Interim report as of 30 June 2018 - Optin Bank · • Distribution network of 5 loan agents and a...

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Interim report as of 30 June 2018 (unaudited)

Interim report

as of 30 June 2018

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First

half-year

2018

• Successful launch of consumer loans and savings account for private customers

• Distribution network of 5 loan agents and a direct web application

• Development and calibration of models for underwriting and operational

processes

• Evaluation and decision of technology platform for eCommerce Finance

Financial

highlights

• Loans to customers MNOK 40.4

• Deposits from customers MNOK 38.5

• Net interest income MNOK 0.65

• Profit after tax MNOK –7.3

• Loan loss allowances MNOK 0.48

• Equity MNOK 103.7, CET 1 ratio 92.7 %

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DIRECTORS’ REPORT

About Optin Bank ASA Optin Bank ASA is a newly established niche bank offering consumer loans, savings accounts and eCommerce Financing. Optin Bank

ASA was converted from Optin Prosjekt AS on August 22nd 2017. The company was granted a banking license by the Norwegian

Financial Supervisory Authority on September 8th 2017.

Optin Bank ASA has mainly Norwegian shareholders. The bank is registered on NOTC under the ticker OPTIN. The banks business

address is Munkedamsveien 53B, Oslo.

Optin Bank is a member of The Norwegian Banks’ Guarantee Fund and all retail deposits up to two million kroner are secured by the

deposit guarantee.

Development in the first half-year 2018 After the launch in Q1 2018 we have focused on process improvement and optimisation to ensure a good customer experience in addition

to ensuring compliance of internal and external policies and guidelines. This will be a continuous process for the bank supported by

increased focus on technological development of existing and new processes and products.

We launched consumer loans in mid-March and in April we launched savings accounts for private customers. The main channel for

consumer loan distribution is through loan agents. By the end of the first half of 2018 we had a distribution network of 5 agents and have

commenced development of customer recruitment through digital channels. In addition, we have experienced growing loan demand

through the direct web application at www.optinbank.no.

We comply with the FSA’s guidelines on distribution and marketing of consumer loans and offer loans with maturity between 1 and 5 years

and interest rates based on the individual assessment of each customer. The loan maturity can be extended to 15 years when refinancing

existing loans or credit card debt. The application process is digital with an efficient and swift case handling from application to the

disbursement of the loan. Our savings account provides savers favourable interest rate, smooth application process and a simple

management of the customers’ savings without fees or withdrawal limits.

The growth in lending volumes has been in line with our expectations and net loans to customers amounted to MNOK 40.4 by the end of

the first half of 2018. We are focusing on calibrating the models for credit risk for customers and operational processes to ensure

sustainable and robust growth. Deposits from customers amounted to MNOK 38.5 MNOK by the end of the first half of 2018. The total

assets grew to MNOK 148.9, and liquid assets in bank deposits and debt instruments were at MNOK 82.9.

Profit after tax for the first half-year 2018 was MNOK –7.3, with net interest income of MNOK 0.8 and operating expenses of MNOK 13.7.

There are no non-performing loans in the portfolio at 30 June 2018. All loans to customers are assessed for impairment in accordance

with IFRS 9, and provisions for expected losses are recorded when the loans are disbursed. Loan loss provisions at 30 June 2018 were

MNOK 0.5.

Outlook Robust underwriting and credit processes will ensure healthy and sustainable growth, and we are constantly adjusting our models to

provide transparent and competitively-priced products to our customers. We are continuing to develop the distribution network with four

new loan agents during the fall.

We are meeting the customers’ expectations of digital banking by participating in «Digital Excellence Kickstart Program» hosted by

Google, and we will work closely with the Google Global Team to shape our interactions with consumers through all Google channels, e.g.

YouTube and Google Adwords.

eCommerce Finance is an important part of the strategy and growth ambitions for Optin Bank. We have now chosen the technological

platform for eCommerce Finance and will progress with the development and implementation of the platform in the third quarter of 2018.

Our business priorities going forward will be to strengthen our sales organisation, enhance technological capabilities to ensure

development of proprietary solutions for eCommerce Finance, and continue to establish relations with strategical partners with the same

long-term focus as Optin Bank.

Market changes and regulatory conditions will be important factors for the development of operations, our strategy and ensuring profitable

growth in the future.

Oslo, 31 July 2018

The Board of Directors

Optin Bank ASA

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INCOME STATEMENT

Amounts in NOK 1 000 Note 2Q 2018 Jan-Jun

2018

2Q 2017 Jan - Jun

2017

2017

Interest income 754 883 0 0 144

Interest expense (106) (119) (1) (1) (1)

Net interest income 6 647 764 (1) (1) 143

Commission and fee income 4 4 0 0 0

Commission and fee expense (106) (121) 0 0 0

Net commission and fee expense 7 (101) (116) 0 0 0

Total income 546 648 (1) (1) 143

Salaries and administrative expenses 8 (3 400) (7 030) (860) (860) (3 748)

Depreciation on fixed and intangible assets (484) (616) 0 0 (17)

Other operating expenses 9 (3 369) (6 056) (49) (51) (8 767)

Total operating expenses before impairment losses (7 254) (13 702) (909) (911) (12 532)

Impairment losses on loans to customers (418) (482) 0 0 0

Profit before tax (7 126) (13 536) (909) (912) (12 389)

Income tax expense 4 651 6 253 0 0 3 185

Profit for the year (2 475) (7 282) (909) (912) (9 204)

STATEMENT OF COMPREHENSIVE INCOME

Amounts in NOK 1 000 Note 2Q 2018 Jan-Jun

2018

2Q 2017 Jan - Jun

2017

2017

Profit for the year (2 475) (7 282) (909) (912) (9 204)

Other comprehensive income 0 0 0 0 0

Total comprehensive income (2 475) (7 282) (909) (912) (9 204)

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STATEMENT OF FINANCIAL POSITION

Amounts in NOK 1 000 kroner Note 30 June 2018 30 June 2017 31 December 2017

ASSETS

Loans and advances to credit institutions 2,4 72 878 20 011 107 766

Loans and advances to customers 3,4 40 397 0 0

Debt instruments 4 10 000 0

Intangible assets 12 490 3 445 3 824

Deferred tax assets 9 438 0 3 185

Fixed assets 420 24 362

Other assets 3 239 0 15

TOTAL ASSETS 148 862 23 480 115 152

LIABILTIEIS

Deposits from customers 38 492 0 0

Other liabilities 6 634 2 692 4 134

TOTAL LIABILITIES 45 126 2 692 4 134

EQUITY

Share capital 5 672 1 576 5 672

Share premium 114 900 20 474 114 900

Total paid-in equity capital 120 572 22 050 120 572

Other capital (9 554) (350) (9 554)

Total comprehensive income (7 282) (912)

Total other equity (16 836) (1 261) (9 554)

TOTAL EQUITY 5 103 736 20 789 111 018

TOTAL LIABILITIES AND EQUITY 148 862 23 480 115 152

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STATEMENT OF CHANGES IN EQUITY

1 January - 30 June 2018

Amounts in NOK 1 000 Share capital Share premium Other equity Total equity

Equity at 01.01.2018 5 672 114 900 (9 554) 111 018

Total comprehensive income 0 0 (7 282) (7 282)

Equity at 30.06.2018 5 672 114 900 (16 836) 103 736

1 January - 30 June 2017


Equity at 01.01.2017 325 0 (350) (25)

Issue of share capital (net of

transaction costs)

1 251 20 474 0 21 725

Total comprehensive income 0 0 (912) (912)

Equity at 30.06.2017 1 576 20 474 (1 261) 20 789

1 January- 31 December 2017


Equity at 01.01.2017 325 0 (350) (25)

Issue of share capital (net of

transaction costs)

5 347 114 900 0 120 247

Total comprehensive income 0 0 (9 204) (9 204)

Equity at 31.12.2017 5 672 114 900 (9 554) 111 018

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STATEMENT OF CASH FLOWS

Amounts in NOK 1 000 30 June 2018 30 June 2017 31 December 2017

Net payments on loans to customers (40 440) 0 0

Net receipts on deposits from customers 38 492 0 0

Interest received 447 0 144

Interest paid (199) (1) (1)

Net (increase)/decrease in debt securities (10 000) 0 0

Net payments on commissions and fees (1 568) 0 0

Payments to operations (12 403) (726) (12 891)

Net (increase)/decrease in other assets 0 3 (763)

Net increase/(decrease) in other liabilities 0 2 051 3 977

Net cash flows from operating activities (25 670) 1 327 (9 535)

(9 341) (3 366) (4 100) Purchase of fixed and intangible assets

Net cash flows from investing activities (9 341) (3 366) (4 100)

Proceeds from issuance of share capital 0 21 725 120 247

Net cash flows from financing activities 0 21 725 120 247

Net cash flows (35 011) 19 686 106 612

Cash and cash equivalents at 1 January 106 625 12 12

Net increase/(decrease) in cash and cash equivalents (35 011) 19 686 106 612

Cash and cash equivalents at end of period 71 614 19 698 106 625

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NOTES TO THE FINANCIAL STATEMENTS Note 1 Accounting principles

The financial statements for Optin Bank ASA («the Company») are prepared in accordance with the International Financial Reporting

Standards (IFRS) as adopted by the EU. The financial statements as of 30 June 2018 follow IAS 34 Interim reporting and the same

accounting principles as described in the annual report for 2017, except from IFRS 9 Financial instruments that has been adopted from 1

January 2018. The company's functional and presentation currency is Norwegian kroner (NOK)

Implementation of IFRS 9 Financial instruments from 1 January 2018 did not have any effect on the company’s equity or income

statement.

Classification and measurement

All financial instruments are assessed based on a combination of the company’s business model and the instruments’ contractual cash

flow characteristics. A financial asset is measured at amortised cost if it is held with the objective to collect contractual cash flows, and the

cash flows from the asset are solely payments of principal and interest on the principal amount outstanding. Financial assets are classified

and measured at fair value through other comprehensive income if they are held in a business model whose objective is achieved by both

collecting contractual cash flows and selling financial assets. Any financial assets that are not held in one of the two business models

mentioned are measured at fair value through profit or loss.

The accounting for financial liabilities follows the same requirements of IAS 39, except for the treatment of gains or losses arising from an

entity’s own credit risk relating to liabilities designated at FVPL. Such movements are presented in OCI with no subsequent reclassification

to the income statement.

Impairment of financial assets

Financial assets measured at amortised cost are assessed for impairment already at recognition. The impairment assessment

distinguishes between three stages. All performing loans are assessed in Stage 1 at recognition, and the loan loss allowance is calculated

based on 12-month expected credit loss. When a loan shows a significant increase in credit risk, it is assessed in Stage 2 with an

allowance for the lifetime expected credit loss. Impaired loans are assessed in Stage 3 with an allowance for the lifetime expected credit

loss. The impairment assessment in Stage 1 and 2 is performed on a group of loans with similar features. Financial assets are included in

Stage 3 when there is objective evidence that the loan is credit impaired and the impairment assessment is performed on an individual

basis.

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Note 2 Loans and advances to credit institutions

Amounts in NOK 1 000

30 June 2018 30 June 2017 31 December 2017

Loans and advances to credit institutions without agreed period of notice 72 878 20 011 107 766

Total loans and advances to credit institutions 72 878 20 011 107 766

Note 3 Loans to customers



Gross loans to customers 40 879 0 0

Loan loss allowances Stage 1 (434) 0 0

Loan loss allowances Stage 2 (48) 0 0

Net loans to customers 40 397 0 0

Reconciliation of gross loans to customers

Stage 1 Stage 2 Stage 3 Total

Gross loans to customers at 01.01.18 0 0 0 0

Transfers between stages 0 0 0 0

Originated during the period 39 294 1 584 0 40 879

Gross loans to customers at 30.06.18 39 294 1 584 0 40 879

Reconciliation of loan loss allowances

Stage 1 Stage 2 Stage 3 Total

Loan loss allowance sat 01.01.18 0 0 0 0

Transfers between stages 0 0 0 0

Loan loss allowances on loans originated during the period (434) (48) 0 (482)

Loan loss allowances at 30.06.18 (434) (48) 0 (482)

30 June 2018 30 June 2017 31 December 2017 Geographic distribution of loans to customers

Oslo 5 649 0 0

Akershus 6 860 0 0

Østfold 2 030 0 0

Hedmark 519 0 0

Oppland 1 146 0 0

Buskerud 2 641 0 0

Vestfold 3 018 0 0

Telemark 1 232 0 0

Rogaland 2 366 0 0

Vest-Agder 896 0 0

Aust-Agder 233 0 0

Hordaland 3 761 0 0

Møre og Romsdal 1 436 0 0

Trøndelag 3 535 0 0

Nordland 3 195 0 0

Troms 1 290 0 0

Finnmark 983 0 0


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Gross loans to customers by past due status


Not past due 34 034 0 0

Past due 1-30 days 5 266 0 0

Past due 31-60 days 1 166 0 0

Past due 61-90 days 412 0 0

Past due over 90 days 0 0 0


Note 4 Classification of financial instruments



Financial assets at amortised cost

Loans and advances to credit institutions 72 878 20 011 107 766

Loans to customers 40 397 0 0

Financial assets at fair value through profit or loss

Debt instruments 10 000 0 0

Financial liabilities at amortised cost

Deposits from customers 38 492 0 0

Note 5 Regulatory capital


30 June 2018

Share capital 5 672

Share premium 114 900

Other equity (9 554)

(-) Intangible assets (12 490)

Common Equity Tier 1 capital 98 528

Total regulatory capital 98 528

Credit risk

Institutions 14 576

Retail 40 397

Other 13 097

Total credit risk 68 069

Market risk 0

Operational risk 38 189

Total risk-weighted assets 106 258

Common Equity Tier 1 capital ratio 92.7%

Tier 1 capital ratio 92.7%

Total capital ratio 92.7%

Liquidity Coverage Ratio - LCR 1 987.21%

Leverage Ratio—LR 2 77.67%

1 The Liquidity Coverage Ratio (LCR) measures high-quality liquid assets held by Optin Bank to meet its short-term obligations. The CRD IV-regulation § 8 requires a 100 per cent LCR, which means an amount of highly liquid assets that is equal or greater than the net cash outflow over a 30-day stress period.

2 The Leverage Ratio (LR) measures Optin Bank’s Tier 1 capital relative to the non-risk-weighted exposure of all assets and off-balance sheet items. The CRD IV-regulation §5 requires a 3 per cent leverage ratio, and an additional buffer of 2 per cent.

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Note 6 Net interest income


2Q 2018 Jan-Jun 2018 2Q 2017 Jan - Jun 2017 2017

Interest income from loans and advances to credit

institutions 89 196 0 0 144

Interest income from loans to customers 665 687 0 0 0

Total interest income 754 883 0 0 144

Interest expenses (106) (119) (1) (1) (1)

Total interest expenses (106) (119) (1) (1) (1)

Net interest income 647 764 (1) (1) 143

Note 7 Net commission and fee expenses


2Q 2018 Jan-Jun 2018 2Q 2017 Jan - Jun 2017 2017

Commission and fee income 4 4 0 0 0

Commissions to loan agents (79) (87) 0 0 0

Fees on banking services (27) (34) 0 0 0

Net commission and fee expenses (101) (116) 0 0 0

Note 8 Salaries and administrative expenses


2Q 2018 Jan-Jun 2018 2Q 2017 Jan - Jun 2017 2017

Salaries 2 219 4 541 747 747 3 249

Employer contribution 427 796 105 105 476

Pension costs 260 457 8 8 17

Other personnel expenses 494 1 236 0 0 6

Total salaries and administrative expenses 7 030 860 860 3 748 3 400

Note 9 Other operating expenses


2Q 2018 Jan-Jun 2018 2Q 2017 Jan - Jun 2017 2017

IT expenses 2 486 4 152 0 0 2 023

Property rental 278 765 25 25 391

Marketing expenses 19 29 0 0 289

Other operating expenses 587 1 110 24 26 6 064

Total other operating expenses 3 369 6 056 49 51 8 767

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