POP Mortgage Bank Plc

BOARD OF DIRECTORS’

REPORT AND FINANCIAL

STATEMENTS

1 January – 31 December 2024

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

CONTENTS

BOARD OF DIRECTORS’ REPORT FOR THE FINANCIAL

PERIOD OF 1 JANUARY – 31 DECEMBER 2024 ................................................................................................................................................ 4

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

Operating environment ............................................................................................................................................................................................................6

Key ﬁgures and the formulas of key ﬁgures .................................................................................................................................................... 7

Performance and balance sheet ..................................................................................................................................................................................9

Credit rating ..........................................................................................................................................................................................................................................9

Risk and capital adequacy management and risk position ........................................................................................................9

Business risks ...................................................................................................................................................................................................................................10

Internal control .................................................................................................................................................................................................................................13

Internal audit ...................................................................................................................................................................................................................................... 13

Management and personnel ...........................................................................................................................................................................................13

The bank’s corporate and governance system ........................................................................................................................................13

Audit . ........................................................................................................................................................................................................................................................... 14

Social responsibility .................................................................................................................................................................................................................. 14

Events after the closing date ....................................................................................................................................................................................... 14

Outlook for 2025 .......................................................................................................................................................................................................................... 14

Board of Directors proposal on the disposal of the result for the period ............................................................... 14

POP MORTGAGE BANK’S FINANCIAL STATEMENTS

1 JANUARY – 31 DECEMBER 2024 (IFRS) ............................................................................................................................................................... 15

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

POP Mortgage Bank’s balance statement ....................................................................................................................................................16

POP Mortgage Bank’s statement of changes in equity capital ............................................................................................17

POP Mortgage Bank’s cash ﬂow statement ............................................................................................................................................... 18

NOTES .......................................................................................................................................................................................................................................................19

Note 1 Accounting policies ....................................................................................................................................................................................19

Note 2 Risk management ........................................................................................................................................................................................25

Note 3 Interest income and expenses ...................................................................................................................................................... 31

Note 4 Net income from hedge accounting .....................................................................................................................................31

Note 5 Personnel expenses .................................................................................................................................................................................... 31

Note 6 Other operating expenses ................................................................................................................................................................ 32

Note 7 Depreciation ....................................................................................................................................................................................................... 32

Note 8 Income tax ........................................................................................................................................................................................................... 32

Note 9 Net income and expenses of ﬁnancial assets and ﬁnancial

liabilities by measurement category .........................................................................................................................................................33

Note 10 Classiﬁcation of ﬁnancial assets and liabilities ................................................................................................34

Note 11 Fair values and valuation techniques of ﬁnancial assets

and ﬁnancial liabilities ................................................................................................................................................................................................ 36

Note 12 Loans and receivables from credit institutions ...................................................................................................39

Note 13 Intangible assets ....................................................................................................................................................................................... 39

Note 14 Other assets ..................................................................................................................................................................................................40

Note 15 Debt securities issued to the public .................................................................................................................................40

Note 16 Derivatives and hedge accounting ..................................................................................................................................... 41

Note 17 Offsetting ............................................................................................................................................................................................................43

Note 18 Provisions and other liabilities ..................................................................................................................................................44

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

Note 19 Equity capital .................................................................................................................................................................................................44

Note 20 Collateral given and received ...................................................................................................................................................45

Note 21 Distributable funds .................................................................................................................................................................................45

Note 22 Related party disclosures ...............................................................................................................................................................46

Note 23 Events after the closing date ....................................................................................................................................................46

SIGNATURES ..................................................................................................................................................................................................................................... 47

AUDITOR’S REPORT ...............................................................................................................................................................................................................48

INDEPENDENT AUDITOR’S REPORT ON THE ESEF FINANCIAL

STATEMENTS OF POP MORTGAGE BANK PLC ...................................................................................................................................52

This document is a translation of the original Finnish version “POP Asuntoluottopankki Oyj toimintaker-

tomus ja tilinpäätös 1.1.-31.12.2024”. In case of discrepancies, the Finnish version shall prevail.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 4

BOARD OF DIRECTORS’ REPORT

FOR THE FINANCIAL PERIOD OF

1 JANUARY – 31 DECEMBER 2024

The POP Mortgage Bank Plc (hereinafter ‘POP

Mortgage Bank’) engaged in mortgage banking

operations after it was authorised by the European

Central Bank on 25 May 2022 and had been grant-

ed an operating license pursuant to the Act on

Mortgage Banks and Covered Bonds on 30 June

2022. POP Mortgage Bank is a member credit in-

stitution within the POP Bank amalgamation.

POP Mortgage Bank is responsible for acquiring

external funding for the amalgamation in cooper-

ation with Bonum Bank Plc. POP Mortgage Bank is

also responsible for issuing secured bonds and for-

warding the acquired funding to member credit in-

stitutions belonging to the Amalgamation of POP

Banks. On February 29, 2024, the board of POP

Mortgage Bank decided to increase the amount

of the covered bond program from EUR 1 bil-

lion to EUR 1.5 billion. As part of the loan program,

POP Mortgage Bank issued a new covered bond

amounting to EUR 250 million in October 2024.

POP Mortgage Bank’s operations are based on

the intermediary loan model. Thus, the mort-gage-

backed loan portfolio provided as collateral for

bonds to be issued is not recognised on POP Mort-

gage Bank’s balance sheet. Instead, it remains on

each member credit institution’s balance sheet.

POP Mortgage Bank recorded a proﬁt of EUR 0.6

(0.1) million for the reporting period and balance

sheet totalled EUR 798.3 (544.3) million at the end

of the reporting period.

POP BANK GROUP AND

AMALGAMATION OF POP BANKS

POP Bank Group is a Finnish ﬁnancial group that

offers retail banking services for private custom-

ers as well as small and medium-sized companies.

POP Banks are cooperative banks owned by their

member customers. POP Bank Group’s mission

is to promote its customers’ ﬁnancial well-being,

prosperity and local success.

STRUCTURE OF THE POP BANK GROUP

The POP Bank Group consists of POP Banks, POP

Bank Centre coop and their controlled entities.

POP Banks are member credit institutions of POP

Bank Centre coop. POP Bank Centre coop and its

member credit institutions are mutually liable for

their debts and liabilities according to the Act on

the Amalgamation of Deposit Banks. POP Banks,

POP Bank Centre coop and their controlled service

companies constitute the amalgamation of POP

Banks.

POP Bank Centre coop is the central institution of

the amalgamation of POP Banks and is responsible

for steering and supervising POP Bank Group. POP

Bank Centre coop has two subsidiaries, Bonum

Bank Plc and POP Mortgage Bank Plc, which are

also its member credit institutions.

Bonum Bank Plc serves as the central credit in-

stitution of the POP Banks and acquires external

funding for the Group by issuing unsecured bonds.

Bonum Bank Plc is also responsible for the POP

Banks’ card business and the Group’s payment

transactions and centralised services, in addition

to granting credit to retail customers. POP Mort-

gage Bank Plc is responsible for the Group’s mort-

gage-backed funding, which it acquires by issuing

covered bonds.

POP Bank Group also includes POP Holding Ltd

owned by POP Banks and POP Bank Centre coop.

POP Holding Ltd owns 30 per cent from Finnish

P&C Insurance Ltd that belongs to LocalTapio-

la Group and uses the auxiliary business name of

POP Insurance. POP Holding Ltd is not a member

of the amalgamation of POP Banks and is included

in the scope of joint liability.

The following chart presents the structure of the

POP Bank Group and the entities included in the

amalgamation and scope of joint liability. There

have been no changes in the group structure dur-

ing reporting period.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 5

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 6

OPERATING ENVIRONMENT

Global economic growth was moderate in 2024.

Growth was stronger in Asia, but in the Unit-

ed States and the euro area, which are important

markets for Finnish exports, economic growth re-

mained slower. The ECB (European Central Bank)

and the FED (US Federal Reserve) have sought to

slow down the high inﬂation rates of recent years,

and therefore both maintained a tight mone-

tary policy in the ﬁrst half of 2024, keeping inter-

est rates high. As inﬂationary pressures gradu-

ally eased, the ECB started to gradually lower its

key interest rates in June to support the economy,

which was slowing down. The FED started to re-

duce interest rates in September.

Although the euro area economy grew in 2024, the

emergence of political and economic problems

in the major euro area economies, Germany and

France in particular, dampened growth prospects.

In addition, in the euro area, the US election result

in November increased fears of a trade war and

concerns about continued US support for Ukraine,

and raised expectations of increased cost pres-

sures for European NATO members.

The Finnish economy continued to perform slug-

gishly, with GDP growth remaining negative in 2024.

This was partly because of industrial action in the

early part of the year, as well as reduced house-

hold consumption. The sharp decline in construc-

tion and growth in unemployment also slowed the

economy’s recovery from the recession. There was

a record number of bankruptcies in 2024, especial-

ly in construction and related sectors. The number

of bankruptcies in the restaurant sector was also

exceptionally high. Finnish exports were modest in

the early part of the year, but started to grow in the

second half. As a result of the weak outlook and

demand, corporate investment fell markedly from

2023. On the positive side for the Finnish econo-

my, inﬂation rates returned to normal and interest

rates started to fall considerably.

During 2024, wage and salary earners’ purchasing

power increased, and the household debt ratio was

declining. Falling interest rates towards the end of

the year and a slowdown in the downward trend in

housing prices boosted housing sales. However, the

majority of households remained cautious about

spending and major purchases.

Households’ caution was also reﬂected in the

growth of bank deposits in Finland. In particular,

the popularity of higher-interest ﬁxed-term de-

posits increased. The amount of assets invested

in Finnish investment funds increased signiﬁcantly

as well. The average price performance of Finnish

stocks was weak during 2024, with the general in-

dex down by 6.8% from the end of 2023, while the

US stock market in particular rose strongly, driven

by technology companies.

Although wage and salary earners’ overall pur-

chasing power developed favourably in 2024, a

signiﬁcant proportion of households continued to

suffer from rising costs as a result of the excep-

tionally high inﬂation of previous years.

In agriculture, one of the main cost components is

the level of input prices, which stabilised from the

price spikes of previous years. However, producer

prices have fallen more than input prices, so entre-

preneurial income in agriculture has not increased.

The differences in proﬁtability performance be-

tween farms became even more polarised. For for-

est owners, a positive development was the con-

tinued growth in the industrial demand for wood.

Both the volume and the average prices in the tim-

ber trade increased markedly on the previous year.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 7

COSTTOINCOME RATIO, %

Total operating expenses

Total operating income

RETURN ON EQUITY ROE, %

Proﬁt for the ﬁnancial year

Equity capital and non-controlling interest

(average of the beginning and the end of the period)

RETURN ON ASSETS ROA, %

Proﬁt for the ﬁnancial year

Balance sheet total

(average of the beginning and the end of the period)

EQUITY RATIO, %

Equity capital and non-controlling interest

Balance sheet total

COMMON EQUITY TIER 1 CAPITAL RATIO CET1, %

Common Equity Tier 1 capital (CET1)

Risk weighted assets

TIER 1 CAPITAL RATIO T1, %

Tier 1 capital (T1)

Risk weighted assets

x 100

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

standards or other regulation and are used to describe the company’s ﬁnancial position and develop-

ment. The key ﬁgures presented by the POP Mortgage Bank are based on IFRS Financial Statement Re-

porting standards, except for the operating expenses ratio and the combined expense ratio for insurance

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

31 Dec 2024 31 Dec 2023

Cost-to-income ratio, % 59% 94%

ROA, % 0.1% 0.0%

ROE, % 3.6% 0.4%

Capital adequacy ratio (TC) % 212.7% 231.6%

Equity ratio, % 2.2% 3.1%

KEY FIGURES AND THE FORMULAS OF KEY FIGURES

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 8

CAPITAL ADEQUACY RATIO TC, %

Total capital (TC)

Risk weighted assets

LEVERAGE RATIO, %

Tier 1 capital (T1)

Leverage ratio exposure

LIQUIDITY COVERAGE RATIO LCR, %

Liquid assets

Liquidity outﬂows - liquidity inﬂows under stressed conditions

NET STABLE FUNDING RATIO NSFR, %

Stable funding

Required amount of stable funding

x 100

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 9

PERFORMANCE AND BALANCE

SHEET

PERFORMANCE

POP Mortgage Bank recorded a proﬁt of EUR 0.6

(0.1) million for the reporting period.

POP Mortgage Bank’s net interest income was

EUR 1.7 (1.2) million. Interest income EUR 25.3 (17.6)

million was entirely generated from interest earn-

ings on receivables from credit institutions. Inter-

est expenses EUR 23,6 (16,4) million consisted of

EUR 17.5 (13.0) million in bonds issued and EUR 6.0

(3.5) million in derivative contracts.

POP Mortgage Bank’s operating expenses totalled

EUR 0.9 (1.0) million. Personnel expenses includ-

ed fees paid to the members of the Board of Di-

rectors. Other operating expenses include EUR

0.2 (0.3) million in ICT expenses and EUR 0.5 (0.5)

million in purchased services. Purchased servic-

es include management services purchased from

Bonum Bank Plc and POP Bank Centre coop,

among other services. Depreciation and amortisa-

tion include the amortisation of intangible assets.

BALANCE SHEET AND FINANCIAL POSITION

POP Mortgage Bank’s balance sheet totalled EUR

798.3 (544.3) million at the end of the reporting

period.

Loans and receivables from credit institutions in-

cludes EUR 29.7 (26.3) million in deposits made in

Bonum Bank and EUR 750.0 (500.0) million in in-

termediary loans granted to banks belonging to

the Amalgamation of POP Banks.

The bonds issued, at EUR 756.1 (503.3) million, in-

cludes secured bonds issued in October 2024 and

in previous periods with a total nominal value of

EUR 750 million, and the change in the fair value of

the underlying asset in hedge accounting.

POP Mortgage Bank’s equity was EUR 17.5 (16.9)

million at the end of the review period.

CREDIT RATING

In September 2024, the credit rating agency S&P

Global Rating has conﬁrmed the ‘AAA’ credit rat-

ing with a stable outlook for POP Mortgage Bank’s

loan program and the issued bonds.

RISK AND CAPITAL ADEQUACY

MANAGEMENT AND RISK

POSITION

PRINCIPLES AND ORGANISATION OF RISK

MANAGEMENT

The POP Bank Group’s strategy outlines the

Group’s risk appetite. Business activities are car-

ried out at a moderate risk level so that the risks

can be managed in full. The purpose of risk man-

agement is to ensure the risk levels are proportion-

ate to bank’s and the amalgamation’s risk-bear-

ing capacity and capital adequacy position. Risk

management processes must be able to identify

all signiﬁcant risks of the business operations and

assess, measure and monitor these regularly.

As the central institution, POP Bank Centre coop

supervises the sufﬁciency and functioning of

the risk management systems at the level of the

member credit institutions and the amalgamation

and is liable for the Group’s risk and capital ad-

equacy management in accordance with section

17 of the Amalgamation Act. The central institution

of the amalgamation issues binding instructions

concerning risk and capital adequacy manage-

ment, corporate governance and internal control

to the member credit institutions to secure their

solvency and capital adequacy. Furthermore, com-

mon business controlling thresholds have been

established for the member institutions to ensure

that the risks taken by an individual member insti-

tution are within acceptable limits.

POP Mortgage Bank’s risk management goal is to

ensure that the bank complies with laws, decrees,

instructions and regulations issued by the authori-

ties, their own rules and the internal binding guide-

lines issued by the central institution of the amal-

gamation in its activities.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 10

The purpose of capital adequacy management is

to ensure a sufﬁcient amount, type and efﬁcient

use of the capital of the POP Mortgage Bank. Cap-

ital is held to cover the material risks arising from

the amalgamation’s business strategy and plan

and to secure the uninterrupted operation of the

amalgamation in case of unexpected losses. The

goal is pursued through a documented and sys-

tematic capital adequacy management process

which is integrally linked to the amalgamation’s

and member credit institutions’ strategy process

and business planning and management. POP

Mortgage Bank is responsible for member banks

long-term funding by issuing secured bonds. Issu-

ing is based on the funding needs of the amalga-

mation as an entity due to which POP Mortgage

Bank’s control process of the capital adequacy is

closely connected to the strategy process of the

amalgamation as well as the planning and manag-

ing of the business operations.

The amalgamation’s risk management and capi-

tal adequacy management are described in more

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

cial statements. Furthermore, information con-

cerning risks speciﬁed in the EU Capital Require-

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

in a separate Pillar III report. Copies of the ﬁnancial

statements and the Pilar III report of the POP Bank

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

or from the ofﬁce of the POP Bank Centre coop,

address Hevosenkenkä 3, 02600 Espoo, Finland.

BUSINESS RISKS

CREDIT RISKS

POP Mortgage Bank’s credit risk consist of inter-

mediary loans granted to the member banks of the

amalgamation of POP Banks and from derivatives.

POP Mortgage Bank engages in mortgage bank

operations under an intermediary loan model es-

tablished by the Act on Mortgage Banks and Cov-

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

secured bonds and use the acquired funds to of-

fer intermediary loans to the member banks of th

amalgamation.

Under the intermediary loan model, the mort-

gage-backed loans provided as collateral for se-

cured bonds remain on the member banks’ bal-

ance sheets and are not recognised on POP Mort-

gage Bank’s balance sheet. The risks associated

with the mortgage-backed loans provided as col-

lateral are not transferred to POP Mortgage Bank.

The bonds are recognised as collateral for the se-

cured bonds issued. The intermediary loans grant-

ed to member banks are presented under “Re-

ceivables from credit institutions” on the balance

sheet.

LIQUIDITY RISK

Bonum Bank Plc, the central credit institution of

the amalgamation, is responsible for liquidity man-

agement. Liquidity risks are managed by main-

taining a liquidity reserve consisting of LCR-eli-

gible (Liquidity Coverage Ratio) liquid assets, as-

sets eligible as collateral for central bank funding,

and short-term bank receivables. Based on an au-

thorization granted by the Financial Superviso-

ry Authority, the member credit institutions of the

amalgamation have been exempted from the LCR

and NSFR (Net stable funding ratio) requirements

by the decision of the central institution. The LCR

and NSFR requirements are calculated at the level

of the amalgamation of POP Banks.

POP Bank Group’s liquidity position remained

strong during the ﬁnancial period. The liquidity

coverage ratio (LCR) for the amalgamation of POP

Banks was 315.1 (273.9) per cent on 31 December

2024, with the regulatory minimum level being 100

per cent. The amalgamation’s Net Stable Funding

Ratio (NSFR) was 136.9 (132.7) per cent on 31 De-

cember 2024.

MARKET RISK

POP Mortgage Bank’s most signiﬁcant market

risk is the interest rate risk associated with the

banking book. The interest rate risk refers to the

impact of changes in interest rate levels on the

market value of balance sheet and off-balance-

sheet items, or on net interest income. The banking

book consists of intermediary loans granted to the

amalgamation’s member banks and market-based

ﬁnancing.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 11

POP Mortgage Bank does not engage in trad-

ing activities. The use of derivatives is limited to

hedging interest rate risk in the banking book.

POP Mortgage Bank monitors the interest rate risk

by using the present value method and the dy-

namic income risk model. The present value meth-

od measures how changes in interest rates af-

fect the constructed market value of the balance

sheet. In the present value method, the market

value of the balance sheet is calculated as the

present value of the expected cash ﬂows of indi-

vidual balance sheet items. Interest rate sensitivi-

ty indicators are used to monitor the market value

changes caused by changes in the interest rates

and credit spreads of investment items in different

interest rate scenarios. The income risk model pre-

dicts future net interest income and its changes in

various market rate scenarios within a time frame

of ﬁve years. The amount of interest rate risk taken

is assessed with the effect of diverse interest rate

shocks on the net interest income and net present

value.

OPERATIONAL RISKS

The objective of the management of operation-

al risks is to identify essential operational risks

in business operations and minimise their mate-

rialisation and impacts. The objective is pursued

through continuous personnel development and

by means of comprehensive operating instructions

and internal control measures, such as by segre-

gating preparation, decision-making, implementa-

tion and control from one another.

POP Mortgage Bank carries out an annual self-as-

sessment of operational risks based on the risks

assessments it performs, in which the monitoring

of operational risk incidents is utilised. The risk as-

sessment also aims to evaluate the risks related to

POP Mortgage Bank most signiﬁcant outsourced

operations. Some of the potential losses caused

by operational risks are hedged through insurance.

Risks caused by malfunctions in information sys-

tems are prepared for through continuity planning.

CRISIS RESOLUTION PLAN

In accordance with the bank resolution act for own

funds and eligible liabilities, the Financial Stabil-

ity Authority has on 17 April 2024 set a minimum

requirement of own funds and eligible liabilities

(MREL-requirement) for POP Mortgage Bank. The

MREL requirement for POP Mortgage Bank is 16.0

per cent of total risk-weighted assets (TREA) or

6.0 per cent of the leverage ratio exposures (LRE).

The MREL requirement has been fulﬁlled with own

funds.

CAPITAL ADEQUACY MANAGEMENT

At the end of the reporting period. POP Mortgage

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

Bank’s capital ratio was 212.7 (231.6) per cent and

the core capital adequacy ratio 212.7 (231.6) per

cent. On 31 December 2024, the Bank’s own funds

totalled EUR 16.6 (16.4) million consisting entirely

of CET1 capital adequacy.

POP Mortgage Bank’s own funds are comprised of

share capital, retained earnings and other non-re-

stricted reserves, less the deductible items in ac-

cordance with the CRR. Member credit institutions

of the amalgamation have been exempted from

the own funds requirements for intragroup items

and large exposures limits for exposures between

the central credit institution and the member

credit institutions based on a permission granted

by the FIN-FSA.

POP Mortgage Bank’s leverage ratio on 31 Decem-

ber 2024 was 235.5 (158.5) per cent. The minimum

level of regulation is 3 per cent.

The statutory minimum is 8 per cent for the capital

adequacy ratio and 4.5 per cent for CET1 capital.

In addition to the minimum capital adequacy ra-

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

ditional capital requirement, which is 2.5 per cent

in accordance with the Act on Credit Institutions,

and to the variable country-speciﬁc additional

capital requirements for foreign exposures.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 12

SUMMARY OF CAPITAL ADEQUACY

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Own funds

Common Equity Tier 1 capital before deductions 16,855 16,793

Deductions from Common Equity Tier 1 capital -304 -411

Total Common Equity Tier 1 capital (CET1) 16,551 16,381

Additional Tier 1 capital before deductions - -

Deductions from Additional Tier 1 capital - -

Additional Tier 1 capital (AT1) - -

Tier 1 capital (T1 = CET1 + AT1) 16,551 16,381

Tier 2 capital before deductions - -

Deductions from Tier 2 capital - -

Total Tier 2 capital (T2) - -

Total capital (TC = T1 + T2) 16,551 16,381

Total risk weighted assets 7,780 7,074

of which credit risk 1,465 2,136

of which credit valuation adjustment risk (CVA) 4,554 3,344

of which market risk (exchange rate risk) - -

of which operational risk 1,761 1,594

Fixed capital conservation buffer according to Act on Credit

institutions (2.5%)

195 177

Countercyclical capital buffer - -

CET1 Capital ratio (%) 212.7% 231.6%

T1 Capital ratio (%) 212.7% 231.6%

Total capital ratio (%) 212.7% 231.6%

Capital requirement

Total capital 16,551 16,381

Capital requirement * 817 743

Capital buffer 15,734 15,639

Leverage ratio

Tier 1 capital (T1) 16,551 16,381

Leverage ratio exposure 7,034 10,338

Leverage ratio, % 235.3% 158.5%

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

country-speciﬁc countercyclical capital requirements of foreign exposures.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 13

INTERNAL CONTROL

The purpose of POP Mortgage Bank’s internal con-

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

effective manner, works towards the goals and im-

plements the procedures conﬁrmed by senior man-

agement. Internal control aims to ensure that the

organisation complies with regulations and man-

ages risks comprehensively, and that its operations

are efﬁcient and reliable.

Internal control is implemented at all levels of the

organisation. Internal control is implemented by the

Board of Directors, the CEO and other management

and personnel, as well as the risk management and

compliance functions independently of business

operations. As part of internal control, the amalga-

mation has implemented a whistle-blowing mech-

anism that enables the Bank’s employees to report,

internally through an independent channel, suspect-

ed violations of rules and regulations concerning

the ﬁnancial market in the central institution or a

member credit institution.

INTERNAL AUDIT

Within the amalgamation, POP Bank Centre coop

is centrally responsible for the steering and organ-

isation of internal audit in the bank centre, mem-

ber credit institutions and other companies of the

amalgamation. POP Mortgage Bank’s internal audit

is based on the internal audit guidelines conﬁrmed

by the Board of Directors and the Supervisory Board

of POP Bank Centre coop as well as on the audit

plan approved by the Board of Directors of POP

Bank Centre coop.

The purpose of internal audit is to assess the scope

and sufﬁciency of the internal control of the Bank’s

operational organisation and to monitor and assess

the functionality of risk management systems. In-

ternal audit reports its observations primarily to the

Bank’s Board of Directors. After audits, the Bank’s

Board of Directors discusses the summaries pre-

pared as a result of the internal audit. Internal Audit

reports of its activity and observations regularly to

central institution’s Supervisory Board, central insti-

tution’s Board and CEO.

MANAGEMENT AND PERSONNEL

POP Mortgage Bank’s Board of Directors during the

ﬁnancial year included:

● Juha Niemelä, Chairman of the Board

● Matti Vainionpää, Vice Chairman of the Board

● Marja Pajulahti, Member of the Board

POP Mortgage Bank does not have personnel. The

Deputy CEO of Bonum Bank Timo Hulkko has act-

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

ström has acted as the CEO’s deputy.

THE BANK’S CORPORATE AND

GOVERNANCE SYSTEM

POP Mortgage Bank’s functions are controlled by its

sha

reholder, which exercises its decision-making

power at the General Meeting in accordance with

the Finnish Limited Liability Companies Act and

the Articles of Association. The Annual General

Meeting decides on the distribution of the Bank’s

proﬁt and elects the members of the Board of Di-

rectors.

The Bank is represented by and directed by the

Board of Directors. Operational decisions con-

cerning the Bank’s business operations and stra-

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

rectors. The work of the Board of Directors is based

on the Bank’s Articles of Association, decisions of

the General Meeting and applicable legislation.

The Bank’s CEO manages the Bank’s operational

activities in accordance with the instructions pro-

vided by the Board of Directors.

The investigation of the independence of Board

members and the CEO takes place in accord-

ance with regulations issued by the Finnish Finan-

cial Supervisory Authority. Board members and the

CEO shall provide an account of the entities in

which they operate when they are elected to their

ofﬁce. In addition, Board members and the CEO

shall provide an account of ﬁtness and propriety

according to the regulation by the Financial Su-

pervisory Authority when they accept their duties.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

BOARD OF DIRECTOR’S REPORT 14

POP Mortgage Bank’s Corporate Governance Re-

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

AUDIT

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

ised public accountants, with Tiia Kataja, author-

ised public accountant, as the principal auditor.

SOCIAL RESPONSIBILITY

POP Mortgage Bank operates as part of the POP

Bank Group and supports the responsibility efforts

of the local POP Banks. The POP Bank Group pub-

lishes a sustainability report as part of its man-

agement report. The POP Bank Group’s man-

agement report and consolidated IFRS ﬁnancial

statements are published on the website at www.

poppankki.ﬁ.

EVENTS AFTER THE CLOSING

DATE

Board of Directors of POP Mortgage Bank is not

aware of events after the closing date that would

have a material impact on the information present-

ed in the ﬁnancial statements.

OUTLOOK FOR 2025

The outlook for the Finnish economy remains uncer-

tain. There are early signals of economic recovery,

but household purchasing power is recovering slow-

ly. The employment situation continued to weaken

towards the end of 2024 and the number of bank-

ruptcies was at a record level, and no rapid turn in

the economic cycle is in sight in early 2025. How-

ever, private consumption is expected to recover as

a result of increasing purchasing power, which will

support the outlook for economic growth towards

the end of the year. The unstable geopolitical sit-

uation continues to cast a particular shadow over

economic development.

POP Mortgage Bank’s capital adequacy is expected

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

eral for the issued bonds is expected to be good.

BOARD OF DIRECTORS

PROPOSAL ON THE DISPOSAL OF

THE RESULT FOR THE PERIOD

POP Mortgage Bank’s distributable funds were EUR

7,480,838.21. POP Mortgage Bank’s Board of Direc-

tors proposes to the Annual General Meeting that

the proﬁt for the period EUR 625,672.92 be recog-

nised in retained earnings and that no dividends be

paid.

POP MORTGAGE BANK’S FINANCIAL STATEMENTS 1 JANUARY – 31

DECEMBER 2024 (IFRS)

POP MORTGAGE BANK’S INCOME STATEMENT

*The presentation method for interest income from derivative contracts has been changed. For the inter-

est on derivatives, the interest from one interest rate swap will henceforth be recorded on a net basis rather

than as gross interest income and gross interest expense. A reclassiﬁcation of EUR 12,788 thousand from

interest income to interest expenses was made for the comparative period. The change is described in more

detail in Note 1, under Changes in presentation method.

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

(EUR 1,000) Note

1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Interest income* 25,288 17,631

Interest expenses* -23,567 -16,418

Net interest income 3 1,721 1,212

Net income from hedge accounting 4 -204 -176

Total operating income 1,517 1,037

Personnel expenses 5 -18 -23

Other operating expenses 6 -757 -835

Depreciation and amortisation 7 -116 -116

Total operating expenses -891 -974

Proﬁt before taxes 626 63

Income taxes 8 - -

Result for the period 626 63

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 15

POP MORTGAGE BANK’S BALANCE STATEMENT

(EUR 1,000) Note 31 Dec 2024 31 Dec 2023

Assets

Loans and advances to credit institutions 10, 11, 12 779,737 526,280

Derivatives 10, 11, 12 7,872 6,945

Intangible assets 13 281 398

Other assets 14 10,363 10,687

Total assets 798,254 544,310

Liabilities

Debt securities issued to the public 10, 11, 15 756,069 503,259

Debt to credit institutions 10 13,440 10,650

Derivatives 10, 11, 16 587 2,863

Other liabilities 17 10,677 10,682

Total liabilities 780,773 527,455

Equity capital

Share capital 18 10,000 10,000

Reserves 18 9,000 9,000

Retained earnings 18 -1,519 -2,145

Total equity capital 17,481 16,855

Total liabilities and equity 798,254 544,310

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 16

POP MORTGAGE BANK’S STATEMENT OF CHANGES IN EQUITY CAPITAL

(EUR 1,000) Share capital

Reserve for

invested non-

restricted equity Retained earnings Total equity

Balance at 1 Jan 2024 10,000 9,000 -2,145 16,855

Proﬁt for the ﬁnancial year - - 626 626

Proﬁt for the ﬁnancial year

- - 626 626

Balance at 31 Dec 2024 10,000 9,000 -1,519 17,481

(EUR 1,000) Share capital

Reserve for

invested non-

restricted equity Retained earnings Total equity

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

Proﬁt for the ﬁnancial year - - 63 63

Proﬁt for the ﬁnancial year

- - 63 63

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

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 17

POP MORTGAGE BANK’S CASH FLOW STATEMENT

POP Mortgage Bank had no items to present in the cash ﬂow from investing activities during the review

period.

(EUR 1,000) Note

1 Jan - 31 Dec

2024

1 Jan - 31 Dec

2023

Cash ﬂow from operating activities

Proﬁt for the ﬁnancial year 626 63

Adjustments to proﬁt for the ﬁnancial year 675 533

Increase (-) or decrease (+) in operating assets

-236,476 -257,354

Advances to credit institutions

10,11,12

-236,800 -248,700

Other assets 14 324 -8,654

Increase (+) or decrease (-) in operating liabilities

2,784 19,352

Liabilities to credit institutions 10 2,790 10,650

Other liabilities 17 -6 8,702

Total cash ﬂow from operating activities

-232,391 -237,407

Cash ﬂow from ﬁnancing activities

Debt securities issued, increase 10,11,15 249,048 249,203

Total cash ﬂow from ﬁnancing activities 249,048 249,203

Change in cash and cash equivalents

Cash and cash equivalents at period-start 13,080 1,284

Cash and cash equivalents at the end of the period 29,737 13,080

Net change in cash and cash equivalents 16,657 11,796

ADDITIONAL INFORMATION OF THE CASH FLOW

STATEMENT

Interest received 25,298 22,132

Interest paid 23,886 20,825

Adjustments to result for the ﬁnancial year

Changes in fair value 203 174

Depreciation 7 116 116

Other 356 243

Cash and cash equivalents

Receivables from credit institutions payable on

demand

12 29,737 13,080

Total 29,737 13,080

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 18

NOTES

GENERAL

POP MORTGAGE BANK PLC AND POP BANK

GROUP

POP Mortgage Bank Plc (hereinafter ‘POP Mort-

gage Bank’) is a subsidiary wholly owned by POP

Bank Centre coop and a member credit institution

in the amalgamation of POP Banks, acting as the

mortgage bank for the member banks of the POP

Bank Centre coop (POP Banks). POP Mortgage

Bank has been established on September 2, 2021.

On 25 May 2022, POP Mortgage Bank Plc was au-

thorised by the European Central Bank to engage

in mortgage banking operations and it was grant-

ed an operating license pursuant to the Act on

Mortgage Banks and Covered Bonds on 30 June

2022.

POP Mortgage Bank belongs to the POP Bank

Group. The POP Bank Group consists of the amal-

gamation of POP Banks and companies over which

it has control. The Group is engaged in banking

business. The central institution for the amalga-

mation of POP Banks is POP Bank Centre coop. Its

members consist of POP Mortgage Bank, Bonum

Bank Plc and 18 co-operative banks. The amalga-

mation of POP Banks is an economic entity spec-

iﬁed in the Act on the Amalgamation of Deposit

Banks, the members of which are jointly liable for

each other’s debts and commitments.

POP Mortgage Bank and Bonum Bank Plc are re-

sponsible for acquiring external funding for the

amalgamation. POP Mortgage Bank engages in

mortgage bank operations under an intermediary

loan model established by the Act on Mortgage

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

termediary loan model, POP Mortgage Bank dis-

tributes the capital originating from the issued

bond to the member banks of amalgamation as

an intermediary loan. POP Mortgage Bank under-

writes intermediary loans on member banks bal-

ance sheets in security for issued bonds. In the

intermediary loan model, member banks mort-

gage-backed loans capital and associated risks

are not transferred to POP Mortgage Bank. Inter-

mediary loans will be stated to balance sheet item

“Loans and receivables from credit institutions”.

POP Mortgage Bank’s registered ofﬁce is Espoo.

Copy of POP Mortgage Bank’s ﬁnancial state-

ments are available from its ofﬁce at Hevosenk-

enkä 3, 02600 Espoo, Finland and online at www.

poppankki.ﬁ/en.

POP Bank Centre coop has prepared the POP

Bank Group’s consolidated ﬁnancial statements

in accordance with the Act on the Amalgamation

of Deposit Banks. Copies of the ﬁnancial state-

ments of the POP Bank Group are available on-

line at www.poppankki.ﬁ/en or from the ofﬁce

of the central institution, address Hevosenken-

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

present information concerning risks speciﬁed

in the EU Capital Requirements Regulation (EU

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

BASIS OF PREPARATION

POP Mortgage Bank’s ﬁnancial statements have

been prepared in accordance with International Fi-

nancial Reporting Standards (IFRS) approved in the

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

plicable Finnish accounting and corporate legisla-

tion and regulatory requirements have also been

taken into account when preparing the notes to the

ﬁnancial statements.

The ﬁgures in the ﬁnancial statements are in thou-

sand euros, unless otherwise stated. The ﬁgures in

the calculations and tables are rounded, whereby

the sum total of individual ﬁgures may deviate from

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

counting and operational currency is euro.

POP Mortgage Bank has no subsidiaries or asso-

ciated companies.

NOTE 1 ACCOUNTING POLICIES

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 19

CHANGES IN PRESENTATION METHOD

POP Mortgage Bank has clariﬁed the presentation

method for interest related to hedging derivative

contracts. Unlike the previous presentation meth-

od, the interest from a single derivative contract

will now be recorded on a net basis instead of as

gross interest income and gross interest expense.

Interest from derivatives hedging assets will be

presented in the income statement under interest

income, and interest from derivatives hedging li-

abilities will be presented under interest expens-

es. The presentation method for interest liabilities

and receivables has also been modiﬁed, such that

the interest from derivative contracts is shown as

a net amount in either “other assets” or “other li-

abilities” on the balance sheet, depending on the

interest payment situation at each reporting date.

Comparative period data in the income statement

has been adjusted to match the new presentation

method. No corresponding adjustment has been

made on the balance sheet. This adjustment has

no impact on net interest income.

ACCOUNTING POLICIES REQUIRING

MANAGEMENT’S JUDGEMENT AND

UNCERTAINTY FACTORS AFFECTING

ESTIMATES

The application of the IFRS requires the man-

agement to make estimates and assumptions

concerning the future that affect the reported

amounts in the ﬁnancial statements, as well as the

information included in the notes. The manage-

ment’s main estimates concern the future and key

uncertainties related to the amounts at the bal-

ance sheet date. Such key estimates are related

to fair value measurement, as well as the impair-

ment of ﬁnancial assets and intangible assets. The

management’s estimates and assumptions are

based on the best view at the balance sheet date,

which may differ from the actual result.

The management must assess whether the mar-

kets for ﬁnancial instruments are active or not.

Furthermore, the management must assess

whether an individual ﬁnancial instrument is sub-

ject to active trading and whether the price infor-

mation obtained from the market is a reliable indi-

cation of the instrument’s fair value.

When the fair value of ﬁnancial instruments is de-

termined using a valuation technique, the man-

agement’s judgement is needed in the choice of

the valuation technique to be applied. Insofar as

there is no market input available for the tech-

niques, management must evaluate how other da-

ta can be used for the valuation.

In the calculation of expected credit losses, the

management’s assessment has been used in de-

ciding that the probability of default of the POP

Banks Group’s internal items is to be zero. The as-

sessment was made based on the structure of

the Group and the principles of risk management.

The most signiﬁcant item within the amalgama-

tion to which the principle is applied is the interim

loans granted to POP Banks, which are presented

in Note 12 Loans and receivables from credit insti-

tutions.

FINANCIAL INSTRUMENTS

CLASSIFICATION AND RECOGNITION

Financial assets are classiﬁed on initial recogni-

tion into following measurement categories based

on the business model followed in their manage-

ment and the debt instruments’ cash ﬂow charac-

teristics:

● Financial assets at amortised cost

● Financial assets at fair value through proﬁt

In accordance with the IFRS 9 Financial instru-

ments, ﬁnancial liabilities are classiﬁed on initial

recognition into following measurement categories:

● Financial liabilities at amortised cost

● Financial liabilities at fair value through proﬁt

and loss

Purchases and sales of ﬁnancial instruments are

recognised on transaction date. Instruments is-

sued are recognised in the balance sheet on the

date when the customer makes the subscription.

A ﬁnancial asset is derecognised when the con-

tractual rights to the cash ﬂows from the ﬁnancial

asset expire, or when the rights have been trans-

ferred to another party so that substantially all the

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 20

risks and rewards of ownership of the ﬁnancial as-

set are transferred. In addition, an agreement in-

cluded in ﬁnancial assets is derecognised on the

balance sheet if the rights to cash ﬂows that are

based on the agreement are transferred to anoth-

er party or if the agreement includes an obligation

to pay the cash ﬂows in question to one or sever-

al recipients. If a consideration is received, but all

the risks and rewards of ownership of the trans-

ferred asset are substantially retained, the trans-

ferred asset is recognised in its entirety and a ﬁ-

nancial liability is recognised for the consideration

received.

Impaired ﬁnancial assets are derecognised when

no further payments are expected and the actu-

al ﬁnal loss can be determined. In connection to

derecognition, the previously recognised expect-

ed credit loss is cancelled and the ﬁnal credit loss

is recognised. Payments on derecognised receiv-

ables received later are recognised in the income

statement as an adjustment of impairment losses.

Financial liabilities are derecognised when the re-

lated obligations have been fulﬁlled and they have

been extinguished. An exchange of a debt instru-

ment with substantially different terms or sub-

stantial modiﬁcation of the terms of an existing ﬁ-

nancial liability is accounted for as an extinguish-

ment of the original ﬁnancial liability and the rec-

ognition of a new ﬁnancial liability.

BUSINESS MODELS FOR MANAGING FINANCIAL

ASSETS AND MEASUREMENT

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

fers to how an entity manages its ﬁnancial assets

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

business model determines whether cash ﬂows will

result from collecting contractual cash ﬂows, sell-

ing ﬁnancial assets or both. The business model is

determined at a level that reﬂects how ﬁnancial

asset groups are managed together to achieve a

particular business objective.

POP Mortgage Bank’s ﬁnancial assets are

managed according to three business models:

1. Financial assets held (objective to collect cash

ﬂows)

2. Combination of ﬁnancial assets held and sold

(objective to collect cash ﬂows and sale)

3. Other long-term investments

Financial assets held -business model includes

loans and receivables and debt instruments held

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

ments of Principal and Interest) for their cash ﬂow

characteristics. In the SPPI-test, it is determined

whether the asset’s contractual cash ﬂows are

solely payments of principal and interest on the

principal amount outstanding.

Combination-business model includes debt in-

struments with contractual cash ﬂows being sole-

ly payments of principal and interest, held to ma-

turity or close to maturity or sold for example to

reach the targets of the investment strategy.

Other long-term investments -business model in-

cludes shares and other instruments, whose cash

ﬂows do not consist solely on payments of princi-

pal and interest.

POP Mortgage Bank does not actively trade ﬁ-

nancial assets.

Financial instruments measured at amortised

cost

Financial assets measured at amortised cost in-

cludes loans and receivables and the debt instru-

ments, which are, according to the investment

policy, intended to be held to maturity with terms

of regular payments of interest and principal ei-

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

uid assets, in which the liquidity does not have to

be tested by regular sales, may be classiﬁed to

this measurement class.

POP Mortgage Bank’s ﬁnancial liabilities are

measured at amortised cost according to the ef-

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 21

fective interest rate method. Financial liabilities

measured at amortised cost includes deposits

and debt securities issued to the public, liabilities

to credit institutions as well as other ﬁnancial lia-

bilities.

DETERMINING FAIR VALUE

Fair value is the price that would be attained if the

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

bility from one market party to another in a stand-

ard business transaction taking place on a valua-

tion day.

A ﬁnancial instrument’s fair value is based on price

quotations obtained from active markets or, if ac-

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

uation methods. A market is considered active if

price quotations are readily and regularly avail-

able and if they reﬂect real and regularly occur-

ring arm’s-length market transactions. Current bid

price is used as the quoted market price of ﬁnan-

cial assets.

If the market has a well-established valuation

technique for a ﬁnancial instrument for which

there is no direct market price available, the fair

value is based on the commonly used valuation

model and on the market quotations of the input

data used in the model.

If there is no well-established valuation technique

in the market, fair value is determined based on

a speciﬁc valuation model created for the prod-

uct in question. The valuation models are based

on widely used measuring techniques, incorporat-

ing all the factors that market participants would

consider when setting a price. The valuation pric-

es used include market transaction prices, the dis-

counted cash ﬂow method, as well as the fair value

of another substantially similar instrument at the

reporting date. The valuation methods take into

account an estimate of the credit risk, applicable

discount rates, early repayment options, and oth-

er such factors that may impact reliable determi-

nation of the fair value of the ﬁnancial instrument.

The fair values of ﬁnancial instruments are divided

into three hierarchical levels depending on how the

fair value is deﬁned:

● Fair values quoted in the active markets for

identical assets or liabilities (Level 1)

● Fair values that are determined using oth-

er input data than the quoted prices at Level

1, which are observable for the assets or lia-

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

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

● Fair values determined by the input data,

which is essentially not based on the observa-

ble market data (Level 3).

The fair value hierarchy level into which an item

measured at fair value is fully classiﬁed is de-

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

est level and is signiﬁcant in respect to the whole

item. The signiﬁcance of the input data is evaluat-

ed considering the whole item, which is valued at

fair value.

IMPAIRMENT OF FINANCIAL ASSETS

A loss allowance on ﬁnancial assets measured at

amortized cost or fair value through other com-

prehensive income and off-balance sheet cred-

it commitments is recognised on the basis of ex-

pected credit losses. The expected credit loss of

a ﬁnancial instrument is determined as the dif-

ference between the contractual cash ﬂows that

the entity is entitled to receive under the contract

and the cash ﬂows expected to be received by the

entity at the original effective interest rate at the

time of reporting.

To determine expected credit losses, ﬁnancial in-

struments are classiﬁed in stages from 1 to 3.

Stage 1 represents ﬁnancial instruments whose

credit risk has not increased signiﬁcantly since

the initial recognition. Expected credit losses are

determined for such ﬁnancial instruments based

on expected loan losses for 12 months. Stage 2

represents ﬁnancial instruments whose credit risk

has increased signiﬁcantly after the initial rec-

ognition on the basis of qualitative or quantita-

tive criteria and, for stage 3, ﬁnancial instruments

whose counterparty has been declared as default.

Expected credit losses are determined for ﬁnan-

cial instruments classiﬁed in stage 2 and 3 based

on the expected credit losses over the entire life of

the instrument.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 22

POP Mortgage Bank’s ﬁnancial assets consist of

internal deposits of the POP Banks Group. In the

calculation of expected credit losses (ECL), the

probability of default (PD) of the group’s internal

items has been considered to be zero, based on

the group’s structure and risk management prin-

ciples. Calculation principles for expected credit

losses are described in more detail in Note 2 POP

Bank Group’s accounting policies to the POP Bank

Group’s ﬁnancial statements.

DERIVATIVE CONTRACTS AND HEDGDE

ACCOUNTING

POP Mortgage Bank hedges its interest rate risk

against changes in fair value, primarily using in-

terest rate swaps. Hedge accounting is applied for

fair value hedging. The hedged instrument of fair

value hedging is ﬁxed-rate bonds issued. Deriva-

tive contracts are not made for trading purposes.

All derivative contracts are recognised and meas-

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

itive fair values of derivative contracts are pre-

sented as assets under Derivatives and negative

fair values as liabilities under Derivatives. Chang-

es in the value of derivatives in hedge accounting

are recorded in the income statement under Net

income from Hedge accounting. The interest on

hedging derivative contracts is recorded on a net

basis, with the interest on derivatives hedging lia-

bilities presented under interest expenses. The in-

terest on derivative contracts is presented on the

balance sheet as a net amount under either other

assets or other liabilities, depending on the inter-

est payment position at each reporting date.

The hedging relationship between the hedging de-

rivative contract and the hedged instrument and

the objectives of risk management are document-

ed before hedge accounting is applied. If there is a

high correlation between the change in the value

of the hedging derivative and the hedged instru-

ment, the hedging is considered effective.

POP Mortgage Bank applies IFRS 9 Financial In-

struments to hedge accounting for all hedging re-

lationships.

INTANGIBLE ASSETS

Intangible assets comprise the implementation

cost of information system. An intangible asset

is recognised in the balance sheet at acquisition

cost if it is probable that the expected econom-

ic beneﬁts associated, and the acquisition cost

of the asset can be measured reliably. Acquisition

cost includes all costs that are directly attributa-

ble to bringing the asset to its working condition

for its intended use.

Intangible assets have a limited useful life. The ac-

quisition cost of intangible assets is amortised in

the income statement on the basis of the estimat-

ed useful lives of assets. The estimated useful life

is 3–5 years for information systems and licenses.

The amortisation of the acquisition cost of intan-

gible assets begins when the asset is ready to be

taken into use. Indications of impairment of intan-

gible assets are examined annually and intangible

assets are tested for impairment when necessary.

EMPLOYEE BENEFITS

Employee beneﬁts are short-term employee ben-

eﬁts, such as remunerations for positions of re-

sponsibility, which are expected to be paid in con-

nection with the work performance they are relat-

ed to or within the following 12 months.

POP Mortgage Bank does not have employees. The

company purchases the administrative and man-

agement services needed from its parent compa-

ny POP Bank Centre coop and its sister company

Bonum Bank Plc.

INCOME TAX

The income statement includes taxes on income

for the ﬁnancial year and changes in deferred tax-

es.

Deferred tax liabilities and assets are calculated

on taxable and deductible temporary differenc-

es between the carrying amount and the tax ba-

sis. Deferred tax assets are recognised to the ex-

tent that it is probable that taxable income will be

available against which the deductible temporary

difference can be utilised.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 23

Deferred tax assets and liabilities are measured at

the tax rate that is expected to apply at the time

when the temporary difference is reversed.

A deferred tax asset is recognised for the carry

forward of unused tax losses to the extent that fu-

ture taxable proﬁt will be probable and unused tax

credits can be utilised.

CHANGES IN ACCOUNTING POLICIES

Adoption of new IFRS standards, amendments to

standards and interpretations

The amendments to standards and interpretations

that came into effect in 2024 had no impact on

POP Mortgage Bank’s ﬁnancial statements.

Adoption of new IFRS standards, amendments to

standards and interpretations in future ﬁnancial

years

The standard amendments approved for appli-

cation in the ﬁnancial year beginning 1 January

2025 are not estimated to have an impact on POP

Mortgage Bank’s ﬁnancial statements.

POP Mortgage Bank intends to adopt IFRS 18

Presentation and Disclosures standard for the ﬁ-

nancial year commencing 1 January 2027, if the

standard has been approved for application in the

EU. The Standard shall be applied in periods be-

ginning on or after 1 January 2027, but its earli-

er application is permitted. IFRS 18 supersedes

IAS 1 Presentation of Financial Statements. The

adoption of the standard will have an impact on

the presentation of POP Mortgage Bank’s ﬁnancial

statements. POP Mortgage Bank will assess the

impact of the standard during the ﬁnancial year

2025.

Other standard amendments to be adopted lat-

er are not expected to have a material impact on

POP Mortgage Bank’s ﬁnancial statements.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 24

NOTE 2 RISK MANAGEMENT

PRINCIPLES OF RISK MANAGEMENT AND

CAPITAL ADEQUACY MANAGEMENT

POP Mortgage Bank is the mortgage bank and a

member credit institution of the amalgamation of

POP Banks and a subsidiary of the POP Bank Cen-

tre coop. The central institution issues binding in-

structions concerning risk and capital adequacy

management, corporate governance, and internal

control to the member credit institutions to secure

their solvency and capital adequacy. Furthermore,

common business controlling thresholds have been

established for the member institutions to ensure

that the risks taken by an individual member insti-

tution are within acceptable limits.

Risk and capital adequacy management is regu-

lated by EU legislation, Act on Credit Institutions

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

it Banks (2010/599; hereinafter referred to as the

“Amalgamation Act”) and the standards, regulations

and guidelines issued by the Financial Supervisory

Authority. POP Mortgage Bank also complies with

the Act on Mortgage Banks and Covered Bonds

(151/2022).

The purpose of risk management is to ensure that

the bank does not take such risks in its operations

that would result in a material threat to the capital

adequacy or solvency. The purpose of the risk man-

agement process is to ensure that all signiﬁcant

risks resulting from business activities are identi-

ﬁed, assessed, measured, and monitored on a regu-

lar basis and that they are proportionate to the risk

appetite capacity of POP Mortgage Bank.

The purpose of capital adequacy management is to

ensure the sufﬁcient amount, type and efﬁcient use

of the capital of POP Mortgage Bank. Capital is held

to cover the material risks arising from POP Mort-

gage Bank’s business strategy and plan and to se-

cure the uninterrupted operation of POP Mortgage

Bank in case of unexpected losses. The goal is pur-

sued through a documented and systematic capi-

tal adequacy management process that is integral-

ly linked to the amalgamations and other member

credit institutions’ business planning and manage-

ment.

The central institution is responsible for the risk and

capital adequacy management of the POP Bank

Group. The central institution provides guidance to

the member credit institutions to ensure risk man-

agement and supervises that the member institu-

tions operate in accordance with regulation, their

own rules, guidelines issued by the central institu-

tion and in accordance with appropriate and ethi-

cally acceptable procedures. The special regulations

related to the operations of a mortgage bank have

been taken into account in the guidance of the cen-

tral cooperative and in the steering limits and pro-

cess requirements set for the business operations

of POP Mortgage Bank. The bank, within limits set

by conﬁrmed business risk thresholds, carries its

business risks independently in its operations and

is liable for its capital adequacy. The capital ade-

quacy, liquidity coverage ratio and customer risks of

POP Mortgage Bank are supervised both at the lev-

el of individual member institutions and at the con-

solidated amalgamation level. Violations of the risk

management principles are addressed in accord-

ance with the agreed operating models.

POP Mortgage Bank conducts an extensive identi-

ﬁcation and evaluation of risks related to its oper-

ations and sets risk-bearing capacity to match the

total amount of the risks. In order to secure the cap-

ital adequacy, bank sets risk-based capital objec-

tives and prepares a capital plan to achieve these

objectives. Calculation methods deﬁned by the

central institution’s risk monitoring function are

used when preparing the capital plan.

The most signiﬁcant risks associated with POP

Mortgage Bank’s operations are credit risk, liquidity

risk, interest rate risk and operational risk. The risk

strategy conﬁrmed by the Board of Directors of the

central institution outlines the risk appetite of the

operations, within which the Board of Directors of

the POP Mortgage Bank sets its own guidelines and

restrictions. Business activities are carried out at a

moderate risk level so that the risks can be man-

aged in full.

Risk management is an essential part of the inter-

nal controls of POP Mortgage Bank. The purpose

internal controls is to ensure that the institution

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 25

complies with regulations, carries out comprehen-

sive risk management and operates efﬁciently and

reliably. Moreover, internal controls serve to ensure

that the objectives and goals set for different lev-

els of the amalgamation are achieved in accord-

ance with internal guidelines.

ORGANISATION OF RISK AND CAPITAL

ADEQUACY MANAGEMENT

POP Mortgage Bank’s Board of Directors conﬁrms

the objectives of the business operations, guide-

lines, limits to the risk levels of the operations as

well as the risk-taking authorities. The Board of

Directors is also responsible for proactive capital

planning and adapting the capital adequacy man-

agement planning and proactive capital planning

into reliable governance and guidance. The Board

of Directors assesses the appropriateness, ex-

tent and reliability of capital adequacy manage-

ment. The Board of Directors sets the target lev-

el for capital adequacy and conﬁrms the level and

structure of capital required by the risk proﬁle. The

executive management is responsible for the risk

management of the daily operations within the

scope of the risk limits and risk-taking authority.

The executive management is responsible for the

practical implementation, continuous monitor-

ing, supervision and reporting of capital adequa-

cy and risk management to the Board of Directors

of the amalgamation. The executive management

also ensures that the responsibilities, authoriza-

tions, processes and reporting relationships relat-

ed to capital adequacy management have been

clearly deﬁned and sufﬁciently described and that

the employees are familiar with capital adequa-

cy management and the related processes and

methods to the extent required by their duties.

POP Mortgage Bank’s independent risk moni-

toring is responsible for monitoring the risk limits

and capital adequacy in the business operations

as well as reporting them to the Board of Direc-

tors and the independent risk management func-

tion of the central institution of the amalgama-

tion. The assignment of Bonum Bank’s risk moni-

toring function is to form a comprehensive view of

the risks included in the bank’s operations, devel-

op risk management methods and processes for

identifying, measuring, and monitoring risks in ac-

cordance with the principles issued by the central

institution.

The centralized compliance function of the central

institution supervises that the bank complies with

applicable laws, decrees, instructions and regula-

tions issued by the authorities, their own rules and

the internal binding guidelines issued by the cen-

tral institution of the amalgamation in its activ-

ities. As the central institution, POP Bank Centre

coop supervises the sufﬁciency and functioning

of the risk management systems in all the mem-

ber credit institutions in accordance with section

17 of the Amalgamation Act. In addition, the su-

pervision of a mortgage bank takes into account

the requirements and special features of the reg-

ulation related to the mortgage banking business.

The principles, organisation and internal control

measures of amalgamation’s risk and capital ad-

equacy management are described in more detail

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

ments. Material information regarding capital ade-

quacy as speciﬁed in the Capital Requirements Reg-

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

III report. Copies of the ﬁnancial statements of the

POP Bank Group are available from the ofﬁce of the

central institution, address Hevosenkenkä 3, 02600

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

CAPITAL ADEQUACY MANAGEMENT

The objective of capital adequacy management

is to ensure that POP Mortgage Bank has an ade-

quate capital buffer to achieve its business strate-

gy and to cover the material risks arising from them

in all circumstances. In solvency management, POP

Mortgage Bank complies with the solvency man-

agement principles set by the central cooperative

of the amalgamation.

Capital adequacy management is pursued through

a systematic capital adequacy management pro-

cess that is integrally linked to the amalgama-

tion’s and other member credit institutions’ business

planning and management. As part of the capital

adequacy management process the aim is to iden-

tify all material risks and assess their magnitude

and required capital levels.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 26

Under the supervision of the central institution, POP

Mortgage Bank prepares its own capital plan and

stress tests on an annual basis using harmonized

principles deﬁned by the central institution. The pro-

cess ensures that POP Mortgage Bank’s growth,

proﬁtability and risk-bearing capacity objectives

are appropriate and consistent.

The most signiﬁcant capital requirements of POP

Mortgage Bank arise from receivables from inter-

mediary loans granted to the member banks of

the amalgamation of POP Banks. The amalga-

mation applies the standardised approach for the

calculation of the capital requirement for credit

risk, and the basic indicator approach for calcu-

lating the capital requirement to the operational

risk. POP Mortgage Bank does not engage in trad-

ing activities.

POP Mortgage Bank’s own funds consist of share

capital, retained earnings and other non-restricted

reserves, less the deductible items in accordance

with the EU’s Capital Requirements Regulation (No.

575/2013).

POP Mortgage Bank releases the essential infor-

mation in terms of capital adequacy calculation

annually as part of its Board of Directors’ report

and notes to the ﬁnancial statements.

BUSINESS RISKS

CREDIT RISK

POP Mortgage Bank’s most signiﬁcant risk is

credit and counterparty risk. Credit risk refers to

a situation in which a counterparty cannot fulﬁl

its contractual obligations. POP Mortgage Bank’s

credit risk consist of intermediary loans granted to

the member banks of the amalgamation of POP

Banks and from derivatives.

POP Mortgage Bank engages in mortgage bank

operations under an intermediary loan model es-

tablished in accordance with the Act on Mortgage

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

the bank may issue secured bonds and use the

acquired funds to offer intermediary loans to the

member banks of the amalgamation. Under the

intermediary loan model, the mortgage-backed

loans provided as collateral for secured bonds re-

main on the member banks’ balance sheets and

are not recognised on POP Mortgage Bank’s bal-

ance sheet. The risks associated with the mort-

gage-backed loans provided as collateral are not

transferred to POP Mortgage Bank. The loans are

recognised as collateral for the secured bonds is-

sued. The intermediary loans granted to mem-

ber banks are presented under “Receivables from

credit institutions” on the balance sheet.

POP Mortgage Bank is responsible for monitor-

ing the amount and adequacy of the eligible loan

portfolio in the POP Bank Group’s mortgage bank-

ing operations. The pool eligibility of collateral is

reviewed on a daily basis, based on the criteria of

the business operations and the Act on Mortgage

Credit Banks. POP Mortgage Bank has a frame-

work agreement with the member credit institu-

tions of the POP Bank Group on the issue of se-

cured bonds and the use of mortgage-backed

loans on the balance sheets of the member banks

as collateral for the bonds to be issued. Credit

decisions, credit management and collateral as-

sessment are carried out locally by the member

banks, based on the guidelines issued by the cen-

tral institution. Loan collateral is prudently valued

at fair value, and market valuations are monitored

regularly using both statistical models and good

industry knowledge. The valuation factors applied

to collateral are consistent across all the member

credit institutions of the amalgamation.

The amalgamation’s risk management and capital

adequacy management are described in more detail

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

Copies of the ﬁnancial statements of the POP Bank

Group are available online at www.poppankki.ﬁ or

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

dress Hevosenkenkä 3, 02600 Espoo, Finland.

MARKET RISKS

Market risk refers to the effect of changes in inter-

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

and capital adequacy. The market risk classes are

interest rate, currency, equity and commodity risk.

The objective of market risk management is to iden-

tify and assess market risks related to the business

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 27

operations, mitigate the risks to an acceptable level

and timely monitoring of the risk exposures. Within

the amalgamation of POP Banks, the central insti-

tution’s Board of Directors conﬁrms the market risk

strategy and market risk management guidelines,

which create the foundation for market risk man-

agement at POP Mortgage Bank.

In accordance with the Act on Mortgage Cred-

it Banks and Covered Bonds, the business of POP

Mortgage Bank is to issue euro-denominated se-

cured bonds and to grant intermediate loans to the

member credit banks of the Amalgamation of POP

Banks. POP Mortgage Bank does not have a trading

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

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

mation of POP Banks.

POP Mortgage Bank does not take stock risk, com-

modity risk or currency risk in its operations. Both

the secured bonds and intermediary loans issued

are denominated in euros. In its operations, POP

Mortgage Bank uses interest rates derivatives,

where necessary, to match the interest cash ﬂows

of issued bonds and intermediary loans to reduce

the interest rate risk.

The interest rate risk is the most signiﬁcant market

risk in POP Mortgage Bank’s business operations.

Interest rate risk refers to the effect of changes in

interest rate levels on the market value or net inter-

est income of balance sheet items and off-balance

sheet items. The banking book consists of loans

and receivables from credit institutions and mar-

ket-based ﬁnancing.

Interest rate risk arises from differences in the in-

terest terms of receivables and liabilities and mis-

matches in interest rate repricing and maturity

dates. The objective of interest rate risk manage-

ment is to stabilise the interest rate risk involved in

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

fect of open risk is minor in all circumstances and

meet the regulatory requirements set for mortgage

banks as well as stricter internal risk limits. Interest

rate risk is managed primarily by planning the bal-

ance sheet structure, such as the interest rate ﬁx-

ing or maturity of assets and liabilities or alterna-

tively by using interest rate derivatives for hedging

purposes. The information on the derivatives have

been disclosed in Note 16 derivatives and hedge

accounting.

Interest rate risk in POP Mortgage Bank is monitored

using the net present value method and the net in-

terest income model. The net present value method

measures how changes in interest rates change the

calculated market value of balance sheet items. In

the net present value method, the market values of

each balance sheet item are expected to be formed

as the present value of the cash ﬂows generated

by the instrument in question. The net interest in-

come model predicts the future net interest income

as market interest rates change. The net interest in-

come forecast is calculated at the reporting date

using forward interest rates available in the market

for the following ﬁve years. The amount of interest

rate risk taken is assessed with the effect of diverse

interest rate shocks on the net interest income and

net present value.

THE INTEREST RATE SENSITIVITY ANALYSIS OF THE BANKING BOOK

Impact to interest margin 31 Dec 2024 31 Dec 2023

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

Interest rate risk +2% -point -242 -130

Interest rate risk -2% -point 246 130

The impact of the interest rate risk on operat-

ing income has been calculated as a change to the

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

suming two percentage point upward or downward

parallel interest rate level shift. The effect on own

funds has been determined through present val-

ue change in balance sheet with the same interest

rate shocks.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 28

LIQUIDITY RISKS

Liquidity risk refers to the POP Mortgage Bank’s

ability to fulﬁl its commitments. Liquidity risk can

be divided into short-term liquidity risk and long-

term structural ﬁnancing risk. Short-term liquidity

risk refers to a situation in which the bank cannot

without difﬁculty fulﬁl its liabilities to pay. Struc-

tural ﬁnancing risk refers to a reﬁnancing risk that

arises from the difference in the maturities of bal-

ance sheet receivables and liabilities.

The central institution of amalgamation applies

a permission by the Finnish Financial Superviso-

ry Authority to decide that the requirements laid

down in the sixth part of the EU Capital Require-

ments Regulation and EU’s statutory orders based

on the Regulation are not applied to its member

credit institutions. According to the permission,

the regulatory requirements for liquidity risk are

met at the amalgamation level only. The central

credit institution, Bonum Bank Plc, is responsible

for meeting the regulatory requirements.

Bonum Bank as the central credit institution is re-

sponsible for coordinating the implementation of

the liquidity strategy at the amalgamation level,

and it monitors and supervises the liquidity strat-

egy implemented by the member credit institu-

tions. The central credit institution coordinates

the payment transactions of the member cred-

it institutions and the acquisition and balancing

of liquidity in the amalgamation. The task of the

amalgamation’s independent risk control function

is to supervise and monitor the liquidity risk.

MATURITY OF FINANCIAL LIABILITIES 31 DEC 2024

(EUR 1,000) 3-12 months 1-5 years

Total

Debt securities issued to the public

249,329 506,741 756,069

Derivatives 587 - 587

Total

249,915 506,741 756,656

MATURITY OF FINANCIAL LIABILITIES 31 DEC 2023

(EUR 1,000) 3-12 months 1-5 years

Total

Debt securities issued to the public

- 503,259 503,259

Derivatives - 2,863 2,863

Total

- 506,123 506,123

OPERATIONAL RISKS

Operational risks refer to ﬁnancial losses or oth-

er harmful consequences to business that may

be caused by internal inadequacies or errors in

systems, processes, procedures and the actions

of personnel, or by external factors affecting the

business. The operational risk of POP Mortgage

Bank also arises from outsourced operations and

major business projects.

The objective of the management of operation-

al risks is to identify essential operational risks in

the business operations and minimise their ma-

terialisation and effects. The objective is pursued

by continuous personnel development, as well as

comprehensive operating instructions and internal

control measures, such as by segregating prepa-

ration, decision-making, implementation and con-

trol from each other, whenever possible.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 29

The operational risks associated with the key

products, services, functions, processes and sys-

tems are identiﬁed in the assessment process

concerning a new product or service carried out by

the business function and reviewed by the com-

pliance and risk control function. The bank carries

out annual self-assessment of operational risks

on the basis of the risk assessments it performs, in

which the monitoring of operational risk incidents

is applied. Some of the losses caused by opera-

tional risks are hedged through insurance. Risks

caused by malfunctions of information systems

are prepared for by continuity planning.

Operational risks are monitored by collecting in-

formation on operational risk events, ﬁnancial

losses and any malpractices encountered. The ex-

ecutive management utilises reporting produced

by internal control on compliance with instructions

and information on changes in the operating envi-

ronment.

STRATEGIC RISK

Strategic risk refers to losses caused by choosing

wrong strategy or business model in relation to the

development of the bank’s operating environment.

The losses may also be caused by unsuccessful

implementation of strategy, unexpected changes

in the competitive environment or responding too

slowly to changes.

In accordance with the strategic objectives speci-

ﬁed in the business plan, POP Mortgage Bank must

be able to secure the long-term funding needed

by the banks within the amalgamation. Potential

strategic threats have been considered when esti-

mating capital needs.

POP Mortgage Bank aims to minimise strategic

risks by means of regular updates of its strategic

and annual plans. Analyses of the condition and

development of the POP Bank Group, as well as

other analyses and estimates concerning the de-

velopment of the sector, competition and ﬁnancial

operating environment are utilized in the planning.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 30

NOTE 3 INTEREST INCOME AND EXPENSES

NOTE 5 PERSONNEL EXPENSES

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Wages and salaries -18 -23

Total personnel expenses -18 -23

Personnel costs consist of administrative fees. POP Mortgage Bank has no employees.

NOTE 4 NET INCOME FROM HEDGE ACCOUNTING

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Interest income

Loans and advances to credit institutions 25,288 17,631

Total interest income* 25,288 17,631

Interest expenses

Liabilities to credit institutions -221 -20

Debt securities issued to the public -17,520 -12,964

Derivatives in hedges of liabilities* -5,826 -3,434

Total interest expenses -23,567 -16,418

Net interest income 1,721 1,212

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Change in hedging instruments' fair value 3,204 10,602

Change in hedged items' fair value -3,408 -10,777

Net income from hedge accounting -204 -176

*The presentation method for interest income from derivative contracts has been changed. For the in-

terest on derivatives, the interest from one interest rate swap will henceforth be recorded on a net basis

rather than as gross interest income and gross interest expense. A reclassiﬁcation of EUR 12,788 thou-

sand from interest income to interest expenses was made for the comparative period. The change is de-

scribed in more detail in Note 1, under Changes in presentation method.

Derivatives and hedge accounting are explained in more detail in Note 16.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 31

NOTE 6 OTHER OPERATING EXPENSES

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Purchased services -515 -514

ICT expenses -169 -266

Audit fees -18 -20

Other operating expenses -54 -34

Total other operating expenses -757 -835

Audit fees

Statutory audit -18 -20

Total audit fees -18 -20

NOTE 7 DEPRECIATION

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Intangible assets -116 -116

Total depreciation -116 -116

NOTE 8 INCOME TAX

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

the prudence principle, no deferred tax assets have been recognised for these losses. The bank has un-

used tax losses totalling EUR 1,519 (2,145) thousand after deducting the ﬁscal year’s result, of which EUR

140 thousand will expire in 2031 and EUR 1,379 thousand in 2032.

RECONCILIATION BETWEEN TAX EXPENSE IN THE INCOME STATEMENT AND TAX EXPENSE

CALCULATED USING THE APPLICABLE TAX RATE

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan- 31 Dec 2023

Proﬁt before tax 626 63

Income tax rate 20 % 20 %

Tax calculated at the tax rate -125 -13

+ Use of tax losses carried forward from previous

years

125 13

Tax expense in the income statement - -

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 32

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Financial assets

At amortised cost

Interest income and expenses 25,288 17,631

Total 25,288 17,631

NOTE 9 NET INCOME AND EXPENSES OF FINANCIAL ASSETS AND

FINANCIAL LIABILITIES BY MEASUREMENT CATEGORY

(EUR 1,000) 1 Jan - 31 Dec 2024 1 Jan - 31 Dec 2023

Financial liabilities

At amortised cost

Interest income and expenses -17,741 -12,984

Total -17,741 -12,984

At fair value through proﬁt or loss

Derivatives and hedge accounting

Fair value gains and losses -204 -176

Interest income and expenses -5,826 -3,434

Total -6,030 -3,610

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 33

NOTE 10 CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

FINANCIAL ASSETS 31 DEC 2024

(EUR 1,000)

Measured at

amortised cost

Hedging

derivatives

Total

carrying

amount

Loans and advances to credit institutions

779,737 - 779,737

Derivative contracts - 7,872 7,872

Financial assets total 779,737 7,872 787,609

Other assets 10,645

Total assets 31 Dec 2024 798,254

FINANCIAL ASSETS 31 DEC 2023

(EUR 1,000)

Measured at

amortised cost

Hedging

derivatives

Total

carrying

amount

Loans and advances to credit institutions

526,280 - 526,280

Derivative contracts - 6,945 6,945

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

Other assets 11,085

Total assets 31 Dec 2023 544,310

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 34

FINANCIAL LIABILITIES 31 DEC 2024

(EUR 1,000)

Measured at

amortised cost

Hedging

derivatives

Total

carrying

amount

Liabilities to credit institutions 13,440 - 13,440

Debt securities issued to the public 756,069 - 756,069

Derivative contracts - 587 587

Financial liabilities total 769,509 587 770,096

Other liabilities 10,677

Total liabilities 31 Dec 2024 780,773

FINANCIAL LIABILITIES 31 DEC 2023

(EUR 1,000)

Measured at

amortised cost

Hedging

derivatives

Total

carrying

amount

Liabilities to credit institutions 10,650 - 10,650

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

Derivative contracts - 2,863 2,863

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

Other liabilities 10,682

Total liabilities 31 Dec 2023 527,455

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 35

NOTE 11 FAIR VALUES AND VALUATION TECHNIQUES OF FINANCIAL

ASSETS AND FINANCIAL LIABILITIES

FINANCIAL ASSETS MEASURED AT FAIR VALUE 31 DEC 2024

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

Total fair

value

Carrying

amount

Derivatives - 7,872 - 7,872 7,872

Total - 7,872 - 7,872 7,872

FINANCIAL LIABILITIES MEASURED AT FAIR VALUE 31 DEC 2024

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

Total fair

value

Carrying

amount

Derivatives - 587 - 587 587

Total - 587 - 587 587

FINANCIAL LIABILITIES MEASURED AT FAIR VALUE 31 DEC 2023

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

Total fair

value

Carrying

amount

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

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

FINANCIAL ASSETS MEASURED AT FAIR VALUE 31 DEC 2023

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

Total fair

value

Carrying

amount

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

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

FAIR VALUE HIERARCHY LEVELS OF ITEMS RECURRENTLY RECOGNISED AT FAIR VALUE

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 36

ASSETS MEASURED AT AMORTISED COST 31 DEC 2024

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

Total fair

value

Carrying

amount

Loans and advances to

credit institutions

- 801,317 - 801,317 779,737

Total - 801,317 - 801,317 779,737

LIABILITIES MEASURED AT AMORTISED COST 31 DEC 2024

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

Total fair

value

Carrying

amount

Debt securities issued

to the public

- 767,622 - 767,622 756,069

Total - 767,622 - 767,622 756,069

ASSETS MEASURED AT AMORTISED COST 31 DEC 2023

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

Total fair

value

Carrying

amount

Loans and advances to

credit institutions

- 539,417 - 539,417 526,280

Total - 539,417 - 539,417 526,280

LIABILITIES MEASURED AT AMORTISED COST 31 DEC 2023

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

Total fair

value

Carrying

amount

Debt securities issued

to the public

- 502,871 - 502,871 503,259

Total - 502,871 - 502,871 503,259

FAIR VALUE HIERARCHY LEVELS OF ITEMS RECOGNISED AT AMORTISED COST

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 37

FAIR VALUE DETERMINATION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

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

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

FAIR VALUE HIERARCHIES

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

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

rities with publicly quoted prices.

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

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

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

market quotation of components of an instrument. This group includes, among other things, interest rate

derivatives, including interest rate swaps, as well as other instruments not traded in liquid markets. The

valuation methods for these instruments are based on generally accepted calculation models.

Level 3 includes ﬁnancial instruments and other assets that are not measured using market quotations

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

els. The assumptions applied in the measurement techniques often involve insecurity. The fair value of

assets allocated to Level 3 is often based on price information obtained from a third party.

TRANSFERS BETWEEN FAIR VALUE HIERARCHY LEVELS

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

the event that caused the transfer or the date when the circumstances changed. There were no transfers

between levels during the reporting period.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 38

NOTE 12 LOANS AND RECEIVABLES FROM CREDIT INSTITUTIONS

NOTE 13 INTANGIBLE ASSETS

CHANGES IN INTANGIBLE ASSETS 2024

(EUR 1,000)

Information

systems

Incomplete

intangible

assets

Total

Acquisition cost 1 Jan 582 - 582

Acquisition cost 31 Dec 582 - 582

Accumulated depreciation 1 Jan -184 - -184

- Depreciation -116 - -116

Accumulated depreciation 31 Dec -301 - -301

Carrying amount 1 Jan 398 - 398

Carrying amount 31 Dec 281 - 281

CHANGES IN INTANGIBLE ASSETS 2023

(EUR 1,000)

Information

systems

Incomplete

intangible

assets

Total

Acquisition cost 1 Jan 582 - 582

Acquisition cost 31 Dec 582 - 582

Accumulated depreciation 1 Jan -68 - -68

- Depreciation -116 - -116

Accumulated depreciation 31 Dec -184 - -184

Carrying amount 1 Jan 514 - 514

Carrying amount 31 Dec 398 - 398

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Deposits

Repayable on demand 29,737 13,080

Other - 13,200

Intermediary loans 750,000 500,000

Total 779,737 526,280

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 39

NOTE 14 OTHER ASSETS

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Accrued income and prepaid expenses

Interest 10,291 10,602

Other 72 86

Other assets total 10,363 10,687

NOTE 15 DEBT SECURITIES ISSUED TO THE PUBLIC

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Covered bonds 756,069 503,259

Total debt securities issued to the public 756,069 503,259

Bond Issue date Due date Interest Nominal Currency

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

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

Issued during the ﬁnancial year

POPA 15102029 15 Oct 2024 15 Oct 2029 2,875% / ﬁxed 250,000 EUR

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

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Balance sheet 1 Jan 503,259 243,038

Increase of bonds 249,048 249,203

Total changes of cash ﬂow of ﬁnancial activities 249,04 8 249,203

Valuations and accrued interests 3,762 11,019

Balance sheet 31 Dec 756,069 503,259

DEBT SECURITIES PRESENTED IN CASH FLOW RECONCILIATION TO BALANCE SHEET

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 40

NOTE 16 DERIVATIVES AND HEDGE ACCOUNTING

POP Mortgage bank hedges its interest rate risk against fair value changes primarily using interest rate

swaps. With interest rate swaps, the interest rates of variable-rate intermediate loans and ﬁxed-rate is-

sued bonds are swapped to the same interest basis. The hedged items are ﬁxed-rate bonds. As a result

of the hedging, changes in market interest rates have a minimal impact on net interest income.

Fair value 31 Dec 2024 Fair value 31 Dec 2023

(EUR 1,000) Assets Liabilities Assets Liabilities

Derivatives

Fair value hedging 7,872 587 6,945 2,863

Derivatives total 7,872 587 6,945 2,863

Interest rate risk 31 Dec 2024 Interest rate risk 31 Dec 2023

(EUR 1,000)

Carrying

amount of

hedged

liabilities

Of which

accumulated

amount of fair

value hedge

adjustment

Carrying

amount of

hedged

liabilities

Of which

accumulated

amount of fair

value hedge

adjustment

Micro hedge

Hedged publicly

issued bonds

756,069 7,734 503,259 4,326

Total 756,069 7,734 503,259 4,326

DERIVATIVES AND HEDGED ITEMS COVERED BY HEDGE ACCOUNTING

EFFECTS OF HEDGE ACCOUNTING ON FINANCIAL POSITION AND RESULT

HEDGING INTEREST RATE DERIVATIVES

FAIR VALUE HEDGE

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

was EUR 750 (500) million. This item is included on the balance sheet under “Debt securities issued to

the public”. The nominal values of derivative instruments correspond to the nominal values of the objects

to be hedged.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 41

31 Dec 2024 Nominal value / Remaining maturity

(EUR 1,000)

Less than

1 year 1-5 years

More than

5 years Total

Instruments hedging

interest rate risk

250,000 500,000 - 750,000

31 Dec 2023 Nominal value / Remaining maturity

(EUR 1,000)

Less than

1 year 1-5 years

More than

5 years Total

Instruments hedging

interest rate risk

- 500,000 - 500,000

Interest rate risk

Fair value hedging

(EUR 1,000) 1.1.-31.12.2024 1.1.-31.12.2023

Change in the fair value of the derivative contract 3,204 10,602

Change in the fair value of the hedged item -3,408 -10,777

Hedge ineffectiveness recognised in the income

statement

-204 -176

HEDGE ACCOUNTING GAINS AND LOSSES AND HEDGE INEFFECTIVENESS

MATURITY PROFILE OF THE NOMINAL AMOUNT OF HEDGING INTEREST RATE RISK

The maturities of the hedged items fully correspond to the maturities of the hedging contracts.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 42

NOTE 17 OFFSETTING

31 DEC 2024

Amounts which are not offset but are

subject to enforceable master netting

arrangements or similar agreements

(EUR 1,000)

Recognised

financial

assets,

gross

Recognised

financial

liabilities

offset in

balance

sheet, gross

Carrying

amount in

balance

sheet, net

Enforceable

master

netting

arrangement

Financial

instruments

held as

collateral

Cash

held as

collateral Net amount

Assets

Derivatives 14,172 - 14,172 1,086 13,440 - -

Total 14,172 - 14,172 1,086 13,440 - -

Liabilities

Derivatives 1,086 - 1,086 1,086 - - -

Total 1,086 - 1,086 1,086 - - -

31 DEC 2023

Amounts which are not offset but are

subject to enforceable master netting

arrangements or similar agreements

(EUR 1,000)

Recognised

financial

assets,

gross

Recognised

financial

liabilities

offset in

balance

sheet, gross

Carrying

amount in

balance

sheet, net

Enforceable

master

netting

arrangement

Financial

instruments

held as col-

lateral

Cash

held as

collateral Net amount

Assets

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

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

Liabilities

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

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

OFFSETTING OF FINANCIAL ASSETS AND LIABILITIES

The table below presents items that, in certain circumstances, can be settled on a net basis, even though

they are presented on a gross basis in the balance sheet. The netting arrangement is based on a mutu-

ally enforceable general netting agreement (ISDA).

The total in the Net amount column of the table does not equal the sum of the preceding columns due

to differences between the valuation and collateral review dates. The collateral is determined such that,

at the time of the review, the collateral received fully neutralises the counterparty risk.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 43

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Accrued expenses

Interest payable -9,995 -10,314

Other accrued expenses -681 -368

Total provisions and other liabilities

-10,677 -10,682

NOTE 18 PROVISIONS AND OTHER LIABILITIES

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Share capital 10,000 10,000

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

Retained earnings

Proﬁt (loss) for previous ﬁnancial years -2,145 -2,207

Proﬁt (loss) for the period 626 63

Total equity 17,481 16,855

NOTE 19 EQUITY CAPITAL

SHARE CAPITAL

POP Mortgage Bank has one class of shares, and

each share has one vote and equal rights to div-

idend. Shares have no nominal value. All issued

shares have been fully paid. The total number of

shares issued is 500.

There are no restrictions on the use of equity

items.

The share subscription price received in connec-

tion with the share issues is entered in share cap-

ital to the extent that it has not been recorded in

the invested unrestricted equity reserve according

to the share issue decision.

INVESTED UNRESTRICTED EQUITY RESERVE

The invested unrestricted equity reserve includes

the subscription price of shares to the extent that

it has not been recorded in share capital accord-

ing to speciﬁc resolution.

RETAINED EARNINGS

Retained earnings are earnings accrued in previ-

ous ﬁnancial years that have not been transferred

to equity reserves or distributed to shareholders.

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 44

NOTE 20 COLLATERAL GIVEN AND RECEIVED

NOTE 21 DISTRIBUTABLE FUNDS

DISTRIBUTABLE FUNDS

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Proﬁt (loss) for the period 626 63

Proﬁt (loss) for previous ﬁnancial years -2,145 -2,207

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

Distributable funds total 7,481 6,855

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Given on behalf of own liabilities and commitments

Mortgage-backed loan portfolio* 1,028,621 682,731

Total collateral given 1,028,621 682,731

Collateral received

Collateral received from member banks of POP Bank

amalgamation*

1,022,621 676,731

Other 13,240 10,650

Total collateral received 1,035,861 687,381

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

EUR 1.5 billion issuance programme as well as the interim loans based on it. The collateral given and re-

ceived consists of loans secured by real estate.

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

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 45

NOTE 22 RELATED PARTY DISCLOSURES

The related parties of POP Mortgage Bank comprise the members of the company’s Board of Directors

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

Mortgage Bank’s parent entity POP Bank Centre coop, as well as its managing director and deputy man-

aging director. Furthermore, related parties include those entities over which key persons included in the

management and/or members of their immediate families have control or joint control. The related parties

also include the entities belonging to the POP Bank Centre Group, speciﬁcally POP Bank Centre coop

and Bonum Bank Plc.

NOTE 23 EVENTS AFTER THE CLOSING DATE

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

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

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Assets

Loans 29,733 20,630

Liabilities

Debt securities issued to the public 8,000 8,000

Income statement

Income statement 535 145

Other operating expenses 186 171

BUSINESS TRANSACTIONS WITH RELATED PARTY COMPANIES

Salaries and remuneration

(EUR 1,000) 31 Dec 2024 31 Dec 2023

Juha Niemelä, Chairman of the Board 6 8

Matti Vainionpää, Vice Chairman of the Board 6 8

Marja Pajulahti, Member of the Board 6 8

Total 18 23

COMPENSATION TO MEMMBERS OF THE BOARD

POP Mortgage Bank Plc Board of directors’ report and

ﬁnancial statements 1 January - 31 December 2024

FINANCIAL STATEMENT 46

The ﬁnancial statements, prepared in compliance with the applicable ﬁnancial statement framework

give a true and fair view of POP Mortgage Bank’s assets, liabilities, ﬁnancial position, and proﬁt or loss.

The Board of Directors’ report contains an account giving a true view of the business development and

performance of the POP Mortgage Bank, as well as a description of the most signiﬁcant risks, uncertain-

ties, and other relevant aspects of the company’s status.

Espoo 14 February 2025

Board of Directors of POP Mortgage Bank

Auditor’s note

A report on the audit performed has been issued today.

Espoo 14 February 2025

KPMG Oy Ab

Tiia Kataja

APA

SIGNATURES

Juha Niemelä

Chairman of the Board

Marja Pajulahti

Member of the Board

Timo Hulkko

CEO

Matti Vainionpää

Vice Chairman of the Board

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

AUDITOR’S REPORT

To the Annual General Meeting of POP Mortgage

Bank Plc

REPORT ON THE AUDIT OF THE FINANCIAL

STATEMENTS

OPINION

We have audited the ﬁnancial statements of

POP Mortgage Bank Plc (business identity code

3236645-3) for the year ended 31 December 2024.

The ﬁnancial statements comprise balance sheet,

income statement, statement of changes in equi-

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

terial accounting policy information.

In our opinion the ﬁnancial statements give a true

and fair view of the bank’s ﬁnancial performance,

ﬁnancial position and cash ﬂows in accordance

with IFRS Accounting Standards as adopted by

the EU and comply with statutory requirements.

Our opinion is consistent with the additional re-

port submitted to the Board of Directors.

BASIS FOR OPINION

We conducted our audit in accordance with good

auditing practice in Finland. Our responsibilities

under good auditing practice are further described

in the Auditor’s Responsibilities for the Audit of the

Financial Statements section of our report.

We are independent of the company in accord-

ance with the ethical requirements that are appli-

cable in Finland and are relevant to our audit, and

we have fulﬁlled our other ethical responsibilities

in accordance with these requirements.

We have not provided any non-audit services to

the POP Mortgage Bank Plc.

We believe that the audit evidence we have ob-

tained is sufﬁcient and appropriate to provide a

basis for our opinion.

MATERIALITY

The scope of our audit was inﬂuenced by our ap-

plication of materiality. The materiality is deter-

mined based on our professional judgement and

is used to determine the nature, timing and extent

of our audit procedures and to evaluate the effect

of identiﬁed misstatements on the ﬁnancial state-

ments as a whole. The level of materiality we set

is based on our assessment of the magnitude of

misstatements that, individually or in aggregate,

could reasonably be expected to have inﬂuence on

the economic decisions of the users of the ﬁnan-

cial statements. We have also taken into account

misstatements and/or possible misstatements

that in our opinion are material for qualitative rea-

sons for the users of the ﬁnancial statements.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our

professional judgment, were of most signiﬁcance

in our audit of the ﬁnancial statements of the cur-

rent period. These matters were addressed in the

context of our audit of the ﬁnancial statements as

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

do not provide a separate opinion on these mat-

ters. The signiﬁcant risks of material misstatement

referred to in the EU Regulation No 537/2014 point

of key audit matters below.

We have also addressed the risk of management

override of internal controls. This includes consid-

eration of whether there was evidence of man-

agement bias that represented a risk of material

misstatement due to fraud.

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

port is legally binding.

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

THE KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED IN THE

AUDIT

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

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

● Receivables from credit institutions, EUR

780 million, and Debt securities issued to

the public, EUR 756 million, are signiﬁcant

items on the POP Mortgage Bank’s balance

sheet. Receivables from credit institutions

mainly include intermediary loans issued to

POP Bank Group’s member banks, and Debt

securities issued to the public comprise

covered bonds.

● In the intermediary loan model, POP Mort-

gage Bank issues covered bonds and pro-

vides POP banks with intermediary loans

against property mortgages. The mort-

gage-backed loans included in the cover

pool constituting the collateral for the cov-

ered bonds are recorded on the balance

sheets of POP banks.

● POP Mortgage Bank manages the bond

also collaterals given and received, as well

as intermediary loans. The company is re-

sponsible for ensuring that the collaterals

comply with the regulatory requirements at

all times.

● Due to the signiﬁcance of the carrying

amounts of Receivables from credit institu-

tions and Debt securities issued to the pub-

lic, the regulatory requirements for the in-

termediary loan process, Receivables from

credit institutions and Debt securities is-

sued to the public are addressed as a key

audit matter.

● We evaluated the intermediary loan process

of POP Mortgage Bank, including provision

of loans to POP banks, collateral manage-

ment for intermediary loans (cover pool) and

bond register management.

● We gained an understanding of POP Bank

Centre coop’s control environment for the

centralised lending process regarding POP

banks by performing centralised audit pro-

cedures.

● The main areas of the audit were the as-

sessment of the monitoring process of col-

lateral valuations for covered bonds using

data analyses, and inspection of intermedi-

ary loan contracts on a sample basis.

● Furthermore, we considered the appropri-

ateness of the notes provided by POP Mort-

gage Bank in respect of Receivables from

credit institutions and Debt securities is-

sued to the public.

RESPONSIBILITIES OF THE BOARD OF

DIRECTORS AND THE MANAGING DIRECTOR

FOR THE FINANCIAL STATEMENTS

The Board of Directors and the Managing Direc-

tor are responsible for the preparation of ﬁnan-

cial statements that give a true and fair view in

accordance with IFRS Accounting Standards as

adopted by the EU and that ﬁnancial statements

comply with statutory requirements. The Board of

Directors and the Managing Director are also re-

sponsible for such internal control as they deter-

mine is necessary to enable the preparation of ﬁ-

nancial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the ﬁnancial statements, the Board of

Directors and the Managing Director are responsi-

ble for assessing the company’s ability to continue

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

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

ters relating to going concern and using the going

concern basis of accounting. The ﬁnancial state-

ments are prepared using the going concern basis

of accounting unless there is an intention to liqui-

date the company or cease operations, or there is

no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT

OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance

about whether the ﬁnancial statements as a whole

are free from material misstatement, whether due

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

that includes our opinion. Reasonable assurance is

a high level of assurance, but is not a guarantee

that an audit conducted in accordance with good

auditing practice will always detect a material

misstatement when it exists. Misstatements can

arise from fraud or error and are considered ma-

terial if, individually or in the aggregate, they could

reasonably be expected to inﬂuence the economic

decisions of users taken on the basis of the ﬁnan-

cial statements.

As part of an audit in accordance with good au-

diting practice, we exercise professional judgment

and maintain professional skepticism throughout

the audit. We also:

● Identify and assess the risks of material mis-

statement of the ﬁnancial statements, wheth-

er due to fraud or error, design and perform

audit procedures responsive to those risks,

and obtain audit evidence that is sufﬁcient

and appropriate to provide a basis for our

opinion. The risk of not detecting a materi-

al misstatement resulting from fraud is higher

than for one resulting from error, as fraud may

involve collusion, forgery, intentional omis-

sions, misrepresentations, or the override of

internal control.

● Obtain an understanding of internal control

relevant to the audit in order to design audit

procedures that are appropriate in the cir-

cumstances, but not for the purpose of ex-

pressing an opinion on the effectiveness of

the company’s internal control.

● Evaluate the appropriateness of accounting

policies used and the reasonableness of ac-

counting estimates and related disclosures

made by management.

● Conclude on the appropriateness of the Board

of Directors’ and the Managing Director’s use

of the going concern basis of accounting and

based on the audit evidence obtained, wheth-

er a material uncertainty exists related to

events or conditions that may cast signiﬁcant

doubt on the company’s ability to continue as

a going concern. If we conclude that a mate-

rial uncertainty exists, we are required to draw

attention in our auditor’s report to the relat-

ed disclosures in the ﬁnancial statements or,

if such disclosures are inadequate, to modi-

fy our opinion. Our conclusions are based on

the audit evidence obtained up to the date of

our auditor’s report. However, future events or

conditions may cause the company to cease

to continue as a going concern.

● Evaluate the overall presentation, structure

and content of the ﬁnancial statements, in-

cluding the disclosures, and whether the ﬁ-

nancial statements represent the underlying

transactions and events so that the ﬁnancial

statements give a true and fair view.

We communicate with those charged with govern-

ance regarding, among other matters, the planned

scope and timing of the audit and signiﬁcant au-

dit ﬁndings, including any signiﬁcant deﬁciencies

in internal control that we identify during our audit.

We also provide those charged with governance

with a statement that we have complied with rele-

vant ethical requirements regarding independence,

and communicate with them all relationships and

other matters that may reasonably be thought to

bear on our independence, and where applicable,

related safeguards.

From the matters communicated with those

charged with governance, we determine those

matters that were of most signiﬁcance in the au-

dit of the ﬁnancial statements of the current pe-

riod and are therefore the key audit matters. We

describe these matters in our auditor’s report un-

less law or regulation precludes public disclosure

about the matter or when, in extremely rare cir-

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

cumstances, we determine that a matter should

not be communicated in our report because the

adverse consequences of doing so would reason-

ably be expected to outweigh the public interest

beneﬁts of such communication.

OTHER REPORTING REQUIREMENTS

INFORMATION ON OUR AUDIT ENGAGEMENT

We were ﬁrst appointed as auditors by the Annu-

al General Meeting in 2021 and our appointment

represents a total period of uninterrupted engage-

ment of 4 years.

OTHER INFORMATION

The Board of Directors and the Managing Director

are responsible for the other information. The oth-

er information comprises the report of the Board

of Directors.

Our opinion on the ﬁnancial statements does not

cover the other information.

In connection with our audit of the ﬁnancial state-

ments, our responsibility is to read the other infor-

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

er information is materially inconsistent with the

ﬁnancial statements or our knowledge obtained

in the audit, or otherwise appears to be materially

misstated. Our responsibility also includes consid-

ering whether the report of the Board of Directors

has been prepared in compliance with the appli-

cable provisions.

In our opinion, the information in the report of the

Board of Directors is consistent with the informa-

tion in the ﬁnancial statements and the report of

the Board of Directors has been prepared in com-

pliance with the applicable provisions.

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

clude that there is a material misstatement of the

report of the Board of Directors, we are required to

report that fact. We have nothing to report in this

regard.

Helsinki, 14 February 2025

KPMG OY AB

Tiia Kataja

Authorised Public Accountant, KHT

INDEPENDENT AUDITOR’S REPORT ON THE ESEF FINANCIAL

STATEMENTS OF POP MORTGAGE BANK PLC

To the Board of Directors of POP Mortgage Bank

Plc

We have performed a reasonable assur-

ance engagement on the ﬁnancial statements

743700I7HTCNLUBZTZ74-2024-12-31-0-eng.html

of POP Mortgage Bank Plc (Business ID 3236645-

3) that have been prepared in accordance with the

Commission’s regulatory technical standard for the

ﬁnancial year ended 31.12.2024.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS

AND THE MANAGING DIRECTOR

The Board of Directors and the Managing Direc-

tor are responsible for the preparation of the com-

pany’s report of the Board of Directors and ﬁnan-

cial statements (the ESEF ﬁnancial statements) in

such a way that they comply with the requirements

of the Commission’s regulatory technical standard.

This responsibility includes:

● preparing the ESEF ﬁnancial statements in

XHTML format in accordance with Article 3 of

the Commission’s regulatory technical standard

and

● ensuring the consistency between the ESEF ﬁ-

nancial statements and the audited ﬁnancial

statements.

The Board of Directors and the Managing Director

are also responsible for such internal control as they

determine is necessary to enable the preparation of

ESEF ﬁnancial statements in accordance with the

requirements of the Commission’s regulatory tech-

nical standard.

AUDITOR’S INDEPENDENCE AND QUALITY

MANAGEMENT

We are independent of the company in accord-

ance with the ethical requirements that are appli-

cable in Finland and are relevant to the engagement

we have performed, and we have fulﬁlled our other

ethical responsibilities in accordance with these re-

quirements.

The auditor applies International Standard on Qual-

ity Management (ISQM) 1, which requires the ﬁrm to

design, implement and operate a system of quali-

ty management including policies or procedures re-

garding compliance with ethical requirements, pro-

fessional standards and applicable legal and regu-

latory requirements.

AUDITOR’S RESPONSIBILITIES

Our responsibility is to, in accordance with Chapter

7, Section 8 of the Securities Markets Act, provide

assurance on the ﬁnancial statements that have

been prepared in accordance with the Commission’s

regulatory technical standard.

Our responsibility is to indicate in our opinion to

what extent the assurance has been provided. We

conducted a reasonable assurance engagement in

accordance with International Standard on Assur-

ance Engagements (ISAE) 3000.

The engagement includes procedures to obtain ev-

idence on:

● whether the ﬁnancial statements that are in-

cluded in the ESEF ﬁnancial statements are, in

all material respects, in accordance with the

requirements of Article 4 of the Commission’s

regulatory technical standard and

● whether there is consistency between the ESEF

ﬁnancial statements and the audited ﬁnancial

statements.

The nature, timing and extent of the selected pro-

cedures depend on the auditor’s judgment. This in-

cludes an assessment of the risk of a material devi-

ation due to fraud or error from the requirements of

the Commission’s regulatory technical standard.

We believe that the evidence we have obtained is

sufﬁcient and appropriate to provide a basis for our

opinion.

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024

OPINION

Our opinion pursuant to Chapter 7, Section 8 of

the Securities Markets Act is that the company’s

ﬁnancial statements that are included in the ESEF

ﬁnancial statements of POP Mortgage Bank Plc

743700I7HTCNLUBZTZ74-2024-12-31-0-eng.html

for the ﬁnancial year ended 31.12.2024 have been

prepared, in all material respects, in accordance

with the requirements of the Commission’s regula-

tory technical standard.

Our opinion on the audit of the ﬁnancial state-

ments of POP Mortgage Bank Plc for the ﬁnancial

year ended 31.12.2024 has been expressed in our

auditor’s report dated 14.2.2025. With this report

we do not express an opinion on the audit of the

ﬁnancial statements nor express another assur-

ance conclusion.

Helsinki 13 March 2025

KPMG OY AB

Tiia Kataja

Authorised Public Accountant, KHT

POP Mortgage Bank Plc Board of directors’ report and ﬁnancial statements 1 January - 31 December 2024