Interim report as of 31 March 2020€¦ · over e-mail, and Digipost), deferred invoice/pay later, accounts, and card payments. Check-out options include plugins for web shopping

1

Interim report as of 31 March 2020

2


THE BOARD'S REPORT

Letter from the CEO

Optin Bank is still in a start-up phase, and we’re on our way to prove our concept, which we strongly believe in.

We’ve created a highly flexible platform that can be integrated with any transaction or payment solution, which is

a major improvement from the first draft.

In the end of Q1 many things changed for many people due to the corona virus. The highest priority for everyone

is to save lives and follow the advice given from the government and official bodies. The consequences of

“shutting down Norway” are severe, both for businesses and their employees. To reduce the spread of corona,

we decided on March 11 to establish Optin Bank from home offices. It only took a few hours before we were fully

operational again. Most employees are working from home, and operationally, the current situation is not an

operational challenge for us. We use digital platforms and have frequent meetings and are going full steam

ahead with great technology that allows us to operate the new normal.

We have in strategic partnerships with others developed a technological platform enabling us to offer a

contactless payment solution for every kind of payment platform. The solution, Optin Pay, can be integrated in

every any order platform, as well as mobile and web-based solutions. It is highly flexible and can be offered both

with the partner’s own brand, or as OptinPay. We can offer payment alternatives like invoices, deferred invoice,

accounts, card payments and VIPPS. Payment through cards and VIPPS is handled through our partnership

with Bambora. We also offer contactless InStore solutions, which can lead to major operational savings and a

much better customer experience, by moving the payment from a physical terminal to the customer’s phone.

This is done by integrating our solution with the partner’s backend or order platform.

The demand for payment solutions and contactless payments is increasing and will lead to permanent changes

in how we sell goods and services in the future. Optin Bank is in an optimal position and will be able to

contribute to secure and convenient payment solutions, to increase production and commerce, but also offer

liquidity to our partners which will be critical to get the wheels turning in Norway again.

The developments in Q4 and in Q1 makes me very optimistic for 2020 with a promise for a prosperous 2020.

We continue to build a solid foundation for Optin Bank to address the opportunities generated and the team will

continue to onboard new partners and delivering outstanding technical developments, combined with massive

progression operationally.

As we are heading into the next quarter in 2020, I am confident that we have built a solid platform and

foundation with our team, processes, and tech base. All in all, the bank is geared for profitable growth, clearly

positioned to the next level of open banking and through adding substantial value in a larger ecosystem.

Harald Dahl Pedersen

CEO

3


THE BOARD'S REPORT

Key developments

Strengthening of competence in sales and technology,

process and project management.

Very good traction in sales and signing commercial

agreement with partners, sectors and online

merchant.

New partnerships for domestic, Nordic and

international expansion.

Continuous technological development on our

platform.

Optimization of commercial and operational processes

to increase speed of onboarding partners.

Operational developments

The bank continues to strengthen its partner base with

several signings in the service sector. We will

continue to sign agreements with dentist clinics in Q2

on OptinPay. The agreement is significant from a

volume perspective as well as a strategic perspective

due to the potential volume, target market potential,

and the level of integration.

Volume wise, Opus Dental aggregates a total of

+1500 dental clinics in Norway alone, and taps into a

transaction volume of approximately NOK 20 billion.

While the competition in this sector is fierce, the

integration with Opus Dental offers functionality

unique to OptinPay.

The Opus agreement marked a milestone in

integration as the solutions on both sides are

developed with new functionality to provide a better

and more competitive offering for the operations of the

dental health clinics.

The agreement with Bambora to integrate Credit,

Debit card and Vipps payments into the

check-out solution is set and in production. With

Bambora onboard, OptinPay now offers full spectrum

payment options with invoice (Paper, eFaktura, PDF

over e-mail, and Digipost), deferred invoice/pay later,

accounts, and card payments. Check-out options

include plugins for web shopping platforms, combined

with a strong, open and flexible API allowing the bank

to tap into literally every kind of payment transaction in

existence. Q4 also saw the birth of a mobile check-out

solution capable of supporting Level 3 security for

sensitive data distribution.

Besides Opus Dental, the bank showed strong

commercial traction with signed agreements with 35

new merchants, representing an addressable

business volume in the upper range of NOK 250

Million. The partner mix is showing success in three

key markets: a) services, b) product sales with

medium ticket sizes, and c) system providers / re-

sellers delivering solutions to the eCommerce space,

bundling OptinPay with the delivery.

Financial information

The loan portfolio at the end of Q1 2020 was NOK

183 million. Deposits from customers amounted to

NOK 359 million at the end of Q1 2020.

The total assets amounted to NOK 449 million, and

cash equivalents in the form of bank deposits and the

interest-bearing securities amounted to NOK 225

million.

Optin Bank had a core capital adequacy ratio of 24,88

per cent at the end of Q1 2020.

Profit after tax for the first quarter of 2020 is NOK –

13.7 million.

Net interest income amounted to NOK 3,7 million in

the first quarter of 2020.

4


THE BOARD'S REPORT

Net commission costs in the fourth quarter amounted to

NOK 1.8 million and are mainly related to agent

commissions for loan brokerage.

Operating expenses in Q1 2020 were NOK 11,6 million.

Rental costs are booked as depreciation an

accordance with IFRS 16 for 2020.

Optin Bank ASA has had NOK 12,6 million in overdue

commitments over 90 days as of March 31, 2020.

Although the full effect of COVID-19 is not yet

identified, we believe that the current IFRS-9 model

quickly will identify and adjust loan losses according to

the credit quality in the portfolio. Due to the moderate

loan balance the model is based on current

delinquency status, and loan loss provisions will

increase as soon as a customer skips payment.

History dictates that the share of consumer loan

customers defaulting decreases after twelve months.

More than 80 % of the current healthy balance origin

from loans paid out more than one year ago, and 97 %

of the balance was paid out more than 9 months ago.

As a result of the consumer loans portfolio being of

mature age, Optin expect the proportion of customers

defaulting to continue to decline over the coming

months.

As a result, Optin have not made any adjustments to

the values used in the IFRS9 model for the first quarter.

We believe that the uncertainty around COVID-19

effect are handled as a combination of having a

conservative model and the portfolio in general getting

better over time as the high-risk customers has already

defaulted.

The bank has a conservative approach to expected

cash flow from commitments maturing over 90 days

and offsetting between 60 and 100 percent of principal

for anticipated losses. Loss provisions in Q1 2020

amounted to NOK 4,8.

Future development

Together, we’re now going to determine our focus

areas for 2020, considering everything that is

happening. We keep strengthening the organization

within technology, development and sales, while

content and quality of communication will also be a

priority for us. This is crucial for our customers, but

also, for ourselves in acquiring more customers,

attractive partnerships, and in securing capital so we

can keep supporting the growth ahead of us. Optin

has a capital light business model, but like everyone

else, we must ensure that we allocate our available

capital to where it’s most effective, and this will be a

guiding principle for Optin in 2020.

Our main focus the last quarters has been to

onboard new partners on our solution and

developing the payment functionality and our

platform. We now have a product that can handle

any transaction, contactless and in every sector,

and we can offer our product to a lot more segments

than strictly ecommerce. This effort has materialized

in a product that’s easy to sell, something our new

partners can confirm.

We’ve been able to achieve this because we’ve had

a close dialogue with our partners, listened to their

needs, as well as analyzing what the market wants.

Due to the good inhouse competence on the Tech

side, we have created a very flexible platform,

enabling us to be ready for the massive changes

that are developing within payment solutions. Thus,

we’ve created an API that is highly dynamic, and

fully in line with our partner strategy. Our focus is to

deliver a solution that our partners say they need,

not just what we think but what they require. We

strongly insist that our partners own the customers

and the sales process, and we’ll deliver the

functionality the customers see that they have.

Obviously, this often vary a lot, and with the solution

we now have, we can cater for most payment

processes, all depending on what the customer

wants.

5


THE BOARD'S REPORT

About Optin Bank ASA

Optin Bank ASA is a FinTech scale-up in the eCommerce space, offering services in the payments and

financial transactions segment, combined with a savings accounts product at very competitive interest rates.

Optin Bank ASA was converted from Optin Prosjekt AS August 22nd, 2017. The company was granted a

banking license by the Norwegian Financial Supervisory Authority on September 8th, 2017. Optin Bank ASA

is mainly owned by Norwegian investors. The bank has a business office in Munkedamsveien 53B in Oslo.

Optin Bank is a member of the Banks' Guarantee Fund and all customers` deposits up to NOK 2 million are

secured with a deposit guarantee.

Our eCommerce platform has been developed together with market leading players such as Aptic, Flowize,

Fair Group and Bambora .

Together with these partners we offer an end to end solution for payments ranging from checkout to

collections. Payment options in the web and mobile checkout includes Invoices, Deferred invoices, Accounts,

Cards, and VIPPS. The Card and VIPPS settlements are executed through the partnership with Bambora.

Our savings account offers very competitive terms for the consumer, including low risk, higher interest rates

compared to a traditional payroll or utility account, without any additional fees or withdrawal restrictions. The

savings account product is consistently ranked amongst the top 10 best savings accounts in Norway, and we

experience a good recruitment of new deposit customers. The interest rate of the savings account is aligned

with the development of the market and our liquidity and capital requirements.

Oslo, 31 March 2020

The Board of Optin Bank AS

6


INCOME STATEMENT

Amounts in NOK 1 000 Note Q1 2020 Jan-Mar

2020

Q1 2019 Jan-Mar

2019

2019

Interest income, amortised cost 5 470 5 470 5 928 5 928 25 249

Other interest income 90 90 291 291 625

Interest income 5 560 5 560 6 219 6 219 25 874

Interest expense, amortised cost (1 811) (1 811) (1 561) (1 561) (5 838)

Other interest expense - - - - (47)

Interest expense (1 811) (1 811) (1 561) (1 561) (5 885)

Net interest income 6 3 749 3 749 4 658 4 658 19 989

Commission and fee income 113 113 57 57 354

Commission and fee expense (1 341) (1 341) (1 013) (1 013) (5 187)

Net commission and fee expense 7 (1 229) (1 229) (955) (955) (4 834)

Net gain/(loss) on financial instruments at fair value 258 258 363 363 1 175

Total income 2 779 2 779 4 066 4 066 16 330

Salaries and administrative expenses 8 (4 851) (4 851) (4 846) (4 846) (19 920)

Depreciation on fixed and intangible assets 10 (1 986) (1 986) (1 150) (1 150) (6 407)

Other operating expenses 9, 10 (4 794) (4 794) (4 442) (4 442) (19 056)

Total operating expenses before impairment losses (11 630) (11 630) (10 437) (10 437) (45 383)

Impairment losses on loans to customers (4 818) (4 818) (8 520) (8 520) (19 518)

Profit before tax (13 670) (13 670) (14 892) (14 892) (48 571)

Income tax expense - - 3 723 3 723 (15 406)

Profit for the period (13 670) (13 670) (11 169) (11 169) (63 977)

STATEMENT OF COMPREHENSIVE INCOME

Amounts in NOK 1 000 Note Q1 2020 Jan-Mar

2020

Q1 2019 Jan-Mar

2019

2019

Profit for the period (13 670) (13 670) (11 169) (11 169) (63 977)

Other comprehensive income

Total comprehensive income (13 670) (13 670) (11 169) (11 169) (63 977)

7


STATEMENT OF FINANCIAL POSITION

Amounts in NOK 1 000 Note 31 March 2020 31 March 2019 31 December 2019

ASSETS

Loans and advances to credit institutions 2,4 39 547 44 632 64 208

Loans and advances to customers 3,4 182 955 214 783 206 049

Debt instruments 4 185 200 91 716 144 942

Intangible assets 21 287 19 231 19 511

Deferred tax assets (5) 19 124 (5)

Fixed assets 6 779 324 7 053

Other assets 13 187 15 077 14 658

TOTAL ASSETS 448 950 404 888 456 416

LIABILITIES

Deposits from customers 359 570 288 016 350 508

Other liabilities 9 222 7 121 12 061

TOTAL LIABILITIES 368 792 295 137 362 569

EQUITY

Share capital 8 093 6 849 8 093

Share premium 183 155 148 329 183 174

Total paid-in equity capital 191 247 155 177 191 267

Other equity (97 419) (34 257) (97 419)

Total comprehensive income (13 670) (11 169) -

Total other equity (111 089) (45 427) (97 419)

TOTAL EQUITY 80 159 109 752 93 847

TOTAL LIABILITIES AND EQUITY 448 950 404 888 456 416

8


STATEMENT OF CHANGES IN EQUITY

1 January - 31 March 2020

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

Equity at 01.01.2020 8 093 183 174 (97 419) 93 847

Issue of share capital (net of transaction costs) - -

Employee stock options - (19) (19)

Total comprehensive income (13 670) (13 670)

Equity at 31.03.2020 8 093 183 155 (111 089) 80 159



Equity at 01.01.2019 5 672 115 179 (34 440) 86 411

Employee stock options 183 183

Share issuance transaction costs 1 177 33 149 34 326


Equity at 31.03.2019 6 849 148 329 (45 427) 109 752



Equity at 01.01.2019 5 672 115 179 (34 440) 86 411

Employee stock options 183 183

Share issuance transaction costs 1 177 33 149 34 326


Equity at 31.03.2019 6 849 148 329 (45 427) 109 752

9


STATEMENT OF CASH FLOWS

Amounts in NOK 1 000 31 March 2020 31 March 2019 31 December 2019

Net payments on loans to customers 16 819 (30 285) (33 873)

Net receipts/(payments) on deposits from customers 10 380 (93 358) (32 866)

Interest received 6 854 5 774 25 369

Interest paid (2 335) (1 561) (6 506)

Net (increase)/decrease in debt securities (40 420) 68 015 17 068

Net payments on commissions and fees 997 (2 334) (5 356)

Payments to operations (14 974) (8 662) (37 528)

Net cash flows from operating activities (22 677) (62 410) (73 693)

Purchase of fixed and intangible assets (3 441) (2 723) (6 989)

Net cash flows from investing activities (3 441) (2 723) (6 989)

Proceeds from issuance of share capital 75 34 326 69 038

Net cash flows from financing activities 75 34 326 69 038

Net cash flows (26 044) (30 808) (11 644)

Cash and cash equivalents at 1 January 62 664 74 309 74 309

Net increase/(decrease) in cash and cash equivalents (26 044) (30 808) (11 644)

Cash and cash equivalents at end of period 36 621 43 501 62 664

10


NOTES TO THE FINANCIAL STATEMENTS Note 1 Accounting principles

The financial statements for Optin Bank ASA are prepared in accordance with the International Financial Reporting standards (IFRS) as

adopted by EU. The financial statements as of 31 March 2020 follow IAS 34 Interim reporting and the same accounting principles as

Note 2 Loans and advances to credit institutions

Amounts in NOK 1 000

31 March 2020 31 March 2019 31 December 2019

Loans and advances to credit institutions without agreed period of notice 39 547 44 632 64 208

Total loans and advances to credit institutions 39 547 44 632 64 208

Note 3 Loans to customers



Gross loans to customers 195 183 230 392 213 482

Loan loss allowances Stage 1 (1 371) (1 269) (1 637)



Net loans to customers 182 955 214 783 206 049

Reconciliation of gross loans to customers

Stage 1 Stage 2 Stage 3 Total

Gross loans to customers at 01.01.20 189 804 20 631 3 047 213 482

Transfers between Stage 1 and Stage 2 (5 711) 5 509 - (202)

Transfers between Stage 1 and Stage 3 (31) - 30 (1)

Transfers between Stage 2 and Stage 3 - 463 (434) 28

Derecognised in the period (18 411) (667) (58) (19 136)

Originated during the period 1 012 - - 1 012

Gross loans to customers at 31.03.20 166 663 25 936 2 584 195 183

Reconciliation of loan loss allowances

Stage 1 Stage 2 Stage 3 Total

Loan loss allowances at 01.01.19 (1 637) (3 399) (2 383) (7 420)

Transfers between Stage 1 and Stage 2 106 (2 216) - (2 110)

Transfers between Stage 1 and Stage 3 0 - (30) (30)

Transfers between Stage 2 and Stage 3 - (140) 255 115

Derecognised in the period 170 (2 944) 0 (2 774)

Originated during the period (10) - - (10)

Loan loss allowances at 31.03.20 (1 371) (8 700) (2 157) (12 228)

Gross loans to customers by past due status


Not past due 142 319 175 436 158 300

Past due 1-30 days 24 417 21 406 31 549

Past due 31-60 days 10 063 7 126 13 715

Past due 61-90 days 5 745 3 681 6 916

Past due over 90 days 12 639 22 744 3 003


11


Note 3 Loans to customers (cont.)


Geographic distribution of loans to customers 31 March 2020 31 March 2019 31 December 2019

ØSTFOLD 13 377 29 524 33 087

AKERSHUS 17 772 30 633 45 886

OSLO 56 256 19 324 14 880

HEDMARK 5 847 7 112 6 878

OPPLAND 3 775 8 171 4 881

BUSKERUD 8 107 13 692 9 379

VESTFOLD 10 739 13 072 12 315

TELEMARK 5 661 7 031 6 246

AUST-AGDER 3 480 14 517 11 364

VEST-AGDER 5 395 7 343 5 824

ROGALAND 10 649 4 164 3 781

HORDALAND 16 297 19 996 18 108

SOGN OG FJORDANE 1 622 1 864 1 726

MØRE OG ROMSDAL 8 491 10 799 9 087

NORDLAND 6 821 19 063 13 055

TROMS 5 814 11 555 7 184

FINNMARK 3 083 7 753 6 132

TRØNDELAG 12 000 4 776 3 669


Note 4 Classification of financial instruments


At 31 March 2020 Amortised cost FVTPL Total

Loans and advances to credit institutions 39 547 39 547

Loans to customers 182 955 182 955

Debt instruments 185 200 185 200

Total financial assets 182 955 224 748 407 703

Deposits from customers 359 570 359 570

Total financial liabilities 359 570 - 359 570

At 31 March 2019



Certificates and obligations 91 716 91 716




At 31 December 2019



Debt instruments 144 942 144 942




12


Note 5 Regulatory capital


31 March 2020

Share capital 8 093

Share premium 183 155

Other equity (111 089)

(-) Intangible assets (21 287)

(-) Deferred tax assets (220)

Common Equity Tier 1 capital 58 652

Total regulatory capital 58 652

Credit risk

Institutions 12 921

Retail 182 955

Other 19 966

Total credit risk 215 843

Operational risk 19 883

Total risk-weighted assets 235 726

Common Equity Tier 1 capital ratio 24,88 %

Tier 1 capital ratio 24,88 %

Total capital ratio 24,88 %

Liquidity Coverage Ratio - LCR 1 733 %

Leverage Ratio - LR 2 14 %

1 The Liquidity Coverage Ratio (LCR) measures high-quality liquid assets held by Optin Bank to meet its short-term obligations. The CRD IV-regulation § 8 requires a 100 per cent

LCR, which means an amount of highly liquid assets that is equal or greater than the net cash outflow over a 30-day stress period.

2 The Leverage Ratio (LR) measures Optin Bank’s Tier 1 capital relative to the non-risk-weighted exposure of all assets and off-balance sheet items. The CRD IV-regulation §5

requires a 3 per cent leverage ratio, and an additional buffer of 2 per cent.

13


Note 6 Net interest income


Q1 2020 Q1 2019 2019 Jan-Mar 2020 Jan-Mar 2019

Interest income from loans and advances to credit

institutions 90 70 332 90 70

Interest income from loans to customers 5 470 5 928 25 249 5 470 5 928

Interest income from debt instruments - 221 293 - 221

Total interest income 5 560 6 219 25 874 5 560 6 219

Interest expense on deposits to customers (1 811) (1 561) (5 838) (1 811) (1 561)

Deposit Guarantee Fund levy - - (47) - -

Total interest expenses (1 811) (1 561) (5 885) (1 811) (1 561)

Net interest income 3 749 4 658 19 989 3 749 4 658

Note 7 Net commission and fee expense


Q1 2020 Q1 2019 2019 Jan-Mar 2020 Jan-Mar 2019

Commission and fee income 113 57 354 113 57

Commission to loan agents (1 304) (981) (4 758) (1 304) (981)

Fees on banking services (38) (32) (429) (38) (32)

Net commission and fee expenses (1 229) (955) (4 834) (1 229) (955)

Note 8 Salaries and administrative expenses


Q1 2020 Q1 2019 2019 Jan-Mar 2020 Jan-Mar 2019

Salaries 3 620 3 632 14 024 3 620 3 632

Employer contribution 793 757 3 029 793 757

Pension costs 288 272 1 123 288 272

Other personnel expenses 149 185 1 745 149 185

Total salaries and administrative expenses 4 851 4 846 19 920 4 851 4 846

Note 9 Other operating costs


Q1 2020 Q1 2019 2019 Jan-Mar 2020 Jan-Mar 2019

IT-expenses 3 627 3 252 14 286 3 627 3 252

Property rental 169 559 858 169 559

Marketing expenses 50 34 163 50 34

Other operating expenses 947 597 3 748 947 597

Total other operating expenses 4 794 4 442 19 056 4 794 4 442

14


Note 10 IFRS 16


The bank implemented IFRS 16 January 1, 2019. The implementation is described in note 1.

The table below shows the effect of the transition to IFRS 16 on the various balance sheets.

Beløp i 1000 kroner Booked value 31.12.19

IFRS 16 Booked value 01.01.20

Varige driftsmidler 6 789 (109) 6 898

Annen Gjeld 6 789 (109) 6 898

The table below shows a reconciliation between nominal loan commitments as at 31.12.19 and capitalized lease commitments on 1.1.2020

When calculating lease obligations, the company has assumed a marginal loan interest rate of 2.1%.

Operating lease obligations as of 01.01.2020 (nominal) 6 898

+ Correction related to CPI adjustment -

- Repayment of lease agreements (Expected on a straight-line basis over the lease period) (312)

- Low value leases (expensed on a straight-line basis over the lease period) -

Effect of discounting using marginal borrowing rate -

The carrying amount of lease obligations as of 01.04.2020 6 586

Use Rights Asset

Use rights Asset is related to the rent of office space.

Amounts in NOK 1 000 2020

Balance 01 January 2020 6 829

Depreciation for the year 325

Balance 31 March 2020 6 504

Renting Commitment

Maturity analysis of lease obligations (contractual maturity - undiscounted)

Amounts in the income statement

Amounts in NOK 1 000 2020

Interest on rental obligation 34

Costs associated with short-term leases -

Cost of renting where underlying assets have low value -

Documents

Interim report as of 31 March 2020€¦ · over e-mail, and Digipost), deferred invoice/pay later, accounts, and card payments. Check-out options include plugins for web shopping