 96 63 21 04
jum@vestjyskbank.dk
Management's review
Investor relations
28
Annual Report
Company announcements 2021
In 2021, Vestjysk Bank issued the following company announcements:
10 December
Vestjysk Bank A/S has s
igned a loan agreement for DKK 150 million in Sen
ior Non
-
Preferred Debt
18 November
Vestjysk Bank’s Q1
-
Q3 2021 Quarterly Report
12 October
Vestjysk Bank upgrades its guidance for 2021.
7 September
Vestjysk Bank A/S has signed a loan agreement for DKK 1
40 million in Senior Non
-
Preferred Debt
17 August
Claus E. Petersen resigning as Deputy Chief Executive Officer of Vestjysk Bank A/S
17 August
Vestjysk Bank’s Half
-
Year Report 2021
9 August
Vestjysk Bank upgrades its guidance for 2021.
9 July:
Result o
f mandatory takeover offer
published on 7 June 2021
7 July: Preliminary result of the mandatory takeover offer made by Aktieselskabet Arbejdernes Landsbank
to the shareholders of Vestjysk Bank
15 June
Vestjysk Bank A/S has issued DKK 180 million in Senior Non
-
Preferred
31 May
Mandatory tender offer to all shareholders in Vestjysk Bank
19 May
Vestjysk Bank’s Q1 2021 Q
uarterly Report
24 March
Inside information
–
Potential mandatory public offer
22.marts
Resolutions at Vestjysk Ban
k A/S’ Annual
General Meeting on 22 March 2021
4 March
Vestjysk Bank A/S has issued DKK 140 million Senior Non
-
Preferred
2 March
Vestjysk Bank A/S is exploring the possibility to issue Senior Non
-
Preferred
26 February
The Board of Directors of Vestjys
k Bank A/S giv
es notice of annual general meeting
25 February
Vestjysk Bank A/S refinances hybrid core capital
23 February
Notification and public disclosure of transactions with shares in Vestjysk Bank A/S
23 February
Vestjysk Ba
nk’s 2020
Annual Report
29 January
Total number of voting rights and capital in Vestjysk Bank A/S
14 January
Changes to the management in Vestjysk Bank A/S
14 January
Merger between Vestjysk Bank A/S and Den Jyske Sparekasse A/S
13 January Decisions adopted on the extraordinary general meeting of Den Jyske Sparekasse A/S held on 13
January 2021 regarding the merger with Vestjysk Bank
13 January Resolutions at Vestjysk Bank A/S’s extraordinary general meeting held on 13 January 2021
regarding the merger with Den Jyske Sparekasse
7 January
Vestjysk Bank A/S's extraordinary general meeting
Management's review
Corporate Governance
Annual Report
29
Corporate Governance
Corporate governance report
Vestjysk Bank’s corporate governance is based on the recommendations of the Committee on Corporate Governance in
Denmark (Komitéen for god Selskabsledelse) and is thus in line with the principles which listed companies must consider under
the rules of Nasdaq Copenhagen. Moreover, the Bank considers its position on the corporate governance code of Finance
Denmark.
Vestjysk Bank has decided to publish its statutory corporate governance report on the Bank’s website – see
https://www.vestjyskbank.dk/english/organisation.
The report provides details on the Bank’s status on each of the recommendations issued by the Committee on Corporate
Governance and in the corporate governance code of Finance Denmark.
Corporate social responsibility report
Vestjysk Bank’s corporate social responsibility work focuses on five key areas: Climate and the environment, Community,
Employees, Human rights and Anti-corruption and bribery. Through its vision, mission and values, Vestjysk Bank has for several
years focused on responsibility as an integral part of its business.
Vestjysk Bank supports the Danish government’s commitment to giving a high priority to human rights and climate change,
including Denmark’s backing of the UN’s Sustainable Development Goals. The Bank sees these goals as a strategic benchmark
that guides its efforts.
As a local and regional bank, it is relevant for Vestjysk Bank to focus on the following Sustainable Development Goals:
Goal 5: Gender equality
Goal 8: Decent Work and Economic Growth
Goal 11: Sustainable Cities and Communities
Vestjysk Bank supports local associations and cultural life and many of the events and activities that help build communities
where people meet. The Bank’s sponsorships cover a wide array of organisations – from local associations to elite sports – and
the Bank’s employees also support the local community by performing volunteer work in the various associations.
It is important to Vestjysk Bank that young people looking for a future in the financial sector are given the opportunity to complete
their studies and subsequently find employment in the sector. It is therefore a priority for us each year to offer a number of
financial economics students and finance undergraduates internships with the Bank as they finish their studies. It is the Bank’s
intention to recruit finance and business trainees once they have completed their financial economist or finance bachelor studies.
The Bank sees diversity as a strength that has the capacity to contribute positively to the Bank’s growth, robustness as well as
to meet its established strategies and plans. Diversity in age, gender, experience and expertise has a high priority.
Vestjysk Bank has decided to publish its statutory corporate social responsibility report on the Bank’s website – see
https://www.vestjyskbank.dk/english/csr.
Management's review
Corporate Governance
30
Annual Report
Report on the underrepresented gender
It is Vestjysk Bank’s ambition to be an attractive workplace for both genders and endeavours to provide equal opportunities to
pursue careers and to attain and hold positions of leadership. In relation to this, it is important to the Bank that managers possess
the required skills, regardless of gender.
Vestjysk Bank has decided to publish its statutory report on the underrepresented gender at the Bank’s website – see
vestjyskbank.dk/investor-relations/csr.
Reporting on data ethics
Vestjysk Bank plans to adopt a data ethics policy in 2022. The policy will outline the Bank’s data ethics principles and data ethics
code of conduct and will be based on the principles, values and conduct set out below.
The Bank’s usage of customer data
Vestjysk Bank collects and stores large volumes of data, including personal data. We are aware of our great responsibility as a
data controller and of the trust placed in us to process data responsibly. We want to be transparent about the basis on which
we process data and how we prioritise our data protection efforts.
It is important that the Bank’s customers and community have a high degree of trust in our ability to store their data. Respect
for our customers’ and employees’ privacy is a core value for the Bank, and we safeguard people’s right to protect their privacy.
Openness and transparency about the Bank’s processing of customer data
To ensure our customers’ integrity, we strive to be open and transparent about the data we store on each customer. The Bank’s
customers should at any time be able to obtain information about the personal data the Bank stores about them and how and
for what purpose we store the data.
To protect our customers’ control over the data we store about them, we continually seek to ensure that our processing is as
structured as possible, so that we know what data we are storing about each customer at any given time.
We also ensure that we do not store data for longer than is necessary to meet the purposes for which the relevant personal data
are processed.
In the Bank’s processing of data, we strive to strike an objective balance in relation to factors such as classification of customers.
Procurement of data
We solely collect and store data that are necessary and that we may lawfully process. We must always ensure that personally
identifiable information is collected lawfully, for example pursuant to current legislation or according to agreement with or with
the consent of the customer.
The Bank’s focus on our community
Besides our customer relationships, we have widespread contacts with our community. We are aware that this means that we
also have a wider responsibility in terms of ethical data processing.
Being part of the financial sector, the Bank’s use of data is to a great extent a matter of financial calculation and assessments,
but it also has extensive legal and societal implications. For example, we collaborate with the authorities and comply with our
obligation to provide information when requested to do so. We also collaborate with the authorities by reporting relevant
information with respect to money laundering and other criminal activity.
Annual Report
31
Data processing by third parties
When the Bank collaborates with third parties, we ensure that the third parties protect our customers’ data to the same extent
as we do.
We enter into data processing agreements with relevant third parties and control that the third parties comply with the Bank’s
requirements, including our data ethics policy.
We do not sell customer data or other data to third parties.
Compliance within the Bank and training of employee skills
All employees of the Bank are bound by our data ethics policy. Managers have a special responsibility in this respect. They are
expected to set a good example and ensure that all employees are aware of and comply with the policy.
We prioritise keeping our employees well informed about data ethics, data security and proper handling of personal data by
means of regular training and skills development.
We strive to develop a ‘positive culture’ among our employees, in which openness about errors and problems leads to
improvements. Challenges and dilemmas may arise in relation to the processing of personal data. We must be able to discuss
and resolve these issues across employee groups and build a culture where errors and problems lead to improvements over
time. The precondition for a such a culture is that the Bank’s employees feel comfortable with coming forward and admitting or
pointing out errors. The overall goal is to reduce the number of errors to a minimum.
Roles and responsibilities
The Bank’s relevant business areas will responsible for integrating data ethics in our day-to-day operations and implementing
the Bank’s overall data ethics principles and goals.
Our view of data ethics considerations goes beyond mere compliance with and adherence to legislation. We therefore seek a
proactive approach to data ethics that is more comprehensive than legal compliance.
Rules on the appointment of members of the Board of Directors
After the Extraordinary General Meeting held on 13 January 2021, Vestjysk Bank’s Board of Directors will consist of at least four
and no more than nine members until the Annual General Meeting 2023. For the period after the Annual General Meeting 2023,
the Board of Directors may consist of at least four and no more than seven members elected by the company in general meeting.
The chairman and deputy chairman of the Board are also elected by the general meeting. Members are elected for terms of one
year and are eligible for re-election.
Management's review
Corporate Governance
32
Annual Report
Board of Directors and Executive Board
Vestjysk Bank’s Board of Directors
The Board of Directors of Vestjysk Bank consists of nine members, four of whom are elected by the Bank’s employees.
Kim Duus (born 1956), Chairman
Gender: Male
First elected to Vestjysk Bank’s Board of Directors at
the AGM in 2019, when he was also appointed
Chairman of the Board
Expiry of current term: 2022
Other directorships:
Chairman of the board of directors of P+,
Pensionskassen for Akademikere
Deputy chairman of the board of directors of Cobiro
A/S
Member of the board of directors of
Investeringsforeningen Sparinvest
Member of the board of directors of Nærpension
Forsikringsformidling A/S
Committee appointments:
Chairman of the Board of Directors’ nomination
committee
Member of the Board of Directors’ remuneration
committee
Member of the Board of Directors’ risk committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 150,000
Change to shareholding for the year: 0
Niels Fessel (born 1959), Deputy Chairman
Gender: Male
First elected to Vestjysk Bank’s Board of Directors in
2021
Expiry of current term: 2022
Other directorships:
None
Committee appointments:
Chairman of the Board of Directors’ remuneration
committee
Member of the Board of Directors’ nomination
committee
Member of the Board of Directors’ audit committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 125,000
Change to shareholding for the year: 125,000
Annual Report
33
Lars Langhoff (born 1969)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors in
2021
Expiry of current term: 2022
Other directorships:
Member of the executive board of Langhoff Family
ApS
Member of the executive board of Codex Advokaters
Komplementar Advokatanpartsselskab
Member of the board of directors and the executive
board of B&P af 17.2.12 A/S
Member of the board of directors and the executive
board of CA af 31/12 2012 A/S
Chairman of the board of directors of O.M. Holding.
Horsens A/S
Chairman of the board of directors of Højfyns Gruppen
ApS
Chairman of the board of directors of Odense Byg og
Bo ApS
Chairman of the board of directors of Svend Erik Lind
A/S
Chairman of the board of directors of O.M. Invest,
Glud A/S
Chairman of the board of directors of Print Production
A/S
Chairman of the board of directors of Odense Byg og
Bo Invest ApS
Chairman of the board of directors of Teglgaarden
Agro ApS
Chairman of the board of directors of Thygesen
Transport A/S
Chairman of the board of directors of Allégården A/S
Chairman of the board of directors of O.M. Glud II A/S
Chairman of the board of directors of OL Biogas ApS
Member of the board of directors of Codex Advokater
Advokatpartnerselskab
Member of the board of directors of Dansk Farmland
K/S
Committee appointments:
Member of the Board of Directors’ risk committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 29,920
Change to shareholding for the year: 0
Jan Nordstrøm (born 1960),
Gender: Male
First elected to Vestjysk Bank’s Board of Directors in
2021
Expiry of current term: 2022
Other directorships:
Vice President of Danish Crown A/S
Committee appointments:
Chairman of the Board of Directors’ risk committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 74,732
Change to shareholding for the year: 0
Lars Holst (born 1952)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors at
the AGM in 2014
Expiry of current term: 2022
Other directorships:
Member of the board of directors of Vækstfonden
Member of the board of directors of Grønlandsbanken
A/S
Chairman of the board of directors of AG Gruppen A/S
and the following subsidiaries:
Chairman of the board of directors of AG Construction
A/S
Chairman of the board of directors of AG Development
A/S
Chairman of the board of directors of AG Investments
A/S
Committee appointments:
Member of the Board of Directors’ risk committee
Member of the Board of Directors’ audit committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 15,000
Change to shareholding for the year: 0
Management's review
Corporate Governance
34
Annual Report
Bent Simonsen (born 1961)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors at
the AGM in 2013
Expiry of current term: 2022
Other directorships:
Member of the executive board of Hazel Invest ApS
Chairman of the board of directors of Viborg
Håndboldklubs Venner ApS
Member of the board of directors of A/S
Plantningsselskabet Sønderjylland
Member of the board of directors of Den Sønderjyske
Plantagefond
Member of the board of directors of Green Chip A/S
Member of the board of directors of Stjernholm US
Inc.
Advisory Board Ausumgaard I/S
Committee appointments:
Chairman of the Board of Directors’ audit committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 125,000
Change to shareholding for the year: 0
Claus Jensen (born 1964)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors in
2020
Expiry of current term: 2022
Other directorships:
Chairman of the Danish Metalworkers' Union
Chairman of CO-Industri
Chairman of Industriansatte i Norden, IN
Deputy chairman of IndustriALL, Europe
Member of the board of directors of A/S A-Pressen
Member of the board of directors of AKF Holding
Member of the executive committee of the Danish
Trade Union Confederation (FH)
Member of the board of directors and board of
representatives of Arbejdernes Landsbank
Member of the board of directors of Industriens
Pensionsforsikring A/S
Member of the board of directors of Industriens
Pension Holding A/S
Member of the board of directors of Industriens
Pension Service A/S
Member of the board of directors of Odense Havn A/S
Member of the board of directors of Sund & Bælt
Holding A/S
Member of the board of directors of Øresundsbro
Konsortiet
Committee appointments: None
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 0
Change to shareholding for the year: 0
Bolette van Ingen Bro (born 1965)
Gender: Female
First elected to Vestjysk Bank’s Board of Directors in
2018
Expiry of current term: 2022
Other directorships:
CEO of Navigators
CEO of Cluster Excellence Denmark / Danish Clusters
ApS
CEO of Netweavers ApS
Chairman of the board of directors of Fonden West
Coast Center Jutland
Chairman of the board of directors of Kystcentret A/S
Member of the board of directors of Det Danske
Hedeselskab
Member of the board of directors of Dalgasgroup A/S
Committee appointments: None
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 194,500
Change to shareholding for the year: 0
Annual Report
35
Hanne Træholt Odegaard (born 1969),
Gender: Female
First elected to Vestjysk Bank’s Board of Directors in
2021
Expiry of current term: 2022
Other directorships:
Member of the board of directors of Hans Schiess
Mindelegat
Committee appointments:
Member of the Board of Directors’ audit committee
Independent: Yes
Number of shares in Vestjysk Bank at 31 December
2021: 20,400
Change to shareholding for the year: 0
Jacob Møllgaard (born 1976)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors as
an employee representative in 2013
Expiry of current term: 2023
Other directorships:
Deputy Chairman of the Financial Services Union
Denmark, District West
Committee appointments: None
Independent: No
Number of shares in Vestjysk Bank at 31 December
2021: 4,246
Change to shareholding for the year: 0
Mette Holmegaard Nielsen (born 1976)
Gender: Female
First elected to Vestjysk Bank’s Board of Directors as
an employee representative in 2019
Expiry of current term: 2025
Committee appointments:
Member of the Board of Directors’ audit committee
Independent: No
Number of shares in Vestjysk Bank at 31 December
2021: 22,124
Change to shareholding for the year: 0
Karsten Westergård Hansen (born 1960)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors as
an employee representative in 2021
Expiry of current term: 2025
Other directorships:
Member of the board of directors of Fonden Magion
Member of the board of directors of Badminton
Midtjylland
Member of the board of directors of Grindsted
Badmintonklub
Committee appointments:
Member of the Board of Directors’ remuneration
committee
Independent: No
Number of shares in Vestjysk Bank at 31 December
2021: 27,200
Change to shareholding for the year: 0
Steen Louie Pedersen (born 1964)
Gender: Male
First elected to Vestjysk Bank’s Board of Directors as
an employee representative in 2021
Expiry of current term: 2023
Other directorships:
Member of the board of directors of Hedensted
Golfklub
Member of the board of directors of Den Jyske
Sparekasses Støttefond
Committee appointments:
Member of the Board of Directors’ risk committee
Independent: No
Number of shares in Vestjysk Bank at 31 December
2021: 18,360
Change to shareholding for the year: 0
Management's review
Corporate Governance
36
Annual Report
Vestjysk Bank’s Executive Board
Jan Ulsø Madsen, Chief Executive Officer (born 1960)
Appointed Chief Executive Officer of Vestjysk Bank on 1
February 2015
Other directorships:
Member of the board of directors of Sparinvest
Holdings SE
Member of the board of directors of Opendo A/S
Member of the board of directors of Foreningen Lokale
Pengeinstitutter
Number of shares in Vestjysk Bank at 31 December
2021: 124,000
Change to shareholding for the year: 0
Michael Nelander Petersen, Managing Director (born
1963)
Appointed Managing Director of Vestjysk Bank on 25
September 2012
Other directorships:
Member of the board of directors of BEC
Member of the board of directors of Lokal Pulje Invest
Member of the board of directors of Factor Insurance
Brokers A/S
Number of shares in Vestjysk Bank at 31 December
2021: 90,000
Change to shareholding for the year: 0
Torben Sørensen, Managing Director (born 1957)
Appointed Managing Director of Vestjysk Bank on 14
January 2021
Other directorships:
None
Number of shares in Vestjysk Bank at 31 December
2021: 35,088
Change to shareholding for the year: 0
Management's review
Organisation
Annual Report
37
Management's review
Organisation
38
Annual Report
The Bank’s strategy and organisation
Through its values, Presence, Simplicity and Action, Vestjysk Bank wishes to support positive development for the Bank’s
customers and to stimulate activity in its local communities. Vestjysk Bank wishes to use its position as the strongest local bank
in Denmark to share in the responsibility for the development of its local communities.
Following the merger with Den Jyske Sparekasse, Vestjysk Bank now has sufficient size and strength to focus even more on
attracting new customers while at the same time offering existing customers focused advisory services.
This will continue to be carried out from the Bank's branch network, aiming to grow the business volume through a targeted
effort to attract new retail and business customers as well as through additional business with existing customers, not least in
the leasing and investment areas.
Vestjysk Bank will also give special attention to attracting large new business customers to the Corporate Customer department
and particularly to growth in the Bank’s niche areas, with Renewable Energy particularly expected to add to the business volume
growth.
Vestjysk Bank will also focus on strengthening the business areas of Fisheries and Agriculture, where the Bank has both large
market shares and strong expertise. The development of the Bank’s business in these industries will therefore remain a big
priority.
To support these business initiatives, the Bank’s digitalisation will continue in the coming years, both in the form of new digital
solutions for its customers and further automation and digitalisation of internal processes to ensure that the Bank stays
competitive in the Danish banking market.
Strengthening these business initiatives will also require focus on maintaining and strengthening the skills of the Bank’s
employees. Training of both banking and sales skills will therefore be on the agenda, and the Bank will take on new trainees and
junior clerks.
The Bank’s aim is to realise a satisfactory return on equity, combined with focus on a healthy sector distribution of the Bank’s
credit exposures.
Credit management is to continually improve the quality of the Bank’s credit book through stringent management of existing
vulnerable exposures, focus on increasing business volume with existing financially sound customers and growth through the
intake of financially sound new retail and business customers. In the business customer segment, the Bank focuses particularly
on customers with a business volume of DKK 3-75 million.
The objective of increasing the business volume must continually be balanced against the Bank’s liquidity and capital structure.
We consider central, western and eastern Jutland our core market area. The market strategy is adapted to the general
opportunities in the individual market areas. The number of branches is regularly evaluated against current and anticipated
market developments.
Vestjysk Bank’s core business is conventional retail and business banking with special expertise in lending and financing for
agriculture, fisheries, real estate, and small and medium-sized enterprises.
We aim to provide a portfolio of products and services designed to meet the needs of ordinary retail and business customers in
all core market areas. This portfolio is to ensure a sound business platform for customers as well as the Bank.
The business segment will continue to be the Bank’s primary business segment, with agriculture, fisheries and real estate as the
largest sectors. Considering the Bank’s geographical locations and history, the strategy is to continue to have significant
business in these areas. The Bank wants to maintain a 60-65%/35-40% ratio of business to retail banking.
Annual Report
39
The Board of Directors annually defines limits of maximum business volume within individual sectors, and no individual sector
may exceed 15% of the Bank’s total lending portfolio.
The Bank previously built up a certain portfolio outside its market area in Denmark. Going forward, Vestjysk Bank will seek to
primarily retain existing customers and attract new customers within its geographical market area. We will therefore actively
maintain the proportion of loans outside our market area at the current level of about 13%.
The Bank has also built up a portfolio abroad. Over a period of several years, the Bank has reduced the proportion of loans
abroad, and will now strive to maintain the current level of about 2%.
The Bank’s lending portfolio must be characterised by financially sound exposures and a continued healthy diversification on
sectors, geography and business areas. Only in exceptional cases and for limited time periods will the Bank accept exposures
that exceed 10% of its total capital.
The Executive Board has three members, who between them cover management’s areas of responsibility.
Organisation
Vestjysk Bank is organised around its two main customer groups, Business and Retail. The cornerstone of the Bank’s business
is the branch network in Jutland, organised in three regions: Eastern, Western and Central, plus a number of niche areas. In
addition to the branches, the Bank has the following niche areas: Agriculture, Fisheries, Private Banking and Corporate
Customers, which comprises Project Financing, Healthcare, Tourism and Renewable Energy.
The customer-facing functions and the central corporate departments are linked through a number of committees and
management fora.
The committees are:
• The investment committee
• The price/product committee
• The price/credit committee
• The risk committee
The management fora are:
• A staff forum
• A business forum
• A management forum
Enhancing the competencies of Management and employees
Vestjysk Bank aims to maintain a consistently high level of expertise for management and employees alike. With our ambition of
doing things right, skill building is a key strategic development area.
This focus is one of the reasons that the Bank is able to retain and attract competent employees with strong general and specialist
competencies. The average age and seniority of the Bank’s employees are 47.3 and 13.2 years respectively. The average number
of FTEs in 2021 was 657.
Management’s statement
40
Annual Report
The Bank’s Board of Directors and Executive Board have today considered and approved the Annual Report of Vestjysk Bank
A/S for the period 1 January – 31 December 2021.
The annual report is presented in accordance with the Danish Financial Business Act. Furthermore, the annual report has been
prepared in accordance with Danish disclosure requirements for listed financial enterprises.
In our opinion, the accounting policies applied are appropriate and the Financial Statements present a true and fair view of the
Company’s assets and liabilities and financial position as at 31 December 2021, and of the results of the Bank’s activities for the
reporting period 1 January – 31 December 2021. In our opinion, the annual report has been prepared, in all material respects, in
compliance with the ESEF Regulation.
In our opinion, the Management’s review includes a fair review of the development and performance of the Bank and a fair
description of the principal risks and uncertainty factors that the Bank faces.
We recommend the annual report for adoption by the shareholders at the annual general meeting.
Herning, 10 February 2022
Executive Board
…………
…………………………………
Jan Ulsø Madsen
Chief Executive Officer
…………………………………………
Michael Nelander Petersen
Managing Director
…………………………………………
Torben Sørensen
Managing Director
Management’s statement
Annual Report
41
Board of Directors
………………………………………..
Kim Duus
Chairman
………………………………………..
Niels Fessel
Deputy Chairman
…………………………………………
Lars Langhoff
…………………………………………
Jan Nordstrøm
…………………………………………
Lars Holst
…………………………………………
Bent Simonsen
…………………………………………
Claus Jensen
…………………………………………
Bolette van Ingen Bro
…………………………………………
Hanne Træholt Odegaard
…………………………………………
Jacob Møllgaard
…………………………………………
Mette Holmegaard Nielsen
…………………………………………
Karsten Westergård Hansen
…………………………………………
Steen Louie
Auditors’ report
42
Annual Report
Report by the Internal Audit Department
To the Shareholders of Vestjysk Bank A/S
Opinion
In our opinion, the Financial Statements of Vestjysk Bank A/S give a true and fair view of the Company’s assets, liabilities and
financial position at 31 December 2021 and of the results of its operations for the financial year 1 January – 31 December 2021
in accordance with the Danish Financial Business Act.
Our opinion is consistent with our Auditor’s Long-form Report to the Audit Committee and the Board of Directors.
Basis of opinion
We have audited the Financial Statements of Vestjysk Bank A/S for the financial year 1 January - 31 December 2021, which
comprise a statement of income and a statement of comprehensive income, a statement of financial position, a statement of
changes in equity and notes to the financial statements, including accounting policies. The Financial Statements are prepared
in accordance with the Danish Financial Business Act.
We conducted our audit on the basis of the Executive Order of the Danish Financial Supervisory Authority on Auditing Financial
Enterprises and Financial Groups and in accordance with International Standards on Auditing with respect to the planning and
performing of audits.
We planned and performed the audit to obtain reasonable assurance as to whether the Financial Statements are free from
material misstatement. We participated in the audit of all critical audit areas.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Statement on the Management’s review
Management is responsible for the Management’s review.
Our opinion on the Financial Statements does not cover the Management’s review, and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the Management’s review and, in doing so,
consider whether the Management’s review is materially inconsistent with the Financial Statements or our knowledge obtained
during the audit or otherwise appears to be materially misstated.
Moreover, it is our responsibility to consider whether the Management’s review provides the information required under the
Danish Financial Business Act.
Based on the work we have performed, we conclude that the Management’s review is in accordance with the Financial
Statements and has been prepared in accordance with the requirements of the Danish Financial Business Act. We did not identify
any material misstatements of the Management’s review.
Herning, 10 February 2022
Mikael Flohr Hansen
Chief Audit Executive
Annual Report
43
Independent Auditor’s Report
To the Shareholders of Vestjysk Bank A/S
Opinion
We have audited the financial statements of Vestjysk Bank A/S for the financial year 1 January to 31 December 2021, which
comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity and notes,
including a summary of significant accounting policies. The financial statements are prepared in accordance with the Danish
Financial Business Act and additional Danish disclosure requirements for listed financial services companies.
In our opinion, the financial statements give a true and fair view of the Bank’s financial position at 31 December 2021 and of its
financial performance for the financial year 1 January to 31 December 2021 in accordance with the Danish Financial Business
Act and additional Danish disclosure requirements for listed financial services enterprises.
Our opinion is consistent with our audit book comments issued to the Audit Committee and the Board of Directors.
Basis for opinion
applicable in Denmark. Our responsibilities under those standards and requirements are further described in the "Auditors’
responsibilities for the audit of the financial statements" section of this auditor’s report. We are independent of the Bank in
accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code)
and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
To the best of our knowledge and belief, we have not provided any prohibited non-audit services as referred to in Article 5(1) of
Regulation (EU) No 537/2014.
We were appointed auditors of Vestjysk Bank A/S for the first time on 25 March 2021 for the financial year 2021.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements for the financial year 1 January to 31 December 2021. These matters were addressed in the context of our audit of
the financial statements as a whole and in forming our opinion thereon. We do not provide a separate opinion on these matters.
Loan impairment charges and provisions for
guarantees, etc.
How the matter was addressed in our audit
The Banks’ loans and advances amount to DKK 16,778m
and guarantees amount to DKK 10,052m at 31 December
2021 (loans and advances amounted to DKK 9,332m at
31 December 2020, and guarantees amounted to DKK
5,202m at 31 December 2020). Loan impairment charges
and provisions for guarantees, etc. for the period 1
January 2021 to 31 December 2021 total DKK -20m (DKK
29m in the period 1 January 2020 to 31 December 2020)
in the financial statements.
Determining loan impairment charges and provisions for
guarantees, etc. is subject to significant uncertainty and
to some extent based on management judgement. Due to
the significance of such management judgement and the
loan and guarantee volumes, etc. for business, including
Based on our risk assessment, our audit comprised a
review of the Bank’s relevant procedures for loan
impairment charges and provisions for guarantees, etc.,
testing of relevant controls and analysis of the
development in credit quality of loans and guarantees,
etc. including the amount of impairment charges and
provisions.
Our audit procedures included testing design and
implementation and the operating effectiveness of
relevant controls regarding:
• Current assessment of credit risk
Auditors’ report
44
Annual Report
agriculture, auditing loan impairment charges and
provisions for guarantees, etc. for business is a key audit
matter.
The principles for determining the impairment losses are
described in detail in the summary of significant accounting
policies, and Management has described the management
of credit risks and the review for impairment in notes 1-1a, 8-
9 and 36-37 to the financial statements.
In 2021, recognising the effects of COVID-19 has required
particular focus in terms of management add-ons in the
models and the individual impairment losses.
The areas of loans and guarantees, etc. involving the
highest level of management judgement, thus requiring
greater audit attention, are:
• Identification of exposures and guarantees etc.
that are credit-impaired relative to initial
recognition.
• Parameters and management add-ons in the
applied calculation model used to determine
Stage 1 and Stage 2 expected losses.
• Valuation of collateral and future cash flows,
including management judgement involved in
determining Stage 3 expected losses.
• Assessing the effects of COVID-19 and other
events that are not already considered by the
models in terms of management add-ons in the
models and the individual impairment losses.
•
Assessment and validation of input and
assumptions applied in calculating impairment
charges and provisions for Stage 1 and Stage 2
guarantees
• Determination of management add-ons for the
individual and model-based impairment losses, etc.
Our audit procedures also comprised:
• Review and assessment of the applied impairment
model prepared by the associated datacentre,
including the received internal auditor’s report
stating that the calculations of the model are within
the framework of the rules in the Executive Order on
Financial Reports, and that the Bank’s use of the
impairment model has allowed for the emphasis of
matter stated in the auditor’s report.
• Review and assessment of the Bank’s calculation of
Stage 1 and Stage 2 impairment charges, including
an assessment of the model variables and the
assumptions thereof which Bank Management has
found to be adequate in the Bank’s circumstances.
• Testing, on a sample basis, the accuracy of the data
on which the calculation is based as well as a
recalculation thereof.
• Reviewing, on a sample basis, exposures to ensure
timely identification of credit-impaired loans and
provisions for guarantees.
• Testing, on a sample basis for loans classified to be
in Stage 3, the calculated impairment charges and
provisions for guarantees for consistency with legal
and bank guidelines to this effect. Our work
included testing collateral values and definition of
scenarios.
• Challenging management judgements incorporated
in the models and management add-ons in the
models and the individual impairment losses in
relation to the effects of COVID-19 and other events
that are not already considered by the models.
Statement on Management’s Review
Management is responsible for the management commentary.
Our opinion on the financial statements does not cover the management commentary, and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the management commentary and, in doing
so, consider whether the management commentary is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
Moreover, it is our responsibility to consider whether the management commentary provides the information required under the
Danish Financial Business Act.
Based on the work we have performed, we conclude that the management commentary is in accordance with the financial
statements and has been prepared in accordance with the requirements of the Danish Financial Business Act. We did not identify
any material misstatement of the management commentary.
Annual Report
45
Management’s responsibilities for the financial statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the
Danish Financial Business Act and additional Danish disclosure requirements for listed financial services companies and for such
internal control as Management determines is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, Management is responsible for assessing the Bank’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern, and using the going concern basis of accounting unless Management
either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements
applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risk of material misstatement of the financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by Management.
• Conclude on the appropriateness of Management's use of the going concern basis of accounting in preparing the
financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Bank to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and contents of the financial statements, including disclosures in the notes,
and whether the financial statements represent the underlying transactions and events in a manner that gives a true and
fair view.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
independence, and, where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
Auditors’ report
46
Annual Report
circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on compliance with the ESEF Regulation
As part of our audit of the financial statements of Vestjysk Bank A/S, we have performed procedures to express an opinion on
whether the annual report for the financial year 1 January 2021 to 31 December 2021, with the file name 2021-vestjyskbank-
dk.xhtml, has been prepared, in all material respects, in compliance with Commission Delegated Regulation (EU) 2019/815 on
the European Single Electronic Format (ESEF Regulation), which includes requirements related to the preparation of an annual
report in XHTML format.
Management is responsible for preparing an annual report that complies with the ESEF Regulation, including preparation of the
annual report in XHTML format.
Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in
compliance with the ESEF Regulation based on the evidence we have obtained and to issue a report that includes our opinion.
The procedures include testing whether the annual report is prepared in XHTML format.
In our opinion, the annual report for the financial year 1 January 2021 to 31 December 2021, with the file name 2021-
vestjyskbank-dk.xhtml, is prepared, in all material respects, in compliance with the ESEF Regulation.
Copenhagen, 10 February 2022
Deloitte
Statsautoriseret Revisionspartnerselskab
CVR No 33 96 35 56
Jens Ringbæk Jakob Lindberg
State Authorised Public Accountant State Authorised Public Accountant
Identification No (MNE) mne27735 Identification No (MNE) mne40824
Financial Statements
Statements of Income and Comprehensive Income
Annual Report
47
Note
2021
2020
DKK'000
DKK'000
Statement of Income
2
Interest income
793,499
490,237
2a
Negative interest income
24,352
7,642
3
Interest expenses
61,776
30,247
3a
Negative interest expenses
99,519
33,820
Net interest income
806,890
486,168
Dividends on shares etc.
13,434
8,840
4
Income from fees and commissions
653,318
359,496
Fees and commissions paid
52,015
33,256
Net interest and fee income
1,421,627
821,248
5
Value adjustments
107,631
64,659
46
Other operating income
486,276
686
6
Staff costs and administrative expenses
1,044,250
510,253
Depreciation, amortisation and impairment of tangible assets
51,678
17,489
Other operating expenses
5,414
2,534
8
Impairment of loans and receivables, etc.
-20,007
28,533
Income from investments in associates
19,887
0
Profit/loss from operations in the process of being wound up
-18
0
Profit before tax
954,068
327,784
11
Tax
-125,718
25,233
Profit after tax
1,079,786
302,551
Statement of Comprehensive Income
Profit after tax
1,079,786
302,551
Other comprehensive income:
Change in the value of owner-occupied properties
676
0
Changes in the value of pension obligations
-474
-661
Other comprehensive income after tax 202
-661
Total comprehensive income 1,079,988
301,890
Proposed distribution of net profit
Additional tier 1 capital holders
21,898
18,539
Retained earnings
1,058,090
283,351
Total
1,079,988
301,890
Financial Statements
Statements of Financial Position
48
Annual Report
Note 2021
2020
DKK'000
DKK'000
Assets
Cash in hand and demand deposits with central banks
5,174,339
364,364
12
Receivables from credit institutions and central banks
186,898
569,359
13
Loans and other receivables at amortised cost
16,778,363
9,331,543
Bonds at fair value
9,346,206
6,159,587
Shares, etc.
859,384
546,932
14
Investments in associates
127,847
0
15
Assets related to pooled schemes
9,223,381
5,426,277
16
Intangible assets
103,979
0
Land and buildings, total
382,240
235,986
17
Investment property
32,129
0
18
Owner-occupied property
274,770
235,986
18
Owner-occupied property, leased
75,341
28,967
19
Other property, plant and equipment
10,315
2,545
Current tax assets
0
1,193
20
Deferred tax assets
292,718
98,000
Assets held for sale
48,577
0
21
Other assets
685,238
323,294
Prepayments
90,498
17,005
Assets total
43,309,983
23,105,052
Financial Statements
Statements of Financial Position
Annual Report
49
Note
2021
2020
DKK'000
DKK'000
Equity and liabilities
Debts
22
Debts to credit institutions and central banks
307,854
22,445
23
Deposits and other debt
26,023,854
13,409,203
Deposits with pooled schemes
9,223,381
5,426,277
24
Issued bonds
378,279
0
Current tax liabilities
64,747
0
25
Other liabilities
1,102,669
550,630
Prepayments
14,890
15
Debts, total
37,115,674
19,408,570
Provisions
Provision for pensions and similar liabilities
25,670
15,316
9
Provisions for losses on guarantees
21,288
22,176
9
Other provisions
153,173
66,133
Provisions, total
200,131
103,625
26
Subordinated debt
597,746
347,961
Equity
27
Share capital
1,233,574
895,982
Share premium
46,398
47,449
Reserves provided for in the Bank’s Articles of Association
599,492
0
Revaluation reserves
1,267,171
551,600
Retained earnings
1,938,060
1,594,865
Shareholder equity, total
5,084,695
3,089,896
Additional tier 1 capital holders
311,737
155,000
Equity, total
5,396,432
3,244,896
Equity and liabilities, total
43,309,983
23,105,052
Financial Statements
Statements of Changes in Equity
50
Annual Report
DKK’000 Share
capital
Share
premium
Revaluation
reserves
Reserves
provided
for in the
Bank’s
Articles of
Association
Retained
earnings
Shareholder
equity,
total
Additional
tier 1
capital
holders *)
Equity,
total
Equity, 1 January 2021
895,982
0
47,449
551,600
1,594,865
3,089,896
155,000
3,244,896
Profit after tax for the period
1,038,001
1,038,001
21,898
1,059,899
Revaluation reserve, associates
19,887
0
19,887
19,887
Other comprehensive income after
tax 676
-474
202
202
Total comprehensive income
0
0
676
19,887
1,037,527
1,058,090
21,898
1,079,988
Issue of shares on merger
337,592
599,492
937,084
937,084
Additions on merge
0
100,000
100,000
Reclassification of reserves on
merger 695,684
-695,684
0
0
Issue of additional tier 1 capital
-375
-375
95,700
95,325
Redemption of additional tier 1
capital 0
-50,000
-50,000
Interest on additional tier 1 capital
0
-10,861
-10,861
Additions relating to sale of own
shares 41,671
41,671
41,671
Disposals relating to purchase of
own shares -41,671
-41,671
-41,671
Profits brought forward
-1,727
1,727
0
0
Equity, 31 December 2021
1,233,574
599,492
46,398
1,267,171
1,938,060
5,084,695
311,737
5,396,432
Equity, 1 January 2020
895,982
0
47,449
551,600
1,306,136
2,801,167
155,000
2,956,167
Profit after tax for the period
289,390
289,390
13,161
302,551
Other comprehensive income after
tax
-661
-661
-661
Total comprehensive income 0
0
0
0
288,729
288,729
13,161
301,890
Interest on additional tier 1 capital
-13,161
-13,161
Additions relating to sale of own
shares
49,924
49,924
49,924
Disposals relating to purchase of own shares
-49,924
-49,924
-49,924
Equity, 31 December 2020
895,982
0
47,449
551,600
1,594,865
3,089,896
155,000
3,244,896
The reserves provided for in the Bank’s Articles of Association, amounting to DKK 551.6 million at 1 January 2021, arose in connection
with Vestjysk Bank’s capital reduction in 2013. The DKK 695.7 million addition to reserves stems from the merger with Den Jyske
Sparekasse. The non-distributable reserve consists of DKK 568.7 million transferred on Den Jyske Sparekasse’s conversion into a
limited liability company in June 2018 and DKK 127 million relating to a transfer from guarantee capital to reserves provided for in the
Articles of Association in connection with amendments made to the Articles of Association in the spring of 2015. The reserves provided
for in the Bank’s Articles of Association are not distributable as dividends but may be used to cover losses that cannot be covered by
distributable elements.
Financial Statements
Statements of Changes in Equity
Annual Report
51
*) Holders of additional tier 1 capital
The additional tier 1 capital has been provided for an indefinite term and Vestjysk Bank has full discretion at all times to omit
interest payments, and it is consequently accounted for as equity.
The capital meets the tier 2 capital requirements under
CRR/CRD IV.
Additional tier 1 capital DKK 155 million
There is an option of early redemption, subject to approval by the Danish Financial Supervisory Authority, on 16 August 2022.
The capital accrues interest at 8.50% until 16 August 2022, after which it accrues interest at a floating rate of CIBOR6 plus a
credit spread. If Vestjysk Bank’s common equity tier 1 capital ratio falls below 5.125%, the loan will be written down.
Additional tier 1 capital DKK 50 million
There is an option of early redemption, subject to approval by the Danish Financial Supervisory Authority, on 26 June 2023.
The capital accrues interest at 7,5% until 26 June 2023, after which it accrues interest at a floating rate of CIBOR6 plus a credit
spread. If Vestjysk Bank’s common equity tier 1 capital ratio falls below 5.125%, the loan will be written down.
Additional tier 1 capital DKK 50 million
There is an option of early redemption, subject to approval by the Danish Financial Supervisory Authority, on 12 March 2026.
The capital accrues interest at 4,75% until 12 March 2026, after which it accrues interest at a floating rate of CIBOR6 plus a
credit spread. If Vestjysk Bank’s common equity tier 1 capital ratio falls below 5.125%, the loan will be written down.
Additional tier 1 capital DKK 45,7 million
There is an option of early redemption, subject to approval by the Danish Financial Supervisory Authority, on 25 January 2026.
The capital accrues interest at 5,75% until 25 January 2026, after which it accrues interest at a floating rate of CIBOR6 plus a
credit spread. If Vestjysk Bank’s common equity tier 1 capital ratio falls below 5.125%, the loan will be written down.
Financial Statements
Notes
52
Annual Report
Note
1 Accounting policies 25 Other liabilities
1a Accounting estimates and assessments 26 Subordinated debt
2 Interest income 27 Share capital
2a Negative interest income 28 Capital
3 Interest expenses 29 Contingent assets
3a Negative interest expenses 30 Contingent liabilities and security pledge
4 Income from fees and commissions 31 Hedge accounting
5 Value adjustments 32 Derivative financial instruments
6 Staff costs and administrative expenses 33 Fair value of financial assets and liabilities
7 Auditors' fees 34 Risk and risk management
8 Impairment of loans and receivables, etc. 35 Loans and guarantees, by sector(net)
9
Impairments of loans and receivables and
provisions on guarantees and unutilised credit
lines
36 Loans by rating, sectors and IFRS9- stages
10
Receivables for which accrual of interest has
been discontinued
37 Maximum credit exposure
11 Tax 38 Interest rate risk
12
Receivables from credit institutions and central
banks
39 Foreign exchange risk
13
Loans and other receivables, by term to
maturity
40 Share risk
14 Investments in associates 41 Liquidity risk
15 Assets related to pooled schemes 42 Other risks
16 Intangible assets 43 Related parties
17 Investment property 44 Pending litigation
18 Owner-occupied property 45 Events after the balance sheet date
19 Other property, plant and equipment 46 Merger
20 Deffered tax asset 47 Financial highlights
21 Other assets
22 Debts to credit institutions and central banks
23 Deposits and other debt
24 Issued bonds
Annual Report
53
Note
1
Accounting policies
General information
The Annual Report for the period 1 January – 31 December 2021 for Vestjysk Bank A/S (the "bank") has been prepared
in accordance with the Danish Financial Business Act, including the Danish Financial Supervisory Authority's Executive
Order on Financial Reports for Credit Institutions and Investment Companies etc. Comparative figures for 2020 do not
include Den Jyske Sparekasse.
Except for changes in "Changes to accounting policies", the accounting policies are unchanged from last year.
The financial statements have been prepared in Danish kroner (DKK).
Changes in accounting policies
The accounting policies are unchanged from 2020, but the accounting estimates concerning deferred tax assets have
been changed.
Deferred tax assets
The Bank previously recognised deferred tax assets based on the expectation that the deferred tax asset could be used
within a period of 3 years based on the banks' budgets.
In recent years, the bank has been able to meet its budgets and forecasts, both with respect to pre-tax profit and to net
interest and fee income.
It is further assessed that there is a greater certainty over expected cost reductions in the form of the synergy effects
created by the merger with Den Jyske Sparekasse. For the most part, the full synergy effects will flow through as from
2022.
Finally, the bank has improved the credit quality of the loan portfolio in recent years, and, at the same time, account has
been taken of future financial uncertainty in the form of a provision for accelerated impairment which amounts to DKK
325m as at the end of 2021.
In the light thereof, the bank considers the application of a 5-year time frame for the recognition of deferred tax assets
to be well-founded and to give the fairest presentation.
As a result of the changed time frame for the recognition of deferred tax assets, the post-tax profit for 2021, the equity
as at the end of 2021 and the assets as at the end of 2021 have increased by DKK 195m.
General information on recognition and measurement
Assets are recognised in the balance sheet when it is likely that future financial advantages will accrue to the company
and the value of such assets may be reliably measured. Liabilities will be recognised in the balance sheet when it is likely
that future financial advantages may flow from the company and the value of such liabilities may be reliably measured.
On initial recognition, assets and liabilities are measured at fair value except for the following material:
• Owner-occupied and investment properties are measured at cost
• Customer relationships are measured at cost
• Leased assets and lease liabilities are measured at the present value of the lease payments
• Provisions for liabilities are measured at present values or at cost
Subsequently, the assets and liabilities will be measured as described for each individual item below.
Financial Statements
Notes
54
Annual Report
Note
1
Accounting policies (continued)
On recognition and measurement, account is taken of foreseeable risks and losses which arise before the annual report is
presented and which prove or disprove matters which existed on the balance sheet date.
In the income statement, income is recognised as earned, including value adjustments of financial assets and liabilities
which are measured at fair value, value adjustments of properties to fair value, except for adjustments of owner-occupied
properties to the revalued amount thereof which are recognised in the equity. In addition, all costs incurred to achieve
earnings for the year are recognised in the income statement, including any depreciation, amortisation, impairment and
provision for liabilities and any reversal due to changes in accounting estimates of amounts which have previously been
recognised in the income statement.
Financial instruments
Financial instruments are recognised on the settlement date and are derecognised when the right to receive or deliver cash
flows provided by financial instruments has expired or if the financial instrument has been transferred and the bank has
essentially transferred all the risks and rewards incident to ownership.
Financial instruments in general
According to IFRS 9-compatible accounting rules, financial assets are classified and measured based on the business
model for the financial assets and the contractual cash flows relating to the financial assets. Consequently, financial assets
must be classified in one of the following three categories:
• Financial assets which are held to generate the contractual payments and for which the contractual payments
solely comprise interest on and repayment of the amount outstanding are measured after the date of initial
recognition at amortised cost. For example, loans and bonds in investment securities which are generally held
until they expire etc. They are measured at amortised cost.
• Financial assets which are held in a mixed business model and some of which are held to generate the contractual
payments and others are sold and for which the contractual payments of the financial assets in the mixed
business model solely comprise interest on and repayment of the amount outstanding are measured after the
date of initial recognition at fair value over other comprehensive income. Vestjysk Bank has no financial assets
comprised by the measurement category which recognises financial assets at fair value over other comprehensive
income.
• Financial assets which do not meet the above business model criteria or for which the contractual payments do
not solely comprise interest on and repayment of the amount outstanding are measured after the date of initial
recognition at fair value over the income statement. For example, the bank's holding of bonds held for trading,
derivative financial instruments and financial assets which are either held for trading or risk management or as
part of an investment strategy based on fair value and, in the light thereof, are included in the bank's internal
management reporting.
Financial liabilities are generally measured at amortised cost after initial recognition. Financial liabilities may also be
measured at fair value if the instrument is held as part of an investment strategy or for risk management based on fair
values and are regularly disclosed at fair value in the reporting to the management and if a fair value measurement reduces
or eliminates an accounting inconsistency.
Derivative financial instruments
On initial recognition, derivative financial instruments are measured at cost. Subsequently, they are measured at fair value
which is generally based on quoted market prices. If the instruments are unlisted, the fair value is calculated according to
generally accepted principles based on market-based parametres. Any positive and negative fair values of derivative
financial instruments are classified as "Other assets" and "Other liabilities", respectively.
Annual Report
55
Note
1
Accounting policies (continued)
Fair value adjustments of derivative financial instruments which are classified as and meet the criteria for hedging of the
fair value of a recognised asset or liability (fair value hedge) are recognised in the income statement under "Value
adjustments" together with the change in the value of the hedged asset or liability.
The fair value adjustments of derivative financial instruments which no longer meets the requirements for hedge accounting
are recognised on a continuing basis in the income statement over the remaining term of the hedged asset or liability.
The hedging relationships are established for individual
assets and liabilities and at portfolio level. The effectiveness of
hedge accounting is measures and assessed on a regular basis.
Business combination
Newly acquired or newly formed businesses are recognised in the financial statements from the date of acquisition or the
date of formation. Businesses disposed of or wound up are recognised in the income statement until the date of disposal
or winding up. Acquisitions are accounted for using the purchase method, according to which the identifiable assets and
liabilities of acquired businesses are measured at fair value as at the date of acquisition. Account is taken of the tax effect
of revaluations.
Any positive difference (goodwill) between the cost of the acquired equity investment and the fair value of the acquired
assets and liabilities is recognised under intangible assets and will be written down in case of impairment. Any negative
difference (badwill) is recognised as income in the income statement under "Other operating income".
Foreign currency translation
The financial statements have been prepared in Danish kroner (DKK) which is also the bank's functional currency.
Transactions in other currencies than the functional currency are foreign currency transactions.
On initial recognition, foreign currency transactions are translated using the functional currency at the exchange rate
prevailing as at the date of the transaction. Exchange differences arising between the exchange rate prevailing as at the
date of the transaction and the exchange rate as at the payment date are recognised in the income statement under "Value
adjustments".
Receivables, liabilities other than provisions and other monetary items in foreign currencies not settled on the balance
sheet date are translated at the closing rate. The difference between the closing rate and the rate at the accrual of the asset
is also recognised in the income statement under "Value adjustments".
Set-off
Assets and liabilities will be presented as set off when it is possible to lawfully effect a set-off and the bank intends to effect
set-off or to dispose of the asset and the liability at the same time
Financial Statements
Notes
56
Annual Report
Note
1
Accounting policies (continued)
Income statement and other comprehensive income
Interest income and interest expenses
Interest income and interest expenses relating to all interest-bearing instruments are recognised in the income statement in
the period relevant to them, i.e. due and accrued interest, and by applying the effective interest rate based on the expected
life of the financial instrument.
Interest income and expenses also comprise amortisation of fees and commissions which form an integrated part of the
effective interest rate of a financial instrument, such as upfront commissions and document management fees in connection
with the establishment of loans etc.
The following also applies to interest income and expenses:
• Negative interest is recognised under "Interest expenses", and negative interest expenses are recognised under
"Interest income". Negative interest is disclosed in the notes to the relevant items.
• Interest on additional tier 1 capital with an indefinite term for which the bank has full discretion to omit interest
payments are recognised directly in equity on the date of payment as a distribution.
Fees and commissions
Fees and commissions relating to services provided for a period accrue over the service period and include guarantee
commissions and portfolio management fees.
Other fees are recognised in the income statement on completion of the transaction and include fund and custody fees and
payment and intermediary fees.
Fees and commissions forming an integrated part of the effective interest rate are recognised under Interest income".
Fees for provision of mortgage loan on behalf of Totalkredit and DLR Kredit are calculated based on a set-off model.
Commissions for the establishing loans are recognised on the date of the establishment of the loan, and fees for ongoing
provision of services to the borrower are recognised concurrently with the bank's provision of the services and the creation
of the right to the fees. Identified losses eligible for set-off are treated as a reduction of income in the period in which set-off
is effected.
Fees and commissions delivered are treated for accounting purpose in the same way as fees and commissions received.
Value adjustments
Value adjustments of assets and liabilities measured at fair value, the earnings impact of foreign currency translation
adjustments and value adjustments of hedge accounting (fair value hedge) are recognised under value adjustments.
Other operating income and expenses
Other operating income and expenses include items of a secondary nature in relation to the bank's principal activities. The
most important items are the operation of investment and owner-occupied properties, badwill in connection with takeover of
businesses and gains/losses on sales of land and buildings and other property, plant and equipment.
Annual Report
57
Note
1
Accounting policies (continued)
Staff costs and administrative expenses
Staff costs include wages and salaries, pensions, social security costs, pensions, holiday allowance etc. for employees.
Costs and expenses relating to benefits for employees, including anniversary bonuses, will be recognised as the employees
perform the work entitling them to such benefits.
Defined contribution plans have been concluded with the majority of the employees. As regards the defined contribution
plans, fixed contributions are paid to an independent pension fund, and the bank has no obligation to pay additional
contributions to such pension fund. To a minor extent, defined benefit plans have been concluded – see the description
under ”Provisions for liabilities”.
Administrative expenses include expenses relating to IT, premises and stationery and office supplies etc. and costs
associated with acquisitions.
Taxes
Tax for the year, which consists of current taxes for the year and change in deferred taxes, is recognised in the income
statement with the share attributable to the profit or loss for the year and directly in other comprehensive income and equity,
respectively, with the share attributable thereto.
Current tax liabilities and current tax receivables are recognised in the balance sheet as a forecast tax liability on the taxable
income for the year adjusted for tax paid on account. This will be recognised in ”Current tax liabilities” or ”current tax assets”.
"Deferred tax assets" and "Deferred tax liabilities" are recognised on all temporary differences between the carrying amount
and the tax base of assets and liabilities. However, deferred tax on temporary differences relating to amortisation of goodwill
disallowed for tax purposes and other items where temporary differences, except for acquisitions, have occurred at the
acquisition date without impacting the profit or taxable income.
Deferred tax assets are recognised with the value at which, in the opinion of the management, the asset is expected to be
realised by offset against deferred tax liabilities or elimination in tax on future earnings.
Deferred tax is measured based on the tax rules and tax rates applicable subject to legislation as at the balance sheet date
when the deferred tax is expected to be triggered as current tax.
Vestjysk Bank will be jointly taxed with the Arbejdernes Landsbank Group.
Financial Statements
Notes
58
Annual Report
Note
1
Accounting policies (continued)
Balance sheet assets
Cash in hand and demand deposits with central banks
Cash in hand and demand deposits with central banks consist of the bank's domestic and foreign physical cash balance
and demand deposits with central banks. The item is measured at initial recognition at fair value and is subsequently
measured at amortised cost.
Receivables from credit institutions and central banks
Receivables from credit institutions and central banks include receivables from other credit institutions and time deposits
with central banks if the other party is a credit institution or a central bank.
Receivables from credit institutions and central banks will initially be recognised at fair value plus transaction costs and
less any received fees and commissions relating to the establishment. Subsequently, receivables from credit institutions
and central banks are measured at amortised cost using the effective interest method less impairments for expected
losses.
Loans and other receivables at amortised cost
The item consists of loans with respect to which payment has been made directly to the borrower.
Loans are recognised on initial fair value measurement less fees and commissions. In connection with a subsequent
measurement, loans are recognised at amortised cost which is usually equivalent to nominal value less fees and
commissions.
Adjustments for expected losses as a result of credit risk are recognised in the income statement under the item
”Impairment of loans and other receivables etc.”
Other receivables include lease agreements according to which the bank is the lessor when all significant risks and
rewards incidental to ownership of the asset are transferred to the lessee (finance lease). Finance lease agreements are
measured at the net investment in the lease agreement, i.e. the present value of the cash flows of the lease agreement
plus an unguaranteed residual value of the asset at the expiry of the lease agreement.
Income from the leased assets is recognised on the basis of the effective interest rates in the lease agreements and are
included in the income statement under ”Interest revenue”. Profits/losses resulting from sales of leased assets are
included in the income statement ”Other operating income” or ”Other operating expenses”.
Provisions for expected credit losses (”Impairment”)
Provisions are made for expected credit losses (”impairment”) incurred on all financial assets that are subsequently
measured at amortised cost, and corresponding provisions are made for expected credit losses incurred on undrawn
credit lines, loan commitments and financial guarantees.
With respect to financial assets recognised at amortised cost impairments relating to expected credit losses are
recognised in the income statement under ”Impairment of loans and receivables etc.” and reduces the value of the asset
in the balance sheet. Provisions for losses incurred on undrawn credit lines, loan commitments and guarantees are
recognised as a liability. Impairments are based on an expected loss model.
Annual Report
59
Note
1
Accounting policies (continued)
Impairment model
With respect to all loans, impairments will be made according to the impairment rules compatible with IFRS 9. The
impairment model is based on a calculation of expected losses dividing the loans into 3 stages depending on the credit
impairment of the individual loan compared to the initial recognition of the loans:
• Stage 1: Exposures without a significant increase in credit risk since the initial recognition. The assets are
written down for impairment by an amount equal to the expected credit losses in case of any default within the
next 12 months.
• Stage 2: Exposures with respect to which a significant increase in credit risk has been identified. The assets are
written down for impairment by an amount equal to the expected credit loss for the useful life of the asset.
• Stage 2 weak: Exposures with respect to which a significant increase in credit risk has been identified and the
customer's ability to pay is characterised by significant signs of weakness. The assets are written down for
impairment by an amount equal to the expected credit loss for the useful life of the asset.
• Stage 3: consists of credit-impaired assets and the financial asset has been defaulted on or otherwise credit
impaired. In stage 3, the impairments are calculated on the basis of an individual assessment of the credit loss
for the useful life of the asset. Unlike other stages, interest revenue is solely based on the value of the asset
written down for impairment.
On initial recognition, the individual loans are generally placed in stage 1 in connection with which expected losses for 12
months are written down for impairment on initial recognition. With respect to loans in stage 1, expected losses will be
written down for impairment over the next 12 months, while, with respect to loans in stages 2 and 3, expected losses will
be written down for impairment over the remaining term to maturity of the loans. Unlike other stages 1 and 2, interest
revenue is solely based on the value of the asset written down for impairment.
If the credit risk in respect of the financial asset is considered to be low on the balance sheet date, the asset will, however,
remain in stage 1 which is characterised by the absence of a significant increase in credit risk. The credit risk is considered
to be low when the customer's 12-month PD is below 0.2%. In addition to loans and receivables meeting the PD criterion,
the category of assets with a low credit risk also comprises receivables from Danish credit institutions.
Placing the assets in stages and the calculation of expected losses are based on the bank's rating models in the form of
PD models developed and maintained by BEC, and Vestjysk Bank's internal credit management.
Assessment of significant credit risk increase – transition to stage 2
In connection with the transition from stage 1 to stage 2, a significant credit risk increase relative to the date of the initial
recognition will be defined in the following situations:
• An increase in PD for the expected remaining term to maturity of the financial asset of 100% and an increase in
the 12-month PD of 0.5 percentage points when the 12-month PD was below 1.0% on initial recognition.
• An increase in PD for the expected remaining term to maturity of the financial asset of 100% or an increase in the
12-month PD of 2.0 percentage points when the 12-month PD was 1.0% or more on initial recognition.
• If the financial asset has been in arrears for more than 30 days with an amount considered to be significant.
Financial assets with respect to which the customer is experiencing significant financial difficulties or with respect to whi
ch
the bank has granted more favourable terms due to the customer's financial difficulties will be kept in stage 2 if a loss is
not expected in the most likely scenario.
Financial Statements
Notes
60
Annual Report
Note
1
Accounting policies (continued)
Credit-impaired – transition to stage 3
If one of the customer's exposures are considered to be credit-impaired or defaulted on (see the next section on the
definition of default), this will result in all of the customer's exposures being moved from stage 1 or 2 to stage 3. The
credit-impairment criteria have been established on the basis of the bank's credit management and credit policy and
includes the following objective credit-impairment indications:
• The borrower is experiencing significant financial difficulties, and Vestjysk Bank assesses that the borrower will
not be able to meet its financial obligations as agreed.
• The borrower is in breach of contract e.g. due to a failure to meet its payment obligation relating to interest and
capital repayments or repeated overdrafts.
• Vestjysk Bank has granted more favourable terms to the borrower which would not have been considered if not
for the debtor's financial difficulties.
• It is likely that the borrower will enter into bankruptcy or become subject to other financial restructuring
proceedings.
• Disappearance of an active market for the financial asset due to financial difficulties.
• Acquisition of a financial asset at a deep discount that reflects the incurred credit losses.
• The exposure has been in arrears/overdraft for more than 90 days with an amount considered to be significant.
In connection with Vestjysk Bank's implementation of new guidelines on the application of the definition of default under
article 178 of the Capital Requirements Regulation (EBA/GL/2016/07) which comes into force on 1 January 2021, the
bank seeks to standardise the criteria for being in default, stage 3 and non-performing exposures. There are various
quarantine periods for the individual terms, and, therefore, there will be a difference in the criteria for no longer being in
default.
Definition of default (stage 3)
Determining when a borrower has defaulted on its financial obligations is critical to the calculation of the expected credit
loss. A borrower is considered by Vestjysk Bank to be in default of its obligations if:
• the borrower has been in arrears with more than 90 days with respect to significant parts of the financial
obligations or
• the bank assesses that it is likely that the exposure will result in a loss and/or a forced realisation of the security
interests provided for Vestjysk Bank or other creditors.
The definition of default applied by the bank in connection with the measurement of the expected credit loss corresponds
to the definition applied for internal risk management purposes, and the definition has also been adjusted to the definition
of default in the Capital Requirements Regulation (CRR). Customers are considered have defaulted on their financial
obligations in case of bankruptcy, suspension of payments, debt rescheduling, indication of current or expected future
challenges in creating a balance between income and expenses etc.
Annual Report
61
Note
1
Accounting policies (continued)
Calculation of expected loss
The calculation of impairment of exposures in stages 1 and 2 is made on the basis of a portfolio-based model calculation,
while the calculation of the impairment of the remaining part of the exposures is made by way of a manual, individual
assessment based on three scenarios (a basic scenario, a more positive scenario and a more negative scenario)
indicating the likelihood of such scenarios occurring. The model impairment is based on a management estimate
described in detail in note 1a.
In the portfolio-based model calculation, the expected loss is calculated as a function of PD (likelihood of default), EAD
(exposure value in connection with default) and LGD (losses incurred due to default are calculated on the basis of a PD
model developed and maintained at Vestjysk Bank's data centre, accompanied by a forward-looking, macroeconomic
module developed and maintained by LOPI.
The macroeconomic module is based on several regression models establishing the historical link between impairments
for the year within several sectors and industries and several explanatory macroeconomic variables. Subsequently,
estimates are added to the regression models with respect to the macroeconomic variables based on forecasts from
consistent sources such as the Danish Economic Council, Danmarks Nationalbank and others, and such forecasts usually
look two years into the future and comprises variables as increase in government expenditure, increase in GDP, interest,
etc. This means that the expected impairments are calculated for up to two years into the future within the individual
sectors and industries. However, with respect to terms to maturity exceeding two years under normal conditions, a
straight-line interpolation will be made between the impairment percentage for year 2 and the impairment percentage for
year 10 in which it is assumed from a model perspective that a long-term equilibrium in the form of a consistent level will
be achieved. The same impairment percentage applicable to the long-term equilibrium in year 10 will be applied to terms
to maturity exceeding 10 years. Finally, the calculated impairment percentages are transformed to adjustment factors
adjusting the data centre's estimates in the individual sectors and industries.
The bank closely monitors the development of the corona crisis and will continuously assess whether the model
impairments are sufficient.
Accordingly, the method for the adjustment to the long-term equilibrium has been changed in the current financial year
with respect to GDP and government expenditure, respectively, so that these two variables will reach their equilibrium
already in 2022.
Practice for removing financial assets from the balance sheet
Financial assets measured at amortised cost will be removed from the balance sheet in full or in part if Vestjysk Bank no
longer has a reasonable expectation of full or partial payment of the outstanding amount. The inclusion will cease on the
basis of a specific, individual assessment of the individual exposures. With respect to business customers, Vestjysk Bank
will typically base its assessment on indicators such as the customer's liquidity, earnings and equity and the security
interests provided in relation to the exposure. With respect to retail customers, Vestjysk Bank will typically base its
assessment on the customer's liquidity, income and assets as well as the customer's security interests provided for the
commitment and possibilities of realisation thereof. When a financial asset it removed from the balance sheet in full or in
part, the impairment of the financial asset will also be deleted from the accumulated impairments, see. note 9.
Financial Statements
Notes
62
Annual Report
Note
1
Accounting policies (continued)
Vestjysk Bank will continue its efforts to collect outstanding amount after the assets have been removed from the balance
sheet. The measures will depend on the specific situation. Vestjysk Bank generally seeks to conclude a voluntary
arrangement with the customer, including to renegotiate terms or restructure a business to the effect that debt collection
or petition for bankruptcy cannot be applied until other measures have been taken.
Impairment taken over
In connection with business combinations, the bank amortises impairment on acquired stage 3 exposures (exposures
that were credit-impaired on initial recognition) over the expected remaining term to maturity. This means that the
acquired stage 3 exposures (exposures that were credit-impaired on initial recognition) will be moved from exposures
that were credit-impaired on initial recognition to the provisions account over a 5-year period.
Bonds at fair value and shares
On initial recognition at the settlement date, bonds and shares etc. are measured at fair value excluding transaction
costs. Subsequently, bonds and shares etc. are measured at fair value. Realised and unrealised gains and losses and
dividends are recognised in the income statement under ”Value adjustments” and ”Dividends on shares”, respectively.
When an active market exists, the fair value of bonds and listed shares etc. will be measured by applying quoted market
prices for the instruments. A market is considered an asset when the trading frequency and volume of an instrument is
sufficient to provide a valid pricing. The fair value of such instruments is determined on the basis of the most recent
observable closing rates on the balance sheet date (level 1). In the alternative, recognised models and observable market
data are applied with respect to similar assets for the measurement of the fair value (level 2).
The fair value of unlisted shares and other shares is calculated on the basis of the information available on transactions
etc. and taking account of any shareholders' agreements. Alternatively, the fair value is calculated on the basis of
expected cash flows (level 3). A small part of the shares is measured in level 3.
Shares in associates
An associate is a business over which the bank may exert significant influence, but not controlling interest, through the
participation in the investing business's financial and operational decisions, and which does not qualify as a subsidiary.
Significant influence is typically obtained through ownership of between 20% and 50% of the voting rights.
Shares in associates are recognised and measured in the bank's financial statements according to the equity method
which means that the shares are measured at the proportionate share of the associates' equity calculated according to
the banks accounting policies less or plus, respectively, unrealised intercompany profits or losses, and plus the carrying
amount of goodwill.
In the income statement under ”Income from investments in associates”, the proportionate share of the associates' profit
after tax and elimination of unrealised intercompany profits and losses and less any impairment of goodwill. In the bank's
other comprehensive income, the proportionate share of all transactions and events recognised in the associate's equity
is recognised.
Annual Report
63
Note
1
Accounting policies (continued)
Assets related to pooled schemes and Deposits with pooled schemes
Assets included in pension pools and customer contributions to pension pools are presented in separate balance sheet
items. Assets and liabilities in the pooled scheme are recognised at fair value in the income statement (accounting
mismatch). Return on pooled assets and contributions are collectively presented in ”Value adjustments”.
Intangible assets
Intangible assets relate to the value of acquired customer relations.
Customer relations acquired in connection with an acquisition is recognised at cost and are depreciated on a straight-
line basis over the expected financial useful life not exceeding 10 years. The financial useful life depends on customer
loyalty. The useful life is re-assessed every year. Any change in depreciations as a result of the useful life will, in future,
be recognised as a change in an accounting estimate.
An impairment test of customer relations will be made when there is an indication of a decrease in value. Impairment of
goodwill and customer relations are recognised in the income statement and will not be reversed subsequently.
Any depreciation, amortisation and impairment are recognised in the income statement under "Depreciation, amortisation
and impairment of property, plant and equipment and intangible assets".
Investment properties
Investment properties are properties possessed to obtain rental income and/or capital gains. Investment properties are
recognised at cost on the date of acquisition. Cost includes the acquisition cost and costs arising directly form the
acquisition until the time when the asset is ready for use.
Investment properties are subsequently measured at fair value. Gains or losses due to changes in the investment
properties' fair value are recognised in the income statement under value adjustments in the period during which they
occur. The fair value is calculated on the basis of the returns method, and external experts are involved in the
measurement of the fair value at least every three years.
Owner-occupied properties
The owner-occupied properties are properties which the bank itself is using for administration, branch or other service
activities. The owner-occupied properties are recognises at cost on acquisition. Cost includes the acquisition cost and
costs arising directly form the acquisition until the time when the asset is ready for use.
Subsequently, the owner-occupied properties are measured at revalued amount corresponding to the property's fair
value at the date of revaluation less depreciation, amortisation and impairment. The revaluations with respect to the
accounting value are recognised in "Other comprehensive income" and transferred to revaluation reserves under the
equity. Impairments outweighing previous revaluations of the same property are deducted from the revaluation reserves
via "Other comprehensive income" while other impairments are transferred to the income statement.
Revaluations are made often enough, and at least once a year based on the current market and interest rate level, to
ensure that the carrying amount does not differ materially from the fair value of the owner-occupied properties at the
balance sheet date.
Financial Statements
Notes
64
Annual Report
Note
1
Accounting policies (continued)
In the ongoing measurement of owner
-
occupied properties, the value of each individual property is determined on the
basis of the returns method according to generally accepted principles. The statement of the property's operating income
includes rental income less maintenance, administrative and other operating expenses. The property's return
requirements are determined to best reflect the transactions completed in the period leading up to the date of
assessment. Account is taken of the nature of each individual property, location and state of repair within a reasonable
time frame. External experts are involved in the measurement of the fair value at least every three years.
Owner-occupied properties are depreciated on a straight-line basis over the expected useful life of 50 years, taking into
account the expected residual value on expiry of the useful life. Depreciation, amortisation and impairment are recognised
in the income statement under the paragraph "Depreciation, amortisation and impairment of property, plant and
equipment". The site value is not depreciated.
Depreciation and amortisation methods, useful life, residual values and the need for impairment are reviewed each year.
Leased owner-occupied properties
Vestjysk Bank has chosen to apply IFRS 16 as the basis for interpretation of the classification and recognition of leases
for the lessee.
Leases are recognised in the balance sheet corresponding to the value of the calculated lease commitment. The lease
commitment is measured at present value of the lease payments, calculated by applying the bank's marginal borrowing
rate as the discount rate if the internal interest rate is not available. The lease commitment is recognised in the balance
sheet as a liability other than provision and will be adjusted concurrently with the payments of capital repayments. At the
same time, the commitment carries interest. The interest expenses are charged to the income statement on a regular
basis.
When discounting the lease commitments to net present value, Vestjysk Bank applied its alternative borrowing rate which
constitutes the costs by raising external financing for a similar asset with a finance period corresponding to the term of
the lease agreement.
Lease assets are measured at cost on initial recognition, which corresponds to the value of the lease commitment
adjusted for prepaid lease payments plus directly related costs. Subsequently, the asset is measured at cost less
accumulated depreciation, amortisation and impairment.
The Lease asset is depreciated over the term of the lease agreement or the expected option to renew the lease asset,
whichever is the longest. By assessing the expected lease period, Vestjysk Bank has identified the non-terminable lease
period set out in the agreement plus periods which the management expects to be likely to exercise. In the assessment
of the expected term of lease agreements concerning properties for head office purposes, the expected term of the lease
agreement has been fixed at between 3 and 10 years. The lease assets are depreciated on a straight-line basis over the
expected consumption periods of 3-10 years under the paragraph "Depreciation, amortisation and impairment of
property, plant and equipment and intangible assets" in the income statement.
The bank has chosen to use the relaxation of the rules on lease agreements with a short term and a low value. As a result,
such lease assets are not recognised in the balance sheet as assets and liabilities. The lease commitment concerning
lease agreement with a short term and a low value is stated in a note. The costs are, therefore, recognised on a straight-
line basis in the income statement over the term of the lease agreement.
Annual Report
65
Note
1
Accounting policies (continued)
Other property, plant and equipment
Other property, plant and equipment are measured at cost less accumulated depreciation and impairment. Other
property, plant and equipment are depreciated on a straight-line basis based on the following assessment of the
estimated useful lives of the other assets less any residual value:
• IT equipment 2-3 years
• Machinery and equipment 3 years
• Vehicles 3-4 years
Other property, plant and equipment are reviewed for impairment when there is an indication of impairment.
Other assets
This item comprises assets not recognised under other asset items, such as equity investments in BEC, positive market
values of spot transactions and derivative financial instruments and interest and commission receivables.
Except for derivative financial instruments which have a positive value on the balance sheet day and which are measured
at fair value, this item is measured at cost on initial recognition and, subsequently, at amortised cost.
Prepayments and accrued income
Prepayments and accrued income stated as assets comprise prepaid expenses relating to salary, commission, rent and
interest. This item is measured at cost corresponding to nominal value.
Balance sheet – equity and liabilities
Debts to credit institutions and central banks
Debts to credit institutions and central banks are recognised at fair value corresponding to received fees less costs
directly attributable to transactions. Subsequently, they are measured at amortised cost by applying the effective interest
rate method with the result that the difference between net proceeds and nominal value is recognised in the income
statement under "Interest expenses" over the term of the loan.
This item includes debt classified as non-preferred senior debt to be included as MREL capital.
Deposits and other debts
Deposits comprise amounts received, including liabilities relating to genuine sales and re-purchase transactions, from
other parties who are not credit institutions or central banks. Deposits are recognised at fair value corresponding to
received fees less costs directly attributable to transactions. Subsequently, they are measured at amortised cost by
applying the effective interest rate method with the result that the difference between net proceeds and nominal value is
recognised in the income statement under "Interest expenses" over the term of the loan.
Issued bonds at amortised cost
Issued bonds at amortised cost do not comprise non-preferred senior debt issued as part of the compliance with the
MREL requirements as an SIFI institution.
Issued bonds are recognised on issuance at fair value less costs directly attributable to transactions. Subsequently,
issued bonds are measured at amortised cost by applying the effective interest rate method.
Financial Statements
Notes
66
Annual Report
Note
1
Accounting policies (continued)
Other liabilities
This item comprises liabilities not recognised under other liability items and comprises liabilities arising from finance
leases with the lessee, negative market values of derivative financial instruments for hedging purposes, outstanding
interest and accounts payable.
Fair value measurement of negative fair value of derivative financial instruments is described in further detail in the
paragraph "Hedge accounting", and lease obligations are described in further detail in the paragraph "Leased owner-
occupied properties". Other items are measured at amortised cost.
Provisions for liabilities
Provisions for liabilities are recognised when the group has a legal and constructive obligation as a result of previous
events and when it is likely that a disposal of resources with financial advantages will be required in order to pay the
liability and it is possible to reliably estimate the liability.
Provisions for liabilities relating to pensions and the like are based on an external actuarial calculation of the present
value of the expected pension benefits. The present value is calculated on the basis of expectations for future staff
turnover, discount rate and salary increase rate and yield on related assets. The difference between the expected
development in pension benefits and the actual benefits will result in actuarial gains and losses which are recognised in
other comprehensive income.
With respect to provisions for losses on guarantees, credit lines and unutilised credit lines, reference is made to the
paragraph on financial guarantees and the paragraph on loans at amortised cost.
With respect to provisions for deferred tax, reference is made to the paragraph on tax.
Subordinated debts
Subordinated debts are liabilities other than provisions in the form of tier 2 capital and other capital contributions which
will not be satisfied in case of solvent liquidation or bankruptcy until the ordinary creditor claims have been satisfied.
Subordinated debts are recognised initially at fair value less costs directly attributable to transactions. Subsequently,
subordinated debts are measured at amortised cost by applying the effective interest rate method.
Equity
Revaluation reserves
Revaluation reserves comprise the revaluations of the bank's owner-occupied properties after recognition of deferred
taxes. The reserve will be dissolved on the impairment or sale of the property.
Annual Report
67
Note
1
Accounting policies (continued)
Add
itional Tier 1 capital
The bank's Additional Tier 1 capital amounts to DKK 301m. The loan contains no contractual obligations to deliver cash
and cash equivalents or other financial assets as the term of the principal amount is indefinite and the bank is entitled to
omit interest payments. According to the Danish Executive Order on the Presentation of Financial Statements, the
issuance is therefore classified as equity and not as debt. Consequently, the equity has been increased by the loan
proceeds when the loan was raised, and the loan is treated as Additional Tier 1 capital in the statement of own funds. If
the bank decides to repay the loan in full or in part, the equity will be reduced on the date of repayment. Interest is treated
for accounting purposes as dividends and is transferred directly to the equity and, therefore, does not affect the income
statement.
Own shares
Acquisition costs and considerations and dividends on own shares are recognised in the retained profit under equity. A
capital reduction by way of cancellation of own shares reduces the share capital by an amount equal to the nominal value
of the shares as at the date of registration of the capital reduction.
Financial Statements
Notes
68
Annual Report
Note
1
Accounting policies (continued)
Basis of accoun
ting of key figures and financial ratios
Capital
Capital ratio = Own funds x 100
Total risk exposure
Tier 1 capital ratio = Tier 1 capital x 100
Total risk exposure
Common Equity Tier 1 capital ratio = Common Equity Tier 1 capital x 100
Total risk exposure
Earnings
Return on equity before tax = Profit before tax excl. non-controlling interest x 100
Equity excl. non-controlling interest (avg.)
Return on equity after tax = Profit before tax excl. non-controlling interest x 100
Equity excl. non-controlling interest (avg.)
Income-cost ratio = Income
Costs (excl. taxes)
Cost ratio = Operating expenses, depreciation and amortisation
Core income
Return on capital employed = Profit after tax x 100
Total assets (avg.)
Employees translated into full time (average) Actual length of employment x 100
Full time
Market risk
Interest rate risk = Interest rate risk x 100
Tier 1 capital
Currency position = Exchange rate indicator 1 x 100
Tier 1 capital
Currency risk = Exchange rate indicator 2 x 100
Tier 1 capital
Liquidity coverage ratio (LCR) = Cash and easily realisable assets x 100
Payment obligations for the next 30 days
Net Stable Funding Ratio (NSFR) = Available stable funding x 100
Required stable funding
Annual Report
69
Note
1
Accounting policies (continued)
Credit risk
Loans plus impairments relative to deposits =
Gross loan
Deposits
Loans relative to equity =
Gross loan
Eguity
Growth in loans for the period =
Loans excl. reverse transactions carried forward – Loans excl. reverse
transactions brought forward) x 100
Loans excl. reverse transactions brought forward
Sum of large exposures >10% =
Sum of large exposures over 10% of Common Equity Tier 1 capital after
deductions,
excl. credit institutions and jointly owned data centrals
Common Equity Tier 1 capital
Sum of 20 largest exposures*) =
Sum of 20 largest exposures after
deductions,
excl. credit institutions and jointly owned data centrals x 100
Common Equity Tier 1 capital
Accumulated impairment ratio
Accumulated impairment on loans and guarantees x 100
Gross loans and guarantees
Impairment ratio for the year =
Accumulated impairment on loans and guarantees for the year x 100
Gross loans and guarantees
The Vestjysk Bank share
Earnings per share
=
Vestjysk Banks shareholders' share of the profit for the year
Number of shares issued (avg.)
Equity value per share =
Vestjysk Banks shareholders' share of the profit for the year
Number of shares issued (avg.)
Price, end of year
Read
Other financial ratios
Growth in loans *) =
(Loans carried forward - Loans carried forward 1 year before) x 100
Loans carried forward 1 year before
*
)
The key figures is used in the Danish FSA be
nchmarks, as described in the management review
.
Financial Statements
Notes
70
Annual Report
Note
1a
Accounting estimates and judgments
The calculation of the carrying amount of certain assets and liabilities is based on an estimate of the effect of future events
on the values of such assets and liabilities at the reporting date.
The estimates and judgments applied by Management are based on assumptions that it considers reasonable, but which
are inherently uncertain and unpredictable. Such assumptions may be incomplete or inaccurate, and unexpected future
events or circumstances may arise. Therefore, estimates and judgments are inherently difficult to make and will always
entail uncertainty when they involve transactions with customers and other counterparties. It may be necessary to change
previous estimates as a result of changes to the assumptions on which the estimates were based or as a result of new
information or subsequent events.
The principles for making accounting estimates and judgments material to the financial reporting include an assessment
of:
Loan impairment charges and provisions for guarantees
Revaluation of domicile property
Fair value measurement of financial instruments
Measurement of deferred tax assets
Loan impairment charges and provisions for guarantees
Impairment losses on loans and receivables are recognised in accordance with the accounting policies and based on a
number of assumptions. Impairment losses are based on an expected loss model, as a result of which Management has
made a number of estimates in connection with the calculation of impairment losses.
Provisions for losses on guarantees also entail uncertainty where the quantification of the risk of a payment having to be
made on a guarantee is substantially based on estimates.
Calculation and recognition of impairment is based on a number of factors, several of which are estimated, and as such
contain an element of uncertainty.
For example, impairment losses are strongly affected by macroeconomic trends, including the following factors:
Scenarios
The determination of losses under the expected loss model is based on Management’s forecasts of future economic
developments. Preparing such forecasts involves estimates made by Management. The estimates are based on different
scenarios (a base case scenario, an upside scenario and a downside scenario), each of which is given a probability
weighting reflecting Management’s assessment of current forecasts. The determination and probability weighting of
scenarios entail uncertainty.
Value of collateral
Determining the value of collateral also involves estimates. Such estimates relate to the assessment of whether all future
payments will be received and the determination of the amount of future payments, including realisable values of any
collateral and expected dividend payments from estates.
Annual Report
71
Note
1a
Accounting estimates and judgments (continued)
Model uncertainty and management estimates
In connection with Vestjysk Bank’s implementation of new guidelines on the application of the definition of default taking
effect at 1 January 2021, the Bank is seeking to standardise the criteria for occurrence of default, stage 3 and non-performing
exposures. As different quarantine periods apply to each of these, the criteria for when an asset is no longer in default also
differ.
In addition to the use of forward-looking elements, impairment losses in stages 1 and 2 are also subject to uncertainty due
to the fact that the models do not take into account all relevant factors. As the historical data underlying the models is still
limited, it has been necessary to apply management estimates in supplement to the model calculations. These management
estimates relate particularly to agriculture, fishery and economic uncertainties, including the coronavirus crisis. Management
estimates have been based on individual assessments of each segment and the borrowers concerned. Assessing the effects
of the long-term probability of default of these borrowers and segments in an upside and a downside scenario, respectively,
involves estimates.
The coronavirus pandemic
The Bank is closely monitoring the coronavirus developments and will assess on an ongoing basis whether the model
impairment losses are adequate.
Agriculture
We must also stress that, for the agricultural sector in particular, an adverse trend in sales conditions could result in additional
impairment losses, including in case of changes in the estimates and assumptions used to calculate impairment allowances
in this sector.
The Bank is closely monitoring developments in the agricultural and mink sectors, including milk and pork settlement prices,
and will continue to factor the consequences of any changes into the calculation of impairment.
Management is aware that the Bank has a relatively high proportion of credit-impaired customers. Consequently, loan
impairment losses and provisions for guarantees are subject to considerable uncertainty. If the economic climate deteriorates
significantly, particularly in the agricultural sector, this could have a material adverse impact on the Bank’s results of
operation and financial position.
Financial Statements
Notes
72
Annual Report
Note
1a
Accounting estimates and judgments (continued)
Revaluation of domicile property
The rate of return method is applied when measuring domicile property at revalued amount. The uncertainty related to the
measurement is mainly linked to the rate of return and rental value used in the valuation.
The carrying amount of domicile property is specified in note 18.
Fair value measurement of financial instruments
Vestjysk Bank measures a number of financial instruments at fair value, including all derivative financial instruments, as
well as shares and bonds.
Assessments are made in connection with determining the fair value of financial instruments in the following areas:
Choice of valuation method
Determination of when available listed prices do not reflect the fair value
Calculation of fair value adjustments to provide for relevant risk factors, such as credit and liquidity risk
Assessment of which market parameters are to be monitored
Estimate of future cash flows and return requirements for unlisted shares.
As part of its operations, Vestjysk Bank has acquired strategic investments. These are measured at fair value based on the
available information about trading in the relevant company's shares or, alternatively, a valuation model based on accepted
and current market data, including an assessment of expected future earnings and cash flows. The valuation will also be
influenced by co-ownership, trading and other available information.
The carrying amount of securities measured at fair value is specified in note 33.
Measurement of deferred tax assets
Deferred tax assets are recognised for all unutilised tax losses to the extent that it is considered probable that the Bank
will realise taxable profits within the next three years against which the tax losses can be set off. Future earnings are
calculated without including expected earnings in respect of Den Jyske Sparekasse. Determining the amount to be
recognised is based on an estimate of the probable timing and amount of future taxable profits. Budgets of the Bank's
performance are based on an estimate of the probable timing and amount of future taxable profits, including the timing
and amount of impairment losses. The Bank’s use of a five-year budget period is due to its significant exposure to the
agricultural sector and the uncertainty concerning future earnings in this sector.
At the reporting date, the Bank’s Management assessed that a deferred tax asset of DKK 293 million concerning the tax
loss can be realised within a five-year period. If the budgets are not realised as expected, the deferred tax asset may prove
to have been overestimated.
Annual Report
73
Note
2021
2020
DKK'000
DKK'000
2
Interest income
Receivables from credit institutions and central banks
41
53
Loans and other receivables
769,747
474,544
Bonds
18,341
14,335
Derivative financial instruments
5,225
1,304
Other interest income
145
1
Total
793,499
490,237
2a
Negative interest income
Receivables from credit institutions and central banks
15,363
2,730
Bonds
8,989
4,912
Total
24,352
7,642
3
Interest expenses
Credit institution and central banks
928
0
Deposits and other debt
19,724
9,683
Issued bonds
6,028
0
Subordinated debt
34,151
20,226
Other interest expenses
945
338
Total
61,776
30,247
3a
Negative interest expenses
Credit institutions and central banks
0
163
Deposits and other debt
99,519
33,657
Total
99,519
33,820
4
Income from fees and commissions
Securities trading and custody services
151,599
86,163
Payment services
89,960
49,366
Loan processing fees
125,300
46,082
Guarantee commission
100,966
56,808
Other fees and commissions
185,493
121,077
Total
653,318
359,496
5
Value adjustments
Other loans and receivables at fair value
0
Bonds
-14,248
16,053
Shares, etc.
76,128
33,872
Investment property
1,177
0
Foreign currency
29,326
12,330
Foreign exchange, interest rate, equity, commodity, and other contracts as
well as derivative financial instruments
14,759
3,324
Assets related to pooled schemes
994,739
-11,989
Deposits with pooled schemes
-994,739
11,989
Other assets
-9,958
-920
Other liabilities
10,447
0
Total
107,631
64,659
Financial Statements
Notes
74
Annual Report
Note
2021
2020
DKK'000
DKK'000
6
Staff costs and administrative expenses
Staff costs:
Wages and salaries
427,481
237,300
Pensions
54,273
28,329
Payroll tax
62,669
39,289
Expenses relating to social security contributions etc.
8,205
2,259
Total
552,628
307,177
Average number of employee (FTE) 657.4
394.7
Other administrative expenses:
IT expenses
312,080
139,795
Rent, electricity and heat
24,326
9,208
Other administrative expenses
155,216
54,073
Total
491,622
203,076
Total 1,044,250
510,253
Salaries and remuneration of the Board of Directors and Executive Board
are included in staff costs in the following amounts
Board of directors
Fixed remuneration 3,539
2,755
Number of members of the Board of Directors 13
10
The Board of Directors is remunerated with a fixed fee.
Executive Board
Fixed remuneration 12,774
6,590
Pension
335
329
Total 13,109
6,919
Value of benefits
458
279
Number of members of the Executive Board 3
2
Other employees with significant influence on the Bank’s risk profile
Fixes remuneration
15,574
12,959
Holiday pay in resignation, total
293
0
Pension
2,088
1,594
Total 17,955
14,553
Number of employees with significant influence on the Bank's risk profile 18
16
Information on the individual remuneration of Board members and members of the Executive Board appears from the
remuneration report, which is available on Vestjysk Bank's website: Vestjyskbank.dk\vederlagsrapport. The Board of
Directors' and the Executive Board's shareholdings in Vestjysk Bank A/S appear in the management's
review\management.
Annual Report
75
Note
2021
2020
DKK'000
DKK'000
Annual pension for the Executive Board and other with significant
influence on the Bank's risk profile
Executive Board
No bonus programmes, incentive programmes or similar remuneration programmes have been agreed with the
members of the Executive Board.
Jan Ulsø Madsen, Chief Executive Officer
The Bank does not make contributions to any pension schemes.
Jan Ulsø Madsen may resign giving 6 months’ notice, and the Bank may terminate his employment giving 12
months’ notice.
If the Bank terminates Jan Ulsø Madsen’s employment in connection with a merger, a transfer of shares or the
voting majority, or the transfer of all assets and activities, Jan Ulsø Madsen will be entitled to a special severance
payment equal to 12 months’ salary in addition to his salary during the notice period.
Torben Sørensen, Managing Director
The Bank does not make contributions to any pension schemes.
Torben Sørensen’s employment expires without notice at the end of June 2022. His employment is non-
terminable by the Bank, but Torben Sørensen may resign giving 6 months' notice.
Michael Nelander Petersen, Managing Director
The Bank contributes 12.25% of Michael Nelander Petersen’s salary to a defined contribution plan.
Michael Nelander Petersen may resign giving 6 months’ notice, and the Bank may terminate his employment
giving 12 months’ notice.
If the Bank terminates Michael Nelander Petersen’s employment in connection with a merger, a transfer of shares
or the voting majority, or the transfer of all assets and activities, Michael Nelander Petersen will be entitled to a
special severance payment equal to 12 months’ salary in addition to his salary during the notice period.
Other employees with significant influence on the Bank’s risk profile:
Contribution-based through pension fund.
The Bank contributes 12.25% of the salary.
7 Auditors' fees
Fees for statutory audit of the financial statements
2,429
750
Fees for other assurance engagements
463
2,113
Fees for tax consulting
121
120
Fees for other services
4,005
215
I alt 7,018
3,198
Fees for other assurance engagements mainly relate to reports to public authorities including the merger with Den
Jyske Sparekasse and review of the Bank’s tax statements. Fees for tax consulting relate to consulting on the
Bank’s tax statements for previous years. Fees for other services.
8
Impairment of loans and receivables, ect.
Impairment of loans and other receivables in the statement of income
New impairments, new and increased exposures
592,694
572,166
Reversal of impairment, new and redeemed exposures
-676,076
-517,045
Loans with no prior individual impairment/provisions, written off
46,922
28,315
Recovered on previously written-off debts
-24,594
-58,242
Total -61,054
25,194
Provisions for losses on guarantees and unused credit commitments in the
statement of income
Impairments for the period
135,998
61,277
Reversal of provisions in prior financial years
-94,951
-57,938
Total
41,047
3,339
Impairment of loans and other receivables, end of the reporting period -20,007
28,533
Interest income on impaired loans is offset against impairment in the
amount of 32,667
40,739
Financial Statements
Notes
76
Annual Report
Note
2021
2020
DKK'000
DKK'000
9
Impairments of loans and receivables and provisions on guarant
ees
and unutilised credit lines
Impairment of loans and receivables.
Stage 1 (absence of significant increase in risk assessment)
Impairment, beginning of the reporting period
25,381
45,111
New impairments, new exposures
30,843
10,388
Reversed impairments repaid accounts
-88,141
-71,655
Change in impairments, beginning of period to/from stage 1
-3,020
-14,215
Change in impairments, beginning of period to/from stage 2
34,825
21,584
Change in impairments, beginning of period to/from stage 3
43,792
28,144
Impairments due to change in credit risk
9,056
6,024
Nedskrivninger ultimo
52,736
25,381
Stage 2 (significant increase in risk assessment)
Impairment, beginning of the reporting period
63,689
75,845
Impairment, addition from merger
51,943
-
New impairments, new exposures
42,460
15,572
Reversed impairments repaid accounts
-80,856
-70,043
Change in impairments, beginning of period to/from stage 1
2,437
11,570
Change in impairments, beginning of period to/from stage 2
-47,981
-28,043
Change in impairments, beginning of period to/from stage 3
46,286
37,161
Impairments due to change in credit risk
235,235
21,627
Impairment, end of the reporting period
313,213
63,689
Stage 3 (credit-impaired)
Impairment, beginning of the reporting period
2,001,640
2,198,643
New impairments, new exposures
158,210
155,037
Reversed impairments repaid accounts
-550,030
-472,599
Change in impairments, beginning of period to/from stage 1
583
2,645
Change in impairments, beginning of period to/from stage 2
13,155
6,459
Change in impairments, beginning of period to/from stage 3
-90,077
-65,305
Impairments due to change in credit risk
417,589
459,715
Impairments lost
-381,567
-323,695
Other movements
32,667
40,740
Impairment, end of the reporting period 1,602,170
2,001,640
Loans, credit-impaired at initial recognition
Impairment, beginning of the reporting period (acquired impairment) 35,877
52,246
Impairment, addition from merger 867,165
-
New impairments
0
2,060
Reversed impairments
-257,749
-1,006
Impairments lost -251,719
-17,423
Impairment, end of the reporting period
393,574
35,877
In connection with the merger With Den Jyske Sparekasse, stage 2 impairments are included as an increase in
stage 2 impairments. This is considered accurate.
Annual Report
77
Note
2021
2020
DKK'000
DKK'000
9
Provisions for losses on guarantees
Provisions, beginning of the reporting period
22,176
25,762
Addition from merger
13,705
-
New provisions, new exposures
2,938
2,274
Reversed provisions for losses at repaid accounts
-20,317
-14,571
Provision during the period due to change in credit risk
2,786
8,968
Provisions, lost
0
-257
Provisions, end of the reporting period 21,288
22,176
Overall accumulated impairment of loans and receivables and provisions
for losses on guarantees
1,989,407
2,148,763
Accumulated impairment ratio 6.9%
12.9%
Provisions for losses on unused credit commitments
Provisions beginning of the reporting period
66,133
59,466
Addition from merger
31,399
-
New provisions, new exposures
28,676
4,462
Reversed provisions for losses at repaid accounts
-74,634
-45,949
Provision during the period due to change in credit risk
101,599
48,154
Provisions, end of the reporting period 153,173
66,133
10 Receivables for which accrual of interest has been discontinued
Receivables for which accrual of interest has been discontinued, end of
the reporting period
1,072,551
1,209,302
Total impairment charge thereon 770,809
758,278
Receivables for which accrual of interest has been discontinued, as a
percentage of loans before impairment 5.6%
10.6%
11
Tax
Current tax
71,750
25,152
Deffered tax
-194,718
0
Adjustment of current tax for prior years
-2,750
81
Total
-125,718
25,233
Applicable tax rate is reduced from 22% to an income at 13.2%
according to deffered tax asset
Applicable tax rate
22.0%
22.0%
Use of losses from previous years
-11.5%
-12.1%
Tax-free value adjustments
-1.0%
-1.7%
Deferred tax asset
-20.4%
0.0%
Other adjustments
-2.0%
-0.5%
Adjustment of current tax for prior years
-0.3%
0.0%
Effective tax rate
-13.2%
7.7%
Financial Statements
Notes
78
Annual Report
Note
2021
2020
DKK'000
DKK'000
12
Receivables from credit institutions and central banks
Receivables at notice from central banks
0
481,000
Receivables from credit institutions
186,898
88,359
Total
186,898
569,359
Distributed by term to maturity
On demand
186,898
88,359
Up to and including 3 months
0
481,000
Total 186,898
569,359
13
Loans and other receivables, by term to maturity
Distributed by term to maturity
On demand
2,728,240
974,970
Up to and including 3 months
3,127,280
2,607,584
3 months to 1 year
1,941,304
1,070,132
1 year to 5 years
5,300,552
2,927,120
More than 5 years
3,680,987
1,751,737
Total
16,778,363
9,331,543
14
Investments in associates Ownership:
Domicile:
Thise Udviklingsselskab ApS 30.8%
Skive
Activity: Estate rental
HN Invest Tyskland A/S
33.3%
Odense
Activity: Holding
company and lending for real estate investment
Egns-Invest Tyske Ejendomme A/S
20.0%
Horsens
Activity: Other rentals
Ejendomsfællesskabet Den Jyske Sparekasse og KGH Property I/S
50.0%
Grindsted
Activity: Other rentals
2021
2020
DKK'000
DKK'000
Fair value, beginning of the period 0
Additions
107,960
Disposals
0
Fair value, end of the period
107,960
Changes in value, beginning of the period 0
Disposals 0
Profit 19,887
Changes in value, end og the period 19,887
Value, end of the period 127,847
15
Assets related to pooled schemes
Cash assets 0
0
Investment funds 9,223,381
5,426,277
Other assets 0
0
Total 9,223,381
5,426,277
Annual Report
79
Note
2021
2020
DKK'000
DKK'000
16
Intangible assets
Customer relationships
Total acquisition cost, beginning of the reporting period 14,964
14,964
Additions from merger
119,613
0
Disposals
19,577
Total acquisition cost, end of the reporting period
115,000
14,964
Depreciation and impairment, beginning of the reporting period
14,964
14,964
Depreciation and impairment for the period
15,634
0
Reversed depreciation, disposals 19,577
Depreciation and impairment, end of the reporting period 11,021
14,964
Recognised holding, end of the reporting period 103,979
0
Other Intangible assets
Total acquisition cost, beginning of the reporting period 1,416
1,416
Doisposals
606
0
Total acquisition cost, end of the reporting period
810
1,416
Depreciation and impairment, beginning of the reporting period
1,416
1,399
Depreciation and impairment, end of the reporting period
0
17
Reversed depreciation, disposals 606
Depreciation and impairment for the period
810
1,416
Depreciation and impairment, end of the reporting period 0
0
Total 103,979
0
17
Investment property
Fair value, beginning of the period
0
425
Additions on merger
33,014
0
Additions
48,405
0
Disposals
50,467
425
Changes, Fair value
1,177
0
Fair value, end of the period
32,129
0
18
Owner-occupied property
Revalued amount, beginning of the period 235,986
261,684
Additions from merger 153,650
0
Additions 0
1,496
Disposals 100,680
16,851
Depreciations 5,256
4,044
Changes in value recognised in other comprehensive income 3,852
0
Changes in value recognised in the statement of income -12,782
-6,299
Revalued amount, end of the period
274,770
235,986
The Bank’s uses a return
-
based model to value its owner
-
occupied properties, based on estimated prices per
square metre and return requirements. A return requirement of between 4.75% and 10% has been applied to
properties.
Leased owner-occupied property
Value of leases, beginning of the period 28,967
0
Impact of changing 0
15,316
Recognised in statement of financial position, beginning period 28,967
15,316
Additions from merge 6,718
Additions 53,685
17,418
Depreciations 6,372
3,767
Changes in value recognised in the statement of income -7,657
0
Value of leases, end of the period
75,341
28,967
Total
382,240
264,953
Financial Statements
Notes
80
Annual Report
Note
2021
2020
DKK'000
DKK'000
19
Other property, plant and equipment
Cost
Cost, beginning of the reporting period
11,690
11,089
Additions
11,625
1,075
Disposals
8,686
474
Total cost, end of the reporting period
14,629
11,690
Impairment and depreciation
Impairment and depreciation, beginning of the reporting period
9,145
6,258
Depreciation for the reporting period
3,521
3,361
Impairments and depreciation for the period on sold and scrapped
assets 210
0
Reversals for impairment charges for previous years and reversal of
total impairment and depreciation on assets sold or retired from
operations during the reporting period
8,562
474
Impairment and depreciation, end of the reporting period
4,314
9,145
Carrying amount, end of the reporting period
10,315
2,545
20 Deffered tax asset
The bank reassessed the possibilities of utilizing the deffered tax asset in 2012, which resulted in a impairment
to DKK 0.
Vestjysk Bank assesses that the deferred tax asset is expected to be partly used within the next five years,
based on a cautious expectation of earnings for 2022-2026. Therefore, the deferred tax is partly recognised at
DKK 293 million in the financial statement 31. December 2021. Of this, DKK 290 million relates to the unutilised
tax losses, which will be set off in the total capital (2020: 85 million).The unrecognised tax asset amounted to
DKK 113 million at 31 December 2021.
21
Other assets
Positive market value of derivative financial instruments
80,617
19,804
Interest and commission receivable
202,816
118,440
Investments in BEC
292,196
143,595
Other assets
109,609
41,455
Total
685,238
323,294
22 Debts to credit institutions and central banks
Off this:
DKK 140 million. Floating rate at 1.673%, maturing in September 2025
DKK 150 million. Floating rate at 1.873%, maturing in December 2025
The debt is classified as non-preferred debt, which may be included as MREL capital.
Distributed by term to maturity:
On demand
17,507
22,075
1 year to 5 years 290,000
Over 5 years 347
370
Total 307,854
22,445
Annual Report
81
Note
2021
2020
DKK'000
DKK'000
23
Deposits and other debt
On demand
24,370,772
12,451,225
Term deposits
2,158
0
Time deposits 58,809
0
Special deposits
1,592,115
957,978
Total
26,023,854
13,409,203
Distributed by term to maturity:
On demand
25,274,388
12,734,036
Up to and including 3 months
13,446
15,067
3 months to 1 year
249,855
41,658
1 year to 5 years
47,277
179,866
Over 5 years
438,888
438,576
Total
26,023,854
13,409,203
24
Issued bonds
DKK 60 million fixed rate 3.00%, September 2024
60,000
DKK 60 million accrued establishment costs
-163
DKK 140 million floating rate 1.647%, March 2025
140,000
DKK 140 million accrued establishment costs
-405
DKK 180 million fixed rate 2.035%, June 2025
180,000
DKK 180 million accrued establishment costs
-1,153
Total
378,279
0
The debt is classified as non-preferred debt, which may be included as MREL capital.
Distributed by term to maturity:
1 year to 5 years 378,279
0
Total 378,279
0
25
Other liabilities
Negative market value of derivative financial instruments
84,092
20,126
Various creditors
844,627
459,237
Interest and commission payable
16,020
15,295
Lease liabilities
85,653
32,393
Other liabilities
72,277
23,579
Total
1,102,669
550,630
26
Subordinated debt
Tier 2 capital
597,746
347,961
Total 597,746
347,961
Charged as an expense under interest expenses/subordinated debt:
Interest expenses
32,426
19,280
Costs related to incurrence and repayment
1,725
946
Total
34,151
20,226
Subordinated debt that can be included in the total capital
597,746
347,961
A nominal DKK 225 million will fall due on 16 August 2027 with an option for early redemption on 16 August 2022
subject to the Financial Supervisory Authority's approval. The capital accrues interest at a fixed 6.50% until 16
August 2022, after which it accrues interest at a floating rate of CIBOR6 plus a credit spread. The capital meets
the tier 2 capital requirements under CRR/CRD IV.
A nominal DKK 125 million will fall due on 28 August 2029 with an option for early repayment on 28 August 2024
subject to the Financial Supervisory Authority's approval. The capital accrues interest at a fixed 3.75% until 28
August 2028, after which it accrues interest at a floating rate of CIBOR6 plus a credit spread. The capital meets
the requirements under CRR/CDR IV.
A nominal DKK 250 million w
ill fall due on 26 June 2028 with an option for early repayment on 26 June 2023
subject to the Financial Supervisory Authority's approval. The capital accrues with at a floating rate of CIBOR6
plus a credit spread at 5.5% currently 5.317%. The capital meets the requirements under CRR/CDR IV.
Financial Statements
Notes
82
Annual Report
Note
2021
2020
DKK'000
DKK'000
27
Share capital
Share capital
1,233,574
895,982
Number of shares (units of DKK 1)
1,233,573,501
895,981,517
Number of own shares, beginning of the period
Number of own shares (thousands)
173
173
Nominal value DKK’000
173
173
Percentage of the share capital 0.0%
0.0%
Additions
Purchase of own shares (thousands)
12,303
16,541
Nominal value DKK’000
12,303
16,541
Percentage of the share capital 1.0%
1.8%
Total purchase price DKK’000
41,671
49,924
Disposals
Sold own shares (thousands)
12,303
16,541
Nominal value DKK’000
12,303
16,541
Percentage of the share capital 1.0%
1.8%
Total selling price DKK’000
41,671
49,924
Number of own shares, end of reporting period
Number of own shares (thousands)
173
173
Nominal value DKK’000
173
173
Percentage of the share capital 0.0%
0.0%
Own shares are intermediated, purchased and sold through the securities exchange as part of
Vestjysk
Bank's
normal customer banking transactions. The Bank is not a direct counterparty in such transactions.
Vestjysk Bank has a constant holding of own shares.
28
Capital
Shareholders’ Equity
5,396,432
3,244,896
Tier 1 Capital recognised in Equty
-300,700
-155,000
Interest Tier 1 Capital
-11,037
0
Prudent valuation
-10,880
-6,489
Intangible assets
-103,979
0
Deferred tax assets
-289,626
-85,434
Investments in the sector
-284,956
-215,841
Non Performing Exposures (NPE-deduction)
-82,505
Common equity tier 1 capital
4,312,749
2,782,132
Additional tier 1 capital
300,700
155,000
Tier 1 capital
4,613,449
2,937,132
Tier 2 capital
597,746
343,598
Total capital
5,211,195
3,280,730
- Credit risk
19,682,489
10,376,551
- Market risk
1,697,106
1,264,788
- Operational risk
2,070,490
1,662,041
Total risk exposure
23,450,085
13,303,380
Common equity tier 1 capital ratio
18.4%
20.9%
Tier 1 capital ratio
19.7%
22.1%
Total capital ratio
22.2%
24.7%
MREL- capital
Total capital
5,211,195
3,280,730
MREL-capital
668,280
4,363
MREL- total capital
5,879,475
3,285,093
MREL-capital ratio
25.1%
24.7%
Annual Report
83
Note
3521
3361
DKK'000
DKK'000
29 Contingent assets
Deferred tax asset at a tax rate of 22% 113,225
436,091
The deferred tax asset is primarily related to carry forward taxable deficits.
It is the Banks assessment that there is no basis for recognition of all of the deferred tax asset presently.
Therefore, the deferred tax is partly recognised at DKK 293 million in the financial statement.
The remaining deferred tax asset is treated as a contingent asset which is not recognised in the Statement of
Financial Position.
30
Contingent liabilities and security pledge
Guarantees
Financial guarantees
2,843,247
1,143,146
Loss guarantees on mortgage loans
3,955,149
2,209,108
Registration and remortgaging guarantees
1,061,802
450,655
Other contingent liabilities
2,191,726
1,399,149
Total
10,051,924
5,202,058
Other contingent liabilities’ include, among other things, performance bonds, delivery guarantees as well as
provisions of indemnity in relation to the Guarantee Fund.
Other commitments
Irreversible credit commitments 34,571
116,262
Total 34,571
116,262
The Bank’s membership
of
BEC means that in the case of termination of the Bank’s membership, it is liable to
pay an exit fee of DKK 1,123 million.
Security pledged
Credit institutions:
Margin accounts pledged as security in relation to financial derivatives
97,841
13,643
Deposited in the Danish Growth Fund
403
404
Bonds:
Pledged as security for credit facility with Danmarks Nationalbank
Total nominal value
994,557
1,098,139
Total market value
1,001,032
1,103,746
31 Hedge accounting
To manage interest rate risk, the following are hedged (fair value
hedge):
Loans at amortised cost
51,255
32,214
Hedged with interest rate swaps, maturity 2021-2039:
Notional principal
41,920
31,661
Fair value
-9,335
-553
Total fair value adjustment of hedging instruments
9,375
1,169
Total fair value adjustment of the hedged items
-9,375
-1,169
Recognised in the statement of Income
0
0
Financial Statements
Notes
84
Annual Report
Note
32 Derivative financial instruments
risks and positions.
2021 (DKK'000)
Nominal
value
Net market
value
Positive
market value
Negative
market value
Foreign exchange contracts
Up to 3 months 927,635
2,281
9,668
7,388
3 months to 1 year 383,010
1,622
8,572
6,950
1 year to 5 years 27,175
-187
365
551
More than 5 years 0
0
0
0
Average market value
3,115
17,819
14,705
Interest rate contracts
Up to 3 months 1,156,550
1,384
3,903
2,520
3 months to 1 year 99,449
88
769
680
1 year to 5 years 100,993
16
4,770
4,754
More than 5 years 686,980
-8,683
52,281
60,964
Average market value
-11,314
70,927
82,241
Share contracts
Up to 3 months 1,423
4
289
285
3 months to 1 year 0
0
0
0
1 year to 5 years 0
0
0
0
More than 5 years 0
0
0
0
Average market value
-1,152
398
1,550
2020 (DKK'000)
Nominal
value
Net market
value
Positive
market value
Negative
market value
Foreign exchange contracts
Up to 3 months 583,368
-319
2,335
2,654
3 months to 1 year 309,702
-100
4,978
5,078
1 year to 5 years 95,969
355
1,102
747
More than 5 years
0
0
0
Average market value
759
8,469
7,710
Interest rate contracts
Up to 3 months 696,504
878
3,017
2,139
3 months to 1 year 48,888
-483
197
680
1 year to 5 years 0
0
0
0
More than 5 years 40,648
270
7,687
7,417
Average market value
-492
14,010
14,502
Share contracts
Up to 3 months 92,824
-314
488
802
3 months to 1 year 290
-609
0
609
1 year to 5 years
0
0
0
More than 5 years
0
0
0
Average market value
-1,663
690
2,353
Annual Report
85
Note
33
Fair value of financial assets and liabilities
Financial assets and liabilities are measured in the statement of financial position at their fair value or at amortised
cost.
Fair value is the price that will be received on sale of an asset or that must be paid to transfer an obligation in a
normal transaction between participants in the market at the time of measurement. In absence is the most
advantageous market value at the time used.
For financial instruments measured at fair value, the basis for determining fair value is:
Level 1: Listed prices in an active market for identical assets or liabilities
Level 2: Valuation model based primarily on observable market data.
Level 3: Valuation model that, to a significant degree, is based on non-observable market data.
Shares, bonds, assets in pooled schemes and derivative financial instruments have been measured at their fair value
in the financial statements so that the recognised values correspond to fair values.
For listed shares and bonds, the fair value is determined as the officially listed price at the reporting date. For
unlisted shares in the form of shares in sector-held enterprises where the shares are redistributed, the fair value is
determined as the redistribution price and the shares are included in level 2 (observable). For other unlisted shares in
sector-held enter-prises, with no observable market data, the valuation is involving estimates, based on financial
reports from the enterprise, previous trading of shares in the enterprise and input from qualified external party. The
banks most essentials investments in level 3 are: shares in PRAS A/S. The fair value in PRAS is based on net asset
value. This share represents shareholdings in Nykredit and DLR kredit. The shares in Nykredit is not valued at net
asset value, but at valuation per share the investors bought the shares for in 2017. The bank assesses the net asset
value corresponds to the fair value. A change of 10 percent in the market value of sector-held enterprises in level 3
will result in an income and equity impact before tax of DKK 20.4 million.
For other financial instruments, the fair value is computed
-
to the greatest extent
possible
-
ba
sed on generally
accepted valuation methods based on observable market data. The valuation is based on non-observable market
data only in exceptional cases.
For of loans and impairments in stage 2 and 3 are assessed to correspond to changes in credit quality. The
difference relative to fair values is assessed to be impairments in stage 1, received fees and commissions, interest
receivable, not falling due until after the end of the financial reporting period, and, for fixed-rate loans, interest rate-
dependent value adjustments.
The fair value of receivables from credit institutions and central banks is determined by applying the same method
as for loans, although the bank has not made impairments of receivables from credit institutions and central banks.
Issued bonds and Subordinated debt are measured at amortised cost. The difference between the carrying amount
and the fair value is assessed to be interest payable not falling due until after the end of the financial reporting period
as well as costs amortised over the term of the loan and for fixed-rate debt securities in issue, also interest rate-
dependent value adjustments for fixed-rate subordinated debt.rest rate-dependent value adjustments for fixed-rate
subordinated debt.
For floating
-
ra
te financial liabilities in the form of deposits and debt to credit institutions measured at amortised cost,
the difference relative to fair values is estimated to be interest payable not falling due until after the end of the
financial reporting period.
For fixed-rate financial liabilities in the form of deposits and debt to credit institutions measured at amortised cost,
the difference relative to fair values is estimated to be interest payable not falling due until after the end of the
financial reporting period and the interest rate-dependent value adjustments.
Financial Statements
Notes
86
Annual Report
Note
33 Fair value of financial assets and liabilities(contunued)
2021 (DKK'000)
Carrying
amount
Fair Value
Listed
Prices
level 1
Observable
prices
level 2
Non-
observable
prices level
3
Finansielle aktiver
Cash on hand and demand deposits with
central banks 5,174,339
5,174,339
18,302
5,156,037
0
Receivables from credit institutions and
centralbanks 186,898
186,898
0
186,898
0
Loans at amortised cost
16,778,363
16,888,544
0
16,888,544
Bonds at fair value
9,346,206
9,346,206
9,298,811
47,395
0
Shares, etc. 859,384
859,384
46,462
591,917
221,005
Assets related to pooled schemes 9,223,381
9,223,381
9,223,381
0
0
Derivative financial instruments
80,617
80,617
0
80,617
0
Total 41,649,188
41,759,369
18,586,956
6,062,864
17,109,549
Financial liabilities
Debts to credit institutions and centralbanks 307,854
307,854
0
307,854
0
Deposits 26,023,854
26,023,144
0
0
26,023,144
Deposits in pooled schemes 9,223,381
9,223,381
0
0
9,223,381
Issued bonds 378,279
383,146
0
0
383,146
Subordinated debt 597,746
607,279
0
0
607,279
Derivative financial instruments 84,092
84,092
0
84,092
0
Total 36,615,206
36,628,896
0
391,946
36,236,950
Shares measured at fair value based on
non-observable inputs (level 3)
Carrying amount, beginning of the period
123,047
Additions
83,496
Disposals
654
Value adjustment
15,116
Value, end of the period
221,005
Period's value adjustments relating to
financial assets in the portfolio, total 15,248
Annual Report
87
Note
33 Fair value of financial assets and liabilities(contunued)
2020 (DKK'000)
Carrying
amount
Fair Value
Listed
Prices
level 1
Observable
prices
level 2
Non-
observable
prices level
3
Financial assets
Cash on hand and demand deposits with
central banks 364,364
364,364
54,604
309,760
0
Receivables from credit institutions and
centralbanks 569,359
569,359
0
569,359
0
Loans at amortised cost
9,331,543
9,389,785
0
0
9,389,785
Bonds at fair value
6,159,587
6,159,587
6,111,764
47,823
0
Shares, etc. 546,932
546,932
50,224
373,661
123,047
Assets related to pooled schemes 5,426,277
5,426,277
5,426,277
0
0
Derivative financial instruments
19,804
19,804
0
19,804
0
Total 22,417,866
22,476,108
11,642,869
1,320,407
9,512,832
Financial liabilities
Debts to credit institutions and centralbanks 22,445
22,445
0
22,445
0
Deposits 13,409,203
13,409,934
0
0
13,409,934
Deposits in pooled schemes 5,426,277
5,426,277
0
0
5,426,277
Subordinated debt 347,961
362,007
0
0
362,007
Derivative financial instruments 20,126
20,126
0
20,126
0
Total 19,226,012
19,240,789
0
42,571
19,198,218
Shares measured at fair value based on non
-
observable inputs (level 3)
Carrying amount, beginning of the period
111,319
Additions
8,936
Disposals
6,387
Value adjustment
9,179
Value, end of the period 123,047
Period's value adjustments relating to
financial assets in the portfolio, total
5,494
Financial Statements
Notes
88
Annual Report
Note
34 Risk and risk management
Vestjysk Bank is exposed to various types of risk. These risks as well as the Bank’s policies and goals for
managing such risks are described in the Management Review’s sections on risk:
Credit Risk page
19
Market Risk page
21
Interest Rate Risk page
22
Exchange Rate Risk page
23
Share Risk page
23
Operational Risk page
23
Liquidity Risk page
24
35
Loans and guarantees, by sector(net)
2021
2021
2020
2020
DKK'000
pct.
DKK'000
pct.
Public authorities
0
0%
0
0%
Business:
Agriculture, hunting, forestry and fishery
3,818,034
14%
2,558,808
18%
Manufacturing industry and raw material
extraction 788,808
3%
479,457
3%
Energy supply
834,351
3%
301,180
2%
Construction and civil engineering contractors
929,348
4%
487,888
3%
Trade
1,108,418
4%
638,933
5%
Transportation, hotels and restaurant
businesses 614,433
2%
477,962
3%
Information and communication
57,364
0%
78,858
1%
Credit and financing institutes and insurance
businesses 1,282,313
5%
510,094
4%
Real estate
2,611,642
10%
1,776,461
12%
Other businesses
1,035,228
4%
778,643
5%
Business, total
13,079,939
49%
8,088,284
56%
Retail
13,750,347
51%
6,445,317
44%
Total
26,830,286
100%
14,533,601
100%
36
Loans by rating, sectors and IFRS9- stages
Loans at amortised cost, unused credit commitments and financial guarantees, by rating and IFRS 9 stages
2021 DKK'000
Stage 1
Stage 2
Stage 3
Credit-
impaired at
initial
recognition
Total
Normal credit quality
21,305,535
625,408
0
0
21,930,943
Some signs of weakness
9,939,012
3,087,976
0
25,001
13,051,989
Significant signs of weakness
934,179
967,212
0
94,577
1,995,968
Impaired loans
0
0
2,843,623
743,904
3,587,527
Total
32,178,726
4,680,596
2,843,623
863,482
40,566,427
Annual Report
89
Note
36
2020 DKK'000
Stage 1
Stage 2
Stage 3
Credit
-
impaired at
initial
recognition
Total
Normal credit quality
12,380,243
366,899
0
0
12,747,142
Some signs of weakness
4,887,893
1,624,717
0
0
6,512,610
Significant signs of weakness
322,159
439,505
0
0
761,664
Impaired loans
0
0
3,392,279
75,008
3,467,287
Total
17,590,295
2,431,121
3,392,279
75,008
23,488,703
Note
The Bank’s credit risk in relation to
business customers is managed by rating customers from 1
-
11 using a rating
system developed by BEC together with member banks The Bank’s credit risk I relation to business customers is
managed using an internal segmentation model classifying customers according to credit risk.
Both models are directly compatible with the Danish FSA’s classification model. The correlation between the
models is set out in the table below.
Normal
credit
quality
Some
signs
of
weakness
Significant
signs
of
weakness
Credit-
impaired
customers
The Bank’s segmentation model (business)
E1+E2 E3+E4 E5 E6
The Bank’s customer rating model (retail)
1-3 4-6 7-8 9-11
The Danish FSA’s classification model
3-2a 2b 2c 1
36
Loans at amortised cost, unused credit commitments and financial guarantees, by sector and IFRS 9 stage
2021 DKK'000
Stage 1
Stage 2
Stage 3
Credit-
impaired at
initial
recognition
Total
Public authorities
0
0
0
0
0
Business:
Agriculture, hunting, forestry and fishery 3,386,531
1,099,280
1,188,467
493,334
6,167,612
Manufacturing industry and raw material
extraction
1,116,065
119,840
101,448
52,687
1,390,040
Energy supply
784,947
392,813
65,992
25,343
1,269,095
Construction and civil engineering contractors 1,448,770
254,405
73,124
7,118
1,783,417
Trade
1,659,060
283,512
179,889
61,278
2,183,739
Transportation, hotels and restaurant
businesses
655,610
118,851
146,383
52,713
973,557
Information and communication
107,627
8,081
1,853
0
117,561
Credit and financing institutes and insurance
businesses
1,325,551
121,385
152,459
53,067
1,652,462
Real estate
4,242,143
626,493
250,653
47,538
5,166,827
Other businesses
1,233,020
383,653
98,033
0
1,714,706
Business, total
15,959,324
3,408,313
2,258,301
793,078
22,419,016
Retail
16,219,402
1,272,283
585,322
70,404
18,147,411
Total
32,178,726
4,680,596
2,843,623
863,482
40,566,427
Financial Statements
Notes
90
Annual Report
Note
36
Loans at amortised cost, unused credit commitments and financial guarantees, by sector and IFRS 9 stage
2020 DKK'000
Stage 1
Stage 2
Stage 3
Credit
-
impaired at
initial
recognition
Total
Public authorities
0
0
0
0
0
Business:
Agriculture, hunting, forestry and fishery 2,133,633
775,524
1,457,694
65,419
4,432,270
Manufacturing industry and raw material
extraction
809,545
96,705
96,659
0
1,002,909
Energy supply
296,035
138,435
97,879
0
532,349
Construction and civil engineering contractors 922,978
121,723
71,275
0
1,115,976
Trade
1,136,349
150,148
214,232
246
1,500,975
Transportation, hotels and restaurant
businesses
478,328
141,159
151,300
0
770,787
Information and communication
123,456
23,815
6,084
0
153,355
Credit and finan
cing institutes and insurance
businesses
557,272
64,930
207,674
24
829,900
Real estate
1,977,716
352,996
688,548
5,286
3,024,546
Other businesses
1,080,385
174,984
108,022
242
1,363,633
Business, total
9,515,697
2,040,419
3,099,367
71,217
14,726,700
Retail
8,074,598
390,702
292,912
3,791
8,762,003
Total
17,590,295
2,431,121
3,392,279
75,008
23,488,703
Annual Report
91
Note 2021
2020
DKK'000
DKK'000
37
Maximum credit exposure
before impairment and
provisions
Loans measured at amortised cost
18,746,482
11,458,130
Unused credit commitments
15,001,791
8,657,605
Guarantees
10,073,212
5,224,234
Loans, guarantees etc..
43,821,485
25,339,969
Receivables from credit institutions and central banks
5,342,935
879,119
Bonds at fair value
9,346,206
6,159,587
Positive market value of derivative financial instruments
80,617
19,804
Total
58,591,243
32,398,479
Maximum credit exposure after impairment and provisions
Loans measured at amortised cost
16,778,363
9,331,543
Unused credit commitments
14,848,618
8,591,472
Guarantees
10,051,924
5,202,058
Loans, guarantees etc..
41,678,905
23,125,073
Receivables from credit institutions and central banks
5,342,935
879,119
Bonds at fair value
9,346,206
6,159,587
Positive market value of derivative financial instruments
80,617
19,804
Total
56,448,663
30,183,583
Collateral for loans, credit commitments and
guarantees
Bank accounts
198,918
83,637
Securities
2,149,310
1,093,870
Mortgages on properties and wind turbines
15,358,032
8,759,773
Right of subrogation for mortgages secured in real
property
4,592,095
2,221,921
Charges held in movable property, motor vehicles, operating equipment, ships
etc. 4,460,282
2,760,342
Other
474,711
284,841
Total 27,233,348
15,204,384
Of this amount collateral for loans, credit
commitments and guarantees
(stage 3 including credit impairment on inital recognition) 1,878,150
1,484,302
The Bank holds a charge on the financed asset for most of its business exposures, which is the reason the most
common types of collateral are mortgages secured in real property, ships, wind turbines, motor vehicles, movable
property, securities as well as floating charges. Owner’s sureties and personal insurance also constitute a large
share of the collateral held by the Bank.
For the majority of retail customer exposures, it is also the case that the Bank holds a charge in the financed
asset—which is the reason the most common types of collateral are mortgages secured in real property and in
motor vehicles.
The Bank continuously performs assessments of pledged collateral. Valuations are performed based on the fair
value of the asset, less the margin for covering costs related to realisation, selling period costs as well as rebates.
A number of exposures are secured by coll
ateral in excess of the amount of the exposure. The excess collateral is
not included in the calculation for loans, credit commitments and guarantees.
Financial Statements
Notes
92
Annual Report
Note
38
Interest rate risk
Interest rate risk is the risk of losses incurred in the event of change in the general interest rate level. Vestjysk
Banks interest rate risk is related to activities involving normal banking business such as deposits, loans, trading
and position-taking in interest-related products.
The interest rate risk is divided into risks inside and outside the Bank’s trading book, see below. All else being
equal, the direct impact on the income statement from a change in the general interest level will only be related to
the interest rate risk inside the trading book. An increase in the interest rate of 1 percentage point would result in
an loss after tax of DKK 74.6 million in 2021.
Outside the trading book a change in the general interest rate level will have an impact on the future earnings and
equity, as a change in interest rates will impact the alternative funding and investment options.
Interest rate risk is calculated applying the Financial Supervisory Authority’s guidelines.
2021
2020
DKK'000
DKK'000
Interest rate risk outside the Bank’s trading book:
Securities
83,396
56,549
Futures/forward contracts/forward rate agreements
-2,697
-1,657
Swaps
-23
12
Total
80,676
54,904
Interest rate risk outside the Bank’s trading book:
Loans
5,122
2,812
Deposits 0
0
Issued Bonds -7,445
0
Subordinated debt
-4,582
-8,034
Equity
-6,662
-2,445
Total
-13,567
-7,667
Total interest rate risk 67,109
47,237
Measured in relation to the tier 1 capital, the interest rate risk corresponds
to 1.5%
1.6%
Interest rate risk, by modified duration
Up to 1 year
-163
1,810
1 year to 2 years
4,911
-1,612
2 year to 3.6 years
28,653
17,618
More than 3.6 years
33,708
29,421
Total
67,109
47,237
39 Foreign exchange risk
Foreign exchange risk is the risk of losses on foreign exchange positions because of changes in foreign exchange
rates.
Foreign exchange Indicator 1 expresses a simplified measure of the scope of the institution's positions in foreign
currency and is calculated - according to the guidelines of the Danish Financial Supervisory Authority - as the
greater of the sum of the foreign currency positions in which the Bank has net payables (short foreign exchange
positions) and the sum of all the currencies in which the Bank has a net receivable (long foreign exchange
positions).
Annual Report
93
Note
2021
2020
DKK'000
DKK'000
39
Foreign exchange risk
Assets in foreign currency, total 594,748
342,463
Liabilities in foreign currency, total 220,776
190,151
Foreign exchange indicator 1 5,060
6,431
Foreign exchange indicator 1 in percent of tier 1 capital 0.1%
0.2%
The foreign exchange position consists primarily of positions in EUR,
CAD, CNY, THB and USD.
A change unfavourable to the Bank of 2% in EUR and of 10% in other
foreign currencies will result in a profit/loss and equity impact before tax
of -293
-594
40 Share risk
The Bank’s share risk is derived from shares and derivatives in the Bank’s investment and trading books
Shares, etc.
Shares/unit trust certificates listed on NASDAQ Copenhagen A/S 46,462
33,208
Shares/unit trust certificates listed on other exchanges 0
17,017
Unlisted shares recognised at fair value 812,922
496,707
Total 859,384
546,932
Of which, sector shares 810,088
493,546
Sensitivity
An increase in share prices of 10 percentage points will result in a
profit/loss and equity impact before tax of 79,473
50,483
of which sector shares
74,914
45,555
of which other shares
4,559
4,928
An increase in share prices of 10 percentage points will result in a
profit/loss and equity impact before tax of -79,473
-50,483
of which sector shares
-74,914
-45,555
of which other shares
-4,559
-4,928
41 Liquidity risk
The liquidity buffer is determined on the basis of the Bank's objective of maintaining an LCR of 100% and that the
bank has a comfortable coverage in the requirement of 100%. An LCR value of 100% must be able to be
maintained month by month under a chosen 3-month stress scenario. The stress scenario is based on LOPI’s
liquidity model for assets.
The liquidity buffer consists of liquid government and mortgage bonds categorised as level 1a, level 1b or level 2a
assets and deposits held with the Danish central bank.
Liquidity buffer
LCR values
13,306,287
6,207,822
LCR values after adjustment on level 1a assets
13,306,287
3,961,917
Net outflow
5,172,298
2,197,146
Liquidity Coverage Ratio - LCR 257.3%
180.3%
Net Stable Funding (NSFR)
As part of the planning of Vestjysk Bank’s funding, it is ensured that the Bank complies with the Net Stable
Funding Ratio and that it maintains a comfortable excess cover relative to the 100% requirement. An NSFR value
of 100% must be able to be maintained month by month under a chosen 3-month stress scenario. The stress
scenario is based on LOPI’s liquidity model for assets.
NSFR
139.3%
120.6%
As the method of calculating NSFR was revised on 30 June 2021, the
comparative
figures are not directly
comparable
Financial Statements
Notes
94
Annual Report
2021
2020
DKK'000
DKK'000
42 Other risks
Operational risks
The general responsibility for operational risk resides with the Bank's Middle Office.
Vestjysk Bank is focused on mitigating operational risks by maintaining clear organisational responsibilities with
the necessary and adequate segregation of duties, control and business procedures in all significant activity areas.
Vestjysk Bank continually enhances policies and contingency plans regarding physical disasters and IT
breakdowns. The Bank is a member of BEC Financial Technologies(BEC)which handles day-to-day IT system
operations. The Bank com-plies with the directions and recommendations it receives from BEC and does not
develop proprietary IT systems.
The Bank’s IT contingency plans address breakdowns at the head office and parts of the branch network. In case
of a breakdown at one or more branches, operations can be maintained from the remaining branches, and in case
of a long-lasting breakdown at the head office, vital functions can be maintained from a branch. The Bank’s
contingency plan is re-viewed by the Board of Directors at least annually.
Total capital risk
Total capital is monitored on an ongoing basis and monthly reporting to the Board of Directors takes place
according to established guidelines.
Compliance
Vestjysk Bank has an independent compliance function, whose area of responsibility is to monitor the bank is
compliant with existing legislation, market standards and internal rules. There is an instruction and annual plan for
the compliance function approved by the Executive Board.
43 Related parties
Vestjysk Bank’s related parties comprise the members of the Board of
Directors and Executive Board as well as these persons’ relatives.
Size of loans, pledges, sureties or guarantees made for members of
the institution's
Executive Board 520
300
Board of Directors 2,421
8,611
In 2021
credit lines
to the e
xecutive board is
extended of total
4.746
DKK'000
All commitments are provided on arm's-length terms
Interest rate:
Executive Board 5,75% *
0% *
Board of Directors 1,25% - 3,0%
1,25% - 3,0%
* MasterCard interest rate 0%
Security pledges made for commitments issued to members of the
institute’s:
Executive Board 0
0
Board of Directors 570
1,185
Apart from what is consi
dered normal management remuneration, no
transactions have been carried out with related parties during the period.
Arbejdernes Landsbank is a related part, due to Arbejdernes Landsbank is a associate company
There is no exposures or security pledges for Arbejdernes Landsbank.
44 Pending litigation
Vestjysk Bank is a part in various lawsuits. The proceedings are evaluated on an ongoing basis, and requisite
provisions are made based on an assessment of the risk of losses.
The pending proceedings are not expected to have material influence on the bank’s financial position.
45 Events after the balance sheet date
No significant events have occured after the reporting date, 31 December 2021.
Annual Report
95
Note 14. January 2021
DKK'000
46 Merger
The merger with Den Jyske Sparekasse was completed effective at 14 January 2021 applying
the purchase method of accounting. The table below sets out a breakdown of the purchase
price by net assets. The stated carrying amounts have been determined at fair value at the
acquisition date in accordance with Vestjysk Bank’s accounting policies. The breakdown of
the purchase price by net assets is final with no changes from the date of the merger.
Breakdown of purchase price by net assets at 14 January 2021
Assets
Cash in hand and demand deposits with central banks
231,473
Receivables from credit institutions and central banks
1,086,890
Loans and other receivables at amortised cost
6,919,578
Bonds at fair value
3,786,337
Shares, etc.
263,201
Investments in associates
107,960
Assets related to pooled schemes
2,732,073
Intangible assets (including customer relations)
119,613
Land and buildings, total
195,895
Investment property
33,014
Owner-occupied property
153,650
Owner-occupied property, leased
9,231
Other property, plant and equipment
1,807
Current tax assets
474
Assets held for sale
4,276
Other assets
260,314
Prepayments
5,592
Assets total
15,715,483
Financial Statements
Notes
96
Annual Report
Note
14. January 2021
DKK'000
46
Equity and liabilities
Debts
Debts to credit institutions and central banks
131,763
Deposits and other debt
10,414,161
Deposits with pooled schemes
2,732,073
Issued bonds
59,743
Other liabilities
252,882
Prepayments
19,595
Debts, total
13,610,217
Provisions
Provision for pensions and similar liabilities
10,073
Provisions for losses on guarantees
20,402
Other provisions
30,163
Provisions, total
60,638
Subordinated debt
248,060
Debts, total
13,918,915
Acquired net assets
1,796,568
Purchase price
Acquired net assets
1,796,568
Tier 1 capital
-102,324
Negative goodwill
-477,455
Total purchase price
1,216,789
Transferred to reserve under equity:
Issue of 337,591,984 shares at a price per share of 2.776
937,084
Cash distribution
279,705
Total purchase price
1,216,789
The Bank has incurred non-recurring costs in connection with the merger, which are recognised in the statement
of income under “Administrative expenses” and “Depreciation, amortisation and impairment”
The Bank has recognised negative goodwill in the amount of DKK 477 million in “Other operating inc
ome”. The
negative goodwill income is subject to taxation, and a non-recurring expense of DKK 37 million has been
recognised in tax in this respect. The tax of negative goodwill is calculated and recognised under “Tax” in the
statement of financial position.
Acquired net assets include loans and other receivables at a fair value of DKK 6.9 billion. The fair value of loans is
based on an assessment of the market value of the acquired loan portfolio, stated at the present value of
expected future cash inflows.
In connection with the acquisition, Vestjysk Bank has determined the value of identifiable intangible assets in the
form of customer relationships recognised in the takeover balance sheet at fair value. The fair value of customer
relationships represents the value of the customer base acquired from Den Jyske Sparekasse. The fair value is
calculated as the present value of expected future cash flows generated by sales to the customers after deduction
of a reasonable return on all assets contributing to the generation of the cash flows in question. The value of
customer relationships is amortised over ten years in Vestjysk Bank’s statement of income.
Annual Report
97
Note 2021
2020
2019
2018
2017
47 Financial highlights
Key figures
Statement of income (DKKm)
Net interest income 807
486
510
548
573
Net fee income 601
326
329
297
338
Dividends on shares, etc. 13
9
29
12
4
Value adjustments 108
65
185
35
23
Other operating income 486
1
2
17
7
Core income 2,015
887
1,055
909
945
Staff costs and administrative expenses 1044
510
477
470
482
Other operating expenses and depreciation, amortisation and
impairment of property, plant and equipment and intangible
assets 57
20
31
11
22
Operating expenses and operating depreciation and
amortisation 1,101
530
508
481
504
Core earnings before impairment 914
357
547
428
441
Impairment of loans and receivables, etc. -20
29
64
186
270
Income from investments in associates 20
0
0
0
0
Profit/loss from operations in the process of being wound up 0
0
0
0
0
Profit before tax 954
328
483
242
171
Tax -126
25
5
-54
8
Profit after tax 1,080
303
478
296
163
Statement of financial position (DKKm)
Total assets 43,310
23,105
22,192
21,198
21,902
Loans 16,778
9,332
10,221
10,797
11,629
Deposits 26,024
13,409
13,043
12,902
13,506
Deposits, pooled schemes 9,223
5,426
5,233
4,681
4,890
Contingent liabilities 10,052
5,202
3,966
3,487
3,608
Custody services 19,809
10,040
8,708
7,585
8,713
Arranged mortgage loans 58,192
33,447
30,749
29,122
28,381
Business volume 62,077
33,369
32,463
31,867
33,633
Business volume including custody
serv
ices and arranged
mortgage loans 140,078
76,856
71,920
68,574
70,727
Equity 5,396
3,245
2,956
2,589
2,515
Financial Statements
Notes
98
Annual Report
Note 2021
2020
2019
2018
2017
47 Financial highlights (continued)
Financial ratios
Solvency
Total capital ratio
18.4%
20.9%
17.6%
15.7%
15.2%
Tier 1 capital ratio
19.7%
22.1%
18.6%
17.4%
16.8%
Common equity tier 1 capital ratio
22.2%
24.7%
21.1%
19.7%
19.2%
MREL-capital
25.1%
24.7%
Earnings
Return on equity before tax, p.a.
1
18.7%
10.6%
17.4%
9.9%
8.5%
Return on equity after tax, p.a.
1
21.2%
9.8%
17.2%
12.1%
8.2%
Income-cost ratio
1.88
1.59
1.84
1.36
1.22
Cost ratio
2
54.1%
59.8%
48.2%
52.9%
53.3%
Return on assets
3.3%
1.3%
2.2%
1.4%
0.8%
Average number of employees (FTE)
657.4
394.7
377.9
385.8
421.9
Market risk
Interest rate risk
1.5%
1.6%
0.7%
-0.5%
-1.2%
Foreign exchange position
0.1%
0.2%
0.4%
0.3%
0.2%
Foreign exchange risk
0.0%
0.0%
0.0%
0.0%
0.0%
LCR
257.3%
180.3%
259.2%
195.3%
255.4%
NSFR
3
139.3%
120.6%
Credit risk
Loans plus impairment on loans relative to deposits
47.7%
60.8%
68.9%
76.3%
79.4%
Loans relative to equity
3.1
2.9
3.5
4.2
4.6
Lending growth for the period
79.8%
-8.7%
-5.3%
-5.6%
-7.2%
Sum of 20 largest exposures
4
106.0%
109.3%
102.7%
116.4%
-
Accumulated impairment ratio
6.9%
12.9%
14.5%
15.6%
16.5%
Impairment ratio
-0.1%
0.1%
0.3%
1.0%
1.5%
Vestjysk Bank share
Earnings per share 1.0
0.3
0.5
0.3
0.3
Book value per share
5
4.1
3.4
3.1
2.6
2.6
Share price at 31 December 3.4
2.8
3.1
2.0
2.7
Share price/earnings per share 3.4
8.2
5.8
5.9
8.7
Share price/book value per share 0.8
0.8
1.0
0.7
1.1
In accordance with the accounting policies, the comparative figures 2016-2017 have not been restated in connection with
the implementation of IFRS 9 at 1 January 2018.
1 Profit/loss / average equity, which is calculated on the basis of opening equity plus capital increase and recognised
negative
goodwill in connection with the merger with Den Jyske Sparekasse 15. January 2021.
2 Operating expenses and operating depreciation and amortisation/core
income.
3 As the method of calculating NSFR was revised on 30 June 2021, the comparative figures are not directly
comparable.
4 As from 2018, this financial ratio is calculated according to new rules
5 The ratio "Book value per share" is adjusted for the portion of equity
(additional tier 1 capital), that is not part of the
shareholders’ share of equity.
vestjyskbank.dk
Vestjysk Bank A/S, Industrivej Syd 13c, DK-7400 Herning, CVR 34631328